LiDCO Group Plc 24 April 2008 Press Release 24 April 2008 LIDCO GROUP PLC ("LiDCO" or the "Company") Preliminary Results for the year to 31 January 2008 LiDCO (AIM:LID), the UK-based, the hemodynamic monitoring company, today announces its Preliminary Results for the year ended 31 January 2008. Financial Highlights: O Revenue up 18% at £4.05m (2006/7: £3.44m) O Administration and distribution expenses reduced by 6% to £4.62m (2006/7: £4.94m) O Net cash outflow before financing £1.7m (2006/7: £1.6m) O Product margins maintained at 78% on monitors, modestly improved to 87% on disposables O Loss from operations reduced by 23% to £2.01m (2006/7: £2.62m) O Loss per share reduced to 1.5p (2006/7: 2.1p) O Cash balance £2.2m (2006/7: £1.5m) Corporate Highlights: O LiDCOrapid patent filed and product launched in April 2008 O New distributors signed in USA, Israel, Canada, Turkey & Middle East O Product extension through launch of PC software products LiDCO(SE) and LiDCO(PRO) O Further clinical outcome studies show LiDCO products reduce mortality, complications and length of stay O New exclusive critical care marketing collaboration with Becton, Dickinson UK Commercial Highlights: O Continued adoption of technology with 40% of installed monitors now in the USA, 20% in the UK, 25% in Europe and 15% in the Rest of World O Installed base of monitors up 14% at 1,184 (2006/7: 1,035) O Monitor revenues up 34% to £1.93m (2006/7: £1.44m) O Sensors volume up 7% to 26,081 units; and revenue increased by 9% to £1.99m (2006/7:£1.82m) O Considerable growth in export territories, up by 63% to £2.32m (2006/7 £1.43m) O Over the last four years sales have increased by 79% while costs have been reduced by 16% Commenting on the results Terry O'Brien, Chief Executive, said: "This has been one of the most productive periods in our history, resulting in strong growth in revenues, control of costs and a significant reduction in our operating loss. he progress made on all fronts and the launch of our new product for use in the operating theatre puts the Company in a strong position to take a growing share of the substantial market opportunity for minimally invasive hemodynamic monitoring in both critical care and major surgery." The investor presentation "LiDCO's Preliminary Results - twelve months ended 31st January 2008" will be available from today on the LiDCO website (www.lidco.com). For further information, please contact: LiDCO PLC Terry O'Brien (CEO) Tel: +44 (0)20 7749 1500 John Rowland (Company Secretary) Theresa Wallis (Chairman) www.lidco.com Panmure Gordon Edward Farmer Tel: +44 (0) 20 7459 3600 edward.farmer@panmure.com Media enquiries: Abchurch Heather Salmond / Stephanie Cuthbert Tel: +44 (0) 20 7398 7718 stephanie.cuthbert@abchurch-group.com www.abchurch-group.com Chairman's Statement Over the last year we have pursued our strategy of growing sales of our hemodynamic monitoring products in a range of geographical regions across the globe whilst maintaining careful control of costs. Overall sales for the year grew by 18% to £4.05m, split 48% and 52% between capital and recurring revenue respectively. As a result of the issue of shares during the year, the Company's cash balance at the year-end was £2.2m. More than half of LiDCO's sales during the year came from outside the UK. Of note was the strong growth in sales in continental Europe, assisted by the redeployment of some of our UK sales resources. UK sensor sales showed good growth, as did sensor sales in Europe. Turning to product development, the Company's main focus last year was the development of the new LiDCOrapid monitor and disposables. This is designed especially to meet the needs of the substantial and growing market in major surgery and other hospital applications where quick and easy set-up is required and continuous trend information is important. This new monitor uses the same algorithm as that used in the existing LiDCOplus monitor, so data from studies involving the LiDCOplus also validates the LiDCOrapid monitor, thus helping with market acceptance. The LiDCOrapid was launched in April 2008. In addition, we were pleased to see the publication during the year of a number of independent outcome studies by leading centres, such as the University of Iowa, further endorsing the use of our LiDCOplus technology. Such outcome studies are important because they show the compelling advantages of using our products, such as shortened hospital stays, reduced mortality and reduced infections. These not only benefit the patient but also bring important cost-savings for the hospital. Our products continue to be developed and assembled, with certain proprietary elements manufactured, in our facility in East London, under strict quality standards. The Company's critical care products are registered in 14 markets in Europe, the USA, Brazil, South Korea and Japan. Sales during the year were made through our direct sales forces in the UK and USA, and through our international network of speciality critical care and anesthesia distributors in 15 other countries. In June the Company signed a new marketing collaboration agreement with Becton, Dickinson U.K. Ltd. This type of collaboration with a leading global medical technology company is a tribute to our technology and to our specialist sales force. This type of collaborative agreement not only broadens our offering among our target customers but also potentially helps to increase penetration of our markets. In December 2007 the Company raised £2m through the issue of new shares, to be used for completing the development and market introduction of the LiDCOrapid monitor, supporting continued sales growth of the Company's existing products in the critical care market and continuing its active research and development programme. On behalf of the Board I would like to thank our shareholders for their continued support of the Company. We were delighted to welcome Paul Clifford to the Board in April as Finance Director. Paul has extensive experience of technology and software companies, both listed on the main market and venture capital-backed. His past positions include being finance director of Comino Group plc, a company that was listed on the London Stock Exchange's main market, and Civica UK Limited. To date the market for our products has been mainly the Intensive Care / Critical Care units of hospitals. The launch of the LiDCOrapid monitor, now available for sales to customers in the EU and USA, will open more fully the substantial market opportunity in major surgery. LiDCOrapid's ease of use is a key feature that is expected to broaden the range of distributors willing and able to work with us in existing and new territories. We therefore expect to increase further our distributor network this year in the EU, the USA and the Rest of the World, whilst maintaining our direct sales forces in the UK and USA. The Company's product development activities, conducted in close consultation with leading clinicians, mean that we now have a broader portfolio of linked products to offer our customers enabling the measurement, analysis, audit and communication of real-time and historic hemodynamic data in both critical care units and the operating theatre. Meanwhile, there is an expanding body of scientific data linking the optimisation of patients' hemodynamic status with better outcomes and reduced hospital stays. With strong growth in sales of our existing products, reinforced by the recent launch of the LiDCOrapid monitor targeted at the major surgery market, the emergence of an additional new market opportunity for improving the viability of transplant organs, together with our growing network of distributors, the Company is well positioned for further growth in the coming year. As we look with enthusiasm to the year ahead, I would like to thank all the Group's staff and directors for their dedication and hard work over the past year and our Clinical Advisory Board for their valuable contribution. CHIEF EXECUTIVE OFFICER'S REVIEW Overview The worldwide market for hemodynamic monitoring products continues to evolve, mainly driven by the move away from the use of the older invasive catheter products towards the newer less invasive devices. The potential market for these minimally invasive devices, which include LiDCO's product range, is estimated at US$800 million per annum (surgery patient market segment). We estimate that sales revenues for minimally invasive hemodynamic monitoring products grew in value last year by 33%. Our objectives for the year were fourfold: achieve revenue growth of our core intensive care product, expand the product range, increase our sales distribution network and contain costs. I am pleased to say that all four of these objectives were achieved. Sales were up 18% on the prior year while we managed to reduce normal operating overheads by 6%. The favourable combination of increased sales and reduced costs means that significant progress towards profitability was made. Following the expansion of the distributor network and the recent introduction of the LiDCOrapid product, our business has both a wider product and geographic base and is now capable of significantly increasing its share of the global hemodynamic monitoring market. In summary, I feel that this has been one of our most productive periods and the Company is in a strong position to continue to move forward in 2008. Sales and trading Our strategy has been to supply the fast growing hemodynamic monitoring market with our proprietary products. I am pleased to report that there is an increasing momentum for the market's transition to our minimally invasive products and simultaneously in our ability to access this market. Since last year's preliminary results we have significantly expanded our distribution network with new distributors added in a number of territories, including Canada, the USA, Israel, Turkey, and Saudi Arabia. Negotiations are ongoing with specialty distributors in additional regions of the USA where we do not have direct representation to further improve our sales reach. We expect to be able announce the conclusion of these arrangements during the next few months. Revenues outside of the UK were up by a very encouraging 63%. The performance of established European distributors in the period was particularly encouraging with revenue increasing by no less than 71%. The resurgence of sales growth in the USA, while anticipated, was also good to see. Overall sales growth at 18% was therefore limited by lower demand for monitors in the UK although disposable sales remained buoyant. In a year where all capital purchases by hospitals in the UK NHS were at a low level for most of the period we decided to redeploy existing sales resources to the export market, which contributed to our 63% increase in export sales. Exports now represent the majority of our sales. This has the positive effect of reducing our reliance on an often 'stop/start' UK market. We are expecting trading in the UK to improve moderately this year with NHS capital purchase budgets likely to be a little more freely available. Furthermore our new LiDCOrapid surgery product is targeted at a more accessible revenue budget. Accordingly we have now brought our UK sales force up to strength with a number of new appointments. Despite an increasing proportion of lower-margin distributor sales, product gross margins were maintained at 78% on monitors, and modestly improved to 87% on disposables. In addition to maintaining product margin the increased sales were achieved without an increase in costs. I am very pleased to be able to report that over the last four years our sales have increased by 79% while we have simultaneously reduced our costs by 16%. Over the last few years we have made strategic investments in our patents, our products and their automated manufacture, coupled with development of clinical/business cases. We are now starting to see clear evidence that these investments have been justified and can now be leveraged to support a significantly larger turnover from both our direct and distributor sales teams. Looking forward, our new surgery product, the LiDCOrapid Monitor, launched in April, should have a dual advantage for us. Not only does it address the needs of a US$800m per annum surgery market, but also makes our product range more attractive to sell by both the existing and new distribution partners. The attractive features of this new product - proprietary technology and design, high margin, ease of set-up and use - have already helped propel the recent expansion of our distribution network. While this expansion of the sales distribution channel occurred too late to contribute materially to the 2007/08 results, these additions are expected to provide a significant new source of revenue in the second half of the current year. In addition to signing up more distributors, in June 2007 LiDCO announced the signing of an exclusive UK marketing collaboration with Becton, Dickinson U.K. Limited ('BD'). BD is a leading global medical technology company and this collaboration involves the joint promotion, in selected UK hospitals where LiDCO already has existing sales and customer relationships, of a number of critical care products currently being sold by the BD Medical Surgical Systems business unit. LiDCO's strong customer relationship with critical care departments in UK hospitals was a key factor in BD's decision to form this exclusive collaboration. This marketing partnership will result in enhanced sales coverage for BD's critical care product lines in the UK and LiDCO will receive a share of any profits made. Market trends - LiDCO's sales and marketing strategy Intensive care market In a 2007 article in the Journal of the American Medical Association doctors from Harborview Hospital in Seattle noted that their use of the invasive pulmonary artery catheter (PAC) for measuring cardiac output had declined by 77% over the last four years. The authors, whose hospital is now a LiDCO product user, also commented that "Recently nurses and residents gathered around the bedside of the sole patient in the intensive care unit (ICU) with a PAC so they could actually observe one still in use". The use of the invasive PAC approach to monitor hemodynamics continues to decline and this is particularly so in the ICU. In contrast the sales of the LiDCOplus Monitor are increasing in the ICU - clearly in these LiDCO accounts we are replacing the PAC with our technology, which has been convincingly demonstrated to improve clinical outcome and reduce costs in patients after surgery. The transition to minimally invasive monitoring in this market is expected to continue. We intend to further distinguish ourselves from older catheter-based technologies by presenting to hospitals a number of strong clinical and business cases associated with use of our products. Accordingly we were pleased to announce during the year the results of a study conducted in 2006 at the University of Iowa, showing that use of our products in severely ill patients with shock and sepsis substantially reduced mortality. The university, which has been using our technology since 2003, conducted a retrospective analysis of outcomes in a group of critically ill patients treated for septic shock and systemic inflammatory response syndrome (SIRS). This epidemiological study was undertaken to evaluate the various hemodynamic monitoring technologies used in the ICU and their effect on outcomes in this gravely ill patient population. Patients treated with the LiDCOplus Monitor had a substantially lower mortality rate than those treated clinically with the PAC: ICU mortality in the LiDCO treated group of patients was only 12% compared with 32% in the PAC treated group or 31% in those patients managed without any hemodynamic monitoring. The compelling data from this study supports the case that using the LiDCOplus Monitor decreases death rates in patients with septic shock or SIRS. This is very exciting news for us and our hospital customers and for patients, as these conditions have historically been very difficult to treat successfully. Similar trials are in progress in other countries to repeat and confirm this observation. If successful the data should have meaningful effects on the uptake of our LiDCOplus Monitor product within our existing ICU customer base. Major surgery market - a new opportunity Now that we have established our technology's credentials and the LiDCO brand name within the technically demanding intensive care market, we have used our expertise to produce a product for sale into the emerging high-risk surgery market. This project resulted in the recent launch of the LiDCOrapid Monitor. Our goal was to introduce a simple and easy-to-use product that would be used to optimize a patient's hemodynamic profile during surgery. Individualized fluid administration to maintain and optimize hemodynamics and tissue oxygenation plays a major role in the management of the moderate to high-risk surgical patient. This cannot be achieved reliably through the use of conventionally measured parameters such as arterial pressure, heart rate, urine output and central venous pressure but requires use of a specially designed monitor that provides a continuous measure of cardiac output. The LiDCOrapid is the first monitor specifically designed to help surgical teams maintain a patient's optimal hemodynamic profile. It is easy to use and set up and is designed with a user interface that is both visually intuitive and informative. It provides early warning of hemodynamic change, together with an indication of fluid responsiveness and actual response to a fluid or drug intervention. We are confident that widespread adoption of the LiDCOrapid will have a major impact on improving outcomes after major surgery by reducing complications and shortening hospital stays: this will not only benefit patients but also cut treatment costs. The initial response to this new product has been excellent and we are very excited about the potential of this product to take a significant share of this $800 million surgery market. Organ transplantation - a developing market opportunity There has been a large amount of publicity in the press about the growing shortage of transplantable organs. This is in part related to declining numbers of patients suitable to act as organ donors. However the situation is compounded by an assumption that post-collection loss of transplantable organs is inevitable if an initial assessment of the donor suggests that the patients' hemodynamics, and hence organs, have deteriorated irreversibly. Brain death is known to induce dramatic changes in hemodynamics but donors are often not adequately hemodynamically monitored. This results in inadequate resuscitation, thereby reducing organ yield due to oxygen debt. In an effort to improve donor outcomes, LiDCO is working with an Organ Procurement Organisation (OPO) in the USA which is using our minimally invasive continuous hemodynamic monitoring to guide donor management decisions in hemodynamically unstable donors. The OPO believes that the ability to monitor and assess continuously fluid parameters, pressure and blood flow would enable the OPO coordinator to recognize and apply situation-specific interventions that target improving hemodynamics and hence improve end-organ perfusion. LiDCOplus monitoring is minimally invasive and brings the advantage that such care could be initiated immediately by the OPO coordinator (frequently a nurse) without the need for inserting specialized catheters (e.g. the invasive pulmonary artery catheter) or requiring specialist physician support. I am delighted to report that minimally invasive hemodynamic monitoring has indeed helped to improve donor outcomes in these cases, with a significant increase in the number of organs available for transplantation. This issue has been further studied by the University of Pittsburgh in a recently published prospective study. This confirmed our expectation that donors who were adequately resuscitated with the LiDCOplus monitor provided a significantly higher number (3.7 compared with 2) of organs per donor that were suitable for transplant, whereas donors who had inadequate volume resuscitation were associated with a higher inflammatory response. These results have generated considerable interest within the transplantation community, which is beginning to translate into sales of our technology into this developing market. Regulatory affairs and product quality During the period both our EC notified body and the US FDA conducted surveillance visits. LiDCO is pleased to report that no non-conformity issues were raised by either group of inspectors. Our product quality and customer satisfaction record continues to be excellent. Business Review - Summary Table Year to 31 Jan Year to 31 Jan Increase/ Increase/ 2008 2007 (decrease) (decrease) % Revenue by type (£'000) - Monitors 1,934 1,443 491 34% - Sensors 1,986 1,818 168 9% - Fee per Use & Rentals 78 111 (33) -30% - Licence Fees 53 70 (17) -24% - Total Revenues 4,051 3,443 608 18% Monitors sold & placed (Units) 151 112 38 34% Sensor and Fee per Use Sales (Units) 26,081 24,316 1,765 7% Installed Base (year end) 1,184 1,035 149 14% Geographic segmental sales reporting USA O Overall sales revenue has increased by 62%* to £1.24m (2006/7: £0.77m) O Monitor sales increased by 184%* to £0.74m (2006/7: £0.26m) O Sensor, fee for use & rental sales stable* at £0.50m (2006/7: £0.51m) * In constant currency terms, overall revenue increased by 70%, monitor sales by 200% and sensor sales by 6% UK O Overall sales revenue down 14% to £1.72m (2006/7: £2.01m) O Monitor sales revenue down 43% to £0.52m (2006/7: £0.92m) O Sensor and, fee for use sales of £1.20m up 10% (2006/7: £1.09m) Continental Europe O Overall sales revenue up 71% to £0.87m (2006/7: £0.51m) O Monitor sales up 139% to £0.55m (2006/7: £0.22m) O Sensor sales up 14% to £0.32m (2006/7: £0.29m) Rest of World & Other Income O Overall sales revenue up 39% to £0.22m (2006/7: £0.15m) O Monitor sales up 253% to £120,000 (2006/7: £34,000) O Sensor sales down by £9,000 to £40,000 (2006/7: £49,000) O License fees income decreased to £52,000 (2006/7: £70,000) FINANCIAL REVIEW IFRS The attached financial statements for the year to 31 January 2008 have been prepared for the first time in accordance with IFRS and the impact of IFRS has had no effect, other than presentation, on the reported figures and there were no material changes to the opening balances. Where necessary, comparative figures previously reported under UK GAAP have been restated for the transition to IFRS. Operating results Turnover increased by 18% to £4.05m (2006/07: £3.44m). The installed base of monitors increased in the year by 149 units to 1,184 (2006/7: 1,035 units), representing an increase of 14%. This has led to an accompanying increase in sensor usage of 7% from 24,316 to 26,081 units. Product margins against external procurement costs have been maintained at 78% on monitors and modestly improved to 87% on disposables. The overall reported gross margin on sales is 64%, down from 67% in 2006/7 with the decrease being almost entirely accounted for by the increased monthly payments to Med One. Excluding the Med One monthly payments, the gross margin on sales was 75% (2006/ 07: 76%). Administrative and distribution expenses were reduced by £320,000 (6%) from £4.94m to £4.62m. This is principally due to savings in staff costs, professional fees and premises costs which were offset by increases in depreciation and amortization. As a result of the increase in revenues and reduced costs, operating losses decreased by £613,000 to £2.01m (2006/07: £2.62m and the loss per share was reduced to 1.50 pence (2006/07: 2.10 pence). Taxation As the Group is still at the pre-profit stage there was no tax charge for the year. In addition the Group has a deferred tax asset of £6.1m to offset against future profits, although this has not been recognized in the accounts. In the UK, the Group qualifies for research and development (R&D) tax credits which amounted to £120,000 in 2007/08 which are shown in the income statement. Cash, financing and working capital The net cash outflow from operating activities remained level at £1.10m (2006/ 07:1.12m) despite the reduction in operating losses. This was largely as a result of exceptional cash receipts in 2006/07 from two years of R&D tax credits and the collection of a large number of old outstanding debtors. Excluding the receipt of R&D tax credits, the net cash outflow from operating activities has reduced by 30% over the last two years. The net cash outflow before financing increased from £1.60m to £1.69m as the result of increased spending on both fixed and intangible fixed assets. Debtor days at the year end showed a slight improvement to 111 days compare with 115 days last year. Creditor days have reduced from 45 days to 29 days. Stock at the year end as a percentage of turnover has reduced from 31% to 21%. In November 2007, the Company placed 23,647,074 shares at a price of 8.5p per share raising £2m before expenses with financial institutions and a number of private investors. The expenses relating to the placing were £67,000. As anticipated in last year's financial statements, the Group made use of its £1m (US$2m) Laurus loan facility and drew down £500,000 in August 2007. The amount drawn down at the year end stood at £553,000. The Laurus loan facility is due for repayment in August 2008 and it is anticipated that this will need to be replaced by a new facility of similar size. The Company is in discussions with a number of lenders and the Board is reasonably confident that this facility can be replaced. As a result of the placing and the draw down of the loan facility, the Group's cash balances at the year end were £2.23m compared with £1.47m the previous year. PRODUCT DEVELOPMENT The last year has been a very active one for product development. Our development strategy is to respond quickly to market opportunities by providing proprietary hemodynamic monitoring products. The LiDCOrapid development follows on from the launch of the LiDCOplus version 4.1 software, the new LiDCO PC products LiDCOview(SE) and LiDCOview(PRO) (launched) and LiDCOlive (in development and discussed below). LiDCOrapid was launched on target in April of this year with the first shipments of product to our distributor customers. Customer response to this exciting product has been exceptional and we are expecting this product to represent a new standard of care for major surgery patients. We believe that the combination of the LiDCOplus and LiDCOrapid monitors and our data analysis PC software products collectively represent the most evolved platforms available today for the care and hemodynamic optimization of both intensive care and surgery patients. LiDCOlive - data display independent of location The LiDCOlive development is aimed at the creation of a virtual intensive care unit, taking real-time hemodynamic patient data and easy-to-interpret screens to the clinician - irrespective of their physical location. Location-independent monitoring is required to offset the growing shortage of the highly skilled staff needed to care for these patients. LiDCO is therefore developing a PC-based software product called LiDCOlive that can display the LiDCOplus Monitor trend screen and real-time patient data on any PC or laptop regardless of location. The clinician, together with the nurse at the patient's bed-side, can then discuss potential treatment approaches and immediately see the effects of their agreed change in fluid or drug therapy. This "virtual ICU" approach using LiDCO's technology has the potential to make a considerable improvement in the care of high-risk patients and to make best use of the skills of the hospital clinical staff. The prototype LiDCOlive product has been successfully demonstrated in Japan, the Czech Republic and the USA at various international meetings this year. One of the trialists of LiDCOlive, Dr. Loua Shaikh (Department of Critical Care Medicine, Frimley Park Hospital, UK), said: "In terms of patient care, the impact of time and distance on the delivery of experience and expert knowledge to the bedside are considerably diminished." The LiDCOlive software is still a product in development but we expect the first generation of this product to be available during the second half of 2008. Terry O'Brien Chief Executive Officer 23 April 2008 CONSOLIDATED INCOME STATEMENT For the year ended 31 January 2008 Year Year ended ended 31 January 31 January 2008 2007 £'000 £'000 Revenue 4,051 3,443 Cost of sales (1,442) (1,127) Gross profit 2,609 2,316 Distribution costs (93) (69) Administrative expenses (4,526) (4,870) Loss from operations (2,010) (2,623) Finance income 49 69 Finance expense (25) (35) Loss before tax (1,986) (2,589) Income Tax 120 204 Loss for the year attributable to equity holders of the parent (1,866) (2,385) Loss per share (basic and diluted) (p) (1.50) (2.10) All transactions arise from continuing operations. There were no recognised gains or losses other than the loss for the financial year. CONSOLIDATED BALANCE SHEET At 31 January 2008 Restated 2008 2007 £'000 £'000 Non-current assets Property, plant and equipment 833 854 Intangible assets 747 656 1,580 1,510 Current assets Inventory 839 1,080 Trade and other receivables 1,329 1,279 Current tax 120 142 Cash and cash equivalents 2,234 1,474 4,522 3,975 Current liabilities Trade and other payables (707) (778) Deferred income (41) (68) Borrowings (563) - (1,311) (846) Net current assets 3,211 3,129 Total assets less current liabilities 4,791 4,639 Equity attributable to equity holders of the parent Share Capital 710 592 Share premium 22,550 20,723 Merger reserve 8,513 8,513 Retained earning (27,016) (25,240) Total equity 4,757 4,588 Non-current liabilities Finance lease liability 34 51 Total non-current liabilities - 51 Total equity and non-current liabilities 4,791 4,639 CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 January 2008 Year Year ended ended 31 January 31 January 2008 2007 £'000 £'000 Operating loss (2,010) (2,622) Depreciation and amortisation charges 611 412 Share based payments 88 66 Decrease in inventories 241 196 Decrease/(increase) in receivables (50) 495 (Decrease)/increase in payables (96) 87 Finance expense (25) (35) Income tax credit received 142 283 Net cash outflow from operating activities (1,099) (1,118) Cash flows from investing activities Purchase of property, plant & equipment (170) (137) Purchase of intangible fixed assets (467) (410) Interest received 49 69 Net cash used in investing activities (588) (478) Net cash outflow before financing (1,687) (1,596) Cash flows from financing activities Issue of ordinary share capital 1,945 3,245 Convertible loan drawdown/(repayment) 502 (1,126) Net cash generated from financing activities 2,447 2,119 Net increase in cash and cash equivalents 760 523 Opening cash and cash equivalents 1,474 951 Closing cash and cash equivalents 2,234 1,474 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY For the year ended 31 January 2008 Share Share Merger Other Retained Total capital premium reserve reserve earnings equity £'000 £'000 £'000 £'000 £'000 £ At 1 February 2006 503 17,566 8,513 (88) (22,833) 3,661 Issue of share capital 89 3,157 - - - 3,246 Transfer - - - 88 (88) 0 Share based payment expense - - - - 66 66 Loss for the year - - - - (2,385) (2,385) At 31 January 2007 592 20,723 8,513 - (25,240) 4,588 Issue of share capital 118 1,827 - - - 1,945 Share based payment expense - - - - 90 90 Loss for the year - - - - (1,866) (1,866) At 31 January 2008 710 22,550 8,513 - (27,016) 4,757 The share premium account represents the excess over the nominal value for shares allotted. The merger reserve represents a non distributable reserve arising from historic acquisitions. The other reserve relates to the former investment in shares in the Employee Share Ownership Trust. This investment is no longer classified as an investment of the Company or the Group. NOTES TO THE FINANCIAL STATEMENTS 1. NATURE OF THE FINANCIAL INFORMATION These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and under the historical cost convention and were approved by the Board on 23 April 2008. They are presented in sterling, which is the functional currency of the parent company and the Group. The preparation of financial statements in accordance with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates. The policies have changed from the previous year when the financial statements were prepared under applicable United Kingdom Generally Accepted Accounting Principles (UK GAAP). The comparative information has been restated in accordance with IFRS. There were no material changes to the opening balances. The date of transition to IFRS was 1 February 2006 (transition date). These results are audited, however the financial information does not constitute statutory accounts as defined under section 240 of the Companies Act 1985. The financial information for the year ended 31 January 2007 has been derived from the Group's statutory accounts for that year, as filed with the Registrar of Companies. The auditors' report on the statutory accounts for the year ended 31 January 2007 was unqualified and did not contain statements under section 237 (2) or (3) of the Companies Act 1985. The financial statements have been prepared on the going concern basis, which assumes that the Group will have sufficient funds to continue in operational existence for the foreseeable future. The Group has continued to invest in the development of its operations and in particular its sales and marketing presence by continuing to invest in both its direct and indirect sales channels during the year and in a new product offering. As a result the Group has continued to trade at a loss during the year ended 31 January 2008. The directors have approved forecasts for the foreseeable future, which indicate that the Group will have sufficient funds to trade during that period. The forecasts assume a level of new sales about which there is uncertainty. If such new sales are not achieved, the directors believe that there are sufficient opportunities available to them to obtain additional funding from sources which are currently being explored, to enable the Group to continue to develop its operations and to meet its liabilities as they fall due. The convertible loan from Laurus is due for repayment in August 2008 and it is anticipated that this will need to be replaced by a new loan facility of similar size. The company is in discussion with a number of lenders and the board are reasonably confident that the facility can be replaced. Accordingly the financial statements have been prepared on a going concern basis. The financial statements do not include any adjustments that would be required in the event that the Company had insufficient funding available. 2. DIVIDENDS It remains the Company's policy that no dividends will be paid until future operations have provided appropriate levels of distributable profits and cash. 3. DISTRIBUTION Copies of this statement will be available for collection free of charge from the Company's registered office at 16 Orsman Road, London N1 5QJ. An electronic version will be available on the Company's website, www.lidco.com. This information is provided by RNS The company news service from the London Stock Exchange