Final Results
April 01 2003 - 1:01AM
UK Regulatory
RNS Number:4594J
Deltex Medical Group PLC
01 April 2003
1 April 2003
Deltex Medical Group plc
Preliminary results for the year ended 31 December 2002
Deltex Medical Group plc ('Deltex Medical'/'Group'/'Company'), the AIM listed
haemodynamic monitoring company, announces its results for the year to 31
December 2002.
Highlights
* Sales increased by 38% to #1.8m (2001: #1.3m)
* Loss for financial year reduced to #2.9m (2001: #3.3m); 2002 loss includes
exceptional item of #0.2m
* CardioQ installed base rose 39% to 841 units (2001: 605 units)
* #0.8m subscribed from major shareholders and new investors to continue
rapid expansion
* #2.0m net cash at year-end (2001: #5.6m) - net cash usage
is reducing due to sales growth and careful management of existing
resources
* Increasing recognition both of the medical and economic benefits of
haemodynamic optimisation, and of the solutions offered by Deltex
Medical's technology
* Significant acceleration of sales since the adoption of direct sales
effort by in-house team for the UK market from 1 July 2002
* Use of CardioQ system expanded to include operating theatres, as well as
intensive care units
* Single use probes, DP6 and DP12, for specific surgical procedure use,
launched in December 2002; two additional DP products, DP240 and pDP,
developed in 2003
* Andy Hill appointed as Chief Executive, January 2003, and
Daniel Bretonneau appointed as Sales Director in July 2002
* Current trading in line with expectations.
Chairman, Nigel Keen, commented:
"2002 was a year of significant progress for Deltex Medical. We strengthened
our management team, increased our manufacturing capacity to meet growing demand
and launched new products designed specifically to provide solutions needed by
our customers. We have focused the Company's sales and marketing approaches on
communicating and implementing the many benefits of our proprietary systems.
"The budgetary pressures on most healthcare systems around the world are such
that a technology with proven economic benefits so significantly in excess of
cost merits the full attention of healthcare decision makers.
"Because of the significant progress made since 2002, the Board believes that
Deltex Medical now meets each of the required criteria in its key markets and
has the necessary resources in place to take advantage of the growing acceptance
of haemodynamic optimisation and its benefits for large numbers of patients in
operating theatres, intensive care units and accident and emergency departments.
This will enable us to deliver increasing and sustainable value to our
shareholders."
Enquiries
Deltex Medical Group plc
Nigel Keen, Chairman
nigel.keen@deltexmedical.com
01243 774 837
Andy Hill, Chief Executive
andy.hill@deltexmedical.com
01243 774 837
Ewan Phillips, Finance Director
ewan.phillips@deltexmedical.com
01243 774 837
Financial Dynamics
Stephanie Highett/Francetta Carr
stephanie.highett@fd.com
020 7831 3113
Notes for Editors
Deltex Medical primarily develops, assembles and markets a cardiac function
monitor and therapy guidance device, the CardioQ ('CardioQ'/'Monitor'). The
CardioQ incorporates the Company's proprietary software and a small diameter,
easy-to-use, minimally invasive, disposable oesophageal probe that is used for
transmitting and receiving an ultra-sound ('Doppler') signal. By using this
Doppler technology, the CardioQ provides clinicians with the ability to
haemodynamically optimise critically ill patients and those undergoing routine
moderate to major surgery through the controlled administration of fluid and
drugs. Haemodynamic optimisation has been scientifically proven to improve the
speed and quality of patient recovery and reduce hospital stay.
There are already over 800 CardioQs currently in use in hospitals worldwide and
distribution arrangements are in place in over 30 countries. In addition, there
are currently more than 75 clinical publications on the use of the CardioQ which
have repeatedly:-
* validated the results of the Monitor against known standards for measuring
cardiac output, demonstrating that the technology works
* proved that the CardioQ works in a wide range of surgical procedures
* demonstrated that the Company's technology provides significant health and
economic benefits by helping to reduce post-operative complications and
length of hospital stays by an average of 30 to 40 per cent for a wide range
of patients.
The Company is also currently developing a number of new products:-
* the SupraQ - a monitor based on the CardioQ technology but using a
completely non-invasive probe; the prototype is being prepared for clinical
testing
* the NeuroQ - a monitor designed to measure blood flow in the brain; the new
prototype is in preparation for clinical trials.
Chairman's statement
Group overview
The human body provides oxygen to all its principal organs through the
circulation of blood around the system. In critically ill patients or when
individuals are involved in a traumatic event it is vital that the clinician is
given information to ensure that this blood circulation is continuing properly
('haemodynamic optimisation'). If the oxygen supply is not maintained for any
extended period ('haemodynamic compromise') the patient either takes longer to
recover, does not recover completely or does not recover at all.
Similarly, patients who undergo routine moderate and major surgery are at risk
of complications and extended hospital stay due to haemodynamic compromise. This
is because all surgical patients are denied fluid and food for a period prior to
their operation ('nil by mouth'); during the operation they are treated with
anaesthetic agents that affect the body's ability to compensate for the
dehydration caused by the nil by mouth regime; and are further compromised
through blood loss and evaporation from the wound during the surgical procedure.
Deltex Medical has developed and proven a cardiac function monitoring system,
the CardioQ, which it manufactures and markets. The CardioQ monitor uses
Doppler ultrasound technology to provide clinicians with information to allow
them to ensure that critically ill patients and those undergoing moderate and
major surgery are haemodynamically optimised. The data is provided through a
disposable probe which is inserted into the patient's oesophageous through the
mouth or nose. Using this data the doctor is able actively to intervene to
manage the patient's fluid status with the goal of achieving, then maintaining
haemodynamic optimisation. Clinical studies have repeatedly shown that using the
CardioQ provides significant health and economic benefits by helping to reduce
post-operative complications and length of hospital stays by more than 35% on
average for a wide range of patients.
Whilst the CardioQ is today used principally with sedated patients, Deltex
Medical is currently developing devices which will extend the use of the system
to unsedated patients. This will allow the clinician to ensure that the patient
is haemodynamically optimised from the time that he or she arrives in the
healthcare system, be that at the site of an accident or on admission to
hospital, through to discharge of the patient from the hospital.
Deltex Medical's opportunity and its goal is to make haemodynamic optimisation
guided by the CardioQ a standard of care in operating theatres, intensive care
units and accident and emergency departments worldwide. This will provide
doctors with information to enable them to guide therapy which will help them
make their patients better, quicker.
Trading results
2002 was a year of significant progress for Deltex Medical. We strengthened our
management team, increased our manufacturing capacity to meet growing demand,
launched new products designed specifically to provide solutions needed by
doctors and focused the Company's sales and marketing approaches on
communicating and implementing the many benefits of our proprietary systems.
In the year ended 31 December 2002, Deltex Medical increased sales by 38% to
#1.8 million. Underlying this was a 28% increase in the number of Single
Patient Probes ("SPP") sold. We sold 201 CardioQ monitors in the year and saw
the installed base of CardioQs increase by 39% to 841.
The net loss before taxation for the year amounted to #3.1 million, a reduction
of #0.2 million compared to 2001 or #0.4 million after exceptional items. This
reflects both the increased contribution from sales as they continue to build
and changes we have made to our cost base to ensure we focus our resources on
those markets where the clinical and healthcare environment is suitable for the
accelerated adoption of our technology.
Cash at the end of the year was #2.0 million (2001: #5.6 million). This was in
line with our expectations. After taking into account the payment in the early
part of 2002 of liabilities outstanding at the end of 2001, and #300,000 spent
in the second half of the year on one-off items which were necessary to position
the Group for sustainable future growth, we were using cash at an average rate
of #225,000 per month for the year as a whole. This included the increased
spending in the second half arising as we invested in building our UK and
international sales and clinical training teams, upgraded our systems and
expanded our probe manufacturing capacity. Tight control of our overheads and
increasing revenues from our rapidly growing installed base of CardioQ in
hospitals has meant that our monthly net cash usage was reducing as we entered
2003 and has continued to reduce subsequently. A key strength of Deltex
Medical's business model is that, as the business grows and becomes more
established into hospital protocols, the Group generates increasing amounts of
cash from recurring probe orders each month.
In order to provide additional cash resources to continue this rapid expansion,
we have received commitment from our major shareholders and new investors to
subscribe to #0.8 million in new equity. We will call an Extraordinary General
Meeting of Shareholders to pass the resolution necessary to allow the Company to
issue these new shares. This has been set out in more detail in a separate
announcement issued today.
Probe utilisation and installed base
During 2002, we increased our installed base from 605 units to 841 and we sold
24,000 of our SPP used in intensive care, up from 18,000 in the previous year.
On 1 July 2002 we took back the distribution of our products in the UK. Our
distributor had done well in introducing the CardioQ in the UK and we felt that
we could build on that base more effectively by controlling our own sales effort
using our established sales model which has been shown to be effective.
Consequently a major thrust for us during the period has been the establishment
of our own field sales force and team of clinical trainers in the UK building on
the small team we have had in place for some time to support our UK business.
This has resulted in our recruiting five additional sales people and seven
additional nurse specialist clinical trainers in the UK. This development has
already dramatically increased the amount of time spent presenting the CardioQ
system to doctors and nurses. Feedback from the UK market since July clearly
reinforces that there is considerable demand for the haemodynamic monitoring
solution which the CardioQ offers. Furthermore we believe that the market will
be considerably expanded by the introduction of lower cost applications of the
technology such as that provided by our new range of probes.
Since the launch of the CardioQ in 1999 the majority of regular use in hospitals
has been in intensive care; operating theatre use has been limited mostly to
patients whose treatment also involves a spell in intensive care. The most
common condition treated using the CardioQ is hypovolemia, a deficiency in
circulating fluid volumes. The body reacts to hypovolemia by seeking to
maximise the delivery of blood to the most vital organs, meaning that peripheral
systems and less essential organs such as the gut are compromised. Unpleasant
and often severe medical complications frequently arise in patients whose
haemodynamic status has been compromised by hypovolemia, meaning that patients
often stay in hospital longer and make less complete recoveries than they would
have done had their fluid status been monitored and optimised.
The dehydration caused by the "nil by mouth" regime together with the effects of
anaesthetic drugs and the trauma caused by surgery itself each combine to
contribute to the fact that every patient undergoing surgery under general
anaesthetic is liable to suffer from hypovolemia to some degree. While fitter,
younger people undergoing relatively minor procedures can probably withstand
this with minimal adverse consequence, virtually all older or less healthy
patients or those undergoing moderate to high risk surgery would benefit, often
considerably, from having their haemodynamic status monitored and optimised
during surgery. As more doctors accept the benefits of haemodynamic
optimisation guided by the CardioQ in surgery as evidenced by the many clinical
papers that have been published, there are very substantial opportunities to
grow our user base.
In July 2002 we launched the Multi Patient Probe ("MPP") in the UK. The MPP
allows the doctor to re-use the probe up to six times, thereby lowering the cost
of use for each of these patients. We found that many doctors wanted to use the
CardioQ to haemodynamically optimise their patients in the operating theatre,
but feedback showed that there would be an even greater demand in the UK for a
single use probe to be used during an operation at a cost per procedure similar
to that of the MPP.
To make this lower price possible and therefore to give us access to
significantly higher volumes of users, we have refined our system to emphasise
length of time of access to the clinical knowledge embedded in the CardioQ.
This approach has resulted in the development of a range of probes (the DP
range) which provide access to the system for a set time - for example the DP6
lasts six hours and is recommended for use in less complex moderate to high risk
surgery and the DP12 lasts twelve hours and is recommended for use in longer
duration surgery such as more serious cardiac procedures. Both the DP6 and DP12
probes were launched ahead of schedule in the UK on 18 December 2002, since when
we have sold nearly 1,200 probes. We are currently introducing these products
in more than half of the major NHS hospitals in the UK; over a quarter of the
major NHS hospitals are already CardioQ users. In addition we are beginning to
receive our first enquiries from privately owned UK hospitals.
Since the year end we have developed two additional new probes:
* The DP240 - an alternative to the 10 day duration SPP, the
DP240 is indicated for nasal as well as oral insertion (as are all other probes
in the DPn series); and
* The pDP - a single use paediatric probe for use with our
proprietary paediatric nomogram. The pDP is currently being evaluated for both
operating theatre and intensive care use in five of the six major childrens'
hospitals in England.
Our current research and development efforts include a number of projects to
allow common usage of our system on unsedated patients. We will shortly start
trials of softer oesophageal probes for nasal insertion on awake patients and
are planning a multi-centre evaluation of the SupraQ for later in 2003. The
SupraQ is a wholly non-invasive device which works by measuring the flow of
blood in the aorta with a probe placed on the supra-sternal notch at the base of
the throat. A clinical trial which commenced in 2002 using the SupraQ to
monitor patients undergoing Caesarean Sections is generating positive feedback.
Overseas markets
United States of America
Throughout 2002, we made significant progress in implementing our strategy in
the USA. We have focused our small clinical educator sales team on developing a
small number of key accounts. We also made substantial progress in achieving
our longer term objectives in the USA with the publication of another major
study showing significant benefits from the CardioQ technology and, since the
year end, have received a positive response from the American Medical
Association to our application for reimbursement coding. In June we reduced the
US administrative overhead burden and upgraded our field team to meet the skill
set profile we have now identified as most successful. The team achieved
considerable success in increasing probe revenues from targeted key accounts.
Europe
Sales in Europe progressed, with strong growth in Italy and France where the
CardioQ is longer established. We increased our European team in the second
half of the year to allow us to concentrate on working with our distributor
partners to roll-out our successful UK sales and marketing models tailored to
local conditions, the key emphasis is to work towards having appropriate
clinical education and training programmes in place and to position the CardioQ
for high volume use in operating theatres as well as specialist applications in
intensive care units.
Far East and Latin America
We have continued our efforts in a number of developing markets particularly in
the Far East and Latin America. In many countries in these regions, the
potential of haemodynamic optimisation guided by the CardioQ to significantly
reduce hospital stays is attractive politically as well as medically as it
allows more people access to hospital medicine than might otherwise be the case.
The response to our newly developed marketing strategies has been very
positive both from our distributors and local administrators. Deltex Medical is
well positioned in many of these markets with good quality, thoroughly trained
distributors and we now have the ability to be flexible in deciding our level of
investment according to the availability of returns from our efforts.
Key Achievements
During the year we accelerated the evolution of Deltex Medical from its past
heavy emphasis on research and development which was needed to introduce the
CardioQ and get it clinically accepted through to a more customer focused sales
and marketing led business.
Our key achievements during this period have been to:
* Increase manufacturing capacity and efficiency by
installing and commissioning a new clean room at our facility in Chichester;
* Increase significantly our UK market presence by bringing
distribution in our home market back in-house from 1 July 2002, recruiting and
training five additional sales people and seven additional clinical trainers;
* Sharpen our focus on working effectively with our key
distribution partners in Europe by strengthening our international sales and
clinical training team;
* Increase the number of staff with primarily
customer-facing roles from under a third to over a half and significantly
increase the focus of the remainder to provide customers with the solutions,
support and service they need;
* Install and implement new communications, financial,
customer relationship management, human resource and planning systems;
* Upgrade our quality systems and recruit a dedicated
regulatory affairs and quality assurance manager;
* Redesign our marketing materials to emphasise the
substantial benefits of the CardioQ technology to all stakeholders whether
patients, medical staff or healthcare managers;
* Re-organise our management structures to flatten reporting
lines and clearly define team and personal responsibilities.
The effectiveness of these changes is demonstrated by the substantial and
accelerating increase in our user base and by the way in which we were able to
launch the DP6 probe into the UK market ahead of schedule.
Board and organisational changes
In April 2002 Kemp Coady stepped down as Chief Executive and I took his place.
Kemp has stayed on the Board as a non-executive Director.
Andy Hill, who originally started working with us in June 2002 to oversee the
transition to selling direct in the UK, joined the Board as Chief Operating
Officer in October and was appointed Chief Executive in January 2003, since when
I have reverted to serving as non-executive Chairman. Andy has over 16 years
experience in the medical devices industry, initially in sales and sales
management and for the last few years in general management setting up the
European operations of a number of early stage high growth US medical device
businesses.
Daniel Bretonneau, who has been in charge of international sales since 1999, was
promoted to the Board as Sales Director in July 2002.
Prospects
The first few months of 2003 have seen Deltex Medical continue to build on the
momentum generated throughout 2002. Demand for our products is growing strongly
in our traditional intensive care market and there is very positive response to
our new range of operating theatre solutions. We have already started working
with a number of doctors on programmes designed to move their hospitals towards
full adoption of the CardioQTM in operating theatres and intensive care units
over the next year to 18 months. It has taken a long time for acceptance of the
concept of haemodynamic optimisation to reach this stage where such major
investments by hospitals have become feasible.
The budgetary pressures on most healthcare systems around the world are such
that a technology with proven economic benefits so significantly in excess of
the initial investment and ongoing cost merits the full attention of healthcare
decision makers.
We believe that there are a number of determinants of success for an innovative
medical device business in making its products become a standard of care. The
key ones are:
* Supportive clinical data;
* Physician motivation to change patient management;
* Ease of use;
* Short learning curve;
* Compelling cost/benefit ratio;
* Regulatory and reimbursement approval; and
* Patient acceptability.
Deltex Medical believes that it now meets each of these criteria in its key
markets and has the necessary resources in place to take advantage of the
growing acceptance of haemodynamic optimisation and its benefits for large
numbers of patients in operating theatres, intensive care units and accident and
emergency departments. We are confident this will enable us to deliver
increasing and sustainable value to our shareholders.
Nigel Keen
Chairman
1 April 2003
Consolidated profit and loss account
for the year ended 31 December 2002
2002 2001
Note #m #m
Unaudited Audited
Turnover 1 1.8 1.3
Cost of sales (0.9) (0.7)
---- ----
Gross profit 0.9 0.6
---- ----
Net operating expenses (4.1) (4.0)
---- ----
Operating loss (3.2) (3.4)
Interest receivable and similar income 0.1 0.1
Interest payable and similar charges - -
---- ----
Loss on ordinary activities before taxation (3.1) (3.3)
Tax on loss on ordinary activities 0.2 -
---- ----
Loss for the financial year (2.9) (3.3)
======= =======
Loss per share - basic and diluted (7.8p) (17.4p)
======= =======
The above results all relate to continuing operations. The loss on ordinary
activities before taxation and the loss for the financial year have been
computed on the historical cost basis.
Statement of Group total recognised gains and losses
for the year ended 31 December 2002
2002 2001
#m #m
Unaudited Audited
Loss for the financial year (2.9) (3.3)
Currency translation differences in foreign
currency net investment (0.1) 0.1
---- ----
(3.0) (3.2)
===== =====
Consolidated balance sheet
At 31 December 2002
2002 2001
#m #m
Unaudited Audited
Fixed assets
Tangible assets 0.3 0.4
---- ----
Current assets
Stocks 0.7 0.7
Debtors 0.9 0.4
Cash at bank and in hand 2.0 5.6
---- ----
3.6 6.7
Creditors:
amounts falling due within one year (1.0) (1.2)
---- ----
Net current assets 2.6 5.5
---- ----
Net assets 2.9 5.9
==== ====
Capital and reserves
Called up share capital 3.7 3.7
Share premium account 8.6 8.6
Merger reserve 1.8 1.8
Profit and loss account (25.3) (22.3)
Capital redemption reserve 14.1 14.1
---- ----
Equity shareholders' funds 2.9 5.9
==== ====
Consolidated cash flow statement
for the year ended 31 December 2002
2002 2001
Note #m #m
Unaudited Audited
Net cash outflow from operating activities 3 (3.4) (2.4)
---- ----
Returns on investments and servicing
of finance
Interest received 0.1 0.1
---- ----
Net cash inflow from returns on
investments and servicing of finance 0.1 0.1
---- ----
Taxation 0.1 -
Capital expenditure
Purchase of tangible fixed assets (0.2) (0.3)
---- ----
Net cash outflow from capital expenditure (0.2) (0.3)
---- ----
Net cash outflow before financing (3.4) (2.6)
---- ----
Financing
Issue of ordinary share capital - 5.3
Expenses in connection with share issue - (1.1)
---- ----
Net cash inflow from financing - 4.2
---- ----
(Decrease)/increase in net cash in the year (3.4) 1.6
===== ====
Notes to the preliminary statement
for the year ended 31 December 2002
1. Nature of the financial information
The financial statements for Deltex Medical Group plc have yet to be signed for
the year ended 31 December 2002. The financial information set out in the
announcement does not constitute the Company's statutory accounts for the year
ended 31 December 2002 or 31 December 2001. The financial information for the
year ended 31 December 2001 is derived from the statutory accounts for that year
which have been delivered to the Registrar of Companies. The auditors reported
on those accounts; their report was unqualified and did not contain a statement
under either Section 237 (2) or Section 237 (3) of the Companies Act 1985. The
statutory accounts for the year ended 31 December 2002 will be finalised on the
basis of the financial information presented by the directors in this
preliminary announcement and will be delivered to the Registrar of Companies
following the Company's Annual General meeting.
The preliminary results have been prepared in accordance with applicable
accounting standards. The particular accounting policies adopted are the same
as those adopted in the financial statements for the year ended 31 December
2001, except for Deferred Taxation which is now accounted for in accordance with
FRS19 : Deferred Tax. The adoption of the new standard did not result in a prior
year adjustment, nor did it have an impact on the taxation charge for the period
ended 31 December 2002.
2. Turnover
The Group's activities consist solely of the manufacture and marketing of
medical devices. By origin, all sales are United Kingdom sales.
2002 2001
#m #m
Unaudited Audited
Analysis of turnover by destination
United Kingdom 0.7 0.5
United States of America 0.4 0.3
Rest of Europe 0.4 0.3
Rest of the World 0.3 0.2
---- ----
1.8 1.3
===== =====
3. Operating Cashflow
2002 2001
#m #m
Unaudited Audited
Operating loss (3.2) (3.4)
Depreciation on tangible fixed assets 0.3 0.4
Exchange differences - (0.1)
Decrease in stocks - 0.2
Increase in debtors (0.4) (0.1)
(Decrease)/Increase in creditors (0.1) 0.6
--- ---
Net cash outflow from operating activities (3.4) (2.4)
===== =====
4. Dividends
The directors do not recommend payment of a dividend (2001: nil).
5. Loss per share
The loss per share calculation for 2002 is based on the loss for the financial
year of #2.9 million and weighted average number of shares in issue of 36.9
million. For 2001 the loss per share calculation was based upon the loss of
#3.3 million and weighted average number of shares in issue of 18.7 million.
The Group had no dilutive potential ordinary shares in either year, which would
serve to increase the loss per ordinary share. Therefore there is no difference
between the loss per ordinary share and the diluted loss per ordinary share.
6. Distribution of announcement
Copies of this announcement are being sent to all shareholders and will be
available for collection free of charge from the Company's registered office at
Terminus Road, Chichester, West Sussex PO19 8TX.
This information is provided by RNS
The company news service from the London Stock Exchange
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FR UAAUROVROOUR