Preliminary Results

Consort Medical plc achieves good results in a tough market

Consort Medical plc (LSE: CSRT), a leader in drug delivery and device technologies, today announces results for the year ended 30 April 2009.


  • Like-for-like revenues of ongoing products and services rose by 6.9% to £120.3m (2008 re-presented*: £112.6m).Revenues including discontinued products fell 5.2%
  • Profit before tax and special items rose 1.5% to £17.9m (2008 re-presented: £17.6m)
  • Profit before tax up 186% at £12.0m (2008 re-presented: £4.2m)
  • Adjusted earnings per share up 1% at 45.1p (2008 re-presented: 44.7p)
  • Basic earnings per share up by 182% to 26.2p (2008 re-presented: 9.3p)
  • Final dividend maintained at 12.1p per share (2008: 12.1p per share)
  • Further strengthening of the senior management team
  • Announcement today of restructuring and investment programme to transform King Systems’ manufacturing efficiencies and to raise margins in both Divisions, saving £5m cost per annum over three years

Jon Glenn, Chief Executive Officer, commented:

I am very pleased with Consort Medical’s performance this year. We have increased like-for-like revenues and profit and we have maintained our final dividend despite a challenging market. Bespak and King Systems are both performing well and we are today announcing an investment programme that will help us increase margins across both these business. I am confident that this programme will give our newly strengthened management team the platform to deliver improved products to patients and drive value for shareholders.

* Note that prior year comparative numbers have been re-presented to consolidate the income statement of Integrated Aluminium Components Ltd (IAC Ltd), a component manufacturing subsidiary for Bespak Division, which was previously held for sale.


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

Jonathan Glenn, Chief Executive Officer

Toby Woolrych, Group Finance Director

Brunswick – Tel: +44 (0) 20 7404 5959

Jon Coles/Justine McIlroy

Consort Medical plc is a leader in medical devices for drug delivery and device technologies.The Group develops drug delivery systems for the pharmaceutical industry and disposable airway management products for critical care settings in hospitals. 300m people around the world have asthma or Chronic Obstructive Pulmonary Disease (COPD) and a third of their inhaled medication is delivered by a Bespak device every day.

Consort Medical develops and manufactures metered dose inhaler valves, actuators, compliance aids, dry powder devices, disposable facemasks, breathing circuits and laryngeal tubes. The Group has facilities in King’s Lynn and Hemel Hempstead in the UK, Indianapolis, Indiana and Kent, Ohio in the US.Consort Medical is a public company quoted on the full list of the London Stock Exchange (LSE: CSRT).

Consort Medical plc

Joint Chairman and Chief Executive’s Review

We are pleased to be able to report that Consort Medical has delivered a good set of results in challenging markets.Consort Medical’s businesses possess strong franchises and profitable platforms, which will underpin a range of opportunities for organic growth over the medium term.

Summary of the year

The Group entered the year still adjusting to the changes required following Pfizer’s decision to withdraw the Exubera delivery device for inhaled insulin from the market. An extensive cost reduction and site closure programme successfully delivered significant cost savings on time. As a result, we are pleased to report that Consort Medical exceeded its target of maintaining level earnings and increased profit before tax and special items by 1.5% to £17.9m.Profit after tax excluding special items rose 3% to £13.0m and adjusted earnings per share increased by 1% to 45.1p. Including special items, profit after tax rose 188% to £7.6m and earnings per share by 182% to 26.2p. This was achieved in the face of challenging market conditions for both businesses, with revenues down 5%.Like for like revenues increased 6.9%.

Bespak performed particularly well in a period of change, increasing margins from 15.1% to 16.6%: though operating profits fell 6% to £13.5m due to the Exubera impact. King Systems had a challenging year and earnings fell slightly in dollar terms to $8.5m after a weak first half.Second half trading was stronger, as forecast, and margins returned to historic levels. Group cash flows continue to be strong with an EBITDA of £22.0m (2008 re-presented: £21.1m) and borrowings remain tightly managed and are below one times EBITDA. The company has low leverage and is well within all its banking covenants. This financial strength will be used to help us to deliver our future growth plans.


Consort Medical is a healthcare company focused on medical device technologies for drug delivery and management of patient airways. Our strategy moving forward 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 exceptional capabilities in drug delivery and device technologies. We will also continue to manage costs aggressively in order to maintain and increase margins in the current challenging economic environment, whilst acknowledging that we must deliver sales growth in the medium term in order to successfully develop the business and provide an adequate return to our shareholders.

Although Bespak and King Systems are performing well and are profitable, their markets, both within the respiratory and anaesthesia sectors, are relatively mature. We are seeking opportunities both to increase our share of the value chain in our existing markets and to leverage the strengths of our business into higher growth areas. Bespak has exceptional capabilities in high volume precision manufacture in tightly regulated markets. These competencies can be employed in related healthcare segments, or can be supplemented by adjusting the business model over time to seek a larger part of the value chain. King Systems also has opportunities to broaden its product offering through its quality US sales force, and additionally to expand internationally. We have today announced our investment programme which is expected to protect margins in Bespak and significantly increase them in King Systems, through investments in automation and other efficiency measures. The exceptional cost of £8m will be taken over the next three years and, when complete, will deliver significant annual cost reductions of over £5m per annum in addition to other commercial benefits.

Very few, if any, businesses are immune from the current economic environment. We have continued to take cost out of the business, but have increased our investment to ensure we are well positioned to capitalise on opportunities when markets start to recover. We are laying the foundations for growth by investing our strong cash flow in additional innovation, product development and targeting of new markets.King Systems will increase its R&D expenditure in 2009/10 and will improve its rate of new product introduction. Bespak has several important products entering Phase III clinical trials or final customer trials and we are confident that they will deliver new opportunities for growth.

Review of the year

Bespak Division

Bespak is a leading drug delivery device manufacturer which has many of the world’s top pharmaceutical companies as its largest customers. It currently focuses on the inhalation market, with devices primarily used to treat asthma and COPD (Chronic Obstructive Pulmonary Disease). Over 300 million people worldwide have been diagnosed with these diseases and Bespak devices deliver over one third of their inhaled medication. Bespak moulds or sources over 3 billion parts a year in making 500 million products, from valves and actuators to complete devices.

We have this year integrated IAC Ltd, a subsidiary that makes components for the valve business, into the Bespak Division following the decision not to sell IAC Ltd in the current market environment. IAC Ltd was last year reported as an asset held for sale. This means that the prior period income statement has been re-presented in order that the trading performance of IAC Ltd is reflected for comparative purposes.

Bespak maintained its strong market position in this period. Underlying revenue, excluding Exubera and other discontinued products, remained flat at £81.2m, reflecting the final withdrawal of CFC propellant inhalers from the market and customer destocking due to the macroeconomic environment. Strong cost reduction initiatives, including the closure of the Milton Keynes site, meant that margins increased from 15.1% to 16.6%. Operating profit for the period of £13.5m was just 6% below prior year, despite the loss of Exubera, one of its largest products, in the second half of 2007/08.

Our valve customers have broadly maintained market share in the core US albuterol market despite increasing competition. Our valve capacity expansion programme was completed during the year and we now have capacity in place sufficient to meet our forecasts for the next five years.

Device services continued to perform well, with revenue growing from £23.5m to £25.6m (excluding discontinued products). A new product for one of the world’s largest pharma companies was launched during the period, which has the potential to generate mid single digit millions of pounds revenue. In March 2009 we announced that a major contract had been extended by a number of years. We are delighted to have secured the ongoing commitment of this core customer, but the impact of the revised terms will place additional margin pressure on the business over the next two financial years. We are managing the impact of this through cost reduction and manufacturing efficiencies. During the period we also completed the construction of a new facility to house one of our device services programmes, partnered with one of the world’s largest pharma companies, and were pleased to win a further development contract with another key global pharmaceutical customer.

Bespak made good progress during the period with its dose counter technology for metered dose inhaler systems (MDIs). The first dose counters entered into clinical trials with a major customer. In order to meet increasing volumes for clinical trial activities, we have commissioned a pilot line for dose counters capable of meeting demand for the next two years. Our dose counter programmes are subject to the clinical timelines of our customers and inevitably some of our customers’ programmes have slipped during the year. New valve technologies have also seen encouraging progress. The primeless valve has entered into phase III clinical trials and samples of the new valve targeted at emerging markets are also on customer trial.

In closing the Milton Keynes facility on time and on budget, the Bespak division demonstrated its ability to deliver significant change without disruption to operations.The Milton Keynes closure saved the business over £7m last year. The ongoing continuous improvement manufacturing efficiency programme again delivered savings of over £0.7m for the division. Bespak has instigated an additional organisational restructuring to ensure that the business efficiently weathers the current global economic environment and also that it is positioned for the upturn. The savings from this programme are expected to largely offset the margin pressures experienced by the division and will allow continued investment in R&D and new commercial activities.

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.

Total sales grew by 1% at constant exchange rates (23% at actual exchange rates) in a market that is believed to have contracted, at least temporarily, due to the current global economic crisis.The patented Flex 2 circuit product recovered strongly from the impact of the first half recall to show strong growth over the period and achieved record volumes in the second half.Mask sales remained consistent and there was strong growth, from a low base, in the Division’s unique laryngeal tube devices.International sales grew by 6% in the year, with particularly strong growth in Europe, rising to a total of 11% of King Systems’ total sales.

Division margins were reduced to 8% in the first half but recovered to historic levels of over 14% in the second half. Material costs rose sharply during 2008 but fell back to 2007 levels by period end.

During the past year King Systems launched new products. The King Systems Laryngeal Airway Device (LAD) was launched in November, along with two variants of the Airtraq disposable visualisation system. In March 2009, the company launched its own HME filter in order to bring an important product line in house. Internationally, King has continued to expand into new markets via distribution agreements in China, Turkey and Egypt.

King Systems has an active continuous improvement programme which last year saved nearly $1m. We put in place improved sourcing capabilities that are expected to save over $0.5m next year. Emergent Respiratory Products was closed in April 2009, Consort Medical having largely impaired its investment in this associate company in the previous year. Revenues were growing at a disappointing rate and the management of King Systems decided that resources could be focused on higher growth opportunities. The impact in the year ended 30 April 2009 was £0.1m. However, the most important restructuring activity has been the detailed manufacturing strategic review which we concluded this year and which is expected to deliver significant benefits.

Restructuring Programme

The manufacturing strategic review at King Systems has identified an extensive programme of investment in automation that will revolutionise the business’ operational capability. Over three years the business will automate its key assembly operations, allowing King Systems to reduce headcount, increase capacity, improve quality, lower lead times and generate cost savings that will fund investment to open new market segments and protect existing ones.Once complete, the investment is expected to save £3.5m ($5.3m) of cost per annum and King System’s margins are forecast to rise by at least three percentage points. Capital expenditure on the automation programme will total around £6.6m over three years. This is not expected to lead to a significant increase in Group capital expenditure as Bespak’s capital needs are forecast to reduce. Additional cost reduction activities across the rest of the business will save a further £1.5m per annum, leading to a total cost reduction by 2011/12 of £5m per annum. The £8m cost of the restructuring will be spread over three years, with an initial charge in 2008/09 of £3.9m.

Board and management changes

Dr Peter Fellner was appointed Chairman on 1 May 2009, succeeding John Robinson who served as Consort Medical’s Chairman for the past five years. We would like, on behalf of the Board, to thank John for his outstanding leadership during a period which encompassed a number of significant challenges, particularly the withdrawal of Exubera. George Kennedy CBE, already a Non-executive Director, was appointed Senior Independent Director and Chairman of the Remuneration Committee on 1 May 2009. George has an outstanding record in the medical technology sector, and we welcome his new appointment. We are also pleased to welcome Dr. William Jenkins following his recent appointment as a Non-executive Director. William has exceptional experience in pharmaceutical innovation and new product development. He was formerly Head of Worldwide Clinical Development and Regulatory Affairs for Novartis Pharma AG, and previously Head of Worldwide Clinical Research at Glaxo. William has joined the Remuneration and Nominations Committees. In addition, in October 2008 we appointed Toby Woolrych as Group Finance Director.Toby has wide and relevant experience with Acta SpA and Johnson Matthey plc, and we welcome him to the Board.

In October Don Dumoulin joined us as Chief Executive Officer, King Systems Division. Don previously worked for several major healthcare companies, including running Roche’s North American diabetes business, and held senior sales and marketing roles with SmithKline Beecham and Procter and Gamble. In January Joe Barry was appointed Managing Director, Bespak Division, having previously run the King Systems international business and delivered significant growth in this business segment. Joe previously gained broad multinational experience in a wide range of roles at GE, Dow Chemical and US Can. The executive team was also strengthened with the appointment of Lisa King as Group Director of HR. Lisa has over twenty years of experience in HR with large companies including Prudential and UCB.

Financial review

Revenue from products and services in 2008/09 fell, as expected, by 5.2% to £120.3m (2008 re-presented: £126.9m). The reduction was almost entirely due to the loss of Exubera. Underlying revenue in Bespak grew by 0.4% to £81.2m and revenue in King Systems grew by 23.4% to £39.4m (1% at CER).

Operating profit before special items fell 1% to £18.9m. Bespak contributed an operating profit of £13.5m, with an operating margin of 16.6%, significantly up from 15.1% last year. Excluding IAC Ltd, the operating margin was slightly ahead of expectations at 18.7% (2008: 16.0%).King Systems contributed an operating profit of £5.4m, with an operating margin of 13.7% (2008: 14.9%). The lower margin was a result of higher material costs, a minor product recall and the termination costs of the division CEO, which were incurred mainly in the first half.

Profit before tax and special items increased 1.5% to £17.9m (2008 re-presented: £17.6m). Finance income increased to £0.8m, with cash deposits being locked in at high interest rates for most of the financial year. Finance expenses fell to £1.5m (2008: £1.9m) as lower interest rates on the Group’s US dollar borrowings more than offset the adverse translation effect. Other finance expense represented the non-cash IAS 19 pension charge arising from the company’s pension deficit, which is expected to rise again in 2009/10 as a result of an increasing deficit. Losses from associates reduced to £0.1m (2008: £0.4m) following the decision to close Emergent Respiratory Products (ERP).

Special items of £5.9m included £2.0m of continuing amortisation of intangible assets following the acquisition of King Systems in 2005 and £3.9m relating to the launch of the restructuring programme and additional asset impairments. Profit before tax of £12.0m was 186% up from £4.2m in the prior period.

Profit after tax but before special items increased by 3% to £13.0m (2008: £12.7m).Tax of £4.4m included a £1.4m charge relating to the abolition of Industrial Buildings Allowances, a non-cash adjustment. The underlying tax of £4.8m reflected a rate of 27.1% (2008: 27.9%). Profit after tax and special items increased by 188% to £7.6m.Basic earnings per share therefore increased by 182% to 26.2p and adjusted basic earnings per share increased by 1% to 45.1p.

The Board is recommending a maintained final dividend per share of 12.1p (2008: 12.1p) such that the total dividend for the year amounts to 19.1p (2008: 19.1p). The final dividend will be paid on 23 October 2009 to shareholders on the register on 25 September 2009. Dividend cover, based on earnings before special items, was 2.4 times (2008: 2.3 times).

The Group continued to maintain a strong balance sheet, with over £19m of cash and net debt (£19m) of just 0.9 times EBITDA £22.0m.Gross assets increased in the period largely due to the translation benefit on King Systems’ US assets, offset by an increase in the translation of our US dollar borrowings.

The pension deficit increased to £12.1m (2008: £7.8m) as asset values fell. Bespak has successfully completed a renegotiation of terms with the Bespak pension fund in which accrual rates have been reduced and the members’ contribution rates have increased. The Group’s cash contribution will remain the same but, with lower required contributions to current service, payments to reduce the deficit will be significantly increased. This will reduce both future risk and volatility to the scheme and the Group.

Following revaluation of the Milton Keynes site, the directors decided that it should be removed from being an asset held for sale.It has been transferred to the assets of Bespak Division where it will be maintained and used as an auxiliary warehouse until market conditions improve.

As described above, the directors decided to retain IAC Ltd, as an efficient sale process was not possible in the current environment. IAC Ltd was a loss-making manufacturer of key components for Bespak that the Group bought out of receivership in July 2007 in order to guarantee continuity of supply. Some investment was made to reduce losses in 2008/09.IAC Ltd contributed revenues of £6.6m (2008: £6.5m) and an operating loss before special items of £0.4m (2008: profit £0.1m).

The Group’s Divisions are strongly cash generative. EBITDA was £22.0m (2008: £21.1m) and cash generated from continuing operations was £23.1m (2008: £25.3m). Capital expenditure of £8.4m was slightly below the previous year (2008: £8.6m). The majority of capital expenditure related to the completion of capacity expansion at Bespak. Future capital expenditure is expected to be mainly at King Systems to support the automation programme. Loan repayments totalled £4.3m (2008: £3.5m) and pension deficit payments £1.6m (2008: £1.7m).

The Group’s borrowings are currently held in US dollars and qualify as an investment hedge against movements in the King Systems assets which they were used to acquire – hence all gains and losses are taken to exchange reserves within equity. At a constant currency, net debt fell by £3.6m to £10.1m (2008: £13.7m), but an adverse exchange impact on the closing debt of £8.8m led to the year end net debt of £18.9m. Both loan repayments and interest are met by US dollar income from King Systems and Bespak. The Group has a revolver facility with the Royal Bank of Scotland for £40m or $55m, whichever is higher, against which $44m has been drawn. This facility expires on 31 December 2010. The Group has a further US dollar term loan of $12.25m with the Royal Bank of Scotland which is being repaid in installments to finish on 31 December 2010. We have not sought to refinance these facilities as the interest payable on the revolver facility is advantageous to the rates currently available and we are confident that these levels of borrowing can be renegotiated nearer the time. The Group additionally maintains levels of sterling cash sufficient to meet tax and dividend obligations and to act as a reserve. These funds are invested with a range of reputable financial institutions approved by the Board.

Gearing at 30 April 2009 was 20% (2008: 16%) or less than 1x EBITDA 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 £32m (2008: £39.7m).


The Group’s strong cash flows and balance sheet mean that it is well positioned not only to withstand a recession but also to be able to invest in new organic or acquisitive opportunities which may become available.Market conditions, particularly in North America, remain challenging but new product flow and cost reductions throughout the organisation will assist in achieving growth in the coming years.

  • News
  • Case Studies
  • Pages
  • Blogs
  • Locations
  • Experts