TIDMMGP
RNS Number : 1304C
Medica Group PLC
11 April 2017
11 April 2017
Preliminary Announcement of Unaudited Results for Medica Group
PLC for the year ended 31 December 2016
Delivered 28.3% revenue growth; increased adjusted operating
profit by 37.6% whilst continuing to
invest in future growth
Medica Group PLC (LSE:MGP, "Medica" or the "Company", the UK
market leader by revenue in the provision of Teleradiology services
by revenue, today announces its maiden unaudited results, as a
listed company, for the year ended 31 December 2016.
2016 2015 % change
------------------------ ------ ------ ---------
Revenue (GBPm) 28.5 22.2 28.3%
------------------------ ------ ------ ---------
Gross profit (GBPm) 14.2 11.3 26.0%
------------------------ ------ ------ ---------
Gross profit margin
(%) 49.8% 50.7%
------------------------ ------ ------ ---------
EBITDA (GBPm)
(1) 9.2 6.8 35.4%
------------------------ ------ ------ ---------
Adjusted operating
profit (GBPm)
(2) 8.1 5.9 37.6%
------------------------ ------ ------ ---------
Adjusted profit
before tax (GBPm)
(3) 6.0 3.0 98.9%
------------------------ ------ ------ ---------
EBITDA cash conversion
(%) (4) 92% 96%
------------------------ ------ ------ ---------
(1) EBITDA is a non-IFRS measure and is calculated as operating
profit before depreciation, amortisation, exceptional items, and
exceptional costs.
(2) Adjusted operating profit is a non-IFRS measure and is
calculated as operating profit before exceptional items, certain
exceptional costs relating to refinancing and amortisation in
respect of assets acquired on acquisition.
(3) Adjusted profit before tax is a non-IFRS measure and is
calculated as operating profit before exceptional items (including
certain exceptional costs relating to refinancing) and amortisation
in respect of assets acquired on acquisition.
(4) EBITDA cash conversion % is calculated as Cash Flows from
Operating activities pre-exceptional items and pre tax payments
divided by EBITDA
For reconciliation of these measures to the financial
statements, see note 13
Financial highlights
-- Delivered 28.3% revenue growth
o NightHawk continued to perform well, with revenue increasing
by 26.6%
o Routine Cross-Sectional also saw significant growth, with
revenue increasing by 43.5%
o Routine Plain Film grew by 6.1%
-- Gross profit margin of 49.8% (50.7% in 2015)
-- Adjusted operating profit increased by 37.6%, whilst the
adjusted operating profit margin also increased to 28.5% (2015:
26.6%) demonstrating operational leverage of the platform
-- EBITDA cash conversion of 92% (2015: 96%)
Operational highlights
-- Total number of reported body parts increased by 16.2%, from 1.17m in 2015 to 1.35m in 2016
o NightHawk reported body parts increased by 32.6%
o Cross-Sectional reported body parts increased by 48.7%
o Plain Film reported body parts increased by 3.4%
-- Recruitment has been strong throughout 2016, with the total
number of Radiologists (including radiographers and
rheumatologists) contracting with Medica standing at 248 as at
December 2016. This represents a net increase of 58
year-on-year
-- Medica provided services to 99 NHS Trusts and private providers in 2016 (2015: 92)
Post-period highlights
-- Completed successful Initial Public Offering on the Main
Market of the London Stock Exchange in March 2017, raising GBP15m
for the Company, before expenses
-- Net proceeds from the IPO were used to pay down net debt to
approximately GBP10m and cover IPO-related transaction costs.
-- The Company is trading in line with the Board's expectations in 2017
John Graham, Chief Executive Officer of Medica, commented:
"Medica continued to see strong demand for our services during
the year, with revenues from Nighthawk and Cross-Sectional
increasing significantly. Our strong track record of delivering
organic growth has allowed us to continue to invest in building a
scalable platform from which to meet this increased demand. We have
grown our customer base to 99 NHS trusts and private healthcare
providers, and recruited a net 58 new Radiologists to our team,
which is the largest cohort of consultant radiologists outside of
the NHS. Our market leading platform and reputation for high
quality clinical governance positions us to take advantage of the
many growth opportunities we have identified as we look to further
expand our offering. The Board's outlook is positive for the year
ahead."
For further information, please contact:
Medica Group: +44 (0)33 33 111 222
John Graham, Chief Executive Officer
Tony Lee, Chief Financial Officer
Investec Bank plc +44 (0)20 7597 5970
Sara Hale
Daniel Adams
Henry Reast
Edward Thomas
David Herring
FTI Consulting +44 (0)20 3727 1000
Brett Pollard
Ben Atwell
Victoria Foster Mitchell
Robert Winder
Chairman's Statement
I am pleased to provide my inaugural Chairman's statement and
the first for Medica Group PLC as a public company.
In 2016, Medica achieved a highly impressive set of results and
is now well placed as a public company to continue delivering high
quality services to its customers. The Group saw growth across all
three of its main Teleradiology offerings as more clients seek a
quality solution for dealing with increased demands for reporting
against a backdrop of a lack of in-house reporting capacity to meet
these increased demands in a timely manner. The number of
Radiologists contracting with Medica also continued to grow
throughout the year, and stood at a total 248 at the year end.
This financial performance demonstrates the strength of our
proven operating model which delivers a quality client offering
through our high standards of clinical governance and bespoke
technology.
In March 2017, Medica successfully listed on the Main Market of
the London Stock Exchange, raising gross proceeds of GBP15m for the
Company, which were used to pay down the net debt of the Group to
approximately GBP10m. This provides the Company with a strong
platform from which to pursue further organic growth and capitalise
on growth opportunities to generate long-term value for
shareholders.
The Board intends to adopt a progressive dividend policy for the
Company from Admission which will seek to maximise shareholder
value and reflect Medica's strong earnings potential and cash flow
characteristics, while allowing it to retain sufficient capital to
fund ongoing operating requirements and to invest in the Group's
long term growth. As set out in its IPO prospectus, the Board
expects to announce its first dividend as a public company later in
the year, representing an interim dividend for the period ended 30
June 2017.
The executive management and the whole team have shown
commendable commitment and dedication to the Group throughout 2016.
The Board believes that attracting, motivating and retaining
employees of the right calibre is vital to the continued success of
the Group. As part of the IPO, the Executive Directors have
received long-term share-based incentive options to align their
remuneration with the financial performance of the Group and its
shareholders. In addition, as part of the IPO, employees of the
Group were able to participate in the offer, pursuant to which
shares totalling a value of GBP203,288 were taken up. As part of
the IPO process, the Company has also added a strong non-executive
Board which blends public market experience with experience of the
NHS.
I have been extremely impressed by the progress of the Group
over the past year and I am very excited to join the Group as
Chairman. I believe we are well positioned to create value for all
shareholders going forward by delivering high levels of service to
our clients and helping to improve patient outcomes.
Roy Davis
Chairman
Chief Executive Review
I am delighted to present my first Chief Executive's Review
statement as a publicly listed company following our listing on the
Main Market of the London Stock Exchange in March 2017.
Medica is the UK market leader by revenue in the provision of
Teleradiology services. The Group currently has one business
segment of Teleradiology offering three primary services to
hospital radiology departments: NightHawk, Routine cross-sectional
(Routine CS) and Routine plain film (Routine PF).
NightHawk is an out of hours emergency reporting service which
is focused on delivering accurate reports within fast turnaround
times and represented our largest revenue contributor. NightHawk
typically provides reporting on CT scans. The second and third key
service offerings, Routine CS and Routine PF, are designed to
assist hospital radiology departments in managing their
demand/supply imbalance for less urgent daytime reporting on
examinations. Routine CS covers a combination of CT and MRI scans
(both forms of cross-sectional scan) while Routine PF covers plain
film examinations and both services typically have a 48 hour
turnaround time.
Overview of performance in 2016
This has been another strong year of double-digit growth for
Medica. The Group has successfully grown organically year-on-year
through the continued successful deployment of new clients, of
which the pipeline remains strong, as well as by increasing the
revenue generated from existing customers, which has been the main
driver of revenue growth in the year. The Group has been
particularly successful in growing the revenue generated from
customers new to Teleradiology based on its high quality service
offering. As at 31 December 2016, Medica was servicing more than
half of the 190 NHS Acute Trusts in England and Scotland (covering
more than 100 NHS hospitals).
Volumes have grown significantly in the year, with NightHawk and
Routine CS in particular seeing scan volumes increase by 32.6% and
48.7%, respectively. This growth in volume is being driven by an
increasing number of NHS Trusts partnering with Medica to deal with
the increased number of scans.
The Group's ability to continue to grow its revenue is directly
related to its ability to handle increasing volumes of reporting,
which in turn is partly driven by volumes requested by customers
and partly by the number of Medica Radiologists the Group contracts
with. The Group contracted with 248 Radiologists as at 31 December
2016. Recruitment is undertaken through a variety of means. Word of
mouth recommendations from existing Medica reporters who contract
with the Group is a significant recruitment tool. In addition, the
Group maintains a presence at many specialist and national events
and maintains a database of candidates for recruitment.
The Group's ability to attract high quality reporters is key to
its ongoing success, and there are a number of reasons why
Radiologists want to join Medica, ranging from the flexibility of
working hours and the location where they can work from; the
opportunity to report on greater volumes of scans in their areas of
specialism; and being part of an organisation that has a strong
clinical support structure. Since January 2013, the Group has been
able to grow its number of Medica Radiologists from 101 in January
2013 to 248 as at 31 December 2016. The attractions of the Group
will allow it to contract with further Medica Radiologists to
support the growth in the business. Medica's recruitment pipeline
remains stronger than ever.
The Group's IT network, which has received significant
investment, also allows the business to manage significantly higher
volumes. The Group embeds itself within the systems of its
customers, allowing for an automated process of accessing images
from clients' Picture Archiving Communications System ("PACS"),
reporting on examinations with the full Radiology Information
System ("RIS") history, and entering the results directly back into
the clients RIS system.
Business model
Medica provides Teleradiology services to NHS Trusts and other
customers which contract with Medica either by way of a direct
contractual arrangement (which is the case for customers generating
the majority of the Group's revenue for the financial year ended 31
December 2016) or via one of the framework agreements established
by third party procurement teams on behalf of the NHS. The
contracts and framework agreements are typically for three years
and such agreements mainly govern the price of a specific service
and agreed minimum performance levels, for example the turnaround
time of scans being reported by the Group.
The direct contracts or framework agreements do not state any
guaranteed minimum volumes. However, once a customer starts to
outsource some of its radiology reporting, in the Group's
experience it is rare that it withdraws from doing so, recognising
the benefit of having both in-house and Teleradiology reporting
available. Customers may use the Group for one or more services,
and over time as Medica has demonstrated its service offering,
customers often expand the number of Medica's services they
utilise.
In a small number of cases, Medica has entered into a direct
contract under which a customer has primarily used Medica's
services in order to address a one-off issue such as reducing a
back-log of examinations. While some of these customers do not
currently use the Group's services on an ongoing basis, the
infrastructure remains in place and the Group would be able to
reactivate the services it has previously provided to these
customers quickly and without incurring significant costs.
The Group typically charges its customers on a 'per scan type,
per body part' basis. A scan may be made up of images of multiple
body parts, with each body part being charged separately. The
Group's operating model provides good visibility over gross margin
as the per scan type, per body part methodology applied to its
customers is consistent with how the Group pays its Radiologists .
Cost of sales primarily consists of fees paid to Medica
Radiologists for reporting and the costs of internal clinical
audit. Gross margin across each service line is similar as higher
priced scans have commensurably higher radiologist costs.
Medica has developed a scalable platform for the delivery of
Teleradiology and other services and the Group has demonstrated
that it can increase the volume of reports without a corresponding
increase in administrative costs. This is demonstrated by the
increase in the adjusted operating profit margin from 26.6% in 2015
to 28.5% in 2016.
Service lines
The Group currently operates one business segment of
Teleradiology with three main service lines, all of which have
grown in 2016 as Medica continues to deliver a high quality
clinical service supported by the efficient use of technology.
NightHawk
NightHawk scan volumes increased by 32.6% during the year.
Medica's NightHawk service is an out of hours service to
hospital emergency departments, offering 'always on' support 24
hours a day, 365 days a year.
Timely and accurate reporting of images is the most critical
aspect of emergency Teleradiology. To achieve this, Medica has
invested heavily in its technical platform and this has enabled the
achievement of an average turnaround time of 22 minutes which
compares favourably with a typical contracted service level
turnaround time of 60 minutes; the Group's average turnaround time
for NightHawk reports is believed by the Directors to be
considerably shorter than the industry average.
With A&E admissions increasing and a trend towards greater
use of diagnostic imaging to deliver better patient outcomes,
out-of-hours diagnostic imaging has been growing strongly. It is
normal for A&E departments to experience spikes and lulls in
activity and so staffing to an adequate level is challenging. Some
departments utilise 'on-call' radiologists, whereby the radiologist
on duty is required to wake up during the night, attend the
hospital and report potentially on only one scan. The standard
working arrangements in the NHS is for compensatory time for 'on
call' duties to be paid back, either immediately following the duty
or by regular sessional allowance. Either method reduces the
daytime radiologist reporting capacity available to the Trust.
NightHawk enables its clients to better utilise their in-house
radiology resources by reducing or removing entirely the need for
on-call radiologists to deal with emergency care needs, through
instead facilitating access to highly experienced, UK-based Medica
Radiologists able to turn around completed reports within a short
period of time of a scan or PF image being received by Medica.
Through NightHawk a busy hospital has access to a greater
Consultant Radiologist resource, helping it manage peaks in demand
out of hours and during quiet periods the on-call radiologist's
time is not wasted which is much more efficient for the hospital.
For the Medica Radiologist, their time is better utilised as they
can provide cover across a number of other NightHawk customers,
more efficiently managing the peaks and troughs in demand across
the customer base and helping to ensure a steady flow of work for
the individual.
Additionally, through the panel of Consultant Radiologists to
whom Medica is able to provide access, the Group has been able to
facilitate the development of specialisms in emergency reporting.
Most recently, Medica has launched reporting services for multiple
trauma patients.
Routine Cross-sectional and Routine plain film
Routine Cross-sectional scan volumes increased by 48.7% during
the year, whilst Routine Plain Film scan volumes increased by 3.4%
during the year.
The Group's Routine service offering is split into two distinct
services: Routine CS and Routine PF. They are both designed to
assist hospitals in managing their ordinary course daytime capacity
and turnaround times. Again, the services are provided on a 24
hours a day, 365 days a year basis. The turnaround time under the
service level agreements with the Group's customers is typically 48
hours, but Medica can offer shorter turnaround times, including
same-day turnaround times, if required.
The growth in the number of examinations, particularly
cross-sectional is being driven by factors such as an enhanced
ability to achieve early diagnosis and provide preventative care,
to seek reinforcement of diagnosis and care decisions and to use
diagnostic imaging across a broader range of conditions. Combined
with the general shortage of daytime reporting capacity within the
NHS, there is an increasing need for hospitals to outsource some of
their reporting needs. In addition, hospitals increasingly need
reporting from experts in particular fields within the general
discipline of radiology, for example specialist neuro-radiologists
or paediatric radiologists, and this increasing need for specialist
reporting is making it more difficult for hospitals to resource
their radiology departments to the optimum level.
Cross-sectional imaging, which comprises CT and MRI scans, is
growing much faster than PF and is of higher value per unit. As a
consequence, Medica has prioritised growing cross-sectional volumes
through its Routine CS offering over Routine PF, preferentially
utilising Medica Radiologists' capacity to report on these scans,
instead of PF images. During this time, the Group has had to
actively manage the PF business, in terms of balancing clients'
needs versus its own reporting capacity and in some cases,
declining larger volume work where it considered that the Group did
not have sufficient capacity to provide such reporting.
As the Teleradiology market has developed, Medica has launched a
new service in August 2016, Radiographer Reporting, utilising
highly skilled and qualified radiographers, in addition to Medica
Radiologists, to conduct PF reporting. The Group launched this
service in August 2016, initially recruiting two Advanced
Practitioner Radiographers, with five more having joined by the end
of 2016 and with several more in the recruitment pipeline at
varying stages of deployment. Medica's deployment of Advanced
Practitioner Radiographers for PF reporting is focussed on areas
where radiographers are already widely utilised for this purpose in
the NHS. Underpinned by the Group's reputation for clinical
excellence the service has now been introduced by seven clients.
The introduction of Radiographer Plain Film Reporting allows more
Medica Radiologist capacity to be focussed on cross-sectional
reporting.
The Directors believe that the Group is now well-positioned to
tackle the excess Plain Film reporting demand seen in recent years
by utilising Reporting Radiographers. As a result, Radiographer
Plain Film reporting represents a growth opportunity for the
Company and an enhancement of the support we are able to offer our
customers.
Strategy
The Directors have to date focused on building a platform that
can deliver a high quality Teleradiology service to the Group's
core customer base of NHS hospitals, centred on its NightHawk and
Routine offerings.
The Group's core strategy is to continue to grow its business by
adding additional Medica reporting capacity, maintaining the
highest clinical standards and continuing to win new work for its
existing service lines. Having invested in the Group's IT and
services platform, both in terms of the technical and clinical
aspects and the ongoing recruitment of Medica Radiologists, the
Directors believe that the business can continue to grow strongly
within its existing service lines, including the Radiographer
Reporting service, as well as some of the speciality services that
have recently been launched, such as mammography and DXA. In
addition, the Board believes that there are a number of growth
opportunities that the Group can pursue, many of which are a
logical extension of its existing platform and feature in the
Group's current business plan. The Board consider these
opportunities as follows:
-- Expansion into new reporting lines. There are a number of
diagnostic reporting services such as cardiology which the Group
currently does not undertake but which the platform is able to
facilitate and which could be provided to existing and new
customers. Once these services have been piloted with a small group
of customers and patients, in order to be in a strong position to
commence operational roll-out, the Group will first look to invest
in recruiting the right clinical lead to provide internal
expertise, in line with its strategy of providing a high quality,
clinician-led service.
-- Non-NHS. Currently substantially all of the Group's revenues
are derived from NHS Trusts. However, there are opportunities to
grow further revenue with the private hospital groups and
independent diagnostic imaging companies, utilising capacity within
the Group as its Medica Radiologist base continues to grow.
-- Clinical audit. The Group has a strong clinical governance
structure, including an internal audit function focussed on
maintaining the high clinical standard and service standards of
Medica Radiologists. Having been approached by customers to audit
their own in-house radiology departments, there is a clear
opportunity to market this service to existing and new clients.
-- Radiographer reporting. Medica has already launched its
Radiographer Reporting service, which utilises highly skilled and
qualified radiographers to conduct PF reporting. Although a
relatively recently launched service, the Directors believe that
the Group is well-positioned to benefit from the growth opportunity
arising from Radiographer Reporting, underpinned by the Group's
reputation for clinical excellence.
Beyond the opportunities listed above, there are other areas of
growth that the Directors believe Medica would be well-placed to
take advantage of, but are considered longer-term opportunities and
would likely require additional expertise to augment those already
in place and, in some circumstances, may be better achieved through
acquisition.
Clinical governance
As the provider of a highly skilled clinical service, Medica
places clinical governance and quality control at the heart of its
service offering. The Group has established a Medical Advisory
Board (MAB) and a separate Clinical Advisory Group (CAG). The
clinical governance processes and outputs are overseen by the
Clinical Governance Committee.
The CAG consists of five members, including two past Presidents
of the British Institute of Radiology. These members comprise the
Group's Medical Director, Dr Stephen Davies; the Associate Medical
Director, the clinical audit lead; a NightHawk lead; and a PET
CT/Mammography lead. The CAG's role is to review radiologist
performance and in doing so, strive for continuous improvement in
the standard of reporting of Medica Radiologists. An example of
this is the regular sharing of case studies amongst the entire
radiologist reporting group, detailing complex cases and acting as
learning tools for Medica Radiologists. There are also a number of
clinical speciality leads within the Group, who specialise in a
particular field of radiology, and who help the Group maintain
best-in-class service.
Outlook
Looking forward to 2017, the year has begun well, with trading
in line with the Board's expectations. Medica has secured a number
of new client contracts that are expected to commence in the coming
weeks and months and a healthy pipeline of prospects. The pipeline
for recruiting Radiologists in the new financial year also
continues to be strong.
John Graham
CEO
Financial Review
Trading results
Medica has enjoyed strong growth in recent years, and this
continued throughout 2016, with Group revenues growing by 28.3%to
GBP28.5m (2015: GBP22.2) and adjusted operating profit growing by
37.6% to GBP8.1m (2015: GBP5.9m).
Revenue
Revenue has increased across all three service lines driven by
an increase in the number of scans which Medica has reported
upon.
-- NightHawk revenues increased to GBP13.5m, a 26.6% increase
from 2015 revenue of GBP10.7m. The increase in volumes and revenue
was due to continued growth in existing clients emergency service
requirements as the number of A&E admissions and the proportion
of patients requiring a scan both increase and Trusts expand the
scope of the services they procure, as well as new client wins.
-- Routine Cross-sectional revenues increased to GBP10.5m, a
43.6% increase from 2015 revenue of GBP7.3m. Similarly to
NightHawk, growth has been driven primarily through existing
customers as their scan volumes increased and Medica enhanced its
partnership with Trusts reporting a greater quantity and proportion
of their work, as well as new customer wins.
-- Plain Film revenues increased to GBP3.9m, a 6.1% increase
from 2015 revenue of GBP3.7m. During the period, Plain Film volumes
were actively managed so as to focus on the faster growing Routine
Cross-sectional service.
Revenue growth has also been supported through the continued
strength of our ability to recruit and retain Radiologists. Medica
added an additional net 58 reporters in 2016 and at 31 December
2016, there were a total of 248 with which Medica contracted with,
a record high for the Company.
Gross margins
Gross profit margin for the year was 49.8% (2015: 50.7%).
Gross profit margin edged down in the year as expected. There
are a number of contributing factors with the main reason being the
replacement of older contracts with older pricing from three or
more years ago often through migration to framework agreements. The
reduction in average price has been more than compensated by
increases in volume.
The Company looks to achieve a similar gross margin across each
of its service lines. In 2016, the gross margins for each service
line were as follows:
-- NightHawk: 51.7%
-- Routine Cross-Sectional: 53.1%
Routine Plain
-- Film: 51.9%
The only costs included within cost of sales relate to the costs
of paying Medica's Radiologists and internal clinical audit costs.
Internal clinical audit costs are not included within the
individual service line gross profit figures above.
Adjusted Operating Profit
Adjusted Operating profit for the year grew to GBP8.1m, a 37.6%
increase from 2015 levels of GBP5.9m. This was accompanied by an
increase in the Adjusted Operating Profit margin from 26.6% in 2015
to 28.5% in 2016.This growth in Adjusted Operating Profit and
margin demonstrates the operational leverage in the business as
volumes continue to grow.
Net finance expense
Finance costs were GBP2.2m for the year (2015:GBP3.0m). The
Group refinanced its existing debt facility at listing post the
year end, with the net proceeds of the IPO used to pay net debt
down to approximately GBP10m, reducing its bank debt and repaying
loan notes from CBPE, the majority private equity owners of Medica
prior to the IPO, in full.
Taxation
The Group has incurred a tax charge of GBP1.0m in the year ended
31 December 2016 compared to GBP0.4m in the year ended 31 December
2016.
Dividends
The Board intends to adopt a progressive dividend policy from
IPO for the Company, which will seek to maximise shareholder value
and reflect its strong earnings potential and cash flow
characteristics, while allowing it to retain sufficient capital to
fund ongoing operating requirements and to invest in the Group's
long term growth. The Board intends to pay the dividend in an
approximate one-third (interim dividend) and two-thirds (final
dividend) split and expects the Company's first dividend as a
listed company to be an interim dividend for the period ended 30
June 2017.
Cash flow
The Group continues to deliver strong cash generation with
operating cash flow before tax and exceptional IPO costs 29.9%
higher at GBP8.5m (2015: GBP6.5m) due to an increase in EBITDA and
efficient use of working capital, offset by expansionary capex
incurred in order to deploy additional radiologists and new
customers. All of this resulted in EBITDA cash flow conversion of
92% (2015: 96%). Cash flow from operating activities increased by
18.9% to GBP6.8m (2015: GBP5.7m).
Capex for the year was GBP1.2m (2015: GBP1.5m) as the business
continued to invest in its infrastructure to support volume growth
and to improve its efficiency and service offering.
Net Debt
As at year end, the Company had net debt of GBP22m. Post year
end, the Company used the net proceeds of the IPO to fund the
repayment of the GBP6.9 million of outstanding loan notes held by
CBPE as well as contributing to the repayment of GBP8.6 million of
the Group's outstanding indebtedness under the Group's existing
term loan and revolving credit facilities, which the Directors
believe will result in an appropriate level of gearing going
forward given the size of the Group and the Company's status as a
listed company. Following this repayment, the Company had net debt
of approximately GBP10 million.
On 7 March 2017, the Company and its subsidiaries entered into a
new facilities agreement (the "New Facilities") for the purpose of
refinancing that part of the facilities that were not repaid out of
the proceeds of the Offer. Under the New Facilities, up to GBP13
million in aggregate is available to the Group under a GBP12
million term loan facility and a GBP1 million revolving credit
facility. Both facilities will mature on 6 March 2022, being the
fifth anniversary of entry into the New Facilities. Interest is
payable under the New Facilities at the rate of LIBOR + 1.75 per
cent.
Intangible assets
As at the year end, total intangible assets were GBP25.3m (31
December 2015: GBP26.0): The Group's intangible assets is the
goodwill of GBP15.9m and other intangible assets from the
acquisition by Medica Group of Medica Reporting Limited in May
2013. In addition, there is a small proportion, which at the year
end was GBP0.6m (year ended 31 December 2015: GBP0.4 million), in
relation to purchased software and certain capitalised development
software and licences.
Property Plant and Equipment:
As at the year end, total value of property, plant and equipment
was GBP1.8m (31 December 2015: GBP1.9m). Property, plant and
equipment primarily relate to computer equipment, the majority of
which is the servers installed with customers, radiologists'
workstations and infrastructure technology. The growth in property,
plant and equipment reflects the net increase, i.e. after
depreciation, of additional capital expenditure for new customers
and new radiologists and software for new projects.
Working capital:
The Group's working capital is based on the timing difference
between receipt of payment from its customers and the payment by
the Group to Medica Radiologists of their reporting charges.
Current assets mainly comprise trade receivables, with a small
element of prepayments, and cash. Trade receivables have grown with
the business and primarily relate to the revenues to be collected
from customers. Current liabilities mainly comprise trade payables
(mainly the payments due to radiologists), the portion of current
debt repayable in the next 12 month period, and corporation
tax.
Tony Lee
Finance Director
Unaudited Consolidated Income Statement
For the year ended 31 December 2016
31 31
December December
Note 2016 2015
GBP000 GBP000
Revenue 28,522 22,238
Cost of sales (14,313) (10,962)
-------- ---------
Gross profit 14,209 11,276
Administration expenses (6,993) (6,241)
-------- ---------
Operating profit 7,216 5,035
Other expenses - exceptional items 6 (757) -
-------- ---------
Operating profit after exceptional
items 6,459 5,035
Finance income 10 19
Finance costs 7 (2,181) (2,970)
-------- ---------
Profit before tax 4,288 2,084
Analysed as
EBITDA 9,229 6,811
Exceptional items 6 (757) -
Finance costs 7 (2,181) (2,970)
Finance income 10 19
Depreciation (883) (795)
Amortisation (1,130) (981)
-------- ---------
Profit before tax 4,288 2,084
Income tax charge 8 (971) (398)
-------- ---------
Profit attributable to equity holders
of the parent 3,317 1,686
======== =========
Statement of Comprehensive Income
Profit for the year 3,317 1,686
Other comprehensive income - -
Total comprehensive profit for the
year attributable to owners of the
parent 3,317 1,686
======== =========
Profit per share (basic and diluted)
Basic and diluted profit per ordinary
share (pence) 9 3.32p 1.69p
All transactions arise from continuing operations.
Unaudited Consolidated Balance Sheet
For the year ended 31 December 2016
At 31 At 31
December December
2016 2015
GBP000 GBP000
Non-current assets
Goodwill 15,948 15,948
Other intangible assets 9,402 10,094
Property, plant and equipment 1,835 1,929
--------- ---------
27,185 27,971
Current assets
Trade and other receivables 6,073 4,333
Cash and cash equivalents 4,713 2,085
--------- ---------
10,786 6,418
Current liabilities
Trade and other payables (3,283) (2,036)
Borrowings (1,362) (1,522)
Derivative financial instruments (52) -
--------- ---------
(4,697) (3,558)
Non-current Liabilities
Borrowings and other financial liabilities (25,369) (25,972)
Derivative financial instruments - (22)
Deferred tax (1,596) (1,845)
(26,965) (27,839)
Net Assets 6,309 2,992
========= =========
Equity
Share capital 146 146
Share premium account 1,309 1,309
Retained profit 4,854 1,537
--------- ---------
Total equity 6,309 2,992
========= =========
Unaudited Consolidated Statement of Changes in Equity
For the year ended 31 December 2016
Share Share Retained Total
Capital premium earnings Equity
GBP000 GBP000 GBP000 GBP000
At 31 December
2014 146 1,309 (149) 1,306
---------- -------- --------- -------
Profit and total comprehensive
income for the period - 1,686 1,686
At 31 December
2015 146 1,309 1,537 2,992
========== ======== ========= =======
Profit and total comprehensive
income for the period - 3,317 3,317
At 31 December
2016 146 1,309 4,854 6,309
========== ======== ========= =======
Unaudited Consolidated Cash Flow Statement
For the year ended 31 December 2016
12 Months 12 Months
ended ended
31 31
December December
2016 2015
Operating activities GBP GBP
Profit before tax 4,288 2,084
Adjustments for :
Depreciation 883 795
Amortisation 1,130 981
Finance income (10) (19)
Finance costs 2,181 2,970
Changes in:
(Increase) in trade and other receivables (1,740) (633)
Increase in trade and other payables 949 343
Movement of derivative financial
instruments 30 -
Tax (paid) (924) (812)
Cash inflow from operating activities 6,787 5,709
Investing activities
Purchase of property plant and
equipment (789) (1,267)
Purchase of software intangibles (438) (214)
Interest received 10 8
---------- ---------
Cash outflow from investing activities (1,217) (1,473)
Cash flows from financing activities
Loan finance raised 13,600 -
Repayment of borrowings (15,626) (1,322)
Interest paid (916) (1,990)
Net cash outflow from financing (2,942) (3,312)
Net change in cash and cash equivalents 2,628 924
========== =========
Movement in net cash
Cash and cash equivalents, beginning
of period 2,085 1,161
Increase in cash and cash equivalents 2,628 924
-
Cash and cash equivalents, end
of period 4,713 2,085
========== =========
Notes to the accounts
1. General Information
Medica Group PLC ("the Company") was incorporated in England and
Wales on 22 April 2013 under the Companies Act 2006 (registration
number 08497963) and is domiciled in the United Kingdom. Its
registered office and principal place of business is Havelock
Place, Havelock Road, Hastings, East Sussex, TN34 1BG.
The consolidated financial statements of the Group for the year
ended 31 December 2016 (including comparatives) comprise the
Company and its subsidiaries (together referred to as "the Group").
The Group's principal activity is the provision of Teleradiology
reporting and is the leading independent provider in the UK.
2. Accounting Policies
The unaudited financial information has been prepared using the
recognition and measurement principles of International Financial
Reporting Standards ("IFRS") and IFRIC interpretations as adopted
by the European Union (EU).
This announcement does not itself contain sufficient information
to comply with IFRSs.
This set of unaudited financial information has been prepared in
accordance with the accounting policies set out in the Group's
Prospectus, relating to its admission to the London Stock Exchange
of 16 March 2017. The prospectus can be obtained from the Company's
website at www.medicagroup.co.uk.
The unaudited financial information set out above does not
constitute the Company's statutory accounts for the year ended 31
December 2016, or the year ended 31 December 2015. Statutory
accounts for the year ended 31 December 2015 have been delivered to
the Registrar of Companies and those for the year to 31 December
2016 will be delivered once approved by the Board. The audit report
for year ended 31 December 2015 did not contain statements under
s498(2) or (3) of the Companies Act 2006. The auditors have not yet
reported upon the accounts for the year ended 31 December 2016.
The consolidated financial statements are presented in Sterling,
the presentational and functional currency of the Company, rounded
to the nearest GBP'000.
3. Going Concern
The Directors of Medica Group PLC have assessed the current
financial position of the Group, along with future cash flow
requirements to determine if the Group has the financial resources
to continue as a going concern for a period of at least twelve
months from the approval of the accounts. As a result of this
review the Directors of Medica Group PLC have concluded that it is
appropriate that Medica Group PLC be considered a going concern.
For this reason, they have adopted the going concern basis in
preparing the financial statements. The financial statements do not
include any adjustments that would result in the going concern
basis of preparation being inappropriate.
4. Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements under IFRS requires the
Group to make estimates and assumptions that affect the application
of policies and reported amounts. Estimates and judgements are
continually evaluated and are based on historical experience and
other factors including expectations of future events that are
believed to be reasonable under the circumstances. Actual results
may differ from these estimates. The estimates and assumptions
which have a risk of causing a material adjustment to the carrying
amount of assets and liabilities are discussed below.
Key sources of estimation uncertainty
Intangible assets and impairment
The Group recognises the intangible assets acquired as part of
business combinations at fair value at the date of acquisition. The
determination of these fair values is determined by experts engaged
by management and based upon management's and the Directors'
judgement and includes assumptions on the timing and amount of
future incremental cash flows generated by the assets and selection
of an appropriate discount rate. Furthermore management must
estimate the expected useful lives of intangible assets and charge
amortisation on these assets accordingly. At the reporting date no
impairments to other intangible assets were recognised in the
period.
Fair value measurement
Management uses valuation techniques to determine the fair value
of financial instruments (where active market quotes are not
available) and non-financial assets. This involves developing
estimates and assumptions consistent with how market participants
would price the instrument. Management bases its assumptions on
observable data as far as possible but this is not always
available. In that case management uses the best information
available. Estimated fair values may vary from the actual prices
that would be achieved in an arm's length transaction at the
reporting date.
Matters of judgement
Deferred taxation
Deferred tax liabilities have been recognised which are
contingent and dependent upon future trading performance.
5. Segment reporting
Management prepare and monitor financial information for the
Group's three primary service lines (Routine Cross-Sectional,
Routine Plain Film and NightHawk) on a regular basis. This
financial information is reviewed and used by the chief operational
decisions maker (considered to be the Chief Executive Officer) in
managing the operating activities of the Group. IFRS 8 sets out
certain thresholds in determining whether reportable operating
segments exist, and all of the three primary service lines exceed
these thresholds. However, IFRS 8 permits the aggregation of
operating segments where these services lines are similar in
nature, service delivery processes, types or classes of customers,
and regulatory factors. Management consider it is most appropriate
to aggregate the three service lines into one Teleradiology
operating segment due to the similarities in respect of these
factors.
Medica Group PLC has identified only one geographic area, the
UK. As a result of this and there being only one operating segment
as described above, no analysis has been provided.
No customer accounted for more than 10% of the Group's
revenues.
The Group identified four revenue streams, NightHawk, Routine
Cross-Sectional, Routine Plain Film and other. The analysis of
revenue by each stream is detailed below.
2016 2015
GBP000 GBP000
NightHawk 13,536 10,692
Routine Cross-Sectional 10,508 7,320
Routine Plain Film 3,876 3,652
Other 602 574
28,522 22,238
====== ======
6. Exceptional items
2016 2015
GBP000 GBP000
Costs incurred in respect of Initial
public offering 757 -
757 -
====== =======
The above costs were incurred in respect of the Company's
refinancing and listing on the London Stock Exchange in March 2017.
Although some of the costs are allowable for corporation tax
purposes a large proportion of the costs are deemed capital in
nature and therefore are not allowable for tax purposes, however
the tax effect is not considered material by the Board. Additional
costs in respect of the initial public offering were incurred
between January 2017 and March 2017 which will be treated as
exceptional items in 2017 financial results. The costs of these
exceptional items have been financed through the funds raised
through the offering and therefore are not expected to have any
negative impact upon the cash flow of the group. Management
identified a portion of the exceptional IPO costs as relating to
the issue of new shares and subsequently GBP47,000 has been treated
as a prepayment at the reporting date and is to be recognised in
equity in 2017.
7. Finance costs
2016 2015
GBP000 GBP000
Bank interest 978 490
Amortisation of loan
arrangement fees 291 192
Interest on secured loan notes 882 2,288
Fair value movement on derivative
financial instruments 30 -
2,181 2,970
====== =======
8. Tax expense
Major components of tax expense: 2016 2015
Current tax: GBP000 GBP000
UK current tax expense 1,214 718
Prior year adjustment 6 -
-------- ---------
Total current tax 1,220 718
-------- ---------
Deferred Tax:
Originations and reversal of temporary
differences (189) (174)
Effect of rate change (60) (146)
-------- ---------
Total deferred tax (249) (320)
Tax expense on ordinary activities 971 398
======== =========
Reconciliation of tax expense:
UK corporation tax is assessed on the profit on ordinary
activities for the year is lower than (2015: higher than) the
standard rate of corporation tax in the UK of 20% (2015:
20.25%).
The charge for the year can be reconciled to the loss per the
income statement as follows:
Reconciliation of effective tax
rate: 2016 2015
GBP000 GBP000
Profit on ordinary activities before
tax 4,288 2,084
-------- --------
Income tax using the Company's
domestic tax rate 20.00% (2015:
20.25%) 858 422
Effect of:
Expenses not deductible for tax
purposes 167 122
Prior year adjustment - current
tax 6 -
Effect of tax rate change - deferred
tax (60) (146)
Total tax credit for period 971 398
======== ========
9. Earnings per share
Both the basic and diluted profit per share have been calculated
using the profit after tax attributable to shareholders of Medica
Group PLC as the numerator, i.e. no adjustments to profits were
necessary in 2015 or 2016. The calculation of the basic profit per
share is based on the profit attributable to ordinary shareholders
divided by the weighted average number of shares in issue during
the year.
There are no dilutive instruments and hence diluted earnings per
share is identical to standard earning per share.
2016 2015
GBP000 GBP000
Profit for the year attributable
to ordinary shareholders 3,317 1,686
Exceptional items 757 -
----------- -----------
Profit for the year before exceptional
items attributable to ordinary
shareholders 4,074 1,686
Refinance costs 39 -
Amortisation of acquired intangibles 870 870
----------- -----------
Adjusted profit for the period
attributable to ordinary shareholders 4,983 2,556
=========== ===========
Weighted average number of ordinary
shares 100,000,002 100,000,002
Basic and diluted profit per ordinary
share (pence) 3.32p 1.69p
=========== ===========
Basic and diluted profit per ordinary
share before exceptional items
(pence) 4.07p 1.69p
=========== ===========
Adjusted basic and diluted earnings
per ordinary share (pence) 4.98p 2.56p
=========== ===========
On 15 March 2017 the subdivision of the 1,455,000 ordinary
shares of GBP0.10 each was approved so that each ordinary share of
GBP0.10 each was sub-divided into 50 ordinary shares of 0.2p and by
way of a bonus issue the Company allotted 27,250,002 ordinary
shares of 0.2p each at nominal value to its existing shareholders
pro rata to their existing shareholdings. The weighted average
number of ordinary shares after these transactions amounted to
100,000,002 and in accordance with IAS33 the earnings per share
calculations have been retrospectively adjusted.
10. Transactions with Directors and other related parties
The Group's related parties include key management personnel. In
addition, on 2 May 2013 Medica Group PLC issued GBP18,360,000 in
loan notes to CBPE Nominees Ltd, the Group's ultimate parent
undertaking at 31 December 2016. In accordance with the terms of
the loan note dated 2 May 2013, interest accrues quarterly on the
principal amount of the loan notes outstanding and unpaid interest
is rolled up and compounded at the end of each quarter. The
principal amount outstanding, together with any interest accrued
but unpaid, is repayable in full on Maturity on 30 November
2018.
On 29 January 2016 the Group repaid GBP13.5m CBPE loan
notes.
At 31 December 2016 the amount owing, including unpaid interest
was GBP6,686,000 (31 December 2015: GBP19,244,000), and interest
charges of GBP882,000 (31 December 2015: GBP2,288,000), had been
recognised in the consolidated statement of comprehensive income
(see note 11 for details of repayment post year-end).
Included in administrative costs are GBP43,500 (2015: GBP35,750)
in respect of fees payable to CBPE Nominees Limited for services of
the Investor Director to the Group.
11. Controlling Party
At 31 December 2016 the Company's ultimate parent undertaking
was CBPE Nominees Ltd, a private company limited by shares,
accounts of which can be obtained from CBPE Capital Limited, 2
George Yard, London, EC3V 9DH. At the date of approval of this
preliminary announcement, there was no overall controlling party of
the group, following the admission of the Company's ordinary shares
onto the premium listing segment of the Official List and to
trading on the London Stock Exchange's main market for listed
securities on 21 March 2017.
12. Post balance sheet events
The principal events since 31 December 2016 relate to the
admission of the Group to the Main Market of the London Stock
Exchange on 21 March 2017.
On 28 February 2017 the entire amount standing to the credit of
the Company's Share Premium account, being GBP1,309,000, was
cancelled and GBP1,309,000 was credited to a newly created capital
reduction reserve on the Company's Statement of Financial Position.
This exercise was completed in order to facilitate the
reregistration of the Company as a Public Limited Company by
ensuring that a minimum level of distributable reserves existed at
the reregistration date.
On 1 March 2017 Medica Reporting Group Limited was reregistered
at Companies House as Medica Group PLC.
On 15 March 2017 the subdivision of the 1,455,000 ordinary
shares of GBP0.10 each was approved so that each ordinary share of
GBP0.10 each was sub-divided into 50 ordinary shares of 0.2p and by
way of a bonus issue the Company allotted 27,250,002 ordinary
shares of 0.2p each at nominal value to its existing shareholders
pro rata to their existing shareholdings.
On 16 March 2017 an Offer Prospectus was published in which the
Selling Shareholders offered 78,865,979 Existing Shares, in
aggregate, for sale and the Company offered 11,111,112 New Shares
for subscription. The New Shares rank pari passu in all respects
with the Existing Shares and carry the right to receive all
dividends and distributions.
On 21 March 2017 Medica Group PLC was admitted to the premium
listing segment of the Official List and to trading on the London
Stock Exchange's main market for listed securities. The total
number of shares in issue at Admission was 111,111,114 shares of
0.2p each.
The new shares issue raised GBP15m and these funds were used
fund costs of the Initial Public Offering, to repay CBPE loan notes
in full and to reduce the Group's bank debt to GBP12m, leaving a
net debt position on admission of approximately GBP10m.
The bank debt is a five year term loan which is repayable in
full at the end of the term. Interest is paid quarterly at 1.75%
above base rate.
On 21 March 2017 the Group made an equity settled share based
payment award to certain Executive Directors under a Performance
Share Plan whereby the Executives Directors will be issued with
866,665 ordinary shares after a vesting period of three years
dependant on the achievement of targets set by the Remuneration
Committee. The share based payments will be accounted for in
accordance with IFRS 2, whereby the fair value of the Share Based
Payment awards will be measured at the grant date and recognised in
the income statement over the vesting period, with a reassessment
of the number of awards expected to vest to be made at each
reporting date. Consequently the potential shares described above
could have a dilutive effect on potential earnings per share.
13. Reconciliation of Non-IFRS Financial KPIs
The Group uses a number of key performance indicators to monitor
the performance of its business. This note reconciles these key
performance indicators to individual lines in the financial
statements.
12 Months 12 Months
ended
31 ended 31
December December
2016 2015
Reconciliation of Adjusted Operating
Profit GBP GBP
Operating profit 7,216 5,035
Adjustments for:
Amortisation of acquired intangibles 870 870
Refinance costs 39 -
Adjusted Operating profit 8,125 5,905
Adjusted Operating profit margin 28.5% 26.6%
Reconciliation of Adjusted Profit
Before Tax
Profit for the year 3,317 1,686
Adjustments for:
Amortisation of acquired intangibles 870 870
Exceptional items 757 -
Refinance costs 39 -
Adjusted profit after tax 4,983 2,556
Income tax charge 971 398
---------- ---------
Adjusted Profit before Tax 5,954 2,954
Reconciliation of EBITDA cash conversion
percentage
Cash inflow from operating activities 6,787 5,709
Adjustments for :
Tax paid 924 812
Exceptional items 757 -
8,468 6,521
EBITDA 9,229 6,818
Conversion rate 91.8% 95.6%
Reconciliation of Net debt
Cash and equivalents 4,713 2,085
Borrowings due within one year (1,362) (1,522)
Borrowings due after one year (25,369) (25,972)
--------
Net Debt (22,018) (25,409)
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LBLLFDZFBBBB
(END) Dow Jones Newswires
April 11, 2017 02:01 ET (06:01 GMT)
Medica (LSE:MGP)
Historical Stock Chart
From Apr 2024 to May 2024
Medica (LSE:MGP)
Historical Stock Chart
From May 2023 to May 2024