New technologies, reducing cash consumption
Deltex Medical is a UK based manufacturer of minimally invasive haemodynamic monitor technologies: ODM is the only technology to measure continuously blood flow in the central circulation in real time, enabling clinicians to respond quickly to changes in flow and to optimise patient care.Headline performance at the H1’17 results illustrated total revenue growth of 7% from £2.7m to £2.9m continuing from H2’16 the export-led return to growth. As flagged, performance in RoW territories was affected by ordering patterns, with order flow £0.1m lower than during the last period. Cost savings in probe tip assembly contributed to an increase in gross margin from 64% to 76%, and to a narrowing loss from £1.7m in H1’16 to £1m in H1’17.
US revenues increased nicely by £0.3m from £0.9m to £1.2m, up 35% (or 20% at CER) including sales of single use ODM probes which grew 21% from £0.8m to £1.0m. Total sales to distributor markets fell 9% to £0.7m with RoW distributor ordering patterns a factor – Far East and Latin America probe sales fell 47%. In direct markets, UK revenues appear to be bottoming, falling 3% from £1m with probe sales down 12% to £662,000.
The launch in May of High-Definition Impedance Cardiography (HD-ICG) technology on CardioQODM+ platform gives the Company three leading advanced haemodynamic monitoring technologies on one platform. This allows a broader range of clinical settings to be addressed in hospitals by clinicians, whilst providing additional revenue streams to Deltex.
We leave our revenue forecasts largely unchanged, making minor adjustments that take our 2017 adjusted loss before tax to £1.77m (from £1.83m) and from £0.44m to £0.33m in 2018. After some minor adjustments to working capital measures, our end of 2017 gross cash estimate is now £540,000 (up from £350,000).
Our updated valuation of Deltex Medical Group, using a 10% WACC – rolling forwards and including the newly issued shares, plus adjusting forecasts as described – rises to £31.8m, up from £30m previously. That is equivalent to 10.2p per share.
Deltex Medical Group is engaged in the manufacture and marketing of oesophageal Doppler haemodynamic monitoring systems used in surgery and intensive care. Through its subsidiaries, Co. is engaged in the manufacture and marketing of medical devices in the United States, Spain and Germany; and the provision of employee services. Co.'s product, CardioQ-ODM enables doctors to fine-tune a patient's cardiac performance during surgery using a technique known as Doppler-guided fluid management. The CardioQ-ODM directly measures central blood flows, the indicator of potentially harmful changes in haemodynamic status that are common to all patients having surgery.
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