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Corin Group PLC (CRG.LN) Reports a 20% Increase Net Profit in FY2004 BY HUYEN NGUYEN, APRIL 18, 2005

On April 5th, Corin reported fiscal year 2004 financial results. Total sales grew by 9% on a constant currency basis and 7% as reported. Group turnover for the year was reported at £25.6 million, compared to £24 million in 2003. Net profit grew from £2.9 million in 2003 to £3.6 million in 2004 which is a 20% increase year-over-year.

Gross profit grew by 12% to £18.3 million; gross margin increased to 72% compared to 68% in 2003. The increase in gross margin was primarily attributed to the change to an in-house manufacturing location (Cirencester, UK) from an outsourcing German subcontract manufacturer. Improvement in margin was also favorably impacted by transitioning to a direct sales force from an indirect sales distribution network in major orthopedic markets worldwide.

On December 31, 2004, Corin Group had net cash of £0.53 million and in 2004 generated cash from operations in the amount of £4 million. In October 2004, Corin announced a possible acquisition by an unknown company but the deal was never consummated. The Board had decided against it due to negative effects of some of its customers who currently held strong positions in certain export markets.

FY2004 Operational Highlights & Product Highlights by Geography:
Growth rates are compared to 20'03

• Total sales increased by 7% as reported to £25.6 million, and 9% constant currency
• Metal on metal hips and mobile bearing knees accounted for 58% of total sales
• Knee increased by 11% to £8.5 million driven by Cormet which increased by 33% to £6.4 million
• Operating profit grew by 14% to £5.3 million on a reported basis, and 20% constant currency
• Direct sales increased by 20% to £20.2 million, compared to £16.9 million
• Direct sales accounted for 79% of total group turnover, compared to 70%
• Manufacturing space was increased by 50%
• April 2004, Corin entered into an agreement with the Acrobot Company to develop twin technologies using robotics and MIS for Cormet
• May 2004, Corin acquired certain assets of a former Australian distributor which contributed £0.77 million from this subsidiary
• June 2004, Corin entered into a collaboration agreement with Endo Plus (UK) to promote Corin's large diameter metal on metal articulation head with Endo Plus cementless hip stem, SL Plus
• Developing two spinal disc devices: cervical and lumbar
• UK

  - Sales increased by 20% to £8.7 million
  - Product sales grew faster than the UK orthopedic market
  - Cormet hip resurfacing system grew by 40% and represented almost 30% of UK sales (~£2.6 million)
  - Metal-on-metal hip resurfacing accounts for approximately 10% of all hip sales and continues to grow strong
  - Knees grew by 23%
  - Rotaglide®+ mobile bearing knee system continued to gain market share
  - The OSG mobile bearing ankle almost doubled in sales

  
  
• Continental Europe
  - Excluding sales from Turkey, underlying group sales increased by 4%
  - Sales from Germany increased by 6% as reported, and 8% constant currency
  - Germany is suffering from price erosion due to an increase in competitors
  - Cormet was the primary driver for sales which was up by 67%

• USA
  - Sales grew by 30% to £2.5 million; constant currency grew by 45%
  - Spine sales is continuing to decline due to increase in competitors
  - Knee sales grew by 159% which were driven by Optimom sales which more than doubled.
  - Corin is hopeful that by 2006, the FDA will approve the down-classification of the mobile bearing knee. This would allow marketing of the Rotaglide+ and the Uniglide in the U.S.
  - March 2005, Corin submitted a Pre Market Approval Application (PMA) to the FDA on for its metal resurfacing hip

• Japan
  - Sales declined by 14% to £2.6 million on a reported basis and 10% constant currency
  - The decline in sales severely impacted group profitability because of its previously high gross margin
  - Reimbursement pricing for implants was reduced during mid-year for the entire Japanese market
  - Lost a major end user customer in '04
  - To improve the company's orthopedic market share, Corin appointed a Japanese national in the Chief Executive position who will be in charge of the Asia Pacific region

• Rest of the World
  - South America grew 18%
  - The two newest direct sales operations, South Africa and Australia, grew 45% and 23% respectively
  - Created a Wholly Owned Foreign Enterprise (WOFE) in China which will be completed in 2Q:05
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