LiDCO Group Plc
Annual Report & Accounts LiDCO Annual Report 2008/09
Financial Highlights
Contents
Overview
Financial Highlights IFC
Commercial Highlights 01
Competitive Edge 02
Channel Strategy 04
Chairman’s Statement 06
Reviews
Chief Executive Officer’s Statement 08
Financial Review 12
Management and Governance
Board of Directors 14
Clinical Advisory Board 15
Corporate Governance 16
Corporate Social Responsibility Statement 18
Directors’ Remuneration Report 19
Directors’ Report 22
Report of the Independent Auditor to the Members
of LiDCO Group Plc (Parent Company) 25
Financial Statements and Notes
Consolidated Income Statement 26
Consolidated Balance Sheet 27
Consolidated Cash Flow Statement 28
Consolidated Statement of Changes in
Shareholders’ Equity 29
Notes to the Financial Statements 30
Report of the Independent Auditor to the Members
of LiDCO Group Plc 44
Company Balance Sheet 45
Notes to the Financial Statements 46
Additional Information
Company Information 48
Advisers to the Company 48
Revenue
Million
£4.53 2008/09
£4.05 2007/08
Administration and distribution expenses
Million
£4.82 2008/09
£4.62 2007/08
Net cash outflow before financing
Million
£1.8 2008/09
£1.7 2007/08
Loss from operations
Million
£1.8 2008/09
£2.0 2007/08
Product margins
Per cent
81 2008/09
81 2007/08
Product margins (disposables) (average)
Per cent
91 2008/09
87 2007/08
Loss per share
Pence
1.2 2008/09
1.5 2007/08
Cash balance
Million
£0.5 2008/09
£2.2 2007/08 Commercial Highlights
Highest single year increase in installed monitor base.
LiDCOplus & LiDCOrapid monitors installed base up 28% to 1,510.
Successful launch of the LiDCOrapid; 279 monitors sold or
placed in first ten months.
New distributors added for 18 territories. LiDCO products are
now available in 47 countries worldwide.
Continued progress to profitability and significant increase in
level of recurring revenue.
326 monitors sold or placed in the period up 116% (2007/08: 151).
Monitor revenue steady at £1.96m (2007/08: £1.93m).
Disposables income growth in all territories up 26% from
£1.99m to £2.50m.
Selected as technology for two US multi-centre patient
outcome studies.
LiDCO Group Plc
Welcome
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.
01 LiDCO Annual Report 2008/09 02/03 LiDCO Annual Report 2008/09
Technical Innovation
Bringing real time benefits to patient care
Demands on healthcare resources and the costs of
surgical and intensive care have led to a medical
industry trend of providing point-of-care
healthcare treatment, which is minimally invasive,
portable, easy to use and overall reduces cost.
Point-of-care treatment is more efficient for both
patients and healthcare providers, potentially
reducing delays in treatment, morbidity and costs.
However, we believe that a number of limitations
apply to the existing method of cardiovascular
monitoring. To this end we have developed
innovative medical devices to serve critical-care
and surgery patients at cardiovascular risk.
Competitive Edge
Opportunity
$
238
M
The American market for minimally
invasive hemodynamic monitoring for
high risk surgery is currently valued
at $238m per annum.
78
%
It is estimated that the over 65 age
group in the US will increase by 78%
by 2015, indicating the cardiovascular
treatment market has significant
prospects for growth. The older
population in 2030 is projected to be
twice as large as in 2000, growing from
35m to 71.5m and representing nearly
20% of the total US population.
5.3
M
At least 5.3m surgery patients
per annum world-wide are suitable for
monitoring of the key cardiovascular
parameters – blood pressure, cardiac
output and oxygen delivery. The LiDCO System
Sensor technology/
Indicator dilution
A small dose of lithium chloride is injected via a
central or peripheral venous line. The resulting
arterial lithium concentration-time curve is
recorded by withdrawing blood past a lithium
sensor attached to the patient’s existing
arterial line.
The sensor consists of a lithium-selective
electrode in a flow-through cell.
It is disposable, sterilised by gamma
irradiation and foil packed.
The LiDCO System is used to calibrate
the LiDCOplus monitor to provide an accurate
measurement of bloodflow and oxygen delivery.
Unique Products
One step ahead
LiDCOplus and LiDCOrapid
derive cardiac output through
the PulseCO software
Via the complementary software (PulseCO) the
LiDCOplus Hemodynamic Monitor provides real
time, comprehensive assessment of a patient’s
hemodynamic status and fluid requirements.
The monitor is intended for monitoring continuous
blood pressure and cardiac output in patients with
pre-existing peripheral arterial line access. The system
is safe, accurate and easy to use.
The use of minimally invasive hemodynamic
monitoring is receiving widespread acceptance in the
market place with many institutions in the US, EU and
UK now routinely using the LiDCO technology. 04/05 LiDCO Annual Report 2008/09
Broadening our network
Expanding our reach
Our commercial strategy has been to strengthen
our product range, broaden our network of
distributors and accelerate growth of the installed
user base of our minimally invasive hemodynamic
monitoring products.
In line with our strategy we have expanded our
sales reach by broadening our network of
distribution partners. In July we signed an exclusive
distribution agreement with KOL Bio Medical
Instruments (KOL) for the sale of the LiDCOrapid
Monitor in the eastern side of the US market.
This significantly enlarged sales force gives LiDCO
access to more than 40% of the US market.
Channel Strategy
A strong performance
International Sales
Sales by region £’000 2008/09 2007/08
UK 2,161 1,724
USA 1,027 1,241
Continental Europe 1,093 873
Rest of the World 251 213
Monitor installed base (Units)
UK 266 231
USA 546 469
Continental Europe 458 300
Rest of the World 240 184 LiDCO and KOL
A productive partnership
KOL is a speciality distributor of medical technology
with extensive experience of selling hemodynamic
monitoring equipment.The company has a 15 strong
specialist sales team and currently supplies to 21 states
on the Eastern side of the US.
The combined sales and nurse educator sales force of
LiDCO and KOL is now 20 people, approximately four
times that of last year.
We are expecting good growth in sales from the US.
In other territories, as anticipated, we have added
distributors in Continental Europe and the Rest of the
World territories:
UK
Sales revenue up 25% to £2,161,000 (2008 £1,724,000)
USA
Significant order for 12 LiDCO monitors ($250,000)
Duke University now has a total of 28 monitors
Continental Europe
New distributors appointed in Turkey, Portugal
and Germany
Rest of the World
New distributors appointed in Russia, Israel, Canada,
Australia, Middle East and Argentina 06 LiDCO Annual Report 2008/09
Chairman’s Statement
During the last twelve months we have continued
to pursue our strategy of growing our global
product sales whilst maintaining our high product
margins and careful control of costs.
Once again more than half of LiDCO’s sales during
the year came from outside the UK. For the second
year running, the Group’s sales continued to
increase in continental Europe.
I am delighted to report that this has been a very successful
and productive year for the Group. During the last twelve
months we have continued to pursue our strategy of
growing our global product sales whilst maintaining our
high product margins and careful control of costs. Overall
sales for the year increased by 12% to £4.53 million, split
between 43% capital and 57% recurring revenue.
Once again more than half of LiDCO’s sales during the year
came from outside the UK. For the second year running, the
Group’s sales continued to increase in continental Europe.
Disposables’ sales across all territories showed strong
growth, in particular in the UK, Europe and Rest of World.
An important milestone was the launch of the LiDCOrapid
monitor and disposables in April 2008. The LiDCOrapid is
designed specifically to meet the needs of the growing high-
risk surgery market 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 validate
the LiDCOrapid monitor, aiding market acceptance.
Until recently, the market for our products was mainly the
intensive/critical care units of hospitals. The launch of the
LiDCOrapid monitor gave the Group access to the US$800
million potential high-risk surgery market. Furthermore,
the LiDCOrapid’s ease of use is a key feature that enables
us to attract a broader range of distributors in new and
existing territories. As a result we significantly increased
our distributor network this year in the EU, USA and the
Rest of the World, whilst maintaining our direct sales forces
in the UK and USA.
The market’s positive reception of the LiDCOrapid was the
key driver behind 2008/09 being a record year for the
Group in terms of the number of monitors sold or placed in
hospitals. The value of the total monitor sales was, however,
broadly the same as last year’s. This was due to the focus of
our sales resources on the launch and establishment of the
LiDCOrapid, which is priced at a lower level than the
LiDCOplus.
In April this year the Group announced the extension of its
existing exclusive collaboration with Becton, Dickinson and
Company (‘BD’) to include additional territories beyond the
UK. In addition we entered into an exclusive distribution and
sales relationship for the LiDCOrapid monitor with BD in
Japan. Collaborations such as these with a leading global
medical technology company are a tribute to our
technology and potentially help to increase penetration
of our markets.
Our products continue to be developed and assembled,
with certain proprietary elements manufactured, in our
facility in East London, under strict quality standards.
The Group’s product development activities are conducted
in close consultation with leading clinicians. This means that
we now have a portfolio of linked products to offer our
customers, enabling not only the measurement but also the
analysis, audit, training and sharing of real-time and historic
hemodynamic data in both critical care units and the
operating theatre. Meanwhile, there is an expanding
amount of scientific data linking the optimisation of
patients’ hemodynamic status with better outcomes and
reduced hospital stays.
The Group’s cash balance at the year-end was £0.49 million.
In August 2008, the Group’s US$2m convertible loan facility
reached maturity and was replaced by a combined overdraft
and invoice financing facility with Royal Bank of Scotland,
the maximum amount available under these being £1.25
million. At 31 January 2009, the borrowings under these
facilities were £608,000.
We were pleased to announce in April 2009 the
appointment of FinnCap as the Group’s Nominated Adviser
and Broker. FinnCap are based in London and have a strong
track record in advising, raising capital, providing research
and after market care for both growing and established
smaller companies. 07 LiDCO Annual Report 2008/09
Whilst we are mindful that the current economic conditions
could potentially lead to a tightening in public and private
expenditure on healthcare, in particular capital budgets, we
believe that our products are well positioned in the current
environment for the following reasons:
• they have been shown to save costs by significantly
reducing infections and length of hospital stays among
patients who have undergone high risk surgery;
• Medicare’s decision not to reimburse US healthcare
providers for treatment of hospital-acquired infections will
we believe further encourage use of our products to
implement fluid optimisation strategies in high risk patients;
• the demand for the older invasive catheter-based
hemodynamic monitoring products is declining due to
concerns over the risks associated with these.
The addition of the LiDCOrapid and the expansion of our
distributor network have given us a solid platform for
growth. The substantial increase in the number of monitors
sold or placed during 2008/09 means we are well placed to
benefit from significant and consistent revenue streams from
the sale of the disposables on both the LiDCOplus and the
LiDCOrapid.
As we look with enthusiasm to the year ahead, I would like
to thank our shareholders for their continued support, 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
20 April 2009
£
4.53
M
Overall sales for the year increased
by 12% to £4.53m, split between 43%
capital and 57% recurring revenue. 08 LiDCO Annual Report 2008/09
Chief Executive Officer’s Statement
The recent launch of the LiDCOrapid monitor
was an important milestone for the Company
with excellent initial market acceptance resulting
in us seeing good demand for the product.
Although still at an early stage, the strategy to
access the surgery market in order to swiftly grow
the installed base and secure a faster growing
recurring revenue stream is already showing much
promise.
Broadening LiDCO’s product range –
the launch of the LiDCOrapid
One year on from the launch of the LiDCOrapid I am
delighted to report that there has been an excellent initial
market acceptance. The launch of this product allows
LiDCO, and our distribution partners, to address an
additional market that we estimate to be potentially worth
US$800m per annum. From April 2008 to January 2009,
279 LiDCOrapid monitors have been sold or placed with
distributors and hospital customers. The number of patients
undergoing high risk surgery is higher than the numbers of
patients admitted to the intensive care unit, thus the
surgical market represents the biggest potential revenue
stream for our technology.
The Company now has products to access two markets –
the intensive care patient with the LiDCOplus technology
and the high-risk surgery patient with the LiDCOrapid.
Accordingly, looking at the last year we have seen the
biggest yearly increase in our monitor installed-base since
we started trading. Strong demand for our new surgery
product means that our installed base of both types of our
monitors stands at 1,510 units at the year-end.
Broadening our network of distributors –
improving the channels to market
LiDCO’s strategy is to increase sales by predominantly
using a distribution route to market, rather than increasing
its own sales force. During the year we have added 13 new
distributors, covering 18 countries and have considerably
increased the number of sales personnel now selling our
technology. As planned, we have added distributors in all
our major markets including North America, Continental
Europe, the Middle East and Asia. Our distribution partners
are major players in their respective markets and LiDCO
products are now available in 47 countries worldwide.
Our technology is attractive to distributors due to the
market growth rate, potential and product margin.
Overview
Achievements
This last year has been highly significant for
LiDCO, with the Company successfully achieving
its goals, which were to:
1. Continue to grow income and progress toward
profitability.
2. Strengthen the product range and address the
surgery market.
3. Accelerate the growth of the installed user base.
4. Significantly broaden the network of distributors. 09 LiDCO Annual Report 2008/09
The launch of the LiDCOrapid significantly increased the
market potential for our products. As anticipated, we then
saw an increased interest in selling or co-promoting our
products from a number of distributors in new territories
and from a major corporation (Becton Dickinson). With the
expansion of our product line and the growing global interest
in better fluid management and targeted oxygen delivery,
our sales partners are showing an increasing commitment to
investing the time and resources necessary to develop their
respective markets. Following the launch of the LiDCOrapid
and appointment of the new distributors in the first half of
the year, we saw second half revenues increase over the first
half by 24%. Distributors accounted for 76% of the 279
LiDCOrapid monitors sold or placed since April. We anticipate
an increasing distribution sales revenue contribution as the
full effect of the increased distributor appointments starts to
be seen.
One of the most important appointments made was in July
when we announced that LiDCO had signed an exclusive
distribution agreement with KOL Bio Medical Instruments
(KOL) for the sale of the LiDCOrapid monitor in the eastern
side of the US. As a result, including our own direct sales force,
we now have access to around 40% of US hospitals. KOL is
establishing a strong pipeline of customers.
More recently, in April we announced a significant expansion
of our existing marketing collaboration with Becton Dickinson
(‘BD’), a multi-billion dollar global medical technology
company. BD has made an upfront payment for a license to
sell (following registration and reimbursement) the LIDCOrapid
in Japan. In addition, we have expanded our co-marketing
arrangements with BD beyond the original UK agreement,
to cover a number of export territories. This marketing
partnership aims to enhance sales coverage for BD’s and
LiDCO’s product lines. BD is one of the world’s biggest global
suppliers of medical disposables to the surgery and critical care
market. BD is a very important and influential corporate
partner for us. The reputation of the LiDCO brand amongst
our customers was a key factor in BD’s decision to extend this
exclusive collaboration. Their increased commitment to
working with us is reflective of a growing belief within the
medical device industry that hemodynamic monitoring is a
market with strong growth potential.
Market trends/Prospects for sales
The worldwide market for hemodynamic monitoring products
continues to experience significant growth. We estimate sales
revenues (worldwide) for minimally invasive hemodynamic
monitoring products grew by 28% from £68m to £87m
during 2008. This followed growth of 33% in reported
revenues in the prior year. The move away from the use of
the older, invasive catheter products towards the newer, less
invasive devices reflects a shift in attitude of both hospitals and
insurers. Dr David Green at King’s College Hospital, London
recently reported to the Portuguese national anesthetists’
meeting that he had been able to more than halve his use of
central venous catheters from 85% to 35% of his high-risk
surgery patients by using the LiDCOrapid. LiDCO is therefore
well placed to benefit from the USA’s Medicare decision to no
longer pay hospitals for the cost of treatment of catheter and
surgery related complications and infections. Not only can
the technology be used to reduce the requirement to insert
a central catheter for fluid management – we have also
demonstrated that use of oxygen delivery targeting using
LiDCOplus technology on high-risk surgery patients can
reduce:
• complications by more than one third¹
• costs by £4,800 on average per patient
• hospital stay per patient by an average of 12 days
These benefits have been estimated to save a single hospital
up to £2m per year.
279
From April 2008 to January 2009, 279
LiDCOrapid Monitors have been sold or
placed with distributors and hospital
customers.
$
800
M
The launch of the LiDCOrapid Monitor
will allow us to address an additional
surgical market that we estimate to be
potentially US$800m per annum.
¹Early goal-directed therapy after major surgery
reduces complications and duration of hospital stay.
A randomised, controlled trial, Critical Care 2005,
9:R687-R693 doi:10.1186/cc3887. 10 LiDCO Annual Report 2008/09
Chief Executive Officer’s Statement
continued
Sales and trading
Revenues were up 12% to £4.53m (2007: £4.05), this
increase understates the much more pronounced growth in
the monitor installed base and underlying disposables
income growth. Disposable revenue growth and higher
numbers of monitors placed have been driven by the launch
of the LiDCOrapid and by our expanded distribution
network. The focus necessary to launch and promote the
LiDCOrapid had a knock-on effect on the growth and capital
revenues from sales of our ICU product – the LiDCOplus
monitor. As a result the LiDCOplus monitor installed base
continued to grow, but at a slower rate compared to 2008.
Due to the price differential between the LiDCOrapid
monitor and the more expensive LiDCOplus monitor, the
modest increase in monitor revenues (1%) across the period
belies the considerable increase (up 116% at 326 units
compared with 151 units in 2007/8) in units sold and
placed. Better, and still emerging, evidence of the
underlying good commercial progress was seen in the
associated disposables income which was up 26% to £2.5m
(2007/8 £1.99m), as smart card income from the
LiDCOrapid base starts to augment existing LiDCOplus
sensor income.
These results underplay the full impact that the launch
of the LiDCOrapid and increase in the distributor sales
force are likely to have in the future on disposables sales.
We anticipate that our products will exhibit higher
disposable usage, as the monitors are transferred from
distributors and ultimately into full use in hospitals.
LiDCOrapid smart card sales revenues should produce a fast
growing and secure income stream. LiDCO is well placed to
benefit from the shift away from invasive catheter-based
hemodynamic monitoring. We now have the sales reach to
ensure we are more adequately represented when hospitals
are making this decision.
Although the world economy is in a significant downturn,
healthcare is one of the most defended expenditures made
by developed societies. Healthcare expenditure in the USA
rose to $2.4 trillion in 2008 according to figures released
by the Centers for Medicare and Medicaid Services (CMS).
This represents a 6.1% increase, outpacing economic
growth in the US, which was 3.5% in 2008. Healthcare
expenditure is projected (March 2009, Clinica) to increase
by 5.5% in 2009. Our expectation is that, despite
recessionary pressures, the hemodynamic monitoring
market will continue to grow in 2009. Hospitals are
increasingly looking to improve profitability through
improved efficacy of treatments and reduced complications.
Patients with complications tend to require extended
hospital stay and this costs a disproportionate amount.
However, while anticipating continued growth for the
minimally invasive hemodynamic monitoring market, we are
seeing a significant shift regarding how hospitals propose to
pay for the adoption of this technology. Revenue budgets
will be progressively more used, as capital equipment
purchase budgets will be put on hold. We have therefore
prudently made an allowance for this trend in our sales
forecasting. There will be significantly more product
placements (where the monitor is given to a hospital at no
cost but the disposables incur a higher charge) and use of
revenue budget streams than has been the case in the last
few years. We started to see this happening towards the
end of 2008 and this will impact on capital sales revenue
in our direct and distributor markets, particularly the USA.
The strong LiDCO brand strengths of safety, minimally
invasive monitoring, accuracy and ease-of-use, are
increasingly being accepted by the clinical community.
This is evidenced by the choice of our technology for use
in key outcome studies and the continued expansion of
our customer base. With the launch of the LiDCOrapid
and expansion of distribution partners we have the
products, structure and sales resources to progress further
during 2009.
Business Review
Summary Table
%
Year to Year to Increase/ Increase/
31 Jan 2009 31 Jan 2008 (decrease) (decrease)
Revenue by type (£’000)
Monitors 1,959 1,934 25 1
Sensors/smart cards 2,495 1,986 509 26
Fee per use and rentals 78 78 (0) 0
Licence fees 0 53 (53) (100)
Total revenues 4,532 4,051 481 12
Monitors (Units) 326 151 175 116
Sold 310 150 160
Placed 16 1 15
Sensor and fee per use 30,125 26,081 4,044 16
Sales (Units)
Installed base (year-end) 1,510 1,184 326 28 11 LiDCO Annual Report 2008/09
Geographic segmental sales reporting
Revenues were up by between 18 – 25% in the UK,
Continental Europe and the Rest of the World territories.
Disposables revenues were up in all territories by between
14 – 56%. All territories showed significant increases in the
LiDCO monitor installed base. However, in the USA revenues
were down, despite a rise of 14% in recurring disposables
income. This was a consequence of hospitals acquiring the
LiDCOrapid, rather than the more expensive LiDCOplus
monitor, and simultaneously more customers requiring
monitor placements, rather than exclusively following a
capital purchase route. This resulted in a reduction in
reported capital sales revenues (£0.46m vs. 2007/08
£0.75m). Despite this revenue reduction, in the USA the
installed base increased more strongly than in the prior
year by 77 monitors, which was up almost double (93%)
the increase seen in the prior year.
We are expecting good sales revenue growth in all
territories during 2009, as the installed base begins to
contribute further to disposable revenues augmented by
an additional income stream from our new distributors.
UK
• Total sales revenue up 25% to £2.16m (2007/08: £1.72m)
• Monitor sales revenue up 36% to £0.71m (2007/08: £0.52m)
• Sensors, smart card and fee for use sales up 20% to £1.45m (2007/08: £1.20m)
• Installed base up by 35 (15%) to 266 (2007/08: 231)
USA
• Total sales revenue down by 17% to £1.03m (2007/08: £1.24m)
• Monitor sales decreased by 39% to £0.45m (2007/08: £0.74m)
• Sensors, smart card, fee for use sales up 14% at £0.57m (2007/08: £0.50m)
• Installed base up by 77 (16%) to 546 (2007/08:469)
Continental Europe
• Total sales revenue up 25% to £1.09m (2007/08: £0.87m)
• Monitor sales up 8% to £0.59m (2007/08: £0.55m)
• Sensors, smart card sales up 56% to £0.50m (2007/08: £0.32m)
• Installed base up by 158 (53%) to 458 (2007/08: 300)
Rest of World & Other Income
• Total sales revenue up 18% to £0.25m (2007/08: £0.21m)
• Monitor sales up 70% to £0.20m (2007/08: £0.12m)
• Sensor and Smart Card sales up 26% to £50,317 (2007/08: £40,000)
• No license fees income in the period (2007/08: £52,000)
• Installed base up by 56 (30%) to 240 (2007/08: 184)
56
%
Continental Europe
Sensor, smart card sales up 56%
to £0.50m (2007/08: £0.32m). 12 LiDCO Annual Report 2008/09
Financial Review
The foundations are
now in place to
significantly increase
revenues and earnings
in the coming years.
We look to the future
with confidence.
Operating results
Turnover increased by 12% to £4.53m (2007/08: £4.05m).
Operating losses decreased by 11% to £1.8m (2007/08:
£2.01m) and the loss per share was reduced to 1.16 pence
(2007/08: 1.50 pence).
The installed base of monitors increased in the year by 326
units (2007/08: 151 units) to 1,510 units (2007/08: 1,184
units), representing an increase of 28%. Similarly the sales
of disposables increased by 26% from £1.99m to £2.50m.
The average product margin across all products against
external procurement costs has been maintained at 81%.
For LiDCOplus monitors this product margin improved
slightly to 80% albeit on lower volumes than usual due to
displacement by the LiDCOrapid. The product margin on
LiDCOplus sensors was maintained at 87%. The strategy of
selling the new LiDCOrapid monitor for less than half the
price of the LiDCOplus monitor came with a margin
reduction although this was still very respectable at 70%.
Conversely, LiDCOrapid smart card produces the highest
product margin, which bodes well for the future as we
anticipate significant volume growth in this area. The overall
gross margin on sales after allowing for Med One costs was
67%, up from 64% in 2007/08. Med One payments in the
year amounted to £587,000 (2007/08; £444,000).
Sales of LiDCOrapid smart cards are expected to be an
important growth revenue stream in future years. It is far
too early to establish the average smart card usage per
monitor but within months since launch, usage rates in
individual hospitals have been as high as 11 per month in
the UK.
During the year, whilst increasing turnover by 12% and
incurring the costs of introducing the LiDCOrapid, the
administrative and distribution expenses increased by just
£200,000 (4%) from £4.62m to £4.82m and employee
numbers remained almost static at 39.
Taxation
As the Group is still at the pre-profit stage there was no tax
charge for the year and in addition the Group has a deferred
tax asset of £6m although this has not been recognised in
the accounts. In the UK, the Group qualifies for research and
development tax credits, which are estimated as £120,000
in 2008/09 and are shown in the income statement.
Cash, financing and working capital
The net cash outflow of £1.8m before financing activities
was the same as the operating loss. There were no untoward
movements in working capital items although year-end
stock increased by £214,000 from launching the LiDCOrapid
as an additional mainstream product during the year. Stock
at the year-end was £1.05m and as a percentage of turnover
increased slightly from 21% to 23%. Expenditure on fixed
assets in the year was broadly similar to the charge for
depreciation and amortization.
The Laurus US dollar convertible loan facility was repaid
at the end of its three year term in August 2008.
On repayment, the amount outstanding was £553,000
and was replaced with facilities from Royal Bank of Scotland.
The facility with Royal Bank of Scotland comprises a
£250,000 overdraft and an invoice discount facility of up
to £1m although this latter facility is geared to outstanding
sales invoices at any time and has yet to be made fully
available.
At the year-end the cash balances amounted to £487,000.
Together with the facilities detailed above the Board
anticipates that this should be sufficient to see the Company
through to profitability and positive cashflow. However the
Board consider that given the current credit environment,
reducing reliance on such banking facilities would be
prudent and is therefore considering further strengthening
the balance sheet if and when it is appropriate to do so.
Outlook and Prospects
We are pleased to have more than doubled the rate of
selling/placing monitors and have seen significant increases
in recurring revenue in all territories. The foundations are
now in place to significantly increase revenues and earnings
in the coming years. We have made solid, sustainable
progress and are confident that in the coming year we will
take our proportionate share of the minimally invasive
hemodynamic monitoring market. We look to the future
with confidence.
Product Development
The product development activities in 2008 centred around
existing product support and enhancements, along with the
market expansion to surgery with launch of the LiDCOrapid.
The broad development aims for 2009 are not only to
further refine and differentiate the LiDCOrapid user
interfaces, but also improve and simplify customer use of
our technology. This includes making it easier to set up an
interface with the patient (universal pressure waveform
module) and further work on language localization to
simplify interpretation and use. 13 LiDCO Annual Report 2008/09
LiDCOrapid user interface enhancements
Since launch of the LiDCOrapid customer feedback has been
very positive regarding the product’s ease of setup, user
interface and utility. In line with our strategy of continuous
product improvement our aim is to further evolve this
product by adding more user options, without adding
complexity to setup and use. I am pleased to say that a
follow-on software release containing additional user
interface improvements is at an advanced stage and
planned for release in the first half of 2009. These features
include longer display periods for the fluid monitoring
parameters and the addition of history and charting screens
further differentiating the product from the competition
and enhancing functionality.
Universal pressure waveform module
Easier access to arterial blood pressure data should allow
fuller market penetration for both of our monitoring
products. Development of a universal waveform acquisition
module simplifies the acquisition of the raw arterial data
stream. This will allow the use of our products in situations
where access to the blood pressure waveform is difficult,
or involves the additional purchase of expensive cabling,
or where on occasion the primary patient monitor does not
provide the necessary analogue arterial pressure output.
For example this module will allow the LiDCOplus and
LiDCOrapid to be connected to patients in new locations of
use, such as the trauma department where existing primary
patient monitors may not have the arterial pressure
analogue output function we require. This project was
initiated in 2008 and has progressed well. It is planned for
release in late 2009/early 2010.
LiDCOview & live
LiDCOview Pro continues to be a successful tool for
customers involved in research and training on
hemodynamic monitoring. We are seeing increasing
numbers of customers becoming familiar with our
proprietary software.
LiDCOlive has been developed to prototype demonstration
stage. We believe that this product will be useful for
clinicians in both the intensive care unit and operative room.
Customer feedback is always very positive and the concept
of remote monitoring is easy to convey. LiDCOlive will
require an IT investment by hospitals and we shall be
seeking to partner with a few hospitals with the aim of
developing and demonstrating a business case for its
adoption.
Development of supportive clinical & business cases
Our ambition is to be able to present customers with a
compelling clinical and business case linked to the use of
our products. To that end improved outcomes have already
been demonstrated in two different intensive care
populations:
• in a post-operative surgical intensive care setting, where
treated patients’ hospital stay was reduced by 12 days
and complications by more than one third;
• in severely ill patients with shock and sepsis, where the
use of LiDCO technology substantially reduced mortality
to 12% of patients treated, compared with 32% in the
invasive catheter treated group.
In the Interim announcement I was pleased to report that
LiDCO had been selected as the technology for use in two
further significant multi-centre outcome trials in the USA.
Both studies will be coordinated by doctors working at the
University of Pittsburgh and will use LiDCOplus monitors.
They are summarised below:
Prospective trial improving outcomes in high-risk surgery
The first study is a 200 patient randomised controlled trial
looking at the application of oxygen delivery mediated,
goal-directed therapy in high-risk surgery patients. This
takes the treatment protocol previously established in the
original St George’s hospital trial and goes one step further.
Patients in the trial will be hemodynamically managed both
during and after surgery with the LiDCOplus technology.
USA “Monitor” multi-centre randomised transplantation
donor optimization study
The second trial for which we have been chosen is in the
field of organ transplantation. The trial has been funded by
the US Government and is known as MOnIToR (Monitoring
Organ donors to Improve Transplantation Results). The
background to this study is that despite efforts to increase
organ donation, there remains a critical shortage in both the
numbers of organ donors and with the numbers of organs
procured per donor. Early research has shown that donors
who are adequately fluid resuscitated with LiDCO’s
technology provided a significantly higher number of
organs per donor (3.7 compared with 2) that were deemed
suitable for transplant. Donors who had inadequate volume
resuscitation had a higher inflammatory response and
patients transplanted with organs from poorly resuscitated
patients had higher readmission rates back to hospital after
surgery.
Significant funding has now been awarded to the University
of Pittsburgh in order to conduct a much expanded USA
multi-centre randomised transplantation donor optimisation
study, using our technology in 960 subjects. In this study
donors will be resuscitated conventionally, or with a
protocol targeting fluids and cardiac output using the
LiDCOplus monitor. Success will be judged as a 0.5 increase
in the numbers of organs per donor transplanted as
compared to the control group. Nevertheless, if only
successful in harvesting 0.5 extra organs per donor and
implemented throughout the USA, this would represent a
17% increase in the numbers of organs available – from
around 22,500 to 26,250 per annum.
Regulatory Affairs and Quality
LiDCO was successfully audited against the requirements
of ISO13485:2003, ISO9001:2000, the EC Medical Devices
Directive and the Health Canada Medical Device
Regulations.
In October 2008, U.K. Medicines & Healthcare products
Regulatory Agency carried out a Statutory
Pharmacovigilance Inspection of LiDCO Ltd. All LiDCO’s
responses to the findings were to the Inspector’s satisfaction.
Health Canada issued the Medical Device Licence for the
LiDCOrapid and the Australian TGA listed the LiDCOrapid on
the Australian Register of Therapeutic Goods.
Dr Terence O’Brien
Chief Executive Officer
20 April 2009 14 LiDCO Annual Report 2008/09
Board of Directors
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.
Paul Clifford
Finance Director
Mr Clifford qualified as a chartered accountant with
Touche Ross (now Deloittes) in 1975. He joined the Group
in April 2008 having spent 28 years in finance positions in
technology companies. 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 AIM quoted Civica plc and Mr Clifford became
finance director of Civica UK Limited, its £80m turnover
main operating subsidiary, leaving in 2008. Mr Clifford is
also part-time finance director of private equity backed
Cityspace Limited and a non-executive director of AIM
quoted Prologic plc.
Theresa Wallis
Non-Executive Chairman
Ms Wallis has worked most of her career in financial services,
moving into the technology commercialisation 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 principal 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
Special Products Limited. She is also a member of the
Quoted Companies Alliance’s Executive Committee and
its Markets and Regulations Committee.
John Barry
Sales & 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. 15 LiDCO Annual Report 2008/09
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.
Professor David Bennett
David Bennett is visiting Professor of Intensive Care
Medicine at King’s College Hospital, London and was
formerly 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.
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.
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.
Clinical Advisory Board 16 LiDCO Annual Report 2008/09
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 2008 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 currently 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 pages
14 & 15.
There were 11 Board meetings during the year. The attendance of the individual directors at the Board meetings and Committee meetings was as follows:
Attendance record at Board and Committee meetings
Board Audit Remuneration Nominations
Name Position Meetings Committee Committee Committee
Ms T A Wallis Non-executive Chairman 11 (11) 2 (2) 3 (3) 1 (1)
Dr T K O’Brien Chief Executive Officer 11 (11) n/a n/a 1 (1)
Mr P L Clifford* Finance Director 8 (8) n/a n/a n/a
Dr D M Band Scientific Director 9 (11) n/a n/a n/a
Mr J G Barry Sales & Marketing Director 9 (11) n/a n/a n/a
Mr I G Brown Non-executive Director 10 (11) 2 (2) 3 (3) 1 (1)
*Mr Clifford was appointed Finance Director on 23 April 2008
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 2009, the Board carried out an evaluation of the performance, functioning and composition of the Board and that of each Committee. This
involved each director completing an evaluation, the results of which were then collated and discussed by the Board and actions were agreed. It is the
Board’s intention to continue to review annually its performance and that of its Committees.
Corporate Governance 17 LiDCO Annual Report 2008/09
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 twice 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 £12,000 against an audit fee of £41,000. The Committee is satisfied that the auditors remain independent for the
purposes of the annual audit. The Committee considers 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 three times during the year.
Nomination 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
public announcements to the market on technological 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, Chairman and Finance Director 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
access to 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 financial statements.
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. 18 LiDCO Annual Report 2008/09
The Company recognises the importance of Corporate Social Responsibility.
At the core of LiDCO are its medical monitors for hemodynamic monitoring which have been developed over a number of years and continue to be
developed. The original objective of the design of these products was to translate specialist physiological parameters and principles into useable
information and tangible protocols to improve clinical outcomes. The Company has been successful in achieving this objective and its products, which
are used in hospitals in many parts of the world, are life saving and help surgeons to improve the outcome of clinical operations for the benefit of the
patient both during and after surgery and help hospitals to reduce their costs.
LiDCO works with its employees, customers and suppliers to conduct its business in an ethical way. The Company is of a relatively small size but growing
and thus the Company’s commitment to Corporate Social Responsibility is dynamic and is reviewed by the Board on a regular basis.
Employees
The Company recognises that an essential part of its continued success is the support and involvement of its employees.
• Effective communication is essential to ensure its employees are fully engaged with the business. The senior management team meets regularly
throughout the year as a forum to discuss interdepartmental issues and briefing sessions are also held by the Chief Executive to update employees on
Company progress, strategy and objectives.
• Employees have annual appraisals to set objectives, identify strengths and areas for development.
• Training is provided where necessary to enhance job performance and aid development.
• The Company has a share option scheme with a high level of employee participation.
• The Company regularly reviews the benefits offered to employees and has recently introduced childcare vouchers which are available to all employees.
Environment
Whilst not of substantial impact compared with many other manufacturing industries, nevertheless the Company recognises its activities have an impact
on the environment and acknowledges its responsibility to ensure this is minimised.
• In accordance with the requirements of the Waste Electrical and Electronic Equipment Regulations (WEEE), the Company has signed up to a compliance
system to recycle and dispose of electrical equipment waste.
• Where possible, other products are recycled within the Company.
• Paper, cardboard and ink cartridge recycling collection facilities are in place in London and Cambridge.
• Redundant computer equipment is offered to employees or disposed of in accordance with good practice.
• Company purchased vehicles are run on diesel fuel for fuel efficiency.
• The Company continually reviews the chemicals it uses in its manufacturing processes with the aim of using the least toxic and most environmentally
friendly products commensurate with producing high quality products.
Ethics and Values
• The Company designs and manufactures life saving products which help clinicians to improve the outcome of clinical operations for the benefit of
patients both during and after surgery and helps hospitals to reduce their costs.
• The Company aims for all employees to have job satisfaction, a safe and secure working environment, the feeling that their achievements are
recognised and an opportunity to develop their full potential.
• The Company recognises customer needs for a high level of customer service and quality of its products, at the right price.
Health and Safety
• As a producer of medical products the Company operates in a highly regulated environment and is subject to regular inspection and audit.
• The Company uses an external specialist to advise on its health and safety policy and practice. Stringent procedures are in place in areas of the
Company where risks are apparent, and the Company provides a physically safe working environment, training, protective clothing and equipment to
all employees who undertake their duties.
• All Company car drivers are provided with a full driving risk assessment and training upon joining, and a further paper based risk assessment is
completed every three years.
• Health and safety matters are regularly reviewed at Board meetings.
Shareholders
The Company aims to treat its stakeholders in a responsible manner. It maintains regular contact with its major shareholders to explain developments in
the business and all shareholders are invited to question management at the Annual General Meeting. See also “Relations with Shareholders” in the
Corporate Governance Report on page 16.
Corporate Social Responsibility Statement 19 LiDCO Annual Report 2008/09
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 2009.
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 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 three times in the year.
Base salary
All four executive directors receive a base salary and, if appropriate, 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 Group’s share option
schemes and are not eligible for annual incentive payments or benefits in kind.
Remuneration of directors
Year ended 31 January 2009
Allowance
Salary in lieu of
and fees benefits Benefits Bonus Total 2008
£’000 £’000 £’000 £’000 £’000 £’000
T A Wallis 44 –– – 44 44
T K O’Brien 185 37 – 30 252 244
J G Barry 171 34 3 30 238 229
P L Clifford* 37 –– 7 44 –
D M Band 45 9– 8 62 56
I G Brown 28 –– – 28 28
Total 510 80 3 75 668 601
*Mr Clifford was appointed Finance Director on 23 April 2008, on a part-time basis.
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 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 appointment 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. During the year, the Chairman’s
appointment was renewed for a term ending 19 December 2011 and Mr Brown’s appointment was renewed for a term ending 11 October 2011.
Directors’ Remuneration Report 20 LiDCO Annual Report 2008/09
Directors’ interests in share options
Options were granted to the executive directors as follows:
Options Lapsed
Options at Date of granted during Options at Exercise Exercisable Expiry
Option type 31 Jan 2008 grant during 2008 the year 31 Jan 2009 price from 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
1,027,395 –– 1,027,395
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
815,116 –– 815,116
J G Barry Unapproved 106,250 July-01 –– 106,250 0.5p July-04 Dec-11
Unapproved 211,000 Dec-02 –– 211,000 13p Dec-05 Dec-12
EMI 539,000 Dec-02 –– 539,000 13p Dec-05 Dec-12
Unapproved 90,000 Nov-03 –– 90,000 28.25p Nov-06 Nov-13
Unapproved 356,844 Apr- 05 –– 356,844 21.5p Apr-08 Apr-15
Unapproved 192,436 Apr-05 –– 192,436 22p Dec-05 Apr-15
Unapproved 328,481 Apr-05 –– 328,481 22p Apr-06 Apr-15
Unapproved 656,961 Apr-05 –– 656,961 22p Sep-06 Apr-15
EMI 136,045 Apr-05 –– 136,045 22p Dec-05 Apr-15
Unapproved 45,000 Jun-06 –– 45,000 21p Jun-09 Jun-16
Unapproved 75,000 Jun-07 –– 75,000 12.5p Jun-10 Jun-17
Unapproved Apr-08 83,333 – 83,333 7.5p Apr-11 Apr-18
EMI Apr-08 266,667 – 266,667 7.5p Apr-11 Apr-18
2,737,017 350,000 – 3,087,017
P L Clifford Approved Nil Apr-08 66,000 – 66,000 7.5p Apr-11 Apr-18
Nil 66,000 – 66,000
Totals 4,579,528 416,000 – 4,995,528
The share price was 7.50p on 1 February 2008 and 7.00p on 30 January 2009, with high and low during the year of 13.00p and 5.25p respectively.
Pensions
No pension contributions were payable by the Group during the year (2007/08: £nil).
Directors’ Remuneration Report
continued 21 LiDCO Annual Report 2008/09
Shareholder return
The graph below shows the share price performance since January 2004, using the FTSE TechMARK Mediscience Index as a comparator,
which the directors consider to be the most suitable benchmark index.
Theresa Wallis
Chairman of the Remuneration Committee
20 April 2009
0
5
10
15
20
25
30
35
40
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
31/07/08
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TechMARK MediScience
LiDCO
Relative price scale 22 LiDCO Annual Report 2008/09
The directors of LiDCO Group Plc present their annual report and audited financial statements (Annual Report) for the year ended 31 January 2009.
Principal activities, business review and business risks
The principal activity of the Group is the development, manufacture and sale of cardiac monitoring equipment.
The business review is included in the Chief Executive Officer’s Review and Corporate Social Responsibility Statement which should be read as part of this
Directors’ Report.
The key commercial risks associated with the business are:
• healthcare spending – the Group’s performance is affected by hospitals’ expenditure and any, or developing, capital budgetary constraints, which the
Group mitigates by targeting its efforts and resources according to sales opportunities where budgets are likely to be available and a wider geographic
sales growth predominately through an expanding specialist distributor network;
• competitive activity from other producers of hemodynamic monitors who sell competing products which may restrict the Group’s ability to maintain
or make further progress in increasing its share of the growing minimally invasive hemodynamic monitoring market. The Group addresses this by
encouraging independent clinical validation of its products, introducing product developments/enhancements and sponsoring clinical studies that
focus on patient outcome improvement; and
• the Group is competing against more established suppliers and the Group’s progress and competitive advantage is more fully covered in the Chief
Executive Officer’s Review and in the Corporate Responsibility Statement which should be read as part of this Directors’ Report.
The key financial risk is the management and maintenance of sufficient cash balances to support the ongoing development, supply and marketing of the
LiDCO products.
Results and dividends
The Group’s revenue for the year was £4,532,000 (2007/08: £4,051,000). The Group made a consolidated loss after taxation of £1,650,000 (2007/08:
£1,866,000). The directors do not recommend the payment of a dividend (2007/08: £nil).
The Company’s share price at 30 January 2009 was 7.00p (2008: 7.50p)
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 on pages 34 and 37 respectively.
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 page 47 to the financial statements.
Directors
The directors of the Company who served during the year are set out below; short biographies are set out on pages 14 & 15.
T A Wallis Non-Executive Chairman
T K O’Brien Chief Executive Officer
P L Clifford (appointed 23 April 2008) Finance Director
D M Band Scientific Director
J G Barry Sales and Marketing Director
I G Brown Non-Executive Director
Mr Barry and Ms Wallis retire by rotation and, being eligible, offer themselves for re-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 19 and 20.
Directors’ interests in shares
The directors who held office at 31 January 2009 had beneficial interests in the ordinary shares of the Company as shown below:
Directors’ shareholdings
Ordinary shares of 0.5p each
31 January 31 January
2009 2008
Number Number
T A Wallis 201,037 145,037
T K O’Brien 11,035,461 10,935,461
P L Clifford* 188,000 –
D M Band 7,060,832 7,060,832
J G Barry 379,642 379,642
I G Brown 100,000 100,000
*Mr Clifford was appointed a director on 23 April 2008 and acquired his shareholding on 28 April 2008
The directors have no interests in the shares of the Company’s subsidiary undertakings.
Directors’ Report 23 LiDCO Annual Report 2008/09
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 meetings. All employees are encouraged to give their views on matters of common concern through the
line management. A significant number of employees have share options.
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 2009 represents 42 days’ worth (2007/08:29 days) as a proportion of the total amount invoiced by suppliers during the period.
Significant shareholdings
As at 15 April 2009, 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 which there Percentage
Shareholder is an interest notified*
Ingalls & Snyder Llc 19,843,972 13.98%
H J Leitch 10,879,489 7.66%
P A Brewer 9,678,727 6.82%
Cheviot Asset Management Limited 9,585,486 6.75%
Liontrust Intellectual Capital Trust 9,543,851 6.72%
R M Greenshields 9,042,407 6.37%
AXA Framlington Investment Management 6,651,470 4.68%
Charles Stanley & Co 4,310,586 3.04%
*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 (2007/08: £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 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. 24 LiDCO Annual Report 2008/09
Going concern
The financial statements have been prepared on the going-concern basis, which assumes that the Company 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 it has
continued to trade at a loss during the year ended 31 January 2009.
The Group finances its operations through a mixture of shareholders’ funds and loan facilities. During the year a three year US dollar based convertible loan
facility came to the end of its term and was replaced by a combined sterling based overdraft and invoice discount financing facility. 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
certain level of drawdown from the invoice discount financing facility and include projections for new sales about which there is a degree of uncertainty. If
such a level of drawdown and/or 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 meet its liabilities as they fall due.
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 on pages 39 to 41.
Key Performance Indicators (KPIs)
The Board monitors progress against 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 are prepared annually and progress against budget and forecasts is reviewed monthly by the Board. Underpinning the monthly financial
reporting is a system of internal control, based on authorisation procedures.
The adequacy of internal controls and the internal control structures was reviewed by the Board in April 2009.
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).
During the year the Board performed a comprehensive risk and controls analysis. The Board has established a process involving all departments for the
assessment of key risks to the business. The risk register is updated on an ongoing basis and reviewed by the Board four times a year. 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 24 June 2009 is set out on pages 49 and 50 of this
Annual Report including an explanation of each resolution.
By order of the Board
John Rowland
Company Secretary
20 April 2009
Directors’ Report
continued 25 LiDCO Annual Report 2008/09
We have audited the Group financial statements of LiDCO Group Plc for the year ended 31 January 2009 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 2009.
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’s Report 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’s Report 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 2009 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 2009.
Emphasis of matter
The Directors have highlighted in the basis of preparation section of the accounting policies the issues the Company continues to face with regards to
the need to generate significant revenue growth and to have available sufficient funds to enable it to achieve that growth. The Directors have initiated a
number of discussions and strategic plans to mitigate these uncertainties and have a reasonable expectation that they will reach a successful conclusion.
These would ensure that the Company and Group will have adequate resources to continue in operational existence for the foreseeable future.
Consequently, the annual report and accounts have been prepared on a going concern basis.
In forming our opinion on the financial statements, which is not qualified, we have considered and are satisfied with the disclosures made in the
Accounting Policies in the Company and Group financial statements concerning the going concern basis of preparation.
Grant Thornton UK LLP
Registered Auditor
Chartered Accountants
London
20 April 2009
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.
Report of the Independent Auditor to the Members of LiDCO Group Plc 26 LiDCO Annual Report 2008/09
Year ended Year ended
31 January 31 January
2009 2008
Note £’000 £’000
Revenue 2 4,532 4,051
Cost of sales (1,512) (1,442)
Gross profit 3,020 2,609
Distribution costs (107) (93)
Administrative expenses (4,709) (4,526)
Loss from operations 3 (1,796) (2,010)
Finance income 57 49
Finance expense (31) (25)
Loss before tax (1,770) (1,986)
Income tax 5 120 120
Loss for the year attributable to equity holders of the parent (1,650) (1,866)
Loss per share (basis and diluted) (p) 6 (1.16) (1.50)
All transactions arise from continuing operations.
There were no recognised gains or losses other than the loss for the financial year.
The accompanying accounting policies and notes form an integral part of these financial statements.
Consolidated Income Statement
For the year ended 31 January 2009 27 LiDCO Annual Report 2008/09
2009 2008
Note £’000 £’000
Non-current assets
Property, plant and equipment 7 671 833
Intangible assets 8 746 747
1,417 1,580
Current assets
Inventory 9 1,053 839
Trade and other receivables 10 1,686 1,329
Current tax 120 120
Cash and cash equivalents 487 2,234
3,346 4,522
Current liabilities
Trade and other payables 11 (905) (707)
Deferred income 11 (37) (41)
Borrowings 11 (618) (563)
(1,560) (1,311)
Net current assets 1,786 3,211
Total assets less current liabilities 3,203 4,791
Equity attributable to equity holders of the parent
Share capital 14 710 710
Share premium 22,531 22,550
Merger reserve 8,513 8,513
Retained earnings (28,575) (27,016)
Total equity 3,179 4,757
Non-current liabilities
Finance lease liability 12 24 34
Total non-current liabilities 24 34
Total equity and non-current liabilities 3,203 4,791
The financial statements were approved by the Board of Directors on 20 April 2009.
Theresa Wallis Terence O’Brien
Director Director
Consolidated Balance Sheet
At 31 January 2009
The accompanying accounting policies and notes form an integral part of these financial statements. 28 LiDCO Annual Report 2008/09
Year ended Year ended
31 January 31 January
2009 2008
£’000 £’000
Operating loss (1,796) (2,010)
Depreciation and amortisation charges 688 611
Share based payments 91 88
(Increase)/decrease in inventories (214) 241
(Increase)/decrease in receivables (357) (50)
Increase/(decrease) in payables 294 (96)
Finance expense (31) (25)
Income tax credit received 121 142
Net cash outflow from operating activities (1,204) (1,099)
Cash flows from investing activities
Purchase of property, plant & equipment (208) (170)
Purchase of intangible fixed assets (447) (467)
Interest received 57 49
Net cash used in investing activities (598) (588)
Net cash outflow before financing (1,802) (1,687)
Cash flows from financing activities
Issue of ordinary share capital – 1,945
Convertible loan repayment (553) 502
Invoice discounting financing facility 364 –
Net cash outflow from financing activities (189) (2,447)
Net (decrease)/increase in cash and cash equivalents (1,991) 760
Opening cash and cash equivalents 2,234 1,474
Closing cash and cash equivalents 243 2,234
Consolidated Cash Flow Statement
For the year ended 31 January 2009
The accompanying accounting policies and notes form an integral part of these financial statements. 29 LiDCO Annual Report 2008/09
Share Share Merger Retained Total
capital premium reserve earnings equity
£’000 £’000 £’000 £’000 £’000
At 1 February 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 and total recognised loss for the year –– – (1,866) (1,866)
At 31 January 2008 710 22,550 8,513 (27,016) 4,757
Issue of share capital – (19) –– (19)
Share based payment expense –– – 91 91
Loss and total recognised loss for the year –– – (1,650) (1,650)
At 31 January 2009 710 22,531 8,513 (28,575) 3,179
The share premium account represents the excess over the nominal value for shares allotted. The charge to the share premium account is in respect of
costs relating to the issues of shares in the year ended 31 January 2008.
The merger reserve represents a non-distributable reserve arising from historic acquisitions.
Consolidated Statement of Changes in Shareholders’ Equity
For the year ended 31 January 2009
The accompanying accounting policies and notes form an integral part of these financial statements. 30 LiDCO Annual Report 2008/09
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 48. The Group’s shares are quoted 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 (IFRSs) 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.
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 accounting policies have 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 31st January 2009.
IFRS standards and interpretations not yet adopted
New standards and interpretations currently in issue but not effective for accounting periods commencing on 1 January 2008 currently are:
• IAS 1 Presentation of Financial Statements (revised 2007) (effective 1 January 2009)
• IAS 23 Borrowing Costs (revised 2007) (effective 1 January 2009)
• Amendment to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements – Puttable Financial Instruments and
Obligations Arising on Liquidation (effective 1 January 2009)
• IAS 27 Consolidated and Separate Financial Statements (Revised 2008) (effective 1 July 2009)
• Amendment to IFRS 2 Share-based Payment – Vesting Conditions and Cancellations (effective 1 January 2009)
• Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards and IAS 27 Consolidated and Separate Financial Statements –
Costs of Investment in a Subsidiary, Jointly Controlled Entity or Associate (effective 1 January 2009)
• Amendment to IAS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items (effective 1 July 2009)
• Improvements to IFRSs (effective 1 January 2009 other than certain amendments effective 1 July 2009)
• IFRS 3 Business Combinations (revised 2008) (effective 1 July 2009)
• IFRS 8 Operating Segments (effective 1 January 2009)
• IFRIC 15 Agreements for the Construction of Real Estate (effective 1 January 2009)
Note that the amendment to IAS 39 and IFRS 7 issued in October 2008 took immediate effect (and may be applied from 1 July 2008) so this is a standard
in issue but not yet effective in an annual period that had not ended at 1 July 2008.
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 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 2009.
The Group finances its operations through a mixture of shareholders funds’ and loan facilities. During the year a three year US dollar based convertible
loan facility came to the end of its term and was replaced by a combined sterling based overdraft and invoice discount financing facility. 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 certain level of drawdown from the invoice discount financing facility and include projections for new sales about which there is a degree of
uncertainty. If such a level of drawdown and/or new sales revenues are not realised, the directors believe that there are sufficient opportunities available
to them to obtain additional funding from sources to enable the Group to continue to develop its operations and to meet its liabilities as they fall due.
Given the current credit environment the Board is considering strengthening the balance sheet. The financial statements do not include any adjustments
that would be required in the event that the Company had insufficient funding available.
Basis of consolidation
The Group’s consolidated financial statements consolidate those of the Company and of its subsidiary undertakings drawn up to 31 January 2009.
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.
Notes to the Financial Statements
For the year ended 31 January 2009 31 LiDCO Annual Report 2008/09
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.
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. 32 LiDCO Annual Report 2008/09
1 Principal accounting policies continued
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.
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.
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.
Impairment
The carrying values of property, plant and equipment and intangible assets with finite lives are reviewed for impairment when events or changes in
circumstances indicate the carrying value may be impaired. If any such indication exists the recoverable amount of the asset is estimated in order to
determine the extent of impairment loss.
Notes to the Financial Statements
continued 33 LiDCO Annual Report 2008/09
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 & 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).
Revenue recognition
The recognition of sales to Med One, as fully explained in the accounting policy on revenue recognition above, is considered to be a key judgment.
2 Revenue and segmental information
The Group has one primary segment – the supply of monitors, consumables and support services associated with the use of the 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 January 31 January
2009 2008
Group Revenue £’000 £’000
UK 2,161 1,724
USA 1,027 1,241
Europe 1,093 873
Rest of World 251 213
4,532 4,051
Result
UK 565 249
USA (329) (111)
Europe 477 291
Rest of World 92 93
Total 805 522
Unallocated costs (2,601) (2,532)
Loss from operations (1,796) (2,010) 34 LiDCO Annual Report 2008/09
2 Revenue and segmental information continued
Turnover and result by geographical region continued
Year ended Year ended
31 January 31 January
2009 2008
Revenue by type £’000 £’000
Monitor sales 1,959 1,934
Consumables sales 2,495 1,986
Fees for use 78 78
Licence fees – 53
4,532 4,051
Sales of monitors to Med One as detailed in Note 1 under revenue recognition during the year amounted to £314,000 (2007/08: £467,000). The
monthly payments to Med One relating to consumables and included within cost of sales amounted to £587,000 (2007/08: £444,000) 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.
3 Loss from operations
The loss on operations before taxation is stated after:
Year ended Year ended
31 January 31 January
2009 2008
£’000 £’000
Auditors’ remuneration:
– Fees payable to the Company auditors for the audit of the Group accounts: 16 15
Fees payable to the Company auditors for other services:
– Audit of the Company’s subsidiaries 25 24
– Other services relating to the interim review* 7 7
– Other services 5 3
Research and development 149 177
Depreciation of property, plant and equipment 241 235
Amortisation of intangible assets 447 376
Operating leases – rental of land and buildings 149 162
The cost of goods sold during the year amounted to £765,000 (2008: £666,000)
* Non-audit services comprise £7,000 for interim review services. The Board considers it cost-effective for the auditors to provide these services.
Notes to the Financial Statements
continued 35 LiDCO Annual Report 2008/09
4 Staff costs
Staff costs during the year were as follows:
Year ended Year ended
31 January 31 January
2009 2008
Group £’000 £’000
Wages and salaries 2,099 2,015
Social security costs 183 178
Share based payments charge 91 88
2,373 2,281
The average number of employees (including executive directors) of the Company during the year was:
2009 2008
Number Number
Production 10 10
Sales 17 17
Administration 11 12
38 39
Remuneration of directors is shown in the Remuneration Report.
Remuneration in respect of other key management personnel was as follows:
2009 2008
£’000 £’000
Emoluments 380 371
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 January 31 January
2009 2008
£’000 £’000
United Kingdom corporation tax at 28% (2008: 28%) – –
Research and development expenditure tax credits (120) (120)
Total tax (120) (120)
Loss on ordinary activities multiplied by standard rate of corporation tax in the
United Kingdom of 28% (2008: 28%) (496) (587)
Effect of:
Expenses not deductible for tax purposes 164 164
Depreciation for the period in excess of capital allowances 68 50
Increase in tax losses 264 389
Other timing differences – (16)
Adjustments in respect of prior year – –
Research and development expenditure tax credits (120) (120)
Total tax (120) (120)
The Group has a deferred tax asset of approximately £6.4m (2008: £6.1m) arising primarily from operating losses which has not been recognised due to
the uncertainty of future taxable profits. 36 LiDCO Annual Report 2008/09
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 January 31 January
2009 2008
£’000 £’000
Loss after tax for the financial year (1,650) (1,866)
Number Number
(‘000) (‘000)
Weighted average number of ordinary shares 141,983 122,353
Effect of dilutive share options – –
Adjusted weighted average number of ordinary shares 141,983 122,353
Loss per share – basic and diluted (p) (1.16) (1.50)
7 Property, plant and equipment
Leasehold Plant and Fixtures Computer
improvements machinery and fittings equipment Total
£’000 £’000 £’000 £’000 £’000
Cost
At 1 February 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
Additions – 3 23 107 133
Disposals –– (13) (252) (265)
At 31 January 2009 555 431 171 927 2,084
Accumulated depreciation
At 1 February 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
Charge for the year 53 33 16 139 241
Disposals –– (13) (198) (211)
At 31 January 2009 355 308 138 612 1,413
Carrying amount at 31 January 2009 200 123 33 315 671
Carrying amount at 31 January 2008 253 153 26 402 833
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 £34,000 (2008: £43,000) in respect of assets held under finance leases.
Notes to the Financial Statements
continued 37 LiDCO Annual Report 2008/09
8 Intangible assets
Product Software
Clinical trials registration development Total
£’000 £’000 £’000 £’000
Cost
At 1 February 2007 92 369 1,278 1,739
Additions 24 90 353 467
At 31 January 2008 116 459 1,631 2,206
Additions – 97 349 446
At 31 January 2009 116 556 1,980 2,652
Accumulated amortisation
At 1 February 2007 77 78 928 1,083
Charge for the year 9 70 297 376
At 31 January 2008 86 148 1,225 1,459
Charge for the year 15 112 320 447
At 31 January 2009 101 260 1,545 1,906
Carrying amount at 31 January 2009 15 296 435 746
Carrying amount at 31 January 2008 30 311 406 747
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.
9 Inventories
2009 2008
£’000 £’000
Raw materials and consumables 250 207
Finished goods and goods for resale 803 632
1,053 839 38 LiDCO Annual Report 2008/09
10 Trade and other receivables
2009 2008
£’000 £’000
Trade receivables 1,537 1,185
Other receivables 48 45
Prepayments 101 99
1,686 1,329
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 2009, trade receivables of £1.24m (2008: £0.92m)
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:
2009 2008
£’000 £’000
Not more than three months 50 129
More than three months but not more than six months 30 59
More than six months but not more than one year 106 82
More than one year 111 –
297 270
Movements in Group provisions for impairment of trade receivables are as follows, which are included within administrative expenses in the income
statement.
2009 2008
£’000 £’000
Opening balance 100 228
Provision for receivables impairment 44 47
Receivables written off in year (24) (175)
Unused amounts reversed (25) –
Closing balance 95 100
The other classes within trade and other receivables do not contain impaired assets.
11 Current liabilities
2009 2008
£’000 £’000
Trade payables 560 364
Social security and other taxes 92 100
Accruals 253 243
Deferred income 37 41
Convertible loan – 553
Bank overdraft 244 –
Invoice discount financing facility 364 –
Finance leases 10 10
1,560 1,311
The bank overdraft and invoice discount financing facility are provided by a UK bank. The bank has a charge over the assets of the Group, but excluding
any intellectual property rights.
12 Non-current financial liabilities
2009 2008
£’000 £’000
Finance leases 24 34
Notes to the Financial Statements
continued 39 LiDCO Annual Report 2008/09
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 which is typified by a small number of high value accounts and their
assessment of the current economic environment. The maximum exposure is £2,072,000 (2008: £3,464,000).
The credit risk on liquid funds is limited because the counterparties are reputable international banks.
Liquidity risk
The Group seeks to manage this financial risk by ensuring sufficient liquidity through the use of variable rate bank facilities is available to meet foreseeable
needs and to invest surplus cash assets safely and profitably.
Liquidity Risk Analysis
The Group manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term financial liabilities as well as cash-
outflows due in day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis.
The Group maintains cash and marketable securities to meet its liquidity requirements. Funding for long-term liquidity needs is additionally secured by an
adequate amount of committed credit facilities.
As at 31 January 2009, the Group’s liabilities have contractual maturities which are summarised below:
Current Non Current
Within 6 to 12 1 to 5 Over 5
6 months months years years
31 January 2009 £’000 £’000 £’000 £’000
Invoice discount financing facility – 364 ––
Bank overdraft – 244 ––
Finance lease obligations 77 24 –
Trade payables 905 –– –
912 615 24 –
This compares to the maturity of the Group’s financial liabilities in the previous reporting period as follows:
Current Non Current
Within 6 to 12 1 to 5 Over 5
6 months months years years
31 January 2008 £’000 £’000 £’000 £’000
Loan note – 553 ––
Finance lease obligations 55 34 –
Trade payables 707 –– –
712 558 34 – 40 LiDCO Annual Report 2008/09
13 Financial instruments continued
Market Risks
Interest rate risk
The Group finances its operations through a mixture of shareholder funds and variable rate bank facilities. The Group accepts the risk attached to interest
rate fluctuations as interest rates have been relatively stable or declined 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 dollar exchange rate as the US dollar based loan liability and US dollar
payables are party mitigated by US dollar receivables from sales.
Group interest rate profile
Floating rate
Cash current Deposit and
bank reserve
accounts account Total
Financial assets at 31 January 2009 £’000 £’000 £’000
Currency
Sterling 1 370 371
US dollars 78 – 78
Euro 38 – 38
117 370 487
Summary of financial assets and liabilities by category
The carrying amounts of the Group’s financial assets and liabilities as recognised at the balance sheet date of the reporting periods under review may also
be categorised as follows. See note 1, principle accounting policies, covering financial issues, financial liabilities and derivative instruments and hedge
accounting for explanations about how the category of instruments affects their subsequent measurement.
2009 2008
Current assets £’000 £’000
Loans and receivables:
– Trade and other receivables 1,686 1,329
– Cash and cash equivalents 487 2,234
2,173 3,563
2009 2008
Non-current liabilities £’000 £’000
Other payables 24 34
24 34
2009 2008
Current liabilities £’000 £’000
Financial liabilities measured as amortised cost:
– Borrowings 618 563
Trade payables and other short-term financial liabilities 905 707
Deferred income 37 41
1,560 1,311
Notes to the Financial Statements
continued 41 LiDCO Annual Report 2008/09
Capital Risk Management
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to
shareholders through an optimal balance of debt and equity.
The Board reviews the capital structure, including the level of indebtedness and interest cover as required. As part of this review, the Board considers the
cost of capital and the risk associated with each class of capital.
The Group is exposed to translation and transaction foreign exchange risk. The currencies where the Group is most exposed to foreign currency volatility
are 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
2009 2008
£’000 £’000
Trade and other receivables 576 581
Cash and cash equivalents 79 107
Convertible loan – (553)
Invoice discounting financing facility (97) –
Trade and other payables (253) (92)
305 43
Currently, no hedging instruments are used. The Group keeps under review the extent of its exposure to currency fluctuations, which relate entirely to
trading transactions.
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 dollar 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
2009 2008
£’000 £’000
Currency fluctuation 25% 12%
If Sterling had strengthened against the US dollar by the percentage above retrospectively, then this would have had the following impact:
US Dollars
2009 2008
£’000 £’000
Net result for the year (12) (39)
Equity (12) (39)
If Sterling had weakened against the US dollar by the percentage above retrospectively, then this would have had the following impact:
US Dollars
2009 2008
£’000 £’000
Net result for the year 12 39
Equity 12 39
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. 42 LiDCO Annual Report 2008/09
14 Share capital
2009 2008
£’000 £’000
Authorised – 200,000,000 ordinary shares of 0.5 pence each 1,000 750
2009 2008
Number Number
of shares of shares
Issued and fully paid – ordinary shares of 0.5 pence each 000 000
At the beginning of the year 141,983 118,336
Issued for cash – 23,647
At the end of the year 141,983 141,983
£’000 £’000
At the beginning of the year 710 592
Issued for cash – 118
At the end of the year 710 710
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 of three years.
2009 2008 (restated)
Weighted Weight
average average
exercise exercise
Number price (p) Number price (p)
Outstanding at the beginning of the year 7,962,277 17.6 8,452,738 15.5
Issued in the year 1,601,120 7.8 577,000 12.2
Forfeited during the year (209,525) 16.0 (1,067,461) 19.1
Exercised during the year –– ––
Outstanding at the end of the year 9,353,872 20.1 7,962,277 17.6
Exercisable at the end of the year 6,855,872 13.8 4,329,628 12.3
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 behavioral considerations. These fair values were
calculated using a Black-Scholes option pricing model as follows:
2009 2008
Weighted average share price (p) 20.1 19.0
Weighted average exercise price (p) – 19.0
Expected volatility 40% 40%
Expected life 3.5 3.5
Risk free rate 3.5% 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 0.5p and 28.25p per share.
Notes to the Financial Statements
continued 43 LiDCO Annual Report 2008/09
16 Capital commitments
The Group had no capital commitments at 31 January 2009 or 31 January 2008.
17 Contingent liabilities
There were no contingent liabilities at 31 January 2009 or 31 January 2008.
18 Leasing commitments
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
2009 2008
Land and Land and
buildings Other buildings Other
Group £’000 £’000 £’000 £’000
In one year or less 164 56 149 39
Between one and five years 60 70 224 54
224 126 373 93 44 LiDCO Annual Report 2008/09
We have audited the parent company financial statements of LiDCO Group Plc for the year ended 31 January 2009 which comprise the principal
accounting policies, the balance sheet and notes 1 to 8. 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 2009.
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’s Report
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 2009;
• 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.
Emphasis of matter
The Directors have highlighted in the basis of preparation section of the accounting policies the issues the Company continues to faces with regards to
the need to generate significant revenue growth and to have available sufficient funds to enable it to achieve that growth. The Directors have initiated a
number of discussions and strategic plans to mitigate these uncertainties and have a reasonable expectation that they will reach a successful conclusion.
These would ensure that the Company and Group will have adequate resources to continue in operational existence for the foreseeable future.
Consequently, the annual report and accounts have been prepared on a going concern basis.
In forming our opinion on the financial statements, which is not qualified, we have considered and are satisfied with the disclosures made in the
Accounting Policies in the Company and Group financial statements concerning the going concern basis of preparation.
Grant Thornton UK LLP
Registered Auditor
Chartered Accountants
London
20 April 2009
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.
Report of the Independent Auditor to the Members of LiDCO Group Plc 45 LiDCO Annual Report 2008/09
2009 2008
Note £’000 £’000
Fixed assets
Investments 2 65 65
65 65
Current assets
Debtors 3 5 27
Amount due from subsidiary undertakings 3 10,955 9,831
Cash at bank 371 2,037
11,331 11,895
Current liabilities
Creditors: Amounts falling due within one year 4 – (553)
– (553)
Net current assets 11,331 11,342
Total assets less current liabilities 11,396 11,407
Net assets 11,396 11,407
Shareholders’ funds
Share Capital 5 710 710
Share premium 6 22,531 22,550
Retained earnings 6 (11,845) (11,853)
Shareholders’ funds 11,396 11,407
The financial statements were approved by the Board of Directors on 20 April 2009.
Theresa Wallis Terence O’Brien
Director Director
Company Balance Sheet
At 31 January 2009
The accompanying accounting policies and notes form an integral part of these financial statements. 46 LiDCO Annual Report 2008/09
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 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 2009.
The Group finances its operations through a mixture of shareholders funds’ and loan facilities. During the year a three year US dollar based convertible
loan facility came to the end of its term and was replaced by a combined sterling based overdraft and invoice discount financing facility. 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 certain level of drawdown from the invoice discount financing facility and include projections for new sales about which there is a degree of
uncertainty. If such a level of drawdown and/or new sales revenues are not realised, the directors believe that there are sufficient opportunities available to
them to obtain additional funding from sources to enable the Group to continue to develop its operations and to meet its liabilities as they fall due. Given
the current credit environment the Board is considering strengthening the balance sheet. 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.
2 Investments
Shares in
subsidiary
undertakings
Company £’000
Cost and net book value
At 1 February 2008 and at 31 January 2009 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
3 Debtors
2009 2008
£’000 £’000
Prepayments – 22
Other debtors 5 5
Amount due from subsidiary 10,955 9,831
10,960 9,858
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. The directors made a provision for impairment of £12m in the year to 31 January 2008, and consider no further impairment provision is
necessary at 31 January 2009. The timing of the repayment of this debt is uncertain and unlikely to be within one year.
Notes to the Financial Statements
For the year ended 31 January 2009 47 LiDCO Annual Report 2008/09
4 Current liabilities
Creditors: amounts falling due within one year
2009 2008
£’000 £’000
Convertible loan – 553
2009 2008
£’000 £’000
Nominal value of convertible loan – 553
Equity component – –
Liability component at final drawdown date – 553
Interest charged 23 25
Interest paid (23) (21)
Liability component at 31 January 2009 – 557
The directors believe the amount shown above represents a fair value of the liability component.
5 Share capital
2009 2008
£’000 £’000
Authorised
200,000,000 ordinary shares of 0.5p each 1,000 750
Allotted, called up and fully paid
141,983,054 ordinary shares of 0.5p each 710 710
6 Reserves
Share Other Equity Profit & loss
premium reserve reserve account
£’000 £’000 £’000 £’000
At 1 February 2008 22,550 –– (11,853)
Issue of share capital (19) –– –
Profit for the year –– – 8
At 31 January 2009 22,531 –– (11,845)
The charge to the share premium account is in respect of costs relating to the issue of shares in the year ended 31 January 2008.
7 Reconciliation of shareholders’ funds
2009 2008
£’000 £’000
Profit/(loss) for the year 8 (12,027)
Shares issued – 1,945
Share premium account (19) –
(11) (10,082)
Opening shareholders’ funds 11,407 21,489
Closing shareholders’ funds 11,396 11,407
8 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 profit for the year of the Company was £8,000 (2007/08: loss £12,027,000). The loss for 2007/08 includes an impairment provision of
£12m in respect of the amount due from subsidiary undertakings. 48 LiDCO Annual Report 2008/09
Company registration number:
2659005
Registered office:
16 Orsman Road
London
N1 5QJ
Company website:
www.lidco.com
Company Information
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 0GA
Nominated adviser
and stockbroker:
FinnCap
4 Coleman Street
London
EC2R 5TA
Bankers:
Natwest Bank Plc
63-65 Piccadilly
London
W1J 0AJ
Advisers to the Company
Directors and Company Secretary:
Ms T A Wallis Non-Executive Chairman
Dr T K O’Brien Chief Executive Officer
Mr P L Clifford Finance Director
Mr J G Barry Sales and Marketing Director
Dr D M Band Scientific Director
Mr I G Brown Non-Executive Director
Mr J P Rowland Company Secretary Design and Production
www.ckdcorp.co.uk
Photography
Thomas Skovsende
Print
Barclay’s Print.
Printed on Satimat. Made from 15% recycled de-inked
FSC certified pulp with all virgin fibres that are 100% FSC
certified and PCF bleached, without using chlorine gas. LiDCO Group Plc
UK Office:
16 Orsman Road
London
N1 5QJ
T: + 44 (0)20 7749 1500
F: + 44 (0)20 7749 1501
www.lidco.com
Sales and Marketing:
Unit M, South Cambridge Business Park
Babraham Road, Sawston
Cambridge
CB22 3JH
T: + 44 (0) 1223 830666
F: + 44 (0) 1223 837241