RNS Number:0445G
Gyrus Group PLC
23 February 2000
GYRUS GROUP PLC
("Gyrus" or the "Company")
GYRUS GROUP PLC
INTERIM STATEMENT
CHAIRMAN'S STATEMENT
For the six month period ending 31st December 1999 we are pleased to announce
that the turnover of the group increased to #5.3m (1998: #4m), an increase of
32%. R&D revenue contributed 31% to turnover which reduced the impact of a
10% fall in product sales resulting from an inventory reduction program
instituted by Johnson & Johnson. The gross margin on product sales was
impacted by this loss of volume but, nonetheless, operating losses were down
20% to #0.9m (1998: #1.1m).
Following the decision by our customer Mitek Products, a subsidiary of Ethicon
Inc (J&J), to extend their focus to include arthroscopic knee surgery, we
announced in September launch of our 2.3mm reduced diameter instruments for
treating knee cartilage. At the same time we agreed the terms of a $6m
investment from Johnson & Johnson to develop a series of products to spearhead
this expansion. Product developments supported by this Key Growth Project
initiative have been rapid. On 25th January we announced the launch of the
first product which enhances performance of VAPR instruments by extracting the
by-products of tissue vaporisation and further improving visualisation. This
is the first of a series of products which will be launched over the next
12-18 months. The increasing focus on knee surgery should continue to support
the anticipated growth in our arthroscopy business.
As a result of a company-wide inventory restructuring programme within Johnson
& Johnson, Mitek made a one-off reduction in their orders on some of the more
established product lines. This action was made possible by Gyrus becoming an
approved supplier, avoiding the need for Mitek to hold a buffer stock. The
impact of this reduction for the six month period was that trading was
somewhat below our expectations. This was communicated during our AGM on 15th
December 1999 as a one time adjustment to our forecast.
The latest order forecasts from Mitek show monthly levels exceeding those
prior to the inventory reduction, confirming continued growth in end-user
sales. The demand for the 2.3mm electrodes is particularly encouraging. We
believe that this growth will be further enhanced both by the new products we
have under development and increasing adoption outside the US.
Gynecare sales were also impacted by the same corporate decision, albeit on a
lower volume. During the period Gynecare have undergone a series of
management changes including the appointment of a new Division President. As
a result the emphasis and focus on VersaPoint has been increased and our
continued development of the VersaPoint product portfolio is now funded by
Gynecare. These developments are currently focused on expanding the
VersaPoint Resectoscope System (VRS), originally launched last year, to allow
surgeons to treat larger pathologies of the uterus. The system has now
received 510(k) approval for the broader indication of endometrial ablation
(removing the entire lining of the uterus). We believe these developments will
result in a wider acceptance of our technology but, in the near term, the
effects of the inventory reduction will take a little longer to work through
due to the lower volumes compared to Mitek.
The Gyrus Endourology System for treatment of benign prostatic hyperplasia
(BPH) continues to find market acceptance in Europe and Australasia.
Surgeons' confidence in the use of the product and excellent clinical results,
have resulted in sales growth month on month. The rate of unit growth however
was held back pending availability of clinical trial results. Preliminary
results have helped to increase sales. This modest increase will be
accelerated by both a steady build up of clinical outcomes data and the launch
of additional products during the year. A user meeting in July 2000 is
expected to attract over 100 leading surgeons from Europe. This meeting will
provide a scientific platform and will enable surgeons to share their
experience of the system. A distribution structure is now in place in Europe
managed by experienced area managers. New procedures to treat BPH are also
under development, to increase the utility of the generator, creating a
urology workstation offering a range of choices to suit most clinical
preferences and conditions.
In the USA clinical evaluations are well advanced in six centres. Although
surgical techniques in the USA are somewhat different to Europe, the system is
finding ready acceptance. Discussions are well advanced with two US
corporations that could result in a distributor agreement during Q2 2000,
assuming that on completion of the trials this is still seen to be the optimal
approach to US distribution.
Research & Development continues to be a critical focus for the company with a
55% increase in R&D expenditure to support the Key Growth Projects, continuing
VersaPoint developments and a new Endourology product to be introduced in Q2
2000. Expenditure has also increased on PlasmaKinetic II technology where
cosmetic and laparoscopic applications have become a high priority. The
cosmetic surgery system remains on target for launch in Q4 2000.
Several US patents covering PlasmaKinetic I technology are on Notice of
Allowance, four have now issued. A key patent was issued just prior to
Christmas triggering the $1.5M milestone payment from Ethicon and we fully
expect several more to issue over the year, including the first of those
covering PlasmaKinetic II technology. We will continue to expand our patent
portfolio and the geographical coverage of that portfolio.
The new 40,000sq ft headquarters will be finished on time. Management has
decided on a phased programme of occupation to be completed towards the end of
2000 once the new cleanroom is commissioned. The existing site will be given
over entirely to Research & Development utilising the current manufacturing
area for pilot builds and process development.
We have virtually fully absorbed the 'one off' adjustment to inventory during
the period yet we have still posted significant revenue growth, thanks to
productivity and innovation of our R&D. With the continued robust growth in
end user sales we are back on course, with a growing order book and customers
enthusiastic about our new product introductions. The strength of our
distribution partners and the development of our technology will continue to
drive the company to the achievement of its business plans. The Board wishes
to thank the management, staff, suppliers and investors for their continued
confidence and support in the future of Gyrus Group PLC.
Brian Steer
Chairman
Gyrus Group PLC
Consolidated profit and loss accounts
Six months Six months Year ended
ended 31 ended 31 30 June
December December 1999
1999 1998
(unaudited) (unaudited) (audited)
#000 #000 #000
Product sales and royalties
3,615 4,010 9,093
Development fees
1,663 - 303
Turnover - continuing operations 5,278 4,010 9,396
Cost of sales (2,633) (2,474) (5,697)
Gross profit 2,645 1,536 3,699
Selling and distribution expenses (542) (422) (947)
Research and development expenses (1,693) (1,090) (2,325)
General and administrative expenses (1,313) (1,156) (2,389)
- exceptional general and administrative - - (874)
expenses
Operating loss - continuing operations (903) (1,132) (2,836)
Interest receivable and similar income 81 257 441
Interest payable and similar charges (17) (33) (61)
Loss on ordinary activities before and
after taxation, being the loss for the (839) (908) (2,456)
financial period
Loss per ordinary share
Basic and diluted 2.7p 2.9p 7.9p
There are no recognised gains and losses other than the loss for each of
periods stated above.
Gyrus Group PLC
Consolidated balance sheets
As at 31 As at 31 As at 30
December December June 1999
1999 1998
(unaudited) (unaudited) (audited)
#000 #000 #000
Tangible assets 1,466 1,537 1,376
Current assets
Stocks 2,562 2,364 2,376
Debtors 3,372 1,355 1,883
Investments - cash on deposit 2,200 6,000 4,000
Cash at bank and on hand 89 583 972
8,223 10,302 9,231
Creditors: Amounts falling due within one
year (1,855) (1,805) (2,403)
Net current assets 6,368 8,497 6,828
Total assets less current liabilities 7,834 10,034 8,204
Creditors: Amounts falling due after more (184) (243) (198)
than one year
Deferred income (357) (417) -
Net assets 7,293 9,374 8,006
Capital and reserves
Share capital 14,036 13,929 13,991
Merger reserve 3,561 3,561 3,561
Profit and loss account (10,304) (8,116) (9,546)
Equity shareholders' funds 7,293 9,374 8,006
Reconciliation of movements in shareholders'
funds
As at 31 As at 31 As at 30
December December June 1999
(unaudited) (unaudited) (audited)
#000 #000 #000
At beginning of period 8,006 10,087 10,087
Loss for the financial period attributable
to equity shareholders (839) (908) (2,456)
New share capital issued 45 75 137
Share related awards 81 120 238
At end of period 7,293 9,374 8,006
Gyrus Group PLC
Consolidated cashflow statements
Six months Six months Year ended
ended 31 ended 31 30 June
December December 1999
1999 1998
(unaudited) (unaudited) (audited)
#000 #000 #000
Net cash flow from operating activities (2,278) (2,223) (3,729)
Returns on investment and servicing of
finance
Interest received 81 261 460
Interest paid (10) (19) (35)
Interest elements in finance lease rentals (4) (14) (27)
Net cash flows for returns on investments
and servicing of finance 67 228 398
Taxation
- - -
Capital expenditure and financial investments
Purchase of tangible fixed assets (481) (94) (311)
Sale of tangible fixed assets 15 - 15
(466) (94) (296)
Cash out flow before management of liquid
resources and financing (2,677) (2,089) (3,627)
Management of liquid resources 1,800 2,300 4,300
Financing
Capital element of finance lease rental (33) (63) (113)
payments
Bank loan (18) (18) (36)
Issue of share capital 45 75 70
Net cash outflow from financing (6) (6) (79)
Increase (decrease) in cash in the period (883) 205 594
Gyrus Group PLC
Reconciliation of net cash flow to movements
in net funds
Six months Six months Year ended
ended 31 ended 31 30 June
December December 1999
1999 1998
(unaudited) (unaudited) (audited)
#000 #000 #000
Increase (decrease) in cash in the period (883) 205 594
Cash outflow from decrease in debt and
lease financing 51 81 149
Decrease in liquid funds (1,800) (2,300) (4,300)
(2,632) (2,014) (3,557)
New finance leases - - (18)
Change in net funds (2,632) (2,014) (3,575)
Net funds at beginning of period 4,678 8,253 8,253
Net funds at end of period 2,046 6,239 4,678
Analysis of net funds
Six months Six months Year ended
ended 31 ended 31 30 June
December December 1999
1999 1998
(unaudited) (unaudited) (audited)
#000 #000 #000
Cash at bank and in hand 89 583 972
Finance leases (100) (165) (133)
Debt due within one year (36) (36) (36)
Debt due after one year (107) (143) (125)
Current asset investments 2,200 6,000 4,000
Net funds at end of period 2,046 6,239 4,678
Reconciliation of operating loss to cash flow from
operating activities
Six months Six months Year ended
ended 31 ended 31 30 June
December December 1999
1999 1998
(unaudited) (unaudited) (audited)
#000 #000 #000
Operating loss (903) (1,132) (2,836)
Depreciation charges 368 330 707
Loss on disposal of fixed assets 8 - 4
Increase in stocks (186) (814) (826)
(Increase) decrease in debtors (1,489) 168 (375)
(Decrease) increase in creditors (513) (563) 108
Increase (decrease) in deferred income 357 (332) (749)
Share related awards 81 120 238
(2,278) (2,223) (3,729)
Gyrus Group PLC
Notes to the Interim Statement
1. Basis of preparation
The interim statement has been drawn up under the same accounting policies as
those used for the financial statements for the year ended 30 June 1999. The
interim financial statements do not constitute statutory accounts as they are
unaudited. They have however been reviewed by KPMG Audit Plc and their report
is set out below. The annual report and accounts of Gyrus Group PLC for the
year ended 30 June 1999 received an unqualified audit report and have been
filed with the Registrar of Companies.
2. Loss per share
The loss per share is based on losses of #839,000 (six months ended 31
December 1998: loss of #908,000 and year ended 30 June 1999: loss of
#2,456,000), and on 31,177,562 ordinary shares (six months ended 31 December
1998: 31,031,028 and year ended 30 June 1999: 31,047,678), being the weighted
average number of shares during the period.
3. Dividend
The directors do not recommend payment of a dividend.
4. Approval
This Interim Statement was approved by the Board of Directors on 22 February
2000.
5. Copies of the Interim Statement
Copies of the interim statement will be sent to all shareholders and further
copies are available at the Company's registered office, Fortran Road, St
Mellons, Cardiff, CF3 0LT.
Review Report by KPMG Audit Plc to the Directors of Gyrus Group PLC
Introduction
We have been instructed by the company to review the financial information and
we have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The Listing
Rules of the London Stock Exchange require that the accounting policies and
presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where they are to be
changed in the next annual accounts in which case any changes, and the reasons
for them, are to be disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4: Review of interim financial information issued by the Auditing
Practices Board. A review consists principally of making enquiries of Group
management and applying analytical procedures to the financial information and
underlying financial data and, based thereon, assessing whether the accounting
policies and presentation have been consistently applied unless otherwise
disclosed. A review is substantially less in scope than an audit performed in
accordance with Auditing Standards and therefore provides a lower level of
assurance than an audit. Accordingly we do not express an audit opinion on
the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 December 1999.
KPMG Audit Plc, Chartered Accountants, Cardiff
22 February 2000
END
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