MGP.L Regulatory News (MGP)

21 January 2021

Medica Group Plc

Trading Update for the year ended 31 December 2020

Medica Group Plc (LSE: MGP, "Medica" or the "Company"), the UK and Ireland market leader in the provision of teleradiology services, announces an unaudited trading update for the year ended 31 December 2020 and a business update.

Trading update

As previously announced, revenues during 2020 were materially affected by the impact of the Covid-19 pandemic on radiology reporting activity. However, following the initial lockdown period in the UK beginning in March, NightHawk activity recovered strongly to pre-Covid-19 levels by mid-2020, with Elective revenues recovering more slowly. In November, we signalled that we expected subsequent lockdowns to impact trading. As a result, during the second lockdown in Q4 2020, recovery in Elective revenues slowed significantly, however, encouragingly, NightHawk continued to perform well.

Therefore, we expect revenue for the year to be £36.8 million, a decrease of approximately 21% year-on-year. Gross margins remained strong at 47.4% and profits were in line with expectations. During the year, we continued to make significant investments to underpin long term growth. These planned investments to develop our technology, infrastructure and people, when combined with the reduction in revenue have, as expected, had a material impact on profitability, with adjusted net operating profit margins of c. 14% for the year compared to 24% in 2019. The results for the year include the first eight weeks of Global Diagnostics Ireland (GDI), which is trading in line with the Board's expectations.

Despite the decline in revenue, cash generation remained strong in 2020. After taking account of the £15.4m, plus costs, in respect of the acquisition of GDI in November, and the subsequent increase in our debt facilities of £6m in November to support the acquisition, gross cash at 31 December 2020 was £13.9 million and net debt was £4.0 million.

Looking ahead into 2021, it is too early to know what the impact of the latest lockdown measures announced on 4 January 2021 will have on the business, which will in large part depend on how long these measures remain in place. Whilst we have inevitably seen an impact on Elective volumes, which have reduced somewhat compared to December levels, we have been pleased with the resilience of Nighthawk. The Board remain confident in Medica's ability to benefit from the strong recovery in demand that is expected as the impact of Covid-19 starts to recede later in the year once vaccination programmes accelerate and the NHS is able to tackle the unprecedented list of 4.5 million patients waiting longer than 18 weeks for elective treatments.

Business update

Medica is pleased to announce that in December the Company signed a partnership agreement with Sectra Ltd, a leading international provider of medical imaging IT, to deliver a new Picture Archive and Communication System (PACS); the key component of Medica's FutureTech programme. Medica expects this new system to go live in Q1 2022.

Also, in December, following two successful pilot projects, Medica deployed its Urgent Stroke Augmented Intelligence ("AI") Support Tool ("qER") into live clinical practice. Medica believes this clinical application, delivered in partnership with Qure.ai, is the first full implementation of AI into clinical practice by a UK teleradiology provider and acts as a decision support tool to enhance radiologist reporting of urgent stroke cases during the night. To date, the tool has contributed to the care of approximately 15,000 patients and it has been well received by clients and radiologists.

Medica is also pleased to announce that it remains on track to complete the integration of GDI as planned by the end of Q1 2021. Looking ahead, the new full lockdown in Ireland announced on 30 December may have some limited short-term impact on volumes but we remain confident in the outlook for Ireland given recent contract wins.

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

"Whilst 2020 financial results have inevitably been impacted by the pandemic, we have made good progress with our new strategy and made important investments. We entered the Republic of Ireland with our first acquisition, launched our exciting FutureTech programme and delivered our first AI solution into clinical reporting. The current increase in the number of cases of Covid-19 in both the UK and Ireland, and the subsequent regional and national lockdowns, will mean that recovery of Medica's Elective work will be impacted in Q1 2021 and until the restrictions have been removed. However, the Company remains upbeat that the impact of the rapid immunisation programmes will mean that the NHS should start to be able to manage the huge backlog of patients on waiting lists for elective procedures in the second half of 2021. Medica will be ready to assist its clients to support this effort when the time comes, and we remain confident about our long term growth prospects."

For further information, please contact:

About Medica Group PLC

Medica intends to lead the way in telemedicine and is the market leader in the UK and Ireland for the provision of teleradiology services, providing outsourced interpretation and reporting of MRI (magnetic resonance imaging), CT (computerised tomography), ultrasound and plain film (x-ray) images. In addition, Medica is the market leader for the provision of retinal diagnostic screening in Ireland where it also provides selective managed services in diagnostics to the public and private sectors

In the UK, Medica currently offers two primary services to hospital radiology departments:

· NightHawk, urgent reporting service, and

· Elective which includes routine cross-sectional reporting on MRI and CT scans, and routine plain film reporting on x-ray images.

Medica contracts with the largest pool of consultant radiologists in the UK and Ireland, performing remote access teleradiology across its customer base of more than 100 NHS Trusts in the UK, the Irish HSE, private hospital groups and diagnostic imaging companies. This enables the Company to offer a fast, responsive service both during the day and importantly supporting urgent out-of-hours reporting.

Medica has developed a bespoke, secure IT platform that provides market-leading linkage between a hospital's Radiology Information System (RIS) and consultant radiologists who contract with the Company. Direct RIS access ensures that where the wider patient medical history is available, it can be reviewed by the consultant as part of every report. For more information please visit www.medica.co.uk