Gyrus Group PLC - Final Results
22 September 1998 - 9:32AM
UK Regulatory
RNS No 2799n
GYRUS GROUP PLC
22nd September 1998
Preliminary Results for the year ended 30 June 1998
Gyrus Group PLC ("Gyrus") the "PlasmaKinetic" endosurgical
device company today announces its maiden preliminary results
following flotation in November 1997, for the year ended 30
June 1998.
Key Points
* Trading results - trading results have exceeded market
expectations with Group turnover at #5.71 million (1997: #1.56
million) and loss before tax of #4.00 million (1997: #2.45
million) reflecting investment in the business.
* VAPRTM System - the arthroscopic product has been
successfully launched by the Groups marketing partner Ethicon
Inc., a division of Johnson & Johnson. The product is
installed in over 1,000 hospitals and in excess of 90,000
electrodes were shipped during the year.
* VersaPointTM System - following the acquisition by Johnson
& Johnson, Gynecare are reporting excellent market reception
and forecasting contiued strong growth.
* European sales & marketing - Gyrus has now established its
UK sales force and appointed a country manager in Spain, the
Directors expect to make further appointments and market
launches in France, Germany and Italy during the forthcoming
year.
* Gyrus Endourology launch - the Groups system for the
treatment of enlarged prostate and other urinary tract
diseases was launched in May 1998. The product is being
trialed in many hospitals and sales are expected to commence
in the second quarter of the current financial year.
* Manufacturing capacity - the Group has satisfactorily
increased manufacturing capacity during the year to meet the
higher than anticipated demand. The Group satisfied the
requirements of an FDA audit in September 1998 and was
accredited to ISO 9001 which will allow it to self-audit
products that require CE marking
Brian Steer, Chairman, commented:
"I am delighted with the Companys outstanding progress
recording remarkable sales and manufacturing growth within
such a very short timeframe. In achieving these goals, it has
become evident that we have the capability to continue on a
powerful development course to maintain growth with the
opportunity to enter many new surgical fields. We will
continue to ensure that Gyrus takes full advantage of the
acceptance of its products and technology through accelerated
growth and new product development."
CHAIRMANS STATEMENT
For Gyrus, 1997/98 has been an eventful and successful year in
which we have managed a major expansion, completed our
flotation on the London Stock Exchange and finished the year
ahead of sales goals by more than 30%.
Group turnover for the year ended 30 June 1998 was #5.71
million (1997: #1.56 million), product sales and royalties
were ahead of expectations at #5.50 million and development
fees were #0.21 million. The loss on ordinary activities
before taxation increased in line with expectations to #4
million (1997: #2.45 million) and the loss per ordinary share
was 14.9p (1997: 14.3p). Cash and investments totalled #8.68
million (1997: #0.93 million).
Product sales
Sales growth reflects the successful launch of the
arthroscopic AxiPolar products, based on the Groups
PlasmaKinetic technology, through our marketing partner Mitek,
a division of Ethicon, a Johnson & Johnson company. First
launched in June 1997 by Mitek through a 85 strong salesforce
in the USA, followed by a phased launch in selected European
markets, the product is now installed in over 1000 hospitals
and will continue its global roll out through 1998. The
product in its various configurations has been well received
by surgeons, enabling them to perform minimal access
procedures in both the shoulder and knee joints. Gyrus sold
in excess of 90,000 electrodes to Mitek in the year ended 30
June 1998 demonstrating wide acceptance of the Groups
technology in the market.
Gynecare, our other partner, was acquired by Johnson & Johnson
in November 1997 and effectively re-launched VersaPoint, the
hysteroscopic application of our technology, through a
salesforce specifically directed at the womens healthcare
market. The transition to Johnson & Johnson sales forces in
both the USA and Europe has accelerated product sales. This
acceleration has been assisted by synergistic positioning
alongside other products in their portfolio. Gynecare are
reporting excellent market reception and forecasting continued
strong growth as more and more surgeons become trained in
hysteroscopic procedures.
We have established our European sales and marketing office,
set up a UK force of four sales people and a product manager.
In Spain, a Country Manager has been appointed to manage our
business through a network of independent distributors and
plans are in place for marketing in France using a similar
approach. This will be followed by launch in Italy and
Germany early in the 1999. We are reviewing a number of
alternative approaches to addressing the US market involving
established distribution networks.
The Gyrus Endourology system for treatment of enlarged
prostate gland and other urinary tract diseases was launched
in May 1998 and is the first product to be brought to market
through Gyruss European sales and marketing division. Trials
are now taking place in many hospitals. First sales are
expected in the second quarter of this financial year. The
product has been well received with tissue effect being ahead
of current technologies used. Notably the product is viewed
as potentially reducing costs by causing less blood loss,
allowing earlier removal of catheters and shortening hospital
stays.
Operations
The scale up of manufacturing has been particularly
outstanding in response to customers demand for our products.
The Company completed the year with a forward order book of
#2.4m. However, in meeting customers demands management
decided to accept higher costs than budgeted, which were
associated with the introduction of shift working and "rush"
material sourcing. Management is now bringing costs into line
as sales forecasting accuracy from our customers improves and
our manufacturing scheduling and material requirement plans
become more effective. To enable achievement of long term
goals, management is committed to an operational focus on cost
effective manufacturing, logistical and quality management to
profitably service our partners and direct business.
Gyrus Group PLC
In the litigious environment of the US medical device market,
success can bring with it assertions of infringement by third
parties. Whilst such assertions have been made, we have been
advised that these are without valid or enforceable
foundation. Other than those simply dismissed as purely
speculative, one has resulted in legal proceedings being taken
against Johnson & Johnson as the US importer of our
PlasmaKinetic systems. As the cited party, J&J Ethicon are
vigorously defending this action with our mutual interests
represented under a joint defence agreement.
During the year the Group prepared for a series of regulatory
audits. The new FDA Quality System Regulation came fully into
force in June of this year and the Group successfully
underwent an audit by the FDA early in September.
Additionally the Group received ISO 9001 accreditation in
July, which will allow the Group to self-audit against the
Medical Device Directives and apply the CE mark to its
products without the need for third party review.
As indicated at the time of flotation a larger production
facility is required to meet long-term forecasts. Management
is considering a proposal from the Welsh Development Agency to
utilise an adjacent site to build a further 40,000 sq. ft.
manufacturing facility.
Research and development
Research and development has been expanded throughout the
year, as planned at flotation. This expansion has been to
support development activities in three main sectors. The
first of these comprises project teams supporting line
extensions, such as the VAPR "T" introduction announced in
January of this year, as well as improvements to existing
product ranges. The second sector of development activities
has been on introducing new speciality applications for the
Groups PlasmaKinetic technology, culminating in the launch of
the Gyrus Endourology System in May of this year. The third
area has been directed at the development of the new platform
technologies targeted at laparoscopic, ENT and head and neck
surgery. With the growth in product demand and in order to
consolidate acceptance and positioning of our technology in
the market, the on-going resource required to support the
first two activities is expected to increase against original
forecasts. To accommodate this additional resource R&D will
be restructured during the first half of the year.
Through the development process, management has recognised
additional market opportunities for the Groups technologies
beyond those envisaged at the time of the flotation. Of
these, the minimal access cardiac surgery market is
particularly attractive as an emerging, high value, segment of
the medical device market. Several alliances between large
corporations and small medical technology companies have
already been established in this sector. Management believes
that such an alliance will also be the best route for the
Group to access this market.
Summary
Throughout the year we have continued to build a robust
management infrastructure and have been successful in
recruiting high calibre individuals into all areas of the
business. The workforce has been totally supportive and
responsive to the need to successfully meet demand beyond our
original forecast.
In summary, I am pleased to report that the Company has made
outstanding progress, recording remarkable sales and
manufacturing growth within such a very short timeframe. In
achieving these goals, it has become evident that we have the
capability to continue on a powerful development course to
maintain growth with the opportunity to enter many new
surgical fields, either through our direct distribution, or
through additional partnerships. The Board, in recognising
the excellent performance of the Group in meeting
significantly over forecast sales, believes that it is in the
best interests of the Company to continue to ensure that it
takes full advantage of the acceptance of its products and
technology through accelerated growth and new product
development.
The Board wishes to thank the management, staff and investors
for their support and contribution to the outstanding result
achieved by the Company in 1997/98.
Brian L Steer
Chairman
Gyrus Group PLC
Consolidated profit and loss accounts
for the year ended 30 June 1998
Year ended Year ended
30 June 1998 30 June 1997
#000 #000
Product sales 5,089 396
Development fees 212 1,127
Royalties 408 32
_________ _________
Turnover - continuing operations 5,709 1,555
Cost of sales (4,043) (301)
_________ _________
Gross profit 1,666 1,254
Selling and distribution expenses (717) (120)
General and administration expenses (3,042) (2,239)
Research and development expenses (2,319) (1,352)
_________ _________
Operating loss - continuing
operations (4,412) (2,457)
Interest receivable and
similar income 506 66
Interest payable and similar
charges (100) (60)
_________ _________
Loss on ordinary activities
before and after taxation,
being the loss for the
financial year (4,006) (2,451)
__________ _________
Loss per ordinary share (pence) (14.9)p (14.3)p
__________ _________
There are no recognised gains or losses other than the loss
for each of the periods stated above.
Gyrus Group PLC
Consolidated balance sheets
as at 30 June 1998
30 June 1998 30 June 1997
#000 #000
Tangible assets 1,773 1,232
________ ________
Current assets
Stocks 1,550 260
Debtors 1,527 332
Investments 8,300 0
Cash at bank and in hand 378 934
________ ________
11,755 1,526
Creditors:amounts falling
due within one year (2,401) (886)
_________ ________
Net current assets 9,354 640
_________ ________
Creditors: amounts falling
due after more than one year (291) (357)
Deferred income (749) (1,356)
_________ ________
Net assets 10,087 159
_________ ________
Capital and reserves
Share capital 13,854 1,379
Merger reserve 3,561 2,182
Profit and loss account (7,328) (3,402)
_________ ________
Equity shareholders' funds 10,087 159
_________ ________
Reconciliation of movements
in shareholders' funds
30 June 1998 30 June 1997
#000 #000
At beginning of year 159 (9)
Loss for the financial year
attributable to equity
shareholders (4,006) (2,451)
New share capital issued 13,854 2,544
Charge for share related awards 80 181
Goodwill written off 0 (106)
_________ _______
At end of year 10,087 159
_________ _______
Gyrus Group PLC
Consolidated cash flow statement
for the year ended 30 June 1998
Year ended Year ended
30 June 1998 30 June 1997
#000 #000
Net cash outflow from
operating activities (5,027) (1,274)
Returns on investment
and servicing of finance
Interest received 427 67
Interest paid (67) (25)
Interest element in financial
lease rental payments (28) (29)
________ _________
Net cash flows for returns
on investments and
servicing finance 332 13
________ _________
Taxation 0 (4)
________ _________
Capital expenditure
Purchase of tangible fixed assets (960) (1,046)
Sale of tangible fixed assets 2 26
________ _________
(958) (1,020)
________ _________
Cash outflow before use of liquid
resources and financing (5,833) (2,285)
Management of liquid resources
Cash placed on short term deposit (8,300) 0
________ _________
(14,133) (2,285)
Financing
Loan from customer 0 (645)
Capital element of finance
lease rental payments (65) (123)
Bank loan (135) 232
Issue of share capital,
net of issue costs 13,777 2,544
________ _________
Net cash inflow from financing 13,577 2,008
________ _________
Decrease in cash (556) (277)
________ _________
Gyrus Group PLC
Reconciliation of net cash flow to movement in net funds
Year ended Year ended
30 June 1998 30 June 1997
#000 #000
Decrease in cash in year (556) (277)
Cash outflow from decrease
in debt and lease financing 200 536
Increase in liquid funds 8,300 0
_________ _________
7,944 259
Inception of new finance leases (71) (279)
Loan notes issued 0 (100)
_________ _________
Change in net funds 7,873 (120)
Net funds at beginning of year 380 500
_________ _________
Net funds at end of year 8,253 380
_________ _________
Analysis of net funds
Year ended Year ended
30 June 1998 30 June 1997
#000 #000
Cash at bank and in hand 378 934
Debt due within one year (36) (136)
Debt due after one year (161) (196)
Finance leases (228) (222)
Current asset investments 8,300 0
_________ _______
Net funds at end of year 8,253 380
_________ _______
Reconciliation of operating loss to cash flow from operating
activities
Year ended Year ended
30 June 1998 30 June 1997
#000 #000
Operating loss (4,412) (2,457)
Depreciation charges 505 188
Profit on disposal of fixed assets 0 (12)
Increase in stocks (1,290) (258)
Increase in debtors (1,116) (277)
Increase in creditors 1,633 5
(Decrease) increase in deferred income (607) 1,356
Share-related awards 80 181
________ ________
(5,207) (1,274)
________ ________
Gyrus Group PLC
Notes
1. Basis of preparation
The financial information set out above does not
constitute the Companys statutory financial statements
for the years ended 30 June 1998 or 1997 within the
meaning of Section 240 of the Companies Act 1985. The
financial information contained on pages 4 to 8 is
derived from the Companys audited statutory financial
statements.
The consolidated financial information has been drawn up
under the same accounting policies as those used for the
financial statements for the year ended 30 June 1997. 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 years ended
30 June 1998 and 30 June 1997 has been prepared by
consolidating Gyrus Group PLC and Gyrus Medical Limited
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 #4,006,000 (year
ended 30 June 1997: loss of #2,451,000) and on 26,834,016
ordinary shares (year ended 30 June 1997: 17,161,000)
being the average number of shares in issue during the
year.
3. Dividend
The directors do not recommend payment of a dividend.
4. Approval
This statement was approved by the Board of Directors on
21 September 1998.
For further information please contact:
Mark Goble Today 0171 466 5000
Gyrus Group PLC Thereafter 01222 300100
Tim Anderson/Zena Bates
Buchanan Communications 0171 466 5000
END
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