LID.L Regulatory News (LID)

18 Oct 2005 07:01

LiDCO Group Plc18 October 2005 For immediate release 18 October 2005 LIDCO GROUP PLC ("the Company") INTERIM RESULTS LiDCO, the UK-based, AIM-traded cardiovascular monitoring company, announces itsInterim Results for the six months ended 31 July 2005. Group performance showssubstantial sales growth and significantly reduced losses. Financial Highlights • Turnover up 71% at £1.6m (2004: £0.9m)• Gross profit margin of £1.2m up to 78% (2004: 66%)• Reduced administration expenses down 17% at £2.4m (2004: £2.9m)• Cash outflow before financing down 36% at £1.1m (2004: £1.7m)• Pre-tax loss down 50% at £1.1m (2004: £2.3m)• Loss per share reduced by 60% at 1.16p (2004: 2.91p)• US$2m three year secured revolving convertible loan agreement on 10th August 2005 with Laurus Master Fund Corporate Highlights • LiDCO announced in March the results of a major trial at St George's Hospital, London. The results revealed the following: - Savings in the cost of treating patients - average of £4,000 (10 bed days) per patient - Estimated national extrapolation equates to a saving of £500 m per annum for the NHS• US specialist hospital equipment rental company, Med One, purchased 25 LiDCOplus monitors for £0.25m in July 2005 to rent to NHS hospitals in the UK• Regulatory approval and launch in six new territories: Brazil, Denmark, Ireland, Norway, Sweden and Bulgaria• Launch of the LiDCOplus Monitor v3 software enabling a communications link between LiDCO's proprietary stand-alone monitoring system and Philips' patient monitor Commercial Highlights • Installed base of monitors now at 857 (June 2004: 667)• Number of PulseCO/LiDCOplus monitors sold/placed during the period increased by 14% (87 against 76)• Sensor and fee per use volumes up 45% to 11,061 from 7,614• Sales growth in priority markets; USA up 34%, UK & Europe up 91%• Continued worldwide uptake of LiDCO's technology with 45% of installed monitors in USA, 37% in Europe and 18% in the ROW Revenue Summary Table Revenue & Installed Base Summary Table Sales Detail July 05 June 04 £'000 £'000 Capital (% of total sales) 721 (46%) 321 (35%)Sensors (% of total sales) 747 (48%) 515 (56%)Monitor fee for use 41 44Licence fees 35 35Distributor rental 22 0Service Contracts 2 0Total 1,568 915Installed base (Monitors) 857 667 Dr Terry O'Brien, Chief Executive, stated: "I am pleased to announce theseresults showing excellent cost control and very encouraging sales growth. Weexpect sales to continue to increase in the second half of the year asdistributors in our recently licensed territories begin to close more accounts." 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 Strong Panmure Gordon Tel: +44 (0)20 7459 3600Grant Harrison, Aubrey Powell, Katherine Roe The investor presentation 'Interim Results - Six months ended 31st July 2005'will be available on the LiDCO website (www.lidco.com). CHIEF EXECUTIVE OFFICER'S STATEMENT The first half of the year has seen good sales growth in LiDCO's key markets.This has been achieved despite the fact that most hospitals are struggling tofind funding for new medical technologies. In the UK one in four National HealthSystem (NHS) trusts is in deficit. The financial crisis has led to closed wards,cancelled operations and staff shortages in hospitals with managers strugglingto meet targets and balance their books. Clearly hospital customers are lookingfor technologies that improve outcomes while reducing costs. Our technology hasbeen shown to satisfy these requirements. The results of a trial conducted by StGeorge's Hospital, London announced in March demonstrated that the use of theLiDCOplus Monitor to maintain oxygen levels following major surgery patientssignificantly reduced complications (particularly infections). Patient stay inhospital was significantly shortened - by an average of more than 10 days perpatient. This equated to a saving of on average £4,000 per patient treated. Ithas been estimated that if this approach was adopted by the NHS throughout theUK it would result in a saving of £500 million per year. Our minimally 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 4th Evidence Based Peri-OperativeMedicine Conference in London in June a review paper* concluded that theresources are already available to hospitals to modernize the treatment ofsurgical patients, reduce costs and improve the outcomes from surgicalintervention. Therefore the capital and running costs are 'marginal incomparison with the potential savings.' Of significance for the use of LiDCO'stechnology the report concluded that 'for hemodynamic optimization, thepotential savings in terms of reduced hospital stays have been estimated for anaverage NHS trust to be in the order of over £2 million, based on a reduction instays of 22-31% and taking into account capital outlay of £60,000 and annualrunning costs of £150,000.' A full paper further reporting these results will bepublished in Critical Care on the 8th of November 2005. Given these clear clinical and financial benefits we are working with ourinternational distributor network to help hospital customers to adopt ouradvanced hemodynamic monitoring products. In doing so we expect there will be aconsiderable benefit to patients. Such adoption of a technology is notinstantaneous - rather it takes time for hospitals to budget for the newequipment and then partner with our clinical educator support staff to implementthe change at the ward level. The second half of this year will see anincreasing volume of sales through our distribution partners, as the investmentmade in marketing in their territories coupled with strong clinical andfinancial arguments comes to fruition. *"Modernising Care for Patients Undergoing Major Surgery: Improving PatientOutcomes and Increasing Clinical Efficiency" presented by the Improving SurgicalOutcomes Group, June 2005. FINANCIAL & TRADING REVIEW Turnover was £1.6m, up by 71% from £0.9m in the six months ended 30 June 2004,with an improvement in the gross profit margin from 66% to 78%. Revenues in ourpriority territories of the UK, USA and Continental EU territories rose by 114%,34% and 38% respectively. The installed base of monitors increased by 87 unitsto 857 (compared to 667 units in June 2004) - with an accompanying increase insensor usage of 45% from 7,614 to 11,061 units. Continuing progress in theunderlying business is clear and we are confident in the development ofassociated annuity sales. With the appointment of new distributors, the number of sales peoplerepresenting our products in the USA, Europe and now Brazil has increased. Theadditional contribution from these territories will help to deliver highergrowth in both placement of monitors and associated annuity revenue in thesecond half of this year. The sale of 25 monitors in the UK to Med One, the USspecialist hospital equipment rental company, follows on from the sale of 75monitors to Med One in the USA in January 2005; this is the first time Med Onehas purchased hospital equipment for rental outside the USA and demonstrates itsconfidence in LiDCO's cardiac monitoring system. The gross profit of £1.2m represents a gross margin of 78% (2004: 66%), being ablend of the 84% and 73% margins for monitors and disposables respectively.Continuing with active cost management, administrative expenses fell by 17%during the period (£2.4m against £2.9m). Consequently the pre-tax loss was downby a very encouraging 50% (£1.1m vs £2.3m) and the loss per share reduced by 60%(1.16p against 2.91p). In Europe and the USA sales increased significantly: UK• Six months turnover up 114% to £786,000 (2004: £367,000).• Sensor sales up 55% at 4,449 (2004: 2,880).• The market for minimally invasive hemodynamic monitoring is clearly growing in the UK and we expect this to continue as more hospital trusts invest in our technology to improve outcomes in intensive care and post operative major surgery patients. USA• Turnover up 34% to £425,000 (2004: £316,000).• Sensor sales up 44% at 4,932 (2004: 3,434).• USA sales are still predominantly derived from our direct sales force of 5 people. In the next six months we expect to see a contribution from distribution partners. Continental Europe• Turnover up 38% to £222,000 (2004: £161,000)• Sensor sales up 67% at 1,505 (2004: 900).• As with the US in the second half of 2005, we should start to see an increasing contribution from our distribution partners in the EU territories where we have achieved registration in the last year - Sweden, Denmark, Ireland, Norway and Bulgaria. Japan, Far East and Rest of World• Turnover up 178% to £100,000 (2004: £36,000)• Sensor sales down by 56% at 175 (2004: 400). Licence Fees• Turnover £35,000 (2004: £35,000) Having already purchased 100 PulseCO monitors, our distributor Nipro Corporationis currently selling these to Japanese hospitals via the capital sales route.Response to the product has been encouraging. Following these positive signsfrom Japanese customers, Nipro Corporation is currently engaged in establishingthe clinical trials necessary to establish a hospital reimbursement code for theuse of our product. The reduction in sensor sales across the period is due to a combination ofproduct purchase timing issues and a reduction in distributor sensor sales tothe Far East. Following launch of our products in Brazil we anticipate that thismarket will represent a significant opportunity for our technology and sensorsales have commenced since the product launch in June. RESEARCH AND DEVELOPMENT AND PRODUCT APPLICATIONS Phillips VueLink In May 2004, LiDCO signed a contract with Philips Medical Systems to create acommunications link (VueLink interface) between LiDCO's proprietary stand-alonemonitoring system and Philips' patient monitors. I am pleased to announce thatthe software was launched in March of this year. A considerable number ofcustomers have already elected to upgrade to the new software which includes anumber of additional new features. The added functionality, which allows themonitor to communicate with Phillips and other third party hospital informationsystems, is becoming a mandatory feature for a hemodynamic monitor. New Applications for LiDCO's Minimally Invasive Monitoring System Important progress has been made in taking LiDCO's technology into new markets:Obstetrics, expanding the use in existing markets by improving patient outcomesand reducing invasiveness, and veterinary. Obstetric Use Positive data was presented at the Society of Obstetric Anesthesia andPerinatology meeting held in June in Palm Springs, California, USA. Doctors atthe Departments of Anesthesiology & Obstetrics and Gynecology, University ofTexas Health Science Center, San Antonio, TX reported that the LiDCOplusMonitor, used to observe cardiovascular changes during continuous epiduralanesthesia in a patient undergoing caesarean section, was able to safelymaintain cardiac output and blood pressure monitoring where this otherwise wouldnot have been possible without the use of an invasive catheter. This department is one of a number of University centers actively investigatingthe potential applications of the LiDCO technology to the anesthetic managementof high risk obstetric patients. We expect this to develop as a valuable nichemarket following publication of further positive clinical reports. Improving Outcomes and Reducing Costs in High-Risk Surgery Patients Perioperative optimization is the preventative increase in patients' blood flowduring the period around surgery to ensure adequate oxygen delivery to the brainand other critical organs. Not surprisingly, these optimization protocols reducecomplications and hospital stay as shown by the St George's research group whoused our technology to reduce hospital stay in surgical patients by an averageof 10 days. Following the presentation of these results we were delighted toannounce that Professor David Bennett has joined our Clinical Advisory Board.Professor Bennett was the Director of the Intensive Care Unit, St George'sHospital for more than 25 years and is a member of the editorial board ofIntensive Care Medicine and Critical Care. David is internationally renowned forhis pioneering work on the application of less invasive cardiovascularmonitoring to improve outcomes and reduce costs associated with the treatment ofrisk surgery patients. We have a high degree of interest from academic centersfor speakers who can scientifically review and present the opportunities toimprove care with the use of advanced hemodynamic monitoring. In conjunction with our Clinical Advisory Board and a number of researchcenters, LiDCO is further developing the LiDCOplus user interface software tofurther simplify the physician and nurse-led optimization of fluid and drugadministration to at risk critical care and surgical patients. We expect theseadditional product features will be available for customers in 2006. We continue to assess the potential to combine third party, less invasive sensortechnologies, i.e. not requiring an arterial line, with the LiDCOplus monitor tomeasure arterial blood pressure and derive blood flow measurements. Suchcombinations of technology could open up additional markets - where theplacement of an arterial line is not indicated. Veterinary use A paper from the Royal Veterinary Hospital, London validating LiDCO's LiDCOplusMonitor, and in particular the Company's pulse contour software (PulseCO), foruse in the care of horses during surgery was published in a prestigiousveterinary journal in July. This is the first time that LiDCO's proprietarysoftware, providing continuous pulse contour cardiovascular monitoring, has beendemonstrated to be applicable in horses. The paper was entitled: "Use of Lithiumdilution and pulse contour analysis cardiac output determination inanaesthetized horses: a clinical evaluation - G. Hallowell & K. Corley,Veterinary Anaesthesia and Analgesia, 2005, 32, 201 - 211." The paper concluded that LiDCO's method of pulse contour analysis is arelatively non-invasive and reliable way of monitoring continuous cardiac outputin horses under anaesthesia. The paper also concluded that the ability to easilymonitor continuous cardiac output might decrease morbidity and mortality in theanaesthetized horses. REGULATORY AFFAIRS Lithium Chloride Mutual Recognition Approvals in Five Further EuropeanTerritories & Brazil Lithium 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 thirteen European countries including UK, Spain, Germany,Austria, Italy, Czech Republic, Belgium and Holland. In addition, the LiDCOplus Monitor and associated disposables have been approvedfor sale in Brazil. Brazil is the largest medical market in Latin America witharound 7,200 hospitals and an estimated hospital services market of $5 billion. Given the recent enlargement of the EU further applications (in up to 10territories) through a third wave application to the Mutual RecognitionProcedure are scheduled for the Lithium Chloride injection in the first quarterof 2006. Full marketing approvals are expected to start coming through in thelast quarter of the same year. Terry O'BrienChief Executive Officer18 October 2005 INDEPENDENT REVIEW REPORT TO LIDCO GROUP PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 31 July 2005 which comprises the profit and loss account,the balance sheet, the cash flow statement and related notes 1 to 4. We haveread the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the company, inaccordance with Bulletin 1999/4 issued by the Auditing Practices Board. Ourwork has been undertaken so that we might state to the company those matters weare required to state to them in an independent review report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the company, for our review work, for thisreport, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare also responsible for ensuring that the accounting policies and presentationapplied to the interim figures are consistent with those applied in preparingthe preceding annual accounts except where any changes, and the reasons forthem, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with United Kingdom auditing standards and thereforeprovides a lower level of assurance than an audit. Accordingly, we do notexpress an audit opinion on the financial information. Going concern As set out in the notes to the interim financial information, the Company mayrequire additional funding in the event that new customer sales are not achievedas forecast by the directors. The directors believe that there are sufficientopportunities available to them to obtain additional funding if necessary. Theinterim financial information does not include any adjustments that might arisefrom a failure to obtain new funding, should this prove necessary. In view ofthe significance of this uncertainty, we draw attention to this matter but ourreview conclusion is not qualified in this respect. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 31 July 2005. Deloitte & Touche LLPChartered AccountantsLondon18 October 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the six months ended 31 July 2005 Thirteen Six months Six months months ended ended 31 July ended 30 31 January 2005 June 2004 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 TURNOVER 1,568 915 2,456Cost of sales (351) (312) (808) Gross profit 1,217 603 1,648 Administrative expenses (2,403) (2,910) (5,965) OPERATING LOSS (1,186) (2,307) (4,317) Interest receivable and similar income 39 12 77 LOSS ON ORDINARY ACTIVITIES BEFORE TAX (1,147) (2,295) (4,240) Tax on loss on ordinary activities - - 41 LOSS ON ORDINARY ACTIVITIES AFTER TAX (1,147) (2,295) (4,199) Loss per share (basic and diluted) (p) 1.16 2.91 4.65 CONSOLIDATED BALANCE SHEETAs at 31 July 2005 Thirteen Six months Six months months ended ended 31 July ended 30 31 January 2005 June 2004 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 FIXED ASSETSTangible assets 1,125 1,300 1,221Intangible assets 301 335 313 1,426 1,635 1,534 CURRENT ASSETSStocks 1,172 1,522 1,165Debtors 1,441 974 1,510Cash at bank and in hand 668 3,659 1,607 3,281 6,155 4,282 CREDITORS: amounts falling due within one year (458) (622) (558) NET CURRENT ASSETS 2,823 5,533 3,724 TOTAL ASSETS LESS CURRENT LIABILITIES 4,249 7,168 5,258 CREDITORS: amounts falling due after more than one year (88) (163) (123) NET ASSETS 4,161 7,005 5,135 CAPITAL AND RESERVESCalled up share capital 497 491 495Share premium account 17,313 17,080 17,142Merger reserve 8,513 8,513 8,513Other reserve (88) (60) (88)Profit and loss account (22,074) (19,019) (20,927) EQUITY SHAREHOLDERS' FUNDS 4,161 7,005 5,135 CONSOLIDATED CASH FLOW STATEMENTFor the six months ended 31 July 2005 Thirteen Six months Six months months ended ended 31 July ended 30 31 January 2005 June 2004 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Operating loss (1,186) (2,307) (4,317) Depreciation and amortization 203 318 623(Increase)/decrease in stocks (7) 143 500Decrease/(increase) in debtors 69 227 (309)(Increase)/decrease in creditors (135) 72 (32) Net cash outflow from operating activities (1,056) (1,547) (3,535) Returns on investment and servicing of finance 39 12 77 Capital expenditure and financial investment (96) (205) (390) Cash outflow before financing (1,113) (1,740) (3,848) Financing 174 3,799 3,855 (Decrease)/increase in cash in the period (939) (2,059) 7 NOTES TO THE INTERIM STATEMENT 1. NATURE OF THE FINANCIAL INFORMATION The financial information has been prepared in accordance with generallyaccepted accounting principles in the UK and was approved by the Board on 18October 2005. The accounting policies applied in preparing the financialinformation are consistent with those adopted and disclosed in the Group'sstatutory accounts for the 13 months ended 31 January 2005. These results are unaudited and the financial information does not constitutestatutory accounts as defined under section 240 of the Companies Act 1985. Thefinancial information for the 13 months ended 31 January 2005 has been derivedfrom the Group's statutory accounts for that period, as filed with the Registrarof Companies. The auditors' report on the statutory accounts for the periodended 31 January 2005 was unqualified and did not contain statements undersection 237 (2) or (3) of the Companies Act 1985. The financial statements have been prepared on the going concern basis, whichassumes the Company will have sufficient funds to continue in operationalexistence for the foreseeable future. Following the Laurus convertible loanagreement mentioned below, the Directors have approved forecasts which indicatethe Company will have sufficient funding to continue to trade for theforeseeable future. These forecasts assume a level of new customer sales aboutwhich there is some degree of uncertainty. If necessary, the Directors believethere are sufficient opportunities available to the Company to obtain additionalfunding to address this uncertainty. 2. EVENTS AFTER THE BALANCE SHEET DATE On 10 August 2005 LiDCO Group Plc entered into a US$2 million threeyear secured revolving convertible loan agreement with Laurus Master Fund. 3. DIVIDENDS It remains the Company's policy that no dividends will be paid until futureoperations have provided appropriate levels of distributable profits and cash. 4. DISTRIBUTION OF THE INTERIM STATEMENT Copies 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. This information is provided by RNS The company news service from the London Stock Exchange