Final Results

Advanced Medical Solutions Grp PLC 28 March 2002 For immediate release: Thursday 28 March 2002 Advanced Medical Solutions Group plc Preliminary Results for the Year Ended 31 December 2001 Winsford, Cheshire: Advanced Medical Solutions Group plc ('AMS'), the medical device company, announces its preliminary results for the year ended 31 December 2001. Highlights: • Losses reduced by 45% to £1.5 million (2000: £2.7 million) • Gross margins improved to 18% from 6% • Cash outflow reduced by 55% to £0.8 million (2000: £1.8 million) • £6.0 million net funds at period end • Existing partnerships with blue-chip players in woundcare arena strengthened • Resounding rejection, at recent EGM, of proposal to invite offers for the share capital of the Company • $3.5 million strategic acquisition of woundcare company, MedLogic Global Holdings Limited ('MedLogic') (see separate announcement) • £4 million equity fundraising (see separate announcement) • Transfer to Alternative Investment Market from Official List of London Stock Exchange (see separate announcement) Commenting on today's results, Dr. Geoffrey Vernon, Non-Executive Chairman, said: 'AMS' results show the significant progress of the Group towards profitability, within current cash, in-line with market expectations. Our stated strategy of building stronger relationships with our blue-chip partners has already resulted in significantly improved margins and a continued reduction in losses. 'In addition to our results, we have also announced today the strategic acquisition of MedLogic, a specialist in tissue adhesives and sealants; a fundraising and the transfer of our shares from the Official List of the London Stock Exchange to the Alternative Investment Market. The combination of these actions, and predominantly the acquisition which we see as a strong strategic fit with the Group, will allow us to progress at a greater pace towards building a substantial international woundcare business.' - ENDS - For further information, please contact: Advanced Medical Solutions On 28.03.02: +44 (0) 20 7466 5000 Don Evans, CEO Thereafter: +44 (0) 1606 863 500 Mary Tavener, Finance Director Robert W. Baird Shaun Dobson Tel:+44 (0)20 7667 8416 Buchanan Communications Tel: +44 (0) 20 7466 5000 Nicola How / Fergus Mellon Chairman's Statement: Overview I am pleased to report that our results for 2001 show the continued progress of the Group toward profitability within current cash. The Shareholders' decision at the recent extraordinary general meeting not to invite offers for the share capital of the Company, I believe confirms the support of the majority of our shareholders of the Company's strategy to focus on taking the core woundcare business to break-even and thus provide a solid financial platform from which to grow a leading medical device company. As I outlined in my letter accompanying the extraordinary general meeting circular, Management has demonstrated an ability to control costs and manage cash. The Board feels that it is now appropriate and opportune to accelerate growth through selective corporate activity. Following a review of potential acquisition candidates, the Board feels that the proposed acquisition of MedLogic (as announced today) will increase the market available to the Group and assist in positioning the Group within the 'higher end' tissue repair sector of the woundcare market. MedLogic develops and manufactures medical grade adhesives for the wound closure market. Financial Performance AMS has made significant progress in reducing its losses and is on track to reach profitability and a cash generative position in line with current market expectations. The continuing focus of the Management team during 2001 on reducing losses and cash burn has resulted in a 45% reduction in net loss to £1.5 million (2000: £2.7 million) on turnover of £7.4 million, while the operating cash outflow position improved by 55% to £0.8 million. This, together with continued tight control of working capital, leaves the Group with sufficient net funds, £6.0 million, to get the existing business to sustainable profitability and to implement the strategy to acquire complementary technologies that will drive growth and increase shareholder value. Gross margins improved from 6% to 18% despite a reduction in turnover as low margin, consumer sales were shed as part of a re-focusing of the Group on higher value, professional woundcare products. Partnerships Existing partnerships with blue chip firms such as Smith & Nephew, 3M, Coloplast and Molnlycke were further strengthened during 2001, which contributed to a 24% increase in sales for Professional woundcare. Our strategy of focusing on fewer partners continues to prove successful, allowing a streamlining of the Group at all levels. As a result of a major review of the Consumer business, a significant amount of unprofitable business was shed to ensure that higher margins could be achieved going forward. Although this had an impact on revenues, it did not reduce the bottom line. The relationship with Novartis Consumer Health Europe was broadened with the launch of our new proprietary scar reduction product into the Spanish market under the Novartis Trofolastin(R) brand. This is an important step in moving our Consumer range upmarket from the price sensitive retail end to the higher value pharmacy market. Johnson & Johnson Consumer Product Company's Band-Aid(R) product employing our alginate material is also now on sale in pharmacies across the United States. Technology The Group continues to progress its R&D activities to move from passive wound dressings to higher value active delivery and tissue repair and engineering. At the simplest level our blister dressings routinely now contain homeopathic / antiseptic agents such as tea tree oil. Our collaboration with Noble Fiber Technologies allows us to incorporate silver fibres into our alginate material, thus producing dressings that provide silver (a broad spectrum antimicrobial) at the wound site whilst maintaining the fluid handling and haemostatic features of alginate. Products arising out of this technology collaboration are being reviewed with potential partners for development and clinical and regulatory approval for a launch in early 2003. The granting of two new patents, as announced in September 2001, has strengthened our hydrogel technology platform. Our new anti-bleed gel, which is based on one of these patents, forms the basis of a development agreement with a major pharmaceutical partner. This involves the development of a product under a leading antibiotic brand. Our tissue engineering programme, based around the use of biopolymer fibres as scaffolds for cell growth, was also progressed with the support of external grant funding. Prospects The operational performance during the last two years has provided a firmer financial footing for the future and this has allowed us to look at ways of accelerating growth. In addition, a number of external opportunities to increase the Group's product range and broaden its technology base are currently being investigated. The Board believes that the proposed acquisition of MedLogic is a strong strategic fit with the Company's current business and that it will not delay break-even in line with current market expectations. Dr G N Vernon 27 March 2002 Chairman Consolidated Profit and Loss Account For the year ended 31 December 2001 Year ended Year ended 31 December 31 December 2001 2000 £'000 £'000 Turnover 7,373 7,815 Cost of sales (6,075) (7,373) Gross profit 1,298 442 Distribution costs (136) (262) Administration costs (3,322) (3,701) Other operating income 222 402 Operating loss (1,938) (3,119) Interest receivable and similar income 369 470 Interest payable and similar charges (30) (37) Loss on ordinary activities before taxation (1,599) (2,686) Taxation 129 - Retained loss for the year (1,470) (2,686) Basic loss per share: restated including effect of rights issue (1.6)p (2.9)p The above results relate to continuing operations. There is no difference between reported and historical profits and losses. Statement of total recognised gains and losses Year ended Year ended 31 December 31 December 2001 2000 £'000 £'000 Loss for the financial year (1,470) (2,686) Currency translation differences on foreign currency net investments 10 24 Total losses recognised since last annual report (1,460) (2,662) Reconciliation of movements in shareholders' funds At 31 December 2001 Group Company Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 2001 2000 2001 2000 £'000 £'000 £'000 £'000 Opening shareholders' funds 13,454 9,590 17,068 13,351 Loss for the financial year (1,470) (2,686) (4,928) (2,809) Currency translation differences on foreign currency net investments 10 24 - - New share capital subscribed - 3,184 - 3,184 Premium on issue of shares during the year - 3,822 - 3,822 Costs of share issue - (480) - (480) Closing shareholders' funds 11,994 13,454 12,140 17,068 The loss for the Company includes an exceptional write-down in the value of investments of £5,144k (2000:£3,164k). Balance Sheets At 31 December 2001 Group Company 2001 2000 2001 2000 £'000 £'000 £'000 £'000 Fixed assets Tangible assets 4,809 5,403 - - Investments - - 5,941 10,180 4,809 5,403 5,941 10,180 Current assets Stocks 887 1,021 - - Debtors - due within one year 1,844 2,385 42 68 - due after more than one year 200 200 200 200 Cash at bank and in hand 6,238 7,013 5,963 6,642 9,169 10,619 6,205 6,910 Creditors: amounts falling due within one year (1,778) (2,228) (6) (22) Net current assets 7,391 8,391 6,199 6,888 Total assets less current liabilities 12,200 13,794 12,140 17,068 Creditors: amounts falling due after more than one year (206) (340) - - 11,994 13,454 12,140 17,068 Capital and reserves Called up share capital 9,355 9,355 9,355 9,355 Share premium account 36,910 36,910 36,910 36,910 Other reserve 1,531 1,531 - - Profit and loss account (35,802) (34,342) (34,125) (29,197) Equity shareholders' funds 11,994 13,454 12,140 17,068 These financial statements were approved by the Board on 27 March 2002 Dr. D.W. Evans Chief Executive Officer Consolidated Cash Flow Statement For the year ended 31 December 2001 Year ended Year ended 31 December 31 December 2001 2000 £'000 £'000 Net cash outflow from operating activities (764) (1,705) Returns on investments and servicing of finance Interest received 395 452 Interest element of finance lease rental and hire purchase payments (30) (37) Net cash inflow from returns on investments and 365 415 servicing of finance Capital expenditure and financial investment Purchase of tangible fixed assets (353) (660) Sale of tangible fixed assets 204 6 Net cash outflow before use of liquid resources and (548) (1,944) financing Management of liquid resources Sales of term deposits 805 - Purchase of term deposits - (4,362) Financing Share issues by parent company - 7,006 Share issue expenses - (480) Net movement of capital element of finance lease rental and hire purchase payments (237) (316) Net cash (outflow)/inflow from financing (237) 6,210 Increase/(decrease) in cash 20 (96) Notes to the Accounts: 1. No dividend has been proposed. 2. The basic loss per share has been calculated on a weighted average number of shares in issue during the year, namely 93,553,394 (2000: 93,181,925 after adjusting for the effect of the rights issue) and loss of £1,470k (2000: £2,686k). The comparative loss per share as disclosed in the previous financial statement has been adjusted for the efforts of the right issue. 3. This statement was approved by the Directors and agreed with the Group's auditors on 27 March 2002. A copy can be obtained from the Secretary at the Company's Head Office, Road Three, Winsford Industrial Estate, Winsford, Cheshire CW7 3PD. 4. The figures and financial information for the year 2001 do not constitute the statutory financial statements for that year. 5. The figures and financial information for the year 2000 do not constitute the statutory financial statements for that year. Those financial statements have been delivered to the Registrar and included in the auditors report which was unqualified. The Annual General Meeting will be held at the Blue Cap, 520 Chester Road, Sandiway, Northwich, Cheshire, CW8 2DN at 11:00 am on 31 May 2002. This information is provided by RNS The company news service from the London Stock Exchange

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