Trading update for FY22 and outlook for FY23
17/01/2023 07:00
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RNS Number : 9008M Medica Group PLC 17 January 2023
Medica Group Plc
Trading update for FY22 and outlook for FY23
Performance in-line with expectations underpinned by continued growth in acute
services, Ireland and the US, alongside strong recovery in UK elective revenue
Medica Group Plc (LSE: MGP, "Medica", the "Company" or the "Group"), an
international provider of high-quality telemedicine services, announces an
unaudited trading update for the full-year ended 31 December 2022, as well as
its outlook for 2023.
Trading update
Medica had a strong performance for the second half of the year across the
Group, driven in particular by UK Elective revenues returning to expected
levels due to a strong recovery in radiologist reporting capacity from
September onwards. Overall, Group revenue of £77.0 million for the
twelve-month period ending 31 December 2022 was in-line with market
expectations and represents an increase of 24% over 2021. Gross margins also
remained resilient at 48%. Given the strong performance of the business since
the summer, underlying operating profit for 2022 is expected to be in line
with market expectations.
Cash generation from the business remained strong and after accounting for
continued investment in its technology platforms, an increase in the interim
dividend, and payment of deferred consideration during the year, Medica had
£0.5 million of net cash¹ at 31 December 2022.
UK
UK revenue increased by 15% to £54.0 million in FY22. The UK business
experienced significant growth in acute services driven by contract renewals,
net new contract wins and the extension of service agreements. As a core
partner, Medica continues to work closely with NHS customers on managing the
current exceptional patient demand.
NightHawk services have delivered expected revenue of £33.3 million,
representing an increase of 12% over the same period last year. In H221 and
during FY22, over 65% of our Nighthawk contract portfolio has been
successfully renewed with the balance expected to renew in future years. As
the average NightHawk contract length is 3-5 years, this high renewal rate,
coupled with a positive contribution from new contracts commenced during the
year, underpins future revenue growth. In September, Medica reported a
temporary shortfall in reporting capacity due to several factors, including
radiologists taking accrued annual leave from the pandemic, particularly
during the summer, which impacted Elective revenue. Despite the impact of
radiologist availability during part of the year, overall Elective revenue for
FY22 was £20.7 million, an increase of 20% compared to the prior year.
Medica continued to recruit additional radiologist capacity, particularly
after the summer, resulting in an overall 16% increase in rostered reporting
hours (our measure of capacity) which compared favourably to a 5% increase in
the prior year.
Ireland
Medica Ireland performed strongly throughout 2022 with revenue increasing by
30% to £12.6 million, exceeding management's expectations. As reported
previously, this was driven by a combination of an increased number of scan
and reporting contracts in ultrasound and x-ray plain film, as well as a
significant increase in the number of new out-of-hours teleradiology hospital
clients. The Medica Vision diabetic retinopathy screening service also
performed ahead of expectations.
US
As expected, RadMD, our US business, reported a strong second-half, delivering
£10.4 million in its first full-year post-acquisition. The US business starts
2023 with good coverage of FY23 revenue, driven by a number of significant
contract wins with new pharmaceutical and biotech companies that will convert
to revenue in 2023 and subsequent years.
Technology platforms
As previously reported in February 2022, we successfully introduced our new
Picture Archive and Communications ("PACS") platform in the UK and, since
then, we have continued to invest in our FutureTech programme to drive
longer-term benefits in productivity and reporter experience. In addition,
during the year we invested in developing proprietary technology to support
the transfer and upload of clinical trial images.
Outlook
Medica continues to be well-positioned to deliver on its stated growth and
financial metrics, as outlined in September 2021. As 2023 commences, national
health systems remain focused on efforts to clear patient backlogs which will
require more capacity to report images and it is unlikely that the pressures
on urgent hospital admissions will diminish in the short term.
The focus of Medica in the UK this year remains to increase rostered reporting
hours by onboarding more radiologists, particularly those working outside the
UK. In addition, we will continue to improve the reporting experience and
productivity of those already in our network through our FutureTech programme.
These initiatives will simultaneously support client demand by delivering an
enhanced reporting system and by expanding the reach of our recruitment of
specialist radiologists in the UK and overseas.
Medica is also well-positioned in Ireland to support the HSE to perform and
report an increasing number of ultrasound and plain film x-ray exams as part
of national efforts to reduce pandemic backlogs. Similarly, the business
expects to continue to increase both the number of new out-of-hours reporting
contracts, as well as the hours of provision for existing customers.
Since its acquisition in early 2021, RadMD has demonstrated significant
revenue growth, and the pipeline and orderbook are now more diversified,
including significant new pharmaceutical and biotech companies. These new
clients are expected to drive growth in 2023 at similar levels to 2022. With a
strengthened leadership team and ongoing support from the founders, RadMD will
continue to invest in new systems to improve the transfer and management of
clinical trial images, as well as deepen relationships with new clients.
In addition, Medica continues to evaluate strategic acquisition opportunities
to expand the scale and therapeutic focus of its clinical trials business, as
well as to accelerate wider growth and differentiation of our business.
Finally, Medica will continue to focus on new areas of organic growth,
including wider telemedicine services such as remote digital pathology
reporting, as well as expanding our international reach and network of
radiologists.
Dr. Stuart Quin, Chief Executive Officer of Medica, commented:
"We are pleased to report a strong performance in the second half of 2022,
driving results in-line with expectations. In particular, UK Elective revenue
returned to expected levels due to a strong recovery in radiologist reporting
capacity from September onwards. This, combined with a significant number of
successful tenders and renewals across the business, means we enter 2023
well-positioned to continue to deliver against our growth strategy.
"We are working closely with our NHS and HSE clients in the UK and Ireland
respectively, to help them manage the ongoing demands for reporting services
resulting from the significant pressure on both acute and elective radiology
services. To achieve this, we are continuing efforts to expand our network of
reporters working 24/7 in the UK, Ireland and, increasingly, overseas. In
addition, the investment in our technology will enable enhanced functionality
and improve the productivity of our international network of reporters. We
also continue to see strong growth in our US clinical trials business, driven
by a strong and increasingly diversified orderbook and pipeline.
"Finally, we maintain our focus on diversifying our services into new areas of
telemedicine and generating scale advantages, particularly in our clinical
trials business, through M&A and partnerships. I look forward to
continuing to grow the business and remain confident in Medica's
market-leading position in telemedicine."
(1) Net cash is a non-IFRS measure and is calculated by subtracting bank
borrowings from cash and cash equivalents.
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/)
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