LID.L Regulatory News (LID)

LiDCO Group Plc

("LiDCO" or the "Company")

Pre-Close Trading Update and Notice of Results

LiDCO (AIM: LID), the hemodynamic monitoring company, provides the following pre-close update for the full year ended 31 January 2019 (FY19).

LiDCO continues to make progress with its HUP offering. Since its launch 18 months ago, as of 19 February 2019 the Company had a total global contracted base of 191 HUP monitors (31 January 2018: 96) generating £1.50m (31 January 2018: £0.73m) of annualised HUP contracts with the revenue recognition being spread over the term of the contract.

Since the December 2018 trading update, LiDCO has gained a further two new US HUP customers, with the US contracted base as at 19 February standing at 114 monitors (2018: 58 units) worth £0.96m per annum. These two new HUP customers are prestigious reference accounts and bring the total number of customers won during the FY19 to 13.

As detailed in the December update, the transitioning of the Company's larger UK customers to the SaaS business model has deferred revenue from the current financial year. Overall, LiDCO product revenues for FY19 were £6.19m (FY18: £6.87m) and total revenues (including third party products) were £7.32m (FY18: £8.27m). Whilst total revenues were marginally below market expectations, much of the effect of this on the bottom line is mitigated by favourable LiDCO product mix generating higher gross margins and overheads before share-based payments being approximately £0.28m lower than expected.

In the US, the strong growth of HUP meant that recurring revenues, which includes per patient disposables and service contracts, grew nearly 50% compared with the prior year to £1.27m (FY18: £0.85m). LiDCO product revenues for FY19 were £1.38m (FY18: £1.36m), with the prior year having exceptionally strong capital sales.

In the UK, LiDCO is seeking to convert its largest customers to the HUP business model. The Company initially

evaluated this approach with its largest UK account in January 2018 and, encouragingly, the customer has been able to treat more patients and has increased its investment in hemodynamic monitoring. Following this success, three more of LiDCO's larger customers have signed multi-year HUP contracts, meaning that a total of £0.51m, or 15% of LiDCO's FY19 recurring revenues in the UK, have been converted. This strategy, to actively convert UK customers to the SaaS business model, had a transitional impact on sales revenue recognition within the financial year through the deferral of revenues which would normally have been booked in the year. These deferred revenues will be recognised over the 12 months from signing the HUP agreements. The transition to HUP has also dampened Q4 sales, as some customers have reduced purchases of consumables in anticipation of converting to HUP in their new financial year, which commences in April 2019. Demand for capital monitor purchases has also been lower than expected as customers conserved or diverted cash as part of their Brexit mitigation measures. As a result, sales in Q4 were less than the usual peak and LiDCO product revenues for FY19 were £3.56m (FY18: £4.14m).

Following the previously announced termination of the Argon distribution contract and subsequent signing of new third-party opportunities, third party sales in FY19 were £1.13m (FY18: £1.40m). During FY19, the Company has sourced alternative distribution opportunities to replace the contribution made by Argon. The Company has recently signed an exclusive UK distribution agreement with Xavant Technology (Pty) Ltd. ("XAVANT") to take full distribution responsibilities for Xavant's Advanced Nerve Stimulation and Monitoring Technology in the UK as from 1 February 2019. Xavant is a leading supplier of quantitative neuromuscular monitoring for use during general anaesthesia. LiDCO is now the exclusive distributor for Maicuff, Antmed and Xavant in the UK.

Overall LiDCO revenues outside of the UK and US markets in FY19 were £1.25m (FY18: £1.37m). Strong revenue growth in Japan and preliminary orders from new distribution channels in Europe were offset by weaker demand from the Middle East region primarily driven by no sales to Iran, where the market has been impacted by US sanctions.

LiDCO continues to invest in geographical expansion, during the year applying for several regulatory registrations in key target markets in South East Asia and Latin America, which are expected to benefit FY20. Importantly, the Company made significant progress with registering its latest monitor platform in China. All the prerequisite testing and documentation was completed during 2018 with the submission to CFDA being made in January 2019. The normal timescales for the CFDA to review this type of filing is a few months.

The Company's cash outflow in H2 was £0.32m compared with £1.19m in H1 and cash balances at 31 January 2019 totalled £1.72m (31 January 2018: £3.23m). The Company remains debt free and the Board believes that LiDCO retains the appropriate strength in its balance sheet to deliver its strategic objectives.

The Company intends to announce its results for the full year to 31 January 2019 on 26 March 2019.

Commenting, Matt Sassone, Chief Executive Officer of LiDCO, said: "Whilst the transition to the HUP business model has a short-term effect of deferring sales, we are encouraged by the progress made having built a recurring revenue base of over £1.5m in just 18 months from launch of the HUP business model. The fundamentals of our business remain strong and we believe that this is reiterated by our new customer wins this financial year. With continued focus on LiDCO's HUP model, we are well-placed to grow the business in line with our objectives over the short to medium term."

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

The sales numbers in this update are extracted from unaudited preliminary financial statements. The value of the contracted HUP base in the US has been translated to GBP at a rate of £1 = $1.30

For further information, please contact:

About LiDCO Group Plc (www.lidco.com)

LiDCO is a supplier of non-invasive and minimally invasive hemodynamic equipment to hospitals used to monitor the amount of blood flowing around the body and ensure that vital organs are adequately oxygenated. LiDCO's products facilitate the application of hemodynamic optimisation protocols for high risk patients in both critical care units and in the operating theatre. 

Increasingly clinical studies are showing that the optimisation of patients' hemodynamic status in high risk patients produces better outcomes and reduced hospital stay. LiDCO's computer-based technology, developed at St Thomas' Hospital in London, has been shown to significantly reduce morbidity and complications, length of stay and overall costs associated with major surgery.

Key Products:

LiDCOunity: a hemodynamic monitor that combines the full suite of LiDCO technology (non-invasive, minimally invasive and calibrated technologies) into one platform. Designed to have the flexibility to adapt to a patient's changing acuity, the product enables clinicians to seamlessly transition between non-invasive, minimally invasive and calibrated hemodynamic monitoring.

LiDCOplus: a computer-based platform monitor used in the Intensive Care Unit for real-time continuous display of hemodynamic parameters including cardiac output, oxygen delivery and fluid-volume responsiveness (PPV% and SVV%).

LiDCOrapid: a cardiac output monitor designed specifically for use in the operating theatre for fluid and drug management. The monitor enables anaesthetists to receive accurate and immediate feedback on the patient's fluid and hemodynamic status - a key measure of overall well-being before, during and after surgery. The LiDCOrapid provides:

· early and rapid warning of hemodynamic change to aid choice of therapeutic route: fluid or drug

· quantification of hemodynamic response guidance on effective delivery of fluids to ensure the right amount at the right time

The software incorporated into LiDCOrapid allows the LiDCOrapid monitor to co-display Medtronic's level of consciousness parameter ('BISTM')* and add the convenience of CNSystem's continuous non-invasive blood pressure monitoring ('CNAP')**. This addresses a growing requirement for non-invasive monitoring solutions that are more comprehensive and can effectively replace multiple single parameter monitors. 

LiDCOview: an easy-to-use graphical display of historical LiDCOplus and LiDCOrapid hemodynamic data.

*BISTM and Bispectral Index are trademarks of Medtronic registered in the US and foreign countries.

**CNAPTM is a trademark of CNSystems Medizintechnik AG.

LiDCO monitors use single-patient disposables (sensors or smartcards) which provide an ongoing revenue stream.

LiDCO Distribution Network:

LiDCO sells directly to hospitals in the UK and USA and through a network of specialty critical care and anaesthesia distributors in the rest of the world.

LiDCO's headquarters are in London and its shares are traded on AIM.