Deltex wins new NHS order

News that Deltex Medical had won its first major order of 2005 from the National Health Service lifted the shares out of their torpor last week to bring them up to 19.75p. That still represents a 20 per cent shortfall on the 24.75p at which I tipped them 11 months ago but could yet be a turning point.

  The UK remains the main market for Deltex’s CardioQ haemodynamic optimisation system – and associated probes – and was unduly sticky last year as cash shortages prevented many hospitals from any form of discretionary spending. That hit CardioQ sales, even though all the evidence shows the system can save money by shortening patient stay.

  Deltex recorded a £2.1 million loss before exceptional items in 2004, only marginally lower than the previous year. But it cut its cash burn to £1 million and, with £1.1 million of net cash at the year-end and with expectations it will move into profit in the second half of the year, last year’s fundraising could be the last – at least for short-term funding reasons. Deltex is talking to around 20 NHS trusts – any number of which could sign up to CardioQ once their next tax year (and therefore funding period) starts. Meanwhile, sales of probes to existing customers have been steadily increasing over the past year. There are signs too that Deltex is beginning to open up the US market.

  A market capitalisation of just over £13 million is not pricing in much success. The shares will pick up on new orders and confirmation that losses are shrinking. Patience will be rewarded. Continue to hold.