RNS Number:1194A
Gyrus Group PLC
8 March 2001
ANNOUNCEMENT PR7748A
8th March 2001
GYRUS GROUP PLC
("Gyrus", "the Group" or "the Company")
GYRUS GROUP RESULTS DELIVER ON BOTH
FINANCIAL AND COMMERCIAL PROMISES
Reporting on the last six months of the eighteen month period ended 31st
December 2000, Gyrus Group PLC -
* Reported profit before tax and goodwill amortisation of #
118,000 with sales growing 136% to #13 million.
* Direct sales grew #5.3 million, now representing 41% of
revenue.
* Performance of Everest exceeded expectations contributing #1.4
million to operating profits.
* Sales to marketing partners increased by 83% to #6.5 million.
* Innovation continues with launch of less traumatic tissue
management techniques, applicable to broad range of surgical
procedures, will result in new growth potential.
Commenting on the company results announced today, Chairman Brian Steer said:
"The high percentage of sales now coming from direct business has moved the
Group significantly towards profitability and now provides a strong platform
for sustained growth."
ENQUIRIES
* Gyrus Group PLC Tel: (01628) 535800
Dr Mark Goble, Group Chief Executive Fax: (01628) 535801
Analyst and Broker Enquiries E-Mail:mark.goble@gyrus.co.uk
* Jean Garon PR Tel: (01628) 483040
Jean Garon Fax: (01628) 486796
Press Enquiries E-Mail: jean@garonpr.demon.co.uk
GYRUS GROUP PLC
Results for the period ended 31 December 2000
CHAIRMAN'S REPORT
Group Trading Results Summary
I am very pleased to report that in the six month period ended 31 December
2000 the Group recorded a 136% growth in turnover to #13.0 million (1999: #5.5
million) and a profit before tax and goodwill amortisation of #0.1 million,
the Group's first profitable period since flotation in November 1997. During
this period acquisitions contributed over 50% of turnover highlighting the
Group's move into direct distribution of its products. Product gross margins
were 49% up from 27% in the same period in the prior year. During the period
the Company's year end was changed to 31 December. For the eighteen-month
period ended 31 December 2000 turnover was #26.7 million and losses before
interest and goodwill amortisation were #2.4 million. Cash and investments at
31 December 2000 were #7.6 million.
Direct Sales
US Operations
The acquisition of Everest completed on 17 April 2000 was a significant step
for Gyrus towards becoming a major player in the global market for surgical
products. Everest has contributed #8.8m to sales since acquisition, exceeding
our original expectations. In October 2000 Chris Smith was appointed
President and CEO. The independent sales force has increased to 120 and
staff turnover has been minimal.
Our PlasmaKineticTM technology was developed to optimise the performance of
Everest instruments and introduced to key centres in December 2000 as the
PlasmaKineticTM Tissue Management system. This system also incorporates the
features of the Endourology system as an integrated package and was launched
at the US National Sales Meeting in March 2001. The full launch followed a
series of successful evaluations at the key centres which confirmed the
anticipated performance enhancements over conventional practices. The
introduction was further supported with a new training, education and
marketing package which together with a revised incentive scheme will ensure a
highly motivated sales force.
In February 2001 US operations moved to a new facility of 42,700 sq ft more
than doubling effective capacity.
UK, Europe and non US Operations
The acquisition of SkyMed Limited on 10 October 2000 brought a number of major
strategic benefits. It provided the basis for our international operations
managing all direct sales outside the US with an established and respected
direct sales and distribution capability in the UK and management of the
existing distribution network outside of the US. The founder of SkyMed, David
Ball, has been appointed to head up our sales operations, leading an
experienced team to drive international sales growth.
Whilst Everest products and distributed products continue to grow rapidly,
Endourology is still slow despite continued positive clinical outcomes. It is
anticipated that the addition of SkyMed's sales resource and additional sales
people will be effective in converting clinical acceptance into sales.
We continue to improve efficiency at our manufacturing operations in Cardiff,
product gross margins increasing from 27% to 42%. With the introduction of
the PlasmaKineticTM Tissue Management generators in the US combined with
ongoing demand for VAPRII, electronic assembly capacity has been increased to
maximise installations during the forthcoming year. Capital investment of #
0.3 million in a new clean room is scheduled for the second half of 2001.
The corporate management function, international sales and marketing, clinical
trials management and technology development are being consolidated to a
single site on the outskirts of Reading.
Marketing Partners
Total sales through our marketing partners in the six months ended 31 December
2000 were #6.5 million an increase of 83% over the same period in the prior
year.
Sales of VAPR to Mitek were #2.9 million (1999: #2.6million) in line with
expectations despite the installed base of generators increasing less than
expected to 3,400. This lower placement rate was due to an internal policy
decision at J&J which was reversed in Q4 and, assisted by launch of the VAPRII
system in October, placement rates towards the end of the year reached their
highest level for the period. The VAPRII system offers a versatile and
comprehensive range of features making it, we believe, the most competitive
arthroscopic system on the market. Several other products were introduced
through the year aimed at improving utilisation in the knee sector of the
market.
Sales of VersaPoint to Gynecare doubled to #2 million (1999: #1 million) in
line with expectations despite the voluntary withdrawal of the system. This
action was taken as a result of a small number of suspected cases of air or
gas embolism. Following review of these cases by an international panel of
experts it was determined that this was a technique related issue not a
technology related issue. As a result, changes to the labelling were
developed and subsequently reviewed and cleared by the FDA following which
Gynecare re-launched the product in February. Product sales during Q4 were to
inventory to support the re-launch which as predicted has impacted sales
during Q1 2001. We anticipate Gynecare being able to quickly attain the
growth rate seen prior to the withdrawal from the 1,200 users.
Instruments for saphenous vein harvesting sold to Guidant Corporation grew by
65% to #0.8 million. As anticipated, sales to Bard and Ethicon Endosurgery
were relatively flat for the period at #0.5 million and #0.3 million
respectively.
The Management Team
Management strength is vital to the implementation of our strategic plans,
enabling us to resource a number of initiatives from a solid operational base.
We have been able to attract and retain a top quality management group at
all levels including teams from Everest and SkyMed. The Group has introduced
an improved salary and incentives structure as recommended by the Remuneration
Committee. Chris Smith, President and CEO of US operations, Tom Murphy,
Finance Director, and Jon Moore, Managing Director of Gyrus Medical Limited,
are today appointed as directors of Gyrus Group PLC.
Research & Development
R&D expenditure for the six month period was #2.8million or 21% of revenue.
Of this total #1.2 million was funded by J&J under the Key Growth project
agreement. Activities under the $6 million Key Growth project included the
launch of the VAPRII system in October and going forward the aggregate
investment in projects by J&J will be increased by approximately 20%. This
additional investment will support the development of new arthroscopic
applications for the VAPR system. The bulk of the in-house R&D expenditure
was on the continued development of the PKII technology for cosmetic
applications. The first CE marked PKII system was scheduled for release to
human use in December. Market feedback resulted in a decision to broaden the
scope of the pre-clinical evaluations to include a wider range of tissue
effects. A decision was also taken to develop the core PKII technology for
additional applications in laparoscopy, ENT and head and neck surgery. These
decisions have now been factored into the project and first human use will
commence in Q2 2001.
Outlook for 2001
As well as continuing to pursue organic growth through technology innovation
and clinical development, we have an active program to pursue acquisitions and
licensing arrangements that fit with our strategic goals and leverage our
growing sales and distribution capability. One key area of growth in 2001
will be in direct sales with increasing market penetration on a global basis
in both gynaecological and urological surgery. This growth will be supported
by a broadened strategy for the Group as it now focuses on the management of
tissue using less traumatic techniques during both open and endoscopic
surgical procedures. We believe that sales to our marketing partners Mitek
and Gynecare will pick up in the second half of the year. In Gynecare's case
due to the VersaPoint re-launch in February and in Mitek's because of
increasing VAPR II generator placements during the first half driving
disposable sales. Following clinical trials we will be progressing
negotiations with potential marketing partners to take the PKII system into
the dermatological market whilst retaining the ENT and head and neck surgery
applications. The manufacturing units in both Cardiff and Minneapolis will
continue to drive down costs. These cost reduction programmes, when combined
with the growing percentage of sales coming from our direct business, will
progressively improve our gross margin on product sales.
Conclusion
I am delighted that the Group has reported a profit before tax and goodwill
amortisation of #118,000 for the six month period ended 31 December 2000. The
successful acquisition and integration of both Everest and SkyMed is a credit
to the management teams, and their performance endorses our strategy of
increasing direct sales. This integration now provides a global platform from
which we can grow the business on all fronts. New and enhanced products are
expected to continue to flow onto the market and we are confident that
existing products will grow as a result of geographic expansion and increased
penetration. We will continue to realise our growth expectations through
continued investment in technology, enhanced commercial management and
appropriate acquisitions.
I would like to thank management and employees of the expanded Group for their
contribution in a period of great change. I thank our business partners,
professional advisers and suppliers for their support and our shareholders for
their faith and belief in the exciting prospects for our business.
Brian Steer,
Chairman, Gyrus Group PLC
8th March 2001
GYRUS GROUP PLC
Consolidated profit and loss accounts
Periods ended 31 December
Eighteen Year ended Six months ended 31
months December
ended 31 31 December
December
2000 2000 1999 2000 1999
(audited) (unaudited) (unaudited) (unaudited) (unaudited)
#000 #000 #000 #000 #000
Turnover
Product sales 22,858 19,243 8,698 11,817 3,615
and royalties
Development 3,833 2,170 1,966 1,193 1,663
fees
Turnover - 26,691 21,413 10,664 13,010 5,278
continuing
operations
Turnover
Existing 17,321 12,043 10,664 6,290 5,278
operations
Acquisitions 9,370 9,370 - 6,720 -
26,691 21,413 10,664 13,010 5,278
Cost of sales (12,916) (10,283) (5,856) (6,059) (2,633)
Gross profit 13,775 11,130 4,808 6,951 2,645
Gross profit % 52 52 45 53 50
Selling and (4,124) (3,582) (1,067) (2,366) (542)
distribution
costs
Research and (7,141) (5,448) (2,928) (2,755) (1,693)
development
costs
General and
administrative
expenses
- ordinary (4,964) (3,651) (2,546) (1,923) (1,313)
- exceptional - - (874) - -
- goodwill (1,156) (1,156) - (826) -
amortisation
Total general (6,120) (4,807) (3,420) (2,749) (1,313)
and
administrative
expenses
Operating loss (3,610) (2,707) (2,607) (919) (903)
- continuing
operations
Operating loss
Existing (4,247) (3,344) (2,607) (1,472) (903)
operations
Acquisitions - 1,793 1,793 - 1,379 -
operating
profit
Operating (2,454) (1,551) (2,607) (93) (903)
profit(loss)
before
goodwill
amortisation
-goodwill (1,156) (1,156) - (826) -
amortisation
(3,610) (2,707) (2,607) (919) (903)
Interest, net 397 333 220 211 64
Loss on
ordinary
activities
before and
after (3,213) (2,374) (2,387) (708) (839)
taxation,
being the loss
for the
financial
period
Profit (loss)
per ordinary
share
Basic and (8.6)p (5.9)p (7.7)p (1.6)p (2.7)p
diluted
Excluding (5.5)p (3.0)p (7.7)p 0.3p (2.7)p
goodwill
amortisation
#000 #000 #000 #000 #000
EBITDA (1,237) (703) (1,862) 352 (535)
GYRUS GROUP PLC
Consolidated balance sheets
As at 31 As at 31 As at 30
December December June
2000 1999 1999
(audited) (unaudited) (audited)
#000 #000 #000
Fixed assets
Goodwill 31,918 - -
Tangible assets 2,802 1,466 1,376
34,720 1,466 1,376
Current assets
Stocks 5,325 2,562 2,376
Debtors 5,638 3,372 1,883
Investments 5,700 2,200 4,000
Cash at bank and in hand 1,956 89 972
18,619 8,223 9,231
Creditors: amounts falling due within
one year
(3,868) (1,855) (2,403)
Net current assets 14,751 6,368 6,828
Total assets less current liabilities 49,471 7,834 8,204
Creditors: amounts falling due after
more than one year
(486) (184) (198)
Deferred income - (357) -
Net assets 48,985 7,293 8,006
Capital and reserves
Share capital and share premium 57,863 14,036 13,991
Merger reserve 3,561 3,561 3,561
Profit and loss account (12,439) (10,304) (9,546)
Equity shareholders' funds 48,985 7,293 8,006
GYRUS GROUP PLC
Consolidated cash flow statements
Periods ending 31 December
Eighteen Year ended 31 Six months ended 31
months December December
ended 31
December
2000 2000 1999 2000 1999
(audited) (unaudited) (unaudited) (unaudited) (unaudited)
#000 #000 #000 #000 #000
Net cash (4,431) (2,153) (3,784) (1,039) (2,278)
flow from
operating
activities
Returns on
investment
and
servicing of
finance
Interest 541 460 280 324 81
received
Interest (21) (11) (26) (6) (10)
paid
Interest (67) (63) (17) (35) (4)
element in
finance
lease
rentals
Net cash 453 386 237 283 67
flows for
returns on
investments
and
servicing of
finance
Taxation - - - - -
Capital
expenditure
and
financial
investment
Purchase of (1,898) (1,417) (698) (394) (481)
tangible
fixed assets
Sale of 35 20 30 20 15
tangible
fixed assets
(1,863) (1,397) (668) (374) (466)
Acquisition
Purchase of (35,470) (35,470) - (694) -
subsidiary
undertakings
Net cash 497 497 - (99) -
acquired
with
subsidiaries
(34,973) (34,973) (793)
Cash out
flow before
management (40,814) (38,137) (4,215) (1,923) (2,677)
of liquid
resources
and
financing
Management (1,700) (3,500) 3,800 3,300 1,800
of liquid
resources
Financing
Capital (89) (56) (83) (73) (33)
element of
finance
lease rental
payments
Bank loan (54) (36) (36) (18) (18)
Issue of 43,572 43,527 40 12 45
share
capital
Net cash 43,429 43,435 (79) (79) (6)
inflow
(outflow)
from
financing
Increase
(decrease)
in cash in 915 1,798 (494) 1,298 (883)
the period
GYRUS GROUP PLC
Reconciliation of net cash flow to movements in net funds
Eighteen Year ended 31 Six months ended 31
months ended December December
31 December
2000 2000 1999 2000 1999
(audited) (unaudited) (unaudited) (unaudited) (unaudited)
#000 #000 #000 #000 #000
Increase 915 1,798 (494) 1,298 (883)
(decrease)
in net
cash in
the
period
Cash 143 92 119 91 51
outflow
from
decrease
in debt
and lease
financing
Increase 1,700 3,500 (3,800) (3,300) (1,800)
(decrease)
in net
liquid
funds
2,758 5,390 (4,175) (1,911) (2,632)
New (537) (537) (18) (523) -
finance
leases
Change in 2,221 4,853 (4,193) (2,434) (2,632)
net funds
Net funds 4,678 2,046 6,239 9,333 4,678
at
beginning
of period
Net funds 6,899 6,899 2,046 6,899 2,046
at end of
period
Analysis of net funds
At 30 June At 31 December At 30 June At 31 December
1999 1999 2000 2000
#000 #000 #000 #000
Cash at bank and in 972 89 589 1,956
hand
Bank overdraft - - - (69)
Debt due within one (36) (36) (36) (36)
year
Debt due after one (125) (107) (131) (71)
year
Finance leases (133) (100) (89) (581)
Current asset 4,000 2,200 9,000 5,700
investments
4,678 2,046 9,333 6,899
Reconciliation of operating loss to cash flow from operating activities
Eighteen Year ended 31 Six months ended 31
months ended December December
31 December
2000 2000 1999 2000 1999
(audited) (unaudited)(unaudited)(unaudited)(unaudited)
#000 #000 #000 #000 #000
Operating loss (3,610) (2,707) (2,607) (919) (903)
Goodwill 1,156 1,156 - 826 -
amortisation
Depreciation 1,217 849 745 445 368
charges
Loss on 2 (6) 12 (6) 8
disposal of
fixed assets
Exchange (11) (11) - (11) -
movement on
fixed assets
Increase in (1,522) (1,336) (198) (839) (186)
stocks
Increase in (1,787) (296) (2,033) 754 (1,490)
debtors
(Decrease) (196) 316 158 (1,333) (513)
increase in
creditors
Increase in - (357) (60) (37) 357
deferred
income
Share related 240 159 199 78 81
awards
Exchange 80 80 - 3 -
movement on
reserves
(4,431) (2,153) (3,784) (1,039) (2,278)
Purchase of subsidiary undertakings
SkyMed Limited Everest Medical Corp Total
Book value and fair value to Group
#000 #000 #000
Tangible fixed assets 19 217 236
Current assets
Stocks 204 1,222 1,426
Debtors 255 1,773 2,028
Cash at bank and in hand 4 596 600
Total assets 482 3,808 4,290
Creditors
Bank loans and overdrafts (103) - (103)
Trade creditors (187) (1,199) (1,386)
Other creditors (105) - (105)
Total liabilities (395) (1,199) (1,594)
Net assets 87 2,609 2,696
Goodwill 778 32,296 33,074
865 34,905 35,770
Satisfied by:
Cash 565 34,905 35,470
Shares issued 300 - 300
865 34,905 35,770
GYRUS GROUP PLC
Notes to the financial information
1. Basis of preparation
The financial information set out above does not constitute the Company's
statutory accounts for the eighteen months ended 31 December 2000 or for the
year ended 30 June 1999. Statutory accounts for the year ended 30 June 1999
have been delivered to the registrar of companies and those for the eighteen
months ended 31 December 2000 will be delivered following the Company's annual
general meeting. The auditors have reported on those accounts; their reports
were unqualified and did not contain statements under section 237(2) or (3) on
the Companies Act.
The financial information 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.
2. Loss per share
The calculations of loss per share are calculated on the following losses and
numbers of shares:
Eighteen Year ended 31 Six months ended 31
months December December
ended 31
December
2000 2000 1999 2000 1999
(audited)(unaudited) (unaudited)(unaudited)(unaudited)
#000 #000 #000 #000 #000
Loss for the (3,213) (2,374) (2,387) (708) (839)
financial period
Goodwill 1,156 1,156 - 826 -
amortisation
Profit (loss) for
the financial
period excluding (2,057) (1,218) (2,387) 118 (839)
goodwill
amortisation
Eighteen Year ended 31 Six months ended 31
months December December
ended 31
December
2000 2000 1999 2000 1999
(audited) (unaudited)(unaudited)(unaudited)(unaudited)
Weighted average Number Number Number Number Number
number of shares
For basic earnings 37,319,927 40,407,557 31,121,571 44,203,192 31,177,562
per share
Exercise of share - - - - -
options
For diluted 37,319,927 40,407,557 31,121,571 44,203,192 31,177,562
earnings per share
3. Dividend
The directors do not recommend payment of a dividend.
4. Approval
This Statement was approved by the Board of Directors on 7 March 2001.
5. Copies of the financial information
Copies of the 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.
8th March 2001
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