Induction Heal. Regulatory News (INHC)

Induction Healthcare Group PLC

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

Unaudited Interim Results

for the six months ended 30 September 2022

Induction Healthcare (AIM: INHC), a leading digital health platform driving transformation of healthcare systems , announces its unaudited interim results for the six months ended 30 September 2022, a period of continued revenue growth driven by the Company's leading position providing products to support the digitization of healthcare delivery.

Induction's products power remote consultations, capture patient reported data and empower patients to self-manage their care pathway. They are designed around the needs of the patient and deliver cost and efficiency benefits to hospitals, regional care systems and governments. Used at scale by national and regional healthcare systems, Induction's applications are relied upon by hundreds of thousands of clinicians and millions of patients across almost every hospital in the British Isles.

Financial Highlights

· Recorded Revenues up 54% to £7.1m (H1 2021: £4.6m) with organic growth across key products

- Induction Attend Anywhere revenues £5.6m (H1 2021: £3.6m)

- Induction Zesty revenue £1.1m (H1 2021: £0.6m)

· Adjusted EBITDA loss of £1.0m (H1 2021: £0.7m)

· Annual Recurring Revenues ("ARR") at period end of £14.5m up from £13.5m at the start of H1 2022

· Cash position as at 30 September 2022 of £9.0m (31 March 2022: £7.5m)

Operational Highlights

· Strong start to the financial year with better-than-expected Induction Attend Anywhere renewals across NHS England

· Value Added Reseller agreement signed with System C for Induction Zesty

· Induction Zesty contracts with 8 further hospitals in England, building on the previously announced contract win with 4 hospitals in South West London

· Christopher Samler appointed as Non-Executive Chairman

James Balmain, CEO of Induction, said: "We are confident that the business is well-positioned to deliver continued revenue growth from its core products, Induction Attend Anywhere and Induction Zesty. It is however apparent that the rate of growth this year will be impacted by the delays we've seen in the implementation of centrally funded digitisation programmes and the general political turmoil of recent months. We don't expect to see these opportunities drop away, rather they are now more likely to conclude next financial year.

"Despite these headwinds, we remain confident that overall year end revenues will show an improvement of at least 75% against our year end 31 March 2022 recognised revenues of £7.9m and we expect to grow our recurring revenues by at least 23% year on year. Both of these key metrics, whilst encouraging, are lower than our expectation and as a result the business is heavily focussed on underlying profitability and cash. We have initiated programmes internally to ensure our business is sized correctly to capture growth and to ensure that we do not have to raise further working capital pending reaching our objective of cash-flow breakeven by the fourth quarter of next financial year.

"Nothing has changed in terms of the critical need to further advance the digital transformation of the NHS, and in particular to drive efficiencies and support the reduction of extended waiting times. The strategic pillars for growth, as described in our recently published Annual Report remain as relevant as before and we remain confident about the future prospects of the Group."

Investor Presentation

The Company will be hosting a live online presentation via the Investor Meet Company platform at 4pm (GMT) today. The presentation is open to all existing and potential shareholders.

Investors can sign up to Investor Meet Company for free and register for the presentation here:

https://www.investormeetcompany.com/induction-healthcare-group-plc/register-investor.

A recording of the presentation, a PDF of the slides used, and responses to the Q&A session will be available on the Investor Meet Company platform and the Company's investor website afterwards.

ENQUIRIES

About Induction - www.inductionhealthcare.com

Induction (AIM: INHC) Induction delivers a suite of software solutions through a single integrated platform that transforms care delivery. 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. 

Overview

Over the last six months we have seen continued year-on-year revenue growth from our Induction Zesty patient engagement platform and maintained strong annually recurring revenue from our Induction Attend Anywhere video consultation platform, building on a successful renewal of key NHS England contracts at the start of the year.

The need to continue the digital transformation of the NHS remains as strong as ever. Despite recent political and economic turmoil in the UK, delivering this transformation is still very much a key focus for the Government and NHS bodies across the UK. There is committed funding to support the roll-out of software that will help reduce NHS waiting lists.

However, the allocation of this central capital to fund key digital programmes has been slower than expected. Central funding and policy guidance is now in place to drive all hospitals in England to have suitable patient engagement platforms in place by the end of March 2023. This has had the net effect of deferring some expected contract wins and their associated revenue into next financial year.

Induction is well positioned to receive new contracts as a result of this funding:

· Induction Attend Anywhere is the leading hospital video consultation platform throughout NHS England

· Induction Zesty's selected as one of the first four patient engagement platforms to be directly integrated into the NHS App

· To qualify for central funding NHS Trusts have been strongly encouraged to procure those platforms that have integrated into the NHS App

· Induction's unique Value Added Reseller Agreements with both Oracle Cerner and System C for Induction Zesty allows Induction to exclusively capture separate funding made available for upgrades to hospital EMR systems.

H1 performance

Overall recorded revenues for the first half showed an improvement of just over 54% to £7.1m (H1 2021: £4.6m).

We continue to work closely with NHS Wales, NHS Scotland and the Scottish government in ensuring Induction Attend Anywhere continues to deliver a high quality service to the millions of users it serves. Looking ahead to the second half of this year, we remain confident in key H2 contract renewals with these customers.

We have seen some delays in the roll-out of Induction Attend Anywhere in relation to the Department of Work and Pensions (DWP) contract announced in November 2021 as we seek to meet changing platform requirements from the DWP. Completion of these platform updates will be required before the DWP can make the platform available to a wider range of departments, a key driver of increased revenue.

As announced in April, the South West London ICS, comprising four NHS Acute Trusts, signed up to deploy Induction Zesty to support their outpatient transformation programme. Building on this, eight further hospitals have been signed as at 30 September. Induction Zesty revenues nearly doubled to £1.1m (H1 2021: £0.6m) and, for the reasons described above, we believe we will see further significant sales growth in Induction Zesty sales in the second half and through into the next financial year, albeit at a slower rate than originally anticipated.

Other Induction products (our clinical apps Induction Guidance and Induction Switch) delivered revenues of £0.4m (H1 2021: £0.3m). As we've stated in our Annual Report, given the relatively minor contribution of these clinical apps to overall group revenues, as well as their cost base, we are considering the future role of clinical apps within the group.

At the period end, the Group recorded £14.5m of annual recurring revenue (compared to £13.5m at the start of H1 2022) with recurring revenue for the period accounting for over 90% of total revenues.

In the first half we recorded an adjusted EBITDA loss of £1.0m (H1 2021: £0.7m).

Cash position

The Group ended the first half with cash on hand of £9.0m (31 March 2022: £7.5m). 

We currently expect revenue for the full year to be approximately £3m lower than forecast. In addition, we expect cost escalations of £0.9m relating to increased hosting costs (AWS) and adverse foreign exchange movements versus the US Dollar which is the payment currency of many of our IT services. To offset this, the business is conducting an immediate review of its expenditure to align with the current and expected future growth of our public sector customer base. These and other related savings will be material and are to be initiated forthwith, although the benefits are not expected to fully flow through until the first half of next financial year.

The majority, by value, of our main Induction Attend Anywhere contracts renew at the end of March. We therefore receive significant cash inflows during April and May. A notable feature of the recent upheaval across public sector finance is a move towards fewer advance payments and a trend towards quarterly payments. These two trends further underline the need to tightly manage our expenditure, enforce our contractual payment terms more rigorously and drive the business towards profitability. The Group considers that it should give more prominence to adjusted operating income (free cash flow) which will provide investors with a clearer view of cash generation from operations.

Whilst we currently do not foresee a need for further working capital, it is not yet possible to fully quantify the value and timing of our major contracts or the cadence of their cash inflows. The Group intends to update its guidance on this metric, providing investors with additional clarity in due course. In the meantime, we recognise the need to take a conservative approach to cash and cash management.

Board Changes

During the first half we announced a number of Board changes as part of the natural evolution of the business. In May 2022 Dr Hugo Stephenson returned to the Non-executive Director role he originally held on admission to AIM in May 2019, and in July 2022 we announced the appointment of Christopher Samler as Non-Executive Chairman and the executive team are delighted to benefit from their combined experience and support as we drive the business forward.

Ian Johnson has been appointed to the Board as the Senior Independent Director ('SID') replacing Leslie-Ann Reed who will be stepping down following completion of her three-year term. Ian brings over 30 years of Board experience working with quoted and private companies in the Life Sciences space, having spent a career providing strategic direction and business development expertise. He has a proven track record of overseeing business growth and providing commercial advice through scale-up, organic growth and M&A activity. 

More recently, Guy Mitchell has stepped down as the company CFO and is replaced by John Mcintosh as Interim CFO. The board will commence a process to recruit a permanent CFO.

James Balmain

Chief Executive Officer

Condensed Income Statement (Unaudited)

For the six months ended 30 September 2022

Condensed Consolidated Statement of Comprehensive Income (Unaudited)

For the six months ended 30 September 2022

Unaudited Condensed Consolidated Statement of Financial Position

As at 30 September 2022

Unaudited Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 September 2022

Unaudited Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 September 2022

Unaudited Condensed Consolidated Statement of Cash Flows

For the six months ended 30 September 2022

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

1. Accounting Policies

1.1 Reporting entity

Induction Healthcare Group PLC ("Induction", the "Group" or the "Company") is publicly listed on the AIM market of the London Stock Exchange ("LSE"), and incorporated, domiciled and registered in the United Kingdom. The registered number is 11852026 and the registered address is 20 St. Dunstan's Hill, London, United Kingdom, EC3R 8HL. Induction is a leading healthcare technology company helping to streamline delivery of care by providing software to healthcare professionals.

As of 30 September 2022, Induction Healthcare Group PLC comprised of nine legal subsidiaries, that are majority owned and controlled, and therefore fully consolidated in the Company's consolidated financial statements. Details of the Company's subsidiaries are included in note 5.

1.2 Basis of preparation

These interim financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards ("Adopted IFRSs"). They do not include all the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the most recent annual consolidated financial information included in the annual report and accounts as of and for the year ended 31 March 2022.

The accounting policies applied are consistent with those applied in the most recent consolidated annual report and accounts for the year ended 31 March 2022, which are available on the Company's website at www.inductionhealthcare.com under "Investors - Financial reports & publications."

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtained control and continue to be consolidated until the date when such control ceases. The financial information of the subsidiaries is prepared for the same reporting period as the Group, using consistent accounting policies. All intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions are eliminated in full.

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

When the Group loses control over a subsidiary, the assets and liabilities are derecognised along with any related non-controlling interest and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

These interim condensed consolidated financial statements are unaudited and were approved by the Board of Directors and authorised for issue on 5 December 2022 and are available on the Company's website at www.inductionhealthcare.com under "Investors - Financial reports & publications".

2. Revenue

2.1 Revenue by performance obligations

2.2 Revenue by geographical location

2.3 Revenue by product line

2.4 Timing of revenue recognition

2.5 Contract balances

3. Expenses by nature

4. Earnings per share

Basic EPS is calculated by dividing the profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders of the parent (after adjusting for interest on the convertible preference shares) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

The following table reflects the income and share data used in the basic and diluted EPS calculations:

Loss attributable to ordinary shares (basic and diluted)

Weighted average number of ordinary shares (basic and diluted)

5. Investments in subsidiaries

6. Goodwill and intangible assets

7. Trade and other receivables

Trade receivables are non-interest bearing and are generally on terms of 30 days. Included within trade and other receivables is £nil expected to be recovered in more than 12 months.

Cash and cash equivalents

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made on a weekly basis, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.

8. Trade and other payables

Included within trade and other payables is £nil expected to be settled in more than 12 months.

All trade and other payables are non-interest bearing and are normally settled on 30 day terms.

9. Capital and Reserves

9.1 Share Capital

9.2 Share Premium

9.3 Merger Reserve

During the completion of the annual report and accounts for 31 March 2022, amounts recognised in share premium that related to the issuance of ordinary shares as consideration for a business combination were reclassified to the merger reserve. Management have therefore restated the amounts presented for the merger reserve and for the share premium for the 6 months ended 30 September 2021 to reflect this.

10. Related Parties

Transactions with key management personnel

The compensation of key management personnel (directors) is as follows: