Ultrasis Plc Regulatory News (ULT)

Ultrasis plc

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

Results for the year ended 31 July 2014

Ultrasis, the provider of interactive health care services, announces its audited financial results for the year ended 31 July 2014:

· 94% increase in recognised revenue to £1,833,000 (2013: £941,000)

· Invoiced sales increased by173% to £1,968,000 (2013: £719,000)

· 80% increase in operational costs to £3,791,000 (2013: £2,149,000)

· Operating loss before exceptional costs reduced to £1,424,000 (2013: £2,768,000)

· Significant investment in both human resources and estate to provide national network of delivery has seen the team grow from 40 to over 65

· Three acquisitions during the period enabling the Group to diversify the range of products and services available

· Proposed refinancing (announced post year-end) for over £5.05 million of investment in new financial year, subject to shareholder and Takeover Panel approval. The Board expects to post a circular to shareholders with regards the proposed refinancing in February.

 John Smith, Interim Executive Chairman, said "The Group is looking ahead to maximise the significant financial and strategic investment made in both its human resource and physical estate during the past 12 months. We look forward to further progress in 2015."

For all enquiries relating to Ultrasis please contact:

Notes to Editors:

Ultrasis is a provider of health and social care services providing access to physical and mental health services either face to face or via technology. We deliver our range of healthcare products to the consumer, health professionals, and the corporate sector in the UK and Internationally. Ultrasis was the first company to offer computerised products based on Cognitive Behavioural Therapy (CBT) and interactive multimedia, and is still a world leader in this field.

Interim Executive Chairman's statement for the year ended 31 July 2014

I want to begin my report by thanking our employees for their tremendous efforts over the past 12 months, in particular their absolute focus on delivering high quality and customer focused services. The Group has been through a significant amount of change during the past year as we look to deliver our growth strategy.

We have set about establishing a robust infrastructure capable of delivering sustainable growth in revenue, whilst maintaining a high quality service. We have recruited a substantial number of employees and developed a national network of clinics and facilities from which to deliver our services, as well as investing in key central services which are essential to support a growing company. We currently employ 65 people and are looking to increase this to over 75 in the near future.

This investment and strategic direction has already started to show a significant growth in invoiced sales across the Group to £1,968,000 (2013: £719,000, 2012: £891,000), with the recognised sales revenue increasing to £1,833,000 (2013: £941,000). This reversal of the 'year on year' decline in sales revenue of the Group justifies the diversification and acquisition strategy adopted by the Board since I was appointed as Chief Executive in June 2013. This strategy could not have been implemented without the substantial and ongoing support of Mr Paul Bell and the loan facilities he has made available to the Group.

We are a company in transition and as part of this process of change we have seen several colleagues leave the Board: Penelope Tembra, Finance Director, Charlie Martin, Clinical Director, Gerald Malone, Chair, Michael Mills Non-Executive Director and Dan Bate Non-Executive Director. I want to thank them for the many years of service that between them they have given to the Group.

It has also seen us recruit Alan Kershaw who joined the Board as Executive Finance Director in June 2014. Alan brings a wealth of plc experience and knowledge to the Board and we have already seen the benefit of this appointment. We are actively looking to broaden our board and appoint non executive directors, and expect to provide further detail on this on completion of the proposed refinancing.

In the past 12 months we have achieved significant progress in delivering on the strategic objectives that the Board set out in last year's annual report. These objectives will continue to form the basis for measuring the Group's success for the current financial year so I will take the opportunity to restate them:

· Grow the customer base

· Increase income and achieve profitability

· Widen the range of services we provide

· Develop new and innovative products and services

· Increase the number of partners who distribute our products and services

· Form strategic partnerships with public, voluntary and private sector partners

· Enhance our reputation for providing quality products and services

Going forward

Today's results provide details of the Group's activities for the financial year ending 31 July 2014 but much has happened since the year end. The Board and the Senior Management Team remain focused on growing the business and returning it to profitability by delivering on our strategy to become a leading provider of health and social care services.

The acquisitions we have made, and the contracts we have subsequently won are now contributing significant and regular income to the Group.

Crucially we have provisionally secured over £4.55 million of new investment in the Group from Mr Paul Bell, Directors and others and, in addition, the opportunity to raise up to a further £500,000 by way of an open offer to our shareholders. This investment is subject to approval by both the Panel on Takeovers and Mergers and independent shareholders. I want to take this opportunity to make it clear that without this proposed investment the Group will not be in a position to continue to trade, and therefore I would ask all shareholders to carefully consider the future of the Group, and I hope, show their support at the forthcoming General Meeting which is expected to take place in March. I also want to take this opportunity to again publically thank Mr Bell for his continued involvement both financially and strategically as we continue to implement the Board's strategy to bring success to the Group.

John Smith

Interim Executive Chairman

Strategic Report

Overview

The Ultrasis Group has four main operating companies, being Ultrasis PLC, Ultrasis UK Limited, Screenetics UK Limited and Health Assessments UK Limited. All of these companies operate in the healthcare sector providing a range of complementary activities to individuals both in the United Kingdom and beyond, both via health professionals and directly. The focus of the Group's activities remains on customers in the United Kingdom.

During the year under review the company acquired the Screenetics group comprising Screenetics UK Limited, Health Assessments UK Limited and Screenetics Limited in a cash and share acquisition. In addition to this the Company also acquired the business and assets of Step Success Limited and of the Waterloo Health Clinic.

Strategy

The Group's strategic focus remains on growing the healthcare offering both through organic growth and through acquiring other organisations whose activities and people would complement those of the existing offering. The Group aims to maximise the utilisation of technology within healthcare, whilst ensuring that individuals are treated as individuals, and are supported both remotely and face to face.

The Board believes that this strategy will meet the healthcare needs in the UK market, and will result in an improved financial performance of the Group at a steady and sustainable level for the future.

Results for the year

Operating losses for the year were £1,425,000 (2013: £2,768,000); a result of the ongoing expansion of the group's activities. Both the current and prior year figures are stated after exceptional items.

Revenues

The Group's total recognised revenues are £1,833,000 (2013: £941,000) of which revenue generated in the UK was £1,346,000 (2013: £818,000) and internationally generated revenue was £540,000 (2013: £123,000). Total invoiced sales for the year were £1,968,000 (2013: £719,000).

Expenditure

Total operating costs for the year were £3,706,000 (2013: £2,056,000). The current and prior year figures do not include exceptional items which included in 2013 the costs of £1,965,000 relating to the write down of the licence acquired with the acquisition of Healthstar in 2006 to the English Speaking Consumer market, and in 2014 to the gains of £800,000 made on acquisitions.

Joint Venture

The Group's interest in its Joint Venture, USquared Interactive is consolidated using the equity method. The Group's consolidated balance sheet therefore includes a net provision of £78,000 (2013: £5,000) to recognise the cumulative losses in excess of the cost of the investment in the Joint Venture.

The Group entered into a Joint Venture, Ki Health (UK) Limited, during the year. It has not yet begun to trade in its own right and therefore there are no amounts relevant to this entity to include in the Group accounts.

Cash

At the balance sheet date the Group had cash reserves of £122,000 (2013: £469,000) reflecting the cash effect of the operating loss for the year. At this date the Group had undrawn facilities of £1.03m under the terms of the loan facility with Mr Paul Bell.

Key Performance Indicators

The Group currently uses the following KPIs to assess its performance during the year:

1. Annual Invoiced Sales:

Turnover arises within the Group from software licensing and healthcare services and the growth in the latter, both through acquisition and organic growth, has been key to the Group's growth this year. Due to the way that the Company's software licensing business recognises its revenue there is a difference between the level of invoiced sales achieved during the year and the revenue recognised in the accounts. Invoiced sales impacts directly on cash flow and is an important measure of how the Company is currently performing in its market place.

2. Adjusted Operating (Loss)/ Profit:

Adjusted Operating (Loss)/ Profit is based on invoiced sales and before interest and tax, depreciation and amortisation and other non-cash charges such as share based payments. This is before any exceptional items are applied. This is a direct measure of how the Group is performing on an operational basis. Notional non-cash charges such as depreciation, amortisation and share based payments charges which are required to be recognised in the statutory accounts under current accounting standards do not affect the Company's liquidity and by stripping these items out the Directors are able to monitor more efficiently the operational performance of the Company.

Analysis of KPIs

Sales have increased as compared to the prior year, primarily due to the acquisitions made by the Group and also by the significant Public Sector contract won during the year to deliver health assessments for individuals. In order to deliver this contract the Group expanded its team of health professionals across a network of locations across the country. This initial investment period resulted in higher operating losses.

Results and dividends

No dividend will be paid in respect of the year (2013: £nil) and accordingly a consolidated loss after tax of £1,436,000 (2013: £2,771,000) is transferred to reserves.

Risk assessment

The Board is fully committed to the identification and management of risk, especially in the following areas: Financial; Operational; Personnel and Commercial.

Financial

The Group was loss making during the year and whilst many customers are NHS trusts or large multi-national companies which have strong credit profiles, the purchasing and payment process can take longer than the Group's 30 day standard payment terms. The loan financing facility provided by Mr Paul Bell has been assisting the Group in managing this risk. Credit risk is managed in respect of bank and cash balances by only holding balances at banks with high credit ratings.

Operational

The Group's Beating the Blues product has continued to be redeveloped over recent years. Alongside the technology development, the use of this product has been reviewed and enhanced with remote support being provided to customers, to enhance their experience. In addition the more recently introduced face to face services, continue to be developed and evolve to meet the growing demand in the marketplace for healthcare services and products.

Personnel

As a customer centric business, the Group needs to attract and retain high calibre personnel to deliver, develop and enhance the services provided to our customers. The Group and our employees are committed to delivering a quality service which meets our own expectations, those of our peers and those of our customers where possible. Employees are kept informed of key issues affecting them and the Group through regular communication between management and staff.

Commercial

The Group's strategy to broaden the range of healthcare products and services has proven successful in recent months. This is expected to continue to develop and enhance the commercial offering available in the marketplace.

Consolidated Statement of Comprehensive Income

for the year ended 31 July 2014

Consolidated Statement of Financial Position

as at 31 July 2014

Consolidated Statement of Cash Flows

for the year ended 31 July 2014

Consolidated Statement of Changes In Equity

for the year ended 31 July 2014

Statement of accounting policies for the year ended 31 July 2014

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 2014 or 31 July 2013.

The financial information has been extracted from the statutory accounts of the Company for the years ended 31 July 2014 and 31 July 2013. The auditors reported on those accounts; their reports for both years were unqualified but in the current year they drew attention to the basis of preparation of the financial statements.

The financial information set out in this announcement has been prepared on a basis consistent with the accounting policies for year ended 31 July 2014 which were substantially unchanged from the year ended 31 July 2013 other than the accounting treatment for Joint Ventures which has been changed to be in line with IAS 28 (Interests in Associates and Joint Ventures) 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 both a geographic and operational perspective. The Company currently considers there to be only one operational class of business, interactive healthcare, although it is aware of the significance of the Public Sector contract mentioned below within this operational class. 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 healthcare products and services.

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.

During the year under review, external revenue within the UK segment includes revenue of £354,000 from a confidential Public Sector contract.

3. Taxation

Tax charge

The tax charge for the period comprises:

Factors Affecting Tax charge for the Current Year

The tax assessed for the year is higher than that resulting from applying the standard rate of corporation tax (22%). The differences are explained below:

Factors that may affect the future tax charge

Amounts of unprovided deferred tax assets are as follows:

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 rate of 21% for the tax year 2014/15 and 20% for the tax year 2015/16.

4. Exceptional items

The Company acquired the business and assets of Step Success Limited in November 2013 and of the Waterloo Health Clinic in January 2014.

Step Success Limited brought an online activity monitoring platform to the Group. The value of this acquisition has been determined based on the estimated cost to develop the tool, the value of the inherent intellectual property arising and the investment needed to leverage the commercial opportunities which were pre-existing at the date of acquisition. Step Success was previously owned by two individuals who had invested significant funds and effort to develop the platform. Ultrasis had previously expressed an interest in the company but it was considered at that time to be too expensive. Step Success approached Ultrasis with a view to purchasing the contracts and business assets after it had experienced some minor financial difficulties. Ultrasis concluded the purchase at a much reduced cost and provided sufficient working capital to ensure the business continued to trade.

Waterloo Health Clinic is a fully trading health clinic based in central London providing travel health and general health assessment medical facilities. A multiple of one times annual turnover has been used to evaluate the inherent value of this acquisition. This acquisition arose as the previous owners decided to transfer the provision of all Occupational Health services to other clinic locations, but were unable to complete this for their London clinic. Ultrasis was approached to see if it could conclude the transaction in very short order and hence the consideration was minimal.

The Company has adopted IAS 28 (Interests in Associates and Joint Ventures) during the period, and in so doing has now accounted for its USA Joint Venture, U Squared Interactive, using the equity method rather the proportionate consolidation method which has been previously used. As a result of this it has been necessary to reflect this change in both the current and prior year figures, resulting in a prior year adjustment which has increased the net assets of the Group in the prior year by £324,000. As a result of this prior year adjustment the loss per share for the prior year has reduced from 0.21p to 0.17p. It is impractical for the Directors to determine the impact of this change on the Group and Company's accounts prior to this

As part of the Board's annual review of the carrying value of its intangible assets in the year ended 31 July 2013 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.

5. Loss per share

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 the basic and diluted loss per share are the same because exercising the share options would be anti-dilutive.

The calculations of loss per share are based on the following loss and numbers of shares:

6. Intangible assets

** IP = Intellectual Property

*** Acquisition of Subsidiary - The Company acquired the entire share capital of Screenetics UK Limited in October 2013 through a cash and share acquisition.

**** Acquisition of Businesses - The Company acquired the business and assets of Step Success Limited in November 2013 and of the Waterloo Health Clinic in January 2014.

Step Success Limited brought an online activity monitoring platform to the Group. The value of this acquisition has been determined based on the estimated cost to develop the tool, the value of the inherent intellectual property arising and the investment needed to leverage the commercial opportunities which were pre-existing at the date of acquisition. Step Success was previously owned by two individuals who had invested significant funds and effort to develop the platform. Ultrasis had previously expressed an interest in the company but it was considered at that time to be too expensive. Step Success approached Ultrasis with a view to purchasing the contracts and business assets after it had experienced some minor financial difficulties. Ultrasis concluded the purchase at a much reduced cost and provided sufficient working capital to ensure the business continued to trade.

Waterloo Health Clinic is a fully trading health clinic based in central London providing travel health and general health assessment medical facilities. A multiple of one times annual turnover has been used to evaluate the inherent value of this acquisition. This acquisition arose as the previous owners decided to transfer the provision of all Occupational Health services to other clinic locations, but were unable to complete this for their London clinic. Ultrasis was approached to see if it could conclude the transaction in very short order and hence the consideration was minimal.

7. Annual Report and Accounts

Copies of the annual report and accounts for the year ended 31 July 2014 will be posted to shareholders tomorrow and will be available from that date to download from the Company's website, www.ultrasisplc.com.