10 Dec 2013 07:00
Ultrasis plc
("Ultrasis" or the "Company")
Results for the year ended 31 July 2013
Ultrasis, the provider of interactive health care services, announces its audited financial results for the year ended 31 July 2013:
· Revenues of £977,000, a decrease from £1,069,000 in 2012 caused by the continued difficult trading conditions in the UK market
· Operating loss before exceptional costs decreased to £1,238,000 (2012: £1,429,000)
· Cash reserves of £734,000 (2012: £1,284,000)
· New strategy implemented to grow the Company, both by acquisition and organic growth
· Acquisition of the wellness provider, Screenetics announced in October 2013
· Unused loan financing facilities of £2,200,000
John Smith, CEO commented:
"I look forward to leading the Ultrasis Group at this exciting time, the structural changes and acquisitions we are currently making are only the start of our new strategy to create a Company that helps people maintain, regain and improve their physical, psychological and social wellbeing. I believe my clinical background, leadership experience and absolute belief in our products and services will enable me to transform the Company into a profitable business and market leader."
Chairman's Report
As I predicted last year, 2012 was bound to be a difficult year with our main UK market disrupted by substantial changes in the NHS commissioning process. International development took longer to deliver income than we initially anticipated, although the increasingly widespread enthusiasm for "Beating the Blues" bodes well for the future. So, this year's results are disappointing. Not surprisingly, our response has been to review comprehensively our strategy to take account of new market conditions at home and abroad.
That strategy includes a review of our cost base to align it more closely with revenues.
The welcome investment in the Company in early 2013 by Mr Paul Anthony Bell has enabled us to focus our energy on shaping a much more aggressive strategy to grow the Company, both by acquisition and organic growth, also refreshing and adding to our product suites and services.
In June, John Smith was appointed as Chief Executive and the Board has tasked him with delivering this strategy. The acquisition of the wellbeing company, Screenetics, in September 2013 and the assets of Step Success in November 2013 show the strategy is on course. The recent announcement that Screenetics, just six weeks after joining the Ultrasis Group, has secured contracts which will add approximately £2 million per annum to Group revenues is early evidence that rapid growth by acquisition is an attainable goal. In October, shareholders gave the Board sufficient authority to issue shares to enable the Company to take advantage of future suitable acquisition opportunities.
I believe that the growing reputation of Ultrasis' wellbeing products, especially "Beating the Blues", will be reflected in a revival of sales revenues as markets increasingly appreciate the economic and social benefits they deliver. With the growing strength of our international relationships there is an opportunity for the Ultrasis Group to become a market leader in the delivery of health and wellbeing services on a global basis. The Board is looking forward to a constructive year ahead as it pursues its goal of restoring the Group to profitability.
Gerald Malone Chairman
|
Chief Executives Report
The performance of the Company in 2013 fell well short of expectations. The Company failed to secure revenue growth and although cost cutting initiatives were implemented which reduced the operating loss before exceptional items to £1,238,000 from £1,429,000 in 2012, the loss for the year transferred to reserves increased to £3,455,000 (2012: £3,406,000). There are three key reasons for this disappointing outcome:
The NHS continued to be in a state of flux whilst the new Clinical Commissioning Group ("CCG") arrangements were established, delaying purchasing decisions and it remained difficult to make sales in this, our primary market.
Internationally we underestimated the time it takes to break into new markets, especially in the USA where our partnership venture with UPMC, U Squared Interactive, continues to grow steadily, but more slowly than expected.
Despite the excellent clinical evidence of our products the technology platforms upon which they are built is perceived now as dated by customers and users. We have had insufficient resources to invest in keeping them ahead of competitors' offerings which has had an impact on sales.
We have also taken the prudent decision to write down the value of the licence acquired with the acquisition of Healthstar in 2006 to the English Speaking Consumer market, This resulted in a significant non cash charge to the Income Statement of £1,965,000.
Turning to positive events, in February 2013 we secured significant investment and financial support from Mr Paul Anthony Bell. This has enabled the Company to pursue a strategy of growth through acquisition that the Board believes will reverse the decline in the Company's fortunes in the next financial year.
In June 2013 I was delighted to be given the opportunity to lead the Company and was immediately charged with creating a strategy that will bring about significant growth, so increasing shareholder value.
Of course we need to learn lessons from the past, but it is the future strategy of the Group that deserves more scrutiny. To demonstrate and measure the future performance, the Board has adopted straightforward, transparent key performance indicators (KPI's) which for 2013/14 are:
· Grow our customer base, both in the UK and Internationally; · Increase income and achieving profitability; · Widen the range of services we provide; · Develop new and innovative products and services; · Increase the number of partners who distribute our services; · Form strategic partnerships with public, voluntary and private sector partners to the mutual benefit of the parties; · Enhance our reputation for quality products and services.
It is intended to deliver an aggressive and focused approach to growing the business. A key component will be the acquisition of companies which will quickly enhance the Group's revenues and hasten the return to profitability.
Already progress has been made, through the acquisition of the wellness provider, Screenetics. The screening and wellbeing market is poised for significant growth; a point proven when within six weeks of the acquisition three new contract wins were announced by Screenetic's delivering forecast additional Group income of £2 million per annum. Screenetics is ahead of forecast sales for the year and we are confident its growth will be enhanced now that it is part of the Ultrasis Group.
We have also added the assets of the Step Success business to our Group. This is an exciting wellness product which will integrate well into our existing health manager program, allowing us to provide a more complete solution for customers.
The Company is identifying further acquisition opportunities that will add further products and services to the Group. Our aim is to create an eco-system of complementary businesses that allows for both up-sell and cross-sell opportunities.
We believe there is significant potential in direct-to-consumer market and it is our intention to widen the range of the Company's products and services in the next financial year. More and more people are looking for ways to manage their own health and wellbeing and we will be innovating marketing techniques to increase uptake of our services and widen awareness of The Wellness Shop.
Technology improvements - especially the migration of healthcare solutions to mobile platforms and increasing reliance on e-health solutions to curb cost, create new opportunities within healthcare, in both the public and private sectors, to which Ultrasis is increasingly well placed to respond.
The NHS remains a key customer and our recently announced joint venture company with the NHS, The Ki Group, will become the core sales vehicle through which we will secure future public sector contracts. Ki Group will begin to offer services in partnership with the NHS from January 2014 and we are already engaged in discussions with a number of CCGs on how we can help then to deliver effective and affordable access to mental health care for their patients.
During the past year the clinical and technology teams at Ultrasis have been engaged in a "top to bottom" redevelopment of Beating the Blues so that it can be deployed through mobiles, tablets and other devices, as well as through laptop and desktop computers. Beating the Blues 2.0, currently in the final stages of testing, will initially go live in the USA early in the New Year.
Achieving recognition on the National Register of Evidence-based Programs and Practices by The Substance Abuse and Mental Health Services Administration is a significant achievement and has led to raised awareness of Beating the Blues in the USA. We are confident that this recognition, combined with the introduction of Beating the Blues 2.0, will lead to an increase in contracts in the US in the coming year.
Conclusion
Changes already implemented and under way should lead to a significant improvement on the results achieved in the year ended 31 July 2013. Our future focus, on becoming a healthcare company with a broad product portfolio that helps people to maintain, re-gain or improve their physical, emotional and social health and wellbeing, will not only open new commercial opportunities, but mitigate the risks associated with being reliant on one product for revenue delivery, which has historically been our weakness.
Next year is about successfully achieving three key objectives:
· Implementing the strategy agreed by the Board. · Increased revenues, with a return to profitability. · Looking to increase shareholder value through the achievement of the above.
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John Smith
Chief Executive
Financial Report
Revenues
The Group's had total recognised revenues of £977,000 (2012: £1,069,000) of which £818,000 (2012: £866,000) was generated in the UK and £159,000 (2012: £203,000) was generated revenue internationally).
Total invoiced sales for the year were £742,000 compared to £891,000 in 2012, reflective of the continued challenges in the core UK NHS market.
Expenditure
Like for like operating costs for the year decreased by 11%% to £2,195,000 from £2,471,000 in 2012, a result of cost cutting initiatives continued during the year.
However the Group incurred £256,000 exceptional one off costs related to payment in lieu of notice to Nigel Brabbins who resigned from the Board in June 2013.
In addition, as part of the Board's annual review of the carrying value of its intangible assets the Directors took the prudent view to write down the value of the licence acquired with the acquisition of Healthstar in 2006 to the English Speaking Consumer market incurring, non-cash, charges to the Income Statement of £1,965,000.
Results
Operating losses before exceptional items for the year were £1,238,000; an improvement over the prior year's loss of £1,429,000 and a result of the cost reduction initiatives started during the prior year.
When taking the one-off charges to the Income Statement associated with exceptional items the loss increased to £3,451,000.
A loss of £3,451,000 was transferred to reserves (2012: £3,401,000).
Research and Development Expenditure
The Group spent £9,000 on R&D during the year (2012: £87,000) and capitalised £45,000 of development costs (2012: £21,000).
Joint Venture
The Group's interest in its Joint Venture, USquared Interactive is consolidated using the proportionate consolidation method. The Group's consolidated balance sheet therefore includes £319,000 of assets that it jointly controls (2012: £257,000) and £387,000 (2012: £169,000) of the liabilities for which it is jointly responsible. The Group's consolidated income statement includes £36,000 of income (2012: £7,000) and £139,000 of expenses (2012: £235,000) being the Group's share of USquared Interactive's loss for the year.
Cash
At the balance sheet date the Group had reduced cash reserves of £734,000 (2012: £1,284,000) reflecting the impact on cash reserves of the operating loss incurred during the year.
Deferred revenue
The Group had deferred revenue balances of £470,000 (£692,000) available for release to the income statement in future periods.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME
for the year ended 31 July 2013
| 2013 | 2012 | ||||
| ||||||
Notes | £'000 | £'000 | ||||
Revenue | 977 | 1,069 | ||||
Cost of sales | (20) | (27) | ||||
Gross profit | 957 | 1,042 | ||||
Operating expenses
Exceptional costs
| (2,195)
| (2,471)
| ||||
Impairment of intangible fixed assets | 5 | (1,965) | - | |||
Directors severance costs | (256) | - | ||||
Administrative expenses | (4,416) | (2,471) | ||||
Operating loss before exceptional costs | (1,238) | (1,429) | ||||
Operating loss after exceptional costs | (3,459) | (1,429) | ||||
Finance costs | (1) | (8) | ||||
Finance income | 9 | 2 | ||||
Loss before taxation | (3,451) | (1,435) | ||||
Taxation | 3 | - | (1,966) | |||
Loss for the year | (3,451) | (3,401) | ||||
Other comprehensive loss
Items that may be reclassified subsequently to profit or loss: | ||||||
Exchange differences on foreign currency net investments in subsidiaries | (4) | (5) | ||||
Total comprehensive loss for the year attributable to equity holders of the parent | (3,455) | (3,406) | ||||
Loss per share: Basic and diluted loss per share (p) | 4 | (0.21) | (0.23) |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 July 2013
| ||||||||||
Share capital
£'000 | Share premium
£'000 | Share option reserve £'000 | Capital reduction reserve £'000 | Merger reserve
£'000 | Translation reserve
£'000 | Retained losses
£'000 | Total
£'000 |
| ||
Balance brought forward | 1,508 | 21,302 | 1,659 | 6,650 | 2,324 | (6) | (26,704) | 6,733 |
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1 August 2011 |
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Foreign exchange translation differences on foreign currency | - | - | - | - | - | (5) | - | (5) |
| |
Retained loss for the year | - | - | - | - | - | - | (3,401) | (3,401) |
| |
| ||||||||||
Total comprehensive income for the year | - | - | - | - | - | (5) | (3,401) | (3,406) |
| |
New shares issued under Share Incentive Plan
| 3 | 11 | - | - | - | - | - | 14 |
| |
Movement on share option reserve | - | - | 5 | - | - | - | - | 5 |
| |
Balance carried forward 31 July 2012 | 1,511
| 21,313 | 1,664 | 6,650 | 2,324 | (11) | (30,105) | 3,346 |
| |
Share capital £'000 | Share premium £'000 | Share option reserve £'000 | Capital reduction reserve £'000 | Merger reserve £'000 | Translation reserve £'000 | Retained losses £'000 | Convertible loan stock £'000 | Total
£'000 | |
Balance brought forward | 1,511 | 21,313 | 1,664 | 6,650 | 2,324 | (11) | (30,105) | - | 3,346 |
1 August 2012 | |||||||||
Foreign exchange translation differences on foreign currency | - | - | - | - | - | (4) | - | - | (5) |
Retained loss for the year | - | - | - | - | - | - | (3,451) | - | (3,451) |
Total comprehensive income for the year | - | - | - | - | - | (4) | (3,451) | - | (3,455) |
New convertible loan stock issued during year | - | - | - | - | - | - | - | 24 | 24 |
New shares issued | 198 | 388 | - | - | - | - | - | - | 586 |
Movement on share option reserve | - | - | (665) | - | - | - | 680 | - | 15 |
Balance carried forward 31 July 2013 | 1,709 | 21,701 | 999 | 6,650 | 2,324 | (15) | (32,876) | 24 | 515 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 July 2013
| ||||||||||||
31-Jul | 31-Jul |
| ||||||||||
Notes | 2013 | 2012 |
| |||||||||
£'000 | £'000 |
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Non-current assets |
| |||||||||||
Intangible assets | 5 | 613 | 2,687 |
| ||||||||
Plant and equipment | 29 | 36 |
| |||||||||
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Total non-current assets | 642 | 2,723 |
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Current assets |
| |||||||||||
Trade and other receivables |
| 303 | 425 |
| ||||||||
Cash and cash equivalents | 734 | 1,284 |
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Total current assets | 1,037 | 1,709 |
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Current liabilities |
| |||||||||||
Trade and other payables | (1,164) | (902) |
| |||||||||
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Total current liabilities | (903) | (902) |
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Net current assets | 134 | 807 |
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Long term liabilities |
| |||||||||||
Trade and other payables due in more than one year |
(261) |
(184) |
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Net assets | 515 | 3,346 |
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Equity |
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Share capital | 1,709 | 1,511 |
| |||||||||
Share premium | 21,701 | 21,313 |
| |||||||||
Share option reserve | 999 | 1,664 |
| |||||||||
Capital reduction reserve | 6,650 | 6,650 |
| |||||||||
Merger reserve | 2,324 | 2,324 |
| |||||||||
Translation reserve | (16) | (11) |
| |||||||||
Convertible loan stock | 24 | - |
| |||||||||
Retained losses | (32,876) | (30,105) |
| |||||||||
| ||||||||||||
| ||||||||||||
515 | 3,346 |
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CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 July 2013
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Statement of accounting policies for the year ended 31 July 2013
1. Nature of financial information
The financial information set out in this announcement does not comprise the Group's statutory accounts for the years ended 31 July 2013 or 31 July 2012.
The financial information has been extracted from the statutory accounts of the Company for the years ended 31 July 2013 and 31 July 2012. The auditors reported on those accounts; their reports for both years were unqualified but in the prior year they drew attention to the basis of preparation of the financial statements.
The statutory accounts for the year ended 31 July 2012 have been delivered to the Registrar of Companies, whereas those for the year ended 31 July 2013 were approved by the Board on 9 December 2013 and will be delivered to the Registrar of Companies once they have been distributed to shareholders.
The financial information set out in this announcement has been prepared on a basis consistent with the accounting policies for year ended 31 July 2013 which were substantially unchanged from the year ended 31 July 2012 and were disclosed in the Annual Report and Accounts for that year.
(2) Segment information
Management has determined the operating segments by considering the business from a geographic perspective. The Group's operations are in two geographical segments, the United Kingdom and abroad. These divisions are the business segments for which the Group reports its segment information internally to the Board.
Management considers there to be one type of customer being providers and/or users of physical and emotional wellbeing technologies.
All inter-segment sales are transacted on an arm's length basis. The results of each segment have been prepared using accounting policies consistent with those of the Group as a whole.
Geographical Segments |
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UK | Rest of the World | Unallocated | TOTAL | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | ||||||||||||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||||
External Revenue: | 818 | 866 | 159 | 203 | - | - | 977 | 1,069 | |||||||||||
Total Revenues | 818 | 866 | 159 | 203 | - | - | 977 | 1,069 | |||||||||||
Operating loss: | (3,377) | (1,122) | (82) | (307) | - | - | (3,459) | (1,429) | |||||||||||
Finance costs | - | - | - | - | (1) | (8) | (1) | (8) | |||||||||||
Finance income | - | - | - | - | 9 | 2 | 9 | 2 | |||||||||||
(Loss)/Profit before taxation | (3,377) | (1,122) | (82) | (307) | 8 | (6) | (3,451) | (1,435) | |||||||||||
Taxation | - | (1,966) | - | - | - | - | - | (1,966) | |||||||||||
(Loss)/Profit for the period from continuing operations | (3,377) | (3,088) | (82) | (307) | 8 | (6) | (3,451) | (3,401) | |||||||||||
Assets | 778 | 3,064 | 167 | 84 | 734 | 1,284 | 1,679 | 4,432 | |||||||||||
Liabilities | (775) | (903) | (389) | (183) | - | - | (1,164) | (1,086) | |||||||||||
Capital expenditure | (31) | (33) | (58) | - | - | - | (89) | (33) | |||||||||||
Depreciation, Amortisation & Impairment | (2,171) | (210) | - | - | - | - | (2,170) | (210) | |||||||||||
Share based payments | (109) | (17) | - | - | - | - | (109) | (17) | |||||||||||
During the year and the prior year no single customer contributed more than 10% of the Group's revenue.
(3) Taxation
Tax charge
The tax charge for the period comprises:
2013 | 2012 | |
£'000 | £'000 | |
Corporation tax | - | 7 |
Deferred tax | - | (1,973) |
- | (1,966) |
Factors Affecting Tax charge for the Current Year
The tax assessed for the year is higher/(lower) than that resulting from applying the standard rate of corporation tax (24%). The differences are explained below:
| 2013 | 2012 |
% | % | |
Standard rate of tax applying to profits on ordinary activities before tax | 23.67 | 25.33 |
Effect of: | ||
Expenses not deductible for tax purposes | - | - |
Reversal of deferred tax assets previously recognised | (13) | (123) |
Tax losses utilised | - | - |
Tax losses not recognised | (9) | (22) |
Research and development claims | - | - |
Capital allowances for period greater than depreciation | (1) | (3) |
Impact of changes in future applicable tax rates on deferred tax assets | - | (16) |
Total tax charge/(credit) rate for the year as a percentage of (loss)/profit | - | (139) |
Factors that may affect the future tax charge
Amounts of unprovided deferred tax assets are as follows:
2013 | 2012 | ||
Applicable tax rate | 26% | 26% | |
£'000 | £'000 | ||
Trading losses and other losses | 3,860 | 4,122 | |
Capital losses | 1,366 | 1,570 | |
Depreciation in excess of capital allowances | 40 | 45 | |
Fair value adjustments | (348) | (400) | |
4,918 | 5,337 |
On 22 June 2010 the Government announced its intention to propose to Parliament a staggered reduction in the corporation tax rate of 1% every year culminating in a rate of 24% for the tax year 2014/15. The 2011, 2012 and 2013 Budgets accelerated the reduction, resulting in a rate of 24% from 1 April 2012 reducing to a rate of 21% for the tax year 2014/15 and 20% for the tax year 2015/16.
(4) Loss per share
Pence per share | ||
2013 | 2012 | |
Basic loss per share | (0.21) | (0.23) |
Diluted loss per share | (0.21) | (0.23) |
The calculation of diluted loss per share assumes conversion of all potentially dilutive ordinary shares, all of which arise from share options.
The calculations of earnings per share are based on the following loss and numbers of shares, Basic and diluted are the same are the shares are anti-dilutive:
Basic and diluted
|
| ||||
2013 |
2012 |
| |||
£'000 | £'000 |
| |||
Loss for the financial year | (3,451) | (3,401) |
| ||
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| |||||
| |||||
Number | Number |
| |||
of shares | of shares |
| |||
2013 | 2012 |
| |||
Weighted average number of shares for basic earnings per share: |
1,613,147,408
| 1,508,952,463
|
| ||
Contingently issuable shares | 39,785,714
| 1,733,333
|
| ||
Weighted average number of shares for diluted earnings per share: |
1,652,933,122
|
1,510,685,796
|
| ||
(5) Intangible assets
Retail product rights | Capitalised Development Costs | BtB Intellectual Property Licence | Intellectual Property of the Getfit product range | Total | |||||||||||||||
Group | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||||||
Cost | |||||||||||||||||||
At 1 August 2011 | 2,485 |
796 | 168 | 216 | 3,665 | ||||||||||||||
Additions | - | 21 | - | - | 21 | ||||||||||||||
At 31 July 2012 | 2,485 |
817 | 168 | 216 | 3,686 | ||||||||||||||
Amortisation & Impairment | |||||||||||||||||||
At 1 August 2011 | 396 |
374 | 24 | 20 | 814 | ||||||||||||||
Charge for year | 124 |
43 | 8 | 10 | 185 | ||||||||||||||
At 31 July 2012 | 520 |
417 | 32 | 30 | 999 | ||||||||||||||
Net book value | 1,965 |
400 | 136 | 186 | 2,687 | ||||||||||||||
Retail product rights | Capitalised Development Costs | BtB Intellectual Property Licence | Intellectual Property of the Getfit product range | Software licences | Total |
| |||||||||||||
Group | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| ||||||||||||
Cost |
| ||||||||||||||||||
At 1 August 2012 | 2,485 | 817 | 168 | 216 | - | 3,686 |
| ||||||||||||
Additions | - | 45 | - | - | 32 | 77 |
| ||||||||||||
Disposals | - | (521) | - | - | - | (521) |
| ||||||||||||
At 31 July 2013 | 2,485 | 341 | 168 | 216 | 32 | 3,242 |
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Amortisation & Impairment |
| ||||||||||||||||||
At 1 August 2012 | 520 | 417 | 32 | 30 | - | 999 |
| ||||||||||||
Charge for year | - | 168 | 8 | 10 | - | 186 |
| ||||||||||||
Impairment charge* | 1,965 | - | - | - | - | 1,965 |
| ||||||||||||
Disposals | - |
(521) | - | - |
- | (521) |
| ||||||||||||
At 31 July 2013 | 2,485 | 64 | 40 | 40 | - | 2,629 |
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Net book value | - | 277 | 128 | 176 | 32 | 613 |
| ||||||||||||
*As part of the Board's annual review of the carrying value of its intangible assets the Directors took the prudent view to write down the value of the licence acquired with the acquisition of Healthstar in 2006 to the English Speaking Consumer market incurring, non-cash, charges to the Income Statement of £1,965,000. Recognising that market conditions have changed, the board is of the view that there is no immediate prospect of realising revenue from exploitation of the assets and accordingly, writing down their value is the prudent course to take. This charge was shown in the UK segment breakdown in Note 2.
(6) Annual Report and Accounts
Copies of the annual report and accounts for the year ended 31 July 2013 will be posted to shareholders in due course and will be available to download from the Company's website, www.ultrasisplc.com.