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Advanced Medical Solutions Group Plc LSE:AMS London Ordinary Share GB0004536594 ORD 5P
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Advanced Medical Solutions Grp PLC Interim Results

16/09/2020 7:00am

UK Regulatory (RNS & others)


Advanced Medical Solutions (LSE:AMS)
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TIDMAMS

RNS Number : 0969Z

Advanced Medical Solutions Grp PLC

16 September 2020

 
   16 September 2020 
 

Advanced Medical Solutions Group plc

("AMS" or the "Group")

Interim Results for the six months ended 30 June 2020

Winsford, UK, 16 September 2020: 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 2020.

Financial Highlights:

 
 GBP million                       H1 2020   H1 2019   Reported 
                                                         change 
 Group revenue                        39.3      48.7       -19% 
                                  --------  --------  --------- 
 Operating margin (%)                 11.3      23.4       -52% 
                                  --------  --------  --------- 
 Adjusted (1) operating margin 
  (%)                                 14.0      26.7       -47% 
                                  --------  --------  --------- 
 Profit before tax                     4.3      11.2       -62% 
                                  --------  --------  --------- 
 Adjusted(1) profit before tax         5.3      12.8       -59% 
                                  --------  --------  --------- 
 Diluted earnings per share (p)       1.68      4.06       -59% 
                                  --------  --------  --------- 
 Adjusted(1) diluted earnings 
  per share (p)                       2.16      4.80       -55% 
                                  --------  --------  --------- 
 Net operating cash flow               8.8      10.3       -14% 
                                  --------  --------  --------- 
 Net cash(2)                          67.9      63.9        +6% 
                                  --------  --------  --------- 
 Interim dividend per share (p)       0.50      0.50        +0% 
                                  --------  --------  --------- 
 

Business Highlights (including post period end):

Throughout this unprecedented period, AMS has retained its employee base in safe conditions and maintained supply to hospitals and other healthcare providers. The Group has remained profitable and cash generative whilst continuing to invest in R&D and maintaining its dividends. With COVID-19 impacts expected to reduce in each subsequent quarter and balance sheet strength, the Group is well positioned to return to strong growth as our underlying markets continue to recover.

-- Trading was in line with our trading update of 9 July 2020, with the majority of the business impacted by government-led restrictions to control COVID-19 and a slowdown in demand across all regions and product categories

-- All manufacturing sites have remained in operation throughout the COVID-19 pandemic, servicing customers and order demand, and having implemented strict controls to ensure employee safety at all times

-- First half revenue was GBP39.3 million (2019 H1 GBP48.7 million) down by 19% on a reported and constant currency(3) basis

-- Despite the significant challenges, the Group reported an adjusted operating profit of GBP5.5 million (2019 H1: GBP13.0 million) and an increase in net cash to GBP67.9 million (2019 H1: GBP63.9 million)

-- Investment in R&D increased to GBP3.8 million (2019 H1: GBP2.9 million) as progress continued on all core projects across the Group

-- US LiquiBand(R) recovery plan remains on track with sales initiatives recovering 2% share of end market volumes. LiquiBand(R) Rapid launched with a key partner as planned and regained product listings on the two previously lost Group Purchasing Organisation (GPO) contracts

-- Product approvals for new geographies have continued with our first approvals in India for both LiquiBand(R) and LiquiBandFix8(R)

-- Patents granted for LiquiBand(R) Exceed in the UK and US, providing protection and tax benefits until 2034

-- Interim dividend maintained at 0.50p per share (2019 H1: 0.50p) payable on 23 October 2020 to shareholders on the register at the close of business on 25 September 2020. The Board expects to return to dividend growth in the near future, as business returns to normal.

Commenting on the interim results, Chris Meredith, Chief Executive Officer of AMS, said: "The Group has faced an unprecedented first half of the year as a result of the severe impact on our core markets arising from the COVID-19 pandemic. As a business, we have responded well to the challenge, prioritising our employees' safety and continuing critical supply to customers. Whilst the short-term impact has been stark, we are proud that the Group remains profitable and cash generative during this time whilst maintaining a robust balance sheet.

T he Group has maintained investment in R&D to progress its key projects and is well positioned for growth as our markets continue to recover. Whilst we expect COVID-19 to continue to impact sales and profitability in the short term, the Board remains positive about our medium to long-term prospects."

- End -

Notes

1 Adjusted profit before tax is shown before exceptional items which, in 2020 H1 were GBPnil (2019 H1: GBP0.9 million), before amortisation of acquired intangible assets which, in 2020 H1, were GBP1.1 million (2019 H1: GBP0.7 million) and a credit of GBP0.03 million (2019 H1: GBPnil) due to a change in the fair value of long-term liability as defined in the financial review. Adjusted operating margin is shown before exceptional items and amortisation of acquired intangible assets.

2 Net cash in 2020 H1 was GBP67.9 million (2019 H1: GBP63.9 million) defined as cash and cash equivalents of GBP68.4 million (2019 H1: GBP63.9 million) plus short-term investments less financial liabilities and bank loans in 2020 H1 of GBP0.5 million (2019 H1: GBPnil)

3 Constant currency adjusts for the effect of currency movements by re-translating the current period's performance at the previous period's exchange rates

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 / 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 made two acquisitions: Sealantis, an Israeli medical device company with a patent-protected sealant technology platform; and Biomatlante, an established developer and manufacturer of innovative surgical biomaterial technologies based in France.

AMS's products, manufactured in the UK, the Netherlands, Germany, France, the Czech Republic and Israel, 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, France, the Czech Republic and Russia. The Group has R&D innovation hubs in the UK and Germany, Israel and France. Established in 1991, the Group has approximately 700 employees. For more information, please see www.admedsol.com.

Chief Executive's Review

Group performance

This has been an unprecedented period for the Group and, as previously announced, the COVID-19 pandemic has had a significant impact on trading within both divisions, primarily due to the consequential reduction in elective surgery volumes. Despite the challenges, we have continued to invest in R&D and progressed our key projects, ensuring we are well placed to exploit future growth opportunities across the Group as conditions normalise.

Business Unit performance

Surgical Business Unit

The Surgical Business Unit includes tissue adhesives, sutures, biosurgical devices and internal fixation devices marketed under the AMS brands LiquiBand(R) , RESORBA(R) and LiquiBandFix8(R) . In the first half of 2020, Surgical revenues decreased by 19% to GBP21.4 million (2019 H1: GBP26.5 million).

 
 Surgical Business             2020          2019   Reported         Growth 
  Unit                   H1 GBP'000    H1 GBP'000     Growth    at constant 
                                                                   currency 
 Advanced Closure             8,875        13,605      (35%)          (35%) 
                       ------------  ------------  ---------  ------------- 
 Internal Fixation 
  and Sealants                  967         1,179      (18%)          (18%) 
                       ------------  ------------  ---------  ------------- 
 Traditional Closure          6,188         7,189      (14%)          (13%) 
                       ------------  ------------  ---------  ------------- 
 Biosurgical Devices          5,398         4,518        19%            21% 
                       ------------  ------------  ---------  ------------- 
 TOTAL                       21,428        26,491      (19%)          (19%) 
                       ------------  ------------  ---------  ------------- 
 

Advanced Closure

Advanced Closure comprises predominantly 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           2020          2019   Reported         Growth 
                      H1 GBP'000    H1 GBP'000     Growth    at constant 
                                                                currency 
 Americas                  5,094         7,927      (36%)          (37%) 
                    ------------  ------------  ---------  ------------- 
 UK/Germany                1,956         3,353      (42%)          (41%) 
                    ------------  ------------  ---------  ------------- 
 Rest of World             1,825         2,325      (22%)          (22%) 
                    ------------  ------------  ---------  ------------- 
 TOTAL                     8,875        13,605      (35%)          (35%) 
                    ------------  ------------  ---------  ------------- 
 

Revenues decreased by 35% to GBP8.9 million (2019 H1: GBP13.6 million) as demand fell in all territories due to lockdown measures that resulted in much lower volumes for all categories of surgical procedure. The US and UK markets were most heavily impacted as these were the hardest hit by the pandemic, resulting in lockdowns that were longer and more widespread.

Sales initiatives focused on US LiquiBand(R) started to recover some momentum resulting in strong end sales volumes in Q1 2020 and a 2% market share gain in the period. Q2 2020 volumes were much reduced, as anticipated, due to the various restrictions in place but we are pleased to have retained our increased market share position for the full H1.

The LiquiBand (R) Rapid(TM) launch went ahead with one of the Group's main US partners as planned and LiquiBand (R) is now already l isted on both of the major US GPO contracts that were lost in 2019.

Development on our lead LiquiBand(R) XL formulation continues to progress well, and we expect to rerun the clinical study in Q3 2020 - keeping us on track to file for 510K in Q1 2021. In the run up to this, we have implemented some short-term commercial agreements with US hospitals to encourage additional LiquiBand(R) adoption, which have contributed to the recent market share improvement. Once approved, LiquiBand(R) XL is expected to unlock further growth potential in the LiquiBand(R) business with all partners.

We continue to obtain approvals for LiquiBand(R) in new geographies and notably obtained approval for LiquiBand(R) in India in the first half of the year. We are in the process of selecting our best route-to-market partner for this market and anticipate launch in 2021.

While there is continued uncertainty and varying state-by-state impacts of COVID-19, it has been encouraging to see that, by August, end market sales volumes for medical adhesives in the US had already recovered to more than 80% of its historical (pre-COVID-19) usage rate.

Internal Fixation and Sealants

This category comprises our LiquiBandFix8(R) devices, indicated for the internal fixation of hernia meshes using our LiquiBand (R) technology. LiquiBandFix8(R) is used to fix the hernia meshes in place inside the body with accurately delivered individual drops of cyanoacrylate adhesive, instead of traditional tacks and staples. Global hernia surgery volumes are especially impacted by the COVID-19 pandemic as the vast majority are considered non-essential elective surgery resulting in revenue decreasing by 18% to GBP1.0 million (2019 H1: GBP1.2 million).

Despite the restrictions and reduced surgical procedures, we are pleased to have made significant progress in both product training and product approvals. We have delivered virtual symposia in association with prominent hernia societies attended by more than 8,000 surgeons from around the world to increase awareness of the reduced post-operative clinical complications when using LiquiBandFix8(R) instead of staples or tacks. We also obtained H1 approvals for LiquiBandFix8(R) in other geographies, notably in India and Brazil, with distributor selection and launch planning now in process. Entry into the US market for Fix8(R) requires a Pre-Market Approval process and successful completion of our clinical trial that commenced in August 2019. Although all clinical activity was suspended for approximately six months, we are pleased to report that all five sites are now enrolling patients again and one third of procedural volumes have been completed. We expect to file for FDA approval in 2022 and continue to be excited about the long-term prospects for the LiquiBandFix8(R) portfolio with entry into the US being a significant milestone for the Group.

Following the acquisition of Sealantis in 2019, we have used the Medical Device Directive (MDD) extension period to work with our Notified Body in making progress towards gaining our first CE approval for the Seal G laparoscopic device. We have also expanded the existing CE approval for the open device to include a blue visual indicator that significantly aids visibility for the surgeon during product usage. These approvals are both expected before the end of 2020 along with the start of the first clinical trial, delayed due to the postponement of all patient recruitment since March 2020. In October, we also expect to complete our commercial soft launch research activity with 30 European Key Opinion Leaders ahead of full European commercial launch which is on track for H1 2021.

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. Due to the COVID-19 pandemic, revenue decreased by 14% to GBP6.2 million or 13% at constant currency (2019 H1: GBP7.2 million).

The Group continues to assess further opportunities to expand its suture offering.

Biosurgical Devices

The Biosurgical Devices category principally comprises RESORBA(R) antibiotic loaded collagen sponges, collagen membranes and cones and oxidised cellulose. Following the Biomatlante acquisition, synthetic bone substitutes and bio-absorbable screws have been added to this category. Despite the impacts of the COVID-19 pandemic, Biosurgical revenue increased by 19% to GBP5.4 million (2019 H1: GBP4.5 million) and by 21% at constant currency, reflecting the inclusion of Biomatlante sales following its acquisition by the Group in November 2019. We expect to make significant progress selling Biomatlante products under the RESORBA (R) brand through our existing sales infrastructure and we made some initial sales into Germany in the first half of the year.

Collagen loaded with Vancomycin has been sold in Germany for several years on a named patient prescription only basis and we continue to progress a full CE mark to allow broader promotion and sales. We are currently progressing with an MDD application but will move to proceed under Medical Device Regulation (MDR) if necessary. We also continue to work with both EU and US regulators on wider market approvals for our antibiotic loaded collagen pacemaker pouch, also currently sold via prescription in Germany . FDA guidance has indicated the need for further clinical work which we intend to start in Europe in 2021.

Our innovative MBCP(R) synthetic bone substitutes are approved for use in Europe and the US and represent most of our current Biomatlante sales. To access another significant part of the market, we have developed a freeze dried bone substitute (FDBS), which has strong cohesive properties when mixed with fluids and can be easily moulded for optimal placement in orthopaedic and spine surgery. The US approval process is progressing well and we expect to file for 510K before the end of 2020. European approval under MDR is expected to follow in the next few years. The FDBS platform will also open up opportunities for the addition of active ingredients such as platelets, stem cells or synthetic peptides.

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 predominantly to the NHS.

In the first half of 2020, revenue decreased by 20% to GBP17.9 million (2019 H1: GBP22.2 million) driven by factors associated with the COVID-19 pandemic such as lower wound treatment volumes globally, deferral of elective surgery, the temporary closure of wound clinics and lack of community and long-term care services. In addition, the year-on-year comparator was affected by some customers' Brexit preparations in 2019.

 
 Woundcare Business             2020          2019   Reported         Growth 
  Unit                    H1 GBP'000    H1 GBP'000     Growth    at constant 
                                                                    currency 
 Infection Management          7,281         9,407      (23%)          (23%) 
                        ------------  ------------  ---------  ------------- 
 Exudate Management            7,205        10,082      (29%)          (29%) 
                        ------------  ------------  ---------  ------------- 
 Other Woundcare               3,368         2,734        23%            22% 
                        ------------  ------------  ---------  ------------- 
 TOTAL                        17,854        22,223      (20%)          (20%) 
                        ------------  ------------  ---------  ------------- 
 

The Business Unit has continued its regulatory activity during the first half of the year and has successfully obtained MDD extensions until 2024 for all the remaining products in its woundcare range. Consequently, the Group has secured the maximum time possible to complete compliance with the new MDR certification requirements.

Even as volumes trend back towards pre-COVID-19 levels, we remain cautious about our advanced wound care prospects, given the previous year's low market growth rates and some of the ongoing consolidation activity. We do however remain confident that MDR transitions will provide opportunities for us along with optimism around our new product pipeline.

Infection Management

The infection management category comprises advanced woundcare dressings that incorporate antimicrobials such as Silver and Polyhexamethylene Biguanide (PHMB). Revenue decreased by 23% to GBP7.3 million (2019 H1: GBP9.4 million).

During the first half of the year, we launched our Silver Moisture Wicking Fabric product with one partner in the US and signed a distribution agreement with a second partner who has placed launch orders for the second half of the year. Silver high-performance dressings also launched with a second US partner in the first half of the year but hampered by the inability to meet customers and promote products.

Our PHMB foam range provides access to the large, growing antimicrobial foam market and demonstrates enhanced product performance in terms of rapid microbial activity and eradication of pathogens. The new Silicone version that provides gentle but secure adhesion obtained US approval in 2019 and we are filing for EU approval in 2020 in advance of the extended MDD deadline.

The R&D pipeline also includes a device for the debridement of wounds which we expect to launch into the US in 2021 whilst also exploring options for European approval.

Looking ahead, the Group continues to work on developing next generation high-gelling products with differentiated antibiofilm claims and an application of our tissue scaffold in a woundcare environment.

Exudate Management

Exudate management comprises advanced woundcare dressings and gels which do not incorporate any antimicrobial elements. Revenue decreased by 29% to GBP7.2 million (2019 H1: GBP10.1 million) predominantly due to the COVID-19 impact on woundcare activity in general.

We have continued with our initiative to find and appoint new distribution partners in markets where our key partners have no or low presence but the demand for a high quality, cost effective wound care dressing range still exists. A few new contracts have been signed in the first half of the year, contributing more than GBP1 million of additional sales over the next five years. Registrations are also being pursued in additional territories with a view to further exploiting this growth opportunity.

With the heightened attention on the prevention of pressure ulcers in all major markets, we were pleased to successfully add a pressure ulcer prevention indication to our US silicone foam range.

Other Woundcare

Other Woundcare comprises royalties, fees and woundcare sealants. Revenue increased by 23% at reported currency and by 22% at constant currency to GBP3.4 million (2019 H1: GBP2.7 million) mainly due to higher royalty income from the Group's licensing arrangement with Organogenesis.

COVID-19

The Group's priority continues to be the safety, health and well-being of its employees and their families. Having taken appropriate steps, all AMS sites have remained in operation throughout the pandemic meaning it has been able to maintain the supply of its vital medical devices to healthcare partners and customers worldwide whilst complying with government measures on social distancing. As part of this, AMS has:

   --      Enabled working from home arrangements for all roles that can do so; 

-- Utilised Government job retention schemes where employees were unable to carry out their role;

-- Set up a designated team to closely monitor and risk assess the impact of COVID-19 on our operations and taken steps to establish safe working practices in all AMS sites;

-- Undertaken a full evaluation of our supply chain to ensure any risks are identified and mitigated;

-- Adjusted working patterns and put in place controls to minimise interactions and ensure social distancing; and

   --      Maintained our payment terms to support all of the Group's suppliers. 

The Group confirms it is in robust financial condition to weather the continued global disruption and retains a strong net cash position of GBP67.9 million and an undrawn unsecured GBP80 million credit facility, which is committed until December 2023.

Regulatory

As a result of the COVID-19 pandemic, the deadline for Notified Bodies to review Medical Device Directive (MDD) certificates was extended by one year to May 2021, allowing AMS and other suppliers additional time to get new products approved or existing products reapproved under MDD. The end date, when all MDD certificates become invalid, remains as 26 May 2024.

As mentioned above, AMS is utilising the MDD extension to file for new product approvals in 2020 including Sealantis enhancements and Silicone PHMB dressings.

In the first half of 2020, AMS successfully completed its final MDD recertifications so that all products now have extended MDD certificates allowing ample time for compliance with the new European Medical Devices Regulation (MDR) by 2024. AMS is well prepared for the stricter requirements on product safety and performance, clinical evaluation and post-market clinical evidence stipulated by MDR and in the first half of the year submitted its first three MDR files for Notified Body review.

Our extensive preparations leave us well placed to exploit opportunities that will undoubtedly arise in the next few years during the implementation of MDR.

Brexit

Having completed a comprehensive review of Brexit related risks, we continue to prepare 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 are maintaining increased stock holdings on all sites and continue to have extensive planning conversations with our customers.

Summary and outlook

The Group expects the sales impact of COVID-19 to gradually reduce in the second half of 2020 and as we move into 2021, as global lockdowns are eased and a version of normality returns. We are seeing significant variability in the pace of recovery for different geographies and different types of surgical procedures, and with the potential for second waves of COVID-19 infection, it remains difficult to accurately predict the full year financial impact on the Group. We are pleased, however, that we continue to make good progress on key R&D initiatives, and with our US LiquiBand (R) recovery plan and robust financial position, we anticipate a strong recovery once conditions normalise.

We are encouraged by the improved trading since Q2 and the Group is starting to see signs of recovery in most markets. Second half trading to date in 2020 is in line with Board expectations that were communicated in July 2020.

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, adjusted earnings per share and adjusted net cash inflow from operating activities, allowing the impacts of exchange rate volatility, exceptional items, amortisation and the change in fair value of long-term liability to be separately identified. Net cash is an additional non-GAAP measure used.

Overview

Revenue decreased by 19% at reported and constant currency to GBP39.3 million (2019 H1: GBP48.7 million).

Excluding exceptional items, administration expenses increased marginally to GBP16.9 million (2019: GBP16.6 million) inclusive of losses arising from foreign exchange movements as effective cost management and the utilisation of Government job retention schemes were offset by higher amortisation of intangibles. The Group operated its factories at much lower volumes, resulting in under-absorption of its fixed costs and, to reflect the need for operational staff to continue attending our sites during the lockdown period, additional one-off payments were made to these employees totalling GBP0.3 million. The Group incurred GBP3.8 million of gross R&D spend in the period (2019 H1: GBP2.9 million), representing 9.6% of sales (2019 H1: 5.9%) which, whilst impacted by a decrease in sales, also reflects an ongoing investment in innovation and in accommodating the heightened regulatory environment.

No exceptional costs have been incurred in the six-month period (2019 H1: GBP0.9 million).

Amortisation of acquired intangible assets was GBP1.1 million in the six-month period (2019 H1: GBP0.7 million) due to the full period effect of the acquisition of Sealantis in January 2019 and Biomatlante in November 2019.

Adjusted operating profit which excludes amortisation of acquired intangibles and exceptional costs, decreased by 57.7% to GBP5.5 million (2019 H1: GBP13.0 million) whilst the adjusted operating margin decreased by 1,270 bps to 14.0% (2019 H1: 26.7%) due to the negative impact of the COVID-19 pandemic on the Group's revenues.

The Group generated adjusted profit before tax of GBP5.3 million (2019 H1: GBP12.8 million) and profit before tax of GBP4.3 million (2019 H1: GBP11.2 million).

 
 Reconciliation of profit before tax to adjusted profit before 
  tax 
------------------------------------------------------------------- 
                                             Unaudited    Unaudited 
                                            Six months   Six months 
                                                 ended        ended 
                                            30 June 20   30 June 19 
                                               GBP'000      GBP'000 
----------------------------------------  ------------  ----------- 
 Profit before tax                               4,260       11,219 
 Amortisation of acquired intangibles            1,074          682 
 Exceptional items                                   -          920 
 Change in FV of long-term liability              (29)            - 
----------------------------------------  ------------  ----------- 
 Adjusted profit before tax                      5,305       12,821 
----------------------------------------  ------------  ----------- 
 

The Group's effective tax rate, reflecting the blended tax rates in the countries where we operate and including UK patent box relief, decreased to 14.4% (2019 H1: 21.8%). The decrease was due to patent box claims relating to the newly granted LiquiBand (R) Exceed patents which can be retrospectively claimed.

Adjusted diluted earnings per share decreased by 55% to 2.16p (2019 H1: 4.80p) and diluted earnings per share decreased by 59% to 1.68p (2019 H1: 4.06p).

The Board intends to pay an interim dividend of 0.50p per share on 23 October 2020 to shareholders on the register at the close of business on 25 September 2020. This is in line with the interim dividend paid in the first half of 2019. The Board expects to return to dividend growth in the near future, as business returns to normal.

 
 Operating result by business segment 
 Six months ended 30 June           Surgical   Woundcare 
  2020 
                                     GBP'000     GBP'000 
---------------------------------  ---------  ---------- 
 Revenue                              21,428      17,854 
 Profit from operations                1,951       2,779 
 Amortisation of acquired 
  intangibles                          1,069           5 
 Adjusted profit from operations 
  (4)                                  3,020       2,784 
 Adjusted operating margin 
  (4)                                  14.1%       15.6% 
---------------------------------  ---------  ---------- 
 Six months ended 30 June 
  2019 
 Revenue                              26,491      22,223 
 Profit from operations                8,251       4,309 
 Amortisation of acquired 
  intangibles                            678           4 
 Adjusted profit from operations 
  (4)                                  8,929       4,313 
 Adjusted operating margin 
  (4)                                  33.7%       19.4% 
---------------------------------  ---------  ---------- 
 

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

Table is reconciled to statutory information in note 5 of the financial information.

Surgical

Surgical revenues decreased by 19% to GBP21.4 million (2019 H1: GBP26.5 million) at both reported currency and at constant currency. Adjusted operating margin decreased 1,960 bps to 14.1% (2019 H1: 33.7%) as the Group was unable to offset costs in the same proportion to the decrease in revenue and as a result of increased investment in R&D, clinical and regulatory affairs.

Woundcare

Woundcare revenues decreased by 20% to GBP17.9 million (2019 H1: GBP22.2 million) at reported currency and by 20% at constant currency. Adjusted operating margin decreased by 380 bps to 15.6% (2019 H1: 19.4%).

Currency

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. In the first half of the year, approximately one third of sales were invoiced in Euros and approximately one quarter were invoiced in US Dollars. The Group estimates that a 10% movement in the GBP:US$ or GBP:EUR exchange rate will impact Sterling revenues by approximately 2.4% and 3.5% respectively and in the absence of any hedging this would have an impact on profit of 1.8% and 0.6%.

Cash Flow

Net cash inflow from operating activities reduced by 14% to GBP8.8 million (2019 H1: GBP10.3 million) predominantly due to a reduction in operating profit, partially offset by positive working capital movements.

 
 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 June      30 June 
                                           20           19 
                                      GBP'000      GBP'000 
--------------------------------  -----------  -----------  -------- 
 Net cash inflow from operating 
  activities                            8,817       10,261    -14.1% 
 Exceptional items                          -          920   -100.0% 
--------------------------------  -----------  -----------  -------- 
 Adjusted net cash inflow from 
  operating activities                  8,817       11,181    -21.1% 
--------------------------------  -----------  -----------  -------- 
 

At the end of the period, the Group had net cash of GBP67.9 million (31 December 2019: GBP64.1 million).

In the first half of 2020, receivables reduced by GBP11.9 million due to lower sales (2019 H1: GBP2.2 million) with debtor days at 43 (2019 H1: 41 days) and payables reduced by GBP1.1 million (2019 H1: GBP2.8 million) with creditor days at 30 (2019 H1: 26 days). Inventory increased to 7.8 months of supply in the period (2019 H1: 5.0 months of supply) as sales shortfalls in the year have led to increased inventory holdings. Whilst we intend to continue to hold higher than usual stocks to mitigate possible Brexit and COVID-19 supply risks, a reduction in Inventory levels is planned for the second half of the year.

In the period, we invested GBP2.4 million in capital equipment, R&D and regulatory costs including investment in converting and packaging machines (2019 H1: GBP2.6 million).

Tax payments increased to GBP3.3 million (2019 H1: GBP2.9 million) which is GBP2.7 million higher than tax in the income statement due to a one-off change in timing of payments on account in the UK. A back-dated claim for UK patent box relief will be made in respect of the LiquiBand (R) Exceed patent and the Group therefore expect tax payments to be significantly lower in the second half of the year.

In June 2020, the Group paid its final dividend for the year ended 31 December 2019 of GBP2.3 million (2019 H1: GBP1.9 million).

The Group has an unsecured, undrawn GBP80 million, multi-currency credit facility provided jointly by HSBC and NatWest, which is in place until December 2023. 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.

 
 CONDENSED CONSOLIDATED INCOME STATEMENT 
                                      (Unaudited)                            (Unaudited)                             (Audited) 
                                    Six months ended                       Six months ended                    Year ended 31 December 
                                      30 June 2020                           30 June 2019                               2019 
                               Before   Exceptional                   Before   Exceptional                   Before   Exceptional 
                          Exceptional         Items              Exceptional         Items              Exceptional         Items 
                                               Note                                   Note                                   Note 
                                Items             7      Total         Items             7      Total         Items             7      Total 
                   Note       GBP'000       GBP'000    GBP'000       GBP'000       GBP'000    GBP'000       GBP'000       GBP'000    GBP'000 
----------------  -----  ------------  ------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 Revenue from 
  continuing 
  operations        5          39,282             -     39,282        48,714             -     48,714       102,368             -    102,368 
 Cost of sales               (17,540)             -   (17,540)      (19,500)             -   (19,500)      (41,885)             -   (41,885) 
----------------  -----  ------------  ------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 Gross profit                  21,742             -     21,742        29,214             -     29,214        60,483             -     60,483 
 Distribution 
  costs                         (483)             -      (483)         (459)             -      (459)         (997)             -      (997) 
 Administration 
  costs                      (16,949)             -   (16,949)      (16,607)         (920)   (17,527)      (34,566)       (1,053)   (35,619) 
 Other income                     115             -        115           157             -        157           376             -        376 
 Profit from 
  operations                    4,425             -      4,425        12,305         (920)     11,385        25,296       (1,053)     24,243 
 Finance income                   166             -        166           200             -        200           406             -        406 
 Finance costs                  (331)             -      (331)         (366)             -      (366)         (392)             -      (392) 
 Profit before 
  taxation                      4,260             -      4,260        12,139         (920)     11,219        25,310       (1,053)     24,257 
 Income tax         8           (614)             -      (614)       (2,446)             -    (2,446)       (5,338)             -    (5,338) 
----------------  -----  ------------  ------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 Profit for 
  the period 
  attributable 
  to equity 
  holders 
  of the parent                 3,646             -      3,646         9,693         (920)      8,773        19,972       (1,053)     18,919 
----------------  -----  ------------  ------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 Earnings per 
  share 
 Basic              4           1.70p             -      1.70p         4.53p       (0.43p)      4.10p         9.30p       (0.49p)      8.81p 
 Diluted            4           1.68p             -      1.68p         4.48p       (0.43p)      4.06p         9.21p       (0.49p)      8.72p 
 Adjusted 
  diluted 
  (5)               4           2.16p             -      2.16p         4.80p       (0.43p)      4.37p         9.83p       (0.49p)      9.34p 
----------------  -----  ------------  ------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 
 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE 
  INCOME 
                                                   (Unaudited)                            (Unaudited)                              (Audited) 
                                              Six months ended                       Six months ended                             Year ended 
                                                  30 June 2020                           30 June 2019                       31 December 2019 
                                                      GBP'000                                GBP'000                                GBP'000 
----------------  -----  ------------  ------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 Profit for 
  the year                                               3,646                                  8,773                                 18,919 
----------------  -----  ------------  ------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 Exchange differences on translation 
  of foreign operations                                  6,733                                    930                                (3,538) 
 (Loss)/gain arising on cash 
  flow hedges                                          (1,759)                                    284                                  3,091 
 Deferred tax charge arising 
  on cash flow hedges                                      130                                      -                                  (130) 
---------------------------------------------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 Other comprehensive credit/(charge) 
  for the period                                         5,104                                  1,214                                  (577) 
---------------------------------------------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 Total comprehensive income for 
  the period attributable to equity 
  holders of the parent                                  8,750                                  9,987                                 18,342 
---------------------------------------------------  ---------  ------------  ------------  ---------  ------------  ------------  --------- 
 

(5) Adjusted for exceptional items, amortisation of acquired intangible assets and for change in the fair value of long-term liability

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 
                                                 (Unaudited)   (Unaudited)     (Audited) 
                                                     30 June       30 June   31 December 
                                                          20            19            19 
                                          Note       GBP'000       GBP'000       GBP'000 
 Assets 
 Non-current assets 
 Acquired intellectual property 
  rights                                              10,095         9,654         9,478 
 Intangible assets                                    16,134        14,875        15,985 
 Software intangibles                                  2,665         2,983         2,832 
 Development costs                                     6,103         3,696         5,039 
 Goodwill                                             57,470        52,333        53,558 
 Property, plant and equipment                        27,629        27,563        27,707 
 Loans and other financial assets                          -            30             - 
 Deferred tax assets                                       -           179            96 
 Trade and other receivables                             223           321           531 
---------------------------------------  -----  ------------  ------------  ------------ 
                                                     120,319       111,634       115,226 
 Current assets 
 Inventories                                          23,653        16,298        17,655 
 Trade and other receivables                          17,603        23,288        29,221 
 Current tax assets                                    1,001            22           129 
 Cash and cash equivalents                            68,355        63,888        64,751 
---------------------------------------  -----  ------------  ------------  ------------ 
                                                     110,612       103,496       111,756 
---------------------------------------  -----  ------------  ------------  ------------ 
 Total assets                                        230,931       215,130       226,982 
---------------------------------------  -----  ------------  ------------  ------------ 
 Liabilities 
 Current liabilities 
 Trade and other payables                             12,577        11,086        14,043 
 Current tax liabilities                                   -         2,267         1,781 
 Lease liabilities                                     1,140           983         1,353 
                                                      13,717        14,336        17,177 
 Non-current liabilities 
 Trade and other payables                              3,470         3,540         3,150 
 Other loans                                             498             -           664 
 Deferred tax liabilities                              6,863         5,934         6,409 
 Lease liabilities                                     8,070         8,567         8,347 
                                                      18,901        18,041        18,570 
---------------------------------------  -----  ------------  ------------  ------------ 
 Total liabilities                                    32,618        32,377        35,747 
---------------------------------------  -----  ------------  ------------  ------------ 
 Net assets                                          198,313       182,753       191,235 
---------------------------------------  -----  ------------  ------------  ------------ 
 Equity 
 Share capital                              11        10,764        10,738        10,745 
 Share premium                                        36,284        36,072        36,226 
 Share-based payments reserve                         10,211         8,343         9,466 
 Investment in own shares                              (161)         (159)         (159) 
 Share-based payments deferred tax 
  reserve                                                417           729           649 
 Other reserve                                         1,531         1,531         1,531 
 Hedging reserve                                     (1,074)       (2,122)           555 
 Translation reserve                                   6,484         4,219         (249) 
 Retained earnings                                   133,857       123,402       132,471 
---------------------------------------  -----  ------------  ------------  ------------ 
 Equity attributable to equity holders 
  of the parent                                      198,313       182,753       191,235 
---------------------------------------  -----  ------------  ------------  ------------ 
 

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 
                                                                 deferred 
                  capital   premium   payments       shares           tax   reserve   reserve       reserve   earnings     Total 
                  GBP'000   GBP'000    GBP'000      GBP'000       GBP'000   GBP'000   GBP'000       GBP'000    GBP'000   GBP'000 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 At 1 January 
  2020 
  (audited)        10,745    36,226      9,466        (159)           649     1,531       555         (249)    132,471   191,235 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 Consolidated 
  profit for 
  the period 
  to 30 June 
  2020                  -         -          -            -             -         -         -             -      3,646     3,646 
 Other 
  comprehensive 
  income                -         -          -            -             -         -   (1,629)         6,733          -     5,104 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 Total 
  comprehensive 
  income                -         -          -            -             -         -   (1,629)         6,733      3,646     8,750 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 Share-based 
  payments              -         -        795            -             -         -         -             -          -       795 
 Share options 
  exercised            19        58       (50)            -         (232)         -         -             -          -     (205) 
 Shares 
  purchased by 
  EBT                   -         -          -        (375)             -         -         -             -          -     (375) 
 Shares sold by 
  EBT                   -         -          -          373             -         -         -             -          -       373 
 Dividends paid         -         -          -            -             -         -         -             -    (2,260)   (2,260) 
                                                -----------  ------------  --------  --------  ------------ 
 At 30 June 
  2020 
  (unaudited)      10,764    36,284     10,211        (161)           417     1,531   (1,074)         6,484    133,857   198,313 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
                                        Share-   Investment   Share-based 
                    Share     Share      based       in own      payments     Other   Hedging   Translation   Retained 
                                                                 deferred 
                  capital   premium   payments       shares           tax   reserve   reserve       reserve   earnings     Total 
                  GBP'000   GBP'000    GBP'000      GBP'000       GBP'000   GBP'000   GBP'000       GBP'000    GBP'000   GBP'000 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 At 1 January 
  2019 
  (audited)        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 
                                                                 deferred 
                  capital   premium   payments       shares           tax   reserve   reserve       reserve   earnings     Total 
                  GBP'000   GBP'000    GBP'000      GBP'000       GBP'000   GBP'000   GBP'000       GBP'000    GBP'000   GBP'000 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 At 1 January 
  2019 
  (audited)        10,674    35,192      7,333        (156)           708     1,531   (2,406)         3,289    116,560   172,725 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 Consolidated 
  profit for 
  the year 
  to 31 
  December 2019         -         -          -            -             -         -         -             -     18,919    18,919 
 Other 
  comprehensive 
  income                -         -          -            -             -         -     2,961       (3,538)          -     (577) 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 Total 
  comprehensive 
  income                -         -          -            -             -         -     2,961       (3,538)     18,919    18,342 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 Share-based 
  payments              -         -      1,856            -          (59)         -         -             -          -     1,797 
 Share options 
  exercised            71     1,034        277            -             -         -         -             -          -     1,382 
 Shares 
  purchased by 
  EBT                   -         -          -        (603)             -         -         -             -          -     (603) 
 Shares sold by 
  EBT                   -         -          -          600             -         -         -             -          -       600 
 Dividends paid         -         -          -            -             -         -         -             -    (3,008)   (3,008) 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 At 31 December 
  2019 
  (audited)        10,745    36,226      9,466        (159)           649     1,531       555         (249)    132,471   191,235 
---------------  --------  --------  ---------  -----------  ------------  --------  --------  ------------  ---------  -------- 
 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

 
                                               (Unaudited)   (Unaudited)     (Audited) 
                                                Six months    Six months 
                                                     ended         ended    Year ended 
                                                   30 June       30 June   31 December 
                                                        20            19            19 
                                                   GBP'000       GBP'000       GBP'000 
--------------------------------------------  ------------  ------------  ------------ 
 Cash flows from operating activities 
 Profit from operations                              4,425        11,385        24,243 
 Adjustments for: 
 Depreciation                                        1,700         1,603         3,154 
 Amortisation - intellectual property 
  rights                                             1,074           682         1,683 
 - development costs                                   251           244           492 
 - software intangibles                                256           218           519 
 Increase in inventories                           (5,357)       (1,361)       (2,454) 
 Decrease/(increase) in trade and other 
  receivables                                       11,260         2,162         (574) 
 Decrease in trade and other payables              (2,269)       (2,798)       (1,275) 
 Share-based payments expense                          795         1,065         1,856 
 Taxation                                          (3,318)       (2,939)       (5,945) 
 Net cash inflow from operating activities           8,817        10,261        21,699 
--------------------------------------------  ------------  ------------  ------------ 
 Cash flows from investing activities 
 Purchase of software                                 (52)         (662)         (826) 
 Capitalised research and development              (1,217)         (730)       (2,355) 
 Purchases of property, plant and equipment        (1,141)       (1,231)       (2,673) 
 Disposal of property, plant and equipment             120             -             4 
 Interest received                                     166           199           422 
 Acquisition of subsidiary                            (39)      (18,408)      (24,145) 
 Net cash used in investing activities             (2,163)      (20,832)      (29,573) 
--------------------------------------------  ------------  ------------  ------------ 
 Cash flows from financing activities 
 Dividends paid                                    (2,260)       (1,931)       (3,008) 
 Repayment of principal under lease 
  liabilities                                        (493)         (486)         (925) 
 Issue of equity shares                                 60           907         1,066 
 Shares purchased by EBT                             (375)         (603)         (603) 
 Shares sold by EBT                                    373           600           600 
 Interest paid                                       (347)         (366)         (709) 
 Repayment of secured loan                           (176)             -             - 
 Net cash used in financing activities             (3,218)       (1,879)       (3,579) 
--------------------------------------------  ------------  ------------  ------------ 
 Net increase/(decrease) in cash and 
  cash equivalents                                   3,436      (12,450)      (11,453) 
 Cash and cash equivalents at the beginning 
  of the period                                     64,751        76,391        76,391 
 Effect of foreign exchange rate changes               168          (53)         (187) 
 Cash and cash equivalents at the end 
  of the period                                     68,355        63,888        64,751 
--------------------------------------------  ------------  ------------  ------------ 
 

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 2020 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 2020 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 2019 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 apart from the adoption of the following new or amended IFRS and Interpretations issued by the International Accounting Standards Board (IASB):

   -       Amendments to References to the Conceptual Framework in IFRS Standards 
   -       Definition of a Business (Amendments to IFRS 3) 
   -       Definition of Material (amendments to IAS 1 and IAS 8) 
   -       Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS7) 

No revised standards adopted in the current period have had a material impact on the Group's financial statements.

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 2019. 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.      Earnings per share 
 
                                        (Unaudited)   (Unaudited) 
                                         Six months    Six months     (Audited) 
                                              ended         ended    Year ended 
                                            30 June       30 June   31 December 
                                               2020          2019          2019 
 Number of shares                              '000          '000         ' 000 
-------------------------------------  ------------  ------------  ------------ 
 Weighted average number of ordinary 
  shares for the purposes of basic 
  earnings per share                        214,985       213,876       214,730 
-------------------------------------  ------------  ------------  ------------ 
 Effect of dilutive potential 
  ordinary shares: share options, 
  deferred share bonus, LTIPs                 2,585         2,452         2,107 
-------------------------------------  ------------  ------------  ------------ 
 Weighted average number of ordinary 
  shares for the purposes of diluted 
  earnings per share                        217,570       216,328       216,837 
-------------------------------------  ------------  ------------  ------------ 
 

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, amortisation of acquired intangible assets and change in the fair value of long-term liability and is based on earnings of:

 
                                           (Unaudited)   (Unaudited) 
                                            Six months    Six months     (Audited) 
                                                 ended         ended    Year ended 
                                               30 June       30 June   31 December 
                                                  2020          2019          2019 
                                               GBP'000       GBP'000       GBP'000 
----------------------------------------  ------------  ------------  ------------ 
 Earnings 
 Profit for the year being attributable 
  to equity holders of the parent                3,646         8,773        18,919 
 Exceptional items                                   -           920         1,053 
 Amortisation of acquired intangible 
  assets                                         1,074           682         1,683 
 Change in the fair value of long-term 
  liability                                       (29)             -         (345) 
 Adjusted profit for the year being 
  attributable to equity holders of the 
  parent                                         4,691        10,375        21,310 
----------------------------------------  ------------  ------------  ------------ 
 
                                                 pence         pence         Pence 
----------------------------------------  ------------  ------------  ------------ 
 Adjusted basic EPS                              2.18p         4.85p         9.92p 
 Adjusted diluted EPS                            2.16p         4.80p         9.83p 
----------------------------------------  ------------  ------------  ------------ 
 

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.

   5.      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.

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 2020                           Surgical   Woundcare   Consolidated 
 (Unaudited)                              GBP'000     GBP'000        GBP'000 
--------------------------------------  ---------  ----------  ------------- 
 Revenue                                   21,428      17,854         39,282 
--------------------------------------  ---------  ----------  ------------- 
 
 Result 
--------------------------------------  ---------  ----------  ------------- 
 Adjusted segment operating profit          3,020       2,784          5,804 
 Amortisation of acquired intangibles     (1,069)         (5)        (1,074) 
 Segment operating profit                   1,951       2,779          4,730 
 Unallocated expenses                                                  (305) 
 Exceptional items                                                         - 
                                                               ------------- 
 Profit from operations                                                4,425 
 Finance income                                                          166 
 Finance costs                                                         (331) 
--------------------------------------  ---------  ----------  ------------- 
 Profit before tax                                                     4,260 
 Tax                                                                   (614) 
--------------------------------------  ---------  ----------  ------------- 
 Profit for the period                                                 3,646 
--------------------------------------  ---------  ----------  ------------- 
 
 
 At 30 June 2020 
  (Unaudited)                      Surgical   Woundcare   Consolidated 
 Other information                  GBP'000     GBP'000        GBP'000 
--------------------------------  ---------  ----------  ------------- 
 Capital additions: 
 Software intangibles                    25          27             52 
 Development                            647         570          1,217 
 Property, plant and equipment          663         478          1,141 
 Depreciation and amortisation      (2,261)     (1,020)        (3,281) 
--------------------------------  ---------  ----------  ------------- 
 Balance sheet 
 Assets 
 Segment assets                     163,143      67,467        230,610 
 Unallocated assets                                                321 
--------------------------------  ---------  ---------- 
 Consolidated total assets                                     230,931 
--------------------------------  ---------  ----------  ------------- 
 Liabilities 
 Segment liabilities                 18,160      14,458         32,618 
--------------------------------  ---------  ----------  ------------- 
 Consolidated total liabilities                                 32,618 
--------------------------------  ---------  ----------  ------------- 
 
 
 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 
--------------------------------  ---------  ----------  ------------- 
 
 
 Year ended 
  31 December 2019                       Surgical   Woundcare   Consolidated 
 (Audited)                                GBP'000     GBP'000        GBP'000 
--------------------------------------  ---------  ----------  ------------- 
 Revenue                                   56,544      45,824        102,368 
--------------------------------------  ---------  ----------  ------------- 
 
 Result 
--------------------------------------  ---------  ----------  ------------- 
 Adjusted segment operating profit         16,086      11,378         27,464 
 Amortisation of acquired intangibles     (1,675)         (8)        (1,683) 
 Segment operating profit                  14,411      11,370         25,781 
 Unallocated expenses                                                  (485) 
 Exceptional items                                                   (1,053) 
                                                               ------------- 
 Profit from operations                                               24,243 
 Finance income                                                          406 
 Finance costs                                                         (392) 
--------------------------------------  ---------  ----------  ------------- 
 Profit before tax                                                    24,257 
 Tax                                                                 (5,338) 
--------------------------------------  ---------  ----------  ------------- 
 Profit for the year                                                  18,919 
--------------------------------------  ---------  ----------  ------------- 
 
 
 Year ended 
  31 December 
  (Audited)                        Surgical   Woundcare   Consolidated 
 Other information                  GBP'000     GBP'000        GBP'000 
--------------------------------  ---------  ----------  ------------- 
 Capital additions: 
 Software intangibles                   364         462            826 
 Development                          1,346       1,009          2,355 
 Property, plant and equipment        1,393       1,280          2,673 
 Depreciation and amortisation      (3,985)     (1,863)        (5,848) 
--------------------------------  ---------  ----------  ------------- 
 Balance sheet 
 Assets 
 Segment assets                     160,241      66,354        226,595 
 Unallocated assets                                                387 
--------------------------------  ---------  ---------- 
 Consolidated total assets                                     226,982 
--------------------------------  ---------  ----------  ------------- 
 Liabilities 
 Segment liabilities                 21,647      14,100         35,747 
--------------------------------  ---------  ----------  ------------- 
 Consolidated total liabilities                                 35,747 
--------------------------------  ---------  ----------  ------------- 
 

Geographical segments

The Group operates in the UK, Germany, the Netherlands, France, the Czech Republic, Israel, with a sales office located in Russia and a sales presence in the USA. 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)          (Audited) 
                                                Six months ended   Six months ended         Year ended 
                                                    30 June 2020       30 June 2019   31 December 2019 
                                                         GBP'000            GBP'000            GBP'000 
---------------------------------------------  -----------------  -----------------  ----------------- 
 United Kingdom                                            7,349              8,971             20,151 
 Germany                                                   9,234             10,437             20,018 
 Europe excluding United Kingdom and Germany              12,032             12,826             23,476 
 United States of America                                  8,922             14,473             34,879 
 Rest of World                                             1,745              2,007              3,844 
---------------------------------------------  -----------------  -----------------  ----------------- 
                                                          39,282             48,714            102,368 
---------------------------------------------  -----------------  -----------------  ----------------- 
 

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

 
                                                             (Unaudited)        (Unaudited)          (Audited) 
                                                        Six months ended   Six months ended         Year ended 
                                                            30 June 2020       30 June 2019   31 December 2019 
                                                                 GBP'000            GBP'000            GBP'000 
-----------------------------------------------------  -----------------  -----------------  ----------------- 
 United Kingdom                                                  114,466            112,794            117,055 
 Germany                                                          73,163             69,024             69,502 
 Israel                                                           24,478             25,961             23,175 
 France                                                           10,291                  -              9,612 
 Europe excluding United Kingdom, Germany and France               4,924              4,912              5,106 
 United States of America                                          3,609              2,439              2,532 
                                                                 230,931            215,130            226,982 
-----------------------------------------------------  -----------------  -----------------  ----------------- 
 
 
   6.      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 2020. 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 June    30 June     31 Dec    30 June   30 June   31 Dec    30 June   30 June   31 Dec 
                 20         19         19         20        19        19        20        19        19 
              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     1.300      1.406      1.386      9,000     9,500     9,000     (363)     (690)     (307) 
 3 to 6 
  months       1.241      1.444      1.328      8,500     7,500     8,000     (17)      (665)      (5) 
 7 to 12 
  months       1.299      1.363      1.271     14,000    16,000    17,500     (526)     (705)      615 
 Over 12 
  months       1.253      1.338      1.301     10,000     5,000    12,500     (87)      (140)      262 
-----------  ---------  ---------  ---------  --------  --------  --------  --------  --------  -------- 
                                               41,500    38,000    47,000     (993)    (2,200)     56 
-----------  ---------  ---------  ---------  --------  --------  --------  --------  --------  -------- 
 
 
                     Ave. exchange rate              Foreign currency                 Fair value 
               30 June    30 June     31 Dec    30 June   30 June   31 Dec    30 June   30 June   31 Dec 
                  20         19         19         20        19        19        20        19        19 
               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      1.138      1.112      1.125       900       960       620      (28)        2        23 
 3 to 6 
  months        1.074      1.108      1.143       600       960      1,200      12         2        25 
 7 to 12 
  months        1.144      1.137      1.112      1,200     1,820     1,500     (47)       46        61 
 Over 12 
  months        1.112      1.139      1.144      1,000      900      1,200     (18)       28        12 
------------  ---------  ---------  ---------  --------  --------  --------  --------  --------  -------- 
                                                 3,700     4,640     4,520     (81)       78        121 
------------  ---------  ---------  ---------  --------  --------  --------  --------  --------  -------- 
 
   7.      Exceptional items 

During the six months ended 30 June 2020, the Group incurred exceptional items of GBPnil (2019 H1: GBP0.9 million 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 , year ended 31 December 2019: GBP1.1 million in relation to the acquisition and integration of Sealantis and Biomatlante as well as the transaction costs to participate in another potential process which was ultimately unsuccessful ).

   8.      Taxation 

The weighted average tax rate for the Group for the six month period ended 30 June 2020 was 14.4% (first half of 2019: 21.8%, year ended 31 December 2019: 22.0%). The Group's effective tax rate for the full year is expected to be 14.4%, which has been applied to the six months ended 30 June 2020 (first half of 2019: 21.8%, year ended 31 December 2019: 22.0%). This represents a significant decrease on previous periods as the Group is able to retrospectively claim for patent box relief as a result of the granting of patents on LiquiBand(R) Exceed in the first half of 2020.

   9.      Dividends 
 
                                        (Unaudited)   (Unaudited)     (Audited) 
                                         Six months    Six months 
                                              ended         ended    Year ended 
                                            30 June       30 June   31 December 
                                               2020          2019          2019 
 Amounts recognised as distributions 
  to equity holders in the period:          GBP'000       GBP'000       GBP'000 
-------------------------------------  ------------  ------------  ------------ 
 Final dividend for the year ended 
  31 December 2018 of 0.90p per 
  ordinary share                                  -         1,931         1,931 
 Interim dividend for the year 
  ended 31 December 2019 of 0.50p 
  per ordinary share                              -             -         1,077 
 Final dividend for the year ended 
  31 December 2019 of 1.05p per 
  ordinary share                              2,260             -             - 
------------------------------------- 
                                              2,260         1,931         3,008 
-------------------------------------  ------------  ------------  ------------ 
 
   10.    Contingent liabilities 

The Directors are not aware of any contingent liabilities faced by the Group as at 30 June 2020 (30 June 2019: GBPnil, 31 December 2019: GBPnil).

   11.    Share capital 

Share capital as at 30 June 2020 amounted to GBP10,764,000 (30 June 2019: GBP10,738,000, 31 December 2019: GBP10,745,000). During the period the Group issued 371,467 shares in respect of exercised share options, LTIPS, Deferred Annual Bonus Scheme and the Deferred Share Bonus Scheme.

   12.    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.

Due to the impact that COVID-19 has had on the global economy, the Group has deemed it appropriate to use sensitivity analysis on the Group's forecasted performance, using a mid-case scenario, a 10% sales reduction, and a worst-case scenario, a 25% sales reduction. The results show that in both scenarios AMS is able to continue its operations for a period of at least 12 months, and importantly there remains significant margin between our covenants in place.

With regards to the Group's financial position, it had cash and cash equivalents at 30 June 2020 of GBP68.4 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 NatWest, is subject to leverage and interest cover covenants, 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, long-term market growth is expected. 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.

   13.    Principal risks and uncertainties 

Further detail concerning the principal risks affecting the business activities of the Group is detailed on pages 46 and 47 of the Annual Report and Accounts for the year ended 31 December 2019. There have been no significant changes since the last annual report, other than the uncertainty surrounding the COVID-19 pandemic, for which, an update has been provided in market announcements and within these Interim Statements.

   14.    Seasonality of sales 

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

   15.    Events after the balance sheet date 

There have been no material events subsequent to the end of the interim reporting period ended 30 June 2020.

   16.    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".

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END

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September 16, 2020 02:00 ET (06:00 GMT)

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