Induction Healthcare Group PLC

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

Unaudited Interim Results

for the six months ended 30 September 2021

Induction Healthcare (AIM: INHC), a leading flexible care company, announces its unaudited interim results for the six months ended 30 September 2021, a period of substantial revenue growth driven by the Company's buy-and-build strategy and the ongoing digital transformation of healthcare systems worldwide.

Induction provides innovative technology solutions for providers across the secondary and community healthcare markets to enhance communications and connectivity for staff and patients while ensuring the highest standards of clinical safety and information security. Post-period end, Induction solutions have been contracted in other public sector environments, further diversifying the Company's revenue base.

Outlook

·    Inline with market expectations on revenue for FY22

·    Expect to be ahead of market expectations for adjusted EBITDA, reaching an adjusted EBITDA breakeven position for the full year ending March 2022 (FY21 : adjusted EBITDA loss £4.8m)

Financial Highlights

·    Acquisition of Attend Anywhere Pty Ltd ("Induction Attend Anywhere") in June

·    Revenues of £4.6m (H1 FY21: £582K)

-      Strong organic growth across all products

-      Induction Attend Anywhere revenues of £3.6m (since acquisition 9 June 2021)

-      Induction Zesty revenue £617K (H1 FY21: £306K)

-      Induction Guidance revenue £322K (H1 FY21: £274K)

·    Adjusted LBITDA of £0.7m (H1 FY21: £2.4m) ("Operating loss before highlighted items")

·    929% Increase in annual recurring revenue ("ARR") to £14.4m (H1 FY21: £1.4m)

·    Cash position at 30 September of £12.8m (H1 FY21: £5.0m)

-      Successful £25.0m fundraise completed in June

Operational Highlights

·    Three hospitals in South East England selected Induction Zesty to deliver digital patient portals in contracts with a total value of £440K

·    Induction Zesty selected as preferred supplier to South West London integrated care system ("ICS"), one of the first ICS led procurements for digital patient services in England

·    Renewed contract for Induction Attend Anywhere with NHS Wales worth £1.64m ARR, an increase of £400K on the prior year

·    Continued strengthening of the senior management team

-      Appointment of James Balmain as sole CEO (previously joint CEO with Hugo Stephenson)

-      Appointment of Dave Williams as Chief Technology Officer (in September 2021)

-      Appointment of Guy Mitchell as Chief Financial Officer (in November 2021)

Post-period end Highlights

·    Signed first non-healthcare contract with the Department for Work and Pensions ("DWP"), in November 2021, which will deliver up to £1.3m in ARR over a potential 4 year term

·    £6.8m contracted revenue already secured for the final six months of FY22
 

James Balmain, CEO of Induction, said: "We are delighted to have reported such strong revenue growth, alongside a significant improvement in our underlying profitability. We've seen strong user growth across our range of products and are continuing to integrate and reduce costs at Attend Anywhere which we bought after a successful fundraising in June. We've delivered a record level of ARR at the period end which puts us on track to exceed market expectations for EBITDA in FY22.

"A key focus for the Group is the renewal of Induction Attend Anywhere contracts in England. The majority of these are one year contracts expiring in March 2022. We currently expect to renew a very high proportion of all existing Induction Attend Anywhere contracts in England, and with many for a longer term of two years or more, although likely at a slightly lower contract value than under the previous one year terms.

"We continue to build our management team, welcoming Dave Williams as group CTO and Guy Mitchell as Chief Financial Officer. Their knowledge and expertise will enhance our business greatly going forward."

Analyst Briefing

A briefing for equity analysts will take place today at 09:30 GMT. For further details analysts should email induction@walbrookpr.com or call +44 (0)20 7933 8780.

Investor Briefing

James Balmain, Chief Executive Officer and Guy Mitchell, Chief Financial Officer will be hosting a live online presentation relating to the interim results via the Investor Meet Company platform at 15:00 GMT today. The presentation is open to all existing and potential shareholders.

Investors can sign up to Investor Meet Company free and register for the presentation here:

https://www.investormeetcompany.com/induction-healthcare-group-plc/register-investor 

A recording of the presentation, a PDF of the slides used, and responses to the Q&A session will be available on the Investor Meet Company platform and the Company's investor website afterwards.

ENQUIRIES

About Induction -  www.inductionhealthcare.com

Induction (AIM: INHC) is a leading flexible care platform driving digital transformation of healthcare systems worldwide. Induction solutions enhance the investments hospitals have made and lay the foundation for their future. Our products can enable information sharing between busy doctors, alleviate operational burdens on hospitals or put patients in better control of their care, all while ensuring the highest standards of clinical safety and information security. We unchain staff and patients from the limitations of paper-based and desktop systems, creating substantial time and cost efficiencies.

More than 225,000 hospital doctors across multiple territories, including the UK, Ireland, Australia and South Africa, as well as a rapidly growing number of more than 300,000 UK patients, choose Induction solutions.

Induction Switch is the number one healthcare collaboration app in the UK, used by the majority of hospital doctors within the NHS. The app helps to increase productivity and enhance communication by securely sharing phone numbers and bleeps, bookmarks, documents and messages in a clinical setting.

Induction Guidance provides medical organisations, including most hospital trusts within the NHS, with the ability to collaboratively create, edit, and publish their own local medical guidelines in a secure and locally administrated environment. This increases knowledge of, and adherence to, guidance.

Induction Zesty is a market-leading digital platform for patients visiting hospitals. The platform allows patients to book and access their appointments, read their clinical letters, store a copy of their clinical record and provide data to their care teams remotely. It is not just a compelling patient experience, but also delivers significant cost benefits to hospitals.

Induction Attend Anywhere is the UK market leader in secondary care video consultations. It helps hospitals, health systems and other customers offer video consultations to patients and service users as a normal part of day-to-day clinical activity. Our vision is for video consultations to improve lives and help address social, access, equity and sustainability challenges by allowing healthcare providers to determine how and when they see a patient based on each individual case: in-person, via video or on the telephone.

Induction HealthStream is a proprietary data integration platform that reads and writes patient demographic, appointment and clinical record data between a growing number of hospital EHR systems and the Induction platforms. This connectivity between stakeholders and legacy IT systems adds substantial value to pre-existing health IT investment and allows large-scale adoption of Induction app-based services.

CEO REVIEW

Overview

On the heels of a successful fund raise of £25 million and the acquisition of Induction Attend Anywhere in June, Induction has experienced a transformational leap in ARR. This puts the Company firmly on the path towards an adjusted EBITDA breakeven position and cash generation before the end of FY23. As health systems around the world engage in their post-pandemic recovery, digital platforms are playing a vital role and with Induction Attend Anywhere, Induction is operating at scale on the ground floor of this opportunity.

Our vision of a 'flexible care' platform - comprising a comprehensive and integrated suite of telehealth applications - is rapidly becoming reality, allowing health providers to capture data from patients remotely, provide video consultations at scale, empower patients to self-manage their hospital appointments, and distribute information to patients quickly and cost effectively. As the NHS focuses on elective recovery, Induction's tried and tested technologies come into their own.

The Induction Attend Anywhere platform was nationally contracted in multiple markets before the outbreak of COVID19, however the pandemic has acted as a 'super-catalyst' to adoption, leading to delivery of more than 4.5 million secondary care video consultations, covering more than 2,031,009 hours of care.

A recent report by Edge Health, commissioned by NHS England and NHS Improvement, found outpatient appointments delivered via video, using the Induction Attend Anywhere platform, saved 4.64 million hours in patient travel and wait times and £40 million in patient travel costs and parking charges over the course of a year. Induction Attend Anywhere is now the embedded system of choice across the British Isles, creating a compelling case for upsell with our other Induction applications.

In the English market, where the focus lies on the formation of Integrated Care Systems ("ICS"), Induction is strongly positioned in this evolving landscape, having achieved preferred supplier status with the South West London ICS for the Induction Zesty platform, alongside our partner the Cerner Corporation, with whom we have a value-added reseller agreement.

NHS Wales renewed their contract with Induction Attend Anywhere in June, increasing the annual value from £1.2 million to £1.6 million. More recently, Induction won a landmark contract with the Department of Work and Pensions, who will use Induction Attend Anywhere to selectively virtualise the English benefits system. This is the first step to expanding Group revenue generation beyond the NHS while taking our offer beyond secondary care.

Users continue to engage with the Company's other digital health tools with another period of record user growth, up 68% year on year, with growth to more than 250,000 clinical users on Induction Switch and 360,000 registered patients on Induction Zesty. There continues to be significant user interest in interoperability between Induction applications, creating an opportunity for cross-selling within our existing client base, as well as expanding the Company's presence outside the UK's secondary care market.

Financial Review

For the period ended 30 September 2021, reported revenues increased in line with management expectations to £4.59 million (H1 FY21: £582K).

Reported revenue from Induction Guidance grew to £322K (H1 FY21: £274K) in its first full period post-acquisition. Induction Zesty revenue more than doubled to £617K (H1 FY21: £306K), reflecting the contracts signed with three South East England hospitals worth £440K.

Induction Attend Anywhere delivered a total of £10.4 million in revenue and £4.5 million in EBITDA in the full year to 30 June 2021. £3.6 million of revenue was delivered from the date of its acquisition.

Induction Switch is in strong demand from its users but struggled to monetise during the COVID19 pandemic. In the six months to September 2021, Switch delivered £16K of revenues. Whilst the Board continues to focus the majority of the Company's attention on more immediately valuable revenue streams, monetisation efforts are currently underway within the English secondary care market.

At the period end, the Group was reporting £14.4 million of annual recurring revenue, up 929% year-on-year. Recurring revenue for the period accounted for 95% of the total revenue.

Costs have unsurprisingly increased alongside the enlarged customer base, but management are working hard to keep administrative expenses in check while directing expenditure into the continued growth of the business. Development expenses rose to £2.71 million in the period (H1 FY21: £990K). As a result of the higher expenditure following the acquisition of Induction Attend Anywhere, operating losses rose to £5.59 million (H1 FY21: £3.19 million). The adjusted loss before tax for the Group was £2.3 million (H1 FY21:  £2.9 million). The adjustments relate to the unwinding of acquisition date fair value adjustments to the contract liabilities of Induction Attend Anywhere (made as part of the purchase price allocation calculations) of £1.7 million (H1 FY21: nil); and acquisition costs of £1.6 million (H1 FY21: £0.3 million). The Group also capitalised software development expenditure of £1.2 million (H1 FY21: £0.7 million) during the period.

The Group ended the first half of FY22 in a strong cash position with £12.8 million on the balance sheet.

Board Committees

Andy Williams, non-executive Director, is joining each of the Group's board committees (Audit, Remuneration and Nomination) with immediate effect and will chair the Nomination Committee.

Outlook

When the Group joined AIM in May 2019, management set out its intention to deliver care more effectively through a portfolio of digital applications brought together through a buy-and-build strategy. At the time, the Group had 76,000 registered users, predominately in the UK, and no revenues. In less than two years, strategic acquisitions and investment in organic growth have resulted in a Group with four key digital applications providing healthcare connectivity and communications in multiple geographies.

Induction ended the first half of the year with £11.4 million of contracted revenue for the full year FY22. Since the period end, the Group has added its first non-healthcare contract with the DWP. This contract is worth up to £2.6 million to the Group for the initial two years. There is also the potential to deliver up to £5.2 million, in aggregate, if the contract is extended across four years. The scope for further public sector contracts outside of the healthcare space is an exciting new potential area of revenue growth.

A key focus for the Group is the renewal of Induction Attend Anywhere contracts in England. The majority of these are one year contracts expiring in March 2022. We currently expect to renew a very high proportion of all existing Induction Attend Anywhere contracts in England, and with many for a longer term of two years or more, although likely at a slightly lower contract value than under the previous one year terms.

With £12.8million of cash on the balance sheet at 30 September 2021, Induction is well placed to continue to deliver on its buy-and-build strategy while maintaining investment in its existing businesses to drive organic growth. The Group continues to have strong sales momentum, recurring revenues, and a pipeline of orders with multi-year contracts. The Board intends to maintain tight control of costs and is confident of exceeding market expectations on EBITDA for the year ending 31 March 2022.

The Board continues to be very positive about the Group's prospects for significant growth in the next 3-5 years as Induction expands its offering globally and beyond secondary care.

James Balmain

Chief Executive Officer