Interim Results

Deltex Medical Group PLC 17 September 2002 17 September 2002 Deltex Medical Group plc Interim Results for the six months ended 30 June 2002 DELTEX MEDICAL'S TURNOVER RISES 33% Deltex Medical Group plc ('Deltex Medical'/'Group'/'Company'), the AIM listed haemodynamic monitoring company, announces its results for the six months ended 30 June 2002. Highlights • Turnover increased by 33% to £0.8 million (2001: £0.6 million) • 29% reduction in losses to £1.4 million (2001: loss of £1.8 million) • Installed base of CardioQ monitors increased by 107 (or 18%) to 712 during the reporting period; total increase in installed base in year to 31 December 2001 was 164 monitors • Sales of single patient probes rose by 28% in the six months to 30 June 2002 to 11,520 (corresponding period in 2001: 8,985) • Encouraging response to launch of Multi Patient Probes • Growing acceptance of the medical and economic benefits of Haemodynamic Optimisation and of Deltex Medical's technology complemented by the Company's continuing focus on clinical education and 'doctor to doctor' training programmes and its decision to strengthen its direct specialist sales teams in key markets • Cash in hand at the end of June 2002 was £3.8 million. Chairman and Chief Executive, Nigel Keen, commented: 'The strong increase in CardioQ and Single Patient Probe sales is clear evidence of the progress we have made in our drive to establish our technology as common practice in operating theatres, intensive care units and accident and emergency departments worldwide, thereby providing doctors with information that will enable them to guide therapy and help them make their patients better, quicker. 'Since July, when we took our UK distribution back in-house, feedback from the UK market has demonstrated that there is considerable demand for the haemodynamic monitoring solution that the CardioQ offers. This has confirmed the Board's belief that Deltex Medical is one of the best-positioned suppliers of minimally and non-invasive cardiac monitoring solutions. This position will allow us to take advantage of the growing acceptance of the benefits of Haemodynamic Optimisation that will in turn enable us to deliver long-term value to our shareholders.' Enquiries Deltex Medical Group plc 01243 774 837 Nigel Keen, Chairman and Chief Executive nigel.keen@deltexmedical.com Ewan Phillips, Finance Director ewan.phillips@deltexmedical.com Financial Dynamics 020 7831 3113 Stephanie Highett stephanie.highett@fd.com Notes for editors Deltex primarily develops, assembles and markets a cardiac function monitor and therapy guidance device, the CardioQ ('CardioQ'/'Monitor'). The CardioQ incorporates the Company's proprietary software and a narrow, easy-to-use, minimally invasive, disposable oesophageal probe, used for transmitting and receiving an ultra-sound ('Doppler') signal. By using this Doppler technology, the CardioQ provides clinicians with an early warning on the haemodynamic condition of critically ill patients. This continuous, real-time monitoring facilitates the administration of fluids or drugs in a timely fashion and provides an immediate assessment of their impact. There are already over 700 CardioQs currently in use in hospitals worldwide and distribution arrangements are in place in over 30 countries. In addition, there are currently more than 75 clinical publications on the use of the CardioQ which have repeatedly:- • validated the results of the Monitor against known standards for measuring cardiac output, demonstrating that the technology works • proved that the CardioQ works over a variety of types of operation • shown that the Company's technology provides significant health and economic benefits by helping to reduce post-operative complications and length of hospital stays by an average of 30 to 40 per cent for a wide range of patients. The Company is also currently developing a number of new products:- • the SupraQ - a monitor based on the CardioQ technology but using a completely non-invasive probe; the prototype is being prepared for clinical testing • the NeuroQ - a monitor designed to measure blood flow in the brain; the new prototype is in preparation for clinical trials. Chairman's statement Deltex Medical's goal is to establish its technology as common practice in operating theatres, intensive care units and accident and emergency departments worldwide, thereby giving doctors information that will enable them to guide therapy and help them make their patients better, quicker. The half-year to 30 June 2002 saw our installed base of CardioQ's in hospitals increase by 107 units to 712. This compares with an increase of 164 units in the whole of 2001. In addition there continue to be a number of the predecessor versions of the monitor still in use in certain markets. Sales of our Single Patient Probes were 11,520 units and in addition, we sold nearly 200 of our new Multi Patient Probes that can be used up to six times before expiry in anticipation of their launch in July. These sales represent a very significant increase over the 8,985 Single Patient Probes sold in the same period in 2001. In revenue terms sales amounted to £0.8 million, an increase of one third from £0.6 million in the previous year. This is encouraging as the first half of 2002 was affected by the impact of our former distributor in the United Kingdom running down inventories of both monitors and probes prior to the end of the distribution contract at the end of June. In addition in 2001 we recorded substantial initial sales of machines to build up launch stocks both in Japan and South Korea, whereas in the current period the sales did not include any significant one-off volumes. The net loss for the half-year amounted to £1.4 million, an improvement on the loss of £1.8 million recorded in the same period last year. This reflects both the increasing margin as sales begin to build and the shifting pattern of expenditure resulting from the actions we have taken to refocus our activities on those markets where adoption of our technology is proving to be most successful. Cash in hand at the end of June amounted to £3.8 million. After taking into account the payment of expenses in the early part of 2002 in connection with our AIM listing at the end of 2001 this shows that we were using cash at an average rate of £200,000 per month which was in line with our expectations. Major developments Our sales model is to encourage interest in our technology through promoting ' doctor to doctor' training at a number of hospitals in each of our principal markets. The interest that this creates is then followed up by the sales teams who arrange for the CardioQ technology to be acquired by the target hospital. Development of that hospital into a strong and growing CardioQ user is then driven by our teams of clinical trainers who ensure that a broad range of interested clinicians and nurses in the hospital are familiar with and trained to use the CardioQ. This ensures that the technology is available to give the maximum clinical benefit to as many patients as possible. The clinical trainers are also responsible for broadening the use of the CardioQ into those departments of the hospital that are appropriate. On 1 July 2002 we took back in-house the distribution of our products in the UK. Our distributor had done well in introducing the CardioQ in the UK and we felt that we could build on that base more effectively by controlling our own sales effort using the sales model that we have established and which has been shown to be effective. Consequently a major thrust for us during the period has been the establishment of our own field sales force and team of clinical trainers in the UK, building on the small team we have had in place for some time to support our UK business. This has resulted in our recruiting five additional sales people and seven additional nurse-specialist clinical trainers in the UK leading up to the launch of direct sales operations on 1 July. This development has already dramatically increased the amount of time dedicated to presenting the CardioQ technology to doctors and nurses. Feedback from the UK market since July clearly reinforces that there is considerable demand for the haemodynamic monitoring solution that the CardioQ offers. Furthermore we believe that the market will be considerably expanded by the introduction of lower cost applications of the technology such as that provided by our Multi Patient Probe. The interest that the launch of the MPP has engendered has prompted us to look at providing additional low-cost solutions, based upon the MPP platform, which will allow clinicians to broaden the range of patient groups that can benefit from the use of the CardioQ. We have also significantly strengthened our international sales and marketing team with key new territory managers joining us in September and November for the Far East and Europe respectively to drive activity in those markets where we have been through the long lead time periods necessary for gaining regulatory and other approvals. As we have previously reported we have realigned our sales and marketing organisation in the USA to focus more carefully on those hospitals which provide opportunities for increasing the use of our devices. We maintain a small, specialised field sales force in the USA that is supported by an experienced team of clinical trainers. We distribute our products from our base in Baltimore. This strategy has allowed us to maintain the volume of sales in the USA at the same level as before the changes but at a substantially lower cost and we are confident that we will see continuing improvement to our US position as the year progresses. This will lead to us being well placed to accelerate the introduction of our products as the benefits of Haemodynamic Optimisation become better known in the USA, as is happening in the rest of the world. We are making considerable changes to the thrust of our business as we move from being primarily a creator of technology to being focused on driving adoption in the many markets where it is being sold. The scale of this change is evidenced by the fact that when we listed on AIM in November last year only one third of our employees had customer facing roles whereas by November of this year we expect more than half our staff to be primarily customer facing, with far greater responsibility for customers and customer service amongst the remainder. In order to maximize the benefits of this changing focus we have strengthened our management processes across all areas of the business and we expect to see the benefits from our stronger emphasis on customer needs and solutions next year. As part of this increased customer focus Daniel Bretonneau joined the board as sales director in July. Daniel has worked with Deltex Medical since 1999 and has been responsible for opening up many of the promising new markets we are looking to exploit in the years to come. Research and Development Whilst the CardioQ is currently principally used on sedated patients, Deltex Medical is developing devices that will extend the use of the technology to un-sedated patients. This will allow the clinician to assess the patient's haemodynamic status from the time that the patient arrives in the healthcare system, be that at the site of an accident or on admission to hospital, through to discharge of the patient from the hospital. One of the Group's strengths lies in its expertise in research and development both in-house and in terms of its relationships with academic consultants working in a variety of different hospitals and universities and we continue to make progress on a number of different projects. Prospects Since July, when we took our UK distribution back in-house, feedback from the UK market has demonstrated that there is considerable demand for the haemodynamic monitoring solution that the CardioQ offers. This has confirmed the Board's belief that Deltex Medical is one of the best-positioned suppliers of minimally and non-invasive cardiac monitoring solutions. This position will allow us to take advantage of the growing acceptance of the benefits of Haemodynamic Optimisation that will in turn enable us to deliver long-term value to our shareholders. Nigel Keen Chairman 17 September 2002 Consolidated profit and loss account for the six month period ended 30 June 2002 Unaudited Unaudited Audited Half year to Half year to Full year to 30 June 30 June 31 December 2002 2001 2001 Restated £m £m £m Turnover 0.8 0.6 1.3 Cost of sales (0.5) (0.4) (0.7) ---- ---- ---- Gross profit 0.3 0.2 0.6 ---- ---- ---- Net operating expenses (1.8) (2.1) (4.0) ---- ---- ---- Operating loss (1.5) (1.9) (3.4) Interest receivable and similar income 0.1 0.1 0.1 ---- ---- ---- Loss on ordinary activities before taxation (1.4) (1.8) (3.3) Tax on loss on ordinary activities - - - ---- ---- ---- Loss for the period (1.4) (1.8) (3.3) ========= ========= ========= Loss per share - basic and diluted £(0.037) £(0.112) £(0.174) ========= ========= ========= The above results all relate to continuing operations. The loss on ordinary activities before taxation and the loss for the period have been computed on the historical cost basis. Statement of group total recognised gains and losses for the six month period ended 30 June 2002 Unaudited Unaudited Audited Half year to Half year to Full year to 30 June 30 June 31 December 2002 2001 2001 Restated £m £m £m ---- ---- ---- Loss for the period (1.4) (1.8) (3.3) Currency translation differences in foreign currency net investment (0.1) - 0.1 ---- ---- ---- (1.5) (1.8) (3.2) ========= ========= ========= Consolidated balance sheet At 30 June 2002 Unaudited Unaudited Audited 30 June 30 June 31 December 2002 2001 2001 Restated £m £m £m Fixed assets Tangible assets 0.3 0.5 0.4 ---- ---- ---- Current assets Stocks 0.5 0.6 0.7 Debtors 0.5 0.2 0.4 Cash at bank and in hand 3.8 2.1 5.6 ---- ---- ---- 4.8 2.9 6.7 Creditors: Amounts falling due within one year (0.7) (0.4) (1.2) ---- ---- ---- Net current assets 4.1 2.5 5.5 ---- ---- ---- Net assets 4.4 3.0 5.9 ========= ========= ========= Capital and reserves Called up share capital 3.7 15.7 3.7 Share premium account 8.6 6.5 8.6 Merger reserve 1.8 1.8 1.8 Profit and loss account (23.8) (21.0) (22.3) Capital redemption reserve 14.1 - 14.1 ---- ---- ---- Equity shareholders' funds 4.4 3.0 5.9 ========= ========= ========= Consolidated cash flow statement for the six month period ended 30 June 2002 Unaudited Unaudited Audited Half year to Half year to Full year to 30 June 30 June 31 December 2002 2001 2001 £m £m £m ---- ---- ---- Net cash outflow from operating activities (1.7) (1.7) (2.4) ---- ---- ---- Returns on investments and servicing of finance Interest received 0.1 0.1 0.1 ---- ---- ---- Net cash inflow from returns on investments and servicing of finance 0.1 0.1 0.1 ---- ---- ---- Capital expenditure Purchase of tangible fixed assets (0.1) (0.2) (0.3) ---- ---- ---- Net cash outflow for capital expenditure (0.1) (1.8) (0.3) ---- ---- ---- Net cash outflow before financing (1.7) (1.8) (2.6) ---- ---- ---- Financing Issue of ordinary share capital - - 5.3 Expenses in connection with share issue - - (1.1) Capital element of finance lease payments - - - ---- ---- ---- Net cash inflow from financing - - 4.2 ---- ---- ---- (Decrease)/increase in net cash in the period (1.7) (1.8) 1.6 ========= ========= ========= Notes to the interim statement for the six month period ended 30 June 2002 1. Basis of preparation The financial information for the six months ended 30 June 2002 is not audited but has been prepared in accordance with generally accepted accounting principles in the UK. The accounting policies adopted are those which will be applied in the financial statements for the year ended 31 December 2002. These are consistent with those set out in the audited financial statements for the year ended 31 December 2001. The financial information does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The share premium account balance at 30 June 2001 was previously reported as £8.3 million. It has been reduced by £1.8 million to reclassify the share premium account balance in Deltex Medical Holdings Limited, the previous group parent company, as a merger reserve arising on consolidation rather than share premium. Turnover for the six month period ended 30 June 2001 was previously reported as £0.7 million and included an invoice for £49,000 which was reversed in preparing the financial statements for the year ended 31 December 2001. As a result of this, turnover for the six month period ended 30 June 2001 has been shown as £0.6 million. Debtors have been restated accordingly and cost of sales and stocks adjusted to reverse £45,000 of costs associated with this transaction. 2. Turnover The Group's activities consist solely of the manufacture and marketing of medical devices. By origin, all sales are United Kingdom sales. Unaudited Unaudited Audited Half year to Half year to Full year to 30 June 30 June 31 December 2002 2001 2001 Restated £m £m £m Analysis of turnover by destination United Kingdom 0.2 0.2 0.5 United States of America 0.2 0.2 0.3 Rest of Europe 0.1 0.1 0.3 Rest of the World 0.3 0.1 0.2 ---- ---- ---- 0.8 0.6 1.3 ========= ========= ========= 3. Loss per share The loss per share calculation for the six months to 30 June 2002 is based on the loss of £1.4 million and weighted number of shares in issue of 36.9 million. The loss per share calculation for December 2001 is based on the loss of £3.3 million and weighted average number of shares in issue of 18.7 million. For June 2001 the loss per share calculation was based upon the loss of £1.8 million and weighted average number of shares in issue of 15.6 million. The Group had no dilutive potential ordinary shares in either period, which would serve to increase the loss per ordinary share. Therefore there is no difference between the loss per ordinary share and the diluted loss per ordinary share. 4. Reconciliation of movements in shareholders' funds Unaudited Unaudited Audited Half year to Half year to Full year to 30 June 30 June 31 December 2002 2001 2001 Restated £m £m £m Opening shareholders' funds 5.9 4.8 4.8 Increase in share capital during the period - 0.1 2.3 Premium on shares issued, net of costs - - 2.1 Loss for the period (1.4) (1.8) (3.3) Costs associated with share options - (0.1) (0.1) Exchange difference taken to reserves (0.1) - 0.1 ---- ---- ---- Closing shareholders' funds 4.4 3.0 5.9 ========= ========= ========= 5. Operating cash flow Unaudited Unaudited Audited Half year to Half year to Full year to 30 June 30 June 31 December 2002 2001 2001 Restated £m £m £m Operating loss (1.5) (1.9) (3.4) Depreciation of tangible fixed assets 0.1 0.2 0.4 Exchange differences - (0.2) (0.1) Decrease/(increase) in stocks 0.2 0.3 0.2 Decrease/(increase) in debtors (0.1) 0.1 (0.1) (Decrease)/increase in creditors (0.4) (0.1) 0.6 ---- ---- ---- Net cash outflow from operating activities (1.7) (1.6) (2.4) ========= ========= ========= 6. Reconciliation of movement in net cash 1 January Cash flow Other non Exchange 30 June 2002 2002 cash movement changes £m £m £m £m £m Net cash Cash at bank and 5.6 (1.8) - - 3.8 in hand Bank overdrafts (0.1) 0.1 - - - ---- ---- ---- ---- ---- 5.5 (1.7) - - 3.8 ========= ========= ========= ========= ========= 7. Dividends The directors do not recommend payment of a dividend (2001: nil). 8. Distribution of announcement Copies of this announcement are being sent to all shareholders and will be available for collection free of charge from the Company's registered office at Terminus Road, Chichester, West Sussex PO19 8TX. This information is provided by RNS The company news service from the London Stock Exchange

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