LID.L Regulatory News (LID)

28 Apr 2006 12:57

For Immediate Release 28 April 2006 LIDCO GROUP PLC ("the Company" or "LiDCO") PRELIMINARY RESULTS - 12 months to January 2006 LiDCO, the UK-based, AIM-traded cardiovascular monitoring company, announcesits Preliminary Results for the 12 months ended 31 January 2006.Group performance shows over 50% sales growth, with operating losses and cashoutflow almost halved.Dr Terry O'Brien, Chief Executive, stated: "I am delighted we are able toreport over 50% sales growth in both monitors and sensors, since it is thecombination of both these achievements that is taking LiDCO towards its goal ofbecoming the pre-eminent minimally invasive technology for hemodynamicmonitoring."Financial HighlightsN.B. Since the previous reported period was 13 months, all comparatives havebeen adjusted onto a 12 months equivalent basis - see table on next page. * Turnover at ‚£3.4m, up 51% * Gross profit up 68% at ‚£2.6m * Gross profit margin increased from 67% to 75% * Administrative expenses down by 16% at ‚£4.6m * Pre-tax operating loss down 47% at ‚£2.1m * Loss per share reduced by 55% at 1.9p * Cash outflow before financing down 38% at ‚£2.2m For more information please contact:LiDCO Group Plc Tel: +44 (0)20 7749 1500Terry O'Brien (CEO), Hugh McGarel-Groves (FD)Buchanan Communications Tel: +44 (0)20 7466 5000Tim Anderson, Mary-Jane Johnson, James StrongPanmure Gordon Tel: +44 (0)20 7459 3600Aubrey Powell, Katherine Roe, Andrew CollinsThe investor presentation `LiDCO's Preliminary Results - Twelve months ended31st January 2006' will be available on the LiDCO website (www.lidco.com).Financial Highlights Summary Table 12 months 13 months 12 months Variance Variance to 31 to 31 equivalent % January January (12/13ths) 2006 2005 2004/5 Turnover (‚£'000) 3,421 2,456 2,267 1,154 51% Gross Profit (‚£'000) 2,550 1,648 1,521 1,029 68% Gross Profit Margin % 75% 67% 67% 8% Administration Costs (‚£ (4,642) (5,965) (5,506) 864 16%'000) Operating Loss (‚£'000) (2,092) (4,317) (3,985) 1,892 47% Loss per Share (pence) (1.91) (4.65) (4.29) 2.38 55% Cash Outflow before (2,214) (3,848) (3,552) 1,338 38%Financing (‚£'000) Corporate Highlights * Largest-ever US order (US$456,000) announced in November for 31 monitors purchased by the US Army; all delivered by January 2006 * LiDCO also announced in November the results of a major trial at St George's Hospital, London. The results revealed the following: * + Average ‚£4,800 savings (12 bed days) per patient treated + Estimated UK national extrapolation equates to a saving of ‚£500m per annum * US$2m three year secured revolving convertible loan agreement on 10th August 2005 with Laurus Master Fund * Regulatory approval and launch in six new territories: Brazil, Denmark, Ireland, Norway, Sweden and Bulgaria * Launch of the LiDCOplus monitor version 3.0 software in March 2005 enabling a communications link between LiDCO's proprietary stand-alone monitoring system and Philips' patient monitor Commercial Highlights[N.B. All comparatives have been adjusted onto a 12 months equivalent basis -see table overleaf] * Monitors: sales up 30% at 176; sales value up 59% at ‚£1.6m * Sensors and fees per use: volumes up 32% to 23,802 units; sales value up 50% at ‚£1.7m * Priority markets sales growth: USA up 29%, UK up 78% and Continental Europe up 47% * Continued worldwide uptake of LiDCO technology: USA - 44% of installed monitors, UK- 16%, Continental Europe - 22%, Rest of the World - 18% * Installed monitors worldwide base: up 20% by 153 units to 923 Commercial HighlightsSummary Table 12 Months 13 Months 12 Months Increase Increase to 31 to 31 Equivalent % January January (12/13ths) 2006 2005 2004/5 Monitor Sales (Units) 176 147 136 40 30% Sensor and Fee per Use 23,802 19,588 18,081 5,721 32%Sales (Units) Regional Sales (‚£'000) - USA 1,123 944 871 252 29% - UK 1,535 932 860 675 78% - Continental Europe 550 406 375 175 47% - Rest of World 213 174 161 52 33% - Total 3,421 2,456 2,267 1,154 51% Installed Base (end p eriod) - USA 409 (44%) 358 (46%) 358 51 14% - UK 152 (16%) 122 (16%) 122 30 25% - Continental Europe 201 (22%) 143 (19%) 143 58 41% - Rest of World 161 (18%) 147 (19%) 147 14 10% - Total 923 (100%) 770 (100%) 770 153 20% Sales by Type (‚£'000) - Monitors 1,603 1,094 1,010 593 59% - Sensors 1,611 1,160 1,071 540 50% - Fee per Use & Rentals 137 125 115 22 19% - License Fees 70 77 71 -1 -2% - Total 3,421 2,456 2,267 1,154 51%The comparative information for the 13 months to 31 January 2005 relating tothe split between monitor and sensor sales by destination and by type has beenfound to have been misclassified and has been restated where necessary.CHAIRMAN'S STATEMENTThe Group continued to make good progress during the year. Despite the wellpublicised financial challenges facing the NHS and similar constraints faced byproviders of healthcare in other territories, turnover increased to ‚£3.4million and the loss after tax was halved to ‚£1.9 million. Capital salesaccounted for 47% of sales, with sensor and fee-per-use sales accounting for51%.Notable events included the sale of 31 monitors to the US Army, the sale of 49monitors to a USA medical equipment leasing company and the publication of theSt George's Hospital outcome study in the Critical Care journal.The UK and USA direct sales teams continued to perform well, and theperformance of most European distributors has been encouraging. The performanceof the Group's regional partners in the USA was, however, disappointing andsales activity in the USA therefore continued to rely mostly on our directsales team. We will continue to look for additional distribution support.Regulatory approval was achieved and sales activities were launched in afurther six countries, bringing the total number of countries in which theGroup's products are registered and marketed to 16, 13 in the EU plus the USA,Brazil, and Japan.The Board appreciates the importance of maintaining high standards of corporategovernance and complies with most provisions of the Combined Code on CorporateGovernance. During the year the Board performed a wide-ranging review of risksand controls. Annual independent audits are performed to ensure that theGroup's systems, procedures and products continue to comply with therequirements of Quality Standards BS EN ISO 9001:2000 and BS EN ISO 13485:2003and the EC Medical Devices Directive. These audits represent independentverification of the Group's compliance with some of the key elements ofcorporate governance.In addition, the Board conducted a review of its own composition andperformance. In May 2005, Hugh McGarel-Groves joined the Group and wasappointed as Finance Director and in October Ian Brown was appointed as aNon-Executive Director to replace Bert Wiegman, who resigned from the Board inDecember. We are grateful for Mr Wiegman's valuable contribution since hisappointment in 2001. Mr Brown brings with him extensive commercial experiencein the medical device markets. In January 2006 Grant Thornton UK LLP wereappointed as the Group's auditors.During the year, the Group made use of its assets to strengthen its workingcapital position, putting in place a revolving secured convertible loanfacility and further agreements with a medical equipment leasing companyrelating to installed monitors.The body of validation data in support of hemodynamic monitoring and theGroup's products continues to grow. This and our record of continuing toaddress the needs of our customers through regular product improvements andupgrades together with our strong direct sales and operational teams places theGroup in a strong position to take advantage of opportunities and further growthe business.Once again, I would like to extend my thanks to all the Group's Directors andstaff for their hard work and dedication during the year and to our ClinicalAdvisory Board for its support and enthusiasm.Theresa WallisChairmanLiDCO Group Plc27 April 2006CHIEF EXECUTIVE OFFICER'S REVIEWIntroductionThis has been a highly productive year for us on many fronts. I am very pleasedto report that LiDCO's revenues have grown significantly across our major salesterritories of the USA and Europe. This growth has been achieved despite thefinancial constraints that hospitals are subjected to that tend to slow theadoption of new medical technologies. Higher sales coupled to a reducedadministrative cost base have resulted in our losses being halved within theyear.MarketIt is evident that we have a significant and expanding market opportunity thatis expected to grow from its current base of around US$40 million to aroundUS$400 million per annum by the year 2010. During the year, we estimate theminimally invasive cardiovascular monitoring market grew by about 40%, fromUS$26 million to approximately US$40 million per annum. This has resulted inmost companies providing less invasive cardiovascular monitoring productsreporting sales increases within the year. Our percentage sales growth increasewas greater than those reported by any of our competitors - albeit we startedthe year from a low revenue base. In marked contrast, sales of the older andinvasive pulmonary artery catheter are expected to continue to decline - fromUS$150 million today, to around US$100 million per annum in 2010. So, while weare sure that competition for a share of this market will continue, we remainconfident that we will stay at the forefront of this market evolution.Product DevelopmentContinued commercial growth will come from promoting a product that isefficiently manufactured and backed up by excellence in the sales and marketingefforts. I am delighted to report that our product quality and customerfeedback continues to be first-rate. Furthermore, our manufacturing automationand partnerships with our component suppliers will continue to reduce the costof sales and increase margins.Out in the market, our products have now been independently validated throughcontrolled clinical trials in 10 different countries: Japan, USA, UK, Italy,Spain, Belgium, Canada, Germany, Holland and India. Of these trials, the mostsignificant was the patient and cost- outcome study by St George's Hospital,London published in November 2005.The importance of these trial results was highlighted in a Sky News item atthat time, which featured an elderly patient who, following major cancersurgery, had her oxygen delivery optimised with the LiDCOplus monitor. Herpost-operative care, managed by our technology, ensured that she was fit enoughto be back at home within 10 days, without complications, living independentlyagain. Patient satisfaction was clearly high as she stated: "I have friendsaround me, things to do, people to talk to - I'm a lucky bunny". This one casestudy demonstrates the way in which our technology can be harnessed todramatically improve care and save money. We have great hopes that theexcellent clinical results and cost savings achieved by St George's Hospital intheir patients through using our technology will lead to it becoming aworldwide standard of care in the post-operative treatment of major surgerypatients.CustomersIn the UK, one in four National Health Service (NHS) trusts is in deficit. Thefinancial crisis has led to closed wards, cancelled operations and staffshortages in hospitals with managers struggling to meet targets and balancetheir books. Clearly, hospital customers are looking for technologies thatimprove outcomes while reducing costs. Our technology has been shown to satisfythese requirements.The results of the trial conducted by St George's Hospital, London demonstratedthat the use of the LiDCOplus monitor to improve oxygen levels following majorsurgery (Early Goal Directed Therapy) significantly reduced complications(particularly infections). Patient stay in hospital was significantly shortened- by an average of 12 days per patient. This equated to a saving of on average‚£4,800 per patient treated. It has been estimated that if this approach wasadopted by the NHS, it would result in a saving of ‚£500 million per year. Ourminimally invasive hemodynamic monitoring equipment can significantly reducehospital costs and reduce risks for patients. Interest in this modern approachto surgical care is on the increase.At the fourth Evidence-Based Peri-Operative Medicine Conference in London inJune, a review paper* concluded that most of the resources are alreadyavailable to hospitals to modernise the treatment of surgical patients, reducecosts and improve the outcomes from surgical intervention. Therefore, anyadditional capital and running costs are `marginal in comparison with thepotential savings.' Of significance for the use of LiDCO's technology thereport concluded that "for hemodynamic optimisation, the potential savings interms of reduced hospital stays have been estimated for an average NHS trust tobe in the order of over ‚£2 million, based on a reduction in stays of 22-31% andtaking into account capital outlay of ‚£60,000 and annual running costs of ‚£150,000."* " Modernising Care for Patients Undergoing Major Clinical Efficiency"presented by the Improving Surgical Outcomes Group, June 2005Given these clear clinical and financial benefits, we are working to help ourhospital customers to adopt LiDCO's advanced hemodynamic monitoring products.In doing so, we expect there will be a considerable benefit to patients. I ampleased to report that there are additional outcome trials taking place usingour technology in Europe and North and South America. These trials are expectedto reinforce the message that LiDCO's technology can reduce complications andthe costs associated with the treatment of major surgery patients. Replicatingthe outstanding results achieved at St George's Hospital in more countries willhelp sales adoption through the development of more localised business cases.A further major validation of our technology was seen when the US Armypurchased 31 LiDCOplus monitors in November of 2005. Our product was purchasedto be used in 16 major medical centres in and outside the USA. This US$456,000order is the largest received to date by our US sales organisation. It followedon from the successful conclusion of an extensive evaluation of our technologyconducted at Brooke Army Medical Center, Texas. The choice of LiDCO'stechnology over the competition was a tremendous endorsement for both thetechnology and LiDCO's US sales force. This order was followed by a furthersale announced in March 2006 of five LiDCOplus monitors to the US Air Force'smain medical facility, Wilford Hall Medical Center in San Antonio, Texas.ProspectsLooking to the likely sales progress in 2006, we can see from the newspapersand national news that in the UK, hospitals are under tremendous pressure tosave money. In other markets, similar pressures exist. So, despite theavailability of our ethically and financially compelling outcome data, we stillexpect the adoption of our technology will take time. Hospitals have to becomeaware of the technology and its benefits, prepare a business plan, budget forthe new equipment and then partner with LiDCO's clinical educator support staffto implement the change at the ward level. The market for less invasivehemodynamic monitoring products is growing strongly. The challenge for LiDCO isto keep strengthening its product offering and distribution reach, in order toparticipate fully in this growth.LiDCO is actively searching for potential business acquisitions andpartnerships, where synergistic products or distribution channels exist, thatwill support and enhance its own product sales. It is anticipated the yearahead will bring exciting opportunities for such strategic opportunities, aswell as a continuation of the strong ongoing organic growth we have seen in thepast year.TRADING REVIEWUSAOur sales are made through a direct sales force of five people. Turnover in2005/6 was ‚£1,123,000, an increase of 29% over the equivalent previous 12months. The installed base increased by 51 units across the year to 409LiDCOplus monitors.The USA represents our biggest potential market. It already represents 44% ofour installed monitor base. However, it is clear that in the USA thecalibration of our monitors is still a blend of calibration with an invasivepulmonary artery catheter, which we do not supply, and the LiDCO Systemdisposables. While this generates short-term capital income and establishes theLiDCOplus monitor user interfaces, it has the unwanted effect of limitinggrowth of our sensor-based disposable income. Over time we believe that thissituation will begin to resolve itself as the market moves away from invasivecatheter calibration. This trend is already evident. The majority of LiDCOplusmonitors sold last year were for calibration with the LiDCO System disposables- including those sold to the US Army. Thus our large USA installed baseremains a potential source of additional sensor/disposables income. We areadding additional resource to our nurse education programme to supporthospitals that wish to move towards a less invasive approach.The appointment of USA regional distributor partners has not been a success forus. Two of our distributor businesses were purchased during the year and weagreed mutually with one more that they were not right for the task. This isunfortunate given our potential in the USA. We are currently seeking newdistribution support and will continue to develop the USA market with modestyearly increases in our direct sales force.Over the course of 2005 we were pleased to consolidate and grow our position inseveral large teaching hospitals including Vanderbilt University in Nashville,Tennessee; the University of Alabama; the University of Iowa and DukeUniversity Medical Center in Durham, North Carolina. In September, cliniciansfrom Duke University published an important validation paper on our technologyin the journal Critical Care Medicine. While benefiting from association withthese prestigious hospitals, it is also encouraging to see our technologyspreading into different departments within the individual centres. Doctorsfrom all over the world come to these centres for training. Hopefully they willcarry their LiDCO experience with them when they take up future positionsaround the globe.UKAs in the USA, our sales in the UK continue to be made by our direct salesforce of seven people. Turnover in the UK was ‚£1,535,000, an increase of 78%over the equivalent previous 12 months. The installed base increased by 30units across the year to 152 LiDCOplus monitors. To have achieved an increasein revenues of 78% despite the very harsh economic climate and significantoverspends within the NHS was an excellent result. A number of new clinicalcentres are looking to adopt our technology and we therefore expect UK sales tocontinue to grow well in 2006. The main limiting factor on revenue growth willmost likely be the availability of hospital funds for the purchase of ourequipment and associated disposables. The UK is probably the most advancedterritory in terms of its appreciation of the benefits of minimally invasivehemodynamic monitoring products, which in turn leads it to being one of themost competitive environments.While many UK customers have more than one technology, it was pleasing to seeour technology gain traction in several large centres including Guys and StThomas' Hospital in London, Addenbrookes Hospital in Cambridge, the RoyalVictoria Infirmary in Newcastle, Leicester General Hospital and Bristol RoyalInfirmary. Clinicians from Guys and St Thomas' Hospital ended the year with anexcellent LiDCO validation study presentation at the Society of Critical CareMedicine's annual meeting in San Francisco. In the majority of our UKcustomers, our position was consolidated and in many instances we saw themigration of our technology into other departments. Nowhere was this moreevident than in St George's Hospital, where following the publication of theiroutcomes study, the protocol incorporating LiDCO's products was implemented asa standard of care for all patients undergoing high risk major surgery.Following the publication of this important paper, other institutions haveindicated a desire to implement this same approach. Hopefully we will see thismaterialise over the course of 2006 and onwards.Continental EuropeTurnover for the year was ‚£550,000, an increase of 47% over the equivalentprevious 12 months. Sales in Continental Europe are made via a network of smalldistributors and now that registration has been achieved in 13 territories,sales are increasing well with monitor placements up by 41%.It was particularly pleasing to achieve registration in Denmark and Sweden,where our already established distribution partners were eager to commencesales. Our experiences and feedback throughout the year in these markets hasbeen very encouraging. The normal process of establishing advocates andreference centres continues in these areas. In the longer-establishedterritories of Italy and Spain, progress continues to be made with veryencouraging year-on-year growth.Our distributors continue to be motivated and excited by the possibilities thatour technology offers them. We expect sales to continue to increase inContinental Europe through 2006.Rest of the World (`ROW')Sales in Asia, Japan and other Rest of World countries totalled ‚£213,000, anincrease of 33% on a 12 months equivalent basis. This representsslower-than-expected capital sales of monitors to these territories, resultingin an increase in ROW installed base of only 14. However, we are starting tosee encouraging growth in sales of sensors into the ROW installed base, asnewly appointed distributors in countries such as Brazil develop their localmarkets. Brazil, where marketing activities commenced during the year, is thelargest medical market in Latin America. We expect further growth of sales ofdisposables and additional monitor sales in the ROW in 2006.The most significant market for hemodynamic monitoring after the USA is Japan.The market in Japan is dominated by the invasive pulmonary artery catheter, forwhich there is a high reimbursement rate for hospitals. Having purchased 100PulseCO monitors in 2003, our distributor, Nipro Corporation, is currentlyselling these to Japanese hospitals via a capital sales route for calibrationwith a pulmonary artery catheter. Clinical trial results from Japaneseuniversity centres and customer response to the product have been encouraging.Following these positive signs from Japanese customers, Nipro Corporation iscurrently engaged in establishing the clinical trials necessary to achieve ahospital reimbursement code for the use of our product. We do not expectsignificant additional monitor sales in Japan until this has been achieved, bysometime in 2007. Licence fees of ‚£70,000 are included within sales, relatingto the original agreement with Nipro Corporation.RESEARCH AND DEVELOPMENT AND PRODUCT APPLICATIONSLiDCOplus Monitor Software Version 3.0 and Philips VueLinkThis new software was launched in March of 2005. The majority of customers havenow elected to upgrade to the new software, which includes a number ofadditional new product features including a communications link (VueLinkinterface) between LiDCO's proprietary stand-alone monitoring system andPhilips' patient monitors. The added functionality, which allows the monitor tocommunicate with Philips and other third-party hospital information systems, isbecoming a mandatory feature for a hemodynamic monitor. The version 3.0software also has a number of enhancements that allow data to be downloaded toa USB key device and/or real-time download of heart-beat data via anon-proprietary ethernet connection.It is our goal to introduce a new version of the LiDCOplus monitor softwareeach year and thereby keep our products ahead of the competition. Our targetfor 2006 is to introduce the new version 4.0 software, most likely sometime inthe second quarter. The version 4.0 will include a number of significantimprovements and a new measurement, the intra-thoracic blood volume (ITBV).The version 4.0 software will include: Improvements to fluid management andoxygen delivery targeting. This will include a new event-response feature, orintelligent fluid assessment screen, that will allow the detection of fluidresponsiveness and response to fluid administration in ventilated, orspontaneously breathing, patients. Monitoring fluids in non-ventilated patientshas been a significant technical challenge. Our new software will be seen as asignificant advance.In order to help hospitals implement Early Goal Directed Therapy (EGDT), StGeorge's Hospital's high risk surgery protocol, the clinician/nurse will nowalso be able to set a visual and individualised oxygen delivery target on theGraph Screen. This will be a unique feature and will help simplify themanagement of the patients scheduled for advanced hemodynamic monitoringprotocols such as the St George's Hospital EGDT.If venous blood saturation values are available, the version 4.0 software willcalculate the oxygen delivery and consumption, i.e. how much of the oxygen isbeing consumed by the body. This feature will again be useful in detectinglevels of oxygen delivery that are inadequate and may lead to organ failure.Finally, the version 4.0 software will have a number of changes to thecalibration procedure that focus on ease of use and improved quality checks anduser help screens.New measurement, the intra-thoracic blood volume (ITBV)Accurate measurement of the volume of blood in the thorax could be ofsignificant benefit to patients and should widen the attraction of theLiDCOplus Monitor to doctors working in intensive-care units. This developmenttakes away the need to insert an invasive catheter into the central venoussystem, and heart or major artery, which is the currently established techniquefor taking the measurements.The ITBV measurement is scheduled to be introduced in the second quarter of2006. The lithium ion injection is currently used by LiDCO as a markersubstance to measure cardiac output. Combining this existing measurement withthe time taken for the lithium marker to transit from the injection point tothe LiDCO sensor provides a new measurement, the ITBV. Physicians endeavour toincrease the blood volume in order to rehydrate patients in surgery, trauma andintensive-care locations. Correct fluid management improves cardiac performanceand critically, the oxygen delivery to vital organs that has been shown toreduce hospital bed stay. The ITBV is a much more sensitive guide to the fluidmanagement of patients than the traditional invasive catheter-based measurementof pulmonary artery wedge pressure. LiDCO expects that this new measurementwill have widespread application in the improved fluid management of patients.New applications for LiDCO's Minimally Invasive Monitoring SystemImportant progress has been made in taking LiDCO's technology into new markets.Obstetric UsePositive data was presented at the Society of Obstetric Anesthesia andPerinatology meeting held in June 2005 in Palm Springs, California, USA.Doctors at the Departments of Anesthesiology & Obstetrics and Gynecology,University of Texas Health Science Center, San Antonio, Texas, reported thatthe LiDCOplus monitor, used to observe cardiovascular changes during continuousepidural anaesthesia in a patient undergoing caesarean section, was able tosafely maintain cardiac output and blood pressure monitoring where this wouldnot otherwise have been possible without the use of an invasive catheter. Thisdepartment is one of a number of university centres actively investigating thepotential applications of the LiDCO technology to the anaesthetic management ofhigh risk obstetric patients. We expect this may develop as a valuable nichemarket following publication of further positive clinical reports.Veterinary useA paper from the Royal Veterinary Hospital, London validating the LiDCOplusmonitor for use in the care of horses during surgery was published in July.This is the first time that LiDCO's proprietary software, providing continuouspulse contour cardiovascular monitoring, has been demonstrated to be applicablein horses. The paper was entitled: "Use of Lithium dilution and pulse contouranalysis cardiac output determination in anaesthetised horses: a clinicalevaluation" - G. Hallowell & K. Corley, Veterinary Anaesthesia and Analgesia,2005, 32, 201 - 211.The paper concluded that LiDCO's method of pulse contouranalysis is a relatively non-invasive and reliable way of monitoring continuouscardiac output in horses under anaesthesia. The paper also concluded that theability to easily monitor continuous cardiac output might decrease morbidityand mortality in the anaesthetised horses. We are beginning to develop asignificant niche market in veterinary practice.LiDCO's Clinical Advisory BoardWe were delighted to announce in June 2005 that Professor David Bennett hasjoined our Clinical Advisory Board. Professor Bennett was the Director of theIntensive Care Unit, St George's Hospital, for more than 25 years and he is amember of the Editorial Board of Intensive Care Medicine and Critical Care. Heis internationally renowned for his pioneering work on the application of lessinvasive cardiovascular monitoring to improve outcomes and reduce costsassociated with the treatment of risk surgery patients.The Board was further strengthened in October 2005 by the appointment ofProfessor Michael Pinsky, Professor of Critical Care Medicine, Bioengineeringand Anesthesiology, at the University of Pittsburgh School of Medicine, USA. Heis also a member of the Editorial Board of the American Journal of Respiratoryand Critical Care Medicine, Intensive Care Medicine, Critical Care journal andCritical Care Forum. He is Editor-in-chief of the eMedicine textbook CriticalCare Medicine. He has a wide range of research interests - among them being thestudy of heart-lung interactions, hemodynamic monitoring, cardiovascularphysiology, sepsis and outcomes research. He is a world-leading authority onthe application of both existing invasive, and the more recent minimallyinvasive, monitoring technologies to optimise cardiovascular physiology andthereby improve outcomes in critically ill patients.REGULATORY AFFAIRSLithium Chloride mutual recognition approvals in five further European territoriesLithium Chloride is used in conjunction with the LiDCOplus system to provide anabsolute measure of a patient's cardiac output. During the period, we announcedfive further European country approvals for the Lithium Chloride injection foruse with the LiDCOplus system in the territories of: Denmark, Ireland, Norway,Sweden and Bulgaria. These latest registrations now provide LiDCO with fullmarketing approval in 13 European countries.Further applications through a third wave application to the Mutual RecognitionProcedure are scheduled for the Lithium Chloride injection in the secondquarter of 2006. Full marketing approvals are expected to start coming throughin the last quarter of this year, with sales commencing in 2007 in France,Greece and Slovenia.Dr Terry O'BrienChief Executive OfficerLiDCO Group Plc27 April 2006FINANCE DIRECTOR'S REVIEWTrading ResultsTurnover for the year was ‚£3,421,000, an increase of 39% on the previous periodof 13 months and 51% up on the equivalent previous 12 months. Within this totalwere sales of existing placed monitors to LiDCO's US-based hospital equipmentleasing partner, for ‚£436,000, up from ‚£270,000 sold to our US leasing partnerin 2004/5. This included ‚£367,000 of UK monitors, which was the first time ourUS leasing partner had purchased any equipment for leasing to hospitals outsidethe US and demonstrates the strength of this ongoing financial partnership.Monitor sales of ‚£1,603,000 were up 59% by value on a 12 months equivalentbasis. 19,610 sensors were sold for ‚£1,611,000, a 50% equivalent valueincrease. A further 4,192 fees for use (including rental equivalent) wereearned at a sales value of ‚£137,000, up 19%.Gross margins showed a healthy increase from 67% to 75%, mainly reflectingprice increases achieved during the year and also the higher proportion of UKsales within the total (45% of sales vs 38% in 2004/5), with the UK marginssignificantly higher than elsewhere. In combination with the strong salesvolume growth, this resulted in an overall gross profit increase of 68% to ‚£2,550,000.During the year the Group continued its cost-containment programme, andachieved a further reduction in administrative expenses of 16% (12 monthsequivalent) to ‚£4,642,000. This resulted in an operating loss of ‚£2,092,000 -an equivalent 12 months reduction of 47%.TaxThe tax charge continues to be nil, whilst the Group remains at the pre-profitstage. Substantial tax losses have been accumulated both in the UK and USA,which will permit significant deferral of future tax charges, onceprofitability is reached. In the UK, the Group qualifies for research anddevelopment (R&D) tax credits and these are reported within the tax line in theprofit and loss account. Within the year under review are included expected R&Dtax credits of ‚£110,000 relating to 2005/6 and ‚£69,000 relating to prior years.Earnings per shareAfter allowing for the expected R&D tax credits, the loss per share of 1.91pwas an improvement of 55% over the equivalent prior 12 month period. A loss pershare of 4.65p was reported for the prior 13 month period, or 4.29p on a 12months equivalent basis.CashflowNet operating outflow of ‚£2,214,000 represents a reduction in net outflow of38% on a 12 months equivalent basis from 2004/5 and was principally funded fromexisting cash resources ‚£656,000 and from the Laurus convertible loan facility‚£1,355,000. A US$2 million asset-backed convertible revolving loan facility wasestablished with Laurus Master fund in August 2005 and, in November 2005,US$445,000 of this loan was converted to equity in accordance with the terms ofthe agreement. A further drawdown took place in January 2006 and at 31 January2006 the Laurus convertible loan facility was fully utilised.Capital expenditure of ‚£417,000 in the year is close to the total depreciationcharge of ‚£440,000. Group cash balances at 31 January 2006 were ‚£951,000 ascompared with ‚£1,607,000 at 31 January 2005. It should be noted that the priorperiod included within financing inflows a share placement in June 2004 thatproduced net proceeds of about ‚£3.7 million.Accounting PoliciesInternational Financial Reporting Standards (IFRS) are not mandatory for theGroup, as an AIM-quoted Company, until the interim results for the six monthsto 31 July 2007 are reported. The Group has decided not to implement IFRSearlier than the mandatory date and therefore these results are produced inaccordance with existing UK Accounting Standards. FRS 25 (FinancialInstruments: Disclosure and Presentation) has been implemented for the firsttime in these financial statements, which has resulted in the Laurusconvertible loan facility being split between a liability component and anequity component. There are no other significant new accounting policiesreflected in these financial statements.Hugh McGarel-GrovesFinance DirectorLiDCO Group Plc27 April 2006CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the 12 months ended 31 January 2006 12 months 13 months ended ended 31 January 31 January 2006 2005 ‚£'000 ‚£'000 TURNOVER 3,421 2,456 Cost of sales (871) (808) Gross profit 2,550 1,648 Administrative expenses (4,642) (5,965) OPERATING LOSS (2,092) (4,317) Interest receivable and similar income 42 77 Interest Payable (35) - LOSS ON ORDINARY ACTIVITIES BEFORE TAX (2,085) (4,240) Tax on loss on ordinary activities 179 41 LOSS ON ORDINARY ACTIVITIES AFTER TAX (1,906) (4,199) Loss per share (basic and diluted) (p) (1.91) (4.65) CONSOLIDATED BALANCE SHEETSAs at 31 January 2006 31 January 31 January 2006 2005 ‚£'000 ‚£'000 FIXED ASSETS Intangible assets 473 313 Tangible assets 1,038 1,221 1,511 1,534 CURRENT ASSETS Stocks 1,140 1,165 Debtors 1,995 1,510 Cash at bank and in hand 951 1,607 4,086 4,282 CREDITORS: amounts falling due within one year (759) (558) NET CURRENT ASSETS 3,327 3,724 TOTAL ASSETS LESS CURRENT LIABILITIES 4,838 5,258 CREDITORS: amounts falling due after more than (1,177) (123) one year NET ASSETS 3,661 5,135 CAPITAL AND RESERVES Called up share capital 503 495 Share premium account 17,566 17,142 Merger reserve 8,513 8,513 Other reserve (88) (88) Profit and loss account (22,833) (20,927) SHAREHOLDERS' FUNDS 3,661 5,135 CONSOLIDATED CASH FLOW STATEMENTFor the 12 months ended 31 January 2006 12 months 13 months ended ended 31 January 31 January 2006 2005 ‚£'000 ‚£'000 Operating loss (2,092) (4,317) Depreciation and amortisation 440 623 Decrease in stocks 25 500 (Increase) in debtors (307) (309) Increase / (decrease) in creditors 130 (32) Net cash outflow from operating activities (1,804) (3,535) Returns on investment and servicing of 7 77 finance Capital expenditure and financial investment (417) (390) Cash outflow before financing (2,214) (3,848) Financing 1,558 3,855 (Decrease)/increase in cash in the period (656) 7 NOTES TO THE FINANCIAL STATEMENTS1. NATURE OF THE FINANCIAL INFORMATIONThe financial information has been prepared in accordance with generallyaccepted accounting principles in the UK and was approved by the Board on 27April 2006.The accounting policies applied in preparing the financial information areconsistent with those adopted and disclosed in the Group's statutory accountsfor the 13 months ended 31 January 2005.These results are audited, however the financial information does notconstitute statutory accounts as defined under section 240 of the Companies Act1985. The financial information for the 13 months ended 31 January 2005 hasbeen derived from the Group's statutory accounts for that period, as filed withthe Registrar of Companies. The auditors' report on the statutory accounts forthe period ended 31 January 2005 was unqualified and did not contain statementsunder section 237 (2) or (3) of the Companies Act 1985.The financial statements have been prepared on the going concern basis, whichassumes that the Company will have sufficient funds to continue in operationalexistence for the foreseeable future. The Company has continued to invest inthe development of its operations and as a result has continued to trade at aloss in the year ended 31 January 2006.The Directors have approved forecasts until the end of January 2008, whichindicate that the Company will have sufficient funding to continue to tradeduring that period. The forecasts assume a level of new sales about which thereis uncertainty. If such new sales are not achieved, the Directors believe thatthere are sufficient opportunities available to them to obtain additionalfunding from sources which are currently being explored, to enable the Companyto continue to develop its operations and to meet its liabilities as they falldue. Accordingly the financial statements have been prepared on a going concernbasis. The financial statements do not include any adjustments that would berequired in the event that the Company had insufficient funding available.2. DIVIDENDSIt remains the Company's policy that no dividends will be paid until futureoperations have provided appropriate levels of distributable profits and cash.3. DISTRIBUTIONCopies of this statement will be available for collection free of charge fromthe Company's registered office at 16 Orsman Road, London N1 5QJ. An electronicversion will be available on the Company's website, www.lidco.com. ENDLIDCO GROUP PLC