Results for the year ended 31 December 2022
29/03/2023 07:00
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RNS Number : 5454U Medica Group PLC 29 March 2023
Medica Group PLC
Results for the year ended 31 December 2022
Continued growth in acute services, Ireland and the US, alongside strong
recovery in UK Elective revenue, delivered performance in line with revised
expectations
Medica Group PLC (LSE:MGP, "Medica", the "Group" or the "Company"), an
international provider of high-quality telemedicine services, announces its
preliminary results for the year ended 31 December 2022.
Financial highlights
Year ended Year ended Change Change
31 December 2022 31 December 2021 £'000s %
£'000s £'000s
Revenue 76,979 61,913 15,066 24%
Gross profit 37,183 31,394 5,789 18%
Gross profit margin 48.3% 50.7% n/a (2.4)(5)
Underlying operating profit¹ 13,643 12,078 1,565 13%
Underlying operating margin 17.7% 19.5% n/a (1.8)(5)
Underlying profit before tax ² 12,904 11,472 1,432 12%
Profit before tax 8,641 7,339 1,302 18%
Underlying basic EPS (pence) ³ 8.75 7.83 0.92 12%
Basic EPS (pence) 5.88 4.56 1.32 29%
Proposed final dividend (pence) 1.88 1.79 0.09 5%
Cash and cash equivalents 11,004 9,616 1,388 14%
Net Cash/(Debt) (4) 786 3,877 (3,091) (80)%
(1) Underlying operating profit is a non-IFRS measure and is calculated as
operating profit before exceptional items, share-based payments, and one-off
costs including deal fees .
(2) Underlying profit before tax is a non-IFRS measure and is calculated as
profit before tax before exceptional items, share based payments and
amortisation in respect of assets acquired on acquisition and other one-off
costs including deal fees
(3) Underlying Earnings per share is a non-IFRS measure and is calculated
based on underlying operating profit less financing costs and taxation
(4) Net cash/(debt) is a non-IFRS measure and is calculated by subtracting
bank borrowings from cash and cash equivalents
(5) Percentage point movement (ppts)
· Delivered sales of £77.0 million representing 24% revenue
increase on 2021
o UK revenues increased by 15% to £54.0 million as a result of continued
strong performance from Acute services including NightHawk ("NH") and a full
recovery in Elective reporting capacity with record performance in Q4 2022
o Medica Ireland extended the strong results reported in the first half,
with overall revenue of £12.5 million up by 30% compared to 2021
o RadMD performed ahead of expectations delivering £10.4 million of revenue
and closed the year with a combined risk-adjusted pipeline and order book of
over $63 million up from $54m at the end of 2021
· Gross profit margin remained resilient at 48.3% although, as
expected, was lower than 2021 (50.7%) due to a large number of contracts
successfully renewed in year at current market pricing, but gross profit
margin remains ahead of 2019 (47.8%)
· Like-for-Like (LFL) revenues, excluding RadMD which was acquired
in 2021, increased by 17%
· Reported adjusted net operating profit of £13.6 million up from
£12.1 million in 2021, with underlying net operating margin at 17.7% compared
to 19.5% in 2021
· Net cash at 31 December 2022 of £0.8 million
· Earlier in 2022, the Board declared an interim dividend of 0.93
pence per share and is now proposing a final dividend for 2022 of 1.88 pence
per share which will, if approved, result in total dividends for 2022 of 2.81
pence per share, up 5% on 2021
Operational highlights
· Strong recovery in UK Elective volumes from September onwards as
radiologist availability returned to normal levels (following a period of
reduced capacity in Q2 and Q3 primarily caused by annual leave accrued during
the pandemic). This resulted in a record month of reporting in September 2022
· Continued growth in Acute services in the UK through the year due
to the positive impact of increased volumes from existing clients extending
the hours of our NightHawk service and using more urgent and same-day
reporting during daytime hours, together with the positive impact of new
contracts commenced during the year
· Reported a 16% increase in net rostered reporting hours supported
by adding new overseas reporting functionality to our reporting platform in
Q4, accelerating recruitment of radiologists in other geographies
· Reached first major milestone of FutureTech programme with launch
of the new PACS in February delivering experience and functionality
improvements for our radiologists
· Record number of new reporting contracts won in Ireland with the
addition of six new hospital clients
o Medica Ireland now has contracts across all seven hospital groups; and
o 5 additional hospitals added to our HSE Hospital ultrasound waiting list
management portfolio
o Now providing out-of-hours services at 15 of the 25 HSE hospitals
· Medica Ireland supported 'go-live' at the new Carrickmines clinic
of VHI, Ireland's largest healthcare insurer in south Dublin;
higher-than-expected demand post-launch has required increased staff and hours
of service
· Medica Vision reduced significant post-pandemic Diabetic
Retinopathy screening backlog in Ireland to zero patients by the end of the
year which was a significant achievement
· RadMD demonstrated strong conversion of pipeline and backlog to
revenue whilst bringing more diversification into the pipeline, including
sizeable clients with potential for strong account growth in 2023 and
subsequent years
Post-period highlights
· New contract wins across the business underpinning strong start
to the year
· Completion of a small UK acquisition that delivers radiologist
training internationally; complements our existing UK business and offers
opportunities for our network of reporters to continue their professional
development while also supporting potential new international radiologist
hires
· Completion of small bolt-on acquisition in the US to provide
expanded radiologist reader capacity and medical expertise for RadMD to
support growth ambitions
· First new contract win for Medica's Australian joint venture,
MedX, and growing pipeline of opportunities for international teleradiology,
particularly in the Middle East.
Dr. Stuart Quin, Chief Executive Officer of Medica, commented:
"Against a market backdrop in which demand for Medica's services is higher
than ever, we are pleased to report a period of double-digit growth
underpinned by the expansion of our acute services, new contract wins, the
continued strong performance of Medica Ireland and RadMD, and the recovery of
Elective capacity after some mid-year capacity constraints.
"We are committed to continuing investment in our people and systems in 2023.
With our new PACS system and changes to our platform, we are in a strong
position to onboard radiologists and deliver a best-in-class experience for
our reporters. Our recent UK acquisition reinforces our commitment to
radiologist training and development globally. We will also continue to
evaluate business development opportunities that provide scale for our
fast-growing US business, as demonstrated early in 2023 through our bolt-on
acquisition to provide additional radiologist reader capacity.
"Following the progress we have made over the last year, Medica remains
well-positioned for continued growth and is on track to deliver on the
strategic and financial targets we presented to the market in September 2021."
For further information, please contact:
Medica Group Plc: +44 (0)33 33 111 222
Stuart Quin, Chief Executive Officer
Richard Jones, Chief Financial Officer
FTI Consulting +44 (0)20 3727 1000
Victoria Foster Mitchell
Sam Purewal
Liberum (Joint Broker) +44 (0)20 3100 2000
Phil Walker
Richard Lindley
Numis (Joint Broker) +44 (0)20 7260 1000
Freddie Barnfield
Duncan Monteith
Euan Brown
About Medica Group PLC
Medica (LSE:MGP) is an international provider of high-quality telemedicine
services. It is the market leader in teleradiology in the UK and Ireland,
working with more than 100 NHS Trusts and HSE hospitals in Ireland, in
addition to private hospitals, insurance groups and diagnostic imaging
companies. Its network of consultant radiologists, radiographers and
specialist doctors interpret and report MRI, CT, ultrasound and X-ray images
on behalf of healthcare providers, using Medica's bespoke, secure technology
platform for fast and responsive delivery. The company's core services include
NightHawk, an urgent, out-of-hours offering available to clients 24/7 with
dedicated pathways for stroke and major trauma, and Elective, for routine
reporting.
In Ireland, Medica carries out patient scanning, as well as reporting, and
runs a diabetic retinopathy screening programme for the National Screening
Service. Through its US business, RadMD, Medica provides global pharmaceutical
and biotech companies, as well as contract research organisations with
specialist imaging services for clinical trials.
For more information, please visit: www.medicagroupplc.com
(http://www.medicagroupplc.com/)
Chairman's statement
Good performance characterised by continued client expansion and strong growth
from recent acquisitions
I am pleased to report a positive year of continued growth for Medica Group
resulting in annual revenue increasing by 24% to £77.0 million with a
resilient gross profit margin of 48.3% and underlying operating profit of
£13.6 million, up 13% from 2021. As a result, the Board is pleased to
announce that it has declared a final dividend of 1.88 pence per share
reflecting the strong performance of the business last year.
It has been a challenging time for clients in the markets in which we operate.
In the UK, the impact of the pandemic was still apparent, particularly in the
first half of 2022 when clients prioritised urgent elective procedures and
radiologists were required to dedicate more time to supporting their own
hospitals. This fact, combined with the overhang of outstanding annual leave
resulting from the pandemic, meant that we saw some periods of capacity
constraint. However, these market dynamics meant that demand for our services
increased throughout 2022 and, aided by the recruitment of more reporters in
the second half of the year and a resumption in normal hours of reporting
across our existing network, Medica was able to help service this demand.
Whilst overall Elective activity was reduced compared with our initial
projections for the year, our NightHawk and broader Acute service performed
consistently throughout the year with annual revenue growth of 12%. This
strong performance meant that overall Medica derived 62% of its total UK
revenue from acute reporting, up from 47% in 2019 pre-pandemic. Elective
capacity recovered strongly in Q4 2022 delivering 20% increase year-on-year.
I am pleased that our acquisitions in Ireland and the US performed very well
during the year. The Irish healthcare market in many respects reflected the
same challenges as the UK, although our breadth of services, including
ultrasound and X-ray scan and report, as well as diabetic retinopathy
screening, meant that we were able to grow revenue at over 30% year-on-year,
reflecting the value of our diversification strategy. Similarly, Medica's
clinical trial imaging services business based in Pennsylvania also expanded,
taking on some notable new clients, as well as supporting existing clients
with important new therapy launches. RadMD continued to diversify away from
pure reader services into end-to-end imaging core lab services which will
support an expansion of gross margin. Further, RadMD closed the year with a
strong risk-adjusted pipeline and order book that underpins 75% of 2023
revenue. The pipeline is also increasingly diversified with significant new
large biotech client wins, as well as extensions to existing client
relationships.
Leadership development and strategy execution
During 2022, Medica focused on the development of senior leadership roles
across the business. This included internal promotions to Managing Director
for Sarah Burns and Kim Scanlan in the UK and US respectively and the
appointment of Fiona Carr as our first Director of Human Resources. We have
also successfully nurtured our own talent which has resulted in other senior
internal promotions across the company. I am proud that as we start 2023, four
out of the nine roles in the executive team are now held by women, which is up
from only one in 2019, which I believe better represents the wider business as
well as bringing a diversity of thinking to key decisions. As well as HR,
Medica has also invested in the development of its senior medical team with
appointments in radiologist audit, training and development and quality and
governance amongst the changes. Medica continues to invest in its medical
expertise and our recent Care Quality Commission inspection, which gave a
highly positive review of our services, is testament to our continued focus on
quality. Furthermore, our recent UK acquisition of a highly respected
radiologist training specialist in this space is evidence of further
commitment to ensure that radiologists working for Medica continue to feel
valued and are provided with essential skills that can be taken back into
their NHS day jobs.
In 2022, we also made progress with our respective technology platforms across
the business. This included ongoing developments in our FutureTech programme
in the UK which is focused on developing an enhanced reporting environment for
our radiologists and radiographers including those reporting from overseas in
India, Australia, New Zealand and beyond. We also made progress in Ireland
working with the Health Service Executive to improve access to scans and in
the US, with our first image upload platform ready for beta testing. Since
2019 we have recognised the need to invest in technology to support our
operations and to offer greater functionality for our radiologists be they
reporting urgent cases overnight or clinical trial images during the daytime.
Medica remains well positioned for growth in 2023
The outlook for our business remains strong with ongoing demand underpinning
continued double-digit growth in the medium term. Therefore, our focus
continues to be on meeting this demand by increasing reporting capacity and
enabling greater productivity for radiologists, radiographers and other
specialist doctors who choose to work with Medica. To do this, we will
continue to expand the reach of our reporting network, as well as continue to
accelerate recruitment of radiologist consultants in the UK and Ireland. We
are already starting to grow our international reporting presence by expanding
into India to provide capacity for both our teleradiology and clinical trial
reading businesses and to support MedX, our joint venture in Australia.
As we look to the remainder of 2023 and beyond, we continue to evaluate
options for both new avenues of organic growth and M&A in support of our
strategy including two small acquisitions completed already this year. Our
focus remains on growing international scale in our US clinical trials
business, RadMD, as well as looking at new areas of telemedicine such as
digital pathology into which we can expand. In this respect, I am hopeful that
2023 will continue to be an exciting year for Medica and I would personally
like to thank all of our talented team across Medica, including over 700
radiologists with whom we work regularly, as well as our partners, Board and
investors for their ongoing support for the business strategy.
Roy Davis
Chairman
29 March 2023
CEO report
In 2022, Medica's clients faced the challenge of dealing with substantial
backlogs in elective procedures and the resumption of clinical trial testing.
I am pleased that we have been able to play a vital role in supporting them
throughout this time and deliver a strong period of double-digit growth while
continuing to execute against our strategy.
Waiting lists for diagnosis requiring imaging in the UK and Ireland remain at
all-time highs and we expect demand will continue to grow for our services
over the medium term as governments continue to fund investment into scanning
capacity. Given Medica's scale and having the largest network of radiologists
in the UK, I am proud that in 2022 we continued to work in close collaboration
with our clients to be as responsive as we can to deliver high quality, fast
and reliable reporting services.
Continued progress against our strategic goals
As set out below we continued to deliver against our core strategic objectives
focused on our technology, people and service offering.
1. Be the trusted, go-to partner for healthcare providers with a
reputation for reliability and transparency to enhance patient outcomes
Acute services (UK) - Most service procurement exercises were deferred in 2020
and early 2021 until after the pandemic had abated. During 2022, Medica
successfully renewed many of its existing NightHawk contracts, as well as
winning a net positive number of new contracts. Combined with the renewal
success in 2021, this means that over 60% of NightHawk contracts renewed by
value in the 18 months prior to period end, with the balance expected to renew
in future years as they reach the end of their existing term. Since contracts
typically run for three years with the option of a two-year extension, this
provides strong revenue visibility and growth potential.
Medica has increasingly benefited from the high demand for acute services not
only during the night, but also during the day. As busy radiologists are
required to do more complex and time-consuming procedures during the daytime
in their hospitals, Medica is being trusted by clients to fulfil more urgent
requests during normal daytime hours, as well as many hospitals asking Medica
to extend the hours classified as NightHawk. These dynamics together drove
revenue growth at over 1% month-on-month throughout 2022 which is expected to
continue in 2023 and beyond as demand builds and both the complexity and
number of scans per patient continue to grow.
In terms of performance, Medica continued to provide a reliable, safe and
trusted service, delivering against our Service Level Agreement (SLA) of exams
reported within 60 minutes at 92% of urgent exams within SLA against a target
of 90% and continuing to focus on delivering reports within 30 minutes and
suspected stroke reports within 20 minutes. To continue to offer high service
quality as our offering grows, Medica's strategy is to expand the reach of our
recruitment network to support sub-specialist reporting 24/7 from countries
where there is a time-zone benefit, as well as continue to recruit radiologist
consultants in the UK. To this end, Medica has started to report using UK
General Medical Council certified radiologists based in India. Our new systems
have supported this change and we expect that we will expand to other
jurisdictions in 2023, Medica reported a 16% increase in net rostered
reporting hours year-on-year which is our measure of total radiologist
capacity growth.
Acute services (Ireland) - Medica expanded the number of clients using its
out-of-hours, NightHawk reporting services, from seven to 15 over the course
of 2022 which is up from five clients when Medica acquired the company in
2020. Not only did Medica expand the number of clients, but it also expanded
the hours of operation at many of the existing clients. This underlines
Medica's investment thesis at the time of acquisition where we expected the
Irish market opportunity to grow rapidly and shift towards a greater demand
for out-of-hours urgent reporting of CT scans in particular. Medica is now
present in all seven hospital clusters across the Republic of Ireland which
positions us well for continued expansion. During 2022, Medica Ireland doubled
the number of radiologists reporting to support this growth and we have built
a strong pipeline to continue to build our capacity into 2023 and beyond.
Elective services (UK) - as the NHS prioritises the reduction in waiting time
lists, demand for Elective radiology reporting services remains high with
continued unmet demand across the market. The level of outsourcing of
reporting is correlated with NHS scanning capacity and hence Medica works
closely with clients to plan capacity needs on a weekly basis, As described
above, our strategy is to expand recruitment of new radiologists,
radiographers and specialist doctors in the UK and internationally as well as
help reporters to improve their productivity by improving our technology
platform.
Elective and screening services (Ireland) - Medica Ireland continued its
expansion across the HSE with the addition of six new hospital clients
including 5 additional hospitals added to our HSE Hospital ultrasound waiting
list management portfolio. Medica continues to be well positioned in the Irish
market as the go-to provider of teleradiology services having expanded the
number of hospitals to which it is providing services from 19 in 2020 to 33 in
2022. Alongside close partnership with the HSE, Medica is also proud to have
supported Ireland's largest healthcare insurer, VHI, with the launch of its
flagship clinic in Carrickmines in south Dublin. This contract grew ahead of
expectations in 2022 which required Medica to accelerate the recruitment of
radiographers and sonographers to support the demand.
Medica Vision, our diabetic retinopathy screening service was proud to report
that by the end of 2022, had zero backlog remaining post Covid. We are pleased
with this impressive result which sets the company apart from other providers
across the UK and Ireland.
Clinical trial imaging services (US and International) - Medica's clinical
trial business recorded another strong year of growth in 2022 with revenues of
£10.4 million for the first full year post-acquisition. Importantly,
underpinning sustainable strong growth were new contract wins with a number of
sizeable new pharma and biotech companies, as well as a continued shift from
providing radiologist reader services towards full imaging contract research
services (2022 represented 70% of sales up from 65% in 2021). Following a
period of investment post-acquisition, operating margins are not yet at target
levels, however strong revenue growth is expected to be delivered in the
medium term. RadMD reported strong conversion of its signed order book to
revenue and a combined risk-adjusted pipeline and order book of over $63
million as at 31 December 2022. This means that RadMD started 2023 with a
revenue underpin of over 75% for the year.
MedX joint venture - international teleradiology reporting - In 2022,
Medica's joint venture with Integral Diagnostics Pty (IDX), an Australian
listed leader in radiology clinics and teleradiology services, focused on
international business development, leveraging the expertise of both parent
teleradiology companies. MedX was successful in winning its first out-of-hours
contract and is now exploring strategic partnerships in the Middle East and
more widely overseas. As Medica expands its focus on reporting, training and
development of radiologists outside the UK, this will also help to develop our
network of international radiologists for MedX.
2. Invest in our people and systems to build an engaged and motivated team
People development and engaged team - Medica continues to invest in its people
and grow the size of its operational and clinical team in the UK, Ireland and
US to support growth. In 2022, we established an HR team in-house comprising
an experienced Director of HR and two managers to support payroll and HR
processes across the Group.
Our focus remains on 'growing our own' staff. Examples of this include
on-the-job training for sonographers and radiographers in Ireland which we are
looking to expand in 2023 and clear career path management for our operations
and clinical governance teams in the UK. In the US, RadMD made a series of
internal promotions in the Project Management and Operations teams, as well as
hiring experts to bolster our clinical expertise.
In terms of the development of our team, we continue to invest in resources to
support our reporting radiologists, radiographers and specialist doctors to
ensure that they can be as productive as possible during the time that they
spend with us. This has seen us increase the size of our Reporter Relationship
Management team to support rostering of shifts and to manage ongoing
relationships with reporters.
Medica responded to the increased cost of living pressures incurred by our
employees by delivering a second annual pay increase of an average of 2.5% in
October 2022, in addition to an average of 3.0% in April 2022. Further, Medica
issued a one-off payment to all staff in July 2022 which proportionally
benefited those on lower incomes. Neither the October salary increase, nor the
one-off payment applied to senior management. This helped to continue to
ensure that we have an engaged and motivated team during what was a tough
inflationary environment. Medica continues to proactively and regularly
benchmark salaries and to make annual adjustments where necessary.
Medica also introduced a new Restricted Stock Unit scheme which rewarded
eligible employees with a simple option incentive that vested after three
years of employment. These will be awarded annually and are a meaningful
incentive and retention mechanism for employees.
Systems investment - 2022 marked a significant step forward in the development
of our new reporting system in the UK. Our FutureTech programme delivered on
its first major milestone of a new Picture Archiving and Communication System
(PACS) which was launched in February. Throughout 2022, we continued to make
changes to our systems to support radiologist productivity. This also included
the development of a new application to enable Medica reporters overseas to
improve the speed and access to data to at least an equivalent level to
colleagues based and reporting in the UK. This will enable Medica to increase
overseas reporting capacity which will deliver not only additional revenue
growth but will also be margin enhancing as radiologists reporting from
overseas will spend more time reporting during daytime hours, rather than
during the night-time when a premium fee rate needs to be paid. The next phase
of FutureTech will be to further improve the reporting environment for
radiologists by streamlining workflows and aiming to increase the productivity
of reporting during sessions.
During 2022, Medica invested in a new image transfer platform for its clinical
trials business, RadMD. This proprietary platform has been developed in house
and is expected to deliver a bespoke environment for clients to upload and
transfer imaging data to RadMD, as well as a more cost-effective solution for
the company.
Finally, Medica invested in the first phase of a new Enterprise Resource
Planning (ERP) system which was delivered on time and on budget in Q4 2022.
The initial focus is to improve financial reporting across the three business
lines with additional functionality planned for 2023 and 2024.
3. Be the company of choice for specialist doctors and clinicians wanting to
expand their expertise in telemedicine
Clinical governance, training and development
Medica was proud to have successfully passed a Care Quality Commission
inspection and continued to be rated overall "Good" with two areas where we
scored "Outstanding" including clinical governance and leadership of the
service. Medica continues to lead the way in the market in terms of offering a
consistently high quality and reliable service to clients and we have made
progress in many areas during 2022.
Medica continued to invest in its seminar series in 2022 which provided
regular in-depth expert lectures on topics relevant to radiology reporting.
Additionally, Medica has focused on making clinical improvements to our
service including reducing interruptions to reporting during NightHawk shifts
by up to 50% by improved management of so-called justification calls which a
hospital needs to make to a radiologist where a protocol is not in place
before embarking on administering ionising radiation to patients with acute
conditions. Not only does this increase quality by reducing interruptions to
reporting, but it also thereby increases the number of cases that a
radiologist can report on an hourly basis. This project, led by our Medical
Director Dr. Robert Lavis, has not only delivered quality improvements, but
also enabled Medica to take on additional hospitals without having to increase
the number of radiologists due to the productivity gains delivered.
In 2022, Medica recruited a new clinical lead and radiologists in India, as
well as in Australia and New Zealand. As the company increases its focus on
international reporting, Medica was excited to welcome the acquisition of Jane
Chandler Associates (JCA) in January 2023. JCA is an internationally
recognised provider of radiologist training courses that meet international
continuing professional development and training qualifications. Whilst the
majority of courses are still provided in the UK for UK-certified
radiologists, over the past few years, JCA has expanded to offer courses to
radiologists based in Asia. Medica's strategy is to support the continued
growth and expansion of the business into new markets which will both
accelerate revenue growth and offer exciting training and development
opportunities for our international network of radiologists in Medica UK,
Ireland and RadMD in the US, as well as our joint venture, MedX.
Improvement in radiologist enrolment and onboarding
During 2022, Medica focused on improving the time taken to onboard a
radiologist from initial interview through to deployment of a workstation at
their home and training to be ready to start reporting by over 50%. This has
the combined benefit of reducing the time before the reporter starts receiving
work from us, but also providing Medica with additional reporting capacity
sooner.
4. Deliver profitable, diversified growth underpinned by our commitment to ESG
with focus on market-leading clinical governance
In 2022 Medica delivered total revenue growth of 24%, with 30% of total
revenue coming from non-UK operations. This translated into a 13% increase in
underlying operating profits despite continued investment to support future
growth. Progress against financial targets is summarised in the Financial
Review.
Commitment to ESG
In 2021, Medica significantly revised its approach to measuring and reporting
ESG metrics. Our framework focuses on four key areas of our business that
benefit from our commitment to ESG. These areas are aligned to the SASB
(Sustainability Accounting Standards Board) international standards for
healthcare companies.
1. People and Community
2. Responsible Operations
3. Environmental Impact
4. Customer Centricity
A detailed ESG report will be provided in our annual report. In summary,
Medica has made good progress introducing further green travel initiatives
including incentivising employees to use other modes of transport to the
office, for example by introducing a 'cycle to work' scheme and has also
improved recycling of redundant IT equipment. Further, Medica has taken steps
to start to report on diversity and inclusion within the wider business.
Further, the business has focused on improving our reporter experience through
the delivery of our FutureTech programme.
Diversified growth opportunities
Telepathology reporting
Medica is well-placed to take advantage of the growth in reporting of digital
pathology cases. Histology specimens embedded in glass slides can be digitised
to create an image that can be reported remotely by pathologists in much the
same way as Medica's core teleradiology business transfers digital radiology
images to radiologists. This not only presents a new market opportunity for
Medica, but importantly it offers existing clients an integrated service that
focuses on broader diagnosis of a patient's condition. The best example is
diagnosis of cancer which requires often both analysis of tissue or individual
cells, as well as radiological examination of the tumour in situ. These data,
taken together, would provide an integrated report for the oncologist and
medical team in the hospital.
Medica is planning to launch a digital pathology reporting service in the
second half of 2023. This will require integration of pathology reporting
applications into our current PACS reporting system. Additionally, Medica is
in the process of building a network of pathologists to be able to remotely
report the images in the same way that we currently provide this service for
radiology. It is expected that Medica will be able to build on its existing
network of clients to grow this exciting new business line.
Expansion of imaging contract research services
Further expansion of Medica's RadMD clinical trial business which provides
medical imaging services for pharma and biotech clients, will continue to be
an area of focus in 2023. The nature of the market is such that it provides
services to clinical trials operating across the globe. RadMD's customers are
also international and increasingly we are growing our customer base outside
of the US into Europe and Asia where there is a fast-growing life sciences
market. The fast growth of the business will generate operating synergies
across our customer base and enable the company to benefit from the scale
effects that growth brings. Medica will continue to expand both the range of
services and therapeutic areas covered, as well as the international footprint
of clients during 2023. Already this year, we have acquired a reader services
business called VoxelMetrix that has worked with Medica for many years. This
brings not only an established network of clinical trial readers, but also a
leading radiologist expert in clinical trials who will support the ongoing
growth and development of RadMD's services.
Post-period update and outlook
In the UK, 2023 has started well with new contract wins, contract extensions
and service deployments. Whilst 2021/22 saw over 60% of our NightHawk contract
pipeline being renewed, there are still contracts that will be renewed this
year, as well as significant opportunities to win new contracts, and to extend
the provision of services under both new and existing contracts.
In Ireland, we have launched two new hospital contracts for out-of-hours
reporting already this year and we continue to expand services within our
existing network of hospitals
In the US, RadMD continues to focus on winning new contracts for oncology
trials, as well as new therapy areas. RadMD has a risk-adjusted pipeline and
signed order book of over $63m which is expected to convert to revenue over
the coming three years. This visibility underpins over 75% of anticipated
revenue for 2023. Meanwhile, the team continues to focus on developing new
client relationships in the US, Europe and Asia, as well as winning additional
contracts from existing clients.
Medica has already completed two small acquisitions this year in the UK and US
strengthening our commitment to training and development of radiologists
whilst also boosting our reading capacity for clinical trials. We will
continue to evaluate opportunities to expand its range of services,
particularly in the US to support our clinical trials business RadMD.
The focus for 2023 remains to increase the capacity for reporting in both our
UK and Ireland businesses. To do this, we need to continue to expand the
number of radiologists working for Medica as well as ensuring that the time
radiologists, radiographers and specialist doctors choose to work with us is
as seamless and productive as possible. To this end, we continue to focus on
the development of our FutureTech platform in the UK and to enhance our
systems to improve the overall reporting experience. Further, our focus on
international recruitment across Europe, India, Australasia and other regions
will help to build capacity, particularly for our NightHawk reporting service.
Medica will also continue to pursue its organic growth strategy to further
diversify our remote reporting services into areas such as telepathology, and
to expand the scale and breadth of our telemedicine services via potential
acquisitions.
Medica holds the leading position in the market and is ideally placed to
support our clients to reduce backlogs, as well as capitalise on the growth in
funding for clinical trials. We have made significant progress since 2019 to
diversify its service offering and to invest in its team and I am excited to
continue building on these foundations to ensure that we remain a trusted,
go-to partner across our services and geographies. I would like to thank all
our employees for their continued support for our ambitious growth strategy
and continue to be excited by the opportunities that lie ahead for Medica
Group.
Stuart Quin
Chief Executive Officer
29 March 2023
Financial Review
Progress against our strategic financial goals
Strategic financial target¹ Medium term Target Actual FY 2022
Revenue growth rate
UK 12%-14% 15%
Ireland >15% 30%
US² >15% 63%
Target Margins
Gross Profit Margin >45% 48%
Underlying Net Operating Profit margin 20% 18%
Return on Capital Employed³
Group >20% 20%
Ireland >15% 20%
US >15% 14%
Group Operating Cash conversion >80% 64%
¹ Non-GAAP unaudited operational performance measures as set out in the CMD
presentation in September 2021
² YoY comparison including periods pre-acquisition
³ Defined as underlying operating profit (excluding PLC costs) divided by
total assets less current liabilities and long-term debt.
Revenue
Overall revenue increased 24% to £77.0m in 2022 from £61.9m in 2021.
Excluding the impact of acquisitions on 2022 and 2021, on a like-for-like
basis, revenues increased 17%.
UK
Acute services including NightHawk and day-time urgent reporting services, as
well as Same-Day reporting increased revenues by 12% to £33.3m in 2022 from
£29.8m in 2021. Elective reporting services, which had been more severely
impacted than NightHawk and for longer due to the impact of COVID and in-year
capacity constraints, recovered steadily throughout the year and ended the
year at its highest ever run-rate driven by a backlog of scanning demand in
the NHS. Revenues increased by 20% to £20.7m in 2022 from £17.3m in 2021.
Ireland
Revenues increased 30% to £12.5m in 2022 from £9.7m in 2021 as a result of
the positive impact of a number of new contract wins together with strong
growth from the existing business. Return of Capital Employed (ROCE) at 20%
continued to track above our 15% target for acquisitions.
US
RadMD, based in the US and focused on imaging services for clinical trials,
was acquired in March 2021. Total Revenue in 2022 was £10.4m, up 100%
compared to the nine-month period in 2021 and over 63% on a like for like
basis assuming it had been owned for the whole of 2021. The strong growth in
the year was attributed to a strong conversion of a larger pipeline into
signed contracts and sustained conversion of the orderbook to recognised
revenue.
Gross Profit and Gross Profit Margin (GPM)
Gross Profit is stated after the cost of reporters, internal audit costs
required to deliver contractual commitments and other cost of sales such as
framework costs in the UK. In 2022, Gross Profit increased by £5.8m or 18% to
£37.2m in 2022 from £31.4m in 2021. As expected, particularly following
the large number of UK contract renewals together with the impact of a change
in mix from Ireland and the US, overall GPM reduced by 2.4 ppts to 48.3% in
2022.
Underlying Operating Profit
For 2022, consistent with prior years we have reported underlying operating
profits that consider the impact of non-underlying items to provide a more
representative depiction of underlying activity. Underlying operating profits
increased to £13.6m in 2022 from £12.1m 2021. Underlying profit margin
reduced from 19.5% to 17.7% due to the impact of the increased mix of US and
Ireland at lower margins and continued investment to support future growth.
Non-underlying costs
Non-underlying costs after tax decreased by £0.4m to £3.5m in 2022 from
£3.9m in 2021. These costs included £2.4m (2021: £2.2m) relating to the
amortisation of acquired intangible assets, £1.8m (2021: £0.8m) relating to
share-based payments, £0.3m relating to implementation of accounting system,
£0.2m relating to alignment of depreciation policies on implementation of new
accounting software system and £0.3m (2021: £0.6m) relating to one off legal
and professional costs.
In addition, non-underlying costs included finance costs of £0.2m (2021:
£0.6m) relating to a fair value adjustment on contingent consideration and
finance income of £1.1m relating to foreign exchange gains on acquisition
related loans.
The income tax credit on total non-underlying costs was £0.8m (2021 £0.2m).
Net finance expense
Finance costs net of finance income were £0.6m for the year (2021: £0.5m).
During the year, an additional £4.4m of the revolving credit facility was
drawn down to fund deferred consideration payments made in respect of a
previous acquisition. The interest costs for the year of £0.6m represent
interest on drawn down balances together with non-utilisation fees on undrawn
amounts.
Profit before Tax
Underlying profit before tax increased by £1.4m to £12.9m in 2022 from
£11.5m in 2021 reflecting the increase in revenues and gross profit, offset
by the increase in operating costs. Total profit before tax, after taking
account of non-underlying and exceptional items increased by £1.3m to £8.6m
in 2022 from £7.3m in 2021 (23.1%).
Taxation
The Group has incurred a tax charge of £1.4m in the year ended 31 December
2022 (2021 £1.9m), with tax on underlying profits of £2.2m (2021: £2.1m).
The effective rate of tax for 2022 is 16.7% with the effective tax rate on
underlying profits of 17.0%.
Earnings per share
Underlying basic earnings per share (EPS) increased by 12% to 8.75 pence per
share in 2022 from 7.83 pence per share in 2021, reflecting the increase in
profits. Basic EPS, after taking account of non-underlying and exceptional
costs increased by 29% to 5.88 pence in 2022 from 4.56 pence in 2021.
Dividends
In 2022, an interim dividend of 0.93 pence per share was declared in September
2022 and paid in November 2022. In line with our progressive dividend policy,
the directors are proposing a final dividend for 2022 of 1.88 pence per share.
The final dividend will be paid on 21 July 2023 to shareholders on the
register on 23 June 2023 subject to approval by shareholders at the 2023
Annual General Meeting (AGM). The total dividends for 2022 of 2.81 pence per
share represent an increase of 5% over 2021.
Capex
Total capex was £3.2m in 2022 compared to £2.7m in 2021. This included:
intangible capex of £1.1m (2021: £0.8m), tangible capex on infrastructure
and equipment for contracted radiologists of £1.8m (2021 £1.4m) and
right-of-use asset additions of £0.2m (2021 £0.5m).
Cash and debt at 31 December 2022
Operating cash generation in 2022 reduced to £8.7m in 2022 from £9.7m in
2021 after taking account of an increase in debtors in December 2022 which
reversed in early 2023. Operating cash conversion therefore reduced to 64%
compared to 81% in 2021 albeit cash generation is expected to return to normal
levels in 2023.
After taking account of deferred consideration payments relating to the
acquisitions of Global Diagnostics Ireland and RadMD of £5.8m, gross cash at
31 December 2022 was £11.0m (2021 £9.6m) and net cash was £0.8m (2021
£3.9m).
Joint Venture
During the year £0.2m was invested into Med-IDX Pty (MedX), the 50/50 JV with
Integral Diagnostics Pty.
Post Balance Sheet Events
On 5(th) January 2023, the Company issued and allotted 200,000 shares of 0.2
pence each in the capital of the Company to the to the trustee of the
Company's Employee Benefit Trust and these shares will be used to satisfy
future awards and options vesting in the Medica Group PLC Performance Share
Plan 2017. Following Admission, the Company had 122,633,635 ordinary shares
in issue.
On 27 January 2023, RadMD LLC, a Delaware Limited Liability Company that is a
subsidiary of the Company, acquired the assets of VoxelMetrics LLC, a North
Carolina Limited Liability Company engaged in the management of radiology
readers for clinical trials. The acquisition expands the network of radiology
readers across the US, further increasing reporting capacity to support our
clients. The initial consideration paid for the assets of VoxelMetrics LLC was
$2.6m. At the date the financial statements were authorised for issue, all
information in respect of the acquisition was not available and therefore
disclosures required under IFRS 3 will be made in subsequent statements.
On 3 February 2023, the Company acquired the entire issued share capital of
JCA Seminars Limited, an international radiologist training and continuing
professional development company based in the UK. This acquisition diversifies
the offering to our customers whilst increasing the value of the service
offered. The initial consideration paid was £1.4m. At the date the financial
statements were authorised for issue, all information in respect of the
acquisition was not available and therefore disclosures required under IFRS 3
will be made in subsequent statements.
Richard Jones
Chief Financial Officer
29 March 2023
Consolidated income statement and consolidated statement of comprehensive
income
31 December 2022 31 December 2021
£000 £000
Note Underlying Non-Underlying Total Underlying Non-Underlying Total
£'000 (Note 6) £'000 £'000 (Note 6) £'000
£'000 £'000
Revenue 76,979 - 76,979 61,913 - 61,913
Cost of sales (39,796) - (39,796) (30,519) - (30,519)
Gross profit 37,183 - 37,183 31,394 - 31,394
Administration expenses (23,540) (5,188) (28,728) (19,316) (3,540) (22,856)
Operating profit 13,643 (5,188) 8,455 12,078 (3,540) 8,538
Finance costs (627) (213) (840) (550) (593) (1,143)
Finance income - 1,138 1,138 - - -
Share of results of joint ventures (112) - (112) (56) - (56)
Profit before tax 12,904 (4,263) 8,641 11,472 (4,133) 7,339
Income tax expense 7 (2,196) 755 (1,441) (2,079) 207 (1,872)
Profit for the year attributable 10,708 (3,508) 7,200 9,393 (3,926) 5,467
to equity shareholders
Basic profit per ordinary share (pence) 8 5.88 4.56
Diluted profit per ordinary share (pence) 8 5.83 4.5
Statement of Comprehensive Income
Profit for the year 7,200 5,467
Other comprehensive income
Items that will be reclassified subsequently to profit or loss
Foreign exchange translation differences 590 (124)
Total comprehensive income for the year 7,790 5,343
For the year ended 31 December 2022
Consolidated statement of financial position
Company Registration 08497963
Note 31 December 2022 31 December 2021
£000 £000
ASSETS
Non-current assets
Goodwill 10 31,117 30,357
Other intangible assets 11 21,185 22,399
Property, plant and equipment 12 4,531 4,521
Deferred tax 556 186
Investments 57 -
57,446 57,463
Current assets
Trade and other receivables 17,794 14,271
Cash and cash equivalents 11,004 9,616
28,798 23,887
Total assets 86,244 81,350
LIABILITIES
Current liabilities
Trade and other payables (9,865) (9,576)
Borrowings (4,516) (5,739)
Lease liabilities (253) (280)
Contingent consideration 13 (1,550) (5,335)
Current tax (1,039) (880)
(17,223) (21,810)
Net current assets 11,575 2,077
Total assets less current liabilities 69,021 59,540
Non-current liabilities 31 December 2022 31 December 2021
£000 £000
Borrowings (5,702) -
Lease liabilities (701) (814)
Contingent consideration - (1,553)
Deferred tax (1,531) (2,270)
(7,934) (4,637)
Net assets 61,087 54,903
EQUITY
Issued capital 14 245 245
Share premium 14 30,330 30,324
Foreign exchange reserve 468 (122)
Retained earnings 14 30,044 24,456
Total equity 61,087 54,903
Consolidated statement of cash flows
31 December 2022 31 December 2021
£000 £000
Operating activities
Profit for the year 7,200 5,467
Add back taxation 1,441 1,872
Profit before tax 8,641 7,339
Adjustments for:
Depreciation 1,920 1,672
Amortisation 2,991 2,816
Loss on disposal of tangible and 29 55
intangible assets
Share based payments 1,698 682
Social security costs of share-based payment charge 92 78
Fair value movement on contingent consideration (1,017) -
Foreign exchange (252) (590)
Finance costs 840 1,143
Finance income (1,138) -
Share of results of joint ventures 112 56
Changes in:
Increase in trade and (1,325) (4,725)
other receivables
Decrease in trade and other payables (1,925) 2,811
Tax paid (1,923) (1,614)
Cash inflow from operating activities 8,743 9,723
Investing activities
Purchase of subsidiary net of cash acquired - (11,429)
Purchase of property, plant and equipment (1,771) (1,310)
Purchase of software intangibles (1,138) (763)
Contingent consideration paid net of transaction related costs (4,761) -
Additional investment in joint ventures (169) -
Interest received - -
Cash outflow from investing activities (7,839) (13,502)
For the year ended 31 December 2022
31 December 2022 31 December 2021
£000 £000
Cash flows from financing activities
Repayment of lease liability (333) (407)
Proceeds from borrowings 8,317 11,592
Repayment of borrowings (4,000) (23,522)
Issue of ordinary share capital 6 16,162
Costs to issue ordinary share capital - (537)
Dividends paid to ordinary shareholders (3,328) (3,167)
Interest paid (350) (424)
Net cash inflow/(outflow) from 312 (303)
financing activities
Net change in cash and cash equivalents 1,216 (4,082)
Movement in net cash
Cash and cash equivalents, beginning of period 9,616 13,934
Increase/(decrease) in cash and cash equivalents 1,216 (4,082)
Foreign exchange on cash and cash equivalents 172 (236)
Cash and cash equivalents, end of period 11,004 9,616
Consolidated statement of changes in equity
Note Issued capital Share Translation Retained earnings Total equity
premium
£'000
reserve £'000 £'000
£'000
£'000
At 1 January 2021 223 14,721 2 21,507 36,453
Issue of share capital 22 15,603 - - 15,625
Dividends paid 9 - - - (3,167) (3,167)
Share based payments - - - 682 682
Deferred tax on share based payments - - - (33) (33)
Transactions with owners 22 15,603 - (2,518) 13,107
Profit for the year - - - 5,467 5,467
Other comprehensive income
Foreign exchange translation differences - - (124) - (124)
Total comprehensive income for the year - - (124) 5,467 5,343
At 31 December 2021 245 30,324 (122) 24,456 54,903
Issue of share capital - 6 - - 6
Dividends paid 9 - - - (3,328) (3,328)
Share based payments - - - 1,698 1,698
Deferred tax on share based payments - - - 18 18
Transactions with owners - 6 - (1,612) (1,606)
Profit for the year - - - 7,200 7,200
Other comprehensive income
Foreign exchange translation differences - - 590 - 590
Total comprehensive income for the year - - 590 7,200 7,790
At 31 December 2022 245 30,330 468 30,044 61,087
For the year ended 31 December 2022
Notes to the financial information
For the year ended 31 December 2022
1 Medica Group PLC
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 6(th) floor, One Priory Square, Priory Street, Hastings, East
Sussex, TN34 1EA.
The consolidated financial information of the Group for the year ended 31
December 2022 (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 both the UK and Ireland.
The financial information set out in the announcement does not constitute the
Group's statutory accounts for the year ended 31 December 2022 or 31 December
2021. The auditors reported on the accounts for the year ended 31 December
2021 and their report was (i) unqualified, (ii) did not include references to
any matters to which the auditors drew attention by way of emphasis without
qualifying their report and (iii) did not contain statements under section 498
(2) or (3) of the Companies Act 2006.
The audit of the statutory accounts for the year ended 31 December 2022 is not
yet complete. The statutory accounts for the year ended 31 December 2022 will
be finalised based on the financial information presented by the directors in
this preliminary announcement and will be delivered to the Registrar of
Companies in due course.
2 Basis of preparation
The Consolidated financial information of Medica Group PLC and its subsidiary
undertakings (together "the Group") for the 12 months ended 31 December 2022
have been prepared by the directors of Medica Group PLC.
The consolidated financial information of the Group have been prepared in
accordance with UK-adopted International Accounting Standards
The Group has applied an income statement format which seeks to highlight
significant items within Group results for the year such as one-off
acquisition costs, and other non-operating costs such as the amortisation of
acquired intangibles and share based payments. The Group exercises judgement
in assessing the particular items which, by virtue of their scale and nature
should be disclosed in the income statement and related notes as
non-underlying items. The Group believes that such a presentation is useful
for the users of the financial information in helping to provide a balanced
view of, and relevant information on, the Group's underlying financial
performance
A copy of the annual report for the year ended 31 December 2022 will be
available at http://www.medicagroupplc.com (http://www.medicagroupplc.com) by
30 April 2022.
3 Going concern
The Directors have prepared cashflow forecasts for a period of 21 months from
the date of approval of the financial statements (the forecast period). These
indicate that the Group will have sufficient funds to meet its liabilities as
they fall due, and will continue to comply with its loan covenants, throughout
the forecast period.
The forecasts have been prepared by reference to the 2023 approved budget and
detailed bottom-up forecasts for the following financial year which have
considered realistic downside scenarios including:
· Impact of reduced revenue from consideration of reduced
radiologist availability
· Loss of certain material contracts
· Further material inflationary pressure on operating costs more
than current expectations
Under these downside scenarios, individually and even in the implausible
cumulative scenario, excluding any potential mitigating actions that could be
taken, management conclude that the Group will have sufficient funds to
continue to meet its liabilities as they fall due for at least 21 months from
the date of approval of the financial statements and the Board have therefore
determined it is appropriate to adopt the going concern basis in preparing the
financial statements.
4 Segment reporting
Management prepare and monitor financial information for the Group's three key
geographies, UK, Ireland and the US. This financial information is reviewed
and used by the Chief Operational Decision Maker (considered to be the CEO) in
managing the operating activities of the Group.
In the UK, Medica generates revenues via two key service lines, Nighthawk
(urgent and quick turnaround services) and Elective. In Ireland revenues are
generated from tele-radiology, managed services, and a contract with the
National Screening Service to deliver Ophthalmology services. In the US
revenues are generated from providing radiology reporting to Pharma customers
directly as full service iCRO services and indirectly via Contract Research
Organisations (CRO's) as reader only services. These activities are
collectively referred to as imaging core lab services.
31 December 31 December
UK Ireland USA 2022 UK Ireland USA 2021
£000 £000 £000
£000 £000 £000 £000 £000
UK NightHawk 33,330 - - 33,330 29,762 - - 29,762
UK Elective 20,708 - - 20,708 17,292 - - 17,292
Ireland - 12,549 12,549 - 9,665 9,665
Imaging core labs - - 10,392 10,392 - - 5,194 5,194
Revenue 54,038 12,549 10,392 76,979 47,054 9,665 5,194 61,913
Cost of sales (28,354) (6,684) (4,758) (39,796) (23,436) (4,758) (2,325) (30,519)
Gross profit 25,684 5,865 5,634 37,183 23,618 4,907 2,869 31,394
Operating expenses (14,933) (3,793) (4,814) (23,540) (13,750) (3,375) (2,191) (19,316)
Operating profit 10,751 2,072 820 13,643 9,868 1,532 678 12,078
Finance costs (127) (265) (235) (627) (261) (283) (6) (550)
Share of results of joint ventures (112) - - (112) (56) - - (56)
Profit before tax 10,512 1,807 585 12,904 9,551 1,249 672 11,472
Tax (1,662) (293) (241) (2,196) (1,625) (268) (186) (2,079)
Underlying profit for the period 8,850 1,514 344 10,708 7,926 981 486 9,393
Non-underlying loss for the period (3,508) (3,926)
Profit for the period 7,200 5,467
UK Ireland USA 31 December UK Ireland USA 31 December
2022
2021
£000 £000 £000
£000 £000 £000 £000
£000
Non-current assets (excluding deferred tax) 24,698 17,049 56,890 25,314 17,885 57,277
15,143 14,078
Additions to non-current assets 2,428 310 171 2,909 1,907 164 10,457 12,528
Total assets less current liabilities 39,359 15,487 14,175 69,021 36,651 11,061 11,828 59,540
Net assets 38,199 11,231 11,657 61,087 35,354 7,924 11,625 54,903
5 Operating profit
2022 2021
£000 £000
Fees payable to the Company's auditor for the audit of the Company's annual 236 225
accounts
Fees payable to the Company's auditor for the audit of subsidiaries 79 57
Total audit fees 315 282
Audit related services:
Interim review - 18
Total audit related services - 18
The operating profit and the profit before taxation are stated after:
Other assurance services:
Covenant compliance services 3 3
Total non-audit fees 3 21
Total fees paid to Company's auditor 318 303
2022 2021
£000 £000
Operating lease rentals - short term and 187 90
low value leases
Depreciation: property, plant and equipment - owned 1,582 1,241
Depreciation: property, plant and equipment - leased 338 431
Amortisation of intangible fixed assets on acquisition 2,397 2,225
Amortisation of intangible fixed assets on other assets 594 591
Analysis of expenses by nature
2022 2021
£000 £000
Amortisation of intangible assets (note 11) 2,816
2,991
Depreciation of property, plant and equipment (note 12) 1,920 1,672
Loss on disposal of tangible and intangible assets 29 55
Operating lease rentals - short term and low value leases 187 90
Staff costs 17,260 12,341
Auditors remuneration 318 302
Legal and professional fees 1,465 712
Self-employed clinical specialists 34,973 27,506
Other direct costs 2,276 1,215
IT related costs 3,512 2,009
Travel and accommodation costs 582 212
Other non-underlying items (see note 6) 571 49
Other expenses 2,440 4,396
Total cost of sales and operating expenses 68,524 53,375
The breakdown by nature of cost of sales and operating expenses is as follows:
6 Non-underlying items
2022 2021
£000 £000
Amortisation of acquired intangible assets 2,397 2,225
Foreign exchange gain on contingent consideration 14 (173)
Acquisition costs incurred 5 173
Share based payment charge 1,698 682
Social security costs on share based payment charge 92 78
Group restructuring costs 74 -
Depreciation adjustment to align to group accounting policies 173 -
New service development costs 132 -
Implementation of accounting software 254 -
One-off Legal and professional fees 349 555
Total non-underlying costs included within operating expenses 5,188 3,540
FX on acquisition related loans (1,138) -
Fair value adjustment on contingent consideration 213 593
Total non-underlying costs before tax 4,263 4,133
Income tax (755) (207)
Total non-underlying items after taxation 3,508 3,926
Major components of tax expense: 2022 2021
£000 £000
Current tax:
UK current tax expense 1,733 1,860
Adjustments in respect of prior years (52) (24)
Foreign current tax expense 423 331
Total current tax 2,104 2,167
Deferred tax:
Originations and reversal of temporary differences (531) (594)
Adjustments in respect of prior years (154) 13
Effect of rate change 22 286
Total deferred tax (663) (295)
Tax expense on ordinary activities 1,441 1,872
7 Tax expense
Reconciliation of tax expense:
UK corporation tax is assessed on the profit on ordinary activities for the
year and is the same as (2021: same as) the standard rate of corporation tax
is as follows:
· UK
19% (2021: 19%).
·
Ireland
12.5% (2021: 12.5%)
· USA (Federal & state) 25.54%
(2021: 26.7%)
Changes to UK corporation tax rates were substantively enacted by the Finance
Bill 2021 on 24 May 2021. These included an increase of the corporation tax
rate to 25% from 1 April 2023. As this change was substantively enacted at the
balance sheet date, deferred tax is recognised at a rate of 25% in the current
year (2021: 25%).
The charge for the year can be reconciled to the loss per the income statement
as follows:
Reconciliation of effective tax rate: 2022 2021
£000 £000
Profit on ordinary activities before tax 8,641 7,339
Income tax using the Company's domestic tax rate 19% (2021: 19%) 1,642 1,394
Effect of:
Expenses not deductible for tax purposes 19 297
Share based payments 85 -
Prior year adjustment - current and deferred tax (206) (11)
Effect of tax rate change - deferred tax 3 286
Deferred tax not recognised (1) (41)
Impact of difference in overseas tax rates (135) (53)
Other 34 -
Total tax charge for period 1,441 1,872
8 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. 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.
2022 2021
£000 £000
Profit for the year attributable to ordinary shareholders 7,200 5,467
Effects of non-underlying items net of tax (see note 6) 3,508 3,926
Underlying profit for the period attributable to ordinary shareholders 10,708 9,393
Weighted average number of ordinary shares 122,431,211 119,912,604
Dilutive effect of share options 1,169,542 1,656,675
Diluted weighted average number of ordinary shares 123,600,753 121,569,279
Basic profit per ordinary share (pence) 5.88p 4.56p
Diluted profit per ordinary share (pence) 5.83p 4.50p
Underlying basic profit per ordinary share (pence) 8.75p 7.83p
Underlying diluted profit per ordinary share (pence) 8.66p 7.73p
As at 31 December 2022 the directors assessed the potentially dilutive effect
of contingently issuable shares, which comprise share options awarded under
the Performance Share Plan (PSP), options under the Restricted Stock Unit Plan
(RSU), options under the Deferred Bonus Plan (DBP), options under the Company
Share Option Plan (CSOP) and options under the Save as You Earn plan (SAYE).
As at the end of the year there were 7,002,542 (2021: 5,841,660) options
outstanding of which 1,169,542 (2021: 1,656,675) were considered dilutive. The
calculation of diluted earnings per share above takes into consideration the
Group's performance against the targets within the Performance Share Plan to
31 December 2022.
9 Dividends
2022 2021 2022 2021
pence per share pence £000 £000
per share
Interim 2022 dividend paid (2021 interim dividend) 0.93 0.89 1,138 1,088
Final 2021 dividend paid (2020 final dividend) 1.79 1.7 2,190 2,079
3,328 3,167
A final dividend for 2022 of £2.3m (1.88p per share) is proposed by the
Directors and will be paid on 21 July 2023 to shareholders on the register as
at 23 June 2023.
During the year ended 31 December 2022, dividends totalling £56k (2021:
£51k) were paid to persons discharging management responsibilities including
Directors.
10 Goodwill
UK(1) Ireland(2) USA(3) Total
£000 £000 £000 £000
Cost
At 31 December 2020 15,948 7,525 - 23,473
Additions(3) - - 6,817 6,817
Foreign exchange - (76) 143 67
At 31 December 2021 15,948 7,449 6,960 30,357
Foreign exchange - (47) 807 760
At 31 December 2022 15,948 7,402 7,767 31,117
1. UK Cash Generating Unit - acquisition of Medica Reporting Limited in 2013
2. Ireland Cash Generating Units - acquisition of Global Diagnostics Ireland
and Medica Vision Ireland in November 2020. Goodwill split £5,721k and
£1,681k respectively.
3. US Cash Generating Unit - acquisition of RadMD LLC in March 2021
Goodwill is not amortised but tested annually for impairment. Consistent with
the prior year, a bottom up valuation methodology was employed using a
discounted cash flow (DCF) approach based on the future expected cashflows of
each identified CGU based on the smallest identifiable unit where separate
cashflows could be identified.
The CGUs were as follows:
· The UK trading business representing UK tele-radiology
· Medical Diagnostics Ireland (MDI) representing tele-radiology and
managed services
· Medical Vision Ireland (MV) being the unit managing the Irish
diabetic retinopathy screening contract
· The US business covering imaging core lab services
(tele-radiology) to pharma and CRO clients (RAD)
The recoverable amount of each CGU mentioned above was based on value in use
which was calculated using DCF methodology with the following key inputs:
· Country and sector specific WACC of 12.3% (MRL), 12.4% (MDI and
MVI),15.3% (RAD) which was determined to represent the best input for each CGU
individually.
· Baseline forecasts for FY 2023 based on the Board approved
budget.
· Additional forecasts to FY 2026 based on the board approved long
range plan
· Managements key assumptions in the forecasts which have been
derived from past experience, market data and management's expectations of
future growth rates in the business are:
Revenue drivers
o For all CGU's: Expected contract renewals, expected pricing changes and
potential contract wins and losses
o For MRL, Underlying growth in demand for both elective and out of hours
services to tackle the material backlog in diagnostic procedures together with
anticipated growth in radiologist capacity.
o For MDI: Anticipated growth in contracted base, particularly focused on
growth in NightHawk type CT on call contracts
o For MVI: Based on the renewal terms proposed with the National Screening
Service in Ireland pending contract renewal.
o For RAD: Continued growth in clinical trials and imaging reporting
requirements associated with such trials based on the existing orderbook and
pipeline
Cost drivers
o Inflationary impact on operating costs including employee costs together
with the annualised impact of prior year headcount changes for FY 2023
· Terminal Value calculated using EV/EBITDA Multiples at exit based
on multiples for each CGU at entry for MDI, MVI and RAD and based on an
assessment of comparator companies in respect of MRL.
The recoverable amount of each CGU is then compared to the carrying amount of
each CGU, including goodwill and acquired intangible assets allocated to each
unit to consider indication of impairment. There is sufficient headroom in all
CGU's therefore no indicators of impairment have been identified.
The estimate of the recoverable amount for Medica Vision Ireland is dependent
on the successful retender for the diabetic retinopathy screening contract
which is currently expected in quarter two of 2023. If the contract was lost
or the outcome of the re-tender was a material reduction in overall value
there would be an impairment of up to £1,681k to goodwill and £2,958k to
intangible assets.
Management is not currently aware of any other reasonably possible changes to
key assumptions that would cause the carrying amount of any of CGUs to exceed
their recoverable amounts
11 Intangible assets
Customer Software Brand Total
relationships and £000 £000
£000 technology
£000
Cost
At 31 December 2020 17,169 6,647 2,317 26,133
Additions - 763 - 763
Disposals - (97) - (97)
Acquisitions through business combinations 6,612 - 699 7,311
Foreign exchange 29 - 15 44
At 31 December 2021 23,810 7,313 3,031 34,154
Additions - 1,138 - 1,138
Disposals - (1,792) - (1,792)
Acquisitions through business combinations - - - -
Foreign exchange 667 - 78 745
At 31 December 2022 24,477 6,659 3,109 34,245
Amortisation
At 31 December 2020 3,445 4,652 886 8,983
Charge for the year 1,752 914 150 2,816
Eliminated in respect of disposals - (42) - (42)
Foreign exchange (2) - - (2)
At 31 December 2021 5,195 5,524 1,036 11,755
Charge for the year 1,910 919 162 2,991
Eliminated in respect of disposals - (1,786) - (1,786)
Foreign exchange 93 - 7 100
At 31 December 2022 7,198 4,657 1,205 13,060
Net book value
At 31 December 2022 17,279 2,002 1,904 21,185
At 31 December 2021 18,615 1,789 1,995 22,399
At 31 December 2020 13,724 1,995 1,431 17,150
At 31 December 2022 £256,000 (2021: £493,000) of development costs have been
capitalised as internally generated software and technology intangibles. These
have not been shown separately as they are not deemed to be material.
12 Property, plant and equipment
Leasehold property - right of use Leasehold Computer Medical equipment Total
asset improvements equipment £000 £000
£000 £000 £000
Cost
At 31 December 2020 1,053 43 8,022 1,150 10,268
Additions - business combinations 185 - 96 - 281
Additions - separately acquired 543 - 1,286 74 1,903
Disposals - - (68) - (68)
Foreign exchange (34) (3) (23) (75) (135)
At 31 December 2021 1,747 40 9,313 1,149 12,249
Additions - separately acquired 237 - 1,759 35 2,031
Disposals (505) - (76) - (581)
Foreign exchange 47 3 49 61 160
At 31 December 2022 1,526 43 11,045 1,245 13,859
Depreciation and impairment
At 31 December 2020 488 40 4,759 835 6,122
Additions - business combinations - - 96 - 96
Charge for the year 291 1 1,200 180 1,672
Disposals - - (65) - (65)
Foreign exchange (19) (3) (16) (59) (97)
At 31 December 2021 760 38 5,974 956 7,728
Charge for the year 284 1 1,562 73 1,920
Disposals (366) - (53) - (419)
Foreign exchange 10 2 33 54 99
At 31 December 2022 688 41 7,516 1,083 9,328
Net book value
At 31 December 2022 838 2 3,529 162 4,531
At 31 December 2021 987 2 3,339 193 4,521
At 31 December 2020 565 3 3,263 315 4,146
All depreciation charges are included within administrative expenses in the
consolidated statement of comprehensive income.
Property, plant and equipment (continued)
2022 2021
£000 £000
Carrying amount of right-of-use assets included within:
Leasehold property 838 987
Medical equipment 97 96
Carrying value at 31 December 935 1,083
13 Contingent consideration
Global Diagnostics Ireland Limited RadMD LLC
£000 £000
Total
£000
As at 1 January 2021 3,531 - 3,531
Acquired on acquisition - 2,924 2,924
Fair value adjustment (71) 664 593
Foreign exchange (230) 70 (160)
As at 31 December 2021 3,230 3,658 6,888
Fair value adjustment 91 122 213
Amounts paid (1,843) (4,051) (5,894)
Foreign exchange 72 271 343
As at 31 December 2022 1,550 - 1,550
Amounts due in less than one year 1,550 - 1,550
Amounts due in more than one year - - -
Global Diagnostics Ireland Limited
Contingent consideration reduced by £1,680k during the period mainly driven
by payments of £1,673k and £170k on commencement of a new contract and
extension of the NSS contract respectively. Transaction bonuses of £23k and
legal costs of £18k were offset against these payments.
The balance increased by a £91k fair value movement in relation to the
unwinding of the time value of money and £72k relating to foreign exchange
revaluation from Euros to GBP. £42k of the foreign exchange arises on
consolidation of the Global Diagnostics Ireland and been recognised in the
foreign exchange reserve.
During the last quarter of 2022 the NSS retendered the contract held by MVI
with the decision expected in quarter two of 2023. Due to the delay in the
tender process the contract was extended for a further three months. No
changes in the fair value estimate of contingent consideration were made
following Management's reviewed of the probability weighted expected future
values under the various possible outcome of the future contract events.
The balance on 31 December 2022 of £1,550k is disclosed under current
liabilities on the statement of financial position. £176k of this was paid in
January 2023 and the remaining balance is payable in the first half of 2023.
During the prior year, the NSS extended a contract held by MVI by a further 12
months and confirmed the retender of the contract in 2022 triggering a review
of the probability weighted expected future values under the various possible
outcome of the future contract events. This resulted in a decrease of £147k
in the fair value estimate of contingent consideration. This was offset by an
increase of £76k due to the fair value movement in relation to the unwinding
of the time value of money. Other movements related to a decrease in the
liability relating to foreign exchange revaluation from Euros to GBP of
£230k.
RadMD LLC
Contingent consideration reduced by £3,658k during the period mainly driven
by a payment of £4,051k relating to the finalisation of the earnout based on
adjusted 2021 EBITDA. £75k of completion adjustments were offset against this
in the amount paid amount to the vendors. Contingent consideration increased
for fair value movements of £122k and £271k due to foreign exchange
revaluation from USD to GBP which has been recognised in the foreign exchange
reserve.
Fair value movements consist of an increase of £145k due to a higher adjusted
2021 EBITDA than originally estimated resulting in a higher payment of
contingent consideration. As the events occurred after the acquisition date a
charge has been recognised in the income statement and not taken to goodwill.
There was also a fair value decrease of £223k relating to the 2022 earnout
for which the target 2022 EBITDA was not achieved and is not payable. The
balance also increased by £200k due to the fair value movement in relation to
the unwinding of the time value of money.
In the prior year there was an increase in the fair value estimate of
contingent consideration of £664k. £217k of this was due to a higher
expected adjusted 2021 EBITDA than originally estimated resulting in a
higher-than-expected payment subject to agreement with the vendors. £185k
related to a change in the SPA resulting in additional contingent
consideration based on 2022 EBITDA. £262k of the movement related to the fair
value movement for unwinding of the time value of money. As the events
occurred after the acquisition date a charge was recognised in the income
statement and not taken to goodwill. Other movements included an increase in
the liability relating to foreign exchange revaluation from USD to GBP of
£70k recognised in the foreign exchange reserve.
14 Equity
At 31 December 2022 At 31 December 2021
£000 £000
122,433,635 (2021: 122,428,836) ordinary shares of £0.002 each 245 245
Total ordinary share capital of the Company 245 245
Ordinary share capital issued and fully paid
Issue of share capital during the year
The below shares were issued on the exercise of SAYE options:
On 1 July 2022, 3,999 ordinary shares of 0.2p each were issued for cash at par
value.
On 15 July 2022, 800 ordinary shares of 0.2p each were issued for cash at par
value.
Rights attributable to issued shares
Any profits which the Company determines to distribute in any financial year
shall be paid on the ordinary shares. Every holder of an ordinary share and
ordinary share is entitled to one vote and has one vote for every share for
which they are a holder.
On a return of capital on liquidation, capital reduction or otherwise, the
surplus assets of the Company remaining after the payment of its liabilities
shall be applied in distributing the balance of such assets amongst the
holders of the ordinary shares.
Voting rights
The holders of ordinary shares are entitled to receive notice of and attend
and vote at any general meeting of the Company.
Share premium
£6K was recognised in share premium on the issue on ordinary shares for the
exercise of SAYE options.
Retained profit
Retained earnings include current and prior period retained profit and losses
and the cumulative amount of exchange differences recognised through other
comprehensive income.
15 Reconciliation of non-IFRS financial KPIs
The Group uses several key performance indicators to monitor the performance
of its business. This note reconciles these key performance indicators to
individual lines in the financial information.
In the directors' view it is important to consider the underlying performance
of the business during the year. Therefore, the directors have used certain
Alternative Performance Measures (APMs) which are not IFRS-compliant metrics.
The APMs are consistent with those established within the IPO prospectus and
the prior year annual report. It is the directors' intention to monitor and
reassess the appropriateness of the APMs in future years.
At 31 December 2022 At 31 December 2021
£000
£000
Reconciliation of underlying operating profit
Operating profit before non-underlying costs 8,455 8,538
Adjustments for:
Effects of amortisation of acquired intangibles 2,397 2,225
Effects of shared based payments 1,698 682
Social security costs on share based payment charge 92 78
Foreign exchange adjustment on contingent consideration 14 (173)
Acquisition costs incurred 5 173
Group restructuring costs 74 -
Depreciation adjustment to align to group accounting policies 173 -
New service development costs 132 -
Implementation of accounting software 254 -
One-off legal and professional fees 349 555
Underlying operating profit 13,643 12,078
Underlying operating profit margin 17.7% 19.5%
Reconciliation of underlying profit before tax
Profit for the year 7,200 5,467
Adjustments for:
Non-underlying profits or losses net of tax (see note 6) 3,508 3,926
Underlying profit after tax 10,708 9,393
Income tax charge on underlying expenses 2,196 2,079
Underlying profit before tax 12,904 11,472
Reconciliation of net debt
Cash and equivalents 11,004 9,616
Borrowings due within one year (4,516) (5,739)
Borrowings due after one year (5,702) -
Net cash / (debt) 786 3,877
16 Post balance sheet events
On 5th January 2023, the Company issued and allotted 200,000 shares of 0.2
pence each in the capital of the Company to the trustee of the Company's
Employee Benefit Trust and these shares will be used to satisfy future awards
and options vesting in the Medica Group PLC Performance Share Plan 2017.
Following Admission, the Company had 122,633,635 ordinary shares in issue.
On 27 January 2023, RadMD LLC, a Delaware limited liability company that is a
subsidiary of the Company, acquired the assets of VoxelMetrics LLC, a North
Carolina Limited Liability company engaged in the management of radiology
readers for clinical trials. The acquisition expands the network of radiology
readers across the US, further increasing reporting capacity to support our
clients. The initial consideration paid for the assets of VoxelMetrics LLC was
$2.6m. At the date the financial statements were authorised for issue, all
information in respect of the acquisition was not available and therefore
disclosures required under IFRS 3 will be made in subsequent financial
statements.
On 3 February 2023, the Company acquired the entire issued share capital of
JCA Seminars Limited, an international radiologist training company based in
the UK. This acquisition diversifies the offering to our customers whilst
increasing the value of the service offered. The initial consideration paid
was £1.4m. At the date the financial statements were authorised for issue,
all information in respect of the acquisition was not available and therefore
disclosures required under IFRS 3 will be made in subsequent financial
statements.
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