Contents
Page
Highlights .................................................................................................................................................... 4
Business model ........................................................................................................................................... 5
Chairman’s statement ................................................................................................................................. 7
Operating review ......................................................................................................................................... 9
Financial review ........................................................................................................................................13
Corporate governance statement .............................................................................................................15
Audit committee report ..............................................................................................................................18
Directors’ remuneration report ..................................................................................................................20
Strategic report ..........................................................................................................................................32
Directors ....................................................................................................................................................33
Company Secretary and Advisers ............................................................................................................34
Directors’ report .........................................................................................................................................35
Independent auditors’ report .....................................................................................................................38
Consolidated statement of comprehensive income ..................................................................................43
Consolidated balance sheet ......................................................................................................................44
Consolidated statement of changes in equity for the year ended 31 December 2018 .............................45
Consolidated statement of changes in equity for the year ended 31 December 2017 .............................46
Consolidated statement of cash flows ......................................................................................................47
Notes to the consolidated financial statements ........................................................................................48
Parent company balance sheet ................................................................................................................83
Parent company statement of changes in equity ......................................................................................84
Notes to the parent company financial statements ...................................................................................85
Notice of Annual General Meeting ............................................................................................................93
Highlights
Key financial information
2018 full year revenues: £5.0m
(2017: £5.9m)
“I am delighted to see the profitability and cash
generation in the fourth quarter of 2018, which
helps to validate Deltex Medical’s new strategy.
2018 operating loss (pre-exceptional costs
and other gain): £(0.9)m (2017: £(1.9)m)
“The Group continued to generate cash in the
first quarter of 2019.”
“The focus on patient safety, from both
regulators and patient advocacy groups, is
increasing which is helping to create interest in
Deltex Medical’s TrueVue System.”
Nigel Keen
Chairman
H2 2018 operating profit (pre-exceptional
costs): £0.1m (H2 2017: loss £(0.9)m)
Q4 2018 operating profit (pre-exceptional
costs): £0.4m (Q4 2017: loss £(0.2)m)
Q4 2018 cash generation: £0.2m
(Q4 2017: cash used: £(0.3)m)
cash at 31 December 2018: £0.6m
(2017: £0.2m)
Key operating information
increasing interest in haemodynamic
monitoring from the market, due to
heightened focus on patient safety
implementation of new strategy started in
June 2018:
•
•
•
•
targeting profit and cash generation,
over top-line revenue growth
lower operating costs associated with
re-sized business, including
substantially smaller US and UK direct
sales teams
currently establishing a sustainable
platform allowing growth to be targeted
from the re-sized business
once a robust platform is in place, the
business will start to strategically target
growth
lower year-on-year revenues attributable, in
large part, to substantially reduced
expenditure on sales and marketing in H2
2018
4
Business model
What do we do?
Deltex Medical designed its TrueVue System to
accurately measure a patient’s haemodynamics
which comprises the visualisation and
measurement of blood flow in the central
circulation.
The TrueVue System incorporates three best-in-
class technologies to enable doctors to monitor
blood flow in patients undergoing surgery and in
critical care; and then, as appropriate, intervening
safely by administering either fluids or drugs to
maintain optimal patient blood flow.
A large body of published clinical evidence
demonstrates that if central blood flow is
optimised, the risk of complications are
significantly reduced which has been shown to
contribute to faster recoveries for patients and
lower costs of care for the healthcare provider.
The use of Deltex Medical’s core technology - the
TrueVue Doppler - is widely acknowledged to be
the global gold standard in the provision of
optimised haemodynamics. No other device
enables the anaesthetist to manage the patient’s
haemodynamic status during surgery either as
precisely or as rapidly as with Doppler, and no
other technology has been able to generate an
equivalent evidence base of either patient or
economic benefits. In certain clinical scenarios, a
doctor may choose methodologies other than
Doppler to acquire data to aid in the
haemodynamic management of the patient. In
such situations, Deltex Medical’s TrueVue
Impedance or TrueVue PressureWave
technologies are available to satisfy such a clinical
need.
What do we sell?
Deltex Medical’s TrueVue System incorporates
three best-in-class technologies namely TrueVue
Doppler, TrueVue Impedance and TrueVue
PressureWave.
Our TrueVue Doppler utilises a single-use
disposable ultrasound probe which is placed into
the patient’s oesophagus via the nose or mouth.
The TrueVue Doppler provides the clinician with
beat-to-beat real-time information on the patient’s
circulating blood volume.
Deltex Medical’s TrueVue Impedance technology
uses state-of-the-art impedance cardiography to
enable non-invasive continuous monitoring of
awake patients. It comprises single-use
electrodes that are placed on the patient’s neck
and chest.
TrueVue PressureWave utilises the most stable
and extensively researched Pulse Pressure Wave
Algorithm (PPWA) currently available, and is used
in combination with the TrueVue Doppler to
provide continous, highly accurate haemodynamic
status data to clinicians.The TrueVue system is
the only haemodynamic monitoring technology
that can independently measure both blood flow
and blood pressure across each and every
heartbeat. The combination of these two
technologies can be displayed as a Velocity
Pressure Loop (VP Loop) which enables the
display of novel and unique clincial parameters
that are only available on the TrueVue System.
Deltex Medical’s proposition to a hospital is the
use of the TrueVue System to improve patient
safety and reduce avoidable complications. If the
flow of blood around the body is compromised,
which commonly occurs during surgery, then the
amount of oxygen delivered to tissues is reduced
which, in turn, increases the risk of organ under-
perfusion and harm. Periods of inadequate blood
supply to organs, including the gut, kidneys and
liver, increase the risk of complications. Such
complications require additional clincial
interventions which can lead to an increase in the
time spent in hospital and ultimately reduced life
expectancy. For healthcare providers there are
clear financial, reputational and commercial
benefits in reducing complications associated with
poor haemodynamic monitoring during, and
immediately post, surgery. These include the
additional treatment costs needed to resolve
haemodynamic-related complications both
immediately and over the longer term. In short,
the use of the TrueVue System technology
reduces the risk to the patient and the
consequential costs associated with avoidable
complications.
How do we make money?
Our sales proposition comprises both a capital
purchase (the monitor) and a revenue purchase
(the TrueVue consumables). Due to the often-
protracted procurement times for capital items by
hospitals, from time to time we elect to loan our
monitors to hospitals in order to encourage faster
adoption of our technology into a hospital’s
practice. Once the TrueVue Doppler technology
has been adopted by a hospital department/unit,
then TrueVue consumables start to be used which
results in the generation by the Group of high-
margin revenues.
5
focussing on these accounts, whilst also
identifying potential new accounts that, due to
clinical and financial factors, are inclined to
implement haemodynamic monitoring either as
part of an enhanced recovery programme or in
Quality Improvement (QI) plans.
Our main focus in our distributor led markets is
to work with those countries that have
recognised the benefits of haemodynamic
monitoring and/or enhanced recovery protocols
and have a desire to implement these
programmes nationally. This process usually
starts with establishing contact with local Key
Opinion Leaders in the countries who have the
ability to implement change at both hospitals
and the healthcare system level. This requires
support from Deltex Medical, as although we
work closely with local distributors, they usually
do not have the knowledge or background to
drive these change programmes. There are
now multiple countries that have produced
guidance or associated reimbursement
programmes around the proven clinical benefits
shown by TrueVue Doppler.
What is our goal?
Our goal is to see the adoption of our TrueVue
System as the standard of care for all patients:
new-born to adult; awake or anaesthetised;
across all hospital settings.
This, we believe, will be achieved through
clinicians understanding the clinical benefits of
optimised haemodynamic management as well
as hospital systems looking to improve patient
safety and reducing avoidable complications.
Deltex Medical, with its TrueVue System, is well
placed to grow through wider acceptance that
post-operative complications caused by sub-
optimal haemodynamic management of the
patient in surgery or intensive care should be a
‘Never Event’.
Business model (continued)
Our TrueVue Doppler is designed and
manufactured in the UK which gives us good
control over product quality, profit margins and
incremental improvements. Our gross margins
earned in markets where we sell directly,
namely the UK and the USA, are higher than in
those markets (over 40 countries) in which we
sell using distributors where we do not incur
direct selling costs.
Our gross margin earned on TrueVue Doppler
is typically around 75% in the UK, around 85%
in the USA and 55% to 60% in our distributor-
led business. The existence of a large installed
base of monitors enables the Group to
introduce further complementary technologies
without the need to incur the cost of creating a
new installed base
Who are our customers?
Our main customers are anaesthetists, working
within the operating room, and intensivists
working in intensive care.
In the UK, we sell directly to NHS Foundation
Trusts and NHS Trusts (NHS) and we are on
contract with the NHS Supply Chain.
Our sales efforts are focused on those NHS
Hospitals that want to support individual
anaesthetists, or groups of anaesthetists, who
choose to deliver the clinical benefits to patients
of haemodynamic monitoring using the
TrueVue System (with the associated economic
benefits to the hospital).
In the USA, recognition of the importance of
modern ‘Enhanced Recovery’ approaches to
surgery, via the implementation of a patient
pathway based on evidence-based medicine, is
growing at a hospital system level. This
approach recognises that improving the quality
of care provided to patients leads to better
patient outcomes, lower costs of care and
higher profits for the hospital care providers.
Our focus in the USA has been to identify major
hospitals that wish to implement evidence-
based haemodynamic management as part of
an enhanced recovery programme and partner
with them to help achieve their clinical and
financial objectives.
Since opening our US subsidiary, Deltex
Medical, SC, Inc, we have established more
than 30 accounts in US hospitals that utilise our
TrueVue Doppler technology. We are now
concentrating on growing our US business by
6
Chairman’s statement
Group overview
Clinicians and healthcare systems throughout the
world are increasingly recognising the benefits of
monitoring and optimising a patient's
haemodynamic status when anesthetised during
surgery or when sedated in the intensive care unit.
Deltex Medical developed the 'global gold standard'
for haemodynamic monitoring with its oesophageal
Doppler technology, which is marketed as TrueVue
Doppler and often generically referred to by
clinicians as ‘ODM’. This technology has been
shown to improve patient outcomes by enhancing
patient safety, reducing avoidable complications
and lowering attributable healthcare costs. This is
important as there is substantial pressure on
healthcare systems around the world, and
particularly in the USA, to improve patient
outcomes and patient safety, whilst reducing the
costs of care.
Deltex Medical's multi-modal TrueVue System,
which comprises two complementary
haemodynamic monitoring technologies alongside
the oesophageal Doppler, gives clinicians a single
platform which allows them to choose the
monitoring modality most appropriate for a patient's
condition or procedure.
The Group’s ongoing product development
programme will expand and augment the TrueVue
System, adding further modalities onto this
platform.
Changes during 2018
There were major changes at Deltex Medical in
2018.
In February 2018, the Group successfully raised
approximately £2m. This fund-raising strengthened
the Group’s financial position and enabled the
Board to consider new ways to develop the
business.
In April 2018, the results from the FEDORA study
were published in the British Journal of
Anaesthesia. This study showed that the use of the
Group’s TrueVue Doppler technology significantly
reduces postoperative complications and length of
hospital stay, adding to an already extensive
evidence base for the Company's ODM technology.
In June 2018, the Board adopted a new strategy.
The new strategy
There are a number of elements to the new
strategy which include:
targeting profit and cash generation, rather than
pursuing top-line revenue growth;
focussing on selling the TrueVue System
principally to existing customers, thereby
allowing the size of the sales teams in the USA
and the UK to be substantially slimmed down;
adjusting the operating costs of the Group taking
into account the smaller sales teams and the
focus on profit and cash generation;
stabilising the business, following the major
changes to the Group, to establish a strong and
sustainable commercial platform; and
using the more robust platform to create growth
through more focussed selling and leveraging
the complete suite of TrueVue technologies.
The first stage of the implementation of the new
strategy has been completed. Andy Mears was
appointed Chief Executive; the business has been
re-sized to a more appropriate level and there has
been a substantial reduction in Deltex Medical’s
operating costs. There are encouraging signs, that
can be seen in the Q4 year-on-year financial data
below, that the first stage of the new strategy has
been successful.
This has allowed us to establish a strengthening
platform for the Group with a focus on ongoing cash
generation and profitability.
Having re-based the business we can begin to drive
growth once more in the business from this new
baseline.
Financial results
Revenues for the year were £5.0m (2017: £5.9m)
with the 15% reduction in revenues reflecting, in
large part, the 41% (£1.5m) reduction in
expenditure on sales and marketing across the
year.
There were a number of exceptional costs, totalling
some £0.3m (2017: £nil), associated with the
implementation of the new strategy and the
resultant reduction in operating costs. The
operating loss for the year excluding exceptional
costs and other gain was £0.9m (2017: £1.9m).
7
Prospects
The new strategy is being successfully
implemented. The Group has a significantly lower
cost-base, has cash on the balance sheet, is
showing improving profitability and is starting to
generate cash.
The next stage requires the Group to secure and
make sustainable this strong base for the business
which allows us to target growth from the re-sized
business without substantially increasing the cost
base.
The trends in the provision of global healthcare are
increasingly to focus on patient safety and the
reduction of avoidable complications leading to
improved outcomes and lower costs. Advanced
haemodynamic monitoring is an important element
in meeting these requirements and the Board
believes that Deltex Medical is well positioned to
capitalise on these trends.
(822)
(1,711)
422
(156)
889
578
Nigel Keen
Chairman
24 April 2019
Chairman’s statement (continued)
Q4 comparative financial information
The Board believes that the financial impact of the
change in strategy can be seen in the year-on-year
comparison of the Q4 results which are
summarised in the table below:
Unaudited management
information
Quarter
4
2017
£’000
Quarter
4
2018
£’000
Difference
£’000
Revenues
1,603
1,924
(321)
1,244
1,555
(311)
78%
81%
Adjusted gross
margin1
Adjusted gross
margin %
Overheads
(excluding
exceptional
costs2)
Operating
profit/(loss)
Cash
generated/(used)
178
(267)
445
1. Excludes depreciation of £41,000 (Q4 2017: £100,000)
2. Q4 2018 exceptional costs were £22,000 (Q4 2017: £Nil)
The Q4 2018 operating profit (excluding exceptional
costs) was c.£0.4m compared with a Q4 2017
operating loss of £0.2m, representing a £0.6m
improvement in the period.
In Q4 2018, the Group generated c. £0.2m of cash
compared with c. £0.3m of cash usage in Q4 2017.
Historically, December has always been the month
with the highest revenues in the year so the Q4
results are not representative of the underlying full-
year trading performance of the Group per se.
However, the Board believes that the significant
year-on-year improvement in the Q4 financial
performance shows that the new strategy is
beginning to work. The financial performance of the
Group so far in 2019 is in line with market
expectations and the Group continued to generate
cash in the first quarter.
Employees
As part of the implementation of the new strategy
we made the decision to reduce employee numbers
substantially, a process which is always unpleasant
and unsettling. However, the Group continues to
employ a significant number of talented individuals
across a range of disciplines in the UK and
overseas, who are working hard to make Deltex
Medical successful. I would like to thank all the
Group’s employees for their hard work throughout
this year of change.
8
Operating review
Financial results
A number of major structural changes were made to the Group midway through 2018 as part of the
implementation of Deltex Medical’s new strategy.
Although the improvement in the financial performance of the Group is particularly marked in Q4, (the
Group’s busiest quarter), the effect of the change in strategy and the substantially lower operating costs, can
also be seen in the second half of 2018. Summary financial information, analysed by H1 and H2, is set out in
the table below:
Probe revenues
Other revenues
Total revenues
Unaudited management information
H1
2018
£’000
2,003
372
2,375
H1
2017
£’000
2,355
499
2,854
H2
2018
£’000
2,032
548
2,580
H2
2017
£’000
2,581
435
3,016
FY
2018
£’000
4,035
920
4,955
FY
2017
£’000
4,936
934
5,870
Adjusted gross profit1
1,700
2,240
1,996
2,380
3,696
4,620
Adjusted gross margin %
72%
78%
77%
79%
75%
79%
Administrative expenses2
Sales & distribution costs2
Research, Development,
Quality & Regulatory2
(942)
(923)
(1,407)
(1,903)
(672)
(767)
(988)
(1,747)
(1,614)
(2,174)
(152)
(136)
(187)
(217)
(339)
(2,501)
(2,962)
(1,626)
(2,952)
(4,127)
Adjusted EBITDA3
(801)
(722)
Operating profit/(loss)4
(1,066)
(1,085)
370
123
Exceptional costs
(142)
-
(145)
(572)
(853)
-
-
(431)
(943)
(287)
80
Other gain
1. Gross profit excluding the depreciation charge relating to machines loaned to customers and production equipment
2.
Excluding exceptional costs and non-cash costs namely depreciation, amortisation, share-based payments, non-executive
directors’ fees and accumulated absence costs
Earnings before interest, depreciation and amortisation, share-based payments and non-executive directors’ fees and also
excluding exceptional costs
Excluding exceptional costs and other gain
3.
4.
80
-
-
-
(1,911)
(3,650)
(353)
(5,914)
(1,294)
(1,938)
-
-
The reduction in revenues in H2, as compared
to the prior year, reflects the effect of having
smaller direct sales teams and associated
reduced market coverage. However, the Group
had also encountered some loss in revenue
momentum in H1 in part due to challenging
comparators as well as reductions in investment
in sales & marketing.
The improvement in the financial performance of
the Group in the second half of 2018 stands out.
In particular, sales & distribution costs more than
halved from £1.7m (H2 2017) to £0.8m (H2
2018). In addition, the table above shows that in
H2 2018 the Group was adjusted EBITDA
positive as well as recording an operating profit
(excluding exceptional costs) of £0.1m.
The reduction in operating costs is also mirrored by the
reduction in employee numbers. At 31 March 2019, the
Group employed 50 people whereas at 31 March 2018
the Group employed 77 people, reflecting a 35%
reduction in headcount.
The combination of the Q4 performance set out in the
Chairman’s statement and the H2 data shown in the
table above helps give the Board comfort that the
Group has taken important steps to develop a more
robust platform for the future.
All costs will be kept under close scrutiny in 2019,
although as the year progresses we intend to start to
invest selectively in sales & marketing in order to help
support future growth in revenues and exploit
increased interest in the marketplace for our products.
9
Operating review (continued)
Commercial dynamics
Leveraging the Group’s unique TrueVue Doppler
Deltex Medical has built its business model
around the use of high-margin disposable
probes, which are used in its unique TrueVue
System.
There are other companies which provide
haemodynamic monitoring solutions. However,
only Deltex Medical provides the oesophageal
Doppler monitoring technology, which is
generally accepted to be the ‘global gold
standard’ for haemodynamic monitoring. Its use
is supported by a significant number of scientific
studies and Health Technology Assessments.
No other company selling haemodynamic
monitoring technology has an equivalent body of
scientific literature supporting the use of its
technology.
Healthcare providers around the world, and
particularly in the USA, are under increasing
financial and regulatory pressure to ensure that
patient safety and outcomes improve, whilst at
the same time ensuring that healthcare costs
decline. The Group’s TrueVue Doppler
technology has been shown in a number of
clinical trials, including the FEDORA study, to
significantly improve patient outcomes and
patient safety as well as lowering the length of
hospital stay which, in turn, reduces the total
costs of treating the patient.
The FEDORA large multi-centre study was a
significant publication for Deltex Medical. The
previous 20 Randomised Clinical Trials (RCTs)
involving the TrueVue Doppler technology were
completed on high-risk surgical patients. The
Spanish group that conducted the FEDORA
study selected low-risk surgical patients to see if
the same substantial reduction in complications
seen with the earlier RCTs could be reproduced.
(In the past clinicians believed that lower-risk
patients did not need haemodynamic monitoring
- as the patients were typically younger and fitter
- and recovered more quickly after surgery.)
Importantly, the results of the FEDORA study
showed a 75% reduction in complications for
these lower-risk patients, including major
complications such as Acute Kidney Injury (AKI)
and Surgical Site Infections (SSI). It is notable
that many hospitals in North America and
Europe incur financial penalties for AKIs and
SSIs. The FEDORA study builds on the
substantial body of evidence in the academic
literature which supports the use of Deltex
Medical’s oesophageal Doppler haemodynamic
monitoring to improve patient safety and reduce
treatment costs.
The Board believes that, in time, the growing focus on
patient safety and the need to reduce avoidable
complications will increase demand for Deltex
Medical’s TrueVue Doppler technology. Moreover,
once introduced into a hospital department, there are
opportunities to cross-sell other of the Group’s
haemodynamic monitoring technologies on the
TrueVue System into the same hospital.
New product development
The Group's initial and principal technology is a
Doppler-based ultrasound oesophageal
haemodynamic monitoring. This technology generates
highly accurate, real-time data on descending aortic
blood flow velocity on anesthetised or sedated
patients. However, TrueVue Doppler does not provide
a hospital with a complete solution for haemodynamic
monitoring as it can be challenging to use on an awake
patient where completely non-invasive technologies
are preferred.
In 2018, Deltex Medical launched its TrueVue System
monitoring platform which comprises three
haemodynamic monitoring technologies: (i) its existing
oesophageal Doppler ultrasound (TrueVue Doppler);
(ii) high-definition Impedance Cardiography (TrueVue
Impedance); and (iii) Pulse Pressure Waveform
Analysis (TrueVue PressureWave).
The TrueVue System enables the Group to sell its
haemodynamic monitoring technologies into a larger
addressable market within a given hospital. Deltex
Medical is also working on developing a number of
new and complementary products designed to
augment the TrueVue System platform, as well as
designing a next-generation monitor for use with all the
Group’s haemodynamic monitoring modalities. The
Board believes that, once launched, the new monitor
will help the sale of the complete suite of TrueVue
products and associated technologies.
The TrueVue System is currently available in the UK,
continental Europe and a number of other international
markets. 510(k) regulatory clearance has now been
obtained from the US Food & Drug Administration
(FDA) to market the TrueVue System in the USA.
In general, there is a trade-off between the ease-of-use
and the precision of the data generated from each
monitoring technology. The TrueVue platform enables
clinicians to match the appropriate technology to the
risk profile of their patients as they move through the
hospital. For example, anaesthetised patients
undergoing surgery can be treated under the guidance
of the extremely precise TrueVue Doppler, whereas
lower-risk, awake patients can be monitored using
non-invasive TrueVue Impedance or TrueVue
PressureWave.
10
Operating review (continued)
Notwithstanding the importance of updating and
extending the Group's technology-based
products, as part of its new strategy the Board
intends to fund the development of new products
using the cash it generates from its trading
operations and grants.
Three principal divisions: the USA, the UK and
international
The Group sells directly via its own sales-teams
in the USA and the UK; and by using a network
of distributors in other overseas markets.
The US market is strategically important to the
Group due to its size, higher price-points and the
underlying regulatory pressure associated with
improving patient safety and reducing avoidable
complications.
The UK NHS market remains a challenging
customer due, in large part, to the acute
financial pressures faced by all NHS hospitals
along with the competitive environment. There is
little sign of the UK market becoming easier in
the short term, although the Board believes that
the Group’s market share in the UK has
stabilised and certain UK-based initiatives are
expected to be successful in increasing
revenues.
The Group also sells some complementary
products manufactured by third-party companies
in the UK. One of these companies has recently
been purchased by a competitor of Deltex
Medical and this may result in the Group
refocussing its UK sales resources solely onto
its own product range.
Over recent years the Group has built a
successful international division via a network of
overseas distributors selling into some 40
countries. Although the gross margin associated
with these international sales is lower than for
direct sales, the associated selling costs are
also materially lower. This division has been a
steady contributor of cash and profit over recent
years. Important international markets for the
Group include France, Scandinavia, South
Korea and Peru.
Importance of the US healthcare market
In recent years the Group has invested
substantially in building a direct sales and
marketing subsidiary in the USA. This has been
an expensive undertaking and has required
significant levels of investment and associated
funding.
Hospitals in the US are under significant regulatory
pressure to improve patient safety. They are also
under commercial pressure from a range of public and
private payers to reduce the costs of treating patients.
Deltex Medical’s TrueVue Doppler technology has
been shown in scientific studies to improve patient
outcomes and improve patient safety. The data in the
scientific literature clearly show that the use of the
TrueVue Doppler technology reduces patients’ post-
operative complications and consequently their length
of stay in hospital, leading to substantially lower
treatment costs. In the light of the above, the US
healthcare market continues to be of high importance
to the Group.
Part of Deltex Medical’s new strategy was to reduce
the costs of the Group’s US operation to ensure that it
started to contribute profit and cash. This plan has
been successfully implemented and over recent
months the US subsidiary has contributed positively to
the Group’s financial results.
Competition: other companies, ‘doing nothing’ or
inaccurate claims of equivalence
Deltex Medical faces competition in a number of areas.
For example, the Group has competitors, some of
which are substantially larger and have greater
financial resources, which market and sell
haemodynamic monitoring equipment, although none
use oesophageal Doppler as their principal mode of
monitoring.
Deltex Medical also faces commercial challenges from
hospitals which: (i) do no haemodynamic monitoring as
they have not yet been convinced of its benefits,
whether clinical or cost-saving; or (ii) have been
misinformed that competitors’ equipment is
“comparable to ODM, but cheaper and easier to use”.
Both of these issues represent selling challenges that
the Group is currently working on addressing. The
Board is confident that they can be overcome, primarily
with the introduction of the TrueVue System which has
leading modalities across the range.
Conclusion
The first stage of Deltex Medical’s new strategy has
been successfully implemented. The Group now has a
substantially lower cost-base which enables it to
generate, rather than use, cash. Moreover, its direct
sales teams are more focussed on driving revenues
from existing customers - and it is well advanced in
building a strong and sustainable business platform.
11
Operating review (continued)
The Group’s commercial position is also being
helped by market trends evolving around the
need to reduce avoidable complications for
patients, in part driven by regulatory pressures,
that should support higher adoption rates of
Deltex Medical’s TrueVue Doppler technology in
the future.
Deltex Medical is also working hard at
developing the full range of haemodynamic
monitoring modalities on its TrueVue System
financed by cash generated from its ongoing
operations and grants.
Andy Mears
Chief Executive
24 April 2019
12
The operating loss before exceptional items was
£943,000 (2017: £1,938,000).
The other gain of £80,000 (2017: £nil) was recognised
in profit or loss in the SOCI following the extension of
the maturity date of the convertible loan notes from
February 2019 to February 2021 that took place in
February 2018.
Taxation
The Group anticipates being able to submit a claim for
£63,000 relating to its 2018 research and development
activities.
Property, plant and equipment (PPE)
PPE has increased in the year by £313,000. However,
ignoring the effect of adopting the new leasing
standard, IFRS 16, PPE has fallen in value by
£142,000 compared to 2017. The primary reason
being the low levels of capital expenditure offset by
annual depreciation charges. This is most notable in
the estate of placed monitors, that has remained static
for the last few years and has continued to be
depreciated, which decreased in value by £174,000.
Borrowings
Total borrowings reduced by £225,000 to £1,588,000
(2017: £1,813,000). The main change being a
reduction in the amount outstanding on the invoice
discounting facility of £166,000 which is reflective in
the lower level of sales achieved in December 2018.
Trade payables and other payables
Trade payables and other payables have reduced from
£2,649,000 to £2,335,000 at the end of the financial
year.
However, before the effect of the adoption of IFRS 16,
they have reduced by £698,000 which is largely due to
the fact that there was substantially less strain on
working capital balances following both the fundraising
in February 2018 and the cost reductions made in the
second half of the year.
The reduction in the amount outstanding for social
security and other taxes is largely due to the
settlement of outstanding VAT and PAYE liabilities as
well as a reduction in the month-end liabilities due to
lower sales for VAT and reduced headcount for PAYE.
The movement in accrued expenses is principally the
release of sales bonuses that were settled through the
grant of EMI options. The largest amount being
£142,000 following the resignation of Ewan Phillips in
June 2018.
Financial review
Consolidated Statement of Comprehensive Income
(SOCI)
Revenue as reported in the SOCI was lower than 2017
by £915,000 at £4,955,000.
Detailed market information including a review of the
Group’s trading performance can be found on pages 9
to 12 of the Operating review.
Gross margin
The Group’s overall gross margin was 71% for the
year which compared to 75% in 2017. The main
changes in the margin are shown in the table below:
Product
contribution
Depreciation
of placed
monitors
Shipping costs
Production
variances
Product
contribution
Depreciation of
placed monitors
Shipping costs
Production
variances
Probes
%
Product margin 2018
Other
Monitors
%
%
Total
%
86
49
50
80
-
-
(5)
81
(46)
-
(6)
(3)
-
(6)
(3)
41
(3)
(1)
(5)
71
Product margin 2017
Probes
%
Monitors
%
Other
%
Total
%
86
65
-
-
(2)
84
(62)
-
(2)
1
45
-
(9)
(1)
35
81
(4)
(1)
(1)
75
The overall product contribution has remained at a
consistent level with prior years. The overall probe
margin slightly fell in the year due to the under-
recovery of both labour and overheads during the first
half of 2018.
The overall loss incurred on monitors reflects the
change in sales mix with a larger number of monitors
sold in our International distributor led business which
has much lower margins than our direct markets.
Costs
Total costs including exceptional expenditure of
£287,000 (2017: £nil) were £1,559,000 lower than
2017 at £4,761,000 reflecting the effect of the cost
reductions following the change in strategy in the
second half of 2018.
13
Financial review (continued)
Cash flow
The Group’s main funding requirements continue to be
funding of working capital requirements and the
funding of investments.
Jonathan Shaw
Group Finance Director
24 April 2019
14
Corporate governance statement
Chairman’s introduction
Our purpose is to provide returns for our
shareholders by enabling improvements in
outcomes by creating, validating and delivering
innovative healthcare solutions. We aim to
achieve this by:
Investing in our products, services and people;
Partnering with clinicians to adopt the TrueVue
System;
Communicating openly and honestly with our
customers and with each other;
Providing excellent levels of support,
education and training;
Continuing to be thought-leaders to drive
innovation; and
Supporting evidence-based medicine to create
sustainable health benefits.
It is the Board’s role to ensure that Deltex Medical
Group plc (“Deltex Medical” or the “Group”) is
managed for the long-term benefit of all Deltex
Medical’s stakeholders with effective, efficient and
timely decision making. Corporate Governance is
an important element of that task, which reduces
risk and adds value to Deltex Medical.
As your Chairman, I am committed that the Group
should uphold the highest standards of
governance commensurate to its size and the
complexity of its business.
Nigel Keen
Chairman
24 April 2019
Corporate Governance regime
Following the changes made by the London Stock
Exchange to the AIM Rules for Companies (AIM
Rules) in March 2018, the Board of Deltex
Medical have chosen to adopt the QCA Corporate
Governance Code (the QCA Code) that was
published by the Quoted Companies Alliance in
April 2018.
This report sets out how the Group applies the
QCA code. The QCA code is constructed around
ten broad principles. The QCA code requires
certain information to be disclosed either within
the Annual Report & Accounts or on the Group’s
website.
Set out below, is the Board’s explanation of how
the Group applies these principles:
1. Establish a strategy and business model which
promote long-term value for shareholders
The Group designs, develops and markets
advanced haemodynamic monitoring technologies
which, based on the clinical studies to date, are
proven to significantly improve patient outcomes
compared to other technologies that are described
as haemodynamic and/or cardiac output monitors.
Our long term goal remains to encourage
healthcare systems around the world to adopt our
technology as part of routine standard of care
across the entire hospital path way.
However, whilst we have had past success in
persuading the UK NHS to commit to adopt our
technology at pace and scale, the commercial
benefits have not followed as that organisation has
struggled to embrace innovative technologies. We
have been influential in raising the importance of
haemodynamic monitoring in the US healthcare
market where we compete against competitor
technologies which have limited clinical evidence
supporting its efficacy.
Our response, is to focus on those customers that
have understood the clinical benefits of our
technology who are committed to implement our
technology in their chosen clinical fields.
Our business model is explained on pages 5 and 6
of the Annual Report & Accounts 2018.
2. Seek to understand and meet shareholder
needs and expectations
The way in which the Board seeks to understand
and meet the shareholder needs and expectations
is set out in the Corporate Governance section of
the Group’s website.
3. Take into account wider stakeholder and social
responsibilities and their implications for long-
term success.
Information about the Board process can be found
in the Corporate Governance section of the
Group’s website.
4. Embed effective risk management, considering
both opportunities and threats, throughout the
organisation.
Financial controls
The Group has a well-established framework of
internal financial controls that is regularly reviewed
by the Group Finance Director and by the Audit
Committee on an annual basis.
15
Corporate governance statement (continued)
The Board is responsible for reviewing and
approving the overall strategy of the Group. It also
approves the supporting revenue budgets and
plans. Monthly results and variances to plans are
reported to the Board. For the first six months of
2018, this was predominantly focussed on sales
performance whereas for the second six months,
consistent with the change in operational focus,
the Board receives detailed profit and loss
information on both adjusted earnings before
interest, taxation, depreciation and amortisation
and adjusted earnings before interest and taxation.
The Board is assisted by the Audit Committee in
the discharge of its duties in relation to the Annual
Report & Accounts and the Group’s accounting
policies.
Non-financial controls
The Board is cognisant of the need for a robust
system of internal controls which is critical to the
management of its overall strategy.
The Group has a robust Quality Management
System (QMS) that is maintained on the Entropy
document control system that is hosted by BSI.
The Group’s QMS is periodically reviewed by its
European notified body, BSI, and other regulatory
bodies such the USA’s Food & Drug
Administration (FDA). Both BSI and the US FDA
reviewed the QMS during 2018 and neither body
raised any matters of significant concern.
The directors have overall responsibility for the
system of internal control throughout the Group
and for reviewing its effectiveness. Such a system
is designed to manage rather than eliminate the
risk of failure to achieve business objectives, as it
can only provide reasonable, but not absolute,
assurance against material misstatement or loss.
The Board is satisfied with the effectiveness of its
system of internal controls for the financial period
under review.
5. Maintain the board as a well-functioning,
balanced team led by the Chair
The Board considers that with the exception the
Chairman all the non-executive directors are
independent notwithstanding their varying lengths
of tenure in office. In this context, Sir Duncan
Nichol and Julian Cazalet have served on the
Board for around 15 years and 11 years
respectively. However, the Board has concluded
that their length of service has not impaired the
independence of judgement they bear. All of the
non-executive directors receive a fixed fee for their
services which is usually settled by the issue of
new ordinary shares in the Group. None of the
non-executive directors have an interest in any of
the Group’s share option schemes.
The executive directors are employed on a full-
time basis and they are expected to spend the
time required to fulfil their executive responsibilities
which may well be in excess of the 37.5 hours per
week that is set out in their respective service
agreements. This has been the case for both
executive directors during the year under review.
The Chairman is expected to devote as much of
his time, attention, ability and skills as are
reasonably required to perform his duties. His
letter of appointment, dated 19 April 2009, states
that the minimum time commitment is expected to
be 12 days per annum which is consistent with the
minimum expected by the other non-executive
directors.
Directors’ attendance record at the AGM,
scheduled Board meetings and Board committee
meetings, for the year ended 30 June 2018 was as
set out in the table overleaf. For Board and Board
committee meetings, attendance is expressed as
the number of meetings attended out of the
number that each Director was eligible to attend.
Director
Nigel Keen
Ewan Phillips*
Andy Mears**
Jonathan Shaw
Julian Cazalet
Chris Jones
Sir Duncan Nichol
Mark Wippell
AGM
2018
✔
✔
N/A
✔
✔
✔
✔
✔
Audit
Committee
(Maximum 2)
2/2
1/1
1/1
2/2
2/2
2/2
2/2
2/2
Remuneration
Committee
3/3
3/3
1/3
0/3
3/3
3/3
3/3
3/3
Board
8/8
3/3
5/5
8/8
7/8
7/8
8/8
8/8
EGM
0/1
1/1
N/A
1/1
1/1
1/1
0/1
0/1
*Ewan Phillips resigned from the Board on 12 June 2018
** Andy Mears joined the Board on 13 June 2018
16
Corporate governance statement (continued)
8. Promote a corporate culture that is based on
ethical values and behaviours
As a provider of regulated healthcare products to
patients across the world ethical behaviour is key
to everything that the Group does. Our products
are designed and manufactured by our well-trained
employees in Chichester who comply with our
established Quality System. Our sales teams
promote our products to the clinicians and
healthcare systems using them in an open way
and we provide extensive training to users to allow
them to gain the maximum advantage for the use
of our products in the clinical setting.
6. Ensure that between them the directors have
the necessary up-to-date experience, skills and
capabilities
Biographical details of each director can be found
on page 33 of the Annual Report & Accounts 2018.
Following Ewan Phillips’ decision to resign from
the Board, the Chair sought legal advice from DAC
Beachcroft LLP on the most appropriate way to
structure the agreement between Ewan and the
Company.
To help the Board with its strategy review, the
Chair engaged business consultancy services from
Assuage Limited. Following the resignation of
Ewan Phillips on 12 June 2018, Assuage Limited
has provided ad-hoc support to Andy Mears, Chief
Executive Officer, on various matters including the
cost reduction programme that was implemented
in July 2018. The Group has been invoiced
£45,000 for such services during the year.
The Board is aware of the QCA guidance
concerning the separation of the role of the
Company Secretary from that of an executive
director. However, given the size of the Group and
resources available to it, the Board is satisfied with
the existing arrangements and will consider
separating the role of Company Secretary at the
appropriate time.
The Company Secretary also provides support to
both the Remuneration Committee and the Audit
Committee as requested. The Board will, as noted
above, consider separating the role of Company
Secretary at the appropriate time from that of an
executive director.
7. Evaluate board performance based on clear
and relevant objectives, seeking continuous
improvement
The Board has chosen not to undertake formal
reviews of board performance. Instead, the Chair
periodically discusses the input of each director
with the individual concerned to be satisfied that
their contribution to the Board is and remains both
effective and relevant and that they remain
committed to the success of the Group.
17
Audit committee report
Introduction from Julian Cazalet MA FCA,
Chairman of the Audit Committee
I am pleased to present this report on behalf of the
Audit Committee. I have been Chair of the Audit
Committee since 2015 and consider that I have recent
and relevant financial experience.
The Audit Committee has had a busy year which
culminated in the audit tender process which saw the
appointment of new independent auditors for the 2018
audit. In addition, the Audit Committee has kept under
review the Group’s Brexit scenario planning.
During the year, I have met with a number of
shareholders to discuss various matters and I look
forward to continuing to do so in the coming year.
Julian Cazalet MA FCA
Audit Committee Chairman
24 April 2019
Key responsibilities
The primary responsibility of the Audit Committee is to
assist the Board fulfil its oversight responsibilities.
Accordingly, the Audit Committee is required to:
Monitor the integrity of both the Group’s interim and
annual report and accounts;
Review any significant financial reporting matters
that may arise and agree on the reasonableness of
the judgements they may contain;
Advise on the clarity of disclosure of information
provided in the report with the objective of ensuring
that the Annual Report & Accounts, as a whole, is
fair and balanced.
Ensure that the both the Group’s interim and annual
accounts have been prepared in accordance with
applicable accounting standards and that any
significant estimates made are considered to be
reasonable;
Review the adequacy and effectiveness of the
Group’s system of internal control and risk
management; and
Oversee the relationship with the Group’s
independent auditors, reviewing the effectiveness
of the external audit and advising the Board on their
appointment and remuneration.
Audit Committee governance
The Audit Committee comprises all the non-executive
directors and was chaired during the year under review
by Julian Cazalet who is a chartered accountant with
recent and relevant financial experience.
The other non-executive directors who served during
the year under review are all considered to have the
ability and experience necessary to understand both
interim and annual reports and accounts.
The Audit Committee usually meets twice a year along
with the executive directors, by invitation. A private
meeting is also held with the Group’s independent
auditors without the executive directors in attendance.
Activities of the Audit Committee during the year
Internal controls and risk management
The Board has collective responsibility for the
effectiveness of the Group’s system of internal control.
The Audit Committee has assisted the board with its
review of the effectiveness of the internal controls and
risk management during the year principally through
discussion with the executive directors and other
senior managers within the Group. In addition, the
Audit Committee receives reports from its external
auditors that contain control findings that are relevant
to its work.
Information relating to the Group’s principal risks and
uncertainties can be found on page 32 of the Strategic
report.
Financial reporting matters and judgements
The Audit Committee received updates on the key
judgemental financial reporting areas in the Annual
Report & Accounts from the Group Finance Director
and considered the findings from the external auditors
on these matters. The significant reporting matters that
were considered by the Audit Committee during the
year were:
The recognition of revenue for the sale of monitors
on a bill and hold basis to one of the Group’s
distributors. The Audit Committee reviewed the
terms and conditions of the sales contract and
considered that the accounting requirements of
IFRS 15, ‘Revenue from Contracts with Customers’,
had been met and, therefore, the recognition of the
revenue was appropriate.
18
The Audit Committee has received an audit planning
document from the auditors that sets out the auditor’s
perceived audit risks and the scope of the work to be
performed. The Audit Committee was satisfied that the
risks identified were aligned with its own assessment
and that the proposed approach was sufficient for a
high-quality audit to be performed.
Following the completion of the audit, the Audit
Committee received from the auditors a post-audit
management letter that set out the key findings from
the audit. The auditor’s also confirmed their
independence and how they comply with their
professional and regulatory requirements.
The Audit Committee has confirmed that it is satisfied
with the independence, objectivity and the
effectiveness of Nexia Smith & Williamson’s audit and
has recommended to the Board that they are
reappointed.
A resolution to this effect will be proposed at the
forthcoming Annual General Meeting.
Audit committee report (continued)
The carrying value of investments in subsidiaries in
the Parent Company’s Individual Financial
Statements. The Committee reviewed the key
assumptions used in the underlying cash flow
forecast that was used as basis for the value in use
calculation required by accounting standards. The
key assumptions reviewed in the cash flow forecast
were the sales growth rates, gross margins and
overheads. In the context of the value in use
calculation, the Committee satisfied itself that the
pre-tax discount rate was appropriate to use.
The incremental borrowing rate used for lease
accounting purposes. The Group early adopted
IFRS 16, Leases’ from 1 January 2018 using the
modified retrospective approach. The Committee
reviewed the basis upon which the Group’s
incremental borrowing rate was determined and
concluded that the rate used was appropriate.
External audit
The Audit Committee oversaw a competitive tender
process for the provision of audit services for the year
ending 31 December 2018. The incumbent auditors,
PricewaterhouseCoopers LLP, who were appointed in
1999, did not tender. The Audit Committee reviewed
proposals for audit services from three mid-tier firms
and received formal presentations from two of those
firms.
Following these meetings, the Audit Committee
recommended to the Board that Nexia Smith &
Williamson should be appointed as external auditors
for the year ending 31 December 2018.
19
Directors’ remuneration report
Dear Shareholder
Implementation of policy in 2019
The executive directors base salary will be
reviewed on 1st July.
The Directors’ remuneration policy sets out our
remuneration policy for 2018 and beyond and the
Annual report on remuneration sets out the
remuneration paid to the executive and non-
executive directors in respect of 2018 and how our
policy will be implemented in 2019.
As a company listed on the Alternative Investment
Market (AIM), the Company is not required to comply
with Schedule 8 of the Large and Medium-sized
Companies and Groups (Accounts and Reports)
Regulations 2008 as amended in August 2013 (the
“Regulations”), nor is it required to comply with the
principles relating to directors’ remuneration in the UK
Corporate Governance Code 2016 (the “Code”). This
report has not been audited.
Summary of main remuneration policy decisions during
the year
The Committee considered during the year whether
the current policy remains appropriate for 2019 and
concluded that it has a remuneration policy which is a
good balance between competitive pay, incentives to
develop and grow the Company in line with the
strategy and effectively rewards for success and does
not reward where targets are not met.
Corporate performance and remuneration for 2018
As explained in the Chairman’s statement and the
Operating review, on pages 7 to 12, 2018 has been a
year of significant change for Deltex Medical. In June,
the Board concluded that its strategy of investing
heavily to drive growth in the US market was moving too
slowly and it conducted a review, which prompted a
change in strategy. A number of measures where put in
place to improve the Group’s financial results by
reducing the costs of the operation, so that the Group
would generate rather than use cash, giving it a stable
platform from which to expand. To implement these
changes Andy Mears was appointed CEO when Ewan
Phillips left the Group.
As in previous years, the Committee had set stretching
performance targets for the annual bonus which were
clearly linked to the strategy and financial performance
of the Group. The financial targets were not met and
no part of the bonus was paid out. The Committee
carefully reviewed performance against the strategic
objectives set for the annual bonus and although the
Committee determined that management had
performed well in putting in hand the revised strategy,
in the light of the disappointing financial performance it
was determined that no bonus should be paid for
2018.
Annual bonus awards are at the same level as
2018 being 75% of salary for each executive
director. Targets for the 2019 annual bonus are
considered by the Committee to be commercially
sensitive and will be disclosed retrospectively in
next year’s Annual Report (to the extent they are
not commercially sensitive at that time)
Awards under the Deltex Medical Share Option
Scheme for each executive director will be made
at a maximum of 100% of salary. Vesting of the
awards after three years will be determined by
EPS performance.
Summary
The Committee believes that the remuneration policy
continues to both support and motivate our senior
team to achieve the Company’s strategic objectives
and long-term growth for our shareholders.
I will be pleased to engage with you either at the AGM
or beforehand should any shareholder require more
information about our remuneration policies.
Yours sincerely
Nigel Keen
Chairman of the Remuneration Committee
24 April 2019
Directors’ remuneration policy
This part of the remuneration report sets out the
Group’s remuneration policy for its directors.
Policy overview
The remuneration policy promotes the delivery of the
Group’s strategy and seeks to align the interests of
directors and shareholders. The Committee regularly
reviews the link between incentive structure and
strategy to ensure that remuneration packages are
appropriate to attract, motivate and retain the high
calibre executives who are needed to deliver the
Group’s strategy.
20
Directors’ remuneration report (continued)
The Group has an incentive driven policy that seeks to reward executives fairly and responsibly based on Group
performance and their individual contribution. The Group has a strategy aimed at delivering profitable growth and it is
important for motivation and retention that the remuneration of the executives reflects its sustainable, profitable growth
and the increasing complexity of the business.
The Committee considers carefully the motivational effects of the incentive structure in order to ensure that it is
effective and does not have any unintentionally negative impact on matters such as governance, environmental or
social issues. More generally, the Committee ensures that the overall remuneration policy does not encourage
inappropriate risk taking.
Other matters taken into consideration in determining policy
The Committee reviews the executive directors’ packages annually taking account of the level of remuneration paid for
comparable positions in similar companies. In determining the remuneration of the Group’s directors, the Committee
also takes into account the general trends in pay and conditions across the Group as a whole.
The Committee seeks to ensure that the underlying principles which form the basis for decisions on directors’ pay are
consistent with those on which pay decisions for the rest of the workforce are taken.
Remuneration policy table
Element of
pay
Purpose and link to
strategy
Base salary
To provide a
competitive and
appropriate level of
basic fixed pay to
recruit and retain
superior talent and
avoid excessive
risk taking that
might otherwise
result from an over-
reliance on variable
remuneration.
Reflects the
experience,
performance and
responsibilities of
the individual.
Benefits
Provided on a
market-competitive
basis, aids
retention and
follows reward
structure for all
employees.
Operation
Maximum opportunity
Reviewed annually with any increase
No maximum or minimum
usually effective 1st July
Takes account of experience,
performance and responsibilities as well
as the performance of the Group, the
complexity of the role within the Group
and salary increases for employees
generally.
Set with regard to market data for
comparable positions in similar
companies in terms of size,
internationality, business model,
structure and complexity, including
within the industry.
annual increase.
Higher increases than the
average percentage for the
workforce may be appropriate,
for example, where an
individual changes role, where
the complexity of the Group
changes, where an individual is
materially below market
comparators or is appointed on
a below market salary with the
expectation that his/her salary
will increase with experience
and performance.
Currently include but are not limited to:
Death in service cover
Permanent health insurance
Car allowance.
The benefits provided may be subject to
amendment from time to time by the
Committee within this policy.
Relocation costs may be provided as
necessary and reasonable.
Benefits are not part of pensionable
earnings.
The value of benefits varies
from year to year depending on
the cost to the Group and is not
subject to a specific cap.
Benefit costs are monitored and
controlled and represent a
small element of total
remuneration costs.
Pension
To provide a
market-competitive
benefit for
retirement.
Group contributions to a money
4% of base salary.
purchase pension scheme; or
Salary supplement where HMRC annual
or lifetime allowances exceeded.
21
Directors’ remuneration report (continued)
Operation
Maximum opportunity
75% of salary at year-end
payable for maximum
performance.
Bonuses start to be earned
from 0% of salary for achieving
threshold performance.
The maximum limit under the
plan rules is 100% of salary
(value of shares at date of
grant).
Paid annually in May.
Performance targets based on the key
performance indicators and strategic
objectives of the business.
At least 70% of the bonus based on
financial metrics and the balance on
non-financial strategic metrics.
Annual awards under the Share Option
Scheme (ESOS) with vesting subject to
achievement of performance targets.
Both the vesting and performance
period will be over a minimum of three
years.
The Committee will set targets each
year based on long-term financial
performance and/or a stock market-
based metric..
Element of
pay
Purpose and link to
strategy
Annual
bonus
Drives and rewards
the successful
achievement of
short-term targets
set at the start of
the year.
Long term
incentives
To incentivise the
executives and
reward them for
meeting stretching
targets in the long
term which accrue
substantial value to
and align the
directors’ interests
with shareholders.
Facilitates share
ownership to
provide further
alignment with
shareholders.
Annual awards aid
All-
employee
share
schemes
Non-
executive
director
fees
retention.
To encourage
employee share
participation.
The Group may from time to time
operate tax-approved and unapproved
share schemes for which executive
directors could be eligible.
Approved schemes are subject
to the limits set by tax
authorities.
To remunerate the
Chairman and non-
executive directors.
Reviewed annually.
For the non-executive directors agreed
by the executive directors and
Chairman.
For the Chairman agreed by the
Remuneration Committee
There is no prescribed
maximum or minimum annual
increase.
Determined and reviewed taking into
account time commitment, experience,
knowledge and responsibilities of the
role as well as market data for similar
roles in other companies of a similar
size and/or business.
Differences in the remuneration policy of the executive directors and the general employees
There are no material differences in the structure of remuneration arrangements for the executive directors and
senior management, aside from quantum and participation levels in incentive schemes, which reflect the fact that
a greater emphasis is placed on performance-related pay for executive directors and the most senior individuals
in the management team. Outside the senior management team, the Group aims to provide remuneration
structures for employees which reflect market norms.
Choice of performance measures and approach to setting targets
The Committee selects financial and strategic measures (such as sales, profit, cash generation) for the annual
bonus that are key performance indicators for the business over the short term. For the long-term incentives, the
Committee will select a combination of measures that provide a good focus on the outcomes of the Group
strategy together with sustainable improvements in long term profitability.
22
Directors’ remuneration report (continued)
The Committee sets appropriate and demanding
targets for variable pay in the context of the Group’s
trading environment and strategic objectives. The
targets for the annual bonus plan will be set each
year with reference to the Group’s budget and
business and strategic plan. The Committee will
review the performance conditions and targets for
awards under the ESOS each year prior to awards
being made taking account of the Group’s internal
financial planning, market forecasts and the
business environment.
The metrics for awards granted under this policy are
set out in the Annual Report on Remuneration.
Discretions retained by the Committee in operating
its incentive plans
The Committee operates the Group’s various
incentive plans according to their respective rules
and in accordance with HMRC rules where relevant.
To ensure the efficient administration of these plans,
the Committee may apply certain operational
discretions.
These include the following:
select the participants in the plans;
changes and the rationale for those changes will be
set out clearly in the Annual report on remuneration
in respect of the year in which they are made.
Legacy arrangements
The Committee may honour any commitments
entered into with current or former directors (such as
the payment of a pension or the vesting or exercise
of past share awards) that have been disclosed to
and approved by shareholders in previous
remuneration reports. Details of any payments to
former directors will be set out in the Annual Report
on Remuneration as they arise. This will include all
subsisting awards granted under the Executive
Share Option Scheme (ESOS) details of which are
disclosed in the Annual Report on Remuneration.
Recruitment and promotion policy for executive
directors
In setting total remuneration levels and in
considering quantum for each element of the
package for a new executive director, the
Committee would take into account the skills and
experience of the individual, the market rate for a
candidate of that experience and the importance of
securing the relevant individual.
determine the timing of grants and/or payments;
determine the quantum of grants and/or
payments (within the limits set out in the policy
table above);
The Group would seek to align the remuneration
package with this remuneration policy, including the
maximum plan limit for the long-term incentives and
an annual bonus entitlement in line with that of the
other executive directors.
Currently, this would facilitate annual bonus and
ESOS awards of no more than 100% of base salary
respectively (not including any arrangements to
replace forfeited deferred pay). Salary would be
provided at such a level as required to attract the
most appropriate candidate. For new appointments
base salary and total remuneration may be set
initially at below normal market rates on the basis
that it may be increased once expertise and
performance has been proven and sustained.
Specific variable remuneration performance targets
could be introduced for an individual where
necessary for the first year of appointment if it is
appropriate to do so to reflect the individual’s
responsibilities and the point in the year in which
they joined the Board.
determine the extent of vesting based on the
assessment of performance;
determine “good leaver” status and where
relevant extent of vesting in the case of the
share-based plans;
where relevant determine the extent of vesting
in the case of share-based plans in the event of
a change of control;
making the appropriate adjustments required in
certain circumstances (e.g. rights issues,
corporate restructuring events, variation of
capital and special dividends); and
the annual review of weighting of performance
measures, setting targets for the annual bonus
plan and discretionary share plans from year to
year.
The Committee may adjust the targets and/or set
different measures and alter weightings for the
annual bonus plan and share-based awards only if
an event occurs which causes the Committee to
reasonably consider that the performance conditions
would not without alteration achieve its original
purpose and the varied conditions are no less
difficult to satisfy than the original conditions. Any
23
Directors’ remuneration report (continued)
Flexibility is retained to offer additional cash and/or share-based payments on appointment in respect of deferred
remuneration or benefit arrangements forfeited on leaving a previous employer. The Committee would look to
replicate the arrangements being forfeited as closely as possible and in doing so, will take account of relevant
factors including the nature of the deferred remuneration, performance conditions, attributed expected value and
the time over which they would have vested or been paid. Such awards may be made under the terms of the
ESOS or as permitted under the AIM Rules.
For an internal executive director appointment, any variable pay element awarded in respect of the prior role may
be allowed to pay out according to its terms, adjusted as relevant to take into account the appointment. In
addition, any other ongoing remuneration obligations existing prior to appointment may continue.
For external and internal appointments, the Committee may agree that the Group will meet certain relocation,
legal and any other incidental expenses as appropriate.
Executive directors’ service contracts and policy on cessation
Details of the service contracts of the executive directors, available for inspection at the Group’s registered office
and at the Company’s AGM, are as follows:
Executive director
Andy Mears
Jonathan Shaw
Contract date
6 November 2018
6 November 2018
Unexpired term of contract
Rolling contract
Rolling contract
Details of contractual terms and the policy on cessation of employment are summarised in the table below:
Contractual
provision
Notice period
Termination
payment
Detailed terms
6 months by the Group or by the Director.
A Director’s service contract may be terminated without notice and without any further payment or
compensation, except for sums accrued up to the date of termination, in the event of gross misconduct. If
the Group terminates the employment of an executive Director in other circumstances, compensation is
limited to base salary due for any unexpired notice period together with any statutory entitlements in
connection with the termination.
The Group has a right to pay 6 months’ salary in lieu of notice if it so determines.
Remuneration
entitlements
Change of control No executive director’s contract contains additional provisions in respect of a change of control.
Pro-rata bonus may also become payable for the period of active service along with vesting for
outstanding share awards (in certain circumstances – see below).
Any share-based entitlements granted to an executive director under the Group’s share plans will be determined
based on the relevant plan rules. The default treatment for existing awards is that any unvested awards lapse on
cessation of employment. However, in certain prescribed circumstances, such as death, injury, ill health,
disability, retirement or other circumstances at the discretion of the Committee, “good leaver” status may be
applied. For good leavers, under the ESOS awards will vest at cessation to the extent the performance condition
is satisfied, but with the Committee having discretion to vest on the normal vesting date if appropriate and to
waive the performance condition. The Committee has discretion in exceptional circumstances to disapply time
pro-rating and/or to measure performance to and vest awards at the date of cessation. Vesting at cessation would
be the default position where a participant dies.
In certain circumstances, the Committee may choose to grant options as part of arrangements agreed with
directors who leave the Group’s employment.
External appointments
The Board encourages executive directors to accept appropriate external non-executive appointments provided
the aggregate commitment is compatible with their duties as executive directors. The executive director
concerned may retain fees paid for these services, which will be subject to approval by the Board.
24
Directors’ remuneration report (continued)
Non-executive directors
For the appointment of a new Chairman or non-
executive director, the fee arrangement would be in
accordance with the approved remuneration policy
in place at the time.
Non-executive directors do not have service
contracts but are appointed under letters of
appointment. Their appointment can be terminated
without notice and with no compensation payable
on termination, other than accrued fees and
expenses.
Chairman
Under an arrangement between the Group and
Imperialise Limited, Nigel Keen is retained to act as
Chairman of the Group. His current term of
appointment commenced on 19 April 2009. This
arrangement can be terminated by either party at
any time by the giving of six months’ notice.
25
Directors’ remuneration report (continued)
Annual report on remuneration
The Remuneration Committee
The Remuneration Committee (the “Committee”) is
responsible for recommending to the Board the
remuneration packages for executive directors and
has oversight of the bonus and share incentive
strategy for the Group’s executive management.
The Chairman and the executive directors are
responsible for determining the remuneration of the
non-executive directors, and the Remuneration
Committee is responsible for determining the
remuneration of the Chairman.
The role of the Committee includes:
considering and determining the remuneration
policy for the executive directors;
within this agreed policy, considering and
determining the total remuneration packages of
each executive director of the Group;
approving the design and performance targets
for all performance-related plans for executives
as well as the overall total annual payments
made under such plans;
reviewing and noting remuneration trends
across the Group; and
determining the policy for pension
arrangements, service agreements and
termination payments to executive directors.
The members of the Committee are appointed by
the Board and comprise all the independent non-
executive directors: Julian Cazalet, Chris Jones, Sir
Duncan Nichol and Mark Wippell; and the
Chairman of the Board, Nigel Keen. Nigel Keen is
the Chairman of the Committee. The Board
considers that Nigel, with his experience of working
at senior levels in global companies, including high
technology companies, has the most appropriate
blend of skills and experience to make a successful
Chairman of the Remuneration Committee.
All members served throughout the year.
The Chief Executive is invited to attend Committee
meetings as deemed appropriate. For example, the
Chief Executive is able to make a significant
contribution when considering the performance of
the Group Finance Director and to discuss the
wider Group remuneration policy and structure and
terms and conditions affecting other employees.
However, no executive director is present when the
Committee is determining his or her remuneration.
The Committee acts within its agreed written terms
of reference.
The performance of the Committee is reviewed as
part of the wider Board evaluation process.
During the year the Committee fulfilled its duties, as
laid down in the Committee’s terms of reference.
Directors’ remuneration
The remuneration paid to the directors during the year under review and the previous year is summarised in the
tables below:
Executive Director
Year
Salary
Benefits3 Pension4
Andy Mears1
Ewan Phillips2
2018
2018
Cash
settled
£
77,000
89,487
Equity
settled
£
-
-
2017
183,333
17,292
Jonathan Shaw
2018
120,000
-
2017
110,000
10,825
£
4,120
3,372
6,875
7,500
6,875
£
3,080
3,579
8,000
10,000
10,000
Total
2018
286,487
-
14,992
16,659
2017
293,333
28,117
13,750
18,000
Annual
bonus5
Long term
incentive
awards6
£
-
-
-
-
-
-
-
£
-
-
-
-
-
-
-
Total
£
84,200
96,438
215,500
137,500
137,500
318,138
353,000
1 Andy Mears was appointed to the Board as an executive director on 13 June 2018. Only his remuneration as an Executive Director is
reported in the table above.
2 Ewan Phillips resigned from the Board as an executive director on 12 June 2018.
3
4 Contractually, each executive director is entitled to receive a matched contribution to a money purchase pension scheme worth up to
‘Benefits’ comprise the provision of a car allowance paid in cash.
4% of salary. Where the contractual pension contribution exceeds the annual allowance, any balancing payment would be made by the
Group as a cash allowance.
‘Annual bonus’ represents the full annual bonus, payable in cash and share options.
‘Long term incentive awards’ are those awards where the vesting is determined by performance periods ending in the year under report
under the ESOS and therefore reports the value of the ESOS option granted on 10 June 2015.
5
6
26
Directors’ remuneration report (continued)
Non- executive
director
Year
Directors’ fees
Benefits
Pension
Annual
bonus
Long term
incentive
awards
Total
Cash
settled
Equity
settled
£
£
£
£
£
£
Nigel Keen1
Julian Cazalet
Chris Jones
Sir Duncan Nichol
Mark Wippell
Total
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
£
-
-
-
-
9,000
18,000
-
-
-
-
33,333
33,333
24,000
24,000
12,000
-
24,000
24,000
24,000
24,000
9,000
117,333
2017
18,000
105,333
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,333
33,333
24,000
24,000
21,000
18,000
24,000
24,000
24,000
24,000
126,333
123,333
1 Under an arrangement between the Group and Imperialise Limited, Nigel Keen is retained to act as Chairman of the Group and he
must account to Imperialise Limited for his services. Imperialise Limited is paid fees for Nigel Keen’s services. For the year to 31
December 2018, Nigel Keen’s fees as Chairman were £33,000 (2017: £33,000).
External appointments
Neither of the executive directors held any such appointment during the year.
Details of variable pay earned in year
Bonus
No bonus was awarded for the year ended 31 December 2018.
The strategic objectives set by the Committee for each of the executive directors at the beginning of the year included
objectives in the areas of the development of the Group’s strategic plan and implementation of new product
development.
The on-target and maximum bonus potentials for the executive directors as well as the amount actually payable for
the year ended 31 December 2018 are set out below.
Executive director
Andy Mears
Jonathan Shaw
Ewan Phillips2
1 Bonus is calculated on salary as at 31 December 2018
2 Ewan Phillips resigned on 12 June 2018
On-target
Maximum
payable for
payable for
Actual bonus
Actual bonus
bonus
bonus
(% of salary)
(% of salary)
2018
(% of salary1)
50%
50%
N/A
75%
75%
N/A
0%
0%
N/A
2018
(£)
-
-
N/A
27
Directors’ remuneration report (continued)
Interests in share Schemes
Andy Mears’ interests in share options are detailed below:
At 1
January
2018
Granted
Exercised
Lapsed
Expired
At 31
December
2018
Exercise
Price
Exercise period
Number
Number
Number Number
Number
Number
Pence
From
To
125,000
125,000
300,000
150,000
375,000
1,562,500
-
-
-
-
-
-
- 10,000,000
2,637,500 10,000,000
2001 Executive share option scheme
-
-
(125,000)
-
18.50
-
125,000
12.75
2011 Executive share option scheme
30 June
2011
12 June
2012
29 June
2018
11 June
2019
-
-
-
-
300,000
17.25
28 September
2014
27 September
2021
150,000
24.00
375,000
11.00
10 October
2015
10 June
2018
9 October
2022
9 June
2025
1,562,500
22 September
2020
21 September
2027
4.00
-
-
-
-
2003 Enterprise Management Incentive Scheme
-
-
-
10,000,000
1.00
1 April 2020
5 August 2028
(125,000) 12,512,500
-
-
-
-
-
-
-
-
Andy Mears had an interest in 2,637,500 share options at the date of his appointment to the Board.
Jonathan Shaw’s interests in share options are detailed below:
At 1
January
2018
Granted
Exercised
Lapsed
Expired
At 31
December
2018
Exercise
Price
Exercise period
Number
Number
Number Number
Number
Number
Pence
From
To
1,562,500
404,762
1,967,262
-
-
-
-
-
-
2011 Executive share option scheme
-
-
1,562,500
22 September
2020
21 September
2027
4.00
2003 Enterprise Management Incentive Scheme
-
-
-
-
404,762
1,967,262
1.00
22 March
2017
21 March
2027
28
Directors’ remuneration report (continued)
Ewan Phillips, who resigned from the Board on 12 June 2018, had the following interests in share options:
At 1
January
2018
Granted
Exercised
Lapsed
Expired
At 31
December
2018
Exercise
Price
Exercise period
Number
Number
Number Number
Number
Number
Pence
From
To
500,000
500,000
1,000,000
500,000
1,250,000
2,500,000
92,700
510,638
43,478
31,250
34,884
690,105
20,270
13,636
507,692
277,174
115,385
658,743
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,000,000*
2001 Executive share option scheme
-
-
-
-
500,000
18.50
500,000
12.75
2011 Executive share option scheme
30 June
2011
12 June
2012
-
-
-
(833,334)
1,000,000
17.25
500,000
24.00
1,250,000
11.00
28 September
2014
10 October
2015
10 June
2018
1,666,666
22 September
2020
4.00
-
-
-
-
2003 Enterprise Management Incentive Scheme
-
-
-
-
-
-
(92,700)
(510,638)
(43,478)
(31,250)
(34,884)
(87,050)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
603,055
20,270
13,636
507,692
277,174
115,385
658,743
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
30 June
2008
12 June
2009
24 March
2010
25 June
2010
13 October
2010
23 December
2010
19 April
2011
27 September
2011
10 October
2012
23 December
2013
22 March
2017
-
10,000,000
- 17,612,621
1.00
19 June 2018
12 June
2019
12 June
2019
12 June
2019
12 June
2019
12 June
2019
12 June
2019
30 June
2018
11 June
2019
23 March
2020
24 June
2020
12 December
2019
12 December
2019
12 December
2019
12 December
2019
12 December
2019
12 December
2019
12 December
2019
12 December
2019
30 December
2009
29 December
2019
9,245,955 10,000,000
(800,000)
(833,334)
*These share options were granted on 19 June 2018 pursuant to a legal agreement between the Group and Ewan
Phillips in full and final satisfaction of contractual bonus awards in respect of the 2012 and 2013 financial years totalling
£144,200.
Ewan Phillips made a gain of £2,000 on the exercise of share options on 9 February 2018 when the closing share price
was 1.25 pence per share.
29
Directors’ remuneration report (continued)
Dilution limits
The ESOS provides that overall dilution through the issuance of new shares for employee share schemes should not
exceed an amount equivalent to 10% of the Group’s issued share capital over a ten-year period.
The Committee monitors the position prior to the making of any award under these share option schemes to ensure
that the Group remains within this limit. As at the date of this Report, the Group’s headroom position remains within
the 10% limit.
Directors’ shareholdings
Directors’ shareholdings as at 31 December 2018 are shown in the table below.
Legally owned
Unexercised EMI
Options
Unvested options
subject to
performance
conditions under
the EMI scheme
2,781,808
-
10,000,000
54,223,410
8,505,070
525,862
2,307,707
1,588,974
404,762
-
-
-
-
-
-
-
-
-
-
-
Unvested options
subject to
performance
conditions under
the ESOS
2,512,500
1,562,500
-
-
-
-
-
Andy Mears1
Jonathan Shaw
Nigel Keen
Julian Cazalet
Chris Jones
Sir Duncan Nichol
Mark Wippell
1.
Andy Mears was appointed to the Board on 13 June 2018.
Pension arrangements
Executive Director Pension Arrangements
Under the terms of their service contracts executive directors can ask the Group to contribute to a pension plan of
their choice. The Group contributes a maximum of 4% of base salary if matched by a contribution of 4% by the
director or, if lower, a contribution by the director which brings the total pension contribution to the annual allowance
(the maximum tax relieved pension contribution allowable per tax year). Only base salary is pensionable, and
contributions are not included in the calculation of bonus and share award entitlements. Where the Group’s pension
contribution exceeds the annual allowance, a balancing payment is paid by the Group to the director which is taxed as
income.
From the date of Andy Mears’ appointment to the Board, contributions of £2,613 (2017: £nil) were paid into a personal
defined contribution pension.
Contributions totalling £10,000 (2017: £10,000) were paid into a personal defined contribution plan in respect of
Jonathan Shaw under a salary sacrifice arrangement.
Payments for loss of office
On 12 June 2018, Ewan Phillips left the Group. He received the following payments:
base salary, benefits and pension to the date of cessation.
payment in lieu of six months’ notice and car allowance in respect of contractual notice period
payment in lieu of untaken holiday
compensation payment of £75,500; and the
Grant of unapproved options over 10,000,000 shares under the EMI share scheme in respect of unpaid bonuses
for the 2012 and 2013 financial years.
30
Directors’ remuneration report (continued)
The total remuneration of the holder of the office of CEO over the last six years is shown in the table below. The
annual bonus pay-out as a percentage of the maximum opportunity is also shown.
Year ending 31 December
2013
£
2014
2015
2016
2017
20181
£
£
£
£
£
Total remuneration
207,500
207,500
207,500
207,500
207,500
161,687
Annual bonus outcome (%)
45%
0%
0%
0%
0%
0%
2.
The total remuneration comprises the aggregate of salaries and benefits for the office of CEO.
How the policy will be applied in 2019
Base salaries
Andy Mears was appointed as Chief Executive and to the Board in June 2018. Andy’s base salary on appointment to
the Board was £140,000. The salaries of the two executive directors will be reviewed at 1st July 2019.
Benefits and pension
These will be made in accordance with the approved policy.
Annual bonus
The maximum opportunity under the annual bonus plan for 2019 will be 75% of base salary for both the CEO and
GFD.
A combination of financial and non-financial strategic metrics will be used to determine the level of payment under the
annual bonus.
Non-executive directors’ (NED) fees
Board Chairman 2
Basic fee
2018
£
2017
£
33,333
33,333
24,000
24,000
% increase1
0%
0%
Fees for non-executive directors were last increased in 2009.
1
2 All NED fees are planned to be settled by the issue of equity instruments in the Group. Fees planned to be settled by shares remain
outstanding from 1 April 2016 and in aggregate total £301,666. Of this amount, £210,000 is included within accrued liabilities and £91,666
within trade payables in the balance sheet.
Approval
This report was adopted by the Committee on 24 April 2019 and has been approved subsequently by the Board.
Nigel Keen
Chairman of the Remuneration Committee
24 April 2019
31
Strategic report
The directors have pleasure in presenting their
Strategic Report for the year ended 31 December
2018.
The report provides a review of the Group’s business
and describes the principal risks and uncertainties that
it faces. The report includes an analysis of the
performance of the Group during the financial year and
its position at the year-end, including how this is
assessed using key performance indicators (KPI).
The Chairman’s statement, Operating review and
Financial review form part of this Strategic report.
Principal risks and uncertainties
The Group’s strategy has been and continues to be
the establishment of goal directed haemodynamic
management using the TrueVue System and
specifically TrueVue Doppler as a standard of care in
those countries globally where we see the highest
possible return on investment, both through direct
sales and marketing and, where appropriate,
distribution partnerships.
The Group regularly reviews its strategic options and
financing arrangements to reflect circumstances
encountered from time to time.
The directors have, therefore, identified the following
as being the principal risks and uncertainties facing the
Group:
Government policy changes and spending plans.
Lower than anticipated rates of adoption of the
Group’s products in existing key markets.
Not yet established rates of adoption of the
Group’s products in identified new key markets.
The availability to the Group of resources,
including cash, to pursue its strategy.
Exposure to political risks in certain territories.
The Group has established internal controls to assess
the impact, or potential impact, of actual developments
affecting these risks. The Group has developed
internal reporting processes that are used to carefully
manage cash flow, production scheduling and stock
holdings.
A faster or slower than expected change in the
adoption of the Group’s products could expose the
Group to supply chain and production capacity risks. In
addition, supply chain disruptions such as delays, or
losses of inventory also present a potential risk to the
Group’s ability to progress its strategic aims. The
Group mitigates these risks through effective supplier
selection, management and procurement practices.
Government policy changes and spending plans will
continue to impact the Group.
Key performance indicators
The key performance indicators that are used to
monitor performance of the Group are set out in the
table below and are discussed in more detail in both
the Operating review, on pages 9 to 12 and the
Financial review, on pages 13 and 14.
Probe revenues (£’000)
Monitor revenues (£’000)
Third party product
revenues (£’000)
Gross profit percentage
2018
4,035
301
2017
4,936
358
448
71%
378
75%
Adjusted EBITDA (£’000)
(718)
(1,294)
UK probe volumes
11,750
International probe volumes
25,320
US probe volumes
Cash at bank (£’000)
8,820
580
15,295
26,690
10,725
219
Going concern
The Group meets its day-to-day working capital
requirements through a combination of operational
cash flows, an invoice discounting facility and the
raising of additional finance if required.
More information concerning the Group’s cash flows
are given on page 8 of the Annual Report & Accounts
2018.
The directors have reviewed detailed budgets and
forecasts until 30 June 2020. Following on from this
review, the Board has a reasonable expectation that
the Group will have adequate resources to continue in
operational existence for the foreseeable future and
accordingly continues to prepare the Group’s financial
statements on the going concern basis.
The Strategic report on pages 7 to 14 and page 32 has
been approved by the directors and signed:
By order of the Board
Jonathan Shaw
Company Secretary
24 April 2019
32
Directors
Non-executive directors
Nigel Keen Chairman, MA FCA FIET
Nigel has been involved with Deltex Medical since
1988 and Chairman since 1996. He is also Chairman
of the following companies; Syncona Investment
Management Limited (SIML), a company which
manages Syncona Ltd, an evergreen investment
company developing advanced medical products; he is
also a non-executive Director of SIML’s parent
company, Syncona Ltd, a company that is listed on the
London Stock Exchange; Oxford University Innovation
Ltd, the technology transfer Group for Oxford
University; and Oxford Academic Health Science
Network, established by the National Health Service in
England to align the interests of patients in its region
with academia, industry and the healthcare system;
and MedAccess Guarantee Limited, a UK based social
finance company with the pioneering mission to make
global healthcare markets work for everyone.
His career has encompassed venture capital, industry
and banking. He has a degree in engineering from
Cambridge University, is a Fellow of the Institute of
Chartered Accountants, a Fellow of the Institute of
Engineering and Technology and has been involved in
the formation and development of high technology
businesses for more than thirty years. Nigel is
Chairman of the Remuneration Committee.
Julian Cazalet MA FCA
Julian joined the Board in April 2008 and is the
Chairman of the Audit Committee. He was until 2007 a
Managing Director — Corporate Finance of JPMorgan
Cazenove. After graduating in Economics from
Cambridge, he qualified as a Chartered Accountant
before joining Cazenove in 1973. He became a
Partner in 1978. From 1989 he worked in Corporate
Finance, firstly in Equity Capital Markets and
subsequently advising listed companies. He is
Chairman of The Lindsell Train Investment Trust plc
and of a number of charities.
Sir Duncan Nichol
Duncan has been an influential figure in the provision
of acute health services in the UK throughout his
career. He worked for the NHS for nearly 30 years in a
number of senior management roles and was its Chief
Executive from 1989 to 1994. Duncan was the Deputy
Chairman of the Christie NHS Foundation Trust from
2008 to 2012 and is currently Chairman of the
Countess of Chester NHS Foundation Trust.
Mark Wippell
Mark, who joined the board in 2014, has broad
international commercial experience gained through
working extensively with UK, North American and
other overseas based companies. He is Chairman of
the American European Business Association, an
Association Member of BUPA and mentors, and
invests in, technology businesses. He is also a trustee
of various charities. He was formerly a senior
corporate partner of Allen & Overy LLP and is a past
member of three advisory committees at Oxford
University. Mark is qualified as a lawyer in the UK and
the US.
Christopher Jones
Chris Jones joined the board in June 2015 and brings
over 25 years of experience in Fortune 500 and VC
funded healthcare companies in both the UK and,
importantly, throughout the US. Executive Chairman of
Mologic Ltd, Executive Chairman of Elasmogen Ltd,
and Non-executive Director of MediSieve, Causeway
Therapeutics and Health Enterprise East, Mr Jones is
a US national who came to the UK in 2008 to become
CEO of GlySure.
Prior to joining GlySure he was CEO of Tensys
Medical developing and commercialising a novel
continuous, non-invasive blood pressure monitor
resulting in the sale of the company in 2008.
Mr Jones also spent nine years with Nellcor Inc, a
division of Tyco Healthcare, most recently as VP of
Marketing responsible for the $700M WW pulse
oximetry and critical care businesses. Mr Jones is a
graduate of Yale University with a Bachelor of Science
Degree in Molecular Biophysics and Biochemistry.
Executive directors
Andy Mears Chief Executive
Andy joined Deltex Medical in 1989 as an Electronics
Engineer. Throughout his career with Deltex Medical,
he has held a number of roles, including Product
Manager; Production Manager and Operations
Director. Andy was appointed as Group Sales Director
in 2010, Managing Director in 2015 and Chief
Executive in 2018.
Jonathan Shaw Group Finance Director, ACIB, FCCA
Jonathan Shaw joined the board in September 2015.
He has spent the majority of his career working at
either Director or senior manager level in professional
accounting and auditing firms most recently with Grant
Thornton UK LLP in London and including
PricewaterhouseCoopers LLP in Southampton where
he was Deltex Medical’s senior audit manager for
nearly four years. During his career, Jonathan has
undertaken a number of secondments to industry or
government and spent almost three years at the
Financial Reporting Council.
33
Company Secretary and Advisers
Company Secretary and Registered Office
Jonathan Shaw ACIB FCCA
Terminus Road
Chichester
West Sussex
PO19 8TX
Nominated adviser
Arden Partners plc
125 Old Broad Street
London
EC2N 1AR
Joint Broker
Turner Pope Investments (TPI) Limited
6th Floor, Becket House
36 Old Jewry
London
EC2R 8DD
Independent auditors
Nexia Smith & Williamson
Cumberland House
15 – 17 Cumberland Place
Southampton
SO15 2BG
Principal bankers
The Royal Bank of Scotland plc
62-63 Threadneedle Street
PO Box 142
London
EC2N 3AR
Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
34
Directors’ report
Registered no. 03902895
The directors present their report and the audited consolidated financial statements for the year ended 31
December 2018.
Future developments
The Group’s business activities, together with the factors likely to affect its future developments,
performance and position are set out in the Chairman’s statement on pages 7 and 8 and the Operating
review on pages 9 to 12.
Financial risk management
The financial risk management objectives and policies of the Group, including exposure to currency risk,
interest rate risk and liquidity risk are set out in note 23 to the financial statements on pages 76 to 79.
Dividends
The directors cannot propose the payment of a dividend (2017: £nil) for 2018.
Directors
The directors of the Group who served during the year are shown below. Biographical details are given on
page 33.
Nigel Keen
Ewan Phillips*
Andy Mears**
Jonathan Shaw
Julian Cazalet
Chris Jones
Sir Duncan Nichol
Mark Wippell
* Ewan Phillips resigned from the Board on 12 June 2018
Non-executive Chairman
Chief Executive
Chief Executive
Group Finance Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
** Andy Mears was appointed to the Board on 13 June 2018
Directors’ remuneration
The following information has been disclosed to satisfy the disclosure requirement set out in Rule 19 of the
AIM Rules for Companies:
Salary and Fees
Director
Nigel Keen
Ewan Phillips2
Andy Mears1
Jonathan Shaw
Julian Cazalet
Chris Jones
Sir Duncan Nichol
Mark Wippell
Cash
settled
£
-
89,487
77,000
120,000
-
9,000
-
-
Equity
settled
£
33,333
-
-
-
24,000
12,000
24,000
24,000
Benefits
Pension
2018
Total
£
33,333
96,438
84,200
2017
Total
£
33,333
215,500
-
£
-
3,579
3,080
10,000
137,500
137,500
-
-
-
-
24,000
21,000
24,000
24,000
24,000
18,000
24,000
24,000
£
-
3,372
4,120
7,500
-
-
-
-
1 For the period from 13 June 2018 to 31 December 2018.
295,487
117,333
14,992
16,659
444,471
476,333
2 Ewan Phillips resigned as a Director on 12 June 2018. He was paid £103,750 in lieu of his six months’ notice and
received £75,500 as compensation for loss of office. On 19 June 2018, he was granted 10,000,000 options under the
Group’s 2003 Enterprise Management Incentive (EMI) Share Scheme with an exercise price of 1p and an exercise
period of 18 months from the date of grant in full and final satisfaction of contractual bonus awards in respect of the
2012 and 2013 financial years totalling £144,200.
35
Directors’ report (continued)
Of the 2,500,000 options granted in September 2017 to Ewan Phillips under the Group’s 2011 Executive
Share Option Scheme, 1,666,667 were permitted to vest early and are exercisable at 4p per option within
12 months from the date of resignation. In addition, the exercise periods for shares options that had vested
under the 2001 Executive Share Option Scheme and the 2003 Enterprise Management Incentive Scheme
were extended to 12 and 18 months from the date of resignation respectively. The aggregate share-based
payment charge for the share options referred to above was £81,354.
Directors’ indemnities
As permitted by the Companies Act 2006, the Company has indemnified the directors in respect of
proceedings brought by third parties and qualifying third party indemnity insurance was in place throughout
the year and up to the date of approval of the financial statements.
Research & development activities
Deltex Medical Limited, a subsidiary, undertakes research and development work in support of its principal
manufacturing activities. Further information on the Group’s research and development activities can be
found throughout the Strategic Report.
Statement of directors’ responsibilities in respect of the financial statements
The directors are responsible for preparing the Annual Report and the financial statements in accordance
with applicable law and regulation. Company law requires the directors to prepare financial statements for
each financial year. Under that law the directors have prepared the Group financial statements in
accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union
and parent company financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure
Framework”, and applicable law). Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group
and Parent Company and of the profit or loss of the Group and Parent Company for that period. In
preparing the financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
state whether applicable IFRSs as adopted by the European Union have been followed for the
Group financial statements and United Kingdom Accounting Standards, comprising FRS 101, have
been followed for the Company financial statements, subject to any material departures disclosed
and explained in the financial statements;
make judgements and accounting estimates that are reasonable and prudent; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume
that the Group and Parent Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Group and Parent Company’s transactions and disclose with reasonable accuracy at any time
the financial position of the Group and Parent Company and enable them to ensure that the financial
statements comply with the Companies Act 2006. The directors are also responsible for safeguarding the
assets of the Group and Parent 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 Parent Company’s website. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other jurisdictions. The directors
consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess the Group and Parent Company’s
performance, business model and strategy. Each of the directors, whose names and functions are listed in
directors report confirm that, to the best of their knowledge:
the Parent Company financial statements, which have been prepared in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 “Reduced Disclosure Framework”, and applicable law), give a true and fair
view of the assets, liabilities, financial position and profit of the Company;
36
Directors’ report (continued)
Statement of directors’ responsibilities in respect of the financial statements (continued)
the Group financial statements, which have been prepared in accordance with IFRSs as adopted
by the European Union, give a true and fair view of the assets, liabilities, financial position and loss
of the Group; and
the Strategic Report includes a fair review of the development and performance of the business
and the position of the Group and Parent Company, together with a description of the principal
risks and uncertainties that it faces.
In the case of each director in office at the date the Directors’ report is approved:
so far as the director is aware, there is no relevant audit information of which the Group and Parent
Company’s auditors are unaware; and
they have taken all the steps that they ought to have taken as a director in order to make
themselves aware of any relevant audit information and to establish that the Group and Parent
Company’s auditors are aware of that information.
Independent auditors
The independent auditors, Nexia Smith & Williamson, who were appointed by the Board to fill the casual
vacancy following the resignation of PricewaterhouseCoopers LLP, have indicated their willingness to
continue in office and a resolution concerning their reappointment will be proposed at the forthcoming
Annual General Meeting.
Events after the balance sheet date
On 5 February 2019, the Company issued 8,695,652 new ordinary shares pursuant to the exercise of share
options under the Group’s EMI share scheme with an exercise price of 1 penny per share. The proceeds
received on exercise was £87,000.
On 9 April 2019, the Board resolved to waive the non-interest-bearing intra-group loan owing to the
Company from its wholly owned subsidiary undertaking, Deltex Medical Limited. The gross balance owed
to the Company at 31 December 2018 was £45,164,000. This will be accounted for as a capital contribution
in the Annual Report & Accounts 2019.
Annual General Meeting
The notice convening the Annual General Meeting, which will take place on 22 May 2019 at 11.00am at the
offices of DAC Beachcroft LLP, 25 Walbrook, London EC4N 8AF can be found at the back of this
publication.
By order of the Board.
Jonathan Shaw
Company Secretary
24 April 2019
37
Independent auditors’ report
to the members of Deltex Medical Group plc
Opinion
We have audited the financial statements of Deltex Medical Group plc (the ‘parent company’) and its
subsidiaries (the ‘group’) for the year ended 31 December 2018 which comprise Consolidated Statement of
Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity,
Consolidated Statement of Cash Flows, Parent Company Balance Sheet, Parent Company Statement of
Changes in Equity and the notes to the financial statements, including a summary of significant accounting
policies. 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 and, as regards
the parent company financial statements, as applied in accordance with United Kingdom Generally
Accepted Accounting Practice including FRS 101 “Reduced Disclosure Framework” (United Kingdom
Generally Accepted Accounting Practice).
In our opinion:
the financial statements give a true and fair view of the state of the group’s and of the parent
company’s affairs as at 31 December 2018 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by
the European Union;
the parent company financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of the
group and parent company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to SME listed entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to
report to you where:
the directors’ use of the going concern basis of accounting in the preparation of the financial
statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that
may cast significant doubt about the group’s or the parent company’s ability to continue to adopt the
going concern basis of accounting for a period of at least twelve months from the date when the
financial statements are authorised for issue.
Key audit matters
We identified the key audit matters described below as that which were most significant in the audit of the
financial statements of the current period. Key audit matters include the most significant assessed risks of
material misstatement, including those risks that had the greatest effect on our overall audit strategy, the
allocation of resources in the audit and the direction of the efforts of the audit team.
In addressing these matters, we have performed the procedures below which were designed to address each
matter in the context of the financial statements as a whole and in forming our opinion thereon.
38
Independent auditor’s report to the members of Deltex Medical Group plc (continued)
How the matter was addressed in
the audit
We challenged the assumptions used
in the cash flow forecasts. The main
procedures performed on the forecasts
and areas where we challenged
management were as follows:
testing the quality of management
forecasting by comparing cash
flow forecasts for prior periods to
actual outcomes;
discussion with Management over
the basis and appropriateness of
key assumptions used in the
cashflow forecasts;
verifying the consistency of
forecasts used in the impairment
calculations with those used for
going concern assessment;
performing sensitivity calculations
to understand the impact of
changing the key assumptions and
the effect on cashflows and value
in use; and
reviewing the disclosures around
going concern in the financial
statements to ensure they are
consistent with the work
performed.
In performing our procedures, we used
our internal valuation specialists to
assess the appropriateness of the
model and the discount rate and long-
term growth rates applied.
Based on our procedures we have
concluded that the going concern basis
for the financial statements and the
carrying value of investments in
subsidiaries and receivables due from
group companies is appropriate.
Key audit matter
Description of risk
The cash flow projections
which support going
concern for group and
parent and parent
company investment and
intercompany balances
with subsidiaries
The Group is loss-making and has
relied on equity funding to provide
working capital over the last few
years.
Management have prepared a
budget and cash flow forecast
indicating that the group and parent
company can operate as a going
concern for at least 12 months from
the date the financial statements are
approved.
Cash flow projections are inherently
judgemental and subject to
fluctuation with expenditure
requirements. As a result, the ability
of the group and parent company to
operate as a going concern for 12
months from the date of approval of
the financial statements was a key
area of audit focus.
Furthermore, the parent company
has significant balances relating to
investments in subsidiaries and
receivables due from group
companies.
The group’s assessment of carrying
value requires significant judgement
in particular regarding cash flows,
growth rates, discount rates and
sensitivity assumptions to derive a
value in use.
39
Independent auditor’s report to the members of Deltex Medical Group plc (continued)
Key audit matter
Description of risk
Revenue recognition
including deferred income
Revenue growth continues to be a
key focus for the group to meet
market expectations.
Furthermore IFRS 15 has been
adopted this year, which has required
consideration to ensure all types of
sales are recorded in the appropriate
period
Capitalisation of
development costs and
impairment of
development costs
The group has significant intangible
assets arising from the capitalisation
of the costs relating to products in
development.
the ability
is assessing
commercialise
For products in development the main
to
risk
successfully
the
individual product concerned to the
extent that future revenues from the
products will generate sufficient
returns to cover the development
costs over its useful economic life.
This can be a highly judgemental
area.
How the matter was addressed in
the audit
As part of our procedures we:
traced a sample of sales from
customer order to the nominal
ledger, ensuring deferred
income postings were
complete for these
transactions;
reviewed transactions around
the year end and
traced to supporting
documentation to determine if
the sale was recorded in the
correct period, in particular
ensuring that bill and hold
arrangements have been
correctly treated;
performed testing of deferred
income balances to ensure
that revenue was being
correctly deferred; and
reviewed the revenue
recognition policies disclosed
in the financial statements to
determine if these policies
were in accordance with
IFRS15 and in line with the
accounting treatment adopted.
Based on the procedures performed
we concluded that revenue was
appropriately recognised in the
Consolidated Statement of
Comprehensive Income.
A sample of project development costs
capitalised in the year were traced to
supporting documentation ensuring
they were valid capital expenditure and
the relevant capitalisation criteria
under IAS 38 were met.
A sample of development projects in
progress and completed at the year-
end were discussed with management
and individuals overseeing the projects
to understand the future prospects of
the projects and consider whether any
impairment was required.
Based on the procedures performed
we concluded that the capitalisation of
development costs was appropriate
and that no material impairment was
required.
40
Independent auditor’s report to the members of Deltex Medical Group plc (continued)
Key audit matter
Description of risk
The value of share
options and calculation of
the charge in the
Consolidated Statement
of Comprehensive Income
The Group issued new share options
during the year as well as having
options granted in the prior year
which vest in the current year. The
valuation of these options requires
estimates, in particular regarding the
maturity period, expected volatility
and risk-free rate.
How the matter was addressed in
the audit
As part of our procedures we:
reviewed the documentation for
the share options granted in the
year and agreed the relevant
inputs to the model;
used our internal valuations team
to review the inputs used in the
valuation model; and
ensured the correct share-based
payment charge has been
recognised in the P&L for the year.
Based on our procedures we have
concluded that the share-based
payment expense in the Consolidated
Statement of Comprehensive Income
was appropriately recorded.
Our application of materiality
The materiality for the financial statements of the group as a whole was set at £99,000. This has been
determined with reference to the benchmark of the group’s turnover, which we consider to be one of the
principal considerations in assessing the performance of the group. Materiality represents 2% of turnover.
The materiality for the financial statements of the parent as a whole was set at £79,200. This has been capped
at the group’s performance materiality.
An overview of the scope of our audit
Of the group’s five reporting components, we subjected two to a full scope audit in their own right and the
other three reporting components were subjected to specific audit procedures where the extent of our audit
work was based on our assessment of the risk of material misstatement and audited to group performance
materiality.
The components within the scope of our work covered 100 per cent of group revenue, 100 per cent of group
profit before tax and 100 per cent of group net assets.
Other information
The other information comprises the information included in the Annual Report and Accounts, other than the
financial statements and our auditor’s report thereon. The directors are responsible for the other information.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
the information given in the strategic report and the directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements.
41
Independent auditor’s report to the members of Deltex Medical Group plc (continued)
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment
obtained in the course of the audit, we have not identified material misstatements in the strategic report or the
directors’ report.
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.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on pages 36 and 37, the directors
are responsible for the preparation of the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent
company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors either intend to liquidate the group or the
parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
This report is made solely to the parent 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 parent
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 parent company and the parent company’s members as a body, for our audit work, for this report, or
for the opinions we have formed.
Julie Mutton
Senior Statutory Auditor, for and on behalf of
Nexia Smith & Williamson
Statutory Auditor
Chartered Accountants
15-17 Cumberland Place
Southampton
Hampshire
SO15 2BG
24 April 2019
42
Consolidated statement of comprehensive income
For the year ended 31 December 2018
Note
3
4
23
9
4
9
26
6
6
7
Total revenue
Total cost of sales
Gross profit
Administrative expenses
Sales and distribution expenses
Research and Development, Quality and Regulatory
Impairment loss on trade receivables
Exceptional costs
Total costs
Operating loss before exceptional costs and other gain
Exceptional costs
Other gain
Operating loss
Finance income
Finance costs
Loss before taxation
Tax credit on loss
Loss for the year
Other comprehensive income/(expense)
Items that may be reclassified to profit or loss:
Net translation differences on overseas subsidiaries
Other comprehensive income/(expense) for the year, net of tax
Total comprehensive loss for the period/year
Total comprehensive loss for the period/year attributable
to:
Owners of the Parent
Non-controlling interests
2018
£’000
4,955
(1,424)
3,531
(1,721)
(2,189)
(526)
(38)
(287)
(4,761)
(943)
(287)
80
(1,150)
-
(188)
(1,338)
74
(1,264)
2
2
2017
£’000
5,870
(1,488)
4,382
(2,064)
(3,692)
(558)
(6)
-
(6,320)
(1,938)
-
-
(1,938)
-
(163)
(2,101)
100
(2,001)
(113)
(113)
(1,262)
(2,114)
(1,268)
6
(1,262)
(2,135)
21
(2,114)
Loss per share – basic and diluted
10
(0.3p)
(0.7p)
The Group has initially applied IFRS 9, IFRS 15 and IFRS 16 at 1 January 2018. Under the transition methods
chosen, comparative information has not been restated except for the separate presentation of impairment losses
on trade receivables in the Consolidated statement of comprehensive income.
The notes on pages 48 to 82 form an integral part of these consolidated financial statements.
43
Consolidated balance sheet
As at 31 December 2018
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Financial assets at amortised cost
Total non-current assets
Current assets
Inventories
Trade receivables
Financial assets at amortised cost
Other current assets
Current income tax recoverable
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Borrowings
Trade and other payables
Total current liabilities
Non-current liabilities
Borrowings
Trade and other payables
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Capital redemption reserve
Other reserve
Translation reserve
Convertible loan note reserve
Accumulated losses
Equity attributable to owners of the Parent
Non-controlling interests
Note
11
12
15
14
15
15
15
17
17
17
17
19
20
25
25
25
25
25
25
2018
£’000
587
2,528
155
3,270
680
1,410
245
190
74
580
3,179
6,449
(553)
(1,983)
(2,536)
(1,035)
(352)
(114)
(1,501)
(4,037)
2,412
4,927
33,230
17,476
953
149
82
(54,264)
2,553
(141)
(As restated)
2017
£’000
274
2,486
-
2,760
754
1,618
378
54
94
219
3,117
5,877
(809)
(2,649)
(3,458)
(1,004)
-
(115)
(1,119)
(4,577)
1,300
3,132
32,915
17,476
4,752
147
84
(57,059)
1,447
(147)
Total equity
1,300
The notes on pages 48 to 82 form an integral part of these consolidated financial statements. The financial
statements on pages 43 to 82 were approved by the Board of Directors and authorised for issue on
24 April 2019 and were signed on its behalf by:
2,412
Nigel Keen
Chairman
Jonathan Shaw
Group Finance Director
44
Consolidated statement of changes in equity for the year ended 31 December 2018
Share
capital
Share
premium
Capital
redemption
reserve
Other
reserve
Convertible
loan note
reserve
Translation
reserve
Accumulated
losses
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Non-
controlling
interest
Total equity
£’000
£’000
Total
£’000
Balance at 1 January
2018, as previously
reported
3,132
32,915
17,476
4,752
Effect of new standards
-
-
-
-
Balance at 1 January
2018, as restated
Comprehensive
income
Loss for the period
Other comprehensive
income for the period
Total comprehensive
income for year
Transactions with
owners of the Group
Shares issued during
the year
Issue expenses
Equity-settled share-
based payment
Transfers
Share options
exercised
Balance at
31 December 2018
3,132
32,915
17,476
4,752
-
-
-
1,787
-
-
-
8
-
-
-
447
(132)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
166
(3,965)
-
4,927
33,230
17,476
953
84
-
84
-
-
-
-
-
-
(2)
-
82
147
-
147
(57,059)
1,447
98
98
(147)
-
(56,961)
1,545
(147)
-
2
2
-
-
-
-
-
(1,270)
(1,270)
-
2
(1,270)
(1,268)
-
-
-
3,967
-
2,234
(132)
166
-
8
6
-
6
-
-
-
-
-
1,300
98
1,398
(1,264)
2
(1,262)
2,234
(132)
166
-
8
149
(54,264)
2,553
(141)
2,412
The notes on pages 78 to 82 form an integral part of these consolidated financial statements.
45
Consolidated statement of changes in equity for the year ended 31 December 2017
Share
capital
£’000
Share
premium
Capital
redemption
reserve
Other
reserve
Convertible
loan note
reserve
Translation
reserve
Accumulated
losses
Total
Non-
controlling
interest
Total equity
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Balance at
1 January 2017
Comprehensive
income
Loss for the year
Other comprehensive
income for the year
Total
comprehensive
income for the year
Transactions with
owners of the Group
Shares issued during
the year
Premium on shares
issued during the
year
Issue expenses
Equity-settled share-
based payment
Balance at
31 December 2017
2,849
32,268
17,476
4,685
84
260
(55,037)
2,585
(168)
-
-
-
283
-
-
-
-
-
-
-
694
(47)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
67
-
-
-
-
-
-
-
-
(2,022)
(2,022)
(113)
-
(113)
(113)
(2,022)
(2,135)
-
-
-
-
-
-
-
-
283
694
(47)
67
21
-
21
-
-
-
-
3,132
32,915
17,476
4,752
84
147
(57,059)
1,447
(147)
1,300
£’000
2,417
(2,001)
(113)
(2,114)
283
694
(47)
67
The notes on pages 48 to 82 form an integral part of these consolidated financial statements.
46
Consolidated statement of cash flows
for the year ended 31 December 2018
Cash flows from operating activities
Loss before taxation
Adjustments for:
Net finance costs
Depreciation of property, plant and equipment
Profit on disposal of loan monitors
Amortisation of intangible assets
Modification gain on convertible loan note
Share-based payment expense
Effect of exchange rate fluctuations
Decrease/(increase) in inventories
Decrease in trade and other receivables
(Decrease)/increase in trade and other payables
(Decrease)/increase in provisions
Net cash used in operations
Interest paid
Income taxes received
Net cash used from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from the sale of loan monitors
Capitalised development expenditure
Net cash used in investing activities
Cash flows from financing activities
Issue of ordinary share capital
Expenses in connection with share issue
Net movement in invoice discount facility
Repayment of obligations under finance leases
Net cash generated from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Exchange gain/(loss) on cash and cash equivalents
Cash and cash equivalents at end of the period
2018
£’000
2017
£’000
(1,338)
(2,101)
188
246
(12)
173
(80)
166
(9)
(666)
38
52
(694)
(1)
(1,271)
(141)
94
(1,318)
(18)
18
(214)
(214)
2,216
(132)
(171)
(36)
1,877
345
219
16
580
163
265
-
195
-
91
7
(1,380)
(203)
404
251
8
(920)
(123)
115
(928)
(6)
-
(286)
(292)
952
(47)
(7)
(28)
870
(350)
582
(13)
219
The notes on pages 48 to 82 form an integral part of these consolidated financial statements.
47
Notes to the consolidated financial statements
for the year ended 31 December 2018
Principal accounting policies
1.
Presented below are those accounting policies that relate to the financial statements as a whole and includes
details of new accounting standards that are or will be effective for 2018 or later years. To facilitate the
understanding of each note to the financial statements those accounting policies that are relevant to a
particular category are presented within the relevant notes. These policies have been consistently applied to
all the years presented, unless otherwise stated.
1.1. General information
These financial statements are the consolidated financial statements of Deltex Medical Group plc, a public
company limited by shares registered in England and Wales, and its subsidiaries (‘the Group’). Deltex Medical
Group plc is listed on the Alternative Investment Market of the London Stock Exchange. The address of the
registered office is Deltex Medical Group plc, Terminus Road, Chichester, PO19 8TX, registered number
03902895. The Group is principally involved with the manufacture and sale of advanced haemodynamic
monitoring technologies.
1.2. Basis of reporting
The consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union (EU), with interpretations issued by the
International Financial Reporting Interpretations Committee (IFRS IC) and with those parts of the Companies
Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been
prepared under the historical cost convention, with the exception of fair value accounting for share based
payments, and on a going concern basis as discussed in more detail under the ‘Basis of Preparation’ section
of this note.
These financial statements have been prepared applying the accounting policies and presentation that were
applied in the preparation of the Group’s published consolidated financial statements for the year ended 31
December 2017, except for the adoption of new standards effective from 1 January 2018 and the early
adoption of IFRS 16 ‘Leases’. The Group has not early adopted any other standard, interpretation or
amendment that has been issued but is not yet effective.
The Group applies, for the first time:
IFRS 9 ‘Financial Instruments’;
IFRS 15 ‘Revenue from Contracts with Customers’; and
IFRS 16 ‘Leases’.
Several other amendments and interpretations apply for the first time in 2018, but do not have an impact on
the consolidated financial statements of the Group.
1.3. Basis of consolidation
The consolidated financial statements include the financial statements of the Parent Company and all of its
subsidiaries. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Consistent accounting policies have been adopted across the Group. Subsidiaries are all entities over which
the Group has control. The Group controls an entity when it is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-
consolidated from the date that control ceases. The Group applies the acquisition method to account for
business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of
the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests
issued by the Group.
The consideration transferred includes the fair value of any asset or liability resulting from a contingent
consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at the acquisition date. The Group recognises
any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the
non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.
48
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
1.4. Foreign currency translation
The functional and presentational currency for the Parent Company is UK pounds sterling. Group companies use
their local currency as their functional currency. Transactions denominated in currencies other than the functional
currency are recorded at the rates of exchange prevailing on the dates of the transactions.
At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are re-
translated at the rates prevailing on the balance sheet date, with any gains or losses being included in the net
profit or loss of the period. Exchange differences arising on non-monetary assets and liabilities are recognised
directly in equity.
On consolidation, the assets and liabilities of the Group’s overseas operations are translated at exchange rates
prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for
the period. Exchange differences arising, if any, are dealt with through the Group’s reserves, until such a time as
the subsidiary is sold whereupon the cumulative exchange differences relating to the net investment in that
foreign subsidiary are recognised as part of the profit or loss on disposal in the Consolidated Statement of
Comprehensive Income. However, cumulative exchange differences arising prior to 1 January 2006 remain in
equity as permitted by IFRS 1.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at the closing rate. The Group has elected to treat goodwill and fair
value adjustments arising on acquisitions before the date of transition to IFRS as sterling denominated assets
and liabilities.
The following are the principal foreign exchange rates that have been used in the preparation of the financial
statements:
2018
2017
Average Rate
Closing rate
Average rate
Closing rate
Sterling/US Dollar
Sterling/Euro
Sterling/Canadian Dollar
1.33
1.13
1.73
1.27
1.11
1.73
1.29
1.14
1.68
1.35
1.13
1.69
1.5 Impairment of property, plant and equipment and intangible assets
At each balance sheet date, the Group reviews the carrying amounts of its property, plant and equipment and
intangible assets to determine whether there is any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of any
impairment loss. The recoverable amount is the higher of the asset’s value in use and its fair value less costs to
sell. Value in use is calculated using cash flow projections for the asset (or Group of assets where cash flows are
not identifiable for specific assets) discounted at the Group’s cost of capital. If the recoverable amount of an asset
(or cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or
cash generating unit) is reduced to its recoverable amount. Non-financial assets other than goodwill which have
suffered an impairment are reviewed for possible reversal of impairment at each reporting date.
1.6 Use of judgements and estimates
In preparing these consolidated financial statements, management has had to make judgements and estimates
that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities,
income and expenses. However, actual results may differ from these results.
Judgements
Research and development
Costs for research and development activities are only capitalised as intangible assets if the qualification
criteria are met. These criteria are met only when the technical as well as commercial feasibility can be
demonstrated, and cost can be measured reliably. The amounts capitalised represents the Group’s estimate
of what costs have met these criteria. There is a risk that the intangible asset will not generate the required
future economic benefits and therefore could result in potential impairments.
49
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
Revenue recognition – managed care contracts
The Group has a small number of managed care contracts with customers which require the Group to
provide customers with sufficient monitors to treat the number of patients agreed with the customer over the
contracted period. The contracts typically require product support to be provided on a regular basis to
support the customers staff. The judgement made is whether there are multiple performance obligations and
whether they are satisfied at a point in time or over time.
Management have concluded that there is one performance obligation that is satisfied over a period of time
as the customer’s ability to treat patients is not constrained under the managed care contract. If the contract
is terminated, the Group is unconditionally entitled to payment for the monthly contracted amounts from the
contract inception to the date of termination.
Revenue recognition – bill and hold sales
Bill and hold sales occasionally feature in the Group’s sales profiles both in the UK and international markets
served by third party distributors around both the half-year and the year-end date. In determining when the
transaction may be recognised as revenue, management must be satisfied that:
the request to hold stock on the customer’s behalf reflects a substantive arrangement;
the customer acknowledges the deferred delivery instructions, confirms that it has accepted title and
accepts the invoice which is payable in accordance with usual payment terms; and
the products ordered by the customer are on hand, identified and ready for delivery at the time the
sale is recognised.
Revenue recognised under bill and hold arrangements for the year ended 31 December 2018 amounted to
£142,300 (2017: £10,300).
Estimates
Information about estimation uncertainties at 31 December 2018 that have a significant risk of adjustment to
the carrying amount of assets in the next financial year is contained in the following note:
Trade receivables
Note 23 provides information on the measurement of expected credit losses in respect of trade receivables,
staff advances and other receivables.
1.7 Basis of preparation
In common with many companies of its size and which are at its stage of development, the directors manage
carefully the Group’s limited resources to develop the opportunities open to it without over stretching the funding
capabilities of the business. The funds the Group has available to it are impacted by the results of its commercial
activities and through the new funding provided to it by the capital markets and secured lending. The Group
invests in its development of the market in keeping with this level of funding, having sufficient flexibility in its cost
structure to tailor expenditure to accord with income levels. As noted in the Directors’ report, in preparing these
financial statements the directors have reviewed detailed budgets and cash flow forecasts until 30 June 2020.
This review indicates that the Group is expected to continue trading at current levels as a going concern based on
increasing net cash inflows from sales over expenditure of the Group. The directors believe it is appropriate to
prepare the financial statements on the going concern basis.
50
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
2. Revenue recognition
2.1 Accounting policy
Revenue arises predominantly from the sale of advanced haemodynamic monitoring equipment which comprise
monitors and consumable items such as single use probes and other ancillary items such as cables, roll stands
etc. Revenue is also earned from after sales maintenance contracts.
In determining whether to recognise revenue, the Group applies the following 5-step process:
1. Identifying the contract with the customer;
2. Identifying the performance obligations set out in the contract;
3. Determining the overall transaction price;
4. Allocating the transaction price to the performance obligations; and
5. Recognising revenue either when or as performance obligation(s) are satisfied.
The Group recognises contract liabilities for consideration received in advance of unsatisfied performance
obligations and reports these amounts as other liabilities in the Consolidated Balance Sheet. Typically, these
amounts relate to consideration received in advance for after-sales maintenance contracts or, occasionally,
consideration received from new customers in settlement of pro-forma sales invoices.
Monitor and consumable revenues
Revenue on monitors and consumables is recognised when the Group transfers the control of the assets to the
customer. For customers in both the UK and the USA, this is when the goods are accepted for delivery at the
customer’s specified delivery address. For our network of independent distributors which form our ‘International’
business stream, the transfer of control occurs on despatch of the goods in accordance with the Group’s
distributor agreements.
Preventative planned maintenance (PPM) agreements
The Group enters into PPM agreements with customers for the provision of an annual service for their monitors.
These agreements can range in length from 1 to 3 years and provide for an annual service for each monitor
specified by the serial number on the PPM agreement. Revenue is recognised when the service has been
completed and the monitor is ready for use by the customer. As noted above, consideration received from
customers in advance of completing the service of their monitors is recognised as other liabilities in the
Consolidated balance sheet.
Managed care contracts
The Group occasionally enters into managed care contracts with customers in both the UK and USA. These
contracts typically provide for a specified number of patients to be treated over a period of one year. The
contracts specify the maximum number of patients that can be treated under the contract. In the USA, the annual
contract amount is invoiced to the customer in equal monthly instalments irrespective of the fact that the hospital
may not have ordered sufficient consumable probes in any particular month. The contracts provide the customer
with the ability to treat patients at any time during the contract period. Accordingly, revenue is recognised on a
straight-line basis over the life of the contract
In the event that a customer wished to treat more patients than specified in the contract, the customer can choose
to either pay in full the invoiced amount outstanding under the contract and enter into a new agreement or
continue to pay the monthly amounts due under the contract along with a specified amount charged for each
additional consumable probe ordered. In the event of this occurring, any revenue that had not been recognised
under the contract would be recognised in full when the contracted number of probes had been delivered.
In the UK, the annual contract amount is invoiced at the start of the contract. Revenue is recognised on a
straight-line basis over the life of the contract. Payments received in advance are recognised as contract liabilities
in the balance sheet. In the event that a customer wishes to order more consumable probes than that set out in
the contract, a fixed price per probe is specified in the contract. In such circumstances, any revenue that had not
been recognised under the contract would be recognised in full when the contracted number of probes had been
delivered and revenue for any additional consumable probes ordered would be recognised at the time of delivery
to the customer.
51
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
At the end of the contract term, the customer has neither the right to a refund nor to the delivery of consumable
probes that may not have been ordered under the contract.
3. Segmental analysis
3.1. Accounting policy
During the year ended 31 December 2018, the management information that was regularly provided for the
Group’s Chief Operating Decision Maker was revised to provide a profit measure.
Performance and the allocation resources is made on the basis of results derived from the sale of probes,
monitors and third-party products for which revenues and gross margins are regularly reported to the Group’s
Chief Executive Officer who has been identified as the Chief Operating Decision Maker (CODM). The CODM also
monitors a profit measure described internally as ‘adjusted earnings before interest, tax, depreciation and
amortisation (Adjusted EBITDA). However, this measure is reported at a Group level rather than an operating
segment which is based on the nature of the goods provided rather than the geographical market in which they
are sold.
In the light of the above, the segment results for 2018 are set out below. The comparative information for 2017
has been accordingly restated:
3.2. Note
The segment results for 2018 are:
Revenues
Adjusted gross profit2
Sales and marketing costs
Administration costs
R&D costs
Quality and regulation
costs
Probes1
Monitors
Third party
products
Other
Unallocated
£’000
4,035
3,240
£’000
301
154
-
-
-
-
-
-
-
-
£’000
£’000
£’000
448
216
171
86
-
-
-
-
-
-
-
-
-
-
(2,324)
(1,751)
(139)
(200)
Adjusted EBITDA
-
1. Managed care service revenue is categorised as probe revenue
2. Gross profit excluding the depreciation charge relating to machines loaned to customers and production equipment
-
-
-
-
The restated operating segment results for 2017 were:
Revenues
Adjusted gross profit2
Sales and marketing costs
Administration costs
R&D costs
Quality and regulation
costs
Probes1
Monitors
Third party
products
Other
Unallocated
£’000
4,936
4,086
-
-
-
-
£’000
358
317
-
-
-
-
£’000
£’000
£’000
378
130
198
87
-
-
-
-
-
-
-
-
-
-
(3,650)
(1,911)
(126)
(227)
Adjusted EBITDA
-
1. Managed care service revenue is categorised as probe revenue.
2. Gross profit excluding the depreciation charge relating to machines loaned to customers and production equipment.
-
-
-
-
Total
£’000
4,955
3,696
(2,324)
(1,751)
(139)
(200)
(718)
Total
£’000
5,870
4,620
(3,650)
(1,911)
(126)
(227)
(1,294)
52
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
The reconciliation of the profit measure used by the Group’s CODM to the result reported in the Group’s
consolidated SOCI is set out below:
Adjusted EBITDA
Non-cash items:
Depreciation of property, plant and equipment
Amortisation of development costs
Non-executive directors’ fees and employer’s NIC
Share-based payment expenses
Change in accumulated absence cost liability
Bonus accrual releases
Gain on convertible loan note
Operating loss
Finance costs
Loss before tax
Tax credit on loss
Loss for the year
2018
£’000
(718)
(246)
(173)
(140)
(166)
24
189
80
(432)
(1,150)
(188)
(1,338)
74
(1,264)
2017
£’000
(1,294)
(265)
(195)
(108)
(67)
(9)
-
-
(644)
(1,938)
(163)
(2,101)
100
(2,001)
The following table provides an analysis of the Group’s sales by revenue stream and markets. This information is
regularly provided to the Group’s CODM:
For the year ended 31 December 2018
Direct markets
Indirect markets
Probes
Monitors
Third Party
Other
Probes
Monitors
Other
UK
USA
France
Scandinavia
South Korea
Peru
Other
countries
£’000
1,051
1,534
-
-
-
-
49
2,634
£’000
£’000
£’000
£’000
£’000
£’000
5
17
-
-
-
-
14
36
448
-
-
-
-
-
-
108
17
-
-
-
-
448
125
-
-
799
62
258
116
166
1,401
-
-
66
-
-
165
34
265
-
-
35
-
1
-
10
46
For the year ended 31 December 2017
Direct markets
Indirect markets
Probes
Monitors
£’000
£’000
Other
£’000
Probes
Monitors
Third Party
UK
USA
France
Scandinavia
South Korea
Peru
Other
countries
£’000
1,354
1,872
-
-
-
-
89
3,315
£’000
92
117
-
-
-
-
15
224
£’000
378
-
-
-
-
-
-
378
Other
£’000
118
21
-
-
-
-
-
-
854
101
200
254
6
145
212
1,621
-
-
75
-
-
-
59
134
-
-
17
8
9
1
18
53
Total
£’000
1,612
1,568
900
62
259
281
273
4,955
Total
£’000
1,942
2,010
946
109
209
255
399
5,870
The Group’s revenue disaggregated between the sale of goods and the provision of services is set out below. All
revenues are recognised at a point in time.
53
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
Sale of goods
Maintenance income
2018
£’000
4,882
73
4,955
2017*
£’000
5,792
78
5,870
* As noted, the Group has initially applied IFRS 15 at 1 January 2018. Under the transition provisions selected comparative
information has not been restated.
The following table provides information about trade receivables and contract liabilities from contracts with
customers. There were no contract assets at either 31 December 2018 or 1 January 2018.
Trade receivables which are in ‘Trade and other receivables’
Contract liabilities (Note 17.4)
31 December
2018
£’000
1,410
(151)
1 January
2018*
£’000
1,620
(116)
The following aggregated amounts of transaction prices relate to the performance obligations from existing
contracts that are unsatisfied or partially unsatisfied as at 31 December 2018:
Revenue expected to be recognised
4. Expenses
4.1. Expenses by nature
Changes in inventories and work in progress
Raw materials and consumables used
Employee benefit costs
Other employee costs
Non-executive directors’ fees
Depreciation of property, plant and equipment
Amortisation of development costs
Net research and development expenditure
Operating lease rentals
Net foreign exchange (gain)/loss
Audit and accountancy costs
Meeting and other public relations costs
Professional and consultancy costs
Barter prepayment release
Gain on convertible loan note
Other
2021
£’000
3
2018
£’000
(62)
888
3,498
562
124
246
173
70
29
(4)
57
103
213
-
(80)
288
Total
£’000
151
2017
£’000
(86)
910
4,412
889
116
265
195
67
104
40
120
106
196
192
-
282
6,105
7,808
2019
£’000
145
2020
£’000
3
54
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
4.2. Auditors’ remuneration
During the year, the Group (including its overseas subsidiaries) obtained the following services from the Group’s
auditors at the cost as detailed below.
Nexia Smith & Williamson
2018
£’000
2017
£’000
Fees payable to the Group’s auditors for the audit of Parent Company and
consolidated financial statements
Fees payable to the Group’s auditors for other services:
The audit of the Group’s subsidiaries
Tax compliance services
Tax advisory services
10
28
6
3
47
The table below provides information on fees paid to the Group’s auditors who resigned during the year:
PricewaterhouseCoopers LLP
Fees payable to the Company’s auditors for the audit of Parent Company and
consolidated financial statements
Under-accrual in respect of prior years
Fees payable to the Group’s auditors for other services:
The audit of the Group’s subsidiaries
5. Employees
5.1. Accounting policy
2018
£’000
-
2
2
-
2
-
-
-
-
-
2017
£’000
25
-
25
76
101
Short-term obligations
Liabilities for wages and salaries, including annual leave, that are expected to be settled wholly within twelve
months after the end of the period in which the employees render the related service are recognised in respect of
employees services up to the end of the financial reporting period and are measured at the amounts expected to
be paid when the liabilities are settled. The liabilities are categorised as current liabilities within trade and other
payables in the Consolidated Balance Sheet.
Post-employment obligations
The Group operates two defined contribution schemes for its employees. One scheme is for UK based
employees and the other is for US-based employees. In addition, contributions are also paid into private personal
pension schemes that belong to certain employees.
For defined contribution schemes, the Group pays contributions to privately administered pension schemes on a
mandatory, contractual or discretionary basis. The Group has no further payment obligations once the
contributions have been paid. The contributions are recognised as an employee benefit expense when they are
due.
55
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
5.2. Employee benefit expense
Wages and salaries
Social security costs
Pension costs – defined contribution plans
Less amounts capitalised as research and development expenses
Accumulated absence liability movement
Accrued bonuses for the year
Accrued bonuses from prior periods released
Share-based payment expense
2018
£’000
3,369
333
85
3,787
(220)
3,567
(25)
37
(247)
166
3,498
2017
£’000
4,029
404
101
4,534
(252)
4,282
9
54
-
67
4,412
The pensions cost expense of £85,000 (2017: £101,000) represents the aggregate amount paid and payable
into defined contribution pension schemes on behalf of employees.
5.3. Average monthly number of people employed
2018
Number
2017
Number
Number of employees
Average monthly number of people (including executive directors) employed:
Sales and marketing
Production
Office and management
Quality and regulatory
Research and development
Total monthly average headcount
5.4. Directors’ emoluments
Aggregate emoluments
Payment in lieu of notice
Compensation for loss of office
Sums paid to third parties for directors’ services
Contributions to directors’ personal pension schemes
Contributions to the Group’s defined contribution scheme
Sums paid to third parties for the services of a director comprise:
Third party payee
Imperialise Limited
Rockridge Medical Limited
Director
Nigel Keen
Chris Jones
56
71
28
21
13
3
6
71
2018
£’000
373
119
76
54
14
3
639
2018
£’000
33
21
54
85
40
23
12
5
5
85
2017
£’000
379
-
-
51
18
-
448
2017
£’000
33
18
51
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
5.5. Highest paid director
Aggregate emoluments
Contributions to director’s personal pension scheme
2018
£’000
128
10
138
2017
£’000
190
8
198
During the year, one director exercised 800,000 share options with an exercise price of 1 penny per share. The
market price per share at the date of exercise was 1.25 pence leading to a gain of £2,000 on that day. There
were no director share sales or the exercise of share options during 2017.
6. Finance income and costs
Finance income – bank interest receivable
Invoice discount facility
Convertible loan note
Finance lease obligations
Lease liability finance expense
Other interest payable
7. Tax credit on loss
2018
£’000
-
9
135
-
42
2
188
2017
£’000
-
16
131
4
-
12
163
7.1. Accounting policy
The tax credit represents the sum of current tax and deferred tax. Tax is recognised in profit or loss in the
Consolidated Statement of Comprehensive Income (SOCI) except to the extent that it relates to items recognised
in equity in which case it is recognised in other comprehensive income in the Consolidated SOCI. The current tax
is based on taxable results for the year calculated using tax rates that have been enacted or substantively
enacted by the balance sheet date.
7.2. Note
Current tax
Research and development tax credit
Adjustment in respect of prior years
Total current tax
Total deferred tax
Total tax credit on loss
2018
£’000
(63)
(11)
(74)
-
(74)
2017
£’000
(92)
(8)
(100)
-
(100)
57
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
The tax rate for the current year is lower than the prior year, due to changes in the UK corporation tax rate, which
decreased from 20% to 19% from 1 April 2017. The taxable credit on the loss for the year is lower (2017: lower)
than the effective rate of corporation tax in the UK of 19% (2017: 19.25%) applied to the Group’s loss on ordinary
activities before tax. The differences are explained below:
Loss on ordinary activities before tax
2018
£’000
2017
£’000
(1,338)
(2,101)
Loss on ordinary activities multiplied by the standard rate in the UK of 19% (2017: 19.25%)
(254)
(404)
Effects of:
(Non-taxable income)/items disallowed for tax purposes
Losses carried forward for which no deferred tax asset has been recognised
Other movements in unrecognised deferred tax
Tax rate of difference on receivable research and development tax credit
Difference on tax rate on payable research and development tax credit
Adjustment in respect of prior years
Total tax credit on loss
8. Deferred tax
(138)
365
10
(65)
19
(11)
(74)
12
347
(9)
(68)
30
(8)
(100)
8.1. Accounting policy
Deferred tax is provided using the balance sheet date liability method on temporary differences between the
carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the
computation of taxable profit.
In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets
are recognised to the extent that it is probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference
arises from goodwill or from the initial recognition (other than in a business combination) of other assets or
liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that
it is not probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or
the asset is realised. Tax assets and liabilities are offset when there is a legally enforceable right to offset current
tax assets against current liabilities and when the deferred income taxes relate to the same fiscal authority.
8.2. Note
At 31 December 2018, the Group had accumulated trading losses carried forward which are available to offset
against future profits of £32,779,000 (2017: £30,575,000) resulting in an unrecognised potential deferred tax
asset of £6,201,000 (2017: £5,669,000) and share option charges of £Nil (2017: £48,000) with an unrecognised
deferred tax asset of £Nil (2017: £8,000).
58
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
Loss relief is available indefinitely in the UK and for 20 years in the USA. Trading losses in the USA do not begin
to expire until 2028. The movement in deferred income tax assets and liabilities during the year, without taking
into consideration the offsetting of balances within the same jurisdiction is set out below:
Deferred tax liabilities
Development costs
Accelerated capital allowances
At 1 January
Charged/(credited) to profit or loss in the Consolidated SOCI
At 31 December
Deferred tax asset on losses
At 1 January
(Credited)/charged to profit or loss in the Consolidated SOCI
At 31 December
9. Exceptional items
2018
£’000
430
93
523
2018
£’000
448
75
523
2018
£’000
(448)
(75)
(523)
2017
£’000
411
37
448
2017
£’000
457
(9)
448
2017
£’000
(457)
9
(448)
9.1. Accounting policy
As permitted by IAS1, ‘Presentation of Financial Statements’, certain items are presented separately in the
Consolidated SOCI as exceptional items where, in the judgement of the directors, they need to be presented
separately by virtue of their nature, size or incidence in order to obtain a clear and consistent presentation of the
Group’s underlying business performance.
9.2. Note
Exceptional items comprised:
Payments in lieu of notice
Compensation for loss of office
Share-based payment expense relating to settlement of contractual bonuses owed
Redundancy costs
Legal and professional costs relating to redundancies
Bonus accrual release
2018
£’000
2017
£’000
119
76
123
142
29
(202)
287
-
-
-
-
-
-
-
10. Basic and diluted loss per share
The loss per share calculation is based on the loss of £1,270,000 and the weighted average number of shares
in issue of 471,460,901. For 2017, the loss per share calculation is based on the loss of £2,022,000 and the
weighted average number of shares in issue of 301,117,957. While the Group is loss-making, the diluted loss
per share and the loss per share are the same.
59
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
11. Property, plant and equipment
Accounting policy
11.1.
Property, plant and equipment is stated at cost, net of depreciation and any provision for impairment. The cost
of purchased assets includes the original purchase price together with any incidental expenses of acquisition.
Depreciation is calculated to write down property, plant and equipment to their estimated realisable values, by
equal annual instalments over their expected useful economic lives at the following periods:
Leasehold property and improvements: five years or to the end of the lease term, if shorter
Right of use asset: over the period of the lease term
Plant and equipment: three to five years
Machines loaned to customers: five years
Fixtures and fittings: three to five years
Estimated residual values and useful lives are reviewed annually and adjusted where necessary.
Machines loaned to customers
In order to support key accounts and increased probe usage, monitors may be placed on long-term loan with
customers. Where these monitors are expected to be placed for a period longer than six months, the monitors
are transferred at book value to property, plant and equipment and depreciated over five years. Where monitors
are placed on a short-term loan of less than six months and it is expected that the monitors will be sold
thereafter, the monitors are included within inventories.
Other than managed care contracts, the Group has no contractual obligation to provide loan monitors for a
specified period of time. The Group monitors probe usage by customers that have loan monitors and where, for
various reasons, probe volumes do not support the loaned monitor estate the under-utilised monitors are
removed and held ready to meet future demand for monitors by other customers.
60
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
11.2.
Note
Leasehold
property and
improvements
Right of use
asset
Plant and
equipment
Fixtures and
fittings
Machines
loaned to
customers
£’000
£’000
£’000
£’000
£’000
Cost
At 1 January 2017
Exchange difference
Transfers
Additions
Transferred from inventory
Disposals
At 31 December 2017, as
previously stated
Recognition of right of use
asset
At 31 December 2017, as
restated
Exchange difference
Additions
Transferred from inventory
Disposals
At 31 December 2018
Accumulated
depreciation
At 1 January 2017
Exchange differences
Depreciation charge
Disposals
At 31 December 2017
Exchange differences
Depreciation charge
Disposals
At 31 December 2018
Net book value
At 1 January 2017
At 31 December 2017
At 31 December 2018
236
-
7
-
-
-
243
-
243
-
-
-
(68)
175
235
-
4
-
239
-
3
(68)
174
1
4
1
-
-
-
-
-
-
-
514
514
-
-
-
-
514
-
-
-
-
-
-
59
-
59
-
-
455
748
(3)
-
6
-
-
751
-
751
4
18
-
(300)
473
651
(3)
40
-
688
2
45
(297)
438
97
63
35
68
(3)
(7)
-
-
(28)
30
-
30
2
-
-
(29)
3
61
(3)
-
(28)
30
2
-
(29)
3
7
-
-
Total
£’000
2,675
(116)
-
6
181
(126)
1,623
(110)
-
-
181
(98)
1,596
2,620
-
514
1,596
3,134
30
-
64
(26)
1,664
36
18
64
(423)
2,829
1,297
2,244
(32)
221
(97)
(38)
265
(125)
1,389
2,346
54
139
(14)
1,568
326
207
96
58
246
(408)
2,242
431
274
587
Depreciation has been included in the following expenses in profit or loss in the Consolidated SOCI:
Cost of sales
Administration expenses
Research and development expenses
2018
£’000
168
65
13
246
2017
£’000
221
30
14
265
The net book value of property, plant and equipment includes amounts of £455,000 (2017: £13,000) in respect
of assets held under leasing arrangements.
61
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
12. Intangible assets
Accounting policy
12.1.
Expenditure on research and development is charged to profit or loss in the Consolidated SOCI in the year in
which it is incurred with the exception of expenditure incurred in respect of the development of new products
where the outcome of those projects is assessed as being reasonably certain as regards viability and technical
feasibility and the costs incurred can be reliably measured. Such expenditure is capitalised and amortised over
the estimated period of sale for each product, commencing in the year that sales of the product are first made.
Amortisation is charged on a straight-line basis over their useful economic lives of five years.
12.2.
Note
Cost
At 1 January 2017
Amounts written off
Additions
At 31 December 2017
Amounts written off
Additions
At 31 December 2018
Accumulated amortisation
At 1 January 2017
Amounts written off
Amortisation expense
At 31 December 2017
Amounts written off
Amortisation expense
At 31 December 2018
Net book value
At 1 January 2017
At 31 December 2017
At 31 December 2018
Development
costs
£’000
Goodwill
£’000
Total
£’000
3,171
(3)
286
3,454
(38)
253
3,669
841
(2)
195
1,034
-
173
1,207
2,330
2,420
2,462
66
-
-
66
-
-
66
-
-
-
-
-
-
-
66
66
66
3,237
(3)
286
3,520
(38)
253
3,736
841
(2)
195
1,034
-
173
1,207
2,396
2,486
2,528
Amortisation expense of £173,000 (2017: £195,000) has been categorised as research and development
expenditure in profit or loss in the Consolidated SOCI.
Included within development costs are costs amounting to £1,424,000 (2017: £1,331,000) relating to the Group’s
new monitor development project. This amount has not been amortised as the project has not yet been
completed. The Group also has costs of £224,000 (2017: £335,000) relating to the development of its new high
definition impedance cardiography product which became available for sale in May 2017 and has been
amortised from that date. Other individually material projects are:
Project description
Suprasternal Doppler Probe
TrueVue Velocity Pressure Loops
UK Enhanced Recovery App
Spanish Enhanced Recovery App
2018
£’000
220
207
181
65
2017
£’000
111
184
152
92
62
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
13. Subsidiary undertakings
Details of the Group’s subsidiary undertakings are set out below. In all cases, the direct holding is 100% of the
ordinary shares as otherwise stated:
Name
Country of
incorporation
and place of
business
Nature of trading activities
Deltex Medical Limited
UK
Manufacture and marketing of medical devices
Deltex Medical, SC, Inc USA
Marketing and sales of medical devices in the
USA
Deltex Medical Espana
SL
Spain
Marketing and sales of medical devices in
Spain
Deltex Medical Canada
Limited
Canada
Marketing and sales of medical devices in
Canada
Deltex Medical
Holdings Inc
Deltex Inc
Deltex Medical Inc
USA
USA
USA
Dormant
Dormant
Dormant
Proportion
of ordinary
shares
directly
held by the
parent
%
Proportion
of shares
held by
non-
controlling
interests
%
100
100
100
51
100
100
100
-
-
-
49
-
-
-
The registered addresses of the Group’s subsidiary undertakings are:
Subsidiary undertaking
Registered Address
Deltex Medical Limited
Deltex Medical, SC, Inc
Terminus Road, Chichester, United Kingdom PO19 8TX
330 East Coffee St., Greenville, South Carolina, USA
Deltex Medical Holdings Inc
330 East Coffee St., Greenville, South Carolina, USA
Deltex Inc
Deltex Medical Inc
330 East Coffee St., Greenville, South Carolina, USA
330 East Coffee St., Greenville, South Carolina, USA
Deltex Medical Espana SL
C/ del Mirador, 3A, 17250 Playa De Aro, Girona, Spain
Deltex Medical Canada Limited
Baine Johnston Centre, 10 Fort William Place, St John’s NL A1C 5W4, Canada
14. Inventories
Accounting policy
14.1.
Inventories are stated at the lower of cost and net realisable value. Cost is determined on a first in, first out
basis.
Work in progress and finished goods are included on a basis appropriate to their stage of completion of the
various individual items taking account of production materials and components together with an appropriate
share of directly attributable labour and overheads. The latter being allocated on the basis of normal operating
capacity. Cost is assigned to individual items based on the sum of the actual cost of raw materials used and the
allocation of labour and overheads costs using standard rates. The standard labour and overhead rate are kept
under review throughout the year.
Net realisable value represents the estimated selling price in the normal course of business, less all estimated
costs of completion and applicable variable selling expenses. Provision is made for obsolete, slow-moving or
defective items where appropriate.
63
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
14.2.
Note
Raw materials and consumables
Work in progress
Finished goods
2018
£’000
223
28
429
680
2017
£’000
220
53
481
754
Based on inventory holdings and sales history, there are specific provisions for slow-moving inventory of
£36,000 (2017: £28,000), which have been categorised as finished goods.
15. Trade and other receivables
Accounting policy
15.1.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method less provision for impairment. For the year ended 31 December 2017, a provision for
impairment of trade receivables was established when there was objective evidence that the Group will not be
able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of
the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency
in payments (more than 60 days overdue) were considered indicators that the trade receivable may be impaired.
The amount of the provision was the difference between the asset’s carrying amount and the present value of
estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset
was reduced through the use of an allowance account, and the amount of the loss was recognised in the
Consolidated Statement of Comprehensive Income within ‘sales and distribution’ costs. When a trade receivable
was uncollectable, it was written off against the allowance account for trade receivables.
Subsequent recoveries of amounts previously written off were credited against ‘sales and distribution’ costs in the
Consolidated SOCI. Trade and other receivables were classified as ‘loans and receivables’.
Following the adoption of IFRS9, with effect from 1 January 2018, amounts classified as trade receivables are
amounts due from customers for good sold or services performed in the ordinary course of business. They are
generally due for settlement within 30 days for sales made in the UK and the USA and within 60 days for sales
made to other overseas customers and, therefore, are all classified as current. Trade receivables are initially
recognised at the amount of the consideration that is unconditional unless they contain significant financing
components, when they are recognised at fair value. The Group recognises the trade receivables with the
objective of collecting the contractual cash flows and, therefore, measures them subsequently at amortised cost
using the effective interest method.
The carrying amount of trade receivables includes receivables which are subject to a secured invoice discounting
arrangement. Under this arrangement, the Group has transferred the relevant receivables to the invoice
discounting organisation in exchange for cash and is prohibited from selling or pledging the receivables.
However, the Group has retained late payment and credit risk. In the light of this, the Group continues to
recognise the transferred assets in their entirety in its balance sheet.
The Group classifies its other financial assets as at amortised cost only if the asset is held within a business
model whose objective is to collect the contractual cash flows and the contractual cash flows give rise to cash
that are solely repayments of principal and interest.
As permitted by IFRS 9, the Group applies the simplified approach to measuring impairment losses which uses
lifetime expected loss allowance for all trade receivables and contract assets.
64
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
15.2.
Note
Trade receivables
Trade receivables
Less loss allowance
2018
£’000
1,466
(56)
1,410
2017
£’000
1,647
(27)
1,620
Due to the short-term nature of the trade receivable balances, their carrying amount is considered to be the
same as fair value.
Financial assets at amortised cost
Staff advances
Other receivables
2018
2017
Current Non-current
Current
Non-current
£’000
£’000
£’000
£’000
245
-
245
-
155
155
207
171
378
-
-
-
Staff advances relate to cash advances given to staff as on account payments for contractual performance
bonuses earned between 2013 and 2017. At the time these bonuses were awarded, it was and remains the
Group’s intention, in accordance with its usual practice, to settle these contractual amounts due when
appropriate to do so under the Group’s Enterprise Management Incentive Scheme at which time the amounts
advanced to staff will be recovered in full. Other receivables generally arise from transactions outside the normal
operating activities of the Group. The amount outstanding relates to a trade receivable due from the non-
controlling interest in the Group’s Canadian subsidiary which is now repayable on demand. However, the
amount outstanding is expected to be recovered within the next five to ten years depending on the amount of
cash generated from sales made in the Canadian market and has, therefore, been classified as a non-current
asset.
Other current assets
Sundry debtors
Prepayments
2018
£’000
141
49
190
2017
£’000
-
54
54
Included in sundry debtors is an amount of £138,000 (2017: £nil) relating to an advance payment made to
secure key components required to manufacture the Group’s monitor. It is expected that the goods will be
received during the first half of 2019 at which time the debtor balance will be derecognised and the cost of the
inventory received.
16. Cash and cash equivalents
Accounting policy
16.1.
For the purposes of the cash flow statement, cash and cash equivalents includes cash on hand and deposits
held at call with financial institutions.
65
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
16.2.
Note
Cash at bank
17. Financial liabilities
2018
£’000
580
2017
£’000
219
Accounting policy
17.1.
In the light of the fact that the accounting for financial liabilities remains largely the same under IFRS 9 compared
to IAS 39, the Group’s financial liabilities were not affected by the adoption of IFRS 9 at the transition date.
The Group’s financial liabilities include borrowings and trade payables and other payables.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently
stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption
value is recognised in profit or loss in the Consolidated SOCI over the period of the borrowing using the effective
interest method.
Compound financial instruments issued by the Group comprise convertible loan notes that can be converted to
share capital at the option of the holder, and the number of shares to be issued does not vary with changes in
their fair value. The liability component of a compound financial instrument is recognised initially at the fair value
of a similar financial liability that does not have an equity conversion feature.
The equity component is recognised initially as the difference between the fair value of the compound financial
instrument as a whole and the fair value of the financial liability component. Any directly attributable finance
costs are allocated to the financial liability and equity components in proportion to their initial carrying amounts.
Subsequent to initial recognition, the financial liability component is measured at amortised cost using the
effective interest method. The equity component of a compound financial instrument is not re-measured
subsequent to initial recognition except on conversion or expiry.
Where a non-substantial modification of a financial liability occurs, and the financial liability is not derecognised,
the Group recalculates the amortised cost of the modified financial liability by discounting the modified
contractual cash flows using the original effective interest rate and recognises any gain or loss in other income or
other costs in profit or loss in the Consolidated SOCI.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged,
cancelled or expired. The difference between the carrying amount of the financial liability that has been
extinguished or transferred to another party and the consideration paid, including any non-cash assets
transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs in the
Consolidated SOCI.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of
the liability for at least 12 months after the balance sheet date.
Trade payables and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial
year which are unpaid. The amounts are unsecured and are usually paid within the agreed credit terms of the
relevant party concerned. Trade payables and other payables are presented as current liabilities unless payment
is not due within 12 months after the end of the reporting period. They are recognised initially at their fair value
and subsequently at amortised cost using the effective interest method.
66
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
17.2.
Note
Borrowings
Invoice discounting facility
Convertible loan note
2018
2017
Current
Non-current
Current
Non-current
£’000
553
-
553
£’000
-
1,035
1,035
£’000
719
90
809
£’000
-
1,004
1,004
Invoice discounting facility
The amount shown represents the cash drawn down under an invoice discounting facility; There were no
undrawn amounts at the end of the year (2017: £1,000). The amount outstanding under this facility is secured by
way of a fixed charge over the Group’s UK and a proportion of the international trade receivables. Amounts
drawn down under the facility are repayable from the end of the month of invoice.
This is an ongoing facility and is separated into three accounts being Sterling, US$ and Euro currencies. The
facility is subject to a month’s (2017: six months’ notice) on either side and is not subject to an annual review.
Convertible loan note
In February 2018, the terms of the convertible loan note were modified as part of the share placing and open
offer that completed on 12 February 2018. The maturity date was extended to February 2021 (2017: February
2019) and the conversion price was reduced from 6p per share to 4p share to fairly reflect the dilutive effect of
the share issue that was undertaken. At the same time, the convertible loan note holders agreed that a holding
of £25,000 nominal amount of convertible loan notes could also be redeemed.
A gain of £80,000 was recognised in profit or loss in the Consolidated SOCI following the extension of the
maturity date by two years. The settlement cost on redemption of the loan was immaterial and, therefore, not
recognised in profit or loss in the Consolidated SOCI. The conversion right amount of £2,000 relating to the
convertible loan notes redeemed has been transferred to Accumulated losses in Equity in the Consolidated
Balance Sheet.
The convertible loan note recognised in the Consolidated Balance Sheet is calculated as:
Carrying amount at 1 January 2018
Loan note redemption
Modification gain
Interest expense
Interest paid
Carrying amount at 31 December 2018
Financial
liability
£’000
1,094
(25)
(80)
135
(89)
1,035
Equity
component
£’000
84
(2)
-
-
-
82
Total
£’000
1,178
(27)
(80)
135
(89)
1,117
The directors consider that the coupon payable of 8% on the convertible loan note continues to be at a market
rate of interest and, therefore, the carrying amount approximates to its fair value. The effective rate of interest is
12.77% (2017: 13.14%).
67
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
Borrowings in foreign currencies
17.3.
The carrying amounts of the Group invoice discount facility borrowings are denominated in different currencies
and are subject to differing average effective interest rates.
Sterling
Euro
US Dollar
2018
2017
Rate
%
3.10
2.75
5.18
Amount
£’000
221
212
120
553
Rate
%
2.79
2.75
4.44
Amount
£’000
298
272
149
719
All of the Group’s borrowings are at variable rates of interest other than the convertible loan note which has a
fixed coupon of 8% per annum. The effective rate of interest charged was 12.77% which was lower than 13.14%
charged in 2017 which was as a consequence of extending the term of the convertible loan note by two years in
February 2019. There were no outstanding borrowings relating to lease agreements that would have been
categorised as finance leases under IAS 17, ‘Leases’ (2017: £4,000).
17.4.
Trade and other payables
Trade payables
Other payables
Social security and other taxes
Lease obligations
Contract liabilities
Employee short-term benefits
Accrued expenses
2018
2017
(as restated)
Current
Non-current
Current
Non-current
£’000
£’000
£’000
£’000
346
333
146
33
151
57
917
-
-
-
352
-
-
-
1,983
352
613
298
380
4
116
81
1,157
2,649
-
-
-
-
-
-
-
-
Included within other payables is an amount of £278,000 (2017: £298,000) which is payable to the non-
controlling interest in the Group’s Canadian Subsidiary. This amount is expected to be settled in full over the
next 5 – 10 years depending on the amount of cash generated from sales made in the Canadian market.
However, as the amount is repayable on demand it has been categorised as a current liability.
The directors consider that the carrying amount of trade payables and other payables approximates to their fair
value.
18. Leases
Accounting policy
18.1.
At the inception of a contract, the Group assesses whether the contract is, or contains a lease. A contract is, or
contains, a lease if the contract conveys the right to control the use of an identified asset.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset
is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The
finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period. The right-of use asset is depreciated over the
shorter of the asset's useful life and the lease term on a straight-line basis.
68
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities
include the net present value of the following lease payments:
fixed payments (including in-substance fixed payments), less any lease incentives receivable;
variable lease payments that are based on an index or a rate;
amounts expected to be payable by the lessee under residual value guarantees;
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that
option.
The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or
the Group’s incremental borrowing rate.
Right-of-use assets are measured at cost comprising the following:
the amount of the initial measurement of lease liability;
any lease payments made at or before the commencement date less any lease incentives received;
any initial direct costs; and
restoration costs.
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of
machinery that have a lease term of 12 months or less and leases of low-value assets, including short-term
office space. The Group recognises the lease payments associated with these leases as an expense on a
straight-line basis over the lease.
Note
18.2.
Included within Property, plant and equipment is the net book amount of £455,000 relating to the right-of-use
asset arising from the lease over the Group’s head office and factory in Chichester. Included within
administration expenses in profit or loss in the Consolidated SOCI is an amount of £59,000 relating to the
depreciation expense of this asset and included within finance costs is an amount of £43,000 relating to the
finance charge on the related lease obligation. In addition, included within administration expenses in profit or
loss in the Consolidated SOCI is an amount of £29,000 relating to short term leases.
Included within trade and other payables in the Consolidated Balance sheet are current lease obligations
amounting to £33,000 and non-current lease obligations amounting to £352,000. Previously, under IAS 17,
obligations under finance leases were classified as borrowings. The amount outstanding at the end of 2017 was
a current liability of £4,000 which was repaid during the year.
The total cash outflow for leases in the period was £104,000.
As noted previously, the Group has elected to apply IFRS 16 Leases. In accordance with the transition
provisions in IFRS 16 the new rules have been adopted retrospectively with the cumulative effect of initially
applying the new standard recognised on 1 January 2018. Therefore, comparatives for the 2017 financial year
have not been restated.
The table below shows the maturity analysis of the lease obligation using contractual undiscounted cash flows:
Within 1 year
Within 2 to 4 years
More than 5 years
2018
£’000
75
300
206
581
69
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
19. Provision for liabilities
Accounting policy
19.1.
Provisions are recognised when the Group has a present legal or constructive obligation in respect of a past
event and it is probable that settlement will be required of an amount that can be reliably estimated. Provisions
are measured at the present value of the expenditures expected to be required to settle the obligation using a
pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the
obligation.
The increase in the provision due to passage of time is recognised as an interest expense in profit or loss in the
Consolidated SOCI. A provision for national insurance that may become payable on share option gains is
calculated based on the closing share price.
19.2.
Note
At 1 January 2018 and 31 December 2018
National
Insurance
£’000
Dilapidation
provision
£’000
16
98
Total
£’000
114
National Insurance
The provision for Employer’s National Insurance may become payable on gains on share options that are
exercisable over the next one to ten years and is, therefore, classified as a non-current liability.
Dilapidation provision
Under the terms of the operating leases over land and buildings, predominantly in the UK, the Group has an
obligation to return the property in a specified condition at the end of the lease. As the unexpired lease term is
more than one year, the provision has been classified as a non-current liability. It is expected that the provision
will be utilised within the next 10 years.
20. Share capital and share premium
Accounting policy
20.1.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or the
exercise of share options are shown in equity as a deduction, net of tax, from the proceeds.
70
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
Note
20.2.
At 1 January 2018 and 31 December 2018, the authorised share capital of the Company comprised
6,568,546,210 ordinary shares with a nominal value of 1 penny each. The movement in the Company’s issued
share capital is set out below:
At 1 January 2017
Shares issued to third parties as payment for services rendered
Exercise of share options
Share issues:
27 March 2017
27 July 2017
Share issue expenses
27 March 2017
27 July 2017
At 31 December 2017
Exercise of share options
Share issues
12 February 2018
18 May 2018
Share issue expenses
12 February 2018
At 31 December 2018
Number of
shares
(thousands)
Ordinary
shares
£’000
Share
premium
£’000
Total
£’000
284,935
2,849
32,268
35,117
663
285
11,035
16,296
7
3
110
163
-
-
17
-
290
387
(5)
(42)
24
3
400
550
(5)
(42)
313,214
3,132
32,915
36,047
800
8
-
8
176,650
1,767
2,000
20
-
442
5
2,209
25
(132)
(132)
492,664
4,927
33,230
38,157
Net proceeds from share issues, after expenses of £132,000 (2017: £47,000), were £2,085,000
(2017: £903,000).
21. Share-based payments
Accounting policy
21.1.
The Group awards directors, employees and certain of the Group’s distributors and advisers equity-settled share-
based payments, from time to time, on a discretionary basis. In accordance with IFRS 2 ‘Share-based payments’,
equity-settled share-based payments are measured at fair value at the time of grant. Fair value is measured by
the use of a Black–Scholes option pricing model.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-
line basis over the vesting period, based on the Group’s estimate of the number of shares that will eventually
vest. The options are subject to vesting conditions of up to seven years, and their fair value is recognised as an
expense with a corresponding increase in ‘other reserves’ equity over the vesting period. The proceeds received
net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium
when the options are exercised. At each balance sheet date, the entity revises its estimates of the number of
options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in profit or
loss in the Consolidated SOCI, with a corresponding adjustment to equity. The fair value of the equity-settled
share-based payment is recharged by the Company to the subsidiary operating company at fair value. The
expense is, therefore, recognised in the subsidiary operating company, with the equity reserve being recognised
in the Company.
The expected volatility of the Company’s share price is based on the historic volatility (based on the remaining life
of the options), adjusted for any expected changes to future volatility due to publicly available information.
71
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
21.2.
The Group has three share option schemes:
Note
Deltex Medical Group plc 2001 Executive Share Option Scheme (ESOS) (HMRC Approved Scheme);
Deltex Medical Group 2011 Executive Share Option Scheme (HMRC Approved Scheme); and
Deltex Medical 2003 Enterprise Management Incentive plan (‘EMI’).
Options granted under the Approved Share Option Schemes are valued at the market price on the date of grant.
Options are conditional on the employee completing three years’ service (the vesting period). The options are
exercisable starting three years from the grant date, subject to the Group achieving certain performance
conditions; the options have a contractual term of ten years. The Group has no legal or constructive obligation to
repurchase or settle the options in cash.
Options granted under the EMI scheme are granted at 1p per option. Options are granted in lieu of cash for
bonuses or salary obligations relating to past achievement; therefore, there is no vesting period. The options have
a contractual term of ten years. The Group has no legal or constructive obligation to repurchase or settle the
options in cash. Details of share options outstanding during the year for the Group’s share option schemes are as
follows:
2001 Executive Share
Option
Scheme
2011 Executive Share
Option
Scheme
2003 Enterprise
Management
Incentive Scheme
Number
of
options
No.
Weighted
average
exercise
price
p
Number
of
options
No.
Weighted
average
exercise
price
p
Number
of
options
No.
Weighted
average
exercise
price
p
3,257,500
20
9,012,750
15
3,257,672
-
-
10,405,000
4
1,474,616
(6,000)
(16)
(513,250)
(13)
(166,640)
(1,042,000)
(29)
-
-
-
-
-
-
(34,908)
(285,338)
2,209,500
16
18,904,500
9
4,245,582
-
-
-
24,605,488
(8,000)
(13)
(1,976,168)
(5)
(41,371)
(488,000)
(19)
-
-
-
-
-
-
(4,626,917)
(800,000)
1
1
1
1
1
1
1
1
1
1
Total
No.
15,527,922
11,879,616
(685,710)
(1,076,908)
(285,338)
25,359,582
24,605,488
(2,025,539)
(5,114,917)
(800,000)
1,713,500
15
16,928,332
11
23,382,782
1
42,024,614
Options outstanding
at
1 January 2017
Granted during the
year
Lapsed during the
year
Expired during the
year
Exercised during the
year
Options outstanding
at
31 December 2017
Granted during the
year
Lapsed during the
year
Expired during the
year
Exercised during the
year
Options outstanding
at
31 December 2018
72
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
Share options exercisable at the end of the year were:
2001 Executive Share
Option
Scheme
2011 Executive Share
Option
Scheme
2003 Enterprise
Management
Incentive Scheme
Number
of
options
No.
Weighted
average
exercise
price
p
Number
of
options
No.
Weighted
average
exercise
price
p
Number
of
options
No.
Weighted
average
exercise
price
p
Total
No.
3,257,500
20
4,244,000
20
3,257,672
2,209,500
16
4,177,000
20
4,245,582
1
1
10,759,172
10,632,082
1,713,500
15
6,853,332
10
13,382,782
1
21,949,614
Options exercisable at
1 January 2017
Options exercisable at
31 December 2017
Options exercisable
at
31 December 2018
The market price of the Company’s shares at the date of exercise of the EMI options was 1.25 pence (2017:
(weighted average market price) 4 pence). The mid-market closing price of the Company’s shares at the end of
the year was 0.95 pence (2017: 2.13 pence).
Details of the remaining contractual life of share options outstanding for each of the share option schemes is
shown in the table below:
2001 Executive Share
Option
Scheme
2011 Executive Share
Option
Scheme
2003
Enterprise
Management
Incentive
Scheme
2018
Years
2017
Years
2018
Years
2017
Years
2018
Years
2017
Years
Weighted average remaining contractual life
of options outstanding at the end of the
financial year
0.42
0.95
6.42
7.98
4.98
5.73
Fair value of options granted
Share options granted under the 2003 EMI scheme had an estimated weighted average fair value of 0.57 pence
(2017: 2.90 pence) and £151,071 (2017: £39,719) in aggregate. The fair value of a share option at grant date is
determined using a Black Scholes option pricing model which takes into account the share price at date of grant
and the expected price volatility of the underlying share, the exercise price of the option, the expected term of
the option and the risk-free interest rate for the term of the option.
The model inputs for options granted during the year ended 31 December 2018 were:
Share price at grant date
Exercise price
Expected price volatility of the Company’s shares
Expected option life (expressed as weighted average life
used in modelling)
Risk-free interest rate
2018
2017
August
June
March
March
February
0.9p
1.0p
75%
1.3p
1.0p
75%
1.4p
1.0p
75%
3.8p
1.0p
60%
3.9p
1.0p
60%
10 years
1.5 years
1.41%
0.64%
1 year
0.63%
1 year
0.55%
1 Year
0.55%
Fair value at measurement date
0.7p
0.6p
0.6p
2.8p
2.9p
73
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
No share options were granted under either the 2001 or the 2011 Executive Share Option Schemes during the
year ended 31 December 2018 (2017: 10,405,000).
Contractor options
On 9 October 2018, 250,000 share options held by a contractor with an exercise price of 21.5 pence per share
and 250,000 share options with an exercise price of 14.5p were cancelled and replaced with a share option over
500,000 shares with an exercise price of 1.22p. The share option was exercisable from the grant date of 9
October 2018 and may be exercised in part or in whole at any time during the exercise period. The option has
an exercise period of 10 years from grant date. These are the only outstanding options held by contractors. An
option over 252,000 shares with an exercise price of 18.75p expired on 28 February 2018.
The share-based payment expense relating to the cancellation and replacement of the contractor options
referred to above was immaterial and, therefore, no expense was recognised in profit or loss in the
Consolidated SOCI.
74
Notes to the consolidated financial statements for the year ended 31 December 2018 (continued)
22. Change in liabilities arising from financing activities
This note sets out the reconciliation of liabilities arising from financing activities for each of the financial years presented:
At 1 January 2017
Cash flows:
Drawdowns
Repayments1
Cash flow from financing activities
Interest paid1
Net cash outflow
Non cash flows
Interest charged at the effective rate
Foreign exchange movements1
At 31 December 2017
Restatement on adoption of IFRS 16 (Note 26)
At 1 January 2018
Cash flows:
Drawdowns
Repayments
Cash flow from financing activities
Interest paid
Net cash outflow
Non cash flows
Interest charged at the effective rate
Redemption of convertible loan note
Gain on convertible loan note
Foreign exchange movements
At 31 December 2018
Convertible
loan note
£’000
1,053
-
-
-
(90)
(90)
131
-
1,094
-
1,094
-
-
-
(89)
(89)
135
(25)
(80)
-
Invoice discount facility
Sterling
denominated
£000
Euro
denominated
£’000
US Dollar
denominated
£’000
399
206
134
33
£’000
£’000
Finance
lease
Lease
liability
Total
2,236
(2,337)
(101)
(5)
(106)
5
-
298
-
298
1,922
(1,999)
(77)
(2)
(79)
2
-
-
-
1,205
(1,149)
1,560
(1,533)
(56)
(4)
(60)
4
8
272
-
272
27
(7)
(20)
7
(10)
149
-
149
1,070
(1,148)
1,234
(1,270)
(58)
(3)
(61)
3
-
-
(2)
212
(36)
(4)
(40)
4
-
-
7
120
-
(28)
(28)
(5)
(33)
4
-
4
-
4
-
(4)
(4)
-
(4)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
416
416
-
(32)
(32)
(43)
(75)
44
-
-
-
385
£’000
1,825
5,001
(5,047)
(46)
(111)
(157)
151
(2)
1,817
416
2,233
4,226
(4,607)
(207)
(141)
(348)
188
(25)
(80)
23
1,973
1. The comparative figures have been restated to reflect the analysis provided of the change in liabilities given for 2018
75
1,035
221
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
23. Financial risk management
The Group’s financial instruments comprise some cash and various items, such as trade receivables and trade
payables that arise directly from its operations. It is, and has been throughout the period under review, the
Group’s policy that no trading in financial instruments shall be undertaken. The Board reviews and agrees
policies for managing liquidity risk, currency risk, credit risk, interest rate risk and capital risk. The policies have
remained unchanged throughout the year.
Liquidity risk
The Group is managed to ensure that sufficient cash reserves and credit facilities are available to meet liquidity
requirements. The Group has available to it an invoice discounting facility with the Group’s bankers to
supplement working capital needs. From time to time, additional funding is raised to allow the Group to invest in
its strategic projects to develop the business in its chosen markets. Management monitors rolling forecasts of
the Group’s liquidity reserves which comprises undrawn invoice discounting facilities and cash and cash
equivalents on the basis of expected cash flows.
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on their
contractual maturities for all non-derivative financial liabilities. The amounts disclosed in the table are the
contractual undiscounted cash flows.
Invoice discounting facility
Convertible loan note
Finance lease liabilities
Lease obligations
Trade and other payables
Less
than
1 year
£’000
553
88
-
75
1,319
2,035
2018
Between
1 and 2
years
£’000
Between
2 and 5
years
£’000
Between
5 and 10
years
£’000
Less
than
1 year
£’000
-
88
-
75
-
-
1,136
-
225
-
163
1,361
-
-
-
206
278
484
719
90
4
-
2,148
2,961
2017
Between
1 and 2
years
£’000
-
1,139
-
-
-
1,139
Between
2 and 5
years
£’000
-
-
-
-
-
-
Currency risk
The Group has overseas subsidiaries in the USA, Spain and Canada and as a result the Group’s sterling
balance sheet can be affected by movements in the US Dollar, Euro and Canadian dollar exchange rates. The
Group also has transactional currency exposures. Such exposures arise from sales and purchases by operating
units in currencies other than the unit’s functional currency. In general, all overseas operating units trade and
hold assets and liabilities in their functional currency. The Group does not engage in any hedging in respect of
currency risks.
The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in Sterling, was as
follows:
Cash at bank
Trade receivables
Trade payables
Invoice discount facility
2018
2017
US
Dollars
£’000
51
395
(37)
-
Euro
£’000
235
434
(11)
(212)
US
Dollars
£’000
15
458
(70)
-
Euro
£’000
31
451
(21)
(272)
The following table details the Group’s sensitivities to changes in sterling against the respective foreign
currencies. The sensitivities represent management’s assessment of the effect on monetary assets of the
reasonably possible changes in foreign exchange rates.
76
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
The sensitivities analysis of the Group’s exposure to foreign currency risk at the year-end has been determined
based upon the assumption that the increase in Euro, US Dollar and Canadian Dollar exchange rates is
effective throughout the financial year and all other variables remain constant.
However, these potential changes are hypothetical and actual foreign exchange rates may differ significantly
depending on developments occurring in global financial markets.
The information disclosed for 2017 has been restated due to an error identified in the underlying calculations.
IFRS7, ‘Financial Instruments: Disclosures’ requires information about the sensitivity of financial instruments
recognised in the consolidated balance sheet to reasonably possible changes in foreign exchange rates and the
effect that such changes could have on both profit or loss in the Consolidated SOCI and Equity. The information
disclosed in 2017 was based on the effect of exchange rate changes on income and expenses that were
incurred in Euros, US Dollars and Canadian Dollars.
Sensitivity
%
5.0
5.0
2018
Profit
£’000
22
26
2017 (restated)
Equity
£’000
Sensitivity
%
22
26
3.5
3.5
Profit
£’000
10
19
Equity
£’000
10
19
Euros
US Dollar
If the Euro strengthened against Sterling by 5% (2017: 3.5%) an aggregate foreign exchange gain of £22,000
(2017: 10,000) would be recognised in both profit or loss in the Consolidated SOCI and equity comprising of
gains on the trade payables and invoice discount facility offset by exchange losses on cash at bank balances
and trade receivables. The opposite movement would occur if the Euro weakened.
A similar fact pattern applies to the strengthening of the US dollar against Sterling.
Credit risk
The Group is exposed to credit related losses in the event of non-performance by counter parties in connection
with financial instruments. The Group takes actions to mitigate this exposure by ensuring adequate background
on credit risk is known about counterparties prior to contracting with them and through selection of
counterparties with suitable credit ratings and monitors its exposure to credit risk on an ongoing basis.
The Group is also exposed to credit related losses and territory specific credit risk in the event of non-
performance by counterparties in connection with financial instruments.
The Group uses international distributors in a number of overseas territories. In order to assist the distributors in
developing their markets, these distributors may be given extended trade terms. Extended trade terms, by their
nature can increase the credit risk to the Group. Such risks are carefully managed through direct relationships
with the distributors and knowledge of their markets. The maximum credit risk exposure at the balance sheet
date is represented by the carrying value of financial assets and there are no significant concentrations of credit
risk.
Following the adoption of IFRS 9, with effect from 1 January 2018, the Group was required to revise its
impairment methodology for trade receivables arising from the sale of medical devices and from the provision of
preventative planned maintenance contracts. Following this, there was no change to the loss allowance
recognised at 1 January 2018 that had been recognised under IAS 39, the previous accounting standard.
The Group’s financial assets that are subject to the credit loss model are namely trade receivables from the sale
of inventory and the provision of preventative planned maintenance contracts, staff advances and other
receivables.
The level of expected credit losses on trade receivables is considered to be immaterial given the nature of the
Group’s customer base. In the UK, its customers are predominantly UK NHS hospitals. There have not been
any bad debts experienced in the UK at all. The same is true for our business in the USA and Canada where
customers are generally large hospitals. In the context of our Spanish business, the last bad debt was
experienced in 2014 and since that time no other credit losses have been incurred.
77
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
Occasionally bad debts have been experienced in our International distributor-led market from time to time.
However, as this market has been developed over the years our network of independent distributors has
remained relatively stable and consequently the expectation of incurring a credit loss is considered to be
immaterial. The credit loss provision of £38,000 (2017:27,000) represents 2.6% of the Group trade receivables
at 31 December 2018 (2017: 1.6%).
The movement in the Group’s credit loss allowance for trade receivables is shown below:
At 1 January
Foreign exchange
Amounts written off as uncollectible during the year
Increase in loss allowance recognised in profit or loss in the Consolidated SOCI
At 31 December
2018
£’000
27
-
(9)
38
56
2017
£’000
330
1
(304)
-
27
No expected credit loss has been recognised in respect of staff advances as the full recovery of this amount will
be achieved through the grant of share options and subsequent receipt of proceeds from their exercise.
Other receivables relates to a historic trade receivable balance owed by the non-controlling interest in Deltex
Medical Canada Limited. Based on expectations of future trading, the expected credit loss calculated was not
material and, therefore, has not been recognised in profit or loss in the Consolidated SOCI.
While cash is subject to the impairment requirements of IFRS 9, no such impairment loss was identified either at
1 January 2018 or 31 December 2018.
For banks and financial institutions only independently related parties with a minimum rating of ‘A’ are accepted.
As at the date of signing the financial statements all cash and cash equivalents are held with institutions with an
‘A’ rating as per Standard & Poors.
The maximum credit risk exposure at the balance sheet date is represented by the carrying value of the financial
assets and there are no significant concentrations of credit risk.
Interest Rate Risk
The Group has both interest-bearing assets and interest-bearing liabilities. The Group’s policy is to seek the
highest possible return on interest-bearing assets without bearing significant credit risk, and to minimise the rate
payable on interest-bearing liabilities. The Group places its cash balances on deposit at floating rates of interest.
Surplus cash balances are placed on short-term deposit (less than three months). No interest rate swaps are
used. Interest rate risk comprises both the interest rate price risk that results from borrowing at fixed rates of
interest and also the interest cash flow risk that results from borrowing at variable rates.
The Group has borrowings at both fixed and floating rates as shown below:
Fixed rates:
Finance leases
Lease obligations
Convertible loan note
Floating rates
Invoice discounting facility
78
2018
£’000
-
352
1,035
1,387
553
1,940
2017
£’000
4
-
1,094
1,098
719
1,817
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
The following table shows the Group’s sensitivity to a reasonably possible change in interest rates throughout
the year, with all other variables remaining constant:
Sensitivity
%
0.5
1.0
0.5
2018
Profit
£’000
-
(1)
-
Equity
£’000
Sensitivity
%
-
(1)
-
1.0
1.0
1.0
2017
Profit
£’000
(1)
(2)
(1)
Equity
£’000
(1)
(2)
(1)
Euros
US Dollar
Sterling
Capital risk
The Group’s objectives when managing capital (ordinary shares) are to safeguard the Group’s ability to continue
as a going concern in order to provide future returns to shareholders and benefits for other stakeholders and to
maintain optimal capital structure.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares
and share options are recognised as a deduction from equity, net of any tax effects. The Board’s policy is to
maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future
development of the business. The Board of directors monitors the demographic spread of shareholders. The
Board encourages employees to hold shares in the Company. This has been carried out through the Company’s
various executive share option plans. Full details of these schemes are given in note 21.
The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of
borrowings and the advantages and security afforded by a sound capital position and discusses these at regular
Board meetings.
There were no changes to the Group’s approach to capital management during the year. Neither the Company
nor any of its subsidiaries are subject to externally imposed capital requirements.
24. Related party transactions
24.1.
The Group has defined its key management personnel to be the Board of Directors.
Key management compensation
Short-term employee benefits
Short term benefits paid to third parties
Post-employment benefits
Termination benefits
Share-based payments
2018
£’000
423
54
17
210
107
811
2017
£’000
424
51
18
-
38
531
Prior to his appointment as CEO on 13 June 2018, the Group had made advances and settled PAYE obligations
against bonuses to be settled by the grant of EMI share options to Andy Mears as set out below:
Advance outstanding
Maximum
amount
2018
£
13,730
Year-end
balance
2018
£
13,730
Maximum
amount
2017
£
13,730
Year-end
balances
2017
£
13,730
No advances were made during 2018 or 2017 and no interest is charged on the outstanding balance.
79
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
Other transactions
24.2.
During the year, £40,000 (2017: £40,000) was paid to Imperialise Limited, a company controlled by N J Keen
Esq, non-executive Chairman, that was due on its £500,000 nominal amount holding of the Convertible Loan
Notes 2021. At 31 December 2018, £10,082 (2017: £10,082) was owing in respect of interest for the quarter
ended 31 December 2018 (2017: Quarter ended 31 December 2017).
The son of the Group’s non-executive Chairman has been employed on part-time basis since January 2015 by
Deltex Medical Limited. He has been working exclusively on the development and commercialisation of the
Enhanced Recovery App software. He received aggregate short-term employee benefits of £44,366 (2017:
£41,139) and post-employment benefits of £1,600 (2017: £1,600).
25. Capital and reserves
The nature and purpose of other reserves is explained in the table below:
Name of reserve
Capital reserve
Other reserve
Translation reserve
Convertible loan note
reserve
Nature and purpose
This reserve represents the nominal value of ordinary shares that were
repurchased and subsequently cancelled in December 2001. This reserve is
non-distributable and represents paid up share capital.
This reserve represents the reserve that is used to recognise the grant date fair
value of options issued to employees but not yet exercised. On exercise, the
amount relating to the options exercised is transferred to Accumulated Losses.
Exchange differences arising on the translation of the foreign controlled entity
are recognised in other comprehensive income in the Consolidated SOCI and
accumulated in a separate reserve within equity. The cumulative amount is
reclassified to profit or loss in the Consolidated SOCI when the net investment is
disposed of.
This reserve represents the residual value attributed to the equity conversion
component at the time of issue of the Convertible loan notes. On conversion or
redemption, the amount relating to the principal amount either converted or
redeemed is transferred to Accumulated Losses.
26. Changes in accounting policies
This note explains the impact of the adoption of the following accounting standards:
IFRS 9, ‘Financial Instruments’;
IFRS 15, ‘Revenue from Contracts with Customers’; and
IFRS 16, ‘Leases’.
IFRS 9 ‘Financial Instruments’
IFRS 9 replaces IAS 39, ‘Financial Instruments: Recognition and Measurement’. It makes substantial changes to
the previous accounting guidance on the classification and measurement of financial instruments and introduces
an ‘expected credit loss’ model for the impairment of financial assets. The new standard also requires the
recognition of a modification gain or loss in profit or loss in the Statement of Comprehensive Income (SOCI)
when the contractual cash flows of a financial liability are either modified or renegotiated and such action does
not lead to its derecognition.
The Group has applied transitional relief and opted not to restate prior periods. There were no differences
identified arising from the adoption of IFRS 9 in relation to classification, measurement and impairment that
required recognition at the date of initial application, namely 1 January 2018.
The application of IFRS 9 has had an impact in the following areas:
The application of the expected credit loss impairment model to financial assets. This affects the Group’s
trade receivable balances, staff advances and other receivables. The Group has applied a simplified
model in recognising expected lifetime credit losses for trade receivables as these items do not have a
significant financing component. However, given the nature of the Group’s customer base the directors
do not expect to suffer credit losses from its trade receivables over and above those identified at the end
of 2017. Consequently, the Group’s estimate of expected credit losses is the same under IFRS 9 as that
80
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
previously recognised under IAS 39. The application of the expected credit loss model to staff advances
and other receivables did not result in a measurement difference at the date of transition.
The recognition of modification gains or losses. This impacts the Group’s convertible loan note that had
its maturity date extended by two years in February 2018. A gain of £80,000 was recognised in the
operating loss for the year ended 31 December 2018. If the Group had applied its previous accounting
policy, this gain would have been recognised over the remaining term of the convertible loan note
through an adjustment to the effective interest rate because the terms and conditions of the loan
remained broadly unchanged. The loss after tax was reduced by £80,000 following the recognition of
this gain. No retrospective adjustments were required in relation to this change in accounting policy as
none of the borrowings outstanding at 1 January 2018 had been modified in prior periods.
Presentation of impairment losses on trade receivables. As a result of adopting IFRS 9, the Group has
adopted the consequential amendments that were made to IAS 1, ‘Presentation of Financial
Statements’, which require the presentation of impairment of financial assets to be presented in a
separate line item in profit or loss in the Consolidated SOCI. Consequently, the Group has reclassified
impairment losses of £6,000, recognised under IAS 39, from administrative expenses to impairment
losses on trade receivables in the Consolidated SOCI for the year ended 31 December 2017.
The Group has also adopted the consequential amendments to IFRS 7, ‘Financial Instruments: Disclosures’,
that are applied to disclosures about 2018 but have not been generally applied to 2017.
IFRS 15 ‘Revenue from Contracts with Customers’
IFRS 15, ‘Revenue from Contracts with Customers,’ and the related ‘Clarifications to IFRS 15 Revenue from
Contracts with Customers’ (hereinafter referred to as ‘IFRS 15’) replace IAS 18, ‘Revenue’,
IAS 11, ‘Construction Contracts’, and several revenue-related Interpretations.
The new standard has been applied retrospectively without restatement, with the cumulative effect of initial
application recognised as an adjustment to the opening balance of retained earnings at 1 January 2018.
In accordance with the transition guidance, IFRS 15 has only been applied to contracts that were incomplete at 1
January 2018.
The adoption of IFRS 15 has mainly affected the accounting for revenue relating to maintenance contracts.
Under IFRS 15, revenue for the provision of an annual service of a monitor is recognised in the period that the
monitor service is completed. Payment received from a customer in advance of completing the monitor service,
which typically takes 1 – 2 days per monitor, is recognised as a contract liability and is reported as an other
liability in the Condensed Consolidated Balance Sheet. Previously, under IAS 18, such revenue was recognised
in equal monthly instalments over the period of the contract to match the benefits to the customer.
At 1 January 2018, the adjustment required under IFRS 15 to recognise a contract liability relating to
consideration received in advance of carrying out the service of a monitor was not materially different to the
amount of deferred income recognised under the Group’s previous accounting policy. Consequently, no
adjustment to opening reserves has been recognised. The contract liability recognised at 31 December 2018
was £154,000 which was higher by £8,000 compared to the amount of deferred revenue that would have been
recognised under the Group’s previous accounting policy.
IFRS 16 ‘Leases’
IFRS 16 ‘Leases’ replaces IAS 17, Leases’ and IFRIC 4 ‘Determining whether an Arrangement contains a
Lease’. IFRS 16 becomes effective from 1 January 2019, however, the Group has chosen to adopt the standard
early. The adoption of the new standard has fundamentally changed the way in which the Group has accounted
for the lease of its building in Chichester. Previously this lease was accounted for under IAS 17 as an operating
lease and was off-balance sheet. However, the adoption of IFRS 16 has required the recognition of both a right
of use asset and a lease liability. The consequence of this means that the lease rental that used to be an
operating expense is now represented by a depreciation charge on the right-of-use asset and a finance cost
relating to the lease liability.
81
Notes to the consolidated financial statements
for the year ended 31 December 2018 (continued)
In addition, the application of IFRIC 1, ‘Changes in Existing Decommissioning, Restoration and Similar
Liabilities’, has required the Group to recognise the dilapidation provision as a component of the cost of the right-
of-use asset. Any subsequent changes to this estimate will be accounted for as a change in the cost of the right-
of-use asset and its related depreciation charge. It is noted that when this provision was initially recognised it
should have been recognised in property, plant and equipment as a leasehold improvement and depreciated
over its useful economic life. However, on initial recognition of the provision an expense was recognised in profit
or loss in the Consolidated SOCI which has been corrected by the adjustment of £98,000 recognised in equity.
The dilapidation provision is being depreciated over the remaining useful economic life. The amount of the
provision that should have been depreciated from the date of initial recognition is not material and, therefore, has
not been adjusted in the carrying amount of the right of use asset.
The Group leases its head office building in Terminus Road, Chichester. The non-cancellable period at 1
January 2018 was eight years and nine months with the next, and final, break clause in September 2022. The
lease payments are next due to be reviewed in October 2022 with the new annual rent payable being the higher
of an open market rental determined by an independent chartered surveyor or the current rental charge. The
lease payment also includes reimbursement of the landlord’s insurance premium which are adjusted annually.
The Group has applied the modified retrospective approach to its property lease. In doing so, the Group has
elected to:
measure the right-of-use asset at an amount equal to the lease liability at the date of initial application;
applied the exemption not to recognise right-of-use and liabilities for leases with less than 12 months of
lease term remaining; and
apply the practical expedient to exclude initial direct costs from the right-of-use asset.
For leases that were classified as finance leases under IAS 17, the carrying amount of the right-of-use asset and
the lease liability at 1 January 2018 were determined at the carrying amount of the leased assets and lease
liabilities at that date.
On transition to IFRS 16, the Group recognised an additional £514,000 right-of-use asset and an additional
£416,000 lease liability, recognising the difference of £98,000 in retained earnings. This being the dilapidation
provision that had previously been charged to profit or loss in the Consolidated SOCI in accordance with IAS 37,
‘Provisions, Contingent Liabilities and Contingent Assets’. When measuring the lease liability, the Group
discounted future lease payments using management’s estimate of an incremental borrowing rate of 12%.
The table below summarises the financial effect of adopting the new lease accounting standard:
Operating lease commitment at 31 December 2017 as disclosed in the Group’s Annual
Report & Accounts 2017 (Note 24)
Discounted at the Group’s incremental borrowing rate at 1 January 2018
Finance lease liabilities recognised at 31 December 2017
Recognition exemption for short-term leases
Lease liabilities recognised at 1 January 2018
£’000
674
(245)
429
4
(17)
416
27. Events after the balance sheet date
On 5 February 2019, the Company issued 8,695,652 new ordinary shares pursuant to the exercise of share
options under the Group’s EMI share scheme with an exercise price of 1 penny per share. The proceeds received
on exercise was £87,000.
82
Parent company balance sheet
As at 31 December 2018
Fixed Assets
Intangible assets - Goodwill
Investments
Trade and other receivables
Current assets
Trade and other receivables
Cash and cash equivalents
Creditors – amounts falling due within one year
Net current liabilities
Total assets less current liabilities
Creditors – amounts falling due after more than one year
Net assets
Equity
Share capital
Share premium
Capital redemption reserve
Other reserve
Convertible loan note reserve
Accumulated losses:
At 1 January, as previously reported
Effect of transition to IFRS 9
At 1 January, as restated
Loss for the year
Transfers
Accumulated losses
Total shareholders’ funds
Note
4
5
6
6
7
8
13
2018
£’000
66
140
9,012
9,218
9
-
9
(422)
(413)
8,805
(1,035)
7,770
4,927
33,230
17,476
953
82
(44,499)
(3,003)
(47,502)
(5,363)
3,967
(48,898)
7,770
2017
£’000
66
12,218
3,000
15,284
18
-
18
(438)
(420)
14,864
(1,004)
13,860
3,132
32,915
17,476
4,752
84
(24,391)
-
(24,391)
(20,108)
-
(44,499)
13,860
The notes on pages 85 to 92 form an integral part of these financial statements. The financial statements on
pages 83 to 92 were approved by the Board of Directors and authorised for issue on 24 April 2019 and were
signed on its behalf by:
Nigel Keen
Chairman
Jonathan Shaw
Group Finance Director
83
Parent company statement of changes in equity
For the year ended 31 December 2018
Share
capital
£’000
2,849
Share
premium
account
£’000
Capital
redemption
reserve
£’000
32,268
17,476
Other
reserve
£’000
4,685
Convertible
loan note
reserve
£’000
Accumulated
losses
Total
£’000
£’000
84
(24,391)
32,971
Balance at 1 January 2017
Comprehensive expense
Loss for the year
Total comprehensive
expense for the year
Shares issued during the
year
Premium on shares issued
during the year
Issue expenses
Credit is respect of service
cost settled by award of
options
Balance at
31 December 2017, as
previously reported
-
283
-
-
-
-
-
694
(47)
-
-
-
-
-
-
-
-
-
-
67
3,132
32,915
17,476
4,752
(20,108)
(20,108)
(20,108)
(20,108)
-
-
-
-
283
694
(47)
67
-
-
-
-
-
84
-
(44,499)
13,860
(3,003)
(3,003)
Effect of new standards
-
-
-
-
Balance at
31 December 2017, as
restated
Comprehensive expense
Loss for the year
Total comprehensive
expense for the year
Shares issued during the
year
Premium on shares issued
during the year
Issue expenses
Credit is respect of service
cost settled by award of
options
Transfers
Share options exercised
3,132
32,915
17,476
4,752
84
(47,502)
10,857
-
-
1,787
-
-
-
-
8
-
-
-
447
(132)
-
-
-
-
-
-
-
-
-
-
-
4,927
33,230
17,476
-
-
-
-
-
166
(3,965)
-
953
-
-
-
-
-
-
(2)
-
82
(5,363)
(5,363)
(5,363)
(5,363)
-
-
-
-
3,967
-
1,787
447
(132)
166
-
8
(48,898)
7,770
The notes on pages 85 to 92 form an integral part of these financial statements.
84
Notes to the parent company financial statements
For the year ended 31 December 2018
1. Principal accounting policies
1.1. Basis of preparation
These financial statements are the financial statements for Deltex Medical Group plc, the parent of the Deltex
Medical Group, which operates as a Group holding company. It is a public company, limited by shares and is
incorporated in England and Wales. It is listed on the Alternative Investment Market of the London Stock
Exchange. The financial statements have been prepared in accordance with Financial Reporting Standard 101,
‘Reduced Disclosure Framework’ (FRS 101) published in March 2018.
They have been prepared on the going concern basis under the historical cost convention and in accordance with
the Companies Act 2006 as applicable to companies using FRS 101. The preparation of financial statements in
conformity with FRS 101 requires the use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements are disclosed below.
No income statement is presented by the Company as permitted by Section 408 of the Companies Act 2006.
The following exemptions from the requirements of IFRS have been applied in the preparation of these financial
statements, in accordance with FRS 101:
The requirements of paragraphs 62, B64(d), B64(e), B64(g), B64(h), B64(j) to B64(m), B64(n)(ii), B64
(o)(ii), B64(p), B64(q)(ii), B66 and B67 of IFRS 3, ‘Business Combinations’;
The requirements of IFRS 7 ‘Financial Instruments: Disclosures’;
The requirements of paragraphs 91-99 of IFRS 13, ‘Fair Value Measurement’;
The requirement in paragraph 38 of IAS 1, ‘Presentation of Financial Statements’ to present comparative
information in respect of:
paragraph 79(a)(iv) of IAS 1;
paragraph 73(e) of IAS 16, ‘Property, Plant and Equipment’; and
Paragraph 118(e) of IAS 38, ‘Intangible Assets’;
The requirements of paragraphs 10(d), 10(f), 39(c) and 134-136 of IAS 1;
The requirements of IAS 7, ‘Statement of Cash Flows’;
The requirements of paragraphs 30 and 31 of IAS 8, ‘Accounting Policies, Changes in Accounting
Estimates and Errors’;
The requirements of paragraph 17 of IAS 24, ‘Related Party Disclosures’; and
The requirements in IAS 24 to disclose related party transactions entered into between two or more
members of a Group, provided that any subsidiary which is a party to the transaction is wholly owned by
such a member.
1.2. Judgements and key sources of estimation uncertainty
The Company has funded the trading activities of its principal subsidiaries by way of intra-group loans. The
amounts advanced did not have any specific terms relating to their repayment, were unsecured and were interest
free.
In the light of the above, management have had to determine whether such loan balances should be accounted for
as loans and receivables in accordance with IFRS 9, ‘Financial Instruments’, or whether, in fact, it represents an
85
Notes to the parent company financial statements
for the year ended 31 December 2018 (continued)
interest in a subsidiary which is outside the scope of IFRS 9 and accounted for in accordance with IAS 27,
‘Separate Financial Statements’.
Management have concluded that, whilst in substance, the loans represent an interest in a subsidiary as the
funding provided is considered to provide the subsidiary with a long term source of capital, in legal form, the loans
are financial liabilities of the subsidiaries concerned. Therefore, the loans are accounted for in accordance with
IFRS 9 and are carried at their amortised cost less any credit loss allowances, if any. This represented a change
from the year ended 31 December 2017 when management concluded that the loans were outside of the scope of
the extant accounting standard IAS 39, ‘Financial Instruments: Recognition and Measurement’. As explained in
note 13, the Company has applied the transitional relief and opted not to restate prior periods. The change in the
measurement of intra-group loans on the adoption of IFRS 9 has been dealt with in equity.
Following the adoption of IFRS 9, the carrying amount of the loans are assessed for credit impairment and if
considered to be credit impaired a credit loss provision is recognised. In determining whether a credit loss
provision is required, management must determine whether there has been a significant change in the credit risk of
the respective subsidiary. If there has, then management are required to recognise a lifetime credit loss. The key
estimate is the determination of the probability of default and the loss given default under a range of scenarios and
the likelihood of each scenario and the relevant credit loss occurring.
Prior to the adoption of IFRS 9, the carrying amount of the loans were tested for impairment if events occurred
which indicated that the assets were impaired. The carrying value of the loans were compared to the value in use
of the relevant subsidiary which was also the cash generating unit (CGU). The estimation of the value in use of a
CGU required the Group to make an estimate of the expected future cash flows from the CGU and also the
selection of a suitable pre-tax discount rate to calculate the present value of those cash flows.
The key assumptions in the value in use calculation were revenue growth rates used in the management approved
budgets and forecasts which underpinned the ability of the Group to generate positive cash flows and the pre-tax
discount rate used to discount the cash flows.
1.3. Significant accounting policies
Investments
Investments which comprise investments in share capital are stated at cost less any provisions for impairment in
value. At each balance sheet date, the Company reviews the carrying amount of the investments to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated to determine the extent of any impairment loss. The recoverable
amount is the higher of the investment’s value in use and its fair value less costs to sell. Value in use is calculated
using cash flow projections for the investments discounted at the Company’s cost of capital.
If the recoverable amount of the investment is estimated to be less than its carrying amount, the carrying amount of
the investment is reduced to its recoverable amount. An impairment loss is recognised in profit and loss in the
Statement of Comprehensive Income (SOCI), unless the relevant investment is carried at a revalued amount, in
which case the impairment loss is treated as a revaluation decrease.
Deferred taxation
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements, with the exception of when the deferred tax liability
arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
Deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available
against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are
expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or
substantively enacted at the balance sheet date. The carrying amount of deferred income tax assets is reviewed at
each balance sheet date. Deferred income tax assets and liabilities are offset, only if a legally enforcement right
exists to set off current tax assets against current tax liabilities, the deferred income taxes relate to the same
86
Notes to the parent company financial statements
for the year ended 31 December 2018 (continued)
taxation authority and that authority permits the Company to make a single net payment.
Foreign currency translation
Foreign currency monetary assets and liabilities are translated into sterling at the rate of exchange ruling at the
balance sheet date. Transactions in overseas currencies are translated at the rate of exchange ruling on the date
of the transaction or at a contracted rate if applicable. Any gains or losses arising during the year have been dealt
with in profit or loss in the SOCI.
Share-based payments
The Company awards directors, employees and certain of the Group’s distributors and advisors equity-settled
share-based payments, from time to time, on a discretionary basis. In accordance with IFRS 2 ‘Share-based
payments’, equity-settled share-based payments are measured at fair value at the time of grant. Fair value is
measured by use of a Black-Scholes model. The fair value determined at the grant date of the equity-settled share-
based payments is expensed on a straight-line basis over the vesting period, based on the Company’s estimate of
the number of shares that will eventually vest. The options are subject to vesting conditions of up to six years, and
their fair value is recognised as an expense with a corresponding increase in ‘other reserves’ equity over the
vesting period. At each balance sheet date, the entity revises its estimates of the number of options that are
expected to vest.
It recognises the impact of the revision to original estimates, if any, in profit or loss in the Statement of
Comprehensive Income with a corresponding adjustment to reserves. The proceeds received net of any directly
attributable transaction costs are credited to share capital (nominal value) and share premium when the options
are exercised.
The fair value of the equity-settled share-based payment is recharged by the Company to the subsidiary operating
company at fair value. The expense is therefore recognised in the subsidiary operating company, with the equity
reserve being recognised in the Group company.
Related party transactions
The Company is the ultimate parent undertaking of the Deltex Medical Group plc and is therefore included in the
consolidated financial statements of that Group, which are on pages 43 to 82 of the Report & Accounts 2018.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand and deposits held with banks.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds.
Terms of loans to subsidiaries
The Company uses its cash to fund the operations of its subsidiaries until such a time that the subsidiaries are in a
position to return the monies to Group. These loans are interest free and have no fixed repayment date, apart from
a £3,000,000 10% fixed interest-bearing loan which is repayable on demand. Interest income is recognised using
the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash
payments to the gross carrying amount of the financial asset or the amortised cost of the financial liability.
In calculating interest income, the effective interest rate is applied to the gross carrying amount of the financial
asset when the asset is not judged to be credit impaired. If subsequent to initial recognition a financial asset
becomes credit impaired, interest income is calculated by applying the effective interest rate to the financial asset’s
amortised cost. If the financial asset is no longer credit impaired, then the interest calculation reverts to the gross
basis.
87
Notes to the parent company financial statements
for the year ended 31 December 2018 (continued)
Compound financial instruments
Compound financial instruments issued by the Company comprise convertible notes that can be converted to
share capital at the option of the holder, or subject to certain conditions at the option of the Company and the
number of shares to be issued does not vary with changes in their fair value. The liability component of a
compound financial instrument is recognised initially at the fair value of a similar liability that does not have an
equity conversion option.
The equity component is recognised initially as the difference between the fair value of the compound financial
instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are
allocated to the liability and equity components in proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at
amortised cost using the effective interest method. The equity component of a compound financial instrument is
not re-measured subsequent to initial recognition except on conversion or expiry. Borrowings are classified as
current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12
months after the end of the reporting period.
2. Auditors’ remuneration
The statutory audit fee in respect of the Parent Company’s financial statements payable to Nexia Smith &
Williamson was £10,000. The amount paid to PricewaterhouseCoopers LLP for the statutory audit of the Report &
Accounts 2017 was £25,000.
Fees paid to the Company’s auditors, Nexia Smith & Williamson, for services other than the statutory audit are not
disclosed in these financial statements because the consolidated group financial statements of the ultimate parent
undertaking, Deltex Medical Group plc, disclose the non-audit fees on a consolidated basis. There were no
non-audit fees paid to PricewaterhouseCoopers LLP in 2017.
3. Directors’ emoluments
Aggregate emoluments
Short term benefits paid to third parties
2018
£’000
72
54
126
2017
£’000
72
51
123
There are no (2017: Nil) benefits accruing to directors under personal pension plans.
Included in the above figure are amounts payable to the employing company, Imperialise Limited, of £33,333
(2017: £33,333), and Rockridge Medical Limited of £21,000 (2017: £18,000), for the services of those directors.
Remuneration, including Executive directors, is disclosed on page 56 of this Report & Accounts. Additional
information is provided in the Directors’ remuneration report on pages 20 to 31.
All Executive directors in office at the year-end receive their emoluments from Deltex Medical Limited, a
subsidiary undertaking of the Group. Except for financing activities, their services to the Company are incidental
to their services to the Group as a whole. The average number of non-executive directors by function was
categorised as administrative for both years was 5 (2017: 5). None of the directors had contracts for service so
the monthly average number of employees was nil (2017: nil).
4.
Intangible fixed assets – Goodwill
This amount represents the goodwill that arose in 2013 on the acquisition of the trade and assets of Deltex
Medical Canada Limited. As the amount is considered by the directors to be immaterial in the context of the
Company’s accounts the balance has not been tested for impairment as the directors consider the balance to be
recoverable. Deltex Medical Canada Limited reported a profit of £11,000 (2017: profit of £42,000).
88
Notes to the parent company financial statements
for the year ended 31 December 2018 (continued)
5.
Investments
The directors consider that the carrying value of the investments is supported by their future cash flows.
Details of the Company’s subsidiary undertakings are set out on page 63 of this Report & Accounts.
Cost
At 1 January 2018, as originally reported
Effect of adoption of IFRS 9
At 1 January 2018, as restated and 31 December 2018
Accumulated impairment
At 1 January 2018, as originally reported
Effect of adoption of IFRS 9
At 1 January 2018, as restated
Impairment charge
At 31 December 2018
Net book amount
At 31 December 2017
At 31 December 2018
Investments in
subsidiary
undertakings
£’000
Loans to
subsidiary
undertakings
£’000
437
-
437
272
-
272
25
297
165
140
31,863
(31,863)
-
19,810
(19,810)
-
-
-
12,053
-
Total
£’000
32,300
(31,863)
437
20,082
(19,810)
272
25
297
12,218
140
As the carrying amount of the Company’s net assets at the balance sheet date exceeded its market capitalisation
by £12.0m (2017: £21.5m), the carrying value of investments in subsidiaries were compared to their recoverable
amounts based on valuation in use calculations derived from management approved budgets and forecasts
covering the three-year period ending 31 December 2021 (2017: four-year period ending 31 December 2021). A
terminal value was calculated using the forecast cash flows for the year ended 31 December 2021 using a long-
term growth rate of 2.25% (2017: 2.25%). Forecast cash flows were discounted using a pre-tax discount rate of
20% (2017:15%). This impairment calculation resulted in an impairment charge of £25,000 (2017: £20,082,000)
to be recognised in profit or loss in the Parent Company’s Statement of Comprehensive Income (SOCI).
6. Trade and other receivables
In 2013, the Group reclassified £3,000,000 of the long-term investments by Group in Deltex Medical Limited as a
long-term loan. This loan is being charged interest at a rate of 10% per annum, is unsecured and fell due for
repayment on 1 January 2018. Since that time, the Parent Company has effectively rolled the loan forward on the
existing terms except for the fact that the amount is now repayable on demand. However, the Company has no
current intention of making a demand for payment for either this or any of the other intra-group loans that are
outstanding. As a consequence, the amounts falling due are classified as non-current assets.
Amounts falling due within one year
Other receivables
Prepayments
Amounts falling due after more than one year
Amount owed by subsidiary undertaking
89
2018
£’000
2017
£’000
5
4
9
14
4
18
9,012
3,000
Notes to the parent company financial statements
for the year ended 31 December 2018 (continued)
On transition to IFRS 9, the Company determined that the historical intra-group loans that had previously been
accounted for as part of the cost of investment in subsidiaries were credit impaired. However, it concluded that
the term loan owed by Deltex Medical Limited was not. However, it was concluded that that there had been a
significant change in credit risk of that loan and, consequently, an expected life credit loss was recognised.
The expected credit losses were determined based on different recovery options and credit loss scenarios. Three
recovery options were considered which included full repayment of the balances outstanding, the possibility of a
trade sale and the recovery through continued trading. The likelihood of each occurring was assessed together
with the expected credit loss under each scenario. The expected credit loss recognised represents the weighted
average of the lifetime credit losses. The expected credit loss at 31 December 2018 was £47,362,000, an
increase of £6,121,000 in the year which has been recognised in profit or loss in the Parent Company’s SOCI. The
gross balances outstanding, on transition to IFRS 9 on 1 January 2018, were £52,999,000. The gross balances
outstanding at 31 December 2018 were £56,372,000.
7. Creditors: amounts falling due within one year
Trade payables
Accruals
Borrowings
8. Creditors: amounts falling due after more than one year
Convertible loan note
9. Share capital
2018
£’000
146
276
-
422
2018
£’000
1,035
2017
£’000
173
175
90
438
2017
£’000
1,004
See notes 20 and 21, on pages 70 to 74 of the Consolidated Financial Statements, for full details of the
Company’s share capital and its share option schemes.
10. Deferred tax
The movement in deferred income tax assets and liabilities during the year, without taking into consideration the
offsetting of balances within the same tax jurisdiction, is as follows:
Deferred tax liabilities
At 1 January 2017
Credited to profit or loss in the Consolidated SOCI
At 31 December 2017
Credited to profit or loss in the Consolidated SOCI
At 31 December 2018
Deferred tax assets
At 1 January 2017
Charged to profit or loss in the Consolidated SOCI
At 31 December 2017
Charged to profit or loss in the Consolidated SOCI
At 31 December 2018
90
Foreign
exchange
£’000
Total
£’000
55
(12)
43
(12)
31
55
(12)
43
(12)
31
Tax
losses
£’000
Total
£’000
(55)
12
43
12
31
(55)
12
43
12
31
Notes to the parent company financial statements
for the year ended 31 December 2018 (continued)
11. Ultimate controlling party
There are no shareholders with overall control of the Company as at 31 December 2018 or 31 December 2017.
12. Related party transactions
Exemption has been taken under FRS 101 paragraph 8(k) from disclosing related party transactions between the
Company and its subsidiary undertakings and from paragraph 8(j) from disclosing key management
compensation. The directors of Deltex Medical Group plc had no other material transactions, other than those
disclosed in note 24, with the Company during the year, other than as a result of service agreements. Details of
directors’ remuneration is disclosed in the Directors’ report, on page 35, and in the Directors’ remuneration report
on pages 20 to 31.
13. Changes in accounting policies
This note explains the impact of the adoption of the following standards:
IFRS9, ‘Financial Instruments’
IFRS 15, ‘Revenue from contracts with customers’; and
IFRS 16, ‘Leases’
IFRS 9 ‘Financial Instruments’
IFRS 9 replaces IAS 39, ‘Financial Instruments: Recognition and Measurement’. It makes substantial changes to
the previous accounting guidance on the classification and measurement of financial instruments and introduces
an ‘expected credit loss’ model for the impairment of financial assets. The new standard also requires the
recognition of a modification gain or loss in profit or loss in the Statement of Comprehensive Income (SOCI) when
the contractual cash flows of a financial liability are either modified or renegotiated and such action does not lead
to its derecognition.
The Group has applied transitional relief and opted not to restate prior periods. There were differences identified
arising from the adoption of IFRS 9 in relation to classification, measurement and impairment that required
recognition at the date of initial application, namely 1 January 2018.
The application of IFRS 9 has had an impact in the following areas:
The categorisation of intra-group loans. Prior to the adoption of IFRS 9, Management had concluded that
intra-group loans were probably as permanent as equity and, therefore, were accounted for under IAS 27,
‘Separate Financial Statements’, rather than IAS 39. However, following the adoption of IFRS 9 which has
clarified that if the debt instrument is not considered to be an equity instrument by the borrower then it
cannot be considered to be in the scope of IAS 27 by the lender. As the loans are undocumented and
carry no interest, they are considered to be financial liabilities by the subsidiary entities that have received
the intra- Group loans. In the light of this, the intra-group loans have been categorised as financial assets
from 1 January 2018.
The application of the expected credit loss impairment model to financial assets. This affects the
Company’s financial assets namely intra-group loans. The Company has applied the ‘expected credit loss’
model to financial assets recognised at amortised cost. The application of IFRS 9 leads to the earlier
recognition of impairment losses compared to IAS 39. The Company has determined that the application
of the impairment requirements of IFRS 9 results in an allowance for impairment of £41,241,000, which
includes an additional impairment of £2,334,000 relating to the intra-group term loan of £3,000,000, which
has been recognised in Accumulated losses in equity in the balance sheet. As noted above, prior to the
adoption of IFRS 9, other than the 5 year-term intra-group loan to Deltex Medical Limited, the balances
outstanding were not measured for impairment under IAS 39. Accordingly, aggregate adjustments of
£38,238,000 relating to impairment losses measured in accordance with IAS 36, ‘Impairment of Assets’,
have been reversed on transition to IFRS 9 and are recognised in Accumulated losses in equity in the
balance sheet.
91
Notes to the parent company financial statements
for the year ended 31 December 2018 (continued)
The recognition of modification gains or losses. This impacts the Company’s convertible loan note that
had its maturity date extended by two years in February 2018. A gain of £80,000 was recognised in the
operating loss for the year ended 31 December 2018. If the Company had applied its previous accounting
policy, this gain would have been recognised over the remaining term of the convertible loan note through
an adjustment to the effective interest rate because the terms and conditions of the loan remained broadly
unchanged. The loss after tax was reduced by £80,000 following the recognition of this gain. No
retrospective adjustments were required in relation to this change in accounting policy as none of the
borrowings outstanding at 1 January 2018 had been modified in prior periods.
IFRS 15, ‘Revenue from contracts with customers’ and IFRS 16, ‘Leases’.
Whilst the Company has adopted both of these standards with effect from 1 January 2018, they did not have any
effect on the Company’s financial statements.
14. Events after the balance sheet date
On 5 February 2019, the company issued 8,695,652 new ordinary shares pursuant to the exercise of share
options under the Group’s EMI share scheme with an exercise price of 1 penny per share. The proceeds received
on exercise was £87,000.
On 9 April 2019, the Board resolved to waive the non-interest-bearing intra-group loan owing to the company
from its wholly owed subsidiary undertaking Deltex Medical Limited. The gross balance owed to the company at
31 December 2018 was £45,164,000. This will be accounted for as a capital contribution in the Annual Report &
Accounts 2019.
92
Notice of Annual General Meeting
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt
as to the action you should take, you are recommended immediately to seek your own personal financial
advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser
authorised under the Financial Services and Markets Act 2000. If you have sold or otherwise transferred all
of your shares in Deltex Medical Group plc, you should pass this document, the accompanying form of
proxy and the annual report and accounts of Deltex Medical Group plc for the financial year ended 31
December 2018 without delay to the stockbroker, bank or other person who arranged the sale or transfer
so they can pass these documents to the person who now holds the shares. This document should be
read in conjunction with the accompanying Form of Proxy.
DELTEX MEDICAL GROUP plc
(Incorporated in England, registered number 03902895)
NOTICE OF ANNUAL GENERAL MEETING
Notice of an annual general meeting of Deltex Medical Group plc (the “Company”) to be held at the offices of DAC
Beachcroft LLP, 25 Walbrook, London EC4N 8AF at 11:00am on 22 May 2019 (the “AGM”) is set out on pages 97
and 98 (inclusive) of this document. To be valid as a proxy in respect of the AGM, the form of proxy accompanying
this document must be completed and returned in accordance with the instructions thereon so as to be received by
the Company’s registrars, Equiniti, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, not later than
48 hours before the time of the meeting.
93
Directors:
Nigel Keen (Chairman)
Andrew Mears
Jonathan Shaw
Julian Cazalet
Christopher Jones
Sir Duncan Nichol
Mark Wippell
24 April 2019
To holders of ordinary shares of 1p each (“Ordinary Shares”) in the capital of Deltex Medical Group plc (the
“Company”)
Dear Shareholder
Notice of Annual General Meeting of the Company and annual accounts for the year ended 31 December
2018
I am pleased to send you details of arrangements for our annual general meeting, together with the annual
accounts of the Company, which contain the reports of the directors and the auditors, for the year ended 31
December 2018.
The formal notice of the annual general meeting of the Company, which will take place at the offices of DAC
Beachcroft LLP, 25 Walbrook, London EC4N 8AF at 11:00am on 22 May 2019 (the “AGM”), is set out on pages 97
and 98 (inclusive) of this document.
The purpose of this letter is to explain certain aspects of the business of the AGM to you.
Resolution 1 - Receipt of audited financial statements
Resolution 1 deals with the receipt of the directors’ and auditors’ reports and the accounts of the group for the
financial year ended 31 December 2018 (the “Annual Report & Accounts 2018”).
Resolutions 2, 3, and 4 - Re-election and election of directors
Resolution 2 proposes the re-election of Nigel Keen as a director and Resolution 3 proposes the re-election of
Mark Wippell as a director. The Company’s articles of association (The “Articles”) require that at each annual
general meeting one third of the directors (excluding directors being elected for the first time) must retire by
rotation; accordingly, Nigel Keen and Mark Wippell offer themselves for re-election as proposed by resolutions 2
and 3.
Resolution 4 proposes the reappointment of Andy Mears, who was appointed as a director on 13 June 2018. In
accordance with the Articles, having been appointed since the last annual general meeting, Andy Mears ceases to
be a director at the conclusion of the AGM unless reappointed at the meeting; accordingly, being eligible, Andy
Mears offers himself for re-appointment as proposed by resolution 4.
Biographical details of Nigel Keen, Mark Wippell and Andy Mears are set out on page 33 of the Annual Report &
Accounts 2018. The Board considers that the considerable experience that each of these directors bring will
continue to be beneficial to the Company.
Resolution 5 – Re-appointment of auditors
Nexia Smith & Williamson have expressed their willingness to continue as the Company’s auditors. Resolution 6
proposes their re-appointment and authorises the directors to determine their remuneration.
94
Resolution 6 – Power to allot and issue shares
The directors are not permitted to allot new shares (or to grant rights over shares) unless authorised to do so by
the shareholders of the Company. At the annual general meeting of the Company held on 20 June 2018 (the “2018
AGM”), the directors were given authority to allot relevant securities up to a maximum aggregate nominal value of
£1,635,544 (being one third of the then issued ordinary share capital of the Company) and to allot a further one-
third pursuant to a rights issue. This authority expires at the conclusion of the AGM and the directors are seeking a
fresh shareholder authority to allot relevant securities.
Accordingly, it is proposed that the directors are given general authority to allot relevant securities up to an
aggregate nominal value of £1,671,197 (being one-third of the issued ordinary share capital as at 31 March 2019)
and in addition to allot relevant securities only in connection with a rights issue up to a further aggregate nominal
value of £1,671,197.
Accordingly if this resolution is passed the directors will have the authority in certain circumstances to allot new
shares and other relevant securities up to a total aggregate nominal value of £3,342,394 representing an amount
equal to two-thirds of the Company’s issued share capital as at 31 March 2019. Although the directors have no
present intention of exercising this authority, the general authority to allot shares will provide flexibility for the
Company to allot shares and to grant rights to subscribe for or to convert into shares when they consider it to be in
the Company’s interests to do so.
The authority, if granted, will expire on the earlier of the conclusion of the Company’s next annual general meeting
after the passing of this resolution and 15 months from the date of passing this resolution. The Board intends to
seek its renewal at subsequent annual general meetings of the Company.
Resolution 7 – Disapplication of the statutory rights of pre-emption
Section 561 of the Companies Act 2006 gives holders of equity securities (within the meaning of that Act) certain
rights of pre-emption on the issue for cash of new equity securities (other than in connection with an employee
share scheme). The directors believe that it is in the best interests of the shareholders that the directors should
have limited authority to allot ordinary shares (or rights to convert into or subscribe for ordinary shares, or sell any
ordinary shares which the Company elects to hold in treasury) for cash without first having to offer such shares to
existing shareholders in proportion to their existing holdings.
Resolution 7 proposes, in substitution for the powers that were granted to the directors at the 2018 AGM, that
power be granted to allot securities for cash on a non-pre-emptive basis up to a maximum aggregate nominal
value equal to £501,359 (representing approximately ten per cent. of the nominal issued share capital of the
Company as at 31 March 2019).
The resolution also disapplies the pre-emption rights to the extent necessary to facilitate rights issues, open offers
and similar transactions without having to follow the specific statutory procedures that would otherwise apply to
such issues.
The authority, if granted, will expire on the earlier of the conclusion of the Company’s next annual general meeting
after the passing of this resolution and 15 months from the date of passing this resolution. The Board intends to
seek its renewal at subsequent annual general meetings of the Company.
Resolution 7 will be proposed as a special resolution.
Action to be taken
Your participation at the AGM is important to us. The AGM is a great opportunity for shareholders to communicate
directly with us, express their views and to ask questions and we welcome your attendance. Whether or not you
propose coming to the AGM and you want to vote on any of the resolutions you can do this in one of two ways:
Register your vote electronically by logging on to www.sharevote.co.uk: or
Complete and return the enclosed proxy form
Proxy appointments, whether submitted electronically or by post, must be received by Equiniti by no later than
11.00am on 20 May 2019. Your attention is drawn to the notes endorsed on the enclosed form of proxy.
95
Recommendation
Your directors believe that all the proposals to be considered at the AGM are in the best interests of the Company
and its shareholders as a whole and recommend that shareholders vote in favour of the resolutions, as they intend
to do in respect of their own beneficial shareholdings of 79,131,679 ordinary shares in aggregate, representing
approximately 16 per cent. of the ordinary shares currently in issue.
Yours sincerely
Nigel Keen
Chairman
96
DELTEX MEDICAL GROUP plc
NOTICE OF ANNUAL GENERAL MEETING
NOTICE is hereby given that the ANNUAL GENERAL MEETING of Deltex Medical Group plc will be held at the
offices of DAC Beachcroft LLP, 25 Walbrook, London EC4N 8AF at 11:00am on 22 May 2019 to transact the
following business:
Ordinary Business
As ordinary business, to consider and if thought fit pass the following resolutions, which will be proposed as
ordinary resolutions:
1. To receive the Company’s audited financial statements for the year ended 31 December 2018, together with the
reports of the directors and of the auditors thereon.
2. To re-elect as a director Nigel Keen.
3. To re-elect as a director Mark Wippell.
4. To elect as a director Andy Mears.
5. To re-appoint Nexia Smith & Williamson as auditors of the Company to hold office until the conclusion of the next
annual general meeting at which accounts are laid before the Company and that their remuneration be fixed by the
directors.
To transact any other ordinary business of the Company.
Special Business
As special business, to consider and if thought fit pass the following resolutions, of which resolution 6 will be
proposed as an ordinary resolution and resolution 7 as a special resolution:
6. THAT, in accordance with section 551 of the Companies Act 2006 (the “Act”), the directors be generally and
unconditionally authorised to allot Relevant Securities (as defined below):
6.1. comprising equity securities (as defined by section 560 of the Act) up to an aggregate nominal amount of
£3,342,394 in connection with an offer of such securities by way of a rights issue
(a) to holders of ordinary shares in proportion (as nearly as may be practicable) to their respective holdings;
and
(b) to holders of other equity securities as required by the rights of those securities or as the directors
otherwise consider necessary,
but subject to such exclusions or other arrangements as the directors may deem necessary or expedient in
relation to treasury shares, fractional entitlements, record dates, legal or practical problems in or under the
laws of any territory or the requirements of any regulatory body or stock exchange; and
6.2. in any other case, up to an aggregate nominal amount of £1,671,197,
provided that this authority shall, unless renewed, varied or revoked by the Company, expire 15 months after
the passing of this resolution or, if earlier, at the conclusion of the next annual general meeting of the
Company after the passing of this resolution, save that the Company may, before such expiry, make offers or
agreements which would or might require Relevant Securities to be allotted and the directors may allot
Relevant Securities in pursuance of such offer or agreement notwithstanding that the authority conferred by
this resolution has expired. This resolution revokes and replaces all unexercised authorities previously
granted to the directors to allot Relevant Securities but without prejudice to any allotment of shares or grant of
rights already made, offered or agreed to be made pursuant to such authorities.
97
In this resolution, “Relevant Securities” means:
(a) shares in the Company, other than shares allotted pursuant to:
(i) an employee share scheme (as defined in section 1166 of the Act);
(ii) a right to subscribe for shares in the Company where the grant of the right itself constitutes a Relevant
Security; or
(iii) a right to convert securities into shares in the Company where the grant of the right itself constitutes a
Relevant Security; and
(b) any right to subscribe for or to convert any security into shares in the Company other than rights to
subscribe for or convert any security into shares allotted pursuant to an employee share scheme (as defined
in section 1166 of the Act).
References to the allotment of Relevant Securities in this resolution include the grant of such rights.
7. THAT, subject to the passing of resolution 6, the directors be authorised to allot equity securities (as defined in
section 560 of the Act) for cash under the authority conferred by that resolution and/or to sell ordinary shares held
by the Company as treasury shares as if section 561 of the Act did not apply to any such allotment or sale,
provided that such authority shall be limited to:
(a) the allotment of equity securities in connection with an offer of equity securities (but, in the case of the authority
granted under 6.1, by way of a rights issue only)
(i) to the holders of ordinary shares in proportion (as nearly as may be practicable) to their respective holdings;
and
(ii) to holders of other equity securities as required by the rights of those securities or as the directors otherwise
consider necessary,
but subject to such exclusions or other arrangements as the directors may deem necessary or expedient in
relation to treasury shares, fractional entitlements, record dates, legal or practical problems in or under the laws of
any territory or the requirements of any regulatory body or stock exchange; and
(b) the allotment of equity securities or sale of treasury shares (otherwise than pursuant to clause 7(a) of this
resolution) to any person up to an aggregate nominal amount of £501,359.
The authority granted by this resolution will expire 15 months after the passing of this resolution or, if earlier, at the
conclusion of the next annual general meeting of the Company after the passing of this resolution, save that the
Company may, before such expiry make offers or agreements which would or might require equity securities to be
allotted (or treasury shares to be sold) after the authority expires and the directors may allot equity securities (or
sell treasury shares) in pursuance of any such offer or agreement as if the authority had not expired. This
resolution revokes and replaces all unexercised powers previously granted to the directors to allot equity
securities or sell treasury shares as if section 561 of the Act did not apply but without prejudice to any allotment of
equity securities or sale of treasury shares already made or agreed to be made pursuant to such authorities.
By order of the Board
Jonathan Shaw
Company Secretary
24 April 2019
Registered office:
Terminus Road
Chichester
PO19 8TX
98
Notes:
Any member entitled to attend and vote at the annual general meeting is entitled to appoint one or more proxies
(who need not be a member of the Company) to attend and to vote instead of the member. Completion and return
of a form of proxy will not preclude a member from attending and voting at the meeting in person, should he or she
subsequently decide to do so. In order to be valid, any form of proxy and power of attorney or other authority under
which it is signed, or a notarially certified or office copy of such power or authority, must reach the Company’s
registrars, to Equiniti, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, not less than 48 hours
before the time of the meeting or of any adjournment of the meeting.
Shareholders wishing to appoint a proxy and register their proxy votes electronically should visit the website,
www.sharevote.co.uk. The on-screen instructions will give details on how to appoint a proxy and submit proxy
voting instructions. Electronic proxy appointments and voting instructions must be received by no later than 11.00
am on 20 May 2019 (or 48 hours excluding non-working days before an adjourned meeting) in order to be valid.
Shareholders may not use any other electronic address or telephone number, whether found in this circular and
Notice of Meeting, or in the Annual Report & Accounts 2018 or on any form of proxy or the Company’s website, for
the purposes of submitting voting instructions or appointing proxies. The only electronic address accepted for this
stated purpose is the one at the website, www.sharevote.co.uk.
To be entitled to attend and vote at the annual general meeting (and for the purpose of the determination by the
Company of the votes they may cast), shareholders must be registered in the register of members of the Company
at 6:30 pm on 20 May 2019 (or in the case of any adjournment, on the date which is forty-eight hours before the
time of the adjourned meeting). Changes to the register of members after the relevant deadline shall be
disregarded in determining the rights of any person to attend and vote at the annual general meeting. A copy of
this notice, within the Annual Report & Accounts 2018, can be found on the Company’s website,
www.deltexmedical.com.
Shareholders can, at no cost, obtain copies of the audited financial statements of the Company for the year ended
31 December 2018 and the directors’ and auditors’ reports on those financial statements by application to the
Company Secretary at the registered office of the Company. Biographical details of each director who is being
proposed for re-election or election by shareholders are set out in the Company’s annual report and accounts for
the year ended 31 December 2018. To appoint a proxy or to give or amend an instruction to a previously appointed
proxy via the CREST system, the CREST message must be received by the issuer’s agent, Equiniti (ID RA19), not
later than 11.00 am on 20 May 2019 or, in the case of any adjournment, on the date which is forty-eight hours
before the time of the adjourned meeting.
For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the
message by the CREST Applications Host) from which the issuer’s agent is able to retrieve the message. After this
time any change of instructions to a proxy appointed through CREST should be communicated to the proxy by
other means. CREST Personal Members or other CREST sponsored members, and those CREST Members who
have appointed voting service provider(s) should contact their CREST sponsor or voting service provider(s) for
assistance with appointing proxies via CREST. For further information on CREST procedures, limitations and
system timings please refer to the CREST Manual.
We may treat as invalid a proxy appointment sent by CREST in the circumstances set out in Regulation 35(5) (a)
of the Uncertified Securities Regulations 2001. In any case your proxy form must be received by the Company’s
registrars no later than 48 hours before the time of the meeting or of any adjourned meeting excluding any part of
day that is not a working day. As at 31 March 2019, the Company’s issued share capital consists of 501,359,019
ordinary shares of 1p each, carrying one vote each. No shares are held in treasury.
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