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| 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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 3.80 | 1.95% | 198.60 | 198.00 | 200.00 | 200.00 | 191.20 | 191.20 | 234,922 | 16:35:12 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Plastics,resins,elastomers | 126.21M | 15.89M | 0.0732 | 27.32 | 434.42M |
From May 2019 to May 2024
TIDMAMS
RNS Number : 6934F
Advanced Medical Solutions Grp PLC
11 March 2020
11 March 2020
Advanced Medical Solutions Group plc
("AMS" or the "Group")
Unaudited Preliminary Results for the year ended 31 December 2019
Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), the surgical and advanced woundcare specialist company, today announces its unaudited preliminary results for the year ended 31 December 2019.
Financial Highlights:
Hot Features
Premium
2019 2018 Reported Change
change at constant
currency(1)
Group revenue (GBP million) 102.4 102.6 0% -1%
------ ------ --------- -------------
Operating margin (%) 23.7 27.8 -410bps -
------ ------ --------- -------------
Adjusted(2) operating margin
(%) 26.4 28.2 180bps -
------ ------ --------- -------------
Profit before tax (GBP million) 24.3 28.3 -14% -
------ ------ --------- -------------
Adjusted(2) profit before
tax (GBP million) 26.6 28.8 -7% -
------ ------ --------- -------------
Diluted earnings per share
(p) 8.72 10.41 -16% -
------ ------ --------- -------------
Adjusted(2) diluted earnings
per share (p) 9.83 10.63 -8% -
------ ------ --------- -------------
Net operating cash flow 21.7 21.7 0% -
------ ------ --------- -------------
Net cash(3) (GBP million) 64.8 76.4 -15% -
------ ------ --------- -------------
Proposed full year dividend
per share (p) 1.55 1.32 +17% -
------ ------ --------- -------------
Business Highlights:
-- Despite significant challenges in 2019, growth was achieved across multiple categories, but was offset by previously reported the downturn in US LiquiBand(R) , and Group revenue of GBP102.4 million was flat on 2018. Key drivers were:
o US LiquiBand(R) sales reduced by 23% to GBP17.7 million (2018: GBP23.0 million) and by 25% at constant currency
o EU/ROW LiquiBand(R) revenue increased by 24% at reported and constant currency to GBP10.8 million (2018: GBP8.7 million)
o Fix8(TM) s ales increased by 27% at reported and constant currency to GBP2.6 million (2018: GBP2.1 million)
o Biosurgical sales increased by 9% to GBP9.4 million (2018: GBP8.6 million) and by 10% at constant currency
o Suture sales increased by 8% to GBP14.4 million (2018: GBP13.3 million) and by 9% at constant currency
o Sales of antimicrobial dressings increased by 4% to GBP20.6 million (2018: GBP19.7 million) and by 3% at constant currency
-- Investment in acquisitions and increased research and development, regulatory and clinical activity is establishing a bedrock for future growth:
o Acquisition of Sealantis in January 2019 for US$25 million (GBP19 million) strengthened our internal sealants R&D pipeline
o Acquisition of Biomatlante in November 2019 for EUR8 million (GBP7 million) strengthened our biosurgical portfolio and enters us into the synthetic bone substitutes market with a differentiated product
o Broadened and more diverse portfolio of innovative internally developed products
-- Adjusted operating margin down 180 bps to 26.4% (2018: 28.2%) and adjusted profit before tax down 7% to GBP26.6 million (2018: GBP28.8 million) due to investment in the product pipeline including Sealantis, adverse sales mix and currency contracts.
-- The Group maintains its solid balance sheet and the Board proposes an increased final dividend of 1.05p per share to be paid on 19 June 2020 to shareholders on the register at the close of business on 29 May 2020, making a total dividend for the year of 1.55p per share (2018: 1.32p), an increase of 17%.
Commenting on the results Chris Meredith, Chief Executive Officer of AMS, said: "2019 was a challenging year and despite the setbacks we faced, I am pleased with the overall performance of the Group, other than for US LiquiBand(R) sales, which were disappointing. We look forward to regaining positive momentum in our US LiquiBand(R) business given the recent approval of LiquiBand(R) Rapid and the anticipated approval of LiquiBand(R) XL and we expect to realise significant commercial benefits in coming years following the successful acquisitions of Sealantis and Biomatlante. Our strong pipeline of R&D innovation further expands our addressable market and has never been stronger. We continue to be optimistic about our growth prospects in the growing global health care market."
- End -
Note 1 Constant currency removes the effect of currency movements by re-translating the current year's performance at the previous year's exchange rates
Note 2 Adjusted profit before tax is shown before exceptional items which were GBP1.1 million (2018: GBP0.4 million), amortisation of acquired intangible assets which was GBP1.7 million (2018: GBP0.1 million) and change in fair value of long-term debt, a GBP0.3 million credit (2018: GBPnil) as defined in the Financial Review. Adjusted operating margin is shown before exceptional items and amortisation of acquired intangible assets
Note 3 Net cash is defined as cash and cash equivalents plus short term investments less financial liabilities and bank loans
For further information, please visit www.admedsol.com or 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 / Patrick Robb / Gary Clarence
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 LiquiBand(R) Fix8(TM) . 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, Germany, France, the Netherlands, 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, the Czech Republic and Russia. The Group has R&D innovation hubs in the UK, Germany, France and Israel. Established in 1991, the Group has more than 700 employees. For more information, please see www.admedsol.com .
Chief Executive's Statement
Group performance
Whilst 2019 proved a challenging year for the Group, with the previously reported downturn of US LiquiBand (R) and the third-party sterilisation failure at the end of 2019 which was resolved in early 2020, I am pleased to report that good growth in other areas of the business enabled the Group to deliver revenues of GBP102.4 million, broadly in line with 2018.
Adjusted profit before tax decreased by 7% to GBP26.6 million due to our operational investment in Sealantis, adverse sales mix and currency contracts. This contributed to a decrease of 8% in adjusted diluted earnings per share.
As previously stated, Surgical Business Unit sales were restricted by US LiquiBand(R) performance, resulting in a 1% decrease in revenue to GBP56.5 million and by 2% at constant currency. W e have made progress on the two key product approvals needed to support the recovery of LiquiBand(R) in the US. LiquiBand(R) Rapid(TM) was recently approved by the FDA and the LiquiBand(R) XL pilot clinical study is in progress and will be concluded by the end of Q1 2020.
Our Woundcare business grew 1% to GBP45.8 million but was flat at constant currency. We strengthened our woundcare portfolio in the year with US approvals for our antimicrobial PHMB foam and silver high-performance dressings, both of which were signed to partners and launched to the market in Q4 2019.
The acquisition of Biomatlante demonstrates our strategy of utilising our strong cash position to acquire businesses with complementary products, exciting technologies and new routes to market and the acquisition of Sealantis demonstrates our willingness to invest in longer term growth opportunities.
Market
Favourable global healthcare and demographic trends are likely to continue to drive growth in our large global surgical and advanced woundcare markets in the longer term, both of which provide AMS with significant future opportunities.
In recent years, the advanced woundcare market has reported lower market growth rates as well as increased price pressure and ongoing reviews of reimbursement levels in various European countries, all of which will create headwinds for our Woundcare Business Unit.
We have increased the size of our addressable part of the surgical market with our two acquisitions in 2019. Commercialisation of Sealantis is expected in 2021 and will open up the US$ 1 billion internal sealants market. Biomatlante provides innovative complementary products and immediate access to the US$0.5 billion synthetic bone substitutes market
In addition, we are starting to see opportunities due to competitor product withdrawals in our surgical and woundcare markets as a result of the enhanced regulatory environment. We are confident of strong growth as we continue to expand our product portfolio, enter new geographies and increase our share in each market.
Strategy
Our strategy continues to be based on four pillars: Growth, Innovation, Operational Excellence and Culture.
Growth
Our Growth strategy is to harness the opportunities from our multiple routes to market across multiple geographies with products that add value to patients and payers through delivery of equal or better clinical performance without compromising care or outcomes. We continue to increase our investment in major R&D and regulatory projects to enable future growth opportunities.
Innovation
For Innovation we continue to strengthen our portfolio by developing or acquiring high quality products that allow us or our partners to make market share gains in high value segments.
Operational excellence
Our operational strategy is centred around the needs of our customers and aims to reduce operating costs and operational risk whilst producing high quality products and increasing capacity. This will allow us to continue to drive out cost and improve margins.
Culture
We operate to the highest ethical standards with our values of Care, Fair, Dare embedded in all we do:
-- Caring about the work we undertake and the real-life differences we can make -- Acting with integrity and ensuring we are fair in all aspects of business -- Moving boundaries and challenging constructively to build on others' ideas
Acquisitions
The acquisition of Sealantis has provided an important pipeline of significant products, intellectual property, a strong R&D team and access to markets in which we have not previously operated. The internal sealants market is large (greater than US$1 billion) and growing, and Sealantis has developed a range of products that reduce leakage of blood or fluid following gastrointestinal surgery. Integration is now successfully complete, and the project team are currently engaging with regulators as we prepare clinical trials. We expect to record a low level of sales to key opinion leaders in 2020 with first commercial product launches planned for 2021.
The acquisition of Biomatlante enhances our product offering and market access into orthopaedic, spinal, dental and sports surgery. It has a range of innovative, revenue generating biomaterial products including, MBCP (R) , a biphasic calcium phosphate synthetic bone substitute which has a unique micro and macroporous structure that most closely resembles the architecture of natural human bone. The technology is supported by more than 650 published studies and 30 years of clinical experience, which validate its superior performance in comparison to competitor products. The Group expects Biomatlante to be earnings enhancing in 2020. Integration is progressing well and the potential for further commercial synergies has been confirmed in post-completion commercial reviews.
Bringing in high-quality people and products to our Group is a crucial part of our strategy and we are working with the existing management in both acquired businesses to maximise their potential in the coming years.
The Group continues to actively seek acquisitions that deliver value for shareholders and meet our criteria of being:
-- Products or technologies that enable us to leverage our woundcare customer base or surgical routes to market, or
-- Surgically focused companies with product synergies, strong R&D capability and ownership of their products
We have an internal team working to identify, appraise and progress acquisition opportunities and continue to explore options to accelerate growth through select targets.
Regulatory
The transition phase of the new European Medical Devices Regulation (MDR) runs until May 2024. MDR stipulates stricter requirements for product safety and performance, clinical evaluation and post-market clinical evidence. In the past eighteen months, the Group has successfully completed the Medical Device Directive (MDD) recertification of the RESORBA(R) ranges, the LiquiBand(R) portfolio, and all of our significant woundcare products providing extended time to implement MDR. This demonstrates our capability to navigate the increasingly challenging regulatory framework as we complete our MDR implementation as part of our robust Group wide regulatory plan. During the MDR transition period, the Group expects to continue to incur an increasing level of costs associated with regulatory activity.
The Group is beginning to see opportunities arising from the impact of the MDR and, given our extensive preparations, we remain confident in our ability to exploit them. To support future geographic growth, our regulatory teams added more than one hundred new international registrations for our surgical and woundcare products in the year, across Latin America, the Middle East, the Far East and Australasia.
During the year, we successfully transitioned to MDSAP (Medical Device Single Audit Program) and, following audits at each of our sites, our certificates were received in the second half of 2019.
Brexit
The Group is well prepared for the possible end of the Brexit transition period on 31 December 2020. UK product certificates have been reassigned to BSI Netherlands so that our products retain their EU approval, Advanced Medical Solutions BV has been appointed as our EU Authorised Representative and we will continue to hold increased inventory levels on all sites. Under WTO rules, there would be no duty on our finished goods and steps are in place to mitigate any additional duty costs on raw materials.
COVID-2019
In response to the ongoing outbreak of COVID-19 the Group has set-up a designated team to closely monitor and risk assess its supply chain. The team is working proactively with employees, customers and suppliers to monitor any potential disruption and, to date, expects no significant supply issues. The Group has also assessed the risks for its employees and has reiterated published guidance such as good personal hygiene practices. Our forward-looking financial guidance assumes no significant impact from the COVID-19 outbreak.
Stakeholders
We continue to be grateful for the support and hard work of our committed staff, partners and other stakeholders.
Outlook
The Group expects to deliver more than 10% revenue growth in 2020 driven by new product launches, strong underlying demand for our surgical portfolio and opportunities arising from the transition to MDR. US LiquiBand(R) is expected to return to growth in 2020 given the recent approval of LiquiBand(R) Rapid and the anticipated approval of LiquiBand(R) XL which is expected in H2. Notwithstanding that, we see the low reported market growth and increasing reimbursement challenges as potential headwinds for our Woundcare Business Unit, which will also be impacted by uneven ordering patterns associated with Brexit. Operationally the business is in robust strength, our recent acquisitions are providing new market and product opportunities and the Board remains optimistic about AMS's future growth prospects from both an organic and acquisitive standpoint.
Business Unit performance
As announced in our Financial Statements for the year ended 31 December 2018, we adjusted our Business Units at the start of 2019 to enable increased focus and unlock commercial and R&D synergies . Comparative segment information has been restated to align with the new Business Unit structure.
Surgical Business Unit
The Surgical Business Unit reports sales of all surgical devices. Overall, revenue decreased by 1% to GBP56.5 million (2018: GBP57.1 million) and by 2% at constant currency. Whilst the Business Unit delivered strong growth in Internal Fixation and Sealants, Traditional Closure, Biosurgical devices and OEM Sealants, this was offset by the previously reported decline in Advanced Closure.
Surgical Business 2019 2018 Reported Change
Unit GBP'000 GBP'000 Change at constant
currency
Advanced Closure 28,539 31,684 -10% -11%
--------- --------- --------- -------------
Internal Fixation
and Sealants 2,629 2,066 27% 27%
--------- --------- --------- -------------
Traditional Closure 14,407 13,342 8% 9%
--------- --------- --------- -------------
Biosurgical Devices 9,423 8,640 9% 10%
--------- --------- --------- -------------
OEM Sealants 1,545 1,381 12% 12%
--------- --------- --------- -------------
TOTAL 56,544 57,113 -1% -2%
--------- --------- --------- -------------
Advanced Closure
LiquiBand(R) topical skin adhesives incorporating medical cyanoacrylate adhesives in combination with purpose-built applicators used to close and protect a broad variety of surgical and traumatic wounds.
Advanced Closure 2019 2018 Reported Change
GBP'000 GBP'000 Change at constant
currency
Americas 17,733 22,963 -23% -25%
--------- --------- --------- -------------
UK/Germany 6,850 5,550 23% 24%
--------- --------- --------- -------------
ROW 3,956 3,171 25% 24%
--------- --------- --------- -------------
TOTAL 28,539 31,684 -10% -11%
--------- --------- --------- -------------
Revenue decreased by 10% to GBP28.5 million (2018: GBP31.7 million), and by 11% at constant currency despite strong growth in all territories except the US which was impacted by a combination of factors, as previously reported:
-- Destocking due to lost business with two large Group Purchasing Organisations and a slowdown in new evaluations as a result of not having a combined glue and tape device for large wound closure in the AMS portfolio.
-- Third party sterilisation issue.
US LiquiBand(R) is expected to return to growth in 2020 following the launches of LiquiBand(R) Rapid(TM) and LiquiBand(R) XL. Following its recent approval, we are launching LiquiBand(R) Rapid(TM) with one of our main partners in Q2 2020. This will enable AMS to regain ground with an improved product. The LiquiBand(R) XL device will allow us to compete in the large wound market for the first time and unlock further growth potential in our LiquiBand(R) business with all partners. LiquiBand(R) XL will finish its critical pilot study by the end of Q1 2020 providing confirmation that we have a device and formulation that meets the key criteria of 10-day wear time. The successful product from the pilot study will enter a full GLP study in April which would keep us on track to file for a 510k by the end of Q2 2020.
Internal Fixation and Sealants
LiquiBand(R) Fix8(TM) devices are 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 increased by 27% to GBP2.6 million (2018: GBP2.1 million) predominately driven by demand for the laparoscopic device. The open hernia mesh fixation device, approved in in late 2018, has received very positive surgeon feedback reinforcing our decision to access the substantial portion of the global hernia market dedicated to open hernia surgery. Following the soft launch of the open hernia mesh device at the start of the year, we have made significant progress during the year in building clinical evidence and developing a base of high-profile key opinion leaders which should create a platform for success in 2020.
In May 2019 we received the US Investigational Device Exemption (IDE) for laparoscopic Fix8(TM) which allowed us to start the clinical trial that will provide the safety and effectiveness data required to support our premarket approval (PMA). The clinical trial is progressing very well in terms of surgeon feedback on the product and its performance. Patient recruitment commenced in August 2019 at our first site but was initially slower than anticipated. We have now increased the number of clinical sites to five, increased the number of investigators at the sites and expect to complete all surgical procedures by the end of 2020. We expect to file for FDA approval in H2 2021. 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 landmark for the Group.
The acquisition of Sealantis, in January 2019, provided AMS with a unique product platform to access the $1 billion internal sealants market. We are working on navigating the regulatory environment and on some product design enhancements to maximise commercial success and expect:
-- soft launch to key opinion leaders in H2 2020 -- 150 patient study across three major markets in H2 2020 -- commercial product launch planned for 2021 -- larger pivotal study to support FDA approval to start in H2 2021
Traditional Closure
RESORBA(R) branded Absorbable and Non-absorbable Sutures.
Revenue increased by 8% to GBP14.4 million (2018: GBP13.3 million) and by 9% at constant currency. Growth was delivered in various European territories and in the US.
Biosurgical Devices
Our biosurgical portfolio has been significantly expanded by the acquisition of Biomatlante which has added synthetic bone substitutes, cross-linked collagen membranes and bioabsorbable screws to our existing biosurgical ranges which include RESORBA(R) Gentacoll(R) used in Orthopaedic and Cardiac applications, and collagen fleeces and cones used in Dental applications.
Revenue increased by 9% to GBP9.4 million (2018: GBP8.6 million) and by 10% at constant currency , predominately driven by growth in Europe and Latin America, a number of new customers notably in the Far East and by Biomatlante revenue (GBP0.4 million) following its acquisition at the end of November 2019.
Antibiotic loaded collagens providing local drug delivery 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. We have submitted our CE mark application for collagen with vancomycin and approval is expected in H2 2020. Our antibiotic collagen pouch for cardiovascular devices, which is currently sold under pr escription in Germany, is sc heduled for an FDA review meeting in Q2 2020 with a view to finalising the product indications and regulatory pathway for 510k approval.
OEM Sealants
Surgical sealants sold under partner brands.
Revenue increased by 12% in 2019 to GBP1.5 million (2018: GBP1.4 million) partly due to partner ordering patterns.
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.
Revenue increased by 1% to GBP45.8 million (2018: GBP45.5 million) and was in line with prior year at constant currency.
Woundcare Business Unit 2019 2018 Reported Growth
GBP'000 GBP'000 Growth at constant
currency
Infection Management 20,555 19,744 4% 3%
--------- --------- --------- -------------
Exudate Management 19,271 20,422 -6% -6%
--------- --------- --------- -------------
Other Woundcare 5,998 5,319 13% 9%
--------- --------- --------- -------------
TOTAL 45,824 45,485 1% 0%
--------- --------- --------- -------------
Infection Management
Advanced woundcare dressings that incorporate antimicrobials such as Silver and Polyhexamethylene Biguanide (PHMB).
Revenue increased by 4% to GBP20.6 million (2018: GBP19.7 million) and by 3% at constant currency with growth driven mainly by additional sales of PHMB dressings including a number of new customers and the first shipment of our atraumatic PHMB foam dressing into the US following its approval in July 2019. Our atraumatic PHMB foam range demonstrates enhanced product performance in terms of rapid microbial activity and eradication of pathogens and enters the growing antimicrobial foam market which exceeds GBP100 million.
Silver High Performance Dressing, our next generation antimicrobial gelling fibre technology with excellent performance and patent protected construction, received US approval in the second half of 2019 and has been signed up by a number of our US partners with launch orders predominately expected to ship in the first half of 2020.
Our Moisture Wicking Fabric with silver, indicated for use in the management of skin folds and skin-on-skin friction, was approved for the US and EU in the second half of 2019 and gives AMS and its partners access to a new market of more than $25 million with initial orders expected in the first half of 2020.
Following customer feedback, we have improved the design of our silver post-operative dressing which launched with a US partner in 2018 and expect increased ordering from multiple partners in 2020.
Looking forward, the Group is working on developing next generation high-gelling products with differentiated antibiofilm claims.
Exudate Management
The exudate management category comprises advanced woundcare dressings which do not incorporate any antimicrobial elements and includes the majority of our ActivHeal(R) range. Revenue was impacted by one of our main partners significantly altering its inventory levels due to its assessment of the risk of Brexit related supply disruption. This major partner ordered significantly more than usual in Q4 2018 and H1 2019 followed by much lower demand in H2 2019. Revenue consequently declined by 6% to GBP19.3 million (2018: GBP20.4 million) and by 6% at constant currency.
During the year, we expanded our Lite foam portfolio with a range of shapes and sizes for the acute post-surgery market, extended the claims on our silicone foam range to include pressure ulcer prevention in the US and gained a number of new customers in the EU and Latin America.
The Group is seeing strong progress from its initiative to exploit ActivHeal(R) opportunities in select overseas markets. We continue to navigate the approval process in multiple new markets including the Middle East and Latin America. This initiative has generated significant distribution partner interest and validates the decision to realign our Business Units at the start of 2019.
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 the gels and sealants used in woundcare, royalties and other fee income. Revenue increased by 13% to GBP6.0 million (2018: GBP5.3 million) and by 9% at constant currency predominately due to increased Organogenesis royalties of GBP2.9 million (2018, impacted by lower reimbursement: GBP1.8 million).
Chris Meredith
Chief Executive Officer
Financial Review
Summary
In 2019 the Group delivered reported revenue in-line with prior year and a 1% decrease at constant currency. Profit before tax decreased 14% due to operational investment in Sealantis, adverse sales mix and currency contracts and increased amortisation due to the acquisition of Sealantis at the start of the year.
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, amortisation and the change in fair value of long-term debt to be separately identified. Net cash is an additional non-GAAP measure used.
Administration costs were impacted by foreign exchange movements and increased by 3.8% to GBP34.6 million (2018: GBP33.3 million) excluding exceptional items. Foreign exchange movements, predominately driven by exchange rates on currency contracts increased administration costs by approximately GBP3 million with underlying administration costs lower than in 2018 as the Group controlled its discretionary administrative expenditure. The Group, however, continued to increase its investment in research and development including through Sealantis and incurred GBP6.5 million of gross R&D, regulatory and clinical spend in the year (2018: GBP6.0 million), representing 6.3% of sales (2018: 5.8%).
Exceptional items of GBP1.1 million in the year (2018: GBP0.4 million) relate to the Sealantis and Biomatlante acquisitions as well as other business development activities.
Adjusted operating margin decreased by 180 bps to 26.4% (2018: 28.2%) and operating margin decreased by 410 bps to 23.7% (2018: 27.8%) due to lower US LiquiBand(R) sales, adverse currency contracts and the continued investment in Sealantis.
Adjusted profit before tax decreased by 7% to GBP26.6 million (2018: GBP28.8 million) and profit before tax decreased by 14% to GBP24.3 million (2018: GBP28.3 million).
The Group adopted IFRS 16 (Leases) in 2019 and the comparative period has been restated, which reduced profit before tax by GBP0.1 million in the year (2018: GBP0.2 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) Restated
2019 2018
GBP'000 GBP'000
------------------------------------------------ ----------- -----------
Profit before tax 24,257 28,271
---------------------------------------------------- ----------- -----------
Amortisation of acquired intangibles 1,689 81
Change in fair value of long-term
debt (345) -
Exceptional items 1,053 402
---------------------------------------------------- ----------- -----------
Adjusted profit before tax 26,648 28,754
---------------------------------------------------- ----------- -----------
The Group's effective tax rate in the Income Statement, reflecting the blended tax rates in the countries where we operate and including UK patent box relief, increased to 22.0% (2018: 20.3%) 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 8% to 9.83p (2018: 10.63p) and diluted earnings per share decreased by 16% to 8.72p (2018: 10.41p).
The Board is proposing a final dividend of 1.05p per share, to be paid on 19 June 2020 to shareholders on the register at the close of business on 29 May 2020. This follows the interim dividend of 0.50p per share paid on 25 October 2019 and would, if approved, make a total dividend for the year of 1.55p per share (2018: 1.32p), a 17% increase on 2018.
Operating result by business segment
Year ended 31 December
2019 Surgical Woundcare
GBP'000 GBP'000
------------------------------ --------- ----------
Revenue 56,544 45,824
Profit from operations 14,411 11,370
Amortisation of acquired
intangibles 1,675 8
Adjusted profit from
operations(4) 16,086 11,378
Adjusted operating margin(4) 28.4% 24.8%
------------------------------ --------- ----------
Year ended 31 December
2018
Revenue 57,113 45,485
Profit from operations 18,164 11,272
Amortisation of acquired
intangibles 76 5
Adjusted profit from
operations(4) 18,240 11,277
Adjusted operating margin(4) 31.9% 24.8%
------------------------------ --------- ----------
(Note 4: Adjusted for exceptional items and amortisation of acquired intangible assets)
(Table is reconciled to statutory information in note 4 of the financial information.)
Surgical
The adjusted operating margin of the Surgical Business Unit decreased by 350 basis points to 28.4% (2018: 31.9%), impacted by the US LiquiBand (R) sales reduction, Sealantis losses and adverse currency movements.
Woundcare
The adjusted operating margin of the Woundcare Business Unit remained consistent at 24.8% (2018: 24.8%), as an increased royalty from Organogenesis in the period was offset by adverse currency movements.
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 3.4% and 2.7% respectively and in the absence of any hedging this would have an impact on profit of 2.7% and 1.0%.
Cash flow
Adjusted net cash inflow from operating activities increased by 3% to GBP22.8 million (2018: GBP22.1 million). Net cash inflow from operating activities, impacted by exceptional items, were in line with the previous year at GBP21.7 million (2018: GBP21.7 million).
Reconciliation of Net cash inflow from operating activities
to Adjusted net cash inflow from operating activities
-------------------------------------------------------------------------
(Unaudited) (Unaudited)
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
------------------------------------------- ------------- -------------
Net cash inflow from operating activities 21,699 21,674
Add back exceptional items 1,053 402
------------------------------------------- ------------- -------------
Adjusted net cash inflow from operating
activities 22,752 22,076
------------------------------------------- ------------- -------------
Working capital increased during the year, mainly due to increased inventory levels and lower payables. Inventory increased to 5.1 months of supply (2018: 4.7 months) with high inventories to mitigate Brexit and recertification further impacted by goods awaiting sterilisation following the delay at a third-party facility. Payables decreased in value due to controlled discretionary expenditure, however creditor days increased to 34 days (2018: 31 days). Debtor days increased marginally to 49 days (2018: 47 days).
Capital investment in equipment, R&D and regulatory costs increased to GBP5.9 million (2018: GBP4.7 million).
Cash outflow relating to taxation increased to GBP5.9 million (2018: GBP3.8 million) due to the timing of tax payments, in particular in Germany and the US.
The Group paid its final dividend for the year ended 31 December 2018 of GBP1.9 million in June 2019 (2018: for the year ending 2017, GBP1.6 million), and its interim dividend for the six months ended 30 June 2019 of GBP1.1 million (for the 6 months ended 30 June 2018: GBP0.9 million) in October 2019.
The Group has an undrawn unsecured GBP80 million credit facility provided jointly by The Royal Bank of Scotland and HSBC 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) Restated
Year ended 31 December (Unaudited) (5)
Before Before
exceptional Exceptional exceptional Exceptional
items items 2019 items items 2018
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ---- ------------ ----------- -------- ------------ ----------- --------
Revenue from continuing
operations 4 102,368 - 102,368 102,598 - 102,598
Cost of sales (41,885) - (41,885) (39,192) - (39,192)
------------------------ ---- ------------ ----------- -------- ------------ ----------- --------
Gross profit 60,483 - 60,483 63,406 - 63,406
Distribution costs (997) - (997) (1,316) - (1,316)
Administration costs (34,566) (1,053) (35,619) (33,318) (402) (33,720)
Other income 376 - 376 104 - 104
------------ ----------- --------
Profit from operations 5 25,296 (1,053) 24,243 28,876 (402) 28,474
Finance income 406 - 406 378 - 378
Finance costs (392) - (392) (581) - (581)
------------------------ ---- ------------ ----------- -------- ------------ ----------- --------
Profit before taxation 25,310 (1,053) 24,257 28,673 (402) 28,271
Income tax 6 (5,338) - (5,338) (5,784) - (5,784)
------------------------ ---- ------------ ----------- -------- ------------ ----------- --------
Profit for the year
attributable to equity
holders of the parent 19,972 (1,053) 18,919 22,889 (402) 22,487
------------------------ ---- ------------ ----------- -------- ------------ ----------- --------
Earnings per share
Basic 7 9.30p (0.49p) 8.81p 10.74p (0.19p) 10.55p
Diluted 7 9.21p (0.49p) 8.72p 10.59p (0.18p) 10.41p
Adjusted diluted 7 9.83p (0.49p) 9.34p 10.63p (0.18p) 10.45p
------------------------ ---- ------------ ----------- -------- ------------ ----------- --------
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
Restated
(Unaudited) (5)
2019 2018
GBP'000 GBP'000
-------------------------------------------- ------------- -----------
Profit for the year 18,919 22,487
------------------------------------------------ ------------- -----------
Exchange differences on translation
of foreign operations (3,538) 466
Gain/(loss) arising on cash flow
hedges 3,091 (3,064)
Deferred tax charge arising on
cash flow hedges (130) -
------------------------------------------------ ------------- -----------
Total other comprehensive expense
for the year (577) (2,598)
------------------------------------------------ ------------- -----------
Total comprehensive income for
the year attributable to equity
holders of the parent 18,342 19,889
------------------------------------------------ ------------- -----------
(Note 5: See note 3 in the notes to the condensed consolidated financial statements)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited) (Unaudited)
Restated Restated
(Unaudited) (5) (5)
31 December 31 December 1 January
19 18 18
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Acquired intellectual property
rights 9,478 9,673 9,675
Technology based intangible assets 15,985 - -
Software intangibles 2,832 2,548 3,078
Development costs 5,039 3,204 2,135
Goodwill 53,558 42,145 41,801
Property, plant and equipment 27,707 27,850 27,362
Deferred tax assets 96 208 199
Trade and other receivables 531 415 286
------------------------------------ ------------ ------------ ------------
115,226 86,043 84,536
Current assets
Inventories 17,655 14,800 11,073
Trade and other receivables 29,221 27,172 20,950
Current tax assets 129 813 48
Cash and cash equivalents 64,751 76,391 62,454
------------------------------------ ------------ ------------ ------------
111,756 119,176 94,525
------------------------------------ ------------ ------------ ------------
Total assets 226,982 205,219 179,061
------------------------------------ ------------ ------------ ------------
Liabilities
Current liabilities
Trade and other payables 14,043 14,643 10,547
Current tax liabilities 1,781 3,863 2,305
Lease liabilities 1,353 975 874
17,177 19,481 13,726
Non-current liabilities
Trade and other payables 3,150 655 310
Deferred tax liabilities 6,409 3,303 3,120
Lease liabilities 8,347 9,055 9,579
Borrowings 664 - -
------------------------------------ ------------ ------------ ------------
18,570 13,013 13,009
------------------------------------ ------------ ------------ ------------
Total liabilities 35,747 32,494 26,735
------------------------------------ ------------ ------------ ------------
Net assets 191,235 172,725 152,326
------------------------------------ ------------ ------------ ------------
Equity
Share capital 10,745 10,674 10,632
Share premium 36,226 35,192 34,778
Share-based payments reserve 9,466 7,333 4,676
Investment in own shares (159) (156) (152)
Share-based payments deferred
tax reserve 649 708 815
Other reserve 1,531 1,531 1,531
Hedging reserve 555 (2,406) 658
Translation reserve (249) 3,289 2,823
Retained earnings 132,471 116,560 96,565
------------------------------------ ------------ ------------ ------------
Equity attributable to equity
holders of the parent 191,235 172,725 152,326
------------------------------------ ------------ ------------ ------------
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
2018
(Restated)
(5) 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
(expense)/
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
--------------- -------- -------- --------- ----------- ------------ -------- -------- ------------ --------- --------
Consolidated
profit
for the year
to
31 December
2019 - - - - - - - - 18,919 18,919
Other
comprehensive
income/
(expense) - - - - - - 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
(Unaudited) 10,745 36,226 9,466 (159) 649 1,531 555 (249) 132,471 191,235
--------------- -------- -------- --------- ----------- ------------ -------- -------- ------------ --------- --------
(Note 5: See note 3 in the notes to the condensed consolidated financial statements)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Unaudited) Restated(5)
Year ended Year ended
31 December
31 December 19 18
GBP'000 GBP'000
------------------------------------------------------- -------------- ------------
Cash flows from operating activities
Profit from operations 24,243 28,474
Adjustments for:
Depreciation 3,154 3,180
Amortisation - intellectual property rights 1,683 81
- software intangibles 519 593
- development costs 492 325
Increase in inventories (2,454) (3,707)
Increase in trade and other receivables (574) (6,813)
(Decrease)/increase in trade and other payables (1,275) 1,692
Share-based payments expense 1,856 1,659
Taxation (5,945) (3,810)
Net cash inflow from operating activities 21,699 21,674
------------------------------------------------------- -------------- ------------
Cash flows from investing activities
Purchase of software (826) (304)
Capitalised research and development (2,355) (1,392)
Purchases of property, plant and equipment (2,673) (3,062)
Disposal of property, plant and equipment 4 78
Interest received 422 377
Acquisition of subsidiaries net of cash (24,145) -
Net cash used in investing activities (29,573) (4,303)
------------------------------------------------------- -------------- ------------
Cash flows from financing activities
Dividends paid (3,008) (2,492)
Repayment of principal under lease liabilities (925) (858)
Issue of equity shares 1,066 430
Shares purchased by EBT (603) (600)
Shares sold by EBT 600 596
Interest paid (709) (581)
Net cash used in financing activities (3,579) (3,505)
------------------------------------------------------- -------------- ------------
Net (decrease)/increase in cash and cash equivalents (11,453) 13,866
Cash and cash equivalents at the beginning of the year 76,391 62,454
Effect of foreign exchange rate changes (187) 71
Cash and cash equivalents at the end of the year 64,751 76,391
------------------------------------------------------- -------------- ------------
Notes Forming Part of the Condensed 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 twelve months ended 31 December 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 novel high-performance polymers (both natural and synthetic) for use in advanced woundcare dressings and materials, and medical adhesives and sutures for closing and sealing tissue, for sale into the global medical device market and dental market.
2. Basis of preparation
These condensed unaudited consolidated financial statements have been prepared in accordance with the accounting policies set out in the annual report for the year ended 31 December 2018 except for new standards adopted for the year.
In the current year the Group has applied a number of amendments to IFRSs issued by the IASB. With the exception of IFRS 16 Leases, their adoption has not had a material impact on the disclosures or on the amounts reported in the Annual Financial Statements. The following amendments were applied:
-- IFRIC 23 Uncertainty over Income Tax Treatments
-- Amendments to IFRS 9, Prepayment features with Negative Compensation
-- Amendments to IAS28, Long-term Interests in Associates and Joint ventures
-- Annual Improvements to IFRSs 2015-2017 cycle
While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), as adopted for use in the EU, this announcement does not itself contain sufficient information to comply with IFRSs. The Group expects to publish full financial statements that comply with IFRSs in April 2020.
The financial information set out in the announcement does not constitute the Group's statutory accounts for the years ended 31 December 2019 or 31 December 2018. The financial information for the year ended 31 December 2018 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies, but restated for the impact of IFRS 16 Leases. The auditor reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain a statement under s498 (2) or (3) Companies Act 2006. The audit of the statutory accounts for the year ended 31 December 2019 is not yet complete. These accounts will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Group's annual general meeting.
The financial statements have been prepared on the historical cost basis of accounting except as disclosed in the accounting policies set out in the annual report for the year ended 31 December 2018.
With regards to the Group's financial position, it had cash and cash equivalents at the 31 December 2019 of GBP64.8 million. In December 2018, the Group entered a five-year, unsecured, multi-currency, credit facility for GBP80 million and which was undrawn in 2019.
While the current economic environment is uncertain, the Group 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 contracts with customers across different geographic regions and also with substantial financial resources, ranging from government agencies through to global healthcare companies. The Group has also considered the implications that may arise as a result of Brexit and developed appropriate risk management solutions to mitigate this risk.
Having taken 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 preliminary announcement.
New accounting standards not yet applied
At the date of authorisation of the Annual Financial Statements, the following new and revised IFRSs that are potentially relevant to the Group, and which have not been applied in the Annual Financial Statements, were in issue but not yet effective (and in some cases had not yet been adopted by the EU):
-- Amendments to References to Conceptual Framework in IFRS Standards - effective for accounting periods beginning on or after 1 January 2020
-- Amendments to IFRS 3 - effective for accounting periods beginning on or after 1 January 2020
-- Amendments to IAS1 and IAS8 - effective for accounting periods beginning on or after 1 January 2020
-- IFRS 17 Insurance Contracts - effective for accounting periods beginning on or after 1 January 2021
The Directors do not expect that the adoption of the standards listed above will have a material impact on the Financial Statements of the Group in future periods.
3. 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 IFRS 16.
As previously As restated
reported
At 31 December Impact of At 1 January
2018 IFRS 16 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 year ended 31 December 2019, in relation to leases under IFRS 16 the Group recognised the following amounts in the consolidated income statement:
Year ended Year ended
31 December 31 December
2019 2018
GBP'000 GBP'000
---------------------------- ------------ ------------
Depreciation (1,051) (1,020)
Operating leases 1,309 1,272
Finance cost (383) (415)
---------------------------- ------------ ------------
Net impact on Group profit (125) (163)
---------------------------- ------------ ------------
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
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
-------------------------------------------- --------
4. Segment information
As referred to in the Chief Executive's Report, the Group is organised into two Business Units: Surgical and Woundcare. These Business Units are the basis on which the Group reports its segment information. 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.
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 and income tax assets. These are the measures reported to the Group's Chief Executive for the purposes of resource allocation and assessment of segment performance.
Business segments
Segment information about these businesses is presented below.
Year ended Surgical Woundcare Consolidated
31 December 2019
(unaudited)
GBP'000 GBP'000 GBP'000
-------------------------------- --------- ---------- -------------
Revenue
External sales 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 costs (1,053)
-------------
Operating profit 24,243
Finance income 406
Finance costs (392)
-------------------------------- --------- ---------- -------------
Profit before tax 24,257
Tax (5,338)
-------------------------------- --------- ---------- -------------
Profit for the year 18,919
-------------------------------- --------- ---------- -------------
At 31 December 2019 Surgical Woundcare Consolidated
(unaudited)
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
-------------------------------- --------- ---------- -------------
Year ended Surgical Woundcare Consolidated
31 December 2018
(unaudited) Restated (5) GBP'000 GBP'000 GBP'000
-------------------------------- --------- ---------- -------------
Revenue
External sales 57,113 45,485 102,598
Result
-------------------------------- --------- ---------- -------------
Adjusted segment operating
profit 18,240 11,277 29,517
Amortisation of acquired
intangibles (76) (5) (81)
Segment operating profit 18,164 11,272 29,436
Unallocated expenses (560)
Exceptional costs (402)
-------------
Operating profit 28,474
Finance income 378
Finance costs (581)
-------------------------------- --------- ---------- -------------
Profit before tax 28,271
Tax (5,784)
-------------------------------- --------- ---------- -------------
Profit for the year 22,487
-------------------------------- --------- ---------- -------------
At 31 December 2018 Surgical Woundcare Consolidated
(unaudited) Restated (5)
-------------------------------- --------- ---------- -------------
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
-------------------------------- --------- ---------- -------------
Geographic segments
The Group operates in the UK, The Netherlands, Germany, 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 and as a result of the acquisition of Biomatlante the Group now operates in France. 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 revenue by geographical market, irrespective of the origin of the goods/services, based upon location of the Group's customers:
(Unaudited) (Unaudited)
Year ended 31 December 2019 2018
GBP'000 GBP'000
------------------------------------- ------------- -------------
United Kingdom 20,151 18,447
Germany 20,018 19,416
Europe excluding United Kingdom
and Germany 23,476 23,987
United States of America 34,879 37,317
Rest of World 3,844 3,431
--------------------------------------- ------------- -------------
102,368 102,598
------------------------------------- ------------- -------------
The following table provides an analysis of the Group's total
assets by geographical location:
---------------------------------------------------------------------
(Unaudited) (Unaudited)
As at 31 December 2019 2018
GBP'000 GBP'000
------------------------------------- ------------- -------------
United Kingdom 117,056 129,340
Germany 69,501 66,505
Europe excluding United Kingdom
and Germany 14,718 6,663
United States of America 2,532 2,711
Israel 23,175 -
------------------------------------- ------------- -------------
226,982 205,219
------------------------------------- ------------- -------------
5. Profit from operations
(Unaudited)
(Unaudited) Restated
Year ended 31 December 2019 2018
GBP'000 GBP'000
----------------------------------------------- ------------ ------------
Profit from operations is arrived at after
charging:
Depreciation of property, plant and equipment 3,154 3,180
Amortisation of:
- acquired intellectual property rights 1,683 81
- software intangibles 519 593
- development costs 492 325
Research and development costs expensed
to the income statement 3,195 3,079
Cost of inventories recognised as expense 40,717 37,927
Write down of inventories expensed 504 780
Staff costs 33,179 33,559
Net foreign exchange loss 2,790 88
------------------------------------------------ ------------ ------------
6. Taxation
(Unaudited) (Unaudited)
Year ended 31 December 2019 2018
GBP'000 GBP'000
-------------------------------- ------------------- ---------------------
a) Analysis of charge for
the year
Current tax:
Tax on ordinary activities
- current year 5,195 5,859
Tax on ordinary activities
- prior year 5 (126)
------------------------------------ ------------------- ---------------------
5,200 5,733
Deferred tax:
Tax on ordinary activities
- current year 61 107
Tax on ordinary activities
- prior year 77 (56)
------------------------------------ ------------------- ---------------------
138 51
-------------------------------- ------------------- ---------------------
Tax charge for the year 5,338 5,784
------------------------------------ ------------------- ---------------------
The Group has chosen to use a weighted average country tax rate
rather than the UK tax rate for the reconciliation of the charge
for the year to the profit per the income statement. The Group
operates in several jurisdictions, some of which have a tax
rate in excess of the UK tax rate. As such, a weighted average
country tax rate is believed to provide the most meaningful
information to the users of the financial statements.
--------------------------------------------------------------------------------
(Unaudited)
(Unaudited) Restated
Year ended 31 December 2019 2018
GBP'000 GBP'000
-------------------------------- ------------------- ---------------------
b) Factors affecting tax
charge for the year
Profit before taxation 24,257 28,271
------------------------------------ ------------------- ---------------------
Profit multiplied by the
weighted average Group tax
rate of 21.64% (2018: 21.08%) 5,248 5,960
Effects of:
Net expenses not deductible
for tax purposes and other
timing differences 246 12
Patent Box Relief (124) (318)
Utilisation of trading losses (26) -
Net impact of deferred tax
on capitalised development
costs and R&D relief (131) 210
Share-based payments 43 102
Adjustments in respect of
prior year - current tax 5 (126)
Adjustments in respect of
prior year and rate changes
- deferred tax 77 (56)
Taxation 5,338 5,784
------------------------------------ ------------------- ---------------------
7. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
(Unaudited) (Unaudited)
Year ended 31 December 2019 2018
Number of shares '000 '000
--------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares
for the purposes of basic earnings per share 214,730 213,146
--------------------------------------------------- ------------ ------------
Effect of dilutive potential ordinary shares:
share options, deferred share bonus, LTIPs 2,107 2,911
--------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares
for the purposes of diluted earnings per
share 216,837 216,057
--------------------------------------------------- ------------ ------------
(Unaudited)
(Unaudited) Restated
2019 2018
GBP'000 GBP'000
--------------------------------------------------- ------------ ------------
Profit for the year attributable to equity
holders of the parent 18,919 22,487
Exceptional costs 1,053 402
Amortisation of acquired intangible assets 1,683 81
Movement in fair value accounting for liabilities (345) -
Adjusted profit for the year attributable
to equity holders of the parent 21,310 22,970
--------------------------------------------------- ------------ ------------
(Unaudited)
(Unaudited) Restated
2019 2018
pence pence
--------------------------------------------------- ------------ ------------
Basic 9.30 10.74
Diluted 9.21 10.59
Adjusted basic 9.92 10.78
Adjusted diluted 9.83 10.63
--------------------------------------------------- ------------ ------------
8. Acquisition of Sealantis
On 31 January 2019 the Group acquired the entire issued share capital of Sealantis Limited, an Israel 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 (2,402)
Grant liability (1,694)
Goodwill 9,615
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.
9. Acquisition of Biomatlante
On 29 November 2019, the Group acquired the entire issued share capital of Biomatlante SA, a France based developer and manufacturer of innovative surgical biomaterial technologies.
GBP'000
---------------------------------------------- --------
Identifiable net assets acquired
Technology-based intangible asset (Know-how) 2,186
Technology-based intangible asset (Patents) 360
Customer related intangible assets 426
Development costs 30
Property, Plant and Equipment 167
Finance lease assets 407
Inventory 682
Trade and other receivables 1,471
Cash and cash equivalents 135
Trade and other payables (1,441)
Loans and Borrowings (1,267)
Deferred tax on Intangible asset (742)
Lease liabilities (430)
Goodwill 3,927
Total net assets acquired 5,911
---------------------------------------------- --------
Satisfied by GBP'000
-------------------- --------
Cash consideration 5,911
-------------------- --------
The Group intends to settle Biomatlante's external borrowings increasing total cash outflow as a result of the acquisition to approximately GBP7 million.
Net cash flow on acquisition GBP'000
------------------------------------ --------
Cash consideration 5,911
Completion payment - post year end (39)
Cash acquired (135)
------------------------------------ --------
5,737
------------------------------------ --------
None of the goodwill on the acquisition is expected to be deductible for income tax.
10. Events after reporting period
There has been no material event subsequent to the end of the reporting period ended 31 December 2019.
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
FR EAADEFAXEEAA
(END) Dow Jones Newswires
March 11, 2020 03:00 ET (07:00 GMT)
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