Final Results
Clinical Computing PLC
27 April 2006
CLINICAL COMPUTING PLC
2005 PRELIMINARY RESULTS
Clinical Computing Plc (the 'Company' or 'Group'), the international developer
of clinical information systems for the healthcare market, announces Preliminary
Results for the year ended 31 December 2005. The Group trades through three
operating subsidiaries: Clinical Computing UK, Ltd. in the United Kingdom and
Europe, Clinical Computing, Inc. in the United States and Clinical Computing Pty
Limited in Australia. The results are reported under IFRS with 2004 comparisons
restated accordingly.
Financial Overview
• Revenue of £1.66m (2004: £1.76m) - 76.0% from the US (2004: 78.3%)
• Operating costs increased 10.8% to £3.2m (2004: £2.9m)
• Non-recurring restructuring charges £0.3m included in operating costs
(96.6% of cost increase)
• Loss on ordinary activities after taxation £1.38m (2004: £0.77m)
• Loss per share (basic and diluted): 4.4p (2004: loss 2.4p)
• Cash balance of £0.17m as at 31 December 2005 with an additional
unutilised debt facility of £0.5m available. Facility increased to £0.8m in
April 2006 and available to October 2007
Business Review
• Clinical Vision 4 ('CV4') flagship product 'live' with 13 customers
(2004: 8)
• Five CV4 implementations underway
• Purchase order secured from NHS customer (contract pending)
• 100 customers under maintenance agreements for all products (2004: 100)
• Senior Management appointments.
Outlook and Prospects
Chairman Howard Kitchner, commenting on the Group outlook, said:
'The Group currently has five customer implementations underway and a further
commitment secured via a purchase order, and subject to contract.
Our focus continues to be on leveraging our CV4 technology by expanding the
clinical applications which we provide on this technology. Industry trends
indicate that clinically focused products comprise a growing market segment of
the health IT market place.
In both the US and UK markets the decision cycles regarding the purchase of a
clinical information system continue to take more than twelve months. Near term
opportunities exist in both the US and UK markets and we look to leverage our
growing US customer base and capitalise on follow-on activity in the UK. The
Group is actively exploring partnership opportunities that would enhance the
likelihood of reducing the decision cycles it has historically experienced.
The new management team is single mindedly focused on delivering our business
plan. In support of this plan I as well as two other shareholders have assisted
the Company in securing an £800,000 credit facility to provide the cash
resources to see through the plan and deliver the contract opportunities
currently being pursued. I look forward to reporting contract wins in the
coming months.'
Contacts:
Joe Marlovits, Chief Executive 020 8747 8744
Peter Binns/Paul McManus Binns & Co PR Ltd 020 7786 9600
Chairman's Statement
Introduction
Clinical Vision 4 ('CV4'), our flagship clinical information system is live with
13 customers using the renal medicine application and five implementations are
underway in the first half of 2006. CV4 was developed as a generic information
system capable of supporting multiple clinical specialties for the purposes of
providing a robust patient-oriented health record. Our strategy remains to
leverage the CV4 technology into other clinical modalities, capitalizing on the
Company's leadership position in renal medicine. We remain committed to
providing a point of care clinical information system that meets the needs of
the clinicians responsible for patient care, as well as the business and IT
needs of healthcare entities responsible for supporting clinical best practice
in a budget constrained environment.
The second half of 2005 saw delays in moving our identified pipeline of CV4
customers through to license agreements. In our half-year announcement we noted
a new contract total of £1,100,000 was won in the period to September. The
Group did not secure any further CV4 contracts during the second half of 2005.
However, the Group's pipeline of potential business continues to include several
significant opportunities.
Results
Results for the year under review reflect a delay in beginning the
implementations of several license agreements won during the year, as well as an
increase in costs due to non-recurring costs related to changes in the
management structure of the Group and our UK operations. Turnover for the year
was £1,655,806 (2004: £1,757,997) a reduction of 5.8 per cent which primarily
reflects a decrease in our US based business. Results from operations included a
one time non-recurring charge for restructuring of £301,938 producing a loss of
£1,561,242 (2004: £1,146,542). Loss on ordinary activities after taxation was
£1,379,565 (2004: loss £772,513). The loss per share was 4.4p (2004: loss
2.4p).
Management changes
During the year under review, John Lowry was appointed as Chief Executive
Officer. John undertook a strategic review of the business which resulted in a
restructuring of the management team including the appointment of Joel Tatham as
director of Product Management and recruiting Tim Brennan, as director of
Product Development. Project delivery and customer support was consolidated
under Doug Colyer, the director of customer services. In January 2006 Paul
Helliwell joined the management team as the UK sales director.
Having completed his strategic review and the management appointments, John is
now a consultant to the Company. Effective 27 April 2006, the board of
directors have appointed Joe Marlovits as Chief Executive to replace John and a
permanent Finance Director is now being recruited to assume Joe's previous
responsibilities.
Geographic markets and risk
UK healthcare market
The Company's Proton(TM) product continues to be the de facto standard for renal
dialysis information systems in the UK. The directors believe that the Group is
best positioned to successfully move this customer base to a new technology.
The Group is developing a CV4 transition programme with selected NHS Trusts that
have been long term customers of the Company.
In 2006, the Group received a purchase order for a renal system to be
implemented in an NHS Hospital in the North West of England, and will result in
a new customer for the Group. Once CV4 is fully installed further follow-on
activity is expected. Despite the widely publicised cash constraints faced by
many NHS Trusts, the management team is actively working with leading
organisations within and affiliated with the NHS to transition more NHS
customers to CV4.
US healthcare market
The US market continues to be our primary source of revenue and contract
opportunities. The immediate opportunity for the Group in the US is to build on
our customer base of healthcare organisations providing renal dialysis services.
During the year under review five US customers completed their implementations
of CV4 and are now using the product to support patient care and improve
operational efficiencies.
The US federal government is becoming involved in the electronic health record
initiative, in a manner similar to the one being undertaken in the UK. The
current purchasing environment is therefore subject to changing economic and
political influences, but it is expected that this influence will generate
opportunities for the Group. Likewise, the US renal market experienced
significant consolidation over the last year and the fall-out from this
consolidation may lead to new opportunities for the Group. At the present time
integration of renal dialysis information systems with renal billing software is
a growing market trend influencing purchasing decisions.
Outlook
The Group currently has five customer implementations underway and a further
commitment secured via a purchase order, and subject to contract.
Our focus continues to be on leveraging our CV4 technology by expanding the
clinical applications which we provide on this technology. Industry trends
indicate that clinically focused products comprise a growing market segment of
the health IT market place.
In both the US and UK markets the decision cycles regarding the purchase of a
clinical information system continue to take more than twelve months. Near term
opportunities exist in both the US and UK markets and we look to leverage our
growing US customer base and capitalise on follow-on activity in the UK. The
Group is actively exploring partnership opportunities that would enhance the
likelihood of reducing the decision cycles it has historically experienced.
The new management team is single mindedly focused on delivering our business
plan. In support of this plan I as well as two other shareholders have assisted
the Company in securing an £800,000 credit facility to provide the cash
resources to see through the plan and deliver the contract opportunities
currently being pursued. I look forward to reporting contract wins in the
coming months
H Kitchner
Chairman
27 April 2006
Finance Review
Accounting standards
This is the Group's first report under International Financial Reporting
Standards ('IFRS') and the comparative prior year figures have been restated
accordingly. The change to IFRS has not affected revenue recognition or cash
flows of the Group. The board has reviewed the Group's development expenditure
against IFRS capitalisation criteria and determined that the amount to be
capitalised is nil and therefore all costs have been expensed. A reconciliation
of the impact of this change in accounting standards to the 2004 results is
included in the notes to the financial statements.
Financial performance
The Group's focus remains the development, sale and support of clinical
information systems, primarily for healthcare organisations specialising in
renal medicine. In addition to Clinical Vision 4(TM) the Group continues to
derive revenue from support and maintenance contracts for its other products:
PROTON(TM) , di-PROTON(TM), and RENLStar(TM). At the end of 2005 the Group had
100 customers using one of its products (2004: 100).
During the year under review the Group derived 76.0 per cent of its revenues
from the US market (2004: 78.3 per cent). Total revenue for the year of
£1,655,806 decreased 5.8 per cent from the prior year. The decrease in revenue
was attributed to our dollar based revenue, where we recognised less license
revenue in 2005 compared to 2004.
The Group's operating costs for the year were £3,217,048 compared to £2,904,539,
an increase of 10.8 per cent. The increase of £312,509 is largely attributable
to non-recurring costs related to restructuring the management team and UK
operations totalling £301,938 (96.6 per cent).
Operations generated a loss of £1,561,242 compared to an operating loss of
£1,146,542 for 2004. The loss for the year after tax was £1,379,565 or 4.4p per
share (2004: £772,513 or 2.4p per share)
Taxation
During the year under review, the Group filed a research and development 'r&d'
tax credit claim with respect to r&d activities undertaken in 2004 on various
components of the Clinical Vision 4 product. Under the terms of the current
United Kingdom r&d tax credit regime the Company was able to elect for a cash
refund on a percentage of its total r&d expenditure. A tax credit of £158,934
has been reported in the year under review (2004: £324,882).
Cash flow
Net cash used to support operations during 2005 was £714,913 (2004: £868,652).
The positive difference of £664,652 between the cash used to support operations
(£714,913) and the loss for the year (£1,379,565) resulted primarily from the
Group increasing its deferred revenue by approximately £382,000 when compared to
the prior year which consists of cash collected in advance of revenue
recognition, £162,000 of cash related to the r&d tax receivable from 2004 which
was collected in 2005 and £78,000 of accrued revenue from the end of 2004 which
was collected in 2005.
Foreign currency risk
The Company has one major overseas trading subsidiary which is in the USA.
Receipts and payments for this subsidiary are largely in the local currency, US
dollars, and no hedge against the fluctuation between sterling and the dollar is
made. This subsidiary generated 76% of the Group's total revenue (£1,258,605)
and 47% of its operating costs (£1,501,908) in its local currency. Any cash
required to support this subsidiary during the year was provided by the Company
from its sterling cash balance.
Additionally, the Company has a small subsidiary in Australia. Receipts and
payments are largely in the local currency and are not hedged. Any short fall
in cash flow from this subsidiary was also provided by the Company from its
sterling cash balance.
Capital structure and finance
The consolidated equity position at 31 December 2005 was a deficit of £579,750
(2004: equity £786,797). The decrease is primarily due to the loss for the
year. The Company has an available un-drawn debt facility of £800,000 committed
to 30 October 2007. This facility is provided by Brown Shipley, on normal
commercial terms, backed by personal guarantees of the Chairman and two
shareholders. Neither the Chairman nor the shareholders have received
compensation or any other benefits for providing such guarantees. However the
directors believe that this facility, along with the annual maintenance
contracts and signed but unbilled contractual arrangements should provide the
financial resources for the Group to pursue its current strategy.
J Marlovits
Chief Executive
27 April 2006
Clinical Computing Plc
Consolidated Income Statement
For the year ended 31 December 2005
Notes 2005 2004
£ £
Continuing Operations
Revenue 2 1,655,806 1,757,997
Cost of sales (720,228) (780,219)
__________ __________
Gross profit 935,578 977,778
Distribution costs (496,194) (495,827)
Administrative expenses
Research and development (878,561) (803,442)
Other (1,122,065) (825,051)
Total administrative expenses (2,000,626) (1,628,493)
__________ __________
Loss from operations (1,561,242) (1,146,542)
Interest income 22,743 49,147
__________ __________
Loss before tax (1,538,499) (1,097,395)
Tax 158,934 324,882
__________ __________
Loss for the year (1,379,565) (772,513)
__________ __________
Basic and diluted loss per share 5 (4.4p) (2.4p)
__________ __________
Clinical Computing Plc
Consolidated Statement of Recognised Income and Expense
For the year ended 31 December 2005
Notes 2005 2004
£ £
Exchange difference on translation of
foreign operations (40,722) 133,306
Loss for the year (1,379,565) (772,513)
__________ __________
Total recognised income and expense
for the year (1,420,287) (639,207)
__________ __________
Clinical Computing Plc
Consolidated Balance Sheet
31 December 2005
Notes 2005 2004
£ £
Non-current assets
Property, plant and equipment 81,883 98,963
__________ __________
Current assets
Trade and other receivables 345,977 524,618
Cash and cash equivalents 173,010 875,731
__________ __________
518,987 1,400,349
Total assets 600,870 1,499,312
__________ __________
Current liabilities
Trade and other payables (1,180,620) (712,515)
__________ __________
Net current (liabilities) / assets (661,633) 687,834
__________ __________
Net (liabilities) / assets (579,750) 786,797
_________ _________
Equity
Share capital 1,576,768 1,576,768
Share premium account 4 6,125,438 6,099,699
Share option reserve 4 37,655 9,654
Translation reserve 4 78,537 119,259
Retained earnings 4 (8,398,148) (7,018,583)
__________ __________
Total (deficit) / equity (579,750) 786,797
_________ _________
Clinical Computing Plc
Consolidated Cash Flow Statement
For the year ended 31 December 2005
Notes 2005 2004
£ £
Net cash from operating activities 6 (714,913) (868,652)
__________ __________
Investing activities
Interest received 22,743 49,147
Purchases of property, plant and equipment (21,923) (48,856)
__________ __________
Net cash used in investing activities 820 291
__________ __________
Net decrease in cash and cash equivalents (714,093) (868,361)
Cash and cash equivalents at beginning
of year 875,731 1,749,977
Effect of foreign exchange rate changes 11,372 (5,885)
__________ __________
Cash and cash equivalents at end of year 173,010 875,731
__________ __________
Clinical Computing Plc
Notes
1. Basis of preparation
The financial information set out in this preliminary announcement was approved by the board on 26
April 2006 and does not constitute the Company's statutory accounts for the years ended 31
December 2005 or 2004, but is derived from those accounts.
The accounts for the year ended 31 December 2004 carry an unqualified audit report, do not contain
a statement under section 237(2) or (3) of the Companies Act and have been delivered to the
Registrar of Companies. The financial information contained in this preliminary announcement for
the 2004 year has been restated following the implementation of International Financial Reporting
Standards.
The Group's 2005 Annual Report and Financial Statements are to be delivered to the Registrar of
Companies following the Company's Annual General Meeting. The annual report for the year ended 31
December 2005 will be posted to shareholders in due course.
Copies of the 2005 full annual report and accounts will also be available from the Company's
registered office at 2 Kew Bridge Road, Brentford, Middlesex, TW8 OJF and on its web site
www.ccl.com.
The consolidated financial information for the year ended 31 December 2005 has been prepared in
accordance with IFRS. The financial information included in this announcement has been extracted
from the un-audited financial statements for the year ended 31 December 2005. The contents of this
announcement have been agreed with the Company's auditors.
The financial statements are prepared on a going concern basis, which assumes that the Company and
the Group will continue to trade for the foreseeable future. The directors consider the going
concern assumption to be appropriate for the following reasons:
The Company and the Group have been loss making and cash negative at the operational level since
undertaking the development of the CV4 technology, and all such research and development costs
associated with this project have been expensed as incurred. During 2005 a new management
structure was put in place to transition the Company's management team to a more commercial
emphasis. Since this restructuring, numerous operational improvements have been adopted to
enhance the future trading prospects of the Group. The management team submitted a trading and
cash flow plan to the directors for the period to April 2007. The directors have accepted this
plan which shows 82 per cent of the forecasted revenue for the period to be covered by contracts
which were in place as of 31 March 2006. A further pipeline of opportunities beyond the
forecasted revenue is actively being pursued by the management team. Although the management
team's forecast shows improved trading conditions, inherently there can be no certainty that these
forecasts will be achieved. Therefore and in further support of this plan, the Company has
increased its borrowing facility with Brown Shipley to £800,000, effective 25 April 2006. This
facility is available to the Company until 30 October 2007 and secured by personal guarantees of
the Chairman and 2 other shareholders. Following a review of the management team's plan and
taking account of the above borrowing facility, the directors have formed a judgment, at the time
of approving the financial statements, that there is a reasonable expectation the Group and
Company has adequate resources to continue in operational existence for the foreseeable future. A
special resolution is being put forth at the Annual General Meeting to increase the borrowing
powers of the directors so that the above debt facility can be fully utilised in accordance with
the Company's Articles of Association.
2. Revenue
An analysis of the Group's revenue is as follows: Year Year
ended ended
2005 2004
£ £
Software licenses 391,602 526,789
Maintenance 1,116,399 1,081,672
Services and other revenue 147,805 149,536
__________ __________
Revenue 1,655,806 1,757,997
__________ __________
3. Business and geographical segments
For management and legal purposes, the Group has three operating companies.
These companies are the basis on which the Group reports its primary segment
information. All the business operations provide software, maintenance and
services to the healthcare sector. There is no significant difference between
risk and return on the software and services offered and therefore there is only
one business segment.
Segmental information is presented below.
Corporate
US UK Australia UK Total
£ £ £ £ £
2005
Revenue
External Revenue 1,258,605 397,201 - - 1,655,806
__________ __________ ________ __________ __________
Total Revenue 1,258,605 397,201 - - 1,655,806
__________ __________ _______ __________ __________
Results
Operating loss (239,969) (628,155) (71,371) (621,747) (1,561,242)
__________ __________ ________ __________ __________
Balance Sheet
Assets 278,395 539,007 8,255 (224,787) 600,870
Liabilities (2,083,701) (2,739,965) (234,072) 3,877,118 (1,180,620)
Other Information
Capital Expenditure 9,358 12,345 220 - 21,923
Depreciation 34,495 7,470 49 3,929 45,943
Corporate
US UK Australia UK Total
£ £ £ £ £
2004
Revenue
External Revenue 1,376,169 381,828 - - 1,757,997
__________ __________ ________ __________ __________
Total Revenue 1,376,169 381,828 - - 1,757,997
__________ __________ ________ __________ __________
Results
Operating loss (168,732) (684,755) (47,771) (245,284) (1,146,542)
__________ __________ ________ __________ __________
Balance Sheet
Assets 366,208 540,710 2,166 590,228 1,499,312
Liabilities (1,835,689) (2,189,795) (146,312) 3,459,281 (712,515)
Other Information
Capital Expenditure 32,716 16,140 - - 48,856
Depreciation 37,382 12,875 - 4,294 54,551
4. Equity - share premium, reserves and retained earnings
Share premium Share option Translation Retained
account reserve reserve earnings Total
£ £ £ £ £
At December 2004 as previously
reported UK GAAP 6,099,699 - - (6,889,670) (789,971)
Restatement on adoption of IFRS - 9,654 119,259 (128,913) -
__________ __________ __________ __________ __________
At 1 January 2005 6,099,699 9,654 119,259 (7,018,583) (789,971)
Share options - 28,001 - - 28,001
Exchange difference on translation
of foreign operations - - (40,722) - (40,722)
Recovery of expenses on issue of
equity shares made in prior year 25,739 - - - 25,739
Retained loss for the year - - - (1,379,565) (1,379,565)
__________ __________ __________ __________ __________
At 31 December 2005 6,125,438 37,655 78,537 (8,398,148) (2,156,518)
__________ __________ __________ __________ __________
5. Loss per share
The calculation of the basic and diluted earnings per share is based on the
following data:
2005 2004
£ £
Earnings
Earnings for the purposes of basic and diluted earnings per share (1,379,565) (762,859)
__________ __________
Number of shares
Number Number
Weighted average number of ordinary shares for the purposes of basic and diluted
earnings per share 31,535,361 31,535,361
__________ __________
The calculations of basic and diluted losses per share are the same because the
effect of including share options would be anti-dilutive and are excluded from
the calculation per IAS 33.
6. Notes to the cash flow statement
2005 2004
£ £
Loss from operations (1,561,242) (1,146,542)
Adjustments for:
Depreciation of property, plant and equipment 45,943 54,551
Share option charges 28,001 9,654
__________ __________
Operating cash flows before movements in working capital (1,487,298) (1,082,337)
Decrease / (Increase) in receivables 35,060 (52,092)
Increase in payables 416,262 102,824
__________ __________
Cash generated by operations (1,035,976) (1,031,605)
Taxes received 321,063 162,753
__________ __________
Net cash from operating activities (714,913) (868,852)
__________ __________
7. Explanation of transition to IFRS
This is the first year that the Group has presented its financial statements
prepared in accordance with IFRS. The following disclosures are required in the
year of transition. The last financial statements under UK GAAP were for the
year ended 31 December 2004 and the date of transition to IFRS was therefore 1
January 2004. There was no impact on the 1 January 2004 balance sheet from
transitioning to IFRS and specifically no change to the equity from transition
to IFRS. An explanation of how the transition from UK GAAP to IFRS has affected
the Company's financial position and financial performance is set out in the
following tables.
Reconciliation of profit and loss for 2004 Effect of IFRS
UK GAAP transition IFRS
£'000 £'000 £'000
Revenue 1,757,997 - 1,757,997
Cost of sales (780,219) - (780,219)
__________ __________ __________
Gross profit 977,778 - 977,778
Distribution costs (495,827) - (495,827)
Administrative expenses
Research & development (803,442) - (803,442)
Other (A) (815,397) (9,654) (825,051)
Total administrative expenses (1,618,839) (9,654) (1,628,493)
__________ __________ __________
Loss from operations (1,136,888) (9,654) (1,146,542)
Investment expense 49,147 - 49,147
__________ __________ __________
Loss before tax (1,087,741) (9,654) (1,097,395)
Tax 324,882 - 324,882
__________ __________ __________
Loss for the year (762,859) (9,654) (772,513)
__________ __________ __________
Basic and diluted loss per share (2.4p) 0.0p (2.4p)
__________ __________ __________
Reconciliation of equity at 31 December 2004 IFRS
UK GAAP adjustments IFRS
£'000 £'000 £'000
Equity
Share capital 1,576,768 - 1,576,768
Share premium account 6,099,699 - 6,099,699
Share option reserve (A) - 9,654 9,654
Translation reserves (B) - 119,259 119,259
Retained earnings (A) (B) (6,889,670) (128,913) (7,018,583)
__________ __________ __________
Total equity 786,797 - 786,797
__________ __________ __________
(A)Share-based payments
The group operates two share option schemes - the Approved and Unapproved
Executive Share Option Schemes ('the Schemes').
Under UK GAAP, a charge was recorded only when an award had intrinsic value on
the date of grant. Historically, share options have only been issued with an
exercise price equal to the prevailing market price on the grant date and
therefore a charge was not recorded under UK GAAP. IFRS 2 'Share-based Payment'
requires that an expense is recognised in the income statement based on the fair
value of an award on the date of grant and that this expense is then spread over
the option vesting period. The fair value of share options is measured using an
option-pricing model. The Black-Scholes model has been used to determine the
fair value of options granted under the Schemes.
The impact of adopting IFRS was to increase the share-based payments expense in
the income statement with a corresponding credit to equity. The charge under
IFRS2 reflected in these statements is reflected in the tables above.
(B)Translation reserves
The translation reserve results from exchange gains and losses arising on the
translation of the Group's net investment in its US and Australian operating
subsidiaries. The foreign exchange impact of translating foreign operations
since 1 January 2004 is reflected in the table above showing the analysis of the
impact on the Balance Sheet at 31 December 2004.
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