RNS Number:4561Q
Gyrus Group PLC
6 September 2000
GYRUS GROUP PLC
GYRUS GROUP REPORTS RESULTS FOR THE YEAR ENDED 30 JUNE 2000 TODAY
Gyrus Group PLC (Gyrus) - the minimal access surgery company - reports today:
* Year on year turnover growth of 46%, supported by the Everest acquisition.
* Gross margins strengthened.
* Rapid progress in USA continues following Everest acquisition.
* US introduction of new PlasmaKinetic generator to enhance performance of
Everest instruments worldwide on track for introduction in 4Q2000.
* Gyrus Endourology system now established in a number of key centres in the
US in preparation for sales launch 1Q2000.
* Cosmetic surgery product development on track.
* Group restructuring completed.
* Gyrus is now a commercially focused medical technology company actively
seeking further opportunities to strengthen its global sales and distribution
network.
Dr Mark Goble, CEO, commented: "The strong last quarter is an indication of
our future performance, the combination of global distribution and proprietary
technology present an exciting opportunity."
ENQUIRIES
GYRUS GROUP PLC
Dr Mark Goble, Chief Executive, or
John Bradshaw, Finance Director
Tel: (01628) 535 800
Fax: (01628) 535 801
E-Mail: john.bradshaw@gyrus.co.uk
(Analyst/Broker/Shareholder Enquiries)
JEAN GARON PR
Jean Garon
Tel: (01628) 483040
Fax: (01628) 486796
E-Mail: jean@garonpr.demon.co.uk
(Press Enquiries)
CHAIRMAN'S REPORT
For the twelve month period ended 30 June 2000 I am pleased to report that the
turnover of the group increased 46% to #13.7 million (1999: #9.4 million).
R&D revenue increased to #2.6 million (1999: #0.3 million) reflecting the
impact of the Key Growth Project with Johnson & Johnson and the $1.5 million
patent milestone payment received in December 1999. Product sales and
royalties increased to #11.0 million (1999: #9.1 million). Margins on
product sales in the first half were affected by the inventory realignment at
Johnson & Johnson. These have strengthened in the second half to 43% as a
result of increasing sales to Mitek and Gynecare and the strong contribution
from Everest's sales at 52%. Everest contributed turnover of #2.6 million and
operating profits of #0.4 million before goodwill amortisation. Group sales
during the quarter ended 30 June 2000 were particularly strong bringing losses
for the period in line with management expectations.
In mid-April the company raised #45 million by way of a Placing and Open Offer
primarily to finance the acquisition of Everest Medical Inc. At 30 June 2000
cash and short term investments were #9.6 million held to finance the group's
future growth.
The acquisition of Everest Medical was successfully completed in mid-April and
early signs post acquisition are extremely encouraging. The management team,
with the exception of the CEO, has remained in place and is exceeding our
operational expectations and forecasts. A professional search firm is well
advanced in the recruitment of a new CEO. The group's financial year end has
been changed to 31 December to align it with those of Everest and J&J (See
note 1).
We believe that our PlasmaKinetic technology will provide a superior energy
source to enhance the performance benefits of Everest instruments. This
strategy of technology integration was well received following presentations
and hands-on demonstrations included in the first combined US National Sales
Meeting in May. The development of a dedicated PlasmaKinetic generator is now
well under way with a target release date of Q4 2000.
Following the acquisition of Everest we reviewed the options available to us
to distribute the Gyrus Endourology System in the US market. We concluded
that the management and a significant proportion of 105 independent sales
professionals were well qualified and well positioned to distribute the
system. This decision is in the process of being implemented with introduction
of the system into twenty selected centres of excellence. Experience from
these centres will support sales training prior to a full launch of the system
in Q1, 2001.
The process of consolidating sales and distribution structures for Everest
instruments and the Gyrus Endourology System outside the US has begun. A
single distributor is now in place in Italy and we are currently reviewing
opportunities to integrate and strengthen distribution in the UK.
Having achieved the inventory reduction goals at Mitek and Gynecare we have
seen a significant upturn in orders and the forecast demand throughout the
remainder of the year. As a result of a promotional focus on VersaPoint
during the Spring, sales of generators to Gynecare resumed in June, earlier
than was anticipated. Underlying end-user sales continue to be strong with
both Mitek and Gynecare showing year on year growth. With the change of our
year end to 31 December, aligning it to the planning cycle at Mitek and
Gynecare, we are now in a much better position to plan production demands
through 2001.
A stream of new products has been introduced including a suction capability
for both the 2.3mm and 3.5mm range of VAPR arthroscopic instruments, a 2.3mm
wedge instrument for knee arthroscopy and a VersaPoint resecting loop for
gynaecological use. Development of further products, under the Key Growth
Project investment are continuing to plan with further launches anticipated
before 31 December 2000. We continue to enjoy the full co-operation of both
Mitek and Gynecare and their support for both our technology and products in
their respective markets of arthroscopy and women's health.
The Gyrus Endourology System for the treatment of benign prostatic hyperplasia
(BPH) continues to make steady progress. A User Group Meeting was held at the
end of June and attended by 90 surgeons drawn from Europe and Australia who
reviewed clinical work to date. It was concluded that the system was at least
equal to the 'gold standard' TURP but with the significant benefits of less
blood loss and the use of saline to avoid the toxicity of non-electrolyte
fluids. We are committed to being at the forefront of new procedures being
developed to address BPH as well as meeting the other surgical needs of a
urological practice. As part of the programme we received 510(k) approval for
Plasma-Sect, a resection loop used for both prostate and bladder surgery.
The technology development group has been continuing the development of
PlasmaKinetic II technology for cosmetic surgery. As this development nears
the pilot production phase, this group will be amalgamated with the design and
development group and another advanced research group spun-off to develop the
other applications of the technology to a similar stage.
In June, following careful review, we restructured the company as a number of
business units operating on a global basis as a matrix within the overall
operating company. We also took steps to ensure that the operational units of
Gyrus Medical and Everest Medical focused on strengthening margins in an
environment of controlled overhead expense. This has enabled us to redirect
investment into the expansion of our sales and marketing infrastructure
supporting our direct markets as well as providing direction for our research
and development activities.
Jon Moore has been appointed Managing Director, Operations of Gyrus Medical
Ltd and will be responsible for all Cardiff based activities, he was
previously Production & Development Director.
The new Cardiff facility is now occupied and is expected to be fully
operational by the end of 2000. As a consequence of the restructuring our two
peripheral offices will be vacated. Our current manufacturing facility will
accommodate the amalgamated Research and Development group and will be used
for development and pilot production of new products. A group headquarters to
include the executive directors, sales, marketing and customer service
activities for our direct business as well as the advanced research group will
relocate to a new facility along the M4 corridor.
Summary
During the twelve month period the Group made significant progress towards
globalisation of its business. The acquisition of Everest opened up direct
access to the single largest health care market in the world, enabling Gyrus
to add its products and technology to those of Everest and to become a
significant player in energy-based surgical procedures.
In addition, implementing this strategy has reduced our dependence on Johnson
& Johnson. The fact that we managed our way through a significant inventory
realignment yet were still able to post a 46% growth in turnover is strong
evidence to support the robustness of our business. The restructuring of the
organisation reflects both the acquisition of Everest and the opportunities it
presents in accelerating our growth globally in the markets we currently
serve. It also enables the overall business units to become efficient
manufacturing, marketing and selling organisations capable of enhancing the
return from our research investment.
The Board wishes to thank the management, staff and suppliers for their
support during the year. I would also like to welcome a number of new
shareholders as well as thank those whose continued support, in conjunction
with our bankers and advisors, enabled the successful and timely acquisition
of Everest Medical Inc.
Brian Steer
Chairman, Gyrus Group PLC
6th September 2000
Gyrus Group PLC
Consolidated profit
and loss accounts
Year ended Year ended Six months Six months
30 June 30 June ended 30 ended 30
2000 1999 June 2000 June 1999
(unaudited) (audited) (unaudited) (unaudited)
#000 #000 #000 #000
Product sales and 11,041 9,093 7,426 5,083
royalties
Development fees 2,640 303 977 303
Turnover - continuing 13,681 9,396 8,403 5,386
operations
Turnover
Existing operations 11,031 9,396 5,753 5,386
Acquisition 2,650 0 2,650 0
13,681 9,396 8,403 5,386
Cost of sales (6,857) (5,697) (4,224) (3,223)
Gross profit 6,824 3,699 4,179 2,163
Selling and (1,758) (947) (1,216) (525)
distribution expenses
Research and (4,386) (2,325) (2,693) (1,235)
development expenses
General and
administrative
expenses
- ordinary (3,041) (2,389) (1,728) (1,233)
- exceptional 0 (874) 0 (874)
general and
administrative
expenses
- goodwill (330) 0 (330) 0
Total general and (3,371) (3,263) (2,058) (2,107)
administrative
expenses
Operating loss - (2,691) (2,836) (1,788) (1,704)
continuing operations
Operating loss
Existing operations (2,775) (2,836) (1,872) (1,704)
Acquisition - 414 0 414 0
operating profit
(330) 0 (330) 0
- goodwill
84 0 84 0
(2,691) (2,836) (1,788) (1,704)
Interest receivable 229 441 148 184
and similar income
Interest payable and (43) (61) (26) (28)
similar charges
Loss on ordinary (2,505) (2,456) (1,666) (1,548)
activities before and
after taxation, being
the loss for the
financial period
Loss per ordinary
share
Basic and diluted 7.4p 7.9p 4.6p 5.0p
Excluding goodwill 6.4p 7.9p 3.7p 5.0p
#000 #000 #000 #000
EBITDA (1,589) (2,129) (1,054) (1,327)
The total recognised
gains and losses in
the periods ended 30
June 2000 comprise the
loss made in the
period shown above and
gains of #80,000 in
the net investment in
foreign enterprises
arising from changes
in currency exchange
rates.
Gyrus Group PLC
Consolidated balance
sheets
As at 30 June As at 30 June
2000 1999
(unaudited) (audited)
#000 #000
Fixed assets
Goodwill 31,843 0
Tangible assets 2,324 1,376
Current assets
Stocks 4,281 2,376
Debtors 6,209 1,883
Investments - cash on 9,000 4,000
deposit
Cash at bank and on hand 589 972
20,079 9,231
Creditors: Amounts falling (4,746) (2,403)
due within one year
Net current assets 15,333 6,828
Total assets less current 49,500 8,204
liabilities
Creditors: Amounts falling (160) (198)
due after more than one
year
Deferred income (37) 0
Net assets 49,303 8,006
Capital and reserves
Share capital and premium 57,551 13,991
Merger reserve 3,561 3,561
Profit and loss account (11,809) (9,546)
Equity shareholders' funds 49,303 8,006
Reconciliation of
movements in shareholders'
funds
As at 30 June As at 30 June
2000 1999
(unaudited) (audited)
#000 #000
At beginning of period 8,006 10,087
Loss for the financial (2,505) (2,456)
period attributable to
equity shareholders
New share capital issued 43,560 137
(net of expenses of #1.7m)
Share related awards 162 238
Gain on foreign currency 80 0
translation
At end of period 49,303 8,006
Gyrus Group PLC
Consolidated cashflow
statements
Year ended Year ended 30 Six months Six months
30 June 2000 June 1999 ended 30 June ended 30 June
2000 1999
(unaudited) (audited) (unaudited) (unaudited)
#000 #000 #000 #000
Net cash flow from (3,392) (3,729) (1,114) (1,506)
operating activities
Returns on investment and
servicing of finance
Interest received 217 460 136 199
Interest paid (39) (35) (37) (16)
Interest elements in (8) (27) 4 (13)
finance lease rentals
Net cash flows for returns 170 398 103 170
on investments and
servicing of finance
Taxation 0 0 0 0
Capital expenditure and
financial investments
Purchase of tangible fixed (1,504) (311) (1,023) (217)
assets
Sale of tangible fixed 15 15 0 15
assets
(1,489) (296) (1,023) (202)
Acquisition
Purchase of subsidiary (34,776) 0 (34,776) 0
undertaking
Net cash acquired with 596 0 596 0
subsidiary
(34,180) 0 (34,180) 0
Cash out flow before (38,891) (3,627) (36,214) (1,538)
management of liquid
resources and financing
Management of liquid (5,000) 4,300 (6,800) 2,000
resources
Financing
Capital element of finance (16) (113) 17 (50)
lease rental payments
Bank loan (36) (36) (18) (18)
Issue of share capital 43,560 70 43,515 (5)
Net cash inflow (outflow 43,508 (79) 43,514 (73)
from financing
Increase (decrease) in (383) 594 500 389
cash in the period
Gyrus Group PLC
Reconciliation of net
cash flow to movements
in net funds
Year ended Year ended Six months Six months
30 June 30 June ended 30 ended 30
2000 1999 June 2000 June 1999
(unaudited) (audited) (unaudited) (unaudited)
#000 #000 #000 #000
Increase (decrease) in (383) 594 500 389
cash in the period
Cash outflow from 52 149 1 68
decrease in debt and
lease financing
Increase (decrease) in 5,000 (4,300) 6,800 (2,000)
liquid funds
4,669 (3,557) 7,301 (1,543)
New finance leases (14) (18) (14) (18)
Change in net funds 4,655 (3,575) 7,287 (1,561)
Net funds at beginning 4,678 8,253 2,046 6,239
of period
Net funds at end of 9,333 4,678 9,333 4,678
period
Analysis of net funds
Year ended Year ended
30 June 30 June
2000 1999
(unaudited) (audited)
#000 #000
Cash at bank and in 589 972
hand
Finance leases (131) (133)
Debt due within one (36) (36)
year
Debt due after one (89) (125)
year
Current asset 9,000 4,000
investments
Net funds at end of 9,333 4,678
period
Reconciliation of
operating loss to cash
flow from operating
activities
Year ended Year ended Six months Six months
30 June 30 June ended 30 ended 30
2000 1999 June 2000 June 1999
(unaudited) (audited) (unaudited) (unaudited)
#000 #000 #000 #000
Operating loss (2,691) (2,836) (1,788) (1,704)
Goodwill amortisation 330 0 330 0
Depreciation charges 772 707 404 377
Loss on disposal of 8 4 0 4
fixed assets
Increase in stocks (683) (826) (497) (12)
(Increase) decrease in (2,541) (375) (1,052) (543)
debtors
(Decrease) increase in 1,137 108 1,651 671
creditors
Increase (decrease) in 37 (749) (320) (417)
deferred income
Share related awards 162 238 81 118
Exchange movement on 77 0 77 0
reserves
(3,392) (3,729) (1,114) (1,506)
Purchase of subsidiary
undertaking
On 17 April 2000 Gyrus
Group PLC acquired the
entire share capital of
Everest Medical
Corporation for
#34,776,000 satisfied in
cash.
#000
Provisional fair values of
the net assets acquired
Tangible fixed assets 217
Stocks 1,222
Debtors 1,773
Cash at bank and in hand 596
Creditors (1,211)
2,597
Goodwill 32,173
34,770
Satisfied by cash 34,770
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.
Goodwill, representing the excess of purchase consideration over the fair
value of the net assets acquired since April 2000 is capitalised and amortised
over 20 years. 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. This interim
report covers the six months and twelve months ended 30 June 2000 since the
groups financial year has changed to 31 December. Audited financial
statements will be prepared for the eighteen month period ending 31 December
2000.
2. Loss per share
The loss per share is based on losses of #1,666,000 for the six months ended
30 June 2000 and #2,505,000 for the year ended 30 June 2000 (six months ended
30 June 1999: loss of #1,548,000 and year ended 30 June 1999: loss of
#2,456,000), and on 36,569,002 ordinary shares for the six months ended 30
June 2000 and 33,858,551 ordinary shares for the year ended 30 June 2000 (six
months ended 30 June 1999: 31,064,603 and year ended 30 June 1999:
31,047,678), being the weighted average number of shares during the periods.
3. Dividend
The directors do not recommend payment of a dividend.
4. Approval
This Interim Statement was approved by the Board of Directors on 5 September
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 Companys registered office, Fortran Road, St
Mellons, Cardiff, CF3 0LT.
INDEPENDENT REVIEW REPORT BY KPMG AUDIT PLC TO GYRUS GROUP PLC
Introduction
We have been instructed by the company to review the financial information set
out in the figures 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 Financial Services Authority 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 30 June 2000.
KPMG Audit Plc
Chartered Accountants
Marlborough House
Fitzalan Court
Fitzalan Road
Cardiff
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