REG - Adv Medical Solutns. - Unaudited Preliminary Results
13/03/2024 07:15
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RNS Number : 6044G Advanced Medical Solutions Grp PLC 13 March 2024
13 March 2024
Advanced Medical Solutions Group plc
("AMS" or the "Group" or the "Company")
Unaudited preliminary results for the year ended 31 December 2023
~ AMS set for strong growth in 2024, underpinned by implementation of
commercial initiatives, product launches, as well as a transformational
surgical acquisition announced today ~
Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), a world-leading
specialist in tissue-healing technologies, today announces its unaudited
preliminary results for the year ended 31 December 2023.
Financial Summary:
2023 2022 Reported change Change at constant currency¹
Revenue (£ million) 126.2 124.3 +2% +2%
Adjusted Measures
Adjusted² profit before tax (£ million) 25.9 28.5 -9%
Adjusted² profit before tax margin 20.5% 22.9% -2.4pp
Adjusted² diluted earnings per share (p) 9.39p 10.47p -10%
Reported Measures
Profit before tax (£ million) 21.2 25.9 -18%
Profit before tax margin 16.8% 20.8% -4.0pp
Diluted earnings per share (p) 7.25p 9.30p -22%
Net operating cash flow (£ million) 12.3 26.9 -54%
Net cash(3) (£ million) 60.2 82.3 -27%
Proposed full year dividend per share (p) 2.36p 2.15p +10%
Business Highlights (including post period end):
AMS is pleased to report results in line with updated guidance and significant
commercial, regulatory and clinical progress as it continues to build its
platform for growth and invest in its portfolio of next-generation products.
Operational
· Successful implementation of new route to market strategy for US
LiquiBand(®) that is delivering accelerated growth expectations in Q1 2024
and gives the Board confidence in achieving record US LiquiBand(®) sales in
2024
· FDA approval for LIQUIFIX(TM), the first atraumatic hernia
fixation device in the US with the full in-market launch with TELA Bio Inc
("TELA Bio") progressing very well and attracting significant market interest
· Completion of the first SEAL-G(®) and SEAL-G(®) MIST human
clinical trials with initial data showing promising improvement in comparison
to reported leak rates
· Acquisition of Peters Surgical SAS ("Peters Surgical") for a
total maximum cash consideration of €141.4 million (£121 million) announced
today - See separate announcement
· Acquisition of Syntacoll GmbH ("Syntacoll") for €1 million on
1(st) March 2024, a specialist manufacturer of drug-eluting collagens that
strengthens the Group's existing Biosurgical business
· Acquisition of Connexicon Ltd ("Connexicon") on 1(st) February
2023, increasing the Group's ability to develop and commercialise innovative
and differentiated adhesive and sealant technologies
Financial
· Group revenue increased by 2% to £126.2 million (2022: £124.3
million) with strong organic growth partly offset by de-stocking of US
LiquiBand(®) and reduced royalties, as guided in September 2023
· Adjusted profit before tax decreased by 9% to £25.9 million
(2022: £28.5 million) whilst reported profit before tax decreased by 18% to
21.2 million (2022: £25.9 million) as margins were impacted by the temporary
reduction in US LiquiBand(®) revenue and lower royalty income
· Net cash decreased to £60.2 million (2022: £82.3 million)
following the acquisition of Connexicon, planned inventory build and the
purchase of shares by the Employee Benefit Trust
· Investment in R&D increased to £12.6 million (2022: £12.3
million), representing 10% of revenues (2022: 10%), as the Group maintains
investment in new products and Medical Device Regulation ("MDR")
· Surgical Business Unit revenues increased to £79.1 million
(2022: £74.9 million), an increase of 6% at reported and constant currency
· Woundcare Business Unit revenues decreased to £47.1 million
(2022: £49.5 million), a decrease of 5% at reported and constant currency
· Reflecting management's ongoing confidence in the Group's
outlook, the Board proposes an increased final dividend of 1.66p per share
(2022: 1.51p) bringing the total proposed dividend to 2.36p per share (2022:
2.15p)
Commenting on the results Chris Meredith, Chief Executive Officer of AMS,
said: "I am very pleased with the progress we made in 2023 with a number of
key initiatives setting a strong foundation for growth for the next five
years. The recently signed US distribution agreements are already having a
positive impact on the LiquiBand(®) franchise. Also, market feedback through
our new US partner for LIQUIFIX(TM) validates the confidence we have in the
commercial potential for this unique product. Outside the US, we continue to
make excellent progress as we strengthen our position in established markets
and drive growth through geographic expansion.
"The acquisition of Peters Surgical is a transformational step in the history
of AMS. The expansion of our portfolio while leveraging the direct sales,
distribution network, R&D capability and manufacturing base of both
businesses will transform the Group into a major player in the field of
tissue-healing. The Group has never been in such a strong position given the
quality of our products and breadth of our portfolio. As a result, we are also
increasing our dividend, demonstrating our commitment to drive shareholder
value. I am extremely proud of the AMS employees who have worked so hard to
get us to this point and I look forward to working closely with our new
colleagues at Peters Surgical and Syntacoll and our other partners as we
embark on this exciting new phase of the business."
Analyst briefing
A briefing for sell-side analysts will take place at 10am this morning. Please
contact AMS@consilium-comms.com (mailto:AMS@consilium-comms.com) for further
details.
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 amortisation of acquired
intangible assets which was £4.9 million (2022: £3.4 million) and the
movement in long-term liabilities recognised on acquisitions which was a
credit £0.2 million (2022: £0.8 million credit)
3. Net cash consists of cash and cash equivalents with nil debt (2022:
£nil debt)
- End -
For further information, please visit www.admedsol.com
(http://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
Michael King, Investor Relations
ICR Consilium Strategic Communications Tel: +44 (0) 20 3709 5700
Mary-Jane Elliott / 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 , bone substitutes
and internal sealants, which it markets under its brands LiquiBand(®),
RESORBA(®), LiquiBandFix8(®), LIQUIFIX(TM) 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, 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
In 2023, the Group has performed in line with updated guidance with a strong
underlying performance from the surgical Business Unit. Importantly, AMS has
now successfully optimised its commercial partnerships for US LiquiBand(®),
achieved FDA approval for LIQUIFIX(TM) and launched the product in the US with
our specialist partner TELA Bio, and made significant clinical progress with
SEAL-G(®) and SEAL-G(®) MIST. The Group is now positioned for strong revenue
growth in 2024 and continues to maintain its investment in innovative products
that will reinforce our position as a world-leading specialist in
tissue-healing technologies.
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(®), LIQUIFIX(TM) and Seal-G(®).
Growth in the Surgical Business was driven by strong performances from
LiquiBand(®) outside the US, Traditional Closure, Other Distributed and
Internal fixation products. Revenue increased to £79.1 million (2022: £74.9
million) during the Period, an increase of 6% on a constant currency and
reported basis.
Surgical Business Unit 2023 2022 Reported Growth Change at constant currency
£ million
£ million
Advanced closure 34.6 36.0 -4% -4%
Internal Fixation and Sealants 5.0 4.1 21% 21%
Other Distributed 5.0 2.9 72% 69%
Traditional Closure 18.1 16.0 13% 15%
Biosurgical Devices 16.4 15.8 4% 3%
TOTAL 79.1 74.9 6% 6%
Peters Surgical
The acquisition of Peters Surgical for a maximum consideration of €141.4
million, announced separately today, will transform our Surgical Business
Unit, adding €84 million of revenue(4) at healthy gross margins, a highly
synergistic product range and commercial and operational structure.
4. Based on unaudited financial information extracted from management
information for the financial year to 31 Dec 2023
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 2022 Reported Growth Change at constant currency
£ million
£ million
Americas 18.2 23.4 -22% -21%
UK/Germany 8.2 7.3 12% 11%
ROW 6.8 5.3 28% 28%
Connexicon 1.4 0.0
TOTAL 34.6 36.0 -4% -4%
LiquiBand(®) revenues decreased in the period by 4% as strong ex-US growth
was offset by US de-stocking linked to the implementation of the new route to
market strategy, with the Group renegotiating its three hospital distribution
agreements.
The new agreements will enable more product and brand differentiation for each
of the Group's partners including the first solely AMS branded product in the
US, which represents a significant milestone for LiquiBand(®). Taking over
direct marketing control for one of the distribution channels allows AMS to
offer LiquiBand(®) solutions in US Hospital sales channels where the Group's
two Acute Strategic Partners' relationships are less robust. This has involved
AMS setting up and maintaining its own locally based inventory in the US. The
switching of inventory ownership is now complete, but the resulting
de-stocking undertaken by its partner and additional inventory disruption
during negotiations with other partners resulted in a £5m impact during 2023.
Throughout this process end-user sales have been uninterrupted and there has
been no impact on customer order fulfilment.
The Connexicon acquisition in February 2023 will support the enhanced
LiquiBand(®) partner agreements by providing the product exclusivity and
differentiation that they need to significantly expand market penetration. The
US approval process for these products is progressing well and remains on
track for completion in H2 2024. Connexicon continues to perform well in
Europe and ROW and is being positioned for approval in China, which would be
AMS's first tissue adhesive approval in this very large market. The clinical
trial is progressing well and Chinese approval is anticipated at around the
end of 2025.
The new agreements also enable the promotion of LiquiBand(®) XL in all three
hospital distribution channels providing access to the fast growing $70
million long wound market and facilitating the conversion of new accounts and
increase market share for the LiquiBand(®) brand as a whole. The pipeline of
evaluations and conversions for LiquiBand(®) XL continues to increase rapidly
and surgeon feedback on the efficacy and ease of use for the product remains
very positive.
The Board has been very pleased with the impact of the new strategy on 2024
partner ordering and commitment and remain confident of achieving record US
LiquiBand(®) revenues for the year.
Outside the US, the LiquiBand(®) brand continued to perform very strongly
during the Period, with underlying growth of 11% in UK/Germany and 28% in the
Rest of the World markets as new territories continue to make a positive
impact on financial performance. LiquiBand(®) XL is being well received in
these markets and early-stage traction is also contributing to growth.
Internal Fixation and Sealants
LiquiBandFix8(®)/LIQUIFIX(TM) is used to fix hernia meshes placed inside the
body with accurately delivered individual drops of cyanoacrylate adhesive,
instead of traditional sutures, tacks and staples.
LiquiBandFix8(®) continued to perform strongly in Europe and ROW with
revenues increasing by 21% to £5.0 million (2022: £4.1 million) in the
period due to deeper market penetration and, to a lesser extent, the
annualised impact of the acquisition of AFS Medical ("AFS").
2023 was an important year for AMS's hernia mesh fixation device, with the
completion of a 284-patient clinical study, US approval in June and an
agreement secured in September with TELA Bio for the marketing and
distribution of LiquiBandFix8(®) across the high value United States market
under the brand name LIQUIFIX(TM). The launch of LIQUIFIX(TM) is progressing
very well with TELA Bio having completed an extensive training programme among
its specialist hernia sales force and good progress having been made across a
number of significant GPO systems in the US. The initial response from
surgeons and from AMS's partner has been very positive and US orders received
to date are ahead of expectations.
SEAL-G(®) MIST is a novel, internal, biological sealant used to seal tissue
to reduce leakage of fluid during internal surgery. We are very pleased with
the results from the first SEAL-G(®) clinical study of 160 gastrointestinal
(GI) surgery patients that was completed in 2023, although not a randomised
controlled trial, initial data confirmed that reports of serious leakages with
SEAL-G(®) were significantly lower than those from published studies with
standard of care treatments.
In 2024, we have chosen to move into a clinical study for pancreatic surgery,
which is a high-risk procedure with higher leakage rates and thus lower
patient population to demonstrate results. This study is underway and initial
feedback is encouraging albeit very early.
Unfortunately, the discontinuation of a component required to connect the
laparoscopic to an external gas supply is restricting commercialisation for
the time being and limiting our activities to just critical clinical work and
KOL surgeon evaluations. With no short-term solution, we are now trying to
expedite the development of the next generation laparoscopic device that does
not need a gas supply connection.
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. Revenues grew strongly during the Period, increasing by
13% to £18.1 million and by 15% at constant currency (2022: £16.0 million)
as the Group continues to have success with its strategy of delivering solid
suture growth in its core German market with much higher growth outside of
Germany with notable success in Eastern Europe and the US. This has resulted
in ex-Germany suture sales exceeding German sales for the first time; in
comparison to the suture business that was heavily German weighted at the time
of the RESORBA(®) acquisition.
Biosurgical Devices
Biosurgical Devices comprise antibiotic-loaded collagen sponges, collagen
membranes and cones, oxidised cellulose, synthetic bone substitutes and
bio-absorbable screws. Revenues increased to £16.4 million (2022: £15.8
million) with the reported increase deflated by a strong FY22 comparative
period linked to MDR related ordering and uneven phasing of shipments but with
much stronger growth expected again in 2024.
End-user demand for collagens in Europe remains and the RESORBA(®) branded
bone substitutes range is now established in over 20 countries creating a
platform for accelerated growth and following the 2023 US independent rep
pilot launch of bone substitutes, a dedicated US based manager has been
recruited to drive this growth opportunity. Adding further US approvals for
further Biosurgical devices remains a priority and the Group continues to work
towards its first US 510(k) submission for collagen, initially in a dental
application.
Acquisition of Syntacoll GmbH ("Syntacoll") post Period end
In looking to continually improve its collagen expertise and capabilities, the
Group became aware of the opportunity to acquire certain assets of Syntacoll
GmbH, a highly synergistic competitor in this space, from administration and
the transaction was completed on 1(st) March 2024 with a business combination
for €1 million and the retention of a number of employees with expertise in
Production, Quality and R&D.
Syntacoll is a company based near Munich in Germany that specialises in
collagen-based absorbable surgical implants that has a 4,800m(2), GMP
compliant, state of the art collagen manufacturing facility with a class 1
licence for collagen-based drugs.
Syntacoll has significant in-house capability in drug-loaded collagens as well
as analysis, profiling and quality control processes which will help to
strengthen the Group's existing collagen business. The new manufacturing
facility will also be set up as a second site of manufacture for some of AMS'
existing key products which will help to address the risk of sole supply.
A significant restructuring process of the business has already been completed
prior to the acquisition and Syntacoll is expected to report a small profit in
the first year under AMS' ownership and additional revenues from ongoing sales
of Collatamp, a gentamicin-collagen implant.
The business also has manufacturing rights for XaraColl, a bupivacaine
hydrochloride-collagen implant for the US market which could deliver
substantial revenues in the coming years.
The Board expects to deliver strong growth in 2024 from the combined
RESORBA(®) and Syntacoll Biosurgical portfolio.
Other Distributed Products
The Other Distributed category comprises bought-in minimally invasive access
ports and laparoscopic instruments predominately sold by AFS. Revenues were
significantly boosted by annualisation following the acquisition of AFS in H1
2022 and increased to £5.0 million during the Period (2022: £2.9 million),
growth of 72% on a reported basis and 69% at constant currency.
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
including multi-layer woundcare and bio diagnostics products.
Revenues decreased by 5% to £47.1 million (2022: £49.5 million) on a
reported and constant currency basis due to a steep decline in the
Organogenesis royalty stream and ongoing challenging market conditions
relating to pricing pressure, low-cost competition and reimbursement issues
related to Infection Management products. A restructuring of the Business Unit
was completed in Q1 2024 in order to focus on driving growth with prudent cost
control measures now in place.
Woundcare Business Unit 2023 2022 Reported Growth Change at constant currency
£ million
£ million
Infection and Exudate Management 39.5 38.9 +2% +2%
Other Woundcare 7.6 10.6 -28% -27%
TOTAL 47.1 49.5 -5% -5%
Infection and Exudate Management
Infection and Exudate Management revenue increased by 2% to £39.5 million
(2022: £38.9 million) with growth driven from AMS's own ActivHeal(®) range
and from the pipeline of specialist materials that came with the 2020 Raleigh
acquisition.
Other Woundcare
Other Woundcare comprises royalties, fees and woundcare sealants. Revenue
reduced by 28% at reported currency and by 27% at constant currency to £7.6
million (2022: £10.5 million) as a result of significantly reduced royalty
from Organogenesis following US reimbursement reviews announced in 2023.
Royalties from Organogenesis has continued to fall sharply throughout the
period. Given the current trajectory and expected near-term implementation of
the reimbursement changes, AMS continues to guide towards minimal royalty in
its expectations for the remainder of the patent life (2024 -2026).
Acquisition strategy
The Group's strategy is 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/or that have products or customers
that offer significant synergies particularly in the surgical sector.
Regulatory
Despite enforcement dates for the Medical Devices Regulation (MDR) being
delayed until 2027-2028, AMS has continued with its previously established
schedule of work to meet the new standards. The Group continues to make good
progress and the phasing of its capitalisation of R&D costs relating to
MDR are broadly unchanged.
Environmental, Social & Governance
AMS continues to make positive progress on its ESG activities building on the
foundations reported in its FY22 Annual Report, further developing its Net
Zero Strategy and Pathway and agreeing key targets that will drive this
activity, for example: to be Net Zero by 2045.
AMS has also strengthened its preparations for 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 staff, partners and
other stakeholders, without whose help and commitment, the achievements of
this year, and the years prior, would not have been possible.
Outlook (before financial impact from acquisitions announced today)
Trading in Q1 2024 has started strongly with the Group's key drivers
performing well. Management is particularly pleased with the orders already
received and commitment demonstrated by its US LiquiBand(®) partners since
the new agreements were signed last year. This provides validation of the new
route to market strategy and gives the Board confidence in achieving record US
LiquiBand(®) sales in 2024.
The US launch of LIQUIFIX(TM) is now underway and very good progress has been
made across a number of significant Group Purchasing Organizations (GPO)
systems in the US. AMS's commercial partner TELA Bio has completed an
extensive training programme among its specialist hernia sales force and
initial orders received are ahead of expectations.
These promising US marketing initiatives, good progress in AMS's established
non-US markets and ongoing geographical expansion means AMS is primed to
generate double-digit revenue growth in 2024, in line with expectations, and
is well placed for strong growth in the short, medium and long-term.
Chris Meredith
Chief Executive Officer
Financial Review
Summary
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, 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 2% at both reported and constant currency to £126.2
million (2022: £124.3 million).
Gross margin decreased to 55.6% (2022: 59.0%) due to reduced sales of
LiquiBand(®) into the US as well as the reduced Organogenesis royalty. The
annualised impact of AFS, whilst adding sales and profit to the Group, dilutes
gross margin given its position as a distributor. The acquisition of
Connexicon has had a further dilutive effect on gross margin due to its
current low volumes which are at a lower margin than achieved elsewhere in the
Group. We expect Connexicon gross margins to improve as volumes increase and
manufacturing is in-sourced to our Plymouth factory. Inflationary increases
continue to have an impact on gross margin percentage although inflationary
pressures are not as substantial as those experienced in recent years.
Administration expenses increased to £50.7 million (2022: £47.4 million) due
to the addition of Connexicon and the full year impact of AFS. Selling and
marketing costs increased in the year as investment into growth areas has
continued as well as launch activity for US LiquiBandFix8(®). Whilst the
Group hedges significant foreign exchange exposure, a residual risk remains on
the revaluation of foreign currency receivables into GBP which had an adverse
impact on administration expenses in the year. However, this was offset by a
lower bonus provision for employees attributable to the below expected
financial performance of the Group. Acquisition costs relating to Connexicon
amounted to approximately £0.2 million.
The Group incurred £12.6 million of gross R&D spend in the period (2022:
£12.3 million), representing 10.0% of sales (2022: 9.9%), maintaining
investment in innovation and in meeting the increasing regulatory standards.
As shown in the table below, part of this cost is capitalised and amortised
over the following 5 to 10 years.
2023 2022
£'000 £'000
Total investment in Research and Development, Regulatory and Clinical 12,621 12,301
Of which:
Charged to the profit and loss account 6,405 6,149
Capitalised, to be amortised over 5-10 years 6,216 6,152
Amortisation of acquired intangible assets increased to £4.9 million (2022:
£3.4 million) due to the acquisition of Connexicon in February 2023.
Other Income which relates to R&D claims in the UK and Ireland grew to
£0.9 million (2022: £0.5 million). The growth in the year is largely due to
the addition of Connexicon which has invested heavily in R&D in relation
to its US FDA approval.
In the period, finance income grew by £2.1 million to £3.8 million (2022:
£1.7 million), largely due to a £1.7 million increase in interest income on
our bank deposits. Finance costs increased to £1.5 million (2022: £0.7
million) due to the movement in long-term acquisition liability expense which
is higher due to the unwind of contingent consideration arising on acquisition
of Connexicon(4). A net credit of £0.2 million (2022: £0.8 million credit)
was recorded in relation to movements in the long-term liabilities relating to
deferred consideration and earnout from the Sealantis, AFS and Connexicon
acquisitions.
Adjusted profit before tax which excludes amortisation of acquired intangibles
and movements in long term liabilities recognised on acquisition, decreased by
9% to £25.9 million (2022: £28.5 million) whilst the adjusted PBT margin
decreased by 240 bps to 20.5% (2022: 22.9%) due to lower gross margin, higher
administration expenses and adverse foreign exchange movements as discussed
above.
Reported profit before tax decreased by 18% to £21.2 million (2022: £25.9
million) which includes additional amortisation of intangible assets following
the acquisition of Connexicon in the year.
Reconciliation of profit before tax to adjusted profit before tax
(Unaudited) Audited
2023 2022
£'000 £'000
Profit before tax 21,157 25,910
Amortisation of acquired intangibles 4,887 3,414
Movement in long-term acquisition liabilities (186) (840)
Adjusted profit before tax 25,858 28,484
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 24.9% (2022: 21.2%) due to the UK Government's enactment of a 25%
tax rate from April 2023 and a higher effective tax rate in Germany due to the
reduced Organogenesis royalty.
Adjusted diluted earnings per share decreased by 10% to 9.39p (2022: 10.47p)
and diluted earnings per share decreased by 22% to 7.25p (2022: 9.30p),
reflecting the Group's reduced earnings.
Reflecting its confidence in the Group's prospects, the Board is proposing an
increased final dividend of 1.66p per share (2022 final dividend: 1.51p), to
be paid on 21 June 2024 to shareholders on the register at the close of
business on 31 May 2024. This follows the interim dividend of 0.70p per share
(2022 interim dividend: 0.64p) paid on 24 October 2023 and would, if approved,
make a total dividend for the year of 2.36p per share (2022: 2.15p), an
increase of 10%.
(Note 4: Note 7 of the financial information contains further information
regarding the acquisition accounting for Connexicon.)
Operating result by business segment
Year ended 31 December 2023 Surgical Woundcare
£'000 £'000
Revenue 79,093 47,117
Segment operating profit 16,041 4,374
Amortisation of acquired intangibles 3,944 943
Adjusted segment operating profit(5) 19,985 5,317
Adjusted operating margin(5) 25.3% 11.3%
Year ended 31 December 2022
Revenue 74,861 49,469
Segment operating profit 19,333 6,687
Amortisation of acquired intangibles 2,469 945
Adjusted segment operating profit(5) 21,802 7,632
Adjusted operating margin(5) 29.1% 15.4%
(Note 5: Adjusted for amortisation of acquired intangible assets.)
(Table is reconciled to statutory information in note 3 of the financial
information.)
Surgical
Surgical revenues increased by 6% to £79.1 million (2022: £74.9 million) at
reported currency and by 6% at constant currency. Adjusted operating margin
decreased by 380 bps to 25.3% (2022: 29.1%) due to the impact of temporary
LiquiBand(®) destocking at US partners, the addition of Connexicon and full
year of AFS at lower operating margin and the adverse margin impact of
inflation.
Woundcare
Woundcare revenues decreased by 5% to £47.1 million (2022: £49.5 million) at
reported currency and 5% at constant currency. Adjusted operating margin
decreased by 410 bps to 11.3% (2022: 15.4%) due to reduced Organogenesis
royalty stream and ongoing challenging market conditions relating to pricing
pressure, low-cost competition and reimbursement issues.
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 18 months. In the financial year, approximately one
third of sales were invoiced in Euros and approximately one quarter were
invoiced in US Dollar.
The Group estimates that a 10% movement in the £:US$ or £:€ exchange rate
will impact Sterling revenues by approximately 2.6% and 3.6% respectively and,
in the absence of any hedging, this would have an impact on the Group
operating margin of 1.9% and 0.4% percentage points respectively.
Cash flow
Net cash inflow from operating activities in the period was £12.3 million,
which was lower than prior year (2022: £26.9 million) due to decreased
operating profit and increased investment in inventory to mitigate supply
chain issues and enhance our commercial capabilities. In particular we have
seen an improvement in our OTIF (On-time in full) performance metric as we
have available Inventory to immediately fulfil a higher proportion of orders.
Net cash used in investing activities in the period was £20.3 million, which
has increased from prior year (2022: £11.9 million) due to the acquisition of
Connexicon, which is inclusive of the initial consideration and a further
£7.0 million contingent consideration paid during the year following delivery
of several research & development, regulatory and commercial milestones.
£0.4 million of contingent consideration was also paid in the year as AFS
achieved its 2022 EBITDA milestone. These items were partially offset by
higher interest received on our cash balance.
Net cash used in financing activities in the period was £13.6 million, which
has increased from prior year (2022: £6.3 million) due to shares purchased by
the Employee benefit trust "EBT", and a 10% increase in dividends paid.
At the end of the period, as a result of the above movements, the Group had
net cash of £60.2 million (31 December 2022: £82.3 million) a decrease of
£22.1 million in the period.
Working capital increased during the year. Inventory cover increased to 7.1
months of supply (2022: 6.2 months) due to planned increases in stock levels
to fulfil anticipated commercial demand and to continue to build supply chain
resilience. Receivables increased by £3.8 million (2022: £1.4 million
increase) due to the impact of favourable hedging contracts and the addition
of Connexicon. Debtor days has remained broadly consistent with prior period
at 45 days (2022: 44 days). Creditor days reduced to 35 days (2022: 37 days)
due to timing of payments. Total payables increased as a result of the
addition of Connexicon and the associated contingent consideration and
increased by £0.5 million (2022: £5.7 million increase).
Capital investment in equipment, R&D and regulatory costs of £9.8 million
(2022: £9.9 million) has continued at a similar level as the Group continues
to invest in growth.
Cash outflow relating to taxation increased to £4.4 million (2022: £3.3
million) due to the timing of payments on account.
The Group paid its final dividend for the year ended 31 December 2022 of £3.3
million in June 2023 (for the year ending December 2021, £3.0 million in June
2022), and its interim dividend for the six months ended 30 June 2023 of £1.5
million in October 2023 (for the 6 months ended 30 June 2022: £1.4 million in
October 2022).
The proposed acquisition of the entire issued share capital of Peters Surgical
will be funded by a new debt facility which includes a £60 million term loan
facility and £30 million revolving credit facility, together (the "New Debt
Facility") with the balance of the consideration to be funded by the Company's
cash. See separate announcement for further information.
CONDENSED CONSOLIDATED INCOME STATEMENT
(Unaudited) (Audited)
Year ended 31 December 2023 2022
Note £'000 £'000
Revenue from continuing operations 3 126,210 124,330
Cost of sales (56,070) (50,914)
Gross profit 70,140 73,416
Distribution costs (1,520) (1,626)
Administration costs (50,669) (47,378)
Other income 931 478
Operating profit 4 18,882 24,890
Finance income 3,786 1,691
Finance costs (1,511) (671)
Profit before taxation 21,157 25,910
Income tax 5 (5,268) (5,504)
Profit for the period attributable to equity holders of the parent 15,889 20,406
Earnings per share
Basic 6 7.36p 9.42p
Diluted 6 7.25p 9.30p
Adjusted diluted(6) 6 9.39p 10.47p
(Note 6: Adjusted for amortisation of acquired intangible assets and movement
in long-term acquisition liabilities.)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited) (Audited)
2023 2022
£'000 £'000
Profit for the year 15,889 20,406
Exchange differences on translation of foreign operations (3,126) 6,940
Gain/(loss) arising on cash flow hedges 3,984 (1,297)
Deferred tax charge arising on cash flow hedges (465) (201)
Total other comprehensive income/(expense) for the year 393 5,442
Total comprehensive income for the year attributable to equity holders of the 16,282 25,848
parent
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited) (Audited)
31 December 2023 31 December 2022
£'000 £'000
Assets
Non-current assets
Intangible assets 55,864 48,373
Goodwill 80,435 70,859
Property, plant and equipment 29,601 29,015
Deferred tax assets 356 -
Trade and other receivables 593 937
166,849 149,184
Current assets
Inventories 36,046 27,911
Trade and other receivables 25,728 21,553
Current tax assets 388 184
Cash and cash equivalents 60,160 82,262
122,322 131,910
Total assets 289,171 281,094
Liabilities
Current liabilities
Trade and other payables 19,254 20,671
Current tax liabilities 1,165 948
Lease liabilities 1,164 1,059
21,583 22,678
Non-current liabilities
Trade and other payables 4,400 3,510
Deferred tax liabilities 11,013 9,593
Lease liabilities 7,973 8,691
23,386 21,794
Total liabilities 44,969 44,472
Net assets 244,202 236,622
Equity
Share capital 10,865 10,843
Share premium 37,473 37,269
Share-based payments reserve 18,649 15,711
Investment in own shares (6,877) (167)
Share-based payments deferred tax reserve 150 531
Other reserve 1,531 1,531
Hedging reserve 2,000 (1,519)
Translation reserve 1,878 5,004
Retained earnings 178,533 167,419
Equity attributable to equity holders of the parent 244,202 236,622
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 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
Own shares purchased - - - (392) - - - - - (392)
Own shares sold - - - 389 - - - - - 389
Dividends paid - - - - - - - - (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
Consolidated profit for the year to 31 December 2023 - - - - - - - - 15,889 15,889
Other comprehensive (expense)/income - - - - - - 3,519 (3,126) - 393
Total comprehensive (expense)/income - - - - - - 3,519 (3,126) 15,889 16,282
Share-based payments - - 2,916 - (381) - - - - 2,535
Share options exercised 22 204 22 - - - - - - 248
Own shares purchased - - - (6,710) - - - - - (6,710)
Dividends paid - - - - - - - - (4,775) (4,775)
At 31 December 2023 (Unaudited) 10,865 37,473 18,649 (6,877) 150 1,531 2,000 1,878 178,533 244,202
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) (Audited)
Year ended Year ended
31 December 2023 31 December 2022
Note £'000 £'000
Cash flows from operating activities
Operating profit 18,882 24,890
Adjustments for:
Depreciation 4,375 4,049
Amortisation - acquired intangible assets 4,887 3,414
- software intangibles 522 502
- development costs 1,004 879
Increase in inventories (8,064) (7,087)
Increase in trade and other receivables (2,515) (596)
(Decrease)/Increase in trade and other payables (5,249) 1,711
Share-based payments expense 2,916 2,439
Taxation paid (4,413) (3,324)
Net cash inflow from operating activities 12,345 26,877
Cash flows from investing activities
Purchase of software (89) (73)
Capitalised research and development (6,216) (6,152)
Purchases of property, plant and equipment (3,544) (3,739)
Disposal of property, plant and equipment 42 46
Interest received 2,470 820
Acquisition of subsidiaries net of cash 7 (5,529) (2,781)
Payment of contingent consideration 7 (7,399) -
Net cash used in investing activities (20,265) (11,879)
Cash flows from financing activities
Dividends paid (4,775) (4,341)
Repayment of principal under lease liabilities (1,472) (1,295)
Repayment of loan 7 (480) (331)
Issue of equity shares 181 266
Own shares purchased (6,710) (392)
Own shares sold - 389
Interest paid (362) (617)
Net cash used in financing activities (13,618) (6,321)
Net (decrease)/increase in cash and cash equivalents (21,537) 8,677
Cash and cash equivalents at the beginning of the year 82,262 72,965
Effect of foreign exchange rate changes (564) 620
Cash and cash equivalents at the end of the year 60,160 82,262
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
02867684). 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 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, focused on quality outcomes for patients
and value for payers. The Group 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(®), Liquifix(TM) and Seal-G(®). The Group also
supplies wound care dressings such as silver alginates, alginates and foams
through its ActivHeal(®) brand as well as under white label.
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 2022 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:
· Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and
IFRS7, IFRS4 and IFRS16)
· Onerous Contracts - Cost of Fulfilling a Contract (Amendments to
IAS37)
· Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16)
· Annual Improvements to IFRS Standards 2018-2020 (Amendments to
IFRS1, IFRS9, IFRS16 and IAS 41); and
· References to Conceptual Framework (Amendments to IFRS3)
While the financial information included in this preliminary announcement has
been prepared in accordance with the recognition and measurement criteria of
international accounting standards and International Financial Reporting
Standards (IFRSs) as adopted by the UK, 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 2024.
The unaudited financial information set out in the announcement does not
constitute the Group's statutory accounts for the years ended 31 December 2023
or 31 December 2022. The financial information for the year ended 31 December
2022 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 2023 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 unaudited 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 2022.
Going concern
With regards to the Group's financial position, it had cash and cash
equivalents at the 31 December 2023 of £60.2 million and continues to be
profitable with positive operational cash flow.
The proposed acquisition of the entire issued share capital of Peters Surgical
will be funded by a new debt facility which includes a £60 million term loan
facility and £30 million revolving credit facility, together (the "New Debt
Facility") with the balance of the consideration to be funded by the Group's
cash.
Both the term loan and the revolving credit facility mature in March 2027 and
thereafter can be extended by two consecutive twelve months periods. Interest
on drawn funds will be charged at the SONIA interest rate plus an initial bank
margin of 1.75%, with this margin expected to reduce in 2025 in line with
forecasted leverage reductions.
The Directors expect the initial proforma net debt to EBITDA ratio of the
Enlarged Group to be approximately 1.5x and to reduce materially thereafter.
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 a period of 12 months from the date of this preliminary announcement.
These have been based on a comprehensive review of revenue, expenditure and
cash flows, taking into account specific business risks and the current
economic environment. Sensitivity analysis has been prepared to stress test
forecasts and the Directors are confident the business is a going concern
given the significant headroom available. The Directors also considered
whether any factors exist that might reasonably impact the Group's ability to
continue as going concern beyond the period of 12 months from the date of
signing the accounts, with no factors considered reasonably possible.
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 large 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 proposed acquisition of Peters Surgical will
further expand AMS's product portfolio, add additional direct sales capability
in key territories, improve manufacturing efficiency and further expand the
Group's specialist development and commercialisation function.
Having taken the above into consideration, the Directors have reached a
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 this preliminary announcement.
New accounting standards not yet applied
Certain new accounting standards and interpretations have been published that
are not mandatory for 31 December 2023 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 31 December 2023 Surgical Woundcare Consolidated
(unaudited)
£'000 £'000 £'000
Revenue
External sales 79,093 47,117 126,210
Result
Adjusted segment operating profit 19,985 5,317 25,302
Amortisation of acquired intangibles (3,944) (943) (4,887)
Segment operating profit 16,041 4,374 20,415
Unallocated expenses (1,533)
Operating profit 18,882
Finance income 3,786
Finance costs (1,511)
Profit before tax 21,157
Tax (5,268)
Profit for the year 15,889
Year ended 31 December 2023 Surgical Woundcare Consolidated
(Unaudited)
Other information £'000 £'000 £'000
Capital additions:
Software intangibles 47 42 89
Development costs 5,222 994 6,216
Property, plant and equipment 2,337 1,207 3,544
Depreciation and amortisation (7,504) (3,284) (10,788)
At 31 December 2023
Statement of Financial Position
Assets
Segment assets 207,647 81,524 289,171
Liabilities
Segment liabilities 34,810 10,159 44,969
Year ended 31 December 2022 Surgical Woundcare Consolidated
(audited)
£'000 £'000 £'000
Revenue
External sales 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
Year ended 31 December 2022 Surgical Woundcare Consolidated
(audited)
Other information £'000 £'000 £'000
Capital additions:
Software intangibles 34 39 73
Development costs 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)
At 31 December 2022 190,456 90,638 281,094
Statement of Financial Position
Segment assets
Liabilities
Segment liabilities 29,786 14,686 44,472
Geographic segments
The Group operates in the UK, The Netherlands, Germany, the Czech Republic,
France, Ireland 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 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) (Restated)
Year ended 31 December 2023 2022
£'000 £'000
United Kingdom 17,385 15,321
Germany 26,365 23,025
Rest of Europe 38,933 32,333
United States of America 31,875 43,387
Rest of World 11,652 10,264
126,210 124,330
Several international distributors with material sales have changed their
shipping location during the year. To ensure a like for like comparison, the
prior year sales by geographical market has been restated to categorise these
specific customers as if they had always been based in the amended shipping
location.
The following table provides an analysis of the Group's total assets by
geographical location:
(Unaudited) (Audited)
As at 31 December 2023 2022
£'000 £'000
United Kingdom 140,039 151,817
Germany 80,942 78,877
France 11,761 11,934
Rest of Europe 37,782 16,670
United States of America 1,256 451
Israel 19,231 21,345
291,011 281,094
4. Operating profit
(Unaudited) (Audited)
Year ended 31 December 2023 2022
£'000 £'000
Operating profit is arrived at after charging:
Depreciation of property, plant and equipment 4,375 4,049
Amortisation of:
- acquired intangible assets 4,887 3,414
- software intangibles 522 502
- development costs 1,004 879
Research and development costs expensed excluding regulatory costs 5,597 4,323
Cost of inventories recognised as expense 55,733 50,663
Write down of inventories expensed 337 251
Staff costs 49,024 46,065
Net foreign exchange loss 1,955 1,683
5. Taxation
(Unaudited) (Audited)
Year ended 31 December 2023 2022
£'000 £'000
a) Analysis of charge for the year
Current tax:
Tax on ordinary activities - current year 5,516 5,655
Tax on ordinary activities - prior year (540) 6
4,976 5,661
Deferred tax:
Tax on ordinary activities - current year (183) (84)
Tax on ordinary activities - prior year 475 (73)
292 (157)
Tax charge for the year 5,268 5,504
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 2023 2022
£'000 £'000
b) Factors affecting tax charge for the year
Profit before taxation 21,157 25,910
Profit multiplied by the weighted average Group tax rate of 28.0% (2022: 5,918 5,911
22.8%)
Effects of:
Net expenses not deductible for tax purposes and other timing differences 605 243
Patent Box Relief (817) (554)
Utilisation of trading losses (526) (269)
Net impact of deferred tax on capitalised development costs and R&D relief (245) 32
Share-based payments 398 208
Adjustments in respect of prior year - current tax (540) 6
Adjustments in respect of prior year and rate changes - deferred tax 475 (73)
Taxation 5,268 5,504
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 2023 2022
'000 '000
Number of shares
Weighted average number of ordinary shares in issue 217,093 216,512
Shares held in EBT (1,195) -
Weighted average number of ordinary shares for the purposes of basic earnings 215,898 216,512
per share
Effect of dilutive potential ordinary shares: share options, deferred share 3,391 2,969
bonus, LTIPs
Weighted average number of ordinary shares for the purposes of diluted 219,289 219,481
earnings per share
(Unaudited) (Audited)
2023 2022
£'000 £'000
Profit for the year attributable to equity holders of the parent 15,889 20,406
Amortisation of acquired intangible assets 4,887 3,414
Movement in long-term acquisition liabilities (186) (840)
Adjusted profit for the year attributable to equity holders of the parent 20,590 22,980
(Unaudited) (Audited)
2023 2022
pence pence
Basic EPS 7.36 9.42
Diluted EPS 7.25 9.30
Adjusted basic EPS 9.54 10.61
Adjusted diluted EPS 9.39 10.47
7. 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 eleven-month period from acquisition to 31(st) December 2023,
Connexicon contributed £1.4 million of revenue to the Group and £0.4 million
of operating profit. In addition, amortisation of intangible assets of £1.3
million, plus movement in long-term acquisition liability expense of £1.1
million was recorded within the Group as a result of the acquisition. A number
of the commercial milestones set out in the Option Agreements were fulfilled,
and therefore exercised, resulting in contingent consideration payments of
€8 million (£7.0 million) in the period. The results, assets and
liabilities of Connexicon have 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 (fair value) 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.
£13.7 million was the estimated fair value of the contingent consideration at
the acquisition date and £7.6 million is the fair value at 31 December 2023.
None of the goodwill on the acquisition is expected to be deductible for
income tax.
In addition to the contingent consideration payment in relation to Connexicon,
€0.5 million (£0.4 million) was paid in the year relating to AFS.
8. Events after reporting period
With the exception of the acquisition of Peters Surgical for a maximum
consideration of €141.4 million and the acquisition of certain assets of
Syntacoll GmbH for €1 million as discussed above, there have been no
material events subsequent to 31 December 2023.
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