aap Implantate AG: Third Quarterly Report


In the third quarter of 1999 national and international marketing and sales activities were pushed ahead successfully. Foreign sales in particular declined due to the postponement of tenders for major export orders until the first half of 2000, to the economic situation in Latin America and Asia and to delays in entering the U.S. and Japanese markets. That led to group turnover falling short of target during the review period. Due to the factors mentioned, the management is expecting that the group turnover target of DM 15.99 million for the present financial year cannot be reached. At a conservative estimate of current trends, especially in connection with the tender-related postponement of orders, turnover for the year is forecast to total DM 11 million.

Despite the reduction in forecast turnover for the current financial year, the 1999 profit forecast of DM 729,000 is expected to be achievable. DVFA-adjusted third-quarter profits are up 596% on the year to DM 515,000. Extraordinary expences of DM 2.49 million arising from the IPO resulted in a third-quarter loss of DM 1.53 million. Tax losses carried forward and resulting from the consolidation of aap companies having led to a reduction in third-quarter losses by DM 1.18 million, the adjusted profit per share is DM 0.14 (previous year: DM 0.02).

Cash flow as per DVFA/SG, taking IPO costs into account, increased markedly by 156% on the corresponding period of the previous year.

Above-average strengthening of domestic market position

The intensification of sales activities in Germany led in the period under review to above-average growth in domestic sales, which were 25% up on the year. The annual average sectoral growth lies below 5%. The 40% increase in direct sales via our sales engineers is particularly gratifying.

Outlook

The health market, and thus the market for orthopaedic products, is a growth market. In-house studies show that potential worldwide sales of the new products currently at various stages of development in aap amounts to DM 3.6 billion.

Our endeavours so far to set up direct and indirect sales networks in the U.S. have proved highly successful. Agreements have been signed with two sales partners, taking the geographical expansion of aap’s market presence in the U.S. a step further. They will shortly be expanded further in the wake of talks in progress with other potential partners.

Now that Shonin product licences have been issued for Japan, aap can actively enter the world’s second-largest and fastest-growing market alongside the U.S. Strategically outstanding cooperation with Kobayashi Medical Devices has led to aap shipping its first consignments of products to Japan, and that is only the initial phase, so the outlook from 2000 is very good.

Further impetus for aap’s strategy of expansion is expected from activities already undertaken in connection with the Chinese market. Dynamic economic development in China and the opening-up of the chinese medical profession to the West and the adoption of new treatment techniques in orthopaedic surgery and other sectors have given rise to entirely new sales prospects for international manufacturers of orthopaedic products. Feasibility studies have been completed, and specific moves will be made before this financial year is over toward signing sales agreements and applying for product licences.

By mid-2000 aap expects to have completed the acquisitions on which it has already embarked. They will, above all, enable us to gain access to new markets, to enlarge our product portfolio and to make sure of further, future-oriented technologies.

Taking into account the further enlargement of activities in the U.S., Japan and China and what has been a steady improvement in aap’s market position in Germany, we reaffirm our target figures for 2000 and thereafter.