International Medical Devices Share Discussion Threads

[pugugly] 01/5/2003 14:02

The crunch question it seems to me is whether the board have selected the correct time frame for the amortisation of goodwill and licences. (See extract from accounts below) If for instance the actual time frame should be 5 years (as an example for discussion only) then the company would be operating at a loss by eating capital to produce a lower income stream.

Could it be indicative that when the Directors exercised options over some 284,000 shares during year 02 they chose to sell, so far as I can tell, all or most of them at 280p?

Also appears that hedge may have run out on euro purchases. Therefore parallel imports should be considerably more expensive and distribution profits (imo) very substantially reduced in this area.

"INTANGIBLE ASSETS AND AMORTISATION OF INTANGIBLE ASSETS
Goodwill arising on acquisitions is capitalised in accordance with FRS 10 – Goodwill and intangible assets.
The Directors believe that a period of 10 years is an appropriate period over which to amortise goodwill and licences for each of the businesses acquired, and the charge of £11.9m in 2002 (2001 : £10.6m) reflects this policy.
The Directors consider that externally purchased brands and product licences meet the conditions for recognition as assets in accordance with FRS 10. Examples of such acquisitions have been seen historically at Martindale.
The cost of parallel import licences, acquired for use within the Pharmaceutical Distribution Division, is written off immediately as incurred to the profit and loss account"

"FINANCIAL RATIOS
Interest cover for the year ended 31st December 2002 was 6.6 times (based upon operating profit before goodwill and product licence amortisation and exceptional items) (2001 : 7.3 times).
Dividend cover for the year ended 31st December 2002 was 4.0 times (based upon adjusted earnings per share) (2001 : 3.7 times).
Gearing at 31st December 2002 was 70% compared to 57% at the previous year end".

Check out pensions liabilities. Salary increase at 2.5% and inflation at 1.5% seem to me to be low and discount rate at 5.5% seems to me to be high. However according to the accounts the scheme is only some £300k in deficit – Not significant imo.

NJP Some 82 pages in the accounts – so could be more interesting points to find – so over to you.

e&oe – dyor and all usual disclaimers etc.

[dodddy] 30/4/2003 15:45

this is payback for not coming clean with the interims. looks like its going to 125. city gonna kick em for this serves em right

[pugugly] 30/4/2003 15:20

NJP re post 18 Sorry could not resist bring ttt at 157//158.. Surprised?

[pugugly] 30/4/2003 14:58

The AGM statement when read in conjunctions with the accounts is IMO a profit warning - certainly for the interim results and possibly could be construed as one for the whole year. I need to do some more work on the accounts but some of the worries are:-
Very large difference between Normalised eps and FRS3 eps
Very high goodwill write-off.
According to Refs 01 accounts NEGATIVE ntav (ok only marginal) but effetively no real asset backing for share price.
Zocor coming off patent - Need to do more digging on this one.
Interest cover FELL (admitedly to 6.6x from 7.3x - ok still relatively satisfactory but could be the start of a trend.

Of possibly even more of a worry Europe - especially France is a high cost manufacturing area and the appreciation of the Euro will not help in gaining US business
On balance wiile the Board is very optimist but the very low share purchase by the COO may be indicative - However as they say DYOR etc..

[the other kevin] 30/4/2003 11:07

Dropping like a stone to 154 offer. Is it in oversold territory yet?

[boadicea] 29/4/2003 14:15

PS to post 101: I recently note the following - presumably bought with his own money, i.e. not an exec option. Usually a good sign although a modest outlay for a COO.

"LONDON (AFX) - Intercare Group PLC said its chief operating officer Andrew
Kay has beneficially acquired 5,000 shares in the company at 199 pence per
share."

[boadicea] 29/4/2003 13:58

One needs to analyse the source and destination of their supply/sales to evaluate the effects of exchange rate movements. If anyone who has done this is willing to share the results it would be of considerable help! The improvement in the Euro seems to have stalled yesterday and sterling may respond by falling against dollar.... but who knows?
Decoding today's statement implies that interim figures will disappoint and whether full-year makes up the shortfall or not is a very open question to be greeted by a healthy scepticism.
However, much of this seems to be in the current price imho.

It seems probable that the shorters have got the bit between their teeth again, to which the best response is for real investors to pick their moment and say thank-you. All imho and dyor.

Good luck to all.

[banovallum] 27/4/2003 16:36

INT goes XD on 1st May--forget administrative record dates because you must hold or buy 30th April to benefit.

[njp] 26/4/2003 13:08

Anne

You should qualify for the dividend. Presumably 'sold ex div' refers to the status of the shares at the date you sold them, when they would have been 'ex div'.

[annef] 24/4/2003 20:05

NJP
Sorry to bother you again. I sold some Brad&Bing shares yesterday and bought into INT (my second tranche in the last few weeks.) On my sale instructions that I rec'd this morning, it says I sold B&B XD. Hopefully, this does not mean that I sold my entitlement to their div, as the ex-div date was 26 Mar 03, record date 28 Mar 03 and the payment date is 9 May 03. (the B&B's div is quite a good div).

If y can't help, I'll phone my broker.

Hope INT starts going up now, I can't believe it went back to its price of over 2 years ago. I think it's a good solid co and it's a long term holding for me.

Regards, Anne

[njp] 23/4/2003 12:01

Anne

If you buy before close of business on 2nd May you should be OK but check with your broker to be certain.

As for 'X' trades, I'm no expert but it would seem to imply a swap between brokers, presumably acting for a large seller and buyer(s). I live in hope that, if it helped clear an overhang, we might see more buoyancy in the price. I doubt 370k is large enough to cast too much of a shadow, though.

[annef] 22/4/2003 19:10

NJP

You seem to be very well informed re the markets, could you answer some questions for me.
1 INT has a 3.2 final div to be paid 30 May 03 to shareholders on books as at 2 May 03. What wld be the last possible date to buy to collect the div and do you think investors will be buying INT to secure the div?
2 There was a huge trade today, trade type "X". "Cross at the Same Price", "A transaction that was effected as an agency cross or a riskless principal transation at the same price and on the same terms...." What does that mean in simple English?

Regards, Anne

[qazwsx123] 21/4/2003 11:20

If you are interested in biotechs, you may be interested in the expected news from Alizyme (AZM) as follows:

1) May 2003: PIIb results for Renzapride treating c-IBS (514 patients).
2) Mid 2003: first licensing deal for Colal-Pred.
3) Oct 2003: PIIb results for Renzapride treating m-IBS (170 patients).
4) Oct 2003: PIIb results for ATL-962 treating obesity (340 patients).
5) H2 2003: PIIa results for ATL-104 treating mucositis.
6) Q4 2003: further pharmacokinetic/dynamic results for Renzapride (48 patients in USA).
------------------------------------------------------------------------------
7) 2004: licensing deals for Renzapride treating c-IBS & m-IBS.
8) 2004: licensing deal for ATL-962 treating obesity.
9) H2 2004: PIII results for Colal-Pred (active disease and remission trials).
------------------------------------------------------------------------------
10) H1 2005: Colal-Pred on market.

Sales of Colal-Pred treating active ulcerative colitis should exceed £100m pa, as should sales for maintaining remission; generating revenues of approximately £30 million pa for the Company (i.e. 15% royalties on annual sales of approximately £200 million) (Investor's Chronicle suggested 30% royalties, but that may be on the high side).

Sales of Renzapride, ATL-962 and ATL-104, should generate much higher revenues for Alizyme.

Brett Pollard of analysts Seymour Pierce estimates the licensing deals anticipated for Colal-Pred, Renzapride and ATL-962, during 2003/04, could bring in £50 million cash.

[boadicea] 11/4/2003 17:35

I note that 5 brokers cover INT - TDW/WestLB/ING/BD/Nomura.
Two of them, but I don't know which, have recently come out with strong buy recommendations. Can anyone enlighten us as to what was said?

[keyboard] 10/4/2003 13:43

TOK;

I agree with NJP about buying in tranches, as INT is in a yo-yo situation
of late. I think the advfn figures are not updated regularly, or perhaps they use different criteria.
Some more statistics to add to those provided by NJP which might help:
DPS>5.4
Last Div:3.2
xd>30/04
payday>30/05 (if you buy now you would get the div. as well)
Market Makers>4
NMS>3000
Market Cap>150.01m
Shares in issue>82.650m

High/Low
2003>229.5/176.5
2002>297.5/205
2001.296.5/213
2000.262/99.5

INT is imo worth considering seriously if one wants to
hold this as an investment and buying in tranches really makes sense.

[the other kevin] 10/4/2003 10:46

NJP - I agree it will be higher - but I also think it might just be a little lower yet, maybe 175. But don't follow me. Bottom picking was never my forte!

[njp] 10/4/2003 10:33

Kevin

Just means it's cheap! Agree on waiting and watching, though, or, probably better if you reckon it's worth an investment, buying in tranches. With the company expecting double digit growth for several years (and they've always delivered on their promises to date) INT will be much higher than this a year from now.

[the other kevin] 10/4/2003 10:18

NJP - Thanks again. Pity the chart looks so unattractive. Keenly watching and waiting on this one.

[njp] 10/4/2003 10:01

Without doing a lot of research, I'd suggest that ADVFN have used basis earnings per share - i.e after exceptionals and goodwill amortisation. Adjusted earnings obviously give a truer perspective on sustainable earnings. Here are the numbers extracted from the announcement. I suggest you check out the announcement yourself.

Key Financials
2002 2001

Turnover #275.1m #216.0m + 27%
Operating profit* #29.0m #24.7m + 17%
Profit before tax* #24.6m #21.3m + 15%
Adjusted earnings per share* 21.7p 19.5p + 11%
Dividend per share 5.4p 5.2p + 4%
Cash inflow from operations #35.9m #16.2m + 122%

*Before amortisation of goodwill and exceptional items

Statutory figures
2002 2001

Operating profit+ #17.1m #14.1m
Profit before tax+ #10.6m #10.8m
Basic earnings per share+ 5.1p 6.0p

[njp] 10/4/2003 09:49

Sharescope numbers are correct. ADVFN numbers are notoriously cr&p. Suggest you check out the news section and get the results announcement yourself. BTW, expected eps for 2003 is approx 24p, which puts INT on a propsective p/e of 7.5.

[the other kevin] 10/4/2003 09:41

I'm looking for a pharmaceutical share to add to my portfolio and, to me, INT looks attractive. But there seems to be a divergence between the fundamental data displayed on Sharescope and ADVFN. For instance, Sharescope figs first: p/e 8.5 and 35.59; Peg 0.76 and nil; yield 3.3 and 2.98; divi cover 4 and 0.94; eps growth 13.1 and -15. I'm confused. There's probably a simple explanation that I've missed but perhaps someone could help, please.

[njp] 26/3/2003 21:40

The guys on the PBB traders thread are still actively shorting it - target 140p apparently. Fundamentally, nothing that I've heard by way of reasons is relevant.

A) OFT & pharmacy license revisions: this looks as though it may well be watered down but, anyway, will have no effect on INT as (a) they have no retail interests and (b) INT's trade is in prescription drugs, not OTC, and I can't see why people would bother to go to the supermarket to get their prescription medicines rather than the pharmacy next door to the doctor's surgery when the price they pay is fixed by government. And, if the local pharmacy suffers because the supermarkets are taking their OTC trade away, why would a supermarket take it over? Much more likely it'll be snapped up by one of the pharmacy chains.

B) A general fear that margins will be squeezed due to European health services taking action to drive down costs: this is what INT is all about - generic medicines!

I've no doubt the market will remain competitive, but INT have proved their worth in such conditions. The results announcement mentions the strenghthening euro as having an adverse impact - presumably on their parallel import trade - but PI is less important in INT's business mix these days.

I see no specific concerns for INT, just market and sector sentiment. Oh, and TA of course. The shorters see a 'head and shoulders' formation on the chart - not surprising given the (good) reasons why INT rose and bumped it's head on £3 before falling back with the market. The recent break of the H&S neckline at about 210 theoretically gives a target of 130p (290-210=80, 210-80=130). Why, silly me! It's all so obvious!

I guess I wouldn't rush to buy right now (another reason why the shorters have it all so easy). But, if it gets below 150p I'm very interested! P/e of little more than 6 on prospective earnings. Well run company and recession proof market. INT's time will come.

As a PS, if it gets to the shorters' target, it even starts to become a dividend play!

[boadicea] 26/3/2003 20:56

I don't believe this! What is putting the skids under it?
Turnover well UP. Operating profit UP. Dividend UP.
The management is doing all the right things. Generics should be a gradually strengthening market with important patent expiries. Cheaper sourcing should win all the way, never mind who the retailers are allowed to be.
Is there a stronger competitor waiting to put the squeeze on? Is there an insurmountable public resistance to generics? I don't see it.

So I continue to have faith and add on the dips.
But please, anyone, if you know otherwise, let me in on the secret!