Preliminary unaudited results for the year ended 30 April 2010

Strong performance in a challenging year and new product launches in 2010/11

Consort Medical plc (LSE: CSRT), a leader in drug delivery and device technologies, today announces results for the year ended 30 April 2010.

Financial Highlights:

  • Revenues from ongoing products and services broadly flat at £118.6m (2009: £120.3m)
  • Like-for-like operating profit before special items increased by 3% to £19.4m (2009: £18.9m). Operating profit after special items down 7% to £12.2m (2009: £13.1m)
  • Profit before tax and special items down 6% to £16.9m (2009: £17.9m)
  • Profit before tax and after special items down 13% to £10.5m (2009:12.0m)
  • Profit after tax and special items up 6% to £8.1m (2009: £7.6m)
  • Basic earnings per share up by 6% to 27.8p (2009: 26.2p)
  • Adjusted basic earnings per share down 6% at 42.5p (2009: 45.1p)
  • Final dividend maintained at 12.1p per share (2009: 12.1p per share)

Operational Highlights:

  • £16.9m acquisition of The Medical House plc now fully integrated into Bespak and making encouraging progress with three development contracts in fast growing autoinjector space progressing as planned
  • Maintained market share in Bespak Respiratory’s core markets with a 10% rise in operating profits and with good progress on a number of new products
  • King Systems transformation programme on schedule and significant progress with R&D pipeline
  • Group cost reduction initiatives delivering higher returns than previously forecast
  • Strengthened management team to take the business forward

Jon Glenn, Chief Executive Officer, commented:

“Consort has delivered a strong performance in a challenging year with a 3% rise in like-for-like operating profits. Our continued investment in organic growth opportunities is expected to lead to new product launches later in 2010 and our cost reduction initiatives are ahead of schedule. We have been delighted with the Bespak Injectables acquisition and have been encouraged by the considerable interest shown by global pharma companies in Bespak’s enhanced product capabilities. Overall, we are confident of our prospects for the year ahead.”


Consort Medical plc – Tel: +44 (0) 1442 867920

Jonathan Glenn, Chief Executive Officer

Toby Woolrych, Group Finance Director

Brunswick Group LLP – Tel: +44 (0) 20 74045959

Jon Coles/Justine Mcllroy/Will Carnwath

Consort Medical plc

Chairman and Chief Executive’s Combined Review

We are pleased to report that Consort Medical has delivered robust results for the last financial year, notwithstanding global recession. We have delivered an encouraging overall financial performance and both divisions made strides towards delivering the promised organic growth in revenues and margins. The Group’s strong cash flows and balance sheet have enabled Consort Medical to withstand the global economic recession in good shape, to maintain our dividend payment for the full financial year, and also to continue to invest in both organic and acquisitive growth opportunities. In particular, we have been delighted with our acquisition of The Medical House plc, which opens an important new market for Bespak’s unique capabilities.

Group Results

Consort Medical entered the last financial year facing destocking across its markets, a material price reduction in one of Bespak’s key contracts and a weak hospital market in the US for King Systems. In this context, we have been pleased with the resilient financial performance in the last year. Revenues and operating profits (before special items) were broadly flat at £118.6m (2009: £120.3m) and £18.7m (2009: £18.9m) respectively. We were particularly pleased that like-for-like operating profits, excluding the impact of The Medical House acquisition, rose by 3% on the back of excellent cost control. Profit before tax and special items fell by 6% due to lower interest income on our cash balances and an increased non-cash pension charge. Profit after tax but before special items fell by 6% to £12.3m and adjusted earnings per share fell by 6% to 42.5p. Including special items, profit before tax fell by 13% to £10.5m, profit after tax rose by 6% to £8.1m and basic earnings per share rose by 6% to 27.8p.

Bespak’s respiratory business performed better than expected. While revenues fell by 5% in challenging market conditions to £76.6m, the cost initiatives that we introduced resulted in operating profits increasing by 10% to £14.8m. Operating margins increased for a second successive year from 16.6% to 18.2%. There were encouraging signs that markets were improving as we entered 2010 and the division finished the year strongly. Bespak also made encouraging progress with a number of key development programmes.

King Systems also performed robustly in a market which saw declining hospital procedures in 2009. Revenues in dollars rose by 1% to $65.7m (a 4.5% increase in sterling terms). Operating profits fell by $1.3m (14.8%) to $7.2m which reflects an additional investment of $1.7m in R&D, focussed in particular on a major product launch for 2010, as well as incurring additional costs to drive our manufacturing transformation programme.

Group cash generation continues to be strong, with an EBITDA of £21.6m (2009: £22.0m), and net debt remains tightly managed at 1.5x EBITDA. The Group refinanced its borrowing facilities until October 2013 and we have leverage available to help us deliver our future growth plans. We have laid the foundations for growth by investing our strong cash flow in additional innovation, product development and targeting of new markets. King Systems in particular significantly increased its R&D expenditure in 2009/10 and will rapidly increase its rate of new product introduction.


Consort Medical is a healthcare company focused on high margin disposable medical device technologies. Our strategy is to build and strengthen our core business through new product innovation, increased market reach and higher value business models. We will diversify the Group into adjacent markets and technologies which leverage our competencies or utilise our sales channels. We will also continue to manage costs carefully, to maintain and increase margins.

Business performance

Acquisition of The Medical House plc

We acquired The Medical House plc (“TMH”) for £16.9m in November 2009. TMH has developed a strong portfolio of autoinjector technologies designed for the delivery of biological drugs, which now make up over 40% of the pharmaceutical industry’s development pipeline. TMH has three autoinjector programmes already in late development for major customers as well as a needle-free injector for Merck Serono which was launched in July 2009. The combination of TMH’s development expertise with Bespak’s manufacturing skills provides pharmaceutical customers with a compelling offering. The acquisition leverages Bespak’s unique capabilities into a faster growing market place and also takes it higher up the value chain using a royalty based revenue model, which is in line with the strategy we set out last year. TMH has now been fully integrated into Bespak and rebranded Bespak Injectables. We have already reached our target of realising cost savings of £0.5m per annum – the savings will be achieved in full in the 2010/11 financial year. The costs of the integration were taken partly through normal operating expenses and partly as special items.

Bespak Division

Bespak is a leading drug delivery device manufacturer, with many of the world’s top pharmaceutical companies as its largest customers. Bespak moulds or sources over 3 billion parts a year, from valves and actuators to complete devices.

Bespak performed strongly during 2009/10. Operating profit before special items for the year of £14.1m was 5% up on prior year despite a 4% fall in revenues in difficult markets. Operating margins increased from 16.6% to 18.2% benefitting from a range of cost reduction initiatives. The restructuring activities, for which a £2.2m charge was taken as a special item in the current year, delivered savings of £1.7m in the year and is expected to deliver a further £2.2m per annum from next year. This is in addition to savings from our continuous improvement programme amounting to a further annualised £0.8m. The Integrated Aluminium Components Ltd (IAC) subsidiary that was consolidated last year has been returned to profitability.

In our valve business we maintained market share in our core markets. We renewed a major long term contract worth over £30m with one of our larger customers in December, and saw an improvement in overall demand in early 2010. We have made good progress this year on a number of new products from our portfolio of over fifty development programmes. In particular, the primeless (Easifill) valve has been in successful Phase III trials with a customer for a systemic therapeutic application and we anticipate a regulatory filing in 2011. We also have two further valve variants on test with customers for asthma applications: one is scheduled to launch in 2011 and the other in 2012. We have an emerging market valve which is undergoing customer evaluation.

The FDA has issued guidance that all new drugs delivered by an inhaler should have a dose counter and has recommended the retro-fitting of dose counters to existing products. Bespak aims to address this market by offering both its own integrated dose counter (“IDC”) and/or a manufacturing capability for those customers who may have developed their own solution. Our own IDC has just successfully completed Phase III clinical trials with a customer for a new product, and we anticipate further progress towards commercialisation in the coming year. We are a supplier of dose counters to a major Pharma company that has one of the only dose counters currently on the market in volume.

Bespak Respiratory’s device services business offers unique design for manufacture and manufacturing capability to customers who own their own device technologies. Revenues fell as expected during the period as a result of contractual changes with a major customer which were announced in February 2009. However, excellent progress has been made in the past year in bringing two programmes to an industrialisation phase, including a potentially significant programme that was installed in a bespoke building erected last year.

Bespak Injectables has also made good progress with its currently marketed product and with its development programmes. The cool.clickTM2 needle-free injector device for use with Merck-Serono’s human growth hormone drug was launched in July 2009, and initial revenues have been in line with expectations. The first Bespak autoinjector programme, for Dr Reddys Laboratories, is awaiting FDA approval which is anticipated in the late summer of 2010. The second major autoinjector programme, for an undisclosed major Pharma company, has made good progress and filing is expected towards the end of 2010 for a 2011 launch. The third programme, in collaboration with Catalent Pharma Solutions for Stallergenes, has made good progress in stability trials and is expected to file for approval in 2011.

King Systems Division

King Systems is a leading US manufacturer of medical devices used by anaesthetists and emergency practitioners to establish, manage and maintain patient airways: our products are used in around 10 million procedures every year. Products include anaesthesia circuits, masks, breathing bags, laryngeal tubes and visualisation devices.

King Systems delivered revenue growth of 1% to $65.7m in the past year despite a challenging US hospital market and operational difficulties experienced in the third quarter. Operating profits before special items fell to $7.2m, reflecting both significant investment in R&D, which is fully expensed when incurred, and in the implementation of the manufacturing transformation programme. Underlying gross margins rose over the period, reflecting a $1m gain from the early stages of the transformation and $0.5m from the continuous improvement programme.

The US domestic market endured a difficult calendar 2009, with a sharp fall in elective surgeries depressing the entire US hospital market. King Systems performed reasonably well in this context, with consumption data showing consistent slight growth on prior year, although this did not translate fully into revenue due to the operational issues reported on below. Encouraging order intake in early 2010 suggests that we can look for a modest improvement in the US hospital market this year.

We reported in March 2010 that during the third quarter a reorganisation of plant processes and equipment layout at the main Noblesville facility had caused some disruption and loss of production while additional air handling equipment was installed on the circuit assembly lines. King Systems responded quickly, adding extra labour to increase production capacity and where necessary air freighting product direct to customers. Production levels have now returned to normal.

The manufacturing transformation programme has reached the end of its first year on track to deliver $5m of annualised savings by April 2012 as we previously set out. Savings of $1m per annum have now been achieved. The product range has been rationalised and the main Noblesville facility reorganised in order to improve product flow and prepare for the installation of automated production lines. The main circuit and mask automation lines have been designed and orders placed with capital equipment suppliers. These will be built over the course of this year and will be installed and commissioned in early 2011.

King Systems has also significantly increased its R&D expenditure during 2009/10 as planned, with investment tripling over the period. Encouraging progress has been made in developing a platform product scheduled for launch in late 2010. Further smaller product launches have been made and will be made over the coming months, further adding to the organic sales growth of the Division.

Board and management changes

Having successfully delivered The Medical House acquisition, Paul Boughton resigned from the Board after five years as Group Corporate Development Director. We wish him well in the future. The Executive team was completed this year with three important appointments. In November 2009, John Slater joined as Group Legal Counsel and Company Secretary, having previously held similar roles at Celltech Group plc and Vernalis plc. Nick Higgins joined in January 2010 as Director of Corporate Development. Nick has a wealth of experience of transactions in the healthcare industry, having previously been CEO of Intercytex Group plc and prior to that Nick spent eleven years as Chief Business Officer of Acambis plc. Finally, Keyvan Djamarani rejoined the Group on 1 May 2010 as Director of Group Operations, with the remit to drive an optimised global manufacturing footprint and to deliver the transformation programme at King Systems. All three are members of the Group Executive Committee.

Financial review

Revenue from products and services in 2009/10 fell by 1.5% to £118.6m (2009: £120.3m). The reduction was due mainly to destocking of MDI valves and a reduction in income from a key Bespak contract that was extended on less favourable terms in February 2009. Bespak revenues fell by 4.3% to £77.5m, a fall of 5% excluding revenue from The Medical House acquisition. Revenue in King Systems grew by 4.5% to £41.1m (1.3% at constant exchange rate).

Operating profit before special items fell 1% to £18.7m. TMH contributed a loss of £0.7m following the acquisition, which includes some costs of integration. Like-for-like operating profit before special items excluding TMH therefore rose by 3% to £19.4m. Bespak contributed an operating profit before special items of £14.1m, up 5% on prior year despite reduced revenues and acquired losses. Bespak’s operating margin of 18.2%, was significantly up from 16.6% last year and from 15.1% in 2008. King Systems contributed an operating profit before special items of £4.6m, with an operating margin of 11.1% (2009: 13.7%). The lower margin was a result of planned investment both in increased R&D and in the transformation programme: gross margins actually rose during the year. We are therefore confident that, although the decline in King Systems’ margins is disappointing, they will rise again as increased volumes and reduced costs feed through in the coming year.

Profit before tax and special items fell by 5.5% to £16.9m (2009: £17.9m), but was at the top end of expectations. The fall in profit was largely driven by the economic environment, finance income fell by £0.6m as the interest we received on our cash deposits fell from an average rate of 6% in the previous year to less than 1%. At the same time, the non-cash IAS19 pension charge arising from the Company’s pension deficit rose by £0.4m as a result of an increasing deficit attributable to the volatile financial markets.

Profit before tax of £10.5m was 12.5% down on the prior period. Profit after tax and special items increased by 6% to £8.1m. Basic earnings per share therefore increased by 6% to 27.8p while adjusted basic earnings per share fell by 6% to 42.5p.

The taxation charge for the year was £2.4m. The underlying tax charge of £4.6m reflected a rate of 27.2% (2009: 27.1%), considerably lower than anticipated after several longstanding tax matters worth around £0.5m were resolved in our favour during the year.

The Board is pleased to be able to recommend a maintained final dividend per share of 12.1p (2009: 12.1p) such that the total dividend for the period amounts to 19.1p (2009: 19.1p). The final dividend will be paid on 22 October 2010 to shareholders on the register on 24 September 2010. Dividend cover, based on earnings before special items, was 2.2 times (2009: 2.4 times). At the 30 April 2010 share price of 365p this represented a yield of 5.2%.

Special items of £6.4m included £2.4m of continuing amortisation of intangible assets following the acquisition of King Systems in 2005 and TMH in 2009 and £4.0m relating to the transformation programme. The transformation programme has already removed over £2.6m of costs from the business, and in total the programme is expected to remove over £7m per annum of cost across the two Divisions by April 2012. The restructuring charges were higher than previously forecast in the 2009/10 year because some programmes were pulled forward from 2010/11, because of additional disruption costs during the King Systems transformation and because some additional costs were taken in Bespak relating to additional restructuring and the integration of TMH. Overall the three year programme cost has increased from £8.0m to £9.6m but will deliver an additional £2m of annual savings.

In November 2009, Consort Medical plc completed the acquisition of TMH and has been consolidated from that date. A number of significant accounting policy changes were made upon acquisition to reflect the more prudent policies of Consort Medical. In the six months of ownership by Consort Medical, the business made a loss of £0.7m, around half of which relates to integration costs. The main income is to be derived from royalties and profit share once the devices in development are launched to the market. With one device awaiting FDA approval, and two further devices expected to launch in 2011, management continues to expect that the business will be accretive in the next financial year as originally forecast. Now that the business is fully integrated and rebranded as Bespak Injectables, we will continue reporting its revenues separately from the Respiratory business although only one consolidated operating profit number will be reported as the two businesses are run by an integrated management team in a single operating segment.

The Group’s Divisions are strongly cash-generative. EBITDA was £21.6m (2009: £22.0m) and cash generated from continuing operations was £21.1m (2009: £23.1m). Capital expenditure of £5.9m was slightly below the previous period (2009: £8.4m). The majority of capital expenditure was at King Systems to support the automation programme. Net debt increased by £14.3m to £33.2m (2009: £18.9m) due to the acquisition of TMH.

In April 2010, the Group refinanced its principal facilities with the Royal Bank of Scotland (RBS) and introduced HSBC as a new relationship bank. In order to eliminate the risk of volatile currency movements affecting our headroom we have split our main facilities into two revolving credit facilities (RCFs) and one sterling term loan. The first RCF is for $56m, against which we had drawn $48m as at 30 April 2010. The second RCF is for £25m, against which nothing had been drawn at year end and which also acted to guarantee the £5.6m of loan notes issued in respect of the acquisition of TMH. The majority of these loan notes were subsequently redeemed in May 2010. An additional £10m term loan has been established which will commence amortisation on 1 July 2011. All of these facilities will expire in October 2013. Margins are variable with a cost of between two and three percent over LIBOR depending upon the level of net debt prevailing at the time. A non-utilisation fee of half the margin is applicable to unused headroom and arrangement fees of around 1.7% (including advisors fees) are to be amortised over the next three years. The Group has maintained its existing US dollar term loan of $5m with RBS, which is being repaid in instalments to finish on 21 December 2010. The Group additionally maintains levels of sterling cash sufficient to meet tax and dividend obligations and to be a reserve in case of an adverse event. These funds are invested with a range of reputable financial institutions approved by the Board.

Gearing at 30 April 2010 was 31% (2009: 20%) and the Group remains comfortably within both its headroom and its covenants. Taking into account the cash balances available, the total headroom at the period end was £42m (2009: £32m).

The Group monitors its foreign currency exposures carefully and seeks to mitigate all material transactional exposures. The Group currently has low exposure to movements in the euro and only a modest exposure to US dollar movements. Where necessary we buy or sell forward currency to protect current period transactions. The Group has a translational exposure with its King Systems Division which is to some extent mitigated by maintaining borrowings in US dollars.

Bespak operates a defined benefit pension scheme in the UK that is closed to new employees, who are eligible to join a defined contribution pension scheme. As at 30 April 2010, the deficit was £13.3m compared with £12.1m as at 30 April 2009. The movement was primarily as a result of gross liabilities increasing to £70m due to declining discount rates, offset by a recovery in asset values. The Company continues to contribute £2.9m annually to reduce the deficit.

The Group considers effective risk management to be a high priority. We are pleased to report that the Group incurred no material financial or business losses despite the riskier economic and business environment.


Consort has delivered a strong performance in a challenging year with a 3% rise in like-for-like operating profit before special items. Our continued investment in organic growth opportunities is expected to lead to new product launches later in 2010 and our cost reduction initiatives are ahead of schedule. We have been delighted with the Bespak Injectables acquisition and have been encouraged by the considerable interest shown by global pharma companies in Bespak’s enhanced product capabilities. Overall, we are confident of our prospects for the year ahead.

To view the consolidated income statement PDF, click here

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