Annual Report & Accounts 2020
Creating quality
outcomes through
our innovative surgical
and woundcare
products
About AMS
Advanced Medical Solutions
is a world-leading developer
and manufacturer of innovative
and technologically advanced
products for the global surgical
and woundcare markets
Creating quality outcomes for our...
..patients
...employees
...investors
Read about our Patients
on pages 8 to 9 and 30 to 31
Read about our Employees
on pages 10 to 11 and 30 to 31
Read about our Investors
on pages 12 to 13 and 30 to 31
For our other Stakeholders please see pages 32 to 35
Impact of COVID-19
The restrictions relating to the COVID-19 pandemic
during 2020 severely disrupted the entire global
market and resulted in a significant slowdown in
surgical and wound treatment volumes. In addition,
the reduced access to hospitals for our direct sales
teams and our partners sales teams significantly
restricted our business development activities
during the year.
Throughout 2020, we maintained supply to
our healthcare partners and customers whilst
implementing safety measures to minimise risks for
our employees and their families and continued to
invest in R&D and other key projects in order to be
in a good position for strong growth as our end
markets recover.
Our strong cash position (£54 million cash, no
debt and an undrawn £80 million credit facility at
31 December 2020) underlines our robust financial
condition, which enabled us to weather the global
disruption caused by the pandemic.
The biggest impact was felt in the second quarter
of 2020, with subsequent quarters being less
impacted as hospitals gradually started to reinstate
non-urgent procedures. In the first quarter of 2021,
demand for our products remained below normal
historical levels due to COVID-19 disruption but
vaccination progress provides increased confidence
of a return to more normal volumes later in the year.
B
Advanced Medical Solutions Group plc Annual Report & Accounts 2020
Financial Highlights
Group revenue (£ million)
Diluted earnings per share (p)
£86.8m
2019: £102.4m
Change: -15%
Profit before tax (%)
11.6%
2019: 23.7%
Change: -12.1pp
3.94p
2019: 8.72p
Change: -55%
Adjusted1 diluted earnings per share (p)
5.44p
2019: 9.83p
Change: -45%
Adjusted1 profit before tax (%)
Net operating cash flow
15.4%
2019: 26.0%
Change: -10.60pp
£21.5m
2019: £21.7m
Change: -1%
Profit before tax (£ million)
Net cash2 (£ million)
£10.1m
2019: £24.3m
Change: -58%
£53.8m
2019: £64.1m
Change: -16%
Company Overview
1 Highlights
2 Our Business at a Glance
4
Investment Case
Strategic Report
8 Our Patients
10 Our Employees
12 Our Investors
14 Chief Executive’s Q&A
16 Market Overview
18 Our Strategy
20 Strategy in Action
24 Key Performance Indicators
26 Operating Review – Surgical
28 Operating Review – Woundcare
30 Stakeholder Engagement (s172)
36 ESG and Sustainability
44 Financial Review
46 Risk Management
Governance
52 Board of Directors
54 Senior Management Team
56 Corporate Governance Report
63 Audit Committee Report
66 Remuneration Report
77 Directors’ Report
Financial Statements
Independent Auditor’s Report
82
92 Consolidated Income Statement
Consolidated Statement of
92
Comprehensive Income
93 Consolidated Statement of Financial Position
94 Consolidated Statement of Changes in Equity
96 Consolidated Statement of Cash Flows
97 Notes Forming Part of the Consolidated
Adjusted1 profit before tax (£ million)
Proposed full-year dividend per share (p)
Financial Statements
£13.4m
2019: £26.6m
Change: -50%
1.70p
2019: £1.55p
Change: +10%
Operational Highlights (including post-period end)
• Sales and profitability heavily impacted by COVID-19.
133 Company Statement of Financial Position
134 Company Statement of Changes in Equity
135 Notes to the Company Financial Statements
140 Five Year Summary
140 Alternative Performance Measures
141 Advisors
• Proposed increased dividend and repayment of UK Government furlough reflects Board’s confidence and strong financial position.
• Investment in R&D increased to £7.9 million (2019: £6.5 million) as progress continued on all key projects across the Group.
• Approval and restricted US launch of LiquiBand® Rapid™. Successful completion of LiquiBand® XL clinical trials keeps us on track
for approval and launch towards the end of 2021.
• US clinical trial for LiquiBandFix8® progressing well. Filing expected in 2022, following 12 month patient follow up.
• Seal-G® and Seal-G® MIST clinical study enrolment began in February 2021. CE mark extensions expected in H1 2021.
Provides access to a new $1 billion market to fulfil a significant unmet need.
• Acquisition of Raleigh Adhesive Coatings in November 2020 for £22 million. Strong strategic fit with commercial synergies.
• Grahame Cook appointed to Board in February 2021. Steve Bellamy to retire from the Board at the AGM in June 2021.
Board refreshment to continue over the next two years.
Certain financial measures, including adjusted results above, are not defined under IFRS and are alternative performance measures as described on page 140.
1.
2. Net cash is defined as cash and cash equivalents plus short term investments less bank loans and financial liabilities excluding those relating to IFRS 16.
01
OverviewStrategic ReportGovernanceFinancial Statements
Our Business at a Glance
Our Purpose
Creating quality outcomes through our
innovative surgical and woundcare products
Achieved through our value chain
New product development
Research and development
Design and testing
Regulatory
Approvals for new products and new territories
Maintain approvals for existing products/markets
Operations
Manufacturing and security of supply
Quality assurance
Routes to market
Flexible route to market incorporating our direct
sales teams, our global network of distributors
and our OEM partners
For information see Our Supply Chain on pages 34 and 35
Underpinned by Our Values
For more information see Our Values on
pages 42 and 43
02
Care
Caring about the work we
undertake and the real life
differences we can make
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Our Strategic Pillars
Delivering for Our Stakeholders
Growth
Exploiting the opportunities
arising from having a broad
product range sold via multiple
routes to market and across
multiple geographies
Innovation
Strengthening our portfolio
by developing or acquiring
market-leading high
quality products
Operational
Excellence
Continuously improving our
operations to drive out cost
and defend margin
Culture
Investing in recruiting and
developing talent while
embedding our values
of Care, Fair, Dare
Our Patients
Delivering excellent outcomes
for our Patients
Our Employees
Being a great place for our
Employees to work
Our Investors
Delivering long-term sustainable
growth and value for our Investors
Our Clinicians
Delivering effective, efficient and
safe experiences for our Clinicians
Our Partners
Delivering quality and value
for our Partners
Our Regulators
Meeting the evolving
requirements of our Regulators
Our Communities
Involvement and support for
our Communities
Our Supply Chain
Strong, mutually beneficial
relationships for our Supply Chain
For information see Our Strategy on pages 18 to 23
For information on Our Stakeholders see pages 30 to 35
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
03
OverviewStrategic ReportGovernanceFinancial Statements Investment Case
Innovation
Products
Operational
Excellence
Our investment in R&D
enables us to develop
high-quality, innovative
products that create
quality outcomes for
clinicians and patients.
Our strong portfolio of
products provides multiple
growth drivers and high
values of recurring revenues
with strong gross margins.
Our manufacturing
capabilities and extensive
regulatory expertise enable
us to obtain market access
and securely supply
our products.
We develop or acquire products
and technologies which can
drive market share gains in high
value segments. We have been
increasing R&D investment in our
innovation hubs in the UK, France,
Germany and Israel, resulting in
an R&D pipeline that is stronger
than ever. In 2020, we incurred
£7.9 million of gross R&D spend,
representing 9.1% of sales (2019:
£6.5 million; 6.3%).
In recent years we have
expanded our product ranges
through product development
and acquisition to create a
strong, balanced portfolio of
complementary high-quality,
innovative and technologically
advanced surgical and woundcare
products with multiple growth
drivers providing high values of
recurring revenues with strong
gross margins.
In 2020 gross margin was impacted
by the COVID-19 pandemic.
Our specialist lean manufacturing
sites and world class quality
systems provide security of
supply and allow us to focus
on delivering excellent customer
service, lowering operational
costs and improving margins.
Our extensive regulatory
experience enables us to bring
products to market, implement
post market surveillance and
comply with increasing levels
of regulatory standards such
as the Medical Device
Regulations (MDR).
19.8%
Percentage of sales
from new products
2019: 23.6%
53.0%
Gross margin %
2019: 59.1%
89%
Customer service %
(OTIF: On-Time-In-Full)
2019: 80%
04
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Commercial
Flexibility
Growth
Our flexible approach
to route to market
incorporating direct sales
teams and a global network
of distributors and OEM
partners enables us to
access healthcare markets
globally and maximise
value to AMS.
We have a track record
of strong growth and
significant potential
for accelerated future
growth with our existing
products and exciting
near-term pipeline of
high-potential products.
Our commercial success is based
on our strategy of selecting the
best route to market for each
product to maximise our value.
We have been successful in our
key US LiquiBand® market by
implementing a hybrid model
with our four key distribution
partners providing channel
coverage, supported by our
specialist sales teams on the
ground. Elsewhere, we use a
mix of direct sales, OEM partners
and distributors. We will continue
to adopt this flexible approach
as we globalise our exciting
newer technologies.
Favourable global healthcare
trends are expected to result
in our markets growing.
Our existing products are all
positioned to gain market share
and enter new geographies
with regulatory developments
expected to provide further
opportunities. Key projects
in our near-term pipeline such
as LiquiBand® XL, Sealantis
and the LiquiBandFix8® PMA
will enable us to enter new
large markets with great
products. Strategically aligned
acquisitions will continue to
supplement our organic growth.
In 2020 CAGR was impacted
by COVID-19.
Profitable
& Cash
Generative
We have a strong balance
sheet and track record
of cash generation
which enables us to
invest in longer-term
growth opportunities.
Our ongoing record of cash
generation even during severe
periods of COVID-19 disruption
and our cash position (£54 million
at December 2020 with an
£80 million undrawn unsecured
debt facility) enables us to
continue to progress our key
projects whilst investing in select
strategically aligned acquisitions.
In 2020, we acquired Raleigh
Coatings which increases
our woundcare capabilities
and provides significant
revenue and cost synergies.
84
10.5%
Countries sold into
2019: 84
Sales CAGR over ten years
2019: 15.6%
£21.5m
Net cash flow from
operating activities
2019: £21.7m
05
OverviewStrategic ReportGovernanceFinancial Statements Living by our values:
Dare
Moving boundaries and challenging constructively to build on others’ ideas
Despite the impact of the COVID-19 pandemic we increased our level
of investment in R&D. Our investments in key projects such as Sealantis,
LiquiBandFix8® PMA and the Medical Device Regulation (MDR) are expected
to drive significant commercial benefits in the next few years. In spite of the
unprecedented conditions, we leveraged our robust balance sheet to further
invest in the future of the Group with the acquisition of Raleigh Coatings.
We believe that our strategy of acquiring businesses with complementary
technologies and commercial synergies is the best way to supplement our
organic growth and ensure long-term, sustainable growth for the Group.
For more information see our values on page 42
06
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Strategic
Report
8 Our Patients
10 Our Employees
12 Our Investors
14 Chief Executive’s Q&A
16 Market Overview
18 Our Strategy
20 Strategy in Action
24 Key Performance Indicators
26 Operating Review – Surgical
28 Operating Review – Woundcare
30 Stakeholder Engagement (s172)
36 ESG and Sustainability
44 Financial Review
46 Risk Management
07
OverviewStrategic ReportGovernanceFinancial Statements Creating quality outcomes for
our patie nts
Developing intuitive, safe and cost-effective products which ensures
the best clinical outcome for the patient.
We focus on delivering innovative and technologically advanced products and industry-
leading training. We engage patient feedback to ensure our products improve the patient
experience – through focus groups, clinician groups and a robust complaints system
to address any issues which did not meet the patient expectations. Patient and clinician
experience is a key focus for AMS.
For more information see Our Stakeholders on pages 30 to 31
LiquiBandFix8® (laparoscopic) – Minimising complications
and improving patient safety and comfort
Breaking the spiral of post-operative pain in hernia-mesh fixation
Two separate retrospective studies carried out by Mr Paul Wilson (Consultant General
Surgeon – Royal Lancaster Infirmary) demonstrated the safety and efficacy of FIX8® for
inguinal and ventral hernia repair. Evidence included lower levels of complications such as
post-operative pain and recurrence. The initial 2016 study included 200 patients with a 12
month follow up and the 2020 study included 137 patients with a 24 month follow up period.
The studies outline these key benefits: Reduced patient trauma; Improved patient recovery;
Improved delivery with increased patient safety; Reduced post-operative complications.
Ergonomic design
Non-Sticking / Atraumatic Tip
Controlled Delivery Trigger
Quality indicator
Fast set
time
Strong and
secure
Precision
applicator
Improved
patient care
New tinted
adhesive
08
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 our patie nts
09
OverviewStrategic ReportGovernanceFinancial Statements Creating quality outcomes for
our emp loyees
Through activities which include employee forums, engagement surveys, a senior
management communication portal, regular communication with the workforce
and embedding our culture and values, we have ensured that the health, safety
and well-being of all employees is paramount.
Our response to the COVID-19 pandemic demonstrated the very best of AMS. We continued to commit
to looking after our people and retaining key talent. We have implemented a people-centric approach
extending to phased return planning and flexible working arrangements in line with local government
advice. We have fully supported those who have to work from home, utilising our flexible working policy
and technology infrastructure.
For more information see Our Stakeholders on pages 30 and 31
Delivering the highest standards of COVID-19
management and response for our employees
The health and safety of our employees is critical and the policies and
procedures at our sites reflect this. We acted swiftly to provide consistent
and regular communication to our teams around the world, ensuring open
lines of communication to senior management.
Our approach was to establish a COVID-19 committee and cascade principles with
regular calls to allow local leaders to implement changes at their sites, aligned with local
government policy. We had a focus on removing anxiety, providing clarity on legislation,
and supporting physical and mental well-being. Our teams made sure that every person
was kept updated with relevant information and had regular contact with their managers
and teams.
We have supported the workforce with full employment, avoiding any COVID-19 related
redundancies and protecting jobs throughout the pandemic. Employees who were
unable to work were fully paid. The pandemic has highlighted a resilient can-do attitude,
with many of our team seamlessly switching to home working while safely keeping our
manufacturing sites open and maintaining a relentless focus on serving our customers.
The pandemic also focused our sense of community, implementing the Care values and
looking out for the safety and well-being of each other.
10
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 our emp loyees
93%
78%
Employee Retention
Significantly higher in 2020 with
low attrition being partly testament
to the management of COVID-19
and our long-term prospects.
Employee Engagement
Care, Fair, Dare values have
helped us to positively
manage the business through
the COVID-19 pandemic.
11
OverviewStrategic ReportGovernanceFinancial Statements Creating quality outcomes for
our inves tors
Given the severe challenges caused by COVID-19, we performed well operationally
and financially. We continued to meet the demand of our healthcare partners whilst
implementing safety measures to minimise risks to employees.
We generated strong operating cash flows and are proposing an increased dividend having
repaid UK Government furlough support received during the year.
Demonstrating our acquisition strategy, we added to our Woundcare capabilities with the
purchase of Raleigh Coatings which provides growth prospects and significant commercial
and operational synergies.
We made good progress on clinical activity to progress US approvals for our key LiquiBand® XL
and LiquiBandFix8® technologies and are well positioned for strong organic growth in both the
short and long-term.
For more information see Our Stakeholders on pages 30 and 31
Acquisition of Raleigh Coatings supplements
our organic revenue growth potential
We maintained our strong financial position
throughout the year which enabled us to continue
to deliver on our strategy of acquiring strategically-
aligned businesses with commercial synergies
to supplement our organic revenue growth by
acquiring Raleigh Coatings in November 2020.
Raleigh’s capabilities in acrylic and silicone coating and
perforation will provide AMS with significant efficiency and cost
saving opportunities. The acquisition also provides commercial
synergies and entry points into new customers and markets
such as medical diagnostics and a healthy R&D pipeline of
medical products.
For more information view www.raleighcoatings.com
12
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 our inves tors
£86.8m
£21.5m
1.70p per share
Group Revenue
2019: £102.4m
Net cash flow from
operating activities
2019: £21.7m
Proposed full-year
dividend per share
2019: 1.55p per share
13
OverviewStrategic ReportGovernanceFinancial Statements Chief Executive’s Q&A
“ Our R&D pipeline 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
AMS performed well in 2020 despite severe
COVID-19 disruptions
How has AMS managed the impact of COVID-19?
Having created a designated COVID-19 working group,
prioritised safe working practices and complied with
government measures on social distancing, all our sites
have remained in operation throughout the pandemic
and we have therefore been able to continue to service
the demand of our healthcare partners while maintaining
our robust balance sheet.
As part of this we have:
• Enabled working from home arrangements where possible;
•
Implemented support processes for staff who have tested
positive or have otherwise had to isolate;
• Set up a designated team to closely monitor and risk assess
the impact of COVID-19 on operations and taken steps to
establish safe working practices in all AMS sites;
• Undertaken a full evaluation of the supply chain to ensure
any risks are identified and mitigated;
• Adjusted working patterns and put in place controls to
minimise physical interactions and ensure social distancing;
• Maintained payment terms to support suppliers;
• Provided contractual order flexibility to customers whose
demand has been impacted by the COVID-19 downturn;
• Repaid £0.4 million of UK job retention scheme support
relating to our employees who were unable to work
during the year due to COVID-19 restrictions. Furloughed
employees received full salary at the Group’s cost;
• Maintained a strong year-end net cash position of £53.8
million and proposed a 10% increase in full year dividend.
As is well known, COVID-19 restrictions have disrupted our
global markets in 2020, with a resulting slowdown in surgical
and wound treatment volumes. In addition, reduced access
to hospitals has significantly restricted business development
activities during the year. As COVID-19 vaccine programmes
roll out in key markets, we await the reduction in infection
rates and a gradual return to normalised levels of elective
surgery across all of our markets.
Whilst it is expected that the short term impact of COVID-19
will dissipate, it is anticipated that long-term behavioural
impacts could provide us with new opportunities, such
as increased ‘direct to patient’ supply of products.
Outside of COVID-19, how does AMS expect their
markets to develop?
Driven by favourable global healthcare and demographic
trends, global surgical and advanced woundcare markets
are expected to grow in the medium to long-term providing
ongoing growth potential. Key R&D and regulatory projects
in the Group’s pipeline will significantly increase the size of
the market that is addressable by our products.
Following the successful clinical trials for LiquiBand® XL we
expect to obtain 510(k) approval in H2 2021 which will allow
entry in to the growing $50 million large wound closure
market towards the end of 2021. This product launch has
the added benefit of unlocking further growth potential
in the base LiquiBand® business.
The clinical trial for the LiquiBandFix8® US Pre-Market
Approval is progressing well and both trial results and
surgeon feedback have been positive. Patient procedures
will be complete in 2021 followed by FDA filing in 2022.
US approval would be a significant milestone, being the first
product of its type to enter the $250 million US hernia fixation
market. This positive progress supports efforts to secure
more specialist partners for LiquiBandFix8® which is
expected to drive much stronger growth for this category
globally, especially as elective surgery volumes recover.
The Sealantis clinical trial commencement in February 2021
and the extended product approvals expected imminently
position us with a differentiated product to address the
high unmet medical need for an effective internal sealant
following bowel surgery. The planned Seal G range of
products will allow us to enter the global $1 billion internal
sealants market starting as planned in H1 2021 with a soft
launch whilst further clinical evidence is built that will
facilitate a full European launch in 2022.
The acquisition of Raleigh enhances our woundcare
capabilities and growth potential and enables entry into the
bio-diagnostic testing sector for the first time, demonstrating
the strategy of utilising our strong financial position
to acquire businesses with complementary products,
exciting technologies and new routes to market.
14
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 The Senior Management Team’s extensive preparations
leave us well placed to exploit opportunities that will
undoubtedly arise in the next few years during the
implementation of MDR.
We obtained various product approvals for new territories
in 2020 including our first approvals in India for both
LiquiBand® and LiquiBandFix8®.
How has Brexit impacted AMS?
Our extensive preparations for Brexit enabled us to navigate
the end of the transition period on 31 December 2020 with
limited impact on the business. UK product certificates have
been reassigned to BSI Netherlands, Advanced Medical
Solutions BV has been appointed as the EU Authorised
Representative for our UK manufactured products and the
other necessary administrative and labelling changes have
been put in place. We now intend to unwind the increased
stock levels that were built to mitigate possible Brexit delays.
In 2021, we are experiencing a limited level of Brexit related
disruption in the following areas:
• Delays in port.
•
Increased freight costs including surcharges,
paperwork and proof of origin declaration costs.
• Further labelling changes such as for the additional
UK CA mark to be phased in.
• MDR importer requirements to be phased in.
What is the outlook for 2021 and beyond?
Despite the ongoing challenges posed by COVID-19 across
the globe, we have seen a continuing gradual recovery
across the business over recent quarters and 2021 has
started well with a healthy order book in both Business Units.
Strong progress has been made in product development,
regulatory approvals in new geographies and indications
for our products. These factors significantly increase the size
of our addressable market in the near-term when combined
with the approval of LiquiBand® Rapid™ and the successful
clinical trials for LiquiBand® XL. On this basis we are set
for strong organic growth in 2021 and beyond. We will
continue to invest in R&D programmes and, in particular,
in Sealantis, the LiquiBandFix8® PMA and Medical Device
Regulation, which are expected to provide significant growth
opportunities in the medium-term.
The Board is committed to its strategy of building organic
and acquisitive growth and is confident in both the short
and long-term prospects for AMS.
Chris Meredith
Chief Executive Officer
12 April 2021
We further increased our addressable market in woundcare
with a number of product launches and approvals:
• The US launch of Silver Moisture Wicking Fabric provides
access to the growing market for the management of
skin folds and skin-on-skin friction;
• The US approval of the Debridement pad opens the
market for wound bed preparation devices; and
• The CE mark approval of Silicone PHMB foam, which
sits alongside the existing US approval, facilitates greater
penetration of the antimicrobial foam market.
These new woundcare products enable our partners to
participate in new markets worth a total of $200 million.
We also made significant R&D and regulatory progress
in expanding the product indications for our Silver High
Performance Dressing which positions us to obtain a full
anti-microbial claim by the end of 2021. This important
indication will unlock deeper penetration of the US
antimicrobial gelling fibre market with a competitive product.
How is the M&A strategy progressing?
We continue to seek acquisitions that deliver additional
value for shareholders and meet the criteria of being
accretive businesses with strong R&D and manufacturing
capabilities, and that have products or customers that offer
effective commercial synergies. The acquisition of Raleigh
demonstrates a good fit with this strategy, and integration
is progressing well. The Board remains optimistic about
Raleigh’s growth prospects, as well as the potential
for significant cross-selling and cost saving synergies.
During the year, we incurred exceptional costs of
£0.8 million relating to both the acquisition of Raleigh
and the participation in a process, in which we were
unsuccessful, for a sizeable surgical business.
What progress did AMS make in 2020 in the
increasingly challenging regulatory environment?
The Board is confident that the implementation of Medical
Device Regulation (MDR) will provide opportunities for us
due to anticipated competitor product withdrawals. We are
making strong progress in our own MDR preparations having
already secured additional time by extending the existing
MDD filings.
As a result of the COVID-19 pandemic, the deadline for
Notified Bodies to review Medical Device Directive (MDD)
certificates was extended by one year to May 2021, allowing
AMS and other companies additional time to get new
products approved or existing products reapproved
under MDD. The end date, when all MDD certificates
become invalid, remains as 26 May 2024.
The MDD extensions were utilised to submit and obtain
CE mark approval for Silicone PHMB foam and to file
for extensions to the Sealantis CE mark.
In 2020, we successfully completed our final MDD
recertifications so that all products now have extended
MDD certificates allowing ample time for compliance with
the new European Medical Devices Regulation by 2024.
We are well prepared for the stricter requirements on product
safety and performance, clinical evaluation and post-market
clinical evidence stipulated by MDR and in the year submitted
our first four MDR files for Notified Body review.
15
OverviewStrategic ReportGovernanceFinancial Statements Market Overview
We operate in the global surgical and advanced
woundcare markets. Both markets are growing
steadily driven by an increasingly ageing
population and advances in technology
Surgical
The surgical market is worth approximately $10 billion1 globally with historic product compound
annual growth rate (CAGRs) estimated to be between 0% and 8%. AMS has potential to grow in
all areas. The following segments represent our most significant near term opportunities.
Internal Sealants – Sealantis
Sealantis is an alginate-based, tissue
adhesive technology platform which
enables us to enter a new $1bn
market with a unique product to
satisfy a significant unmet patient
need. The clinical trial started
in February 2021 and CE market
extensions are anticipated in
H1 2021. Initial sales are expected
in 2021 with full European launch
to follow in 2022.
Internal Fixation – LiquiBandFix8®
Fix8® was our first product for
internal fixation, entering a $400m
market for hernia mesh fixation with
an innovative product that delivers
benefits to the patient in terms
of reduced complications and
post-operative pain. The larger
part of this market is in the
US which will open up when we
complete our Pre Market Approval
(PMA) process. We expect to file
a 510(k) with the FDA in 2022.
$10bn1
Surgical market split
Biosurgicals/Haemostats
Tissue Adhesives
Synthetic Bone
Substitutes
Sutures
Internal Fixation
Internal Sealants
Other Closure
Tissue Adhesives – LiquiBand®
LiquiBand® is the Group’s most
successful product having
gained more than 20% share of
end-volumes of the $250m US
market. Further growth is now
expected following the 2021
launch of LiquiBand® RapidTM and
the anticipated 2021 launch of
LiquiBand® XL, which will enter
a new $50m large wound market
and will also unlock further
hospital conversions for the
base LiquiBand® business.
Synthetic Bone Subs – Biomatlante
The acquisition of Biomatlante
in 2019 entered AMS into the
$500m synthetic bone substitutes
market. Accelerated growth is now
expected as we commercialise the
RESORBA® branded versions of
Biomatlante’s products through our
existing routes to market and expand
our geographical penetration by
progressing a US 510(k) approval
for our innovative Freeze Dried
Bone Substitute (FDBS) range.
1. Sourced from various third party data sources and market reports.
16
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Global Surgical market
$10bn
Product CAGRs
0% – 8%
Woundcare
Global Advanced Woundcare market
$4bn
Product CAGRs
0% – 5%
The advanced woundcare market is worth approximately $4 billion1 globally with historic product
CAGRs estimated to be between 0% and 5%. The following segments represent our most significant
near term opportunities.
Infection Control – Silicone
PHMB, Moisture Wicking Fabric
and Debridement
We have increased our addressable
market in Infection Control with
a number of product launches
and approvals:
The launch of Silver Moisture
Wicking Fabric provides access
to the growing market for the
management of skin folds
and skin-on-skin friction.
The US approval of our
Debridement pad opens
up the market for wound
bed preparation devices.
The CE mark approval of
Silicone PHMB foam, which
sits alongside the existing
US approval, facilitates greater
penetration of the antimicrobial
foam market.
These new woundcare products
enable our partners to participate
in new markets worth $200m.
We have also progressed an
expansion to the product indication
for our Silver High Performance
Dressing positioning us to obtain
full antimicrobial claim by the
end of 2021 and to unlock deeper
penetration of the US antimicrobial
gelling fibre market.
Exudate Management –
Raleigh and ActivHeal®
We are progressing a number of
initiatives to enable us to increase
our share of the large Exudate
Management market:
• Our initiative to appoint new
ActivHeal® distributors in non-core
markets for our OEM partners will
expand our geographical reach.
ActivHeal® is expected to launch in
a number of new territories in 2021
with additional registrations also
being sought to further exploit
this growth opportunity.
• The Raleigh acquisition provides
opportunities for us to win new
Exudate Management customers
and enter into new markets such
as the bio-diagnostic testing sector
and brings a pipeline of new
projects with growth potential.
• Adding a pressure ulcer prevention
indication to our US Silicone foam
range enables our partners to win
business by promoting our products
for this increasingly important
patient concern.
$4bn1
Woundcare market split
Exudate Management
Infection Control
Other Woundcare
1. Sourced from various third party data sources and market reports.
17
OverviewStrategic ReportGovernanceFinancial Statements Our Strategy
Our Strategic Pillars driving future success
To sustainably grow our surgical 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,
appreciating our employees and being good corporate citizens.
Growth
Exploiting the opportunities arising from having
a broad product range sold via multiple routes to
market and across multiple geographies.
Innovation
Strengthening our portfolio by developing or
acquiring market-leading high-quality products.
For more information see page 20
For more information see page 21
Growth
Innovation
Our Strategy
18
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Due to the difficult trading conditions caused by COVID-19 we have focused on maximising our financial and operational
performance, maintaining supply to our customers, protecting our workforce and investing in the future of the business.
Our Strategic Pillars highlight these areas as critical to the future success of the Group.
9.1%
89%
78%
% spend on R&D and Innovation
2019: 6.3%
22% increase in investment
Customer Service (OTIF)
2019: 80%
11% improvement in performance
Employee Engagement Score
2019: 48%
62% increase in positive responses
Operational Excellence
Continuously improving our operations to drive
out cost and defend margin.
Culture
Investing in hiring and developing talent while
embedding our Care, Fair, Dare values.
For more information see page 22
For more information see page 23
Operational
Excellence
Culture
Our strategic
pillars driving
future
success
19
OverviewStrategic ReportGovernanceFinancial Statements Strategy in Action
Growth
Our growth strategy is to exploit opportunities from
multiple routes to market across numerous 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
to other available products.
• Continued to progress our US Fix8®
IDE enrolment with well over half the
required patient operation numbers
now completed. Filing is expected
in 2022, following the 12 month
follow-up stipulated by the FDA.
• Delivered approvals and launches
of Surgical products in multiple
new territories such as LiquiBand®
and LiquiBandFix8® in India.
• Submitted and gained CE mark
approval for Silicone PHMB foam,
offering high efficacy and sustained
performance compared to alternative
products. This approval enables AMS
to access the growing antimicrobial
silicone foam market in the EU.
• Signed multiple agreements
in APAC and Gulf States with
distributors for commercialisation
of the ActivHeal® portfolio.
• Acquired Raleigh Coatings providing
growth potential including access
to the bio-diagnostics space,
commercial and operational
synergies and expanding our in
house capabilities to include acrylic
and silicone coating and perforation.
•
Initiated Group-wide clinical
programmes to support MDR
certifications for all products.
How we are
measuring success
• Revenue growth at constant
currency (%).
• Adjusted diluted earnings
per share growth (%).
How we are going
to achieve it
• Market share gains: Continue
to increase the market share of
our key products, particularly in
large markets such as the US, by
demonstrating a strong combination
of high-quality products delivering
improved performance and value
for money versus competitors.
• New products: Develop new
products in-line with our core
strategy and deliver at least two
new product launches each year.
• New markets/entry: Achieve
product approvals in new
geographies and open up
opportunities and markets for our
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.
• Grow our recently acquired
businesses: Deliver on the multiple
growth opportunities and exploit the
inherent commercial, operational
and regulatory synergies.
• M&A: Identify and deliver
strategically aligned acquisitions
providing strong Surgical product
synergies or routes to market or
Woundcare technologies that
we could use to leverage our
customer base.
What we have
achieved in the year
• Optimised the design and completed
clinical trials for the LiquiBand® XL
technology delivering a product with
strong performance characteristics
for 510(k) filing in H1 2021.
See Our KPI performance
on pages 24 and 25
20
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 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
• Expert Key Opinion Leader
Panels: Expand relationships with
Key Opinion Leader (KOL) panels
to provide expert input into the
innovation process and exchange
information to ensure our innovation
output meets clinical needs.
• Product Development: Create
differentiated products that have
fewer complications and provide
more effective, efficient, safer
experiences for both clinician
and patient.
• Centres of Excellence: Establish
Centres of Excellence for Innovation
and ensure resources and ideas from
across the Group are better utilised.
•
• Biomatlante: Developed a freeze
dried bone substitute (FDBS), with
strong cohesive properties when
mixed with fluids that can be easily
moulded for optimal placement
in orthopaedic and spine surgery
which will open up opportunities
for the addition of active ingredients
such as platelets, stem cells or
synthetic peptides. Filed for US
approval at the end of 2020.
• Designed and developed a
Debridement pad which clinicians
use to prepare the wound bed and
enhance wound healing. Obtained
510(k) approval and submitted
CE mark application.
Invested in an in-house cell culture
laboratory to support our entry into
the Bio-engineered Skin Substitutes
market, enable ex vivo and cell
proliferation testing, and the
creation of skin healing models.
• 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
• Sealantis: Worked with Notified
Body to progress towards
gaining our first CE approval for
the laparoscopic Seal G device.
Expanded the existing CE approval
for the open device to include a
colourant that significantly aids
visibility for the surgeon during use.
Both approvals are expected in H1
2021. Started the clinical trial for the
open and laparoscopic devices in
Q1 2021. Completed commercial
research activity with 30 European
Key Opinion Leaders ahead of a
soft launch in H1 2021 and a full
European launch in 2022.
See Our KPI performance
on pages 24 and 25
• Conducted focus groups with KOLs
to solicit feedback on our markets
which we will use to inform
our selection process for
innovation projects.
How we are
measuring success
• % of revenue spend on
R&D & Innovation.
• % of sales from new products
launched in the previous five years.
9.1%
% of revenue spend
on R&D & Innovation
2019: 6.3%
21
OverviewStrategic ReportGovernanceFinancial Statements Strategy in Action continued
Operational
Excellence
Through a strategy that begins with focusing on what
our customers need and value, we pursue 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.
How we are going
to achieve it
• Continuously improve: Deliver
a cost competitive, high quality
product portfolio allowing AMS
to win business in competitive
markets. Build a strong continuous
improvement culture driving
year-over-year business process
improvement, delivering cost
reduction and improved quality.
• Invest for growth: Smart
investments in capacity which
provide agility to support business
in growth areas.
• Exceed Customer Expectations:
Consistent supply of high quality
products through optimised
supply chain processes, systems
and organisation, simplifying and
driving efficiencies for AMS and
our customers.
• Improve Speed to Market: Focus on
our Product Development Process
through effective industrialisation
and right first time product approval,
delivering improved speed to
market. Deliver excellent capability
for effective project priorities,
resourcing and execution.
• Mitigate Business Risk: Maintain
regulatory certification of AMS
products with clear strategy on
Notified Bodies and audit readiness
at all AMS sites. Smart compliance
with minimal overhead cost.
All sites meet legal, quality
and regulatory standards.
-0.1%
Year-over-year change
of our standard cost base
2019: 2.8%
What we have
achieved in the year
• Delivery of gross 4% cost reduction
projects across the sites and plans
to deliver a further 5% in 2021.
• Deployed initial modules of
our eQMS (Electronic Quality
Management System) across
multiple sites.
• Manufacturing scaled up in Israel
to support the future launch of
our Sealantis products.
• Good progress integrating
Biomatlante into AMS operations.
• Good progress on Fix8® IDE
(investigational device exemption)
clinical study.
•
•
Invested in technology and
capacity across both Surgical
and Woundcare.
Improved our customer service
(OTIF) result by 11% whilst reducing
our overall inventory levels.
• Extensive training and Group
deployment of our Product
Development Process across
our new product portfolio.
• Established processes around our
PMO (Project Management Office)
and trained 45 staff in effective
project management across AMS.
• Good progress in updating and
submitting our technical files and
our Quality Management System in
line with the new MDR requirements.
• Created COVID-19 safe
environments across all
our operating environments.
How we are
measuring success
• Customer Service
(OTIF – On-Time-in-Full) (%).
• Year-over-year change of our
standard cost base (%).
22
See Our KPI performance
on pages 24 and 25
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Culture
Our employees drive the success of AMS. We actively
promote our Care, Fair, Dare values 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
We achieve a positive culture in our
business by focusing on Care, Fair, Dare
and implementing our five-point plan:
What we have
achieved in the year
• Drew on our Care, Fair, Dare values
to help manage our way through
the COVID-19 pandemic.
• 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 appropriate
remuneration and benefits, and
to having a diverse workforce.
• Talent Management: Developing
and retaining talent allows us to
build skills to maintain a culture of
innovation and retain knowledge
within the business.
• Values and Behaviours: Care, Fair,
Dare provides values and 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.
78%
• Launched an Employee Health and
Well-Being programme to support
employees through the pandemic.
• Reviewed our flexible working
models and made changes to our
policies to support both retention
of employees and supporting
business needs.
• Conducted pulse surveys to ensure
we understand and could react to
how our employees were feeling.
• Developed a Senior Management
Team global communications
process to allow two way
communications on status
of COVID-19 management.
•
Implemented an integrated online
recruitment tool to allow us to
manage recruitment completely
remotely from application through
to offer.
• Rolled out our business ethics
training to all managers, which
included commitments to
diversity and inclusion.
• Developed a strategic, Group-wide
annual training plan, to ensure
training investment is aligned
to employee development
and business priorities.
• Developed a Group Environmental
Plan with clear targets.
How we are
measuring success
• Employee attrition (%).
• Employee Engagement Score (%).
See Our KPI performance
on pages 24 and 25
Employee engagement score
2019: 48%
23
OverviewStrategic ReportGovernanceFinancial Statements Key Performance Indicators
Measuring success
The Group has a range of Key Performance Indicators (KPIs) which are used
to monitor Group performance and help measure progress against our strategy.
Financial KPIs
Revenue movement at constant currency1 %
Revenue movement %
Adjusted2 diluted earnings per share
Adjusted diluted earnings per share (EPS)1
movement %
(EPS movement %
-15%
Definition
Net revenue in the year.
2020
2019
2018
2017
2016
-15%
-1%
12%
13%
11%
-45%
2020
2019
2018
2017
2016
-45%
-8%
13%
12%
23%
Strategic linkage
Long-term revenue growth demonstrates the successful
execution of the Group’s strategy. It is a contributory
factor to providing long-term value for our shareholders.
Progress made in the year
Revenue fell by 15% in 2020 to £86.8 million (2019: £102.4 million)
predominately due to the impact of COVID-19 on surgical
and wound treatment volumes. Supported by the continued
recovery of US LiquiBand®, a healthy order book, new
product launches and the Raleigh acquisition, the Group is
well-positioned to grow in 2021, despite COVID-19 disruptions.
Definition
Movement in adjusted diluted EPS2 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
The COVID-19 pandemic resulted in much lower volumes
and adverse operating leverage resulting in adjusted diluted
EPS2 reducing to 5.44p in 2020 (2019: 9.83p). This is a 45%
reduction on 2019.
Year-over-year change of our average
Year-over-year change of our average
standard cost2 %
standard cost3 %
Non-Financial KPIs
Customer service (OTIF) %
Customer service (OTIF) %
-0.1%
2020
-0.1%
2019
2018
2.8%
2.4%
89%
2017
No data available
2016
No data available
Definition
Measures the reduction in standard cost base3 against prior year.
Strategic linkage
Reducing standard costs ensures our products are competitive
in the marketplace and demonstrates the successful execution
of our strategy, which is critical for the long-term sustainability
of the Group.
Progress made in the year
The standard cost base decreased by 0.1% in 2020 (2019:
increase of 2.8%) driven by cost improvement activities resulting
in reduced total costs despite inflationary pressures. For 2021,
we are targeting operational cost improvements of 5% and
another reduction in total standard costs. Our Chief Operations
Officer is focused on driving the achievement of this target.
2020
2019
2018
2017
2016
89%
80%
83%
93%
90%
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 increased to 89% (2019: 80%), resolving the temporary
stock shortages linked to recertification of the RESORBA
portfolio during 2019.
Improvements to forecasting and planning processes have been
implemented and manufacturing capacity increases delivered.
We expect to see further improvement to OTIF and are aiming
to exceed 92% in 2021.
1.
Certain financial measures, including adjusted results above, are not defined under IFRS and are alternative performance measures as described on page 140.
2. Reduction in average standard cost of production assuming no change in product mix.
24
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Key to strategic linkage in this report
Growth
Innovation
Operational
Excellence
Culture
% of revenue spend on R&D & Innovation
% of revenue spend on R&D & Innovation
% of sales from new products launched in the
% of sales from new products launched
in the previous five years
previous five years
9.1%
2020
2019
2018
2017
2016
6.3%
5.8%
4.4%
4.4%
9.1%
19.8%
2020
2019
2018
2017
2016
19.8%
23.6%
24.6%
23.7%
11.8%
Definition
Spend on R&D, Innovation & Regulatory Affairs as a % of sales
in the financial year.
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 developer of innovative and technologically advanced
products, investing resources in this area is critical to fulfilling
the strategic goals of the business.
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
Spend increased to 9.1% of revenue in 2020 (2019: 6.3% of
revenue) driven by investment areas such as Sealantis and the US
LiquiBandFix8® Pre-Market Approval (PMA) and also influenced
by lower revenue. Innovation is a core part of our strategy and we
expect to continue to increase our spend in this area during 2021.
Progress made in the year
19.8% of 2020 sales were from new products (2019: 23.6%).
We expect this measure to remain at a high level due to our
strong product pipeline including planned 2021 launches such
as LiquiBand® XL and as our recent product launches, such as
LiquiBand® Rapid™, become established in the market.
Employee attrition %
Sta retention/turnover %
Employee Engagement Score %
Employee Engagement Score %
7%
2020
2019
2018
7%
12%
10%
78%
2020
2019
2018
78%
48%
41%
2017
No data available
2016
No data available
Definition
The % of employees who have left the Group during the year
(gross number of leavers).
Strategic linkage
Low levels of employee 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 values.
However, an element of turnover is considered beneficial, to
support new ideas and best practices from outside the Group.
Progress made in the year
Employee attrition was 7% in 2020 (2019: 12%). This fall has
been driven by the pandemic and our policies such as no
redundancies, paying full salaries to those unable to work
and proactive COVID-19 management.
2017
No data available
2016
No data available
Definition
Of the employees who responded to the Employee Survey,
the % of employees who had seen positive action from the
implementation of our Care, Fair, Dare culture.
Strategic linkage
How successfully we have embedded our culture. An increasing
score indicates more engaged employees leading to more
productive and happier employees, and higher retention.
Progress made in the year
The engagement score in 2020 increased to 78% (2019: 48%).
This score is driven by employees viewing that the Company
handled the pandemic well. We are aiming for a score of at
least 80% in 2021. Participation in the Employee Survey was
45% across the Group in 2020 (2019: 49%).
25
OverviewStrategic ReportGovernanceFinancial Statements Operating Review – Surgical Business Unit
Our exciting R&D pipeline makes us confident
of delivering strong growth as well as
providing meaningful benefits to patients
Surgical Business Unit
The Surgical Business Unit includes tissue adhesives, sutures,
biosurgical devices and internal fixation devices marketed
predominately under the AMS brands LiquiBand®, RESORBA®
and LiquiBandFix8®. Revenue reduced by 11% to £50.2 million
(2019: £56.5 million) due to the impact of COVID-19.
Surgical Business Unit
2020
£’000
2019
£’000
Reported
change
Change at
constant
currency
Advanced Closure
22,751
30,085
-24%
-24%
Internal Fixation
and Sealants
2,104
2,629
Traditional Closure
12,993
14,407
Biosurgical Devices
12,321
9,423
TOTAL
50,169
56,544
-20%
-10%
31%
-11%
-20%
-9%
30%
-11%
Advanced Closure
Advanced Closure comprises LiquiBand®, incorporating
medical cyanoacrylate adhesives in purpose-built applicators
used to close and protect topical wounds as well as surgical
sealants sold under partners’ brands.
Advanced Closure
2020
£’000
2019
£’000
Reported
change
Change at
constant
currency
Americas
13,940
18,999
UK/Germany
ROW
TOTAL
4,955
3,856
6,850
4,236
22,751
30,085
-27%
-28%
-9%
-24%
-26%
-28%
-9%
-24%
Revenues decreased by 24% on a reported and constant
currency basis to £22.8 million (2019: £30.1 million).
Following its approval and restricted launch in 2020, the
commercial launch of LiquiBand® Rapid™ in 2021 will enable
a key partner to regain ground with an improved product.
The planned 2021 launch of LiquiBand® XL will enable AMS to
compete in the treatment of large wounds and unlock further
growth potential in the LiquiBand® business. 510(k) approval
is expected in H2 2021 following successful clinical trials
in late 2020, with the product demonstrating very positive
performance characteristics against the predicate device.
Whilst US procedural volumes remain depressed and hospital
access limited, based on the above factors, US LiquiBand®
is expected to deliver strong growth in 2021 and beyond.
We continue to obtain new approvals for LiquiBand®, notably
in India during the year. The Group is now in the process of
screening and selecting the best go-to-market partner for
its first commercial activity into this large market.
Internal Fixation and Sealants
This category comprises LiquiBandFix8®, which is used to
fix hernia meshes inside the body with accurately delivered
individual drops of cyanoacrylate adhesive and Seal-G® which
reinforces the staple/suture line to minimise anastomotic
leaks following gastrointestinal bowel surgery.
LiquiBandFix8® revenue decreased by 20% to
£2.1 million (2019: £2.6 million). Despite the restrictions,
pleasing progress has been made in product training and
new territory approvals. The sales teams delivered virtual
symposia with prominent hernia societies attended by more
than 8,000 surgeons to increase awareness of the reduced
post-operative complications when using LiquiBandFix8®
instead of staples or tacks. We also obtained approvals for
LiquiBandFix8® in new markets, notably India and Brazil, with
distributor selection and launch planning now in process.
The clinical trial for US Fix8® Pre-Market Approval had to be
suspended for approximately six months due to COVID-19
but has since regained momentum with over 65% of the total
required patient procedures now complete. FDA approval
is expected to be filed in 2022 upon completion of the 12
month follow-up stipulated by the FDA. AMS continues to be
excited about the long-term prospects for the LiquiBandFix8®
portfolio, with entry into the US being a significant milestone
for the Group. Feedback from surgeons and hospital centres
involved in the trial has been very encouraging to date.
During 2020, commercial research activity was completed
with European Key Opinion Leaders (KOL) which provided
positive feedback on Seal-G® & Seal-G® MIST as solutions to
the high unmet need for an effective gastrointestinal sealant.
Post-period end, we progressed two major milestones
towards the Sealantis soft launch in H1 2021 and full
European commercial launch in 2022:
• Began patient enrolment for the first clinical study of
Seal-G® & Seal-G MIST® in February 2021, following
COVID-19 related delays in 2020.
• Progressed CE mark extensions to strengthen
portfolio. Laparoscopic Seal-G MIST® was approved
and we are extending open Seal-G® to include blue
colourant to aid visibility during surgery. Approvals
are expected imminently.
26
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Traditional Closure
The Traditional Closure category comprises the RESORBA®
branded absorbable and non-absorbable suture ranges,
which includes certain surgical specialties (such as dental
and ophthalmic).
Revenue decreased by 10% at reported and 9% at
constant currency to £13.0 million (2019: £14.4 million).
AMS expects to drive suture growth by focusing
on specific opportunities such as targeted Group
Purchasing Organisation (GPO) promotions in the
DACH region, increasing its US footprint, dental
portfolio selling with Biomatlante and RESORBA®
products and leveraging its Moorfields Eye Hospital
site advocacy to grow the ophthalmic business.
The Group continues to look for ways to make
its suture portfolio more comprehensive. In 2019,
AMS added a long lasting synthetic polydioxanone
(PDO) thread material, followed by the 2020 launch
of a high tensile strength OT Cord range for
orthopaedic and sports medicine. In 2021,
a barbed suture range to provide knotless
tissue security is expected to be launched.
Biosurgical Devices
The Biosurgical Devices category comprises
RESORBA® and Biomatlante technologies,
including antibiotic loaded collagen sponges,
collagen membranes and cones, synthetic
bone substitutes and bio-absorbable screws.
Biosurgical revenue increased by 31% at reported
and 30% at constant currency to £12.3 million (2019:
£9.4 million) reflecting the inclusion of Biomatlante
sales following its acquisition in November 2019.
AMS expects to make significant progress selling
Biomatlante products under the RESORBA® brand
through the existing sales infrastructure and some
initial sales have been made into Germany during the
year. In addition, AMS is also looking to sell more of its
dental and orthopaedic collagens and sutures via the
existing Biomatlante customer base.
In November 2020, the Group filed a 510(k) application
for freeze dried bone substitute (FDBS) which would
be the first US approval for any of Biomatlante’s newer
innovative products. The FDBS platform has strong
cohesive properties when mixed with fluids, can be easily
moulded for optimal surgical placement and will open up
opportunities for the addition of active ingredients such as
platelets, stem cells or synthetic peptides. AMS anticipates
510(k) approval in the next 12 months.
Collagen loaded with Vancomycin has been sold in
Germany for several years on a named, patient prescription
only basis and we continue to progress a full CE mark
to allow broader promotion and sales. AMS is currently
progressing with an MDD application but will move to
proceed under MDR as necessary. The Group continues
to work with both EU and US regulators on wider market
approvals for its antibiotic loaded collagen pacemaker
pouch, also currently sold via prescription in Germany.
27
OverviewStrategic ReportGovernanceFinancial Statements Operating Review – Woundcare Business Unit
Strengthening our woundcare capabilities
and product range with exciting technologies
will help us to deliver growth
Woundcare Business Unit
The Woundcare Business Unit is comprised of a
multi-product portfolio of advanced woundcare dressings
sold under partner brands and under the ActivHeal® brand,
plus a portfolio of specialist medical bulk materials now
including the multi-layer woundcare and bio-diagnostics
products that came with the acquisition of Raleigh Coatings.
Infection Management
The Infection Management category comprises advanced
woundcare dressings that incorporate antimicrobials
such as Silver and Polyhexamethylene Biguanide (PHMB).
Revenue decreased by 26% on a reported basis and 25% on a
constant currency basis to £15.3 million (2019: £20.6 million)
predominantly due to COVID-19 impacts.
Revenue decreased by 20% to £36.6 million (2019:
£45.8 million) due to COVID-19 impacts on sales volumes.
Woundcare Business Unit
2020
£’000
2019
£’000
Reported
change
Infection Management 15,289
20,555
Exudate Management 15,413
19,271
Other Woundcare
5,925
5,998
TOTAL
36,627
45,824
-26%
-20%
-1%
-20%
Change at
constant
currency
-25%
-20%
-1%
-20%
During 2020, AMS successfully obtained MDD extensions
until 2024 for all the remaining products in its woundcare
range. Consequently, the Group has secured the maximum
time possible to complete compliance with the new MDR
certification requirements. AMS has a dedicated team in place
focused on completing the work for each product in good
time to allow regular approvals across the next three years.
Despite the lower market growth rates and consolidation
activity in the woundcare market, the Board is confident that
the following catalysts position our Woundcare Business Unit
for good growth:
• The approval of several new products.
• The addition to the Group of Raleigh Coatings.
• ActivHeal® potential in select new markets.
• The opportunities expected to arise from MDR.
During the year, the Group’s Silver Moisture Wicking Fabric
product was launched with two US partners and Silver
High-Performance Dressings were launched with a
second US partner. Volumes were impacted by COVID-19
restrictions, which limited access to potential customers
and promotional opportunities.
In November 2020 AMS obtained CE mark approval for the
Silicone PHMB foam range that sits alongside the US approval
for this product, which was granted in late 2019. The silicone
variant of the Group’s PHMB range provides gentle but secure
adhesion in addition to existing performance characteristics
such as rapid microbial activity and eradication of pathogens.
This provides AMS with a strong product for the growing
antimicrobial foam market.
During 2020, AMS completed the development of a
Debridement pad which clinicians use to prepare the
wound bed and enhance wound healing. The Group
successfully obtained approval for use in FDA markets
and also progressed European approval by submitting
the CE mark application.
Following progress made in 2020, the Group is now
positioned to obtain a full anti-microbial claim for our Silver
High Performance Dressing in 2021 which will unlock deeper
penetration of the US antimicrobial gelling fibre market with
a patent protected product that has excellent performance
characteristics. We expect to submit the special 510(k)
application in Q2 2021.
In December 2020, an exclusive five-year agreement for
one of the Group’s silver alginates came up for renewal.
Discussions with the customer are expected to conclude
by the middle of 2021 and may incorporate other avenues
for AMS to maximise value with this product over the next
five years.
Looking ahead, the Group continues to work on developing
next generation high-gelling products with differentiated
anti-biofilm claims and an application of its surgical tissue
scaffolds in a woundcare environment.
28
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Exudate Management
Exudate Management comprises advanced woundcare
dressings and gels which do not incorporate any
antimicrobial elements. Raleigh’s results are reported
within exudate management and provides significant
growth opportunities. Revenue decreased by 20%
to £15.4 million (2019: £19.3 million).
AMS has progressed the initiative to find and appoint
new distribution partners for ActivHeal® in markets
with strong demand for high-quality, cost effective
dressings and where current key partners have no
or low presence. A number of ActivHeal® contracts
were signed in 2020 and these partners are expected
to launch in 2021, contributing significant additional
sales value over the next five years. Registrations are
being pursued in additional territories with a view
to further exploiting this growth opportunity.
The acquisition of Raleigh in November 2020
significantly strengthens AMS’s woundcare
position by bringing acrylic and silicone coating and
perforation in house, providing opportunities for cost
savings and aiding product development. In addition,
Raleigh’s products and expertise will allow AMS to
win new customers and enter into new markets
such as the bio-diagnostic testing sector and brings
an R&D pipeline of new projects in the medical space.
AMS recorded £0.7 million of sales in 2020 relating
to Raleigh.
With the heightened attention on the prevention of
pressure ulcers in all major markets, it is pleasing to
add a product in this indication to the existing US
silicone foam range. It will enable our customers
to promote the expanded range for this increasingly
important patient concern.
Other Woundcare
Other Woundcare comprises royalties, fees and woundcare
sealants. Revenue decreased by 1% on a reported and
constant currency basis to £5.9 million (2019: £6.0 million)
mainly due to a minor decrease in sealant revenue. Royalty
and fee income, which includes the Group’s licensing
arrangement with Organogenesis, remained consistent.
29
OverviewStrategic ReportGovernanceFinancial Statements Stakeholder Engagement and s172
Effective engagement with our key
stakeholders and managing our impact
on stakeholder interests
Effective 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,
is an ongoing part of the
operational management
and governance of the
Group, and is key for long-
term sustainable growth.
S172 Statement
As required by s172 of the Companies
Act 2006, a Director of a company
must act in the way they consider, in
good faith, would most likely promote
the success of the company for the
benefit of its shareholders. In so
doing, the Director must have regards,
amongst other matters, to the:
• Likely consequences of any
decision in the long-term.
•
Interests of the company’s
employees.
• Need to foster the company’s
business relationships with
suppliers, customers and others.
•
Impact of the company’s actions
on the community and environment.
• Desirability of the company
maintaining a reputation for high
standards of business conduct.
• Need to act fairly between
members of the company.
30
Our Stakeholders
Patients
The patient is at the heart of everything we do
and patient needs are fundamental to our success.
We develop innovative products for our patients to
create quality outcomes, minimise complications
and improve patient safety and comfort.
Employees
We are a people-centric, equal opportunity business
driven by our Care, Fair, Dare values and employ
over 700 people in 11 international locations,
aiming to develop them to the best of their abilities
whilst maintaining their safety and well-being.
Investors
Effective communication with shareholders on
strategy and governance is critical. External strategic
communications advisors provide support to manage
the relationship with investors and analysts and assist
with market interactions and announcements.
Engagement in 2020
Outcomes in 2020
• Worked closely with industry bodies and charities in our markets
to enable us to keep informed of any trends or changes that will
product lifecycle.
• Gained real world data on products as part of the
affect our patients.
• Pre-Market Approval (PMA) on LiquiBandFIX8® and other clinical
work to develop products with ambition to improve quality of
life and outcomes from surgery.
• Certification of a number of new Woundcare
and Surgical products.
• Endorsement from Tissue Viability Society
on education and training.
• Post-market surveillance to garner end user feedback.
• Consolidated view in market that silicone is the
• Recruitment of end users for clinical studies to help validate
adhesive of choice.
products to improve patient experience.
• Focused on providing a COVID-19 safe workplace for our
employees, customers, suppliers and sub-contractors, requesting
regular feedback on any issues at sites. Our safety performance
improved with an All Incident Rate (AIR) score of 2.8 (2019: 2.9).
• Updated training and information for employees regarding
COVID-19 and developed a Health and Well-being platform for
mental health. Implemented ways of supporting employees,
including home working.
• Enhanced Environment, Health and Safety reporting to the
Board and SMT, increasing the focus on reducing our
environmental impact.
• Employee Forums, Works Council and Safety Committees
acted as forums to achieve closer engagement with
employees and allow regular access to Group HR.
• Communication with employees through our intranet,
newsletters, an SMT portal, CEO roundtables and Group
Whistleblowing Policy.
• Introduced environmental and energy management systems.
• Women in all recruitment selection pools and on all interview
panels with diversity a focus in the recruitment process.
• Nominated Penny Freer as the designated Non-Executive
Director for workforce engagement. Penny reviewed the
work carried out during the global pandemic.
• Board analysed talent reviews included five-year training and
development plans, which lead to the restructuring of the
Surgical Business Unit.
• Care, Fair, Dare further developed through cultural workshops,
• In 2021 there will be a review of culture to assess understanding
employee engagement surveys and appraisals.
and perception.
• 139 investor or analyst meetings covering areas including results,
strategy, markets, R&D pipeline, acquisitions and dividends.
• Board refreshment and succession plan implemented for the
Non-Executive members following feedback from shareholders
• Consulted with major shareholders and proxy agencies ahead
of 2020 AGM on issues such as Director independence, tenure
and number of Board appointments.
• Brokers provided analysis of investor and analyst feedback.
• Notified of any concerns of retail shareholders which provides
a good perspective on drivers for investment.
• Our AGM provides an opportunity for engagement with investors
to provide updates on performance and activities, however,
due to COVID-19 the 2020 AGM was a closed meeting.
• Trading updates, full and half-year announcements, product
approvals and COVID-19 updates kept shareholders informed
regularly on performance.
and proxy agencies.
• Improved guidance to market on impact of COVID-19, financial
performance, product approvals and R&D pipeline, clinical
studies, acquisitions and impact of Brexit.
• Increased investment in major R&D and regulatory projects and
continued to look for further acquisitions that meet our criteria.
• More insight into what our shareholders expect.
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Our Stakeholders
Patients
The patient is at the heart of everything we do
and patient needs are fundamental to our success.
We develop innovative products for our patients to
create quality outcomes, minimise complications
and improve patient safety and comfort.
Employees
We are a people-centric, equal opportunity business
driven by our Care, Fair, Dare values and employ
over 700 people in 11 international locations,
aiming to develop them to the best of their abilities
whilst maintaining their safety and well-being.
Investors
Effective communication with shareholders on
strategy and governance is critical. External strategic
communications advisors provide support to manage
the relationship with investors and analysts and assist
with market interactions and announcements.
How AMS met s172 requirements in 2020
The Board received regular updates on how the business has engaged with stakeholders, any feedback received and the
impact on existing policies and procedures. Board reports consider the impact on stakeholders. Enhanced Environment,
Health and Safety Reporting was put in place to better understand how to reduce the impact on our communities.
The move from sustainability to Environmental, Social and Governance (ESG) reporting, and how to best meet
market expectations, is now a key project for the Group and stakeholders will be engaged in the ESG process in 2021.
Ensuring high standards of business conduct is critical for the success of the Group. The Board receives regular updates
throughout the year on ethical and compliance issues. Our Corporate Governance Report on pages 56 to 62 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 approval of the strategy. Our strategic progress
in 2020 is disclosed in the Chief Executive’s Q&A on pages 14 and 15 and in the review of Our Strategy on pages 18 to 23.
Engagement in 2020
Outcomes in 2020
• Worked closely with industry bodies and charities in our markets
to enable us to keep informed of any trends or changes that will
affect our patients.
• Pre-Market Approval (PMA) on LiquiBandFIX8® and other clinical
work to develop products with ambition to improve quality of
life and outcomes from surgery.
• Gained real world data on products as part of the
product lifecycle.
• Certification of a number of new Woundcare
and Surgical products.
• Endorsement from Tissue Viability Society
on education and training.
• Post-market surveillance to garner end user feedback.
• Consolidated view in market that silicone is the
• Recruitment of end users for clinical studies to help validate
adhesive of choice.
products to improve patient experience.
• Focused on providing a COVID-19 safe workplace for our
employees, customers, suppliers and sub-contractors, requesting
regular feedback on any issues at sites. Our safety performance
improved with an All Incident Rate (AIR) score of 2.8 (2019: 2.9).
• Updated training and information for employees regarding
COVID-19 and developed a Health and Well-being platform for
mental health. Implemented ways of supporting employees,
including home working.
• Enhanced Environment, Health and Safety reporting to the
Board and SMT, increasing the focus on reducing our
environmental impact.
• Employee Forums, Works Council and Safety Committees
acted as forums to achieve closer engagement with
employees and allow regular access to Group HR.
• Communication with employees through our intranet,
newsletters, an SMT portal, CEO roundtables and Group
Whistleblowing Policy.
• Introduced environmental and energy management systems.
• Women in all recruitment selection pools and on all interview
panels with diversity a focus in the recruitment process.
• Nominated Penny Freer as the designated Non-Executive
Director for workforce engagement. Penny reviewed the
work carried out during the global pandemic.
• Board analysed talent reviews included five-year training and
development plans, which lead to the restructuring of the
Surgical Business Unit.
• Care, Fair, Dare further developed through cultural workshops,
• In 2021 there will be a review of culture to assess understanding
employee engagement surveys and appraisals.
and perception.
• 139 investor or analyst meetings covering areas including results,
strategy, markets, R&D pipeline, acquisitions and dividends.
• Consulted with major shareholders and proxy agencies ahead
of 2020 AGM on issues such as Director independence, tenure
and number of Board appointments.
• Brokers provided analysis of investor and analyst feedback.
• Notified of any concerns of retail shareholders which provides
a good perspective on drivers for investment.
• Our AGM provides an opportunity for engagement with investors
to provide updates on performance and activities, however,
due to COVID-19 the 2020 AGM was a closed meeting.
• Trading updates, full and half-year announcements, product
approvals and COVID-19 updates kept shareholders informed
regularly on performance.
• Board refreshment and succession plan implemented for the
Non-Executive members following feedback from shareholders
and proxy agencies.
• Improved guidance to market on impact of COVID-19, financial
performance, product approvals and R&D pipeline, clinical
studies, acquisitions and impact of Brexit.
• Increased investment in major R&D and regulatory projects and
continued to look for further acquisitions that meet our criteria.
• More insight into what our shareholders expect.
31
OverviewStrategic ReportGovernanceFinancial Statements Stakeholder Engagement and s172 continued
Engagement with our stakeholders helps us to appreciate
the impact our decisions have on their interests and
better understand their needs and concerns
Our Stakeholders
Engagement in 2020
Outcomes in 2020
Clinicians
We work with clinicians and Key
Opinion Leaders to ensure our
products are clinically safe and
meet regulatory requirements
as swiftly as possible.
• Invested in industry-leading training and education such
as our ActivHeal® Academy to deliver free educational
programmes endorsed by UK Tissue Viability Society.
• Developed new clinical articles for our newer product lines
(Aquafiber Extra, Silicone Foam and Silicone Foam Lite).
• Continued to build our subscription database to keep
them informed of our brands and current activities.
• Maintained the Sealantis CMO relationship and initiated
development of Clinical Advisory Boards for guidance,
clinical trial development and PMA preparation of clinical
use and market development for Seal-G®.
• Conducted virtual symposia and market surveys and
‘Voice of Customer’ for key Surgical products focusing on
Perception, Price and Positioning ahead of clinicals, training
and launches.
Partners
Our network of over 100 distribution
partners for our branded products and
our global OEM partners allow us to
provide quality outcomes for patients
we cannot reach directly.
• Ensured partners have the opportunity to speak to
key employees at any time regarding any concerns.
• Provided education and training through dedicated
websites and online tools, including social media platforms
such as launching ActivHeal® on Facebook and Instagram.
• Provided value-based incentives and pricing schemes
that created win/win relationships with our partners.
• Quarterly Business Reviews (QBRs) with major partners
to gain market and product feedback.
• Provided masterclasses, allowed Key Opinion Leaders
the opportunity to learn our products and participated
in industry clinician groups.
• Aligned our pipeline of new products and value-added
services and customer support programmes with partners.
• Committed to being open and transparent with regulators
and to work closely with them.
• Worked in partnership with Notified Bodies to ensure
we understand the latest regulatory programme and
that our products are approved as quickly as possible.
This included monthly meetings, clear contacts and lines
of communication, and attending workshops on MDR.
• Continued to work with multiple Notified Bodies to
get our products approvals extended under MDD.
Regulators
We engage with Competent
Authorities and Notified Bodies in
order to operate within the appropriate
regulatory and legal framework and
successfully ensure our products have
approval for use in the target markets.
• Increased loyalty and positive feedback in the market for
ActivHeal®, with 96% of clinicians viewing the provision
of educational materials as important and 100% indicating
that they benefited greatly from it.
• ActivHeal® awarded best website and finalist status for the
best education campaign (Wound Care Today) and finalist
status for the best education campaign with the Chartered
• Expanded use of clinicians and advisory bodies to expedite
Institute of Marketing.
product approvals.
• Extensive survey through industry-leading journal gained
insight as to how our ActivHeal® brand is perceived
by clinicians.
• Following clinical feedback from the NHS Clinical Evaluation
Team, made further improvements to our best in
class packaging.
• 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.
• In 2021 we will work to establish clinician/advisory panels
focusing on woundcare and microbiology, identifying
technologies to meet clinical need.
• Gained increased understanding of regulatory requirements
during the extended MDR transition period, improving
regulatory guidance and service to partners and clinicians.
• Improved success on new product approvals, taking
advantage of the MDD extension by renewing further
CE Marks under MDD, with a full product range
achieving this for a further five years.
• Significantly increased resources available to invest in
regulatory affairs following increased Board exposure
to the issues.
• Broader understanding of MDR and other legislation
affecting the Group, ensuring Board decisions are
based on the full understanding.
• Improved Board understanding of key drivers for the
Notified Bodies and Competent Authorities, leading
to more informed decisions.
32
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Our Stakeholders
Engagement in 2020
Outcomes in 2020
We work with clinicians and Key
• Invested in industry-leading training and education such
Clinicians
Opinion Leaders to ensure our
products are clinically safe and
meet regulatory requirements
as swiftly as possible.
as our ActivHeal® Academy to deliver free educational
programmes endorsed by UK Tissue Viability Society.
• Developed new clinical articles for our newer product lines
(Aquafiber Extra, Silicone Foam and Silicone Foam Lite).
• Continued to build our subscription database to keep
them informed of our brands and current activities.
• Maintained the Sealantis CMO relationship and initiated
development of Clinical Advisory Boards for guidance,
clinical trial development and PMA preparation of clinical
use and market development for Seal-G®.
• Conducted virtual symposia and market surveys and
‘Voice of Customer’ for key Surgical products focusing on
Perception, Price and Positioning ahead of clinicals, training
and launches.
Partners
Our network of over 100 distribution
• Ensured partners have the opportunity to speak to
partners for our branded products and
key employees at any time regarding any concerns.
our global OEM partners allow us to
provide quality outcomes for patients
we cannot reach directly.
• Provided education and training through dedicated
websites and online tools, including social media platforms
such as launching ActivHeal® on Facebook and Instagram.
• Provided value-based incentives and pricing schemes
that created win/win relationships with our partners.
• Quarterly Business Reviews (QBRs) with major partners
to gain market and product feedback.
• Provided masterclasses, allowed Key Opinion Leaders
the opportunity to learn our products and participated
in industry clinician groups.
• Aligned our pipeline of new products and value-added
services and customer support programmes with partners.
We engage with Competent
• Committed to being open and transparent with regulators
Authorities and Notified Bodies in
and to work closely with them.
Regulators
order to operate within the appropriate
regulatory and legal framework and
successfully ensure our products have
approval for use in the target markets.
• Worked in partnership with Notified Bodies to ensure
we understand the latest regulatory programme and
that our products are approved as quickly as possible.
This included monthly meetings, clear contacts and lines
of communication, and attending workshops on MDR.
• Continued to work with multiple Notified Bodies to
get our products approvals extended under MDD.
• Increased loyalty and positive feedback in the market for
ActivHeal®, with 96% of clinicians viewing the provision
of educational materials as important and 100% indicating
that they benefited greatly from it.
• ActivHeal® awarded best website and finalist status for the
best education campaign (Wound Care Today) and finalist
status for the best education campaign with the Chartered
Institute of Marketing.
• Expanded use of clinicians and advisory bodies to expedite
product approvals.
• Extensive survey through industry-leading journal gained
insight as to how our ActivHeal® brand is perceived
by clinicians.
• Following clinical feedback from the NHS Clinical Evaluation
Team, made further improvements to our best in
class packaging.
• 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.
• In 2021 we will work to establish clinician/advisory panels
focusing on woundcare and microbiology, identifying
technologies to meet clinical need.
• Gained increased understanding of regulatory requirements
during the extended MDR transition period, improving
regulatory guidance and service to partners and clinicians.
• Improved success on new product approvals, taking
advantage of the MDD extension by renewing further
CE Marks under MDD, with a full product range
achieving this for a further five years.
• Significantly increased resources available to invest in
regulatory affairs following increased Board exposure
to the issues.
• Broader understanding of MDR and other legislation
affecting the Group, ensuring Board decisions are
based on the full understanding.
• Improved Board understanding of key drivers for the
Notified Bodies and Competent Authorities, leading
to more informed decisions.
Our Stakeholders
Our Patients
Our Employees
Our Investors
Our Clinicians
Our Partners
Our Regulators
Our Communities
Our Supply Chain
33
OverviewStrategic ReportGovernanceFinancial Statements Stakeholder Engagement and s172 continued
Strengthening our relationships with stakeholders is
an ongoing part of operational management and
governance, supporting the implementation of ESG
Our Stakeholders
Engagement in 2020
Outcomes in 2020
Communities
Our values encourage us to support
charitable causes, both locally and
nationally, and to contribute to the
local community. We want to further
engage with our communities as part
of our ESG framework which will be
implemented over the next 12 months.
Our Supply Chain
We work with suppliers to ensure
continuity of supply to customers,
achieving this through robust supply
agreements, minimising sole supply of
materials and a comprehensive supplier
audit programme, whilst developing
supplier relationships, adapting
to remote supply management and
ensuring suppliers comply with our
Ethical Sourcing Policy.
• Encourage employees to participate, taking part in
Passion for Learning, an organisation focused on boosting
children’s confidence and self-esteem and providing
resource for St Luke’s Hospice.
• Participate in the local communities through charitable
giving and other activities, such as local business groups.
• Allocated matching charity funding (with an appropriate
financial cap) raised by each site and individuals for their
chosen charities.
• Long-standing relationship with selected charities,
including St Luke’s Hospice and Jeremiah’s Journey,
who provide free support to children, parents and carers
who have experienced the death of someone special.
• Sponsor local community events and sports teams,
and sports teams of employees and their close
family members.
• Met with suppliers and sub-contractors to ensure
we receive the level of service expected, contracting
on favourable commercial terms.
• Held business briefings for new and existing sub-contractors
to ensure they are aware of our plans and can provide
performance feedback.
• Numerous remote meetings were held with a key supplier
who experienced capacity constraints due to COVID-19.
• Enhanced sourcing function to support R&D in project
delivery and de-risking supply chain.
• Awareness of importance of complying with all payment
terms and complying with requirements to disclose
payment terms as required by Section 3 of Small
Business, Enterprise and Employment Act 2015.
• Enhanced Supplier Approval Scheme.
• Employees gained a better
understanding of the needs of their
local community and the work our
chosen charities carry out.
• Substantially increased focus on
charities and charitable giving.
• Increased focus on employee
volunteering and contributions.
• Risk mitigation plans resulted
in continuity of supply.
• Ongoing discussions with suppliers
have led to mutually beneficial
arrangements, for example
improved sterilisation turnaround.
• Supported innovation team,
helping manage R&D investment.
• Robust supplier audit schedule to
enhance regulatory compliance.
• Payment practices compare
favourably with industry norms.
• Increased number of suppliers
have contractual terms in place.
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
in the Non-Financial Reporting Statement on page 35. 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 Stakeholder Engagement section on pages 30 to 35 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.
34
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Our Stakeholders
Engagement in 2020
Communities
Our values encourage us to support
• Encourage employees to participate, taking part in
charitable causes, both locally and
nationally, and to contribute to the
Passion for Learning, an organisation focused on boosting
children’s confidence and self-esteem and providing
local community. We want to further
resource for St Luke’s Hospice.
engage with our communities as part
of our ESG framework which will be
implemented over the next 12 months.
• Participate in the local communities through charitable
giving and other activities, such as local business groups.
• Allocated matching charity funding (with an appropriate
financial cap) raised by each site and individuals for their
chosen charities.
• Long-standing relationship with selected charities,
including St Luke’s Hospice and Jeremiah’s Journey,
who provide free support to children, parents and carers
who have experienced the death of someone special.
• Sponsor local community events and sports teams,
and sports teams of employees and their close
family members.
We work with suppliers to ensure
• Met with suppliers and sub-contractors to ensure
continuity of supply to customers,
we receive the level of service expected, contracting
achieving this through robust supply
on favourable commercial terms.
Our Supply Chain
agreements, minimising sole supply of
materials and a comprehensive supplier
audit programme, whilst developing
supplier relationships, adapting
to remote supply management and
ensuring suppliers comply with our
Ethical Sourcing Policy.
• Held business briefings for new and existing sub-contractors
to ensure they are aware of our plans and can provide
performance feedback.
• Numerous remote meetings were held with a key supplier
who experienced capacity constraints due to COVID-19.
• Enhanced sourcing function to support R&D in project
delivery and de-risking supply chain.
• Awareness of importance of complying with all payment
terms and complying with requirements to disclose
payment terms as required by Section 3 of Small
Business, Enterprise and Employment Act 2015.
• Enhanced Supplier Approval Scheme.
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 2020.
Outcomes in 2020
Reporting
requirement
Group Policies that
guide our approach
Information and risk management,
with page references
• Employees gained a better
understanding of the needs of their
local community and the work our
chosen charities carry out.
• Substantially increased focus on
charities and charitable giving.
• Increased focus on employee
volunteering and contributions.
• Risk mitigation plans resulted
in continuity of supply.
• Ongoing discussions with suppliers
have led to mutually beneficial
arrangements, for example
improved sterilisation turnaround.
• Supported innovation team,
helping manage R&D investment.
• Robust supplier audit schedule to
enhance regulatory compliance.
• Payment practices compare
favourably with industry norms.
• Increased number of suppliers
have contractual terms in place.
Environmental
matters
– Environmental Policy
– Ethical Sourcing Policy
– Sustainability Policy
Reporting on our environmental
impact – pages 38 to 41
Business at a Glance –
pages 2 and 3
Risk Management –
pages 46 to 49
Employees and
social matters
– Equality, Diversity
and Inclusion Policy
Reporting on our environmental
impact – pages 38 to 41
– Community Support
– Health and Safety Policy
– Environmental Policy
– Ethical Sourcing Policy
Business at a Glance –
pages 2 and 3
Risk Management –
pages 46 to 49
Stakeholder Engagement –
pages 30 to 35
Our Strategy – pages 18 to 23
Respect for
human rights
– Anti-Slavery Policy
– Ethical Sourcing Policy
Corporate Governance Report
– pages 56 to 62
– Modern Slavery Act Policy
Anti-corruption
and anti-bribery
matters
– Anti-Bribery Policy
– Gift Policy
– Sanctions Policy
– Whistleblowing Policy
– Ethical Sourcing Policy
Audit Committee Report –
pages 63 to 65
Risk Management –
pages 46 to 49
Description of the business model
Business at a Glance –
pages 2 and 3
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
Risk Management –
pages 46 to 49
Non-financial key performance indicators
Key Performance Indicators –
pages 24 and 25
35
OverviewStrategic ReportGovernanceFinancial Statements ESG and Sustainability
Developing a robust ESG Framework,
building on our principles of sustainability
Effective management of health, safety, environment,
quality, energy, carbon emissions and ethical sourcing
is part of our Sustainability Policy. Our ESG strategy
and framework will take the next step, identify issues
that are a priority for our stakeholders and set out
how these will be addressed. We intend to report
on continuing progress in subsequent annual reports
as we focus on long-term sustainable success.
Sustainability priorities
“ Although our activities in 2020 have focused
on reducing our environmental impact we
appreciate that ESG is much wider than this
and our framework will reflect that. ESG is a
focus for the Board both now and for the future.”
Peter Allen
Chairman
Developing products that provide better
outcomes for patients and clinicians
• Working with patients, partners and clinicians
to identify unmet needs.
• Industry-leading educational materials and
training to support clinicians and partners.
Creating a great place to
work for our employees
• Focusing on employee safety, flexible working
and providing assistance in respect of COVID-19.
• Eliminating discrimination, develop
employees and treat them equally.
3
Number of new
products released
2019: 3
Reducing our
environmental impact
• Reducing emissions,
improving efficiency and
use of sustainable resources.
• Reducing waste, recycling, protecting
water quality and re-use of materials.
20.72
CO2e emissions per £k sales (KG)
2019: 25.14
36
78%
Employee Engagement
2019: 48%
Supporting local
communities
• Providing local employment
and encouraging employee
volunteering in the community.
• Providing financial support for employees’
charity work and focus on chosen charities.
£16k
Charitable donations*
2019: £26k
* Charity work in 2020 impacted by COVID-19.
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Sustainability Policy and activities in 2020
With over 700 employees across 11 sites, the Group recognises that its activities have
wide-ranging and interconnected impacts on the economy, environment and society.
The below activities were part of our Sustainability Policy in 2020:
Health, safety
and wellbeing
Environmental
responsibility
Resource
use
• Committed to minimising
• Stringent targets to reduce
•
workplace risk by assessing
risk and implementing Best
Practice mitigations.
Implementation of plans
to protect the health, safety
and mental well-being
of employees, including
occupational health
surveillance, Cycle-To-Work
schemes and employee
engagement initiatives
during home working.
• Continual improvement of
health and safety processes and
implementation of a Health and
Safety Policy Statement and
Group Standards Manual.
carbon emissions and energy
consumption by improving
efficiency and use of
renewable sources.
• Apply principles of sustainable
environmental stewardship,
working with landlords and local
communities to implement
biodiversity net gain and
safeguarding geodiversity.
• Use water efficiently, recycle
where possible and protect
water quality.
• Developing a sustainable travel
plan through our car fleet and
aim to reduce the number of,
and need to take, journeys.
• Use resources sustainably and
substitute primary resources
wherever possible.
•
Implement waste prevention,
re-use of materials, recycling,
and energy recovery to
minimise waste disposal.
• Encourage employees to
suggest ideas to reduce energy
use and pledge ways they can
personally help to achieve this.
• Understand the wider
environmental factors that
may impact the business.
• Leverage our training function
to develop information around
environmental activities.
Business and
product innovation
Being committed
to our community
Equality, diversity
and inclusion
• Engage with stakeholders
to develop our products for
sustainable performance.
•
Identify and consult with local
community stakeholders close
to our operations.
• Committed to complying with
• Encourage employee
ISO 13485 and working towards
implementation of ISO 14001
and ISO 50001 which focus
on environmental and
energy management.
• Developing products that
improve the outcomes
for patients.
• Explore efficiencies within our
projects and products, ensuring
that we are utilising the most
efficient processes.
• Utilise innovations which
have a positive impact
on climate change.
volunteering for community
projects and financially support
employees in charity work
or activities.
• Provide employment using local
sourcing and businesses and
build our business on the basis
of responsible practices.
• Ensure that community interests
are considered as part of the
decision making process at
all sites.
• Flexible working arrangements
to support fitness, health and
childcare and provide employee
assistance programmes.
• Care about the work we
undertake and the real life
differences we can make,
acting with integrity and fairness.
• Eliminate all forms of
discrimination, promote
diversity and give fair and equal
treatment to all employees and
our supply chain.
• Provide employees with a
Personal Development Plan,
providing feedback and support
from managers and peers.
• Value our workforce and ensure
they are appropriately skilled
and competent to carry out
their roles.
37
OverviewStrategic ReportGovernanceFinancial Statements ESG and Sustainability continued
The Group is an environmentally conscious
organisation which acknowledges the impact
its operations and services may have on
the environment
Environment
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.
In line with increasing stakeholder expectations on
environmental issues, the Group aims to minimise energy
and water consumption and reduce, recycle and re-use
our resources to prevent the unnecessary waste of materials.
In 2020 the Board endorsed an Environmental Policy and
committed to develop our Environmental programmes in
2021 with the adoption and ultimately certification of the
internationally recognised ISO standards, for Environmental
Management (ISO 14001) and Energy Management (ISO
50001). 2020 targets included no breaches of environmental
permits or consents and agreement of Environmental
Policies incorporating Energy Management, both of
which were met.
We have agreed future sustainability targets which include
ISO accreditation, ESG sustainability framework development
and commitment to both United Nations Sustainable
Development Goals and the UK Ten Point Plan for a Green
Industrial Revolution. The Group is giving greater visibility to
ISO 14001 to drive a positive culture on environmental issues.
This is supported by sustainability and environmental activity
being discussed at Board meetings on a quarterly basis, using
this as a platform to develop initiatives, gain commitment
and get buy-in for trickle activity. To further develop the
change of mindset, an Environmental Pledge programme
was developed and was launched across the Group in 2021,
allowing all AMS employees to participate and pledge how
they can change either their view or activities they undertake
both in and out of the working environment. We also initiated
e-signatures to reduce printing and postage.
Our focus – Streamlined Energy
and Carbon Reporting
We complied 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 needed to implement in 2020
and beyond as are outlined in this report.
Our focus in 2020 was to review and determine the areas
where we make our largest environmental impact. We
considered all manufacturing locations, warehouses, R&D
sites and offices. The acquisition of Biomatlante, based in
Nantes, France, in late 2019 is included in our 2020 reporting.
Our findings below do not include the acquisition of Raleigh
made in late 2020. Our emissions reporting represents all
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 year
2019
2020
We report our emissions in three scopes which come
from the internationally recognised ISO standards
(ISO 14069:2013).
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.
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 in June 2020.
38
Advanced Medical Solutions Group plc Annual Report & Accounts 2020
Percentage of kg CO2e emissions
by scope in 2019 and 2020
2019
2020
80
70
60
50
40
30
20
10
0
Scope 1
Scope 2
Scope 3
In 2020 we committed to investigating ways in which we
can sustainably offset the carbon we generate. This has
been reviewed and plans developed to include a range of
both internal and external activities, for example, the use of
internal controls requesting environmental and/or energy
consideration when planning and implementing projects,
this is aimed at both individual locations and Group activity.
We are looking to develop links both locally to all our
locations and where possible supporting international
carbon reduction projects.
In the long-term AMS will assess the commitment required
to develop carbon neutral processes and policies.
Case Study – Reducing our
environmental impact
In 2020 our Plymouth site undertook a project
looking at energy consumption.
The investigations with a local provider established
that 494 photovoltaic solar panels on the roof of the
building should provide a substantial renewable source
of energy to the site.
After quantifying the energy and environmental returns
the project received SMT approval and is the first of
its type within AMS, a key step in becoming a more
sustainable business. The return on investment is
longer than usual but the goals in both the short and
long-term far outweigh any longer payback. The key
benefits are expected to be:
• Will provide over 20% of site electricity per year.
• Equivalent Carbon saving of in excess of 1,900 trees
per annum, removing 41 tonnes of CO2e from being
released through traditional electricity generation.
• Will generate 140 MWh per year, saving over
40 tonnes of CO2e (1,800 trees).
• Supports the local economy as the project
is being developed and planned in conjunction
with a local provider.
“ We see this project as a key part of our drive to
reduce both our carbon footprint and energy
costs. Over the next 25 years we will save over
1,000 tonnes of CO2e, the equivalent of 45,000
trees. It is important to the employees at the
Plymouth site to contribute to the Group’s
ESG and sustainability goals.”
Michael Browne
Operations and Quality Manager – Plymouth
39
OverviewStrategic ReportGovernanceFinancial Statements ESG and Sustainability continued
AMS Group 2020 emissions (by footprint/scope and 2019 for comparison).
AMS Group 2020
Footprint
Premises
Mains gas
Electric
Water
Waste
Travel
Company vehicles
Other
F-gas losses
Total
AMS Group 2019
Footprint
Premises
Mains gas
Electric
Water
Waste
Travel
Scope 1
Scope 2
Scope 3
GHG emissions
(kg CO2e)
Sub-total
(kg CO2e)
248,249
1,310,640
248,249
1,310,640
10,798
12,039
10,798
12,039
1,581,726
172,504
144,762
565,516
1,310,640
22,838
172,504
172,504
144,762
144,762
1,898,992
Scope 1
Scope 2
Scope 3
GHG emissions
(kg CO2e)
Sub-total
(kg CO2e)
700,741
1,322,642
700,741
1,322,642
9,998
70,096
9,998
70,096
2,103,477
Company vehicles
406,308
406,308
406,308
Other
F-gas losses
Total
287,370
1,394,419
1,322,642
80,094
287,370
287,370
2,797,155
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 0.02 KG CO2e per unit sold.
• Average kg CO2e emitted per £K of sales from all reported activity was 21.9 kg CO2e.
• Business travel by car accounted for 9% of all kg CO2e generated in 2020.
• Waste for 2020 accounted for less than 1% of the total reported footprint due to more efficient recycling, waste initiatives,
a better understanding of our waste flows and continual improvement plans.
•
Indirect emissions were the biggest area of kg CO2e generation, accounting for 69% of emissions. This reflects sites
being fully operational despite reduced numbers of staff on site and productions levels were lower due to COVID-19.
kg CO2e per ‘each’ produced 2019 and 2020
kg CO2e per £K sales 2019 and 2020
n
o
i
t
a
c
o
l
y
b
’
h
c
a
e
‘
r
e
p
e
2
O
C
g
k
0
2
0
2
0.045
0.040
0.035
0.030
0.025
0.020
0.015
0.010
0.005
0.000
40
AMS Site
2019
Group Average
2020
Group Average
0
2
0
2
n
o
i
t
a
c
o
l
l
y
b
s
e
a
s
K
£
r
e
p
e
2
O
C
g
k
30
25
20
15
10
5
0
PLY
WIN
EU
PLY
WIN
EU
Advanced Medical Solutions Group plc Annual Report & Accounts 2020
Reducing environmental impact – future plans
• Reporting and feedback on our environmental progress
each year.
• Meeting our initial targets to reduce environmental
burden through effective energy and environmental
management. This is being further developed with
the introduction of the ISO accreditation schemes.
• Entering into energy agreements with suppliers and
•
•
committing to have contracts in place so that 50% of all
electricity supplied to our sites by 2025 is generated from
renewable sources (excluding nuclear). At the start of
2021 we sit at 35% from renewable sources.
Investigate and implement (where appropriate) energy and
environmental initiatives that will reduce our burden with
proven reduction against our energy management plan.
In line with our environmental and energy commitments,
we will incorporate the United Nations Sustainable
Development Goals and the UK Government’s Green
Industrial Revolution programme in all areas that can
be made applicable to our business.
• Continue to review how much travel is necessary with
improved communication methods as demonstrated
across the world during the COVID-19 pandemic. The
review of travel completed in 2020 outlined a reduction in
miles travelled, and with some locations looking to restrict
sales of petrol and diesel cars in the coming years and
more viable methods of communication at our disposal,
AMS will continue to review our fleet and our policies and
processes behind this in 2021.
Social
Social factors will be a key aspect of the ESG framework and
the actions in 2020 are set out below. We have considered
a variety of Social factors and introduced a number of
employee policies in 2020. We will further move our
engagement forward in 2021 by introducing a Code of
Conduct. As we come out of the pandemic we will look to
increase our Community and Sponsorship work, which has
been limited due to remote working. We will look to further
strengthen employee engagement and maintain our high
standards of health and safety.
Health and Safety/COVID-19
We are focused on maintaining the highest levels of health
and safety within our business. We acted swiftly to the
COVID-19 pandemic and provided consistent and regular
communication to our employees around the world,
ensuring open lines of communication to management.
We established a COVID-19 Committee and cascaded
down principles with regular calls to allow local leaders to
implement changes. We had a focus on removing anxiety,
providing clarity on legislation, and supporting physical and
mental well-being. Our teams made sure that every person
was kept updated with relevant information and had regular
contact with their managers and teams.
The pandemic has highlighted our resilient can-do attitude,
with many of our team seamlessly switching to home
working while safely keeping our manufacturing sites open
and maintaining a relentless focus on serving our customers.
Feedback has been very positive and employees have
continued to work effectively despite the challenging and
uncertain circumstances. Individual teams have also worked
hard to maintain good communication between colleagues
and have made good use of video conferencing facilities.
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. Health and safety is also a legal requirement and
we must, therefore, continually improve our performance
and adapt to change, such as the challenges raised by
COVID-19. To achieve this aim, appropriate levels of resource
are allocated to ensure a positive health and safety culture
throughout the Group. Despite the challenges of COVID-19,
our AIR (All Incident Rate) performance in 2020 reduced to
2.8 (2019: 2.9), significantly below the target of 4.0 set in 2019
which reconfirms our desire to continuously improve our
safety performance and enhance our safety culture.
Total number of injuries x 1000
Total labour hours worked
AIR
(per 100,000)
2020
2019
2018
2017
2016
2.8
2.9
2.3
4.1
5.4
Our commitment to health and safety is supported by
the additional actions we took in 2020. We implemented
a Health and Safety Policy Statement which was rolled out
across the Group. Ensuring that all our sites, including those
we have acquired in the last two years, have the same high
levels of Health and Safety is important. All sites have active
HSE Committees, which have been given a remit to also
cover Environmental impact. New starter inductions include
a mandatory Environment, Health and Safety induction,
which includes workplace health and safety, environmental
awareness, fire safety awareness and stress management.
These improvements have been supported by the Group
Health, Safety and Environmental Manager who was
appointed in 2019.
Delivering for our patients, clinicians and partners
We aim to build strong, mutually beneficial relationships with
clinicians and patients, with support from our suppliers and
partners, who we rely on to meet the needs of our patients.
We provide the highest levels of education, training and
support, some of which is award winning, and utilise
social media to engage with clinicians.
41
OverviewStrategic ReportGovernanceFinancial Statements ESG and Sustainability continued
We expect our suppliers, partners, clinicians and customers
to behave ethically and responsibly and to comply with their
legal obligations and our Ethical Sourcing Policy. The Group
audits our suppliers and manufacturers regularly. Quality
compliance is a key part of the Group’s audit. We have been
working to ensure that suppliers and customers have robust
supply agreements in place for the benefit of both parties
to ensure continued supply of products.
The Group fully supports the aims of the Modern Slavery Act
2015 to eradicate human slavery and trafficking. In particular,
the Group wishes to ensure that no child labour or servitude
of any kind or human trafficking has been involved in the
supply and distribution of products or services. Further details
of these steps can be seen in our Modern Slavery Statement,
which is available on our website.
Our employees
The Group employs over 700 people in 11 international
locations and is committed to a policy of equal opportunities
in the recruitment, engagement, performance management
and retention of employees. The multinational diversity of
the Group’s workforce supports the distribution of products
across the world.
We require 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. In line with
the Culture strategic pillar we aim to develop and retain our
talent, allowing us to build skills to maintain an innovations
culture and retain knowledge within our business. This
is important to achieve the long-term strategic goals
of the business.
We are an equal opportunities employer. We are committed
to eliminating discrimination and to giving fair and equal
treatment to all employees and job applicants regardless
of age, disability, race, sex, sexual orientation, marriage or
civil partnership status, pregnancy, maternity and paternity,
gender reassignment, religion or belief. An Equality, Diversity
and Inclusion 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. There is a policy of including women
in all recruitment selection pools and on all interview panels.
The AMS ‘Care, Fair, Dare’ values
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 an intranet, emails and newsletters. The SMT
meet monthly and information is also communicated
through team meetings. This allows employees the
opportunity to provide feedback or raise questions directly.
Employees are able to ask the SMT questions directly through
a portal. We also have employee forums and site ‘town halls’
run by the CEO, where employees can ask questions directly.
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. Penny Freer
also engages with employees through her role as the
Director responsible for Workforce Engagement.
As the Company grows, it is important that there are values
and a culture which are understood in all locations in which
we operate. At AMS this is underpinned by our Care, Fair,
Dare values (see below). We have well established processes
through which we seek feedback from our employees
about their perception of our values and culture, and
how employees have demonstrated the values during their
interactions with them, which include cultural workshops,
employee engagement surveys and exit interviews. To ensure
our culture is driven from the top, the Board’s involvement
in the review process is critical and the Board will undertake
a more detailed review of our culture in 2021.
Gender ratio and reporting
The Group recognises the importance of diversity,
including gender, at all levels. The Group has a strong
female representation on the Senior Management Team
where women comprise 43% of positions. One Board
member of the six appointed is female (16.6%) and of
our over 700 employees, approximately 54% are female.
The Group continues to actively seek to recruit and
advance women into its top management through
manager training, application monitoring and
robust, transparent selection processes.
Care
Fair
A culture of:
A focus on:
A behavioural style which is:
A leadership style which:
• Listening, supporting and taking action
• Quality
• Valuing contribution
• The ‘Bigger Picture’
• Open-minded
• Respectful
• Builds engagement
• Motivates and retains
• Accountability and responsibility
• Supporting and coaching
• Leading by example
• The team not the individual
Dare
• Optimism and realism
• Determination and persistence
• Solutions not problems
• Continuous improvement
42
• Transparent
•
Inclusive
• Responsive
• Creative
• Proactively communicates
• Empowers decision making
• Challenges the status quo
• Removes barriers and innovation
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Main Board
Total Employees
Male
5
Female 1
6
Male
46%
Female 54%
745
Senior Management
Team
Male
4
Female 3
7
In 2020 we reported a disclosable mean pay gap of 35.3%
in favour of our UK male employees (2019: 35.2%) with
limited change in the structural profile of the UK employees.
Our full report can be found on the Group website.
Charity
We encourage employees to engage with the community.
Despite COVID-19 we continued to provide fund raising
matching to a number of charities. During the year, there
were various local fundraising activities across the different
regions supporting a number of charities, including our
chosen charities in the UK, St Luke’s Hospice, providing
palliative care for local people, and Jeremiah’s Journey,
support for children and young people who have
experienced the death of someone special, as well as
NHS Charities and Passion for Learning. Colleagues from
our Dutch subsidiary carried out charity work for a food bank.
We participate in the local communities, through events and
charitable giving and also through other activities, such as
having a position on the Board of the Winsford 1-5 Group,
for businesses local to the Winsford Site.
In 2021 we will increase our support of local initiatives by
helping to fund activities led by the Cheshire Community
Foundation, with our CEO joining the funding Committee.
Governance
Governance has always been an area of focus for AMS.
Our Corporate Governance Report on pages 56 to 62 and
Remuneration Report on pages 66 to 76 outline our strength
in this area, often going further than is required by an AIM
quoted company and by following the stricter UK Corporate
Governance Code.
We have outlined actions taken to increase diversity and
strengthened our commitment to equality by increasing
the scope of our Equality Policy and relaunching it to cover
aspects covered in this report as the Equality, Diversity and
Inclusion Policy.
Our approach to Risk Management is outlined on pages
46 to 49 and this has been further strengthened by the
introduction of a comprehensive Business Continuity Plan
in Q1 2021 with input and resource from our insurers.
Governance will be a foundation of our work for developing
an ESG framework in the next 12 months and is an area
where we feel significant progress has been made.
A culture of:
A focus on:
A behavioural style which is:
A leadership style which:
A set of values which:
Care
Fair
• Listening, supporting and taking action
• Quality
• Valuing contribution
• The ‘Bigger Picture’
• Open-minded
• Respectful
• Builds engagement
• Motivates and retains
• Accountability and responsibility
• Supporting and coaching
• Leading by example
• The team not the individual
Dare
• Optimism and realism
• Determination and persistence
• Solutions not problems
• Continuous improvement
• Transparent
•
Inclusive
• Responsive
• Creative
• Proactively communicates
• Empowers decision making
• Challenges the status quo
• Removes barriers and innovation
• Encourages pride and
a sense of belonging
• Ensures that the health,
safety and well-being of all
employees is paramount
• Delivers results
• Will build a
sustainable future
43
OverviewStrategic ReportGovernanceFinancial Statements Advanced Medical Solutions Group plc Annual Report & Accounts 2020
Financial Review
“ Despite the severe COVID-19 disruption, the Group remained profitable and
generated strong operational cash flows while continuing to invest in key
projects and increasing dividends.”
Eddie Johnson
Chief Financial Officer
The Group maintains its solid balance sheet
and continues to invest in future growth
Summary
Group revenue declined by 15% at reported and constant
currency. Adjusted profit before tax reduced by 50% as
investment in R&D and other key projects continued
and the employee base was retained, resulting in
adverse operating leverage.
To provide the clearest possible insight into performance,
the Group uses alternative performance measures. These
measures are not defined in International Financial Reporting
Standards (IFRS) and, therefore, are considered to be non-
GAAP (Generally Accepted Accounting Principles) measures.
Accordingly, the relevant IFRS measures are also presented
where appropriate. AMS uses such measures consistently at
the half year and full year and reconciles them as appropriate.
The measures used in this statement include constant currency
revenue growth, adjusted operating margin, adjusted profit
before tax, adjusted earnings per share and adjusted net
cash inflow from operating activities, allowing the impacts of
exchange rate volatility, exceptional items, amortisation and
the change in long-term liabilities to be separately identified.
Net cash is an additional non-GAAP measure used.
Excluding exceptional items, administration expenses reduced
marginally to £33.7 million (2019: £34.6 million), inclusive of
losses arising from foreign exchange movements, as the
Group implemented effective cost management although
these were partially offset by higher amortisation of intangibles.
The Group operated its factories at much lower volumes,
resulting in under-absorption of its fixed costs and, to reflect
the need for operational staff to continue attending Group sites
during the lockdown period, additional one-off payments were
made to these employees totalling £0.3 million. Furthermore,
£0.4 million of UK job retention scheme support was repaid
relating to our employees who were unable to work but still
received their salary in full at the Group’s cost.
The Group incurred £7.9 million of gross R&D spend
in the period (2019: £6.5 million), representing 9.1% of sales
(2019: 6.3%) reflecting increased investment in innovation
and in meeting the increasing regulatory standards.
Exceptional items were £0.8 million in the year (2019:
£1.1 million) relating to both the acquisition of Raleigh and
our participation in a process, in which AMS was unsuccessful,
for a sizeable surgical business.
Amortisation of acquired intangible assets was £2.3 million
in 2020 (2019: £1.7 million) due to the full period effect of
the acquisition of Sealantis in January 2019 and Biomatlante
in November 2019.
A £0.2 million expense was recorded due to the change in the
fair value of long-term liabilities recognised on acquisition of
Sealantis in 2019 (2019: credit of £0.3 million).
Adjusted operating margin decreased by 10.5 percentage
points to 15.9% (2019: 26.4%) and operating margin decreased
by 11.3 percentage points to 12.4% (2019: 23.7%) predominately
due to COVID-19 impacts.
Adjusted profit before tax decreased by 50% to £13.4 million
(2019: £26.6 million) and profit before tax decreased by 58%
to £10.1 million (2019: £24.3 million).
Reconciliation of profit before tax to adjusted
profit before tax
Profit before tax
2020
£’000
2019
£’000
10,089
24,257
Amortisation of acquired intangibles
2,269
Change in long-term liabilities
Exceptional items
167
834
1,683
(345)
1,053
Adjusted profit before tax
13,359
26,648
The Group’s effective tax rate, reflecting the blended tax rates
in the countries where we operate and including UK patent box
relief, decreased to 14.9% (2019: 21.8%). The decrease was due
to patent box claims relating to the newly granted LiquiBand®
Exceed patents which can be retrospectively claimed.
Adjusted diluted earnings per share decreased by 45% to 5.44p
(2019: 9.83p) and diluted earnings per share decreased by 55%
to 3.94p (2019: 8.72p).
Reflecting the strong net cash position and confidence in the
Group’s prospects, the Board is proposing an increased final
dividend of 1.20p per share, to be paid on 18 June 2021 to
shareholders on the register at the close of business on
28 May 2021. This follows the interim dividend of 0.50p per
share paid on 23 October 2020 and would, if approved, make
a total dividend for the year of 1.70p per share (2019: 1.55p)
44
Revenue
Net operating cash flow
Proposed dividend per share
£86.8m
-15%
£21.5m
-1%
1.70p
+10%
2019: £102.4m
2019: £21.7m
2019: 1.55p
an increase of 10%. In line with best practice, AMS repaid the
£0.4 million of UK Government furlough support that had
been received during the year.
Operating result by business segment
Year ended 31 December 2020
Revenue
Operating profit
Amortisation of acquired intangibles
Adjusted operating profit4
Adjusted operating margin4
Year ended 31 December 2019
Revenue
Operating profit
Amortisation of acquired intangibles
Adjusted operating profit4
Adjusted operating margin4
Surgical
£’000
Woundcare
£’000
50,169
36,627
6,962
2,132
9,094
18.1%
5,220
137
5,357
14.6%
Surgical
£’000
Woundcare
£’000
56,544
14,411
1,675
16,086
28.4%
45,824
11,370
8
11,378
24.8%
Note 4: Adjusted for exceptional items and amortisation of acquired intangible assets
Table is reconciled to statutory information in Note 4 of the Financial Information.
Surgical
Surgical revenues decreased by 11% to £50.2 million (2019:
£56.5 million) at both reported currency and constant currency.
Adjusted operating margin decreased 1,030 bps to 18.1%
(2019: 28.4%) as the Group was unable to offset costs in the
same proportion to the decrease in revenue and as a result of
increased investment in R&D, clinical and regulatory affairs.
Woundcare
Woundcare revenues decreased by 20% at both reported
currency and constant currency to £36.6 million (2019:
£45.8 million). Adjusted operating margin decreased by
1,020 bps to 14.6% (2019: 24.8%).
Currency
In the year, approximately one third of sales was invoiced
in Euros and approximately one quarter was invoiced in US
Dollars. The Group estimates that a 10% movement in the
£:US$ or £:€ exchange rate would impact Sterling revenues
by approximately 2.8% and 3.4% respectively. The Group
hedges significant currency transaction exposure by using
forward contracts, and aims to hedge approximately 80% of its
estimated transactional exposure for the next 12 to 18 months.
In the absence of this hedging, it is estimated that a 10%
movement in the £:US$ or £:€ exchange rate would have
an impact on operating margin of 2.2 and 0.1 percentage
points respectively.
Cash flow
Despite the unprecedented conditions, the Group delivered a
strong net cash inflow from operating activities of £21.5 million
(2019: £21.7 million) with the reduction in operating profit
being mostly offset by favourable working capital movements.
Reconciliation of net cash inflow from operating
activities to adjusted net cash inflow from
operating activities
Year ended 31
December 2020
£’000
Year ended 31
December 2019
£’000
Net cash inflow from
operating activities
Add back exceptional items
Adjusted net cash inflow
from operating activities
21,511
613
21,699
1,053
22,124
22,752
At the end of the period, following the acquisition of Raleigh
for £22.0 million, the Group had net cash of £53.8 million
(31 December 2019: £64.1 million).
Working capital decreased during the year, due to a decrease
in receivables as a result of lower sales, partially offset by
increased inventory levels and lower payables. Inventory cover
was temporarily increased to 5.7 months of supply (2019: 5.1
months) in preparation for potential supply chain risks relating
to COVID-19 and the end of the Brexit transition period. Debtor
days decreased to 45 days (2019: 49 days) due to customer
mix and Creditor days decreased to 30 days (2019: 34 days).
Capital investment in equipment, R&D and regulatory costs
decreased slightly to £5.3 million (2019: £5.9 million), with
a high proportion of R&D costs being expensed in the year.
Cash outflow relating to taxation decreased to £3.7 million
(2019: £5.9 million) due to lower taxable profits, partially
offset by the requirement to accelerate payments on
account in the UK.
The Group paid its final dividend for the year ended
31 December 2019 of £2.3 million in June 2020 (2019:
for the year ending 2018, £1.9 million in June 2019), and its
interim dividend for the six months ended 30 June 2020
of £1.1 million in October 2020 (for the six months ended
30 June 2019: £1.1 million in October 2019).
The Group has an undrawn unsecured £80 million credit
facility provided jointly by NatWest and 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.
45
OverviewStrategic ReportGovernanceFinancial Statements Risk Management
Creating quality outcomes by managing risk
Risk and uncertainty are an inherent part of doing business which could impact our
business, brands, assets, revenue, profits, liquidity and capital resources. To meet our
strategic objectives, build shareholder value and promote our stakeholders’ interests,
we must manage this risk.
An effective and successful risk management process
balances risk and reward and is dependent on the judgement
of the likelihood and impact of the risk involved. The Board
has overall responsibility for ensuring there is an effective
risk management framework, which underpins our
business model.
The Business Units, Senior Management Team (SMT),
Audit Committee and Board review risks throughout the
year. These risks are documented in the Risk Register
which is formally reviewed by the SMT, external auditor
and the Board twice annually. The plans and actions
assigned to the Executive Directors and SMT members
are reviewed to ensure progress is being made with risk
actions and mitigation plans.
We believe that the policies, procedures and monitoring
systems that are in place are sufficient to effectively
manage the risks faced by our business.
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 47,
and for determining the nature and extent of the significant
risks it is willing to take in achieving its strategic objectives.
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.
Key Roles and Responsibilities
Implementation and compliance responsibility
Board
Audit
Committee
Senior Management
Team
Business Units and
Other Functions
• Overall responsibility
for corporate strategy,
governance, performance,
internal controls and Risk
Management Framework.
• Identification, review and
management of identified
Group strategic risks.
• Defining the Group’s
appetite for risk.
• Assessing the effectiveness
of the risk management
processes adopted across
the Group.
• Challenging the content
of the Risk Register.
• Assessing the effectiveness
of the risk management
processes adopted across
the Group.
• Ensuring compliance with
financial and reporting
legislation, rules and
regulations and ensuring the
Annual Report is fair, balanced
and understandable.
• Monitoring compliance
with internal control systems
and co-ordinating Internal
Audit arrangements.
• Monitoring and oversight of
internal and external audit.
• Management of the business
and delivery 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.
• Challenging the
appropriateness and
adequacy of action
plans to mitigate risk.
• Analysing the aggregation
of risk across the Group.
• Provision of cross-functional
resource to effectively
mitigate risk.
• Execution of the delivery
of the actions associated
with managing risk.
• Timely reporting on the
implementation and
progress of agreed
action plans.
• Identification and reporting
of strategic risks to the
Senior Management Team.
• Implementation of a risk
management approach
which promotes the
ongoing identification,
evaluation, prioritisation,
mitigation and monitoring
of operational risk.
Monitoring and reporting responsibility
46
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 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.
Financial
Strategic
2
1
3
+4
+5
+9
8
6
Identif y
Identify ris k
s existin g c
s
s
e
s
s
A
r o l s
t
n
o
A
n
a
l
y
s
e
c
S
Assess mitig
Score m
iti
o
g
r
e
r
i
s
a
t
k
e
s
d
a
t
e
f
d
a
c
r
t
i
s
o
k
s
r
s
Risk
Management
Process
M
o
n
i
t
o
r
M
o
n
i
t
o
f
o
r
e
a
c
ti
o
x
e
c
n
s
ution
a
n
d Report
y
n
n r e sponsibilit
p action pla
M a nage
e l o
v
A s s i g
D e
Risk Heat Map
While we continue to monitor and manage a wide range of
risks, the risk map summarises those risks considered to have
the greatest potential impact if they were to materialise.
Principal Risks
1 Lack of growth
2 Poor ROI from R&D
3 Acquisitions/integration
4 Forex
5 COVID-19
6 Regulatory
7 Single source supply
8 Cyber-risk
9 Talent management
Risk Size
Likelihood
-7
Large
Middle
Small
High
Low
Operational
Trend (net position
of risk vs FY2019):
+
Increase from 2019
–
Decrease from 2019
47
OverviewStrategic ReportGovernanceFinancial Statements
Risk Management continued
Strategic Risks
Risk
1
Potential Impact
Key Controls and Mitigating Factors
Status
• Income shortfall.
• Market capitalisation
• Development and launch of new products to secure
existing and new customers and drive future growth.
Lack of growth
impacted.
• Implemented a more flexible partnering approach.
• Reduced profit.
• Diversified approach reduces the impact on any one
No change
• Loss of competitive
project, partner or product.
advantage.
• Contracts with agreed set minimum which allow terms
• Loss of key partners.
to be renegotiated or agreements terminated.
• Evaluation of opportunities to broaden reach into
new markets or adjacent sectors and new claims
for existing products.
• Ongoing evaluation of incoming technologies
for licensing.
• Full-service offering including strong regulatory and
quality assurance, product development, product
differentiation and clinical support to mitigate a
pure cost of supply proposition.
• Close monitoring of performance and structure
of Business Units.
Strong pipeline and well
positioned for strong
growth as markets
recover
2
Poor return
on investment
from R&D
• Income shortfall.
• Pipeline of new products/technologies identified
• Market capitalisation
to provide growth and differentiation
impacted.
• Unique products protected by know-how and/or IP
• Loss of reputation
as an innovator.
• Loss of competitive
and IP enforcement.
No change
• Improved front-end business planning process including
robust business cases and marketing plans.
advantage.
• Effective alignment of strategy to consider the market
• Loss of key partners.
• Loss of market
share.
• Misidentification of
new, competitive
technology.
• Commercial value
of products not
maximised.
• Risk of impairment
of assets.
changes and promote quality and cost savings.
• Marketing strategy to support partners and products.
• Implementation of processes to ensure R&D projects
progress to plan.
• Strong links with partners, including Universities,
to reduce the risk of missed opportunities.
• Investment in clinical research, personnel, symposia,
and Key Opinion Leaders to foster new approaches.
• R&D being restructured and strengthened with the
appointment of a Director of Innovation in 2021.
• Utilise licensing and outsourcing options.
3
Making the
wrong or no
acquisition/poor
integration
• Impact on Group
performance
and market
capitalisation.
• Reputational loss.
• Strategy set, M&A objectives defined and
advisors appointed.
• Detailed market intelligence and identification of targets.
• Extensive due diligence process established.
No change
• Integration plan in place with key milestones.
Financial Risks
Risk
4
Forex exposure
48
Potential Impact
Key Controls and Mitigating Factors
Status
• Loss of income.
• Established treasury policy on forex exposure.
• Shortfall in profit.
• Robust forward forecasting of currency cash flows.
• Market expectations
• Aim to hedge 80% of forecast net cash flows for
missed.
the next 12-18 months.
Strengthening Sterling
creates forex headwinds
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Key:
Increased risk
Decreased risk
No change
Operational Risks
Risk
5
Continuation
of COVID-19
pandemic
Potential Impact
Key Controls and Mitigating Factors
Status
• Continued disruption
• Business continuity plans and chain of command
of business.
already in place.
• Reduced demand for
elective surgeries.
• Regular dialogue with stakeholders to plan a real
world view of future Pandemic scenarios.
• Inability to supply
• Flexible working policies and technology infrastructure
product.
in place which facilitates off-site working.
• Loss of income and
shortfall in profit.
• Established safe working practices at all AMS sites.
• A strong cash position and resilient balance sheet.
Variants could reduce
effectiveness of
vaccines. Rollout
of vaccine delayed
in key territories
6
• Inability to
supply product.
Regulatory risk
• Product launches
delayed.
• Loss of product
claims.
• Stringent regulatory regime with an experienced team.
• Clear regulatory strategy to manage MDR.
• Strong regulatory pathway to gain approvals.
• Work with partners and distributors to utilise local expertise.
No change
• Strictly controlled Quality Management System.
7
Vulnerability to
single source
supply
• Inability to supply
specific products.
• Increased cost of
supply and exposure
to cost increases.
• Dual source key components wherever possible.
• Strong Vendor Risk Assessment process.
• Hold inventory to prevent operational issues arising
from delays.
• Business Interruption Insurance in place.
Mitigating actions have
reduced exposure
8
Cyber-Risk
• Systems and data
compromised.
• Financial loss.
• Business
interruption.
• Loss of reputation.
• Implementation of audit and testing recommendations.
• IT administrator access levels tightened.
• Increased segregation of duties.
• Majority of servers physically hosted on site.
• Cyber Security training for all employees.
No change
9
Talent
management
• Loss of key staff.
• Insufficient talent
pool for succession
planning.
• Succession and talent management process at SMT
and mid-management levels to identify talent gaps
and high potential.
• Developed a grade system to improve career paths.
• Integrated total reward, performance and culture strategy
to drive attraction, retention and employee engagement.
• Introduced changes to long-term working arrangements.
Increased acceptance
of remote working
presents retention risks
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 8 to 49 was approved by the Board of Directors and signed
on its behalf by:
Eddie Johnson
Chief Financial Officer
12 April 2021
49
OverviewStrategic ReportGovernanceFinancial Statements Living by our values:
Fair
Acting with integrity and being fair to all stakeholders
As a responsible employer we wish to act with integrity and to be fair in
our interactions with all stakeholders. We create a working environment
where any topic can be openly discussed and maintain high standards
of corporate governance. We ensure that our employees are trained and
know how to act if they encounter someone who is acting in a manner
not aligned with our fair values. We place great importance on ensuring
our people are treated equally and work in an environment which
promotes equality and diversity. We are ever more focused on
sustainability and the environment, adapting our working
processes to act as a good corporate citizen.
For more information see Our Values on
pages 42 and 43
50
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Governance
52 Board of Directors
54 Senior Management Team
56 Corporate Governance Report
63 Audit Committee Report
66 Remuneration Report
77 Directors’ Report
5151
OverviewStrategic ReportGovernanceFinancial Statements Board of Directors
Peter Allen
Non-Executive
Chairman
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.
Independent:
On appointment.
R N
Term of office:
Peter Allen was appointed as Non-Executive Chairman of the Group
in January 2014.
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.
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.
N
Term of office:
Chris Meredith was appointed to the Board in April 2006.
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.
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 in
January 2019.
Chris Meredith
Chief Executive Officer
Independent:
Not applicable.
Eddie Johnson
Chief Financial Officer
Independent:
Not applicable.
52
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Key:
Denotes Chairman:
Audit Committee:
A
Remuneration Committee:
R
Nomination Committee:
N
Penny Freer
Senior Independent
Non-Executive Director
Biography:
With 25 years’ experience in investment banking, Penny was formerly
Head of Equities for Robert W Baird in London, and prior to this held
senior positions at Credit Lyonnais and NatWest Markets.
Independent:
Yes.
A R N
Term of office:
Penny Freer joined the Board of AMS in March 2010 as Senior
Independent Non-Executive Director.
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.
Steve Bellamy
Non-Executive Director
Biography:
Steve Bellamy was formerly an Executive Director of Sherwood
International plc and Brierley Investments’ London operations. He has
also held Chairmanships, Non-Executive Directorships and advisory
roles in a wide range of both public and private businesses, many of
which were in the technology sector. He is a New Zealand qualified
Chartered Accountant.
Independent:
Yes.
Term of office:
Steve Bellamy was appointed as Non-Executive Director of AMS
in February 2007.
A R N
External appointments:
Steve Bellamy is currently a Non-Executive Director at Caffyns plc.
Grahame Cook
Non-Executive Director
Independent:
Yes.
A R N
Biography:
Grahame Cook has 18 years’ experience in investment banking in global
equity capital markets and M&A and corporate advisory. He advised the
London Stock Exchange on the creation of TechMark, the specialist
segment of the Main Market focusing on innovative technology and
healthcare companies and has healthcare experience, most recently
as a Non-Executive Director of Morphogenesis Inc and Chairman of
Sinclair Pharma plc. He also held Board positions at Horizon Discovery
plc, MDY Healthcare plc and Crawford Healthcare Holdings Limited.
He is a qualified Chartered Accountant.
Term of office:
Grahame Cook was appointed as Non-Executive Director of AMS
in February 2021.
External appointments:
Grahame Cook is a Non-Executive Director of Attraqt plc, Draper Espirit
plc, Minoan Group plc, Pirtsemit Limited and Sapience Communications
Limited and a member at T and JK Estates LLP, TJK Holdings LLP and
KS Halkins LLP.
53
OverviewStrategic ReportGovernanceFinancial Statements Senior Management Team
Simon Coates
Group IS Manager
Rose Guang
Group Quality Assurance/
Regulatory Affairs (QA/RA) Director
Ross McDonald
Business Unit Director, Surgical
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.
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.
Biography:
Ross joined AMS in January 2006 having graduated with a BSc from University of
Glasgow and MSc in Entrepreneurial Studies from Glasgow Caledonian University.
Prior to joining AMS, Ross spent five years in the Pharmaceutical industry. Upon
joining AMS, from 2006 to 2012, Ross worked across our direct and distributed
sales functions, both in the UK Sales organisation, before taking on responsibility
for the European Woundcare Business in 2010. In 2012 Ross relocated to the US.
In his role as National Sales Manager Americas he contributed to a period of
sustained and high growth for LiquiBand®. In October 2016 Ross returned to the
UK to take up a new role as Director of Sales for US, UK and Germany and quickly
moved into the Global Sales Director role, both for the Surgical Business Unit.
In January 2021, Ross was appointed as Business Unit Director of the Surgical
Business Unit.
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.
Alan Richardson
Chief Operations Officer
54
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 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.
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:
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:
Owen joined AMS in April 2012 as Assistant Company Secretary and became
Deputy Company Secretary in October 2013. Having completed a BA (Hons)
in International Business and Masters in Business Administration (MBA), he
helped to launch a licensed Corporate Service Provider on the Isle of Man in 2006
and qualified through the Institute of Chartered Secretaries and Administrators
(ICSA) in 2007, now the Chartered Governance Institute. He moved to the UK
in 2010, working at Eversheds LLC and GB Group plc prior to AMS.
In January 2021, Owen was appointed as Company Secretary.
55
Cathy Tomlinson
Group HR Director
Pieter van Hoof
Group Operations Director
Becky Walmsley
Business Unit Director, Woundcare
Owen Bromley
Company Secretary
OverviewStrategic ReportGovernanceFinancial Statements Corporate Governance Report
“ The Group has focused on strong and robust corporate
governance to reflect enhanced stakeholder expectations,
building on clarity of purpose and a values-based culture.”
Peter Allen
Chairman
Strong progress in enhancing
our corporate governance
Dear Shareholder,
On behalf of the Board, I am pleased to present the Corporate
Governance Report for the year ended 31 December
2020. This year has seen continued focus on compliance
with enhanced corporate governance requirements and
consideration of stakeholder expectations. This report
includes details about the Board and an explanation of
our individual roles and responsibilities. We summarise the
activities of the Board and the Committees, outlining how
we have discharged our responsibilities to stakeholders
this year and enhanced our culture of good governance
and integrity, which will support the achievement of our vision
and strategy outlined in the Strategic Pillars on pages 18 to 23.
Changes to the Board and Succession Planning
In 2020 we outlined that, in accordance with the 2018 UK
Corporate Governance Code (‘Code’), the Group intended to
refresh the composition of the Non-Executive Directors. This
process was initiated with the retirement of Peter Steinmann.
Following an extensive search process Grahame Cook was
appointed to the Board in February 2021. His experience of
driving significant value creation at a number of healthcare
companies will be invaluable in the next stage of AMS’s
growth. Steve Bellamy will retire from the Board at the
2021 AGM at which point Grahame will become Chair of the
Audit Committee. The Board would like to thank Steve for his
significant contribution to the success of AMS over the last
fourteen years.
We continue the process of recruiting further Non-Executive
Directors as part of the plan for Board refreshment and will
ensure that as this progresses over the next two years, there
are smooth and effective handovers.
Corporate Governance
We choose to comply with the Code and remain committed
to maintaining high standards of corporate governance
to drive the generation of shareholder value and long-
term sustainable growth, safeguarding the interests
of stakeholders. We comply with the Code as far as is
practicable and appropriate for a public company of
the Group’s size.
The Code reinforces the need for the Board to understand
the views of our key stakeholders which were considered
in Board discussions and decision-making. A review of the
Group’s stakeholders and how we engage with them is set
out on pages 30 to 35.
In line with Code Provision 24 and general best practice,
I stepped down from the Audit Committee on 6 May 2020
and will attend Audit Committee meetings when invited as
the Board considers my extensive accounting experience adds
value to the discussion. I also stepped down as Chairman
of Diurnal plc in May 2020 in order to meet the corporate
governance requirements regarding Board appointments.
Sustainability and Environmental,
Social and Governance (ESG)
ESG and sustainability is a focus for a number of stakeholders.
Whilst the Board has always been responsive to sustainability
matters, we believe there is an opportunity for us during 2021
to define an ESG framework and set targets to enable us to
measure and track our progress in the years ahead. We look
forward to updating you on our progress in next year’s report.
Recognition and Looking Forward
On behalf of the Board, I would like to thank all of our
employees for their dedication and hard work during
the past year during the COVID-19 pandemic.
Despite the challenges faced this year, we continue
to progress our strategy. AMS is well positioned to take
advantage of opportunities across our product portfolio
as the markets recover. We will continue to invest in both
internal and external opportunities in line with the Group’s
long-term strategy and growth objectives. During the
coming year, in addition to further strengthening our
corporate governance, the Board will continue to focus on:
• Supporting the Group as it continues to manage
the impact of the COVID-19 pandemic; and
• Supporting the management team with design
and implementation of the strategy.
Peter Allen
Chairman and Chair of the Nomination Committee
12 April 2021
56
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 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.
Throughout the year
The Board met 13 times during the year, a number of which were arranged to manage the progress of acquisitions. All of the
meetings were held in the UK or by video conference due to the COVID-19 pandemic. The Directors attended the following
meetings in the year ended 31 December 2020:
Board Member
Peter Allen
Steve Bellamy
Penny Freer
Chris Meredith
Eddie Johnson
Peter Steinmann (retired on 10 June 2020)
Grahame Cook**
*
Invited
** Appointed as a Non-Executive Director on 1 February 2021
As part of the focus on key stakeholders, the Board has spent
time discussing workforce engagement. There was increased
engagement with employees, with the CEO holding video
conferences with each site and regular COVID-19 updates.
We refreshed a number of key governance documents
and introduced some key policies. Penny Freer was
appointed as the designated Non-Executive Director for
workforce engagement in 2020. Unfortunately, the onset
of COVID-19 and the subsequent lockdown has impacted
physical workforce engagement, although management
have updated the Board regularly at meetings. We will focus
on proactive ways to increase engagement in 2021. Our
Employee Engagement score indicates a high level
of satisfaction overall in the workforce.
As in previous years, the implementation of strategy has
been a significant area of focus in our Board meetings during
the year. The Executive Directors have provided regular
updates, allowing the Board to be informed of our view
on the successes and challenges throughout the Group.
Principal risks facing the Group continue to be significantly
impacted by COVID-19. Details of our principal risks are set
out on pages 46 to 49. The Risk Register and principal risks
are regularly assessed by the Board and Audit Committee.
Further information regarding the principal matters discussed
by the Board during 2020 are set out on page 59.
2021 AGM
In 2021 we will put forward all Directors for re-election
in accordance with Code Provision 18, with the exception
of Steve Bellamy who will retire from the Board.
Board
13/13
13/13
13/13
13/13
13/13
5/5
N/A
Audit*
Committee*
Remuneration*
Committee*
Nomination
Committee
3/3*
3/3*
3/3*
3/3*
3/3*
1/1*
N/A*
3/3*
3/3*
3/3*
3/3*
2/3*
1/1*
N/A*
8/8
8/8
8/8
8/8
7/8*
1/1
N/A
Penny Freer, despite her tenure in excess of the nine-year
limit outlined in Code Provision 10, is considered to be
independent of character and judgement, qualities which
are exhibited through her contribution to Board meetings and
Chairmanship of the Remuneration Committee. In addition,
Penny has extensive experience with the Company and
undertakes ongoing training and development to maintain
relevant knowledge and expertise. The Board rigorously
self-assesses performance, with a focus on independence
and commitment and believes that she will continue to add
value. With the appointment of Grahame Cook we continue
to comply 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 75. 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 take responsibility
for the long-term, sustainable 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.
57
OverviewStrategic ReportGovernanceFinancial Statements Corporate Governance Report continued
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.
Chairman
Peter Allen
Chief Executive Officer
Chris Meredith
• Leadership and management of the Board.
• Managing the Group’s business.
• Setting the Board’s agenda, style and tone
• Developing Group strategy for consideration
of discussions.
and approval by the Board.
• 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.
• 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.
Senior Independent Director
Penny Freer
• 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.
Non-Executive Directors
Steve Bellamy
Grahame Cook
• Constructively challenging and contributing
to the development of 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.
• All responsibilities of a Non-Executive
• Formulating Executive Director remuneration.
Director as outlined below.
The Non-Executive Directors
Each of the Non-Executive Directors is free from any
relationship with the Executive Management of the
Company and 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 59. 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.
58
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Matters considered by the Board in 2020 included:
Impact of the COVID-19 pandemic
Strategic plans
Sustainability
Dividend policy
Acquisition strategy
Environment, Health and Safety (EHS)
Environmental, Social, Governance (ESG)
Potential merger and acquisition targets
UK Corporate Governance Code
Directors’ responsibilities
Risk review
Major capital expenditure
Finance and operations review
Board evaluation
Reports from the Board Committees
Annual budget, results, forecast updates
Impact of Brexit
Organisation and management structure
The Board also delegates a number of its responsibilities
to Committees and management as described below.
All Directors have access to the advice and services of the
Company Secretary. The Board approves the appointment
and removal of the Company Secretary and appointed Owen
Bromley on 1 January 2021. The Non-Executive Directors are
able to contact the Executive Directors, Company Secretary
or Senior Managers at any time for further information.
Diversity
We recognise the importance of diversity at Board level.
The Board is comprised of 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 2020 was 16.6%. The Board is aware of the
Hampton-Alexander target of 33%, and will take this into
consideration during succession planning.
Board Committees
The Board has delegated authority to the Audit,
Remuneration and Nomination Committees. Steve Bellamy,
Penny Freer and Grahame Cook 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.
Board Composition
The Board comprises the Non-Executive Chairman, two
Executive Directors and three Non-Executive Directors.
The Directors’ profiles appear on pages 52 and 53 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 to
ensure that they can make an effective contribution to
the Board. The appointment process is managed by the
Nomination Committee and details of how this was managed
for appointing Grahame Cook can be found on page 60.
The SMT also has diverse experience. It is comprised of
several nationalities and female representation is 43%,
which is felt to be acceptable but will be kept under review.
Our Group Equality Policy has been strengthened to cover
Equality, Diversity and Inclusion.
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 66 to 76 and the full
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 2020 was six until the AGM,
five for the remainder of the year and increased back to
six in February 2021. The Board 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 57.
1 yr
2 yrs
3 yrs
4yrs
5yrs
6yrs
7yrs
8yrs
9yrs
10+yrs
Date of
appointment
Peter Allen
4 Dec 2013
Steve Bellamy
1 Feb 2007
Penny Freer
1 Mar 2010
Chris Meredith
3 May 2005
Eddie Johnson 1 January 2019
Grahame Cook 1 February 2021
Date of election
or next re-election
8 June 2021
Retiring
8 June 2021
8 June 2021
8 June 2021
8 June 2021
59
OverviewStrategic ReportGovernanceFinancial Statements Corporate Governance Report continued
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, information on Group strategy,
products and performance and access to policies and
other key documents. 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 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. 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 respective Chairman
annually. The 2020 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 Chairman confirms that the performance
of the Non-Executive Directors continues to be effective.
An external evaluation was not considered appropriate at
this time as Board refreshment is being implemented. This
will be considered when the changes are complete and the
incumbents have spent a period of time on the Board.
Remuneration Committee
The Remuneration Committee comprises Penny Freer
(Chairman), Peter Allen, Steve Bellamy and Grahame Cook
as laid out below:
Name
Penny Freer
Chairman (since 25 June 2010,
member since 1 March 2010)
Nomination Committee
The Nomination Committee comprises Peter Allen
(Chairman), Penny Freer, Steve Bellamy, Chris Meredith
and Grahame Cook as laid out below:
Name
Peter Allen
Chairman (since 1 January 2014,
member since 4 December 2013)
Chris Meredith
Member (since 1 January 2011)
Penny Freer
Member (since 1 March 2010)
Steve Bellamy
Member (since 20 February 2007)
Grahame Cook
Member (since 1 February 2021)
The Committee meets when necessary and met eight
times during 2020, a number of the meetings relating to the
appointment of a Non-Executive Director. The Committee
has Terms of Reference that are reviewed at least annually
and were updated at the end of 2020. The Company
Secretary acts as Secretary to the Committee.
The Committee’s role is to:
• Ensure 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 regarding 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.
In 2020 the Nomination Committee oversaw a rigorous
recruitment process for a new Non-Executive Director. This
culminated in the appointment of Grahame Cook in February
2021 following an extensive search which the Chairman led
with the executive search consultancy Dzaleta Consulting
who specialise in Board recruitment for life science
companies. We developed a shortlist of candidates before
interviews were conducted with all members of the Board.
Board members were unanimous in his appointment.
Steve Bellamy
Member (since 20 February 2007)
Audit Committee
Peter Allen
Member (since 4 December 2013)
Grahame Cook
Member (since 1 February 2021)
The Audit Committee comprises Steve Bellamy (Chairman),
Penny Freer and Grahame Cook. Peter Allen stepped down
from the Audit Committee on 6 May 2020.
The Committee has Terms of Reference that are reviewed
at least annually and were updated at the end of 2020. The
Company Secretary acts as Secretary to the Committee.
Name
Steve Bellamy
The Remuneration Committee met three times in 2020. 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 approves all new incentive schemes and grants
of options under the Group’s Share Option Plan and shares
under the Group’s Long-Term Incentive Plan (LTIP). The
report of the Committee is included on pages 66 to 76.
60
Chairman (since 6 June 2007,
member since 20 February 2007)
Penny Freer
Member (since 1 March 2010)
Grahame Cook
Member (since 1 February 2021)
Steve Bellamy chairs the Committee. Grahame Cook will take
over Chairmanship following the 2021 AGM. Both Steve and
Grahame have recent and relevant financial experience and
are qualified Chartered Accountants. The Committee has
Terms of Reference that are reviewed at least annually and
were updated at the end of 2020. The Company Secretary
acts as Secretary to the Committee.
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 We will continue to progress our programme of Board
refreshment in 2021 to ensure that the Board is in the
best possible position to drive long-term sustainable
growth for the benefit of our stakeholders
The Committee met three times during the year. The
Chairman, 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 63 to 65.
The Group has a high number of contracts with customers
across different geographic regions who also have substantial
financial resources, ranging from government agencies
through to global healthcare companies. The Group
developed appropriate risk management solutions to mitigate
the risk posed by the end of the Brexit transition period at the
end of December 2020.
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. 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.
With regard to the Group’s financial position, it had net cash
at the year-end of £53.8million (2019: £64.8 million) following
the acquisition of Raleigh Adhesive Coatings Limited in
November 2020 for £22 million and increased investment
in R&D of £7.9 million (2019: £6.5 million) to progress all key
projects. The Group has an undrawn, unsecured £80 million
credit facility provided jointly by NatWest and HSBC which is
in place until December 2023.
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 increased need for surgical procedures and chronic
wound treatment. Consequently, market growth is predicted
for the medium-term once the impact of COVID-19 subsides.
Further details of the impact of COVID-19 can be found on
the inside cover and on page 14.
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 66 to 76.
Modern Slavery Act
Prior to the introduction of the legislation, the Company
implemented an Ethical Sourcing Policy and the requirements
of the Modern Slavery Act 2015 build on that policy.
During 2020, the Company took 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’.
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OverviewStrategic ReportGovernanceFinancial Statements Annual General Meeting
The 2021 AGM will be held in accordance with government
guidance on COVID-19.
The AGM will be convened at 11.00am on the 8 June 2021.
The health and safety of shareholders, as well as employees
and customers, is of paramount importance. Details of
the AGM will be outlined in the AGM Notice, on the
Company’s website (www.admedsol.com) and through
RNS announcements to the market.
The results of the AGM will be announced to the London Stock
Exchange and placed on the Company’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.
Corporate Governance Report continued
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 employees
are paid equally for doing equivalent jobs across the business.
Our latest report under the Gender Pay Gap Regulations is
available on the Companys website ‘www.admedsol.com’.
Relations with Shareholders
The Strategic Report, which incorporates the Chairman’s
Statement, Chief Executive’s Q&A, Financial Review,
Section 172 Statement, Stakeholder Engagement, Risk
Management and Sustainability/ESG 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 shareholder communication and the Company
maintains a regular dialogue with its shareholders, which is
described in the Stakeholder Engagement section on pages
30 to 35.
The Notice for the Annual General Meeting is sent to
shareholders at least 20 working days before the meeting.
Details of how the 2021 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.
62
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Audit Committee Report
“ The Committee plays a key role in safeguarding shareholder
value and supporting our long-term strategy by providing
oversight of internal controls, risk management and
financial reporting.”
Steve Bellamy
Chair of the Audit Committee
As the Group implements its strategy
and manages the impact of COVID-19,
the Committee oversees the governance
of audit and risk management
Dear Shareholder,
As Chair of the Audit Committee, I am pleased to present
the Committee’s report for the year ended 31 December
2020. This report outlines the Committee’s work to fulfil
our responsibilities to provide effective governance over
the Group’s financial reporting, internal controls and
risk management, ensuring that shareholders and other
stakeholders interests are protected. In meeting these
responsibilities, the Committee continues to consider the
provisions of the 2018 UK Corporate Governance Code
and FRC Guidance on Audit Committees.
As the Group continues to manage the challenges of
COVID-19, integrating new acquisitions and organic growth
over the medium to long-term, the Committee’s strong
governance of audit and risk management is critical.
The Committee was chaired by myself with Penny Freer as
the other member in place throughout the year. In line with
Code Provision 24 and corporate governance best practice
Peter Allen, as Chairman of the Group, stepped down from
his position as a member of the Audit Committee in May
2020. When invited, he attends Audit Committee meetings
as the Committee considers his extensive financial
experience adds value to the discussion.
Peter Steinmann left the Committee following his retirement
at the 2020 AGM. Grahame Cook was appointed as a Non-
Executive Director on 1 February 2021 and to the Committee
with immediate effect. He will become Chairman of the Audit
Committee following the 2021 AGM.
The Committee met three times in 2020. Board members,
representatives from the External Auditors, Deloitte, and the
Group’s Internal Auditors, RSM, are invited to attend certain
meetings as considered appropriate.
The Committee remains focused on ensuring that the
Group’s financial and risk management capability is
appropriate in an increasingly complex business and
an increasingly regulated environment.
I am confident that the Committee performs all the
appropriate activities for a Group of AMS’ size, complexity
and nature and that the members have the necessary skills,
knowledge and experience which, together with input from
the Chairman and External and Internal Auditors, means we
have, a well-balanced, fit for purpose Committee to continue
to meet the challenges ahead.
Steve Bellamy
Chair of the Audit Committee
12 April 2021
Attendance record and tenure in 2020
Member
Steve Bellamy (Chair)
Penny Freer
Peter Steinmann (retired in June 2020 at the AGM)
Number of meetings held
during the year when the
Director was a member
Number of
meetings attended
3
3
1
3
3
1
Committee
tenure
14 years
10 years
6 years
63
OverviewStrategic ReportGovernanceFinancial Statements Audit Committee Report continued
Aims and Objectives
The 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, up-to-date
information on its financial position and supports the Board
in its consideration as to whether the Group’s published
Financial Statements are fair, balanced and understandable.
The Audit Committee is required to:
• Oversee and advise the Board on the risk exposures of
the Company and related risk management strategies.
• Oversee Internal Audit and 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, prevention of bribery and corruption and
ensure arrangements are in place to enable employees to
raise matters of possible impropriety in confidence.
• 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.
• Review audit and non-audit services and fees.
• Review the Terms of Reference annually to ensure all key
areas are being considered and that the Committee’s
remit and activities are in line with best practice.
These were last updated in December 2020.
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 2020.
• Reviewed the annual and half-yearly financial reports
and related statements.
• Assessed key accounting judgements, cost of capital
and COVID-19 and Brexit impacts.
• Discussed an action plan to bring the release date of the
Annual Report closer to that of the Preliminary Statement.
• Reviewed all significant matters in relation to the Financial
Statements and how these have been addressed including:
– Going Concern – Code Provision 31 requires the
Directors to explain in the Annual Report how they
assessed the prospects of the Company, over what
period and why that period is appropriate.
– Assesses risk management, risk appetite, internal
controls, the risk and control reporting structure and
the ongoing process to review the principal risks of
the Group. As part of these reviews, consideration
has been given to the impact of COVID-19.
– Valuation of assets acquired on the acquisition
of Raleigh in the year.
– Carrying value of assets acquired on acquisitions,
including the inherent sources of estimation
uncertainty due to the inclusion of future
cash flows.
External Audit
• Monitored the independence and ensured the objectivity
of the External Auditor, approved the Audit Plan for the
2020 audit, reviewed the performance of the External
Auditor, considered the re-appointment of Deloitte LLP as
auditor for 2021 and recommended their re-appointment
to the Board.
Internal Audit
• Considered and agreed the strategic and annual Internal
Audit plan, followed up on management responses
to Internal Audit findings and recommendations,
reviewed the effectiveness of RSM and considered
their re-appointment and engaged RSM to conduct
a ‘Healthcheck’ of AMS’s control environment and
assurance framework.
Risk Management
• Reviewed and considered key risks to the Group, the plans
and controls to mitigate these risks and scoring criteria.
Effectiveness of External Auditor
An annual performance review of the External Auditor
is undertaken to assess:
• Effectiveness of the audit process.
• Resource quality – ensuring the right quality and balance
of audit team resource and that the team provides
continuity, knowledge and a fresh perspective through
new team members.
• Effective communication – ensuring key audit judgements
are communicated at the earliest opportunity to promote
discussion and challenge between the External Auditors,
management and the Committee. Communication
regarding good practice, changes to reporting
requirements and accounting standards enables the
Group to be fully and properly prepared. Timely provision
of audit papers enables adequate management review,
Committee consideration and feedback.
• Scoping and planning – timely provision of the External
Audit plan and timetable.
• Fees – ensuring they are transparent, appropriate and
communicated prior to the commencement of any work
being undertaken. Variations are challenged at the earliest
opportunity to enable dialogue and agreement.
• Auditor independence – the Committee monitors the
External Auditor’s compliance with ethical guidelines
and considers their independence and objectivity. The
Committee received and reviewed written confirmation
from the External Auditor that there were no relationships
that, in their judgement, may impact their independence.
The External Auditor has confirmed that they consider
themselves independent within the meaning of UK
regulatory and professional requirements.
64
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Non-Audit Services
The External Auditor may provide non-audit services where
it is in the Group’s best interests, provided certain criteria are
met. The External Auditor must not audit their own work,
make management decisions for the Group, create a conflict
of interest or find themselves in the role of an advocate for
the Group. There was one project in 2020 where expenditure
exceeded the £10,000 threshold for approval by the
Committee, which was the £22,000 fee for audit related
assurance services relating to the review of the Interim
Statements. The Company policy on non-audit services
complies with the FRC’s 2019 Revised Ethical Standard.
Deloitte LLP has been the External Auditor for 13 financial
years. A performance, effectiveness and independence
evaluation lead the Committee to recommend the
re-appointment of Deloitte LLP as the Group’s External
Auditor for the next financial year.
Internal Audit
Internal Audit is delivered by RSM against an agreed plan
under the guidance of the Committee. It reviews areas
of potential risk and substantial process improvement and
provides assurance that key controls are operating effectively
and consistently. RSM’s findings and recommendations are
reported directly to the Committee. The Committee:
• Ensures the function has the necessary resources and
access to information, employees, the Board and the
Committee Chairman to enable it to fulfil its mandate.
• Approves the Internal Auditor appointment
and termination.
• Reviews and assesses the Internal Audit work plan
and receives a report at least twice per year.
• Reviews and monitors management’s responsiveness
to the Internal Auditor’s findings and recommendations.
• Monitors and reviews the effectiveness of controls
in relation to the overall risk management system.
All reports are discussed with the Committee and the
External Auditor. Recommendations are considered and
acted upon. RSM attends Committee meetings twice a year
and provides an update in writing ahead of each meeting.
In 2020 the Internal Auditor reviewed previous audit reports
and undertook an internal control ‘Healthcheck’ of AMS’s
control environment and assurance needs. A separate
audit was carried out on Risk Management Assurance. The
recommendations of Internal Audit were accepted by the
Audit Committee and acted upon. A two-year Internal Audit
plan was discussed in detail and agreed in December 2020.
The Internal Controls Framework and Risk Management
Strategy are available on the Company’s Intranet. Policies
are updated and formally approved by the Committee at
least once a year.
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,
TÜV Sud, DEKRA Certification GmbH and PCBC.
Risk Management and Internal Controls
The Board, taking guidance from the Committee,
monitors and reviews all material controls including financial,
operational and compliance controls. Only reasonable and
not absolute assurances can be made against material
loss or misstatement. Key features of the internal control
systems are:
• The Group has an organisational structure with clear
responsibility and accountability. The Board is available
to hear any individual’s concerns about improprieties.
• The Board has a schedule of matters reserved for its
consideration which includes potential acquisitions, capital
projects, treasury policies, risk management, approval
of budgets and re-forecasts, Health and Safety,
Corporate Governance and Environmental, Social
and Governance (ESG).
• The Board monitors the activities of the Group through
monthly management accounts, full-year forecasts,
and reports on current activities and plans. The Senior
Management Team also regularly monitors financial
and operational performance.
• The Group has set appropriate levels of authorisation
which must be adhered to.
• An Enterprise Resource Planning (ERP) system, with
in-built controls over process and authority, minimising
manual intervention, is in place in the UK, Netherlands and
Germany, with equivalent systems in other jurisdictions.
• The Group operates a ‘whistleblowing’ policy enabling
individuals to report any concerns confidentially.
Any weaknesses identified in the Group’s internal control
system are reported to the Committee and corrective actions
agreed. Creating long-term shareholder value is the reward
for taking controlled risk. Risk management is crucial to the
Group’s success and is given a high priority to ensure that
adequate systems are in place to evaluate and limit
risk exposure.
The Committee, Board and Management each formally
review the Risk Register at least twice a year. Risks are
evaluated for both likelihood and financial impact, helping
to identify the most significant risks the business faces.
Actions are agreed to mitigate the risks and progress is
regularly assessed. The process for identifying, evaluating
and managing the risks faced by the Group is ongoing
throughout the year. 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 Committee.
65
OverviewStrategic ReportGovernanceFinancial Statements Remuneration Report
“ In 2020 the Committee focused on rewarding sustainable
performance and compliance with best practice, which
helps to drive value creation for shareholders and supports
our growth strategy.”
Penny Freer
Chairman of the Remuneration Committee
As a matter of good corporate governance we seek
shareholder approval for our Remuneration Report,
which allows our shareholders to express their views
on the implementation of the Remuneration Policy
Dear Shareholder,
On behalf of the Board, I am pleased to present the
Remuneration Report for the year ended 31 December 2020.
The Remuneration Committee was made up of myself as
Chairman, Peter Allen and Steve Bellamy. Peter Steinmann
left the Committee on 10 June 2020 following his retirement
from the Board at the AGM. Grahame Cook was appointed as
a Non-Executive Director on 1 February 2021 and joined the
Committee with immediate effect. The Committee formally
met three times in 2020.
We remain committed to high standards of corporate
governance. The report is put to an advisory vote each year
at the AGM. During the year we engaged with the Group’s
largest institutional investors and proxy voting agencies
on various governance matters. Engagement with our
shareholders and other stakeholders has been invaluable
and the Committee has taken into consideration the
feedback received. The Committee also uses an independent
remuneration consultant to advise on best practice and to
ensure appropriate disclosures in this Remuneration Report.
In order to deliver the Group’s strategy, as outlined by our
Strategic Pillars, the Committee believes AMS must continue
to attract, motivate and retain high calibre talent. The
Committee therefore must ensure that our remuneration
policy is appropriate for a successful, growing business
with over 700 employees in seven countries. It is important
to ensure our Remuneration Policy is appropriate for
a business the size and profile of AMS.
Despite the challenges presented by the pandemic, AMS
met the demands of its healthcare partners and delivered
a strong set of financial results in difficult trading conditions.
The impact of COVID-19 was successfully managed in line
with the guidance we provided to the market.
.
A resolution will be put to shareholders at the AGM
on 8 June 2021 asking shareholders to consider
and approve this Report.
Penny Freer
Chairman of the Remuneration Committee
12 April 2021
Attendance record and tenure in 2020
Member
Penny Freer (Chairman)
Steve Bellamy
Peter Allen
Peter Steinmann (retired 20 June 2020)
Number of meetings held
during the year when the
Director was a member
Number of
meetings attended
Committee
tenure
3
3
3
1
3
3
3
1
11 years
14 years
7 years
6 years
66
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Remuneration for 2020
The annual bonus awards and Long-Term Incentive Plan (‘LTIP’) vesting in 2020 for the Executive Directors were as follows:
Annual bonus
The performance conditions for the annual bonus for the last financial year were based on the achievement of financial
targets (Revenue, Adjusted PBT and EPS – accounting for 85% of the total bonus) and personal objectives (accounting for 15%).
In view of performance, the Committee determined:
• Adjusted PBT of £13.4 million was below threshold target (£30.3 million), resulting in a Nil award for the financial element.
• Personal objectives are linked to corporate, financial, strategic and non-financial objectives (see page 72). The Committee
determined that these objectives were met in full. However there is no bonus for 2020 as financial targets were not met.
• The Committee made the decision that despite a strong performance in a challenging market disrupted significantly
by COVID-19 and, in line with best practice in the market, a bonus would not be paid to Executive Directors or Senior
Management irrespective of the financial performance or achievement of personal objectives.
LTIP
Chris Meredith and Eddie Johnson were granted LTIP awards in April 2017 with performance criteria and weightings as follows:
• TSR (50%) – the performance period ended on 5 April 2020. The Company ranked between the median and upper quartile
(18th out of 68 comparators) which resulted in a vesting of 98.9% (49.45% out of 50% vesting).
• EPS (50%) – the growth in EPS was calculated over the three financial years to 30 December 2019. The average annual
growth was 9.45%, above the threshold level of 5% which resulted in a vesting of 47.2% (23.6% out of 50%).
• Overall across both elements the final vesting result was 73.1%.
The Committee believes these outcomes are a fair reflection of Group performance over the vesting period.
Implementation of policy in 2021
The Committee decided to increase Executive Director salaries in 2021 in line with the workforce with all employees receiving
a cost of living increase of 1%. This led to the salaries of Chris Meredith and Eddie Johnson increasing to £307,545 and
£174,275 respectively. The Committee regularly reviews remuneration policy. Having reflected on individual performance
during 2020 and the impact of COVID-19 it believes there should be the ability to award a bonus in respect of exceptional
performance relating to personal objectives even if the financial objectives have not been met. Therefore prospectively
the annual bonus and LTIP schemes for 2021 will apply as follows:
• Annual bonus opportunity shall be 150% for Chris Meredith and 75% for Eddie Johnson. 85% of the total bonus will be
based on stretch revenue, adjusted PBT and EPS targets. The balance of 15% will be based on personal objectives where
exceptional achievement may result in the award of a bonus even if financial objectives have not been achieved.
• The Committee intends to grant Chris Meredith and Eddie Johnson LTIP awards in April 2021.
Compliance with the 2018 UK Corporate Governance Code (‘Code’)
As a large AIM quoted company, AMS has chosen to follow the Code and is compliant in the majority of areas including
malus provisions in the LTIP and share ownership guidelines (Executive Shareholding Policy).
The Company does not comply with Provisions 36 (share awards granted for Executive Directors are not subject to a total
vesting and holding period of five years or more) and 37 (remuneration schemes do not include provisions that would enable
the Company to recover and/or withhold sums or share awards). A formal policy for post-employment shareholding will be
considered in 2021. Full details of the share schemes offered to the Executive Directors can be found on pages 70 and 71,
Provision 38 outlines that pension contribution rates for Executive Directors, or payments in lieu, should be aligned with
those available to the workforce. The Committee does not consider the current contributions of 10% to be excessive and
this issue will be addressed for any new appointments. Full details of compliance with the Code is on the Company’s website
(www.admedsol.com). When determining the Executive Director remuneration policy (‘Policy’) the Committee is aware of
the Code requirements for clarity, simplicity, risk mitigation, predictability, proportionality and alignment to culture:
Clarity
• Our Policy is well understood with a clear aim; support the delivery of strategy and promote long-term sustainable growth.
• To achieve this the Policy aims to be strategically aligned, promotes pay for performance, is competitive in the market and
provides a commitment to employees to pay fairly and in a clear, transparent and simple way.
• Each component of remuneration is clearly explained in the Policy table, including its purpose, how it is operated, the
maximum potential and any relevant performance measures, which are disclosed for shareholders’ consideration.
67
OverviewStrategic ReportGovernanceFinancial Statements Remuneration Report continued
Simplicity
• The Policy reflects standard UK market practice with an annual performance bonus and LTIPs.
• All payments are in the form of cash or AMS shares and no artificial structures are used to deliver remuneration.
Risk
• The Committee can use its discretion to override the formulaic outcomes of the incentive plans if it is felt appropriate.
• Malus provisions operate in the LTIP and Deferred Annual Bonus plan (DAB) allowing payments to be adjusted or withheld.
• There is an appropriate mix of financial, non-financial and share price measures to avoid undue risk taking.
Predictability
• Appropriate limits are set out in the Policy and within the respective share scheme rules so outcomes can be predicted.
•
In operating the Policy, the Committee continually monitors the performance of share scheme awards so that it is aware
of potential outcomes and forewarned of potential issues.
Proportionality
• The outcomes of our share schemes are aligned to delivery of strategy and are measured against various metrics.
Alignment of culture
A focus of the Policy is long-term sustainable growth which is reflected in our Care, Fair, Dare values. We voluntarily seek
advisory shareholder approval for our Remuneration Report and feedback helps inform the Committee’s approach. Specific
comments on the Policy can be sent to the Company Secretary (companysecretary@admedsol.com).
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 Committee comprises three Non-Executive Directors and the Chairman of the Board. Biographical information on the
members is set out on pages 52 and 53. They have no personal financial interest in decisions other than as shareholders, no
conflict of interest from cross-Directorships and no day-to-day involvement in running the business. They do not participate
in bonus, share option or pension arrangements.
The Committee, on behalf of the Board and in consultation with the Chief Executive Officer, determines the policy on
executive remuneration, employment conditions and individual remuneration packages of the Executive Directors 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 targets for such schemes and approves payment under such schemes. The Board has accepted
the Committee’s recommendations in full. The Terms of Reference of the Committee are available on the Company’s
website, ‘www.admedsol.com’. The activities the Remuneration Committee undertook in 2020 were:
Month
March
Principal Activities
• Review of 2019 personal objectives and implications for bonus and Deferred Annual Bonus awards.
• Discussion on 2020 personal objectives for the Executive Directors and review of 2020 corporate objectives.
• Review of 2020 LTIP and share option awards for 2020 (Executive Directors, SMT and key employees).
• Review of LTIP performance criteria (TSR/EPS), how these are calculated and consideration of holding periods.
• Review of Gender Pay Report and decision to defer filing.
• Decision to run the Deferred Share Bonus Scheme twice in 2020 (April and October) due to COVID-19.
October
• Review of 2020 personal objectives for Executive Directors.
• Ratification of LTIP and share option awards for 2020 (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 and ratification of 2017 LTIP vesting.
• Review and approval of Executive Shareholding Policy and Good Leaver delegation rules.
December • 2021 salaries for the Executive Directors and SMT and 2021 personal objectives for the Executive Directors.
• Consideration of the bonus structure for 2021, SMT LTIP awards for 2021 and the rules regarding these awards.
• Review of results of Committee Self Assessment questionnaire.
• Reviewed Terms of Reference, Directors’ Expenses Policy and 2021 Remuneration Committee Meeting dates.
68
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Remuneration Policy
The objective of the Policy is to attract, retain and motivate management of the calibre required to develop and implement
the strategy and enhance earnings over the long-term without paying more than is necessary, having regard to views of
shareholders and other stakeholders. The choice of financial, non-financial and strategic measures is important, as is the
exercise of independent judgement and discretion when determining remuneration awards, taking account of Group and
individual performance and wider circumstances. The Policy aims to conform to best practice as far as reasonably practicable
and the Committee retains the right to exercise discretion. There are four key aspects to the Policy:
• Strategically aligned – Aligned with our strategy and culture. Share ownership drives the right long-term behaviour.
Executive Directors are required to build a significant shareholding aligning their interests with the stakeholders’ interests.
Design of long-term incentives will be prudent and will not expose shareholders to unreasonable financial risk.
• Pay for performance – Senior Management remuneration promotes long-term success 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 three-years. Long-term incentives are linked to long-term financial and strategic objectives.
• Market competitive – 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.
The Policy supports strategy and promotes long-term sustainable success. Executive remuneration is aligned to purpose
and the Care, Fair, Dare values are linked to the delivery of the long-term strategy. The Policy enables the use of discretion to
override formulaic outcomes and to withhold sums or share awards under appropriate specified circumstances. In considering
reward elements, account will be taken of both Group performance and the performance of each individual Executive
Director. Discretion can also be used when making grant awards.
The Committee appointed Ellason LLP in 2021 to provide advice on the remuneration of Executives and SMT, having
previously used Mercer (see details of work carried out by Mercer in 2020 below) . Executive Director remuneration
consists of basic salary, bonus, LTIPs, health and insurance benefits, and pension contributions. A balance between
fixed and performance-related remuneration elements is maintained.
Enhanced Shareholding Guidelines
Executive Directors and senior management are expected to accumulate and maintain a significant shareholding. The holding
requirements for the Executive Shareholding Policy are 200% and 100% of salary respectively for the Executive Directors and
SMT in order to align their interests with our stakeholders and encourage share ownership. All Executive Directors and SMT
members met or exceeded the shareholding target in 2020, 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 any sanction, which may include a simple ‘warning’ or reduction in the next LTIP grant or a reduction of
bonus opportunity.
Mercer was engaged in April 2020 to review LTIP performance criteria, vesting and best practice in the market in light of the
impact of COVID-19. Mercer was the only advisor who provided material assistance to the Committee during 2020 as below:
Advisors
Appointment and selection
Other services provided
Fees for Committee assistance
Mercer LLC
Appointed to provide ongoing advice to the
Committee on various remuneration matters
Advice on LTIP performance criteria,
vesting and best practice
£Nil
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 of Executive Directors. The cost of living increase for the 2020 financial year
was 1.5% for all Directors, SMT and the broader employee population. No further increase was considered to be required
for the Executive Directors. The Committee will review Executive Director and Non-Executive Director salaries against
industry benchmarks during 2021.
Statement of Voting at General Meeting
At the 2020 AGM the percentages of votes cast ‘for’, and ‘against’ in respect of the Directors’ Remuneration Report were:
Resolution
Number of shares voted
Votes cast ‘for’
Votes cast ‘against’
To approve the Directors’ Remuneration Report
112,770,820
98.31%
1.69%
69
OverviewStrategic ReportGovernanceFinancial Statements Remuneration Report continued
Overview of Directors’ and Senior Management Remuneration Policy
Element of
remuneration
Purpose and how it
supports strategy
How the element operated
and maximum opportunity
Framework used to
assess performance
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 salary levels are
set taking into account experience,
responsibilities and performance,
both from an individual and business
perspective and from utilising external
market data (benchmarking).
Salaries are reviewed annually with
changes effective from 1 January. Current
salaries of the Executive Directors are set
out on page 67. A review was last carried
out in December 2020.
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
standard increase for the UK workforce.
Benefits
To provide a competitive
level of benefit provision.
Executive Directors and their families
receive private medical insurance. No
maximum cost.
N/A.
Annual
Performance
Bonus
To drive and reward
performance against
annual financial and
operational goals which
are consistent with the
medium to long-term
strategic needs of
the business.
Executive Directors are entitled 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.
For Executive Directors, both financial
and non-financial measures are used.
Financial targets are set against Group
revenue, PBT and EPS (85%), personal
objectives are set and an assessment
is made based on Care, Fair, Dare (15%).
In 2020 as the Financial thresholds were
not met there was no bonus payable. The
underpin has been removed from 2021
to allow the Committee a greater level of
discretion when determining the payment
of a bonus in respect of personal
objectives.
The maximum percentages of salary
achievable are set out on page 67.
Senior Management receive up to 50%
of salary in bonus based on financial
performance targets (77%) and personal
objectives and performance against
Care, Fair, Dare (23%).
Business need may alter future bonus
measures or weightings.
Deferred
Annual Bonus
(DAB)
Provides mechanism
to exercise malus
provisions.
The DAB requires Executive Directors and
SMT to defer up to 25% of their Annual
Performance Bonus for three years.
N/A.
The DAB includes malus provisions
which are laid out on page 71.
There is no provision for clawback.
Deferred
Share Bonus
Plan (DSB)
To align the interests
of all employees
with shareholders,
to incentivise long-term
value creation and to
act as a retention tool.
The DSB is available to all employees and
allows investment of bonus and/or salary
into shares. It also allows for the provision
of matching (free) shares if the shares are
held for a set period.
N/A.
70
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Element of
remuneration
Purpose and how it
supports strategy
How the element operated
and maximum opportunity
Framework used to
assess performance
Long-Term
Incentive
Plan (LTIP)
To align the interests
of the Executive
Directors and SMT with
shareholders and to
incentivise long-term
value creation.
Pension
To provide a
market competitive
remuneration package
to enable the recruitment
and retention of
Executive Directors and
Senior Management.
No shares shall vest from the proportion
of the Award determined by reference
to the AIM Healthcare Share Index if
the Company is ranked below median.
Awards vest on a sliding scale from 25%
to 100% for performance from median
to upper quartile.
Performance against EPS will be based
on the percentage increase in the
Group’s EPS over a three-year period
commencing on 1 January of the year in
which the Award is made. Awards vest on
a sliding scale from 25% to 100% for an
average annual EPS growth rate over the
vesting period of a minimum of 5% rising
to 20%. No awards will be made
for an average annual growth rate
below the minimum.
The Committee has flexibility to make
adjustments to performance conditions
to ensure the Award achieves its purpose.
Vesting is subject to the Committee being
satisfied that the Group’s performance
on these measures is consistent with the
performance of the business.
N/A.
The LTIP permits an annual grant
that vests subject to performance
and employment.
Under LTIP rules, the maximum annual
award is 200% of salary. Details of the
award levels for 2020 are set out below.
Awards under the LTIP may be granted
in the form of nil-cost options or cash
(where they cannot be settled in shares).
Awards have a £1 consideration.
50% of the Award is based on the Total
Shareholder Return (TSR) performance
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. The calculation analyses the 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.
The 2014 LTIP scheme introduced malus
provisions which are laid out below.
There is no provision for clawback.
Executive Directors contribute up to
10% of salary into a defined contribution
plan with the Group contributing
a fixed 10%. All other UK employees
contribute a minimum of 3% which is
matched by a Company contribution of
6%. An employee may substitute pension
contributions for salary if they are
impacted by limitations on the size
of individual personal pension funds.
It is intended that any new Executive
Directors will have a pension in line
with the workforce.
Malus provisions – 2014 LTIP/DAB
The 2014 LTIP and DAB incorporate malus provisions. 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
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 it is determined that
the malus provision applies then the number of shares comprised in an Award that are not vested and/or vested shares in the
case of an unexercised Option should be reduced (to Nil if appropriate).
71
OverviewStrategic ReportGovernanceFinancial Statements Remuneration Report continued
Directors’ Emoluments – Single Figure of Remuneration (2019 and 2020)
Salary
and fees
Annual
Performance
Bonus
Deferred
Bonus
LTIPs
vested
Gains on
DSBs vested1
Benefits
Pensions
Total
Remuneration
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
Chris Meredith
Eddie Johnson
305
173
300
170
Peter Allen
Steve Bellamy
Penny Freer
Peter Steinmann2
75
45
45
19
74
44
44
38
Total
662
670
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
192
426
41
92
–
–
–
–
–
–
–
–
9
33
–
–
–
–
13
58
–
–
–
–
233
518
42
71
1
1
–
–
–
–
2
1
1
–
–
–
–
2
30
17
–
–
–
–
30
17
537
265
770
338
–
–
–
–
75
45
45
19
74
44
44
38
47
47
986 1,308
1. Gains on DSBs vested is based on the share price at vesting date. Details of the DSB can be found on page 70.
2. Peter Steinmann retired on 10 June 2020.
The table above summarises the payments made and amounts earned by the Executive and Non-Executive Directors for
the 2019 and 2020 financial years. The fees for the Chairmen of the Audit Committee and Remuneration Committees (Steve
Bellamy and Penny Freer) include a fee of £3,000 for chairing a Committee. No Annual Performance Bonus was payable for
2019 and 2020 and as a result the Deferred Annual Bonus scheme was not utilised. The Executive Directors were granted
LTIPs as detailed on page 73. All Directors have confirmed that they have not received remuneration save as disclosed above.
Salaries and Fees
Details of 2021 salaries for the Executive Directors are outlined on page 67 and prior year in the table above.
Annual Performance Bonus and Deferred Annual Bonus
Details of the Annual Performance Bonus and Deferred Annual Bonus are outlined on page 70.
The personal objectives for the Executive Directors for the year ended 31 December 2020 included progress in developing
new products, successful integration of acquisitions and improving working capital ratios. The table below summarises 2020
performance against the targets:
Performance Measures
Group revenue
Adjusted Profit Before Tax
Weighting
28.33%
28.33%
Adjusted fully diluted Earnings Per Share
28.33%
Personal objectives/values assessment
15.0%
Total
100.0%
Threshold
£m
114.9
30.3
11.0
Target
£m
118.4
31.3
11.39
Stretch
£m
Achievement
2020 result
£m
(% of maximum)
124.3 Below threshold
32.8 Below threshold
11.96 Below threshold
Committee assessed that the Executive
Directors fully achieved their objectives.
Maximum
0.0%
0.0%
0.0%
15.0%
0.0%
In 2020 threshold was not achieved in any financial criteria and therefore no bonus is payable for 2020. If the minimum profit
threshold had been met then 22.5% of salary would have been payable to Chris Meredith and 11.5% to Eddie Johnson relating
to personal objectives, as well as 8.75% and 4.375% of salary respectively relating to the delivery of threshold profit. 2021
objectives are commercially sensitive and not detailed in this Report. 2020 bonus payments in respect of 2019 were
as follows:
Director
Chris Meredith
Eddie Johnson
Bonus paid in 2020
(2019 Financial Year)
Percentage of salary
Deferred
(total bonus)
Maximum %
of salary
£Nil
£Nil
£Nil
£Nil
0.0%
0.0%
150%
75%
72
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Vesting of LTIPs for the year ended 31 December 2020
Details of the LTIP performance conditions for the LTIPs granted on 6 April 2017 which vested on 6 April 2020 are shown
on page 67. The value of the vesting shown in the Directors’ Emoluments table on page 72 is calculated by multiplying
the number of shares from the Award that vested by the share price on the vesting date.
Directors’ Interests in the Long-Term Incentive Plan (LTIP)
On 14 April 2020 the Committee approved LTIP awards as outlined below. Eddie Johnson was awarded 25% above his
indicated award level to reflect strong performance and that his remuneration package is towards the lower end of the market.
Director
Type of Award
Basis of grant
awarded
Share price at
Number of
date of grant (£)
shares granted
Face value
of grant (£)
Vesting determined
by performance
over 3 years
Chris Meredith
Nil-cost option
200% of salary
Eddie Johnson
Nil-cost option
100% of salary
2.39
2.39
254,812
72,197
609,000
172,550
See page 71
See page 71
Outstanding Share Awards – Maximum under the LTIP
Director
Chris Meredith
Eddie Johnson
As at 1
January 2020
Exercised
in the year
Issued in
the year
Lapsed in
the year
As at 31
December
2020
Market price at
date of grant (p)
First vesting date
146,939
129,628
109,571
90,344
182,510
–
34,235
28,126
23,775
19,603
38,783
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
254,812
–
–
–
–
–
72,197
–
-
29,475
–
–
–
–
–
6,396
–
–
–
146,939
129,628
80,096
90,344
182,510
254,812
34,235
28,126
17,379
19,603
38,783
72,197
151.50
10 September 2018 (vested)
184.60
246.69
308.00
328.75
239.00
132.00
184.60
246.69
308.00
328.75
239.00
18 April 2019 (vested)
6 April 2020 (vested)
13 April 2021
24 April 2022
14 April 2023
2 April 2018 (vested)
18 April 2019 (vested)
6 April 2020 (vested)
13 April 2021
24 April 2022
14 April 2023
Chris Meredith and Eddie Johnson both exercised Nil LTIPs in 2020 (2019: Nil). Awards have no performance re-testing facility.
Approach to Remuneration of Executive Directors at the time of Recruitment
When appointing an Executive Director the Committee may utilise all existing remuneration components. Salary will reflect
experience, skills, market data and current salary. They will be eligible for a personal pension, medical insurance and share
schemes. In line with the Code, it is the intention that pension contributions will be at a rate available to the wider workforce.
Non-Executive Directors
Non-Executive Directors are appointed under arrangements that may be terminated by either party on six months’ notice.
Their fees are determined by the Executive Directors, taking into account the time and responsibility of the role. They
receive travel expenses, do not participate in incentive arrangements and have confirmed they have not received any
other remuneration in 2020 save as disclosed on page 72. Further details of Non-Executive Director fees are below:
Element of
remuneration
Purpose and how it
supports strategy
How the element operated
and maximum opportunity
Non-Executive
Director fees.
Reflects time
commitments and
responsibilities of
each role.
There is no maximum annual increase. The Board
is guided by the market and broader employee
population. On occasion they may need to recognise
an increase in the scale or scope of the role. Fees
have not been increased in 2021 pending a review
which will be carried out during the year.
Framework used to
assess performance
Non-Executive Directors do
not participate in variable pay
arrangements and do not
receive retirement benefits.
73
OverviewStrategic ReportGovernanceFinancial Statements Remuneration Report continued
Service Agreements
Executive Director service contracts are not fixed term, are terminable by either party giving not less than 12-months’ written
notice and can be viewed at the Company’s registered office and at the AGM. The Committee reviews the contractual terms
for new Executive Directors to ensure they reflect best practice. Details of the service contracts are as follows:
Executive Director
Chris Meredith
Eddie Johnson
Non-Executive Directors
Peter Allen
Steve Bellamy
Penny Freer
Grahame Cook
Date of Contract
3 May 2005
1 January 2019
4 December 2013
1 February 2007
1 March 2010
1 February 2021
Unexpired Term (months)
or Rolling Contract
Rolling Contract
Rolling Contract
Rolling Contract
Rolling Contract
Rolling Contract
Rolling Contract
Notice Period
(months)
12
12
6
6
6
6
Policy on Payment for Loss of Office – Executive Directors
The Committee considers individual cases of early termination and determines compensation on a case-by-case basis. There
are no special provisions in the event of loss of office or for payment in lieu of notice (PILON). If such circumstances were to
arise, the Executive Director would have no claim against the Company for damages or any other remedy in respect of the
termination. The Committee would apply principles of mitigation to any payment made to a departing Executive Director.
Whilst the Committee retains overall discretion for ‘Good Leaver’ status, it typically defines a ‘Good Leaver’ for the Annual
Performance Bonus and 2014 LTIP as 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.
No payments were made to past Directors or for loss of office during the year ended 31 December 2020.
Event
Timing of vesting/award
Calculation of vesting/payment
Bonus/DAB
Good Leaver
Annual Performance Bonus payment would be
negotiated as part of the leaving arrangements
(at the discretion of the Remuneration Committee).
No automatic entitlement to Annual Performance
Bonus on a pro-rata basis – it is 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).
Bad Leaver
Not applicable.
Individuals lose the right to their Annual Performance
Bonus and unvested Deferred Annual Bonus shares.
Change
of control
Annual Performance Bonuses are paid and unvested
Deferred Share Bonus shares vest on the date of change
of control notification to the Executive Directors.
Annual Performance Bonus is paid to the extent that
performance conditions have been satisfied and are
pro-rated to the effective date of change of control.
LTIP
Good Leaver
On normal vesting date (or earlier at the Remuneration
Committee’s discretion).
Unvested awards vest to the extent that performance
conditions have been satisfied and are reduced pro-rata
to account for any part of the vesting period remaining.
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 an Executive Director may have a legal entitlement to additional amounts, which
would need to be met. The Committee retains discretion to settle other amounts reasonably due to the Executive Director.
74
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 The Committee may approve new contractual arrangements with departing Executive Directors including (but not limited
to) settlement and/or consultancy arrangements which will be used sparingly and only where it is in the best interests
of the Company and shareholders. 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 may occur as a result
of a takeover bid.
Statement of Directors’ Shareholdings and Share Interests
Director
Beneficially
owned1 at
31 December 2019
Beneficially
owned1 at
31 December 2020
Outstanding
LTIP awards at
31 December 2020
Outstanding
DAB awards at
31 December 2020
Outstanding
share awards
under DSB at
31 December 2020
Shareholding
as a % of Issued
Share Capital at
31 December 2020
Chris Meredith
1,514,804
1,515,241
Eddie Johnson
Peter Allen
Penny Freer
98,787
50,000
13,888
Steve Bellamy
100,000
118,938
50,000
13,888
100,000
884,329
210,323
–
–
–
57,977
10,854
–
–
–
56,609
40,647
–
–
–
0.70%
0.05%
–
–
–
1.
Includes all shares beneficially held by the Executive Director (or their spouse and children) and vested DSBs.
Executive Directors are required under the Executive Shareholding Policy to hold shares equivalent in value to 200% of pre-tax
annual salary. Compliance with this policy as at 31 December 2020 is shown below, using the share price as at that date:
Director
Shares
held1
Vested
DSBs
LTIPs (50% of vested/
unexercised LTIPs)
DAB
Awards
Total Shares
Shareholding
target (£)
Shareholding
value (£)
% holding
vs salary
Chris Meredith 1,480,127
35,114
178,332
57,977
1,751,550
609,000
4,256,267
Eddie Johnson
19,044
99,894
39,870
10,854
169,662
345,100
412,279
1,397%
239%
1. Beneficially held by the Executive Director (or their spouse and children).
CEO Total Remuneration
The total remuneration figure for the Chief Executive Officer during each of the last five financial years is shown below.
Total remuneration includes salary, Annual Performance Bonus, gains on DSBs in that year and LTIP awards vesting in the year.
The Annual Performance Bonus and LTIP vesting level as a percentage of the maximum opportunity is shown for each year.
Year ended 31 December
Total remuneration (£’000)
Annual Bonus (% of maximum)
LTIP vesting (% of maximum)
Relative Importance of Spend on Pay
2016
784
72.5%
50%
2017
1,040
82.6%
76.9%
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
896
50.6%
87.3%
2019
(£m)
33.2
3.0
5.4
18.9
2019
770
0%
2020
537
0%
90.3%
73.1%
2020
(£m)
35.8
3.4
1.5
8.6
Change
%
8%
11.6%
-71.8%
-54.7%
£1,043,000 (2019: £1,026,000) of staff costs relate to pay for the Directors, of which £590,000 relates to the highest paid
Director (2019: £568,000). Total pension contributions were £1,349,000 (2019: £1,309,000) and for the highest paid
Director £30,000 (2019: £30,000).
During 2020, distributions to shareholders included a dividend of £2,256,000 paid on 14 June 2020 (2019: £1,931,000)
and £1,081,000 paid on 23 October 2020 (2019: £1,074,000). It is proposed that a dividend of 1.20p per share be paid
on 18 June 2021. Further details are provided in Note 14 on page 113.
75
OverviewStrategic ReportGovernanceFinancial Statements Remuneration Report continued
Private Healthcare
Executive Directors and other senior employees are entitled to private healthcare and permanent health insurance.
Share Options
Employees may be granted share options under the 2019 Share Option Plan (SOP). Options granted under the SOP are not
offered at a discount. The exercise of options is conditional on performance conditions, normally after the third anniversary
of the date of grant and no later than the tenth anniversary of grant. Full details are included in Note 29 on pages 126 to 131.
The SOP allows employees to be granted approved or unapproved options. Under the approved part of the SOP, UK
employees can receive up to £30,000 of shares by market value of the shares on the grant date and benefit from the
growth in value of those shares.
Share Performance – 2020
The opening share price for 2020 was 296p and the closing price, on the last trading day of the year, was 243p. The range
during the year was 307.5p (high) and 192p (low) (Source: Daily Official List of the London Stock Exchange).
Five-year Share Performance
For the five-year period ending 28 February 2021, the Advanced Medical Solutions Group plc share price outperformed the
FTSE All-Share Index by 26% and FTSE All-Share Health Care Index by 20%. It underperformed the FTSE Small Cap Index by
12% and FTSE AIM All-Share Index by 34%.
250
200
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AMS
FTSE AIM All Share
FTSE Small Cap
FTSE All Share
FTSE All Share Health Care
0
2016
2017
2018
2019
2020
2021
For the five-year period ending 28 February 2021, the Advanced Medical Solutions Group plc Total Shareholder Return (TSR),
share price growth plus reinvested dividends, outperformed the FTSE All-Share Index by 7%, FTSE All-Share Health Care Index
by 1% and FTSE Small Cap Index by 32%. It underperformed the FTSE AIM All-Share Index by 43%.
) 250
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76
100
50
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2016
2017
2018
2019
2020
2021
AMS
FTSE AIM All Share
FTSE Small Cap
FTSE All Share
FTSE All Share Health Care
Advanced Medical Solutions Group plc Annual Report & Accounts 2020
Directors’ Report
For the year ended 31 December 2020
This Directors’ Report includes disclosures required under the Companies Act 2006, the Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008 and the 2018 UK Corporate Governance Code (Code).
Additional information can be located as follows:
Disclosure
Location
Principal activities, business review and
future developments
Throughout the Strategic Report – pages 8 to 49
Results
Financial Statements – pages 82 to 132
Corporate Governance
Corporate Governance Report – pages 56 to 62
Directors’ remuneration including Directors’
interest in the share capital of the Company
Remuneration Report – pages 66 to 76
Principal Risks and Uncertainties
Principal Risks and Uncertainties – pages 46 to 49
Financial instruments and risk management
Research and development activities
Note 24 to the Financial Statements – pages 122 to 124 and in the
Strategic Report – pages 46 to 49
Value creation – page 2 and in the Strategic Report – pages 8 to 49.
Financial review on pages 44 and 45
Shareholder, employee and stakeholder engagement
Stakeholder Engagement Report – pages 30 to 35
Sustainability and Environmental, Social and
Governance reporting (ESG), Health and Safety
ESG Report – pages 36 to 43
Key Performance Indicators
Key Performance Indicators – pages 24 and 25
Company’s capital structure
Group Statement of Changes in Equity – page 86 and in the
Financial Statements – Note 27 on page 125
Long Term Incentive Plan and share schemes
Remuneration Report – pages 66 to 76
Events after the balance sheet date
Financial Statements – Note 32 on page 132
Significant subsidiary undertakings
Financial Statements – Note 3 on pages 137 and 138
Non-Financial Reporting Statement
Page 35
Dividends
The Group made a profit before tax for the year to 31 December 2020 of £10.1 million (2019: £24.3 million). The Directors
are recommending a final dividend of 1.20p per share (2019: 1.05p per share). The final dividend will, subject to shareholders’
approval, be paid on 18 June 2021 to shareholders on the register at the close of business on 28 May 2021. This would make a
total dividend of 1.70p for the full year (2019: 1.55p). The Board will continue to review the Group’s dividend policy, with future
distributions reflecting the cash generation and capital needs of the Company.
Capital Structure
The Group has an undrawn unsecured £80 million credit facility provided jointly by NatWest and HSBC which is in place until
December 2023. The 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. 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 125.
Going Concern
The Directors continue to adopt the going concern basis in preparing the Financial Statements. Details of going concern
can be found on page 61 and in the Notes forming part of the Financial Statements on page 97.
Share Capital and Issue of Ordinary Shares
At 31 March 2021 the Group’s issued share capital is set out below:
Ordinary Shares of 5p each
Number
215,473,287
£000
10,769
% of Issued
Share Capital
100
77
OverviewStrategic ReportGovernanceFinancial Statements Directors’ Report continued
Substantial Shareholdings
Details of the interests in voting rights in the Company’s shares with substantial interests of 3% or more in the Ordinary Share
capital of the Company as at 31 March 2021, in accordance with the Disclosure and Transparency Rules:
Octopus Investments Limited
AXA SA
Canaccord Genuity Group Inc
Charles Stanley Group
Investec Group
Groupama
AEGON
31 March 2021
% of Issued
Share Capital
24,490,812
12,491,210
10,078,085
9,891,587
9,787,571
7,317,749
6,937,851
11.37
5.80
4.68
4.59
4.54
3.40
3.22
As at 12 April 2021 one change in these shareholdings has been notified. AXA SA have crossed below the 5% threshold
and hold 10,645,216 shares (4.94% of the issued share capital).
Re-election of Directors
The Chairman has determined that each Director demonstrates commitment to their role and displays effective performance
and is recommending the re-election of all Directors seeking to remain on the Board. AMS has elected to comply with 2018
Code Provision 18 and therefore all Directors will retire and shall stand for re-election at the AGM to be held on 8 June 2021,
with the exception of Steve Bellamy who will retire in accordance with the succession plan outlined on page 56.
The Board has procedures for Directors’ conflicts of interest. Only Directors who have no interest in the matter under
consideration are able to take the relevant decision. 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. 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
AMS is an equal opportunities employer committed to eliminating all forms of discrimination and to giving fair and equal
treatment to all employees and job applicants. An Equality, Diversity and Inclusion Policy, to reflect best practice in this
area, is in force. Further detail on this area can be found in our ESG Report on pages 36 to 43.
Annual General Meeting
The AGM will be held at 11.00 am on 8 June 2021, in line with the UK Government’s latest guidelines on COVID-19.
Further details are outlined in the AGM Notice.
Directors’ Responsibilities Statement
The Directors are responsible for preparing the Annual Report and 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 Regulations and
have elected to prepare the Parent Company Financial Statements in accordance with 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.
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.
78
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 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 disclosures when compliance with 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.
The Directors’ Report has been approved by the Board and authorised for issue.
Owen Bromley
Company Secretary
12 April 2021
79
OverviewStrategic ReportGovernanceFinancial Statements Living by our values:
Care
Caring about the work we undertake and the real life differences
we can make
AMS performed well in 2020, both operationally and financially, despite
severe COVID-19 disruptions which caused a temporary downturn in
the demand for our products. AMS has focused on the health, safety and
well-being of the employee base and maintaining supply to hospitals and
other healthcare providers to ensure our products continue to help with
patients and clinicians. Our robust balance sheet allowed us to benefit key
stakeholders, enabling us to pay full salary to furloughed employees, to
repay UK furlough support and to maintain dividends for our shareholders.
We continue to invest in R&D and look to leverage our cash position with
strategically-aligned acquisitions to create quality outcomes for our patients,
clinicians and partners, whilst making a positive impact on our communities.
For more information see Our Values on
pages 42 and 43
80
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Financial Statements
Financial
Statements
82
Independent Auditor’s Report
92 Consolidated Income
Statement
92 Consolidated Statement
of Comprehensive Income
93 Consolidated Statement
of Financial Position
94 Consolidated Statement
of Changes in Equity
96 Consolidated Statement
of Cash Flows
97 Notes Forming Part of the
Condensed Consolidated
Financial Statements
133 Company Statement
of Financial Position
134 Company Statement
of Changes in Equity
135 Notes to the Company
Financial Statements
140 Five Year Summary
140 Alternative Performance
Measures
141 Advisors
81
OverviewStrategic ReportGovernance Independent Auditor’s Report
to the Members of Advanced Medical Solutions Group plc
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 2020 and of the Group’s profit for the year then ended;
•
•
the Group Financial Statements have been properly prepared in accordance with International Accounting Standards
in conformity with the requirements of the Companies Act 2006;
the Parent Company Financial Statements have been properly prepared in accordance with 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 international accounting standards in conformity with the requirements of the Companies Act 2006. The financial
reporting framework that has been applied in the preparation of the Parent Company Financial Statements is applicable law
and 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.
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Advanced Medical Solutions Group plc Annual Report & Accounts 2020 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 Sealantis Limited; and
• Going concern.
Within this report, key audit matters are identified as follows:
! Newly identified
Similar level of risk
Materiality
Scoping
Significant changes
in our approach
The materiality that we used for the Group Financial Statements was £1 million which was determined
on the basis of 1.2% of revenue.
We focused our Group audit scope on the UK, Germany, the Netherlands, France and Israel
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 approximately 99% of revenue, 99% of profit before tax and 99% of net assets.
The following changes to our approach occurred this year:
• Change to the benchmark used for materiality (see section 6 for further details);
• Biomatlante SA (France) was a new component throughout the year following acquisition
in November 2019 and thus audited by the Group team (see section 7 for further details).
4. Conclusions relating to going concern
In auditing the Financial Statements, we have concluded that the Directors’ use of the going concern basis of accounting
in the preparation of the Financial Statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s and Parent Company’s ability to continue to adopt the going
concern basis of accounting is discussed in section 5.4.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the Group’s and Parent Company’s ability to continue as
a going concern for a period of at least twelve months from when the Financial Statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant
sections of this report.
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to the Members of Advanced Medical Solutions Group plc
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 £86.8 million (2019: £102.4 million).
How the scope of
our audit responded
to the key audit matter
The timing of when revenue is recognised is relevant to the reported performance of the Group.
There is 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. Pressures to meet stakeholder expectations could provide incentives to record revenues where
risk and reward have not passed.
We have specifically focused this key audit matter to cut-off and occurrence of revenue recorded within
November and December 2020. We have also considered 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.
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.
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 compared to the previous year.
To evaluate 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 evaluated 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.
Key observations
Based on the work performed we concluded that revenue has been recognised appropriately.
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Advanced Medical Solutions Group plc Annual Report & Accounts 2020 5.2. Acquisition accounting
Key audit matter
description
How the scope of
our audit responded
to the key audit matter
During the year, the Group has acquired Raleigh Adhesive Coatings Limited.
On 23 November 2020, the Group acquired the entire issued share capital of Raleigh Adhesive
Coatings Limited for £22 million, generating £8.7 million in intangible assets and £13.2 million in goodwill.
A discount rate of 10.2% was used by management in discounting to fair value and seven year forecasts
were used to determine the net present value. After 2027, a terminal value calculation was used with
a 2.5% long-term growth rate. Within the forecasts, management have 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, giving an overall growth rate of 10%.
In the acquisition, the intangibles were identified using various valuation techniques: excess earning,
relief from royalty and replacement cost.
Accounting for acquisitions under IFRS 3 Business combinations is complex as management are required
to separately identify and value 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.
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, reasonableness of
assumptions applied, to challenge the appropriateness of the discount rate and whether the fair value
model being used is appropriate considering circumstances identified. Together with our internal
specialists we assessed the reasonableness of valuation assumptions such as long-term growth rate
and valuation multiples.
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 us with the help of 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 evaluated whether the policies for acquisition accounting within the Financial Statements 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 intangible assets and goodwill generated on
acquisition have been valued appropriately. The assumptions around the growth rate, discount rate
and customer relationship intangibles all appear appropriate.
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to the Members of Advanced Medical Solutions Group plc
5.3. Carrying value of goodwill related to Advanced Medical Solutions (Sealantis) Limited (Sealantis)
Key audit matter
description
During 2019, the Group acquired a business (Sealantis) which has yet to begin trading and is within the
development stage. The Group has significant values of goodwill (£9.2 million, (2019: £9.6 million)) and
intangible assets (£13 million (2019: £15 million)) in relation to this acquisition.
Sealantis is recognised as its own cash generating unit. A discount rate of 17.5% (2019: 22.5%) has
been applied in determining the net present value to represent the increased risk presented by the
development stage of the acquisition. IAS 36 states that the discount rate is risk adjusted to reflect the
way that the market would assess the specific risks associated with the asset’s estimated cash flows;
and to exclude risks that are not relevant to the asset’s estimated cash flows or for which the estimated
cash flows have been adjusted.
Management has used a 21 year period to forecast their results. Within the forecast, management has
assumed a 9.6% growth rate per annum over 21 years and that the entity will return a positive EBITDA
from the fourth year onwards.
We observed that management’s long term growth rate goes out beyond the period supported by third
party data, and the discount rate used was prepared on a post-tax basis as opposed to the pre-tax basis
required in accordance with IAS 36 Impairment of assets.
There is a risk that 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 36 Impairment of 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.
We obtained an understanding of the controls relevant to management’s impairment review.
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 challenged
the appropriateness of the risk adjusted discount rate.
IAS 36 states that the discount rate is risk adjusted to reflect the way that the market would assess the
specific risks associated with the asset’s estimated cash flows; and to exclude risks that are not relevant
to the asset’s estimated cash flows or for which the estimated cash flows have been adjusted. To gain
assurance over the risk adjustment to the discount rate, which is highly judgemental, we have sensitized
management’s model as to what percentage probability of product success would cause the model to
break even. We demonstrated that the discount rate of 17.5% applied by management implied a much
lower rate of success than we would normally expect for a product at the stage of development that
Sealantis were at as at the year end. Moving to the expected risk adjustment rate would give a risk
adjusted rate lower than the rate adopted by management of 17.5%.
We challenged the underlying assumptions included within the budgets by discussing with management
and corroborating committed plans through review of management papers and underlying evidence.
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 for future cash flows which supported the cash flows applied by management are
reasonable. We evaluated the forecast period used by management in their model.
We re-performed the sensitivity analysis and performed additional sensitivities on the time impact
of delaying results, or considering the impact reduced revenue growth, considering what data was
available from third parties to support market growth rates and the group’s potential market share.
Whilst management’s model would appear to be optimistic in its growth rate assumptions and outside
of our acceptable range, the discount rate used is also outside of our acceptable range, however
on the prudent side. However, overall the carrying value is appropriate and does not indicate an
impairment is required.
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.
How the scope of
our audit responded
to the key audit matter
Key observations
86
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 5.4. Going concern
Key audit matter
description
During the year there was a global outbreak of the COVID-19 strain of Coronavirus, and business
continue to be impacted by the ongoing uncertainty around further outbreaks in each jurisdiction,
with national lockdowns being called and rules changed as more understanding around the pandemic
in each country develops and/or new variants are uncovered.
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
• access to existing sources of capital.
There is 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 the models.
The associated disclosure is included within Note 2 to the Financial Statements.
How the scope of
our audit responded
to the key audit matter
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 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 sensitivities on their assumptions to stress test them and to evaluate
whether the assumptions are sensitive to small variations. We have then evaluated how much headroom
remains in the forecasts to assess whether the going concern assumption remains appropriate.
In reviewing management’s assessment, we have considered:
• Their presentation to the Board which looks out to April 2022, i.e. twelve months from approval
of the Annual Report and Accounts. The paper indicates significant headroom before taking into
consideration their undrawn committed £80m facility;
• The £80m facility which carries two financial covenants, and management do not expect to breach
these. Our work did not identify any expected breaches, and there is nothing to indicate the facility
would become unavailable for any reason;
• Their forecasts for each Business Unit and reasonably possible sensitivities after a year of trading
through the worst of COVID-19 pandemic. In accordance with the enhanced requirements of
ISA 570, management has performed sensitivities and considered other possible impacts, such
as foreign exchange, Brexit. We have reviewed the appropriateness of the sensitivities in respect
of what is reasonably possible, and also based on hindsight of performance through the lockdowns
throughout the year and post year-end.
Key observations
Based on the work performed we concluded that the adoption of the going concern basis of accounting
is appropriate.
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to the Members of Advanced Medical Solutions Group plc
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 million (2019: £1.2 million)
£0.9 million (2019: £1.1 million)
Group Financial Statements
Parent Company Financial Statements
Basis for determining
materiality
1.2% of revenue (2019: 5% of pre-tax profit)
The Parent Company materiality represents
less than 1% of equity (2019: less than
1% of 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.
Rationale for the
benchmark applied
Revenue £87m
Revenue and profit continues to be of focus to the
Group. Previously we have used 5% of profit before
tax as the benchmark, but following the impact of
COVID-19, we do not believe this to be an appropriate
basis this year, with profits being more severely
impacted than revenues due to the relative fixed cost
base. As a fairer reflection of trade, we believe revenue
represents the next best measure and is considered to
be a key focus of the users of the Financial Statements.
Group materiality
£1m
Component
materiality range
£0.4m to £0.9m
Audit Committee
reporting threshold
£0.05m
Revenue
Group materiality
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.
Performance materiality
70% (2019: 70%) of group materiality
70% (2019: 70%) of Parent Company materiality
Group Financial Statements
Parent Company Financial Statements
Basis and rationale
for determining
performance materiality
In determining performance materiality, we considered the following factors:
•
the quality of the control environment; and
• 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 £0.05 million
(2019: £0.06 million), 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.
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Advanced Medical Solutions Group plc Annual Report & Accounts 2020 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, the Netherlands, France and Israel, 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 99% (2019: 100%) of the Group’s revenue, 99%
(2019: 95%) of the Group’s profit before tax and 99% (2019: 99%) 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 £0.4 million to £0.9 million (2019: £0.6 million to £0.8 million).
7.2. Working with other auditors
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, had a virtual planning
meeting, virtually attended the close meeting and reviewed their documentation of the findings from their work virtually.
We do not consider our interactions with the component auditor to be impacted significantly due to COVID-19.
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.
8. Other information
The other information comprises the information included in the Annual Report, other than the Financial Statements and
our auditor’s report thereon. The Directors are responsible for the other information contained within the Annual Report.
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.
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 course of 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
this gives rise to a material misstatement in the financial statements themselves. 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 this regard.
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.
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to the Members of Advanced Medical Solutions Group plc
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent
to which our procedures are capable of detecting irregularities, including fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance
with laws and regulations, we considered the following:
•
the nature of the industry and sector, control environment and business performance including the design of the Group’s
remuneration policies, key drivers for Directors’ remuneration, bonus levels and performance targets;
• results of our enquiries of management, internal audit and the Audit Committee about their own identification and
assessment of the risks of irregularities;
• any matters we identified having obtained and reviewed the group’s documentation of their policies and procedures
relating to:
•
identifying, evaluating and complying with laws and regulations and whether they were aware of any instances
of non-compliance;
• detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or
alleged fraud;
•
the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
•
the matters discussed among the audit engagement team including significant component audit teams and relevant
internal specialists, including valuations and IT regarding how and where fraud might occur in the Financial Statements
and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for
fraud and identified the greatest potential for fraud within revenue recognition due to possible pressures to meet stakeholder
expectations could provide incentives to record revenues where risk and reward have not passed. In common with all audits
under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the group operates in, focusing on provisions
of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the
Financial Statements. The key laws and regulations we considered in this context included the UK Companies Act,
AIM Listing Rules and tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the Financial Statements
but compliance with which may be fundamental to the group’s ability to operate or to avoid a material penalty, such as those
set out by the relevant regulatory bodies.
11.2. Audit response to risks identified
As a result of performing the above, we did not identified revenue recognition as a key audit matter related to the potential risk
of fraud or non-compliance with laws and regulations. The key audit matters section of our report explains the matter in more
detail and also describes the specific procedures we performed in response to that key audit matter.
Our procedures to respond to risks identified included the following:
• reviewing the Financial Statement disclosures and testing to supporting documentation to assess compliance with
provisions of relevant laws and regulations described as having a direct effect on the Financial Statements;
• enquiring of management, the Audit Committee and legal counsel concerning actual and potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;
• reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing
correspondence with HMRC and regulatory licensing authorities; and
•
in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and
other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential
bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course
of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members
including internal specialists and significant component audit teams, and remained alert to any indications of fraud or
non-compliance with laws and regulations throughout the audit.
90
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Report on other legal and regulatory requirements
12. 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.
13. Matters on which we are required to report by exception
13.1. 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.
13.2. 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.
14. 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
12 April 2021
91
OverviewStrategic ReportGovernanceFinancial Statements Consolidated Income Statement
For the year ended 31 December 2020
Revenue from
continuing operations
Cost of sales
Gross profit
Distribution costs
Administration costs
Other income
Profit from operations
Finance income
Finance costs
Profit before taxation
Income tax
Profit for the year
attributable to equity
holders of the parent
Earnings per share
Basic
Diluted
Adjusted diluted
Note
4
4, 5
11
12
13
15
15
15
Year ended 31 December 2020
Year ended 31 December 2019
Before
exceptional
items
£’000
Exceptional
items
£’000
86,796
(40,756)
46,040
(1,071)
(33,658)
253
11,564
220
(861)
10,923
(1,505)
–
–
–
–
(834)
–
(834)
–
–
(834)
–
Before
exceptional
items
£’000
Exceptional
items
£’000
102,368
(41,885)
60,483
(997)
–
–
–
–
Total
£’000
86,796
(40,756)
46,040
(1,071)
Total
£’000
102,368
(41,885)
60,483
(997)
(34,492)
(34,566)
(1,053)
(35,619)
253
10,730
220
(861)
10,089
(1,505)
376
25,296
406
(392)
25,310
(5,338)
–
(1,053)
–
–
(1,053)
–
376
24,243
406
(392)
24,257
(5,338)
9,418
(834)
8,584
19,972
(1,053)
18,919
4.38p
4.32p
5.44p
(0.39p)
(0.38p)
(0.38p)
3.99p
3.94p
5.06p
9.30p
9.21p
9.83p
(0.49p)
(0.49p)
(0.49p)
8.81p
8.72p
9.34p
The above results relate to continuing operations.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
Profit for the year
Items that will potentially be reclassified subsequently to profit and loss:
Exchange differences on translation of foreign operations
Gain arising on cash flow hedges
Deferred tax charge arising on cash flow hedges
Other comprehensive income/(expense) for the year
Total comprehensive income for the year attributable to equity holders of the parent
Notes
18
Year ended
31 December
2020
£’000
Year ended
31 December
2019
£’000
8,584
18,919
3,507
842
(160)
4,189
12,773
(3,538)
3,091
(130)
(577)
18,342
92
Advanced Medical Solutions Group plc Annual Report & Accounts 2020
Consolidated Statement of Financial Position
At 31 December 2020
Assets
Non-current assets
Acquired intellectual property rights
Technology based 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
Deferred tax liabilities
Lease liability
Borrowings
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
2020
£’000
2019
£’000
16
16
16
16
19
17
18
21
20
21
22
23
23
23
18
23
23
27
28
28
28
28
9,879
22,357
2,437
7,368
68,911
30,064
–
364
9,478
15,985
2,832
5,039
53,558
27,707
96
531
141,380
115,226
21,025
21,107
1,214
53,829
97,175
238,555
13,139
319
1,257
14,715
3,229
8,536
9,864
–
21,629
36,344
17,655
29,221
129
64,751
111,756
226,982
14,043
1,781
1,353
17,177
3,150
6,409
8,347
664
18,570
35,747
202,211
191,235
10,769
36,288
11,142
(162)
430
1,531
1,237
3,258
10,745
36,226
9,466
(159)
649
1,531
555
(249)
137,718
202,211
132,471
191,235
The Financial Statements of Advanced Medical Solutions Group plc (registration number 2867684) on pages 92 to 132 were
approved by the Board of Directors and authorised for issue on 12 April 2021 and were signed on its behalf by:
Chris Meredith
Chief Executive Officer
93
OverviewStrategic ReportGovernanceFinancial Statements
Consolidated Statement of Changes in Equity
Attributable to equity holders of the Group
Attributable to equity holders of the Group
Share capital
£’000
Share premium
£’000
Share–based
payments
£’000
Investment
in own shares
£’000
At 31 December 2018
10,674
35,192
7,333
(156)
Share–based
£’000
708
£’000
1,531
payments deferred tax
Other reserve
Hedging reserve
Translation reserve
Retained earnings
Consolidated profit for the year to 31 December 2019
Other comprehensive income
Total comprehensive income
Share-based payments
Share options exercised
Shares purchased by EBT
Shares sold by EBT
Dividends paid
At 31 December 2019
Consolidated profit for the year to 31 December 2020
Other comprehensive income
Total comprehensive income
Share-based payments
Share options exercised
Shares purchased by EBT
Shares sold by EBT
Dividends paid
At 31 December 2020
–
–
–
–
71
–
–
–
–
–
–
–
1,034
–
–
–
–
–
–
1,856
277
–
–
–
10,745
36,226
9,466
–
–
–
–
24
–
–
–
–
–
–
–
62
–
–
–
–
–
–
1,611
65
–
–
–
10,769
36,288
11,142
–
–
–
–
–
(603)
600
–
(159)
–
–
–
–
–
(542)
539
–
(162)
–
–
–
(59)
–
–
–
–
–
–
–
–
–
–
–
(219)
649
1,531
£’000
(2,406)
–
2,961
2,961
–
–
–
–
–
555
–
682
682
–
–
–
–
–
£’000
3,289
–
(3,538)
(3,538)
(249)
–
3,507
3,507
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
430
1,531
1,237
3,258
£’000
116,560
18,919
18,919
–
–
–
–
–
–
–
–
–
(3,008)
132,471
8,584
–
8,584
(3,337)
137,718
Total
£’000
172,725
18,919
(577)
18,342
1,797
1,382
(603)
600
(3,008)
191,235
8,584
4,189
12,773
1,392
151
(542)
539
(3,337)
202,211
94
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Attributable to equity holders of the Group
At 31 December 2018
Consolidated profit for the year to 31 December 2019
Share capital
Share premium
£’000
10,674
£’000
35,192
Other comprehensive income
Total comprehensive income
Share-based payments
Share options exercised
Shares purchased by EBT
Shares sold by EBT
Dividends paid
At 31 December 2019
Other comprehensive income
Total comprehensive income
Share-based payments
Share options exercised
Shares purchased by EBT
Shares sold by EBT
Dividends paid
At 31 December 2020
–
–
–
–
71
–
–
–
–
–
–
–
24
–
–
–
1,034
–
–
–
–
–
–
–
–
–
–
–
62
–
–
–
£’000
7,333
1,856
277
–
–
–
–
–
–
–
–
–
1,611
65
–
–
–
£’000
(156)
(603)
600
–
(159)
–
–
–
–
–
–
–
–
–
–
(542)
539
–
(162)
10,769
36,288
11,142
Consolidated profit for the year to 31 December 2020
10,745
36,226
9,466
Share–based
payments
Investment
in own shares
Share–based
payments deferred tax
£’000
Other reserve
£’000
Hedging reserve
£’000
Translation reserve
£’000
Retained earnings
£’000
708
–
–
–
(59)
–
–
–
–
649
–
–
–
(219)
–
–
–
–
430
1,531
–
–
–
–
–
–
–
–
1,531
–
–
–
–
–
–
–
–
(2,406)
–
2,961
2,961
–
–
–
–
–
555
–
682
682
–
–
–
–
–
3,289
–
(3,538)
(3,538)
–
–
–
–
–
(249)
–
3,507
3,507
–
–
–
–
–
1,531
1,237
3,258
116,560
18,919
–
18,919
–
–
–
–
(3,008)
132,471
8,584
–
8,584
–
–
–
–
(3,337)
137,718
Total
£’000
172,725
18,919
(577)
18,342
1,797
1,382
(603)
600
(3,008)
191,235
8,584
4,189
12,773
1,392
151
(542)
539
(3,337)
202,211
95
OverviewStrategic ReportGovernanceFinancial Statements Consolidated Statement of Cash Flows
For the year ended 31 December 2020
Cash flows from operating activities
Profit from operations
Adjustments for:
Depreciation
Amortisation
– intellectual property rights
– software intangibles
– development costs
Increase in inventories
Decrease/(Increase) in trade and other receivables
Decrease 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)
31
Net cash used in investing activities
Cash flows from financing activities
Dividends paid
Repayment of principal under lease liabilities
Repayment of bank loan
Issue of equity shares
Shares purchased by EBT
Shares sold by EBT
Interest paid
Net cash used in financing activities
Net decrease 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
96
Year ended
31 December
2020
£’000
Year ended
31 December
2019
£’000
Note
10,730
24,243
3,467
3,154
2,269
563
533
(1,892)
10,262
(2,292)
1,611
(3,740)
21,511
(126)
(2,788)
(2,346)
136
277
(21,924)
(26,771)
(3,337)
(1,150)
(664)
65
(542)
539
(735)
(5,824)
(11,084)
64,751
162
53,829
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)
64,751
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 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 twelve months ended 31 December 2020 comprise the Company and its subsidiaries
(together referred to as the ‘Group’).
The Group is a world-leading independent developer and manufacturer of innovative and technologically advanced products
for the global surgical and woundcare markets, focused on quality outcomes for patients and value for payers. AMS has
a wide range of surgical products including tissue adhesives, sutures, haemostats, and internal fixation devices, which it
markets under its brands LiquiBand®, RESORBA®, and LiquiBandFix8®. AMS also supplies wound care dressings such
as silver alginates, alginates and foams through its ActivHeal® brand as well as under white label.
2 Basis of preparation
The Group Financial Statements have been prepared in accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006. The Financial Statements have been prepared in accordance with International
Financial Reporting Standards (IFRS). 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 the current year the Group has applied a number of amendments to IFRSs issued by the IASB. Their adoption has not
had a material impact on the disclosures or on the amounts reported in the Annual Financial Statements. The following
amendments were applied:
• Amendments to References to the Conceptual Framework in IFRS Standards.
• Definition of a Business (Amendments to IFRS 3).
• Definition of Material (amendments to IAS 1 and IAS 8).
•
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS7).
• Conceptual Framework for Financial Reporting (Revised).
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 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.
Whilst the Group experienced a decline in revenue as a result of the COVID-19 pandemic, 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 remained profitable and cash generative when excluding acquisitions in the year. With regards to the Group’s
financial position, it had cash and cash equivalents at the year-end of £53.8 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 NatWest Bank 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.
97
OverviewStrategic ReportGovernanceFinancial Statements 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 Raleigh in 2020, the Group has identified assets and liabilities arising on acquisitions and devised fair
values for them (see Note 31). Third party valuation specialists were engaged to assist in the identification and valuation of
separable intangible 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
which include estimates of sales growth, production costs and operating expenditure. Discount rates used in determining the
fair values are based on management’s assessment of risk inherent in the current business model and are an area of judgment.
Carrying value of assets acquired on acquisitions
The Group has a number of cash generating units (see Note 19) which have identified assets and liabilities arising on
acquisitions and devised fair values for them. Management subsequently assess the carrying value as part of the annual
impairment review. Management considers that the methodologies adopted in the impairment review are supportable and
reasonable but there are inherent sources of estimation uncertainty due to the inclusion of future cash flows in the valuation
which include estimates of sales growth and market share of the relevant market, production costs, capital expenditure
and operating expenditure. As Sealantis (Surgical: CGU2) is a pre-commercialisation venture, it’s cash flows are particularly
judgemental but are predicted to support the carrying value of these assets. Discount rates used in determining the fair
values are based on management’s assessment of risk inherent in the current business model and are an area of judgment.
Basis of consolidation
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial
and operating policies of an entity so as to retain benefits from its activities. The Financial Statements of the subsidiaries
are included in the Consolidated Financial Statements on the basis of acquisition accounting, from the date that control
commences until the date that control ceases. All entities within the Group have the same year-end, apart from Raleigh
Coatings which has been aligned with the Group through an eight month period ending 31 December 2020.
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 in the Income Statement.
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 on the basis of the recoverable amount for the
relevant cash-generating unit. In assessing 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.
98
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 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.
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 is 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 2020, £3.9 million (2019: £3.4 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.
Grants
Grants are recognised only when there is reasonable assurance that the Group will comply with the conditions attached to
them and that the grants will be received. Grants related to income are presented as a deduction of the related cost. Grants
that are receivable as compensation for expenses already incurred are recognised in the Income Statement in the period
in which they become receivable. £0.4 million received in the year in respect of the UK Government furlough Scheme
has been repaid by the Group.
Exceptional items
Exceptional items are those items that are significant for separate disclosure 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 arise from interest on the Group’s credit facilities, lease liabilities and 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.
99
OverviewStrategic ReportGovernanceFinancial Statements Notes Forming Part of the Consolidated Financial Statements continued
3 Accounting policies continued
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, 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 in order 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.
The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated
and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of
cash flow hedging reserve, limited to the cumulative change in fair value of the hedged item from inception of the hedge.
The gain or loss relating to the ineffective portion is recognised immediately in the Income Statement.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to the Income
Statement in the periods when the hedged item affects the Income Statement, in the same line as the recognised hedged
item. Furthermore, if the Group expects that some or all of the loss accumulated in the cash flow hedging reserve will not
be recovered in the future, that amount is immediately reclassified to the Income Statement.
The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the
qualifying criteria (after rebalancing, if applicable). This includes instances when the hedging instrument expires or is
sold, terminated or exercised. The discontinuation is accounted for prospectively. Any gain or loss recognised in other
comprehensive income and accumulated in cash flow hedge reserve at that time remains in equity and is reclassified to
the Income Statement when the forecast transaction occurs. When a forecast transaction is no longer expected to occur,
the gain or loss accumulated in the cash flow hedge reserve is reclassified immediately to the Income Statement.
The Group’s risk management strategies and hedge documentation are aligned with the requirements of IFRS 9.
Taxation
Taxation expense includes the amount of current income tax payable and the charge for the year in respect
of deferred taxation.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Income
Statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the end of the reporting period.
A provision is recognised for those matters for which the tax determination is uncertain but it is considered probable that there
will be a future outflow of funds to a tax authority. The provisions are measured at the best estimate of the amount expected
to become payable. The assessment is based on the judgement of tax professionals within the Company supported by
previous experience in respect of such activities and in certain cases based on specialist independent tax advice.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and
liabilities in the Financial Statements and the corresponding tax bases used in the computation of taxable profit, and is
accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference
arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction
that affects neither the taxable profit nor the accounting profit. In addition, a deferred tax liability is not recognised if
the temporary difference arises from the initial recognition of goodwill.
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.
100
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates,
and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible
temporary differences associated with such investments and interests are only recognised to the extent that it is probable that
there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected
to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset
is realised based on tax laws and rates that have been enacted or substantively enacted at the reporting date.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner
in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets
and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current
tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
Current tax and deferred tax for the year
Current and deferred tax are recognised in the Income Statement, except when they relate to items that are recognised
in other comprehensive income or directly in equity, in which case, current and deferred tax are also recognised in other
comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting
for a business combination, the tax effect is included in the accounting for the business combination.
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 and customer-related intangible assets acquired on
acquisition and are initially recognised at their fair value. Other intangibles are amortised over their estimated useful economic
lives, between 9 and 12 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 between one and five years, which is deemed to be the useful economic life.
101
OverviewStrategic ReportGovernanceFinancial Statements Notes Forming Part of the Consolidated Financial Statements continued
3 Accounting policies continued
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.
Property, plant and equipment
Land and buildings and plant and equipment held for use in the production of goods and services or for administrative
purposes are carried in the 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
At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets
to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any). Where the asset
does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of
the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified,
corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group
of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with an indefinite useful life are tested for impairment at least annually and whenever there is an indication
at the end of a reporting period that the asset may be impaired.
Recoverable amount is the higher of fair value less costs of disposal 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 the risks specific to the asset for which the estimates of future cash flows have not
been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised
immediately in the Income Statement, unless the relevant asset is carried at a revalued amount, in which case the impairment
loss is treated as a revaluation decrease and to the extent that the impairment loss is greater than the related revaluation
surplus, the excess impairment loss is recognised in the Income Statement.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased
to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit)
in prior years. A reversal of an impairment loss is recognised immediately in the Income Statement to the extent that it
eliminates the impairment loss which has been recognised for the asset in prior years. Any increase in excess of this
amount is treated as a revaluation increase.
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 value of money.
102
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 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.
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 for the purpose of meeting short-term cash commitments and are subject to
insignificant risk in change in value and which are readily convertible to a known amount of cash. Cash held in accounts
with more than 90 days’ notice that are not required to meet short-term cash commitments are shown as an investment.
Trade and other receivables
Trade and other 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 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.
The Group recognises a loss allowance for expected credit losses on investments in debt instruments that are measured
at amortised cost or at fair value through other comprehensive income. The amount of expected credit losses is updated
at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.
The Group always recognises lifetime expected credit losses (ECL) for trade receivables. The expected credit losses on
these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted
for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well
as the forecast direction of conditions at the reporting date, including time value of money where appropriate.
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3 Accounting policies continued
Financial instruments continued
For all other financial instruments, the Group recognises lifetime ECL when there has been a significant increase in credit
risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial
recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.
Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a
financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default
events on a financial instrument that are possible within 12 months of the reporting date.
De-recognition of financial assets:
The Group de-recognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group
neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset,
the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group
retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise
the financial asset and also recognises a collateralised borrowing for the proceeds received.
On de-recognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and
the sum of the consideration received and receivable is recognised in the Income Statement. In addition, on derecognition
of an investment in a debt instrument classified as FVTOCI, the cumulative gain or loss previously accumulated in the
investments revaluation reserve is reclassified to the Income Statement. In contrast, on de-recognition of an investment in
an equity instrument which the Group has elected on initial recognition to measure at FVTOCI, the cumulative gain or loss
previously accumulated in the investments revaluation reserve is not reclassified to the Income Statement, but is transferred
to retained earnings.
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 the Income Statement.
Fair value is determined in the manner described in Note 24.
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 the
Income Statement (administrative costs) immediately unless the derivative is designated and effective as a hedging instrument,
in which event the timing of the recognition in the Income Statement 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.
104
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Leased assets
For all leased 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 determined, the incremental borrowing rate. Lease payments
are allocated between the liability and finance expense. The finance expense is charged to the Income Statement 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 the Income Statement 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 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 the Income Statement
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 2020, the Group had net funds with no borrowings. Working capital is managed
in order to generate maximum conversion of 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.
IFRS not yet effective and not adopted early
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2020
reporting periods and have not been early adopted by the Group. These standards are not expected to have a material
impact on the entity in the current or future reporting periods or on foreseeable future transactions and include:
Amendments to IFRS 10 – Consolidated Financial Statements and IAS 28 Sale or Contribution of Assets between an Investor
and its Associate or Joint Venture
Amendments to IAS 1 – Classification of Liabilities as Current or Non-current
Amendments to IFRS 3 – Reference to the Conceptual Framework
Amendments to IAS 16 – Property, Plant and Equipment — Proceeds before Intended Use
Amendments to IAS 37 – Onerous Contracts – Cost of Fulfilling a Contract
105
OverviewStrategic ReportGovernanceFinancial Statements Notes Forming Part of the Consolidated Financial Statements continued
4 Segment information
The Group is organised into two Business Units: Surgical and Woundcare. These Business Units are the basis on which the
Group reports its segment information.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated
on a reasonable basis. Unallocated items comprise mainly investments and related revenue, corporate assets, head office
expenses and income tax assets. These are the measures reported to the Group’s Chief Executive for the purposes of
resource allocation and assessment of segment performance.
Business segments
Segment information about these businesses is presented below.
Surgical
£’000
Woundcare
£’000
Consolidated
£’000
50,169
36,627
86,796
9,094
(2,132)
6,962
5,357
(137)
5,220
14,451
(2,269)
12,182
(618)
(834)
10,730
220
(861)
10,089
(1,505)
8,584
Surgical
£’000
Woundcare
£’000
Consolidated
£’000
74
1,659
1,367
52
1,129
979
126
2,788
2,346
(4,709)
(2,123)
(6,832)
155,301
82,999
238,300
255
238,555
20,354
15,990
36,344
Year ended 31 December 2020
Revenue
External sales
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 2020
Other information
Capital additions:
Software intangibles
Development
Property, plant and equipment
Depreciation and amortisation
Statement of Financial Position
Assets
Segment assets
Unallocated assets
Consolidated total assets
Liabilities
Segment liabilities
106
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Year ended 31 December 2019
Revenue
External sales
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
Surgical
£’000
Woundcare
£’000
Consolidated
£’000
56,544
45,824
102,368
16,086
(1,675)
14,411
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
107
OverviewStrategic ReportGovernanceFinancial Statements Notes Forming Part of the Consolidated Financial Statements continued
4 Segment information continued
Geographical segments
The Group operates in the UK, Germany, the Netherlands, France, the Czech Republic and Israel with a sales office located
in Russia and a sales presence in the USA. 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
or services, based upon location of the Group’s customers:
Year ended 31 December
United Kingdom
Germany
France
Rest of Europe
United States of America
Rest of World
The following table provides an analysis of the Group’s total assets by geographical location:
At year ended 31 December
United Kingdom
Germany
France
Rest of Europe
United States of America
Israel
5 Profit from operations
Year ended 31 December
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 excluding regulatory costs
Cost of inventories recognised as expense
Write down of inventories expensed
Staff costs
Net foreign exchange loss
2020
£’000
16,748
18,888
4,369
18,027
23,690
5,074
86,796
2020
£’000
125,343
71,752
9,703
7,224
3,370
21,163
238,555
2019
£’000
20,151
20,018
3,913
19,563
34,879
3,844
102,368
2019
£’000
117,055
69,501
9,613
5,106
2,532
23,175
226,982
2020
£’000
2019
£’000
3,467
3,154
2,269
563
533
3,727
40,397
359
35,828
376
1,683
519
492
3,195
40,717
504
33,179
2,790
108
Advanced Medical Solutions Group plc Annual Report & Accounts 2020
6 Exceptional items
During 2020, £834,000 of exceptional costs were incurred mainly relating to the acquisition of Raleigh Adhesive Coatings
Limited and transaction costs to participate in another potential process which was ultimately unsuccessful (2019: £1,053,000
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). Transaction costs typically relate to external professional
service costs during transaction evaluation and completion where successful.
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
2020
£’000
Year ended
31 December
2019
£’000
23
155
178
22
–
22
200
23
152
175
24
175
199
374
Audit related assurance services relate to the review of the half-yearly financial report.
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.
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OverviewStrategic ReportGovernanceFinancial Statements Notes Forming Part of the Consolidated Financial Statements continued
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 costs
Amounts paid to third parties
Share-based payments
Year ended
31 December
2020
Number
Year ended
31 December
2019
Number
379
59
133
119
690
361
50
139
114
664
Year ended
31 December
2020
£’000
Year ended
31 December
2019
£’000
28,554
25,858
4,314
1,349
1,611
4,156
1,309
1,856
35,828
33,179
Year ended
31 December
2020
£’000
Year ended
31 December
2019
£’000
643
47
19
334
1,043
604
47
68
308
1,026
The Group’s highest paid Director is disclosed in the Remuneration Report on page 72.
Retirement benefits are accruing to the following number of Directors
under money purchase schemes
2
2
110
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 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 costs
Share-based payments
11 Finance income
Bank interest
12 Finance costs
Amortisation of facility fees
Finance lease interest
Other interest
Change in long-term liabilities
Year ended
31 December
2020
£’000
Year ended
31 December
2019
£’000
1,667
106
595
1,659
108
607
2,368
2,374
Year ended
31 December
2020
£’000
Year ended
31 December
2019
£’000
220
406
Year ended
31 December
2020
£’000
Year ended
31 December
2019
£’000
299
375
20
167
861
299
383
55
(345)
392
Change in long-term liabilities relates to movements in the long-term liabilities arising on the acquisition of Sealantis in 2019.
The expense occurs as the liabilities unwinds and for any changes to sales projections. (See Note 24 for further information on
how these liabilities are calculated).
111
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13 Taxation
a) Analysis of charge for the year
Year ended 31 December
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
2020
£’000
1,514
21
1,535
(3)
(27)
(30)
2019
£’000
5,195
5
5,200
61
77
138
Tax charge for the year
1,505
5,338
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 lower (2019: higher) than the weighted
average Group tax rate of 24.6% (2019: 21.6%) as explained below:
Year ended 31 December
Profit before taxation
Profit multiplied by the weighted average Group tax rate 24.6% (2019: 21.6%)
Effects of:
Expenses not deductible for tax purposes and other timing differences
Patent Box Relief
Utilisation of trading losses
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
2020
£’000
10,089
2,481
268
(1,091)
–
(186)
39
21
(27)
2019
£’000
24,257
5,248
246
(124)
(26)
(131)
43
5
77
Taxation
1,505
5,338
Subsequent to year-end, the UK Government has proposed to increase UK corporation tax to 25% from April 2023. The Group
will apply revised, substantively enacted rates in future reporting periods. The Group is currently assessing the impact of this
rate change and expects it to increase the Group’s effective tax rate.
In addition to the amount charged to the Income Statement and the Statement of Comprehensive Income, the Group
has recognised directly in equity:
• Excess tax deductions related to share-based payments on exercised options, totalling £65,000 surplus:
(2019: £277,000 surplus).
• Changes in excess deferred tax deductions related to share-based payments, totalling £219,000 surplus:
(2019: £59,000 surplus).
A Deferred tax charge arising on cash flow hedges is included in other comprehensive income totalling £160,000
(2019: £130,000).
112
Advanced Medical Solutions Group plc Annual Report & Accounts 2020
14 Dividends
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2019 of 1.05p (2018: 0.90p) per Ordinary Share
Interim dividend for the year ended 31 December 2020 of 0.50p (2019: 0.50p) per Ordinary Share
Year ended
31 December
2020
£’000
Year ended
31 December
2019
£’000
2,256
1,081
3,337
1,931
1,077
3,008
Proposed final dividend for the year ended 31 December 2020 of 1.20p (2019: 1.05p)
per ordinary share
2,585
2,256
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 basic and diluted earnings per share is based on the following data:
Year ended 31 December
2020
Number of
shares
2019
Number of
shares
Weighted average number of Ordinary Shares for the purposes of basic earnings per share
215,126
214,730
Effect of dilutive potential Ordinary Shares: share options, deferred share bonus and LTIPs
2,705
2,107
Weighted average number of Ordinary Shares for the purposes of diluted earnings per share
217,831
216,837
Profit for the year attributable to equity holders of the parent
Exceptional costs
Amortisation of acquired intangible assets
Movement in liability fair value accounting
Adjusted profit for the year attributable to equity holders of the parent
Earnings per share
Basic EPS
Diluted EPS
Adjusted basic EPS
Adjusted diluted EPS
£’000
8,584
834
2,269
167
£’000
18,919
1,053
1,683
(345)
11,854
21,310
pence
pence
3.99
3.94
5.51
5.44
8.81
8.72
9.92
9.83
113
OverviewStrategic ReportGovernanceFinancial Statements
Notes Forming Part of the Consolidated Financial Statements continued
16 Acquired intellectual property rights, software intangibles and development costs
2020
Cost
At beginning of year
On acquisition
Additions
Exchange differences
At end of year
Amortisation
At beginning of year
Charged in the year
Exchange differences
At end of year
Net book value
At 31 December 2020
At 31 December 2019
Acquired
intellectual
property rights
£’000
Other
intangible
assets
£’000
Software
intangibles
£’000
Development
and
recertification
costs
£’000
Total
£’000
13,138
–
–
610
17,584
8,710
–
(250)
5,417
8,333
44,472
–
126
86
–
2,788
81
8,710
2,914
527
13,748
26,044
5,629
11,202
56,623
3,660
132
77
3,869
9,879
9,478
1,599
2,137
(49)
3,687
2,585
3,294
563
44
533
7
11,138
3,365
79
3,192
3,834
14,582
22,357
15,985
2,437
2,832
7,368
5,039
42,041
33,334
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 in 2019 on the acquisition of Sealantis Limited and represent technological based
know-how and on the acquisition of Biomatlante which represent technological based know-how, patents and customer
listings. Other intellectual property rights on acquisition in the year relate to technological based know-how and customer
listings arising on the acquisition of Raleigh Coatings. See Note 31 for further information.
114
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 RESORBA® ‘know-how’ and GENTA-COLL® brand name are being amortised over ten and fifteen years respectively with one
and six 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 £9,330,000. 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.
Intangible assets are amortised on a straight-line basis and the amortisation is recognised within administration 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
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
115
OverviewStrategic ReportGovernanceFinancial Statements Notes Forming Part of the Consolidated Financial Statements continued
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
2020
Cost
At beginning of year
5,785
12,496
113
30,117
922
995
50,428
On acquisition
Additions
Disposals
Exchange adjustment
At end of year
Depreciation
–
6
–
241
6,032
645
1,876
(141)
155
–
–
–
–
584
2,300
(54)
273
3
40
(21)
18
15,031
113
33,220
962
At beginning of year
1,065
Provided for the year
Disposals
Exchange adjustment
At end of year
Net book value
191
–
64
3,314
1,266
(141)
35
1,320
4,474
At 31 December 2020
At 31 December 2019
4,712
4,720
10,557
9,182
10
–
–
–
10
103
103
17,148
1,843
(29)
84
19,046
14,174
12,969
671
92
(21)
13
755
207
251
–
–
(353)
42
684
513
75
(247)
32
373
311
482
1,232
4,222
(569)
729
56,042
22,721
3,467
(438)
228
25,978
30,064
27,707
At 31 December 2020, the Group had entered into contractual commitments for the acquisition of property, plant and
equipment amounting to £414,000 (2019: £349,000).
The net book value of plant and equipment includes £83,000 within plant and machinery (2019: £103,000) 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
2019
Cost
At beginning of year
5,962
12,285
894
1,146
48,216
407
198
(300)
(94)
12
101
–
–
–
27,917
66
2,411
(130)
(147)
21
23
–
(16)
12,496
113
30,117
922
2,559
1,068
(300)
(13)
3,314
9,182
9,726
10
–
–
–
10
15,710
1,732
(130)
(164)
17,148
103
2
12,969
12,207
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
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
–
41
–
(218)
5,785
963
152
–
(50)
1,065
4,720
4,999
116
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 18 Deferred tax
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon.
At 31 December 2018
Charge/(credit) to income
Credit to equity
Exchange adjustment
Acquisition of subsidiary
At 31 December 2019
Charge/(credit) to income
Credit to equity
Exchange adjustment
Acquisition of subsidiary
At 31 December 2020
Share–based
payments
£’000
1,077
114
(59)
–
–
1,132
130
(219)
–
–
1,043
Advanced
capital
allowances
£’000
(511)
(186)
–
–
–
(697)
(177)
(3)
–
(55)
(932)
Intangible
assets
£’000
(2,999)
477
–
29
(3,145)
(5,638)
341
–
(144)
(1,655)
(7,096)
Research and
Development
Assets
£’000
(693)
(314)
–
–
–
(1,007)
(248)
–
–
–
(1,255)
Other
£’000
31
(134)
–
–
–
(103)
(179)
–
(14)
–
(296)
Total
£’000
(3,095)
(43)
(59)
29
(3,145)
(6,313)
(133)
(222)
(158)
(1,710)
(8,536)
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
2020
£’000
(8,536)
–
(8,536)
2019
£’000
(6,409)
96
(6,313)
At the Statement of Financial Position date, the Group has approximately £9.8 million unused tax losses (2019: £8.8 million)
relating to 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. The losses
do not have time limits.
19 Goodwill
Cost
At 1 January
Acquisitions
Exchange differences
At 31 December
2020
£’000
2019
£’000
53,558
13,170
2,183
68,911
42,145
13,542
(2,129)
53,558
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 £39.3 million and £9.3 million (2019: £37.2 million and £8.8 million) respectively.
CGU2, which is in a pre-commercialisation stage, has goodwill of £9.2 million (2019: £9.6 million) and CGU3 has goodwill
of £4.1 million (2019: £3.9 million).
Two cash generating units (CGU) exist within the Woundcare segment whereby goodwill has been allocated. CGU1 has
goodwill of £3.0 million (2019: £2.9 million) and CGU2 has £13.2 million of goodwill (2019: £nil) arising on the acquisition
of Raleigh Adhesive Coatings Limited on 23 November 2020.
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. Additional goodwill arose on the acquisition of Sealantis Limited on 31 January 2019
and on the acquisition of Biomatlante SA on 30 November 2019.
117
OverviewStrategic ReportGovernanceFinancial Statements Notes Forming Part of the Consolidated Financial Statements continued
19 Goodwill continued
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 2020
Surgical: CGU1
Surgical: CGU2
Surgical: CGU3
Woundcare: CGU1
Woundcare: CGU2
Consolidated
Assumed life of
CGU (years)
Discount Rate
Average sales
growth rate
20
20
20
20
N/A
6.8%
17.5%
7.4%
6.6%
N/A
6.8%
53.2%
6.4%
3.2%
N/A
Intangible assets
with indefinite
useful life
£’000
Total
£’000
9,330
48,668
–
–
–
–
9,330
9,242
4,143
3,018
13,170
78,241
Goodwill
£’000
39,338
9,242
4,143
3,018
13,170
68,911
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts have been determined based on a value-in-use calculation on a cash generating unit basis,
which uses cash flow projections based on financial budgets approved by the Directors covering a 12-month period. These
budgets have been adjusted for specific risk factors that take into account sensitivities of the projection. With the exception
of Surgical: 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 17%, and with growth not exceeding the long-
term average growth rate for the industry for years six to twenty. Using a forecasting period of 20 years is deemed reasonable
given the nature of the products sold by the CGUs, the regulatory framework that competitors must also comply with and
the established nature of the markets into which they are sold. The growth rate would have to fall significantly in order for an
impairment to be required. A discount rate of between 6.6% and 7.4% per annum (2019: between 7.1% and 7.5%), being the
Group’s current pre-tax weighted average cost of capital adjusted for the risk of each CGU, has been applied to these cash
flows, being an estimation of current market risks and the time value of money.
Surgical CGU2 is a pre-commercialisation venture and has high growth forecast in early years, contributing to an average
sales growth rate of 53.2%. Its forecasts are made on the basis of a H1 2021 soft launch whilst further clinical evidence is
built that will facilitate a full European Launch in 2022. It also has intellectual property in place protecting its products in
certain markets for a number of years, supporting the Group’s assumption that it will be able to penetrate the market with
its products. A discount rate of 17.5% (2019: 22.5%) has been applied to the cash flows of Surgical: CGU2 to represent the
pre-commercialisation stage of this venture, a reduction on the previous year reflecting the progress made with the
regulatory environment.
Woundcare CGU2 was acquired in November 2020 and has performed in line with expectations, as such no impairment
charge has been recognised, see Note 16 for details of the intangible assets arising on acquisition.
The Group has conducted a sensitivity analysis on the impairment test and for Surgical CGU1, Surgical CGU3 and Woundcare
CGU1 as set out below. The changes required to key assumptions to generate an impairment charge within these CGUs are
not considered to be reasonably possible changes and as such the assumptions are not considered to give rise to a key
source of estimation uncertainty.
The cash flows used within the impairment model for Surgical CGU2, are based on assumptions which are key sources
of estimation uncertainty and reasonably possible changes in these assumptions could lead to an impairment. Whilst the
regulatory progress made in the last year reduces uncertainty, there is still inherent uncertainty in relation to the regulatory
approval process, product launch date and the success of market penetration. In the event that sales growth and market
penetration falls significantly below management’s expectation, management has prepared sensitivity analysis to evaluate the
potential impairment required. In the event of sales growth being in-line with management’s expectations for years 2021 to
2025 and then sales growth being restricted to 5% in subsequent years from 2026 to 2040, an impairment to goodwill would
arise of £4.8 million.
118
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Sensitivity analysis conducted on each input independently has been prepared for all CGUs and the following inputs would
eliminate headroom in the impairment assessments:
At 31 December 2020
Surgical: CGU1
Surgical: CGU2
Surgical: CGU3
Woundcare: CGU1
20 Inventories
Raw materials
Work in progress
Finished goods
Discount rate
Business
continuity
period (years)
11.3%
24.8%
21.0%
50.0%
15
11
8
3
2020
£’000
8,585
5,879
6,561
Growth Rate
2.8%
27.2%
-5.0%
-25.0%
2019
£’000
7,333
3,866
6,456
21,025
17,655
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 (2019: £nil) carried at net realisable value.
Total gross inventories
Inventory impairment
Net inventory
2020
£’000
23,060
(2,035)
21,025
2019
£’000
19,068
(1,413)
17,655
The group performs a detailed assessment of all inventory and provisions are made for items identified as obsolete
or slow moving.
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
2020
£’000
2019
£’000
17,663
25,627
621
1,320
1,503
1,269
715
1,610
21,107
29,221
207
157
364
2020
£’000
17,859
(196)
17,663
273
258
531
2019
£’000
25,788
(161)
25,627
119
OverviewStrategic ReportGovernanceFinancial Statements Notes Forming Part of the Consolidated Financial Statements continued
21 Trade and other receivables continued
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 loss allowance.
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.
Receivables are written off when there is no reasonable expectation of recovery. Indicators that there may be no reasonable
expectation of recovery include, ageing of the debt past 180 days, unwillingness to engage in correspondence and insolvency
events of the counterparty.
The Group believes that the unimpaired amounts that are past due are still collectible 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 receivables
31 to 60 days overdue
61 to 90 days overdue
> 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 uncollectable
Amounts recovered during the year
Balance at the end of the year
2020
£’000
665
740
43
1,448
2019
£’000
880
215
308
1,403
Year ended
31 December
2020
£’000
Year ended
31 December
2019
£’000
161
75
(35)
(5)
196
277
20
(88)
(48)
161
Analysis of customers
In the year ended 31 December 2020, no customer accounted for more than 10% of the Group’s revenue (2019: one – 12%
of revenue). No expected credit loss provision is believed to be required for other receivables and accrued income.
22 Cash and cash equivalents
Cash held at banks
2020
£’000
53,829
2019
£’000
64,751
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of 90 days or less.
The carrying amount of these assets is approximately equal to their fair value.
120
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 23 Trade and other payables
Current liabilities
Trade payables
Other payables
Derivative financial instruments
Lease liabilities
Accruals and deferred income
Non-current liabilities
Other payables
Bank loans
Lease liabilities
2020
£’000
6,791
2,138
–
1,257
4,210
2019
£’000
7,402
3,164
302
1,353
3,175
14,396
15,396
3,229
–
9,864
13,093
3,150
664
8,347
12,161
Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs.
Other payables principally comprise amounts due in respect of payroll taxes, pension costs and indirect taxes yet
to be remitted.
Accruals and deferred income principally comprise amounts outstanding for trade purchases and ongoing costs but
not yet invoiced and amounts received from customers but not yet recognised as revenue.
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 procedures in place to ensure
that all payables are paid within the pre-agreed credit terms.
Bank loans at 31 December 2019 related to a number of loans acquired as part of the Biomatlante acquisition in the same
year and were settled during the year ended 31 December 2020.
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 Trade and other receivables, Cash and
cash equivalents and Derivative instruments in designated hedge accounting relationships, ‘Financial Liabilities Measured at
Amortised Cost’ (trade and other payables and financial liabilities), ‘Derivative Instruments in Designated Hedge Accounting
Relationships’ (cash flow hedges) and ‘Fair Value Through Profit and Loss (FVTPL)’ under IFRS 9 ‘Financial Instruments’ and
lease liabilities under IFRS 16 ‘Leases’.
Carrying value
Financial assets
Trade and other receivables
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
Lease liabilities
2020
£’000
2019
£’000
18,284
53,829
1,527
–
9,310
11,121
27,154
64,751
988
302
14,816
9,700
Non-current liabilities arose on the acquisition of Sealantis in 2019 and relate to royalties payable and amounts due to the
Israeli Innovation Authority.
121
OverviewStrategic ReportGovernanceFinancial Statements Notes Forming Part of the Consolidated Financial Statements continued
24 Financial instruments continued
Royalties payable are based on future sales of existing products in development and are due until the end of 2027. The liability
is calculated based on the net present value of future sales projections with a 17.5% discount rate applied. The discount rate
used to calculate the liability is consistent with the discount rate used in the impairment assessment (see Note 19).
Amounts due to the Israeli Innovation Authority are payable based on future sales and subject to at least 10% of manufacturing
being retained in Israel. The Group expects to continue to perform at least 10% of manufacturing in Israel of the relevant
products. The liability is calculated based on the net present value of future sales projections with a 7.7% discount rate applied
on the basis that the liability does not expire until the liability is settled. The change in the valuation of the liabilities, which
occurs as the liability unwinds and sales projections are updated, are recognised in finance costs (see Note 12).
In December 2019 the Group entered into a multi-currency facility with the NatWest Bank PLC and HSBC UK Bank PLC.
The principle 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 and the 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 covenants continue to apply in the event that the facility is undrawn.
The Risk Management section on pages 46 to 49 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 finance lease liabilities are at fixed rates and denominated
in Sterling whilst derivative financial instruments are non-interest bearing, is as follows:
At 31 December 2020
Trade and other payables
Lease liabilities
Bank loans
At 31 December 2019
Trade and other payables
Lease liabilities
Bank loans
On demand
or within
one year
£’000
13,139
1,257
–
14,396
On demand
or within
one year
£’000
14,043
1,353
–
Between
one and
two years
£’000
71
1,088
–
1,159
Between
one and
two years
£’000
139
909
133
15,396
1,181
Between
two and
five years
£’000
763
2,920
–
3,683
Between
two and
five years
£’000
1,154
1,545
531
3,230
Five years
or more
£’000
2,396
5,856
–
Total
financial
liabilities
£’000
16,368
11,121
–
8,252
27,489
Five years
or more
£’000
1,857
5,893
–
7,750
Total
financial
liabilities
£’000
17,193
9,700
664
27,557
Interest
rate
N/A
N/A
N/A
Interest
rate
N/A
N/A
2.56%
The Group enters lease arrangements to acquire right-of-use assets, predominately relating to premises from which the
Group operates, vehicles and office equipment. Material leases include the lease of the Group’s headquarters, factory
and distribution centre in Winsford, UK and a factory in Etten-Leur, the Netherlands.
The Winsford leases were entered into in 2017 and expire in 2032. They have a total lease liability net present value
of £7.6 million (2019: £8.1 million) and attract increases at five year intervals linked to market rate. The incremental
borrowing rate is 4%.
The Etten-Leur lease was entered into in 2020 and expires in 2033 and has a lease liability net present value of £ 2.1 million
(2019: £0.7 million). Rent increases are indexed linked on an annual basis. The incremental borrowing rate is 0.62%.
122
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 (b) Interest rate and currency of financial assets
The currency and interest rate profile of the financial assets of the Group is as follows:
Currency
Sterling
US Dollar
Euro
Israeli Shekel
At 31 December 2020
Currency
Sterling
US Dollar
Euro
Israeli Shekel
At 31 December 2019
Floating
£’000
Non–interest
bearing
£’000
36,399
371
3,018
–
39,788
11,165
1,004
1,758
114
14,041
Floating
£’000
Non–interest
bearing
£’000
Total
£’000
47,564
1,375
4,776
114
53,829
Total
£’000
54,926
6,786
61,712
317
1,974
–
276
384
88
593
2,358
88
57,217
7,534
64,751
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
2020
£’000
10,308
7,253
3,878
32
21,471
2019
£’000
10,703
13,449
5,555
45
29,752
The financial assets all mature within one year. Credit risk is discussed in Note 21.
(c) Currency exposures
At 31 December 2020, the Group had unhedged US Dollar currency exposures of £nil (2019: £nil) and unhedged
Euro currency exposures of £nil (2019: £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 2020 Sterling revenues
by approximately 2.8% and 3.4% respectively and in the absence of any hedging this would have had an impact on profit
margin as a percentage of revenue by 2.2% and 0.1%.
123
OverviewStrategic ReportGovernanceFinancial Statements Notes Forming Part of the Consolidated Financial Statements continued
24 Financial instruments continued
Forward foreign exchange contracts
It is the policy of the Group to enter into forward foreign exchange contracts to cover specific foreign currency payments
and receipts.
The following table details the forward foreign currency contracts outstanding as at the year-end:
Outstanding contracts
Cash flow hedges
Sell US dollars
Less than 3 months
3 to 6 months
7 to 12 months
Over 12 months
Outstanding contracts
Sell Euros
Less than 3 months
3 to 6 months
7 to 12 months
Over 12 months
Average contract rate
Notional principle
Fair value
2020
USD:£1
2019
USD:£1
2020
USD ‘000
2019
USD ‘000
2020
£’000
2019
£’000
1.30
1.30
1.27
1.31
1.386
1.328
1.271
1.301
8,000
6,500
14,000
6,000
34,500
9,000
8,000
17,500
12,500
47,000
312
235
805
205
1,557
(307)
(5)
615
262
565
Average exchange rate
Foreign currency
Fair value
2020
EUR:£1
2019
EUR:£1
2020
EUR ‘000
2019
EUR ‘000
2020
£’000
2019
£’000
1.15
1.14
1.11
1.10
1.125
1.143
1.112
1.144
600
600
1,200
600
3,000
620
1,200
1,500
1,200
4,520
(16)
(16)
(1)
2
(30)
23
25
61
12
121
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 (2019: £nil) in respect of FVTPL contracts. The gain of £842,000
(2019: £3,091,000 gain) in respect of cash flow hedges has been taken to reserves.
25 Fair value of financial assets and liabilities
The Directors consider that the fair value of the Group’s financial instruments do not differ significantly from their book values.
26 Foreign exchange rates
The Group uses the average of exchange rates prevailing during the period to translate the results and cash flows of overseas
subsidiaries into Sterling and period end rates to translate the net assets of those entities. The currencies which most influence
these translations and the relevant exchange rates were:
Currency
US Dollar
Euro
Average rate
Closing rate
Percentage change
2020
2019
2020
2019
Average
%
Closing
%
1.284
1.130
1.275
1.138
1.365
1.112
1.320
1.175
1
(1)
3
(5)
124
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 27 Share capital
Number of Ordinary Shares of 5p each
At 1 January 2019
Share capital allotted for share schemes
At 31 December 2019
Share capital allotted for share schemes
At 31 December 2020
Allotted, called up and fully paid
‘000
213,473
1,417
214,890
493
215,383
At the Statement of Financial Position date, 403,239 (2019: 420,270) shares are retained by the Trust to meet the matching
requirements of the scheme. For further information on the Share option plans, see Note 29.
Ordinary Shares of 5p each
At 1 January 2019
Share capital allotted for share schemes
At 31 December 2019
Share capital allotted for share schemes
At 31 December 2020
Allotted, called up and fully paid
£’000
10,674
71
10,745
24
10,769
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 parents functional currency, being Sterling, are recognised directly in the
translation reserve. Gains and losses on hedging instruments that are designated as hedges of net investments in foreign
operations are included in the translation reserve.
A £3,507,000 gain has been recorded in the translation reserve during the period, which would otherwise have been
recognised in Administration costs (2019: £3,538,000 loss) if hedge accounting had not been adopted.
125
OverviewStrategic ReportGovernanceFinancial Statements Notes Forming Part of the Consolidated Financial Statements continued
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
2020
£’000
2019
£’000
253
705
653
265
748
843
1,611
1,856
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
15/04/2011
08/09/2011
26/04/2013
15/04/2014
19/09/2014
02/04/2015
Share price at grant date
Exercise price
Expected life
Contractual life
Risk free rate
Expected volatility
Expected dividend yield
Fair value of options
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
77.5p
77.5p
3 yrs
10 yrs
0.36%
36%
0.7%
15p
115.75p
115.75p
121.75p
121.75p
3 yrs
10 yrs
0.80%
36%
0.7%
23p
3 yrs
10 yrs
0.80%
36%
0.7%
24p
132.0p
132.0p
3 yrs
10 yrs
0.80%
31%
0.7%
22p
Grant Date
18/04/2016
06/04/2017
13/04/2018
24/04/2019
14/04/2020
25/09/2020
Share price at grant date
Exercise price
Expected life
Contractual life
Risk free rate
Expected volatility
Expected dividend yield
Fair value of options
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
239.0p
239.0p
3 yrs
10 yrs
0.08%
36%
0.6%
46p
214.5p
214.5p
3 yrs
10 yrs
0.08%
36%
0.6%
42p
Under the terms of the Company’s Share Option Schemes, 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.
126
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Unapproved Executive Share Option Scheme, Enterprise Management Incentive Scheme (EMI) and Company Share
Option Plan (CSOP) continued
Options have been granted over the following number of Ordinary Shares which were outstanding at 31 December 2020:
Number of
options as
at 1 January
2020
Remaining life
(years)
1 January
2020
Issued
Lapsed
Exercised
Number of
options as at
31 December
2020
Remaining life
(years)
31 December
2020
Date of grant
Option
price (p)
Unapproved Executive
Share Option Scheme
15.04.14
19.09.14
02.04.15
18.04.16
06.04.17
13.04.18
24.04.19
14.04.20
25.09.20
115.75
121.75
132.00
184.60
246.70
308.00
328.75
239.00
214.50
Enterprise Management
Incentive Scheme
106,000
28,000
80,000
192,284
451,097
349,021
500,730
–
–
4.3
4.7
5.2
6.3
7.3
8.3
9.3
–
–
–
–
–
–
–
–
–
–
–
–
–
(4,000)
102,000
–
–
28,000
80,000
(25,293)
166,991
(24,036)
–
(115,874)
837,027
(67,000)
34,872
–
–
–
–
–
–
427,061
349,021
384,856
770,027
34,872
16.04.10
42.00
15,000
0.3
–
–
(15,000)
–
Company Share
Option Plan
15.04.11
08.09.11
26.04.13
15.04.14
02.04.15
18.04.16
06.04.17
13.04.18
24.04.19
14.04.20
88.00
86.25
77.50
115.75
132.00
184.60
246.70
308.00
328.75
239.00
6,000
1,000
1,000
19,220
12,727
66,798
193,047
129,781
157,341
1.3
1.7
3.3
4.3
5.2
6.3
7.3
8.3
9.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(6,715)
–
(31,461)
–
–
273,992
(8,000)
–
–
–
6,000
1,000
1,000
(6,220)
13,000
–
–
–
–
–
–
12,727
66,798
186,332
129,781
125,880
265,992
2,309,046
1,145,891 (253,086)
(50,513)
3,151,338
The weighted average remaining contractual life of the options outstanding at 31 December 2020 is 7.5 years (2019: 8.2 years).
The weighted average exercise price of options exercised in the year was £2.42 (2019: £3.15).
Outstanding at beginning of the year
Issued
Exercised
Lapsed
Outstanding at end of the year
Exercisable at end of the year
2020
2019
Number of
Options
Number of
Options
2,309,046
2,436,596
1,145,891
692,778
(50,513)
(635,285)
(253,086)
(185,043)
3,151,338
2,309,046
1,090,909
528,029
127
3.3
3.7
4.2
5.3
6.3
7.3
8.3
9.3
9.7
0.3
0.7
2.3
3.3
4.2
5.3
6.3
7.3
8.3
9.3
OverviewStrategic ReportGovernanceFinancial Statements Notes Forming Part of the Consolidated Financial Statements continued
29 Share-based payments continued
Long Term Incentive Plan (LTIP)
The fair value of the LTIP options is calculated based on a binomial tree 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
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
06/06/2014
02/04/2015
10/09/2015
18/04/2016
06/04/2017
117.0p
0p
3 yrs
10 yrs
0.80%
36%
0.7%
75%
85.9p
132.0p
151.5p
184.6p
246.7p
0p
3 yrs
10 yrs
0.80%
29%
0.7%
80%
64.4p
0p
3 yrs
10 yrs
0.67%
27%
0.4%
80%
75.5p
0p
3 yrs
10 yrs
0.67%
25%
0.4%
64%
0p
3 yrs
10 yrs
0.18%
23%
0.4%
64%
159.0p
220.0p
02/11/2017
13/04/2018
24/04/2019
14/04/2020
25/09/2020
344.7p
306.8p
328.75p
239.0p
214.5p
0p
3 yrs
10 yrs
0.18%
23%
0.4%
64%
0p
3 yrs
10 yrs
0.94%
25%
0.4%
72%
0p
3 yrs
10 yrs
0.75%
26%
0.4%
50%
0p
3 yrs
10 yrs
0.08%
36%
0.6%
62%
0p
3 yrs
10 yrs
0.08%
36%
0.6%
62%
Fair value of option
220.0p
264.0p
297.0p
217.0p
185.0p
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
06.06.14
02.04.15
10.09.15
18.04.16
06.04.17
02.11.17
13.04.18
24.04.19
14.04.20
25.09.20
Market
price at
date of
grant (p)
Number of
LTIPs at
1 January
2020
117.00
132.00
38,450
99,270
151.50
146,939
184.60
228,308
246.70
344.70
459,855
9,308
308.00
364,645
328.75
239.00
214.50
437,469
–
–
Remaining life
1 January
Number of
LTIPs at
31 December
Remaining life
31 December
2020
Issued
Lapsed
Exercised
2020
2020
4.4
5.2
5.7
6.3
7.3
7.8
8.3
9.3
–
–
–
–
–
–
–
–
–
629,910
–
22,476
–
–
–
–
–
–
–
38,450
99,270
146,939
(10,230)
218,078
(120,526)
(174,110)
165,219
(7,112)
–
2,196
–
–
–
–
(3,306)
361,339
–
–
–
437,469
629,910
22,476
3.4
4.2
4.7
5.3
6.3
6.8
7.3
8.3
9.3
9.7
1,784,244
652,386
(127,638)
(187,646)
2,121,346
128
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 The weighted average exercise price of the Long-Term incentive Plan in the year was £2.35 (2019: £3.24).
The weighted average remaining contractual life of the LTIPs outstanding at 31 December 2020 is 7.4 years (2019: 7.5 years).
Outstanding at beginning of the year
Issued
Exercised
Lapsed
Outstanding at end of the year
Exercisable at end of the year
Number of
Options
2020
Number of
Options
2019
1,784,244
1,863,065
652,386
437,469
(187,646)
(452,661)
(127,638)
(63,629)
2,121,346
1,784,244
670,152
512,967
The exercise price of these options is £1 for each issue of LTIPs.
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
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%
61p
0p
5 yrs
10 yrs
0.69%
36%
0.7%
100%
63p
Grant date
30/04/2014
29/04/2015
03/05/2016
02/05/2017
13/04/2018
29/04/2019
05/05/2020
16/11/2020
Share price at grant date
126.0p
141.5p
183.0p
264.1p
306.8p
328.75p
244.97p
218.4p
Exercise price
Expected life
Contractual life
Risk-free rate
Expected volatility
Expected dividend yield
Probability of
performance conditions
Fair value of option
0p
5 yrs
10 yrs
0.80%
36%
0.7%
100%
110p
0p
5 yrs
10 yrs
0.80%
31%
0.7%
100%
124p
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
0p
5 yrs
10 yrs
0.08%
36%
0.6%
100%
253p
0p
5 yrs
10 yrs
0.08%
36%
0.6%
100%
190p
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 70.
129
OverviewStrategic ReportGovernanceFinancial Statements Notes Forming Part of the Consolidated Financial Statements continued
29 Share-based payments continued
Deferred Share Bonus Scheme (DSB) continued
Date of grant
Deferred Share Bonus Plan
Market price at
date of grant
(p)
Number of DSB
matching shares at
1 January
Number of DSB
matching shares at
31 December
2020
Issued
Lapsed
Exercised
2020
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
29.04.19
05.05.20
16.11.20
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
244.97
218.40
6,759
13,640
18,365
16,120
8,005
10,562
97,556
84,773
117,416
292,336
253,004
135,863
251,378
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
364,468
97,219
–
–
–
–
–
–
–
–
–
–
(13,937)
(13,567)
(6,127)
(4,530)
–
–
(4,225)
(2,868)
(3,720)
(4,468)
(1,900)
(47,588)
(41,417)
(24,893)
(158,489)
(66,681)
–
(4,820)
(2,202)
–
6,759
9,415
15,497
12,400
3,537
8,662
49,968
43,356
92,523
133,847
172,386
122,296
240,431
357,736
97,219
1,305,777
461,687
(38,161)
(363,271)
1,366,032
The weighted average exercise price of the Deferred Share Bonus Plan in the year was £2.39 (2019: £3.17).
Outstanding at beginning of the year
Issued
Exercised
Lapsed
Outstanding at end of the year
Exercisable at end of year
Number of
Options
2020
Number of
Options
2019
1,305,777
1,286,244
461,687
275,800
(363,271)
(221,582)
(38,161)
(34,685)
1,366,032
1,305,777
548,350
665,532
The exercise price of the matching shares is £nil.
Deferred Annual Bonus Scheme (DAB)
The fair value of the DAB options are calculated based on a Black-Scholes Merton model assuming the inputs below:
Grant date
21/05/2014
15/04/2015
18/04/2016
06/04/2017
13/04/2018
24/04/2019
Share price at grant date
115.4p
129.0p
184.6p
246.7p
308.0p
328.75p
Exercise price
Expected life
Contractual life
Risk-free rate
Expected volatility
Expected dividend yield
Probability of performance conditions
Fair value of option
0p
3 yrs
10 yrs
0.80%
31%
0.7%
100%
115p
0p
3 yrs
10 yrs
0.80%
31%
0.7%
100%
129p
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
130
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 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.
Market price at
date of grant
Number of
DAB matching
shares at
1 January
Remaining life
(years)
1 January
Number of DAB
matching
shares at
31 December
Remaining life
(years)
31 December
Date of grant
(p)
2020
2020
Issued
Lapsed
Exercised
2020
2020
Deferred Annual Bonus Plan
21.05.2014
15.04.2015
18.04.2016
06.04.2017
13.04.2018
24.04.2019
115.40
129.00
184.60
246.70
308.00
328.75
520
12,393
18,466
64,886
63,037
36,721
196,023
4.3
5.3
6.3
7.3
8.3
9.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(6,298)
(12,495)
(27,930)
–
–
520
6,095
5,971
36,956
63,037
36,721
(46,723)
149,300
3.3
4.3
5.3
6.3
7.3
8.3
As no bonus was awarded in 2020, no Deferred Annual Bonus have arisen.
The weighted average exercise price of the Deferred Annual Bonus Plan options in the year was £2.45 (2019: £3.30).
The weighted average remaining contractual life of the Deferred Annual Bonus Plan options outstanding at
31 December 2020 is 7.1 years (2019: 7.8).
Outstanding at beginning of the year
Issued
Exercised
Lapsed
Outstanding at end of the year
Exercisable at end of year
Number of
Options
2020
Number of
Options
2019
196,023
239,178
–
(46,723)
–
36,721
(79,876)
–
149,300
196,023
49,542
31,379
30 Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.
There are no other related party transactions to disclose.
131
OverviewStrategic ReportGovernanceFinancial Statements Notes Forming Part of the Consolidated Financial Statements continued
31 Acquisition of Raleigh
On 23 November 2020 the Group acquired the entire issued share capital of Raleigh Adhesive Coatings Limited, a UK-based
woundcare and bio-diagnostics coatings business. In the year ended 31 December 2020, Raleigh contributed £0.7 million
revenue to the Group and had an operating profit of £0.1 million. In addition, amortisation of intangible assets of £0.1 million
was recorded within the Group as a result of the acquisition. Had Raleigh been part of the Group since 1 January 2020,
it would have contributed £6.4 million of revenue and £0.4 million of operating profit.
Identifiable net assets acquired
Technology-based Intangible assets
Customer related intangible assets
Property, plant and equipment
Finance lease assets
Trade and other receivables
Inventory
Cash and cash equivalents
Corporation tax debtor
Trade and other payables
Lease liabilities
Deferred Tax
Goodwill
Total net assets acquired
Satisfied by
Cash consideration
Net cash flow on acquisition
Cash consideration
Cash acquired
£’000
1,320
7,390
587
645
1,999
1,009
76
54
(1,891)
(646)
(1,713)
13,170
22,000
£’000
22,000
£’000
22,000
(76)
21,924
None of the goodwill on the acquisition is expected to be deductible for income tax. See Note 19 for the allocation
of goodwill to CGUs.
32 Events after reporting period
There have been no material events subsequent to the end of the reporting period ended 31 December 2020.
132
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Company Statement of Financial Position
At 31 December 2020
Non-current assets
Investments in subsidiaries
Loans and other financial assets
Current assets
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
Note
2020
£’000
2019
£’000
3
4
5
6
58,017
123
58,017
255
58,140
58,272
46,871
46,880
93,751
24,723
59,043
83,766
(5,995)
87,631
(7,838)
75,928
145,896
134,200
10,769
36,288
11,142
(162)
87,859
10,745
36,226
9,466
(159)
77,922
Equity attributable to equity holders of the parent
145,896
134,200
The Company reported a net profit for the year ended 31 December 2020 of £13.3 million (2019: £13.8 million).
The Financial Statements of Advanced Medical Solutions Group plc (registration number 2867684) on pages 133 to 139
were approved by the Board of Directors and authorised for issue on 12 April 2021 and were signed on its behalf by:
Chris Meredith
Chief Executi ve Officer
133
OverviewStrategic ReportGovernanceFinancial Statements Company Statement of Changes in Equity
For the year ended 31 December 2020
At 1 January 2019
Share-based payments
Share options exercised
Shares purchased by EBT
Shares sold by EBT
Total comprehensive income
Dividends paid
At 31 December 2019
Share-based payments
Share options exercised
Shares purchased by EBT
Shares sold by EBT
Total comprehensive income
Dividends paid
Share capital
£’000
10,674
–
71
–
–
–
–
10,745
–
24
–
–
–
–
7,333
1,856
277
–
–
–
–
9,466
1,611
65
–
–
–
–
Share–based
payments
£’000
Investment in
own shares
£’000
Share
premium
£’000
Retained
earnings
£’000
Total
£’000
(156)
35,192
67,164
120,207
–
–
(603)
600
–
–
–
1,034
–
–
–
–
(159)
36,226
–
–
(542)
539
–
–
–
62
–
–
–
–
–
–
–
–
13,766
(3,008)
77,922
–
–
–
–
13,274
(3,337)
87,859
1,856
1,382
(603)
600
13,766
(3,008)
134,200
1,611
151
(542)
539
13,274
(3,337)
145,896
At 31 December 2020
10,769
11,142
(162)
36,288
134
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Notes to the Company Financial Statements
Year ended 31 December 2020
1 Significant accounting policies
Basis of preparation
These Financial Statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure
Framework (‘FRS 101’).
In preparing these Financial Statements, the Company applies the recognition, measurement and disclosure requirements
of International Financial Reporting Standards, but makes amendments where necessary in order to comply with
Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.
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
Investments and receivables 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 Income Statement for the period.
Taxation
Tax on the profit or loss for the period comprises current and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in profit or loss
because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that
are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted
or substantively enacted by the end of the reporting period.
A provision is recognised for those matters for which the tax determination is uncertain but it is considered probable that there
will be a future outflow of funds to a tax authority. The provisions are measured at the best estimate of the amount expected
to become payable. The assessment is based on the judgement of tax professionals within the Company supported by
previous experience in respect of such activities and in certain cases based on specialist independent tax advice.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. Temporary differences in respect of the initial
recognition of assets and liabilities that affect neither accounting nor taxable profit are not provided for. The amount
of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the reporting date.
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.
135
OverviewStrategic ReportGovernanceFinancial Statements Notes to the Company Financial Statements continued
Year ended 31 December 2020
1 Significant accounting policies continued
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 de-recognised when the contractual
rights to the cash flows from the financial assets expire or are transferred. Financial liabilities are de-recognised when the
obligation specified in the contract is discharged, cancelled or expires.
Derivatives
The Company uses derivative financial instruments to hedge its exposure to currency 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.
2 Income Statement
As permitted by section 408 of the Companies Act 2006, the Company has elected not to present its own Income Statement
for the year. Advanced Medical Solutions Group plc reported a profit for the financial year ended 31 December 2020 of
£13,274,000 (2019: Profit of £13,766,000).
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 (2019: 16), all of whom were classified as Administration (2019: 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 to the Consolidated Financial Statements)
Year ended
31 December
2020
£’000
Year ended
31 December
2019
£’000
2,155
168
89
1,611
4,023
1,400
553
86
1,856
3,894
136
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 3 Investments in subsidiaries
Cost
At 1 January 2020
At 31 December 2020
Provisions for impairment
At 1 January 2020
At 31 December 2020
Net Book value
At 31 December 2020
At 31 December 2019
Investments in
subsidiaries
£’000
86,687
86,687
28,670
28,670
58,017
58,017
Shares in Group undertakings and loans to Group undertakings have been written down to recognise losses
in subsidiary companies.
The following were subsidiary undertakings at the end of the year and have all been included in the consolidated accounts.
Name
Proportion of
voting rights and
Ordinary Share
capital held
Country of
operation
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
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
137
OverviewStrategic ReportGovernanceFinancial Statements Notes to the Company Financial Statements continued
Year ended 31 December 2020
Name
Proportion of
voting rights and
Ordinary Share
capital held
Country of
operation
Nature of business
Registered address
Innovative Technologies Limited
England
100%‡
Dormant
Raleigh Adhesive Coatings Limited
England
100%*
Development and
manufacture of
medical products
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
Advanced Medical Solutions BV
Netherlands
100%
Development and
manufacture of
medical products
Munnikenheiweg 35,
4879 NE Etten-Leur,
Netherlands
Advanced Medical Solutions (Germany) GmbH
Germany
100%^
Holding Company
Resorba Medical GmbH
Germany
100%#
Development and
manufacture of
medical products
Am Flachmoor 16, 90475
Nuremberg, Germany
Am Flachmoor 16, 90475
Nuremberg, Germany
Resorba s.r.o.
Czech
Republic
100%#
Resorba ooo
Russia
100%#
Advanced Medical Solutions Israel
(Sealantis) Limited
Israel
100%*
Biomatlante S.A
France
100%
MPN Medizin Produkte Neustadt GmbH
Germany
100%#
Advanced Medical Solutions (USA) Inc
USA
100%*
Advanced Medical Solutions (Europe) Limited
England
100%
Manufacture and
sales office of
medical products
Haltravska No. 9/578,
34401, Domazlice,
Czech Republic
Sales office of
medical products
Fadeeva Str. 5, 125047
Moscow, Russia
Development and
manufacture of
medical products
Malat Building, Technion
City, Haifa, Israel 3200004
Development and
manufacture of
medical products
5, Rue Edouard Belin,
44360 Vigneux de
Bretagne, France
Manufacture of
medical products
Marketing support
of medical products
Providing financial
support to other
Group entities
Sierkdorfer Str. 15, 23730,
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
* 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 (Germany) GmbH.
The above table reflects the situation at the year-end.
138
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 4 Trade and other receivables
Due within one year
Prepayments and accrued income
Amounts due from Group undertakings
Derivative financial instruments
Amounts Owed by Group undertakings
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
2020
£’000
2019
£’000
287
46,584
–
46,871
2020
£’000
26,763
22,161
48,924
179
24,423
121
24,723
2019
£’000
5,234
21,529
26,763
2,340
2,340
2,340
2,340
46,584
24,423
2020
£’000
4,823
1,172
5,995
2019
£’000
6,232
1,606
7,838
6 Share capital
Details on the share capital of the Company are provided in Note 27 on page 125 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
2020
£’000
2019
£’000
253
705
653
265
748
843
1,611
1,856
Details of the share-based payments of the Company are provided in Note 29 on pages 126 to 131 in the Notes to the
Group’s accounts.
139
OverviewStrategic ReportGovernanceFinancial Statements Five Year Summary
Consolidated Income Statement
Revenue
Profit from operations (Pre-exceptional)
Profit attributable to equity holders of the parent
(Pre-exceptional)
Basic earnings per share (Pre-exceptional)
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
2020
£m
86.8
11.6
9.4
4.4p
141.4
97.2
(36.4)
202.2
10.6
11.1
0.4
36.3
1.5
1.2
3.3
137.7
202.2
2019
£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
2018
£m
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
0.4
34.0
1.5
(3.5)
0.6
78.6
125.5
The five year summary is presented with IFRS16 – Leases, taking effect from 1 January 2018. Assets and liabilities prior to this
point are presented under IAS17 – Leases.
Alternative Performance Measures
The Group’s performance is assessed using a number of financial measures which are not defined under IFRS and are
therefore non-GAAP (or alternative) performance measures. These are set out as follows:
• Adjusted profit measures are believed by the Directors to enable a reader to obtain a fuller understanding of underlying
performance since they exclude items which are not reflective of the normal course of business. Adjusted profit before
tax is shown before exceptional items which were £0.8 million (2019: £1.1 million), amortisation of acquired intangible
assets which was £2.3 million (2019: £1.7 million) and change in long-term liability expense of £0.2 million (2019: credit
of £0.3 million) as reconciled in the Financial Review (see page 45).
• Adjusted operating margin is shown before exceptional items and amortisation of acquired intangible assets as reconciled
in the Financial Review (see page 45).
• Margin percentages (which are calculated by dividing the relevant profit figure by revenue) for each of the relevant profit
metrics provide management with an insight into relative year-on-year performance.
• Adjusted earnings per share measures are derived from adjusted profit after tax with the rationale for their use being
the same as for adjusted profit metrics and are reconciled to their IFRS equivalent in Note 15 to the consolidated
financial statements.
• Adjusted net cash inflow from operating activities are derived from excluding items which are not reflective of the normal
course of business with the rationale for their use being the same as for adjusted profit metrics as reconciled in the
Financial Review (see page 45).
Further information regarding the profit adjusting items an be found in the Notes to the Group Financial Statements:
• Exceptional items (Note 6).
• Amortisation of acquired intangible assets which was (Note 16).
• Change in long-term liabilities expense (Note 12).
140
Advanced Medical Solutions Group plc Annual Report & Accounts 2020 Advisors
Nominated Advisor and Broker
Investec Bank plc
30 Gresham Street
London EC2V 7QN
Bankers
HSBC
99–101 Lord Street
Liverpool L2 6PG
Auditor
Deloitte LLP
Independent Auditor
The Hanover Building
Corporation Street
Manchester M4 4AH
Tax Advisor
PwC
No. 1 Spinningfields
1 Hardman Square
Manchester M3 3EB
Registrars and Transfer Office
Link Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
NatWest
2nd Floor
1 Spinningfields Square
Manchester M3 3AP
Patent Attorneys
Marks & Clerk
Manchester Office
1 New York Street
Manchester M1 4HD
Foley & Lardner LLC
975 Page Mill Square
Palo Alto CA 94304–1013
Public Relations
Consilium Strategic Communications
41 Lothbury
London EC2R 7HG
141
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
www.admedsol.com
CBP00019082504183028