RNS Number:1496D
Gyrus Group PLC
21 September 2004
21 September 2004
Gyrus Group PLC
PBTA rises 23% to #3.7 million, Revenues up 26% at CER
Gyrus Group PLC ("Gyrus" or "the Group"), a leading supplier of medical devices
which reduce trauma and complications in surgery, announces its interim results
for the six months ended 30 June 2004.
Financial Highlights
* Group revenues up 14% (26% on a constant exchange rate basis) to #42.5m
(H1 2003: #37.2m)
* Underlying profit before tax and goodwill amortisation (PBTA) up 23% to
#3.7m (H1 2003: #3.0m), despite weakness of US Dollar
* Adjusted EPS* rises 11% to 4.1p (H1 2003: 3.7p)
* Operating cash flow of #7.0m (H1 2003: #1.9m)
* Before goodwill amortisation and deferred tax credit
Operating Highlights
* Surgical Division revenues up 37% to $25.0m (H1 2003: $18.3m)
* Partnered Technologies Division revenues up 42% to $18.0m (H1 2003:
$12.7m)
* Strong growth in US direct businesses; gynaecology up 29%, urology up 117%
* Installed base of generators rises by 33% to 4256 (H1 2003: 3190)
* Gross margin maintained at over 60% despite the weaker dollar
Commenting on the results, Brian Steer, Executive Chairman, said:
"To have achieved such strong revenue and profit growth despite the weakness of
the dollar is a major achievement and evidence of the strength of our business
model. We are continuing to benefit from the changes implemented last year and
remain confident in our ability to achieve our "high teens" revenue growth and
profitability targets in the medium term."
Enquiries:
Gyrus Group PLC On 21 September 2004:
Brian Steer, Executive Chairman Tel: 0207 831 3113
Simon Shaw, Chief Financial Officer Tel: 0207 831 3113
Financial Dynamics
David Yates / Ben Atwell Tel: 0207 831 3113
A meeting for analysts will be held at the offices of Financial Dynamics,
Holborn Gate, 26 Southampton Buildings, London WC2A 1PB at 9.30am. Please call
Mo Noonan on 020 7269 7116
OVERVIEW
Gyrus has performed well in the first half of 2004 despite a 12% depreciation in
the US dollar against the comparable period. Reported sales grew 14% to #42.5
million (H1 2003: #37.2 million), which represents 26% growth on a constant
currency basis (17% before acquisitions). The Group's Profit Before Tax and
Amortisation of Goodwill ("PBTA") increased 23% to #3.7 million (H1 2003: #3.0
million).
There were strong performances in the Partnered Technologies and Surgical
Divisions driven largely by sales of new products introduced in 2003. These
divisions compensated for a weaker performance in the ENT Division. The Group
continued to be strongly cash generative during the period resulting in a
reduction in net debt to #8.1 million from #15.5 million at the end of last
year.
The Group continues to focus on driving growth and profitability through the
excellence of its products and its operational capability to develop,
manufacture, market and distribute on a global basis. The performance of the
first six months reflects many of the changes made in 2003, notably:
* The business unit structure within the two direct divisions (ENT and
Surgical) has proved effective in driving the sales growth of key products.
* The establishment of a centrally managed selling organization, Gyrus North
American Sales, has continued to improve our direct US distribution channel.
* The strengthened management team and structure put in place in the second
half of 2003 are both proving effective.
* The ongoing programme to improve operating performance within a tight
financial control environment is expected to yield improved operating
margins in 2005 and beyond.
FINANCIAL REVIEW
The Group showed strong growth in the first half with revenue growing to #42.5
million (H1 2003: #37.2 million) despite the depreciation of the US dollar.
Gross margin remained consistent at 60.1% (H1 2003: 60.3%) as margin
improvements achieved during the period offset margin losses on foreign currency
revenues from products supplied out of our Cardiff plant.
Operating expenses (excluding goodwill amortisation) increased 14% to #21.4
million (H1 2003: #18.7 million). Additional R&D expenditure represented over 3%
of this increase while the operating expenses of the newly acquired Entermed and
Explorent contributed 6%. Overall, operating expenses remained stable at
approximately 50% of revenue. PBTA increased by 23% to #3.7 million (H1 2003:
#3.0 million).
A comparison of basic earnings per share (EPS) between the periods is severely
distorted by the #4.8 million Deferred Tax credit which was recognised under
FRS19 in H1 2003. EPS excluding goodwill amortisation and deferred tax credits
rose 11% to 4.1p (H1 2003: 3.7p). The H1 2004 effective tax rate of
approximately 18% of PBTA comprises approximately 7% overseas taxes payable (H1
2003: 3%) and an 11% deferred tax charge (H1 2003: Nil). This non-cash item
represents the unwinding of part of the Group's deferred tax asset as the
Group's accumulated tax losses are utilised to reduce Corporation Tax actually
payable.
During the period, the Group continued to invest in the placement of new
generators in the US. $1 million was invested which, after depreciation and
retirements, resulted in no change in net book value of the installed base at
$5.5 million (H1 2003: $5.5 million). There has been a significant move towards
sales of generators, particularly the new SuperPulse urology workstation.
Overall, the installed base of generators in the US market grew by 33% to 4256
units (H1 2003: 3190 units). Sales of the related disposable instruments
increased 50% to $18 million (H1 2003: $12 million).
Emphasis on controlling working capital and capital expenditure resulted in
positive cash flow of #7.0 million in the period thereby reducing net debt at
30th June 2004 to #8.1 million (31st December 2003: #15.5 million).
BUSINESS REVIEW
Each of our business units continues to focus on the surgeon and the operating
room environment. Most of our products enable a less traumatic procedure to be
carried out by the surgeon with faster operating times together with better
patient outcomes. Our procedure-based systems continue to be overwhelmingly
based upon Gyrus's proprietary technologies. Through our research and
development activities we continue to improve the performance of our products.
SuperPulse, for example, having been successfully launched last winter has
resulted in growth in US Urology business revenues of 117% during the period.
We have continued to invest in and develop our independent sales organization.
Our particular focus is on identifying and building around individuals, rather
than distributor groupings, who fit the Gyrus profile of experienced,
relationship-driven sales professionals in the specialist medical devices arena.
During the period we have seen an increase in both the number and performance of
dedicated full-time Gyrus sales people. We have increased our investment in the
formal training of our sales people together with improved field management and
training through our regional management structure.
During the period, our Regional Management team and Divisional Vice Presidents
have done an excellent job in prioritising sales time to ensure a balanced sales
result. This has enabled us to build upon our established marketing and selling
strength in the operating room where we have seen significant success.
The performance of each business unit during the first half of 2004 is shown
below. As the effect of currency change clouds the underlying operational growth
of each business unit comparisons are made in the principal billing currency.
Analysis of Revenues
Business H12003 H12004 Growth
Gynaecology US $m 11.9 15.4 29.4%
International #m 0.9 1.3 44.4%
Urology US $m 1.2 2.6 116.7%
International #m 0.6 1.0 66.7%
General Surgery US $m 0.9 1.0 11.1%
International #m 1.2 1.0 (16.7)%
Total Surgical US $m 14.0 19.0 35.7%
International #m 2.7 3.3 22.2%
Otology US $m 12.2 12.0 (1.6)%
International #m 1.5 2.3 53.3%
Sinus & Rhinology US $m 6.1 7.0 14.8%
International #m 1.0 0.9 (10.0)%
Head & Neck US $m 4.9 4.9 0.0%
International #m 0.8 2.5 213.0%
Total ENT US $m 23.2 23.9 3.0%
International #m 3.3 5.7 72.7%
Partnered Technologies $m 12.7 18.0 41.7%
$/# rate 1.60 1.82 (12.0)%
Total Revenue #m 37.2 42.5 14.2 %
SURGICAL DIVISION
This division, representing 32% of group turnover, continues to grow strongly
and outperform management expectations in each of its business units.
Gynaecology
The superiority of PK technology in driving the cutting forceps and other
instruments is demonstrated by 29% sales growth in the US compared to H1 2003.
The growth in laparoscopic supra-cervical hysterectomies and the recognition
that the PK portfolio provides the instruments of choice in this procedure
provides a strong platform for growth in Gynaecology in both US and
International markets.
The growth of PK Open Forceps, introduced early in 2003, offers a broader
open-surgery application of PK technology in Gynaecology, Urology and General
Surgery where the technology is demonstrating clear competitive advantages.
Growth in PK Open Forceps revenue over the period was over 200%.
Urology
The acceptance of the SuperPulse platform with its superior performance in
urological procedures, particularly resection of the prostate, has taken US
sales in the period to $2.6 million, a growth of 117% over H1 2003.
International sales have also experienced strong growth at 67%. The benefits of
reduced operating time, less blood loss and shorter recovery time for the
patient makes SuperPulse the modality of choice for this procedure.
In open prostatectomy, PK Open Forceps are proving beneficial in this procedure
and achieving greater acceptance, once again broadening the utility of the
Urology workstation.
General Surgery
As the Group's strategy for the General Surgery market develops, we continue to
retain our position based upon the utility of individual instruments in
procedures outside our core Gynaecology and Urology businesses. We have, over
the first six months, maintained our initial entry sites in this market with US
sales increasing by 11% to over $1 million. International sales declined
marginally. We continue to believe that the general surgery market consisting of
29 million surgical procedures a year in the US is an attractive target market
for many of our products and technologies in selected procedures particularly:
Bariatric Surgery, Nissan Fundoplication and Colon Resection. Key to success in
this sector is the ability of our sales force to convert accounts to the
adoption of the PK system throughout the operating sites of general surgery
hospitals.
ENT DIVISION
We are focusing our efforts on enabling growth in this full line business whilst
improving its profitability.
During the first half of 2004 we undertook a degree of restructuring aimed at
improving profitability. Furthermore we anticipate introducing our first
proprietary PK Technology-based products into this Division this winter.
Otology
This business unit continues to maintain its market leadership position based on
its portfolio of vent tubes and ossicular chain prostheses used to treat middle
ear conditions. The market remains essentially flat and subject to the variable
incidence of middle ear infections particularly in children. Our introduction of
Smart prostheses containing Nitinol, a memory shaping metal alloy, improves ease
of fixation for the surgeon in ossicular chain prosthesis implantation and
continues to support our market share. Internationally, our otology business
grew by over 50% as a result of the acquisition of Entermed BV (now re-branded
Gyrus Medical BV) in Q4 2003.
As announced in July, the initial response to the introduction of RetroX in the
second half of 2003 was encouraging and clinical results based on initial uptake
of the product were excellent. However after this early success, full roll out
of the product has stalled as a result of the unfamiliarity of our
surgeon-focused sales force with the audiology market. We are currently
considering alternative marketing options for this product including the
introduction of a second generation product offering.
In the R&D pipeline we have a number of products that are designed to support
our market position including a Tympanic Membrane patch and an otology
development of our Sepra range, licensed from Genzyme.
Sinus and Rhinology
Our US sales growth of 15% in this sector has largely been driven by the success
of the Diego Powered Dissector, which over the period has grown revenues by 52%.
This performance was tempered by a reduction in sales of scopes and instruments
as the business identified and began to source from an alternative supplier. We
expect Explorent sourcing capability to reverse this trend in the second half.
Revenues in our International Sinus & Rhinology business declined by 10% to #0.9
million.
During the coming winter season we expect to introduce the proprietary PK Diego
microdebrider and combined coagulation system. This second stage development of
the Diego system adds a PlasmaKinetic capability to the wide range of dissection
instruments. As a result, the surgeon will be able to stop the bleeding from
resected tissues without the need to change instruments thus reducing blood loss
and saving surgical time. This combined debriding and coagulating capability is
a first in this sector and is expected to support our growth in both the US and
International markets.
Head and neck
The sales and marketing initiatives taken to address the loss of revenue in
Somnoplasty resulting from reimbursement changes have been successful in
achieving our goal of holding our market position and revenues in this sector.
Our international Head and Neck business grew revenues by over 200% largely as a
result of the acquisitions of Entermed and Explorent in Q4 2003.
The development of a new head and neck workstation, which will include a new
generation of our PK Technology, is nearing completion and will be introduced
towards the end of this year. This new generator together with a range of new
instruments is expected to provide the growth opportunity we have been seeking
in this sector. The multi-functional platform will give the surgeon the
versatility to perform head and neck procedures, including Somnoplasty, from one
workstation. The first instrument for this workstation will focus on
tonsillectomy and adenoidectomy of which there are 600,000 procedures performed
in operating rooms each year in the United States. This new advanced technology
is superior to current competitive technologies and has the ability to deliver a
unique, selectable blended cut and coagulation output which will enable us to
ensure a safer procedure and improved outcomes with less blood loss and quicker
recovery times.
Partnered Technologies
Gyrus's Partnered Technologies business consists of technology licence,
marketing and supply relationships with Johnson & Johnson (Depuy Mitek, Ethicon
Endo-Surgery and Gynecare), Guidant and Bard. Overall, the Partnered
Technologies business grew 42% to $18.0 million in the first half of 2004 with
all partners experiencing growth.
In arthroscopy, product sales to Depuy Mitek rose 32% in the first half of 2004.
Depuy Mitek supplies the Gyrus VAPR 3 system into arthroscopic markets for the
removal and shrinkage of soft tissue. This increase has been driven by the
success of the low profile suction (LPS) and large diameter suction (LDS)
instruments first introduced in 2003.
In hysteroscopy, Gynecare supplies the Versapoint system into hysterscopic
gynaecology for the removal of Benign Uterine Pathologies and the removal of the
endometrial lining. Sales increased by 36% in H1 2004.
In the cardiovascular field, product sales to Guidant increased 24%. Guidant
utilises a series of instruments for the harvesting of the saphenous vein for
coronary artery bypass grafts.
This Division has enjoyed a very strong six months when revenues from each
partner showed growth above expected levels. The Division has focused on
strengthening the relationships with its partners with a view to driving future
growth as new products utilising core Gyrus technologies are made available to
them.
MANAGEMENT
The Board and management developments in the second half of 2003 have proved
effective in providing an infrastructure capable of taking the company forward
and achieving its goals of high teens revenue growth and improving
profitability.
Gyrus believes its greatest asset is its employees and the company increasingly
has the depth and quality of management to allow the Group to implement its
long-term strategic development plans.
RESEARCH & DEVELOPMENT
The Group's investment in R&D for the first half was #3.9 million (9.1% of
sales) compared to #3.2 million (8.7% of sales) in the same period of 2003. The
Group has maintained its level of investment focusing R&D spend on product and
procedural development initiatives including the combination of medical devices
and surgical biomaterials to improve clinical outcomes.
There are a number of potentially significant new product introductions planned
for the coming winter and spring:
Head & Neck: We are currently developing a new workstation for introduction
later in the year that will include a significant enhancement to our PK
Technology, a new form of bipolar radio-frequency energy utilising a blend
capability to cut and coagulate at the same time. This new generator will also
incorporate our Somnoplasty technology creating a workstation capable of
enabling surgeons to perform a wide range of head and neck surgical procedures
including tonsillectomies, addenoidectomies, radical neck dissection and
thyroid-related procedures.
Gynaecology: A new instrument focused on the Laparoscopic Surgical Hysterectomy
(LSH) sector is planned for introduction in the second half. This instrument
provides improved haemostasis with precision and enables LSH procedures to be
performed more effectively.
Sinus & Rhinology: In the second half of 2004, we will introduce PK Diego,
adding a PK Technology capability to our successful Diego micro-debrider and its
range of instruments.
Throughout the remainder of the year, R&D activities will continue to focus on
both incremental expansion of product lines and the development of key new
products aimed at delivering growth from our core technologies.
OPERATIONS
During the first half of 2004 the Group has continued to take steps to improve
operating profitability in the medium term. Central to this is the
implementation of "lean manufacturing" across the group.
The benefits of lean manufacturing include increased productivity, reduced
inventories, better product quality and space utilisation.
Since initiating this programme in the Surgical Division (Minneapolis) in 2003
we have seen encouraging results. Significant double-digit improvements in
productivity have been achieved in our core PK Cutting Forceps manufacturing
facility. Other benefits include approximately $0.5 million reduction in work
in progress and a scrap reduction of 50% compared to the same period in 2003.
This initiative has led to a significant improvement in that plant's operating
profitability.
In our Cardiff plant the lean manufacturing initiative is well under way and
beginning to yield encouraging improvements in operating efficiency.
We expect to see continued benefits from the lean initiative as we roll out the
initiative to our ENT division in due course.
Beyond manufacturing we are seeking ways to improve margins and profitability
through operational rationalisation, overhead reduction and continuing tight
control of the expense base. We have undertaken some re-structuring at ENT in
the first half and will continue to focus on improving profitability across the
Group going forward.
OUTLOOK
The strategies and changes implemented over the last 18 months were designed to
create a strong platform for Gyrus' future growth. This platform now consists of
global business units focused on specific sectors of the surgery market. These
are supported by dedicated US and international selling organisations, Group R&D
and administrative teams. As a result, in the first half of 2004, we have seen
excellent growth in our revenues, despite the weaker dollar. The Group has been
strongly cash generative and achieved an 11% improvement in earnings per share
(excluding goodwill amortisation and deferred tax credits).
Through continued focus on our operations, we expect to improve margins in the
medium term through further rationalisation and lean manufacturing. We have
functional and physical capacity throughout our business, which can accommodate
growth without the need for major capital investment.
A high priority is the continued upgrade and development of our sales and
distribution function to promote a range of speciality high technology products
to the surgical and medical community. A pipeline of new products both from our
R & D activities and licensing will fuel growth when coupled with our marketing
capabilities.
The breadth of our portfolio of leading products in niche specialties provides
both significant growth opportunities and insures against individual product
shortfalls thereby enabling a balanced approach to products at different life
cycle stages.
In the period since 30th June the Group has continued to perform well and
remains on track to deliver our expectations for the full year.
In balancing growth and profitability in the short and long term we are
dependent on the competitive strength of our global sales structure, the
excellence of our technologies and the maintenance of our focus on our selected
surgical markets and customers. We believe we are well positioned to take
advantage of the many opportunities open to us and remain confident in our
ability to achieve our local currency "high teens" growth targets in the medium
term.
Consolidated profit and loss accounts Note Six months Six months 12 months
Ended ended ended
30 June 30 June 31 December
2004 2003 2003
(unaudited) (unaudited) (audited)
#000 #000 #000
Turnover 2 42,452 37,249 78,132
Cost of Sales (16,930) (14,777) (31,795)
_____ _____ _____
Gross Profit 25,522 22,472 46,337
Selling and distribution expenses (11,801) (10,932) (22,001)
Research and development expenses (3,877) (3,245) (6,467)
General and administrative expenses before
goodwill amortisation (5,684) (4,525) (8,440)
goodwill amortisation (3,423) (3,316) (6,682)
_____ _____ _____
Total general and administrative expenses (9,107) (7,841) (15,122)
Operating Profit
Profit before goodwill amortisation 4,160 3,770 9,429
Goodwill amortisation (3,423) (3,316) (6,682)
_____ _____ _____
Operating Profit 2 737 454 2,747
_____ _____ _____
Interest net (506) (757) (1,334)
_____ _____ _____
Profit/(loss) on ordinary activities before
taxation 231 (303) 1,413
Taxation (charge)/credit 4 (646) 4,829 4,544
_____ _____ _____
(Loss)/profit on ordinary activities after
taxation (415) 4,526 5,957
_____ _____ _____
(Loss)/profit per ordinary share 3
Basic (0.5)p 5.4p 7.2p
_____ _____ _____
Diluted (0.5)p 5.4p 7.1p
_____ _____ _____
Adjusted basic, excluding goodwill
amortisation 3.6p 9.4p 15.2p
_____ _____ _____
Adjusted basic, excluding goodwill
amortisation and deferred tax (charge)/credit 4.1p 3.7p 9.6p
_____ _____ _____
Profit before tax and goodwill amortisation 3,654 3,013 8,095
_____ _____ _____
Consolidated statement of total recognised Six months Six months 12 months
gains and losses Ended ended ended
30 June 30 June 31 December
2004 2003 2003
(unaudited) (unaudited) (audited)
#000 #000 #000
(Loss)/profit on ordinary activities after
taxation (415) 4,526 5,957
Currency translation differences arising on
foreign currency net investments (505) (464) (2,860)
Share related awards - 9 9
_____ _____ _____
Total recognised gains and losses relating to
this period (920) 4,071 3,106
_____ _____ _____
Consolidated balance sheets Note As at As at As at
30 June 30 June 31 December
2004 2003 2003
(unaudited) (unaudited) (audited)
#000 #000 #000
Fixed assets
Intangible assets 115,238 117,597 118,971
Tangible assets 11,462 13,359 12,097
_____ _____ _____
126,700 130,956 131,068
Current assets
Stocks 16,754 18,006 16,814
_____ _____ _____
Debtors - due within one year 13,966 14,589 14,243
Deferred tax asset 4 5,780 6,326 6,160
_____ _____ _____
Debtors 19,746 20,915 20,403
Cash at bank and on hand 7,050 2,396 5,392
_____ _____ _____
43,550 41,317 42,609
Creditors: amounts falling due within one year (13,079) (10,268) (11,221)
_____ _____ _____
Net current assets 30,471 31,049 31,388
Total assets less current liabilities 157,171 162,005 162,456
Creditors: Amounts falling due after more than
one year (14,924) (18,048) (19,448)
_____ _____ _____
Net assets 142,247 143,957 143,008
_____ _____ _____
Capital and reserves
Share capital and premium 154,286 154,111 154,127
Merger reserve 3,860 3,860 3,860
Profit and loss account (15,899) (14,014) (14,979)
_____ _____ _____
Equity shareholders' funds 142,247 143,957 143,008
Reconciliation of movement in shareholders' As at As at As at
funds 30 June 30 June 31 December 2003
2003 2003 (audited)
(unaudited) (unaudited) #000
#000 #000
Net assets at beginning of period 143,008 139,788 139,788
(Loss)/profit for the financial period (415) 4,526 5,957
attributable to equity shareholders
New share capital issued (net of expenses) 159 98 114
Share related awards - 9 9
Loss on foreign currency translation (505) (464) (2,860)
_____ _____ _____
Net assets at end of period 142,247 143,957 143,008
_____ _____ _____
Consolidated cashflow statements Six months Six months 12 months
Ended ended ended
30 June 30 June 31 December
2004 2003 2003
(unaudited) (unaudited) (audited)
#000 #000 #000
Net cash inflow from operating activities 9,230 5,146 12,959
Returns on investment and servicing of finance
Interest received 74 30 64
Interest paid (388) (937) (1,221)
Interest elements in finance lease rentals (12) (17) (31)
_____ _____ _____
Net cash flows for returns on investments and
servicing of finance (326) (924) (1,188)
Taxation (364) (297) (288)
_____ _____ _____
Capital expenditure and financial investments
Purchase of tangible fixed assets (1,517) (1,674) (3,538)
Purchase of intangible fixed assets (1) (305) (722)
_____ _____ _____
(1,518) (1,979) (4,260)
Acquisitions
Purchase of subsidiary undertakings - - (4,258)
Net cash acquired with subsidiaries - - 133
_____ _____ _____
- - (4,125)
_____ _____ _____
Cash inflow before financing 7,022 1,946 3,098
_____ _____ _____
Financing
Capital element of finance lease rental payments (58) (89) (169)
Decrease in bank loans (3,733) (2,452) (1,612)
Proceeds of issue of share capital net of costs 159 98 114
_____ _____ _____
Net cash outflow from financing (3,632) (2,443) (1,667)
_____ _____ _____
Increase/(decrease) in cash in the period 3,390 (497) 1,431
_____ _____ _____
Reconcilliation of net cash flow to movements Six months Six months 12 months
in net funds Ended ended ended
30 June 30 June 31 December
2004 2003 2003
(unaudited) (unaudited) (audited)
#000 #000 #000
Increase/(decrease) in cash in the period 3,390 (497) 1,431
Cash outflow from decrease in debt and lease
financing 3,791 2,541 1,361
_____ _____ _____
7,181 2,044 2,792
Inception of new finance leases - - (160)
Translation differences 173 - (179)
_____ _____ _____
Change in net debt 7,354 2,044 2,453
Net debt at beginning of period (15,471) (17,924) (17,924)
_____ _____ _____
Net debt at end of period (8,117) (15,880) (15,471)
Analysis of net debt As at As at As at
30 June 30 June 31 December
2004 2003 2003
(unaudited) (unaudited) (audited)
#000 #000 #000
Cash at bank and in hand (net of overdraft) 7,050 2,396 4,145
Finance leases (243) (228) (308)
Debt due within one year - - (420)
Debt due after one year (14,924) (18,048) (18,888)
_____ _____ _____
Net debt at end of period (8,117) (15,880) (15,471)
_____ _____ _____
Reconciliation of operating profit to cash Six months Six months 12 months
inflow from operating activities Ended ended ended
30 June 30 June 31 December
2004 2003 2003
(unaudited) (unaudited) (audited)
#000 #000 #000
Operating profit 737 454 2,747
Goodwill amortisation 3,423 3,316 6,682
Licences amortisation 71 6 126
Depreciation charges 1,963 2,194 3,997
Loss on disposal of fixed assets 63 131 236
(Increase)/decrease in stocks (138) 1,011 2,269
Decrease/(increase) in debtors 80 (2,019) (493)
Increase/(decrease) in creditors 3,031 44 (2,614)
Share related awards - 9 9
_____ _____ _____
9,230 5,146 12,959
_____ _____ _____
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 2003.
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 comparative figures for the financial year ended 31
December 2003 are not the company's full statutory accounts for the financial
year. Those accounts have been reported on by the company's auditors and
delivered to the registrar of companies. The report of the auditors was
unqualified and did not contain a statement under section 237 (2) or (3) of the
Companies Act 1985.
2. Segmental Information Six months Six months 12 months
Ended ended ended
30 June 30 June 31 December
2004 2003 2003
(unaudited) (unaudited) (audited)
#000 #000 #000
Turnover by destination #000 #000 #000
North America 29,746 29,500 56,048
United Kingdom and rest of Europe 10,019 6,304 19,647
Rest of World 2,687 1,445 2,437
_____ _____ _____
42,452 37,249 78,132
_____ _____ _____
Turnover by origin #000 #000 #000
North America 26,758 25,416 53,571
United Kingdom and rest of Europe 15,694 11,833 24,561
_____ _____ _____
42,452 37,249 78,132
_____ _____ _____
Profit before interest and taxation by #000 #000 #000
origin
North America 2,371 1,460 2,753
United Kingdom and rest of Europe (1,642) (1,006) (6)
Rest of World 8 - -
______ ____ _____
737 454 2,747
______ _____ _____
Net assets #000 #000 #000
North America 136,045 142,698 141,050
United Kingdom and rest of Europe 5,558 1,259 1,688
Rest of World 644 - 270
_____ _____ _____
142,247 143,957 143,008
_____ ____ _____
Business Segment
Period ended 30 June 2004 (unaudited) ENT Surgical Partnered Total
Technologies
#000 #000 #000 #000
Turnover 18,674 13,881 9,897 42,452
Cost of Sales (7,231) (4,353) (5,346) (16,930)
Sales and marketing (6,650) (5,151) - (11,801)
Research and development (743) (610) (1,565) (2,918)
General and administration before (1,862) (904) (806) (3,572)
goodwill amortisation
_____ _____ _____ _____
Segment profit before goodwill
amortisation 2,188 2,863 2,180 7,231
Goodwill amortisation (2,604) (658) (161) (3,423)
_____ _____ _____ _____
Segment profit/(loss) (416) 2,205 2,019 3,808
Expenses not allocated
- Central research and development (898)
- General and administration (2,173)
_____ _____ _____ _____
Profit/(loss) before interest and
taxation (416) 2,205 2,019 737
Period ended 30 June 2003 (unaudited) ENT Surgical Partnered Total
Technologies
#000 #000 #000 #000
Turnover 17,814 11,381 8,054 37,249
Cost of Sales (6,258) (3,519) (5,000) (14,777)
Sales and marketing (6,413) (4,519) - (10,932)
Research and development (915) (626) (1,555) (3,096)
General and administration before
goodwill amortisation (1,457) (595) (754) (2,806)
_____ _____ _____ _____
Segment profit before goodwill 2,771 2,122 745 5,638
amortisation
Goodwill amortisation (2,497) (650) (169) (3,316)
_____ _____ _____ _____
Segment profit 274 1,472 576 2,322
Expenses not allocated
- Central research and development (149)
- General and administration (1,719)
_____ _____ _____ _____
Profit before interest and taxation 274 1,472 576 454
_____ _____ _____ _____
3. (Loss)/profit per share
The loss per share after tax is based on a loss attributable to the ordinary
shareholders of #415,000 for the six months ended 30 June 2004, a profit of
#4,526,000 for the six months ended 30 June 2003, and a profit of #5,957,000 for
the twelve months ending 31 December 2003, and on 83,352,353 ordinary shares for
the six months ended 30 June 2004, 83,200,595 for the six months ended 30 June
2003 and 83,251,136 for the twelve months ended 31 December 2003, being the
weighted average number of shares during the period. The diluted profit per
share is based on 83,675,226 ordinary shares for the six months ending 30 June
2004, 83,367,788 for the six months ending 30 June 2003 and 83,583,612 for the
twelve months ending 31 December 2003.
Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2004 2003 2003
(unaudited) (unaudited) (audited)
#000 #000 #000
(Loss)/profit for period (415) 4,526 5,957
Goodwill amortisation 3,423 3,316 6,682
_____ _____ _____
Profit for the period excluding exceptional
items and goodwill amortisation 3,008 7,842 12,639
_____ _____ _____
Deferred tax charge/(credit) to the profit and
loss account 380 (4,800) (4,634)
_____ _____ _____
Profit for the period excluding goodwill
amortisation and deferred tax charge/(credit)
to the profit and loss account 3,388 3,042 8,005
_____ _____ _____
4. Taxation and Deferred Taxation
The tax (charge)/credit is made up as follows: Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2004 2003 2003
(unaudited) (unaudited) (audited)
#000 #000 #000
UK corporation tax on profit for the period - 129 130
Foreign tax on profits for the period (266) (100) (220)
Net origination/reversal of timing differences (380) 4,800 4,634
_____ _____ _____
Total (646) 4,829 4,544
_____ _____ _____
The movement in the net deferred tax asset is:
#000
Net deferred tax asset recognised at 30 June 2003 6,326
Charges to the profit and loss in the period (166)
_____
Net deferred tax asset recognised at 31
December 2003 6,160
Charged to the profit and loss in the period (380)
_____
Net deferred tax asset recognised at 30 June 2004 5,780
_____
5. Dividend
The Directors do not recommend the payment of a dividend.
6. Approval
This interim statement was approved by the Board of Directors on 21 September
2004.
7. Copies of the Interim Statement
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 engaged by the company to review the financial information set out
on pages 11 to 17 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.
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than the company
for our review work, for this report, or for the conclusions we have reached.
Directors responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules which 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 for use in the United Kingdom. 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 conclusion
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 2004.
KPMG Audit PLC
Chartered Accountants
21 September 2004
This information is provided by RNS
The company news service from the London Stock Exchange
END
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