2020 Annual Report & Accounts
Deltex Medical
A UK-headquartered international medical device company which develops and
manufactures specialist haemodynamic monitoring devices.
“Navigating haemodynamics – see what we see”
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 and is used
primarily in elective surgery; but also in ventilated ICU
patients, including those with CV-19. 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 as well as developing
the next generation of the TrueVue System, due for
launch in Q4 2021, 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.
Contents
Overview
Highlights
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
Financial information
Consolidated financial statements
Notes to the consolidated financial
statements
Parent company financial statements
Notes to the parent company financial
statements
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Our customers
Notice of Annual General Meeting
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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 next generation 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
COVID-19
▪ COVID-19 signficantly adversely affected our principal market, elective surgery, during the year…
▪ … but we decided to use the impetus from COVID-19 to bring forward a number of changes to the
business, including:
➢
targeting intensive care units (“ICUs”) – where the technology was originally developed;
➢ accelerating our product development programmes; and
➢
identifying further cost reductions and efficiencies
▪
these COVID-19-associated changes leave the business with a substantially stronger platform from
which to grow in the future once the pandemic has subsided
Financial
▪
revenues: £2.4 million (2019: £4.3 million)
▪ 16% reduction in overhead costs (excluding exceptionals) to £2.7 million (2019: £3.2 million)
▪ adjusted EBITDA: £(0.2) million (2019: £0.4 million)
▪
▪
loss (before exceptional items) for the year: £(0.6) million (2019: £(0.1) million)
loss for the year: £(0.8) million (2019: £(0.2) million)
▪ cash at hand (31 December, 2020): £0.9 million (2019: £0.9 million)
Business
▪ significant opportunity for Deltex Medical arising from the pressure on international healthcare
systems to tackle the backlog of elective surgical procedures - where TrueVue Doppler has been
shown to help reduce patient length of hospital stay
▪ elective surgery volumes are starting to climb in the UK and overseas
▪ we have established a more significant ICU market in the UK as a result of COVID-19
▪ next generation monitor to be released in Q4 2021 – with good revenue potential for new monitor
sales and from the replacement of existing units
▪ emerging opportunity around the use of TrueVue Doppler data to create curated data sets to improve
patient care
▪ positive market dynamics associated with recent consolidation in the haemodynamic monitoring
sector led by major healthcare companies
▪
increasingly robust regulatory environment requiring manufacturers of medical devices to submit
efficacy data generated by their own products, as opposed to citing third parties’ data, which
enhances the value of the Group’s strong proprietary evidence base
Board
▪ David Moorhouse, currently Group Finance Director, has informed the Board that he wishes to retire
from the Board at the AGM on 27 May 2021
▪ Natalie Wettler, currently the Group Financial Controller, will, subject to standard regulatory process,
be promoted to Group Finance Director from the AGM
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Commenting on the results, Nigel Keen, Chairman of Deltex Medical, said:
“Like for so many businesses, COVID-19 represented a large shock with some short-term adverse
consequences for the Group. However, it is clear that Deltex Medical has used the impetus of COVID-
19 to make changes that leave the business significantly better positioned for the future”
“We are encouraged by the prospects that we believe will arise for Deltex Medical as a result of recent
consolidation in the sector as well as the need to clear the backlog associated with elective surgery that
exists around the world.”
“We are also excited by the success of the new product development programmes that have been
driven hard during lock down.”
“We are looking forward to seeing the business starting to grow robustly once the pandemic abates.”
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CHAIRMAN’S STATEMENT
“Navigating haemodynamics – see what we see”
Introduction
The COVID (“CV-19”) pandemic changed the way that many companies conducted their businesses in
2020, and Deltex Medical was no exception. Our principal activity is to provide TrueVue haemodynamic
monitoring to clinicians for use in elective surgery; but operating theatres were effectively closed throughout
the world for most of the year which resulted in little or no use of our probes. However, our TrueVue
technology was originally developed for use in UK Intensive Care Units (“ICUs”) and so we were able to
redirect our resources to support hospitals and doctors who switched their focus to care for severely ill CV-
19 patients in ICUs.
As soon as the scale of the CV-19 challenge became clear, we looked for opportunities to minimise
damage and to create benefit from the unexpected disruption to the business. We immediately focussed on
supporting our ICU customers; we consolidated and improved our marketing and on-line training resources;
and we drove our product development programmes, both by moving to complete our new next generation
monitor platform for launch later in 2021, and also by enhancing our signal acquisition technologies to
make the TrueVue technology easier to use. These enhancements will allow us to address a much wider
patient population, and broader market, than before.
A major strength of the TrueVue system is its safety and reliability. This is in large part due to the attention
to detail provided by our experienced and highly trained workforce. It was clear that we needed to ensure
that we looked after the safety and wellbeing of our employees to allow us to continue to service all our
markets throughout the world during the pandemic, albeit at substantially lower levels than before. We have
done this by maximising our use of US and UK governmental salary support schemes (“Salary Support
Schemes”) and obtaining governmental research and development (“R&D”) grants to support our
employees to the extent possible. We are pleased to report that as a result of this we did not need to make
any of our employees redundant during the pandemic, thereby retaining the capability to ramp up our
business as our markets recover.
As we move through the second quarter of 2021, the world is a different place. The global vaccine
programmes are bringing a return to a new normality in which our business should flourish as healthcare
systems significantly increase capacity to treat patients who have had their scheduled surgery postponed
during 2020.
Interest in our markets is strengthening, as is evidenced by the acquisition of several of our competitors by
major global medical device companies. Against this backdrop our next generation monitor launch will
provide the platform to support our clinical advocates in helping the healthcare systems around the world to
recover and start to deal with clinical backlogs. Our new easier-to-use technologies will expand the range of
patients who will benefit from the haemodynamic information delivered by the TrueVue system.
Financial results
Group revenues for the year ended 31 December, 2020 were £2.4 million (2019: £4.3 million). The 44%
year-on-year reduction reflects the near-complete closure of the global elective surgery market and the
running down of stock levels by our distributors.
Gross margin was also adversely affected by the reduction in manufacturing volumes, reducing to a
reported 68% (2019: 77%). We believe that this decline in reported gross margin will be transient and
anticipate that as unit volumes increase, then the gross margin will recover to the higher levels seen
historically.
Total overheads, excluding exceptional costs, declined significantly to £2.7 million (2019: £3.2 million),
representing a 16% year-on-year reduction.
In the year the total value of the Salary Support Schemes was £0.4 million (2019: zero).
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Adjusted EBITDA for the year (comprising earnings before interest, tax, depreciation and amortisation,
share-based payments, non-executive directors’ fees, as well as any exceptional items) was £(0.2) million
(2019: £0.4 million).
Operating loss for the year was £(0.6) million (2019: £(0.0) million).
Exceptional items of £0.2 million (2019: £0.1 million) relate to the (non-cash) write off of previously
capitalised R&D programmes which the Group has decided not to take forward. Given the acceleration and
expansion of the R&D work in 2020, we decided to assess the existing portfolio of the Group’s capitalised
development programmes in a broader sense this year, and have concluded that the adjustment reflected
by the above exceptional item is appropriate.
Loss for the year was £(0.8) million (2019: £(0.2) million).
We focus carefully on the stewardship of our cash resources. Cash at hand at 31 December, 2020 was
£0.9 million (2019: £0.9 million).
Commercial activities
In March 2020, we were encouraged by a significant upturn in demand from UK ICUs for our TrueVue
Doppler technology to treat the initial surge of CV-19 ventilated ICU patients. The TrueVue Doppler
technology had originally been developed in a London ICU. It was good to see this initial increase in ICU-
related demand at the beginning of the pandemic, although this increase was not large enough to
counteract the effect of cessation of elective surgery globally and as the year progressed use in ICUs
reduced as fewer patients were in need of ventilation.
To respond to the constraints of remote working we invested in and improved our portfolio of digital training
resources. This will help to counterbalance the restrictions imposed on salespeople or technical experts
entering hospitals.
The substantial challenge faced by UK hospitals in respect of reducing the backlog associated with delayed
elective surgical procedures has been recognised by the Government and additional funding has been
announced to help NHS hospitals work through this backlog. Given the importance of the elective surgery
market to Deltex Medical’s commercial activities, investment or additional resources designed to accelerate
elective surgery is expected to benefit the Group.
Our TrueVue Doppler technology has been demonstrated to reduce hospital length of stay in a significant
number of published randomised clinical trials. We believe that surgical departments will increasingly take
into account these data as hospitals explore new ways to reduce the elective surgery backlog as quickly as
possible.
We anticipate that one of the long-lasting outcomes of the CV-19 pandemic, and the potential for future
variant-associated smaller outbreaks, will be a focus on investigating new ways of increasing patient
throughput as well as reducing risk in a hospital setting. The TrueVue system is well positioned to help
hospitals meet these requirements.
Notwithstanding the pandemic, we continued to drive forward a number of development programmes
during the year. On the back of ongoing R&D programmes, some of which were supported by
competitively-awarded UK Government-funded research grants, we have made good progress on
broadening the applicability of our technology in the healthcare setting. As part of this work, we now plan to
launch our new next generation monitor in the second half of this year.
The greater focus on the haemodynamic condition of patients undergoing surgery and in ICUs presents
new opportunities for the TrueVue technology. The very precise real-time haemodynamic beat-to-beat data
generated by the TrueVue system can be used to design patient-specific algorithms which will allow
clinicians to be able to predict earlier patient outcomes, thereby optimising patient care.
Employees
I would like, on behalf of the Board, to thank our highly trained and dedicated workforce who are based in
the UK, Spain and the USA, and who have been extremely flexible and responsive to customers’ needs
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during the worst months of the pandemic. Our employees always worked hard to satisfy demand for our
products from hospitals which were treating high volumes of CV-19 patients.
Board changes
There have recently been a number of changes to the Board.
David Moorhouse rejoined Deltex Medical in October 2019, having previously been Group Finance Director
from 1996 to 2001. David has recently informed us that he wishes to retire at the forthcoming AGM.
We are pleased to be announcing today, subject to routine regulatory process, the promotion of Natalie
Wettler to the role of Group Finance Director with effect from the AGM. Natalie held a number of senior
roles in the Group’s finance department between 2011 and 2016. We were delighted when she agreed to
rejoin the Group in January 2020 as the Group Financial Controller.
Sir Duncan Nichol retired from the Board at the end of 2020. Sir Duncan had previously been Chief
Executive of the NHS from 1989 to 1994. The Group benefited from his immense experience, wisdom and
extensive network of healthcare-related contacts. I would like to thank him for his contributions over the
years and we wish him well for his retirement.
Tim Irish joined the Board on 20 January 2021. Tim had previously been on the Board of Deltex Medical
between May 2014 and March 2015. He resigned as a Director on 31 March 2015 when he was appointed
to the Board of NICE, the National Institute for Health and Care Excellence. We are delighted that he has
rejoined the Board and we look forward to working with him. Tim has some 35 years of experience working
in the life sciences and healthcare sectors.
Current trading and prospects
We have seen recent consolidation in our markets with several of our competitors having been acquired by
larger global medical device companies. We believe this shows that the market for haemodynamic
monitoring is evolving rapidly.
Currently, our sales activity levels remain comparatively subdued, as CV-19 continues to affect adversely
the number of elective surgical procedures being undertaken. Moreover, many of our international
distributors are reporting that their core customers are experiencing a ‘third wave’, and that consequently
there are very low levels of elective surgery taking place. We anticipate that sales in the first half of 2021
will reflect the continuing CV-19 prevalence in many of our key markets.
In the second half of the year, based on discussions with our customers and distributors, we anticipate that
there will be a significant increase in the Group’s activity levels, particularly in NHS and US hospitals, as
there are a number of initiatives being put in place to increase the volume of elective procedures
undertaken whilst at the same time minimising in-patient stay. The lower costs, shorter length-of-stay and
improved outcomes that have been demonstrated by our TrueVue Doppler technology will significantly help
hospitals achieve greater surgical in-patient throughput.
This increased level of activity provides a strong backdrop for the launch of our new next generation
monitor in the second half of 2021. The new monitor will also incorporate new technological developments
which have been completed during lock-down which enhance the ease of use of the TrueVue system and
expand the range of patients who can benefit from the use of the system.
As a result of these positive factors, the Board believes that the Group is well positioned for growth as the
year progresses.
Nigel Keen
Chairman
21 April 2021
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BUSINESS REVIEW
COVID-19 – how the Group reacted to the unexpected disruption
As highlighted in the Chairman’s Statement, the CV-19 pandemic caused our principal market, elective
surgery, to effectively close around the globe for much of 2020. The effective cessation in elective surgical
procedures forced us to review rapidly how best to react and drive the business forward, given such a
challenging commercial environment. Set out below is a summary of the key actions we implemented,
which included:
▪ driving, as much as possible, our technology into the key ICU markets at the beginning of the
pandemic as: (i) clinicians were still working out the optimal treatment regime for CV-19 patients and
we were convinced that TrueVue Doppler-derived data would be helpful to establish optimised
treatment protocols; (ii) before the ICUs became completely full we believed that there would be a
window of opportunity to engage with intensivists; and (iii) we anticipated that once the pandemic
took hold then intensivists would no longer have the time or “bandwidth” to discuss with our clinical
educators how best to use the TrueVue Doppler to assist in the treatment of CV-19 patients;
▪ making sure that we were able to support our customers, both face-to face and virtually, who
continued to use the Group’s technology during the pandemic in both the ICU and operating room;
▪ evaluating how best to cope with the new challenge associated with hospitals effectively closing
their doors to salespeople, which we anticipate may well carry on for some time. As part of our
response to this challenge, we have significantly increased our investment in digital training and
marketing resources;
▪ accelerating and expanding our product development programmes. As part of our strategic decision
to accelerate a number of product development initiatives, we applied for, and were awarded, an
additional Innovation Continuity Grant by Innovate UK worth approximately £ 0.2 million;
▪ making the strategic decision early-on that we would not make any redundancies across the
company to ensure that we retained our highly trained and flexible teams for when elective surgery
resumes; and
▪ maximising the contribution from Salary Support Schemes which collectively amounted to £352,000
in the year.
We were able to implement these steps whilst still retaining a substantial level of cash at hand on the
balance sheet (£0.9 million at 31 December 2020).
Next generation product development – good progress and expansion of applicability
We have made good progress on the development of the next generation monitor, the TrueVue System,
which we plan to launch towards the end of the second half of 2021. This next generation monitoring
platform will provide users with more detailed and precise information about the key characteristics of a
patient’s haemodynamics (blood flow and blood pressure) as well as enabling such data to be readily
downloaded for further analysis. In addition, the TrueVue System will incorporate battery power, making it
much more mobile and hence a clinically more useful device with broader applications.
Last year we were awarded a series of R&D grants. One of these enabled us to commission some
collaborative research work with the UK’s National Physics Laboratory (“NPL”). Although we have our own
in-house experts, we believed that our core ultrasound technology would benefit from an independent
review by world-class physicists. The feedback that we received from NPL has been extremely constructive
in terms of improving our existing device; but also in the development of a new non-invasive Doppler device
we are planning to release on the next generation monitoring platform. This new ultrasound device has
broader utility and can be used in a number of different clinical areas that we currently do not service.
These include Accident & Emergency departments, where we anticipate it acting as a sophisticated triage
tool, through to looking at the haemodynamic status of conscious, un-sedated patients in a general ward
setting or in the ICU.
We are expanding the specification for our next generation monitor to include this new non-invasive
Doppler-based device. We are also in the process of determining, in parallel with finalising the design for
the new monitor, the optimal specification for this non-invasive technology as well as establishing how it
could best be used by clinicians to optimise the patient pathway in the wider hospital setting.
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One challenge we face at the moment with the development of this technology is that most UK clinicians
have been focussed on treating CV-19 patients, and it has been practically very difficult to carry out the
clinical evaluations and receive user feedback which form an important part of our product development
process.
Curated data sets – new trend seen among large MedTech groups
We are seeing a new trend, which is being led by some of the large MedTech groups, which relates to
capturing raw haemodynamic data with a view to using such data to create and guide patient treatment
protocols. Such ‘curated data sets’ comprise data linked to the patient’s haemodynamic status which can
subsequently be used as a reference for constructing predictive models of future clinical events. Using
artificial intelligence, these curated data sets can be used to create cloud-based haemodynamic algorithms
which would further improve the quality of patient care. The TrueVue System is the only haemodynamic
monitoring device able to generate haemodynamic data with the requisite precision to allow such protocols
to be created.
Increasing value associated with Deltex Medical’s unique evidence base
Deltex Medical has invested considerable resources in compiling an unrivalled evidence base comprising
24 Randomised Clinical Trials (RCTs). The 24th RCT has just been published1. Collectively these RCTs
demonstrate that, among other things, the use of Deltex Medical’s TrueVue Doppler results in significantly:
▪ better outcomes for patients;
▪
▪
reduced patient hospital length-of-stay; and
lower costs for healthcare providers.
As healthcare systems together with governmental and private (e.g. insurers) payers focus on evidence-
based interventions, then the value of Deltex Medical’s evidence base will become increasingly apparent.
Regulatory
There is a general trend towards more onerous regulatory requirements associated with medical devices in
healthcare markets around the world, including the transition from the Medical Device Directive (MDD) to
the Medical Device Regulation (MDR).
These changes mean that there is an increasing need for manufacturers of medical devices to cite efficacy
data generated by their own products in regulatory submissions, as opposed to using third party data
collected from other sources. As a result, we believe that the inherent value associated with the Group’s
evidence base will continue to climb.
There is still uncertainty from a regulatory perspective about the consequences for our business following
the UK leaving the EU. Some parts of the new regulatory regime in the UK are already clear with, for
example, the establishment of the new UK Conformity Assessed (UKCA) mark which has been established
to replace the CE mark here in the UK. (The CE mark will still be required on Deltex Medical equipment
sold into the EU.) Deltex Medical’s Regulatory Affairs group is used to servicing the needs of a wide range
of different national and international regulatory environments and so is well set up to handle any changes
required. For example, in 2019 we moved our Notified Body which regulates our application of CE marks
to Deltex Medical products from the UK to the Netherlands, in order to be ready for the regulatory changes
which inevitably would arise following the United Kingdom’s exit from the EU.
Three principal divisions: UK, USA and International
The commercial activities of the Group are managed in three divisions: UK, USA and International. These
three divisions were all significantly held-back by the CV-19 pandemic during 2020.
We sell directly into the UK and the USA via a team of sales people and clinical educators. In the short term
both of these teams face customer access challenges as hospitals have sought to exclude, or at the very
least severely restrict, access to non-hospital personnel to hospitals. To counteract this, we have improved
1 Halawa N et al., Respiratory and Hemodynamic effects of prophylactic alveolar recruitment during liver transplant: a RCT,
Journal of Experimental and Clinical Transplantation, March 2021
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the breadth and scope of our on-line, digital training materials for clinicians, as well as appropriate
supporting materials for a hospital’s finance teams and purchasing departments.
We principally sell into overseas territories, other than the USA, by a network of some 40 distributors which
typically sell a complementary bundle of MedTech equipment and consumables into the healthcare market
in each of their territories. These distributors are able to give us real-time feedback on the status of, or
developments within, each of their markets. All of them have reported a cessation of elective surgery as
well as the announcement of various initiatives designed to enable a rapid catch-up of elective surgical
procedures once the pandemic has abated.
Whilst the distributor network we have in place currently works effectively, we may need to expand our
international footprint as our next generation products come on stream, particularly as we anticipate a
broader utility and applicability for these products.
Increasing consolidation in the haemodynamic sector
The recent acquisition of several of the Group’s competitors by major healthcare groups is likely to result in
increased investment in the haemodynamic market which, in turn, should result in this market segment
becoming larger. Historically the majority of the Group’s competitors were small to medium-sized
companies; however, most of these companies have now been acquired by larger, global medical device
organisations. The resulting anticipated greater investment in marketing and clinical education is likely to
drive broader adoption of haemodynamic monitoring across the international healthcare markets.
Conclusion
Irrespective of how quickly global vaccination programmes bring CV-19 under control, it is clear that there
is a substantial backlog of elective surgery which needs to be addressed across the world. It is also clear
that there is substantial pressure, from a number of sources including political, clinician-led and patient-
safety advocacy groups, to reduce this backlog rapidly. This broad-based pressure to reduce the elective
surgery backlog will be a key positive driver for our business.
The product development work that we accelerated during the last year resulting in the near completion of
our new next generation TrueVue System will be transformative for the Group as it provides the products
we can use to take advantage of the increasing addressable market for haemodynamic monitoring
stimulated by the recent consolidation in the sector.
We are looking forward to the second half of this year when we expect our principal markets to reopen. We
will then be able to re-assemble our team of highly trained employees at our headquarters in the UK and
together drive back up Group revenues and increased cash generation.
“Navigating haemodynamics – see what we see”
Andy Mears
Chief Executive
21 April 2021
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Directors
NON-EXECUTIVE DIRECTORS
Nigel Keen Chairman, MA FCA FIET
Nigel has been involved with Deltex Medical since 1988 and has been 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 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.
Tim Irish
Tim has worked in the life sciences industry for 35 years. His career has spanned global health technology
companies across Europe and North America, including GSK, GE and Philips. Tim is a Professor of
Practice at King's College London (KCL) and Chairman, KHP MedTech Innovations Ltd, a joint venture
between KCL and two of London’s leading NHS Trusts, Guy’s & St Thomas’ and King’s College Hospital.
Tim joined the Board of the National Institute for Health and Care Excellence (“NICE”) in April 2015 and is
currently Vice-Chair. Tim currently holds four other non-executive director positions in health and
technology related entities based in the UK, EU and USA. Tim joined the Board on 20 January 2021.
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.
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 a member of the CW Innovation
Advisory Group supported by CW+, the official charity of the Chelsea & Westminster NHS Foundation Trust.
He mentors, and invests in, technology businesses and acts as a mentor in fintech accelerator programmes
powered by Techstars. 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.
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EXECUTIVE DIRECTORS
Andy Mears, Chief Executive
Andy joined Deltex Medical in 1989 as an Electronics Engineer. During 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 regularly advises Departments within the UK government on their strategies to encourage UK
healthcare companies to trade internationally. Within these roles he has been an active member of the All-
Party Parliamentary Group (APPG) for Trade & Investment as well as more recently a member of the UK Life
Science Export Trade Advisory Group (ETAG) helping to define post-BREXIT trade agreements.
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 accounting standards in conformity with the requirements of the Companies Act 2006 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 for that period. In preparing the financial statements, the Directors are
required to:
▪ select suitable accounting policies and then apply them consistently;
▪ state whether international accounting standards in conformity with the requirements of the
Companies Act 2006 have been followed for the Group financial statements and United Kingdom
Accounting Standards, comprising FRS 101, have been followed for the Company financial
statements, subject to any material departures disclosed and explained in the financial statements;
▪ make judgements and accounting estimates that are reasonable and prudent; and
▪ prepare the financial statements on a 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. In addition, the directors are responsible for ensuring that they meet their
responsibilities under the AIM rules. The Directors are responsible for the maintenance and integrity of the
Group’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, save for Sir Duncan
Nichol who retired from the Board on 31 December 2020,confirm that, to the best of their knowledge:
▪
▪
▪
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 loss of the Company;
the Group financial statements, which have been prepared in accordance with international
accounting standards, 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.
12
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
13
Corporate Governance Statement
Chairman’s introduction
Our purpose is to provide returns to 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 technologies within our TrueVue System;
▪ communicating openly and honestly with our customers and with each other;
▪ providing excellent levels of support, education and training, taking into account any restrictions
imposed by CV-19;
▪ 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. These sections also describe the strategy
adopted in respect of navigating the Group through the specific challenges created by CV-19. 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. In 2020 and early 2021 CV-19 has made such
meetings effectively impossible; however, a number of telephone or internet-based calls have taken
place between the Chairman, the CEO and/or the FD and the Group’s shareholders.
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. During the
14
year considerable time was spent by the Board on reviewing the specific risks for the Group associated
with CV-19.
A summary of the principal risks and uncertainties facing the Group, as well as mitigating actions, are
set out on pages 20 to 21 of this document.
5) Maintain the Board as a well-functioning, balanced team led by the Chairman
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 for managing the Group’s business activities and implementing the Group’s strategy. 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 and appropriate supporting
documentation 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 (UK) 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.
There are a minimum of ten Board meetings scheduled per year. The Non-Executive Directors spend
approximately a day a month working on Deltex Medical related matters, including reviewing the Board
papers. The Chairman maintains contact both with the Board, the Executive Directors and employees
between Board Meetings, and typically spends approximately three days a month working on Group-
related matters. In 2020 all the Non-Executive Directors attended all the Board meetings, save for one
director. 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,
15
shareholders are informed of significant developments through the periodic announcements that the
Group makes describing significant events relating to 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
21 April 2021
16
Strategic Report
The Directors have set out below their Strategic Report for the year ended 31 December 2020.
The Strategic Report incorporates, and should be read in conjunction with, the rest of this document and in
particular the following sections:
1. Chairman’s Statement (page 4)
2. Business Review (page 7)
3. Corporate Governance (page 14)
4. Principal Risks of the Group (page 20)
5. Directors’ Report (page 22)
Key performance indicators
The key performance indicators that are used to monitor the 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. (loss) / profit (before exceptionals and
other gain) (£000)
Gross profit margin
Cash and cash equivalents (£000)
Probe revenues (£000)
Monitor revenues (£000)
2020
(208)
(561)
68%
853
2019
391
90
77%
908
2,113
3,533
161
260
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. During the CV-19
pandemic the Group also made use of Salary Support Schemes provided by the UK and US governments
and will continue to access, as appropriate, such schemes.
The Directors have reviewed detailed budgets and forecasts until 30 June 2022, which take into account
the possible continued effects of CV-19. This review indicates that the Group is expected to continue
trading as a going concern based on projected net cash flows derived from sales of the Group.
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.
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
regard (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 management of the Company and
which is described on pages 14 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 theatres / rooms. Accordingly, it is important that we identify, evaluate, manage
and mitigate the risks we face effectively and that we continue to develop our approach to risk management
proactively. For further information see the section entitled ‘Principal Risks of the Group’ on page 20.
Our employees
The Company is committed to being 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 2020, as part of our response to CV-19, we decided not to make any redundancies as we value our
highly trained and flexible workforce, and wanted to support them as much as possible during the
pandemic. 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,
although this has been made substantially more challenging as a result of the pandemic and the effective
cessation of “face-to-face” meetings. We have tried to compensate for this, to the extent possible, by the
judicious use of internet-based digital meetings.
We also need to develop close relationships with our suppliers, many of whom we have worked with for a
number of years.
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 engaging openly 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 14.
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
21 April 2021
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
In normal years Deltex Medical undertakes continuous reviews of its staff with a focus on encouraging high
performance and an increase in the skills base. As a result of the pandemic, it has been much harder to carry
out systematic staff reviews and implementing training progammes to expand employee skills. Accordingly
we have sought to carry out staff reviews on an ad hoc and pragmatic basis; and we anticipate this approach
will continue until the pandemic is effectively over.
The successful selling of the Group’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). It is likely that Brexit will have an impact on the Group’s procedures in
exporting both monitors and probes; however, at the current time it is too early to assess the longer term
impact of Brexit on our EU exports. It is also too early to state definitively what new regulatory procedures
will need to be adopted, and indeed what measures will need to be taken, if any, in order to ensure that
supplies are maintained to our US subsidiary and to our distributors in many jurisdictions. The Group
maintains a continuous watch on new regulatory requirements and has plans in place to mitigate in the short
term 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 setting (i.e. a hospital), 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 to
date no such litigation has 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 competitors has a clinical evidence base which is
equivalent to that supporting 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 Group revenue and profits.
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;
the availability to the Group of resources, including cash, to pursue its strategy and other opportunities
that it comes across; and
20
▪
technological difficulties and/or supply chain challenges associated with the timely development and
launch of new products.
COVID-19
The Group’s commercial activities, and in particular the demand for its products, are exposed to the risks
created by the continued global spread of CV-19 and the extent to which vaccination programmes, lock-
downs and other actions in response by governments, healthcare systems and relevant authorities are
successful. There is significant uncertainty on a country-by-country basis as to the ongoing short-term and
long-term effect of CV-19 on the markets in which the Group operates.
There are other risks posed by CV-19, including the impact on our employees and the 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
supply risk is minimised, at least in the near future.
Further information on the potential effect of CV-19 on the Group is set out elsewhere in this document,
including in the Chairman’s Statement and the Business Review.
21
Directors’ Report
The Directors present their report and the audited consolidated financial statements for the year ended 31
December 2020.
Future developments
The Group’s business activities, together with the factors likely to affect its future developments,
performance and position are set out in the Chairman’s Statement on page 4, the Business Review on
page 7 and the Principal Risks of the Group on page 20.
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 24 to the financial statements on pages 71 to 74.
Dividends
The Directors cannot propose the payment of a dividend (2019: £nil) for 2020.
Directors
The Directors of the Group who served during the year are shown below. Biographical details are given on
pages 10 and 11.
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
* Sir Duncan retired from the Board on 31 December 2020
Tim Irish was appointed to the Board after the year end, on 20 January 2021.
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 27 May 2021 at 11.00 a.m. 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
21 April 2021
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 supervision 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 and in particular for the Executive Directors and senior managers.
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
21 April 2021
***************************************************************************
The Remuneration Committee
The Remuneration Committee (the “Committee”) is responsible for recommending to the Board the
remuneration packages for Executive Directors and has supervision 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 of the
Executive Directors 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 during the year comprised all the
independent non-executive Directors: Julian Cazalet, Chris Jones, Sir Duncan Nichol and Mark Wippell as
well as 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 2020 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
required to comply with the principles relating to Directors’ remuneration in the UK Corporate Governance
24
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 reviews the link between incentive structure and strategy
regularly 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 which 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, particularly mindful of the additional stress and
responsibilities imposed by the CV-19 pandemic, and retention that the remuneration of the executives
reflects its plans for 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 remained 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. Salary increases were last implemented across the Group on 1 July 2019.
The Executive Directors’ base salary will be reviewed on 1 July 2021. 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.
25
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 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
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
Total
£
£
£
£
£
Andy Mears
2020
200,000
7,500
11,710
- 219,210
David Moorhouse*
2019
2020
2019
170,000
7,500
5,623
- 183,123
65,825
14,250
-
-
-
-
-
-
65,825
14,250
Jonathan Shaw**
2019**
93,392
5,734
7,645
- 106,771
Total
2020
2019
265,825
7,500
11,710
- 285,035
277,642
13,234
13,268
-
304,144
*
**
David Moorhouse was appointed to the Board on 20 November 2019.
Jonathan Shaw resigned from the Board on 4 October 2019. He also received termination payments with a value of
£95,000
‘Benefits’ comprise the provision of a car allowance paid in cash.
‘Annual bonus’ represents the full annual bonus, payable in cash and share options.
26
Andy Mears has an interest in 6,387,500 share options under the 2011 Executive share option scheme with
exercise periods ranging from 28 September 2014 to 22 July 2023 and expiry dates from 27 September
2021 to 21 July 2030 at exercise prices from 17.25p to 1.325p. 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.
Non-executive
Directors
Nigel Keen
Julian Cazalet
Chris Jones
Sir Duncan Nichol
Mark Wippell
Total
Year
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Cash
settled
Directors’
fees
Equity
settled
Directors’
fees Benefits Pension
Annual
bonus
Long term
incentive
awards
Total
£
£
£
£
£
£
£
-
-
-
-
-
-
-
-
-
-
-
-
33,333
33,333
24,000
24,000
24,000
24,000
24,000
24,000
24,000
24,000
129,333
129,333
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,333
33,333
24,000
24,000
24,000
24,000
24,000
24,000
24,000
24,000
129,333
129,333
All NED fees are planned to be settled by the issue of equity instruments in the Group. The non-executive
Chairman and the non-executive Directors, with the exception of Chris Jones, elected to defer their
Directors’ emoluments in order to help the Group maximise its cash resources from 1 April 2016 to 31
December 2020. Chris Jones also elected to defer his emoluments in a similar manner from 1 July 2018.
These arrangements have been set out each year in Deltex Medical’s Annual Report and Accounts and full
provision has always been made for the cost of these fees. The Group decided to settle these liabilities,
which at 31 December 2019 amounted in total to £448,249, by the issue of 29,883,257 new Ordinary
Shares at 1.5 pence per Share, representing a premium of 30% to the closing mid-market price on 18
December 2020. The Shares were issued on 21 December 2020. A further liability has arisen in relation to
the non-executive Directors’ emoluments for the 2020 financial year amounting in total to £129,333. It is
intended that this liability will also be settled by the issue of Ordinary Shares in the course of 2021.
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 2020 are shown in the table below.
Legally owned
Unexercised
Options
5,858,731
829,834
78,095,142
15,782,542
2,925,862
8,754,136
8,866,446
-
-
-
-
-
-
Unvested
options subject
to performance
under
the EMI scheme
Unvested
options subject
to performance
under the ESOS
10,000,000
6,387,500
-
-
-
-
-
-
1,000,000
-
-
-
-
-
Andy Mears
David Moorhouse
Nigel Keen
Julian Cazalet
Chris Jones
Sir Duncan Nichol
Mark Wippell
Approval
This report was adopted by the Committee on 21 April 2021 and has been approved subsequently by the
Board.
Nigel Keen
Chairman of the Remuneration Committee
21 April 2021
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 spoken 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
21 April 2021
***************************************************************************
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.
29
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
which contain control findings that are relevant to its work.
Information relating to the Principal Risks of the Group can be found on page 20.
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:
(1)
the carrying value of investments in subsidiaries and group balances in the Parent Company’s
Individual Financial Statements. The Committee reviewed the key assumptions used in the underlying cash
flow forecast which was used as the basis for the value in use calculation required by the relevant
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; and
in December 2020 the maturity date of the Convertible Note was extended to February 2024. It had
(2)
previously been extended to February 2022 in March 2020. The Committee considered these modifications
but did not take the view that they were made in contemplation of each other and therefore should not be
assessed together. Further information on the modification can be found in Note 18.2 to the consolidated
financial statements.
External audit
The Audit Committee has received an audit planning document from the auditors which 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, notwithstanding the additional restrictions and
complexities associated with carrying out external auditing in a COVID-secure manner.
Following the completion of the audit, the Audit Committee received from the auditors a post-audit
management letter which 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 2020 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 significant accounting
policies. The financial reporting framework that has been applied in their preparation is applicable law and
international accounting standards in conformity with the requirements of the Companies Act 2006 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 2020 and of the group’s loss for the year then ended;
• the group financial statements have been properly prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006;
• the parent company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
• 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 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 note 1.7 of the financial statements which describes the impact of COVID-19 on the
Group. Our opinion is not modified in respect of this matter.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’
assessment of the group and parent company’s ability to continue to adopt the going concern basis of
accounting included:
• Challenging the assumptions used in the detailed budgets and forecasts prepared by management for the
financial period ending 30 June 2022;
31
• Considering historical trading performance both prior to and during the Covid-19 pandemic;
• Comparing the forecast results to those actually achieved in the 2021 financial period so far;
• Reviewing bank statements to monitor the cash position of the group post year end, and obtaining an
understanding of significant expected cash outflows (such as capital expenditure) in the forthcoming 12-
month period;
• Considering the sensitivity of the assumptions and re-assessing headroom after sensitivity.
As part of our evaluation of going concern, we have requested management to perform additional work
concerning sensitivity on their assumptions to assess the financial headroom in their models.
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the group and parent company’s
ability to continue as a going concern for a period of at least twelve months from when the financial
statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
Key audit matters
We identified the key audit matters described below as those that were of most significance 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 the
matters in the context of the financial statements as a whole and, in forming our opinion thereon.
Consequently, we do not provide a separate opinion on these individual matters.
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 in their view
the group and
parent company can continue
to 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, these projections
were 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
32
How the matter was addressed in
the audit
We challenged the assumptions
used in the cash flow forecasts for
going concern as described in note
1.7 of the group financial
statements and in respect of the
impairment reviews as described in
notes 5 and 6 of the parent entity
financial statements.
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 where
appropriate
carrying value requires
significant judgement in
particular regarding cash
flows, growth rates, discount
rates and sensitivity
assumptions to derive a value
in use.
Revenue recognition
including contract
liabilities
Revenue recognition
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
33
•
reviewed management’s
sensitivity calculations to
understand the impact of
changing the key
assumptions on cashflows
and value in use
• performing our own further
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.
As part of our procedures relating
to revenue recognition as described
in note 2 of the group financial
statements we:
•
•
reviewed transactions
around the year end and
traced to supporting
documentation to
determine if the sale was
recorded in the correct
period
traced a sample of sales
from customer order to the
nominal ledger, ensuring
contract liability postings
were complete for these
transactions.
• 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.
As part of our procedures regarding
the development costs as described
in note 13 of the group financial
statements we:
• Traced a sample of project
development
costs capitalised in the year
to supporting
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.
documentation ensuring
they were valid capital
expenditure
and the relevant
capitalisation
criteria under IAS 38 were
met.
• Discussed a sample of
development projects in
progress and
completed at the year end
with management and
individuals within the
development team to
understand the future
prospects of the projects
and
considered whether any
impairment
was required. Explanations
received were checked for
consistency with our
understanding of the
business and the wider
market.
• Reviewed the useful
economic life of a sample
projects
to determine if the useful
economic life is
appropriate.
Our application of materiality
The materiality for the group financial statements as a whole (“group FS materiality”) was set at £47,900.
This has been determined with reference to the benchmark of the group’s revenue, which we consider to be
one of the principal considerations for members of the company in assessing the group’s performance. FS
materiality represents 2% of the group’s revenue as presented on the face of the Consolidated Statement of
Comprehensive Income.
The materiality for the parent company financial statements as a whole (“parent FS materiality”) was set at
£38,320. This has been determined with reference to the benchmark of the parent company’s net assets as it
exists only as a holding company for the group and carries on no trade in its own right. Parent FS materiality
represents approximately 1% of net assets as presented on the face of the parent company balance sheet.
Performance materiality for the group financial statements was set at £38,320, being 80% of group FS
materiality, for purposes of assessing the risks of material misstatement and determining the nature, timing
and extent of further audit procedures. We have set it at this amount to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected misstatements exceeds FS materiality. We
judged this level to be appropriate based on our understanding of the group and its financial statements, as
updated by our risk assessment procedures and our expectation regarding current period misstatements
including considering experience from previous audits. It was set at 80% to reflect the fact that few
misstatements were expected in the current period and there is little estimation in the financial statements.
34
Performance materiality for the parent company financial statements was set at £30,656, being 80% of parent
FS materiality. It was set at 80% to reflect the fact that few misstatements were expected in the current
period and there is little estimation in the financial statements.
An overview of the scope of the audit
Of the group’s five reporting components, we subjected two to audits for group reporting purposes and three
to specific audit procedures where the extent of our audit work was based on our assessment of the risk of
material misstatement and of the materiality of that component. The latter were not individually significant
enough to require an audit for group reporting purposes but were still material to the group.
The components within the scope of our work covered 100% of group revenue, 100% of group profit before
tax, and 100% of group net assets.
Other information
The other information comprises the information included in the Annual Report, other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information
contained within the Annual Report. 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. 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 course of 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 this gives
rise to a material misstatement in the financial statements themselves. 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.
Opinions 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 in relation to which 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.
35
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 12, 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud, is detailed below:
We obtained a general understanding of the Group’s legal and regulatory framework through enquiry of
management concerning: their understanding of relevant laws and regulations; the entity’s policies and
procedures regarding compliance; and how they identify, evaluate and account for litigation claims. We also
drew on our existing understanding of the company’s industry and regulation.
We understand that the Group complies with the framework through:
• Outsourcing tax compliance to external experts.
• Outsourcing foreign payroll to external experts.
•
Subscribing to relevant updates from external experts, and making changes to internal procedures and
controls as necessary.
• Ensuring certification under ISO 13485 (Quality Management System) and compliance with local
regulators for their products which is essential to be able to sell their products in the UK and overseas.
In the context of the audit, we considered those laws and regulations: which determine the form and content
of the financial statements; which are central to the Group’s ability to conduct its business; and where failure
to comply could result in material penalties. We identified the following laws and regulations as being of
significance in the context of the company:
• The Companies Act 2006, international accounting standards in respect of the preparation and
presentation of the group financial statements and FRS 101 in respect of the preparation and
presentation of the parent entity financial statements.
• Compliance with ISO 13485 and regulators such as British Standards Institution “BSI” & U.S. Food and
Drug Administration “FDA”.
We performed the following specific procedures to gain evidence about compliance with the significant laws
and regulations identified above:
36
• Examined the results of any regulatory compliance audits and performed online searches of key
regulators to ensure adequate compliance certificates were held.
The senior statutory auditor led a discussion with senior members of the engagement team regarding the
susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur.
The areas identified in this discussion were:
• Manipulation of the financial statements, especially revenue, via fraudulent journal entries or error
affecting cut off around the year end, particularly as the size of the company means that there is
little opportunity for segregation of duties.
• Provisions including stock and trade debtor provisions as these are estimates by management.
• Estimates made by management regarding the useful economic life of capitalised development costs
and associated judgement regarding the viability and long term recoverability of the carrying value of
these projects.
• Group’s status as AIM listed entity which creates an incentive for fraudulent financial reporting to
show favourable results to the market.
The procedures we carried out to gain evidence in the above areas included:
• Challenging management regarding the assumptions used in the estimates and judgements identified
above.
Substantive work on material areas affecting profits.
•
• Testing journal entries, focusing particularly on postings to unexpected or unusual accounts, those
posted at unusual times and journals outside the normal scope of the client business.
A further description of our responsibilities is available on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the parent company’s members, as a body, in accordance with Chapter 3 of Part
16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the parent
company’s members those matters we are required to state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the parent company and the parent company’s members as a body, for our audit work, for this report, or
for the opinions we have formed.
Julie Mutton
Senior Statutory Auditor, for and on behalf of
Nexia Smith & Williamson
Statutory Auditor
Chartered Accountants
15-17 Cumberland Place
Southampton
Hampshire
SO15 2BG
21 April 2021
37
Consolidated statement of comprehensive income
For the year ended 31 December 2020
Note
3
4
24
9
4
10
7, 18
6
7
Revenue
Cost of sales
Gross profit
Administrative expenses
Sales and distribution expenses
Research and Development, Quality and Regulatory
Impairment reversal/(loss) on trade receivables
Exceptional costs
Total costs
Other operating income
Other gain
Operating loss
Operating (loss)/profit before exceptional costs and other
gain
Finance costs
Loss before taxation
Tax credit on loss
Loss for the year
Other comprehensive expense
Items that may be reclassified to profit or loss:
Net translation differences on overseas subsidiaries
Other comprehensive expense for the year, net of tax
Total comprehensive loss for the year
Total comprehensive loss for the year attributable to:
Owners of the Parent
Non-controlling interests
2020
£’000
2,398
(757)
1,641
(1,472)
(964)
(246)
11
(232)
(2,903)
469
171
(622)
(561)
(172)
(794)
9
(785)
(6)
(6)
(791)
(804)
13
(791)
2019
£’000
4,256
(974)
3,282
(1,515)
(1,220)
(446)
(11)
(137)
(3,329)
-
13
(34)
90
(176)
(210)
51
(159)
(8)
(8)
(167)
(169)
2
(167)
Loss per share – basic and diluted
11
(0.15p)
(0.03p)
The notes on pages 43 to 75 form an integral part of these consolidated financial statements.
38
Consolidated balance sheet
As at 31 December 2020
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Financial assets at amortised cost
Total non-current assets
Current assets
Inventories
Trade receivables
Financial assets at amortised cost
Other current assets
Current income tax recoverable
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Borrowings
Trade and other payables
Total current liabilities
Non-current liabilities
Borrowings
Trade and other payables
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Capital redemption reserve
Other reserve
Translation reserve
Convertible loan note reserve
Accumulated losses
Equity attributable to owners of the Parent
Non-controlling interests
Note
12
13
16
15
16
16
16
18
18
18
18
20
21
26
26
26
26
26
26
2020
£’000
305
2,554
153
3,012
895
576
15
122
61
853
2,522
5,534
(159)
(1,416)
(1,575)
(993)
(274)
(51)
(1,318)
(2,893)
2,641
5,773
33,444
17,476
505
135
82
(54,648)
2,767
(126)
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
(53,823)
2,794
(139)
Total equity
2,655
The notes on pages 43 to 75 form an integral part of these consolidated financial statements. The financial
statements on pages 38 to 42 were approved by the Board of Directors and authorised for issue on
21 April 2021 and were signed on its behalf by:
2,641
Nigel Keen
Chairman
David Moorhouse
Group Finance Director
39
1
4
6
,
2
)
6
2
1
(
7
6
7
,
2
)
8
4
6
,
4
5
(
5
3
1
2
8
6
7
4
,
7
1
4
4
4
,
3
3
3
7
7
,
5
5
5
6
,
2
)
6
(
)
5
8
7
(
)
1
9
7
(
1
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7
)
3
(
9
3
-
y
t
i
u
q
e
l
a
t
o
T
0
0
0
’
£
-
3
1
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1
-
-
-
-
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0
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’
£
)
9
3
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4
Consolidated statement of cash flows
for the year ended 31 December 2020
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
Write off of research and development projects not taken
forward
Modification gain on convertible loan note
Share-based payment expense
Other tax income
Effect of exchange rate fluctuations
Decrease/(increase) in inventories
Decrease in trade and other receivables
(Decrease)/increase in trade and other payables
(Decrease)/increase in provisions
Net cash generated (used in) / from operations
Interest paid
Income taxes received
Net cash generated (used in) / from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from the sale of loan monitors
Capitalised development expenditure (net of grants)
Net cash used in investing activities
Cash flows from / (used in) financing activities
Issue of ordinary share capital
Expenses in connection with share issue
Net movement in invoice discount facility
Principal lease payments
Net cash generated from / (used in) financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Exchange loss on cash and cash equivalents
Cash and cash equivalents at end of the period
2020
£’000
2019
£’000
(794)
172
103
-
40
222
(119)
39
(52)
(6)
(395)
13
680
(303)
(11)
(16)
(132)
80
(68)
(6)
-
(165)
(171)
253
(3)
(23)
(37)
190
(49)
908
(6)
853
(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
The notes on pages 43 to 75 form an integral part of these consolidated financial statements.
42
Notes to the consolidated financial statements
for the year ended 31 December 2020
Principal accounting policies
1.
Presented below are those accounting policies that relate to the financial statements as a whole and include
details of new accounting standards that are or will be effective for 2021 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 Accounting
Standards in conformity with the requirements of the Companies Act 2006. 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 2019. 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
subsidiary are recognised as part of the profit or loss on disposal in the Consolidated Statement of Comprehensive
43
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
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:
2020
2019
Average Rate
Closing rate
Average rate
Closing rate
Sterling/US Dollar
Sterling/Euro
Sterling/Canadian Dollar
1.29
1.13
1.73
1.37
1.12
1.74
1.28
1.14
1.70
1.31
1.17
1.71
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 judgement 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.
Convertible Loan Note Modifications
In March 2020, the Group negotiated the extension for a further 12 months of the Convertible Loan Notes. In
December 2020, as part of a longer term financing review, the Group further extended the Convertible Loan
Notes by an additional 2 years to February 2024. The directors do not consider that these two modifications were
made in contemplation of each other and therefore should not be assessed together in determining whether these
are substantial modifications under IFRS 9.
Estimates
Information about estimation uncertainties at 31 December 2020 that could have a risk of adjustment to the
carrying amount of assets in the next financial year is considered in the following note:
44
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
Trade receivables
Note 16 and 24 provide 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
2022. This review indicates that the Group is expected to continue trading as a going concern based on
projected net cash flows derived from sales of the Group. The directors recognise that COVID-19 continues to
have an impact on the demand for its products and the continued impact of COVID-19 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’
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.
45
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
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 of resources are 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, share-based payments, non-executive directors’ fees, as well as any exceptional items’ (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.
46
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
3.2. Note
The operating segment results for 2020 are:
Revenues
Adjusted gross profit2 3
Sales and marketing costs3
Administration costs3
R&D costs3
Quality and regulation
costs3
Probes1
Monitors
Third party
products
Other
Unallocated
£’000
2,113
1,585
£’000
161
136
-
-
-
-
-
-
-
-
£’000
£’000
£’000
-
-
-
-
-
-
124
106
-
-
-
-
-
-
(942)
(903)
(23)
(167)
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
3. Other operating income is allocated within the corresponding expense categories
-
-
-
-
The operating segment results for 2019 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
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
-
-
-
-
Total
£’000
2,398
1,827
(942)
(903)
(23)
(167)
(208)
Total
£’000
4,256
3,353
(1,304)
(1,297)
(139)
(222)
391
47
Notes to the consolidated financial statements
for the year ended 31 December 2020 (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
Write off of research and development projects not taken forward
Non-executive directors’ fees and employer’s NIC
Share-based payment expenses
Change in accumulated absence cost liability
Net bonus accrual and staff advances movement
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
2020
£’000
(208)
(103)
(40)
(222)
(172)
(39)
1
(10)
119
52
(414)
(622)
(172)
(794)
9
(785)
2019
£’000
391
(149)
(84)
-
(136)
(117)
26
22
-
13
(425)
(34)
(176)
(210)
51
(159)
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 2020
Direct markets
Indirect markets
Probes
Monitors
Third Party
Other
Probes
Monitors
Other
£’000
£’000
£’000
£’000
£’000
£’000
£’000
UK
USA
France
Scandinavia
South Korea
Portugal
Other countries
652
858
-
-
-
-
15
1,525
102
16
-
-
-
-
32
150
-
-
-
-
-
-
-
-
83
26
-
-
-
-
-
109
-
-
170
95
159
86
78
588
-
-
-
-
-
-
11
11
For the year ended 31 December 2019
Direct markets
Indirect markets
Probes
£’000
Monitors
Third Party
£’000
£’000
Other
£’000
Probes
Monitors
£’000
£’000
Other
£’000
UK
USA
France
Scandinavia
South Korea
Peru
Other countries
902
1,443
-
-
-
-
29
2,374
49
45
-
-
-
-
-
293
-
-
-
-
-
-
107
42
-
-
-
-
-
-
-
289
83
277
258
251
94
293
149
1,158
-
-
9
-
10
-
148
167
48
15
2,398
Total
£’000
837
900
180
97
160
86
138
Total
£’000
1,351
1,530
304
84
290
261
436
-
-
10
2
1
-
2
-
-
6
1
3
3
8
21
4,256
Notes to the consolidated financial statements
for the year ended 31 December 2020 (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
2020
£’000
2,338
60
2,398
2019
£’000
4,176
80
4,256
The following table provides information about trade receivables and contract liabilities from contracts with
customers. There were no contract assets at either 31 December 2020 or 31 December 2019.
Trade receivables which are in ‘Trade and other receivables’
Contract liabilities (Note 18.4)
31 December
2020
31 December
2019
£’000
576
(58)
£’000
1,062
(53)
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 2020:
Revenue expected to be recognised
2021
£’000
54
2022
£’000
1
2023
£’000
3
Total
£’000
58
Revenue recognised in 2020 which was included in contract liabilities at 31 December 2019 amounted to
£46,000. Revenue recognised in 2019 included in contract liabilities at 31 December 2018 amounted to
£131,000.
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
Write off of research and development projects not taken forward
Short-term leases
Net foreign exchange (gain)/loss
Audit and accountancy costs
Meeting and other public relations costs
Professional and consultancy costs
Gain on convertible loan note
Other income
Other
49
2020
£’000
(20)
380
2,289
159
172
103
40
222
20
(10)
70
(54)
199
(119)
(52)
90
3,489
2019
£’000
173
755
2,350
315
128
149
84
43
23
43
59
48
189
-
(13)
(56)
4,290
Notes to the consolidated financial statements
for the year ended 31 December 2020 (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
2020
£’000
10
33
7
-
50
2019
£’000
10
32
7
-
49
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.
50
Notes to the consolidated financial statements
for the year ended 31 December 2020 (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 and staff advances from prior periods released
Share-based payment expense
2020
£’000
2,162
256
62
2,480
(309)
2,171
(1)
20
60
39
2,289
2019
£’000
2,232
244
65
2,541
(201)
2,340
(26)
43
(124)
117
2,350
The pensions cost expense of £62,000 (2019: £65,000) represents the aggregate amount paid and payable into
defined contribution pension schemes on behalf of employees.
5.3. Average monthly number of people employed
2020
Number
2019
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
51
50
12
17
11
4
6
50
2020
£’000
369
-
-
33
1
12
415
2020
£’000
33
-
33
52
15
17
10
4
6
52
2019
£’000
363
65
30
57
8
6
529
2019
£’000
33
24
57
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
5.5. Highest paid director
Aggregate emoluments
Contributions to director’s personal pension scheme
6. Finance costs
Invoice discount facility
Convertible loan note
Lease liability finance expense
7. Tax credit on loss
2020
£’000
207
12
219
2020
£’000
1
128
43
172
2019
£’000
177
6
183
2019
£’000
3
126
47
176
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
2020
£’000
2019
£’000
(9)
-
(9)
-
(9)
(64)
13
(51)
-
(51)
In 2020, the other gain includes an amount of £52,000 (2019: £13,000) comprises tax income arising from the
Research and Development Expenditure Credit scheme which is accounted for as a government grant.
The taxable credit on the loss for the year is lower (2019: higher) than the effective rate of corporation tax in the
UK of 19% (2019: 19%) applied to the Group’s loss on ordinary activities before tax. The differences are
explained below:
52
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
Loss on ordinary activities before tax
Loss on ordinary activities multiplied by the standard rate in the UK of 19% (2019: 19%)
Effects of:
Non-taxable income
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
2020
£’000
(794)
(151)
(101)
213
27
(7)
-
3
-
7
-
(9)
2019
£’000
(210)
(40)
(496)
485
-
(49)
3
21
28
(17)
14
(51)
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 2020, the Group had accumulated trading losses carried forward which are available to offset
against future profits of £34,286,000 (2019: £34,608,000) resulting in an unrecognised potential deferred tax
asset of £6,854,000 (2019: £6,486,000).
53
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
Loss relief is available indefinitely in the UK and for 20 years in the USA. Trading losses in the USA do not begin
to expire until 2028. The movement in deferred income tax assets and liabilities during the year, without taking
into consideration the offsetting of balances within the same jurisdiction is set out below:
Deferred tax liabilities
Development costs
Accelerated capital allowances
At 1 January
Charged/(credited) to profit or loss in the Consolidated SOCI
At 31 December
Deferred tax asset on losses
At 1 January
(Credited)/charged to profit or loss in the Consolidated SOCI
At 31 December
9. Exceptional items
2020
£’000
588
56
644
2020
£’000
404
240
644
2020
£’000
(404)
(240)
(644)
2019
£’000
399
5
404
2019
£’000
523
(119)
404
2019
£’000
(523)
119
(404)
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
Net bonus accrual and staff advances movement
Write off of research and development projects not taken forward
2020
£’000
2019
£’000
-
-
10
222
232
65
30
-
42
137
10. Other operating income
10.1. Accounting policy
Government grants are accounted for under the accruals model as permitted by IAS 20, ‘Accounting for
Government Grants and Disclosure of Government Assistance’. Grants related to income are recognised in the
Statement of Comprehensive Income under Other operating income in the same period as the related
expenditure.
54
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
10.2.
Other operating income comprised:
UK Job Retention Scheme
US Payment Protection Plan
Other operating income – 3rd party termination agreement
2020
£’000
214
138
117
469
2019
£’000
-
-
-
-
11. Basic and diluted loss per share
The loss per share calculation is based on the loss of £798,000 and the weighted average number of shares in
issue of 526,448,659. For 2019, 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. While the Group is loss-making, the diluted loss
per share and the loss per share are the same.
12. Property, plant and equipment
Accounting policy
12.1.
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.
55
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
12.2.
Note
Leasehold
property and
improvements
Right of use
asset
Plant and
equipment
Fixtures and
fittings
Machines
loaned to
customers
£’000
£’000
£’000
£’000
£’000
Cost
At 1 January 2019
Exchange difference
Additions
Transferred from inventory
Disposals
At 31 December 2019
Exchange difference
Additions
Transferred from inventory
175
427
473
-
5
-
-
-
-
-
-
180
427
-
-
-
-
-
-
At 31 December 2020
180
427
Accumulated
depreciation
At 1 January 2019
Exchange differences
Depreciation charge
Disposals
At 31 December 2019
Exchange differences
Depreciation charge
At 31 December 2020
Net book value
At 1 January 2019
At 31 December 2019
At 31 December 2020
174
-
2
-
176
-
2
178
1
4
2
59
-
48
-
107
-
48
155
368
320
272
-
5
-
-
478
(2)
3
-
479
438
-
27
-
465
(2)
13
476
35
13
3
3
(1)
-
-
-
2
-
-
-
2
3
(2)
1
-
2
-
-
2
-
-
-
Total
£’000
2,742
(45)
10
62
(112)
2,657
(53)
6
7
1,664
(44)
-
62
(112)
1,570
(51)
3
7
1,529
2,617
1,568
2,242
(39)
71
(88)
(41)
149
(88)
1,512
2,262
(51)
40
(53)
103
1,501
2,312
96
58
28
500
395
305
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
2020
£’000
49
51
3
103
2019
£’000
71
69
9
149
56
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
13. Intangible assets
Accounting policy
13.1.
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. As such, the amortisation period relates to a specific period to reflect the
benefits, being between 6 and 10 years.
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 2020, £464,000 (2019: £145,000) was recognised from government grants.
13.2.
Note
Cost
At 1 January 2019
Amounts written off
Additions
At 31 December 2019
Amounts written off
Additions
At 31 December 2020
Accumulated amortisation
At 1 January 2019
Amounts written off
Amortisation expense
At 31 December 2019
Amounts written off
Amortisation expense
At 31 December 2020
Net book value
At 1 January 2019
At 31 December 2019
At 31 December 2020
Development
costs
£’000
Goodwill
£’000
Total
£’000
3,669
(149)
250
3,770
(222)
165
3,713
1,207
(106)
84
1,185
-
40
1,225
2,462
2,585
2,488
66
-
-
66
-
-
66
-
-
-
-
-
-
-
66
66
66
3,735
(149)
250
3,836
(222)
165
3,779
1,207
(106)
84
1,185
-
40
1,225
2,528
2,651
2,554
Amortisation expense of £40,000 (2019: £84,000) 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 2020 (continued)
Included within development costs are costs amounting to £1,707,000 (2019: £1,575,000) 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 an amount of £155,000 net book value (2019: £186,000) relating to the
development of its high definition impedance cardiography product which became available for sale in May 2017
and has been amortised from that date. Other individually material projects, all of which have not been amortised
as the projects are still in progress, are:
Project description
Suprasternal Doppler Probe
TrueVue Velocity Pressure Loops
UK Enhanced Recovery App
2020
£’000
308
215
-
2019
£’000
301
208
192
58
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
14. 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 unless otherwise stated:
Name
Country of
incorporation
and place of
business
Nature of trading activities
Deltex Medical Limited
UK
Manufacture and marketing of medical devices
Deltex Medical, SC, Inc USA
Marketing and sales of medical devices in the
USA
Deltex Medical Espana
SL
Spain
Marketing and sales of medical devices in
Spain
Deltex Medical Canada
Limited
Canada
Marketing and sales of medical devices in
Canada
Deltex Medical
Holdings Inc
Deltex Inc
Deltex Medical Inc
USA
USA
USA
Dormant
Dormant
Dormant
Proportion
of ordinary
shares
directly
held by the
parent
%
Proportion
of shares
held by
non-
controlling
interests
%
100
100
100
51
100
100
100
-
-
-
49
-
-
-
The registered addresses of the Group’s subsidiary undertakings are:
Subsidiary undertaking
Registered Address
Deltex Medical Limited
Deltex Medical, SC, Inc
Terminus Road, Chichester, United Kingdom PO19 8TX
330 East Coffee St., Greenville, South Carolina, USA
Deltex Medical Holdings Inc
330 East Coffee St., Greenville, South Carolina, USA
Deltex Inc
Deltex Medical Inc
330 East Coffee St., Greenville, South Carolina, USA
330 East Coffee St., Greenville, South Carolina, USA
Deltex Medical Espana SL
C/ del Mirador, 3A, 17250 Playa De Aro, Girona, Spain
Deltex Medical Canada Limited
Baine Johnston Centre, 10 Fort William Place, St John’s NL A1C 5W4, Canada
15. Inventories
Accounting policy
15.1.
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 2020 (continued)
15.2.
Note
Raw materials and consumables
Work in progress
Finished goods
2020
£’000
289
-
606
895
2019
£’000
219
57
639
915
There are no specific provisions for slow-moving inventory (2019: £nil).
16. Trade and other receivables
Accounting policy
16.1.
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 required 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.
16.2.
Note
Trade receivables
Trade receivables
Less loss allowance
2020
£’000
576
-
576
2019
£’000
1,090
(28)
1,062
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
2020
2019
Current Non-current
Current
Non-current
£’000
£’000
£’000
£’000
15
-
15
-
153
153
214
-
214
-
157
157
60
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
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 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 would be
recovered in full. However, during the year, the Group made the decision to review the historic bonus amounts
and corresponding staff advances. As a result, an accrual relating to the bonuses due to be settled exists.
These bonuses are expected to be cleared during the course of 2021.
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
17. Cash and cash equivalents
17.1.
Accounting policy
2020
£’000
85
37
122
2019
£’000
64
49
113
For the purposes of the cash flow statement, cash and cash equivalents includes cash on hand and deposits
held at call with financial institutions.
17.2.
Note
Cash at bank
18. Financial liabilities
18.1.
Accounting policy
2020
£’000
853
2019
£’000
908
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
61
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
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 gain 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.
18.2.
Note
Borrowings
Invoice discounting facility
Convertible loan note
2020
2019
Current
Non-current
Current
Non-current
£’000
£’000
159
-
159
-
993
993
£’000
188
-
188
£’000
-
1,072
1,072
Invoice discounting facility
The amount shown represents the cash drawn down under an invoice discounting facility; There was £nil
undrawn amounts at the end of the year (2019: £2,000). The amount outstanding under this facility is secured by
way of a fixed charge over the Group’s UK and a proportion of the international trade receivables. Amounts
drawn down under the facility are repayable from the end of the month of invoice.
This is an ongoing facility and is separated into three accounts being Sterling, US$ and Euro currencies. The
facility is subject to one month’s (2019: 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 from February 2021
which had been extended in February 2018. In December 2020, the maturity date was extended further to
February 2024.
A gain of £119,000 was recognised in profit or loss in the Consolidated SOCI within other gain following the
extension of the maturity date by three years.
62
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
The convertible loan note recognised in the Consolidated Balance Sheet is calculated as:
Carrying amount at 1 January 2020
Modification gain
Interest expense
Interest paid
Carrying amount at 31 December 2020
Financial
liability
£’000
Equity
component
£’000
1,072
(119)
128
(88)
993
82
-
-
-
82
Total
£’000
1,154
(119)
128
(88)
1,075
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
13.14% (2019: 13.14%).
Borrowings in foreign currencies
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
2020
2019
Rate
%
3.17
2.75
4.93
Amount
£’000
47
80
32
159
Rate
%
3.55
2.75
6.02
Amount
£’000
103
27
58
188
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 13.14% (2019: 13.14%).
18.3.
Trade and other payables
Trade payables
Other payables
Social security and other taxes
Lease obligations
Contract liabilities
Employee short-term benefits
Accrued expenses
2020
2019
Current
Non-current
Current
Non-current
£’000
£’000
£’000
£’000
201
249
141
41
58
30
696
1,416
-
-
-
274
-
-
-
274
381
483
129
32
53
31
1,089
2,198
-
-
-
320
-
-
-
320
Included within other payables is an amount of £249,000 (2019: £288,000) 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.
63
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
19. Leases
Accounting policy
19.1.
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.
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.
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 term.
Note
19.2.
Included within Property, plant and equipment is the net book amount of £272,000 (2019: £320,000) relating to
the right-of-use asset arising from the lease over the Group’s head office and factory in Chichester. Included
within administration expenses in profit or loss in the Consolidated SOCI is an amount of £48,000 (2019:
£48,000) relating to the depreciation expense of this asset and included within finance costs is an amount of
£43,000 (2019: £47,000) relating to the finance charge on the related lease obligation. Included within
administration expenses in profit or loss in the Consolidated SOCI is an amount of £20,000 (2019: £23,000)
relating to short term leases.
Included within trade and other payables in the Consolidated Balance sheet are current lease obligations
amounting to £41,000 and non-current lease obligations amounting to £274,000.
The total cash outflow for leases in the period was £95,000.
64
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
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
20. Provision for liabilities
2020
£’000
75
300
56
431
Accounting policy
20.1.
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.
20.2.
Note
At 1 January 2020
Release of provision
Unwinding of discounting
At 31 December 2020
National
Insurance
£’000
Dilapidation
provision
£’000
16
(16)
-
-
46
-
5
51
Total
£’000
62
(16)
5
51
National Insurance
The provision for Employer’s National Insurance has been reviewed during the year as part of the historic bonus
accruals and staff advances analysis. As such, this provision is no longer required and has been released in the
year.
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 dilapidation provision has been discounted and the unwinding of the
discounting is on an annual basis.
21. Share capital and share premium
Accounting policy
21.1.
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.
65
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
Note
21.2.
At 1 January 2020 and 31 December 2020, 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 2019
Exercise of share options
At 31 December 2019
Share issues:
21 December 2020
Share issue expenses
21 December 2020
At 31 December 2020
Number of
shares
(thousands)
Ordinary
shares
£’000
Share
premium
£’000
Total
£’000
492,664
32,205
524,869
4,927
322
5,249
33,230
38,157
-
322
33,230
38,479
52,422
524
217
741
-
-
(3)
(3)
577,291
5,773
33,444
39,217
Net proceeds from the issue of shares totalled £738,000 (2019: £322,000), after expenses of £3,000 (2019: £nil).
22. Share-based payments
Accounting policy
22.1.
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. Due to the specialist nature of the work performed by
contractors, the Group is unable to reliably measure the fair value and therefore the fair value is measured using
an 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.
22.2.
The Group has two current share option schemes:
Note
▪ 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 Scheme are valued at the market price on the date of grant.
Options are conditional on the employee completing three years’ service (the vesting period). The options are
exercisable starting three years from the grant date, subject to the Group achieving certain performance
conditions; the options have a contractual term of ten years. The Group has no legal or constructive obligation to
repurchase or settle the options in cash.
Options granted under the EMI scheme are either granted at 1p per option for options that have been granted in
66
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
lieu of cash for bonuses or salary obligations, or at market price on the date of grant for options conditional on the
employee completing three years’ service. The options relating to past achievement have no vesting period.
Options that are conditional on the employee completing three years’ service have a three year 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
1,713,500
15
16,928,332
11
23,382,782
-
-
15
-
-
-
-
-
-
-
19,604,742
(6,544,332)
10
-
-
-
-
-
(21,277)
(32,205,459)
10,384,000
10
10,760,788
5,000,000
(1,342,250)
-
1
4
-
6,487,500
-
(50,000)
Total
No.
42,024,614
19,604,742
(6,544,332)
(1,734,777)
(32,205,459)
21,144,788
11,487,500
(1,342,250)
(50,000)
1
1
-
1
1
1
1
-
1
Options outstanding
at
1 January 2019
Granted during the
year
Lapsed during the
year
Expired during the
year
Exercised during the
year
Options outstanding
at
31 December 2019
Granted during the
year
Lapsed during the
year
Expired during the
year
Options
outstanding at
31 December 2020
-
-
(1,713,500)
-
-
-
-
-
-
-
14,041,750
7
17,198,288
1
31,240,038
67
Notes to the consolidated financial statements
for the year ended 31 December 2020 (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.
Options exercisable at
1 January 2019
Options exercisable at
31 December 2019
Options exercisable
at
31 December 2020
1,713,500
15
6,853,332
10
13,382,782
4,929,000
7
10,760,788
-
-
-
-
9,041,750
11
10,710,788
1
19,752,538
1
1
21,949,614
15,689,788
There were no share options exercised during the year ended 31 December 2020. The weighted average market
price of the Company’s shares at the date of exercise of the EMI options in the year ended 31 December 2019
was 1.27 pence. The mid-market closing price of the Company’s shares at the end of the year was 1.45 pence
(2019: 1.43 pence).
Details of the remaining contractual life of share options outstanding for each of the share option schemes is
shown in the table below:
2011 Executive Share
Option Scheme
2003 Enterprise Management
Incentive Scheme
2020
Years
2019
Years
2020
Years
2019
Years
Weighted average remaining contractual life
of options outstanding at the end of the
financial year
6.36
5.85
8.25
8.25
Fair value of options granted
Share options granted under the 2003 EMI scheme had an estimated weighted average fair value of 1.3 pence
(2019: 0.28 pence) and £1,655 (2019: £54,167) 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.
68
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
The model inputs for options granted during the year ended 31 December 2020 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
2020
2019
December
1.3p
1.3p
66%
3 years
0.41%
May
1.4p
1.0p
75%
Jan
1.2p
1.0p
75%
0 years
0.75%
0 years
0.76%
Fair value at measurement date
0.9p
0.4p
0.2p
Share options granted under the 2011 ESOS scheme had a fair value of 0.6 pence and £3,990 in
aggregate. No options were granted under this scheme during the year ended 31 December 2020.
The model inputs for options granted during the year ended 31 December 2020 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
Fair value at measurement date
2020
July
1.3p
1.3p
66%
3 years
0.15%
0.6p
Contractor options
On 15 July 2020, 4,000,000 share options were granted to two contractors under the 2003 EMI scheme with an
exercise price of 1.3 pence per share. The share options are exercisable from the grant date 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. The vesting period has been recognised over 3 years in line with the contract of work to
be performed. A further option over 500,000 shares with an exercise price of 1.22p, exercisable from the date of
grant of 9 October 2018 also remain outstanding at 31 December 2020. The option has an exerise period of 10
years from grant date. These are the only outstanding options held by contractors.
The share-based payment expense relating to the share options granted during the year had a fair value of 0.9
pence and £5,100 in aggregate.
69
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a
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
24. 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
159
Invoice discounting
facility
Convertible loan note 88
Lease obligations
Trade and other
payables
75
897
2020
2018
2019
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
-
-
1,224
225
-
-
-
56
249
188
-
-
88
75
1,665
88
75
-
1,048
225
-
-
-
131
288
1,219
163
1,449
305
2,016
163
1,273
419
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
2020
US
Dollars
£’000
158
267
(2)
-
Euro
£’000
108
160
-
(80)
2019
US
Dollars
£’000
255
517
-
-
Euro
£’000
109
269
(4)
(27)
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.
71
Notes to the consolidated financial statements
for the year ended 31 December 2020 (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
2020
Profit
£’000
11
29
Equity
£’000
Sensitivity
%
11
29
5.0
5.0
2019
Profit
£’000
20
51
Equity
£’000
20
51
Euros
US Dollar
If the Euro strengthened against Sterling by 5% (2019: 5%) an aggregate foreign exchange gain of £11,000
(2019: £20,000) 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. 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. There is no current
credit loss provision as at 31 December 2020 (2019: £11,000). In 2019, the credit loss provision represented
1.0% of the Group trade receivables at 31 December 2019.
72
Notes to the consolidated financial statements
for the year ended 31 December 2020 (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
(Reduction)/Increase in loss allowance recognised in profit or loss in the Consolidated SOCI
At 31 December
2020
£’000
2019
£’000
28
(17)
(11)
-
56
(39)
11
28
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 2020 or 31 December 2020.
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
2020
£’000
315
993
1,308
159
1,467
2019
£’000
352
1,072
1,424
188
1,612
73
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
The following table shows the Group’s sensitivity to a hypothetical change in interest rates throughout the year,
with all other variables remaining constant:
Sensitivity
%
0.5
1.0
0.5
2020
Profit
£’000
-
-
-
Equity
£’000
Sensitivity
%
-
-
-
0.5
1.0
0.5
2019
Profit
£’000
-
-
-
Equity
£’000
-
-
-
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 22.
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.
25. Related party transactions
25.1.
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
2020
£’000
413
38
13
-
32
496
2019
£’000
411
57
14
95
43
620
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
2020
£
13,730
Year-end
balance
2020
£
-
Maximum
amount
2019
£
13,730
Year-end
balances
2019
£
13,730
During the year ended 31 December 2020, historic bonuses due to employees and corresponding staff advances
from employees were reviewed and settled. As a result, the advance relating to Andy Mears has been cleared
and as such there is no advance due from or historic bonus due.
74
Notes to the consolidated financial statements
for the year ended 31 December 2020 (continued)
Other transactions
25.2.
During the year, £40,000 (2019: £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
2024. At 31 December 2020, £10,055 (2019: £10,082) was owing in respect of interest for the quarter ended 31
December 2020 (2019: Quarter ended 31 December 2019).
26. 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.
75
Parent company balance sheet
As at 31 December 2020
Fixed Assets
Intangible assets - Goodwill
Investments
Trade and other receivables
Current assets
Trade and other receivables
Cash and cash equivalents
Creditors – amounts falling due within one year
Net current assets/(liabilities)
Total assets less current liabilities
Creditors – amounts falling due after more than one year
Note
4
5
6
6
7
8
Net assets
Equity
Share capital
Share premium
Capital redemption reserve
Other reserve
Convertible loan note reserve
Accumulated losses:
At 1 January
Loss for the year
Transfers
Accumulated losses
Total shareholders’ funds
2020
£’000
66
4,107
1,431
5,604
46
253
299
(250)
49
5,653
(993)
4,660
5,773
33,444
17,476
505
82
(50,078)
(2,515)
(27)
52,620
4,660
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)
(1,811)
631
(50,078)
6,398
The notes on pages 78 to 84 form an integral part of these financial statements. The financial statements on
pages 76 to 77 were approved by the Board of Directors and authorised for issue on 21 April 2021 and were
signed on its behalf by:
Nigel Keen
Chairman
David Moorhouse
Group Finance Director
76
Parent company statement of changes in equity
For the year ended 31 December 2020
Share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Balance at 1 January 2019
4,927
33,230
17,476
Other
reserve
£’000
953
Convertible
loan note
reserve
£’000
Accumulated
losses
£’000
82
(48,898)
Total
£’000
7,770
Comprehensive expense
Loss for the year
Total comprehensive
expense for the year
Credit in respect of service
cost settled by award of
options
Transfers
Share options exercised
Balance at
31 December 2019
Comprehensive expense
Loss for the year
Total comprehensive
expense for the year
Shares issued during the
year
Issue expenses
Credit in respect of service
cost settled by award of
options
Transfers
-
-
-
322
5,249
-
-
524
-
-
-
-
-
-
-
-
-
-
-
33,230
17,476
-
-
217
(3)
-
-
-
-
-
-
-
-
5,773
33,444
17,476
-
-
117
(631)
-
439
-
-
-
-
39
27
505
The notes on pages 78 to 84 form an integral part of these financial statements.
-
-
-
-
82
-
-
-
-
-
-
(1,811)
(1,811)
(1,811)
(1,811)
-
117
631
-
-
322
(50,078)
6,398
(2,515)
(2,515)
(2,515)
(2,515)
-
-
-
(27)
741
(3)
39
-
82
(52,620)
4,660
77
Notes to the parent company financial statements
For the year ended 31 December 2020
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 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 interest in a subsidiary which is outside the scope of IFRS 9 and accounted for
in accordance with IAS 27, ‘Separate Financial Statements’.
78
Notes to the parent company financial statements
For the year ended 31 December 2020
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.
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.
Convertible Loan Note Modifications
In March 2020, the Group negotiated the extension for a further 12 months of the Convertible Loan Notes.
In December 2020, as part of a longer term financing review, the Group further extended the Convertible
Loan Notes by an additional 2 years to February 2024. The directors do not consider that these two
modifications were made in contemplation of each other and therefore should not be assessed together in
determining whether these are substantial modifications under IFRS 9.
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.
79
Notes to the parent company financial statements
For the year ended 31 December 2020
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.
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 38 to 42 of the Report
& Accounts 2020.
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
80
Notes to the parent company financial statements
For the year ended 31 December 2020
converted to share capital at the option of the holder, or subject to certain conditions at the option of the
Company and the number of shares to be issued does not vary with changes in their fair value. The
liability component of a compound financial instrument is recognised initially at the fair value of a similar
liability that does not have an equity conversion option.
The equity component is recognised initially as the difference between the fair value of the compound
financial instrument as a whole and the fair value of the liability component. Any directly attributable
transaction costs are allocated to the liability and equity components in proportion to their initial carrying
amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured
at amortised cost using the effective interest method. The equity component of a compound financial
instrument is not re-measured subsequent to initial recognition except on conversion or expiry.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer
settlement of the liability for at least 12 months after the end of the reporting period.
2. Auditors’ remuneration
The statutory audit fee in respect of the Parent Company’s financial statements payable to Nexia Smith
& Williamson was £10,000 (2019: £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
2020
£’000
96
33
129
2019
£’000
72
57
129
There are no (2019: 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 (2019: £33,333), and Rockridge Medical Limited of £nil (2019: £24,000), for the services of the
respective directors.
Remuneration, including Executive directors, 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 (2019: 5). None of the directors had
contracts for service so the monthly average number of employees was nil (2019: 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. Based on the profitability and value in use, 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 £27,000 (2019: profit of £5,000).
81
Notes to the parent company financial statements
For the year ended 31 December 2020
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 2020
At 31 December 2020
Accumulated impairment
At 1 January 2020
Impairment charge
At 31 December 2020
Net book amount
At 31 December 2019
At 31 December 2020
Investments in
subsidiary
undertakings
£’000
45,601
45,601
39,523
1,971
41,494
6,078
4,107
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 2023 (2019: three-year period ending 31 December 2022). A
terminal value was calculated using the forecast cash flows for the year ended 31 December 2023 using
a long-term growth rate of 2.25% (2019: 2.25%). Forecast cash flows were discounted using a pre-tax
discount rate of 20% (2019: 20%). This impairment calculation resulted in an impairment charge of
£1,971,000 (2019: £1,281,000) to be recognised in profit or loss in the Parent Company’s Statement of
Comprehensive Income (SOCI).
6. Trade and other receivables
In 2013, the Group reclassified £3,000,000 of the long-term investments by Group in Deltex Medical
Limited as a long-term loan. This loan is being charged interest at a rate of 10% per annum, is
unsecured and fell due for repayment on 1 January 2018. Since that time, the Parent Company has
effectively rolled the loan forward on the existing terms except for the fact that the amount is now
repayable on demand. However, the Company has no current intention of making a demand for
payment for either this or any of the other intra-group loans that are outstanding. As a consequence, the
amounts falling due are classified as non-current assets.
Amounts falling due within one year
Other receivables
Amounts falling due after more than one year
Amount owed by subsidiary undertaking
82
2020
£’000
2019
£’000
46
46
4
4
1,431
1,866
Notes to the parent company financial statements
For the year ended 31 December 2020
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 2020 was £10,572,000 (31 December 2019: £9,972,000), an increase of £600,000
in the year, which has been recognised in profit or loss in the Parent Company’s SOCI. The gross
balances outstanding at 31 December 2020 were £12,003,000 (31 December 2019: £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
2020
£’000
43
207
250
2020
£’000
993
2019
£’000
164
380
544
2019
£’000
1,072
See notes 21 and 22 of the Consolidated Financial Statements for full details of the Company’s share
capital and its share option schemes.
83
Notes to the parent company financial statements
For the year ended 31 December 2020
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 2019
Credited to profit or loss in the Consolidated SOCI
At 31 December 2019
Credited to profit or loss in the Consolidated SOCI
At 31 December 2020
Deferred tax assets
At 1 January 2019
Charged to profit or loss in the Consolidated SOCI
At 31 December 2019
Charged to profit or loss in the Consolidated SOCI
At 31 December 2020
Foreign
exchange
£’000
Total
£’000
31
3
34
(4)
30
31
3
34
(4)
30
Tax
losses
£’000
Total
£’000
(31)
(3)
(34)
4
(30)
(31)
(3)
(34)
4
(30)
11. Ultimate controlling party
There are no shareholders with overall control of the Company as at 31 December 2020 or 31
December 2019.
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 25, with the Company during the year,
other than as a result of service agreements. Details of directors’ remuneration is disclosed on pages 24
to 28.
84
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 2020 without delay to the stockbroker,
bank or other person who arranged the sale or transfer so they can pass these documents to the
person who now holds the shares. This document should be read in conjunction with the
accompanying Form of Proxy.
DELTEX MEDICAL GROUP plc
(Incorporated in England, registered number 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 11.00 am on 27 May 2021 (the
“AGM”) is set out on pages 89 and 91 (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.
85
Directors:
Nigel Keen (Chairman)
Andrew Mears
David Moorhouse
Julian Cazalet
Tim Irish
Christopher Jones
Mark Wippell
21 April 2021
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 2020
This year’s AGM comes at a strange time for us all. Until the onset of the COVID-19 pandemic, for
many years we had 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. Again this year, because of the regulations in place to protect against the
spread of COVID-19, people are advised not to travel and we are not able to host large gatherings
of 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, again this year 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.
In addition, immediately following the AGM, Andy Mears, CEO, will provide a live presentation
related to a Company Update via the Investor Meets Company platform. This will take place on 27th
May 2021 at 12:00pm BST. The presentation is open to all existing and potential shareholders.
Questions can be submitted before the event via your Investor Meet Company dashboard up until
9am the day before the meeting or at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and add to meet Deltex Medical Group
PLC (DEMG) via: https://www.investormeetcompany.com/deltex-medical-group-plc/register-
investor
Investors who already follow DEMG on the Investor Meet Company platform will automatically be
invited to the presentation.
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 2020.
The AGM will take place at the Company’s offices at Terminus Road, Chichester at 11:00 am on
27 May 2021. The formal notice of the AGM is set out on pages 89 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
86
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 2020 (the “Annual Report & Accounts 2020”).
Resolutions 2, 3, 4, 5 and 6 - Re-election, election and appointment of directors
Resolution 2 proposes the re-election of Nigel Keen as a director; Resolution 3 proposes the re-
election of Andy Mears as a director; and Resolution 4 proposes the re-election of Mark Wippell as
a director. The Company’s articles of association (the “Articles”) require that at each annual
general meeting one third of the directors (excluding directors being elected for the first time) must
retire by rotation; accordingly, Nigel Keen, Andy Mears and Mark Wippell offer themselves for re-
election as proposed by resolutions 2, 3 and 4.
Resolution 5 proposes the reappointment of Tim Irish, who was appointed as a director on 20
January 2021. In accordance with the Articles, having been appointed since the last annual
general meeting, Tim Irish ceases to be a director at the conclusion of the AGM unless
reappointed at the meeting; accordingly, being eligible, Tim Irish offers himself for re-appointment
as proposed by resolution 5.
Resolution 6 proposes the appointment of Natalie Wettler, who offers herself for appointment as a
director as proposed by resolution 6.
Biographical details of Nigel Keen, Andy Mears, Mark Wippell and Tim Irish are set out on pages
10 and 11 of the Annual Report & Accounts 2020. Natalie Wettler held a number of senior roles in
the Group’s finance department between 2011 and 2016. We were delighted when she agreed to
rejoin the Group in January 2020 as the Group Financial Controller. The Board considers that the
considerable experience that each of these directors bring will continue to be beneficial to the
Company.
Resolution 7 – Re-appointment of auditors
Nexia Smith & Williamson have expressed their willingness to continue as the Company’s
auditors. Resolution 7 proposes their re-appointment and authorises the directors to determine
their remuneration.
Resolution 8 – 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 3 June 2020 (the “2020 AGM”), the directors were given authority to allot
relevant securities up to a maximum aggregate nominal value of £3,499,120 (being two thirds 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 £1,924,301 (being one-third of the issued ordinary share
capital as at 31 March 2021) and in addition to allot relevant securities only in connection with a
rights issue up to a further aggregate nominal value of £1,924,301.
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
£3,848,602 representing an amount equal to two-thirds of the Company’s issued share capital as
at 31 March 2021. 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.
87
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 9 – 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 9 proposes, in substitution for the powers that were granted to the directors at the 2020
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 £1,924,301 (representing approximately thirty-three
per cent. of the nominal issued share capital of the Company as at 31 March 2021).
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 9 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
COVID-19. 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 11.00 am on 25 May 2021. Your attention is drawn to the notes on the enclosed form
of proxy.
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
115,379,768 ordinary shares in aggregate, representing approximately 20 per cent. of the ordinary
shares currently in issue.
Yours sincerely
Nigel Keen
Chairman
88
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 at Terminus Road, Chichester, West Sussex PO19 8TX at 11:00 am on 27 May 2021 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 2020, together with the
reports of the directors and of the auditors thereon.
2. To re-elect as a director Nigel Keen.
3. To re-elect as a director Andy Mears.
4. To re-elect as a director Mark Wippell.
5. To elect as a director Tim Irish.
6. To elect as a director Natalie Wettler.
7. 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 8 will be
proposed as an ordinary resolution and resolution 9 as a special resolution:
8. 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):
8.1. comprising equity securities (as defined by section 560 of the Act) up to an aggregate nominal amount of
£3,848,602 in connection with an offer of such securities by way of a rights issue or open offer
(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
8.2. in any other case, up to an aggregate nominal amount of £1,924,301,
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.
89
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.
9. THAT, subject to the passing of resolution 8, 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 8.1, by way of a rights issue or open offer 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 9(a) of this
resolution) to any person up to an aggregate nominal amount of £1,924,301.
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
21 April 2021
Registered office:
Terminus Road
Chichester PO19 8TX
Notes:
Any member entitled to attend and vote at the annual general meeting is entitled to appoint one or more
proxies (who need not be a member of the Company) to attend and to vote instead of the member.
Completion and return of a form of proxy will not preclude a member from attending and voting at the
meeting in person, should he or she subsequently decide to do so. In order to be valid, any form of proxy
and power of attorney or other authority under which it is signed, or a notarially certified or office copy of
such power or authority, must reach the Company’s registrars, to Equiniti, Aspect House, Spencer Road,
Lancing, West Sussex, BN99 6DA, not less than 48 hours before the time of the meeting or of any
adjournment of the meeting.
Shareholders wishing to appoint a proxy and register their proxy votes electronically should visit the
website, www.sharevote.co.uk. The on-screen instructions will give details on how to appoint a proxy and
submit proxy voting instructions. Electronic proxy appointments and voting instructions must be received
by no later than 11.00 am on 25 May 2021 (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 2020 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 25 May 2021 (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 2020, 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 2020 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 2020. To appoint a proxy or to
give or amend an instruction to a previously appointed proxy via the CREST system, the CREST
message must be received by the issuer’s agent, Equiniti (ID RA19), not later than 11.00 am on 25 May
2021 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 2021, the Company’s issued
share capital consists of 577,290,545 ordinary shares of 1p each, carrying one vote each. No shares are
held in treasury.
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