Deltex Medical Regulatory News (DEMG)

Deltex Medical Group plc

Results Summary for the year ended 31 December 2012

25 March 2013 - Deltex Medical Group plc ("Deltex Medical", "Group" or "Company"),the global leader in oesophageal Doppler monitoring (ODM), today announces its audited results for the year ended 31 December 2012.

Financial Highlights

·; Sales up 7.5% to £6.8m

·; £0.7m growth from sales of surgical probes

·; Faster growth in surgical probe sales in main markets

o UK up 24% (2011: 16%)

o Europe up 18% (2011: down 10%)

o USA up 10% (2011: down 15%)

·; Cash used in operations reduced by £0.2m to £1.1m

·; UK operation generated over £1 million of cash

·; Operating loss increased by £0.7m to £2.1m after effects of:

o £1.1m of non-cash costs (2011: £0.7m)

o £0.3m loss of margin on launch sales to distributors of CardioQ-ODM+

o £0.4m investment in completing marketing materials upgrade and R&D projects

·; Cash of £0.7m; £2.5m new equity raised in January to fund US market development project

Operating Highlights

·; ODM the only intra-operative fluid management monitoring technology selected as a high impact innovation by the NHS

·; NHS implementation plan launched in December 2012

·; CardioQ-ODM the only intra-operative fluid management monitor recommended by NICE

·; Excellent results from Premier pilot programme at Duke University Hospital, North Carolina

·; Swedish enhanced recovery roll-out: 50% per annum probe growth over last two years

·; First health system in Canada to roll-out ODM and enhanced recovery

·; CardioQ-ODM+ incorporating Pulse Pressure Waveform Analysis launched

Current Developments

·; Major market development project established in USA with Premier Inc

o Implement ODM & enhanced recovery in up to five hospitals

o Disseminate implementation programme to >50% of US hospitals within two years

·; Working with NHS hospitals which plan to increase CardioQ-ODM usage significantly

o Implementation of NICE guidance on CardioQ-ODM

o Introduce dedicated trainer model into UK super-users

·; Installed base of new CardioQ-ODM+ over 150 and growing

·; Surgical probe sales growth in early 2013 in all direct markets

Nigel Keen, Chairman, commented:

"Deltex Medical has entered the next phase in its development as we move from the market creation phase into market development in the UK, with a number of other European countries set to follow. We have additionally put in place a process to accelerate significantly the creation of a mass market for our products in the USA. Our surgical probe business has traction and growth rates improved substantially in 2012 in our key markets. Current momentum leveraged off a tightly controlled cost base will move the business towards regular cash generation in the near future and a number of opportunities are emerging to drive accelerated profitable growth over a prolonged period."

For further information, please contact:-

Notes for Editors

Deltex Medical manufactures and markets CardioQ-ODMÔ Oesophageal Doppler Monitoring ('ODM') systems. ODM is the only therapy to measure blood flow in the central circulation in real time. Minimally invasive, easy to set up and quick to focus, the technology generates a low-frequency ultrasound signal, which is highly sensitive to changes in flow and measures them immediately. Randomised, controlled trials using Doppler have demonstrated that early fluid management intervention will reduce post-operative complications, reduce intensive care admissions, and reduce the length of hospital stay.

The CardioQ-ODM has two distinct established clinical applications: firstly, to guide fluid management during surgery and secondly, to monitor cardiac output in critical care settings.

Surgical market

In March 2011 the National Institute for Health & Clinical Excellence ('NICE') recommended that CardioQ-ODM be considered for use in patients undergoing major and high risk surgery and in high risk patients undergoing intermediate risk surgery. NICE estimated the applicable number of such patients in the NHS in England alone to be over 800,000 each year. CardioQ-ODM has been shown to be effective in both elective and emergency surgery and with both general and regional anaesthetics. This recommendation was specific to CardioQ-ODM and was based on the robust evidence base that supports its use.

Subsequent to the NICE guidance, the NHS in England announced its selection of ODM as a high impact innovation to be rolled out across the system fully, at pace and scale with significant financial penalties starting in the NHS 2013/14 financial year ending 31 March 2014.

The NICE evaluation and recommendation confirms that the potential global market for CardioQ-ODM in surgery includes tens of millions of patients, even if confined to developed health economies: the most conservative estimate of the potential value of the market opportunity Deltex Medical has created is in excess of £1 billion per annum. The Company's core focus is on building market leading positions in this surgical market, both geographically and by type of surgery.

Critical care market

In critical care settings, well-equipped hospitals will often have more than one cardiac output monitoring technology available. In this environment, ODM's strengths are that it is quick to set up, easy to use, safe, low cost and the ideal technology for a patient in crisis requiring rapid or frequent intervention. The potential market for cardiac output monitoring in critical care is a fraction of the size of that for intra-operative fluid management.

Through the 2012 launch of the CardioQ-ODM+, Deltex Medical has added the Pulse Pressure Waveform Analysis ('PPWA') approach to monitoring cardiac output to ODM functionality. Doing this has improved Deltex Medical's offer for monitoring applications as well as providing doctors and nurses with a choice of clinical strategies appropriate to individual patients in different clinical settings.

Company goal

Our goal is to make oesophageal Doppler monitoring (ODM) a standard of care for patients in both these markets. We believe that, in most modern health systems, it is essential to have a robust evidence base of both clinical benefit and cost effectiveness in order to achieve system-wide adoption of a new medical technology. Deltex Medical is one of the very first medical technology companies to have completed the investment necessary to build such an evidence base: as a result, use of ODM during surgery has the proven potential to deliver both clinical and economic benefits that are material at each of patient, hospital and system level.

The Company is currently in the implementation phase of achieving this goal in a number of territories worldwide and there are already over 2,800 CardioQ-ODM systems in use in hospitals worldwide. Distribution arrangements are in place in over 30 countries.

Chairman's Statement

Deltex Medical's goal is to make Oesophageal Doppler Monitoring ('ODM') a standard of care in both major surgery and in critical care. Achieving this will create a major international business that generates substantial amounts of cash and profits sustainable over many years. In 2012 we made substantial progress towards achieving this goal. Our products are gaining traction and were being used in some 20% or more surgical patients by the end of the year than at the start in countries including the UK, USA, France, Scandinavia and Canada. In addition, the launch of the CardioQ-ODM+ monitor has also given us a considerable technological and competitive edge in critical care.

Group sales grew overall by £474,000 up 7.5% to £6,777,000. This growth was achieved because more doctors in more hospitals around the world used our probes more often to manage their patients' fluids during surgery. Doing so reduced the frequency and severity of post-operative complications suffered by those patients thereby improving the quality of the care delivered and lowering its cost.

Growth rates increased in key markets: UK surgical probes grew £477,000 (24%: 2011 growth rate 16%); European surgical probes grew £126,000 (18%: 2011 fall of 10%) US surgical probes grew by over 20% in the second half and overall by £74,000 (10.5%: 2011 fall of 15%). Further underlying growth in surgical probe sales in other export markets was masked by changes in distributor stock holdings resulting in a net fall of £128,000: thus sales of probes to our Canadian distributor were less than half those in 2011 despite the distributor's sales to end users more than doubling.

Sales of disposable surgical probes are now Deltex Medical's largest source of revenue. Over the last decade they have grown by more than twenty-fold from under £0.2m in 2002 to circa £4.5m in 2012. Over the same period, they have grown from about one-tenth of group revenues to around two-thirds.

In the UK, where we have been amongst the fastest growing major new medical technologies over the last decade, our probes are still only used in about one in twenty-five of those patients where their use is recommended by the National Institute for Health and Clinical Excellence ('NICE'), giving us a clear opportunity for substantial future growth. The UK sales operation accounted for over half our 2012 surgical probe revenues and already generates well over £1 million of cash a year, hence we expect this trend to translate into increasingly strong cash-flow.

In December 2011, the NHS in England announced its selection of ODM as a high impact innovation to be rolled out across the system fully, at pace and at scale. Details of the initial implementation plan and targets for the 2013/14 NHS financial year were finalised late in December 2012 and give us additional opportunities for accelerated growth. Other markets, such as France and Scandinavia, are close behind the UK in terms of acceptance of ODM as a standard of care.

In January, we announced a major collaborative research project with Premier Inc ('Premier') aimed at accelerating significantly the creation of a mass market for our products in the USA. The two year project will entail: the implementation of CardioQ-ODM in colorectal surgery in three to five Premier hospitals within an enhanced recovery surgical programme; tracking by Premier of the patient and economic consequences; development by Premier's clinical change experts of a scalable changes management package; and promotion of this package amongst Premier's network which comprises approximately half the hospitals in the USA.

This collaboration with Premier follows excellent results emerging from a preliminary pilot project undertaken with Premier and Duke University Hospital: preliminary data showed substantial reductions in hospital costs and, although the pilot will not complete until later in 2013, we incurred circa £100,000 in 2012 to reflect the substantive progress made. To prepare further for future US growth we are working on a number of initiatives to make the existing pathways for physician reimbursement for use of ODM both more certain and simpler. Where established locally at adequate levels of $80 per patient or higher, physician reimbursement has been associated with achieving our best levels of growth in the USA.

Gross margins were 71% overall and over 80% in direct markets. We have maintained or improved gross margins on probe sales over the last four year in all our markets while sacrificing margin on monitor sales to support momentum in building the installed base at a time of severe restrictions in capital budgets in most developed health systems. In December 2012 we discounted substantially the first sales of over 100 CardioQ-ODM+ monitors to our distributors to enable them to start to seed key hospital accounts with these new monitors from the start of 2013. We estimate that this launch exercise resulted in a one-off margin reduction of circa £300,000 (4% of the full year gross margin). We expect gross margins to improve over time as higher margin probe revenues continue to generate a greater share of total revenues.

Operating expenses increased by £951,000 (16%) and operating losses increased by £676,000 to £2,078,000. This increased loss is after charging £1,069,000 of non-cash costs (2011: £670,000) which includes £540,000 (2011: £270,000) of non-cash clinical trial costs. £417,000 of these trial costs were written off in the first half for projects which we have put on hold for the time being as we refocus our efforts in the short term on research projects aimed at more immediate returns. Cash used in operations was £243,000 lower than in 2011 at £1,094,000.

During 2012 we invested circa £400,000 in completing projects to bring the CardioQ-ODM+ to market and to upgrade our product marketing messages and materials. In 2013 we plan to leverage growth off a cash cost base, excluding costs directly attributable to the US Premier project, broadly similar to that in 2012. However, we do intend to implement modest increases in our cost base to support opportunities in hospitals to increase further surgical probe growth rates, based primarily around our proven 'dedicated trainer' model.

Cash at 31 December was £667,000 (2011: £752,000) and since the year-end we have raised circa £2.5 million, before expenses, in new equity funds to support the Premier collaboration and provide an element of additional working capital headroom. Excluding the planned and funded investment in the Premier collaboration, the traction established in multiple markets in 2012, together with a tightly controlled cost base, position the company to move more rapidly towards consistent operating cash generation.

Trading in the early part of 2013 has been satisfactory with surgical probe sales ahead of 2012 in all our direct markets and sales to distributors on plan. The UK growth in 2013 to date has been achieved against particularly strong growth in the early part of last year and there are encouraging signs that a number of NHS hospitals are planning to increase significantly their use of our products. We have been encouraged by the positive reception of the second generation CardioQ-ODM+ released late in December 2012. More than 100 of these monitors which combine flow (ODM) and pressure (Pulse Pressure Waveform Analysis) modalities in the same device have already been installed in hospitals, mostly in the UK and Continental Europe, where they are being used in both critical care and surgery.

Deltex Medical has entered the next phase in its development as we move from the market creation phase into market development in the UK with a number of other European countries set to follow. We have additionally put in place a process to accelerate significantly the creation of a mass market for our products in the USA. Our surgical probe business has traction in important markets and growth rates improved substantially in 2012 in our key markets. Current momentum leveraged off a tightly controlled cost base will move the business towards regular cash generation in the near future and a number of opportunities are emerging to drive accelerated profitable growth over a prolonged period.

Nigel Keen

Chairman

25 March 2013

Operating Review

Overview

During 2012 Deltex Medical strengthened further its global market leading position in Oesophageal Doppler Monitoring (ODM). ODM benefits substantial numbers of patients, the largest group being patients undergoing major surgery where it is the only technology proven to both reduce post-operative complications suffered by patients and to reduce lengths of hospital stay. ODM's value is being recognised increasingly by clinicians and healthcare administrators. ODM during surgery can be implemented successfully into routine clinical practice on a wide scale because it is a simple procedure that is easy to learn, quick to perform and applicable in almost all patients.

Deltex Medical generates revenues from the sale of single patient disposable probes, the sale of monitors and from providing maintenance and support services. In addition to sales for cash, it also sells a small number of monitors most years under barter arrangements in return for hospitals undertaking specific clinical research. Sales of probes are the best indicator of the level of uptake of ODM and therefore the long term value created by the Group as they increase as more doctors start to treat more patients. The mix of Deltex Medical's revenues has changed markedly over time with sales of surgical probes now being comfortably the largest source of revenue.

Since 2009, restricted capital budgets in most of the markets where we, or our distributors, traditionally sold monitors have meant fewer hospitals purchasing monitors and pressure on pricing. To maintain momentum behind growth in the high value, high margin probe annuity revenue stream we have moved towards new business models in direct markets whereby we own a greater proportion of the installed base of monitors in operating theatres and, where appropriate, we have supported our distributors to make similar transitions. As a consequence, reduction in margin on monitor sales combined with increased amortisation charges for our fleet of installed monitors have caused a small decline in overall gross margin to 71% (2011: 72%). We expect this trend to reverse and gross margins to improve over time as high margin probe sales continue to grow and monitor utilisation increases. Gross margin was over 80% in all direct markets.

In 2012 the recurring revenue streams of probes and maintenance contributed 87% of cash sales with sales of surgical probes comprising 70% of cash sales compared to 36% in 2008 and 10% in 2002. We expect the higher growth rates achieved and achievable in surgical probe sales to lead to higher overall growth rates as they contribute higher proportions of total revenues.

Markets

The CardioQ-ODM has two distinct established clinical applications: firstly, to guide fluid management during surgery and secondly, to monitor cardiac output in critical care settings.

Surgical market

Deltex Medical's key focus is on the developing market for intra-operative fluid management using ODM during surgery. In 2011 NICE recommended that CardioQ-ODM be considered for use in patients undergoing major and high risk surgery and in high risk patients undergoing major surgery. NICE estimated the annual number of such patients in the NHS in England alone to be over 800,000, just over 1,600 patients per year for each 100,000 of population. This equates to tens of millions of patients globally and an evolving market opportunity in excess of £1 billion per annum. The Company's core focus is on building market leading positions in this surgical market, both geographically and by type of surgery.

Deltex Medical has considerable competitive advantages in the emerging market for intra-operative fluid management: a technology, ODM, that measures blood flows precisely in the central circulation; patient management algorithms driven by changes in what is directly measured; a comprehensive evidence base of both clinical and economic benefit across multiple types of surgery; positive clinical meta-analyses and government sponsored systematic reviews; a NICE recommendation and recognition as a key component of modern 'enhanced recovery' approaches to surgery.

Clinical evidence is an essential pre-requisite to both wide clinical acceptance and systematic adoption of a new medical technology. To date seventeen studies using ODM during surgery have been published in peer reviewed clinical journals and these demonstrate overwhelmingly that ODM improves patient outcomes and reduces costs of care. By contrast, there are now ten published studies using competing technologies, but not one of these has yet shown clinical or economic benefits equivalent to ODM. This is unsurprising given the growing body of published studies shows that no other technology is able to detect reliably the small changes in blood flow detected by ODM. This is particularly important during surgery when patients' haemodynamics are often volatile.

Critical care market

Doctors and nurses caring for patients in critical care settings want to be able both to monitor the haemodynamic status of patients over prolonged periods and to intervene using drugs and fluids to optimise the patient's circulating blood volume. ODM's strengths in such settings are that it is quick to set up, easy to use, safe, low cost and the ideal technology for a patient in crisis requiring rapid or frequent intervention. As a pure monitoring technology in critical care, ODM works best when embedded into routine nursing protocols to ensure optimal probe focusing.

We have increased significantly our technology for use in critical care through the launch of the CardioQ-ODM+ monitor early in 2012 and, more importantly, a substantial upgrade to it in December. The CardioQ-ODM+ incorporates the most common competing technology, Pulse Pressure Waveform Analysis ('PPWA'), into our established ODM platform. PPWA has attractions as a technology for monitoring patients over long periods in critical care settings, but it has been hampered by the need for users to recalibrate it frequently with more precise measurements of cardiac output. This is needed to compensate for PPWA's inability to detect reliably changes in compliance in the vascular system. Recalibration methodologies have traditionally been cumbersome, invasive, expensive and imprecise leading to a tendency for insufficient or inadequate recalibration to be actually carried out. Using ODM as a calibration technique means that PPWA can be recalibrated in seconds rather than minutes, at no additional cost and more precisely than previously: it also means that doctors and nurses can intervene using ODM functionality when the monitored parameters indicate this may be beneficial or necessary.

United Kingdom

Deltex Medical built on its market leading position in the UK surgical market in 2012. The Company maintained its position amongst the market leaders in critical care.

UK revenues overall grew by £336,000 (9%), driven by a £470,000 (24%) increase in surgical probe sales, offset by a £77,000 (9%) decline in critical care probes and a £65,000 (10%) decline in monitor revenues. We sold 84 monitors (2011: 61) in the UK in the year at lower average selling prices than in 2011 as we reduced the price of the CardioQ-ODM monitors. The UK surgical installed base of monitors increased by 96 units (18%) to 615 and the critical care installed base increased by 27 units (9%) to 311. By the end of the year the total UK installed base of 926 monitors included 49 CardioQ-ODM+ monitors.

The 24% growth rate in UK surgical probes was half as fast again as the 16% growth rate achieved in 2011. Our probes were used to treat over 33,000 patients in the UK with just under 30,000 of these used in the NHS in England, representing only 3.5% of those patients where use of CardioQ-ODM is recommended by NICE.

The minimum target set by the NHS for the year ending 31 March 2014 is for each NHS Trust to be using some form of intra-operative fluid management technology on at least 80% of their share of 77,560 major surgery patients, i.e. a minimum of 62,000 patients in the year or 7.5% of patients covered by the NICE guidance. These minimum targets are backed up by potentially harsh financial penalties for non-compliance as hospitals failing to achieve targets locally will fail to pre-qualify for 2.5% of their standard NHS revenues. The impact of these targets is likely to vary in different regions of England due to significant variation in current levels of uptake: in 2012 compliance with NICE's guidance was as high as 6.7% in the South-East but as low as 1.5% in the Midlands. Our focus in better penetrated hospitals and regions is to support compliance with the totality of NICE guidance, whereas in later adopters, the focus is on compliance with minimum standards.

The launch of the CardioQ-ODM+ means that we are the only supplier to offer a single intra-operative fluid management product which is able to guide accurately all the various fluid management algorithms which have been studied in trials to date. While we expect the majority of hospitals to choose the lower priced CardioQ-ODM monitors because of the substantial weight of clinical evidence in favour of Doppler guided fluid management, we are seeing demand for the CardioQ-ODM+ in those hospitals where some clinicians prefer a choice of fluid management strategy.

United States of America

Sales in the USA were £91,000 (13%) ahead of 2011, with a £74,000 (10%) increase in probe sales: probe sales comprised 97% of total sales in the USA where our normal model is to place monitors free of charge in return for higher probe prices.

This result marked a return to growth after a difficult year in 2011 when hospital activity was hit by adverse macro-economic conditions. All the 2012 probe growth was achieved in the second half of the year: we achieved over 20% growth in the second half and 30% in the final quarter.

Our business model in the USA is based around developing accounts to the stage where they are using around 50 or more probes a month and then deploying a dedicated clinical trainer to drive further and deeper growth. Based on fourth quarter run-rates in our two most developed hospital accounts we exited the year generating combined net margins, after the cost of the dedicated trainers, worth circa $500,000 per annum on sales worth circa $800,000 per annum. We are working with a number of hospitals with a view to introducing a dedicated trainer when appropriate.

In January 2013 we announced that we had entered into, and raised equity capital to support, the second phase of a major collaboration with Premier, a major purchasing and quality improvement organisation owned by US hospital systems. The programme will result in the implementation of CardioQ-ODM in up to five US hospitals and, in return for fees payable to Premier, give Deltex Medical access to Premier`s patient outcome and hospital cost data, Premier's clinical change management and quality improvement expertise as well as a scalable implementation programme for other hospitals to follow and, ultimately, Premier's extensive networks of hospitals and health policy makers.

Deltex Medical is undertaking this collaboration with Premier with the objectives of:

·; accelerating the creation of a significant market for its products in the USA both through increasing the number of deeply penetrated hospitals and through generating high quality evidence of clinical and economic benefit specific to US health systems;

·; increasing the rate of sales growth that the Company would otherwise expect to achieve in the USA during the next two years; and

·; establishing by the end of the collaboration period (expected to occur in late 2014 or early 2015) a substantial pipeline of QUEST and wider Premier alliance hospitals committed to adopting CardioQ-ODM following the implementation models developed with Premier.

The clinical acceptance of the importance of intra-operative fluid management in determining patients' outcomes after surgery in the USA is generally some way behind that in the UK and Europe but there are clear signs of increasing interest from clinicians in leading hospitals.

International

Distributors service export markets, with the exceptions of those in the USA and Spain, with support from a small team of our own staff.

Sales to distributors in 2012 totalled £1,849,000, an increase of £54,000 (3%) over 2011. Monitor revenues increased by £62,000 and probe revenues fell by £14,000. The decline in probe revenues was the net effect of a £114,000 increase in sales to European distributors and a £128,000 fall in probe sales to distributors in the Rest of the World. Changes in the sales mix meant the average selling price for probes was £51 compared to £55 in 2011 and £51 in 2010. The average selling price of monitors to distributors was £3,391 compared to £3,699 in 2011 and £4,235 in 2010, reflecting the pricing pressure on capital equipment in most markets as well as our decision to accelerate the build-up of an installed base of the new CardioQ-ODM+ monitor by offering substantial discounts to distributors to accompany the December 2012 release.

Distributor stocking patterns can obscure underlying growth in adoption of our products. Thus, while probe sales to our Canadian distributor more than halved in 2012, the distributor's sales of probes to customers more than doubled. Our largest distributor outside Europe is in Peru where probe growth was at the lowest rate for some years as a result of a four month doctors' strike. This has now been resolved and the distributor reports that momentum is returning. Our Peruvian distributor operates a successful dedicated trainer model in major hospitals and we expect positive results from a first major study of CardioQ-ODM to drive further adoption in Peru and South America.

In Continental Europe our distributors report surgical probe sales growth in more developed markets including France, Scandinavia, Austria and Italy with good progress in markets which are versed in the need for haemodynamic monitoring such as Germany. New clinical guidelines are expected to be published in France shortly after a number of delays to date. In Sweden where CardioQ-ODM is increasingly recognised as the standard of care and is being pushed out as part of a national drive on enhanced recovery surgical programmes, our distributor has seen end user growth of around 50% per annum over the last two years.

We sold 114 CardioQ-ODM+ monitors to international distributors in December 2012 subsequent to completing a substantial upgrade to the product. Since the year end, we have been supporting the installation of many of these monitors into hospitals around the world with highly positive feedback in both critical care and surgical settings.

Research and Development

Our key focus in 2012 was on the release in December of the CardioQ-ODM+ monitor combining full ODM functionality with Pulse Pressure Wave Analysis ("PPWA"). Feedback to date shows that doctors already value highly the unique choice of clinical strategies that the CardioQ-ODM+ gives them in various clinical settings.

Our priorities in 2013 and beyond are on: completing a substantial upgrade of the monitor platform; improving further the handling capacities of our probes; starting manufacture of our new simulator mannequins for education and training support; investigating and integrating other haemodynamic monitoring technologies that offer supplementary applications to our existing products and developing commercially viable non-invasive Doppler signal acquisition solutions.

Prospects

We have started 2013 with confidence. Our products are independently validated as delivering better care, better health and lower costs which puts them in the "sweet spot" of evolving health policy in many developed health economies. In the UK our technology is being prioritised by the NHS as a high impact innovation and we are making good progress towards creating similar opportunities in a growing number of major overseas markets. Our products have traction in a number of key markets and we see increasing opportunities to accelerate further existing growth rates.

Ewan Phillips

Chief Executive

25 March 2013

Operating Review

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2012

These supplementary disclosures do not form part of the Consolidated statement of comprehensive income and these tables are not included in the notes to the financial statements. Consolidated Balance Sheet

at 31 December 2012

Consolidated Statement of Changes in Equity 

for the year ended 31 December 2012

Consolidated Statement of Cash Flows

for the year ended 31 December 2012

1 Nature of the financial information

This Results Statement containing condensed financial information for the year ended 31st December 2012 is prepared in accordance with the accounting policies set out in the Annual Report 2012. New standards, amendments to standards or interpretations which were effective in the financial year beginning 1 January 2012 have not had a material effect on the group's financial statements.

This Results Statement does not constitute statutory accounts of the Group within the meaning of sections 434(3) and 435(3) of the Companies Act 2006. The full set of audited financial statements are available online at www.deltexmedical.com and will be sent out to shareholders with the AGM notice in due course. The balance sheet at 31st December 2011 has been derived from the full Group accounts published in the Annual Report 2011, which has been delivered to the Registrar of Companies. The report of the independent auditors for the year ended 31 December 2012 and 2011 were unqualified and did not contain a statement under section 498 of the Companies Act 2006.

2 Alternative financial measures

The Group uses a number of alternative (non-Generally Accepted Accounting Practice (non-GAAP)) financial measures, which are not defined by IFRS. The Directors use these measures in order to assess the underlying operational performance of the Group and as such these measures are important and should be considered alongside the IFRS measures. The following non-GAAP measures are referred to in this Results Statement.

a) Adjusted operating loss beneath the Consolidated Statement of Comprehensive Income

This is defined as operating loss before non-cash charges to the Consolidated Statement of Comprehensive Income. A reconciliation of the operating loss to the adjusted operating loss is shown beneath the Consolidated Statement of Comprehensive Income.

b) Adjusted operating cash flow before movement in working capital

This is defined as the operating cash flow before movement in working capital which relates to cash transactions only. Therefore any non-cash working capital elements have been removed. A reconciliation of the adjusted operating cash flow before movement in working capital to the operating cash flow before movement in working capital is shown beneath the Notes to the Cash flow Statement.

3 Revenue

UK probes sales are split:

4 Dividends

The directors do not recommend payment of a dividend (2011: nil).

5 Notes to the Consolidated Statement of Cash flows

These supplementary disclosures do not form part of the note to the Consolidated Statement of Cash Flows and these tables are not included in the notes to the financial statements.

6 Loss per share

Basic loss per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares issued during the year. 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.

The loss per share calculation for 2012 is based on the loss of £2,093,000 and weighted average number of shares in issue of 148,243,393. For 2011 the loss per share calculation was based upon the loss of £1,421,000 and weighted average number of shares in issue of 136,698,498

7 Distribution of the announcement

Copies of this announcement are sent to shareholders on request and will be available for collection free of charge from the Company's registered office at Terminus Road, Chichester, West Sussex PO19 8TX. Copies of the Report and Accounts for the year ended 31 December 2012 will be sent to shareholders in due course. Both this announcement, Report and Accounts and Results Presentation are available to download from the Company's website free of charge at www.deltexmedical.com.