Advanced Medical Solutions Group plc

("AMS" or the "Group")

Unaudited Preliminary Results for the year ended 31 December 2020

~ Robust financial and operational performance despite COVID-19 impacts; in line with current consensus forecasts; set for strong growth in 2021 and beyond ~

Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), the surgical and advanced woundcare specialist company, today announces its unaudited preliminary results for the year ended 31 December 2020.

Financial Summary:

Operational Highlights (including post period end):

·      Having prioritised employee safety, all manufacturing sites have remained in operation throughout the COVID-19 pandemic servicing customers and meeting order demand. Nonetheless, as previously announced, and in line with consensus market forecasts, on a Group level, sales and profitability were heavily impacted by COVID-19, as shown in the above table

·      Given the Group's strong net cash position and reflecting the Board's confidence in the future, an increased full year dividend is proposed. In line with best practice, AMS repaid the £0.4 million of UK government furlough support that had been received during the year

·      Approval and launch of LiquiBand^® Rapid™, albeit at a restricted level due to current lack of access to surgeons. Successful completion of LiquiBand^® XL clinical trials keeps us on track for approval and launch towards the end of 2021

·      Investment in R&D increased to £7.9 million (2019: £6.5 million) as progress continued on all key projects across the Group

·      US clinical trial to support the Premarket Approval (PMA) for LiquiBandFix8^® progressed well with more than 65% of the total required patient procedures now complete. Filing for the device is expected in 2022, following the 12 month follow-up stipulated by the FDA

·      Patient enrolment for the first human clinical study of Seal-G^® and Seal-G^® MIST began in February and CE mark extensions for the product are expected imminently giving AMS access to a new $1 billion addressable market with a differentiated product to fulfil a significant unmet need

·      Acquisition of Raleigh Adhesive Coatings Limited ("Raleigh") in November 2020 for £22 million provides a strong strategic fit with commercial synergies and new commercial opportunities

·      Grahame Cook was appointed as Non-Executive Director and joined the Audit, Nomination and Remuneration Committees in January; Steve Bellamy, who has been an AMS Board member since 2007, will retire from the Board at the AGM in June.

Commenting on the results Chris Meredith, Chief Executive Officer of AMS, said: "In what was a very challenging year for everyone, I am pleased with how the team and the business performed and the Group closed the year in line with current consensus forecasts. Despite the severe COVID-19 disruption, the Group remained profitable and generated strong operational cash flows, whilst continuing to invest in key projects and an increasing dividend with significant progress across many of the Group's key strategic initiatives. The progress made on LiquiBand^® XL, Sealantis and the Fix8 PMA, as well as the acquisition of Raleigh will be catalysts for accelerated growth as elective surgery volumes recover.

Looking forward, the Group saw a continuing gradual recovery over the last two quarters of 2020 and 2021 has started well with a healthy order book in both Business Units.'' 

Notes

1.     Constant currency removes the effect of currency movements by re-translating the current year's performance at the previous year's exchange rates

2.     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 fair value of long-term liability expense of £0.2 million (2019: credit of £0.3 million) as defined in the Financial Review. Adjusted operating margin is shown before exceptional items and amortisation of acquired intangible assets

3.     Net cash is defined as cash and cash equivalents plus short term investments less bank loans and financial liabilities excluding those relating to IFRS16

- End -

For further information, please visit www.admedsol.com or contact:

About Advanced Medical Solutions Group plc

AMS 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. In 2019, the Group made two acquisitions: Sealantis, an Israeli medical device company with a patent-protected sealant technology platform; and Biomatlante, an established developer and manufacturer of innovative surgical biomaterial technologies based in France. In 2020, the Group acquired Raleigh Adhesive Coatings, a leading coater and converter of materials predominately for woundcare and bio-diagnostics products based in the UK.

AMS's products, manufactured in the UK, Germany, France, Israel, the Netherlands, and the Czech Republic, are sold globally via a network of multinational or regional partners and distributors, as well as via AMS's own direct sales forces in the UK, Germany, the Czech Republic and Russia. The Group has R&D innovation hubs in the UK, Germany, France and Israel. Established in 1991, the Group has more than 700 employees. For more information, please see www.admedsol.com  

Chief Executive's Statement

COVID-19 impact

Having created a designated COVID-19 working group, prioritised safe working practices and complied with government measures on social distancing, all AMS sites have remained in operation throughout the pandemic and the Group has therefore been able to service the demand of its healthcare partners throughout 2020 while maintaining its robust balance sheet.

As part of this, AMS has:

·    Enabled working from home arrangements for all roles that can do so;

·    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 all of the Group's suppliers;

·    Provided contractual order flexibility to customers whose demand has clearly been impacted by the COVID-19 downturn;

·      Repaid the £0.4 million of UK job retention scheme support received 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 AMS with new opportunities, such as increased 'direct to patient' supply of products.

Product portfolio progress opening up new markets

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 for AMS. In addition, the 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.

LiquiBand^® range

Following the successful clinical trials for LiquiBand^® XL the Group expects 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 LiquiBand Fix8^® US Pre-Market Approval process is progressing well and both trial results and surgeon feedback has been positive. It is expected that patient procedures will be complete in 2021 followed by FDA filing in 2022. US approval would be a significant milestone for the Group, 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 LiquiBand Fix8^® which is expected to drive much stronger growth for this category globally as elective surgery volumes recover.

Sealantis

The Sealantis clinical trial commencement in February and the extended product approvals expected imminently position AMS 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 the Group 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.

Raleigh

The acquisition of Raleigh enhances the Group's woundcare capabilities and growth potential and enables entry into the bio-diagnostic testing sector for the first time, demonstrating the Group's strategy of utilising its strong financial position to acquire businesses with complementary products, exciting technologies and new routes to market.

Woundcare

AMS further increased its 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 the Group's partners to participate in new markets worth a total of $200 million.

AMS has also made significant R&D and regulatory progress in expanding the product indications for our Silver High Performance Dressing which positions the Group 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.

Acquisition strategy

The Group continues 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, the Group incurred exceptional costs of £0.8 million relating to both the acquisition of Raleigh and its participation in a process, in which AMS was unsuccessful, for a sizeable surgical business.

Regulatory opportunities and progress

The Board is confident that the implementation of Medical Device Regulation (MDR) will provide opportunities for AMS due to anticipated competitor product withdrawals. The Group is making strong progress in its own MDR preparations having already secured additional time by extending the Group's 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.

AMS utilised the MDD extension to submit and obtain CE mark approval for Silicone PHMB foam and to file for extensions to the Sealantis CE mark.

In 2020, AMS successfully completed its 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. AMS is 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 its first four MDR files for Notified Body review.

The senior management team's extensive preparations leave the Group well placed to exploit opportunities that will undoubtedly arise in the next few years during the implementation of MDR.

AMS obtained various product approvals for new territories in 2020 including the Group's first approvals in India for both LiquiBand^® and LiquiBandFix8^®.

Brexit

The Group's extensive preparations for Brexit enabled it 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 the Group's UK manufactured products and the other necessary administrative and labelling changes have been put in place. The Group now intends to unwind the increased stock levels that were built to mitigate possible Brexit delays.

In 2021, AMS is expected to experience a minimal 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

Stakeholders

On behalf of the Board, I would like to thank the Group's committed staff, partners and other stakeholders, without whose help and commitment, the achievements of this year would not have been possible.

Outlook

Despite the ongoing challenges posed by COVID-19 across the globe, the Group has 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 product indications, significantly increasing the size of the Group's addressable market in the near term including the approval of LiquiBand^® Rapid™ and the successful clinical trials for LiquiBand^® XL. On this basis the Group is set for strong organic growth in 2021 and beyond. AMS 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.

Operational review

Group performance

Given that all products and regions were impacted by COVID-19 restrictions, the Group performed well and saw improving results in Q3 and Q4. However, as previously stated, Group revenue declined to £86.8 million (2019: £102.4 million) and the resulting adverse operating leverage led to adjusted profit before tax reducing to £13.4 million (2019: £26.6 million) and adjusted diluted earnings per share reducing to 5.4p (2019: 9.8p).

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^®. Business Unit revenue reduced by 11% to £50.2 million (2019: £56.5 million) due to sales volumes being adversely impacted by the effects of COVID-19.

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.

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.

In addition, 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.  

AMS continues to obtain approvals for LiquiBand^® in new geographies and notably obtained approval for LiquiBand^® 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^® and Seal G^®. LiquiBandFix8^® is used to fix hernia meshes inside the body with accurately delivered individual drops of cyanoacrylate adhesive. Seal-G^® is used to reinforce 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. The Group also obtained approvals for LiquiBandFix8^® in other geographies, notably in India and Brazil, with distributor selection and launch planning now in process.

The clinical trial for the Fix8^® Pre-Market Approval process 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 which provided positive feedback on Seal-G & Seal-G MIST as solutions to the high unmet need for an effective GI sealant.

Post-period end, the Group 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 final notified body review to strengthen the portfolio by obtaining approval for the laparoscopic Seal-G MIST^® device and extending the open Seal-G^® CE mark to include a blue colourant to aid visibility during surgery. Both approvals are expected imminently.

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 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 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 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.

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 Raleigh acquisition.

Revenue decreased by 20% to £36.6 million (2019: £45.8 million) due to COVID-19 impacts on sales volumes.

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 of Raleigh

-     ActivHeal^® potential in select new markets

-     The opportunities expected to arise from MDR

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.

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 which 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. Although discussions are on-going with the customer, the new terms the customer is seeking are not acceptable to AMS and therefore the contract may not be renewed. We are also assessing various other options to maximise the value to AMS for 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.

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 are expected to launch in 2021, contributing significant additional sales value over the next five years. Registrations are also 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 all the Group's 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.

Chris Meredith

Chief Executive Officer

Financial Review

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 reconcile 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 fair value of long-term liability 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 1,050 bps to 15.9% (2019: 26.4%) and operating margin decreased by 1,130 bps 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).

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 Group's 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) 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.

^{Note 4: Adjusted for exceptional items and amortisation of acquired intangible assets}

^{Table is reconciled to statutory information in note 3 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

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 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 will impact Sterling revenues by approximately 2.8% and 3.4% respectively and in the absence of any hedging this would have an impact on profit of 2.2% and 0.1%.

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 working capital management.

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: £64.8 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).

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 6 months ended 30 June 2019: £1.1 million in October 2019).

The Group has an undrawn unsecured £80 million credit facility provided jointly by The Royal Bank of Scotland 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.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION