RNS Number:8976K
Gyrus Group PLC
1 October 2001
The issuer advises that the following replaces the Interim Results
announcement released today at 7:00 under RNS number 8815K.
As previously released, the announcement contains draft text and figures.
These have been amended and the full corrected version appears below.
Embargoed for release, Monday 1 October 2001 - 07.00am (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 traumatic 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% (H1
2000:43%)
* Operating losses, excluding goodwill and exceptionals, were #0.89 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 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%
> Hitek/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
* Integration of acquisitions completed 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 sales 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 recent acquisitions of both Somnus and S+N's ENT division have been
integrated 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.
The recent deals we announced with Genzyme Biosurgery and Visualization
Technologies Inc provide very real evidence of the speed with which we intend
to implement these plans"
Enquiries:
Gyrus Group PLC On 17/09/2001:
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. ("Somnus") and
Smith+Nephew Inc's ENT division ("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%, up from 49% on the prior half and 43% 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.
Operating losses, excluding goodwill and exceptionals, were #0.89 million
including an inventory book valuation adjustment of #0.7 million at Gyrus
Medical Ltd. The exceptional loss of #1.3 million represents a substantial
portion of the anticipated Somnus Medical Technologies, Inc. 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.
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 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. 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 investment in sales and marketing support for our direct businesses will
in future reflect our aggressive strategy to increase market share. Part of
this strategy calls for the placement of capital equipment enabling us to
drive sales of disposable products. The amortisation of the capital equipment
will become a significant sales and marketing cost.
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 give 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 is now virtually complete ahead of the
Board's expectations. 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 has had extensive experience of
integrating acquisitions. This, in addition to a conservative headcount
reduction policy, resulted in a successful transition albeit 25% (#500,000)
over the originally estimated cost.
The transfer of Somnus' manufacturing operations to Gyrus Medical Inc in
Minneapolis and the transfer of all other commercial activities to Gyrus ENT
in Memphis has been completed. 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.
This has been reflected in generator placements doubling in August compared
to August 2000 as the slower than expected sales over the period of
integration is reversed. As a result, we anticipate achieving our goal of
turning the Somnus business from substantially loss making to breakeven by
the end of the year.
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 regional variations in reimbursement practices, it has been
necessary to initiate a completely new marketing and clinical programme. This
new approach is not expected to impact sales until 2002.
Gyrus ENT was launched at the prestigious American Academy of Otolaryngology
and Head and Neck Surgery Meeting in Denver, Colorado, in September. The
launch was enthusiastically received both by customers and by 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.
In the period management critically reviewed its accounting procedures,
particularly as they apply to product cost structure. It became clear that
margin variances arising from influences such as fluctuating demand from our
marketing partners were not being properly captured. The absence of
manufacturing output on the Gynecare business during the first couple of
months of the period further compounded the issue. As a result it was
necessary to realign standard costs, reflected in an adjustment to the
inventory book value of #700,000, and to prudently revise expectations on
future margin levels until the effect of corrective actions can be fully
assessed.
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.
* 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 resource at Somnus has been retained and, with the exception of a
small number of employees who have accepted positions within the Group or who
have been contracted to the end of the year, 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 related to 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 direct 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 but, nonetheless, have already
commenced restructuring of our R&D resource given the changing focus of the
Group.
Our intellectual property portfolio has continued to expand with 21 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. With a total of 100 US patents covering RF technologies, 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 to growth of our direct sales both in real terms and as a
percentage of overall business. 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.
Many of the challenges of the recent acquisitions of both Somnus and S+N's
ENT division have been addressed and integration has progressed faster than
anticipated. The historical under investment by Somnus in sales and marketing
clearly impacted sales growth expectations during the transition period that
we are now reversing. 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
investment in aggressive sales and marketing programmes.
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.
In the coming months the Group will continue to standardise and unify its
corporate policies and procedures in key areas of our business. These will
reflect the needs of management in reviewing and effectively controlling its
Worldwide operations.
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 than some other businesses. Many of today's largest medical device
businesses have demonstrated sustained growth through numerous economic
cycles. Early indications following the recent tragic events in the US are
that this immunity is proving robust although we do anticipate some slowing
of the small percentage of our business that is patient paid.
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
Eighteen
Six months ended Six months ended months
30 June 2001 30 June 2000 ended 31
December 2000
(unaudited) (unaudited) (audited)
#000 #000 #000
Product sales and 16,533 7,426 22,858
royalties
Development fees 667 977 3,833
Turnover - 17,200 8,403 26,691
continuing
operations
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 (8,356) (4,224) (12,916)
Gross profit 8,844 4,179 13,775
Selling and (4,377) (1,216) (4,124)
distribution
expenses
Research and (2,665) (2,693) (7,141)
development
expenses
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 (5,177) (2,058) (6,120)
administrative
expenses
Operating loss - (3,375) (1,788) (3,610)
continuing
operations
Operating loss
Existing operations (2,023) (1,872) (4,247)
Acquisitions (1,352) 84 637
(3,375) (1,788) (3,610)
Interest, net 169 122 397
Loss on ordinary (3,206) (1,666) (3,213)
activities before
taxation
Tax (47) 0 0
Loss on ordinary (3,253) (1,666) (3,213)
activities after
taxation
Loss per ordinary
share
Basic and diluted 6.6p 4.6p 8.6p
Excluding goodwill
and exceptional 1.5p 3.7p 5.5p
general
and administrative
expenses
#000 #000 #000
Earnings before
interest, taxation, (1,441) (1,054) (1,237)
depreciation and
amortisation
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 #356,000 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 12,805 4,281 5,325
Debtors 9,826 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
30,574 20,079 18,619
Creditors: Amounts falling (15,297) (4,746) (3,868)
due within one year
Net current assets 15,277 15,333 14,751
Total assets less current 154,814 49,500 49,471
liabilities
Creditors: Amounts falling
due after more than (12,356) (160) (486)
one year
Deferred income 0 (37) 0
Net assets 142,458 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 (15,282) (11,809) (12,439)
Equity shareholders' funds 142,458 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 (3,253) (1,666) (3,213)
equity shareholders
New share capital issued,
net of expenses of 96,316 43,515 43,872
#3,752,000 (June and Dec
2000:#1,661,000)
Share related awards 54 81 240
Gain on foreign currency 356 80 80
translation
At end of period 142,458 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 (34) 4 (67)
finance lease rentals
Net cash inflows from
returns on investments 142 103 453
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 (108,337) (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 96,316 43,515 43,572
share capital, net of
costs
Net cash inflow from 108,631 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 (3,375) (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 (180) (889) (1,492)
Increase in debtors (2,892) (1,878) (1,752)
Increase/(decrease) in 3,645 2,946 (192)
creditors
Decrease in deferred 0 (320) 0
income
Share related awards 54 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
Eighteen months
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 #3,253,000 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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