Audited Final Results

Induction Healthcare Group PLC

31 July 2023

 

Induction Healthcare Group PLC

("Induction", the "Company", or the "Group")

FY23 Audited Final Results

Induction (AIM: INHC), a leading digital health platform driving transformation of healthcare systems, announces its audited final results for the year ended 31 March 2023.

Financial Highlights

·    Revenues up 12.1% to £13.6m¹ (proforma 2022: £12.1m²)

·    Gross margin steady at 63.1% (2022: 63.1%)

·    Business rightsizing programme completed by year end with projected annual savings of £6m compared to FY23

·    Operating loss narrowed to £4.8m³ (2022: (£5.3m))

·    Net cash at the year-end of £4.3m (2022: £7.5m)

Operational Highlights

·    Attend Anywhere (video conferencing platform) revenues increase by 9.9% and margins maintained despite competitive pressures.

·    Renewed Attend Anywhere national contracts with NHS Scotland (3 years) and NHS Wales (1 year with option to extend).

·    Zesty patient management platform revenues increase by 50% despite delays in Government funding and NHS Wayfinder programme. More than 1 million UK patients are using Zesty to manage their care.

·    Completion of NHS Single Sign On and integration of core portal features into the NHS App.

·    Completed business right sizing and cost reduction programme which puts us on track with our commitment to self-sustaining growth and cash breakeven in 2024. Removed circa £6.0m annualized costs.

·    Initiated an integrated product development programme to allow patients and clinicians to use our entire product suite seamlessly, creating a strong platform for future growth.

Post Period End Highlights

·    Paul Tambeau appointed CEO and John McIntosh appointed CFO. Christopher Samler returns to a non-Executive Chair position.

·    Non-core asset (Switch) sold for a material consideration.

Paul Tambeau, CEO of Induction Healthcare, said: "We are pleased to report an overall revenue growth rate of over 12% despite market headwinds and at the same time as we completed on significantly rightsizing our cost base. The business is now firmly on a sustainable footing and this, together with our fast-growing patient management platform (Zesty), which grew significantly, indicates that we are well positioned for the coming year."

Note 1: Reported revenue from continuing operations is stated after reclassifying assets held for sale under IFRS5 (Induction Switch and Induction Guidance £0.7m).  These product assets were held for sale at year end 31 March 2023 and classified under discontinued operations (Total recognised revenue from continuing operations  £12.9m plus discontinuing operations £0.7m was £13.6m). Note 2: Reported revenue from customer contracts as at 31 March 2022 is stated after the application of IFRS3 being a fair value adjustment (£4.2m) relating to the deferred revenue acquired as part of the Attend Anywhere Pty Limited acquisition in June 2021. Had this adjustment not been applied, pro-forma recognised revenue from customer contracts for the year would have been £12.1m compared with the reported figure of £7.9m.  Note 3: Operating Loss from continuing operations (£17.4m) before depreciation £0.1m, amortisation £4.8m and non-cash impairment £7.7m.

Annual Report and Accounts and Notice of AGM

The Annual Report and Accounts and notice of AGM will be available later today on the Company's website: https://inductionhealthcare.com/investors/financial-reports-and-publications/.  Copies of both documents will be posted to shareholders in due course.

Enquiries

Induction Healthcare Group PLC Christopher Samler, Chair Paul Tambeau, Chief Executive Officer	[phone] [phone]
Singer Capital Markets (Nominated Adviser and Broker)	[phone]
Philip Davies Alaina Wong Jalini Kalaravy

About Induction - www.inductionhealthcare.com

Induction (AIM: INHC) Induction delivers a suite of software solutions that transforms care delivery and the patient journey through hospital. Our system-wide applications help healthcare providers and administrators to deliver care at any stage remotely as well as face-to-face - giving the communities they serve greater flexibility, control and ease of access. Purpose-built for integration with leading Electronic Medical Record (EMR) platforms, our products offer immediate stand-alone value that becomes even greater when integrated with pre-existing systems.

Used at scale by national and regional healthcare systems, as well non-health government services, our applications are relied upon by hundreds of thousands of clinicians and millions of patients across almost every hospital in the British Isles.

Highlights from Annual Report

Chair's Statement

The year ending March 2023 has been a particularly challenging period for Induction. The Group has faced both market challenges, as the NHS has struggled to come to terms with the new post-Covid reality, and internal challenges precipitated by our own managerial failings. As a Board we recognised and addressed both of these strong headwinds, putting in place a series of measures which have been both painful and absolutely necessary, but which have been vindicated.

Having reached the middle of the first quarter of financial year 2024, it is apparent that the strong medicine we have administered to the business is having a positive impact and, although it is too early to be definitive, the future looks distinctly brighter. Market opportunities are also opening up as Government policy stabilises in the post-Johnson/Truss era.

The lack of healthcare policy consistency immediately post-Covid, as well as the lack of clarity over central funding, characterised most of the financial year. As waiting lists expanded and the Department of Health struggled to line up behind clear, funded policies to address the problem, the previously announced commitments to invest in digital platforms were constantly delayed. As a consequence, expectations of growth, particularly with NHS commissioning groups for our appointment setting platform Zesty were seriously delayed.

By early 2023 it was becoming clear that a more consistent and properly funded digital approach to the challenge of cutting waiting times was emanating from the Department of Health. It is from this revised approach that Induction hopes to benefit from over the coming year and the current indications are positive.

At the same time our expected growth in the Zesty platform has been delayed by policy indecision, so also our video conferencing platform (Attend Anywhere) has come under pricing and competitive pressure from a combination of post-Covid changes in usage patterns, and a more active challenge to our previously strong market position.

Attend Anywhere is a video platform specifically designed for clinicians and hospitals and their patients and has several unique features which directly address these needs. However, these features are costly to support and it is often tempting for hospital trusts to opt for Microsoft Teams or similar which are perceived as being 'free'. Despite these pressures, Attend Anywhere has retained most of its share - retaining NHS Wales, NHS Scotland and many of the English Trusts, demonstrating the benefits of a health-specific application.

As reported at the time, last year's financial audit was severely delayed and this, combined with other key indicators, led the Board to conclude that significant changes were necessary to the management and internal processes of the company.

In December 2022 we replaced the senior management with an interim team - with the Chair stepping into the executive role, Paul Tambeau moving to interim COO and John McIntosh interim CFO position.  The Board and the executive moved quickly to stem the cash outflows and to create a sustainable business that would ensure that we have no requirement to come to the market for more cash.

Our previous CEO (James Balmain) moved to a commercial sales position focused on Zesty. This move ideally suited his skills and expertise and his ongoing activity in this role, as well as providing the link between sales and product definition, is proving invaluable.

The 'rightsizing' of Induction necessitated cutting both our ambitions, our activities, and our headcount. We put on hold our ambition to grow by acquisition and at the same time we significantly reduced the breadth of our activities. We cut out non-core activity (i.e. activity that doesn't relate exclusively to secondary healthcare) and set about divesting our non-core assets (the clinical apps comprising Switch and Guidance). At the same time, we reduced our headcount and associated cost base by circa 30%.  We also ruthlessly examined our hosting cost base and have seen that cost fall by over 35%. The resulting rightsizing programme has eliminated annualised expenditure of c. £6 million, putting the Group on a sustainable footing for the future. All cash costs relating to the Group's restructuring have been fully recognised in the results to 31 March 2023. 

The full year results outcome was an EBITDA loss on continuing operations which narrowed to £4.8m (2022: £5.3m) with the rightsizing process completing in March 2023. To this end the full year results before tax for 31 March 2023 are a watershed, reflecting the impact of certain material non-cash impairment charges. Inclusive of a non-cash impairment charge of £7.7m (2022: £ nil), the Group's loss for the year reached £17.4m (2022: Loss £8.4m).  

These measures were painful on every level, however we now have a sustainable business which is smaller, leaner and significantly more focused. We also have a business which is better able to meet the digital challenges, as well as the opportunities, that the fast-changing NHS presents.

In response to the challenge we faced in the middle of last year we have also sought to enhance our Board - both in terms of people and our processes. To this end we appointed Ian Johnson as our senior non-executive director. Ian has a wealth of experience in the healthcare environment. Meanwhile we said farewell to Leslie-Ann Reed who resigned at the end of her term in October 2023. More recently, and subsequent to the end of the financial year (May 2023), we announced that Hugo Stephenson, a director and founder, resigned at the end of his term. We thank both for their service to Induction.  Consistent with our commitment to hire a permanent leadership team, Paul Tambeau (CEO) and John McIntosh (CFO) were appointed to the board on 30 June 2023.  At the same time, with the outlook more positive, I stepped back to the non-executive Chair position.

Whilst, as a Board, we know that these changes have been fundamental to a sustainable future, we also know that they would not have been made possible without the drive and support of our leadership teams and all employees - across all the geographies we operate in. As a result of their action and determination we can look forward to significantly improved prospects for 2024 and we genuinely thank them for their part in turning our business around. 

Finally, it remains for me to thank our long-suffering shareholders. You have placed your confidence in the Board, the leadership team and in me. I believe that in time we will justify that confidence.

Christopher Samler

Non-executive Chair

CEO Statement

Double Digit Growth

FY23 saw a 12.1% increase in recognized revenue from all operations and 9.7% increase in ARR. Whilst this partly relates to the business being able to recognize a full year of Attend Anywhere revenue, our main growth engine was Zesty, growing from £1.5m in FY22 to £2.2m in FY23.

In addition to this growth within Zesty, there are a number of Trusts which have purchased Zesty via our partners Oracle Cerner and SystemC for deployment in FY24 but are yet to be recognised as contracted ARR while we finalise flow-through contracting with our partner. Induction also played a leadership role in partnering with the NHS Wayfinder Programme in embedding core Zesty functionality into the NHS App, including single sign-on. This will position Induction well for growth into the future as the NHS seeks to move more patient-facing activities into the NHS App.

With our Attend Anywhere business, we were pleased to renew our national contract with NHS Scotland contract for 3 years, and our NHS Wales national contract for another 1 year, with the option to renew for an additional year. We retained a large proportion of our NHS England contracts despite challenging market conditions.

Market Conditions Impacting Growth

Renewals in our Attend Anywhere business, especially within NHS England, were under pressure as the national funding that supported these contracts during COVID came to an end. This put downward pressure on pricing as Trusts, many of which are already under financial constraint, had to find the budget to fund the renewal. We were successful at renewing 81% of these contracts. With the NHS's national contract with Microsoft, we also saw Trusts looking at Teams as an alternative solution. Whilst Teams doesn't have some of the health-specific capability of Attend Anywhere, such as robust waiting room functionality, we've had to work with Trusts in recognizing the administrative burden this would put on them. Finally, with the health care sector moving to more in-person appointments following COVID, we have seen a decline in usage of video consultations. Our Customer Success team has prioritized getting closer to our customers to help drive utilization and to help generate continuing value for patients and clinicians.

Notwithstanding the strong growth in our Zesty business, there were delays in the NHS Wayfinder program as well as the provision of national funding for Trusts to procure a portal. NHS procurement cycles and processes also factored into our growth in FY23.

Business Rightsizing & Focus

In the last quarter of FY23, we executed a plan to right-size the business and get our costs in check so that Induction was on a more sustainable footing. This involved reducing the Group's headcount (across a mix of employees and contractors) across our global team. It also involved reducing our operating costs, particularly web hosting and professional fees. The result of this program was circa 30% being cut from the c.£1.5m monthly operating costs incurred at the beginning of the final quarter of the year. 

In completing the restructuring, we also reshaped business processes and provided a much-needed focus to all areas of the Group's operation.  The result is a better understanding of the economics of our products and where and how it should be playing to maximize margin. In March 2023, we gained approval of our FY24 Operating Plan and Budget which built on our approach of closely managing costs, focusing on key priorities, and delivering value to the customer.

In focusing the business on our core strategy, we had to look at our product suite. With the development of a new integrated product strategy, our focus going forward will be on supporting the interactions between care teams and patients. That meant we have decided to divest assets that don't align with this strategy, notably Induction Switch and Induction Guidance. The Induction Switch business was subsequently sold for a material undisclosed sum post year end. We also decided to shut down our Booking application since much of this functionality sits within Zesty, and it wasn't generating sufficient revenue to justify significant investments required to upgrade the technology.

Finally, in the short term, we are going to be focused on the UK market. International growth is an important part of the Group's future, but only once we have stabilized the UK business and matured our business operations to take on new territories.

Looking Ahead with Renewed Focus

Within our FY24 Operating Plan, we're going to be focused on executing on 4 Key Goals:

1.    To be a profitable and sustainable growing business to deliver our commitments to shareholders. This involves strengthening our sales capabilities and capitalizing on near-term growth opportunities. We are working to industrialise systems and processes within the business to ensure we continue to closely monitor our cost base.

2.    To successfully develop our Integrated Product. We are investing in bringing functionality from Zesty, Attend Anywhere and FormBuilder together for customers in a way that enables us to be responsive to customer needs. With these building blocks in place, we will be looking at how we expand our capabilities to meet growing customer needs.

3.    To be customer centric and commercial in everything we do. We will get closer to our customers to truly understand their pressures and how we can support them. Our customers also have valuable insight into how our integrated product should develop.

4.    To implement and continuously develop an inclusive, performance driven and rewarding employee experience. We are investing in the growth and development of our people as we seek to build a culture where people want to grow their careers.

Outlook

As we execute on our plan, we believe there are market factors that can generate new growth for the business. Underlying demand for digital healthcare services is growing as the NHS seek to make up for COVID-driven backlogs, while at the same time treating new patients. This has resulted in potential new funding streams from the NHS to tackle these challenges, presenting a strong opportunity for the business going forward.

The NHS continues to prioritize further developments within the NHS App, enabling Induction to become more embedded in the health ecosystem. There is also new funding available to Trusts to procure or enhance their patient portals, which Induction is well positioned to capitalize on.

We're also seeing increasing demand for integrating the capabilities of both our Zesty and Attend Anywhere platforms, creating a better experience for clinicians and patients.

Given the rightsizing changes we have already implemented, and the growth opportunities in front of us, we are confident this puts the Group in a sustainable position. 

Paul Tambeau

CEO

Financial Review

Revenue

The twelve months to 31st March 2023 was the first period the Group has benefited from a full year of recognised revenue from its Induction Attend Anywhere acquisition. 

Revenue from contracts with customers for the year to 31 March 2023 per table below was £13.6m (pro-forma 2022: £12.1m). Excluding a non-cash accounting adjustment revenues from all operations grew 12.1% in the year to 31 March 2023.

In our prior year reporting for the twelve months to 31st March 2022 we applied an adjustment to revenues to account for IFRS 3 requirements.  Consequently, as a more appropriate year on year comparison, recognised revenue for the year of reporting should be compared with prior year pro-forma full year revenue.  This period end also saw our non-core products, Switch and Guidance being put up for sale.  These two product assets are classified as discontinued operations on the face of the P&L under IFRS5 - as assets held for sale)

	31 March 2023 £000	31 March 2022 £000 Re-presented
Revenue analysis
Revenues from customer contracts 1	13,584	12,116
Non-cash IFRS3 adjustment 2	(74)	(4,209)
Revenue from all operations	13,510	7,907
Revenue - Discontinued operations 3	627	6764
Reported revenue
Revenue - continuing operations	12,884 4	7,231

1 Reported revenue from continuing operations is stated after reclassifying assets held for sale under IFRS5 (Induction Switch and Induction Guidance £0.6m).  These product assets were held for sale at year end 31 March 2023 and classified under discontinued operations (Total recognised revenue from continuing operations £12.9m, plus IFRS3 adjustment (£0.1m) and discontinued operations £0.6m was £13.6m, 2022: £12.1m).

2 Reported revenue from customer contracts as at 31 March 2022 is stated after the application of IFRS3 being a fair value adjustment (£4.2m) relating to the deferred revenue acquired as part of the Attend Anywhere Pty Limited acquisition in June 2021. Had this adjustment not been applied, pro-forma revenues from contracts with customers would have been £12.1m.

3 Revenue from product assets (Induction Switch and Induction Guidance) is disclosed under IFRS5 as assets held for sale.

4 After excluding discontinued operations revenue (£0.6m).  For reference only the comparative recognised 2022 revenue was £0.7m.

The majority of the Group's revenue came from Induction Attend Anywhere which has grown by 9.9% to £10.8m (2022: £9.8m), while revenue from Induction Zesty has leapt to £2.2m (2022: £1.5m).  Induction's other clinical apps (Switch and Guidance) delivered £0.6m (2022: £0.7m).

The headwinds which curtailed revenue growth in the second half of the year predicated a rightsizing programme to bring the Group's cost base into line with our sustainable revenue growth.  The restructuring was completed by year end and all associated costs have been provided for in the year to 31st March 2023.

While focus is on sustainable recognised revenue growth management also takes note of ARR. ARR differs from recognised revenue due to the timing of revenue recognition, which includes amounts for partial years based on contract start dates, whereas ARR is an annualised amount. Recognised revenue also includes non-recurring non-SaaS fees.

ARR from all operations as at 1st April 2023 was £13.5m (2022: £12.3m).  This represented the annualised value of the recurring revenue base that expected to be carried into future periods, and its growth is a forward-looking indication of recurring revenue growth.

Gross profit

Reported Gross profit was £8.1 million (2022: £5.0 million) with gross margin steady at 63.1% versus prior year reported margin from all operations (2022: 63.1%).  Direct costs are predominantly made up of web hosting expenses, sales and delivery staff costs.  The year-on-year increase in gross profit is not directly attributable to revenue growth due to the prior year FY22 accounts reporting revenue from customer contracts after IFRS 3 fair value adjustment. Had the prior year IFRS 3 adjustment not been applied prior year Group revenues would have been £12.1m on a pro-forma basis.  Given the consistent year-on-year gross margin percentage, growth of gross profit is more comparable to recognised revenue growth from customer contracts of 12.1% as described in the Revenue section above.

Capitalised development costs

Development expenses for the year were £9.3m (2022: £6.0m) an increase of £3.3m. The reported cost increase for the year to 31 March 2023 is made up of two components: a lower level of capitalised development cost of £2.2m and, an increase of development expenses of £1.1m.

Prior year additions to internally generated intangible assets were £3.1m reflecting the amount capitalised in the year to 31 March 2022. The comparable figure for the period to 31 March 2023 is £0.8m. This capitalised development expense movement has been charged directly to the income statement rather than being capitalised in the year. 

In determining the amounts to be capitalised management makes assumptions regarding the percentage of staff time spent on development activities. There is a high level of estimation uncertainty over the estimates, as the ability to reliably track time is inhibited by the time recording method. The nature of the features developed during the year do not meet the criteria for capitalisation under IAS38.  This conclusion resulted in costs, which would otherwise have been taken to the balance sheet, being charged directly to the operating costs of the business.  As a result of this decision the reported development expenses more closely represent the development cash outflows experienced by the business in the year of reporting.

Impairment charge

Management performed an impairment review as at 31 March 2023 in accordance with IAS 36 'Impairment of assets'.  The resulting non-cash impairment charge of £7.7m is explained in further detail in note 17 - Goodwill within the financial statements.

Operating expenses

Excluding the adjusting items depreciation, amortisation and share based payments, operating expenses grew by £2.4m driven by increased development expenses and restructuring costs.

Core performance measures

Our rightsizing programme resulted in restructuring costs of £0.8m being charged to the income statement. By the 31st March 2023 the cost containment action had resulted in monthly cost reductions of the order of £0.5m - the equivalent of an annualised £6.0m reduction in cash outflow.   

The Group's Operating Plan is focused on sustainable growth. Management considers that EBITDA is the key operating metric to measure the Group's performance and progress towards sustainable growth.  In addition, the Group also measures and presents performance in relation to various other non-GAAP measures, such as gross margin, and revenue growth.  ARR is considered useful to determine long term revenue growth, viewed in the context of sustainable growth.

Adjusted EBITDA results are prepared to provide a more comparable indication of the Group's core business performance by removing the impact of certain items including exceptional items (material and non-operating related costs), and other, non-trading, items that are reported separately. Adjusted results exclude items as set out in the consolidated statement of comprehensive income.

Adjusted EBITDA loss was £3.6m (Re-presented 2022: £3.8m).

	31/03/2023 £m	31/03/2022 £m Re-presented
Loss before tax for the year - all operations	(18.3)	(9.5)
Loss from discontinued operations	0.9	0.4
Loss before tax from continuing operations	(17.4)	(9.1)
Add: Impairment losses	7.7	-
Add: Depreciation and amortisation	4.9	3.8
Operating loss before depreciation, amortisation and impairment	(4.8)	(5.3)
Adjusted for exceptional and non-cash costs:
- Acquisition and fundraise related -  transaction costs1	-	0.5
- Other exceptional items1	0.8	0.4
- Share based payments (non-cash)	0.4	0.6
Adjusted Operating profit/(loss) before, depreciation, amortisation, impairment and exceptional costs ("Adjusted EBITDA")	(3.6)	(3.8)
Adjusted EBITDA from continuing operations	(3.6)	(3.8)

     ¹Restructuring costs. 

Cash

Cash as at 31 March 2023 was £4.3m (2022: £7.5m).  As described above, the Leadership Team focused on cost containment and cash conservation during the last quarter of the year.  Processes around cash have been revisited to ensure projected business needs are sustainable. 

We continue to tightly manage our cost base which, as at 31 March 2023, was reduced by over 30% on a monthly basis from the level at the beginning of 2023. 

Going concern

The Group incurred an operating loss on continuing operations of £4.8m for the year ended 31 March 2023 (2022 £5.3m), however, it had net assets of £24.3m inclusive of £4.3m of cash and cash equivalents.

Management has performed a going concern analysis as described in the Directors report. The liquidity of the group is judged sufficient to meet the cash needs of the Group as they fall due. 

The directors have considered the applicability of the going concern basis in the preparation of the financial statements. This included a review of financial results, internal budgets and cash flow forecasts to 31 October 2024, including downside scenarios.

Assets and Liabilities

Goodwill as at 31 March 2023 of £10.7m (2022: £19.8m) and intangibles of £15.3m (2022: £21.0m) are derived from the earlier acquisitions, Attend Anywhere Pty Limited, Zesty Limited and Horizon Strategic Partners Limited.  Following a review of the carrying value of the assets a non-cash impairment charge of £7.4m has been applied. Refer to note 17 of the financial statements.

Trade Receivables were £2.7m (2022: £3.3m) reflecting increased collection activity at the period end.  Trade payables were £2.7m (2022: £3.4m) in part reflecting the impact of the right sizing programme reduced monthly costs.

Taxation

Current tax receivable £1.1m (2022: £1.2m) consists of Research and Development tax credits due to the Group for current and prior years. Post year end the Group received £0.3m of tax R&D reclaim.  In spite of the delay to the repayments we expect further receipts in due course after appropriate follow-up.

Loss before tax

The Group net loss before tax was £17.4m (2022: loss of £9.1 million (re-presented)) the year-on-year change is driven by a non-cash impairment charge of £7.7m. 

Discontinued operations

During the year ending 31 March 2023 the Group classified the Induction Switch and Induction Guidance products as being held for sale, as a result of a decision to focus on patient facing products in the secondary care market.  This resulted in removal of discontinued operations losses of £0.8m (for reference: 2022 £0.4m) from the Group profit and loss. Refer to note 13 of the financial statements for further details.

Principal risks and uncertainties.

As more fully described in the Directors' Report and notes to the financial statements included in the annual report, the amounts and timing of future revenues remain uncertain.  However, the executive has taken significant steps, which we believe mitigate the Group's risks. 

John McIntosh

Chief Financial Officer

 

Consolidated  Statement   of  Comprehensive  Income

For the year ended 31 March 2023

 

	Notes	2023            £000	2022        £000
			Re-presented
Continuing operations
Revenue from contracts with customers	3	12,884	7,231
Cost of sales		(4,754)	(2,751)
Gross profit		8,130	4,987
Sales and marketing expenses		(1,523)	(1,092)
Administrative expenses		(6,952)	(7,260)
Development expenses		(9,287)	(5,256)
Impairment losses	4	(7,748)	-
Loss from operations		(17,380)	(9,129)
Finance income		1	1
Finance expense		(7)	(30)
Loss before tax		(17,386)	(9,158)
Tax credit		798	1,082
Loss for the year from continuing operations		(16,588)	(8,432)
Discontinued operations
Loss from discontinued operations, net of tax		(795)	(356)
Loss for the year		(17,383)	(8,432)
Other comprehensive income
Exchange gains/(losses) arising on translation on foreign operations		(963)	810
Other comprehensive income for the year, net of tax		(963)	810
Total comprehensive income		(18,346)	(7,266)

Loss per share attributable to the ordinary equity holders of the parent
Basic	6	(0.19)	(0.10)
Diluted		(0.19)	(0.10)
Loss per share from continuing operations attributable to the ordinary equity holders of the parent
Basic	6	(0.18)	(0.10)
Diluted		(0.18)	(0.10)

 

Consolidated Statement of Financial Position

As at 31 March 2023

	Notes	2023                 £000	2022        £000
Assets
Non-current assets
Property, plant and equipment		9	244
Intangible assets	8	15,251	20,962
Goodwill	7	10,685	19,758
Deferred tax assets		556	1,540
Total non-current assets		26,501	42,504
Current assets
Contract assets		1,228	786
Trade and other receivables		2,672	3,347
Current tax receivable		1,175	1,240
Cash and cash equivalents		4,287	7,496
Assets held for sale		2,474	-
Total current assets		11,836	12,869
Total assets		38,337	55,373
Liabilities
Non-current liabilities
Contract liabilities		3,588	326
Deferred tax liability		3,870	5,851
Other financial liabilities		56	128
Total non-current liabilities		7,514	6,305
Current liabilities
Trade and other payables		2,713	3,365
Provisions		528	-
Contract liabilities		2,198	2,579
Current tax payable		-	789
Liabilities associated with assets held for sale		1,016	-
Other financial liabilities		72	72
Total current liabilities		6,527	6,805
Total liabilities		14,041	13,110
Net assets		24,296	42,263
Equity attributable to equity holders of the parent
Share capital		462	460
Share premium reserve		41,665	41,665
Merger reserve		20,205	20,205
Foreign exchange reserve		(162)	801
Other reserves		1,578	1,405
Retained earnings		(39,452)	(22,273)
Total equity		24,296	42,263

Consolidated Statement of Changes in Equity

As at 31 March 2023

		Share capital £000	Share premium       £000	Foreign Merger          exchange reserve               reserve £000                    £000		Other reserves £000	Retained earnings £000	Total equity                    £000
At 31 March 2021 and 1 April 2021		210	18,432	10,879	(9)	792	(13,839)	16,465
Comprehensive income for the year
Loss for the year		-	-	-	-	-	(8,434)	(8,434)
Other comprehensive gain / (loss) for the year		-	-	-	810	-	-	810
Total comprehensive income for the year		-	-	-	810	-	(8,434)	(7,624)
Transactions with owners, recorded directly in equity
Issue of ordinary shares		179	24,821	-	-	-	-	25,000
Issue of shares as consideration for a business combination		71	-	8,928	-	-	-	8,999
Equity settled share-based payments		-	-	-	-	613	-	613
Share-issue costs		-	(1,190)	-	-	-	-	(1,190)
Reclassification of equity		-	(398)	398	-	-	-	-
Total contributions by and distributions to owners		250	23,233	9,326	-	613	-	33,422
At 31 March 2022 and 1 April 2022		460	41,665	20,205	801	1,405	(22,273)	42,263
Comprehensive income for the year
Loss for the year		-	-	-	-	-	(17,383)	(17,383)
Other comprehensive income / (loss) for the year		-	-	-	(963)	-	-	(963)
Total comprehensive income for the year		-	-	-	(963)	-	(17,383)	(18,346)
Transactions with owners, recorded directly in equity
Issue of shares on exercise of equity settled share-based payments		2	-	-	-	(204)	204	2
Equity settled share-based payments		-	-	-	-	377	-	377
Total contributions by and distributions to owners		2	-	-	-	173	204	379
At 31 March 2023		462	41,665	20,205	(162)	1,578	(39,452)	24,296

 

 

 

 

Consolidated Statement of Cash Flows

For the year ended 31 March 2023

		2023                       £000	2022        £000
Cash flows from operating activities
Loss for the year		(17,383)	(8,434)
Adjustments for
Depreciation of property, plant and equipment		119	28
Amortisation of intangible fixed assets		4,726	3,785
Impairment losses on intangible assets		7,748	-
Finance income		(1)	(1)
Finance expense		7	30
Fair value adjustments on financial liabilities		-	-
Share-based payment expense		377	613
Net foreign exchange loss/(gain)		63	-
Income tax charge/(credit)		(798)	(1,146)
		(5,142)	(5,125)
Movements in working capital:
Decrease/(Increase) in trade and other receivables and contract assets		166	1,661
(Decrease)/Increase in trade and other payables and contract liabilities		2,972	1,115
Interest received		1	1
Interest paid		(7)	(30)
Income taxes received		65	458
Income taxes paid		(863)	(141)
Net cash used in operating activities		(2,808)	(2,061)
Cash flows from/(used in) investing activities
Acquisition of subsidiary, net of cash acquired		-	(13,486)
Purchases of property, plant and equipment		(17)	(256)
Payment of software development costs		(810)	(3,090)
Net cash used in investing activities		(827)	(16,832)
Cash flows from/(used in) financing activities
Issue of ordinary shares		2	25,000
Proceeds on other financial liabilities		-	210
Share issue costs		-	(1,190)
Repayment of bank borrowings		-	-
Payment of lease liabilities		(72)	(12)
Net cash from/(used in) financing activities		(70)	24,008
Net cash increase/(decrease) in cash and cash equivalents		(3,705)	5,115
Cash and cash equivalents at the beginning of year		7,496	2,472
Exchange gains/(losses) on cash and cash equivalents		496	(91)
Cash and cash equivalents at the end of the year		4,287	7,496

Notes (forming part of the abridged financial statements)

1   Basis of preparation

The preliminary results for the year ended 31 March 2023 are an abridged statement of the full Annual Report which was approved by the Board of Directors on 28^th July 2023. The consolidated financial statements in the full Annual Report are prepared in accordance with UK-adopted International Financial Reporting Standards (' UK-Adopted IFRS'), with IFRS as issued by the International Accounting Standards Board ('IASB') and with the requirements of the Companies Act 2006. The auditor's report on those consolidated financial statements was unqualified, and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006. The preliminary results do not comprise statutory accounts within the meaning of section 434(3) of the Companies Act 2006. The Annual Report for the year ended 31 March 2023 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The financial information included in this preliminary announcement does not itself contain sufficient information to comply with IFRS. The annual report and audited financial statements for the year ended 31 March 2023 will be made available on the Company's website.

2   Going concern

The Group has recognised total revenues during the year of £13.6m (2022: £7.9m) and had cash balances at 31 March 2023 of £4.3m (2022: £7.5m) with cash outflows from operating activities during the year of £2.8m (2022: £2.1m).

During the year ended 31 March 2023, the Group successfully completed a rightsizing programme, estimated to deliver c. 30% reduction in costs.

In assessing the appropriateness of the going concern assumption, the Board of Directors ("the Directors") has reviewed the ability to continue operating over the period to 30 June 2025 ("the going concern period"). The Directors have also reviewed other relevant information, together with considering scenarios with adverse impacts across the Group's principal risks relating to: revenue reductions from either non-renewals of major contracts with customers or downward price pressures; non-materialisation of forecast sales to new customers and delays in securing new contracts with customers resulting in delayed cash inflows. These risks are further connected to macro-economic conditions and the UK government's fiscal policy, in particular the funding and support to the group's customers which are primarily NHS Trusts and other government bodies. The Directors determined that the forecast period extends to 30 June 2025 to take into account the operating cycle of the group, which sees significant contract renewals in March 2025, with cash inflows received in April and May 2025.

The Directors' cash inflows under the base case of going concern assessment assumes all existing customer contracts with major customers will be renewed when they come due within the forecast period at the same contract terms. It also includes assumptions regarding growth in revenues due to new customer contracts, and growth in revenues due to sales of new products to existing customers. The base case going concern assessment cash outflows allows investment in the full range of planned market and product development activities, through increased employee-related and other spend to achieve revenue targets over this forecast period.

The Directors have considered a severe but plausible downside scenario whereby the Group is impacted by: reductions in revenue arising from either non-renewals of some major customer contracts or downward price pressure; non-materialisation of some forecast sales to new customers and three to six-month delays in securing some contracts with new customers resulting in delays in SaaS revenues and cash inflows, with associated reductions in incremental costs directly linked to revenue generation. The severe but plausible downside scenario has indicated that cash balances are their lowest in April 2024 before increasing again in May 2024 in line with the Group's operating cycle. At this low point, cash balances remain positive. Under a more severe scenario, the Directors believe they can timeously respond to decreases in cash inflows by taking mitigating actions to reduce costs. These include but are not limited to; delays in hiring new employees; delays in hiring new contractors; and reducing discretionary spend through, for example, reducing professional and consulting expenditure and contractor costs.

In determining that there is no material uncertainty related to going concern, the Directors have applied significant judgement regarding renewals of existing contracts with major customers, in particular NHS customers. The Directors have made this judgement after considering the UK budget announcement in November 2022. Whilst there remains uncertainty as to the specifics of the NHS funding plan following the budget announcement, the Directors note that NHS funding generally was increased and there was a focus on NHS efficiency, which the Group's products / services are designed to assist with.

Therefore, the Directors believe that the judgement they have made is appropriate based upon information available at that point.

After due consideration, the Directors have concluded that there is a reasonable expectation that the Group and Company have adequate resources to meet their liabilities as they fall due for the period to 30 June 2025, and therefore these financial statements are prepared on a going concern basis.

3   Revenue

During the year ended 31 March 2023, the Group classified the Induction Switch and Induction Guidance products as disposal groups held for sale (refer Note 13). Consequently, revenues from contracts with customers arising from these products have been presented as part of results from discontinued operations. Revenues as presented in this note include only revenues from continuing operations, and comparative amounts for the year ended 31 March 2022 have been re-presented to exclude the impact of discontinued operations.

The following is an analysis of the Group's revenue for the year from continuing operations:

	2023 £000	2022 £000 Re-presented
Provision of software (including set-up services of £0.1m (2022: £0.2m))	11,703	6,711
Post-contract support and maintenance	258	217
Text message revenue	431	303
Professional services	492	-
Total revenue from contracts with customers	12,884	7,231

Revenue from the provision of software of £11.7m (2022: £6.7m) is shown after IFRS 3 related adjustments of £0.07m (2022: £4.2m)). This includes £0.05m related to Induction Zesty (2022: £0.07m) and £0.02m related to Induction Attend Anywhere (2022: £4.2m). As a result of applying IFRS 3 in accounting for acquisitions, the Group is required to determine the fair value of all acquired assets and liabilities. This includes determining the fair value of the contract liabilities ("deferred income") of the acquiree.

The following is an analysis of revenue from continuing operations by country of destination:

	2023 £000	2022 £000 Re-presented
United Kingdom	12,884	7,231
Europe	-	-
United States	-	-
Rest of World	-	-
Total revenue from contracts with customers	12,884	7,231

Revenue from the United Kingdom of £12.8m (2022: £7.2m) is shown after IFRS 3 related adjustments of £0.07m (2022: £4.2m).

4   Expenses by nature for continuing operations

The following represents expenses incurred during the year, by nature. These amounts exclude the results of discontinued operations, which are presented separately in Note 13.

	2023 £000	2022 £000
Employee costs	9,630	7,859
Depreciation of property, plant and equipment	119	29
Amortisation of intangible assets	4,514	3,785
Impairment of goodwill and intangible assets	7,748	-
Contractors' costs	2,756	2,366
Acquisition related transaction costs	-	423
Fundraise related transaction costs recognised in profit and loss	-	108
Professional and legal fees	512	459
Research and development expense capitalised	(805)	(3,090)
Share-based payment charge	377	613

5   Employee benefit expenses for continuing operations

The following represents employee benefit expenses from continuing operations.

	2023 £000	2022 £000
Employee benefit expenses (including directors) comprise:
Wages and salaries	6,934	5,735
Social security costs	801	551
Defined contribution pension cost	359	309
Share-based payment expenses	361	613
Other employee benefits	1,175	651
Total employee benefit expense	9,630	7,859

6   Loss per share

6.1 Basic loss per share

	2023 £	2022 £
From continuing operations attributable to the ordinary equity holders of the Group	(0.18)	(0.10)
Total basic loss per share attributable to the ordinary equity holders of the Group	(0.19)	(0.10)

6.2 Diluted loss per share

	2023 £	2022 £
From continuing operations attributable to the ordinary equity holders of the Group	(0.18)	(0.10)
Total diluted loss per share attributable to the ordinary equity holders of the Group	(0.19)	(0.10)

6.3 Reconciliation of loss used in calculating loss per share

	2023 £000	2022 £000 Re-presented
Loss attributable to the ordinary equity holders of the Group used in calculating basic loss per share and diluted loss per share:
From continuing operations	(16,588)	(8,076)
From discontinued operations	(795)	(356)
	(17,383)	(8,432)

6.4 Weighted average number of shares used as the denominator

		2023 number	2022 number
Shares in issue at the beginning of the period	92,050,727			42,050,728
Shares issued	-			35,714,285
Issue of ordinary shares on exercise of equity settled share-based payments	329,573			-
Shares issued on business combination	-			14,285,714
Issued ordinary shares as at the end of the period	92,380,300			92,050,727
Weighted average number of ordinary shares used as the denominator in calculating basic loss per share		92,370,367	82,461,686

7   Goodwill

7.1 Carrying amount of goodwill

The following represents the carrying value of goodwill as at 31 March 2023.

	2023 £000	2022 £000
Cost	18,164	20,175
Accumulated impairment	(7,479)	(417)
	10,685	19,758

The following reconciles goodwill at the beginning and end of the period.

	2023 £000	2022 £000
Cost
At 1 April	20,175	9,790
Additions as a result of business combinations	-	10,012
Transferred to assets of disposal groups held for sale	(1,553)	-
Translation differences	(458)	373
At 31 March	18,164	20,175
Accumulated impairment
At 1 April	417	-
Impairment charge	7,758	417
Transferred to assets of disposal groups held for sale	(696)	-
At 31 March	7,479	417

The net carrying value of goodwill transferred to assets of disposal groups held for sale was £0.8m. During the year ended 31 March 2023, the Group classified the Induction Switch and Induction Guidance CGU's as disposal groups held for sale, refer to Note 13. As a result, goodwill balances relating to these CGU's have been reclassified to assets held for sale, after the impairment losses detailed below were recognized.

7.2 Allocation of goodwill to cash generating units

Goodwill is allocated to the Group's cash generating unit as follows:

	2023 £000	2022 £000
Induction Attend Anywhere	9,928	10,385
Induction Zesty	757	8,237
Induction Guidance	-	1,136
Induction Switch	-	-
	10,685	19,758

The Attend Anywhere CGU consists of the assets and cash flows related to the Attend Anywhere video consultation product. The Zesty CGU consists of the assets and cash flows related to the Zesty patient portal product. The Induction Guidance CGU consists of the assets and cash flows related to the Induction Guidance product line (formerly MicroGuide, acquired as part of the acquisition of Horizon Strategic Partners). The Induction Switch CGU consists of the assets and cash flows related to the Induction Switch app.

Goodwill in relation to the Induction Guidance and Induction Switch CGU's have been re-classified to assets of disposal groups held for sale in accordance with IFRS 5 "Non-current assets held for sale and discontinued operations.

8   Intangible assets

Trade name                         Users             Technology                       Total £000                          £000                          £000                          £000
Cost
At 31 March 2021	633	1,426			6,446	8,505
Additions - internally developed	-	-			3,090	3,090
Acquired through business combinations	-	7,713			7,480	15,193
Translation differences	-	321			398	719
At 31 March 2022	633	9,460			17,414	27,507
Additions - internally developed	-	-			809	809
Transferred to assets of disposal groups held for sale	(264)	(919)			(1,024)	(2,207)
Translation differences	-	(394)			(556)	(950)
At 31 March 2023	369	8,147			16,643	25,159
Accumulated amortisation and impairment
At 31 March 2021	83		265	2,273		2,621
Charge for the year	61		1,067	2,658		3,786
Translation differences	-		54	83		137
At 31 March 2022	144		1,386	5,014		6,544
Charge for the year	62		1,620	3,034		4,716
Transferred to assets of disposal groups held for sale	(102)		(355)	(513)		(970)
Translation differences	-		(395)	13		(382)
At 31 March 2023	104		2,256	7,548		9,908
Net book value
At 31 March 2022	489		8,074	12,400		20,963
At 31 March 2023	265		5,891	9,095		15,251

9   Events after the reporting date

On the 30th June 2023 the Group announced the completion of the sale of Switch, a directory app, for an undisclosed sum. This is in line with the previously announced strategy to focus on sustainable growth and allows additional cost savings to be applied.  The revenues of Switch are disclosed as part of the discontinued operations.

 

END