LID.L Regulatory News (LID)

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 2015, a year in which the Company grew sales of its high margin surgery disposables, increased gross margins and profitability ending the year debt free.

Financial highlights

· Second consecutive profitable year, with profit before tax* up 18% to £0.33m (2013/14: £0.28m)

· Total revenue down 4% to £8.27m (2013/14: £8.63m)

· Gross margins (excluding third party products) improved to 82% (2013/14: 81%)

· Admin expenses reduced to £5.49m (2013/14: £5.66m)

· LiDCO product revenue (excluding third party products) £6.63m (2013/14: £6.87m)

· Surgical disposables revenue up 10% to £3.39m (2013/14: £3.08m)

· Export sales up 9% to £2.67m (2013/14: £2.46m); up 22% (excluding Japan)

· EBITDA* of £1.06m (2013/14: £1.15m)

· Earnings per share up 20% to 0.18p (2013/14: 0.15p)

· Debt free with cash at year end of £1.51m (2013/14: £2.37m)

* before share-based payments 

Operational highlights

· 267 monitors installed (2013/14: 303); 210 surgical monitors (2013/14: 268)

· Surgical disposables sales up in all territories other than Japan with UK up 4% to 24,410 (2013/14: 23,570)

· Surgical disposables unit sales up 10% to 44,758 (2013/14: 40,660)

After year end

· Registration of LiDCOrapid v2 Unity software and non-invasive blood pressure module in Japan

· Study shows LiDCO detects blood loss fastest

· Grant in the UK of combined hemodynamic and depth of anaesthesia patent

· Grant of patent in Japan for improved method of deriving cardiac output

Commenting on the results Terry O'Brien, Chief Executive Officer, said: "LiDCO has now reported two consecutive years of profitable trading. We are now debt free, well-funded and expect to be cash generative in the current financial year. We have a strong position in our domestic market coupled with a growing surgery disposables business both domestically and in export territories. 

"We can expect 2015/16 to be our third successive year of profits. We are well resourced and organised for further growth through our direct sales organisation in the UK and increasingly see wider opportunities for growth with distribution partners."

The Company presentation will be available from today on the LiDCO website: www.lidco.com.

STRATEGIC REPORT

Introduction

Over the year LiDCO made significant progress, particularly in its principal surgical monitoring business. The Company is pleased to report its second consecutive year of profitable trading. We are particularly gratified that we increased profits, managing the business well through challenging conditions in our domestic market and in Japan. Following an exceptionally strong 2014 performance, profits before tax and share-based payment charges were up 18%, despite a small reduction in overall revenues. Better gross margins coupled with good control of overheads offset the revenue variance. Importantly, and underpinning future commercial progress, the Company increased its installed base of hemodynamic monitors, particularly in the surgery market and grew its worldwide revenue from the associated high margin surgery disposables by 10%. In the UK, against a tougher financial background, the Company increased both its surgical disposables sales and market share. As anticipated, we ended the year free of debt.

Worldwide there are 240 million anesthetic procedures performed per annum of which 24 million are high-risk surgeries. During the year we informed investors of the publication of a number of exciting studies that used LiDCO's technology to achieve reduced complications and costs in a number of elective high-risk cancer surgery, cardiac surgery and post-surgical intensive care populations. In November 2014, UK investigators from four acute Trusts in a multi-centre trial showed that use of our LiDCOrapid monitor, as part of a care pathway for the treatment of emergency surgery patients, reduced 30-day mortality from 15.6% to 9.6%. This means that approximately 6 lives will be saved for every 100 patients monitored. Given these compelling results it is not surprising that interest in the identification and better treatment and monitoring of high-risk surgery patients continues to grow. We supply hemodynamic monitoring technology that can be used either minimally invasively or non-invasively, thus helping to achieve the right care throughout the hospital as and where required in the patient pathway of all high-risk emergency and elective surgery patients.

We benefit from our UK location where the NHS and clinicians lead the way in the adoption of advanced intraoperative fluid monitoring technology despite growing competition for funds. Globally, this is becoming a more widespread practice, particularly following the recent endorsement by the American Society of Anesthesiologists' Perioperative Surgical Home ('PSH') initiative. Our growing surgery disposable sales indicate that LiDCO's innovative platform monitor is increasingly being incorporated into what we believe is very likely to become a mainstream requirement for the perioperative care of high-risk patients. In response to the growing interest, we expect to expand our market access through the appointment of additional distribution partners, particularly in the fast emerging ROW territory in 2015. As the fluid and hemodynamic monitoring market continues to evolve and grow, we anticipate continued growth in our surgical disposables business, which is a key performance indicator for us.

Financial Review

Revenues

With challenges in our domestic market and in Japan, total revenues for the year fell by 4% to £8.27m (2013/14: £8.63m) including sales of third party products of £1.64m (2013/14: £1.77m). Revenues from LiDCO's own product sales reduced by 3% to £6.63m (2013/14: £6.87m), following a 25% increase in the previous year. Further comment is provided below by territory.

Gross profit and margin

Overall gross profit fell by 3% to £5.73m (2013/14: £5.90m) but with gross profit margins, excluding third party products, improved from 81% to 82%. The margin achieved on the sale of third party products was constant at 20%.

Overheads

With tight cost control and a reduced amortisation charge, total overheads fell by £171,000 to £5.49m. Included in the prior year were non-recurring costs of approximately £100,000 relating to the reorganisation of the customer services department. Over the last three years, overheads have increased by £690,000 (14%) including the significant cost of recommencing US direct sales. US direct sales costs increased by £128,000, the result of full year costs of the clinical educators who were recruited part way through the prior year.

Having considered the medium term growth opportunities in the UK surgical market, and believing we could increase our market share, we felt justified in strengthening the UK sales force. The financial impact of this commenced in the latter part of the year with increased headcount costs offset this year by both a reduction in variable direct sales costs and other marketing activities. The coming year will see a full year of costs for this enlarged team and an increase in both variable direct sales costs and other marketing activities. We will also consider a modest increase in resource to address emerging markets distributors in ROW where revenue grew by 76%.

The average headcount (excluding non-executive directors) increased from 42 to 44.

Earnings and tax

The Group increased its profit before tax and share-based payment charges by 18% to £326,000 (2013/14: £277,000), its second consecutive year of profits with operating profits, similarly adjusted of £331,000 (2013/14: £295,000).

Depreciation and amortisation for the year of £732,000 (2013/14: £856,000) is effectively reduced by the release of £158,000 (2013/14: £158,000) of deferred income relating to the three year sale and leaseback of monitors, giving adjusted depreciation and amortisation of £574,000 (2013/14: £698,000). Using the adjusted value, EBITDA for the year was £817,000 (2013/14: £933,000). Earnings per share increased by 20% to 0.18p (2013/14: 0.15p).

Although the Group made a profit before tax, it benefits from research and development tax credits of £123,000. The Group has a deferred tax asset of £4.80m, recognition of which will be considered when a sustained trend of profits is more established.

Cash flow, borrowings and cash balances

During the year the Company repaid £175,000 of loans to become free of debt, as well as paying the final installment of £112,000 relating to the buy-back of the US customer base and inventory from LiDCO's former distributor in the US. A high level of sales falling towards the end of the year saw trade debtors increase by £0.70m, impacting year-end cash.

Cash balances at the year-end were £1.51m (2014: £2.37m) and the business remains well-funded. The Company expects to be cash generative in the current financial year.

Property, plant and equipment

There was a net increase in property, plant and equipment in the year of £14,000 with additions of £363,000 offset by depreciation of £349,000. The most significant additions were £261,000 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.

Intangible assets

Expenditure on intangible assets in the period was £635,000 (2013/14: £723,000) of which £540,000 (2013/14: £621,000) was spent on product development with a further £95,000 (2013/14: £62,000) spent on new product registration, predominantly in respect of Japan and China. We have been busy on the product development front. Expenditure included a number of software developments in both our surgery and intensive care monitors. Three new versions of the LiDCOrapidv2 Unity software (2.03, 2.04 and 2.05) were concluded. On the critical care side we have invested in a number of projects: simplifying the LiDCO System calibration procedure while updating the LiDCOplus software graphical user interface and operating system. In March 2015 we concluded the development of our new portable LiDCO Battery Monitor Stand System ('BMSS'). In parallel with the above projects we have been developing our next generation LiDCO v3 Unity software.

Inventory

Inventory was reduced by £143,000 in the second half of the year, although there was an increase over the whole year of £68,000, due to delivery in the first half of the last batch of forward ordered LiDCOrapid monitors referred to previously to mitigate against the effect of end of life notices issued by the manufacturers on some monitor components. Although we expect inventory levels to reduce further in the current financial year, the Group relies on a number of single-source key suppliers and strategically maintains high levels of inventory in respect of such suppliers.

Operational Review

During the period a total of 267 monitors (2013/14: 303 monitors) were sold or placed, with total disposable unit sales of 60,661 (2013/14: 60,857). Revenue from sales of monitors was £1.32m (2013/14: £1.43m). Surgical disposables units and revenue were up 10% to 44,758 units (2013/14: 40,660) and £3.39m (2013/14: £3.08m) respectively. Sales of intensive care disposables units fell from 20,197 to 15,903 units with revenue of £1.58m (2013/14: £2.07m). Total disposable revenues (including third party products) continues to represent 80% of total product revenues and their margin contribution represents 87% of total administration costs (2013/14: 90%).

UK

Sales in the UK market (excluding third party products) were £3.95m (2013/14: £4.40m). Including third party Argon products, sales were £5.59m (2013/14: £6.17m). Sales were partly affected by a combination of hospitals moving to holding lower levels of disposable inventories and lower surgery monitor capital sales. Prior year incentives for NHS hospitals to purchase hemodynamic monitors and disposables were not repeated, having the effect of reducing capital monitor sales and restricting disposable revenue growth. Despite these changes in procurement, unit sales of surgical disposables and revenue in the UK both grew: units increasing by 4% to 24,410 (2013/14: 23,570). Restrictions on capital funds resulted in a higher percentage of surgery monitors being placed rather than sold compared to the prior year. Encouragingly, measured against reported reductions in disposable revenue in the UK surgery market, indications are that LiDCO has increased its domestic market share. Sales of intensive care disposables in the UK were lower than the prior period, predominantly reflecting the phasing of a major customer's order. Despite the in-period reduction in ICU disposables sales, 34 (mostly replacement) monitors were installed and we feel the UK ICU business is broadly stable while our surgery business is clearly growing.

During the year we concluded a reorganisation of the UK sales operation, putting in place the additional management and information infrastructure necessary to further grow our sales. We currently sell to 42% of UK NHS hospitals with our surgery product and 29% with our ICU product. Our active installed base of surgery monitors is 430 and ICU monitors is 270. We see opportunities to further increase our business by expansion in existing and into new hospital accounts looking to install our multi-parameter platform technology.

International territories

Export sales were up 9% to £2.67m (2013/14: £2.46m), including a significant uplift of 29% in the US and 76% in ROW. Excluding Japan, export sales were up 22% to £2.67m (2013/14: £2.20m). Regarding the major markets of the US and Japan, the performance in the US of our sales team was encouraging, in contrast, distributor sales to Japan were very disappointing (see commentary in Japan section below). We are seeing an increasing level of sales collectively to existing distributors and interest to represent us from potential new distributors - particularly in the ROW territory. We expect to appoint a number of new distributors in 2015.

US

Following the purchase back from our US distribution partner of the installed base of surgery monitors in late 2012, we have sold directly into US hospitals via a small direct sales force. Over the last year, the sales team's focus has been on the growth of disposable sales into our LiDCOrapid installed base. This strategy has been successful, and we have achieved a 25% increase in surgery disposable sales, with unit sales up 25% from 5,650 to 7,065. In addition, 37 LiDCOrapid monitors were sold or placed into the market during the year. Total US revenues for the year were up 29% to £1.10m (2013/14: £0.86m). US sales continue to be profitable before unallocated central costs.

We feel the US market is at the start of a move into a higher growth phase - particularly with the stimulus for use in major surgery that is coming from the American Society of Anesthesiologists' Perioperative Surgical Home ('PSH') initiative. Furthermore, there are additional substantial opportunities for our technology in the cardiac surgery market, where invasive catheter-based technologies continue to decline. The challenge with the US has moved from one of establishing the market need to one primarily of logistics and the selling costs of addressing this large market from our small, albeit profitable, base business. Appropriately, we continue to explore additional national and regional distribution and licensing arrangements in the US. One existing arrangement is a royalty license granted to ICU Medical, who has an existing invasive catheter-based cardiac output monitoring business. ICU Medical is approaching the end of a major R&D investment to develop a new hemodynamic monitor (Cogent) that incorporates our technology. We expect to start receiving a royalty income from sales of both monitors and disposables by ICU Medical towards the end of 2015, after they launch their new monitor in the US.

Japan

Sales of the LiDCOrapid disposable kit (including Argon's blood pressure transducer) are reimbursed in the Japanese market which is the second largest market for hemodynamic monitoring in the world after the USA. Nihon Kohden was appointed in August 2012 as the exclusive distributor for the LiDCOrapid monitor and disposable kit in Japan. Nihon Kohden collaborates with LiDCO and its existing partner Argon Medical Devices, to market and sell LiDCOrapid products in Japan.

No monitor or disposable sales were made in the period (2013/14: £269,000). Unfortunately revenue comparisons are not yet reflective of end user hospital sales in Japan, at this early stage they are still affected by the requirement to run down prior stocking order inventories. Installations of monitors have been slower than expected, as are disposable usage rates. Japan is a conservative market and our partners in Japan are growing end user sales but slowly as they are addressing a highly embedded competitor. We expect monitor sales to our distributor to recommence soon and disposable sales later in the year.

We believe our technology has superior performance. Despite this performance advantage however, the disruption associated with a change in practice results in resistance to conversion. Importantly, after the year-end we achieved the registration of the LiDCOrapidv2 Unity software with non-invasive blood pressure module in Japan. This expands our product offering and further differentiates us from our main competitor's minimally invasive product. We can now offer customers a flexible technology where transitions between minimally invasive and non-invasive monitoring can now be achieved seamlessly. We expect this enhanced functionality will be attractive to customers and provide an enhanced stimulus for conversion to use of our technology.

Continental Europe

In the previous year, 2013/14 we saw a significant increase in revenues from our European distributors. This was encouraging after the cut-backs in healthcare expenditure seen in some European countries in recent years. During 2013/14 total sales increased by 54% to £959,000. Despite the growth seen at the time, we informed shareholders that we remained cautious about sales prospects in continental Europe in our planning for the 2014/15 reporting period. This proved to be wise as revenues modestly declined to £899,000. Surgical disposables were up by 7% on unit volume and 3% on revenue, but this increase was offset by reduced ICU disposables. We sold 50 monitors to distributors of which 37 were LiDCOrapid and 13 LiDCOplus (mostly replacements). We are seeing some indications that interest in intraoperative fluid monitoring is starting to grow - particularly in northern Europe, and are cautiously optimistic that we will see growth in our surgery business this year.

Rest of World

Sales to the ROW distributors grew strongly again and were up by 76% to £668,000 (2013/14: £379,000). This followed a sales increase of 61% in the prior year. Monitor sales were up to 67 units from 33. Growth was seen predominantly in surgery disposables which were up by 125% to 6,073 units and ICU disposables grew by 7% to 1,355 units. We expect to make further distributor appointments in the emerging markets and expect to see good growth again from these territories in 2015.

Details of the Company's performance, by revenues and unit sales by key geographies, are given in the tables below:

Revenues performance by product and key geographies

The most significant component of the revenue labelled 'Other' above is monitor service contracts in the UK which increased by 21% to £243,000 (2013/14: £196,000).

Unit sales performance by category in key geographies

Global markets

We estimate the global revenue opportunity for minimally invasive and non-invasive hemodynamic monitoring disposables to be potentially about US$2 billion per annum and estimate current revenues at about US$300m. The priority countries for LiDCO are the UK, US and Japan with the latter two being the world's first and second largest markets by size (estimated at US$650m and US$480m respectively) representing a total of around 5 million high risk surgery patients per annum.

New products

After the year end we achieved registration of LiDCOrapidV2 with Unity software and non-invasive blood pressure monitoring in Japan. This followed registration and launch in the EU and USA the previous year. This product provides customers with two additional non-invasive monitoring options: continuous arterial blood pressure and depth of anesthesia. LiDCO's technology now addresses a far bigger market. The multimodal nature of the LiDCOrapidv2 further distinguishes the Company's products from the competition, allowing the customer choice regarding the degree of invasiveness while adding the option of continuous brain function monitoring. Patients can now benefit from continuous blood pressure and hemodynamic monitoring at any stage of their treatment and in all of the hospital locations where such care is required. We estimate this non-invasive capability has doubled the potential size of the market opportunity for sale of our products, now projected to be capable of growing to US$2 billion per annum in disposables sales.

Over the year we upgraded the Unity software several times (now at version 2.05) to add additional features and functionality. All LiDCO monitors are now compatible with the latest release of the Philips IntelliBridge patient data interface. IntelliBridge connects to LiDCO devices via a specific Philips IntelliBridge module and cable. In May 2014 we announced that US based NantHealth, a leading provider of healthcare information technology solutions, had successfully completed development of a proprietary communications link between LiDCO monitors and its own DeviceConX (formerly iSirona) system. In combination, these new features make the LiDCOrapidv2 system even easier to use and importantly integrates the data into the hospital's patient information system. With technology use rising in hospitals, it becomes increasingly important for different systems and equipment to communicate with each other in order to help make informed decisions about patient care.

Earlier this month we exhibited our recently CE marked new battery powered monitor stand at the ISICEM meeting in Brussels. The availability of a battery powered (up to 6 hours) stand allows the LiDCOrapidV2 to be mobile so it can now be used in the monitoring of patients' hemodynamic and fluid status in transit between different hospital locations.

For some time our development focus has been on the major surgery market opportunities, however we continue to see good prospects for growth of sales in the high dependency and critical care markets. Accordingly across the year we have invested in a number of new projects that are aimed at simplifying the LiDCO System (lithium dilution) calibration procedure software, while updating our critical care LiDCOplus software graphical user interface and operating system. Our ambition is to make these improvements available to customers in the second half of this year.

Finally, in parallel with the above projects we have been developing our next generation LiDCO v3 Unity software. This is a substantial development with the aim of creating an even more flexible monitor that will have additional features and over time integrate further parameters that we believe will more comprehensively address our customers' requirements for acute care of the high-risk patient. We expect to launch our first LiDCO v3 Unity product later this year and will keep investors informed with progress as we near the project's completion.

Patents

Underpinning our technology and revenue streams is a strong patent position. Patent cover provides us with a more protectable product and 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 the grant in the UK of our combined hemodynamic and depth of anaesthesia patent and that the Japanese authorities have approved our improved method for deriving cardiac output from the arterial pressure waveform.

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.

We announced the findings from a number of important clinical papers during the year.

1. The publication of a cost-effectiveness analysis from clinicians at St George's Hospital, London. These doctors have been delivering goal-directed therapy (GDT), using the LiDCOplus monitor, for high-risk surgery patients in the postoperative period for the last 9 years. In the short term, GDT decreased costs by £2,631 per patient and by £2,134 per hospital survivor. In the long term, GDT was projected to prolong quality-adjusted life expectancy by 9.8 months and to bring incremental cost savings of £1,285 per patient. The cost-effectiveness analysis concluded that the implementation of GDT is both clinically sound and cost-effective, commenting that additional monitoring expense can be offset after less than two months when 100 patients per year receive GDT through savings, due to reduced costs accrued from a reduction in complication rates and hospital length of stay. Reference: Ebm C, Cecconi M, Sutton L, Rhodes A (2014) A Cost-Effectiveness Analysis of Postoperative Goal-Directed Therapy for High-Risk Surgical Patients DOI: 10.1097/CCM0000000000000164

2. Publication in Anesthesia & Analgesia of a paper from the Enhanced Recovery Study Group at Duke University of North Carolina, titled 'Reduced Length of Hospital Stay in Colorectal Surgery after Implementation of an Enhanced Recovery Protocol' (ERAS). The study concludes that implementation of an Enhanced Recovery After Surgery ('ERAS') programme for colorectal surgery was associated with a significantly reduced length of stay ('LOS') and incidence of urinary tract infection. Three key outcomes in the study were length of stay post-operatively, the incidence of post-operative urinary tract infections and the readmission rates. The median LOS was 5 days in the ERAS group compared with 7 days in the traditional group (P < 0.001). ERAS patients had fewer urinary tract infections (13% vs 24%, P = 0.03) and the 30 day readmission rates were lower in ERAS patients (9.8% vs 20.2%, P = 0.02). Reference: Anesthesia Analgesia 2014; 118:1052-61

3. Results of the OPTIMISE study, a multi-centre trial in the UK aimed at improving surgical outcomes by optimising cardiovascular management, have been published in the Journal of the American Medical Association, concluding that when included in a meta-analysis, the intervention was associated with a clinically important 24% reduction in complication rates and a shorter length of stay. OPTIMISE was a multi-centre, randomised controlled trial conducted in 17 acute NHS hospitals to evaluate the clinical effectiveness of a peri-operative hemodynamic therapy algorithm on high-risk patients undergoing major gastrointestinal surgery. The primary outcome score, a combined 30-day complications and mortality rate, was improved in the intervention group, compared to controls, but fell slightly short of statistical significance (p=0.07). The authors commented that a number of factors 'reduced the power of the trial, perhaps resulting in a failure to achieve statistical significance for the primary outcome.' Importantly, further analysis of the data led the authors to state that: 'inclusion in an updated meta-analysis indicates that the intervention was associated with a clinically important reduction in complication rates.'

4. Prospective observational trial covering a total of 264 cardiac surgery patients. The study showed that the use of LiDCOplus significantly reduced the incidence of acute kidney injury (AKI), reduced the subsequent need for renal replacement therapy, and reduced the length of hospital stay. The incidence of AKI was significantly reduced in the GDT group with a total of 8 patients (6.5%) exhibiting AKI compared to 28 (19.9%) in the standard of care group. The median duration of hospital stay was 6 days in the GDT group compared to 7 days for patients receiving standard of care. NICE (National Institute for Health and Care Excellence) has estimated that the costs to the NHS of AKI (excluding costs in the community) are between £434m and £620m per year, which is more than the costs associated with breast cancer, or lung and skin cancer combined. The study clearly shows that avoidance of kidney compromise through using the LiDCO's fluid monitoring technology overseen by the ICU nursing team can reduce the incidence of post-operative AKI by 70%. This represents a significant saving to the NHS and improves patient outcomes. Reference: Thomson Rebekah, Meeran Hanif, Valencia Oswaldo, Al-Subaie Nawaf, Goal-Directed therapy following cardiac surgery and the incidence of acute kidney injury, Journal of Critical Care (2014), doi: 10.1016/j.jcrc.2014.06.011

5. A study concluding that the implementation of an evidence-based care bundle for patients undergoing emergency laparotomy was associated with a significant reduction in the risk of death following the surgery. The emergency laparotomy pathway quality improvement care (ELPQuiC) bundle included goal-directed fluid therapy provided throughout the study using the LiDCOrapid cardiac output monitor, both during surgery and for 6 hours while the patient was cared for in the intensive care unit. The study, which was conducted in four NHS hospitals, showed that the number of lives saved per 100 patients treated rose from 6.47 to 12.44 and the overall adjusted risk of 30-day mortality significantly decreased from 15.6% to 9.6%. The study's authors concluded that 5.97 more lives were saved per 100 patients treated overall compared with outcomes before implementation of the ELPQuiC bundle. The study also noted that 'significant changes in both the use of goal-directed fluid therapy and admission to ICU were found across almost all of the participating sites. These two elements of the bundle may have the greatest impact in reducing mortality in other hospitals and healthcare systems where these standards of care are not met routinely.' Large numbers of patients undergo high-risk emergency general surgery. This makes this patient population a compelling target for quality improvement in their care. The potential gains for saving lives are far greater than many other areas of hospital care. Reference: British Journal of Surgery 2014; 10.1002/bjs.9658

6. A research group in Australia evaluated the performance of minimally invasive cardiac output monitors to detect blood loss in volunteers subjected to blood removal of 2.5% blood volume aliquots to a total of 20% blood volume removed. The devices tested were LiDCO's LiDCOrapid, Edwards' Vigileo FloTracTM, and the USCOM and Deltex CardioQTM Doppler based devices. A statistically significant difference from baseline stroke volume (a measure of the circulation ability to fill the heart effectively) was detected quickest by the LiDCO device after only 2.5% blood loss compared to the other devices where blood loss was detected less quickly. It is not possible to detect blood loss early enough using the traditional monitoring parameter of blood pressure. The precision to detect small changes in blood volume status is valuable in many clinical settings. Earliest detection must be the goal. Through this excellent comparative study, LiDCO monitors have been shown to be the quickest at detecting blood loss. This performance gives our customers the best chance of avoiding excessive blood loss and guiding fluid replacement. Reference: Evaluation of the utility of the Vigileo FloTracTM, LiDCOTM, USCOM and CardioQTM to detect hypovolaemia in conscious volunteers: a proof of concept study. Reference: Anaesthesia 2015, 70, 142-149.

Outlook

LiDCO has now reported two consecutive years of profitable trading. We are now free of debt, well-funded and expect to be cash generative in the current financial year. We have a strong market position in the UK coupled with a growing surgery disposable business in both the domestic UK and export markets.

It is important to remember that the hemodynamic monitoring market effectively required reinventing and revitalizing over the last decade or so. When we started promoting our technology back in 2001 the traditional and invasive pulmonary artery catheter market had been declining for a number of years due to concerns regarding its invasiveness and lack of convincing clinical outcome data. The next generation of less invasive technologies had a considerable challenge to establish that their use was safe and clinically effective in reducing complications and length of stay.

LiDCO's technology has been shown to be both safe and effective. LiDCO products can now be used for the monitoring of fluids and drugs completely non-invasively without the requirement for any catheter insertion at all as well as being minimally invasive. The hemodynamic monitoring market is now growing in some of the major markets outside the UK. We can now expect to see more systematic use and higher sales volumes. Our main challenge going forward is not one of validation for our technology, but rather execution and ensuring that we have the resources to expand our product sales into the many countries where adoption of advanced hemodynamic monitoring is now occurring. Encouragingly we are increasingly attracting quality distributors with the desire and resources necessary to participate in this market.

We expect 2015 to be our third successive year of profits. We are well resourced and organised for further growth in the UK and expect export sales to advance again as we improve our access through additional distribution arrangements.

This will, as previously announced, be my last set of final results as Chief Executive. We are well progressed in finding a suitable replacement who will be focused on executing on the substantial opportunity available to LiDCO. I will be handing over a solid and profitable platform which I believe can deliver both significant growth and value to shareholders.

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 high margin single patient use disposables.

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 now 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 - 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 data.

· We generate revenues principally through the sale or licensing of the sale of single-use disposables 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 and are subject to ongoing development.

· We provide first-class training and education to our customers. This helps entrench our technology and reduce hospitals costs, thereby 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 disposables. Product design, manufacturing and sales and marketing excellence 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 higher volume use of LiDCO's minimally or non-invasive monitoring in high-risk patients reducing complications and lowering costs and length of stay.

It is our strategy to derive revenue growth predominantly from increasing use of our technology and high margin disposables into a growing installed base of LiDCO-enabled monitors. This will be achieved by adding further functionality to the monitor, the development of USB-enabled modules and by increasing the size of the worldwide monitor installed base.

Having multiple sale and distribution options 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. Our direct sales experience in the UK and USA has allowed us to develop a distribution business and sales model which effectively forms a distributor 'franchise'. Our core technologies are patented and have been licensed in part on a non-exclusive basis to a major corporate partner in the US in return for future royalty payments. We continued to explore further arrangements to access the US market.

Measuring our performance: KPIs

The following KPIs are some of the indicators used by management to measure performance during the year:

Business objectives

Our financial objectives are to continue to profitably grow the business with cash generation. Revenue growth is expected to derive principally from increased sales of our surgical disposables. We expect growth of surgical disposable sales in both of our direct markets of the UK and USA and also in the distribution territories. Clearly, a factor central to growth will be how we maximise the impact of the LiDCOrapidv2 both in the existing surgical monitor installed base and in acquiring new hospital accounts. Work is already under way to expand use into new hospital areas, for example obstetric, emergency medical and non-elective surgical patients. These are exciting, high volume new applications where our technology is capable of improving outcomes and reducing costs.

Our corporate collaborations are an important element of our business. There are a number of these in place, ranging from OEM module licensing-in (Covidien and CNSystems), distribution provisions (Nihon Kohden and Argon) through to royalty-based licensing-out arrangements (ICU Medical).

During the year ahead we will be further developing the marketing and educational support materials for use of our product in the peri-operative arena.

Overseas, we are targeting opening new distributor accounts in a number of fast-growing emerging markets. Following approval of the LiDCOrapidv2 for sale in the USA, Europe and now Japan, we are pursuing the registration of the new software and non-invasive blood pressure and brain monitoring modules in China.

Further development work will continue to focus on optimising the LiDCOrapidv2 to maintain our initiative in non-invasive multi modal monitoring by further refining our products. After our financial year end we launched the new version of LiDCOrapidv2 Unity software - version 2.05. This was launched in March 2015 at the 35th ISICEM meeting in Brussels. This new version of the Unity software added further functionality.

Over the longer term we expect to enhance our products by integrating additional flexibility and parameters into the LiDCO monitor platform. We are assessing a number of promising opportunities which would benefit from our expertise in integrating parameters via USB modules and the associated product registrations. Our agile software development allows us to fast track the integration of new parameters. We look to add parameters that make sense from a physiological monitoring point of view to complement our existing displays. Our product strategy is to continue to grow sales by growing the significance of the LiDCO monitor in terms of more comprehensive monitoring of the acute care patient pathway.

Terry O'Brien

Chief Executive Officer

30 March 2015

Glossary of terms

CONSOLIDATED comprehensive INCOME STATEMENT

For the year ended 31 January 2015

CONSOLIDATED Balance Sheet

At 31 January 2015

consolidated Cash flow Statement

For the year ended 31 January 2015

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

For the year ended 31 January 2015

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 30 March 2015. 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 2014 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 2014 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 2014 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 £343,000 (2013/14: £299,000) and weighted average number of shares in issue of 194,174,908 (2013/14: 193,831,249). 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 194,174,908.

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 in April together with the notice of the Annual General Meeting.