Avoid this digital TV software stock until we see some more contract wins
Cardiovascular monitoring business LiDCO, led by chief executive Dr Terry O’Brien, has raised £3.5m through a placing at 20p for product development, to fund a further US sales push and to boost working capital. ‘It strengthens our balance sheet tremendously and means we’re very strong in terms of cash’, commented O’Brien.
News of the funding accompanied results for the year to January. These revealed pre-tax losses clipped back to £2.1m (£4.2m) and cash outflow slashed by 38% to £2.2m. Year-end cash balances were £951,000 (£1.6m).
This was a year of decent progress, with turnover jumping 51% higher to £3.4m and gross margins spiking up to 75% (67%) thanks to price increases.
Recent highlights included the sale of 31 monitors to the US Army – the group’s biggest ever US order worth £249,000 – and the sale of 49 monitors to a US medical equipment leasing company.
Even more significant are results from a hospital trial validating the patient care benefits and cost savings of the group’s technology. The trial demonstrated use of the LiDCOplus monitor improves oxygen levels after major surgery, lessens infections and slashes hospital stay time by an average of 12 days per patient, saving £4,800 per patient treated.
Adoption of the technology will still take time, despite compelling data, since hospitals remain under great pressure to save money. Nevertheless, long-term trends are positive, with the minimally invasive cardiovascular monitoring market having grown 40% to around £21.8m last year, all market players posting rising sales and LiDCO’s percentage sales growth increase greater than its competitors. In contrast, sales of invasive pulmonary artery catheters are in decline.
Optimistic City analysts are looking for LiDCO to post profits by January 2008, though the shares are certainly not for the risk averse.
Market cap: Â£23.65m
PE Forecast: n/a
Share price: 23.5p
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