REG - Adv Medical Solutns. - Interim Results
20/09/2023 07:00
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RNS Number : 9881M Advanced Medical Solutions Grp PLC 20 September 2023
20 September 2023
Advanced Medical Solutions Group plc
("AMS" or the "Group")
Interim Results for the six months ended 30 June 2023
Winsford, UK, 20 September 2023: Advanced Medical Solutions Group plc (AIM:
AMS), the world-leading specialist in tissue-healing technologies, today
announces its unaudited interim results for the six months ended 30 June 2023
(the "Period").
Financial Highlights:
H1 H1 Reported change Change at constant currency¹
2023 2022
Revenue (£ million) 63.1 58.3 +8% +5%
Adjusted Measures
Adjusted² profit before tax (£ million) 13.8 13.6 +1%
Adjusted² profit before tax margin % 21.8% 23.4% -1.6pp
Adjusted² diluted earnings per share (p) 4.97 5.01 -1%
Reported Measures
Profit before tax (£ million) 11.8 12.3 -5%
Profit before tax margin % 18.7% 21.2% -2.5pp
Diluted earnings per share (p) 4.06 4.42 -8%
Net operating cash flow (£ million) 4.1 12.5 -67%
Net cash(3) (£ million) 69.1 75.3 -8%
Interim dividend per share (p) 0.70p 0.64p +10%
Business Highlights (including post period end):
The Group made significant progress in a number of key projects during the
period which are expected to establish substantial, new commercial
opportunities in the short to medium term. As previously highlighted, the
results were impacted by the temporary de-stocking impact of the US
LiquiBand(®) strategic growth initiative but included strong growth in other
parts of the business.
Financial
· Revenue increased by 8% to £63.1 million (2022 H1: £58.3
million) driven by growth in non-US markets, which averaged 20% against the
first half of last year
· Gross margins reduced to 56.5% (2022 H1: 58.9%) due to temporary
adverse product mix
· Total investment in R&D increased to £6.0 million (2022 H1:
£5.4 million), representing 9.5% (2022 H1: 9.3%) of revenue, as progress was
made on key projects including new product development and Medical Device
Regulation ("MDR")
· The Group reports a 1% increase in adjusted profit before tax to
£13.8 million (2022 H1: £13.6 million) with adjusted profit before tax
margin of 21.8% (2022 H1: 23.4%)
· Net cash decreased to £69.1 million from a 2022 year-end
position of £82.3 million (2022 H1: £75.3 million) following the acquisition
of Connexicon Medical Ltd ("Connexicon") in February
· Surgical Business Unit revenues increased to £39.4 million (2022
H1: £35.9 million), an increase of 5% at constant currency
· Woundcare Business Unit revenues increased to £23.7 million
(2022 H1: £22.4 million), an increase of 4% at constant currency
· Given the Group's strong net cash position and reflecting the
Board's continued confidence in the future, the proposed interim dividend is
increased to 0.70p per share (2022 H1: 0.64p)
Operational
· Good progress towards establishing new US LiquiBand(®)
distribution agreements with hospital partners and executing new
route-to-market strategy. As previously reported, associated destocking was
greater than expected but end-user sales were unaffected and the Board remains
confident that this initiative will achieve its objective of creating the
foundation for accelerated growth for LiquiBand(®) in the US
· Acquisition of Connexicon completed, adding to the Group's
ability to develop and commercialise innovative adhesive and sealant
technologies and to offer the increased differentiation and exclusivity sought
by our US partners. Integration is going well, financial performance is in
line with initial expectations and its pipeline approvals are progressing well
· Recruitment of the Seal-G(®) and Seal-G(®) MIST human clinical
trials completed in July 2023 with data to be made available for a European
soft launch in H2 2023. Initial data shows significant reduction in leakage
rates in cases using Seal-G(®)
Post Period End
· Announced 18 September, the Group has signed a US
LiquiBandFix8(®) commercialisation agreement with TELA Bio Inc ("TELA Bio")
ahead of a September launch under the brand name LIQUIFIX(TM), entering a new
$200 million addressable market with a unique, differentiated product
· The Group can confirm very good progress has been made with all
the new US LiquiBand(®) distribution agreements and is highly confident that
the new route-to-market strategy will be fully operational and driving
accelerated growth by the end of 2023
Commenting on the interim results, Chris Meredith, Chief Executive Officer of
AMS, said: "I'm pleased to report first half growth at Group level driven by
our diverse portfolio of products, despite the short-term disruption to US
LiquiBand(®) sales and the changes to the Organogenesis royalty stream. This
demonstrates the increasing strength of our existing portfolio which will play
a big part in generating and sustaining stronger growth in the future. I am
particularly excited at the breadth of opportunities now open to us as a
number of new initiatives and product launches, such as LIQUIFIX(TM) in the US
and Seal-G(®) in Europe, come into effect this year. With so many potential
growth drivers in place, I remain confident that we will see accelerated
growth from 2024."
- End -
Notes
1 Constant currency adjusts for the effect of currency movements by
re-translating the current period's performance at the previous period's
exchange rates
2 Adjusted profit before tax is shown before amortisation of acquired
intangible assets which, in 2023 H1, were £2.4 million (2022 H1: £1.6
million) and a £0.4 million credit for movement in long-term acquisition
liabilities (2022 H1: credit of £0.3 million) as defined in the financial
review. Adjusted operating margin is shown before amortisation of acquired
intangible assets.
3 Net cash consists of cash and cash equivalents with nil debt (2022
H1 and YE: £nil debt)
For further information, please contact:
Advanced Medical Solutions Group plc Tel: +44 (0) 1606 545508
Chris Meredith, Chief Executive Officer
Eddie Johnson, Chief Financial Officer
Michael King, Investor Relations Manager
ICR Consilium Tel: +44 (0) 20 3709 5700
Matthew Neal / Lucy Featherstone
Investec Bank plc (NOMAD) & Broker Tel: +44 (0) 20 7597 5970
Gary Clarence / David Anderson
HSBC Bank PLC (Broker) Tel: +44 (0) 20 7991 8888
Sam McLennan / Joe Weaving / Stephanie Cornish
About Advanced Medical Solutions Group plc
AMS is a world-leading independent developer and manufacturer of innovative
tissue-healing technology, focused on quality outcomes for patients and value
for payers. AMS has a wide range of surgical products including tissue
adhesives, sutures, haemostats, internal fixation devices and internal
sealants, which it markets under its brands LiquiBand(®), RESORBA(®),
LiquiBandFix8(®) and Seal-G(®). AMS also supplies wound care dressings such
as silver alginates, alginates and foams through its ActivHeal(®) brand as
well as under white label. Since 2019, the Group has made five acquisitions:
Sealantis, an Israeli developer of innovative internal sealants; Biomatlante,
a French developer and manufacturer of surgical biomaterials, Raleigh, a
leading UK coater and converter of woundcare and bio-diagnostics materials,
AFS Medical, an Austrian specialist surgical business and Connexicon, an Irish
tissue adhesives specialist.
AMS's products, manufactured in the UK, Germany, France, the Netherlands, the
Czech Republic and Israel, are sold globally via a network of multinational or
regional partners and distributors, as well as via AMS's own direct sales
forces in the UK, Germany, Austria, the Czech Republic and Russia. The Group
has R&D innovation hubs in the UK, Ireland, Germany, France and Israel.
Established in 1991, the Group has more than 800 employees. For more
information, please see www.admedsol.com (http://www.admedsol.com/) .
Chief Executive's Review
Surgical Business Unit
The Surgical Business Unit includes tissue adhesives, sutures, biosurgical
devices and internal fixation devices marketed under the AMS brands
LiquiBand(®), RESORBA(®), LiquiBandFix8(®) and LIQUIFIX(TM). Revenue
increased by 10% on a reported basis and 5% on a constant currency basis in
the Period to £39.4 million (2022 H1: £35.9 million).
Surgical Business Unit 2023 H1 2022 H1 Reported Growth Growth at constant currency
£ million £ million
Advanced Closure 17.0 17.9 -5% -8%
Internal Fixation and Sealants 2.2 1.6 31% 27%
Traditional Closure 9.4 8.0 18% 12%
Biosurgical Devices 8.3 7.7 7% 3%
Other Distributed Products 2.5 0.7 267% 252%
TOTAL 39.4 35.9 10% 5%
Advanced Closure
LiquiBand(®) is a range of topical skin adhesives, incorporating medical
grade cyanoacrylate in combination with purpose-built applicators. These
products are used to close and protect a broad variety of surgical and
traumatic wounds.
Advanced Closure 2023 H1 2022 H1 £ million Reported Growth Growth at constant currency
£ million
Americas 9.2 12.0 -23% -27%
UK/Germany 4.0 3.4 16% 15%
ROW 3.8 2.5 53% 52%
TOTAL 17.0 17.9 -5% -8%
LiquiBand(®) revenues reduced by 5% to £17.0 million (2022 H1: £17.9
million) due to the previously announced disrupted ordering patterns and
de-stocking during the Period that has occurred during the transition to our
new, previously reported, strategic initiative to accelerate US LiquiBand(®)
growth. However, this was offset by strong growth in non-US markets.
As part of its enhanced partner strategy in the US, the Group continues to
have positive discussions with its partners and has made good progress with
new agreements aimed at delivering stronger growth from early 2024 onwards.
This process has taken longer and associated destocking has been greater than
initially anticipated, as indicated in the 4 September trading update.
Expectations for FY 2024 remain unchanged.
The Group confirms that since the end of the Period, very good progress has
been made with all US LiquiBand(®) distribution agreements and that it is
highly confident that the new route-to-market strategy will be fully
operational and driving accelerated growth by the end of 2023.
The destocking has not affected LiquiBand(®) end sales demand and the
pipeline of evaluations and conversions for LiquiBand(®) XL continues to grow
strongly. As such the Board's expectations for LiquiBand(®) growth remain
high, both short and long term and LiquiBand(®) sales forecasts for 2024 and
future years remain unchanged.
The acquisition of Connexicon was completed in February and integration of the
business is progressing well with its existing portfolio continuing to grow in
European and ROW territories. It is also being positioned to obtain approval
in China, which would be AMS' first tissue adhesive approval in this very
large market. In addition, the development and approval of its new US
portfolio, to support the enhanced partner strategy, is progressing well with
510(k) approvals on track for H2 2024.
Internal Fixation and Sealants
LiquiBandFix8(®) is used to fix hernia meshes placed inside the body with
accurately delivered individual drops of cyanoacrylate adhesive, instead of
traditional tacks and staples. Revenues increased by 31% on a reported basis
to £2.2 million (2022 H1: £1.6 million) and 27% on a constant currency basis
due to good commercial progress, increasing volumes of hernia surgery and the
annualised impact of the acquisition of AFS Medical ("AFS").
Following the PMA approval for LiquiBandFix8(®) in June 2023, and the earlier
completion of a 284-patient US clinical study, AMS announced on 18 September
an agreement for TELA Bio to market and distribute LiquiBandFix8(®) across
the United States under the brand name LIQUIFIX(TM). The signing of this
agreement successfully concludes a comprehensive selection process involving a
number of potential partners with a broad range of strengths and marketing
strategies. During this process, it became clear that TELA Bio brings the
right combination of strengths and attributes, with a vision and ambition that
is closely aligned with and complements AMS' strategy and aspirations. TELA
Bio is a specialist medical technology company that designs, develops and
markets innovative tissue reinforcement materials to address unmet needs in
soft tissue reconstruction. It has an established and fast-growing footprint
in the US market with products that focus on addressing the shortcomings of
existing reinforcement materials in hernia repair, abdominal wall
reconstruction and plastic reconstructive surgery.
TELA Bio's specialist representative sales force are now undergoing training
ahead of launch in September 2023 at the American Hernia Society Annual
Meeting. As the first product of its kind in the US, its less invasive
application is expected to reduce pain and other post-operative complications
and to provide tangible benefits to patients and payors. This represents a
significant commercial opportunity for AMS as it enters a new addressable
market estimated at $200 million.
Seal-G(®) MIST (laparoscopic surgery) and Seal-G(®) (open surgery) are
novel, internal, biological sealants used to seal tissue during
gastrointestinal surgery to reduce leakage of fluid. Enrolment for the first
Seal-G(®) clinical study, comprising 160 patients, was successfully completed
in July 2023 and a small number of end-user commercial orders have been
received for devices ahead of the European soft launch in Q4 2023 that will
utilise data from the study. An initial analysis of the data indicates a
significant reduction in the number of serious clinical leaks that required
re-operation. Although not a randomised controlled trial, the Seal-G(®) study
reported serious leakages of only 1.25% which is significantly lower than the
4.2% - 4.7% leakage rate reported in DICA (Diverticular Inflammation and
Complication) data and in published studies.
Planning and study design for follow-on clinical trials is progressing well as
AMS assesses the optimum pathway to build evidence for both colon and other
surgical procedures whilst giving consideration to our medium-term goal of
Pre-Market Approval in the large and lucrative US market.
Traditional Closure
RESORBA(®) branded Absorbable and Non-absorbable Suture ranges are used in
general surgery and a wide range of surgical specialties including dental and
ophthalmic surgery. Revenue increased by 18% to £9.4 million and by 12% at
constant currency (2022 H1: £8.0 million) with a steady performance from its
more established European markets. The Group's ongoing strategy to increase
its penetration of other geographies also drove growth, such as in the US,
where increasing dental suture sales made a significant contribution to
Traditional Closure growth.
Biosurgical Devices
The Biosurgical Devices category comprises antibiotic-loaded collagen sponges,
collagen membranes and cones, oxidised cellulose, synthetic bone substitutes
and bio-absorbable screws. Revenue increased by 7% to £8.3 million (2022 H1:
£7.7 million) and by 3% at constant currency.
End user demand for AMS' collagens remains strong but timing of orders and
despatches resulted in uneven phasing with stronger revenues and growth
anticipated in the second half of 2023. AMS remains confident in the growth
potential of its innovative Biosurgical portfolio via its specialist partner
network as it continues to expand its distribution network into new
territories.
The Group's strategy to market Biomatlante's bone substitutes under the
RESORBA(®) brand continues to progress well with growth in an increasing
number of European countries in the Period and the initial pilot US launch via
an independent rep model in the second half of 2023.
Other Distributed Products
The Other Distributed category comprises products distributed by AFS,
including minimally invasive access ports and laparoscopic instruments,
following its acquisition in April 2022. This category excludes sales of
LiquiBandFix8(®) which are recorded within the Internal Fixation and Sealants
category. Predominantly driven by annualisation, revenue increased by 267% on
a reported basis and 252% on a constant currency basis to £2.5 million (2022
H1 £0.7 million).
Plymouth facility expansion
The construction phase of the Plymouth facility expansion is now largely
complete, significantly increasing the manufacturing capacity for Seal-G,
Fix8(®) and LiquiBand(®) and providing additional R&D laboratory space.
Woundcare Business Unit
The Woundcare Business Unit is comprised of the Group's multi-product
portfolio of advanced woundcare dressings sold under its partners' brands and
the ActivHeal(®) label, plus a portfolio of specialist medical bulk materials
and multi-layer woundcare products.
The Woundcare Business Unit delivered growth in the Period, due to higher
ordering from OEM partners and increased sales of ActivHeal(®) overseas.
Revenue increased by 6% in the Period to £23.7 million (2022 H1: £22.4
million) and by 4% on a constant currency basis.
Woundcare Business Unit 2023 H1 2022 H1 Reported Growth Growth at constant currency
£ million £ million
Infection Management 7.7 7.2 8% 5%
Exudate Management 12.2 11.1 10% 8%
Other Woundcare 3.8 4.1 -8% -11%
TOTAL 23.7 22.4 6% 4%
Infection and Exudate Management
Infection Management revenue increased by 8% on a reported basis and by 5% on
a constant currency basis to £7.7 million (2022 H1: £7.2 million) and
Exudate Management revenue increased by 10% on a reported and 8% on a constant
currency basis to £12.2 million (2022 H1: £11.1 million).
Key initiatives driving growth in the Period and expected to drive future
growth include:
· Expanding the distribution network for our own ActivHeal(®)
range of dressings as newly signed distributors and new market registrations
make an impact. The Group expects ActivHeal(®) to continue to be a key
contributor to Woundcare growth in future periods.
· Commercial success with Raleigh's pipeline of new products of
special medical materials.
Other Woundcare
Other Woundcare comprises royalties, fees and woundcare sealants. Revenue
reduced by 8% at reported currency and by 11% at constant currency to £3.8
million (2022 H1: £4.1 million) as a result of lower royalty income from the
Group's licensing arrangement with Organogenesis.
As announced on 4 September, Organogenesis has recently indicated that changes
to US reimbursement coverage have created uncertainty regarding the revenue
outlook for some of its key products, including those utilising AMS patents.
Given that Organogenesis withdrew its own guidance and that AMS has no control
of, and minimal insight into its sales, AMS removed this royalty in its
entirety from Q4 2023 guidance onwards.
Regulatory
AMS continues to make good progress in meeting the requirements for the new
Medical Devices Regulation (MDR) and is well placed to obtain certifications
for all its products well before the extended 2027/2028 deadlines.
Supply chain and inflation
AMS continues to take proactive steps to address the ongoing global supply
chain challenges and has continued to increase inventory levels during the
Period while setting up alternative suppliers where feasible. As a result,
shortages of material have not had a significant impact on the Group's ability
to supply products to its customers.
Inflationary pressures continue in some areas but the Group continues to
strive to recover a significant proportion of this impact from its customers
through price review negotiations.
Board changes
As part of the ongoing plan to refresh the Non-Executive Directors, given that
Peter Allen has completed 10 years service, he will retire from the Board once
a successor has been appointed. The Group is progressing with a thorough,
external selection process for a new Chair that is now close to completion. A
further announcement will be made in due course.
Environmental, Social & Governance
AMS continues to make positive progress on its ESG activities, building on the
foundations reported in its FY22 Annual Report. Since that report, we have
further developed our Net Zero Strategy and Pathway and have agreed key
targets that will drive this activity, for example: to be Net Zero by 2045.
AMS has also strengthened its preparations for the Task Force on
Climate-related Financial Disclosures (TCFD) and in conjunction with its ESG
consultants will continue to progress this area in advance of its FY23
reporting in April 2024.
In addition, numerous and wide ranging ESG activities continue to take place
across the Group driven by employee suggestions and actions, as well as Board
and ESG Committee initiatives.
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 during the Period would not have been possible.
Summary and Outlook
In the first half of 2023, many parts of the business delivered strong growth
to offset the temporary shortfall in ordering of LiquiBand(®) in the US and
drive overall growth for the Group.
As announced in its 4 September trading statement, reduced royalty
expectations, following recent US reimbursement changes, and higher than
anticipated de-stocking by US partners have impacted FY23 and consequently AMS
expects revenues of approximately £124 - £127 million and adjusted pre-tax
profit of approximately £25 - £27 million for the year. With the exception
of the royalty adjustment (impacting Q4 2023 to Q3 2026), there were no
changes to the expectations for future years.
The Board anticipates accelerated LiquiBand(®) growth from 2024 with the new
US partner strategy taking effect and other key initiatives, such as the
imminent US launch of LIQUIFIX(TM) and the soft launch of Seal-G(®) in
Europe, now in place and setting the foundation for strong growth and
improving margins for the Group in 2024 and beyond.
Financial Review
IFRS reporting
To provide the clearest possible insight into our performance, the Group uses
alternative performance measures. These measures are not defined in
International Financial Reporting Standards (IFRS) and, therefore, are
considered to be non-GAAP (Generally Accepted Accounting Principles) measures.
Accordingly, the relevant IFRS measures are also presented where appropriate.
AMS uses such measures consistently at the half-year and full-year and
reconciles them as appropriate. The measures used in this statement include
constant currency revenue growth, adjusted operating margin and profit,
adjusted profit before tax and adjusted earnings per share, allowing the
impacts of exchange rate volatility, exceptional items, amortisation and the
movement in long-term acquisition liabilities to be separately identified. Net
cash is an additional non-GAAP measure used.
Overview
Revenue increased by 8% at reported currency to £63.1million (2022 H1: £58.3
million) and increased by 5% at constant currency as summarised in the Chief
Executive's Review.
Gross profit increased to £35.7 million (2022 H1: £34.4 million) but gross
margin decreased to 56.5% (2022 H1: 58.9%) due to adverse product mix relating
to the temporary impact of the US LiquiBand(®) strategic initiative and to
reduced royalty income from Organogenesis.
Administration expenses increased to £25.0 million (2022 H1: £21.6 million)
inclusive of adverse foreign exchange movements which adversely affected the
Group by £1.9 million in the first half of the year when compared to the
first half of 2022. The acquisition of AFS in April 2022 has had an
annualising effect in the first half of 2023, adding £1.0 million of
administration expenses and the acquisition of Connexicon added £0.2 million
of operating administration costs, £0.6 million of amortisation of acquired
intangible assets and £0.2 million of one-off professional fees relating to
the acquisition. The group also continued to invest in its sales and marketing
teams as well as new product development and regulatory team to support the
Group's continuing growth.
The Group incurred £6.0 million of gross R&D spend in the Period (2022
H1: £5.4 million), representing 9.5% of sales (2022 H1: 9.3% of sales). This
reflects the Group's continued investment in innovation as demonstrated by the
PMA approval of LiquiBandFix8(®) in the period as well as investment to meet
increased regulatory standards. The acquisition of Connexicon has further
added to the Group's R&D capabilities in the period, in particular the
Group's ability to develop and launch innovative and sealant technologies. As
shown in the table below, elements of this cost are capitalised and amortised
over 5 to 10 years.
H1 2023 H1 2022
£'000 £'000
Total investment in Research and Development, Regulatory and Clinical 5,972 5,403
Of which:
Charged to the profit and loss account 2,926 2,832
Capitalised, to be amortised over 5-10 years 3,046 2,571
Amortisation of acquired intangible assets increased to £2.4 million (2022
H1: £1.6 million) following the acquisition of Connexicon.
Adjusted operating profit, which excludes amortisation of acquired
intangibles, decreased by 7% to £12.8 million (2022 H1: £13.8 million)
whilst the adjusted operating margin decreased by 340 bps to 20.3% (2022 H1:
23.7%) due to the decrease in the gross margin in addition to the Group's
continued investment in future growth opportunities.
Movement in long-term acquisition liabilities of Sealantis, AFS &
Connexicon resulted in a net credit of £0.4 million (2022 H1: £0.3 million).
Despite adverse sales mix impacts, the Group delivered increased adjusted
profit before tax of £13.8 million (2022 H1: £13.6 million). Reported profit
before tax was £11.8 million (2022 H1: £12.3 million).
Reconciliation of profit before tax to adjusted profit before tax
H1 2023 H1 2022
£'000 £'000
Profit before tax 11,768 12,336
Amortisation of acquired intangibles 2,402 1,573
Movement in long-term acquisition liabilities (404) (283)
Adjusted profit before tax 13,766 13,626
The Group's effective corporation tax rate, reflecting the blended tax rates
in the countries where we operate and including UK patent box relief,
increased to 24.1% (2022 H1: 21.6%) as a result of the increase in the UK
Corporation tax rate to 25%, effective 1(st) April 2023 (2022: 19%).
The large UK corporation tax increase has had a significant adverse impact on
earnings per share resulting in adjusted diluted earnings per share reducing
by 1% to 4.97p (2022 H1: 5.01p), diluted earnings per share reducing by 8% to
4.06p (2022 H1: 4.42p), adjusted basic earnings per share reducing by 1% to
5.04p (2022 H1: 5.07p) and basic earnings per share reducing by 8% to 4.12p
(2022 H1: 4.47p).
The Board intends to pay an interim dividend of 0.70p per share on 27 October
2023 to shareholders on the register at the close of business on 29 September
2023. This is a 10% increase on the interim dividend paid in respect of the
first half of 2022 reflecting the Board's ongoing confidence in the future
growth in the Group.
Operating result by business segment
Six months ended 30 June 2023 Surgical Woundcare
£'000 £'000
Revenue 39,411 23,677
Segment operating profit 8,164 2,860
Amortisation of acquired intangibles 1,931 471
Adjusted segment operating profit(4) 10,095 3,331
Adjusted operating margin(4) 25.6% 14.1%
Six months ended 30 June 2022
Revenue 35,941 22,363
Segment operating profit 9,605 3,081
Amortisation of acquired intangibles 1,101 472
Adjusted segment operating profit(4) 10,706 3,553
Adjusted operating margin(4) 29.8% 15.9%
(4) Adjusted for amortisation of acquired intangible assets
Table is reconciled to statutory information in note 5 of the financial
information.
Surgical
Surgical revenues increased by 10% to £39.4 million (2022 H1: £35.9 million)
at reported currency and increased by 5% to £38.3 million (2022 H1: £36.2
million) at constant currency. Adjusted operating margin decreased by 420 bps
to 25.6% (2022 H1: 29.8%) due to temporarily adverse sales mix, the impact of
inflation and increased investment in regulatory affairs, and research and
development.
Woundcare
Woundcare revenues increased by 6% to £23.7 million (2022 H1: £22.4 million)
at reported currency and increased by 4% to £23.1 million (2022 H1: £22.1
million) at constant currency. Adjusted operating margin decreased by 180 bps
to 14.1% (2022 H1: 15.9%) predominately due to lower royalty income from
Organogenesis.
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 first half of the year,
approximately one third of sales were invoiced in Euros and approximately one
quarter were invoiced in US Dollars.
The Group estimates that a 10% movement in the £:US$ or £:€ exchange rate
will impact Sterling revenues by approximately 2.6% and 4.0% respectively and
in the absence of any hedging this would have an impact on the Group operating
margin of 2.0% and 0.7% percentage points respectively.
Cash Flow
Net cash inflow from operating activities decreased by 67% to £4.1 million
(2022 H1: £12.5 million) due to increased working capital as explained below.
At the end of the Period, net cash had reduced to £69.1 million (31 December
2022: £82.3 million) due to working capital increases and acquisition related
payments of €10m for the acquisition and initial earnout of Connexicon, and
€0.5 million for the achievement of AFS' FY22 EBITDA milestone.
In the first half of 2023, receivables increased by £3.2 million (2022 H1:
£0.9 million increase) due to increased sales volumes, the impact of
favourable hedging contracts, and the addition of Connexicon. Debtor days
reduced to 41 from the 44 days at year-end (2022 H1: 43 days) as a result of
lower US sales, which are typically on longer payment terms. Creditor days
were in line with December 2022 at 37 days (2022 H1: 35 days). Total payables
were inflated by the addition of Connexicon and the associated contingent
consideration and increased by £4.0 million (2022 H1: £5.5 million
increase). Planned inventory increases to fulfil anticipated commercial demand
and to continue to build resilience resulted in inventories growing by £3.9
million to 6.7 months of supply in comparison to 6.2 months at December 2022
(2022 H1: 5.5 months).
In the Period, £4.8 million was invested in capital equipment, R&D and
regulatory costs (2022 H1: £4.3 million) including investment in additional
Freezer dryer capacity in Germany to improve production efficiency and an
extension at Plymouth which is now substantially complete.
Tax payments increased to £1.4 million (2021 H1: £0.8 million) which is
£1.5 million lower than tax in the income statement. Payments in the prior
period were particularly low due to a refund of taxes received.
In June 2023, the Group paid its final dividend for the year ended 31 December
2022 of £3.3 million (2022 H1: £3.0 million).
The Group retains strong support from its two banks, NatWest and HSBC, and is
confident in its ability to raise necessary funds to complete further
acquisitions as and when opportunities arise.
CONDENSED CONSOLIDATED INCOME STATEMENT
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December 2022
Total Total Total
Note £'000 £'000 £'000
Revenue 5 63,088 58,304 124,330
Cost of sales (27,435) (23,934) (50,914)
Gross profit 35,653 34,370 73,416
Distribution costs (713) (781) (1,626)
Administration costs (25,007) (21,579) (47,378)
Other income 473 227 478
Operating profit 10,406 12,237 24,890
Finance income 2,229 436 1,691
Finance costs (867) (337) (671)
Profit before taxation 11,768 12,336 25,910
Income tax 7 (2,836) (2,668) (5,504)
Profit for the period attributable to equity holders of the parent 8,932 9,668 20,406
Earnings per share
Basic 4 4.12p 4.47p 9.42p
Diluted 4 4.06p 4.42p 9.30p
Adjusted diluted(5) 4 4.97p 5.01p 10.47p
The above results relate to continuing operations
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December 2022
£'000 £'000 £'000
Profit for the period 8,932 9,668 20,406
Exchange differences on translation of foreign operations (3,674) 3,896 6,940
Gain/(Loss) arising on cash flow hedges 2,774 (3,704) (1,297)
Deferred tax charge arising on cash flow hedges (163) - (201)
Other comprehensive (Charge)/credit for the period (1,063) 192 5,442
Total comprehensive income for the period attributable to equity holders of 7,869 9,860 25,848
the parent
( )
(5) Adjusted for amortisation of acquired intangible assets and movement in
long-term acquisition liabilities.
(
)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited) (Unaudited) (Audited)
30 June 2023 30 June 2022 31 December 2022
Note £'000 £'000 £'000
Assets
Non-current assets
Intangible assets 55,451 46,639 48,373
Goodwill 79,770 69,409 70,859
Property, plant and equipment 29,344 27,783 29,015
Trade and other receivables 1,260 79 937
165,825 143,910 149,184
Current assets
Inventories 31,812 22,732 27,911
Trade and other receivables 24,392 21,985 21,553
Current tax assets 403 177 184
Cash and cash equivalents 69,142 75,341 82,262
125,749 120,235 131,910
Total assets 291,574 264,145 281,094
Liabilities
Current liabilities
Trade and other payables 21,097 18,422 20,671
Current tax liabilities 594 1,746 948
Lease liabilities 1,051 1,109 1,059
22,742 21,277 22,678
Non-current liabilities
Trade and other payables 7,034 5,724 3,510
Deferred tax liabilities 10,919 8,229 9,593
Lease liabilities 8,126 8,323 8,691
26,079 22,276 21,794
Total liabilities 48,821 43,553 44,472
Net assets 242,753 220,592 236,622
Equity
Share capital 11 10,858 10,836 10,843
Share premium 37,420 37,102 37,269
Share-based payments reserve 17,199 14,434 15,711
Investment in own shares (167) (167) (167)
Share-based payments deferred tax reserve 413 569 531
Other reserve 1,531 1,531 1,531
Hedging reserve 1,092 (3,725) (1,519)
Translation reserve 1,330 1,960 5,004
Retained earnings 173,077 158,052 167,419
Equity attributable to equity holders of the parent 242,753 220,592 236,622
CONDENSED CONSOLIDATED Statement of Changes in Equity
Attributable to equity holders of the Group
Share- Investment Share-based
Share Share based in own payments Other Hedging Translation Retained
capital premium payments shares deferred tax reserve reserve reserve earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2023 (audited) 10,843 37,269 15,711 (167) 531 1,531 (1,519) 5,004 167,419 236,622
Consolidated profit for the period to 30 June 2023 - - - - - - - - 8,932 8,932
Other comprehensive income/(expense) - - - - - - 2,611 (3,674) - (1,063)
Total comprehensive income/(expense) - - - - - - 2,611 (3,674) 8,932 7,869
Share-based payments - - 1,476 - - - - - - 1,476
Share options exercised 15 151 12 - (118) - - - - 60
Shares purchased by EBT - - - (687) - - - - - (687)
Shares sold by EBT - - - 687 - - - - - 687
Dividends paid (Note 8) - - - - - - - - (3,274) (3,274)
At 30 June 2023 (unaudited) 10,858 37,420 17,199 (167) 413 1,531 1,092 1,330 173,077 242,753
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 2022 (audited) 10,804 36,996 13,180 (164) 933 1,531 (21) (1,936) 154,354 212,677
Consolidated profit for the period to 30 June 2022 - - - - - - - - 9,668 9,668
Other comprehensive (expense)/ income - - - - - - (3,704) 3,896 - 192
Total comprehensive (expense)/ income - - - - - - (3,704) 3,896 9,668 9,860
Share-based payments - - 1,141 - - - - - - 1,141
Share options exercised 32 106 113 - (364) - - - - (113)
Shares purchased by EBT - - - (337) - - - - - (337)
Shares sold by EBT - - - 334 - - - - - 334
Dividends paid (Note 8) - - - - - - - - (2,970) (2,970)
At 30 June 2022 (unaudited) 10,836 37,102 14,434 (167) 569 1,531 (3,725) 1,960 158,052 220,592
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 2022 (audited) 10,804 36,996 13,180 (164) 933 1,531 (21) (1,936) 151,354 212,677
Consolidated profit for the year to 31 December 2022 - - - - - - - - 20,406 20,406
Other comprehensive (expense)/ income - - - - - - (1,498) 6,940 - 5,442
Total comprehensive (expense)/ income - - - - - - (1,498) 6,940 20,406 25,848
Share-based payments - - 2,439 - (402) - - - - 2,037
Share options exercised 39 273 92 - - - - - - 404
Shares purchased by EBT - - - (392) - - - - - (392)
Shares sold by EBT - - - 389 - - - - - 389
Dividends paid (Note 8) - - - - - - - - (4,341) (4,341)
At 31 December 2022 (audited) 10,843 37,269 15,711 (167) 531 1,531 (1,519) 5,004 167,419 236,622
( )
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
30 June 2023 30 June 2022 31 December 2022
Note £'000 £'000 £'000
Cash flows from operating activities
Operating profit 10,406 12,237 24,890
Adjustments for:
Depreciation 2,045 1,917 4,049
Amortisation - acquired intangible assets 2,402 1,573 3,414
- development costs 458 436 879
- software intangibles 258 245 502
Increase in inventories (4,011) (2,355) (7,087)
Increase in trade and other receivables (2,732) (1,098) (596)
(Decrease)/Increase in trade and other payables (4,783) (737) 1,711
Share-based payments expense 1,476 1,141 2,439
Taxation paid (1,370) (827) (3,324)
Net cash inflow from operating activities 4,149 12,532 26,877
Cash flows from investing activities
Purchase of software (4) (22) (73)
Capitalised development costs (3,046) (2,571) (6,152)
Purchases of property, plant and equipment (1,767) (1,669) (3,739)
Proceeds from disposal of property, plant and equipment - 27 46
Interest received 1,147 156 820
Acquisition of subsidiaries (net of cash acquired) 9 (5,529) (2,781) (2,781)
Payment of contingent consideration 9 (3,080) - -
Net cash used in investing activities (12,279) (6,860) (11,879)
Cash flows from financing activities
Dividends paid 8 (3,274) (2,970) (4,341)
Repayment of principal under lease liabilities (653) (581) (1,295)
Issue of equity shares 162 108 (331)
Shares purchased by EBT (687) (337) 266
Shares sold by EBT 687 334 (392)
Interest paid (198) (304) 389
Repayment of borrowings 9 (486) (331) (617)
Net cash used in financing activities (4,449) (4,081) (6,321)
Net (decrease)/increase in cash and cash equivalents (12,579) 1,591 8,677
Cash and cash equivalents at the beginning of the period 82,262 72,965 72,965
Effect of foreign exchange rate changes (541) 785 620
Cash and cash equivalents at the end of the period 69,142 75,341 82,262
Notes Forming Part of the 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 six
months ended 30 June 2023 comprise the Company and its subsidiaries (together
referred to as the "Group").
The Group is primarily involved in the design, development and manufacture of
innovative tissue-healing technology for sale into the global medical device
market.
2. Basis of preparation
The information for the period ended 30 June 2023 does not constitute
statutory accounts as defined in section 434 of the Companies Act 2006. A copy
of the statutory accounts for the year ended 31 December 2022 has been
delivered to the Registrar of Companies. The auditor reported on those
accounts; their report was unqualified, did not draw attention to any matters
of emphasis without qualifying the report and did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006.
The individual financial statements for each Group company are presented in
the currency of the primary economic environment in which it operates (its
functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each Group company are
expressed in pounds sterling, which is the functional currency of the Company
and the presentation currency for the consolidated financial statements.
3. Accounting policies
The same accounting policies, presentations and methods of computation are
followed in the condensed set of financial statements as applied in the
Group's latest annual audited financial apart from the adoption of the
following new or amended IFRS and Interpretations issued by the International
Accounting Standards Board (IASB):
- Amendments to IFRS 17 Insurance Contracts including the
Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to
IFRS 4)
- Initial Application of IFRS 17 and IFRS 9 - Comparative
Information (Amendment to IFRS 17)
- Deferred Tax related to Assets and Deferred Tax related to
Assets and Liabilities arising from a Single Transaction (Amendments to IAS
12)
- Definition of Accounting Estimates (Amendments to IAS 8); and
- Disclosure of Accounting Policies (Amendments to IAS 1 and
Practice Statement 2)
No revised standards adopted in the current period have had a material impact
on the Group's financial statements.
The unaudited condensed set of financial statements included in this
half-yearly financial report have been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting', as adopted
by the United Kingdom. These condensed interim accounts should be read in
conjunction with the annual accounts of the Group for the year ended 31
December 2022. The annual financial statements of Advanced Medical Solutions
Group plc are prepared in accordance with International Financial Reporting
Standards as adopted by the United Kingdom.
4. Earnings per share
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
30 June 2023 30 June 2022 31 December 2022
Number of shares '000 '000 '000
Weighted average number of ordinary shares for the purposes of basic earnings 216,947 216,272 216,512
per share
Effect of dilutive potential ordinary shares: share options, deferred annual 3,084 2,527 2,969
bonus, Share Incentive Plan, LTIPs
Weighted average number of ordinary shares for the purposes of diluted 220,031 218,799 219,481
earnings per share
Basic EPS is calculated by dividing the earnings attributable to ordinary
shareholders by the weighted average number of shares outstanding during the
period.
Diluted EPS is calculated on the same basis as basic EPS but with the further
adjustment to the weighted average shares in issue to reflect the effect of
all potentially dilutive share options. The number of potentially dilutive
share options is derived from the number of share options and awards granted
to employees where the exercise price is less than the average market price of
the Company's ordinary shares during the period.
Adjusted earnings per share
Adjusted EPS is calculated after adding back amortisation of acquired
intangible assets and movement in long-term acquisition liabilities and is
based on earnings of:
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
30 June 2023 30 June 2022 31 December 2022
£'000 £'000 £'000
Earnings
Profit for the year being attributable to equity holders of the parent 8,932 9,668 20,406
Amortisation of acquired intangible assets 2,402 1,573 3,414
Movement in long-term acquisition liabilities (404) (283) (840)
Adjusted profit for the year being attributable to equity holders of the 10,930 10,958 22,980
parent
pence pence pence
Basic EPS 4.12 4.47 9.42
Diluted EPS 4.06 4.42 9.30
Adjusted basic EPS 5.04 5.07 10.61
Adjusted diluted EPS 4.97 5.01 10.47
The denominators used are the same as those detailed above for both basic and
diluted earnings per share.
The adjusted diluted EPS information is considered to provide an alternative
representation of the Group's trading performance, consistent with the view of
management.
5. 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, exceptional items, income tax assets and the
Group's external borrowings. These are the measures reported to the Group's
Chief Executive for the purposes of resource allocation and assessment of
segment performance.
Business segments
The principal activities of the business units are as follows:
Surgical
Selling, marketing and innovation of the Group's surgical products either sold
directly by our sales teams or by distributors.
Woundcare
Selling, marketing and innovation of the Group's advanced woundcare products
supplied under partner brands, bulk materials and the ActivHeal(®) brand
predominantly to the UK NHS as well as bio diagnostics products following the
acquisition of Raleigh.
Segment information about these Business Units is presented below:
Six months ended Surgical Woundcare Consolidated
30 June 2023
(Unaudited) £'000 £'000 £'000
Revenue 39,411 23,677 63,088
Result
Adjusted segment operating profit 10,095 3,331 13,426
Amortisation of acquired intangibles (1,931) (471) (2,402)
Segment operating profit 8,164 2,860 11,024
Unallocated expenses (618)
Operating profit 10,406
Finance income 2,229
Finance costs (867)
Profit before tax 11,768
Tax (2,836)
Profit for the period 8,932
At 30 June 2023 Surgical Woundcare Consolidated
(Unaudited)
Other information £'000 £'000 £'000
Capital additions:
Software intangibles 2 2 4
Development 2,680 366 3,046
Property, plant and equipment 1,253 514 1,767
Depreciation and amortisation (3,680) (1,483) (5,163)
Balance sheet
Assets
Segment assets 206,856 84,718 291,574
Unallocated assets -
Consolidated total assets 291,574
Liabilities
Segment liabilities 37,800 11,021 48,821
Six months ended
30 June 2022 Surgical Woundcare Consolidated
(Unaudited) £'000 £'000 £'000
Revenue 35,941 22,363 58,304
Result
Adjusted segment operating profit 10,706 3,553 14,259
Amortisation of acquired intangibles (1,101) (472) (1,573)
Segment operating profit 9,605 3,081 12,686
Unallocated expenses (449)
Operating profit 12,237
Finance income 436
Finance costs (337)
Profit before tax 12,336
Tax (2,668)
Profit for the period 9,668
At 30 June 2022 Surgical Woundcare Consolidated
(Unaudited)
Other information £'000 £'000 £'000
Capital additions:
Software intangibles 13 9 22
Development 1,976 595 2,571
Property, plant and equipment 1,095 574 1,669
Depreciation and amortisation (2,695) (1,476) (4,171)
Balance sheet
Assets
Segment assets 179,274 84,757 264,031
Unallocated assets 114
Consolidated total assets 264,145
Liabilities
Segment liabilities 29,184 14,369 43,553
Year ended
31 December 2022 Surgical Woundcare Consolidated
(Audited) £'000 £'000 £'000
Revenue 74,861 49,469 124,330
Result
Adjusted segment operating profit 21,802 7,632 29,434
Amortisation of acquired intangibles (2,469) (945) (3,414)
Segment operating profit 19,333 6,687 26,020
Unallocated expenses (1,130)
Operating profit 24,890
Finance income 1,691
Finance costs (671)
Profit before tax 25,910
Tax (5,504)
Profit for the year 20,406
At 31 December 2022
(Audited) Surgical Woundcare Consolidated
Other information £'000 £'000 £'000
Capital additions:
Software intangibles 34 39 73
Development 4,617 1,535 6,152
Property, plant and equipment 2,258 1,481 3,739
Depreciation and amortisation (5,759) (3,085) (8,844)
Balance sheet
Assets
Segment assets 190,456 90,638 281,094
Unallocated assets -
Consolidated total assets 281,094
Liabilities
Segment liabilities 29,786 14,686 44,472
Geographical segments
The Group operates in the UK, the Netherlands, Germany, the Czech Republic,
Ireland, France and Israel, with a sales office located in Russia, distributor
in Austria, and a sales presence in the USA. In presenting information on the
basis of geographical segments, segment revenue is based on the geographical
location of customers. Segment assets are based on the geographical location
of the assets. The Group's small legacy sales office in Moscow has
historically contributed approximately 1% of the Group's operating profit.
The following table provides an analysis of the Group's sales by geographical
market, irrespective of the origin of the goods or services, based upon
location of the Group's customers:
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December 2022
Segmental Revenue £'000 £'000 £'000
United Kingdom 9,994 9,515 19,960
Germany 11,666 10,250 20,780
Rest of Europe 19,136 14,596 32,519
United States of America 16,678 19,519 40,807
Rest of World 5,614 4,424 10,264
63,088 58,304 124,330
The following table provides an analysis of the Group's total assets by
geographical location:
(Unaudited) (Unaudited) (Audited)
30 June 2023 30 June 2022 31 December 2022
Segmental Assets £'000 £'000 £'000
United Kingdom 154,705 145,112 151,817
Germany 76,428 67,942 78,877
France 11,414 9,611 11,934
Rest of Europe 27,117 14,697 16,670
Israel 19,698 22,277 21,345
United States of America 2,212 4,506 451
291,574 264,145 281,094
6. Financial Instruments' fair value disclosures
It is the policy of the Group to enter into forward foreign exchange contracts
to cover specific foreign currency payments and receipts.
The Group held the following financial instruments at fair value at 30 June
2023. The Group has no financial instruments with fair values that are
determined by reference to significant unobservable inputs i.e. those that
would be classified as level 3 in the fair value hierarchy, nor have there
been any transfers of assets or liabilities between levels of the fair value
hierarchy. There are no non-recurring fair value measurements.
The following table details the forward foreign currency contracts outstanding
as at the period end:
Ave. exchange rate Foreign currency Fair value
30 June 23 30 June 22 31 Dec 22 30 June 23 30 June 22 31 Dec 22 30 June 23 30 June 22 31 Dec 22
USD:£1 USD:£1 USD:£1 USD'000 USD'000 USD'000 £'000 £'000 £'000
Cash flow hedges
Sell US dollars
Less than 3 months 1.31 1.36 1.28 9,500 9,000 11,500 (192) (791) (540)
3 to 6 months 1.30 1.36 1.31 9,000 10,000 9,000 (142) (868) (550)
7 to 12 months 1.21 1.32 1.30 15,000 17,500 18,500 585 (1,012) (1,040)
Over 12 months 1.14 1.30 1.15 15,000 25,000 22,500 1,188 (1,052) 890
48,500 61,500 61,500 1,439 (3,723) (1,240)
Ave. exchange rate Foreign currency Fair value
30 June 23 30 June 22 31 Dec 22 30 June 23 30 June 22 31 Dec 22 30 June 23 30 June 22 31 Dec 22
EUR:£1 EUR:£1 EUR:£1 EUR'000 EUR'000 EUR'000 £'000 £'000 £'000
Cash flow hedges
Sell Euros
Less than 3 months 1.15 1.15 1.14 600 900 600 5 6 (9)
3 to 6 months 1.15 1.15 1.15 600 900 600 4 2 (15)
7 to 12 months 1.14 1.15 1.15 1,200 1,600 1,200 8 (5) (29)
Over 12 months - 1.15 1.14 - 800 1,200 - (5) (26)
2,400 4,200 3,600 17 (2) (79)
7. Taxation
The weighted average tax rate for the Group for the six-month period ended 30
June 2023 was 26.3% (first half of 2022: 24.4%, year ended 31 December 2022:
22.8%). The Group's effective tax rate for the full year is expected to be
24.1%, which has been applied to the six months ended 30 June 2023 (first half
of 2022: 21.6%, year ended 31 December 2022: 21.2%). This represents an
increase on the previous period due to the increased tax rate in the UK, where
the Group generates a significant amount of profit.
8. Dividends
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December 2022
Amounts recognised as distributions to equity holders in the period: £'000 £'000 £'000
Final dividend for the year ended 31 December 2021 of 1.37p per ordinary share - 2,970 2,960
Interim dividend for the year ended 31 December 2022 of 0.64p per ordinary - - 1,381
share
Final dividend for the year ended 31 December 2022 of 1.51p per ordinary share 3,274 - -
3,274 2,970 4,341
9. Acquisition of Connexicon
On 1 February 2023, the Group acquired 99% of the Share Capital of Connexicon
Medical Limited ("Connexicon"), a tissue adhesive technology specialist based
in Dublin, Republic of Ireland for an initial up-front payment of € 7
million, with options in place to acquire the remaining 1% of Share Capital.
The remaining 1% of Share Capital not acquired by AMS have no-voting rights
and the options are linked to future contingent considerations up to a
potential €18 million, dependent on the delivery of certain research &
development, regulatory and commercial milestones between 2023 and 2027.
In the five-month period from acquisition to 30 June 2023, Connexicon
contributed £0.4 million of revenue to the Group and a negligible amount of
operating profit. In addition, amortisation of intangible assets of £0.6
million was recorded within the Group as a result of the acquisition. The
results, assets and liabilities of Connexicon has been included in the
Surgical business unit segment.
£'000
Identifiable net assets acquired
Customer related intangible assets 587
Technology based intangible assets 7,951
Property, plant and equipment 800
Trade and other receivables 754
Inventory 466
Cash and cash equivalents 846
Trade and other payables (1,204)
Lease liabilities (8)
Borrowings (487)
Deferred tax on intangible asset (674)
Arising on acquisition
Goodwill 11,040
Total net assets 20,071
Satisfied by £'000
Cash consideration 6,375
Contingent consideration 13,696
20,071
Net cash flow on acquisition £'000
Cash consideration 6,375
Cash acquired (846)
5,529
Contingent consideration arose on the acquisition in respect of up to €18
million which is payable subject to delivery of certain research &
development, regulatory and commercial milestones between 2023 and 2027. €16
million (£14 million) is the estimated fair value of the contingent
consideration at the acquisition date.
None of the goodwill on the acquisition is expected to be deductible for
income tax.
During the period, £3.1 million of Contingent consideration was paid (30 June
2022: £nil, 31 December 2022: £nil). Connexicon met milestones relating to
product and process validation resulting in a contingent consideration payment
of €3 million whilst AFS achieved its 2022 EBITDA milestone, resulting in a
payment of €500,000.
10. Contingent liabilities
The Directors are not aware of any contingent liabilities faced by the Group
as at 30 June 2023 (30 June 2022: £nil, 31 December 2022: £nil).
11. Share capital
Share capital as at 30 June 2023 amounted to £10,858,000 (30 June 2022:
£10,836,000, 31 December 2022: £10,843,000). During the period the Group
issued 296,989 shares in respect of share options, LTIPS, Deferred Annual
Bonus Scheme and the Share Incentive Plan.
12. Going concern
In carrying out their duties in respect of going concern, the Directors have
carried out a review of the Group's financial position and cash flow forecasts
for the next 12 months and considered whether there are any factors that
indicate a deterioration in trading performance beyond 12 months. The
forecasts used are based on a comprehensive review of revenue, expenditure and
cash flows, taking into account specific business risks and the current
economic environment.
The Group has used sensitivity analysis on the Group's forecasted performance,
using a mid-case scenario, a 10% sales reduction, and a worst-case scenario, a
25% sales reduction. The results show that in all of these scenarios AMS is
able to continue its operations for a period of at least 12 months.
With regards to the Group's financial position, it had cash and cash
equivalents at 30 June 2023 of £69.1 million.
While the current economic environment is uncertain, AMS operates in markets
whose demographics are favourable, underpinned by an increasing need for
products to treat chronic and acute wounds. Consequently, long-term market
growth is expected. The Group has a number of long-term contracts with
customers across different geographic regions and also with substantial
financial resources, ranging from government agencies through to global
healthcare companies.
After taking the above into consideration, the Directors have reached the
conclusion that the Group is well placed to manage its business risks in the
current economic environment. Accordingly, they continue to adopt the going
concern basis in preparing the condensed consolidated financial statements.
13. Principal risks and uncertainties
Further detail concerning the principal risks affecting the business
activities of the Group is detailed on pages 43-47 of the Annual Report and
Accounts for the year ended 31 December 2022. There have been no significant
changes since the last annual report.
14. Seasonality of sales
There are no significant factors affecting the seasonality of sales between
the first and second half of the year.
15. Events after the balance sheet date
With the exception of its trading update on 4(th) September, there have been
no material events subsequent to the end of the interim reporting period ended
30 June 2023.
16. Copies of the interim results
Copies of the interim results can be obtained from the Group's registered
office at Premier Park, 33 Road One, Winsford Industrial Estate, Winsford,
Cheshire, CW7 3RT and are available on our website "www.admedsol.com".
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