LID.L Regulatory News (LID)

18 Oct 2006 07:00

For immediate release 18 October 2006LIDCO GROUP PLC ("LiDCO" or the "Company") Interim Results for the 6 months to July 2006 LiDCO, the UK-based, AIM-quoted cardiovascular monitoring company, announcesits Interim Results for the six months ended 31 July 2006.Terry O'Brien, Chief Executive, said:"The Company's management remains confident that the second half of the yearwill see significantly higher sales than in the first half, due to the releaseof NHS budgets in the UK and the fulfilment of sales orders in the USA andelsewhere, which were delayed due to the intense competitor activity thataffected hospital trials and other clinical case evaluations. We have a solidpipeline of future potential orders and we are now seeing these starting tocome through."Corporate Highlights * Milestone new software product previewed earlier this month - version 4.0 software upgrade * Enhanced fluid management platform and intra thoracic blood volume parameter distances the LiDCOplus Monitor from non-PC based technologies * First in-licensing agreement signed in September 2006 to act as UK and Ireland distributor for Med-Dynamix's "URINFO" monitoring product * Continued uptake with key university hospital centres in major markets Financial Highlights * Turnover up 3% at ‚£1.62m (2005: ‚£1.57m) * Product margins maintained at average 75% on monitors, 85% on disposables * Operating cash outflow 6% improved at ‚£1.00m (2005 ‚£1.06m) * Operating loss ‚£1.48m (2005: ‚£1.25m) * Loss per share of 1.33p (2005: 1.22p) * Share placing in May 2006 raised ‚£3.5 million (gross) from institutional investors * Cash balance ‚£2 million (undrawn Laurus loan facility of ‚£1 million also available if required) Commercial Highlights * Continued broad adoption of technology with 44% of installed monitors in the USA, 39% in Europe and 17% in the ROW and sensor sales revenue up in all territories * Installed base of monitors now up 12% at 962 (July 2005: 857) * Monitors sold or placed: unit increase down from 87 to 39 units; sales value only reduced by 11% at ‚£0.64m * Sensors and fees per use volumes up 10% to 12,112 units; sales value also increased 16% to ‚£0.94m * 16% growth in domestic UK market sales - UK becoming profit contributor * Sales force expansion in direct sales territories Commercial Highlights Summary TableSales by Type (‚£'000) 6 Months 6 Months Increase/ Increase/ to 31 July to 31 July (decrease) (decrease) 2006 2005 % - Monitors 641 723 (82) -11% - Sensors 877 747 130 17% - Fee per Use & Rentals 62 63 (1) -2% - License Fees 35 35 - 0% - Total 1,615 1,568 47 3% Monitors sold / placed (Units) 39 87 (48) -55% Sensor and Fee per Use Sales 12,112 11,061 1,051 10%(Units) Installed Base (end period) 962 857 105 12% For more information please contact:LiDCO Group Plc Tel: +44 (0)20 7749 1500 Terry O'Brien (CEO), Hugh McGarel-Groves (FD) Buchanan Communications Tel: +44 (0)20 7466 5000 Tim Anderson, James Strong The investor presentation `LiDCO's Interim Results - six months ended 31st July2006' will be available on the LiDCO website (www.lidco.com).CHIEF EXECUTIVE OFFICER'S STATEMENTThe six months under review were testing. Sales increased but were subject togreater competitive pressure, mainly in the US and Europe, leading to lengthyproduct assessments. However, the LiDCOplus Monitor continues to haveinvaluable endorsements following this process, which we believe from now on,will again boost sales. In the UK, constraints on NHS spending had a similareffect and although the UK NHS continues to be under financial pressure we arestarting to see capital budgets being spent to improve critical care services.Against this backdrop, the 3% increase in overall sales to ‚£1.62 millioncompared to the same period last year and a 16% increase in the UK, which isour major territory, was a commendable result.While monitor sales were held back, revenues from product usage sales continuedto grow well and were ahead by 16% at ‚£0.94 million. Indeed, product usagesales were up in all territories: in the UK they increased by 11%, in the USAby 9% and in the other more recently established territories of the EC and ROWby 43% and 170% respectively.Management anticipate that sales in the second half of the year will bestronger due to a resumption of capital spend from UK hospitals and greaterrevenue generation from a fuller UK and USA sales pipeline. Sales resource isbeing increased through a strengthening of our direct sales teams in these twoterritories.We have been winning evaluations of our product against the market leader, soour conclusions from looking at the first six months is that competitoractivities in major markets have at worst added a few months to our evaluationsand hospitals continue to conclude in our favour in the majority of cases,where we have tendered.A major milestone in the development of our LiDCOplus monitor occurred thismonth with the launch of the version 4.0 software upgrade which furtherdistances us from out-dated and non-PC based and therefore, less adaptabletechnologies. We have added a considerable number of new features and a newparameter (Intra Thoracic Blood Volume) to our software that is expected toenhance the ability of the LiDCOplus Monitor to guide and target theadministration of fluids and drugs. It is that focus on oxygen and fluiddelivery in acutely ill patients that has dramatically improved outcomes.Increasingly, ease of interpretation of complex data by busy clinical staffwill be required to both maintain and improve standards of care. Customersregard us as the leaders in user interface design and our lead in this area isbecoming one of our most important and unique selling points.I am pleased to announce that after an intensive 18 months of work we havepreviewed the LiDCOplus monitor version 4.0, which also incorporates the newclinical audit LiDCOview software, at our research open day and at two majormeetings - the recent European Intensive Care Society meeting in Barcelona andthe American Society of Anesthesiologists meeting in Chicago. Most of the newfeatures of the version 4.0 software are unique and are designed to help usersto more easily and quickly achieve appropriate levels of oxygen delivery insurgery and intensive care patients. Studies have shown that early goaldirected therapy using the LiDCOplus monitor saves up to approximately ‚£4,800per patient treated through a significant reduction in side effects and bedstay days.More clinical outcome studies are approaching conclusion and we are optimisticthat we will see further development of the clinical and business case for theuse of our products, both in the intensive care unit and operating theatre. Theproduct improvements we have recently introduced further differentiate ourtechnology from the competition. The LiDCOview software is designed to aid theimplementation of clinical audit both at the bedside and within any windowsbased PC. Feedback from clinicians leads us to be optimistic that the LiDCOplusmonitor version 4.0 software in combination with the LiDCOview will set a newstandard in acute care patient management that should enhance sales both in thesecond half of 2006/7 and beyond.Our service orientated sales force is highly regarded within the med-techbusiness community. We have in-licensed our first distribution product, theMed-Dynamix "URINFO" system, for the UK and Ireland markets. There is a naturaltechnical and customer synergy between LiDCO's and Med-Dynamix's products, andthe prevention of renal failure through early detection with the "URINFO" andsubsequent appropriate fluid management with the LiDCOplus monitor is our goal.We believe this combined offering will make an even stronger case to ourcustomers. Although these are still early days we feel that there is a goodmarket for the "URINFO" product in the intensive care unit and general ward.The Company's cash position remains strong following the fundraising in May2006, with the balance sheet at 31 July 2006 showing a cash balance ofapproximately ‚£2 million and an undrawn borrowing facility of ‚£1million. Theissue was well supported by existing investors and we were able to introducesome new investors into stock. As always we are indebted to our investors fortheir support to LiDCO. This new funding is allowing us to increase our salesstaff and continue to invest in research and product development.UK * Overall sales revenue up 16% to ‚£904,000 (2005: ‚£781,000) * Monitor sales revenue up 23% to ‚£401,000 (2005: ‚£326,000) * Sensor, fee for use & rental sales of ‚£503,000 up 11% (2005: ‚£453,000) * Sensor, fee for use units up 16% at 5,170 (2005: 4,449) In the context of the well publicised financial difficulties within the NHS,this continued growth was a major achievement and I am pleased to note thatsince then we have started to see hospitals releasing their budgets.The first half of the year was financially tough in the NHS. During the period,capital spend within the NHS was negligible until June. Despite this hold backof budgets, a number of notable university hospitals converted to ourtechnology. In particular, we were delighted that in September 2006 the newcardiothoracic surgery department at Southampton University Healthcare TrustHospital chose to purchase 6 of our LiDCOplus monitors, taking the total numberof monitors at this hospital to 14. Interest in adopting the LiDCOplus Monitorfor its ability to reduce bed costs (12 days reduction per patient treated) andcomplications (down 40%) of major risk surgery patients is growing. Our latestsoftware product - version 4.0 - is now on limited release with customers andits new features for the management of fluid balance and targeting of oxygendelivery will further distance LiDCO's technology from older and non PC basedmonitoring technologies. We remain optimistic that the UK market will to growat a brisk pace within the surgery and intensive care settings using theversion 4.0 software to improve results and reduce costs.In response to this growing demand for our technology, we are increasing our UKdirect sales force, using part of the recent fundraising to meet thisadditional cost. In September 2006 we were pleased to be able to addMed-Dynamix's renal monitoring product to those sold by our own sales force.The combination of LiDCO's hemodynamic monitor and this innovative renalfunction product is expected to provide customers with a fuller patientmanagement solution initially in our existing intensive care/ surgical marketsand ultimately in the general ward arena. We estimate the market opportunity inthe UK to be multi-million - with all hospitals having an existing revenuebudget for this technology. Our initial focus is to offer this product toexisting LiDCO customers and work with them to establish a clinical andbusiness case for this combination of technologies. St Thomas' Hospital will bethe first centre to adopt this product and will change over to this technologyfor use in their intensive care and surgery patients. Hospitals can expect tomake significant savings using this technology to detect the early signs ofrenal failure.USA * Overall sales revenue steady at ‚£423,000 (2005: ‚£425,000) * Monitor sales down 13% at ‚£157,000 (2005: ‚£180,000) * Sensor, fee for use & rental sales up 9% at ‚£266,000 (2005: ‚£245,000) * Sensor and fee for use units down 9% at 4,512 (2005: 4,932) The market for improved monitoring was very competitive in the US in the firstsix months of 2006. Sales in the US have been delayed by more protractedevaluations against other products as a result of targeted defensive action byour main US-based competitor demanding that their products are also evaluatedby our prospective customers. This is the inevitable consequence of oursuccesses in the US market. We are the only non US company to make headway andare up against a strong domestic market leader. Nevertheless in theseevaluations our product has performed exceptionally well and we expect to seethe pipeline delivering significantly more sales in the second half of theyear. In this respect I am pleased to report that Harborview UniversityHospital, Seattle has chosen us, following a competitive review. As in the UK,we are increasing our direct sales resources in the US and will start to seethe impact soon.For the full year we expect to see significant growth in the US market. Tosupport US sales we have worked with the University of Iowa on a clinicaloutcome study, where our technology's effects on patient outcome have beencompared to those achieved with more traditional monitoring products. We expectthe results of this study to be publicised within the next six months. Apositive result from this study would add to the business case establishedthrough the St Georges' study and would be of great importance to the USmarketing efforts.Continental Europe * Overall sales revenue down 11% to ‚£200,000 (2005: ‚£225,000) * Monitor sales down 54% to ‚£57,000 (2005: ‚£125,000) * Sensor sales up 43% to ‚£143,000 (2005: ‚£100,000) * Sensor units up 33% at 2,000 (2005: 1,505) The reduction in monitor sales was due to capital stocking order variancesbetween the periods. We are still rolling the product out in Europe, so revenuevariances will arise. Nevertheless, this strong disposable sales increase showsthat once established, a good revenue stream can be generated from theinstalled base of monitors. As in the USA, competition for business has beenintense, however our distributor confidence and their pipeline remains strong,so we are comfortable that the second half will see more capital stockingorders and a continued advance in the disposable revenues.Rest of World * Overall sales revenue down 35% to ‚£88,000 (2005: ‚£135,000) * Monitor sales down 71% to ‚£26,000 (2005: ‚£90,000) * Sensor sales up 170% to ‚£27,000 (2005: ‚£10,000) * Sensor units up 146% at 430 (2005: 175) * Licence fees unchanged at ‚£35,000 Capital restocking cycles have impacted on this reporting period so overallturnover was reduced, but as in other territories, sensor sales grew, in thiscase more than doubling. A large part of this growth in disposables comes fromBrazil where we have seen great enthusiasm for improved monitoring, using goaldirected therapy for major surgery and intensive care patients.FINANCIAL & TRADING REVIEWTurnover was ‚£1.62 million, up by 3% from ‚£1.57 million in the six months ended31 July 2005. Revenues in the UK, which accounts for 56% of total sales, showedthe strongest growth, increasing by 16%.The installed base of monitors increased in the six month period by 39 unitsand by 105 units over the previous twelve months to 962 (compared to 857 unitsas at 31 July 2005). This has led to an accompanying increase in sensor usageof 10% from 11,061 to 12,112 units. Continuing progress in the underlyingbusiness is clear, our sales pipeline looks strong and we are confident of astronger second half trading. Product margins against external procurement costs on non-leasing related salescontinue to average about 75% on monitors and 85% on disposables, within asales mix made up of UK and USA direct sales, plus lower margin distributorsales in continental Europe and elsewhere. The overall reported gross margin onsales is 68% (2005: 78%). Changes in sales mix are the main factor causing thisreduction. The principal change in sales mix is the increasing volume of UK andUS sales involving LiDCO's medical equipment leasing partner, which hasresulted in sales being achieved that would not otherwise have occurred andconsequent overall P&L and cashflow benefits, however these are lower marginsales, similar to those via distributors where margins typically do not exceedabout 70%.Administrative expenses have increased by 4% (‚£107,000). Administrative costsare expected to show a lower percentage increase for the full year, as the costsaving from the termination of the lease for the Company's sales and marketingheadquarters in Cambridge and its replacement with a much lower cost lease onanother smaller property nearby took effect from July 2006.Overall, reported net loss before tax of ‚£1.48 million is ‚£270,000 higher thanfor the prior period, principally due to the ‚£150,000 effect of the lower grossmargin (68% vs 78%) as explained previously and ‚£107,000 of administrative costincreases also mentioned above. A R&D tax credit of ‚£55,000 is included (nil inprior period), which results in a net loss after tax of ‚£1.43 million and aloss per share of 1.33p versus 1.22p in the half year to 31 July 2005.In May 2006, we raised ‚£3.5 million gross (‚£3.2 million net) by aninstitutional share placing, which was supported by a number of existingshareholders and also allowed the introduction of several new institutionalshareholders. In order to save interest cost, ‚£1.0 million was used from thisfundraising to repay all but $100,000 of the $2 million Laurus loan. At the endof July, the Company's cash balance was ‚£2.0 million. In addition, the undrawnLaurus borrowing facility of ‚£1.0 million is available if necessary.RESEARCH AND DEVELOPMENT AND PRODUCT APPLICATIONAt our recent research day at St Thomas' Hospital we demonstrated the potentialof our new version 4.0 software and clinical research / clinical audit software(LiDCOview) to help customers review and audit patient care. Full details ofthe improvements have been covered in our announcement of 9 October 2006. Inessence these software improvements are designed to make our products moreusable and auditable both within the existing patient population but alsowithin an expanded group of arterial line patients where fluid management isimportant. We have applied our physiological expertise, sensor and computingtechnology to monitor and display the relationship between hemodynamicvariables in a simplified and easy to interpret form at the point of care. Thetransformation of raw physiological data into useable information - in effect a`heads up' display of the parameters that matter the most and then thetargeting of specific treatment protocols that can improve clinical outcome hasbeen a key objective throughout the development of the Company's products.The older invasive catheter technologies were not only more risky to use, butalso poor at the display of data in an approachable and usable form. UsingLiDCO's technology to apply a nurse-led goal-directed protocol to high risksurgery patients has been shown to reduce total hospital stay by an average of12 days, saving ‚£4,800 per patient treated. If extrapolated throughout the NHS,this could result in estimated savings of ‚£500 million annually within the UK.Our ambition is that this goal directed protocol should become a standard ofcare at all hospitals using existing nursing and clinical resources.The evolution of LiDCO's products has led to its current form which representsa new generation of cardiovascular monitor, fuelled by data from minimallyinvasive sensors, employing algorithms that model the cardiovascular system andwith user interfaces that facilitate decision support and protocolization ofcare. Through this combination of technologies we are entering a new era wherethe costs of applying our products are far outweighed by the clinical, humanand financial return.REGULATORY AFFAIRS The submission of the next regulatory application, that will allow furthermarket expansion in the EU, is planned for Q1 2007. We are currently waitingfor clearance from the Medicines and Healthcare Products Regulatory Associationand for completion of certain mutual recognition procedures. The successfulcompletion of mutual recognition procedures will open markets in France, Greeceand Slovenia for the Lithium Chloride solution. We are also including theCzech Republic as a simple administrative change in this application, followingits recent inclusion in the EU.OUTLOOKOur prospective sales order pipeline continues to grow, but competitivepressure, mainly in the US and Europe, combined with constraints on NHS budgetsin the UK, delayed it being turned into sales until very recently. This has nowstarted to change and we look forward to stronger sales in the second half ofthis year.Terry O'BrienChief Executive Officer18 October 2006CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the six months ended 31 July 2006 Six months Restated Restated ended 31 July six months twelve 2006 ended 31 months July 2005 ended 31 January 2006 (unaudited) (unaudited) (audited) ‚£'000 ‚£'000 ‚£'000 TURNOVER 1,615 1,568 3,421 Cost of sales (517) (351) (871) Gross profit 1,098 1,217 2,550 Administrative expenses (2,575) (2,468) (4,771) OPERATING LOSS (1,477) (1,251) (2,221) Interest receivable and similar income 28 39 43 Interest payable (33) - (36) LOSS ON ORDINARY ACTIVITIES BEFORE TAX (1,482) (1,212) (2,214) Tax on loss on ordinary activities 55 - 179 LOSS ON ORDINARY ACTIVITIES AFTER TAX (1,427) (1,212) (2,035) Loss per share (basic and diluted) (p) 1.33 1.22 2.05 CONSOLIDATED BALANCE SHEETAs at 31 July 2006 Six months Restated Restated ended six months twelve 31 July ended months 2006 31 July ended 2005 31 2005 January 2006 (unaudited) (unaudited) (audited) ‚£'000 ‚£'000 ‚£'000 FIXED ASSETS Tangible assets 917 1,125 1,038 Intangible assets 562 301 473 1,479 1,426 1,511 CURRENT ASSETS Stocks 1,146 1,172 1,140 Debtors 1,757 1,441 1,995 Cash at bank and in hand 1,973 668 951 4,876 3,281 4,086 CREDITORS: amounts falling due within one (801) (458) (759)year NET CURRENT ASSETS 4,075 2,823 3,327 TOTAL ASSETS LESS CURRENT LIABILITIES 5,554 4,249 4,838 CREDITORS: amounts falling due after more (72) (88) (1,177)than one year NET ASSETS 5,482 4,161 3,661 CAPITAL AND RESERVES Called up share capital 590 497 503 Share premium account 20,683 17,313 17,566 Merger reserve 8,513 8,513 8,513 Other reserve 85 (23) 41 Profit and loss account (24,389) (22,139) (22,962) EQUITY SHAREHOLDERS' FUNDS 5,482 4,161 3,661 CONSOLIDATED CASH FLOW STATEMENTFor the six months ended 31 July 2006 Six months Restated Restated ended twelve six months months 31 July ended ended 31 January 2006 31 July 2006 2005 (unaudited) (unaudited) (audited) ‚£'000 ‚£'000 ‚£'000 Operating loss (1,477) (1,251) (2,221) Depreciation and other non cash items 199 268 569 (Increase)/decrease in stocks (6) (7) 25 Decrease/(increase) in debtors 238 69 (307) Increase/(decrease) in creditors 51 (135) 130 Net cash outflow from operating (995) (1,056) (1,804)activities Interest receivable 28 39 43 Interest payable (33) - (36) Capital expenditure and financial (110) (96) (417)investment Cash outflow before financing (1,110) (1,113) (2,214) Issue of ordinary share capital 3,203 174 203 Convertible loan (repayment) / drawdown (1,071) - 1,355 Increase/(decrease) in cash in the 1,022 (939) (656)period NOTES TO THE INTERIM STATEMENT1. 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 17October 2006. The accounting policies applied in preparing the financialinformation have no significant changes from those adopted and disclosed in theGroup's statutory accounts for the 12 months ended 31 January 2006, other thanthe implementation of FRS 20, Share Based Payments, which has been adopted witheffect from 1 February 2006. It should be noted that for comparison purposesthe prior year's results have also been adjusted to include a FRS 20 charge.The results shown for the twelve months to 31 January 2006 are based on theaudited accounts for that period, restated for the effect of FRS 20.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 12 months ended 31 January 2006 has been derivedfrom the Group's statutory accounts for that period, as filed with theRegistrar of Companies. The auditors' report on the statutory accounts for theperiod ended 31 January 2006 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 six months to 31 July 2006. The Directors have approved forecastsuntil the end of January 2008, which indicate that the Company will havesufficient funding to continue to trade during that period. The forecastsassume a level of sales about which there is uncertainty. If such new sales arenot achieved, the Directors believe that there are sufficient opportunitiesavailable to them to obtain additional funding from existing sources, whichwould enable the Company to continue to develop its operations and to meet itsliabilities as they fall due. Accordingly the financial statements have beenprepared on a going-concern basis. The financial statements do not include anyadjustments that would be required in the event that the Company hadinsufficient funding available.2. DIVIDENDSIt remains the Company's policy that no dividends will be paid until futureoperations have providedappropriate levels of distributable profits and cash.3. SHARE BASED PAYMENTThe adoption of FRS 20 has resulted in a change to the accounting policy forshare based payments. A prior year adjustment has been made to the financialinformation set out for the period ended 31 July 2005. The Company recognised atotal expense of ‚£44,000 relating to equity settled share option transactionsin the six month period ended 31 July 2006; six months to 31 July 2005 ‚£64,500;twelve months to 31 January 2006 ‚£129,000.4. DISTRIBUTION OF THE INTERIM STATEMENTCopies 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