Corin Group PLC - Final Results

RNS Number:5195S
Corin Group PLC
17 April 2008

17 April 2008

Corin Group PLC

Profits jump as Cormet is rolled out in USA

Corin Group PLC (LSE: CRG, "Corin" or "the Group"), a leading manufacturer and
supplier of orthopaedic devices, has today published preliminary results for the
year ended 31 December 2007.

Highlights

• Group sales on constant currency basis* up 35% to £38.5 million
(2006: £28.5 million)

• USA sales jump to £10.97 million (2006: £0.92 million)

• Reported sales £37.0 million (2006: £28.5 million)

• Underlying profit before tax**increased by 89% to £6.6 million
(2006:£3.5 million).

• Reported profit before tax increased by 17% to £4.1 million
(2006: £3.5 million).

• Underlying earnings per share** up 82% to 10.53 pence (2006: 5.80 pence)

• Reported earnings per share 6.49 pence (2006: 5.80 pence)

• Proposed final dividend of 0.9 pence, total for year 1.38 pence
(2006: 1.38 pence)

• Instrument sets distribution and surgeon training strong in Q4 2007

• Manufacturing capacity for continued rapid growth in place

• New products and product enhancements under development and being launched

* Constant currency is calculated by translating 2007 results at the average
exchange rates used for December 2006 results (see note 6)

** Before the exceptional cost relating to the departure of the CEO (see note 9)
and after adjusting to a constant currency basis*

Simon Hartley, Corin's Interim Chief Executive, said:

"Having increased inventories during the early part of 2007 and invested in our
manufacturing capabilities, we were able during the last quarter to rapidly grow
sales and build interest in Cormet in the USA, through Stryker, our distribution
partner. Distribution of instrument sets was strong and Stryker implemented a
substantial surgeon training programme. All of this resulted in a significant
jump in our financial performance.

"We have a number of exciting new products under development which will
strengthen our product range and will be launched around the world in 2008."

Enquiries:

Corin Group PLC
Graeme Hart, Chairman 01285 659 866
Simon Hartley, Interim Chief Executive

College Hill
Adrian Duffield 020 7457 2020

Overview

2007 proved to be a pivotal year for the Group with a number of key milestones
being achieved.

The global distribution strategy for Corin's proprietary products is now
beginning to deliver returns. Distinct and different distribution strategies
for the USA, Europe and Japan are being developed to enable the Group to exploit
its leading proprietary products worldwide. The Group also delivered a highly
creditable set of results showing strong growth in both sales and profitability.

Following the FDA approval for distribution of Cormet in the USA in July 2007,
Stryker, the Group's exclusive USA distribution partner for Cormet, purchased a
significant amount of instrumentation and product and also invested heavily in
surgeon training programmes. Implantations began in August and increased
steadily during the rest of the year.

In Japan, the co-marketing partner, Kobayashi, commenced distribution of Corin's
products in April 2007. Corin also continued to sell its devices in Japan
through its wholly owned subsidiary.

In April 2007 the Group announced an agreement with Stryker Canada for the
distribution of Uniglide, its mobile bearing uni-condylar knee.

Financial Results

Group sales in 2007 increased on a constant currency basis by 35% to £38.5
million (2006: £28.5 million) and by 30% to £37.0 million on an actual basis.

The high levels of instrumentation sales to Stryker in both the USA and Canada,
and Kobayashi in Japan, coupled with increased raw material costs and adverse
exchange rate movements, led to a reduction in gross margin from 68% to 63%.

Underlying profit before tax, before exceptional costs (£1.1 million) and after
adjusting to a constant currency basis (£1.4 million), increased by 89% to £6.6
million. The exceptional costs relate to the departure of Ian Paling as Chief
Executive and the recruitment of Peter Huntley, his successor. Reported profit
before tax increased by 17% to £4.1 million (2006: £3.5million).

Underlying earnings per share, before exceptional items (as set out in note 9)
on a constant currency basis, were up 82% to 10.53 pence (2006: 5.80 pence) and
reported earnings per share were 6.49 pence (2006: 5.80 pence).

The Board is recommending a final dividend of 0.9 pence per share making a full
year dividend of 1.38 pence per share (2006: 1.38 pence per share).

The increase in the Group's level of business has led to a necessary increase in
working capital with the investment in inventories to service Stryker in the USA
contributing to an increase of £2.5 million. The Group continued to generate
cash from operations even with this significant increase in inventories.

Capital expenditure of £4.4 million during the year resulted in net borrowings
of £8.0 million at 31 December 2007, compared to net borrowings of £3.5 million
at 31 December 2006.

The Group's working capital requirements remain significant as a consequence of
the implementation of Corin's strategy to establishing direct sales subsidiaries
in the major orthopaedic markets and the need to ensure that sufficient
instrumentation and product will be available to supply Stryker's sales network
in the USA.

During 2007 the Group invested £3.7 million in tangible fixed assets, including
£2.1 million in consigned surgical instrumentation. The investment in plant and
machinery reflects the investment programme necessary to ensure that the Group
is able to take advantage of market opportunities both in the USA and elsewhere.

Operating Review

UK

Sales for the year were up 2.4% to £8.9 million (2006: £8.7 million). Corin
believes this level of growth is broadly in line with the overall market which
saw increasing competition and some price degradation in the key product areas
as the major orthopaedic players have embraced Metal on Metal (MOM) hip
technology.

Overall, sales of Corin's MOM hip devices declined by 8.6% due to pricing
pressures and the lack of a competitive cementless hip stem which held back
sales of Optimom. The Group's new cementless stem, Metafix, has now been
launched in the UK and enhances the MOM offering.

Sales of the mobile bearing knees were flat as the gains made by the Uniglide,
mobile bearing unicondylar knee, were offset by the reduction in sales of the
Rotaglide+, mobile bearing total knee. The instrumentation platform for the
Rotaglide+ is seen as dated by some surgeons and is currently being improved.

Continental Europe

Sales in Continental Europe were £9.0 million (2006: £9.9 million). This decline
was largely due to the loss of business in France, Switzerland and Croatia. The
German market continues to be difficult with purchasing groups becoming
increasingly powerful. However, sales increased in Germany during the second
half of 2007 when compared to the second half of 2006 resulting in sales for the
year down only 2% to £4.87 million (2006: £4.95 million).

The Group is currently developing a "Mini Stem" in association with a number of
German surgeons which will be launched in Germany in the second half of 2008 and
will enhance further Corin's philosophy of providing lifelong patient care.

Elsewhere in Europe sales were steady. Securing effective distribution in
France continues to be an important priority for the Board.

USA

The USA is the single largest market for orthopaedic devices, accounting for
almost 70% of global demand. Much of Corin's focus has been on achieving FDA
approval for the Group's key proprietary devices and on ensuring the Group has
the right distribution partners.

In July 2007, the Group's efforts to combine a major distribution partner with a
FDA approval for Cormet were realised. This approval, which followed a positive
FDA Advisory Panel vote in February, was the culmination of a US based clinical
trial, which commenced in 2001, and which has provided strong clinical data in
support of Cormet. In November, the FDA approved the sale of intermediate sizes
for Cormet which improves the competitiveness of the device as the size range
now has 2 mm increments rather than the original 4 mm.

Following FDA approval of Cormet in July, Corin shipped a significant number of
Cormet instrument sets and associated implants to Stryker prior to the end of
December 2007. As a result, sales in the USA were £10.97 million (2006: £0.92
million). Stryker has committed considerable resources to training both surgeons
and field based sales representatives and the number of surgeons trained in 2007
was ahead of Corin's initial estimates.

In 2004, an Advisory panel to the FDA recommended the technologies of both total
and unicondylar mobile bearing knees for down classification, from Class 3 to
Class 2. This recommendation remains under consideration by the FDA and should
down classification occur, the Group would seek FDA approval for both the
Rotaglide+ and the Uniglide knees via a 510k approval route (the Class 2
approval process). The time scale for potential down classification is still
unclear.

In the second half of 2007, Corin made a submission to the FDA for the
commencement of an IDE clinical trial, the first step in the FDA approval
process for Class 3 products, for the Uniglide mobile bearing unicondylar knee.
It is anticipated that the first implantations under the trial will be carried
out in the second quarter of 2008. There is significant demand from US
orthopaedic surgeons to access this device and surgeon enrolment in an IDE will
be very beneficial in meeting this demand, as well as allowing evaluation of the
device in the USA.

Japan

Japan is the second largest orthopaedic market in the world. On a constant
currency basis, direct sales by Corin Japan were flat at £2.55 million (2006:
£2.55 million) despite government controlled reimbursement prices being reduced
significantly during both 2006 and 2007. Direct sales after currency movements
were £2.30 million.

The first half of 2007 saw the final part of the initial stocking order of both
instrumentation and product being delivered to Kobayashi, the Group's
co-marketing partner in Japan, who formally launched Corin products in the
second quarter of 2007.

During 2007, the Group increased its product development initiatives for the
Japanese market and expects to have a steady flow of new devices specifically
for the Asian markets over the next 18 months or so.

Rest of the World

In the other export markets the Group saw a reduction in turnover compared to
2006. In particular, the 2006 South American sales initiative where the
Venezuelan government contracted with Cuba for the supply of orthopaedic
implants for Venezuelan hospitals was not repeated in 2007. As a result, sales
in South America were £1.0 m (2006: £2.35m).

In Australia, sales continue to show growth as a result of a number of
initiatives, with the Lars ligament in particular becoming increasingly
important. Sales increased by 31% to £1.94 million (2006: £1.48 million).

Sales in South Africa were held back, due to payment issues with the Group's
main sub distributor, to £0.37 million (2006: £0.58 million). It is not
anticipated that sales will recover in this territory in the short term.

In China, the development of the sales infrastructure progressed well and as a
result, sales rose to £0.32 million (2006: £0.27 million). Further growth in
China is anticipated in 2008 as Corin further develop its sales infrastructure
and launch its proprietary products in this important market.

In April 2007 the Group announced another long term exclusive agreement with
Stryker, for distribution of the mobile bearing Uniglide knee in Canada. The
Uniglide knee already has regulatory approval in Canada and the Board is
confident that Uniglide will achieve a strong position in this important and
growing market. Implantations during 2007 were encouraging.

Global Distribution Strategy

The Group has developed specific distribution strategies for each major market.

In the USA, the strategy has been to obtain FDA approval for the key proprietary
devices and to sign long term distribution agreements with a major orthopaedic
company. For Cormet, the long term, exclusive distribution agreement with
Stryker has now begun and will enable the proprietary nature of this device to
be fully exploited in the USA, in order to deliver substantial shareholder
returns. The Group has a similar long term exclusive distribution agreement,
subject to FDA approval, for Uniglide.

In Japan, the Group's strategy has been to identify a high quality Japanese
company as a co-marketing partner, to stand alongside its existing wholly owned
distributor. The appointment of Kobayashi as the Group's Japanese partner was
announced in September 2006, and Corin products were launched in April 2007.
Although initial progress has been slower than anticipated Kobayashi is
developing surgeon interest both in metal on metal hips and mobile bearing knees
and a number of product development initiatives specifically for the Japanese
market are being pursued.

The Group's distribution strategy in the principal markets in Europe is aimed at
developing direct sales forces, supported by a local technical infrastructure,
as is the case in both the UK and Germany. The Board considers selling through
independent distributors in Europe to be an interim strategy, prior to locating
appropriate European acquisition targets, which would provide national
distribution in their own European territory and potentially provide
complementary product opportunities.

Product Development

The Group has continued to strengthen its research and development
infrastructure by investing in high quality bio-mechanical engineering graduates
and by securing consultancy contracts with high profile orthopaedic surgeons,
both in the UK and Germany.

The product development programme for the Metafix, the new cementless stem,
progressed well and has been successfully launched in the UK during the first
quarter of 2008. The Metafix will be sold worldwide and is due to be launched
in Germany and Australia during the second quarter of 2008. Good progress was
also made with the Mini Stem development project and it is anticipated that this
device will be launched in Germany during the second half of 2008. Both of
these stems will primarily be used with Optimom, the Group's large diameter
metal on metal articulation. A new cementless acetabular cup for both ceramic
on ceramic and metal on polyethylene articulation is currently under development
and will be sold with both the Metafix and the Mini Stem.

As part of the Group's continued investment in metal on metal technology, the
size range of both Optimom and Cormet was extended during 2007 to allow for
greater bone conservation. Both these devices will substantially extend the
range of indications that can be treated using the Group's large diameter metal
on metal articulation devices.

Development of a new mobile bearing ankle, the Zenith, was completed during
2007. This device builds upon technology inherited from the Group's German
operation and may offer an attractive alternative to the commonly used solution
of arthrodesis (fusion of the ankle) when treating arthritis of this joint.
Initial implantations were carried out in the UK during the second half of 2007
and implantations began in Germany during the first quarter of 2008.

The Board continues to believe that navigation will become more and more
important in hip and knee surgery, and particularly when made available in
conjunction with conservative treatment options, as in Cormet and Uniglide.
During 2007, Corin further extended its equity participation in The Acrobot
Company. Trials using the Acrobot Planner and WayFinder technologies for
planning and CT based navigation of Cormet have been encouraging. During the
second half of 2007, Corin also signed exploitation agreements with BrainLab,
probably the leading orthopaedic navigation specialist worldwide, for both
Cormet and Uniglide. These agreements give Corin access to an open platform
navigation application for these two leading products.

Several projects are in process with the Universities of Sheffield, Birmingham,
London Imperial, and Bristol in order to evaluate different material and coating
technologies for articulating surfaces and new methods of manufacturing novel
implants. Projects are also underway to evaluate different coating technologies
for the bone apposition surfaces.

Manufacturing

Manufacturing Cormet instrumentation and product for Stryker in the USA has been
and will continue to be a major challenge for Corin. In anticipation of this,
investment in both the necessary capital equipment and in enhancing the Group's
infrastructure particularly in the manufacturing, regulatory and research and
development areas has been significant. In addition, to ensure security of
supply, dual sourcing of raw materials and subcontract processes continues to be
the norm. The Group anticipates that all of these actions together with the
build up of instrumentation and product inventories, means that its existing
manufacturing capacity will be sufficient to satisfy the forecast demand for the
foreseeable future.

Current Trading and Outlook

FDA approval for Cormet in July 2007 was probably the most important event in
Corin's history. The experience with Cormet outside of the USA gives the Board
considerable confidence that MOM resurfacing of the hip will be keenly embraced
by USA surgeons. In Cormet, Corin has the device with the longest clinical
history, excellent surgical instrumentation and, in Stryker, a very strong US
partner with first class sales and training capabilities.

Following a strong start after the launch of Cormet in 2007 Stryker's surgeon
training programme during the first quarter of 2008 was slower than anticipated
for a number of reasons. Although these are now substantially resolved the
delays in the training programme have led to some shipments of instrumentation
and product being rescheduled. It is too early to say what impact the delays in
Stryker's training programme will have for the full year as a whole. However,
the potential for Cormet, given its positioning in the world's largest
orthopaedic market and commercial fundamentals remains substantial.

The Board is confident of achieving considerable success with Cormet in the USA,
as the Stryker sales effort and training programme gains momentum. With a well
developed international distribution strategy, new product flow, some innovative
research activities and growing demand from young active patients worldwide,
Corin is well placed to deliver significant sales growth in the future. Whilst
still early in the financial year, the Group's overall performance remains in
line with the Board's expectations.

Consolidated Income Statement
For the year ended 31 December 2007

Note 2007 2007 2007 2006
Before Exceptional Total
Exceptional Items Items
£'000 £'000 £'000 £'000

Revenue 2 36,993 - 36,993 28,545
Cost of sales (13,859) - (13,859) (9,092)

Gross profit 23,134 - 23,134 19,453
Distribution costs (825) - (825) (928)
Administrative expenses 9 (16,721) (1,066) (17,787) (14,787)

Operating profit 5,588 (1,066) 4,522 3,738
Finance costs (506) - (506) (234)
Finance income 68 - 68 24

Profit before tax 2 5,150 (1,066) 4,084 3,528
Taxation 3 (1,244) (1,062)

Profit for the financial year 2,840 2,466
Attributable to:
Equity holders of parent company 2,804 2,474
Minority interests 36 (8)

2,840 2,466
Earnings per share
- Basic 5 6.49p 5.80p
- Diluted 5 6.48p 5.79p

Consolidated Balance Sheet
At 31 December 2007

2007 2006
Note £'000 £'000
Assets
Non-current assets
Property, plant and equipment 7,137 5,303
Goodwill 1,471 1,471
Other intangible assets 2,285 1,897
Investments 250 100
Deferred tax assets 1,984 910

Total non-current assets 13,127 9,681

Current assets
Inventories 17,363 14,895
Trade and other receivables 13,256 7,748
Cash and cash equivalents 7 1,212 1,925

Total current assets 31,831 24,568

Total assets 2 44,958 34,249

Equity and liabilities
Equity attributable to equity holders of the parent
Share capital 8 1,036 1,032
Share premium account 8 14,394 14,180
Employee share scheme reserve 8 3,582 1,743
Own shares held reserve 8 (10) (10)
Translation reserve 8 (547) (1,128)
Retained earnings 8 9,697 7,464
28,152 23,281
Minority interest 8 73 37

Total equity 28,225 23,318

Non-current liabilities
Long-term borrowings 6,828 4,545
Deferred tax liabilities 198 53
Provisions 159 274

Total non-current liabilities 7,185 4,872

Current liabilities
Trade and other payables 5,766 4,365
Current tax payable 1,349 848
Short-term borrowings 2,433 846

Total current liabilities 9,548 6,059

Total liabilities 2 16,733 10,931

Total equity and liabilities 44,958 34,249

Consolidated Cash Flow Statement
For the year ended 31 December 2007

2007 2006
Note £'000 £'000
Cash flows from operating activities
Profit before tax 4,084 3,528
Adjustments for:
Depreciation and amortisation 2,429 1,746
Net interest expense 438 210
Share based payments 934 504
Negative goodwill - (143)
Loss on disposal of plant, property and equipment 213 113
Increase in inventories (2,438) (3,333)
Increase in trade and other receivables (5,392) (1,330)
Increase in trade and other payables 1,139 564

Cash generated from operations 1,407 1,859
Interest paid (506) (234)
Taxes paid (772) (1,029)

Net cash flows from operating activities 129 596

Cash flows from investing activities
Interest received 68 24
Acquisitions (150) (481)
Proceeds from sale of fixed assets 78 57
Capital expenditure (4,393) (3,477)

Net cash used in investing activities (4,397) (3,877)

Cash flows from financing activities
Proceeds from issue of ordinary share capital (net of issues)
costs) 218 337
Proceeds from borrowings 4,370 3,436
Repayment of loans - (825)
Payment of finance lease liabilities (500) (319)
Dividends paid (571) (569)

Net cash received from financing activities 3,517 2,060

Net decrease in cash and cash equivalents (751) (1,221)

Cash and cash equivalents at the beginning of the year 1,925 3,308
Exchange adjustments 38 (162)

Cash and cash equivalents at the end of the year 7 1,212 1,925

Consolidated Statement of Recognised Income and Expense
For the year ended 31 December 2007

2007 2006
£'000 £'000

Exchange differences on translation of foreign 581 (638)
currency net investments
Tax on items taken directly to equity 905 475

Net expense recognised directly in equity 1,486 (163)
Profit for the year 2,840 2,466

Total recognised income and expense for the year 4,326 2,303

Attributable to:
Equity holders of the Parent Company 4,290 2,311
Minority interests 36 (8)

4,326 2,303

2,303

Notes to the Financial Statements
For the year ended 31 December 2007

1. Basis of preparation

These financial statements have been prepared in accordance with International
Financial Reporting Standards, International Accounting Standards and
Interpretations (collectively IFRS) issued by the International Accounting
Standards Board (IASB) as adopted by the European Union and with those parts of
the Companies Act 1985 applicable to companies preparing their accounts under
IFRS.

The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 2007 or 2006, but is derived
from those accounts. Statutory accounts for 2006 have been delivered to the
Registrar of Companies and those for 2007 will be delivered following the
company's annual general meeting. The auditors have reported on those accounts;
their reports were unqualified, did not include references to any matters to
which the auditors drew attention by way of emphasis without qualifying their
reports and did not contain statements under Section 237(2) or (3) of the
Companies Act 1985.

2. Segmental Information

For management purposes, the Group is organised into geographical segments which
are based on the location of assets. These geographical segments are the basis
on which the Group reports its primary information.

2007 2006
£'000 £'000
Revenue by location of assets
UK Operations 31,927 22,545
German Operations 4,871 5,163
Japan Operations 3,245 3,091
Other International Operations 3,195 3,652
43,238 34,451
Less Intercompany Sales
Germany (2,684) (2,792)
Japan (1,863) (1,648)
Other (1,698) (1,466)
36,993 28,545

2007 2006
£'000 £'000
Revenue by location of customer
UK 8,892 8,682
Germany 4,871 4,949
Japan 3,290 3,091
Europe (excluding Germany) 4,130 4,957
USA 10,972 925
Rest of World 4,838 5,941
36,993 28,545

Inter-company transfers are priced along the same lines as sales to external
customers, except that an appropriate discount is applied to encourage use of
group resources at a rate acceptable to local tax authorities. This policy was
applied consistently throughout the current and prior year.

All revenue is derived from the sales of orthopaedics goods.

2007 2006
£'000 £'000
Profit before taxation
UK Operations 4,352 3,084
German Operations (151) 115
Japan Operations 398 522
Other International Operations (515) (193)

4,084 3,528

2007 2006
£'000 £'000
Assets
UK Operations 32,164 23,331
German Operations 5,179 4,228
Japan Operations 2,965 3,206
Other International Operations 4,650 3,484

44,958 34,249

2007 2006
£'000 £'000
Liabilities
UK Operations 15,836 10,137
German Operations 282 54
Japan Operations 208 401
Other International Operations 407 339

16,733 10,931

2007 2006
£'000 £'000
Capital expenditure
UK Operations 2,229 2,152
German Operations 712 397
Japan Operations 208 66
Other International Operations 565 134

3,714 2,749

2007 2006
£'000 £'000
Depreciation and amortisation
UK Operations 1,426 1,071
German Operations 759 447
Japan Operations 84 55
Other International Operations 160 173

2,429 1,746

2007 2006
£'000 £'000
Non-cash expenses
UK Operations 476 345
Exceptional Items 447 -
923 345

The Group's secondary reporting format is by business segments. The Group only
has one business segment being orthopaedics.

3. Taxation

Tax on profit on ordinary activities

The tax charge is made up as follows: 2007 2006

£'000 £'000
United Kingdom corporation tax on profits for the year 1,343 843
Overseas taxation 75 347
Prior year adjustment - United Kingdom corporation tax 20 (2)

Total current tax 1,438 1,188

Deferred tax
Accelerated capital allowances 141 6
IFRS 2 (215) (32)
Stock profit -current year movement (136) (100)
Effect of tax rate change 16 -

Total deferred tax (194) (126)

Total tax on profit on ordinary activities 1,244 1,062

Factors affecting current tax charge

The tax assessed for the period is higher than the standard rate of corporation
tax in the UK of 30% (2006: 30%). The differences are explained as follows:

2007 2006

£'000 £'000
Profit before tax 4,084 3,528
Profit multiplied by the standard rate of corporation tax in the UK of 30% (2006: 30%) 1,225 1,058

Effect of:
Net expenses not deductible for tax purposes 44 17
R&D tax credit relief (68) (79)
Release of fair value provision - (63)
Overseas losses not utilised 54 12
Higher tax rates on overseas earnings (31) 119
Prior year adjustment 20 (2)

Total tax charge for the year 1,244 1,062

Ta

4. Dividends

2007 2006
£'000 £'000

Final dividend of 0.9p (2006 - 0.9p) per ordinary share proposed and paid during
the year relating to previous year's results 372 371
Interim dividend of 0.48p (2006 - 0.48p) per ordinary share paid during the year 199 198

571 569

The directors are proposing a final dividend of 0.9p (2006: 0.9p) per share
totalling £373,000 (2006: £372,000). This dividend has not been accrued at the
balance sheet date. Subject to shareholder approval at the annual general
meeting on 17 June 2008 the final dividend will be paid on 11 July 2008 to
shareholders on the register on 27 June 2008.

5. Earnings per Share

The calculation of basic earnings per share is based on the profit attributable
to ordinary shareholders divided by the weighted average number of shares in
issue during the year. Shares held in employee share trusts are treated as
cancelled for the purposes of this calculation.

The calculation of diluted earnings per share is based on the calculation
described above adjusted to allow for the issue of shares on the assumed
conversion of all dilutive options.

2007 2006
Weighted Weighted
average average
Earnings number of Per Share Earnings number of Per Share
£'000 shares amount p £'000 shares amount p

Post-Exceptional Item
Basic earnings per share 2,804 43,228,576 6.49 2,474 42,688,248 5.80

Diluted earnings per share 2,804 43,287,679 6.48 2,474 42,723,434 5.79

Underlying earnings per share

Basic earnings per share 4,553 43,228,576 10.53 2,474 42,688,248 5.80

Underlying earnings per share is before the post tax exceptional cost (£746,000)
relating to the departure of the CEO (see note 9) and after adjusting to a
constant currency basis (see note 6).

The difference between the basic and diluted weighted average number of shares
for the year ended 31 December 2007 is wholly attributable to outstanding share
options.

6. Constant Currency Reconciliation

A reconciliation of reported, to constant currency sales, operating profit and
profit before tax for 2007 is set out below:

Currency At Constant
Reported Movement* Currency
£'000 £'000 £'000

Sales 36,993 1,485 38,478
Operating Profit 4,522 1,433 5,955
Profit before Tax 4,084 1,433 5,517
Tax (1,244) (430) (1,674)
Profit after Tax 2,840 1,003 3,843

Currency movement is calculated by translating 2007 results at the average
exchange rates used for Dec 2006 results.

7. Notes to the Cash Flow Statement

Cash and cash equivalents comprises:

Group
2007 2006
£'000 £'000

Cash available on demand 1,212 1,570
Short-term deposits - 355

1,212 1,925

8. Changes In Shareholders' Equity

Share Employee Share Own Shares
Capital Share Translation Premium Held Retained Minority
Reserve Scheme Reserve Account Reserve Earnings Total Interests Total Equity
Group £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

At 1 January
2006 1,025 1,124 (490) 13,850 (10) 5,199 20,698 566 21,264

Total
recognised
income and
expense for
the year - 475 (638) - - 2,474 2,311 (8) 2,303

Transfer of
reserves - (360) - - - 360 - - -

Share-based
payment
expense - 504 - - - - 504 - 504

Purchase of
minority
interest - - - - - - - (521) (521)

Issue of share
capital 7 - - 330 - - 337 - 337

Dividends paid - - - - - (569) (569) - (569)

At 31 December
2006 1,032 1,743 (1,128) 14,180 (10) 7,464 23,281 37 23,318

Total recognised
income and
expense for
the year - 905 581 - - 2,804 4,290 36 4,326

Share-based
payment expense - 934 - - - - 934 - 934
Issue of share
capital 4 - - 214 - - 218 - 218

Dividends paid - - - - - (571) (571) - (571)

At 31 December
2007 1,036 3,582 (547) 14,394 (10) 9,697 28,152 73 28,225

9. Exceptional Item

The year 2007 saw the departure of the Chief Executive Officer Ian Paling.
Specific payments have been made to him in accordance with the Group's
contractual obligations. In addition, accelerated expenditure has been
recognised in respect of his associated share schemes, as required per IFRS 2
Share-based Payment.

2007
£'000
Contractual Severance Payments
Basic Salary 51
Bonus 113
Termination Payment 97
Pension 113

374

Legal Fees, recruitment and associated costs 245

Accelerated Expenditure
Share Options 447

Total Exceptional Item 1,066

This information is provided by RNS
The company news service from the London Stock Exchange
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