2007/8
www.lidco.com
LiDCO Group Plc
Sales and Marketing:
Unit M, South Cambridge Business Park
Babraham Road, Sawston
Cambridge CB22 3JH
T: +44 (0)1223 830 666
F: +44 (0)1223 837 241
USA Distribution Office:
Medical Specialties Distributors LLC
(formerly Wren Medical Systems)
905 Lakeside Drive, Gurnee, IL 60031
T: +1847 625 0600
F: +1847 625 0981
UK Office:
16 Orsman Road
London
N1 5QJ
T: +44 (0)20 7749 1500
F: +44 (0)20 7749 1501
LiDCO Group Plc Annual Report and Accounts 2007/8
LiDCO Group Plc
Annual Report and Accounts
for the year ended 31 January 2008
LiDCO_COV_0708_aw:LiDCO REP COV_0708_aw  20/5/08  08:44  Page 1 LiDCO researches, develops, manufactures
and markets innovative medical devices.
Our products primarily serve critical-care and
cardiovascular risk hospital patients who
require real-time cardiovascular monitoring.
Contents
01 Highlights
02 R&D Progress
04 Chairman’s Statement
06 Chief Executive Officer’s Review
10 Financial Review
12 Board of Directors
12 Clinical Advisory Board
14 Corporate Governance Report
16 Directors’ Remuneration Report
20 Directors’ Report
23 Report of the Independent Auditors to
the Members of LiDCO Group Plc
24 Consolidated Income Statement
25 Consolidated Balance Sheet
26 Consolidated Cash Flow Statement
27 Consolidated Statement of Changes
in Shareholders’ Equity
28 Notes to the Financial Statements
42 Report of the Independent Auditors
to the Members of LiDCO Group Plc
43 Company Balance Sheet
44 Notes to the Financial Statements
47 Company Information
LiDCO_COV_0708_aw:LiDCO REP COV_0708_aw  20/5/08  08:44  Page 2 LiDCO Group Plc
Annual Report and Accounts 2007/8
1
HIGHLIGHTS
FINANCIAL HIGHLIGHTS
• Revenue up 18% to £4.05m (2006/7: £3.44m)
• Administration and distribution expenses reduced
by 6% to £4.62m (2006/7: £4.94m)
• Net cash outflow before financing £1.7m (2006/7: £1.6m)
• Product margins maintained at 78% on monitors,
modestly improved to 87% on disposables
• Loss from operations reduced by 23% to £2.01m
(2006/7: £2.62m)
• Loss per share reduced to 1.5p (2006/7: 2.1p)
• Cash balance £2.2m (2006/7: £1.5m)
CORPORATE HIGHLIGHTS
• LiDCOrapid patent filed and product launched in April 2008
• New distributors signed in USA, Israel, Canada,
Turkey and the Middle East
• Product extension through launch of PC software
products LiDCOview
SE
and LiDCOview
PRO
• Further clinical outcome studies show LiDCO products
reduce mortality, complications and length of stay
• New exclusive critical care marketing collaboration
with Becton Dickinson U.K. Limited.
COMMERCIAL HIGHLIGHTS
• Continued adoption of technology with 40%
of installed monitors now in the USA, 20% in the UK,
25% in Europe and 15% in the Rest of the World
• Installed base of monitors up 14% to 1,184
(2006/7: 1,035)
• Monitor revenues up 34% to £1.93m
(2006/7: £1.44m)
• Sensors volume up 7% to 26,081 units; and
revenue increased by 9% to £1.99m (2006/7:£1.82m)
• Considerable growth in export territories,
up by 63% to £2.32m (2006/7 £1.43m)
• Over the last four years sales have increased
by 79% while costs have been reduced by 16%
The investor presentation ‘LiDCO’s Preliminary Results – Twelve months ended
31st January 2008’ is available on the LiDCO website (www.lidco.com).
01 02 03 04/5 05/6 06/7 07/8
12 months
1,130
2,042
2,717
750
Stocking order Japan
1967
2,267
3,421 3,443
4,051
Sales growth
£’000
01 02 03 04/5 05/6 06/7 07/8
12 months
(5,496)
(3,370)
(3,552)
(2,214)
(1,596) (1,687)
Cash outflow before financing
£’000
(7,391)
Monitor installed base
Disposables sales
Monitor installed base and disposables growth
Units
1,200
1,000
800
600
400
200
0
30,000
25,000
20,000
15,000
10,000
5,000
0
01 02 03 04/5 05/6 06/7 07/8
12 months
Monitors – No. of units
Disposables – No. of units
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Annual Report and Accounts 2007/8
2
R&D PROGRESS
STRATEGY
Business Model
• Customers are offered a choice of outright
purchase of the LiDCOrapid and LiDCOplus
monitors or free of charge placement in
return for enhanced pricing on the associated
LiDCO disposables
• In the UK and USA sales are through LiDCO’s
direct sales force
• In other territories sales are through
distributors
Customers
Major hospitals in developed and fast
developing countries
Hospital market segments:
• Intensive care unit/high dependency unit
• Risk surgery/operating room
• Cardiac surgery
• Interventional cardiology
LiDCO TECHNOLOGY
Proven to improve outcome and reduce costs in the ICU and also in surgery
Market
Major surgery
• LiDCOrapid
Intensive care unit
• LiDCOplus
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Annual Report and Accounts 2007/8
3
UK USA Continental Europe Rest of the World
2006/7
2007/8
1,241
Sales by region
£’000
1,724
873
213
767
2,012
511
153
UK USA Continental Europe Rest of the World
2006/7
2007/8
Monitor installed base
Units
231
300
184
207
237
162
INTERNATIONAL SALES
Benefit of Use
In surgery
• Hemodynamic monitoring in major surgery
patients reduces complications and
hospital stay
After surgery
• Goal directed management of intensive
post-operative patients reduced hospital
stay by average of 12 days reducing costs
by £4,800
For patients in shock
• Treatment of shock and sepsis patients
with the LIDCOplus has reduced mortality
rates from 32% to 12%
More organs available for transplantation
• LiDCO technology reduces toxic levels of
cytokines resulting in more organs being
available for transplantation to heart and
renal transplant patients
Reference
• Tissue oxygen debt as a determinant
of lethal and non-lethal post-operative
organ failure
Shoemaker, Appel and Kram
Critical Care Medicine 1998, 16(11): 117-20
• Early goal directed therapy after major
surgery reduces complications and
duration of hospital stay
Pearse, Dawson, Fawcett, Rhodes, Grounds and Bennett
Critical Care 2005, 9:R687-R693
• Clinical outcomes of dynamic versus
static monitors in shock
Hata, Shelsky, Frazier, Wang and Nickel
Presented at the Society of Critical Care Medicine,
Hawaii, February 2008
• Multi-system organ failure to multi-organ
donor – utilizing minimally invasive
hemodynamic monitoring
Berens
Presented at the NATCO Meeting, August 2007
469
429
LiDCO_FRONT_0708_aw:LiDCO REP_FRONT_0708_aw  21/5/08  15:53  Page 3 We expect to increase further our
distributor network this year in the EU,
the USA and the Rest of the World,
whilst maintaining our direct sales forces
in the UK and USA.
LiDCO Group Plc
Annual Report and Accounts 2007/8
4
CHAIRMAN’S STATEMENT
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5
Over the last year we have
pursued our strategy of growing
sales of our hemodynamic
monitoring products in a range
of geographical regions across
the globe whilst maintaining
careful control of costs.
Overall sales for the year grew
by 18% to £4.05m, split 48%
and 52% between capital and
recurring revenue respectively.
As a result of the issue of
shares during the year, the
Company’s cash balance at the
year-end was £2.2m.
More than half of LiDCO’s sales during the
year came from outside the UK. Of note was
the strong growth in sales in continental
Europe, assisted by the redeployment of
some of our UK sales resources. UK sensor
sales showed good growth, as did sensor
sales in Europe.
Turning to product development, the
Company’s main focus last year was the
development of the new LiDCOrapid monitor
and disposables. This is designed especially
to meet the needs of the substantial and
growing market in major surgery and other
hospital applications where quick and easy
set-up is required and continuous trend
information is important. This new monitor
uses the same algorithm as that used in the
existing LiDCOplus monitor, so data from
studies involving the LiDCOplus also
validates the LiDCOrapid monitor, thus
helping with market acceptance. The
LiDCOrapid was launched in April 2008.
In addition, we were pleased to see the
publication during the year of a number of
independent outcome studies by leading
centres, such as the University of Iowa,
further endorsing the use of our LiDCOplus
technology. Such outcome studies are
important because they show the compelling
advantages of using our products, such as
shortened hospital stays, reduced mortality
and reduced infections. These not only
benefit the patient but also bring important
cost-savings for the hospital.
Our products continue to be developed and
assembled, with certain proprietary elements
manufactured, in our facility in East London,
under strict quality standards. The
Company’s critical care products are
registered in 14 markets in Europe, the USA,
Brazil, South Korea and Japan. Sales during
the year were made through our direct sales
forces in the UK and USA, and through our
international network of speciality critical care
and anesthesia distributors in 15 other
countries. In June the Company signed a
new marketing collaboration agreement with
Becton, Dickinson U.K. Limited. This type of
collaboration with a leading global medical
technology company is a tribute to our
technology and to our specialist sales force.
This type of collaborative agreement not only
broadens our offering among our target
customers but also potentially helps to
increase penetration of our markets.
In December 2007 the Company raised
£2m through the issue of new shares, to be
used for completing the development and
market introduction of the LiDCOrapid
monitor, supporting continued sales growth
of the Company’s existing products in the
critical care market and continuing its active
research and development programme.
On behalf of the Board I would like to thank
our shareholders for their continued support
of the Company.
We were delighted to welcome Paul Clifford
to the Board in April 2008 as Finance
Director. Paul has extensive experience
of technology and software companies,
both listed on the main market and venture
capital-backed. His past positions include
being finance director of Comino Group plc,
a company that was listed on the London
Stock Exchange’s main market, and
Civica UK Limited.
To date the market for our products has
been mainly the intensive care /critical care
units of hospitals. The launch of the
LiDCOrapid monitor, now available for sales
to customers in the EC and USA, will open
more fully the substantial market opportunity
in major surgery. LiDCOrapid’s ease of use is
a key feature that is expected to broaden the
range of distributors willing and able to work
with us in existing and new territories.
We therefore expect to increase further our
distributor network this year in the EC, the
USA and the Rest of the World, whilst
maintaining our direct sales forces in the UK
and USA. The Company’s product
development activities, conducted in close
consultation with leading clinicians, mean
that we now have a broader portfolio of
linked products to offer our customers
enabling the measurement, analysis, audit
and communication of real-time and historic
hemodynamic data in both critical care units
and the operating theatre. Meanwhile, there
is an expanding body of scientific data linking
the optimization of patients’ hemodynamic
status with better outcomes and reduced
hospital stays.
With strong growth in sales of
our existing products, reinforced
by the recent launch of the
LiDCOrapid monitor targeted
at the major surgery market,
the emergence of an additional
new market opportunity
for improving the viability of
transplant organs, together
with our growing network
of distributors, the Company
is well positioned for further
growth in the coming year.
As we look with enthusiasm to the year
ahead, I would like to thank all the Group’s
staff and directors for their dedication and
hard work over the past year and our Clinical
Advisory Board for their valuable contribution.
Theresa Wallis
Chairman
LiDCO Group Plc
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Annual Report and Accounts 2007/8
6
CHIEF EXECUTIVE OFFICER’S REVIEW
Our objectives for the year were
fourfold: achieve revenue growth of our
core intensive care product, expand the
product range, increase our sales
distribution network and contain costs.
I am pleased to say that all four of these
objectives were achieved.
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7
Overview
The worldwide market for hemodynamic
monitoring products continues to evolve,
mainly driven by the move away from the
use of the older invasive catheter products
towards the newer less invasive devices.
The potential market for these minimally
invasive devices, which include LiDCO’s
product range, is estimated at US$800
million per annum (surgery patient market
segment). We estimate that sales revenues
for minimally invasive hemodynamic
monitoring products grew in value last year
by 33%. Our objectives for the year were
fourfold: achieve revenue growth of our core
intensive care product, expand the product
range, increase our sales distribution
network and contain costs.
I am pleased to say that all four of these
objectives were achieved. Sales were up
18% on the prior year while we managed to
reduce normal operating overheads by 6%.
The favourable combination of increased
sales and reduced costs means that
significant progress towards profitability was
made. Following the expansion of the
distributor network and the recent
introduction of the LiDCOrapid product, our
business has both a wider product and
geographic base and is now capable of
significantly increasing its share of the global
hemodynamic monitoring market.
In summary, I feel that this has
been one of our most productive
periods and the Company is in a
strong position to continue to
move forward in 2008.
Sales and trading
Our strategy has been to supply the fast
growing hemodynamic monitoring market
with our proprietary products. I am pleased to
report that there is an increasing momentum
for the market’s transition to our minimally
invasive products and simultaneously in our
ability to access this market.
Since last year’s preliminary
results we have significantly
expanded our distribution
network with new distributors
added in a number of territories,
including Canada, the USA,
Israel, Turkey, and the Middle
East. Negotiations are ongoing
with specialty distributors in
additional regions of the USA
where we do not have direct
representation to further improve
our sales reach. We expect to be
able announce the conclusion of
these arrangements during the
next few months.
Revenues outside of the UK were up by a
very encouraging 63%. The performance of
established European distributors in the
period was particularly encouraging with
revenue increasing by no less than 71%.
The resurgence of sales growth in the USA,
while anticipated, was also good to see.
Overall sales growth at 18% was therefore
limited by lower demand for monitors in the
UK although disposable sales remained
buoyant. In a year where all capital
purchases by NHS hospitals in the UK were
at a low level for most of the period we
decided to redeploy existing sales resources
to the export market, which contributed to
our 63% increase in export sales. Exports
now represent the majority of our sales.
This has the positive effect of reducing our
reliance on an often ‘stop/start’ UK market.
We are expecting trading in the UK to
improve moderately this year with NHS
capital purchase budgets likely to be a little
more freely available. Furthermore our new
LiDCOrapid surgery product is targeted at a
more accessible revenue budget.
Accordingly we have now brought our UK
sales force up to strength with a number
of new appointments.
Despite an increasing proportion of lower-
margin distributor sales, product gross
margins were maintained at 78% on
monitors, and modestly improved to 87% on
disposables. In addition to maintaining
product margin the increased sales were
achieved without an increase in costs. I am
very pleased to be able to report that over
the last four years our sales have increased
by 79% while we have simultaneously
reduced our costs by 16%. Over the last few
years we have made strategic investments in
our patents, our products and their
automated manufacture, coupled with
development of clinical/business cases. We
are now starting to see clear evidence that
these investments have been justified and
can now be leveraged to support a
significantly larger turnover from both our
direct and distributor sales teams.
Looking forward, our new surgery product,
the LiDCOrapid monitor, launched in April,
should have a dual advantage for us.
Not only does it address the needs of a
US$800million per annum surgery market,
but also makes our product range more
attractive to sell by both the existing and new
distribution partners. The attractive features
of this new product – proprietary technology
and design, high margin, ease of set-up and
use – have already helped propel the recent
expansion of our distribution network.
While this expansion of the sales distribution
channel occurred too late to contribute
materially to the 2007/08 results, these
additions are expected to provide a
significant new source of revenue in the
second half of the current year.
In addition to signing up more distributors, in
June 2007 LiDCO announced the signing of
an exclusive UK marketing collaboration with
Becton, Dickinson U.K. Limited (‘BD’). BD is
a leading global medical technology
company and this collaboration involves the
joint promotion, in selected UK hospitals
where LiDCO already has existing sales and
customer relationships, of a number of
critical care products currently being sold by
the BD Medical Surgical Systems business
unit. LiDCO’s strong customer relationship
with critical care departments in UK hospitals
was a key factor in BD’s decision to form this
exclusive collaboration. This marketing
partnership will result in enhanced sales
coverage for BD’s critical care product lines
in the UK and LiDCO will receive a share of
any profits made.
LiDCO_FRONT_0708_aw:LiDCO REP_FRONT_0708_aw  21/5/08  15:53  Page 7 Market trends –
LiDCO’s sales and marketing strategy
Intensive care market
In a 2007 article in the Journal of the
American Medical Association doctors from
Harborview Hospital in Seattle noted that
their use of the invasive pulmonary artery
catheter (PAC) for measuring cardiac output
had declined by 77% over the last four years.
The authors, whose hospital is now a LiDCO
product user, also commented that ‘Recently
nurses and residents gathered around the
bedside of the sole patient in the intensive
care unit (ICU) with a PAC so they could
actually observe one still in use’. The use of
the invasive PAC approach to monitor
hemodynamics continues to decline and this
is particularly so in the ICU. In contrast the
sales of the LiDCOplus monitor are
increasing in the ICU – clearly in these LiDCO
accounts we are replacing the PAC with our
technology, which has been convincingly
demonstrated to improve clinical outcome
and reduce costs in patients after surgery.
The transition to minimally
invasive monitoring in this
market is expected to continue.
We intend to further distinguish
ourselves from older
catheter-based technologies
by presenting to hospitals a
number of strong clinical and
business cases associated with
use of our products.
Accordingly we were pleased to announce
during the year the results of a study
conducted in 2006 at the University of Iowa,
showing that use of our products in severely
ill patients with shock and sepsis
substantially reduced mortality.
The University, which has been using our
technology since 2003, conducted a
retrospective analysis of outcomes in a group
of critically ill patients treated for septic shock
and systemic inflammatory response
syndrome (SIRS). This epidemiological study
was undertaken to evaluate the various
hemodynamic monitoring technologies used
in the ICU and their effect on outcomes in
this gravely ill patient population.
Patients treated with the LiDCOplus monitor
had a substantially lower mortality rate than
those treated clinically with the PAC: ICU
mortality in the LiDCO treated group of
patients was only 12% compared with 32%
in the PAC treated group or 31% in those
patients managed without any hemodynamic
monitoring. The compelling data from this
study supports the case that using the
LiDCOplus monitor decreases death rates in
patients with septic shock or SIRS. This is
very exciting news for us and our hospital
customers and for patients, as these
conditions have historically been very difficult
to treat successfully. Similar trials are in
progress in other countries to repeat and
confirm this observation. If successful the
data should have meaningful effects on the
uptake of our LiDCOplus monitor product
within our existing ICU customer base.
Major surgery market – a new opportunity
Now that we have established our
technology’s credentials and the LiDCO
brand name within the technically demanding
intensive care market, we have used our
expertise to produce a product for sale into
the emerging high-risk surgery market.
This project resulted in the recent launch of
the LiDCOrapid monitor. Our goal was to
introduce a simple and easy-to-use product
that would be used to optimize a patient’s
hemodynamic profile during surgery.
Individualized fluid administration to maintain
and optimize hemodynamics and tissue
oxygenation plays a major role in the
management of the moderate to high-risk
surgical patient. This cannot be achieved
reliably through the use of conventionally
measured parameters such as arterial
pressure, heart rate, urine output and central
venous pressure but requires use of a
specially designed monitor that provides a
continuous measure of cardiac output.
The LiDCOrapid is the first
monitor specifically designed to
help surgical teams maintain a
patient’s optimal hemodynamic
profile. It is easy to use and set
up and is designed with a user
interface that is both visually
intuitive and informative.
It provides early warning of hemodynamic
change, together with an indication of fluid
responsiveness and actual response to a
fluid or drug intervention. We are confident
that widespread adoption of the LiDCOrapid
will have a major impact on improving
outcomes after major surgery by reducing
complications and shortening hospital stays:
this will not only benefit patients but also cut
treatment costs. The initial response to this
new product has been excellent and we are
very excited about the potential of this
product to take a significant share of this
US$800 million surgery market.
Organ transplantation –
a developing market opportunity
There has been a large amount of publicity in
the press about the growing shortage of
transplantable organs. This is in part related
to declining numbers of patients suitable to
act as organ donors. However the situation
is compounded by an assumption that post-
collection loss of transplantable organs is
inevitable if an initial assessment of the donor
suggests that the patients’ hemodynamics,
and hence organs, have deteriorated
irreversibly. Brain death is known to induce
dramatic changes in hemodynamics but
donors are often not adequately
hemodynamically monitored. This results in
inadequate resuscitation, thereby reducing
organ yield due to oxygen debt. In an effort
to improve donor outcomes, LiDCO is
working with an Organ Procurement
Organisation (OPO) in the USA which is using
our minimally invasive continuous
hemodynamic monitoring to guide donor
management decisions in hemodynamically
unstable donors. The OPO believes that the
ability to monitor and assess continuously
fluid parameters, pressure and blood flow
would enable the OPO coordinator to
recognize and apply situation-specific
interventions that target improving
hemodynamics and hence improve end-
organ perfusion. LiDCOplus monitoring is
minimally invasive and brings the advantage
that such care could be initiated immediately
by the OPO coordinator (frequently a nurse)
without the need for inserting specialized
catheters (eg. the invasive pulmonary artery
catheter) or requiring specialist physician
support. I am delighted to report that
LiDCO Group Plc
Annual Report and Accounts 2007/8
8
CHIEF EXECUTIVE OFFICER’S REVIEW
Continued
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Annual Report and Accounts 2007/8
9
minimally invasive hemodynamic monitoring
has indeed helped to improve donor
outcomes in these cases, with a significant
increase in the number of organs available
for transplantation.
This issue has been further
studied by the University of
Pittsburgh in a recently
published prospective study.
This confirmed our expectation
that donors who were
adequately resuscitated with
the LiDCOplus monitor provided
a significantly higher number
(3.7 compared with 2) of organs
per donor that were suitable for
transplant, whereas donors
who had inadequate volume
resuscitation were associated
with a higher inflammatory
response. These results have
generated considerable interest
within the transplantation
community, which is beginning
to translate into sales of
our technology into this
developing market.
Product development
The last year has been a very active one for
product development. Our development
strategy is to respond quickly to market
opportunities by providing proprietary
hemodynamic monitoring products. The
LiDCOrapid development follows on from the
launch of the LiDCOplus version 4.1 software,
the new LiDCO PC products LiDCOview
SE
and LiDCOview
PRO
(launched) and LiDCOlive
(in development and discussed below).
LiDCOrapid was launched on target in April of
this year with the first shipments of product to
our distributor customers. Customer
response to this exciting product has been
exceptional and we are expecting this
product to represent a new standard of care
for major surgery patients.
We believe that the combination of the
LiDCOplus and LiDCOrapid monitors and our
data analysis PC software products
collectively represent the most evolved
platforms available today for the care and
hemodynamic optimization of both intensive
care and surgery patients.
LiDCOlive –
data display independent of location
The LiDCOlive development is aimed at the
creation of a virtual intensive care unit, taking
real-time hemodynamic patient data and
easy-to-interpret screens to the clinician –
irrespective of their physical location.
Location-independent monitoring is required
to offset the growing shortage of the highly
skilled staff needed to care for these patients.
LiDCO is therefore developing a PC-based
software product called LiDCOlive that can
display the LiDCOplus monitor trend screen
and real-time patient data on any PC or
laptop regardless of location. The clinician,
together with the nurse at the patient’s bed-
side, can then discuss potential treatment
approaches and immediately see the effects
of their agreed change in fluid or drug
therapy. This ‘virtual ICU’ approach using
LiDCO’s technology has the potential to make
a considerable improvement in the care of
high-risk patients and to make best use of
the skills of the hospital clinical staff. The
prototype LiDCOlive product has been
successfully demonstrated in Japan, the
Czech Republic and the USA at various
international meetings this year. One of the
trialists of LiDCOlive, Dr. Loua Shaikh
(Department of Critical Care Medicine, Frimley
Park Hospital, UK), said: ‘In terms of patient
care, the impact of time and distance on the
delivery of experience and expert knowledge
to the bedside are considerably diminished.’
The LiDCOlive software is still a
product in development but we
expect the first generation of
this product to be available
during the second half of 2008.
Regulatory affairs and product quality
During the period both our EC notified
body and the US FDA conducted
surveillance visits. LiDCO is pleased to report
that no non-conformity issues were raised
by either group of inspectors. Our product
quality and customer satisfaction record
continues to be excellent.
Dr Terry O’Brien
Chief Executive Officer
23 April 2008
LiDCO_FRONT_0708_aw:LiDCO REP_FRONT_0708_aw  21/5/08  15:53  Page 9 In November 2007 , the Company
placed 23,647 ,074 shares at a price
of 8.5p per share raising £2m before
expenses with financial institutions
and a number of private investors.
The Group’s cash balances at the year
end were £2.23m compared with
£1.47m in the previous year.
LiDCO Group Plc
Annual Report and Accounts 2007/8
10
FINANCIAL REVIEW
LiDCO_FRONT_0708_aw:LiDCO REP_FRONT_0708_aw  21/5/08  15:53  Page 10 LiDCO Group Plc
Annual Report and Accounts 2007/8
11
IFRS
The attached financial statements for the
year to 31 January 2008 have been prepared
for the first time in accordance with IFRS and
the impact of IFRS has had no effect, other
than presentation, on the reported figures
and there were no material changes to the
opening balances. Where necessary,
comparative figures previously reported
under UK GAAP have been restated for the
transition to IFRS.
Operating results
Turnover increased by 18%
to £4.05m (2006/07: £3.44m).
The installed base of monitors
increased in the year by
149 units to 1,184 (2006/7:
1,035 units), representing an
increase of 14%. This has led
to an accompanying increase
in sensor usage of 7% from
24,316 to 26,081 units.
Product margins against external
procurement costs have been maintained at
78% on monitors and modestly improved to
87% on disposables. The overall reported
gross margin on sales is 64%, down from
67% in 2006/7 with the decrease being
almost entirely accounted for by the
increased monthly payments to Med One.
Excluding the Med One monthly payments,
the gross margin on sales was 75%
(2006/07: 76%).
Administrative and distribution expenses
were reduced by £320,000 (6%) from
£4.94m to £4.62m. This is principally due to
savings in staff costs, professional fees and
premises costs which were offset by
increases in depreciation and amortization.
As a result of the increase in revenues and
reduced costs, operating losses decreased
by £613,000 to £2.01m (2006/07: £2.62m)
and the loss per share was reduced to 1.50
pence (2006/07: 2.10 pence).
Taxation
As the Group is still at the pre-profit stage
there was no tax charge for the year. In
addition the Group has a deferred tax asset
of £6.1m to offset against future profits,
although this has not been recognized in the
accounts. In the UK, the Group qualifies for
research and development (R&D) tax credits
which amounted to £120,000 in 2007/08
which are shown in the income statement.
Cash, financing and working capital
The net cash outflow from operating activities
remained level at £1.10m (2006/07: £1.12m)
despite the reduction in operating losses.
This was largely as a result of exceptional
cash receipts in 2006/07 from two years of
R&D tax credits and the collection of a large
number of old outstanding debtors.
Excluding the receipt of R&D tax credits, the
net cash outflow from operating activities has
reduced by 30% over the last two years.
The net cash outflow before financing
increased from £1.60m to £1.69m as the
result of increased spending on both fixed
and intangible fixed assets.
Debtor days at the year end showed a slight
improvement to 111 days compared with
115 days last year. Creditor days have
reduced from 45 days to 29 days. Stock at
the year end as a percentage of turnover has
reduced from 31% to 21%.
In November 2007, the Company placed
23,647,074 shares at a price of 8.5p per
share raising £2m before expenses with
financial institutions and a number of private
investors. The expenses relating to the
placing were £67,000.
As anticipated in last year’s financial
statements, the Group made use of its £1m
(US$2m) Laurus loan facility and drew down
£500,000 in August 2007. The amount
drawn down at the year end stood at
£553,000. The Laurus loan facility is due for
repayment in August 2008 and it is
anticipated that this will need to be replaced
by a new facility of similar size. The Company
is in discussions with a number of lenders
and the Board is reasonably confident that
this facility can be replaced.
As a result of the placing and the draw down
of the loan facility, the Group’s cash balances
at the year end were £2.23m compared with
£1.47m the previous year.
Dr Terry O’Brien
Chief Executive Officer
23 April 2008
2006/7
Monitors 42%
Sensors 53%
FFU/Rental 3%
Licence Fees 2%
2007/8
Monitors 48%
Sensors 49%
FFU/Rental 2%
Licence Fees 1%
Sales as percentages
Monitors Sensors FFU/Rental Licence fees
2006/7
2007/8
1,934
Sales by type
£’000
1,986
78
53
1,443
1,818
111
70
LiDCO_FRONT_0708_aw:LiDCO REP_FRONT_0708_aw  21/5/08  15:53  Page 11 LiDCO Group Plc
Annual Report and Accounts 2007/8
12
BOARD OF DIRECTORS
Dr Max Jonas
Dr Jonas is a consultant intensivist and
senior lecturer in critical care working at
Southampton University and Hospitals.
He has responsibility for a 28 bed intensive
care unit and has specific interests in
hemodynamics and the assessment of
monitoring equipment. He is currently deputy
chairman of the technology assessment
section of the European Society of Intensive
Care Medicine and president of the Society
of Critical Care Technologists.
1. Theresa Wallis
Non-Executive Chairman
CLINICAL ADVISORY BOARD
2. Dr Terence O’Brien
Chief Executive Officer
3. Dr David Band
Scientific Director
5. Paul Clifford
Finance Director
4. John Barry
Sales and Marketing Director
5. Ian Brown
Non-Executive Director
LiDCO_FRONT_0708_aw:LiDCO REP_FRONT_0708_aw  21/5/08  15:53  Page 12 LiDCO Group Plc
Annual Report and Accounts 2007/8
13
Professor David Bennett
Professor Bennett is Professor of Intensive
Care Medicine at St George’s Hospital,
London where until 2003 he was director
of the mixed medical/surgical intensive care
unit, a position he held for more than 25
years. David has chaired numerous scientific
committees, was honorary secretary of the
European Society of Intensive Care Medicine
and editor-in-chief of Clinical Intensive Care.
He is on the editorial board of Intensive Care
Medicine and Critical Care. He reviews
regularly for these journals and also for
Critical Care Medicine and Anesthesia
and Analgesia.
Professor Michael Pinsky
Professor Pinsky is Professor of Critical Care
Medicine, Bioengineering, Cardiovascular
Diseases and Anesthesiology at the
University of Pittsburgh School of Medicine,
USA and is a member of the editorial board
of the Journal of Critical Care and Critical
Care Forum. He is editor-in-chief of the
eMedicine textbook Critical Care Medicine.
He was awarded Docteur hooris causa from
the Université de Paris V (Le Sorbonne). He
has a wide range of research interests –
among them being the study of heart-lung
interactions, hemodynamic monitoring,
cardiovascular physiology, sepsis and
outcomes research. He is a world leading
authority on the application of both existing
invasive, and the more recent introduced
minimally invasive, monitoring technologies.
Dr Christopher Wolff
Dr Wolff holds the post of senior research
fellow at The Centre for Clinical Pharmacology,
The William Harvey Research Institute, Bart’s
and London Queen Mary School of Medicine
and Dentistry, London. He is a clinician,
physiologist and mathematician and has
major research interests in respiratory and
cardiovascular physiology.
1. Theresa Wallis
Non-Executive Chairman
Ms Wallis has worked most of her career
in financial services, moving into the
technology commercialism sector in 2001.
She worked for the London Stock Exchange
for 13 years, where from 1995 she was chief
operating officer of the Alternative Investment
Market (AIM), having managed the market’s
development and launch in 1994/5.
From 2001 to end 2006 she was a
principle executive of ANGLE plc, a venture
management and consulting business
focusing on the commercialisation of
technology. She is currently a non-executive
director of FTSE International Limited and
Noble Income & Growth VCT plc. She is also
a member of the Quoted Companies
Alliance’s Executive Committee and its
Markets and Regulations Committee.
4. John Barry
Sales and Marketing Director
Mr Barry joined the Group in February 2001.
He entered the medical industry working for
Baxter Healthcare Inc. In 1997 he was
appointed director of marketing for critical
care in Europe and in 1999, when Baxter
Healthcare sold Edwards Lifesciences
Corporation, Mr Barry was appointed director
of marketing for the cardiac surgery business
of Edwards Lifesciences Corporation in
Europe, the Middle East and Africa.
2. Dr Terence O’Brien
Chief Executive Officer
Dr O’Brien co-founded the Group in 1991.
Prior to that, he held senior positions with
biomedical companies including Sandoz SA,
Pharmacia AB, Meadox Medical Inc,
Novamedix Ltd, Enzymatix Ltd and Surgicraft
Ltd. Dr O’Brien was associate commercial
director at Enzymatix, which subsequently
listed on the London Stock Exchange
as ChiroScience Plc. Over the last 25 years
Dr O’Brien has been involved in the
research and development and subsequent
marketing of a number of medical device
technologies that are now standards of care
in the anesthesia, critical care and
surgery markets.
5. Paul Clifford
Finance Director
Mr Clifford qualified as a chartered
accountant with Touche Ross (now Deloittes)
in 1975 and has spent 28 years in technology
companies. Between 1980 and 1984, he was
finance director, then managing director of
DCC International, a computer software
company. He was finance director of Unix
systems supplier TIS Limited when it was
acquired by Misys plc in 1989. In 1991 he
co-founded BCS Computing Limited, a
private equity backed concern investing in
computer software companies. He became
finance director of software group, Comino
in 1996, prior to its flotation on AIM in 1997.
In 2006, Comino was acquired by Civica plc
and Mr Clifford was appointed finance
director of Civica UK Limited, the main
operating subsidiary until he left in 2008.
3. Dr David Band
Scientific Director
Dr Band co-founded the Group in 1991
and is the co-inventor of the LiDCO System.
He is a specialist in the ﬁeld of respiratory
physiology, electrochemistry and ion-selective
electrodes. He has a degree in medicine,
and was a reader in applied physiology in the
Division of Physiology, GKT School of
Biomedical Sciences, St Thomas’ campus.
6. Ian Brown
Non-Executive Director
Mr Brown has over 25 years’ experience
in the medical devices industry and has
extensive experience of developing and
introducing new medical devices to the
market in the UK and overseas. Between
1986 and 2003, he was an executive director
and shareholder in a medical device start-up
company (Novamedix Group), initially as sales
and marketing director and later as managing
director. The company was progressively sold
to a major US healthcare group (Ofix). In his
early career, Mr Brown worked in a number
of UK and international sales and marketing
positions for Johnson & Johnson, Smiths
Industries and Pharmacia AB.
LiDCO_FRONT_0708_aw:LiDCO REP_FRONT_0708_aw  21/5/08  15:53  Page 13 The Combined Code
Companies that have shares traded on the Alternative Investment Market (AIM) of the London Stock Exchange are not required to comply
with the disclosures of the Combined Code on Corporate Governance which is appended to the Listing Rules of the Financial Services
Authority (the 2006 FRC Code). However, the Board is committed to maintaining the highest standards of corporate governance, where
appropriate for a Company of its size.
The Board of Directors
The Board consists of four executive directors and two non-executive directors. The non-executive directors are free from any relationship
with the executive management of the Company and the Board considers that both non-executive directors, other than through their
shareholdings, are independent directors. The non-executive directors bring a wide range of skills and experience to the Board and fulfil a
vital role in corporate accountability.
The Chairman of the Board is Ms Wallis and Mr Brown is the senior independent non-executive director.
Directors’ biographies are provided on page 13.
There were 12 scheduled meetings during the year. The attendance of the individual directors at the Board Meetings and
Committee Meetings was as follows:
Attendance record at Board meetings and Committees
Audit Remuneration Nominations
Name Position Board Meetings Committee Committee Committee
Ms T A Wallis Non-executive Chairman 12 (12) 3 (3) 4 (4) 1 (1)
Dr T K O’Brien Chief Executive Officer 12 (12) n/a n/a 1 (1)
Dr D M Band Scientific Director 8 (12) n/a n/a n/a
Mr J G Barry Sales & Marketing Director 11 (12) n/a n/a n/a
Mr I G Brown Non-executive Director 12 (12) 3 (3) 4 (4) 1 (1)
Numbers in brackets denote the total number of meetings during the year.
All the directors have access to the advice and services of the Company Secretary, whose appointment and removal is a matter for the
Board as a whole. All directors are able to take independent advice in the furtherance of their duties, if necessary, at the Company’s expense.
The Company Secretary supports both the Board and the Committees.
Under the Company’s Articles of Association, all new directors are required to resign and seek re-election at the first Annual General Meeting
following their appointment. All directors are required to seek re-election at intervals of no more than three years.
Board evaluation and performance
In February 2008, the Board carried out an evaluation of its performance, functioning and composition and that of each Committee.
This involved each director completing an evaluation, the results of which were then collated and discussed by the Board. Actions were
agreed, including the need to appoint an experienced finance director. This position has now been filled. It is the Board’s intention to
continue to review annually its performance and that of its Committees.
LiDCO Group Plc
Annual Report and Accounts 2007/8
14
CORPORATE GOVERNANCE
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:00  Page 14 Committees of the Board
Audit Committee
The members of the Committee are Ms Wallis (Chairman) and Mr Brown. The external auditors also attend meetings. The Committee
considers financial reporting and internal controls. It also reviews the scope and results of the external audit and the independence and
objectivity of the auditors. It meets at least twice a year and reviews the interim and annual financial statements before they are submitted for
approval by the Board. The Committee met three times during the year. The Committee considers annually whether the auditors remain
independent for the purposes of the audit. This year the fee for non-audit work is £10,000 against an audit fee of £39,000. The Committee
is satisfied that the auditors remain independent for the purposes of the annual audit. The Committee consider that given the size of the
Company and its current stage of development a separate internal audit function cannot be justified, but the matter is re-considered
annually by the Committee.
Remuneration Committee
The members of the Committee are Ms Wallis (Chairman) and Mr Brown. The Committee reviews and sets the remuneration of the executive
directors. It also reviews the policy for the salaries and bonuses of all other staff. It advises on share schemes and approves the granting of
share options. The Committee met four times during the year.
Nominations Committee
The members of the Committee are Ms Wallis (Chairman), Mr Brown and Dr O’Brien. The Committee considers, at the request of the Board,
candidates for new appointments to the Board and advises on all matters relating to Board appointments.
Relations with shareholders
The Company seeks to maintain and enhance good relations with its shareholders. The Company’s interim and annual reports are
supplemented by published updates to investors on technical and commercial progress. All investors have access to up-to-date information on
the Company via its website, www.lidco.com, which also provides contact details for investor relations enquiries. All shareholders are invited to
make use of the Company’s Annual General Meeting to raise any questions regarding the management or performance of the Company.
The Chief Executive and Chairman meet regularly with shareholders and the investing community and report to the Board feedback from those
meetings. Both non-executive directors have the opportunity to attend shareholder meetings. The Board is kept informed on market views
about the Company.
Accountability and audit – Going concern
As noted in the accounting policies and on the basis of current financial projections, the directors have a reasonable expectation that the
Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt
the going concern basis in preparing the accounts.
Internal control, regulation and risk management
The composition of the Board and the senior management team provides a suitable range of knowledge and experience to enable
adequate risk monitoring. Further details may be found in the Directors’ Report.
LiDCO Group Plc
Annual Report and Accounts 2007/8
15
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:00  Page 15 The directors present their Remuneration Report which covers the remuneration of both the executive and non-executive directors.
The report will be subject to shareholder vote at the forthcoming Annual General Meeting in June 2008.
Committee membership
The membership of the Remuneration Committee is made up of the following non-executive directors:
T A Wallis (Chairman)
I G Brown
Neither of the Committee members has any day-to-day involvement in the running of the Company, nor do they have any business
or other relationship that could affect, or appear to affect, the exercise of their independent judgement, other than as shareholders.
No director plays a part in any decision about his or her own remuneration.
Remuneration policy
The Committee determines on behalf of the Board, the remuneration for the executive directors and reviews remuneration policies for all
employees. Remuneration levels are set in order to attract high calibre recruits and to retain and motivate those directors and employees once
they have joined the Company to ensure the future success of the business and to deliver long-term shareholder value. This is achieved by
a combination of base salary, bonuses and share options, which are offered to executive directors and employees at all levels. The Committee
met four times in the year.
Base salary
All three executive directors receive a base salary and an allowance in lieu of benefits. The salary reflects the experience and level of
competence of the individual to whom it applies, as judged by the Committee, taking into account salary levels in the market.
Annual bonus
The executive directors who served during the year are members of the Company’s Senior Management Bonus Scheme. Under the terms
of the Scheme, the Remuneration Committee assesses the directors’ individual performances soon after the end of the financial year,
judged against pre-determined targets.
The criteria for awarding bonuses during the year included corporate and individual objectives. Corporate objectives included sales
performance and loss before tax. Bonuses are capped at 50% of base salary.
Remuneration policy of the non-executive directors
The Board determines the remuneration of the non-executive directors. The non-executive directors do not participate in the Company’s
share option schemes and are not eligible for annual incentive payments or benefits in kind.
LiDCO Group Plc
Annual Report and Accounts 2007/8
16
DIRECTORS’ REMUNERATION REPORT
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:00  Page 16 Remuneration of directors
Year ended 31 Jan 2008
Allowance in
Salary and fees lieu of benefits Benefits Bonus Total 2007
£’000 £’000 £’000 £’000 £’000 £’000
T A Wallis 44 ––– 44 44
T K O’Brien 180 36 1 27 244 237
J G Barry 166 33 3 27 229 222
D M Band 43 9– 4 56 58
I G Brown 28 ––– 28 28
H M J McGarel-Groves* ––– –– 196
Total 461 78 4 58 601 785
*Mr McGarel-Groves was employed for part of the of the year 2006/7 until 22 January 2007, the date of his resignation. Included in his salary and fees for the year ended
31 January 2007, is the sum of £66,000 which together with 239,130 shares issued to him at 11.5p per share was paid as part of settlement arrangements on resignation.
Contracts of service
Details of the service contracts currently in place for the directors who have served during the year are as follows:
Executive directors
The service contracts of Dr O’Brien, Dr Band and Mr Barry are dated 29 June 2001 and are not set for a specific term but include a rolling
12 months’ notice period. Mr Clifford has a service contract with the Company dated 21 April 2008; as with the other executive directors,
this is not set for a specific term, but includes a rolling six months’ notice period.
Non-executive directors
The non-executive directors do not have service contracts with the Company. The letter of appointment for each non-executive director states
that they are appointed for an initial period of three years. At the end of the initial period, the contract may be renewed for a further period if
the Company and the director agree. In keeping with best practice, these appointments are terminable without notice by either party.
The Chairman’s appointment was renewed in 2006 for the period ending 19 December 2008.
LiDCO Group Plc
Annual Report and Accounts 2007/8
17
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:00  Page 17 Directors’ interests in share options
Options were granted to the executive directors as follows:
Options at Date of Options granted Lapsed during Options at Exercise Exercisable
Option type 31 Jan 2007 grant during 2007 the year 31 Jan 2008 price from Expiry Date
T K O’Brien EMI 750,000 Dec-02 750,000 13p Dec-05 Dec-12
EMI 11,627 Apr-05 11,627 21.5p Apr-08 Apr-15
Unapproved 265,768 Apr-05 265,768 21.5p Apr-08 Apr-15
D M Band EMI 750,000 Dec-02 750,000 13p Dec-05 Dec-12
EMI 11,627 Apr-05 11,627 21.5p Apr-08 Apr-15
Unapproved 53,489 Apr-05 53,489 21.5p Apr-08 Apr-15
J G Barry Unapproved 106,250 Jul-01 106,250 5p Jul-01 July-11
(Note 1) Unapproved 211,000 Dec-02 211,000 13p Dec-03 Dec-12
EMI 539,000 Dec-02 539,000 13p Dec-05 Dec-12
Unapproved 90,000 Nov-05 90,000 28.25p Nov-06 Nov-13
Unapproved 356,844 Apr-05 356,844 21.5p Apr-08 Apr-15
Unapproved 1,177,878 Apr-05 1,177,878 22p Dec-05 Apr-15
EMI 136,045 Apr-05 136,045 22p Apr-06 Apr-15
Unapproved 45,000 Jun-06 45,000 21p Jun-09 Jun-16
Unapproved Jun-07 75,000 75,000 12.5p Jun-10 Jun-17
H M J McGarel-Groves EMI 250,000 (250,000) Nil 20.75p May-08 Jul-07
(Note 2) EMI 229,166 (229,166) Nil 21p Jun-09 Jul-07
Unapproved 20,834 (20,834) Nil 21p Jun-09 Jul-07
Unapproved 239,130 (239,130) Nil 11.5p Jun-10 Jul-07
Total 5,243,648 75,000 (739,130) 4,579,518
Note 1
In April 2005 Mr Barry was granted options with accelerated vesting as follows:
• 192,436 Unapproved share options vesting 31/12/05 exercisable at 22p
• 328,481 Unapproved share options vesting 30/4/06 exercisable at 22p
• 656,961 Unapproved share options vesting 30/9/06 exercisable at 22p
• 136,045 EMI share options vesting 31/12/05 exercisable at 22p
Each tranche remains exercisable for a period of 10 years from date of grant
Note 2
Mr McGarel-Groves resigned on 22 January 2007. His share options all lapsed in July 2007.
The share price was 10p on 1 February 2007 and 7.5p on 31 January 2008, with high and low during the year of 13.25p and 7.37p respectively.
Pensions
No pension contributions were payable by the Group during the year (2006/7: £nil)
LiDCO Group Plc
Annual Report and Accounts 2007/8
18
DIRECTORS’ REMUNERATION REPORT
Continued
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:00  Page 18 Shareholder return
The graph below shows the share price performance since January 2003, using the FTSE TechMARK Mediscience Index as a comparator,
which the directors consider to be the most suitable benchmark index.
Relative price scale
Theresa Wallis
Chairman of the Remuneration Committee
23 April 2008
LiDCO Group Plc
Annual Report and Accounts 2007/8
19
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
LiDCO MediScience
31-01-03
31-07-03
31-01-04
31-07-04
31-01-05
31-07-05
31-01-06
31-07-06
31-01-07
31-07-07
31-01-08
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:00  Page 19 The directors of LiDCO Group Plc present their annual report and audited financial statements (Annual Report) for the year ended
31 January 2008.
Principal activities, business review and business risks
The principal activity of the Group is the development, manufacture and sale of cardiac monitoring equipment.
The review of the business is included in the Chief Executive Officer’s Review which should be read as part of this directors’ report.
The key commercial risks associated with the business are:
• the development of competing products which can restrict the Group’s ability to make further progress in increasing its share of the
minimally invasive hemodynamic monitoring market. The Group addresses this by seeking independent validation of its products and
introducing product developments and enhancements to both existing and new markets;
• healthcare spending – the Group’s performance is affected by hospitals’ expenditure and budgetary constraints which the Group mitigates
by targeting its efforts and resources according to specific opportunities and market expansion in different territories;
• competition activity from market leaders in the USA and Japan. The Group is competing against more established suppliers and the
Group’s progress in these markets is more fully covered in the Chief Executive Officer’s Review.
The key financial risk being the management and maintenance of sufficient cash balances to support the ongoing development and marketing
of the LiDCO technology.
Results and dividends
The Group’s revenue for the year was £4,051,000 (2006/7: £3,443,000). The Group made a consolidated loss after taxation of £1,866,000
(2006/7: £2,385,000). The directors do not recommend the payment of a dividend (2006/7: £nil).
The Company’s share price at 31 January 2008 was 7.5p (2007: 10p).
Research and Development
The Group continued to develop the LiDCO systems during the year. Details of the costs expended on research and development are set out
in Notes 3 and 8 to the financial statements.
Share capital and share premium account
Full details of the authorised and issued share capital of the Company, together with details of the movements in the Company’s issued share
capital and the share premium accounts during the year, are shown in notes 6 and 7 on pages 45 and 46 to the financial statements. In
December 2007, the Company placed 23.6m shares at a price of 8.5p, raising approximately £2m before expenses.
Directors
The directors of the Company who served during the year are set out below; short biographies are set out on page 13.
T A Wallis Non-Executive Chairman
T K O’Brien Chief Executive Officer
D M Band Scientific Director
J G Barry Sales and Marketing Director
I G Brown Non-Executive Director
Mr Brown retires by rotation and, being eligible, offers himself for re-election at the forthcoming Annual General Meeting. Mr Clifford who was
appointed Group Finance Director of the Company on 23 April 2008 will offer himself for election at the forthcoming Annual General Meeting.
Directors’ remuneration
The Remuneration Report, which includes information regarding directors’ service contracts, appointment arrangements and interests in share
options, can be found on pages 17 and 18.
Directors’ interests in shares
The directors who held office at 31 January 2008 had beneficial interests in the ordinary shares of the Company as shown below:
Directors’ shareholdings
Ordinary shares of 0.5p each
31 January 2008 31 January 2007
Number Number
T A Wallis 145,037 108,000
T K O’Brien 10,935,461 10,109,577
D M Band 7,060,832 7,060,832
J G Barry 379,642 379,642
I G Brown 100,000 100,000
The directors have no interests in the shares of the Company’s subsidiary undertakings.
LiDCO Group Plc
Annual Report and Accounts 2007/8
20
DIRECTORS’ REPORT
For the year ended 31 January 2008
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:00  Page 20 Directors’ indemnities and Directors’ and Officers’ Insurance
The Company has exercised the power given by shareholders at the 2006 Annual General Meeting to extend the indemnities to directors and
officers against liability to third parties. The directors also have Directors’ and Officers’ insurance cover in place in respect of personal liabilities
which may be incurred by directors and officers in the course of their service with the Company.
Employment policy
Equal opportunity is given to all employees regardless of their gender, race or ethnic origin, religion, age, disability, or sexual orientation.
The policy of the directors is to encourage the involvement of all employees in the development and performance of the Group.
Employees are regularly briefed on the Group’s activities through regular information releases and meetings. All employees are encouraged
to give their views on matters of common concern through the line management. All employees participate in the share option schemes.
Supplier payment policy
It is and will continue to be the policy of the Group to negotiate with suppliers so as to obtain the best available terms taking account of
quality, delivery, price and period of settlement and, having agreed those terms, to abide by them. The total amount of the Group’s trade
creditors falling due within the year ended 31 January 2008 represents 29 days’ worth (2006/7: 45 days) as a proportion of the total amount
invoiced by suppliers during the period.
Significant shareholdings
As at 18 April 2008, the Company has been notified that the following shareholders, other than directors, had the following interest
of 3% or more of the Company’s ordinary share capital:
Number of shares in Percentage
Shareholder which there is an interest notified*
Ingalls & Snyder Llc 16,424,000 11.57%
H J Leitch 10,729,489 7.56%
P A Brewer 9,678,727 6.82%
Liontrust Intellectual Capital Trust 9,543,851 6.72%
R M Greenshields 9,042,407 6.37%
AXA Framlington Investment Management 8,852,942 6.24%
Cheviot Asset Management Limited 8,776,333 6.18%
Charles Stanley & Co 4,866,686 3.43%
*The percentages shown are based on the issued share capital at that date.
Charitable and political donations
The Group made no charitable or political donations in the year (2006/7: £nil).
Directors’ responsibilities for the financial statements
The directors are responsible for preparing the Annual Report and group financial statements in accordance with applicable law and
International Financial Reporting Standards as adopted by the European Union. The parent company financial statements have been prepared
in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
Company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs
of the Company and the Group and of the profit or loss of the Group or Company for that period. In preparing those financial statements,
the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the
financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
In so far as the directors are aware:
• there is no relevant audit information of which the Company’s auditors are unaware; and
• the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to
establish that the auditors are aware of that information.
The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of
the Company and enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s
website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.
LiDCO Group Plc
Annual Report and Accounts 2007/8
21
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:00  Page 21 Going concern
The financial statements have been prepared on the going concern basis, as set out in Note 1, Basis of Preparation, which assumes that the
Company will have sufficient funds to continue in operational existence for the foreseeable future. The Company has continued to invest in the
development of its operations and in particular its sales and marketing presence by continuing to invest in both its direct and indirect sales
channels during the year and in a new product offering. As a result it has continued to trade at a loss during the year ended 31 January 2008.
The directors have approved forecasts for the foreseeable future, which indicate that the Company will have sufficient funding to continue to
trade during that period. The forecasts assume a level of new sales about which there is uncertainty. If such new sales are not achieved, the
directors believe that there are sufficient opportunities available to them to obtain additional funding from sources that are currently being
explored which would enable the Company to continue to develop its operations and to meet its liabilities as they fall due. The convertible loan
from Laurus (see note 11) is due for repayment in August 2008 and it is anticipated that this will need to be replaced by a new loan facility of
similar size. The Company is in discussion with a number of lenders and the Board is reasonably confident that the facility can be replaced.
Accordingly, the financial statements have been prepared on a going concern basis. The financial statements do not include any adjustments
that would be required in the event that the Company had insufficient funding available.
Financial risk management
The Financial Risk Management objectives and policies of the Group, including the exposure to interest rate risk, liquidity risk and currency
risk are set out in note 13 to the financial statements.
Key Performance Indicators (KPIs)
The Board monitors progress of the Group’s strategy and by reference to the KPIs, specifically revenue growth, gross margin, price
maintenance, working capital levels and market position. These KPIs have been addressed in the Chief Executive Officer’s Review and
the Financial Review.
Internal controls, regulation and risk management
The Company has implemented an organisational structure with clearly-defined responsibilities and lines of accountability.
Detailed budgets and forecasts are prepared annually and progress against expectations is reviewed monthly by the Board. Underpinning the
monthly financial reporting is a system of internal control, based on authorisation procedures.
As a medical device Company, LiDCO also has a system of regulatory controls, to ensure compliance with all requirements of the Medicines
and Healthcare Products Regulatory Agency (MHRA), the US Food & Drug Administration (FDA) and other medical bodies. During the year the
Company was compliant with ISO 9001 (Quality Management Systems) and ISO13485 (Medical Devices – Quality Management Systems).
The Company performs periodic risk assessments involving all departments. The results are reviewed by the Board and actions to mitigate
risk are indentified and agreed.
Auditors
A resolution to re-appoint Grant Thornton UK LLP as auditors and to authorise the directors to set their remuneration will be proposed at the
forthcoming Annual General Meeting.
Annual General Meeting
The Notice to convene the Annual General Meeting of the Company to be held on Wednesday 25 June 2008 is included in the circular which
accompanies this Annual Report. The circular details the resolutions to be proposed at the meeting together with a brief explanation for each.
By order of the Board
John Rowland
Company Secretary
23 April 2008
LiDCO Group Plc
Annual Report and Accounts 2007/8
22
DIRECTORS’ REPORT
Continued
For the year ended 31 January 2008
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:00  Page 22 We have audited the group financial statements of LiDCO Group Plc for the year ended 31 January 2008 which comprise the principal
accounting policies, the consolidated income statement, the consolidated balance sheet, the consolidated cash flow statement and the
consolidated statement of changes in shareholders’ equity and notes 1 to 18. These Group financial statements have been prepared under
the accounting policies set out therein.
We have reported separately on the parent company financial statements of LiDCO Group Plc for the year ended 31 January 2008.
This report is made solely to the Company’s members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit
work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Annual Report and the Group financial statements in accordance with United Kingdom law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in the Statement of Directors’ Responsibilities.
Our responsibility is to audit the Group financial statements in accordance with relevant legal and regulatory requirements and International
Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the Group financial statements give a true and fair view, and whether the Group financial statements
have been properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in
the Directors’ Report is consistent with the financial statements. The information given in the Directors’ Report includes that specific information
presented in the Chief Executive Officer’s Review that is cross referred from the business review section of the Directors’ Report.
In addition we also report to you if, in our opinion, we have not received all the information and explanations we require for our audit, or if
information specified by law regarding directors’ remuneration and other transactions is not disclosed.
We read other information contained in the Annual Report and consider whether it is consistent with the audited Group financial statements.
The other information comprises only the Directors’ Report, Corporate Governance Statement, Remuneration Report, Chief Executive Officer’s
Review and the Chairman’s Statement. We consider the implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the Group financial statements. Our responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board.
An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Group financial statements. It also
includes an assessment of the significant estimates and judgments made by the directors in the preparation of the Group financial statements,
and of whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide
us with sufficient evidence to give reasonable assurance that the Group financial statements are free from material misstatement, whether
caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information
in the group financial statements.
Opinion
In our opinion:
• the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state
of the Group’s affairs as at 31 January 2008 and of its loss for the year then ended;
• the Group financial statements have been properly prepared in accordance with the Companies Act 1985; and
• the information given in the Directors’ Report is consistent with the financial statements for the year ended 31 January 2008.
Grant Thornton UK LLP
Registered Auditors
Chartered Accountants
London
23 April 2008
Note: The maintenance and integrity of the LiDCO Group Plc website is the responsibility of the directors: the work carried out by the auditors does not involve
consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since
they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions.
LiDCO Group Plc
Annual Report and Accounts 2007/8
23
REPORT OF THE INDEPENDENT AUDITORS
TO THE MEMBERS OF LIDCO GROUP PLC
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:00  Page 23 Year ended Year ended
31 January 2008 31 January 2007
£’000 £’000
Note (Restated)
Revenue 2 4,051 3,443
Cost of sales (1,442) (1,127)
Gross profit 2,609 2,316
Distribution costs (93) (69)
Administrative expenses (4,526) (4,870)
Loss from operations 3 (2,010) (2,623)
Finance income 49 69
Finance expense (25) (35)
Loss before tax (1,986) (2,589)
Income Tax 5 120 204
Loss for the year attributable to equity holders of the parent (1,866) (2,385)
Loss per share (basic and diluted) (p) 6 (1.50) (2.10)
All transactions arise from continuing operations.
There were no recognised gains or losses other than the loss for the financial year.
LiDCO Group Plc
Annual Report and Accounts 2007/8
24
CONSOLIDATED INCOME STATEMENT
For the year ended 31 January 2008
The accompanying accounting policies and notes form an integral part of these financial statements.
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 24 LiDCO Group Plc
Annual Report and Accounts 2007/8
25
CONSOLIDATED BALANCE SHEET
At 31 January 2008
The accompanying accounting policies and notes form an integral part of these financial statements.
Restated
2008 2007
Note £’000 £’000
Non-current assets
Property, plant and equipment 7 833 854
Intangible assets 8 747 656
1,580 1,510
Current assets
Inventory 9 839 1,080
Trade and other receivables 10 1,329 1,279
Current tax 120 142
Cash and cash equivalents 2,234 1,474
4,522 3,975
Current liabilities
Trade and other payables 11 (707) (778)
Deferred income 11 (41) (68)
Borrowings 11 (563) –
(1,311) (846)
Net current assets 3,211 3,129
Total assets less current liabilities 4,791 4,639
Equity attributable to equity holders of the parent
Share capital 14 710 592
Share premium 22,550 20,723
Merger reserve 8,513 8,513
Retained earnings (27,016) (25,240)
Total equity 4,757 4,588
Non-current liabilities
Finance lease liability 12 34 51
Total non-current liabilities – 51
Total equity and non-current liabilities 4,791 4,639
The financial statements were approved by the Board of Directors on 23 April 2008.
Theresa Wallis Terence O’Brien
Director Director
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 25 The accompanying accounting policies and notes form an integral part of these financial statements.
LiDCO Group Plc
Annual Report and Accounts 2007/8
26
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 January 2008
Year ended Year ended
31 January 2008 31January 2007
£’000 £’000
Operating loss (2,010) (2,622)
Depreciation and amortisation charges 611 412
Share based payments 88 66
Decrease in inventories 241 196
Decrease/(increase) in receivables (50) 495
(Decrease)/increase in payables (96) 87
Finance expense (25) (35)
Income tax credit received 142 283
Net cash outflow from operating activities (1,099) (1,118)
Cash flows from investing activities
Purchase of property, plant & equipment (170) (137)
Purchase of intangible fixed assets (467) (410)
Interest received 49 69
Net cash used in investing activities (588) (478)
Net cash outflow before financing (1,687) (1,596)
Cash flows from financing activities
Issue of ordinary share capital 1,945 3,245
Convertible loan drawdown/(repayment) 502 (1,126)
Net cash generated from financing activities 2,447 2,119
Net increase in cash and cash equivalents 760 523
Opening cash and cash equivalents 1,474 951
Closing cash and cash equivalents 2,234 1,474
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 26 The accompanying accounting policies and notes form an integral part of these financial statements.
LiDCO Group Plc
Annual Report and Accounts 2007/8
27
CONSOLIDATED STATEMENT OF
CHANGES IN SHAREHOLDERS’ EQUITY
For the year ended 31 January 2008
Share Share Merger Retained Total
capital premium reserve Other reserve earnings equity
£’000 £’000 £’000 £’000 £’000 £’000
At 1 February 2006 503 17,566 8,513 (88) (22,833) 3,661
Issue of share capital 89 3,157 –– – 3,246
Transfer ––– 88 (88) –
Share based payment expense ––– – 66 66
Loss for the year ––– – (2,385) (2,385)
At 31 January 2007 592 20,723 8,513 – (25,240) 4,588
Issue of share capital 118 1,827 –– – 1,945
Share based payment expense ––– – 90 90
Loss for the year ––– – (1,866) (1,866)
At 31 January 2008 710 22,550 8,513 – (27,016) 4,757
The share premium account represents the excess over the nominal value for shares allotted.
The merger reserve represents a non-distributable reserve arising from historic acquisitions.
The other reserve relates to the former investment in shares in the Employee Share Ownership Trust.
This investment is no longer classified as an investment of the Company or the Group.
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 27 1 Principal accounting policies
The Group’s principal activity is the development, manufacture and sale of cardiac monitoring equipment. LiDCO Group Plc is the Group’s
ultimate parent company. It is incorporated and domiciled in England & Wales and situated at the address shown on page 47.
The Group’s shares are listed on the Alternative Investment Market of the London Stock Exchange.
Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and
under the historical cost convention. They are presented in sterling, which is the functional currency of the parent company and the Group.
The preparation of financial statements in accordance with IFRS requires the use of estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of
current events and actions, actual results may ultimately differ from those estimates.
The policies have changed from the previous year when the financial statements were prepared under applicable United Kingdom Generally
Accepted Accounting Principles (UK GAAP). The comparative information has been restated in accordance with IFRS. The changes to
accounting policies are explained below. There were no material changes to the opening balances. The date of transition to IFRS was
1 February 2006 (transition date).
The Group has taken advantage of certain exemptions available under IFRS 1 First-time adoption of International Financial Reporting
Standards. The exemptions used are explained under the respective accounting policy.
The accounting policies that have been applied in the opening balance sheet have also been applied consistently throughout all periods
presented in these financial statements. These accounting policies comply with each IFRS that is mandatory for accounting periods ending on
31 January 2008.
IFRS standards and interpretations not yet adopted
The following new standards and interpretations, which are yet to become mandatory have not been applied to the Group’s
2008 financial statements.
Effective for reporting
Standard or Interpretation period starting on or after
Amendment to IFRS 2 Share-based Payment-Vesting Conditions and Cancellations 1 January 2009
IFRS3 Business Combinations (Revised 2008) 1 July 2009
IFRS8 Operating Segments 1 January 2009
IAS1 Presentation of Financial Statements (revised 2007) 1 January 2009
IAS23 Borrowing costs (revised 2007) 1 January 2008
IAS27 Consolidated and Separate Financial Statements (Revised 2008) 1 July 2009
Amendment to IAS32 Financial Instruments:
Presentation and IAS1 Presentation of Financial Statements –
Puttable Financial Instruments and Obligations Arising on Liquidation 1 January 2009
IFRIC14 IAS19 – The limit on a Defined Benefit asset. Minimum Funding Requirements and their Interaction 1 January 2008
IFRIC13 Customer Loyalty Programmes 1 January 2008
IFRIC12 Service Concession Arrangements 1 January 2008
IFRIC11 IFRS2 Group and Treasury Share Transactions 1 March 2007
The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material financial impact
on the consolidated financial statements.
Going concern
The financial statements have been prepared on the going concern basis, which assumes that the Group will have sufficient funds to continue
in operational existence for the foreseeable future. The Group has continued to invest in the development of its operations and in particular its
sales and marketing presence by continuing to invest in both its direct and indirect sales channels during the year and in a new product
offering. As a result the Group has continued to trade at a loss during the year ended 31 January 2008.
The directors have approved forecasts for the foreseeable future, which indicate that the Group will have sufficient funds to trade during that
period. The forecasts assume a level of new sales about which there is uncertainty. If such new sales are not achieved, the directors believe
that there are sufficient opportunities available to them to obtain additional funding from sources which are currently being explored, to enable
the Group to continue to develop its operations and to meet its liabilities as they fall due. The convertible loan from Laurus (see note 11) is due
for repayment in August 2008 and it is anticipated that this will need to be replaced by a new loan facility of similar size. The Company is in
discussion with a number of lenders and the Board are reasonably confident that the facility can be replaced. Accordingly the financial
statements have been prepared on a going concern basis. The financial statements do not include any adjustments that would be required in
the event that the Company had insufficient funding available.
LiDCO Group Plc
Annual Report and Accounts 2007/8
28
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 January 2008
The accompanying accounting policies and notes form an integral part of these financial statements.
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 28 Basis of consolidation
The Group’s consolidated financial statements consolidate those of the Company and of its subsidiary undertakings drawn up to 31 January
2008. Subsidiary undertakings are all entities over which the Group has the power to control the financial and operating policies so as to
obtain economic benefits from its activities. The Group obtains and exercises control through voting rights.
Business combinations are dealt with by the purchase method. The purchase method involves the recognition at fair value of all identifiable
assets and liabilities, including contingent liabilities of the subsidiary at the acquisition date whether or not they were recognised in the
statements of the subsidiary prior to acquisition. On initial recognition the assets and liabilities of the subsidiary are included in the
consolidated balance sheet at their fair values which are also used as the bases for subsequent measurement in accordance with the Group
accounting policies. The results of any subsidiary undertakings acquired during the period, where applicable are included from the date of
acquisition. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
IFRS transition changes
There are no material changes to the reported figures following the adoption of IFRS and no material changes to the opening balances.
The main policies that are amended are:
Financial instruments: Recognition and measurement
IAS39 is applicable to the convertible loan. At 31 January 2008, the liability amounted to £553,000 and the adjustment
arising from this is immaterial.
Deferred tax
The Group has a significant unprovided deferred tax asset. Although there is a change in the basis of assessment for deferred tax under
IAS12: Income Taxes, there is no recognition of this unprovided element.
Exemptions
IFRS1 ‘First-time Adoption of International Financial Reporting Standards’ sets out the transition rules, which must be applied, when IFRS is
adopted for the first time. The standard sets out certain mandatory exemptions to retrospective application and certain optional exemptions.
The most significant optional exemptions available and taken by the Group are in business combinations. The Group has adopted the
exemption under IFRS1 relating to business combinations which occurred before the date of transition, 1 February 2006.
Revenue recognition
Revenues are recognised at fair value of the consideration receivable net of the amount of value added taxes.
Sale of goods
Sales revenue comprises revenue earned (net of returns, discounts and allowances) from the provision of products to entities outside the
consolidated entity. Sales revenue is recognised when the risks and rewards of ownership of the goods passes to the customer, which is
normally upon delivery, and when the amount of revenue can be measured reliably.
The Group has an arrangement for the placing of monitors in hospitals with Med One Capital Funding, LLC, a US company that has trading
relationships with the majority of US hospitals and provides a number of deferred payment arrangements together with product support and
advice. The Group sells monitors to Med One and recognises the revenue as a sale. Title to the monitors passes to Med One, as do the
significant risks and rewards of ownership and there is no obligation for the Group to re-purchase the monitors. The full revenue arising from
the sale of consumables relating to these monitors is recognised as revenue by the Group. Med One is entitled to a portion of the monthly
revenue from the sale of consumables for a period of three years and payments made to Med One in this way are included within cost of sales.
Delivery of services
Revenue from rendering services is recognised in the period in which the service is provided.
Interest income
Interest income is brought to account as it accrues, using the effective interest method.
Other income
Other income is brought to account when the consolidated entity’s right to receive income is established and the amount can be reliably measured.
LiDCO Group Plc
Annual Report and Accounts 2007/8
29
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 29 Research and development
Research expenditure is charged to the income statement in the period in which it is incurred.
Development costs are capitalised when all the following conditions are satisfied:
• completion of the intangible asset is technically feasible so that it will be available for use or sale
• the Group intends to complete the intangible asset and use or sell it
• the Group has the ability to use or sell the intangible asset
• the intangible asset will generate probable future economic benefits
• there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset, and
• the expenditure attributable to the intangible asset during its development can be measured reliably
Capitalised development costs which comprise cost of materials, labour and attributable overheads are amortised over a period
of three to five years.
Development costs not meeting the criteria for capitalisation are expensed as incurred.
Intangible assets – development costs
Intangible assets represent costs relating to product registration in new countries, software development costs and clinical trials on the LiDCO
system. Where the directors are satisfied as to the technical, commercial and financial viability of these projects, the expenditure has been
capitalised and is amortised in equal amounts over the useful life.
The carrying values of intangible assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value
may not be recoverable. The amortisation periods generally applicable are:
Clinical trials Three years
Product registration costs Five years
Software development Three years
Property, plant & equipment
Property, plant and equipment are stated at cost, net of depreciation. Depreciation is calculated to write down the cost less estimated
residual value of these assets by equal annual instalments over their estimated useful economic lives which are re-assessed annually.
The periods/rates generally applicable are:
Leasehold improvements Over the life of the lease
Plant and machinery 10% per annum
Fixtures and fittings 12.5% per annum
Office equipment 20% per annum
Computer equipment 33% per annum
Leases
Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance
leases. Assets held under finance leases are capitalised at the lower of fair value or present value of the minimum lease payments in the
balance sheet and depreciated over their estimated useful economic lives. The interest element of leasing payments represents a constant
proportion of the capital balance outstanding and is charged to the income statement over the period of the lease.
All other leases are regarded as operating leases and the payments made under them are charged to the income statements account on
a straight-line basis over the lease term.
Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary
course of business, less the estimated costs of selling expenses.
The cost of inventories is based on the first-in first-out principle and includes expenditure incurred in acquiring the inventories and
bringing them to their existing locations and condition.
LiDCO Group Plc
Annual Report and Accounts 2007/8
30
NOTES TO THE FINANCIAL STATEMENTS
Continued
For the year ended 31 January 2008
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 30 Income tax
Current tax is the tax currently payable based on the taxable result for the year.
Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference
between the carrying amounts of assets and liabilities and their tax bases. In addition, tax losses available to be carried forward as well as
other income tax credits to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the
underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and
liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or
substantively enacted at the balance sheet date.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate
to items that are charged or credited directly to equity (such as the revaluation of land) in which case the related deferred tax is also charged
or credited directly to equity.
Foreign currency
Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in
foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Any gain or loss arising from a change in exchange
rates subsequent to the date of the transaction is included as an exchange gain or loss in the income statement.
Trade and other receivables
Trade receivables, which generally have 30-90 day terms, are recognised and initially recognised at fair value amount and subsequently at
amortised cost using the effective interest method, less provisions for impairment. Provision against trade receivables is made when there is
objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables.
The amount of the write-down is determined as the difference between the asset’s carrying amount and the present value of estimated
future cash flows.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and demand deposits with an original maturity of three months or less,
and which are subject to an insignificant risk of change in value.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements
entered into and the definitions of a financial liability and an equity instrument. Financial liabilities are obligations to pay cash or other financial
assets and are recognised when the Group becomes party to the contractual provisions of the instrument and are initially recorded at fair value
net of issue costs. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its
liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.
Embedded derivatives: Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when
their risks and characteristics are not closely related to those of the host contracts and the contracts are not measured at fair value with
changes in fair value recognised in the income statement.
The fair value of the liability portion of a convertible loan is determined using a market interest rate for an equivalent non-convertible loan.
The amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the loan. The remainder
of the proceeds is allocated to the conversion option, which is recognised and included in shareholder’s equity.
Share-based payments
The Group has one equity-settled share-based remuneration scheme for employees. Where share options are awarded to employees, the fair
value of the options at the date of grant is calculated using a pricing model and is charged to the income statement over the vesting period.
Market, and non-market vesting conditions such as sales growth are factored into the fair value of the options granted. As long as all other
vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied.
LiDCO Group Plc
Annual Report and Accounts 2007/8
31
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 31 Key judgments in applying the entity’s accounting policies
The Group’s management makes estimates and assumptions regarding the future. Estimates and judgments are continually evaluated based
on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Useful lives of intangible assets and property, plant and equipment
Intangible assets and property, plant and equipment are amortised or depreciated over their useful lives. Useful lives are based on the
management’s estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness.
Changes to estimates can result in significant variations in the carrying value and amounts charged to the income statement in specific
periods (notes 7 and 8).
Inventory
The Group reviews the net realisable value of, and demand for, its inventory on a regular basis to provide assurance that recorded inventory
is stated at the lower of cost or net realisable value. Factors that could impact estimated demand and selling prices include the timing and
success of future technological innovations, competitor actions, supplier prices and economic trends (note 9).
Trade receivables
Trade receivables are primarily due from two groups, hospitals in the UK and USA where sales are made by the Group’s own sales force and
distributors, predominantly in Europe and the Rest of the World. In making provision for overdue trade receivables, management consider
those due directly from hospitals to be generally of lower risk than those due from distributors and apply a lower level of provision. The size of
the distributor together with its financial credit rating and the length of relationship with the Group are also taken into account (note 10).
2 Revenue and segmental information
The Group has one primary segment – the supply of monitors, sensors and support services associated with the use of LiDCO’s cardiac
monitoring equipment. Geographical and product type analysis is used by management to monitor sales activity and is presented below:
Turnover and result by geographical region
Year ended Year ended
31 Jan 2008 31 Jan 2007
Group revenue £’000 £’000
UK 1,724 2,012
USA 1,241 767
Europe 873 511
Rest of the World 213 153
4,051 3,443
Result
UK 249 462
USA (111) (499)
Europe 291 170
Rest of the World 93 79
Total 522 212
Unallocated costs (2,532) (2,835)
Loss from operations (2,010) (2,623)
Year ended Year ended
31 Jan 2008 31 Jan 2007
Revenue by type £’000 £’000
Monitor sales 1,934 1,443
Sensor sales 1,986 1,818
Fee for use 78 111
Licence fees 53 70
4,051 3,443
Sales of monitors to Med One as detailed in note 1 under revenue recognition during the year amounted to £467,000 (2006/07: £399,000).
The monthly payments to Med One relating to consumables and included within cost of sales amounted to £444,000 (2006/07: £316,000)
during the year.
The Group can identify trade receivables and trade payables relating to the geographical segments. As noted above, the Group has one
primary segment and other assets and liabilities together with non-sales related overheads are not accounted for on a segment by segment
basis. Accordingly, segment assets, liabilities and segment cash flows are not provided.
LiDCO Group Plc
Annual Report and Accounts 2007/8
32
NOTES TO THE FINANCIAL STATEMENTS
Continued
For the year ended 31 January 2008
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 32 3 Loss from operations
The loss on operations before taxation is stated after:
Year ended Year ended
31 Jan 2008 31 Jan 2007
£’000 £’000
Auditors’ remuneration:
Fees payable to the Company auditors for the audit of the Group accounts: 15 14
Fees payable to the company auditors for other services:
Audit of the Company’s subsidiaries 24 23
Other services relating to the interim review* 7 24
Other services* 3 10
Research and development 177 247
Depreciation of property, plant and equipment 235 185
Amortisation of intangible assets 376 227
Operating leases – rental of land and buildings 162 233
The cost of goods sold during the year amounted to £666,000 (2007: £570,000)
*Non-audit services comprise £7,000 for interim review services and £3,000 for IFRS compliance services.
The Board considers it cost effective for the auditors to provide these services.
4 Staff costs
Staff costs during the year were as follows:
Year ended Year ended
31 Jan 2008 31 Jan 2007
Group £’000 £’000
Wages and salaries 2,015 2,269
Social security costs 178 188
Share based payments charge 88 95
2,281 2,552
Included in the share based payment charge for the year ended 31 January 2007, is the sum of £28,000 representing the issue of 239,130
shares to Mr McGarel-Groves at 11.5p per share as part of the settlement arrangements on his resignation.
The average number of employees (including executive directors) of the Company during the year was:
Number Number
2008 2007
Production 10 11
Sales 17 16
Administration 12 11
39 38
Remuneration in respect of key management personnel was as follows:
2008 2007
£’000 £’000
Emoluments 371 368
LiDCO Group Plc
Annual Report and Accounts 2007/8
33
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 33 5 Tax on loss on ordinary activities
The tax credit is based on the loss for the year and represents:
Year ended Year ended
31 Jan 2008 31 Jan 2007
£’000 £’000
United Kingdom corporation tax at 28% (2007: 30%) – –
Adjustments in respect of prior year – (62)
Research and development expenditure tax credits (120) (142)
Total tax (120) (204)
Loss on ordinary activities multiplied by standard rate of corporation tax
in the United Kingdom of 28% (2007: 30%) (587) (777)
Effect of:
Expenses not deductible for tax purposes 164 211
Depreciation for the period in excess of capital allowances 50 44
Increase in tax losses 389 543
Other timing differences (16) (21)
Adjustments in respect of prior year – (62)
Research and development expenditure tax credits (120) (142)
Total tax (120) (204)
The Group has a deferred tax asset of approximately £6.1m (2007: £6.1m) arising primarily from operating losses which have not been
recognised due to the uncertainty of future taxable profits.
6 Loss per share
The calculation of basic earnings per share is based on the loss attributable to ordinary shareholders divided by the weighted average number
of shares in issue during the year. The calculation of diluted earnings per share is based on the calculation described above adjusted to allow
for the issue of shares on the assumed conversion of all dilutive options. Share options are regarded as dilutive when, and only when, their
conversion to ordinary shares would increase the loss per share.
Year ended Year ended
31 Jan 2008 31 Jan 2007
£’000 £’000
Loss after tax for the financial year (1,866) (2,385)
Number Number
£’000 £’000
Weighted average number of ordinary shares 122,353 113,836
Effect of dilutive share options – –
Adjusted weighted average number of ordinary shares 122,353 113,836
Loss per share – basic and diluted (p) (1.50) (2.10)
LiDCO Group Plc
Annual Report and Accounts 2007/8
34
NOTES TO THE FINANCIAL STATEMENTS
Continued
For the year ended 31 January 2008
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 34 7 Property, plant & equipment
Leasehold Plant and Fixtures Computer
improvements machinery and fittings equipment Total
£’000 £’000 £’000 £’000 £’000
Cost
At 1 February 2006 541 408 154 970 2,073
Additions 14 37 113 137
Disposals ––– (136) (136)
At 31 January 2007 555 411 161 947 2,074
Additions – 17 – 316 333
Disposals ––– (191) (191)
At 31 January 2008 555 428 161 1,072 2,216
Accumulated depreciation
At 1 February 2006 187 217 111 520 1,035
Charge for the year 57 28 12 224 321
Disposals ––– (136) (136)
At 31 January 2007 244 245 123 608 1,220
Charge for the year 58 30 12 135 235
Disposals ––– (72) (72)
At 31 January 2008 302 275 135 671 1,383
Carrying amount at 31 January 2008 253 153 26 402 833
Carrying amount at 31 January 2007 311 166 38 339 854
Plant and equipment is depreciated at various rates depending on the estimated life of the item of plant or equipment. The rates of
depreciation are shown in note 1.
The carrying amount of the Group’s plant and equipment includes £43,000 (2007: £nil) in respect of assets held under finance leases.
8 Intangible assets
Product Software
Clinical trials registration development Total
£’000 £’000 £’000 £’000
Cost
At 1 February 2006 74 191 1,064 1,329
Additions 18 178 214 410
At 31 January 2007 92 369 1,278 1,739
Additions 24 90 353 467
At 31 January 2008 116 459 1,631 2,206
Accumulated amortisation
At 1 February 2006 74 22 760 856
Charge for the year 3 56 168 227
At 31 January 2007 77 78 928 1,083
Charge for the year 9 70 297 376
At 31 January 2008 86 148 1,225 1,459
Carrying amount at 31 January 2008 30 311 406 747
Carrying amount at 31 January 2007 15 291 350 656
Intangible assets are all internally generated and amortised over their estimated useful lives. Amortisation costs are included in administrative
expenses. The rates of amortisation are shown in note 1.
LiDCO Group Plc
Annual Report and Accounts 2007/8
35
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 35 9 Inventories
2008 2007
£’000 £’000
Raw materials and consumables 207 152
Finished goods and goods for resale 632 928
839 1,080
10 Trade and other receivables
2008 2007
£’000 £’000
Trade receivables 1,185 1,088
Other receivables 45 42
Prepayments 99 149
1,329 1,279
All amounts are short term and the directors consider that the carrying amount of trade and other receivables approximates to their fair value.
All of the Group’s trade and other receivables have been reviewed for indicators of impairment. At 31 January 2008, trade receivables of
£0.92m (2007: £0.64m) were fully performing. In addition, some of the unimpaired trade receivables are past due as at the reporting date.
The age of trade receivables past due but not impaired is as follows:
2008 2007
£’000 £’000
Not more than three months 129 341
More than three months but not more than six months 59 76
More than six months but not more than one year 82 5
More than one year – 28
270 450
Movements in Group provisions for impairment of trade receivables are as follows, which are included within administrative expenses
in the income statement.
2008 2007
£’000 £’000
Opening balance 228 344
Provision for receivables impairment 47 23
Receivables written off in year (175) (139)
Unused amounts reversed – –
Closing balance 100 228
The other classes within trade and other receivables do not contain impaired assets.
LiDCO Group Plc
Annual Report and Accounts 2007/8
36
NOTES TO THE FINANCIAL STATEMENTS
Continued
For the year ended 31 January 2008
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 36 11 Current liabilities
2008 2007
£’000 £’000
Trade payables 364 415
Social security and other taxes 100 78
Accruals 243 285
Deferred income 41 68
Convertible loan 553 –
Finance leases 10 –
1,311 846
A US$2 million three year convertible loan agreement was entered into with Laurus Master Fund Ltd (Laurus) on 10 August 2005.
The notes are convertible into ordinary shares of the Group at any time during the three year period at a price of 24p, or at 85% of the
average closing price over the preceding 10 trading days, if lower and if the conversion has been requested by the Group. Interest is payable
at 1.5% above New York Journal Prime, which has resulted in an effective average interest rate of circa 9.5%. The balance of the Laurus loan
at 31 January 2008 was US$1,100,000 (£553,000). The split between the debt element and an equity component, representing the fair value
of the embedded option to convert the liability into equity of the Group, is as follows:
2008 2007
£’000 £’000
Nominal value of convertible loan 553 51
Equity component – –
Liability component at final drawdown date 553 51
Interest charged 25 35
Interest paid (21) (35)
Liability component at 31 January 2008 557 51
The directors believe the amount shown above represents a fair value of the liability component.
The calculation has been carried out in accordance with IAS32 in order to determine the equity component of the Laurus convertible loan. The
interest rate payable to Laurus represents a full commercial rate, this calculation gives an equity component of zero.
LiDCO Group Plc
Annual Report and Accounts 2007/8
37
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 37 12 Non-current financial liabilities
2008 2007
£’000 £’000
Finance leases 34 –
Convertible loan (see note 11) – 51
34 51
13 Financial instruments
Financial risks
The Group’s financial instruments comprise cash and liquid resources, borrowings and items such as trade receivables and trade payables
that arise from its operations.
The main risks that arise from the Group’s financial instruments are credit, interest rate, liquidity and currency risk. The Board reviews and
agrees policies for managing each of these risks and they are summarised below.
Credit risk
The Group’s credit risk is primarily attributable to trade receivables. The amounts presented in the balance sheet are net of allowances for
doubtful receivables, estimates by management based on prior experience of customers and their assessment of the current economic
environment. The maximum exposure is £1,185,000 (2007: £1,088,000)
The credit risk on liquid funds is limited because the counterparties are respectable international banks.
Liquidity risk
The Group seeks to manage this financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest surplus cash
assets safely and profitably.
Market risks
Interest rate risk
The Group finances its operations through a mixture of shareholder funds and a US dollar based convertible loan with an interest rate of 1.5%
above New York Journal Prime. The Group accepts the risk attached to interest rate fluctuations as interest rates have been relatively stable
over the last three years and the interest expense is a small proportion of total administrative expenses.
Currency risk
The Group manages currency risk by assessing the net exposure in each non-sterling currency in which exposure arises. The only significant
exposure relates to US dollars. The Group accepts the risk attached to fluctuations in the US$ exchange rate as the US$ based loan liability
and US$ payables are partly mitigated by US$ receivables from sales.
Group interest rate profile
Floating rate
Cash current Deposit and
bank accounts reserve account Total
Financial assets at 31 January 2008 £’000 £’000 £’000
Currency
Sterling 91 2,036 2,127
US dollars 107 – 107
198 2,036 2,234
Floating rate
Cash current Deposit and
bank accounts reserve account Total
Financial assets at 31 January 2007 £’000 £’000 £’000
Currency
Sterling 70 1,304 1,374
US dollars 100 – 100
170 1,304 1,474
LiDCO Group Plc
Annual Report and Accounts 2007/8
38
NOTES TO THE FINANCIAL STATEMENTS
Continued
For the year ended 31 January 2008
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 38 Group interest rate profile (Continued)
Floating rate
2008 2007
Financial liabilities £’000 £’000
Currency
Sterling ––
US dollars 553 51
553 51
Interest on the Laurus convertible loan is payable at 1.5% above New York Journal Prime, which has resulted in an effective interest rate
of circa 9.5%. The loan is repayable within one year.
The Group is exposed to translation and transaction foreign exchange risk. The currency where the Group is most exposed to foreign
currency volatility is US dollars.
Transactions and balances of the subsidiaries are denominated in the local currency and had the following balances denominated in US dollars:
US Dollars
2008 2007
£’000 £’000
Trade and other receivables 581 369
Cash and cash equivalents 107 99
Convertible loan (553) (51)
Trade and other payables (92) (74)
43 343
Currently, no hedging instruments are used. The Group keeps under review the extent of its exposure to currency fluctuations.
The following table illustrates the sensitivity of the net result for the year and equity in regards to the Group’s financial assets and financial
liabilities and the sterling to US$ exchange rates. It assumes a percentage change in the exchange rate based on the foreign currency financial
instruments held at each balance sheet date. Both of these percentages have been determined based on the average market volatility in
exchange rates in the previous 12 months.
US Dollars
2008 2007
£’000 £’000
Currency fluctuation 12% 12%
If sterling had strengthened against each currency by the percentage above retrospectively, then this would have had the following impact:
US Dollars
2008 2007
£’000 £’000
Net result for the year (39) 3
Equity (5) (41)
If sterling had weakened against each currency by the percentage above retrospectively, then this would have had the following impact:
US Dollars
2008 2007
£’000 £’000
Net result for the year 39 (3)
Equity 5 41
Exposure to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above
is considered to be representative of the group’s exposure to currency risk.
Fair values of financial assets and liabilities
There was no difference between the fair value and the book value of financial assets and liabilities.
LiDCO Group Plc
Annual Report and Accounts 2007/8
39
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 39 14 Share capital
2008 2007
£’000 £’000
Authorised – 150,000,000 ordinary shares of 0.5 pence each 750 750
2008 2007
No. of shares No. of shares
Issued and fully paid – ordinary shares of 0.5 pence each 000 000
At the beginning of the year 118,336 100,572
Issued for cash 23,647 17,764
At the end of the year 141,983 118,336
£’000 £’000
At the beginning of the year 592 503
Issued for cash 118 89
At the end of the year 710 592
The company issued the following ordinary shares during the period:
Total
Date of issue No. of shares Issue price consideration
11 December 2007 12,472,940 8.5p £1,060,200
13 December 2007 11,174,134 8.5p £949,800
Expenses relating to the placing of the above shares were £67,000.
LiDCO Group Plc
Annual Report and Accounts 2007/8
40
NOTES TO THE FINANCIAL STATEMENTS
Continued
For the year ended 31 January 2008
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 40 15 Share-based payments
Equity-settled share option scheme
The Group has a share option scheme for employees and directors of the Group. Options are exercisable at a price equal to the average
quoted market price of the Group’s shares on the date of grant. The vesting period is over a period up to three years.
2008 2007
Weighted average Weighted average
Number exercise price (p) Number exercise price (p)
Outstanding at the beginning of the year 8,794,573 15.5 8,275,622 15.9
Issued in the year 577,000 12.2 825,250 21.0
Forfeited during the year (760,831) 19.1 (281,299) 24.1
Exercised during the year –– (25,000) 13.0
Outstanding at the end of the year 8,610,742 17.6 8,794,573 15.5
Exercisable at the end of the year 3,551,000 12.3 4,317,173 16.0
Fair value is determined by reference to the fair value of the instrument granted to the employee. The expected life used in the model has been
adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
These fair values were calculated using a Black-Scholes option pricing model as follows:
2008 2007
Weighted average share price (p) 19.0 19.0
Weighted average exercise price (p) 19.0 19.0
Expected volatility 40% 40%
Expected life 3.5 3.5
Risk free rate 5% 5%
Expected dividend yield ––
The expected volatility is based on the Group’s historical share price averaged over a period equal to the expected life. The expected life is the
average expected period to exercise. The risk free rate of return is based on the UK Government gilts. The share options outstanding at the
end of the year have exercise prices of between 5.0p and 28.25p per share.
16 Capital commitments
The Group had no capital commitments at 31 January 2008 or 31 January 2007.
17 Contingent liabilities
There were no contingent liabilities at 31 January 2008 or 31 January 2007.
18 Leasing commitments
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
2008 2007
Land and Land and
buildings Other buildings Other
Group £’000 £’000 £’000 £’000
In one year or less 149 39 140 47
Between one and five years 359 54 508 47
508 93 648 94
LiDCO Group Plc
Annual Report and Accounts 2007/8
41
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 41 We have audited the parent company financial statements of LiDCO Group Plc for the year ended 31 January 2008 which comprise the
principal accounting policies, the balance sheet and notes 1 to 9. These parent company financial statements have been prepared under the
accounting policies set out therein.
We have reported separately on the group financial statements of LiDCO Group Plc for the year ended 31 January 2008.
This report is made solely to the Company’s members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit
work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Annual Report, and the parent company financial statements in accordance with United Kingdom law
and Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of Directors’ Responsibilities.
Our responsibility is to audit the parent company financial statements in accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the parent company financial statements give a true and fair view and whether the parent
company financial statements have been properly prepared in accordance with the Companies Act 1985. We also report to you whether in our
opinion the information given in the Directors’ Report is consistent with the financial statements.
In addition we also report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the
information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and other
transactions is not disclosed.
We read other information contained in the Annual Report and consider whether it is consistent with the audited parent company financial
statements. The other information comprises only the Corporate Governance Statement, Directors’ Report, Directors’ Remuneration Report,
Chief Executive Officer’s Review and the Chairman’s Statement. We consider the implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the parent company financial statements. Our responsibilities do not extend to any other
information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board.
An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the parent company financial
statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the parent
company financial statements, and of whether the accounting policies are appropriate to the Company’s circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide
us with sufficient evidence to give reasonable assurance that the parent company financial statements are free from material misstatement,
whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of
information in the parent company financial statements.
Opinion
In our opinion:
• the parent company financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting
Practice, of the state of the Company’s affairs as at 31 January 2008;
• the parent company financial statements have been properly prepared in accordance with the Companies Act 1985; and
• the information given in the Directors’ Report is consistent with the financial statements.
Grant Thornton UK LLP
Registered Auditors
Chartered Accountants
London
23 April 2008
Note: The maintenance and integrity of the LiDCO Group Plc website is the responsibility of the directors: the work carried out by the auditors does not involve
consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since
they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions.
LiDCO Group Plc
Annual Report and Accounts 2007/8
42
REPORT OF THE INDEPENDENT AUDITORS
TO THE MEMBERS OF LIDCO GROUP PLC
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 42 LiDCO Group Plc
Annual Report and Accounts 2007/8
43
COMPANY BALANCE SHEET
At 31 January 2008
The accompanying accounting policies and notes form an integral part of these financial statements.
2008 2007
Note £’000 £’000
Fixed assets
Investments 2 65 65
65 65
Current assets
Debtors 3 27 70
Amount due from subsidiary undertakings 3 9,831 20,101
Cash at bank 2,037 1,304
11,895 21,475
Current liabilities
Creditors: Amounts falling due within one year 4 (553) –
(553) –
Net current assets 11,342 21,475
Total assets less current liabilities 11,407 21,540
Creditors: Amounts falling due after more than one year 5 – (51)
Net assets 11,407 21,489
Shareholders’ funds
Share capital 6 710 592
Share premium 7 22,550 20,723
Retained earnings 7 (11,853) 174
Shareholders’ funds 11,407 21,489
The financial statements were approved by the Board of Directors on 23 April 2008.
Theresa Wallis Terence O’Brien
Director Director
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 43 1 Principal accounting policies
Basis of preparation
The separate financial statements of the Company are presented as required by the Companies Act 1985. As permitted by that Act,
the separate financial statements have been prepared in accordance with all applicable United Kingdom accounting standards.
The principal accounting policies of the Company are set out below.
The financial statements have been prepared on the historical cost basis.
Going concern
The financial statements have been prepared on the going concern basis, which assumes that the Group will have sufficient funds to continue
in operational existence for the foreseeable future. The Group has continued to invest in the development of its operations and in particular its
sales and marketing presence by continuing to invest in both its direct and indirect sales channels during the year and in a new product
offering. As a result the Group has continued to trade at a loss during the year ended 31 January 2008.
The directors have approved forecasts for the foreseeable future, which indicate that the Group will have sufficient funds to trade during that
period. The forecasts assume a level of new sales about which there is uncertainty. If such new sales are not achieved, the directors believe
that there are sufficient opportunities available to them to obtain additional funding from sources which are currently being explored, to enable
the Group to continue to develop its operations and to meet its liabilities as they fall due. The convertible loan from Laurus (see note 4) is due
for repayment in August 2008 and it is anticipated that this will need to be replaced by a new loan facility of similar size. The Company is in
discussion with a number of lenders and the Board are reasonably confident that the facility can be replaced. Accordingly the financial
statements have been prepared on a going concern basis. The financial statements do not include any adjustments that would be required in
the event that the Company had insufficient funding available.
Investments
Investments in subsidiary undertakings are stated at cost less provision for impairment.
Foreign currency
Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in
foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Any gain or loss arising from a change in exchange
rates subsequent to the date of the transaction is included as an exchange gain or loss in the profit and loss account.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the Company are classified according to the substance of the contractual arrangements
entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual
interest in the assets of the Company after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and
equity instruments are set out below.
Embedded derivatives: Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when
their risks and characteristics are not closely related to those of the host contracts and the contracts are not measured at fair value with
changes in fair value recognised in the income statement.
The fair value of the liability portion of a convertible bond is determined using a market interest rate for an equivalent non-convertible bond.
The amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the bond. The remainder of the
proceeds is allocated to the conversion option, which is recognised and included in shareholders’ equity.
2 Investments
Shares in subsidiary undertakings
Company £’000
Cost and net book value
At 1 February 2007 and at 31 January 2008 65
The Company’s beneficial interest in subsidiary undertakings consists of:
Country of beneficial registration Holding Nature of business
LiDCO Limited England and Wales 100% Surgical instruments and appliances
Cassette Analytical Systems Limited England and Wales 100% Dormant
LiDCO Group Plc
Annual Report and Accounts 2007/8
44
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 January 2008
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 44 3 Debtors
2008 2007
£’000 £’000
Prepayments 22 70
Other debtors 5 –
Amount due from subsidiary 9,831 20,101
9,858 20,171
The amount due from subsidiary relates to the ongoing funding provided to the principal trading subsidiary, LiDCO Limited, whilst it
continues to be loss-making. Further to a review of this debt, the directors have made a provision for impairment in the year of £12m.
The timing of the repayment of this debt is uncertain and unlikely to be within one year.
4 Current liabilities
Creditors: amounts falling due within one year
2008 2007
£’000 £’000
Convertible loan 553 –
A US$2 million three year convertible loan agreement was entered into with Laurus Master Fund Ltd (Laurus) on 10 August 2005.
The notes are convertible into ordinary shares of the Group at any time during the three year period at a price of 24p, or at 85% of the average
closing price over the preceding 10 trading days, if lower and if the conversion has been requested by the Group. Interest is payable at 1.5%
above New York Journal Prime, which has resulted in an effective average interest rate of circa 9.5%. The balance of the Laurus loan at
31 January 2008 was US$1,100,000 (£553,000). The split between the debt element and an equity component, representing the fair value
of the embedded option to convert the liability into equity of the Group, is as follows:
2008 2007
£’000 £’000
Nominal value of convertible loan 553 51
Equity component – –
Liability component at final drawdown date 553 51
Interest charged 25 35
Interest paid (21) (35)
Liability component at 31 January 2008 557 51
The directors believe the amount shown above represents a fair value of the liability component.
5 Creditors: amounts falling due after more than one year
2008 2007
£’000 £’000
Convertible loan – 51
6 Share capital
2008 2007
£’000 £’000
Authorised
150,000,000 ordinary shares of 0.5p each 750 750
Allotted, called up and fully paid
141,983,054 ordinary shares of 0.5p each 710 592
The Company issued the following ordinary shares during the period:
Total
Date of issue No. of shares Issue price consideration
11 December 2007 12,472,940 8.5p £1,060,200
13 December 2007 11,174,134 8.5p £949,800
LiDCO Group Plc
Annual Report and Accounts 2007/8
45
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 45 7 Reserves
Share Other Equity Profit & loss
premium reserve reserve account
£’000 £’000 £’000 £’000
At 1 February 2007 20,723 –– 174
Issue of share capital 1,827 –––
Loss for the year ––– (12,027)
At 31 January 2008 22,550 –– 11,853
8 Reconciliation of shareholder funds
2008 2007
£’000 £’000
(Loss)/profit for the year (12,027) 80
Shares issued 1,945 3,245
(10,082) 3,325
Opening shareholder funds 21,489 18,164
Closing shareholder funds 11,407 21,489
9 Loss for the financial year
In accordance with the exemptions given by section 230 of the Companies Act 1985, the holding company has not prepared its own profit
and loss account. The loss for the year of the Company was £12,027,000 (2006/7: profit £80,000). The loss for the year includes an
impairment provision of £12m in respect of the amount due from subsidiary undertakings.
LiDCO Group Plc
Annual Report and Accounts 2007/8
46
NOTES TO THE FINANCIAL STATEMENTS
Continued
For the year ended 31 January 2008
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 46 LiDCO Group Plc
Annual Report and Accounts 2007/8
47
COMPANY INFORMATION
Company registration number
2659005
Registered office
16 Orsman Road
London
N1 5QJ
Company website
www.lidco.com
Directors
Ms T A Wallis Non-Executive Chairman
Dr T K O’Brien Chief Executive Officer
Dr D M Band Scientific Director
Mr J G Barry Sales and Marketing Director
Mr P L Clifford Finance Director
Mr I G Brown Non-Executive Director
Company Secretary
Mr J P Rowland
Solicitors
Herbert Smith LLP
Exchange House
Primrose Street
London
EC2A 2HS
Hewitsons
Shakespeare House
42 Newmarket Road
Cambridge
CB5 8EP
Auditors
Grant Thornton UK LLP
Registered Auditors
Chartered Accountants
Grant Thornton House
Melton Street
Euston Square
London
NW1 2EP
Registrars
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
HD8 0LA
Nominated
Adviser
and Stockbroker
Panmure Gordon (UK) Ltd
Moorgate Hall
155 Moorgate
London
EC2M 6XB
Bankers
Barclays Bank Plc
PO Box 885
Mortlock House
Vision Park
Histon
Cambridge
CB4 9DE
ADVISERS TO THE COMPANY
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 47 LiDCO Group Plc
Annual Report and Accounts 2007/8
48
NOTES
LiDCO_BACK_0708_aw:LiDCO_BACK_0708_aw  21/5/08  16:01  Page 48 LiDCO researches, develops, manufactures
and markets innovative medical devices.
Our products primarily serve critical-care and
cardiovascular risk hospital patients who
require real-time cardiovascular monitoring.
Contents
01 Highlights
02 R&D Progress
04 Chairman’s Statement
06 Chief Executive Officer’s Review
10 Financial Review
12 Board of Directors
12 Clinical Advisory Board
14 Corporate Governance Report
16 Directors’ Remuneration Report
20 Directors’ Report
23 Report of the Independent Auditors to
the Members of LiDCO Group Plc
24 Consolidated Income Statement
25 Consolidated Balance Sheet
26 Consolidated Cash Flow Statement
27 Consolidated Statement of Changes
in Shareholders’ Equity
28 Notes to the Financial Statements
42 Report of the Independent Auditors
to the Members of LiDCO Group Plc
43 Company Balance Sheet
44 Notes to the Financial Statements
47 Company Information
LiDCO_COV_0708_aw:LiDCO REP COV_0708_aw  20/5/08  08:44  Page 2 2007/8
www.lidco.com
LiDCO Group Plc
Sales and Marketing:
Unit M, South Cambridge Business Park
Babraham Road, Sawston
Cambridge CB22 3JH
T: +44 (0)1223 830 666
F: +44 (0)1223 837 241
USA Distribution Office:
Medical Specialties Distributors LLC
(formerly Wren Medical Systems)
905 Lakeside Drive, Gurnee, IL 60031
T: +1847 625 0600
F: +1847 625 0981
UK Office:
16 Orsman Road
London
N1 5QJ
T: +44 (0)20 7749 1500
F: +44 (0)20 7749 1501
LiDCO Group Plc Annual Report and Accounts 2007/8
LiDCO Group Plc
Annual Report and Accounts
for the year ended 31 January 2008
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