Resetting the trend, probe sales positive
​FY16 group revenues reached £6.3m in FY16 vs £6.2m (ex-research barter sales of £0.2m) marginally lower than the £6.4m total in FY15. KPI probe sales reached £5.4m (£5.2m) with sustained momentum from US revenues, up 40% to £1.9m in FY16, counterbalancing UK weakness. Looking ahead, with two new platform accounts added post year end, DEMG has reached a milestone of 30 US platform accounts, which could see higher margin US sales outperform other geographies for the first time in 2017.
By contrast, as flagged, UK sales declined 26% vs FY15 to £1.9m as a result of attrition and the lack of advanced haemodynamic management within the NHS. Meanwhile, revenues from international sales grew 20% to £1.7m led by France, Scandinavia, Peru and Korea, illustrating the potential in these most ODM-receptive markets.
The overall picture is of higher margin US sales on track to lead revenues from FY17. This, coupled with cost-cutting initiatives including in-house probe assembly leading to c £30,000 net savings/month, suggest margin expansion towards historical 70% levels is in sight. DEMG‘s end 2016 cash position of £0.6m, net of an £0.5m fund raise in July, provides short term funding. Pressure on sales has led to downgrades and a volatile 12-month share price performance. The current EV sales multiple of 2x implies expectations of further downgrades, although the current run rate in the US suggests DEMG could have reversed the overall financial downward trend. We will reinstate forecasts at the FY16 results due to be reported in the week of 20 March.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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