By John Harrington
Date: Tuesday 24 Apr 2012
LONDON (ShareCast) - LiDCO, the blood movement monitoring company, announced its maiden post-tax profit although phasing issues with a major customer meant the numbers were not as impressive as the market had been expecting.
The company made a loss of £45,000 before tax in the year to January 31st, versus a loss of £490,000 the year before. Once the tax man had chipped in with a sub of £60,000, however, the company's bottom line moved into the red, albeit by just £15,000. The previous year it had made a post-tax loss of £390,000.
Revenue grew to £7.1m from £6.2m the year before.
The market had been expecting a profit before tax of £0.23m on revenue of £7.43m, which may account for the shares shedding a halfpenny to 18p in the wake of the results.
Finance director Paul Clifford explained to Sharecast that because the company's financial year was out of phase with the fiscal year of Covidien, its US distributor, LiDCO's annual revenue could be affected by timing issues which get ironed out over a longer period. Sales to Covidien clocked in at £1.8m, down from £2.4m the year before.
"Covidien order the same number of monitors from us every year, but depending on when they place that order, it could show up in this year's accounts or next year's, and we can't control that," Clifford said.
Having said that, the two parties are moving to a quarterly order schedule which should minimise this "concertina" effect.
"The important thing to focus on is our disposable sales," Clifford claimed. "We work on the razor model: sell the razor blade, make the money on selling the blades."
Revenue from disposables accounts for 70% of the group's total revenues and rose 36% year-on-year to £5.02m.
The number of monitors installed during the period was 364, down from 524 additions the year before, but taking the installed base up to 2,189 units.
The UK remains LiDCO's major market, largely because the country invests so much money in medical equipment. It is able to do this, Chief Executive Officer Terry O'Brien informed Sharecast, because of the policy of successive governments to consolidate health facilities, thus putting bigger budgets at their disposal.
The closure of small local hospitals and the transfer of patients to better funded larger units often attracts the ire of local residents (and the local press) but O'Brien argued that it was a good thing because it enables the National Health Service (NHS) to invest in technology which, over the long run, saves the country money on the "prevention is better than cure" rule.
"The UK is the largest market in Europe [for hemodynamic monitoring] and was an early adopter of the technology, but it is not a story you often hear on the news. In contrast, a place like Germany, which has a lot of smaller hospitals, is a late adopter, and so is missing out," O'Brien maintained.
"The [UK] government is very interested in the technology of intra-operative hemodynamic [blood flow] monitoring, because it reduces the length of stay of patients in hospitals," O'Brien said.
Full adoption of hemodynamic monitoring by the NHS for 750,000 additional patients per year is expected to save the NHS £400m per annum - assuming it is adopted, of course; O'Brien seems confident it will be and that other countries will follow.
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