Final Results Archives - Advanced Medical Solutions

Unaudited Preliminary Results

AdMedSol — Wed, 19 Mar 2025 07:00:09 +0000

RNS Number : 2726B

Advanced Medical Solutions Grp PLC

19 March 2025

Advanced Medical Solutions Group plc

(“AMS” or the “Group” or the “Company”)

Unaudited preliminary results for the year ended 31 December 2024

~ Strong underlying growth maintained, and excellent progress made integrating recent acquisitions ~

Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), a world-leading specialist in tissue-healing technologies, today announces its unaudited preliminary results for the year ended 31 December 2024.

Financial Summary:

	2024	2023	Reported change	Change at constant currency¹	Growth excluding acquisitions⁵
Revenue (£ million)	177.5	126.2	+41%	+43%	+10%
Adjusted Measures
Adjusted² EBITDA (£ million)	40.2	29.7	+35%
Adjusted² EBITDA margin	22.6%	23.5%	-0.9pp
Adjusted² profit before tax (£ million)	29.4	25.9	+14%
Adjusted² profit before tax margin	16.6%	20.5%	-3.9pp
Adjusted³ diluted earnings per share (p)	10.45	9.05	+16%

Reported Measures
Profit before tax (£ million)	9.8	21.2	-54%
Profit before tax margin	5.5%	16.8%	-11.2pp
Diluted earnings per share (p)	3.25	7.25	-55%
Net operating cash flow (£ million)	19.5	12.3	+58%
Net (debt)/cash⁴ (£ million)	(55.8)	60.2	-193%

Proposed full year dividend per share (p)	2.60	2.36	+10%

Business Highlights (including post Period end):

AMS is pleased to report Full Year 2024 results in line with consensus forecasts and excellent progress in integrating the recent acquisitions of Peters Surgical and Syntacoll.

Operational

· Successful implementation of the new route to market strategy in late 2023 has resulted in strong growth from US LiquiBand^® throughout 2024.

· Transformational acquisition of Peters Surgical SAS (“Peters Surgical”) at an enterprise value of €132.5 million (£113 million) was completed on 1 July 2024. The acquisition added £37.2 million of revenue from the July acquisition date.

· Acquisition of Syntacoll GmbH (“Syntacoll”) for €1 million on 1 March 2024, a specialist manufacturer of drug-eluting collagens has significantly strengthened the capacity and capability of the Group’s existing Biosurgical business. The acquisition added £5.6 million of revenue from the March acquisition date.

· The full in-market launch of LIQUIFIX^TM, the first atraumatic hernia fixation device in the US, resulted in better-than-expected initial orders. On the back of major Group Purchasing Organisation (“GPO”) approvals, accelerated in-market growth is expected in 2025 and record monthly end user sales were recorded in January and February 2025.

Financial

· Group revenue increased by 43% at constant currency to £177.5 million (2023: £126.2 million), driven by strong growth in US LiquiBand^®, other key surgical product categories and the acquisitions of Peters Surgical and Syntacoll. Excluding both acquisitions, group revenue increased by 10% at constant currency.

· Adjusted profit before tax increased by 14% to £29.4 million (2023: £25.9 million) and reported profit before tax decreased by 54% to £9.8 million (2023: £21.2 million) as a result of acquisition and integration costs.

· Net debt at 31 December 2024 stood at £55.8 million (2023: Net cash of £60.2 million) following the acquisition of Peters Surgical.

· Investment in R&D increased to £12.9 million (2023: £12.6 million), representing 7% of revenues (2023: 10%). Whilst the gross investment in R&D has increased following the addition of Peters Surgical, R&D expenditure as a proportion of revenue has been diluted by the acquisition and by reduced Medical Device Regulation (“MDR”) related investment.

· Surgical Business Unit revenues (excluding Peters Surgical) increased to £98.6 million (2023: £79.1 million), an increase of 28% at constant currency, driven by strong performances from all key product categories.

· Woundcare Business Unit revenues decreased to £41.8 million (2023: £47.1 million), a decrease of 11% at reported and constant currency due to a number of factors. Strategic initiatives within the Woundcare business are being successfully implemented, which are expected to positively impact margins in 2025.

· Reflecting management’s ongoing confidence in the Group’s outlook, the Board proposes an increased final dividend of 1.83p per share (2023: 1.66p) bringing the total proposed dividend to 2.60p per share (2023: 2.36p).

Commenting on the results Chris Meredith, Chief Executive Officer of AMS, said: “I am very pleased to report such a strong set of results during a year where AMS went through such a significant transformation. The integration of both Peters Surgical and Syntacoll has established the Group as a larger, more diverse tissue-healing specialist with a broader geographic reach. 2025 has started well and we remain confident that the strong, underlying momentum of our core business, combined with the broader portfolio, synergies and benefits from the acquisitions, will drive future strong topline growth and greater profitability.”

Notes

1. Constant currency removes the effect of currency movements by re-translating the current year’s performance at the previous year’s exchange rates

2. Reconciled in the Financial Review

3. Reconciled in note 6 of the financial information

4. Net debt consists of cash and cash equivalents of £17.0 million and £72.8 million of borrowings, excluding the impact of IFRS16 as reconciled in note 7 of the financial information. (2023: £60.2 million of cash and £nil debt)

5. Growth excluding acquisitions excludes the impact of acquisitions in the year on a constant currency basis

– End –

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 Michael King, Investor Relations

ICR Healthcare	Tel: +44 (0) 20 3709 5700
Mary-Jane Elliott / Lucy Featherstone	AMS@icrhealthcare.com

Investec Bank PLC (NOMAD & Broker)	Tel: +44 (0) 20 7597 5970
Gary Clarence / David Anderson

About Advanced Medical Solutions Group plc – see www.admedsol.com

AMS is a world-leading independent developer and manufacturer of innovative tissue-healing technology, focused on quality outcomes for patients and value for payers. AMS has a wide range of surgical products including tissue adhesives, sutures, haemostats, internal fixation devices and internal sealants, which it markets under its brands LiquiBand^®, RESORBA^®, LiquiBandFix8^®, LIQUIFIX™, Peters Surgical, Ifabond, Vitalitec and Seal-G^®. AMS also supplies wound care dressings such as silver alginates, alginates and foams through its ActivHeal^® brand as well as under white label. Since 2019, the Group has made seven acquisitions: Sealantis, an Israeli developer of innovative internal sealants, Biomatlante, a French developer and manufacturer of surgical biomaterials, Raleigh, a leading UK coater and converter of woundcare and bio-diagnostics materials, AFS Medical, an Austrian specialist surgical business, Connexicon, an Irish tissue adhesives specialist, Syntacoll, a German specialist in collagen-based absorbable surgical implants and Peters Surgical, a global provider of specialty surgical sutures, mechanical haemostasis and internal cyanoacrylate devices.

AMS’s products, manufactured in the UK, Germany, France, the Netherlands, Thailand, India, 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, Austria, France, Poland, Benelux, India, the Czech Republic and Russia. The Group has R&D innovation hubs in the UK, Ireland, Germany, France and Israel. Established in 1991, the Group has more than 1,500 employees. For more information, please see www.admedsol.com.

Chief Executive’s Review

Summary and Outlook

Growth across all surgical product categories has resulted in a strong financial performance for the Group in the twelve months to December 2024, including a significant contribution from Peters Surgical from 1 July. The integration of Peters Surgical and Syntacoll has been a key focus in the second half of the year, and excellent progress has been made, supported by detailed operational plans to deliver further synergies and cost efficiencies from the enlarged Group over the next three years.

The business has continued to perform well in Q1 2025, and the Board’s expectations are in line with current consensus forecasts for the full year. As more revenue and operational synergies are generated, the Board expects further growth across the business in 2026 and 2027.

Surgical Business Unit

The Surgical Business Unit includes tissue adhesives, sutures, biosurgical devices and internal fixation devices marketed under the AMS brands LiquiBand^®, RESORBA^®, LiquiBandFix8^®, LIQUIFIX^TM, Peters Surgical, Ifabond, Vitalitec and Seal-G^®.

Organic growth in the Surgical Business was driven by strong performances from LiquiBand^® in the US, Traditional Closure, Other Distributed and Internal Fixation products. Revenue increased to £98.6 million (2023: £79.1 million) during the Period, an increase of 28% on a constant currency and 25% on a reported basis.

Surgical Business Unit	2024 £ million	2023 £ million	Reported Growth	Change at constant currency
Advanced Closure	43.4	34.6	25%	28%
Internal Fixation and Sealants	6.4	5.0	28%	30%
Traditional Closure	19.9	18.1	10%	15%
Biosurgical Devices	22.6	16.4	38%	42%
Other Distributed	6.3	5.0	26%	30%
Subtotal (excluding Peters Surgical)	98.6	79.1	25%	28%
Peters Surgical	37.2	–	–	–
Total	135.8	79.1	72%	–

Advanced Closure

LiquiBand^® is a range of topical skin adhesives, incorporating medical grade cyanoacrylate in combination with purpose-built applicators. These products are used to close and protect a broad variety of surgical and traumatic wounds.

Advanced Closure	2024 £ million	2023 £ million	Reported Growth	Change at constant currency
Americas	26.9	18.2	48%	52%
Rest of World	16.5	16.4	1%	2%
Total	43.4	34.6	25%	28%

LiquiBand^® revenues increased in the Period by 28% on a constant currency basis and 25% on a reported currency basis driven by strong US growth.

New agreements, greater incentives and more brand differentiation for the Group’s US partners were successfully implemented towards the end of 2023 and made a significant impact on Advanced Closure US revenue growth during the Period. Sales increased to £26.9 million (2023: £18.2 million), 52% at constant currency and 48% on a reported basis. This positive performance during the Period reflects improved partner engagement under the new distribution agreements, as well as the strength of the pipeline of new business. Reported sales were positively impacted by re-stocking of one of the Group’s partners in H1 and the phasing of orders in Q4 related to some of the LiquiBand^® products. This is expected to impact reported growth in the first half of 2025.

Outside the US, end user sales were not fully reflected in reported revenue due to the phasing of orders in some key markets. Stronger reported growth in Rest of World sales is expected to return this year.

Internal Fixation and Sealants

LiquiBandFix8^®/LIQUIFIX^TM is used to fix hernia meshes placed inside the body with accurately delivered individual drops of cyanoacrylate adhesive, instead of traditional sutures, tacks and staples.

Global supply of the LiquiBandFix8^®/LIQUIFIX^TM devices was affected by a supplier-driven quality issue in the year and although it has since been resolved, the issue did impact sales during 2024. Despite this, LiquiBandFix8^®/LIQUIFIX^TM revenues increased by 30% on a constant currency basis and by 28% on a reported basis to £6.4 million (2023: £5.0 million), following the successful US launch through our distribution partner TELA Bio.

Having already obtained listings for LIQUIFIX^TM from two important US GPOs, the company now expects to receive approval from the largest and most significant GPO by the end of March with an anticipated go-live date in mid-2025. An extensive training programme for TELA Bio’s specialist hernia sales force was completed during the Period, and the initial response from surgeons has been positive. US pre-launch orders in H1 2024 were ahead of expectations and 2025 has started positively, with record monthly end user sales in January and February 2025. It is worth noting that the initial stocking coupled with later than expected GPO approvals in 2024 and 2025 will impact overall reported sales in 2025, albeit we do expect to be reporting continued strong end user growth.

The pancreatic study for our novel, internal, biological sealant, SEAL-G^®, continues to progress with interim results expected mid-2025; as does the development of a next generation device that will remove the necessity for a gas supply connection and regulator. We expect to be able to give a meaningful update on these two workstreams at the time of our 2025 interim results. Since our acquisition of Sealantis in 2019, the company has been investing in the development of the SEAL-G^® product and the amortised carrying value of the capitalised development costs stands at £6.8 million at 31 December 2024.

Traditional Closure

RESORBA^® branded Absorbable and Non-absorbable Suture ranges are used in general surgery and a wide range of surgical specialties including dental and ophthalmic surgery. Revenues (excluding Peters Surgical sutures) grew strongly during the Period, increasing by 10% to £19.9 million and by 15% at constant currency (2023: £18.1 million). The brand continued to generate good growth in its core German market and across multiple other markets as hospital appetite for progressing suture conversions continues to build.

Biosurgical Devices

Biosurgical Devices comprise antibiotic-loaded collagen sponges, collagen membranes and cones, oxidised cellulose, synthetic bone substitutes and bio-absorbable screws. Revenues increased 38% to £22.6 million (2023: £16.4 million) and 42% at constant currency, following the acquisition of Syntacoll which contributed £5.6 million during the Period.

As reported in September 2024, technical and manufacturing issues at the Nuremberg facility had restricted the Group’s ability to fulfil all RESORBA^® collagen customer orders during the first half. The integration of Syntacoll’s facilities and its expertise has addressed these issues and supply of product has improved during the second half. However, this has resulted in end user demand not being fully reflected in reported sales for the Period.

Syntacoll’s expertise has enabled the Group to accelerate its regulatory pathway to access the substantial opportunity for its distinctive collagen portfolio in the lucrative US market. The first US collagen approval, for a dental application, is expected in 2026. Multiple avenues are also being explored to obtain US approval of our wider antibiotic loaded collagen portfolio within the next few years.

The Group’s innovative next-generation Freeze Dried Bone Substitute (FDBS) presents another considerable opportunity given its ability to significantly improve bone re-growth through its highly differentiated cohesiveness, mouldability and capacity to mix with various biological fluids and compounds. AMS is targeting US 510(k) submission at the end of 2025 with approval expected around of the end of 2026. Launch into Europe is expected to be on a similar timeline.

Other Distributed Products

The Other Distributed category comprises bought-in minimally invasive access ports and laparoscopic instruments predominately sold by AFS. Revenues increased to £6.3 million during the Period (2023: £5.0 million), growth of 26% on a reported basis and 30% at constant currency.

Peters Surgical

The acquisition of Peters Surgical on 1 July 2024 has contributed revenue of £37.2 million to the AMS Group during the Period. As anticipated, the business ended the year strongly, generating sales growth of 8%, for continuing products, in the second half, compared with proforma 2023 results with good year-on-year growth in sutures, glues and with its innovative Vascular Temporary Occlusion (VTO) portfolio.

Integration

The organisational integration of the AMS and Peters Surgical teams has been completed, with the establishment of a single Group-wide team for all key functions including Sales, Marketing and R&D.

The program of delivery for commercial synergies is well underway with some due to start in 2025 and others expected to follow in the next few years depending on contractual restrictions.

In mid-2024, the Group created a dedicated integration team to deliver the other key synergies relating to branding, product portfolio, manufacturing and supply chain of sutures. This team consists of individuals with key capabilities from both AMS and Peters Surgical, is supported by external consultants and will be fully focused on building and delivering critical elements of the integration plan.

To maximise the significant commercial opportunity, it will be necessary to invest in increased manufacturing capacity and to enable the supply of alternative suture winding cards to allow deeper penetration of the substantial US market. Good progress was made in the Period, and the Group remains on track to deliver the majority of the planned operational synergies from early 2027.

Further 510(k) approvals of Peter Surgical suture ranges were granted in 2024, leaving one final suture family awaiting US approval which is expected during 2025, paving the way for the US launch before the end of the year.

In addition, a development project has been started to combine the IFABOND^® portfolio of internal hexyl cyanoacrylate adhesives with AMS’s more precise delivery device technology which will allow the improved portfolio to be optimised for use in a range of internal applications.

Woundcare Business Unit

The Woundcare Business Unit is comprised of the Group’s multi-product portfolio of advanced woundcare dressings sold under its partners’ brands and the ActivHeal^® label, plus a portfolio of specialist medical bulk materials including multi-layer woundcare and bio diagnostics products.

Revenues decreased by 11% to £41.8 million (2023: £47.1 million) on a reported and constant currency basis due to ongoing and challenging market conditions and reducing royalties.

Since the announcement in September of AMS’s plans to restructure the Woundcare business by focusing on higher margin business and reducing investment in certain areas, excellent progress has been made and these initiatives are on track to positively impact margins from Q2 2025.

Woundcare Business Unit	2024 £ million	2023 £ million	Reported Growth	Change at constant currency
Infection and Exudate Management	36.9	39.5	-7%	-6%
Other Woundcare	4.9	7.6	-36%	-35%
Total	41.8	47.1	-11%	-11%

Infection and Exudate Management

Infection and Exudate Management revenue decreased by 7% at reported currency and 6% at constant currency to £36.9 million (2023: £39.5 million), as the business implemented its strategy to focus on more profitable product categories.

Other Woundcare

Other Woundcare comprises royalties, fees and woundcare sealants. Revenue reduced by 36% at reported currency and by 35% at constant currency to £4.9 million (2023: £7.6 million) due to the continued reduction in royalty from Organogenesis following US reimbursement reviews announced in 2023.

Regulatory

Despite enforcement dates for the Medical Devices Regulation (MDR) being delayed until 2027-2028, AMS has already substantially completed its established schedule of work to meet the new standards. Consequently, capitalisation of regulatory costs is expected to start to decline in 2025.

Environmental, Social & Governance

The transformational acquisition of Peters Surgical has created the opportunity to leverage the considerable CSR program already established in the Peters Surgical group and to create an optimised combined ESG program for the enlarged group. This alignment will include combining emissions data for the two businesses and rebasing the initial carbon footprint for the enlarged group, progressing its Pathway to Net Zero project, which has a commitment date of 2045.

All sustainability activities are now being optimised and managed by a single team across the enlarged group.

On 18 March it was announced that Grahame Cook, Senior Independent Non-Executive Director, will become Non-Executive Chair on 31 March following Liz Shanahan’s decision to step down for personal reasons. In his new role, Grahame will retain his positions on the Audit, Nominations and Remuneration Committees. Grahame was appointed to the Board in February 2021 and has substantial global equity markets experience, having formerly worked as a managing director at UBS and joint Chief Executive of Panmure Gordon.

Stakeholders

On behalf of the Board, I would like to thank the Group’s staff, partners and other stakeholders, without whose help and commitment, the achievements of this year, and the years prior, would not have been possible.

Chris Meredith

Chief Executive Officer

Financial Review

Summary

IFRS reporting

To provide the clearest possible insight into our performance, the Group uses alternative performance measures. These measures are not defined in International Financial Reporting Standards (IFRS) and, therefore, are considered to be non-GAAP (Generally Accepted Accounting Principles) measures. Accordingly, the relevant IFRS measures are also presented where appropriate. AMS uses such measures consistently at the half-year and full-year and reconciles them as appropriate. The measures used in this statement include constant currency revenue growth, adjusted operating margin, adjusted profit before tax, adjusted EBITDA and adjusted earnings per share, allowing the impacts of exchange rate volatility, exceptional items, unwind of Inventory fair value accounting, amortisation, and the movement in long-term acquisition liabilities to be separately identified. Net debt/cash are an additional non-GAAP measure used.

Overview

Revenue increased by 43% at constant currency and by 41% at reported currency to £177.5 million (2023: £126.2 million).

Gross margin decreased to 52.2% (2023: 55.6%) whilst adjusted gross margin which excludes the impact of the fair value accounting on the acquisition of Peters Surgical results in a gross margin of 53.1% (2023: 55.6%). Despite the strong performance of US LiquiBand^® several factors are contributing to the reduced gross margin including the acquisition of Syntacoll which has had a dilutive impact as it currently achieves a significantly lower gross margin than the Group’s average and the reduced Organogenesis royalty. The addition of Peters Surgical has also had a slight dilutive impact as its gross margins are marginally below those of the AMS group.

As part of the IFRS3 acquisition accounting of Peters Surgical, the Inventory valuation has been increased by £1.7 million to its fair value. This increased Inventory valuation has resulted in higher cost of goods sold in the second half of the year and has been treated as an adjusted item.

Administration expenses before exceptional items increased to £69.0 million (2023: £50.7 million) due to the addition of Peters Surgical which added approximately £16 million of additional cost into the second half of the year and includes £3.2 million of Peters Surgical related amortisation of acquired intangible assets. The remaining increase in administration expenses in the year relates to increased sales and marketing activity and expenditure in Research, Development, Regulatory and Clinical as the Group continues to invest in growth opportunities.

Exceptional items
	(Unaudited)	Audited
	2024	2023
	£’000	£’000
Syntacoll	1,890	–
Risk Management	2,017	–
Peters acquisition-related	5,090	–
Peters integration activities	1,927	–
Total exceptional items	10,924	–

Exceptional items of £10.9 million were incurred in the year in relation to the acquisition and integration of Peters Surgical and Syntacoll. Given the significance of these costs in the year, in comparison to costs incurred for acquisitions in previous years, they have been disclosed separately. Syntacoll exceptional costs relate to legal fees, staff termination costs, an initial idle Period following when no manufacturing was undertaken and some integration related costs. Risk management exceptional costs relate to foreign currency risk management costs to protect against adverse movements in the euro rate whilst the Group awaited FDI approval to complete the acquisition of Peters Surgical. Risk and warranty insurance was also obtained.

Acquisition related costs include costs for advisory services, legal, financial, tax, HR and operational due diligence services, as well as legal services relating to the share purchase agreement and related banking facility required as part of the acquisition funding.

Integration-related costs predominately relate to consultancy services to lead the integration project as well as the costs of an internal dedicated integration team and other relevant integration activities.

The Group incurred £12.9 million of gross R&D spend in the Period (2023: £12.6 million), representing 7.3% of sales (2023: 10.0%), maintaining investment in innovation and in meeting the increasing regulatory standards. As shown in the table below, part of this cost is capitalised and amortised over the following 5 to 10 years with the amount capitalised declining in the year as a result of the substantial MDR progress made.

R&D, Regulatory and Clinical expenditure
		2024	2023
	£’000		£’000
Total investment in Research and Development, Regulatory and Clinical	12,922		12,621
Of which:
Charged to the profit and loss account	8,807		6,405
Capitalised, to be amortised over 5-10 years	4,115		6,216

Amortisation of acquired intangible assets increased to £7.8 million (2023: £4.9 million) due to the acquisition of Peters Surgical in July 2024.

Other Income remained consistent at £0.9 million (2023: £0.9 million) and relates to R&D claims in the UK and Ireland.

In the Period, finance income declined to £2.2 million (2023: £3.8 million), as the majority of funds held on deposit were used to fund the acquisition of Peters Surgical. Finance costs increased to £3.6 million (2023: £1.5 million) following the acquisition of Peters Surgical which was funded by an initial £80 million of borrowing. Finance costs are expected to reduce as SONIA rates are widely expected to reduce in the coming year and the Group repays its borrowings.

A net credit of £0.9 million (2023: £0.2 million credit) was recorded in relation to movements in long-term acquisition liabilities, primarily relating to deferred consideration and earnout from the Connexicon acquisition.

Adjusted EBITDA which consists of earnings before finance costs, tax, depreciation and amortisation as well as excluding exceptional items and the unwind of Inventory fair value accounting increased by 35% to £40.2 million (2023: £29.7 million) as a result of the addition of Peters Surgical.

Reconciliation of profit before tax to adjusted EBITDA
	(Unaudited)	Audited
	2024	2023
	£’000	£’000
Profit before tax	9,823	21,157
Finance income and costs	1,396	(2,275)
Amortisation	9,849	6,413
Depreciation	6,453	4,375
Exceptional items	10,924	–
Unwind of Inventory fair value accounting	1,726	–
Adjusted EBITDA	40,171	29,670

Adjusted profit before tax which excludes amortisation of acquired intangibles, exceptional items, unwind of Inventory fair valuer accounting and movements in long term liabilities recognised on acquisition, increased by 14% to £29.4 million (2023: £25.9 million) whilst the adjusted PBT margin decreased by 400 bps to 16.5% (2023: 20.5%) as a result of the dilutive impact of the Peters Surgical acquisition and associated borrowing.

Reported profit before tax decreased by 54% to £9.8 million (2023: £21.2 million) as a result of £10.9 million of exceptional items, the £1.7 million unwind of Inventory fair value accounting following the acquisition of Peters Surgical in the second half of the year and the addition of £2.9 million of additional amortisation on acquired intangibles as a result of the Peters Surgical acquisition.

Reconciliation of profit before tax to adjusted profit before tax
	(Unaudited)	Audited
	2024	2023
	£’000	£’000
Profit before tax	9,823	21,157
Amortisation of acquired intangibles	7,804	4,887
Exceptional items	10,924	–
Movement in long-term acquisition liabilities	(868)	(186)
Unwind of Inventory fair value accounting	1,726	–
Adjusted profit before tax	29,409	25,858

The Group’s effective corporation tax rate, reflecting the blended tax rates in the countries where we operate and including UK patent box relief, increased to 27.3% (2023: 24.9%) with the main driver behind the increase being acquisition costs, some of which are not tax deductible, and the annualised impact of the UK Corporation tax rate increase to 25%, effective 1 April 2023. These are partly offset by lower profits in Germany as a result of the reduced Organogenesis royalty. The tax rate in Germany is higher than the Group’s average tax rate and therefore a lower proportion of profit in Germany reduces the Group’s effective tax rate.

Adjusted diluted earnings per share increased by 16% to 10.45p (2023: 9.05p) and diluted earnings per share decreased by 55% to 3.25p (2023: 7.25p), reflecting the Group’s reduced earnings.

Reflecting its confidence in the Group’s prospects, the Board is proposing an increased final dividend of 1.83p per share (2023 final dividend: 1.66p), to be paid on 20 June 2025 to shareholders on the register at the close of business on 30 May 2025. This follows the interim dividend of 0.77p per share (2023 interim dividend: 0.70p) paid on 25 October 2024 and would, if approved, make a total dividend for the year of 2.60p per share (2023: 2.36p) an increase of 10%.

Operating result by business segment
Year ended 31 December 2024	Surgical	Woundcare
	£’000	£’000
Revenue	135,768	41,753
Segment operating profit	23,268	1,664
Amortisation of acquired intangibles	6,864	940
Adjusted segment operating profit⁶	30,132	2,604
Adjusted operating margin⁶	22.2%	6.2%
Year ended 31 December 2023
Revenue	79,093	47,117
Segment operating profit	16,041	4,374
Amortisation of acquired intangibles	3,944	943
Adjusted segment operating profit⁶	19,985	5,317
Adjusted operating margin⁶	25.3%	11.3%

^{Note 6: Adjusted for amortisation of acquired intangible assets and excludes exceptional items and the unwind of Inventory fair value accounting.}

^{Table is reconciled to statutory information in note 3 of the financial information.}

Surgical

Surgical revenues inclusive of Peters Surgical increased by 72% to £135.8 million (2023: £79.1 million) at reported currency. Adjusted operating margin decreased by 310 bps to 22.2% (2023: 25.3%) due to the dilutive impact of Peters Surgical at an operating margin level. Whilst Peters Surgical contributes significant sales, it only adds £4.5 million of adjusted operating profit. The previously mentioned impact on gross margin of the addition of low margin Syntacoll business is also impacting adjusted operating margin.

Woundcare

Woundcare revenues decreased by 11% to £41.8 million (2023: £47.1 million) at reported currency and constant currency. Adjusted operating margin decreased by 510 bps to 6.2% (2023: 11.3%) due to the factors noted in the Chief Executive’s review. We are confident that the actions taken will improve the business unit’s operating margin in 2025.

Currency

The Group hedges significant currency transaction exposure by using forward contracts and aims to hedge approximately 80% of its estimated transactional exposure for the next 18 months. In the financial year, approximately one half of sales were invoiced in Euros and approximately one quarter were invoiced in US Dollar.

The Group estimates that a 10% movement in the £:US$ or £:€ exchange rate will impact Sterling revenues by approximately 2.5% and 4.4% respectively and, in the absence of any hedging, this would have an impact on the Group operating margin of 1.7% and 0.7% percentage points respectively.

Cash flow

Net cash inflow from operating activities in the Period was £19.5 million, an increase on the prior year (2023: £12.3 million) as a result of the acquisition of Peters Surgical. Further information on the acquisition impact of Peters Surgical is included in note 8.

Working capital increased during the year. Inventory cover decreased to 6.0 months of supply (2023: 7.1 months) partly due to the addition of Peters Surgical and Syntacoll. Excluding the impact of Peters Surgical and Syntacoll, Inventory levels were in-line with the prior year despite growing sales as the stock builds seen in prior years have been completed. Increasing levels of receivables is linked to the strong performance in the US although a number of large payments were received shortly after year-end inflating the year-end position. As a result, Debtor days has increased to 53 days (2023: 45 days). Creditor days were in line with prior year at 35 days (2023: 35 days). Total payables increased by £14.0 million as a result of the addition of Peters Surgical and Syntacoll.

Net cash used in investing activities in the Period was £67.1 million as a result of the acquisition of Peters Surgical which resulted in investing cash outflows of £53.2 million (net of cash acquired). £5.5 million of cash outflows relating to payment of contingent consideration occurred and principally relates to achievement of milestones at Connexicon following receipt of FDA approval (2023: £7.4 million).

Capital investment in equipment, R&D and regulatory costs declined to £8.7 million (2023: £9.8 million) as a result of the reducing investment in MDR certification.

Cash outflow relating to taxation increased to £5.0 million (2023: £4.4 million) and included £1.1 million of taxation payments for Peters Surgical.

Net cash received from financing activities in the Period was £5.5 million (2023: used £13.6 million) which includes receipt of £79.3 million of borrowings in July 2024 as part of a facilities provided by the Group’s banks, NatWest and HSBC. £8.0 million was subsequently repaid before the end of the year resulting in a net inflow on these facilities of £71.3 million. £62.2 million of these borrowings was utilised to repay Peters Surgical loans as part of the cash-free, debt-free basis of the acquisition. Interest payments increased from £0.4 million to £4.0 million as a result of the new borrowing facilities. The Group did not purchase any of its own shares in the year (2023: £6.7 million).

The Group paid its final dividend for the year ended 31 December 2023 of £3.6 million in June 2024 (for the year ending December 2022, £3.3 million in June 2023), and its interim dividend for the six months ended 30 June 2024 of £1.6 million in October 2024 (for the 6 months ended 30 June 2023: £1.5 million in October 2023). No cash outflows relating to share purchases occurred during the year (2023: £6.7 million).

At the end of the Period, as a result of the above movements, the Group had net debt of £55.8 million (31 December 2023: net cash of £60.2 million) a movement of £116.0 million as a result of the Peters Surgical acquisition.

CONDENSED CONSOLIDATED INCOME STATEMENT
		(Unaudited)			(Audited)
Year ended 31 December		2024			2023
		Before Exceptional items	Exceptional items	Total	Before Exceptional items	Exceptional items	Total
			Note 8			Note 8
	Note	£’000	£’000	£’000	£’000	£’000	£’000
Revenue from continuing operations	3	177,521	–	177,521	126,210	–	126,210
Cost of sales		(84,903)	–	(84,903)	(56,070)	–	(56,070)
Gross profit		92,618	–	92,618	70,140	–	70,140
Distribution costs		(2,348)	–	(2,348)	(1,520)	–	(1,520)
Administration costs		(69,033)	(10,924)	(79,957)	(50,669)	–	(50,669)
Other income		906	–	906	931	–	931
Operating profit	4	22,143	(10,924)	11,219	18,882	–	18,882
Finance income		2,161	–	2,161	3,786	–	3,786
Finance costs		(3,557)	–	(3,557)	(1,511)	–	(1,511)
Profit before taxation		20,747	(10,924)	9,823	21,157	–	21,157
Income tax	5	(4,662)	1,981	(2,681)	(5,268)	–	(5,268)
Profit for the Period		16,085	(8,943)	7,142	15,889	–	15,889

Profit for the Period attributable to equity holders of the parent		16,037	–	7,094	15,889	–	15,889
Non-controlling interest		48	–	48	–	–	–
Earnings per share
Basic	6	7.48p	(4.17p)	3.31p	7.36p	–	7.36p
Diluted	6	7.35p	(4.10p)	3.25p	7.25p	–	7.25p
Adjusted diluted⁶	6	10.45p	(4.69p)	5.77p	9.39p	–	9.39p

^{Note 6: Reconciled in note 7 of the financial information.}

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
	(Unaudited)	(Audited)
	2024	2023
	£’000	£’000
Profit for the year	7,142	15,889
Exchange differences on translation of foreign operations	(6,177)	(3,126)
(Loss)/gain arising on cash flow hedges	(3,104)	3,984
Deferred tax credit /(charge) arising on cash flow hedges	664	(465)
Total other comprehensive (expense)/income for the year	(8,617)	393
Total comprehensive (loss)/income for the year attributable to equity holders of the parent	(1,475)	16,282

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	(Unaudited)	(Audited)
	31 December 2024	31 December 2023
	£’000	£’000
Assets
Non-current assets
Intangible assets	99,412	55,864
Goodwill	115,384	80,435
Property, plant and equipment	45,871	29,601
Deferred tax assets	1,022	356
Derivative financial assets	–	520
Trade and other receivables	1,029	73
	262,718	166,849
Current assets
Inventories	55,259	36,046
Trade and other receivables	52,451	23,583
Current tax assets	1,233	388
Derivative financial assets	296	2,145
Cash and cash equivalents	17,039	60,160
	126,278	122,322
Total assets	388,996	289,171
Liabilities
Current liabilities
Trade and other payables	33,782	19,254
Derivative financial liabilities	261	–
Borrowings	5,421	–
Current tax liabilities	1,780	1,165
Lease liabilities	3,087	1,164
	44,331	21,583
Non-current liabilities
Trade and other payables	3,873	4,400
Derivative financial liabilities	474	–
Borrowings	67,428	–
Deferred tax liabilities	20,746	11,013
Lease liabilities	10,628	7,973
	103,149	23,386
Total liabilities	147,480	44,969
Net assets	241,516	244,202
Equity
Share capital	10,892	10,865
Share premium	37,525	37,473
Share-based payments reserve	21,747	18,649
Investment in own shares	(6,877)	(6,877)
Share-based payments deferred tax reserve	224	150
Other reserve	1,531	1,531
Hedging reserve	(440)	2,000
Translation reserve	(4,299)	1,878
Retained earnings	180,474	178,533
Equity attributable to equity holders of the parent	240,777	244,202
Non-controlling interest	739	–
Total equity	241,516	244,202

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 2023 (Audited)	10,843	37,269	15,711	(167)	531	1,531	(1,519)	5,004	167,419	236,622
Consolidated profit for the year to 31 December 2023	–	–	–	–	–	–	–	–	15,889	15,889
Other comprehensive income/(expense)	–	–	–	–	–	–	3,519	(3,126)	–	393
Total comprehensive income/(expense)	–	–	–	–	–	–	3,519	(3,126)	15,889	16,282
Share-based payments	–	–	2,916	–	(381)	–	–	–	–	2,535
Share options exercised	22	204	22	–	–	–	–	–	–	248
Own shares purchased	–	–	–	(6,710)	–	–	–	–	–	(6,710)
Dividends paid	–	–	–	–	–	–	–	–	(4,775)	(4,775)
At 31 December 2023 (Audited)	10,865	37,473	18,649	(6,877)	150	1,531	2,000	1,878	178,533	244,202
Consolidated profit for the year to 31 December 2024	–	–	–	–	–	–	–	–	7,142	7,142
Other comprehensive (expense)/income	–	–	–	–	–	–	(2,440)	(6,177)	–	(8,617)
Total comprehensive (expense)/income	–	–	–	–	–	–	(2,440)	(6,177)	7,142	(1,475)
Share-based payments	–	–	3,086	–	74	–	–	–	–	3,160
Share options exercised	27	52	12	–	–	–	–	–	–	91
Own shares purchased	–	–	–	–	–	–	–	–	–	–
Dividends paid	–	–	–	–	–	–	–	–	(5,201)	(5,201)
At 31 December 2024 (Unaudited)	10,892	37,525	21,747	(6,877)	224	1,531	(440)	(4,299)	180,474	240,777

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

		(Unaudited)	(Audited)
		Year ended	Year ended
		31 December 2024	31 December 2023
	Note	£’000	£’000
Cash flows from operating activities
Operating profit		11,219	18,882
Adjustments for:
Depreciation		6,453	4,375
Amortisation – acquired intangible assets		7,804	4,887
– software intangibles		537	522
– development costs		1,508	1,004
Increase in inventories		(2)	(8,064)
Increase in trade and other receivables		(10,384)	(2,515)
Increase/(decrease) in trade and other payables		4,318	(5,249)
Share-based payments expense		3,086	2,916
Taxation paid		(5,050)	(4,413)
Net cash inflow from operating activities		19,489	12,345
Cash flows from investing activities
Purchase of software		(572)	(89)
Capitalised research and development		(4,115)	(6,216)
Purchases of property, plant and equipment		(4,057)	(3,544)
Disposal of property, plant and equipment		27	42
Interest received		1,229	2,470
Acquisition of subsidiaries net of cash	8	(54,132)	(5,529)
Payment of contingent consideration		(5,529)	(7,399)
Net cash used in investing activities		(67,149)	(20,265)
Cash flows from financing activities
Dividends paid		(5,201)	(4,775)
Repayment of principal under lease liabilities		(2,605)	(1,472)
Repayment of loan	7	(62,192)	(480)
Borrowings received	7	79,453	–
Issue of equity shares		12	181
Own shares purchased		–	(6,710)
Interest paid		(3,989)	(362)
Net cash used in financing activities		5,478	(13,618)
Net (decrease) in cash and cash equivalents		(42,182)	(21,537)
Cash and cash equivalents at the beginning of the year		60,160	82,262
Effect of foreign exchange rate changes		(939)	(564)
Cash and cash equivalents at the end of the year		17,039	60,160

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 in England and Wales (registration number 02867684). 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 2024 comprise the Company and its subsidiaries (together referred to as the “Group”).

The Group is a world-leading independent developer and manufacturer of innovative tissue-healing technology, focused on quality outcomes for patients and value for payers. AMS has a wide range of surgical products including tissue adhesives, sutures, haemostats, internal fixation devices and internal sealants, which it markets under its brands LiquiBand^®, RESORBA^®, LiquiBandFix8^®, LIQUIFIX™, Peters Surgical, Ifabond, Vitalitec and Seal-G^®. AMS also supplies wound care dressings such as silver alginates, alginates and foams through its ActivHeal^® brand as well as under white label. Since 2019, the Group has made seven acquisitions: Sealantis, an Israeli developer of innovative internal sealants, Biomatlante, a French developer and manufacturer of surgical biomaterials, Raleigh, a leading UK coater and converter of woundcare and bio-diagnostics materials, AFS Medical, an Austrian specialist surgical business, Connexicon, an Irish tissue adhesives specialist, Syntacoll, a German specialist in collagen-based absorbable surgical implants and Peters Surgical, a global provider of specialty surgical sutures, mechanical haemostasis and internal cyanoacrylate devices.

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 2023 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. 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:

- Lease Liability in a Sale and Leaseback – Amendments to IFRS 16 Leases

- Classification of liabilities as Current or Non-Current and Non-current Liabilities with Covenants – Amendments to IAS 1 Presentation of Financial Statements

- Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures – Supplier Finance Arrangements; and

Lack of Exchangeability – Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of international accounting standards and International Financial Reporting Standards (IFRSs) as adopted by the UK, 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 2025.

The unaudited financial information set out in the announcement does not constitute the Group’s statutory accounts for the years ended 31 December 2024 or 31 December 2023. The financial information for the year ended 31 December 2023 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. 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 2024 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 unaudited 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 2023.

Going concern

With regards to the Group’s financial position, it had cash and cash equivalents at the 31 December 2024 of £17.0 million and continues to be profitable with positive operational cash flow.

The 2024 acquisition of Peters Surgical has resulted in the Group obtaining a new debt facility which includes a £60 million term loan facility and £30 million revolving credit facility, together the “New Debt Facility”. The balance of the consideration was funded by the Group’s existing cash resources. £12 million of the revolving credit facility is drawn at 31 December 2024, with £18 million available if required.

Both the term loan and the revolving credit facility mature in March 2027 and thereafter can be extended by two consecutive twelve months periods with the banks’ agreement. Interest on drawn funds is charged at the SONIA interest rate plus a current bank margin of 1.75%. This margin is expected to reduce in 2025 in line with forecasted leverage reductions.

The Group is required to comply with the following financial covenants a) Interest cover in respect of any relevant period shall not be less than 4.0:1.0 and b) Net leverage in respect of each relevant Period shall not exceed 3.0:1.0.

The EBITDA to finance charge ratio of the Group at 31 December 2024 is 7.8 and is expected to increase as the borrowing facilities are repaid.

The net debt to EBITDA ratio of the Group at 31 December 2024 is 1.2 and is expected to reduce as the borrowing facilities are repaid.

In carrying out their duties in respect of going concern, the Directors have carried out a review of the Group’s financial position and cash flow forecasts for a period of 12 months from the date of signing the accounts . These have been based on a comprehensive review of revenue, expenditure and cash flows, taking into account specific business risks and the current economic environment. Sensitivity analysis has been prepared to stress test forecasts and the Directors are confident the business is a going concern given the significant headroom available. The Directors also considered whether any factors exist that might reasonably impact the Group’s ability to continue as going concern beyond the period of 12 months from the date of this preliminary announcement, with no factors considered reasonably possible.

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 large 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 acquisition of Peters Surgical will further expand AMS’s product portfolio, add additional direct sales capability in key territories, improve manufacturing efficiency and further expand the Group’s specialist development and commercialisation function.

Having taken the above into consideration, the Directors have reached a 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 financial statements.

New accounting standards not yet applied

Certain new accounting standards, amendments and interpretations have been published that are not mandatory for 31 December 2024 reporting periods and have not been early adopted by the group. These standards are not expected to have a significant impact on the Group’s net results.

3. Segment information

As referred to in the Chief Executive’s Statement, 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.

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 31 December 2024	Surgical		Woundcare	Consolidated
(unaudited)
	£’000		£’000	£’000
Revenue
External sales	135,768		41,753	177,521
Result
Adjusted segment operating profit	30,132		2,604	32,736
Amortisation of acquired intangibles	(6,864)		(940)	(7,804)
Segment operating profit	23,268		1,664	24,932
Exceptional items				(10,924)
Unallocated expenses				(2,789)
Operating profit				11,219
Finance income				2,161
Finance costs				(3,557)
Profit before tax				9,823
Tax				(2,681)
Profit for the year				7,142

Year ended 31 December 2024	Surgical		Woundcare	Consolidated
(Unaudited)
Other information	£’000		£’000	£’000
Capital additions:
Software intangibles	494		78	572
Development costs	3,517		598	4,115
Property, plant and equipment	2,607		1,450	4,057
Depreciation and amortisation	(13,198)		(3,104)	(16,302)
At 31 December 2024
Statement of Financial Position
Assets
Segment assets	333,209		55,787	388,996
Liabilities
Segment liabilities	116,229		30,031	146,252
Unallocated liabilities				1,228
Consolidated liabilities				147,480

Year ended 31 December 2023		Surgical	Woundcare	Consolidated
(audited)
		£’000	£’000	£’000
Revenue
External sales		79,093	47,117	126,210
Result
Adjusted segment operating profit		19,985	5,317	25,302
Amortisation of acquired intangibles		(3,944)	(943)	(4,887)
Segment operating profit		16,041	4,374	20,415
Unallocated expenses				(1,533)
Operating profit				18,882
Finance income				3,786
Finance costs				(1,511)
Profit before tax				21,157
Tax				(5,268)
Profit for the year				15,889

Year ended 31 December 2023		Surgical	Woundcare	Consolidated
(audited)
Other information		£’000	£’000	£’000
Capital additions:
Software intangibles		47	42	89
Development costs		5,222	994	6,216
Property, plant and equipment		2,337	1,207	3,544
Depreciation and amortisation		(7,504)	(3,284)	(10,788)
At 31 December 2023 Statement of Financial Position Segment assets		207,647	81,524	289,171
Liabilities
Segment liabilities		34,810	10,159	44,969

Geographic segments

Segment revenue is based on the geographical location of customers. Segment assets are based on the country by which the legal entity resides.

	(Unaudited)	(Audited)
Year ended 31 December	2024	2023
	£’000	£’000
United Kingdom	16,606	17,385
Germany	32,288	26,365
France	14,790	6,217
Rest of Europe	46,314	32,716
United States of America	43,382	31,875
Rest of World	24,141	11,652
	177,521	126,210
The following table provides an analysis of the Group’s non-current assets by geographical location:
	(Unaudited)	(Audited)
As at 31 December	2024	2023
	£’000	£’000
United Kingdom	44,684	50,754
Germany	64,539	60,168
France	103,666	8,801
Rest of Europe	26,901	28,809
Rest of World	22,928	18,317
	262,718	166,849

4. Operating profit

	(Unaudited)	(Audited)
Year ended 31 December	2024	2023
	£’000	£’000
Operating profit is arrived at after charging:
Depreciation of property, plant and equipment	6,453	4,375
Amortisation of:
- acquired intangible assets	7,804	4,887
- software intangibles	537	522
- development costs	1,508	1,004
Research and development costs expensed excluding regulatory costs	5,237	5,597
Cost of inventories recognised as expense	84,269	55,733
Write down of inventories expensed	634	337
Staff costs	66,496	49,024
Net foreign exchange loss	141	1,955

5. Taxation

		(Unaudited)	(Audited)
Year ended 31 December		2024	2023
		£’000	£’000
a) Analysis of charge for the year
Current tax:
Tax on ordinary activities – current year		5,044	5,516
Tax on ordinary activities – prior year		140	(540)
		5,184	4,976
Deferred tax:
Tax on ordinary activities – current year		(2,351)	(183)
Tax on ordinary activities – prior year		(152)	475
		(2,503)	292
Tax charge for the year		2,681	5,268
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)		(Audited)
Year ended 31 December	2024		2023
	£’000		£’000
b) Factors affecting tax charge for the year
Profit before taxation	9,823		21,157
Profit multiplied by the weighted average Group tax rate of 29.0% (2023: 28.0%)	2,850		5,918
Effects of:
Net expenses not deductible for tax purposes and other timing differences	1,189		605
Patent Box Relief	(1,129)		(817)
Utilisation of trading losses	(301)		(526)
Net impact of deferred tax on capitalised development costs and R&D relief	16		(245)
Share-based payments	68		398
Adjustments in respect of prior year – current tax	140		(540)
Adjustments in respect of prior year and rate changes – deferred tax	(152)		475
Taxation	2,681		5,268

6. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

	(Unaudited)	(Audited)
Year ended 31 December	2024	2023
Number of shares	‘000	‘000
Weighted average number of ordinary shares in issue	217,561	217,093
Shares held in EBT	(3,222)	(1,195)
Weighted average number of ordinary shares for the purposes of basic earnings per share	214,339	215,898
Effect of dilutive potential ordinary shares: share options, deferred share bonus, LTIPs	3,959	3,391
Weighted average number of ordinary shares for the purposes of diluted earnings per share	218,298	219,289

	(Unaudited)	(Audited)*
	2024	2023
	£’000	£’000
Profit for the year attributable to equity holders of the parent	7,094	15,889
Amortisation of acquired intangible assets	7,804	4,887
Long-term liability expense	(868)	(186)
Exceptional items	10,924	–
Unwind of Inventory fair value accounting	1,726	–
Tax on adjusted items	(3,857)	(755)
Adjusted profit for the year attributable to equity holders of the parent	22,823	19,835



	(Unaudited)	(Audited)
	2024	2023
	pence	pence
Basic EPS	3.31	7.36
Diluted EPS	3.25	7.25
Adjusted basic EPS	10.65	9.19
Adjusted diluted EPS	10.45	9.05

* Adjusted basic and adjusted diluted earnings per share have been revised to include tax on adjusted items to ensure comparability with the current Period.

7. Net Debt

The following table provides an analysis of the Group’s net debt/cash
	(Unaudited)	(Audited)
As at 31 December	2024	2023
	£’000	£’000
Cash held at banks	17,039	60,160
Facility A borrowings	(59,608)	–
Facility B borrowings	(11,922)	–
Other Debt	(1,319)	–
Net (debt)/cash	(55,810)	60,160

The 2024 acquisition of Peters Surgical has resulted in the Group obtaining a new debt facility which includes a £60 million term loan facility “Facility A” and a £30 million revolving credit facility “Facility B”. £12 million of the revolving credit facility is drawn at 31 December 2024, with £18 million available if required.

Both the term loan and the revolving credit facility mature in March 2027 and thereafter can be extended by two consecutive twelve month periods with the banks agreement. Interest on drawn funds will be charged at the SONIA interest rate plus an initial bank margin of 1.75%, with this margin expected to reduce in 2025 in line with forecasted leverage reductions.

Facility A requires a £5 million repayment on the 1st July 2025 anniversary date and £5 million each anniversary date thereafter.

Other debt consists of bank borrowings and overdraft facilities at legal entities which joined the Group as part of the Peters Surgical acquisition.

Movements in borrowings is as follows:
	(Unaudited)	(Audited)
For the year ended 31 December	2024	2023
	£’000	£’000
Facility A funds received	59,494	–
Facility B funds received	19,831	–
Other borrowings received	128
Facility B repayments	(8,000)	–
Advance repayment of Peters Surgical loan balances	(50,630)
Other borrowings repaid	(3,562)	(480)
Total movement in borrowings	17,261	(480)

Funds received under facilities A and B were received net of arrangement fees.

Other borrowings received include short-term borrowing facilities available at Peters Surgical. Other borrowings repaid primarily relate to factoring facilities at Peters Surgical.

Borrowings in 2023 arose on the acquisition of Connexicon Medical which were subsequently repaid.

8. Acquisitions

Syntacoll GmbH

On 1 March 2024, the Group acquired the trade and assets of Syntacoll GmbH (“Syntacoll”), a specialist manufacturer of drug-eluting collagens that strengthens the Group’s existing Biosurgical business based near Munich in Germany for approximately £0.9 million cash consideration. The fair value of assets acquired are as follows:

		£’000
Identifiable net assets acquired
Technology-based Intangible asset	214
Property, plant and equipment	111
Inventory	600
Total net assets	925

Peters Surgical

On 1 July 2024, the Group acquired 100% of the Share Capital of Peters Surgical (“Peters Surgical”), a leading global provider of specialty surgical sutures, mechanical haemostasis and internal cyanoacrylate devices headquartered in Paris, France.

In the six-month Period from acquisition to 31 December 2024, Peters Surgical contributed £37.2 million of revenue to the Group and £4.2 million of operating profit. Amortisation of intangible assets of £2.9 million has also been recorded in the period in respect of the acquisition. The resulting unwind in Inventory fair value accounting resulted in a £1.7 million expense being recorded as an adjusting item.

The results, assets and liabilities of Peters Surgical have been included in the Surgical business unit segment.

The fair value of the acquired identifiable intangible assets and lease liabilities is provisional pending final valuations for those assets and liabilities.

	£’000
Identifiable net assets acquired
Technology Intangibles	30,769
Customer Intangibles	19,244
Property, plant and equipment	15,296
Software intangibles	891
Deferred tax asset	181
Inventory	19,482
Trade Receivables	20,681
Tax debtor	1,954
Cash	10,526
Trade payables	(16,886)
Loan	(56,653)
Tax liability	(2,454)
Deferred tax liability	(13,074)
Lease liabilities	(3,480)

Arising on acquisition
Goodwill	38,207
Total net assets	64,684

Satisfied by	£’000
Cash consideration	63,733
Contingent consideration (fair value)	951
	64,684

Net cash flow on acquisition	£’000
Cash consideration	63,733

Cash acquired	(10,526)
	53,207

Contingent consideration arose on the acquisition of up to €8.9 million (approximately £7.5 million) payable on delivery of US regulatory approvals, achievement of FY24 gross margin targets, and satisfying certain inventory and tax conditions. This Contingent consideration has been fair valued at £1.0 million at acquisition. No payments have been made in the Period in relation to this contingent consideration.

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

9. Events after reporting Period

There have been no material events subsequent to 31 December 2024.

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The post Unaudited Preliminary Results appeared first on Advanced Medical Solutions.

Unaudited Preliminary Results

AdMedSol — Wed, 15 Mar 2023 07:00:07 +0000

RNS Number : 9901S

Advanced Medical Solutions Grp PLC

15 March 2023

Advanced Medical Solutions Group plc

(“AMS” or the “Group” or the “Company”)

Unaudited preliminary results for the year ended 31 December 2022

~ Strong revenue growth, profit and cash generation in line with expectations.

Good clinical and regulatory progress across promising pipeline of new products ~

Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), the world-leading specialist in tissue-healing technologies, today announces its unaudited preliminary results for the year ended 31 December 2022.

Financial Summary:

	2022	2021	Reported change	Change at constant currency¹
Revenue (£ million)	124.3	108.6	14%	10%
Adjusted Measures
Adjusted² profit before tax (£ million)	28.5	25.6	11%
Adjusted² profit before tax margin %	22.9%	23.6%	-0.7pp
Adjusted² diluted earnings per share (p)	10.47	9.66	8%

Reported Measures
Profit before tax (£ million)	25.9	22.0	18%
Profit before tax margin %	20.8%	20.2%	0.6pp
Diluted earnings per share (p)	9.30	8.01	16%
Net operating cash flow (£ million)	26.9	31.0	-13%
Net cash³ (£ million)	82.3	73.0	13%

Proposed full year dividend per share (p)	2.15	1.95	10%

Business Highlights (including post period end):

AMS is pleased to report robust financial performance in line with expectations and significant regulatory and clinical progress as it continues to invest in its portfolio of next-generation products.

Financial

· Group revenue increased to £124.3 million (2021: £108.6 million), an increase of 14% or 10% at constant currency, driven by commercial progress, foreign exchange tailwinds and higher pricing to recover inflationary cost increases

· Adjusted profit before tax increased by 11% to £28.5 million (2021: £25.6 million) as the business continued to manage the majority of inflationary pressure through selling price increases

· Net cash increased to £82.3 million (2021: £73.0 million) driven by strong trading and robust operational cash flow

· Investment in R&D increased to £12.3 million (2021: £9.3 million), representing 9.9% of revenues (2021: 8.6%), as the Group accelerates investment in new products and Medical Device Regulation (“MDR”)

· Surgical Business Unit revenues increased to £74.9 million (2021: £64.6 million), an increase of 16% and of 12% at constant currency

· Woundcare Business Unit revenues increased to £49.5 million (2021: £44.0 million), an increase of 13% and of 8% at constant currency

· Reflecting the strong financial performance and management’s ongoing confidence in the Group’s outlook, the Board proposes an increased final dividend of 1.51p per share (2021: 1.37p) bringing the total proposed dividend to 2.15p per share (2021: 1.95p)

Operational

· Good engagement and progress with the FDA on our US LiquiBandFix8^® Pre-Market Approval (PMA) with approval on track for H2 2023

· The Seal-G^® and Seal-G^® MIST clinical study continues to progress well with over 80% of patients now recruited. The final results are on track to be released in H1 2023 when they will be used to market the technology during the commercial launch

· LiquiBand^® XL was approved and launched in the US during H2 2022. Initial market response is very positive and underpins confidence in the product

· Completed the acquisition of AFS Medical GmbH (“AFS”), an Austria-based distributor of minimally invasive surgical devices for an initial cash purchase price of €4.5 million with a further cash deferred consideration of up to €1.5 million based on delivery of 2022-2024 EBITDA targets

· On 1^st February 2023, AMS announced that it had acquired Connexicon Medical Ltd (Connexicon), a tissue adhesive technology specialist, for an initial, upfront payment of €7 million with further deferred payments dependent on delivery of certain research & development, regulatory and commercial milestones between 2023 and 2027. The acquisition strengthens AMS’s position in the $300 million global medical adhesive market, providing significant new commercial opportunities

Commenting on the results Chris Meredith, Chief Executive Officer of AMS, said: “I am pleased with the resilience that our business has shown in delivering another period of strong financial performance in the current challenging economic conditions, and we are on track to meet 2023 expectations. The investments we have made in our in-house and acquired technologies have strengthened the quality and breadth of our portfolio enabling us to deliver returns across a broader range and validate our growth strategy. AMS is committed to investing in R&D and acquisitions that will further strengthen our established portfolios while continuing to penetrate new markets, maintaining robust growth in the long-term.”

Notes

1. Constant currency removes the effect of currency movements by re-translating the current year’s performance at the previous year’s exchange rates

2. Adjusted profit before tax is shown before amortisation of acquired intangible assets which was £3.4 million (2021: £3.2 million) and the movement in long-term liabilities recognised on acquisitions which was a credit £0.8 million (2021: £0.4 million debit).

3. Net cash consists of cash and cash equivalents with nil debt (2021: £nil debt)

– End –

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 Michael King, Investor Relations

Consilium Strategic Communications	Tel: 44 (0) 20 3709 5700
Mary-Jane Elliott / Matthew Neal / Lucy Featherstone

Investec Bank PLC (NOMAD & Broker)	Tel: 44 (0) 20 7597 5970
Gary Clarence / David Anderson

HSBC Bank PLC (Broker)	Tel: 44 (0) 20 7991 8888
Sam McLennan / Joe Weaving / Stephanie Cornish

About Advanced Medical Solutions Group plc

AMS is a world-leading independent developer and manufacturer of innovative tissue-healing technology, focused on quality outcomes for patients and value for payers. AMS has a wide range of surgical products including tissue adhesives, sutures, haemostats, internal fixation devices and internal sealants, which it markets under its brands LiquiBand^®, RESORBA^®, LiquiBandFix8^® and Seal-G^®. AMS also supplies wound care dressings such as silver alginates, alginates and foams through its ActivHeal^® brand as well as under white label. Since 2019, the Group has made five acquisitions: Sealantis, an Israeli developer of innovative internal sealants; Biomatlante, a French developer and manufacturer of surgical biomaterials, Raleigh, a leading UK coater and converter of woundcare and bio-diagnostics materials, AFS Medical, an Austrian specialist surgical business and Connexicon, an Irish tissue adhesives specialist.

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, Ireland, Germany, France and Israel. Established in 1991, the Group has more than 800 employees. For more information, please see www.admedsol.com.

Chief Executive’s Review

Group performance

The Group delivered record sales of £124.3 million driven by good commercial progress from both Business Units.

Surgical Business Unit

Growth in the Surgical Business was driven by strong performances from the Biosurgical Devices and Internal Fixation products. Revenue increased by 16% in the period to £74.9 million (2021: £64.6 million) and by 12% on a constant currency basis.

Surgical Business Unit	2022 £ million	2021 £ million	Reported Growth	Change at constant currency
Advanced Closure	36.0	33.1	9%	1%
Internal Fixation and Sealants	4.1	2.6	60%	60%
Other Distributed	2.9	0.0
Traditional Closure	16.0	14.9	7%	6%
Biosurgical Devices	15.8	14.0	13%	13%
TOTAL	74.9	64.6	16%	12%

Advanced Closure

Advanced Closure	2022 £ million	2021 £ million	Reported Growth	Change at constant currency
Americas	23.4	22.4	5%	-6%
UK/Germany	7.3	6.3	17%	17%
ROW	5.3	4.5	19%	17%
TOTAL	36.0	33.1	9%	1%

Revenues increased to £36.0 million (2021: £33.1 million) representing growth of 9% on a reported basis and 1% on a constant currency basis.

Strong growth in LiquiBand^® globally was partially offset by weakness in US revenues and consequently US sales increased by only 5% at reported currency and declined by 6% at constant currency.

In 2022, the Group began a strategic review of its US LiquiBand^® business which involves assessing and streamlining its routes to market and product offering in order to help drive stronger growth in this key market sector. As part of this initiative, we identified and first made contact with Connexicon as a potential acquisition target. We intend to complete this strategic review process during 2023 and it is expected that this will result in improved market access and growth potential from H2 2023. As a consequence of the ongoing changes, we had reduced orders from one partner in H2 2022 and this is expected to continue throughout H1 2023.

Following its approval in H1 2022, LiquiBand^® XL delivered a strong launch in H2 2022 with £0.6 million of initial US orders fulfilled, strengthening our optimism on the short and long-term potential of LiquiBand^® XL in the fast growing $60 million long wound market and unlocking further growth potential for the LiquiBand^® business. The US approval is to be extended in early 2023 with the addition of a product that can close wounds up to 60cm rather than the current maximum of 40cm.

Going forward, we remain highly confident of delivering growth with LiquiBand^® in the US, especially as we start to reap the benefits of adding LiquiBand^® XL and the recently acquired Connexicon Medical products to our portfolio.

The acquisition of Connexicon Medical in February 2023 brings an existing Indermil^® Flexifuse^® business in Europe and APAC, progress towards accessing the large Chinese market and an exciting, enhanced portfolio for the US market that provides significant commercial synergies with approvals expected by early 2024. The addition of Connexicon’s highly experienced R&D team to the Group has provided AMS with a medical adhesive development hub in Dublin, strengthening the Company’s ability to develop and launch innovative adhesive and sealant technologies in the coming years.

Outside the US market, the LiquiBand^® brand continued to perform very strongly, with underlying growth of 17% in both the UK/Germany and the Rest of the World markets. AMS is encouraged to see early-stage traction building for LiquiBand^® XL outside the US, and this is now contributing to growth.

In addition, the Group has recently taken over the direct ownership and distribution of InteguSeal^®, a cyanoacrylate microbial surgical sealant, from a partner that has historically generated a low level of sales. AMS is now looking at options for broader global distribution that have the potential to generate more meaningful revenue. The first direct order was shipped to a new partner in Japan in late 2022 and there is significant business development activity planned in other key EU and APAC markets in early 2023.

Internal Fixation and Sealants

LiquiBandFix8^® uses individual, accurately delivered drops of cyanoacrylate adhesive inside the body, to fix hernia meshes in place, instead of sutures or tacks.

A strong performance from LiquiBandFix8^® was supported by the UK National Institute for Clinical Excellence (NICE) recommendation and the AFS acquisition as revenues increased to record levels of £4.1 million (2021: £2.6 million) an increase of 60% at reported and constant currency. The marketing expertise from AFS will be beneficial to other marketing teams and will help to increase traction in more specialist minimally invasive surgical markets.

In October 2022, AMS reported that the Premarket Approval (PMA) for LiquiBandFix8^® had been submitted and accepted by the FDA. Since then, FDA engagement has been high and the process is progressing well with approval on track for H2 2023. This would be the first product of its kind in the US and the anticipated launch in 2024 represents a significant commercial opportunity for the Company.

Seal-G^® MIST (laparoscopic surgery) and Seal-G^® (open surgery) are novel, internal, biological sealants used to seal tissue during gastrointestinal surgery to reduce bleeding and leakage of fluid. The trial continues to progress well with over 80% of the 160 procedures now complete, with results on track for H1 2023 and launch planned for H2 2023.

Key Opinion Leader feedback continues to be highly positive and AMS remains excited about the opportunity for Seal-G^® products in answering a high unmet patient need for an effective GI sealant. Beyond colon surgery, the Company sees opportunities to drive demand in surgeries with other potential indications that experience high leakage rates, for example oesophageal and pancreatic surgery. In early 2023, we received our first end-user commercial order from a UK surgeon who is using SEAL-G^® in oesophageal surgery to reduce the risk of leaks.

Traditional Closure

This portfolio has been established in predominantly European markets. However, in line with the Group’s ongoing strategy to expand the geographic reach of existing products, recent successes in the US dental market made a significant contribution to Traditional Closure revenues during the period.

Biosurgical Devices

The Biosurgical Devices category comprises antibiotic-loaded collagen sponges, collagen membranes and cones, oxidised cellulose, synthetic bone substitutes and bio-absorbable screws. Revenues increased by 13% at reported and constant currency to £15.8 million (2021: £14.0 million).

Demand for collagens both with and without antibiotics continued to drive growth in Europe in 2022 including an increased focus on the cardiovascular market with a supplementary brand and a new specialist partner network. AMS’s strategy to expand its distribution network into new territories has also been working well, with particular success in the Far East where one of its distributors was the first to exceed annual collagen revenues of £0.5 million.

The Group continues to work towards its first collagen approval in the US with a 510(k) submission expected in 2023 for a dental application to support haemostasis and healing following tooth extraction.

The RESORBA^® branded bone substitutes range has shown a promising start following its launch in 2021, rolling out in a number of European countries during 2022. The Group continues to work towards its planned Independent Rep launch into the US Bone Substitutes market which is on track for mid-2023.

Other Distributed Products

Following the acquisition of AFS in the period, the Other Distributed category comprises products distributed by AFS, including minimally invasive access ports and laparoscopic instruments. This category excludes sales of LiquiBandFix8^® which are recorded within the Internal Fixation and Sealants category. Since acquisition, AFS trading has been in-line with expectations.

Woundcare Business Unit

The Woundcare portfolio growth was driven by higher ordering from OEM partners, growth in ActivHeal^®, bulk materials and royalties as well as increased pricing to recover inflationary cost increases. Revenue increased by 13% in the Period to £49.5 million (2021: £44.0 million) and by 8% on a constant currency basis.

Woundcare Business Unit	2022 £ million	2021 £ million	Reported Growth	Change at constant currency
Infection Management	16.1	15.1	7%	2%
Exudate Management	23.4	21.7	8%	7%
Other Woundcare	9.9	7.2	38%	26%
TOTAL	49.5	44.0	13%	8%

Infection Management

The infection management category comprises advanced woundcare dressings that incorporate anti-microbials such as Silver and Polyhexamethylene Biguanide (PHMB). Revenue increased by 7% on a reported basis and by 2% on a constant currency basis to £16.1 million (2021: £15.1 million).

The Group’s growth in the infection management market continues to be affected by reimbursement issues in a number of territories, driving greater use of standard dressings over higher priced anti-microbial alternatives. However, orders for AMS’s silver alginate range have now stabilised following the renegotiation of a major contract in 2022 and progress continues to be made through new distribution channels. Other new products, such as the Silver High Performance Dressing and Silicone PHMB foam range continue to be rolled out and help to sustain growth.

New product approvals in this area are becoming increasingly challenging and we are currently reviewing FDA questions on the 510(k) for our innovative high gelling product with anti-biofilm activity that was submitted in 2022. On a more positive note, we expect to obtain extended US approval for our Silicone PHMB foam range in H1 2023. This dressing provides high efficacy and sustained performance, and the enhanced anti-microbial approval increases its potential to penetrate the US, MEA and APAC regions.

Exudate Management

Exudate Management comprises advanced woundcare dressings, gels and bulk materials which do not incorporate any antimicrobial elements. Revenue increased by 8% on a reported basis and by 7% on a constant currency basis to £23.4 million (2021: £21.7 million).

Increased orders from the Group’s OEM partners continued to drive Exudate Management growth with a significant increase in demand for our specialist medical foam material.

Growth has also been driven by the successful implementation of the Group’s strategy to expand the distribution network for its own ActivHeal^® range of dressings. AMS has continued to appoint new ActivHeal^® distribution partners in markets where its key partners have no or low presence, but the demand for a high quality, cost effective woundcare dressing range still exists. Several new contracts were signed in 2022, with launches being undertaken as market registrations are obtained.

AMS has applied its Biosurgical, collagen technology into developing a tissue scaffold designed to treat hard to heal and stalled wounds such as diabetic foot ulcers and venous leg ulcers. A 510(k) submission was made in the period and we are reviewing FDA questions as we continue to evaluate the optimal commercial strategy.

Progress continues to be made in the development of a customer-specific negative pressure dressing. The 510(k) submission has been made by our partner and AMS awaits confirmation of approval and commercialisation.

Other Woundcare

Other Woundcare comprises royalties, fees and woundcare sealants. Revenue increased by 38% at reported currency and by 26% at constant currency to £9.9 million (2021: £7.2 million) due to increased partner demand for membranes, gels and hydrocolloid and a higher royalty income from the Group’s licensing arrangement with Organogenesis.

Acquisition strategy

In line with our stated strategy, the acquisition of AFS in May 2022 underlines the Group’s ambition to expand its direct surgical footprint and capability and the acquisition of Connexicon Medical in February 2023 illustrates the company’s commitment to further expand its key portfolios and ensure that it remains at the forefront of its core technologies.

Whilst in recent years the Group’s completed transactions have been strategic bolt-ons, a key focus of the recently formed corporate business development team is on identifying larger more transformative targets. With cash of £82.3 million at the end of 2022 and access to extensive debt facilities, the Group is well placed to execute a deal of this nature.

Regulatory

In December 2022, the EU Commissioner announced that the enforcement of the Medical Devices Regulation (MDR) would be delayed until 2027 or 2028 depending on the classification of the device. Given the progress we have already made, AMS expects positive responses to its applications for certificate extensions for MDD products expiring before these dates. It is anticipated that competitors that have not made MDR progress will be unable to secure such extensions.

AMS plans to maintain its current schedule of work to meet the new standards and anticipates that the phasing of its capitalisation of R&D costs relating to MDR will be broadly unchanged.

At the current time, of the 55 AMS product groups going through MDR, 30 have been approved or are awaiting self-declaration, 19 are with the Notified Bodies ahead of their review and the remaining 6 files are being readied for submission to Notified Bodies in the next 12 months.

Supply Chain and Inflation

AMS has taken proactive steps to mitigate risks arising from global supply chain challenges such as increasing inventory levels and setting up alternative suppliers where feasible. As a result, shortages of material have not had a significant impact on the Group’s ability to supply products to its customers. Given the long shelf life of the Group’s materials and finished goods, the risk of inventory obsolescence is low but is closely monitored and provisions are made where relevant. We continue to closely monitor the global supply chain situation.

Inflationary pressures continue to be felt across the business through higher cost of goods, energy prices and staff costs. However, the Group has been able to successfully recover a significant proportion of this impact from its customers through price review negotiations.

Environmental, Social & Governance

Our ESG strategy remains focused on our environmental impact, the well-being of our workforce, driving equality, diversity and inclusion, and further strengthening our corporate governance, internally and across our supply chain. We believe that being a good corporate citizen is critical to our long-term sustainable success.

Building on the ESG framework we developed in 2021, the Group has made good progress in 2022. An important step during the year was the appointment of Inspired Energy as our ESG partner. AMS has worked with the organisation to create a ‘Pathway to Net Zero’ with an initial focus on calculating our Scope 3 emissions and Carbon Balance Sheet. We intend to complete this process prior to issuing the annual report in early Q2 2023 and will publish a comprehensive update at that time.

The steering committee continues to manage ESG activities across the Group and has been supplemented with a network of local ESG champions representing each site and function, as well as an Equality Diversity and Inclusion Committee.

Stakeholders

On behalf of the Board, I would like to thank the Group’s committed staff, partners and other stakeholders, without whose help and commitment, the achievements of this year, and the years prior, would not have been possible.

Outlook

The Group is well placed to navigate the ongoing macro-economic challenges. We have proven our ability to recover the majority of energy and other cost inflation by increasing selling prices, are insulated from high interest rates due to our cash position and our products do not rely on consumer demand exposed to recessionary factors.

These factors along with our proven commercial strategy to increase our share of our large markets with innovation and geographical expansion, leaves us well placed for continued growth both in the short and long term.

Influenced by the strategic review of our US LiquiBand^® business, and the associated 2024 launch timing for the US Connexicon products, we expect weak demand in H1 2023 as we finalise the strategic discussions across our partner base, followed by recovery in H2 2023 and much stronger growth thereafter.

Given AMS’ resilience and the strength of its overall portfolio, the Group remains on track to meet market expectations for 2023.

Chris Meredith

Chief Executive Officer

Financial Review

Summary

IFRS reporting

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

Overview

Revenue increased by 14% at reported currency and 10% at constant currency to £124.3 million (2021: £108.6 million).

Gross margin improved to 59.0% (2021: 56.2%) as increased volumes drove improved operational leverage.

Administration expenses increased to £47.4 million (2021: £37.0 million) due to the addition of AFS expenses, higher regulatory and R&D investment, increased selling and marketing activity and a significant adverse foreign exchange movement.

The Group incurred £12.3 million of gross R&D spend in the period (2021: £9.3 million), representing 9.9% of sales (2021: 8.6%), reflecting increased investment in innovation and in meeting the increasing regulatory standards. As shown in the table below, part of this cost is capitalised and amortised over the following 5 to 10 years.

	2022	2021
	£’000	£’000
Total investment in Research and Development, Regulatory and Clinical	12,301	9,343
Of which:
Charged to the profit and loss account	6,149	5,310
Capitalised, to be amortised over 5-10 years	6,152	4,033

Amortisation of acquired intangible assets increased to £3.4 million in 2022 (2021: £3.2 million) due to the acquisition of AFS in May 2022.

In the period, a credit of £0.8 million (2021: £0.4 million debit) was recorded in relation to movements in the long-term liabilities relating to deferred consideration and earnout from the Sealantis and AFS acquisitions.

Adjusted profit before tax, which excludes amortisation of acquired intangibles and movements in long term liabilities recognised on acquisition, increased by 11% to £28.5 million (2021: £25.6 million) whilst the adjusted PBT margin decreased by 70 bps to 22.9% (2021: 23.6%) due to cost inflation having an adverse impact on the Group’s profit margin.

Reported profit before tax was £25.9 million (2021: £22.0 million).

Reconciliation of profit before tax to adjusted profit before tax
	(Unaudited)	Audited
	2022	2021
	£’000	£’000
Profit before tax	25,910	21,984
Amortisation of acquired intangibles	3,414	3,179
Movement in long-term acquisition liabilities	(840)	426
Adjusted profit before tax	28,484	25,589

The Group’s effective corporation tax rate, reflecting the blended tax rates in the countries where we operate and including UK patent box relief, increased slightly to 21.2% (2021: 20.5%). The UK Government’s enactment of a 25% tax rate from April 2023 will result in an increased group effective tax rate from FY2023.

Adjusted diluted earnings per share increased by 8% to 10.47p (2021: 9.66p) and diluted earnings per share increased by 16% to 9.30p (2021: 8.01p), reflecting the Group’s increased earnings.

Reflecting its confidence in the Group’s prospects, the Board is proposing an increased final dividend of 1.51p per share, to be paid on 9 June 2023 to shareholders on the register at the close of business on 19 May 2023. This follows the interim dividend of 0.64p per share paid on 22 October 2022 and would, if approved, make a total dividend for the year of 2.15p per share (2021: 1.95p) an increase of 10%.

Operating result by business segment
Year ended 31 December 2022	Surgical	Woundcare
	£’000	£’000
Revenue	74,861	49,469
Segment operating profit	19,333	6,687
Amortisation of acquired intangibles	2,469	945
Adjusted segment operating profit⁴	21,802	7,632
Adjusted operating margin⁴	29.1%	15.4%
Year ended 31 December 2021
Revenue	64,630	43,971
Segment operating profit	18,298	5,420
Amortisation of acquired intangibles	2,005	1,174
Adjusted segment operating profit⁴	20,303	6,594
Adjusted operating margin⁴	31.4%	15.0%

^{Note 4: Adjusted for amortisation of acquired intangible assets}

^{Table is reconciled to statutory information in note 3 of the financial information.}

Surgical

Surgical revenues increased by 16% to £74.9 million (2021: £64.6 million) at reported currency and by 11.6% at constant currency. Adjusted operating margin decreased by 230 bps to 29.1% (2021: 31.4%) due to lower shipments of LiquiBand^® to US partners, the addition of AFS at lower operating margin and the adverse margin impact of inflation.

Woundcare

Woundcare revenues increased by 13% to £49.5 million (2021: £44.0 million) at reported currency and increased 8.4% at constant currency. Adjusted operating margin increased by 40 bps to 15.4% (2021: 15.0%) as favourable sales pricing mix was offset by the adverse margin impact of inflation.

Currency

The Group hedges significant currency transaction exposure by using forward contracts and aims to hedge approximately 80% of its estimated transactional exposure for the next 18 months. In the financial year, approximately one third of sales were invoiced in Euros and approximately 30% were invoiced in US Dollar.

The Group estimates that a 10% movement in the £:US$ or £: € exchange rate will impact Sterling revenues by approximately 3.1% and 3.0% respectively and, in the absence of any hedging, this would have an impact on the Group operating margin of 2.5% and 0.3% percentage points respectively.

Cash flow

The Group continued to generate significant amounts of cash from operations. Net cash inflow from operating activities in the period was £26.9 million, which was lower than 2021 (£31.0 million) due to increased investment in inventory to mitigate the supply chain crisis and to mitigate any potential risks relating to the transition to MDR.

At the end of the period, the Group had net cash of £82.3 million (31 December 2021: £73.0 million) inclusive of the acquisition of AFS.

Working capital increased during the year. Increased inventory and receivables were only partially offset by increased payables. Inventory cover increased to 6.2 months of supply (2021: 4.9 months) due to planned increases in stock levels. Debtor days and Creditor days have both remained broadly consistent with prior period at 44 days (2021: 44 days) and 37 days (2021: 37 days) respectively.

Capital investment in equipment, R&D and regulatory costs increased to £9.9 million (2021: £6.5 million) as the Group continues to invest in its future pipeline.

Cash outflow relating to taxation decreased to £3.3 million (2021: £4.1 million) due to the timing of payments on account.

The Group paid its final dividend for the year ended 31 December 2021 of £3.0 million in June 2022 (2021: for the year ending December 2020, £2.6 million in June 2021), and its interim dividend for the six months ended 30 June 2022 of £1.4 million in October 2022 (for the 6 months ended 30 June 2021: £1.2 million in October 2021).

The Group retains strong support from its two banks, NatWest and HSBC, and in order to retain maximum flexibility of facility size for future acquisitions, it did not renew its credit facility when it expired in December 2022.

CONDENSED CONSOLIDATED INCOME STATEMENT
		(Unaudited)	(Audited)
Year ended 31 December		2022	2021
	Note	£’000	£’000
Revenue from continuing operations	3	124,330	108,601
Cost of sales		(50,914)	(47,531)
Gross profit		73,416	61,070
Distribution costs		(1,626)	(1,483)
Administration costs		(47,378)	(36,970)
Other income		478	381
Operating profit	4	24,890	22,998
Finance income		1,691	84
Finance costs		(671)	(1,098)
Profit before taxation		25,910	21,984
Income tax	5	(5,504)	(4,503)
Profit for the period attributable to equity holders of the parent		20,406	17,481
Earnings per share
Basic	6	9.42p	8.11p
Diluted	6	9.30p	8.01p
Adjusted diluted⁵	6	10.47p	9.66p

^{Note 5: Adjusted for amortisation of acquired intangible assets and movement in long-term acquisition liabilities.}

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
	(Unaudited)	(Audited)
	2022	2021
	£’000	£’000
Profit for the year	20,406	17,481
Exchange differences on translation of foreign operations	6,940	(5,194)
Loss arising on cash flow hedges	(1,297)	(1,548)
Deferred tax (charge)/credit arising on cash flow hedges	(201)	290
Total other comprehensive income/(expense) for the year	5,442	(6,452)
Total comprehensive income for the year attributable to equity holders of the parent	25,848	11,029

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	(Unaudited)	(Audited)
	31 December 2022	31 December 2021
	£’000	£’000
Assets
Non-current assets
Intangible assets	48,373	40,958
Goodwill	70,859	66,032
Property, plant and equipment	29,015	27,441
Trade and other receivables	937	105
	149,184	134,536
Current assets
Inventories	27,911	19,300
Trade and other receivables	21,553	21,016
Current tax assets	184	1,692
Cash and cash equivalents	82,262	72,965
	131,910	114,973
Total assets	281,094	249,509
Liabilities
Current liabilities
Trade and other payables	20,671	14,958
Current tax liabilities	948	897
Lease liabilities	1,059	1,153
	22,678	17,008
Non-current liabilities
Trade and other payables	3,510	3,679
Deferred tax liabilities	9,593	7,438
Lease liabilities	8,691	8,707
	21,794	19,824
Total liabilities	44,472	36,832
Net assets	236,622	212,677
Equity
Share capital	10,843	10,804
Share premium	37,269	36,996
Share-based payments reserve	15,711	13,180
Investment in own shares	(167)	(164)
Share-based payments deferred tax reserve	531	933
Other reserve	1,531	1,531
Hedging reserve	(1,519)	(21)
Translation reserve	5,004	(1,936)
Retained earnings	167,419	151,354
Equity attributable to equity holders of the parent	236,622	212,677

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 2021 (Audited)	10,769	36,288	11,142	(162)	430	1,531	1,237	3,258	137,718	202,211
Consolidated profit for the year to 31 December 2021	–	–	–	–	–	–	–	–	17,481	17,481
Other comprehensive expense	–	–	–	–	–	–	(1,258)	(5,194)	–	(6,452)
Total comprehensive expense	–	–	–	–	–	–	(1,258)	(5,194)	17,481	11,029
Share-based payments	–	–	1,979	–	503	–	–	–	–	2,482
Share options exercised	35	708	59	–	–	–	–	–	–	802
Shares purchased by EBT	–	–	–	(366)	–	–	–	–	–	(366)
Shares sold by EBT	–	–	–	364	–	–	–	–	–	364
Dividends paid	–	–	–	–	–	–	–	–	(3,845)	(3,845)
At 31 December 2021 (Audited)	10,804	36,996	13,180	(164)	933	1,531	(21)	(1,936)	151,354	212,677
Consolidated profit for the year to 31 December 2022	–	–	–	–	–	–	–	–	20,406	20,406
Other comprehensive (expense)/income	–	–	–	–	–	–	(1,498)	6,940	–	5,442
Total comprehensive (expense)/income	–	–	–	–	–	–	(1,498)	6,940	20,406	25,848
Share-based payments	–	–	2,439	–	(402)	–	–	–	–	2,037
Share options exercised	39	273	92	–	–	–	–	–	–	404
Shares purchased by EBT	–	–	–	(392)	–	–	–	–	–	(392)
Shares sold by EBT	–	–	–	389	–	–	–	–	–	389
Dividends paid	–	–	–	–	–	–	–	–	(4,341)	(4,341)
At 31 December 2022 (Unaudited)	10,843	37,269	15,711	(167)	531	1,531	(1,519)	5,004	167,419	236,622

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

		(Unaudited)	(Audited)
		Year ended	Year ended
		31 December 2022	31 December 2021
	Note	£’000	£’000
Cash flows from operating activities
Operating profit		24,890	22,998
Adjustments for:
Depreciation		4,049	3,893
Amortisation – acquired intangible assets		3,414	3,179
– software intangibles		502	529
– development costs		879	1,247
(Increase)/decrease in inventories		(7,087)	941
Increase in trade and other receivables		(596)	(1,769)
Increase in trade and other payables		1,711	2,105
Share-based payments expense		2,439	1,979
Taxation paid		(3,324)	(4,077)
Net cash inflow from operating activities		26,877	31,025
Cash flows from investing activities
Purchase of software		(73)	(254)
Capitalised research and development		(6,152)	(4,441)
Purchases of property, plant and equipment		(3,739)	(1,768)
Disposal of property, plant and equipment		46	53
Interest received		820	84
Acquisition of subsidiaries net of cash	7	(2,781)	–
Net cash used in investing activities		(11,879)	(6,326)
Cash flows from financing activities
Dividends paid		(4,341)	(3,845)
Repayment of principal under lease liabilities		(1,295)	(1,281)
Repayment of loan	7	(331)	–
Issue of equity shares		266	723
Shares purchased by EBT		(392)	(366)
Shares sold by EBT		389	364
Interest paid		(617)	(700)
Net cash used in financing activities		(6,321)	(5,105)
Net increase in cash and cash equivalents		8,677	19,594
Cash and cash equivalents at the beginning of the year		72,965	53,829
Effect of foreign exchange rate changes		620	(458)
Cash and cash equivalents at the end of the year		82,262	72,965

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 02867684). 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 2022 comprise the Company and its subsidiaries (together referred to as the “Group”).

The Group is primarily involved in the design, development and manufacture of innovative tissue healing technology, focused on quality outcomes for patients and value for payers The Group has a wide range of surgical products including tissue adhesives, sutures, haemostats, internal fixation devices and internal sealants, which it markets under its brands LiquiBand^®, RESORBA^®, LiquiBandFix8^® and Seal-G^®. The Group also supplies wound care dressings such as silver alginates, alginates and foams through its ActivHeal^® brand as well as under white label.

2. Basis of preparation

· Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS7, IFRS4 and IFRS16)

· Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS37)

· Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)

· Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS1, IFRS9, IFRS16 and IAS 41); and

· References to Conceptual Framework (Amendments to IFRS3)

The financial information set out in the announcement does not constitute the Group’s statutory accounts for the years ended 31 December 2022 or 31 December 2021. The financial information for the year ended 31 December 2021 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. 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 2022 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 2021.

Going concern

With regards to the Group’s financial position, it had cash and cash equivalents at the 31 December 2022 of £82.3 million. In December 2018, the Group entered an unsecured, multi-currency, credit facility for £80 million which was undrawn in 2022 and expired in December 2022. The Group has opted not to renew the facility.

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.

Having taken the above into consideration and reviewed cash flow forecasts for the next 12 months, 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

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2022 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods or on foreseeable future transactions.

3. Segment information

Business segments

Segment information about these businesses is presented below.

Year ended 31 December 2022	Surgical	Woundcare	Consolidated
(unaudited)
	£’000	£’000	£’000
Revenue
External sales	74,861	49,469	124,330
Result
Adjusted segment operating profit	21,802	7,632	29,434
Amortisation of acquired intangibles	(2,469)	(945)	(3,414)
Segment operating profit	19,333	6,687	26,020
Unallocated expenses			(1,130)
Operating profit			24,890
Finance income			1,691
Finance costs			(671)
Profit before tax			25,910
Tax			(5,504)
Profit for the year			20,406

Year ended 31 December 2022	Surgical	Woundcare	Consolidated
(Unaudited)
Other information	£’000	£’000	£’000
Capital additions:
Software intangibles	34	39	73
Development costs	4,617	1,535	6,152
Property, plant and equipment	2,258	1,481	3,739
Depreciation and amortisation	(5,759)	(3,085)	(8,844)
At 31 December 2022
Statement of Financial Position
Assets
Segment assets	190,456	90,638	281,094
Unallocated assets			–
Consolidated total assets			281,094
Liabilities
Segment liabilities	29,786	14,686	44,472


Year ended 31 December 2021	Surgical	Woundcare	Consolidated
(audited)
	£’000	£’000	£’000
Revenue
External sales	64,630	43,971	108,601
Result
Adjusted segment operating profit	20,303	6,594	26,897
Amortisation of acquired intangibles	(2,005)	(1,174)	(3,179)
Segment operating profit	18,298	5,420	23,718
Unallocated expenses			(720)
Operating profit			22,998
Finance income			84
Finance costs			(1,098)
Profit before tax			21,984
Tax			(4,503)
Profit for the year			17,481

Year ended 31 December 2021	Surgical	Woundcare	Consolidated
(audited)
Other information	£’000	£’000	£’000
Capital additions:
Software intangibles	145	109	254
Development costs	2,922	1,519	4,441
Property, plant and equipment	1,028	740	1,768
Depreciation and amortisation	(5,579)	(3,269)	(8,848)
At 31 December 2021
Statement of Financial Position
Assets
Segment assets	159,442	89,944	249,386
Unallocated assets			123
Consolidated total assets			249,509
Liabilities
Segment liabilities	22,651	14,181	36,832

Geographic segments

The Group operates in the UK, The Netherlands, Germany, the Czech Republic, France and Israel, with a sales office located in Russia, as a distributor in Austria, and a sales presence in the USA. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets.

The following table provides an analysis of the Group’s revenue by geographical market, irrespective of the origin of the goods/services, based upon location of the Group’s customers:

	(Unaudited)	(Audited)
Year ended 31 December	2022	2021
	£’000	£’000
United Kingdom	19,960	18,454
Germany	20,780	20,863
Rest of Europe	32,519	22,913
United States of America	40,807	36,712
Rest of World	10,264	9,659
	124,330	108,601

The following table provides an analysis of the Group’s total assets by geographical location:
	(Unaudited)	(Audited)
As at 31 December	2022	2021
	£’000	£’000
United Kingdom	151,817	142,056
Germany	78,877	67,389
France	11,934	9,674
Rest of Europe	16,670	7,853
United States of America	451	1,984
Israel	21,345	20,553
	281,094	249,509

4. Operating profit

	(Unaudited)	(Audited)
Year ended 31 December	2022	2021
	£’000	£’000
Operating profit is arrived at after charging/(crediting):
Depreciation of property, plant and equipment	4,049	3,893
Amortisation of:
– acquired intangible assets	3,414	3,179
– software intangibles	502	529
– development costs	879	1,247
Research and development costs expensed excluding regulatory costs	4,323	3,841
Cost of inventories recognised as expense	50,663	47,530
Write down of inventories expensed	251	1
Staff costs	46,065	39,691
Net foreign exchange loss/(gain)	1,683	(2,017)

5. Taxation

		(Unaudited)	(Audited)
Year ended 31 December		2022	2021
		£’000	£’000
a) Analysis of charge for the year
Current tax:
Tax on ordinary activities – current year		5,655	4,936
Tax on ordinary activities – prior year		6	(323)
		5,661	4,613
Deferred tax:
Tax on ordinary activities – current year		(84)	(490)
Tax on ordinary activities – prior year		(73)	(190)
Effect of increase in UK corporation tax rates to 25%		–	570
		(157)	(110)
Tax charge for the year		5,504	4,503
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)		(Audited)
Year ended 31 December	2022		2021
	£’000		£’000
b) Factors affecting tax charge for the year
Profit before taxation	25,910		21,984
Profit multiplied by the weighted average Group tax rate of 22.8% (2021: 23.0%)	5,911		5,053
Effects of:
Net expenses not deductible for tax purposes and other timing differences	243		7
Patent Box Relief	(554)		(652)
Utilisation of trading losses	(269)		–
Net impact of deferred tax on capitalised development costs and R&D relief	32		(123)
Share-based payments	208		161
Adjustments in respect of prior year – current tax	6		(323)
Adjustments in respect of prior year and rate changes – deferred tax	(73)		380
Taxation	5,504		4,503

6. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

	(Unaudited)	(Audited)
Year ended 31 December	2022	2021
Number of shares	‘000	‘000
Weighted average number of ordinary shares for the purposes of basic earnings per share	216,512	215,677
Effect of dilutive potential ordinary shares: share options, deferred share bonus, LTIPs	2,969	2,635
Weighted average number of ordinary shares for the purposes of diluted earnings per share	219,481	218,312

	(Unaudited)	(Audited)
	2022	2021
	£’000	£’000
Profit for the year attributable to equity holders of the parent	20,406	17,481
Amortisation of acquired intangible assets	3,414	3,179
Movement in long-term acquisition liabilities	(840)	426
Adjusted profit for the year attributable to equity holders of the parent	22,980	21,086

	(Unaudited)	(Audited)
	2022	2021
	pence	pence
Basic EPS	9.42	8.11
Diluted EPS	9.30	8.01
Adjusted basic EPS	10.61	9.78
Adjusted diluted EPS	10.47	9.66

7. Acquisition of AFS

On 28 April 2022, the Group acquired the entire issued share capital of AFS Medical GmbH, an Austria-based distributor of minimally invasive surgical devices.

In the eight month period from acquisition to 31 December 2022, AFS contributed £3.7 million of net revenue to the Group and £0.2 million of operating profit. In addition, amortisation of intangible assets of £0.3 million was recorded within the Group as a result of the acquisition.

	£’000
Identifiable net assets acquired
Customer related intangible assets	3,424
Marketing intangible assets	524
Property, plant and equipment	242
Trade and other receivables	296
Inventory	845
Cash and cash equivalents	42
Trade and other payables	(1,294)
Lease liabilities	(226)
Borrowings	(331)
Borrowings from AMS	(2,526)
Deferred tax on intangible asset	(986)

Arising on acquisition
Goodwill	1,452
Total net assets	1,462

Borrowings from AMS arose as funds were advanced prior to completion of the acquisition to repay external funding. These borrowings are now eliminated on consolidation. £0.3 million of borrowings that existed at the date of acquisition have been repaid prior to 31 December 2022 as disclosed in the Condensed Consolidated Statement of Cash flows.

Satisfied by	£’000
Cash consideration	297
Contingent consideration	1,165
	1,462

Net cash flow on acquisition	£’000
Cash consideration	297
Cash acquired	(42)
	255

Contingent consideration arose on the acquisition in respect of up to €1.5 million which is payable subject to EBITDA delivery in 2022-2024. £1.2 million is the estimated fair value of it as at the acquisition date.

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

8. Events after reporting period

There have been no material events subsequent to 31 December 2022 with the exception of the acquisition of Connexicon Medical Limited, announced in February 2023, for initial consideration of €7 million and with further deferred payments dependent on the delivery of future research & development, regulatory and commercial milestones.

END

FR JIMTTMTABTAJ

The post Unaudited Preliminary Results appeared first on Advanced Medical Solutions.

Unaudited Preliminary Results

AdMedSol — Wed, 16 Mar 2022 07:00:04 +0000

RNS Number : 8974E

Advanced Medical Solutions Grp PLC

16 March 2022

Advanced Medical Solutions Group plc

(“AMS” or the “Group”)

Unaudited Preliminary Results for the year ended 31 December 2021

~ Strong revenue growth, profit and cash generation despite the ongoing impact of COVID-19. Positioned for further growth with a promising pipeline of next-generation products ~

Financial Summary:

	2021	2020	Reported change	Change at constant currency¹	2019
Revenue (£ million)	108.6	86.8	25%	29%	102.4
Adjusted Measures
Adjusted² profit before tax (£ million)	25.6	13.4	92%		26.6
Adjusted² profit before tax %	23.6%	15.4%	8.2pp		26.0%
Adjusted² diluted earnings per share (p)	9.66	5.44	78%		9.83

Reported Measures
Profit before tax (£ million)	22.0	10.1	118%		24.3
Profit before tax %	20.2%	11.6%	8.6pp		23.7%
Diluted earnings per share (p)	8.01	3.94	103%		9.83
Net operating cash flow	31.0	21.5	44%		21.7
Net cash³ (£ million)	73.0	53.8	36%		64.1

Proposed full year dividend per share (p)	1.95p	1.70p	15%		1.55p

Business Highlights:

AMS is pleased to report strong financial performance in line with expectations and significant regulatory and clinical progress as it continues to invest in its portfolio of next-generation products.

Financial

· Revenue increased to £108.6 million (2020: £86.8 million) with strong performances reported across all key product categories and territories as levels of elective surgery and wound treatment volumes continued to rebuild towards pre-pandemic levels. This represents an increase of 25% on a reported basis and 29% on a constant currency¹ basis

· Adjusted profit before tax increased by 92% to £25.6 million (2020: £13.4 million) as increased sales volumes drove significant improvements in operational leverage

· Net cash increased to £73.0 million (2020: £53.8 million) driven by strong trading during the year and robust operational cash flow

· Investment in R&D increased to £9.3 million (2020: £7.9 million), representing 8.6% of revenues (2020: 9.1%), as progress continued across key projects throughout the Group

· Surgical Business Unit revenues increased to £64.6 million (2020: £50.2 million), an increase of 34% at constant currency

· Woundcare Business Unit revenues increased to £44.0 million (2020: £36.6 million), an increase of 23% at constant currency

· Global LiquiBand^® sales increased to £33.1 million (2020: £22.8 million), an increase of 53% at constant currency, with particular strength shown in the US market as end user demand returned and partners rebuilt inventories

· Reflecting the strong financial performance and Management’s ongoing confidence in the Group’s outlook, the Board proposes an increased final dividend of 1.37p per share (2020: 1.20p)

Operational

· The Seal-G^® and Seal-G^® MIST clinical study continues to progress well with approximately 25% of patients now recruited. The final results are on track to be released in H2 2022 when they will be used to market the technology during the full commercial launch

· As previously reported, recruitment for the US clinical trial of LiquiBandFix8^® has now been completed and the Premarket Approval (PMA) filing remains on track for H2 2022 once all the patients have completed their 12-month follow up

· The filing for AMS’ innovative high gelling product with anti-biofilm activity has been submitted for 510(k) approval with the product on track for a US launch in late 2022

Acquisition

· AMS is announcing today the signing of an agreement to acquire AFS Medical GmbH (“AFS”), an Austrian based distributor of minimally invasive surgical devices including LiquiBandFix8^®. The deal is expected to complete in mid-2022, subject to regulatory clearances, and strengthens the Group’s direct surgical sales footprint and capabilities

Commenting on the results Chris Meredith, Chief Executive Officer of AMS, said: “I am delighted with AMS’ financial performance in 2021 which reflects the strength of our product portfolio, the quality of our staff and partners, the expansion of our commercial platform and the commitment of clinicians to use our tissue-healing technologies. The acquisition of AFS enhances our direct selling footprint and capabilities, product portfolio and our plans to increase Fix8^® penetration globally and I am delighted to welcome them to the Group. Despite the pandemic continuing to present challenges, trading has started well in the new financial year and I remain confident that our commitment to innovation, investment in R&D and the expansion of our distribution network will deliver significant and robust long-term growth.”

Notes

1. Constant currency removes the effect of currency movements by re-translating the current year’s performance at the previous year’s exchange rates

2. Adjusted profit before tax is shown before exceptional items which were £nil (2020: £0.8 million, 2019: £1.1 million), amortisation of acquired intangible assets which was £3.2 million (2020: £2.3 million, 2019: £1.7 million) and long-term liability expense of £0.4 million (2020: £0.2 million, 2019: credit of £0.3 million) as defined in the Financial Review. Adjusted operating margin is shown before exceptional items and amortisation of acquired intangible assets

3. Net cash is defined as cash and cash equivalents plus short term investments less bank loans and financial liabilities excluding those relating to IFRS16

– End –

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 Michael King, Investor Relations

Consilium Strategic Communications	Tel: 44 (0) 20 3709 5700
Mary-Jane Elliott / Matthew Neal / Lucy Featherstone

Investec Bank PLC (NOMAD & Broker)	Tel: 44 (0) 20 7597 5970
Daniel Adams / Gary Clarence

HSBC Bank PLC (Broker)	Tel: 44 (0) 20 7991 8888
Sam McLennan / Joe Weaving / Stephanie Cornish

About Advanced Medical Solutions Group plc

AMS is a world-leading independent developer and manufacturer of innovative tissue-healing technology, focused on quality outcomes for patients and value for payers. AMS has a wide range of surgical products including tissue adhesives, sutures, haemostats, internal fixation devices and internal sealants, which it markets under its brands LiquiBand^®, RESORBA^®, LiquiBandFix8^® and Seal-G^®. AMS also supplies wound care dressings such as silver alginates, alginates and foams through its ActivHeal^® brand as well as under white label. Since 2019, the Group has made three acquisitions: Sealantis, an Israeli medical device company with a patent-protected sealant technology platform; Biomatlante, an established French developer and manufacturer of innovative surgical biomaterial technologies and Raleigh, a UK leading coater and converter of materials predominately for woundcare and bio-diagnostics products.

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 Review

Group Performance

The Group delivered record sales of £108.6 million supported by commercial success, despite the ongoing impact of COVID-19 on elective surgery, wound treatment volumes and hospital access. In comparison to 2019, this included a positive net revenue impact of £6 million from acquisitions and foreign exchange movements.

Surgical Business Unit

The recovery of global elective surgery volumes continued throughout 2021, supporting significant revenue growth in the year. Revenue increased by 29% in the period to £64.6 million (2020: £50.2 million) and by 34% on a constant currency basis.

Surgical Business Unit	2021 £ million	2020 £ million	Reported Growth	Change at constant currency
Advanced closure	33.1	22.8	46%	53%
Internal Fixation and Sealants	2.6	2.1	23%	24%
Traditional Closure	14.9	13.0	15%	18%
Biosurgical Devices	14.0	12.3	14%	17%
TOTAL	64.6	50.2	29%	34%

Advanced Closure

Advanced Closure	2021 £ million	2020 £ million	Reported Growth	Change at constant currency
Americas	22.4	13.9	60%	72%
UK/Germany	6.3	5.0	27%	28%
ROW	4.5	3.9	16%	17%
TOTAL	33.1	22.8	46%	53%

Revenues increased to £33.1 million (2020: £22.8 million), representing strong growth of 46% on a reported basis and 53% on a constant currency basis. This was achieved despite restricted access to hospitals, for both our direct sales teams and those of our distribution partners, which impacted our ability to win new business.

US LiquiBand^® sales were particularly strong, up 60%, to record high end sales volumes, driven by increased market demand and the replenishment of inventory levels at the Group’s marketing partners that had been reduced in 2020. The availability of LiquiBand^® Rapid, the new accelerated Topical Skin Adhesive technology and a re-focussing of the marketing strategy also helped to support the overall performance of this franchise. As announced in the December trading update, whilst later than planned, AMS expects the 510(k) approval for LiquiBand^®XL to be granted in the first half of 2022 as it works to submit responses to the FDA’s final questions.

LiquiBand^®sales in the UK and Germany also recovered strongly as underlying demand for the product returned while the rollout of LiquiBand^® Rapid during the year continued to strengthen the brand’s market position. Following successful pilots with Key Opinion Leaders, LiquiBand^®XL was launched into the UK in late 2021 and European launch will follow in the first half of 2022. Approvals for Liquiband^® XL have also recently been granted in New Zealand and Australia with launch planning underway in both markets. Surgeon feedback from this large wound product continues to be very positive.

Leverage of the LiquiBand^® brand also continues in the Rest of the World with initial sales to the Group’s new Indian partner in the period and further new LiquiBand^® territories expected to follow in 2022 and beyond.

Internal Fixation and Sealants

LiquiBandFix8^® is used to fix hernia meshes placed inside the body with accurately delivered individual drops of cyanoacrylate adhesive, instead of traditional, suture, tacks and staples. Revenues increased by 23% on a reported basis and 24% on a constant currency basis to £2.6 million (2020: £2.1 million). Demand continued to improve despite remaining heavily suppressed in comparison to pre-pandemic levels, reflecting the non-essential nature of the majority of hernia surgery. AMS continued to launch LiquiBandFix8^® into new territories including through a new Indian distributor in 2021. It also expects to increase its penetration in existing markets, building on the extensive combined experience of the AMS sales team and, following its acquisition, the AFS sales team.

AMS continues to prepare the US PMA for LiquiBandFix8^® now that recruitment into the clinical trial is complete. The Group still anticipates that the PMA filing will be finalised in the second half of 2022 once the 12-month patient follow-up is complete and continues to believe that US approval and launch of this product will be a significant milestone for the Group.

Seal-G^® MIST (laparoscopic surgery) and Seal-G^® (open surgery) are a novel, internal, biological sealant used to seal tissue during gastrointestinal surgery to reduce bleeding and leakage of fluid. As previously announced, AMS obtained CE mark for both of these products in the first half of 2021. Since then, the first human clinical trial with the technology has begun with approximately 25% of patients recruited to date. With an additional five trial sites now recruiting patients, results are expected to be released in H2 2022. The Group does not anticipate significant revenues until it can start to market the clinical trial results as part of the full European launch. Key Opinion Leader feedback continues to be very positive and AMS remains confident that the device is a good solution to the high unmet patient need for an effective GI sealant.

As we plan for full scale manufacturing of Seal-G, the US Fix8^® volumes and ongoing growth of LiquiBand^® globally, we have started an exciting project to expand the footprint of our Plymouth facility to accommodate these volumes and increase the space available in the laboratories for our R&D team. Construction is expected to start in 2022 with an estimated total spend of £2 million to £3 million over a two year period.

Traditional Closure

We continue to make small additions to our comprehensive range of sutures and to look for growth opportunities in existing and new territories.

Biosurgical Devices

The Biosurgical Devices category comprises antibiotic-loaded collagen sponges, collagen membranes and cones, oxidised cellulose, synthetic bone substitutes and bio-absorbable screws. Revenues increased by 14% to £14.0 million (2020: £12.3 million) and by 17% at constant currency.

Demand for collagen and bone-substitutes increased during the year as elective procedures started to return towards normal levels. Dental and orthopaedic surgical procedures continued to be significantly affected and slower to recover following the restrictions caused by COVID-19. This is reflected in the sales of these products.

Antibiotic-loaded collagens, used to locally deliver antibiotics, remain an important part of AMS’ biosurgical portfolio. The company has extended the CE mark for Gentamycin until 2024 under the Medical Devices Directive (MDD) while it progresses the work required for Medical Device Regulation (MDR) approval.

The Group is also working towards its first collagen approval in the US with 510(k) submission expected in H1 2023 for a dental application which supports haemostasis and healing following tooth extraction.

The RESORBA^® branded bone substitutes range was sold into six new EU countries in 2021 following its initial launch in 2020 with more territories to follow in 2022.

The Group has been assessing approval options for its newly developed freeze-dried bone substitute (FDBS), which can be mixed with fluids and moulded for optimal placement in orthopaedic and spine surgery. In response to the changing regulatory environment in Europe and the US, AMS has decided to modify its strategy to pursue wider, more commercially attractive claims in the long-term, rather than apply for more limited, specific applications in the short-term. Consequently, more development and regulatory work will be required before this technology can be commercialised.

Acquisition of AFS Medical GmbH

The Group today announces that it has strengthened its direct sales footprint, capabilities, and product portfolio, by agreeing to acquire AFS Medical GmbH, a specialist distributor of minimally invasive surgical devices headquartered in Vienna. The acquisition will be an important part of the Group’s strategy to expand its direct sales presence and expertise as well as enhancing its plans to increase LiquiBand Fix8^® penetration in other markets. The AFS direct sales team in Austria has been very successful in marketing LiquiBand Fix8^®, as a distributor for AMS, gaining a significant share of the Austrian market for hernia mesh fixation; AFS will continue to distribute LiquiBand Fix8^® along with a range of surgical products for AMS and other suppliers. AFS also has a number of proprietary designs for surgical devices that AMS intends to develop, manufacture and market in the future. Consideration will be an initial cash purchase price of €4.5 million, including debt, with a further cash deferred consideration of up to €1.5 million based on EBITDA delivery in 2022-2024. The acquisition is expected to complete in mid-2022 following the required regulatory clearances. It is expected to add approximately €4 million to Group revenues in 2023 and to be earnings enhancing.

Woundcare Business Unit

Global wound treatment volumes continue to recover towards pre-pandemic levels in 2021 and helped to drive growth in the Woundcare Business Unit. Revenue increased by 20% in the period to £44.0 million (2020: £36.6 million) and by 23% on a constant currency basis. A healthy order book is in place heading into 2022 suggesting that a level of confidence is returning in many markets.

Woundcare Business Unit	2021 £ million	2020 £ million	Reported Growth	Change at constant currency
Infection Management	15.1	15.3	-1%	1%
Exudate Management	21.7	15.4	41%	43%
Other Woundcare	7.2	5.9	22%	28%
TOTAL	44.0	36.6	20%	23%

Infection Management

The infection management category comprises advanced woundcare dressings that incorporate antimicrobials such as Silver and Polyhexamethylene Biguanide (PHMB). Revenue reduced by 1% on a reported basis but increased by 1% on a constant currency basis to £15.1 million (2020: £15.3 million).

As previously reported, 2021 sales were impacted by the renegotiation of a long-standing commercial agreement for one of the Group’s novel silver alginates, which resulted in there being no orders for this product in H1 2021. Sales restarted in H2 2021 but at a lower level than in previous years. The new five-year contract agreement is non-exclusive and allows AMS to promote the product directly in many markets and the Group has already made progress in gaining new business with this product.

In the first half of 2021, AMS obtained enhanced anti-microbial 510(k) approval for its patent-protected Silver High Performance Dressing. This product is now being sold via two US partners and into a number of ActivHeal territories whilst discussions continue with other interested partners.

Good progress has been made in the development of AMS’ innovative antimicrobial high gelling product with anti-biofilm activity. The 510(k) submission has now been made to the FDA and US approval and launch is anticipated at the end of 2022.

The Group’s Silicone PHMB foam range, which provides high efficacy and sustained performance, was CE mark approved in 2020, is now being sold into the MEA region and is expected to launch with a US partner and multiple APAC distributors in 2022.

Exudate Management

Exudate Management comprises advanced woundcare dressings and gels which do not incorporate any antimicrobial elements. Revenue increased by 41% on a reported basis and 43% on a constant currency basis to £21.7 million (2020: £15.4 million) which incorporated £5.5 million of Raleigh sales (2020: £0.7 million).

Following its acquisition in November 2020, the integration of the Raleigh acquisition continues to progress well, including the in-sourcing of woundcare manufacturing processes which are expected to come on stream and save costs in 2022. New commercial opportunities arising from the acquisition have also been evaluated and a number of existing customers have already signed multi-year contracts with the Group.

AMS made good progress in expanding the commercialisation of its ActivHeal^® portfolio, having signed multiple agreements with distributors in APAC and Gulf States and won a tender in the Kingdom of Saudi Arabia.

The Woundcare Business Unit has also expanded its distribution network in the period by appointing a distribution partner in the Republic of Ireland to fulfil contract awards with the Health Service Executive, including products within both Infection Management and Exudate Management.

AMS continues to develop a customer-specific negative pressure dressing which requires 510(k) submission by our partner with submission and launch still planned for 2022. The Group sees considerable medium-term potential in the negative pressure wound treatment space.

AMS has continued to develop the application of its biosurgical, collagen technology into a tissue scaffold designed to treat hard to heal and stalled wounds such as diabetic foot ulcers and venous leg ulcers. The 510(k) submission to the FDA remains on-track for H2 2022 and a number of commercial partners have expressed an interest in this technology.

Other Woundcare

Other Woundcare comprises royalties, fees and woundcare sealants. Revenue increased by 22% at reported currency and by 28% at constant currency to £7.2 million (2020: £5.9 million) due to higher royalties from Organogenesis.

During the period, AMS obtained CE mark approval for its Mechanical Debridement product and successfully listed the product with the FDA for the US market and are currently assessing commercial opportunities.

Acquisition strategy

The Group continues to seek acquisitions that deliver additional value for shareholders and meet the criteria of being accretive businesses with strong R&D and manufacturing capabilities, and/or that have products or customers that offer effective commercial synergies. The agreement to acquire AFS underlines the Group’s strategy to expand its direct surgical footprint and capability whilst the acquisition of Raleigh in 2020 demonstrates our objective to increase our woundcare capabilities and commercial potential.

Regulatory

As previously announced, AMS obtained its first Medical Devices Regulation (MDR) certificates in the year, significantly ahead of the 2024 deadline. The Group continues to invest heavily in the processes needed to comply with the extensive requirements on product safety and performance, clinical evaluation and post-market clinical evidence stipulated by MDR. Further submissions and approvals are anticipated this year and Management is confident that it is well placed for the opportunities that will inevitably arise in Europe during the ongoing implementation of MDR.

As previously reported, our Woundcare Business Unit continues to suffer headwinds from ongoing reviews of reimbursement regimes in various European countries, which can influence the appetite of our partners to commit to new product launches.

Supply Chain

Whilst the Group did not suffer any impact at the end of the Brexit transition period, it did experience some disruption in 2021 due to the global supply chain crisis prompted by the pandemic and this is expected to continue well into 2022. We have seen a number of instances where delayed deliveries from our material suppliers have resulted in longer timelines for us to fulfil some of our customer orders. We continue to closely monitor the supply situation and global inflationary challenges and are building higher levels of critical raw materials and forward planning as much as possible.

Russia

The Group is reviewing the activities in its small legacy sales office in Moscow that has historically contributed approximately 1% of the Group’s operating profit.

Environmental, Social & Governance

The Group continues to make strong progress on ESG. We have established a Steering Committee which manages activities across the Group and helped to develop an ESG Framework. Our ESG strategy is focused on our environmental impact, the well-being of our workforce, driving equality, diversity and inclusion, and further strengthening our corporate governance, internally and across our supply chain to meet ever increasing customer requirements. The progress we have made reaffirms our commitment to being a good corporate citizen which we believe is critical to our long-term sustainable success.

Stakeholders

Summary and Outlook

The return of elective surgery volumes towards pre-pandemic levels and AMS’ ongoing commitment to expanding its portfolio through new product launches has meant the Group has been able to deliver strong growth in revenue, profitability and cash generation in 2021 which was in line with expectations, along with an increased dividend. Furthermore, both Business Units have made significant regulatory and clinical progress in the year as the Group continues to increase its investments in developing next-generation products that it believes will drive robust long-term growth.

The Omicron COVID-19 variant is causing healthcare staff shortages in some of our markets but to date it appears that AMS will experience a much shorter and less severe impact from this variant than in previous peaks of the pandemic.

The US LiquiBand^® and general business recovery in 2021 and healthy order book in early 2022 are grounds for optimism and with our strong financial position and ongoing commitment to innovation, AMS is well placed for continued growth in 2022 and beyond.

Chris Meredith

Chief Executive Officer

Financial Review

Summary

IFRS reporting

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

Overview

Revenue increased by 25% at reported currency and 29% at constant currency to £108.6 million (2020: £86.8 million).

Gross margin improved to 56.2% (2020: 53.0%) as a result of higher throughput at our manufacturing facilities reducing the cost to manufacture our products and as a result of a strong recovery of sales in our higher margin goods.

Administration expenses increased to £37.0 million (2020: £34.5 million) inclusive of foreign exchange movements due to higher amortisation of intangible assets and a return to more routine levels of business activity, partially offset by favourable currency hedges in the year.

The Group incurred £9.3 million of gross R&D spend in the period (2020: £7.9 million), representing 8.6% of sales (2020: 9.1%), reflecting increased investment in innovation and in meeting the increasing regulatory standards.

No exceptional costs were incurred in the year (2020: £0.8 million relating to both the acquisition of Raleigh and our participation in a process, in which AMS was unsuccessful, for a sizeable surgical business).

Amortisation of acquired intangible assets was £3.2 million in 2021 (2020: £2.3 million) due to the full period effect of the acquisition of Raleigh in November 2020.

£0.4 million was recorded in relation to the long-term liability expense recognised on acquisition of Sealantis in 2019 (2020: £0.2 million).

Adjusted operating profit which excludes amortisation of acquired intangibles and exceptional costs, increased by 89.3% to £26.2 million (2020: £13.8 million) whilst the adjusted operating margin increased by 880 bps to 24.1% (2020: 15.9%) due to the negative impact of the COVID-19 pandemic on the Group’s revenues in the prior period.

The Group generated adjusted profit before tax of £25.6 million (2020: £13.4 million) and profit before tax of £22.0 million (2020: £10.1 million).

Reconciliation of profit before tax to adjusted profit before tax
	(Unaudited)	Audited
	2021	2020
	£’000	£’000
Profit before tax	21,984	10,089
Amortisation of acquired intangibles	3,179	2,269
Long-term liability expense	426	167
Exceptional items	–	834
Adjusted profit before tax	25,589	13,359

The Group’s effective corporation tax rate, reflecting the blended tax rates in the countries where we operate and including UK patent box relief, increased to 20.5% (2020: 14.9%). The increase on the previous period has arisen as the Group was able to retrospectively claim for patent box relief as a result of the granting of patents on LiquiBand^® Exceed in the first half of 2020. Additionally, the substantive enactment of the higher tax rate in the UK from April 2023 has increased the valuation of the deferred tax liability and contributed an additional 2.6 percentage points to the effective tax rate.

Adjusted diluted earnings per share increased by 78% to 9.66p (2020: 5.44p) and diluted earnings per share increased by 103% to 8.01p (2020: 3.94p), reflecting the Group’s increased earnings.

Reflecting the Group’s strong net cash position and confidence in the Group’s prospects, the Board is proposing an increased final dividend of 1.37p per share, to be paid on 17 June 2022 to shareholders on the register at the close of business on 27 May 2022. This follows the interim dividend of 0.58p per share paid on 22 October 2021 and would, if approved, make a total dividend for the year of 1.95p per share (2020: 1.70p) an increase of 15%.

Operating result by business segment
Year ended 31 December 2021	Surgical	Woundcare
	£’000	£’000
Revenue	64,630	43,971
Segment operating profit	18,298	5,420
Amortisation of acquired intangibles	2,005	1,174
Adjusted segment operating profit⁴	20,303	6,594
Adjusted operating margin⁴	31.4%	15.0%
Year ended 31 December 2020
Revenue	50,169	36,627
Segment operating profit	6,962	5,220
Amortisation of acquired intangibles	2,132	137
Adjusted segment operating profit⁴	9,094	5,357
Adjusted operating margin⁴	18.1%	14.6%

^{Note 4: Adjusted for exceptional items and amortisation of acquired intangible assets}

^{Table is reconciled to statutory information in note 3 of the financial information.}

Surgical

Surgical revenues increased by 29% to £64.6 million (2020: £50.2 million) at reported currency and 34% at constant currency. Adjusted operating margin increased by 1,330 bps to 31.4% (2020: 18.1%) as higher sales allowed the Group to achieve greater operational leverage compared with the previous period.

Woundcare

Woundcare revenues increased by 20% to £44.0 million (2020: £36.6 million) at reported currency and by 23% at constant currency. Adjusted operating margin increased by 400 bps to 15.0% (2020: 14.6%) as the general recovery was partially offset by reduced Silver Alginate volumes.

Currency

The Group estimates that a 10% movement in the £:US$ or £:€ exchange rate will impact Sterling revenues by approximately 3.4% and 2.9% respectively and, in the absence of any hedging, this would have an impact on the Group operating margin of 2.8% and 0.3% percentage points respectively.

Cash flow

The Group continued to generate significant amounts of cash through operations as strong net cash inflow from operating activities grew to £31.0 million (2020: £21.5 million) as the business recovered from the impact of the COVID-19 pandemic without significantly increasing working capital.

Reconciliation of Net cash inflow from operating activities to Adjusted net cash inflow from operating activities
	(Unaudited)	(Audited)
	Year ended 31 December 2021	Year ended 31 December 2020
	£’000	£’000

Net cash inflow from operating activities	31,025	21,511
Add back exceptional items	221	613
Adjusted net cash inflow from operating activities	31,246	22,124

At the end of the period, the Group had net cash of £73.0 million (31 December 2020: £53.8 million).

Working capital decreased during the year, despite the sales growth achieved during the year. An increase in receivables as a result of higher sales has been offset by reduced inventory levels and increased payables. Inventory cover reduced to 4.9 months of supply (2020: 5.7 months) following a period of increased demand and supply chain disruption. To mitigate against ongoing supply disruption, the Group intends to rebuild inventory back to the higher levels held during the Brexit transition period and earlier stages of the COVID-19 pandemic. Debtor days reduced marginally to 44 days (2020: 45 days) whilst Creditor days increased to 37 days (2020: 30 days) mainly due to the timing of payments.

Capital investment in equipment, R&D and regulatory costs increased to £6.5 million (2020: £5.3 million) as the Group continues to invest in its future pipeline.

Cash outflow relating to taxation increased to £4.1 million (2020: £3.7 million) which is £0.4 million lower than tax in the income statement. This is due to the timing of payments on account and the non-cash impact of the upwards revaluation in the Deferred Tax Liability following the enactment of higher tax rates in the UK from April 2023. Despite a significantly higher tax expense in the year as the Group’s taxable profits grew, the prior period included accelerated payments on account in the UK resulting in only a marginal increase in cash outflow relating to taxation. The UK Government’s enactment of a 25% tax rate from April 2023 will result in an increased group effective tax rate from FY2023.

The Group paid its final dividend for the year ended 31 December 2020 of £2.6 million in June 2021 (2020: for the year ending 2019, £2.3 million in June 2020), and its interim dividend for the six months ended 30 June 2021 of £1.2 million in October 2021 (for the 6 months ended 30 June 2020: £1.1 million in October 2020).

The Group has an undrawn unsecured £80 million credit facility provided jointly by Natwest and HSBC which is in place until December 2022. This facility carries an annual interest rate of the applicable reference rate such as SONIA in the case of sterling 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)			(Audited)
		Before exceptional items	Exceptional items	2021	Before exceptional items	Exceptional items	2020
	Note	£’000	£’000	£’000	£’000	£’000	£’000
Revenue from continuing operations	3	108,601	–	108,601	86,796	–	86,796
Cost of sales		(47,531)	–	(47,531)	(40,756)	–	(40,756)
Gross profit		61,070	–	61,070	46,040	–	46,040
Distribution costs		(1,483)	–	(1,483)	(1,071)	–	(1,071)
Administration costs		(36,970)	–	(36,970)	(33,658)	(834)	(34,492)
Other income		381	–	381	253	–	253
Profit from operations	4	22,998	–	22,998	11,564	(834)	10,730
Finance income		84	–	84	220	–	220
Finance costs		(1,098)	–	(1,098)	(861)	–	(861)
Profit before taxation		21,984	–	21,984	10,923	(834)	10,089
Income tax	5	(4,503)	–	(4,503)	(1,505)	–	(1,505)
Profit for the year attributable to equity holders of the parent		17,481	–	17,481	9,418	(834)	8,584
Earnings per share
Basic	6	8.11p	–	8.11p	4.38p	(0.39p)	3.99p
Diluted	6	8.01p	–	8.01p	4.32p	(0.38p)	3.94p
Adjusted diluted⁵	6	9.66p	–	9.66p	5.44p	(0.38p)	5.06p

^{Note 5: Adjusted for exceptional items, amortisation of acquired intangible assets and long-term liabilities expense.}

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
	(Unaudited)	(Audited)
	2021	2020
	£’000	£’000
Profit for the year	17,481	8,584
Exchange differences on translation of foreign operations	(5,194)	3,507
(Loss)/gain arising on cash flow hedges	(1,548)	842
Deferred tax credit/(charge) arising on cash flow hedges	290	(160)
Total other comprehensive (expense)/ income for the year	(6,452)	4,189
Total comprehensive income for the year attributable to equity holders of the parent	11,029	12,773

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	(Unaudited)	(Audited)
	31 December 2021	31 December 2020
	£’000	£’000
Assets
Non-current assets
Acquired intellectual property rights	9,118	9,879
Technology based intangible assets	19,256	22,357
Software intangibles	2,107	2,437
Development costs	10,477	7,368
Goodwill	66,032	68,911
Property, plant and equipment	27,441	30,064
Trade and other receivables	105	364
	134,536	141,380
Current assets
Inventories	19,300	21,025
Trade and other receivables	21,016	21,107
Current tax assets	1,692	1,214
Cash and cash equivalents	72,965	53,829
	114,973	97,175
Total assets	249,509	238,555
Liabilities
Current liabilities
Trade and other payables	14,958	13,139
Current tax liabilities	897	319
Lease liabilities	1,153	1,257
	17,008	14,715
Non-current liabilities
Trade and other payables	3,679	3,229
Deferred tax liabilities	7,438	8,536
Lease liabilities	8,707	9,864
	19,824	21,629
Total liabilities	36,832	36,344
Net assets	212,677	202,211
Equity
Share capital	10,804	10,769
Share premium	36,996	36,288
Share-based payments reserve	13,180	11,142
Investment in own shares	(164)	(162)
Share-based payments deferred tax reserve	933	430
Other reserve	1,531	1,531
Hedging reserve	(21)	1,237
Translation reserve	(1,936)	3,258
Retained earnings	151,354	137,718
Equity attributable to equity holders of the parent	212,677	202,211

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 2020 (Audited)	10,745	36,226	9,466	(159)	649	1,531	555	(249)	132,471	191,235
Consolidated profit for the year to 31 December 2020	–	–	–	–	–	–	–	–	8,584	8,584
Other comprehensive income	–	–	–	–	–	–	682	3,507	–	4,189
Total comprehensive income	–	–	–	–	–	–	682	3,507	8,584	12,773
Share-based payments	–	–	1,611	–	(219)	–	–	–	–	1,392
Share options exercised	24	62	65	–	–	–	–	–	–	151
Shares purchased by EBT	–	–	–	(542)	–	–	–	–	–	(542)
Shares sold by EBT	–	–	–	539	–	–	–	–	–	539
Dividends paid	–	–	–	–	–	–	–	–	(3,337)	(3,337)
At 31 December 2020 (Audited)	10,769	36,288	11,142	(162)	430	1,531	1,237	3,258	137,718	202,211
Consolidated profit for the year to 31 December 2021	–	–	–	–	–	–	–	–	17,481	17,481
Other comprehensive income	–	–	–	–	–	–	(1,258)	(5,194)	–	(6,452)
Total comprehensive income	–	–	–	–	–	–	(1,258)	(5,194)	17,481	11,029
Share-based payments	–	–	1,979	–	503	–	–	–	–	2,482
Share options exercised	35	708	59	–	–	–	–	–	–	802
Shares purchased by EBT	–	–	–	(366)	–	–	–	–	–	(366)
Shares sold by EBT	–	–	–	364	–	–	–	–	–	364
Dividends paid	–	–	–	–	–	–	–	–	(3,845)	(3,845)
At 31 December 2021 (Unaudited)	10,804	36,996	13,180	(164)	933	1,531	(21)	(1,936)	151,354	212,677

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

		(Unaudited)	(Audited)
		Year ended	Year ended
		31 December 2021	31 December 2020
	Note	£’000	£’000
Cash flows from operating activities
Profit from operations		22,998	10,730
Adjustments for:
Depreciation		3,893	3,467
Amortisation – acquired intangible assets		3,179	2,269
– software intangibles		529	563
– development costs		1,247	533
Decrease/(Increase) in inventories		941	(1,892)
(Increase)/Decrease in trade and other receivables		(1,769)	10,262
Increase/(Decrease) in trade and other payables		2,105	(2,292)
Share-based payments expense		1,979	1,611
Taxation		(4,077)	(3,740)
Net cash inflow from operating activities		31,025	21,511
Cash flows from investing activities
Purchase of software		(254)	(126)
Capitalised research and development		(4,441)	(2,788)
Purchases of property, plant and equipment		(1,768)	(2,346)
Disposal of property, plant and equipment		53	136
Interest received		84	277
Acquisition of subsidiaries net of cash		–	(21,924)
Net cash used in investing activities		(6,326)	(26,771)
Cash flows from financing activities
Dividends paid		(3,845)	(3,337)
Repayment of principal under lease liabilities		(1,281)	(1,150)
Repayment of loan		–	(664)
Issue of equity shares		723	65
Shares purchased by EBT		(366)	(542)
Shares sold by EBT		364	539
Interest paid		(700)	(735)
Net cash used in financing activities		(5,105)	(5,824)
Net increase /(decrease) in cash and cash equivalents		19,594	(11,084)
Cash and cash equivalents at the beginning of the year		53,829	64,751
Effect of foreign exchange rate changes		(458)	162
Cash and cash equivalents at the end of the year		72,965	53,829

Notes Forming Part of the Condensed Consolidated Financial Statements

1. Reporting entity

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 2021 comprise the Company and its subsidiaries (together referred to as the “Group”).

2. Basis of preparation

· Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS7, IFRS4 and IFRS16)

The financial information set out in the announcement does not constitute the Group’s statutory accounts for the years ended 31 December 2021 or 31 December 2020. The financial information for the year ended 31 December 2020 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. 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 2021 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 2020.

Going concern

With regards to the Group’s financial position, it had cash and cash equivalents at the 31 December 2021 of £73.0 million. In December 2018, the Group entered an unsecured, multi-currency, credit facility for £80 million which was undrawn in 2021 and expires in December 2022.

New accounting standards not yet applied

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2021 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods or on foreseeable future transactions.

3. Segment information

Business segments

Segment information about these businesses is presented below.

Year ended 31 December 2021	Surgical		Woundcare	Consolidated
(unaudited)
	£’000		£’000	£’000
Revenue
External sales	64,630		43,971	108,601
Result
Adjusted segment operating profit	20,303		6,594	26,897
Amortisation of acquired intangibles	(2,005)		(1,174)	(3,179)
Segment operating profit	18,298		5,420	23,718
Unallocated expenses				(720)
Exceptional costs				–
Operating profit				22,998
Finance income				84
Finance costs				(1,098)
Profit before tax				21,984
Tax				(4,503)
Profit for the year				17,481

Year ended 31 December 2021	Surgical		Woundcare	Consolidated
(Unaudited)
Other information	£’000		£’000	£’000
Capital additions:
Software intangibles	145		109	254
Development	2,922		1,519	4,441
Property, plant and equipment	1,028		740	1,768
Depreciation and amortisation	(5,579)		(3,269)	(8,848)
At 31 December 2021
Statement of Financial Position
Assets
Segment assets	159,442		89,944	249,386
Unallocated assets				123
Consolidated total assets				249,509
Liabilities
Segment liabilities	22,651		14,181	36,832

Year ended 31 December 2020		Surgical	Woundcare	Consolidated
(audited)
		£’000	£’000	£’000
Revenue
External sales		50,169	36,627	86,796
Result
Adjusted segment operating profit		9,094	5,357	14,451
Amortisation of acquired intangibles		(2,132)	(137)	(2,269)
Segment operating profit		6,962	5,220	12,182
Unallocated expenses				(618)
Exceptional costs				(834)
Operating profit				10,730
Finance income				220
Finance costs				(861)
Profit before tax				10,089
Tax				(1,505)
Profit for the year				8,584

Year ended 31 December 2020		Surgical	Woundcare	Consolidated
(audited)
Other information		£’000	£’000	£’000
Capital additions:
Software intangibles		74	52	126
Development		1,659	1,129	2,788
Property, plant and equipment		1,367	979	2,346
Depreciation and amortisation		(4,709)	(2,123)	(6,832)
At 31 December 2020
Statement of Financial Position
Assets
Segment assets		155,301	82,999	238,300
Unallocated assets				255
Consolidated total assets				238,555
Liabilities
Segment liabilities		20,354	15,990	36,344

Geographic segments

The Group operates in the UK, The Netherlands, Germany, the Czech Republic, France, Israel, with a sales office located in Russia, and a sales presence in the USA. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets.

The following table provides an analysis of the Group’s revenue by geographical market, irrespective of the origin of the goods/services, based upon location of the Group’s customers:

	(Unaudited)	(Audited)
Year ended 31 December	2021	2020
	£’000	£’000
United Kingdom	18,454	16,748
Germany	20,863	18,888
France	4,161	4,369
Rest of Europe	18,752	18,027
United States of America	36,712	23,690
Rest of World	9,659	5,074
	108,601	86,796
The following table provides an analysis of the Group’s total assets by geographical location:
	(Unaudited)	(Audited)
As at 31 December	2021	2020
	£’000	£’000
United Kingdom	142,056	125,343
Germany	67,389	71,752
France	9,674	9,703
Rest of Europe	7,853	7,224
United States of America	1,984	3,370
Israel	20,553	21,163
	249,509	238,555

4. Profit from operations

	(Unaudited)	(Audited)
Year ended 31 December	2021	2020
	£’000	£’000
Profit from operations is arrived at after charging/(crediting):
Depreciation of property, plant and equipment	3,893	3,467
Amortisation of:
– acquired intangible assets	3,179	2,269
– software intangibles	529	563
– development costs	1,247	533
Research and development costs expensed excluding regulatory costs	3,841	3,727
Cost of inventories recognised as expense	47,530	40,397
Write down of inventories expensed	1	359
Staff costs	39,691	35,828
Net foreign exchange (gain)/loss	(2,017)	376

5. Taxation

		(Unaudited)	(Audited)
Year ended 31 December		2021	2020
		£’000	£’000
a) Analysis of charge for the year
Current tax:
Tax on ordinary activities – current year		4,936	1,514
Tax on ordinary activities – prior year		(324)	21
		4,613	1,535
Deferred tax:
Tax on ordinary activities – current year		(490)	(3)
Tax on ordinary activities – prior year		(190)	(27)
Effect of increase in UK corporation tax rates to 25% (2020: 19%)		570	–
		(110)	(30)
Tax charge for the year		4,503	1,505
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)		(Audited)
Year ended 31 December	2021		2020
	£’000		£’000
b) Factors affecting tax charge for the year
Profit before taxation	21,984		10,089
Profit multiplied by the weighted average Group tax rate of 23.0% (2020: 24.6%)	5,053		2,481
Effects of:
Net expenses not deductible for tax purposes and other timing differences	8		268
Patent Box Relief	(652)		(1,091)
Utilisation of trading losses	–		–
Net impact of deferred tax on capitalised development costs and R&D relief	(123)		(186)
Share-based payments	161		39
Adjustments in respect of prior year – current tax	(324)		21
Adjustments in respect of prior year and rate changes – deferred tax	380		(27)
Taxation	4,503		1,505

6. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

	(Unaudited)	(Audited)
Year ended 31 December	2021	2020
Number of shares	‘000	‘000
Weighted average number of ordinary shares for the purposes of basic earnings per share	215,677	215,126
Effect of dilutive potential ordinary shares: share options, deferred share bonus, LTIPs	2,627	2,705
Weighted average number of ordinary shares for the purposes of diluted earnings per share	218,304	217,831

	(Unaudited)	(Audited)
	2021	2020
	£’000	£’000
Profit for the year attributable to equity holders of the parent	17,481	8,584
Amortisation of acquired intangible assets	3,179	2,269
Long-term liability expense	426	167
Exceptional costs	–	834
Adjusted profit for the year attributable to equity holders of the parent	21,086	11,854

	(Unaudited)	(Audited)
	2021	2020
	pence	pence
Basic EPS	8.11	3.99
Diluted EPS	8.01	3.94
Adjusted basic EPS	9.78	5.51
Adjusted diluted EPS	9.66	5.44

7. Events after reporting period

Other than the acquisition of AFS as disclosed above, there have been no material events subsequent to the end of the reporting period ended 31 December 2021.

END

FR UVAURUSUOAUR

The post Unaudited Preliminary Results appeared first on Advanced Medical Solutions.

Unaudited Preliminary Results

AdMedSol — Wed, 17 Mar 2021 07:00:09 +0000

RNS Number : 4848S

Advanced Medical Solutions Grp PLC

17 March 2021

Advanced Medical Solutions Group plc

(“AMS” or the “Group”)

Unaudited Preliminary Results for the year ended 31 December 2020

~ Robust financial and operational performance despite COVID-19 impacts; in line with current consensus forecasts; set for strong growth in 2021 and beyond ~

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 2020.

Financial Summary:

	2020	2019	Reported change	Change at constant currency¹
Revenue (£ million)	86.8	102.4	-15%	-15%
Adjusted Measures
Adjusted² profit before tax (£ million)	13.4	26.6	-50%
Adjusted² profit before tax %	15.4%	26.0%	-10.6pp
Adjusted² diluted earnings per share (p)	5.44	9.83	-45%

Reported Measures
Profit before tax (£ million)	10.1	24.3	-58%
Profit before tax %	11.6%	23.7%	-12.1pp
Diluted earnings per share (p)	3.94	8.72	-55%
Net operating cash flow	21.5	21.7	-1%
Net cash (£ million)	53.8	64.8	-17%

Proposed full year dividend per share (p)	1.70p	1.55p	10%

Operational Highlights (including post period end):

· Having prioritised employee safety, all manufacturing sites have remained in operation throughout the COVID-19 pandemic servicing customers and meeting order demand. Nonetheless, as previously announced, and in line with consensus market forecasts, on a Group level, sales and profitability were heavily impacted by COVID-19, as shown in the above table

· Given the Group’s strong net cash position and reflecting the Board’s confidence in the future, an increased full year dividend is proposed. In line with best practice, AMS repaid the £0.4 million of UK government furlough support that had been received during the year

· Approval and launch of LiquiBand^® Rapid™, albeit at a restricted level due to current lack of access to surgeons. Successful completion of LiquiBand^® XL clinical trials keeps us on track for approval and launch towards the end of 2021

· Investment in R&D increased to £7.9 million (2019: £6.5 million) as progress continued on all key projects across the Group

· US clinical trial to support the Premarket Approval (PMA) for LiquiBandFix8^® progressed well with more than 65% of the total required patient procedures now complete. Filing for the device is expected in 2022, following the 12 month follow-up stipulated by the FDA

· Patient enrolment for the first human clinical study of Seal-G^® and Seal-G^® MIST began in February and CE mark extensions for the product are expected imminently giving AMS access to a new $1 billion addressable market with a differentiated product to fulfil a significant unmet need

· Acquisition of Raleigh Adhesive Coatings Limited (“Raleigh”) in November 2020 for £22 million provides a strong strategic fit with commercial synergies and new commercial opportunities

· Grahame Cook was appointed as Non-Executive Director and joined the Audit, Nomination and Remuneration Committees in January; Steve Bellamy, who has been an AMS Board member since 2007, will retire from the Board at the AGM in June.

Commenting on the results Chris Meredith, Chief Executive Officer of AMS, said: “In what was a very challenging year for everyone, I am pleased with how the team and the business performed and the Group closed the year in line with current consensus forecasts. Despite the severe COVID-19 disruption, the Group remained profitable and generated strong operational cash flows, whilst continuing to invest in key projects and an increasing dividend with significant progress across many of the Group’s key strategic initiatives. The progress made on LiquiBand^® XL, Sealantis and the Fix8 PMA, as well as the acquisition of Raleigh will be catalysts for accelerated growth as elective surgery volumes recover.

Looking forward, the Group saw a continuing gradual recovery over the last two quarters of 2020 and 2021 has started well with a healthy order book in both Business Units.”

Notes

1. Constant currency removes the effect of currency movements by re-translating the current year’s performance at the previous year’s exchange rates

2. Adjusted profit before tax is shown before exceptional items which were £0.8 million (2019: £1.1 million), amortisation of acquired intangible assets which was £2.3 million (2019: £1.7 million) and change in fair value of long-term liability expense of £0.2 million (2019: credit of £0.3 million) as defined in the Financial Review. Adjusted operating margin is shown before exceptional items and amortisation of acquired intangible assets

3. Net cash is defined as cash and cash equivalents plus short term investments less bank loans and financial liabilities excluding those relating to IFRS16

– End –

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 / 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 LiquiBandFix8^®. 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. In 2020, the Group acquired Raleigh Adhesive Coatings, a leading coater and converter of materials predominately for woundcare and bio-diagnostics products based in the UK.

AMS’s products, manufactured in the UK, Germany, France, Israel, the Netherlands, and the Czech Republic, are sold globally via a network of multinational or regional partners and distributors, as well as via AMS’s own direct sales forces in the UK, Germany, the Czech Republic and Russia. The Group has R&D innovation hubs in the UK, 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

COVID-19 impact

Having created a designated COVID-19 working group, prioritised safe working practices and complied with government measures on social distancing, all AMS sites have remained in operation throughout the pandemic and the Group has therefore been able to service the demand of its healthcare partners throughout 2020 while maintaining its robust balance sheet.

As part of this, AMS has:

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

· Implemented support processes for staff who have tested positive or have otherwise had to isolate;

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

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

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

· Maintained payment terms to support all of the Group’s suppliers;

· Provided contractual order flexibility to customers whose demand has clearly been impacted by the COVID-19 downturn;

· Repaid the £0.4 million of UK job retention scheme support received relating to our employees who were unable to work during the year due to COVID-19 restrictions. Furloughed employees received full salary at the Group’s cost;

· Maintained a strong year end net cash position of £53.8 million and proposed a 10% increase in full year dividend.

As is well known, COVID-19 restrictions have disrupted our global markets in 2020, with a resulting slowdown in surgical and wound treatment volumes. In addition, reduced access to hospitals has significantly restricted business development activities during the year. As COVID-19 vaccine programmes roll out in key markets, we await the reduction in infection rates and a gradual return to normalised levels of elective surgery across all of our markets.

Whilst it is expected that the short term impact of COVID-19 will dissipate, it is anticipated that long term behavioural impacts could provide AMS with new opportunities, such as increased ‘direct to patient’ supply of products.

Product portfolio progress opening up new markets

Driven by favourable global healthcare and demographic trends, global surgical and advanced woundcare markets are expected to grow in the medium to long term providing ongoing growth potential for AMS. In addition, the key R&D and regulatory projects in the Group’s pipeline will significantly increase the size of the market that is addressable by our products.

LiquiBand^® range

Following the successful clinical trials for LiquiBand^® XL the Group expects to obtain 510(k) approval in H2 2021 which will allow entry in to the growing $50 million large wound closure market towards the end of 2021. This product launch has the added benefit of unlocking further growth potential in the base LiquiBand^® business.

The clinical trial for the LiquiBand Fix8^®US Pre-Market Approval process is progressing well and both trial results and surgeon feedback has been positive. It is expected that patient procedures will be complete in 2021 followed by FDA filing in 2022. US approval would be a significant milestone for the Group, being the first product of its type to enter the $250 million US hernia fixation market. This positive progress supports efforts to secure more specialist partners for LiquiBand Fix8^®which is expected to drive much stronger growth for this category globally as elective surgery volumes recover.

Sealantis

The Sealantis clinical trial commencement in February and the extended product approvals expected imminently position AMS with a differentiated product to address the high unmet medical need for an effective internal sealant following bowel surgery. The planned Seal G range of products will allow the Group to enter the global $1 billion internal sealants market starting as planned in H1 2021 with a soft launch whilst further clinical evidence is built that will facilitate a full European launch in 2022.

Raleigh

The acquisition of Raleigh enhances the Group’s woundcare capabilities and growth potential and enables entry into the bio-diagnostic testing sector for the first time, demonstrating the Group’s strategy of utilising its strong financial position to acquire businesses with complementary products, exciting technologies and new routes to market.

Woundcare

AMS further increased its addressable market in woundcare with a number of product launches and approvals:

· The US launch of Silver Moisture Wicking Fabric provides access to the growing market for the management of skin folds and skin-on-skin friction;

· The US approval of the Debridement pad opens the market for wound bed preparation devices; and

· The CE mark approval of Silicone PHMB foam, which sits alongside the existing US approval, facilitates greater penetration of the antimicrobial foam market.

These new woundcare products enable the Group’s partners to participate in new markets worth a total of $200 million.

AMS has also made significant R&D and regulatory progress in expanding the product indications for our Silver High Performance Dressing which positions the Group to obtain a full anti-microbial claim by the end of 2021. This important indication will unlock deeper penetration of the US antimicrobial gelling fibre market with a competitive product.

Acquisition strategy

The Group continues to seek acquisitions that deliver additional value for shareholders and meet the criteria of being accretive businesses with strong R&D and manufacturing capabilities, and that have products or customers that offer effective commercial synergies. The acquisition of Raleigh demonstrates a good fit with this strategy, and integration is progressing well. The Board remains optimistic about Raleigh’s growth prospects, as well as the potential for significant cross-selling and cost saving synergies.

During the year, the Group incurred exceptional costs of £0.8 million relating to both the acquisition of Raleigh and its participation in a process, in which AMS was unsuccessful, for a sizeable surgical business.

Regulatory opportunities and progress

The Board is confident that the implementation of Medical Device Regulation (MDR) will provide opportunities for AMS due to anticipated competitor product withdrawals. The Group is making strong progress in its own MDR preparations having already secured additional time by extending the Group’s existing MDD filings.

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

AMS utilised the MDD extension to submit and obtain CE mark approval for Silicone PHMB foam and to file for extensions to the Sealantis CE mark.

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

The senior management team’s extensive preparations leave the Group well placed to exploit opportunities that will undoubtedly arise in the next few years during the implementation of MDR.

AMS obtained various product approvals for new territories in 2020 including the Group’s first approvals in India for both LiquiBand^® and LiquiBandFix8^®.

Brexit

The Group’s extensive preparations for Brexit enabled it to navigate the end of the transition period on 31 December 2020 with limited impact on the business. UK product certificates have been reassigned to BSI Netherlands, Advanced Medical Solutions BV has been appointed as the EU Authorised Representative for the Group’s UK manufactured products and the other necessary administrative and labelling changes have been put in place. The Group now intends to unwind the increased stock levels that were built to mitigate possible Brexit delays.

In 2021, AMS is expected to experience a minimal level of Brexit related disruption in the following areas:

· Delays in port

· Increased freight costs including surcharges, paperwork and proof of origin declaration costs

· Further labelling changes such as for the additional UK CA mark to be phased in

· MDR importer requirements to be phased in

Stakeholders

On behalf of the Board, I would like to thank the Group’s committed staff, partners and other stakeholders, without whose help and commitment, the achievements of this year would not have been possible.

Outlook

Despite the ongoing challenges posed by COVID-19 across the globe, the Group has seen a continuing gradual recovery across the business over recent quarters and 2021 has started well with a healthy order book in both Business Units.

Strong progress has been made in product development, regulatory approvals in new geographies and product indications, significantly increasing the size of the Group’s addressable market in the near term including the approval of LiquiBand^® Rapid™ and the successful clinical trials for LiquiBand^® XL. On this basis the Group is set for strong organic growth in 2021 and beyond. AMS will continue to invest in R&D programmes and, in particular, in Sealantis, the LiquiBandFix8^® PMA and Medical Device Regulation, which are expected to provide significant growth opportunities in the medium term.

The Board is committed to its strategy of building organic and acquisitive growth and is confident in both the short and long-term prospects for AMS.

Operational review

Group performance

Given that all products and regions were impacted by COVID-19 restrictions, the Group performed well and saw improving results in Q3 and Q4. However, as previously stated, Group revenue declined to £86.8 million (2019: £102.4 million) and the resulting adverse operating leverage led to adjusted profit before tax reducing to £13.4 million (2019: £26.6 million) and adjusted diluted earnings per share reducing to 5.4p (2019: 9.8p).

Surgical Business Unit

The Surgical Business Unit includes tissue adhesives, sutures, biosurgical devices and internal fixation devices marketed predominately under the AMS brands LiquiBand^®, RESORBA^® and LiquiBandFix8^®. Business Unit revenue reduced by 11% to £50.2 million (2019: £56.5 million) due to sales volumes being adversely impacted by the effects of COVID-19.

Surgical Business Unit	2020 £’000	2019 £’000	Reported Growth	Change at constant currency
Advanced closure	22,751	30,085	-24%	-24%
Internal Fixation and Sealants	2,104	2,629	-20%	-20%
Traditional Closure	12,993	14,407	-10%	-9%
Biosurgical Devices	12,321	9,423	31%	30%
TOTAL	50,169	56,544	-11%	-11%

Advanced Closure

Advanced Closure comprises LiquiBand^®, incorporating medical cyanoacrylate adhesives in purpose-built applicators used to close and protect topical wounds as well as surgical sealants sold under partners’ brands.

Advanced Closure	2020 £’000	2019 £’000	Reported Growth	Change at constant currency
Americas	13,940	18,999	-27%	-26%
UK/Germany	4,955	6,850	-28%	-28%
ROW	3,856	4,236	-9%	-9%
TOTAL	22,751	30,085	-24%	-24%

Revenues decreased by 24% on a reported and constant currency basis to £22.8 million (2019: £30.1 million).

Following its approval and restricted launch in 2020, the commercial launch of LiquiBand^® Rapid™ in 2021 will enable a key partner to regain ground with an improved product.

In addition, the planned 2021 launch of LiquiBand^® XL will enable AMS to compete in the treatment of large wounds and unlock further growth potential in the LiquiBand^® business. 510(k) approval is expected in H2 2021 following successful clinical trials in late 2020, with the product demonstrating very positive performance characteristics against the predicate device.

Whilst US procedural volumes remain depressed and hospital access limited, based on the above factors, US LiquiBand^® is expected to deliver strong growth in 2021 and beyond.

AMS continues to obtain approvals for LiquiBand^® in new geographies and notably obtained approval for LiquiBand^® in India during the year. The Group is now in the process of screening and selecting the best go-to-market partner for its first commercial activity into this large market.

Internal Fixation and Sealants

This category comprises LiquiBandFix8^® and Seal G^®. LiquiBandFix8^® is used to fix hernia meshes inside the body with accurately delivered individual drops of cyanoacrylate adhesive. Seal-G^® is used to reinforce the staple / suture line to minimise anastomotic leaks following gastrointestinal bowel surgery.

LiquiBandFix8^® revenue decreased by 20% to £2.1 million (2019: £2.6 million). Despite the restrictions, pleasing progress has been made in product training and new territory approvals. The sales teams delivered virtual symposia with prominent hernia societies attended by more than 8,000 surgeons to increase awareness of the reduced post-operative complications when using LiquiBandFix8^® instead of staples or tacks. The Group also obtained approvals for LiquiBandFix8^® in other geographies, notably in India and Brazil, with distributor selection and launch planning now in process.

The clinical trial for the Fix8^® Pre-Market Approval process had to be suspended for approximately six months due to COVID-19 but has since regained momentum with over 65% of the total required patient procedures now complete. FDA approval is expected to be filed in 2022 upon completion of the 12 month follow-up stipulated by the FDA. AMS continues to be excited about the long-term prospects for the LiquiBandFix8^® portfolio, with entry into the US being a significant milestone for the Group. Feedback from surgeons and hospital centres involved in the trial has been very encouraging to date.

During 2020, commercial research activity was completed with European Key Opinion Leaders which provided positive feedback on Seal-G & Seal-G MIST as solutions to the high unmet need for an effective GI sealant.

Post-period end, the Group progressed two major milestones towards the Sealantis soft launch in H1 2021 and full European commercial launch in 2022:

· Began patient enrolment for the first clinical study of Seal-G^® & Seal-G MIST^® in February 2021, following COVID-19 related delays in 2020

· Progressed CE mark extensions to final notified body review to strengthen the portfolio by obtaining approval for the laparoscopic Seal-G MIST^® device and extending the open Seal-G^® CE mark to include a blue colourant to aid visibility during surgery. Both approvals are expected imminently.

Traditional Closure

The Traditional Closure category comprises the RESORBA^® branded Absorbable and Non-absorbable Suture ranges, which includes certain surgical specialties (such as dental and ophthalmic).

Revenue decreased by 10% at reported and 9% at constant currency to £13.0 million (2019: £14.4 million).

AMS expects to drive suture growth by focusing on specific opportunities such as targeted GPO promotions in the DACH region, increasing its US footprint, dental portfolio selling with Biomatlante and RESORBA^® products and leveraging its Moorfields Eye Hospital site advocacy to grow the ophthalmic business.

The Group continues to look for ways to make its suture portfolio more comprehensive. In 2019, AMS added a long lasting synthetic PDO thread material, followed by the 2020 launch of a high tensile strength OT Cord range for orthopaedic and sports medicine. In 2021, a barbed suture range to provide knotless tissue security is expected to be launched.

Biosurgical Devices

The Biosurgical Devices category comprises RESORBA^® and Biomatlante technologies including antibiotic loaded collagen sponges, collagen membranes and cones, synthetic bone substitutes and bio-absorbable screws.

Biosurgical revenue increased by 31% at reported and 30% at constant currency to £12.3 million (2019: £9.4 million) reflecting the inclusion of Biomatlante sales following its acquisition in November 2019. AMS expects to make significant progress selling Biomatlante products under the RESORBA^® brand through the existing sales infrastructure and some initial sales have been made into Germany during the year. In addition, AMS is looking to sell more of its dental and orthopaedic collagens and sutures via the existing Biomatlante customer base.

In November 2020, the Group filed a 510(k) application for freeze dried bone substitute (FDBS) which would be the first US approval for any of Biomatlante’s newer innovative products. The FDBS platform has strong cohesive properties when mixed with fluids, can be easily moulded for optimal surgical placement and will open up opportunities for the addition of active ingredients such as platelets, stem cells or synthetic peptides. AMS anticipates 510(k) approval in the next 12 months.

Collagen loaded with Vancomycin has been sold in Germany for several years on a named patient prescription only basis and we continue to progress a full CE mark to allow broader promotion and sales. AMS is currently progressing with an MDD application but will move to proceed under MDR as necessary. The Group continues to work with both EU and US regulators on wider market approvals for its antibiotic loaded collagen pacemaker pouch, also currently sold via prescription in Germany.

Woundcare Business Unit

The Woundcare Business Unit is comprised of a multi-product portfolio of advanced woundcare dressings sold under partner brands and under the ActivHeal^® brand, plus a portfolio of specialist medical bulk materials now including the multi-layer woundcare and bio-diagnostics products that came with the Raleigh acquisition.

Revenue decreased by 20% to £36.6 million (2019: £45.8 million) due to COVID-19 impacts on sales volumes.

Woundcare Business Unit	2020 £’000	2019 £’000	Reported Growth	Change at constant currency
Infection Management	15,289	20,555	-26%	-25%
Exudate Management	15,413	19,271	-20%	-20%
Other Woundcare	5,925	5,998	-1%	-1%
TOTAL	36,627	45,824	-20%	-20%

During 2020, AMS successfully obtained MDD extensions until 2024 for all the remaining products in its woundcare range. Consequently, the Group has secured the maximum time possible to complete compliance with the new MDR certification requirements. AMS has a dedicated team in place focused on completing the work for each product in good time to allow regular approvals across the next three years.

Despite the lower market growth rates and consolidation activity in the woundcare market, the Board is confident that the following catalysts position our woundcare business unit for good growth:

– The approval of several new products

– The addition of Raleigh

– ActivHeal^® potential in select new markets

– The opportunities expected to arise from MDR

Infection Management

The infection management category comprises advanced woundcare dressings that incorporate antimicrobials such as Silver and Polyhexamethylene Biguanide (PHMB). Revenue decreased by 26% on a reported basis and 25% on a constant currency basis to £15.3 million (2019: £20.6 million) predominantly due to COVID-19 impacts.

During the year, the Group’s Silver Moisture Wicking Fabric product was launched with two US partners and Silver High-Performance Dressings were launched with a second US partner. Volumes were impacted by COVID-19 restrictions, which limited access to potential customers and promotional opportunities.

In November 2020, AMS obtained CE mark approval for the Silicone PHMB foam range which sits alongside the US approval for this product which was granted in late 2019. The silicone variant of the Group’s PHMB range provides gentle but secure adhesion in addition to existing performance characteristics such as rapid microbial activity and eradication of pathogens. This provides AMS with a strong product for the growing antimicrobial foam market.

During 2020, AMS completed the development of a debridement pad which clinicians use to prepare the wound bed and enhance wound healing. The Group successfully obtained approval for use in FDA markets and also progressed European approval by submitting the CE mark application.

Following progress made in 2020, the Group is now positioned to obtain a full anti-microbial claim for our Silver High Performance Dressing in 2021 which will unlock deeper penetration of the US antimicrobial gelling fibre market with a patent protected product that has excellent performance characteristics. We expect to submit the special 510(k) application in Q2 2021.

In December 2020, an exclusive five year agreement for one of the Group’s silver alginates came up for renewal. Although discussions are on-going with the customer, the new terms the customer is seeking are not acceptable to AMS and therefore the contract may not be renewed. We are also assessing various other options to maximise the value to AMS for the next five years.

Looking ahead, the Group continues to work on developing next generation high-gelling products with differentiated anti-biofilm claims and an application of its surgical tissue scaffolds in a woundcare environment.

Exudate Management

Exudate management comprises advanced woundcare dressings and gels which do not incorporate any antimicrobial elements. Raleigh’s results are reported within exudate management and provides significant growth opportunities. Revenue decreased by 20% to £15.4 million (2019: £19.3 million).

AMS has progressed the initiative to find and appoint new distribution partners for ActivHeal^® in markets with strong demand for high quality, cost effective dressings and where current key partners have no or low presence. A number of ActivHeal^® contracts were signed in 2020 and are expected to launch in 2021, contributing significant additional sales value over the next five years. Registrations are also being pursued in additional territories with a view to further exploiting this growth opportunity.

The acquisition of Raleigh in November 2020 significantly strengthens AMS’s woundcare position by bringing acrylic and silicone coating and perforation in house, providing opportunities for cost savings and aiding product development. In addition, Raleigh’s products and expertise will allow AMS to win new customers and enter into new markets such as the bio-diagnostic testing sector and brings an R&D pipeline of new projects in the medical space. AMS recorded £0.7 million of sales in 2020 relating to Raleigh.

With the heightened attention on the prevention of pressure ulcers in all major markets, it is pleasing to add a product in this indication to the existing US silicone foam range. It will enable all the Group’s customers to promote the expanded range for this increasingly important patient concern.

Other Woundcare

Other Woundcare comprises royalties, fees and woundcare sealants. Revenue decreased by 1% on a reported and constant currency basis to £5.9 million (2019: £6.0 million) mainly due to a minor decrease in sealant revenue. Royalty and fee income, which includes the Group’s licensing arrangement with Organogenesis, remained consistent.

Chris Meredith

Chief Executive Officer

Financial Review

Summary

Group revenue declined by 15% at reported and constant currency. Adjusted profit before tax reduced by 50% as investment in R&D and other key projects continued and the employee base was retained, resulting in adverse operating leverage.

To provide the clearest possible insight into 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. AMS uses such measures consistently at the half year and full year and reconcile them as appropriate. The measures used in this statement include constant currency revenue growth, adjusted operating margin, adjusted profit before tax, adjusted earnings per share and adjusted net cash inflow from operating activities, allowing the impacts of exchange rate volatility, exceptional items, amortisation and the change in fair value of long-term liability to be separately identified. Net cash is an additional non-GAAP measure used.

Excluding exceptional items, administration expenses reduced marginally to £33.7 million (2019: £34.6 million) inclusive of losses arising from foreign exchange movements as the Group implemented effective cost management although these were partially offset by higher amortisation of intangibles. The Group operated its factories at much lower volumes, resulting in under-absorption of its fixed costs and, to reflect the need for operational staff to continue attending Group sites during the lockdown period, additional one-off payments were made to these employees totalling £0.3 million. Furthermore, £0.4 million of UK job retention scheme support was repaid relating to our employees who were unable to work but still received their salary in full at the Group’s cost.

The Group incurred £7.9 million of gross R&D spend in the period (2019: £6.5 million), representing 9.1% of sales (2019: 6.3%) reflecting increased investment in innovation and in meeting the increasing regulatory standards.

Exceptional items were £0.8 million in the year (2019: £1.1 million) relating to both the acquisition of Raleigh and our participation in a process, in which AMS was unsuccessful, for a sizeable surgical business.

Amortisation of acquired intangible assets was £2.3 million in 2020 (2019: £1.7 million) due to the full period effect of the acquisition of Sealantis in January 2019 and Biomatlante in November 2019.

A £0.2 million expense was recorded due to the change in the fair value of long-term liabilities recognised on acquisition of Sealantis in 2019 (2019: credit of £0.3 million).

Adjusted operating margin decreased by 1,050 bps to 15.9% (2019: 26.4%) and operating margin decreased by 1,130 bps to 12.4% (2019: 23.7%) predominately due to COVID-19 impacts.

Adjusted profit before tax decreased by 50% to £13.4 million (2019: £26.6 million) and profit before tax decreased by 58% to £10.1 million (2019: £24.3 million).

Reconciliation of profit before tax to adjusted profit before tax
	(Unaudited)	Audited
	2020	2019
	£’000	£’000
Profit before tax	10,089	24,257
Amortisation of acquired intangibles	2,269	1,683
Change in fair value of long-term liability	167	(345)
Exceptional items	834	1,053
Adjusted profit before tax	13,359	26,648

The Group’s effective tax rate, reflecting the blended tax rates in the countries where we operate and including UK patent box relief, decreased to 14.9% (2019: 21.8%). The decrease was due to patent box claims relating to the newly granted LiquiBand^®Exceed patents which can be retrospectively claimed.

Adjusted diluted earnings per share decreased by 45% to 5.44p (2019: 9.83p) and diluted earnings per share decreased by 55% to 3.94p (2019: 8.72p).

Reflecting the Group’s strong net cash position and confidence in the Group’s prospects, the Board is proposing an increased final dividend of 1.20p per share, to be paid on 18 June 2021 to shareholders on the register at the close of business on 28 May 2021. This follows the interim dividend of 0.50p per share paid on 23 October 2020 and would, if approved, make a total dividend for the year of 1.70p per share (2019: 1.55p) an increase of 10%. In line with best practice, AMS repaid the £0.4 million of UK government furlough support that had been received during the year.

Operating result by business segment
Year ended 31 December 2020	Surgical	Woundcare
	£’000	£’000
Revenue	50,169	36,627
Segment operating profit	6,962	5,220
Amortisation of acquired intangibles	2,132	137
Adjusted segment operating profit⁴	9,094	5,357
Adjusted operating margin⁴	18.1%	14.6%
Year ended 31 December 2019
Revenue	56,544	45,824
Segment operating profit	14,411	11,370
Amortisation of acquired intangibles	1,675	8
Adjusted segment operating profit⁴	16,086	11,378
Adjusted operating margin⁴	28.4%	24.8%

^{Note 4: Adjusted for exceptional items and amortisation of acquired intangible assets}

^{Table is reconciled to statutory information in note 3 of the financial information.}

Surgical

Surgical revenues decreased by 11% to £50.2 million (2019: £56.5 million) at both reported currency and constant currency. Adjusted operating margin decreased 1,030 bps to 18.1% (2019: 28.4%) as the Group was unable to offset costs in the same proportion to the decrease in revenue and as a result of increased investment in R&D, clinical and regulatory affairs.

Woundcare

Woundcare revenues decreased by 20% at both reported currency and constant currency to £36.6 million (2019: £45.8 million). Adjusted operating margin decreased by 1,020 bps to 14.6% (2019: 24.8%).

Currency

The Group hedges significant currency transaction exposure by using forward contracts, and aims to hedge approximately 80% of its estimated transactional exposure for the next 12 to 18 months. In the year, approximately one third of sales was invoiced in Euros and approximately one quarter was invoiced in US Dollars. The Group estimates that a 10% movement in the £:US$ or £:€ exchange rate will impact Sterling revenues by approximately 2.8% and 3.4% respectively and in the absence of any hedging this would have an impact on profit of 2.2% and 0.1%.

Cash flow

Despite the unprecedented conditions, the Group delivered a strong net cash inflow from operating activities of £21.5 million (2019: £21.7 million) with the reduction in operating profit being mostly offset by working capital management.

Reconciliation of Net cash inflow from operating activities to Adjusted net cash inflow from operating activities
	(Unaudited)	(Audited)
	Year ended 31 December 2020	Year ended 31 December 2019
	£’000	£’000

Net cash inflow from operating activities	21,511	21,699
Add back exceptional items	613	1,053
Adjusted net cash inflow from operating activities	22,124	22,752

At the end of the period, following the acquisition of Raleigh for £22.0 million, the Group had net cash of £53.8 million (31 December 2019: £64.8 million).

Working capital decreased during the year, due to a decrease in receivables as a result of lower sales, partially offset by increased inventory levels and lower payables. Inventory cover was temporarily increased to 5.7 months of supply (2019: 5.1 months) in preparation for potential supply chain risks relating to COVID-19 and the end of the Brexit transition period. Debtor days decreased to 45 days (2019: 49 days) due to customer mix and Creditor days decreased to 30 days (2019: 34 days).

Capital investment in equipment, R&D and regulatory costs decreased slightly to £5.3 million (2019: £5.9 million).

Cash outflow relating to taxation decreased to £3.7 million (2019: £5.9 million) due to lower taxable profits, partially offset by the requirement to accelerate payments on account in the UK.

The Group paid its final dividend for the year ended 31 December 2019 of £2.3 million in June 2020 (2019: for the year ending 2018, £1.9 million in June 2019), and its interim dividend for the six months ended 30 June 2020 of £1.1 million in October 2020 (for the 6 months ended 30 June 2019: £1.1 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)			(Audited)
		Before exceptional items	Exceptional items	2020	Before exceptional items	Exceptional items	2019
	Note	£’000	£’000	£’000	£’000	£’000	£’000
Revenue from continuing operations	3	86,796	–	86,796	102,368		102,368
Cost of sales		(40,756)	–	(40,756)	(41,885)	–	(41,885)
Gross profit		46,040	–	46,040	60,483	–	60,483
Distribution costs		(1,071)	–	(1,071)	(997)	–	(997)
Administration costs		(33,658)	(834)	(34,492)	(34,566)	(1,053)	(35,619)
Other income		253	–	253	376	–	376
Profit from operations	4	11,564	(834)	10,730	25,296	(1,053)	24,243
Finance income		220	–	220	406	–	406
Finance costs		(861)	–	(861)	(392)	–	(392)
Profit before taxation		10,923	(834)	10,089	25,310	(1,053)	24,257
Income tax	5	(1,505)	–	(1,505)	(5,338)	–	(5,338)
Profit for the year attributable to equity holders of the parent		9,418	(834)	8,584	19,972	(1,053)	18,919
Earnings per share
Basic	6	4.38p	(0.39p)	3.99p	9.30p	(0.49p)	8.81p
Diluted	6	4.32p	(0.38p)	3.94p	9.21p	(0.49p)	8.72p
Adjusted diluted	6	5.44p	(0.38p)	5.06p	9.83p	(0.49p)	9.34p

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
	(Unaudited)	(Audited)
	2020	2019
	£’000	£’000
Profit for the year	8,584	18,919
Exchange differences on translation of foreign operations	3,507	(3,538)
Gain arising on cash flow hedges	842	3,091
Deferred tax charge arising on cash flow hedges	(160)	(130)
Total other comprehensive income/(expense) for the year	4,189	(577)
Total comprehensive income for the year attributable to equity holders of the parent	12,773	18,342

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	(Unaudited)	(Audited)
	31 December 2020	31 December 2019
	£’000	£’000
Assets
Non-current assets
Acquired intellectual property rights	9,879	9,478
Technology based intangible assets	22,357	15,985
Software intangibles	2,437	2,832
Development costs	7,368	5,039
Goodwill	68,911	53,558
Property, plant and equipment	30,064	27,707
Deferred tax assets	–	96
Trade and other receivables	364	531
	141,380	115,226
Current assets
Inventories	21,025	17,655
Trade and other receivables	21,107	29,221
Current tax assets	1,214	129
Cash and cash equivalents	53,829	64,751
	97,175	111,756
Total assets	238,555	226,982
Liabilities
Current liabilities
Trade and other payables	13,139	14,043
Current tax liabilities	319	1,781
Lease liabilities	1,257	1,353
	14,715	17,177
Non-current liabilities
Trade and other payables	3,229	3,150
Deferred tax liabilities	8,536	6,409
Lease liabilities	9,864	8,347
Borrowings	–	664
	21,629	18,570
Total liabilities	36,344	35,747
Net assets	202,211	191,235
Equity
Share capital	10,769	10,745
Share premium	36,288	36,226
Share-based payments reserve	11,142	9,466
Investment in own shares	(162)	(159)
Share-based payments deferred tax reserve	430	649
Other reserve	1,531	1,531
Hedging reserve	1,237	555
Translation reserve	3,258	(249)
Retained earnings	137,718	132,471
Equity attributable to equity holders of the parent	202,211	191,235

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to equity holders of the Group

			Share-	Investment	Share-based
	Share	Share	based	in own	payments	Other	Hedging	Translation	Retained
	capital	premium	payments	shares	deferred tax	reserve	reserve	reserve	earnings	Total
	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
At 1 January 2019	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 (Audited)	10,745	36,226	9,466	(159)	649	1,531	555	(249)	132,471	191,235
Consolidated profit for the year to 31 December 2020	–	–	–	–	–	–	–	–	8,584	8,584
Other comprehensive income	–	–	–	–	–	–	682	3,507	–	4,189
Total comprehensive income	–	–	–	–	–	–	682	3,507	8,584	12,773
Share-based payments	–	–	1,611	–	(219)	–	–	–	–	1,392
Share options exercised	24	62	65	–	–	–	–	–	–	151
Shares purchased by EBT	–	–	–	(542)	–	–	–	–	–	(542)
Shares sold by EBT	–	–	–	539	–	–	–	–	–	539
Dividends paid	–	–	–	–	–	–	–	–	(3,337)	(3,337)
At 31 December 2020 (Unaudited)	10,769	36,288	11,142	(162)	430	1,531	1,237	3,258	137,718	202,211

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

		(Unaudited)	(Audited)
		Year ended	Year ended
		31 December 2020	31 December 2019
	Note	£’000	£’000
Cash flows from operating activities
Profit from operations		10,730	24,243
Adjustments for:
Depreciation		3,467	3,154
Amortisation – intellectual property rights		2,269	1,683
– software intangibles		563	519
– development costs		533	492
Increase in inventories		(1,892)	(2,454)
Decrease/(Increase) in trade and other receivables		10,262	(574)
Decrease in trade and other payables		(2,292)	(1,275)
Share-based payments expense		1,611	1,856
Taxation		(3,740)	(5,945)
Net cash inflow from operating activities		21,511	21,699
Cash flows from investing activities
Purchase of software		(126)	(826)
Capitalised research and development		(2,788)	(2,355)
Purchases of property, plant and equipment		(2,346)	(2,673)
Disposal of property, plant and equipment		136	4
Interest received		277	422
Acquisition of subsidiaries net of cash	7	(21,924)	(24,145)
Net cash used in investing activities		(26,771)	(29,573)
Cash flows from financing activities
Dividends paid		(3,337)	(3,008)
Repayment of principal under lease liabilities		(1,150)	(925)
Repayment of loan		(664)	–
Issue of equity shares		65	1,066
Shares purchased by EBT		(542)	(603)
Shares sold by EBT		539	600
Interest paid		(735)	(709)
Net cash used in financing activities		(5,824)	(3,579)
Net decrease in cash and cash equivalents		(11,084)	(11,453)
Cash and cash equivalents at the beginning of the year		64,751	76,391
Effect of foreign exchange rate changes		162	(187)
Cash and cash equivalents at the end of the year		53,829	64,751

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 2020 comprise the Company and its subsidiaries (together referred to as the “Group”).

The Group is primarily involved in the design, development and manufacture of 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

· Amendments to References to the Conceptual Framework in IFRS Standards

· Definition of a Business (Amendments to IFRS 3)

· Definition of Material (amendments to IAS 1 and IAS 8)

· Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS7)

· Conceptual Framework for Financial Reporting (Revised)

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), 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 2021.

The financial information set out in the announcement does not constitute the Group’s statutory accounts for the years ended 31 December 2020 or 31 December 2019. The financial information for the year ended 31 December 2019 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. 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 2020 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 2019.

With regards to the Group’s financial position, it had cash and cash equivalents at the 31 December 2020 of £53.8 million. In December 2018, the Group entered a five-year, unsecured, multi-currency, credit facility for £80 million and which was undrawn in 2020.

New accounting standards not yet applied

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2020 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods or on foreseeable future transactions.

3. Segment information

Business segments

Segment information about these businesses is presented below.

Year ended	Surgical		Woundcare	Consolidated
31 December 2020
(Unaudited)
	£’000		£’000	£’000
Revenue
External sales	50,169		36,627	86,796
Result
Adjusted segment operating profit	9,094		5,357	14,451
Amortisation of acquired intangibles	(2,132)		(137)	(2,269)
Segment operating profit	6,962		5,220	12,182
Unallocated expenses				(618)
Exceptional costs				(834)
Operating profit				10,730
Finance income				220
Finance costs				(861)
Profit before tax				10,089
Tax				(1,505)
Profit for the year				8,584

At 31 December 2020	Surgical		Woundcare	Consolidated
(Unaudited)
Other information	£’000		£’000	£’000
Capital additions:
Software intangibles	74		52	126
Development	1,659		1,129	2,788
Property, plant and equipment	1,367		979	2,346
Depreciation and amortisation	(4,709)		(2,123)	(6,832)
Statement of Financial Position
Assets
Segment assets	155,301		82,999	238,300
Unallocated assets				255
Consolidated total assets				238,555
Liabilities
Segment liabilities	20,354		15,990	36,344

Year ended		Surgical	Woundcare	Consolidated
31 December 2019
(Audited)		£’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
(Audited)
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)
Statement of Financial Position
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

Geographic segments

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)	(Audited)
Year ended 31 December	2020	2019
	£’000	£’000
United Kingdom	16,748	20,151
Germany	18,888	20,018
France	4,369	3,913
Rest of Europe	18,027	19,563
United States of America	23,690	34,879
Rest of World	5,074	3,844
	86,796	102,368
The following table provides an analysis of the Group’s total assets by geographical location:
	(Unaudited)	(Audited)
As at 31 December	2020	2019
	£’000	£’000
United Kingdom	125,343	117,055
Germany	71,752	69,501
France	9,703	9,614
Rest of Europe	7,224	5,106
United States of America	3,370	2,532
Israel	21,163	23,175
	238,555	226,982

4. Profit from operations

	(Unaudited)	(Audited)
Year ended 31 December	2020	2019
	£’000	£’000
Profit from operations is arrived at after charging:
Depreciation of property, plant and equipment	3,467	3,154
Amortisation of:
– acquired intellectual property rights	2,269	1,683
– software intangibles	563	519
– development costs	533	492
Research and development costs expensed excluding regulatory costs	3,727	3,195
Cost of inventories recognised as expense	40,397	40,717
Write down of inventories expensed	359	504
Staff costs	35,828	33,179
Net foreign exchange loss	376	2,790

5. Taxation

		(Unaudited)	(Audited)
Year ended 31 December		2020	2019
		£’000	£’000
a) Analysis of charge for the year
Current tax:
Tax on ordinary activities – current year		1,514	5,195
Tax on ordinary activities – prior year		21	5
		1,535	5,200
Deferred tax:
Tax on ordinary activities – current year		(3)	61
Tax on ordinary activities – prior year		(27)	77
		(30)	138
Tax charge for the year		1,505	5,338
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)		(Audited)
Year ended 31 December	2020		2019
	£’000		£’000
b) Factors affecting tax charge for the year
Profit before taxation	10,089		24,257
Profit multiplied by the weighted average Group tax rate of 24.6% (2019: 21.6%)	2,481		5,248
Effects of:
Net expenses not deductible for tax purposes and other timing differences	268		246
Patent Box Relief	(1,091)		(124)
Utilisation of trading losses	–		(26)
Net impact of deferred tax on capitalised development costs and R&D relief	(186)		(131)
Share-based payments	39		43
Adjustments in respect of prior year – current tax	21		5
Adjustments in respect of prior year and rate changes – deferred tax	(27)		77
Taxation	1,505		5,338

6. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

	(Unaudited)	(Audited)
Year ended 31 December	2020	2019
Number of shares	‘000	‘000
Weighted average number of ordinary shares for the purposes of basic earnings per share	215,126	214,730
Effect of dilutive potential ordinary shares: share options, deferred share bonus, LTIPs	2,705	2,107
Weighted average number of ordinary shares for the purposes of diluted earnings per share	217,831	216,837

	(Unaudited)	(Audited)
	2020	2019
	£’000	£’000
Profit for the year attributable to equity holders of the parent	8,584	18,919
Exceptional costs	834	1,053
Amortisation of acquired intangible assets	2,269	1,683
Movement in fair value accounting for liabilities	167	(345)
Adjusted profit for the year attributable to equity holders of the parent	11,854	21,310

	(Unaudited)	(Audited)
	2020	2019
	pence	pence
Basic EPS	3.99	8.81
Diluted EPS	3.94	8.72
Adjusted basic EPS	5.51	9.92
Adjusted diluted EPS	5.44	9.83

7. Acquisition of Raleigh

On 23 November 2020 the Group acquired the entire issued share capital of Raleigh Adhesive Coatings Limited, a UK-based woundcare and bio-diagnostics coatings business. In the year ended 31 December 2020, Raleigh contributed £0.7 million revenue to the Group and had an operating profit of £0.1 million. In addition, amortisation of intangible assets of £0.1 million was recorded within the Group as a result of the acquisition. Had Raleigh been part of the Group since 1 January 2020, it would have contributed £6.4 million of revenue and £0.4 million of operating profit.

	£’000
Identifiable net assets acquired
Technology-based Intangible assets	1,320
Customer related intangible assets	7,390
Property, plant and equipment	587
Finance lease assets	645
Trade and other receivables	1,999
Inventory	1,009
Cash and cash equivalents	76
Corporation tax debtor	54
Trade and other payables	(1,891)
Lease liabilities	(646)
Deferred tax	(1,713)
Goodwill	13,170
Total net assets acquired	22,000

Satisfied by	£’000
Cash consideration	22,000

Net cash flow on acquisition	£’000
Cash consideration	22,000
Cash acquired	(76)
	21,924

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

8. Events after reporting period

There have been no material events subsequent to the end of the reporting period ended 31 December 2020.

END

FR JFMMTMTABTMB

The post Unaudited Preliminary Results appeared first on Advanced Medical Solutions.

Unaudited Preliminary Results

AdMedSol — Wed, 11 Mar 2020 07:00:05 +0000

RNS Number : 6934F

Advanced Medical Solutions Grp PLC

11 March 2020

Advanced Medical Solutions Group plc

(“AMS” or the “Group”)

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:

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

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

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

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

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

o 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:

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

o 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

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 £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^® Fix8^TM. 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.

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	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)	(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

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”).

2. Basis of preparation

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.

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.

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	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
	£’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.

END

FR EAADEFAXEEAA

The post Unaudited Preliminary Results appeared first on Advanced Medical Solutions.

Unaudited preliminary results

AdMedSol — Wed, 13 Mar 2019 07:00:05 +0000

RNS Number : 6681S

Advanced Medical Solutions Grp PLC

13 March 2019

Advanced Medical Solutions Group plc

(“AMS” or the “Group”)

Unaudited Preliminary Results for the year ended 31 December 2018

~Continued good growth with delivery on strategy and market expectation~

Financial Highlights:

	2018	2017	Reported growth	Growth at constant currency ¹
Group revenue (£ million)	102.6	96.9	6%	7%
Operating margin (%)	27.5	26.0	150bps	–
Adjusted² operating margin (%)	28.0	26.2	180bps	–
Profit before tax (£ million)	28.4	25.3	12%	–
Adjusted² profit before tax (£ million)	28.9	25.4	14%	–
Diluted earnings per share (p)	10.48	9.39	12%	–
Adjusted² diluted earnings per share (p)	10.71	9.46	13%	–
Net cash inflow from operating activities (£ million)	20.4	17.0	20%
Net cash³ (£ million)	76.4	62.5	22%	–

Proposed final dividend of 0.90p per share, making a total dividend for the year of 1.32p per share (2017: 1.10p), up 20%.

Business Highlights (including post-period end):

· Revenues up 6% to £102.6 million and by 7% at constant currency

o Branded revenues up 12% to £62.1 million (2017: £55.2 million) and by 13% at constant currency

o OEM revenues down 3% to £40.5 million (2017: £41.7 million) and by 2% at constant currency

· Adjusted operating margin up 180bps to 28.0% (2017: 26.2%).

· Adjusted profit before tax up 14% to £28.9 million (2017: £25.4 million).

· Continued strong performance from LiquiBand^® topical tissue adhesives, sales up 22% to £31.7 million (2017: £26.0 million) and by 24% at constant currency

o US revenues up 26% to £23.0 million (2017: £18.2 million) and by 30% at constant currency

o Market share by volume⁴ increased by 2% during the year

· Strong growth in Internal Adhesives, following the relaunch of LiquiBand^® Fix 8™ laparoscopic in Q2 and the soft launch of the open device in Q4. Sales increased 21% to £2.1 milllion (2017: £1.7 million) and by 21% at constant currency

· Sales of collagens and other biosurgical devices increased by 8% to £8.6 milllion (2017: £8.0 million) and by 6% at constant currency

· Sales of sutures were impacted by regulatory challenges, up 1% at reported and constant currency to £13.3 milllion (2017: £13.1 million)

· Antimicrobial dressings up 1% to £19.6 million (2017: £19.4 million) and by 2% at constant currency

· After the period end, in January 2019, AMS announced the acquisition of Sealantis Limited (“Sealantis”) for $US 25 million (approximately £19 million) in cash with royalties due on product sales until 2027

o Innovative technology platform and products to enter $US1 billion internal sealants market

o First product expected in the European market in H1 2021; multiple potential additional sealant products

· Appointment of Eddie Johnson as CFO and Board Director on 1 January 2019 following the retirement of Mary Tavener following 19 years of service

Outlook

The Group made good progress in the year, with new products strengthening the portfolio and the acquistion of Sealantis enabling us to drive towards unlocking further new growth from the US$1 billion internal sealants market in the short to medium term. The product portfolio was strengthened with four launches in Q4 and the Group is well prepared to navigate the increasingly challenging regulatory environment for medical device companies. The Group continues with its previously outlined long-term growth strategy and objectives and trading in the current financial year has begun in line with the Board’s expectations. The Board remains optimistic about AMS’s future growth prospects.

Commenting on the results Chris Meredith, Chief Executive Officer of AMS, said: “2018 was AMS’s 17^th consecutive year of growth with strong financial and strategic progress across the Group. Our solid revenue growth was driven by sales in our Branded division which included LiquiBand^® topical tissue adhesives further increasing market share a further 2%, and the growth of our Internal Adhesives and Biosurgical devices. We have further reaffirmed our commitment to innovation through the acquisition of Sealantis which now opens up the large internal sealants market for the Group. We are well positioned to take advantage of market opportunities across our product portfolio, and we continue to actively review M&A opportunities.”

– 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 All items are shown before exceptional items which were £0.4 million (2017: £nil) and amortisation of acquired intangible assets which were £0.1 million (2017: £0.1 million) as defined in the Financial Review

Note 3 Net cash is defined as cash and cash equivalents plus short term investments less financial liabilities and bank loans

Note 4 Data supplied by Global Healthcare Exchange

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 – see www.admedsol.com

AMS’s products, manufactured out of two sites in the UK, one in the Netherlands, two in Germany and one in the Czech Republic, are sold in more than 75 countries 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. Established in 1991, the Group has approximately 630 employees. For more information, please see www.admedsol.com.

Chairman’s Statement

Overview

This has been another good year for the Group and we continue to progress as a leading, international provider of high quality, high value, innovative and technologically advanced products for the surgical and advanced woundcare markets.

Strategy

During 2018 our strategy has evolved to overcome changing market dynamics. With a focus on our strategic pillars of Growth, Innovation, Operational Excellence and Culture, we continue to provide high quality products with benefits to both patients and payors. Our acquisition of Sealantis adds significant growth potential in the internal sealants market and underlines our increasing commitment to innovation.

Board changes

As announced at our AGM in June 2018, Mary Tavener retired from the role of Chief Financial Officer and Board Director on 31 December 2018 and Eddie Johnson, who has been with AMS for seven years, as Group Financial Controller, assumed the role of Chief Financial Officer and joined the Board. We would like to thank Mary for her 19 years of dedicated and outstanding service to AMS. In her time with the Group, she has been integral to our listing on AIM, several acquisitions and this has culminated in AMS growing for 17 consecutive years.

We are also pleased that in November 2018 Alan Richardson joined the Group as Chief Operations Officer from Convatec. Alan has assumed responsibility for our Group Operations, Quality and Regulatory functions and brings with him a wealth of experience

Dividend

The Board is proposing a final dividend of 0.90p per share, to be paid on 14 June 2019 to shareholders on the register at the close of business on 24 May 2019. This follows the interim dividend of 0.42p per share on 26 October 2018 and would, if approved, make a total dividend for the year of 1.32p per share (2017: 1.10p), an increase of 20%.

On behalf of the Board, I would like to thank all of our employees for their contributions during the past year. We would not have been able to achieve our strong performance without their commitment and effort. I would also like to thank our customers, suppliers, business partners and shareholders for their continued support in helping AMS achieve its goals.

AMS continues to be in robust financial health and is well positioned to take advantage of market opportunities across our product portfolio and invest in both internal and external opportunities in line with the Group’s long-term strategy and growth objectives.

Peter Allen

Chairman

Chief Executive’s Statement

Group performance

I am pleased to report another good set of results for the Group. Revenue increased by 6%, or 7% at constant currency, to £102.6 million and adjusted profit before tax increased by 14% to £28.9 million, which contributed to an increase of 13% in adjusted diluted earnings per share.

Branded Business Unit sales increased strongly by 12% to £62.1 million and by 13% at constant currency, underlining the potential for our products in the global surgical market, with LiquiBand^® contributing £31.7 million of sales at 22% growth, or 24% at constant currency.

We strengthened our product portfolio in both Business Units with four key launches in Q4: LiquiBand^® Fix 8™ Open (EU), LiquiBand^® Exceed Mini (US), silver post-operative dressing (US) and antimicrobial PHMB foam dressing (US).

Given the changing market dynamics, particularly in woundcare and the regulatory environment, we continue to evolve our organisation and strategy to maximise value and efficiency for the Group. In 2018 our strategy has evolved to allow increased focus on our four key strategic pillars of Growth, Innovation, Operational Excellence and Culture and going into 2019, we made some minor adjustments within the Business Units to better manage our different surgical and advanced woundcare opportunities and optimise the Group’s routes to market. We are pleased with the progress we have made and are well positioned to drive continued growth for the future.

Market

The Group operates in the large global surgical and advanced woundcare markets, both of which have shown steady growth over many years due to favourable global healthcare trends and both provide AMS with significant future opportunities.

The growth trajectory continued in 2018 for our main surgical market and we extended our future addressable market by adding the Sealantis portfolio to our range. The addition of the Seal G and Seal G MIST products through the acquisition of Sealantis opens up a further US$1 billion market within which we do not yet compete. We anticipate that commercialisation will commence in 2021.

As reported by many other global woundcare suppliers, the advanced woundcare market has shown some weakness in the past year. This has been due to factors such as local reimbursement changes in certain countries and the entry of some lower cost competition which have slowed growth rates for all woundcare providers.

We know from our recent experiences of product recertification in Germany that the increased regulatory hurdles are likely to result in competitor product withdrawals in our surgical and woundcare markets and fewer competitors in the medium term which will result in more opportunities for the stronger, higher quality suppliers and products, including AMS. We are confident of long term growth as we continue to expand our product portfolio, enter new geographies and increase our share in each market.

Strategy

Our long-term growth strategy remains unchanged. Historically our strategy to expand into new geographies, increase distribution of our surgical products and to enhance our product portfolio has served us well and delivered several years of solid growth. As we continue to evolve to overcome changing market dynamics so does our strategy and our strategy is now based on four pillars: Growth, Innovation, Operational Excellence and Culture.

Growth

Our Growth strategy still centres on exploiting the opportunities from having multiple routes to market across multiple geographies trying to ensure our products add value to patients and payors through delivery of equal or better clinical performance without compromising care or outcomes.

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

In the increasingly competitive medical device space, as we continue to grow and expand our technology base, we need to ensure that we continue to drive down costs and to defend our margin through Operational Excellence. We have created the Chief Operations Officer role to lead this pillar of our business and are well advanced with developing plans to ensure ongoing continuous improvement is driven across each of our operating sites.

Culture

We are only as good as our people and we have spent significant time agreeing and communicating our desired culture and capturing the essence of what has helped AMS become the success it is today. Recruiting and retaining high calibre individuals and teams remains critical to the success of AMS and we believe the work we have done and continue to do in this area will serve us well for the future. Our Cultural pillar is captured within our Care Fair Dare values and behaviours which we use to help recruit, recognise and reward performance across the Group.

Sealantis Deal & Acquisition Strategy

The acquisition of Sealantis has brought us a pipeline of significant products, intellectual property, a strong R&D team and access to markets in which we have not historically 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 in high risk surgeries. Bringing in the high quality people and products to our Group is exciting and both businesses are currently working through the integration process which we expect to complete this year. We will start clinical trials in H2 2019 in support of first product launches in H1 2021. In addition to the initial product uses in gastrointestinal surgery, significant potential opportunities have also been identified in Neuro, Orthopaedic and Cardiovascular surgery indications.

The Group continues to actively look for businesses that deliver value for shareholders, immediately or in the short to medium term, and which meet our selection criteria of being:

· Products or technologies that enable us to leverage our woundcare customer base or surgical routes to market;

· Surgically focused companies with product synergies, strong R&D capability and ownership of their own products.

We have an internal team working with advisors to identify, appraise and progress acquisition opportunities and continue to explore options to accelerate growth through select targets.

Realligned Business Units for 2019

We have identified some significant benefits accessible by implementing a realignment to our Business Units. The changes include the transfer of ActivHeal^® (£6.3 million sales in 2018) from Branded to OEM, and the renaming of the Business Units to Surgical and Woundcare, respectively, to better reflect the nature of the business. The new structure was implemented in January 2019 and will be presented in this way from the H1 2019 results onwards.

Under the new structure, our Surgical Unit (previously the Branded Unit) will only include the sales, marketing, research, development and innovation of all our surgical products. Woundcare (previously the OEM Unit) will now include all advanced woundcare sales, marketing, research, development and innovation of all woundcare devices, regardless of whether they are sold under an AMS or a partner brand name.

Regulatory

As already announced, in May 2017, the European Medical Devices Regulation (MDR) started its three year transition period to replace the existing Medical Devices Directive. The MDR stipulates stricter requirements on product safety and performance, clinical evaluation and post-market clinical evidence and all medical device manufacturers will have to update their technical documentation and processes to meet the new requirements in order to continue to sell into the EU, creating a significant increase in medical regulatory activities globally.

Notified bodies will also have to operate to the new higher standards and each will have to go through their own approval process in order to be able to certify medical devices under MDR. Consequently, over the last few years the number of Notified Bodies has roughly halved to 60 and those that remain are indicating resource constraints within their organisations as they strive to meet the new regulatory requirements and the influx of requests from companies who are seeking a new body following the closure of their previous selected partner.

AMS is prepared for the impact of these regulatory changes over the next few years and expects to see market growth opportunities in the medium term as a result of this increasingly complex environment. All medical device manufacturers are at risk of experiencing delays in product approvals and recertifications and significantly increased demands for evidence on older products.

In 2018 and early 2019, AMS successfully completed its five-year recertification process for the RESORBA^® product portfolio, which proved significantly more onerous than usual, as we previously reported, due to the above factors and resulted in some short-term disruption to supply. Although this did influence the phasing of our sales, the Group did not see a material impact in 2018 nor does it expect one in 2019. As a result of working through this process, AMS is able to confidently work within this regulatory framework and has prepared and actioned a robust group wide plan to navigate the regulatory challenges of the next few years.

Brexit

As already reported, AMS is well positioned and well prepared for Brexit and in early 2019, BSI Netherlands confirmed the successful reassignment of all of our UK product certificates from BSI U.K. to BSI Netherlands, with a protracted transition period for related packaging changes. As a further minor labelling change, we will have to include details of an EU Authorised Representative (Advanced Medical Solutions BV) on the packaging of our UK manufactured products. We have also completed a comprehensive review of our supply chain to identify critical raw materials and increased stock holdings to reduce the risk of supply chain disruptions.

The year ahead

We enter 2019 with optimism due to our strong and enhanced product portfolio and our regulatory strength. This provides us with significant opportunities in our large and growing markets, particularly given the anticipated impact of the EU’s Medical Device Regulation. We anticipate and are already seeing products being withdrawn from the market and suppliers refusing to commit to new requirements in support of existing products. This can only be good for the stronger more capable players in the space and will increase the burden on low cost or inferior products.

The underlying demographics are still working in our favour in both our woundcare and surgical markets. As our portfolio continues to evolve through our own research and development and select acquisitons and licensing deals, as well as our continuous process of gaining new approvals and market entry across all key regions, we remain very optimistic about the future prospects for AMS.

Business Unit performance

Branded Business Unit

The Branded Business Unit reports products sold under AMS brands. Overall, revenue increased by 12% to £62.1 million (2017: £55.2 million) and by 13% at constant currency. This was driven principally by strong growth in Advanced Closure and Internal Fixation and Sealants, as well as continued growth across the rest of the product range.

Branded Business Unit	2018	2017	Reported Growth	Growth at constant currency
Advanced Closure	31,719	26,038	22%	24%
Internal Fixation and Sealants	2,066	1,706	21%	21%
Traditional Closure	13,342	13,147	1%	1%
Biosurgical Devices	8,640	8,036	8%	6%
Advanced Woundcare	6,293	6,318	0%	0%
TOTAL	62,060	55,244	12%	13%

Advanced Closure

Advanced Closure is the largest proportion of the Branded Business Unit. It is comprised predominately of the LiquiBand^® topical skin adhesive range of products incorporating medical cyanoacrylate adhesives in combination with purpose built applicators. These products are used to close and protect a broad variety of surgical and traumatic wounds.

Advanced Closure	2018	2017	Reported Growth	Growth at constant currency
Americas	22,963	18,195	26%	30%
UK/Germany	5,585	5,344	5%	4%
ROW	3,171	2,498	27%	27%
TOTAL	31,719	26,038	22%	24%

The category saw strong growth in 2018, with revenue increasing by 22% to £31.7 million (2017: £26.0 million), and by 24% at constant currency. This was driven by AMS continuing to take market share, new products launches, and expansion into new markets. We are the second largest player in the global advanced closure market, and in 2018 our share of the key US market increased by 2% in the year. The Group expects this growth and market share capture to continue in the coming years.

2018 saw the successful US launch of LiquiBand^® Exceed mini device which is used to close smaller wounds. The regulatory process for our newly developed large wound device is also progressing, but taking longer than anticipated, with US approval now expected in Q3 2019.

Internal Fixation and Sealants

This category comprises our LiquiBand^® Fix 8™ devices, which 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 in this category increased by 21% to £2.1 million (2017: £1.7 million). After new design enhancements were made to our LiquiBand^® Fix 8™ laparoscopic device, the product moved back into strong growth from Q2 2018 and has received very positive feedback from surgeons. In late 2018, we launched LiquiBand^® Fix8™ for open surgery, which is a substantial portion of the global hernia market, and can be used for both mesh fixation and final wound closure with potential cost advantages.

The US approval process for LiquiBand^® Fix8™ is well underway with patient enrolment for the clinical study in H1 2019. The global internal surgery market represents a significant opportunity for AMS and, with the acquisition of Sealantis, announced in January 2019, we now have multiple adhesive technologies to develop in combination with our applicator design expertise.

Traditional Closure

The traditional closure category includes our RESORBA^® branded Absorbable and Non-absorbable Sutures. Revenue growth in the period was restricted by the regulatory challenges, increasing by 1% to £13.3 million (2017: £13.1 million). Growth has been driven by a number of new accounts recently won in the U.K. and China and by success with variants for certain surgical specialties, including dental and ophthalmic.

Whilst the suture category is complex and mature, AMS will continue to explore targeted opportunities in this area and and will aim to derive benefit by bundling sutures with other products.

Biosurgical devices

The Biosurgical devices category is principally composed of collagen-based materials including our RESORBA^® Gentacoll^® Gentamycin Collagen products used in Orthopaedic and Cardiac applications, and Collagen fleeces and cones used in Dental applications. Revenue increased by 8% to £8.6 million (2017: £8.0 million) and by 6% at constant currency, driven by growth in Asia and progress among some of our European distributors.

We conducted our first prescription usage of a new antibiotic collagen pouch for cardiac implantable electronic devices, such as pacemakers, in Germany. Antibiotic loaded collagens provide local, rather than systemic, drug delivery giving significant patient and environmental benefits. This is a key product development focus for AMS and we are working on development and regulatory activities for alternative antibiotics for Orthopaedic and Cardiac applications.

AMS also further broadened its range of Dura substitute products and Dental membranes in the period.

Advanced Woundcare

The Branded woundcare category is predominately the ActivHeal^® range. Revenue was flat in the year at £6.3 million (2017: £6.3 million), but growth was seen in certain areas such as our newer launches in silicone and antimicrobial products.

As part of our announced Business Unit restructure, the ActivHeal^® brand will be managed by the Woundcare Business Unit, enabling new product and customer opportunities to be assessed as part of our overall woundcare portfolio.

OEM Business Unit

Our OEM Business Unit reports products sold under partner brands, supporting our partners with a multi-product portfolio of advanced woundcare products and bulk materials. Revenue declined slightly by 3% to £40.5 million (2017: £41.7 million) and by 2% at constant currency.

OEM Business Unit	2018	2017	Reported Growth	Growth at constant currency
Infection Management	19,622	19,368	1%	2%
Exudate Management	16,042	17,004	-6%	-5%
Other Woundcare	4,874	5,292	-8%	-6%
TOTAL	40,538	41,664	-3%	-2%

Infection Management

The infection management category comprises advanced woundcare dressings that incorporate antimicrobials such as Silver and Polyhexamethylene Biguanide (PHMB). Revenue increased by 1% to £19.6 million (2017 £19.4 million) and by 2% at constant currency.

In Q4 we successfully launched our new patented silver post-operative dressing with a major US partner. This is an ergonomic dressing for total joint arthroplasty, of which there are approximately 1.6 million performed annually in the United States. In vitro data has demonstrated the product’s best-in-class performance against a wide spectrum of bacteria and yeast. Following FDA approval, and also in Q4, we launched our premium PHMB foam range into the US with a new partner. The PHMB foam range demonstrates enhanced performance, with rapid microbial activity within 24 hours and eradication of some pathogens within six hours. The market for antimicrobial foams in the US and EU is approximately £100 million and growing.

In the second half of 2019, we expect to further extend our infection management portfolio by launching an antimicrobial high performance dressing and a range of products addressing skin infections on intact skin. The Group is also 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. Revenue was impacted by changes in reimbursement levels in certain countries as well as increasing lower-cost competition and consequently declined by 6% to £16.0 million (2017: £17.0 million) and by 5% at constant currency.

AMS launched the new Lite foam product range in the period, secured a new US partner and expanded into Latin America following successful regulatory approval in Brazil.

The Group is working on extending the Lite foam portfolio with a range of shapes and sizes for the acute post surgery market, as well as extending the claims on our silicone foam range for pressure ulcer prevention.

We are confident that the above actions will counteract the ongoing challenging market conditions anticipated in 2019.

Other Woundcare

Other woundcare comprises the sealants used in woundcare, royalties and other fee income. Revenue decreased by 8% to £4.9 million (2017 £5.3 million) and by 6% at constant currency due to reduced Organogenesis royalties of £1.8 million (2017, initial year with some up front elements: £2.5 million) as end sales were impacted by lower reimbursement levels until fully reinstated in Q4.

ActivHeal ^®

The realignment of the business units in 2019 to incorporate ActivHeal^® into the woundcare division will enable the Business Unit to have direct access to clinicians, with a more focused approach and simplified decision making structure, in addition to commercial and R&D synergies.

Chris Meredith

Chief Executive Officer

Financial Review

Summary

The Group delivered another strong financial performance, with a 12% increase in profit before tax and a 6% increase in reported revenue. At constant currency, revenue increased by 7% with currency movements reducing revenue by approximately £0.9 million during 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 and adjusted profit before tax, allowing the impacts of exchange rate volatility, exceptional items and amortisation to be separately identified. Net cash is an additional non-GAAP measure used. The Group incurred exceptional costs of £0.4 million in the year relating mainly to the acquisition of Sealantis (2017: £nil) and amortisation of acquired intangibles of £0.1 million (2017: £0.1 million).

Administration costs excluding exceptional items increased by 4.3% to £33.6 million (2017: £32.2 million) with increased investment in R&D, regulatory and sales and marketing being partially offset by favourable movements on currency contracts. The Group incurred £6.0 million of gross R&D, regulatory and clinical spend in the year (2017: £4.3 million), representing 5.8% of sales (2017: 4.4%), with increased regulatory costs incurred due to the recertification of Suture and Collagen products.

Adjusted operating margin increased by 180 bps to 28.0% (2017: 26.2%) and operating margin increased by 150 bps to 27.5% (2017: 26.0%) due to positive sales mix and favourable currency contracts.

Adjusted profit before tax increased by 14% to £28.9 million (2017: £25.4 million) and profit before tax increased by 12% to £28.4 million (2017: £25.3 million).

Reconciliation of profit before tax to adjusted proft before tax
	(Unaudited)	(Audited)
	2018	2017
	£’000	£’000
Profit before tax	28,434	25,277
Amortisation of acquired intangibles	81	134
Exceptional items	402	–
Adjusted profit before tax	28,917	25,411

The Group’s effective tax rate, reflecting the blended tax rates in the countries where we operate, and including UK patent box relief was unchanged at 20.3% (2017: 20.3%).

Adjusted diluted earnings per share increased by 13% to 10.71p (2017: 9.46p) and diluted earnings per share increased by 12% to 10.48p (2017: 9.39p).

Operating result by business segment
Year ended 31 December 2018	Branded	OEM
	£’000	£’000
Revenue	62,060	40,538
Profit from operations	18,197	10,985
Amortisation of acquired intangibles	76	5
Adjusted profit from operations⁵	18,273	10,990
Adjusted operating margin⁵	29.4%	27.1%
Year ended 31 December 2017
Revenue	55,244	41,664
Profit from operations	14,336	11,354
Amortisation of acquired intangibles	125	9
Adjusted profit from operations⁵	14,461	11,363
Adjusted operating margin⁵	26.2%	27.3%

^{Note 5: Adjusted for exceptional items and for amortisation of acquired intangible assets}

^{Table is reconciled to statutory information in note 3 of the financial information.}

Branded

The adjusted operating margin of the Branded Business Unit increased by 320 basis points to 29.4% (2017: 26.2%), supported by sales growth, beneficial sales mix and favourable currency movements. Operating costs increased, especially sales, marketing, R&D and regulatory costs, to continue to support ongoing growth.

OEM

The adjusted operating margin of the OEM Business Unit decreased slightly to 27.1% (2017: 27.3%), mainly due to the reduced royalty from Organogenesis in the period.

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 3.6% and 2.5% respectively and in the absence of any hedging this would have an impact on profit of 3.0% and 0.7%.

Cash Flow

Net cash inflow from operating activities increased by 20% to £20.4 million (2017: £17.0 million) and at the end of the period, the Group had net cash of £76.4 million (2017: £62.5 million).

Working capital increased during the year mainly due to trade receivables being £6.8 million higher, which was caused by a change in customer mix (more US customers on longer payment terms), sales phasing (impacted by new product launch dates and also some product availability issues relating to the recertification of RESORBA^® products) and currency movements. Debtor days increased to 47 days (2017: 41 days) mainly due to the increased proportion of US debtors which are on longer payment terms. Inventory also increased during the year as we intentionally built stock levels to mitigate possible supply risks from recertification and Brexit, with inventory months increasing to 4.7 months (2017: 4.2 months of supply). Creditor days increased to 31 days (2017: 27 days).

In the year, we invested £4.7 million in capital equipment, R&D and regulatory costs (2017: £4.5 million).

Cash outflow relating to taxation decreased to £3.8 million (2017: £4.5 million) due to the timing of tax payments on account.

The Group paid its final dividend for the year ended 31 December 2017 of £1.6 million on 15 June 2018 (2017: for the year ending 2016, £1.3 million), and its interim dividend for the six months ended 30 June 2018 of £0.9 million (2017: £0.7 million) on 26 October 2018.

In December 2018, the Group secured a new £80 million, multi-currency credit facility with a £20 million accordion option. The credit facility is provided jointly by HSBC and The Royal Bank of Scotland and is in place until December 2023. It is unsecured and has not been drawn down. 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)				(Audited)
		2018	Exceptional Items	Before exceptional Items		2017
	Note	£’000	£’000	£’000		£’000
Revenue from continuing operations	3	102,598	–	102,598		96,908
Cost of sales		(39,192)	–	(39,192)		(38,504)
Gross profit		63,406	–	63,406		58,404
Distribution costs		(1,316)	–	(1,316)		(1,130)
Administration costs		(33,974)	(402)	(33,572)		(32,184)
Other income		104	–	104		150
Profit from operations	4	28,220	(402)	28,622		25,240
Finance income		378	–	378		147
Finance costs		(164)	–	(164)		(110)
Profit before taxation		28,434	(402)	28,836		25,277
Income tax	5	(5,784)	–	(5,784)		(5,143)
Profit for the year attributable to equity holders of the parent		22,650	(402)	23,052		20,134
Earnings per share
Basic	6	10.63p	(0.19p)	10.82p	9.52p
Diluted	6	10.48p	(0.19p)	10.67p	9.39p

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
	(Unaudited)	(Audited)
	2018	2017
	£’000	£’000
Profit for the year	22,650	20,134
Exchange differences on translation of foreign operations	466	2,187
(Loss)/gain arising on cash flow hedges	(3,064)	4,192
Total other comprehensive (expense)/income for the year	(2,598)	6,379
Total comprehensive income for the year attributable to equity holders of the parent	20,052	26,513

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	(Unaudited)	(Audited)
	31-Dec-18	31-Dec-17
	£’000	£’000
Assets
Non-current assets
Acquired intellectual property rights	9,673	9,675
Software intangibles	2,548	3,078
Development costs	3,204	2,135
Goodwill	42,145	41,801
Property, plant and equipment	18,124	17,019
Deferred tax assets	177	199
Trade and other receivables	415	286
	76,286	74,193
Current assets
Inventories	14,800	11,073
Trade and other receivables	27,172	20,950
Current tax assets	813	48
Cash and cash equivalents	76,391	62,454
	119,176	94,525
Total assets	195,462	168,718
Liabilities
Current liabilities
Trade and other payables	14,643	10,547
Current tax liabilities	3,863	2,290
Other taxes payable	–	15
	18,506	12,852
Non-current liabilities
Trade and other payables	655	310
Deferred tax liabilities	3,303	3,120
	3,958	3,430
Total liabilities	22,464	16,282
Net assets	172,998	152,436
Equity
Share capital	10,674	10,632
Share premium	35,192	34,778
Share-based payments reserve	7,333	4,676
Investment in own shares	(156)	(152)
Share-based payments deferred tax reserve	708	815
Other reserve	1,531	1,531
Hedging reserve	(2,406)	658
Translation reserve	3,289	2,823
Retained earnings	116,833	96,675
Equity attributable to equity holders of the parent	172,998	152,436

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 2017 (audited)	10,524	34,005	3,469	(152)	459	1,531	(3,534)	636	78,590	125,528
Consolidated profit for the year to 31 Dec 2017	–	–	–	–	–	–	–	–	20,134	20,134
Other comprehensive income	–	–	–	–	–	–	4,192	2,187	–	6,379
Total comprehensive income	–	–	–	–	–	–	4,192	2,187	20,134	26,513
Share-based payments	–	–	1,279	–	356	–	–	–	–	1,635
Share options exercised	108	773	(72)	–	–	–	–	–	–	809
Shares purchased by EBT	–	–	–	(484)	–	–	–	–	–	(484)
Shares sold by EBT	–	–	–	484	–	–	–	–	–	484
Dividends paid	–	–	–	–	–	–	–	–	(2,049)	(2,049)
At 31 December 2017 (audited)	10,632	34,778	4,676	(152)	815	1,531	658	2,823	96,675	152,436
Consolidated profit for the year to 31 Dec 2018	–	–	–	–	–	–	–	–	22,650	22,650
Other comprehensive (expense)/ income	–	–	–	–	–	–	(3,064)	466	–	(2,598)
Total comprehensive income	–	–	–	–	–	–	(3,064)	466	22,650	20,052
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	116,833	172,998

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

	(Unaudited)	(Audited)
	Year ended	Year ended
	31-Dec-18	31-Dec-17
	£’000	£’000
Cash flows from operating activities
Profit from operations	28,220	25,240
Adjustments for:
Depreciation	2,159	2,053
Amortisation – intellectual property rights	81	134
– software intangibles	593	415
– development costs	325	380
(Increase)/decrease in inventories	(3,707)	505
Increase in trade and other receivables	(6,813)	(8,627)
Increase in trade and other payables	1,692	73
Share-based payments expense	1,659	1,279
Taxation	(3,810)	(4,486)
Net cash inflow from operating activities	20,399	16,966
Cash flows from investing activities
Purchase of software	(304)	(958)
Capitalised research and development	(1,392)	(860)
Purchases of property, plant and equipment	(3,062)	(2,901)
Disposal of property, plant and equipment	78	264
Interest received	377	147
Net cash used in investing activities	(4,303)	(4,308)
Cash flows from financing activities
Dividends paid	(2,492)	(2,049)
Issue of equity shares	430	809
Shares purchased by EBT	(600)	(484)
Shares sold by EBT	596	484
Interest paid	(164)	(110)
Net cash used in financing activities	(2,230)	(1,350)
Net increase in cash and cash equivalents	13,866	11,308
Cash and cash equivalents at the beginning of the period	62,454	51,125
Effect of foreign exchange rate changes	71	21
Cash and cash equivalents at the end of the period	76,391	62,454

Notes Forming Part of the Condensed Consolidated Financial Statements

1. Reporting entity

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 2018 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

• IFRS 9, Financial Instruments: Classification and measurement

• Amendments to IFRS 2, Classification and Measurement of Share-based payment Transactions

IFRS 15 was effective for annual periods beginning 1 January 2018 and replaced IAS 11 Construction Contracts and IAS 18 Revenue. The Group decided to adopt the standard early with effect for the year ended 31 December 2017.

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 2019.

The financial information set out in the announcement does not constitute the Group’s statutory accounts for the years ended 31 December 2018 or 31 December 2017. The financial information for the year ended 31 December 2017 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. 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 2018 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 2017.

With regards to the Group’s financial position, it had cash and cash equivalents at the year end of £76.4 million. In December 2018, the Group entered a five-year, unsecured, multi-currency, credit facility for £80 million and which was undrawn in 2018.

New accounting standards not yet applied

• IFRS 16, Leases – effective for accounting periods beginning on or after 1 January 2019.

• IFRIC 23, Uncertainty over Income Tax Treatments – effective for accounting periods beginning on or after 1 January 2019.

• Annual Improvements of IFRS Standards 2015-2017 cycle

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, except as follows:

IFRS 16 is effective for annual periods beginning 1 January 2019 and will replace IAS 17 Leases. The standard represents a significant change in the accounting and reporting of leases for lessees as it provides a single lessee accounting model. As such it requires lessees to recognise assets and liabilities for all leases unless the underlying asset has a low value or the lease term is 12 months or less. The standard may also require the capitalisation of a lease element of contracts held by the Group which under the existing accounting standard would not be considered a lease. Early adoption is permitted if IFRS 15 ‘Revenue from Contracts with Customers’ has also been applied; however, the Group has not undertaken this option.

The Group holds a number of operating leases, which currently, under IAS 17, are expensed on a straight line basis over the lease term. The Group has made the following estimates of the approximate impacts of adopting the new standard, which are sensitive to all changes up to the application date. If the standard had been adopted in the current year, a depreciation charge of around £1.0 million in relation to the right-of-use asset and a finance expense charge of around £0.4 million would have been recognised in place of the operating lease charge of £1.3 million. In addition, a right-of-use asset, of £9.7 million, and related lease liability of approximately £10.0 million would be recognised in the statement of financial position.

3. Segment information

As referred to in the Chief Executive’s Report, the Group is organised into two Business Units: Branded and OEM (original equipment manufacturer). These Business Units are the basis on which the Group reports its segment information.

Business segments

Segment information about these businesses is presented below.

Year ended	Branded		OEM	Consolidated
31 December 2018
(unaudited)
	£’000		£’000	£’000
Revenue
External sales	62,060		40,538	102,598
Result
Adjusted segment operating profit	18,273		10,990	29,263
Amortisation of acquired intangibles	(76)		(5)	(81)
Segment operating profit	18,197		10,985	29,182
Unallocated expenses				(560)
Exceptional costs				(402)
Operating profit				28,220
Finance income				378
Finance costs				(164)
Profit before tax				28,434
Tax				(5,784)
Profit for the year				22,650

At 31 December 2018	Branded		OEM	Consolidated
(unaudited)
Other Information	£’000		£’000	£’000
Capital additions:
Software intangibles	170		134	304
Development	815		577	1,392
Property, plant and equipment	1,731		1,331	3,062
Depreciation and amortisation	(1,761)		(1,397)	(3,158)
Balance sheet
Assets
Segment assets	132,234		62,709	194,943
Unallocated assets				519
Consolidated total assets				195,462
Liabilities
Segment liabilities	14,235		8,229	22,464
Consolidated total liabilities				22,464

Year ended		Branded	OEM	Consolidated
31 December 2017
		£’000	£’000	£’000
Revenue
External sales		55,244	41,664	96,908
Result
Adjusted segment operating profit		14,461	11,363	25,824
Amortisation of acquired intangibles		(125)	(9)	(134)
Segment operating profit		14,336	11,354	25,690
Unallocated expenses				(450)
Exceptional costs				–
Operating profit				25,240
Finance income				147
Finance costs				(110)
Profit before tax				25,277
Tax				(5,143)
Profit for the year				20,134

At 31 December 2017		Branded	OEM	Consolidated
Other Information		£’000	£’000	£’000
Capital additions:
Software intangibles		715	243	958
Development		425	435	860
Property, plant and equipment		1,563	1,338	2,901
Depreciation and amortisation		(1,192)	(1,790)	(2,982)
Balance sheet
Assets
Segment assets		112,057	56,580	168,637
Unallocated assets				81
Consolidated total assets				168,718
Liabilities
Segment liabilities		10,406	5,876	16,282
Consolidated total liabilities				16,282

Geographic segments

The Group operates in the UK, The Netherlands, Germany, the Czech Republic and Russia, with a sales presence in the US. 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)	(Audited)
Year ended 31 December	2018	2017
	£’000	£’000
United Kingdom	18,447	17,266
Germany	19,416	19,062
Europe excluding United Kingdom and Germany	23,987	22,939
United States of America	37,317	35,330
Rest of World	3,431	2,311
	102,598	96,908
The following table provides an analysis of the Group’s total assets by geographical location.
	(Unaudited)	(Audited)
As at 31 December	2018	2017
	£’000	£’000
United Kingdom	120,501	98,305
Germany	66,485	65,212
Europe excluding United Kingdom and Germany	5,765	4,743
United States of America	2,711	458
	195,462	168,718

4. Profit from operations

	(Unaudited)	(Audited)
Year ended 31 December	2018	2017
	£’000	£’000
Profit from operations is arrived at after charging:
Depreciation of property, plant and equipment	2,159	2,053
Amortisation of:
– acquired intellectual property rights	81	134
– software intangibles	593	415
– development costs	325	380
Operating lease rentals – plant and machinery	225	248
– land and buildings	1,031	1,005
Research and development costs expensed to the income statement	3,079	2,052
Cost of inventories recognised as expense	37,927	36,711
Write down of inventories expensed	780	1,253
Staff costs	33,559	29,920
Net foreign exchange loss	88	2,427

5. Taxation

	(Unaudited)	(Audited)
Year ended 31 December	2018	2017
	£’000	£’000
a) Analysis of charge for the year
Current tax:
Tax on ordinary activities – current year	5,859	5,397
Tax on ordinary activities – prior year	(126)	(293)
	5,733	5,104
Deferred tax:
Tax on ordinary activities – current year	107	39
Tax on ordinary activities – prior year	(56)	–
	51	39
Tax charge for the year	5,784	5,143
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)	(Audited)
Year ended 31 December	2018	2017
	£’000	£’000
b) Factors affecting tax charge for the year
Profit before taxation	28,434	25,277
Profit multiplied by the weighted average Group tax rate of 21.08% (2017: 21.91%)	5,994	5,538
Effects of:
Net expenses not deductible for tax purposes and other timing differences	(22)	1
Patent Box Relief	(318)	(310)

Net impact of deferred tax on capitalised development costs and R&D relief	210	170
Share-based payments	102	37
Adjustments in respect of prior year – current tax	(126)	(293)
Adjustments in respect of prior year and rate changes – deferred tax	(56)	–
Taxation	5,784	5,143

6. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

	(Unaudited)	(Audited)
Year ended 31 December	2018	2017
	£’000	£’000
Earnings
Profit for the year attributable to equity holders of the parent
Pre exceptional items	23,052	20,134
Post exceptional items	22,650	20,134
Number of shares	‘000	‘000
Weighted average number of ordinary shares for the purposes of basic earnings per share	213,146	211,563
Effect of dilutive potential ordinary shares: share options, deferred share bonus, LTIPs	2,911	2,760
Weighted average number of ordinary shares for the purposes of diluted earnings per share	216,057	214,323


	(Unaudited)	(Audited)
	2018	2017
	£’000	£’000
Profit for the year attributable to equity holders of the parent	22,650	20,134
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the parent
Amortisation of acquired intangible assets	81	134
Adjusted profit for the year attributable to equity holders of the parent	22,731	20,268


	(Unaudited)	(Audited)
	2018	2017
	pence	pence
Basic – pre exceptional	10.82p	9.52p
Basic – post exceptional	10.63p	9.52p
Diluted – pre exceptional	10.67p	9.39p
Diluted – post exceptional	10.48p	9.39p
Adjusted basic (pre exceptional items)	10.85p	9.58p
Adjusted diluted (pre exceptional items)	10.71p	9.46p
Adjusted basic (post exceptional items)	10.66p	9.58p
Adjusted diluted (post exceptional items)	10.52p	9.46p

7. Events after reporting period

On 31 January 2019, the Company announced the acquisition of Sealantis Limited, a developer of alginate-based tissue adhesive technology platform, for $US 25 million (approximately £19 million). The acquisition was funded from existing cash reserves and the Company will pay royalties on future sales of existing products in development until the end of 2027. Given the proximity of the transaction to the announcement of the Group’s financial statements, a full purchase price allocation exercise has not yet been completed and the valuation of the assets acquired is subject to amendment on finalisation of the fair value exercise. Acquired net assets have a provisional value of £0.3 million prior to fair value adjustments according to the management accounts of Sealantis Limited as at 31 January 2019. The remainder of the acquisition price will be allocated between intangible assets, including goodwill and other intangible assets, with a significant proportion representing products under development and related intellectual property. None of the goodwill is expected to be deductible for tax purposes.

END

FR EAADAFDENEAF

The post Unaudited preliminary results appeared first on Advanced Medical Solutions.

Unaudited preliminary results

AdMedSol — Wed, 14 Mar 2018 07:00:05 +0000

RNS Number : 6308H

Advanced Medical Solutions Grp PLC

14 March 2018

Advanced Medical Solutions Group plc

(“AMS” or the “Group”)

Unaudited Preliminary Results for the year ended 31 December 2017

Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), the surgical and advanced wound care specialist company, today announces its unaudited preliminary results for the year ended 31 December 2017.

Financial Highlights:

	2017	2016	Reported growth	Growth at constant currency¹
Group revenue (£ million)	96.9	83.2⁶	16%	12%
Adjusted² operating margin (%)	26.2	23.7	250bps	–
Adjusted² profit before tax (£ million)	25.4	19.7	29%	–
Profit before tax (£ million)	25.3	19.1	32%	–
Adjusted² diluted earnings per share (p)	9.46	7.66	23%	–
Diluted earnings per share (p)	9.39	7.38	27%	–
Net operating cash flow³ pre-exceptional items (£ million)	21.5	22.3	(4%)
Net cash (£ million)⁴	62.5	51.1	22%	–

· Proposed final dividend of 0.75p per share, making a total dividend for the year of 1.10p (2016: 0.92p), up 20%

Business Highlights:

· Strong revenue growth, up 16% to £96.9 million and by 12% at constant currency

o Branded revenues up 22% to £55.2 million (2016: £45.4 million) and by 16% at constant currency

o OEM revenues up 10% to £41.7 million (2016: £37.8 million) and by 8% at constant currency

· Continued strong performance from LiquiBand^® topical tissue adhesives, sales up 35% to £26.0 million (2016: £19.3 million) and by 30% at constant currency

o US revenues up 47% to £18.2 million (2016: £12.4 million) and by 40% at constant currency

o As at 31 December 2017, market share by volume⁵ increased to 26% (June 2017: 24%)

· RESORBA^® branded products up 15% to £20.8 milllion (2016: £18.1 million) and by 6% at constant currency

· Antimicrobial dressings up 11% to £19.4 million (2016: £17.5 million) and by 9% at constant currency

· Out-licensing deal signed with Organogenesis for a collagen-based wound dressing containing Polyhexamethylene Biguanide (“PHMB”)

Outlook

2017 has seen another good performance by the Group. With our increasing portfolio of products, high quality business partners, the opportunities we see from our R&D pipeline and our strong financial position, the Board remains optimistic about our future prospects and the potential for further growth. The Group continues to trade in line with Board expectations.

Commenting on the results Chris Meredith, Chief Executive Officer of AMS, said:

“This has been another year of good growth across the Group and we are well positioned to take advantage of market opportunities across our product portfolio. Innovation is at the heart of our strategy and this allows us to maintain the high quality of our products that offer benefits to both patients and payors. Alongside our organic growth plan, AMS is actively reviewing M&A opportunities that will further increase value for shareholders. We look to the future with continued confidence.”

– End –

Note 1 Constant currency removes the effect of currency movements by re-translating the current period’s performance at the previous period’s exchange rates

Note 2 All items are shown before exceptional items which were £nil (2016: £0.4 million) and amortisation of acquired intangible assets which were £0.1 million (2016: £0.2 million) as defined in the Financial Review

Note 3 Net operating cash flow is arrived at by taking the operating profit for the period before exceptional items of £nil (2016: £0.4 million), depreciation, amortisation, working capital movements and other non cash items

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

Note 5 Data supplied by Global Healthcare Exchange

Note 6 2016 Revenue restated by £0.7 million (2016: £0.6 million) as a result of adoption of IFRS 15 (Revenue from Contracts with Customers)

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 Mary Tavener, Chief Financial Officer

Consilium Strategic Communications	Tel: +44 (0) 20 3709 5700
Mary-Jane Elliott / Matthew Neal / Philippa Gardner

Investec Bank PLC (NOMAD & Broker)	Tel: +44 (0) 20 7597 5970
Daniel Adams / Patrick Robb / Gary Clarence

About Advanced Medical Solutions Group plc – see www.admedsol.com

AMS is a world-leading independent developer and manufacturer of innovative and technologically advanced products for the global surgical, wound care and wound closure markets, focused on quality outcomes for patients and value for payors. AMS has a wide range of products that include silver alginates, alginates, foams, tissue adhesives, sutures and haemostats, which it markets under its brands; ActivHeal^®, LiquiBand^® and RESORBA^® as well as supplying under white label.

AMS’s products, manufactured out of two sites in the UK, one in the Netherlands, two in Germany and one in the Czech Republic, are sold in more than 75 countries 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. Established in 1991, the Group has approximately 600 employees. For more information, please see www.admedsol.com.

Chairman’s Statement

AMS continues to progress as a leading international provider of high quality, high value, innovative and technologically advanced products for the surgical and advanced wound care markets. We are pleased to report another year of strong revenue growth, profit performance and cash generation.

Our revenues increased 16% to £96.9 million (2016: £83.2 million), representing growth of 12% on a constant currency basis and our adjusted⁷ profit before tax increased by 29% to £25.4 million (2016: £19.7 million) and our profit before tax increased by 32% to £25.3 million (2016: £19.1 million). The continued strong cash generation of the business has resulted in the Group ending the year with net cash of £62.5 million (2016: £51.1 million).

As reported at the half year, at the beginning of 2017 we reviewed our business structure and consolidated our Business Units from four to two. Our Branded Business Unit focuses on the distribution, marketing and innovation of all the Group’s branded products. Our OEM business focuses on the distribution, marketing and innovation of all the Group’s products that are supplied to our medical device partners under their brands. This new structure is designed to enhance focus and improve marketing efficiencies for the Group.We have restated our segmental prior year financials in line with this new reporting structure.

Good progress has been made with all of our brands. LiquiBand^® continues to do well in the US and we have gained a further 2% market share since we last reported to take our market share by volume to 26%. Revenue from our RESORBA^® brands grew steadily across all territories and has grown by 15% and by 6% at constant currency to £20.8 million (2016: £18.1 million), while ActivHeal^® grew by 4% to £6.3 million (2016: £6.0 million).

We were pleased to announce in October 2017 that we had agreed a patent out-licensing agreement with Organogenisis for a collagen based wound dressing containing Polyhexamethylene Biguanide (“PHMB”). Under this agreement, we receive royalties from Organogenesis’s net sales in the US on the product. The agreement is in place for the life of the patent which expires in October 2026.

The Board is proposing a final dividend of 0.75p per share, making a total dividend for the year of 1.10p per share, an increase of 20% (2016: 0.92p). If approved at the Annual General Meeting, this dividend will be paid on 15 June 2018 to shareholders on the register at the close of business on 25 May 2018.

We ensure that the Group is managed in accordance with the UK Corporate Governance Code as far as is reasonably practicable, although it is not a requirement for an AIM quoted company. The Board believes that effective corporate governance will assist in the delivery of sustainable shareholder value and safe-guard shareholders’ long-term interests.

AMS continues to be in robust financial health and we are continuing to grow our international footprint and scale. The Group is well positioned to increase investment in internal innovation and to actively pursue external opportunities in line with our long-term strategy and growth objectives.

Peter Allen

Chairman

⁷ All items are shown before amortisation of acquired intangible assets which, in 2017, was £0.1 million (2016: £0.2 million) as defined in the financial review and before exceptional costs which were £nil million (2016: £0.4 million)

Chief Executive’s Statement

I am pleased to report another strong set of results across the Group. Our revenue has increased 16% to £96.9 million and we have improved our adjusted⁸ profit before tax by 29% to £25.4 million and our reported profit before tax by 32% to £25.3 million (2016: £19.1 million).

Our strategy for growth remains unchanged. We continue to expand into new geographies, increase our distribution of surgical products through our direct sales forces, and enhance our product portfolio by developing high quality products that add value to patients and payors in our advanced woundcare and surgical markets.

As reported at the half year, we have streamlined our reporting structure and now operate under two Business Units: Branded and OEM.

Branded

The Branded Business Unit reports the sales of all our own brands. Branded reported revenue was 22% higher at £55.2 million (2016: £45.4 million) and 16% higher at constant currency.

LiquiBand^® topical adhesives

LiquiBand^® is our range of medical adhesives based on cyanoacrylate, and is our largest brand with sales of £26.0 million, (2016: £19.3 million) up 35% on the prior year and 30% at constant currency.

Our LiquiBand^®range of products utilises different formulations of cyanoacrylate in innovatively designed applicators. They are designed to meet the requirements of the clinician and to treat the full spectrum of wounds that they need to close and protect. They have several key attributes that compare favourably with the existing market leader, including wound closure strength, tensile strength, set time, surface area coverage and adhesive yield.

Sales in the US, which remains our largest market, increased by 47% to £18.2 million (2016: £12.4 million) at reported currency and by 40% at constant currency. We access this market through distributors who target both hospitals and non hospitals, helping us to identify customers and convert opportunities into sales following surgeon evaluation. We support our partners with marketing and clinical data demonstrating the efficacy of our products. We continue to grow our volume market share which is now at 26%, up 2% from June 2017 and 3% over the full year.

In the UK and Germany good progress has been made. Revenues have increased 12% to £5.3 million (2016: £4.7 million) and 10% at constant currency with new hospitals being accessed. In the EU and ROW, sales of LiquiBand^® increased by 19% to £2.5 million (2016: £2.1 million) at reported currency and 18% at constant currency.

We are now targeting new geographic markets for LiquiBand^®. Following on from establishing distribution agents in Asia, we have also identified opportunities for LiquiBand^® in a number of Central American markets and anticipate first sales in this region in 2018.

Our primary focus for R&D is to extend our LiquiBand^®product range to compete in the growing market for combined glues and tape used for larger wound closure. We expect to receive approval to market this in the US around the end of 2018.

⁸ All items are shown before amortisation of acquired intangible assets which, in 2017, was £0.1 million (2016: £0.2 million) as defined in the financial review and before exceptional costs which were £nil million (2016: £0.4 million)

Hernia Mesh Fixation device – LiquiBand^® Fix8™

LiquiBand^® Fix 8™ is used to hold hernia meshes in place within the body instead of tacks and staples. This accurate laparoscopic application of adhesive is expected to both reduce surgical complications and reduce the potential pain associated with the use of tacks and staples. It also provides the ability to attach mesh in areas where tacks and staples cannot be applied, helping to improve the patient experience and surgical outcomes.

As reported at the half year, sales growth of LiquiBand^® Fix8™ has been restricted due to design enhancements we have made following surgeon feedback. Further feedback has been received on the updated device and modifications have been completed. We have chosen not to actively promote the device while the modifications were ongoing, nevertheless sales increased by 3% to £1.7 million (2016: £1.7 million) and 1% at constant currency. We expect to see a return to sales growth this year.

At present, the device is approved for use within Europe and those markets that accept European approval standards. We have started the process to get LiquiBand^® Fix8™ approved in the US market. This necessitates a full Pre Market Approval (PMA) involving clinical trials with patient enrolment expected to start in mid 2018 and enrolment completing by the end of the year. We expect the total cost of completing the approval process will be around £3 million with the majority of the spend being incurred in 2018 and 2019.

In R&D, we are also working on broadening the claims on the use of the device for hernia mesh fixation as well as for a number of other laparoscopic surgical applications and developing a device suitable for hernia mesh fixation in open surgery which we expect to launch in Europe in the first half of 2019.

RESORBA^®

Our RESORBA^® branded products portfolio is comprised of a comprehensive range of sutures which are used to close wounds and a range of bio-surgical products that include collagens, cellulose and bone substitutes that can be used as haemostats or scaffolds for tissue growth. Sales of RESORBA^® products increased by 15% to £20.8 million (2016: £18.1 million) and by 6% at constant currency. Within this, sales of sutures increased by 15% to £13.0 million (2016: £11.3 million) and by 6% at constant currency and sales of bio-surgical products increased by 16% to £7.9 million (2016: £6.8 million) and by 8% at constant currency.

During 2016, we renegotiated the supply agreement with an OEM partner for collagen products in order to go direct. We are pleased that we have started to sell these products into a number of new territories.

Germany remains our largest market with £13.0 million of sales (2016: £12.0 million), up 8% on the prior year and up by 1% at constant currency while sales to markets outside Germany accessed by our distributors increased by 30% to £7.5 million (2016: £5.8 million) and 19% at constant currency. Our initiative to offer a range of dental sutures into the US market is developing and following launch in 2016, sales have increased to £0.3 million. The total US surgical suture market is estimated to be in excess of $1 billion and is dominated by a few major brands and provides a significant opportunity for the Group in the medium term.

We continue to access new markets, in particular Asia Pacific, and have recently hired a new sales manager to target Australasia for both our RESORBA^® and LiquiBand^® brand ranges.

In R&D we continue to work on preparing a range of different antibiotics that can be incorporated in our bio-surgical products. We expect to file for European approval in the second half of 2018.

ActivHeal^®

ActivHeal^® is our range of high quality woundcare dressings specifically designed to offer the NHS significant cost savings without compromising on clinical outcomes or patient care. Sales of ActivHeal^® increased by 4% to £6.3 million (2015: £6.0 million), reversing the decline that was reported in 2016, however the market remains difficult with increasing price pressure becoming evident. The Group has enhanced its education and marketing materials as well as broadened its product range with our antimicrobial and atraumatic foam dressing ranges.

OEM

Our OEM business supports our partners with a multi-product portfolio of advanced woundcare products and bulk materials. We have been working with many of the world’s major wound care companies for a number of years providing manufacturing services to supply their woundcare dressings, new products they can incorporate into their portfolio of brands, as well as regulatory assistance in obtaining product approvals in overseas markets. Revenue increased 10% to £41.7 million (2016: £37.8 million) and increased 8% at constant currency.

A key driver for this Business Unit is in supplying products that incorporate antimicrobials. Sales of our antimicrobial dressings increased by 11% to £19.4 million (2016: £17.5 million), and by 9% at constant currency. Within this, silver alginate products grew by 12% to £18.0 million (2016: £16.2 million) and by 9% at constant currency while the Polyhexamethylene Biguanide (PHMB) foam range, which was launched in 2016 into Europe, increased 2% at reported and constant currency.

PHMB is an antimicrobial which is effective against several bacteria including Methicillin-resistant Staphylococcus aureus (MRSA) and Escherichia coli (E.coli). Although we received approval to market PHMB foam into the US in 2017, we deferred a launch until we could market these products with extended claims. We expect to obtain these approvals in 2018.

Sales of our non-antimicrobial foams were down 16% at reported currency to £7.4 million (2016: £8.8 million) and by 20% at constant currency. Sales were impacted by the pipeline fill of our atraumatic foam launches in 2016, which we estimate to have been around £1 million. We also had some issues caused by a change of raw material from one of our suppliers which interrupted our ability to promote part of our more established range of products. These issues are now resolved. Sales of our other technologies, which include alginates and gels, increased 7% at reported currency to £11.8 million (2016: £11.0 million) and by 5% at constant currency.

In October 2017 we agreed an out-licensing agreement with Organogenesis Inc., a commercial leader in regenerative medicine focused on advanced wound care and surgical biologics, on a U.S. patent for a collagen-based wound dressing containing PHMB.

Under the terms of the agreement, Organogenesis has been granted an exclusive license in the United States to the patent. In exchange for this, we have recognised £2.5 million from royalties, and will receive a minimum royalty of $1 million for each of the financial years ending 31 December 2018 and 2019. This is part of an ongoing royalty stream that will be payable to AMS on the net sales of the Licensed Product for the life of the patent. The patent is due to expire in October 2026.

The Group’s ability to out-license our patented technologies is an endorsement of the quality of our innovation and we are pleased to be working with a partner that is using the AMS patent to access the US market so effectively.

In the latter part of 2017, we noted that a number of our partners have reported a slowdown in the European advanced wound care market. We continue, however, to believe in our medium and long term prospects in this market.

In R&D, we continue to work on extending our advanced woundcare portfolio with focus on our antimicrobial range, improving the absorbancy of dressings and combining a number of materials to enhance product performance. We are developing a range of surgical dressings for which we are expecting to obtain approval in mid 2018 for the US market. We are also expecting to receive approval to market an antimicrobial high performance dressing in the US before the end of 2018.

Operations and regulatory

With the business continuing to show strong organic growth, we have made investments in our converting capability at our Etten Leur site, as well as improving our packaging capability in Nuremberg which is expected to complete in 2018.

As a result of the continued success of our medical adhesives business, we have also made plans to extend the capacity of the Plymouth facility. This will be a significant project for us and we estimate that the spend will be around £4 million and will take around three years. It will provide us with the capability to increase production of our existing product range as well as allowing us the capacity to manufacture new products such as the open hernia device.

Following the FDA inspection of our Winsford site in June 2016, our Plymouth facility was inspected by the FDA in April 2017. We were very pleased with the outcome of this audit with no non-conformances raised.

The new European Medical Devices Regulation (MDR) entered into force on 25 May 2017, marking the start of the transition period for manufacturers selling medical devices into Europe. The MDR, which replaces the Medical Devices Directive (MDD) has a transition period of three years and manufacturers have this transition period to update their technical documentation and processes to meet the new requirements. The MDR brings more scrutiny on product safety and performance and stricter requirements on clinical evaluation and post-market clinical follow up. Our notified body, BSI, is already adopting the new standard and we are working with our OEM partners to ensure that we meet the new requirements. We anticipate that, although there will be some additional costs associated with meeting the new requirements, overall, the tighter regulatory standards should prove beneficial for the Group in the longer term.

Our implementation of Oracle ERP in Germany was successfully completed at the end of September. This will bring benefits from better availability of information and enhanced controls. This completes our major ERP conversions across the Group, although ongoing improvements to systems will continue.

Acquisitions strategy

The Group is actively looking for businesses that meet its acquisition strategy of:

· licensing or acquiring technology that allows us to leverage our global OEM customer base or branded routes to market;

· licensing or acquiring additional brands within woundcare, wound closure or surgical setting that complement our existing range; and

· geographic expansion through acquiring surgically focused companies with strong direct sales capability and ownership of complementary products.

We have an internal team working with advisors to identify, appraise and progress acquisition opportunities.

The UK and the European Union

To date, there has been no day-to-day operational impact of the referendum vote to leave the European Union, other than changes to currency exchange rates. In preparation, the Group has submitted its application to obtain Authorised Economic Operator status for its UK trading entities and expects to achieve this designation by the end of the year. With its footprint in mainland Europe, the Group is well positioned to deal with the uncertain outcome of the UK negotiations with the EU, moving activities into jurisdictions that are beneficial to the business.

Our culture

As a Group that is highly dependent on the innovation and creativity of our employees for our future growth and success, it is important that we have a culture and set of values that is understood and embraced across the business. We have adopted the business motto of ‘The AMS Care, Fair, Dare approach’ to summarise our culture, underpin our values, and to deliver results, building a sustainable future for our business. Under this motto, we have defined the principles and expectations of how we will operate together to deliver success. We have run workshops across all our sites and have responded to feedback about how we can improve the Care, Fair, Dare ethos in the workplace. We are now enbodying these attitudes into our objectives and appraisal process.

We recognise the importance of our people to the Group and that it is only by their effective engagement that we will continue to be successful. We value their commitment and determination to achieve and deliver good results. Our working environment encourages openness, teamwork, an understanding of others’ needs and the ability ‘to make a difference’. We continue to develop the talent at AMS by training and by providing a place to work where our employees feel valued, incentivised and fulfilled.

Summary and outlook

2017 has seen another good performance by the Group. Trading in the current financial year has begun well and is in line with the Board’s expectations. With our increasing portfolio of products, high quality business partners, the opportunities we see from our R&D pipeline and our strong financial position, the Board remains optimistic about our long-term prospects and the potential for further growth.

Financial Review

Summary

The Group has delivered another year of strong financial performance, with revenue increasing by 16%, or 12% at constant currency, to £96.9 million (2016: £83.2 million) and with improving operating margins.

The Group has elected to adopt IFRS 15 (Revenue from Contracts with Customers) in 2017, which has no impact on profit or cash flow but results in fee income of £0.7 million (2016: £0.6 million) being recorded as Revenue rather than as Other Income.

During the year, the Group streamlined into two Business Units, to enhance commercial focus and improve marketing efficiencies.

All prior year values have been restated to refect IFRS 15 adoption and the Business Unit restructure.

The Group uses alternative performance measures such as adjusted operating margin, adjusted profit before tax, net operating cash flow pre-exceptional items, and revenue growth at constant currency, to allow the users of the accounts to gain a clearer understanding of performance, allowing the impacts of amortisation, exceptional items and exchange rate volatility to be separately identified. The Group did not incur any exceptional costs in the year (2016: £0.4 million) and amortisation of acquired intangible assets was £0.1 million in the period (2016: £0.2 million).

To aid comparison, the Group’s adjusted income statement is summarised in Table 1 below.

Table 1	Year ended 31 December 2017			Year ended 31 December 2016 (restated)¹⁰
Adjusted Income Statement	£’000			£’000		Change
Revenue	96,908				83,242	16%
Gross profit		58,404			48,048	22%
Distribution costs			(1,130)		(1,047)
Adjusted administration costs⁸			(32,050)		(27,293)
Other income			150		–
Adjusted operating profit			25,374		19,708	29%
Net finance income/(costs)			37		(3)
Adjusted profit before tax			25,411		19,705	29%
Amortisation of acquired intangibles			(134)		(242)
Exceptional Items			–		(361)
Profit before tax			25,277		19,102	32%
Tax			(5,143)		(3,410)
Profit for the period			20,134		15,692	28%
Adjusted earnings per share – basic⁹			9.58p		7.77p	23%
Earnings per share – basic⁹			9.52p		7.65p	24%
Adjusted earnings per share – diluted⁹			9.46p		7.66p	23%
Earnings per share – diluted⁹			9.39p		7.38p	27%

Note 8 Adjusted administration costs exclude amortisation of acquired intangible assets and exceptional items

Note 9 See Note 7 Earnings per share for details of calculation

Note 10 Restated to reflect £0.6 million of fee income as revenue under newly adopted IFRS15

Currency movements impacted revenues favourably by approximately £3.4 million during the year.

Adjusted operating profit before exceptional items increased by 29% to £25.4 million (2016: £19.7 million) and adjusted operating margin increased by 250 bps to 26.2% (2016: 23.7%). Administration costs excluding exceptional items increased by 17% to £32.0m (2016: £27.3 million) due to currency movements and further investment in selling and marketing, particularly to support the Branded Business Unit. The Group incurred £3.0 million of gross R&D spend in the year (2016: £2.6 million), respresenting 3.1% of sales (2016: 3.1%).

Profit before tax for the year was 32% higher at £25.3 million (2016: £19.1 million).

The Group’s effective tax rate increased to 20.4% (2016: 17.9%) mainly due to being required to move to the less favourable, large company RDEC scheme in 2017. This effective tax rate reflects the blended tax rates in the countries in which we operate and, for the UK, includes the tax relief associated with the patent box scheme and the utilisation of residual previously unrecognised UK tax losses.

A reconciliation between the weighted average Group tax rate and the Group’s effective rate is summarised in Table 2 below.

Table 2

Taxation	%
Weighted average Group tax rate	21.91
Patent box relief	(1.23)
Net impact of deferred tax on capitalised development costs and R&D relief	0.67
Net impact of expenses not deductible, utilisation of historical losses, prior year adjustments, depreciation and share based payments	(1.00)
Effective taxation rate	20.35

Earnings (excluding amortisation of acquired intangible assets and before exceptional items) increased by 24% to £20.3 million (2016: £16.3 million), resulting in a 23% increase in adjusted basic earnings per share to 9.58p (2016: 7.77p) and a 23% increase in adjusted diluted earnings per share to 9.46p (2016: 7.66p).

Profit after tax increased by 28% to £20.1 million (2016: £15.7 million), resulting in a 24% increase in basic earnings per share to 9.52p (2016: 7.65p) and a 27% increase in diluted earnings per share to 9.39p (2016: 7.38p).

The Board is proposing a final dividend of 0.75p per share, to be paid on 15 June 2018 to shareholders on the register at the close of business on 25 May 2018. This follows the interim dividend of 0.35p per share on 27 October 2017 and would, if approved, make a total dividend for the year of 1.10p per share (2016: 0.92p), a 20% increase on 2016.

The operational performance of the Business Units is shown in Table 3 below. The adjusted profit from operations and the adjusted margin are shown after excluding amortisation of acquired intangibles.

Table 3

Operating result by business segment
Year ended 31 December 2017	Branded	OEM
	£’000	£’000
Revenue	55,244	41,664
Profit from operations	14,336	11,354
Amortisation of acquired intangibles	125	9
Adjusted profit from operations	14,461	11,363
Adjusted operating margin	26.2%	27.3%
Year ended 31 December 2016 (restated)
Revenue	45,427	37,815
Profit from operations	11,313	8,677
Amortisation of acquired intangibles	225	17
Adjusted profit from operations	11,538	8,694
Adjusted operating margin	25.4%	23.0%

Branded

The adjusted operating margin of the Branded Business Unit increased to 26.2% (2016: 25.4%), supported by sales growth and sales mix. Operating costs increased, especially sales, marketing, R&D and regulatory costs, to continue to support ongoing growth.

OEM

The adjusted operating margin of the OEM Business Unit increased to 27.3% (2016: 23.0%), mainly due to the out-licensing agreement of wound dressings containing Collagen and PHMB, which generated a £2.5 million royalty income in the year.

Geographic breakdown of revenues

The geographic breakdown of Group revenues in 2017 is shown in Table 4 below:

Table 4

Geographic Breakdown of Group Revenues
£’000	2017	% of total	2016	% of total
Europe excluding UK and Germany	22.9	23.6%	21.4	25.8%
Germany	19.1	19.7%	18.4	22.1%
UK	17.3	17.9%	17.9	21.5%
USA	35.3	36.4%	23.5	28.2%
Rest of World	2.3	2.4%	2.0	2.4%

Approximately 90% of our US sales are invoiced in US Dollars and approximately 60% of our sales to mainland Europe are invoiced in Euros. The Group hedges significant currency transaction exposure by using forward contracts and options and aims to have at least 70% of its estimated transactional exposure for the next twelve months hedged. The Group estimates that a 10% movement in the £:US$ or £:Euro exchange rate will impact Sterling revenues by approximately 3.3% and 2.6% respectively and in the absence of any hedging this would have an impact on profit of 2.7% and 0.3%.

Cash Flow

Table 5 below summarises the Group’s cash flows.

Table 5

Group Cash Flows
	2017	2016
Year ended 31 December	£’000	£’000
Adjusted operating profit (Table 1)	25,374	19,708
Non-cash items	4,127	4,023
Adjusted EBITDA¹¹	29,501	23,731
Working capital movement	(8,049)	(1,480)
Operating cash flow before exceptional items	21,452	22,251
Exceptional items	–	(361)
Operating cash flow after exceptional items	21,452	21,890
Capital expenditure and capitalised R&D	(4,455)	(2,536)
Net Interest	37	(3)
Tax	(4,486)	(2,065)
Free cash flow	12,548	17,286
Dividends paid	(2,049)	(1,783)
Proceeds from share issues	809	868
Exchange gains	21	553
Net increase in cash and cash equivalents	11,329	16,924

Note 11: Adjusted EBITDA is earnings before interest, tax, depreciation, intangible asset amortisation, share based payments and exceptional items

Adjusted EBITDA increased by 24% to £29.5 million (2016: £23.7 million).

Working capital increased during the year, mainly due to the higher value of trade receivables, which was caused by sales phasing and royalties, with debtor days unchanged at 41 days (2016: 41 days). Trade payable days reduced to 27 days (2016: 33 days) and months of supply of inventory held across the Group reduced to 4.2 months (2016: 4.4 months of supply).

The Group generated net cash from operating activities of £21.5 million (2016: £21.9 million).

In the year, we invested £4.5 million in capital equipment, software and capitalised R&D (2016: £2.5 million), including investment in new packaging machines, ERP software and internally developed products.

Cash outflow relating to taxation increased sharply to £4.5 million (2016: £2.1 million) with historical losses and related deferred tax balances now fully used up.

The Group generated a free cash flow of £12.5 million in the year (2016: £17.3 million). The conversion of adjusted operating profit into free cash flow was 49% (2016: 88%). This was mainly due to investment in the Business Units, working capital outflow, increased taxation and dividends.

The Group paid its final dividend for the year ended 31 December 2016 of £1.3 million on 16 June 2017 (2016: for the year ending 2015, £1.2 million), and its interim dividend for the six months ended 30 June 2017 of £0.7 million (2016: £0.6 million) on 27 October 2017.

The Group has a £30 million, multi-currency credit facility with a £20 million accordion option, provided jointly by HSBC and The Royal Bank of Scotland in place until December 2019. It is unsecured and has not been drawn down. This facility carries an annual interest rate of LIBOR or EURIBOR plus a margin that varies between 0.65% and 1.75% depending on the Group’s net debt to EBITDA ratio.

At the end of the period, the Group had net cash of £62.5 million (2016: £51.1 million). The movement in net cash from the start of the year to net cash at the end of the year is reconciled in Table 6 below:

Table 6

Movement in net cash	£’000
Net cash as at 1 January 2017	51,125
Exchange rate impacts	21
Free cash flow	12,548
Dividends paid	(2,049)
Proceeds from share issues	809
Net cash as at 31 December 2017	62,454

The Group’s going concern position is fully described in note 2.

CONDENSED CONSOLIDATED INCOME STATEMENT
				Restated
Year ended 31 December		(Unaudited)			(Audited)
		2017	Before exceptional Items	Exceptional Items	2016
	Note	£’000	£’000	£’000	£’000
Revenue from continuing operations	4	96,908	83,242	–	83,242
Cost of sales		(38,504)	(35,194)	–	(35,194)
Gross profit		58,404	48,048	–	48,048
Distribution costs		(1,130)	(1,047)	–	(1,047)
Administration costs		(32,184)	(27,535)	(361)	(27,896)
Other income		150	–	–	–
Profit from operations	5	25,240	19,466	(361)	19,105
Finance income		147	108	–	108
Finance costs		(110)	(111)	–	(111)
Profit before taxation		25,277	19,463	(361)	19,102
Income tax	6	(5,143)	(3,410)	–	(3,410)
Profit for the year attributable to equity holders of the parent		20,134	16,053	(361)	15,692
Earnings per share
Basic	7	9.52p	7.65p	(0.17p)	7.48p
Diluted	7	9.39p	7.55p	(0.17p)	7.38p
Adjusted¹² diluted	7	9.46p	7.66p	(0.17p)	7.49p

^{Note 12: Adjusted for exceptional items and for amortisation of acquired intangible assets}

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
	(Unaudited)	(Audited)
	2017	2016
	£’000	£’000
Profit for the year	20,134	15,692
Exchange differences on translation of foreign operations	2,187	8,851
Gain/(loss) arising on cash flow hedges	4,192	(3,009)
Total other comprehensive income for the period	6,379	5,842
Total comprehensive income for the period attributable to equity holders of the parent	26,513	21,534

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	(Unaudited)	(Audited)
	31 Dec-17	31-Dec-16
	£’000	£’000
Assets
Non-current assets
Acquired intellectual property rights	9,675	9,468
Software intangibles	3,078	2,500
Development costs	2,135	1,645
Goodwill	41,801	40,337
Property, plant and equipment	17,019	16,177
Deferred tax assets	199	–
Trade and other receivables	286	10
	74,193	70,137
Current assets
Inventories	11,073	11,440
Trade and other receivables	20,950	11,872
Current tax assets	48	432
Cash and cash equivalents	62,454	51,125
	94,525	74,869
Total assets	168,718	145,006
Liabilities
Current liabilities
Trade and other payables	10,547	12,901
Current tax liabilities	2,290	2,049
Other taxes payable	15	85
	12,852	15,035
Non-current liabilities
Trade and other payables	310	1,291
Deferred tax liabilities	3,120	3,152
	3,430	4,443
Total liabilities	16,282	19,478
Net assets	152,436	125,528
Equity
Share capital	10,632	10,524
Share premium	34,778	34,005
Share-based payments reserve	4,676	3,469
Investment in own shares	(152)	(152)
Share-based payments deferred tax reserve	815	459
Other reserve	1,531	1,531
Hedging reserve	658	(3,534)
Translation reserve	2,823	636
Retained earnings	96,675	78,590
Equity attributable to equity holders of the parent	152,436	125,528

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 2016 (audited)	10,451	33,196	2,253	(152)	437	1,531	(525)	(8,215)	64,681	103,657
Consolidated profit for the year to 31 December 2016	–	–	–	–	–	–	–	–	15,692	15,692
Other comprehensive income	–	–	–	–	–	–	(3,009)	8,851	–	5,842
Total comprehensive income	–	–	–	–	–	–	(3,009)	8,851	15,692	21,534
Share-based payments	–	–	1,230	–	22	–	–	–	–	1,252
Share options exercised	73	809	(14)	–	–	–	–	–	–	868
Shares purchased by EBT	–	–	–	(449)	–	–	–	–	–	(449)
Shares sold by EBT	–	–	–	449	–	–	–	–	–	449
Dividends paid	–	–	–	–	–	–	–	–	(1,783)	(1,783)
At 31 December 2016 (audited)	10,524	34,005	3,469	(152)	459	1,531	(3,534)	636	78,590	125,528
Consolidated profit for the year to 31 December 2017	–	–	–	–	–	–	–	–	20,134	20,134
Other comprehensive income	–	–	–	–	–	–	4,192	2,187	–	6,379
Total comprehensive income	–	–	–	–	–	–	4,192	2,187	20,134	26,513
Share-based payments	–	–	1,279	–	356	–	–	–	–	1,635
Share options exercised	108	773	(72)	–	–	–	–	–	–	809
Shares purchased by EBT	–	–	–	(484)	–	–	–	–	–	(484)
Shares sold by EBT	–	–	–	484	–	–	–	–	–	484
Dividends paid	–	–	–	–	–	–	–	–	(2,049)	(2,049)
At 31 December 2017 (unaudited)	10,632	34,778	4,676	(152)	815	1,531	658	2,823	96,675	152,436

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

	(Unaudited)	(Audited)

Year ended 31 December	2017	2016
	£’000	£’000
Cash flows from operating activities
Profit from operations	25,240	19,105
Adjustments for:
Depreciation	2,053	1,898
Amortisation – intellectual property rights	134	242
– development costs	380	441
– software intangibles	415	329
Impairment of development costs	–	125
Decrease/(increase) in inventories	505	(2,005)
Increase in trade and other receivables	(8,627)	(674)
Increase in trade and other payables	73	1,199
Share-based payments expense	1,279	1,230
Taxation	(4,486)	(2,065)
Net cash inflow from operating activities	16,966	19,825
Cash flows from investing activities
Purchase of software	(958)	(795)
Capitalised research and development	(860)	(259)
Purchases of property, plant and equipment	(2,901)	(1,523)
Disposal of property, plant and equipment	264	41
Interest received	147	109
Net cash used in investing activities	(4,308)	(2,427)
Cash flows from financing activities
Dividends paid	(2,049)	(1,783)
Finance lease	–	(1)
Issue of equity shares	809	868
Shares purchased by EBT	(484)	(449)
Shares sold by EBT	484	449
Interest paid	(110)	(111)
Net cash used in financing activities	(1,350)	(1,027)
Net increase in cash and cash equivalents	11,308	16,371
Cash and cash equivalents at the beginning of the year	51,125	34,201
Effect of foreign exchange rate changes	21	553
Cash and cash equivalents at the end of the year	62,454	51,125

Notes Forming Part of the Condensed Consolidated Financial Statements

1. Reporting entity

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 2017 comprise the Company and its subsidiaries (together referred to as the “Group”).

2. Basis of preparation

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 2018.

The financial information set out in the announcement does not constitute the Group’s statutory accounts for the years ended 31 December 2017 or 31 December 2016. The financial information for the year ended 31 December 2016 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. 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 2017 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 2016.

With regards to the Group’s financial position, it had cash and cash equivalents at the year end of £62.5 million. The Group also has in place a five-year, unsecured, multi-currency, credit facility for £30 million which is due for renewal in December 2019 and which was undrawn in 2017.

• Amendments to IAS 7 – Disclosure Initiative

• Amendments to IAS 12, Recognition of Deferred Tax Assets for Unrealised Losses

• Annual Improvements to IFRSs: 2014-16 Cycle specifically amendments to IFRS 12 IFRS 12, Disclosure of Interests in Other Entities

IFRS 15 is effective for annual periods beginning 1 January 2018 and will replace IAS 11 Construction Contracts and IAS 18 Revenue. The standard establishes a principles based approach for revenue recognition and is based on the concept of recognising revenue for obligations only when they are satisfied and the control of goods or services is transferred. It applies to all contracts with customers, except those in the scope of other standards. It replaces the separate models for goods, services and construction contracts under the current accounting standards. The Group has decided to adopt the standard early with effect for the year ended 31 December 2017. As a result of the early adoption, Other Income of £709,000 excluding the royalty income from Organogenesis has been re-classified as Revenue (2016: £621,000). The impact on profit before tax is £nil (2016: £nil).

New accounting standards not yet applied

• IFRS 9, Financial Instruments – effective for accounting periods beginning on or after 1 January 2018.

• IFRIC 22, Foreign Currency Transactions and Advance Consideration – effective for accounting periods beginning on or after 1 January 2018.

• Amendments to IFRS 2, Classification and Measurement of Share-based Payment Transactions – effective for accounting periods beginning on or after 1 January 2018.

• Annual Improvements to IFRSs: 2014-16 Cycle, IFRS 1 and IAS 28 Amendments – effective for accounting periods beginning on or after 1 January 2018.

• IFRS 16, Leases – effective for accounting periods beginning on or after 1 January 2019.

• IFRIC 23, Uncertainty over Income Tax Treatments – effective for accounting periods beginning on or after 1 January 2019.

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, except as follows:

The Group holds a number of operating leases, which currently, under IAS 17, are expensed on a straight line basis over the lease term. The Group has made the following estimates of the approximate impacts of adopting the new standard, which are sensitive to all changes up to the application date. If the standard had been adopted in the current year, a depreciation charge of around £1.0 million in relation to the right-of-use asset and a finance expense charge of around £0.6 million would have been recognised in place of the operating lease charge of £1.3 million. In addition, a right-of-use asset and largely offsetting lease liability of approximately £11.0 million would be recognised in the statement of financial position.

3. Accounting policies

The same accounting policies, presentations and methods of computation are followed in the condensed set of financial statements as applied in the Group’s latest annual audited financial incorporating new standards effective for the year as noted above. The annual financial statements of Advanced Medical Solutions Group plc are prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

4. Segment information

Business segments

Segment information about these businesses is presented below.

Year ended	Branded		OEM		Consolidated
31 December 2017
(unaudited)
	£’000		£’000		£’000
Revenue
External sales	55,244		41,664		96,908
Result
Segment result	14,336		11,354		25,690
Unallocated expenses					(450)
Profit from operations					25,240
Finance income					147
Finance costs					(110)
Profit before tax					25,277
Tax					(5,143)
Profit for the year					20,134

At 31 December 2017	Branded		OEM		Consolidated
(unaudited)
Other Information	£’000		£’000		£’000
Capital additions:
Software intangibles	715		243		958
Development	425		435		860
Property, plant and equipment	1,563		1,338		2,901
Depreciation and amortisation	(1,192)		(1,790)		(2,982)
Balance sheet
Assets
Segment assets	112,057		56,580		168,637
Unallocated assets					81
Consolidated total assets					168,718
Liabilities
Segment liabilities	10,406		5,876		16,282
Consolidated total liabilities					16,282

Year ended		Branded		OEM		Consolidated
31 December 2016 (restated)
		£’000		£’000		£’000
Revenue
External sales		45,427		37,815		83,242
Result
Segment result		11,313		8,677		19,990
Unallocated expenses						(885)
Profit from operations						19,105
Finance income						108
Finance costs						(111)
Profit before tax						19,102
Tax						(3,410)
Profit for the year						15,692

At 31 December 2016 (restated)		Branded		OEM		Consolidated
Other Information		£’000		£’000		£’000
Capital additions:
Software intangibles		596		199		795
Development		157		102		259
Property, plant and equipment		1,105		418		1,523
Depreciation and amortisation		(1,310)		(1,600)		(2,910)
Balance sheet
Assets
Segment assets		97,498		47,388		144,886
Unallocated assets						120
Consolidated total assets						145,006
Liabilities
Segment liabilities		12,020		7,458		19,478
Consolidated total liabilities						19,478

Geographic segments

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:

Year ended 31 December	2017	2016
	£’000	£’000
United Kingdom	17,266	17,957
Germany	19,062	18,466
Europe excluding United Kingdom and Germany	22,939	21,360
United States of America	35,330	23,505
Rest of World	2,311	1,954
	96,908	83,242
The following table provides an analysis of the Group’s total assets by geographical location.
As at 31 December	2017	2016
	£’000	£’000
United Kingdom	98,305	80,580
Germany	65,212	59,950
Europe excluding United Kingdom and Germany	4,743	3,962
United States of America	458	514
	168,718	145,006

5. Profit from operations

Year ended 31 December	2017	2016
	£’000	£’000
Profit from operations is arrived at after charging:
Depreciation of property, plant and equipment	2,053	1,898
Amortisation of:
– acquired intellectual property rights	134	242
– software intangibles	415	329
– development costs	380	441
Operating lease rentals – plant and machinery	248	253
– land and buildings	1,005	917
Research and development costs expensed to the income statement	2,052	2,276
Cost of inventories recognised as expense	36,516	33,498
Write down of inventories expensed	1,448	634
Staff costs	29,920	26,162
Net foreign exchange loss	2,427	1,271

6. Taxation

Year ended 31 December	2017	2016
	£’000	£’000
a) Analysis of charge for the year
Current tax:
Tax on ordinary activities – current year	5,397	3,180
Tax on ordinary activities – prior year	(293)	(358)
	5,104	2,822
Deferred tax:
Tax on ordinary activities – current year	39	599
Effect of reduction in UK corporation tax rates	–	(11)
	39	588
Tax charge for the year	5,143	3,410
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.
Year ended 31 December	2017	2016
	£’000	£’000
b) Factors affecting tax charge for the year
Profit before taxation	25,277	19,102
Profit multiplied by the weighted average Group tax rate of 21.91% (2016: 22.11%)	5,538	4,224
Effects of:
Net expenses not deductible for tax purposes and other timing differences	1	19
Patent Box Relief	(310)	(242)
Utilisation and recognition of trading losses	–	(203)

Net impact of deferred tax on capitalised development costs and R&D relief	170	(183)
Share-based payments	37	(47)
Adjustments in respect of prior year – current tax	(293)	(359)
Adjustments in respect of prior year and rate changes – deferred tax	–	201
Taxation	5,143	3,410

7. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

Year ended 31 December	2017	2016
	£’000	£’000
Earnings
Profit for the year attributable to equity holders of the parent
Pre exceptional items	20,134	16,053
Post exceptional items	20,134	15,692
Number of shares	‘000	‘000
Weighted average number of ordinary shares for the purposes of basic earnings per share	211,563	209,815
Effect of dilutive potential ordinary shares: share options, deferred share bonus, LTIPs	2,760	2,778
Weighted average number of ordinary shares for the purposes of diluted earnings per share	214,323	212,593


	2017	2016
	£’000	£’000
Profit for the year attributable to equity holders of the parent	20,134	16,053
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the parent
Amortisation of acquired intangible assets	134	242
Adjusted profit for the year attributable to equity holders of the parent	20,268	16,295


	2017	2016
	pence	pence
Basic – pre exceptional	9.52p	7.65p
Basic – post exceptional	9.52p	7.48p
Diluted – pre exceptional	9.39p	7.55p
Diluted – post exceptional	9.39p	7.38p
Adjusted basic (before exceptional items)	9.58p	7.76p
Adjusted diluted (before exceptional items)	9.46p	7.66p

This information is provided by RNS

The company news service from the London Stock Exchange

END

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