RNS Number : 9881M
Advanced Medical Solutions Grp PLC
20 September 2023
 

 

20 September 2023

 

 

Advanced Medical Solutions Group plc

("AMS" or the "Group")

 

Interim Results for the six months ended 30 June 2023

 

 

Winsford, UK, 20 September 2023: Advanced Medical Solutions Group plc (AIM: AMS), the world-leading specialist in tissue-healing technologies, today announces its unaudited interim results for the six months ended 30 June 2023 (the "Period").

 

Financial Highlights:

 

 

H1

2023

H1

2022

Reported change

Change at constant currency¹

Revenue (£ million)

63.1

58.3

+8%

+5%

Adjusted Measures

 




Adjusted² profit before tax (£ million)

13.8

13.6

+1%


Adjusted² profit before tax margin %

21.8%

23.4%

-1.6pp


Adjusted² diluted earnings per share (p)

4.97

5.01

-1%



 




Reported Measures

 




Profit before tax (£ million)

11.8

12.3

-5%


Profit before tax margin %

18.7%

21.2%

-2.5pp


Diluted earnings per share (p)

4.06

4.42

-8%


Net operating cash flow (£ million)

4.1

12.5

-67%


Net cash3 (£ million)

69.1

75.3

-8%



 




Interim dividend per share (p)

0.70p

0.64p

+10%


 

 

Business Highlights (including post period end):

 

The Group made significant progress in a number of key projects during the period which are expected to establish substantial, new commercial opportunities in the short to medium term. As previously highlighted, the results were impacted by the temporary de-stocking impact of the US LiquiBand® strategic growth initiative but included strong growth in other parts of the business.

 

Financial

 

·      Revenue increased by 8% to £63.1 million (2022 H1: £58.3 million) driven by growth in non-US markets, which averaged 20% against the first half of last year

 

·      Gross margins reduced to 56.5% (2022 H1: 58.9%) due to temporary adverse product mix

 

·      Total investment in R&D increased to £6.0 million (2022 H1: £5.4 million), representing 9.5% (2022 H1: 9.3%) of revenue, as progress was made on key projects including new product development and Medical Device Regulation ("MDR")

 

·      The Group reports a 1% increase in adjusted profit before tax to £13.8 million (2022 H1: £13.6 million) with adjusted profit before tax margin of 21.8% (2022 H1: 23.4%)

 

·      Net cash decreased to £69.1 million from a 2022 year-end position of £82.3 million (2022 H1: £75.3 million) following the acquisition of Connexicon Medical Ltd ("Connexicon") in February

 

 

·      Surgical Business Unit revenues increased to £39.4 million (2022 H1: £35.9 million), an increase of 5% at constant currency

 

·      Woundcare Business Unit revenues increased to £23.7 million (2022 H1: £22.4 million), an increase of 4% at constant currency

 

·      Given the Group's strong net cash position and reflecting the Board's continued confidence in the future, the proposed interim dividend is increased to 0.70p per share (2022 H1: 0.64p)

 

Operational

 

·      Good progress towards establishing new US LiquiBand® distribution agreements with hospital partners and executing new route-to-market strategy. As previously reported, associated destocking was greater than expected but end-user sales were unaffected and the Board remains confident that this initiative will achieve its objective of creating the foundation for accelerated growth for LiquiBand® in the US

 

·      Acquisition of Connexicon completed, adding to the Group's ability to develop and commercialise innovative adhesive and sealant technologies and to offer the increased differentiation and exclusivity sought by our US partners. Integration is going well, financial performance is in line with initial expectations and its pipeline approvals are progressing well

 

·      Recruitment of the Seal-G® and Seal-G® MIST human clinical trials completed in July 2023 with data to be made available for a European soft launch in H2 2023. Initial data shows significant reduction in leakage rates in cases using Seal-G®

 

 Post Period End  

 

·      Announced 18 September, the Group has signed a US LiquiBandFix8® commercialisation agreement with TELA Bio Inc ("TELA Bio") ahead of a September launch under the brand name LIQUIFIXTM, entering a new $200 million addressable market with a unique, differentiated product

 

·      The Group can confirm very good progress has been made with all the new US LiquiBand® distribution agreements and is highly confident that the new route-to-market strategy will be fully operational and driving accelerated growth by the end of 2023

Commenting on the interim results, Chris Meredith, Chief Executive Officer of AMS, said: "I'm pleased to report first half growth at Group level driven by our diverse portfolio of products, despite the short-term disruption to US LiquiBand® sales and the changes to the Organogenesis royalty stream. This demonstrates the increasing strength of our existing portfolio which will play a big part in generating and sustaining stronger growth in the future. I am particularly excited at the breadth of opportunities now open to us as a number of new initiatives and product launches, such as LIQUIFIXTM in the US and Seal-G® in Europe, come into effect this year. With so many potential growth drivers in place, I remain confident that we will see accelerated growth from 2024."

- End -

 

Notes

1    Constant currency adjusts for the effect of currency movements by re-translating the current period's performance at the previous period's exchange rates

2     Adjusted profit before tax is shown before amortisation of acquired intangible assets which, in 2023 H1, were £2.4 million (2022 H1: £1.6 million) and a £0.4 million credit for movement in long-term acquisition liabilities (2022 H1: credit of £0.3 million) as defined in the financial review. Adjusted operating margin is shown before amortisation of acquired intangible assets.

3     Net cash consists of cash and cash equivalents with nil debt (2022 H1 and YE: £nil debt)

 

 

 

 

 

 

 

For further information, please contact:

 

Advanced Medical Solutions Group plc

Tel: +44 (0) 1606 545508

Chris Meredith, Chief Executive Officer

Eddie Johnson, Chief Financial Officer

Michael King, Investor Relations Manager



 

ICR Consilium

Tel: +44 (0) 20 3709 5700

Matthew Neal / Lucy Featherstone

 

 

Investec Bank plc (NOMAD) & Broker

Tel: +44 (0) 20 7597 5970

Gary Clarence / David Anderson

 


HSBC Bank PLC (Broker)

Tel: +44 (0) 20 7991 8888

Sam McLennan / Joe Weaving / Stephanie Cornish


 

 

About Advanced Medical Solutions Group plc

 

AMS is a world-leading independent developer and manufacturer of innovative tissue-healing technology, focused on quality outcomes for patients and value for payers. AMS has a wide range of surgical products including tissue adhesives, sutures, haemostats, internal fixation devices and internal sealants, which it markets under its brands LiquiBand®, RESORBA®, LiquiBandFix8® and Seal-G®. AMS also supplies wound care dressings such as silver alginates, alginates and foams through its ActivHeal® brand as well as under white label. Since 2019, the Group has made five acquisitions: Sealantis, an Israeli developer of innovative internal sealants; Biomatlante, a French developer and manufacturer of surgical biomaterials, Raleigh, a leading UK coater and converter of woundcare and bio-diagnostics materials, AFS Medical, an Austrian specialist surgical business and Connexicon, an Irish tissue adhesives specialist.

AMS's products, manufactured in the UK, Germany, France, the Netherlands, the Czech Republic and Israel, are sold globally via a network of multinational or regional partners and distributors, as well as via AMS's own direct sales forces in the UK, Germany, Austria, the Czech Republic and Russia. The Group has R&D innovation hubs in the UK, Ireland, Germany, France and Israel. Established in 1991, the Group has more than 800 employees. For more information, please see www.admedsol.com.

 



 

Chief Executive's Review

 

Surgical Business Unit

 

The Surgical Business Unit includes tissue adhesives, sutures, biosurgical devices and internal fixation devices marketed under the AMS brands LiquiBand®, RESORBA®, LiquiBandFix8® and LIQUIFIXTM. Revenue increased by 10% on a reported basis and 5% on a constant currency basis in the Period to £39.4 million (2022 H1: £35.9 million).

 

Surgical Business Unit

2023 H1

£ million

2022 H1

£ million

Reported Growth

Growth at constant currency

Advanced Closure

17.0

17.9

-5%

-8%

Internal Fixation and Sealants

2.2

1.6

31%

27%

Traditional Closure

9.4

8.0

18%

12%

Biosurgical Devices

8.3

7.7

7%

3%

Other Distributed Products

2.5

0.7

267%

252%

TOTAL

39.4

35.9

10%

5%

 

Advanced Closure

LiquiBand® is a range of topical skin adhesives, incorporating medical grade cyanoacrylate in combination with purpose-built applicators. These products are used to close and protect a broad variety of surgical and traumatic wounds.

 

Advanced Closure

2023 H1

£ million

2022 H1 £ million

Reported Growth

Growth at constant currency

Americas

9.2

12.0

-23%

-27%

UK/Germany

4.0

3.4

16%

15%

ROW

3.8

2.5

53%

52%

TOTAL

17.0

17.9

-5%

-8%

 

LiquiBand® revenues reduced by 5% to £17.0 million (2022 H1: £17.9 million) due to the previously announced disrupted ordering patterns and de-stocking during the Period that has occurred during the transition to our new, previously reported, strategic initiative to accelerate US LiquiBand® growth. However, this was offset by strong growth in non-US markets.

 

As part of its enhanced partner strategy in the US, the Group continues to have positive discussions with its partners and has made good progress with new agreements aimed at delivering stronger growth from early 2024 onwards. This process has taken longer and associated destocking has been greater than initially anticipated, as indicated in the 4 September trading update. Expectations for FY 2024 remain unchanged.

 

The Group confirms that since the end of the Period, very good progress has been made with all US LiquiBand® distribution agreements and that it is highly confident that the new route-to-market strategy will be fully operational and driving accelerated growth by the end of 2023.

 

The destocking has not affected LiquiBand® end sales demand and the pipeline of evaluations and conversions for LiquiBand® XL continues to grow strongly. As such the Board's expectations for LiquiBand® growth remain high, both short and long term and LiquiBand® sales forecasts for 2024 and future years remain unchanged.

 

The acquisition of Connexicon was completed in February and integration of the business is progressing well with its existing portfolio continuing to grow in European and ROW territories. It is also being positioned to obtain approval in China, which would be AMS' first tissue adhesive approval in this very large market. In addition, the development and approval of its new US portfolio, to support the enhanced partner strategy, is progressing well with 510(k) approvals on track for H2 2024.

 

Internal Fixation and Sealants

LiquiBandFix8® is used to fix hernia meshes placed inside the body with accurately delivered individual drops of cyanoacrylate adhesive, instead of traditional tacks and staples. Revenues increased by 31% on a reported basis to £2.2 million (2022 H1: £1.6 million) and 27% on a constant currency basis due to good commercial progress, increasing volumes of hernia surgery and the annualised impact of the acquisition of AFS Medical ("AFS").

 

Following the PMA approval for LiquiBandFix8® in June 2023, and the earlier completion of a 284-patient US clinical study, AMS announced on 18 September an agreement for TELA Bio to market and distribute LiquiBandFix8® across the United States under the brand name LIQUIFIXTM. The signing of this agreement successfully concludes a comprehensive selection process involving a number of potential partners with a broad range of strengths and marketing strategies. During this process, it became clear that TELA Bio brings the right combination of strengths and attributes, with a vision and ambition that is closely aligned with and complements AMS' strategy and aspirations. TELA Bio is a specialist medical technology company that designs, develops and markets innovative tissue reinforcement materials to address unmet needs in soft tissue reconstruction. It has an established and fast-growing footprint in the US market with products that focus on addressing the shortcomings of existing reinforcement materials in hernia repair, abdominal wall reconstruction and plastic reconstructive surgery.

 

TELA Bio's specialist representative sales force are now undergoing training ahead of launch in September 2023 at the American Hernia Society Annual Meeting. As the first product of its kind in the US, its less invasive application is expected to reduce pain and other post-operative complications and to provide tangible benefits to patients and payors. This represents a significant commercial opportunity for AMS as it enters a new addressable market estimated at $200 million.

 

Seal-G® MIST (laparoscopic surgery) and Seal-G® (open surgery) are novel, internal, biological sealants used to seal tissue during gastrointestinal surgery to reduce leakage of fluid. Enrolment for the first Seal-G® clinical study, comprising 160 patients, was successfully completed in July 2023 and a small number of end-user commercial orders have been received for devices ahead of the European soft launch in Q4 2023 that will utilise data from the study. An initial analysis of the data indicates a significant reduction in the number of serious clinical leaks that required re-operation. Although not a randomised controlled trial, the Seal-G® study reported serious leakages of only 1.25% which is significantly lower than the 4.2% - 4.7% leakage rate reported in DICA (Diverticular Inflammation and Complication) data and in published studies.

 

Planning and study design for follow-on clinical trials is progressing well as AMS assesses the optimum pathway to build evidence for both colon and other surgical procedures whilst giving consideration to our medium-term goal of Pre-Market Approval in the large and lucrative US market.

 

Traditional Closure

RESORBA® branded Absorbable and Non-absorbable Suture ranges are used in general surgery and a wide range of surgical specialties including dental and ophthalmic surgery. Revenue increased by 18% to £9.4 million and by 12% at constant currency (2022 H1: £8.0 million) with a steady performance from its more established European markets. The Group's ongoing strategy to increase its penetration of other geographies also drove growth, such as in the US, where increasing dental suture sales made a significant contribution to Traditional Closure growth. 

 

Biosurgical Devices    

The Biosurgical Devices category comprises antibiotic-loaded collagen sponges, collagen membranes and cones, oxidised cellulose, synthetic bone substitutes and bio-absorbable screws. Revenue increased by 7% to £8.3 million (2022 H1: £7.7 million) and by 3% at constant currency.

 

End user demand for AMS' collagens remains strong but timing of orders and despatches resulted in uneven phasing with stronger revenues and growth anticipated in the second half of 2023. AMS remains confident in the growth potential of its innovative Biosurgical portfolio via its specialist partner network as it continues to expand its distribution network into new territories.

 

The Group's strategy to market Biomatlante's bone substitutes under the RESORBA® brand continues to progress well with growth in an increasing number of European countries in the Period and the initial pilot US launch via an independent rep model in the second half of 2023.

 

Other Distributed Products      

The Other Distributed category comprises products distributed by AFS, including minimally invasive access ports and laparoscopic instruments, following its acquisition in April 2022. This category excludes sales of LiquiBandFix8® which are recorded within the Internal Fixation and Sealants category. Predominantly driven by annualisation, revenue increased by 267% on a reported basis and 252% on a constant currency basis to £2.5 million (2022 H1 £0.7 million).

 

Plymouth facility expansion

The construction phase of the Plymouth facility expansion is now largely complete, significantly increasing the manufacturing capacity for Seal-G, Fix8® and LiquiBand® and providing additional R&D laboratory space.

 

Woundcare Business Unit

The Woundcare Business Unit is comprised of the Group's multi-product portfolio of advanced woundcare dressings sold under its partners' brands and the ActivHeal® label, plus a portfolio of specialist medical bulk materials and multi-layer woundcare products.

The Woundcare Business Unit delivered growth in the Period, due to higher ordering from OEM partners and increased sales of ActivHeal® overseas. Revenue increased by 6% in the Period to £23.7 million (2022 H1: £22.4 million) and by 4% on a constant currency basis.

Woundcare Business Unit

2023 H1

£ million

2022 H1

£ million

Reported Growth

Growth at constant currency

Infection Management

7.7

7.2

8%

5%

Exudate Management

12.2

11.1

10%

8%

Other Woundcare

3.8

4.1

-8%

-11%

TOTAL

23.7

22.4

6%

4%

 

Infection and Exudate Management

Infection Management revenue increased by 8% on a reported basis and by 5% on a constant currency basis to £7.7 million (2022 H1: £7.2 million) and Exudate Management revenue increased by 10% on a reported and 8% on a constant currency basis to £12.2 million (2022 H1: £11.1 million).

 

Key initiatives driving growth in the Period and expected to drive future growth include:

·      Expanding the distribution network for our own ActivHeal® range of dressings as newly signed distributors and new market registrations make an impact. The Group expects ActivHeal® to continue to be a key contributor to Woundcare growth in future periods.

·      Commercial success with Raleigh's pipeline of new products of special medical materials.

 

Other Woundcare

Other Woundcare comprises royalties, fees and woundcare sealants. Revenue reduced by 8% at reported currency and by 11% at constant currency to £3.8 million (2022 H1: £4.1 million) as a result of lower royalty income from the Group's licensing arrangement with Organogenesis.

 

As announced on 4 September, Organogenesis has recently indicated that changes to US reimbursement coverage have created uncertainty regarding the revenue outlook for some of its key products, including those utilising AMS patents. Given that Organogenesis withdrew its own guidance and that AMS has no control of, and minimal insight into its sales, AMS removed this royalty in its entirety from Q4 2023 guidance onwards.

 

Regulatory

AMS continues to make good progress in meeting the requirements for the new Medical Devices Regulation (MDR) and is well placed to obtain certifications for all its products well before the extended 2027/2028 deadlines.

 

Supply chain and inflation

AMS continues to take proactive steps to address the ongoing global supply chain challenges and has continued to increase inventory levels during the Period while setting up alternative suppliers where feasible. As a result, shortages of material have not had a significant impact on the Group's ability to supply products to its customers.

 

Inflationary pressures continue in some areas but the Group continues to strive to recover a significant proportion of this impact from its customers through price review negotiations. 

 

Board changes

As part of the ongoing plan to refresh the Non-Executive Directors, given that Peter Allen has completed 10 years service, he will retire from the Board once a successor has been appointed. The Group is progressing with a thorough, external selection process for a new Chair that is now close to completion. A further announcement will be made in due course.

 

Environmental, Social & Governance

AMS continues to make positive progress on its ESG activities, building on the foundations reported in its FY22 Annual Report. Since that report, we have further developed our Net Zero Strategy and Pathway and have agreed key targets that will drive this activity, for example: to be Net Zero by 2045.

 

AMS has also strengthened its preparations for the Task Force on Climate-related Financial Disclosures (TCFD) and in conjunction with its ESG consultants will continue to progress this area in advance of its FY23 reporting in April 2024.

 

In addition, numerous and wide ranging ESG activities continue to take place across the Group driven by employee suggestions and actions, as well as Board and ESG Committee initiatives.

 

Stakeholders

On behalf of the Board, I would like to thank the Group's committed staff, partners and other stakeholders, without whose help and commitment the achievements during the Period would not have been possible.

 

Summary and Outlook

In the first half of 2023, many parts of the business delivered strong growth to offset the temporary shortfall in ordering of LiquiBand® in the US and drive overall growth for the Group.

 

As announced in its 4 September trading statement, reduced royalty expectations, following recent US reimbursement changes, and higher than anticipated de-stocking by US partners have impacted FY23 and consequently AMS expects revenues of approximately £124 - £127 million and adjusted pre-tax profit of approximately £25 - £27 million for the year. With the exception of the royalty adjustment (impacting Q4 2023 to Q3 2026), there were no changes to the expectations for future years.

 

The Board anticipates accelerated LiquiBand® growth from 2024 with the new US partner strategy taking effect and other key initiatives, such as the imminent US launch of LIQUIFIXTM and the soft launch of Seal-G® in Europe, now in place and setting the foundation for strong growth and improving margins for the Group in 2024 and beyond.

 

 

 

 



 

Financial Review

 

IFRS reporting

To provide the clearest possible insight into our performance, the Group uses alternative performance measures. These measures are not defined in International Financial Reporting Standards (IFRS) and, therefore, are considered to be non-GAAP (Generally Accepted Accounting Principles) measures. Accordingly, the relevant IFRS measures are also presented where appropriate. AMS uses such measures consistently at the half-year and full-year and reconciles them as appropriate. The measures used in this statement include constant currency revenue growth, adjusted operating margin and profit, adjusted profit before tax and adjusted earnings per share, allowing the impacts of exchange rate volatility, exceptional items, amortisation and the movement in long-term acquisition liabilities to be separately identified. Net cash is an additional non-GAAP measure used.

 

Overview

Revenue increased by 8% at reported currency to £63.1million (2022 H1: £58.3 million) and increased by 5% at constant currency as summarised in the Chief Executive's Review.

 

Gross profit increased to £35.7 million (2022 H1: £34.4 million) but gross margin decreased to 56.5% (2022 H1: 58.9%) due to adverse product mix relating to the temporary impact of the US LiquiBand® strategic initiative and to reduced royalty income from Organogenesis.

 

Administration expenses increased to £25.0 million (2022 H1: £21.6 million) inclusive of adverse foreign exchange movements which adversely affected the Group by £1.9 million in the first half of the year when compared to the first half of 2022. The acquisition of AFS in April 2022 has had an annualising effect in the first half of 2023, adding £1.0 million of administration expenses and the acquisition of Connexicon added £0.2 million of operating administration costs, £0.6 million of amortisation of acquired intangible assets and £0.2 million of one-off professional fees relating to the acquisition. The group also continued to invest in its sales and marketing teams as well as new product development and regulatory team to support the Group's continuing growth.

 

The Group incurred £6.0 million of gross R&D spend in the Period (2022 H1: £5.4 million), representing 9.5% of sales (2022 H1: 9.3% of sales). This reflects the Group's continued investment in innovation as demonstrated by the PMA approval of LiquiBandFix8® in the period as well as investment to meet increased regulatory standards. The acquisition of Connexicon has further added to the Group's R&D capabilities in the period, in particular the Group's ability to develop and launch innovative and sealant technologies. As shown in the table below, elements of this cost are capitalised and amortised over 5 to 10 years.

 


 H1 2023

H1 2022


£'000

£'000

Total investment in Research and Development, Regulatory and Clinical

5,972

5,403

Of which:



Charged to the profit and loss account

2,926

2,832

Capitalised, to be amortised over 5-10 years

3,046

2,571

 

Amortisation of acquired intangible assets increased to £2.4 million (2022 H1: £1.6 million) following the acquisition of Connexicon.

 

Adjusted operating profit, which excludes amortisation of acquired intangibles, decreased by 7% to £12.8 million (2022 H1: £13.8 million) whilst the adjusted operating margin decreased by 340 bps to 20.3% (2022 H1: 23.7%) due to the decrease in the gross margin in addition to the Group's continued investment in future growth opportunities.

 

Movement in long-term acquisition liabilities of Sealantis, AFS & Connexicon resulted in a net credit of £0.4 million (2022 H1: £0.3 million).

 

Despite adverse sales mix impacts, the Group delivered increased adjusted profit before tax of £13.8 million (2022 H1: £13.6 million). Reported profit before tax was £11.8 million (2022 H1: £12.3 million).

 

Reconciliation of profit before tax to adjusted profit before tax


H1 2023

H1 2022

 

£'000

£'000

Profit before tax

11,768

12,336

Amortisation of acquired intangibles

2,402

1,573

Movement in long-term acquisition liabilities

(404)

(283)

Adjusted profit before tax

13,766

13,626

 

 

The Group's effective corporation tax rate, reflecting the blended tax rates in the countries where we operate and including UK patent box relief, increased to 24.1% (2022 H1: 21.6%) as a result of the increase in the UK Corporation tax rate to 25%, effective 1st April 2023 (2022: 19%).

 

The large UK corporation tax increase has had a significant adverse impact on earnings per share resulting in adjusted diluted earnings per share reducing by 1% to 4.97p (2022 H1: 5.01p), diluted earnings per share reducing by 8% to 4.06p (2022 H1: 4.42p), adjusted basic earnings per share reducing by 1% to 5.04p (2022 H1: 5.07p) and basic earnings per share reducing by 8% to 4.12p (2022 H1: 4.47p).

 

The Board intends to pay an interim dividend of 0.70p per share on 27 October 2023 to shareholders on the register at the close of business on 29 September 2023. This is a 10% increase on the interim dividend paid in respect of the first half of 2022 reflecting the Board's ongoing confidence in the future growth in the Group.

 

 

Operating result by business segment

Six months ended 30 June 2023

Surgical

Woundcare

 

£'000

£'000

Revenue

39,411

23,677

Segment operating profit

8,164

2,860

Amortisation of acquired intangibles

1,931

471

Adjusted segment operating profit4

10,095

3,331

Adjusted operating margin4

25.6%

14.1%

Six months ended 30 June 2022



Revenue

35,941

22,363

Segment operating profit

9,605

3,081

Amortisation of acquired intangibles

1,101

472

Adjusted segment operating profit4

10,706

3,553

Adjusted operating margin4

29.8%

15.9%

 

 

4 Adjusted for amortisation of acquired intangible assets

 

Table is reconciled to statutory information in note 5 of the financial information.

 

Surgical

Surgical revenues increased by 10% to £39.4 million (2022 H1: £35.9 million) at reported currency and increased by 5% to £38.3 million (2022 H1: £36.2 million) at constant currency. Adjusted operating margin decreased by 420 bps to 25.6% (2022 H1: 29.8%) due to temporarily adverse sales mix, the impact of inflation and increased investment in regulatory affairs, and research and development.

 

Woundcare

Woundcare revenues increased by 6% to £23.7 million (2022 H1: £22.4 million) at reported currency and increased by 4% to £23.1 million (2022 H1: £22.1 million) at constant currency. Adjusted operating margin decreased by 180 bps to 14.1% (2022 H1: 15.9%) predominately due to lower royalty income from Organogenesis.

 

 

Currency

The Group hedges significant currency transaction exposure by using forward contracts and aims to hedge approximately 80% of its estimated transactional exposure for the next 12 to 18 months. In the first half of the year, approximately one third of sales were invoiced in Euros and approximately one quarter were invoiced in US Dollars.

 

The Group estimates that a 10% movement in the £:US$ or £:€ exchange rate will impact Sterling revenues by approximately 2.6% and 4.0% respectively and in the absence of any hedging this would have an impact on the Group operating margin of 2.0% and 0.7% percentage points respectively.

 

Cash Flow

Net cash inflow from operating activities decreased by 67% to £4.1 million (2022 H1: £12.5 million) due to increased working capital as explained below.

 

At the end of the Period, net cash had reduced to £69.1 million (31 December 2022: £82.3 million) due to working capital increases and acquisition related payments of €10m for the acquisition and initial earnout of Connexicon, and €0.5 million for the achievement of AFS' FY22 EBITDA milestone.

 

In the first half of 2023, receivables increased by £3.2 million (2022 H1: £0.9 million increase) due to increased sales volumes, the impact of favourable hedging contracts, and the addition of Connexicon. Debtor days reduced to 41 from the 44 days at year-end (2022 H1: 43 days) as a result of lower US sales, which are typically on longer payment terms. Creditor days were in line with December 2022 at 37 days (2022 H1: 35 days). Total payables were inflated by the addition of Connexicon and the associated contingent consideration and increased by £4.0 million (2022 H1: £5.5 million increase). Planned inventory increases to fulfil anticipated commercial demand and to continue to build resilience resulted in inventories growing by £3.9 million to 6.7 months of supply in comparison to 6.2 months at December 2022 (2022 H1: 5.5 months).

 

In the Period, £4.8 million was invested in capital equipment, R&D and regulatory costs (2022 H1: £4.3 million) including investment in additional Freezer dryer capacity in Germany to improve production efficiency and an extension at Plymouth which is now substantially complete.

 

Tax payments increased to £1.4 million (2021 H1: £0.8 million) which is £1.5 million lower than tax in the income statement. Payments in the prior period were particularly low due to a refund of taxes received.

 

In June 2023, the Group paid its final dividend for the year ended 31 December 2022 of £3.3 million (2022 H1: £3.0 million).

 

The Group retains strong support from its two banks, NatWest and HSBC, and is confident in its ability to raise necessary funds to complete further acquisitions as and when opportunities arise.

 


CONDENSED CONSOLIDATED INCOME STATEMENT

 








(Unaudited)

(Unaudited)

(Audited)



Six months ended

30 June 2023

Six months ended

 30 June 2022

Year ended

 31 December 2022



 

 

 









 

Total



Total



Total


Note

 

 

£'000



£'000 



£'000 

Revenue

5

 

 

63,088



58,304



124,330

Cost of sales


 

 

(27,435)



(23,934)



(50,914)

Gross profit

 

 

35,653



34,370



73,416

Distribution costs


 

(713)



(781)



(1,626)

Administration costs


 

(25,007)



(21,579)



(47,378)

Other income


 

 

473



227



478

Operating profit


 

 

10,406



12,237



24,890

Finance income


 

2,229



436



1,691

Finance costs


 

 

(867)



(337)



(671)

Profit before taxation


 

 

11,768



12,336



25,910

Income tax

7

 

 

(2,836)



(2,668)



(5,504)

Profit for the period attributable to equity holders of the parent


 

 

8,932



9,668



20,406

Earnings per share

 









Basic

4

 

4.12p



4.47p



9.42p

Diluted

4

 

4.06p



4.42p



9.30p

Adjusted diluted5

4

 

 

4.97p



5.01p



10.47p

 

The above results relate to continuing operations

 

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 






(Unaudited)

(Unaudited)

(Audited)



Six months ended

 30 June 2023

Six months ended

 30 June 2022

Year ended

 31 December 2022



 

 

£'000



£'000



£'000

Profit for the period


 

 

8,932



9,668



20,406

Exchange differences on translation of foreign operations

(3,674)



3,896



6,940

Gain/(Loss) arising on cash flow hedges

2,774



(3,704)



(1,297)

Deferred tax charge arising on cash flow hedges

(163)



-



(201)

Other comprehensive (Charge)/credit for the period

(1,063)



192



5,442

Total comprehensive income for the period attributable to equity holders of the parent

7,869



9,860



25,848

 

 

5 Adjusted for amortisation of acquired intangible assets and movement in long-term acquisition liabilities.


 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION



(Unaudited)

(Unaudited)

(Audited)



30 June 2023

30 June 2022

31 December 2022


Note

£'000

£'000

£'000

Assets

 




Non-current assets

 




Intangible assets


55,451

46,639

48,373

Goodwill


79,770

69,409

70,859

Property, plant and equipment


29,344

27,783

29,015

Trade and other receivables


1,260

79

937



165,825

143,910

149,184

Current assets

 




Inventories


31,812

22,732

27,911

Trade and other receivables


24,392

21,985

21,553

Current tax assets


403

177

184

Cash and cash equivalents


69,142

75,341

82,262



125,749

120,235

131,910

Total assets

 

291,574

264,145

281,094

Liabilities

 




Current liabilities

 




Trade and other payables


21,097

18,422

20,671

Current tax liabilities


594

1,746

948

Lease liabilities


1,051

1,109

1,059



22,742

21,277

22,678

Non-current liabilities

 




Trade and other payables


7,034

5,724

3,510

Deferred tax liabilities


10,919

8,229

9,593

Lease liabilities


8,126

8,323

8,691



26,079

22,276

21,794

Total liabilities

 

48,821

43,553

44,472

Net assets

 

242,753

220,592

236,622

Equity

 




Share capital

11

10,858

10,836

10,843

Share premium


37,420

37,102

37,269

Share-based payments reserve


17,199

14,434

15,711

Investment in own shares


(167)

(167)

(167)

Share-based payments deferred tax reserve


413

569

531

Other reserve


1,531

1,531

1,531

Hedging reserve


1,092

(3,725)

(1,519)

Translation reserve


1,330

1,960

5,004

Retained earnings


173,077

158,052

167,419

Equity attributable to equity holders of the parent

 

242,753

220,592

236,622

 

 


CONDENSED CONSOLIDATED Statement of Changes in Equity

Attributable to equity holders of the Group

 

 

 

 

Share-

Investment

Share-based

 

 

 

 

 

 

Share

Share

based

in own

payments

Other

Hedging

Translation

Retained

 

 


capital

premium

payments

shares

deferred tax

reserve

reserve

reserve

earnings

Total

 

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

At 1 January 2023 (audited)

10,843

37,269

15,711

(167)

531

1,531

(1,519)

5,004

167,419

236,622

 

Consolidated profit for the period to 30 June 2023

-

-

-

-

-

-

-

-

8,932

8,932

 

Other comprehensive income/(expense)

-

-

-

-

-

-

2,611

(3,674)

-

(1,063)

 

Total comprehensive income/(expense)

-

-

-

-

-

-

2,611

(3,674)

8,932

7,869

 

Share-based payments

-

-

1,476

-

-

-

-

-

-

            1,476

 

Share options exercised

15

151

12

-

(118)

-

-

-

-

60

 

Shares purchased by EBT

-

-

-

(687)

-

-

-

-

-

(687)

 

Shares sold by EBT

-

-

-

687

-

-

-

-

-

687

 

Dividends paid (Note 8)

-

-

-

-

-

-

-

-

(3,274)

(3,274)

 

At 30 June 2023 (unaudited)

10,858

37,420

17,199

(167)

413

1,531

1,092

1,330

173,077

242,753

 

 



Share-

Investment

Share-based


 

 



 


Share

Share

based

in own

payments

Other

Hedging

Translation

Retained


 


capital

premium

payments

shares

deferred tax

reserve

reserve

reserve

earnings

Total

 

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

At 1 January 2022 (audited)

10,804

36,996

13,180

(164)

933

1,531

(21)

(1,936)

154,354

212,677

 

Consolidated profit for the period to 30 June 2022

-

-

-

-

-

-

-

-

9,668

9,668

 

Other comprehensive (expense)/ income

-

-

-

-

-

-

(3,704)

3,896

-

192

 

Total comprehensive (expense)/ income

-

-

-

-

-

-

(3,704)

3,896

9,668

9,860

 

Share-based payments

-

-

1,141

-

-

-

-

-

-

1,141           

 

Share options exercised

32

106

113

-

(364)

-

-

-

-

(113)

 

Shares purchased by EBT

-

-

-

(337)

-

-

-

-

-

(337)

 

Shares sold by EBT

-

-

-

334

-

-

-

-

-

334

 

Dividends paid (Note 8)

-

-

-

-

-

-

-

-

(2,970)

(2,970)

 

At 30 June 2022 (unaudited)

10,836

37,102

14,434

(167)

569

1,531

(3,725)

1,960

158,052

220,592

 

 




Share-

Investment

Share-based


 

 




Share

Share

based

in own

payments

Other

Hedging

Translation

Retained



capital

premium

payments

shares

deferred tax

reserve

reserve

reserve

earnings

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2022 (audited)

        10,804

            36,996

        13,180

(164)

             933

          1,531

(21)

 (1,936)

       151,354

       212,677

Consolidated profit for the year to 31 December 2022

-

-

-

-

-

-

-

-

20,406

20,406

Other comprehensive (expense)/ income

-

-

-

-

-

-

(1,498)

6,940

-

5,442

Total comprehensive (expense)/ income

-

-

-

-

-

-

(1,498)

6,940

20,406

25,848

Share-based payments

-

-

2,439

-

(402)

-

-

-

-

2,037

Share options exercised

39

273

92

-

-

-

-

-

-

404

Shares purchased by EBT

-

-

-

(392)

-

-

-

-

-

(392)

Shares sold by EBT

-

-

-

389

-

-

-

-

-

389

Dividends paid (Note 8)

-

-

-

-

-

-

-

-

(4,341)

(4,341)

At 31 December 2022 (audited)

10,843

37,269

15,711

(167)

531

1,531

(1,519)

5,004

167,419

236,622

 

 

 


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

 

 

 

(Unaudited)

(Unaudited)

(Audited)


 

Six months

Six months

Year


 

ended

ended

ended


 

30 June 2023

30 June 2022

31 December 2022

 

Note

£'000

£'000

£'000

Cash flows from operating activities

 

 



Operating profit

 

10,406

12,237

24,890

Adjustments for:

 

 



Depreciation

 

2,045

1,917

4,049

Amortisation - acquired intangible assets

 

2,402

1,573

3,414

- development costs

 

458

436

879

- software intangibles

 

258

245

502

Increase in inventories

 

(4,011)

(2,355)

(7,087)

Increase in trade and other receivables

 

(2,732)

(1,098)

(596)

(Decrease)/Increase in trade and other payables

 

(4,783)

(737)

1,711

Share-based payments expense

 

1,476

1,141

2,439

Taxation paid

 

(1,370)

(827)

(3,324)

Net cash inflow from operating activities

 

4,149

12,532

26,877

Cash flows from investing activities

 

 



Purchase of software

 

(4)

(22)

(73)

Capitalised development costs

 

(3,046)

(2,571)

(6,152)

Purchases of property, plant and equipment

 

(1,767)

(1,669)

(3,739)

Proceeds from disposal of property, plant and equipment

 

-

27

46

Interest received

 

1,147

156

820

Acquisition of subsidiaries (net of cash acquired)

9

(5,529)

(2,781)

(2,781)

Payment of contingent consideration

9

(3,080)

-

-

Net cash used in investing activities

 

(12,279)

(6,860)

(11,879)

Cash flows from financing activities

 

 



Dividends paid

8

(3,274)

(2,970)

(4,341)

Repayment of principal under lease liabilities

 

(653)

(581)

(1,295)

Issue of equity shares

 

162

108

(331)

Shares purchased by EBT

 

(687)

(337)

266

Shares sold by EBT

 

687

334

(392)

Interest paid

 

(198)

(304)

389

Repayment of borrowings

9

(486)

(331)

(617)

Net cash used in financing activities

 

(4,449)

(4,081)

(6,321)

Net (decrease)/increase in cash and cash equivalents

 

(12,579)

1,591

8,677

Cash and cash equivalents at the beginning of the period

 

82,262

72,965

72,965

Effect of foreign exchange rate changes

 

(541)

785

620

Cash and cash equivalents at the end of the period

 

69,142

75,341

82,262



 

Notes Forming Part of the Consolidated Financial Statements

 

1.      Reporting entity

 

Advanced Medical Solutions Group plc ("the Company") is a public limited company incorporated and domiciled in England and Wales (registration number 2867684). The Company's registered address is Premier Park, 33 Road One, Winsford Industrial Estate, Cheshire, CW7 3RT.

 

The Company's ordinary shares are traded on the AIM market of the London Stock Exchange plc. The consolidated financial statements of the Company for the six months ended 30 June 2023 comprise the Company and its subsidiaries (together referred to as the "Group").

 

The Group is primarily involved in the design, development and manufacture of innovative tissue-healing technology for sale into the global medical device market.

 

2.      Basis of preparation

 

The information for the period ended 30 June 2023 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for the year ended 31 December 2022 has been delivered to the Registrar of Companies. The auditor reported on those accounts; their report was unqualified, did not draw attention to any matters of emphasis without qualifying the report and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

The individual financial statements for each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in pounds sterling, which is the functional currency of the Company and the presentation currency for the consolidated financial statements.

 

3.      Accounting policies

 

The same accounting policies, presentations and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial apart from the adoption of the following new or amended IFRS and Interpretations issued by the International Accounting Standards Board (IASB):

-       Amendments to IFRS 17 Insurance Contracts including the Extension of the Temporary Exemption from Applying  IFRS 9 (Amendments to IFRS 4)

-       Initial Application of IFRS 17 and IFRS 9 - Comparative Information (Amendment to IFRS 17)

-       Deferred Tax related to Assets and Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)

-       Definition of Accounting Estimates (Amendments to IAS 8); and

-       Disclosure of Accounting Policies (Amendments to IAS 1 and Practice Statement 2)

 

No revised standards adopted in the current period have had a material impact on the Group's financial statements.

 

The unaudited condensed set of financial statements included in this half-yearly financial report have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the United Kingdom. These condensed interim accounts should be read in conjunction with the annual accounts of the Group for the year ended 31 December 2022. The annual financial statements of Advanced Medical Solutions Group plc are prepared in accordance with International Financial Reporting Standards as adopted by the United Kingdom.

 

4.      Earnings per share

 

 


(Unaudited)

(Unaudited)

 

 


Six months

Six months

(Audited)


ended

ended

Year ended


30 June 2023

30 June 2022

31 December 2022

Number of shares

'000

'000

'000

Weighted average number of ordinary shares for the purposes of basic earnings per share

216,947

216,272

216,512

Effect of dilutive potential ordinary shares: share options, deferred annual bonus, Share Incentive Plan, LTIPs

3,084

2,527

2,969

Weighted average number of ordinary shares for the purposes of diluted earnings per share

220,031

218,799

219,481

 

Basic EPS is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of shares outstanding during the period.

 

Diluted EPS is calculated on the same basis as basic EPS but with the further adjustment to the weighted average shares in issue to reflect the effect of all potentially dilutive share options. The number of potentially dilutive share options is derived from the number of share options and awards granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period.



 

 

Adjusted earnings per share

 

Adjusted EPS is calculated after adding back amortisation of acquired intangible assets and movement in long-term acquisition liabilities and is based on earnings of:

 


(Unaudited)

(Unaudited)



Six months

Six months

(Audited)


ended

ended

 Year ended


30 June 2023

30 June 2022

31 December 2022


£'000

£'000

£'000

Earnings

 



Profit for the year being attributable to equity holders of the parent

8,932

9,668

20,406

Amortisation of acquired intangible assets

2,402

1,573

3,414

Movement in long-term acquisition liabilities

(404)

(283)

(840)

Adjusted profit for the year being attributable to equity holders of the parent

10,930

10,958

22,980






pence

pence

pence

Basic EPS

4.12

4.47

9.42

Diluted EPS

4.06

4.42

9.30

Adjusted basic EPS

5.04

5.07

10.61

Adjusted diluted EPS

4.97

5.01

10.47

 

 

The denominators used are the same as those detailed above for both basic and diluted earnings per share.

 

The adjusted diluted EPS information is considered to provide an alternative representation of the Group's trading performance, consistent with the view of management.

 

5.      Segment information

 

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly investments and related revenue, corporate assets, head office expenses, exceptional items, income tax assets and the Group's external borrowings. These are the measures reported to the Group's Chief Executive for the purposes of resource allocation and assessment of segment performance.

 

Business segments

The principal activities of the business units are as follows:

 

Surgical

Selling, marketing and innovation of the Group's surgical products either sold directly by our sales teams or by distributors.

 

Woundcare

Selling, marketing and innovation of the Group's advanced woundcare products supplied under partner brands, bulk materials and the ActivHeal® brand predominantly to the UK NHS as well as bio diagnostics products following the acquisition of Raleigh.

 

Segment information about these Business Units is presented below:

 

Six months ended

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

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

(Unaudited)

Surgical

Woundcare

Consolidated

Other information

£'000

£'000

£'000

Capital additions:




Software intangibles

2

2

4

Development

2,680

366

3,046

Property, plant and equipment

1,253

514

1,767

Depreciation and amortisation

(3,680)

(1,483)

(5,163)

Balance sheet




Assets




Segment assets

206,856

84,718

291,574

Unallocated assets

 

 

-

Consolidated total assets



291,574

Liabilities




Segment liabilities

37,800

11,021

48,821

 

 

Six months ended

 

 

 

30 June 2022

Surgical

Woundcare

Consolidated

(Unaudited)

£'000

£'000

£'000

Revenue

35,941

22,363

58,304





Result




Adjusted segment operating profit

10,706

3,553

14,259

Amortisation of acquired intangibles

(1,101)

(472)

(1,573)

Segment operating profit

9,605

12,686

Unallocated expenses



(449)

Operating profit



12,237

Finance income



436

Finance costs



(337)

Profit before tax



12,336

Tax



(2,668)

Profit for the period



9,668

 

 

At 30 June 2022

(Unaudited)

Surgical

Woundcare

Consolidated

Other information

£'000

£'000

£'000

Capital additions:




Software intangibles

13

9

22

Development

1,976

595

2,571

Property, plant and equipment

1,095

574

1,669

Depreciation and amortisation

(2,695)

(1,476)

(4,171)

Balance sheet




Assets




Segment assets

179,274

84,757

264,031

Unallocated assets



114

Consolidated total assets



264,145

Liabilities




Segment liabilities

29,184

14,369

43,553

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 








Year ended



31 December 2022

Surgical

Woundcare

Consolidated

(Audited)

£'000

£'000

£'000

Revenue

74,861

49,469

124,330





Result




Adjusted segment operating profit

21,802

7,632

29,434

Amortisation of acquired intangibles

(2,469)

(945)

(3,414)

Segment operating profit

19,333

6,687

26,020

Unallocated expenses


(1,130)

Operating profit



24,890

Finance income



1,691

Finance costs



(671)

Profit before tax



25,910

Tax



(5,504)

Profit for the year



20,406

 

 

 




At 31 December 2022




(Audited)

Surgical

Woundcare

Consolidated

Other information

£'000

£'000

£'000

Capital additions:




Software intangibles

34

39

73

Development

4,617

1,535

6,152

Property, plant and equipment

2,258

1,481

3,739

Depreciation and amortisation

(5,759)

(3,085)

(8,844)

Balance sheet




Assets




Segment assets

190,456

90,638

281,094

Unallocated assets



-

Consolidated total assets



281,094

Liabilities




Segment liabilities

29,786

14,686

44,472

 

 

 

Geographical segments

 

The Group operates in the UK, the Netherlands, Germany, the Czech Republic, Ireland, France and Israel, with a sales office located in Russia, distributor in Austria, and a sales presence in the USA. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets. The Group's small legacy sales office in Moscow has historically contributed approximately 1% of the Group's operating profit.

 

The following table provides an analysis of the Group's sales by geographical market, irrespective of the origin of the goods or services, based upon location of the Group's customers:

 


(Unaudited)

(Unaudited)

(Audited)


Six months ended

Six months ended

Year ended


30 June 2023

30 June 2022

31 December 2022

Segmental Revenue

£'000

£'000

£'000

United Kingdom

9,994

9,515

19,960

Germany

11,666

10,250

20,780

Rest of Europe

19,136

14,596

32,519

United States of America

16,678

19,519

40,807

Rest of World

5,614

4,424

10,264


63,088

58,304

124,330

 

 

 

 

 

 

 

 

 

The following table provides an analysis of the Group's total assets by geographical location:

 


(Unaudited)

(Unaudited)

(Audited)


30 June 2023

30 June 2022

31 December 2022

Segmental Assets

£'000

£'000

£'000

United Kingdom

154,705

145,112

151,817

Germany

76,428

67,942

78,877

France

11,414

9,611

11,934

Rest of Europe

27,117

14,697

16,670

Israel

19,698

22,277

21,345

United States of America

2,212

4,506

451


291,574

264,145

281,094


 



 

6.      Financial Instruments' fair value disclosures

 

It is the policy of the Group to enter into forward foreign exchange contracts to cover specific foreign currency payments and receipts.

 

The Group held the following financial instruments at fair value at 30 June 2023. The Group has no financial instruments with fair values that are determined by reference to significant unobservable inputs i.e. those that would be classified as level 3 in the fair value hierarchy, nor have there been any transfers of assets or liabilities between levels of the fair value hierarchy. There are no non-recurring fair value measurements.

 

 

The following table details the forward foreign currency contracts outstanding as at the period end:

 

 

Ave. exchange rate

Foreign currency

Fair value

 

 

30 June 23

30 June 22

31 Dec 22

30 June 23

30 June 22

31 Dec 22

30 June 23

30 June 22

31 Dec 22

 


USD:£1

USD:£1

USD:£1

USD'000

USD'000

USD'000

£'000

£'000

£'000

 

Cash flow hedges










 

Sell US dollars










 

Less than 3 months

1.31

1.36

1.28

9,500

9,000

11,500

(192)

(791)

(540)

3 to 6 months

1.30

1.36

1.31

9,000

10,000

9,000

(142)

(868)

(550)

7 to 12 months

1.21

1.32

1.30

15,000

17,500

18,500

585

(1,012)

(1,040)

Over 12 months

1.14

1.30

1.15

15,000

25,000

22,500

1,188

(1,052)

890


 



48,500

61,500

61,500

1,439

(3,723)

(1,240)

 

 

 

 

 

Ave. exchange rate

Foreign currency

Fair value

 

30 June 23

30 June 22

31 Dec 22

30 June 23

30 June 22

31 Dec 22

30 June 23

30 June 22

31 Dec 22


EUR:£1

EUR:£1

EUR:£1

EUR'000

EUR'000

EUR'000

£'000

£'000

£'000

Cash flow hedges










Sell Euros










Less than 3 months

1.15

1.15

1.14

600

900

600

5

6

(9)

3 to 6 months

1.15

1.15

1.15

600

900

600

4

2

(15)

7 to 12 months

1.14

1.15

1.15

1,200

1,600

1,200

8

(5)

(29)

Over 12 months

-

1.15

1.14

-

800

1,200

-

(5)

(26)





2,400

4,200

3,600

17

(2)

(79)

 

 

 

 

 

 

 

 

7.      Taxation

 

The weighted average tax rate for the Group for the six-month period ended 30 June 2023 was 26.3% (first half of 2022: 24.4%, year ended 31 December 2022: 22.8%). The Group's effective tax rate for the full year is expected to be 24.1%, which has been applied to the six months ended 30 June 2023 (first half of 2022: 21.6%, year ended 31 December 2022: 21.2%). This represents an increase on the previous period due to the increased tax rate in the UK, where the Group generates a significant amount of profit.

 

8.      Dividends

 


(Unaudited)

(Unaudited)

(Audited)


Six months ended

Six months ended

Year ended


30 June 2023

30 June 2022

31 December 2022

Amounts recognised as distributions to equity holders in the period:

£'000

£'000

£'000

Final dividend for the year ended 31 December 2021 of 1.37p per ordinary share

-

2,970

2,960

Interim dividend for the year ended 31 December 2022 of 0.64p per ordinary share

-

-

1,381

Final dividend for the year ended 31 December 2022 of 1.51p per ordinary share

3,274

-

-


3,274

2,970

4,341

 

9.      Acquisition of Connexicon

 

On 1 February 2023, the Group acquired 99% of the Share Capital of Connexicon Medical Limited ("Connexicon"), a tissue adhesive technology specialist based in Dublin, Republic of Ireland for an initial up-front payment of € 7 million, with options in place to acquire the remaining 1% of Share Capital. The remaining 1% of Share Capital not acquired by AMS have no-voting rights and the options are linked to future contingent considerations up to a potential €18 million, dependent on the delivery of certain research & development, regulatory and commercial milestones between 2023 and 2027.

 

In the five-month period from acquisition to 30 June 2023, Connexicon contributed £0.4 million of revenue to the Group and a negligible amount of operating profit. In addition, amortisation of intangible assets of £0.6 million was recorded within the Group as a result of the acquisition. The results, assets and liabilities of Connexicon has been included in the Surgical business unit segment.

 

 

 

£'000

Identifiable net assets acquired

 

Customer related intangible assets

587

Technology based intangible assets

7,951

Property, plant and equipment

800

Trade and other receivables

754

Inventory

466

Cash and cash equivalents

846

Trade and other payables

(1,204)

Lease liabilities

(8)

Borrowings

(487)

Deferred tax on intangible asset

(674)

Arising on acquisition

 

Goodwill

11,040

Total net assets

20,071

 

 

Satisfied by

£'000

Cash consideration

6,375

Contingent consideration

13,696


20,071

 

 

 

 

 

 

Net cash flow on acquisition

£'000

Cash consideration

6,375

Cash acquired

(846)


5,529

 

Contingent consideration arose on the acquisition in respect of up to €18 million which is payable subject to delivery of certain research & development, regulatory and commercial milestones between 2023 and 2027. €16 million (£14 million) is the estimated fair value of the contingent consideration at the acquisition date.

 

None of the goodwill on the acquisition is expected to be deductible for income tax.

 

During the period, £3.1 million of Contingent consideration was paid (30 June 2022: £nil, 31 December 2022: £nil). Connexicon met milestones relating to product and process validation resulting in a contingent consideration payment of €3 million whilst AFS achieved its 2022 EBITDA milestone, resulting in a payment of €500,000.

 

 

10.     Contingent liabilities

 

The Directors are not aware of any contingent liabilities faced by the Group as at 30 June 2023 (30 June 2022: £nil, 31 December 2022: £nil).

 

11.    Share capital

 

Share capital as at 30 June 2023 amounted to £10,858,000 (30 June 2022: £10,836,000, 31 December 2022: £10,843,000). During the period the Group issued 296,989 shares in respect of share options, LTIPS, Deferred Annual Bonus Scheme and the Share Incentive Plan.

 

12.    Going concern

 

In carrying out their duties in respect of going concern, the Directors have carried out a review of the Group's financial position and cash flow forecasts for the next 12 months and considered whether there are any factors that indicate a deterioration in trading performance beyond 12 months. The forecasts used are based on a comprehensive review of revenue, expenditure and cash flows, taking into account specific business risks and the current economic environment.

 

The Group has used sensitivity analysis on the Group's forecasted performance, using a mid-case scenario, a 10% sales reduction, and a worst-case scenario, a 25% sales reduction. The results show that in all of these scenarios AMS is able to continue its operations for a period of at least 12 months.

 

With regards to the Group's financial position, it had cash and cash equivalents at 30 June 2023 of £69.1 million.

 

While the current economic environment is uncertain, AMS operates in markets whose demographics are favourable, underpinned by an increasing need for products to treat chronic and acute wounds. Consequently, long-term market growth is expected. The Group has a number of long-term contracts with customers across different geographic regions and also with substantial financial resources, ranging from government agencies through to global healthcare companies.

 

After taking the above into consideration, the Directors have reached the conclusion that the Group is well placed to manage its business risks in the current economic environment. Accordingly, they continue to adopt the going concern basis in preparing the condensed consolidated financial statements.

 

13.    Principal risks and uncertainties

 

Further detail concerning the principal risks affecting the business activities of the Group is detailed on pages 43-47 of the Annual Report and Accounts for the year ended 31 December 2022. There have been no significant changes since the last annual report.

 

14.    Seasonality of sales

 

There are no significant factors affecting the seasonality of sales between the first and second half of the year.

 

15.    Events after the balance sheet date

 

With the exception of its trading update on 4th September, there have been no material events subsequent to the end of the interim reporting period ended 30 June 2023.

 

16.    Copies of the interim results

 

Copies of the interim results can be obtained from the Group's registered office at Premier Park, 33 Road One, Winsford Industrial Estate, Winsford, Cheshire, CW7 3RT and are available on our website "www.admedsol.com".

 

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