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Annual Report 2019
About AMS
Advanced Medical Solutions is a world-leading
independent developer and manufacturer
of innovative and technologically advanced
products for the global surgical and
woundcare markets.
Our Strategic Pillars are the foundation for success:
Growth
Exploiting the
Growth
opportunities of having
Exploiting the
a broad product range
opportunities arising
sold via multiple routes
from having a broad
to market and across
product range sold
multiple geographies
via multiple routes to
market and across
multiple geographies
Innovation
Strengthening
Innovation
our portfolio by
Strengthening
developing or acquiring
our portfolio by
market leading high
developing or acquiring
quality products
market-leading high
quality products
Operational
Excellence
Operational
Engaging a culture
Excellence
of continuous
Continuously
improvement to
improving our
drive out cost and
operations to
defend margin
drive out cost and
defend margin
We operate to the highest ethical standards, with our
values of Care, Fair, Dare embedded in all we do.
Culture
Investing in hiring and
Culture
developing talent while
Investing in hiring and
embedding our Culture
developing talent while
of Care, Fair, Dare
embedding our Culture
of Care, Fair, Dare
Care
Caring about the work
we undertake and the
real life differences we
can make
Fair
Acting with integrity
and ensuring we
are fair in all aspects
of business
Dare
Moving boundaries
and challenging
constructively to build
on others’ ideas
In this report
Company Overview
24 Woundcare Business Unit
Financial Statements
1 Highlights
2 Group at a Glance
Strategic Report
4 Our Business Model
6 Section 172 Statement
8 Chairman’s Statement
9 Chief Executive’s Q&A
12 Our Strategic Pillars
14 Major R&D Investments
16 Our Key Performance
Indicators
18 Our Acquisitions: Biomatlante
20 Surgical Business Unit
20 Our Products
22 Product Categories
24 Our Products
26 Product Categories
28 Financial Review
30 Stakeholder Engagement
44 Risk Management
Governance
48 Board of Directors
50 Senior Management
52 Corporate
Governance Report
58 Audit Committee Report
62 Remuneration Report
78 Directors’ Report
84 Independent Auditor’s Report
91 Consolidated
Income Statement
91 Consolidated Statement
of Comprehensive Income
92 Consolidated Statement
of Financial Position
93 Consolidated Statement
of Changes in Equity
94 Consolidated Statement
of Cash Flows
95 Notes Forming Part
of the Consolidated
Financial Statements
Advanced Medical Solutions Group plc Annual Report 2019
126 Company Statement
of Financial Position
126 Company Statement of
Changes in Equity
127 Notes to the Company
Financial Statements
131 Five Year Summary
132 Advisers
Company Overview
Strategic Report
Governance
Financial Statements
Business Highlights
Financial Highlights
Despite significant challenges in 2019, growth
was achieved across multiple categories, but was
offset by the previously reported downturn in US
LiquiBand®. Group revenue of £102.4 million was
flat on 2018. Key drivers were:
• US LiquiBand® sales reduced by 23% to £17.7 million
(2018: £23.0 million) and by 25% at constant currency
• EU/ROW LiquiBand® revenue increased by 24% at reported
and constant currency to £10.8 million (2018: £8.7 million)
• Fix8® sales increased by 27% at reported and constant
currency to £2.6 million (2018: £2.1 million)
• Biosurgical sales increased by 9% to £9.4 million
(2018: £8.6 million) and by 10% at constant currency
• Suture sales increased by 8% to £14.4 million
(2018: £13.3 million) and by 9% at constant currency
• Sales of antimicrobial dressings increased by 4%
to £20.6 million (2018: £19.7 million) and by 3% at
constant currency
Investment in acquisitions and increased research
and development, regulatory and clinical activity
is establishing a bedrock for future growth:
• Acquisition of Sealantis in January 2019 for US$25 million
(£19 million) strengthened our internal sealants R&D pipeline
• Acquisition of Biomatlante in November 2019 for €8 million
(£7 million) strengthened our biosurgical portfolio and
enters AMS into the synthetic bone substitutes market with
a differentiated product
• Broadened and more diverse portfolio of innovative, internally
developed products
Adjusted operating margin down 180 bps to
26.4% (2018: 28.2%) and adjusted profit before
tax down 7% to £26.6 million (2018: £28.8 million)
due to investment in the product pipeline
including Sealantis, adverse sales mix and
currency contracts.
Group revenue
(£ million)
£102.4m
2018: £102.6m
Reported change: 0%
(-1% at constant currency1)
Adjusted² operating
margin (%)
26.4%
2018: 28.2%
Reported change: -180bps
Profit before tax
(£ million)
£24.3m
2018: £28.3m
Reported change: -14%
Adjusted² profit before
tax (£ million)
£26.6m
2018: £28.8m
Reported change: -7%
Diluted earnings
per share (p)
8.72p
2018: 10.41p
Reported change: -16%
Adjusted² diluted
earnings per share (p)
9.83p
2018: 10.63p
Reported change: -8%
Net operating
cash flow
£21.7m
2018: £21.7m
Reported change: 0%
Net cash
(£ million)
£64.8m
2018: £76.4m
Reported change: -15%
Proposed an increased final dividend of
1.05p per share, making a total dividend
for the year of 1.55p per share (2018: 1.32p),
a 17% increase on 2018.
Impact of COVID-19
Since the balance sheet date, the Group has been impacted by the COVID-19 pandemic. The priority has been the safety,
health and well-being of our employees, and supplying our customers as far as is feasibly possible.
Given the strong cash position outlined above, the Group confirms it is in robust financial condition to weather the global
disruption caused by the pandemic. The Board believes in the long term prospects of the Group and is still proposing its
final dividend for 2019.
The Group currently estimates that its annual revenues will be impacted by approximately 3% to 5% for each month
the widespread restrictions remain in place. The Group continues to monitor the situation carefully and will update the
market as appropriate.
In this period of uncertainty, the Group continues to carefully manage its operating costs, working capital and capital
expenditure to ensure that it remains in the strongest possible financial and operational position to return to strong
growth when the Group’s end markets recover to a more normal basis.
Further comment on COVID-19 can be found in the Chief Executive’s Q&A on page 11 and throughout the Annual Report.
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 £1.1 million (2018: £0.4 million) and amortisation of acquired intangible assets which were £1.7 million (2018: £0.1 million)
and change in fair value of long-term debt £0.3 million (2018: Nil), as defined in the Financial Review. Adjusted operating margin is shown before exceptional items and amortisation
of acquired intangible assets.
3 Net cash is defined as cash and cash equivalents plus short term investments less financial liabilities and bank loans.
Advanced Medical Solutions Group plc Annual Report 2019
1
Group at a Glance
Our Business
Group sales
£102.4m
Countries
>75
Employees
>700
Distribution partners
>100
Manufacturing
and R&D locations
9
6
4
5
1
2
3
8
9
The AMS Group has nine manufacturing facilities.
The Group’s headquarters are located in the UK.
1. Winsford, UK: HQ: Advanced Woundcare
manufacturing, R&D, Sales & Marketing
5. Domazlice, the Czech Republic: RESORBA®
Sutures manufacturing & Sales
2. Plymouth, UK: Tissue adhesives
manufacturing, R&D, Sales & Marketing
6. Neustadt, Germany: RESORBA®
Sutures manufacturing
3. Etten Leur, the Netherlands: Bulk foam roll-
stock manufacturing, Sales & Marketing
7. Haifa, Israel: Sealantis® internal sealants
manufacturing, R&D
4. Nuremberg, Germany: RESORBA® Collagen
and Haemostats manufacturing, R&D, Sales &
Marketing
8/9. Nantes, France: Biosurgical products
manufacturing, R&D, Sales & Marketing
10. Moscow, Russia: Sales
2
Advanced Medical Solutions Group plc Annual Report 2019
10
7
Business Units in 2019
Surgical
Surgical is reported in
five product categories –
Advanced Closure, Internal
Fixation and Sealants,
Traditional Closure,
Biosurgical Devices and
OEM Sealants.
Surgical
Market1
Woundcare
Woundcare is reported in
three product categories
– Infection Management,
Exudate Management
and Other Woundcare.
Addressable Market
£10.8bn²
2018: £8.5bn
2 Sealantis and Biomatlante acquisitions
increased our addressable market
Surgical sales
£56.5m*
2018: £57.1m
* down 1%, and 2% at
constant currency
Advanced
Woundcare
Market1
Woundcare sales
£45.8m*
2018: £45.5m
* up 1%, and no change at
constant currency
Our Surgical
technologies
• Tissue adhesives
• Collagen
• Sutures
• Oxidised cellulose
• Internal fixation
• Alginate sealants
• Bone substitutes
Our brands
• LiquiBand®
• RESORBA®
• LiquiBandFix8®
• Seal-G®
• Biomatlante
Surgical
Our Surgical Business Unit includes the
sales, marketing, research, development
and innovation of all our surgical products.
Our Woundcare
technologies
• Alginates
• Fibres
• Foams
• Hydrocolloid
• Hydrogels
• Antimicrobial dressings
Our brands
• ActivHeal® *
* ActivHeal® was
incorporated into
Woundcare at the
start of 2019 to allow a
more market-focused
approach, along with
commercial and
R&D synergies
Woundcare
Our Woundcare Business Unit includes
sales, marketing, research, development and
innovation of all our woundcare devices,
regardless of whether they are sold under
an AMS or partner brand.
1 Based on data supplied by The Global Healthcare Exchange and IMS Health.
2 Includes Biomatlante ($0.5bn) and Sealantis ($1.0bn), which were not part of Surgical in 2018.
Advanced Medical Solutions Group plc Annual Report 2019
3
Financial StatementsGovernanceCompany OverviewStrategic Report Our Business Model
Creating quality outcomes
across Surgical and Woundcare
Our Value Chain
New Product Development
Marketing and
Regulatory Approval
Operations
Research
and development
Design and testing
Bringing products
to market
Regulatory approval
in key markets
Manufacturing and
security of supply
Quality assurance
What resources and
relationships we rely on:
What resources and
relationships we rely on:
What resources and
relationships we rely on:
• Separate R&D teams focusing
• Strong regulatory affairs
• Nine manufacturing sites
on different technologies
• Woundcare: foams, fibres
and antimicrobials
• Surgical: tissue adhesives,
haemostats, sutures, fixation,
sealants and bone substitutes
• Collaborations with universities,
Key Opinion Leaders, surgeons
and Tissue Viability Nurses
• Extensive patent portfolio:
over 30 patent families
• Stage gate process
• R&D Centre of Excellence
from Sealantis acquisition
Our Key Stakeholders
• Communities
• Employees
Read more on P30 – 43
department with world-wide
regulatory experience
• Extensive experience of
managing successful audits
(FDA, MDSAP) and managing
recertification to comply with
the Medical Device Regulation
• Regulatory registrations in over
75 countries
• Clinical support teams
supporting both product
development and post
market surveillance
• All manufacturing sites
compliant with ISO 13485:2016
• All UK, German and Czech sites
are compliant with FDA 21 CFR
part 820 Quality Management
System (QMS)
• Strong relationships with
our supply chain
• Investors
• Regulators
• Patients, Partners and Clinicians
• Supply Chain
4
Advanced Medical Solutions Group plc Annual Report 2019
Our Markets
and Products
Our Routes
to Market
Outcomes
Surgical
AMS or Partner Sales Team
Quality outcomes
for patients
• Surgical market is £8bn
• Products include LiquiBand®
tissue adhesives, LiquiBand®
Fix8® internal adhesive,
RESORBA® sutures,
haemostats, bone substitutes
and internal sealants
2019 sales:
£56.5m
• All Surgical products are sold
by our direct sales teams
in Germany, the UK, Russia
and the Czech Republic and
through our global network of
over 100 distributors in other
parts of the world
Value for payers
Woundcare
AMS or Partner Sales Team
Solid financial
position
• Woundcare market is £2.8bn
• OEM sales of finished
• Products include alginates,
hydrogels, hydrocolloids,
antimicrobial dressings, film
and foams
products and bulk materials to
our medical device partners
• Global advanced woundcare
customer base
• ActivHeal® range of advanced
• Bulk foam sold to converters
woundcare products
and packers
2019 sales:
£45.8m
• ActivHeal® is predominantly
sold through AMS in the UK
and through distributors in
other markets
Long-term growth and
value for shareholders
Reporting in 2019
2019 is the first year we have reported our
divisional performance by Surgical and
Woundcare to reflect our core markets.
Advanced Medical Solutions Group plc Annual Report 2019
5
Financial StatementsGovernanceCompany OverviewStrategic Report Creating Effective Engagement with our Key Stakeholders (s.172)
AMS aims to sustainably grow its medical
device and woundcare businesses organically
and via acquisition – focusing on customer
satisfaction, productivity, innovation, business
continuity and Health and Safety. We achieve
this through the application of our values
– Care, Fair, Dare – which ensures we
value our employees and behave as good
corporate citizens. To achieve this we maintain
close relationships with our key stakeholders.
Engagement with our stakeholders is critical to the business.
It helps us to appreciate the impact our decisions have on
stakeholder interests and better understand their needs and
concerns. It strengthens our relationship with them and is an
ongoing part of the operational management and governance
of the Group.
We have identified our key stakeholders below. We engage with
our stakeholders in a number of ways. Details are provided in
the Stakeholder Engagement section which can be found on
pages 30 to 43.
Our
Investors
Pages 30 – 31
Our
Regulators
Page 42
Our
Employees
Pages 32 – 35
Our key
stakeholders
Our
Communities
Page 41
Our Patients, Partners
and Clinicians
Page 36
Our Supply
Chain
Page 37
6
Advanced Medical Solutions Group plc Annual Report 2019
Section 172 obligations
The UK Corporate Governance Code 2018 (Code) emphasises
the importance of s.172 of the Companies Act 2006, which
requires Directors to act in a way that promotes the success
of the Company for the benefit of shareholders as a whole.
In doing so s.172 requires the Directors to have regard to a
number of matters including:
• The likely consequences of any decision in the long-term;
• The interests of the Group’s employees;
• The need to foster the Group’s business relationships with
patients, suppliers, customers and others;
• The impact of the Group’s operations on the community and
the environment;
• The desirability of the Group maintaining a reputation for high
standards of business conduct; and
• The need to act fairly as between members of the Company.
An overview of the Board’s 2019 engagement with stakeholders
who are material to the long-term success of the business is
explained in the Engagement with Stakeholders section on
pages 30 to 43.
In 2020 the Board will receive regular updates from the
Executive Directors on how the business has engaged with
stakeholders, the feedback received and the impact this has
had on the Group’s existing policies, processes and procedures.
This will include an enhanced Health, Safety and Environment
Report to support the Board’s consideration of the impact
of their decisions on our community and the environment.
Board reports will include an assessment of the impact on
our stakeholders.
Ensuring high standards of business conduct is also critical for
the success of the Group. The Directors receive regular updates
throughout the year on ethical and compliance issues and our
Corporate Governance Report on pages 52 to 57 identifies
policies and guidelines governing our approach to anti-
corruption, anti-bribery, social matters and human rights.
Consideration of the long-term impact of decisions is integral
to the approval of the strategy. Our strategic progress in 2019 is
disclosed in the Chief Executive’s Q&A on pages 9 to 11 and in
the review of our Strategic Pillars on pages 12 and 13.
Advanced Medical Solutions Group plc Annual Report 2019
7
Financial StatementsGovernanceCompany OverviewStrategic Report Chairman’s Statement
The Board remains optimistic
about our future growth prospects
“The Board remains optimistic about
AMS’s future growth prospects from both
an organic and acquisitive standpoint.”
Peter Allen
Chairman
Overview
Despite the challenges faced this year, we continue to progress
as a world-leading, international provider of high quality, high
value, innovative and technologically advanced products for the
global surgical and advanced woundcare markets.
Strategy
During 2019 our strategy, which is built on our strategic pillars
of Growth, Innovation, Operational Excellence and Culture,
has been further embedded to help us manage the challenges
of changing market dynamics. We continue to provide high
quality products with benefits to both patients and payers.
Our acquisition of Sealantis added significant growth potential
in the internal sealants market and underlined our strategic
commitment to innovation. The acquisition of Biomatlante
provides complementary technologies to strengthen our
product portfolio, market access and R&D pipeline.
We believe we can continue to deliver on our strategic
pillars by driving the organic growth of our product range,
maximising the synergies presented by acquisitions, seizing on
opportunities in the market created by the introduction of the
Medical Device Regulation (MDR), which has been delayed until
2021, and continuing to consider further acquisitions that meet
our strategic criteria.
We are managing the impact of COVID-19, with the priority
on the safety, health and wellbeing of our employees and
supplying our customers as far as feasibly possible. We aim
to be in the best possible financial and operational position to
return to strong growth when the Group’s end markets recover
to a normal basis.
Corporate Governance
We remain committed to high standards of corporate
governance, choosing to comply with the UK Corporate
Governance Code. The Board believe that these high standards
facilitate the delivery of our strategy and drive the generation of
shareholder value, helping to safeguard their interests. Details of
how we engage with our key stakeholders are outlined in the
Engagement with Stakeholders section.
8
Advanced Medical Solutions Group plc Annual Report 2019
We are embedding the section 172 principles at both Senior
Management Team (SMT) and Board level, and have a robust
framework of systems and controls throughout the Company.
Board Changes and Succession Planning
We have a well-established and mature Board which has
successfully overseen the growth of the Group over recent
years. Despite the benefits this brings, we are aware of the tenure
requirements for our Non-Executive Directors and Chairman and
the importance of succession planning. We have initiated plans to
refresh the Board and this process will start with Peter Steinmann
retiring from the Board at the AGM this year.
Dividend
The Board is proposing a final dividend of 1.05p per share, to
be paid on 19 June 2020 to shareholders on the register at
the close of business on 29 May 2020. This follows the interim
dividend of 0.50p per share paid on 25 October 2019 and
would, if approved, make a total dividend for the year of 1.55p
per share (2018: 1.32p), an increase of 17%.
In light of the COVID-19 pandemic, we reviewed our decision
to propose a final dividend in 2020 and decided to maintain
it, given our financial health and the medium to long-term
prospects of the Group.
Recognition and thanks
On behalf of the Board, I would like to thank all of our
employees for their dedication and hard work during the
past year. I would also like to thank our customers, suppliers,
business partners and shareholders for their continued support
in helping AMS achieve its goals.
AMS is well positioned to take advantage of market
opportunities across our product portfolio and invest in both
internal and external opportunities in line with the Group’s long-
term strategy and growth objectives.
Peter Allen
Chairman
7 May 2020
Chief Executive’s Q&A
Despite the setbacks I am pleased with
the overall performance of the Group
“Our strong pipeline of R&D innovation further
expands our addressable market and has never
been stronger. We continue to be optimistic
about our growth prospects in the growing
global healthcare market.”
Chris Meredith
Chief Executive Officer
2019 was a challenging year and despite
the difficulties we faced, I am pleased with
the overall performance of the Group,
other than for US LiquiBand® sales which
were disappointing.
We look forward to regaining positive
momentum in our US LiquiBand® business
given the recent approval of LiquiBand® Rapid™
and anticipated approval of LiquiBand® XL.
during 2019?
Q How has the Group performed
A Whilst 2019 proved a challenging year for the
Group, with the previously reported downturn of US
LiquiBand® and a third-party sterilisation failure at the end of
2019, which was resolved in early 2020, I am pleased to report
that good growth in other areas of the business enabled the
Group to deliver revenues of £102.4 million, in line with 2018.
Adjusted profit before tax decreased by 7% to £26.6 million due
to our operational investment in Sealantis, adverse sales mix
and currency contracts. This contributed to a decrease of 8%
in adjusted diluted earnings per share.
We have made progress on the two key product approvals
needed to support the recovery of LiquiBand® in the US.
LiquiBand® Rapid™ was recently approved by the FDA and the
LiquiBand® XL clinical pilot study was concluded prior to the
end of Q1 2020.
As previously stated, Surgical Business Unit sales were restricted
by US LiquiBand® performance, resulting in a 1% decrease
in revenue to £56.5 million and by 2% at constant currency1.
Our Woundcare business grew 1% to £45.8 million but was
flat at constant currency1. We strengthened our woundcare
portfolio in the year with US approvals for our antimicrobial
PHMB foam and silver high-performance dressings, both of
which were signed to partners and launched to the market
in Q4 2019.
The acquisition of Biomatlante demonstrates our strategy
of utilising our strong cash position to acquire businesses
with complementary products, exciting technologies and
new routes to market and the acquisitions of Sealantis and
Biomatlante demonstrates our willingness to invest in key
markets to deliver longer-term growth opportunities.
1 Constant currency removes the effect of currency movements by re-translating the current period’s performance at the previous period’s exchange rates.
Advanced Medical Solutions Group plc Annual Report 2019
9
Financial StatementsGovernanceCompany OverviewStrategic Report Chief Executive’s Q&A
continued
the year?
Q How has the market changed during
A Favourable global healthcare and demographic trends
are likely to continue to drive growth in our large global
surgical and advanced woundcare markets in the longer-term,
both of which provide AMS with significant opportunities.
In recent years, the advanced woundcare market has reported
lower market growth rates as well as increased price pressure
and ongoing reviews of reimbursement levels in various
European countries, all of which will create headwinds for our
Woundcare Business Unit.
We have increased the size of our addressable surgical market
with our two acquisitions in 2019. Commercialisation of
Sealantis is expected in 2021 and this will open up the
US$1 billion internal sealants market. Biomatlante provides
innovative complementary products and immediate access to
the US$0.5 billion synthetic bone substitutes market.
In addition, we are starting to see opportunities due
to competitor product withdrawals in our surgical and
woundcare markets as a result of the more stringent regulatory
environment. We are confident of long-term growth as
we continue to expand our product portfolio, enter new
geographies and increase our share in each market.
will this impact the year ahead?
Q How has the year been strategically and how
A Our strategy continues to be based on four pillars:
Growth, Innovation, Operational Excellence and Culture.
Growth
Our growth strategy is to harness the opportunities from our
multiple routes to market across multiple geographies with
products that add value to patients and payers through delivery
of equal or better clinical performance without compromising
care or outcomes. We continue to increase our investment
in major R&D and regulatory projects to enable future
growth opportunities.
Innovation
For innovation, we continue to strengthen our portfolio by
developing or acquiring high-quality products that allow
us or our partners to make market share gains in high
value segments.
Operational Excellence
Our operational strategy is centred around the needs of our
customers and aims to reduce operating costs and operational
risk whilst increasing capacity. This will allow us to continue to
drive out cost and improve margins.
10 Advanced Medical Solutions Group plc Annual Report 2019
Culture
We operate to the highest ethical standards with our values of
Care, Fair, Dare embedded in all we do.
• Caring about the work we undertake and the real-life
differences we can make;
• Acting with integrity and ensuring we are fair in all aspects of
business; and
• Moving boundaries and challenging constructively to build on
others’ ideas.
Q What do AMS expect to be the benefits of the
acquisitions made in 2019 and how do these fit
with AMS’s strategy?
A The acquisition of Sealantis has provided an important
pipeline of significant products, intellectual property,
a strong R&D team and access to markets in which we have
not previously operated. The internal sealants market is
large (US$1 billion) and growing and Sealantis has developed
a range of products that reduce leakage of blood or fluid
following gastrointestinal surgery. Integration has now been
successfully completed, and the project team are currently
engaging with regulators as we prepare clinical trials, with first
commercial product launches planned for 2021. We expect to
record a low level of sales to Key Opinion Leaders in 2020.
The acquisition of Biomatlante enhances our product offering
and market access into orthopaedic, spinal, dental and sports
surgery. It has a range of innovative, revenue-generating
biomaterial products including, MBCP®, a biphasic calcium
phosphate synthetic bone substitute which has a unique
micro and macroporous structure that most closely resembles
the architecture of natural human bone. The technology
is supported by more than 650 published studies and 30
years of clinical experience, which validate its superior
performance in comparison to competitor products. The Group
expects Biomatlante to be earnings enhancing in 2020.
Integration is progressing well and the potential for further
commercial synergies has been confirmed in post-completion
commercial reviews.
Bringing in high-quality people and products to our Group is a
crucial part of our strategy and we are working with the existing
management in both acquired businesses to maximise their
potential in the coming years.
The Group continues to actively seek acquisitions that deliver
value for shareholders and which meet our criteria of being:
• Products or technologies that enable us to leverage our
woundcare customer base or surgical routes to market, or
• Surgically focused companies with product synergies, strong
R&D capability and ownership of their own products.
We have an internal team working to identify, appraise and
progress acquisition opportunities and continue to explore
options to accelerate growth through select targets.
Q How have regulatory challenges in 2019
affected AMS and how is the Group prepared
for the future?
A The transition phase of MDR runs until May 2024.
MDR stipulates stricter requirements for product
safety and performance, clinical evaluation and post-market
clinical evidence. In the past eighteen months, the Group has
successfully completed the recertification of the RESORBA®
ranges, the LiquiBand® portfolio, and all of our significant
woundcare products providing extended time to implement
MDR. This demonstrates our capability to navigate the
increasingly challenging regulatory framework as part of our
robust Group-wide regulatory plan. During the MDR transition
period, the Group expects to continue to incur an increasing
level of costs associated with regulatory activity.
The Group is beginning to see opportunities arising from the
impact of the MDR and, given our extensive preparations, we
remain confident in our ability to exploit them. To support future
geographic growth, our regulatory teams added more than
one hundred new international registrations for our surgical
and woundcare products in the year, across Latin America, the
Middle East, the Far East and Australasia.
During the year, we successfully transitioned to MDSAP
(Medical Device Single Audit Program) and, following audits at
each of our sites, our certificates were received in the second
half of 2019.
Q How is AMS prepared for Brexit?
A The Group is well prepared for the anticipated end
of the Brexit transition period on 31 December
2020. UK product certificates have been reassigned to BSI
Netherlands so that our products retain their EU approval,
Advanced Medical Solutions BV has been appointed as our
EU Authorised Representative and we will continue to hold
increased inventory levels on all sites. Under WTO rules, there
would be no duty on our finished goods and steps are in place
to mitigate any additional duty costs on raw material.
your stakeholders?
Q How have you engaged with
A We outline how we engage with our Stakeholders on
pages 30 to 43. They were identified as; Our Investors,
Our Employees, Our Communities, Our Patients, Partners and
Clinicians, Our Supply Chain and Our Regulators. We continue
to be grateful for the support and hard work of our committed
staff, partners and other stakeholders.
the year ahead?
Q What is your key message for
A The Group expected, prior to the COVID-19 pandemic,
to deliver more than 10% revenue growth in 2020
driven by new product launches, strong underlying demand
for our surgical portfolio, cross-selling of existing products
and/or entering new markets, and opportunities arising from
the transition to MDR. US LiquiBand® was expected to return
to growth in 2020 given the recent approval of LiquiBand®
Rapid™ and the anticipated approval of LiquiBand® XL
which is expected in H2. Notwithstanding that, we see the
low reported market growth and increasing reimbursement
challenges as potential headwinds for our Woundcare
Business Unit, which will also be impacted by uneven ordering
patterns associated with Brexit and COVID-19. Operationally,
the business is in robust strength, our recent acquisitions are
providing new market and product opportunities and the
Board remains optimistic about AMS’s future growth prospects
from both an organic and acquisitive standpoint.
presented by COVID-19?
Q How do you plan to respond to the risk
A In response to the ongoing outbreak of COVID-19
the Group has set-up a designated team to closely
monitor and risk assess its supply chain. The Group has
also assessed the risks for its employees and has reiterated
published guidance such as good personal hygiene practices
and social distancing. AMS issued guidance to the market on
COVID-19 in April 2020.
All AMS sites are currently in operation and meeting the Group’s
commitments to maintain supply of its medical devices to
healthcare partners and customers worldwide. However, the
Group is now experiencing a slowdown in demand caused by
the cancellation or postponement of elective surgeries and a
reduction in accident and emergency treatment as a result of
the global lockdowns.
Clinical activities and new customer evaluations in both
Business Units have also been temporarily impeded by the
pandemic, and we envisage some potential supply disruption
across the Group in the coming months. We are unable to
predict the eventual financial impact for AMS, as it will depend
on how long pandemic control procedures are in operation
and how quickly thereafter the global markets in which the
Group operates can recover. The Group currently estimates that
its annual revenues will be impacted by approximately 3% to 5%
for each month the widespread restrictions remain in place.
Our forward-looking financial guidance is constantly being
reviewed in light of the situation and further guidance on the
pandemic will be provided if required.
Advanced Medical Solutions Group plc Annual Report 2019 11
Financial StatementsGovernanceCompany OverviewStrategic Report Our Strategic Pillars
Our core focus areas for ongoing success
To sustainably grow our medical device and woundcare businesses organically and via
acquisition, and increase customer satisfaction by focusing on productivity, innovation,
businesses continuity and Health and Safety. We do this by living our Company culture through
our Care, Fair, Dare values, valuing our employees and being good corporate citizens.
Growth
Our growth strategy is to exploit opportunities from
multiple routes to market across multiple geographies
with our diverse portfolio of innovative surgical and
woundcare products, which add value to patients and
payors and deliver equal or better clinical performance.
Innovation
We aim to continue to strengthen our portfolio by
developing or acquiring high-quality products that allow
us or our partners to make market share gains in high
value segments. We invest in hiring and developing talent
capable of delivering innovation for the business.
How we are going to achieve it
• Market share gains: Continue to increase the market share of
our key products, particularly in large markets like the US, by
demonstrating a strong combination of high-quality products
delivering improved performance and value for money
versus competitors.
How we are going to achieve it
• Expert Key Opinion Leader Panels: Establish Key Opinion Leader
panels to provide expert input into the innovation process and
exchange information to ensure our innovation output meets
clinical needs.
• University linkage: Partner with universities to drive innovation and
• New products: Develop new products in line with our core strategic
exchange ideas, knowledge and resources.
areas and deliver at least two new product launches each year.
• New markets/entry: Achieve product approvals in new geographies
and open up opportunities and market partners. Leverage our
Regulatory expertise to take advantage of higher barriers to entry to
new products and markets and maximise opportunities arising from
competitor products not being renewed in specific markets.
• Leverage acquisition synergies: Integrate and benefit from the
recent Sealantis and Biomatlante acquisitions by exploiting R&D,
commercial, regulatory and back-office synergies.
• M&A: Identify targets and deliver acquisitions with breakthrough
innovations. These should provide technologies to leverage the
Woundcare customer base or surgical routes to market or surgically
focused companies with strong product synergies.
What we have achieved in the year
• Continued strong growth of LiquiBandFix8®, aided by the launch of
Fix8® Open and regaining a Ventral Hernia Claim.
• Initiated enrolment of our US Fix8® IDE and have multiple sites
involved with increasing patient enrolment.
• Strong LiquiBand® Exceed Mini sales since launch. Rapid adoption with
minimal cannibalisation, particularly in the US Alternate Sites market.
• Biosurgical growing strongly. Continued global registrations (LATAM/
Asia). Antimicrobial Collagen dressing further penetrating the
EU market.
• Centres of Excellence: Establish Centres of Excellence for Innovation
and ensure resources and ideas from across the Group are
better utilised.
• Investment in innovation (People and Processes):
More centralised resources from across the Group to drive
innovation. Streamline processes to maximise output from innovation
resources. Ensure that best practice and standard processes are
implemented across the Group. Increase spend on R&D aligned
to increased output of innovation projects. Utilise knowledge and
implement learnings from acquisitions.
What we have achieved in the year
• Gained further experience and insight into better R&D practices and
testing that will allow us to meet and achieve product launches in an
increasingly difficult regulatory environment.
• Achieved recertification for our RESORBA®, LiquiBand® and
Woundcare ranges and passed numerous FDA and Notified Body
audits across multiple manufacturing sites.
• Submitted and awaiting CE approval for VancoColl antimicrobial
collagen, offering higher potency antibiotic to the European market.
• Further established our KOL network and initiated multiple clinical
studies and case studies.
• Successful acquisition of Sealantis and Biomatlante.
• Held more than 20 masterclasses, symposiums and training
• Strong growth of Sutures within a mature market, driven by the
German market and continued niche market expansion globally.
workshops to educate and solicit feedback and encourage surgeon
to surgeon discussions about our products and technologies.
• Continued growth and expansion of our Surgical Business into
Emerging Markets (Asia/LATAM).
• Launched patented Silver High Performance Dressing and our
premium PHMB foam range with silicone adhesive into the US.
• Acquisitions of Sealantis (internal sealants) and Biomatlante (biological
products) to expand R&D capabilities and product range.
How we are measuring success
• % of revenue spend on R&D & Innovation
• % of sales from new products launched in the previous five years
See pages 16 and 17 for our KPI performance
How we are measuring success
• Revenue growth at constant currency (%)
• Adjusted diluted earnings per share growth (%)
See pages 16 and 17 for our KPI performance
12 Advanced Medical Solutions Group plc Annual Report 2019
Key to strategic linkage in this report
Growth
Innovation
Operational
Excellence
Culture
Operational Excellence
Through a strategy that begins with focusing on what
our customers need and value, we will drive a culture
of engagement and continuous improvement that will
enable lower operational risk, lower operating costs, and
increased revenues. This will allow us to continue to drive
out cost and increase margin.
Culture
Our employees drive the success of AMS. We actively
promote our Care, Fair, Dare culture and measure our
employees’ engagement in our Culture. We encourage
internal promotion of employees on a global basis and
have invested in apprenticeship programmes to build
future talent for our business.
How we are going to achieve it
• Continuous improvement: Establish strong foundations and
implement a culture of Continuous Improvement deploying an
appropriate balance of Lean and Six Sigma techniques across all areas
of AMS.
• Investment: Invest in organisation and capabilities/systems that will
support future growth and develop our people.
• Customer satisfaction/OTIF: Improve customer satisfaction
and productivity.
• Plan for Success: Design and deliver an optimal manufacturing
footprint strategy to support future growth and optimise our
supply chain.
• Compliance: Increase Quality and Regulatory capabilities to allow
us to meet the ever-increasing requirements across the world which
are being driven by stricter standards, including the Medical Device
Regulation (MDR).
What we have achieved in the year
• Established a PMO (Project Management Office) to improve our
project management capability across AMS.
• Invested in technology and capacity across both Surgical
and Woundcare.
• Software selection and initial deployment of an eQMS (Electronic
Quality Management System) and forecasting tools.
• Invested in continuous improvement resources and value stream
mapping tools.
How we are going to achieve it
We achieve a positive culture in our business by focusing on Care, Fair,
Dare and implementing our five-point plan:
• Talent Attraction: Our business requires highly skilled teams to bring
innovative products to market ahead of our competition. We are
committed to attracting the right talent with the correct remuneration
and benefits, and to having a diverse workforce.
• Talent Management: Developing and retaining talent allows us to
build skills to maintain an innovations culture and retain knowledge
within our business.
• Values and Behaviours: Care, Fair, Dare provides a cultural framework
to nurture how we interact and achieve success as a team.
• Open Communication: Listening to all views, taking feedback and
pro-actively providing information to allow us to remain agile and
customer-centric.
• Health and Safety: maintaining the highest levels of health and safety
within our business ensures employees feel safe and secure within
the working environment.
What we have achieved in the year
• Enhanced our Talent Review process to standardise it across
business areas and build talent plans that align with our five-year
business plans.
• Developed a Quality and R&D Career path to nurture talent in this
vital area, building on the Regulatory career path we created in 2019.
• Worked on implementing Care, Fair, Dare action plans in teams and
• Delivery of gross 2% cost reduction projects across the sites and
held review workshops.
plans to deliver 4% in 2020.
• Good progress in readiness of the changing regulatory environment
which is being driven by MDR.
• Successful transition to MDSAP accreditation across all sites.
• Developed operational capabilities in Israel to support the integration
of our Sealantis acquisition.
• Reduced our safety related injury rate by 25%.
How we are measuring success
• Customer Service (OTIF – On Time in Full) (%)
• Rolled out standard recruitment training – including competency
based questions ensuring we recruit to our Care, Fair, Dare values and
training all managers in unconscious bias in recruitment.
• Re-launched our reward and recognition process to ensure a clear
link to living our Care, Fair, Dare values.
• Integrated our values with the values of Sealantis through
collaborative workshops to ensure maximum buy-in and achieve
better cultural alignment between the businesses.
• Developed a strategic, Group-wide annual training plan, to ensure
training investment is aligned to business priorities.
• Year-over-year change of our standard cost base (%)
• Developed a Group Environmental Plan with targets listed in our
See pages 16 and 17 for our KPI performance
Group Environmental Policy.
How we are measuring success
• Staff Retention/Turnover (%)
• Employee Engagement Score (%)
See pages 16 and 17 for our KPI performance
Advanced Medical Solutions Group plc Annual Report 2019 13
Financial StatementsGovernanceCompany OverviewStrategic Report Major R&D Investments
Investment in R&D in 2019
We have made unprecedented levels of investment in pre-commercialised projects in 2019 as
outlined below. We believe that this investment, which is directly related to acquisitions, research
and development, regulatory and clinical activity, will establish a bedrock for future growth.
We expect to start seeing payback from late 2020. During 2019 we:
• Acquired Sealantis to strengthen our internal sealants R&D pipeline
• Acquired Biomatlante to strengthen our biosurgical portfolio and enter us into the synthetic
bone substitutes market with a differentiated product
• Broadened and diversified our portfolio of innovative internally developed products
Investment in major projects
LiquiBandFix8® US PMA
Investment £3m
Market opportunity £200m
Sealantis
Investment £8m
Market opportunity US$1bn
Medical Device
Regulation (MDR)
Investment £3.5m
Market retention £3bn;
growth opportunities
Collagen pouch
Investment c. £1m
Market opportunity >£500m
Silver High
Performance Dressing
Investment £1m
Market opportunity £100m
We received the US lnvestigational Device Exemption (IDE) for laparoscopic Fix8® which allowed us
to start the clinical trial to support our premarket approval (PMA). The clinical trial is progressing well in
terms of surgeon feedback on the product and its performance. Patient recruitment was initially slower
than anticipated. We have increased the number of clinical sites and investigators at the sites, and prior
to the COVID-19 pandemic, we expected to complete all procedures by the end of 2020 and to file
for FDA approval in H2 2021. Patient recruitment is temporarily on hold whilst lockdown is in place.
We continue to be excited about the long-term prospects for the LiquiBandFix8® portfolio and entry
into the US will be a significant landmark for the Group.
Sealantis has developed a range of products that reduce leakage of blood or fluid following
gastrointestinal surgery. We are working on navigating the regulatory environment and product design
enhancements to maximise commercial success. We expect:
• Soft launch to Key Opinion Leaders in H2 2020
• 150 patient study across three major markets in H2 2020
• Commercial product launch planned for 2021
• Larger pivotal study to support FDA approval to start in H2 2021
MDR stipulates stricter requirements for product safety and performance, clinical evaluation, and
post market clinical evidence. The Group has successfully completed recertification of the RESORBA®
ranges, the LiquiBand® portfolio, and all of our significant woundcare products, providing extended
time to implement MDR during the transition period until 2024.
Opportunities are arising from the impact of MDR, which we are confident of exploiting. To support
future geographic growth, we added more than 100 new international registrations for our surgical and
woundcare products in the year, across Latin America, the Middle East, the Far East and Australasia.
Our antibiotic collagen pouch for cardiovascular devices, which is currently sold under prescription in
Germany, is scheduled for an FDA review meeting in Q2 2020 to finalise the product indications and
regulatory pathway for 510(k) approval in the US.
Silver High Performance Dressing, our next generation antimicrobial gelling fibre technology with
excellent performance and patent-protected construction, received US approval in the second half of
2019 and has been signed up by a number of our US partners with launch orders expected to ship in
the first half of 2020. We intend to move forward with EU approval in 2020.
14 Advanced Medical Solutions Group plc Annual Report 2019
Market opportunity £200m
Investment £3m
Market opportunity US$1bn
Investment £8m
Market opportunity £3bn
Investment £3.5m
Market opportunity >£500m
Investment c. £1m
Market opportunity £100m
Investment £1m
LiquiBandFix8® US PMA
Investment £3m
Market opportunity £200m
We received the US lnvestigational Device Exemption (IDE) for laparoscopic Fix8® which allowed us
to start the clinical trial to support our premarket approval (PMA). The clinical trial is progressing well in
terms of surgeon feedback on the product and its performance. Patient recruitment was initially slower
than anticipated. We have increased the number of clinical sites and investigators at the sites, and prior
to the COVID-19 pandemic, we expected to complete all procedures by the end of 2020 and to file
for FDA approval in H2 2021. Patient recruitment is temporarily on hold whilst lockdown is in place.
We continue to be excited about the long-term prospects for the LiquiBandFix8® portfolio and entry
into the US will be a significant landmark for the Group.
Sealantis
Sealantis has developed a range of products that reduce leakage of blood or fluid following
gastrointestinal surgery. We are working on navigating the regulatory environment and product design
Investment £8m
Market opportunity US$1bn
Medical Device
Regulation (MDR)
Investment £3.5m
Market retention £3bn;
growth opportunities
Collagen pouch
Investment c. £1m
Market opportunity >£500m
Silver High
Performance Dressing
Investment £1m
Market opportunity £100m
enhancements to maximise commercial success. We expect:
• Soft launch to Key Opinion Leaders in H2 2020
• 150 patient study across three major markets in H2 2020
• Commercial product launch planned for 2021
• Larger pivotal study to support FDA approval to start in H2 2021
MDR stipulates stricter requirements for product safety and performance, clinical evaluation, and
post market clinical evidence. The Group has successfully completed recertification of the RESORBA®
ranges, the LiquiBand® portfolio, and all of our significant woundcare products, providing extended
time to implement MDR during the transition period until 2024.
Opportunities are arising from the impact of MDR, which we are confident of exploiting. To support
future geographic growth, we added more than 100 new international registrations for our surgical and
woundcare products in the year, across Latin America, the Middle East, the Far East and Australasia.
Our antibiotic collagen pouch for cardiovascular devices, which is currently sold under prescription in
Germany, is scheduled for an FDA review meeting in Q2 2020 to finalise the product indications and
regulatory pathway for 510(k) approval in the US.
Silver High Performance Dressing, our next generation antimicrobial gelling fibre technology with
excellent performance and patent-protected construction, received US approval in the second half of
2019 and has been signed up by a number of our US partners with launch orders expected to ship in
the first half of 2020. We intend to move forward with EU approval in 2020.
Investment in major projects – Markets and key information
The below analysis focuses on five key areas from 2019:
Sealantis
Entry into the $1bn
market for internal
sealants.
LiquiBandFix8® PMA
Investment in
preparation to enter
significant markets;
£100m US laparoscopic
mesh fixation market
and £100m US
open surgery mesh
fixation market.
Medical Device
Regulation (MDR)
Increased costs for
regulatory activities.
Maintain access
to all EU markets.
Further opportunities
expected in future.
Collagen Pouch
New single
competitor market for
pacemaker surgery;
initially the USA only.
Silver High
Performance
Dressing
Access to clear gelling
wound dressings
market; US approved
2019, EU approval is
being worked through
by the Notified Body.
2018
2019
2020
2021
2022
2023
2024
2025
Market opportunity £200m
Investment £3m
Market opportunity US$1bn
Investment £8m
Market opportunity £3bn
Investment £3.5m
Market opportunity >£500m
Investment c. £1m
Market opportunity £100m
Investment £1m
Advanced Medical Solutions Group plc Annual Report 2019 15
Financial StatementsGovernanceCompany OverviewStrategic Report Our Key Performance Indicators
Measuring success
The Group has a range of Key Performance Indicators (KPIs) which are used to monitor
Group performance and measure progress against our strategy.
Financial KPIs
Revenue movement at constant currency1 %
% of revenue spend on R&D & Innovation
-1%
-1%
19
18
17
16
15
12%
13%
11%
9%
6.3%
19
18
17
16
15
6.3%
5.8%
4.4%
4.4%
3.7%
Definition
Net revenue adjusted for constant currency1.
Definition
Spend on R&D & Innovation as a % of sales in the financial year.
Strategic linkage
Strategic linkage
Continued growth in revenue demonstrates the successful
execution of the Group’s strategy. It is a contributing factor to our
aim of providing long-term value for our shareholders.
As a developer of innovative and technologically advanced
products investing resources in this area is critical to fulfilling the
strategic goals of the business.
Progress made in the year
Revenue was flat in 2019 at £102.4 million (2018: £102.6 million)
and decreased by 1% on a constant currency basis. Supported by
new product approvals and the Biomatlante acquisition, the
Group expects to deliver more than 10% revenue growth once
our markets have recovered from the COVID-19 pandemic.
Progress made in the year
Spend increased by 9% (50bps) in 2019 to 6.3% of revenue
(2018: 5.8% of revenue). As highlighted by our acquisition of
Sealantis and strategic goals related to Innovation, we expect to
continue to increase our spend in this area during 2020.
Adjusted2 diluted earnings per share (EPS)
movement %
% of sales from new products launched in the
previous five years
-8%
-8%
19
18
17
16
13%
12%
23%
15
10%
Definition
Movement in adjusted2 diluted EPS achieved in the year.
Strategic linkage
EPS is a measure of corporate profitability and the Group’s
financial progress. It is also an important factor to our aim of
providing value for our shareholders.
Progress made in the year
Adjusted diluted EPS was 9.83p in 2019 (2018: 10.63p), impacted
by operational investment in Sealantis, adverse sales mix and
currency contracts.
23.6%
19
18
17
16
15
23.6%
24.6%
23.7%
11.8%
11.2%
Definition
This is a measure of the % of sales the Group is generating from
products launched in the five years prior to that year.
Strategic linkage
As a Group focused on innovation with a number of patented
products and technologies, this is an important measure of the
success of our innovation programme, a stated strategic aim.
Progress made in the year
23.6% of 2019 sales were from new products (2018: 24.6%).
We expect this to accelerate in 2020 due to our strong product
pipeline, planned launches of LiquiBand® Rapid™ and LiquiBand®
XL in 2020, and as our recent product launches become
established in the market.
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 £1.1 million (2018: £0.4m) and amortisation of acquired intangible assets which were £1.7m million (2018: £0.1 million) and
change in fair value of long-term debt £0.3 million (2018: Nil), as defined in the Financial Review. Adjusted operating margin is shown before exceptional items and amortisation of
acquired intangible assets.
16 Advanced Medical Solutions Group plc Annual Report 2019
Key to strategic linkage in this report
Growth
Innovation
Operational
Excellence
Culture
Year-over-year change of our average standard cost3 %
Staff retention/turnover %
2.8%
2.4%
12%
19
18
12%
10%
2.8%
(increase)
19
18
17
No data available
16
No data available
15
No data available
Definition
Measures the reduction in standard cost base3 against prior year.
Strategic linkage
Continued improvements in cost reduction demonstrate the
successful execution of our strategy and are important for the
sustainability of the Group.
Progress made in the year
The standard cost base increased by 2.8% in 2019 (2018: 2.4%)
as cost improvement activities were outweighed by inflationary
factors. The target in 2020 is a 2% reduction, with a further
reduction of 4% in 2021. Our Chief Operations Officer is focused
on driving the achievement of this target.
Non-Financial KPIs
17
No data available
16
No data available
15
No data available
Definition
The % of staff who have left the Group during the year (gross
number of leavers).
Strategic linkage
Low levels of staff turnover are critical for the future success
of the business. Low levels of turnover increase employee
engagement and the embedding of the Care, Fair, Dare culture.
However, on element of turnover is considered beneficial, to
support new ideas and best practices from outside the Group.
Progress made in the year
Staff turnover was 12% in 2019 (2018: 10%), which is lower than
the national average of 15%. We consider this level of turnover to
be beneficial to the business.
Customer service (OTIF) %
Employee Engagement Score %
80%
19
18
17
16
15
80%
83%
93%
90%
96%
48%
19
18
48%
41%
17
No data available
16
No data available
15
No data available
Definition
On-Time in Full (OTIF) is a measure of whether we delivered on
our commitment to provide excellent service to our customers.
Strategic linkage
OTIF is important both in terms of contractual commitment and
customer retention.
Progress made in the year
OTIF decreased to 80% (2018: 83%), impacted by temporary
stock shortages during recertification of the RESORBA® portfolio
and sterilisation delays. Actions are being taken to increase
manufacturing capacity and to improve forecasting and planning
processes. We expect OTIF to return to above 90% in 2020.
Definition
Of the employees who responded to the Employee Survey,
the % of employees who had seen positive action from the
implementation of Care, Fair, Dare culture.
Strategic linkage
This % indicates how successfully we have embedded our
culture. An increasing score indicates more engaged employees,
leading to higher productivity and higher retention.
Progress made in the year
The engagement score in 2019 increased to 48% (2018: 41%).
Whilst we are satisfied with the employee engagement score for 2019,
we aim to increase this in 2020. Participation in the Employee Survey
increased to 49% of employees across the Group in 2019 (2018: 38%).
3 Reduction in average standard cost of production assuming no change in product mix.
Advanced Medical Solutions Group plc Annual Report 2019 17
Financial StatementsGovernanceCompany OverviewStrategic Report
Our Acquisitions: Biomatlante
Biomatlante acquisition:
• Strengthen AMS’s product portfolio
• Added an innovative R&D pipeline
• Increase market access in orthopaedic and dental
• Provides a range of revenue-generating surgical products
and an R&D pipeline of complementary biosurgical
technologies and offers significant growth potential
in additional surgical markets estimated to be worth
US$0.5 billion. The acquisition is expected to be marginally
earnings enhancing in the first full year of ownership
• Transaction completed in November 2019 for €8 million
(approximately £7 million) in cash, with a potential further
up to €0.3m due over the next two years
• Significant growth potential in the synthetic bone
substitute surgical markets
• Part of AMS’s growth strategy of acquisitions which have
synergies with the AMS portfolio
• The addition of a talented dedicated team to AMS and an
excellent cultural fit supports the smooth integration of
the business.
Biomatlante at a glance
Biomatlante was founded in 1995 in Nantes, France.
Biomatlante specialises in producing synthetic biomaterials
for bone regeneration and is a world leader in bone graft
technologies, selling products in over 50 countries.
Biomatlante’s products are routinely used in orthopaedics
and trauma surgery as well as in spine, ENT, stomatology,
and dental surgery.
Biomatlante is ready for the upcoming regulatory changes
in Europe (MDR) and has a strong quality management
system certified by multinational regulators including MDSAP
certification, ISO 13485 and the US FDA.
Biomatlante has developed strong ties with many research
institutions and established close collaboration with the key
being INSERM and the Nantes University.
A summary of the key aspects of the Biomatlante business is
outlined below.
Major players in Orthopaedics, Spine and Dental
Founded in 1995
35 employees
Over 650 publications
More than 30 years
of clinical background
8 patents (including
2 exclusive license
agreements)
Pioneers in synthetic
bone substitutes
Commercial presence in
over 50 countries
Collaboration with national and
international universities and research centres
18 Advanced Medical Solutions Group plc Annual Report 2019
“This acquisition is in line with our strategy to acquire technologies that are complementary
to our surgical portfolio and allow us to leverage our global routes to market.
The acquisition grants AMS access to multiple new markets, including the synthetic bone
substitutes market which is estimated at US$0.5 billion. We are excited to welcome the
Biomatlante team to AMS and look forward to working together with them to accelerate
their commercial success internationally and to continue to develop the Biomatlante
technology in a wide range of their potential applications and indications.”
Chris Meredith, CEO of AMS
Technology & Products
Biomatlante commercialised products, include:
• MBCP® Synthetic bone substitutes: Syringes, Inserts and
Synergies with AMS:
Biomatlante has multiple significant synergies with AMS,
most notably in:
In’Oss™ (MBCP® Putty – a Moldable Bone Graft Substitute)
• Sales & Marketing
• EZ Cure™ Collagen membranes
• R&D
• Osteotwin™ Biocompatible Interference Resorbable Screw
• Regulatory
• Marketing
• Operational
MBCP® is a biphasic calcium phosphate synthetic bone graft substitute
with a unique micro and, macro porous structure that most closely
resembles the architecture of natural human bone. Soluble and
resorbable: it gradually dissolves in the body, promoting new bone
formation through the release of calcium and phosphate ions. In time,
the porous structure becomes completely infiltrated with, and replaced
by, healthy viable bone.
The acquisition significantly strengthens the Group’s product
portfolio for the orthopaedic, spine and dental space, increases
R&D capabilities in collagen and adds bone substitute capabilities
to the Group, as well as operational capabilities and footprint
in France.
Biomatlante has an established orthobiologics and bone regeneration portfolio.
Orthobiologics and Bone Regeneration Portfolio
MBCP® technology
Resorbable Osteosynthesis
Advanced Osteogenic Calcium Phosphate Bioceramics
Collagen Membranes
Orthopaedic / Spine
Dental
Breakdown of Sales
Geographical Distribution (%)
Medical Fields (%)
Brand Distribution (%)
Europe
APAC
NAM
MEA
LATAM
Dental
Spine
Ortho
Sport
Biomatlante
Semi-finished
Private Brand
Advanced Medical Solutions Group plc Annual Report 2019 19
Financial StatementsGovernanceCompany OverviewStrategic Report Our Surgical Products: Patient Benefits
Minimising complications and
improving patient safety and comfort
LiquiBandFix8® is 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 provides accurate laparoscopic
application of adhesive and reduces 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. The range was
expanded in 2018 to include a LiquiBand FIX8® Device for
atraumatic mesh fixation in Open inguinal hernia surgery
(LiquiBandFix8® Open).
In 2019 we gained a Ventral claim for LiquiBandFix8® Open,
which was major progress on indications. We also launched
a pain campaign, driving the benefits of the Fix8® products.
Key advantages of LiquiBandFix8® and LiquiBandFix8®
Open for patients, are outlined on these pages.
Top Right: LiquiBandFix8® laparoscopic
Right: LiquiBandFix8® Open
LiquiBandFix8® Open
LiquiBandFix8® Open provides the same atraumatic benefits
in open procedures as mesh using the Lichtenstein technique.
The unique dual tip atraumatic device is engineered for strong mesh
fixation and wound closure in open inguinal hernia surgery, and
provides numerous benefits:
• Patient Comfort – N-Butyl 2 cyanoacrylate adhesive is a good
replacement for sutures in inguinal hernia repair leading to lesser
post-operative complications and morbidities, a low exothermic
reaction and a better quality of life.
• Cost-Effectiveness – Optimises cost due to less turnaround time
which results in improved theatre output without compromising
patient care.
• Strong Fixation – Offers high endurance against intra-abdominal
pressure exerted by daily activities which may lead to mesh distortion.
• Drive is for a trauma-less hernia mesh fixation and to lead change
to clinical standard of care.
• A study by Cochrane compared using glue against sutures/
Lichtenstein technique. The study found that fixing with cyanoacrylate
saved 10.8 Minutes which equates to a 20% faster surgery and a
significant reduction in perceived pain (a p value less than 0.05).
• Device has a removable tip for wound closure and mesh fixation
which is designed to project liquid anchors drop-by-drop and a
guarded aperture to prevent tip blockage.
OPEN SURGERY FIXATION DEVICE
OPEN SURGERY FIXATION DEVICE
OPEN HERNIA MESH FIXATION DEVICE
20 Advanced Medical Solutions Group plc Annual Report 2019
LiquiBandFix8® (laparoscopic) – The global
leader in trauma-less hernia mesh fixation
LiquiBandFix8® seeks to lead a change to clinical standard of care.
The goal is to increase patient safety and comfort through the use
of LiquiBandFix8®. The device is the first cyanoacrylate hernia mesh
fixation device that replicated the look, feel and application technique
of the industry standard invasive tacking devices and provides
numerous benefits:
• Reduced patient trauma – Provides surgeons with the ability to
precisely deliver cyanoacrylate in single 0.125ml drops. This is
significantly less traumatic than tacks in the abdominal wall
• Improved patient recovery – Quicker and more comfortable recovery
due to use of mesh in preference to screws or tacks
• Improved delivery with increased patient safety – Surgeons are
able to fix mesh more aggressively in intimate, higher risk areas where
there would be a concern in using invasive tacks, for example near
important vessels, tissues and cords, improving both the effectiveness
and safety of the surgery
• Reduced post-operative complications – Innovative liquid anchors
result in strong hernia mesh fixation, reducing the risk of some
common post-operative complications such as: Neuralgia, Paresthesia
and Mechanical Tissue Trauma
Laparoscopic hernia mesh fixation device
Together we can
minimise pain.
Device delivers precision, which drives patient safety
Non-Sticking, Atraumatic Tip
Quantity Indicator
Controlled Delivery Trigger
Ergonomic Design
Advanced design of
Strong and Secure Mesh Fixation
offers accurate
fixation and
patient safety.
Precise and Controlled Application
Fixation at Multiple Angles
Case evidence
of patient benefits
Two separate retrospective studies carried out
by Mr Paul Wilson (Consultant General Surgeon
– Royal Lancaster Infirmary) have demonstrated
the safety and efficacy of the Fix8® laparoscopic
device for inguinal and ventral hernia repair and
provided evidence of lower levels of complications
such as post-operative pain, recurrence and other
adverse events. The 2016 inguinal hernia repair
study included 200 patients with a 12 month
follow up and the 2020 study,
the first ever study for cyanoacrylate fixation of
ventral hernia meshes, included 137 patients with
a 24 month follow up period.
Advanced Medical Solutions Group plc Annual Report 2019 21
Financial StatementsGovernanceCompany OverviewStrategic Report Our Business Units
Surgical
Overview
The Surgical Business Unit includes sales, marketing,
research, development and innovation of our surgical
products. It is engaged principally in delivering differentiated
devices to surgeons to close and seal wounds and to
reduce the incidence of various surgical complications.
“With an exciting R&D pipeline, new
products being added to the LiquiBand®
range, regulatory approvals underway,
and opportunities from the Sealantis
and Biomatlante acquisitions, we are
optimistic about our ability to continue
to deliver meaningful benefits to patients
across the world.”
Jeff Willis, Business Unit Director
Sales by product area
Surgical Business Unit
2019
£’000
2018
£’000
Reported
Growth
Growth at
constant
currency
Advanced Closure
28,539
31,684
-10%
Traditional Closure
14,407
13,342
Biosurgical Devices
9,423
8,640
Internal Adhesive & Fixation
2,629
2,066
OEM Sealants
Total
1,545
1,381
56,544
57,113
8%
9%
27%
12%
-1%
-11%
27%
9%
10%
12%
-2%
Surgical revenue
£56.5m
Revenue decreased by 1%
at reported currency and
by 2% at constant currency.
(2018: £57.1 million).
Advanced Closure
Traditional Closure
Advanced Closure consists of the LiquiBand® topical skin
adhesives, incorporating medical cyanoacrylate adhesives in
combination with purpose-built applicators used to close and
protect a broad variety of surgical and traumatic wounds.
Growth
Revenue decreased by 10% to £28.5 million (2018: £31.7 million)
and by 11% at constant currency despite strong growth in all
territories except the US which was impacted by a combination
of factors as previously reported:
• Destocking due to lost business with two large Group
Purchasing Organisations.
• Slowdown in new evaluations due to not having a combined
glue and tape device for large wound closure.
• Third-party sterilisation issue which was resolved in
early 2020.
Innovation
LiquiBand® Rapid™ will be launched in Q2 2020. LiquiBand® XL,
which finished its pilot study at the end of Q1 2020, will allow us
to compete in the combined glue and tape device for closing
larger wounds market. The successful product from the pilot
study will enter a full study in May, which would keep us on
track to file for a 510(k) by the end of Q2 2020.
Future
As the only supplier of both octyl and butyl chemistries and
with continued formulation and claim expansions, AMS is well
positioned to continue to innovate and gain global market share
in Advanced Closure. Regaining market share in the US is a
focus for 2020.
22 Advanced Medical Solutions Group plc Annual Report 2019
Traditional Closure consists of RESORBA® branded absorbable
and non-absorbable sutures.
Growth
RESORBA® sutures delivered a record year of growth.
Revenue increased by 8% to £14.4 million (2018: £13.3 million)
and by 9% at constant currency. Growth was delivered in
various European territories and the US.
Innovation
The sutures category is well established and AMS has a full
range of products. Despite this, AMS continues to enhance the
range and in 2019 launched a new absorbable thread material
(PDO RESORBA®).
Expansion was planned into the orthopaedic suture space,
which will be implemented in 2020 with the launch of
OT-Cord, a coated high molecular weight suture.
Future
AMS will continue to explore targeted opportunities in this area
and derive benefit by bundling with other products.
We will continue our full range focus in Germany, including
commitment contracts with major German buying groups, and
‘full house’ suture account conversions. We hope to leverage
speciality suture wins (and bundle with commitment contracts)
and expand in locally distributed geographies (China, USA) and
focal speciality areas (Dental).
Acquisitions
Base
Business
LiquiBand®
(US & ROW)
Internal
Sealants
Surgical
Business Unit
LiquiBand
Fix8® (US
& ROW)
Synthetic
Bone
Substitutes
Collagen
Pouch
Vancocoll
GENTA-
COLL®
Above: Surgical growth drivers
Strategy
Deploy our core skills in adhesives/sealants, applicator design,
and biosurgicals to help surgeons achieve the best outcome
for their patients. We will do this by investing in innovation
and working with Key Opinion Leaders to deliver both new
and improved products. We aim to:
• Continue to grow LiquiBand® by targeting larger accounts
and Health Providers (US), engaging new distributors (EU)
and developing the Asia Pacific and Latin American markets
• Launching product upgrades and new products into the
market (LiquiBand Rapid® and LiquiBand XL in 2020)
• Expanding sales of LiquiBandFix8® into key territories
including Asia Pacific and LATAM and continue to seek
value added Hernia specialist partners in all regions
• Increase adoption of both Fix8®Lapro and Fix8®Open
across Europe and key territories
• Expand use of biosurgical products across the EU and
other territories using clinical evidence and industry groups
• Progress key regulatory approvals for antibiotic collagens
• Upgrade and develop suture range to drive sales in new
and existing territories, leveraging the experience of
speciality suture wins
Biosurgical Devices
Internal Adhesion and Fixation
Biosurgicals is principally composed of collagen-based materials
including RESORBA® Gentacoll® Gentamycin Collagen
products used in orthopaedic and cardiac applications, and
Collagen fleeces and cones used in Dental applications.
Growth
Revenue increased by 9% to £9.4 million (2018: £8.6 million)
and by 10% at constant currency, predominately driven
by growth in Europe and Latin America, a number of new
customers, notably in the Far East, and by Biomatlante revenue
(£0.4 million) following its acquisition at the end of November.
Innovation
Our biosurgical portfolio has been significantly expanded by
the acquisition of Biomatlante which has added synthetic
bone substitutes, cross-linked collagen membranes and
bioabsorbable screws to our existing biosurgical ranges.
Antibiotic loaded collagens providing local drug delivery is a key
product development focus for AMS and we are working on
development and regulatory activities for alternative antibiotics
for orthopaedic and cardiac applications. We have submitted
our CE mark application for collagen with vancomycin and
approval is expected in H2 2020. Our antibiotic collagen
pouch for cardiovascular devices, which is currently sold
under prescription in Germany, is scheduled for an FDA review
meeting in Q2 2020 to finalise the product indications and
regulatory pathway for 510(k) approval.
Future
There are significant opportunities to expand dental and
surgical use of RESORBA® biosurgical products across the EU.
Biomatlante, and the launch of RESORBA® Bone initiatives, will
enhance our footprint into the global orthobiologics market.
This category comprises LiquiBandFix8® devices, which are
indicated for internal fixation of hernia meshes.
Growth
Revenue increased by 27% to £2.6 million (2018: £2.1 million)
predominately driven by demand for the laparoscopic device.
Innovation
The open hernia mesh fixation device has received very positive
surgeon feedback reinforcing our decision to access the global
hernia market. In 2019, we added an indication for a ventral
claim. We are building clinical evidence and a base of high-
profile Key Opinion Leaders to create a platform for success in
2020. We are also exploring further configurations of the Fix8®
technology platform.
Future
Internal surgery is a significant opportunity and, with the
acquisition of Sealantis, we have multiple adhesive/sealant
technologies to develop in combination with our applicator
design expertise. AMS will also seek to optimise our channel
strategy and continue to seek hernia speciality sales
partnerships to maximise commercial gains.
OEM Sealants
Surgical sealants sold under partner brands. Revenue increased
by 12% in 2019 to £1.5 million (2018: £1.4 million) partly due to
partner ordering patterns.
Advanced Medical Solutions Group plc Annual Report 2019 23
Financial StatementsGovernanceCompany OverviewStrategic Report Our Woundcare Products: Patient Benefits
Providing confidence for patients
with security and protection
The Woundcare Business Unit has a strong,
continuous new product pipeline targeting
two new launches per annum, which
was achieved in 2019. Progress has been
focused on the infection management area,
a cornerstone of our innovation pipeline.
There are multiple growth opportunities via
range extensions and market expansions for
the woundcare market.
2019 saw the launch of our Lite foam products range in
the EU and further approvals in Brazil of our advanced
woundcare portfolio. We anticipate further product range
extensions in the next two years, including the development
of next generation gelling fibres.
In 2019 we gained FDA approvals for two new products into
the US which strengthened our infection control portfolio,
and are designed to meet the needs of patients with wounds
requiring dressings with additional performance benefits.
These were a High Performance Dressing with Silver, which
includes a patent protected quilting pattern, and an extension
to our premium PHMB foam range with silicone adhesive,
which continues to demonstrate enhanced performance.
Both launches were positioned with major US partners.
Key advantages of the new products for patients are outlined
on these pages.
ActivHeal®
ActivHeal® range and benefits
• The Group is seeing strong progress from its initiative to
exploit ActivHeal® opportunities in select overseas markets.
We continue to navigate the approval process in multiple
new markets including the Middle East and Latin America.
This initiative has generated significant distribution partner
interest and validates the decision to realign our Business Units
at the start of 2019.
• Range offers the best outcome for the patient
ActivHeal® was developed to offer the NHS a more affordable
clinically effective woundcare dressing range. It offers clinicians
a simple, clear and cost-effective woundcare range whilst
ensuring the best clinical outcome for the patient.
• Support of expanded range and award-nominated
clinician support
We provide access to our ActivHeal® Academy, a multi-tiered
woundcare education programme to support clinicians of
all levels with easily accessible, online educational resources.
This support for clinicians provides patients with the best
possible outcome when ActivHeal® products are used. We are
enhancing the portfolio of products for clinicians to utilise and
are continually expanding the ActivHeal® range and in 2019
added Silicone Lite Foam.
24 Advanced Medical Solutions Group plc Annual Report 2019
Above: ActivHeal® product range
PHMB Silicone Border
– Next generation dressing containing
the antimicrobial agent PHMB which kills
and inhibits the growth of bacteria for
chronic and post-surgical wounds.
Key benefits of dressing
• Patient reassurance – When tested in vitro against MRSA, MRSE,
and E. coli it achieved 99.9% eradication of these pathogens within
24 hours. This is faster than some silver foam dressings. It gives
patients peace of mind that their wound is receiving the most
appropriate dressing solution.
Above: Silicone PHMB Border dressing
High Performance Dressing with Silver –
Next-generation antimicrobial gelling fibre
technology with excellent performance
and patent-protected construction.
• Maximum action of dressing – As PHMB in the dressing works
so quickly, it means even patients with heavily exuding wounds
which require frequent dressing changes are getting the maximum
benefit of the dressing’s mode of action.
• Reduction in pain – Proven efficacy for up to 7 days. It manages
both wound exudate and microbial contamination, reducing
wound pain during healing and improving the patient’s quality
of life.
• Minimises discomfort during replacement of dressing –
Dressing changes are stressful for patients with infected wounds.
We developed PHMB silicone border to have gentle but secure
adhesion, reducing this pain and making dressing changes easier.
• Designed to minimise discomfort during use – Dressing easily
repositioned or lifted for wound observation. Excellent fluid
handling capability means fewer dressing changes, benefiting both
patients and healthcare professionals.
Key benefits of technology
• Eradication of pathogens – Good performance against
bacteria and yeast, enabling effective treatment of a
patient’s wound. Silver content helps to effectively suppress
colonisation and proliferation of bacteria and yeast within the
dressing for up to 7 days.
• Fewer dressing changes and reduction of wound
maceration – Unique quilting pattern provides better fluid
handling capacity than other dressings. As a result, patients
with heavily exuding wounds require fewer dressing changes,
enhancing their quality of life. Its ability to lock in exudate and
prevent the spread of wound fluid is key to reducing lateral
wicking and minimising the risk of peri-wound maceration.
• Easier dressing changes – Best in class tensile strength
increases confidence in removing dressing intact, a benefit
for clinician and patient. The quilting pattern enabling this is
protected by a design patent.
• Maintains a moist environment ideal for wound healing –
Dressing forms a soft gel on contact with exudate, conforming
to the wound and helping to maintain a moist wound
environment, ideal for the promotion of moist wound healing.
• Absorbency – Demonstrates excellent absorbency of
wound exudate.
Above: High Performance Dressing technology
Advanced Medical Solutions Group plc Annual Report 2019 25
Financial StatementsGovernanceCompany OverviewStrategic Report Our Business Units
Woundcare
Overview
The Woundcare Business Unit is responsible for driving
sales through our business to business partners,
“direct sales”, and third-party converters by supplying
a comprehensive multi-product portfolio of advanced
woundcare products. We partner with world-leading
woundcare companies, developing innovative products
with differentiated claims and providing regulatory
and clinical support for our partners to distribute
under their own brands. We also distribute the AMS
branded ActivHeal® range, which is sold predominately
to the NHS but increasingly through partners into
other markets.
“We are excited by
the progress made in
2019 linked to product
approvals in the
infection management
area, which are the
cornerstones of our
innovation pipeline.”
Becky Walmsley,
Business Unit Director
Infection Management
Exudate Management
The Infection Management category comprises advanced
woundcare dressings that incorporate antimicrobials such as
Silver and Polyhexamethylene Biguanide (PHMB).
Growth
Revenue increased by 4% to £20.6 million (2018: £19.7 million)
and by 3% at constant currency with growth driven mainly by
additional sales of PHMB dressings, including a number of new
customers and the first shipment of our atraumatic PHMB foam
dressing into the US following its approval in July 2019.
Innovation
Silver High Performance Dressing, our next generation
antimicrobial gelling fibre technology with excellent
performance and patent protection construction, received US
approval in H2 2019 and has been signed up by a number of US
partners with launch orders expected to ship in H1 2020.
Our Moisture Wicking Fabric with silver, indicated for use
in the management of skin folds and skin-on-skin friction,
was approved for the US and EU in the second half of 2019
and provides access to a new market, worth more than
US$25 million, with initial orders expected in the first half
of 2020.
We have improved the design of our silver post-operative
dressing which launched with a US partner in 2018 and we
expect increased ordering from multiple partners in 2020.
Future
Looking forward, the Group is working on developing
next generation high-gelling products with differentiated
antibiofilm claims.
The Exudate Management category comprises advanced
woundcare dressings which do not incorporate any
antimicrobial elements and includes the majority of our
ActivHeal® range.
Growth
Revenue was impacted by one of our main partners significantly
altering its inventory levels due to the risk of Brexit related supply
disruption. This partner ordered significantly more than usual in
Q4 2018 and H1 2019 followed by much lower demand in H2
2019. Revenue consequently declined by 6% to £19.3 million
(2018: £20.4 million) and by 6% at constant currency.
Innovation
During the year we expanded our Lite Foam portfolio with a
range of shapes and sizes for the acute post-surgery market,
extended the claims on our silicone foam range to include
pressure ulcer prevention (US) and gained a number of new
customers in the EU and LATAM.
Future
There is strong progress from exploiting ActivHeal®
opportunities in select overseas markets. We continue to
navigate the approval process in multiple new markets including
the Middle East and Latin America. This initiative has generated
significant distribution partner interest and validates the decision
to realign our Business Units at the start of 2019.
We are confident that the above actions, coupled with
our ability to meet the demands of MDR, will continue to
counteract the ongoing challenging market conditions in the
advanced woundcare market.
26 Advanced Medical Solutions Group plc Annual Report 2019
Sales by product area
Acquisitions
OEM Business Unit
2019
£’000
2018
£’000
Reported
Growth
Growth at
constant
currency
Base
Business
ActivHeal®
Infection Management
20,555
19,744
Exudate Management
19,271
20,422
Other Woundcare
5,998
5,319
Total
45,824
45,485
4%
-6%
13%
1%
3%
-6%
9%
0%
Woundcare revenue
£45.8m
Revenue increased by 1% at reported
currency and was in line with prior year
at constant currency (2018: £45.5m)
Woundcare
Business Unit
Moisture
Wicking
Fabric
Silver Post
Operative
Dressing
Atraumatic
PHMB
Foam
Silver High
Performance
Dressing
Above: Woundcare growth drivers
Other Woundcare
Royalties, fee income, gels and sealants used in woundcare.
Growth
Revenue increased by 13% to £6.0 million (2018: £5.3 million)
and by 9% at constant currency predominately due to increased
Organogenesis royalties of £2.9 million (2018, impacted by
lower reimbursement: £1.8 million).
Innovation
Our skin protection range of products has been expanded via
a new five-year global supply agreement with a key partner.
This next generation launch addresses the market need
of products for patients affected by prolonged exposure
to moisture.
Future
We will continue to evaluate the different ways our skin
protection products can enhance the patient’s quality of life
and help with the wound healing process.
Strategy
To be the partner of choice for innovative, differentiated
products enabling our customers to be successful
through full design, development, manufacturing and
distribution services supported by in-house regulatory,
clinical and marketing professionals. To achieve this AMS
will continue to:
• Expand the product portfolio via a multi-year innovative
product development pipeline into growth segments,
utilising close links to universities to enhance innovation
• Invest in our people to provide guidance to ensure
compliance with the changing regulatory and clinical
landscape, supporting expansion into new markets
• Gain product approvals by leveraging in-house expertise
• Expand into emerging markets with our partners
• Invest to enhance our reputation for high quality,
customer service, regulatory and clinical support
• Gain access to end users and develop a network of Key
Opinion Leaders (KOL)
• Ensure our intellectual property is safeguarded to
protect our product portfolio
Advanced Medical Solutions Group plc Annual Report 2019 27
Financial StatementsGovernanceCompany OverviewStrategic Report Financial Review
The Group maintains its solid
balance sheet and continues
to invest in future growth
Eddie Johnson
Chief Financial Officer
Summary
In 2019 the Group delivered reported revenue in-line with the
prior year and a 1% decrease at constant currency. Profit before
tax decreased by 14% due to investment in Sealantis, adverse
sales mix, currency contracts and increased amortisation due to
the acquisition of Sealantis at the start of the year.
To provide the clearest possible insight into our performance,
the Group uses alternative performance measures.
These measures are not defined in International Financial
Reporting Standards (IFRS) and, therefore, are considered to
be non-GAAP (Generally Accepted Accounting Principles)
measures. Accordingly, the relevant IFRS measures are
also presented where appropriate. We use such measures
consistently at the half year and full year and reconcile them
as appropriate. The measures used in this statement include
constant currency revenue growth, profit from operations,
adjusted operating margin, adjusted profit before tax and
adjusted net cash inflow from operating activities, allowing
for the impacts of exchange rate volatility, exceptional items,
amortisation and the change in fair value of long-term debt to
be separately identified. Net cash is an additional non-GAAP
measure used.
Administration costs were impacted by foreign
exchange movements and increased by 3.7% to
£34.6 million (2018: £33.3 million) excluding exceptional
items. Foreign exchange movements, predominately
driven by exchange rates on currency contracts increased
administration costs by approximately £3 million with
underlying administration costs lower than in 2018 as the
Group controlled its discretionary administrative expenditure.
The Group, however, continued to increase its investment in
research and development including Sealantis and incurred
£6.5 million of gross R&D, regulatory and clinical spend in the
year (2018: £6.0 million), representing 6.3% of sales (2018: 5.8%).
Exceptional items of £1.1 million in the year (2018: £0.4 million)
relate to the Sealantis and Biomatlante acquisitions as well as
other business development activities.
Adjusted operating margin decreased by 180 bps to 26.4%
(2018: 28.2%) and operating margin decreased by 410 bps to
23.7% (2018: 27.8%) due to lower US LiquiBand® sales, adverse
currency contracts and the investment in Sealantis.
Adjusted profit before tax decreased by 7% to £26.6 million
(2018: £28.8 million) and profit before tax decreased by 14% to
£24.3 million (2018: £28.3 million).
The Group adopted IFRS 16 (Leases) in 2019 and the
comparative period has been restated, which reduced profit
before tax by £0.1 million in the year (2018: £0.2 million).
There is no overall impact on the Group’s cash and cash
equivalents as a result of IFRS 16.
Reconciliation of profit before tax to adjusted
profit before tax
Profit before tax
Amortisation of acquired intangibles
Change in fair value of long-term debt
Exceptional items
Adjusted profit before tax
2019
£’000
2018
£’000
24,257
28,271
1,689
(345)
1,053
81
–
402
26,648
28,754
The Group’s effective tax rate in the Income Statement,
reflecting the blended tax rates in the countries where we
operate and including UK patent box relief, increased to
22.0% (2018: 20.5%) mainly due to some of the exceptional
items in the period not being deductible for tax purposes and
to Sealantis operating losses not being offset against profits
elsewhere in the Group.
28 Advanced Medical Solutions Group plc Annual Report 2019
Cash Flow
Adjusted net cash inflow from operating activities increased by
3% to £22.8 million (2018: £22.1 million). Net cash inflow from
operating activities, impacted by exceptional items, were in line
with the previous year at £21.7 million (2018: £21.7 million).
Net cash inflow from
operating activities
Add back Exceptional items
Adjusted Net cash inflow from
operating activities
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
21,699
1,053
21,674
402
22,752
22,076
Working capital increased during the year, mainly due to increased
inventory levels and lower payables. Inventory increased to
5.1 months of supply (2018: 4.7 months) with high inventories
to mitigate Brexit and recertification further impacted by goods
awaiting sterilisation following the delay at a third-party facility.
Payables decreased in value due to controlled discretionary
expenditure, however, creditor days increased to 34 days
(2018: 31 days). Debtor days increased marginally to 49 days
(2018: 47 days).
Capital investment in equipment, R&D and regulatory costs
increased to £5.9 million (2018: £4.7 million).
Cash outflow relating to taxation increased to £5.9 million
(2018: £3.8 million) due to the timing of tax payments, in
particular in Germany and the US.
The Group paid its final dividend for the year ended
31 December 2018 of £1.9 million in June 2019 (2018: for the
year ending 2017, £1.6 million), and its interim dividend for the
six months ended 30 June 2019 of £1.1 million in October 2019
(for the 6 months ended 30 June 2018: £0.9 million).
The Group has an undrawn £80 million credit facility provided
jointly by Royal Bank of Scotland Group plc (The Royal Bank of
Scotland) and HSBC UK Bank plc (HSBC) which is in place until
December 2023. This facility carries an annual interest rate of
LIBOR or EURIBOR plus a margin that varies between 0.60%
and 1.70% depending on the Group’s net debt to EBITDA ratio.
The facility is subject to leverage and interest cover covenants
and is unsecured.
Adjusted diluted earnings per share decreased by 8% to 9.83p
(2018: 10.63p) and diluted earnings per share decreased by 16%
to 8.72p (2018: 10.41p).
The Board is proposing a final dividend of 1.05p per share to
be paid on 19 June 2020 to shareholders on the register at
the close of business on 29 May 2020. This follows the interim
dividend of 0.50p per share paid on 25 October 2019 and
would, if approved, make a total dividend for the year of 1.55p
per share (2018: 1.32p), a 17% increase on 2018.
Operating result by business segment
Year ended 31 December 2019
Revenue
Profit from operations
Amortisation of acquired intangibles
Adjusted profit from operations4
Adjusted operating margin4
Year ended 31 December 2018
Revenue
Profit from operations
Amortisation of acquired intangibles
Adjusted profit from operations4
Adjusted operating margin4
Surgical
£’000
Woundcare
£’000
56,544
45,824
14,411
11,370
1,675
8
16,086
11,378
28.4%
24.8%
57,113
45,485
18,164
11,272
76
18,240
31.9%
5
11,277
24.8%
Note 4: Adjusted for exceptional items, amortisation of acquired intangible assets and
change in fair value of long-term debt.
The table is reconciled to statutory information in Note 4 of the financial information.
Surgical
The adjusted operating margin of the Surgical Business Unit
decreased by 350 basis points to 28.4% (2018: 31.9%), impacted
by the reduction in US LiquiBand® sales which are at a higher
gross margin than the Group average, Sealantis costs and
adverse currency movements.
Woundcare
The adjusted operating margin of the Woundcare Business Unit
remained consistent at 24.8% (2018: 24.8%), as an increased
royalty from Organogenesis in the period was offset by adverse
currency movements.
Currency
More than one-third of Group revenues are invoiced in US
Dollars and approximately one quarter are invoiced in Euros.
The Group hedges significant currency transaction exposure
by using forward contracts and aims to hedge approximately
80% of its estimated transactional exposure for the next 12 to
18 months. The Group estimates that a 10% movement in the
£:US$ or £:€ exchange rate will impact Sterling revenues by
approximately 3.4% and 2.7% respectively and in the absence
of any hedging this would have an impact on profit of 2.7%
and 1.0%.
Advanced Medical Solutions Group plc Annual Report 2019 29
Financial StatementsGovernanceCompany OverviewStrategic Report Stakeholder Engagement
Effective engagement with our key
stakeholders and managing our impacts
Engaging with Investors
Our
Investors
Our
Regulators
Our
Employees
Our key
stakeholders
Our
Communities
Our Patients,
Partners and
Clinicians
Our Supply
Chain
Outcomes
• Information has been provided in results
announcements and trading updates on:
– Progress against market expectations and short to
medium-term targets;
– General market conditions, including progress made
in key markets such as US topical skin adhesives,
internal adhesives and EMEA/APAC;
– Details of product pipeline, including new product
launches in the EU, US and smaller international
markets, and progress on the premarket approval
(PMA) for LiquiBandFix8®;
– Progress on the acquisitions made and the strategy
for future acquisitions
– Ongoing impact of the Medical Device Regulation
(MDR), and challenges and opportunities
this provides;
– Impact of the realigned Business Units in 2019; and
– Preparations to mitigate impact of Brexit and
COVID-19.
Investor and analyst meetings and consultation
The Executive Directors and external strategic communications
advisors manage the Group’s external relationships with
investors, prospective investors, and analysts. They schedule a
comprehensive programme of investor and analyst meetings
and calls, in particular following the release of annual and half-
year results and trading updates.
Engagement in 2019
• The Executive Directors attended 118 investor or analyst
meetings (107 one-to-one meetings and 11 group meetings),
engaging with around 70% of our current shareholders (by
shareholding value) and 7 analysts. Key themes discussed
included results, strategy, market dynamics, R&D pipeline,
acquisition strategy, dividends and other matters relevant
to individual parties. Investor roadshows were organised in
London and Liverpool and also a number of site visits were
arranged for investors;
• The Remuneration Committee Chairman consulted with
major shareholders on the proposed increases in the
remuneration package for the Chief Executive Officer and
newly appointed Chief Financial Officer;
• The Chairman, the Senior Independent Director and other
Non-Executive Directors were available to attend meetings
with major shareholders at the request of either party to gain
an understanding of any issues and concerns; and
• Our investor website was updated and reviewed regularly to
ensure that our information was up to date.
30 Advanced Medical Solutions Group plc Annual Report 2019
Effect of engagement with investors and analysts on Board decisions
• The Board has reviewed matters such as: the best use of distributable reserves,
for example for dividend payments; the timing and content of results announcements,
trading updates, composition of the Board and succession planning, as well as other matters
raised by shareholders at the AGM.
• The Board decided to continue to increase investment in major R&D and regulatory projects
and to look for further acquisitions that meet our strict criteria as the best use of our
cash balances.
• The Board decided to put in place a medium-term succession plan for the Non-Executive
members of the Board.
Board awareness of investor views
Engagement in 2019
• The Chief Financial Officer reported regularly to the Board on
the Company’s investor relations activities, including updates
from the Company’s brokers to ensure that all Directors are
aware of, and have a clear understanding of, the views of
major shareholders and analysts covering AMS.
• The Company’s brokers provided an analysis of investor
and analyst feedback during the year under review and the
Executive Directors regularly circulated updates to the Board.
Outcomes
• Additional information was provided to investors in results
announcements and trading updates as outlined above
• Gives the Board a clear understanding of investor
sentiment and how this changes over time
Views of retail shareholders
Engagement in 2019
• The Deputy Company Secretary, together with the
Company’s Registrars, engaged with our retail shareholders
throughout the year to deal with enquiries relating to their
shareholdings or information requests.
• A number of retail shareholders attended the AGM and had
the opportunity to meet with and put questions or comments
to the Board.
• The Deputy Company Secretary notifies the Chairman and
Chief Financial Officer of any areas of concern or importance
raised by retail shareholders. No such queries were raised
during the year.
• This provides a good perspective on the different drivers for
investment in the Group and the reasons as to why retail
shareholders may hold shares in the Company, such as brand
recognition, capital growth and dividends.
Views of voting agencies
Engagement in 2019
• The Board is fully aware of the influence that proxy agencies,
such as the Institutional Shareholder Service (ISS), Glass
Lewis and the Investment Association, have on how our
investors will vote at the AGM or via proxy. We wrote to
investors and voting agencies to update them in respect
of the remuneration packages and practices for Executive
Directors, where applicable. We have worked closely with
the proxy agencies and significant shareholders on key issues
such as Director independence, tenure and number of Board
appointments in 2020.
Outcomes
• More insight into what our shareholders expect
• Any feedback from proxy agencies helps to form our
Remuneration Policy to ensure that our practices are
satisfactory and provides input into succession planning
for the Board and Nomination Committee
Annual General Meeting
Engagement in 2019
• At the 2019 AGM, the Chief Executive updated shareholders
on the Group’s performance and activities during the
prior year.
• The Chairman and each Board Committee Chair were
available throughout the AGM to answer any queries raised.
• The 2020 AGM will be a closed meeting in response to
Government guidance on COVID-19.
• The Notice of AGM will be circulated to all shareholders at
least 20 business days prior to the meeting.
Outcomes
• At the 2019 AGM, a number of retail shareholders asked
the Board to consider the AGM location. We decided
to hold the 2020 AGM in Cheshire. We will consider
shareholders’ views for the 2021 AGM
Trading updates
Engagement in 2019
We continue to keep our shareholders fully informed of
the performance of the business on a regular basis, through
the publication of two trading updates, in January and June
as well as the full and half-year announcements in March and
September, and further announcements as and when required,
including a COVID-19 update on 2 April 2020.
Advanced Medical Solutions Group plc Annual Report 2019 31
Financial StatementsGovernanceCompany OverviewStrategic Report Stakeholder Engagement
continued
Engaging with our Employees
Health and safety, well being, and environment
Engagement in 2019
• We are focused on maintaining the highest levels of health
and safety within our business. The health and safety of
our employees, as well as that of our customers, suppliers,
sub-contractors and all other visitors to our sites and offices,
is of the utmost importance to us. We reduced our AIR (All
Incident Rate) target by 33% from 6.0 to 4.0 in 2019 which
reconfirms our desire to continuously improve our safety
performance and enhance our safety culture.
AIR total number of injuries x 1000
Total labour hours worked
Outcomes
• Reviewed and updated the training and information
provided to our employees and those visiting our sites
to ensure that they remain fit for purpose and reflect
the feedback received from our employees;
• Developed the 2020-2024 Environmental,
Health & Safety strategy;
• Site H&S plans driven by site leadership teams
introduced; and
• Prepared and consulted on an environmental and
energy management system for introduction in 2020
AIR
(per 100,000)
19
18
17
16
15
2.9
2.3
4.1
4.3
5.4
Employee Forum/Works Council
Engagement in 2019
• Employee Forums have been established at sites across the
Group, taking into account local requirements:
– The Group has Employee Forums at both UK sites and a
• AMS continued to deliver solid safety performance with an
AIR score of 2.9 (2018: 4.1). The number of incidents fell,
driven by the stricter targets and improvements implemented
following the higher score in 2018.
• The Deputy Company Secretary updates the Senior
Management Team (SMT) with a report highlighting any
key H&S matters on a monthly basis and these reports are
reviewed at the respective Board meetings during the year.
• A Group Health, Safety & Environmental Manager was
appointed in 2019, highlighting the importance of this area
to the Group.
• During 2019 the following engagement took place with
employees on health and safety:
– Group Health, Safety & Environmental Manager visited
the Group sites to understand any health, safety or
environmental issues impacting employees;
– Process to audit and assess all locations was undertaken;
– Engaged with site employees on how they see health and
safety, what they would like to see; and
– Key health and safety messages were reiterated at the
Employee Forum meetings, and opinions sought on ways
to improve health and safety at our sites and reduce our
impact on the environment.
combined UK Employee Consultative Group (ECG), which
discusses key initiatives relevant to UK employees. UK site
and ECG meetings are held twice annually. SMT members
attend the site meetings and the ECG is chaired by a
SMT member and attended by the Group HR Director.
In Germany, there is a Works Council which meets monthly
at our Nuremberg site and the Group HR Director and CFO
attended a number of meetings in 2019, covering a variety
of issues relating to employee working conditions. Both the
ECG and Works Council comprise representatives from
across the related sites.
• Our French site (Biomatlante) has a Works Council, which will
be integrated in 2020. Our smaller sites (Etten Leur, Israel and
Neustadt) have HR on-site and hold monthly site employee
meetings, allowing direct access to Group HR to raise issues.
• The objectives of the forums are to:
– Achieve closer engagement between the SMT
and employees
– Provide further opportunity for employees, via forum
members, to influence working conditions and ways
of working
– Provide an initial indication of possible employee reaction
to proposed policy and benefit changes
– Share results of engagement activities and generate
ideas for action; and
– Allow direct access to Group HR to raise issues
32 Advanced Medical Solutions Group plc Annual Report 2019
• Since it was set up, the National ECG Forum has met
three times. During these meetings, they have discussed
and considered various matters, including mental health
awareness, stress, reward and recognition, employee benefits
and charitable donations, flexible working arrangements, and
Code of Conduct. A bespoke Code of Conduct applicable to
the Group will be implemented in 2020.
Outcomes
• The National ECG forum has provided valuable input
since it was put in place in 2018, including raising
awareness of mental health across the Group, providing
training to Mental Health First Aiders, introducing
a Stress Policy, and increasing the awareness of
recycling projects.
• Forum members have helped to increase the profile
and awareness of charity work across the Group.
Charity matching is available, helping to increase the
focus on St Luke’s Cheshire Hospice and Jeremiahs
Journey, the selected charities in the UK in 2019, as
well as a number of charities in Germany including
animal protection, help for people with disabilities and
children’s charities.
Internal Communications
Engagement in 2019
We continue to ensure that our employees are kept informed
of developments and important issues. These are cascaded
throughout the business through a variety of channels including
the Group’s intranet, emails and newsletters.
The SMT meet monthly and communication is cascaded down
through team meetings. This allows employees the opportunity
to provide feedback or raise questions directly.
Employees also have the opportunity to ask the SMT questions
directly through a portal on the Group’s Intranet, which can be
done anonymously if desired.
There is a Group Whistleblowing Policy which provides direct
access to the Board. This is a mechanism for employees to
communicate any concerns they may have.
Outcomes
• Employees raised a number of issues with Senior
Management, such as looking at ways to utilise
renewable energy at higher energy use sites and how
to better tackle plastic waste and recycling in general.
Site visits allowed employees to present issues in an
open forum to the Executive Directors. These were part
of the gap analysis carried out at the end of 2019 and
will be integrated into the updated Environmental Plan
in 2020.
Diversity and inclusion in recruitment and training
Engagement in 2019
• HR assessed the need for diversity in the recruitment process.
• Actions were initiated at our RESORBA® site to ensure
compliance with local legislation relating to disabled
employees, which resulted in a long-standing fine not
being levied.
• In April 2019, the Company again invited all employees in the
Group to participate in the Deferred Share Bonus Plan (DSB).
The invitation enabled eligible employees to contribute up to
£1,800 or 100% of their bonus, whichever is higher.
Main Board
Total Employees
6
747
Male
Female
5
1
Male
Female
46%
54%
Senior Management Team
9
Male
Female
6
3
As at 31 December 2019
Outcomes
• The Group introduced a policy of having women in all
recruitment selection pools.
• There are women on all interview panels across
the Group.
• At 31 December 2019, approximately 31% of employees
participate in one or more active DSB grants and 188
employees participated in the April 2019 DSB Scheme.
All Group employees were eligible.
• The inclusion of employees in share schemes aligns
their interests with that of the Executive Directors and
other shareholders and increases their engagement
with the performance of the Group through investment
in the Company’s shares.
Advanced Medical Solutions Group plc Annual Report 2019 33
Financial StatementsGovernanceCompany OverviewStrategic Report Stakeholder Engagement
continued
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:
• Listening,
• Quality
• Open-minded
• Builds
Care
support and
taking action
• Valuing
contribution
• The ‘Bigger
Picture’
• Respectful
engagement
• Motivates and
retains staff
• Accountability
• Supporting
• Transparent
• Proactively
and responsibility
and coaching
• Inclusive
Fair
• Leading by
example
• The team not
the individual
communicates
• Empowers
decision
making
• Optimism
with realism
• Solutions
not problems
Dare
• Determination
and persistence
• Continuous
improvement
• Responsive
• Challenges the
• Creative
status quo
• Removes
barriers
to innovation
• Encourages
pride and sense
of belonging
• Ensures that the
health, safety
and well-being
of all employees
is paramount
• Delivers results
• Will build a
sustainable future
Culture
Engagement in 2019
• Our Group operates to the highest ethical standards with our
values of Care, Fair, Dare embedded in all we do. Our culture
defines the behaviours we expect from every one of our
employees when going about their business. We have well
established processes through which we seek feedback
from our employees about their perception of our culture
and how employees have demonstrated the values during
their interaction with them. We also receive feedback from
our cultural workshops, employee engagement surveys,
exit interviews, Employee Forums and visits by the Executive
Directors and Senior Management to our sites and offices.
• Employees had the opportunity to attend Care, Fair,
Dare workshops to agree action plans for their team
and feedback on the process.
Outcomes
• To ensure that the tone of our culture is driven from
the top, the Board’s involvement in the review process
is critical. The Board is scheduled to undertake a more
detailed review of our culture in 2020 to assess how it
is perceived (both positive and negative), and will agree
with management as to what, if any, actions need to be
taken. The review will also outline how we propose to
measure and report on our culture in the Annual Report
going forward.
34 Advanced Medical Solutions Group plc Annual Report 2019
Engagement survey
Engagement in 2019
• We annually undertake an employee engagement survey
which focuses on the implementation of Care, Fair, Dare.
• For the year under review, the survey results showed the
overall level of engagement increased from 41% in 2018
to 48% in 2019.
• We are satisfied with the employee engagement score
in 2019, although we aim to increase this in 2020.
• Employees have seen a positive improvement and 49% of
employees took part. Participation has increased from 38%
in 2018.
• These results have been shared with the teams and each
team have implemented a Care, Fair, Dare action plan
to further embed the culture. It is hoped this will help to
maintain or enhance employee engagement levels.
• We are investigating the use of a variety of software tools
to further enhance and improve employee engagement
in 2020.
Outcomes
• New strategies to promote health, safety and
environment have been put in place as detailed above.
• We have implemented a number of initiatives to
improve internal communications. These include
cascading our Corporate Objectives to help employees
better understand the big picture, a request raised in the
Care, Fair, Dare workshops and introducing an ‘Ask the
SMT’ intranet portal where any employee can ask the
SMT any question, anonymously if desired.
• Provided resource to introduce a Project Management
Office to prioritise our most important projects and
optimise resource allocation.
• Reviewed Authority Matrix to empower employees, a
request from employee workshops.
• Articles in our newsletter outlined further changes
made from survey results.
• Introduced competency-based interviews using Care,
Fair, Dare values.
• Trained managers on 360-degree feedback.
• Revamped R&D processes to better link it to our Care,
Fair, Dare values.
Policie s
S
t
a
n
d
ards
Train
i
n
PMO
g
e s o urces
R
Effect of engagement with
employees on Board decisions
To increase its engagement with the workforce and comply
with Code Provision 5 the Board nominated Penny Freer,
the Senior Independent Director, as the designated Non-
Executive Director for workforce engagement. Penny will
attend her first UK ECG meeting as soon as the practicalities
of COVID-19 allow and report back to the Board thereafter.
She will attend at least one meeting annually going forward
and is also available to members of the UK ECG, Works
Councils and any other employee body from across the
Group throughout the year.
The Board also listened to recommendations regarding
how to improve new product development and better
manage competing demands on resources. This led to
the development of the improved Product Development
Process and implementation of a Project Management
Office (PMO). This will help with launching products into
the market quicker and overcoming regulatory hurdles.
Talent reviews were initiated across the Group, which
included five-year training and development plans, and were
presented to the Board in Q1 2020. Senior Management
presented directly to the Board on their areas of responsibility
in 2019, to increase engagement, and this will continue
in 2020.
Advanced Medical Solutions Group plc Annual Report 2019 35
Financial StatementsGovernanceCompany OverviewStrategic Report Stakeholder Engagement
continued
Engaging with Patients, Partners and Clinicians
Patient, Partner and Clinician Satisfaction
Engagement in 2019
• We focus on delivering innovative and technologically
advanced products and industry-leading training, whilst
resolving partner or clinician problems quickly and efficiently.
• We ensure that our partners have the opportunity to speak to
key employees at any time and any concerns are reviewed
and acted upon quickly and effectively.
• We invested significant resources in our ActivHeal® Academy
to deliver free educational programmes to our clinicians,
providing them with online training that can also meet their
CPD needs.
• We provided education and training for our partners
and clinicians, both through face-to-face training and
masterclasses, as well as developing platforms such as social
media, dedicated websites, online tools and marketing
software, allowing increased accessibility to our resources.
• Patient outcomes and clinician experience provide key inputs
to our innovation process.
• We provide value-based incentives, rebates and pricing
schemes that create win/win relationships with our partners.
Outcomes
• Increased loyalty and positive feedback in the market
for ActivHeal®, with 96% of clinicians viewing the
provision of educational materials as important to them
and 100% indicating that they benefited greatly from it.
• ActivHeal® nominated for a Marketing Excellence Award.
• Investment in technology to improve our
communication with partners and clinicians.
• Growing global network and Surgical Business Unit,
supported by investment in technology to improve
communication with partners and clinicians.
Partner and Clinician Insight
Engagement in 2019
• Partner and clinician insight is crucial to decision making
and continuous improvement of our products and
business. 2019 engagement initiatives included:
– Increased our understanding of the key reasons that our
products are chosen;
– Engaged an extensive survey through an industry-leading
journal to gain insight as to how our ActivHeal® brand is
perceived by clinicians;
– Worked with the NHS on a Clinical Evaluation Team
Report in order to enhance our ActivHeal® brand and raise
awareness of the benefits we can provide by making ‘best
in class’ packaging;
36 Advanced Medical Solutions Group plc Annual Report 2019
– Engaged clinicians more directly, including support and
participation in industry clinician groups;
– Conducted ‘Voice of Customer’ and focus groups to review
products and ideas to provide feedback on a regular basis;
– Leveraged our ‘best in class’ LiquiBand® evaluation support
tools to train and support evaluation and implementation of
our products;
– Provided masterclasses and training, and allowed Key
Opinion Leaders the opportunity to learn our products;
and,
– Sessions with key partners and clinicians, which allow us to
receive feedback directly from them.
• In 2020 we will establish clinician/advisory panels focusing
on woundcare and microbiology to identify technologies and
patient and clinical need.
Outcomes
• Aligned our pipeline of new products and value-added
rebates, services and customer support programs
with partners.
• Results from feedback received has led to a review
and further enhancements and marketing of our
ActivHeal range.
Patient and Customer Feedback
Engagement in 2019
• Held Quarterly Business Reviews (QBRs) with all major
partners to solicit market and product feedback.
• Customer feedback is used in a number of ways:
– Focus groups to gain insight on our launches to market;
– Issues raised by partners and clinicians at Clinician Groups
is shared with our Procurement and Commercial teams for
planning future design and specification;
– Complaints are analysed to agree actions to resolve
root causes.
Outcomes
• Refined internal policies, processes and procedures
to take into account partner and clinician feedback.
• Enhance product design to improve user experience.
Industry Bodies
Engagement in 2019
• We continue to work closely with industry bodies and
charities working in our markets, such as the European Hernia
Society, International Bariatric Club, The Lindsay Leg Club and
Tissue Viability Society. This enables us to keep informed on
any trends or changes that will affect partners or clinicians,
and also gives us a voice to contribute to the sector.
Engaging with our Supply Chain
Ongoing supplier relations
Engagement in 2019
• The Chief Executive Officer, Chief Operations Officer and
Group Purchasing and Supplier Quality Manager meet with
suppliers and sub-contractors to ensure that: (i) we are
receiving the level of service expected; (ii) we have contracted
on favourable commercial terms, locally and nationally;
and (iii) any issues or challenges they are facing can be
considered and suitable solutions found.
• During the year, our Group Purchasing and Supplier Quality
Manager attended a networking event to meet suppliers
and material innovators.
• Our Sourcing and Procurement Department held
business briefings for new and existing subcontractors
to ensure that they are aware of our plans and can
provide performance feedback.
• Numerous calls and face-to-face meetings were held with
a key supplier who experienced a technical failure at their
sterilisation plant.
Outcomes
• Ongoing discussions with suppliers have led to
mutually beneficial arrangements improving costs and
the consistency of supply of materials, and reducing
lead times.
• Informed the business of innovative and alternative
technologies available for possible future adoption.
• Keeps our sub-contractors and supply chain up to date
in respect of any changes to our working practices
as appropriate.
• Key sterilisation supplier committed to significant
investment at a key UK site to improve the service
provided to AMS as one of their key customers.
Research and Development
Engagement in 2019
• We invite all of our supply chain to bring product and service
innovations and improvements to our attention.
Outcomes
• Development of a new product through to launch
by working with an existing supplier and utilising their
knowledge and network.
• Aim to launch two new products per year. A pipeline is
in place to achieve this goal in the coming years.
Payment terms
Engagement in 2019
• We are fully aware of the importance to both the Group
and our sub-contractors and suppliers of complying with
all payment terms.
• We have complied with the requirements to disclose
our payment terms as required by Section 3 of the Small
Business, Enterprise and Employment Act 2015.
Outcomes
• Our payment practices compare favourably
with industry norms.
Advanced Medical Solutions Group plc Annual Report 2019 37
Financial StatementsGovernanceCompany OverviewStrategic Report Stakeholder Engagement
continued
Minimising our Environmental Impact
Environmental Review of 2019
It is the Group’s policy to abide by all laws, directives and regulations relevant to its field of operations and we aim to minimise
the effects of our operations on the environment. We are required to comply with the Streamlined Energy and Carbon Reporting
(SECR) regulations in 2020. In 2019, we measured our environmental impact in line with the SECR requirements and planned the
actions we need to implement in 2020. Our high-level findings are set out below:
Environmental Impact
During 2019 AMS emitted
2,562 tonnes of CO2e into
the atmosphere
Communication is key
2020 is a key year as AMS needs to
comply with SECR
2020 targets need
to be agreed
AMS has a base line figure to meet
SECR, it now needs to meet the
criteria of SECR
Future Sustainability
We need to commit to taking
action on energy and
environmental activities
Change of mindset
Public expectations are changing.
AMS must react to this
38 Advanced Medical Solutions Group plc Annual Report 2019
Our focus
Our focus was on the areas of largest environmental impact,
including manufacturing sites, warehouses, R&D sites and
offices. Acquisitions completed in 2019 are not included in the
data. Our emissions reporting represents our core business
operations and facilities which fall within the scope of our
Consolidated Financial Statements. Primary data from energy
suppliers has been used wherever possible.
KG CO2e by scope 2019 (AMS Group)
We report our emissions in three scopes:
Scope 1 – All Direct Emissions from the activities of
an organisation or under their control, including fuel
combustion on site such as gas boilers, fleet vehicles and air-
conditioning leaks.
Scope 2 – Indirect Emissions from electricity purchased and
used by the organisation. Emissions are created during the
production of the energy eventually used by the organisation.
Scope 3 – All Other Emissions from activities of the
organisation, occurring from sources that they do not own
or control.
Location-based emissions are calculated in compliance with the
factors published by BEIS/DEFRA for 2019. In 2020 we will be
reviewing ways to offset carbon generation.
2,562,342
Scope 1 45%
Scope 2 52%
3%
Scope 3
AMS Group (2019 emissions by footprint/scope)1
Footprint
Premises
Employees
Electric
Water
Waste
Sub total
Travel
Company Vehicles
Sub total
Other – Materials used
F-gas losses
Sub total
Total
Scope 1
Scope 2
Scope 3
465,928
1,322,642
9,998
70,096
406,308
287,370
GHG emissions
sub / total
(kg C02e)
465,928
1,322,642
9,998
70,096
1,868,664
406,308
406,308
287,370
287,370
1,159,606
1,322,642
80,094
2,562,342
1 Data compiled under the requirements of the Streamlined Energy and Carbon Reporting Framework (SECR).
Advanced Medical Solutions Group plc Annual Report 2019 39
Financial StatementsGovernanceCompany OverviewStrategic Report Stakeholder Engagement
continued
A breakdown of the KG CO2e per unit and per
£k sales at our sites combined, together with a
summary of the key data shows:
• Average KG CO2e emitted from all reported activity was 0.04
KG CO2e per unit sold.
• Average KG CO2e emitted per £K of sales from all reported
activity was 25.14 KG CO2e.
• Business travel by car accounted for 16% of all KG
CO2e reported.
• Service use (Gas & Electric) followed by business miles are
the biggest generation of emissions equalling 70%.
• Waste accounts for 3% of the total reported.
• Indirect emissions was the biggest area of KG CO2e
generation accounting for 52%.
KG CO2e per unit produced (2019)
0.040
0.030
0.020
0.010
0
Winsford
Plymouth
EU sites
The Future – what we will do
• Report and feedback on our environmental progress
KG CO2e per £K sales (2019)
each year.
• Set targets to reduce environmental burden through effective
energy and environmental management.
• Investigate and implement (where appropriate) energy and
environmental initiatives that will reduce our burden.
• In line with AMS’s own environmental and energy
commitments, we will incorporate the United Nations
Sustainable Development Goals that can be made applicable
to our business (see below).
• Look to reduce essential service use (Electric & Gas) as this
is our single biggest resource and accounts for 70% of our
reported environmental figures. AMS will aim to reduce by
10% over 2020 with further reductions year on year planned.
• Look at business travel as this accounts for 16% of emissions
and with modern communication methods could be area to
reduce environmental burden.
40
35
30
25
20
15
10
5
0
Winsford
Plymouth
EU sites
AMS site
Group average
AMS site
Group average
Above: United Nations Sustainable Development Goals being incorporated by the Group.
40 Advanced Medical Solutions Group plc Annual Report 2019
Engaging with our Communities
Volunteering/local community
Engagement in 2019
• We encourage all of our employees to participate in our
engagement with the community. We took part in Passion for
Learning, a caring and inclusive organisation passionate about
using fun and imagination to boost children’s confidence
and self-esteem, where our Chief Executive Officer and R&D
Department attended in person. We also provided volunteer
marshals for the St Luke’s Hospice Midnight Walk, our
dedicated charity at the Winsford site. Among the other good
causes we supported in 2019 were being involved in local
schools and providing HR guidance for a local charity.
• We participate in the local communities, through events such
as those above and through charitable giving outlined below
and also through other activities, such as membership of the
Winsford 1-5 Group, for businesses local to the Winsford Site.
Outcomes
• Employees gained a better understanding of the needs
of their local community and the work our chosen
charities carry out.
Charitable giving
Engagement in 2019
• We believe that it is important to support charitable causes,
both locally and nationally. We have therefore allocated
funding in the form of matching funds (with an appropriate
financial cap) raised by each site and individuals for their
chosen charities.
• In the UK we have a long-standing relationship with
St Luke’s Hospice, who provide palliative care to local
people, and raised funds for Jeremiah’s Journey, who
provide free support to children, young people and their
parents and carers who have, or are about to experience,
the death of someone special. We also support a number
of charities local to sites across the Group, sponsor local
community events and sports teams, and employees and
close family members of employees who participate in
sporting teams or activities, where appropriate.
Outcomes
• Substantially increased focus on charities
and charitable giving
• Increased focus on employee volunteering
Above: Charities selected by UK sites in 2019.
Advanced Medical Solutions Group plc Annual Report 2019 41
Financial StatementsGovernanceCompany OverviewStrategic Report Outcomes
• Ability to be more efficient in obtaining product
renewal certificates and well prepared ahead of the
MDR deadline with better understanding and positive
relationships with notified bodies, potentially providing a
competitive advantage to the Group.
• Gaining an increased understanding of regulatory
requirements during the MDR transition period led to
improved regulatory guidance and service to partners
and customers.
• Improved success on new product approvals
moving forward.
• Robust Group-wide regulatory strategy.
Stakeholder Engagement
continued
Engaging with our Regulators
Engagement on 2019
• The Board is committed to ensuring that it is open and
transparent with regulators and look to work closely
with them.
• We work closely with our notified bodies to ensure that
our products are approved as quickly as possible. This has
been critical in the last two years following the need to
renew product certificates Group-wide and the upcoming
introduction of the Medical Device Regulation (MDR).
• Work with the Notified Bodies in 2019 lead to monthly
meetings, clear contacts and lines of communication, and
attending workshops to help both sides understand the
enhanced requirements of the MDR.
Effect of engagement with
Regulators on Board decisions
• Broader understanding of MDR and other legislation
affecting the Group ensures that Board decisions are
based on the full understanding of the environment in
which we operate and reference the five-year strategy and
post-MDR landscape.
• The Board has significantly increasing resources
available to invest in regulatory affairs following a review
of the regulatory strategy and increased exposure to
regulatory issues.
• The Board better understands the key drivers for the
Notified Bodies and Competent Authorities we certify with,
resulting in more informed decisions.
42 Advanced Medical Solutions Group plc Annual Report 2019
Business Conduct
The Group aims to maintain a reputation for high standards of business conduct. We aim to comply with, and in many
cases exceed, the requirements for an AIM-Listed Company. This is highlighted by the Group policies outlined below in
the Non-Financial Reporting Statement. In particular, we have an increased focus on our impact on the environment, with
more comprehensive reporting across the Group and voluntary disclosures on our environmental impact. The Engagement
with Stakeholders section on pages 30 to 43 further outlines our commitments to our investors, customers, communities,
environment and supply chain, and builds on our aim to act as a good corporate citizen.
In addition we follow the 2018 UK Corporate Governance Code (Code), which is the most comprehensive and stringent
governance code in the UK. Reporting against the Code ensures we maintain our high standards of Corporate Governance
and act in the way our stakeholders would expect.
Non-Financial Reporting Statement
This Annual Report contains the information required to comply with the Companies, Partnerships and Groups (and Non-
Financial Reporting) Regulations 2016, as contained in sections 414CA and 414CB of the Companies Act 2006. The table
below provides key references to information that, taken together, comprises the Non-Financial Reporting Statement
for 2019.
Reporting requirement
Group Policies that guide our approach
Environmental matters
– Group Environmental Policy
– Ethical Sourcing Policy
Employees and social
matter
Respect for
human rights
Anti-corruption and
anti-bribery matters
– Group Equality Policy
– Community Support
– Health and Safety Policy
– Group Environmental Policy
– Ethical Sourcing Policy
– Anti-Slavery Policy
– Ethical Sourcing Policy
– Group Anti-Bribery Policy
– Group Gift Policy
– Group Sanctions Policy
– Group Whistleblowing Policy
– Ethical Sourcing Policy
Information and risk management,
with page references
Minimising our Environmental Impact, pages 38 to 40
Our Business Model, pages 4 and 5
Risk Management, pages 44 to 47
Minimising our Environmental Impact, pages 38 to 40
Our Business Model, pages 4 and 5
Risk Management, pages 44 to 47
Engagement with Stakeholders, pages 30 to 43
Our Strategic Pillars, pages 12 and 13
Corporate Governance Report, pages 52 to 57
Audit Committee Report, pages 58 to 61
Risk Management, pages 44 to 47
Description of the business model
Description of the principal risks in relation to the above matters, including
business relationships, products and services likely to affect those areas of
risk, and how the company manages the risks
Our Business Model, pages 4 and 5
Risk Management, pages 44 to 47
Non-financial key performance indicators
Key Performance Indicators, pages 16 and 17
Advanced Medical Solutions Group plc Annual Report 2019 43
Financial StatementsGovernanceCompany OverviewStrategic Report Risk Management
Directors and SMT members are reviewed to ensure progress
is being made with risk actions and mitigation plans.
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 Board has applied principles 28 and 29 of the 2018
UK Corporate Governance Code (Code) by establishing a
continuous process for identifying, evaluating and managing
the significant risks the Group faces, as outlined on page 45,
and for determining the nature and extent of the significant risks
it is willing to take in achieving its strategic objectives.
We believe that the policies, procedures and monitoring
systems that are in place are sufficient to effectively manage
the risks faced by our business.
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, and is carried out In accordance
with the relevant provisions set out in the Code.
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, external auditor and the Board
twice annually. The plans and actions assigned to the Executive
Key Roles and Responsibilities
Board
• Overall responsibility for corporate strategy,
governance, performance, internal controls
and Risk Management Framework
• Identification, review and management of
• Defining the Group’s appetite for risk
• Assessing the effectiveness of the risk
management processes adopted across
the Group
identified Group strategic risks
• Challenging the content of the Risk Register
Audit
Committee
• Assessing the effectiveness of the risk
• Monitoring compliance with internal
management processes adopted across
the Group
control systems and co-ordinating Internal
Audit arrangements
• Ensuring compliance with financial and
• Monitoring and oversight of internal
reporting legislation, rules and regulations
and ensuring the Annual Report is fair,
balanced and understandable
and external audit
• Management of the business and delivery
• Challenging the appropriateness and
Senior
Management
Team
of strategy
• Identification and monitoring of the key
risk indicators and taking timely action
where appropriate
• Ensuring implementation of the Group’s
actions and mitigation plans required to
manage risk
adequacy of action plans to mitigate risk
• Analysing the aggregation of risk across
the Group
• Provision of cross-functional resource to
effectively mitigate risk
y
t
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o
p
s
e
r
g
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r
o
p
e
r
d
n
a
g
n
i
r
o
t
i
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o
M
Business
Units and
Other
Functions
• Execution of the delivery of the actions
• Identification and reporting of strategic risks
associated with managing risk
to the Senior Management Team
• Timely reporting on the implementation and
• Implementation of a risk management
progress of agreed action plans
approach which promotes the ongoing
identification, evaluation, prioritisation,
mitigation and monitoring of operational risk
44 Advanced Medical Solutions Group plc Annual Report 2019
y
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n
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o
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t
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m
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p
m
l
I
Risk Management Model
C o r p o rate Governance
Identify
Identify risks
Assess existing
controls
Analyse
Score risks
Assess mitigated
factors
Score mitigated
risks
Risk
Management
Process
Monitor
and Report
Monitor execution
of actions
Manage
Assign responsibility
Develop action plan
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 and the Board review the Risk Register formally at least
twice a year, assessing whether the risks are still the most 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 and
risk mitigation plans and progress are reported to and reviewed
by the Board, following the SMT’s bi-annual review of the
Group’s Risk Register.
Internal Audit
Additionally, the Board is supported by a programme of
Internal Audits. Internal Audit reports to the Audit Committee
on the progress of control or process improvements following
Internal Audit recommendations.
Risk Heat Map
While we continue to monitor and manage a wider range of risks, the risk map summarises those risks considered to have the
greatest potential impact if they were to materialise.
Principal Risks
1 Market share/new markets
6 Brexit
2
Intellectual property
7 Regulatory
3
Industry consolidation/
loss of key business
4 Increased competition
5 Acquisitions/integration
Risk Size
8 Single source supply
9 Cyber-risk
10 Talent management
11 Forex
Likelihood
Large
Medium
Small
High
Low
Trend (net position
of risk vs FY2018)
Increase
from 2018
No
change
Decrease
from 2018
S T R ATEGY
Strategic
2
5
3
4
6
1
7
8
9
10
al
n
O peratio
11
F
i
n
a
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c
i
a
l
Advanced Medical Solutions Group plc Annual Report 2019 45
Financial StatementsGovernanceCompany OverviewStrategic Report
Risk Management
continued
Principal Risks and Uncertainties
All of the Principal Risks and Uncertainties are listed in the following pages, which includes a link to the strategy through the
strategy icons.
Strategic Risks
Risk
Potential Impact
Key Controls and Mitigating Factors
Status
1. Market share
declines/developing
new markets is
slower than
expected
• Income shortfall
• Effective alignment of strategy to consider the market changes and
• Loss of Woundcare partners
promote quality and cost savings
• Cost increase
• Loss of
competitive advantage
• New territories for revenue growth identified and developed
• Continued development of new products and projects to deliver
growth to provide differentiation
• Marketing strategy to support partners and products
Increased
risk
Increased risk for
the woundcare
market as a whole
and LiquiBand®
in the US
2. Lack of
innovation/
insufficient
focus on protection
of intellectual
property (IP)
3. Industry
consolidation/loss
of business at key
account level
• Loss of business
• Pipeline of new products/technologies identified and prioritised
• Loss of market share
• Implementation of improved Product Development Process and
No
change
• Poor return on
R&D investment
• Misidentification of new,
competitive technology
• Commercial value of
Project Management Office to ensure R&D projects progress to plan
and action is taken if necessary
• Patented technologies reviewed for inclusion in new developments
• Strong links with partners, including Universities, to reduce the risk of
missed opportunities
products not maximised
• Investment in clinical research, personnel and symposia to foster new
• Potential patent
infringement
approaches, and Key Opinion Leaders
• Consideration of licensing technology
• IP portfolio regularly reviewed and strong IP enforcement
• Early review of IP portfolios of acquisitions
• Income shortfall
• Reduced reliance on any one customer. Our biggest customer
represents 12% of the Group’s revenue
• All customers have contracts with agreed termination clauses
• Evaluation of opportunities to broaden reach into new markets,
potentially by developing partnerships across numerous jurisdictions
• Unique products protected by know-how and/or IP
• Evaluation of new claims to support existing product range
• Development and launch of new products to secure existing
customers and drive future growth
Increased
risk
US LiquiBand®
business fell in
2019 and there
is a competitive
woundcare market
4. Increased global
competition
• Income shortfall
• Full-service offering including strong regulatory and quality assurance,
product development, product differentiation and clinical support to
mitigate a pure cost of supply proposition
No
change
• Contracts have agreed set minimas which allow terms to be
renegotiated or agreements terminated
• Diversified approach reduces the impact on any one project, partner
or product
5. Making the wrong
or no acquisition/
poor integration
• Impact on Group
• Strategy set and M&A objectives defined
performance, revenue and
market capitalisation
• Reputational loss
• Advisors appointed
• Detailed market intelligence and identification of targets
• Extensive due diligence process established
• Integration plan in place with key milestones
6. Brexit
Implications
• Higher costs
• Customs delays
• Comprehensive supply chain review completed
• Awarded Authorised Economic Operator status to allow quicker
• More complicated/longer
customs clearance
product approvals
• Applied for HMRC approval for import duty recovery (cost saving
• Longer lead times
for customers
• Reduced client willingness
to develop business in
the UK
and reduce duty risk post Brexit)
• Transferred certificates to BSI Netherlands
• Inventory levels increased at all sites
• Appointed EU Authorised Representative
• Liaised with partners to mitigate supply/customs issues
No
change
Decreased
risk
AMS is well prepared
for Brexit
46 Advanced Medical Solutions Group plc Annual Report 2019
Key to strategic linkage in this report
Growth
Innovation
Operational
Excellence
Culture
Operational Risks
Risk
Potential Impact
Key Controls and Mitigating Factors
7. Regulatory risk
• Inability to supply product
• Stringent regulatory regime with an experienced team
• Product launches delayed
• Clear 3–5 year regulatory strategy in place to manage MDR
• Unable to keep
existing claims
• Loss of customer,
revenue and reputation
• Third-party sourcing as contingency for regulatory delays
• Strong regulatory pathway ensures that the increased regulatory
requirements are met to gain approvals
• Work with partners and distributors where they have local expertise
8. Vulnerability to
single source supply
• Inability to supply specific
products and exposed to
price increases
• Increased cost of supply
• Strictly controlled Quality Management System
• Dual source key components wherever possible
• Strong Vendor Risk Assessment process
• Hold levels of inventory to prevent operational issues arising
from delays
• Business Interruption Insurance to cover significant interruption
of supply
9. Cyber-Risk
• Systems and
data compromised
• Loss of sensitive data
• Loss of reputation
• Implementation of audit and testing recommendations
• IT administrator access levels tightened
• Compulsory Cyber Security training for all employees
• Ongoing user education
10. Talent
management
• Loss of key staff
• Insufficient talent pool for
• Succession and talent management process at SMT and mid-
management levels to identify talent gaps and high potential
succession planning
• Designed and developed a better grade system, allowing individuals to
clearly see a career path
• Integrated total reward, performance and culture strategy to drive
attraction, retention and employee engagement
• Care, Fair, Dare culture embedded across the Group
• Introduced better coaching and mentoring across SMT to aid
personal development and engagement across teams
Financial Risks
Risk
Potential Impact
Key Controls and Mitigating Factors
11. Forex exposure
• Loss of income
• Established treasury policy on forex exposure
• Shortfall in profit
• Robust forward forecasting of currency cash flows
• Market expectations missed
• Aim to hedge 80% of forecast net cash flows for the next 18 months
Status
No
change
No
change
No
change
No
change
Status
No
change
Since 31 December 2019, COVID-19 has become a key risk. At the time of printing this Annual Report we are managing this
risk accordingly. Details on COVID-19 have been outlined in the Highlights (page 1), Chairman’s Statement (page 8), and Chief
Executive’s Q&A (pages 9 to 11). Going concern has been addressed on page 56. More information, where necessary, has been
provided in press releases and market announcements.
The Strategic Report has been prepared solely to provide information to shareholders to assess how the Directors have performed
their duty to promote the success of the Group.
The Strategic Report contains certain forward-looking statements. These statements are made by the Directors in good faith based
on the information available to them up to the approval of this report and such statements should be treated with caution due to
the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.
The Group Strategic Report, which encompasses pages 4 to 47, was approved by the Board of Directors and signed on its behalf by:
Eddie Johnson
Company Secretary
7 May 2020
Advanced Medical Solutions Group plc Annual Report 2019 47
Financial StatementsGovernanceCompany OverviewStrategic Report
Board of Directors
Peter V Allen
Chris Meredith
Eddie Johnson
Non-Executive Chairman
Chief Executive Officer
Chief Financial Officer and
Company Secretary
A
R
N*
N
C
Biography:
Peter 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, six years as
Chairman (2007–2013) of ProStrakan
Group plc (Interim CEO 2010–11),
three years as Chairman of Proximagen
Neurosciences plc (2009–12) and
five years as Chairman at Diurnal
plc (2015-2020). He is a qualified
Chartered Accountant.
Term of office:
Peter Allen was appointed as Non-
Executive Chairman of the Group in
January 2014.
Biography:
Chris Meredith 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 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.
Chris has previously held senior positions
at Smiths Industries, Cardinal Health,
Banner Pharmacaps, and Aster Cephac.
He was appointed Managing Director
of Advanced Woundcare in February
2008, became Chief Operating Officer in
January 2010 and was appointed as Chief
Executive Officer in January 2011.
Term of office:
Chris Meredith was appointed Group
Chief Executive Officer in January 2011.
Biography:
Eddie Johnson joined AMS in October
2011 and was appointed Group Financial
Controller in November 2012. Prior to
this he gained a first class degree in
Maths and Computer Science from
Keele University in 1993 and qualified
as a Chartered Accountant in 1996.
Since moving into industry in 1996 Eddie
has held a number of senior finance roles
in various industry sectors including, more
recently, Head of Commercial Finance
at Norcros plc and Western European
Financial Controller for Sumitomo
Electrical Wiring Systems.
Term of office:
Eddie Johnson was appointed as Chief
Financial Officer and Company Secretary
in January 2019.
Independent:
Not applicable.
Independent:
Not applicable.
Independent:
Not applicable.
External appointments:
Peter is currently the Non-Executive
Chairman of AIM listed Clinigen plc and
Abcam plc, together with privately owned
Oxford Nanopore Technologies Limited
and Istesso Limited.
External appointments:
Chris Meredith was appointed as a
Non-Executive Director of Creavo
Medical Technologies Ltd in May 2018.
Creavo Medical Technologies Ltd is a
UK-based, privately-held medical device
Company that is developing innovative
techniques and in no way conflicts
with AMS.
External appointments:
Not applicable.
Key
* Denotes Chairman
C Company Secretary
A Audit Committee
R Remuneration
Committee
N Nomination
Committee
48 Advanced Medical Solutions Group plc Annual Report 2019
Penny Freer
Steve Bellamy
Peter M Steinmann
Senior Independent
Non-Executive Director
Non-Executive Director
Non-Executive Director
A
R*
N
A*
R
N
A
R
N
Biography:
Penny Freer joined the Board of AMS in
March 2010. 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.
Biography:
Steve Bellamy was formerly an Executive
Director of Sherwood International
plc and Brierley Investments’ London
operations. He has also held Non-
Executive Directorships and advisory roles
in a wide range of businesses, many of
which were in the technology sector,
and was most recently a Non-Executive
Director at Michelmersh Brick Holdings
plc. He is a New Zealand qualified
Chartered Accountant.
Biography:
Peter Steinmann 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.
Peter has held Directorships prior to
joining AMS. Having worked throughout
Europe and North America, he has
extensive knowledge of the global
medical devices market.
Term of office:
Penny Freer was appointed as Senior
Independent Non-Executive Director of
AMS in March 2010.
Term of office:
Steve Bellamy was appointed as
Non-Executive Director of AMS in
February 2007.
Term of office:
Peter Steinmann was appointed as Non-
Executive Director of AMS in July 2013.
Independent:
Yes.
Independent:
Yes.
Independent:
Yes.
External appointments:
Penny Freer is Chairman of AP Ventures
LLP, a non-executive director of
Empresaria Group plc, Crown Place
VCT plc and The Henderson Smaller
Companies Investment Trust plc and a
founding partner of corporate advisory
business, London Bridge Capital Partners.
External appointments:
Steve Bellamy is currently a Non-
Executive Director at Caffyns plc.
External appointments:
Peter is currently a Non-Executive
Director of Calciscon AG, (in-vitro
diagnostics), and a Director of Steinmann
International GmbH.
Advanced Medical Solutions Group plc Annual Report 2019 49
Financial StatementsGovernanceCompany OverviewStrategic Report
Senior Management
Simon Coates
Rose Guang
Alan Richardson
Cathy Tomlinson
Group Quality
Assurance/Regulatory
Affairs (QA/RA)
Director
Biography:
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 Six Sigma
Master Black Belt.
Chief
Operations Officer
Group HR Director
Biography:
Alan joined AMS in
November 2018 as
Chief Operations Officer.
Alan graduated with a B Eng
honours degree in Chemical
Engineering from Bradford
University. Alan joined
Yorkshire Chemicals as a
Chemical Engineer and
has since had 25 years of
experience in the Medical
Device, Pharmaceutical,
Contract Research and
Chemical Industries
having worked for both
Bristol-Myers Squibb and
Convatec. Prior to joining
AMS, Alan spent 11 years
at Convatec and held a
number of roles including
Director, New Product
Integration; Vice President
Quality and Operations and
Vice President of Advanced
Woundcare Operations.
Biography:
Cathy joined AMS in May
2017 as Group HR Director.
Cathy graduated with a
degree in Business Studies
from Liverpool John Moores
University and completed
a Masters in Business
Administration at Strathclyde
University. She spent five
years working for Amazon
and was head of HR for their
final mile delivery business
(which was a start-up
business for Amazon).
Prior to this Cathy held
senior HR roles for Xerox –
supporting the outsourcing
of managed services
from government and
blue-chip organisations to
Xerox and Emirates Airline,
based in Dubai, where she
supported the growth of the
airline in new geographies
and acquisitions.
Group IS Manager
Biography:
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 fluoropolymer 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.
50 Advanced Medical Solutions Group plc Annual Report 2019
Pieter van Hoof
Becky Walmsley
Jeff Willis
Group
Operations Director
Business Unit Director,
Woundcare
Business Unit Director,
Surgical
Biography:
Becky joined AMS in July
2015 as Business Unit
Director of OEM and Bulk
Materials (now Woundcare).
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.
Biography:
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.
Biography:
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
Director of the Surgical
Business Unit. He resides
in the US.
Advanced Medical Solutions Group plc Annual Report 2019 51
Financial StatementsGovernanceCompany OverviewStrategic Report Corporate Governance Report
“The Group has focused on the new
corporate governance rules and the
important matter of Board succession.”
Peter Allen
Chairman and Chair of the Nomination Committee
Chairman’s Introduction to
Corporate Governance:
The Board is committed to the principles of good corporate
governance which encompass leadership, effectiveness,
accountability, remuneration and shareholder relations.
Our shares are quoted on the AIM market and are subject to the
AIM Admission Rules of the London Stock Exchange.
For the year ended 31 December 2019, Advanced Medical
Solutions Group has chosen to comply with the 2018 UK
Corporate Governance Code (Code), which was updated for
financial years beginning on or after 1 January 2019. The Code
sets a higher standard than the alternative Quoted Companies
Alliance (QCA) Code and this aligns with our corporate
governance principles. We comply as far as is practicable and
appropriate for a public Company of the Group’s size. We set
out important details of our work during the year on the
following pages.
All statements made are made against the Code.
Whilst exercising our governance responsibilities, the Group
aims to create value and to honour our responsibilities to our
key stakeholders, further details of which are outlined in our
Engagement with Stakeholders as set out on pages 30 to 43.
In this report, we have provided additional insight into our
approach to board succession. From our engagement with
shareholders and proxy firms, Glass Lewis and ISS, we believe
this will be welcomed.
Furthermore, in line with Code Provision 24 and general best
practice, I have stepped down from the Audit Committee
with effect from 6 May 2020. When invited, I will attend Audit
Committee meetings as the Board considers my extensive
accounting experience adds value to the discussion.
In addition, I have recently stepped down as Chairman of
Diurnal plc in order to meet the corporate governance
requirements regarding Board appointments.
Succession planning
AMS has a Board which functions well.
In accordance with the Code, the Group intends to refresh the
composition of the Non-Executive Directors. This process will
start at the 2020 AGM and over the next 3 years we will ensure
that new non-executive directors are appointed allowing for a
smooth and effective handover, particularly with respect to the
Chairmanships of the Audit and Remuneration Committees.
52 Advanced Medical Solutions Group plc Annual Report 2019
Peter Steinmann will retire from the Board this year and will
not put himself forward for re-election at the upcoming AGM.
The Board would like to thank Peter for his contribution over
the last six and a half years.
2020 AGM
In 2020 we will put forward all the Directors for re-election in
accordance with Code Provision 18, except for Peter Steinmann
as outlined above.
Steve Bellamy and Penny Freer, despite their tenures in excess
of the nine-year limit outlined in Code Provision 10, are both
considered to be independent of character and judgement,
qualities which are exhibited through their contribution to
Board meetings, and their Chairmanship of the Audit and
Remuneration Committees respectively. In addition, both Steve
and Penny have extensive experience with the Company and
undertake ongoing training and development to maintain
relevant knowledge and expertise. The Board rigorously self-
assesses their performance, with a focus on independence
and commitment and believes that they will continue to add
value. The Company, therefore, complies with Code Provision
24, which requires there to be at least two independent Non-
Executive Directors.
Peter Allen, Steve Bellamy and Penny Freer own shares in
the Company as shown on page 80. These holdings have
been highlighted to shareholders and are small. They are not
considered to impact Non-Executive Director independence
under Code Provision 10.
Role of the Board
The role of the Board is to establish the vision and strategy for
the Group, to deliver shareholder value and 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 the Chief Executive Officer of the Company.
The roles are clearly set out in writing and reviewed by the Board.
Role
Chairman
Name
Peter Allen
Responsibility
• Leadership and management of the Board
• Setting the Board’s agenda, style and tone of discussions
• Ensuring the Board’s effectiveness in all aspects of its role
• Working closely with the Chief Executive Officer on developing
the Group’s strategy, and providing general advice and support
• Facilitating active engagement by all members
• Participating in shareholder communications
• Promoting high standards of corporate governance
Chief Executive Officer
Chris Meredith
• Managing the Group’s business
Senior Independent Director
Penny Freer
Non-Executive Directors
Steve Bellamy
Peter Steinmann
• Developing Group strategy for consideration and approval by
the Board
• Leading the Senior Management Team (SMT) in delivering the
Group’s strategic and day-to-day operational objectives
• Leading and maintaining communications with all stakeholders
• Acting as an intermediary for other Directors when necessary
• Available to meet with shareholders and aid communication of
shareholder concerns when normal channels of communication
are inappropriate
• Chairing meetings of Non-Executive Directors if, and
when required
• All responsibilities of a Non-Executive Director as outlined below
• Constructively challenging and contributing to the development
of Group strategy
• Monitoring the integrity of financial information, financial controls
and systems of risk management to ensure they are robust
• Reviewing the performance of Executive Management
• Formulating Executive Director remuneration
The Non-Executive Directors
Each of the Non-Executive Directors is 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 52. The Chairman,
Peter Allen, was considered independent on his appointment.
The Operation of the Board
The Board has the responsibility 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 business and financial
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.
Advanced Medical Solutions Group plc Annual Report 2019 53
Financial StatementsGovernanceCompany OverviewStrategic Report Corporate Governance Report
continued
Matters considered by the Board in 2019 included:
• Directors’ responsibilities
• Finance and operations review
• Annual budget
• Strategic plans
• Acquisition strategy
• Potential merger and
acquisition targets
• Risk review
• Health, Safety and Environment
• Impact of Brexit
• Board evaluation
• Gender Pay Gap Reporting
• UK Corporate Governance Code
• Major capital expenditure
• Reports from the Board Committees
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. Steve Bellamy, Penny Freer and Peter Steinmann are members of the Audit, Remuneration and Nomination
Committees. Peter Allen is a member of the 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 nine times in 2019. 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 2019:
Board Member
Peter Allen
Steve Bellamy
Penny Freer
Chris Meredith
Peter Steinmann
Eddie Johnson
* By invitation.
Board
Audit Committee
Remuneration Committee
Nomination Committee
9/9
9/9
9/9
9/9
9/9
9/9
3/3
3/3
3/3
3/3*
3/3
3/3*
3/3
3/3
3/3
3/3*
3/3
N/A
1/1
1/1
1/1
1/1
1/1
N/A
All Directors have access to the advice and services of the Company Secretary and Deputy 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.
Board Composition
The Board comprises the Non-Executive Chairman, two Executive Directors and three Non-Executive Directors. The Directors’
profiles appear on pages 48 and 49 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.
Diversity
We recognise the importance of diversity at Board level and our Board members comprise different nationalities with a wide
range of skills and experiences from a variety of business backgrounds. The female representation on the Board at 31 December
2019 was 16.6%. The Board is aware of the Hampton-Alexander target of 33%, and will take this into consideration during
succession planning.
The Senior Management Team also has diverse experience. Its members comprise several nationalities and female representation
was 33%. It is felt that this ratio is acceptable at this time, and will be kept under review.
54 Advanced Medical Solutions Group plc Annual Report 2019
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.
Further details of their terms and conditions are summarised in the Remuneration Report on pages 73 and 74 and the terms and
conditions of appointment of the Non-Executive Directors are available at the Company’s Registered Office.
Tenure Chart
The size of the Board during 2019 was six and the tenure is shown below. The Company follows the Code as far as is practicable.
The explanations regarding the tenures and independence of the Board members is outlined on page 52.
1 year
2 years
3 years
4 years
5 years
6 years
7 years
8 years
9+ years
Peter Allen
Steve Bellamy
Penny Freer
Chris Meredith
Peter Steinmann
Eddie Johnson
Date of
appointment
Date of next
election or
re-election
04-Dec-13
10-Jun-20
01-Feb-07
10-Jun-20
01-Mar-10
10-Jun-20
03-May-05
10-Jun-20
01-Jul-13
Retiring
01-Jan-19
10-Jun-20
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 2019 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. In 2020 all of the Directors will be put forward for re-election in accordance
with Code Provision 18. The Notice of AGM provides details of those Directors seeking re-election.
Remuneration Committee
The Remuneration Committee comprises Penny Freer (Chairman), Peter Allen, Steve Bellamy and Peter Steinmann as laid
out below:
Name
Penny Freer
Steve Bellamy
Peter Allen
Chairman (since 25 June 2010, member since 1 March 2010)
Member (since 20 February 2007)
Member (since 4 December 2013)
Peter Steinmann (stepping down at 2020 AGM)
Member (since 1 July 2013)
Advanced Medical Solutions Group plc Annual Report 2019 55
Financial StatementsGovernanceCompany OverviewStrategic Report
Corporate Governance Report
continued
The Committee has Terms of Reference that are reviewed at least annually, were updated at the end of 2018 and are available to
view on the Company’s Website ‘www.admedsol.com’. The Deputy Company Secretary acts as Secretary to the Committee.
The Remuneration Committee met three times in 2019. 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 grants of shares under the Group’s
Long-Term Incentive Plan (LTIP). The report of the Committee is included on pages 62 and 77.
Nomination Committee
The Nomination Committee comprises Peter Allen (Chairman), Penny Freer, Steve Bellamy, Chris Meredith and Peter Steinmann as
laid out below:
Name
Peter Allen
Chris Meredith
Penny Freer
Steve Bellamy
Chairman (since 1 January 2014, member since 4 December 2013)
Member (since 1 January 2011)
Member (since 1 March 2010)
Member (since 20 February 2007)
Peter Steinmann (stepping down at 2020 AGM)
Member (since 1 July 2013)
The Committee 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 2019 and are available to view on the Company’s 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:
• 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
• Make recommendations to the Board regarding the re-election of Directors, succession planning and Board composition, having
due regard for diversity, including gender
• Consider succession planning for Senior Management and membership of the Audit and Remuneration Committees
Audit Committee
The Audit Committee comprised Steve Bellamy (Chairman), Peter Allen, Penny Freer, and Peter Steinmann in 2019. Peter Allen
stepped down from the Audit Committee on 6 May 2020.
Name
Steve Bellamy
Penny Freer
Chairman (since 6 June 2007, member since 20 February 2007)
Member (since 1 March 2010)
Peter Steinmann (stepping down at 2020 AGM)
Member (since 1 July 2013)
Steve Bellamy, a qualified Chartered Accountant, chairs the Committee and has recent and relevant financial experience.
The Committee has Terms of Reference that are reviewed at least annually, were updated at the end of 2019 and are available to
view on the Company’s 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, Head of Financial Reporting,
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 58 to 61.
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 the 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.
In light of the COVID-19 pandemic sensitivity analysis has been prepared to stress test forecasts and the Directors are confident the
business can withstand the challenges and is a going concern, due to the significant headroom available.
All AMS sites are currently in operation and meeting the Group’s commitments to maintain supply of its medical devices to
healthcare partners and customers worldwide. However, the Group is now experiencing a slowdown in demand caused by the
cancellation or postponement of elective surgeries and a reduction in accident and emergency treatment as a result of the global
lockdowns. The Group currently estimates that its annual revenues will be impacted by approximately 3% to 5% for each month
the widespread restrictions remain in place.
With regard to the Group’s financial position, it had net cash at the year-end of £64.8 million (2018: £76.4 million). Net cash
reduced in 2019 due to the acquisitions of Sealantis in January and Biomatlante is November. The Group has an undrawn five-year,
£80 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 facility is provided jointly by the Group’s existing banks HSBC and The Royal Bank of Scotland.
The facility is subject to leverage and interest cover covenants and is unsecured.
While the current economic environment is very uncertain, in particular in relation to COVID-19, 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 for the medium-term once the impact of COVID-19 subsides. Further details of the
56 Advanced Medical Solutions Group plc Annual Report 2019
impact of COVID-19 can be found on pages 1 and 11. The Group has a high number of contracts with customers across different
geographic regions who also with substantial financial resources, ranging from government agencies through to global healthcare
companies. The Group has also considered the implications that may arise as a result of Brexit and developed appropriate risk
management solutions to mitigate this risk.
Having considered the above, the Directors have concluded 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 62 to 77.
Modern Slavery Act
Prior to the introduction of the legislation the Company had implemented an Ethical Sourcing Policy and the requirements of
the Modern Slavery Act build on that policy. During 2019, the Company has taken the following key steps to implement the
requirements of the Modern Slavery Act 2015:
• Group-wide communication of the Anti-Slavery and Human Trafficking Policy through compliance training
• Reinforcement of existing policies covering ethical business practices and legal compliance
• Contractual commitments from supply chain partners to act in accordance with our Ethical Sourcing Policy
• Routine audits of suppliers include an assessment of compliance
• Continuing liaison with suppliers, contractors and business partners to establish their commitment to the eradication of slavery
and human trafficking
• The full compliance statement can be found on the Company’s website ‘www.admedsol.com’.
Gender Pay Gap Reporting – Ensuring Opportunities for All
AMS believes in being an inclusive and diverse employer, where individuals are provided opportunities to develop and reach their
full potential. We are confident that men and women are paid equally for doing equivalent jobs across the business.
Our latest report under the Gender Pay Gap Regulations (Equality Act 2010 (Gender Pay Gap Information) Regulations 2017) is
available on the corporate website ‘www.admedsol.com’.
Relations with Shareholders
The Strategic Report, which incorporates the Chairman’s Statement, Chief Executives Q&A, Financial Review, Section 172
Statement, Stakeholder Engagement and Risk Management sections, together with other 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, and this is described in the Stakeholder Engagement section on pages 30 to 43.
The Notice for the Annual General Meeting is sent to shareholders at least 20 working days before the meeting. Details of how the
2020 AGM will be adapted in line with the latest guidance on COVID-19 are outlined below.
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
In line with the UK Government’s latest guidelines on COVID-19, AMS will host its 2020 AGM as a closed meeting at the Group’s
Winsford office at 11.00 am on 10 June 2020. The health and safety of the Group’s shareholders, as well as its employees and
customers is of paramount importance and, as a result, it will not be possible for shareholders to attend the meeting in person.
Any shareholders attempting to attend the AGM will be refused entry.
The AGM will be convened with the minimum necessary quorum of two shareholders. The outcome of the resolutions will, as
usual, be determined by shareholder vote based on the proxy votes received. Shareholders are therefore strongly encouraged to
vote by proxy on the resolutions contained in the AGM notice. Given the restrictions on attendance, shareholders are also strongly
encouraged to appoint the “Chairman of the Meeting” as their proxy rather than another person who will not be permitted to
attend the meeting. Further details on voting can be found in the AGM Notice.
The results of the AGM will be announced to the London Stock Exchange and placed on the Group’s website, in the usual way,
as soon as practicable after the conclusion of the AGM.
The Board would like to thank all shareholders for their continued support and understanding in these exceptional circumstances.
Eddie Johnson
Company Secretary
7 May 2020
Advanced Medical Solutions Group plc Annual Report 2019 57
Financial StatementsGovernanceCompany OverviewStrategic Report Audit Committee Report
“The Committee has remained focused
on safeguarding shareholder value
by ensuring effective governance,
internal controls, risk management
and financial reporting.”
Steve Bellamy
Chair of the Audit Committee
Attendance record and tenure in 2019
Member
Steve Bellamy (Chair)
Peter Allen (stepped down on 6 May 2020)
Penny Freer
Peter Steinmann
As set out in the biographical information on pages 48 and 49,
the members of the Committee have a strong mix of skills,
expertise and experience and as a whole have the relevant
competencies for the sector in which we operate. The Board
has determined that Steve Bellamy, a qualified Chartered
Accountant in New Zealand, and Peter Allen, a member of the
Institute of Chartered Accountants in England and Wales, were
the Committee’s financial experts.
In line with Code Provision 24, Peter Allen stepped down from
the Audit Committee with effect from 6 May 2020 in line with
Best Practice. When invited, he will attend Audit Committee
meetings as the Board considers his extensive financial
experience adds value to the discussion.
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.
58 Advanced Medical Solutions Group plc Annual Report 2019
Number of meetings held
during the year when the
Director was a member
Number of
meetings
attended
3
3
3
3
Committee
tenure
13 years
6 years
10 years
6 years
The Audit Committee is required to:
• Oversee and advise the Board on the current risk exposures
of the Company and related future risk strategies
• Oversee the activities of Internal Audit
• Review internal control policies and procedures for the
identification, assessment and reporting of material financial
and non-financial risks
• Review the Group’s procedures for detecting and
preventing fraud
• Review the Group’s procedures for the prevention of bribery
and corruption
• Review the Group’s procedures for ensuring that appropriate
arrangements are in place to enable employees to raise
matters of possible impropriety in confidence
• Review the effectiveness of the Group’s financial reporting
• 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
• Review the engagement, effectiveness and independence
of the External Auditor, and consider a tender process
where appropriate
• Review audit and non-audit services and fees
• Review the Committee’s Terms of Reference
Audit Committee Activities
To discharge its responsibilities, during the year, the Committee
has undertaken the following activities:
Financial Statements and Reports
• Reviewed and approved the External Audit fees for 2019.
• Reviewed the annual and half-yearly financial reports and
related statements:
– Assessed key accounting judgements
– Assessed cost of capital
– Assessed impact of Brexit
– Assessed working towards releasing the Annual Report
earlier following the Preliminary Statement.
• Reviewed and considered the significant matters in relation
to the Financial Statements and how these have been
addressed, including:
– Going Concern – The 2018 UK Corporate Governance
Code Provision 31 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. This is set out on page
56. 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
statement which was documented for the first time in
2016. Consideration has also been given to the impact
of COVID-19.
– Goodwill impairment, including the acquisitions of Sealantis
and Biomatlante.
– Accounting for the acquisitions and associated valuation of
intangible assets acquired.
External Audit
• Monitored the independence and ensured the objectivity of
the External Auditor.
• Approved all non-audit service work over £10,000.
Risk Management
• Reviewed the key risks to the Group and the plans to mitigate
these risks.
• Reviewed the scoring criteria and reporting to the Committee.
Terms of Reference
• 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.
Effectiveness of External Auditor
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,
management and the Audit Committee, 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 the Audit Committee and management.
• Fees: – ensuring they are transparent, appropriate and
communicated prior to the commencement of any work
undertaken. Where variations occur, these are challenged at
the earliest opportunity to enable dialogue and negotiation to
be undertaken.
• Reviewed and approved the Audit Plan for the 2019 audit.
• Auditor independence: – the Committee continues to
• Reviewed the performance of the External Auditor and
considered the re-appointment of Deloitte LLP as auditor for
2020 and recommended appointment to the Board.
Internal Audit
• Considered and agreed the strategic and annual Internal
Audit plan.
• Reviewed and followed up on management responses to
Internal Audit findings and recommendations.
• Reviewed the performance of RSM UK and considered their
re-appointment.
• Reviewed ongoing advice from previous audits.
• Engaged RSM to conduct a ‘Healthcheck’ of AMS control
environment and assurance needs.
monitor the External Auditor’s compliance with applicable
ethical 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 2019 59
Financial StatementsGovernanceCompany OverviewStrategic Report Audit Committee Report
continued
Non-Audit Services
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:
• Audit their own work
• Make management decisions for the Group
• Create a conflict of interest
• Find themselves in the role of an advocate for the Group
All projects where forecast expenditure may exceed £10,000
were approved by the Audit Committee. In 2019, Deloitte
were engaged to provide due diligence on a potential
acquisition. The fee was £175,000 (above the £10,000
threshold). Deloitte LLP has been the Group’s External Auditor
for 12 financial years. 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 re-appointment
of Deloitte LLP as the Group’s External Auditor for the next
financial year. The Group will comply with the FRC ‘Revised
Ethical Standard 2019, which will restrict the services permitted.
Internal Audit
Internal Audit at AMS is managed and delivered by an external
firm of Auditors, RSM UK, who provide this service under the
direction and guidance of the Audit Committee. Against an
agreed mandate, this function performs independent Internal
Audit across the Group. An Internal Audit strategy and an annual
Internal Audit plan are approved by the Audit Committee each
year. Internal Audit reviews areas of potentially significant risk
and substantial process improvement and provides 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:
• Reviews and approves the charter of the Internal Audit
function and ensures the function has the necessary
resources and access to information and the Group’s
employees as necessary to enable it to fulfil its mandate
and is equipped to perform in accordance with appropriate
professional standards for Internal Auditors.
• Approves the appointment and the termination of the
Internal Auditors.
• Ensures the Internal Auditor has direct access to the
Board Chairman and to the Committee Chairman and is
accountable to the Committee.
• Reviews and assesses the annual Internal Audit work plan.
• Receives a report on the results of the Internal Auditors work
at least twice per year.
• Reviews and monitors management’s responsiveness to the
Internal Auditor’s findings and recommendations, and follows
up on the corrective actions taken.
• Monitors and reviews the effectiveness of the Company’s
controls in the context of the Company’s overall risk
management system.
60 Advanced Medical Solutions Group plc Annual Report 2019
All Internal Audit reports are discussed with the Audit
Committee and the External Auditor, and the recommendations
are considered and acted upon. RSM UK attends Audit
Committee meetings twice a year and updates the Audit
Committee in writing ahead of each Committee meetings.
In 2019 the Internal Auditor reviewed previous audit reports and
undertook a ‘Healthcheck’ of AMS’ control environment and
assurance needs. The recommendations of Internal Audit were
accepted by the Audit Committee and acted upon.
The role of Internal Audit was reviewed in 2019. It was
determined that internal audit should be focused on controls,
driven by corporate governance and effective risk management,
with audits focusing on key risks. A three-year Internal Audit plan
was discussed in detail and agreed in March 2020.
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), TÜV Rheinland LGA Products
GmbH, PCBC, Dekra and Lloyds Register, 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 Chief Financial Officer. The updated policies are then
formally approved by the Board.
Risk Management and 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:
• 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.
• 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, Health and Safety and Corporate Governance.
• The Board or the Audit Committee reviews the Risk Register
at least twice a year.
• The Board monitors the activities of the Group through the
management accounts, monthly and full year forecasts
and other reports on current activities and plans. The Senior
Management Team, at least monthly, monitors financial and
operational performance in detail.
• The Group has set appropriate levels of authorisation which
must be adhered to as the Group carries out its business.
• 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, the Netherlands and Germany, with appropriate
equivalent systems in other jurisdictions
• 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.
Maximising long-term shareholder value is a key corporate
objective for the Group, 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
Report on pages 44 to 47. 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, scores these risks to understand
the significance and assigns 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 Board or 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.
Steve Bellamy
Chair of the Audit Committee
7 May 2020
Advanced Medical Solutions Group plc Annual Report 2019 61
Financial StatementsGovernanceCompany OverviewStrategic Report Remuneration Report
“In 2019 the Committee has focused on
the Group’s Remuneration Policy and
compliance with best practice, along
with increased shareholder engagement.”
Penny Freer
Chair of the Remuneration Committee
The Board presents the Remuneration Report for the year ended 31 December 2019.
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. The following table details members of the Committee, their attendance at meetings held during the year and their tenure:
Attendance record and tenure in 2019
Member
Penny Freer (Chair)
Steve Bellamy
Peter Allen
Peter Steinmann
Number of meetings held
during the year when the
Director was a member
Number of
meetings
attended
3
3
3
3
Committee
tenure
10 years
13 years
6 years
6 years
Biographical information on the Committee members is set out on pages 48 and 49. 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 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’.
62 Advanced Medical Solutions Group plc Annual Report 2019
A resolution will be put to shareholders at the Annual General Meeting on 10 June 2020 asking them to consider and approve this
Report. The activities the Remuneration Committee undertook in 2019 were:
Month
March
October
December
Principal Activities
• Discussion on the progress of shareholder consultation regarding
the 2019 remuneration for the Chief Executive Officer and newly
appointed Chief Financial Officer
• Review of 2018 personal objectives
• Review of proposed 2018 Executive Director and Senior
Management Team (SMT) bonus and Deferred Annual Bonus awards
• Discussion on 2019 personal objectives for the Executive Directors
• Review of the 2019 corporate objectives
• Review of LTIP performance criteria, how these are calculated, and
consideration of holding periods
• Review and approval of Gender Pay Report
• Review of 2019 personal objectives for Executive Directors
• Ratification of LTIP and share option awards for 2019 (Executive
Directors, SMT and key employees)
• Ratification of Annual Performance Bonus and Deferred Annual
Bonus awards for Executive Directors and SMT
• Review of compliance with Executive Shareholding Policy for
Executive Directors and SMT
• Ratification of 2016 LTIP vesting (Executive Directors and
Senior Management)
• Review of the criteria for the Executive Shareholding Policy
• Consideration of the proposed 2020 salaries for the Executive
Directors and SMT
• Consideration of SMT LTIP awards for 2020 and the rules regarding
these awards
• Ratification of changes to the Executive Shareholding Policy
• Review of results of Committee Self Assessment questionnaire,
• Terms of Reference and Directors’ Expenses Policy
• Approval to run DSB Scheme and contribution levels in 2020
• Agreement of 2020 Remuneration Committee Meeting dates
• Review of legal and corporate governance developments
Advanced Medical Solutions Group plc Annual Report 2019 63
Financial StatementsGovernanceCompany OverviewStrategic Report Remuneration Report
continued
2019 Remuneration at a Glance
Components of remuneration
Total remuneration
Fixed
Variable
Salary
Fixed total
Annual bonus
Variable total
=
=
Total
Fixed
= Total
Fixed
Salary
CEO – Chris Meredith
CFO – Eddie Johnson
Pensions and other benefits
CEO – Chris Meredith
CFO – Eddie Johnson
Variable
Annual bonus
Bonus 2019
CEO – Chris Meredith
CFO – Eddie Johnson
Performance measures
Group revenue
+
Pension and other benefits
CEO – Chris Meredith
CFO – Eddie Johnson
+
LTIP
+
DSB
+
Variable
£’000
300
170
31
18
£’000
Nil
Nil
Fixed
Variable
43%
57%
Fixed
Variable
56%
44%
Shareholding requirements
(as at 31 December 2019)
Target
CEO – Chris Meredith
200% of base salary
CFO – Eddie Johnson
200% of base salary
Actual shareholding
as a % of target
844%
133%
Weighting
Overall
achievement
2019
performance
(% of overall
maximum)
Remuneration Policy
Strategically aligned
Nil
100%
Nil1
£’000
426
92
The remuneration policy is aligned with our strategy and
culture. Share ownership drives the right long-term behaviour.
The Executive Directors are required to build a significant
shareholding. This aligns their interests with the stakeholders’
interest for sustainable long-term growth.
Pay for performance
The remuneration of our Senior Management is designed to
promote the long-term success of the Company and reward
value creation for our stakeholders. Assessment of short-term
incentives under the Annual Performance Bonus is made
against corporate, financial, strategic and other non-financial
objectives. A proportion of the bonus is deferred for Executive
Directors and Senior Management for a period of three-years.
Long-term incentives are linked to long-term financial and
strategic objectives.
Weighting
Overall
achievement
2019
performance
(% of overall
maximum)
50%
100%
50%
Market competitive
Financial
Group PBT adjusted
85%
Below
threshold
15% Maximum
100%
EPS
CEO – Chris Meredith
CFO – Eddie Johnson
Personal
Overall
LTIP
2016 LTIP vesting for 2016–2019
CEO – Chris Meredith
CFO – Eddie Johnson
Performance measures
Financial
Total shareholder
return (TSR)
Financial
Overall
DSB
Earnings per
share (EPS)
50%
80.6%
40.3%
100%
90.3%
All elements of our remuneration are reviewed regularly to
ensure they remain market competitive to attract and retain
talent, as well as to avoid excessive overpayment.
Employee commitment
We are committed to paying our people fairly and in a clear,
transparent and simple way.
Gains on DSB vested
CEO – Chris Meredith
CFO – Eddie Johnson
1 Nil bonus as threshold not achieved on financial measurements.
64 Advanced Medical Solutions Group plc Annual Report 2019
£’000
13
58
Remuneration Policy
The remuneration policy is formulated to provide a remuneration structure that is competitive and will allow the Company 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. At the same time, the Company seeks to ensure that it is 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. The policy aims to conform to best practice as far as reasonably practicable. The policy
will continue to apply for 2020 and subsequent years, subject to ongoing review as appropriate. The Committee retains the right to
exercise discretion. The policy is based around the following key principles:
• Total rewards will be set at levels that are sufficiently competitive to enable the recruitment and retention of high calibre
Senior Executives
• Total incentive-based rewards will be earned through the achievement of performance conditions consistent with
shareholder interests
• The design of long-term incentives will be prudent and will not expose shareholders to unreasonable financial risk
• In considering the market positioning of reward elements, account will be taken of the performance of the Group and of each
individual Executive Director
The Committee appointed Mercer (previously Kepler) in 2014 to provide advice on the remuneration of the Executives and SMT.
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.
Enhanced Shareholding Guidelines
Executive Directors and senior management are expected to accumulate and maintain a significant shareholding. In December
2019 the holding requirements for the Executive Shareholding Policy were increased to 200% and 100% of salary respectively for
the Executive Directors and SMT to reflect Corporate Governance Best Practice and enhance their alignment with the interests of
our stakeholders, and philosophy of share ownership. All SMT members met or exceeded the shareholding target in 2019, except
the three members who have been with the Company for less than five years. If a SMT member does not comply at the end of the
five year period the Committee retains discretion to decide on the appropriate sanction, which may include a simple ‘warning’ or
reduction in the next LTIP grant, or a reduction of bonus opportunity.
Mercer was engaged from December 2018 to February 2019 to provide guidance on consulting with shareholders on the
proposed 2019 salary increases for Chris Meredith (Chief Executive Officer) and Eddie Johnson (upon appointment as Chief
Financial Officer). Chris Meredith’s salary was increased by 7.8% in 2019 and Eddie Johnson received a salary of £170,000 upon
appointment. Penny Freer (Senior Non-Executive Director and Chairman of the Remuneration Committee) spoke with the majority
of the significant shareholders in early 2019 to discuss these proposed salary changes. The feedback was generally supportive,
and any concerns raised were resolved. Mercer will again be engaged in early 2020 to review the performance criteria and
holding periods for the 2014 LTIP, to ensure they are in line with corporate governance best practice. Mercer is the only advisor
who provided material assistance to the Committee during 2019 in its consideration of matters related to Directors remuneration.
Details of the engagement with Mercer in 2019 are set out below:
Advisors
Mercer LLC
Appointment and selection
Other services provided to the Company
Fees for Committee assistance
Appointed to provide ongoing advice to the
Committee on various matters including Directors’
remuneration, shareholder communication and
other governance matters.
Advice on employee reward
£9,840
The Committee will continue to ensure our remuneration structure is aligned to the Company’s culture that supports our long-
term sustainable growth, whilst emphasising our underlying philosophy of share ownership.
Advanced Medical Solutions Group plc Annual Report 2019 65
Financial StatementsGovernanceCompany OverviewStrategic Report Remuneration Report
continued
Compliance with the UK Corporate Governance Code 2018 (Code)
As a large AIM quoted company AMS has chosen to follow the Code on a ‘comply or explain’ basis. There were a number of
changes to the Code in 2018. We are compliant in the majority of areas such as the inclusion of malus provisions in the LTIP, LTIP
awards vesting at the normal vesting date for good leavers and share ownership guidelines for Executive Directors (Executive
Shareholding Policy). For new appointments, the Committee will set pension contributions in line with those available to the
wider workforce.
The areas where we are currently not compliant with the Code are:
Code provision
Description of non-compliance
Explanation/remedial action
36
37
38
Share awards granted for Executive Directors are not released
for sale on a phased basis or subject to a total vesting and
holding period of five years or more. The vesting period is
three years. The Committee has not developed a formal
policy for post-employment shareholding requirements
encompassing both unvested and vested shares.
LTIP performance criteria are being reviewed with Mercer
ahead of the 2020 LTIP awards. A formal policy for post-
employment shareholding will be considered in 2020.
Remuneration schemes should include provisions that would
enable the Company to recover and/or withhold sums or
share awards and specify the circumstances in which it would
be appropriate to do so.
Despite the LTIP and Deferred Annual Bonus Scheme having
malus provisions, there is currently not a clawback provision.
This will be considered with post-employment shareholding
in 2020.
The pension contribution rates for Executive Directors, or
payments in lieu, should be aligned with those available to
the workforce.
The Company has implemented a policy that any future
Executive Director appointments will receive the same
pensions contributions as the workforce. The Committee does
not consider the current contributions of 10% to be excessive.
We aim to voluntarily seek advisory shareholder approval for our Remuneration Report to provide accountability and for
shareholders to express their views on the remuneration policy and its implementation. All feedback provided by shareholders
helps inform the Committee’s approach to governance of the remuneration policy. The Committee welcomes any feedback
on the remuneration policy. If shareholders have any specific comments on the Remuneration Policy, the Committee maybe
contacted through the Company Secretary (companysecretary@admedsol.com).
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, Glass Lewis 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 were consulted in advance about changes to the
remuneration policy in 2019.
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. The cost of living increase for the 2019 financial year was 2% for
the Senior Management Team and the broader employee population. However, the Committee determined to increase the basic
salary for Chris Meredith (Chief Executive Officer) by 7.8%, which was discussed with shareholders by Penny Freer (Chairman
of the Remuneration Committee). Eddie Johnson (Chief Financial Officer) was awarded a salary of £170,000, below that of his
predecessor, as the scope of his role does not include operational oversight.
Statement of Voting at General Meeting
At the 2019 AGM, the percentages of votes cast ‘for’, and ‘against’ in respect of the Directors’ Remuneration Report were as follows:
Resolution
To approve the Directors’ Remuneration Report
Number of
shares voted
113,671,023
Votes cast
‘for’
95.58%
Votes cast
‘against’
4.42%
66 Advanced Medical Solutions Group plc Annual Report 2019
Overview of Directors’ and Senior Management Remuneration Policy
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 Senior Management, the Committee
retains the discretion to award a higher increase than
the UK workforce.
The Committee used this discretion when awarding
Chris Meredith (CEO) a 7.8% increase in 2019.
Base Salary
To provide competitive
fixed remuneration.
To attract, retain and
motivate Executive
Directors and Senior
Management 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
65 salary levels of Executive Directors
and Senior Management 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 on page 70. A review
was last carried out in December 2019.
There is no prescribed 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.
Benefits
N/A
To attract, retain and
motivate Executive
Directors and Senior
Management of
the right calibre
to deliver the
Company’s strategy
by providing a market
competitive level of
benefit provision.
A range of benefits 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.
Annual
Performance
Bonus
Drives and rewards
performance against
annual financial and
operational goals
which are consistent
with the medium to
long-term strategic
needs of the business.
Each of the Executive Directors is
entitled under the terms of their service
agreements to receive an Annual
Performance 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 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 and a
values assessment based on Care, Fair, Dare.
Executive Directors can receive an Annual
Performance Bonus, up to the percentage of salary set
out on page 70.
Senior Management are entitled to receive up to 50%
of their salary in bonus, of which 77% of the award
is dependent on financial performance targets and
23% on personal objectives and Care, Fair, Dare.
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.
For Executive Directors and Senior Management,
if the Financial thresholds are not met there is no
bonus payable.
Advanced Medical Solutions Group plc Annual Report 2019 67
Financial StatementsGovernanceCompany OverviewStrategic Report Remuneration Report
continued
Overview of Directors’ and Senior Management Remuneration Policy continued
Policy Table
Element of
remuneration
Purpose and
how it supports
strategy
Deferred
Annual
Bonus (DAB)
Provides mechanism
to exercise malus
provisions.
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 as
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
How the element operated
and maximum opportunity
Framework used to
assess performance
Following advice from Mercer regarding
corporate governance developments
in remuneration, the Committee
introduced a Deferred Annual Bonus
(DAB) Scheme whereby both Executive
Directors and the SMT are required
to defer up to 25% of their Annual
Performance Bonus for three years.
The DAB was approved by shareholders
at the 2014 AGM.
The DAB introduced malus provisions
which are laid out on page 69. There is
no provision for clawback.
The Deferred Share Bonus Plan (DSB)
is available to all employees and allows
them to elect 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 in order to receive additional
free shares from the Company. It acts
as a valuable retention tool aligning
employees’ interests with those of
shareholders. The DSB first operated
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
levels for 2019 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.
The 2014 LTIP introduced malus
provisions which are laid out on page 69.
There is no provision for clawback.
N/A
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 Group over a three-year period.
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 Group’s EPS over a
three-year period commencing on the 1 January of the
year the Award is made. Awards will vest on a sliding
scale from 25% to 100% for an average annual growth
rate of EPS from target EPS of 5% to an average annual
growth rate increase of EPS of 20% over the vesting
period. No awards will be made for an average annual
growth rate of EPS below target EPS.
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 Group’s
performance on these measures is consistent with the
underlying performance of the business.
68 Advanced Medical Solutions Group plc Annual Report 2019
Element of
remuneration
Purpose and
how it supports
strategy
How the element operated
and maximum opportunity
Framework used to
assess performance
Pension
To provide a
market competitive
remuneration
package to enable
the recruitment and
retention of Executive
Directors and
Senior Management.
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 a fixed 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,
except for those who have opted out.
Any new Executive Directors joining the
Group will have a pension in line with
the workforce.
Malus provisions – 2014 LTIP/DAB
The 2014 LTIP and DAB incorporate malus provisions. For LTIPs and DABs awarded from 2014 onwards, the Committee may in
its absolute discretion resolve to vary an Award in the event that any of the Financial Statements or results for the Company, or for
any Group Company, are materially restated (other than restatement due to a change in accounting policy or to rectify a minor
error) or if, in the reasonable opinion of the Committee and following consultation with the relevant employing Group Company,
a participant has deliberately misled the management of the Company and/or the market and/or the Company’s shareholders
regarding the financial performance and/or technical information of any Group Company or any Subsidiary, or a participant’s
actions amount to serious misconduct or conduct which causes significant financial loss for the Company, any Group Company
and/or the participant’s Business Unit.
If the Committee determines that the malus provision applies then they may resolve that the number of shares comprised in an
Award that are not vested shares and/or vested shares in the case of an Option where the Option has not yet been exercised
should be reduced (to Nil if appropriate) and/or impose further conditions on an Award.
Advanced Medical Solutions Group plc Annual Report 2019 69
Financial StatementsGovernanceCompany OverviewStrategic Report Remuneration Report
continued
Directors’ Emoluments – Single Figure of Remuneration
The various elements of the remuneration for each Director in 2018 and 2019:
Salary and fees
Annual
Performance
Bonus
Deferred Bonus
LTIPs vested
Gains on DSBs
vested1
Benefits
Pensions
Total
Remuneration
£’000
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Chris Meredith
Eddie Johnson2
Peter Allen
Steve Bellamy
Penny Freer
Peter Steinmann
Mary Tavener3
Total
300
170
74
44
44
38
–
670
278
–
73
43
43
37
215
689
–
–
–
–
–
–
–
127
–
–
–
–
–
81
– 208
–
–
–
–
–
–
–
–
42
426
407
–
–
–
–
–
27
69
92
–
–
–
–
–
518
–
–
–
–
–
377
784
13
58
–
–
–
–
–
13
–
–
–
–
–
4
71
17
1
1
–
–
–
–
–
2
1
–
–
–
–
–
1
2
30
17
–
–
–
–
–
28
–
–
–
–
–
22
770
338
74
44
44
38
–
896
–
73
43
43
37
727
47
50 1,308 1,819
1 Gains on DSBs vested is based on the share price at vesting date. Details of the DSB can be found on page 68.
2 Eddie Johnson was appointed as Chief Financial Officer on 1 January 2019.
3 Mary Tavener resigned as Chief Financial Officer on 31 December 2018.
The table above summarises the payments made and additional amounts earned by the Executive Directors and Non-Executive
Directors for the 2018 and 2019 financial years. The Chairmen of the Audit Committee and Remuneration Committee (Steve
Bellamy and Penny Freer) received a supplementary fee of £3,000 for chairing a Committee. The Deferred Annual Bonus recorded
in the table above is in respect of the 2018 financial year, to be paid or deferred into shares, which will not be received until
2022. No Annual Performance Bonus was payable for 2019, and as a result the Deferred Annual Bonus scheme was not utilised.
The Executive Directors were granted further LTIPs as detailed on page 72. 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 1.5% for Executive Director base salary in 2020.
The Group’s UK employees also received a 1.5% salary increase for the 2020 financial year.
Director
Chris Meredith
Eddie Johnson (appointed 1 January 2019)
2020
2019
% increase
£304,500
£300,000
£172,550
£170,000
1.5%
1.5%
Annual Performance Bonus
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 2020 will be 150% of salary for the Chief Executive Officer and
75% for the Chief Financial Officer. There is no bonus payment if the minimum financial thresholds are not met.
The personal objectives for the Executive Directors are set on an individual basis and for the year ended 31 December 2019 were
linked to the corporate, financial, strategic and other non-financial objectives of the Group.
70 Advanced Medical Solutions Group plc Annual Report 2019
The table below summarises 2019 performance against the targets:
Performance Measures
Group revenue
Adjusted Profit Before Tax
Adjusted fully diluted Earnings Per Share
Weighting
Threshold £m
Target £m
Stretch £m
Achievement £m
28.33%
28.33%
28.33%
107.4
28.2
10.1
110.7
29.1
10.4
116.3
30.6
10.9
Below threshold
Below threshold
Below threshold
2019 result
(% of overall
maximum)
0.0%
0.0%
0.0%
Personal objectives / values assessment
15.0%
The Remuneration Committee has assessed
that the Executive Directors fully achieved their
personal objectives for the year.
Total
100.0%
Maximum
15.0%
0.0%
In 2019 threshold was not achieved in any of the financial performance criteria, and therefore no bonus will be payable in 2020
for the 2019 Financial Year. However, the Executive Directors performance against their personal objectives was still reviewed by
the Remuneration Committee; if financial thresholds had been met then up to 22.5% of salary would have been payable to the
Chief Executive Officer and 11.5% of salary would have been paid to the Chief Financial Officer (Eddie Johnson) upon achievement
of personal objectives. The Committee considers the 2020 objectives to be commercially sensitive as they give our competitors
insight into our business plans and therefore are not detailed in this Report.
Overall the 2019 bonus payments made in respect of the 2018 financial year were as follows:
Director
Chris Meredith
Eddie Johnson (bonus for 2019 reflects Group Financial Controller role)
Bonus paid
in 2019 (2018
Financial Year)
Deferred
Annual Bonus
Percentage
of salary
(total bonus)
Maximum %
of salary
£169,093
£42,273
£29,624
£7,261
50.6%
48.4%
120%
50%
Vesting of LTIPs for the year ended 31 December 2019
The LTIPs granted on 18 April 2016 to the Executive Directors under the 2014 Long-Term Investment Plan were based on
performance criteria during the three-year period as detailed below. The LTIPs vested on 18 April 2019. The performance
conditions were:
• 50% of the Award was subject to a performance condition based on the Company’s Total Shareholder Return (TSR) performance
over the performance period (90 dealing day period to the date of grant measured against the 90 dealing day period prior to the
three-year anniversary following the date of grant) relative to the constituent companies of the AIM Healthcare Share Index over
the performance period
• 50% of the Award was subject to a performance condition based on the growth in the Company’s underlying diluted earnings
per share (EPS) over the period from 1 January 2016 to 31 December 2018
The Performance Targets were as follows:
TSR Performance
Below 50% of the comparator Group
Vesting %
0%
Between 50% and 75% of comparator Group
Straight-line vesting between 25% and 100% based on the ranking in the comparator Group
Above 75% of comparator Group
EPS average annual growth rate
<5% average annual growth rate
100%
Vesting %
0%
5%–20% average annual growth rate
Straight line vesting between 25% and 100%
Following a review of the performance conditions of the LTIPs granted in April 2016, 90.3% of the award vested in April 2019.
The Company achieved 100% vesting for the TSR element (2018: 100% vesting), ranking 8th out of the 60 comparators and 80.6%
vesting for the EPS element (2018: 74.5% vesting) with average annual EPS growth of 16.1%.
In the Directors’ emoluments single figure remuneration table on page 70, the figure attributable to the LTIPs granted on 18 April
2019 is calculated by multiplying the number of shares in respect of which the Award vested by the share price on the vesting date.
Advanced Medical Solutions Group plc Annual Report 2019 71
Financial StatementsGovernanceCompany OverviewStrategic Report Remuneration Report
continued
Directors’ Interests in the Long-Term Incentive Plan (LTIP)
In 2019 the Committee considered it appropriate to approve LTIP awards based on 200% of salary for Chris Meredith and 75% of
salary for Eddie Johnson. Both awards represent the maximum allowed under the remuneration policy and formed part of the
shareholder consultation.
On 24 April 2019 the following LTIP awards were granted to each Executive Director:
Director
Chris Meredith
Eddie Johnson
Type of Award
Basis of grant
awarded
Share price
at date of grant (£)
Number of shares
granted
Face value of grant
(£)
Vesting determined by
performance over
Nil-cost option
200% of salary
Nil-cost option
75% of salary
3.2875
3.2875
182,510
38,783
600,000
127,500
See below
See below
EPS – Three financial years to 31 December 2021.
TSR – Three years to 24 April 2022 (average share price of 90 days prior to grant compared to average share price of 90 days prior
to vesting).
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:
Director
Chris Meredith
Eddie Johnson
(appointed 1 January 2019)
As at
1 January
2019
146,939
143,553
109,571
90,344
–
34,235
31,148
23,775
19,603
–
Exercised in
the year
Issued in
the year
Lapsed in
the year
As at
31 December
2019
Market price at
date of grant
(p)
First vesting date
–
–
–
–
–
–
–
–
–
–
–
–
–
–
182,510
–
–
–
–
38,783
–
13,925
–
–
–
–
3,022
–
–
–
146,939
129,628
109,571
90,344
182,510
34,235
28,126
23,775
19,603
38,783
151.50 10 September 2018 (vested)
184.60
246.69
308.00
328.75
18 April 2019 (vested)
6 April 2020
13 April 2021
24 April 2022
132.00 10 September 2018 (vested)
184.60
246.69
308.00
328.75
18 April 2019 (vested)
6 April 2020
13 April 2021
24 April 2022
The entitlement to shares under the LTIP is subject to achieving the performance conditions referred to on page 71. 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 2019, Chris Meredith exercised Nil LTIPs (2018: Nil) and Eddie Johnson Nil LTIPs
(2018: Nil). Awards made have no performance re-testing facility.
72 Advanced Medical Solutions Group plc Annual Report 2019
Approach to Remuneration of Executive Directors on Recruitment
In the case 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, market data,
internal relativities and their current salary. New appointments will be eligible to receive a personal pension, medical insurance
benefits and to participate in the Company’s share schemes.
In line with Best Practice for new Executive Director appointments, the Committee will set pension contributions in line with rates
available to the wider workforce.
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 related to the supplementary fee paid to the Chairmen
of the Audit and Remuneration Committees.
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.
Reflects time commitments,
responsibilities of each role and
fees paid.
Framework used to assess performance
Non-Executive Directors do
not participate in variable pay
arrangements and do 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. 2019 fee
levels are set out on page 70 and
those fees were increased by 1.5%
in 2020 in line with the general
workforce.
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
Date of Contract
3 May 2005
Unexpired Term (months)
or Rolling Contract
Rolling Contract
Eddie Johnson (appointed 1 January 2019)
1 January 2019
Rolling Contract
Non-Executive Directors
Peter Allen
Steve Bellamy
Penny Freer
Peter Steinmann
4 December 2013
Rolling Contract
1 February 2007
Rolling Contract
1 March 2010
1 July 2013
Rolling Contract
Rolling Contract
Notice Period (months)
12
12
6
6
6
6
Advanced Medical Solutions Group plc Annual Report 2019 73
Financial StatementsGovernanceCompany OverviewStrategic Report 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 Performance 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 Performance 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
Annual Performance Bonus payment would
be negotiated as part of the terms of the
leaving arrangements (at the discretion of the
Remuneration Committee)
Unvested Deferred Annual Bonus share awards vest at
the normal vesting date (or earlier at the Remuneration
Committee’s discretion)
No automatic entitlement to Annual Performance
Bonus on a pro-rata basis (at the discretion of the
Remuneration Committee)
Bad Leaver
Not applicable
Individuals lose the right to their Annual Performance
Bonus and unvested Deferred Annual Bonus share awards
Change of control
LTIP
Good Leaver
Annual Performance Bonuses are paid and unvested
Deferred Share Bonus share awards vest on the date
of notification to the Executive Directors regarding the
change of control
Annual Performance Bonus is paid only to the extent that
any performance conditions have been satisfied and are
pro-rated for the proportion of the financial year worked
to the effective date of change of control
On normal vesting date (or earlier at the Remuneration
Committee’s discretion)
Unvested 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
Unvested awards lapse on cessation of employment
Unvested awards lapse on cessation of employment
Change of control
Unvested awards vest on the date of notification to the
Executive Directors regarding the change of control
Unvested awards vest and a pro-rata reduction applies for
the proportion of the vesting period not served
Upon exit or change of control Deferred Share Bonus (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) which take effect as a result of a takeover bid.
74 Advanced Medical Solutions Group plc Annual Report 2019
Payments to past Directors
No payments were made to past Directors during the year ended 31 December 2019.
Payments for Loss of Office
No payments for loss of office were made during the year ended 31 December 2019.
Statement of Directors’ Shareholdings and Share Interests
Director
Chris Meredith
Eddie Johnson
Beneficially owned1 at
31 December 2018
Beneficially owned1 at
31 December 2019
Outstanding
LTIP awards at
31 December 2019
Outstanding
DAB awards at
31 December 2019
Outstanding share
awards under DSB at
31 December 2019
Shareholding as a % of
Issued Share Capital at
31 December 2019
1,491,943
77,555
1,514,804
98,787
658,992
144,522
57,977
22,542
27,556
33,886
0.70%
0.05%
Executive Directors are required to hold shares worth 200% of pre-tax annual salary in Company shares in compliance with the
Executive Shareholding Policy. This was increased from 100% of pre-tax annual salary in December 2019. Compliance with this
policy as at 31 December 2019 is shown below:
Director
Chris Meredith
Eddie Johnson
Shares held2
Vested DSBs
1,480,127
19,044
34,677
79,743
LTIPs (50%
of vested /
unexercised
LTIPs)
138,284
31,181
DAB Awards
Total Shares
Target
shareholding
target (£)
Actual
shareholding
value (£)
57,977
1,711,065
600,000
5,064,751
22,542
152,510
340,000
451,428
% vs holding
target
844%
133%
1 Includes all shares beneficially held by the Executive Director (or their spouses and children) and vested DSBs.
2 Beneficially held by the Executive Director (or their spouses and children).
The shareholding as a % shown above is based on the share price as at 31 December 2019.
Non-Executive appointments at other companies
Chris Meredith has been a Non-Executive Director of Creavo Medical Technologies Ltd since May 2018. Creavo Medical
Technologies Ltd is a UK-based, privately-held medical device company that is developing innovative techniques. There is no
conflict of interest with AMS.
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 Performance 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
Performance Bonus payout and LTIP vesting level as a percentage of the maximum opportunity is also shown for each of
these years.
Year ended 31 December
Total remuneration (£’000)
Annual Bonus (% of maximum)
LTIP vesting (% of maximum)
2015
741
78.76%
55.1%
2016
784
72.5%
50%
2017
1,040
82.6%
76.9%
2018
896
50.6%
87.3%
2019
770
0%
90.3%
Relative Importance of Spend on Pay
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 prior year.
2018
(£m)
33.6
2.5
5.8
22.5
2019
(£m)
33.2
3.0
5.4
18.9
change
%
-1.2%
20%
-8.6%
-15.6%
Advanced Medical Solutions Group plc Annual Report 2019 75
Financial StatementsGovernanceCompany OverviewStrategic Report Remuneration Report
continued
£1,026,000 (2018: £1,436,000) of the staff costs figure relates to pay for the Directors, of which £568,000 relates to the highest
paid Director (2018: £712,000). Total pension contributions were £1,309,000 (2018: £1,218,000) and for the highest paid Director
£30,000 (2018: £28,000).
During 2019, distributions to shareholders included a dividend of £1,931,000 paid on 14 June 2019 (2018: £1,593,000) and
£1,074,000 paid on 25 October 2019 (2018: £901,000). It is proposed that a dividend of 1.05p per share be paid on 19 June 2020.
Further details are provided in Note 14 on page 109.
Gender Pay Gap Reporting – Ensuring Opportunities for All
The full compliance statement can be found on the Company’s website ‘www.admedsol.com’.
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 for shares in the Company
under the 2019 Share Option Plan (SOP), 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 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 119 to 123.
Company Share Option Plan (CSOP)/Executive Share Option Scheme
The Company Share Option Plan (CSOP) and Executive Share Option Scheme reached their ten year limit in 2019. The final awards
under these schemes were made on 24 April 2019, These schemes were replaced at the 2019 AGM by the 2019 Share Option
Plan (SOP).
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. The last remaining options under this scheme will either be exercised or lapse in 2020.
2019 Share Option Plan (SOP)
On 5 June 2019 the Company received approval for the 2019 Share Option Plan (SOP). The SOP allows for employees to be
granted either approved or unapproved options. Under the approved part of the plan relevant employees can 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.
Share Performance – 2019
The opening share price for 2019 was 275p and the closing price, on the last trading day of the year, was 296p. The range during
the year was 354.5p (high) and 225p (low) (Source: daily official list of the London Stock Exchange).
76 Advanced Medical Solutions Group plc Annual Report 2019
Five-year Share Performance
For the five-year period ending 28 February 2020 the Advanced Medical Solutions Group plc share price has outperformed the
FTSE All-Share Index by 76%, FTSE Techmark All-Share Index by 54%, FTSE All-Share Health Care Index by 56%, the FTSE Small Cap
Index by 55%, and FTSE AIM All-Share Index by 53%.
)
0
0
1
o
t
d
e
s
a
b
e
r
(
e
c
i
r
p
e
r
a
h
S
400
350
300
250
200
150
100
50
0
2015
2016
2017
2018
2019
2020
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 2020 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 58%, FTSE Techmark
All-Share Index by 38%, FTSE All-Share Health Care Index by 36%, the FTSE Small Cap Index by 39%, and FTSE AIM All-Share Index
by 48%.
)
0
0
1
o
t
d
e
s
a
b
e
r
(
n
r
u
t
e
r
l
r
e
d
o
h
e
r
a
h
s
l
a
t
o
T
400
350
300
250
200
150
100
50
0
2015
2016
2017
2018
2019
2020
AMS
FTSE All Share
FTSE Techmark All Share
FTSE All Share Health
FTSE Small Cap
FTSE AIM All Share
Approved on behalf of the Board.
Penny Freer
Chair of the Remuneration Committee
7 May 2020
Advanced Medical Solutions Group plc Annual Report 2019 77
Financial StatementsGovernanceCompany OverviewStrategic Report
Directors’ Report
For the year ended 31 December 2019
Strategic Report
The Group has complied with the requirements of S414C(11) of the Companies Act 2006 by including certain non-financial
information within the Strategic Report. The Strategic Report can be found on pages 4 to 47. 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. The Group has complied with Sch 7.11(1)(b) and Sch 7.11B(1).
Principal Risks and Uncertainties
A description of the Group’s principal risks and uncertainties can be found on pages 46 and 47 in the Strategic Report. This includes
the Financial Risk relating to Forex Exposure. The potential impact and key controls and mitigating factors relating to this risk are
outlined on page 47.
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 2019 £3,195,000 (2018: £3,079,000)
on research and development. In accordance with International Accounting Standards, a further £2,355,000 (2018: £1,392,000) has
been capitalised. Following a review of development £nil impairments were made in 2019 (2018: £nil).
Dividends
The Group made a profit before tax for the year to 31 December 2019 of £24.3 million (2018: £28.3 million). The Directors
are recommending payment of a final dividend of 1.05p per share (2018: 0.90p per share). The final dividend will, subject to
shareholders’ approval, be paid on 19 June 2020 to shareholders on the register at the close of business on 29 May 2020. This will
make a total dividend of 1.55p for the full year (2018: 1.32p).
Post-Balance Sheet Events
Since 31 December 2019 the COVID-19 pandemic has impacted the Group. Further details on COVID-19 can be found in the
Chairman’s Statement (page 8), Chief Executive’s Q&A (pages 9 to 11) and Risk Management Section (pages 44 to 47). The impact
on going concern is outlined on page 56.
Key Performance Indicators
The Directors monitor the performance of the Group on a regular basis with particular reference to the relevant Key Performance
Indicators (KPI’s). The Group updated its KPI’s in 2018 to ensure that they continue to be the most relevant for the Group and
are linked to the Group strategy (see the Strategic Pillars on pages 12 and 13). Further detail and performance against the KPI’s is
provided on pages 16 and 17. The KPI’s for 2019 and 2020 are as follows:
• Revenue growth at constant currency (%)
• Year-over-year change of our standard cost base (%)
• Adjusted1 diluted EPS (%)
• % of spend on R&D and Innovation
• Customer service (OTIF)2
• Staff retention/turnover (%)
• % of sales from new products launched in the previous five years
• Employee Engagement Score (%)
Capital Structure
A five-year, £80 million, multi-currency, revolving, credit facility was agreed in December 2018 with an accordion option under
which AMS can request up to an additional £20 million on the same terms. The facility is provided jointly by the Group’s banks
HSBC and The Royal Bank of Scotland. The facility is subject to leverage and interest cover covenants and is unsecured.
The Company’s Ordinary Shares are admitted to, and traded on, the Alternative Investment Market (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 on page 118.
There are no specific conditions on the following scenarios:
• No special rights of control and no restrictions on the size or transfer of shares
• All shares are fully paid
• No special conditions in the Articles of Association under change of control situations
1 Before exceptional items and amortisation of acquired intangible assets.
2 OTIF – ‘On time in full’.
78 Advanced Medical Solutions Group plc Annual Report 2019
Going Concern
The Directors continue to adopt the going concern basis in preparing the Financial Statements as outlined in the Corporate
Governance Report on page 56.
Non-Financial Reporting Statement
In compliance with the European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and
groups) Regulations 2017, our Non-Financial Reporting Statement is set out on page 43.
Share Capital and Issue of Ordinary Shares
At 8 April 2020, the Group’s issued share capital comprised:
Ordinary Shares of 5p each
Number
214,932,064
£000
10,746
% of Issued
Share Capital
100
The issued share capital of the Company is set out in Note 27 to the Financial Statements on page 118.
Substantial Shareholdings
As at 8 April 2020, 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
Canaccord Genuity Group Inc
AXA SA
BlackRock Inc
Investec Group
Groupama
Charles Stanley Group
AEGON
Aviva plc
8 April 2020
22,744,483
15,537,008
14,681,511
10,535,960
9,976,667
9,787,629
8,410,871
7,258,849
6,687,377
% of Issued
Share Capital
10.58
7.23
6.83
4.90
4.64
4.55
3.91
3.38
3.11
There have been no significant changes to the substantial shareholdings between 31 December 2019 and 8 April 2020. The top
shareholders listed above remain the same as 31 December 2019.
Directors
The names of the current Directors together with brief biographies are shown on pages 48 and 49.
The Directors who were in office during the year ended 31 December 2019, 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 72.
Re-appointment of Directors
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. At the forthcoming
Annual General Meeting to be held on 10 June 2020, all Directors will be put forward for re-election.
At the forthcoming Annual General Meeting on 10 June 2020 the entire Board will retire and formally offer themselves for
re-appointment, with the exception of Peter Steinmann who will step down as a Director. This is part of our formal succession
planning strategy outlined on page 52.
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 73.
Advanced Medical Solutions Group plc Annual Report 2019 79
Financial StatementsGovernanceCompany OverviewStrategic Report Directors’ Report
continued
Directors and their Interests
The Directors of the Company at 31 December 2019 and their interests, all of which are beneficially held, in the share capital of the
Company were:
Director
Chris Meredith
Eddie Johnson3
Steve Bellamy
Peter Allen
Penny Freer
Peter Steinmann
Ordinary Shares of 5p each at 31 December 2019
Ordinary Shares of 5p each at December 2018
Shares
1,503,377
59,426
100,000
50,000
13,888
–
DSBs
38,983
73,247
–
–
–
–
LTIPs Deferred Bonus2
Shares
658,992
144,522
–
–
–
–
57,977
1,484,395
22,542
–
–
–
–
36,535
100,000
50,000
13,888
–
DSBs
19,164
57,566
LTIPs Deferred Bonus1
343,468
108,761
77,756
20,333
–
–
–
–
–
–
–
–
–
–
–
–
1 Deferred Bonus shares are in respect of the bonus earned relating to the 2015, 2016 and 2017 financial years.
2 Deferred Bonus shares are in respect of the bonus earned relating to the 2014, 2015, 2016, 2017 and 2018 financial years.
3 Appointed as a Director on 1 January 2019.
Further details of the Directors’ remuneration and benefits are included in the Remuneration Report on pages 62 to 77.
The Board has agreed on 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
conflicts of 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 – Equal Opportunities and Development
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 make responsible adjustments to retrain the employee if required and offer
suitable alternative employment within the Group.
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.
Please refer to pages 32 to 35 of the Stakeholder Engagement section to see further information on Employees.
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 2019 Group Share Option Plan (2019 SOP), which was approved at the
2019 AGM. Prior to 2019 options were granted under the Company Share Option Plan (CSOP).
80 Advanced Medical Solutions Group plc Annual Report 2019
The 2019 SOP has been approved by HMRC and allows employees to receive up to £30,000 of options in a tax-efficient manner.
Options granted under this are not offered at a discount. Further details are included in the Remuneration Report on pages 62
to 77.
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 of
the DSB Scheme are provided in the Remuneration Report on page 68. 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 and the last of these will vest in 2020.
1,417,000 Ordinary Shares (2018: 831,000) were issued during the year to employees exercising their share options and options
over other share incentive schemes. Details are given in Note 27 to the Group Financial Statements.
Health and Safety
The Group is committed to high standards in health, safety and environmental performance. The Group provides safe places and
systems of work, safe plant and machinery, safe handling of materials and ensures appropriate information, instruction and training
are given. Employees are encouraged to identify ‘near misses’ to ensure preventative actions are taken to avoid any unsafe work
practices. 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.
Further details are outlined in the Stakeholder Engagement section on pages 30 to 43.
Environment
AMS is focused on reducing our impact on the environment. The Group has operations across a number of countries, where
local management drive environmental performance. Specific site-level objectives are established to ensure compliance with local
legislative requirements. The Company aims to adopt responsible environmental practices and to give consideration to minimising
the impact on the environment. Detail of actions taken in 2019 to minimise our impact are outlined in the Stakeholder Engagement
section on pages 30 to 43.
Evaluations of capital investment opportunities are ongoing to further reduce energy consumption. 2020 will demonstrate a
significant investment in both infrastructure and expertise. The UK manufacturing sites will comply with the new Streamlined
Energy Carbon Reporting (SECR) legislation, that will continually drive us to improve energy efficiency. An analysis of how we
performed in 2019 can be found on page 39.
Corporate Social Responsibility
AMS is committed to ensuring that the business operates in a responsible way. Please see the Stakeholder Engagement section
on pages 30 to 43 for an analysis of the key areas of employees, ethical standards, environment, Health and Safety and customer
and community.
Political Donations
No political donations which require disclosure in accordance with the Electoral Acts 1997 to 2012 were made by the Group during
the year.
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 International Accounting Standard Regulation and have elected to prepare the
Parent Company Financial Statements in accordance with the United Kingdom Generally Accepted Accounting Principles (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.
Advanced Medical Solutions Group plc Annual Report 2019 81
Financial StatementsGovernanceCompany OverviewStrategic Report Directors’ Report
continued
In preparing the Parent Company Financial Statements the Directors are required to:
• Select suitable accounting policies and then apply them consistently
• Make judgements and accounting estimates that are reasonable and prudent
• State whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and
explained in the Financial Statements
• 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, IAS 1 requires that Directors:
• Properly select and apply accounting policies
• Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information
• 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
• Assess 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.
Responsibility Statement
We confirm that to the best of our knowledge:
• 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
• 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
• 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:
• So far as the Director is aware, there is no relevant audit information of which the Company’s Auditor is unaware
• 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 Section 418 of the Companies Act 2006.
Deloitte LLP has expressed their willingness to continue in office as Auditor and a resolution to re-appoint 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 10 June 2020 are contained in the Notice
of the Annual General Meeting. 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.
82 Advanced Medical Solutions Group plc Annual Report 2019
Special Business
The effect of Resolution 10, to be proposed at the meeting, would be to allow the Company to allot shares conferred by Section
551 of the Companies Act 2006.
The effect of Resolution 11, to be proposed at the meeting, would be to dis-apply the statutory pre-emption rights conferred by
Section 570 of the Companies Act 2006.
The effect of Resolution 12, to be proposed at the meeting, would be to allow the Company to purchase its own shares conferred
by Section 701 of the Companies Act 2006.
Annual General Meeting
The Annual General Meeting will be held at 11.00 am on 10 June 2020. In line with the UK Government’s latest guidelines on
COVID-19, AMS will host its 2020 AGM as a closed meeting at the Group’s Winsford office. The health and safety of the Group’s
shareholders, as well as its employees and customers, is of paramount importance and, as a result, it will not be possible for
shareholders to attend the meeting in person. Any shareholders attempting to attend the AGM will be refused entry.
Further details can be found in the Notice of the Annual General Meeting.
Other Information
Other information relevant to the Director’s Report may be found in the following sections of the Annual Report:
Information
Location in the Annual Report
Principal activities, business review and future developments
Chairman’s Statement and Chief Executive’s Q&A – pages 8 to 11
Results
Corporate Governance
Directors’ remuneration, including the interests of the Directors
and secretary in the share capital of the Company
Financial Statements – pages 84 to 125
Corporate Governance Report – pages 52 to 57
Remuneration Report – pages 62 to 77
Principal Risks and Uncertainties
Key Performance Indicators
Principal Risks and Uncertainties – pages 46 and 47
Key Performance Indicators – pages 16 and 17
Company’s capital structure including a summary of the rights
and obligations attaching to shares
Group Statement of Changes in Equity – page 93;
and Financial Statements
Long Term Incentive Plan, share options and share schemes
Remuneration Report – pages 62 to 77
Events after the balance sheet date
Significant subsidiary undertakings
Financial Statements – Note 32 on page 125
Financial Statements – page 127
The Directors’ Report has been approved by the Board and authorised for issue.
Eddie Johnson
Company Secretary
7 May 2020
Advanced Medical Solutions Group plc Annual Report 2019 83
Financial StatementsGovernanceCompany OverviewStrategic Report Independent Auditor’s Report to the Members of Advanced Medical
Solutions Group plc Report on the audit of the Financial Statements
1 Opinion
In our opinion:
• the Financial Statements of Advanced Medical Solutions Group plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) give a true and
fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2019 and of the Group’s profit for the year
then ended;
• the Group Financial Statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as
adopted by the European Union;
• the Parent Company Financial Statements have been properly prepared in accordance with the United Kingdom Generally Accepted
Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and
• the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the Financial Statements which comprise:
• the Consolidated Income Statement;
• the Consolidated Statement of Comprehensive Income;
• the Consolidated and Parent Company Statements of Financial Position;
• the Consolidated and Parent Company Statements of Changes in Equity;
• the Consolidated Cash Flow Statement;
• the related Consolidated Financial Statement Notes 1 to 32; and
• the related Parent Company Financial Statement Notes 1 to 7.
The financial reporting framework that has been applied in the preparation of the Group Financial Statements is applicable law and
IFRSs as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the Parent
Company Financial Statements are applicable law and the United Kingdom Accounting Standards, including FRS 101 “Reduced
Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).
2 Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the Financial
Statements section of our report.
We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our
audit of the Financial Statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to
listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3 Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
• Revenue recognition;
• Acquisition accounting;
• Carrying value of goodwill related to the newly acquired subsidiary; and
• Going concern.
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
Scoping
Significant changes in our
approach
The materiality that we used for the Group Financial Statements was £1.2 million which was determined on
the basis of 5% of profit before tax.
We focused our Group audit scope on the UK, Germany and Netherlands, with the UK and Germany subject
to a full scope audit, and Netherlands, France and Israel subject to specified procedures. As a consequence
of the audit scope determined, we achieved coverage of approximately 100% of revenue, 95% of profit
before tax and 99% of net assets.
Last year the auditor’s report included only one key audit matter, whereas this year we have included three
further key audit matters: acquisition accounting, the carrying value of goodwill related to a newly acquired
subsidiary and going concern. These are included in our report as a result of events that have happened
within the year.
84 Advanced Medical Solutions Group plc Annual Report 2019
4 Conclusions relating to going concern
We are required by ISAs (UK) to report in respect of the following matters where:
• the Directors’ use of the going concern basis of accounting in preparation of the Financial Statements is not appropriate; or
• the Directors’ have not disclosed in the Financial Statements any identified material uncertainties that may cast significant doubt
about the Group’s or the Parent Company’s ability to continue to adopt the going concern basis of accounting for a period of at
least 12 months from the date when the Financial Statements are authorised for issue.
We have nothing to report in respect of these matters.
5 Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
5.1 Revenue recognition
Key audit matter description
The Group sells medical devices across a number of geographical regions generating revenue of £102.4
million (2018: £102.6 million).
The timing of when revenue is recognised is relevant to the reported performance of the Group. There is
an opportunity through manipulation or error to misstate the allocation of revenue between periods. This
timing of revenue recognised, in particular around year end, is a focus for material Group revenue streams.
We have specifically focused this key audit matter to cut-off and occurrence for revenue recorded
within November and December 2019 and other one-off material revenue transactions based on our
understanding of monthly peaks in sales reported and the associated credit terms with those, and other
major, customers. Pressures to meet stakeholder expectations could provide incentives to record revenues
where risk and reward have not passed.
The associated disclosure is included within Note 4 to the Financial Statements. For specific detail on the
Groups accounting policy, please see Note 3 to the Financial Statements.
How the scope of our
audit responded to the
key audit matter
We obtained an understanding of the relevant controls over the revenue process.
We tested a sample of individual sales transactions and traced to despatch notes and subsequent cash
receipt or other supporting documents.
We performed a detailed analysis of revenue trends within each Business Unit including:
• inquiry of management and obtaining evidence of management reviews of actual revenue to budget; and
• performing enquiries of management and key members of the commercial team to identify any key changes
to sales terms in force during the previous year.
To validate cut off and occurrence of revenue within the risk period:
• we identified the population upon which a risk of material misstatement could be likely and for the population
identified we validated a sample of sales transactions to despatch records, or alternative evidence, to confirm
timing and occurrence of the transaction;
• we interrogated and analysed any credit notes post year end which may contradict occurrence of revenue;
and
• we analysed the receivables ledgers at year end and post year end to identify and interrogate any material
overdue debts.
We identified and considered the impact of any credit notes or inventory returns occurring after year-end,
including evaluating the impact of any material overdue debts from customers.
Key observations
Based on the work performed we concluded that revenue has been recognised appropriately.
Advanced Medical Solutions Group plc Annual Report 2019 85
Financial StatementsGovernanceCompany OverviewStrategic Report
Independent Auditor’s Report to the Members of Advanced Medical
Solutions Group plc Report on the audit of the Financial Statements continued
5.2 Acquisition accounting
Key audit matter description
During the year, the Group has acquired two new subsidiaries, Sealantis Limited and Biomatlante SA.
On 31 January 2019, the Group acquired the entire issued share capital of Sealantis Limited for £20.8
million, generating £15 million in intangible assets and £9.6 million in goodwill. A discount rate of 22.5%
was used by management in discounting to fair value and 11 year forecasts were used to determine the
net present value, underpinned by the assumptions that the products being developed will get the various
approvals sought, the underlying assumptions of 41% growth rate over 21 years and that management’s
projections are reasonably representative of a market participant perspective
And then on 29 November 2019, the Group acquired the entire issued share capital of Biomatlante SA for
£5.9 million, generating £3 million in intangible assets and £3.9 million in goodwill. A discount rate of 11.9%
was used by management in discounting to fair value and seven year forecasts were used to determine the
net present value. Within the forecasts, management has made assumptions of growth within the business
underpinned by growth in sales of existing products reliant on know-how as well as new product sales
reliant on patents, giving an overall growth rate of 10%.
In both acquisitions, the intangibles were identified using various valuation techniques: excess earning, relief
from royalty, cost-based.
Accounting for acquisitions under IFRS 3 Business combinations is complex as management are required to
separately identify the intangible assets acquired, which involves a higher level of judgement.
The associated disclosure is included within Note 31 to the Financial Statements. For specific detail on the
Group’s accounting policy, please see Note 3 to the Financial Statements.
How the scope of our
audit responded to the
key audit matter
We obtained an understanding of the relevant controls within acquisition accounting.
We reviewed the sale and purchase agreements (SPA), other transactional documentation and third
party purchase price allocation reports to evaluate the goodwill and intangible assets recognised and to
corroborate the consideration paid.
With the involvement of internal specialists we evaluated the valuation techniques, the reasonableness of
assumptions applied, to challenge the appropriateness of the risk-adjusted discount rate and whether the
fair value model being used is appropriate considering circumstances identified.
We challenged the discount rates used by independently setting expectations based on various competitors
to the Group and third-party information available, such as beta values, risk-free rates and cost of debt
and premiums based on the size of the acquisition or the risk profile of the entity. We then compared
management’s calculation to that derived by our internal specialists.
We have reviewed the key judgments and assumptions to cash flow forecasts, including assessing the
potential impact of market developments and strategic plans allowing us to consider sensitivities and
whether it reflects a reasonable possible change.
We have reviewed that the policies for acquisition accounting within the Financial Statements to assess
whether the policies are consistent with the principles of IFRS 3 Business combinations and have been
applied appropriately.
Key observations
Based on the work performed we are satisfied that the policies for acquisition accounting under IFRS 3
Business Combinations have been applied appropriately.
5.3 Carrying value of goodwill related to newly acquired subsidiary
Key audit matter description
During the year, the Group acquired a business (Sealantis Limited) which has yet to begin trading and is in
the development stage. The Group has recorded significant values of goodwill (£9.6 million) and intangible
assets (£15 million) in relation to this acquisition.
Sealantis Limited is recognised as its own cash-generating unit. A discount rate of 22.5% has been applied
in determining the net present value to represent the increased risk presented by the development stage of
the acquisition. Management has used a 21 year period to forecast their results, and determined an eleven
year break even period.
Within the forecast, management have assumed a 41% growth rate over 21 years and that the entity will
return a positive EBITDA from the fourth year onwards.
There is a risk the carrying value of goodwill and intangible assets may be higher than its value in use due to
the judgement required in forecasting future sales of the entity given it is in the development stage. We have
considered the carrying value and indicators of impairment in accordance with IAS 38 Intangible Assets.
The associated disclosure is included within Note 19 to the Financial Statements. For specific detail on the
Group’s accounting policy, please see Note 3 to the Financial Statements.
86 Advanced Medical Solutions Group plc Annual Report 2019
How the scope of our
audit responded to the
key audit matter
Key observations
5.4 Going concern
Key audit matter description
How the scope of our
audit responded to the
key audit matter
We obtained an understanding of the controls relevant to acquisition accounting.
We have understood and challenged the rationale behind the risk-adjusted discount rate applied to the
specific cash-generating unit reflecting the additional risk relating to the development stage of the business
and the associated inherent risk. With the support of internal specialists we challenge the appropriateness of
the risk-adjusted discount rate.
We challenged the underlying assumptions included within the budgets by discussing with management
and corroborating committed plans through review of management papers. We assessed the potential
impact to EBITDA of changes in the market and internal hurdles in the development process, including
understanding the current status of product approvals from relevant Notified Bodies.
We have compared the forecasts to a selection of market reports and evaluated management’s justifications
and assumptions for future cash flows.
We re-performed the sensitivity analysis and performed additional sensitivities on the time impact of
delaying results, or considering the impact of reduced revenue growth.
Based on the work performed we concluded that no impairment should be recorded against the
Sealantis cash generating unit and that goodwill and intangible assets are fairly stated in accordance
with IAS 38 Intangible Assets.
Subsequent to the year-end, there has been a global outbreak of the COVID-19 strain of Coronavirus. The
impact of this is still being understood around the world, with non-critical businesses being forced to close
or work from home (if possible), and thus likely to impact on possible supply chains and workforces.
There is a risk that one or more of the following apply and need to be considered:
• the extent of operational disruption;
• potential diminished demand for products or services;
• contractual obligations due or anticipated within one year;
• potential liquidity and working capital shortfalls; and
• gaining access to existing sources of capital.
There are therefore additional levels of uncertainty in respect to the going concern assumptions being
applied.
Given the added level of uncertainty in the application of the going concern basis of accounting, additional
time has been required by both management and the audit team to prepare and audit models and forecasts
and challenge their basis of preparation, including any assumptions made within those models.
The associated disclosure is included within Note 2 to the Financial Statements.
We obtained an understanding of the controls relevant to management’s assessment of the going concern
basis of preparation.
We have reviewed and challenged management’s updated going concern paper, and we have completed
the following additional audit procedures:
We have evaluated management’s method to assess the Company’s ability to continue as a going concern
in light of COVID-19; assessing completeness of all material aspects of the business being considered.
We have evaluated the relevance and reliability of the underlying data used to make the assessment of the
impact of COVID-19.
We have evaluated the assumptions on which management’s assessment of the impact of COVID-19 is
based by determining whether there is adequate support for the assumptions underlying management’s
assessment. We have also performed additional sensitivities on their assumptions to stress test them and
determined that they are not sensitive to small variations. We have then evaluated how much headroom
remains in the forecasts to assess whether the going concern assumption remains appropriate.
We have evaluated management’s plans for future actions to mitigate the impact of COVID-19 in relation
to its going concern assessment, including determining whether the outcome of these plans is likely to
improve the situation and whether management’s plans are feasible in the circumstances.
We have considered whether any additional facts or information in relation to the impact of COVID-19 have
become available since the date on which management made its assessment.
Key observations
Based on the work performed we concluded that the adoption of the going concern basis of
accounting is appropriate.
Advanced Medical Solutions Group plc Annual Report 2019 87
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Solutions Group plc Report on the audit of the Financial Statements continued
6 Our application of materiality
6.1 Materiality
We define materiality as the magnitude of misstatement in the Financial Statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope
of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the Financial Statements as a whole as follows:
Materiality
£1.2 million (2018: £1.4 million)
£1.1 million (2018: £1.26 million)
Group financial statements
Parent company financial statements
Basis for determining materiality
5% of profit before tax
(2018: 5% of profit before tax)
Rationale for the benchmark applied
Profit before tax is determined to be the most
relevant performance measure to the users of
the Financial Statements.
The Parent Company materiality represents less
than 1% of the Group’s equity (2018: less than 1%
of the Group’s equity) which is capped at 90% of
Group materiality.
As a non-trading Parent Company, equity is the
key driver of the company.
Materiality
Profit before tax
£24.3 million
Profit before tax
Group materiality
Group materiality
£1.2 million
Component
materiality range
£0.6m to £0.8m
Audit Committee
reporting threshold
£0.06m
6.2 Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the Financial Statements as a whole. Group performance materiality
was set at 70% of Group materiality for the 2019 audit (2018: 70%). In determining performance materiality, we considered the
following factors:
a) the quality of the control environment, and
b) our past experience of the audit, which has indicated a low number of corrected and uncorrected misstatements
identified in prior periods.
6.3 Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £0.06m
(2018: £0.07m), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the
financial statements.
88 Advanced Medical Solutions Group plc Annual Report 2019
7 An overview of the scope of our audit
7.1 Identification and scoping of components
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and
assessing the risks of material misstatement at the Group level.
Based on this assessment, we focused our Group audit scope on the UK, Germany and Netherlands, with the UK and Germany
subject to a full scope audit and the Netherlands, France and Israel subject to specified procedures. As a consequence of the audit
scope determined, we achieved coverage of 100% (2018: 94%) of the Group’s revenue, 95% (2018: 93%) of the Group’s profit
before tax and 99% (2018: 95%) of the Group’s net assets. Our audit work at each location was executed at levels of materiality
applicable to each individual entity which was lower than Group materiality. Component materiality ranged from £0.6m to £0.8m
(2018: £0.3m to £1.26m).
Audit work to respond to the risks of material misstatement was performed directly by the Group audit engagement team except
for Germany which is audited by the component auditor Deloitte & Touche GmbH. During the year and subsequent to the
year end, senior members of the Group audit team have engaged in regular communications with Deloitte & Touche GmbH.
We included the component audit team in our team briefing, discussed their risk assessment, attended the close meeting and
reviewed their documentation of the findings from their work.
At the Group level we also tested the consolidation process and carried out analytical procedures to confirm our conclusion that
there were no significant risks of material misstatement of the aggregated financial information of the remaining components
(Russia, Czech Republic and the US components) not subject to audit.
7.2 Our consideration of the control environment
A fully substantive audit was performed with no controls or IT reliance undertaken as determined from our initial risk assessment.
8 Other information
The Directors are responsible for the other information. The other information comprises the information included in the annual
report, other than the Financial Statements and our auditor’s report thereon.
Our opinion on the Financial Statements does not cover the other information and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a
material misstatement in the Financial Statements or a material misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in respect of these matters.
9 Responsibilities of Directors
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, and for such internal control as the Directors determine
is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud
or error.
In preparing the Financial Statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
10 Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
Financial Statements.
A further description of our responsibilities for the audit of the Financial Statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Advanced Medical Solutions Group plc Annual Report 2019 89
Financial StatementsGovernanceCompany OverviewStrategic Report Independent Auditor’s Report to the Members of Advanced Medical Solutions
Group plc Report on other legal and regulatory requirements
11 Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• 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
• 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 Group and the parent company and their environment obtained in
the course of the audit, we have not identified any material misstatements in the Strategic Report or the Directors’ Report.
12 Matters on which we are required to report by exception
12.1 Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• 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
• the Parent Company Financial Statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
12.2 Directors’ Remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ Remuneration have
not been made.
We have nothing to report in respect of this matter.
13 Use of our report
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.
Rachel Argyle (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Manchester
7 May 2020
90 Advanced Medical Solutions Group plc Annual Report 2019
Consolidated Income Statement
For the year ended 31 December 2019
Year ended 31 December 2019
Restated (see Note 3)
Year ended 31 December 2018
Profit from operations
4, 5
25,296
(1,053)
24,243
Revenue
Cost of sales
Gross profit
Distribution costs
Administration costs
Other income
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
11
12
13
15
15
The above results relate to continuing operations.
Note
4
Before
exceptional
items
£’000
102,368
(41,885)
60,483
(997)
Exceptional
items (Note 6)
£’000
Before
exceptional
items
£’000
Exceptional
items (Note 6)
£’000
Total
£’000
102,368
102,598
–
–
–
–
(41,885)
60,483
(997)
Total
£’000
102,598
(39,192)
63,406
(1,316)
(33,720)
104
–
–
–
–
(402)
–
(402)
28,474
–
–
(402)
–
378
(581)
28,271
(5,784)
(39,192)
63,406
(1,316)
(33,318)
104
28,876
378
(581)
28,673
(5,784)
(34,566)
(1,053)
(35,619)
376
–
376
406
(392)
25,310
(5,338)
–
–
(1,053)
–
406
(392)
24,257
(5,338)
19,972
(1,053)
18,919
22,889
(402)
22,487
9.30p
9.21p
(0.49p)
(0.49p)
8.81p
8.72p
10.74p
10.59p
(0.19p)
(0.18p)
10.55p
10.41p
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2019
Profit for the year
Items that will potentially be reclassified subsequently to profit and loss:
Exchange differences on translation of foreign operations
Gain/(loss) arising on cash flow hedges
Deferred tax charge arising on cash flow hedges
Other comprehensive expense for the year
Total comprehensive income for the year attributable to equity holders of the parent
Year ended
31 December
2019
£’000
Note
Restated
Year ended
31 December
2018
£’000
18,919
22,487
18
(3,538)
3,091
(130)
(577)
18,342
466
(3,064)
–
(2,598)
19,889
Advanced Medical Solutions Group plc Annual Report 2019 91
Financial StatementsGovernanceCompany OverviewStrategic Report
Consolidated Statement of Financial Position
At 31 December 2019
Assets
Non-current assets
Acquired intellectual property rights
Intangible assets
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
Lease liability
Non-current liabilities
Trade and other payables
Bank loans
Deferred tax liabilities
Lease liability
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
2019
£’000
Restated
2018
£’000
Restated
2017
£’000
16
16
16
16
19
17
18
21
20
21
22
23
23
23
23
18
23
27
28
28
28
28
9,478
15,985
2,832
5,039
53,558
27,707
96
531
9,673
–
2,548
3,204
42,145
27,850
208
415
9,675
–
3,078
2,135
41,801
27,362
199
286
115,226
86,043
84,536
17,655
29,221
129
64,751
111,756
14,800
27,172
813
76,391
119,176
226,982
205,219
14,043
1,781
1,353
17,177
3,150
664
6,409
8,347
18,570
35,747
191,235
10,745
36,226
9,466
(159)
649
1,531
555
(249)
14,643
3,863
975
19,481
655
–
3,303
9,055
13,013
32,494
172,725
10,674
35,192
7,333
(156)
708
1,531
(2,406)
3,289
11,073
20,950
48
62,454
94,525
179,061
10,547
2,305
874
13,726
310
–
3,120
9,579
13,009
26,735
152,326
10,632
34,778
4,676
(152)
815
1,531
658
2,823
132,471
191,235
116,560
172,725
96,565
152,326
The financial statements of Advanced Medical Solutions Group plc (registration number 2867684) on pages 91 to 125 were
approved by the Board of Directors and authorised for issue on 7 May 2020 and were signed on its behalf by:
Chris Meredith
Chief Executive Officer
92 Advanced Medical Solutions Group plc Annual Report 2019
Consolidated Statement of Changes in Equity
Attributable to equity holders of the Group
Share
capital
£’000
Share
premium
£’000
Share-based
payments
£’000
Investment
in own
shares
£’000
At 1 January 2018 (Restated)
10,632
34,778
4,676
(152)
Share-based
payments
deferred tax
£’000
815
Other
reserve
£’000
1,531
Hedging
reserve
£’000
Translation
reserve
£’000
Retained
earnings
£’000
Total
£’000
658
2,823
96,565
152,326
Consolidated profit for the year
to 31 December 2018
Other comprehensive
(expense)/income
Total comprehensive (expense)/
income
Share-based payments
Share options exercised
Shares purchased by EBT
Shares sold by EBT
Dividends paid
–
–
–
–
42
–
–
–
–
–
–
–
414
–
–
–
–
–
–
1,659
998
–
–
–
At 31 December 2018 (Restated)
10,674
35,192
7,333
Consolidated profit for the year
to 31 December 2019
Other comprehensive
income/(expense)
Total comprehensive
income/(expense)
Share-based payments
Share options exercised
Shares purchased by EBT
Shares sold by EBT
Dividends paid
–
–
–
–
71
–
–
–
–
–
–
–
–
–
–
1,856
1,034
277
–
–
–
–
–
–
At 31 December 2019
10,745
36,226
9,466
–
–
–
–
–
(600)
596
–
(156)
–
–
–
–
–
(603)
600
–
(159)
–
–
–
(107)
–
–
–
–
–
–
–
22,487
22,487
–
(3,064)
466
–
(2,598)
–
(3,064)
466
22,487
19,889
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,552
1,454
(600)
596
(2,492)
(2,492)
708
1,531
(2,406)
3,289
116,560
172,725
–
–
–
(59)
–
–
–
–
–
–
–
18,919
18,919
–
2,961
(3,538)
–
(577)
–
2,961
(3,538)
18,919
18,342
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,797
1,382
(603)
600
(3,008)
(3,008)
649
1,531
555
(249)
132,471
191,235
Advanced Medical Solutions Group plc Annual Report 2019 93
Financial StatementsGovernanceCompany OverviewStrategic Report Year ended
31 December
2019
£’000
Restated
Year ended
31 December
2018
£’000
24,243
28,474
3,154
1,683
519
492
(2,454)
(574)
(1,275)
1,856
(5,945)
21,699
(826)
(2,355)
(2,673)
4
422
(24,145)
(29,573)
(3,008)
(925)
1,066
(603)
600
(709)
(3,579)
(11,453)
76,391
(187)
3,180
81
593
325
(3,707)
(6,813)
1,692
1,659
(3,810)
21,674
(304)
(1,392)
(3,062)
78
377
–
(4,303)
(2,492)
(858)
430
(600)
596
(581)
(3,505)
13,866
62,454
71
64,751
76,391
Consolidated Statement of Cash Flows
For the year ended 31 December 2019
Cash flows from operating activities
Profit from operations
Adjustments for:
Depreciation
Amortisation – intellectual property rights
– software intangibles
– development costs
Increase in inventories
Increase in trade and other receivables
(Decrease)/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
Acquisition of subsidiaries (net of cash acquired)
Net cash used in investing activities
Cash flows from financing activities
Dividends paid
Repayment of principal under lease liabilities
Issue of equity shares
Shares purchased by EBT
Shares sold by EBT
Interest paid
Net cash used in financing activities
Net (decrease)/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
94 Advanced Medical Solutions Group plc Annual Report 2019
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 2019 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 and related devices, for closing and
sealing tissue, and sutures, haemostats and synthetic bone substitutes for sale into the global medical device and dental market.
2 Basis of preparation
The Group financial statements 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 a period of 12 months from the date of signing 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.
In light of the COVID-19 pandemic sensitivity analysis has been prepared to stress test forecasts and the Directors are confident the
business can withstand the challenges and is a going concern, due to the significant headroom available.
All AMS sites are currently in operation and meeting the Group’s commitments to maintain supply of its medical devices to
healthcare partners and customers worldwide. However, the Group is now experiencing a slowdown in demand caused by the
cancellation or postponement of elective surgeries and a reduction in accident and emergency treatment as a result of the global
lockdowns. The Group currently estimates that its annual revenues will be impacted by approximately 3% to 5% for each month the
widespread restrictions remain in place.
With regards to the Group’s financial position, it had cash and cash equivalents at the year-end of £64.8 million. The Group has
an undrawn £80 million, multi-currency credit facility with a £20 million accordion option. The credit facility is provided jointly by
HSBC UK Bank PLC and The Royal Bank of Scotland Group PLC and is in place until December 2023. 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 0.60% and
1.70% depending on the Group’s net debt to EBITDA ratio as well as certain financial covenants that need to be complied with.
While the current economic environment is very uncertain, in particular in relation to COVID-19, 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 in the medium-term once the impact of COVID-19 subsides. The Group has a large
number of 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 a conclusion that the Group is well placed to manage its
business risks in the current economic environment, including Brexit and COVID-19. 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. With the exception of IFRS
16 Leases, 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:
• IFRIC 23 Uncertainty over Income Tax Treatments
• Amendments to IFRS 9, Prepayment features with Negative Compensation
• Amendments to IAS 28, Long-term Interests in Associates and Joint ventures
• Annual Improvements to IFRSs 2015-2017 cycle
Advanced Medical Solutions Group plc Annual Report 2019 95
Financial StatementsGovernanceCompany OverviewStrategic Report Notes Forming Part of the Consolidated Financial Statements
continued
3 Accounting policies
Critical Accounting Judgements and Key Sources of Estimation Uncertainty
The preparation of financial statements, in conformity with adopted IFRS, requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the reported value of assets and liabilities, income and
expense. Actual results may differ from these estimates. In preparing these Financial Statements, one key source of estimation
uncertainty has been identified that could potentially have a material adjustment to the carrying amounts of assets and liabilities in
future financial years. No critical accounting judgement or key sources of estimation uncertainty have been identified in relation
to Brexit.
Valuation of assets acquired on acquisition
Upon acquisition of Sealantis in January 2019 and Biomatlante in November 2019, the Group has identified assets and liabilities
arising on acquisitions and devised fair values for them. Third party valuation specialists were engaged to assist in the identification
and valuation of separable intangible assets. As Sealantis is a pre-commercialisation venture, it’s cash flows are predicted to support
the carrying value of these assets. Management considers that the methodologies adopted in the valuation are supportable and
reasonable but there are inherent sources of estimation uncertainty due to the inclusion of future cash flows in the valuation and
assumed growth rates of the future business. There is also some estimation uncertainty in relation to the date of product approvals.
Sensitivities have been considered further in note 19.
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 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. All entities within the Group have the same year-end.
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 based on the recoverable amount for the relevant cash-
generating unit. In assessing the recoverable amount, the estimated future cash flows are discounted to their present value using
a discount rate that reflects the current market assessments of the time. Any impairment is recognised immediately in the Income
Statement and is not subsequently reversed.
Revenue recognition
The Group manufactures and sells a range of innovative and technologically advanced products for the global surgical, woundcare
and wound closure markets. Sales are recognised when control of the products has transferred to the customer in accordance
with the contractual shipping terms, the customer has discretion over the channel and price to sell the products in accordance
with the sales contract, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products.
Transfer occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been
transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the
acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied.
96 Advanced Medical Solutions Group plc Annual Report 2019
Occasionally, the products are sold with volume discounts based on aggregate sales over a 12 month period. Revenue from these
sales is recognised based on the price specified in the contract, net of the estimated volume discounts. Accumulated experience
and customer-provided forecasts are used to estimate and provide for the discounts, using the expected value method, and
revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. No element of finance is
deemed present as the sales are made with a credit term of up to 90 days, which is consistent with market practice. A receivable
is recognised when the goods are transferred as this is the point in time that the consideration is unconditional because only the
passage of time is required before the payment is due.
The Group also recognises revenue from royalty income receivable under licence agreements from external customers at
amounts excluding value added tax as the products under licence are sold and the revenue can be reliably measured. For the year
ended 31 December 2019, £3.4 million (2018: £2.3 million) revenue from royalty income was recognised.
Other income
Other income relates to tax credits received under the UK Research and Development Expenditure Credit (RDEC) scheme and is
recognised in the Income Statement in the same period in which the expense is incurred.
Exceptional items
Exceptional items are those items that are significant by virtue of their size, nature or incidence, or that the Directors consider
should be disclosed separately to enable a full understanding of the Group’s financial performance. 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.
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.
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 Statement of Financial Position 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 Statement of Financial Position date. The revenue and expenses of foreign operations
are translated at an average rate for the period unless exchange rates fluctuate significantly. Exchange differences arising on
consolidation are recognised in equity within the Group’s translation reserve. Such translation differences are recognised as income
or expense in the period in which the operation is disposed of.
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 to confirm the principle of an ‘economic
relationship’ exists. 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.
The Group’s risk management strategies and hedge documentation are aligned with the requirements of IFRS 9.
Advanced Medical Solutions Group plc Annual Report 2019 97
Financial StatementsGovernanceCompany OverviewStrategic Report Notes Forming Part of the Consolidated Financial Statements
continued
3 Accounting policies continued
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
Statement of Financial Position 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 where it is probable the temporary difference will not reverse in the foreseeable
future. 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.
Other intangible assets
Other intangibles consist mainly of research and device technologies acquired on acquisition and are initially recognised at their
fair value. Other intangibles are amortised over their estimated useful economic lives, usually 9 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.
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.
Regulatory certification costs
Expenditure on regulatory certification costs, where the certificate allows a product to be sold into a market for a period of
time greater than one year, is capitalised once it can be demonstrated that the product is clearly identifiable, technically and
commercially feasible, will generate future economic benefits, that the certification costs of the asset can be measured reliably
and the Group has sufficient resources to complete certification. Expenditure capitalised is stated as the cost of materials less
accumulated amortisation. Internal costs relating to regulatory certification costs are not capitalised unless they can be identified as
directly attributable to the certification process. Capitalised certification costs are amortised over the term of the certificate which is
deemed to be the useful economic life.
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 useful economic life, which is in the range of three to
ten years.
98 Advanced Medical Solutions Group plc Annual Report 2019
Property, plant and equipment
Land and buildings and plant and equipment held for use in the production of goods and services or administrative purposes are
carried in the Statement of Financial Position 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:
• Freehold property and improvements
– 4% per annum on cost
• Leasehold improvements and Right-of-use assets
– Shorter of useful economic life and unexpired period of the lease
• Plant and machinery
• Fixtures and fittings
• Motor vehicles
– 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 Statement of
Financial Position 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 is the higher of fair value less costs to sell or value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a discount rate that reflects the current market assessments of the time.
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.
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.
Advanced Medical Solutions Group plc Annual Report 2019 99
Financial StatementsGovernanceCompany OverviewStrategic Report
Notes Forming Part of the Consolidated Financial Statements
continued
3 Accounting policies continued
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:
• They include no contractual obligations upon the Group to deliver cash or other financial assets that are potentially unfavourable
to the Group; and
• 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 to meet short-term cash commitments and are subject to insignificant risk in the 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 IFRS 9 ‘Financial instruments’, 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 stated initially at fair value and subsequent to initial recognition they are measured at amortised cost including
a provision for expected credit losses. The Group measures the provision at an amount equal to lifetime expected credit losses,
estimated by reference to past experience and relevant forward-looking factors. The Group writes off a trade receivable when there
is objective evidence that the debtor is in significant financial difficulty and there is no realistic prospect of recovery, for example,
when a debtor enters bankruptcy or financial reorganisation.
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 using the effective
interest method.
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 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.
100 Advanced Medical Solutions Group plc Annual Report 2019
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 Statement of Financial Position 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
For all assets, the lessee recognises a right-of-use asset and a corresponding liability at the date at which the leased asset is available
to use. Assets and liabilities arising from a lease are initially measured on a present value basis using the interest rate implicit in the
lease or if that rate cannot be readily determinable, the incremental borrowing rate. Lease payments are allocated between the
liability and finance expense. The finance expense is charged to profit and loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability for each period, The right-of-use asset is depreciated over the
shorter of the asset’s useful life and the lease term on a straight line basis. Payments associated with leases with a lease term of
12 months or less and leases of low-value assets are recognised as an expense in profit or loss on a straight-line basis.
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’.
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. At each Statement
of Financial Position date the Group revises its estimate of the number expected to vest as a result of the effect of non-market
based vesting conditions. The impact, if any, is recognised in profit or loss with a corresponding adjustment to reserves.
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 2019, the Group had net funds but acquired £1.2 million of borrowings on the acquisition of
Biomatlante. Capital is managed by maximising retained profits. Working capital is managed 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
Statement of Financial Position as a reduction in equity. Gains and losses on Group shares are recognised directly in reserves.
Advanced Medical Solutions Group plc Annual Report 2019 101
Financial StatementsGovernanceCompany OverviewStrategic Report Notes Forming Part of the Consolidated Financial Statements
continued
3 Accounting policies continued
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):
• Amendments to References to Conceptual Framework in IFRS Standards – effective for accounting periods beginning on or after
1 January 2020
• Amendments to IFRS 3 – effective for accounting periods beginning on or after 1 January 2020
• Amendments to IAS1 and IAS8 – effective for accounting periods beginning on or after 1 January 2020
• IFRS 17 Insurance Contracts – effective for accounting periods beginning on or after 1 January 2021
Changes in accounting policies – IFRS 16
From 1 January 2019, the Group has adopted IFRS 16 (Leases)
The Group is not party to any material leases where it acts as a lessor, but the Group does have a number of material property
leases relating to operating sites as well as equipment and vehicle leases. Details of the Group’s accounting policies under IFRS
16 are set out below, followed by a description of the impact of adopting IFRS 16. Judgements applied in the adoption of IFRS
16 included determining the lease term for those leases with termination or extension options and determining an incremental
borrowing rate where the rate implicit in a lease could not be readily determined.
Approach to transition
The Group has applied IFRS 16 using the full retrospective approach, with the restatement of the comparative information.
In respect of those leases the Group previously treated as operating leases, the Group has elected to measure its right of use assets
arising from property leases using the approach set out in IFRS 16.C8(b)(i). Under IFRS 16.C8(b)(i) right of use assets are calculated as
if the Standard applied at lease commencement but discounted using the borrowing rate at the date of initial application.
Financial impact
The application of IFRS 16 to leases previously classified as operating leases under IAS 17 resulted in the recognition of right-of-use
assets and lease liabilities. Provisions for onerous lease contracts have been derecognised and operating lease incentives previously
recognised as liabilities have been derecognised and factored into the measurement of the right-to-use assets and lease liabilities.
The Group has chosen to use the table on page 103 to set out the adjustments recognised at the date of initial application
of IFRS16.
102 Advanced Medical Solutions Group plc Annual Report 2019
Assets
Non-current assets
Property, plant and equipment
Deferred tax asset
Total impact on assets
Liabilities
Current liabilities
Lease liabilities
Non-current liabilities
Lease liabilities
Total impact on liabilities
Retained earnings
As previously
reported
at 31 December
2018
£’000
Impact of
IFRS16
£’000
As Restated
at 1 January
2019
£’000
18,124
177
18,301
9,726
31
9,757
27,850
208
28,058
–
–
–
976
976
9,055
10,031
9,055
10,031
116,833
(273)
116,560
Additional Property, plant and equipment recognised at 31 December 2018 as part of the transition includes £9.0 million of
Leasehold property, £0.5 million of Plant and machinery and £0.2 million of Motor vehicles.
In terms of the income statement impact, the application of IFRS 16 resulted in a decrease in other operating expenses and an
increase in depreciation and interest expense compared to IAS 17. During the 12 months ended 31 December 2019, in relation to
leases under IFRS 16 the Group recognised the following amounts in the consolidated income statement:
Depreciation
Operating leases
Finance cost
Net impact on Group profit
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
(1,051)
1,309
(383)
(125)
(1,020)
1,272
(415)
(163)
The table below presents a reconciliation from operating lease commitments disclosed at 31 December 2018 under IAS 17 to lease
liabilities recognised at 1 January 2019 under IFRS 16.
Operating lease commitments disclosed under IAS 17 at 31 December 2018
Short-term and low-value lease commitments straight-line expensed under IFRS 16
Effect of discounting
Effect of different rent calculations between IAS 17 and IFRS 16
Finance lease liabilities recognised under IAS 17 at 31 December 2018
Lease liabilities recognised at 1 January 2019
£’000
15,181
(300)
(2,775)
(2,075)
–
10,031
4 Segment information
As previously communicated in the 2018 annual report, the Group has identified some significant benefits accessible by
implementing a realignment to our Business Units. The changes included the transfer of ActivHeal® (£6.3 million sales in 2018)
from Branded to OEM, and the renaming of the Business Units to Surgical and Woundcare respectively to better reflect the nature
of the business. The new structure was implemented in January 2019 and is presented in this way with comparative information
restated to align with the new segmental structure.
The Surgical Unit (previously the Branded Unit) will only include the sales, marketing, research, development and innovation of all
our surgical products. Woundcare (previously the OEM Unit) will now include all advanced woundcare sales, marketing, research,
development and innovation of all woundcare devices, regardless of whether they are sold under an AMS or a partner brand name.
Advanced Medical Solutions Group plc Annual Report 2019 103
Financial StatementsGovernanceCompany OverviewStrategic Report Notes Forming Part of the Consolidated Financial Statements
continued
4 Segment information continued
Year ended 31 December 2019
Revenue
Result
Adjusted segment operating profit
Amortisation of acquired intangibles
Segment operating profit
Unallocated expenses
Exceptional costs
Operating profit
Finance income
Finance costs
Profit before tax
Tax
Profit for the year
At 31 December 2019
Other information
Capital additions:
Software intangibles
Research & development
Property, plant and equipment
Depreciation and amortisation
Statement of Financial Position
Assets
Segment assets
Unallocated assets
Consolidated total assets
Liabilities
Segment liabilities
Year ended 31 December 2018 (Restated)
Revenue
Result
Adjusted segment operating profit
Amortisation of acquired intangibles
Segment operating profit
Unallocated expenses
Exceptional costs
Profit from operations
Finance income
Finance costs
Profit before tax
Tax
Profit for the year
104 Advanced Medical Solutions Group plc Annual Report 2019
Surgical
£’000
56,544
16,086
(1,675)
14,411
Woundcare
£’000
Consolidated
£’000
45,824
102,368
11,378
(8)
11,370
27,464
(1,683)
25,781
(485)
(1,053)
24,243
406
(392)
24,257
(5,338)
18,919
Surgical
£’000
Woundcare
£’000
Consolidated
£’000
364
1,346
1,393
462
1,009
1,280
826
2,355
2,673
(3,985)
(1,863)
(5,848)
160,241
66,354
226,595
387
226,982
21,647
14,100
35,747
Surgical
£’000
57,113
Woundcare
£’000
Consolidated
£’000
45,485
102,598
18,240
11,277
29,517
(76)
(5)
(81)
18,164
11,272
29,436
(560)
(402)
28,474
378
(581)
28,271
(5,784)
22,487
At 31 December 2018 (Restated)
Other information
Capital additions:
Software intangibles
Research & development
Property, plant and equipment
Depreciation and amortisation
Statement of Financial Position
Assets
Segment assets
Unallocated assets
Consolidated total assets
Liabilities
Segment liabilities
Surgical
£’000
Woundcare
£’000
Consolidated
£’000
170
815
1,730
(2,281)
134
577
1,332
(1,898)
304
1,392
3,062
(4,179)
137,208
67,492
204,700
519
205,219
19,349
13,145
32,494
Geographical segments
The Group operates in the UK, Germany, the Netherlands, the Czech Republic, with sales offices in Russia and a sales presence in
the USA. As a result of acquisitions in the year, the Group now has an office in Israel and an operating site in France. 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 the location of the Group’s customers:
United Kingdom
Germany
Europe excluding the United Kingdom and Germany
United States of America
Rest of World
The following table provides an analysis of the Group’s total assets by geographical location.
United Kingdom
Germany
Europe excluding the United Kingdom and Germany
United States of America
Israel
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
20,151
20,018
23,476
34,879
3,844
18,447
19,416
23,987
37,317
3,431
102,368
102,598
Year ended
31 December
2019
£’000
117,055
69,501
14,718
2,532
23,175
Restated
Year ended
31 December
2018
£’000
129,340
66,505
6,663
2,711
–
226,982
205,219
Advanced Medical Solutions Group plc Annual Report 2019 105
Financial StatementsGovernanceCompany OverviewStrategic Report
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 and other intangible assets
– software intangibles
– development costs
Research and development costs expensed to the income statement
Cost of inventories recognised as expense
Write-down of inventories expensed
Staff costs
Net foreign exchange loss
Year ended
31 December
2019
£’000
Restated
Year ended
31 December
2018
£’000
3,154
3,180
1,683
519
492
3,195
40,717
504
33,179
2,790
81
593
325
3,079
37,927
780
33,559
88
6 Exceptional items
During 2019, £1,053,000 of exceptional costs were incurred mainly relating to the acquisition and integration of Sealantis Ltd
and Biomatlante SA and transaction costs to participate in another potential process which was ultimately unsuccessful.
(2018: £402,000 mainly relating to the acquisition of Sealantis Ltd).
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 and the audit
of the Company’s subsidiaries
Total audit fees
Audit related assurance services
Other services
Total non-audit fees
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
23
152
175
24
175
199
374
20
105
125
14
7
21
146
Other services in the year predominantly relate to transaction services on an unsuccessful transaction process.
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.
106 Advanced Medical Solutions Group plc Annual Report 2019
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)
9 Directors’ emoluments
Remuneration for management services
Pension
Amounts paid to third parties
Share-based payments
Year ended
31 December
2019
Number
Year ended
31 December
2018
Number
361
50
139
114
664
353
39
137
100
629
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
25,858
26,699
4,156
1,309
1,856
3,983
1,218
1,659
33,179
33,559
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
604
47
68
308
1,026
902
49
67
418
1,436
The Group’s highest-paid Director is disclosed in the Remuneration Report on page 70.
Retirement benefits are accruing to the following number of Directors under money purchase schemes
2
2
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, fees and short-term employee benefits
Pension
Share-based payments
11 Finance income
Bank interest
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
1,659
108
607
2,109
107
750
2,374
2,966
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
406
378
Advanced Medical Solutions Group plc Annual Report 2019 107
Financial StatementsGovernanceCompany OverviewStrategic Report Notes Forming Part of the Consolidated Financial Statements
continued
12 Finance costs
Amortisation of facility fees
Finance lease interest
Other interest
Change in fair value of long-term debt
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
Tax on ordinary activities – prior year
Tax charge for the year
Year ended
31 December
2019
£’000
Restated
Year ended
31 December
2018
£’000
299
383
55
(345)
392
164
417
–
–
581
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
5,195
5
5,200
61
77
138
5,338
5,859
(126)
5,733
107
(56)
51
5,784
b) Factors affecting tax charge for the year
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.
The tax assessed for the year is higher (2018: lower) than the weighted average Group tax rate of 21.64% (2018: 21.08%) as
explained below:
Profit before taxation
Weighted average Group tax rate 21.64% (2018: 21.08%)
Effects of:
Expenses not deductible for tax purposes and other timing differences
Utilisation and recognition of trading losses
Patent Box Relief
Net impact of deferred tax on capitalised development costs and R&D 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
2019
£’000
24,257
5,248
Restated
Year ended
31 December
2018
£’000
28,271
5,960
246
(26)
(124)
(131)
43
5
77
12
–
(318)
210
102
(126)
(56)
5,338
5,784
Legislation to reduce the main rate of UK corporation tax to 17% was passed by parliament in September 2016 to take effect from
1 April 2020. Subsequent to year-end, parliament reversed this tax rate reduction in March 2020 and therefore the Group will apply
revised substantively enacted rates in future reporting periods. The impact of the rate change is not deemed to be significant to
the Group.
108 Advanced Medical Solutions Group plc Annual Report 2019
In addition to the amount charged to the Income Statement and other Comprehensive Income, the Group has recognised directly
in equity:
• Excess tax deductions related to share-based payments on exercised options
• Changes in excess deferred tax deductions related to share-based payments, totalling £59,000 surplus: (2018:£107,000 surplus).
A Deferred tax charge arising on cash flow hedge is included in other comprehensive income totalling £130,000 (2018: nil).
14 Dividends
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2018 of 0.90p (2017: 0.75p) per Ordinary Share
Interim dividend for the year ended 31 December 2019 of 0.50p (2018: 0.42p) per Ordinary Share
Proposed final dividend for the year ended 31 December 2019 of 1.05p (2018: 0.90p) per ordinary share
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
1,921
1,087
3,008
2,256
1,591
901
2,492
1,921
The proposed final dividend is subject to approval by the shareholders and has not been included as a liability in these
Financial Statements.
15 Earnings per share
The calculation of the basic and diluted earnings per share, based on statutory earnings and adjusted earnings, is based on the
following data:
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
Exceptional costs
Amortisation of acquired intangible assets
Movement in liability fair value accounting
Year ended
31 December
2019
‘000
Year ended
31 December
2018
‘000
214,730
213,146
2,107
2,911
216,837
216,057
£’000
18,919
1,053
1,683
(345)
Restated
£’000
22,487
402
81
–
Adjusted profit for the year attributable to equity holders of the parent pre exceptional costs
21,310
22,970
Earnings per share
Basic – pre exceptional
Basic – post exceptional
Diluted – pre exceptional
Diluted – post exceptional
Adjusted basic – pre exceptional items
Adjusted diluted – pre exceptional items
Adjusted basic – post exceptional items
Adjusted diluted – post exceptional items
pence
9.30
8.81
9.21
8.72
9.92
9.83
9.43
9.34
Restated
pence
10.74
10.55
10.59
10.41
10.78
10.63
10.59
10.45
Advanced Medical Solutions Group plc Annual Report 2019 109
Financial StatementsGovernanceCompany OverviewStrategic Report Notes Forming Part of the Consolidated Financial Statements
continued
16 Acquired intellectual property rights, software intangibles and development costs
2019
Cost
At beginning of year
On acquisition
Additions
Disposals/impairment
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 2019
At 31 December 2018
Acquired
intellectual
property rights
£’000
Other
intangible
assets
£’000
Software
intangibles
£’000
Development
and
recertification
costs
£’000
13,316
–
4,645
360
17,624
–
–
(538)
–
–
(40)
–
826
(1)
(53)
5,997
30
2,355
–
(49)
Total
£’000
23,958
18,014
3,181
(1)
(680)
13,138
17,584
5,417
8,333
44,472
3,643
–
2,097
84
–
(67)
1,599
–
–
519
(1)
(30)
2,793
492
–
9
8,533
2,694
(1)
(88)
3,660
1,599
2,585
3,294
11,138
9,478
9,673
15,985
–
2,832
2,548
5,039
3,204
33,334
15,425
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. Other intangible
assets were recognised on the acquisition of Sealantis Limited and represent technological based know-how.
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’ and GENTA-COLL® brand name which are being amortised over 10 and 15
years respectively with two and seven 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 £8,829,000. 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.
Acquired
intellectual
property rights
£’000
Other
intangible
assets
£’000
Software
intangibles
£’000
Development
costs
£’000
Total
£’000
13,237
–
–
79
–
13,316
3,562
81
–
–
3,643
9,673
9,675
–
–
–
–
–
–
–
–
–
–
–
–
–
4,711
304
(139)
(6)
(225)
4,606
1,392
22,554
1,696
–
(1)
–
(139)
72
(225)
4,645
5,997
23,958
1,633
593
(138)
9
2,471
325
–
(3)
7,666
999
(138)
6
2,097
2,793
8,533
2,548
3,078
3,204
2,135
15,425
14,888
2018
Cost
At beginning of year
Additions
Disposals/impairment
Exchange differences
Transfer of asset
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 2018
At 31 December 2017
110 Advanced Medical Solutions Group plc Annual Report 2019
17 Property, plant and equipment
Freehold land,
property and
improvements
£’000
Right-of-use
assets
£’000
Short
leasehold
improvements
£’000
Plant and
machinery
£’000
Fixtures
and
fittings
£’000
Motor
vehicles
£’000
Total
£’000
2019
Cost
At beginning of year (Restated)
5,962
12,285
On acquisition
Additions
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 2019
At 31 December 2018
407
198
(300)
(94)
12
101
–
–
–
27,917
66
2,411
(130)
(147)
12,496
113
30,117
922
–
41
–
(218)
5,785
963
152
–
(50)
2,559
1,068
(300)
(13)
10
–
–
–
15,710
1,732
(130)
(164)
1,065
3,314
10
17,148
4,720
4,999
9,182
9,726
103
2
12,969
12,207
894
1,146
48,216
21
23
–
(16)
605
77
–
(11)
671
251
289
–
–
(102)
(49)
995
519
125
(102)
(29)
513
482
627
595
2,673
(532)
(524)
50,428
20,366
3,154
(532)
(267)
22,721
27,707
27,850
At 31 December 2019, the Group had entered into contractual commitments for the acquisition of property, plant and equipment
amounting to £349,000 (2018: £1,035,000).
The net book value of plant and equipment includes £103,000 within plant and machinery (2018: £125,000) of capitalised
borrowing costs relating to the Winsford site.
Freehold land,
property and
improvements
£’000
Right-of-use
assets
£’000
Short
leasehold
improvements
£’000
Plant and
machinery
£’000
Fixtures
and
fittings
£’000
Motor
vehicles
£’000
Total
£’000
2018
Cost
At beginning of year
Additions
Disposals
Transfer of assets from intangible assets
Exchange adjustment
At end of year (Restated)
Depreciation
At beginning of year
Provided for the year
Disposals
Exchange adjustment
At end of year (Restated)
Net book value
5,321
604
–
–
37
11,890
12
405
(15)
–
5
–
–
–
–
25,807
2,306
(473)
225
52
752
152
(13)
–
3
1,139
44,921
–
–
–
7
3,467
(501)
225
104
5,962
12,285
12
27,917
894
1,146
48,216
801
148
–
14
963
1,547
1,021
(15)
6
10
–
–
–
14,436
1,652
(399)
21
2,559
10
15,710
441
172
(10)
2
605
289
311
324
187
–
8
17,559
3,180
(424)
51
519
20,366
627
815
27,850
27,362
At 31 December 2018 (Restated)
At 31 December 2017 (Restated)
4,999
4,520
9,726
10,343
2
2
12,207
11,371
Advanced Medical Solutions Group plc Annual Report 2019 111
Financial StatementsGovernanceCompany OverviewStrategic Report
Notes Forming Part of the Consolidated Financial Statements
continued
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.
At 31 December 2017
Charge/(credit) to income
Credit to equity
Exchange adjustment
At 31 December 2018 (Restated)
Charge/(credit) to income
Credit to equity
Exchange adjustment
Acquisition of subsidiary
At 31 December 2019
Share-based
payment
£’000
1,074
110
(107)
–
1,077
114
(59)
–
–
Advanced
capital
allowances
£’000
(587)
76
–
–
(511)
(186)
–
–
–
Research
and
Development
Assets
£’000
(430)
(263)
–
–
(693)
(314)
–
–
–
Intangible
assets
£’000
(2,978)
25
–
(46)
(2,999)
477
–
29
(3,145)
Other
£’000
–
31
–
–
31
(134)
–
–
–
1,132
(697)
(5,638)
(1,007)
(103)
Total
£’000
(2,921)
(21)
(107)
(46)
(3,095)
(43)
(59)
29
(3,145)
(6,313)
Certain deferred tax assets and liabilities have been offset where there is a legal, enforceable right to do so. The following is the
analysis of the deferred tax balances (after offset) for financial reporting purposes:
Deferred tax liabilities
Deferred tax assets
2019
£’000
(6,409)
96
(6,313)
2018
£’000
(3,303)
208
(3,095)
At the Statement of Financial Position date, the Group has approximately £8.8 million unused tax losses (2018: £nil) arising on the
acquisition of Biomatlante and Sealantis, available for offset against future profits. These have not been recognised in the Statement
of financial Position as there is not currently sufficient evidence to prove that sufficient taxable profit will be available.
19 Goodwill
Cost
At 1 January
Acquisitions
Exchange differences
At 31 December
2019
£’000
2018
£’000
42,145
13,542
(2,129)
53,558
41,801
–
344
42,145
Three cash generating units (CGU) exist within the Surgical segment whereby goodwill has been allocated. CGU1 has goodwill
and indefinite useful life intangible assets of £37.2 million and £8.1 million (2018: £39.1 million and £9.3 million) respectively.
CGU2 which is in a pre-commercialisation stage has goodwill of £9.6 million (2018: £nil) and CGU3 has goodwill of £3.9 million
(2018: £nil).
One cash generating unit (CGU) exists within the Woundcare segment whereby goodwill has been allocated. CGU1 has goodwill
of £2.9 million (2018: £3 million which is restated by £1.8 million to include the 2018 Branded CGU1 balance as a result of the
business unit reorganisation (See Note 4).
Goodwill arose on the acquisition of Advanced Medical Solutions B.V. on 30 September 2009 and on the acquisition of RESORBA®
on 22 December 2011.
£9.6 million of goodwill arose in the year on the acquisition of Sealantis Limited on 31 January 2019 and £3.9 million arose on the
acquisition of Biomatlante SA on 30 November 2019.
112 Advanced Medical Solutions Group plc Annual Report 2019
The goodwill and intangible assets with indefinite useful economic life have been allocated to the relevant CGU based upon the
underlying identification of operations and assets to which the goodwill and intangibles relate to, as follows:
At 31 December 2019
Surgical: CGU1
Surgical: CGU2
Surgical: CGU3
Woundcare: CGU1
Consolidated
Intangible
assets with
indefinite
useful life
£’000
Total
£’000
8,829
46,049
–
–
–
9,554
3,927
2,857
Goodwill
£’000
37,220
9,554
3,927
2,857
53,558
8,829
62,387
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
Surgical CGU3 relates to Biomatlante which was recently acquired in November 2019 and therefore an annual impairment
assessment has not been made.
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. With the exception of CGU2, a pre-
commercialisation venture, 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 14%, and with growth not exceeding the long-term average growth rate for the
industry for years 6 to 20. Using a forecasting period of 20 years is deemed reasonable given the nature of the products sold by the
CGUs. The growth rate would have to fall significantly in order for an impairment to be required. A discount rate of between 7.1%
and 7.5% per annum (2018: between 7.3% and 8.05%), 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. A discount
rate of 22.5% has been applied to the cash flows of CGU2 to represent the pre-commercialisation stage of this venture. The Group
has conducted a sensitivity analysis on the impairment test.
For Surgical CGU1 and Woundcare CGU1, there is no reasonably possible changes in key assumptions that would lead to an
impairment and the assumptions do not give rise to a key source of estimation uncertainty.
For Surgical CGU2 as a pre-commercial venture, the assumptions applied to the impairment test give rise to a key source of
estimation uncertainty.
The cash flows used within the impairment model are based on assumptions which are sources of estimation uncertainty and
movements in these could lead to an impairment.
The following key assumptions have been sensitised to identify the change required to eliminate the headroom within the
impairment test:
The cash flow forecasts in each of the years covered by the forecast would have to be 41% below forecast
The discount rate would have to increase to 30%
The business continuity period would have to decrease from 20 years to 11.
20 Inventories
Raw materials
Work in progress
Finished goods
2019
£’000
7,333
3,866
6,456
17,655
2018
£’000
6,526
3,373
4,901
14,800
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 (2018: £nil) carried at net realisable value.
Total gross inventories
Inventory impairment
Net inventory
2019
£’000
19,068
(1,413)
17,655
2018
£’000
16,552
(1,752)
14,800
Advanced Medical Solutions Group plc Annual Report 2019 113
Financial StatementsGovernanceCompany OverviewStrategic Report
Notes Forming Part of the Consolidated Financial Statements
continued
21 Trade and other receivables
Current assets
Trade receivables
Other receivables
Derivative financial instruments
Prepayments and accrued income
Non-current assets
Derivative financial instruments
Prepayments and accrued income
Amount receivable for the sale of goods
Loss allowance
Net trade receivables
2019
£’000
2018
£’000
25,627
24,660
1,269
715
1,610
29,221
273
281
531
2019
£’000
694
–
1,818
27,172
–
415
415
2018
£’000
25,788
24,937
(161)
(277)
25,627
24,660
The Group’s principal financial assets are cash and trade receivables. The Group’s credit risk is primarily attributable to its
trade receivables.
No interest is charged on 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.
The Group believes that the unimpaired amounts that are past due are still collectable in full, based on historic payment behaviour
and extensive analysis of customer credit risk – a large proportion of debts overdue over 30 days were recovered post the
Statement of Financial Position date. The Group does not hold any collateral or other credit enhancements over these balances.
The carrying amount and ageing of these debtors is summarised below.
Ageing of overdue but not impaired trade receivables
31 to 60 days overdue
61 to 90 days overdue
Over 90 days overdue
Total
Movement in loss allowance for trade receivables
Balance at the beginning of the year
Impairment losses recognised
Amounts written off as non-collectable
Amounts recovered during the year
Balance at the end of the year
2019
£’000
880
215
308
1,403
2018
£’000
1,693
146
–
1,839
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
277
20
(88)
(48)
161
192
126
(8)
(33)
277
Analysis of customers
In the year ended 31 December 2019, one customer accounted for more than 10% of the Group’s revenue. The customer
accounted for 12% of the Group’s revenue in 2019 (2018: one – 16% of revenue).
114 Advanced Medical Solutions Group plc Annual Report 2019
22 Cash and cash equivalents
Cash and cash equivalents
2019
£’000
2018
£’000
64,751
76,391
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
Lease liabilities
Derivative financial instruments
Accruals and deferred income
Non-current liabilities
Other payables
Lease liabilities
Bank loans
Derivative financial instruments
2019
£’000
7,402
3,164
1,353
302
3,175
15,396
3,150
8,347
664
–
12,161
Restated
2018
£’000
3,962
2,378
975
2,008
6,295
15,618
258
9,055
–
397
9,710
Trade payables, other payables and accruals and deferred income principally comprise amounts outstanding for trade purchases
and ongoing costs.
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.
Bank loans relate to a number of loans acquired as part of the Biomatlante acquisition in the year and expire in 3-5 years with an
average interest rate of 2.56%.
The Directors consider that the carrying amount of trade payables approximates to their fair value.
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 and 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 IFRS 9 ‘Financial Instruments’ and leases under IFRS 16 ‘Leases’.
Carrying value
Financial assets
Loans and receivables (including cash and cash equivalents)
Derivative instruments in designated hedge accounting relationships
Financial liabilities
Derivative instruments in designated hedge accounting relationships
Financial liabilities measured at amortised cost
Financial liabilities measured at fair value
Lease liabilities
2019
£’000
Restated
2018
£’000
91,905
102,160
988
–
302
14,816
2,739
9,700
2,406
15,298
–
10,030
Advanced Medical Solutions Group plc Annual Report 2019 115
Financial StatementsGovernanceCompany OverviewStrategic Report
Notes Forming Part of the Consolidated Financial Statements
continued
24 Financial instruments continued
In December 2018 the Group entered into a multi-currency facility with the Royal Bank of Scotland Group PLC and HSBC UK Bank
PLC. The principal features of the facility are:
• The committed value of the facility is £80 million
• There is an uncommitted accordion of an additional £20 million
• It is unsecured
• Facility will expire in December 2023
• The interest payable on drawings under the loan is based on inter-bank interest rates (EURIBOR or, if Sterling denominated,
LIBOR) plus a sliding scale margin determined by the Group’s leverage: the margin would currently be 0.60%
• 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
• It was undrawn at the end of the year
The Risk Management section on pages 44 to 47 provides an explanation of the financial risks faced by the Group and the objectives and
policies for managing those risks including hedging practices adopted. 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:
2019
Trade and other payables
Lease liabilities
Bank loans
At 31 December 2019
2018 (Restated)
Trade and other payables
Lease liabilities
At 31 December 2018
On-demand
or within
one year
£’000
Between
one and
two years
£’000
14,043
1,353
–
15,396
139
909
133
1,181
On demand
or within
one year
£’000
Between
one and
two years
£’000
Between
two and
five years
£’000
1,154
1,545
531
3,230
Between
two and
five years
£’000
14,643
975
15,618
450
791
1,241
158
1,564
1,722
Five
years
or more
£’000
1,857
5,893
–
7,750
Five
years
or more
£’000
47
6,700
6,747
Total
financial
liabilities
£’000
17,193
9,700
664
27,557
Total
financial
liabilities
£’000
15,298
10,030
25,328
Interest
rate
%
2.56%
Interest
rate
%
(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
Israeli Shekel
At 31 December 2019
Currency
Sterling
US Dollar
Euro
At 31 December 2018
116 Advanced Medical Solutions Group plc Annual Report 2019
Floating
£’000
Non-interest
bearing
£’000
Total
£’000
54,926
6,786
61,712
317
1,974
–
57,217
276
384
88
7,534
Floating
£’000
Non-interest
bearing
£’000
593
2,358
88
64,751
Total
£’000
48,321
25,059
73,380
334
1,340
1,279
58
1,613
1,398
49,995
26,396
76,391
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
Israeli Shekel
2019
£’000
10,703
13,449
5,555
45
2018
£’000
11,544
12,636
3,406
–
29,752
27,586
The financial assets all mature within one year. Credit risk is discussed in Note 21.
(c) Currency exposures
At 31 December 2019, the Group had unhedged US Dollar currency exposures of £nil (2018: £nil) and unhedged Euro currency
exposures of £nil (2018: £nil).
Risk sensitivity
The Group’s interest rate risk is not considered to be a significant risk.
The Group estimates that a 10% movement in the £:US$ or £:Euro exchange rate would have impacted 2019 Sterling revenues by
approximately 3.4% and 2.7% respectively and in the absence of any hedging this would have had an impact on profit of 2.7% and 1.0%.
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
Average contract rate
Notional principle
Fair value
2019
USD:£1
2018
USD:£1
2019
USD ‘000
2018
USD ‘000
2019
£’000
2018
£’000
Cash flow hedges
Sell US dollars
Less than 3 months
3 to 6 months
7 to 12 months
Over 12 months
Sell Euros
Less than 3 months
3 to 6 months
7 to 12 months
Over 12 months
1.386
1.328
1.271
1.301
1.319
1.432
1.423
1.407
9,000
8,000
17,500
12,500
47,000
10,400
7,500
17,000
7,000
41,900
Average exchange rate
Foreign currency
2018
EUR:£1
2019
EUR ‘000
2018
EUR ‘000
(307)
(5)
615
262
565
(230)
(589)
(1,175)
(397)
(2,391)
Fair value
2019
£’000
2018
£’000
1.114
1.116
1.110
1.110
620
1,200
1,500
1,200
4,520
600
960
1,920
320
3,800
23
25
61
12
121
(4)
(9)
(2)
(15)
2019
EUR:£1
1.125
1.143
1.112
1.144
The fair value amounts (classified under level two of the fair value hierarchy) presented above are the difference between the
market value of equivalent instruments at the Statement of Financial Position date and the contract value of the instruments.
No profits or losses are included in operating profit in the year (2018: £nil) in respect of FVTPL contracts. The gain of £3,091,000
(2018: £3,064,000 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.
Advanced Medical Solutions Group plc Annual Report 2019 117
Financial StatementsGovernanceCompany OverviewStrategic Report
Notes Forming Part of the Consolidated Financial Statements
continued
26 Foreign exchange rates
Currency
US Dollar
Euro
27 Share capital
Number of Ordinary Shares of 5p each
At 1 January 2018
Share options exercised
At 31 December 2018
Share options exercised
At 31 December 2019
Average rate
Closing rate
Percentage change
2019
2018
2019
2018
Average
%
Closing
%
1.275
1.138
1.337
1.130
1.320
1.175
1.280
1.118
5
(1)
3
5
Allotted,
called up
and fully paid
‘000
212,642
831
213,473
1,417
214,890
During the year, employees exercised share options and options over LTIPs for 1,087,946 shares (2018: 642,121) at a range of
option prices from 71p to 185p.
During the year, 312,521 (2018: 353,045) 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 Statement of Financial Position date, 420,270 (2018: 424,652) shares
are retained by the Trust to meet the matching requirements of the scheme.
Ordinary Shares of 5p each
At 1 January 2018
Share options exercised
At 31 December 2018
Share options exercised
At 31 December 2019
Allotted,
called up
and fully paid
£’000
10,632
42
10,674
71
10,745
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.
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 instruments are 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 parent’s 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 £3,538,000 loss has been recorded in the translation reserve during the period, which would otherwise have been recognised in
Administration costs (2018: £466,000 gain) if hedge accounting had not been adopted.
118 Advanced Medical Solutions Group plc Annual Report 2019
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
2019
£’000
265
748
843
1,856
2018
£’000
136
936
587
1,659
Unapproved Executive Share Option Scheme, 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
Share price at grant date
Exercise price
Expected life
Contractual life
Risk free rate
Expected volatility
Expected dividend yield
Fair value of options
Grant Date
Share price at grant date
Exercise price
Expected life
Contractual life
Risk free rate
Expected volatility
Expected dividend yield
Fair value of options
20/04/2009
15/04/2011
08/09/2011
10/05/2012
26/04/2013
15/04/2014
33.75p
33.75p
3 yrs
10 yrs
2.40%
34%
0%
6p
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
77.5p
77.5p
3 yrs
10 yrs
0.36%
36%
0.7%
15p
115.75p
115.75p
3 yrs
10 yrs
0.80%
36%
0.7%
23p
19/09/2014
02/04/2015
18/04/2016
06/04/2017
13/04/2018
24/04/2019
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
246.7p
246.7p
3 yrs
10 yrs
0.18%
23%
0.4%
29p
308.0p
308.0p
3 yrs
10 yrs
0.94%
34%
0.7%
41p
328.75p
328.75p
3 yrs
10 yrs
0.75%
26%
0.4%
48p
Advanced Medical Solutions Group plc Annual Report 2019 119
Financial StatementsGovernanceCompany OverviewStrategic Report Notes Forming Part of the Consolidated Financial Statements
continued
29 Share-based payments continued
Under the terms of the Company’s Share Option Scheme, approved by shareholders in 2019, 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 determined prior to
the date of the offer. Individuals who are entitled to awards under the LTIP are not 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 2019:
Date of grant
Option
price (p)
Weighted
average price at
exercise (p)
Number of
options as at
1 January 2019
Remaining
life 1 January
2019
Issued
Lapsed
Exercised
Number of
options as at
31 December
2019
Remaining life
31 December
2019
Unapproved Executive Share Option Scheme
10.05.12
15.04.14
19.09.14
02.04.15
18.04.16
06.04.17
13.04.18
24.04.19
69.08
115.75
121.75
132.00
184.60
246.70
308.00
328.75
319.00
5,500
330.00
122,000
319.00
33,360
312.74
139,546
317.69
601,088
–
–
–
500,580
404,304
–
Enterprise Management Incentive Scheme
16.04.10
42.00
274.00
38,000
Company Share Option Plan
15.04.11
08.09.11
10.05.12
26.04.13
15.04.14
19.09.14
02.04.15
18.04.16
06.04.17
13.04.18
24.04.19
88.00
86.25
69.08
77.50
115.75
121.75
132.00
184.60
246.70
308.00
328.75
–
–
330.00
–
319.00
319.00
6,000
1,000
1,000
1,000
24,400
24,640
330.00
17,727
330.00
148,053
211,922
156,476
–
–
–
3.4
5.3
5.7
6.2
7.3
8.3
9.3
–
1.3
2.3
2.7
3.4
4.3
5.3
5.7
6.2
7.3
8.3
9.3
–
–
–
–
–
–
–
535,437
–
–
–
–
–
(5,500)
–
(16,000)
106,000
(5,360)
28,000
(59,546)
80,000
(408,804)
192,284
(49,483)
(55,283)
(34,707)
–
–
–
451,097
349,021
500,730
–
–
–
–
–
–
–
–
–
–
–
–
(23,000)
15,000
–
–
–
–
–
–
–
–
(18,875)
(26,695)
–
–
(1,000)
6,000
1,000
–
–
1,000
(5,180)
19,220
(24,640)
–
(5,000)
12,727
(81,255)
66,798
–
–
–
193,047
129,781
157,341
2.4
4.3
4.7
5.2
6.3
7.3
8.3
9.3
0.3
1.3
1.7
2.4
3.3
4.3
4.7
5.2
6.3
7.3
8.3
9.3
–
–
157,341
–
The weighted average remaining contractual life of the options outstanding at 31 December 2019 is 8.2 years (2018: 7.7 years).
2,436,596
692,778
(185,043)
(635,285)
2,309,046
2019
2018
Number of
Options
Weighted
average
exercise price
(p)
Number of
Options
Weighted
average
exercise price
(p)
2,436,596
219.12
2,273,099
692,778
(635,285)
(185,043)
328.75
314.97
289.25
599,479
(333,413)
(102,569)
2,309,046
260.72
2,436,596
528,029
150.16
414,173
183.50
308.00
314.75
242.13
219.12
113.78
Outstanding at beginning of the year
Issued
Exercised
Lapsed
Outstanding at end of the year
Exercisable at end of the year
120 Advanced Medical Solutions Group plc Annual Report 2019
Long Term Incentive Plan (LTIP)
The fair value of the LTIP is calculated based on a binomial tree model assuming the inputs below:
Grant date
06/06/2014
02/04/2015
10/09/2015
18/04/2016
06/04/2017
02/11/2017
13/04/2018
24/04/2019
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
117.0p
0p
3 yrs
10 yrs
0.80%
36%
0.7%
75%
85.9p
132.0p
0p
3 yrs
10 yrs
0.80%
29%
0.7%
80%
64.4p
151.5p
0p
3 yrs
10 yrs
0.67%
27%
0.4%
80%
75.5p
184.6p
246.7p
344.7p
306.8p
328.75p
0p
3 yrs
10 yrs
0.67%
25%
0.4%
0p
3 yrs
10 yrs
0.18%
23%
0.4%
0p
3 yrs
10 yrs
0.18%
23%
0.4%
0p
3 yrs
10 yrs
0.94%
25%
0.4%
0p
3 yrs
10 yrs
0.75%
26%
0.4%
64%
159.0p
64%
220.0p
64%
220.0p
72%
264.0p
50%
297.0p
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 71. The numbers
shown are maximum entitlements and the actual number of shares issued (if any) will depend on these performance conditions
being achieved.
Date of grant
Long-Term Incentive Plan
Market
price at
date of
Grant (p)
Number of
LTIPs at
1 January
2019
Remaining
life
1 January
2019
Issued
Lapsed
Exercised
Number of
LTIPs at
31 December
2019
Remaining
life
31 December
2019
06.06.14
02.04.15
10.09.15
18.04.16
06.04.17
02.11.17
13.04.18
24.04.19
117.00
132.00
151.50
184.60
246.70
344.70
308.00
328.75
49,033
103,566
262,186
610,023
912,324
9,308
364,645
–
5.5
6.3
6.7
7.3
8.3
8.8
9.3
–
–
–
–
–
–
–
437,469
–
–
–
(10,583)
(4,296)
38,450
99,270
(115,247)
146,939
(59,180)
(322,535)
228,308
(4,449)
–
–
–
–
–
–
–
907,875
9,308
364,645
437,469
2,311,085
437,469
(63,629)
(452,661)
2,232,264
4.5
5.3
5.7
6.3
7.3
7.8
8.3
9.3
The weighted average remaining contractual life of the LTIPs outstanding at 31 December 2019 is 7.5 years (2018: 8.1 years).
Outstanding at beginning of the year
Issued
Exercised
Lapsed
Outstanding at end of the year
Exercisable at end of year
The exercise price of these options is £1 for each issue of LTIPs.
2019
Number of
Options
2018
Number of
Options
2,311,085
1,887,825
437,469
824,500
(452,661)
(308,708)
(63,629)
(92,532)
2,232,264
2,311,085
512,967
414,785
Advanced Medical Solutions Group plc Annual Report 2019 121
Financial StatementsGovernanceCompany OverviewStrategic Report
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
02/05/2008
23/04/2009
05/05/2010
11/05/2011
10/05/2012
02/07/2013
Share price at grant date
18.25p
35.50p
34.00p
40.32p
83.00p
70.625p
74.125p
Exercise price
Expected life
Contractual life
Risk-free rate
Expected volatility
Expected dividend yield
Probability of performance conditions
Fair value of option
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
0p
3.5 yrs
10 yrs
5.00%
27%
0%
100%
14p
0p
3.5 yrs
10 yrs
5.00%
38%
0%
100%
30p
0p
3 yrs
10 yrs
2.40%
30%
0%
100%
72p
0p
5 yrs
10 yrs
2.40%
34%
0%
100%
61p
0p
5 yrs
10 yrs
1.92%
18%
0.7%
100%
72p
0p
5 yrs
10 yrs
0.39%
34%
0.7%
100%
110p
0p
5 yrs
10 yrs
0.69%
36%
0.7%
100%
63p
30/04/2014
29/04/2015
03/05/2016
02/05/2017
13/04/2018
24/04/2019
126.0p
0p
5 yrs
10 yrs
0.80%
36%
0.7%
100%
110p
141.5p
0p
5 yrs
10 yrs
0.80%
31%
0.7%
100%
124p
183.0p
264.1p
306.8p
328.75p
0p
5 yrs
10 yrs
0.67%
25%
0.4%
100%
160p
0p
5 yrs
10 yrs
0.18%
23%
0.4%
100%
233p
0p
5 yrs
10 yrs
0.94%
25%
0.4%
100%
266p
0p
5 yrs
10 yrs
0.75%
26%
0.4%
100%
296p
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 being met. Details on the DSB are given on page 68.
Grant date
Deferred Share Bonus Plan
12.04.07
02.05.08
23.04.09
05.05.10
11.05.11
10.05.12
02.07.13
30.04.14
29.04.15
03.05.16
02.05.17
13.04.18
24.04.19
Market
price at
date of
grant (p)
Number of
DSB matching
shares at
1 January
2019
Remaining
life
1 January
2019
Issued
Lapsed
Exercised
Number of
DSB matching
shares at
31 December
2019
Remaining
life
31 December
2019
18.25
35.50
34.00
40.32
83.00
70.63
74.13
126.00
141.50
183.00
264.10
306.77
328.75
11,187
13,640
19,416
16,120
9,858
10,562
102,070
85,991
141,051
318,567
272,369
285,413
–
1,286,244
–
–
0.3
1.3
2.4
3.4
4.5
5.3
6.3
7.3
8.3
9.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(4,428)
–
(1,051)
–
(1,853)
–
(4,514)
(1,218)
6,759
13,640
18,365
16,120
8,005
10,562
97,556
84,773
(23,635)
117,416
(556)
(25,675)
292,336
(5,562)
(13,803)
253,004
(14,131)
(135,419)
135,863
275,800
275,800
(14,436)
(9,986)
251,378
(34,685)
(221,582)
1,305,777
–
–
–
0.3
1.4
2.4
3.5
4.3
5.3
6.3
7.3
8.3
9.3
The weighted average remaining contractual life of the DSBs outstanding at 31 December 2019 is 6.5 years (2018: 6.9 years).
122 Advanced Medical Solutions Group plc Annual Report 2019
Outstanding at beginning of the year
Issued
Exercised
Lapsed
Outstanding at end of the year
Exercisable at end of year
The exercise price of the matching shares is £nil.
2019
Number of
Options
2018
Number of
Options
1,286,244
1,155,699
275,800
290,008
(221,582)
(152,843)
(34,685)
(6,620)
1,305,777
1,286,244
665,532
409,895
Deferred Annual Bonus Scheme (DAB)
The fair value of the DAB 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
06/04/2017
13/04/2018
24/04/2019
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
246.7p
308.0p
328.75p
0p
3 yrs
10 yrs
0.67%
25%
0.4%
100%
183p
0p
3 yrs
10 yrs
0.18%
23%
0.4%
100%
250p
0p
3 yrs
10 yrs
0.94%
25%
0.4%
100%
308p
0p
3 yrs
10 yrs
0.75%
26%
0.4%
100%
329p
The expected volatility was determined by calculating the historic volatility of the Group’s share price over the previous three years.
The DAB scheme began on 21 May 2014. Participants compulsorily defer part of their bonus for the relevant financial year and they
vest at the end of a three-year period from the time of grant.
Grant date
Deferred Annual Bonus Plan
21.05.2014
15.04.2015
18.04.2016
06.04.2017
13.04.2018
24.04.2019
Market
price at
date of
grant (p)
Number of
DAB matching
shares at
1 January
2019
Remaining
life
1 January
2019
Issued
Lapsed
Exercised
Number of
DAB matching
shares at
31 December
2019
Remaining
life
31 December
2019
115.40
129.00
184.60
246.70
308.00
328.75
520
20,847
89,888
64,886
63,037
–
239,178
5.3
6.3
7.3
8.3
9.3
–
–
–
–
–
–
36,721
36,721
–
–
–
–
–
–
–
–
(8,454)
(71,422)
–
–
–
520
12,393
18,466
64,886
63,037
36,721
(79,876)
196,023
4.3
5.3
6.3
7.3
8.3
9.3
The weighted average remaining contractual life of the DABs outstanding at 31 December 2019 is 7.8 years (2018: 7.5).
Outstanding at beginning of the year
Issued
Exercised
Lapsed
Outstanding at end of the year
Exercisable at end of year
2019
Number of
Options
2018
Number of
Options
239,178
233,587
36,721
(79,876)
–
63,037
(57,446)
–
196,023
239,178
31,379
21,367
30 Related party transactions
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 2019 123
Financial StatementsGovernanceCompany OverviewStrategic Report
Notes Forming Part of the Consolidated Financial Statements
continued
31 Acquisitions
On 31 January 2019 the Group acquired the entire issued share capital of Sealantis Limited, an Israel-based developer of an
alginate-based tissue adhesive technology platform.
Identifiable net assets acquired
Technology-based Intangible assets
Property, plant and equipment
Other receivables
Cash and cash equivalents
Trade and other payables
Deferred tax on Intangible assets
Grant liability
Goodwill
Satisfied by
Cash consideration
Contingent consideration
£’000
15,012
21
59
999
(804)
(2,402)
(1,694)
9,615
£’000
19,407
1,399
20,806
Contingent consideration reflects the fair value of a royalty due to the sellers in each financial year up to 31st December 2027.
Net cash flow on acquisition
Cash consideration
Cash acquired
£’000
19,407
(999)
18,408
None of the goodwill on the acquisition is expected to be deductible for income tax..
In the year ended 31 December 2019, Sealantis contributed no revenue to the Group and had an operating loss of £1,001,000.
In addition, amortisation of intangible assets of £1,574,000 and a credit of £345,000 related to a revaluation of a long-term debt
were recorded within the Group as a result of the acquisition. Had Sealantis been part of the Group since 1 January 2019, it would
have contributed no revenue and £1,140,000 of operating loss.
On 30 November 2019 the Group acquired the entire issued share capital of Biomatlante S.A. a French based developer and
manufacturer of synthetic bone graft technologies.
Identifiable net assets acquired
Technology-based Intangible assets (Know-how)
Technology-based Intangible assets (Patents)
Customer-related Intangible assets
Development costs Intangible assets
Finance lease assets
Property, plant and equipment
Inventory
Trade receivables
Lease liabilities
Cash and cash equivalents
Trade and other payables
Loan and borrowings
Deferred tax on Intangible assets
Goodwill
Satisfied by
Cash consideration
124 Advanced Medical Solutions Group plc Annual Report 2019
£’000
2,186
360
426
30
407
167
682
1,471
(430)
135
(1,441)
(1,267)
(742)
3,927
£’000
5,911
Net cash flow on acquisition
Cash consideration
Completion payment
Cash acquired
£’000
5,911
(39)
(135)
5,737
None of the goodwill on the acquisition is expected to be deductible for income tax.
In the year ended 31 December 2019, Biomatlante contributed £431,000 revenue to the Group and had an operating profit of
£93,000. In addition, amortisation of intangible assets of £29,000 was recorded within the Group as a result of the acquisition.
Had Biomatlante been part of the Group since 1 January 2019, it would have contributed £4,581,000 of revenue and £42,000 of
operating profit.
32 Subsequent events
Subsequent to the Statement of Financial Position date, the Group has been impacted by the COVID-19 pandemic. The impact has
been discussed on page 1.
Advanced Medical Solutions Group plc Annual Report 2019 125
Financial StatementsGovernanceCompany OverviewStrategic Report Company Statement of Financial Position
At 31 December 2019
Non-current assets
Investments in subsidiaries
Loans and other financial assets
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 premium
Share-based payments reserve
Investment in own shares
Retained earnings
Equity attributable to equity holders of the parent
Company Statement of Changes in Equity
For the year ended 31 December 2019
Note
2019
£’000
2018
£’000
3
58,017
255
52,147
415
58,272
52,562
4
5
6
24,723
59,043
83,766
3,380
71,676
75,056
(7,838)
75,928
(7,411)
67,645
134,200
120,207
10,745
36,226
9,466
(159)
10,674
35,192
7,333
(156)
77,922
67,164
134,200
120,207
Share
premium
£’000
Retained
earnings
£’000
Total
£’000
34,778
54,086
104,020
At 1 January 2018
Share-based payments
Share options exercised
Shares purchased by EBT
Shares sold by EBT
Total comprehensive income
Dividends paid
At 31 December 2018
Share-based payments
Share options exercised
Shares purchased by EBT
Shares sold by EBT
Total comprehensive income
Dividends paid
At 31 December 2019
Share capital
£’000
10,632
–
42
–
–
–
–
Share-based
payments
£’000
4,676
1,659
998
–
–
–
–
Investment in
own shares
£’000
(152)
–
–
(600)
596
–
–
–
414
–
–
–
–
10,674
7,333
(156)
35,192
–
71
–
–
–
–
1,856
277
–
–
–
–
–
–
(603)
600
–
–
–
1,034
–
–
–
–
10,745
9,466
(159)
36,226
–
–
–
–
15,570
(2,492)
67,164
–
–
–
–
13,766
(3,008)
77,922
1,659
1,454
(600)
596
15,570
(2,492)
120,207
1,856
1,382
(603)
600
13,766
(3,008)
134,200
The Company reported a net profit for the year ended 31 December 2019 of £13.8 million (2018: £15.6 million).
The financial statements of Advanced Medical Solutions Group plc (registration number 2867684) on pages 126 to 130 were
approved by the Board of Directors and authorised for issue on 7 May 2020 and were signed on its behalf by:
C Meredith
Chief Executive Officer
126 Advanced Medical Solutions Group plc Annual Report 2019
Notes to the Company Financial Statements
Year ended 31 December 2019
Significant accounting policies
1
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 the advantage of the FRS 101 disclosure
exemptions have been taken.
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.
Critical judgements in applying the Company’s accounting policies and areas of key
estimation uncertainty
In the process of applying the Company’s accounting policies, which are described below, no judgements have been made by
the Directors, nor do any areas of key estimation uncertainty exist that have a significant effect on the amounts recognised in the
Financial Statements.
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 Statement of Financial Position date, monetary assets and liabilities that are denominated in foreign currencies
are retranslated at the rates prevailing on the Statement of Financial Position 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 to 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.
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 Statement of Financial Position 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.
Advanced Medical Solutions Group plc Annual Report 2019 127
Financial StatementsGovernanceCompany OverviewStrategic Report Notes to the Company Financial Statements
continued
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 Statement of Financial Position 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 Statement of Financial Position 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.
Income statement
2
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 2019 of £13,766,000
(2018: Profit of £15,570,000).
The Auditor’s 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 16 (2018: 16), all of whom were classified as Administration (2018: same).
The Directors’ remuneration is detailed in Note 9 to the Consolidated Financial Statements.
Staff costs for all employees, including Executive Directors, consists of:
Wages and salaries
Social Security costs
Pension costs
Share-based payments (see Note 29)
3
Investments in subsidiaries
Cost
At 1 January 2019
Additions in the year
At 31 December 2019
Provisions for impairment
At 1 January 2019
At 31 December 2019
Net Book value
At 31 December 2019
At 31 December 2018
Year ended
31 December
2019
£’000
Year ended
31 December
2018
£’000
1,400,081
3,355,650
552,613
85,780
512,247
102,872
1,855,688
1,659,409
3,894,162
5,630,178
Investments
in subsidiaries
£’000
80,817
5,870
86,687
28,670
28,670
58,017
52,147
Additions in the year represent the acquisition of Biomatlante S.A.
Shares in Group undertakings and loans to Group undertakings have been written down to recognise losses in subsidiary companies.
128 Advanced Medical Solutions Group plc Annual Report 2019
Investments in subsidiaries continued
3
The following were subsidiary undertakings at the end of the year and have all been included in the consolidated accounts.
Name
Country of operation
Proportion of
voting rights and
ordinary share
capital held
Nature of business
Registered address
Advanced Medical Solutions
Limited
England
100%
Development and manufacture
of medical products
Advanced Medical Solutions
(UK) Limited
England
100%
Holding Company
Advanced Medical Solutions
Trustee Company Limited
England
100%
Trustee Company
Advanced Medical Solutions
(Plymouth) Limited
England
100%
Dormant
Advanced Healthcare
Systems Limited
England
100%*
Dormant
MedLogic Global Holdings
Limited
England
100%¶
Holding Company
Innovative Technologies
Limited
England
100%‡
Dormant
Premier Park, 33 Road One,
Winsford Industrial Estate,
Winsford, Cheshire, CW7 3RT,
United Kingdom
Premier Park, 33 Road One,
Winsford Industrial Estate,
Winsford, Cheshire, CW7 3RT,
United Kingdom
Premier Park, 33 Road One,
Winsford Industrial Estate,
Winsford, Cheshire, CW7 3RT,
United Kingdom
Premier Park, 33 Road One,
Winsford Industrial Estate,
Winsford, Cheshire, CW7 3RT,
United Kingdom
Premier Park, 33 Road One,
Winsford Industrial Estate,
Winsford, Cheshire, CW7 3RT,
United Kingdom
Premier Park, 33 Road One,
Winsford Industrial Estate,
Winsford, Cheshire, CW7 3RT,
United Kingdom
Premier Park, 33 Road One,
Winsford Industrial Estate,
Winsford, Cheshire, CW7 3RT,
United Kingdom
Munnikenheiweg 35, 4879 NE
Etten-Leur, Netherlands
Am Flachmoor 16, 90475
Nuremberg, Germany
Am Flachmoor 16, 90475
Nuremberg, Germany
Haltravska No. 9/578, 34401,
Domazlice, Czech Republic
Advanced Medical Solutions
BV
Advanced Medical Solutions
(Germany) GmbH
Resorba Medical GmbH
Netherlands
100%
Germany
100%^
Germany
100%#
Resorba s.r.o.
Czech Republic
100%#
Resorba ooo
Advanced Medical Solutions
Israel (Sealantis) Limited
Biomatlante S.A
MPN Medizin Produkte
Neustadt GmbH
Advanced Medical Solutions
(USA) Inc
Russia
Israel
100%#
100%*~
France
100%~
Germany
100%#
USA
100%¶
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 Fadeeva Str. 5, 125047
Development and manufacture
of medical products
Development and manufacture
of medical products
Manufacture of medical products Sierkdorfer Str. 15, 23730,
Moscow, Russia
Malat Building, Technion City,
Haifa, Israel 3200004
5, Rue Edouard Belin, 44360
Vigneux de Bretagne, France
Marketing support of medical
products
Neustadt in Holstein, Germany
2711 Centerville Road, Suite 400,
Wilmington, Newcastle, 19808,
Delaware, USA
Premier Park, 33 Road One,
Winsford Industrial Estate,
Winsford, Cheshire, CW7 3RT,
United Kingdom
Advanced Medical Solutions
(Europe) Limited
England
100%
Providing financial support to
other Group entities
* Held indirectly through Advanced Medical Solutions Limited.
‡ Held indirectly through MedLogic Global Holdings Limited.
^ 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.
~ Acquired during the financial year ended 31 December 2019.
The above table reflects the situation at the year-end.
Advanced Medical Solutions Group plc Annual Report 2019 129
Financial StatementsGovernanceCompany OverviewStrategic Report Notes to the Company Financial Statements
continued
4 Trade and other receivables
Due within one year
Prepayments and accrued income
Other receivables
Amounts due from Group undertakings
Derivative financial instruments
Amounts Owed by Group undertakings
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
Amounts owed to group undertakings
Accruals and deferred income
Derivative financial instruments
2019
£’000
2018
£’000
179
–
24,423
121
24,723
2019
£’000
5,234
21,529
26,763
412
74
2,894
–
3,380
2018
£’000
4,925
309
5,234
2,340
2,340
2,340
2,340
24,423
2,894
2019
£’000
6,232
1,606
–
7,838
2018
£’000
3,922
3,474
15
7,411
6 Share capital
Details on the share capital of the Company are provided in Note 27 on page 118 in the Notes 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
2019
£’000
265
748
843
2018
£’000
136
936
587
1,856
1,659
Details on the share-based payments of the Company are provided in Note 29 on pages 119 to 123 in the Notes to the
Group’s accounts.
130 Advanced Medical Solutions Group plc Annual Report 2019
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
2019
£m
2018
£m
102.4
25.3
20.0
9.3p
115.2
111.8
(35.7)
191.3
10.6
9.5
0.6
36.2
1.5
0.6
(0.2)
132.5
191.3
102.6
28.9
22.9
10.7p
86.0
119.2
(32.5)
172.7
10.5
7.3
0.7
35.2
1.5
(2.4)
3.3
116.6
172.7
2017
£m
96.9
25.2
20.1
9.5p
84.5
94.5
(26.7)
152.3
10.5
4.7
0.8
34.8
1.5
0.6
2.8
96.6
152.3
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
Advanced Medical Solutions Group plc Annual Report 2019 131
Financial StatementsGovernanceCompany OverviewStrategic Report Advisers
Nominated Advisor and Broker
Investec Bank plc
30 Gresham Street
London EC2V 7QN
Auditor
Deloitte LLP
Statutory Auditor
PO Box 500
2 Hardman Street
Manchester M60 2AT
Tax Adviser
PwC
No. 1 Spinningfields
1 Hardman Square
Manchester M3 3EB
Bankers
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
Registrars and Transfer Office
Link Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Public Relations
Consilium Strategic Communications
41 Lothbury
London EC2R 7HG
132 Advanced Medical Solutions Group plc Annual Report 2019
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Registered Office:
Premier Park, 33 Road One
Winsford Industrial Estate
Winsford, Cheshire, CW7 3RT
Company Number: 2867684
Tel: +44 (0)1606 863500
Fax: +44 (0)1606 863600
e-mail: info@admedsol.com
Web: www.admedsol.com