TIDMDEMG
RNS Number : 6282B
Deltex Medical Group PLC
24 September 2018
24 September 2018
Deltex Medical Group plc
("Deltex Medical" or the "Company" or the "Group")
Interim results for the six-month period ended 30 June 2018
Deltex Medical Group plc (AIM: DEMG), the global leader in
oesophageal doppler monitoring today announces its results for the
six-month period ended 30 June 2018.
Operational highlights
-- Andy Mears appointed as CEO in mid-June
-- Revised strategy of building a stable business by focussing
on driving revenues from existing customers
-- Programme of cost reduction and business stabilisation
launched in the first half
- significantly accelerated and expanded since June with a
significant reduction in sales and marketing costs
-- Focus on developing relationships with existing customers
also expected to help the generation of incremental revenues from
new TrueVue System product launches
-- Publication of the large multicentre FEDORA study showing a
76% reduction in total post-operative complications for low and
moderate-risk patients using Deltex Medical's oesophageal doppler
haemodynamic monitoring technology
Financial highlights
-- A strong prior year comparator for Monitor sales and a number
of one-off events associated with Probe revenues (including
currency affects, changes in ordering by two large US accounts and
a temporary inventory adjustment by a French distributor) resulted
in revenues being held back to GBP2,325,000 (2017 H1:
GBP2,877,000)
-- Substantial reductions in overheads: estimated annualised
cost savings of c.GBP2,000,000 to be achieved from actions
taken:
-- c.GBP750,000 from actions prior to June
-- c.GBP1,250,000 from actions since appointment of new CEO
-- 33% reduction in employee numbers to 56 at 31 August (31
December 2017: 84)
-- 30% reduction in sales and distribution costs to GBP1,373,000
(2017 H1: GBP1,949,000)
-- 14% reduction in total costs to GBP2,796,000 (2017 H1:
GBP3,265,000)
-- Operating loss (before exceptional costs) of GBP999,000 (2017
H1: GBP1,082,000)
-- Cash on balance sheet at 30 June 2018 of GBP1,065,000 (31
December 2017: GBP219,000)
Nigel Keen, Chairman of Deltex Medical, commented:
"The successful GBP2,050,000 fund raising in February 2018 has
put the Group in a stronger financial position - allowing us to
improve our business structure.
"We made a number of changes to the Group in the first half -
the appointment of a new CEO in June and a revised business
strategy - which mean that Deltex Medical is much better positioned
for the second half of the year and 2019.
"The lower cost base that the business now operates has given
the Group a stronger platform from which to develop.
"Strategically we are now prioritising profitability over
securing new customers - and believe that by working more closely
with our existing customers we will start to generate incremental
revenues more quickly from new product launches on the TrueVue
System."
Deltex Medical Group plc 01243 774 837
investorinfo@Deltexmedical.com
Nigel Keen, Chairman
Andy Mears, Chief Executive
Jonathan Shaw, Group Finance Director
Nominated Adviser & Broker
Arden Partners plc 020 7614 5900
Chris Hardie
Ciaran Walsh
Joint Broker
Turner Pope Investments (TPI) 0203 621 4120
Ltd info@turnerpope.com
Andy Thacker
Financial Public Relations
IFC Advisory Ltd 0203 934 6630
Tim Metcalfe
Graham Herring
Heather Armstrong
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. Deltex Medical's proprietary oesophageal doppler
monitoring ("ODM") (TrueVue Doppler) is the only technology to
measure blood flow 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 flow and measures such changes in
'real time'. Deltex Medical has been the only Group in the enhanced
haemodynamic space to build a robust and credible evidence base
proving the clinical and economic benefits of its core technology,
TrueVue Doppler, which has been demonstrated to reduce
complications suffered by patients after surgery and save hospitals
the costs of treating those complications.
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 creates an
electrical field across the chest and measures the disruption to
this field 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 an
important part of the anaesthesia protocol for high risk surgical
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 condition as well as the skill and expertise of
the user. Doing this will enable the Group to partner 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 through distribution arrangements in
approximately 40 other countries.
Chairman's statement
Introduction
Deltex Medical has developed the 'international gold standard'
for haemodynamic monitoring with its oesophageal doppler
technology. This technology has been shown to improve patient
outcomes by enhancing patient safety and lowering attributable
healthcare costs. Among other benefits, the use of Deltex Medical's
technology has been shown to result in patients incurring
statistically-significant lower rates of surgical site infections
("SSIs") and acute kidney injuries ("AKIs"). The use of the Deltex
Medical oesophageal doppler technology is supported by a
substantial body of scientific evidence. Clinicians and health-care
systems throughout the world are increasingly recognising the
benefits of monitoring and optimising their patient's haemodynamic
status.
Deltex Medical's recently launched multi-modal TrueVue System -
which includes two other complementary haemodynamic monitoring
technologies as well as oesophageal doppler - will give clinicians
a single platform to choose the most appropriate monitoring
modality for the patient's condition.
Change in strategy
The Group has been investing significantly, particularly in the
USA, over several years to grow the base of clinicians who are
familiar with and trained to use the TrueVue System and hospitals
where it is used. This has called for substantial funding 'ahead of
the curve' to build a population of potential users who can use the
Deltex Medical products effectively and consistently, thereby
generating revenues for the business to allow it to grow its user
base, develop its product offering and provide a return to
shareholders. The strategy has been to continue to invest to grow
this base of knowledgeable users and to encourage those users to
deploy the system in their clinical practices. This had been
expected to result in a significant increase in revenues which
would have enabled the Company to generate sufficient cash to fund
further growth without needing further calls of capital from its
shareholders.
The adoption of the Deltex Medical technology by those qualified
users into their clinical practices has been slower than
anticipated and this has led to the Group using rather than
generating cash, resulting in a series of capital raisings from
shareholders. Whilst this strategy has continued to expand the
population of trained potential users of the Group's products, it
has become increasingly clear that the subsequent revenues are
arising more slowly than originally expected. Accordingly, the
Board decided to re-evaluate the strategy of committing substantial
resources to market development in advance of revenue
generation.
The successful fund raising in February 2018 gave the
opportunity to re-visit the Company's strategy with a view to
focussing on generating revenues by developing and servicing the
existing customer base. It is expected that this will generate cash
that can then be deployed 'behind the curve' without needing
repeatedly to access capital from shareholders. Cash surpluses will
be used to develop further users and to progress the roll out of
the new modalities within the TrueVue System - which will further
enhance the capabilities of the system itself.
Adoption of this revised strategy may develop new customers at a
slower rate than has been experienced to date but uptake by the
existing user base is expected to be enhanced.
This change in strategy has resulted in a number of changes -
including the appointment of Andy Mears as CEO in June as well as
the implementation of a restructuring programme - which have
provided a much stronger and robust platform from which to build
the business. Andy Mears is well suited to drive increased use by
clinicians as he successfully led the Deltex Medical sales and
marketing effort in different parts of the world for several years;
furthermore, with his engineering background he is the acknowledged
'product champion' for the TrueVue System.
Key events in the first six months
The first six months of 2018 represented a period of significant
activity - and substantial change - for the Group, including:
-- in February 2018, the Group successfully raised GBP2,050,000
(net of expenses) to strengthen its balance sheet and for general
working capital purposes;
-- in March, the large FEDORA study was published which
demonstrated that, among other things, use of Deltex Medical's
oesophageal doppler monitoring technology resulted in a 75%
reduction in total post-operative complications as well as reduced
length of stay for both moderate-risk and low-risk patients;
-- in April, the Group's French distributor won a contract for
haemodynamic monitoring for Paris's government-funded hospitals.
The contract is worth a minimum of EUR4 million over the eight-year
life of the tender; and
-- in June, the senior management of the Group was changed with
the appointment of Andy Mears as Chief Executive Officer.
Market dynamics - and how to optimise the Group's market
position
Since the promotion of Andy Mears to CEO on 13 June, the Board
has been considering carefully how to maximise value for Deltex
Medical shareholders as well as monetise the value inherent in the
Group's technology.
The Group's doppler-based haemodynamic monitoring technology
provides accurate, real-time, multi-factorial data for
anaesthetists and intensivists which can be used to improve
outcomes for anaesthetised patients undergoing surgery or sedated
patients in the intensive care unit. Deltex Medical is generally
acknowledged to have developed the international 'gold standard'
for high quality haemodynamic monitoring data; however, there is a
trade-off between the inherent quality and fidelity of the data and
the ease-of-use of the technology. Whereas Deltex Medical's
technology measures blood flow and other critical physiological
characteristics in real-time, most of the Group's competitors use
algorithm-derived information which provides clinicians with an
approximation of the haemodynamic status of the patient. This
algorithm-derived information does not enjoy the same depth of
support in the scientific literature; however, such devices are
typically easier and cheaper-to-use than Deltex Medical's high
accuracy technology and this can create marketing and adoption
issues for Deltex Medical, particularly when selling into
price-sensitive markets. The Group believes that the scientific
evidence base strongly supports the use of its technology over the
selection of easier-to-use and cheaper alternatives and this
difference lies at the heart of the commercialisation and
market-education dynamic the Group is working to optimise.
The Board has now decided to modify the Group's approach to the
market. Clearly the Group has a substantial number of customers
around the world, including in the USA, who have already accepted
the advantages inherent in the oesophageal doppler technology and
it makes good commercial sense to focus on developing the business
around that existing customer base. Moreover, the Board believes
that focussing on building closer relationships with these
established customers will provide the Group with a significantly
more effective platform for launching new, complementary
technologies on its multi-modal TrueVue System.
The combination of a lower cost-base - due to substantial
reductions in sales and marketing expenditure - and an improved
platform for future product launches is attractive. In addition,
this lower cost strategy de-risks the Group financially as it
reduces substantially the business's cash breakeven point.
Cost reduction programme
The Group had already started to reduce its costs substantially
and benefitted during the first half from actions taken around the
end of the prior year and the start of the current year resulting
in estimated annualised cost-savings of approximately GBP750,000.
Since the appointment of the new CEO in June, initiatives designed
to increase sales effectiveness and re-focus the business around
the existing customer-base have been significantly accelerated and
expanded. This has resulted in a restructuring of the business with
the removal of a layer of senior management, which with other
initiatives will give rise to further estimated annualised
cost-savings of approximately GBP1,250,000. The magnitude of the
cost reduction programme can also be seen in the Group's employee
number data. The number of employees at the end of August was 56,
representing a 33% reduction from the 84 people employed on 31
December 2017.
In the short-term, the Board believes that cost cutting is
absolutely critical as it allows Deltex Medical to move more
quickly to a cash breakeven point and thereby start to "take
control of its destiny" in terms of paying its way from cash
generated from its trading activities. However, this only
represents the first part of the strategy for the Group going
forward; other parts include a more focussed selling effort to
existing customers, using the cash generated to expand the user
base and to finance further development of the TrueVue System.
New product development and the TrueVue System
The Group's initial - and principal - technology is
doppler-based oesophageal haemodynamic monitoring. This technology
generates highly accurate, real time data; however, it can only be
easily used on anesthetised or sedated patients. Accordingly, it
does not provide the hospital with the complete solution for the
haemodynamic monitoring of all of its patients.
Deltex Medical recently launched its TrueVue System monitoring
platform which comprises three haemodynamic monitoring
technologies: (i) its existing oesophageal doppler ultrasound
(TrueVue Doppler); (ii) high-definition impedance cardiography
(TrueVue Impedance); and (iii) pulse pressure waveform analysis
(TrueVue PressureWave). The TrueVue System enables the Group to
sell its haemodynamic monitoring technologies into a larger
addressable market within a given hospital.
The TrueVue System is currently available in the UK, continental
Europe and a number of other international markets. 510(k)
regulatory clearance has now been obtained from the US Food &
Drug Administration (FDA) to market the TrueVue System in the USA,
with product launches planned for 2019.
In general terms there is a trade-off between the ease-of-use
and the precision of the data generated from each monitoring
technology. The TrueVue platform enables clinicians to match the
appropriate technology to the risk profile of the patients as they
move through the hospital. For example, high-risk, anaesthetised
patients undergoing surgery can be treated under the guidance of
the extremely precise TrueVue Doppler, whereas lower-risk, awake
patients in a high dependency unit can be monitored using
non-invasive TrueVue Impedance.
The TrueVue System is implemented by upgrades to the existing
Deltex Medical machines which are already installed with the users.
However, the Group is also developing a new monitor which will
provide clinicians with a more modern and user-friendly interface
with the TrueVue System's capabilities.
Notwithstanding the importance of updating and extending the
Group's technology-based products, the Board has decided to reduce
the rate of new product development. This reduction in monthly cash
expenditure on research and development will help to reduce the
Group's cash breakeven point - and will also help ensure that in
the short term the primary focus of the senior management of the
Group will be on increasing probe usage by existing customers.
The UK market
The UK market - and in particular sales into NHS hospitals -
remains challenging. In the last couple of years the Group had
anticipated supressed UK revenues and accordingly had taken the
decision to reduce its investment in sales and marketing into the
UK market. However, Deltex Medical does believe that there are
opportunities to build revenues from its existing UK customer
base.
The US market
The US market remains critically important for the future
prospects of the Group. The US healthcare system tends to support
higher price points than other markets. Further, the US
reimbursement system - involving both public payers such as
Medicare, Medicaid and private sector insurance companies - has
been shown to help drive the adoption of new technology as well as
usage rates of disposables used within medical devices. In
addition, the US market tends to influence other international
territories - particularly in the Middle East and Asia - where a
number of US hospital Groups own or manage prestigious overseas
hospitals.
In recent years US hospitals have faced increasingly large
financial penalties - in the form of reduced reimbursements by
government-funded payers such as Medicare and Medicaid - in the
event of patients experiencing avoidable post-operative
complications such as AKIs and/or SSIs. Accordingly, Deltex Medical
believes that its TrueVue Doppler technology, supported by the
evidence base including the recently published FEDORA study, will
be able to generate additional revenues from its existing US
customers as a result of the increased focus on avoiding AKIs and
SSIs. In addition, there are other opportunities to improve the
commercial position of Deltex Medical's technology in the USA by
better aligning the usage protocols of its technology more closely
with the US reimbursement system.
The Board anticipates that the lower sales and marketing costs
associated with the Group's US operation should result in the US
subsidiary contributing meaningfully to the costs of running the UK
operations which are in place to support the Group's users
worldwide.
International sales
The Group has developed a large network of some 40 international
distributors which sell Deltex Medical's haemodynamic monitoring
technology, including the probes. The gross margin on the probes
generated by distributor sales are inevitably lower than sales
generated by the Group's direct sales activities in the USA and the
UK; however, such distributed sales do not incur significant sales
and marketing costs.
Financial information
Data on probe revenues has already been announced in the
pre-close statement on 25 July 2018. The probe revenues in the
table below show declines, however sales in the USA were held back
by the weaker US dollar compared with H1 2017, together with
changes in ordering by two large accounts, masking encouraging
growth in use by major hospital systems. In addition, International
sales were lower due to temporary inventory adjustment by the
Group's French distributor in preparation for the transition to the
previously announced new large Paris hospital contract.
H1 2018 H1 2017
Probe revenues GBP'000 GBP'000
----------------- --------- ---------
USA 824 1,029
UK 540 663
International 611 685
----------------- --------- ---------
Total 1,975 2,377
----------------- --------- ---------
The Board believes that there is scope to drive up probe usage
in these three areas on the back of the commercial refocussing
activities that have been put in place since the appointment of the
new CEO.
The Group generates an attractive gross margin from the sales of
probes used within its haemodynamic monitoring technology. The
consolidated gross margin on probes was 78% (2017 H1: 83%).
Sales and distribution costs declined by 30% to GBP1,373,000
(2017 H1: GBP1,949,000). Other overheads were essentially unchanged
resulting in total costs of GBP2,796,000 (2017 H1:
GBP3,265,000).
In the first half there were net exceptional costs of GBP142,000
(2017 H1: Nil) relating to costs associated with the cost reduction
programmes. An equivalent amount is expected in the second half.
Further information on the exceptional items are set out in note 15
of the accompanying financial information.
The operating loss before exceptional costs and other gains was
GBP999,000 (2017 H1: GBP1,081,000). The loss for the period was
GBP1,194,000 (2017 H1: GBP1,093,000).
Following the fund raising at the beginning of the year, the
Group has much improved financial resources with cash on the
balance sheet of GBP1,065,000 at 30 June 2018 (2017: GBP219,000)
and a lower operating cost-base.
Current trading and prospects
Deltex Medical has world-leading technology which has taken many
years to develop and optimise. It has also taken significant time
and investment to build - with the support of a number of Key
Opinion Leaders around the world - the impressive body of
supporting scientific publications which advocate the use of Deltex
Medical's technology to improve patient outcomes.
More recently, there has been an increased focus in a number of
healthcare systems in developed markets on patient safety. The
introduction of financial penalties associated with avoidable
post-operative complications such as AKIs and SSIs gives a platform
for the Group's technology to play an important role in supporting
a broad range of patient safety initiatives as well as helping
hospitals reduce the financial penalties associated with avoidable
complications.
The Board believes that Deltex Medical has good prospects to
improve significantly the financial returns that it generates from
its long-standing investment in haemodynamic monitoring
technologies. As a first step the business has been re-focussed and
costs have been significantly reduced, enabling it to build a
platform to expand from via the adoption of its
broader-applicability TrueVue System.
The Board notes that, as a result of the previously reported
poor trading in H1 2018 and the implementation of the new strategy,
revenues for the year ending 31 December 2018 will be behind market
expectations and lower than those reported in 2017. However, the
impact of lower revenues will be offset by the newly implemented
cost reductions with the loss for the year expected to be in line
with market expectations.
Although the revised strategy has only been in place since
mid-June, there are already a number of encouraging signs relating
to the performance of the Group based around its smaller, leaner
and more focussed structure.
The Board is encouraged by the prospects for the Group going
forward with a significantly lower cost base providing a solid
platform for a more focussed sales approach and the delivery of the
TrueVue System.
Condensed Consolidated Statement of Comprehensive Income
for the period ended 30 June 2018
Unaudited half Unaudited half Audited full year
year 2018 year 2017 2017
Probes Other Total Probes Other Total Probes Other Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ----- -------- -------- --------- -------- -------- --------- -------- -------- ---------
Total revenue 6 1,975 350 2,325 2,377 500 2,877 4,936 934 5,870
Total cost of
sales (434) (317) (750) (402) (292) (694) (762) (726) (1,488)
------------------ ----- -------- -------- --------- -------- -------- --------- -------- -------- ---------
Gross profit 1,541 33 1,575 1,975 208 2,183 4,174 208 4,382
Administrative
expenses (1,026) (1,088) (2,070)
Sales and
distribution
expenses (1,373) (1,949) (3,692)
Research and
Development,
Quality and
Regulatory (255) (228) (558)
Exceptional costs (142) - -
------------------ ----- -------- -------- --------- -------- -------- --------- -------- -------- ---------
Total costs (2,796) (3,265) (6,320)
------------------ ----- -------- -------- --------- -------- -------- --------- -------- --------
Operating loss
before
exceptional
costs (999) (1,082) (1,938)
Exceptional costs 15 (142) - -
------------------ ----- -------- -------- --------- -------- -------- --------- -------- -------- ---------
Other gains 4a 80 - -
Operating loss (1,141) (1,082) (1,938)
Finance income - - -
Finance costs (99) (82) (163)
------------------ ----- -------- -------- --------- -------- -------- --------- -------- -------- ---------
Loss before
taxation (1,240) (1,164) (2,101)
Tax credit on
loss 46 71 100
------------------ ----- -------- -------- --------- -------- -------- --------- -------- -------- ---------
Loss for the
period/year (1,194) (1,093) (2,001)
------------------ ----- -------- -------- --------- -------- -------- --------- -------- -------- ---------
Other
comprehensive
(expense)/income
Items that may
be reclassified
to profit or
loss:
Net translation
differences on
overseas
subsidiaries (4) (14) (113)
------------------ ----- -------- -------- --------- -------- -------- --------- -------- -------- ---------
Other
comprehensive
(expense)/income
for the year,
net
of tax (4) (14) (113)
------------------ ----- -------- -------- --------- -------- -------- --------- -------- -------- ---------
Total
comprehensive
loss for the
period/year (1,198) (1,107) (2,114)
------------------ ----- -------- -------- --------- -------- -------- --------- -------- -------- ---------
Total
comprehensive
loss for the
period/year
attributable to:
Owners of the
Parent (1,203) (1,116) (2,135)
Non-controlling
interests 5 9 21
------------------ ----- -------- -------- --------- -------- -------- --------- -------- -------- ---------
(1,198) (1,107) (2,114)
------------------ ----- -------- -------- --------- -------- -------- --------- -------- -------- ---------
Loss per share
- basic and
diluted 9 (0.3p) (0.4p) (0.7p)
------------------ ----- -------- -------- --------- -------- -------- --------- -------- -------- ---------
Condensed Consolidated Balance Sheet
Unaudited Audited
30 June 30 June 31 December
2018 2017 2017
Note GBP'000 GBP'000 GBP'000
-------------------------------------- ------ --------- --------- ------------
Assets
Non-current assets
Property, plant and equipment 681 284 274
Intangible assets 2,529 2,521 2,486
-------------------------------------- ------ --------- --------- ------------
Total non-current assets 3,210 2,805 2,760
Current assets
Inventories 700 921 754
Trade and other receivables 1,480 1,858 2,050
Current income tax recoverable 139 178 94
Cash and cash equivalents 1,065 188 219
-------------------------------------- ------ --------- --------- ------------
Total current assets 3,384 3,145 3,117
-------------------------------------- ------ --------- --------- ------------
Total assets 6,594 5,950 5,877
Liabilities
Current liabilities
Borrowings 10 (594) (706) (813)
Trade and other payables (2,043) (2,223) (2,645)
Total current liabilities (2,637) (2,929) (3,458)
-------------------------------------- ------ --------- --------- ------------
Non-current liabilities
Borrowings 10 (1,276) (983) (1,004)
Provisions (235) (259) (115)
-------------------------------------- ------ --------- --------- ------------
Total non-current liabilities (1,511) (1,242) (1,119)
-------------------------------------- ------ --------- --------- ------------
Total liabilities (4,148) (4,171) (4,577)
-------------------------------------- ------ --------- --------- ------------
Net assets 2,446 1,779 1,300
-------------------------------------- ------ --------- --------- ------------
Equity
Share capital 13 4,927 2,968 3,132
Share premium 33,230 32,570 32,915
Capital redemption reserve 17,476 17,476 17,476
Other reserve 4,888 4,733 4,752
Translation reserve 143 246 147
Convertible loan note reserve 84 84 84
Accumulated losses (58,160) (56,139) (57,059)
-------------------------------------- ------ --------- --------- ------------
Equity attributable to owners of the
Parent 2,588 1,938 1,447
Non-controlling interests (142) (159) (147)
-------------------------------------- ------ --------- --------- ------------
Total equity 2,446 1,779 1,300
-------------------------------------- ------ --------- --------- ------------
Condensed Consolidated Statement of Changes in Equity for the
period ended 30 June 2018
(unaudited)
Capital Convertible Non-controlling
Share Share redemption Other loan note Translation Accumulated interest Total
capital premium reserve reserve reserve reserve losses Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- -------- -------- ----------- -------- ------------ ------------ ------------ --------- ---------------- ---------
Balance at 1
January 2018,
as previously
reported 3,132 32,915 17,476 4,752 84 147 (57,059) 1,447 (147) 1,300
Effect of new
standards - - - - - - 98 98 - 98
---------------- -------- -------- ----------- -------- ------------ ------------ ------------ --------- ---------------- ---------
Balance at 1
January 2018,
as restated 3,132 32,915 17,476 4,752 84 147 (56,961) 1,545 (147) 1,398
Comprehensive
income
Loss for the
period - - - - - - (1,199) (1,199) 5 (1,194)
Other
comprehensive
income for the
period - - - - - (4) - (4) - (4)
---------------- -------- -------- ----------- -------- ------------ ------------ ------------ --------- ---------------- ---------
Total
comprehensive
income for the
six-month
period - - - - - (4) (1,199) (1,203) 5 (1,198)
Transactions
with owners
of the company
Shares issued
during the
period 1,787 - - - - - - 1,787 - 1,787
Premium on
shares
issued during
the period - 447 - - - - - 447 - 447
Issue expenses - (132) - - - - (132) - (132)
Equity-settled
share-based
payment - - - 136 - - - 136 - 136
Share options
exercised 8 - - - - - - 8 - 8
---------------- -------- -------- ----------- -------- ------------ ------------ ------------ --------- ---------------- ---------
Balance at
30 June 2018 4,927 33,230 17,476 4,888 84 143 (58,160) 2,588 (142) 2,446
---------------- -------- -------- ----------- -------- ------------ ------------ ------------ --------- ---------------- ---------
Condensed Consolidated Statement of Changes in Equity for the
period ended 30 June 2017
(unaudited)
Capital Convertible Non-controlling
Share Share redemption Other loan note Translation Accumulated interest Total
capital premium reserve reserve reserve reserve losses Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- -------- -------- ----------- -------- ------------ ------------ ------------ --------- ---------------- ---------
Balance at
1 January
2017 2,849 32,268 17,476 4,685 84 260 (55,037) 2,585 (168) 2,417
Comprehensive
income
Loss for the
period - - - - - - (1,102 (1,102) 9 (1,093)
Other
comprehensive
income for
the period - - - - - (14) - (14) - (14)
---------------- -------- -------- ----------- -------- ------------ ------------ ------------ --------- ---------------- ---------
Total
comprehensive
income for
the six-month
period - - - - - (14) (1,102) (1,116) 9 (1,107)
---------------- -------- -------- ----------- -------- ------------ ------------ ------------ --------- ---------------- ---------
Transactions
with owners
of the company
Shares issued
during the
period 119 - - - - - - 119 -
Premium on
shares issued
during the
period - 307 - - - - - 307 - 307
Issue expenses - (5) - - - - - (5) - (5)
Equity-settled
share-based
payment - - - 48 - - - 48 - 48
Balance at
30 June 2017 2,968 32,570 17,476 4,733 84 246 (56,139) 1,938 (159) 1,779
---------------- -------- -------- ----------- -------- ------------ ------------ ------------ --------- ---------------- ---------
Condensed Consolidated Statement of Changes in Equity for the
year ended 31 December 2017
(audited)
Capital Convertible Non-controlling
Share Share redemption Other loan note Translation Accumulated interest Total
capital premium reserve reserve reserve reserve losses Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- -------- -------- ----------- -------- ------------ ------------ ------------ --------- ---------------- ---------
Balance at
1 January
2017 2,849 32,268 17,476 4,685 84 260 (55,037) 2,585 (168) 2,417
Comprehensive
income
Loss for the
year - - - - - - (2,022) (2,022) 21 (2,001)
Other
comprehensive
income for
the year - - - - - (113) - (113) - (113)
---------------- -------- -------- ----------- -------- ------------ ------------ ------------ --------- ---------------- ---------
Total
comprehensive
income for
the year - - - - - (113) (2,022) (2,135) 21 (2,114)
Transactions
with owners
of the company
Shares issued
during the
year 283 - - - - - - 283 - 283
Premium on
shares issued
during the
year - 694 - - - - - 694 - 694
Issue expenses - (47) - - - - - (47) - (47)
Equity-settled
share-based
payment - - - 67 - - - 67 - 67
Balance at
31 December
2017 3,132 32,915 17,476 4,752 84 147 (57,059) 1,447 (147) 1,300
---------------- -------- -------- ----------- -------- ------------ ------------ ------------ --------- ---------------- ---------
Condensed Consolidated Statement of Cash Flows
for the period ended 30 June 2018
Unaudited Audited
Six months Six months Year
ended ended ended 31
30 June 30 June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
---------------------------------------------- ----------- ----------- ----------
Cash flows from operating activities
Loss before taxation (1,240) (1,164) (2,101)
Adjustments for:
Net finance costs 99 82 163
Depreciation of property, plant and
equipment 122 109 265
(Profit)/loss on disposal of loan
monitors (6) 1 -
Amortisation of intangible assets 96 85 195
Modification gain on convertible loan (80) - -
note
Share-based payment expense 136 72 91
Effect of exchange rate fluctuations 4 2 7
----------------------------------------------- ----------- ----------- ----------
(869) (813) (1,380)
(Increase)/decrease in inventories 47 (123) (203)
Decrease in trade and other receivables 564 600 404
(Decrease)/(increase) in trade and
other payables (513) (87) 251
Increase in provisions 38 68 8
----------------------------------------------- ----------- ----------- ----------
Net cash used in operations (733) (355) (920)
Interest paid (70) (62) (123)
Income taxes received - - 115
----------------------------------------------- ----------- ----------- ----------
Net cash used from operating activities (803) (417) (928)
Cash flows from investing activities
Purchase of property, plant and equipment (13) (6) (6)
Proceeds from the sale of loan monitors 7 - -
Capitalised development expenditure (138) (210) (286)
Interest received - - -
---------------------------------------------- ----------- ----------- ----------
Net cash used in investing activities (144) (216) (292)
Cash flows from financing activities
Issue of ordinary share capital 2,216 402 952
Expenses in connection with share
issue (132) (5) (47)
Outflow from decrease in invoice discounting
facility (268) (131) (7)
Repayment of obligations under finance
leases (22) (18) (28)
----------------------------------------------- ----------- ----------- ----------
Net cash generated from financing
activities 1,794 248 870
----------------------------------------------- ----------- ----------- ----------
Net increase/(decrease) in cash and
cash equivalents 847 (385) (350)
Cash and cash equivalents at beginning
of the period 219 582 582
Exchange (loss)/gain on cash and cash
equivalents (1) (9) (13)
----------------------------------------------- ----------- ----------- ----------
Cash and cash equivalents at end of
the period 1,065 188 219
----------------------------------------------- ----------- ----------- ----------
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 2018 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 2017
(Annual Report & Accounts 2017). 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 2017 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 2017 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
2017, except for the adoption of new standards effective from 1
January 2018 and the early adoption of IFRS 16 'Leases', and are
expected to be applied in the preparation of the financial
statements for the year ending 31 December 2018. The Group has not
early adopted any other standard, interpretation or amendment that
has been issued but is not yet effective.
The Group applies, for the first time:
-- IFRS 9 'Financial Instruments';
-- IFRS 15 'Revenue from Contracts with Customers'; and
-- IFRS 16 'Leases'.
As required by IAS 34, the nature and effect of these changes
are disclosed in note 4 below.
Several other amendments and interpretations apply for the first
time in 2018, but do not have an impact on the interim condensed
consolidated financial statements of the Group.
These condensed consolidated interim financial statements were
approved by the Board of Directors and approved for issue on 24
September 2018.
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 2017, except for new significant judgements
and estimation uncertainty related to the application of IFRS 9,
IFRS 15 and IFRS 16, which are described in note 4 below.
4. Changes in significant accounting policies
This note explains the impact of the adoption of the following
accounting standards:
-- IFRS 9 'Financial Instruments';
-- IFRS 15 'Revenue from Contracts with Customers'; and
-- IFRS 16 'Leases'.
and discloses the new accounting policies that have been applied
from 1 January 2018, where they are different to those applied in
prior periods.
a. IFRS 9 'Financial Instruments'
IFRS 9 replaces IAS 39, 'Financial Instruments: Recognition and
Measurement'. It makes substantial changes to the previous
accounting guidance on the classification and measurement of
financial instruments and introduces an 'expected credit loss'
model for the impairment of financial assets. The new standard also
requires the recognition of a modification gain or loss in profit
or loss in the Statement of Comprehensive Income (SOCI) when the
contractual cash flows of a financial liability are either modified
or renegotiated and such action does not lead to its
derecognition.
The Group has applied transitional relief and opted not to
restate prior periods. There were no differences identified arising
from the adoption of IFRS 9 in relation to classification,
measurement and impairment that required recognition at the date of
initial application, namely 1 January 2018.
The application of IFRS 9 has had an impact in the following
areas:
-- The application of the expected credit loss impairment model
to financial assets. This affects the Group's trade receivable
balances The Group has applied a simplified model in recognising
expected lifetime credit losses as these items do not have a
significant financing component. However, given the nature of the
Group's customer base the directors do not expect to suffer credit
losses from its trade receivables over and above those identified
at the end of 2017. Consequently, the Group's estimate of expected
credit losses is the same under IFRS 9 as that previously
recognised under IAS 39.
-- The recognition of modification gains or losses. This impacts
the Group's convertible loan note that had its maturity date
extended by two years in February 2018. A gain of GBP80,000 was
recognised in the operating loss for the six-month period ending 30
June 2018. If the Group had applied its previous accounting policy,
this gain would have been recognised over the remaining term of the
convertible loan note through an adjustment to the effective
interest rate because the terms and conditions of the loan remained
broadly unchanged. The loss after tax was reduced by GBP80,000
following the recognition of this gain. No retrospective
adjustments were required in relation to this change in accounting
policy as none of the borrowings outstanding at 1 January 2018 had
been modified in prior periods.
b. IFRS 15 'Revenue from Contracts with Customers'
IFRS 15, 'Revenue from Contracts with Customers,' and the
related 'Clarifications to IFRS 15 Revenue from Contracts with
Customers' (hereinafter referred to as 'IFRS 15') replace IAS 18,
'Revenue', IAS 11 ', Construction Contracts', and several
revenue-related Interpretations.
The new Standard has been applied retrospectively without
restatement, with the cumulative effect of initial application
recognised as an adjustment to the opening balance of retained
earnings at 1 January 2018.
In accordance with the transition guidance, IFRS 15 has only
been applied to contracts that were incomplete at 1 January
2018.
The adoption of IFRS 15 has mainly affected the accounting for
revenue relating to maintenance contracts. Under IFRS 15, revenue
for the provision of an annual service of a monitor is recognised
in the period that the monitor service is completed. Payment
received from a customer in advance of completing the monitor
service, which typically takes 1 - 2 days per monitor, is
recognised as a contract liability and is reported as an other
liability in the Condensed Consolidated Balance Sheet. Previously,
under IAS 18, such revenue was recognised in equal monthly
instalments over the period of the contract to match the benefits
to the customer.
At 1 January 2018, the adjustment required under IFRS 15 to
recognise a contract liability relating to consideration received
in advance of carrying out the service of a monitor was not
materially different to the amount of deferred income recognised
under the Group's previous accounting policy. Consequently, no
adjustment to opening reserves has been recognised. The contract
liability recognised at 30 June 2018 was GBP74,362 which was higher
by GBP21,238 compared to the amount of deferred revenue that would
have been recognised under the Group's previous accounting
policy.
c. IFRS 16 'Leases'
IFRS 16 'Leases' replaces IAS 17, Leases' and IFRIC 4
'Determining whether an Arrangement contains a Lease'. IFRS 16
becomes effective from 1 January 2019, however, the Group has
chosen to adopt the standard early. The adoption of the new
standard has fundamentally changed the way in which the Group has
accounted for the lease of its building in Chichester. Previously
this lease was accounted for under IAS 17 as an operating lease and
was off-balance sheet. However, the adoption of IFRS 16 has
required the recognition of both a right to use asset and a lease
liability. The consequence of this means that the lease rental that
used to be an operating expense is now represented by a
depreciation charge on the right-of-use asset and a finance cost
relating to the lease liability. In addition, the application of
IFRIC 1 'Changes in Existing Decommissioning, Restoration and
Similar Liabilities' has required the Group to recognise the
dilapidation provision as a component of the cost of the
right-of-use asset. Any subsequent changes to this estimate will be
accounted for as a change in the cost of the right-of-use asset and
its related depreciation charge.
The Group leases its head office building in Terminus Road,
Chichester. The non-cancellable period at 1 January 2018 was seven
years and nine months with the next, and final, break clause in
September 2022. The lease payments are due to be reviewed in
October 2018 and October 2022 with the new annual rent payable
being the higher of an open market rental determined by an
independent chartered surveyor or the current rental charge. The
lease payment also includes reimbursement of the landlord's
insurance premium which are adjusted annually.
The Group has applied the modified retrospective approach to its
property lease. In doing so, the Group has elected to:
-- measure the right-of-use asset at an amount equal to the
lease liability at the date of initial application;
-- applied the exemption not to recognise right-of-use and
liabilities for leases with less than 12 months of lease term
remaining; and
-- apply the practical expedient to exclude initial direct costs from the right-of-use asset.
For leases that were classified as finance leases under IAS 17,
the carrying amount of the right-of-use asset and the lease
liability at 1 January 2018 were determined at the carrying amount
of the leased assets and lease liabilities at that date.
On transition to IFRS 16, the Group recognised an additional
GBP513,941 right-of-use asset and an additional GBP416,441 lease
liability, recognising the difference of GBP97,500 in retained
earnings. This being the dilapidation provision that had previously
been charged to profit or loss in the Consolidated SOCI in
accordance with IAS 37, 'Provisions, Contingent Liabilities and
Contingent Assets'. When measuring the lease liability, the Group
discounted future lease payments using management's estimate of an
incremental borrowing rate of 12%. The table below summarises the
financial effect of adopting the new lease accounting standard:
GBP'000
----------------------------------------------------------------- -------------------
Operating lease commitment at 31 December 2017 as
disclosed in the Group's Annual Report & Accounts
2017 (note 24) 674
Discounted at the Group's incremental borrowing rate
at 1 January 2018 (245)
----------------------------------------------------------------- -------------------
429
Finance lease liabilities recognised at 31 December
2017 4
Recognition exemption for short-term leases (17)
----------------------------------------------------------------- -------------------
Lease liabilities recognised at 1 January 2018 416
----------------------------------------------------------------- -------------------
5. Significant accounting policies
a. Revenue
Revenue arises predominantly from the sale of advanced
haemodynamic monitoring equipment which comprise monitors and
consumable items such as single use probes and other ancillary
items such as cables, roll stands etc. Revenue is also earned from
after sales maintenance contracts.
In determining whether to recognise revenue, the Group applies
the following 5-step process:
1. Identifying the contract with the customer;
2. Identifying the performance obligations set out in the contract;
3. Determining the overall transaction price;
4. Allocating the transaction price to the performance obligations; and
5. Recognising revenue either when or as performance obligation(s) are satisfied.
The Group occasionally enters into managed care service
contracts with customers in both the UK and USA. These contracts
typically provide for a specified number of patients to be treated
over a period, which can range from between 1 and 3 years, and
revenue is initially recognised on the number of consumable probes
delivered to the customer in a particular month. As these contracts
are negotiated with customers based on the number of patients
expected to be treated on a monthly basis, the total revenue
recognised in any month does not exceed the monthly contract fee.
At the end of the contract term, there is neither a contractual
right to a refund for any patients that may not have been treated
under the contract nor for probes that have not been ordered under
the contract to be delivered.
The Group recognises contract liabilities for consideration
received in advance of unsatisfied performance obligations and
reports these amounts as other liabilities in the Consolidated
Balance Sheet. Typically, these amounts relate to consideration
received in advance for after-sales maintenance contracts or,
occasionally, consideration received from new customers in
settlement of pro-forma sales invoices.
Monitor and consumable revenues
Revenue on monitors and consumables is recognised when the Group
transfers the control of the assets to the customer. For customers
in both the UK and the USA, this is when the goods are accepted for
delivery at the customer's specified delivery address. For our
network of independent distributors which form our 'International'
business stream, the transfer of control occurs on despatch of the
goods in accordance with the Group's distributor agreements.
Preventative planned maintenance (PPM) agreements
The Group enters into PPM agreements with customers for the
provision of an annual service for their monitors. These agreements
can range in length from 1 to 3 years and provide for an annual
service for each monitor specified by the serial number on the PPM
agreement. Revenue is recognised when the service has been
completed and the monitor is ready for use by the customer.
b. Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when
the Group becomes a party to the contractual provisions of the
financial instrument. Financial assets are derecognised when the
contractual rights to the cash flows expire, or when the financial
asset and substantially all of its risks and rewards have been
transferred. Financial liabilities are derecognised at the point at
which it is extinguished, discharged or expires.
Classification and measurement of financial assets
With the exception of trade receivables that do not have a
significant financing element which are measured at the transaction
price in accordance with IFRS 15, all financial assets are
initially measured at their fair value adjusted, where applicable,
for transaction costs.
Financial assets, other than those designated and effective as
hedging instruments, are classified into the following
categories:
-- amortised cost
-- fair value through profit or loss (FVTPL)
-- fair value through other comprehensive income (FVOCI).
The classification is determined by both:
-- the entity's business model for managing the financial asset; and
-- the contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are
recognised in profit or loss are
presented within finance costs, finance income or other
financial items, except for the impairment of trade receivables
which is presented within other expenses.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets
meet the following conditions (and
are not designated as FVTPL):
-- they are held within a business model whose objective is to
hold the financial assets and collect its contractual cash flows;
and
-- the contractual terms of the financial assets give rise to
cash flows that are solely payments of principal and interest on
the principal amount outstanding.
The Group's cash and cash equivalents, trade and all of its
other receivables fall into this category of financial
instruments.
The Group does not have any other category of financial
assets.
Impairment of financial assets
Trade and other receivables and contract assets
The Group makes use of a simplified approach in accounting for
trade and other receivables as
well as contract assets and records the loss allowance as
lifetime expected credit losses. These are the expected shortfalls
in contractual cash flows, considering the potential for default at
any point during the life of the financial instrument. The Group
uses its historical experience, external indicators and
forward-looking information to calculate the expected credit losses
that require to be recognised.
At 30 June 2018, the expected credit loss provision equated to
that which would have previously been recognised under IAS 39.
Classification and measurement of financial liabilities
In the light of the fact that the accounting for financial
liabilities remains largely the same under IFRS 9 compared to IAS
39, the Group's financial liabilities were not affected by the
adoption of IFRS 9 at the transition date. However, for
completeness, the accounting policy is disclosed below.
The Group's financial liabilities include borrowings and trade
and other payables.
Financial liabilities are initially measured at fair value, and,
where applicable, adjusted for
transaction costs unless the Group designated a financial
liability at fair value through profit
or loss.
Subsequently, all financial liabilities are measured at
amortised cost using the effective interest method. The Group does
not have any financial liabilities that are measured at fair
value.
All interest-related charges that are reported in profit or loss
are included within finance costs or finance income.
Where a non-substantial modification of a financial liability
occurs, and the financial liability is not derecognised, the Group
recalculates the amortised cost of the modified financial liability
by discounting the modified contractual cash flows using the
original effective interest rate and recognises any gain or loss in
other income or other costs in profit or loss in the Consolidated
SOCI.
Following the extension of the convertible loan note maturity
date from February 2019 to February 2021, a modification gain of
GBP80,000 was recognised in other gains in profit or loss in the
Consolidated SOCI for the six-month period ended 30 June 2018.
c. Leases
At the inception of a contract, the Group assesses whether the
contract is, or contains a lease. A contract is, or contains, a
lease if the contract conveys the right to control the use of an
identified asset.
Leases are recognised as a right-of-use asset and a
corresponding liability at the date at which the leased asset is
available for use by the Group. Each lease payment is allocated
between the liability and finance cost. The finance cost is charged
to profit or loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability
for each period. The right-of use asset is depreciated over the
shorter of the asset's useful life and the lease term on a
straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease
liabilities include the net present value of the following lease
payments:
-- fixed payments (including in-substance fixed payments), less
any lease incentives receivable;
-- variable lease payments that are based on an index or a rate;
-- amounts expected to be payable by the lessee under residual value guarantees;
-- the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option; and
-- payments of penalties for terminating the lease, if the lease
term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate
implicit in the lease, if that rate can be determined, or the
Group's incremental borrowing rate.
Right-of-use assets are measured at cost comprising the
following:
-- the amount of the initial measurement of lease liability;
-- any lease payments made at or before the commencement date
less any lease incentives received;
-- any initial direct costs; and
-- restoration costs.
The Group has elected not to recognise right-of-use assets and
lease liabilities for short-term leases of machinery that have a
lease term of 12 months or less and leases of low-value assets,
including short-term office space. The Group recognises the lease
payments associated with these leases as an expense on a
straight-line basis over the lease.
d. Exceptional items
As permitted by IAS 1, 'Presentation of Financial Statements',
certain items are presented separately in the Consolidated SOCI as
exceptional where, in the judgement of management, they need to be
disclosed separately by virtue of their nature, size or incidence
in order to obtain a clear and consistent presentation of the
Group's underlying business performance.
6. Revenue
The Group's revenue disaggregated by primary geographical
markets is as follows:
For the six months ended 30 June 2018 (Unaudited)
Direct markets Indirect markets
Probes Monitors Third Party Other Probes Monitors Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------- --------- ------------ -------- -------- --------- -------- --------
UK 540 - 183 39 - - - 782
USA 824 - - 10 - - - 834
France - - - - 365 66 32 463
Scandinavia - - - - 20 - - 20
South Korea - - - - 134 - - 134
Peru - - - - - - - -
Other countries 32 14 - - 59 6 1 112
----------------- -------- --------- ------------ -------- -------- --------- -------- --------
1,396 14 183 49 578 72 33 2,325
----------------- -------- --------- ------------ -------- -------- --------- -------- --------
For the six months ended 30 June 2017* (Unaudited)
Direct markets Indirect markets
Probes Monitors Third Party Other Probes Monitors Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------- --------- ------------ -------- -------- --------- -------- --------
UK 662 82 171 57 - - - 972
USA 1,030 120 - 8 - - - 1,158
France - - - - 431 3 9 443
Scandinavia - - - 51 - 1 52
South Korea - - - 67 - 4 71
Peru - - - - - 1 1
Other countries 45 - - 4 91 34 6 180
----------------- -------- --------- ------------ -------- -------- --------- -------- --------
1,737 202 171 69 640 37 21 2,877
----------------- -------- --------- ------------ -------- -------- --------- -------- --------
For the year ended 31 December 2017* (Audited)
Direct markets Indirect markets
Probes Monitors Third Party Other Probes Monitors Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------- --------- ------------ -------- -------- --------- -------- --------
UK 1,354 92 378 118 - - - 1,942
USA 1,872 117 - 21 - - - 2,010
France - - - - 854 75 17 946
Scandinavia - - - - 101 - 8 109
South Korea - - - - 200 - 9 209
Peru - - - - 254 - 1 255
Other countries 89 15 - 6 212 59 18 399
----------------- -------- --------- ------------ -------- -------- --------- -------- --------
3,315 224 378 145 1,621 134 53 5,870
----------------- -------- --------- ------------ -------- -------- --------- -------- --------
Information on probe and monitor units are set out below:
Six months ended Six months ended Year ended
30 June 2018 30 June 2017 31 December 2017
Probes Monitors Probes Monitors Probes Monitors
Units Units Units Units Units Units
----------------- -------- --------- -------- --------- -------- ----------
Direct markets
UK 6,005 - 7,450 13 15,295 13
USA 4,845 - 5,755 7 10,725 7
Other countries 270 1 365 - 715 1
----------------- -------- --------- -------- --------- -------- ----------
11,120 1 13,570 20 26,735 21
Distributor
markets
Europe 7,340 51 9,565 5 19,220 33
Rest of World 3,300 - 1,740 17 10,470 11
----------------- -------- --------- -------- --------- -------- ----------
10,640 51 11,305 22 29,690 44
----------------- -------- --------- -------- --------- -------- ----------
21,760 52 24,875 42 56,425 65
----------------- -------- --------- -------- --------- -------- ----------
The above information is not audited financial data.
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 30 June 31 December
2018 2017* 2017*
GBP'000 GBP'000 GBP'000
------------------------------- ------------------- ------------------- -----------------------
Sale of goods 2,306 2,840 5,792
Maintenance income 20 37 78
2,326 2,877 5,870
------------------------------- ------------------- ------------------- -----------------------
* As noted, the Group has initially applied IFRS 15 at 1 January
2018. Under the transition provisions selected comparative
information has not been restated.
The following table provides information about trade receivables
and contract liabilities from contracts with customers. There were
no contract assets at either 30 June 2018 or 1 January 2018.
30 June 1 January
2018 2018*
GBP'000 GBP'000
------------------------------------------------------------ ------------------- ---------------------
Trade receivables which are in 'Trade and other
receivables' 1,007 1,620
Contract liabilities (75) (46)
------------------------------------------------------------ ------------------- ---------------------
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 2018:
2018 2019 2020 2021 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ------------------- ------------------- ------------------- ------------------- -------------------
Revenue
expected
to be
recognised 66 3 3 3 75
----------------------- ------------------- ------------------- ------------------- ------------------- -------------------
7. Segment results
The following analysis is regularly presented to the chief
operating decision maker of the Group, the Chief Executive Officer,
on a monthly basis. The segment results include items directly
attributable to a segment, as well as those, which can be allocated
on a reasonable basis.
The unaudited segment results for the six months ended 30 June
2018 were:
Third
Probes Monitors party Carriage Other Total
products
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------------------ -------------------- -------------------- -------------------- ------------------- -------------------
Revenue
from
customers 1,975 86 183 10 71 2,325
---------------------- ------------------ -------------------- -------------------- -------------------- ------------------- -------------------
Reconciliation to result for the period
Cost of goods sold (750)
Total costs (2,796)
Other gains 80
-------------------------------------- -------------------
Operating loss (1,141)
Finance income -
Finance expense (99)
Loss before taxation (1,240)
Tax credit on loss 46
Loss for the period (1,194)
-------------------------------------- -------------------
The unaudited segment results for the six months ended 30 June
2017 were:
Third
Probes Monitors party Carriage Other Total
products
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------------------ -------------------- -------------------- -------------------- ------------------- -------------------
Revenue
from
customers 2,377 239 171 12 78 2,877
---------------------- ------------------ -------------------- -------------------- -------------------- ------------------- -------------------
Reconciliation to result for the period
Cost of goods sold (694)
Total costs (3,265)
---------------------------------------- -------------------
Operating loss (1,082)
Finance income -
Finance expense (82)
---------------------------------------- -------------------
Loss before taxation (1,164)
Tax credit on loss 71
Loss for the financial
period (1,093)
---------------------------------------- -------------------
The audited segment results for the year ended 31 December 2017
were:
Third
Probes Monitors party Carriage Other Total
products
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------------------ -------------------- -------------------- -------------------- ------------------- -------------------
Revenue
from
customers 4,936 360 378 25 171 5,870
---------------------- ------------------ -------------------- -------------------- -------------------- ------------------- -------------------
Reconciliation to result for the year
Cost of goods sold (1,488)
Total costs (6,320)
-------------------------------------- -------------------
Operating loss (1,938)
Finance income -
Finance expense (163)
-------------------------------------- -------------------
Loss before taxation (2,101)
Tax credit on loss 100
Loss for the year (2,001)
-------------------------------------- -------------------
8. Dividends
The Directors cannot recommend the payment of a dividend (2017:
nil).
9. 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 2018 is based on the
loss after tax attributable to owners of the parent of GBP1,199,000
and the weighted average number of shares in issue of 449,907,014.
The loss per share calculation for six months to 30 June 2017 is
based on the loss after tax attributable to owners of the parent of
GBP1,102,000 and the weighted average number of shares in issue of
291,220,142. The loss per share calculation for the year ended 31
December 2017 is based on the loss after tax attributable to owners
of the parent of GBP2,022,000 and the weighted average number of
shares in issue of 301,117,957. While the Company is loss-making,
the diluted loss per share and the loss per share are the same.
10. Borrowings
Unaudited Audited
30 June 30 June 31 December
2018 2017* 2017*
GBP'000 GBP'000 GBP'000
-------------------------------------- ------------------- ------------------- -----------------------
Current borrowings:
Invoice discount facility 453 600 719
Convertible loan note 88 90 90
Finance leases - 16 4
Lease liabilities 53 - -
-------------------------------------- ------------------- ------------------- -----------------------
594 706 813
Non-current borrowings
Convertible loan note 929 983 1,004
Finance leases - - -
Lease liabilities 347 - -
-------------------------------------- ------------------- ------------------- -----------------------
1,276 983 1,004
-------------------------------------- ------------------- ------------------- -----------------------
Total borrowings 1,870 1,689 1,817
-------------------------------------- ------------------- ------------------- -----------------------
* As noted, the Group has initially applied IFRS 16 at 1 January
2018. Under the transition provisions selected comparative
information has not been restated.
11. Convertible loan note
In February 2019, the terms of the convertible loan note were
modified as part of the share placing and open offer that completed
on 12 February 2018. The maturity date was extended to February
2021 and the conversion price was reduced from 6p per share to 4p
share to fairly reflect the dilutive effect of the share issue that
was undertaken. The convertible loan note recognised in the
Condensed Consolidated Balance Sheet is calculated as:
Financial Equity
liability component Total
GBP'000 GBP'000 GBP'000
---------------------------------------------- ---------------------- ---------------------- -------------------
Carrying amount at 1 January 2018 1,094 84 1,178
Loan note redemption (25) - (25)
Modification gain (80) - (80)
Interest expense 73 - 73
Interest paid (45) (45)
---------------------------------------------- ---------------------- ---------------------- -------------------
Carrying amount at 30 June 2018 1,017 84 1,101
---------------------------------------------- ---------------------- ---------------------- -------------------
12. Leases
Included within Property, plant and equipment is an amount of
GBP514,000 relating to the right-of-use asset arising from the
lease over the Group's head office and factory in Chichester.
Included within administration expenses in profit or loss in the
Consolidated SOCI is an amount of GBP29,400 relating to the
depreciation expense of this asset and included within finance
costs is an amount of GBP20,800 relating to the finance charge on
the related lease obligation. In addition, included within
administration expenses in profit or loss in the Consolidated SOCI
is an amount of GBP10,700 relating to short term leases.
The total cash outflow for leases in the period was
GBP43,000.
As noted previously, the Group has elected to apply IFRS 16
Leases. In accordance with the transition provisions in IFRS 16 the
new rules have been adopted retrospectively with the cumulative
effect of initially applying the new standard recognised on 1
January 2018. Therefore, comparatives for the 2017 financial year
have not been restated.
13. Share capital
In February 2018, the Company raised GBP2,208,125, before
expenses, through subscriptions for 91,490,000 new ordinary shares
at 1.25p per share and the placing of 85,160,000 new ordinary
shares at the same price. All ordinary shares were issued with a
nominal value of 1p per share. Additionally, 800,000 new ordinary
shares were issued in the same month following the exercise of
vested options from the Group's Enterprise Management Incentive
Share Option Scheme by Ewan Phillips, Chief Executive Officer.
These share options had an exercise price of 1p per share.
14. Related parties
Transactions with key management personnel
Ewan Phillips, Chief Executive Officer, who resigned from the
Group on 12 June 2018 received compensation for loss of office
amounting to GBP194,000.
In addition, he was subsequently granted 10,000,000 options
under the Group's Enterprise Management Incentive Share Option
Scheme with an exercise price of 1p per share as settlement of
contractual bonuses owed of GBP144,200. The share options are
exercisable until September 2019. It was also agreed that 1,666,666
of the 2,500,000 options granted in September 2017 under the
Group's 2011 Executive Share Option Scheme which have an exercise
price of 4p per share vested immediately and could be exercised at
any time, subject to the rules of the scheme, within twelve months
of leaving the Group. The aggregate share-based payment expense
totalled GBP81,000.
15. Exceptional items
The net exceptional cost reported in the period relate to
restructuring costs incurred during the year which includes
payments for loss of office, redundancy payments, professional fees
and share-based payment expense offset by the release of
contractual bonus accruals.
GBP'000
------------------------------------------------ -------------------
Compensation for loss of office 194
Redundancy payments 38
Legal and consulting fees 31
Share-based payment expense 81
Contractual bonus accruals reversal (202)
------------------------------------------------ -------------------
142
------------------------------------------------ -------------------
There were no exceptional items in the prior period/year.
16. 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. The sales for the first six months of 2018
represented 37% (six months period to 30 June 2017: 39%) of the
annual level of these revenues for the year ended 31 December
2017.
17. Non-cash costs
The following table provides information on the nature of
non-cash items that are included in the Group's loss for the
period/year:
Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
-------------------------------------------- ---------------------- ---------------------- ------------------------
Depreciation of property, plant
and
equipment 47 23 44
Depreciation of loaned monitors 75 86 221
Profit on disposal of loan (6) - -
monitors
Amortisation of development
costs 96 85 195
Share-based payments 136 60 91
Bonus accruals
(released)/charged (202) - 40
Directors' fees 53 53 105
Accumulated absence movement 38 69 9
Barter prepayments release - 109 194
Gain on convertible loan note (80) - -
157 485 899
-------------------------------------------- ---------------------- ---------------------- ------------------------
18. Principal foreign exchange rates
The following are the principal foreign exchange rates that have
been used in the preparation of the condensed consolidated interim
financial statements:
Unaudited Audited
30 June 2018 30 June 2017 31 December 2017
Average Closing Average Closing Average Closing
rate rate rate rate rate rate
------------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
GBP/US dollar 1.3747 1.3155 1.2639 1.2992 1.2931 1.3452
GBP/Euro 1.1374 1.1303 1.1665 1.1365 1.1450 1.1250
GBP/Canadian
dollar 1.7348 1.7348 1.6831 1.6904 1.6786 1.6923
------------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
19. 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
20. 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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LIFIAAAIVFIT
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