Unaudited Preliminary Results

RNS Number : 4848S
Advanced Medical Solutions Grp PLC
17 March 2021
 


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 profit 4

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

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

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 2019 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:

· 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.

 

While the current economic environment is uncertain, the Group operates in markets whose demographics are favourable, underpinned by an increasing need for products to treat chronic and acute wounds. Consequently, market growth is predicted. The Group has a number of contracts with customers across different geographic regions and also with substantial financial resources, ranging from government agencies through to global healthcare companies. The Group has also considered the ongoing implications of COVID-19 and Brexit and developed appropriate risk management solutions to mitigate these risks.

 

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 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

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

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 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



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.

 

 

 

 

 

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