LID.L Regulatory News (LID)

LiDCO Group Plc

("LiDCO" or the "Company")

Trading Update and Notice of Results

LiDCO (AIM: LID), the hemodynamic monitoring company, announces an update on trading and outlook for the 12 month period ending 31 January 2019.

Based on current trading, the Board now expects LiDCO product revenues for 2018-19 to be similar to the last financial year. The principle reasons are the deferral of revenues as the Company makes more rapid progress to transition existing large UK customers to its High Usage Programme (HUP) business model, an anticipated order from South East Asia being delayed, and longer sales cycles in the US.

Following the previously announced termination of the Argon distribution contract and subsequent signing of new third party opportunities, the Board expects that third party sales are likely to be in the region of £1.0m (2017: £1.4m) this financial year. The Board anticipates gross margins to be a little stronger than last year and expenditure continues to be tightly controlled, with operational expenses expected to be around £0.3m lower than last year.

LiDCO continues to make headway with its differentiated HUP, Software as a Service (SaaS), business model following its launch in July 2017. As the business wins HUP contracts, it transitions towards multi-year licence revenues, giving greater visibility alongside stronger cash generation as customers pay in advance of services being provided. At the end of November 2018, the Company had £1.3m (November 2017: £0.3m) of annualised HUP contracts globally with the revenue recognition being spread over the term of the contract as opposed to monitor and consumable revenues being recognised at the time of transaction.  

In the UK, LiDCO is seeking to convert its largest customers to the HUP business model. The Company initially tested 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, in recent months, two more of LiDCO's larger customers have converted to HUP. This decision to actively convert UK customers to the SaaS business model will have a transitional impact on sales revenue recognition within this financial year by deferring revenues which would normally have been booked this year to be recognised over the 12 months from signing the HUP agreement. The Board strongly believes that this is the right strategy, as converting its largest users to HUP will drive greater transformational growth in the future as well as improving forward visibility and sales efficiencies.

In the US, there remains an encouraging pipeline of prospective customers, many at an advanced stage of contracting, but the timing of finalising these agreements remains difficult to predict and at this stage any which are signed will not have a material impact on reported revenues for this financial year. Whilst, at times, progress appears slower than originally anticipated, the Group's management and sales team are learning how to anticipate and overcome identified causes as well as building various relationships to help penetrate the US market, which is the largest in the world for hemodynamic monitoring. The Company has not lost any prospects from its substantial pipeline since the interim period end and is very focused on closing those at the most advanced stage. The Board believes that its disruptive HUP model will continue to gain traction in the US and anticipates that its US operations will become cash flow break-even during the course of the coming financial year.

The Company's cash position was expected to benefit in H2 2018-19 from further growth in HUP contracts, with the upfront payments made this financial year. However, given likely timing of signing new HUP contracts, the Board now anticipates an overall cash outflow in H2 of around £0.5m with the cash benefits of anticipated new HUP contracts being received in the next financial year. The Board believes that LiDCO retains the appropriate strength in its balance sheet to deliver its strategic objectives. The Company remains debt free.

The Board is confident that the HUP business model is the right strategy for driving transformational growth for the Company, albeit additional time is needed to realise the significant opportunities, particularly in the US. The Board anticipates significant revenue growth in FY 2019-20 sales as the current annualised base of HUP contracts carries forward into next year, partially offset by lower third party sales as the business transitions to the new third party distribution agreements. Gross margins are expected to improve due to a favourable LiDCO product mix and higher margins on the new third party sales, whilst operating expenses are expected to remain broadly stable.

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: "Having just returned from visiting a number of prospective HUP customers in the US, I remain very positive with our prospects for penetrating this market. In addition, we are making good progress with converting customers to our HUP model in the UK. As a result, I am convinced that we will continue to grow a strong foundation of contracted HUP recurring revenues. We will continue to keep costs and cash flows under control as we transform the business to a Software as a Service model which will be a much more predictable business."

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

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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.