LiDCO Group Plc
Annual Report & Accounts
For the year ended 31 January 2010 LiDCO Group Plc
www.lidco.com
During an average life span of 70 years, the human heart will pump more
than 400 million litres of blood. Monitoring of the key hemodynamic
parameters – blood pressure, cardiac output, oxygen delivery and fluid
status – can provide a practical, early warning of cardiovascular change.
LiDCO is a manufacturer of minimally invasive hemodynamic monitoring
equipment and disposables. LiDCO's products are the result of a
multi-disciplinary developmental approach that combines physiological
expertise, sensor and computing technology with novel graphical user
software. The transformation of raw and complex physiological data into
more useable and effective information has been a key objective
throughout the development of the Company's products.
Our monitors are designed to display this key data in a way that clearly,
quickly and simply identifies the underlying drivers (blood flow, arterial tone
and fluid status) underlying the hemodynamic changes. Following an
appropriate intervention by the user the LiDCO monitor then measures the
response of the patient to a drug or fluid intervention. Early intervention
to avoid such potentially dangerous and life threatening hemodynamic
events has been demonstrated to reduce complications and length of stay
in high risk surgery patients.
Contents
IFC Overview
01 Highlights
02 Products, Access to Markets and Evidence
04 Chairman’s Statement
06 Chief Executive Officer’s Statement
10 Financial Review
12 Board of Directors and Company Secretary
13 Clinical Advisory Board
14 Corporate Governance Report
16 Corporate Social Responsibility Statement
17 Directors’ Remuneration Report
20 Directors’ Report
23 Independent Auditor’s Report (Group)
24 Consolidated Income Statement
25 Consolidated Balance Sheet
26 Consolidated Cash Flow Statement
27 Consolidated Statement of Changes in Shareholders’ Equity
28 Notes to the Financial Statements
42 Independent Auditor’s Report (Company)
43 Company Balance Sheet
44 Notes to the Financial Statements
46 Company Information
46 Advisers to the Company
LiDCO Annual Report 2009/10 01 LiDCO Annual Report 2009/10
Financial Highlights
Revenue up 18% to £5.37m (2008/09: £4.53m)
Export sales £3.54m now 66% of income and up by 50% (2008/09: £2.36m)
USA sales biggest contributor up by 121% to £2.28m (2008/09: £1.03m)
Recurring revenue up 22% to £3.13m (2008/09: £2.57m) – now 58% of revenue
Operating loss reduced by 14% to £1.54m (2008/09: £1.80m)
Loss per share reduced to 0.87p (2008/09: 1.16p)
Strengthened balance sheet – cash balance £1.85m (2008/09: £0.49m)
Borrowings repaid and £3.02m of equity raised in the year
Revenue
Million
£5.37 2009/10
£4.53 2008/09
£4.05 2007/08
£3.44 2006/07
£3.42 2005/06
Administration and distribution expenses
Million
£4.83 2009/10
£4.82 2008/09
£4.62 2007/08
£4.94 2006/07
£4.77 2005/06
Loss from operations
Million
£1.5 2009/10
£1.8 2008/09
£2.0 2007/08
£2.6 2006/07
£2.2 2005/06
Net cash outflow before financing
Million
£1.0 2009/10
£1.8 2008/09
£1.7 2007/08
£1.6 2006/07
£2.2 2005/06
Operational Highlights
LiDCO products now distributed by Covidien in the USA, the Group’s biggest market
Highest single year increase in installed monitor base. LiDCOplus & LiDCOrapid monitors installed
base up 37% to 2,075. 565 monitors sold or placed in the period (2008/9: 326)
Sensors, smartcard and fees-per-use volumes up 26% to 37,918 units (2008/09: 30,125 units)
Selected as sole technology for OPTIMISE – UK Government sponsored multi-centre clinical
outcomes study
Second generation LiDCOrapid v1.02 software launched
Work commenced to integrate Covidien’s depth of anesthesia Bispectral Index (BIS) product
onto LiDCOrapid platform monitor
LiDCOrapid Japanese registration progressing - launch expected in 2011 Products, Access to Markets and Evidence
LiDCO is a manufacturer of minimally invasive hemodynamic
monitoring equipment and disposables for use in hospitals.
These products are used primarily for the management of adult
hospital patients requiring critical care and those at major
cardiovascular risk during surgery.
02 LiDCO Annual Report 2009/10
Evidence
Globally there is a growing body of clinical
evidence that the monitoring and targeting
of optimal hemodynamic levels can improve
the standard of care and clinical outcome of
high-risk surgery patients. Such improved
care reduces the incidence of complications,
reduces bed days and costs. The use of LiDCO’s
technology to target oxygen levels in high-risk
surgery patients has been shown to reduce
bed stay by an average of 12 days per patient.
National guidelines have been written to
encourage the expansion of the use of
hemodynamic monitoring in certain surgical
procedures. It is estimated that the worldwide
market for hemodynamic monitoring will grow
to $800m per annum over the coming years.
Distribution network
The Company sells via its own direct sales force
to hospitals in the UK, and in export markets
predominantly through a worldwide network
of speciality critical care and anesthesia
distributors. LiDCO’s distributors for the USA
and Japan are Covidien and Becton Dickinson
respectively – both multi billion dollar medical
device corporations.
Products
LiDCOplus is a computer-based platform
monitor used in the Intensive Care Unit for
real-time continuous display of hemodynamic
parameters.
LiDCOrapid is our new hemodynamic monitor
designed specifically for use in the Operating
Theatre for fluid and drug management.
LiDCO single-patient-use disposables is
used in conjunction with the LiDCOplus and
LiDCOrapid. 03 LiDCO Annual Report 2009/10
International Sales
Sales by region £’000 2009/10 2008/09
USA 2,273 1,027
UK 1,822 2,161
Continental Europe 990 1,093
Rest of the World 282 251
Monitor installed base (Units)
USA 892 546
UK 313 266
Continental Europe 589 458
Rest of the World 281 240
32
M
In the USA, new legislation
will extend healthcare
cover to an additional
32 million people.
66
%
Exports represented 66%
of sales (2008/09: 52%).
349
%
USA showed strong
growth where monitors
sold/placed and revenue
were up 349% and
121% respectively. Chairman’s Statement
Healthcare is expected to remain one the most
defended expenditures in developed countries.
As hospitals seek to improve efficiency by
reducing costly surgical complications, demand
for minimally invasive hemodynamic monitoring
products is likely to grow.
04 LiDCO Annual Report 2009/10
I am pleased to report another very
good year for LiDCO and we have made
excellent progress on our strategy for
growth. Revenues grew by 18%, our
installed base of monitors increased by
a record 37% and disposables unit sales
rose 26%. We ended the year with
important new distribution partnerships
in place, a strengthened cash position
and no borrowings. Against a background
of the banking crisis, currency
fluctuations, and subsequent recession,
we believe that this is a considerable
achievement.
Our strategy for growth remains clearly
focused on three key areas: products,
market access and evidence and
awareness.
Market access
LiDCO’s sales and distribution operations
focus on specific types of patient within
target clinical settings.
Until 2008, our market was mainly
intensive and critical care units, but the
launch of the LiDCOrapid gave us access
to the high-risk surgery market potentially
worth US$800m. Furthermore, the
product’s ease of use has attracted a wide
range of distributors in both new and
existing territories. In 2009/10, two thirds
of our sales were exports. We significantly
improved the Group’s access to two of
the world’s biggest markets, the USA and
Japan through distribution partnerships
with Aspect Medical Systems, Inc (now
part of Covidien) and Becton, Dickinson
and Company (BD).
Products
We create high value, high margin
products that are innovative and have
strong intellectual property protection.
Our products are developed in close
consultation with leading clinicians and
assembled at our London facility, under
strict quality standards. Our portfolio
of integrated products enables
measurement, analysis, audit, training
and sharing of real-time and historic
hemodynamic data, in both critical care
units and the operating theatre. Demand
for other older, invasive catheter-based
hemodynamic monitoring is declining due
to concerns over associated risks. LiDCO’s
products not only help improve patient
outcomes by significantly reducing
infections and length of hospital stays,
they also save money as a result.
Launched in 2008, the LiDCOrapid
monitor and disposables meet the needs
of the growing high-risk surgery market
and other applications where quick and
easy set-up is required and continuous
trend information is important. During
the year we continued to focus our sales
resources on establishing the LiDCOrapid
in the market. 05 LiDCO Annual Report 2009/10
Evidence and awareness
We recognise that continued sales growth
depends on a growing appreciation in the
acute care community of the clinical and
economic benefits of making the use of
hemodynamic monitoring part of normal
protocol. We will increasingly promote
knowledge and understanding of our
products, highlighting their advantages to
clinicians, administrators and healthcare
policy makers.
Scientific evidence is increasingly linking
the optimisation of patients’
hemodynamic status with better
outcomes and reduced hospital stays.
LiDCO has been selected as the sole
technology for two multi-centre
government-funded studies in the UK
and US. OPTIMISE is sponsored by the UK
Government for optimising cardiovascular
management in high-risk abdominal
surgery patients and in the US, MOnIToR
is a transplantation donor organ
optimisation study.
Financial position
To strengthen the Group’s balance
sheet and reduce exposure to potentially
uncertain banking facilities, £3.02m (net)
was raised through the issue of
31,916,000 ordinary shares last summer
to existing investors, new institutional
funds and management. This, together
with the licence fees received, enabled
the Group to repay its borrowings.
The Group’s cash balance at the year end
was £1.8m. Our robust position, coupled
with our partners’ strong balance sheets,
means we have the capital structure to
address the growing market, if necessary,
through placing (rather than selling)
of monitors and deriving income from
recurring disposable sales.
Prospects
Healthcare is expected to remain one
of the most defended expenditures in
developed countries. As hospitals seek
to improve efficiency by reducing costly
surgical complications, demand for
minimally invasive hemodynamic
monitoring products is likely to grow.
The addition of the LiDCOrapid to our
portfolio and the expansion of our
distributor network will enable us to take
full advantage of future opportunities.
I would like to thank our shareholders
for their continued support over the past
year. I am also grateful to my fellow
directors for their wise counsel, our staff
for their dedication and hard work and
our Clinical Advisory Board for their
valuable contribution. We look forward
with confidence to delivering our first
profit this year.
Theresa Wallis
Chairman
23 April 2010
37
%
Our installed base of
monitors increased by a
record 37% and disposables
unit sales rose 26%.
$
800
M
Potential size per annum
of the high risk surgery
market addressed by
the LiDCOrapid. Chief Executive Officer’s Statement
The installed base increased in all regions by
between 17% and 63%. The strongest growth
was in the USA where monitors sold/placed and
revenue were up 349% and 121% respectively
including distributor stocking sales.
06 LiDCO Annual Report 2009/10
Overview
This was another productive year during
which the Group maintained growth,
repaid its borrowings and reduced
distribution costs whilst significantly
expanding its route to market. Sales
increased by 18% to £5.4m, split between
42% capital (including licence fees) and
58% recurring revenue. We are in a strong
position to generate continued growth,
with the right products, a strengthened
balance sheet and increasing sales
resources.
The worldwide recession and the
requirement for universal healthcare
coverage in the USA means that hospital
finances are under increasing stress.
Reducing complications, wound and
central line infections and length of stay
in high-risk surgery patients has become
a prime objective. During the year we
accumulated new clinical data and
improved customer awareness of the
potential savings from using LiDCO’s
products. Abstracts and papers on the
use of our technology in: organ
transplantation, major and bariatric
surgery, intensive care and cardiology
were published by investigators in Europe,
the USA and Asia. Customers have an
increasingly strong evidence-based
business case for the adoption of
advanced hemodynamic monitoring.
The use of LiDCO technology on high-risk
surgery patients can reduce complications
by more than a third, costs by £4,800 per
patient and hospital stay by up to 12
days¹. The LiDCOrapid monitor can be
used to optimise fluids and blood flow
both in or outside of surgery and in
conscious or ventilated patients. Other
products that are incrementally invasive
and/or that can only be easily used in
ventilated patients, are often less practical
for the management of the whole surgical
pathway.
In the USA, new legislation will extend
healthcare cover to an additional 32
million people. This programme is also
trying to lower costs through a series of
public policy mechanisms within Medicare
and Medicaid and is likely over time to
fundamentally change the way doctors
are reimbursed and will encourage the
adoption of the safest, cheapest and most
effective medical procedures. The USA is
currently spending 15.3% of GDP on
healthcare – about double that of the UK.
Medicare has decided not to reimburse
healthcare providers for treatment of
hospital-acquired infections. We believe
this will encourage use of LiDCO products
to implement fluid optimisation strategies
in high-risk patients.
Worldwide, there looks to be a general
need to improve the efficiency of
treatments for high-risk patients, and
ultimately there is likely to be convergence
on what is “best practice”. Companies
that are proven to provide the best, most
cost-effective and most widely adoptable
technology will prosper. Hospitals will also
require training in the adoption of new
technology and “best practice”; this is
why we are developing further training
materials and a hemodynamic workshop
in conjunction with St George’s Hospital,
London.
Outlook and prospects
The global market for hemodynamic
monitoring products will continue to
grow. We estimate worldwide sales
revenues for minimally invasive
hemodynamic monitoring products grew
by less than the average 30% seen in the
previous two years. We believe this was
a consequence of global economic
disruption coupled with what proved
to be reduced, or in some cases entirely
absent capital and disposable revenue
budgets. However, market drivers remain
and have become more relevant.
Customers will continue to move away
from the use of the older, invasive catheter
products. Medicare in the USA is no
longer prepared to pay hospitals for
treatment of catheter and surgery related
complications and infections.
The focus is shifting from hospitals
increasing the number of surgeries
undertaken towards improving the quality
of care. In the UK, NHS expenditure at
7.7% of GDP is forecast to be ring fenced
to the extent possible given the deficit
and economy. So it is likely that the NHS
will need to make annual efficiency
savings of more than £4bn by 2012-13.
Expectations regarding hospital efficiency
savings are outlined in a new national
programme: QIPP – Quality, Innovation,
Productivity and Prevention. A key
element of this programme is pathway
redesign. In particular, the increasing
adoption of ‘enhanced’ surgical pathways
is encouraged. Elements of the pathways
include better pre-operative assessment
and planning; the goal being to reduce
the stress of the operation with post-
operative care structured around
achieving the earliest recovery. Better
intra-operative fluid management and,
if necessary, continued hemodynamic
monitoring and targeted post-operative
oxygen delivery are necessary to achieve
the best results. 07 LiDCO Annual Report 2009/10
Markets
In April 2009 an exclusive sales and
marketing licence for the LiDCOrapid was
granted to BD in Japan. In July, Aspect
Medical was appointed as distributor for
the LiDCOrapid for the USA. BD and
Covidien, – who acquired Aspect in
October – are major global medical
technology groups. The combined up-
front licence fees from these distribution
agreements amounted to £940,000.
The Group had a record year in terms of
the number of monitors sold and placed
in hospitals; the lower priced LiDCOrapid
was the key driver behind this. Capital
sales, excluding Med One sales, are
reflective of the increased numbers sold
and were up by £210,000 (13%).
LiDCO’s strategy is to sell directly to
hospitals in the UK and work with
existing third party distributors in export
territories. The new US arrangements
materially improved sales force
representation while significantly reducing
our US distribution costs by about
£650,000 per annum. The integration
of Covidien’s Nellcor critical care and
Aspect’s surgery sales teams took place
this February. The enlarged team, which
we believe to be the largest monitoring
equipment sales force in the USA gives us
a far greater reach into the USA than was
originally envisaged with Aspect.
Sales in the USA doubled across the
period through the above changes in
the distribution channel. All sales staff
have now had at least their initial training
and are incentivised through a sales
commission plan. Further training is an
on-going process. New accounts have
already been secured and we expect
the sales pipeline to grow substantially
during 2010.
£
5.4
M
Sales increased by 18% to
£5.4m, split between 42%
capital (including license fees)
and 58% recurring revenue.
13
%
The Group had a record
year in terms of the number
of monitors sold and placed
in hospitals. Capital sales,
excluding Med One sales,
were up by £210,000 (13%).
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.
We anticipate that BD’s sales in Japan will
start in 2011.
In the UK we expect the hemodynamic
monitoring market to continue to grow,
and we have a developing pipeline of new
accounts. There is a growing expectation
that hospitals will adopt hemodynamic
monitoring as part of their plans to re-
engineer surgical pathways. We have
recruited a new UK sales manager and
are looking to add to our sales and nurse
educator team in the year. We are also
excited about our collaboration with the
St George’s Hospital simulation centre in
London, where we will be running regular
courses that deal with the practical
implementation of our technology.
The staff there who have used our
technology for many years and have
experience of saving up to 12 bed days
per high-risk surgery patient undergoing
LiDCO-directed therapies.
A study was conducted using LiDCO’s
products that assessed the value of
simultaneous brain and hemodynamic
monitoring during major peripheral
vascular surgery in high-risk patients.
The technical synergies between
Covidien’s depth of anesthesia monitoring
(BIS) and LiDCO’s technology have great
potential to deliver the market’s most
evolved fluid and hemodynamic
monitoring product. Combining these
technologies into a monitor on the
LiDCOrapid platform is an exciting and
commercially valuable project that is now
underway. Chief Executive Officer’s Statement
continued
We are optimistic about sales in 2010,
although still concerned about the economy
and the return to economic growth. We expect
good disposables sales revenue growth in all
territories, as monitors installed in the latter
part of 2009 begin to contribute to disposables
revenues, augmented by additional income
generated by our expanded sales force.
08 LiDCO Annual Report 2009/10
Sales and trading
Revenues were up 18% to £5.37m
(2008: £4.53m), with a 73% increase in
the number of LiDCO monitors sold /
placed in the year (565 up vs 326).
Disposables numbers were up 26% at
37,918 and associated income was also
up, by 21% at £3.13m. Export sales now
represent 66% of income – up from 52%.
Disposable revenue growth and the
higher numbers of monitors placed have
been driven by demand for the
LiDCOrapid through our expanded
distribution network. Monitor sales,
excluding Med One sales, are more
reflective of the increased numbers sold
and were in fact up by £210,000 (13%).
Paradoxically, total capital income
(including Med One income) was down
£104,000. This was a consequence of the
higher number of lower priced
LiDCOrapid monitors sold coupled to prior
period capital revenues being improved
by the sales of monitors placed in the UK
(£314,000) to Med One. Although sales
of placed monitors to Med One have been
useful in the past to improve cash flow
and to reduce risk, our stronger capital
base means that we are now in a position
to finance this ourselves – hence there
were no such sales in the period.
The installed base at the year end stands
at 2075 units, an increase of 37% in the
year. The LiDCOrapid portion of this grew
by 514 units, an increase of 84% over the
previous year and now represents 38% of
the installed base. This has been achieved
within 21 months of launch and across a
turbulent economic period. As previously
reported, the focus necessary to launch
and promote the LiDCOrapid had a knock-
on effect on the growth and capital
revenues from sales of our calibrated
product – the LiDCOplus monitor.
The lack of capital budgets in hospitals
delayed product sales for most of the year.
The disposables revenues almost certainly
underplay the full impact the increase in
installed base is likely to have on future
disposables sales. As monitors are
transferred from distributors into hospitals,
LiDCOrapid smart card sales should
produce further growth in this income
stream.
Geographic segmental sales reporting
The installed base increased in all regions
by between 17% and 63%. The strongest
growth was in the USA where monitors
sold/placed and revenue were up 349%
and 121% respectively including
distributor stocking sales. In the UK,
despite a severe slowdown in activity by
the NHS, particularly in the first half of the
year, the number of monitors sold/placed
increased modestly 47 vs 43. However,
overall revenues were affected negatively
by hospitals moving to the placing model
of acquisition, rather than capital purchase
(16 vs 8), and greater numbers of lower
priced LiDCOrapid monitors in the mix of
monitors sold. In continental Europe,
distributor stocks moved more slowly than
expected to their respective customers,
resulting in a general destocking of
monitors occurring during the period.
We expect sales of monitors to European
distributors to improve in 2010. However,
there are continuing issues for some
territories as distributors have to fund cash
flow issues stemming from increasingly
delayed payment times.
73
%
The number of LiDCO
monitors sold/placed in
the year increased by
73% (565 vs 326).
£
3.13
M
Recurring revenues from
sales of disposables,
service contracts and fees
for use increased by 21%
from £2.57m to £3.13m. 09 LiDCO Annual Report 2009/10
Disposables units sold increased in all
regions with income up in UK, USA and
ROW cumulatively up by £0.6m (29%).
Although disposables unit numbers in the
EU rose by 4%, income was down
£40,000 due to a mix shift towards the
lower transfer price of the LiDCOrapid
smart card. Some cannibalisation of
higher priced LiDCOplus sensor sales
by lower price LiDCOrapid disposables,
at both hospital and distributor levels,
has clearly occurred in the year. Whilst this
may continue, it should be increasingly
diluted by the growing LiDCOrapid sales
into new accounts where LiDCOplus
monitors have not been purchased.
We are optimistic about sales in 2010, although still concerned about the
economy and the return to economic growth. We expect good disposables
sales revenue growth in all territories, as monitors installed in the latter part
of 2009 begin to contribute to disposables revenues, augmented by
additional income generated by our expanded sales force.
USA
• Total sales revenue up by 121% to £2.28m (2008/09: £1.03m)
• Monitor sales up 96% to £0.88m (2008/09: £0.45m)
• Sensors, smart card, fee for use sales up 96% at £1.12m (2008/09: £0.57m)
• Installed base up by 346 (63%) to 892 (2008/09:546)
Continental Europe
• Total sales revenue down 9% to £0.99m (2008/09: £1.09m)
• Monitor sales down 10% to £0.53m (2008/09: £0.59m)
• Sensors, smart card sales down 8% to £0.46m (2008/09: £0.50m)
• Installed base up by 131 (29%) to 589 (2008/09: 458)
UK
• Total sales revenue excluding Med One steady at £1.82m (2008/09: £1.85m)
Med One revenues nil in period (2008/09: £0.314m)
• Monitor sales revenue down 16% to £0.33m (2008/09: £0.396m)
• Sensors, smart card and fee for use sales up 3% to £1.49m (2008/09: £1.45m)
• Installed base up by 47 (18%) to 313 (2008/09: 266)
Rest of World and Other Income
• Total sales revenue up 12% to £0.28m (2008/09: £0.25m)
• Monitor sales down 40% to £0.12m (2008/09: £0.20m)
• Sensor and Smart Card sales up 22% to £61,000 (2008/09: £50,000)
• Licence fees income £0.10m (2008/09: £nil)
• Installed base up by 41 (17%) to 281 (2008/09: 240)
Review of revenue and units sold and placed
Summary Table
%
Year to Year to Increase/ Increase/
31 Jan 2010 31 Jan 2009 (decrease) (decrease)
Revenue by type (£’000)
Monitors 1,855 1,959 (104) (5)
Excluding Med One 1,855 1,645 210 13
Sensors/cards/use fees 3,125 2,573 552 21
Licence fees 387 – 387
Total revenues 5,367 4,532 835 18
Monitors (Units) 565 326 239 73
Sold 536 310 226
Placed 29 16 13
Sensor, smart card and fee per use sales 37,918 30,125 7,793 26
Sales (Units)
Installed base (year-end) 2,075 1,510 565 37 Financial Review
LiDCO has entered into three significant
partnerships giving us fuller access to the three
largest markets in the world – United States,
Japan and Germany. There is a growing demand
worldwide or minimally invasive monitoring
technology and the clinical community is
showing an increasing recognition for the
LiDCO brand.
10 LiDCO Annual Report 2009/10
Operating results
Turnover increased by 18% to £5.37m
(2008/09: £4.53m). Operating losses
decreased by 14% to £1.54m (2008/09:
£1.80m) and the loss per share was
reduced to 0.87 pence (2008/09: 1.16
pence). Exports represented 66% of sales
(2008/09: 52%).
The installed base of monitors increased
in the year by 565 units (2008/09: 326
units) to 2,075 units (2008/09: 1,510
units), representing an increase of 37%.
The increase in the installed base
comprised 514 LiDCOrapid monitors
and 51 LiDCOplus monitors with 536
(2008/09: 310) of the monitors being
sold and 29 (2008/09: 16) being placed.
Recurring revenues from sales of
disposables, service contracts and fees
for use increased by 21% from £2.57m
to £3.13m.
The average margin across all products
against external procurement costs fell
during the period from 81% to 75%.
This was partly a consequence of higher
monitor costs due to exchange rate
movements and partly due to reduced
margins achieved on sales of LiDCOrapid
monitors to distributors. Future
profitability will significantly depend
on margins achieved on disposables.
These remained high during the year,
albeit with a small reduction in margins
on smart cards due to the increased
proportion sold to distributors. Margins
achieved on LiDCOplus sensors remained
steady at 86% and on smart cards fell by
3% to 92%.
Sales of LiDCOrapid smart cards are
expected to be an important revenue
stream in future. It is too early to establish
the average smart card usage per monitor
but in the UK customers using it for more
than 12 months we have seen rates in
individual hospitals as high as 11 cards per
monitor per month.
Overall gross margin on sales including
Med One costs was 61%, down from 67%
last year. Med One payments in the period
amounted to £688,000 (2008/09:
£587,000). There were no sales to Med
One during the year (2008/09 £314,000)
and as a result Med One payments have
now peaked and should reduce to nil over
the next two years, increasing the overall
gross margin.
The effect of the movement in foreign
exchange rates during the year was to
increase administration expenses by
£223,000 in comparison to the previous
year. In addition, non-US related sales and
marketing costs increased £127,000.
Thus, although the bulk of the US sales
force was transferred to Aspect in July
2009 (which reduced costs in the second
half by about £325,000), administrative
expenses increased by £16,000.
A significant element of the adverse
fluctuations in exchange rates was the
sales and marketing overhead in the USA.
Taxation
As the Group is still at the pre-profit stage
there was no tax charge for the year.
The Group has a potential deferred tax
asset of £6.4m 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 2009/10 and
are shown in the income statement.
Cash, financing and working capital
The net cash outflow before financing
activities was £1.044m (2009: £1.8m),
with an outflow of £743,000 in the first
half and £301,000 in the second.
Historically the Group has used bank
loans, overdrafts and invoice discount
financing facilities as a means of providing
working capital. To reduce our
dependence on such facilities in future,
the Group issued 31,916,000 new
ordinary shares at 10p to existing
investors, including management and to
new institutional investors raising £3.02m
net of costs. This allowed the Group to
repay overdraft and invoice discount
balances of £608,000 outstanding at the
start of the year. The Group was also in
receipt of £940,000 in up-front licence
fees from Aspect and BD. As well as
strengthening the balance sheet, these
funds will more readily help the Group
to adopt a placing model for its monitors
with its UK customer base. Cash balances
at 31 January 2010 amounted to £1.85m.
The Board anticipate this will be sufficient
to see the Group through to profitability
and positive cash flow. In addition the
Group has an unutilised overdraft facility
of £500,000.
Inventory at the year end was £1.09m,
an increase of £41,000, but as a
percentage of turnover reduced from
23% to 20%. Expenditure on fixed and
intangible assets in the year of £606,000
was broadly similar to the previous year
and below the charge for depreciation
and amortisation of £672,000.
Expenditure on fixed and intangible assets
is not expected to rise significantly in the
foreseeable future. 11 LiDCO Annual Report 2009/10
The Group issued warrants to Aspect over
13,915,324 ordinary shares. The warrants
are exercisable in two stages, provided
Aspect achieves its sales minimums in
the first two years of the agreement.
The warrants are exercisable at 14.3
pence per share.
The Group continues to monitor
overheads and cash carefully and is
expecting to achieve its maiden profit
in the current financial year.
Product development
The first half of 2010 will see us continue
to refine the LiDCOrapid graphical user
interface whilst improving and simplifying
customer use and connectivity to our
monitors. The first phase of these changes
was completed in July 2009 when we
announced the launch of the LiDCOrapid
version 1.02. This new software added
user-adjustable timescales for trending
fluid parameters, and two extra screens
(History and Data charting). These
enhancements are being seamlessly added
to our installed monitor base and have
been well received by our UK and export
customers in the six months since launch.
The next revision of the LiDCOrapid
software – version 1.03 will be available
later this summer and will have a
number of new features:
• Universal pressure waveform module:
This – and associated LiDCOrapid software
changes – will allow wider market
adoption by making it easier to access
arterial blood pressure data where, to
date, access has been difficult, or where
the primary patient monitor does not
provide the necessary analogue arterial
pressure output.
• LiDCO Monitor language localisation:
This converts the information on the
LiDCOrapid monitors’ screens from
English into 22 languages. Users can select
from the appropriate language menu on
the start-up screen.
• RS232 Communication changes:
This will allow the LiDCOrapid monitor
to communicate with a wider range of
hospital information systems – one current
project is to connect to GE’s information
system. Hospitals increasingly require that
hemodynamic monitors can pass data to
their information systems. A configurable
output makes this an easier process.
Platform evolution – the LiDCO & BIS
Combination Monitor
There is considerable interest from
customers in producing a combined
product that can realise the synergies
between Aspect’s (now Covidien)
Bispectral Index (BIS) product and the
LiDCOrapid monitor. The former ensures
the correct depth of anesthesia is
achieved, and the latter is used while the
patient remains in surgery to restore blood
pressure and cardiac output to pre-surgery
levels.
To quantify the value of a LiDCO and BIS
combination, we supported a prospective
study at King’s College Hospital, London.
This study has now concluded successfully
and some of the results have been
submitted for presentation. The results
demonstrate that their simultaneous
availability produces a unique insight into
the underlying factors driving the large
blood pressure changes occurring when a
patient is anesthetized.
Evidence – development of supportive
clinical and business cases
Our growth strategy is clearly focused
on providing minimally invasive
hemodynamic monitoring products that
can be effectively sold through our direct
sales force and distribution channel
partners. Increasingly our customers are
demanding that such products are
supported with higher levels of evidence
that their use will be cost-effective.
Helpfully as time moves on, more and
more customers are documenting how
our products have helped with the care
of their patients. Over the last year
valuable insights into specific uses have
been demonstrated in the fields of:
organ transplantation, major and bariatric
surgery, intensive care and cardiology.
At the start of this year the UK’s National
Technology Adoption Centre (NTAC)
reported UK Hospital’s Trusts experiences
using/adopting the technique of
hemodynamic intra-operative goal
directed fluid management. NTAC’s role
is to work with NHS organisations to
understand and overcome the barriers to
the implementation of evidence based
technologies that will deliver improved
patient outcomes and effective use of NHS
resources. The result of that work was the
development of a business case template
that is intended to be tailored by NHS
Trusts to facilitate the implementation of
this technique with the goal of improving
clinical outcomes following major surgery,
leading to reduced hospital stay driving
improved efficiency and productivity.
Customers have an increasingly strong
evidence-based business case for the
adoption of advanced hemodynamic
monitoring that coincides with a strong
imperative to reduce costs and improve
productivity.
Regulatory affairs and quality
During the year LiDCO was successfully
audited against the requirements of
ISO13485:2003, ISO9001:2000, the EU
Medical Devices Directive and the Health
Canada Medical Device Regulations.
Our activities and products comply with
the requirements of all recently published
EU Directives – the Waste Electrical &
Electronic Equipments (WEEE) regulations;
the Restrictions of the use of certain
Hazardous Substances in Electrical and
Electronic Equipment (RoHS) regulations;
the Registration, Evaluation and
Authorisation of Chemicals (REACH)
regulations; the Waste Batteries and
Accumulators regulations; the Batteries
and Accumulators (Placing on the Market)
regulations; the Machinery Directive and
the Eco Design Directive.
LiDCO’s products are registered in a
number of major territories and
registration of LiDCO products is ongoing
in Japan, China, Colombia, Russia and
Argentina.
Dr Terence O’Brien
Chief Executive Officer
23 April 2010 Board of Directors and Company Secretary
12 LiDCO Annual Report 2009/10
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 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 AIM, the market
for smaller growing companies, 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. Since 2001, she has held a number of non-
executive directorships and is currently a non-executive director
of 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. Clinical Advisory Board
13 LiDCO Annual Report 2009/10
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 ex-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.
John Rowland
Company Secretary (right)
Mr Rowland joined the Group in October 2007 qualifying as a
Chartered Secretary in 1983. Prior to joining the Group he was
Group Company Secretary of Robert Dyas, the high street
retailer, between 2000 and 2007 and remains a trustee of their
pension scheme. He has also served as Company Secretary of
Aegis Group plc and The Birkdale Group plc both media
companies and as an Assistant Company Secretary of National
Westminster Bank PLC. Mr Rowland has also held senior
positions with Gestetner Holdings plc and Raybeck plc. 14 LiDCO Annual Report 2009/10
The Combined Code
Companies that have shares traded on the AIM market of the London Stock Exchange are not required to comply with the
disclosures of the Combined Code on Corporate Governance. 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 12 and 13.
There were 12 Board meetings during the year. The attendance of the individual directors at the Board Meetings and the Audit and
Remuneration Committee Meetings was as follows:
Attendance record at Board Meetings and Committees
Board Audit Remuneration Nomination
Name Position Meetings Committee Committee Committee
Ms T A Wallis Non-executive Chairman 12(12) 2(2) 6(6) n/a
Dr T K O’Brien Chief Executive Officer 12(12) n/a n/a n/a
Mr P L Clifford Finance Director 12(12) n/a n/a n/a
Dr D M Band Scientific Director 11(12) n/a n/a n/a
Mr J G Barry Sales & Marketing Director 11(12) n/a n/a n/a
Mr I G Brown Non-executive Director 12(12) 2(2) 6(6) n/a
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 2010, the Board carried out an evaluation of the performance, functioning and composition of the Board and its
Committees. 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 Report 15 LiDCO Annual Report 2009/10
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 £10,000 against an
audit fee of £42,000. 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 six 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. The Committee did
not meet during the year.
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. 16 LiDCO Annual Report 2009/10
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 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 issues 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 15.
Corporate Social Responsibility Statement 17 LiDCO Annual Report 2009/10
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 2010.
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 six 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 operating loss. 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 2010
Allowance
Salary in lieu of
and fees benefits Benefits Bonus Total 2009
£’000 £’000 £’000 £’000 £’000 £’000
T A Wallis 44 – – – 44 44
T K O’Brien 185 37 – 37 259 252
J G Barry 171 34 3 33 241 238
P L Clifford* 72 7– 13 92 44
D M Band 45 9 – 7 61 62
I G Brown 28 ––– 28 28
Total 545 87 3 90 725 668
*Mr Clifford was appointed on a part-time basis on 23 April 2008, increasing the number of days worked in September 2009.
Directors’ Remuneration Report 18 LiDCO Annual Report 2009/10
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. The Chairman’s appointment is for a term ending 19 December 2011 and Mr Brown’s
appointment for a term ending 11 October 2011.
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 2009 grant during 2009 the year 31 Jan 2010 price from date
T K O’Brien EMI 750,000 Dec-02 750,000 13.00p Dec-05 Dec-12
EMI 11,627 Apr-05 11,627 21.50p Apr-08 Apr-15
Unapproved 265,768 Apr-05 265,768 21.50p Apr-08 Apr-15
EMI – May-09 150,000 150,000 12.67p May-12 May-19
1,027,395 150,000 – 1,177,395
D M Band EMI 750,000 Dec-02 750,000 13.00p Dec-05 Dec-12
EMI 11,627 Apr-05 11,627 21.50p Apr-08 Apr-15
Unapproved 53,489 Apr-05 53,489 21.50p 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 13.00p Dec-05 Dec-12
EMI 539,000 Dec-02 539,000 13.00p Dec-05 Dec-12
Unapproved 90,000 Nov-03 90,000 28.25p Nov-06 Nov-13
Unapproved 356,844 Apr-05 356,844 21.50p Apr-08 Apr-15
Unapproved 192,436 Apr-05 192,436 22.00p Dec-05 Apr-15
Unapproved 328,539 Apr-05 328,539 22.00p Apr-06 Apr-15
Unapproved 656,903 Apr-05 656,903 22.00p Sep-06 Apr-15
EMI 136,045 Apr-05 136,045 22.00p Dec-05 Apr-15
Unapproved 45,000 Jun-06 45,000 21.00p Jun-09 Jun-16
Unapproved 75,000 Jun-07 75,000 12.50p Jun-10 Jun-17
Unapproved 83,333 Apr-08 83,333 7.50p Apr-11 Apr-18
EMI 266,667 Apr-08 266,667 7.50p Apr-11 Apr-18
Unapproved – May-09 150,000 150,000 12.67p May-12 May-19
3,087,017 150,000 – 3,237,017
P L Clifford Approved 66,000 Apr-08 – 66,000 7.50p Apr-11 Apr-18
Approved – May-09 75,000 75,000 12.67p May-12 May-19
66,000 75,000 – 141,000
Totals 4,995,528 375,000 – 5,370,528
The share price was 7.00p on 1 February 2009 and 18.25p on 29 January 2010, with high and lows during the year of 26.00p and
6.00p respectively.
Pensions
No pension contributions were payable by the Group during the year. (2008/9: £nil)
Directors’ Remuneration Report
continued 19 LiDCO Annual Report 2009/10
Shareholder return
The graph below shows the share price performance since January 2005, 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
23 April 2010
30
Pence
25
20
15
10
5
0
31/01/05
31/01/06
31/01/07
31/01/08
31/01/09
31/01/10
TechMARK MediScience
LiDCO
Relative price scale 20 LiDCO Annual Report 2009/10
The directors of LiDCO Group Plc present their annual report and audited financial statements (Annual Report) for the year ended
31 January 2010.
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 Chairman’s Statement, the Chief Executive Officer’s Statement 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 predominantly 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 relies on distributors for its sales and marketing activities outside of the UK. The Group mitigates the risk of distributor
underperformance by selecting distributors with the requisite resources, skills, access to customers and creditworthiness and by providing
training programmes and extensive support both in the initial phase following appointment and on an ongoing basis.
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 £5,367,000 (2008/9: £4,532,000). The Group made a consolidated loss after taxation of £1,427,000
(2008/9: £1,650,000). The directors do not recommend the payment of a dividend (2007/8: £nil).
The Company’s share price at 29 January 2010 was 18.25p (2009: 7.00p)
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 32 and 35 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 14 on page 40 and 4 on page 45 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 12 and 13.
T A Wallis Non-Executive Chairman
T K O’Brien Chief Executive Officer
P L Clifford Finance Director
D M Band Scientific Director
J G Barry Sales and Marketing Director
I G Brown Non-Executive Director
Dr O’Brien and Dr Band retire by rotation and, being eligible, offers 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 17 and 18.
Directors’ Report 21 LiDCO Annual Report 2009/10
Directors’ interests in shares
The directors who held office at 31 January 2010 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
2010 2009
Number Number
T A Wallis 301,037 201,037
T K O’Brien 11,516,563 11,035,461
P L Clifford 500,000 188,000
D M Band 7,160,832 7,060,832
J G Barry 429,642 379,642
I G Brown 200,000 100,000
The directors have no interests in the shares of the Company’s subsidiary undertakings.
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 briefed on the Group’s activities through meetings and discussions with management and 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 Group’s average creditor payment
period as at 31 January 2010 was 25 days (2008/9:42days).
Significant shareholdings
As at 16 April 2010, 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 26,828,972 15.42%
Cheviot Asset Management Limited 13,415,748 7.71%
H J Leitch 13,177,489 7.58%
P A Brewer 11,724,727 6.74%
R M Greenshields 9,042,407 5.20%
Liontrust Intellectual Capital Trust 8,738,639 5.02%
Octopus Investments Limited 5,634,200 3.24%
*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 (2008/9: £nil).
Directors’ responsibilities for the financial statements accounts
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. 22 LiDCO Annual Report 2009/10
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 2006. 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.
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. As a result the Group has continued to trade at a loss during the year ended
31 January 2010.
The Group finances its operations through shareholders funds and an overdraft facility. The directors have approved forecasts for the
foreseeable future, which indicate that the Group will have sufficient funds to trade during that period. In May and June 2009, 31,916,000
new ordinary shares were issued at 10 pence per share to existing investors, management and new institutional funds raising £3.02m (net).
During the year the Group appointed a new distributor in the USA. As part of the agreement, the Group transferred the bulk of its US sales
force to the distributor reducing US sales costs by about £650,000 in a full year. The financial statements do not include any adjustments
that would be required in the event that the Company had insufficient funding available.
Accountability and audit – Going concern
As noted in the accounting policies and 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.
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 37 to 39.
Key Performance Indicators (KPIs)
The Board monitors progress against the Group’s strategy and by reference to the KPIs, specifically revenue growth, gross margin, 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 composition of the Board and the senior management team provides a suitable range of knowledge and experience to enable adequate
risk monitoring. 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 are reviewed monthly. 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 2010.
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 ISO13485 (Medical Devices – Quality Management Systems) and ISO 9001 (Quality Management
Systems).
The Board has established a process involving all departments for the comprehensive 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 risks are identified 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 Tuesday 29 June 2010 is set out on pages 5 to 6 of the
separate circular, which includes an explanation of each resolution.
By order of the Board
John Rowland
Company Secretary
23 April 2010
Directors’ Report
continued 23 LiDCO Annual Report 2009/10
We have audited the Group financial statements of LiDCO Group Plc for the year ended 31 January 2010 which comprise the consolidated
comprehensive income statement, the consolidated balance sheet, the consolidated cash flow statement, the consolidated statement of
changes in shareholders equity and the related notes. The financial reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the Company’s members, as a body, in accordance with chapter 3 of part 16 of the Companies Act 2006.
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 auditor’s 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
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the Group financial
statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the Group financial statements in
accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the
Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/UKNP.
Opinion on financial statements
In our opinion the Group financial statements:
• give a true and fair view of the state of the Group’s affairs as at 31 January 2010 and of its loss for the year then ended;
• have been properly prepared in accordance with IFRS as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the Group financial statements are prepared is
consistent with the Group financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Other matters
We have reported separately on the parent company financial statements of LiDCO Group Plc for the year ended 31 January 2010.
David Miller
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
23 April 2010
Independent Auditor’s Report to the members of LiDCO Group Plc 24 LiDCO Annual Report 2009/10
Year ended Year ended
31 January 31 January
2010 2009
Note £’000 £’000
Revenue 2 5,367 4,532
Cost of sales (2,074) (1,512)
Gross profit 3,293 3,020
Administrative expenses (4,832) (4,816)
Loss from operations 3 (1,539) (1,796)
Finance income 5 57
Finance expense (11) (31)
Loss before tax (1,545) (1,770)
Income tax 5 118 120
Loss and total comprehensive expense for the year attributable to equity holders of the parent (1,427) (1,650)
Loss per share (basic and diluted) (p) 6 (0.87) (1.16)
All transactions arise from continuing operations.
There were no items of other comprehensive income for the financial year.
The accompanying accounting policies and notes form an integral part of these financial statements.
Consolidated Comprehensive Income Statement
For the year ended 31 January 2010 25 LiDCO Annual Report 2009/10
2010 2009
Note £’000 £’000
Non-current assets
Property, plant and equipment 7 587 671
Intangible assets 8 764 746
1,351 1,417
Current assets
Inventory 9 1,094 1,053
Trade and other receivables 10 1,649 1,686
Current tax 120 120
Cash and cash equivalents 1,846 487
4,709 3,346
Current liabilities
Trade and other payables 11 (603) (905)
Deferred income 11 (614) (37)
Borrowings 11 (10) (618)
(1,227) (1,560)
Net current assets 3,482 1,786
Total assets less current liabilities 4,833 3,203
Equity attributable to equity holders of the parent
Share capital 14 869 710
Share premium 25,393 22,531
Merger reserve 8,513 8,513
Retained earnings (29,956) (28,575)
Total equity 4,819 3,179
Non-current liabilities
Finance lease liability 12 14 24
Total non-current liabilities 14 24
Total equity and non-current liabilities 4,833 3,203
The financial statements were approved by the Board of Directors on 23 April 2010.
Theresa Wallis Terence O’Brien
Director Director
Consolidated Balance Sheet
At 31 January 2010
The accompanying accounting policies and notes form an integral part of these financial statements. 26 LiDCO Annual Report 2009/10
Year ended Year ended
31 January 31 January
2010 2009
£’000 £’000
Operating loss (1,539) (1,796)
Depreciation and amortisation charges 672 688
Share based payments 46 91
Increase in inventories (41) (214)
Decrease/(increase) in receivables 37 (357)
(Decrease)/increase in payables (302) 294
Increase in deferred income 577 –
Finance expense (11) (31)
Income tax credit received 118 121
Net cash outflow from operating activities (443) (1,204)
Cash flows from investing activities
Purchase of property, plant and equipment (132) (208)
Purchase of intangible assets (474) (447)
Interest received 5 57
Net cash used in investing activities (601) (598)
Net cash outflow before financing (1,044) (1,802)
Cash flows from financing activities
Repayment of finance lease (10) –
Issue of ordinary share capital 3,021 –
Convertible loan repayment – (553)
Invoice discounting financing facility (364) 364
Net cash inflow/(outflow) from financing activities 2,647 (189)
Net increase/(decrease) in cash and cash equivalents 1,603 (1,991)
Opening cash and cash equivalents 243 2,234
Closing cash and cash equivalents 1,846 243
Consolidated Cash Flow Statement
For the year ended 31 January 2010
The accompanying accounting policies and notes form an integral part of these financial statements. 27 LiDCO Annual Report 2009/10
Share Share Merger Retained Total
capital premium reserve earnings equity
£’000 £’000 £’000 £’000 £’000
At 1 February 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 comprehensive expense for the year –– – (1,650) (1,650)
At 31 January 2009 710 22,531 8,513 (28,575) 3,179
Issue of share capital 159 2,862 –– 3,021
Share based payment expense –– – 46 46
Loss and total comprehensive expense for the year –– – (1,427) (1,427)
At 31 January 2010 869 25,393 8,513 (29,956) 4,819
The share premium account represents the excess over the nominal value for shares allotted.
The merger reserve represents a non-distributable reserve arising from historic acquisitions.
Consolidated Statement of Changes in Shareholders’ Equity
For the year ended 31 January 2010
The accompanying accounting policies and notes form an integral part of these financial statements. 28 LiDCO Annual Report 2009/10
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 [1]. The Group’s shares are listed
on the Alternative Investment Market of the London Stock Exchange.
Basis of preparation
These financial statements have been prepared in accordance with the principal accounting policies adopted by the Group, International Financial
Reporting Standards (IFRS) and International Financial Reporting Interpretations (IFRIC) as adopted by the EU and those parts of the Companies Act
2006 applicable to companies reporting under IFRS. 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 31 January 2010.
In the current year, the Group has adopted IFRS 1 (revised) ‘Presentation of Financial Statements’, IFRS 7 ‘Financial Instruments: Improving
disclosures about financial instruments’ and IFRS 8 ‘Operating segments’. IAS 1 (revised) brings new disclosure requirements regarding owner and
non-owner changes in equity which are now required to be shown separately. These financial statements have been prepared under the revised
disclosure requirements which requires the presentation of a comparative balance sheet at the start of the comparative period. Management
consider this is unnecessary since the 2007 balance sheet is the same as that previously published. IFRS 8 requires operating segments to be
identified on the basis of internal reports about components of the Group that are regularly reviewed by the Board. IFRS 7 requires enhanced
disclosures about fair value measurement and liquidity risk.
The forthcoming standards may affect the preparation of the Group’s financial statements in the future:
IFRIC 16: Hedges;
IFRS 3: Business combinations;
IAS 39: Financial instruments.
These standards are effective but the Group has not adopted them early.
IFRS standards and interpretations not yet adopted
As of 31 January 2010, the following standards and interpretations are in issue but not yet adopted by the EU:
• IFRS 9 Financial Instruments (effective 1 January 2013)
• Prepayments of a Minimum Funding Requirement – Amendments to IFRIC 14 (effective 1 January 2011)
• IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective 1 July 2010)
• Improvements to IFRSs (issued 16 April 2009)
• Group Cash-settled Share-based Payment Transactions – Amendment to IFRS 2 (effective 1 January 2010)
• Amendment to IFRS 1 Additional Exemptions for First-time Adopters (effective 1 January 2010)
• IAS 24 (revised 2009) Related Party Disclosures (effective 1 January 2011)
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. As a result the Group has continued to trade at a loss during the year ended 31 January 2010.
The Group finances its operations through shareholders’ funds and an overdraft facility. The directors have approved forecasts for the foreseeable
future, which indicate that the Group will have sufficient funds to trade during that period. During the year the Group appointed a new distributor
in the USA. As part of the agreement, the Group transferred the bulk of its US sales force to the distributor reducing US sales costs by about
£650,000 in a full year.
Accounting convention
The financial statements are prepared under the historic cost convention. The measurement basis and significant accounting policies are set out
below.
Basis of consolidation
The Group’s consolidated financial statements consolidate those of the Company and of its subsidiary undertakings drawn up to 31 January 2010.
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 2010 29 LiDCO Annual Report 2009/10
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 any subsequent 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.
Licence fees
Licence fees are recognised in accordance with the substance of the relevant distribution agreement, provided that it is probable that the economic
benefit associated with the transaction will flow to the Group and the amount of revenue can be reliably measured. Licence fees received in advance
of the recognition of those fees is shown as deferred income.
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 benefit.
• 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 and 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 expected 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
Medical monitors 20% per annum
Medical monitors include equipment on long term loan to hospitals for active use where the hospital pays for disposables. Also included in this
category is equipment for demonstration purposes, clinical trials and testing. 30 LiDCO Annual Report 2009/10
1 Principal accounting policies continued
Leases
Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases.
Assets held under finance leases are capitalised at the lower of fair value or present value of the minimum lease payments in the balance sheet and
depreciated over their estimated useful economic lives. The interest element of leasing payments represents a constant proportion of the capital
balance outstanding and is charged to the income statement over the period of the lease.
All other leases are regarded as operating leases and the payments made under them are charged to the income statements account on a straight-
line basis over the lease term.
Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of
business, less the estimated costs of selling expenses.
The cost of inventories is based on the first-in first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to
their existing locations and condition.
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.
Financial liabilities
The Group’s financial liabilities include borrowings, trade and other creditors. Financial liabilities are measured at amortised cost using the effective
interest rate method.
Share-based payments
The Group has two equity-settled share-based remuneration schemes 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
related performance conditions are factored into the fair value of the options granted and a charge is made irrespective of whether the market
related performance conditions are satisfied. In respect of awards with non market related performance conditions, an estimate of the proportion
that will vest is made at the award date which is adjusted if the number of share options expected to vest differs from the previous estimates. Any
cumulative adjustment prior to vesting is recognised in the current period.
Where the Group issues share warrants in respect of distributor arrangements, 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.
Notes to the Financial Statements
continued 31 LiDCO Annual Report 2009/10
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.
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 three groups, hospitals in the UK and USA where direct sales are made, global distributors predominantly in
the USA and Japan and independent distributors, predominantly in Europe and the Rest of the World. In making provision for overdue trade
receivables, management consider the first two groups to be generally of lower risk than those due from independent 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.
The monitors are judged to have been sold to Med One when title and the significant risks and rewards of ownership have passed. Regarding the
sale of consumables, the obligation to pay Med One is judged to arise when the consumables have been sold to the end user customer.
Licence income
The Group may receive licence fees in connection with the granting of exclusive distribution rights for overseas territories. When recognising such
licence fees the management considers the substance of the relevant distribution agreement. Any work that the Group needs to undertake to fulfill
its obligation is taken into consideration and the period over which the work is likely to be performed. Revenue is only recognised provided that it is
probable that the economic benefit associated with the transaction will flow to the Group and the amount of revenue can be reliably measured.
Normally such licence fees are received on signature of the distribution agreement.
2 Revenue and segmental information
The Group has one 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 the chief operating decision maker to monitor sales activity and is presented below:
Turnover and result by geographical region
Year ended Year ended
31 January 31 January
2010 2009
Group Revenue £’000 £’000
USA 2,273 1,027
UK 1,822 2,161
Continental Europe 990 1,093
Rest of World 282 251
5,367 4,532
Result
USA 459 (329)
UK 113 565
Continental Europe 402 477
Rest of World 127 92
Total 1,101 805
Unallocated costs (2,640) (2,601)
Loss from operations (1,539) (1,796) 32 LiDCO Annual Report 2009/10
2 Revenue and segmental information continued
Products and services
Year ended Year ended
31 January 31 January
2010 2009
£’000 £’000
Monitor sales 1,855 1,959
Consumables sales and recurring revenues 3,125 2,573
Licence fees 387 –
5,367 4,532
Sales of monitors to Med One as detailed in Note 1 under revenue recognition during the year amounted to £nil (2008/09: £314,000). Payments
to Med One relating to consumables and included within cost of sales amounted to £688,000 (2008/09: £587,000) during the year.
The Group can identify trade receivables and trade payables relating to the geographical areas. As noted above, the Group has one 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.
All non-current assets are located in the United Kingdom.
Material customers
During the year a customer, based in the USA accounted for more than 10% of the Group’s total revenue. Revenue recognised during the year is
as follows:
2010 2010 2009 2009
£’000 % revenue £’000 % revenue
Revenue recognised 1,526 28% ––
3 Loss from operations
The loss on operations before taxation is stated after:
Year ended Year ended
31 January 31 January
2010 2009
£’000 £’000
Auditors’ remuneration:
– Fees payable to the Company auditors for the audit of the Group accounts: 17 16
Fees payable to the Company auditors for other services:
– Audit of the Company’s subsidiaries 25 25
– Other services relating to the interim review* 9 7
– Other services* 1 5
Research and development 109 149
Depreciation of property, plant and equipment 216 241
Amortisation of intangible assets 456 447
Operating leases – rental of land and buildings 165 149
Share-based payment charge in respect of distributor arrangements 63 –
Write down of inventories 46 54
Exchange rate losses/(gains) 23 (84)
The cost of goods sold during the year amounted to £1,224,000 (2009: £765,000)
* Non-audit services comprise £9,000 for interim review services. The Board considers it cost effective for the auditors to provide these services.
Notes to the Financial Statements
continued 33 LiDCO Annual Report 2009/10
4 Staff costs
Staff costs during the year were as follows:
Year ended Year ended
31 January 31 January
2010 2009
Group £’000 £’000
Wages and salaries 1,970 2,099
Social security costs 179 183
Share-based payments charge (97) 91
2,052 2,373
The average number of employees (including executive directors) of the Company during the year was:
2010 2009
Number Number
Production 10 10
Sales 16 17
Administration 13 11
39 38
Remuneration of directors is shown in the Directors’ Remuneration Report.
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
2010 2009
£’000 £’000
United Kingdom corporation tax at 28% (2009: 28%) – –
United States income taxes 4 –
Research and development expenditure tax credits – current year (120) (120)
– prior year (2) –
Total tax (118) (120)
United States tax has been calculated at the Federal/State tax rates applicable to profits arising in the respective States.
The tax assessed for the year differs from the standard rate of corporation tax applied to the trading results. The differences are explained below:
Loss on ordinary activities multiplied by standard rate of corporation tax in the
United Kingdom of 28% (2009: 28%) (433) (496)
Effect of:
Expenses not deductible for tax purposes 24 17
Depreciation for the period in excess of capital allowances 50 52
Prior year adjustment (2) –
Increase in tax losses 217 264
Other temporary differences 13 25
Additional deduction for research and development expenditure (99) (85)
Losses surrendered for research and development tax credit 231 223
United States income taxes 3 –
Research and development expenditure tax credits (122) (120)
Total tax (118) (120)
The above table reconciles the income tax credit with the accounting loss at the standard rate of UK corporation tax. 2009 figures have been
restated to comply more nearly with the requirements of IAS12. 34 LiDCO Annual Report 2009/10
5 Tax on loss on ordinary activities continued
The current year research and development tax credit of £120,000 (2009: £120,000) represents 24.5% (2009: 24.2%) of the Group’s qualifying
research and development spend.
The amount of the unused tax losses and temporary differences for which no deferred tax asset was recognised at the balance sheet date was:
Year ended Year ended
31 January 31 January
2010 2009
£’000 £’000
Unused losses (available indefinitely) 23,408 21,422
Temporary differences (available indefinitely) 427 263
23,835 21,685
The related deferred tax asset of approximately £6.7m (2009: £6.4m) has not been recognised due to the uncertainty of future taxable profits.
6 Loss per share
The calculation of basic earnings per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of
shares in issue during the year. The calculation of diluted earnings per share is based on the calculation described above adjusted to allow for the
issue of shares on the assumed conversion of all dilutive options. Share options are regarded as dilutive when, and only when, their conversion to
ordinary shares would increase the loss per share.
Year ended Year ended
31 January 31 January
2010 2009
£’000 £’000
Loss after tax for the financial year (1,427) (1,650)
Number Number
(‘000) (‘000)
Weighted average number of ordinary shares 164,597 141,983
Effect of dilutive share options – –
Adjusted weighted average number of ordinary shares 164,597 141,983
Loss per share – basic and diluted (p) (0.87) (1.16)
Notes to the Financial Statements
continued 35 LiDCO Annual Report 2009/10
7 Property, plant & equipment
Leasehold Plant and Fixtures Computer Medical
improvements machinery and fittings equipment monitors Total
£’000 £’000 £’000 £’000 £’000 £’000
Cost
At 1 February 2008 555 428 161 549 523 2,216
Additions –3 23 6 101 133
Disposals –– (13) (105) (147) (265)
At 31 January 2009 555 431 171 450 477 2,084
Additions – 5 1 47 81 134
Disposals –– (3) (21) (66) (90)
At 31 January 2010 555 436 169 476 492 2,128
Accumulated depreciation
At 1 February 2008 302 275 135 478 193 1,383
Charge for the year 53 33 16 43 96 241
Disposals –– (13) (105) (93) (211)
At 31 January 2009 355 308 138 416 196 1,413
Charge for the year 53 32 15 28 88 216
Disposals –– (3) (19) (66) (88)
At 31 January 2010 408 340 150 425 218 1,541
Carrying amount at 31 January 2010 147 96 19 51 274 587
Carrying amount at 31 January 2009 200 123 33 34 281 671
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.
Medical monitors include equipment on long term loan to hospitals for active use where the hospital pays for disposables. Also included in this
category is equipment for demonstration purposes, clinical trials and testing.
The carrying amount of the Group’s plant and equipment includes £24,000 (2009: £34,000) in respect of assets held under finance leases.
8 Intangible assets
Product Product
Clinical trials registration development Total
£’000 £’000 £’000 £’000
Cost
At 1 February 2008 116 459 1,631 2,206
Additions – 97 349 446
At 31 January 2009 116 556 1,980 2,652
Additions – 73 401 474
At 31 January 2010 116 629 2,381 3,126
Accumulated amortisation
At 1 February 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
Charge for the year 15 119 322 456
At 31 January 2010 116 379 1,867 2,362
Carrying amount at 31 January 2010 – 250 514 764
Carrying amount at 31 January 2009 15 296 435 746
Intangible assets includes assets that are 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. 36 LiDCO Annual Report 2009/10
9 Inventory
2010 2009
£’000 £’000
Raw materials and consumables 246 250
Finished goods and goods for resale 848 803
1,094 1,053
At 31 January 2010, inventories stated net of allowances for obsolete or slow moving items was £106,000 (2009: £117,000).
10 Trade and other receivables
2010 2009
£’000 £’000
Trade receivables 1,473 1,537
Other receivables 51 48
Prepayments 125 101
1,649 1,686
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 2010, trade receivables of £1.10m
(2009: £1.24m) 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:
2010 2009
£’000 £’000
Not more than three months 182 50
More than three months but not more than six months 94 30
More than six months but not more than one year 15 106
More than one year 79 111
370 297
Movements in Group provisions for impairment of trade receivables are as follows, which are included within administrative expenses in the income
statement.
2010 2009
£’000 £’000
Opening balance 95 100
Provision for receivables impairment 94 44
Receivables written off in year (183) (24)
Unused amounts reversed – (25)
Closing balance 6 95
The other classes within trade and other receivables do not contain impaired assets.
11 Current liabilities
2010 2009
£’000 £’000
Trade payables 332 560
Social security and other taxes 65 92
Accruals 206 253
Deferred income 614 37
Bank overdraft – 244
Invoice discount financing facility – 364
Finance leases 10 10
1,227 1,560
The directors consider that the carrying amount of trade and other payables approximates to their fair value.
The Group has overdraft facilities that are provided by a UK bank. The bank has a charge over the assets of the Group but excluding any intellectual
property rights.
Notes to the Financial Statements
continued 37 LiDCO Annual Report 2009/10
12 Non-current liabilities
2010 2009
£’000 £’000
Finance leases 14 24
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 £3,370,000 (2009: £2,072,000).
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 2010, 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 2010 £’000 £’000 £’000 £’000
Finance lease obligations 55 14 –
Trade payables 603 –– –
608 5 14 –
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 2009 £’000 £’000 £’000 £’000
Invoice discount financing facility – 364 ––
Bank overdraft – 244 ––
Finance lease obligations 77 24 –
Trade payables 905 –– –
912 615 24 – 38 LiDCO Annual Report 2009/10
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. This risk reduced significantly during the year with the transfer of the
bulk of the US sales force to Aspect Medical Systems Inc.
Group interest rate profile
Floating rate
Cash current Deposit and
bank reserve
accounts account Total
Financial assets at 31 January 2010 £’000 £’000 £’000
Currency
Sterling 46 1,405 1,451
US dollars 394 – 394
Euro 1– 1
441 1,405 1,846
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, principal accounting policies, covering financial assets and financial liabilities for explanations about how
the category of instruments affects their subsequent measurement.
2010 2009
Current assets £’000 £’000
Loans and receivables:
– Trade and other receivables 1,524 1,585
– Cash and cash equivalents 1,846 487
3,370 2,072
2010 2009
Non-current liabilities £’000 £’000
Finance lease obligations 14 24
14 24
2010 2009
Current liabilities £’000 £’000
Financial liabilities measured as amortised cost:
– Borrowings 10 618
Trade payables and other short term financial liabilities 332 560
342 1,178
Notes to the Financial Statements
continued 39 LiDCO Annual Report 2009/10
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 currency where the Group is most exposed to foreign currency
volatility is US dollars.
Transactions and balances of the subsidiaries are denominated in the local currency and had the following balances denominated in US dollars:
US Dollars
2010 2009
£’000 £’000
Trade and other receivables 79 576
Cash and cash equivalents 394 79
Invoice discounting financing facility – (97)
Trade and other payables (37) (253)
436 305
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
2010 2009
Currency fluctuation 11% 25%
If sterling had strengthened against the US dollar by the percentage above retrospectively, then this would have had the following impact:
US Dollars
2010 2009
£’000 £’000
Net result for the year (76) (12)
Equity (76) (12)
If sterling had weakened against the US dollar by the percentage above retrospectively, then this would have had the following impact:
US Dollars
2010 2009
£’000 £’000
Net result for the year 76 12
Equity 76 12
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. 40 LiDCO Annual Report 2009/10
14 Share capital
2010 2009
£’000 £’000
Authorised – 200,000,000 ordinary shares of 0.5 pence each 1,000 1,000
2010 2009
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 141,983 141,983
Issued for cash 31,916 –
At the end of the year 173,899 141,983
£’000 £’000
At the beginning of the year 710 710
Issued for cash 159 –
At the end of the year 869 710
On 19 May 2009 14,020,000 shares were issued at 10p per share. On 26 June 2009 17,896,000 shares were issued at 10p per share.
On 11 August 2005, the Group issued share warrants to Laurus Master Fund Limited as part of the Group’s loan arrangements with that company.
The warrants are over 936,330 ordinary shares at an exercise price of 30 pence. The last date of exercise is 11 August 2010.
On 28 July 2009, the Group issued share warrants in respect of arrangement with a distributor. (See note 15).
15 Share-based payments
Equity-settled share option schemes
The Group has two share option schemes 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.
2010 2009
Weighted Weight
average average
exercise exercise
Number price (p) Number price (p)
Outstanding at the beginning of the year 9,353,872 15.9 7,962,277 17.5
Issued in the year 1,309,000 13.3 1,601,120 7.8
Forfeited during the year (94,293) 18.4 (209,525) 16.3
Exercised during the year (42,500) 0.5 --
Outstanding at the end of the year 10,526,079 15.8 9,353,872 15.9
Exercisable at the end of the year 7,377,079 18.0 6,855,872 13.8
Notes to the Financial Statements
continued 41 LiDCO Annual Report 2009/10
Fair value is determined by reference to the fair value of the instrument granted to the employee or warrant holder. The expected life used in the model
has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
These fair values for options granted during the year were calculated using a Black-Scholes option pricing model using the following inputs:
2010 2009
Weighted average share price (p) 13.3 7.8
Weighted average exercise price (p) 13.3 7.8
Expected volatility 50% 40% – 45%
Expected life 3.5 3.5
Risk free rate 3.0%-3.5% 3.0%-3.5%
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. The weighted average remaining contractual life of the outstanding options
was 5.45 years.
Share warrants in respect of distributor arrangements
During the year the Group issued share warrants in respect of an arrangement with Aspect Medical Systems Inc. Warrants were issued over a total
of 13,915,324 shares at an exercise price of 14.3 pence which represented a 20% premium over the mid market price for a period of 10 days
before and 10 days after the date of the distributor agreement. The fair value of the warrants at the date of grant has been calculated using the
same pricing model as that used for the equity-settled share option schemes and will be charged to the income statement over the vesting period.
The distributor may exercise the warrants subject to purchasing certain minimum quantities of monitors and disposables during the first and second
years of the distribution agreement.
16 Capital commitments
The Group had no capital commitments at 31 January 2010 or 31 January 2009.
17 Contingent liabilities
There were no contingent liabilities at 31 January 2010 or 31 January 2009.
18 Leasing commitments
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
2010 2009
Land and Land and
buildings Other buildings Other
Group £’000 £’000 £’000 £’000
In one year or less 45 73 164 56
Between one and five years 15 46 60 70
60 119 224 126
19 Related party transactions
During the year, no contracts of significance other than those disclosed within the Directors’ Remuneration Report were existing or entered into by
the Group or its subsidiaries in which the directors had a material interest.
Key management compensation
Compensation for directors who are the only employees with responsibility for planning, directing and controlling the Group is disclosed in the
Directors’ Remuneration Report.
Transactions between the Company and its subsidiaries which are related parties are eliminated on consolidation. There were no transactions
between the Company and its subsidiaries. 42 LiDCO Annual Report 2009/10
We have audited the parent company financial statements of LiDCO Group Plc for the year ended 31 January 2010 which comprise the parent
company balance sheet, the parent company reconciliation of movements in shareholders’ funds and the related notes. The financial reporting
framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of part 16 of the Companies Act 2006. 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 auditor’s 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
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the parent company financial
statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the parent company financial statements in
accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing
Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/UKNP.
Opinion on financial statements
In our opinion the parent company financial statements:
• give a true and fair view of the state of the Company’s affairs as at 31 January 2010;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with
the parent company financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches
not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Other matters
We have reported separately on the Group financial statements of LiDCO Group Plc for the year ended 31 January 2010.
David Miller
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
23 April 2010
Independent Auditor’s Report to the members of LiDCO Group Plc 43 LiDCO Annual Report 2009/10
2010 2009
Note £’000 £’000
Fixed assets
Investments 2 65 65
65 65
Current assets
Debtors 3 5 5
Amount due from subsidiary undertakings 3 14,338 10,955
Cash at bank 11 371
14,354 11,331
Current liabilities
Creditors: Amounts falling due within one year – –
– –
Net current assets 14,354 11,331
Total assets less current liabilities 14,419 11,396
Net assets 14,419 11,396
Shareholders’ funds
Share capital 4 869 710
Share premium 5 25,393 22,531
Retained earnings 5 (11,843) (11,845)
Shareholders’ funds 14,419 11,396
The financial statements were approved by the Board of Directors on 23 April 2010.
Theresa Wallis Terence O’Brien
Director Director
Company Balance Sheet
At 31 January 2010
The accompanying accounting policies and notes form an integral part of these financial statements. 44 LiDCO Annual Report 2009/10
1 Principal accounting policies
Basis of preparation
The separate financial statements of the Company are presented as required by the Companies Act 2006. 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. As a result the Group has continued to trade at a loss during the year ended 31 January 2010.
The Group finances its operations through shareholders’ funds and an overdraft facility. The directors have approved forecasts for the foreseeable
future, which indicate that the Group will have sufficient funds to trade during that period. During the year the Group appointed a new distributor
in the USA. As part of the agreement, the Group transferred the bulk of its US sales force to the distributor reducing US sales costs by about
£650,000 in a full year.
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.
Share-based payment charges
The Group has two equity-settled share-based remuneration schemes 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
related performance conditions are factored into the fair value of the options granted and a charge is made irrespective of whether the market
related performance conditions are satisfied. In respect of awards with non market related performance conditions, an estimate of the proportion
that will vest is made at the award date which is adjusted if the number of share options expected to vest differs from the previous estimates. Any
cumulative adjustment prior to vesting is recognised in the current period.
Where the Group issues share warrants in respect of distributor arrangements, 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.
2 Investments
Shares in
subsidiary
undertakings
Company £’000
Cost and net book value
At 1 February 2009 and at 31 January 2010 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% Medical instruments and appliances
Cassette Analytical Systems Limited England and Wales 100% Dormant
Notes to the Financial Statements
For the year ended 31 January 2010 45 LiDCO Annual Report 2009/10
3 Debtors
2010 2009
£’000 £’000
Other debtors 5 5
Amount due from subsidiary 14,338 10,955
14,343 10,960
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 that no further impairment
provision is necessary at 31 January 2010. The timing of the repayment of this debt is uncertain and unlikely to be within one year.
4 Share capital
2010 2009
£’000 £’000
Authorised
200,000,000 ordinary shares of 0.5p each 1,000 1,000
Allotted, called up and fully paid
173,899,054 ordinary shares of 0.5p each 869 710
5 Reserves
Share Other Equity Profit & loss
premium reserve reserve account
£’000 £’000 £’000 £’000
At 1 February 2009 22,531 –– (11,845)
Issue of share capital 2,862 –– –
Profit for the year –– – 2
At 31 January 2010 25,393 –– (11,843)
6 Reconciliation of shareholders’ funds
2010 2009
£’000 £’000
Profit for the year 2 8
Shares issued 159 –
Share premium account 2,862 (19)
3,023 (11)
Opening shareholders’ funds 11,396 11,407
Closing shareholders’ funds 14,419 11,396
7 Loss for the financial year
In accordance with the exemptions given by section 408 of the Companies Act 2006, the holding company has not prepared its own profit and loss
account. The profit for the year of the Company was £2,000 (2008/9: £8,000).
8 Related party transactions
There were no transactions between the Company and its subsidiary, which are related parties. 46 LiDCO Annual Report 2009/10
Company registration number:
2659005
Registered office:
16 Orsman Road
London
N1 5QJ
Company website:
www.lidco.com
Company Information
Solicitors:
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
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
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
Dr D M Band Scientific Director
Mr J G Barry Sales and Marketing Director
Mr P L Clifford Finance Director
Mr I G Brown Non-Executive Director
Mr J P Rowland Company Secretary 47 LiDCO Annual Report 2009/10
Notes 48 LiDCO Annual Report 2009/10
Notes Design and Production
www.ckdcorp.co.uk
Photography
www.slater-king.com
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