14 September 2022

 

 

Advanced Medical Solutions Group plc

("AMS" or the "Group")

 

Interim results for the six months ended 30 June 2022

 

 

Winsford, UK, 14 September 2022: Advanced Medical Solutions Group plc (AIM: AMS), the world-leading specialist in tissue-healing technologies, today announces its unaudited interim results for the six months ended 30 June 2022 (the "Period").

 

 

Financial Highlights:

 

 

	H1 2022	H1 2021	Reported change	Change at constant currency¹
Revenue (£ million)	58.3	50.2	16%	16%
Adjusted Measures
Adjusted² profit before tax (£ million)	13.6	12.4	10%
Adjusted² profit before tax (%)	23.4%	24.6%	-1.2pp
Adjusted² diluted earnings per share (p)	5.01	4.64	8%
Reported Measures
Profit before tax (£ million)	12.3	11.2	10%
Profit before tax (%)	21.2%	22.3%	-1.1pp
Diluted earnings per share (p)	4.42	4.10	8%
Net operating cash flow (£ million)	12.5	13.7	-8%
Net cash3 (£ million)	75.3	61.1	23%
Interim dividend per share (p)	0.64p	0.58p	+10%

 

 

 

Business Highlights (including post period end):

 

The encouraging start to trading in 2022 continued despite having to manage the increasing macro-economic challenges of supply chain and inflation. AMS is pleased to report strong growth in revenue and profitability as well as significant regulatory and clinical progress in the Period whilst continuing to invest in developing its next-generation products.

 

Financial

 

·      Revenue increased by 16% to £58.3 million (2021 H1: £50.2 million) predominately driven by commercial progress and increased pricing to recover inflationary cost increases

 

·      Gross margins increased to 58.9% (2021 H1: 55.9%) as a result of increased volumes  

 

·      Total investment in R&D increased to £5.4 million (2021 H1: £4.4 million), representing 9.3% (2021 H1: 8.7%) of revenue, as progress was made on key projects across the Group

 

·      The Group reports a 10% increase in adjusted profit before tax to £13.6 million (2021 H1: £12.4 million) despite increased investment in R&D. Adjusted profit before tax margin of 23.4% remains in line with that generated for the full year 2021

 

·      Net cash increased to £75.3 million (FY 2021: £73.0 million)driven by strong trading and operational cash flow, partly offset by the acquisition of AFS Surgical

 

·      Surgical Business Unit revenues increased to £35.9 million (2021 H1: £30.4 million), an increase of 18% at constant currency

 

·      Woundcare Business Unit revenues increased to £22.4 million (2021 H1: £19.8 million), an increase of 11% at constant currency

 

·      Given the Group's strong net cash position and reflecting the Board's continued confidence in the future, the interim dividend is increased to 0.64p per share (2021 H1: 0.58p)

 

Operational

 

·      As announced in May 2022, the LiquiBand^® XL 510(k) approval has been received and initial orders have been fulfilled in Q3. This approval provides access to a new $60m, long wound sealant market in the US and strengthens our market share across the entire LiquiBand^® product portfolio

 

·      The acquisition of AFS Surgical was completed in the Period and integration is going well. The Board remains excited about the commercial synergies that this acquisition provides. Financial performance continues to be in line with initial expectations

 

·      As previously reported, recruitment for the US clinical trial of LiquiBandFix8^® has now been completed and the Premarket Approval (PMA) filing remains on track for H2 2022 once all the patients have completed their 12-month follow up

 

·    The Seal-G^® and Seal-G^® MIST human clinical trials have continued and approximately half of the total of 160 patient procedures have now been completed. Patient recruitment has been slower than initially planned but is now ramping up. With nine sites now actively recruiting patients, procedures are expected to be completed in the first half of 2023

 

Outlook

 

AMS has delivered strong revenue growth in the first half driven by solid underlying performance, management activities to protect margin and the continuing recovery in overseas markets. Trading has continued to progress well in Q3 and AMS remains confident that momentum will continue throughout the second half with the Company on track to meet expectations for the full year.

Commenting on the interim results, Chris Meredith, Chief Executive Officer of AMS, said: "I am pleased to report AMS's continued robust financial performance in the first half with strong revenue, profitability and cash generation. We have also seen significant regulatory and clinical progress in meeting enhanced regulatory requirements and developing the next generation of innovative products, including the launch of LiquiBand^® XL, that we expect to drive further growth over the coming years. This progress has been achieved against a backdrop of challenging macro-economic conditions which is testament to the quality and dedication of the AMS teams involved. The Group's ongoing, robust financial health makes it well placed to deliver organic and acquisitive growth; reflecting this confidence, the Board has decided to increase the dividend for the first half."

- End -

 

Notes

1     Constant currency adjusts for the effect of currency movements by re-translating the current period's performance at the previous period's exchange rates

2     Adjusted profit before tax is shown before amortisation of acquired intangible assets which, in 2022 H1, were £1.6 million (2021 H1: £1.6 million) and a £0.3 million credit for a change in long-term liabilities (2021 H1: credit of £0.4 million) as defined in the financial review. Adjusted operating margin is shown before amortisation of acquired intangible assets.

3     Net cash in 2022 H1 was £75.3 million (2021 H1: £61.1 million) and consists of cash and cash equivalents of £75.3 million (2021 H1: £61.1 million).

 

 

 

For further information, please contact:

 

Advanced Medical Solutions Group plc	Tel: +44 (0) 1606 545508
Chris Meredith, Chief Executive Officer Eddie Johnson, Chief Financial Officer Michael King, Investor Relations Manager
Consilium Strategic Communications	Tel: +44 (0) 20 3709 5700
Mary-Jane Elliott / Matthew Neal / Lucy Featherstone
Investec Bank plc (NOMAD) & Broker	Tel: +44 (0) 20 7597 5970
Daniel Adams / Gary Clarence
HSBC Bank PLC (Broker)	Tel: +44 (0) 20 7991 8888
Sam McLennan / Joe Weaving / Stephanie Cornish

 

 

About Advanced Medical Solutions Group plc

 

AMS is a world-leading independent developer and manufacturer of innovative tissue-healing technology, focused on quality outcomes for patients and value for payers. AMS has a wide range of surgical products including tissue adhesives, sutures, haemostats, internal fixation devices and internal sealants, which it markets under its brands LiquiBand^®, RESORBA^®, LiquiBandFix8^® and Seal-G^®. AMS also supplies wound care dressings such as silver alginates, alginates and foams through its ActivHeal^® brand as well as under white label. Since 2019, the Group has made four acquisitions: Sealantis, an Israeli medical device company with a patent-protected sealant technology platform; Biomatlante, an established French developer and manufacturer of innovative surgical biomaterial technologies, Raleigh, a UK leading coater and converter of materials predominately for woundcare and bio-diagnostics products and AFS Medical, a specialist distributor of minimally invasive surgical devices based in Austria.

AMS's products, manufactured in the UK, Germany, France, the Netherlands, the Czech Republic and Israel, are sold globally via a network of multinational or regional partners and distributors, as well as via AMS's own direct sales forces in the UK, Germany, Austria, the Czech Republic and Russia. The Group has R&D innovation hubs in the UK, Germany, France and Israel. Established in 1991, the Group has more than 700 employees. For more information, please see www.admedsol.com.

 

Chief Executive's Review

 

Surgical Business Unit

 

The Surgical Business Unit includes tissue adhesives, sutures, biosurgical devices and internal fixation devices marketed under the AMS brands LiquiBand^®, RESORBA^® and LiquiBandFix8^®.

 

Significant revenue growth in the Surgical Business Unit was driven by commercial progress, increased pricing and ongoing stock building by some partners. Revenue increased by 18% in the Period to £35.9 million (2021 H1: £30.4 million) on a reported and constant currency basis.

 

Overall elective surgery volumes in our key markets continue to be restricted by hospital capacity and remain below pre-pandemic norms and as a result, the backlog of patients awaiting elective surgery is at record levels.

 

Surgical Business Unit	2022 H1 £ million	2021 H1 £ million	Reported Growth	Growth at constant currency
Advanced Closure	17.9	15.2	18%	15%
Internal Fixation and Sealants	1.6	1.2	37%	39%
Traditional Closure	8.0	7.3	10%	12%
Biosurgical Devices	7.7	6.7	15%	18%
Other Distributed Products	0.7	-	-	-
TOTAL	35.9	30.4	18%	18%

 

Advanced Closure

LiquiBand^® is a range of topical skin adhesives, incorporating medical grade cyanoacrylate in combination with purpose-built applicators. These products are used to close and protect a broad variety of surgical and traumatic wounds.

 

Advanced Closure	2022 H1 £ million	2021 H1 £ million	Reported Growth	Growth at constant currency
Americas	12.0	10.4	16%	11%
UK/Germany	3.4	2.8	22%	23%
Rest of World	2.5	2.0	25%	24%
TOTAL	17.9	15.2	18%	15%

 

Revenues increased to £17.9 million (2021 H1: £15.2 million) representing growth of 18% on a reported basis and 15% on a constant currency basis.

 

US LiquiBand^® growth was strong as LiquiBand^® Rapid continued to make good progress in the market. As previously reported, there has been a level of stock building by our partners as they recover from the COVID-19 pandemic, which continued and was completed in the Period.

 

LiquiBand^® XL is now being sold in additional European territories following its launch in the United Kingdom in late 2021 and initial sales have also been made into Australia and Japan.

 

The 510(k) for LiquiBand^® XL was received in the Period and initial orders to the US are being fulfilled in Q3 2022. This approval provides access to a new $60 million market and unlocks further growth potential in the LiquiBand^® business with all partners.

 

Internal Fixation and Sealants

LiquiBandFix8^® is used to fix hernia meshes placed inside the body with accurately delivered individual drops of cyanoacrylate adhesive, instead of traditional tacks and staples. Revenues increased by 37% on a reported basis to £1.6 million (2021 H1: £1.2 million) and 39% on a constant currency basis due to commercial progress, increasing volumes of hernia surgery and, to a lesser extent, the acquisition of AFS which increases the Group's end sales of the product. Encouraging growth has been seen in the UK following recommendation from the National Institute for Clinical Excellence (NICE) to consider the use of cyanoacrylate adhesives in place of invasive tackers.

 

The acquisition of AFS, who are specialist distributors of LiquiBandFix8^®, will strengthen our ability to further penetrate into existing markets and will complement our existing sales expertise.

 

The US clinical trial for LiquiBandFix8^® continues to progress well with completed patient procedure numbers on track to submit the clinical module of the Premarket Approval (PMA) filing in the second half of 2022, after the 12-month patient follow-up. AMS continues to be encouraged about the long-term prospects for the LiquiBandFix8^® portfolio with entry into the US being a significant milestone for the Group.

 

In the Period, the clinical trials for both Seal-G^® MIST (laparoscopic surgery) and Seal-G^® (open surgery) progressed with nine sites now being used in the trial and about half of the 160 procedures now complete. Recruitment into the trial has been slower than initially expected but is ramping up and completion is now anticipated in H1 2023. We continue to develop our relationships with Key Opinion Leaders and potential partners and remain positive about the opportunity that this product presents to answer a high unmet patient need for an effective GI sealant. Follow-on pivotal clinical trial design is now underway, with a view to starting in 2023.

 

Traditional Closure

RESORBA^® branded Absorbable and Non-absorbable Suture ranges are used in general surgery and a wide range of surgical specialties including dental and ophthalmic surgery. Revenue increased by 10% to £8.0 million and by 12% at constant currency (2021 H1: £7.3 million) with significant growth in sales of dental sutures into the US.

 

Biosurgical Devices    

The Biosurgical Devices category comprises antibiotic-loaded collagen sponges, collagen membranes and cones, oxidised cellulose, synthetic bone substitutes and bio-absorbable screws. Revenue increased by 15% to £7.7 million (2021 H1: £6.7 million) and by 18% at constant currency driven by demand for collagens both with and without antibiotics.

 

The Group is working towards its first collagen approval in the US with a 510(k) submission expected in H1 2023 for a dental application to support haemostasis and healing following tooth extraction.

 

Sales of our RESORBA^® branded bone substitutes range in Germany, the Czech Republic and elsewhere continued to grow since launching in 2020.

 

The Group intends to launch into the US Bone Substitutes market in the next 12 months via an Independent Rep model. This will initially incorporate a number of existing Biomatlante products and in time is expected to be supplemented by adding our more innovative Freeze-Dried Bone Substitute range that requires more development and regulatory work before it can be commercialised.

 

Other Distributed Products      

The Other Distributed category comprises products distributed by AFS, including minimally invasive access ports and laparoscopic instruments, following its acquisition in the Period. This category excludes sales of LiquiBandFix8^® which are recorded within the Internal Fixation and Sealants category. Since acquisition trading has been in line with expectations.

 

Plymouth facility expansion

The construction phase of the Plymouth facility expansion started in the Period and the two-year project remains on track. The extension will significantly increase the manufacturing capacity for Seal-G^®, Fix8^® and LiquiBand^® as well as provide more R&D laboratory space. 

 

 

Woundcare Business Unit

The Woundcare Business Unit is comprised of the Group's multi-product portfolio of advanced woundcare dressings sold under its partners' brands and the ActivHeal^® label, plus a portfolio of specialist medical bulk materials and multi-layer woundcare products.

The Woundcare Business Unit delivered growth due to higher ordering from OEM partners, growth in increased ActivHeal^® sales overseas and royalties as well as increased pricing to recover inflationary cost increases. Revenue increased by 13% in the Period to £22.4 million (2021 H1: £19.8 million) and by 11% on a constant currency basis.

Woundcare Business Unit	2022 H1 £ million	2021 H1 £ million	Reported Growth	Growth at constant currency
Infection Management	7.2	6.7	6%	4%
Exudate Management	11.1	10.0	11%	11%
Other Woundcare	4.1	3.1	32%	27%
TOTAL	22.4	19.8	13%	11%

 

 

Infection Management

The infection management category comprises advanced woundcare dressings that incorporate antimicrobials such as Silver and Polyhexamethylene Biguanide (PHMB). Revenue increased by 6% on a reported basis and by 4% on a constant currency basis to £7.2 million (2021 H1: £6.7 million) due to sales growth with a number of OEM partners and ActivHeal^® growth in the Gulf States. Sales of PHMB were adversely impacted, however, due to a raw material supply issue which has since been resolved in the second half of the year.

 

Following the receipt of an enhanced 510(k) approval for our Silver High Performance Dressing incorporating an antimicrobial indication in the prior year, we have continued to penetrate both the US and the Middle East antimicrobial gelling fibre markets with this patent-protected technology.

 

The Group's CE marked Silicone PHMB foam range, previously sold at low levels into the MEA region, was launched into the UK and a number of other European countries in the Period. US and APAC launches are expected to follow in 2023.

 

AMS submitted a 510(k) application for its high gelling antimicrobial product, in the Period. We have received, and are working through, FDA questions and anticipate approval at around the end of 2022 with commercial launch now expected in 2023.

 

AMS continues to invest in its R&D pipeline to develop the next generation of advanced woundcare products and our reputation for innovative solutions and expertise means we are regularly approached by partners seeking to collaborate with AMS.

 

Exudate Management

Exudate management comprises advanced woundcare dressings and gels which do not incorporate any antimicrobial elements. Revenue increased by 11% on a reported and constant currency basis to £11.1 million (2021 H1: £10.0 million) due to increased orders from OEM partners and ActivHeal^® growth driven by a tender win in the Republic of Ireland.

 

Following the acquisition of Raleigh, the AMS and Raleigh woundcare teams have worked closely together to develop next-generation products and evaluate commercial opportunities for Raleigh products. Progress has also been made with the in-sourcing of elements of the woundcare manufacturing process which commenced in the first half of 2022, albeit at lower levels than planned due to supply chain challenges.

 

AMS has continued to appoint new ActivHeal^® distribution partners in markets where its key partners have no or low presence but the demand for a high quality, cost effective woundcare dressing range still exists. Several new contracts have been signed in the first half of the year, expanding the Group's branded distribution network, with launches planned in the second half of the year and into 2023 upon receipt of market registrations.

 

Having gained regulatory approvals for its Mechanical Debridement product in 2021, AMS is currently in discussions with a number of potential commercial partners with launch expected in 2023.

 

AMS has applied its iosurgical collagen technology into developing a tissue scaffold designed to treat hard to heal and stalled wounds such as diabetic foot ulcers and venous leg ulcers. A 510(k) submission was made in the Period and the Group continues to evaluate the optimal commercial strategy.

 

AMS continues to develop a customer-specific negative pressure dressing and expects to record initial sales in the second half of 2022 as our partner continues with its 510(k) process. In addition, we expect to start work on the partner's next generation device in the near future. The Group sees considerable medium-term potential in the negative pressure wound treatment space.

 

As part of the Medical Devices Regulation (MDR) transition we have been able to add a number of claims to existing products during the Period including an extended wear and tear claim for Silicone Wound Contact Layer as well as a claim to use under negative pressure wound therapy and bony prominences. A pressure injury prevention claim has also been added for the Silicone Foam range.

 

Other Woundcare

Other Woundcare comprises royalties, fees and woundcare sealants. Revenue increased by 32% at reported currency and by 27% at constant currency to £4.1 million (2021 H1: £3.1 million) due to increased partner demand for membranes, higher sales of Silicone Wound Contact Layer and a higher royalty income from the Group's licensing arrangement with Organogenesis.

 

Regulatory

The Group continues to make progress with its preparation for MDR with 10 certificates now received and a further 13 files submitted which together represent 40% of our planned number of submissions. The Group remains well prepared for the stricter requirements on product safety and performance, clinical evaluation and post-market clinical evidence stipulated by MDR and further submissions and approvals are anticipated in the second half of the year.

 

The Group's extensive preparations leave it well placed to exploit opportunities that it expects will arise in Europe in the next few years during the implementation of MDR.

 

Supply chain and inflation

The Group continues to face supply chain challenges, like many other businesses across all sectors globally, with inflationary pressure being felt across the business and shortages of material in some areas. AMS aims to recover the impact of cost inflation from its customers predominately during annual price review negotiations and is on track to achieve this in FY 2022. Shortages of material did not have a significant impact on our operations in the Period but there remains the risk of disruption in future periods. We continue to review stockholding levels and our strong balance sheet allows us to forward order where possible.

 

In the second half of 2022, AMS started to provide additional support to its lower paid employees across the Group to help them to cope with the cost-of-living crisis.

 

Board changes

As part of the ongoing plan to refresh the Non-Executive Directors, Penny Freer stepped down during the Period after 12 years on the Board. As announced in August 2022, Liz Shanahan has since been appointed to replace Penny as an Independent Non-Executive Director. With considerable plc Board experience in healthcare and life sciences and specialist skills in communications, Liz will join the Audit, Nomination and Remuneration Committees and will be responsible for Workforce Engagement in line with the UK Corporate Governance Code requirements.

 

Key management appointments support strategic growth

AMS is committed to pursue growth opportunities through investment in organic and acquisitive growth opportunities. As part of this process, the Group has created a dedicated corporate business development team to strengthen its ability to identify new targets that will expand and complement the Company's portfolio of tissue-healing technologies and distribution capability. The new team is headed by Brian Dowd, formerly the Global Marketing Manager for the Surgical Business Unit at AMS.  Based in the US, Brian already has extensive knowledge of the Group's global strategy and the competitive profile of its key markets, so is ideally placed to pursue new M&A opportunities.

 

The Group has also appointed Andy Donnelly as Group R&D Director who joins AMS with over 25 years of experience in pharmaceutical, medical device and formulation development and will be focussed on further strengthening the Group's innovation, product development and ability to meet MDR requirements. Joining AMS from Bespak, Andy replaces Chris Locke who joined AMS in July 2021 to head up the R&D function and left the business earlier this year.  

 

Russia

The Group continues to review the activities in its small legacy sales office in Moscow that has historically contributed approximately 1% of the Group's operating profit.

 

Environmental, Social & Governance

The Group continues to make strong progress on ESG led by our Steering Committee which manages ESG activities across the Group. Our ESG strategy continues to focus on our environmental impact, the well-being of our workforce, driving equality, diversity and inclusion, and further strengthening our corporate governance, internally and across our supply chain to meet ever increasing customer requirements. During the Period we have commenced the development of a pathway to net zero with an external consultant appointed to support our journey as we seek to reduce our carbon footprint and waste and we have launched an electric vehicle scheme for our employees. We continue to support good causes in our local community with financial support and employee volunteering.

 

Stakeholders

On behalf of the Board, I would like to thank the Group's committed staff, partners and other stakeholders, without whose help and commitment the achievements of this year, and the years prior, would not have been possible.

 

Summary

AMS delivered strong revenue growth, profitability and cash generation in the first half of 2022 driven by good underlying performance and the continuing recovery from the COVID-19 pandemic. The Group made significant regulatory and clinical progress in the Period as it continues to increase its investments in developing next-generation products.

 

 

 

 

Financial Review

 

IFRS reporting

To provide the clearest possible insight into our performance, the Group uses alternative performance measures. These measures are not defined in International Financial Reporting Standards (IFRS) and, therefore, are considered to be non-GAAP (Generally Accepted Accounting Principles) measures. Accordingly, the relevant IFRS measures are also presented where appropriate. AMS uses such measures consistently at the half-year and full-year and reconciles them as appropriate. The measures used in this statement include constant currency revenue growth, adjusted operating margin and profit, adjusted profit before tax and adjusted earnings per share, allowing the impacts of exchange rate volatility, exceptional items, amortisation and the change in long-term liabilities to be separately identified. Net cash is an additional non-GAAP measure used.

 

Overview

Revenue increased by 16% at reported and constant currency to £58.3 million (2021 H1: £50.2 million).

 

Gross profit increased to £34.4 million (2021 H1: £28.1 million) as a result of the sales increases in the Period and gross margin as a percentage of revenue improved to 58.9% (2021 H1: 55.9%) as a result of higher volumes. Whilst we are experiencing inflationary supply pressure across the business we aim to recover these additional costs from customers.

 

Administration expenses increased to £21.6 million (2021 H1: £16.5 million) inclusive of foreign exchange movements as business activity returned to more routine levels and the business invested in its commercial and technical teams as well as its wider business infrastructure in preparation for further growth. The acquisition of AFS added £0.5 million of administration costs and £0.2 million of one-off fees in relation to the acquisition which have not been deemed material enough to disclose as exceptional in nature.

 

The Group incurred £5.4 million of gross R&D spend in the Period (2021 H1: £4.4 million), representing 9.3% of sales (2021 H1: 8.7%) which reflects an ongoing investment in innovation and in accommodating the heightened regulatory environment.

 

No exceptional costs have been incurred in the six-month period (2021 H1: £nil) and amortisation of acquired intangible assets was £1.6 million in the six-month period (2021 H1: £1.6 million).

 

Adjusted operating profit which excludes amortisation of acquired intangibles, increased by 9% to £13.8 million (2021 H1: £12.7 million) whilst the adjusted operating margin decreased by 150 bps to 23.7% (2021 H1: 25.2%) as the Group continued to invest in growth opportunities.

 

£0.3 million was recorded within finance income due to the movement in long-term liabilities recognised on acquisition of Sealantis in 2019 (2021 H1: £0.4 million).

 

The Group generated adjusted profit before tax of £13.6 million (2021 H1: £12.4 million) and profit before tax of £12.3 million (2021 H1: £11.2 million).

Reconciliation of profit before tax to adjusted profit before tax
	Six months ended	Six months ended
	30 June 2022	30 June 2021
	£'000	£'000
Profit before tax	12,336	11,193
Amortisation of acquired intangibles	1,573	1,587
Change in long-term liabilities	(283)	(407)
Adjusted profit before tax	13,626	12,373

 

 

The Group's effective corporation tax rate, reflecting the blended tax rates in the countries where we operate and including UK patent box relief, increased to 21.6% (2021 H1: 20.2%). The increase on the previous period has arisen as the Group has generated a higher proportion of its profits in Germany where the tax rate is higher than in other countries in which the Group pays corporation tax.

 

Adjusted diluted earnings per share increased by 8% to 5.01p (2021 H1: 4.64p) and diluted earnings per share increased by 8% to 4.42p (2021 H1: 4.10p) reflecting the Group's increased earnings. Adjusted basic earnings per share also increased by 8% to 5.07p (2021 H1: 4.69p) and basic earnings per share increased by 8% to 4.47p (2021 H1: 4.15p).

 

The Board intends to pay an interim dividend of 0.64p per share on 21 October 2022 to shareholders on the register at the close of business on 30 September 2022. This is a 10% increase on the interim dividend paid in respect of the first half of 2021 reflecting the Board's confidence in the future growth in the Group.

 

 

Operating result by business segment
Six months ended 30 June 2022	Surgical	Woundcare
	£'000	£'000
Revenue	35,941	22,363
Segment operating profit	9,605	3,081
Amortisation of acquired intangibles	1,101	472
Adjusted segment operating profit4	10,706	3,553
Adjusted operating margin4	29.8%	15.9%
Six months ended 30 June 2021
Revenue	30,377	19,826
Segment operating profit	8,854	2,543
Amortisation of acquired intangibles	1,001	586
Adjusted segment operating profit4	9,855	3,129
Adjusted operating margin4	32.4%	15.8%

 

 

⁴ Adjusted for amortisation of acquired intangible assets

 

Table is reconciled to statutory information in note 5 of the financial information.

 

Surgical

Surgical revenues increased by 18% to £35.9 million (2021 H1: £30.4 million) at reported currency and constant currency. Adjusted operating margin decreased by 260 bps to 29.8% (2021 H1: 32.4%) due to continued investment in research and development, regulatory expenditure and the impact of inflation which has diluted the operating margin.

 

Woundcare

Woundcare revenues increased by 13% to £22.4 million (2021 H1: £19.8 million) at reported currency and by 11% at constant currency. Adjusted operating margin increased by 10 bps to 15.9% (2021 H1: 15.8%).

 

Currency

The Group hedges significant currency transaction exposure by using forward contracts and aims to hedge approximately 80% of its estimated transactional exposure for the next 12 to 18 months. In the first half of the year, approximately one third of sales were invoiced in Euros and approximately one quarter were invoiced in US Dollars.

 

The Group estimates that a 10% movement in the £:US$ or £:€ exchange rate will impact Sterling revenues by approximately 3.8% and 3.2% respectively and in the absence of any hedging this would have an impact on the Group operating margin of 3.1% and 0.3% percentage points respectively.

 

Cash Flow

Net cash inflow from operating activities decreased by 8% to £12.5 million (2021 H1: £13.7 million) as a result of an increase in Inventory holdings.

 

At the end of the Period, the Group had net cash of £75.3 million (31 December 2021: £73.0 million).

 

In the first half of 2022, receivables increased by £0.9 million due to the addition of AFS and higher sales in the Period (2021 H1: £1.5 million increase) with debtor days at 43, a slight reduction from the 44 days at 31 December 2021 (2021 H1: 50 days). Payables increased by £5.5 million as a result of the addition of AFS which includes an element of contingent consideration and increased liabilities for foreign currency hedging (2021 H1: £1.8 million decrease). Creditor days increased to 35 days (2021 H1: 31 days) largely due to the impact of a number of capital expenditure projects. Inventory levels increased by £3.4 million in the Period but remained consistent at 5.5 months of supply in the Period (2021 H1: 5.5 months of supply) as the increase is in-line with revenue growth once the impact of AFS is considered. Attempts to hold higher stock levels have been offset by supply chain challenges.

 

In the Period, we invested £4.3 million in capital equipment, R&D and regulatory costs including investment in expanding the Plymouth site to increase factory and laboratory capacity (2021 H1: £2.8 million).

 

Tax payments decreased to £0.8 million (2021 H1: £1.9 million) which is £1.8 million lower than tax in the income statement due to a refund of taxes paid in the previous year.

 

In June 2022, the Group paid its final dividend for the year ended 31 December 2021 of £3.0 million (2021 H1: £2.6 million).

 

The Group has an unsecured, undrawn £80 million, multi-currency credit facility provided jointly by HSBC and NatWest, which is in place until December 2022. This facility carries an annual interest rate of the applicable reference rate such as SONIA in the case of sterling plus a margin that varies between 0.60% and 1.70% depending on the Group's net debt to EBITDA ratio.