RNS Number:0081S
Gyrus Group PLC
26 February 2002
NEWS RELEASE
Embargoed for release, Tuesday 26 February 2002 - 07.00am (BST)
Gyrus Group PLC
Preliminary Results for the year ended 31 December 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 preliminary results for the year ended 31 December 2001.
Key highlights of the period:
• Group revenues up 135% to £50.3 million (2000: £21.4 million)
• Gross margins demonstrating a sustained upward trend to 57% (2000: 52%)
• Operating profit (EBITA), before exceptional expenses, was £1.5 million.
The net loss before tax of £6.0 million included £4.6 million of goodwill
amortization and £2.4 million of exceptional costs related to the planned
integration of Somnus following acquisition.
• Overall growth of core business revenue was 49%. Acquisitions accounted
for £18.4 million in revenue in 2001.
• Revenues for the second half of 2001 without acquisitions were £17.6
million, a 35% increase over the second half of 2000:
O Gyrus Medical Inc (lower abdominal surgery) sales up 58%
O Gyrus International Ltd (non-NAFTA) sales up 31%
O Gyrus Medical Ltd (R & D systems & generators) sales up 5%
• A leading position in Head and Neck surgery following the £110 million
(including costs) acquisition of Smith & Nephew, Inc.'s ENT division ("S&N's
ENT division") and Somnus Medical Technologies in June 2001
O Gyrus ENT contributed total revenues in 2001 of £18.4 million
O Contribution to revenues in second half was £15.5 million
Commenting on the results, Brian Steer, Chairman, today said:
"2001 has seen a complete transformation of the Group. We are now well placed
to actively pursue organic growth opportunities and to capitalise on our
continued investment in both research and development and sales and marketing."
Mark Goble, Group Managing Director, added:
"The continued growth in our business in 2001 was especially pleasing given the
challenges of integrating two significant acquisitions. With this successfully
completed we will continue to drive the business forward, particularly through
our core PlasmaKinetic energy platform."
Enquiries:
Gyrus Group PLC On 26/02/2002:
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 STATEMENT
In 2001 as a result of organic growth and acquisition, Gyrus has created a
strong platform for the future.
Financial Summary
The year ended 31 December 2001 represented a significant improvement in
financial performance for the group with revenues of £50.3 million, an increase
of 135% over sales of the twelve months ended 31 December 2000. Sales from Gyrus
ENT contributed £18.4 million since acquisition on 5 June 2001. Excluding the
contribution from Gyrus ENT, the core business grew to £31.9 million in 2001.
Sales in the second half of 2001 without acquisitions grew to £17.6 million an
increase of 35% over the second half of 2000.
Operating profit (EBITA) before exceptional expenses was £1.5 million for the
year and £2.4 million in the second half. Contributing to this operating profit
was a strong gross margin of 57% for the year including 60% in the second half.
The gross margin increase reflects the growing portion of direct business
revenue in the sales mix and increasing leverage throughout the manufacturing
operations.
The Group reported a loss after tax of £6.1 million for the year. Included in
the loss was £4.6 million of goodwill amortization and £2.4 million of
exceptional costs related to the planned integration of Somnus following
acquisition.
The year has seen a complete transformation of the Group which we believe
positions it well for growth in 2002 and beyond. This will come as we see an
increasing contribution to the business from the recent acquisitions, a
continuous stream of new products and the positive effects of our new marketing
and clinical programme, which lends vital support to our sales operations, with
growing market penetration on a global basis.
The year on year performance of the core business was outstanding. More
impressive was the growth experienced in the second half of 2001 as compared to
the second half of 2000 - Gyrus Medical Inc grew by 58%, Gyrus International
Ltd, by 31% and Gyrus Medical Ltd, by 5%. The overall growth of the core
business, driven by the PlasmaKinetic energy platform was 35% in the second
half. The integration of the two new businesses went very smoothly, and Gyrus
ENT is now a full-line head and neck business. It already has a leading position
in many sectors, and in the coming year will build on the opportunities to
accelerate growth towards overall leadership in this specialised field.
Operations
We continue to expand our manufacturing capacity to ensure continuing high
levels of quality and customer service. In 2002 we will need to carry out some
reorganisation of manufacturing to ensure optimal use of available space within
the Group. It is unlikely that additional space will be required until 2003,
since Gyrus Medical Inc is considering a move to two shifts. Margins are
expected to continue to improve as a result of these changes. Strengthening of
sales and marketing globally has been key to the rapid growth in 2001, and will
continue into 2002. The restructuring of the Gyrus Medical Inc sales approach to
sharpen its focus on key institutions and centres of excellence has proved
successful, together with the addition of clinical and marketing support. Gyrus
International Ltd will continue to increase its direct support of independent
national distributors as it builds on a very focused geographic expansion.
We spent 14% of our revenue on research and development in 2001, compared with
the industry average of 7%. We will continue to invest in our technologies. 2001
saw the introduction of the PlasmaKinetic platform to the market by Gyrus
Medical Inc. The subsequent dramatic improvement in the performance of our
laparoscopic products has accelerated the company's growth. Exploitation of this
unique energy form is still at an early stage, and further products using this
technology are now being introduced in open surgery. Gyrus ENT will add
PlasmaKinetic energy to several of its products - notably in somnoplasty during
the latter half of 2002.
The Group continues to strengthen its administration and financial functions
with the development of integrated reporting structures and controls.
Consolidation of Gyrus ENT's billing and shipping functions is expected to be
completed by February 2002. Staffing at the central level has been strengthened
to standardise and accelerate consolidated reporting. The appointment of a
patent lawyer ensures that all patents owned by the Group are now managed
centrally. Quality assurance and regulatory functions also report directly. From
its Winnersh headquarters in the UK, the Group now operates four divisions, each
with a strong management team led by a CEO. These address four major clinical
sectors.
The Four Operating Divisions
Gyrus Medical Ltd Responsibility for the Mitek and Gynecare Cardiff, UK
business and the centre of excellence for
generator development and manufacture.
Gyrus Medical Inc Focusing on surgical procedures Minneapolis, USA
performed on the lower abdomen.
Gyrus ENT The integration of S+N's ENT division and Memphis, USA
Somnus, focusing on surgical applications
within the head and neck market.
Gyrus International Responsible for Group sales, and Reading, UK
Ltd. distribution outside the NAFTA area.
Management
The key to building a fast growth business is management. The senior management
team which handled the acquisition of Somnus and Smith & Nephew ENT, ensured
that both businesses were well understood prior to acquisition and that the
integration itself was seamless. Management at the divisional level ensured that
throughout the process the core business was not disrupted and delivered the
expected results. The company is fortunate in having an outstanding and
enthusiastic management team, experienced in their field. The support of the ENT
group, led by Jerry Dowdy, has been critical to the successful integration.
Gyrus International Ltd and Gyrus Medical Inc have successfully filled a number
of key management positions in 2001 to support their rapid growth. Gyrus as a
Group has had no difficulty in recruiting top class personnel. The Board
appreciates the need to attract, retain and reward management appropriately, and
ensures that incentive plans and benefit programmes remain competitive, both in
the UK and US. The Group is committed to training as well as the interchange of
management between the operating divisions. During 2001, we transferred two
people into key positions in the US from their UK base, as well as the
appointment of the Group Finance Director from our US business to the UK.
Outlook
The overall recessionary environment and the tragic events of 11 September in
the US overshadowed 2001, but did not seriously impact sales or the Board's
expectations, despite the fact that the Group's businesses are mainly in the US.
The medical device market is relatively stable in critical times and we see no
reason why Gyrus should not look to continued growth and movement to
profitability, in a world which hopefully will not see the crises of 2001.
Operating from a significantly broader geographic base, with an enhanced product
portfolio and access to additional technologies, the company is set to achieve
the profitable growth we expect.
Our relationship with our marketing partners continues to be important to the
Group, it will continue to show growth off a base of some 20% of the overall
business - a base which is both stable and profitable. Our continued investment
in direct sales and marketing activities in both US divisions - as well as in a
focused international approach - remains crucial. The investment in direct sales
forces in both Gyrus ENT and Gyrus Medical is not a diversion from independent
sales forces; rather it is complimentary to the strategy of gaining focus on
critical growth products and key institutions which are centres of influence in
the US.
Technology, where it can improve patient outcomes, will always be a vital
ingredient to growth. PlasmaKinetic energy will continue to be an important base
technology to our focus of less traumatic tissue management supplemented by
acquired technologies and new licences. In 2002 a constant flow of new products
will support the growth of the base business, to achieve an appropriate return
on the investment in R&D.
The Board will continue to consider new opportunities for acquisitions,
licensing arrangements and distribution agreements. It would also expect to
decide on the appropriate approach to the sales and distribution of the cosmetic
application of PlasmaKinetic II. Subject to receiving the appropriate government
approvals, a launch is planned for 2003.
Conclusion
The year has seen a series of highly significant events through which we have
grown at a very fast pace - more than doubling the revenue of the business. The
Board believes that whilst the challenges were great, the strong organic growth
and acquisition sales reflect the wisdom of the decisions made. The Group is in
an excellent position to continue growing, consolidate its business and
demonstrate significant profitability.
The business is broadly based with a wide and valuable product portfolio. It is
growing geographically and has a well controlled profit and loss and balance
sheet managed by a team committed to delivering its planned goals. We are
confident of Gyrus' ability to compete successfully.
The critical focus for the group is in three areas which will not only drive the
business forward at an accelerated growth rate, but will also differentiate us
from competition:
• The placement of capital equipment and the development of the work station
concept from which we will drive instrument utilisation.
• The continued investment in training and clinical support for our sales
and distribution organisation. Our commitment to a commissioned sales force
ensures motivation and the dedication of time to our product.
• A continuous flow of new products which will utilise our advanced
technologies and create a differentiated product portfolio with clear
benefits to surgeons and patients.
It is this thrust which will drive revenue growth and enhance operating profit.
I would like to thank the management and employees of the Group for their
outstanding contribution in a period of great challenge. I thank our partners
for their continued business and confidence, our professional advisors for their
wise counsel and our suppliers for their support. I am particularly grateful to
our shareholders for their support, shared faith and belief as we continue to
develop this exciting business.
Brian Steer
Executive Chairman
Gyrus Group PLC
Gyrus Group PLC
Consolidated profit and loss accounts
12 months 12 months 18 months 6 months 6 months
ended 31 ended 31 ended 31 ended 31 ended 31
December December December December December
2001 2000 2000 2001 2000
£000 £000 £000 £000 £000
Turnover - continuing operations 50,338 21,413 26,691 33,138 13,010
Turnover
Existing operations 31,862 21,413 26,691 17,611 13,010
Acquisitions 18,476 0 0 15,527 0
50,338 21,413 26,691 33,138 13,010
Cost of sales (21,439) (10,283) (12,916) (13,083) (6,059)
Gross profit 28,899 11,130 13,775 20,055 6,951
Gross profit % 57% 52% 52% 60% 53%
Selling and distribution expenses
- before exceptional items (13,099) (3,582) (4,124) (8,722) (2,366)
- exceptional (349) - - (349) -
Total selling and distribution expense (13,448) (3,582) (4,124) (9,071) (2,366)
Research and development expenses
- before exceptional items (6,874) (5,448) (7,141) (4,209) (2,755)
- exceptional (291) - - (291) -
Total research and development expense (7,165) (5,448) (7,141) (4,500) (2,755)
General and administrative expenses
- before exceptional items and goodwill (7,412) (3,651) (4,964) (4,723) (1,923)
- exceptional (1,742) - - (487) -
- goodwill (4,550) (1,156) (1,156) (3,317) (826)
Total general and administrative expenses (13,704) (4,807) (6,120) (8,527) (2,749)
Operating profit (loss) - continuing
operations
- before exceptional items and goodwill 1,514 (1,551) (2,454) 2,401 (93)
- exceptional (2,382) - - (1,127) -
- goodwill (4,550) (1,156) (1,156) (3,317) (826)
Operating profit (loss) - continuing (5,418) (2,707) (3,610) (2,043) (919)
operations
Operating loss
Existing operations (3,446) (2,707) (3,610) (1,423) (919)
Acquisitions (1,972) - - (620) -
(5,418) (2,707) (3,610) (2,043) (919)
Interest, net (549) 333 397 (718) 211
Tax (123) - - (76) -
Loss on ordinary activities after taxation (6,090) (2,374) (3,213) (2,837) (708)
Profit (loss) per ordinary share
Basic and diluted (9.2)p (5.9)p (8.6)p (3.4)p (1.6)p
Excluding goodwill and exceptional expenses 1.3p (3.0)p (5.5)p 1.9 p 0.3 p
£000 £000 £000 £000 £000
EBITDA 972 (703) (1,237) 2,413 352
Consolidated statement of total recognised gains and losses
12 months 18 months
ended 31 ended 31
December December
2001 2000
£'000 £'000
Loss on ordinary activities after taxation (6,090) (3,213)
Currency translation differences arising on foreign
currency net investments (165) 80
Share related awards 107 240
Total recognised losses (6,148) (2,893)
Gyrus Group PLC
Consolidated balance sheets
As at 31 As at 31
December 2001 December 2000
£000 £000
Fixed assets
Goodwill and intangibles 127,272 31,918
Tangible assets 12,532 2,802
139,804 34,720
Current assets
Stocks 13,587 5,325
Debtors 13,653 5,638
Investments - cash on deposit - 5,700
Cash at bank and on hand 2,757 1,956
29,997 18,619
Creditors: Amounts falling due within one year (12,042) (3,868)
Net current assets 17,955 14,751
Total assets less current liabilities 157,759 49,471
Creditors: Amounts falling due after more than one year (18,555) (486)
Net assets 139,204 48,985
Capital and reserves
Share capital, share premium and merger reserve 157,791 61,424
Profit and loss account (18,587) (12,439)
Equity shareholders' funds 139,204 48,985
Reconciliation of movements in shareholders' funds
As at 31 December 2001 As at 31
December 2000
£000 £000
At beginning of period 48,985 8,006
Loss for the financial period attributable to equity shareholders (6,090) (3,213)
New share capital issued (net of expenses) 96,367 43,872
Share related awards 107 240
Gain/(loss) on foreign currency translation (165) 80
At end of period 139,204 48,985
Gyrus Group PLC
Consolidated cashflow statements
12 months 12 months 18 months 6 months 6 months
ended 31 ended 31 ended 31 ended 31 ended 31
Dec 2001 Dec 2000 Dec 2000 December December
2001 2000
£000 £000 £000 £000 £000
Net cash flow from operating activities (6,476) (2,153) (4,431) (5,662) (1,039)
Returns on investment and
servicing of finance
Interest received 265 460 541 84 324
Interest paid (1,019) (11) (21) (1,014) (6)
Interest elements in finance lease (66) (63) (67) (32) (35)
rentals
Net cash flows for returns on (820) 386 453 (962) 283
investments and servicing of finance
Taxation (123) - - (76) -
Capital expenditure and financial
investments
Purchase of intangible assets (275) - (275) -
Purchase of tangible fixed assets (4,883) (1,417) (1,898) (2,971) (394)
Proceeds of sale of tangible fixed assets 14 20 35 14 20
(5,144) (1,397) (1,863) (3,232) (374)
Acquisition
Purchase of subsidiary undertakings (109,108) (35,470) (35,470) (1,031) (694)
Net cash acquired with subsidiaries 2,371 497 497 - (99)
(106,737) (34,973) (34,973) (1,031) (793)
Cash outflow before management (119,300) (38,137) (40,814) (10,963) (1,923)
of liquid resources and financing
Management of liquid resources 5,700 (3,500) (1,700) 6,936 3,300
Financing
Capital element of finance lease (198) (56) (89) (120) (73)
rental payments
Bank loans 17,798 (36) (54) 5,405 (18)
Proceeds of issue of share capital 96,367 43,527 43,572 51 12
net of costs
Net cash inflow (outflow) from 113,967 43,435 43,429 5,336 (79)
financing
Increase in cash in the period 367 1,798 915 1,309 1,298
Gyrus Group PLC
Reconciliation of net cash
flow to movements in net
(debt)/ funds
12 months 12 months 18 months 6 months 6 months
ended 31 ended 31 ended 31 ended 31 ended 31
Dec 2001 Dec 2000 Dec 2000 December December
2001 2000
£000 £000 £000 £000 £000
Increase in cash in the 367 1,798 915 1,309 1,298
period
Cash (inflow)/outflow from (17,600) 92 143 (5,285) 91
(increase)/decrease in debt
and
lease financing
Increase (decrease) in (5,700) 3,500 1,700 (6,936) (3,300)
liquid funds
(22,933) 5,390 2,758 (10,912) (1,911)
Inception of new finance (53) (537) (537) (25) (523)
leases
Translation difference - - - (40) -
Change in net funds (22,986) 4,853 2,221 (10,977) (2,434)
Net (debt)/funds at 6,899 2,046 4,678 (5,110) 9,333
beginning of period
Net (debt)/funds at end of (16,087) 6,899 6,899 (16,087) 6,899
period
Analysis of net (debt)/
funds
As at 31 Dec 2001 As at 31 Dec
2000
£000 £000
Cash at bank and in hand 2,757 1,956
Bank overdraft (503) (69)
Finance leases (436) (581)
Debt due within one year - (36)
Debt due after one year (17,905) (71)
Current asset investments - 5,700
Net (debt)/funds at end of (16,087) 6,899
period
Reconciliation of operating
loss to cash flow from
operating activities
12 months 12 months 18 months 6 months 6 months
ended 31 ended 31 ended 31 ended 31 ended 31
Dec 2001 Dec 2000 Dec 2000 December 2001 December 2000
£000 £000 £000 £000 £000
Operating loss (5,418) (2,707) (3,610) (2,043) (919)
Goodwill amortisation 4,550 1,156 1,156 3,317 826
Intangibles amortisation 16 - 16 -
Depreciation charges 1,824 849 1,217 1,128 445
Loss on disposal of fixed 51 (6) 2 46 (6)
assets
Increase in stocks (904) (1,254) (1,492) (724) (839)
(Increase) decrease in (6,303) (278) (1,741) (3,411) 754
debtors
(Decrease) increase in (577) 296 (192) (4,222) (1,330)
creditors
Increase (decrease) in - (357) - - (37)
deferred income
Share related awards 107 159 240 53 78
Exchange movement on fixed 178 (11) (11) 178 (11)
assets
(6,476) (2,153) (4,431) (5,662) (1,039)
Gyrus Group PLC
Notes to the Financial Information
1. Basis of preparation
The financial information set out above 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 financial information does not constitute the company's statutory accounts
for the year ended 31 December 2001 or the eighteen month period ended 31
December 2000. The financial information for 2000 is derived from the statutory
accounts for 2000 which have been delivered to the Registrar of Companies. The
auditors have reported on the 2000 accounts; their report was unqualified and
did not contain a statement under section 237(2) or (3) of the Companies Act
1985. The statutory accounts for 2001 will be finalised on the basis of the
financial information presented by the directors in this preliminary
announcement and will be delivered to the Registrar of Companies following the
company's annual general meeting.
2. Segmental Information
Segmental Information 12 months ended 12 months ended 18 months ended 6 months ended 6 months ended
31 Dec 2001 31 Dec 2000 31 Dec 2000 31 December 2001 31 December 2000
Turnover by £000 £000 £000 £000 £000
Destination
North America 40,794 18,841 24,119 26,479 11,767
United Kingdom and 6,535 2,249 2,249 4,006 1,086
Europe
Rest of World 3,009 323 323 2,653 157
50,338 21,413 26,691 33,138 13,010
By Origin
United Kingdom 15,700 12,586 17,902 8,451 6,833
North America 34,638 8,827 8,789 24,687 6,177
50,338 21,413 26,691 33,138 13,010
3. Exceptional expenses
The exceptional expenses relate to the cost of restructuring following the
acquisition of Somnus Medical Technologies, Inc and represent severance costs,
facility closedown costs and costs associated with those transitional services
during the period July to September 2001 incurred as the commercial and
manufacturing activities were integrated into the Group's existing operations.
4. Loss per share
The calculations of per share profit /(loss) are calculated on the following
profit/ (losses) and numbers of shares:
12 months 12 months 18 months 6 months 6 months
ended 31 ended 31 ended 31 ended 31 ended 31
December December December December December
2001 2000 2000 2001 2000
£'000 £'000 £'000 £'000 £'000
Loss for the period (6,090) (2,374) (3,213) (2,837) (708)
Exceptional Costs 2,382 - - 1,127 -
Goodwill 4,550 1,156 1,156 3,317 826
Profit (loss) for the financial 842 (1,218) (2,057) 1,607 118
period excluding exceptional
costs and goodwill
amortisation
Weighted average number 66,422,608 40,407,557 37,319,927 82,902,557 44,203,192
of shares for basic and fully
diluted earnings per share
5. Purchase of Subsidiaries
On 5 June 2001 Gyrus Group PLC acquired the entire share capital of Somnus
Medical Technologies for £41,298,000 including costs, satisfied by cash.
£000
Provisional fair values of the net assets acquired:
Tangible fixed assets 1,722
Stocks 1,528
Debtors 1,340
Cash at bank and in hand 2,370
Creditors (5,750)
1,210
Goodwill 40,088
41,298
Satisfied by cash 41,298
On 5 June 2001 Gyrus Group PLC acquired the assets of Smith and Nephew Inc.'s
ENT division for £68,748,000 including costs, 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 59,437
68,748
Satisfied by cash 68,748
6. Dividend
The directors do not recommend payment of a dividend.
7. Approval
This Statement was approved by the Board of Directors on 25 February 2002.
8. Copies of the Statement
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.
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