RNS No 3621h
GYRUS GROUP PLC
23rd February 1998
Contacts:
Gyrus Group PLC 0171 466 5000 (today)
Mark Goble 0802 364480 (until Thursday)
Buchanan Communications 0171 466 5000
Tim Anderson/ Kirsty Swan
GYRUS GROUP PLC
Interim results for the six months ended 31 December 1997
* Turnover increased to #1.9 million (1996: #14,000)
* Losses increased in line with expectations to #1.9
million (1996: #1.4 million)
* Loss per ordinary share 8.5p (1996: 8.4p)
* Cash at 31 December 1997 totalled #12.3 million (1996:
#1.6 million)
* 19,000 arthroscopy electrodes shipped in Q4 of 1997,
exceeding our target of 17,000
* Monthly production of electrode is now 10,000
* VAPR 'T' for the thermal modification of soft tissue in
the treatment of joint instability launched 2 months ahead of
schedule
* VersaPoint to be relaunched in Europe through the
experienced Ethicon salesforce
* Urology product on target for launch in Q2 1998.
* UK sales team in place
* Research and development projects on target
Mark Goble, Managing Director, said:
"I am delighted to report that the Group is ahead of plan in
sales and production, shipping 19,000 electrodes in Q4 1997
against a target of 17,000. Development activities to support
the arthroscopy system are also ahead of plan as demonstrated
by the launch of VAPR "T". We continue to meet our milestones
with respect to our pipeline of ongoing product developments.
I expect increased market penetration to result from the
excellent progress we have made, leading to greater electrode
revenues in the long term".
Chairmans Statement
The last six months of 1997 proved both exciting and rewarding
for the Group. We successfully floated the Group on the
London Stock Exchange in November 1997 in the midst of some
difficult market conditions triggered by the downturn in the
Far Eastern economy.
The Group has performed in line with expectations with
turnover for the six months ended 31 December 1997 at #1.87
million (1996: #14,000). The loss on ordinary activities
before taxation increased in line with expectations to #1.92
million (1996: #1.44 million) and the loss per ordinary share
was 8.5p (1996: 8.4p). At 31 December 1997 cash and
investments totalled #12.33 million.
Since flotation we have seen rapidly increasing acceptance of
the Companys PlasmaKinetic technology in minimal access
surgical procedures. The PlasmaKinetic technology is based on
the principles of radiofrequency, bipolar electrosurgery.
Incorporating advanced proprietary features, the systems
enable both rapid tissue removal and contouring by
vaporisation as well as controlled thermal modification of
tissue structures. Our partners, Johnson & Johnson, who
market the arthroscopic and gynaecological applications world-
wide, continue to report growing demand for the products with
a user base of over 600 hospitals in the United States. A
recent market report on the US arthroscopy market cites that
the continued growth of the market is expected to be driven by
bipolar radiofrequency devices which promise to cut costs and
reduce patient bleeding.
We have continued to build production capacity to meet demand
and respond to upwardly revised forecasts. We sold 19,000
arthroscopy electrodes in the fourth quarter of 1997 exceeding
our target of 17,000. Our production process is proving
capable of building products of high quality on a consistent
basis. We believe however that we have significant
opportunity to improve the efficiency and volume throughput of
our existing facility. This process commenced in January as
we moved to two shifts and increased our total workforce to
180 people.
These factors are now enabling us to achieve a consistent
production level of 10,000 electrodes per month - well ahead
of our original projections. The accelerated scale up has
consequently had a start-up cost which has impacted our cost
of sales but without significantly influencing our anticipated
result for the year ending 30 June 1998. The Board expects
improved margins over the coming months with greater
predictability of demand and more efficient use of materials
and manpower established to meet this demand.
The Directors announced the successful launch of VAPR "T" on
29 January 1998 following FDA approval. This is a product for
the thermal modification of tissue in the treatment of joint
instability. The launch was two months ahead of schedule and
has found ready acceptance in the market with a major-league
baseball star already having been treated in the US.
The acquisition of Gynecare, the distributor of our
gynaecological system worldwide, by Ethicon Inc has resulted
in aggressive plans to relaunch the VersaPoint hysteroscopic
product in Europe through an experienced Ethicon salesforce.
The original agreements with Gynecare have been amended with
Ethicon to convert a prepaid supply deposit of #195,000 to
licence income in order to support continued development
investment in expansion of the product line.
Pricing has been maintained at expected levels although some
change in practice is foreseen where the capital equipment
elements of the systems will be placed, free of charge,
against a commitment to the purchase of the disposable single-
use electrodes. This is becoming common practice within
established markets in the hospital medical device sector.
Activities to set up a Gyrus direct business to sell and
distribute urological and, head and neck surgical products are
underway. The recruitment of a UK sales team is now complete
and plans are well advanced to establish the European direct
operations in both Spain and France, managed from a newly
established office facility in Buckinghamshire. This direct
marketing group will have its first products released for sale
with the launch of the Urology product line, on target, in the
second quarter of this calendar year. We believe the product
will demonstrate the significant clinical advantages in the
treatment of benign hypertrophic prostrate, as endorsed by the
adoption of our arthroscopic and hysteroscopic products.
Research and development activities are progressing according
to plan with expansion of the existing VersaPoint and VAPR
product lines together with continuing preclinical trials of
prototypes of the platform 2 and 3 technologies. Two further
product launches are expected in the second quarter of this
calendar year.
The Management and staff of the Group continue to develop
their skills and capabilities to meet the challenges of a
rapidly growing business. We have been able to attract first
class people in all areas and are continuously improving our
systems and procedures to ensure proper controls and decision-
making processes. We are actively encouraging further
education of our employees and have in place incentive plans
to ensure focus on the critical areas of our business.
The need for expansion of our facilities is under constant
review. As an interim measure, we have taken further space in
the immediate area to provide additional production
flexibility in our current facility. We are actively
reviewing plans to build a new facility to accommodate the
continued growth in line with a projected commissioning during
mid 1999.
In conclusion I am pleased to report that the Group is
continuing to show solid growth, with sales ahead of plan and
production meeting the demand. We expect to continue to
achieve the plans and goals we have set ourselves.
Brian Steer
Chairman
Consolidated profit and loss accounts
for the six months ended 31 December 1997
Six months Six months
ended ended Year ended
31 December 31 December 30 June
1997 1996 1997
(unaudited) (unaudited) (audited)
#000 #000 #000
Product sales 1,565 14 396
Development fees 210 - 1,127
Royalties 95 - 32
------ ------- -------
Turnover
continuing operations 1,870 14 1,555
Cost of sales (1,331) (6) (301)
-------- ------- -------
Gross profit 539 8 1,254
Selling and distribution
expenses (290) (75) (120)
General and administration
expenses (1,335) (662) (2,239)
Research and development
expenses (891) (738) (1,352)
-------- -------- --------
Operating loss
continuing operations (1,977) (1,467) (2,457)
Interest receivable and
similar income 130 38 66
Interest payable and
similar charges (78) (8) (60)
-------- --------- --------
Loss on ordinary activities
before taxation (1,925) (1,437) (2,451)
Tax on loss on ordinary
activities - - -
-------- -------- ---------
Loss for the financial
period retained for
equity shareholders (1,925) (1,437) (2,451)
======= ======== ========
Loss per ordinary
share (pence) (8.5)p (8.4)p (14.3)p
======= ======== ========
There are no recognised gains or losses other than the loss
for each of the periods stated above.
Consolidated balance sheets
as at 31 December 1997
31 December 31 December
1997 1996 30 June
(unaudited) (unaudited) 1997
#000 #000 #000
Tangible assets 1,519 959 1,232
------- ------- -------
Current assets
Stocks 645 117 260
Debtors 936 174 332
Investments - cash on deposit 11,000 - -
Cash at bank and in hand 1,328 1,575 934
-------- ------- -------
13,909 1,866 1,526
Creditors: amounts falling
due within one year (1,943) (759) (886)
--------- -------- -------
Net current assets 11,966 1,107 640
--------- -------- -------
Total assets less
current liabilities 13,485 2,066 1,872
Creditors: amounts falling
due after more than one year (331) (376) (357)
Deferred income (1,066) (1,106) (1,356)
--------- ------ -------
Net assets 12,088 584 159
--------- ------- -------
Capital and reserves
Share capital 13,853 1,193 1,379
Merger reserve 3,562 1,723 2,182
Profit and loss account (5,327) (2,332) (3,402)
--------- --------- --------
Equity shareholders funds 12,088 584 159
--------- --------- --------
Reconciliation of movements
in shareholders funds
31 December 31 December
1997 1996 30 June
(unaudited) (unaudited) 1997
#000 #000 #000
At beginning of period 159 (9) (9)
Loss for the financial period
attributable to
equity shareholder (1,925) (1,437) (2,451)
New share capital issued 13,854 1,899 2,544
Change in relation to
share-related awards - 131 181
Goodwill written off - - (106)
--------- --------- --------
At end of period 12,088 584 159
--------- --------- --------
Consolidated cash flow statement
for the six months ended 31 December 1997
Six months ended Six months ended Year ended
31 December 31 December 30 June
1997 1996 1997
(unaudited) (unaudited) (audited)
#000 #000 #000
Net cash outflow from
operating activities (1,931) (440) (1,274)
Returns on investment and
servicing finance
Interest received 94 38 67
Interest paid (55) - (25)
Interest element in
financial lease
rental payments (14) (8) (29)
-------- ------ -------
Net cash flows for
returns on investments
and servicing finance 25 30 13
-------- ------- --------
Taxation - - (4)
-------- ------- ---------
Capital expenditure and
financial investments
Purchase of tangible
fixed assets (431) (714) (1,046)
Sale of tangible fixed assets - - 26
-------- -------- ---------
(431) (714) (1,020)
-------- -------- ---------
Cash outflow before
management of liquid
resources and financing (2,337) (1,124) (2,285)
--------- -------- --------
Financing
Loan from customer - (645) (645)
Capital element of finance
lease rental payments (28) (16) (123)
Bank loan (18) 250 232
Issue of share capital,
net of issue costs 13,777 1,899 2,544
--------- ------- -------
Net cash inflow
from financing 13,731 1,488 2,008
--------- ------- -------
Management of liquid resources
Cash placed on short
term deposit (11,000) - -
--------- ------- -------
Increase/(decrease) in cash
in the period 394 364 (277)
--------- -------- --------
Reconciliation of net cash
flow to movement in net funds
Six months Six months
ended ended Year ended
31 December 31 December 30 June
1997 1996 1997
(unaudited) (unaudited) (audited)
#000 #000 #000
Increase/(decrease)
in cash in period 394 364 (277)
Cash inflow from decrease
in debt 18 395 413
Cash outflow from decrease
in lease financing 28 16 123
-------- -------- --------
440 775 259
New finance leases (42) (171) (279)
Issue of unsecured loans - - (100)
-------- -------- ---------
Change in net funds 398 604 (120)
Net funds at beginning
of period 380 500 500
-------- -------- ---------
Net funds at end of period 778 1,104 380
-------- -------- ---------
Analysis of net funds
Six months Six months
ended ended ended
31 December 31 December 30 June
1997 1996 1997
(unaudited) (unaudited) (audited)
#000 #000 #000
Cash at bank and in hand 1,328 1,575 934
Finance leases (236) (221) (222)
Debt due within one year (136) (36) (136)
Debt due after one year (178) (214) (196)
---------- ---------- ----------
Net funds at end of period 778 1,104 380
---------- ---------- ----------
Reconciliation of operating loss to cash flow from operating
activities
Six months Six months
ended ended Year ended
31 December 31 December 30 June
1997 1996 1997
(unaudited) (unaudited) (audited)
#000 #000 #000
Operating loss (1,977) (1,467) (2,457)
Depreciation charges 186 37 188
Profit on disposal of
fixed assets - - (12)
Increase in stocks (385) (115) (258)
Increase in debtors (568) (112) (277)
Increase in creditors 1,103 488 5
(Decrease) increase in
deferred income (290) 598 1,356
Share-related awards - 131 181
-------- -------- ---------
(1,931) (440) (1,274)
-------- -------- ---------
Notes:
1. Basic of preparation
The interim statement has been drawn up under the same
accounting policies as those used for the financial statements
for the year ended 30 June 1997. 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. On 20 October 1997 Gyrus
Group PLC acquired the entire share capital of Gyrus Medical
Limited in a share for share exchange. The financial
information for the six month period ended 31 December 1996
and the year ended 30 June 1997 has been prepared by
consolidating Gyrus Group PLC and Gyrus Medical Limited under
merger accounting principles as if Gyrus Group PLC had always
owned Gyrus Medical Limited. The annual report and accounts
of Gyrus Medical Limited for the year ended 30 June 1997
received an unqualified audit report and have been filed with
the Registrar of Companies.
2. Loss per share
The loss per share is based on losses of #1,925,000 (six
months ended 31 December 1996: loss of #1,437,000 and year
ended 30 June 1997: loss of #2,451,000), and on 22,683,924
ordinary shares (six months ended 31 December 1996: 17,039,297
and year ended 30 June 1997:17,161,000), being the weighted
average number of share in issue during the period.
3. Dividend
The directors do not recommend payment of a dividend.
4. Approval
This Interim Statement was approved by the Board of Directors
on 20 February 1998.
5. Copies of the Interim Statement
Copies of the interim statement will be sent to all
shareholders and further copies are available at the Companys
registered office, Fortran Road, St Mellons, Cardiff, CF3 OLT.
Review Report by KPMG Audit Plc to the Director of Gyrus Group
PLC
We have reviewed the interim financial information for the six
months ended 31 December 1997 set out above which is the
responsibility of, and has been approved by, the Directors.
Our responsibility is to report on the results of our review.
Our review was carried out having regard to the Bulletin
"Review of Interim Financial Information" issued by the
Auditing Practices Board. This review consisted principally
of applying analytical procedures to the underlying financial
data, assessing whether accounting policies have been
consistently applied and making enquiries of Group management
responsible for financial and accounting matters. The review
was substantially less in scope than an audit performed in
accordance with Auditing Standards. Accordingly, we do not
express an audit opinion on the interim financial information.
We draw your attention to the fact that Gyrus Group PLC
acquired the entire share capital of Gyrus Medical Limited
under an agreement dated 20 October 1997. The comparative
information for the year ended 30 June 1997 and the six months
ended 31 December 1996 has been prepared using accounting
policies consistent with those adopted by Gyrus Medical
Limited for the year ended 30 June 1997, taking into account
the group reorganisation, and the losses, cash flows and
balance sheets have been consolidated using merger accounting
principles.
On the basis of our review:
in our opinion, the interim financial information has been
prepared using accounting policies consistent with those
adopted by Gyrus Group PLC in its financial statements for the
year ended 30 June 1997, and in the accountants report dated
6 November 1997 included in the prospectus of the same date,
and taking into account the group reorganisation referred to
above; and
we are not aware of any material modifications that should be
made to the interim information as presented.
KPMG Audit Plc
Chartered Accountants
Cardiff 20 February 1998
END
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