Last checked at 14 Oct 2009 13:58
Immediate release: 14 October 2009
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA OR JAPAN OR ANY JURISDICTION IN WHICH SUCH PUBLICATION OR DISTRIBUTION IS UNLAWFUL.
Deltex Medical Group plc
("Deltex Medical" or the "Company")
Conditional Placing to raise £2.0 million
Deltex Medical Group plc, the global leader in oesophageal Doppler monitoring ("ODM"), announces that the Company has raised £2.0 million (before expenses) by way of a placing by Arden Partners plc of 22,222,222 new ordinary shares of 1p each ("Ordinary Shares") in the capital of the Company (the "Placing Shares") with institutional investors and Directors of the Company at a price of 9 pence per share (the "Placing Price") (the "Placing"). The Placing is being underwritten by Arden Partners plc. The Placing Price is a discount of 2.7 per cent. to the closing middle market price of 9.25 pence per ordinary share (as derived from the Daily Official List of the London Stock Exchange) on 13 October 2009, the latest date prior to this announcement.
The Placing is conditional, inter alia, upon the Company obtaining approval from its shareholders to grant the Directors authority to allot the Placing Shares and to disapply statutory pre-emption rights (the "Resolutions"). Deltex Medical expects to send a circular to shareholders on 14 October 2009 convening a general meeting of the Company to be held at the offices of Laytons, Fifth Floor, Carmelite, 50 Victoria Embankment, Blackfriars, London EC4Y 0LS at 9.00 a.m. on 30 October 2009 ("General Meeting"), at which the Resolutions will be proposed for approval.
The Placing is further conditional on admission of the Placing Shares to trading on AIM ("Admission"). It is expected that Admission will occur, and dealings in the Placing Shares will begin, at 8.00 a.m. on 2 November 2009.
The Placing Shares represent approximately 17.8 per cent. of the enlarged issued share capital of Deltex Medical. The Placing Shares will, when issued, rank pari passu in all respects with the existing issued ordinary shares, including the right to receive any dividends and other distributions declared after Admission.
1. Background to the Placing
The Company's objective is to build a world class multinational medical device business. During the period when the Company has been building its business and has as a result been using cash, it has controlled its cost base having regard to the capital resources it has had available to it and taking account of the uncertainty over the timing for the business to achieve profitability and, more importantly, positive cash generation. It has taken longer than originally anticipated to achieve positive cash flow and as a result it has been necessary to complete small incremental fundraisings to ensure that the business had the cash resources to enable it to continue to develop. As the base of the business has grown it has become more possible to forecast the time at which the Company could expect to become cash flow positive. With the goal in sight, in October 2008 the Directors put in place a cost containment programme which was aimed at accelerating the point at which average monthly (cash) sales would exceed the run-rate for normal month to month cash costs (our definition of positive cash flow) as well as to ensure that the Company had the required funding to operate in an uncertain world economy
As the business grows, the Company needs to strengthen its balance sheet to fund its larger operations and to show to its trading counterparties that it is a sound commercial partner for the larger hospital and healthcare systems which are looking at making a significant operational commitment to the Company's technology. As such the Directors believe that the time is right to raise sufficient new capital both to allow it to complete its current objective of moving the business to be cash flow positive and to strengthen the Balance Sheet at a time when the Company is seeking to build its business with major hospitals worldwide and the NHS in the UK. Positive preliminary results from the NHS UK National Technology Adoption Centre's project to implement wide-scale use of the Company`s products in three NHS hospitals is evidence of this. In addition, there are opportunities to enhance the current production base which will require further capital expenditure and working capital to accelerate the roll-out of major enhancements to both monitors and probes designed to make the Company's products even easier to use. None of these initiatives are intended to add to the current cost base of the Company until such time as this is justified by increased sales and the target for positive cash flow at the turn of the year is still on track.
2. Current Trading
On 3 September 2009 the Company announced its unaudited interim results for the six months ended 30 June 2009. In that announcement it was reported that in the UK sales of the Company's operating theatre probes had increased by 17 per cent. and, other than the record probe sales achieved in December 2008, Deltex Medical delivered its best ever months for probe sales in each of April, June and July during the current financial year. In its most developed region in the USA the Company increased both probe volumes and revenues by over 50 per cent. Sales to distributors in Europe increased by over 40 per cent.
Operating expenses were 12 per cent. lower than in the previous six months with further reductions already enacted. Gross margins increased to 75 per cent. Cash used in operations was 34 per cent. lower than in the first half of 2008 and 35 per cent. lower than in the second half. This progress in key markets was achieved despite the adverse impact of the global economic position on healthcare budgets. At 30 June 2008 cash balances stood at £0.5 million together with a working capital facility of £0.75 million provided by the Company's bank.
The Directors believe that the Company is trading in line with market expectations
3. Directors participation in the Placing
Of the Directors, Nigel Keen, Ewan Phillips and Julian Cazalet are participating in the Placing in respect of 1,066,666, 158,616 and 1,066,666 Placing Shares respectively. Upon completion of the Placing, Mr. Keen will be beneficially interested in an aggregate of 5,189,638 Ordinary Shares representing 4.17 per cent. of the enlarged issued share capital, Mr. Phillips will be beneficially interested in an aggregate of 1,159,773 Ordinary Shares representing 0.93 per cent. of the enlarged issued share capital, and Mr. Cazalet will be beneficially interested in an aggregate of 3,206,410 Ordinary Shares representing 2.57 per cent. of the enlarged issued share capital.
The Directors believe that the Placing and the Resolutions to be proposed at the General Meeting are in the best interests of the Company and its shareholders and accordingly recommend that you vote in favour of the Resolutions as they intend to do in respect of their beneficial shareholdings totalling 11,706,485 ordinary shares, representing 11.43 per cent. of the existing issued share capital of the Company.
Commenting on the Placing, Mr. Nigel Keen, Chairman, said:
"We are delighted with the support from our existing investors and new institutional investors. The proceeds of the Placing will be used to strengthen our Balance Sheet to give us the headroom we need to grow the business profitably and build shareholder value as the Company moves through cash flow breakeven."
For further information please contact:
Deltex Medical Group plc 01243 774 837
Nigel Keen, Chairman njk@deltexmedical.com
Ewan Phillips, Chief Executive eap@deltexmedical.com
Paul Mitchell, Finance Director pjm@deltexmedical.com
Nominated Adviser & Broker
Arden Partners plc 020 7398 1600
Chris Hardie chris.hardie@arden-partners.com
Matthew Armitt matthew.armitt@arden-partners.com
Kreab Gavin Anderson 020 7554 1400
Deborah Walter dwalter@kreabgavinanderson.com
Robert Speed rspeed@kreabgavinanderson.com
This announcement is for information purposes only and does not constitute an offer to sell or an invitation to subscribe for or a solicitation of an offer to buy or subscribe for any securities in any jurisdiction including in which such an offer or solicitation is unlawful and is not for distribution in or into, without limitation, the United Kingdom, the United States, Canada, Australia or Japan (the "Excluded Territories"), or to US persons (within the meaning of Regulation S of the United States Securities Act 1933 (as amended) (the "Securities Act").
The Placing Shares have not been and will not be registered under the Securities Act or under the applicable securities laws of any state in the United States or any Excluded Territory and, unless an exemption under such act or laws is available may not be offered for sale or subscription or sold or subscribed directly or indirectly within the Excluded Territories or for the account or benefit of any national, resident or citizen of the Excluded Territories. No public offering of securities will be made in the United States. The distribution of this announcement in other jurisdictions may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdictions.
Arden Partners plc, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Deltex Medical and for no one else in connection with the Placing and will not be responsible to anyone other than Deltex Medical for providing the protections afforded to clients of Arden Partners plc nor for providing advice in relation to the Placing or any other matters referred to in this announcement.
The contents of this announcement are not to be construed as legal, financial or tax advice. If necessary, each recipient of this announcement should consult his, her or its own legal adviser, financial adviser or tax adviser for legal, financial or tax advice.
This announcement contains certain statements that are or may be "forward-looking statements". These statements typically contain words such as "intends", "expects", "anticipates", "estimates" and words of similar import. All the statements other than statements of historical facts included in this announcement, including, without limitation, those regarding Deltex Medical's financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to Deltex Medical's products and services) are forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and therefore undue reliance should not be placed on such forward-looking statements. There are a number of factors that could cause the actual results, performance or achievements of Deltex Medical or those markets and economies to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding Deltex Medical's present and future business strategies and the environment in which Deltex Medical will operate in the future and such assumptions may or may not prove to be correct. Forward-looking statements speak only as at the date they are made. Neither Deltex Medical, nor Arden Partners plc nor any other person undertakes any obligation (other than, in the case of Deltex Medical, pursuant to the AIM Rules for Companies) to update publicly any of the information contained in this announcement, including any forward-looking statements, in the light of new information, change in circumstances or future events.