Building the platform
We have met our challenges, invested significantly and diversified to create a broad platform for organic growth
Consort Medical is a specialist medical device manufacturer with over 50 years’ experience serving the healthcare industry. It has two divisions: Bespak, based in the UK, is a global leader in drug delivery systems and King Systems is a US leader in disposable products for airway management. Together the Group manufactures over 500 million devices every year.
When I was appointed Chief Executive in late 2007, the business was facing considerable headwinds including loss of a major product, looming patent expiry for another customer’s product and a generally increasing focus on cost among the customer base in both divisions. I am delighted to report that we have addressed these challenges head on and have delivered a good set of results with growth in revenues, profits and margins.
Over the past three years, I have recruited a new management team and together we have significantly reshaped both businesses. We have increased operating margins, and are investing in an ongoing long-term programme of automation in King Systems that is beginning to bear fruit. We have invested significantly in research and development, with a new innovations team in Cambridge creating many new opportunities. We have launched the King Vision digital video laryngoscope, the most sophisticated new product launch in King Systems’ history. We have also built on the stable and profitable core platforms of the business with a strategy of careful diversification into adjacent markets where Consort Medical can employ its core competencies of design for manufacture and high-volume manufacture in regulated markets. This was best demonstrated by the 2009 acquisition of The Medical House plc (now Bespak Injectables) to enter the injectables market and the investment in 2011 in Atlas Genetics Ltd, a Point of Care Diagnostics company.
The Group now has a much broader platform for sustained organic growth. There are currently nine products in late stage development in Bespak that are expected to launch by 2014. There are a further four products in King Systems that will launch in the coming three years, including new generations of the King Vision. The diversification away from the more mature respiratory/anaesthesia markets into faster growing markets such as Injectables, POC diagnostics and airway visualisation both opens up new opportunities and de-risks the portfolio. I am delighted to report that the business returned to revenue and profit growth this year and I believe it is well positioned to deliver sustainable earnings growthin the future. We continue to seek to accelerate our organic growth through selected acquisitions, strategic investments or alliances.
Our strategy for growth
1.Increased new product development
products launched: the King Vision and an MDI valve2
autoinjector products filed with the FDA
2.Diversification into new markets and regions
growth in international revenues in King Systems driven through six new distributors19%
investment in Atlas Genetics, opening market opportunity in point of care diagnostics
3.Higher value products and services
market transforming launch price for King Vision laryngoscope handle
- Commissioning of Integrated Dose Counter capacity in preparation for launch
- FDA approval for, and launch of, first autoinjector product
- Filing of NDA for Easifill primeless valve
- New development contract for Bespak Injectables
- Further double digit international revenue growth in King Systems
- Development contract in new market segment with Bespak innovations team
- Win a development contract at Bespak that will include drug handling
- Obtain regulatory approval for drug handling at Kings Lynn site
- Make further investments in acquisitions or strategic alliances as appropriate
Our year in review
Jonathan Glenn looks back on a successful year that also saw significant change
The year ended 30 April 2011 was a successful one. Revenues and profits have grown strongly and we have maintained a strong balance sheet, with funds available for investment in suitable growth opportunities. We delivered a 7% increase in revenue from products and services to £126.8m and a 10% increase in operating profit before special items to £20.5m. Growth in profit before tax and special items to £17.4m was lower at 3% as a result of increased financing charges following the routine refinancing of our banking facilities in April 2010.
The Bespak Division increased revenues by 8% to £83.8m and its operating profit by 11% to £15.6m. Within the respiratory business, valve volumes remained strong throughout the year, showing a 27% volume increase on prior year. These volumes were driven by strong emerging market revenues, customer business wins and the launch of a new valve. Good progress was also made with the development pipeline, with the portfolio developing broadly on track. Device service revenues were down on last year with the second year impact of a key contract renewal on less favourable terms in February 2009. However, this was offset by a contract to install a new line to double output of a contract integrated dose counter. Bespak Injectables awaits FDA approval for the launch of two autoinjectors. The first approval is now expected in the second half of 2011. The Innovations team made excellent progress during the year, winning a development contract with Atlas Genetics Ltd. to scale up the disposable cartridge used for its Velox™ Point of Care diagnostics system. At the same time, Consort Medical invested £1.1m to acquire a 19.3% share in Atlas Genetics.
King Systems increased revenues by 6% (3% at constant currency) to £43.4m and operating profits by 5% (5% at constant currency) to £4.8m. Global end markets remain soft, but the business offset this by delivering its strategy of new product development and international expansion. The launch of King Systems’ most sophisticated product, the King Vision digital video laryngoscope, addresses a major unmet need for routine visualisation of patient airways by anaesthetists and is expected to be a significant driver of growth in the medium term. International revenues grew by 19%, driven by an improved offering to the global distributor network and the addition of a further six distributors. The manufacturing transformation programme is also on track, with the first major piece of automation, to manufacture Flex 2 Circuits, commissioned in April 2011. In April we were pleased to appoint Steve Davis as CEO of King Systems. Steve will play an important role in delivering the broad range of initiatives currently underway at King Systems.
Looking forward, we are confident that the coming year will see continued revenue and profit growth, driven by the launch of the King Vision and continuing strong demand in the Bespak respiratory business. With 13 new products due to be launched by 2014 we are confident we have now positioned the business for sustainable growth.
15 June 2011