TIDMLID
RNS Number : 6737A
LiDCO Group Plc
28 March 2017
LIDCO GROUP PLC
("LiDCO" or the "Company" or the "Group")
Final Results
LiDCO (AIM: LID), the hemodynamic monitoring company, announces
its audited Final Results for the year ended 31 January 2017.
Financial highlights
-- LiDCO product revenue (excluding third party products) up 14% to GBP6.76m (2016: GBP5.96m)
-- Revenue up 8% to GBP8.21m (2016: GBP7.59m)
-- Gross margins (excluding third party products) of 79% (2016: 81%)
-- Surgery disposables revenue up 12% to GBP3.60m (2016: GBP3.21m)
-- Adjusted profit before tax* of GBP0.06m (2016: loss GBP0.34m)
-- Earnings per share of 0.09p (2016: loss 0.21p)
-- Completed an oversubscribed fundraise of GBP3.0m in December
2016 to accelerate overseas expansion
-- Net cash inflow before fundraise of GBP0.52m (2016: GBP0.08m)
-- Debt free with cash at year-end of GBP4.90m (2016: GBP1.59m)
* Adjusted for share-based payments and 2016 exceptional
item
Operational highlights
-- US expansion commenced with appointment of Head of North America in January 2017
-- 227 monitors sold/placed (2016: 160)
-- Surgical disposable unit sales up 17% to 46,580 (2016: 39,975)
-- Launch of LiDCOrapid(v2) with non-invasive technology in Japan
-- LiDCOrapid(v2) approved by Chinese Food and Drug Administration (CFDA)
-- Launch of new LiDCOunity hemodynamic monitor in Europe and USA
-- Master Distribution companies appointed to manage Middle
East, Canada, Sub-Sahara Africa and former Soviet States
-- Awarded a NHS Supply Chain Framework Agreement for LiDCO products
-- Distribution agreement with ICU Medical to sell LiDCO LXi monitor in USA
-- Renewal of five-year commercial agreement with Argon Medical
to distribute pressure monitoring products in UK & Ireland
Post year-end
-- Appointment of Peter Grant as Non-Executive Chairman designate
-- Launch of new widescreen hemodynamic monitor platform with
additional functionality in Europe
Commenting on the results, Matthew Sassone, Chief Executive
Officer, said:
"LiDCO continues to take the right steps forward in delivering
the strategic plan I outlined when becoming CEO. We are delivering
on the plan to expand overseas from our market leading position in
our home UK market. The fund raising enables us to accelerate our
plans, investing in our commercial operations will enable us to
realise more from the growing attractive market of hemodynamic
monitoring."
This announcement contains information which, prior to its
disclosure, was considered inside information for the purposes of
Article 7 of Regulation (EU) No 596/2014 (MAR).
LiDCO Group Plc www.lidco.com
Matt Sassone (CEO) Tel: +44 (0)20 7749 1500
Paul Clifford (Finance Director)
finnCap Tel: +44 (0)20 7600 1658
Geoff Nash / Emily Watts (Corporate
Finance)
Stephen Norcross (Corporate Broking)
Walbrook PR Ltd Tel: 020 7933 8780 or lidco@walbrookpr.com
Paul McManus (Media Relations) Mob: 07980 541 893
Lianne Cawthorne (Media Relations) Mob: 07584 391 303
The Company presentation will be available from today on the
LiDCO website: www.lidco.com.
Strategic Report
The Group has spent the year delivering on the plan to expand
from our core UK market. Revenues outside of the UK grew by 25% and
in 2016/17 represented 36% of our business, up from 31% in the
prior year. Overall we are pleased with the performance of the
business, with LiDCO product revenues growing 14% over the prior
year. The fundamentals of our high margin recurring disposable
business model remain strong and the global market for hemodynamic
monitoring continues to grow. The Group ended the year having
generated cash from operations and debt free. During the year, we
made the strategic decision to raise the necessary capital to
accelerate the future growth of the Group. The fundraising was
oversubscribed and provided the Group with GBP3.0m (before costs)
to invest in expanding our commercial operations.
The Group is benefiting from the results of the building blocks
put in place when we launched our strategic plan in October 2015,
which can be grouped under the following headings:
-- Geographical expansion
-- Commercial focus
-- Maintain our technology leadership
-- Focus on specific market applications
Geographical expansion
Geographical expansion is our greatest driver of future growth
and the Board has identified a number of key geographies in which
we feel that we can gain a significant market share. This is only
possible if we have a solid foundation in the UK, our home market,
from which to grow. During the year, we further strengthened our UK
market leading position and we were pleased with the robust growth
of LiDCO product revenues, where sales are predominately to the
NHS.
We believe the USA offers us the greatest opportunity and
remains the largest market for hemodynamic monitoring. During the
year we added to our direct sales force and signed a distribution
agreement with ICU Medical for our LiDCO LXi monitor which will
support the launch of their own hemodynamic monitor Cogent, from
which we expect to receive a royalty.
In our distributor markets, we continue to make progress in
creating the infrastructure needed to deliver our geographical
expansion plans. Our internal resources manage distributors in the
territories with the greatest mid to long term market
opportunities, and we utilise master distribution companies to
manage those distributors which we feel will be better served by a
more local presence. As part of this more tailored approach to
distribution management, we have selected markets within Europe,
Middle East and Asia where we have identified strong growth
opportunities and are investing together with our partners in
promotional activities to develop the market further and widen the
adoption of hemodynamic monitoring.
As the world's second largest hemodynamic monitoring market,
Japan is strategically important to us and it is pleasing to see
that in the year we recommenced sales of both monitors and
disposables to our strategic partners in this country.
The proceeds of the fundraising will assist with this strategy
of developing overseas markets, accelerating revenue growth and
reinforcing our leadership position in the UK.
Commercial focus
During the year we continued to re-direct spending towards the
commercial activities of the business in order to improve our sales
efforts and the way that we promote ourselves globally. However it
became apparent that if LiDCO was to realise its full potential,
greater commercial resources were going to be necessary to execute
our strategic plan. After a full review of the strategy the Company
undertook the necessary fundraising in order to raise the capital
required to support our growth plans.
Technology leadership
In March 2016 we launched our latest monitor, LiDCOunity, which
combines the full suite of LiDCO technology into one product,
offering our customers the ability to use one monitor and one
disposable for the whole acute care patient pathway. This is a
unique differentiator and enables us to maintain ourselves as a
technology leader in this field. The launch of this new product was
one of the factors behind our strong monitor sales performance this
year.
Specific market application focus
We estimate that the global market for hemodynamic monitoring to
be currently in excess of $200m per annum of which we have
approximately a 4% share. With a broad potential application of our
technology we need to be focused on the areas that offer us the
greatest return on our investment. At a high level we define this
as high risk surgery and critical care, with particular focus
within these two areas on:
-- Colorectal surgery
-- Emergency laparotomy surgery
-- Oncology surgery
-- Vascular surgery
-- Cardiac surgery
-- Septic shock
LiDCO's technology, when used in these groups of patients in
both intensive care and surgical settings as part of goal-directed
hemodynamic therapy, has been shown to improve patient outcomes
through the optimisation of cardiac output and oxygen delivery to
tissues.
Following the successful fundraising we enter a period of
accelerating revenue growth through significant investment in our
commercial resources. By doing this we believe that we will better
position the Group for sustained higher growth in the medium
term.
Board changes
On 6 March 2017 we announced some key changes to the Board in
line with the Board's succession plans.
Peter Grant joined the Board as Non-Executive Director and
Chairman Designate. It is the Board's intention that Peter will
succeed Theresa Wallis as Chairman of the Board, Audit and
Nomination Committees when she steps down from the Board at the
2017 Annual General Meeting ("AGM"), after 14 years as Chairman.
Another of our Non-Executive Directors, Ian Brown, has also
announced his intention to step down from the Board at the
forthcoming AGM, after 11 years as a Non-Executive Director.
Jill McGregor will join the Board in July 2017 in the role of
Chief Financial Officer. Jill joins the Board as a replacement for
Paul Clifford, the current Finance Director, who will retire from
the Group at the end of March 2017.
On behalf of the Board I would like to thank Theresa, Ian and
Paul for their services and dedication to the Group over many
years.
Financial Review
Revenues
LiDCO product revenues in the year grew by 14% to GBP6.76m
(2016: GBP5.96m) with total revenues (including third party
products) up 8% to GBP8.21m (2016: GBP7.59m).
Overall we saw strong demand for monitors with 227 units being
sold/placed (2016: 160 units) and growth in disposables of 8% to
61,471 units (2016: 56,752 units). Further comment on revenues by
territory is provided below.
Gross profit and margin
The overall gross profit margin from LiDCO product was 79%
(2016: 81%) with the reduction largely the result of an increased
proportion of lower margin monitor and distributor revenues. The
gross margin achieved on the sale of third party products remained
unchanged at 20%. Overall, gross profit grew by 9% to GBP5.60m
(2016: GBP5.14m).
Overheads
Overheads before share-based payments and the 2016 exceptional
item increased marginally to GBP5.54m (2016: GBP5.48m). Personnel
related costs amounted to 66% of overheads and the average full
time equivalent headcount (excluding Non-Executive Directors) was
42 employees (2016: 44 employees).
Share-based payments were, unusually, a credit of GBP41,000
(2016: charge GBP72,000). The implementation of the expansion plans
notified in the circular dated 7 December 2016 (the "Circular") are
expected to result in increased costs in the 2017/18 financial
year. It is, therefore, considered unlikely that the earnings per
share vesting conditions on certain options will be met and this
resulted in the credit.
Geographical expansion remains the greatest driver of our future
growth and we expect to progressively increase sales resources
across all regions but particularly in the US as set out in the
Circular.
Earnings and tax
The Group made an adjusted profit before tax (adjusting for
share-based payments and the 2016 exceptional item) of GBP61,000
(2016: loss GBP343,000). After charging those items and receiving
the benefit of GBP93,000 of research and development tax credits,
the Group made an overall profit for the year of GBP187,000 (2016:
loss GBP416,000) equating to earnings per share of 0.09 pence
(2016: loss per share 0.21 pence).
The Group has a potential unrealised deferred tax asset of
GBP4.10m, recognition of which will be considered when a sustained
trend of profits is more established.
Cash flow, borrowings and cash balances
The Group was cash generative in the year having a net cash
inflow before financing activities of GBP522,000 (2016: GBP79,000)
with inventories having been reduced by GBP472,000. In December
2016 the Group raised GBP3.0m gross through a placing and
subscription of 50m new ordinary shares at 6 pence per share to
provide growth capital to enable the Group to expand its global
sales team and undertake a more extensive and focused marketing
effort.
Year-end cash balances amounted to GBP4.90m (2016: GBP1.59m).
The Group remains debt free.
Property, plant and equipment
There was a net decrease in property, plant and equipment in the
year of GBP122,000 with additions of GBP168,000 offset by
depreciation of GBP290,000. The most significant additions continue
to be GBP140,000 of medical monitors that comprise placed monitors
on long term loan to hospitals in the UK and USA for active use,
where the hospital pays for disposables, together with monitors for
demonstration purposes and clinical trials. The placed monitors
generally attract a premium on the price of disposables to
compensate for the cost of providing and servicing these monitors.
The placed monitors remain the property of the Group, under its
control and can be substituted at the Group's discretion.
Intangible assets
Expenditure on intangible assets in the period was GBP521,000
(2016: GBP493,000) of which GBP461,000 (2016: GBP419,000) was spent
on product development with a further GBP60,000 (2016: GBP74,000)
on new product registration, predominantly in overseas territories.
Expenditure on product development included the next generation
LiDCOunity hardware platform, significant improvements to the
operating system and amendments to the software to allow additional
flexible pricing models.
Inventory
Inventory was reduced by GBP472,000 in the year. Although
inventory levels may reduce further in the current financial year,
traditional rates of inventory turn cannot always be applied to the
Group as it relies on a number of single-source key suppliers and
strategically maintains high levels of inventory in respect of such
suppliers.
Operational Review
Revenue performance by product and key geographies
Year to Jan 2017 Year to Jan 2016
---------------- ------------------------------------------- -------------------------------------------
Monitors Disposables Other Total Monitors Disposables Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- --------- ------------ -------- -------- --------- ------------ -------- --------
LiDCO products
---------------- --------- ------------ -------- -------- --------- ------------ -------- --------
UK 336 3,131 318 3,785 279 2,983 322 3,584
US 295 881 7 1,183 86 976 9 1,071
Japan 32 79 - 111 9 26 - 35
Europe 267 453 18 738 145 572 15 732
ROW 319 624 3 946 265 264 7 536
---------------- --------- ------------ -------- -------- --------- ------------ -------- --------
1,249 5,168 346 6,763 784 4,821 353 5,958
---------------- --------- ------------ -------- -------- --------- ------------ -------- --------
Third party
products
---------------- --------- ------------ -------- -------- --------- ------------ -------- --------
UK - 1,449 - 1,449 - 1,635 - 1,635
---------------- --------- ------------ -------- -------- --------- ------------ -------- --------
Total sales 1,249 6,617 346 8,212 784 6,456 353 7,593
---------------- --------- ------------ -------- -------- --------- ------------ -------- --------
Surgery disposables revenue was GBP3.60m (2016: GBP3.21m). The
most significant component of the revenue labelled 'Other' above is
monitor service contracts in the UK which were GBP251,000 (2016:
GBP256,000).
Unit sales performance by category in key geographies
Unit sales Year to Jan 2017 Year to Jan 2016
------------------------ ----------------------- -----------------------
LiDCO products Monitors Disposables Monitors Disposables
(incl placed monitors) Units Units & Units Units &
Use Use
------------------------ --------- ------------ --------- ------------
Surgery products
UK 51 24,365 48 22,965
US 40 5,650 31 6,885
Japan 10 1,500 - 500
Europe 33 5,310 29 6,895
ROW 72 9,755 29 2,730
------------------------ --------- ------------ --------- ------------
Surgery Total 206 46,580 137 39,975
------------------------ --------- ------------ --------- ------------
ICU products
All territories 21 14,891 23 16,777
------------------------ --------- ------------ --------- ------------
Total 227 61,471 160 56,752
------------------------ --------- ------------ --------- ------------
During the period a total of 227 monitors (2016: 160 monitors)
were sold or placed, with total disposable unit sales of 61,471
(2016: 56,752). Revenue from sales of monitors was GBP1.25m (2016:
GBP0.78m). Surgical disposables units and revenues were up 17% to
46,580 units (2016: 39,975 units) and up 12% to GBP3.60m (2016:
GBP3.21m) respectively, driven by strong demand from the UK, Middle
East and China. Sales of intensive care disposables units were down
from 16,777 units to 14,891 units with revenue of GBP1.54m (2016:
GBP1.61m). We see a reducing demand for our traditional intensive
care disposables from the USA and some European countries as
customers move to using the more convenient surgery disposables to
treat their patients in this care setting. Total disposable
revenues (including third party products) represent 81% of total
product revenues (2016: 85%).
UK
Sales in the UK market (excluding third party products) were up
6% to GBP3.79m (2016: GBP3.58m). Including third party products,
sales were GBP5.23m (2016: GBP5.22m). LiDCO products had a strong
performance considering the restricted spending climate in the NHS
as we consolidated our position as the market leader. The total
number of monitors sold and placed was similar to the previous year
at 67 units but the launch of our new monitor LiDCOunity enabled us
to achieve a higher selling price, with monitor revenues up 20% to
GBP0.34m (2016: GBP0.28m). Total LiDCO disposable units were up 5%
to 34,450 (2016: 32,865) indicating a continuing adoption of our
technology. Sales of third party products in the UK declined 11% to
GBP1.45m (2016: GBP1.63m) due to pricing pressure.
A new sales channel opened during the year as LiDCO products
were awarded a NHS Supply Chain Framework Agreement for the first
time, enabling our customers to purchase without undertaking a
local tender process. In a move to bolster our representation in
Ireland, we appointed an exclusive distributor to manage this
market.
US
The US market is where we see the greatest opportunities for
growth globally. This reflects a greater drive to adopt Enhanced
Recovery After Surgery (ERAS) and Perioperative Surgical Home (PSH)
programmes, both of which advocate a proactive management of the
patient's hemodynamic status.
Market access has been our greatest challenge and is now being
addressed post our fundraising although our performance in the year
was restricted as we sold direct via a small sales team. With the
benefit of a strong first half performance driven by capital sales,
total sales grew by 10% to GBP1.18m (2016: GBP1.07m). However, with
an increasingly competitive environment, disposables sales declined
to GBP0.88m (2016: GBP0.98m) largely due to a significant customer
loss in March 2016. Initially in the year we focused on winning new
business and were successful in winning new customer accounts but
given the significant customer loss we subsequently focused our
existing resources on maintaining our customer base.
During the year we started to realise sales from the five-year
purchasing agreement signed in November 2015 with a large US
healthcare group. To better exploit this and other opportunities we
recruited an additional sales person during the year and a Head of
North America in January 2017. Further to the fundraising we expect
to increase our direct presence significantly during 2017, more
than doubling our sales team, which will enable us to better serve
our existing customer base whilst focusing on increasing our market
share in this large, growing and attractive market.
Although ICU Medical were awarded FDA approval during the year
for their new hemodynamic monitor (Cogent) that incorporates our
technology they have delayed the commercial launch until spring
2017. ICU Medical has a substantial existing invasive
catheter-based cardiac output monitoring business and we now expect
to start receiving a royalty income from sales of both monitors and
disposables from them in this new financial year.
Japan
During the year we launched the LiDCOrapid(v2) Unity software
with non-invasive blood pressure module in Japan. This enables us
to expand our offering, target an additional patient population
with the non-invasive product and revitalise our commercial
efforts. Whilst we are encouraged by the growth in monitor and
disposable sales we continue to explore the best approach to this
considerable yet conservative market. We are addressing a market
with a highly embedded market leader and are re-evaluating our
routes to market. Nihon Kohden was appointed in August 2012 as the
exclusive distributor for five years to sell the LiDCOrapid monitor
and disposable kit in Japan. In 2017 we plan to review our
distribution arrangements in Japan.
Continental Europe
Sales in Europe were steady at GBP0.74m (2016: GBP0.73m) with
total monitors sales of 38 units compared with 31 units last
financial year. We have a strong position in a few selected markets
within Europe and are working on expanding our presence in some of
the larger countries in the region. Historically these larger
markets have not been responsive to LiDCO's technology. We believe
that we have an opportunity to re-launch ourselves and will use
2017 to build a more significant business by targeting the high
risk surgery segment. With our much strengthened balance sheet, we
expect to recruit additional sales resource into this region to
support this initiative.
Rest of World
As anticipated, we saw strong demand from China after gaining
registration in March 2016 and from the Middle East where there is
a growing awareness of ERAS and perioperative fluid management
principles. Sales in ROW grew by 76% to GBP0.95m (2016: GBP0.54m),
driven by strong monitor sales 72 units (2016: 29 units) and
surgery disposables which grew 257% to 9,755 units (2016: 2,730
units).
The high margin on our products supports working through
partners that manage groups of distributors on our behalf, enabling
us to concentrate our direct resources on larger priority markets.
We now have master distribution arrangements in place for the
Middle East, South East Asia, Sub-Sahara Africa, former Soviet
States and Canada. We will use some of the proceeds from the recent
fundraising to add clinical and distribution management resources
to these regions to accelerate adoption and penetration in selected
growth markets.
New Products
In 2016 we launched our latest monitor LiDCOunity, a '3 in 1'
hemodynamic monitor that combines the full suite of LiDCO
technology into one offering. This advanced monitoring system
adapts to patients' changing acuity levels and enables our
customers to have seamless monitoring from the Emergency Department
to the Operating Room, to the Intensive Care Unit and to the other
High Dependency Units. LiDCOunity has the flexibility to offer
non-invasive, minimally invasive and calibrated hemodynamic
monitoring all on one platform, meeting our customers' needs as
their patients' acuity changes.
During the year we sold 43 unity monitors representing 19% of
our overall monitor units shipped during the period.
This year at the International Symposium on Intensive Care and
Emergency Medicine ('ISICEM'), March 2017, we launched in Europe
our next generation monitor platform. In addition to the sleek new
look, we have made significant improvements to our operating system
and graphical user interface. The new monitor comes with the next
version of our unity software with added features and
functionality. A pre-market notification under Section 510(k) of
the Food, Drug and Cosmetic Act has been submitted to US Food and
Drug Administration (FDA) and once we have clearance this product
will be launched in the US.
This new monitor hardware is a significant step forward and
provides the platform for new developments in the future. In
addition the Group intends to introduce a differentiated pricing
model in target markets for customers with high annual usage. The
Board believes that this will reduce the time taken to close
business, encourage higher patient use, increase technology
adoption and provide greater forward visibility of revenue.
Intellectual Property
Underpinning our technology and revenue streams is a strong
brand and patent position. Patent cover provides us with a
protectable product and strong market position. Wherever possible
we take the initiative in developing and protecting our advances in
physiological signal processing and intelligent graphical user
interfaces. We are pleased to report that we have submitted further
patent applications, one of which has been granted in Europe,
covering features that enhance our core PulseCO(TM) algorithm.
Clinical evidence and support
For medical technologies to be introduced into mainstream
practice, their use has to be increasingly shown to be both
clinically and cost effective.
Since the publication of last year's annual report, a number of
important clinical papers were published supporting the use of
LiDCO technology:
1. The American Society for Enhanced Recovery (ASER) and
Perioperative Quality Initiative (POQI) published a joint consensus
statement on perioperative fluid management within an enhanced
recovery pathway for colorectal surgery. The group outlined a
framework for the use of intraoperative goal-directed fluid therapy
(GDFT) and the use of advanced hemodynamic monitoring equipment
used to guide clinical decision-making. Reference: Perioperative
Medicine (2016) 5:24 DOI 10.1186/s13741-016-0049-9
2. Further to the study by Huddart et al that demonstrated a
significant reduction in mortality for patients undergoing
emergency laparotomy in four UK hospital ,a 600 patient study from
Denmark has also shown a significant reduction in mortality when
using a multidisciplinary perioperative protocol incorporating
LiDCO technology. The unadjusted 30-day mortality rate was 21.8 per
cent in the control group compared with 15.5 per cent in the group
receiving the intervention. Reference: Br J Surg. 2017
Mar;104(4):463-471. doi: 10.1002/bjs.10427
3. The Society of Critical Care Medicine journal has published a
study evaluating the effects of goal directed therapy using
LiDCOrapid in high-risk patients undergoing cardiac surgery. The
randomised controlled trial involved 126 patients undergoing
coronary artery bypass surgery or valve repair. The authors
concluded that using LiDCOrapid in these high-risk patients for
implementing a goal-directed hemodynamic therapy decreased major
complications and also reduced ICU and hospital length of stay. The
incidence of infection was reduced by 57% and the frequency of low
cardiac output syndrome was reduced by 76%. This group stayed in
hospital on average three days less than the standard treatment
group. This is an important study, high-risk cardiac patients
require hemodynamic and fluid management both in surgery and also
post operatively in the ICU. Historically this has only been
possible through using a highly invasive pulmonary artery catheter.
The LiDCOrapid's minimal and non-invasive nature provides advanced
monitoring while avoiding additional invasive catheter insertion.
Reference: Crit Care Med. 2016 Apr; 44(4):724-33. doi:
10.1097/CCM.0000000000001479
4. The World Journal of Surgery published a large study
examining the influence of an enhanced recovery programme using
LiDCOrapid for the fluid management element on the outcomes of
upper gastrointestinal cancer surgery in 252 patients. Oesophageal
cancer surgery is frequently performed in malnourished patients who
go on to have a higher incidence of surgical complications that
impede recovery. Both overall length of hospital stay and critical
care length of stay were significantly shorter. Patients in the
enhanced recovery group, where LiDCO technology was used, left
hospital on average three days earlier. Reference: World J Surg
(2016) 40:1645-1654. DOI 10.1007/s00268-016-3473-6
5. Presented at the 11(th) Annual Academic Surgical Congress in
the USA early in 2016 and then peer-reviewed and published, a 394
patient study from a major hospital in the USA showed that
implementing an enhanced recovery programme for elective abdominal
surgery using intraoperative fluid management guided by LiDCOrapid
resulted in a statistically significant decrease of two days in
mean length of stay. In addition, the enhanced recovery group had a
zero mortality rate compared to a 2.6% mortality rate in the
standard care group. The authors also noted that the cost of
surgery was less in the enhanced recovery group. Reference: Surgery
Research and Practice Volume 2016 (2016), Article ID 6830260
Outlook
The recent fundraising has transformed the outlook for the Group
and we now enter a period of investment in our sales and marketing
activities, for which costs are expected to be approximately
GBP1.9m more in 2017/18 than in 2016/17. This investment will
enable us to better execute our strategic plan, ensuring that we
have the resources to expand our product sales into the many
countries where adoption of advanced hemodynamic monitoring is now
occurring. With the additional sales and marketing resources, our
new product launches and the introduction of the new high usage
pricing model coming on stream during the year, the Board is
targeting a year of significant sales growth for LiDCO products in
2017/18 compared with the year just ended.
How we create value: our business model
LiDCO is a UK-based manufacturer and supplier of monitoring
equipment and associated single patient use disposables to
hospitals. LiDCO monitors are 'platform' in design. This means they
can be easily and cost-effectively upgraded to add new software
features and parameters by the addition of USB-connected modules.
Our technology, coupled with our low cost manufacturing and product
sourcing skills, combine to produce a highly differentiated,
patent-protected monitor with a recurring income stream from the
sale of dedicated high margin single patient use disposables and
usage licenses.
Our monitors continuously display a number of crucial
physiological parameters including arterial blood pressure, the
effects of anesthesia on the level of consciousness of the brain,
the requirement for intravenous fluids and the amount of blood and
oxygen supplied to the body's tissues and organs. We provide this
crucial data via an easy-to-interpret monitor user interface which
helps clinicians and nurses ensure vital organs are adequately
perfused and that patients are not over-anesthetised or
sedated.
Historically, hemodynamic monitoring was invasive in nature,
requiring the insertion of invasive central catheters. For this
reason, it was only available to a restricted number of the
high-risk patients that could potentially benefit. LiDCO's
technology does not require the insertion of central catheters and
can be used completely non-invasively and in both ventilated and
non-ventilated patients.
Our customers are acute care physicians and nurses working in
major hospitals caring for emergency and high-risk patients.
Hospitals are migrating away from invasive technologies towards the
use of less invasive monitoring, which has been shown to be cost
effective and improve outcomes. Use of LiDCO monitors in high-risk
patients in both intensive care and surgical settings has been
shown to reduce mortality, complications, length of hospital stay
and improve quality of life.
The key features of our business model:
We have developed a new generation of hemodynamic monitoring
products designed to address a developing disposable market
opportunity - internally estimated to be potentially $2 billion per
annum
-- Our disposable products are produced in high volume with low
cost manufacturing processes and have a high margin.
-- Sales of our products are supported with a growing body of
evidence to satisfy purchaser requirements for clinical and cost
effectiveness.
-- We generate revenues principally through the sale of
single-use disposables and, in future, sale of usage licenses into
a growing installed base of LiDCO-enabled monitors.
-- We protect our disposable income stream through having
patented products with high levels of proprietary intellectual
property which are subject to on-going development.
-- We provide first-class training and education to our
customers. This helps entrench our technology and reduce hospitals
costs, with a focus on providing LiDCO with a sustainable recurring
income.
Delivering our objectives: our strategy
Our strategy is to build shareholder value through the
commercialisation of LiDCO monitoring systems and associated high
margin repeat revenues. Excellence in product design, manufacturing
and sales and marketing are at the core of our values. Our products
are patent protected and supported by a growing body of data
showing their clinical and cost-effectiveness. Our technology is
not only usable in traditional locations such as the intensive care
and surgery departments, but also in any area of the hospital where
high-risk patients require such monitoring. Hospitals acquiring our
compelling hemodynamic platform monitors can transition from
traditional invasive catheter-based monitoring to LiDCO's minimally
or non-invasive monitoring in high-risk patients, thereby reducing
complications and lowering costs and length of stay.
Geographical expansion is key to LiDCO's capacity to address the
worldwide opportunity for sales of our technology. Our sales and
distribution model has three elements. Firstly, we have direct
sales into hospitals in the UK and USA. Elsewhere we sell via
distribution partners. Our depth of margin on disposable sales
allows us to attract quality specialist distribution partners on an
exclusive and non-exclusive basis, plus where necessary work
through master distribution organisations to manage our
distributors on our behalf.
By enabling us to increase our investments in our commercial
operations, the proceeds of the fundraising will assist with this
strategy of developing overseas markets, accelerating revenue
growth and reinforcing our leadership position in the UK.
Our core technologies are patented and we see licensing our
technology as another way to access the market. We have licensed
our algorithm on a non-exclusive basis to a major corporate partner
in the US in return for future royalty payments.
Measuring our performance: KPIs
The following KPIs are some of the indicators used by management
to measure performance during the year:
Key performance indicators Year to January Year to January
2017 2016
-------------------------------------------- ---------------- ----------------
Revenue growth of LiDCO products 14% (10%)
Direct LiDCO product revenue per GBP325,000 GBP266,000
sales employee
Indirect LiDCO product revenue per GBP1,795,000 GBP1,303,000
sales employee
% LiDCO product overseas revenue 44% 40%
% of revenues in repeat LiDCO disposables 76% 81%
Monitors sold/placed in the year 227 160
Unit sales/use of surgery disposables 46,580 39,975
Gross profit margin on LiDCO products 79% 81%
-------------------------------------------- ---------------- ----------------
Business objectives
Our objective is to increase our geographical presence beyond
our market leading position in our home UK market. We see multiple
opportunities in the growing hemodynamic monitoring market, with
the largest opportunity being in the USA. To realise accelerated
revenue growth we plan to significantly increase our investments in
our commercial operations. We are aiming to expand our presence in
the USA and UK as well as other key identified markets in the
distribution territories. Due to the high margins of our offering
we expect this strategy will result in stronger profitability in
the mid-term.
Our corporate collaborations are an important element of our
business. There are a number of these in place, ranging from OEM
module licensing-in (Medtronic and CNSystems), distribution
provisions (ICU Medical, Nihon Kohden and Argon) through to
royalty-based licensing-out arrangements (ICU Medical).
Our recent new product launches will enable us to maintain our
technology leadership position and we will look to differentiate
ourselves further by introducing innovative payment models for high
volume users. Further product improvements will look to add
additional features that improve clinical decision making as well
as catering for both the expert and novice user. At the foundation
of our product development strategy is the objective of enabling
our technology to be used along every step of the emergency or
elective patient's care pathway.
We will focus on improving our promotional activities, with an
increased digital presence as we recognise our customers rely on
this for large parts of purchasing or post-purchase support. New
websites and on-line services are being developed that will provide
improved education for users and highlight the application of our
technology in multiple clinical settings. We continue to target
specific high risk surgery and critical care patient care pathways
with our promotional activities to maximise our return on the
greatest opportunities in our direct markets of UK and USA.
Matthew Sassone
Chief Executive Officer
27 March 2017
CONSOLIDATED comprehensive INCOME STATEMENT
For the year ended 31 January 2017
Note Year ended Year ended
31 January 31 January
2017 2016
GBP'000 GBP'000
Revenue 8,212 7,593
Cost of sales (2,612) (2,455)
Gross profit 5,600 5,138
Administrative expenses (5,502) (5,718)
Operating profit/(loss) 98 (580)
Share-based payments (41) 72
Exceptional cost - 163
Adjusted operating profit/(loss) 57 (345)
--------------------------------------------- ----- ------------ ------------
Finance income 6 3
Finance expense (2) (1)
Profit/(loss) before tax 102 (578)
Income tax 85 162
Profit/(loss) and total comprehensive
income/(expense) for the year attributable
to equity holders of the parent 187 (416)
Earnings/(loss) per share (basic
and diluted) (pence) 2 0.09 (0.21)
CONSOLIDATED Balance Sheet
At 31 January 2017
2017 2016
GBP'000 GBP'000
Non-current assets
Property, plant and equipment 809 931
Intangible assets 1,958 1,869
2,767 2,800
Current assets
Inventory 1,467 1,939
Trade and other receivables 2,684 2,480
Current tax 93 168
Cash and cash equivalents 4,901 1,587
9,145 6,174
Current liabilities
Trade and other payables (1,504) (1,482)
Deferred income (92) (116)
(1,596) (1,598)
Net current assets 7,549 4,576
Net assets 10,316 7,376
Equity attributable to equity holders
of the parent
Share capital 1,221 971
Share premium 30,342 27,798
Merger reserve 8,513 8,513
Retained earnings (29,760) (29,906)
Total equity 10,316 7,376
consolidated Cash flow Statement
For the year ended 31 January 2017
Year ended Year ended
31 January 31 January
2017 2016
GBP'000 GBP'000
Profit/(loss) before tax 102 (578)
Finance income (6) (3)
Finance expense 2 1
Depreciation and amortisation
charges 722 720
Share-based payments (41) 72
Decrease in inventories 472 180
(Increase)/decrease in receivables (204) 338
Increase/(decrease) in payables 21 (114)
Decrease in deferred income (24) (5)
Income tax credit received 161 117
Net cash inflow from operating
activities 1,205 728
Cash flows from investing activities
Purchase of property, plant &
equipment (168) (163)
Purchase of intangible assets (521) (493)
Proceeds on the sale of equipment - 4
Finance income 6 3
Net cash used in investing activities (683) (649)
Net cash inflow before financing 522 79
Cash flows from financing activities
Finance expense (2) (1)
Repayment of finance lease - -
Issue of ordinary share capital 2,794 -
(net of issue costs)
Net cash inflow/(outflow) from
financing activities 2,792 (1)
Net increase in cash and cash
equivalents 3,314 78
Opening cash and cash equivalents 1,587 1,509
Closing cash and cash equivalents 4,901 1,587
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the year ended 31 January 2017
Share Merger Retained Total
Share premium reserve earnings equity
capital GBP'000 GBP'000 GBP'000 GBP'000
GBP'000
At 1 February 2015 971 27,798 8,513 (29,562) 7,720
Share-based payment expense - - - 72 72
Transactions with owners - - - 72 72
Profit and total comprehensive
income for the year - - - (416) (416)
At 31 January 2016 971 27,798 8,513 (29,906) 7,376
Issue of share capital
(net of issue costs) 250 2,544 - - 2,794
Share-based payment credit - - - (41) (41)
Transactions with owners 250 2,544 - (41) 2,753
Loss and total comprehensive
expense for the year - - - 187 187
At 31 January 2017 1,221 30,342 8,513 (29,760) 10,316
NOTES TO THE FINANCIAL STATEMENTS
1. NATURE OF THE FINANCIAL INFORMATION
These financial statements have been prepared in accordance with
the principle accounting policies adopted by the Group,
International Financial Reporting Standards (IFRS) and
International Financial Reporting Interpretations (IFRIC) as
adopted by the EU and those parts of the Companies Act 2006
applicable to companies reporting under and were approved by the
Board on 27 March 2017. They are presented in sterling, which is
the functional currency of the parent company and the Group. The
preparation of financial statements in accordance with IFRS
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Although these estimates are based on
management's best knowledge of current events and actions, actual
results may ultimately differ from those estimates.
These results are audited, however the financial information
does not constitute statutory accounts as defined under section 434
of the Companies Act 2006. The financial information for the year
ended 31 January 2016 has been derived from the Group's statutory
accounts for that year, as filed with the Registrar of Companies.
The auditors' report on the statutory accounts for the year ended
31 January 2016 was unqualified and did not contain statements
under section 498 of the Companies Act 2006.
The accounting policies used in completing this financial
information have been consistently applied in all periods shown.
These accounting policies are detailed in the Group's financial
statements for the year ended 31 January 2016 which can be found on
the Group's website.
2. EARNINGS PER SHARE
The earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the year. The basic
earnings per share for the year is based on a profit after tax of
GBP187,000 (2016: loss GBP416,000) and weighted average number of
shares in issue of 198,969,429 (2016: 194,174,908). The diluted
earnings per share is based on the above calculation adjusted to
allow for the issue of shares on the assumed conversion of all
dilutive options. Share options are regarded as dilutive when, and
only when, their conversion would decrease earnings or increase the
loss per share. The diluted earnings per share is based upon a
weighted average number of shares of 197,574,507.
3. DISTRIBUTION
Copies of this statement will be available for collection free
of charge from the Company's registered office at 16 Orsman Road,
London N1 5QJ. An electronic version of this announcement and the
Annual report and accounts will be available today on the Company's
website, www.lidco.com. Copies of the Annual report and accounts
will be posted to shareholders on 10 April 2017 together with the
notice of the Annual General Meeting.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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