2019 Annual Report & Accounts
Deltex Medical
A UK-headquartered international medical device company which develops and
manufactures specialist haemodynamic monitoring devices.
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Contents
Overview
Highlights
Deltex Medical and COVID-19
Chairman’s Statement
Business Review
Governance
Directors
Directors’ Responsibility Statement
Company Secretary and Advisers
Corporate Governance statement
Strategic Report
Principal Risks of the Group
Directors’ Report
Directors’ Remuneration Report
Report of the Audit Committee
Independent Auditors’ report
Consolidated financial statements
Notes to the consolidated financial
statements
Parent company financial statements
Notes to the parent company financial
statements
Notice of Annual General Meeting
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The Deltex Medical Group at a glance
Our products
Deltex Medical’s TrueVue System incorporates three best-in-
class technologies. The TrueVue Doppler uses a single-use
disposable ultrasound probe which is placed into a sedated or
anaesthetised patient’s oesophagus via their nose or mouth.
TrueVue Doppler provides a clinician with beat-to-beat real-
time information on the patient’s circulating blood volume and
heart function. This information is critical to enable the
clinician to optimise both fluid and drug delivery to a patient.
The second technology, TrueVue Impedance, uses
impedance cardiography to enable non-invasive continuous
monitoring of awake patients. Finally, the TrueVue
PressureWave uses the most stable and extensively
researched pulse pressure wave algorithm currently available
to derive haemodynamic parameters, calibrated from the
Doppler.
Our products are manufactured at the Group’s headquarters
in Chichester, West Sussex guided by a quality assurance
system which allows our devices to be sold in regulated
markets all over the world. Our research & development
group, which is focussed on improving the performance of our
current products and developing the next generation of the
TrueVue system, is also based in our Chichester facility.
Our business model relies principally on the recurring
revenues associated with the sale of the single-use
disposable Doppler probes which are used in the TrueVue
System. Monitors are sold or, due to hospitals’ often
protracted procurement times for capital items, we may loan
monitors in order to encourage faster adoption of our
technology.
Our customers
Our principal customers are anaesthetists working in the
hospital’s operating room and intensivists working in critical
care units. In the UK we sell direct to the NHS. In the USA we
sell direct to more than 30 major hospitals that appreciate the
value of our evidence-based approach to haemodynamic
management. We also sell through distributors in more than
40 countries in the European Union, Asia and South America.
We are seeing increased demand for our TrueVue Doppler
haemodynamic monitoring equipment in intensive care units
caring for Covid-19 patients.
Our objective
To see the adoption of our TrueVue System as the standard
of care in haemodynamic monitoring for all patients from new-
born to adult, awake or anaesthetised, across all hospital
settings globally.
Visit us online for further information at
www.deltexmedical.com
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Highlights
Financial
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the Group posted an operating profit (excluding exceptional items) of £90,000 (2018: loss
£943,000) – an improvement of £1 million
positive adjusted EBITDA of £0.4 million (2018: loss £0.7 million)
revenues £4.3 million (2018: £5.0 million), reflecting a focus on profitable business, lower sales &
marketing spend and cessation of a third-party distribution agreement
overheads (before exceptional costs) decreased by £1.3 million to £3.2 million (2018: £4.5 million)
sales & marketing spend decreased by 44% to £1.2 million (2018: £2.2 million), reflecting
significantly smaller sales teams in the USA and UK
cash and cash equivalents at 31 December 2019 of £0.9 million (2018: £0.6 million)
COVID-19
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demand increasing for Deltex Medical TrueVue Doppler systems in intensive care units in the UK
and USA as a result of the COVID-19 pandemic
reduced demand in Q1 for the Group’s Doppler probes from operating rooms – due to cancellation
of elective surgery in anticipation of COVID-19; although increased demand associated with “catch-
up” expected later in the year
Business
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2019 was a year of restructuring and refocusing Deltex Medical
benefits of the new strategy - with a substantially lower cost base - clear from the financial results
22 randomised controlled trials which show the benefit of measuring aortic blood flow (via TrueVue
Doppler) to optimise the clinical management of patients represent an extremely valuable asset for
the Group
§ work ongoing to extend and augment the technologies on the Group’s TrueVue haemodynamic
monitoring platform supported by a UK Innovate Smart Award
Commenting on the results, Nigel Keen, Chairman of Deltex Medical, said:
“I am pleased to see the Group generate a profit before exceptional costs at the operating level.”
“The benefits of the restructuring and refocusing work, combined with the new strategy, are clear and give
the Group a sound base to grow through and after the effects of the COVID-19 pandemic.”
“Although the COVID-19 pandemic is horrifying, it is notable that UK and US intensive care units are
beginning to order Deltex Medical’s specialist haemodynamic monitoring technology to help clinicians
select the optimal treatment regime for the ventilated COVID-19 patients.”
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Deltex Medical and COVID-19
Deltex Medical: COVID-19 and the hospital Intensive Care Unit (“ICU”) setting
At the moment there is no approved drug or vaccine to treat COVID-19 patients. As a result, intensivists
have limited therapeutic options available for the very sick COVID-19 patients who have been admitted to
an ICU. A recently published research paper (Cunningham et al. “Treatment of COVID-19: old tricks for
new challenges” Critical Care (2020) 24:91) stated that:
“the management of patients mainly focuses on the provision of supportive care, e.g., oxygenation,
ventilation, and fluid management.” [Emphasis added]
UK ICUs
Since the start of the COVID-19 pandemic in the United Kingdom, Deltex Medical has seen an increase in
demand for its TrueVue Doppler technology from NHS ICUs in order to help optimise the treatment of
severely ill COVID-19 patients.
Given the rapidly evolving situation, it is currently not possible to quantify the financial implications of this
increase in demand from NHS ICUs, as it is unclear how long the COVID-19 pandemic will last or the
number of severely sick patients who will be affected. A number of NHS hospitals which have previously
used the Group’s TrueVue Doppler technology in their ICUs are placing orders as a result of the clinical
challenges of treating COVID-19 patients in an ICU.
US ICUs
Deltex Medical has a small sales force in the USA which focuses on sales of its TrueVue Doppler
technology principally into hospital operating rooms (“ORs”). However, the Group has recently started to
see demand for its TrueVue Doppler technology from hospitals in the USA for use in the ICUs.
As a result of COVID-19 there could be strong demand for haemodynamic monitoring in US ICUs and there
is likely to be an overall lack of capacity from existing suppliers to satisfy this potential demand for
haemodynamic monitoring technology. In order to satisfy this potential demand, Deltex Medical is preparing
for a significant increase in demand from the US ICU market. As in the UK, it is difficult to predict the
financial implications for the Group of such increased demand from US ICUs as a result of COVID-19.
Rest of world ICUs
Deltex Medical sells its TrueVue range of haemodynamic monitoring to the rest of the world via a network
of international distributors. Such sales are lower margin and the Group does not have direct access to, or
communication with, the end-user customer. The Group works closely with its international distributors to
support their sales and marketing efforts; however, at the moment the Group is focusing its primary sales
activities on direct sales into the key UK and US healthcare markets. Nevertheless, activity is being seen in
sales to ICUs in a number of international markets served by our distributors.
Deltex Medical: COVID-19 and elective surgery
In the first quarter of 2020, Deltex Medical has seen a decline in monitor and probe orders for use in
elective surgery from UK and US hospitals and from its international distributors. This is as a result of the
cancellation of elective surgical procedures with the corresponding decline in demand for the Group’s
Doppler probes in the OR which has been caused by the need to keep hospital facilities and resources
available for COVID-19 patients.
Once the COVID-19 pandemic has subsided the Group believes that there will be significant demand from
patients and their physicians to catch up with the postponed elective procedures to prevent them from
developing into emergencies. This is expected to result in a pronounced uptick in demand in the future for
TrueVue Doppler probes from the Group’s existing OR-based customers. Preliminary feedback from some
of the overseas markets which experienced the COVID-19 pandemic earlier than the UK, indicates that
elective surgery is beginning to restart in those countries.
Conclusion
Deltex Medical promotes the benefits of its unique Doppler-based haemodynamic monitoring technology,
backed by a substantial body of high quality scientific evidence, to anaesthetists in the OR and intensivists
in the ICU. It currently appears that the COVID-19 pandemic is providing a powerful external stimulus to
drive higher adoption rates of the Group’s TrueVue Doppler technology in ICUs around the world.
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At the moment it is too early to determine what proportion of the reduction in OR-related revenues
experienced at the beginning of the year will be caught up later in the year. Nor is it possible to assess how
large demand will be this year for TrueVue Doppler (and other modalities on its TrueVue haemodynamic
monitoring system) in the ICU setting. However, it is already clear that there is increased demand for the
Group’s TrueVue Doppler in the ICU setting.
As part of our management response to the pandemic, we have taken proactive steps to minimise
expenditure and our cost base. This includes the cessation of all discretionary expenditure and a hiring
freeze. (We have, to date, not furloughed any employees as they are busy serving, directly or indirectly, our
customers, save for two members of staff for medical reasons.) As a consequence, we have been able to
make significant savings which has further enhanced our ability to generate cash even at lower activity
levels.
The Group had cash on hand at 31 December 2019 of £0.9 million. It is following closely the availability and
structure of COVID-19 related Government-sponsored sources of finance, although it currently has no need
to access such funding sources.
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Chairman’s Statement
Financial results
Since its foundation as a technologically driven start-up, Deltex Medical has invested in the development of
the TrueVue System to provide clinicians with the ability to monitor their patients’ haemodynamic condition
throughout their journey through the healthcare system. To validate the safety benefits, improvements in
patient outcomes and the financial savings for the healthcare system, we have invested heavily in
supporting multiple randomised clinical trials (“RCTs”). There have now been in excess of 22 RCTs
published which show the benefits of measuring aortic blood flow to optimise the clinical management of
patients. This scientific evidence base derived using our technology is a unique asset associated with
Deltex Medical’s technology and a key differentiator for the Group.
2019 marked a significant milestone in Deltex Medical’s long history as the Group operated profitably,
posting an operating profit (excluding exceptional items) of £90,000.
Throughout the year we implemented the Group’s new strategy of reducing overhead costs to target
positive EBITDA and focusing selling activities on high-usage accounts, or accounts where the Group’s
TrueVue Doppler technology is already well established. Although COVID-19 is expected to have a
significant effect, 2020 will be the first full year of trading of the re-baselined business under the new
strategy.
The success of the strategy can be seen in the Group’s results with adjusted EBITDA (Earnings before
interest, tax, depreciation and amortisation, share-based payments, non-executive directors’ fees, as well
as certain other non-cash costs) increasing to £0.4 million, up by £1.1 million from a loss of £0.7 million in
2018. The gross margin was also higher at 77% (2018: 71%). This is also reflected in the operating profit
before exceptional items of £90,000 in contrast to a loss of £943,000 in 2018. The 2019 exceptional costs
relate principally to payments in lieu of notice and compensation for loss of office to a former Director.
Overheads (before exceptional costs) declined by 29% (£1.2 million) to £3.2 million (2018: £4.5 million),
included in which sales and marketing expenses were reduced by 44% to £1.2 million (2018: £2.2 million),
reflecting significantly smaller sales teams in the USA and UK.
Reflecting the implementation of the new strategy, revenues for the year declined by 14% to £4.3 million
(2018: £5.0 million). The decline in revenue was primarily as a result of:
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focusing on the most profitable business and not pursuing market share at all costs;
the termination of a distribution agreement relating to the sale of lower margin third-party goods
in the UK;
a substantial reduction in expenditure in sales and marketing, especially in the USA; and
reduced levels of activity from the Group’s French distributor as a result of some isolated
commercial issues.
Cash and cash equivalents at 31 December, 2019 was £0.9 million (2018: £0.6 million) and net assets
were £2.7 million (2018: £ 2.4 million).
Market positioning and proposition to clinicians
There is a large body of scientific evidence comprising RCTs which shows that the use of appropriate
haemodynamic monitoring technology to assist the management of medium- and high-risk anesthetised
surgical patients significantly improves patient outcomes and reduces the incidence rates of avoidable
complications such as acute kidney injuries (“AKIs”) and surgical site infections (“SSIs”). The 2018 Fedora
study went further, showing that there were both clinical and financial benefits associated with the
haemodynamic monitoring of low-risk surgical patients, and not just the medium- and high-risk patients
assessed in earlier RCTs. Substantially all of the evidence supporting the use of haemodynamic monitoring
described in these RCTs was generated using the Group’s TrueVue Doppler technology.
Deltex Medical provides clinicians with a suite of haemodynamic monitoring technologies via its TrueVue
platform led by its flagship TrueVue Doppler technology. The Doppler technology provides extremely
accurate, real-time data on the haemodynamic status of patients which enables clinicians to optimise the
clinical status of anaesthetised patients during surgery safely and rapidly.
Supported by the findings of RCTs, the Group’s selling proposition to intensivists and anaesthetists is that
TrueVue Doppler haemodynamic monitoring results in better outcomes for surgical and critical care
patients with lower associated costs.
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The Group plans to extend the utility and broaden the applicability of the haemodynamic monitoring
technologies on its TrueVue platform via a number of targeted product development initiatives, many of
which are part-funded by competitively-won grants.
We promote the use of Deltex Medical’s TrueVue Doppler technology over lower-accuracy and clinically
unproven alternatives to decision-makers in hospitals around the world. We also focus on the long-term
profitability of the Group thereby providing us with the financial resources to grow the business.
Employees
The Group employs a significant number of talented individuals across a range of disciplines in the UK and
overseas, who work to make Deltex Medical successful. On behalf of the Board I would like to thank all the
Group’s employees for their dedication and hard work during 2019 – and their resilience so far this year in
the face of the COVID-19 pandemic.
Prospects
There are a number of underlying trends which are helping Deltex Medical’s business, including:
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an ageing population worldwide with more complex health issues;
a wider acceptance by clinicians of the need for haemodynamic monitoring;
an increasing focus on patient safety, including the reduction of avoidable complications;
the increasing reluctance of insurers to reimburse hospitals for the costs of avoidable complications,
such as AKIs;
pressure on hospitals, especially in the USA, to reduce the cost of in-patient treatment; and
following the COVID-19 outbreak, an increasing focus on infectious diseases and pandemic
preparedness.
The Board believes that Deltex Medical is well positioned to benefit from these trends which are seen in
many healthcare markets around the world.
Over recent months the Group has seen a slowdown in elective surgical procedures in hospitals throughout
the world as a result of measures taken to combat COVID-19. This has resulted in a decline in TrueVue
Doppler probe usage. In contrast to the reduction in elective surgery in hospitals, sales of monitors and
probes for critical care use to hospitals in countries fighting the COVID-19 virus have sharply increased,
offsetting the decline from elective surgical procedures. It is too early to assess the quantum or timing of
these effects on the Group’s trading in 2020, in part as the Group trades through third party distributors in
many of these countries. Further information on COVID-19 is set out in the section above entitled “Deltex
Medical and COVID-19”.
The Group’s cost base is substantially lower. The sales and marketing activities are significantly more
targeted. There is a strong emphasis on writing profitable business, as opposed to pursuing market share
at any cost. The foundations are in place for the Group to target profitable revenue growth from this new
platform with more focused commercial activities.
Nigel Keen
Chairman
24 April 2020
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Business Review
Why clinicians choose TrueVue Doppler
It is widely accepted that, given the published scientific evidence, anaesthetised patients undergoing
surgery should have their haemodynamic status closely monitored. If such patients are not monitored
carefully with a device providing real-time, accurate haemodynamic information, then physicians are unable
to administer optimally appropriate fluids and drugs. This can result in severe adverse outcomes and give
rise to extended hospital stays as well as substantially higher attributable healthcare costs.
Haemodynamic monitoring is not just indicated for anaesthetised surgical patients but should also be used
on other patients, including those severely unwell patients admitted to ICUs and Accident & Emergency
units for trauma patients.
Multiple RCTs have demonstrated that a TrueVue Doppler haemodynamic monitoring protocol, which
combines targeted fluid and pharmacological interventions, can improve patient outcomes significantly,
including substantially lowering the risk of complications such as SSIs and AKIs.
Deltex Medical’s TrueVue Doppler technology is acknowledged to be the “gold standard” for the monitoring
of real-time bloodflow. Its Doppler technology is strongly differentiated from competing haemodynamic
monitoring technologies, which are not supported by an equivalent evidence base, and which tend to rely
on measuring blood pressure or deriving bloodflow from algorithms. Such information is, at best, imprecise
and, at worst, misleading.
The precision and generation of real-time data from the TrueVue Doppler technology, along with the
unrivalled evidence base supporting its use on patients with different risk profiles, lies at the heart of Deltex
Medical’s technology proposition to its customers.
New product development
The Group’s new product development strategy is to optimise further the TrueVue Doppler technology as
well as to improve and augment the other haemodynamic monitoring technologies available on Deltex
Medical’s TrueVue haemodynamic monitoring platform.
Over the last year the Group has been successful with a number of UK grant applications to help fund the
development and extension of its technology. In October the Group announced that its principal subsidiary,
Deltex Medical Limited (“DML”), had been awarded an Innovate UK Smart Award with eligible project costs
of £0.5 million, of which 70% are eligible for reimbursement. Innovate Smart Award is a UK government
sponsored research and development programme and we will use the grant to develop the next generation
of our monitor. During 2019 DML was awarded five grants with total project costs worth £0.63 million, with
£0.45 million eligible for reimbursement.
The award of these grants has allowed us to accelerate the investment in these new products which are
expected to be completed over the next two years. Deltex Medical will continue to apply for grants during
2020 to assist with the funding of the development of its product range.
Changes in the international regulatory regime for medical device manufacturers
The Group operates in a number of highly regulated environments. The Group has a robust Quality
Management System which was audited in October 2019 under the new Medical Device Single Audit
Program (“MDSAP”). MDSAP comprises a single regulatory audit of a medical device manufacturer's
quality management system to ensure that it satisfies the requirements of multiple regulatory jurisdictions.
Following the MDSAP audit the Group’s systems are now fully certified for product sales in the EU, USA,
Canada and Australia until February 2023. The Group also welcomes the added requirements for proving
competitive equivalence in the Medical Device Regulations (“MDR 2017”). The MDR 2017 specifically
prohibits competitors claiming technical and clinical equivalence to products such as the Group’s TrueVue
Doppler monitor and probes without access to the detailed technical documentation needed to demonstrate
equivalence. The guidance goes on to state “equivalence might be difficult or impossible in case of limited
access to the technical documentation of the devices”. The substantial body of evidence supporting the use
of Deltex Medical’s TrueVue Doppler system means that these changes to international regulations should
be positive for the Group.
Update on the implementation of the new strategy
In 2019 we took a number of important steps to implement the new strategy which we had adopted in the
second half of 2018. These included identifying further cost reductions, negotiating the termination of a
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distribution agreement for third party goods in the UK and increasing our commercial focus to ensure that
the business opportunities we targeted, particularly in the USA, would be successful and profitable.
The next stage of the implementation of the strategy is focused around targeting profitable revenue growth
from the new, reconfigured and leaner platform which we developed during 2019. This will, of course, be
subject to the as yet unknown effect of COVID-19.
Three principal divisions: the USA, the UK and International
The sales and marketing activities of the Group are managed in three divisions: the USA, the UK and
International.
United States
The USA remains the most important market for the Group’s technologies. The addressable market is
substantial and growing. Sales prices for medical device equipment and consumables in the USA are higher
than in other territories. The patient safety advocacy groups are growing in influence. The ‘payers’, such as
the private and public insurers, are ratcheting-up pressure to reduce the incidence of complications for
patients as such payers are increasingly refusing to pay for SSIs and AKIs which they deem avoidable. The
US Government has announced measures to encourage US hospitals to reduce the cost of healthcare, and
this includes the costs associated with extended length-of-stay. The cost of healthcare has widely been
reported as being one of the key issues in the upcoming US presidential election.
Given the opportunities and size of the US healthcare market, Deltex Medical continues to work on a number
of initiatives to increase its US revenues and market share. For example, in July the Group announced that it
had signed an innovative technology contract with Vizient, Inc., the largest membership-driven healthcare
performance improvement company in the USA. This deal with Vizient helps to give our products greater
visibility and credibility to US hospitals.
The principal challenge in the USA remains how to grow the revenue base significantly whilst controlling
the associated sales and marketing overhead costs.
United Kingdom
The NHS remains extremely price sensitive and historically disinclined to spend money on technology to
reduce future costs. It remains unclear whether if there are higher levels of future funding for the NHS this
will substantially enhance our business. Based on previous experience our plans do not anticipate
significantly higher revenues from the NHS; however, the COVID-19 crisis may change our market position
in the UK.
Sales to the NHS also remains highly competitive, with other haemodynamic monitoring companies trying
to increase their market share in the UK, albeit without high precision Doppler-based technology with its
substantial associated scientific evidence base.
The majority of the research & development work associated with the TrueVue Doppler platform took place
in the UK and as a result Deltex Medical retains close relationships with academic ‘Key Opinion Leaders’ in
the UK. These relationships remain important for the Group’s ongoing product development programmes
aimed at expanding and extending the haemodynamic monitoring technologies on the TrueVue platform.
Although the UK remains an important market, the Group’s principal plans for revenue growth by its own
direct sales teams are focussed on the US market.
International
Deltex Medical sells its TrueVue Doppler technology into approximately 40 other countries via a network of
distributors.
During the year we continued to increase the number of distributors selling the Group’s technology and we
expect this division to grow in 2020. Recently signed distribution agreements covering Asia and South America
are expected to help increase our International revenues this year.
Our French distributor continued to face a number of commercial challenges during 2019 which resulted in
them ordering significantly less product from us in the year. Although these issues appear to have been
resolved, the adverse effect of COVID-19 on elective surgery in France, as with other territories, has held
back sales to France so far this year.
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Conclusion
After approximately 18 months of restructuring and refocusing the Group, we believe that we now have a
stable and appropriately funded platform from which we can target profitable growth from a new, lower
baseline of activities. However, the COVID-19 pandemic will inevitably impact the Group’s trading in the
short-term, both in a positive and a negative way as has been described above, and it is currently too early
to assess the quantum or timing of these effects on the Group’s trading in 2020.
Andy Mears
Chief Executive
24 April 2020
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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; 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 Chairman of the Audit Committee. Julian is considered as an
Independent Non-Executive Director by the Board because of the quality of his judgment derived from his
extensive experience of corporate boards gained throughout his career. 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 Trustee 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 qualified as a
lawyer in the UK and the US.
Christopher Jones
Chris Jones joined the Board in June 2015 and brings over 30 years of experience in Fortune 500 and VC
funded healthcare companies in both the UK and the USA. He is 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. Chris 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. He has a Degree of Bachelor of Science in
Molecular Biophysics and Biochemistry from Yale University.
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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 Group Sales Director in 2010, Managing Director in 2015 and Chief Executive in 2018.
Andy is an adviser to the All-Party Parliamentary Group (APPG) for Trade & Investment and member of the
UK Life Science Export Trade Advisory Group (ETAG).
David Moorhouse, Group Finance Director
David joined the Board in October 2019. He has a degree in French and German from Cambridge University
and qualified as a Chartered Accountant with Price Waterhouse. He worked initially as a corporate financier
with European Banking Company Ltd and then joined the executive search firm Russell Reynolds where he
became a Managing Director in London and Chief Executive of its German office. He was appointed Chief
Financial Officer of Deltex Medical Ltd in 1996 and became Managing Director, Europe. He managed several
rounds of private finance and the Company’s public listing in 2002. From 2004 to 2016 he was Head of
Finance and Administration at the International Coffee Organization, an intergovernmental entity based in
London.
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Directors’ Responsibility Statement
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:
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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
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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 the Directors report, confirm that, to
the best of their knowledge:
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the Parent Company’s 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;
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 information contained within this document comprises 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.
13
Company Secretary and Advisers
Company Secretary and Registered Office
David Moorhouse M.A., A.C.A.
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
8 Frederick’s Place
London EC2R 8AB
Independent auditors
Nexia Smith & Williamson
Cumberland House
15 – 17 Cumberland Place
Southampton SO15 2BG
Principal bankers
Santander Corporate and Commercial
1 Dorset Street
Southampton SO15 2DP
Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
14
Corporate Governance Statement
Chairman’s introduction
Our purpose is to provide returns for our shareholders by enabling improvements in outcomes for patients
around the world by creating, validating and delivering innovative healthcare solutions. We aim to achieve
this by:
§
§
§
§
§
§
§
supporting evidence-based medicine to create sustainable health benefits in the communities which
we serve;
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
establishing appropriate committees of the Board and related governance structures, including
those required under section 172 of the Companies Act 2006, to help monitor and guide the aims
described above
The Board of Deltex Medical has chosen to adopt the QCA Corporate Governance Code (the QCA Code)
that was published by the Quoted Companies Alliance in April 2018. The Code is structured around a
number of broad principles which the Board seeks to apply and which are summarised below. Further
information in relation to how the Board applies the Code is set out in the Corporate Governance section of
the Group’s website.
1) Establish a strategy and business model which promote long-term value for shareholders
Deltex Medical’s strategy and business model are described within this document and, in particular,
within the Chairman’s Statement and the Business Review where reference is made to the new
strategy adopted by the Board in the second half of 2018. The Board keeps the Group’s strategy and
business model under close review.
2) Seek to understand and meet shareholder needs and expectations
The Board’s primary contact with both private and institutional shareholders is through the Chairman,
the Chief Executive (“CEO”) and the Group Finance Director (“FD”). The CEO and FD typically meet
with the Group’s institutional shareholders, who wish to meet with them, twice a year around the
publication of the annual accounts and interim results.
3) Take into account wider stakeholder and social responsibilities and their implications for long-
term success.
Engaging with our stakeholders strengthens the Group’s relationships and helps it to make better
business decisions to deliver on its commitments. The Board is regularly updated on wider stakeholder
engagement feedback to stay abreast of stakeholder insights into the issues that matter most to them
and, by extension, the Group’s business.
4) Embed effective risk management, considering both opportunities and threats, throughout the
organisation.
The Board is responsible for the systems of risk management and internal control and for reviewing
their effectiveness. The internal controls are designed to manage rather than eliminate risk and provide
reasonable but not absolute assurance against material misstatement or loss. Through the activities of
the Audit Committee, the effectiveness of these internal controls is reviewed annually.
A summary of the principal risks and uncertainties facing the Group, as well as mitigating actions, are
set out on page 20 of this document
5) Maintain the Board as a well-functioning, balanced team led by the Chair
The Group is led by the Board of directors which comprises the Non-Executive Chairman, two
executive directors and four non-executive directors. Nigel Keen, the Non-Executive Chairman, is
responsible for the running of the Board and Andy Mears, the Chief Executive Officer, has executive
responsibility both for managing the Group’s business activities and implementing the Group’s strategy.
15
The Group is satisfied that the composition of the current Board is sufficient to enable it to carry out its
governance obligations on behalf of the Group’s stakeholders.
To allow the Board to discharge its duties effectively, all directors are provided with relevant information
on a timely basis. In this regard, management reports are provided to all directors in advance of all
Board and Committee meetings.
6) Ensure that between them the Directors have the necessary up-to-date experience, skills and
capabilities
The Board comprises individuals with wide ranging commercial experience for business management
in the healthcare market supported by members with careers in investment banking and the law. Each
director brings experience of other relevant businesses which helps the Board. as a whole, benchmark
the Group’s progress.
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 Chairman
periodically discusses the input of each director with the individual concerned to ensure that their
contribution to the Board is, and remains, both effective and relevant - and that they remain committed
to the success of the Group.
8) Promote a corporate culture that is based on ethical values and behaviours
As a provider of regulated medical devices to patients across the world, ethical behaviour by its
directors and employees is critically important to the Group. 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 clinicians and healthcare systems in an open way.
Further, we provide extensive training to customers, or potential customers, to allow them to gain the
maximum advantage from Deltex Medical’s products for their use in the clinical setting.
9) Maintain governance structures and processes that are fit for purpose and support good
decision-making by the Board
The Board has established a regular programme of Board Meetings at which the executive directors
report on the progress of the business and the risks and opportunities for the forthcoming periods. The
Chairman maintains contact both with the Board and the executive directors and employees between
Board Meetings. As a result, Board decisions are made in the light of up to date and relevant
information. The Group’s Quality System, which is regularly audited by outside regulatory bodies, also
helps provides a governance regime appropriate for the Group.
10) Communicate how the Company is governed and is performing by maintaining a dialogue with
shareholders and other relevant stakeholders.
Extensive dialogue is maintained with shareholders and other stakeholders to discuss the opportunities
for the Group. Although the dialogue is built around the Group’s annual and interim results,
shareholders are informed of significant developments through the periodic announcements that the
Group makes describing significant events in the business.
It is the Board’s role to ensure that Deltex Medical Group plc 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 2020
16
Strategic Report
The Directors have set out below their Strategic Report for the year ended 31 December 2019.
The Strategic Report incorporates, and should be read in conjunction with, the rest of this document and in
particular the following sections:
1. Deltex Medical and COVID-19 (page 4)
2. Chairman’s Statement (page 6)
3. Business Review (page 8)
4. Corporate Governance (page 15)
5. Principal Risks of the Group (page 20)
6. Directors’ Report (page 22)
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 the Chairman’s Statement and the Business Review.
Adjusted EBITDA (£000)
Op. profit (before exceptional costs) (£000)
Gross profit margin
Cash and cash equivalents (£000)
Probe revenues (£000)
Monitor revenues (£000)
2019
391
90
77%
908
3,533
260
2018
(718)
(943)
71%
580
4,035
301
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 including, if appropriate,
applying for Government-supported finance associated with the COVID-19 pandemic.
The Directors have reviewed detailed budgets and forecasts until 30 June 2021, which take into account
the possible effects of COVID-19. This review indicates that the Group is expected to continue trading as a
going concern based on increasing net cash inflows from sales over expenditure of the Group. Over recent
months the Group has seen a slow-down in elective surgical procedures in hospitals throughout the world
as a result of measures taken to combat COVID-19. This has resulted in a decline in TrueVue Doppler
probe usage. In contrast to the reduction in elective surgery in hospitals, sales of monitors and probes for
critical care use to hospitals in countries fighting the COVID-19 virus have sharply increased. The Directors
recognise, however, that whilst the short-term impact of COVID-19 has resulted in an increase in demand
in parts of the business, demand over the coming year is by its nature uncertain.
Notwithstanding the uncertainties over the impact for the Group that COVID-19 causes, the Directors
consider that they have reasonable grounds to believe that the Group will have adequate resources to
continue in operational existence for the foreseeable future and it is therefore appropriate to prepare the
financial statements on the going concern basis.
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 has been accounted for as a capital
contribution in the Annual Report & Accounts 2019.
The Convertible Loan Notes of £1,072,000, which originally had a maturity date of February 2021, were
extended to February 2022 with the consent of the Noteholders in March 2020 (see Note 17 to the financial
statements).
17
Section 172 statement
The Directors of the Company must act in accordance with a set of general duties. These duties are
detailed in section 172 of the UK Companies Act 2006 which is summarised as follows:
A director of a company must act in the way they consider, in good faith, would be most likely to
promote the success of the company for the benefit of its shareholders as whole and, in doing so, have
regards (amongst other matters) to:
§
§
§
§
§
§
the likely consequences of any decisions in the long-term;
the interests of the company’s employees;
the need to foster the company’s business relationships with suppliers, customers and others;
the impact of the company’s operations on the community and the environment;
the desirability of the company maintaining a reputation for high standards of business conduct;
and
the need to act fairly between shareholders of the company.
Within Deltex Medical the Directors fulfil their duties, as summarised above, through a corporate
governance structure that delegates day-to-day decision making to the employees of the Company and
which is described on pages 15 to 16 within this document. In addition, the following paragraphs
summarise how the Directors’ fulfil other aspects of their duties.
Risk management
We provide highly regulated medical devices to our customers who operate principally in hospital intensive
care units and operating rooms. Accordingly, it is important that we effectively identify, evaluate, manage
and mitigate the risks we face and that we continue to evolve our approach to risk management. For further
information see the section entitled ‘Principal Risks of the Group’ on page 20
Our employees
The Company is committed to be a responsible business. Our behaviour is aligned with the expectations of
our employees, customers, shareholders, communities and society as whole. We are a medical device
company and improving outcomes for patients is at the heart of what we do. For our business to succeed
we need to manage our employees’ performance and develop talent whilst ensuring that we operate as
efficiently as possible. In 2019, as part of the implementation of our new strategy, it became clear that we
needed further reductions in our headcount to lower our cost base. Mindful of the disruptive and unsettling
effect of redundancies, we decided to rely in the UK on ‘natural attrition’ during the year, in the form of
ordinary course staff turnover, to achieve the lower level of headcount that we required. For further
information see the Chairman’s Statement, the Business Review and the report of the Remuneration
Committee.
Business relationships
Our strategy prioritises organic growth in the UK and internationally, driven by cross-selling our
sophisticated medical device products to existing customers and distributors, and securing new customers
for the Group. To do this we need to develop and maintain strong customer and distributor relationships.
We also need to develop close relationships with our suppliers, many of whom we have worked with for a
number of years. During the year, following its purchase by one of our competitors, we entered into
discussions with a distributor whose products we sold in the UK. We had professional and constructive
discussions resulting in an equitable agreement to terminate the distribution agreement. For more
information see the Chairman’s Statement and Business Review.
Community and environment
The Company’s approach is to use its position, as far as it can and on a proportionate and responsible
basis, as an employer and medical device vendor to hospitals to create positive change for the people and
communities with which we interact.
Shareholders
The Board is committed to openly engaging with our shareholders, as we recognise the importance of a
continuing effective dialogue, whether with large institutional investors, private or employee shareholders.
18
For more information on our approach to interacting with shareholders please see the Corporate
Governance Statement on page 15.
The Strategic Report comprising pages 17 to 19 has been approved by the Directors and signed.
By order of the Board
David Moorhouse
Company Secretary
24 April, 2020
19
Principal Risks of the Group
Principal Risks of the Group
The Directors have summarised below what they believe to be the principal risks and uncertainties facing the
Group.
Personnel
Deltex Medical undertakes continuous reviews of its staff with a focus on encouraging high performance and
an increase in the skills base. The successful selling of the Company’s technology depends on a number of
factors: the skill and experience of sales personnel in guiding clinicians in the effective use of its products;
the manufacturing of its products to the highest specification in terms of engineering precision and sterility;
the experience and innovation of its research and development personnel developing novel products; and
the skill and thoroughness of its quality assurance team in ensuring that all products leaving the factory in
Chichester conform to the highest standards and prevailing regulatory requirements.
Regulatory environment
The Group operates in a number of highly regulated environments. It has a robust Quality Management
System which is maintained on the Entropy document control system hosted by the British Standards Institute
(BSI). The system is reviewed regularly by the European Union regulatory body, BSI and the USA’s Food
and Drug Administration (FDA). Both bodies conducted detailed audits of the Group’s systems in the course
of 2019 and did not raise any matters of significant concern. It is probable that Brexit will have an important
impact on the Group’s procedures in exporting both monitors and probes. It is too early to predict what new
regulatory procedures will need to be adopted, and indeed what measures will need to be taken in order to
ensure that supplies are maintained to its US subsidiary and to its distributors in many jurisdictions. The
Group maintains a continuous watch on regulatory-associated developments and has plans in place to
mitigate any likelihood of stock shortages associated with changes in the regulatory framework.
Clinical environment
The Group operates in an environment where, by their very nature, surgical procedures are being undertaken
on infirm, and sometimes highly infirm, patients. In an increasingly litigious hospital atmosphere, the Group
may be subject to litigation. However, it should be noted that the Group’s whole ethos is to minimise the risks
to which those patients are exposed and to aid their effective and speedy recovery. It is also the case that no
such litigation has ever been taken against the Group or its products.
Competition
A number of competitors sell products to the same group of clinicians as Deltex Medical with the same
objective: to measure a patient’s haemodynamic status. Some of these competitors are significantly larger
and have substantially greater financial resources. All use different technologies to the Doppler-based
technology used by the Group. However, none of these has a clinical evidence base which is equivalent to
that which supports the use of the Group’s technology.
Financial
The Group is exposed to currency fluctuations. Its principal cost base is in pounds sterling. However, it
receives a significant proportion of its revenue in US dollars and euros. As a result, movements in the
exchange rates between sterling and other currencies have a direct impact on revenue and profits.
COVID-19
There is a risk to the Group from the global spread of COVID-19 whose effects are, at the time of writing this
Report, uncertain. Further information on the potential effect of COVID-19 on the Group is set out earlier in
this document in a section entitled “Deltex Medical and COVID-19”.
There are other risks posed by the COVID-19 virus, including the impact on our employees and our suppliers
of components necessary for the manufacture of our technologies. As part of its risk mitigation planning the
Group currently has a relatively high level of stocks, both of components and finished goods so that this risk
is minimised, at least in the near future.
20
Other risks and uncertainties
Other risks and uncertainties which could affect the Group include:
§
§
§
changes in government policies and spending plans, particularly in respect of healthcare systems;
lower than anticipated rates of adoption of the Group’s products in existing key markets; and
the availability to the Group of resources, including cash, to pursue its strategy and other opportunities
that it comes across.
21
Directors’ Report
The Directors present their report and the audited consolidated financial statements for the year ended 31
December 2019.
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 discussion on COVID-19 on page 4, the Chairman’s Statement
on page 6, the Business Review on page 8 and the Principal Risks of the Group on page 20.
It is clear that COVID-19 will affect the Group’s trading in 2020. The Directors’ current view on the effect
that COVID-19 will have for Deltex Medical is summarised in the section entitled “Deltex Medical and
COVID-19” on page 4.
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 72 to 75.
Dividends
The Directors cannot propose the payment of a dividend (2018: £nil) for 2019.
Directors
The Directors of the Group who served during the year are shown below. Biographical details are given on
pages 11 and 12.
Nigel Keen
Andy Mears
David Moorhouse*
Julian Cazalet
Chris Jones
Sir Duncan Nichol
Mark Wippell
Non-executive Chairman
Chief Executive
Group Finance Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
* David Moorhouse was appointed to the Board on 20 November 2019
Jonathan Shaw, Group Finance Director, resigned from the Board on 4 October 2019
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 the Group’s
principal manufacturing activities. Further information on the Group’s research and development activities
can be found earlier in this document.
22
Independent auditors
The independent auditors, Nexia Smith & Williamson, have indicated their willingness to continue in office
and a resolution concerning their reappointment will be proposed at the forthcoming Annual General
Meeting.
Annual General Meeting
The notice convening the Annual General Meeting, which will take place on 3 June 2020 at 12.00pm at the
Company’s offices at Terminus Road, Chichester PO19 8TX can be found at the back of this Report.
By order of the Board.
David Moorhouse
Company Secretary
24 April 2020
23
Directors’ Remuneration Report
Introduction from Nigel Keen, Chairman of the Remuneration Committee
I am pleased to present this report on behalf of the Remuneration Committee.
Deltex Medical has appointed all the Non-Executive Directors to the Remuneration Committee and the
Committee meets regularly during the year to discuss matters concerning the Executive Directors of the
Group and more broadly on other topics concerning the Group’s employees.
The Board considers that this oversight by the Remuneration Committee is an important component of
good corporate governance for the Group as a whole.
During the year the Committee has been involved in reviewing the remuneration of all the Group’s
employees following the changes made in 2018 and in particular for the executive directors and senior
managers. During the year the Group appointed a new Finance Director and the Committee was engaged
with the procedures around this change.
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 respond to any queries should any shareholder require more information about our
remuneration policies.
Yours sincerely
Nigel Keen
Chairman of the Remuneration Committee
24 April 2020
***************************************************************************
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, excluding
Mr. Keen, 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 is the Chairman of the Committee. The Board considers that Nigel, with his
experience of working at senior levels in global companies, including 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.
This report sets out the Directors’ remuneration policy for 2019 and beyond. As a company listed on 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
24
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. It should be read in conjunction with details of
Directors’ remuneration in notes 5.4 and 5.5 which forms part of the audited financial statements.
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.
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.
During the year the Committee considered whether the current policy remains appropriate for 2020 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. 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 met; however, no bonus was paid out as management elected not to
propose bonus payments for some at a time when salary increases for the work force as a whole had been
held back for some time. Salary increases were implemented across the Group from 1 July 2019.
The Executive Directors’ base salary will be reviewed on 1 July 2020. 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.
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.
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
Contract date
Unexpired term of contract
Andy Mears
6 November 2018
Rolling contract; 6 months’ notice
David Moorhouse
6 April 2020
Rolling contract; 3 months’ notice
25
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.
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
Cash-
settled
salary
Benefits Pension
Annual
bonus
£
£
£
Andy Mears*
2019
2018
170,000
77,000
Jonathan Shaw**
2019**
93,392
7,500
4,120
5,734
5,623
3,080
7,645
2018
120,000
7,500
10,000
David Moorhouse***
2019
14,250
-
-
Total
2019
2018
277,642
13,234
13,268
197,000
11,620
13,080
£
-
-
-
-
-
-
-
Total
£
183,123
84,200
106,771
137,500
14,250
304,144
221,700
*
Andy Mears was appointed to the Board as an Executive Director on 13 June 2018. The 2018 comparative figure
only includes his earnings as a director for that portion of the year during which he served as a director of the
Company.
**
Jonathan Shaw resigned from the Board as an Executive Director on 4 October 2019.
*** David Moorhouse was appointed to the Board on 20 November 2019.
‘Benefits’ comprise the provision of a car allowance paid in cash.
‘Annual bonus’ represents the full annual bonus, payable in cash and share options.
Andy Mears has an interest in 2,387,500 share options under the 2011 Executive share option scheme with
exercise periods ranging from 28 September 2014 to September 2020 and expiry dates from 27 September
2021 to 21 September 2027 at exercise prices from 17.25p to 4p. He also has an interest in 10,000,000
share options under the 2003 Enterprise Management Incentive Scheme exercisable from 1 April 2020 to 5
August 2028 at a price of 1p.
Payments for loss of office
On 4 October 2019 Jonathan Shaw left the Group. He received the following payments: base salary,
benefits and pension to the date of cessation; payment of £65,000 in lieu of six months’ notice; payment of
£30,000 as compensation for loss of office; car allowance in respect of his contractual notice period; and
payment in lieu of holiday not taken. Jonathan Shaw had an interest in 404,762 share options under the
2003 Enterprise Management Incentive Scheme which were exercised on 27 November 2019 at a price of
1p.
26
Non-executive
Directors
Year
Nigel Keen
2019
2018
Julian Cazalet
2019
Chris Jones
2018
2019
2018
Sir Duncan Nichol 2019
Mark Wippell
Total
2018
2019
2018
2019
2018
Cash
settled
Directors’
fees
Equity
settled
Directors’
fees
Benefits Pension
Annual
bonus
Long term
incentive
awards
£
-
-
-
-
-
9,000
-
-
-
-
-
£
33,333
33,333
24,000
24,000
24,000
12,000
24,000
24,000
24,000
24,000
129,333
9,000
117,333
£
-
-
-
-
-
-
-
-
-
-
-
-
£
-
-
-
-
-
-
-
-
-
-
-
-
£
-
-
-
-
-
-
-
-
-
-
-
-
£
-
-
-
-
-
-
-
-
-
-
-
-
Total
£
33,333
33,333
24,000
24,000
24,000
21,000
24,000
24,000
24,000
24,000
129,333
126,333
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 £446,827. Of this amount,
£330,165 is included within accrued liabilities and £116,662 within trade payables in the balance sheet.
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.
27
Directors’ shareholdings
Directors’ shareholdings as at 31 December 2019 are shown in the table below.
Legally owned
Unexercised
Options
2,781,808
459,834
64,740,491
9,397,927
525,862
2,754,136
2,481,831
-
-
-
-
-
-
-
Unvested
options subject
to performance
under
the EMI scheme
Unvested
options subject
to performance
under the ESOS
10,000,000
2,387,500
-
-
-
-
-
-
-
-
-
-
-
-
Andy Mears
David Moorhouse
Nigel Keen
Julian Cazalet
Chris Jones
Sir Duncan Nichol
Mark Wippell
Approval
This report was adopted by the Committee on 24 April 2020 and has been approved subsequently by the
Board.
Nigel Keen
Chairman of the Remuneration Committee
24 April 2020
28
Report of the Audit Committee
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.
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 2020
***************************************************************************
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 20.
29
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 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.
External audit
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 auditors 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.
30
INDEPENDENT AUDITOR’S 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 2019 which comprise the Consolidated Statement
of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity,
the Consolidated Statement of Cash Flows, the Parent Company Balance Sheet, the 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 2019 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.
Emphasis of Matter – impact of COVID-19
We draw attention to notes 1.7 and 26 of the financial statements which describes the impact of COVID-19 on
the company. Our opinion is not modified in respect of this matter.
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.
31
Key audit matters
We identified the key audit matters described below as those 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.
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 in
previous 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.
32
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 before
consideration of COVID-19;
performing sensitivity
calculations to understand
the impact of changing the
key assumptions and the
effect on cashflows and value
in use
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.
Revenue recognition
including contract
liabilities
Revenue growth continues to
be a key focus for the group to
meet market expectations.
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.
For products in development
the main risk is assessing the
ability to successfully
commercialise 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.
33
As part of our procedures we:
·
·
·
·
traced a sample of sales
from customer order to
the nominal ledger,
ensuring contract liability
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
performed testing of
contract liability balances
to ensure that revenue
was being correctly
deferred
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, including
consideration of the
accounting for the
termination of a
distribution agreement.
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. The useful
economic life of a sample
projects has also been reviewed
to determine if the useful
economic life is appropriate.
Our application of materiality
The materiality for the financial statements of the group as a whole was set at £85,100. 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 £68,080. This represents 1% of
net assets.
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 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.
34
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.
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 page 13, 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.
35
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
Date: 24 April, 2020
36
Consolidated statement of comprehensive income
For the year ended 31 December 2019
Note
3
4
23
9
4
9
7, 17
6
7
Revenue
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 profit / (loss) before exceptional costs and other
gain
Exceptional costs
Other gain
Operating loss
Finance costs
Loss before taxation
Tax credit on loss
Loss for the year
Other comprehensive (expense)/income
Items that may be reclassified to profit or loss:
Net translation differences on overseas subsidiaries
Other comprehensive (expense)/income 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
2019
£’000
4,256
(974)
3,282
(1,515)
(1,220)
(446)
(11)
(137)
(3,329)
90
(137)
13
(34)
(176)
(210)
51
(159)
(8)
(8)
(167)
(169)
2
(167)
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
(1,262)
(1,268)
6
(1,262)
Loss per share – basic and diluted
10
(0.03p)
(0.3p)
The notes on pages 42 to 76 form an integral part of these consolidated financial statements.
37
Consolidated balance sheet
As at 31 December 2019
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
Total equity
Note
11
12
15
14
15
15
15
17
17
17
17
19
20
25
25
25
25
25
25
2019
£’000
395
2,651
157
3,203
915
1,062
214
113
80
908
3,292
6,495
(188)
(2,198)
(2,386)
(1,072)
(320)
(62)
(1,454)
(3,840)
2,655
5,249
33,230
17,476
439
141
82
2018
Restated
£’000
At 1 January
2018
Restated
£’000
500
2,528
155
3,183
680
1,410
245
190
74
580
3,179
6,362
(553)
(1,983)
(2,536)
(1,035)
(352)
(56)
(1,443)
(3,979)
2,383
4,927
33,230
17,476
953
149
82
701
2,486
-
3,187
754
1,618
378
54
94
219
3,117
6,304
(840)
(2,650)
(3,490)
(1,004)
(385)
(56)
(1,445)
(4,935)
1,369
3,132
32,915
17,476
4,752
147
84
(53,823)
(54,293)
(56,990)
2,794
(139)
2,655
2,524
(141)
2,383
1,516
(147)
1,369
The notes on pages 42 to 76 form an integral part of these consolidated financial statements. The financial
statements on pages 37 to 76 were approved by the Board of Directors and authorised for issue on
24 April 2020 and were signed on its behalf by:
Nigel Keen
Chairman
David Moorhouse
Group Finance Director
38
Consolidated statement of changes in equity for the year ended 31 December 2019
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
4,927
33,230
17,476
953
82
149
(54,293)
2,524
(141)
2,383
-
-
-
-
-
322
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
117
(631)
-
-
-
-
-
-
-
-
(8)
(8)
-
-
-
(161)
-
(161)
(8)
(161)
(169)
-
631
-
117
-
322
2
-
2
-
-
-
(159)
(8)
(167)
117
-
322
5,249
33,230
17,476
439
82
141
(53,823)
2,794
(139)
2,655
Balance at 1 January
2019, 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
Equity-settled share-
based payment
Transfers
Share options
exercised
Balance at
31 December 2019
The notes on pages 42 to 76 form an integral part of these consolidated financial statements.
39
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
Effect of prior period
adjustment
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, as
restated
3,132
32,915
17,476
4,752
-
-
-
-
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
-
(56,961)
(29)
1,545
(29)
(147)
-
1,398
(29)
147
(56,990)
1,516
(147)
1,369
-
2
2
-
-
-
-
-
(1,270)
(1,270)
-
2
(1,270)
(1,268)
-
-
-
3,967
-
2,234
(132)
166
-
8
6
-
6
-
-
-
-
-
(1,264)
2
(1,262)
2,234
(132)
166
-
8
149
(54,293)
2,524
(141)
2,383
The notes on pages 42 to 76 form an integral part of these consolidated financial statements.
40
Consolidated statement of cash flows
for the year ended 31 December 2019
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
(Increase)/decrease in inventories
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Increase/(decrease) in provisions
Net cash generated from / (used in) operations
Interest paid
Income taxes received
Net cash generated from / (used in) 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
Principal lease payments
Net cash (used in) / generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Exchange (loss)/gain on cash and cash equivalents
Cash and cash equivalents at end of the period
2019
£’000
(210)
176
149
(36)
84
-
117
(2)
278
(235)
427
212
6
688
(139)
60
609
(10)
59
(250)
(201)
322
-
(356)
(33)
(67)
341
580
(13)
908
2018
£’000
(1,338)
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
The notes on pages 42 to 76 form an integral part of these consolidated financial statements.
41
Notes to the consolidated financial statements
for the year ended 31 December 2019
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 2019 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 AIM 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 (IFRIC) 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 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 2018, except for the restatement explained in note 11. The Group has not early adopted any
standard, interpretation or amendment that has been issued but is not yet effective.
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.
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.
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
42
Notes to the consolidated financial statements
for the year ended 31 December 2019 (continued)
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:
2019
2018
Average Rate
Closing rate
Average rate
Closing rate
Sterling/US Dollar
Sterling/Euro
Sterling/Canadian Dollar
1.28
1.14
1.70
1.31
1.17
1.71
1.33
1.13
1.73
1.27
1.11
1.73
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.
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 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 2019 amounted to
£71,000 (2018: £142,300).
43
Notes to the consolidated financial statements
for the year ended 31 December 2019 (continued)
Distribution agreement
As has been noted in the Chairman’s statement, the Group negotiated the termination of a distribution
agreement relating to the sale of low margin third-party goods in the UK during the year. The directors do not
consider that this constituted a major line of business and do not therefore believe that this meets the
definition of a discontinued operation.
Estimates
Information about estimation uncertainties at 31 December 2019 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 any 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
2021. This review indicates that the Group is expected to continue trading as a going concern based on
increasing net cash inflows from sales over expenditure of the Group. The directors recognise that, whilst the
short-term impact of COVID-19 has resulted in an increase in demand in parts of the business, demand over the
coming year is by its nature uncertain.
Notwithstanding the uncertainties over the impact for the Group that COVID-19 causes, the
directors consider that they have reasonable grounds to believe that the Group will have adequate resources to
continue in operational existence for the foreseeable future and it is therefore appropriate to prepare the financial
statements on the going concern basis.
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’
44
Notes to the consolidated financial statements
for the year ended 31 December 2019 (continued)
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.
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
Performance and the allocation resources is made on the basis of results derived from the sale of probes,
monitors and third-party products of 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.
45
Notes to the consolidated financial statements
for the year ended 31 December 2019 (continued)
3.2. Note
The segment results for 2019 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
3,533
2,881
£’000
260
232
-
-
-
-
-
-
-
-
£’000
£’000
£’000
293
127
170
113
-
-
-
-
-
-
-
-
-
-
(1,304)
(1,297)
(139)
(222)
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 operating segment results for 2018 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
4,035
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.
-
-
-
-
46
Total
£’000
4,256
3,353
(1,304)
(1,297)
(139)
(222)
391
Total
£’000
4,955
3,696
(2,324)
(1,751)
(139)
(200)
(718)
Notes to the consolidated financial statements
for the year ended 31 December 2019 (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
Cash item:
Other tax income
Operating loss
Finance costs
Loss before tax
Tax credit on loss
Loss for the year
2019
£’000
391
(149)
(84)
(136)
(117)
26
22
-
13
(425)
(34)
(176)
(210)
51
(159)
2018
£’000
(718)
(246)
(173)
(140)
(166)
24
189
80
-
(432)
(1,150)
(188)
(1,338)
74
(1,264)
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 2019
Direct markets
Indirect markets
Probes
Monitors
Third Party
Other
Probes
Monitors
Other
£’000
902
1,443
-
-
-
-
29
UK
USA
France
Scandinavia
South
Korea
Peru
Other
countries
£’000
£’000
£’000
£’000
£’000
£’000
49
45
-
-
-
-
-
293
-
-
-
-
-
-
107
42
-
-
-
-
-
-
-
289
83
277
258
251
-
-
9
-
10
-
148
-
-
6
1
3
3
8
Total
£’000
1,351
1,530
304
84
290
261
436
2,374
94
293
149
1,158
167
21
4,256
For the year ended 31 December 2018
Direct markets
Indirect markets
Probes
Monitors
Third Party
Probes
Monitors
£’000
£’000
Other
£’000
UK
USA
France
Scandinavia
South Korea
Peru
Other
countries
£’000
1,051
1,534
-
-
-
-
49
2,634
£’000
5
17
-
-
-
-
14
36
£’000
448
-
-
-
-
-
-
Other
£’000
108
17
-
-
-
-
-
-
-
799
62
258
116
166
448
125
1,401
47
Total
£’000
1,612
1,568
900
62
259
281
273
4,955
-
-
66
-
-
165
34
265
-
-
35
-
1
-
10
46
Notes to the consolidated financial statements
for the year ended 31 December 2019 (continued)
The Group’s revenue disaggregated between the sale of goods and the provision of services is set out below. All
revenues from the sale of goods are recognised at a point in time; maintenance income is recognised over time.
Sale of goods
Maintenance income
2019
£’000
4,176
80
4,256
2018
£’000
4,882
73
4,955
The following table provides information about trade receivables and contract liabilities from contracts with
customers. There were no contract assets at either 31 December 2019 or 31 December 2018.
Trade receivables which are in ‘Trade and other receivables’
Contract liabilities (Note 17.4)
31 December
2019
31 December
2018
£’000
1,062
(53)
£’000
1,410
(151)
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 2019:
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
Short-term leases
Net foreign exchange loss/(gain)
Audit and accountancy costs
Meeting and other public relations costs
Professional and consultancy costs
Gain on convertible loan note
Other income
Other
2022
£’000
-
2019
£’000
173
755
2,350
315
128
149
84
43
23
43
59
48
189
-
(13)
(56)
4,290
Total
£’000
53
2018
£’000
(62)
888
3,498
562
124
246
173
70
29
(4)
57
103
213
(80)
-
288
6,105
2020
£’000
50
2021
£’000
3
48
Notes to the consolidated financial statements
for the year ended 31 December 2019 (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
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
5. Employees
5.1. Accounting policy
2019
£’000
10
32
7
-
49
2018
£’000
10
28
6
3
47
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.
49
Notes to the consolidated financial statements
for the year ended 31 December 2019 (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
2019
£’000
2,232
244
65
2,541
(201)
2,340
(26)
43
(124)
117
2,350
2018
£’000
3,369
333
85
3,787
(220)
3,567
(25)
37
(247)
166
3,498
The pensions cost expense of £65,000 (2018: £85,000) represents the aggregate amount paid and payable into
defined contribution pension schemes on behalf of employees.
5.3. Average monthly number of people employed
2019
Number
2018
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
50
52
15
17
10
4
6
52
2019
£’000
363
65
30
57
8
6
529
2019
£’000
33
24
57
71
28
21
13
3
6
71
2018
£’000
373
119
76
54
14
3
639
2018
£’000
33
21
54
Notes to the consolidated financial statements
for the year ended 31 December 2019 (continued)
5.5. Highest paid director
Aggregate emoluments
Contributions to director’s personal pension scheme
2019
£’000
177
6
183
2018
£’000
128
10
138
During the year, one director exercised 404,762 (2018: 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 (2018: 1.25) pence leading to a gain of
£1,012 (2018: £2,000) on that day.
6. Finance income and costs
Invoice discount facility
Convertible loan note
Lease liability finance expense
Other interest payable
7. Tax credit on loss
2019
£’000
3
126
47
-
176
2018
£’000
9
135
42
2
188
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
2019
£’000
2018
£’000
(64)
13
(51)
-
(51)
(63)
(11)
(74)
-
(74)
In 2019, the other gain amount of £13,000 comprises tax income arising from the Research and Development
Expenditure Credit scheme which is accounted for as a government grant. There was no such income in 2018.
51
Notes to the consolidated financial statements
for the year ended 31 December 2019 (continued)
The taxable credit on the loss for the year is higher (2018: lower) than the effective rate of corporation tax in the
UK of 19% (2018: 19%) applied to the Group’s loss on ordinary activities before tax. The differences are
explained below:
Loss on ordinary activities before tax
Loss on ordinary activities multiplied by the standard rate in the UK of 19% (2018: 19%)
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
Research and development expenditure credit
Difference on tax rate on payable research and development tax credit
Rate change adjustment
Share based payment deduction
Adjustment in respect of prior years
Total tax credit on loss
8. Deferred tax
2019
£’000
(210)
(40)
(496)
485
-
(49)
3
21
28
(17)
14
(51)
2018
£’000
(1,338)
(254)
(138)
365
10
(65)
-
19
-
-
(11)
(74)
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 2019, the Group had accumulated trading losses carried forward which are available to offset
against future profits of £34,608,000 (2018: £32,779,000) resulting in an unrecognised potential deferred tax
asset of £6,486,000 (2018: £6,201,000).
52
Notes to the consolidated financial statements
for the year ended 31 December 2019 (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
(Credited)/charged to profit or loss in the Consolidated SOCI
At 31 December
Deferred tax asset on losses
At 1 January
Charged/(credited) to profit or loss in the Consolidated SOCI
At 31 December
9. Exceptional items
2019
£’000
399
5
404
2019
£’000
523
(119)
404
2019
£’000
(523)
119
(404)
2018
£’000
430
93
523
2018
£’000
448
75
523
2018
£’000
(448)
(75)
(523)
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
Write off of research and development obsolete projects
2019
£’000
65
30
-
-
-
-
42
137
2018
£’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 £161,000 and the weighted average number of shares in
issue of 509,679,881. For 2018, 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. While the Group is loss-making, the diluted loss
per share and the loss per share are the same.
53
Notes to the consolidated financial statements
for the year ended 31 December 2019 (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.
54
Notes to the consolidated financial statements
for the year ended 31 December 2019 (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
Total
£’000
Cost
At 1 January 2018, as
previously stated
Effect of prior period
adjustment
At 1 January 2018, as
restated
Exchange difference
Additions
Transferred from inventory
Disposals
At 31 December 2018, as
restated
Exchange difference
Additions
Transferred from inventory
Disposals
243
-
243
-
-
-
(68)
175
-
5
-
-
514
(87)
427
-
-
-
-
751
-
751
4
18
-
30
-
30
2
-
-
1,596
-
3,134
(87)
1,596
3,047
30
-
64
36
18
64
(300)
(29)
(26)
(423)
427
473
-
-
-
-
-
5
-
-
At 31 December 2019
180
427
478
Accumulated
depreciation
At 1 January 2018
Exchange differences
Depreciation charge
Disposals
At 31 December 2018, as
restated
Exchange differences
Depreciation charge
Disposals
At 31 December 2019
Net book value
At 1 January 2018, as
restated
At 31 December 2018, as
restated
At 31 December 2019
239
-
3
(68)
174
-
2
-
176
4
1
4
-
-
59
-
59
-
48
-
107
427
368
320
688
2
45
(297)
438
-
27
-
465
63
35
13
3
(1)
-
-
-
2
30
2
-
(29)
3
(2)
1
-
2
-
-
-
1,664
(44)
-
62
(112)
1,570
2,742
(45)
10
62
(112)
2,657
1,389
2,346
54
139
(14)
1,568
(39)
71
(88)
58
246
(419)
2,242
(41)
149
(88)
1,512
2,262
207
96
58
701
500
395
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
55
2019
£’000
71
69
9
149
2018
£’000
168
65
13
246
Notes to the consolidated financial statements
for the year ended 31 December 2019 (continued)
The net book value of property, plant and equipment includes amounts of £320,000 (restated 2018: £368,000)
in respect of assets held under leasing arrangements. During the year, the directors reviewed the treatment
under IFRS 16 of right of use assets. As a result, a prior period adjustment has been made to remove the
capitalised dilapidation from Property, Plant and Equipment, as well as the associated depreciation, and also to
discount the dilapidation provision (see Note 19). An interest charge for the unwinding of the discount has also
been made. The net impact on the prior year Consolidated SOCI relating to the prior period adjustments are
immaterial, and therefore the comparatives have not been restated.
56
Notes to the consolidated financial statements
for the year ended 31 December 2019 (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.
The Useful Economic Life (UEL) is assessed annually by the directors to reflect the pattern of benefits expected
to flow from the intangible asset. At 31 December 2019, the directors have reviewed the current intangible
assets and deemed the UEL should reflect the life of the asset. As such, the amortisation period has been
changed from the straight-line method over 5 years, to a specific period to reflect the benefits being between 6
and 10 years. If the estimate had not changed, amortisation for the year ended 31 December 2019 would have
been £141,000.
Government grants are received for innovative research and development projects. The grants are recognised
when there is reasonable assurance that the conditions of the grant will be complied with and that the grants will
be received. Government grants are offset against the development costs to which they relate to. During the
year to 31 December 2019, £48,000 (2018: £nil) was recognised from government grants.
12.2.
Note
Cost
At 1 January 2018
Amounts written off
Additions
At 31 December 2018
Amounts written off
Additions
At 31 December 2019
Accumulated amortisation
At 1 January 2018
Amounts written off
Amortisation expense
At 31 December 2018
Amounts written off
Amortisation expense
At 31 December 2019
Net book value
At 1 January 2018
At 31 December 2018
At 31 December 2019
Development
costs
£’000
Goodwill
£’000
3,454
(38)
253
3,669
(149)
250
3,770
1,034
-
173
1,207
(106)
84
1,185
2,420
2,462
2,585
66
-
-
66
-
-
66
-
-
-
-
-
-
-
66
66
66
Total
£’000
3,520
(38)
253
3,735
(149)
250
3,836
1,034
-
173
1,207
(106)
84
1,185
2,486
2,528
2,651
Amortisation expense of £84,000 (2018: £173,000) has been categorised as research and development
expenditure in profit or loss in the Consolidated SOCI.
57
Notes to the consolidated financial statements
for the year ended 31 December 2019 (continued)
Included within development costs are costs amounting to £1,575,000 (2018: £1,424,000) 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 £186,000 (2018: £224,000) 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
2019
£’000
301
208
192
2018
£’000
220
207
181
58
Notes to the consolidated financial statements
for the year ended 31 December 2019 (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
Deltex Medical Espana
SL
Deltex Medical Canada
Limited
Spain
Canada
Deltex Medical
Holdings Inc
Deltex Inc
Deltex Medical Inc
USA
USA
USA
Marketing and sales of medical devices in the
USA
Marketing and sales of medical devices in
Spain
Marketing and sales of medical devices in
Canada
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.
59
Notes to the consolidated financial statements
for the year ended 31 December 2019 (continued)
14.2.
Note
Raw materials and consumables
Work in progress
Finished goods
2019
£’000
219
57
639
915
2018
£’000
223
28
429
680
There are no specific provisions for slow-moving inventory (2018: £36,000).
15. Trade and other receivables
Accounting policy
15.1.
Amounts classified as trade receivables are amounts due from customers for goods 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.
60
Notes to the consolidated financial statements
for the year ended 31 December 2019 (continued)
15.2.
Note
Trade receivables
Trade receivables
Less loss allowance
2019
£’000
1,090
(28)
1,062
2018
£’000
1,466
(56)
1,410
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
2019
2018
Current Non-current
Current
Non-current
£’000
£’000
£’000
£’000
214
-
214
-
157
157
245
-
245
-
155
155
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 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
2019
£’000
64
49
113
2018
£’000
141
49
190
Included in sundry debtors in the prior year is an amount of £138,000 relating to an advance payment made to
secure key components required to manufacture the Group’s monitor. There was no equivalent transaction in
2019.
16. Cash and cash equivalents
16.1.
Accounting policy
For the purposes of the cash flow statement, cash and cash equivalents includes cash on hand and deposits
held at call with financial institutions.
61
Notes to the consolidated financial statements
for the year ended 31 December 2019 (continued)
16.2.
Note
Cash at bank
17. Financial liabilities
17.1.
Accounting policy
2019
£’000
908
2018
£’000
580
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.
62
Notes to the consolidated financial statements
for the year ended 31 December 2019 (continued)
17.2.
Note
Borrowings
Invoice discounting facility
Convertible loan note
2019
2018
Current
Non-current
Current
Non-current
£’000
188
-
188
£’000
-
1,072
1,072
£’000
553
-
553
£’000
-
1,035
1,035
Invoice discounting facility
The amount shown represents the cash drawn down under an invoice discounting facility; There was £2,000
undrawn amounts at the end of the year (2018: £nil). 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 (2018: one month’s notice) on either side and is not subject to an annual review.
Convertible loan note
In March 2020, the maturity date of the convertible loans was extended to February 2022 (2018: February 2021).
In February 2018, 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 the prior year 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 was 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 2019
Interest expense
Interest paid
Carrying amount at 31 December 2019
Financial
liability
£’000
Equity
component
£’000
1,035
126
(89)
1,072
82
-
-
82
Total
£’000
1,117
126
(89)
1,154
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% (2018: 12.77%).
63
Notes to the consolidated financial statements
for the year ended 31 December 2019 (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
2019
Rate
%
3.55
2.75
6.02
Amount
£’000
103
27
58
188
2018
Rate
%
3.10
2.75
5.18
Amount
£’000
221
212
120
553
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% (2018: 12.77%).
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
2019
2018
(as restated)
Current
Non-current
Current
Non-current
£’000
£’000
£’000
£’000
381
483
129
32
53
31
1,089
2,198
-
-
-
320
-
-
-
320
346
333
146
33
151
57
917
1,983
-
-
-
352
-
-
-
352
Included within other payables is an amount of £288,000 (2018: £278,000) 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.
64
Notes to the consolidated financial statements
for the year ended 31 December 2019 (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.
As disclosed in note 11.2, the Directors have made a prior period adjustment to remove the capitalised
dilapidation cost.
Short-term leases
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 £320,000 (2018: £368,000, as
restated) 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
£48,000 (2018: £59,000) relating to the depreciation expense of this asset and included within finance costs is
an amount of £47,000 (2018: £43,000) relating to the finance charge on the related lease obligation. The net
impact on the prior year Consolidated SOCI relating to the prior period adjustments are immaterial, and
therefore the comparatives have not been restated. Included within administration expenses in profit or loss in
the Consolidated SOCI is an amount of £23,000 (2018: £29,000) relating to short term leases.
Included within trade and other payables in the Consolidated Balance sheet are current lease obligations
amounting to £32,000 and non-current lease obligations amounting to £320,000.
The total cash outflow for leases in the period was £98,000.
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
2019
£’000
75
300
131
506
65
Notes to the consolidated financial statements
for the year ended 31 December 2019 (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, as previously stated
Prior period adjustment, discounting of provision
At 1 January 2018 and 31 December 2018, as restated
Unwinding of discounting
At 31 December 2019
National
Insurance
£’000
Dilapidation
provision
£’000
16
-
16
-
16
98
(58)
40
6
46
Total
£’000
114
(58)
56
6
62
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. The directors have reviewed the accounting for the dilapidation provision
during the year, and as a result have made a prior year adjustment to discount the dilapidation provision and
unwind the discounting on an annual basis.
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.
66
Notes to the consolidated financial statements
for the year ended 31 December 2019 (continued)
Note
20.2.
At 1 January 2019 and 31 December 2019, 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 2018
Exercise of share options
Share issues:
12 February 2018
18 May 2018
Share issue expenses
12 February 2018
At 31 December 2018
Exercise of share options
At 31 December 2019
Number of
shares
(thousands)
Ordinary
shares
£’000
Share
premium
£’000
Total
£’000
313,214
3,132
32,915
36,047
800
8
-
8
176,650
1,767
2,000
492,664
32,205
524,869
20
-
4,927
322
5,249
442
5
(132)
33,230
-
2,209
25
(132)
38,157
322
33,230
38,479
Net proceeds from the issue of shares totalled £322,000 (2018: £2,085,000), after expenses of £nil (2018:
£132,000).
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.
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.
67
Notes to the consolidated financial statements
for the year ended 31 December 2019 (continued)
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
Options outstanding
at
1 January 2018
Granted during the
year
Lapsed during the
year
Expired during the
year
Exercised during the
year
Options outstanding
at
31 December 2018
Granted during the
year
Lapsed during the
year
Expired during the
year
Exercised during the
year
Options
outstanding at
31 December 2019
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)
1,713,500
15
16,928,332
11
23,382,782
-
-
19,604,742
(6,544,332)
-
-
10
-
-
-
(21,277)
(32,205,459)
-
-
-
-
(1,713,500)
15
-
-
-
-
Total
No.
25,359,582
24,605,488
(2,025,539)
(5,114,917)
(800,000)
42,024,614
19,604,742
(6,544,332)
(1,734,777)
(32,205,459)
1
1
1
1
1
1
1
-
1
1
10,384,000
10
10,760,788
1
21,144,788
68
Notes to the consolidated financial statements
for the year ended 31 December 2019 (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.
2,209,500
1,713,500
16
15
4,177,000
20
4,254,582
6,853,332
10
13,382,782
-
-
4,929,000
7
10,760,788
1
1
1
10,632,082
21,949,614
15,689,788
Options exercisable at
1 January 2018
Options exercisable at
31 December 2018
Options exercisable
at
31 December 2019
The weighted average market price of the Company’s shares at the date of exercise of the EMI options was 1.27
pence (2018: 1.25 pence). The mid-market closing price of the Company’s shares at the end of the year was 1.43
pence (2018: 0.95 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
2019
Years
2018
Years
2019
Years
2018
Years
2019
Years
2018
Years
Weighted average remaining contractual life
of options outstanding at the end of the
financial year
0.00
0.42
5.85
6.42
8.25
4.98
Fair value of options granted
Share options granted under the 2003 EMI scheme had an estimated weighted average fair value of 0.28 pence
(2018: 0.57 pence) and £54,167 (2018: £151,071) 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 2019 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
2019
Jan
1.2p
1.0p
75%
May
1.4p
1.0p
75%
August
0.9p
1.0p
75%
2018
June
1.3p
1.0p
75%
0 years
0 years
10 years
1.5 years
0.75%
0.76%
1.41%
0.64%
March
1.4p
1.0p
75%
1 year
0.63%
Fair value at measurement date
0.4p
0.2p
0.7p
0.6p
0.6p
69
Notes to the consolidated financial statements
for the year ended 31 December 2019 (continued)
No share options were granted under either the 2001 or the 2011 Executive Share Option Schemes during the
year ended 31 December 2019 (2018: none).
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.
70
Notes to the consolidated financial statements for the year ended 31 December 2019 (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 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
At 1 January 2019
Cash flows:
Drawdowns
Repayments
Cash flow from financing activities
Interest paid
Net cash outflow
Non cash flows
Interest charged at the effective rate
Foreign exchange movements
At 31 December 2019
Convertible
loan note
£’000
1,094
-
-
-
(89)
(89)
135
(25)
(80)
-
1,035
1,035
-
-
-
(89)
(89)
126
-
1,072
Invoice discount facility
Sterling
denominated
£000
Euro
denominated
£’000
US Dollar
denominated
£’000
298
272
149
1,922
(1,999)
1,070
(1,128)
1,234
(1,270)
(58)
(3)
(61)
3
-
-
(2)
212
212
583
(763)
(180)
-
(181)
-
(5)
27
(36)
(4)
(40)
4
-
-
7
120
120
1,093
(1,151)
(58)
(1)
(59)
1
(4)
58
(77)
(2)
(79)
2
-
-
-
221
221
1,612
(1,730)
(118)
(2)
(120)
2
-
103
71
Finance
lease
Lease
liability
£’000
4
-
(4)
(4)
-
(4)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
£’000
416
-
(32)
(32)
(43)
(75)
44
-
-
-
385
385
-
(33)
(33)
(47)
(80)
47
-
352
Total
£’000
2,233
4,226
(4,433)
(207)
(141)
(348)
188
(25)
(80)
5
1,973
1,973
3,288
(3,677)
(389)
(139)
(529)
176
(9)
1,612
Notes to the consolidated financial statements
for the year ended 31 December 2019 (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.
Less
than
1 year
£’000
188
Invoice discounting
facility
Convertible loan note 88
Lease obligations
75
Trade and other
payables
1,665
2019
2018
Between
1 and 2
years
£’000
Between
2 and 5
years
£’000
Between
5 and 10
years
£’000
Less
than
1 year
£’000
Between
1 and 2
years
£’000
Between
2 and 5
years
£’000
Between 5
and 10
years
£’000
-
88
75
-
-
1,048
225
-
-
-
131
288
553
-
-
88
75
1,319
88
75
-
1,136
225
-
-
-
206
278
2,016
163
1,273
419
2,035
163
1,361
484
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
2019
US
Dollars
£’000
255
517
-
-
Euro
£’000
109
269
(4)
(27)
2018
US
Dollars
£’000
51
395
(37)
-
Euro
£’000
235
434
(11)
(212)
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.
72
Notes to the consolidated financial statements
for the year ended 31 December 2019 (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.
Sensitivity
%
5.0
5.0
2019
Profit
£’000
20
51
2018 (restated)
Equity
£’000
Sensitivity
%
20
51
5.0
5.0
Profit
£’000
22
26
Equity
£’000
22
26
Euros
US Dollar
If the Euro strengthened against Sterling by 5% (2018: 5%) an aggregate foreign exchange gain of £20,000
(2018: 22,000) 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.
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.
Occasionally bad debts have been experienced in our International distributor-led market. 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 £11,000 (2018: £38,000) represents 1.0% of the Group trade receivables at 31 December 2019
(2018: 2.6%).
73
Notes to the consolidated financial statements
for the year ended 31 December 2019 (continued)
The movement in the Group’s credit loss allowance for trade receivables is shown below:
At 1 January
Amounts written off as uncollectible during the year
Increase in loss allowance recognised in profit or loss in the Consolidated SOCI
At 31 December
2019
£’000
2018
£’000
56
(39)
11
28
27
(9)
38
56
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 2019 or 31 December 2019.
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:
Lease obligations
Convertible loan note
Floating rates
Invoice discounting facility
2019
£’000
320
1,072
1,392
188
1,580
2018
£’000
352
1,035
1,387
553
1,940
74
Notes to the consolidated financial statements
for the year ended 31 December 2019 (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
2019
Profit
£’000
-
-
-
Equity
£’000
Sensitivity
%
-
-
-
0.5
1.0
0.5
2018
Profit
£’000
-
(1)
-
Equity
£’000
-
(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
2019
£’000
411
57
14
95
43
620
2018
£’000
423
54
17
210
107
811
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
2019
£
13,730
Year-end
balance
2019
£
13,730
Maximum
amount
2018
£
13,730
Year-end
balances
2018
£
13,730
No advances were made during 2019 or 2018 and no interest is charged on the outstanding balance.
75
Notes to the consolidated financial statements
for the year ended 31 December 2019 (continued)
Other transactions
24.2.
During the year, £40,000 (2018: £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 2019, £10,082 (2018: £10,082) was owing in respect of interest for the quarter ended 31
December 2019 (2018: Quarter ended 31 December 2018).
25. Capital and reserves
The nature and purpose of other reserves is explained in the table below:
Name of reserve
Capital redemption
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, lapse
or expiry, 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. Events after the balance sheet date
The impact of COVID-19 on the Group’s trading in 2020 is likely to be significant. Deltex Medical has seen a slow-
down in elective surgical procedures in hospitals throughout the world as a consequence of measures taken to
combat COVID-19 which has resulted in a decline in TrueVue Doppler probe usage. Conversely, sales of monitors
and probes for critical care use to hospitals in countries fighting the COVID-19 virus have sharply increased. It is
too early to assess the quantum or timing of these effects on the Group’s trading in 2020. The issue is examined
in greater depth in the section at the beginning of this Report entitled “Deltex Medical and COVID-19” on pages 4
and 5.
76
Note
4
5
6
6
7
8
Parent company balance sheet
As at 31 December 2019
Fixed Assets
Intangible assets - Goodwill
Investments
Trade and other receivables
Current assets
Trade and other receivables
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
2019
£’000
66
6,078
1,866
8,010
4
4
(544)
(540)
7,470
(1,072)
6,398
5,249
33,230
17,476
439
82
(48,898)
-
(48,898)
(1,811)
406
(50,078)
6,398
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
The notes on pages 79 to 85 form an integral part of these financial statements. The financial statements on
pages 79 to 85 were approved by the Board of Directors and authorised for issue on 24 April 2020 and were
signed on its behalf by:
Nigel Keen
Chairman
David Moorhouse
Group Finance Director
77
Share
premium
account
£’000
Capital
redemption
reserve
£’000
32,915
17,476
Other
reserve
£’000
4,752
Convertible
loan note
reserve
£’000
Accumulated
losses
Total
£’000
£’000
84
(47,502)
10,857
-
-
-
-
-
-
(2)
-
82
-
-
-
-
-
(5,363)
(5,363)
(5,363)
(5,363)
-
-
-
-
3,967
-
1,787
447
(132)
166
-
8
(48,898)
7,770
(1,811)
(1,811)
(1,811)
(1,811)
-
631
-
117
-
322
82
(50,078)
6,398
Parent company statement of changes in equity
For the year ended 31 December 2019
Balance at 1 January 2018
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
Balance at
31 December 2018
Comprehensive expense
Loss for the year
Total comprehensive
expense for the year
Credit is respect of service
cost settled by award of
options
Transfers
Share options exercised
Share
capital
£’000
3,132
-
-
1,787
-
-
-
-
8
-
-
-
447
(132)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
166
(3,965)
-
4,927
33,230
17,476
953
-
-
-
-
322
5,249
-
-
-
-
-
-
-
-
-
-
33,230
17,476
-
-
117
(631)
-
439
The notes on pages 79 to 85 form an integral part of these financial statements.
78
Notes to the parent company financial statements
For the year ended 31 December 2019
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 AIM 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
79
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.
Following the adoption of IFRS 9 in the prior year, 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.
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 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.
- 80 -
1.4. 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 37 to 76 of the Report
& Accounts 2019.
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.
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
- 81 -
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 (2018: £10,000).
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.
3. Directors’ emoluments
Aggregate emoluments
Short term benefits paid to third parties
2019
£’000
72
57
129
2018
£’000
72
54
126
There are no (2018: 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 (2018: £33,333), and Rockridge Medical Limited of £24,000 (2018: £21,000), for the services of
those directors.
Remuneration, including Executive directors, is disclosed on pages 50 to 51 of this Report & Accounts.
Additional information is provided in the Directors’ remuneration report on pages 24 to 28.
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 (2018: 5). None of the directors had
contracts for service so the monthly average number of employees was nil (2018: 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 £5,000
(2018: profit of £11,000).
- 82 -
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 59 of this Report & Accounts.
Cost
At 1 January 2019
Capital contribution
At 31 December 2019
Accumulated impairment
At 1 January 2019
Impairment on intra-group loan
Impairment charge
At 31 December 2019
Net book amount
At 31 December 2018
At 31 December 2019
Investments in
subsidiary
undertakings
£’000
437
45,164
45,601
297
37,945
1,281
39,523
140
6,078
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 with a corresponding impairment of
£37,945,000. This has been reclassified as an investment in the year ended 31 December 2019.
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 2022 (2018: three-year period ending 31 December 2021). A
terminal value was calculated using the forecast cash flows for the year ended 31 December 2022 using
a long-term growth rate of 2.25% (2018: 2.25%). Forecast cash flows were discounted using a pre-tax
discount rate of 20% (2018: 20%). This impairment calculation resulted in an impairment charge of
£1,281,000 (2018: £25,000) to be recognised in profit or loss in the Parent Company’s Statement of
Comprehensive Income (SOCI).
6. Trade and other receivables
As disclosed above, in 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 which has
been reclassified from non-current intra-group amounts owed.
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.
- 83 -
Amounts falling due within one year
Other receivables
Prepayments
Amounts falling due after more than one year
Amount owed by subsidiary undertaking
2019
£’000
2018
£’000
4
-
4
5
4
9
1,866
9,012
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. It concluded
that the term loan owed by Deltex Medical Limited was not. However, it was further 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 2019 was £9,972,000 (31 December 2018: £9,340,000, excluding the waived
Deltex Medical Limited balance) an increase of £632,000 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, and
excluding the waived Deltex Medical Limited balance, at 31 December 2018, were £11,208,000. The
gross balances outstanding at 31 December 2019 were £11,838,000.
7. Creditors: amounts falling due within one year
Trade payables
Accruals
8. Creditors: amounts falling due after more than one year
Convertible loan note
9. Share capital
2019
£’000
164
380
544
2019
£’000
1,072
2018
£’000
146
276
422
2018
£’000
1,035
See notes 20 and 21, on pages 66 to 70 of the Consolidated Financial Statements, for full details of the
Company’s share capital and its share option schemes.
- 84 -
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 2018
Credited to profit or loss in the Consolidated SOCI
At 31 December 2018
Credited to profit or loss in the Consolidated SOCI
At 31 December 2019
Deferred tax assets
At 1 January 2018
Charged to profit or loss in the Consolidated SOCI
At 31 December 2018
Charged to profit or loss in the Consolidated SOCI
At 31 December 2019
Foreign
exchange
£’000
43
(12)
31
3
34
Tax
losses
£’000
(43)
12
(31)
(3)
(34)
Total
£’000
43
(12)
31
3
34
Total
£’000
(43)
12
(31)
(3)
(34)
11. Ultimate controlling party
There are no shareholders with overall control of the Company as at 31 December 2019 or 31
December 2018.
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 on pages 50 to 51, and in
the Directors’ remuneration report on pages 24 to 28.
13. Events after the balance sheet date
The impact of COVID-19 on the Company’s trading in 2020 is likely to be significant. Deltex Medical has
seen a slow-down in elective surgical procedures in hospitals throughout the world as a consequence of
measures taken to combat COVID-19 which has resulted in a decline in TrueVue Doppler probe usage.
Conversely, sales of monitors and probes for critical care use to hospitals in countries fighting the
COVID-19 virus have sharply increased. It is too early to assess the quantum or timing of these effects
on the Company’s trading in 2020. The issue is examined in greater depth in the section at the beginning
of this Report entitled “Deltex Medical and COVID-19” on pages 4 and 5.
- 85 -
Notice of Annual General Meeting
This Document is Important and requires your Immediate Attention. If you are in 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 2019 without delay to the
stockbroker, bank of other person who arranged the sale or transfer so they can pass these document 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 03902905)
NOTICE OF ANNUAL GENERAL MEETING
Notice of an annual general meeting of Deltex Medical Group plc (the “Company”) to be held at the Company’s offices
at Terminus Road, Chichester PO19 8TX at 12.00 pm on 3 June 2020 (the “AGM”) is set out on pages 90 and 92
(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.
- 86 -
Directors:
Nigel Keen (Chairman)
Andrew Mears
David Moorhouse
Julian Cazalet
Christopher Jones
Sir Duncan Nichol
Mark Wippell
24 April 2020
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 (“AGM”) and annual accounts for the year ended 31
December 2019
This year’s AGM comes at a strange time for us all. For many years we have held the AGM in central London and
have welcomed shareholders to the meeting at which we have presented our business and have been pleased to
answer questions from shareholders. This year, because of the regulations in place to protect against the spread
of the Covid – 19 pandemic, people are not able to travel and we are not able to host gatherings of more than two
people. Nevertheless we are still required by the Company’s Articles of Association to hold the AGM. In order to
comply with these various requirements we have decided to hold the AGM at the Company’s premises in
Chichester and although we would like to receive your proxy votes for the resolutions which will be put to the AGM
we will not be able to welcome you to the meeting itself. However, I wish to assure shareholders that we place a
high value on your participation in the governance of the Company and so we intend to hold a number of
shareholder presentations in a more convenient location as soon as circumstances permit.
Recognising this, I am pleased to send you details of arrangements for the AGM, together with the annual
accounts of the Company, which contain the reports of the directors and the auditors, for the year ended 31
December 2019.
The AGM will take place at the Company’s offices at Terminus Road, Chichester at 12:00 pm on 3 June 2020. The
formal notice of the AGM is set out on pages 90 and 91 (inclusive) of this document. Although your attendance at
the AGM is not recommended, we strongly encourage you to exercise your right to vote: please refer to the Notes
at the end of the attached notice of the AGM.
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 2019 (the “Annual Report & Accounts 2019”).
Resolutions 2, 3, 4 and 5 - Re-election and election of directors
Resolution 2 proposes the re-election of Julian Cazalet as a director; Resolution 3 proposes the re-election of
Christopher Jones as a director; and Resolution 4 proposes the re-election of Sir Duncan Nichol 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, Julian Cazalet,
Christopher Jones and Sir Duncan Nichol offer themselves for re-election as proposed by resolutions 2, 3 and 4.
Resolution 5 proposes the reappointment of David Moorhouse, who was appointed as a director on 20 November
2019. In accordance with the Articles, having been appointed since the last annual general meeting, David
Moorhouse ceases to be a director at the conclusion of the AGM unless reappointed at the meeting; accordingly,
being eligible, David Moorhouse offers himself for re-appointment as proposed by resolution 5.
Biographical details of Julia Cazalet, Christopher Jones, Sir Duncan Nichols and David Moorhouse are set out on
pages 11 and 12 of the Annual Report & Accounts 2019. The Board considers that the considerable experience
that each of these directors bring will continue to be beneficial to the Company.
- 87 -
Resolution 6 – 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.
Resolution 7 – 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 22 May 2019 (the “2019
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 £1,749,560 (being one-third of the issued ordinary share capital as at 31 March 2020)
and in addition to allot relevant securities only in connection with a rights issue up to a further aggregate nominal
value of £1,749,560.
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 £3,499,120 representing an amount
equal to two-thirds of the Company’s issued share capital as at 31 March 2020. 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 8 – 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 8 proposes, in substitution for the powers that were granted to the directors at the 2019 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 £524,868 (representing approximately ten per cent. of the nominal issued share capital of the
Company as at 31 March 2020).
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 8 will be proposed as a special resolution.
Action to be taken
As noted at the beginning of this letter, it is not possible to hold a conventional AGM because of the advent of
Covis-19 and we will contact shareholders to arrange information meetings as soon as practicable. In the
meantime, we would strongly urge shareholders to vote on any of the resolutions 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
12.00 noon on 1 June 2020. Your attention is drawn to the notes on the enclosed form of proxy.
- 88 -
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 83,141,889 ordinary shares in aggregate, representing
approximately 16 per cent. of the ordinary shares currently in issue.
Yours sincerely
Nigel Keen
Chairman
- 89 -
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
Company’s offices Terminus Road, Chichester, West Sussex PO19 8TX at 12:00pm on 3 June 2020 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 2019, together with the
reports of the directors and of the auditors thereon.
2. To re-elect as a director Julian Cazalet.
3. To re-elect as a director Christopher Jones.
4. To re-elect as a director Sir Duncan Nichol.
5. To elect as a director David Moorhouse.
6. 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 7 will be
proposed as an ordinary resolution and resolution 8 as a special resolution:
7. 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):
7.1. comprising equity securities (as defined by section 560 of the Act) up to an aggregate nominal amount of
£3,499,120 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
7.2. in any other case, up to an aggregate nominal amount of £1,749,560,
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.
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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.
8. THAT, subject to the passing of resolution 7, 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 7.1, 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 8(a) of this
resolution) to any person up to an aggregate nominal amount of £524,868.
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
David Moorhouse
Company Secretary
24 April 2020
Registered office:
Terminus Road
Chichester
PO19 8TX
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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 12.00 pm on 1 June 2020 (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 2019 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 1 June 2020 (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 2019, 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 2019 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 2019. 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 12.00 pm on 1 June
2020 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 2020, the Company’s issued
share capital consists of 524,868,826 ordinary shares of 1p each, carrying one vote each. No shares are
held in treasury.
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