LID.L Regulatory News (LID)

24 Apr 2008 07:01

LiDCO Group Plc24 April 2008 Press Release 24 April 2008 LIDCO GROUP PLC ("LiDCO" or the "Company") Preliminary Results for the year to 31 January 2008 LiDCO (AIM:LID), the UK-based, the hemodynamic monitoring company, todayannounces its Preliminary Results for the year ended 31 January 2008. Financial Highlights: O Revenue up 18% at £4.05m (2006/7: £3.44m)O Administration and distribution expenses reduced by 6% to £4.62m (2006/7: £4.94m)O Net cash outflow before financing £1.7m (2006/7: £1.6m)O Product margins maintained at 78% on monitors, modestly improved to 87% on disposablesO Loss from operations reduced by 23% to £2.01m (2006/7: £2.62m)O Loss per share reduced to 1.5p (2006/7: 2.1p)O Cash balance £2.2m (2006/7: £1.5m) Corporate Highlights: O LiDCOrapid patent filed and product launched in April 2008O New distributors signed in USA, Israel, Canada, Turkey & Middle EastO Product extension through launch of PC software products LiDCO(SE) and LiDCO(PRO)O Further clinical outcome studies show LiDCO products reduce mortality, complications and length of stayO New exclusive critical care marketing collaboration with Becton, Dickinson UK Commercial Highlights: O Continued adoption of technology with 40% of installed monitors now in the USA, 20% in the UK, 25% in Europe and 15% in the Rest of WorldO Installed base of monitors up 14% at 1,184 (2006/7: 1,035)O Monitor revenues up 34% to £1.93m (2006/7: £1.44m)O Sensors volume up 7% to 26,081 units; and revenue increased by 9% to £1.99m (2006/7:£1.82m)O Considerable growth in export territories, up by 63% to £2.32m (2006/7 £1.43m)O Over the last four years sales have increased by 79% while costs have been reduced by 16% Commenting on the results Terry O'Brien, Chief Executive, said: "This has beenone of the most productive periods in our history, resulting in strong growth inrevenues, control of costs and a significant reduction in our operating loss.he progress made on all fronts and the launch of our new product for use in theoperating theatre puts the Company in a strong position to take a growing shareof the substantial market opportunity for minimally invasive hemodynamicmonitoring in both critical care and major surgery." The investor presentation "LiDCO's Preliminary Results - twelve months ended31st January 2008" will be available from today on the LiDCO website(www.lidco.com). For further information, please contact:LiDCO PLCTerry O'Brien (CEO) Tel: +44 (0)20 7749 1500John Rowland (Company Secretary)Theresa Wallis (Chairman) www.lidco.com Panmure GordonEdward Farmer Tel: +44 (0) 20 7459 3600edward.farmer@panmure.com Media enquiries:AbchurchHeather Salmond / Stephanie Cuthbert Tel: +44 (0) 20 7398 7718stephanie.cuthbert@abchurch-group.com www.abchurch-group.com Chairman's Statement Over the last year we have pursued our strategy of growing sales of ourhemodynamic monitoring products in a range of geographical regions across theglobe whilst maintaining careful control of costs. Overall sales for the yeargrew by 18% to £4.05m, split 48% and 52% between capital and recurring revenuerespectively. As a result of the issue of shares during the year, the Company'scash balance at the year-end was £2.2m. More than half of LiDCO's sales during the year came from outside the UK. Ofnote was the strong growth in sales in continental Europe, assisted by theredeployment of some of our UK sales resources. UK sensor sales showed goodgrowth, as did sensor sales in Europe. Turning to product development, the Company's main focus last year was thedevelopment of the new LiDCOrapid monitor and disposables. This is designedespecially to meet the needs of the substantial and growing market in majorsurgery and other hospital applications where quick and easy set-up is requiredand continuous trend information is important. This new monitor uses the samealgorithm as that used in the existing LiDCOplus monitor, so data from studiesinvolving the LiDCOplus also validates the LiDCOrapid monitor, thus helping withmarket acceptance. The LiDCOrapid was launched in April 2008. In addition, we were pleased to see the publication during the year of a numberof independent outcome studies by leading centres, such as the University ofIowa, further endorsing the use of our LiDCOplus technology. Such outcomestudies are important because they show the compelling advantages of using ourproducts, such as shortened hospital stays, reduced mortality and reducedinfections. These not only benefit the patient but also bring importantcost-savings for the hospital. Our products continue to be developed and assembled, with certain proprietaryelements manufactured, in our facility in East London, under strict qualitystandards. The Company's critical care products are registered in 14 markets inEurope, the USA, Brazil, South Korea and Japan. Sales during the year were madethrough our direct sales forces in the UK and USA, and through our internationalnetwork of speciality critical care and anesthesia distributors in 15 othercountries. In June the Company signed a new marketing collaboration agreementwith Becton, Dickinson U.K. Ltd. This type of collaboration with a leadingglobal medical technology company is a tribute to our technology and to ourspecialist sales force. This type of collaborative agreement not only broadensour offering among our target customers but also potentially helps to increasepenetration of our markets. In December 2007 the Company raised £2m through the issue of new shares, to beused for completing the development and market introduction of the LiDCOrapidmonitor, supporting continued sales growth of the Company's existing products inthe critical care market and continuing its active research and developmentprogramme. On behalf of the Board I would like to thank our shareholders fortheir continued support of the Company. We were delighted to welcome Paul Clifford to the Board in April as FinanceDirector. Paul has extensive experience of technology and software companies,both listed on the main market and venture capital-backed. His past positionsinclude being finance director of Comino Group plc, a company that was listed onthe London Stock Exchange's main market, and Civica UK Limited. To date the market for our products has been mainly the Intensive Care /Critical Care units of hospitals. The launch of the LiDCOrapid monitor, nowavailable for sales to customers in the EU and USA, will open more fully thesubstantial market opportunity in major surgery. LiDCOrapid's ease of use is akey feature that is expected to broaden the range of distributors willing andable to work with us in existing and new territories. We therefore expect toincrease further our distributor network this year in the EU, the USA and theRest of the World, whilst maintaining our direct sales forces in the UK and USA. The Company's product development activities, conducted in close consultationwith leading clinicians, mean that we now have a broader portfolio of linkedproducts to offer our customers enabling the measurement, analysis, audit andcommunication of real-time and historic hemodynamic data in both critical careunits and the operating theatre. Meanwhile, there is an expanding body ofscientific data linking the optimisation of patients' hemodynamic status withbetter outcomes and reduced hospital stays. With strong growth in sales of our existing products, reinforced by the recentlaunch of the LiDCOrapid monitor targeted at the major surgery market, theemergence of an additional new market opportunity for improving the viability oftransplant organs, together with our growing network of distributors, theCompany is well positioned for further growth in the coming year. As we look with enthusiasm to the year ahead, I would like to thank all theGroup's staff and directors for their dedication and hard work over the pastyear and our Clinical Advisory Board for their valuable contribution. CHIEF EXECUTIVE OFFICER'S REVIEW Overview The worldwide market for hemodynamic monitoring products continues to evolve,mainly driven by the move away from the use of the older invasive catheterproducts towards the newer less invasive devices. The potential market forthese minimally invasive devices, which include LiDCO's product range, isestimated at US$800 million per annum (surgery patient market segment). Weestimate that sales revenues for minimally invasive hemodynamic monitoringproducts grew in value last year by 33%. Our objectives for the year werefourfold: achieve revenue growth of our core intensive care product, expand theproduct range, increase our sales distribution network and contain costs. I ampleased to say that all four of these objectives were achieved. Sales were up18% on the prior year while we managed to reduce normal operating overheads by6%. The favourable combination of increased sales and reduced costs means thatsignificant progress towards profitability was made. Following the expansion ofthe distributor network and the recent introduction of the LiDCOrapid product,our business has both a wider product and geographic base and is now capable ofsignificantly increasing its share of the global hemodynamic monitoring market. In summary, I feel that this has been one of our most productive periods and theCompany is in a strong position to continue to move forward in 2008. Sales and trading Our strategy has been to supply the fast growing hemodynamic monitoring marketwith our proprietary products. I am pleased to report that there is anincreasing momentum for the market's transition to our minimally invasiveproducts and simultaneously in our ability to access this market. Since lastyear's preliminary results we have significantly expanded our distributionnetwork with new distributors added in a number of territories, includingCanada, the USA, Israel, Turkey, and Saudi Arabia. Negotiations are ongoingwith specialty distributors in additional regions of the USA where we do nothave direct representation to further improve our sales reach. We expect to beable announce the conclusion of these arrangements during the next few months. Revenues outside of the UK were up by a very encouraging 63%. The performanceof established European distributors in the period was particularly encouragingwith revenue increasing by no less than 71%. The resurgence of sales growth inthe USA, while anticipated, was also good to see. Overall sales growth at 18%was therefore limited by lower demand for monitors in the UK although disposablesales remained buoyant. In a year where all capital purchases by hospitals inthe UK NHS were at a low level for most of the period we decided to redeployexisting sales resources to the export market, which contributed to our 63%increase in export sales. Exports now represent the majority of our sales.This has the positive effect of reducing our reliance on an often 'stop/start'UK market. We are expecting trading in the UK to improve moderately this yearwith NHS capital purchase budgets likely to be a little more freely available.Furthermore our new LiDCOrapid surgery product is targeted at a more accessiblerevenue budget. Accordingly we have now brought our UK sales force up tostrength with a number of new appointments. Despite an increasing proportion of lower-margin distributor sales, productgross margins were maintained at 78% on monitors, and modestly improved to 87%on disposables. In addition to maintaining product margin the increased saleswere achieved without an increase in costs. I am very pleased to be able toreport that over the last four years our sales have increased by 79% while wehave simultaneously reduced our costs by 16%. Over the last few years we havemade strategic investments in our patents, our products and their automatedmanufacture, coupled with development of clinical/business cases. We are nowstarting to see clear evidence that these investments have been justified andcan now be leveraged to support a significantly larger turnover from both ourdirect and distributor sales teams. Looking forward, our new surgery product, the LiDCOrapid Monitor, launched inApril, should have a dual advantage for us. Not only does it address the needsof a US$800m per annum surgery market, but also makes our product range moreattractive to sell by both the existing and new distribution partners. Theattractive features of this new product - proprietary technology and design,high margin, ease of set-up and use - have already helped propel the recentexpansion of our distribution network. While this expansion of the salesdistribution channel occurred too late to contribute materially to the 2007/08results, these additions are expected to provide a significant new source ofrevenue in the second half of the current year. In addition to signing up more distributors, in June 2007 LiDCO announced thesigning of an exclusive UK marketing collaboration with Becton, Dickinson U.K.Limited ('BD'). BD is a leading global medical technology company and thiscollaboration involves the joint promotion, in selected UK hospitals where LiDCOalready has existing sales and customer relationships, of a number of criticalcare products currently being sold by the BD Medical Surgical Systems businessunit. LiDCO's strong customer relationship with critical care departments in UKhospitals was a key factor in BD's decision to form this exclusivecollaboration. This marketing partnership will result in enhanced salescoverage for BD's critical care product lines in the UK and LiDCO will receive ashare of any profits made. Market trends - LiDCO's sales and marketing strategy Intensive care market In a 2007 article in the Journal of the American Medical Association doctorsfrom Harborview Hospital in Seattle noted that their use of the invasivepulmonary artery catheter (PAC) for measuring cardiac output had declined by 77%over the last four years. The authors, whose hospital is now a LiDCO productuser, also commented that "Recently nurses and residents gathered around thebedside of the sole patient in the intensive care unit (ICU) with a PAC so theycould actually observe one still in use". The use of the invasive PAC approachto monitor hemodynamics continues to decline and this is particularly so in theICU. In contrast the sales of the LiDCOplus Monitor are increasing in the ICU -clearly in these LiDCO accounts we are replacing the PAC with our technology,which has been convincingly demonstrated to improve clinical outcome and reducecosts in patients after surgery. The transition to minimally invasive monitoring in this market is expected tocontinue. We intend to further distinguish ourselves from older catheter-basedtechnologies by presenting to hospitals a number of strong clinical and businesscases associated with use of our products. Accordingly we were pleased toannounce during the year the results of a study conducted in 2006 at theUniversity of Iowa, showing that use of our products in severely ill patientswith shock and sepsis substantially reduced mortality. The university, whichhas been using our technology since 2003, conducted a retrospective analysis ofoutcomes in a group of critically ill patients treated for septic shock andsystemic inflammatory response syndrome (SIRS). This epidemiological study wasundertaken to evaluate the various hemodynamic monitoring technologies used inthe ICU and their effect on outcomes in this gravely ill patient population.Patients treated with the LiDCOplus Monitor had a substantially lower mortalityrate than those treated clinically with the PAC: ICU mortality in the LiDCOtreated group of patients was only 12% compared with 32% in the PAC treatedgroup or 31% in those patients managed without any hemodynamic monitoring. Thecompelling data from this study supports the case that using the LiDCOplusMonitor decreases death rates in patients with septic shock or SIRS. This isvery exciting news for us and our hospital customers and for patients, as theseconditions have historically been very difficult to treat successfully. Similartrials are in progress in other countries to repeat and confirm thisobservation. If successful the data should have meaningful effects on theuptake of our LiDCOplus Monitor product within our existing ICU customer base. Major surgery market - a new opportunity Now that we have established our technology's credentials and the LiDCO brandname within the technically demanding intensive care market, we have used ourexpertise to produce a product for sale into the emerging high-risk surgerymarket. This project resulted in the recent launch of the LiDCOrapid Monitor.Our goal was to introduce a simple and easy-to-use product that would be used tooptimize a patient's hemodynamic profile during surgery. Individualized fluidadministration to maintain and optimize hemodynamics and tissue oxygenationplays a major role in the management of the moderate to high-risk surgicalpatient. This cannot be achieved reliably through the use of conventionallymeasured parameters such as arterial pressure, heart rate, urine output andcentral venous pressure but requires use of a specially designed monitor thatprovides a continuous measure of cardiac output. The LiDCOrapid is the firstmonitor specifically designed to help surgical teams maintain a patient'soptimal hemodynamic profile. It is easy to use and set up and is designed witha user interface that is both visually intuitive and informative. It providesearly warning of hemodynamic change, together with an indication of fluidresponsiveness and actual response to a fluid or drug intervention. We areconfident that widespread adoption of the LiDCOrapid will have a major impact onimproving outcomes after major surgery by reducing complications and shorteninghospital stays: this will not only benefit patients but also cut treatmentcosts. The initial response to this new product has been excellent and we arevery excited about the potential of this product to take a significant share ofthis $800 million surgery market. Organ transplantation - a developing market opportunity There has been a large amount of publicity in the press about the growingshortage of transplantable organs. This is in part related to declining numbersof patients suitable to act as organ donors. However the situation iscompounded by an assumption that post-collection loss of transplantable organsis inevitable if an initial assessment of the donor suggests that the patients'hemodynamics, and hence organs, have deteriorated irreversibly. Brain death isknown to induce dramatic changes in hemodynamics but donors are often notadequately hemodynamically monitored. This results in inadequate resuscitation,thereby reducing organ yield due to oxygen debt. In an effort to improve donoroutcomes, LiDCO is working with an Organ Procurement Organisation (OPO) in theUSA which is using our minimally invasive continuous hemodynamic monitoring toguide donor management decisions in hemodynamically unstable donors. The OPObelieves that the ability to monitor and assess continuously fluid parameters,pressure and blood flow would enable the OPO coordinator to recognize and applysituation-specific interventions that target improving hemodynamics and henceimprove end-organ perfusion. LiDCOplus monitoring is minimally invasive andbrings the advantage that such care could be initiated immediately by the OPOcoordinator (frequently a nurse) without the need for inserting specializedcatheters (e.g. the invasive pulmonary artery catheter) or requiring specialistphysician support. I am delighted to report that minimally invasive hemodynamicmonitoring has indeed helped to improve donor outcomes in these cases, with asignificant increase in the number of organs available for transplantation. This issue has been further studied by the University of Pittsburgh in arecently published prospective study. This confirmed our expectation thatdonors who were adequately resuscitated with the LiDCOplus monitor provided asignificantly higher number (3.7 compared with 2) of organs per donor that weresuitable for transplant, whereas donors who had inadequate volume resuscitationwere associated with a higher inflammatory response. These results havegenerated considerable interest within the transplantation community, which isbeginning to translate into sales of our technology into this developing market. Regulatory affairs and product quality During the period both our EC notified body and the US FDA conductedsurveillance visits. LiDCO is pleased to report that no non-conformity issueswere raised by either group of inspectors. Our product quality and customersatisfaction record continues to be excellent. Business Review - Summary Table Year to 31 Jan Year to 31 Jan Increase/ Increase/ 2008 2007 (decrease) (decrease) % Revenue by type (£'000)- Monitors 1,934 1,443 491 34%- Sensors 1,986 1,818 168 9%- Fee per Use & Rentals 78 111 (33) -30%- Licence Fees 53 70 (17) -24%- Total Revenues 4,051 3,443 608 18%Monitors sold & placed (Units) 151 112 38 34%Sensor and Fee per Use Sales (Units) 26,081 24,316 1,765 7%Installed Base (year end) 1,184 1,035 149 14% Geographic segmental sales reporting USA O Overall sales revenue has increased by 62%* to £1.24m (2006/7: £0.77m)O Monitor sales increased by 184%* to £0.74m (2006/7: £0.26m)O Sensor, fee for use & rental sales stable* at £0.50m (2006/7: £0.51m) * In constant currency terms, overall revenue increased by 70%, monitor sales by200% and sensor sales by 6% UK O Overall sales revenue down 14% to £1.72m (2006/7: £2.01m)O Monitor sales revenue down 43% to £0.52m (2006/7: £0.92m)O Sensor and, fee for use sales of £1.20m up 10% (2006/7: £1.09m) Continental Europe O Overall sales revenue up 71% to £0.87m (2006/7: £0.51m)O Monitor sales up 139% to £0.55m (2006/7: £0.22m)O Sensor sales up 14% to £0.32m (2006/7: £0.29m) Rest of World & Other Income O Overall sales revenue up 39% to £0.22m (2006/7: £0.15m)O Monitor sales up 253% to £120,000 (2006/7: £34,000)O Sensor sales down by £9,000 to £40,000 (2006/7: £49,000)O License fees income decreased to £52,000 (2006/7: £70,000) FINANCIAL REVIEW IFRS The attached financial statements for the year to 31 January 2008 have beenprepared for the first time in accordance with IFRS and the impact of IFRS hashad no effect, other than presentation, on the reported figures and there wereno material changes to the opening balances. Where necessary, comparativefigures previously reported under UK GAAP have been restated for the transitionto IFRS. Operating results Turnover increased by 18% to £4.05m (2006/07: £3.44m). The installed base ofmonitors increased in the year by 149 units to 1,184 (2006/7: 1,035 units),representing an increase of 14%. This has led to an accompanying increase insensor usage of 7% from 24,316 to 26,081 units. Product margins against external procurement costs have been maintained at 78%on monitors and modestly improved to 87% on disposables. The overall reportedgross margin on sales is 64%, down from 67% in 2006/7 with the decrease beingalmost entirely accounted for by the increased monthly payments to Med One.Excluding the Med One monthly payments, the gross margin on sales was 75% (2006/07: 76%). Administrative and distribution expenses were reduced by £320,000 (6%) from£4.94m to £4.62m. This is principally due to savings in staff costs,professional fees and premises costs which were offset by increases indepreciation and amortization. As a result of the increase in revenues and reduced costs, operating lossesdecreased by £613,000 to £2.01m (2006/07: £2.62m and the loss per share wasreduced to 1.50 pence (2006/07: 2.10 pence). Taxation As the Group is still at the pre-profit stage there was no tax charge for theyear. In addition the Group has a deferred tax asset of £6.1m to offset againstfuture profits, although this has not been recognized in the accounts. In theUK, the Group qualifies for research and development (R&D) tax credits whichamounted to £120,000 in 2007/08 which are shown in the income statement. Cash, financing and working capital The net cash outflow from operating activities remained level at £1.10m (2006/07:1.12m) despite the reduction in operating losses. This was largely as aresult of exceptional cash receipts in 2006/07 from two years of R&D tax creditsand the collection of a large number of old outstanding debtors. Excluding thereceipt of R&D tax credits, the net cash outflow from operating activities hasreduced by 30% over the last two years. The net cash outflow before financing increased from £1.60m to £1.69m as theresult of increased spending on both fixed and intangible fixed assets. Debtor days at the year end showed a slight improvement to 111 days compare with115 days last year. Creditor days have reduced from 45 days to 29 days. Stockat the year end as a percentage of turnover has reduced from 31% to 21%. In November 2007, the Company placed 23,647,074 shares at a price of 8.5p pershare raising £2m before expenses with financial institutions and a number ofprivate investors. The expenses relating to the placing were £67,000. As anticipated in last year's financial statements, the Group made use of its£1m (US$2m) Laurus loan facility and drew down £500,000 in August 2007. Theamount drawn down at the year end stood at £553,000. The Laurus loan facilityis due for repayment in August 2008 and it is anticipated that this will need tobe replaced by a new facility of similar size. The Company is in discussionswith a number of lenders and the Board is reasonably confident that thisfacility can be replaced. As a result of the placing and the draw down of the loan facility, the Group'scash balances at the year end were £2.23m compared with £1.47m the previousyear. PRODUCT DEVELOPMENT The last year has been a very active one for product development. Ourdevelopment strategy is to respond quickly to market opportunities by providingproprietary hemodynamic monitoring products. The LiDCOrapid development followson from the launch of the LiDCOplus version 4.1 software, the new LiDCO PCproducts LiDCOview(SE) and LiDCOview(PRO) (launched) and LiDCOlive (in development and discussed below). LiDCOrapid was launched on target in April of this year with the first shipments of product to our distributor customers. Customer response to this exciting product has been exceptional and we are expecting this product to represent a new standard of care for major surgery patients. We believe that the combination of the LiDCOplus and LiDCOrapid monitors and ourdata analysis PC software products collectively represent the most evolvedplatforms available today for the care and hemodynamic optimization of bothintensive care and surgery patients. LiDCOlive - data display independent of location The LiDCOlive development is aimed at the creation of a virtual intensive careunit, taking real-time hemodynamic patient data and easy-to-interpret screens tothe clinician - irrespective of their physical location. Location-independentmonitoring is required to offset the growing shortage of the highly skilledstaff needed to care for these patients. LiDCO is therefore developing aPC-based software product called LiDCOlive that can display the LiDCOplusMonitor trend screen and real-time patient data on any PC or laptop regardlessof location. The clinician, together with the nurse at the patient's bed-side,can then discuss potential treatment approaches and immediately see the effectsof their agreed change in fluid or drug therapy. This "virtual ICU" approachusing LiDCO's technology has the potential to make a considerable improvement inthe care of high-risk patients and to make best use of the skills of thehospital clinical staff. The prototype LiDCOlive product has been successfullydemonstrated in Japan, the Czech Republic and the USA at various internationalmeetings this year. One of the trialists of LiDCOlive, Dr. Loua Shaikh(Department of Critical Care Medicine, Frimley Park Hospital, UK), said: "Interms of patient care, the impact of time and distance on the delivery ofexperience and expert knowledge to the bedside are considerably diminished." The LiDCOlive software is still a product in development but we expect the firstgeneration of this product to be available during the second half of 2008. Terry O'BrienChief Executive Officer23 April 2008 CONSOLIDATED INCOME STATEMENTFor the year ended 31 January 2008 Year Year ended ended 31 January 31 January 2008 2007 £'000 £'000 Revenue 4,051 3,443Cost of sales (1,442) (1,127)Gross profit 2,609 2,316 Distribution costs (93) (69)Administrative expenses (4,526) (4,870)Loss from operations (2,010) (2,623) Finance income 49 69Finance expense (25) (35)Loss before tax (1,986) (2,589) Income Tax 120 204 Loss for the year attributable to equity holders of the parent (1,866) (2,385)Loss per share (basic and diluted) (p) (1.50) (2.10) All transactions arise from continuing operations. There were no recognised gains or losses other than the loss for the financialyear. CONSOLIDATED BALANCE SHEETAt 31 January 2008 Restated 2008 2007 £'000 £'000Non-current assetsProperty, plant and equipment 833 854Intangible assets 747 656 1,580 1,510Current assetsInventory 839 1,080Trade and other receivables 1,329 1,279Current tax 120 142Cash and cash equivalents 2,234 1,474 4,522 3,975Current liabilitiesTrade and other payables (707) (778)Deferred income (41) (68)Borrowings (563) - (1,311) (846) Net current assets 3,211 3,129Total assets less current liabilities 4,791 4,639 Equity attributable to equity holders of the parentShare Capital 710 592Share premium 22,550 20,723Merger reserve 8,513 8,513Retained earning (27,016) (25,240)Total equity 4,757 4,588Non-current liabilitiesFinance lease liability 34 51Total non-current liabilities - 51Total equity and non-current liabilities 4,791 4,639 CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 January 2008 Year Year ended ended 31 January 31 January 2008 2007 £'000 £'000Operating loss (2,010) (2,622)Depreciation and amortisation charges 611 412Share based payments 88 66Decrease in inventories 241 196Decrease/(increase) in receivables (50) 495(Decrease)/increase in payables (96) 87Finance expense (25) (35)Income tax credit received 142 283Net cash outflow from operating activities (1,099) (1,118) Cash flows from investing activitiesPurchase of property, plant & equipment (170) (137)Purchase of intangible fixed assets (467) (410)Interest received 49 69Net cash used in investing activities (588) (478)Net cash outflow before financing (1,687) (1,596) Cash flows from financing activitiesIssue of ordinary share capital 1,945 3,245Convertible loan drawdown/(repayment) 502 (1,126)Net cash generated from financing activities 2,447 2,119 Net increase in cash and cash equivalents 760 523 Opening cash and cash equivalents 1,474 951Closing cash and cash equivalents 2,234 1,474 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITYFor the year ended 31 January 2008 Share Share Merger Other Retained Total capital premium reserve reserve earnings equity £'000 £'000 £'000 £'000 £'000 £ At 1 February 2006 503 17,566 8,513 (88) (22,833) 3,661Issue of share capital 89 3,157 - - - 3,246Transfer - - - 88 (88) 0Share based payment expense - - - - 66 66Loss for the year - - - - (2,385) (2,385)At 31 January 2007 592 20,723 8,513 - (25,240) 4,588 Issue of share capital 118 1,827 - - - 1,945Share based payment expense - - - - 90 90Loss for the year - - - - (1,866) (1,866)At 31 January 2008 710 22,550 8,513 - (27,016) 4,757 The share premium account represents the excess over the nominal value forshares allotted. The merger reserve represents a non distributable reserve arising from historicacquisitions. The other reserve relates to the former investment in shares in the EmployeeShare Ownership Trust. This investment is no longer classified as an investmentof the Company or the Group. NOTES TO THE FINANCIAL STATEMENTS 1. NATURE OF THE FINANCIAL INFORMATION These financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRS) as adopted by the EU and under thehistorical cost convention and were approved by the Board on 23 April 2008.They are presented in sterling, which is the functional currency of the parentcompany and the Group. The preparation of financial statements in accordancewith IFRS requires the use of estimates and assumptions that affect the reportedamounts of assets and liabilities, and disclosure of contingent assets andliabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period. Although these estimates arebased on management's best knowledge of current events and actions, actualresults may ultimately differ from those estimates. The policies have changedfrom the previous year when the financial statements were prepared underapplicable United Kingdom Generally Accepted Accounting Principles (UK GAAP).The comparative information has been restated in accordance with IFRS. Therewere no material changes to the opening balances. The date of transition toIFRS was 1 February 2006 (transition date). These results are audited, however the financial information does not constitutestatutory accounts as defined under section 240 of the Companies Act 1985. Thefinancial information for the year ended 31 January 2007 has been derived fromthe Group's statutory accounts for that year, as filed with the Registrar ofCompanies. The auditors' report on the statutory accounts for the year ended 31January 2007 was unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. The financial statements have been prepared on the going concern basis, whichassumes that the Group will have sufficient funds to continue in operationalexistence for the foreseeable future. The Group has continued to invest in thedevelopment of its operations and in particular its sales and marketing presenceby continuing to invest in both its direct and indirect sales channels duringthe year and in a new product offering. As a result the Group has continued totrade at a loss during the year ended 31 January 2008. The directors haveapproved forecasts for the foreseeable future, which indicate that the Groupwill have sufficient funds to trade during that period. The forecasts assume alevel of new sales about which there is uncertainty. If such new sales are notachieved, the directors believe that there are sufficient opportunitiesavailable to them to obtain additional funding from sources which are currentlybeing explored, to enable the Group to continue to develop its operations and tomeet its liabilities as they fall due. The convertible loan from Laurus is duefor repayment in August 2008 and it is anticipated that this will need to bereplaced by a new loan facility of similar size. The company is in discussionwith a number of lenders and the board are reasonably confident that thefacility can be replaced. 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. DIVIDENDS It remains the Company's policy that no dividends will be paid until futureoperations have provided appropriate levels of distributable profits and cash. 3. DISTRIBUTION 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