Final Results
NMT Group PLC
8 May 2002
NMT Group PLC
Preliminary results for the year ended 31 December 2001
NMT Group PLC ('NMT'), the safety syringe manufacturer, today announces its
preliminary results for the year ended 31 December 2001.
2001 Highlights
• High volume 3cc production capability now in place
• 1cc syringe now available in commercial quantities
• Sales and marketing team in key US market significantly strengthened
• £24.2m fundraising successfully completed in December 2001
• Turnover increased to £1.1m (2000:£0.4m); pre-tax loss of £13.3m
(2000:£13.2m)
• Strong balance sheet with cash balances of £26.7m at period end (2000:
£19.9m)
Commenting on the results, Roger Gilmour, Chairman of NMT, said:
'With the resolution of the first generation manufacturing problems, second
generation syringe development well advanced, a strong balance sheet and a broad
range of commercial opportunities ahead, we are encouraged by the progress
achieved since the December 2001 fundraising.'
Enquiries
NMT Group PLC Today: 020 7831 3113
Roy Smith, Chief Executive Thereafter: 02380 646783
Gerard Cassels, Group Finance Director Thereafter: 01506 445004
Financial Dynamics Tel: 020 7831 3113
Fiona Noblet
2001 was a year of fundamental change within NMT. The positive impact of the
initial change programmes launched by the new management team started to be
realised and substantially improved the position of the Group. During the year,
the manufacturing team progressively demonstrated the capability to consistently
produce high quality safety syringes in commercial quantities. The sales and
marketing organisation in the US was re-focused and, as commercial production
became available, significantly strengthened.
In December 2001 £24.2m (net of expenses) was raised to provide further working
capital, additional 1cc manufacturing capacity, and sufficient funds to develop
a 'second generation' of safety syringe products, providing in particular
greater flexibility for the user to switch between needle sizes.
Turnover for the year increased to £1.1m from £0.4m in 2000. The loss for 2001
of £13.3m was similar to the £13.2m in 2000. As a result of the fundraising
discussed above, the balance sheet remained strong with cash balances of £26.7m
(2000 £19.9m) at the end of the year.
Although sales in 2002 to date are significantly greater than the same period
last year, sales volumes have been below expectations. Utilisation of safety
syringes and our own sales growth within the US acute care market has been
slower than anticipated. The directors believe this shortfall has been largely
due to the delayed impact of the Needlestick Safety and Prevention Act on
hospital procurement practices. However, this has been partially offset by
progress in the alternate care market.
In addition, the Group is actively pursuing opportunities within the
pharmaceutical sector as a means to further accelerate our sales growth. In
particular, I am encouraged by discussions with a global pharmaceutical company,
which are at an advanced stage and, if successfully concluded, offer a material
opportunity for the Group.
In parallel to developing our brand equity strategy, the Group is considering
additional commercial opportunities with several leading medical device
organisations. These companies have expressed an interest in distributing our
products in certain strategic markets where they have significant sales and
marketing infrastructures.
Design for the manufacture of second generation syringes is progressing well
with 1cc pilot tooling being manufactured. The new design will both provide
enhanced performance features and deliver significant unit cost savings compared
to our existing fixed needle syringes. The Group is close to selecting a
partner, experienced in the manufacture of medical devices, to outsource the
production of second generation syringes. The short list candidates have
worldwide manufacturing locations and specialise in the assembly of small,
technically challenging, precision components, which must meet stringent
accuracy, quality and finishing standards.
Brian Scanlon resigned as a non-executive director on 31 January 2002 due to
additional commitments arising from a post with Hewitt Associates LLC of
Houston, Texas. I wish him well in the demanding environment of business
practice development in the US and thank him for his support and counsel over
the years.
With the resolution of first generation syringe manufacturing problems, second
generation syringe development well advanced, a strong balance sheet, and a
broad range of commercial opportunities, the directors are encouraged by the
progress achieved since the December 2001 fundraising.
R H Gilmour
Chairman
OPERATING REVIEW
NMT's objective is to commercialise a range of safety devices based on the
Group's patented needle retraction technology. This is being achieved primarily
through the development of a portfolio of safety syringes, intellectual
property, production capacity for the automated assembly of safety syringes and
sales and marketing infrastructures in both the US and Europe.
The Group's manufacturing facility is based in Livingston, Scotland, and
contains four clean rooms, which house the Group's three Sortimat (3cc syringe)
and one Mikron (1cc syringe) automated assembly machines. In addition, the
manufacture of the Group's IV catheter has been outsourced to an experienced
manufacturer of medical devices in India, Eastern Medikit Limited. The Group
has established a dedicated US sales and marketing team which is now based near
Boston, Massachusetts, and a European sales office located in the south of
England.
In the last year, the Group has made significant advances towards establishing
the necessary platform to achieve commercial viability for the Group's
operations, namely:
• developing a high volume production capability for the 3cc syringe;
• commencing the manufacture of commercially saleable quantities of 1cc
syringes;
• continuing to develop a second generation syringe design which allows
simplification of syringe assembly;
• adding a safety IV catheter to the Group's product range; and
• rebuilding the Group's US sales and marketing operations, with the
establishment of a dedicated sales force and securing a number of key US
agreements to provide access to further potential customers.
Production
During 2001 the Group achieved continuous improvement in its ability to
manufacture both 3cc and 1cc syringes. This was particularly evident during the
final quarter when the Group achieved consistent levels of production. This is
the result of the significant effort and resources put in by the operations team
at Livingston.
Following a re-design, based on experience gained from the Group's previous
assembly lines, Sortimat 3 was successfully commissioned within 6 weeks of
delivery in June 2001. The engineering and design features which have been
incorporated into Sortimat 3 are now used as the Group's standard for the
existing 3cc Sortimat machines and Sortimat 2 was appropriately upgraded by the
year-end.
The Group took delivery of a syringe assembly machine to manufacture 1cc safety
syringes from Mikron SA in October 2000. As was experienced with the Sortimat 2
machine, the Mikron machine suffered a number of operational problems upon
start-up and a continuous improvement programme has been developed between
Mikron SA and the Group which showed considerable progress in the latter stages
of the year and is expected to continue to provide further improvement in both
output and yield in 2002.
An ongoing comprehensive multi-cavity tooling programme was implemented by the
Group during 2001 for both 1cc and 3cc safety syringe components with the aims
of reducing material costs and providing sufficient component manufacturing
capacity to match assembly requirements.
The first deliveries of the outsourced IV safety catheters for initial clinical
field trials were made in November 2001, followed by commercial sales orders in
early 2002.
Product Development
The principal production challenges faced by the Group in relation to 3cc and
subsequently 1cc safety syringes arose due to the number of component parts
involved and the complexities of and the stringent tolerances used within the
high speed automated assembly process. To address these issues, significant
design work has been carried out by the Group utilising moulding technology used
in other industries and the considerable experience that has been gained in
commissioning existing assembly lines. As a result of this, the directors
believe that the Group now has design solutions to optimise the manufacturing
process and thereby reduce the cost of production.
Furthermore, to maintain its competitive position, the Group recognises the need
to develop a 'second generation' of safety syringe products providing greater
flexibility for the user to switch between needle sizes. Work on this project
has been undertaken in tandem with the new 1cc assembly line.
Sales and Marketing - United States
The Group's sales and marketing efforts for its safety syringes are concentrated
principally in the US, which the directors believe is currently the largest
market for safety syringes. The use of safe needle technology is mandated
throughout the whole of the US through the Needlestick Safety and Prevention
Act, which came into effect in August 2001.
Following a review of its US operation in the spring of 2001, the Group has:
• relocated its US sales and marketing operating from Indiana to
Massachusetts in order to capitalise on the concentration of medical devise
expertise based in the north-eastern seaboard;
• rebuilt its US sales and marketing operations which now include sixteen
specialist account managers covering the major US territories. The
majority of these people have been recruited since September 2001, when
production issues had been largely resolved;
• re-focused its sales and marketing efforts to target group-purchasing
organisations, proprietary purchasers and integrated healthcare delivery
networks. The agreements already entered into with such bodies enable
hospitals and other purchasers to order the Group's products through these
distributors; and
• re-focused its efforts on the supply of its 1cc and 3cc syringes into the
US market.
Experience during the year, with larger potential customers in particular, has
indicated that there are frequently delays between product evaluation, the
awarding of contracts with distributors to enable purchasers to acquire the
Group's products and the placement of orders.
Furthermore, it became apparent during the year that certain of the Group's
potential customers were unwilling to evaluate the Group's 3cc syringes due to
the lack of an accompanying FDA approved 1cc insulin safety syringe in the
Group's product portfolio. In November 2001, FDA approval for a 1cc insulin
safety syringe was granted and from February 2002 the product has been available
in commercial quantities, which should increase the opportunities for sales
growth of the Group's 3cc syringes.
In addition, the recent US federal needlestick legislation has, in the Group's
experience, not yet been rigorously enforced.
Sales & Marketing - Europe
The directors believe that development of the European market for safety
syringes is behind that of the US and, consequently, that this is not a key
market today for the Group's safety syringe products. However, the Group has
identified potential sales opportunities for an IV safety catheter for which
clinical trials in the UK began in November 2001. The results are encouraging
and three major distributors now stock the Group's catheters to provide a
distribution conduit to all NHS trusts.
Litigation
In November 2001, the Group settled its outstanding patent dispute with Syringe
Development Partners LLC and Medsafe Technologies LLC. The directors felt that
settlement at this stage was in the best interests of the Group, as it would
enable the directors to concentrate on its business at a key time for
manufacturing scale-up and product roll out.
FINANCIAL REVIEW
Operating Results
Turnover of £1.1m primarily consisted of sales for the USA and nearly tripled
the 2000 figure of £0.4m, reflecting the expansion of 3cc syringe output and the
start of 1cc production.
Operating losses of £13.7m remained at a similar level to the £13.7m loss in
2000, but do not include any exceptional items (2000 - £3m).
Net interest receivable of £0.4m resulted in a loss after tax of £13.3m (2000 -
£13.2m).
The loss per share of 5.2p reduced from 8.8p per share in 2000, as a result of
an increase in the weighted average number of shares to 255m shares from 150.1m.
This reflected the issue of 171.3m shares in 2000 and 637m shares on 20
December 2001.
Financial Position and Cash Flow
The Group's net cash at the end of the financial year was £26.7m, an increase of
£6.8m for the period. Cash outflow from operating activities was £14.2m (2000 -
£9.6m). The overall increase in net funds resulted from the proceeds of a share
issue of £24.2m (net of expenses) during the year.
Capital expenditure of £3.1m (2000 - £2.5m) continued to reflect the build-up in
manufacturing capacity with the purchase of automated assembly equipment and
associated component tooling.
Taxation
No tax charge arose for the current year due to trading losses incurred. The
Company has significant unutilised tax trading losses available to carry forward
against future profits.
Consolidated Profit and Loss Account
For the year ended 31 December 2001
2001 2000
£'000 £'000
Turnover 1,136 441
Cost of sales (7,880) (5,070)
_____ _____
Gross loss (6,744) (4,629)
Distribution costs (3,046) (2,339)
_____ _____
Administrative expenses (4,100) (3,708)
Exceptional administrative expenses - (3,030)
_____ _____
Total administrative expenses (4,100) (6,738)
Other operating income 200 -
_____ _____
Operating loss (13,690) (13,706)
Interest receivable and similar income 552 733
Interest payable and similar charges (168) (254)
_____ _____
Loss on ordinary activities before and after tax (13,306) (13,227)
_____ _____
Loss per ordinary share
Basic and diluted (5.2)p (8.8)p
_____ _____
The above results relate to continuing operations.
There is no difference between the loss on ordinary activities and the retained
loss for the period stated above and their historical cost equivalents.
Balance Sheets
At 31 December 2001
Group Company
2001 2000 2001 2000
£'000 £'000 £'000 £'000
Fixed assets _____ _____ _____ _____
Tangible assets 11,532 9,940 11,521 9,940
_____ _____ _____ _____
Current assets
Stocks 2,621 960 1,679 935
Debtors 640 729 8,643 5,306
Cash at bank and in hand 26,740 19,930 26,561 19,867
_____ _____ _____ _____
30,001 21,619 36,883 26,108
Creditors: amounts falling due
within one year (2,720) (3,328) (2,573) (3,173)
_____ _____ _____ _____
Net current assets 27,281 18,291 34,310 22,935
_____ _____ _____ _____
Total assets less current liabilities 38,813 28,231 45,831 32,875
_____ _____ _____ _____
Creditors: amounts falling due
after more than one year (1,088) (1,661) (1,088) (1,661)
_____ _____ _____ _____
Net assets 37,725 26,570 44,743 31,214
_____ _____ _____ _____
Capital and reserves
Called up share capital 37,187 11,708 37,187 11,708
Share premium account 38,639 39,949 38,639 39,949
Profit and loss account (38,101) (25,087) (31,083) (20,443)
_____ _____ _____ _____
Total shareholders' equity funds 37,725 26,570 44,743 31,214
_____ _____ _____ _____
The financial statements were approved by the Board of Directors on 7 May 2002.
Statement of Total Recognised Gains and Losses
For the year ended 31 December 2001
Group
2001 2000
£'000 £'000
Loss on ordinary activities before and after tax (13,306) (13,227)
Exchange adjustment on translation of investment in (100) (41)
subsidiary _____ _____
Total recognised losses for the year (13,406) (13,268)
_____ _____
Reconciliation of Shareholders' Funds
For the year ended 31 December 2001
Group Company
2001 2000 2001 2000
£'000 £'000 £'000 £000
Total losses relating to the year (13,406) (13,268) (11,032) (10,744)
Placing and Open Offer - shares issued 24,169 24,117 24,169 24,117
Share options - exercised - 614 - 614
- notional cost of share options granted 392 440 392 440
_____ _____ _____ _____
Total movements during the year 11,155 11,903 13,529 14,427
Shareholders' funds at 1 January 26,570 14,667 31,214 16,787
_____ _____ _____ _____
Equity shareholders' funds at 31 December 37,725 26,570 44,743 31,214
_____ _____ _____ _____
Consolidated Cash Flow Statement
For the year ended 31 December 2001
2001 2000
Note £'000 £'000
Net cash outflow from operating activities 3 (14,171) (9,632)
_____ _____
Returns on investments and servicing of finance
Interest received 618 697
Interest paid (168) (254)
_____ _____
Net cash inflow from returns on investments and
servicing of finance 450 443
_____ _____
Capital expenditure and financial investment
Purchase of tangible fixed assets (3,096) (2,523)
Cash outflow before management of liquid
resources and financing (16,817) (11,712)
_____ _____
Management of liquid resources
Cash placed on term deposit (5,566) (11,934)
Financing
Term loan repaid - (1,500)
Finance lease - repayment of principal (542) (457)
Proceeds on issue of shares 25,479 26,079
Expenses of share issue (1,310) (1,348)
_____ _____
Net cash inflow from financing 23,627 22,774
_____ _____
Increase/(decrease) in cash in the year 4 1,244 (872)
_____ _____
Notes to the Accounts
1. Accounting Policies
Basis of preparation
The financial statements have been prepared under the historical cost
convention and in accordance with applicable accounting standards and on
the basis of the accounting policies set out in the NMT Group PLC Annual
Report 2000.
2. Financial Information
The financial information set out in this announcement does not constitute
the Group's statutory accounts, within the meaning of Section 240 of the
Companies Act 1985, for the years ended 31 December 2001 or 31 December
2000, but is derived from those accounts. Statutory accounts for 2000
have been delivered to the Registrar of Companies, and those for 2001 will
be delivered following the Company's Annual General Meeting. The auditors
have reported on those accounts and their reports were unqualified and did
not contain statements under section 237 (2) or (3) of the Companies Act
1985.
3. Reconciliation of operating loss to net cash out flow from operating
activities
2001 2000
£'000 £'000
Operating loss (13,690) (13,706)
Loss on disposal of fixed assets - 41
Impairment of intangible fixed assets - 1,731
Depreciation of intangible fixed assets - 79
Depreciation of tangible fixed assets 1,504 986
Exchange adjustments (100) (41)
Share options - cost of share options granted 392 440
Increase in stock (1,661) (440)
Decrease in debtors 23 49
(Decrease)/increase in creditors (639) 1,229
_____ _____
Net cash outflow from operating activities (14,171) (9,632)
_____ _____
4 Reconciliation of net cash flow to movement in net funds
2001 2000
£'000 £'000
Increase/(decrease) in cash in the year 1,244 (872)
Term loan (drawn)/repaid - 1,500
Finance lease additions - (1,572)
Cash flow from finance leases - repayment of principal 542 457
Cash inflow from increase in liquid resources 5,566 11,934
_____ _____
Change in net funds resulting from cash flows and movement in net debt in 7,352 11,447
the year
Net funds at 1 January 2001 (note 5) 17,725 6,278
_____ _____
Net funds at 31 December 2001 (note 5) 25,077 17,725
_____ _____
5 Analysis of net funds
2000 Cash flow Other 2001
non-cash
changes
£'000 £'000 £'000 £'000
Cash at bank and in hand 19,930 6,810 - 26,740
_____ _____ _____ _____
Finance lease due within one year (544) 542 (573) (575)
Finance lease due after 1 year (1,661) - 573 (1,088)
_____ _____ _____ _____
17,725 7,352 - 25,077
_____ _____ _____ _____
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