Sysgroup Regulatory News (SYS)

15 September 2010

System C Healthcare PLC

("System C" or the "Company")

Trading Update

The Company announced on June 15th 2010, that the Board expects to report a 75% increase in annual revenue compared with the previous year, and profits before tax in line with market expectations for the year at £5.4m. These results will be announced on September the 27th 2010. The Board also reported a significant increase in interest in our Medway Patient Administration System (PAS) and Electronic Patient Record (EPR) products from individual NHS hospital Trusts, and a risk to services revenues due to the slowdown in Government spending. Now, four months into the new Government, the situation is beginning to clarify and we are able to make an additional statement.

The structural changes proposed for the NHS have been outlined in the Government White Paper, Equality and Excellence: Liberating the NHS.  Much of the detail still has to emerge, but last week Health Minister Simon Burns made his long-awaited announcement about the future of the National Programme for IT. It is clear that the changes ahead are extensive and profound and are likely to impact most areas of healthcare provision and associated services. This is a turbulent time for NHS employees and suppliers alike and the changes are generating both risks and opportunities. 

As anticipated, the Company is experiencing a decline in services revenues due to a combination of the general reduction in public sector spending and the software delivery problems of other suppliers working under the National Programme for IT. We are now expecting services revenues to be a third lower in this financial year than in 2009/10. Also, it is now clear that central development contracts are being shelved or cancelled. Some or all of this business is expected to be replaced by PAS and EPR product revenues both in the current year and beyond. We have begun to reduce capacity and costs in line with anticipated demand.

For System C, the most significant opportunity is the recent move by individual hospital trusts to purchase local PAS, EPR and clinical systems. The surge in activity has been created by a combination of factors: many trusts have been released from their central obligations to deploy systems from the National Programme for IT; many acute trusts are using systems that are 20 years old or more; in many cases the new systems are critical to generating the efficiency benefits that the NHS now has to deliver. A large number of trusts have started procurement activity in recent months, and the scale and pace of activity provides significant opportunities for System C. Our potential sales prospects for PAS, EPR and clinical products has grown very significantly, and we have quadrupled our PAS/EPR business development team in order to keep up with customer enquiries and procurement activity.

System C welcomes Simon Burns' announcement last week that all NHS Trusts will be freed to buy IT systems of choice outside the National Programme for IT. Our strategy over the last 5 years has been to invest heavily in our Medway PAS/EPR software, in anticipation of a return to devolved purchasing. Our next generation product suite is coming to the market, and has secured significant contract wins, at a time when the market is opening up.

The deployment of the full Medway PAS and EPR at University Hospital Aintree continues to progress to plan. The Medway product range has been well received during procurement demonstrations, and we are very pleased to have won a substantial order to supply our Medway clinical systems to Royal Devon and Exeter in May. We are also pleased to report that we are in the final stages of contract negotiations for the supply of Medway PAS and EPR with another major customer, and we expect to be able to announce more details of this in the very near future.

Large scale public sector purchases of PAS, EPR and clinical systems are made using OJEU or ASCC procurement routes. These are complex processes which generally take between 6 and 12 months to complete. Although the company is very confident of winning significant numbers of sales in this market, we still believe that the flow of revenues from such sales will inevitably tend towards the medium term, because the market for these procurements is only just opening up. This timing issue, combined with a reduction in services revenue, is likely to significantly impact current trading, although we expect to remain profitable in the current year. With our strong reputation, proven products, highly experienced deployment team and strong cash position (£18.6m as of 31 May 2010), System C has put itself in an excellent position to secure product sales and we are very confident that we will win substantial levels of product business in the short to medium term.

Contact:

Notes to editors:

System C Healthcare plc (www.systemc.com), specialises in the design and development of clinical patient management and business intelligence software, and provides systems implementation and consulting services to the health and social care sectors. 

System C (SYS:L) is quoted on the AIM Market of London Stock Exchange.