Unaudited Preliminary Results

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:

 

2019

2018

Reported change

Change at  constant currency¹

Group revenue (£ million)

102.4

102.6

0%

-1%

Operating margin (%)

23.7

27.8

-410bps

Adjusted² operating margin (%)

26.4

28.2

180bps

Profit before tax (£ million)

24.3

28.3

-14%

Adjusted² profit before tax (£ million)

26.6

28.8

-7%

Diluted earnings per share (p)

8.72

10.41

-16%

Adjusted² diluted earnings per share (p)

9.83

10.63

-8%

Net operating cash flow

21.7

21.7

0%

Net cash3 (£ 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®, and Group revenue of £102.4 million was flat on 2018. Key drivers were:

US LiquiBand® sales reduced by 23% to £17.7 million (2018: £23.0 million) and by 25% at constant currency

EU/ROW LiquiBand® revenue increased by 24% at reported and constant currency to £10.8 million (2018: £8.7 million)

Fix8™ sales increased by 27% at reported and constant currency to £2.6 million (2018: £2.1 million)

Biosurgical sales increased by 9% to £9.4 million (2018: £8.6 million) and by 10% at constant currency

Suture sales increased by 8% to £14.4 million (2018: £13.3 million) and by 9% at constant currency

Sales of antimicrobial dressings increased by 4% to £20.6 million (2018: £19.7 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:

Acquisition of Sealantis in January 2019 for US$25 million (£19 million) strengthened our internal sealants R&D pipeline

Acquisition of Biomatlante in November 2019 for €8 million (£7 million) strengthened our biosurgical portfolio and enters us into the synthetic bone substitutes market with a differentiated product

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 £26.6 million (2018: £28.8 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® sales, which were disappointing. We look forward to regaining positive momentum in our US LiquiBand® business given the recent approval of LiquiBand® Rapid and the anticipated approval of LiquiBand® 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 £1.1 million (2018: £0.4 million), amortisation of acquired intangible assets which was £1.7 million (2018: £0.1 million) and change in fair value of long-term debt, a £0.3 million credit (2018: £nil) 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®, RESORBA®, and LiquiBand® Fix8TM. AMS also supplies wound care dressings such as silver alginates, alginates and foams through its ActivHeal® 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® 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 £102.4 million, broadly in line with 2018.

 

Adjusted profit before tax decreased by 7% to £26.6 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® performance, resulting in a 1% decrease in revenue to £56.5 million and by 2% at constant currency. We have made progress on the two key product approvals needed to support the recovery of LiquiBand® in the US. LiquiBand® Rapid™ was recently approved by the FDA and the LiquiBand® XL pilot clinical study is in progress and will be concluded by the end of Q1 2020.

 

Our Woundcare business grew 1% to £45.8 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®, 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® ranges, the LiquiBand® 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® is expected to return to growth in 2020 given the recent approval of LiquiBand® Rapid and the anticipated approval of LiquiBand® 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 £56.5 million (2018: £57.1 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 Unit

2019

£’000

2018

£’000

Reported Change

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® 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

£’000

2018

£’000

Reported Change

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 £28.5 million (2018: £31.7 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® is expected to return to growth in 2020 following the launches of LiquiBand® Rapid™ and LiquiBand® XL. Following its recent approval, we are launching LiquiBand® Rapid™ with one of our main partners in Q2 2020. This will enable AMS to regain ground with an improved product. The LiquiBand® XL device will allow us to compete in the large wound market for the first time and unlock further growth potential in our LiquiBand® business with all partners. LiquiBand® 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® Fix8™ devices are indicated for the internal fixation of hernia meshes using our LiquiBand® technology. Through the accurate delivery of individual drops of cyanoacrylate adhesive, LiquiBand® Fix8™ is used to hold hernia meshes in place within the body instead of traditional tacks and staples.

 

Revenue increased by 27% to £2.6 million (2018: £2.1 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™ 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® Fix8™ 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® branded Absorbable and Non-absorbable Sutures.

 

Revenue increased by 8% to £14.4 million (2018: £13.3 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® Gentacoll® used in Orthopaedic and Cardiac applications, and collagen fleeces and cones used in Dental applications. 

 

Revenue increased by 9% to £9.4 million (2018: £8.6 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 (£0.4 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 prescription in Germany, is scheduled 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 £1.5 million (2018: £1.4 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® range sold predominately to the NHS.

Revenue increased by 1% to £45.8 million (2018: £45.5 million) and was in line with prior year at constant currency.

 

 

Woundcare Business Unit

2019

£’000

2018

£’000

Reported Growth

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 £20.6 million (2018: £19.7 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 £100 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® 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 £19.3 million (2018: £20.4 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® 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 £6.0 million (2018: £5.3 million) and by 9% at constant currency predominately due to increased Organogenesis royalties of £2.9 million (2018, impacted by lower reimbursement: £1.8 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 £34.6 million (2018: £33.3 million) excluding exceptional items. Foreign exchange movements, predominately driven by exchange rates on currency contracts increased administration costs by approximately £3 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 £6.5 million of gross R&D, regulatory and clinical spend in the year (2018: £6.0 million), representing 6.3% of sales (2018: 5.8%).

 

Exceptional items of £1.1 million in the year (2018: £0.4 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® sales, adverse currency contracts and the continued investment in Sealantis.

 

Adjusted profit before tax decreased by 7% to £26.6 million (2018: £28.8 million) and profit before tax decreased by 14% to £24.3 million (2018: £28.3 million).

 

The Group adopted IFRS 16 (Leases) in 2019 and the comparative period has been restated, which reduced profit before tax by £0.1 million in the year (2018: £0.2 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

£’000

£’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

£’000

£’000

Revenue

56,544

45,824

Profit from operations

14,411

11,370

Amortisation of acquired intangibles

1,675

8

Adjusted profit from operations4

16,086

11,378

Adjusted operating margin4

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 operations4

18,240

11,277

Adjusted operating margin4

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® 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 £:US$ or £:€ 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 £22.8 million (2018: £22.1 million). Net cash inflow from operating activities, impacted by exceptional items, were in line with the previous year at £21.7 million (2018: £21.7 million).

 

Reconciliation of Net cash inflow from operating activities to Adjusted net cash inflow from operating activities

(Unaudited)

(Unaudited)

Year ended

31 December 2019

Year ended 31 December 2018

£’000

£’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 £5.9 million (2018: £4.7 million).

 

Cash outflow relating to taxation increased to £5.9 million (2018: £3.8 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 £1.9 million in June 2019 (2018: for the year ending 2017, £1.6 million), and its interim dividend for the six months ended 30 June 2019 of £1.1 million (for the 6 months ended 30 June 2018: £0.9 million) in October 2019.

 

The Group has an undrawn unsecured £80 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

Year ended 31 December

(Unaudited)

(Unaudited) Restated5

Before exceptional items

Exceptional items

2019

Before exceptional items

Exceptional items

2018

Note

£’000

£’000 

£’000 

£’000

£’000 

£’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

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)

(Unaudited)

Restated5

2019

2018

£’000

£’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) Restated5

(Unaudited) Restated5

31 December 19

31 December 18

1 January 18

£’000

£’000

£’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

capital

premium

payments

shares

deferred tax

reserve

reserve

reserve

earnings

Total

£’000

£’000

£’000

£’000

£’000

£’000

£’000

£’000

£’000

£’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) Restated5

Year ended

Year ended

31 December 19

31 December 18

£’000

£’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 £64.8 million. In December 2018, the Group entered a five-year, unsecured, multi-currency, credit facility for £80 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 reported

As restated

At 31 December 2018

Impact of
IFRS 16

At 1 January 2019

£’000

£’000

£’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 £9.0 million of Leasehold property, £0.5 million of Plant and machinery and £0.2 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 2019

31 December 2018

£’000

£’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.

 

£’000

£’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)

£’000

£’000

£’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

£’000

£’000

£’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) Restated5

£’000

£’000

£’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) Restated5

Other information

£’000

£’000

£’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

£’000

£’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

£’000

£’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

£’000

£’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

£’000

£’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

£’000

£’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

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

£’000

£’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.

£’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

£’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

£’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.

 

£’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

£’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 £7 million.

 

Net cash flow on acquisition

£’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.

 


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