LiDCO (AIM: LID), the hemodynamic monitoring company, provides the following trading update for the six months ended 31 July 2019.
LiDCO product revenues in the half year were up 10% compared with H1 last year to £3.33m (2018: £3.02m), slightly above the Board’s expectations. The strong year on year sales growth in H1 was notwithstanding the continuing transition of more of the largest UK customers to the Group’s Software as a Service (“SaaS”) High Usage Programme (“HUP”) business model, which has the effect of deferring revenue recognition.
HUP revenues in H1 grew 119% to £0.80m (2018: £0.37m) contributing to the overall performance of the business in the period. To date the Company now has 243 HUP monitors (31 January 2019: 164) placed in the market that will generate annualised revenues of £2.1m.
US revenues were up 47% (42% on a constant currency basis) to £0.90m (2018: £0.61m), with the growth being driven by the continued success of the HUP offering enabling the Company to take share in this large and growing market by targeting high volume users of advanced hemodynamic monitoring.
In the UK, LiDCO product revenues declined by 8% to £1.61m (2018: £1.76m) due to the timing of certain large orders and the Company’s decision to transition another four of its largest customers to the HUP business model. The impact of these two factors is estimated to have reduced H1 revenue by £0.2m. The strategy, to actively convert UK customers to the SaaS business model, has a transitional impact on revenues as these customers typically de-stock inventory ahead of transitioning to HUP. Overall the Company believes that it is maintaining its leading share of the UK hemodynamic monitoring market.
Outside of the Group’s two direct markets, sales to distributors grew by 27% to £0.83m (2018: £0.65m). The recently announced regulatory approvals of the latest hemodynamic LiDCOrapidv3 monitor in both China and South Korea, and the appointment of a master distributor in Latin America, are expected to contribute to further growth in the second half of the year.
Total revenues (including third party products) were down 4% to £3.51m (2018: £3.64m) as a result of the previously announced termination of the Argon Critical Care distribution contract which contributed £0.63m in H1 2018 but just £0.16m in H1 2019. Adjusting for all third party revenue, including the effect of this terminated contract, gives the underlying growth of 10% for LiDCO products as stated above.
Net cash outflow in H1 was down 57% to £0.53m (2018: £1.22m). This figure is before the receipt of an expected R&D tax credit of £0.19m (2018: £0.13m), normally received in H1 but deferred into H2 this year. The Company had £1.19m of cash as at 31 July 2019 and remains debt free. As set out in the Annual Report and Accounts for 2018/19, the Board believes that LiDCO retains the appropriate strength in its balance sheet to deliver its strategic objective of creating a profitable business with good forward visibility from cash-generative, recurring SaaS revenue streams.
The Company intends to announce its interim results on 15 October 2019.
Commenting, Matt Sassone, Chief Executive Officer of LiDCO, said: “It’s been a good start to the year that has enabled us to transition more UK customers to HUP. In the US we are continuing to gain success from a comparatively small sales presence, which demonstrates the potential of the HUP business model. With HUP gathering more momentum, we are focussed on achieving a strong second half performance as the business moves progressively towards breakeven.”