Interim Results

SURGICAL INNOVATIONS GROUP PLC 6 September 1999 Interim Results for the half year ended 30 June 1999 Surgical Innovations Group plc, the AIM listed provider of healthcare products primarily for the operating theatre, has announced its interim results for the six month period to 30 June 1999. Financial results - Turnover down at £696K due to delayed launch of autologous blood products following the merger (1998: £1m) - Profitability increases after costs are reduced by 16% - Loss for period at £343K (1998: £233K) Operational highlights - New autologous blood products launched in June have been well received in the UK and overseas - Government pressures on blood management could help increase the use of autologous blood products - The licence agreement with Genzyme Surgical Products in the US continues to develop with encouraging sales - An agreement to design and supply Genzyme in France with a new port access device is expected to produce a turnover of £200k over the next 12 months - A new instrument for key hole surgery is soon to be launched - the F4 - which is a new handle design making it easier for the surgeon Commenting on the results, Brian Long Chairman said: 'The agreement with Genzyme France and the launch of F4 demonstrate our continuing ability to develop innovative product and to secure ongoing business with major medical groups.' For further information: Surgical Innovations Group plc Citigate Dewe Rogerson Ian Lomas - Managing Director Keeley Middleton Tel: 0113 230 7597 Tel: 0113 297 9899 Surgical Innovations Group plc/1 Chairman's Statement Financial Results Turnover for the 6 months to 30th June 1999 at £696,000 was a reduction from the £1,068,000 for the equivalent period in 1998 (prior to the merger of Haemocell plc and Surgical Innovations Ltd) but an increase over the £601,000 in the immediately preceding 6 month period, following the merger. With the publication of our results for the year to 31st December 1998 we reported on the disruptions suffered during the consolidation of the Oxford and Leeds operations. This occurred at the time of introducing new Haemocell blood collection products and throughout the 6 month period our supplies of the products were severely restricted. This was the primary reason for turnover being lower than our expectations. Overheads at £739,000 were 16% below the equivalent period in 1998 in spite of incurring considerable expense dealing with the introduction of new blood products referred to above. The Operating Loss at £343,000 was higher than the £233,000 incurred in the first 6 months of 1998 but exactly half the level of the immediately preceding 6 month period. Report on Operations The new Haemocell post-operative blood collection system was introduced in June, and while it was too late to affect the turnover for the period, it has been very well received by hospitals in the UK and internationally. The inter-operative system has been on restricted supply until now (September) but has been well received where it has been used. The UK Government has increased the pressure for better blood management within the NHS and, with our new products providing autologous rather than donated blood, we look forward to increasing acceptance and turnover from this product range. Surgical Innovations Group plc/2 The technical licence agreement signed with Genzyme Surgical Products Corporation of the US has continued to develop over the period. Manufacturing at Genzyme's factory is running smoothly and turnover in the US market is encouraging. Increased sales in the US and better penetration in other world-wide markets will result in greater royalties for our Company. In August we announced an agreement with Genzyme's French subsidiary for the design and supply of a new 'port access device' (used for creating the point of entry in keyhole surgery). This 'resposable' product combines both reusable and disposable components and is aimed at reducing the costs associated with this type of surgery. We expect that this supply agreement will generate turnover in excess of £200,000 over the next 12 months. Since the beginning of the year our design and manufacturing processes have been audited and approved both by the FDA (the US Food and Drug Administration) and under the European CE- mark regulations. It is a tribute to the competence and hard work of our technical staff that all of our regulatory approvals have been maintained during this demanding time. UK Distribution Our 'direct to hospital' UK sales force has been restricted during the period by the supply problems experienced with our blood management products. As described above this situation is now nearing resolution and we look forward to increased activity and turnover in the UK from these products. We have continued to add to our range of distributed products aimed at the operating theatre and intensive care environment. We have reported previously on Cavaterm, a device for the treatment of menorrhagia, and on the RIK operating table mattress system for the reduction of pressure sores. The most recent addition to the range is the Paxman Cooler, a UK developed product Surgical Innovations Group plc/3 which reduces hair loss during chemotherapy treatment. We have already seen encouraging sales with this product and are optimistic both as to its clinical effectiveness and potential commercial success. Product Development Development of instruments for endoscopic surgery is ongoing - the new product designed for Genzyme France has already been referred to. A new instrument range called F4 will be launched shortly. These instruments are based on a new handle design which is easier and more effective for the surgeon to use. It will be sold by the Company's own sales force but is also targeted at OEM customers. An order has already been secured for handle sets from a major US instrument company. We announced recently an agreement with the Engineering Science department at Oxford University for a research project into the next generation of blood filtration technology for the Haemocell intraoperative Autologous Blood Tranfusion (ABT) product. This research will be headed by Professor Brian Bellhouse, who developed the filtration system for the original Haemocell product, and will be aimed at improving the speed and volume of blood processing. Board Changes For the last three years David Stirling has held the position of Finance Director of the Company working on a part time basis. Following the merger and relocation of the Company to Leeds David indicated that he believed the position should become full time. At the beginning of the year we recruited Graham Bowland as Financial Controller and he has done an excellent job of completing the integration of the two companies' systems and establishing financial controls. Today David Stirling is resigning from the Board and Graham will be taking his place as Finance Director and Company Secretary. Surgical Innovations Group plc/4 Graham, 38 years of age, has a BSc in Physics and is a Chartered Accountant. He was Finance Director at Britannia Fine Cloths and Financial Controller at Countrywide Leisure. The Board has come to know him over the last eight months and has gained confidence in his ability to be an excellent Finance Director for the Company. The Board wishes to thank David for the faithful service he has provided, first to Haemocell and then to the merged Surgical Innovations Group. Strategic Plans and Prospects The Company's resources in R&D, device manufacture and direct distribution in the UK continue to be targeted at the operating theatre environment. The agreement with Genzyme France and the launch of F4 demonstrate our continuing ability to develop innovative product and to secure ongoing business with major medical groups. The strategic plan to acquire or invest in other companies with innovative products or technologies has not had positive results during the period. Discussions have been held with a number of potential targets but none, in the opinion of the Board, would have added sufficient value to the Company or provided return to our shareholders. The Board continues to search out new opportunities and in the meantime the Company's cash reserves are closely monitored to ensure that funds are available for the right investment. D Brian Long Chairman 6 September 1999 SURGICAL INNOVATIONS GROUP PLC Consolidated Profit and Loss Account For the six months ended 30 June 1999 Unaudited Unaudited Audited 6 months to6 months to12 months to 30.6.99 30.6.98 31.12.98 £'000 £'000 £'000 Turnover (including licence fees) 696 1,068 1,669 Cost of sales (300) (425) (858) Gross profit 396 643 811 Administrative expenses before exceptional items (739) (876) (1,730) Operating loss (343) (233) (919) Exceptional items - Other operating income - 233 269 - Administrative expenses - - (399) Net interest (payable)/receivablen(34) (18) (23) Loss attributable to shareholdersm(377) (18) (1,072) Loss per ordinary share (0.2p) 0.0p (0.5p) Notes: 1.The consolidated profit and loss account above has been prepared under the merger accounting method and accordingly comparative figures have been restated as appropriate. 2.The consolidated financial information does not constitute full accounts within the meaning of the Companies Act 1985 and has not been reported on by the auditors or delivered to the Registrar of Companies. The figures for the year ended 31st December 1998 have been extracted from the full accounts for that period, on which the auditors gave an unqualified report and which have been filed with the Registrar of Companies. 3.The exceptional other operating income arises principally from the waiver by Getz Bros. Co., Ltd. of loan premium and interest. The exceptional administrative expenses comprise costs associated with the acquisition of Surgical Innovations Limited and the merger of operations. 4.The Directors have not declared an interim dividend. 5.The loss per share is based on the weighted average number of shares in issue during the period. The total number of shares in issue at 30th June 1999 and at 31st December 1998 was 204,007,427, and at 30th June 1998 was 203,656,686. Consolidated Balance Sheet As at 30 June 1999 Unaudited Unaudited Audited 30.6.99 30.6.98 31.12.98 £'000 £'000 £'000 Fixed assets Tangible assets 307 327 323 Current assets Stock 312 572 362 Debtors 440 398 307 Cash at bank and in hand 998 2,329 1,369 1,750 3,299 2,038 Creditors: falling due within one year (541) (1,002) (459) Net current assets 1,209 2,297 1,597 Total assets less current liabilities1 1,516 2,624 1,902 Creditors: amounts falling due after more than one year (1,961) (2,046) (1,970) Net assets/(liabilities) (445) 578 (68) Capital and reserves (445) 578 (68) Notes The balance sheet at 30th June 1998 has been adjusted to reflect: (a) the capital reorganisation carried out by Surgical Innovations Limited on 7th July 1998; (b) the issue of £2,000,000 of convertible loan notes on 7th July 1998; (c) the issue of 101,828,343 shares by Haemocell plc on 7th July 1998 as consideration for Surgical Innovations Limited, net of expenses incurred.
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