Gyrus Group PLC
09 September 2003
9 September 2003
Gyrus Group PLC
Operating Profits (PBTA)* Grow 22% in First Half
Gyrus Group PLC ('Gyrus' or 'the Group'), a leading supplier of medical devices
to reduce trauma and complications in surgery, today announces its results for
the six months ended 30 June 2003, showing revenue growth, increased operating
profits and strong cash generation.
Financial Highlights
• Group revenues from continuing activities are £37.2 million, up 6%, on a
constant exchange rate (CER) basis
• Revenues from direct sales activities up 14% on a CER basis
• Gross margins remain strong at 60.3% (2002: 60.2%)
• PBTA* grew 22% to £3.0 million (2002: £2.5million)
• Cash generation from operating activities was £5.1 million in the period
* Profits before tax and goodwill amortisation
Operating Highlights
• Key sectors delivered outstanding revenue growth over prior year on CER
basis:
• Sinus +74% • Urology +33%
• Gynaecology +32% • UK +24%
• Installed base of generators increases to 3,400 from 2,600 at period
end on a world-wide basis
• Expansion of direct sales capability in Europe through acquisition of
Entermed, announced today
• The Board continues to respond to the changing management needs of the
business
• Senior management appointments and changes made at Group and operational
levels
• Sales force and business units reorganisation demonstrate results
Commenting on the results, Brian Steer, Executive Chairman, said today:
'Gyrus has performed well in the first half of the year, benefiting in
particular from the investments we have made in building up our direct sales
infrastructure.
'Looking forward, the Board continues to put in place the elements necessary for
sustained growth and profitability. Gyrus' technology and new product platform
are state-of-the-art. The quality and cost of its products are controlled
through its own manufacturing operations and the Group will continue to focus
its resources on building up its sales and distribution capabilities on a global
basis. With a strengthened management team now in place, the Board remains
confident of further strong growth.'
Enquiries:
Gyrus Group PLC On 9 September 2003
Brian Steer, Executive Chairman Tel: 0207 831 3113
Dr Mark Goble, Group Managing Director Thereafter:
Tom Murphy, Group Finance Director Tel: 01189 219750
Financial Dynamics Tel: 0207 831 3113
Ben Atwell
Interim Statement
Overview
The Group continues to make good progress towards achieving its commercial
objectives as a result of ongoing strategic and organisational initiatives. The
first six months of 2003 showed the impact of these initiatives as the
investment focus of the Group continues to move towards building its direct
business.
• Revenue was £37.2 million for the period, 6% total growth on continuing
activities and on a constant exchange rate basis
• Direct sales, which exclude sales to corporate partners, grew 14% on a
constant exchange rate basis
• Exceptional growth in sinus (74%), gynaecology (32%), urology (33%) and
UK sales (24%)
• Strong market acceptance of product range including Diego
Microdebrider, PK Open Forceps and VAPR 3 Arthroscopy System
• Strong operating profit before goodwill amortisation of £3.8 million
(10.1%) compared to £3.2 million (8.2%) in the same period of 2002
• Increasing cash generation, £5.1 million from operating activities -
net debt reduced to £15.9 million (31 December 2002: £17.9 million)
The Group is tracking in line with its long-term strategic plan to develop a
strong commercial entity from the technology driven company that came to the
market in 1997 led by the founders Colin and Mark Goble. As part of the Group's
ongoing evolution and succession planning, the founders will, over the coming
months, move into advisory roles within a series of management changes which
strengthens the Operations Board.
On 1 October, Roy Davis will relinquish his non-executive role to become Chief
Operating Officer, Simon Shaw will join the Group as Chief Financial Officer and
Chris Smith currently President of Gyrus Medical Inc, will take on global
responsibility for the business divisions as President of Gyrus Group. These
three positions will report to Brian Steer, Executive Chairman. Tom Murphy,
currently Group Finance Director, is returning to the US to take up his new
appointment as President of Gyrus Medical Inc.
The Board believes that these changes will ensure the continued development of
the business in achieving our goal of sustainable growth and optimal
profitability in future years.
Financial Review
Revenues for the six months ended 30 June 2003 were £37.2 million (2002: £39.1
million) and PBTA increased from £2.5 million to £3.0 million. This reflects a
period of operational success and strong earnings growth (22%). Earnings per
share before goodwill and the impact of the deferred tax asset recorded in the
period was 3.7p per share compared to 2.9p per share in the same period of 2002.
The translation effects of a weakened dollar impacted financial results as
compared to the same period in 2002. Without the currency impact, revenue
growth would have been 6% on a constant dollar basis for our ongoing business.
Prior year revenues also included £1.1 million of revenues from the drapes
business divested in November 2002. The average exchange rate for the period was
$1.61/£1.00 as compared to $1.438/£1.00 in the comparable period
Gross margin for the period was 60.3% up slightly from the 60.2% reported at the
interim stage last year. Operating expenses before goodwill amortisation
continue to be well managed at 50.2% of revenues compared to 52.0% in the
comparative period. Investment continues to be made in sales and marketing,
which was 29.3% of revenues in the period. This level was expected as the Group
continues to invest in creating a world-class sales force through initiatives in
sales force expansion, upgrading, training and sales incentive programmes.
Cash and available borrowings at the period end were £14.3 million compared to
£12.4 million at 31 December 2002. The Group experienced a period of strong cash
generation whilst continuing to invest in the generator placement strategy (£1.1
million), research and development (£3.2 million: 8.7% of sales) and the
licensing agreement with auric for RetroX (£0.6 million) in the period. The
Group expects that the cash and available borrowings will be sufficient to meet
its current goals and positive cash generation to continue throughout 2003. Net
debt was £15.9 million at 30 June 2003 compared to £17.9 million at 31 December
2002.
The Group reported a loss before tax of £0.3 million (loss of 0.4p per share)
compared to a loss before tax of £0.8 million (loss of 1.0p per share) in the
first half of 2002. Included in this loss was £3.3 million of goodwill
amortisation.
During the year ended 31 December 2002 FRS 19 came into force, requiring the
recognition of deferred tax assets. With the Group recording its first taxable
profits the Board thought it right to take a very prudent stance because there
was very little evidence then available in the public arena as to how this new
standard was being applied in practice. Consequently only one year's estimated
utilisation of past tax losses was recognised at that time. The Board has now
been advised that it would be appropriate to look further forward and an
additional £4.8 million of deferred tax asset has been recognised in the period;
UK available losses have now been fully recognised and, for the US (where an
annual cap applies), five years estimated utilisation has now been recognised.
The Group still has potential deferred tax assets of £14 million which have not
yet been recognised.
Business Review
Our mission is to provide the surgeon with a portfolio of products in our chosen
market sectors, which will enable a less traumatic surgical procedure through a
combination of faster operative times and enhanced clinical outcomes. These
procedure based product systems will be centred on our energy-based technologies
and driven by a generator that will evolve as a 'workstation' for each surgical
speciality.
In early 2003 we began the process of realigning our management structure and
responsibilities. These changes involved the creation of global business units
within our structure together with the consolidation of our North American sales
forces under one management infrastructure.
The creation of Gyrus North American Sales (GNAS) in March was a significant
step in providing a stable platform and a greater dedication and commitment
among our sales people. Within this organisation the sales force management and
sales support infrastructure was combined under one organisation with the task
of developing the sector specific sales forces in ENT and Abdominal Surgery. The
training and support necessary for these sales people to sell advanced technical
products has been facilitated by the creation of the global business units each
headed by an experienced manager. These managers have the responsibility for
creating global programmes to create clinical and commercial awareness of the
Gyrus portfolio in their respective markets, the marketing plans and the input
to the product development process to meet future market needs.
The Group experienced an acceleration of growth in the second quarter following
this reorganisation and further success can be seen in such areas as the
in-licensing of RetroX in otology, the strong clinical endorsement of PK Open
Forceps and the growth in Sinus and Rhinology.
The performance of each business unit during the first half of 2003 is shown
below. The table excludes the drapes business, which was sold during 2002.
Since the effect of currency change clouds the underlying operational growth of
each business unit; the comparisons are made in the billing currency.
Business Revenues Revenues Underlying Revenues
Unit H1 H1 Growth H2
2003 2002 (Y-O-Y) 2002
Otology $12.2m $12.0m 2% $10.3m
Sinus & Rhinology $6.1m $3.5m 74% $4.5m
Head & Neck $4.9m $6.4m -23% $5.8m
Gynaecology $11.9m $9.0m 32% $10.6m
Urology $1.2m $0.9m 33% $1.1m
General Surgery $0.9m $0.8m 13% $0.9m
Marketing Partners $12.7m $13.0m -2% $11.7m
International Surgical £1.6m £1.4m 14% £1.7m
International ENT £1.8m £2.9m -38% £2.0m
UK Revenues £2.6m £2.1m 24% £2.4m
Otology -This business holds a market leadership position based on its extensive
portfolio of vent tubes and ossicular chain prostheses used to treat middle ear
conditions. Whilst this market is slow growing our differentiated product range
provides a strong franchise with the otologist. The middle ear implant range
continues to grow as a result of the introduction of Nitinol memory shaping
metal alloy, which provides ease of fixation for the surgeon.
The licensing of RetroX presents an opportunity for very significant growth in
the sector. The Transcutaneous Sound Transmission System is a unique approach
to the correction of high frequency hearing loss, with a market opportunity well
in excess of $1 billion. The licence fee of $1 million includes $500,000 of
advance royalty payments. The patient benefits of RetroX in terms of improved
hearing and comfort together with the cosmetic advantages of a concealed device
have gained early acceptance. The opportunity for the ENT surgeon to expand his
practice is clearly a significant driver for the product. This technology
allows the Group to significantly expand its otology franchise as a hearing
healthcare company.
Collaborative development and licensing deals have been secured for biomaterials
used to treat middle ear conditions such as chronic perforation of the eardrum,
expanding the market opportunity in otology by a further $120 million. Products
derived from these collaborations will be introduced over the next two years.
Sinus & Rhinology - The introduction of the Diego Microdebrider in the fourth
quarter of 2002 has accelerated our revenue growth in this market by 74% over
the same period in 2002. Our return to growth in this sector has been enhanced
by the continued growth of Sepragel, which grew 210% over the prior year.
There are now 335 Diego systems installed as compared to 128 at the beginning of
the year and utilisation has remained strong in the period. We will continue to
expand the versatility of Diego by the addition of a tracking capability and
hand controls together with new blades and instruments providing a
state-of-the-art product portfolio in this surgical speciality estimated as a
$106 million market.
Head & Neck - The core technology which we acquired with the purchase of Somnus
continues to provide the basis for the further development of our Head and Neck
surgery initiative.
There are currently 1,749 generators in the field as compared to 1,618 at the
beginning of the year, but their utilisation has been impacted by the
reimbursement issues in sleep apnoea and the positioning of snoring treatment as
a 'patient pay' product. Revenues from the soft palate area have fallen 46% as
compared to first half 2002. The soft palate area now accounts for 19% of the
Somnoplasty revenues as compared to 40% on acquisition in 2001. The Group has
moved a larger portion of its revenue stream to other products, but has not been
able to stem the decline in Somnoplasty revenues because of the palate impact.
We have taken a number of sales and marketing initiatives to address these
issues. It is anticipated that 'Fasterplasty' introduced in May will revitalise
the surgeons' interest in the product by reducing procedure time from several
minutes to 60-90 seconds. In addition, we have made further investment in
expanding the workstation with new products anticipated early in 2004. The
expectation is that this combination of actions will stabilise the business as
we go into 2004.
Gynaecology - The strong revenue growth in the market continues with a 32%
increase against the same period in 2002. This growth is clearly enhanced by
the continued acceptance of PK technology and recognition that it is the
modality of choice in both the sealing and cutting of tissues and blood vessels
during laparoscopic hysterectomy. At 30 June, there were 614 generators in use
in the US as compared to 467 at the beginning of the period. Our position in
this market has been further strengthened by the acceptance of PK Open Forceps,
which was fully introduced in the second quarter. This product with its broader
applications in gynaecology, urology and general surgery is demonstrating clear
competitive advantages by significantly shortening operating times in a market
estimated at $200 million.
Urology - Although the current revenue base is small, growth is strong at 33%
year on year. We have benefited from the utility of the PK System across a wide
range of procedures, which enable the generators to become a surgical
workstation. At 30 June there were 180 generators in the field in the US as
compared to 151 at the beginning of the period. We today announce that the
advanced urology system, 'Super Pulse', was introduced in August to selected
centres prior to full roll out during September. The introduction of 'Super
Pulse' offers the surgeon and patient all of the advantages of PK technology
without the need for the surgeon to modify his operating techniques. Initial
results have been outstanding with shorter operating times, less bleeding and
shorter recovery times. We believe these changes result in a state-of-the-art
product with significant competitive advantages.
General Surgery -With the broader PK product portfolio and the introduction of
PK Open Forceps, our initial experiences in the procedures of bariatric surgery,
nissen fundoplication and colon resection have been excellent. Our entry into
this market through selected centres of excellence in the US has resulted in
what is so far a small number of conversions of major accounts to an overall
adoption of the PK system throughout their operating room suites. There are 2.9
million general surgical procedures performed each year in the US, the largest
single surgical speciality, and as such we believe that the general surgery
market in both minimally invasive and open surgery procedures offers a
significant opportunity for Gyrus products.
OEM Partners - While experiencing a slight decline of 2% in revenues during the
first half, the Group believes that this revenue performance is a function of
the historical swings that exists as an OEM supplier and does not relate to end
market sales levels which according to our partners continue to grow.
Historically there is a lag between end user sales and the increase in purchase
orders to meet this demand. The Group has strong long-term relationship with its
OEM customers and continues to believe that these revenue streams will grow. As
an example, studies demonstrating that the VAPR 3 Arthroscopy System recently
introduced by Mitek, removes tissues faster than its competitor has resulted in
a 14% increase in sales to Mitek during the second quarter.
International -Whilst the UK business showed good growth at 24% period on period
and the surgical business continued to grow, the first half was impacted by our
ENT business. Stocking orders from distributors during the transfer of the
business from Smith & Nephew early in 2002 were not repeated in 2003. Sales to
customers by distributors however continue to grow and repeat orders are
beginning to gain pace.
Experience has identified a clear association between dedicated sales effort and
product acceptance; this is noted both in the UK where the sales force is direct
and in the US where individual sales people devote a major part of their time to
Gyrus.
To accelerate our growth, particularly in Europe, the acquisition of Entermed
was completed on 4 September 2003 for up to €2.1 million in cash; an up front
payment of €500,000, €1 million over the 12 months following completion and
€600,000 as a performance earn-out over two years. Entermed has been our
distributor in Benelux similar to the Skymed model in the UK, which was acquired
in 2000. Based in Holland, Entermed has sales in excess of €5 million and direct
sales activities in both Belgium and Holland. A very experienced European
Manager with a strong background in electrosurgery products will head Entermed,
which will become the headquarters of our European activities.
Management Structure
The knowledge, dedication and experience of our staff are critical factors to
our success. The breadth and quality of our management team is driving the
growth of a broad portfolio of products in selected market sectors on a global
basis. The company has the depth and critical mass in management terms to enable
effective succession planning at all levels, and is now beyond the stage of
vulnerability to individual management change.
As Gyrus moves from the technology phase into the next stage of its development,
where it seeks to exploit fully the various commercial opportunities available
to it, the Board has approved a number of changes in senior management functions
and operations. Both Mark and Colin Goble, Gyrus' founders, have indicated that
they believe they can make a greater contribution to the Company as independent
consultants focussing on the development of advanced tissue management systems.
Effective October 1, 2003, Mark Goble will step down as Group Managing Director
to become Director of Strategic Development in which capacity he will develop a
strategic technology road map to provide the basis of new product development
within our 3-5 year planning horizon. Colin Goble will continue to develop
products for the Group through the concept phase as a consultant to the Group.
The Board would like to acknowledge the very significant contributions made by
Mark and Colin Goble since they founded the company in 1989. It was their
insight, knowledge, belief in the technology and their perseverance that has
established Gyrus as a leader in its field. They will both continue to play a
major part in the continued development of 'next generation' products as they
transition towards roles as independent advisors to the Operations Board.
Roy Davis will join us as Chief Operating Officer, having had broad experience
at senior levels in operational and general management roles of high technology
enterprises. He also has a wealth of experience drawn from his time as Vice
President & Global Head of Operations Management with Arthur D Little. His six
years experience as a non-executive Director of Group brings an intimate
knowledge of our business. Jon Moore, Managing Director of Gyrus Medical Ltd
will report to Roy Davis.
Simon Shaw is joining as Chief Financial Officer. He has broad based financial
and management experience gained as Chief Operating Officer of Profile
Therapeutics plc together with experience in fund raising, mergers and
acquisitions and an understanding of the changing regulatory requirements
affecting public companies.
Tom Murphy, who has served as Group Finance Director since 2001, is returning to
the US to take up his new appointment as President of Gyrus Medical Inc. During
his tenure as Group Finance Director he has made significant contributions to
our success. He has played a key role in developing Gyrus through the
acquisition and integration of a number of businesses and the day-to-day
financial management of the Group.
Chris Smith has been appointed to the newly created position of President of the
Gyrus Group. Chris Smith joined the company in 2001 as President of Gyrus
Medical Inc and recently took responsibility for our North American Sales
Forces. In his new role he will manage the direct businesses on a global basis
together with sales and distribution. Reporting to Chris Smith will be Jerry
Dowdy, President of Gyrus ENT, Tom Murphy, President of Gyrus Medical Inc., and
David Ball, Managing Director of Gyrus International Ltd.
The Group announced in May 2003 changes to its Group PLC Board with the addition
of Professor Charles Cummings and Keith Krzywicki to create a strong
non-executive Board. At the same time, Michael Garner was appointed Deputy
Chairman, and an Operations Board comprising the Group's senior executives was
established. We believe these changes have effectively improved both the
strategic direction and effective management of the business.
Following these Board and operational management changes, the PLC Board and
Operations Board structure will be as follows.
Gyrus Group PLC Board
Brian Steer Executive Chairman
Michael Garner Non-Executive Director & Deputy Chairman & Chairman Audit Committee
Charles Goodson-Wickes Non-Executive Director & Chairman Remuneration Committee
Charles Cummings Non-Executive Director
Keith Krzywicki Non-Executive Director
Mark Goble Executive Director
Tom Murphy Finance Director will step down 1 January 2004
Simon Shaw Chief Financial Officer, effective 1 January 2004 becomes Director
The Operations Board will consist of the Group management team, the Presidents
of the operating divisions and Mark and Colin Goble acting as consultants to the
Group.
The Board is confident that the implementation of these changes reinforces the
committed strategy to growth and profitability.
Research and Development
The Group's investment in R&D for the first half was £3.2 million (8.7% of
sales), compared to £4.4 million (11.4% of sales) in the same period of 2002.
The Group has seen the level of investment fall as its focus has shifted from
the costly development of platforms towards the product and procedural
development initiatives that can impact revenues now that there is a larger
installed base of generators. Key developments in the period have included; the
completion of PK Open Forceps, the launch of 'SuperPulse' and 'Fasterplasty'
platforms to address the urology and head and neck surgery markets, the
expanding of the Diego product line and the launch of the VAPR 3 Arthroscopy
system.
Throughout the remainder of the year, R&D activities will focus on incremental
expansions to the new product lines and the development of key products in
General and Head and Neck surgery for introduction in 2004. Longer-term
initiatives with collaborative partners in the field of surgical biomaterials
will continue.
As we reported earlier in the year, pre-clinical studies on our PlasmaKinetic II
technology for cosmetic surgery demonstrated equivalence to carbon dioxide
lasers but with the potential for achieving a more significant clinical result
with reduced healing time. FDA clearance for the system in the treatment of
facial blemishes has already been received and trials to substantiate claims of
wrinkle reduction are now underway at three sites in the US and one in the UK.
Early data from these trials is expected in Q4 this year with follow-up
completion at all sites in Q1 2004. With our development strategy increasingly
focused on the hospital surgeon, the Board now considers that the appropriate
route of commercialisation of this technology is through a licensing partner or
spinout once the trials are satisfactorily completed.
Outlook
The Board continues to put in place the elements essential to sustained
performance. Our technology and new product platform is both state of the art
and highly competitive. We continue to focus our resources on building our
sales and distribution capability on a global basis, and we control both the
quality and cost of our products through our own manufacturing operations. We
also continue to strengthen our management team and focus on our customers.
In balancing growth and profitability in the short and long-term we are
dependent on the excellence of the competitive strength of our global sales
structure, our technologies and maintaining our focus on our selective markets
and customers. The outlook is exciting, we believe we are well positioned to
take advantage of the opportunities and face the inevitable challenges.
The strategies and changes implemented have resulted in strong generation of
cash, improvement in profitability and advances in the growth of our focused
business units. Firm control of spending has resulted in significant cost
savings and leverage of our expense base.
The growth in the direct business of 14% on a CER basis is encouraging since it
does not reflect the full impact of the new product introductions - PK Open
Forceps, SuperPulse, RetroX and the Diego System - which came to the market in
the summer period. These products coupled with expanding our direct sales
activities in Europe contribute to the growth opportunities for the second half.
We anticipate growth in the global direct business in excess of 25% in the
second half as these products impact following the summer slow-down in elective
surgery. Whilst this figure in 2003 is tempered by the slower growing elements
of our portfolio, our optimal revenue growth target for the Group in the high
teens remains in place for 2004.
Gyrus Group PLC
Consolidated profit and loss accounts
Note Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£000 £000 £000
Turnover - continuing operations 37,249 38,011 73,252
Business operation disposed of 0 1,068 1,756
_____ _____ _____
Total turnover 2 37,249 39,079 75,008
Cost of sales (14,777) (15,536) (29,268)
_____ _____ _____
Gross profit 22,472 23,543 45,740
Selling and distribution expenses (10,932) (10,970) (21,003)
Research and development expenses (3,245) (4,436) (7,899)
General and administrative expenses
- ordinary (4,525) (4,916) (8,538)
- goodwill amortisation (3,316) (3,316) (6,632)
_____ _____ _____
Total general and administrative (7,841) (8,232) (15,170)
expenses
Operating profit / (loss)
profit before goodwill amortisation 3,770 3,221 8,300
goodwill amortisation (3,316) (3,316) (6,632)
_____ _____ _____
Operating profit / (loss) 454 (95) 1,668
Profit on sale of an operation 0 0 1,983
_____ _____ _____
Profit / (loss) on ordinary activities 454 (95) 3,651
before interest
Interest, net (757) (752) (1,533)
_____ _____ _____
(Loss) / profit on ordinary activities (303) (847) 2,118
before taxation
Tax 4 4,829 (30) (83)
_____
Profit / (loss) on ordinary activities 4,526 (877) 2,035
after taxation
_____ _____ _____
Profit / (loss) per ordinary share 3
Basic 5.4 p (1.1) p 2.5 p
_____ _____ _____
Diluted 5.4 p (1.1) p 2.4 p
_____ _____ _____
Excluding exceptional items and 9.4 p 2.9 p 8.1 p
goodwill amortisation
_____ _____ _____
Excluding exceptional items, goodwill 3.7 p 2.9 p 7.7 p
amortisation and deferred tax credit to
profit and loss account _____ _____ _____
Gyrus Group PLC
Consolidated statement of total recognised gains and losses
Six months Six months 12 months
Ended Ended ended
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£000 £000 £000
Profit / (loss) on ordinary activities after 4,526 (877) 2,035
taxation
Currency translation differences arising on (464) (1,371) (2,795)
foreign currency net investments
Share related awards 9 56 62
_____ _____ _____
Total recognised gains and losses relating to 4,071 (2,192) (698)
this period
Prior year adjustment 0 0 1,200
_____ _____ _____
Total gains and losses recognised since last 4,071 (2,192) 502
annual report
_____ _____ _____
Gyrus Group PLC
Consolidated balance sheets
Note As at As at As at
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£000 £000 £000
Fixed assets
Goodwill and intangibles 117,597 123,898 120,528
Tangible assets 13,359 14,669 14,134
_____ _____ _____
130,956 138,567 134,662
Current assets
Stocks 18,006 15,434 18,767
_____ _____ _____
Debtors - due within one year 14,589 13,963 13,369
Deferred tax asset 4 6,326 1,200 1,526
_____ _____ _____
Debtors 20,915 15,163 14,895
Cash at bank and on hand 2,396 1,605 3,021
_____ _____ _____
41,317 32,202 36,683
Creditors: Amounts falling due within (10,268) (11,478) (10,732)
one year
_____ _____ _____
Net current assets (31,049) 20,724 25,951
Total assets less current liabilities 162,005 159,291 160,613
Creditors: Amounts falling due after (18,048) (20,991) (20,825)
more than one year
_____ _____ _____
Net assets 143,957 138,300 139,788
_____ _____ _____
Capital and reserves
Share capital and premium 154,111 154,019 154,013
Merger reserve 3,860 3,860 3,860
Profit and loss account (14,014) (19,579) (18,085)
_____ _____ _____
Equity shareholders' funds 143,957 138,300 139,788
_____ _____ _____
The opening net assets at 1 January 2002 include a prior year adjustment for the
adoption of Financial Reporting Standard 19: Deferred Taxation. The cumulative
effect on the opening reserves at 1 January 2002 was £1.2million as shown in the
reconciliation of movement in shareholders' funds.
Reconciliation of movement in
shareholders' funds As at As at As at
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£000 £000 £000
Net assets at beginning of period 139,788 139,204 139,204
Prior year adjustment 0 1,200 1,200
_____ _____ _____
As restated at beginning of period 139,788 140,404 140,404
Profit / (loss) for the financial period 4,526 (877) 2,035
attributable to equity shareholders
New issued share capital issued (net of 98 88 82
expenses)
Share related awards 9 56 62
Loss on foreign currency translation (464) (1,371) (2,795)
_____ _____ _____
Net Assets at end of period 143,957 138,300 139,788
_____ _____ _____
Gyrus Group PLC
Consolidated cash flow statements
Six months Six months 12 months
Ended Ended ended
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£000 £000 £000
Net cash inflow from operating activities 5,146 2,348 3,932
Returns on investment and servicing of
finance
Interest received 30 22 30
Interest paid (937) (749) (1,365)
Interest element in finance lease rentals (17) (25) (52)
_____ _____ _____
Net cash flows for returns on investments (924) (752) (1,387)
and servicing of finance
Taxation (297) (30) (83)
_____ _____ _____
Capital expenditure and financial
investments
Purchase of tangible fixed assets (1,674) (4,825) (7,074)
Purchase of intangible fixed assets (305) 0 0
Proceeds of sale of tangible fixed assets 0 0 35
of business operation sold
_____ _____ _____
(1,979) (4,825) (7,039)
Disposals
Net cash from sale of business operation 0 0 2,700
_____ _____ _____
0 0 2,700
_____ _____ _____
Cash inflow / (outflow) before financing 1,946 (3,259) (1,877)
_____ _____ _____
Financing
Capital element of finance lease rental (89) (73) (161)
payments
(Decrease) / increase in bank loans (2,452) 2,595 2,595
Proceeds of issue of share capital net of 98 88 82
costs
_____ _____ _____
Net cash (outflow) / inflow from financing (2,443) 2,610 2,516
_____ _____ _____
(Decrease) / increase in cash in the period (497) (649) 639
_____ _____ _____
Gyrus Group PLC
Reconciliation of net cash flow to movements in net funds
Six months Six months 12 months
Ended Ended ended
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£000 £000 £000
(Decrease) / increase in cash in the period (497) (649) 639
Cash outflow / (inflow) from decrease / 2,541 (2,522) (2,434)
(increase) in debt and lease financing
_____ _____ _____
2,044 (3,171) (1,795)
Inception of new finance leases 0 (47) (42)
_____ _____ _____
Change in net debt 2,044 (3,218) (1,837)
Net debt at beginning of period (17,924) (16,087) (16,087)
_____ _____ _____
Net debt at the end of period (15,880) (19,305) (17,924)
_____ _____ _____
Analysis of net debt As at As at As at
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£000 £000 £000
Cash at bank and in hand (net of overdraft) 2,396 1,605 2,893
Finance leases (228) (410) (317)
Debt due after one year (18,048) (20,500) (20,500)
_____ _____ _____
Net debt at the end of period (15,880) (19,305) (17,924)
_____ _____ _____
Reconciliation of operating profit / (loss)
to cash inflow from operating activities
Six months Six months 12 months
Ended Ended ended
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£000 £000 £000
Operating profit / (loss) 454 (95) 1,668
Goodwill amortisation 3,316 3,316 6,632
Licenses amortisation 6 42 80
Depreciation charges 2,194 1,780 3,294
Loss on disposal of fixed assets 131 5 112
Decrease / (increase) in stocks 1,011 (2,431) (6,551)
Increase in debtors (2,019) (408) (58)
(Decrease) / increase in creditors 44 83 (1,307)
Share related awards 9 56 62
_____ _____ _____
5,146 2,348 3,932
_____ _____ _____
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 2002.
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 2002 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
2003 2002 2002
(unaudited) (unaudited) (audited)
£000 £000 £000
Turnover by destination
North America 29,500 30,630 58,450
United Kingdom and Europe 6,304 5,968 11,707
Rest of World 1,445 2,481 4,851
_____ _____ _____
37,249 39,079 75,008
_____ _____ _____
By Origin
North America 25,416 29,091 61,389
United Kingdom 11,833 9,988 13,619
_____ _____ _____
37,249 39,079 75,008
_____ _____ _____
3. Profit / (Loss) per share
The profit / (loss) per share after tax is based on a profit attributable to the
ordinary shareholders of £4,526,000 for the six months ended 30 June 2003, a
loss of £877,000 for the six months ended 30 June 2002, and a profit of
£2,035,000 for the 12 months ending 31 December 2002, and on 83,200,595 ordinary
shares for the six months ended 30 June 2003, 82,971,002 for the six months
ended 30 June 2002 and 82,987,572 for the twelve months ended 31 December 2002,
being the weighted average number of shares during the period. The diluted
profit / (loss) per share is based on 83,367,788 ordinary shares for the six
months ending 30 June 2003, 82,971,002 for the six months ending 30 June 2002
and 83,524,513 for the twelve months ending 31 December 2002.
Profit / (loss) per ordinary share excluding exceptional items and goodwill
amortisation and profit / (loss) per ordinary share excluding exceptional items,
goodwill amortisation and deferred tax credit to the profit and loss account is
calculated based on the following:
Six months Six months 12 months
Ended Ended ended
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£000 £000 £000
Profit / (loss) for period 4,526 (877) 2,035
Goodwill amortisation 3,316 3,316 6,632
Exceptional items 0 0 (1,983)
_____ _____ _____
Profit / (loss) for the period excluding 7,842 2,439 6,684
exceptional items and goodwill amortisation
_____ _____ _____
Deferred tax credit to the profit and loss (4,800) 0 (326)
account
_____ _____ _____
Profit / (loss) for the period excluding 3,042 2,439 6,358
exceptional items, goodwill amortisation and
deferred tax credit to the profit and loss _____ _____ _____
account
4. Taxation and Deferred Taxation
The tax credit / (charge) is made up as follows:
30 June 30 June 31 December
2003 2002 2002
£000 £000 £000
US taxes (100) (30) (409)
UK corporation tax 129 0 0
Net origination/reversal of timing 4,800 0 326
differences
_____ _____ _____
Total 4,829 (30) (83)
_____ _____ _____
The movement in net deferred tax assets is:
£000
Net deferred tax asset recognised at 30 June 2002 1,200
Credited to the profit and loss in the period 326
_____
Net deferred tax asset recognised at 31 December 2002 1,526
Credited to the profit and loss account in the period 4,800
_____
Net deferred tax asset recognised at 30 June 2003 6,326
_____
The £4.8m credit in respect of deferred tax reflects an increase in the
estimated recoverability of past losses, as a result of the Group's longer, and
ongoing, profitable trading history. No provision is now held against
accumulated trading losses in the UK, whilst in the US a provision is maintained
for past losses that are not expected to be utilised within five trading years.
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 9 September
2003.
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.
This information is provided by RNS
The company news service from the London Stock Exchange
