Interim results to 30 June 2020

RNS Number : 5050Z

Deltex Medical Group PLC

21 September 2020

 

21 September 2020
 

Deltex Medical Group plc ("Deltex Medical" or the "Group")

Interim results to 30 June, 2020

Deltex Medical Group plc (AIM: DEMG), the global leader in oesophageal Doppler monitoring, today announces its unaudited interim results to 30 June 2020.

HIGHLIGHTS

COVID-19

§ Deltex Medical's TrueVue system is primarily used by clinicians to guide clinical practice during elective surgery; however, elective surgery in our key markets was effectively halted by the COVID-19 ("CV-19") pandemic earlier this year

§ in the UK, TrueVue Doppler is also used in intensive care units ("ICUs") for very sick patients. Use of TrueVue Doppler increased at the height of the pandemic during March and April, but dropped back sharply as admission to ICUs for CV-19 patients reduced

§ there are preliminary signs that elective surgery is now beginning to increase as pressure to reduce waiting lists starts to grow, particularly overseas

Financial

§ revenues: £1.2 million (2019: £2.0 million)

§ 33% reduction in like-for-like revenues: £1.2 million (2019: £1.8 million)

§ 25% reduction in overhead costs to £1.3 million (2019: £1.7 million)

§ adjusted EBITDA: £(0.2) million (2019: £0.2 million)

§ loss for the period: £(0.6) million (2019: £(0.3) million)

§ cash at hand - 30 June 2020: £0.6 million (30 June 2019: £0.6 million)

Business

§ the reduction in revenues linked to the cessation of elective surgical procedures in our key markets has been partially offset by the treatment of CV-19 patients in ICUs

§ careful stewardship of cash resources, including use of Government furlough scheme and successful application to the US Government's Paycheck Protection Program

§ good progress being made on new product development, including securing further grant funding 

§ focus now on positioning the business for progress in 2021

Nigel Keen, Chairman of Deltex Medical, said:

"The first half was challenging, but our much lower cost base and careful stewardship of cash means that the business is well placed for future opportunities."

"Although it was pleasing to see the Group's TrueVue Doppler being used to treat a number of acutely sick COVID-19 NHS patients in March and April, the decline in elective surgery in our key markets adversely affected the business significantly."

"We are confident that as the number of elective surgical procedures starts to climb, in part due to increasing pressure to reduce waiting lists, so the financial performance of the Group will improve."

 

For further information, please contact:

Deltex Medical Group plc	01243 774 837
Nigel Keen, Chairman	[e-mail]
Andy Mears, Chief Executive
David Moorhouse, Group Finance Director
Arden Partners plc	020 7614 5900
Ciaran Walsh Dan Gee-Summons	[e-mail]
Joint Broker
Turner Pope Investments (TPI) Ltd	0203 657 0050
Andy Thacker Zoe Alexander	[e-mail]

This announcement contains Inside Information as defined under the Market Abuse Regulation (EU) No. 596/2014.

Notes for Editors

Deltex Medical manufactures and markets haemodynamic monitoring technologies which are primarily used in critical care and general surgical procedures. Deltex Medical's proprietary oesophageal Doppler monitoring ("ODM") (TrueVue Doppler) measures blood flow velocity in the central circulation in real time. Minimally invasive, easy to set-up and quick to focus, the technology generates a low-frequency ultrasound signal which is highly sensitive to changes in blood flow and measures such changes in 'real time'. Deltex Medical is the only company in the enhanced haemodynamic space to have built a robust and credible evidence base demonstrating both the clinical and economic benefits of its core technology: TrueVue Doppler. This technology has been proven in a wide range of clinical trials to reduce complications suffered by patients after surgery and consequently can save hospitals money.

Deltex Medical's TrueVue System on the CardioQ-ODM+ monitor platform now provides clinicians with two further advanced haemodynamic monitoring technologies. TrueVue Impedance is an entirely non-invasive monitoring technology which transmits low magnitude, high frequency electrical signals through the thorax and measures the changes to this signal when the heart pumps blood. TrueVue PressureWave uses the peripheral blood pressure signal analysis to give doctors information on changes in the circulation and is particularly suited to monitoring lower risk or haemodynamically stable patients.

Group goal

Haemodynamic management is now becoming widely accepted as a vital part of the anaesthesia protocols for surgical patients, as well as treating ventilated intensive care patients, including ventilated COVID-19 patients. Consequently, the Group's focus is on maximising value from the opportunities presented, as enhanced haemodynamic management is adopted into routine clinical practice around the world. The Group aims to provide clinicians with a single platform - a 'haemodynamic workstation' - which offers them a range of technologies from simple to sophisticated to be deployed according to the patient's clinical condition as well as the skill and expertise of the user. Doing this will enable the Group to partner with healthcare providers to support modern haemodynamic management across the whole hospital.

The Group is currently in the implementation phase of achieving this goal in a number of territories worldwide, operating directly in the UK and the USA, and via agreements with approximately 40 distributors overseas

 

Chairman's statement

Financial results

The adverse impact of COVID-19 ("CV-19") on the business is reflected in the results of the first half.

The Group saw significantly increased sales into UK intensive care units ("ICUs") in March and April, as intensivists started to use Deltex Medical's equipment to improve the treatment of CV-19 patients, particularly to help avoid acute kidney injuries. In 2019 we negotiated the termination of a third-party distribution agreement, which included revenues of £0.2 million in the first half of 2019, accordingly the like-for-like H1 2019 revenues were £1.8 million, meaning that the H1 2020 revenues of £1.2 million declined by 33% on a like-for-like basis. On a statutory basis the loss of revenues from elective surgical procedures in the first half resulted in total Group revenues declining by 42% to £1.2 million (2019: £2.0 million).

When the scale of the impact of the CV-19 pandemic became clear, especially the adverse impact globally on elective surgery volumes, management took rapid and robust action. This included aggressively cutting discretionary expenditure from March and furloughing the majority of the Group's UK employees from May. These proactive steps resulted in a 25% reduction in costs in the first half to £1.3 million (2019: £1.7 million).

Adjusted EBITDA for the period was a loss of £0.2 million (2019: positive £0.2 million).

During the period the Group was awarded an Innovation Continuity Grant by Innovate UK worth approximately £0.2 million to help the funding of its new product development programme which last year received an Innovate UK Smart award. The cash associated with this grant was received in July 2020. Deltex Medical continues to work closely with Innovate UK to explore additional funding sources for its new product development programme.

The Group also successfully applied for a cash grant of US$0.2 million under the US Government's Paycheck Protection Program, which was received in July 2020.

There continues to be careful stewardship of the Group's cash resources with cash at hand at 30 June, 2020 of £0.6 million (2019: £0.6 million).

Commercial activities

Deltex Medical's TrueVue Doppler haemodynamic monitoring technology was originally developed for use in ICUs where it provides extremely accurate data to help guide therapy for very sick patients whose haemodynamic status is changing rapidly.  More recently, other technologies have entered the market to provide more indicative data on the haemodynamic status of ICU patients who are relatively stable.

For patients in the Operating theatre ("OR"), whose haemodynamic status is intrinsically unstable, the Group's TrueVue Doppler technology has become the standard of care supported by a significant number of positive clinical trial results published in scientific journals.  Since the use of TrueVue Doppler in the OR is a higher margin business than its use in the ICU, and the OR also typically represents a larger addressable market, Deltex Medical has focussed its sales and marketing activities on promoting the use of its TrueVue Doppler technology in the OR setting.

When the CV-19 pandemic struck, clinicians saw that patients admitted into ICU were often critically haemodynamically unstable. This prompted intensivists who were familiar with the benefits of Deltex Medical's technology to start to use the TrueVue Doppler system to treat this cohort of very sick ICU patients. Accordingly, in March and April we saw usage rates significantly increase in UK ICUs.

In parallel, we saw elective surgery being stopped by healthcare systems in our key markets as hospitals focused on treating the large numbers of extremely sick CV-19 patients being admitted into ICUs. This decline in elective surgical procedures resulted in a very significant reduction in orders for TrueVue Doppler probes from the Group's established customer base.

Since May, as lockdown brought the pandemic under control, the number of CV-19 patients in UK and US ICUs has reduced substantially, with many ICUs being nearly completely empty.  Elective surgical procedures are, however, only just beginning to restart and often initially at a much lower level, as hospitals reshape their services to be able to withstand the possibility of a second wave of CV-19 patients whilst at the same time putting in place measures which will allow an increase in normal clinical interventions.

Deltex Medical has seen increased activity levels from our key markets since August. For example:

§ in the United States, our direct sales team is beginning to see the number of elective surgical procedures in US hospitals increasing. It is too early to be able to assess how quickly it will take our US hospital customers to get back to full capacity, although we believe that the USA is currently moving faster than the UK, notwithstanding the continuing relatively high CV-19 transmission rates;

§ in the UK, there are signs that elective surgery is beginning to restart following the end of the summer holiday period. There is also significant pressure from both patients and clinicians to reduce the substantial waiting lists which developed during lockdown for both NHS and private patients. There is a clear recognition that it is better clinically, and less expensive, to treat patients via elective surgical procedures as opposed to waiting for patients' underlying health issues to deteriorate and require emergency interventions. We have seen a UK hospital place an order for 10 new TrueVue Monitors for its ORs following intense use of the TrueVue Doppler technology in its ICUs during the peak of the CV-19 pandemic. It is currently too early to estimate how quickly elective procedures will return to normal, pre-pandemic levels in NHS and private hospitals in the UK; and

§ through our international network of distributors, we are seeing signs of orders returning to more normal levels of demand. For example, in France, Deltex Medical's distributor ordered probes in August for the first time this year and we have also seen orders from Korea as well as some smaller European customers.

New product development

Deltex Medical's new product development programme, including the development of the new Monitor, has continued despite the disruption caused by engineers working from home. Good progress has been made, including securing further grant funding for elements of this development work.

Brexit

The Group has a number of contingency plans already in place which can be quickly implemented to respond to the different possible outcomes associated with Brexit and the EU-UK Withdrawal Agreement negotiations.

Current trading and prospects

Deltex Medical's core haemodynamic monitoring business remains focused on elective surgery. As elective surgery numbers increase worldwide, so the Group's financial performance will improve. In the meantime, we believe that the Group will continue to trade at a reduced level of activity in comparison to pre-CV-19 levels, but that this level of activity is sustainable and is expected to be broadly cash neutral.

Although the second half is expected to be an improvement on the first half of 2020, the ongoing elective surgery delays will result in revenues being materially behind market expectations. The Group does have some significant live tenders with potential international buyers. However, the Board has taken a prudent approach with guidance due to the limited visibility on these large potential orders. We expect revenue levels in 2021 to recover to previous levels seen in 2019.

On the back of the CV-19 ICU experience, the Group is now working with key opinion leaders in the UK and the United States to develop data to show how the protocolized use of TrueVue Doppler on severely sick CV-19 patients can significantly improve patient outcomes.

Since the beginning of September, a number of Deltex Medical employees have been taken off furlough to return to work on a part-time basis in order to help the Group satisfy increasing demand for its TrueVue Doppler probes.

Deltex Medical's focus for the rest of this year will be to ensure that the business is optimally positioned for 2021, including maximising cash generation and, assisted by the Innovate Smart award, continuing with its programme of new product development.

Nigel Keen
Chairman

21 September, 2020

 

Condensed Consolidated Statement of Comprehensive Income

for the period ended 30 June 2020

		Unaudited		Audited
		Six months ended 30 June 2020	Six months ended 30 June 2019	Year ended  31 December 2019
	Note	£'000	£'000	£'000
Revenue	4	1,157	1,993	4,256
Cost of sales		(364)	(487)	(974)
Gross profit		793	1,506	3,282
Administrative expenses		(575)	(853)	(1,515)
Sales and distribution expenses		(542)	(624)	(1,220)
Research and Development, Quality and Regulatory		(185)	(250)	(446)
Impairment loss on trade receivables		-	-	(11)
Exceptional costs	16	-	-	(137)
Total costs		(1,302)	(1,727)	(3,329)
Operating profit / (loss) before exceptional costs and other gain		(509)	(221)	90
Exceptional costs	16	-	-	(137)
Other gain	7	19	-	13
Operating loss		(490)	(221)	(34)
Finance costs		(88)	(86)	(176)
Loss before taxation		(578)	(307)	(210)
Tax credit on loss	7	4	38	51
Loss for the period/year		(574)	(269)	(159)
Other comprehensive (expense)/income
Items that may be reclassified to profit or loss:
Net translation differences on overseas subsidiaries		24	1	(8)
Other comprehensive (expense)/income for the period/year, net of tax		24	1	(8)
Total comprehensive loss for the period/year		(550)	(268)	(167)
Total comprehensive loss for the period/year attributable to:
Owners of the Parent		(560)	(269)	(169)
Non-controlling interests		10	1	2
		(550)	(268)	(167)
Loss per share - basic and diluted	8	(0.11)p	(0.05)p	(0.03p)

Condensed Consolidated Balance Sheet

		Unaudited		Audited
	Note	30 June 2020 £'000	30 June 20191 £'000	31 December 2019 £'000
Assets
Non-current assets
Property, plant and equipment		344	403	395
Intangible assets		2,696	2,595	2,651
Financial assets at amortised cost		159	161	157
Total non-current assets		3,199	3,159	3,203
Current assets
Inventories	9	1,000	946	915
Trade and other receivables		655	1,051	1,062
Financial assets at amortised cost		214	214	214
Other current assets		114	104	113
Current income tax recoverable		103	100	80
Cash and cash equivalents	10	568	595	908
Total current assets		2,654	3,010	3,292
Total assets		5,853	6,169	6,495
Liabilities
Current liabilities
Borrowings	12	(77)	(267)	(188)
Trade and other payables	13	(2,185)	(2,026)	(2,198)
Total current liabilities		(2,262)	(2,293)	(2,386)
Non-current liabilities
Borrowings	12,14	(1,092)	(1,052)	(1,072)
Trade and other payables		(300)	(334)	(320)
Provisions		(65)	(56)	(62)
Total non-current liabilities		(1,457)	(1,442)	(1,454)
Total liabilities		(3,719)	(3,735)	(3,840)
Net assets		2,134	2,434	2,655
Equity
Share capital	15	5,249	5,123	5,249
Share premium		33,230	33,230	33,230
Capital redemption reserve		17,476	17,476	17,476
Other reserve		468	1,076	439
Translation reserve		165	150	141
Convertible loan note reserve		82	82	82
Accumulated losses		(54,407)	(54,563)	(53,823)
Equity attributable to owners of the Parent		2,263	2,574	2,794
Non-controlling interests		(129)	(140)	(139)
Total equity		2,134	2,434	2,655

1.  Certain comparatives have been restated to be consistent with the presentation used in the 2019 Annual Report & Accounts (Note 17).

Condensed Consolidated Statement of Changes in Equity for the period ended 30 June 2020 (unaudited)

	Share capital	Share premium	Capital redemption reserve	Other reserve	Convertible loan note reserve	Translation reserve	Accumulated losses	Total	Non-controlling interest	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2020	5,249	33,230	17,476	439	82	141	(53,823)	2,794	(139)	2,655
Comprehensive income
Loss for the period	-	-	-	-	-	-	(584)	(584)	10	(574)
Other comprehensive income for the period	-	-	-	-	-	24	-	24	-	24
Total comprehensive income for the six-month period	-	-	-	-	-	24	(584)	(560)	10	(550)
Transactions with owners of the company
Equity-settled share-based payment	-	-	-	29	-	-	-	29	-	29
Balance at 30 June 2020	5,249	33,230	17,476	468	82	165	(54,407)	2,263	(129)	2,134

 

Condensed Consolidated Statement of Changes in Equity for the period ended 30 June 2019 (unaudited)

	Share capital	Share premium	Capital redemption reserve	Other reserve	Convertible loan note reserve	Translation reserve	Accumulated losses	Total	Non-controlling interest	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2019, as restated	4,927	33,230	17,476	953	82	149	(54,293)	2,524	(141)	2,383
Comprehensive income
Loss for the period	-	-	-	-	-	-	(270)	(270)	1	(269)
Other comprehensive income for the period	-	-	-	-	-	1	-	1	-	1
Total comprehensive income for the six-month period	-	-	-	-	-	1	(270)	(269)	1	(268)
Transactions with owners of the company
Equity-settled share-based payment	-	-	-	123	-	-	-	123	-	123
Share options exercised	196	-	-	-	-	-	-	196	-	196
Balance at 30 June 2019	5,123	33,230	17,476	1,076	82	150	(54,563)	2,574	(140)	2,434

 

 

Condensed Consolidated Statement of Changes in Equity for the year ended 31 December 2019 (audited)

	Share capital	Share premium	Capital redemption reserve	Other reserve	Convertible loan note reserve	Translation reserve	Accumulated losses	Total	Non-controlling interest	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2019, as restated	4,927	33,230	17,476	953	82	149	(54,293)	2,524	(141)	2,383
Comprehensive income
Loss for the period	-	-	-	-	-	-	(161)	(161)	2	(159)
Other comprehensive income for the period	-	-	-	-	-	(8)	-	(8)	-	(8)
Total comprehensive income for year	-	-	-	-	-	(8)	(161)	(169)	2	(167)
Transactions with owners of the Group
Equity-settled share-based payment	-	-	-	117	-	-	-	117	-	117
Transfers	-	-	-	(631)	-	-	631	-	-	-
Share options exercised	322	-	-	-	-	-	-	322	-	322
Balance at 31 December 2019	5,249	33,230	17,476	439	82	141	(53,823)	2,794	(139)	2,655

Condensed Consolidated Statement of Cash Flows

for the period ended 30 June 2020

		Unaudited		Audited
		Six months ended 30 June 2020 £'000	Six months ended 30 June 2019 £'000	Year  ended 31 December 2019 £'000
Cash flows from operating activities
Loss before taxation		(578)	(307)	(210)
Adjustments for:
Net finance costs		88	86	176
Depreciation of property, plant and equipment		97	100	149
Profit on disposal of loan monitors		(35)	(2)	(36)
Amortisation of intangible assets		40	71	84
Share-based payment expense		29	123	117
Effect of exchange rate fluctuations		(1)	2	(2)
		(360)	73	278
(Increase)/decrease in inventories		(85)	(257)	(235)
Decrease in trade and other receivables		383	479	427
Increase/(decrease) in trade and other payables		(16)	27	212
Increase in provisions		3	-	6
Net cash from/(used in) operations		(75)	322	688
Interest paid		(67)	(69)	(139)
Income taxes received		-	11	60
Net cash generated from/(used in) operating activities		(142)	264	609
Cash flows from investing activities
Purchase of property, plant and equipment		(10)	(12)	(10)
Proceeds from the sale of loan monitors		-	6	59
Capitalised development expenditure		(85)	(138)	(250)
Net cash used in investing activities		(95)	(144)	(201)
Cash flows from financing activities
Issue of ordinary share capital		-	196	322
Outflow from decrease in invoice discounting facility		(111)	(281)	(356)
Repayment of obligations under finance leases		(17)	(16)	(33)
Net cash (used in)/generated from financing activities		(128)	(101)	(67)
Net increase in cash and cash equivalents		(365)	19	341
Cash and cash equivalents at beginning of the period		908	580	580
Exchange (loss)/gain on cash and cash equivalents		25	(4)	(13)
Cash and cash equivalents at the end of the period/year		568	595	908

 

Notes to the condensed consolidated interim financial statements

1.  Reporting Entity

Deltex Medical Group plc is a company that is domiciled in the United Kingdom. It is incorporated in England and Wales (Company Number 03902895) and its registered office is at Terminus Road, Chichester, PO19 8TX, United Kingdom. These condensed consolidated interim financial statements (Interim Financial Statements) as at and for the period ended 30 June 2020 comprise the Company and its subsidiaries (together referred to as 'the Group'). The Group is principally involved with the manufacture and sale of advanced haemodynamic monitoring technologies.

2.  Basis of accounting

These interim financial statements have been prepared in accordance with IAS 34, 'Interim Financial Reporting', and should be read in conjunction with the Group's last annual consolidated financial statements as at and for the year ended 31 December 2019 (Annual Report & Accounts 2019). They do not include all the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position.

These condensed consolidated interim financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The summary of results for the year ended 31 December 2019 is an extract from the published consolidated financial statements of the Group for that year which have been reported on by the Group's auditors and delivered to the Registrar of Companies. The Independent Auditors' Report on the Annual Report & Accounts for 2019 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

These condensed consolidated interim financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 31 December 2019 and are expected to be applied in the preparation of the financial statements for the year ending 31 December 2020. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
 

These condensed consolidated interim financial statements were approved by the Board of Directors and approved for issue on 21 September 2020.

3.  Use of judgements and estimates

In preparing these interim financial statements, management has made judgements and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Although these estimates are based on the directors' best knowledge of the amount, event or actions, it should be noted that actual results may differ from those estimates.

The significant judgements and estimates made by the directors in applying the Group's accounting policies and key sources of estimation uncertainty were the same as those disclosed in Annual Report & Accounts 2019.

4.  Revenue
The Group's revenue disaggregated by primary geographical markets is as follows:

For the six months ended 30 June 2020 (Unaudited)
	Direct markets				Indirect markets
	Probes	Monitors	Third Party	Other	Probes	Monitors	Other	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
UK	377	16	-	31	-	-	-	424
USA	477	16	-	12	-	-	-	505
France	-	-	-	-	-	-	7	7
Scandinavia	-	-	-	-	41	-	-	41
South Korea	-	-	-	-	53	-	1	54
Peru	-	-	-	-	-	-	-	-
Other countries	-	-	-	-	96	28	2	126
	854	32	-	43	190	28	10	1,157
For the six months ended 30 June 2019 (Unaudited)
	Direct markets				Indirect markets
	Probes	Monitors	Third Party	Other	Probes	Monitors	Other	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
UK	441	19	178	44	-	-	-	682
USA	719	-	-	2	-	-	-	721
France	-	-	-	-	250	-	4	254
Scandinavia	-	-	-	-	42	-	1	43
South Korea	-	-	-	-	139	-	2	141
Peru	-	-	-	-	-	-	-	-
Other countries	16	-	-	-	102	27	7	152
	1,176	19	178	46	533	27	14	1,993
For the year ended 31 December 2019 (Audited)
	Direct markets				Indirect markets
	Probes	Monitors	Third Party	Other	Probes	Monitors	Other	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
UK	902	49	293	107	-	-	-	1,351
USA	1,443	45	-	42	-	-	-	1,530
France	-	-	-	-	289	9	6	304
Scandinavia	-	-	-	-	83	-	1	84
South Korea	-	-	-	-	277	10	3	290
Peru	-	-	-	-	258	-	3	261
Other countries	29	-	-	-	251	148	8	436
	2,374	94	293	149	1,158	167	21	4,256

 

The Group's revenue disaggregated between the sale of goods and the provision of services is set out below. All revenues are recognised at a point in time.

	Period ended		Year ended
	30 June 2020	30 June 2019	31 December 2019
	£'000	£'000	£'000
Sale of goods	1,138	1,961	4,176
Maintenance income	19	32	80
	1,157	1,993	4,256

The following table provides information about trade receivables and contract liabilities from contracts with customers. There were no contract assets at either 30 June 2020 or 1 January 2020.

	30 June 2020	1 January 2020
	£'000	£'000
Trade receivables which are in 'Trade and other receivables'	437	1,062
Contract liabilities	(72)	(53)

The following aggregated amounts of transaction prices relate to the performance obligations from existing contracts that are unsatisfied or partially unsatisfied as at 30 June 2020:

	2020	2021	2022	2023	Total
	£'000	£'000	£'000	£'000	£'000
Revenue expected to be recognised	33	33	1	5	72

5.  Segment results

Performance is monitored, and the allocation of resources is made, on the basis of results derived from the sale of probes, monitors and third-party products for which revenues and gross margins are regularly reported to the Group's Chief Executive Officer who has been identified as the Chief Operating Decision Maker (CODM). The CODM also monitors a profit measure described internally as 'adjusted earnings before interest, tax, depreciation and amortisation (Adjusted EBITDA). However, this measure is reported at a Group level rather than an operating segment which is based on the nature of the goods provided rather than the geographical market in which they are sold.


 

The unaudited segment results for the six months ended 30 June 2020 were:

	Probes1	Monitors	Third party products	Other	Unallocated	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Revenues	1,044	60	-	53	-	1,157
Adjusted gross profit2	726	68	-	41	-	835
Sales and marketing costs3	-	-	-	-	-	(519)
Administration costs3	-	-	-	-	-	(423)
R&D costs3	-	-	-	-	-	(53)
Quality and regulation costs3	-	-	-	-	-	(81)
Adjusted EBITDA4	-	-	-	-	-	(241)

1.  Managed care service revenue is categorised as probe revenue

2.  Gross profit excluding the depreciation charge relating to monitors loaned to customers and production equipment

3.  Excluding non-cash costs namely depreciation, amortisation, share-based payment expense, non-executive directors' fees and accumulated absence costs

4.  Earnings before interest, tax, depreciation and amortisation, share-based payment expense and non-executive directors' fees

The unaudited segment results for the six months ended 30 June 2019 were:

	Probes1	Monitors	Third party products	Other	Unallocated	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Revenues	1,709	46	178	60	-	1,993
Adjusted gross profit2	1,416	41	83	32	-	1,572
Sales and marketing costs3	-	-	-	-	(632)	(632)
Administration costs3	-	-	-	-	(615)	(615)
R&D costs3	-	-	-	-	(62)	(62)
Quality and regulation costs3	-	-		-	(110)	(110)
Adjusted EBITDA4	-	-	-	-	-	153

1.  Managed care service revenue is categorised as probe revenue

2.  Gross profit excluding the depreciation charge relating to monitors loaned to customers and production equipment

3.  Excluding non-cash costs namely depreciation, amortisation, share-based payment expense, non-executive directors' fees and accumulated absence costs

4.  Earnings before interest, tax, depreciation and amortisation, share-based payment expense and non-executive directors' fees

The audited segment results for the year ended 31 December 2019 were:

	Probes1	Monitors	Third party products	Other	Unallocated	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Revenues	3,533	260	293	170	-	4,256
Adjusted gross profit2	2,881	232	127	113	-	3,353
Sales and marketing costs3	-	-	-	-	(1,304)	(1,304)
Administration costs3	-	-	-	-	(1,297)	(1,297)
R&D costs3	-	-	-	-	(139)	(139)
Quality and regulation costs3	-	-		-	(222)	(222)
Adjusted EBITDA4	-	-	-	-	-	391

1.  Managed care service revenue is categorised as probe revenue

2.  Gross profit excluding the depreciation charge relating to monitors loaned to customers and production equipment

3.  Excluding non-cash costs namely depreciation, amortisation, share-based payment expense, non-executive directors' fees and accumulated absence costs

4.  Earnings before interest, tax, depreciation and amortisation, share-based payment expense and non-executive directors' fees

The reconciliation of the profit measure used by the Group's CODM to the result reported in the Group's consolidated SOCI is set out below:

	Unaudited		Audited
	30 June 2020 £'000	30 June 2019 £'000	31 December 2019 £'000
Adjusted EBITDA	(241)	153	391
Non-cash items:
Depreciation of property, plant and equipment	(61)	(98)	(149)
Amortisation of development costs	(40)	(71)	(84)
Non-executive directors' fees and employer's social security costs	(72)	(72)	(136)
Share-based payment expense	(29)	(123)	(117)
Change in accumulated absence cost liability	(66)	(10)	26
Bonus accrual releases	-	-	22
Cash item: Other tax income	19	-	13
	(249)	(374)	(425)
Operating loss	(490)	(221)	(34)
Finance costs	(88)	(86)	(176)
Loss before tax	(578)	(307)	(210)
Tax credit on loss	4	38	51
Loss for the period/year	(574)	(269)	(159)

6.  Dividends

The Directors cannot recommend the payment of a dividend (2019: nil) for 2020.

7.  Tax credit on loss
 

	Unaudited		Audited
	30 June 2020	30 June 2019	31 December 2019
	£'000	£'000	£'000
Research and development tax credit	(4)	(52)	(64)
Adjustment in respect of prior periods	-	14	13
Total tax credit on loss	(4)	(38)	(51)

The other gain amount for six months to 30 June 2020 of £19,000 (six months to 30 June 2019: £nil) comprises tax income arising from the Research and Development Expenditure Credit scheme which is accounted for as a government grant. 

8.  Loss per share
Basic loss per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares issued during the year.

The loss per share calculation for six months to 30 June 2020 is based on the loss after tax attributable to owners of the parent of £584,000 and the weighted average number of shares in issue of 524,868,826.

The loss per share calculation for six months to 30 June 2019 is based on the loss after tax attributable to owners of the parent of £270,000 and the weighted average number of shares in issue of 502,437,787.

The loss per share calculation for the year ended 31 December 2019 is based on the loss after tax attributable to owners of the parent of £161,000 and the weighted average number of shares in issue of 509,679,881. While the Company is loss-making, the diluted loss per share and the loss per share are the same.

9.  Inventories

Inventories at 30 June 2020 include the following Finished Goods: 21,398 probes and 250 monitors.

10.  Cash at bank

	Unaudited		Audited
	30 June 2020	30 June 2019	31 December 2019
	£'000	£'000	£'000
Cash at bank	568	595	908

11.  Net cash

	Unaudited			Audited
	30 June 2020	30 June 2019	31 December 2019
	£'000	£'000	£'000
Cash at bank	568	595	908
Less Invoice discount facility	(77)	(267)	(188)
	491	328	720

12.  Borrowings

	Unaudited				Audited
	30 June 2020		30 June 2019		31 December 2019
	Current	Non-current	Current	Non-current	Current	Non-current
	£'000	£'000	£'000	£'000	£'000	£'000
Invoice discount facility	77	-	267	-	188	-
Convertible loan notes	-	1,092	-	1,052	-	1,072
	77	1,092	267	1,052	188	1,072

13.  Trade and other payables

	Unaudited				Audited
	30 June 2020		30 June 2019		31 December 2019
	Current	Non-current	Current	Non-current	Current	Non-current
	£'000	£'000	£'000	£'000	£'000	£'000
Trade payables	445	-	360	-	381	-
Other payables	348	-	345	-	483	-
Social security and other taxes	175	-	122	-	129	-
Lease obligations	35	300	35	334	32	320
Contract liabilities	72	-	150	-	53	-
Employee short-term liabilities	98	-	67	-	31	-
Accrued expenses	1,012	-	947	-	1,089	-
	2,185	300	2,026	334	2,198	320

 

14.  Convertible loan note

The convertible loan note recognised in the Condensed Consolidated Balance Sheet is calculated as:

	Financial liability	Equity component	Total
	£'000	£'000	£'000
Carrying amount at 1 January 2020	1,072	82	1,154
Interest expense	64	-	64
Interest paid	(44)	-	(44)
Carrying amount at 30 June 2020	1,092	82	1,174

The convertible loan note falls due for repayment in February 2022. The convertible loan note is, at the option of the loan note holder, convertible at anytime into new ordinary shares of 1 penny each at a conversion price of 4 pence per share.

15.  Share capital

During the six months ended 30 June 2020, there were no share issues or exercises of shares.

16.  Exceptional items

Exceptional items comprised:

	Unaudited				Audited
	30 June 2020		30 June 2019		31 December 2019
	£'000		£'000		£'000
Payments in lieu of notice		-		-	65
Compensation for loss of office		-		-	30
Write off of research and development obsolete projects		-		-	42
		-		-	137

17.  Seasonal fluctuations

Revenues in our Distributor markets are traditionally higher in the second half of the financial year due to the purchasing patterns of customers.

 

18.  Restatement of prior period balance sheet amounts

Certain comparative balances at 30 June 2019 have been restated to reflect presentational changes made in the preparation of the 2019 Annual Report & Accounts. The table below summarises the changes made:

	As reported	Prior period adjustment for removal of capitalised dilapidation	As restated
	£'000	£'000	£'000
Non-current assets
Property, plant and equipment	490	(87)	403

	As reported	Prior period adjustment for discounting of dilapidation provision	As restated
	£'000	£'000	£'000
Non-current liabilities
Provisions	(114)	58	(56)

19.  Foreign exchange rates

The following are the principal foreign exchange rates used in the preparation of the condensed consolidated interim financial statements:

	Unaudited				Audited
	30 June 2020		30 June 2019		31 December 2019
	Average rate	Closing rate	Average rate	Closing rate	Average rate	Closing rate
Sterling/US dollar	1.27	1.24	1.30	1.27	1.28	1.31
Sterling/Euro	1.15	1.10	1.15	1.12	1.14	1.17
Sterling/Canadian dollar	1.72	1.68	1.73	1.66	1.70	1.71

20.  Distribution of the announcement

Copies of this announcement are sent to shareholders on request and will be available for collection free of charge from the Company's registered office at Terminus Road, Chichester, PO19 8TX, United Kingdom. This announcement is available, free of charge, from the Company's website at www.deltexmedical.com

21.  Cautionary statement

This announcement contains forward-looking statements which are made in good faith based on the information available at the time of its approval. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by several risks and uncertainties that are inherent in any forward-looking statement which could cause actual results to differ materially from those currently anticipated. Nothing in this document should be considered to be a profit forecast.

 

END

 

 

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