Final Results

CEO's statement

Established record to build on

In 2024, the Company set out to build the evidence base for its technologies and to unlock customer opportunities both within and outside the NHS. This has been delivered through sustained partnership with a key group of NHS customers in order to generate that evidence and an expansive programme of stakeholder engagement to build a national and international conversation around our technology.

In recognition of a change in NHS commissioning behaviors towards more regional-based procurement, the Company has sought to position its products to pursue larger regional and national contracts and has reflected the additional needs of regional commissioners in its product offering.

Today, in the NHS and other international health systems, there is a growing level of digital maturity within individual care providers, especially as they embrace electronic care records and other associated technologies. However there is very little capability to share digital information between providers, despite care becoming increasingly cross-provider with patients having to attend multiple care settings. The Company has invested in its products, guided by customer feedback, to hone the value proposition and increase its attractiveness to a wider customer audience. Key developments were released in v1.6 of Bleepa® during the year and include upgrades to its messaging and referral capabilities and the ability to display a dashboard of patient progress along care pathways which enables care navigators to better manage patient flow. These enhancements have enabled the Company to capture the attention of regional commissioners who have the added requirement to be able to coordinate care across multiple providers and therefore benefit from the ability to see patient progress across multiple pathways and provider sites.

During the period we were invited to provide evidence generated by our pilot with QVH in Sussex to the APPG for Diagnostics, a participation that raised our national profile and opened conversations with the NHSE CDC team, culminating in the award of central funding to support a series of pilot projects with different providers. Our pilot with QVH was extended during the period and has subsequently converted to a £495k annual contract post period end. Through these pilots we have demonstrated a 63% reduction in wait times compared to national targets and an 88% reduction in outpatient appointment requirements, which we estimate could save in the order of £295 per patient episode through a reduction in outpatient appointments. This is a strong evidence base of impact against the key system challenges currently facing the NHS - namely waitlists, staff shortages and finance. Our ability to demonstrate success is unlocking further national conversations and also generating interest from regional commissioners.

Outside of the NHS, the Company successfully secured an opportunity for its technology and pathway approach within the UK private sector in partnership with MIP. This paid pilot will seek to develop a pathway approach across screening and traditional private service models and is essentially a translation of our NHS approach into the private sector. The Company expects that this service will go live later this calendar year and will start to generate clinical impact data early in calendar year 2025. It is our intention to use this evidence both to secure a longer-term agreement with MIP but also to translate this into sales to other UK private providers.

In India we have seen increasing recognition of our products since being awarded our import license for Bleepa® as a medical device. During the period the Company was the recipient of a number of national awards including the Gold Award as the best Digital Solution for Rural Healthcare at the Integrated Health and Wellbeing (IHW) Council of India's Digital Health Awards 2024. This recognition has led to significant interest in Bleepa® and has already resulted in a number of pilot agreements across TB screening and hospital care settings, which we are currently in the process of setting up. The Company looks forward to delivering these pilots and converting these opportunities into contracts. In order to support the TB screening programme, we have further invested in Feedback Connect (re-branded from BleepaBox) to remove some of the manual steps in the image/clinical data upload, improving the user experience and automation of data transfer which will allow the TB screening to be delivered more quickly and at greater scale.

Following the theme of international opportunity, during the period the Company evaluated a series of technologies and partnerships which could augment the Bleepa® proposition and open new market opportunities. The Company announced a collaboration with Vertex In Healthcare post period end, a collaboration which leverages some of the Company's legacy Cadran technology to create a new, potential royalty revenue stream. In addition, this has enabled the incorporation of MedDream, an FDA-approved Image Viewer into Bleepa®, allowing the Company to move more rapidly into other international markets in the future, avoiding a number of the challenges experienced with launching a medical device in India. This partnership paves the way for new growth opportunities in international markets.

Business strategy

Due to the long sale cycle of our target customers and, in some cases, their shifting priorities and financial position, the business strategy has been to deliver a broad value proposition to multiple customer segments so that we are positioned to progress multiple sales channels simultaneously and, where necessary, pivot to capture emerging opportunities. The long sales cycle is offset by the long customer lifetime value of individual contracts, which typically renew annually for multiple years following the initial sale as demonstrated during the Period whereby the Company received renewals for the third year running from two of its early customers, additionally benefiting from enlarged values.

This strategy has served us well to date, initially allowing us to land early contracts for our technology in an inpatient setting as a WhatsApp replacement then enabling the Company to move rapidly to capture the emerging opportunity around CDCs and position itself as the preferred solution provider. The Company has pursued parallel and emerging markets to its core product capabilities rather than trying to break into established/traditional markets. Whilst this strategy does extend the sales cycle in some cases, and raises the bar for evidence required, it provides better long-term growth potential into uncontested markets, with the ability to establish a market leading position, healthier margins, and avoid unnecessary competition and the traditional race to the bottom on price that is seen widely across other sectors. In healthcare, this strategy is further supported by the fact that most incumbents enjoy a long contract term with healthcare customers making it very difficult to disrupt established companies within an established market, especially part way through an existing contract term.

The agility required to deliver this strategy has necessitated tight discipline within the team and continued development in our product capabilities to keep pace with the customer opportunity. In Bleepa®, CareLocker® and Feedback Connect, the Company has developed a wide toolkit of capabilities that allows it to address the needs of a wide range of customers. Feedback now has a value proposition to offer almost every part of the healthcare system.

The Company is well positioned for success with evidenced value propositions against the three key areas of challenge facing every healthcare system, namely:

1)   Staffing - Bleepa® enables existing staff to work more efficiently and flexibly; evidenced to deliver a 74% reduction in referral response time and an 89% reduction in outpatient appointment requirements.

2)   Waitlists - Bleepa® enables cross-provider care pathways that deliver a 63% reduction in wait times.

3)   Finance - Bleepa® saves on average, an estimated £295 per patient net of the costs of the platform.

Although felt at the individual provider level, these three pain points are more strongly reflected by regional and national commissioners and the Company's strategy is to pursue larger regional contracts where possible, due to the length of typical sales cycle and the potential upside of enlarged contract sizes. Our average contract size with an individual hospital trust is currently in the order of £120k - although future contracts are expected to be higher. Our target contract size for a CDC is currently in the order of £450k-£600k, which we achieved in the post period with our contract at QVH.

As outlined above, the strategy to maintain a diverse pool of opportunity extends to the UK private and international markets. Whilst these markets have similar needs, they also have important differences, most notably around regulation. In India, the Company took the decision to establish an in-country subsidiary and license its technology to this entity in order to protect its intellectual property and achieve regulatory approval to trade in India however, this approach may not be necessary in other markets due to developments to Bleepa® undertaken during the Period, that allow us to incorporate other technologies with pre-existing regulatory approval in key market areas such as the MedDream viewer, with integration achieved post period.

A key focus for the period was to raise the profile of the Company and its products with customers and wider stakeholders. This was achieved through a series of engagements to NHS stakeholders including speaking on a HSJ panel for diagnostics alongside the national head of the CDC programme and the national director for diagnostics and participating in a number of award programmes such as the Prix Galien award in the UK and the IHW award for Best Digital Solution for Rural Care in India.

Increasingly the Company is entering go-to-market partnerships either to enable us to pursue new international markets (collaboration with Vertex) or to co-create entirely new market opportunities (collaboration with a primary care solutions provider). These decisions are based on total addressable market, technological fit and customer footprint. Post period, the Company announced a collaboration agreement with Vertex, a specialist clinical IT firm with offices in the UK, UAE and South Africa, to combine key technologies and resell each other's products with a view to driving commercial opportunities in multiple markets. The collaboration enables the MedDream viewer to be incorporated into Bleepa®, so it can be sold directly to radiologists for primary diagnostic reporting services, strengthening our teleradiology offering and expanding the reach of the product to new territories such as the USA. In addition, Vertex will licence the database capabilities of Feedback's legacy picture archiving communication system Cadran PACS, now with the MedDream Viewer, which will allow it to build a PACS proposition that will initially be sold in South Africa and other international markets including the UK, where it sells PACS. This is another example of the Company's strategy to generate licencing royalties from its legacy products.

Post period events

The recent announcement that Diagnostic Enhanced Advice and Guidance ("DEAG") diversions achieved through the Bleepa® platform are now eligible for reimbursement under the ERF could be highly significant for the Company. As a result, any Integrated Care Board ("ICB") or hospital in England can now utilise this funding, by local agreement, to reimburse expenditure on the Bleepa® technology.

Based on the Company's existing programme at QVH, the Company believes that diversion away from outpatient appointments could be achieved in up to 90% of referrals using the DEAG approach, which would result in a significant revenue uplift for the participating ICB/Trust whilst simultaneously driving material efficiencies in service delivery and most importantly benefits for their patients. Based on expected patient volumes once fully rolled out the Company believes that an indicative ICB contract could generate over c. £2 million[2] per ICB per annum for Feedback under the ERF mechanism (assuming the ERF rolls forward on an un-capped basis annually). ERF currently runs until 31st March 2025 but the Company believes, following central conversations, that the funding may be renewed in subsequent financial years to continue to support waitlist reduction.

On 04 November 2024 the Company will announce a placing by way of an accelerated bookbuild with closing of the placing expected on the same day and a subscription of new ordinary shares, to raise approximately £5.2m (before expenses). In addition, on 04 November 2024 the Company will announce its intention to launch a retail offer to qualifying retail investors in the UK to raise a further up to £1.0m (before expenses). Subject to closing, the placing, subscription and retail offer is conditional on shareholder approval at the forthcoming Annual General Meeting. This funding will enable the Company to focus investment on sales, product development and provide additional working capital.

Post period we have also gone through a rebranding exercise and launched a new website to improve our messaging, product positioning and customer engagement. For shareholders who have not seen the new website please visit: www.feedbackmedical.com.

Operational review

Bleepa®

Bleepa® now accounts for 87% of revenue compared to 74% in the preceding year as the Company continued to move away from its legacy products. This is due to rising contract values with renewing customers such as the NCA and Royal Berkshire Hospital in Reading, building a growing base of ARR, in addition to new customer opportunities such as the CDC pilots at Amersham, BOB and NCA - Oldham which were nationally sponsored through to the end of the NHS financial year-end of 31^st March 2024. Bleepa® was installed at the sites during this initial pilot period term, however we expect that the sites will seek a second-stage pilot study to operationalise and put patients through the pathway. Once patient throughput is underway the Company expects these pilots to reinforce the evidence generated by QVH and build the business case for further expansion in collaboration with the national team. Post period, Feedback was awarded further funding by NCA - Oldham to extend the delivery of its pilot. This further funding is for £69,000 with an initial 50% paid from the NHSE H1 budget to 30 September 2024, with the balance expected from the NHSE H2 budget to continue the pilot to 31 March 2025.

The new features released in version 1.6 of Bleepa® have ignited interest from a wider group of customers, both domestically in the UK private sector with MIP but also in India where our digital screening solution has been taken up by the NGO Heal Foundation as a digital enabler of its CSR funded screening programmes. The dashboard view developed for v1.6 gives unprecedented visibility of patients across multiple care settings and journeys, information that is not currently available to providers; today some customers can see patient status within their organisation but they do not have the ability to track patient status across organisations, which appeals to both regional customers such as ICBs and also to organisations such as Heal Foundation which have to track patients across multiple screening programmes and geographies.

Building on the success to date and growing national/regional interest in Bleepa®, our product development has also become focused on preparing to scale. Behind the scenes, our product team has been building integrations with the national infrastructure team to be able to utilise existing and widely adopted back-end integrations into primary care systems that enable a seamless experience for GPs, and allow us to push the Bleepa® solution to primary care at scale without undertaking a bespoke integration into individual practices or systems. This work is extremely complex but once completed will enable us to expand to multiple GP practices instantly allowing us to focus on integration with secondary care systems when we come to undertake new deployments, which both accelerates new customer onboarding and reduces the cost of scaling.

CareLocker®

Following initial success with CareLocker®, as a patient-facing interface for Sampurna patients' medical data during the prior period, the Company moved away from pursuing active commercialisation of this in India due to the prevalence of diagnostic centres using WhatsApp to insecurely share medical information in metropolitan centres such as Mumbai, a practice which undermined the value proposition and commercial opportunity. The view we commonly encountered was that, although patients recognised the benefit and were prepared to pay for it at our pilot site, it would be difficult to achieve the necessary scale due to the use of WhatsApp as a free alternative. Therefore we decided to pause trading until new legislation, the Digital Personal Data Protection (DPDP) Act, came into effect. The DPDP Act is an India equivalent legislation of GDPR and places requirements on data providers, such as diagnostic centres, to ensure the security and protection of data which would prevent the use of WhatsApp by diagnostic centres for sharing clinical information with patients. The DPDP Act has now been passed in India and we are actively evaluating how it will be applied in practice and whether this will lead to an opportunity to revisit this customer opportunity.

Domestically, we are seeing increasing interest in being able to share clinical information with patients, as demonstrated by our pilot contract with MIP. The NHS wants this to occur through the NHS App, however this does not currently have these capabilities and it would be very complex and expensive for the NHS to build from scratch. There may therefore be an opportunity to position CareLocker® as a back-end enabler to provide patients with their clinical results through the NHS App, which the Company is actively exploring. It will depend ultimately on political will and the ability to reach meaningful commercial terms that justify the development required to embed CareLocker® into the NHS app.

India

During the period the Company was successful in its application to import Bleepa® as a medical device into India, which was a dependency that needed to be delivered before we could sell Bleepa® in India. This approach required the Company to establish a wholly owned, in-country subsidiary as a vehicle which could then import Bleepa® from the Company and which was necessary to protect our intellectual property, which would have been exposed if we had pursued the faster alternative strategy of exporting the product to a third-party Indian wholesaler. Receiving the import license has enabled our newly appointed in-country Managing Director, Rohit Singh, to start commercialising Bleepa® and begin to address the enormous market opportunity for our technology in India, targeted at sales to hospital groups and to enable national TB screening programmes, with a potential estimated TAM of £8bn.

Rohit Singh, Managing Director of India, has successfully engaged a number of customers both on the use of Bleepa® as a communication tool within hospitals, and as a health corridor between hospitals and for the facilitation of TB screening in remote communities across India. The typical commercial journey in India is to establish a short 3-6-month free pilot with individual customers and then convert to a rolling multi-year contract. In addition to contracts with commercial hospital groups the Company is also pursuing contracts with regional and state governments that typically have to go through competitive procurement, as in the UK, procurement that is typically informed by pilots and therefore the same approach of pilot-contract will be adopted across both public and private sectors.

The contract size potential of individual state contracts however is extremely large, with many states being of an equivalent size to the entire UK population or larger. Based on Rohit's early success we hope to soon be in a position to announce meaningful pilot contracts across multiple healthcare sectors with a view to converting these to paid contracts as soon as possible. TB screening will be funded through corporate social responsibility (CSR) sponsored programmes initially, before hopefully being adopted by regional and national screening programmes. CSR funding is a robust mechanism in India as we believe that companies above a certain threshold have to spend 1% of their annual profits on CSR activity, creating a large capital resource to drive programs such as TB screening. Rohit, in partnership with the Heal Foundation, is actively pursuing CSR sponsors to drive the screening programmes in several states.

Financial review

Revenue for the year ended 31 May 2024 increased 15% to £1.18m (2023: £1.02m), driven by the CDC pilot contracts win of £0.35m, offsetting the ongoing decline in legacy product sales (Cadran support and TexRad). Bleepa® contributed 87% (2023: 77%). In addition, all existing NHS customers renewed in the period with inflationary uplifts. Gross margin remained steady at 93% (2023: 92%).

Sales, a non IFRS measure representing the total customer contract value invoiced in a period, decreased 26% reflecting lower NHS contract wins in the Period. Bleepa® contributed 85% (2023: 73%) of Sales and Image Engineering license fees 12% (2023: 20%). Sales are recognised as revenue monthly across the life of a customer contract (typically 12 months), with any amount not recognised as revenue in the current financial year remaining on the balance sheet as contract liabilities (deferred income) and recognised as revenue in the forthcoming financial year. Contract liabilities (or deferred income) as at period end was £0.22m (2023: £0.44m).

Operating expenses increased 10% to £4.79m (2023: £4.36m), primarily due to higher staff costs arising from headcount expansion and cost-of-living wage increases, a portion, £0.13m (2024: £0.03m), of outsourced software development costs being recognised as maintenance (operating) expense rather than capital given the ongoing maturity of Bleepa®, increased contractor/consultancy costs for business development activities and higher amortisation charges (non-cash). Operating loss increased to £3.69m (2023: £3.42m). EBITDA loss, excluding depreciation and amortisation charges of £0.96m (2023: £0.81m), widened 5% to £2.73m (2023: £2.61m).

Cash outflows from operating activities increased 24% to £2.22m (2023: £1.79m) primarily due to higher operating expenses offsetting higher revenues, and more favourable working capital movements in the prior period. Cash outflows from investing activities remained broadly flat at £1.22m (2023: £1.20m), primarily being capitalised software development expenditures with Graylight Imaging related to product enhancements and new features. The Group's cash position as at 31 May 2024 was £3.88m (31 May 2023: £7.32m), a decrease of £3.44m over the prior year.

Intangible assets increased to £4.07m (2023: £3.71m), primarily representing capitalised software development expenditures of £1.30m (2023: £1.23m), offset by amortisation charges of £0.94m (2023: £0.80m).  Net assets decreased to £7.64m (2023: £10.87m) as at 31 May 2024.

Outlook

A change in the UK government brings with it exciting opportunities. The Prime Minister has talked to 'the biggest reimagining of the NHS' with the new Secretary of State for Health and Social care, Wes Streeting, stating that the NHS needs urgent reform, with a focus on moving care away from hospitals into the community and transitioning from analogue to digital; both of which can delivered by our technology and the diagnostic pathway approach that we have pioneered at QVH. The government's call for a 'Neighbourhood Health Service' requires a new infrastructure to connect the community providers around the patient which is exactly the infrastructure proposed through our recently announced collaboration with a leading UK primary care record provider and which was called for in a recent Tony Blair Institute paper 'Preparing the NHS for the AI Era: A Digital Health Record for every Citizen'.

Importantly there are indications of a change to the financial landscape of the NHS. Lord Ara Darzi's review of the NHS found that the NHS technology landscape was approximately 15 years behind other comparable healthcare systems and that there had been a historic shortfall of approximately £37bn in capital investment which would need to be closed in order to underwrite the NHS recovery programme. These are all indicators that the NHS is seeking to reinvigorate investment in technology and that the new administration recognises the importance of digital enablement in the NHS recovery plan. Proven technology such as Bleepa, with a track record for patient impact, is well positioned to capture the growth opportunities should the financial constraints on the system ease. With the support of our recently announced channel partner, our solution can scale rapidly to capture a national opportunity as it emerges.

We are delighted that DEAG diversions achieved through the Bleepa platform are now eligible for reimbursement under the ERF. This will enable straight to diagnostic, multidisciplinary pathways between care settings, reducing the need for traditional outpatient and multidisciplinary team models. As a result, the ERF will pay ICBs and hospitals for activity, including diversions away from traditional care pathways, at a payment of £206[3] per diversion (based on the median outpatient attendance unit price). ERF is a clinical fund, designed to stimulate clinical activity by linking payment to additional activity delivered. We believe clinical funding is much more likely to be maintained across financial years and is less likely to be re-deployed or withdrawn in the way that we have seen with capital funding for technology in recent years, such as the approximate £800m that was re-deployed from the frontline digitisation fund to meet the increased pay demands of the various staff strike settlements.

Aligning to clinical funds means that our solution would be a component of a clinical service rather than a direct technology cost. This would enable a higher per price per patient as we are able to incorporate the value created from clinical service redesign delivered by our solution, rather than only a technology license fee, thereby achieving higher margins. The funding would scale with patient throughput, with payment both linked to success and uncapped in terms of value delivered - the more activity that the product drives, the more that the Company would be paid and the more that the system and patients would benefit. An indicative ICB contract could generate over £2 million per annum per ICB, assuming the ERF rolls forward on an un-capped basis beyond 31 March 2025.

With a proven value proposition and a growing UK market presence the Company has also started to consider its international options for expansion. Our journey into the Indian market took longer than planned due to complexities around local medical device certification and therefore the Company has looked at how we can circumvent similar difficulties in other markets such as the USA and Middle East.  Incorporating the MedDream viewer in the post period allows the Company to consider wider international markets that previously we were prevented from exploring due to the different regulatory environments. The use cases and evidence base generated from our existing deployments provide a compelling proposition to international providers who typical struggle broadly with the same issue facing UK and Indian healthcare providers. Our ability to provide a shorter patient journey, with the same or fewer staff and with visibility of patient status across entire clinical journeys represents an unparalleled value proposition to commissioners, insurers and providers across many international markets; the success demonstrated in the NHS additionally gives the Company international credibility.

With a growing evidence base, viable funding mechanism and a channel partner who can help the company deliver national scale at pace, plus growing visibility of international opportunity, there has never been a better time to invest in the Company. We look forward to delivering value to our shareholders and transformation for our customers in the upcoming financial year.

Dr Tom Oakley

Chief Executive Officer

October 2024