REG - Adv Medical Solutns. - Interim Results
18/09/2024 07:00
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RNS Number : 5968E Advanced Medical Solutions Grp PLC 18 September 2024
18 September 2024
Advanced Medical Solutions Group plc
("AMS" or the "Group")
Interim results for the six months ended 30 June 2024
~ H1 delivering high quality growth alongside transformative Peters Surgical
acquisition ~
~ Current trading in line, FY expectations reiterated ~
Winsford, UK, 18 September 2024: 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 2024
(the "Period").
Financial Highlights:
H1 H1 Reported change Change at constant currency¹
2024 2023
Revenue (£ million) 68.0 63.1 +8% +10%
Adjusted Measures
Adjusted² profit before tax (£ million) 14.8 13.8 +8%
Adjusted² profit before tax margin % 21.8% 21.8% 0.0pp
Adjusted² diluted earnings per share (p) 5.35 4.97 +8%
Reported Measures
Profit before tax (£ million) 5.7 11.8 -52%
Profit before tax margin % 8.4% 18.7% -10.3pp
Diluted earnings per share (p) 1.92 4.06 -53%
Net operating cash flow (£ million) 7.0 4.1 +68%
Net cash(3) (£ million) 55.6 69.1 -20%
Interim dividend per share (p) 0.77p 0.70p +10%
Business Highlights (including post period end):
Operational
· Robust financial performance in line with expectations, with
strong organic growth in the Period driven by the Surgical business, with
particularly strong growth from US LiquiBand(®).
· The transformative acquisition of Peters Surgical, completed 1
July 2024, a leading global provider of specialty surgical sutures, mechanical
haemostasis and internal cyanoacrylate devices, substantially strengthens
AMS's position as a leading global surgical supplier; with the integration of
the business progressing well.
· The acquisition of Syntacoll GmbH ("Syntacoll"), completed 1
March 2024, a specialist manufacturer of drug-eluting collagens, strengthens
the Group's existing Biosurgical business.
· The Board has completed a strategic review of the Woundcare
Business Unit and has concluded that profitability of the Unit can be improved
by focusing on higher margin business and reducing investment in certain
areas.
Financial
· Revenue increased by 8% to £68.0 million and by 10% at constant
currency (2023 H1: £63.1 million) driven by growth across all categories in
the Surgical Business Unit, partly offset by challenges in the Woundcare
Business Unit.
· Surgical revenues increased by 23% to £48.4 million (2023 H1:
£39.4 million) and by 27% at constant currency, with double-digit growth in
all product categories.
· US LiquiBand(®) grew by 54% at constant currency, due to
significant momentum from the success of AMS's 2023 renegotiation of
distribution agreements with key partners, an element of partner stock rebuild
and in comparison to a weak prior period.
· Significant US launch orders were also received in the Period for
LIQUIFIX(TM) with repeat orders expected in H1 2025, following a longer than
anticipated Group Purchasing Organisations ("GPOs") approval process.
· Woundcare revenues decreased by 17%, at both reported currency
and constant currency, to £19.5 million (2023 H1: £23.7 million) due to the
previously reported declining Organogenesis royalty and weak demand, in
particular within exudate management, which included the cessation of certain
low margin business.
· Gross margins reduced to 54.3% (2023 H1: 56.5%) due to the
previously reported reduction in Organogenesis royalty income stream, weakness
in the Woundcare Business Unit and the addition of Syntacoll which currently
operates at a lower margin.
· Adjusted profit before tax increased by 8% to £14.8 million
(2023 H1: £13.8 million) with adjusted profit before tax margin remaining
constant at 21.8% (2023 H1: 21.8%). Reported profit before tax declined to
£5.7 million (2023 H1: £11.8 million) as a result of significant
acquisition-related exceptional items incurred in the period.
· Net cash(3) decreased to £55.6 million from a year-end position
of £60.2 million (2023 H1: £69.1 million) following the acquisition of
assets of Syntacoll, and contingent consideration for Connexicon Medical Ltd
("Connexicon") following positive achievement of Research & Development
milestones. Additional working capital has also been required to support
Surgical growth. Post period end (as at 1 July), following the completion of
the Peter's Surgical acquisition, the Company's net debt position was £ 56.2
million.
· Given the Board's continued confidence in the future, the interim
dividend is increased 10% to 0.77p per share (2023 H1: 0.70p)
Outlook
· Outlook remains unchanged and the Board anticipates that revenue
and adjusted profit will be in line with its expectations.
Commenting on the interim results Chris Meredith, CEO of AMS, said: "We are
delighted with the progress made so far this year, having completed the
acquisitions of Peters Surgical and Syntacoll and now being able to report
such a strong first half performance from the AMS Surgical business unit.
Since the completion of the Peters Surgical deal in July, integration has been
progressing well, and the business is proving to be an excellent fit
culturally and strategically. Whilst Woundcare has continued to struggle, we
believe we have a pathway to improving its profitability. We feel confident
that our enlarged portfolio, greater geographic reach, the synergies that we
believe can be established over the next three years, combined with the
revitalised momentum established in the legacy AMS Surgical business has set
us on a very strong trajectory for growth in the long-term."
- 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 exceptional items which,
in 2024 H1, were £7.5 million expense (2023 H1: £nil); amortisation of
acquired intangible assets which, in 2024 H1, were £2.5 million (2023 H1:
£2.4 million) and a £0.9 million credit for movement in long-term
acquisition liabilities (2023 H1: credit of £0.4 million) as defined in the
financial review. Adjusted operating margin is shown before amortisation of
acquired intangible assets
3 Net cash consisted of £134.9 million of cash and cash equivalents
(2023 H1: £69.1 million) and £79.3 million of debt (2023 H1: £nil debt. The
majority of the cash as at 30 June was paid out on 1 July to acquire Peters
Surgical.
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 Tel: +44 (0) 20 3709 5700
Mary-Jane Elliott / Lucy Featherstone AMS@consilium-comms.com
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
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®, LIQUIFIX™, Peters Surgical, Ifabond, Vitalitec 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 seven 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, Connexicon, an Irish tissue
adhesives specialist, Syntacoll, a German specialist in collagen-based
absorbable surgical implants and Peters Surgical, a global provider of
specialty surgical sutures, mechanical haemostasis and internal cyanoacrylate
devices.
AMS's products, manufactured in the UK, Germany, France, the Netherlands,
Thailand, India, 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, France, Poland,
Benelux, India, 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 1,500 employees. For more information, please
see www.admedsol.com (http://www.admedsol.com) .
Chief Executive's Review
Summary and Outlook
A number of strategic initiatives, new product launches and key acquisitions
have been implemented over the past 12 months that the Board believes will
transform AMS into a significantly larger, more competitive business with
greater scope to generate stronger and more sustainable growth in the
long-term. The interim results to the end of June 2024 confirm that many of
these initiatives are already working well and delivering growth.
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 23% on a reported basis and 27% on a constant currency basis in
the Period to £48.4 million (2023 H1: £39.4 million).
Surgical Business Unit 2024 H1 2023 H1 Reported Growth Growth at constant currency
£ million £ million
Advanced Closure 21.8 17.0 28% 30%
Internal Fixation and Sealants 3.8 2.2 75% 79%
Traditional Closure 10.4 9.4 11% 17%
Biosurgical Devices 9.5 8.3 15% 18%
Other Distributed Products 3.0 2.5 19% 22%
TOTAL 48.4 39.4 23% 27%
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 2024 H1 2023 H1 £ million Reported Growth Growth at constant currency
£ million
Americas 13.8 9.2 50% 54%
UK/Germany 4.1 4.0 0% 1%
ROW 3.2 3.4 -6% -5%
Connexicon 0.7 0.4 81% 86%
TOTAL 21.8 17.0 28% 30%
LiquiBand(®) revenues increased by 28% to £21.8 million (2023 H1: £17.0
million) and 30% at constant currency, predominately due to the successful
implementation of the new US marketing strategy, which involved AMS taking
over direct sales control for one key distribution channel, as well as other
important renegotiations with its other partners. The success of this
strategy, supported by partner stock rebuild, has resulted in US revenues of
£13.8 million (2023 H1: £9.2 million) in the first half; growth of 50% on a
reported basis and 54% at constant currency, compared to the weak prior period
which saw higher than expected levels of destocking. This strategy has been
further enhanced by Connexicon securing its FDA approvals in July 2024,
providing the opportunity for further product exclusivity for our marketing
partners and greater commitment from all parties.
US FDA approval granted in July for the majority of the Connexicon portfolio
triggered €3m of earn-out payments in July relating to the approval.
Outside the US, end user demand for LiquiBand(®) remains strong, however
phasing of customer orders, including the NHS supply chain, has meant this
underlying demand has not been reflected in reported revenue growth during the
Period.
The Chinese approval process for Connexicon Indermil(®) has begun following
completion of clinical trial recruitment. It is anticipated that approval will
be obtained by 2026 which would represent AMS's first tissue adhesive approval
in this very significant market.
Internal Fixation and Sealants
AMS's hernia mesh fixation device, sold under the LiquiBandFix8(®) brand
ex-US and as LIQUIFIX(TM) in the US, secures meshes inside the body with
accurately delivered individual drops of cyanoacrylate adhesive instead of
traditional tacks and staples. Revenues increased by 75% on a reported basis
to £3.8 million (2023 H1: £2.2 million) and 79% on a constant currency
basis.
The US launch of LIQUIFIX(TM) is progressing well with significant launch
orders received. The GPO approval process has proven to be more prolonged than
anticipated and consequently limited orders are expected in the second half of
2024. Progress has been made in two major US GPOs, with approval in Premier
GPO, leveraging our distribution partners existing Premier mesh approvals, and
pending approval in HealthTrust GPO from 1 November. Following the HealthTrust
GPO approval, significant orders are anticipated from H1 2025.
SEAL-G(®) MIST is a novel, internal, biological sealant used to seal tissue
to reduce leakage of fluid during internal surgery. Following a non-randomised
clinical study of 160 gastrointestinal (GI) surgery patients in 2023, AMS has
progressed with a 60-patient clinical study for pancreatic surgery, which is a
high-risk procedure with higher leakage rates and thus a lower patient
population to demonstrate results. This study is underway with 29 procedures
completed and positive initial feedback.
In 2023, a key component required to connect the laparoscopic device to an
external gas supply was discontinued by the supplier, restricting
commercialisation and limiting our activities to just critical clinical work
and KOL surgeon evaluations. With no short-term solution, AMS is progressing
with its development of the next generation laparoscopic device that does not
need a gas supply connection and has developed a working prototype.
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 11% to £10.4 million (2023 H1: £9.4
million) and by 17% at constant currency with ongoing growth primarily in our
core European markets. Customer appetite for suture conversions has
significantly increased and greater investment in inventory has allowed
commercial demand to be met and increased AMS's ability to win new customers.
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 15% to £9.5 million (2023 H1:
£8.3 million) and by 18% at constant currency, including a £1 million
contribution from the acquisition of the Syntacoll assets from administration
in March 2024. The assets were purchased for €1 million, and came on-line in
May 2024, significantly enhancing AMS's Biosurgical capabilities in the
development, manufacture and regulatory approval of drug-loaded collagens.
These capabilities are expected to accelerate AMS's US approval pathway for
the combined collagen portfolio to open substantial new high margin US
biosurgical opportunities.
End user demand for AMS's collagen products remains strong but technical and
manufacturing issues at the Nuremburg facility in the Period restricted the
Group's ability to fulfil all customer orders. Expertise acquired with the
Syntacoll assets has already started to address some of these issues and, with
the addition of the new facility, AMS expects to have significant capacity
headroom against forecasted future demand.
Other Distributed Products
The Other Distributed products category comprises products distributed through
AFS Medical in Austria, including minimally invasive access ports and
laparoscopic instruments. This category excludes sales of LiquiBandFix8(®)
which are recorded within the Internal Fixation and Sealants category. Revenue
increased by 19% on a reported basis and 22% on a constant currency basis to
£3.0 million (2023 H1: £2.5 million).
Peters Surgical
AMS completed the acquisition of Peters Surgical in July 2024. Consideration
consisted of an initial cash payment of €132.5 million, on a normalised cash
free, debt free basis, and an earnout of up to €8.9 million payable in FY25
and FY26 on delivery of regulatory, gross margin, inventory and tax
milestones. Two US approvals are required to trigger the regulatory milestone,
one of which has already been achieved in Q3 2024. It is anticipated that the
second approval, that would trigger the earnout, will follow in late 2024 or
early 2025. Peters Surgical increased revenues by 6% to €85.2 million in the
last 12 months to the end of the Period.
Excellent progress has been made since the recent completion, confirming the
excellent cultural and strategic fit between both companies.
A dedicated integration team has been established to maximise and deliver
significant operational synergies, which the Board is confident will be £10
million p.a. from FY27 from Peters Surgical and Syntacoll. Optimisation of the
operational functions of both businesses is subject to regulatory approval
timelines and is expected to take approximately three years to complete.
The commercial integration of both businesses is also underway and is on
track.
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.
Business Unit revenue decreased by 17% in the Period to £19.5 million (2023
H1: £23.7 million) on a reported and constant currency basis.
Woundcare Business Unit 2024 H1 2023 H1 Reported Growth Growth at constant currency
£ million £ million
Infection and Exudate Management 17.2 19.9 -13% -13%
Other Woundcare 2.3 3.8 -39% -38%
TOTAL 19.5 23.7 -17% -17%
Infection and Exudate Management
Infection and Exudate Management revenue decreased by 13% on both a reported
and constant currency basis to £17.2 million (2023 H1: £19.9 million).
Ongoing challenging market conditions continue to impact the business
including pricing pressure, low-cost competition and reimbursement issues, but
the first half performance was also impacted by adverse phasing of orders
during the Period. The ordering pattern anticipated during the rest of the
year is expected to result in a stronger second half.
Other Woundcare
Other Woundcare comprises royalties, fees and woundcare sealants. Revenue
reduced by 39% at reported currency and by 38% at constant currency to £2.3
million (2023 H1: £3.8 million) as a result of lower royalty income from the
Group's licensing arrangement with Organogenesis, as announced in September
2023.
Woundcare strategy
With the Group's increased focus on Surgical products and as the challenging
Woundcare market conditions persist, the Board has performed a strategic
review of the Woundcare Business Unit which included assessing its growth
prospects, investment requirements and gross margins by customer and product.
Following this review, the Board has concluded that shareholder value can be
best optimised through various initiatives, including focusing on higher
margin business and reducing investment in certain areas, that will improve
future profitability of the Unit.
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.
Environmental, Social & Governance
AMS continues to make positive progress on its ESG activities, building on the
foundations reported in its FY23 Annual report. It is now working on aligning
these with the considerable CSR program already established in the Peters
Surgical group. This alignment will include combining emissions data for the
two businesses and rebasing the initial carbon footprint for the enlarged
group, progressing its Pathway to Net Zero, which has a commitment date of
2045.
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.
Outlook
The strong underlying trend in AMS's Surgical business has continued in Q3
whilst the Peters Surgical business performed in line with expectations in the
first half of 2024 and is expected to make a positive contribution to the
group from its acquisition in July 2024. The outlook for the Group for the
full year 2024 remains unchanged and the Board anticipates that revenue and
adjusted profit will be in line with its expectations.
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
Completion of the Peters Surgical acquisition in July 2024 transforms the
Group going forwards, adding significant revenue, profit and scale whilst
reducing our net cash position. In the last 12 months to the end of the
Period, Peters Surgical reported revenue of €85.2 million and adjusted
EBITDA of €13.6 million. To fund the acquisition the Group obtained £90
million of borrowing facilities from its banks as discussed in further detail
below.
During the period, revenue increased by 8% at reported currency to £68.0
million (2023 H1: £63.1 million) and increased by 10% at constant currency,
as summarised in the Chief Executive's Review.
Gross profit increased to £36.9 million (2023 H1: £35.7 million) but gross
margin decreased to 54.3% (2023 H1: 56.5%) due to adverse product mix in
Woundcare including the reduced royalty income from Organogenesis.
Administration expenses, before exceptional items, remained constant at £25.0
million (2023 H1: £25.0 million) although it includes the effect of
favourable foreign exchange movements which added £2 million of benefit
versus the prior period. The Group has increased investment in the sales and
marketing team to support growth, in particular in the Surgical business unit
whilst the acquisition of Connexicon in H1 2023 has added £0.2 million of
annualised operating costs.
Exceptional items totalling £7.5 million (2023 H1: £nil) have been incurred
in the period as a result of the acquisition of Peters Surgical and Syntacoll.
Given the significance of these costs in the period, in comparison to costs
incurred for acquisitions in previous periods, they have been disclosed
separately. Exceptional costs incurred in relation to Peters Surgical include
deal advisory fees, due diligence fees such as legal, accounting and tax
amongst others as well as hedging costs to ensure protection against movement
in the euro rate on the purchase price between March 2024 when the Group
agreed to acquire Peters Surgical and June when FDI approval for the
transaction was received. Exceptional items relating to Syntacoll include
legal costs, termination payments to staff not retained and operating costs
for an idle period when the site was not yet operational. The site recommenced
operations at the end of May.
As the investment required to comply with the Medical Device Regulation
("MDR") nears completion, the Group has been able to reduce the regulatory
element of its R&D spend and consequently total investment in R&D has
reduced to £5.6 million (2023 H1: £6.0 million), representing 8.2% (2023 H1:
9.5%) of revenue. The reduction from the prior period also reflects the
inclusion in FY23 of the final stages of the US PMA for LIQUIFIX™. As shown
in the table below, elements of this cost are capitalised and amortised over 5
to 10 years.
H1 2024 H1 2023
£'000 £'000
Total investment in Research and Development, Regulatory and Clinical 5,593 5,972
Of which:
Charged to the profit and loss account 3,448 2,926
Capitalised, to be amortised over 5-10 years 2,145 3,046
Amortisation of acquired intangible assets increased to £2.5 million (2023
H1: £2.4 million) due to the annualised impact of the prior period Connexicon
acquisition.
Adjusted operating profit, which excludes amortisation of acquired intangibles
and exceptional items, increased by 9% to £14.0 million (2023 H1: £12.8
million) whilst the adjusted operating margin increased by 20 bps to 20.5%
(2023 H1: 20.3%) due to the improved performance of the Surgical business
unit.
Movement in long-term acquisition liabilities of Sealantis, AFS &
Connexicon resulted in a net credit of £0.9 million (2023 H1: £0.4 million
credit), as a result of a reduction in the Connexicon earn-out.
The Group delivered increased adjusted profit before tax of £14.8 million
(2023 H1: £13.8 million), despite the Woundcare headwind. Reported profit
before tax was £5.7 million (2023 H1: £11.8 million) as a result of the
significant exceptional items incurred in the period.
Reconciliation of profit before tax to adjusted profit before tax
H1 2024 H1 2023
£'000 £'000
Profit before tax 5,695 11,768
Amortisation of acquired intangibles 2,468 2,402
Exceptional items 7,544 -
Movement in long-term acquisition liabilities (895) (404)
Adjusted profit before tax 14,812 13,766
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 26.7% (2023 H1: 24.1%) with the main driver behind the increase
being acquisition costs, some of which are not tax deductible, and the
annualised impact of the UK Corporation tax rate increase to 25%, effective
1(st) April 2023. These are partly offset by lower profits in Germany as a
result of the reduced Organogenesis royalty. The tax rate in Germany is higher
than the Group's average tax rate and therefore a lower proportion of profit
in Germany reduces the Group's effective tax rate.
Adjusted diluted earnings per share increased by 8% to 5.35p (2023 H1: 4.97p)
whilst adjusted basic earnings per share also increased by 8% to 5.44p (2023
H1: 5.04p). Diluted earnings per share reduced by 53% to 1.92p (2023 H1:
4.06p) as a result of the significant exceptional items incurred in the period
and basic earnings per share reduced by 53% to 1.95p (2023 H1: 4.12p).
The Board intends to pay an interim dividend of 0.77p per share on 25 October
2024 to shareholders on the register at the close of business on 27 September
2024. This is a 10% increase on the interim dividend paid in respect of the
first half of 2023 reflecting the Board's ongoing confidence in the future
growth in the Group.
Operating result by business segment
Six months ended 30 June 2024 Surgical Woundcare
£'000 £'000
Revenue 48,439 19,547
Segment operating profit 11,375 776
Amortisation of acquired intangibles 1,998 470
Adjusted segment operating profit(4) 13,373 1,246
Adjusted operating margin(4) 27.6% 6.4%
Six months ended 30 June 2023
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%
(4) Adjusted for amortisation of acquired intangible assets and exceptional
items
Table is reconciled to statutory information in note 5 of the financial
information.
Surgical
Surgical revenues increased by 23% to £48.4 million (2023 H1: £39.4 million)
at reported currency and increased by 27% at constant currency. Adjusted
operating margin increased by 200 bps to 27.6% (2023 H1: 25.6%) due to
improved sales mix following the new US Marketing strategy for LiquiBand(®).
Woundcare
Woundcare revenues decreased by 17% to £19.5 million (2023 H1: £23.7
million) at reported currency and constant currency. Adjusted operating margin
decreased by 770 bps to 6.4% (2023 H1: 14.1%) predominately due to adverse
product mix and 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 18 months. In the first half of the year, approximately
one third of sales were invoiced in Euros and approximately one third were
invoiced in US Dollars. Sales in Czech Koruna & Russian Ruble are
immaterial for the purpose of hedging. The acquisition of Peters Surgical will
add further USD and Euro cash flows as well as additional currencies including
Thai Baht and Indian Rupees. The impact of this is being considered and risk
management plans will be implemented as appropriate although the net risk is
unlikely to be material.
The Group estimates that a 10% movement in the £:US$ or £:€ exchange rate
will impact Sterling revenues by approximately 3.0% and 3.6% respectively and
in the absence of any hedging this would have an impact on the Group operating
margin of 2.1% and 0.3% percentage points respectively. Given the increased
cost base in Euro currency following the latest acquisitions across Europe,
the Euro currency transaction exposure has a minimal impact on Group Operating
Margin, and hence the Group has decided to only hedge US Dollar currency
transaction exposure over the next 18 months.
Cash Flow
Adjusted net cash inflow from operating activities has increased by 160% due
to increased operating profit when excluding the impact of exceptional items.
Net cash inflow from operating activities increased by 68% to £7.0 million
(2023 H1: £4.1 million) despite reduced operating profit due to the timing of
certain payables items, in particular acquisition related costs which were
incurred but not paid at the end of the period. Additional information on
working capital movements is explained below.
Reconciliation of Net cash inflow from operating activities to Adjusted net
cash inflow from operating activities
(Unaudited) (unaudited)
Six months ended Six months ended
30 June 2024 30 June 2023
Net cash inflow from operating activities 6,962 4,149
Add back exceptional items 3,841 -
Adjusted net cash inflow from operating activities 10,803 4,149
At the end of the Period, net cash had reduced to £55.6 million from £60.2
million at year-end (2023 H1: £69.1 million) due to acquisition related
payments including €1m for the acquisition of Syntacoll assets; earn-out
payments of €3m for achievement of Connexicon Research & Development
milestones and €0.5 million for the achievement of AFS' FY23 EBITDA target.
Additional working capital has also impacted cash as a result of increased
levels of Inventory and Receivables. Net cash includes £79.3 million debt
(2023 H1: £nil debt) obtained at the end of the period ahead of completing
the Peters acquisition.
In the first half of 2024, receivables increased by £2.9 million (2023 H1:
£3.2 million increase) due to increased sales volumes, particularly within
the US. Debtor days increased to 47 from 45 days at year-end (2023 H1: 41
days) due to higher levels of US sales in the period which are typically on
longer payment terms.
Total payables increased by £1.3 million (2023 H1: £4.0 million increase)
due to significant acquisition related activity within the period, some of
which is to be paid post-period end increasing the payables position. This was
partially offset by the reduction in payables following Connexicon & AFS
earn-out related payments. Creditor days increased slightly to 37 days from 35
days at year-end and was in line with previous HY reporting (2023 H1: 37
days).
Inventory levels increased by £2.5 million (2023 H1: £3.9 million increase)
following the acquisition of Syntacoll assets, increasing our capabilities in
the Collagen market. Inventory cover for the period has increased to 7.3
months of supply in comparison to 7.1 months at year-end (2023 H1: 6.7 months)
with the Group choosing to maintain higher than historical levels of Inventory
in order to remain resilient to supply chain risks and fulfil growing
commercial demand.
In the Period, the Group invested £3.8 million in capital equipment, R&D
and regulatory costs, a reduction from the prior period (2023 H1: £4.8
million) which reflects the reducing levels of investment required for MDR.
The prior period also included investment in the LIQUIFIX(TM) PMA approval
which was received in July 2023. The current period includes investment in
packaging automation in Germany to improve production efficiency, investment
in Information Systems including hardware and continued progress on Medical
Device Regulation compliance.
Tax payments increased to £2.9 million (2023 H1: £1.4 million) which is
£1.4 million higher than tax in the income statement, mainly due to timing of
payments on account.
In June 2024, the Group paid its final dividend for the year ended 31 December
2023 of £3.6 million (2023 H1: £3.3 million).
The Group utilised £80 million of funding from its two banks, NatWest and
HSBC, who, as a syndicate, have arranged a new debt facility in the period to
fund part of the cash consideration for the post period end acquisition of
Peters Surgical. As part of the borrowing arrangement, fees of £0.7 million
were deducted from the £80 million loan. The facility is up to £90 million
potential borrowing comprised of Facility A, a £60 million term loan facility
with £5 million of annual repayments commencing 1(st) July 2025 and Facility
B, a £30 million multi-currency revolving credit facility, of which £20
million has been drawn down at 30 June 2024.
£10 million of funding in the revolving credit facility remains available in
future if required. The interest rate on both facilities for the first year is
based on SONIA plus 1.75% margin. Following the first year, the margin can
vary based on the Groups net leverage. The minimum margin is 1.50% per annum
based on a net leverage of less than 1.5:1.0 but greater than 1.0:1.0, and the
maximum margin is 2.50% per annum based on a net leverage of more than
2.5:1.0.
The loan has covenants in place meaning the group needs to comply with the
following financial conditions: a) Interest cover in respect of any relevant
period shall not be less than 4.0:1.0 and b) Net leverage in respect of each
relevant period shall not exceed 3.0:1.0.
Interest cover is calculated as a ratio of Adjusted EBITDA to Net Finance
Charge in respect of any relevant period. Net leverage is calculated as a
ratio of Total Net Debt on the last day of that relevant period to Adjusted
EBITDA in respect of that relevant period.
Post period-end, on 1(st) July 2024, the Group completed the acquisition of
Peters Surgical with consideration consisting of an initial cash payment of
€132.5 million.
CONDENSED CONSOLIDATED INCOME STATEMENT
(Unaudited) (Unaudited) (Audited)
Six months ended 30 June 2024 Six months ended 30 June 2023 Year ended 31 December 2023
Before Exceptional Before Exceptional Before Exceptional
Exceptional Items Exceptional Items Exceptional Items
Items Note 8 Total Items Note 8 Total Items Note 8 Total
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue from continuing operations 5 67,986 - 67,986 63,088 - 63,088 126,210 - 126,210
Cost of sales (31,091) - (31,091) (27,435) - (27,435) (56,070) - (56,070)
Gross profit 36,895 - 36,895 35,653 - 35,653 70,140 - 70,140
Distribution costs (812) - (812) (713) - (713) (1,520) - (1,520)
Administration costs (25,039) (7,544) (32,583) (25,007) - (25,007) (50,669) - (50,669)
Other income 443 - 443 473 - 473 931 - 931
Operating profit 11,487 (7,544) 3,943 10,406 - 10,406 18,882 - 18,882
Finance income 2,024 - 2,024 2,229 - 2,229 3,786 - 3,786
Finance costs (272) - (272) (867) - (867) (1,511) - (1,511)
Profit before taxation 13,239 (7,544) 5,695 11,768 - 11,768 21,157 - 21,157
Income tax 7 (3,167) 1,648 (1,519) (2,836) - (2,836) (5,268) - (5,268)
Profit for the period attributable to equity holders of the parent 10,072 (5,896) 4,176 8,932 - 8,932 15,889 - 15,889
Earnings per share
Basic 4 4.70p (2.75p) 1.95p 4.12p - 4.12p 7.36p - 7.36p
Diluted 4 4.63p (2.71p) 1.92p 4.06p - 4.06p 7.25p - 7.25p
Adjusted diluted(5) 4 5.35p (2.71p) 2.64p 4.97p - 4.97p 9.39p - 9.39p
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Profit for the period 4,176 8,932 15,889
Exchange differences on translation of foreign operations (3,010) (3,674) (3,126) (3,126)
(Loss)/gain arising on cash flow hedges (431) 2,774 3,984 3,984
Deferred tax charge arising on cash flow hedges (212) (163) (465) (465)
Other comprehensive (charge)/ credit for the period (3,653) (1,063) 393 393
Total comprehensive income for the period attributable to equity holders of 523 7,869 16,282 16,282
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 2024 30 June 2023 31 December 2023
Note £'000 £'000 £'000
Assets
Non-current assets
Intangible assets 54,327 55,451 55,864
Goodwill 78,993 79,770 80,435
Property, plant and equipment 30,767 29,344 29,601
Deferred tax Asset 515 - 356
Trade and other receivables 182 1,260 593
164,784 165,825 166,849
Current assets
Inventories 38,564 31,812 36,046
Trade and other receivables 28,996 24,392 25,728
Current tax assets 497 403 388
Cash and cash equivalents 134,944 69,142 60,160
203,001 125,749 122,322
Total assets 367,785 291,574 289,171
Liabilities
Current liabilities
Trade and other payables 22,089 21,097 19,254
Current tax liabilities 569 594 1,165
Lease liabilities 1,534 1,051 1,164
24,192 22,742 21,583
Non-current liabilities
Trade and other payables 2,863 7,034 4,400
Borrowings 11 79,325 - -
Deferred tax liabilities 9,580 10,919 11,013
Lease liabilities 9,015 8,126 7,973
100,783 26,079 23,386
Total liabilities 124,975 48,821 44,969
Net assets 242,810 242,753 244,202
Equity
Share capital 13 10,881 10,858 10,865
Share premium 37,473 37,420 37,473
Share-based payments reserve 20,106 17,199 18,649
Investment in own shares (6,877) (167) (6,877)
Share-based payments deferred tax reserve 325 413 150
Other reserve 1,531 1,531 1,531
Hedging reserve 1,357 1,092 2,000
Translation reserve (1,132) 1,330 1,878
Retained earnings 179,146 173,077 178,533
Equity attributable to equity holders of the parent 242,810 242,753 244,202
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 2024 (audited) 10,865 37,473 18,649 (6,877) 150 1,531 2,000 1,878 178,533 244,202
Consolidated profit for the period to 30 June 2024 - - - - - - - - 4,176 4,176
Other comprehensive expense - - - - - - (643) (3,010) - (3,653)
Total comprehensive (expense)/income - - - - - - (643) (3,010) 4,176 523
Share-based payments - - 1,450 - - - - - - 1,450
Share options exercised 16 - 7 - 175 - - - - 198
Own shares purchased - - - - - - - - - -
Own shares sold - - - - - - - - - -
Dividends paid (Note 9) - - - - - - - - (3,563) (3,563)
At 30 June 2024 (unaudited) 10,881 37,473 20,106 (6,877) 325 1,531 1,357 (1,132) 179,146 242,810
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
Own shares purchased - - - - - - - - - -
Own shares sold - - - - - - - - - -
Dividends paid (Note 9) - - - - - - - - (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 2023 (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 income/(expense) - - - - - - 3,519 (3,126) - 393
Total comprehensive income/(expense) - - - - - - 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)
Own shares sold - - - - - - - - - -
Dividends paid (Note 9) - - - - - - - - (4,775) (4,775)
At 31 December 2023 (audited) 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) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
30 June 2024 30 June 2023 31 December 2023
Note £'000 £'000 £'000
Cash flows from operating activities
Operating profit 3,943 10,406 18,882
Adjustments for:
Depreciation 2,434 2,045 4,375
Amortisation - acquired intangible assets 2,468 2,402 4,887
- development costs 574 458 1,004
- software intangibles 227 258 522
Increase in inventories (2,477) (4,011) (8,064)
Increase in trade and other receivables (4,288) (2,732) (2,515)
Increase/(decrease) in trade and other payables 5,519 (4,783) (5,249)
Share-based payments expense 1,450 1,476 2,916
Taxation paid (2,888) (1,370) (4,413)
Net cash inflow from operating activities 6,962 4,149 12,345
Cash flows from investing activities
Purchase of software (152) (4) (89)
Capitalised development costs (2,145) (3,046) (6,216)
Purchases of property, plant and equipment (1,546) (1,767) (3,544)
Proceeds from disposal of property, plant and equipment 6 - 42
Interest received 1,064 1,147 2,470
Acquisitions (net of cash acquired) 10 (899) (5,529) (5,529)
Payment of contingent consideration 10 (2,998) (3,080) (7,399)
Net cash used in investing activities (6,670) (12,279) (20,265)
Cash flows from financing activities
Dividends paid 9 (3,563) (3,274) (4,775)
Repayment of principal under lease liabilities (876) (653) (1,472)
Repayment of borrowings - (480) (480)
New bank loan raised 79,325 - -
Issue of equity shares (41) 162 180
Shares purchased by Employee Benefit Trust - - (6,710)
Shares sold by Employee Benefit Trust - - -
Interest paid (196) (204) (362)
Net cash used in financing activities 74,649 (4,449) (13,618)
Net increase/(decrease) in cash and cash equivalents 74,941 (12,579) (21,538)
Cash and cash equivalents at the beginning of the period 60,160 82,262 82,262
Effect of foreign exchange rate changes (157) (541) (564)
Cash and cash equivalents at the end of the period 134,944 69,142 60,160
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 2024 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 2024 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 2023 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 16 Leases: Lease Liability in a Sale and
Leaseback
- Amendments to IAS 1 Presentation of Financial Statements:
Classification of liabilities as Current or Non-Current and Non-current
Liabilities with Covenants
- Amendments to IAS 7 Statement of Cash Flows and IFRS
7 Financial Instruments: Disclosures Supplier Finance Arrangements
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 2023. 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 2024 30 June 2023 31 December 2023
Number of shares '000 '000 '000
Weighted average number of ordinary shares 217,395 216,947 217,093
Basic weighted average number of shares held by Employee Benefit Trust (3,222) - (1,195)
Weighted average number of ordinary shares for the purposes of basic earnings 214,173 216,947 215,898
per share
Effect of dilutive potential ordinary shares: share options, deferred annual 3,536 3,084 3,391
bonus, Share Incentive Plan, LTIPs
Weighted average number of ordinary shares for the purposes of diluted 217,709 220,031 219,289
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, exceptional items 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 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Earnings
Profit for the year being attributable to equity holders of the parent 4,176 8,932 15,889
Exceptional items 7,544 - -
Tax impact of exceptional items (1,648) - -
Amortisation of acquired intangible assets 2,468 2,402 4,887
Movement in long-term acquisition liabilities (895) (404) (186)
Adjusted profit for the year being attributable to equity holders of the 11,645 10,930 20,590
parent
pence pence pence
Basic EPS 1.95 4.12 7.36
Diluted EPS 1.92 4.06 7.25
Adjusted basic EPS 5.44 5.04 9.54
Adjusted diluted EPS 5.35 4.97 9.39
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 2024
(Unaudited) £'000 £'000 £'000
Revenue 48,439 19,547 67,986
Result
Adjusted segment operating profit 13,373 1,246 14,619
Amortisation of acquired intangibles (1,998) (470) (2,468)
Segment operating profit 11,375 776 12,151
Unallocated expenses (664)
Exceptional items (7,544)
Operating profit 3,943
Finance income 2,024
Finance costs (272)
Profit before tax 5,695
Tax (1,519)
Profit for the period 4,176
At 30 June 2024 Surgical Woundcare Consolidated
(Unaudited)
Other information £'000 £'000 £'000
Capital additions:
Software intangibles 102 50 152
Development 1,867 278 2,145
Property, plant and equipment 1,024 522 1,546
Depreciation and amortisation (4,219) (1,484) (5,703)
Balance sheet
Assets
Segment assets 278,125 88,985 367,110
Unallocated assets 675
Consolidated total assets 367,785
Liabilities
Segment liabilities 81,994 38,893 120,887
Unallocated liabilities 4,088
Consolidated liabilities 124,975
Six months ended
30 June 2023 Surgical Woundcare Consolidated
(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
Year ended
31 December 2023 Surgical Woundcare Consolidated
(Audited) £'000 £'000 £'000
Revenue 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
At 31 December 2023
(Audited) Surgical Woundcare Consolidated
Other information £'000 £'000 £'000
Capital additions:
Software intangibles 47 42 89
Development 5,222 994 6,216
Property, plant and equipment 2,337 1,207 3,544
Depreciation and amortisation (7,504) (3,284) (10,788)
Balance sheet
Assets
Segment assets 207,647 81,524 289,171
Unallocated assets -
Consolidated total assets 289,171
Liabilities
Segment liabilities 34,810 10,159 44,969
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 2024 30 June 2023 31 December 2023
Segmental Revenue £'000 £'000 £'000
United Kingdom 7,921 8,537 17,385
Germany 11,954 11,666 26,365
Rest of Europe 23,013 20,593 38,933
United States of America 19,593 16,678 31,875
Rest of World 5,505 5,614 11,652
67,986 63,088 126,210
Several international distributors with material sales have changed their
shipping location during the prior year. To ensure a like for like comparison,
the prior year sales for the six months ended 30 June 2023 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) (Unaudited) (Audited)
30 June 2024 30 June 2023 31 December 2023
Segmental Assets £'000 £'000 £'000
United Kingdom 212,554 144,895 138,199
Germany 86,202 76,428 80,942
France 11,103 11,414 11,761
Rest of Europe 36,172 36,927 37,782
Israel 18,246 19,698 19,231
United States of America 3,508 2,212 1,256
367,785 291,574 289,171
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
2024. 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 24 30 June 23 31 Dec 23 30 June 24 30 June 23 31 Dec 23 30 June 24 30 June 23 31 Dec 23
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 1.07 1.31 1.26 8,500 9,500 7,500 1,178 (192) 51
3 to 6 months 1.23 1.30 1.15 10,000 9,000 7,500 202 (142) 617
7 to 12 months 1.25 1.21 1.15 15,000 15,000 18,500 176 585 1,468
Over 12 months 1.24 1.14 1.24 15,000 15,000 22,500 253 1,188 520
48,500 48,500 56,000 1,809 1,439 2,656
Ave. exchange rate Foreign currency Fair value
30 June 24 30 June 23 31 Dec 23 30 June 24 30 June 23 31 Dec 23 30 June 24 30 June 23 31 Dec 23
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 1.14 - 600 600 - 5 5
3 to 6 months - 1.15 1.13 - 600 600 - 4 4
7 to 12 months - 1.14 - - 1,200 - - 8 -
Over 12 months - - - - - - - - -
- 2,400 1,200 - 17 9
7. Taxation
The weighted average tax rate for the Group for the six-month period ended 30
June 2024 was 28.2% (first half of 2023: 26.3%, year ended 31 December 2023:
28.0%). The Group's effective tax rate for the full year is expected to be
26.7%, which has been applied to the six months ended 30 June 2024 (first half
of 2023: 24.1%, year ended 31 December 2023: 24.9%). This represents an
increase on the previous period due to the impact of the increased corporation
tax rate in the UK effective 1(st) April 2023 and acquisition related costs,
some of which are not tax deductible. These are partly offset by lower profits
in Germany as a result of the reduced Organogenesis royalty. The corporation
tax rate in Germany is higher than the Group's average tax rate and therefore
a lower proportion of profit in Germany reduces the group's effective tax
rate.
8. Exceptional items
Exceptional items totalling £7.5 million (2023 H1: £nil) have been incurred
in the period as a result of the acquisition of Peters Surgical and Syntacoll.
Exceptional costs incurred in relation to Peters include deal advisory fees,
due diligence fees such as legal, accounting and tax amongst others as well as
hedging costs to ensure protection against movement in the euro rate on the
purchase price between March 2024 when the Group agreed to acquire Peters and
June when FDI approval for the transaction was received. Exceptional items
relating to Syntacoll include legal costs, termination payments to staff not
retained and operating costs for a period when the site was not yet
operational. The site recommenced operations at the end of May. These costs
have been deemed exceptional items due to the transformative nature of the
acquisition in the case of Peters and due to the unusual nature of the
acquisition in the case of Syntacoll, being a business acquired out of
administration.
9. Dividends
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
Amounts recognised as distributions to equity holders in the period: £'000 £'000 £'000
Final dividend for the year ended 31 December 2022 of 1.51p per ordinary share - 3,274 3,274
Interim dividend for the year ended 31 December 2023 of 0.70p per ordinary - - 1,501
share
Final dividend for the year ended 31 December 2023 of 1.66p per ordinary share 3,563 - -
3,563 3,274 4,775
10. Acquisitions
On 1 March 2024 the Group acquired certain assets of Syntacoll GmbH, for €1
million. Syntacoll GmbH is a specialist manufacturer of drug-eluting collagens
based in Saal an der Donau, Germany, and strengthens the Group's existing
Biosurgical business. The Saal site was not operational between March and May
and those operating costs have been included in exceptional expenses.
During the period €3 million (first half of 2023: €3 million, year ended
31 December 2023: €8 million) of contingent consideration was paid in
respect of Connexicon Medical and €0.5 million in respect of AFS Medical
(first half of 2023: €0.5 million, year ended 31 December 2023: €0.5
million).
11. Borrowings
The Group received £80 million of funding from its two banks, NatWest and
HSBC, who, as a syndicate, have arranged a new debt facility in the period to
fund part of the cash consideration for the acquisition of Peters Surgical
post reporting date. As part of the borrowing arrangement, fees of £0.7
million were deducted from the £80 million loan. The facility is up to £90
million potential borrowing comprised of Facility A, a £60 million term loan
facility with a £5 million repayment due each year on the anniversary of the
closing date and Facility B, a £30 million multi-currency revolving credit
facility, of which £20 million has been drawn down at 30 June 2024.
£10 million of funding in the revolving credit facility remains available in
future if required. The interest rate on both facilities for the first year is
based on SONIA plus 1.75% margin. Following the first year, the margin can
vary based on the Groups net leverage. The minimum margin is 1.50% per annum
based on a net leverage of less than 1.5:1.0 but greater than 1.0:1.0, and the
maximum margin is 2.50% per annum based on a net leverage of more than
2.5:1.0.
The loan has covenants in place meaning the Group needs to comply with the
following financial conditions: a) Interest cover in respect of any relevant
period shall not be less than 4.0:1.0 and b) Net leverage in respect of each
relevant period shall not exceed 3.0:1.0.
Interest cover is calculated as a ratio of EBITDA to Net Finance Charge in
respect of any relevant period.
Net leverage is calculated as a ratio of Total Net Debt on the last day of
that relevant period to Adjusted EBITDA in respect of that relevant period.
12. Contingent liabilities
A maximum potential earnout of €7m relating to the 2023 acquisition of
Connexicon and €0.5m relating to the 2022 acquisition of AFS have been
recognised at fair value. The acquisition of Peters Surgical post period-end
in July 2024, has resulted in an additional earnout with a maximum potential
to pay of €8.9 million.
The Directors are not aware of any additional contingent liabilities faced by
the Group as at 30 June 2024 (30 June 2023: £nil, 31 December 2023: £nil).
13. Share capital
Share capital as at 30 June 2024 amounted to £10,881,000 (30 June 2023:
£10,858,000, 31 December 2023: £10,865,000). During the period the Group
issued 296,989 shares in respect of share options, LTIPS, Deferred Annual
Bonus Scheme and the Share Incentive Plan.
14. 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 10% sales reduction scenario which is felt to reflect a significant
deterioration of trading. The results show that the Group 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 2024 of £134.9 million and debt of £79.3m. The credit
facility from the syndicate comprising HSBC & Natwest available to the
group includes: Facility A £60m long term loan & facility B, a £30m
Revolving Credit Facility. At the reporting date £80m was utilised, leaving
flexibility to draw a further £10m to support working capital needs in the
future. Interest on both is based on SONIA plus a margin (+1.75% in the first
year) based on the Group's net leverage.
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.
15. Principal risks and uncertainties
Further detail concerning the principal risks affecting the business
activities of the Group is detailed on pages 61-65 of the Annual Report and
Accounts for the year ended 31 December 2023. There have been no significant
changes since the last annual report.
16. Seasonality of sales
There are no significant factors affecting the seasonality of sales between
the first and second half of the year.
17. Events after the balance sheet date
Subsequent to the end of the interim reporting period the Group acquired 100%
of the Share Capital of Peters Surgical. The deal completed on 1 July 2024,
for an initial cash consideration of €132.5 million, potentially increasing
by a further €8.9 million earn-out, payable in 2025 based on delivery of US
suture 510(k) approvals, achievement of FY24 revenue and gross margin targets,
and satisfying certain inventory and tax conditions.
Peters Surgical is a manufacturer and distributor of high-quality surgical
closure devices including sutures, haemostatics clips, haemostatic clamps, and
internal glues. The portfolio is focused on surgical specialties in the
Cardiovascular ("CV"), Visceral, and Digestive Urology and Gynaecological
("DUG") surgical indication areas. Headquartered in France, Peters Surgical
was founded in 1926 and today employs approximately 650 people around the
world.
Peters Surgical operates a fully integrated business model including research
and product development, regulatory and clinical affairs, device manufacture,
distribution, commercial and after-sales service. It owns manufacturing
facilities in France, Thailand, India, and Germany.
Peters Surgical sells products in over 90 countries with direct sales
infrastructure in France, Belgium, Germany, Poland and India; and with a
hybrid sales model in the APAC region and the US. Peters Surgical generated
revenues of €75.5 million in 2022 and €84.0 million in 2023.
18. 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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