Deltex Medical Group plc (LON:DEMG) Chief Executive Officer Ewan Phillips caught up with DirectorsTalk for an exclusive interview to discuss their interim results for the six months ended 30 June 2017
Q1: Now, you announced your interim results this morning, can you talk us through the highlights?
A1: The big highlights are that sales are up and that’s the first time since 2014 we’ve shown growth so that’s good. The gross margin is up significantly so on the consumables from 70% to 80% so that’s very good and we reduced our operating costs by 0.3 million. So, overall, we’ve got sales growing, margins increasing, costs reducing and that comes through in a significant reduced loss, I think crucially in terms of both the underlying and actual cash consumption, those are heading in the right direction quite quickly.
Q2: Can you tell us a bit more around the new products that have been launched this year?
A2: Deltex Medical have had 2 new products so far this year. To deal with the straightforward one, for the first time we’ve got a system specifically for vets so slightly different software, slightly different algorithms but as you know it’s a copy of what we’ve done for humans, just tweaked the vet bit. At the moment, we’ve got the probes there, really designed for the smaller animals, sort of large dogs down to rabbit-size I suppose, we are experimenting with bigger animals and since seen the most ridiculous 3.5-metre-long probe which apparently is for horses but it seems to be twice as long as the horse! So, we’re planning in that area, that’s a pretty simple thing, I think the plan there will be in the next year or two is to find a specialist distributor that’s got some sort of global reach.
More importantly, back in May we released, in the UK, another cardiac output monitoring technology, High Definition Impendence Cardiography, it’s entirely non-invasive and it’s perfect for your awake patient and very good in intensive care. That’s really important, I think, strategically because that means we’ve now got three technologies on the one platform, we’ve got the Oesophageal Doppler, which is our proprietary technology, we’ve got Pulse Pressure Waveform Analysis which is quite a good entry-level technology, that’s the one that’s most common in the market because it’s probably the easiest to do and then we’ve got this one, the software between the two the Impendence Cardiography. Now, that’s really important because it means we can now go to a hospital and we can sell them, on one platform, a solution that works from newborns through to the very old that works in the clinic on awake patients all the way through to very sick people in intensive care. It can be used pretty easily from fairly early-stage trainee nurses through to world-leading experts, the Professors and everything like that.
So, it’s a really big step forward for us, we’ve still got a few bits and pieces to add on to it which will give a far more non-invasive option which will start to give more things that combine everything but the core is there. We’re moving from something, one technology, to certainly multiple technologies and all-round hospital solutions so that’s a big step but we won’t really see the benefits coming through until the beginning of the second half and the next couple of years. I’m very excited by that and I think everyone that works for the company is very excited about that.
Q3: Broadening your product offering, what does it mean for Deltex Medical in the future?
A3: Well, it means we can really start to become the sole supplier of haemodynamic equipment across whole hospitals. Although the technology we’ve had and built the company on, the Oesophageal Doppler, it’s a very sophisticated technology, in my view it’s lots and lots and lots of patients that should have it used on them but it does take skilled operators to do that, it’s not very good to use on awake patients, we can’t really say we should be the sole supplier, and indeed nor can any of our competitors. I think now if we can get this these new products offered, we can move towards that, that gives you a lot more flexibility to how you can work with your customers, particularly these days when most hospital systems are cash-strapped so they’re looking for deals that work for both parties to make things happen. At the same time, it means you can really take these modern standards of care and move them forward quite a lot and benefit thousands of patients in every hospital rather than tens of hundreds.
Q4: How are Deltex Medical set for the rest of 2017?
A4: Well, second half is traditionally stronger so we expect to have more sales in the second half, now that’s partly seasonal but it’s also because our international business which sells into distributors, probably best part of half of that is done towards the end of the year so that’s a big time for us. The international business in the first half due to timing differences was down £0.1 million so we’d expect to recover that and show growth so we should see quite strong growth coming through which overall in the second half, that’s always as always, fingers crossed. That, with the continued improvement in cash performance we’ve seen that improving in margins, that sort of comes through, the cost of productions.
So, we would hope that we’re getting pretty close to some very good metrics on the underlying cash consumption in the second half.
