Interim Results For Six Month Period Ended 31 March 2008
5/21/2008
LONDON, UK, 21 May 2008 – Optos plc (LSE: OPTS), a leading medical technology company for the design, development, manufacturing and marketing of retinal imaging devices, is today announcing its interim results covering the six-month period ended 31 March 2008.
All financial numbers are presented in US dollars, which is the Group’s functional and reporting currency, and are prepared in accordance with International Financial Reporting Standards (IFRS).
Financial Highlights
- $48.9M in revenue, up by 22% (2007:$40.2M)
- $5.6M in operating profit before share-based payments, up by 33% (2007:$4.2M)
- $4.6M in operating profit after share-based payments, up by 60% (2007:$2.9M)
- 9.5% operating profit margin (after share-based payments), up by 32% (2007:7.2%)
- $1.8M profit before tax, up by 241% (2007:$0.5M)
- $0.7M net profit, versus a loss of $0.4M in 2007
- $19.4M cash from operating activities, up by 29% (2007:$15.0M)
Operating Highlights
- 2.2M optomap® Retinal Exams, up by 14% (2007:1.9M)
- 3,489 devices installed on a pay-per-patient basis, up by 20% (2007:2,907)
- 89% customer contract renewals
- Secondary and medical market entries through launch of new devices
Commenting on the Group’s performance for the period, Thomas W. Butts, Chief Executive Officer, said:
“Strong revenue growth, improved operating margins and continued high customer contract renewals underpinned a very good set of results that delivered positive earnings for the period. We successfully commercialised two new devices during the first half of the year - the P200C and P200MA. We believe that these devices fill an urgent clinical need in secondary and medical care. We estimate this as a combined new customer opportunity of approximately 15,000 practice locations representing $750-$850 million in potential value. North America continued to generate strong returns and Europe delivered excellent growth for the period. We are on track to generate 20%-25% revenue growth and maintain a contract renewal rate in excess of 85% at the full year.”
Enquiries
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Optos plc |
+44 (0)1383 843 337 |
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John McNeil, Company Secretary |
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Maitland |
+44 (0)20 7379 5151 |
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Anne Wheeler |
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Neil Bennett |
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About Optos Plc
Optos plc is a leading and rapidly growing medical technology company for the design, development, manufacturing and marketing of devices that image the retina, the light-sensitive area at the back of the eye. Optos has commercialised a full range of complementary retinal imaging devices that support different customer segments and patient levels within the eye and healthcare market: P200 is concentrated on wellness screening carried out by optometrists and ophthalmologists; P200C in the advanced clinical optometry and ophthalmology markets; P200MA supports doctors through an advanced medical angiography procedure. All three devices provide practitioners with the benefit of an ultra wide-field high resolution view of the retina, facilitating the early detection, management and treatment of disorders and diseases evidenced in the retina such as glaucoma, diabetic retinopathy and age-related macular degeneration. Retinal imaging can also indicate evidence of non-eye or systemic diseases such as diabetes, hypertension and certain cancers. Optos’ technology provides an unequalled combination of wide-field retinal imaging, speed and convenience for both practitioner and patient and can help save sight and save lives.
Forward-Looking Statements
Certain statements made in this announcement are forward-looking statements. These forward-looking statements are not historical facts but rather are based on the Company's current expectations, estimates and projections about its industry, its beliefs and assumptions. Words such as 'anticipates,' 'expects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors, some of which are beyond the Company's control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. The Company cautions shareholders and prospective shareholders not to place undue reliance on these forward-looking statements, which reflect the view of the Company only as of the date of this announcement. The forward-looking statements made in this announcement relate only to events as of the date on which the statements are made. The Company will not undertake any obligation to release publicly any revisions or updates to these forward-looking statements to reflect events, circumstances or unanticipated events occurring after the date of this announcement except as required by law or by any appropriate regulatory authority.
Interim Business and Financial Review
Revenue for the six months ended 31 March 2008 was $48.9 million, representing an increase of 22% (2007: $40.2 million). Pay-per-patient revenue represented 91% of the Group’s total income for the period and continues to form the Group’s core business model in primary care. Remaining revenue was generated from some capital sales, including sales of our new P200MA device into the medical care market. This is our new ultra wide-field imaging platform on which retinal specialists can perform a medical angiography procedure.
At the end of the period, 3,489 devices had been installed on a pay-per-patient basis, up by 20% from the 2,907 devices that were installed on this basis at the same time last year. During the first half of the year 2.2 million eye exams were performed on a pay-per-patient basis, up by 14% from 1.9 million during the same period last year. Contract renewals across the Group remained strong at 89%.
Gross profit increased by 20% to $31.8 million (2007: $26.4 million). Operating profit before share-based payments was $5.6 million, up by 33% (2007: $4.2 million). Operating profit after share-based payments was up 60% to $4.6 million (2007: $2.9 million). This increase in operating profit delivered a strengthened operating margin of 9.5%, which compares to 7.2% for the same period last year and represents a 32% year over year improvement for the Group. Profit before tax of $1.8 million (2007: $0.5 million) represented year over year growth of 241% and marked the fourth consecutive six-month reporting period that the Group has delivered a pre-tax profit. Profit after tax for the period was $0.7 million versus an after tax loss of $0.4 million last year. EPS for the period was 1.0 cents compared to a loss of 0.7 cents for the same period last year.
Cash from operating activities was $19.4 million (2007: $15.0 million), an increase of 29%.
The Group continued to have excellent access to credit to support future expansion and can report that interest rates payable for new customer contracts using vendor financing arrangements fell during the period. The reduction was driven by lower US dollar 3-yr interest rates which resulted in a gain of in excess of 100 base points versus the same period last year. Vendor financing continues to be an excellent way to help support our business growth. The Group is able to access funds in a flexible manner based on the credit worthiness of each of its individual customers.
Margin Expansion
We have four key initiatives in place to deliver profit margin expansion over the next few years. These include increasing patient utilisation in all customer locations, lowering the unit cost of future device placements, leveraging the asset life of the devices currently in the field as they become fully depreciated and achieving reduced overhead to sales ratios as the business expands. Some of these initiatives have started to deliver enhanced margins for the Group, with operating margins in the first six months increasing to 9.5% from 7.2% at the same time last year, representing a 32% year over year improvement.
Markets
North America
North America offers the Group its largest commercial opportunity and we are pleased to report that our business continued to perform well with revenue for the period at $45.8 million, representing growth of 20% (2007: $38.1 million). Our installed base of devices operating on a pay-per-patient basis grew by 17% to 3,234 over the same period last year. 94% were located in our core US market. Growth in our installed base in Canada continued and was up by 22% over last year.
Our national accounts group continued to progress relationships within the corporate customer segment. During the latter part of first half of the year our P200 device was added to the Wal-Mart Advanced Instrument Program. The clinical and commercial benefits of installing the device will be promoted to an estimated 2,250 in-store primary care optometric practices that are owned by independent optometrists operating within the Wal-Mart retail network.
This substantially strengthens the Group’s commercial opportunity within the corporate customer segment by adding to the existing relationships already in place such as Pearle Vision, with which we entered into an agreement last year. We expect higher install numbers during the second half of the year resulting from a broadened presence within this customer segment.
Europe
Revenue for the period was $3.1 million, up by 44% (2007: $2.2 million). The installed base was 255 at the end of the period, up from 150 at the same time last year and representing 70% growth. Germany now represents our largest individual country market in Europe, where growth in our installed base continued at an excellent rate during the first half of the year at 109% over the same period last year.
Our focus in the UK continues to be on top-tier optician practices where primary patient care is offered in addition to refractive assessment. We are progressing to plan in our newer European markets. Our focus in Norway is on primary care optometry and Switzerland has a combined primary and secondary care market focus. Norway and Switzerland are supported respectively out of our UK and Germany country operations. Our strategy in France and Spain is to initially target the medical care segment with the P200MA.
Technology
Our P200 device continues to support the primary care market. It has also supported a team of scientists led by The Children’s Hospital of Philadelphia (CHOP) and The University of Pennsylvania School of Medicine in a clinical trial where gene therapy has been used to safely restore vision in three young adults with a rare form of congenital blindness. The P200 was used to collect wide-field views of the patient’s retina. This enables the context of the disease to be understood. The speed of image collection obtained through the P200 enabled the doctors to obtain a holistic view where other techniques had failed.
We are very pleased with the medical response to the clinical efficacy of the P200C and P200MA. The ultra wide-field images they generate are revealing important new clinical discoveries that were previously not appreciated due to limitations in existing imaging technologies.
The P200C is designed to meet the need for more exacting clinical imaging capabilities and standards at optometric and ophthalmic practice locations that are clinically managing patients with advanced ocular disease. A key distinguishing feature is directed eye steering. This enables the doctor to obtain a set of images that extend beyond the normal field of view by potentially reaching the ora serrata, which marks the extreme boundary of the retina. This is accepted as being very difficult to observe clinically using conventional examination techniques.
Changing demographics and lifestyle choices come with an increasing incidence of certain degenerative diseases of the nervous system, such as age-related macular degeneration (AMD), and metabolic diseases, such as diabetes. These diseases lead to further health problems and are becoming a significant cause of health care expenditure. The estimated annual cost associated with adult vision problems in the United States is $51.4 billion. AMD is the leading cause of blindness in adults older than 55 and 20 million Americans over the age of 55 are diagnosed diabetics.
The P200MA will fill an urgent need in medical care. It is our new ultra wide-field imaging platform on which retinal specialists perform the optomap® fa Angiography Procedure. We expect the P200MA to make a significant contribution to vitro retinal specialists by providing them with new clinical capabilities in the management of diseases such as diabetes and macular degeneration, both of which are growing at very high rates.
A team of US-based retinal specialists, led by Dr Steven Schwartz, an internationally renowned authority in retinal disease and Professor of Ophthalmology and Chief of the Retina Division at the Jules Stein Eye Institute at the University of California at Los Angeles (UCLA), used the P200MA in a major diabetic research study to capture ultra wide-field images of over 700 eyes from a diabetic patient base. New findings in peripheral retinal neovascularisation were confirmed by using the P200MA, specifically that peripheral retinal vascular non-perfusion and ischemia are directly linked with retinal neovascularisation - this is one of the worst complications of diabetic retinopathy and a leading cause of adult blindness.
Market Opportunity
Commercialising the P200C and P200MA extends our clinical reach deeper into secondary and medical care and builds on the estimated $2-$3 billion potential opportunity in the primary care market that we are supporting primarily through our P200 device. We estimate that approximately 24,000 practices are performing an estimated 165 million comprehensive eye exams annually in this market. In secondary care, the P200C will be the principal device used to support clinical optometrists and ophthalmologists operating in roughly 12,500 practices where approximately 30% of the patient base has advanced ocular disease. Upwards of 21 million exams or procedures, with an estimated $525-$575 million potential opportunity, are carried out annually within these practices. In the medical care market, our P200MA has the potential to reach approximately 2,600 practices across our existing markets, where we estimate 6 million procedures are carried out annually, which would represent a $230-$280 million potential opportunity.
Evergreen Strategy
Our Evergreen Strategy is about supporting our customers by developing new processes and enabling software to keep them current and on the leading edge of retinal imaging and practice management technologies. We introduced V2® Vantage Dx which is a next generation imaging software upgrade that offers our customers several new key features aimed at benefiting practice productivity and the overall patient experience. Two key features include: Exact Disk™ Optic Nerve Enhancement where the software automatically manipulates the patient’s retinal image to ensure that the optic disk appears in its natural shape and 3D Wrap™ which is a previously launched interactive patient education tool but it now includes a refractive error capability that enables practitioners to demonstrate to the patient the effects of refractive error and how this affects vision. Integrated into V2® Vantage Dx is a business process enabled by proprietary software to assist in increasing patient flow and improving practice productivity levels. The doctor benefits from enhanced clinical documentation and the patient from an improved experience in having a comprehensive eye examination.
Outlook
An installed base of approximately 3,500 devices on our core pay-per-patient basis at the half year provides the Group with strong levels of recurring revenue from the existing customer base and allows us to look forward with continued confidence of achieving reliable and visible growth. The Group expects strong returns in the second half of the year from within the corporate customer segment and continued margin improvement as our initiatives are executed and as the business grows. We are re-stating our guidance of achieving 20%-25% revenue growth and maintaining a contract renewal rate in excess of 85% for the full year ending 30 September 2008.
Approved by the Board and Authorised for Issue on 21 May 2008.
This interim statement of results for the six-month period ended 31 March 2008 is available on the Company’s website (www.optos.com)
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