RNS Number:8815K
Gyrus Group PLC
1 October 2001
NEWS RELEASE
Embargoed for release, Monday 1 October 2001 - 07.00 (BST)
Gyrus Group PLC
Interim results for the six months ended 30 June 2001
Gyrus Group plc ("Gyrus" or "the Group"), whose innovative medical devices
focus on the management of tissue using less invasive surgical techniques,
today announces interim results for the six months ended 30 June 2001.
Key highlights of the period:
* Group revenues up 105% to #17.2 million (H1 2000: #8.4 million)
* Product gross margins demonstrating a sustained upward trend to 50.2%
(H1 2000: 43.1%)
* Operating losses, excluding goodwill and exceptionals, were in line with
the Board's expectations at #0.76 million. The exceptional loss of #1.3
million represents a substantial portion of the anticipated Somnus Medical
Technologies, Inc. ("Somnus") integration costs. Operating losses reflect
our increased investment in unfunded R & D as well as in sales and
marketing and promotional support of new product introductions
* Divisional revenues increasing well:
- Lower abdominal product sales up 52%
- Mitek / Gynecare product sales up 22%
- Non-US revenues showing substantial growth with UK, Italy, Benelux and
China particularly strong
- A leading position in Head and Neck surgery following the #104 million
(excluding costs) acquisition of Smith & Nephew, Inc.'s ENT division
("S&N's ENT division") and Somnus in June 2001
* Acquisitions being integrated ahead of plan
Commenting on the results, Brian Steer, Chairman, today said:
"Through a combination of both acquisitions and growth of the core business we
continue to grow at a very fast pace. The investments we have made and
continue to make in both research and development and sales and marketing will
enable us to achieve our growth expectations for the business throughout the
second half and into 2002."
Commenting on the integration of the two recent acquisitions, Mark Goble,
Group Managing Director, said:
"The challenges of recent acquisitions of both Somnus and S&N's ENT division
have been addressed and integration has been faster than anticipated. Looking
forward our goal is to re-invigorate the growth potential of S&N's ENT
division by substantially increased investment, the addition of Somnus, the
integration of PlasmaKinetic technology and the introduction of new
complimentary products."
Enquiries:
Gyrus Group PLC On 01/10/2001:
Dr Mark Goble, Group Managing Director Tel: 0207 831 3113
Tom Murphy, Finance Director Thereafter:
Tel: 01189 219750
Financial Dynamics Tel: 0207 831 3113
Edward Bridges/Sarah Manners
CHAIRMAN'S REPORT
Introduction
The six months to 30 June 2001 has been a period of significant change and
development for the Group during which the core business has performed well
and we have completed two significant acquisitions. First half sales for the
Group were #17.2 million (H1 2000: #8.4 million), an increase of 105% year on
year. The acquisitions of Somnus Medical Technologies, Inc. and S&N's ENT
division contributed #2.9 million to turnover following completion on 5 June
2001. Excluding the contribution from these acquisitions the core business
grew 70% to #14.3 million.
Gross margin on product sales shows a strong, sustained positive trend at
50.2%, up from 48.7% on the prior half and 43.1% on the same period of 2000.
We anticipate that margins will continue improving as the contribution from
direct sales continues to increase as a proportion of overall revenue.
The entry into the head and neck surgery market has always been a strategic
objective for the Group, providing an opportunity to both exploit our
competency in developing less traumatic treatments and to take a leadership
position in a high growth sector. In implementing this strategy, significant
restructuring of the Group has taken place during the period. Following the
acquisitions of S&N's ENT division and Somnus in June 2001 for a total
consideration of #104 million, excluding costs, the Group now has four
operating divisions. Gyrus Medical Ltd, based in Cardiff, will have
responsibility for the Mitek and Gynecare business and will be the centre of
excellence for generator development and manufacture. Gyrus Medical Inc,
based in Minneapolis, will focus on surgical procedures performed on the lower
abdomen. S&N's ENT division and Somnus are being integrated to form Gyrus ENT
LLC focusing on surgical applications within the head and neck market. Gyrus
International Ltd will be responsible for the Group sales outside of the NAFTA
area.
Group Business Review
The two recent acquisitions, together with the core business of Gyrus Medical
Inc and the international distribution capability of Gyrus International Ltd,
substantially change the nature of our business from a number of aspects. On
a forward looking basis, some two thirds of our business will be direct to the
end-user, sold through our own sales force. Of the remaining third, one third
will be sold through distributors in our international markets and the
remaining two thirds will be through marketing partners.
In addition to a change in distribution of products, the product portfolio and
the contributions from our various market sectors have also changed
dramatically. On a pro-forma basis in the second half of 2001, the Board
expects the following segmentation of revenues by clinical area:
Head and Neck Surgery 45-50%
Lower Abdominal Surgery 25-30%
Arthroscopy 10-15%
Hysteroscopy 5-10%
Other 5-10%
With this change, the proportion of revenues generated by our marketing
partners, notably Johnson & Johnson, continues to be reduced. We remain firmly
committed to supporting the growth of the business generated by our partners
in absolute terms and these relationships are now managed through Gyrus
Medical Ltd and Gyrus Medical Inc.
The introduction of PlasmaKinetic tissue management technology has enabled the
broadening of the product portfolio through improved clinical performance.
Whilst the development of radio frequency energy modalities will continue to
be a critical component of our strategy, we will also embrace other forms of
energy as well as biological materials which affect the management of tissue
during surgical procedures and improve clinical outcomes.
The company will also reflect the significant expense of sales and marketing
support for a direct business, this is largely the result of the commission
costs and direct costs of a sales force together with associated marketing
support. It should be noted that the nature of our business calls for the
placement of capital equipment enabling us to drive sales of disposable
products. The amortisation costs over three years of the capital equipment
becomes a significant sales and marketing cost at 21/2%.
Divisional Business Review
* Gyrus ENT - Head and Neck Surgery Division
Gyrus ENT contributed #2.9 million in revenues in the period from 5th to 30th
June. During the period we successfully completed the acquisition of Somnus
and S&N's ENT division. We believe that both of these acquisitions, which
double the size of the Group, will bring significant short and long term
benefits to earnings.
The Board believes that these acquisitions broaden and strengthen our position
as a medical device company and gives us an immediate market leadership
position in the head and neck surgery market. Their products fit with our
focus on less traumatic tissue management. This is a high margin sector of
the market where a mid-size company can be a market leader. As with Everest
Medical Corporation, acquired in April 2000, the combination of Gyrus'
technology with these acquisitions is expected, together with the global
marketing and distribution network, to provide a strong basis for future
growth.
The integration of the companies was completed ahead of the Board's
expectations by the end of September. Management recognised the risks
associated with the programme and were prudent in managing the change to the
extent of retaining a Senior Manager in the United States who had extensive
experience of integration acquisitions. This, in addition to a conservative
headcount reduction policy, resulted in a successful transition which will
however be ahead of budget by 20%.
The transfer of Somnus' manufacturing operations to Gyrus Medical Inc in
Minneapolis is nearing completion as is the transfer of all other commercial
activities to Gyrus ENT in Memphis. The management team is confident that the
Gyrus ENT sales-force will significantly improve sales of Somnus products,
supported by the ten members of the direct sales force coming from Somnus.
In order to effectively position the product portfolio for the future we have
not only restructured territories and trained new sales people but
additionally, due to the need to revitalise patient awareness programmes and
address some regionalised reimbursement issues, it has been necessary to
initiate a completely new marketing and clinical programme. This new approach
is expected to impact sales in quarter two of 2002. In the meantime generator
placements have doubled in August compared to 2000 and will contribute towards
the reversal of slower than expected sales.
Gyrus ENT was launched at the prestigious American Academy of Otolaryngology
and Head and Neck Surgery Meeting in September, held in Denver, Colorado. The
launch was enthusiastically received by both customers and the ENT sales
force. The Group's revolutionary SMartTM Stapes product was introduced at the
meeting along with the announcement of two strategic alliances.
The SMartTM Stapes product is a shape memory metal alloy prosthesis for
surgical correction of conductive hearing loss, a condition affecting 80,000
people annually. One of the key features is the reduction in trauma
associated with its placement. These beneficial features effectively double
the value of the US market to US$17.5 million.
Gyrus and Genzyme Biosurgery (Nasdaq: GZBX), based in Cambridge, Mass., have
entered into an exclusive five-year agreement for the distribution of
Genzyme's SepraTM products for use in ear, nose and throat (ENT) procedures.
Genzyme's SepraTM products are used post-operatively to improve tissue healing
and prevent scar formation following Head & Neck surgical procedures.
Gyrus has entered into a collaborative marketing alliance with Visualization
Technologies Inc. covering computer-assisted image-guidance VTI ENTrakTM
system. The system allows surgeons to navigate through a "road map" of the
patient's anatomy, providing precise information of instrument location with
respect to the vital structures encountered during head and neck surgical
procedures.
The impact of these alliances could add US$4.5 million - US$7.0 million in
revenues in 2002 which will increase as other potential Head & Neck surgery
applications are added.
* Gyrus Medical Inc - Lower Abdominal Surgery Division
Following the acquisition of Everest Medical Inc in April 2000, this division
continues to show impressive growth within its direct business. Notably the
total direct laparoscopy business grew to #4.75 million, a 52% increase over
the corresponding period in 2000 during which direct laparoscopy sales
totalled #3.13 million, including both pre and post acquisition periods.
Total sales were #6.54 million (H1 2000 including both pre and post
acquisition sales: #4.88 million), an increase of 34%. The successful launch
in March 2001 of our PlasmaKinetic tissue management technology has proved to
significantly enhance the performance of Everest instruments and resulted in
sales of #272,000 in the second quarter of 2001 through the installation of
125 systems. In addition 25 PlasmaKinetic generators were placed in urology
centres producing sales of #100,000 in the second quarter of 2001.
All aspects of the direct business are meeting or exceeding expectations.
Improved margins are being derived from cost reduction and price increases
supported by the differentiated performance of our PlasmaKinetic technology,
resulting in a 20% increase in average selling prices in the period compared
to the comparative period in 2000 (including both pre and post acquisition
periods). New product introductions will continue to enhance our position in
this important market.
Additional investment in sales and marketing activities were made to support
the new product introductions. Whilst the company is committed to a sales and
distribution approach in the US using an independent sales force, a small
direct sales force will be employed to support penetration into major
metropolitan accounts.
Overall sales to marketing partners increased to #1.68 million led by sales of
saphenous vein harvesting products to Guidant which increased by 22% to #1.01
million.
* Gyrus Medical Ltd - PlasmaKinetic Systems Division
Our business with our marketing partners, Mitek and Gynecare, continues to
grow with revenues rising 22% to #5.0 million (H1 2000: #4.1 million) as
compared to the same period of 2000. As expected, development revenues were
#667,000 (H1 2000: #977,000), down 32% from 2000 as a number of the key growth
projects reach completion.
The development of the businesses with Mitek and Gynecare has stabilised.
Competition in the arthroscopy market has intensified. Despite this, Mitek
was able to grow end-user sales 19%, higher than comparative published data
from competitors. Going forward, the intensity of the competition will add
further challenges to the development and launch of new products.
The reintroduction of Versapoint by Gynecare commenced in January 2001 with a
strong reacceptance of the product by surgeons in the US where end user sales
have returned to budgeted levels. Outside the US, Versapoint's return to
market has been somewhat slower and has yet to reach pre-withdrawal levels.
The development and manufacture of generators continues to grow.
PlasmaKinetic generators support the laparoscopic business and the endourology
business globally. In the period 1,212 generators were shipped of which 792
were to Mitek, 125 to Gynecare, 244 to Gyrus Medical Inc and 51 to Gyrus
International Ltd.
Management in quarter two critically reviewed its accounting procedures,
particularly as they apply to product cost structure. As a result it was
necessary to realign standard costs reflected in a one off inventory valuation
write off of #700,000.
* Gyrus International Ltd - Non-NAFTA Sales and Distribution
In the six months, sales of the division rose to #1,927,000. Particularly
notable has been the 153% growth of PlasmaKinetic Endourology to #360,000 in
the period. The Group now has 110 urology centres routinely using the system
throughout the UK, Europe and Asia. Overall performance in the UK has been
outstanding with direct sales growing 78% to #1.02 million. Outside the UK,
sales have been particularly strong in Italy, Benelux and China. The growth
rates included in this paragraph are based on the prior year comparative
including pre acquisition revenues of SkyMed Limited which was acquired by the
Gyrus Group in October 2000.
Distribution across the world is being consolidated through independent
distributors to reflect integration of the new acquisitions. Management
strength has been increased and targeted on selected key markets including
Japan, Australasia and Scandinavia. Staff additions have also been made to
enable the UK direct business to take on sales and distribution of Gyrus ENT
products.
With sales outside the NAFTA territories currently representing only 15% of
our global business, we believe there are substantial opportunities for
growth. In a typical breakdown of global sales in the medical device
business, the rest of the world would represent 40% of the total.
Management
The importance of management strength has been notable during the integration
of our recent acquisitions. A significant amount of senior management time
was devoted to the acquisitions but nevertheless the focus of the operational
units was not distracted by the process and we continued to manage and grow
the core business.
Headed by Jerry Dowdy, the management team at S&N's ENT division has made an
excellent transition. After many years of being managed for cash by their
former parent company, they are now ready to leverage the investment
commitment made by Gyrus at the time of the acquisition to embark on a growth
strategy.
The sales and clinical development resources at Somnus have been retained and,
with the exception of a small number of employees offered positions within the
Group, the planned restructuring program at Somnus, including the reduction in
headcount, is now complete.
Research and Development
Of the total R&D spend of #2.7 million, #2 million was on internal projects to
support our direct businesses, up from #1.7 million in the prior period but
falling as a percentage of product sales to 12%. As a percentage of product
sales, we anticipate this level of investment continuing. The bulk of the
investment was divided almost evenly between the PlasmaKinetic tissue
management system, the PlasmaKinetic II cosmetic system and the development of
head and neck surgery products.
The research and development and clinical trial activities of the enlarged
Group are now managed through a Group Technology Committee responsible for all
major projects. The main focus for the Committee is the integration and
expansion of our PlasmaKinetic technology across all market sectors. Very
promising developments have already been made in applying the technology to
meet the needs of the head and neck surgery market. We anticipate new product
introductions for this market to commence as early as the first half of 2002.
The differentiated performance of our PlasmaKinetic tissue management system
in both the laparoscopic and urology markets has opened opportunities for new
instrument developments to address attractive niche sectors within these
markets.
Pre-clinical trials on our PlasmaKinetic II technology for cosmetic surgery
applications have confirmed the ability of the system to stimulate new
collagen formation in the dermis whilst minimising damage to the surface of
the skin. Delays in regulatory review have impacted the timing of first human
use which we now anticipate will occur in the autumn of this year.
Given the competitive environment in the arthroscopic market, development
under the Key Growth Projects with Johnson & Johnson has been delayed by a
corporate review and evaluation process of various design alternatives for our
next generation system. We anticipate conclusion of this review in the fourth
quarter of the current financial year.
Our intellectual property portfolio has continued to expand with 20 issued US
patents now covering our PlasmaKinetic technology. We are also in the process
of integrating the intellectual property acquired through Somnus and S & N's
ENT division. We believe there are opportunities to strengthen our
proprietary position through this integration.
Outlook
In reviewing our position for 2001 we are well advanced in meeting our
commitments of direct sales growth. The successful introduction of
PlasmaKinetic Tissue Management in quarter two leads us to believe that our
forecast of rapid market acceptance will be maintained and the addition of new
applications through the coming months will further support this growth. The
results of our increased efforts in international markets combined with a
launch of Endourology in the US has been encouraging and leads us to
anticipate accelerated growth. The addition of a direct sales force focusing
on the introduction of PlasmaKinetic I tissue management to major teaching
institutions is seen as a key part of broadening customer acceptance.
The challenges of recent acquisitions of both Somnus and S&N's ENT division
are being addressed and integration is progressing faster than anticipated and
within budgeted levels. Looking forward, our goal is to turn S&N's ENT
division from a stable profitable business into a profitable growth business
by the addition of Somnus, the integration of PlasmaKinetic technology and the
introduction of new complimentary products.
The development of the cosmetic application of PlasmaKinetic II technology has
continued throughout the period. However, due to the regulatory delays
encountered, a decision was made to postpone commercialisation until 2002 thus
allowing management focus to be maintained on integrating our technologies.
Conclusion
Through a combination of acquisitions leveraging our technology and growth in
our core business and markets, we continue to grow at a very fast pace. Our
aggressive entry into the head and neck surgery market placed an enormous
challenge on the overall company and the indication is that we have risen to
that challenge. We feel that the business is now robust and well positioned
to realise high growth opportunities in the markets we serve with our focus on
less traumatic tissue management.
The investments we have made and continue to make in both research and
development and sales and marketing will enable us to achieve our sales growth
expectations for the business throughout the second half and into 2002.
It is interesting to note that our business has so far seen relatively minimal
impact from the pressures on the global economy indicating that our position
in the surgical market place may be less sensitive to recessionary influences
that some other businesses.
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.
Gyrus Group plc
Consolidated Profit and Loss Account
Six months Six months Eighteen
ended ended months
30 June 2001 30 June 2000 ended 31
December 2000
(unaudited) (unaudited) (audited)
#000 #000 #000
Product sales and royalties 16,533 7,426 22,858
Development fees 667 977 3,833
Turnover - continuing operations 17,200 8,403 26,691
Turnover
Existing operations 14,251 5,753 17,321
Acquisitions 2,949 2,650 9,370
17,200 8,403 26,691
Cost of sales (8,233) (4,224) (12,916)
Gross profit 8,967 4,179 13,775
Selling and distribution expenses (4,377) (1,216) (4,124)
Research and development expenses (2,665) (2,693) (7,141)
General and administrative expenses
- ordinary (2,689) (1,728) (4,964)
- exceptional (note 3) (1,255) 0 0
- goodwill (1,233) (330) (1,156)
Total general and administrative (5,177) (2,058) (6,120)
expenses
Operating loss - continuing (3,252) (1,788) (3,610)
operations
Operating loss
Existing operations (1,900) (1,872) (4,247)
Acquisitions (1,352) 84 637
(3,252) (1,788) (3,610)
Interest, net 169 122 397
Loss on ordinary activities before (3083) (1,666) (3,213)
taxation
Tax (47) 0 0
Loss on ordinary activities after (3,130) (1,666) (3,213)
taxation
Loss per ordinary share
Basic and diluted 6.3p 4.6p 8.6p
Excluding goodwill and exceptional
general
and administrative expenses 1.3p 3.7p 5.5p
#000 #000 #000
Earnings before interest, taxation,
depreciation and amortisation (1,354) (1,054) (1,237)
The total recognised gains and losses in the period ended 30 June 2001
comprises the loss made in the period shown above and gains of #423,000 in the
net investment in foreign enterprises arising from changes in currency
exchange rates.
Gyrus Group plc
Consolidated Balance Sheet
As at As at As at 31
30 June 2001 30 June 2000 December 2000
(unaudited) (unaudited) (audited)
#000 #000 #000
Fixed assets
Goodwill and intangibles 128,376 31,843 31,918
Tangible assets 11,161 2,324 2,802
139,537 34,167 34,720
Current assets
Stocks 13,001 4,281 5,325
Debtors 10,327 6,209 5,638
Investments - cash on 6,936 9,000 5,700
deposit
Cash at bank and on hand 1,007 589 1,956
31,271 20,079 18,619
Creditors: Amounts falling (15,297) (4,746) (3,868)
due within one year
Net current assets 15,974 15,333 14,751
Total assets less current 155,511 49,500 49,471
liabilities
Creditors: Amounts falling
due after more than (12,856) (160) (486)
one year
Deferred income 0 (37) 0
Net assets 142,655 49,303 48,985
Capital and reserves
Share capital 2,152 1,763 1,766
Share premium 152,027 55,788 56,097
Merger reserve 3,561 3,561 3,561
Profit and loss account (15,085) (11,809) (12,439)
Equity shareholders' funds 142,655 49,303 48,985
Reconciliation of movements in shareholders' funds
As at As at As at 31
30 June 2001 30 June 2000 December 2000
(unaudited) (unaudited) (audited)
#000 #000 #000
At beginning of period 48,985 7,293 8,006
Loss for the financial
period attributable to (3,130) (1,666) (3,213)
equity shareholders
New share capital issued,
net of expenses of 96,315 43,515 43,872
#3,752,000 (June and Dec
2000:#1,661,000)
Share related awards 62 81 240
Gain on foreign currency 423 80 80
translation
At end of period 142,655 49,303 48,985
Gyrus Group plc
Consolidated Cashflow Statement
Eighteen
Six months Six months months
ended ended ended 31
30 June 2001 30 June 2000 December 2000
(unaudited) (unaudited) (audited)
#000 #000 #000
Net cash outflow from (814) (1,114) (4,431)
operating activities
Returns on investments
and servicing of finance
Interest received 181 136 541
Interest paid (5) (37) (21)
Interest elements in (33) 4 (67)
finance lease rentals
Net cash inflows from
returns on investments 143 103 453
and servicing of finance
Taxation (47) 0 0
Capital expenditure and
financial investments
Purchase of tangible (1,912) (1,023) (1,898)
fixed assets
Proceeds of sale of 0 0 35
tangible fixed assets
(1,912) (1,023) (1,863)
Acquisitions
Purchase of subsidiary (108,077) (34,776) (35,470)
undertakings
Net cash acquired with 2,371 596 497
subsidiaries
(105,706) (34,180) (34,973)
Cash outflow before
management of (108,336) (36,214) (40,814)
liquid resources and
financing
Management of liquid (1,236) (6,800) (1,700)
resources
Financing
Capital element of (78) 17 (89)
finance lease rental
payments
Bank loans 12,393 (18) (54)
Proceeds of issue of 96,315 43,515 43,572
share capital, net of costs
Net cash inflow from 108,630 43,514 43,429
financing
(Decrease)/increase in (942) 500 915
cash in the period
Reconciliation of net cashflow to movements in net (debt)/funds
Eighteen
Six months Six months months
ended ended ended 31
30 June 2001 30 June 2000 December 2000
(unaudited) (unaudited) (audited)
#000 #000 #000
(Decrease)/increase in (942) 500 915
cash in the period
Cash (inflow)/outflow
from (12,315) 1 143
(increase)/decrease
in debt and lease
financing
Increase in liquid 1,236 6,800 1,700
funds
(12,021) 7,301 2,758
Inception of new (28) (14) (537)
finance leases
Translation difference 40 0 0
Change in net (12,009) 7,287 2,221
(debt)/funds
Net funds at beginning 6,899 2,046 4,678
of period
Net (debt)/funds at end (5,110) 9,333 6,899
of period
Analysis of net (debt)/funds
As at As at As at 31
30 June 2001 30 June 2000 December 2000
(unaudited) (unaudited) (audited)
#000 #000 #000
Cash at bank and in hand 985 589 1,887
(net of overdrafts)
Finance leases (531) (131) (581)
Debt due within one year 0 (36) (36)
Debt due after one year (12,500) (89) (71)
Current asset investments 6,936 9,000 5,700
Net (debt)/funds at end of (5,110) 9,333 6,899
period
Reconciliation of operating loss to cash flow from operating activities
Six months Six months Eighteen
ended ended months
30 June 2001 30 June 2000 ended 31
December 2000
(unaudited) (unaudited) (audited)
#000 #000 #000
Operating loss (3,252) (1,788) (3,610)
Goodwill amortisation 1,233 330 1,156
Depreciation charges 696 404 1,217
Loss on disposal of 5 0 2
fixed assets
Increase in stocks (338) (889) (1,492)
Increase in debtors (2,843) (1,878) (1,752)
Increase/(decrease) in 3,623 2,946 (192)
creditors
Decrease in deferred 0 (320) 0
income
Share related awards 62 81 240
(814) (1,114) (4,431)
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 31 December 2000.
Goodwill, representing the excess of purchase consideration over the fair
value of the net assets acquired in June 2001 on the acquisition of Smith and
Nephew Inc.'s ENT division and Somnus Medical Technologies Inc 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 31 December 2000 received an unqualified audit report and
have been filed with the Registrar of Companies.
2. Segmental Information
Six months ended Six months ended ended 31
30 June 2000 30 June 2000 December 2000
(unaudited) (unaudited) (audited)
Turnover by #000 #000 #000
Destination
United Kingdom 2,529 104 2,249
and Europe
North America 14,315 8,062 24,119
Rest of World 356 237 323
17,200 8,403 26,691
By Origin #000 #000 #000
United Kingdom 7,249 5,753 17,902
North America 9,951 2,650 8,789
17,200 8,403 26,691
3. Exceptional general and administrative expenses
The exceptional general and administrative expenses relate to the cost of
restructuring following the acquisition of Somnus Medical Technologies Inc and
mainly represent severance costs.
4. Loss per share
The loss per share is based on losses attributable to ordinary shareholders of
#3,130,000 for the six months ended 30 June 2001, #1,666,000 for the six
months ended 30 June 2000, and #3,213,000 for the eighteen months ended 31
December 2000, and on 49,647,659 ordinary shares for the six months ended 30
June 2001, 36,569,002 ordinary shares for the six months ended 30 June 2000
and 37,319,927 ordinary shares for the eighteen months ended 31 December 2000,
being the weighted average number of shares during the periods.
5. Purchase of Subsidiaries
On 5 June 2001 Gyrus Group PLC acquired the entire share capital of Somnus
Medical Technologies for #40,125,000 including costs, satisfied by cash.
#000
Provisional fair values of the net assets acquired:
Tangible fixed assets 1,883
Stocks 1,367
Debtors 1,340
Cash at bank and in hand 2,370
Creditors (5,750)
1,210
Goodwill 38,915
40,125
Satisfied by cash 40,125
On 5 June 2001 Gyrus Group PLC acquired the assets of Smith and Nephew Inc.'s
ENT division for #67,952,000, satisfied by cash.
#000
Provisional fair values of the net assets acquired:
Intangible fixed assets 122
Tangible fixed assets 5,192
Stocks 5,808
Debtors 228
Cash at bank and in hand 1
Creditors (2,040)
9,311
Goodwill 58,641
67,952
Satisfied by cash 67,952
6. Dividend
The directors do not recommend payment of a dividend.
7. Approval
This Interim Statement was approved by the Board of Directors on 1 October
2001.
8. 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.
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 on pages 10 to 15 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 conclusions
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 2001.
KPMG Audit Plc
Chartered Accountants
Marlborough House
Fitzalan Court
Fitzalan Road
Cardiff
CF24 0TE 1 October 2001
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