Annual Report 2016
Creating quality
outcomes
About Us
Advanced Medical Solutions
is a leading developer and
manufacturer of innovative
and technologically advanced
products for the global surgical
and advanced woundcare
markets.
Our primary focus is to
create quality outcomes
for our customers, patients
and shareholders.
Go online
For more information, please visit
www.admedsol.com
Governance
42 Board of Directors
44 Senior Management
46 Corporate Governance
Report
Audit Committee Report
51
55 Remuneration Report
65 Directors’ Report
70 Independent Auditors Report
Contents
Company Overview
01 Highlights 2016
02 Our Markets
03 Our Brands
Strategic Report
04 Chairman’s Statement
06 Chief Executive’s Statement
Our Strategic Objectives
13
Our Business Model
14
Business Units
16
16
20
24
28
Branded Direct
Branded Distributed
OEM
Bulk Materials
29 Financial Review
33 Our Key Performance
Indicators
34 Corporate Social
Responsibility
38 Risk Management
Financial Statements
71
Consolidated Income
Statement
Consolidated Statement
of Comprehensive Income
71
72 Consolidated Statement
of Financial Position
73 Consolidated Statement
of Changes in Equity
Consolidated Statement
of Cash Flows
Notes Forming Part of the
Consolidated Financial
Statements
74
75
103 Company Balance Sheet
103 Statement of Changes
in Equity
104 Notes to the Company
Financial Statements
108 Five Year Summary
109 Notice of Meeting
112 Advisors
Advanced Medical Solutions Group plc Annual Report 2016 Highlights 2016
Creating quality
outcomes through our
financial strength
Financial
Group revenue (£ million)
Adjusted2 operating margin (%)
Adjusted2 profit before tax (£ million)
Profit before tax (£ million)
Adjusted2 diluted earnings per share (p)
Diluted earnings per share (p)
Net operating cash flow3
pre-exceptional items (£ million)
Net cash (£ million)4
2016
82.6
23.9
19.7
19.1
7.66
7.38
22.3
51.1
2015
68.6
25.4
17.4
17.0
6.86
6.68
22.5
34.2
Reported
growth
20%
(150bps)
13%
12%
12%
10%
(1%)
49%
Growth at
constant
currency1
13%
–
–
–
–
–
–
–
Proposed final dividend of 0.62p per share, making a total dividend for the year
of 0.92p (2015: 0.80p), up 15%
Business
e Good sales progress across all Business Units:
• Branded Distributed up 42% to £20.8 million (2015: £14.6 million), and up 30%
at constant currency
• Branded Direct up 10% to £24.6 million (2015: £22.3 million), and up 3%
at constant currency
• OEM up 16% to £32.1 million (2015: £27.7 million), and up 12%
at constant currency
• Bulk Materials up 33% to £5.2 million (2015: £3.9 million),
and up 21% at constant currency
e Continued strong performance in the US with LiquiBand® tissue adhesive range:
• Revenues up 56% to £12.5 million (2015: £8.0 million) and 39%
at constant currency
• As at 31 December 2016, market share by volume5 increased to 23%
(June 2016: 19%) and initial 20% target share achieved in the combined hospital
and non-hospital market
e Successful launch of antimicrobial and atraumatic foam dressings into Europe
e Antimicrobial dressing revenues including both silver and PHMB
(Polyhexamethylene Biguanide) up 13% to £17.5 million (2015: £15.5 million)
and 9% at constant currency
e Sales of the hernia mesh fixation device, LiquiBand® Fix8™ increased 73%
to £1.7 million (2016: £1.0 million), 68% at constant currency, and is in use
in 25 countries; now preparing for Pre Market Approval (PMA) in the US
e German and Czech RESORBA® business up 15% to £13.1 million
(2015: £11.3 million) and 4% at constant currency
e Successful launch of RESORBA® sutures into the US
e ActivHeal® business declined 5% to £6.0 million (2015: £6.4 million)
01
Group revenue
£82.6m
(2015: £68.6m)
Adjusted2 profit
before tax
£19.7m
(2015: £17.4m)
Adjusted2 diluted
earnings per share
7.66p
(2015: 6.86p)
Net cash4
£51.1m
(2015: £34.2m)
1 Constant currency removes the effect of currency movements by
re-translating the current period’s performance at the previous
period’s exchange rates
2 All items are shown before exceptional items which were
£0.4 million (2015: £nil) and amortisation of acquired intangible
assets which, in 2016, were £0.2 million (2015: £0.4 million) as
defined in the financial review
3 Operating cash flow is arrived at by taking the operating profit for
the period before exceptional items of £0.4 million (2015: £nil),
depreciation, amortisation, working capital movements and other
non cash items
4 Net cash is defined as cash and cash equivalents plus short term
investments less financial liabilities and bank loans
5 Data supplied by Global Healthcare Exchange
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 02
Our Markets
Creating quality outcomes
for the global surgical and
advanced woundcare markets...
Our addressable market is large and growing.
Addressable market
~4-6% Market
growth
£82.6m
Global sales
£19.7m
*Adjusted PBT
23.9%
*Adjusted operating margin
7
Locations
>100
Distribution partners
Surgical market
£5.7bn
+65
Countries
Favourable global
healthcare trends
Advanced
woundcare market1
(excluding NPWT)
£2.8bn
Structurally
growing markets
High degree of
recurring revenues
Low clinical
R&D risks
* Adjusted PBT and adjusted operating margin are
shown before amortisation of intangible fixed assets
and exceptional items.
1 Advanced woundcare market includes alginates,
gelling fibre dressings, contact layers, hydrocolloids,
hydrogels, superabsorbents, silvers/other
antimicrobials and foams. It excludes Negative
Pressure Wound Therapy (NPWT).
Advanced Medical Solutions Group plc Annual Report 2016 03
RESORBA®
Our comprehensive range
of sutures sold in Europe
and the Rest of the World.
Approval to sell our sutures
in the US was obtained
in September 2015 and a
range of sutures for dental
use were launched in the
US in 2016.
We also have a range of
haemostats based on
collagen approved for use
in Europe.
RESORBA® sutures and
haemostats can be used
for both surgical and
dental applications.
Our Brands
... through quality
respected brands
LiquiBand®
Our range of medical
adhesives, based on
cyanoacrylate. We have
a range of formulations
and applicators for topical
skin closure.
We have approval to use
the adhesive internally
in Europe for hernia
mesh fixation with our
LiquiBand® Fix8™ device.
Work has started to gain
approval for this device
in the US.
ActivHeal®
Our brand of advanced
woundcare products that
are sold to the NHS in the
UK, providing significant
cost savings to payor
without compromising
on clinical effectiveness.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 04
Chairman’s Statement
Creating quality
outcomes...
AMS has had another year of strong performance
and continues to progress as a leading,
international provider of high quality, high
value, innovative and technologically advanced
products for the surgical and advanced
woundcare markets. We are pleased that we have
delivered another year of strong revenue growth,
profit performance and good cash generation.
I am pleased to report a 20% increase in
revenue to £82.6 million (2015: £68.6 million),
representing growth of 13% on a constant
currency basis and an increase in adjusted6 profit
before tax before exceptional items of 13% to
£19.7 million (2015: £17.4 million), and an increase
in profit before taxation of 12% to £19.1 million
(2015: £17.0 million). The continued strong cash
flow generation of the business has resulted
in the Group ending the year with net cash
of £51.1 million (2015: £34.2 million).
Our strategy of having multiple products and
multiple routes to market continues to pay off
and we have made good progress across all
Business Units in the last year. Whilst revenue
growth was steady in our Branded Direct
Business Unit, our Branded Distributed Business
Unit’s success in the US has continued with
LiquiBand® gaining market share, and surpassing
our initial 20% target market share. We have
also launched a range of dental sutures into
the US through a new partner and we intend
to expand our distribution network more widely
by targeting market opportunities in Asia-Pacific
and South America.
Advanced Medical Solutions Group plc Annual Report 2016 05
We ensure that the Group is managed in
accordance with the UK Corporate Governance
Code as far as is reasonably practicable,
although it is not a requirement for an AIM
quoted company. The Board believes that
effective corporate governance will assist in the
delivery of shareholder value and safe-guarding
shareholders’ long-term interests.
AMS continues to be in robust financial health
and is well positioned to invest in both internal
and external opportunities in line with the
Group’s long-term strategy priorities and
growth objectives.
Peter Allen
Chairman
28 April 2017
Revenue
+20%
+13%*
to £82.6m
(2015: £68.6m)
* at constant currency
Adjusted* profit before tax
+13%
to £19.7m
(2015: £17.4m)
* Profit is shown before amortisation of
intangible assets and exceptional items
Our OEM and Bulk Business Units have
performed well. Our partners have delivered
good growth supported by a number of new
foam product launches. This follows on from
our success with LiquiBand® Fix8™ Hernia
Mesh Fixation Device, our first surgical device
using medical adhesive inside the body, with
plans in place for open surgery hernia use
and other secondary indications subject to
regulatory approval. The success of these
launches demonstrates the strength and
breadth of our innovation and our product
development pipeline.
The Board is proposing a final dividend of 0.62p
per share, making a total dividend for the year
of 0.92p per share (2015: 0.80p), an increase of
15%. If approved at the Annual General Meeting,
this dividend will be paid on 16 June 2017 to
shareholders on the register at the close of
business on 26 May 2017.
On behalf of the Board, I would like to thank all
of our employees for their contributions during
the past year which have been central to the
Company’s strong performance. I would also
like to thank our customers, suppliers, business
partners and shareholders for their continued
support in helping AMS achieve its goals.
... through strong
governance
“ AMS continues to be in robust financial health
and is well positioned to invest in both internal
and external opportunities in line with the
Group’s long-term strategic priorities and
growth objectives.”
Peter Allen
Chairman
6 All items are shown before amortisation of acquired intangible
assets which, in 2016, was £0.2 million (2015: £0.4 million) as
defined in the Financial Review and before exceptional items
which were £0.4 million (2015 :£nil)
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 06
Chief Executive’s Statement
Creating quality
outcomes...
I am pleased to report another strong set of results
across the Group. Our revenue has increased
20% to £82.6 million (2015: £68.6 million) and we
have improved our adjusted6 profit before tax and
before exceptional items by 13% to £19.7 million
(2015: £17.4 million), marking the twelfth
consecutive year we have delivered growth in
revenue, profits and earnings per share.
We continue to deliver on our strategy for growth
by expanding into new geographies, increasing
our distribution of surgical products through
our direct sales forces, enhancing our product
portfolio and providing high quality products that
add value to payors in our advanced woundcare
and surgical markets.
Branded Distributed
The Branded Distributed Business Unit reports
the sales of our brands through third party
distributors where the Group does not have a
direct sales force.
Branded Distributed reported revenue was 42%
higher at £20.8 million (2015: £14.6 million)
and 30% higher at constant currency. The main
contributor to this growth continues to be the
sales of our LiquiBand® range of products into
the US, which accounted for 60% of the Business
Unit’s total sales.
6 All items are shown before amortisation of acquired intangible
assets which, in 2016, was £0.2 million (2015: £0.4 million) as
defined in the Financial Review and before exceptional items
which were £0.4 million (2015 :£nil)
Advanced Medical Solutions Group plc Annual Report 2016 07
Right: LiquiBand®Fix8™ Hernia
Mesh Fixation device
... for our employees,
customers and for patients
“ 2016 was the
twelfth consecutive
year we have
delivered growth
in revenue, profits
and earnings
per share.”
Chris Meredith
Chief Executive Officer
LiquiBand® in the US
Sales of LiquiBand® in the US increased by 56%
to £12.5 million (2015: £8.0 million) at reported
currency and by 39% at constant currency.
We have now increased our volume market
share in the US market to 23.7%7 up from the
half year and exceeding the initial target of 20%
set when we first launched this product into
the US in 2010.
Our LiquiBand® range of products utilises
different formulations of cyanoacrylate that
meet the needs of the surgeon and are sold by
our distributors throughout the whole of the US.
LiquiBand® products combine cyanoacrylate
adhesive technology with innovatively
designed applicators that are able to meet the
requirements of the surgeon and the treatment
of the full spectrum of wounds that they need
to close and protect. Our US based product sales
specialists continue to work closely with our
distributors to convert more hospitals and we are
now targeting a further 10% market gain above
our initial target over the next three years, to take
our market share by volume to at least 30%.
LiquiBand® in the EU and Rest of the World
(ROW)
Outside of the US, in the EU and ROW, our
sales of LiquiBand® have increased by 29% to
£2.2 million (2015: £1.7 million) at reported
currency and 28% at constant currency. We have
now started to increase our sales in Asia-Pacific
by signing distributorships in these regions and
are supporting these with personnel based in the
region. We are already seeing some early success
with an additional seven distributorships agreed,
selling our tissue adhesives, haemostats and
sutures. This provides a significant opportunity
for us in the medium-term.
Our regulatory approval process for LiquiBand®
in China has proved challenging and has been
paused. The tissue adhesive market in China
is small and nascent and will take some time
to develop. In the meantime we will invest
resources into gaining access into the more
readily accessible markets in Asia and the
Middle East.
7 Data supplied by Global Healthcare Exchange
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 08
Chief Executive’s Statement continued
Hernia Mesh Fixation Device - LiquiBand® Fix8™
AMS received approval to market LiquiBand®
Fix8™ in Europe in May 2014. This was the Group’s
first application using medical cyanoacrylate
technology inside the body. It is used to hold
hernia meshes in place within the body instead
of traditional tacks and staples. This accurate
laparoscopic application of adhesive is expected
to reduce surgical complications, in particular
the potential pain associated with the use of
tacks and staples, thereby improving the patient
experience and reducing healthcare costs overall.
Surgeon response to LiquiBand® Fix8™ has been
very positive about the ease of use of this device
and the benefit it brings to patients regarding
the reduced incidence of post-operative pain.
Sales of LiquiBand® Fix8™ in our Branded
Distributed Unit increased by 69% to £1.1 million
(2015: £0.7 million). A number of surgeons
have endorsed the product and have provided
valuable feedback about enhancements to the
device as well as other possible non-hernia
applications. The Company is actively exploring
these opportunities. Having had more than
12 months’ feedback from European usage,
we have made improvements to the device.
We are now in a position to start the process
to gain approval to market this device in the
US. As this will be a first-to-market device into
the US, the regulatory process will be a full
Pre Market Approval (PMA) involving clinical trials.
Our estimate is that it will take around three years
to achieve, requiring an investment of at least
£3.0 million.
RESORBA®
Sales of RESORBA® products to all export
markets (excluding Russia) increased by
25% at reported currency to £3.9 million
(2015: £3.1 million), and by 12% at constant
currency. Within this, our sales of dental products
have increased 33% to £1.9 million and 20% at
constant currency. This includes our first sales of
dental sutures into the US following their approval
from the FDA in 2015.
We launched a range of dental sutures into the
US with a specialised dental distributor in March
2016 and have achieved £0.2 million of sales
in the first year. Gaining US approval for the
RESORBA® product range has been an aim for
the Group since we acquired the business in late
2011 and now provides a significant opportunity
for the Group in the medium-term. The total
US surgical suture market is estimated to be
in excess of $1 billion in size and is dominated
by a few major brands.
Sales in Russia increased by 28% at constant
currency, and increased 29% at reported
currency to £1.0 million (2015: £0.8 million)
reflecting improved market conditions.
Research and Development
In R&D our focus is on continuing to improve
the formulations of the base monomers
that are used in our adhesives as well as
improving the design and innovation around
our devices. We have modified the tip and
priming mechanism of our hernia fixation device
following surgeon feedback and have started the
process to get FDA approval to sell this product
into the US.
Development work has also started on an open
hernia mesh fixation device which we hope will
gain approval in Europe this year.
In addition, work has begun on gaining approval
in Europe for the LiquiBand® Fix 8™ device for
new indications and it is expected we will be
selling the first of these in 2018.
Branded Direct
The Branded Direct Business Unit reports sales
of our branded products through our own
sales teams in the UK, Germany and Czech
Republic. Reported revenue increased 10% to
£24.6 million (2015: £22.3 million) and grew by
3% at constant currency.
UK
Within the UK we supply our range of woundcare
dressings, ActivHeal® into the NHS, supplying
both hospitals and community care. We supply
LiquiBand®, haemostats and sutures as part of
our surgical offering.
ActivHeal®
ActivHeal® is our range of high quality
woundcare dressings that offer the NHS
significant cost savings without compromising
on clinical outcomes or patient care. Sales of our
ActivHeal® range decreased by 5% to £6.0 million
(2015: £6.4 million) as we failed to make up the
lost ground that occurred during destocking
in the first half of the year. We have been
disappointed by this performance and have
taken a number of initiatives to reinvigorate sales.
We have refocused our sales efforts, provided
further training to our commercial team and
have enhanced our education and marketing
materials. We have also strengthened our brand
by broadening the product range being offered
to include our antimicrobial and atraumatic
foam dressings. ActivHeal® offers a compelling
proposition for the NHS and remains a significant
opportunity for the Group.
Advanced Medical Solutions Group plc Annual Report 2016 09
LiquiBand®
Sales of LiquiBand® into the Accident and
Emergency Room (A&E) in the UK increased
1% to £2.3 million (2015: £2.3 million), reversing
the decline of the prior year and addressing the
competitive challenges we have seen, while sales
of LiquiBand® into the Operating Room (OR)
increased 31% to £0.9 million (2015: £0.7 million).
We are confident of the market opportunity
for LiquiBand® in the UK, particularly in the
Operating Room. Sales of LiquiBand® Fix8™ in the
UK increased to £0.1 million (2015: £0.05 million).
Germany and the Czech Republic
Germany is one of the key markets in Europe
and sales of LiquiBand® in Germany, and the
Czech Republic, increased 20% at reported
currency to £1.7 million (2015: £1.4 million)
and by 8% at constant currency, while sales of
LiquiBand® Fix8™ increased 88% to £0.5 million
(2015: £0.2 million). We are pleased with the
steady progress we are making in converting
doctors and surgeons to the benefits of
LiquiBand® and LiquiBand® Fix8™.
RESORBA®
Sales of RESORBA® branded products in
Germany and the Czech Republic increased
15% at £13.1 million (2015: £11.3 million) at
reported level and 4% at constant currency.
Within this, sales of haemostats increased
by 21% to £3.9 million (2015: £3.3 million)
and by 9% at constant currency, sales of
sutures and collagens into the dental market
increased by 14% to £3.5 million and by 3% at
constant currency, whilst sales of sutures into
hospitals were increased by 11% to £4.7 million
(2015: £4.1 million) and flat at constant currency.
We are seeing some success in targeting smaller
accounts that should prove quicker to convert.
However, it can take some time for conversions
to be fully effective. We believe our ability to
supply a comprehensive range of high quality
sutures that provide cost savings to hospitals
remains compelling.
Sales of RESORBA® sutures and haemostats
into the NHS increased by 18% to £0.2 million
(2015: £0.2 million) and this still remains a
sizeable opportunity for us, even though
conversion remains slower than we would like.
Research and Development
In R&D, our focus is on extending the attributes
of our collagens to meet the needs of dental
surgeons as well as including new antibiotics
in our haemostats. We also may consider
licensing our technology to other parties if
this will result in products being quicker to
launch. Longer term we are looking to develop
innovative applications for collagen to address
unmet clinical needs or improve the outcome
of current surgical procedures.
OEM
The OEM Business Unit reports the sales of
products that are sold under third parties’ brands.
We have been working with several of the world’s
major woundcare companies for a number
of years. We provide manufacturing services
to supply their woundcare dressings, new
products they can incorporate into their portfolio
of brands, as well as regulatory assistance in
obtaining product approvals in overseas markets.
OEM revenue increased by 16% at reported
currency to £32.1 million (2015: £27.7 million)
and by 12% at constant currency.
Our OEM business is dependent on the success
of the customers that our partners serve and
the outcome of their strategies. Historically, it is
prone to volatility as a result of ordering patterns,
pipeline filling associated with new product
launches and variability surrounding tender
award allocations. Consequently, revenues and
product mix can vary from year to year and can
impact operating margin. In general, as we work
with a large number of partners, the potential
effects of this volatility are mitigated. Through the
latter part of 2016 we have identified that there
has been a slowdown in activity in the Middle
East resulting in delays in the determination
of some hospital tender awards; this is having
an impact on some of our partners that have
significant business in the region. We are yet
to see a reversal of this trend in 2017. This may
impact performance of this Business Unit in the
short term, however, we continue to believe in
the long-term potential of this growth market.
In 2016 we introduced two new ranges of
foam products; our antimicrobial foam range
containing Polyhexamethylene Biguanide (PHMB)
and our atraumatic foam range incorporating
silicone, facilitating easy dressing removal from
sensitive skin. These have been successfully
launched this year.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 10
Chief Executive’s Statement continued
Research and Development
We continue to work on extending our advanced
woundcare portfolio with focus on extending our
antimicrobial range, improving the absorbency of
dressings and combining a number of materials
to enhance product performance.
Bulk Materials
The Bulk Materials Business Unit reports sales of
bulk materials to third party converters as well as
supplying foam into the OEM and Branded Direct
Business Units as a key material in our foam-
based wound dressings.
Bulk Materials revenue increased by 33% at reported
currency to £5.2 million (2015: £3.9 million) and by
21% at constant currency.
Rollstock foam contributed around 93% of Bulk
Materials revenue and good growth was seen
by several partners.
Research and Development
In R&D, the focus is on developing new foam
formulations, working in conjunction with the
OEM Business Unit.
Operations
Efficiency and gross margins
We continue to make operational improvements
by reducing set up times, eliminating non-value
added activities and increasing outputs wherever
possible. These incremental efficiencies help to
improve gross margins across the Group.
The launches of the two new foam dressing
ranges have required new converting processes
to be developed and the success of the launches
has resulted in significant volumes of new
product being required. We are pleased that we
met these significant volume demands, however,
the initial efficiencies of these processes have
been lower than for our more established
ranges and lower than we would expect to
obtain on a regular basis. We estimate that these
operating effects have had a negative impact
of around 400 basis points on the operating
margins for the OEM Business Unit, where
most of the sales of these products have been
recorded. Changes are currently being made
to the manufacturing processes to improve our
efficiencies and we would expect to see margin
improvement in 2017.
We received CE approval in Europe for
our antimicrobial dressing on 1 September
2015. PHMB has been shown to be effective
against several bacteria including, amongst
others, Staphylococcus Aureus including the
methicillin resistant type, (MRSA) and Escherichia
Coli (E-Coli) and this dressing may be used
throughout the healing process on moderate to
heavily exuding chronic and acute wounds that
are infected or are at risk of infection as well as
on pressure ulcers, leg and foot ulcers, diabetic
ulcers and surgical wounds.
Our PHMB foam dressing range augments our
antimicrobial, silver alginate dressing ranges
and provides an alternative method of treating
infected wounds. We are currently working to
achieve approval for our PHMB foam dressings
in the US and once this is received we expect
to be able to launch later this year.
Our silver alginate business grew by 4% to
£16.2 million (2015: £15.5 million) at a reported
level, but sales were flat at constant currency with
the silver range taken by one specific partner
being particularly affected by the slow-down in
the Middle East. Excluding this partner’s sales,
the rest of the silver alginate business grew 5%
at constant currency.
Our new PHMB dressings may have had some
impact on our silver alginate business, however,
our combined sales of all antimicrobial ranges
have increased by 13% at a reported level to
£17.5 million (2015: £15.5 million) and by 9%
at constant currency.
The launch of our range of atraumatic foam
dressings into our advanced woundcare range
has further extended our foam portfolio and
sales of all our foam-based dressings have
increased 196% to £5.3 million (2015: £1.8 million)
and by 191% at constant currency.
Sales of other woundcare products have also
continued to perform well and have increased
by 9% to £10.5 million (2015: £9.7 million) and by
5% at constant currency.
During 2016, we renegotiated the supply
agreement with an OEM partner for collagen
products, from an exclusive to a non-exclusive
arrangement, allowing us to now supply an
enhanced range of collagen products through
our distributors into the EU and through our
direct sales force in the UK. In the medium-term,
we expect increased sales in both our Branded
Direct and Branded Distributed Business Units,
as our collagen product portfolio is extended.
As anticipated, given that the OEM partner is no
longer required to meet a minimum amount
of sales to maintain exclusivity, this has resulted
in a decline of the sales of collagen products
in the Business Unit, which reduced by 85% to
£0.1 million and by 87% at constant currency.
Advanced Medical Solutions Group plc Annual Report 2016 11
Capacity and resource
Investment is being made in The Netherlands
to increase our foam capacity by approximately
40%. A new line is expected to be operational in
the second half of 2017.
We continue to invest in improving our ERP
(Enterprise Resource Planning) management
and reporting systems and having already
successfully completed the implementation
in Winsford, Plymouth and The Netherlands
facilities where we have converted to Oracle ERP.
We are now working on implementing Oracle
ERP in Germany. The project is expected to
complete in the second half of 2017.
Regulatory and quality assurance
With the regulatory framework becoming
increasingly complex, we have continued to
invest in both Regulatory and Quality functions
and systems to ensure that we are able to
support our partners with winning approvals in
new markets as well as obtaining approval for our
own products.
The FDA conducted its first ever routine
inspection at the Group in June 2016 at our
Winsford site and we were pleased with the
positive outcome.
On the back of our success with LiquiBand®
Fix 8™ in Europe we have started work to gain
approval to market this product in the US which
will involve a full PMA and is likely to take at
least three years with an investment of at least
£3 million.
We are also working on identifying the regulatory
pathway to approve the inclusion of antibiotics
in collagens and progressing with obtaining
approval to sell our collagen products in the
US. The latter approval is expected in late 2017 /
early 2018.
Our regulatory approval process for LiquiBand®
in China has continued to be challenging.
Having resubmitted our files to the Chinese FDA
further extensive Chinese based clinical trials
have been requested. As there is a lack of clarity
around the nature of the trials we have decided
to cease the process until there is more certainty
around what is required for approval.
Our culture
As a Group that is highly dependent on the
innovation and creativity of our employees for
our future growth and success, it is important
that we have a culture and set of values that is
clearly understood across the business. We have
adopted the business motto of ‘The AMS Care,
Fair, Dare approach’ to summarise our culture,
underpin our values, and to deliver results,
building a sustainable future for our business.
Under this motto, we have defined the principles
and expectations of how we will operate
together to deliver success.
We recognise the importance of our people to
the Group and that it is only by their effective
engagement that we will continue to be highly
successful. We value their commitment and
determination to achieve and deliver good
results. Our working environment encourages
openness, teamwork, an understanding
of others’ needs and the ability ‘to make a
difference’. We continue to develop the talent at
AMS by training and by providing a place to work
where our employees feel valued, incentivised
and fulfilled.
Acquisition strategy
The Group is actively looking for businesses that
fit its acquisition strategy. During the period, an
opportunity was identified and work undertaken
to understand the business in more detail. As a
result of the outcome of this work, a decision
was taken not to proceed. An exceptional charge
of £0.4 million has been incurred relating to this
activity. The Group continues to actively review
suitable acquisition opportunities.
Referendum vote to leave the EU
There has been no immediate impact on
the Group’s operations following the UK’s
referendum vote to leave the EU other than the
positive impact on currency exchange rates.
The Group is considering the potential impact
to the business once the UK leaves the EU
and has started to plan for this outcome.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 12
Chief Executive’s Statement continued
Summary and Outlook
We have delivered a reported 20% revenue
growth, 13% at constant currency, with good
profitability and cash generation during the year.
All Business Units have delivered growth at
constant currency with US sales, in particular,
delivering a very strong performance and, not
withstanding the OEM slight headwinds in
emerging markets, we expect this to continue in
the coming year. We have been very pleased with
the launches of our antimicrobial and atraumatic
foam dressings into our advanced woundcare
range. With the continued success of our
LiquiBand® Fix8™ Hernia Mesh Fixation Device,
we are seeking approval for new indications
and new market entry.
We continue to invest in research and
development to keep improving our product
range and deliver innovation that benefits payors
and patients.
We are confident that the Group, with its highest
quality products, is well placed to deliver growth
and we remain optimistic about the prospects
for our future.
Chris Meredith
Chief Executive Officer
28 April 2017
Right: Patient focus
Creating quality outcomes
for patients using our silicone
foam dressing
Advanced Medical Solutions Group plc Annual Report 2016 13
Our Strategic Objectives
Creating quality
outcomes by delivering
on our strategy
To become the best developer, producer and
supplier of innovative medical devices in the areas
of accelerating healing and managing wounds,
minimising adverse surgical outcomes, and sealing
and closing tissue.
Market Outlook
There is a rising incidence of both chronic and acute wounds.
Predisposing factors are on the increase such as obesity,
diabetes and old age. There is also an increasing demand
from emerging healthcare markets.
A continuing trend towards minimally invasive surgery further
provides opportunities for innovations and market growth.
Healthcare economics demand cost-effective product
solutions. AMS’s mission is to meet these needs.
Strategy for growth
1
2
3
4
Add value for payors in advanced woundcare and
surgical markets
Increase direct distribution of surgical products through AMS’s
sales forces in target markets
Continued geographic expansion
Enhance product portfolio, technologies and pipeline
through investment in in-house R&D, acquisitions and licensing
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016
14
Our Business Model
Creating quality outcomes
through our knowledge and
experience in growing markets...
Our Value Chain
New product
development
Marketing
and regulatory
approval
Operations
Research and development
Bringing product to market
Design and testing
Regulatory approval
in key markets
Manufacturing and
security of supply
Quality assurance
e Strong regulatory affairs
department with world-wide
regulatory experience
e Regulatory registrations in over
70 countries
e Clinical support teams supporting
both product development and
post market surveillance
e Six manufacturing sites
e All manufacturing sites compliant
with ISO 13485 and FDA CFR 21
part 820 Quality Management
System (QMS)
e Separate R&D teams focusing
on different technologies:
• Winsford: foams, fibres
and antimicrobials
• Plymouth: tissue adhesives
• Nuremberg: haemostats
and sutures
e Collaborations with universities,
key opinion leaders, surgeons
and tissue viability nurses
e Extensive patent portfolio:
over 30 patent families
e Stage gate process
Advanced Medical Solutions Group plc Annual Report 2016 15
... and clear routes to market
through our divisions
Our Routes to Market
Branded
l
i
a
c
g
r
u
S
e
r
a
c
d
n
u
o
W
Our Business Units
Branded
Direct
Revenue
£24.6m
+3%*
Direct sales of AMS Group brands:
ActivHeal®, LiquiBand®, and RESORBA®.
– Direct sales teams in Germany, UK
and Czech Republic
For further information
see page 16
Branded
Distributed
Sales of AMS Group brands: LiquiBand®
and RESORBA®, through our global network
of distributors.
– Global network of >100
distribution partners
For further information
see page 20
Revenue
£20.8m
+30%*
Outcomes
Quality
outcomes
for patients
Value for
payors
Third-party
OEM
Sales of finished products to our
OEM partners.
– Global advanced woundcare
customer base
Long-term
value for
shareholders
Solid balance
sheet
Revenue
£32.1m
+12%*
For further information
see page 24
Bulk Materials
Sales of bulk materials to converters and
healthcare companies.
Converters, packers, advanced
woundcare partners
Revenue
£5.2m
+21%*
* at constant currency
For further information
see page 28
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 16
Business Units
Branded Direct
The Branded Direct Business Unit is responsible for selling our
brands: ActivHeal®, LiquiBand® and RESORBA® to end users in the
UK, Germany and Czech Republic through our own direct sales
teams. This Business Unit is also responsible for directing R&D
for sutures and collagens.
Strategy
To increase market share of the Group’s
brands in the UK, Germany and the
Czech Republic by:
ActivHeal®
e Ensuring ActivHeal® is included in relevant NHS tenders
e Extending the ranges used in hospitals where ActivHeal®
is listed
e Converting new hospitals to ActivHeal®
e Broadening the product range offered e.g. atraumatic and
antimicrobial foam dressings
LiquiBand®
e Increasing usage in the Operating Room (OR) in the
UK, Germany and Czech Republic through our existing
sales teams
e Promoting the hernia mesh fixation device LiquiBand® Fix8™
into the OR in the UK and Germany
RESORBA®
e Ensuring that RESORBA® is included in German and UK
hospital tender processes
e Targeting Group Purchase Organisations (GPOs)
in Germany
e Increasing the usage in the OR in the UK by cross-selling
RESORBA® sutures and collagens with LiquiBand® products
e Extending the attributes of our collagens by
including antibiotics
e Developing new applications of collagens for unmet
surgical needs
Advanced Medical Solutions Group plc Annual Report 2016 17
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 18
Business Units continued
Branded Direct
continued
Jeff Willis
Business Unit Director
Revenue
+10%
+3%*
to £24.6m
(2015: £22.3m)
* at constant currency
Above: RESORBA® suture range
2016 Sales
Branded Direct (£24.6m)
LiquiBand®
LiquiBand® Fix8™
ActivHeal®
RESORBA®
4.8
0.5
6.0
13.3
ActivHeal® is the Group’s brand of advanced
woundcare dressings that it sells into the NHS
in the UK. The proposition of this brand is that
it provides a range of ‘good value’, advanced
woundcare dressings that deliver cost savings
to the NHS without compromising on clinical
outcomes or patient care. The ActivHeal® range
is supported by a dedicated team of experienced
healthcare professionals and by online education
modules that provide training on the treatment
of wounds. With the NHS operating under
budgetary constraints, ActivHeal® continues
to provide a good growth opportunity for the
Group. The range has now been extended to
include atraumatic silicone foam dressings,
silicone wound contact layers and antimicrobial
PHMB foam dressings.
The LiquiBand® range of medical adhesives and
sealants, based on cyanoacrylate, is used to
close and protect wounds in a safe and secure
way. In the UK, LiquiBand® is well recognised
in the majority of Accident and Emergency
(A&E) units where its attribute of high strength
makes it the product of first choice for closing
trauma wounds.
We also sell LiquiBand® into the OR in the
UK and Germany where it is used to make
the final topical skin closure following the
surgical procedure.
In 2014 we launched our innovative LiquiBand®
Fix8™ device which uses our cyanoacrylate
technology within the body for hernia
mesh fixation.
Below: RESORBA® Collagen
Advanced Medical Solutions Group plc Annual Report 2016 19
RESORBA®’s high quality comprehensive
suture range includes several brands such as
CAPROLON®, GLYCOLON®, MOPYLEN® and
RESOPREN® that are sold into hospitals, private
practices and to oral surgeons. Our suture range
is extensive and includes both absorbable and
non-absorbable sutures, mono and multifilament
threads, and a wide range of needle shapes
and sizes.
RESORBA®’s haemostat range includes
COLLAGEN-resorb and GENTA-COLL-resorb.
The latter is a very pure collagen that includes the
antibiotic gentamicin for use in wounds where
there is a high risk of infection. Combining the
suture and collagen technologies, RESORBA®
has developed products and brands that are
particularly applicable to the oral surgery market,
e.g. PARASORB® Sombrero® is a collagen cone
used for dental implants.
The R&D focus of the Business Unit is on
extending the attributes of our collagens and
adding a range of antibiotics into our haemostats.
Consideration may also be given to licensing
technologies to other partners to increase speed
to market.
Our model of providing ‘high quality good
value’ ranges to the NHS is applicable to
our RESORBA® suture range and we are
actively working to promote our RESORBA®
products within the NHS. We are also aiming
to extend the use of RESORBA®’s sutures
within the German hospital system.
Right: GENTA-FOIL RESORBA®
in place within the middle joint
of the index finger
Creating quality outcomes
with a proactive approach
Joint infection following an incision
with a utility knife
“ Four days prior to presenting at the hospital, Mr F. had
cut himself with a utility knife upon the middle joint of
his right index finger (extensor). The wound was initially
repaired using cutaneous sutures; following this the case
was referred to our healthcare facility.
The patient began to experience increased swelling and
tenderness upon palpation of the joint. Surgery revealed
that the original incision had severed the central slip of
the extensor tendon and had opened the articular
capsule. A cloudy coloured liquid was draining from the
location of the joint. A swab was taken and the area
thoroughly rinsed. The cartilage of the adjacent articular
surfaces was found to be intact, allowing for a
preservative course of action to be taken. A GENTA-FOIL
RESORBA® was cropped to meet the required size and
shape and was then inserted into the joint with forceps.
A joint-spanning external fixator was placed along
the extended finger in order to temporarily immobilise
the joint. The swab collected during surgery produced
a positive culture of Staphylococcus aureus and
Staphylococcus sp. (coag neg), The fixator was used
to immobilise the joint for four weeks, after which it
was removed and then physiotherapy provided. There
was no need to remove the GENTA-FOIL RESORBA®.
Outcome: Thanks to a proactive approach and the use
of the external fixator to keep the joint immobilised, the
implementation of GENTA-FOIL RESORBA® was a
success with the joint being subsequently preserved.”
Presented by
Dr. med Vanessa Haug, Dr. med Thomas Pillukat,
Pillukat Clinic for Hand Surgery
for more detail please visit
www.admedsol.com/our-brands/resorba
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 20
Business Units continued
Branded Distributed
The Branded Distributed Business Unit is responsible for driving sales
of our LiquiBand® and RESORBA® branded products to all markets
where the Group does not have its own sales teams and sales are
made through distributors. It is also responsible for directing R&D
for medical adhesives and sealants.
Strategy
The strategy of this Business Unit is to
increase sales of the Group’s brands in
all markets where the Group does not
have a sales force by:
Increasing the market share of LiquiBand®
in the US:
e Partner with key distributors that access the US
healthcare market
e Develop and launch new products
e Train partner personnel, and provide marketing and
account support
e Targeting 30% market share by volume in the next
three years
Developing and launching new products:
e Next generation internal applications of cyanoacrylate for
fixation including new indications for LiquiBand® Fix8™ and
new product variations for open hernia repair
Maximising opportunities across Europe,
Asia-Pacific, the Middle East, and
Latin America:
e Leverage the combined existing distributor network for
LiquiBand® and RESORBA®
e Appointment of local regional Business Development
and Product Training personnel to support customer
sales activities
Accessing new markets:
e Gain regulatory approval for LiquiBand® topical skin
adhesives, LiquiBand® Fix8™ and RESORBA® collagen
products in select geographies
e Progress approval for LiquiBand® Fix8™ in the US
e Identify new market opportunities
Advanced Medical Solutions Group plc Annual Report 2016 21
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 22
Business Units continued
Branded Distributed
continued
The Group works with many distributors to
promote our LiquiBand® and RESORBA® range
of products, accessing over 70 countries
throughout the world.
One of the key growth drivers is accessing the US
market. This is the largest market for LiquiBand®
topical skin adhesives and continues to be a
major focus for this Business Unit.
We have a range of formulations with different
attributes. Some provide quick, precision closure
and other formulations are more film forming.
Having received FDA Approval in November 2015
for LiquiBand® Exceed™, our market share of the
TSA market in the US has now increased to 23%.
LiquiBand® is also promoted and supported
throughout the rest of the world.
This Business Unit is also responsible for
LiquiBand® Fix8™ which uses the cyanoacrylate
technology within the body for hernia mesh
fixation. Work is progressing to extend the
application range of this product.
Jeff Willis
Business Unit Director
Revenue
+42%
+30%*
to £20.8m
(2015: £14.6m)
* at constant currency
LiquiBand® in the US
56%
+39%*
to £12.5m
(2015: £8.0m)
* at constant currency
2016 Sales
Branded Distributed (£20.8m)
LiquiBand® US
LiquiBand® EU & ROW
LiquiBand® Fix8™
RESORBA®
Other
12.5
2.2
1.1
4.9
0.1
Above: LiquiBand® Exceed™
Our LiquiBand® Exceed™ product can be used to
cover wounds of up to 30cm in length as well as a
single device being suitable for intra-operative reuse
for up to 90 minutes on a single patient.
Advanced Medical Solutions Group plc Annual Report 2016 23
Creating quality outcomes
with innovative products
Transabdominal preperitoneal (TAPP)
laparoscopic repair for inguinal hernia
using glue fixation
“ Glue fixation seems to offer a proper and safe
mesh fixation during TAPP repair, without any
concerns regarding dangerous areas and no
postoperative pain. This allows a faster recovery
and return to normal activity for the patients.”
Presented by
Dr Victor Calu (Consultant Surgeon, Elias Emergency
Hospital , Bucharest, Romania) at the European Association
of Endoscopic Surgery conference in Amsterdam from
15-18 June 2016.
for more detail please visit
www.admedsol.com/our-brands/liquiband
Development work on an open hernia mesh
fixation device has started, which we hope will
gain approval in Europe in 2017. Work has also
begun on gaining approval in Europe for new
indications for the LiquiBand® Fix8™ device.
The RESORBA® suture and collagen ranges are
sold throughout Europe, the Middle East and
Asia. Approval to market the majority of our
suture range in the US was received in November
2015 and the first sales of sutures for dental
applications were achieved in 2016.
During 2016 a supply agreement with an
OEM partner for collagen products, including
RESODURA® and GENTA-COLL®, was re-
negotiated from an exclusive to a non-exclusive
arrangement. This allows this Business Unit to
supply an enhanced range of collagen products
both in the EU and to the rest of the world.
This Business Unit also includes all sales made
by our Russian subsidiary, which are made both
by the direct sales team in Moscow and by the
distributor network that the Moscow sales team
supports throughout the rest of Russia.
Creating quality outcomes
for our US partners
“ We think the needs of our
customers have been under
met for years with existing
adhesives.
In AMS, Medtronic has
found a partner who has
thoughtfully engineered a
solution that benefits patients,
clinicians and hospitals,
as well as Medtronic itself.”
Christopher Ward,
Vice President, marketing surgical innovations
Medtronic PLC.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 24
Business Units continued
OEM
The OEM Business Unit is responsible for supporting our
business-to-business partners with a multi-product portfolio that
is globally competitive and comprises our intellectual property,
technology and know-how. It is responsible for directing R&D
for our advanced woundcare products and technologies.
Strategy
The strategy of this Business Unit is to
support the Group’s partners to be
successful with the products we supply,
and to increase their market share in
our areas of technical expertise by:
Strong partner relationships:
e Key account management
e Reliability of service and quality
e Expansion of product portfolio
e Regulatory support for expansion into new markets
e Strong pipeline of innovative products with links with global
reputable universities for new emerging technologies
Securing new partners through:
e Reputation for quality, customer service and regulatory
capability to assist with expansion into new geographies
Develop new products including:
e Expansion of the foam portfolio
e Expansion of the fibre range
e Enhanced product performance
Advanced Medical Solutions Group plc Annual Report 2016 25
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 26
Business Units continued
OEM
continued
Becky Walmsley
Business Unit Director
Revenue
+16%
+12%*
to £32.1m
(2015: £27.7m)
* at constant currency
Above: Antimicrobrial dressings
Our R&D pipeline is delivering
results with antimicrobial foam
dressings and atraumatic foam
dressing, launched in Europe
2016 Sales
OEM (£32.1m)
Other foam products
PHMB foam
REQUIRE HIGH RES IMAGE
Silver alginate
FROM CLIENT
Other woundcare products
Other
4.0
1.3
16.2
10.5
0.1
Unlike many of our competitors we offer a
full design, development, manufacture and
distribution service supported by regulatory,
clinical and marketing professionals.
We partner with many of the world’s leading
healthcare companies, supplying them with
finished packed products which are provided
under their own brand. Our technologies
include foams, fibres, collagens, hydrogels
and hydrocolloids.
We are also able to add antimicrobials such as
silver and PHMB to our platform technologies,
which are a key growth driver for this
Business Unit.
We support our partners to access new markets
through our regulatory expertise with strong
marketing collateral backed by clinical evidence.
Following approval in 2015, we successfully
launched our PHMB foam dressing into Europe
in 2016. PHMB is an antimicrobial effective
against several bacteria including, amongst
others, Staphylococcus Aureus including the
methicillin resistant type, (MRSA) and Escherichia
Coli (E-Coli). This dressing may be used
throughout the healing process on moderate
to heavily exuding chronic and acute wounds
that are infected or are at risk of infection as
well as on pressure ulcers, leg and foot ulcers,
diabetic ulcers and surgical wounds. Approval to
market this product in the US is ongoing and we
expect to launch the product in the US in 2017.
We also successfully launched our atraumatic
silicone product range into Europe and the US
in 2016.
We continue to extend our product range
by developing new products.
Advanced Medical Solutions Group plc Annual Report 2016 27
Performance
Total Fluid Handling Performance1
Be confident this foam can handle
patient exudate.
AMS
Silicone Foam
28.9g
10cm2/24hr
Allevyn
Gentle*
23.7g
10cm2/24hr
Peel adhesion over 7 days1
Secure but pain free removal.
AMS
Silicone Foam
2.7 (N/2.5cm)
Allevyn
Gentle*
1.4 (N/2.5cm)
Creating quality outcomes for
chronic and acute wounds
The management of pressure damage
upon removal of full leg cast following
fracture to the right patella
“ The Silicone Non Border dressings were applied
to the category 3 pressure ulcer to assist in the
management of exudate, prevent adherence and
trauma at dressing changes along with providing
a moist wound environment to aid wound healing.
Reducing the potential mechanism for pain at
dressing changes helped promote patient comfort
and improve clinical outcomes.
The dressing was able to provide effective exudate
handling as no signs of maceration visible to the
peri wound area, whilst maintaining a moist wound
environment and promoting wound progression as
the wound reduced in size and showed areas of
new epithelial tissue. The Silicone Foam dressing
was easy to apply and remove and was atraumatic
to the patient and was able to aid in the
management of friable, vulnerable traumatic
damaged tissue, and the achievement of
satisfactory clinical outcomes for both the
patient and the clinician.”
Carolynne Sinclair, Tissue Viability Nurse
for more detail please visit
http://www.admedsol.com/our-divisions/oem-supply/fibres/
1 Data on file 2016
* Allevyn Gentle is a registered trademark of Smith & Nephew
Right: Silicone Foam dressing
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 28
Business Units continued
Bulk Materials
This Business Unit is responsible for providing Bulk Materials including foams,
hydrocolloids, fibres and pattern coated films, to third party converters and
partners who have their own converting capability. It is also responsible for
supplying Bulk Materials within the Group.
Rollstock foam contributes the majority of sales
from this Business Unit.
Our medical grade hydrophilic polyurethane
foam is characterised by its ultrasoft, open-pored,
medium density structure. It is very conformable
and offers a high rate of absorbancy with good
lateral control and fluid uptake.
We are looking to extend our foam range.
The development of our antimicrobial PHMB
foam which was launched in 2016 is an example
of the types of products we are working on.
We are also able to supply film membranes
with excellent moisture vapour transmission
rates as well as film-foam membranes that have
applications in scar reduction.
As the range of foam products we manufacture
increases, we are investing in increasing our foam
making capacity in the Netherlands. Our new
line, which will increase capacity by 40%, is
expected to be operational in the second half
of 2017.
Below: Rollstock foam
Becky Walmsley
Business Unit Director
Revenue
+33%
+21%*
to £5.2m (2015: £3.9m)
* at constant currency
Strategy
The strategy of this Business Unit is to:
Extend the product offering through
new product development
Expand commercial focus to new markets
and customers
Reduce the cost of the foam process
through operational improvements to
enable partners to be more competitive
Advanced Medical Solutions Group plc Annual Report 2016 29
Financial Review
Creating quality outcomes
and good financial performance
Group revenue increased by 20% to £82.6 million
(2015: £68.6 million). At constant currency, revenue growth
was 13%.
The Group uses alternative performance measures such as
adjusted operating margin, adjusted profit before tax, net operating
cash flow pre-exceptional items, together with current revenue
measures restated at constant exchange rates, to allow the users of
the accounts to gain a clearer understanding of the performance
of the business, allowing the impacts of amortisation, exceptional
items and exchange rate volatility to be separately identified.
The Group incurred an exceptional expense of £0.4 million in the
year relating to an aborted acquisition (2015: nil).
Amortisation of acquired intangible assets was £0.2 million in the
period (2015: £0.4 million).
To aid comparison, the Group’s adjusted income statement is
summarised in Table 1 below.
Table 1: Adjusted Income Statement
Revenue
Gross profit
Distribution costs
Adjusted administration costs8
Other income
Adjusted operating profit
Net finance costs
Adjusted profit before tax
Amortisation of acquired intangibles
Exceptional Items
Profit before tax
Tax
Profit for the period
Adjusted earnings per share – basic9
Earnings per share – basic9
Adjusted earnings per share – diluted9
Earnings per share – diluted9
8 Adjusted administration costs exclude amortisation of acquired intangible assets and exceptional items
9 See Note 15 Earnings per Share for details of calculation
Year ended
31 December 2016
£’000
Year ended
31 December 2015
£’000
82,621
47,427
(1,047)
(27,293)
621
19,708
(3)
19,705
(242)
(361)
19,102
(3,410)
15,692
7.77p
7.48p
7.66p
7.38p
68,596
39,908
(951)
(22,138)
589
17,408
(45)
17,363
(367)
–
16,996
(2,877)
14,119
6.95p
6.78p
6.86p
6.68p
% Change
20%
19%
13%
13%
12%
11%
12%
10%
12%
10%
Advanced Medical Solutions Group plc Annual Report 2016Company OverviewStrategic Report GovernanceFinancial Statements 30
Financial Review continued
Revenues were favourably impacted by approximately
£4.9 million due to the effects of currency movements in the year.
Gross margin reduced overall by 80bps due to adverse operational
variances on new woundcare ranges, partly offset by mix changes
and the favourable impact of currency movements.
and further investment in selling and marketing, particularly to
support the Branded Direct Business Unit. There was also a benefit
from the translation of US dollar receivables. The Group expensed
£2.3 million of R&D to the Income Statement (2015: £1.8 million).
Spend as a percentage of sales increased to 2.8% (2015: 2.6%).
Adjusted operating profit before exceptional items increased
by 13% to £19.7 million (2015: £17.4 million) but the adjusted
operating margin reduced by 150 bps to 23.9% (2015: 25.4%).
Administration costs excluding exceptional items increased by
23% to £27.3m (2015: £22.1 million) due to currency movements
Profit before tax for the year was 12% higher at £19.1 million
(2015: £17.0 million).
Table 2: Taxation
Weighted average Group tax rate
Loss utilisation and recognition
Patent box relief
R&D relief
Expenses not deductible, prior year adjustments, depreciation and share based payments
Effective taxation rate
%
22.11
(1.06)
(1.27)
(0.96)
(0.97)
17.85
The Board is proposing a final dividend of 0.62p per share, to be
paid on 16 June 2017 to shareholders on the register at the close
of business on 26 May 2017. This follows the interim dividend of
0.30p per share that was paid on 28 October 2016 and would, if
approved, make a total dividend for the year of 0.92p per share
(2015: 0.80p), a 15% increase on 2015.
The operational performance of the Business Units is shown
in Table 3 on page 31. The adjusted profit from operations and
the adjusted margin are shown after excluding amortisation of
acquired intangibles. To aid comparison and in determining the
operational margins of the individual Business Units, the revenue of
the Bulk Materials Business Unit sales made to other Business Units
of £1.8 million (2015: £0.8 million) is included.
The Group’s effective rate of tax for the year was 17.9%
(2015: 16.9%). This is reflective of the utilisation of previously
unrecognised brought-forward UK tax losses, Patent Box relief
and R&D tax credits. It also reflects the impact of blending profits
and losses from different countries and the different tax rates
associated with these countries. The effective tax rate of the Group
is expected to increase in 2017, as the Group is no longer classified
as a Small Medium Enterprise (SME) and will no longer be able
to gain R&D tax credits at the SME rate. We estimate that this will
increase our taxation rate by approximately 2%.
A reconciliation between the weighted average Group tax rate
and the Group’s effective rate is summarised in Table 2 above.
Earnings (excluding amortisation of acquired intangible assets
and before exceptional items) increased by 12% to £16.3 million
(2015: £14.5 million), resulting in a 12% increase in adjusted basic
earnings per share to 7.77p (2015: 6.95p) and a 12% increase in
adjusted diluted earnings per share to 7.66p (2015: 6.86p).
Profit after tax increased by 11% to £15.7 million
(2015: £14.1 million), resulting in a 10% increase in basic earnings
per share to 7.48p (2015: 6.78p) and a 10% increase in diluted
earnings per share to 7.38p (2015: 6.68p).
Advanced Medical Solutions Group plc Annual Report 2016 31
Table 3: Operating Result by Business Segment Year ended 31 December
2016
Revenue
Profit from operations
Amortisation of acquired intangibles
Adjusted profit from operations10
Adjusted operating margin10
Year ended 31 December 2015
Revenue
Profit from operations
Amortisation of acquired intangibles
Adjusted profit from operations10
Adjusted operating margin10
10 Excludes amortisation of intangible assets and exceptional items
Branded
Distributed
£’000
20,753
6,337
84
6,421
30.9%
14,631
4,366
127
4,493
30.7%
Branded Direct
£’000
OEM
£’000
Bulk Materials
£’000
24,553
4,976
141
5,117
20.8%
22,344
5,235
214
5,449
24.4%
32,070
6,881
17
6,898
21.5%
27,674
7,139
25
7,164
25.9%
7,040
1,796
–
1,796
25.5%
4,772
814
–
814
17.1%
Branded Distributed
OEM
The adjusted operating margin of this Business Unit increased to
30.9% (2015: 30.7%), supported by US sales growth, but was lower
than the margin reported in H1 2016 (35.4%), reflecting a higher
than usual proportion of US sales in H1 and an increase in business
unit operating expenses as a result of investment in sales and
marketing personnel.
Branded Direct
The adjusted operating margin of this Business Unit reduced to
20.8% (2015: 24.4%) mainly due to continued investment in sales
and marketing and was lower than the position at H1 2016 (23.7%)
mainly due to the phasing of fee income which occurred in the
first six months of the year.
The adjusted operating margin of this Business Unit reduced to
21.5% (2015: 25.9%) due to adverse operational variances on new
woundcare ranges albeit higher than the margin reported at H1
2016 (18.1%). It is worth noting that some of the margin benefit
arising from the substantial increase in OEM foam sales is reported
in the Bulk Materials Business Unit and is part of the reason for the
increase in operating margin in that Business Unit.
Bulk Materials
The adjusted operating margin of this Business Unit increased
to 25.5% (2015: 17.1%), and improved from the position in H1
2016 (22.9%). Margins were affected by the higher volumes
of production and sales, including a substantial increase in
intercompany sales to the OEM Business Unit.
Table 4: Geographic Breakdown of Group Revenues
Europe (excluding UK and Germany)
Germany
UK
USA
Rest of the World
2016
£ millions
21.4
18.3
17.4
23.5
2.0
% of total
25.9%
22.1%
21.1%
28.5%
2.4%
2015
£ millions
19.1
13.4
16.7
17.8
1.6
% of total
27.8%
19.5%
24.3%
25.9%
2.3%
Geographic Breakdown of Revenues
The geographic breakdown of Group revenues in 2016 is shown in
Table 4 above:
48% of the Group’s sales are in Europe (excluding the UK) of
which 59% are denominated in Euros. Approximately 95% of all
sales to the US are denominated in US Dollars. The Group hedges
significant transaction exposure by using forward contracts
and options and aims to have 70% of its estimated transactional
exposure for the next 12 months hedged. The Group estimates
that a 10% movement in the £:US$ or £:Euro exchange rate
will impact Sterling revenues by approximately 2.7% and 3.1%
respectively and in the absence of any hedging this would have an
impact on profit of 2.2% and 0.5%.
Advanced Medical Solutions Group plc Annual Report 2016Company OverviewStrategic Report GovernanceFinancial Statements 32
Financial Review continued
Table 5 summarises the Group’s cash flows.
Table 5: Group Cash Flows Year ended 31 December
Adjusted operating profit (Table 1)
Non-cash items
Adjusted EBITDA11
Working capital movement
Operating cash flow before exceptional items
Exceptional items
Operating cash flow after exceptional items
Capital expenditure and capitalised R&D
Net interest
Tax
Free cash flow
Dividends paid
Proceeds from share issues
Exchange gains/(losses)
2016
£’000
19,708
4,023
23,731
(1,480)
22,251
(361)
21,890
(2,536)
(3)
(2,065)
17,286
(1,783)
868
553
2015
£’000
17,408
3,153
20,561
1,983
22,544
–
22,544
(2,675)
(47)
(1,253)
18,569
(1,521)
494
(621)
Net increase in cash and cash equivalents
11 Adjusted EBITDA is earnings before interest, tax, depreciation, intangible asset amortisation, share based payments
and exceptional items
16,924
16,921
Adjusted EBITDA increased by 15% to £23.7 million
(2015: £20.6 million).
Working capital increased in the year in line with the growth of the
business. 4.4 months of supply of inventory was held across the
Group (2015: 4.4 months of supply). Trade receivable days were in
line with prior year at 41 days (2015: 41 days) while trade payable
days decreased slightly to 33 days (2015: 34 days).
The Group generated net cash from operating activities of
£21.9 million (2015: £22.5 million) (see Table 5) and had net cash
of £51.1 million (2015: £34.2 million) at the end of the year.
In the year, we invested £2.6 million in capital equipment, software
and capitalised R&D (2015: £2.7 million), including ERP software
and internally developed products.
The Group generated a free cash flow of £17.3 million in the year
(2015: £18.6 million). The conversion of adjusted operating profit
into free cash flow was 88% (2015: 107%).
The Group paid its final dividend for the year ended 31 December
2015 of £1.2 million (2015: for the year ending 2014, £1.0 million)
on 10 June 2016, and its interim dividend for the six months
ended 30 June 2016 of £0.6 million (2015: £0.6 million) on
28 October 2016.
Table 6: Movement in Net Cash
Net cash as at 1 January 2016
Exchange rate impacts
Free cash flow
Dividends paid
Proceeds from share issues
Net cash as at 31 December 2016
The Group’s going concern position is fully described in Note 2.
In December 2014 the Group entered into a five-year, £30 million,
multi-currency revolving credit facility with an accordion option
under which AMS can request up to an additional £20 million on
the same terms. The previous facility for £4 million was due to
expire in 2015. The Group chose to take advantage of favourable
credit conditions to put in place a more suitable facility to support
its growth ambitions. The new facility is provided jointly by the
Group’s existing bankers, HSBC, as well as The Royal Bank of
Scotland PLC. It is unsecured and has not been drawn down.
This facility carries an annual interest rate of LIBOR or EURIBOR
plus a margin that varies between 0.65% and 1.75% depending on
the Group’s net debt to EBITDA ratio.
At the end of the period, the Group had net cash of £51.1 million
(2015: £34.2 million). The movement in net cash from the start of
the year to net cash at the end of the year is reconciled in Table
6 below:
£’000
34,201
553
17,286
(1,783)
868
51,125
Advanced Medical Solutions Group plc Annual Report 2016 33
Our Key Performance Indicators
Creating quality outcomes by
measuring our performance
Revenue growth (%)1
at constant currency
13%
Why we measure it
We see revenue growth as a
contributing factor to our aim
of providing long-term value for
our shareholders.
Adjusted3 operating
margin (%)1
24%
Why we measure it
We see operating margin
as important to ensure the
sustainability of our business and
to our aim of providing long-term
value for our shareholders.
57%
11%
9%
11%
13%
Customer service (OTIF)2
94%
96%
99%
96%
90%
90%
12
13
14
15
16
12
13
14
15
16
Why we measure it
We see OTIF as a contributing
factor to our aim of providing
excellent service to our customers.
Progress made in the year
Revenue has increased by
20% in 2016 to £82.6 million
(2015: £68.6 million), representing
growth of 20% (13% on a constant
currency basis). Our strategy
of having multiple products
and multiple routes to market
continues to pay off and we have
made good progress across all
Business Units in the last year.
Progress made in the year
OTIF fell to 90% in 2016
(2015: 96%), which is lower
than the average Group OTIF
of 96% over the previous four
years. OTIF was impacted
by an interruption in service
from our steriliser, who
experienced difficulties when
they commissioned a new plant
resulting in extended turnaround
times. These issues have now
been resolved. OTIF is expected to
return to levels of previous years
in 2017.
24%
24%
25%
25%
24%
Adjusted3 diluted earnings
per share growth (%)1
24%
6%
14%
10%
12%
12%
12
13
14
15
16
12
13
14
15
16
Why we measure it
We see EPS as an important factor
to our aim of providing value for
our shareholders.
Progress made in the year
Adjusted diluted earnings per
share has increased by 12% to
7.66p (2015: 6.86p).
Progress made in the year
The launch of the two new foam
dressing ranges has required
new converting processes to be
developed and the success of the
launches has resulted in significant
volumes of new product being
required. The initial efficiencies of
these processes have been lower
than for our more established
ranges and lower than we would
expect to obtain on a regular
basis. This has had a negative
impact at the Winsford site.
Improvements are being made to
our processes in 2017.
1 Includes twelve months contribution from RESORBA® acquisition in 2012
2 OTIF – ‘On time in full’
3 Before exceptional items and amortisation of acquired intangible assets
Advanced Medical Solutions Group plc Annual Report 2016Company OverviewStrategic Report GovernanceFinancial Statements 34
Corporate Social Responsibility
Creating quality outcomes...
We continually review our business practices to ensure that our business
operates in a responsible manner with respect to Employees, Ethical Standards,
Health, Safety, Environment and Community. We remain committed to
continuous improvement contributing to the success of the business.
Employees
At AMS we focus on creating an engaging
place to work where employees are able to
develop and are challenged to achieve both their
ambitions and the long-term strategic goals of
the business. With over 600 employees globally,
AMS is focused on retaining and attracting
the right calibre of people and providing an
environment where individuals can deliver to
the best of their capabilities. We recognise the
importance of our people and that it is only
by their effective engagement that we will
continue to be highly successful. We value
their commitment and determination to
achieve and deliver good results. Our working
environment encourages openness, teamwork,
an understanding of others’ needs and the ability
‘to make a difference’.
We develop the talent at AMS by training
with programs such as the Management
Development Programme and principles of Lean
Manufacturing, and by providing a place to work
where our employees feel valued, incentivised
and fulfilled. We continue to support a number
of apprenticeship schemes and graduate
recruitments across the Group and intend to
expand the number of schemes we operate
in 2017.
AMS promotes communication with employees
who are encouraged to put forward their views
to the Company through both our monthly
briefing meetings and also through our
employee surveys. Employees are encouraged
to participate in suggesting and implementing
improvements across the Group.
Employee Diversity
We are committed to actively encouraging
a more inclusive and diverse workplace and
look for opportunities to reinforce this where
appropriate, although we continue to recruit on
merit. The Group is committed to eliminating all
forms of discrimination and giving fair and equal
treatment to all employees and job applicants
in terms of recruitment, pay conditions,
promotions, training and all employment matters
regardless of their age, disability, race, sex, sexual
orientation, marriage and civil partnership,
pregnancy and maternity, gender reassignment,
religion or belief. The female representation on
the Board, Senior Management Team and across
the Group at the year-end is shown here:
Gender Ratio
Main Board
6
Male
Female
4
2
Senior Management Team
8
Male
Female
5
3
Total Employees
601
Male
Female
269
332
Advanced Medical Solutions Group plc Annual Report 2016 35
... by ensuring that our
business is conducted
in a responsible manner...
Ethical Standards
We recognise the importance of operating a
business in an ethical manner.
AMS has set appropriate standards and policies to
uphold all laws relevant to prevention of bribery
and corruption in all jurisdictions in which we
operate. The Group also has in place policies
and procedures covering Gifts and Hospitality,
Whistleblowing, the Modern Slavery Act and the
Market Abuse Regulations.
Culture
AMS is highly dependent on the innovation and
creativity of our employees for our future growth
and success. It is important that we have a culture
and set of values that are clearly understood
across the business, and that employees
embrace. We aim to operate to the highest
ethical standards. We have adopted the business
motto of ‘The AMS Care, Fair, Dare approach’ to
summarise our culture, underpin our values, and
to deliver results, building a sustainable future
for our business. Under this motto, we have
defined the principles and expectations of how
we will operate together to deliver success as the
Company continues to grow. Care, Fare, Dare
will be reviewed and updated throughout 2017
following input gained from employees across
the Group.
The Advanced Medical Solutions’ ‘Care Fair Dare’ Approach
A culture
of:
A focus
on:
A behavioural
style which is:
A leadership
style which:
A set of
values which:
e Listening and
understanding
e Valuing
contribution
e Right first time
e The “Bigger
Picture”
e Open minded
e Sensitive to others
e Builds
engagement
e Motivates and
retains staff
e Ownership and
responsibility
e Leading by
example
e Helping not
judging
e The team not
the individual
e Trustworthy
e Inclusive
e Proactively
collaborates
e Takes
responsibility
e Optimism
e Determination
and persistence
e Solutions not
problems
e Continuous
improvement
e Responsive
e Creative
e Challenges the
status quo
e Promotes
openness
E
R
A
C
R
I
A
F
E
R
A
D
e Define the
AMS culture
e Are understood
across the
Group
e Deliver results
e Will build a
sustainable
future
... and developing talent
within the business
Advanced Medical Solutions Group plc Annual Report 2016Company OverviewStrategic Report GovernanceFinancial Statements 36
Corporate Social Responsibility continued
Supply Chain
Health, Safety and Environment
Our Sourcing Policy requires suppliers to confirm
they engage in ethical treatment of employees
and observe prevailing laws in relation to other
ethical issues, and ensures that suppliers:
e Do not employ any forced, bonded or
involuntary labour;
e Do not use child labour;
e Provide safe and hygienic working conditions;
e Take adequate steps to prevent accidents and
injury to health arising out of, associated with,
or occurring in the course of employment;
e Pay wages and benefits and apply working
hours for a standard working week that are
no less than the applicable minimum national
legal standard;
e Do not discriminate on grounds of
gender, age, religion, political affiliation or
sexual orientation;
e Do not permit harsh or inhumane treatment of
its employees;
e Do not supply equipment used in the unethical
treatment of individuals;
e Do not supply or trade in any banned or
proscribed substances or materials in breach of
the prevailing laws;
e Do not engage in practices that amount to
bribery; and
e Respect and seek to avoid any unlawful
infringement of the intellectual property rights
of third parties
The Health and Safety of our staff, visitors to
our facilities, and those who carry out work
on our behalf, is of the utmost importance to
us. Identifying and complying with applicable
legislation underpins our Health and Safety
activities and improvement initiatives. The Board
provides Health, Safety and Environmental
(HSE) leadership and the Chief Executive
Officer has primary responsibility for setting
the principles. The Chief Financial Officer,
supported by the Group Operations Director,
ensures adequate resource is available to support
operational health, safety and environmental
improvement plans.
We have established HSE Committees at each
site which meet monthly. These Committees
report monthly to the Senior Management Team
and to the Board. We focus on the prevention
of accidents and incidents through proactive
reporting of potential hazards.
Over the last 12 months we have focused our
resources to improve the level of accountability
and expectation for continuous improvement
in Health and Safety. Initiatives to improve
involvement and accountability will continue
over the foreseeable future to help us to further
reduce our accident potential.
Safety Performance 2016
Our All Injury Rate (AIR) was 5.353 in 2016 and
has been below the target of 6.0 over the past 3
years. We endeavour to take proactive initiatives
to ensure our AIR remains below our target.
Our AIR is measured as follows:
AIR (per 100,000)
No more than 6.0
5.764
4.296
5.353
6.0
AIR = Total number of injuries x 100,000
14
15
16
Total labour hours worked
Advanced Medical Solutions Group plc Annual Report 2016
AMS sponsors a number of sports charities and
clubs in the area. We have sponsored the annual
Pie & Peas 5 mile race for three years, which
is organised by the local athletics club based
in Winsford, Cheshire, Vale Royal A.C. As well
as sponsoring this local race, employees are
encouraged to participate in pre-race training
programs to foster employee well being as well
as enjoying good-humoured rivalry. AMS aims to
promote participation in sports and exercise so as
to encourage healthy lifestyles.
We also sponsor our local ladies football club,
Witton Albion Ladies FC, who receive no
other funding and are coached by one of our
employees in their spare time, as well as a local
junior rugby team (Crewe and Nantwich RUFC
Junior Colts).
We are involved with some international charities.
We sponsor a number of children in Africa
and Asia through Plan International, a charity
that promotes child rights and aims to end
child poverty.
We intend to continue to provide ongoing
support to these and other events.
Environment
It is the Group’s policy to abide by all laws,
directives and regulations relevant to its field
of operations and to act in a manner so as
to minimise the effects of our operations on
the environment.
As AMS has operations across a number
of countries, local management drives
environmental performance. Specific
site-level objectives are established to
ensure compliance with local legislative and
external management system requirements.
AMS uses a variety of indicators to monitor
environmental performance.
Community
We are committed to supporting and having a
positive interaction with our local communities.
The Whitechapel Centre is the leading homeless
and housing charity for the Liverpool region.
They work with people who are sleeping rough,
living in hostels or struggling to manage their
accommodation. They are committed to helping
people find and maintain a home and learn
the life skills essential for independent living.
AMS has supported the Whitechapel Centre for
the last two years and at Christmas employees
provided over two hundred shoe boxes wrapped
as presents containing essential items such as
toiletries and warm clothing, and Christmas gifts.
These contributions are matched financially by
the Company.
37
Left: Witton Albion Ladies FC
Team Photo
We were delighted that Advanced
Medical Solutions chose to
support us. We had a fantastic
season, thoroughly enjoyed our
football, and really appreciate
the support and commitment
we received.
Anthony Lee
Manager, Witton Albion Ladies.
Advanced Medical Solutions Group plc Annual Report 2016Company OverviewStrategic Report GovernanceFinancial Statements 38
Risk Management
Creating quality outcomes
by managing risk
Risk and uncertainty are an inherent part of
doing business and could have an impact on our
business, brands, assets, revenue, profits, liquidity
and capital resources. To meet our strategic
objectives, build shareholder value and promote
our stakeholders’ interests, we must manage
this risk.
An effective and successful risk management
process balances risk and reward and is
dependent on the judgement of the likelihood
and impact of the risk involved. The Board has
overall responsibility for ensuring there is an
effective risk management framework, which
underpins our business model.
The Business Units, Senior Management Team
(SMT), Audit Committee and Board review risks
throughout the year. These risks are documented
in the Risk Register which is formally reviewed
by the SMT, Internal Audit and the Board twice
annually. The plans and actions assigned to
the Executive Directors and SMT members are
reviewed to ensure progress in being made with
risk and mitigation plans.
We believe that the policies, procedures and
monitoring systems that are in place are
sufficient to effectively manage the risks faced by
our business.
Key Roles and Responsibilities
Board
e Overall responsibility for corporate strategy,
e Defining the Group’s appetite for risk
governance, performance, internal controls and Risk
Management Framework
e Identification, review and management of identified
Group strategic risks
e Assessing the effectiveness of the risk management
processes adopted across the Group
e Challenging the content of the Risk Register
y
t
i
l
i
b
i
s
n
o
p
s
e
r
g
n
i
t
r
o
p
e
r
d
n
a
g
n
i
r
o
t
i
n
o
M
Audit
Committee
e Assessing the effectiveness of the risk management
e Monitoring compliance with internal control systems
processes adopted across the Group
and manages Internal Audit arrangements
e Ensuring compliance with legislation, rules
and regulations
Senior
Management
Team
e Management of the business and delivery of strategy
e Challenging the appropriateness and adequacy of
e Identification and monitoring of the key risk indicators
action plans to mitigate risk
and taking timely action where appropriate
e Analysing the aggregation of risk across the Group
e Ensuring implementation of the Group’s actions and
e Provision of cross functional/Business Unit resource
mitigation plans required to manage risk
to effectively mitigate risk
Business
Units
e Execution of the delivery of the actions associated
e Identification and reporting of strategic risks to the
with managing risk
Senior Management Team
e Timely reporting on the implementation and progress
e Implementation of a risk management approach
of agreed action plans
which promotes the ongoing identification,
evaluation, prioritisation, mitigation and monitoring
of operational risk
y
t
i
l
i
b
i
s
n
o
p
s
e
r
e
c
n
a
i
l
p
m
o
c
d
n
a
n
o
i
t
a
t
n
e
m
e
p
m
l
I
Advanced Medical Solutions Group plc Annual Report 2016
39
Identifying Risks
A robust methodology is used to identify key risks
across the Group; in Business Units, operations
and during projects. This is an ongoing process.
Analysing Risks
Once identified, the process will evaluate identified
risks to establish root causes, financial and non-
financial impacts and likelihood of occurrence.
We use a scoring system to assess the likelihood
of a risk materialising and the potential financial
impact on the Group. The risks are prioritised
in terms of severity based on the scoring and
a mitigation plan is prepared to reduce the
risk. Once controls and mitigating factors are
considered, the risk is reassessed and re-scored
(mitigated score) to ascertain the net exposure.
Managing Risk
The SMT, Internal Audit and the Board review
the Risk Register formally at least twice a year,
assessing whether the risks are still the most
Risk Management Model
significant facing the Group and whether new
risks have arisen. Effectiveness, adequacy of
controls and mitigating actions are assessed
and if additional controls or actions are required,
these are identified and actions assigned.
The Risk Register documents this.
Monitoring and Reporting Risk
The SMT is responsible for monitoring progress
to mitigate key risks. The risk management
process is continuous; key risks are reported
to the Board following the bi-annual review
of the Group’s Risk Register.
Internal Audit
Additionally, the Board is supported by a program
of Internal Audits. Internal Audit reports to
the Audit Committee on progress of control
or process improvements following Internal
Audit recommendations.
C o r p o r a t e Governance
Identify
Identify risks
Assess existing
controls
Analyse
Assess mitigating
factors
Score mitigating
risks
Risk
Management
Process
Monitor
and Report
Monitor
execution of
actions
Manage
Assign
responsibility
Develop
action plan
Advanced Medical Solutions Group plc Annual Report 2016Company OverviewStrategic Report GovernanceFinancial Statements 40
Risk Management continued
Principal Risks: Impact, key
controls and mitigating factors
Risk
Key Controls and Mitigating Factors
Market share growth declines/
developing new markets is slower
than expected
Impact
eIncome shortfall
eLoss of OEM partners
Lack of innovation/slow adoption
of new products
Impact
eLoss of market share
eReturn on R&D investment is poor
eMisidentification of new,
competitive technology
eLoss of business
eEffective alignment of strategy to consider the market changes and promote quality and cost savings
eNew territories for revenue growth developed
eContinued development of new products and projects to deliver growth to provide differentiation
eMarketing strategy to support partners and products
ePipeline of new products / technologies identified and prioritised
eR&D progress is monitored against the stage gate process to ensure projects are progressing to plan
and action is taken if necessary
eStrong links with partners, including Universities, to reduce the risk of missed opportunities
eInvestment in clinical programmes, Key Opinion Leaders, clinical training and symposia to foster the
adoption of new approaches
eConsideration of licensing technology
Industry consolidation/loss of business
at key account level
Impact
eIncome shortfall
eNo over reliance on any one customer. No one customer is more than 10% of the Group’s revenue
eAll customers have contracts with agreed termination clauses
eEvaluation of opportunities to broaden reach into new markets
eUnique products protected by Intellectual Property (IP)
Increased global competition
reduces profitability
eFull service offering including strong regulatory and quality assurance together with product development,
product differentiation and clinical support to mitigate a pure cost of supply proposition
Impact
eIncome shortfall
Regulatory risk
Impact
eInability to supply product
eProduct launches delayed
eLoss of customer, revenue
and reputation
Making the wrong acquisition
Impact
eImpaction Group performance,
revenue and market capitalisation
eReputational loss
eContacts have agreed set minimas which allow terms to be renegotiated or agreements terminated
eDiversified approach reduces the impact on any one project, partner or product
eStringent regulatory regime in place
eExperienced regulatory team
eStrong regulatory pathway ensures that the increased regulatory requirements are met to gain approvals
eWork with partners and distributors where they have local expertise
eStrictly controlled Quality Management System
eStrategy set and M&A objectives defined
eAdvisors appointed
eDetailed market intelligence and identification of targets
eExtensive due diligence process established
Advanced Medical Solutions Group plc Annual Report 2016 41
Risk
Brexit implications
Impact
eHigher costs
eMore complicated/longer
product approvals
eLonger lead times for customers
Forex exposure
Impact
eLoss of income
eShortfall in profit
eMarket expectations missed
Key Controls and Mitigating Factors
eBrexit team established with plans outlined
eMonitor Brexit discussions and agree course of action once decisions are made
eSet up as an Authorised Economic Operator to allow quicker customs clearance
eEvaluate benefits of establishing a distribution hub in Mainland Europe
eUtilise existing European subsidiaries to best advantage
eTreasury policy on forex exposure determined
eAt least 70% of estimated transactional exposure for next 12 months hedged
Vulnerability to single source supply
Impact
eInability to supply specific products and
eDual source key components wherever possible
eHold levels of inventory to prevent operational issues arising from delays
eBusiness Interruption Insurance to cover significant interruption of supply
eR&D prioritising assessment of ability to patent
ePatented technologies reviewed for inclusion into new developments
eIP portfolio reviewed regularly
eLegal team working closely with R&D and patent attorneys
eStrong enforcement if IP infringed
eCyber Security audits carried out
ePenetration testing
eOngoing user education
eImplementation of audit and testing recommendations
exposed to price increases
eIncreased cost of supply
Insufficient focus on protection of IP
Impact
eCommercial value of products
not maximised
eLoss of revenue
ePotential patent infringement
Cyber-Risk (Systems and
Data compromised)
Impact
eLoss of sensitive data
eLoss of reputation
Mary Tavener
Company Secretary
28 April 2017
Advanced Medical Solutions Group plc Annual Report 2016Company OverviewStrategic Report GovernanceFinancial Statements 42
Board of Directors
Peter V Allen
Non-Executive
Chairman
Mr Allen was appointed as Non-Executive Chairman
of the Group in January 2014. He is currently the
Non-Executive Chairman of LSE listed Future plc,
AIM listed Clinigen plc, and Diurnal plc, together with
privately owned Oxford Nanopore Technologies
Limited. He is a qualified Chartered Accountant.
Mr Allen has extensive experience in the healthcare
industry, having held key senior positions in a number
of companies and playing a significant role in their
development. This includes 12 years at Celltech Group
plc (1992-2004) as CFO and Deputy CEO, 6 years
as Chairman (2007-13) and interim CEO (2010-11) of
ProStrakan Group plc, and three years as Chairman
of Proximagen Neurosciences plc (2009-12).
A
R N*
Chris Meredith
N
Chief Executive
Officer
Mr Meredith was appointed Group Chief Executive
Officer in January 2011. He joined AMS as Group
Commercial Director in July 2005 following a
successful 18-year career in international healthcare
sales, marketing and business development.
His experience prior to joining AMS covered
business-to business contract manufacturing,
product development and clinical research as well as
branded product sales all within the medical device,
pharmaceutical or consumer healthcare markets.
He was appointed Managing Director of Advanced
Woundcare in February 2008 and in January 2010
he became Chief Operating Officer for the Group.
Mr Meredith has previously held senior positions at
Smiths Industries, Cardinal Health, Banner Pharmacaps,
and Aster Cephac.
Mary G Tavener
Chief Financial
Officer
C
Ms Tavener joined AMS as Finance Director in 1999.
Prior to this she was the Group Financial Controller
at BTP plc during a period of considerable corporate
activity and was involved in the acquisition and disposal
of several businesses that repositioned BTP plc as
a fine chemical company prior to it being sold to
Clariant AG. Her experience has been gained in several
manufacturing companies and she has held financial
positions with Cadburys Ltd and Parker Hannifin,
a US Engineering Corporation. Prior to BTP plc she was
the Finance Director of Churchill Tableware Ltd. She is
a qualified Chatered Management Accountant and
member of the Association of Corporate Treasurers.
Advanced Medical Solutions Group plc Annual Report 2016 43
Key
* Denotes Chairman
C Company Secretary
A Audit Committee
R Remuneration Committee
N Nomination Committee
Registered Office
Premier Park, 33 Road One,
Winsford Industrial Estate,
Winsford,
Cheshire CW7 3RT
Registered Number
2867684
Penny Freer
A
R* N
Stephen G Bellamy
A*
R
N
Senior Independent
Non-Executive Director
Non-Executive
Director
Ms Freer was appointed as Senior Independent
Non-Executive Director of AMS in March 2010.
She is a partner of London Bridge Capital Partners,
a corporate advisory business, and a Non-Executive
Director of Empresaria Group plc, Crown Place VCT plc
and Sinophi Healthcare.
Mr Bellamy was appointed as Non- Executive Director
of AMS in February 2007. He is currently Chairman of
Becrypt Ltd (data security and protection technology)
and a founding partner of Accretion Capital LLP
(provider of strategic capital and advice to European
emerging technology companies).
With 25 years’ experience in investment banking she
was formerly Head of Equities for Robert W Baird
in London and prior to this held senior positions at
Credit Lyonnais and NatWest Markets.
Formerly an Executive Director of Sherwood
International plc and Brierley Investments’ London
operations, he has also held a number of other
Non-Executive Directorships and advisory roles.
He is a New Zealand qualified Chartered Accountant.
Peter M Steinmann
Non-Executive
Director
A
R
N
Mr Steinmann was appointed as Non-Executive
Director of AMS in July 2013. He is a Swiss national with
over 25 years of commercial experience in Medical
Devices and Diagnostics. He has held senior roles
within Johnson & Johnson, Medtronic International
and Boehringer Mannheim. Most recently, he was
Regional Vice President Global Surgery and Shared
Services, Medical Devices and Diagnostics, Austria,
Germany and Switzerland at Johnson & Johnson AG,
Switzerland as well as Chairman of the Board.
Having worked throughout Europe and North America,
he has extensive knowledge of the global medical
devices market. He is currently Chairman of Advanced
Perfusion Diagnostics SA, a Non-Executive Director of
DistaMotion SA and is a Board Observer with Orthimo
AG, and has held a number of other Non-Executive
Directorships prior to joining AMS.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 44
Senior Management
Simon Coates
Group IS Manager
Simon joined AMS in 2002 as Group Information
Systems Manager and, during the Company’s growth
since then, he has overseen many key IT projects
including implementing ERP systems across the Group,
integrating acquisitions and relocating the business into
its existing Winsford site.
Simon has over 25 years’ experience in IT infrastructure,
systems implementation and software development
gained from a number of different industries. Prior to
joining AMS he was Worldwide IT manager at Whitford
Plastics Ltd, a manufacturer of fluropolymer coatings,
supporting them through a period of rapid growth,
managing multiple sites and key IT projects including
ERP implementation and adoption of the Euro for the
European offices.
Simon was appointed to the Senior Management Team
in January 2015.
Rose Guang
Group Quality Assurance/
Regulatory Affairs (QA/RA) Director
Rose joined AMS in May 2013 as Group QA/RA Director.
Having completed her Masters Degree in Precision
Engineering from Nanyang Technology University in
Singapore, Rose has over 20 years’ experience working
for medical device companies and has a strong
background in setting up effective quality systems.
Rose has worked for Bausch & Lomb International
Healthcare, Nypro and spent nine years at Medical
House Products plc as Director of Quality, Regulatory
Affairs and Operations. Prior to joining AMS, Rose was
Head of Quality and Regulatory Affairs at Bespak, part
of Consort Medical plc.
Rose is also a 6 Sigma Master Black Belt.
Eddie Johnson
Group Financial Controller
Eddie joined AMS in October 2011. Having gained a
first class degree in Maths and Computer Science from
Keele University in 1993, he qualified as a Chartered
Accountant in 1996. Since moving into industry in
1996 Eddie has held a number of senior finance roles
in various sectors including, more recently, Head of
Commercial Finance at Norcros plc and Western
European Financial Controller for Sumitomo Electrical
Wiring Systems.
In November 2012, Eddie was appointed Group
Financial Controller
Advanced Medical Solutions Group plc Annual Report 2016 45
Pieter van Hoof
Jeff Willis
Group Operations Director
Pieter joined AMS B.V. in November 2009. Having
completed a Masters degree in Engineering in
Chemistry and Biochemistry at the Katholieke
Universiteit Leuven (Belgium). Pieter joined Janssen
Pharmaceutica working as a production supervisor in
the manufacturing unit for sterile injectable products
before joining the DuPont Engineering Polymers
business in September 1999. At DuPont Engineering
Polymers Pieter worked in a number of business
process improvement roles in Supply Chain, certifying
as a 6 Sigma Master Black Belt, before moving
into Sales and Marketing, gathering experience in
account management and business development.
Before joining Advanced Medical Solutions B.V.
Pieter held the position of European Customer Services
Manager for DuPont Engineering Polymers.
Pieter was appointed Director of our Bulk Materials
Business Unit in November 2012 and became the
Operations Manager for our Winsford and Etten-Leur
sites in February 2015. He was promoted to Group
Operations Director in December 2016, following
Richard Stenton’s retirement.
Business Unit Director,
Branded Direct and Branded Distributed
Jeff joined AMS in October 2005 as Vice President
Business Development, Americas. Jeff graduated
with a degree in Biomedical Engineering from the
University of Florida in 1996 and completed a Masters
programme in Management of Technology at Georgia
Institute of Technology in 2001. He spent ten years with
Kimberly-Clark Health Care in various R&D, Product
Development, and New Business Development
roles. In 2004, Jeff joined Abbott Laboratories in
Columbus, Ohio as Manager of Licensing and Business
Development supporting the medical nutritional and
consumer products division.
In October 2009, Jeff assumed the role of Vice
President of Group Marketing for AMS, relocating to
the UK. In December 2011, Jeff also took responsibility
for the Integration of RESORBA®.
Jeff was appointed Director of our Branded Distributed
Business Unit in November 2012, and following a
recent re-organisation is now also Director of the
Branded Direct Business Unit. He resides in the US.
Becky Walmsley
Business Unit Director,
OEM and Bulk Materials
Becky joined AMS in July 2015 as Business Unit Director
of OEM and Bulk Materials. Becky graduated with a
degree in Modern Languages (French and German)
with International Studies from South Bank University in
1993 and completed an Executive Masters of Business
Administration at Lancaster University in 2000.
Becky has more than 13 years’ experience in the
Medical Device sector, having held various senior
management roles, most recently as European Sales
Director for Scapa Healthcare.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 46
Corporate Governance Report
Governance Statement
The Company’s shares are quoted on the AIM market and are subject to the AIM Admission Rules of the London Stock Exchange and
consequently are not required to comply with the provisions or report in accordance with the UK Corporate Governance Code (the
Code) issued by the Financial Reporting Council in 2014. The Code was updated in April 2016 for accounting periods beginning on
or after 17 June 2016 and will be applied for the following financial year. The Board is however committed to the principles of good
corporate governance covering leadership, effectiveness, accountability, remuneration and shareholder relations as outlined in the Code.
The Directors have applied the Code as far as is practicable and appropriate for a public company of the Group’s size.
Role of the Board
The role of the Board is to establish the vision and strategy for the Group, to deliver shareholder value and it is responsible for the
long-term success of the Company. Individual members of the Board have equal responsibility for the overall stewardship, management
and performance of the Group and for the approval of its long-term objectives and strategic plans.
Division of Responsibilities
There is a clear division of responsibilities between the role of the Chairman and Chief Executive Officer of the Company. The roles are
clearly set out in writing and reviewed by the Board.
Board Responsibilities
Role
Chairman
Name
Peter Allen
Appointed Chairman on 1 January
2014 (following his appointment
as a Non-Executive Director on
4 December 2013)
Responsibility
e Leadership and management of the Board
e Setting the Board’s Agenda, style and tone of discussions
e Ensuring the Board’s effectiveness in all aspects of its role
e Work closely with the Chief Executive Officer on developing the
Group’s strategy, and providing general advice and support
Chief Executive
Officer
Chris Meredith
Senior Independent
Director
Penny Freer
Appointed Senior Independent
Director in 2010
Non-Executive
Directors
Steve Bellamy
Peter Steinmann
e Facilitating active engagement by all members
e Participating in shareholder communications
e Promoting high standards of corporate governance
e Managing the Group’s business
e Developing Group strategy for consideration and approval by the Board
e Leading the Senior Management Team (SMT) in delivering the Group’s
strategic and day-to-day operational objectives
e Leading and maintaining communications with all stakeholders
e Acting as an intermediary for other Directors when necessary
e Available to meet with shareholders and aid communication of
shareholder concerns when normal channels of communication
are inappropriate
e Chair meetings of Non-Executive Directors if, and when, required
e All responsibilities of a Non-Executive Director as outlined below
e Constructively challenging and contributing to the development of
Group strategy
e Monitoring the integrity of financial information, financial controls
and systems of risk management to ensure they are robust
e Reviewing the performance of Executive Management
e Formulating Executive Director remuneration
The Non Executive Directors
Each of the Non-Executive Directors are free from any relationship with the Executive Management of the Company and are free from
any business or other relationship that could affect or appear to affect the exercise of their independent judgement. The Board considers
that all of the Company’s Non-Executive Directors are Independent Directors, in both character and judgement, in accordance with the
recommendations of the Code. This is explained in more detail on page 48. The Chairman, Peter Allen, was considered independent on
his appointment.
Advanced Medical Solutions Group plc Annual Report 2016 47
The Operation of the Board
The Board has the authority for ensuring that the Group is appropriately managed and achieves the strategic objectives it sets.
To achieve this, the Board reserves certain matters for its own determination including matters relating to Group strategy, approval
of interim and annual financial results, dividends, major capital expenditure, budgets, monitoring performance, treasury policy, risk
management, corporate governance and the effectiveness of its internal control systems. It has a schedule of matters specifically
reserved for its approval. Matters are delegated to the Board Committees, Executive Directors and the Senior Management Team where
appropriate. The Board performs its responsibilities through an annual programme of meetings and by continuous monitoring of the
performance of the Group.
Matters considered by the Board in 2016 included:
e Finance and operations review
e Annual budget
e Risk review
e Strategic plans
e Health and Safety
e Potential merger and acquisition targets
e Reports from the Board Committees
e Board evaluation
e Acquisition strategy
e Impact of Brexit
e Market Abuse Regulations (MAR)
e Consultant appointments across Group
e Major capital expenditure
The Board also delegates a number of its responsibilities to Committees and Management as described below.
Board Committees
The Board has delegated specific authority to the Audit Committee, Remuneration Committee and the Nomination Committee.
Peter Allen, Steve Bellamy, Penny Freer and Peter Steinmann are members of the Audit, Remuneration and Nomination Committees.
Chris Meredith is a member of the Nomination Committee.
The Terms of Reference of all three Board Committees are available on the corporate website ‘www.admedsol.com’.
Board and Committee Meetings
The Board meets on a formal basis regularly, and met formally eight times in 2016. Members are supplied with financial and operational
information in good time for review in advance of the meetings. Most Board Committee meetings are scheduled around Board meetings.
The Directors attended the following meetings in the year ended 31 December 2016:
Peter Allen
Steve Bellamy
Penny Freer
Chris Meredith
Peter Steinmann
Mary Tavener
* By invitation
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
8
8
8
8
8
8
3
3
3
2*
3
3*
4
4
4
4*
4
4*
1
1
1
1
1
1*
All Directors have access to the advice and services of the Company Secretary. The Board approves the appointment and removal of the
Company Secretary. The Non-Executive Directors are able to contact the Executive Directors, Company Secretary, Deputy Company
Secretary or Senior Managers at any time for further information.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 48
Corporate Governance Report continued
Effectiveness
Board Composition
Board Composition
The Board comprises the Non-Executive Chairman, two Executive Directors and three Non-Executive
Directors. The Directors’ profiles appear on pages 42 and 43 and detail their experience and
suitability for leading and managing the Group. Together they bring a valuable range of expertise and
experience to the Group. No individual or group of individuals dominates the Board’s decision making
process. The Chairman fosters a climate of debate and challenge in the boardroom, built on his
challenging but supportive relationship with the Chief Executive Officer which sets the tone for Board
interaction and discussions.
Appointment of Non-Executive Directors
Non-Executive Directors are appointed to the Board following a formal, rigorous and transparent
process, involving external recruitment agencies, to select individuals who have a depth and breadth
of relevant experience, thus ensuring that the selected candidates will be capable of making an
effective and relevant contribution to the Board. The process for the appointment of Non- Executive
Directors is managed by the Nomination Committee, whose responsibilities are outlined on page 49.
Diversity
We recognise the importance of diversity at Board level and our Board members comprise a number
of different nationalities with a wide range of skills and experiences from a variety of business
backgrounds. Our current female representation on the Board is 33.3%, already above the minimum
representation level which was to be achieved by 2015. Additionally, the Senior Management Team
also has a diverse experience. Its members comprise of several nationalities and female representation
is 37.5%.
Non-Executive Chairman
Executive Directors
Non-Executives Directors
1
2
3
Gender Diversity of Board
Terms of Appointment and Time Commitment
All Non-Executive Directors are appointed for an initial term of three years subject to satisfactory
performance. After this time they may serve additional three year terms following review by the
Board. All Non-Executive Directors are expected to devote such time as is necessary for the proper
performance of their duties. Directors are expected to attend all Board meetings and Committee
meetings of which they are members and any additional meetings as required.
Male
Female
Further details of their terms and conditions are summarised in the Remuneration Report on page
62 and the terms and conditions of appointment of the Non-Executive Directors are available at the
Company’s Registered Office.
Board Tenure
Tenure Chart
The size of the Board during 2016 was six and the tenure was as follows.
The Company follows the Code as far as is practicable. The Board notes the tenure requirement for
a Non-Executive Director who has served on the Board for more than nine years from the date of first
election to not be considered to be independent (Code Provision B.1.1.). Steve Bellamy has served
as a Non-Executive Director for 10 years (February 2017). Due to his extensive experience with the
Company, and that the Board consider him to be independent of character and judgement, he is
considered to be an independent Director. As such Steve Bellamy will be subject to annual re-election
starting in 2017 (Code Provision B.7.1.).
0-3 years
4-7 years
8+ years
4
2
nil
3
3
The Board further notes that under Code Provision B.1.2 a smaller company (below FTSE 350) must
have at least 2 independent Non-Executive Directors. The Board consider Peter Allen, Steve Bellamy,
Penny Freer and Peter Steinmann to be independent.
Peter Allen, Steve Bellamy and Penny Freer own shares in the Company. These holdings have been
highlighted to shareholders and are small. They are not considered to impact Non-Executive Director
independence under Code Provision B.1.1.
Code Provision B.2.3. states that any term beyond six years for a Non-Executive Director should
be subject to rigorous review, taking into account the need for progressive refreshing of the Board.
The Board reviewed the appointments of Steve Bellamy and Penny Freer, and consider that their
continued appointment does not present any issues.
Advanced Medical Solutions Group plc Annual Report 2016 49
Induction and Professional Development
New Directors are given a formal induction process including details of how the Board and Committees operate, meetings with Senior
Management and information on Group strategy, products and performance. Training and development needs of Directors are reviewed
regularly. The Directors are kept appraised of developments in legal, regulatory and financial matters affecting the Group by the Deputy
Company Secretary and the Group’s External Auditors and advisors.
Professional Advice, Indemnities and Insurance
There is provision for Directors to take independent professional advice relating to the discharge of their responsibilities should they feel
they need it. The Company has arranged Directors’ and Officers’ liability insurance against certain liabilities and defence costs. However,
the Directors’ insurance does not provide protection in the event of a Director being found to have acted fraudulently or dishonestly.
Board and Committee Evaluation
The performance evaluation of the Board, its Committees and Directors is undertaken by the Chairman annually and implemented in
collaboration with the Committee Chairmen. The 2016 Board and Committee evaluations were conducted by way of each Director and
Committee member completing comprehensive questionnaires. The results were collated, discussed and acted upon by the Board and
Committees. The Board reviews the outcomes of the Committee evaluations and assesses their performance. The Chairman confirms
that the performance of the Non-Executive Directors continues to be effective.
Election and Re-Election of Directors
The Company’s Articles of Association require all Directors to retire and submit themselves for re-election at the first AGM after
appointment and thereafter at least every three years. The Notice of AGM will give details of those Directors seeking re-election.
Remuneration Committee
The Remuneration Committee comprises Penny Freer (Chairman), Peter Allen, Steve Bellamy and Peter Steinmann. The Committee
has Terms of Reference that are reviewed at least annually, were updated at the end of 2016 and are available to view on the Company
Website ‘www.admedsol.com’. The Deputy Company Secretary acts as Secretary to the Committee.
The Remuneration Committee met four times in 2016. The Committee, in consultation with the Chief Executive Officer, determines the
Group’s policy on Executive remuneration, employment conditions and the individual remuneration packages of the Executive Directors
of all Group companies and all Management earning in excess of £100,000 per annum. It also approves all new incentive schemes, the
grants of options under the Group’s share option schemes and the grant of shares under the Group’s Long-Term Incentive Plan (LTIP).
The report of the Committee is included on pages 55 to 64.
Nomination Committee
The Nomination Committee comprises Peter Allen (Chairman), Penny Freer, Steve Bellamy, Chris Meredith and Peter Steinmann and
meets as and when it is necessary to do so. The Committee has Terms of Reference that are reviewed at least annually, were updated
at the end of 2016 and are available to view on the Company Website ‘www.admedsol.com’. The Deputy Company Secretary acts as
Secretary to the Committee. The Committee met once during the year.
The Committee’s role is to:
e Ensure that appropriate procedures are in place for the nomination and selection of candidates for appointment to the Board
considering the balance of skills, knowledge and experience of the Board;
e Make recommendations to the Board regarding re-election of Directors, succession planning and Board composition, having due
regard for diversity, including gender; and
e Consider succession planning for Senior Management and membership of the Audit and Remuneration Committees.
Audit Committee
The Audit Committee comprises Steve Bellamy (Chairman), Peter Allen, Penny Freer, and Peter Steinmann. Steve Bellamy, a qualified
Chartered Accountant, chairs the Committee. The Committee has Terms of Reference that are reviewed at least annually, were updated
at the end of 2016 and are available to view on the Company Website ‘www.admedsol.com’. The Deputy Company Secretary acts as
Secretary to the Committee.
The Committee met three times during the year. The Chief Executive Officer, Chief Financial Officer, Group Financial Controller, External
Audit Partner and Internal Auditor attended a number of these meetings. The Audit Committee also met with the External Audit partner
without the Executives and Senior Managers present. The Audit Committee Report is included on pages 51 to 54.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 50
Corporate Governance Report continued
Going Concern
In carrying out their duties in respect of going concern, the Directors have carried out a review of the Group’s financial position and cash
flow forecasts for the next 12 months from signing of the accounts. These have been based on a comprehensive review of revenue,
expenditure and cash flows, taking into account specific business risks and the current economic environment.
With regard to the Group’s financial position, it had cash and cash equivalents at the year end of £51.1 million (2015: £34.2 million) and
was debt free (2015: debt free). The Group agreed a five-year, £30 million, multi-currency, revolving credit facility in December 2014 with
an accordion option under which AMS can request up to an additional £20 million on the same terms. The new facility is provided jointly
by the Group’s existing bank HSBC, as well as The Royal Bank of Scotland PLC and replaced the previous £4 million facility. It is unsecured
on the assets of the Group and is currently undrawn.
While the current economic environment is uncertain, AMS operates in a market whose demographics are favourable, underpinned by
an increasing need for products to treat chronic and acute wounds. Consequently, market growth is predicted. The Group has a number
of long-term contracts with customers across different geographic regions and also with substantial financial resources, ranging from
government agencies through to global healthcare companies.
Having taken the above into consideration, the Directors have reached the conclusion that the Group is well placed to manage its
business risks in the current economic environment. Accordingly, they continue to adopt the going concern basis in preparing the
Financial Statements.
Remuneration
The level of remuneration of the Directors is set out in the Remuneration Report on pages 55 to 64.
Relations with Shareholders
The Board appreciates that effective communication with the Company’s shareholders and the investment community as a whole
is a key objective. The Chairman’s Statement, Chief Executive’s Statement and the Strategic Report and Financial Review, together with
the information in the Annual Report of the Group, provides a detailed review of the business. The views of both institutional and private
shareholders are important, and these can be varied and wide-ranging, as is their interest in the Company’s strategy, reputation and
performance. The Executive Directors have overall responsibility for ensuring effective communication and the Company maintains
a regular dialogue with its shareholders, mainly in the periods following the announcement of the interim and final results, but also
at other times during the year. The views of shareholders are sought through direct contact and via feedback from advisors and are
communicated to the Board as a whole. The Board encourages the participation of shareholders at its Annual General Meeting, notice
of which is sent to shareholders at least 20 working days before the meeting. The AMS website ‘www.admedsol.com’ is regularly updated
and provides additional information on the Group including information on the Group’s products and technology.
Annual General Meeting
This year’s AGM will, as last year, include a presentation by the Chief Executive Officer on the current progress of the business and
allow the opportunity for questions on this or any of the resolutions. The Company proposes separate resolutions for each issue and
specifically relating to the report and accounts. The Company ensures all proxy votes are counted and indicates the level of proxies on
each resolution along with the abstentions after it has been dealt with on a show of hands.
After the meeting, shareholders have the opportunity to talk informally to the Board and raise any further questions or issues they may
have. The outcome of the AGM, a copy of the AGM presentation and details of the poll results will be posted on the Company’s website
after the meeting.
Mary Tavener
Company Secretary
28 April 2017
Advanced Medical Solutions Group plc Annual Report 2016 51
Audit Committee Report
Aims and Objectives
The overall aim of the Committee is to monitor the integrity of the Group’s financial statements and announcements, its accounting
processes, and the effectiveness of its internal controls and risk management system. The Committee assists the Board in fulfilling its
responsibility to ensure that the Group’s financial systems provide accurate and up-to-date information on its financial position, and
supports the Board in its consideration as to whether the Group’s published Financial Statements are fair, balanced and understandable.
The Audit Committee is required to:
e Oversee and advise the Board on the current risk exposures of the Company and related future risk strategies
e Oversee the activities of Internal Audit
e Review internal control policies and procedures for the identification, assessment and reporting of material financial and
non-financial risks
e Review the Group’s procedures for detecting fraud
e Review the Group’s procedures for the prevention of bribery and corruption
e Review the Group’s procedures for ensuring that appropriate arrangements are in place to enable employees to raise matters
of possible impropriety in confidence
e Review the effectiveness of the Group’s financial reporting
e Review the content of the Annual Report and advise the Board whether, taken as a whole, it is fair, balanced and understandable, and
provides the information necessary for shareholders to assess the Group’s position, performance, business model and strategy
e Review the engagement, effectiveness and independence of the External Auditor
e Review audit and non audit services and fees
e Review the Committee Terms of Reference
Audit Committee Activities
To discharge its responsibilities, during the year, the Committee has undertaken the following activities:
Financial Statements and Reports
e Reviewed and discussed changes to the UK Corporate Governance framework, including the update issued on 16 June 2016, and its
impact on reporting requirements
e Reviewed and approved the External Audit fees for 2016
e Reviewed the annual and half-yearly financial reports and related statements and discussed:
• Key accounting judgements
• The Income Statement for both the half year and the full year
• Exceptional items - The Committee has challenged the basis and the nature of the items and determined whether separate
disclosure was appropriate or not
• Cost of capital
• Goodwill impairment
• Brexit effect
e Reviewed and considered the significant issues in relation to the Financial Statements and how these have been addressed, including:
• Going Concern – The 2014 UK Corporate Governance Code provision C.2.2 has set out a requirement for the Directors to explain
in the Annual Report how they have assessed the prospects of the Company, over what period they have done so and why they
consider that period to be appropriate. The Committee reviews the analysis undertaken in relation to strategic risk management and
risk assessment, risk appetite, internal control, risk and control reporting structure and the principal risks identified on an ongoing
basis. This monitoring and review validates the draft statement which was documented for the first time in 2016.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 52
Audit Committee Report continued
External Audit
e Monitored the independence and ensured the objectivity of the External Auditor
e Approved all non-audit service work over £10,000
e Reviewed and approved the Audit Plan for the 2016 audit
e Reviewed the performance of the External Auditor and considered the reappointment of Deloitte LLP as auditor for 2017 and
recommended appointment to the Board
e Considered and recommended to the Board the new engagement partner for the audit in line with partner rotation rules
Internal Audit
e Considered and agreed the strategic and annual Internal Audit plan
e Reviewed and followed up on management responses to Internal Audit findings and recommendations
e Reviewed the performance of RSM UK and considered their reappointment
e Reviewed the performance and the resulting recommendations of the Internal Audits into the Site Operational Review and Payroll
Risk Management
e Reviewed the key risks to the Group and the plans to mitigate these risks
e Reviewed the Purchasing Approval levels of the Group
Terms of Reference
e The Committee’s Terms of Reference are reviewed annually in line with the Institute of Chartered Secretaries and Administrators (ICSA)
guidance to reflect the UK Governance Code.
To assess the effectiveness of our External Auditor, a formal performance review is undertaken on an annual basis to identify the
adequacy of their approach to:
Resource quality: – it is important that the External Auditor has achieved the right balance of audit team resource. With the team
providing both continuity and knowledge, as well as a fresh perspective through new team members to allow processes and accounting
policies to be challenged.
Effective communication: – key audit judgements are communicated at the earliest opportunity to promote discussion and challenge
between the External Auditors and management, informing AMS of audit issues as they arise, so that these can be dealt with in a timely
manner. Communication regarding good practice, changes to reporting requirements and accounting standards is also needed to
enable the company to be prepared prior to year end. Timely provision of audit papers is required to enable adequate management
review and feedback. The quality of the reports and publications provided by the External Auditor in terms of content, relevance and
presentation is reviewed.
Scoping and planning: – specifically relating to the year-end audit work: timely provision of the External Audit strategy and timetable
to Audit Committee and management.
Fees: – are transparent and communicated prior to the commencement of any work undertaken. Where variations occur, these are
informed at the earliest opportunity to enable dialogue and negotiation to be undertaken.
Auditor independence: – the Committee continues to monitor the External Auditor’s compliance with applicable ethical guidance and
guidelines and considers the independence and objectivity of the External Auditor as part of the Committee’s duties. The Committee
received and reviewed written confirmation from the External Auditor on all relationships that, in their judgement, may bear on their
independence. The External Auditor has also confirmed that they consider themselves independent within the meaning of UK regulatory
and professional requirements.
Advanced Medical Solutions Group plc Annual Report 2016 53
The External Auditor may be appointed to provide non-audit services where it is in the Group’s best interests to do so, provided a number
of criteria are met. These are that the External Auditor does not:
e Audit their own work
e Make management decisions for the Group
e Create a conflict of interest
e Find themselves in the role of an advocate for the Group
All projects where forecasted expenditure exceeded £10,000 were approved by the Audit Committee. Deloitte LLP has been the Group’s
External Auditor for eight financial years and the engagement partner has completed his five years as audit partner. Therefore, to aid in the
smooth transition of engagement partner in 2017, Deloitte has already commenced the introduction of a new engagement partner to
the Group and the External Audit team. Following the positive outcome of a performance and effectiveness evaluation undertaken by the
management, the Audit Committee concluded that it was appropriate to recommend to the Board the reappointment of Deloitte LLP as
the Group’s External Auditor for the next financial year.
Internal Audit
Internal Audit at AMS is managed and delivered by an external firm of Auditors, RSM UK, to provide this service under the direction and
guidance of the Audit Committee. Against an agreed mandate, this function performs independent Internal Audits across the Group.
A two-year Internal Audit strategy and an annual Internal Audit plan are approved by the Audit Committee each year. Internal Audits target
areas of risk and provide assurance that key controls are effectively designed and operated consistently. Audit reports are produced to
convey the extent of control assurance derived from the formal testing of controls. RSM UK’s findings and recommendations are reported
directly to the Audit Committee.
The Audit Committee:
e Reviews and approves the charter of the Internal Audit function and ensures the function has the necessary resources and access
to information to enable it to fulfil its mandate and is equipped to perform in accordance with appropriate professional standards
for Internal Auditors;
e Approves the appointment and the termination of the Internal Auditors;
e Ensures the Internal Auditor has direct access to the Board Chairman and to the Committee Chairman and is accountable to
the Committee;
e Reviews and assesses the annual Internal Audit workplan;
e Receives a report on the results of the Internal Auditors work at least twice per year;
e Reviews and monitors management’s responsiveness to the Internal Auditor’s findings and recommendations and the corrective
actions taken;
e Meets with the Internal Auditor at least once a year without the presence of management; and
e Monitors and reviews the effectiveness of the Company’s controls in the context of the Company’s overall risk management system.
All Internal Audit reports are discussed with the Audit Committee and the External Auditor, and the recommendations considered
and acted upon. RSM UK attends Audit Committee meetings twice a year and updates the Audit Committee in writing ahead of each
Committee meeting.
In 2016 the Internal Auditor undertook detailed audits of the Process Improvement Plan and Group Payroll at Plymouth, together with
a review of previous audit reports. The recommendations of Internal Audit were accepted by the Audit Committee and acted upon.
In 2017 audits are scheduled for Cyber Security and Planning and Forecasting. The Group also calls on the services of external bodies
to review the controls in certain areas of the Group. The quality assurance systems are reviewed by the Group’s notified bodies, the
British Standards Institute (BSI) and TÜV Rheinland LGA Products GmbH, on a regular basis.
The Internal Controls Framework is available for all employees to view on the Intranet. Updates are driven by an underlying process
change or by the outcomes of Internal Audit projects. Issues are identified, the policies are updated and then approved by the Group
Financial Controller and Chief Financial Officer. The updated policies are then formally approved by the Board.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 54
Audit Committee Report continued
Risk Management and Internal Controls
To achieve good internal controls the Board takes responsibility for the Group’s system of internal control and for reviewing its
effectiveness, taking guidance from the Audit Committee. The Board monitors and reviews all material controls including financial,
operational and compliance controls. Risks arising from operations can only be managed rather than eliminated. Only reasonable
and not absolute assurances can be made against material loss or misstatement. Key features of the internal control system are:
e The Group has an organisational structure with clear responsibilities and lines of accountability. The Group promotes the values
of integrity and professionalism. The members of the Board are available to hear, in confidence, any individual’s concerns
about improprieties;
e The Board has a schedule of matters reserved for its consideration. This schedule includes potential acquisitions, capital projects,
treasury policies and management systems, risk management systems and policies, approval of budgets, re-forecasts and Health
and Safety
e The Board or the Audit Committee reviews the Risk Register at least twice a year;
e The Board monitors the activities of the Group through the management accounts, monthly forecasts and other reports on current
activities and plans. The Senior Management Team, at least monthly, monitors financial and operational performance in detail;
e The Group has set appropriate levels of authorisation which must be adhered to as the Group concludes its business;
e An Enterprise Resource Planning (ERP) system with in-built controls over process and authority, minimising manual intervention and
overall strengthening controls is in place in the UK and the Netherlands and is being implemented in Germany; and
e The Group operates a ‘whistle-blowing’ policy enabling any individual with a concern to approach any of the Non-Executive Directors
in confidence.
As part of the External Auditor’s annual review process, any weaknesses identified in the Group’s internal control system are reported
to and discussed with the Audit Committee and corrective actions are agreed.
Risk Management
The Group’s corporate objective is to maximise long-term shareholder value, recognising that creating value is the reward for taking and
accepting risk. The Directors consider risk management to be crucial to the Group’s success and give it a high priority to ensure that
adequate systems are in place to evaluate and limit risk exposure.
Management formally reviews the Risk Register at least twice a year. Risks are evaluated for both likelihood and financial impact and
scored against both criteria. This is used to identify the most significant risks the business faces. These risks have been identified and are
discussed in more detail in the Strategic Review on pages 4 to 41. Actions are agreed to mitigate the risks.
At each review, progress on actions is assessed and further actions may be identified. Risks are re-scored and the effects of mitigating
actions taken are used to identify a residual risk score. Management also gives consideration to other risks that have been identified, score
these risks to understand significance and assign actions to be taken to mitigate, if required. The process for identifying, evaluating and
managing the risks faced by the Group is ongoing throughout the year.
Management report to the Audit Committee at least twice a year on the Risk Register. The Audit Committee reviews the Group’s Risk
Register and the effectiveness of Management’s actions to mitigate the risks.
As part of the External Auditor’s annual review process, any key risks and areas of audit focus are also identified and agreed with the
Audit Committee.
In September 2014 the FRC issued guidance on ‘Risk Management, Internal Control and Related Financial & Business Reporting’.
The new guidance was applied in the Group’s 2015 accounting period. The Audit Committee believes it meets the FRC requirements.
Mary Tavener
Company Secretary
28 April 2017
Advanced Medical Solutions Group plc Annual Report 2016 55
Remuneration Report
The Board presents the Remuneration Report for the year ended 31 December 2016.
As an AIM quoted company, Advanced Medical Solutions Group plc is not required to comply with the Directors’ Remuneration Report
regulations requirements under Main Market UK Listing Rules or those aspects of the Companies Act applicable to listed companies.
The following disclosures are made voluntarily.
The Remuneration Committee (Committee) comprises the three Non-Executive Directors of the Group and the Chairman of the Board.
Penny Freer is the Chairman of the Committee. Biographical information on the Committee members is set out on pages 42 to 43.
They have no personal financial interest, other than as shareholders, in the matters to be decided. They have no conflict of interest arising
from cross-directorships and no day-to-day involvement in running the business. They do not participate in any bonus, share option or
pension arrangements. The Committee met four times during the year. All the meetings were attended by all members. The Board has
accepted the Committee’s recommendations in full.
The Committee, on behalf of the Board, and in consultation with the Chief Executive Officer, determines the Group’s policy on executive
remuneration, employment conditions and the individual remuneration packages of the Executive Directors of all Group companies
and management and staff earning in excess of £100,000 per annum. It administers the share option schemes, determines the design
of performance-related pay schemes, sets the targets for such schemes and approves payment under such schemes. The Terms of
Reference of the Committee are reviewed each year and are available on the Company’s website, ‘www.admedsol.com’.
A resolution will be put to shareholders at the Annual General Meeting on 7 June 2017 asking them to consider and approve this Report.
The activities the Remuneration Committee undertook in 2016 were:
Month
February
June
October
Principal Activities
e Review of 2015 personal objectives and setting of 2016 personal objectives for Executive Directors
e Review of 2015 Executive Director and Senior Management Team (SMT) bonus and Deferred Annual
Bonus awards
e Review of proposed share option and LTIP awards
e Ratification of LTIP and share option awards for SMT
e Ratification of bonus and Deferred Annual Bonus awards for Executive Directors and SMT
e Review of Leaver Delegation Policy
e Review of legal and corporate governance developments
e Review of compliance with Executive Shareholding Policy for Executive Directors and SMT
e Review of UK pension arrangements
e Review of net settling of LTIPs and unapproved options
e Review of Hermes Remuneration Principles and consideration of remuneration market trends
e Initiation of salary benchmarking project with Towers Watson
November
e Consideration and approval of 2017 basic salary for Executive Directors and SMT
e Discussion on pension arrangements for Executive Directors and SMT
e Review of results of Committee Self Assessment questionnaire, Terms of Reference and Directors
Expenses Policy
e Agreement of 2017 Remuneration Committee Meeting dates
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 56
Remuneration Report continued
Remuneration Policy
The remuneration policy is formulated around the need to provide a remuneration structure that is competitive to attract, retain and
motivate Senior Executives of the calibre required to develop and implement the Company’s strategy and enhance earnings over the
long-term, whilst at the same time not paying more than is necessary for this purpose. A cohesive reward structure consistently applied
with links to corporate performance is seen as crucial in ensuring attainment of the Group’s strategic goals. It is the intention of this policy
to conform to best practice as far as reasonably practicable. It will continue to apply for 2017 and subsequent years, subject to regular
review and supported by independent advice. The Committee retains the right for discretion, although no discretion was used in 2016.
The policy is based around the following key principles:
e Total rewards will be set at levels that are sufficiently competitive to enable the recruitment and retention of high calibre
Senior Executives;
e Total incentive-based rewards will be earned through the achievement of performance conditions consistent with
shareholder interests;
e The design of long-term incentives will be prudent and will not expose shareholders to unreasonable financial risk; and
e In considering the market positioning of reward elements, account will be taken of the performance of the Group and of each
individual Executive Director.
Kepler, part of Mercer (previously Kepler Associates), were engaged in 2014 to advise the Committee with regard to the remuneration
of the Executives and SMT. The Committee took into account recommendations which included the introduction of an Executive
Shareholding Policy requiring the Executive Directors and SMT to hold a minimum of 100% and 50% respectively, of their pre-tax annual
salary in Company shares within five years of attaining office, as well as changes to the bonus scheme. As a result of the Committee’s
recommendations a Deferred Annual Bonus (DAB) Scheme was approved by shareholders at the 2014 AGM and options have been
issued under the DAB every year since its introduction. All SMT members exceeded the threshold as at 31 December 2016, except one
member who had only been appointed 18 months earlier. Each Executive Director’s remuneration package consists of basic salary,
bonus, LTIPs, health and insurance benefits, and pension contributions. The Committee ensures that there is a balance between fixed
and performance related remuneration elements.
Consideration of Shareholder Views
In formulating the remuneration policy, the Committee takes into account guidance issued by shareholder representative bodies,
including the Investment Association, the Pensions and Lifetime Savings Association and Institutional Shareholder Services.
The Committee also takes into consideration any views expressed by shareholders during the year (including at the AGM) and encourages
open dialogue with its largest shareholders. Major shareholders are consulted in advance about changes to the remuneration policy.
Consideration of Employment Conditions elsewhere in the Group
The Committee considers the general basic salary increase for the broader employee population when determining the annual salary
increases and remuneration for the Executive Directors. For example, as explained on page 59, reflecting the wider cost of living increase
for the 2017 financial year, the Committee determined to only increase the basic salary for the Executive Directors by the cost of living.
Statement of Voting at General Meeting
At the 2016 AGM, the percentages of votes cast ‘for’, ‘against’ and ‘withheld’ in respect of the Directors’ Remuneration Report were
as follows:
Resolution
To approve the Directors’ Remuneration Report
No. of shares
Votes cast ‘for’ Votes cast ‘against’
122,758,450
99.95%
0.05%
Advanced Medical Solutions Group plc Annual Report 2016 57
Overview of Director’s Remuneration Policy
Directors’ Policy Table
Element of
remuneration
Purpose and how it
supports strategy
How the element operated
and maximum opportunity
Framework used to
assess performance
Where there is a change in responsibility,
progression in the role, change in size or structure
of the Group or increased experience of the
Executive Director or member of the SMT, the
Committee retains the discretion to award a
higher increase than the UK workforce.
Base Salary
To provide competitive
fixed remuneration.
To attract, retain and
motivate Executive
Directors and the SMT
of the right calibre to
deliver the Company’s
strategy and to provide
a core level of reward
for the role.
In line with the policy outlined on page 56
salary levels of Executive Directors and the SMT
are set after taking into account experience,
responsibilities and performance, both on an
individual and business perspective, and external
market data (benchmarked against companies of
a similar size and complexity and other companies
in the same industry sector).
Salaries are reviewed annually (normally
December, with any changes effective from
1 January). Details of the current salaries of the
Executive Directors are set out below. This review
was last carried out in November 2016. There is
no prescribed maximum annual increase.
The Committee will take into account the general
increase for the broader employee population in
the UK but on occasions may need to recognise,
for example, an increase in the scale, scope or
responsibility of the role. Current salary levels are
set out on page 59.
Benefits
Annual
Performance
Bonus
To attract, retain and
motivate Executive
Directors and the
SMT of the right
calibre to deliver the
Company’s strategy
by providing a market
competitive level of
benefit provision.
Drives and rewards
performance against
annual financial and
operational goals
which are consistent
with the medium to
long-term strategic
needs of the business.
N/A
The range of benefits that may be provided
by the Committee after taking into account
local market practice. The Executive Directors’
benefits currently comprise private medical
insurance. Additional benefits may be provided as
appropriate. There is no defined maximum as the
cost benefits can vary annually and the Company
requires the ability to remain competitive.
Each of the Executive Directors is entitled
under the terms of their service agreements to
receive an Annual Bonus to be determined by
the Committee based on the Group’s financial
performance and the achievement of specific
personal targets set by the Committee.
The maximum Annual Bonus potential is 120%
of salary for the Chief Executive Officer and
100% of salary for the Chief Financial Officer, of
which 85% of the award is dependent on financial
performance targets and 15% on personal
objectives. Bonuses are paid in a mixture of cash
and shares with an element deferred under the
Deferred Annual Bonus scheme.
The annual performance bonus is focused on the
delivery of strategically important performance
targets. These include demanding financial and
non-financial measures. The financial targets
are currently set against Group revenue, Group
profit before tax and Earnings Per Share. 85%
of the award is dependent upon the financial
performance of the Group and 15% is achievable
for meeting personal objectives.
The SMT are entitled to receive up to 50% of
their salary in bonus, of which 86% of the award
is dependent on financial performance targets
and 14% on personal objectives. The Committee
may use different measures and/or weightings for
future bonus cycles to take into account changes
in the strategic needs of the business.
Deferred Annual
Bonus (DAB)
Provides mechanism
to exercise
malus provisions.
N/A
Following advice from Mercer (formally Kepler)
regarding corporate governance developments
in remuneration, the Committee introduced
a Deferred Annual Bonus (DAB) Scheme after
receiving shareholder approval at the 2014 AGM
whereby both Executive Directors and the SMT are
required to defer up to 25% of their Annual Bonus
into share awards that will vest after three years.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 58
Remuneration Report continued
Element of
remuneration
Purpose and how it
supports strategy
How the element operated
and maximum opportunity
Deferred Share
Bonus Plan (DSB)
To align the interests
of the Executive
Directors, the SMT
and the employees
with shareholders,
incentivise long-term
value creation and is a
key tool for retention
of staff.
Long Term
Incentive Plan
(LTIP)
To align the interests
of the Executive
Directors and the SMT
with shareholders and
incentivise long-term
value creation.
The Deferred Share Bonus Plan (DSB) is available
to all employees and allows them to choose for
the payment of some bonus to be made in the
form of shares. It also allows for the provision of
matching shares if the bonus shares are held for
a set period. The DSB encourages employees
to acquire shares in the Company and retain
those shares to receive additional free shares
from the Company. It acts as a valuable retention
tool aligning employees’ interests with those of
shareholders. The first year that the DSB operated
was in 2007. The existing scheme received
shareholder approval at the 2015 AGM.
The Company introduced a new Long-Term
Incentive Plan (2014 LTIP) at the 2014 AGM,
replacing the LTIP introduced in 2006. The LTIP
permits an annual grant of shares that vest subject
to performance and continued employment.
The LTIP awards are granted in accordance
with the rules of the plan. Individuals who are
entitled to awards under the 2014 LTIP are not
eligible to receive options under the Company’s
Share Option Plan or the Executive Share
Option Scheme.
Under the rules of the LTIP, the maximum annual
award size is 200% of salary. Details of the
proposed award level for 2016 are set out below.
Awards under the LTIP may be granted in the
form of nil-cost options or cash (where the award
cannot be settled in shares). Awards are currently
structured with a consideration of £1.
Framework used to
assess performance
N/A
50% of the Award is determined based on the
Total Shareholder Return (TSR) performance of
the Company compared with the AIM Healthcare
Share Index over the vesting period and 50% of
the Award is determined by the growth in the
average Earnings Per Share (EPS) per year of the
Company over the three-year vesting period
commencing on the award date.
Of the 50% of the Award that is determined by
reference to the AIM Healthcare Share Index, no
shares will be awarded if the Company is ranked
below the median. Awards will vest on a sliding
scale from 25% to 100% for performance above
median to upper quartile performance against
the Index. The performance measurement for
EPS will be based on the percentage increase
of the Company’s EPS over a three-year period
commencing on the 1 January. Awards will vest
on a sliding scale from 25% to 100% for an average
increase of EPS from target EPS to an average
increase of EPS of 20% over the vesting period.
No awards will be made for an average increase
of EPS below target EPS. In 2014 the EPS target
was set at 5%.
The Committee has the flexibility to make
appropriate adjustments to the performance
conditions to ensure that the Award achieves
its purpose. Any vesting is also subject to the
Committee being satisfied that the Company’s
performance on these measures is consistent with
the underlying performance of the business.
Pensions
To provide a
market competitive
remuneration
package to enable
the recruitment
and retention of the
Executive Directors
and SMT.
N/A
All UK employees are entitled to become
members of the Group Pension and Life
Assurance Scheme which was set up with effect
from 1 February 1999. The Scheme entitles
Executive Directors to contribute up to 10% of
salary with the Group contributing 10%. All other
UK employees contribute a minimum of 3% of
their salary which is matched by a 6% contribution
of the Group. The Pension Plan is a money
purchase scheme. In 2011, the Group made
arrangements allowing individuals to sacrifice their
salary for pension contributions.
Following changes in the taxation of personal UK
pension contributions, and limitations on the size
of individual personal pension funds, the Group
has agreed that an employee may substitute the
pension contributions they would have received
from the Group for salary.
Automatic enrolment has been implemented for
all UK employees.
Advanced Medical Solutions Group plc Annual Report 2016 59
Directors’ Emoluments – Single Figure of Remuneration
The various elements of the remuneration for each Executive Director in 2015 and 2016:
Salary and fees
Annual Bonus
Deferred Annual
Bonus
LTIPs vested
Gains on DSBs
vested
Benefits
Pensions
Total
remuneration
Name
Chris Meredith
Mary Tavener
Peter Allen
Steve Bellamy
Penny Freer
Peter Steinmann
2016
£’000
265
200*
69
41
41
35
2015
£’000
2016
£’000
2015
£’000
2016
£’000
2015
£’000
255
180
68
38
38
34
173
111
181
118
–
–
–
–
–
–
–
–
58
37
–
–
–
–
60
39
–
–
–
–
2016
£’000
254
204
–
–
–
–
284
Total
* Sacrificed salary of £5,125 in January to March 2016 in lieu of Pension. Annual Salary of £205,000
458
299
651
613
99
95
2015
£’000
2016
£’000
2015
£’000
2016
£’000
2015
£’000
2016
£’000
2015
£’000
2016
£’000
2015
£’000
218
169
–
–
–
–
387
7
–
–
–
–
–
7
–
–
–
–
–
–
–
1
1
–
–
–
–
2
1
1
–
–
–
–
2
26
26
–
–
–
–
26
40
784
579
–
–
–
–
69
41
41
35
741
547
68
38
38
34
52
66 1,549 1,466
The table above summarises the payments made and additional amounts earned by the Executive Directors and Non-Executive
Directors for the 2015 and 2016 financial years. The Chairman of the Audit Committee and Remuneration Committee (Steve Bellamy
and Penny Freer) received a supplementary fee of £3,000 for chairing the Committees. The Deferred Annual Bonus recorded in the
table above is in respect of the 2015 and 2016 financial years, to be paid or deferred into shares, which will not be received until 2018 and
2019 respectively. The Executive Directors were granted further LTIPs as detailed on page 60. All Directors have confirmed that, save as
disclosed in the single figures of remuneration tables above, they have not received any other items in the nature of remuneration.
Salaries and Fees
Executive Directors
The Remuneration Committee determined there would be an increase of 2% for Executive Director base salary for 2017. The Group’s
employees also received a 2% salary increase for the 2017 financial year.
Director
Chris Meredith
Mary Tavener
Annual Performance Bonus
2017
2016
% increase
£270,300
£265,000
£209,100
£205,000
2%
2%
The Annual Bonus contains two elements — the cash element and the deferred share element. The bonus is determined on both
financial targets and personal objectives. Up to 25% of the bonus is deferred into shares in line with the malus provisions. The Annual
Bonus payments presented in the table above were based on performance against growth in Group revenue, adjusted Profit before Tax,
and EPS, and performance against personal performance objectives measured over the relevant financial year. The maximum bonus
potential for the year ending 31 December 2017 will remain as 120% of salary for the Chief Executive Officer and 100% for the Chief
Financial Officer.
The personal objectives for the Executive Directors are usually set on an individual basis. The personal objectives of each Executive
Director for the year ended 31 December 2016 were linked to the corporate, financial, strategic and other non-financial objectives of
the Company.
Up to 18% of salary was payable to the Chief Executive Officer and 15% of salary to the Chief Financial Officer upon achievement of
personal objectives. Based on the assessment against objectives set, the Committee determined that the performance of the Chief
Executive Officer and Chief Financial Officer warranted a 50% payout in relation to the non-financial elements of their respective
bonuses, which resulted in payment worth 9% of salary to the Chief Executive Officer and 7.5% of salary to the Chief Financial Officer.
The Committee consider the 2017 objectives to be commercially sensitive as they give our competitors insight into our business plans
and therefore are not detailed in this Report.
The bonus for the 2016 financial year is accrued and paid in 2017. Overall the 2016 bonus payments made in respect of the 2015 financial
year were as follows:
Name
Chris Meredith
Mary Tavener
Bonus paid in 2016
(2015 Financial
Year)
Deferred Annual
Bonus
Percentage of
salary (for total
bonus)
Maximum % of
salary
£180,752
£118,138
£60,251
£39,379
94.5%
78.8%
120%
100%
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 60
Remuneration Report continued
Vesting of LTIPs for the year ended 31 December 2016
The LTIPs granted on 19 September 2013 to the Executive Directors under the 2006 Long-Term Investment Plan were based on
performance criteria during the three-year period, including the year ended 31 December 2015. The LTIPs vested on 19 September 2016.
The performance conditions were:
e 50% of the Award is subject to a performance condition based on the Company’s Total Shareholder Return (TSR) performance over
the performance period relative to the constituent companies of the AIM Healthcare Share Index over the performance period; and
e 50% of each Award is subject to a performance condition based on the growth in the Company’s underlying diluted earnings per share
(EPS) over the performance period
The Performance Targets were as follows:
TSR Performance
Below 50% of the comparator group
Between 50% and 75% of comparator group
Vesting %
0%
Pro-rata vesting between 0% and 100% based on the ranking in the
comparator group
EPS compound annual growth rate
<10% CAGR
10%-20% CAGR
Vesting %
0%
Pro-rata vesting between 25% and 100%
Following a review of the performance conditions of the LTIPs granted in September 2013, 50% of the award vested in September 2016.
In the Directors’ emoluments single figure remuneration table on page 59, the figure attributable to the LTIPs granted on 19 September
2013 is calculated by multiplying the number of shares in respect of which the Award vested by the share price on the vesting date.
Directors’ Interests in the Long-Term Incentive Plan (LTIP)
On 18 April 2016 the following LTIP awards were granted to each Executive Director:
Director
Chris Meredith
Type of
Award
Basis of grant awarded
Share price
at date
of grant (£)
Number of
shares granted
Face value
of grant (£)
Nil-cost option
100% of salary
1.846
143,553
265,000
Vesting determined
by performance over
See below
Mary Tavener
Nil-cost option
100% of salary
1.846
111,050
205,000
See below
EPS – Three financial years to 31 December 2018
TSR – Three years to 18 April 2019
Outstanding Share Awards
The maximum number of shares to be allocated to the Executive Directors under the LTIP, in each case for an aggregate consideration
of £1, are as follows:
Chris Meredith
Mary Tavener
As at
31 December
2015
188,628
143,631
227,111
210,753
168,316
–
111,314
176,011
148,817
132,013
Exercised in the year
Issued in the
year
Lapsed in the
year
As at
31 December
2016
Market price
at date of
grant (p)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
143,553
–
–
–
–
111,050
–
–
113,556
–
–
–
–
88,006
–
–
–
188,628
143,631
113,555
210,753
168,316
143,553
111,314
88,005
148,817
132,013
111,050
88.00
76.75
90.00
116.25
151.50
184.60
76.75
90.00
116.25
151.50
184.60
First vesting date
15 April 2014 (vested)
6 September 2015 (vested)
19 September 2016 (vested)
6 June 2017
10 September 2018
18 April 2019
6 September 2015 (vested)
19 September 2016 (vested)
6 June 2017
10 September 2018
18 April 2019
The entitlement to shares under the LTIP is subject to achieving the performance conditions referred to on page 58. The figures shown
are maximum entitlements and the actual number of shares (if any) will depend on these performance conditions being achieved.
During the year ended 31 December 2016 the Executive Directors did not exercise any LTIPs. Awards made have no performance
re-testing facility.
Advanced Medical Solutions Group plc Annual Report 2016 61
Approach to Remuneration of Executive Directors on Recruitment
In the cases of appointing a new Executive Director, the Committee may make use of all the existing components of remuneration.
The salaries of new appointments will be determined by reference to the experience and skills of the individual, relevant market data,
internal relativities and their current salary. New appointments will be eligible to receive a personal pension, benefits and to participate
in the Company’s share schemes.
Non-Executive Directors
Non-Executive Directors are appointed under arrangements that may generally be terminated by either party on six months notice
and their appointment is reviewed annually. The fees of the Non-Executive Directors are determined by the Executive Directors, taking
into account the time and responsibility of each role. Additional fees relate to the supplementary fee paid to the Chairmen of the Audit
and Remuneration Committees. No Director or Senior Manager shall be involved in any decisions as to their own remuneration.
Non-Executive Directors receive travel expenses but do not participate in any incentive arrangements. All Non-Executive Directors have
confirmed that, save as disclosed in the single figures of remuneration tables above, they have not received any other items in the nature
of remuneration. Further details of the Non-Executive Director fees are outlined below.
Element of remuneration
Purpose and how it supports strategy
Non-Executive
Director fees
and benefits
Reflects time commitments,
responsibilities of each role, fees
paid and benefits provided by similar
sized companies
Framework used to assess performance
Non-Executive Directors do
not participate in variable pay
arrangement and do not not receive
retirement benefits
How the element operated
and maximum opportunity
As per the Executive Directors there
is no prescribed maximum annual
increase. The Board is guided by
the general increase in the Non-
Executive Director market and the
broader employee population but
on occasion may need to recognise,
for example, an increase in the scale,
scope or responsibility of the role.
Current fee levels are set out on
page 59
Service Agreements
Executive Director service contracts, including arrangements for early termination, are carefully considered by the Committee and
are designed to recruit, retain and motivate Directors of the quality required to manage the Company. The service contract of each
Executive Director is not fixed term and is terminable by either party giving not less than 12 months’ notice in writing. The Executive
Directors’ contracts are available to view throughout the year at the Company’s registered office and at the Annual General Meeting.
The Remuneration Committee reviews the contractual terms for new Executive Directors to ensure they reflect best practice.
Details of the service contracts for the Executive Directors and letters of appointment of the Non-Executive Directors are as follows:
Executive Director
Chris Meredith
Mary Tavener
Non-Executive Directors
Peter Allen
Steve Bellamy
Penny Freer
Peter Steinmann
Date of Contract
3 May 2005
28 June 1999
Unexpired Term (months)
or Rolling Contract
Rolling Contract
Rolling Contract
4 December 2013
Rolling Contract
1 February 2007
1 March 2010
1 July 2013
Rolling Contract
Rolling Contract
Rolling Contract
Notice Period (months)
12
12
6
6
6
6
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 62
Remuneration Report continued
Policy on Payment for Loss of Office – Executive Directors
The Remuneration Committee considers the circumstances of individual cases of early termination and determines compensation
on a case-by-case basis accordingly, taking into account the relevant contractual terms, the circumstances of the termination
and any applicable duty to mitigate. There are no special provisions in the event of loss of office or for payment in lieu of notice
(PILON). The Remuneration Committee considers the circumstances of individual cases of early termination and determines
compensation accordingly.
If such circumstances were to arise, the Executive Director concerned would have no claim against the Company for damages or any
other remedy in respect of the termination. The Remuneration Committee would apply general principles of mitigation to any payment
made to a departing Executive Director and will honour previous commitments as appropriate.
The table below summarises how the awards under the Annual Bonus and 2014 LTIP are typically treated in different leaver scenarios and
on a change of control. Whilst the Remuneration Committee retains overall discretion for determining ‘Good Leaver’ status, it typically
defines a ‘Good Leaver’ for the Annual Bonus and 2014 LTIP as circumstances which include retirement, ill health or injury, disability,
redundancy and the employing company ceasing to be under the control of the Group.
The 2014 DAB defines a ‘Good Leaver’ as ceasing to be a Director or employee of a Group Company where that individual is not a ‘Bad
Leaver’. A ‘Bad Leaver’ is defined as a Director or employee leaving the business due to the financial statements requiring restatement.
Final treatment is subject to the Committee’s discretion.
Event
Timing of vesting/award
Calculation of vesting/payment
Annual Bonus/DAB
‘Good Leaver’
eAnnual Bonus payment would be negotiated as part of the
terms of the leaving arrangements (at the discretion of the
Remuneration Committee)
eUnvested Deferred Annual Bonus share awards vest at
the normal vesting date (or earlier at the Remuneration
Committee’s discretion)
eNo automatic entitlement to Annual Bonus on a pro-rata
basis (at the discretion of the Remuneration Committee)
‘Bad Leaver’
eNot applicable
eIndividuals lose the right to their Annual Bonus and unvested
Deferred Annual Bonus share awards
Change of control
eAnnual Bonuses are paid and unvested Deferred Share
eAnnual Bonus is paid only to the extent that any
Bonus share awards vest on the date of notification to the
Executive Directors regarding the change of control
performance conditions have been satisfied and is
pro-rated for the proportion of the financial year worked
to the effective date of change of control
LTIP
‘Good Leaver’
eOn normal vesting date (or earlier at the Remuneration
Committee’s discretion)
eUnvested awards vest to the extent that any performance
conditions have been satisfied and a pro-rata reduction
applies to the value of the awards to take into account the
proportion of vesting period not served
‘Bad Leaver’
eUnvested awards lapse
eUnvested awards lapse on cessation of employment
Change of control
eUnvested awards vest on the date of notification to the
Executive Directors regarding the change of control
eUnvested awards vest and a pro-rata reduction applies
for the proportion of the vesting period not served
eOutstanding deferred shares vest in full
Upon exit or change of control DSB awards will be treated in line with the DSB plan rules.
If employment is terminated by the Company, the departing Executive Director may have a legal entitlement (under statute or otherwise)
to additional amounts, which would need to be met. In addition, the Committee retains discretion to settle other amounts reasonably
due to the Executive Director.
In certain circumstances, the Committee may approve new contractual arrangements with departing Executive Directors including (but
not limited to) settlement and/or consultancy arrangements. These will be used sparingly and only entered into where the Remuneration
Committee believes that it is in the best interests of the Company and its shareholders to do so.
There are no agreements between the Group and its Directors or employees for loss of office or employment (whether through
resignation, purported redundancy or otherwise) that occurs because of a takeover bid.
Payments to past Directors
No payments were made to past Directors during the year ended 31 December 2016.
Payments for Loss of Office
No payments for loss of office were made during the year ended 31 December 2016.
Advanced Medical Solutions Group plc Annual Report 2016 63
Statement of Directors’ Shareholdings and Share Interests
Director
Chris Meredith
Mary Tavener
Beneficially owned
at 31 December
2015
Beneficially owned
at 31 December
2016
Outstanding LTIP
awards at
31 December
2016
Outstanding
deferred share
awards at
31 December
2016
Outstanding share
awards under DSB
at 31 December
2016
Shareholding
as a % of Issued
Share Capital
at 31 December
2016
1,187,891
1,825,698
1,190,322
1,828,129
968,436
591,199
82,218
57,870
28,995
16,516
0.56%
0.87%
Executive Directors are required to hold shares worth 100% of pre-tax annual salary in Company shares in compliance with the Executive
Shareholding Policy. Compliance with this policy as at 31 December 2016 is shown below:
Director
Chris Meredith
Shares held*
1,190,322
Vested DSB’s
38,368
LTIPs (50% of vested
/unexercised LTIPs)
222,592
Mary Tavener
* Beneficially held by the Executive Director (or their spouses and children)
1,828,129
25,006
99,659
Total Shares
1,451,282
1,952,794
Target
shareholding
target (£)
265,000
Actual
shareholding
value (£)
3,218,217
% vs
holding target
1,214%
205,000
4,053,876
1,977%
The shareholding as a % shown above is based on the share price as at 31 December 2016.
CEO Total Remuneration
The total remuneration figure for the Chief Executive Officer during each of the last five financial years is shown in the table below.
The total remuneration figure includes the salary, Annual Bonus based on that year’s performance, gains made on DSBs in that year and
LTIP awards based on the three-year performance periods ending in the relevant year. The Annual Bonus payout and LTIP vesting level
as a percentage of the maximum opportunity are also shown for each of these years.
Year ended 31 December
Total remuneration (£’000)
Annual Bonus (% of maximum)
LTIP vesting (% of maximum)
Relative Importance of Spend on Pay
2012
695
29.4%
81.7%
2013
331
50.1%
–
2014
645
59.7%
61.5%
2015
741
78.76%
55.1%
2016
785
72.5%
50%
The following table shows the Company’s actual spend on pay (for all employees) relative to dividends, tax and profits for the year
attributable to owners of the parent:
Year ended 31 December
Staff costs
Dividends1
Tax
Profits for the year attributable to owners of the parent
1 The dividend figures relate to amounts payable in respect of the relevant financial year.
2015 (£m)
2016 (£m)
change %
21.6
1.5
2.9
14.1
26.2
1.8
3.4
15.7
21.3%
17.2%
18.5%
11.1%
£1,339,000 (2015:£1,108,000) of the staff costs figure relate to pay for the Directors, of which £778,000 relates to the highest paid
Director (2015:£741,000). Total pension contributions were £944,000 (2015:£770,000) and for the highest paid Director £26,000
(2015:£26,000).
Private Healthcare
Executive Directors and other senior employees are entitled to private healthcare and permanent health insurance.
Share Options
Employees, except for participants in the Long-Term Incentive Plan (LTIP), may be granted options over shares in the Company under the
Company Share Option Plan and Executive Share Option Scheme, under which either approved or unapproved options may be granted.
Options granted under these schemes are not offered at a discount.
The exercising of options under these schemes is conditional on certain performance conditions which are pre-determined by the
Remuneration Committee. Options are exercisable normally only after the third anniversary of the date of grant (or such later time as may
be determined at the time of grant) and cannot, in any event, be exercised later than the tenth anniversary of the date of grant. Awards will
not vest if the Group is not profitable at the end of the performance period. Full details are included in Note 29 on pages 97 to 101.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 64
Remuneration Report continued
Company Share Option Plan (CSOP)
The Company received approval for a Company Share Option Plan (CSOP) on 2 June 2010. This was adopted after HMRC approval
on 13 August 2010. This Plan allows relevant employees to receive up to £30,000 of Company shares by reference to the market value
of these shares on the grant date and to benefit from the growth in value of those shares.
2009 Executive Share Option Scheme
Up until 2010, the Company was able to offer options under an Enterprise Management Incentive (EMI) Scheme. The Company no
longer satisfies the requirements for operating this scheme, however, options already granted will be allowed to vest in accordance with
the scheme rules.
Share Performance – 2016
The opening share price for 2016 was 181.25p and the closing price on the last trading day of the year, was 221.75p. The range during
the year was 234p (high) and 157.65p (low). (Source: daily official list of the London Stock Exchange.)
Five-year Share Performance
For the five-year period ending 28 February 2017 the Advanced Medical Solutions Group plc share price has outperformed the FTSE
All- Share Index by 101%, FTSE Techmark All-Share Index by 62%, FTSE All-Share Health Care Index by 80%, the FTSE Small Cap Index
by 60%, and FTSE AIM All-Share Index by 121%.
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200
150
100
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2012
2013
2014
2015
2016
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AMS
FTSE All Share
FTSE Techmark All Share
FTSE All Share Health
FTSE Small Cap
FTSE AIM All Share
For the five-year period ending 28 February 2017 the Advanced Medical Solutions Group plc Total Shareholder Return (TSR), defined as
share price growth plus reinvested dividends, has outperformed the FTSE All-Share Index by 82%, FTSE Techmark All-Share Index by 41%,
FTSE All-Share Health Care Index by 53%, the FTSE Small Cap Index by 42%, and FTSE AIM All-Share Index by 121%.
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200
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2012
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2016
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AMS
FTSE All Share
FTSE Techmark All Share
FTSE All Share Health
FTSE Small Cap
FTSE AIM All Share
Mary Tavener
Company Secretary
28 April 2017
Advanced Medical Solutions Group plc Annual Report 2016
65
Directors’ Report
For the year ended 31 December 2016
The Directors present their report, incorporating the Chairman’s Statement, the Strategic Report, the Chief Executive’s Statement,
the Financial Review, and the audited Financial Statements for the year ended 31 December 2016.
Strategic Report
The Strategic Report can be found on pages 4 to 41. This report includes a balanced and comprehensive analysis of the development
and performance of the business of the Group and a description of the main trends and factors likely to affect the future development,
performance or position of the business at the end of the year, using key performance indicators where appropriate.
Principal Risks and Uncertainties
A description of the Group’s principal risks and uncertainties can be found on pages 38 to 41, which forms part of this Strategic Report.
Research and Development
The Group attaches a high priority to research and development aimed at developing new products and updating existing products.
The Group has expensed to the Income Statement in the year ended 31 December 2016 £2,276,000 (2015: £1,817,000) on research
and development. In accordance with International Accounting Standards a further £259,000 (2015: £373,000) has been capitalised.
Following a review of development, £125,000 (2015: £nil) impairments were made in 2016.
Dividends
The Group made a profit before tax for the year to 31 December 2016 of £19.1 million (2015: £17.0 million). The Directors are
recommending payment of a final dividend of 0.62p per share. The final dividend will, subject to shareholders’ approval, be paid
on 16 June 2017 to shareholders on the register at the close of business on 26 May 2017. This will make a total dividend of 0.92p
for the full year (2015: 0.80p).
Post-Balance Sheet Events
There have been no adjusting or non-adjusting post-balance sheet events.
Key Performance Indicators
The Directors have monitored the performance of the Group with particular reference to the relevant key performance indicators:
e Revenue growth (%)1 at constant currency
e Adjusted operating margin (%)1
e Customer service (OTIF)2
e Adjusted3 diluted Earnings per Share growth (%)
The Group monitors progress on a regular basis. Performance against the key performance indicators can be found on page 33.
Capital Structure
The Group is debt free. A five-year, £30 million, multi-currency, revolving, credit facility was agreed in December 2014 with an accordion
option under which AMS can request up to an additional £20 million on the same terms. The new facility is provided jointly by the
Group’s existing bank HSBC, as well as The Royal Bank of Scotland PLC and replaced the previous £4 million facility. It is unsecured
on the assets of the Group and is currently undrawn.
Going Concern
After making enquiries and on the basis outlined in the Corporate Governance Report on pages 46 to 50, the Directors have a reasonable
expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and for this reason
they continue to adopt the going concern basis in preparing the accounts.
Share Listing
The Company’s Ordinary Shares are admitted to and traded on the Alternative Investment Market of the London Stock Exchange (AIM),
a market operated by the London Stock Exchange. Further information regarding the Company’s share capital, including movements
during the year, are set out in Note 27 to the Financial Statements.
1 Includes twelve months contribution from RESORBA® acquisition in 2012
2 OTIF – ‘On time in full’
3 Before exceptional items and amortisation of acquired intangible assets
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 66
Directors’ Report continued
For the year ended 31 December 2016
Share Capital and Issue of Ordinary Shares
At 7 April 2017, the Group’s issued share capital comprised:
Ordinary Shares of 5p each
Number
210,524,191
£000
10,526
% of
Issued Share
Capital
100%
The issued share capital of the Company is set out in Note 27 to the financial statements on page 96.
Substantial Shareholdings
As at 7 April 2017 the Company had been notified of, in accordance with the Disclosure and Transparency Rules, or was otherwise aware
of, the following substantial interests of 3% or more in the Ordinary Share capital of the Company.
Octopus Investments Limited
AXA SA
BlackRock Inc
Hargreave Hale Ltd Stockbrokers
Investec Group
Schroders
Aviva plc
Charles Stanley Group
Directors
7 April 17
18,700,969
16,839,237
16,692,089
13,270,056
11,491,169
9,642,800
9,242,575
7,816,840
% of Issued
Share Capital
8.88
8.00
7.93
6.30
5.46
4.58
4.39
3.71
The names of the current Directors together with brief biographies are shown on pages 42 and 43.
The Directors who were in office during the year ended 31 December 2016, the terms of the Directors’ service contracts and details
of the Directors’ interests in the shares of the Company, together with details of share options granted and any other awards made
to the Directors, are disclosed in the Remuneration Report commencing on page 55.
Directors are re-appointed by ordinary resolution at the Annual General Meeting of shareholders. The Board can appoint a Director
during the year but that Director must be elected by an ordinary resolution at the next Annual General Meeting, Directors are subject
to re-election at intervals of no more than three years. At the forthcoming Annual General Meeting, Peter Allen, Steve Bellamy and Peter
Steinmann have indicated their willingness to be re-elected and will retire by rotation. The Directors continue to contribute effectively
and demonstrate commitment to their roles. Details of the notice period in their service agreements are disclosed in the Remuneration
Report on page 61.
Directors and their Interests
The Directors of the Company at 31 December 2016 and their interests, all of which are beneficially held, in the share capital of the
Company were:
Ordinary Shares of 5p each 31 December 2016
Ordinary Shares of 5p each 31 December 2015
Shares
DSBs
LTIPs
Deferred
Bonus2
Shares
DSBs
LTIPs
Chris Meredith
Mary Tavener
Steve Bellamy
Peter Allen
1,190,322
1,828,129
100,000
50,000
28,995
968,436
82,218
1,187,891
25,116
938,439
16,516
591,199
57,870 1,825,698
12,637
568,155
–
–
–
–
–
–
–
100,000
50,000
13,888
–
–
–
–
–
–
–
Penny Freer
1 Deferred Bonus shares are in respect of the bonus earned relating to the 2013 and 2014 financial years.
13,888
–
2 Deferred Bonus shares are in respect of the bonus earned relating to the 2013, 2014 and 2015 financial years.
Further details of the Directors’ remuneration and benefits are included in the Remuneration Report on pages 55 to 64.
Deferred
Bonus1
49,580
36,538
–
–
–
Advanced Medical Solutions Group plc Annual Report 2016 67
The Board has agreed procedures for considering and, where appropriate, authorising Directors’ conflicts or potential conflicts of interest.
Only independent Directors i.e. those who have no interest in the matter under consideration are able to take the relevant decision.
In taking the decision the Directors must act in a way they consider, in good faith, will be most likely to promote the Company’s success.
Directors will be able to impose limits or conditions when giving authorisation if they believe it is appropriate. The Board will report
annually on the Company’s procedures for ensuring that the Board’s power of authorisation in respect of conflicts of interest operated
effectively and that procedures have been followed. None of the Directors had any interest during or at the end of the year in any
contract relating to the business of the Company or its subsidiaries.
Directors and Officers’ Liability Insurance
Insurance cover is in force in respect of the personal liabilities which may be incurred by Directors and Officers of the Company in
the course of their service with the Group, as permitted by the Companies Act 2006. No cover is provided in respect of any fraudulent
or dishonest act.
Employees
The Group depends on the skills and engagement of its employees in order to achieve its objectives. Staff at all levels are encouraged
to make the fullest possible contribution to the Group’s success. The Group is an equal opportunities employer. It is committed to
eliminating all forms of discrimination and to giving fair and equal treatment to all employees and job applicants in terms of recruitment,
pay conditions, promotions, training and all employment matters regardless of age, disability, race, sex, sexual orientation, marriage
or civil partnership status, pregnancy, maternity and paternity, gender reassignment, religion or belief. An Equality Policy is in force
which aims to ensure that all employees are selected, trained, compensated, promoted and transferred solely on the strength of their
ability, skills, qualifications and merit. The aim is to encourage a culture in which all employees have the opportunity to develop as
fully as possible in accordance with their individual abilities and the needs of the Group. The Group also believes that all employees
have a right to work in an environment free from harassment and bullying, and there is an emphasis upon providing a safe and healthy
working environment.
The Group ensures that every consideration is given to applications for employment from disabled persons. Should an employee
become disabled, every effort would be made to retrain the employee if required and offer suitable alternative employment within
the Group.
The Group’s policy is to consult and discuss with employees, through meetings, both formal and informal, those matters likely
to affect employees’ interests. The Employees’ Consultative Committee in the UK, which comprises representatives of employees
and management, and the Work’s Council in Germany meet regularly to discuss business issues and areas of concern.
Management also communicates with staff through regular team briefs. Details of policies, procedures and other information of interest
are regularly updated and are easily accessed by all employees on the Group’s intranet page. The Group undertakes an annual Employee
Opinion Survey and takes into account comments and feedback received when updating and formulating policies and procedures.
The Group’s aim is to recruit and retain sufficient skilled and motivated employees to meet the needs of the business. The Group operates
to the internationally recognised medical device standard ISO 13485. Staff work within a defined quality system, and have Personal
Development Plans that identify their training requirements to help them progress their careers and development. Employees are
encouraged to become involved in the financial performance of the Group through participation in the Group’s share option plans and
are incentivised directly through the Company’s bonus scheme, performance reviews and training and development opportunities.
Employee Share Schemes
Employees, except for participants in the Long-Term Incentive Plan (2014 LTIP), may be eligible after a period of service to be granted
options over shares in the Company under the Company Share Option Plan or Executive Share Option Scheme. The Group received
HMRC approval in 2010 to adopt a Company Share Option Plan (CSOP). Under the CSOP, employees are allowed to receive up to
£30,000 of options in a tax-efficient manner. Options granted under these schemes are not offered at a discount. Further details are
included in the Remuneration Report on pages 55 to 64.
The Company also operates a Deferred Share Bonus Scheme (DSB) in which employees are invited to participate. The DSB encourages
employee share ownership which helps to align the employees’ interests with those of the shareholders. The details on the DSB Scheme
are provided in the Remuneration Report on page 58. The original DSB was set up in 2006 and having reached the end of its ten-year
life a new DSB scheme was introduced on the same terms as the existing scheme following shareholder approval at the 2015 Annual
General Meeting.
The Company no longer satisfies the requirements for granting tax-efficient options under its EMI scheme. Options already granted
under this scheme will be allowed to vest in accordance with the rules of the scheme.
1,452,000 Ordinary Shares (2015: 1,170,000) were issued during the year to employees exercising their share options and options
over other share incentive schemes. Details are given in Note 29 to the Group Financial Statements.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 68
Directors’ Report continued
For the year ended 31 December 2016
Health and Safety
The Group is committed to high standards in health, safety and environmental performance. It is the Group’s policy to abide by, and
where appropriate exceed, all laws, directives and regulations pertinent to its field of operations and to act in a manner so as to minimise
the effects of its operations on the environment. The Group provides safe places and systems of work, safe plant and machinery, safe
handling of materials and ensures appropriate information, instruction and training is given. Employees are encouraged to identify ‘near
misses’ to ensure preventative actions are taken to avoid any unsafe work practices and a common All Incident Rate (AIR) reporting metric
is used across the Group. Emphasis is placed on all employees having a responsibility to maintain a safe working environment. Health and
Safety Committees at all sites assist with advice on safe working practices and ensure any corrective action is taken where necessary.
Health and Safety reports are regularly received from Group sites and are reviewed by the Board. Regular audits are undertaken to
evaluate compliance with Group policy. Health and Safety is a key component of the Group’s Corporate Social Responsibility Policy.
Environment
Where possible, the Group aims to reduce its impact on the environment. The facility at Winsford has been built with a high level of
thermal insulation to reduce the Group’s carbon footprint. It incorporates a solar wall, a renewable energy source that captures the sun’s
warmth and supplements the building’s heating system. Lighting is controlled by movement sensors to avoid wastage and the heating
system is fully programmable. Further details are available in the Corporate Social Responsibility Report on pages 34 to 37.
Corporate Social Responsibility
AMS is committed to ensuring that the business operates in a responsible way across these key areas:
e Employees
e Ethical Standards
e Health, Safety and Environment
e Customer and Community
The Group has implemented a Corporate Social Responsibility Policy.
Directors’ Responsibilities Statement
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors are required to
prepare the Group Financial Statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European
Union and Article 4 of the IAS Regulation and have elected to prepare the Parent Company Financial Statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law including FRS 101
‘Reduced Disclosure Framework’). Under company law the Directors must not approve the accounts unless they are satisfied that they
give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing the Parent Company Financial Statements the Directors are required to:
e Select suitable accounting policies and then apply them consistently;
e Make judgements and accounting estimates that are reasonable and prudent;
e State whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained
in the financial statements; and
e Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue
in business.
In preparing the Group Financial Statements, International Accounting Standard 1 requires that Directors:
e Properly select and apply accounting policies;
e Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
e Provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and
e Make an assessment of the Group’s ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that
the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible
for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United
Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
Advanced Medical Solutions Group plc Annual Report 2016 69
Responsibility Statement
We confirm that to the best of our knowledge:
e The Financial Statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken
as a whole;
e The Strategic Report and Directors’ Report include a fair review of the development and performance of the business and the position
of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks
and uncertainties that they face; and
e The Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable, and provide the information
necessary for shareholders to assess the Group’s performance, business model and strategy.
Auditor
Each of the persons who is a Director at the date of approval of this Annual Report confirms that:
e So far as the Director is aware, there is no relevant audit information of which the Company’s Auditor is unaware; and
e The Director has taken all the steps that he/she ought to have taken as Director in order to make himself/herself aware of any relevant
audit information and to establish that the Company’s Auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of S418 of the Companies Act 2006.
Deloitte LLP has expressed their willingness to continue in office as Auditor and a resolution to reappoint them will be proposed
at the forthcoming Annual General Meeting.
Proposed resolutions for the Annual General Meeting
Details of the business to be conducted at the Annual General Meeting to be held on 7 June 2017 are contained in the Notice of the
Annual General Meeting on pages 109 to 111. In the opinion of the Directors, the passing of these resolutions is in the best interest
of the shareholders. Details of the Special Business to be conducted are outlined below.
Special Business
The effect of Resolution 8, to be proposed at the meeting would be to allow the Company to allot shares conferred by S551 of the
Companies Act 2006.
The effect of Resolution 9, to be proposed at the meeting would be to disapply the statutory pre-emption rights conferred by S570
of the Companies Act 2006.
The effect of Resolution 10, to be proposed at the meeting would be to allow the Company to purchase its own shares conferred
by S701 of the Companies Act 2006.
Annual General Meeting
The Annual General Meeting will be held at 11.00 am on 7 June 2017 at the offices of Investec Bank plc, 2 Gresham Street, London,
EC2V 7QP. Details of the Notice of the Annual General Meeting are given on pages 109 to 111. The Annual General Meeting provides an
opportunity for private shareholders to question your Board and to meet informally with the executive management after the meeting.
On behalf of the Board
Mary Tavener
Company Secretary
28 April 2017
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 70
Independent Auditor’s Report to the members
of Advanced Medical Solutions Group plc
We have audited the Financial Statements of Advanced Medical Solutions Group plc for the year ended 31 December 2016 which
comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of
Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and the related Notes 1
to 31, the Parent Company Balance Sheet, the Parent Company Statement of Changes in Equity and the related Notes 1 to 7. The financial
reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union. The Company Financial Statements is applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice), including FRS 101 'Reduced Disclosure Framework'.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in
an Auditor’s 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 and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective Responsibilities of Directors and Auditor
As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the Financial
Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Financial
Statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the Audit of the Financial Statements
An audit involves obtaining evidence about the amounts and disclosures in the Financial Statements sufficient to give reasonable
assurance that the Financial Statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the Group’s and the Parent Company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the
overall presentation of the Financial Statements. In addition, we read all the financial and non-financial information in the Annual Report
to identify material inconsistencies with the audited Financial Statements and to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become
aware of any apparent material misstatements or inconsistencies we consider the implications for our Report.
Opinion on Financial Statements
In our opinion:
e The Financial Statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December
2016 and of the Group’s profit for the year then ended;
e The Group Financial Statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
e The Parent Company Financial Statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
e The Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
e The information given in the Strategic Report and the Directors’ Report for the financial year for which the Financial Statements
are prepared is consistent with the Financial Statements; and
e The Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have
not identified any material misstatements in the Strategic Report and the Directors’ Report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in
our opinion:
e Adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received
from branches not visited by us; or
e The Parent Company Financial Statements are not in agreement with the accounting records and returns; or
e Certain disclosures of Directors’ remuneration specified by law are not made; or
e We have not received all the information and explanations we require for our audit.
Timothy Edge BSc FCA (Senior Statutory Auditor)
For and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
Manchester, United Kingdom
28 April 2017
Advanced Medical Solutions Group plc Annual Report 2016 Consolidated Income Statement
For the year ended 31 December 2016
Revenue
Cost of sales
Gross profit
Distribution costs
Administration costs
Other income
Profit from operations
Finance income
Finance costs
Profit before taxation
Income tax
Profit for the year attributable to equity holders
of the parent
Earnings per share
Basic
Diluted
Adjusted diluted
The above results relate to continuing operations.
71
Year ended 31 December 2016
Before
exceptional items
£’000
Exceptional items
(note 6)
£’000
82,621
(35,194)
47,427
(1,047)
(27,535)
621
19,466
108
(111)
19,463
(3,410)
–
–
–
–
(361)
–
(361)
–
–
(361)
–
Year ended
31 December 2015
Total
£’000
68,596
(28,688)
39,908
(951)
(22,505)
589
17,041
73
(118)
16,996
(2,877)
Total
£’000
82,621
(35,194)
47,427
(1,047)
(27,896)
621
19,105
108
(111)
19,102
(3,410)
16,053
(361)
15,692
14,119
7.65p
7.55p
7.66p
(0.17p)
(0.17p)
(0.17p)
7.48p
7.38p
7.49p
6.78p
6.68p
6.86p
Note
4
4, 5
11
12
13
15
15
15
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
Profit for the year
Items that will potentially be reclassified subsequently to profit and loss:
Exchange differences on translation of foreign operations
Loss arising on cash flow hedges
Other comprehensive income/(expense) for the year
Total comprehensive income for the year attributable to equity holders of the parent
Year ended
31 December 2016
£’000
Year ended
31 December 2015
£’000
15,692
14,119
8,851
(3,009)
5,842
21,534
(3,348)
(3)
(3,351)
10,768
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 72
Consolidated Statement of Financial Position
At 31 December 2016
Assets
Non-current assets
Acquired intellectual property rights
Software intangibles
Development costs
Goodwill
Property, plant and equipment
Deferred tax assets
Trade and other receivables
Current assets
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Other taxes payable
Obligations under finance leases
Non-current liabilities
Trade and other payables
Deferred tax liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Share-based payments reserve
Investment in own shares
Share-based payments deferred tax reserve
Other reserve
Hedging reserve
Translation reserve
Retained earnings
Equity attributable to equity holders of the parent
Note
2016
£’000
2015
£’000
16
16
16
19
17
18
20
21
22
23
23
18
27
28
28
28
28
9,468
2,500
1,645
40,337
16,177
–
10
8,359
2,009
1,803
34,579
15,795
135
13
70,137
62,693
11,440
11,872
432
51,125
74,869
145,006
12,901
2,049
85
–
8,843
10,817
9
34,201
53,870
116,563
9,139
806
234
1
15,035
10,180
1,291
3,152
4,443
19,478
125,528
10,524
34,005
3,469
(152)
459
1,531
(3,534)
636
78,590
125,528
415
2,311
2,726
12,906
103,657
10,451
33,196
2,253
(152)
437
1,531
(525)
(8,215)
64,681
103,657
The Financial Statements of Advanced Medical Solutions Group plc (registration number 2867684) on pages 71 to 102 were approved by
the Board of Directors and authorised for issue on 28th April 2017 and were signed on its behalf by:
Chris Meredith
Chief Executive Officer
28 April 2017
Advanced Medical Solutions Group plc Annual Report 2016 Consolidated Statement of Changes in Equity
Attributable to equity holders of the Group
73
Share
capital
£’000
Share
premium
£’000
Share-based
payments
£’000
Investment
in own
shares
£’000
Share-based
payments
deferred tax
£’000
10,393
32,742
1,563
(148)
278
Other
reserve
£’000
1,531
Hedging
reserve
£’000
Translation
reserve
£’000
Retained
earnings
£’000
Total
£’000
(522)
(4,867)
52,083
93,053
At 1 January 2015
Consolidated profit for the
year to 31 December 2015
Other comprehensive expense
Total comprehensive income
Share-based payments
Share options exercised
Shares purchased by EBT
Shares sold by EBT
Dividends paid
At 31 December 2015
Consolidated profit for the
year to 31 December 2016
Other comprehensive expense
Total comprehensive income
Share-based payments
Share options exercised
Shares purchased by EBT
Shares sold by EBT
Dividends paid
–
–
–
–
58
–
–
–
–
–
–
–
454
–
–
–
–
–
–
709
(19)
–
–
–
10,451
33,196
2,253
–
–
–
–
73
–
–
–
–
–
–
–
–
–
–
1,230
809
–
–
–
(14)
–
–
–
At 31 December 2016
10,524
34,005
3,469
–
–
–
–
–
(262)
258
–
(152)
–
–
–
–
–
(449)
449
–
(152)
–
–
–
159
–
–
–
–
–
–
–
–
–
–
–
–
–
(3)
(3)
–
–
–
–
–
–
14,119
14,119
(3,351)
–
14,119
10,768
(3,348)
(3,348)
–
–
–
–
–
–
–
–
–
868
493
(262)
258
(1,521)
(1,521)
437
1,531
(525)
(8,215)
64,681
103,657
–
–
–
22
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15,692
15,692
(3,009)
(3,009)
8,851
–
5,842
8,851
15,692
21,534
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,252
868
(449)
449
(1,783)
(1,783)
459
1,531
(3,534)
636
78,590 125,528
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 74
Consolidated Statement of Cash Flows
For the year ended 31 December 2016
Cash flows from operating activities
Profit from operations
Adjustments for:
Depreciation
Amortisation – intellectual property rights
– software intangibles
– development costs
Impairment of development costs
Increase in inventories
(Increase)/decrease in trade and other receivables
Increase in trade and other payables
Share-based payments expense
Taxation
Net cash inflow from operating activities
Cash flows from investing activities
Purchase of software
Capitalised research and development
Purchases of property, plant and equipment
Disposal of property, plant and equipment
Interest received
Net cash used in investing activities
Cash flows from financing activities
Dividends paid
Finance lease
Issue of equity shares
Shares purchased by EBT
Shares sold by EBT
Interest paid
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of the year
Year ended
31 December 2016
£’000
Year ended
31 December 2015
£’000
19,105
17,041
1,898
242
329
441
125
(2,005)
(674)
1,199
1,230
(2,065)
19,825
(795)
(259)
(1,523)
41
109
1,745
367
289
410
–
(1,501)
2,148
1,336
709
(1,253)
21,291
(472)
(373)
(1,907)
77
73
(2,427)
(2,602)
(1,783)
(1,521)
(1)
868
(449)
449
(111)
(1,027)
16,371
34,201
553
51,125
(2)
498
(262)
258
(118)
(1,147)
17,542
17,280
(621)
34,201
Advanced Medical Solutions Group plc Annual Report 2016
75
Notes Forming Part of the Consolidated Financial Statements
1 Reporting Entity
Advanced Medical Solutions Group plc ('the Company') is a public limited company incorporated and domiciled in England and Wales
(registration number 2867684). The Company’s registered address is Premier Park, 33 Road One, Winsford Industrial Estate, Cheshire,
CW7 3RT.
The Company’s Ordinary Shares are traded on the AIM market of the London Stock Exchange plc. The Consolidated Financial Statements
of the Company for the 12 months ended 31 December 2016 comprise the Company and its subsidiaries (together referred to as the
'Group').
The Group is primarily involved in the design, development and manufacture of novel high performance polymers (both natural and
synthetic) for use in advanced woundcare dressings, and distribution of medical adhesives, for closing and sealing tissue, and sutures and
haemostats for sale into the global medical device market.
2 Basis of Preparation
The Group accounts have been prepared in accordance with International Financial Reporting Standards (IFRSs), as adopted by the EU.
The Financial Statements have been prepared on the historical cost basis of accounting except as disclosed in the accounting policies set
out below.
The individual Financial Statements for each Group Company are presented in the currency of the primary economic environment in
which it operates (its functional currency). For the purpose of the Consolidated Financial Statements, the results and financial position of
each Group Company are expressed in Pounds Sterling, which is the functional currency of the Company, and the presentation currency
for the Consolidated Financial Statements.
In carrying out their duties in respect of going concern, the Directors have carried out a review of the Group’s financial position and cash
flow forecasts for the next 12 months. These have been based on a comprehensive review of revenue, expenditure and cash flows, taking
into account specific business risks and the current economic environment.
With regards to the Group’s financial position, it had cash and cash equivalents at the year end of £51.1 million. The Group also has in
place a five year, unsecured, multi-currency, revolving credit facility for £30 million which was undrawn during 2016.
While the current economic environment is uncertain, the Group operates in markets whose demographics are favourable, underpinned
by an increasing need for products to treat chronic and acute wounds. Consequently, market growth is predicted. The Group has a
number of long-term contracts with customers across different geographic regions and also with substantial financial resources, ranging
from government agencies through to global healthcare companies.
After taking the above into consideration, the Directors have reached a conclusion that the Group is well placed to manage its business
risks in the current economic environment. Accordingly, they continue to adopt the going concern basis in preparing the accounts.
In the current year the Group has applied a number of amendments to IFRSs issued by the IASB. Their adoption has not had a material
impact on the disclosures or on the amounts reported in the Annual Financial Statements. The following amendments were applied:
e Amendments to IAS 1, Presentation of Financial Statements: Disclosure Initiative.
e Amendments to IAS 16 and IAS 38, Clarification of Acceptable Methods of Depreciation and Amortisation.
e Annual Improvements 2012-2014 Cycle, specifically amendments to (i) IFRS 5, Non-current Assets Held for Sale and Discontinued
Operations, (ii) IFRS 7, Financial Instruments: Disclosures, and (iii) IAS 19, Employee Benefits.
3 Accounting Policies
Critical judgements in applying the Group’s accounting policies
In the process of applying the Group’s accounting policies, which are described below, the Directors have made the following
judgements that have the most significant effect on the amounts recognised in the Financial Statements (apart from those involving
estimations, which are dealt with below) and have been identified as being particularly complex or involve subjective assessments.
Share based payments
The charge to the Income Statement in relation to options and incentive plans is based on the Black-Scholes Merton or the Monte Carlo
Option Pricing Model valuation technique. These techniques require a number of assumptions to be made such as those in relation to
share price volatility, movement in interest rates, dividend yields and staff behavioural patterns. Details of the accounting policies applied
in respect of share based payments are set out on page 80.
Tax
A deferred tax asset is recognised when it is judged probable that the Group will generate taxable profits which can be offset against tax
losses. The measurement of the tax benefit recognised in the Consolidated Financial Statements is based upon the largest amount of tax
benefit that, in management’s judgement, is likely to be realised. Details of the accounting policies applied in respect of deferred tax are
set out on page 77.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 76
Notes Forming Part of the Consolidated Financial Statements
continued
3 Accounting Policies continued
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the Balance Sheet date, that have
a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year,
are discussed below.
Impairment of goodwill, intangible assets and fixed assets
Determining whether goodwill, intangible assets and fixed assets are impaired requires an estimation of the value in use of the
cash-generating units to which the assets have been allocated. The value in use calculation requires the entity to estimate the future
cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The carrying
amount of goodwill and intangible assets at the balance sheet date was £40.3m and £9.5m respectively (2015: £34.6m and £8.4m).
Details of the accounting policies applied in respect of impairment are set out on page 78.
Basis of consolidation
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating
policies of an entity so as to retain benefits from its activities. The Financial Statements of the subsidiaries are included in the Consolidated
Financial Statements on the basis of acquisition accounting, from the date that control commences until the date that control ceases.
Intercompany transactions and balances between Group entities are eliminated upon consolidation.
Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate
of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, the equity instruments issued by the Group
in exchange for control of the acquiree, plus any costs directly attributable to the issue of debt or equity. Acquisition related expenses
are accounted for as expenses in the period in which the costs are incurred and the services rendered, with the exception of directly
attributable costs incurred as a result of raising equity, which are off-set against share premium, and raising debt, which are capitalised
and amortised over the term of the debt. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions
for recognition under IFRS 3 are recognised at their fair value at the acquisition date, except for non-current assets (or disposal groups)
that are classified as held for sale in accordance with IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations, which are
recognised and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business
combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after
reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the
cost of the business combination, the excess is recognised immediately in profit or loss.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the
identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition. Goodwill is initially
recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill which is
recognised as an asset is reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and
is not subsequently reversed.
Revenue recognition
Revenue represents the fair value of sales of the Group’s products to external customers at amounts excluding value added tax, and is
recognised when the products have been delivered and title has passed. Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be reliably measured.
Revenue from royalty income receivable under licence agreements from external customers at amounts excluding value added tax
is recognised as the products under licence are sold and the revenue can be reliably measured.
Other income
This represents non-refundable up-front licence payments received for the grant of rights for the development and marketing of
products, and other sundry income. The income is recognised in the Income Statement, over the life of each development project,
in proportion to the stage of completion of each project.
Finance income
Finance income relates to interest earned on cash, cash equivalents and investments. Interest income is accrued on a time basis,
by reference to the principal outstanding and at the effective interest rate applicable.
Exceptional items
Exceptional items are those items that are unusual because of their size, nature or incidence, or that the Directors consider should be
disclosed separately to enable a full understanding of the Group’s results. This includes non-recurring transaction costs (see Note 6).
Exceptional items have been presented separately on the face of the Income Statement. The Directors consider that this presentation
gives a fairer presentation of the results of the Group.
Advanced Medical Solutions Group plc Annual Report 2016 77
Finance costs
Finance costs relate to finance payments associated with financial liabilities. They are recognised in the Income Statement as they accrue
using the effective interest method.
Finance costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily
take a substantial period of time to get ready for their intended use, are added to the cost of those assets, until such time as the assets are
substantially ready for their intended use.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets
is deducted from the borrowing costs eligible for capitalisation.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that
an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of
the amount of the obligation.
Foreign currencies
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies at the Balance Sheet date are translated at the foreign exchange rate ruling at that date.
Foreign exchange differences arising on translation are recognised in the Income Statement. Non-monetary assets and liabilities that
are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at foreign exchange rates
ruling at the date the fair value was determined.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated
at foreign exchange rates ruling at the Balance Sheet date. The revenue and expenses of foreign operations are translated at an average
rate for the year where this rate approximates to the foreign exchange rates at the dates of the transactions. Exchange differences arising
on consolidation are recognised in equity.
Hedging
The Group designates certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives in respect
of foreign currency risk, as either fair value hedges, cash flow hedges, or hedges of net investments in foreign operations. Hedges of
foreign exchange risk on firm commitments are accounted for as cash flow hedges. At the inception of the hedge relationship, the entity
documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its
strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group
documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item.
Note 24 sets out details of the fair values of the derivative instruments used for hedging purposes. Movements in the hedging reserve
in equity are detailed in the Consolidated Statement of Changes in Equity.
Taxation
Taxation expense includes the amount of current income tax payable and the charge for the year in respect of deferred taxation.
The income tax payable is based on an estimation of the amount due on the taxable profit for the year. Taxable profit is different from
profit before tax as reported in the Income Statement because it excludes items of income or expenditure which are not taxable or
deductible in the year as a result of either the nature of the item or the fact that it is taxable or deductible in another period. The Group’s
liability for current tax is calculated by using tax rates that have been enacted or substantively enacted by the Balance Sheet date.
Deferred tax is accounted for on a basis of temporary differences, except to the extent where it arises from the initial recognition of
goodwill or of an asset or liability in a transaction that is not a business combination. Deferred tax assets are recognised only to the extent
that it is probable that future taxable profits will be available against which temporary differences can be utilised.
Deferred tax is charged or credited to the Income Statement, except when it relates to items charged or credited directly to equity, in
which case it is dealt with within equity. It is calculated at the tax rates that are expected to apply to the period when the asset is realised
or the liability is settled based on tax laws enacted or substantively enacted by the reporting date.
Intangible assets
Acquired intellectual property rights
Intellectual property rights that are acquired in a business combination are initially recognised at their fair value. Intellectual property
rights purchased outright are initially recognised at cost. Intellectual property rights are capitalised and amortised over their estimated
useful economic lives, usually not exceeding 18 years. In determining the useful economic life each asset is reviewed separately and
consideration given to the period over which the Group expects to derive economic benefit from the asset.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 78
Notes Forming Part of the Consolidated Financial Statements
continued
3 Accounting Policies continued
Development costs
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge, is recognised in the
Income Statement as an expense in the period in which it is incurred.
Expenditure on development activities, where research findings are applied to a plan or design for the production of new or substantially
improved products and processes, is capitalised once it can be demonstrated that the product or process is clearly identifiable,
technically and commercially feasible, will generate future economic benefits, that the development costs of the asset can be measured
reliably and the Group has sufficient resources to complete development. Expenditure capitalised is stated as the cost of materials and
direct labour less accumulated amortisation.
Where development expenditure results in new or substantially improved products or processes and it is probable that recovery will take
place, it is capitalised and amortised on a straight-line basis over the product’s useful life starting from the date on which serial production
commences, which is between one and ten years. Patents and trademarks are measured initially at purchase cost and are amortised on
a straight-line basis over their estimated useful lives, which is between three and 20 years.
Software intangibles
Where computer software is not integral to an item of property, plant or equipment its costs are capitalised and categorised as intangible
assets. Amortisation is provided on a straight-line basis over its economic useful life, which is in the range of three to ten years.
Property, plant and equipment
Land and buildings and plant and equipment held for use in the production of goods and services or for administrative purposes are
carried in the Balance Sheet at cost less any subsequent accumulated depreciation and subsequent accumulated impairment losses.
The Group elected to use the fair value as the deemed cost in respect of land and buildings at the date of transition to IFRS. Fair value
was calculated by reference to their existing use at the date of transition.
Depreciation is provided to write off the cost, less estimated residual values, of all property, plant and equipment, over the expected
useful life of the asset from the date that the asset is brought into use. It is calculated at the following rates:
e Freehold property and improvements
e Leasehold improvements
e Plant and machinery
e Fixtures and fittings
e Motor vehicles
— 4% per annum on cost
— over the length of the lease
— 6.7% to 33.3% per annum on cost
— 33.3% per annum on cost
— 25% per annum on cost
Property, plant and equipment in the course of construction for production are carried at cost, less any recognised impairment loss.
Depreciation of these assets, on the same basis as other property, plant and equipment assets, commences when the assets are ready
for their intended use.
No depreciation is provided on freehold land.
Impairment of tangible and intangible assets excluding goodwill
The carrying amount of the Group’s assets other than inventories and deferred tax assets, are reviewed at each balance sheet date
to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.
Impairment losses are recognised in the Income Statement.
Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the assets in the unit on
a pro rata basis. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent
of the cash inflows from other assets or groups of assets.
Calculation of recoverable amount
The recoverable amount of the Group’s receivables carried at amortised cost is calculated as the present value of estimated future cash
flows. As the Group’s receivables are of short duration they are not discounted.
Reversal of impairment
An impairment loss in respect of a receivable carried at amortised cost is reversed if the subsequent increase in recoverable amount
can be related objectively to an event occurring after the impairment loss was recognised.
In respect of other assets, an impairment loss is reversed when there is an indication that the impairment loss may no longer exist
and there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Advanced Medical Solutions Group plc Annual Report 2016
79
Inventory
Inventory is valued at the lower of cost or net realisable value. Cost comprises direct materials and, where applicable, direct labour
costs that have been incurred in bringing the inventories to their present location and condition and an attributable proportion of
manufacturing overheads based on normal levels of activity.
Net realisable value is based on estimated selling price less further costs to completion and disposal.
The Group makes provision for inventory deemed to be irrecoverable or where the net realisable value is lower than cost. This provision
is established on a stock keeping unit (SKU) basis by reference to the age of the stock, the forward order book, management’s experience
and its assessment of the present value of estimated future cash flow.
Financial Instruments
Classification of financial instruments
Financial instruments are classified as financial assets, financial liabilities or equity instruments.
Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions
e They include no contractual obligations upon the Group to deliver cash or other financial assets that are potentially unfavourable
to the Group; and
e Where the instrument will or may be settled in the Group’s own equity instruments, it is either a non-derivative that includes no
obligation to deliver a variable number of the Group’s own equity instruments or is a derivative that will be settled by the Group
exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability.
Recognition and valuation of financial assets
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and cash deposits and amounts under short-term guarantees usually three
months or less that are held for the purpose of meeting short-term cash commitments and are subject to insignificant risk in change in
value and which are readily convertible to a known amount of cash. Cash held in accounts with more than 90 days’ notice that are not
required to meet short-term cash commitments are shown as an investment.
Investments
Cash held in accounts with more than 90 days’ notice that are not required to meet short-term cash commitments are shown as an
investment. The Group invests funds which are surplus to requirements in fixed rate deposits operating within parameters for credit
ratings and credit limits for individual institutions that are approved and monitored by the Board.
Under IAS 39 'Financial instruments; recognition and measurement', such investments are classified as loans and receivables and are
recognised at fair value on initial recognition and subsequently measured at amortised cost using the effective interest method.
Trade and other receivables
Trade receivables are recognised and carried at the lower of their original invoiced value and recoverable amount. An impairment is made
when it is likely that the balance will not be recovered in full. The recoverable amount is calculated as the present value of estimated
future cash flows. Estimated future cash flows are not discounted due to the relatively short period of time between recognition of trade
receivables and receipt of cash.
Recognition and valuation of equity instruments
Equity instruments are stated at par value. Any premium on issue is taken to the share premium account.
Recognition and valuation of financial liabilities
Financial liabilities are classified according to the substance of the contractual arrangements entered into.
Trade payables
Trade payables are initially recognised at fair value and are subsequently recognised at amortised cost using the effective interest method.
Other loans
Other loans are initially recognised at fair value and are subsequently recognised at amortised cost.
Financial liabilities at Fair Value Through Profit or Loss ('FVTPL')
A derivative that is not designated and effective as a hedging instrument is classified as held for trading. Financial liabilities are classified
as at FVTPL where the financial liabilities are held for trading.
Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. Fair value is determined
in the manner described in Note 24.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 80
Notes Forming Part of the Consolidated Financial Statements
continued
3 Accounting Policies continued
Derivative financial instruments
The Group enters into foreign exchange forward contracts to manage its exposure to foreign exchange rate risk. Further details
of derivative financial instruments are disclosed in Note 24 to the Financial Statements.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to
their fair value at each Balance Sheet date. The resulting gain or loss is recognised in profit or loss (administrative costs) immediately
unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss
depends on the nature of the hedge relationship. The Group currently designates certain derivatives as hedges of highly probable
forecast transactions or hedges of foreign currency risk of firm commitments (cash flow hedges). A derivative with a positive fair value
is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability.
Derivatives with remaining maturity of less than 12 months are presented as current assets or current liabilities.
Leased assets
Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards of ownership
to the Group. All other leases are classified as operating leases.
Assets held as finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum
lease payments during the lease term at the inception of the lease. Lease payments are apportioned between the reduction of the lease
liability and finance charges in the Income Statement so as to achieve a constant rate of interest on the remaining balance of the liability.
Assets held under finance leases are depreciated over the shorter of the estimated useful life of the assets and the lease term.
Assets leased under operating leases are not recorded on the Balance Sheet. Rental payments are charged directly to the Income
Statement. Lease incentives, primarily up-front cash payments or rent-free periods, are capitalised and spread over the period of the
lease term on a straight line basis unless another systematic basis is more representative of the time pattern of the users’ benefit.
Payments made to acquire operating leases are treated as prepaid lease expenses and amortised over the life of the lease.
Pensions
The Group operates a money purchase pension scheme. The assets of the scheme are held separately from those of the Group
in an independently administered fund. The amount charged against the Income Statement represents the contributions payable
to the scheme in respect of the accounting period.
Share-based payments
The Group has applied the requirements of IFRS 2 ‘Share-based payments’. IFRS has been applied to all options granted after 7 November
2002 that were unvested as of 1 January 2006.
The group issues equity–settled share-based payments to certain employees. Equity-settled share-based payments are measured
at fair value at the date of grant. The fair value as determined at the grant date of equity–settled share-based payments is expensed
on a straight-line basis over the vesting period, based on the Group’s estimate of options that will eventually vest.
Fair value is measured by use of a Black-Scholes Merton or Monte Carlo model. The expected life used in the model has been adjusted,
based on management’s best estimate, for the effect of non-transferability, exercise restrictions and behavioural considerations.
Capital management
For the year ended 31 December 2016, the Group had net funds with no borrowings. Capital is managed by maximising retained
profits. Working capital is managed in order to generate maximum conversion of these profits into cash and cash equivalents thereby
maintaining capital.
Capital includes share capital, share premium, investment in own shares, share-based payments reserve, share-based payments deferred
tax reserve, other reserve, translation reserve and retained earnings reserve. There are no externally imposed capital requirements on
the Group.
Employee Benefit Trusts
The Group operates an Employee Benefit Trust (EBT): ‘Advanced Medical Solutions Group plc UK Employee Benefit Trust’.
The Group has de facto control of the assets, liabilities and shares held by the Trust and bear their benefits and risks. The Group records
assets and liabilities of the Trust as its own.
In compliance with IAS 32 ‘Financial Instruments: Presentation Group’, shares held by the EBT are included in the Consolidated Balance
Sheet as a reduction in equity. Gains and losses on Group shares are recognised directly in reserves.
Advanced Medical Solutions Group plc Annual Report 2016 81
IFRS not yet effective and not adopted early
New accounting standards not yet applied
At the date of authorisation of the Annual Financial Statements, the following new and revised IFRSs that are potentially relevant
to the Group, and which have not been applied in the Annual Financial Statements, were in issue but not yet effective (and in some
cases had not yet been adopted by the EU):
e IFRS 2, Share-based Payment - effective for accounting periods beginning on or after 1 January 2018.
e IFRS 16, Leases - effective for accounting periods beginning on or after 1 January 2019.
e IAS 7, Statement of Cash Flows - effective for accounting periods beginning on or after 1 January 2017.
e IAS 12, Income Taxes - effective for accounting periods beginning on or after 1 January 2017.
e IFRS 9, Financial Instruments: Classification and Measurement - effective for accounting periods beginning on or after 1 January 2018.
e IFRS 15, Revenue from Contracts with Customers - effective for accounting periods beginning on or after 1 January 2018.
The Directors do not expect that the adoption of the standards listed above will have a material impact on the Financial Statements of the
Group in future periods, except as follows:
e IFRS 9 is effective for annual periods beginning 1 January 2018 and will replace IAS 39 Financial Instruments. This standard covers the
classification, measurement, impairment and de-recognition of financial assets and financial liabilities, together with the new hedge
accounting model. The Group does not expect the transition to the standard to have a material impact on the Financial Statements.
e IFRS 15 is effective for annual periods beginning 1 January 2018 and will replace IAS 11 Construction Contracts and IAS 18 Revenue.
This standard requires the separation of performance obligations within contracts with customers, and the contractual value to
be allocated to each of the performance obligations. Revenue is then recognised as each performance obligation is satisfied.
Retrospective application in the comparative year ending 31 December 2017 is optional, however the Group does not expect to
undertake this option. An initial assessment has been performed and it is not anticipated that transition to IFRS 15 will have a material
impact on the Group.
e IFRS 16 is effective for annual periods beginning 1 January 2019, subject to EU endorsement, and will replace IAS 17 Leases.
This standard requires lessees to recognise assets and liabilities for all leases, unless the lease term is 12 months or less, or the
underlying asset is of low value. As at 31 December 2016, the Group holds a number of operating leases, which currently, under IAS 17,
are expensed on a straight line basis over the lease term. Retrospective application in the comparative year ending 31 December 2018
is optional, however the Group does not expect to undertake this option. An initial assessment has been performed and it is anticipated
that transition to IFRS 16 will have a material impact on the value of lease assets and liabilities recognised in the Consolidated Balance
Sheet. The Group will continue to monitor the impact until the transition date, providing further quantitative and qualitative measures as
progress is made on implementation planning.
Beyond the information above, it is not practicable to provide a reasonable financial estimate of the effect of these standards until
a detailed review has been completed.
4 Segment Information
As referred to in the Chief Executive’s Statement, the Group is organised into four Business Units: Branded Direct, Branded Distributed,
OEM (Original Equipment Manufacturer) and Bulk Materials. These Business Units are the basis on which the Group reports its
segment information.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a
reasonable basis. Unallocated items comprise mainly investments, and related revenue, corporate assets, head office expenses, income
tax assets and the Group’s external borrowings. These are the measures reported to the Group’s Chief Executive Officer for the purposes
of resource allocation and assessment of segment performance.
Business segments
The principal activities of the Business Units are as follows:
Branded Direct
Selling, marketing, and innovation of the Group’s branded products sold directly by the Group’s sales teams.
Branded Distributed
Distribution, marketing and innovation of the Group’s brands sold by distributors in markets not serviced by the Group’s sales team.
OEM
Selling, marketing and innovation of the Group’s products supplied to partners under their brands.
Bulk Materials
Selling, marketing and innovation of bulk materials to medical device partners and converters.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 82
Notes Forming Part of the Consolidated Financial Statements
continued
4 Segment information continued
Segment information about these Business Units is presented below.
Year ended 31 December 2016
Revenue
External sales
Inter-segment sales
Total revenue
Result
Segment result
Unallocated expenses
Profit from operations
Finance income
Finance costs
Profit before tax
Tax
Profit for the year
At 31 December 2016
Other Information
Capital additions:
Software intangibles
Research and development
Property, plant and equipment
Depreciation and amortisation
Balance sheet
Assets
Segment assets
Unallocated assets
Consolidated total assets
Liabilities
Segment liabilities
Consolidated total liabilities
Year ended 31 December 2015
Revenue
External sales
Inter-segment sales
Total revenue
Result
Segment result
Unallocated expenses
Profit from operations
Finance income
Finance costs
Profit before tax
Tax
Profit for the year
Branded
Direct
£’000
Branded
Distributed
£’000
OEM
£’000
Bulk Materials
£’000
Eliminations
£’000
Consolidated
£’000
24,553
20,753
32,070
–
–
–
24,553
20,753
32,070
5,245
1,795
7,040
–
(1,795)
(1,795)
4,976
6,337
6,881
1,796
–
82,621
–
82,621
19,990
(885)
19,105
108
(111)
19,102
(3,410)
15,692
Branded
Direct
£’000
Branded
Distributed
£’000
OEM
£’000
Bulk Materials
£’000
Consolidated
£’000
463
31
734
(843)
133
126
371
194
100
201
(466)
(1,340)
5
2
217
(260)
68,197
29,301
40,665
6,723
7,082
4,938
6,291
1,167
795
259
1,523
(2,909)
144,886
120
145,006
19,478
19,478
Branded
Direct
£’000
Branded
Distributed
£’000
OEM
£’000
Bulk Materials
£’000
Eliminations
£’000
Consolidated
£’000
22,344
–
22,344
14,631
–
14,631
27,675
–
27,675
3,946
826
4,772
–
(826)
(826)
68,596
–
68,596
5,235
4,366
7,139
814
–
17,554
(513)
17,041
73
(118)
16,996
(2,877)
14,119
Advanced Medical Solutions Group plc Annual Report 2016 83
31 December 2015
Other Information
Capital additions:
Software intangibles
Research and development
Property, plant and equipment
Depreciation and amortisation
Balance sheet
Assets
Segment assets
Unallocated assets
Consolidated total assets
Liabilities
Segment liabilities
Consolidated total liabilities
Geographical Segments
Branded
Direct
£’000
Branded
Distributed
£’000
OEM
£’000
Bulk Materials
£’000
Consolidated
£’000
111
102
730
(855)
15
67
332
(431)
333
200
663
(1,309)
13
4
182
(217)
57,264
20,913
32,874
5,347
5,353
2,888
3,930
735
472
373
1,907
(2,812)
116,398
165
116,563
12,906
12,906
The Group operates in the UK, Germany, the Netherlands, the Czech Republic, with sales offices in Russia and a sales presence in the US.
In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers.
Segment assets are based on the geographical location of the assets.
The following table provides an analysis of the Group’s sales by geographical market, irrespective of the origin of the goods/services,
based upon location of the Group’s customers:
United Kingdom
Germany
Europe excluding United Kingdom and Germany
United States of America
Rest of the World
The following table provides an analysis of the Group’s total assets by geographical location.
United Kingdom
Germany
Europe excluding United Kingdom and Germany
United States of America
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
17,457
18,345
21,360
23,505
1,954
82,621
16,657
13,371
19,223
17,766
1,579
68,596
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
80,580
59,950
3,962
514
145,006
62,785
50,592
3,060
126
116,563
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 84
Notes Forming Part of the Consolidated Financial Statements
continued
5 Profit from Operations
Profit from operations is arrived at after charging:
Depreciation of property, plant and equipment
Amortisation of:
– acquired intellectual property rights
– software intangibles
– development costs
Operating lease rentals - plant and machinery
- land and buildings
Research and development costs expensed to the Income Statement
Cost of inventories recognised as expense
Staff costs
Net foreign exchange loss
6 Exceptional Items
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
1,898
1,754
242
329
441
253
917
2,276
34,132
26,162
1,271
367
289
410
250
896
1,817
27,836
21,579
391
During 2016, £361,000 of exceptional costs were incurred relating to an acquisition that was not progressed in the year (2015: £nil).
7 Auditor’s Remuneration
Amounts payable to Deloitte LLP and their associates in respect of both audit and non-audit services:
Fees payable to the Company’s Auditor and their associates for the audit
of the Company’s annual accounts
Fees payable to the Company’s Auditor and their associates for other audit services to the Group
- the audit of the Company’s subsidiaries
Total audit fees
Audit related assurance services
Other services
Corporate finance services
Total non audit fees
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
13
71
84
13
4
114
130
214
19
67
86
13
–
55
68
154
Fees payable to the Company’s Auditor, Deloitte LLP and its associates, for non-audit services to the Company are not required
to be disclosed in subsidiaries’ accounts because the Consolidated Financial Statements are required to disclose such fees on a
consolidated basis.
A description of the work of the Audit Committee is set out in the Governance section of the Annual Report which includes explanations
of how the audit objectivity and independence is safeguarded when non-audit services are provided by the Auditor.
Advanced Medical Solutions Group plc Annual Report 2016
85
8 Employees
The average monthly number of employees of the Group during the year, including Executive Directors, was as follows:
Production
Research and development
Sales and marketing
Administration
Staff costs for all employees, including Executive Directors, consists of:
Wages and salaries
Social Security costs
Pension costs
Share-based payments (see Note 29)
Year ended
31 December
2016
Number
Year ended
31 December
2015
Number
303
30
120
86
539
274
29
107
78
488
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
20,979
2,965
988
1,230
26,162
17,543
2,523
804
709
21,579
The 2015 comparator has been restated to include an additional amount of £1,079,000 previously omitted from the Note
in the 2015 accounts.
9 Directors’ Emoluments
Remuneration for management services
Pension
Amounts paid to third parties
Share-based payments
Executive Directors
Salaries and short-term employee benefits
Pension
Share-based payments
Highest paid Director
Salaries and short-term employee benefits
Pension
Share-based payments
Retirement benefits are accruing to the following number of Directors under money purchase schemes
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
967
52
65
442
1,526
988
66
30
207
1,321
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
845
52
442
1,339
835
66
207
1,108
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
496
26
256
778
2
497
26
121
644
2
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 86
Notes Forming Part of the Consolidated Financial Statements
continued
10 Remuneration of Key Management Personnel
The key management of the Group comprises the Directors of the Group together with senior members of the management team.
Their aggregate compensation is shown below:
Salaries and short-term employee benefits
Pension
Share based payments
11 Finance Income
Bank interest
12 Finance Costs
Amortisation of facility fees
Total interest expense
13 Taxation
a) Analysis of charge for the year
Current tax:
Tax on ordinary activities - current year
Tax on ordinary activities - prior year
Deferred tax:
Tax on ordinary activities - current year
Effect of reduction in UK corporation tax rates
Tax charge for the year
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
2,334
108
795
3,237
2,225
114
356
2,695
Year ended
31 December
2016
£’000
108
Year ended
31 December
2015
£’000
73
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
111
111
118
118
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
3,180
(358)
2,822
599
(11)
588
3,410
1,743
58
1,801
1,055
21
1,076
2,877
The Group has chosen to use a weighted average country tax rate rather than the UK tax rate for the reconciliation of the charge for
the year to the profit per the Income Statement. The Group operates in several jurisdictions, some of which have a tax rate in excess of
the UK tax rate. As such, a weighted average country tax rate is believed to provide the most meaningful information to the users of the
Financial Statements.
Advanced Medical Solutions Group plc Annual Report 2016 87
b) Factors affecting tax charge for the year
The tax assessed for the year is lower (2015: lower) than the weighted average Group tax rate of 22.11% (2015: 22.35%) as explained below:
Profit before taxation
Weighted average group tax rate 22.11% (2015:22.35%)
Effects of:
Expenses not deductible for tax purposes and other timing differences
Depreciation for period less than capital allowances
Utilisation and recognition of trading losses
Patent Box Relief
Research and development relief
Share-based payments
Adjustments in respect of prior year - current tax
Adjustments in respect of prior year and rate changes - deferred tax
Taxation
Year ended
31 December
2016
£’000
19,102
4,224
Year ended
31 December
2015
£’000
16,996
3,798
50
(31)
(203)
(242)
(183)
(47)
(359)
201
43
(1)
(438)
(269)
(324)
10
58
–
3,410
2,877
Legislation to reduce the main rate of UK corporation tax to 19% and 17% was passed by Parliament in September 2016 to take effect
from 1 April 2017 and 1 April 2020. The reduction in the main rate to 17% had been substantively enacted at the Balance Sheet date and,
therefore, the deferred tax assets and liabilities are calculated in these Financial Statements at this rate.
In addition to the amount charged to the Income Statement and other Comprehensive Income, the Group has recognised directly
in equity:
e Excess tax deductions related to share-based payments on exercised options
e Changes in excess deferred tax deductions related to share-based payments, totalling £22,000 deficit: (2015: £159,000 deficit)
14 Dividends
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2015 of 0.55p (2014: 0.48p) per Ordinary Share
Interim dividend for the year ended 31 December 2016 of 0.30p (2015: 0.25p) per Ordinary Share
Proposed final dividend for the year ended 31 December 2016 of 0.62p (2015: 0.55p) per Ordinary Share
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
1,150
633
1,783
935
586
1,521
1,305
1,305
1,150
1,150
The proposed final dividend is subject to approval by the shareholders and has not been included as a liability in these Financial Statements.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016
88
Notes Forming Part of the Consolidated Financial Statements
continued
15 Earnings per Share
The calculation of the basic and diluted earnings per share is based on the following data:
Year ended 31 December
Profit for the year attributable to equity holders of the parent
Pre exceptional items
Post exceptional items
Number of shares
Weighted average number of Ordinary Shares for the purposes of basic earnings per share
Effect of dilutive potential Ordinary Shares:
share options, deferred share bonus, LTIPs
Weighted average number of Ordinary Shares for the purposes of diluted earnings per share
Profit for the year attributable to equity holders of the parent
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity
holders of the parent
Amortisation of acquired intangible assets
Adjusted profit for the year attributable to equity holders of the parent
Earnings per share
Basic – pre exceptional
Basic – post exceptional
Diluted – pre exceptional
Diluted – post exceptional
Adjusted basic (before exceptional items)
Adjusted diluted (before exceptional items)
2016
£’000
2015
£’000
16,053
15,692
14,119
14,119
‘000
‘000
209,815
208,376
2,778
212,593
£’000
16,053
2,902
211,278
£’000
14,119
242
16,295
367
14,486
pence
7.65
7.48
7.55
7.38
7.77
7.66
pence
6.78
6.78
6.68
6.68
6.95
6.86
Advanced Medical Solutions Group plc Annual Report 2016 89
16 Acquired Intellectual Property Rights, Software Intangibles and Development Costs
2016
Cost
At beginning of year
Additions
Exchange differences
At end of year
Amortisation
At beginning of year
Charged in the year
Disposals / Impairment
Exchange differences
At end of year
Net book value
At 31 December 2016
At 31 December 2015
Acquired
intellectual
property rights
£’000
Software
intangibles
£’000
Development
costs
£’000
Total
£’000
11,541
–
1,356
12,897
3,182
242
–
5
2,859
795
70
3,724
850
329
–
45
3,340
364
31
3,735
1,537
441
125
(13)
3,429
1,224
2,090
17,740
1,159
1,457
20,356
5,569
1,012
125
37
6,743
9,468
8,359
2,500
2,009
1,645
1,803
13,613
12,171
Acquired intellectual property rights were initially recognised on the acquisition of MedLogic Global Limited representing patents and
on the acquisition of RESORBA® representing brand names, know-how and customer listings and contracts.
Intangible assets are amortised on a straight-line basis and the amortisation is recognised within administration costs, the largest
intangible asset being RESORBA® ‘know-how’ which is being amortised over ten years with five years remaining, with the exception of
the RESORBA® brand name, which the Directors believe has an unlimited useful economic life and has a carrying value of £8,885,000.
In reaching this assessment, the Directors have considered that the RESORBA® brand has existed for over 80 years and is widely
recognised as a market leader in the surgical market.
2015
Cost
At beginning of year
Additions
Exchange differences
At end of year
Amortisation
At beginning of year
Charged in the year
Exchange differences
At end of year
Net book value
At 31 December 2015
At 31 December 2014
Acquired intellectual
property rights
£’000
Software
intangibles
£’000
Development
costs
£’000
Total
£’000
12,089
–
(548)
11,541
2,851
367
(36)
3,182
8,359
9,238
2,402
468
(11)
2,859
567
289
(6)
850
2,009
1,835
2,994
17,485
357
(11)
825
(570)
3,340
17,740
1,144
410
(17)
1,537
1,803
1,850
4,562
1,066
(59)
5,569
12,171
12,923
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 90
Notes Forming Part of the Consolidated Financial Statements
continued
17 Property, Plant and Equipment
2016
Cost
At beginning of year
Additions
Transfer of assets into use
Disposals
Exchange adjustment
At end of year
Depreciation
At beginning of year
Provided for the year
Disposals
Exchange adjustment
At end of Year
Net book value
At 31 December 2016
At 31 December 2015
Freehold land,
property and
improvements
£’000
Short
leasehold
improvements
£’000
Plant and
machinery
£’000
Fixtures
and fittings
£’000
Motor
vehicles
£’000
Assets under
construction
£’000
Total
£’000
4,443
12
22,430
679
29
–
(2)
564
5,034
451
124
–
82
657
–
–
–
–
1,247
72
(493)
620
12
–
(18)
15
12
23,876
688
10
11,566
340
–
–
–
1,572
(457)
302
58
(17)
5
10
12,983
386
4,377
3,992
2
2
10,893
10,864
302
339
641
235
–
(239)
82
719
115
144
(157)
14
116
603
526
72
–
(72)
–
–
–
–
–
–
–
–
28,277
1,523
–
(752)
1,281
30,329
12,482
1,898
(631)
403
14,152
–
72
16,177
15,795
At 31 December 2016, the Group had entered into contractual commitments for the acquisition of property, plant and equipment
amounting to £354,000 (2015: £783,000).
The net book value of plant and equipment includes £167,000 (2015: £188,000) of capitalised borrowing costs relating to the
Winsford site.
Freehold land,
property and
improvements
£’000
Short
leasehold
improvements
£’000
Plant and
machinery
£’000
Fixtures
and fittings
£’000
Motor
vehicles
£’000
Assets under
construction
£’000
Total
£’000
2015
Cost
At beginning of year
Additions
Transfer of assets into use
Disposals
Exchange Adjustment
At end of year
Depreciation
At beginning of year
Provided for the year
Disposals
Exchange Adjustment
At end of Year
Net book value
At 31 December 2015
At 31 December 2014
4,657
12
20,578
26
–
(33)
(207)
4,443
360
111
–
(20)
451
3,992
4,297
–
–
–
–
1,604
591
(186)
(157)
647
35
–
–
(3)
12
22,430
679
10
10,379
–
–
–
1,465
(179)
(99)
281
60
–
(1)
10
11,566
340
2
2
10,864
10,199
339
366
619
170
–
(118)
(30)
641
71
118
(76)
2
115
526
548
591
72
(591)
–
–
27,104
1,907
–
(337)
(397)
72
28,277
–
–
–
–
–
11,101
1,754
(255)
(118)
12,482
72
591
15,795
16,003
Advanced Medical Solutions Group plc Annual Report 2016 91
18 Deferred Tax
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and
prior reporting year.
Share-based
payment
£’000
Tax
losses
£’000
Advanced
capital allowances
£’000
At 31 December 2014
Charge to income
Charge to equity
Exchange adjustment
At 31 December 2015
Charge to income
Charge to equity
Exchange adjustment
At 31 December 2016
407
(4)
159
–
562
100
22
–
684
1,669
(1,079)
–
–
590
(590)
–
–
–
Intangible
assets
£’000
(2,513)
56
–
146
(2,311)
(199)
–
(410)
Research
and Development
Assets
£’000
(382)
29
–
–
(353)
50
–
–
Total
£’000
(1,405)
(1,076)
159
146
(2,176)
(588)
22
(410)
(586)
(78)
–
–
(664)
51
–
–
(613)
(2,920)
(303)
(3,152)
Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances (after offset) for
financial reporting purposes:
Deferred tax liabilities
Deferred tax assets
2016
£’000
(916)
684
(232)
2015
£’000
(1,017)
1,152
135
At the balance sheet date, the Group has unused tax losses of £0.6 million (2015: £8.0 million) available for offset against future profits.
No deferred tax asset has been recognised in respect of this loss (2015: £4.7 million) due to the unpredictability of future profit streams.
19 Goodwill
Cost
At 1 January
Exchange differences
At 31 December
2016
£’000
2015
£’000
34,579
5,758
40,337
36,696
(2,117)
34,579
Two cash-generating units (CGU) exist within the Branded Distributed segment whereby goodwill has been allocated. CGU1 has
goodwill and indefinite useful life intangible assets of £29.7m and £6.8m (2015: £25.4m and £6.4m) respectively, and CGU2 has £0.8m
(2015: £1.0m) of goodwill allocated.
Goodwill arose on the acquisition of Advanced Medical Solutions B.V. on 30 September 2009 and the acquisition of RESORBA® on the
22nd December 2011.
The goodwill and intangible assets with indefinite useful economic life have been allocated to the relevant Business Units in proportion to
profit from operations on a consistent basis for all four segments, as follows:
At 31 December 2016
Goodwill
Intangible assets with indefinite useful life
Branded
Direct
£’000
30,516
6,753
37,269
Branded
Distributed
£’000
8,489
2,132
10,621
OEM
£’000
1,092
–
1,092
Bulk Materials
£’000
240
–
240
Consolidated
£’000
40,337
8,885
49,222
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts have been determined based on a value-in-use calculation on a cash generating unit basis, which uses
cash flow projections based on financial budgets approved by the Directors covering a 12 month period. These budgets have been
adjusted for specific risk factors that take into account sensitivities of the projection. The base 12 month projection is extrapolated using
reasonable growth rates specific to each cash generating unit up to year five of between 0% and 15% and has not been inflated for
years six to 20 which management believes does not exceed the long-term average growth rate for the industry or forecast company
growth. The growth rate would have to fall significantly in order for an impairment to be required. A discount rate of between 6.5% and
7.0% per annum (2015: between 6.0% and 7.5%), being the Group’s current pre tax weighted average cost of capital adjusted for risk, has
been applied to these cash flows, being an estimation of current market risks and the time value of money. The Group has conducted a
sensitivity analysis on the impairment test. The Directors believe that any reasonably possible further change in the key assumptions on
which the recoverable amount is based would not cause any of the carrying amounts to exceed the relevant recoverable amount.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 92
Notes Forming Part of the Consolidated Financial Statements
continued
20 Inventories
Raw materials
Work in progress
Finished goods
2016
£’000
4,971
2,819
3,650
11,440
2015
£’000
4,376
1,699
2,768
8,843
There is no material difference between the replacement cost of stock and the amount at which it is stated in the Financial Statements.
Included above are finished goods of £nil (2015: £nil) carried at net realisable value.
Total gross inventories
Inventory provision
Net inventory
Inventory impairment
At beginning of year
Income statement charge
Provision released
Provision utilised
At end of year
21 Trade and Other Receivables
Due: within one year
Trade receivables
Other receivables
Prepayments and accrued income
Amount receivable for the sale of goods
Provision for impairment
2016
£’000
12,995
(1,555)
11,440
2016
£’000
(921)
(1,304)
69
601
(1,555)
2015
£’000
9,764
(921)
8,843
2015
£’000
(685)
(694)
36
422
(921)
2016
£’000
2015
£’000
10,456
255
1,161
11,872
2016
£’000
10,692
(236)
10,456
9,376
41
1,400
10,817
2015
£’000
9,644
(268)
9,376
The Group’s principal financial assets are cash and trade receivables. The Group’s credit risk is primarily attributable to its trade receivables.
The average credit period taken on sales of goods is 41 days (2015: 41 days). No interest is charged on the receivables within the
contracted credit period. Thereafter, interest may be charged at 2% per month on the outstanding balance. In determining the
recoverability of a trade receivable the Group considers any change in the credit quality of the trade receivable from the date credit was
initially granted up to the reporting date. The concentration of credit risk is limited due to the Group’s large and unrelated customer base.
Accordingly, the Directors believe that there is no further credit provision required in excess of the allowance for impairments.
Before accepting any new customer, the Group assesses the potential customer’s credit quality and defines credit limits by customer.
Limits are reviewed on an ongoing basis and reflect current payment history.
Included in the Group’s trade receivable balance are debtors which are past due at the reporting date for which the Group has not
provided as there has not been a significant change in credit quality and the amounts are still considered recoverable - a large proportion
of debts overdue over 30 days were recovered post the Balance Sheet date. The Group does not hold any collateral or other credit
enhancements over these balances. The carrying amount and ageing of these debtors are summarised on page 93.
Advanced Medical Solutions Group plc Annual Report 2016 Ageing of overdue but not impaired receivables
31-60 days overdue
61 to 90 days overdue
Total
Movement in provision for impairment
Balance at the beginning of the year
Impairment losses recognised
Amounts written off as uncollectible
Amounts recovered during the year
Balance at the end of the year
Ageing of impaired trade receivables
Not yet due
0 to 30 days overdue
31 to 60 days overdue
61 to 90 days overdue
Over 90 days overdue
Total
93
2015
£’000
187
56
243
2015
£’000
243
147
(9)
(113)
268
2015
£’000
82
–
3
–
183
268
2016
£’000
128
20
148
2016
£’000
268
100
(1)
(131)
236
2016
£’000
3
–
2
18
213
236
Analysis of customers
In the year ended 31 December 2016, there were no customers accounting for more than 10% of revenue (2015: same).
22 Cash and Cash Equivalents
Cash and cash equivalents
2016
£’000
51,125
2015
£’000
34,201
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less. The carrying
amount of these assets is approximately equal to their fair value.
23 Trade and Other Payables
Current liabilities
Trade payables
Other payables
Derivative financial instruments
Accruals and deferred income
Non-current liabilities
Other payables
Derivative financial instruments
2016
£’000
2015
£’000
3,278
1,599
2,605
5,419
12,901
362
929
1,291
3,339
1,367
525
3,908
9,139
415
–
415
Trade payables, other payables and accruals and deferred income principally comprise amounts outstanding for trade purchases and
ongoing costs.
The average credit period taken for trade purchases is 33 days (2015: 34 days). No interest is charged on trade payables that are within
pre-agreed credit terms. Thereafter, interest may be charged on the outstanding balances at various interest rates. The Group has
financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.
The Directors consider that the carrying amount of trade payables approximates to their fair value.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 94
Notes Forming Part of the Consolidated Financial Statements
continued
24 Financial Instruments
Categories of financial instruments
All financial instruments held by the Group, as detailed in this Note, are classified as ‘Loans and Receivables’ (trade and other receivables,
cash and cash equivalents), ‘Held to maturity investments’ (short-term investments), ‘Financial Liabilities Measured at Amortised
Cost’ (trade and other payables, financial liabilities and obligations under finance leases), ‘Derivative instruments in designated hedge
accounting relationships (cash flow hedges)’ and ‘Fair value through profit and loss (FVTPL)’ (derivative financial instruments) under IAS 39
‘Financial Instruments: Recognition and Measurement’ and finance leases under IAS 17 ‘ Leases’.
Carrying value
2016
£’000
2015
£’000
Financial assets
Loans and receivables (including cash and cash equivalents
61,846
43,631
Financial liabilities
Derivative instruments in designated hedge accounting relationships
Amortised cost
3,534
14,192
525
9,555
In December 2014 the Group entered into a multi-currency facility with the Royal Bank of Scotland and HSBC. The principle features
of the facility are:
e The committed value of the facility is £30 million
e There is an uncommitted accordion of an additional £20 million
e Is unsecured
e Facility will expire in December 2019
e The interest payable on drawings under the loan is based on inter-bank interest (EURIBOR or, if sterling denominated LIBOR) plus
a sliding scale margin determined by the Group’s leverage: the margin is currently 0.65%
e The facility has two covenants - interest cover (ratio of EBITDA to net finance charges) must be above 4:1 and leverage (ratio of Total
Net Debt to adjusted EBITDA) should not exceed 3:1
e It was undrawn at the end of the year
The Risk Management section on pages 38 to 41 provides an explanation of the financial risks faced by the Group and the objectives
and policies for managing those risks. The information below deals with the financial assets and liabilities.
(a) Maturity of financial liabilities
The maturity profile of the Group’s financial liabilities, of which other loans and finance lease obligations are at fixed rates and
denominated in Sterling whilst derivative financial instruments are non-interest bearing, is as follows:
2016
Trade and other payables
At 31 December 2016
2015
Trade and other payables
Finance lease creditors
At 31 December 2015
Finance lease creditors
On demand
or within
one year
£’000
13,830
13,830
On demand
or within
one year
£’000
9,139
1
9,140
Between
one and
two years
£’000
53
53
Between
one and
two years
£’000
53
–
53
Between
two and
five years
£’000
158
158
Between
two and
five years
£’000
158
–
158
Five
years
or more
£’000
151
151
Five
years
or more
£’000
204
–
204
Total
financial
liabilities
£’000
14,192
14,192
Total
financial
liabilities
£’000
9,554
1
9,555
Interest
rate
%
–
Interest
rate
%
–
24%
Fixed rate financial liabilities
Weighted average period for
which rate is fixed
2016
Years
–
2015
Years
5
Advanced Medical Solutions Group plc Annual Report 2016 95
Floating
£’000
Non-interest
bearing
£’000
Total
£’000
16,195
136
2,625
18,956
Floating
£’000
5,543
51
2,192
7,786
30,621
46,816
973
575
32,169
Non-interest
bearing
£’000
24,048
528
1,839
26,415
2016
£’000
6,389
2,399
3,084
11,872
1,109
3,200
51,125
Total
£’000
29,591
579
4,031
34,201
2015
£’000
5,963
1,874
2,980
10,817
(b) Interest rate and currency of financial assets
The currency and interest rate profile of the financial assets of the Group is as follows:
Cash and cash equivalents
Currency
Sterling
US Dollar
Euro
At 31 December 2016
Currency
Sterling
US Dollar
Euro
At 31 December 2015
Trade and other receivables
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
Sterling
US Dollar
Euro
The financial assets all mature within one year.
(c) Currency exposures
At 31 December 2016, the Group had unhedged US Dollar currency exposures of £nil (2015: £nil) and unhedged Euro currency exposures
of £nil (2015: £nil).
Risk sensitivity
The Group estimates that a 10% movement in the £:US$ or £:Euro exchange rate will impact 2016 Sterling revenues by approximately
2.7% and 3.1% respectively and in the absence of any hedging this would have an impact on profit of 2.2% and 0.5%.
Forward foreign exchange contracts
It is the policy of the Group to enter into forward foreign exchange contracts to cover specific foreign currency payments and receipts.
The following table details the forward foreign currency contracts outstanding as at the year-end:
Outstanding contracts
Cash flow hedges
Average exchange rate
Foreign currency
Contract value
Sell US dollars
Less than 3 months
3 to 6 months
7 to 12 months
Over 12 months
2016
USD:£1
1.467
1.421
1.423
1.319
2015
USD:£1
2016
USD ‘000
2015
USD ‘000
2016
£’000
2015
£’000
1.606
1.527
1.526
1.524
5,250
5,250
10,500
22,200
43,200
5,100
4,000
8,600
3,000
20,700
3,579
3,696
7,377
16,829
31,481
3,176
2,619
5,634
1,969
13,398
Fair value
2016
£’000
(673)
(548)
(1,079)
(857)
(3,157)
2015
£’000
(257)
(80)
(167)
(56)
(560)
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 96
Notes Forming Part of the Consolidated Financial Statements
continued
24 Financial Instruments continued
Sell Euros
Less than 3 months
3 to 6 months
7 to 12 months
Over 12 months
Average exchange rate
Foreign currency
Contract value
2016
EUR:£1
1.290
1.263
1.245
1.192
2015
EUR:£1
1.309
1.358
1.358
1.356
2016
£’000
2015
£’000
2016
£’000
1,050
1,250
2,500
2,400
7,200
600
650
1,900
350
3,500
814
990
2,009
2,013
5,826
2015
£’000
459
479
1,399
258
2,595
Fair value
2016
£’000
2015
£’000
(85)
(73)
(146)
(72)
(376)
21
2
9
1
33
The fair value amounts presented above are the difference between the market value of equivalent instruments at the balance sheet date
and the contract value of the instruments. No profits or losses are included in operating profit in the year (2015: £nil) in respect of FVTPL
contracts. The loss of £3,533,000 (2015: £526,000 loss) in respect of cash flow hedges has been taken to reserves.
25 Fair Value of Financial Assets and Liabilities
The Directors consider that the fair value of the Group’s financial instruments do not differ significantly from their book values.
26 Foreign Exchange Rates
Currency
US Dollar
Euro
27 Share Capital
Number of Ordinary Shares of 5p each
At 1 January 2015
Share options exercised
At 31 December 2015
Share options exercised or Shares issued into Trust
At 31 December 2016
Average rate
Closing rate
Percentage change
2016
2015
2016
2015
Average
%
Closing
%
1.3661
1.2352
1.5315
1.3740
1.2312
1.168
1.4833
1.3625
(11)
(10)
(17)
(14)
Allotted, called up
and fully paid
‘000
207,852
1,170
209,022
1,452
210,474
During the year, employees exercised share options and options over LTIPs for 965,958 shares (2015: 1,002,578) at a range of option
prices from 17p to 132p.
During the year, 354,582 (2015: 167,422) shares were issued under the Deferred Share Bonus Scheme and the Deferred Annual Bonus
Scheme at the nominal value of 5p per share. At the balance sheet date, 501,324 (2015: 450,000) of shares are retained by the Trust to
meet the matching requirements of the scheme.
Ordinary Shares of 5p each
At 1 January 2015
Share options exercised
At 31 December 2015
New issues in the year
At 31 December 2016
28 Reserves
Investment in own shares
This is the nominal value of the shares held in trust on behalf of employees in respect of the DSB scheme.
Other reserve
This represents Advanced Medical Solutions Limited’s share premium account arising from merger accounting.
Allotted, called up
and fully paid
‘000
10,393
58
10,451
73
10,524
Advanced Medical Solutions Group plc Annual Report 2016 97
Hedging reserve
The hedging reserve represents the cumulative amount of gains and losses on hedging instruments deemed effective in cash flow
hedges. The cumulative deferred gain or loss on the hedging instrument is recognised in profit or loss only when the hedged transaction
impacts the profit or loss, or is included as a basis adjustment to the non-financial hedged item, consistent with the applicable
accounting policy.
Translation reserve
Exchange differences relating to the translation of the net assets of the Group’s foreign operations, which relate to subsidiaries only,
from their functional currency into the parents functional currency, being Sterling, are recognised directly in the translation reserve.
Gains and losses on hedging instruments that are designated as hedges of net investments in foreign operations are included in the
translation reserve.
A £8,851,000 gain has been recorded in the translation reserve during the period, which would otherwise have been recognised in
administration costs (2015: £3,348,000 loss), if hedge accounting had not been adopted.
29 Share-Based Payments
The charge for share based payments under IFRS 2 arises across the following schemes:
Unapproved Executive Share Option Scheme, Enterprise Management Incentive Scheme
and Company Share Option Scheme
Long-Term Incentive Plan
Deferred Share Bonus Scheme and Deferred Annual Bonus Scheme
2016
£’000
102
744
384
1,230
2015
£’000
98
360
251
709
Unapproved Executive Share Option Scheme and Enterprise Management Incentive Scheme (EMI)
and Company Share Option Plan (CSOP)
The fair value of the executive options is calculated based on a Black-Scholes Merton model assuming the inputs below:
Grant Date
12/04/2007
20/04/2009
16/04/2010
15/04/2011
08/09/2011
10/05/2012
20/06/2012
06/09/2012
Share price at grant date
Exercise price
Expected life
Contractual life
Risk free rate
Expected volatility
Expected dividend yield
Fair value of options
16.75p
16.75p
3.5 yrs
10 yrs
5.00%
27%
0%
2p
33.75p
33.75p
3 yrs
10 yrs
2.40%
34%
0%
6p
42.0p
42.0p
3.5 yrs
10 yrs
2.40%
34%
0%
9p
88.0p
88.0p
3 yrs
10 yrs
1.92%
18%
0.7%
9p
86.25p
86.25p
3 yrs
10 yrs
1.92%
18%
0.7%
9p
69.08p
69.08p
3 yrs
10 yrs
0.39%
34%
0.7%
13p
67.5p
67.5p
3 yrs
10 yrs
0.39%
34%
0.7%
12p
76.75p
76.75p
3 yrs
10 yrs
0.17%
34%
0.7%
17p
Grant Date
26/04/2013
21/05/2013
19/09/2013
15/04/2014
19/09/2014
02/04/2015
18/04/2016
Share price at grant date
Exercise price
Expected life
Contractual life
Risk free rate
Expected volatility
Expected dividend yield
Fair value of options
77.5p
77.5p
3 yrs
10 yrs
0.36%
36%
0.7%
15p
74.0p
74.0p
3 yrs
10 yrs
0.49%
36%
0.7%
14p
90.0p
90.0p
3 yrs
10 yrs
0.86%
36%
0.7%
14p
115.75p
115.75p
3 yrs
10 yrs
0.80%
36%
0.7%
23p
121.75p
121.75p
3 yrs
10 yrs
0.80%
36%
0.7%
24p
132.0p
132.0p
3 yrs
10 yrs
0.80%
31%
0.7%
22p
184.6p
184.6p
3 yrs
10 yrs
0.67%
25%
0.4%
25p
Under the terms of the Company’s Share Option Schemes, approved by Shareholders in 2010, the Board may offer options to purchase
Ordinary Shares in the Company to all employees of the Company at the market price on a date to be determined prior to the date of the
offer. Since 2005, individuals who are entitled to awards under the LTIP are no longer eligible to receive options under the Company’s
Share Option Schemes.
Performance targets are assessed over a three-year period from the date of grant. Once options have vested they can be exercised during
the period up to ten years from the date of grant.
The expected volatility was determined by calculating the historic volatility of the Group’s share price over the previous three years.
Options have been granted over the following number of Ordinary Shares which were outstanding at 31 December 2016:
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 98
Notes Forming Part of the Consolidated Financial Statements
continued
29 Share-Based Payments continued
Date of
grant
Option
price (p)
Weighted
average
price at
exercise (p)
No. of options
as at
1 January
2016
Remaining
life
1 January
2016
Issued
Lapsed
Exercised
No. of options
as at
31 December
2016
Remaining
life
31 December
2016
Unapproved Executive Share Option Scheme
16.04.10
20.06.12
26.04.13
21.05.13
19.09.13
15.04.14
19.09.14
02.04.15
18.04.16
42.00
67.50
77.50
74.00
90.00
115.75
121.75
132.00
184.60
192.38
192.38
198.35
5,000
118,390
15,000
202.73
451,454
215.25
3,000
484,679
127,680
365,296
–
–
–
–
4.3
6.5
7.3
7.4
7.7
8.3
8.7
9.2
–
–
–
–
–
–
–
–
–
–
755,572
Enterprise Management Incentive Scheme
12.04.07
20.04.09
16.04.10
16.75
33.75
42.00
214.00
181.77
186.46
15,000
9,000
118,500
Company Share Option Plan
15.04.11
08.09.11
10.05.12
20.06.12
06.09.12
26.04.13
21.05.13
15.04.14
19.09.14
02.04.15
18.04.16
88.00
86.25
69.08
67.50
76.75
77.50
74.00
115.75
121.75
132.00
184.60
183.00
197.53
198.35
173.95
196.70
183.00
196.70
–
–
–
–
19,000
3,000
51,000
128,591
2,500
85,000
119,865
135,321
116,320
99,704
1.0
3.3
4.3
5.3
5.7
6.4
6.5
6.7
7.3
7.4
8.3
8.7
9.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
148,053
–
–
–
–
–
–
–
–
–
–
–
–
(5,000)
–
(43,056)
75,334
(15,000)
–
(391,454)
60,000
(3,000)
–
–
–
–
–
484,679
127,680
365,296
755,572
(15,000)
(6,000)
–
3,000
(60,500)
58,000
(11,000)
–
–
–
–
(2,000)
(2,000)
6,000
1,000
(22,000)
29,000
(128,591)
(2,500)
–
–
(15,000)
(69,000)
1,000
–
–
–
–
–
(74,716)
45,149
–
–
–
–
135,321
116,320
99,704
148,053
3.3
5.5
6.3
6.4
6.7
7.3
7.7
8.2
9.3
–
2.3
3.3
4.3
4.7
5.4
5.5
5.7
6.3
6.4
7.3
7.7
8.2
9.3
The weighted average remaining contractual life of the options outstanding at 31 December 2016 is 8.0 years (2015 7.8 years).
2,473,300
903,625
(26,000)
(839,817) 2,511,108
2016
2015
Number of
Options
Weighted average
exercise price (p)
Number of
Options
Weighted average
exercise price (p)
Outstanding at beginning of the year
2,473,300
97.52
2,965,254
Granted
Exercised
Lapsed
Outstanding at end of the year
Exercisable at end of year
903,625
(839,817)
(26,000)
2,511,108
278,483
184.60
194.23
81.94
138.49
64.99
495,000
(766,954)
(220,000)
2,473,300
469,981
84.32
132.00
149.70
106.20
97.52
59.70
Advanced Medical Solutions Group plc Annual Report 2016 99
Long Term Incentive Plan (LTIP)
The fair value of the LTIP is calculated based on a binominal tree model assuming the inputs below:
Grant date
15/04/2011
20/06/2012
06/09/2012
21/05/2013
19/09/2013
06/06/2014
02/04/2015
10/09/2015
18/04/2016
Share price of grant date
88.00p
Exercise price
Expected life
Contractual life
Risk free rate
Expected volatility
Expected dividend yield
Probability of performance
conditions
Fair value of option
0p
3 yrs
10 yrs
1.92%
33%
0%
52%
76.5p
67.5p
0p
3 yrs
10 yrs
0.39%
34%
0.7%
44%
28.8p
76.8p
0p
3 yrs
10 yrs
0.39%
34%
0.7%
49%
36.4p
74.0p
0p
3 yrs
10 yrs
0.49%
35%
0.7%
64%
46.3p
90.0p
0p
3 yrs
10 yrs
0.86%
36%
0.7%
70%
60.9p
117.0p
132.0p
151.5p
184.6p
0p
3 yrs
10 yrs
0.80%
36%
0.7%
75%
85.9p
0p
3 yrs
10 yrs
0.80%
29%
0.7%
65%
64.4p
0p
3 yrs
10 yrs
0.67%
27%
0.4%
65%
75.5p
0p
3 yrs
10 yrs
0.67%
25%
0.4%
64%
159.0p
The expected volatility was determined by calculating the historic volatility of the Group’s share price over the previous three years.
The entitlement to shares under the LTIP is subject to achieving the performance conditions referred to on page 58. The numbers shown
are maximum entitlements and the actual number of shares (if any) will depend on these performance conditions being achieved.
Date of
grant
Market
price at
date of
grant (p)
Number of
LTIPs at
1 January
2016
Remaining
life
1 January
2016
Issued
Lapsed
Exercised
Number of
LTIPs at
31 December
2016
Remaining
life
31 December
2016
Long-Term Incentive Plan
15.04.11
20.06.12
06.09.12
21.05.13
19.09.13
06.06.14
02.04.15
10.09.15
18.04.16
88.00
188,628
67.50
76.75
55,118
254,945
74.00
100,000
90.00
117.00
403,122
857,957
132.00
494,357
151.50
300,329
6.3
6.5
6.7
7.4
7.8
8.5
9.3
9.7
–
–
–
–
–
–
–
–
–
–
–
–
188,628
(55,118)
–
–
254,945
(50,000)
(50,000)
–
(201,562)
–
201,560
(33,334)
(16,666)
807,957
(21,787)
(4,357)
468,213
–
–
–
300,329
632,016
184.60
–
–
700,991
(68,975)
5.3
–
5.7
–
6.8
7.5
8.3
8.7
9.7
The weighted average remaining contractual life of the LTIPs outstanding at 31 December 2016 is 7.9 years (2015: 8.3 years).
2,654,456
700,991
(375,658)
(126,141) 2,853,648
Outstanding at beginning of the period
Granted
Exercised
Lapsed
Outstanding at end of the period
Exercisable at end of period
The exercise price of these options is £1 for each issue of LTIPs per individual.
2016
Number of
Options
2015
Number of
Options
2,654,456
2,460,076
700,991
(126,141)
(375,658)
794,686
(235,624)
(364,682)
2,853,648
2,654,456
1,453,090
498,691
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 100
Notes Forming Part of the Consolidated Financial Statements
continued
29 Share-Based Payments continued
Deferred Share Bonus Scheme (DSB)
The fair value of the DSB Shares are calculated based on a Black-Scholes Merton model assuming the inputs below:
Grant date
12/04/2007
12/04/2007
02/05/2008
23/04/2009
05/05/2010
05/05/2010
11/05/2011
11/05/2011
10/05/2012
Share price at grant date
18.25p
18.25p
35.50p
34.00p
40.32p
40.32p
83.00p
83.00p
70.625p
Exercise price
Expected life
Contractual life
Risk-free rate
Expected volatility
Expected dividend yield
Probability of performance
conditions
Fair value of option
0p
3.5 yrs
10 yrs
5.00%
27%
0%
0p
3.5 yrs
10 yrs
5.00%
27%
0%
100%
14p
66.70%
9p
0p
3.5 yrs
10 yrs
5.00%
38%
0%
100%
30p
0p
3 yrs
10 yrs
2.40%
30%
0%
100%
29p
0p
5 yrs
10 yrs
2.40%
34%
0%
100%
34p
0p
3 yrs
10 yrs
2.40%
34%
0%
100%
34p
0p
5 yrs
10 yrs
1.92%
18%
0.7%
100%
72p
0p
3 yrs
10 yrs
1.92%
18%
0.7%
100%
72p
0p
5 yrs
10 yrs
0.39%
34%
0.7%
100%
61p
Grant date
10/05/2012
02/07/2013
02/07/2013
30/04/2014
30/04/2014
29/04/2015
29/04/2015
03/05/2016
03/05/2016
Share price at grant date
70.625p
74.125p
74.125p
126.0p
126.0p
141.5p
141.5p
183.0p
183.0p
Exercise price
Expected life
Contractual life
Risk-free rate
Expected volatility
Expected dividend yield
Probability of performance
conditions
Fair value of option
0p
3 yrs
10 yrs
0.39%
34%
0.7%
100%
62p
0p
5 yrs
10 yrs
0.69%
36%
0.7%
100%
63p
0p
3 yrs
10 yrs
0.69%
36%
0.7%
100%
64p
0p
5 yrs
10 yrs
0.80%
36%
0.7%
100%
108p
0p
3 yrs
10 yrs
0.80%
36%
0.7%
100%
110p
0p
5 yrs
10 yrs
0.80%
31%
0.7%
100%
122p
0p
3 yrs
10 yrs
0.80%
31%
0.7%
100%
124p
0p
5 yrs
10 yrs
0.67%
25%
0.4%
100%
160p
0p
3 yrs
10 yrs
0.67%
25%
0.4%
100%
161p
The expected volatility was determined by calculating the historic volatility of the Group’s share price over the previous three years.
The entitlement to shares under the DSB is subject to a three-year holding period. Additionally, for certain levels of share matching,
additional performance conditions also need to be achieved. The actual number of shares that will be matched will depend on these
performance conditions. Details on the DSB are given on page 58.
Market
price at
date of
grant (p)
Number of
DSB matching
shares at
1 January
2016
Remaining
life
1 January
2016
Issued
Lapsed
Exercised
Number of
DSB matching
shares at
31 December
2016
Remaining
life
31 December
2016
Deferred Share Bonus Plan
Date of
grant
12.04.07
02.05.08
23.04.09
05.05.10
11.05.11
10.05.12
02.07.13
18.25
35.50
34.00
40.32
83.00
70.625
17,970
15,048
53,275
99,450
60,508
51,471
74.125
379,905
30.04.14
126.000
171,514
29.04.15
141.500
252,563
1.3
2.3
3.3
4.3
5.4
6.4
7.5
8.6
9.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,191)
(1,408)
15,779
13,640
(18,063)
35,212
(70,310)
29,140
(26,487)
34,021
(14,543)
36,928
(191,489)
188,416
(8,303)
(2,338)
(10,624)
152,587
(7,803)
242,422
0.3
1.3
2.3
3.3
4.4
5.4
6.5
7.6
8.6
9.6
03.05.16
183.000
–
–
367,204
(18,104)
(2,949)
346,151
1,101,704
367,204
(28,745)
(345,867) 1,094,296
The weighted average remaining contractual life of the DSBs outstanding at 31 December 2016 is 7.6 years (2015: 7.3 years).
Advanced Medical Solutions Group plc Annual Report 2016 Deferred Share Bonus Scheme (DSB)
Outstanding at beginning of the period
Granted
Exercised
Forfeited
Outstanding at end of the period
Exercisable at end of period
The exercise price of the matching shares is £nil.
101
2016
Number of
Options
2015
Number of
Options
1,101,704
1,021,404
367,204
(345,867)
(28,745)
1,094,296
353,136
264,812
(167,422)
(17,090)
1,101,704
297,722
Deferred Annual Bonus Scheme (DABs)
The fair value of the DSB are calculated based on a Black-Scholes Merton model assuming the inputs below:
Grant date
Share price at grant date
Exercise price
Expected life
Contractual life
Risk-free rate
Expected volatility
Expected dividend yield
Probability of performance conditions
Fair value of option
21/05/2014
15/04/2015
18/04/2016
115.4p
0p
3 yrs
10 yrs
0.80%
31%
0.7%
100%
115p
129.0p
0p
3 yrs
10 yrs
0.80%
31%
0.7%
100%
129p
184.6p
0p
3 yrs
10 yrs
0.67%
25%
0.4%
100%
183p
The expected volatility was determined by calculating the historic volatility of the Group’s share price over the previous three years.
The Deferred Annual Bonus scheme (DAB) began on 21 May 2014. Participants compulsorily defer part of their bonus for the relevant
financial year. The grant vests at the end of a three-year period determined by the Remuneration Committee starting from the date
of grant.
Market
price at
date of
grant (p)
Number of
DAB matching
shares at
1 January
2016
Remaining
life
1 January
2016
Date of
grant
Issued
Lapsed
Exercised
Number
of DAB
shares at
31 December
2016
Remaining
life
31 December
2016
Deferred Annual Bonus
Plan
21.05.2014
15.04.2015
18.04.2016
115.40
129.00
184.60
52,398
81,961
–
8.6
9.6
–
134,359
18.2
–
–
94,201
94,201
–
–
–
(1,585)
(3,668)
(3,462)
50,813
78,293
90,739
(8,715)
219,845
7.6
8.6
9.6
The weighted average remaining contractual life of the DABs outstanding at 31 December 2016 is 8.8 years (2015: 9.2).
Deferred Annual Bonus Plan (DAB)
Outstanding at beginning of the period
Granted
Exercised
Forfeited
Outstanding at end of the period
Exercisable at end of period
2016
Number of
Options
134,359
94,201
(8,715)
–
2015
Number of
Options
52,398
81,961
–
–
219,845
134,359
–
–
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 102
Notes Forming Part of the Consolidated Financial Statements
continued
30 Commitments under Operating Leases
As at 31 December 2016, the Group had outstanding commitments under operating leases, which fall due as follows:
Amounts payable under operating leases:
Within one year
In two to five years
After five years
31 Related Party Transactions
2016
Land and
buildings
£’000
908
3,633
2,207
6,748
2016
Other
£’000
83
143
7
233
2015
Land and
buildings
£’000
885
3,561
3,087
7,533
2015
Other
£’000
73
87
–
160
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and there are
no other related party transactions to disclose.
Advanced Medical Solutions Group plc Annual Report 2016 Company Balance Sheet
At 31 December 2016
Non current assets
Investments in subsidiaries
Current assets
Investments
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Net current assets
Net assets
Equity shareholders’ funds
Share capital
Share-based payments reserve
Investment in own shares
Share premium
Retained earnings
Equity attributable to equity holders of the parent
Statement of Changes in Equity
For the Year ended 31 December 2016
At 1 January 2015
Share-based payments
Share options exercised
Shares purchased by EBT
Shares sold by EBT
Profit for the year
Dividends paid
At 31 December 2015
Share-based payments
Share options exercised
Shares purchased by EBT
Shares sold by EBT
Profit for the year
Dividends paid
At 31 December 2016
103
Notes
2016
£’000
2015
£’000
3
4
5
6
52,147
52,082
3,479
42,530
46,009
(3,698)
42,311
94,458
10,524
3,469
(152)
34,005
46,612
94,458
212
28,693
28,905
(5,120)
23,785
75,867
10,451
2,253
(152)
33,196
30,119
75,867
Share-based
payments
£’000
Investment
in own shares
£’000
Share premium
£’000
Retained earnings
£’000
Total
£’000
(148)
32,742
13,640
58,190
Share capital
£’000
10,393
–
58
–
–
–
–
10,451
–
73
–
–
–
–
1,563
709
(19)
–
–
–
–
2,253
1,230
(14)
–
–
–
–
–
–
(262)
258
–
–
(152)
–
–
(449)
449
–
–
–
454
–
–
–
–
33,196
–
809
–
–
–
–
–
–
–
–
18,000
(1,521)
30,119
–
–
–
–
18,276
(1,783)
46,612
709
493
(262)
258
18,000
(1,521)
75,867
1,230
868
(449)
449
18,276
(1,783)
94,458
10,524
3,469
(152)
34,005
The Financial Statements of Advanced Medical Solutions Group plc (registration number 2867684) on pages 71 to 102 were approved by
the Board of Directors and authorised for issue on 28 April 2017 and were signed on its behalf by:
Chris Meredith
Chief Executive Officer
28 April 2017
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 104
Notes to the Company Financial Statements
Year ended 31 December 2016
1 Significant Accounting Policies
Basis of preparation
These Financial Statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework ('FRS 101').
In preparing these Financial Statements, the Company applies the recognition, measurement and disclosure requirements of International
Financial Reporting Standards as adopted by the EU ('Adopted IFRSs'), but makes amendments where necessary in order to comply with
Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.
In these Financial Statements, the Company has adopted FRS 101.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to
share-based payments, financial instruments, capital management, presentation of a Cash Flow statement, presentation of comparative
information in respect of certain assets, standards not yet effective, impairment of assets business combinations, discontinued operations
and related party transactions.
IFRS 2 Share-based payments has not been applied to any equity instruments that were granted on or before 7 November 2002, nor has
it been applied to equity instruments granted after 7 November 2002 that vested before 1 January 2005. This treatment is consistent with
the transitional provisions taken when the Company adopted FRS 20, the UK equivalent standard.
In the transition to FRS 101 from UK GAAP, the Company has made measurement and recognition adjustments which are detailed below.
Critical judgements in applying the company’s accounting policies
In the process of applying the Company’s accounting policies, which are described below, the directors have made the following
judgements that have the most significant effect on the amounts recognised in the Financial Statements (apart from those involving
estimations, which are dealt with below) and have been identified as being particularly complex or involve subjective assessments.
Share-based payments
The charge to the Income Statement in relation to options and incentive plans is based on the Black-Scholes Merton or the Monte Carlo
Option Pricing Model valuation technique. These techniques require a number of assumptions to be made such as those in relation to
share price volatility, movement in interest rates, dividend yields and staff behavioural patterns. Details of the accounting policies applied
in respect of share-based payments are set out on page 105.
Tax
A deferred tax asset is recognised when it is judged probable that the Company will generate taxable profits which can be offset against
tax losses. The measurement of the tax benefit recognised in the Consolidated Financial Statements is based upon the largest amount
of tax benefit that, in management’s judgement, is likely to be realised. Details of the accounting policies applied in respect of deferred
tax are set out below.
Impairment of investments and intragroup receivables
Investment and receivable carrying values are reviewed for impairment if events or changes in circumstances indicate that the
carrying amount of an asset or cash generating unit is not recoverable. Recoverable amount is the higher of fair value, as supported
by management valuation, less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific
to the asset for which the estimates of future cash flows have not been adjusted.
Investments in subsidiaries
Investments in subsidiaries are shown at cost less provision for impairment
Foreign currencies
Transactions in currencies other than Pounds Sterling are recorded at the rates of exchange prevailing on the dates of the transactions.
At each Balance Sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates
prevailing on the Balance Sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not
retranslated. Gains and losses arising on retranslation are included in the profit or loss for the period.
Taxation
Tax on the profit or loss for the period comprises current and deferred tax.
Current tax
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Temporary differences in respect of the initial recognition of assets
and liabilities that affect neither accounting nor taxable profit are not provided for. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively
enacted at the reporting date.
Advanced Medical Solutions Group plc Annual Report 2016 105
Trade and other creditors
Trade and other creditors are non-interest bearing and recognised initially at fair value. Subsequent to initial recognition they are
measured at amortised cost using the effective interest method.
Finance charges
Finance charges comprise interest payable on interest-bearing loans and borrowings and fair value losses on interest rate swap derivative
financial instruments. Finance charges are recognised in the Income Statement on an effective interest method.
Financial instruments
Financial assets and financial liabilities are recognised in the Company’s Balance Sheet when the Company becomes a party to the
contractual provisions of the instrument. Financial assets are derecognised when the contractual rights to the cash flows from the
financial assets expire or are transferred. Financial liabilities are derecognised when the obligation specified in the contract is discharged,
cancelled or expires.
Derivatives
The Company uses derivative financial instruments to hedge its exposure to interest rate risks arising from operational, financing
and investment activities. In accordance with its treasury policy, the Company does not hold or issue derivative financial instruments
for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.
Derivative financial instruments are recognised initially at fair value and re-measured at each period end. The gain or loss on
re-measurement to fair value is recognised immediately in the Income Statement. The Company has elected not to apply hedge
accounting. Forward currency contracts are recognised at fair value in the Balance Sheet with movements in fair value recognised
in the Income Statement for the period. The fair value of the instruments is the estimated amount that the Company would receive
or pay to terminate the swap at the reporting date, taking into account current interest rates and the respective risk profiles of the
swap counterparties.
Derivatives are presented as assets when the fair values are positive and as liabilities when the fair values are negative.
A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than
12 months and it is not expected to be realised or settled within 12 months.
Share-based payments
The Company has applied the requirements of IFRS 2 Share-based payments.
The Company issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured
at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed
on a straight-line basis over the vesting period. At each Balance Sheet date, the Company revises its estimate of the number of equity
instruments expected to vest as a result of the effect of non-market based vesting conditions. The impact of the revision of the original
estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimates with a corresponding
adjustment to the equity-settled employee benefits reserve.
2 Income Statement
As permitted by section 408 of the Companies Act 2006 the Company has elected not to present its own Income Statement for the year.
Advanced Medical Solutions Group plc reported a profit for the financial year ended 31 December 2016 of £18,276,000 (2015: profit of
£18,000,000).
The Auditors’ remuneration for audit and other services is disclosed in Note 7 to the Consolidated Financial Statements.
The average number of employees in the year was 11 (2015: 11). The Directors’ remuneration is detailed in Note 9 to the Consolidated
Financial Statements.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 106
Notes to the Company Financial Statements continued
Year ended 31 December 2016
3 Investments in Subsidiaries
Cost
At 1 January 2016
Additions
At 31 December 2016
Provisions for impairment
At 1 January 2016
At 31 December 2016
Net Book value
At 31 December 2016
At 31 December 2015
Investments
in subsidiaries
£’000
80,752
65
80,817
28,670
28,670
52,147
52,082
In the year to 31 December 2014, a loan of £59,000,000 with Advanced Medical Solutions (Germany) GmbH was converted to an
investment in Advanced Medical Solutions (Europe) Limited.
Shares in Group undertakings and loans to Group undertakings have been written down to recognise losses in subsidiary companies.
The following were subsidiary undertakings at the end of the year and have all been included in the consolidated accounts:
Name
Advanced Medical Solutions Limited
Advanced Medical Solutions (UK) Limited
Country of
Operation
England
England
Advanced Medical Solutions Trustee Company Limited England
Advanced Medical Solutions (Plymouth) Limited
Advanced Healthcare Systems Limited
Advanced Medical Solutions Group Inc.
MedLogic Global Holdings Limited
Innovative Technologies Limited
England
England
USA
England
England
Advanced Medical Solutions BV
Netherlands
Advanced Medical Solutions (Germany) GmbH
Resorba Medical GmbH
Resorba s.r.o.
Resorba ooo
MPN Medizin Produkte Neustadt GmbH
Advanced Medical Solutions (USA) Inc.
Advanced Medical Solutions (Europe) Limited
* Held indirectly through Advanced Medical Solutions Limited.
‡ Held indirectly through MedLogic Global Holdings Limited.
† Held indirectly through Advanced Medical Solutions (UK) Limited.
Germany
Germany
Czech
Republic
Russia
Germany
USA
England
Proportion of
voting rights
and ordinary
share capital
Held
100%
100%
100%
100%
100%*
100% †
100%¶
100%‡
100%
100%^
100%#
100%#
100%#
100%#
100%¶
100%
Nature of business
Development and manufacture of medical products
Holding Company
Trustee Company
Development and manufacture of medical products
Dormant
Holding Company
Holding Company
Dormant
Development and manufacture of medical products
Holding Company
Development and manufacture of medical products
Manufacture and sales office of medical products
Sales office of medical products
Manufacturer of medical products
Marketing support of medical products
Providing financial support to other Group entities
^ s.291 of German Commercial Code invoked: No consolidated financial statements prepared for the German companies.
¶ Held indirectly through Advanced Medical Solutions (Plymouth) Limited
# Held indirectly through Advanced Medical Solutions (Germany) GmbH
The above table reflects the situation at the year-end.
Advanced Medical Solutions Group plc Annual Report 2016 4 Trade and Other Receivables
Due within one year
Prepayments and accrued income
Amounts due from Group undertakings
Derivative financial instruments
Amounts owed by Group undertakings
Cost
At 1 January
Movement
At 31 December
Provisions for impairment
At 1 January
At 31 December
Net book value
At 31 December
5 Creditors: Amounts Falling Due within One Year
Trade creditors
Other creditors
Amounts owed to Group undertakings
Accruals and deferred income
Derivative financial instruments
6 Share Capital
Details on the share capital of the Company are provided in Note 27 on page 96 to the Group’s accounts.
7 Share-based Payments
The charge for share-based payments under IFRS 2 arises across the following schemes:
Unapproved Executive Share Option Scheme, Enterprise Management Incentive Scheme and Company
Share Option Scheme
Long-Term Incentive Plan
Deferred Share Bonus Scheme
107
2016
£’000
180
3,299
–
3,479
2016
£’000
2,340
3,299
5,639
2,340
2,340
2015
£’000
178
–
34
212
2015
£’000
2,399
(59)
2,340
2,340
2,340
3,299
–
2016
£’000
55
–
287
2,980
376
3,698
2016
£’000
102
744
384
1,230
2015
£’000
31
7
2,862
2,220
–
5,120
2015
£’000
98
360
251
709
Details on the share-based payments of the Company are provided in Note 29 on pages 97 to 101 in the Notes to the Group’s accounts.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 108
Five Year Summary
Consolidated Income Statement (Pre-exceptional)
Revenue
Profit from operations
Profit attributable to equity holders of the parent
Basic earnings per share
Consolidated Statement of Financial Position
Net assets employed
Non-current assets
Current assets
Total liabilities
Net assets
Shareholders’ equity
Share capital & investment in own shares
Share-based payments reserve
Share-based payments deferred tax reserve
Share premium account
Other reserve
Hedging reserve
Translation reserve
Retained equity
Equity attributable to equity holders of the parent
2016
£m
82.6
19.1
15.7
7.5p
70.1
74.9
(19.5)
125.5
10.4
3.5
0.5
34.0
1.5
(3.5)
0.6
78.6
125.5
2015
£m
68.6
17.0
14.1
6.8p
62.7
53.9
(12.9)
103.7
10.3
2.3
0.4
33.2
1.5
(0.5)
(8.2)
64.7
103.7
2014
£m
63.0
15.2
12.9
6.2p
66.8
37.8
(11.5)
93.1
10.2
1.6
0.3
32.8
1.5
(0.5)
(4.9)
52.1
93.1
2013
£m
59.5
13.7
11.4
5.5p
71.3
25.8
(11.0)
86.1
10.2
1.3
0.2
32.4
1.5
0.7
(0.7)
40.5
86.1
2012
£m
52.6
12.3
10.5
5.2p
71.9
25.7
(23.9)
73.7
10.2
1.1
0.2
31.9
1.5
(0.1)
(1.4)
30.3
73.7
Advanced Medical Solutions Group plc Annual Report 2016 109
Notice of Meeting
Notice is hereby given that the twenty-third Annual General Meeting of the Company will be held at 11.00 am on 7 June 2017 at the
offices of Investec Bank plc, 2 Gresham Street, London, EC2V 7QP, for the following purposes:
As Ordinary Business:
1. To receive the Report of the Directors and the Financial Statements of the Company for the year ended 31 December 2016 (together
with the Report of the Auditor thereon).
2. To approve the Directors’ Remuneration Report for the year ended 31 December 2016.
3. To reappoint Deloitte LLP as Auditor and to authorise the Directors to fix their remuneration.
4. To re-elect Peter Allen (who retires by rotation in accordance with the Articles of Association) as a Director of the Company.
5. To re-elect Steve Bellamy (who retires by rotation in accordance with the Articles of Association) as a Director of the Company.
6. To re-elect Peter Steinmann (who retires by rotation in accordance with the Articles of Association) as a Director of the Company.
7. To declare a final dividend of 0.62p per Ordinary Share, payable on 16 June 2017 to shareholders on the register at close of business
on 26 May 2017.
As Special Business:
To consider and, if thought fit, to pass Resolution 8, which will be proposed as an Ordinary Resolution, and Resolutions 9 and 10, which
will be proposed as Special Resolutions.
8. To authorise the Directors generally and unconditionally for the purposes of section 551 of the Companies Act 2006 (the ‘2006 Act’)
to exercise all the powers of the Company to allot shares in the Company and to grant rights to subscribe for or to convert any security
into shares in the Company (each an allotment of ‘relevant securities’) up to an aggregate nominal amount of £3,508,736 provided that
this authority is for a period expiring upon the earlier of the date of the Company’s next Annual General Meeting and 15 months after
the date of the passing of this Resolution but the Company may before such expiry make an offer or agreement which would or might
require relevant securities to be allotted after such expiry and the Directors may allot relevant securities in pursuance of such offer or
agreement notwithstanding that the authority conferred by this Resolution has expired. This authority is in substitution for all subsisting
authorities, to the extent unused.
9. Subject to the passing of Resolution 8 above, to authorise the Directors pursuant to section 570 of the 2006 Act to allot equity
securities (within the meaning of section 560 of the 2006 Act) wholly for cash pursuant to the authority conferred by Resolution 8
above as if section 561(1) of the 2006 Act did not apply to any such allotment, provided that this power shall be limited to the allotment
of equity securities:
(a) in connection with an offer of such securities by way of rights to holders of Ordinary Shares in proportion (as nearly as may be
practicable) to their respective holdings of such shares, but subject to such exclusions or other arrangements as the Directors may
deem necessary or expedient in relation to fractional entitlements or any legal or practical problems under the laws of any territory,
or the requirements of any regulatory body or stock exchange;
(b) otherwise than pursuant to sub-paragraph (a) above up to an aggregate nominal amount of £1,052,620; and
(c) which shall expire on the earlier of the conclusion of the next Annual General Meeting of the Company and 15 months after the
date of the passing of this Resolution, save that the Company may before such expiry make an offer or agreement which would
or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of any
such offer or agreement notwithstanding that the power conferred by this Resolution has expired.
10. That the Company is hereby generally and unconditionally authorised for the purposes of Section 701 of the 2006 Act to make
market purchases (within the meaning of Section 693(4) of the 2006 Act) of any of its Ordinary Shares of 5p each in the capital of the
Company on such terms and in such manner as the Directors may from time to time determine provided that:
(a) the maximum number of Ordinary Shares which may be purchased is 10,526,209;
(b) the minimum price which may be paid for each Ordinary Share is 5p which amount shall be exclusive of expenses, if any;
(c) the maximum price (exclusive of expenses) which may be paid for each Ordinary Share shall not be more than 5% above the
average of the middle market quotations for an Ordinary Share as derived from The London Stock Exchange Daily Official List
for the five business days immediately preceding the date on which the ordinary share is purchased;
(d) unless previously renewed, revoked or varied, this authority shall expire upon the earlier of the date of the Company’s next Annual
General Meeting and 15 months after the date of the passing of this Resolution; and
(e) under this authority the Company may make a contract to purchase Ordinary Shares which would or might be executed wholly or
partly after the expiry of this authority, and may make purchases of Ordinary Shares pursuant to it as if this authority had not expired.
By order of the Board
Mary Tavener
Company Secretary
28 April 2017
Registered office:
Premier Park, 33 Road One, Winsford Industrial Estate,
Winsford, Cheshire, CW7 3RT.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 110
Notice of Meeting continued
Notes
1. A member entitled to attend and vote at the meeting convened by the Notice set out on page 109 may appoint a proxy to attend,
speak and, on a poll to vote in his place. A holder of more than one Ordinary Share may appoint different proxies in relation to each
or any of those Ordinary Shares.
2. A member may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares.
A member may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy notice
must be given to the Company’s Registrars not later than 48 hours before the time appointed for the holding of the meeting.
3. A proxy does not need to be a member of the Company but must attend the meeting to represent you. Details of how to appoint the
Chairman of the meeting or another person as your proxy using the proxy form are set out at Note 1 of the proxy form. If you wish
your proxy to speak on your behalf at the meeting you will need to appoint your own choice of proxy (not the Chairman) and give your
instructions directly to them.
4. On a vote on a Resolution on a show of hands at the meeting, a proxy has one vote for and one vote against if the proxy has been
appointed by more than one member and the proxy has been instructed by one or more of the members to vote for the resolution
and by one or more other member to vote against it.
5. Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its
powers as a member provided that they do not do so in relation to the same shares.
6. A form of proxy is enclosed for use by members. To be effective, it must be completed and arrive not later than 48 hours before
the time fixed for the Meeting at Capita Asset Services, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU. You may also deliver
by hand to The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU during usual business hours.
7. The Register of Directors’ Interests in the shares of the Company will be available for inspection at the registered office of the Company
during usual business hours on any weekday (public holidays excepted) until the date of the Meeting and also on that date and at the
place of the Meeting from 9.00 am until the conclusion of the Meeting.
8. The Company, pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, specifies that only those shareholders
registered in the Register of Members of the Company as at close of business on 5 June 2017 shall be entitled to attend or vote at the
aforesaid Annual General Meeting in respect of the number of shares registered in their names at that time. Changes in the entries in
the relevant register of Securities after close of business on 5 June 2017 shall be disregarded in determining the rights of any person
to attend or vote at the meeting.
Notes on Special Business
Resolution 8: Authority to Allot Shares and other relevant securities
This Resolution would give the Directors the authority to allot Ordinary Shares up to an aggregate nominal amount equal to £3,508,736
(representing 70,174,730 Ordinary Shares of 5p each). This amount represents approximately one-third of the issued Ordinary Share
capital of the Company as at 31 March 2017, the latest practicable date prior to publication of this Notice.
The authority sought under this resolution will expire at the conclusion of the Annual General Meeting of the Company held in 2018 or,
if earlier, 15 months after the passing of the resolution.
While the Directors have no present intention of issuing any of the authorised but unissued share capital, it is considered prudent and
appropriate to maintain the flexibility that this authority provides.
Resolution 9: Disapplication of Pre-emption Rights
Your Directors also require additional authority from shareholders to allot shares or grant rights over shares or sell treasury shares
where they propose to do so for cash and otherwise than to existing shareholders in proportion to their existing holdings. Accordingly,
Resolution 9 will be proposed as a Special Resolution to grant such authority. Apart from rights issues, open offers or any other
pre-emptive offer as mentioned the authority will be limited to the issue of shares and sales of treasury shares for cash up to an aggregate
nominal value of £1,052,620 (being 10% of the Company’s issued Ordinary Share capital at 31 March 2017, the latest practicable date
prior to publication of this Notice). This is in keeping with the extent for which such authority has been sought and given at each previous
Annual General Meeting of the Company since 2006.
Allotments made under the authorisation in paragraph (a) of Resolution 9 would be limited to allotments by way of a rights issue only
(subject to the right of the Directors to impose necessary or appropriate limitations to deal with, for example, fractional entitlements and
regulatory matters).
If given, this authority will expire at the conclusion of the Annual General Meeting of the Company held in 2018 or, if earlier, 15 months
after the passing of the Resolution.
Advanced Medical Solutions Group plc Annual Report 2016 111
Resolution 10: Purchase by the Company of its own Shares
In certain circumstances, it may be advantageous for the Company to purchase its own shares. Under section 701 of the 2006 Act, the
Directors of a Company may make market purchases of that Company’s shares if authorised to do so. Your Directors believe that granting
such approval would be in the best interests of shareholders in allowing Directors the flexibility to react promptly to circumstances
requiring market purchases.
Accordingly, Resolution 10, which will be proposed as a Special Resolution, will give the Directors the authority to purchase issued shares
of the Company under section 701 of the 2006 Act.
The authority contained in this Resolution will be limited to an aggregate nominal value of £526,310 (representing 5% of the issued
Ordinary Share capital of the Company as at 31 March 2017 the latest practicable date prior to publication of this Notice; representing
10,526,209 Ordinary Shares of 5p each). The price which may be paid for those shares is also restricted as set out in the Resolution.
This authority will expire at the conclusion of the Annual General Meeting of the Company held in 2018 or, if earlier, 15 months after the
passing of the Resolution.
The Board has no present intention of exercising this authority. However, this will be kept under review, and the Board will use this power
only if and when, taking account of market conditions prevailing at the time, other investment opportunities, appropriate gearing levels
and the overall financial position of the Group, they believe that the effect of such purchases will be in the best interests of shareholders
generally and that they will result in an increase in earnings per share.
Shares purchased under this authority may be held as treasury shares. Shares held in treasury do not carry voting rights and no dividends
will be paid on any such shares. Shares held in treasury in this way can be sold for cash or cancelled. This would allow the Company to
manage its capital base more effectively and to replenish its distributable reserves.
If and when the Board resolves to exercise its authority to make market purchases, it will at that time decide whether shares purchased
are to be cancelled or held in treasury.
As at 31 March 2017, the latest practicable date prior to publication of this Notice, there were share options outstanding over Ordinary
Shares, representing 3.2% of the Company’s issued ordinary share capital. The Company has no warrants in issue in relation to its shares.
If the buyback authority was to be exercised in full, these options would represent 3.3% of the Company’s ordinary issued share capital.
Company OverviewStrategic Report GovernanceFinancial StatementsAdvanced Medical Solutions Group plc Annual Report 2016 112
Advisors
Nominated Advisor and Broker
Bankers
Investec Bank plc
2 Gresham Street
London EC2V 7QP
Auditor
Deloitte LLP
Chartered Accountants and Statutory Auditor
PO Box 500
2 Hardman Street
Manchester M60 2AT
Tax Adviser
PwC
101 Barbirolli Square
Lower Mosley Street
Manchester M2 3PW
Solicitors
Brown Rudnick LLP
8 Clifford Street
London W1S 2LQ
Registrars and Transfer Office
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
HSBC
99–101 Lord Street
Liverpool L2 6PG
Royal Bank of Scotland
2nd Floor
1 Spinningfields Square
Manchester M3 3AP
Patent Attorneys
Marks & Clerk
Manchester Office
1 New York Street
Manchester M1 4HD
Foley & Lardner LLC
975 Page Mill Square
Palo Alto CA 94304-1013
Public Relations
Consilium Strategic Communications
41 Lothbury
London EC2R 7HG
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Paper from
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FSC® C014531
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Paper from
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FSC® C014531
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Paper from
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FSC® C014531
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MIX
Paper from
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FSC® C014531
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Paper from
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FSC® C014531
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Paper from
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FSC® C014531
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