Trading update for FY22 and outlook for FY23

RNS Number : 9008M

Medica Group PLC

17 January 2023

 

Medica Group Plc

Trading update for FY22 and outlook for FY23

Performance in-line with expectations underpinned by continued growth in acute services, Ireland and the US, alongside strong recovery in UK elective revenue

Medica Group Plc (LSE: MGP, "Medica", the "Company" or the "Group"), an international provider of high-quality telemedicine services, announces an unaudited trading update for the full-year ended 31 December 2022, as well as its outlook for 2023.

Trading update

Medica had a strong performance for the second half of the year across the Group, driven in particular by UK Elective revenues returning to expected levels due to a strong recovery in radiologist reporting capacity from September onwards. Overall, Group revenue of £77.0 million for the twelve-month period ending 31 December 2022 was in-line with market expectations and represents an increase of 24% over 2021. Gross margins also remained resilient at 48%. Given the strong performance of the business since the summer, underlying operating profit for 2022 is expected to be in line with market expectations.

Cash generation from the business remained strong and after accounting for continued investment in its technology platforms, an increase in the interim dividend, and payment of deferred consideration during the year, Medica had £0.5 million of net cash¹ at 31 December 2022.

UK

UK revenue increased by 15% to £54.0 million in FY22. The UK business experienced significant growth in acute services driven by contract renewals, net new contract wins and the extension of service agreements. As a core partner, Medica continues to work closely with NHS customers on managing the current exceptional patient demand.

NightHawk services have delivered expected revenue of £33.3 million, representing an increase of 12% over the same period last year. In H221 and during FY22, over 65% of our Nighthawk contract portfolio has been successfully renewed with the balance expected to renew in future years. As the average NightHawk contract length is 3-5 years, this high renewal rate, coupled with a positive contribution from new contracts commenced during the year, underpins future revenue growth. In September, Medica reported a temporary shortfall in reporting capacity due to several factors, including radiologists taking accrued annual leave from the pandemic, particularly during the summer, which impacted Elective revenue. Despite the impact of radiologist availability during part of the year, overall Elective revenue for FY22 was £20.7 million, an increase of 20% compared to the prior year.

Medica continued to recruit additional radiologist capacity, particularly after the summer, resulting in an overall 16% increase in rostered reporting hours (our measure of capacity) which compared favourably to a 5% increase in the prior year.

Ireland

Medica Ireland performed strongly throughout 2022 with revenue increasing by 30% to £12.6 million, exceeding management's expectations. As reported previously, this was driven by a combination of an increased number of scan and reporting contracts in ultrasound and x-ray plain film, as well as a significant increase in the number of new out-of-hours teleradiology hospital clients. The Medica Vision diabetic retinopathy screening service also performed ahead of expectations.

US

As expected, RadMD, our US business, reported a strong second-half, delivering £10.4 million in its first full-year post-acquisition. The US business starts 2023 with good coverage of FY23 revenue, driven by a number of significant contract wins with new pharmaceutical and biotech companies that will convert to revenue in 2023 and subsequent years.

Technology platforms

As previously reported in February 2022, we successfully introduced our new Picture Archive and Communications ("PACS") platform in the UK and, since then, we have continued to invest in our FutureTech programme to drive longer-term benefits in productivity and reporter experience. In addition, during the year we invested in developing proprietary technology to support the transfer and upload of clinical trial images.

Outlook

Medica continues to be well-positioned to deliver on its stated growth and financial metrics, as outlined in September 2021. As 2023 commences, national health systems remain focused on efforts to clear patient backlogs which will require more capacity to report images and it is unlikely that the pressures on urgent hospital admissions will diminish in the short term.

The focus of Medica in the UK this year remains to increase rostered reporting hours by onboarding more radiologists, particularly those working outside the UK.  In addition, we will continue to improve the reporting experience and productivity of those already in our network through our FutureTech programme. These initiatives will simultaneously support client demand by delivering an enhanced reporting system and by expanding the reach of our recruitment of specialist radiologists in the UK and overseas.

Medica is also well-positioned in Ireland to support the HSE to perform and report an increasing number of ultrasound and plain film x-ray exams as part of national efforts to reduce pandemic backlogs. Similarly, the business expects to continue to increase both the number of new out-of-hours reporting contracts, as well as the hours of provision for existing customers.

Since its acquisition in early 2021, RadMD has demonstrated significant revenue growth, and the pipeline and orderbook are now more diversified, including significant new pharmaceutical and biotech companies. These new clients are expected to drive growth in 2023 at similar levels to 2022. With a strengthened leadership team and ongoing support from the founders, RadMD will continue to invest in new systems to improve the transfer and management of clinical trial images, as well as deepen relationships with new clients.

In addition, Medica continues to evaluate strategic acquisition opportunities to expand the scale and therapeutic focus of its clinical trials business, as well as to accelerate wider growth and differentiation of our business. Finally, Medica will continue to focus on new areas of organic growth, including wider telemedicine services such as remote digital pathology reporting, as well as expanding our international reach and network of radiologists.

Dr. Stuart Quin, Chief Executive Officer of Medica, commented:

"We are pleased to report a strong performance in the second half of 2022, driving results in-line with expectations. In particular, UK Elective revenue returned to expected levels due to a strong recovery in radiologist reporting capacity from September onwards. This, combined with a significant number of successful tenders and renewals across the business, means we enter 2023 well-positioned to continue to deliver against our growth strategy.

"We are working closely with our NHS and HSE clients in the UK and Ireland respectively, to help them manage the ongoing demands for reporting services resulting from the significant pressure on both acute and elective radiology services. To achieve this, we are continuing efforts to expand our network of reporters working 24/7 in the UK, Ireland and, increasingly, overseas. In addition, the investment in our technology will enable enhanced functionality and improve the productivity of our international network of reporters. We also continue to see strong growth in our US clinical trials business, driven by a strong and increasingly diversified orderbook and pipeline.

"Finally, we maintain our focus on diversifying our services into new areas of telemedicine and generating scale advantages, particularly in our clinical trials business, through M&A and partnerships. I look forward to continuing to grow the business and remain confident in Medica's market-leading position in telemedicine."

(1)  Net cash is a non-IFRS measure and is calculated by subtracting bank borrowings from cash and cash equivalents.

For further information, please contact:

Medica Group Plc: Stuart Quin, Chief Executive Officer Richard Jones, Chief Financial Officer	[phone]
FTI Consulting Victoria Foster Mitchell Sam Purewal	[phone]
Liberum (Joint Broker) Phil Walker Richard Lindley	[phone]
Numis (Joint Broker) Freddie Barnfield Duncan Monteith Euan Brown	[phone]

About Medica Group PLC

Medica (LSE:MGP) is an international provider of high-quality telemedicine services. It is the market leader in teleradiology in the UK and Ireland, working with more than 100 NHS Trusts and HSE hospitals in Ireland, in addition to private hospitals, insurance groups and diagnostic imaging companies. Its network of consultant radiologists, radiographers and specialist doctors interpret and report MRI, CT, ultrasound and X-ray images on behalf of healthcare providers, using Medica's bespoke, secure technology platform for fast and responsive delivery. The company's core services include NightHawk, an urgent, out-of-hours offering available to clients 24/7 with dedicated pathways for stroke and major trauma, and Elective, for routine reporting.

In Ireland, Medica carries out patient scanning, as well as reporting, and runs a diabetic retinopathy screening programme for the National Screening Service. Through its US business, RadMD, Medica provides global pharmaceutical and biotech companies, as well as contract research organisations with specialist imaging services for clinical trials.

For more information please visit:  www.medicagroupplc.com  

 

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