Induction Healthcare Group PLC

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

Unaudited Interim Results

for the six months ended 30 September 2024

Induction (AIM: INHC), a leading digital health platform driving transformation of healthcare systems, announces its unaudited interim results for the six months ended 30 September 2024.

The Company's growth continues to be driven by the Zesty portal, evidenced by recent wins and growing ARR. Notwithstanding, the first half of the year was impacted by the early election call which caused some contracts to be paused. The new government's emphasis on digital health investments, in addition to recent new business generation, provide a basis for the Company to return to material growth.

Financial Highlights

·      Revenues of £5.4m (H1 FY24: £6.1m)

·      Gross margin improvement to 78.2% (H1 FY24: 75.0%)

·      Adjusted EBITDA Loss of £0.9m (H1 FY24: Loss £0.01m)

·      Operating loss increased to (£3.2m) (H1 FY24: (£2.4m))

·      Cash position £3.1m (FY24 YE: £3.7m).

Operational Highlights

·      51% increase in Zesty portal revenue compared to H1 FY24.

·      5 Zesty portal deployments in progress, bringing the total number of Zesty portal Trusts to 23.

·      7 Trusts contracted for Zesty portal deployment or major upgrade in FY26 & FY27, generating £0.7m new ARR.

·      3.9 million patients can now access Zesty portal via the NHS App, up from 2.5 million 1 year ago.

·      Attend Anywhere revenue down £1.1m compared to H1 FY24 with shift to utilisation-based contracts.

·      Lower revenue in H1 FY25 accounts for higher losses as expenditures remain flat.

·      Completed substantial engineering project to replace Attend Anywhere call screen with Amazon Chime which will generate £0.4m annual savings.

·      Sold Horizon Strategic Partners Limited for £1.2 million.

·      NHS Wales extension to 31 March 2025 for £0.5m.

o   From April 2025, each Health Board will procure separately, although negotiations are underway nationally to fund language and hosting requirements.

o   One Health Board already secured on a 2-year contract with active engagement with the other six Health Boards.

Post Period End Highlights

·      Secured £1.5m contract to digitise diagnostic referrals and bookings in North Central London ICS which will contribute to higher group revenue in H2.

Paul Tambeau, CEO of Induction Healthcare, said: "The Zesty portal continues to be our growth engine, with revenues up 51% compared to the same period last year. We also secured several new Zesty portal wins which will unseat our main competitors over the next two years. However, our plan for this year was negatively impacted by the early election as we had a number of contracts due to be completed in Q1 paused. With Labour's emphasis on reducing the elective recovery backlog, investing in the NHS App, and empowering patients to take more control over their health, Induction is in the right place at the right time to capitalise on growth. Our recent win in North Central London, along with upcoming pilot projects in cancer surveillance and smart uses of AI, provides a basis for Induction to get back onto a growth trajectory next year. We continue to manage cash carefully with no requirement for immediate funding."

 Enquiries

About Induction - www.inductionhealthcare.com

Induction (AIM: INHC) Induction delivers a suite of software solutions that transforms care delivery and the patient journey through hospital. Our system-wide applications help healthcare providers and administrators to deliver care at any stage remotely as well as face-to-face - giving the communities they serve greater flexibility, control and ease of access. Purpose-built for integration with leading Electronic Medical Record (EMR) platforms, our products offer immediate stand-alone value that becomes even greater when integrated with pre-existing systems.  Used at scale by national and regional healthcare systems, as well non-health government services, our applications are relied upon by hundreds of thousands of clinicians and millions of patients across almost every hospital in the British Isles.

CEO Review

Overview

Over the last six months, we have been focused on implementing our FY25 plan that was based on four goals:

1.   To be a profitable business whilst building new revenue streams that will accelerate growth into the future

2.   To continue innovating and integrating our product suite in a way that is validated by our customers and supports the delivery of our revenue plans

3.   To be customer centric and commercial in everything we do

4.   To implement and continuously develop an inclusive, performance driven and rewarding employee experience

I am pleased to say that we are making progress on all four of these goals.

We have been successful in growing Zesty portal revenue and building new revenue streams by 51% to £2.0m (H1 FY24: £1.4m). We secured 5 new Zesty portal wins since 1 April 2024 worth £0.5m ARR which will go live in FY26 & FY27 and we are due to go live in our first Community & Mental Health Trust shortly. Over the last year we have incorporated a number of new features into Zesty portal and these are well received by both new and existing customers. Furthermore, we see increased interest for Zesty portal in the private health care market.

These successes have been subdued by the political environment. In particular, the call for an earlier than expected election caused a number of contracts, which were due to be completed in Q1, to be paused. However, the increased focus by the new administration on healthcare spend in general and particularly on digitisation as a means of increasing efficiency, patient throughput and outcomes will benefit us in the medium term.  

The team have continued to implement changes to our cloud infrastructure to generate additional savings. Our work to overhaul the Attend Anywhere call screen with Amazon Chime will further improve margin as well as deliver a better user experience for patients and clinicians. It also enhances our flexibility for the future design and build of customer-focused product enhancements.

With the divestment of Guidance, the business is now focused on our core products and markets. We're aligning the business to deliver on the next phase of patient engagement platforms by digitising entire pathways and enabling regions to efficiently manage high-risk patients, like those who are being monitored for cancer. We consider the total addressable market for digitising pathways to be material, and we are well placed to capitalise on this opportunity. North Central London represents our first foray into this strategic space.

We're also investing in our people and working to improve our collaborative culture. Employee NPS score is now +6, having improved 29 points over the last year.

Financial Overview

We ended the first half of this year with £5.4m in recognised revenue (including £0.2m relating to the Guidance platform which was earned prior to its sale) down from a total group income £6.1m over the same period last year (which included £0.3m relating to Guidance).

The number of our Attend Anywhere contract renewals held steady, however, price competition drove income down to £3.2m (H1 FY24: £4.3m).  Note: Income from the Guidance product, which was sold during the period (see note 5 - Discontinued operations) is disclosed separately as an asset and is not reported in the P&L.

Gross margin in H1 improved to 78.2% compared to 75.0% in the same period last year as a result of continued rationalisation of the direct cost base including cloud infrastructure.

Our operating loss after depreciation and amortisation increased to £3.2m (H1 FY24: Loss £2.4m). While contribution from our Zesty portal increased period on period by £0.5m. The increased operating loss reflects the fall in contribution from Attend Anywhere of £0.8m, plus one-time, non-cash administrative expenses (£0.3m) and one-time termination and professional costs relating to the business divestment (£0.2m).   

On an adjusted EBITDA position, after accounting for non-recurring, non-cash items we ended H1 with an adjusted Ebitda loss of £0.9m (H1 FY24: Loss £0.01m). This translated into an H1 period end cash position of £3.1m (FY24 YE: £3.7m).

Outlook

The new Labour government has made reducing the elective recovery backlog a major priority for the NHS as 6.3m patients are still waiting for an appointment. The recent budget invested billions of pounds to add 40,000 new appointments per week and technology will be a key enabler to manage that extra capacity. The government has also targeted £2bn for technology investments in the NHS which will include giving patients greater access to their information and greater control of their experience through the NHS App. Induction has been working with the NHS to integrate our solutions into the NHS App and we believe we are well positioned to drive new growth through these investments.

The government is investing in community diagnostic centres so that patients can get into treatment sooner. Our recent win in North Central London, and the associated technology that we are developing to digitise diagnostic referrals and appointments, positions Induction well to generate new regional wins as we can connect hospitals with diagnostic centres.

The government and clinicians alike emphasise the importance of diagnosing patients who have cancer sooner. Our platform has the capability to manage patients on a cancer pathway by sending them notifications to complete a form or book an appointment as part of a surveillance program. The platform integrates these capabilities with video appointments so that patients don't have to travel for routine follow-ups. We are in the final stages of contract negotiations for a cancer surveillance pilot project which, if successful, will unlock new revenue streams for Induction.

While the competitive threat of Microsoft Teams and other solutions remains, our team has done a good job of communicating the value and fit-for-healthcare nature of our video appointments solution and the erosion of our share has been lower than anticipated. However, we expect some revenue churn in Attend Anywhere as Wales moves from a national contract to each Health Board procuring their video solution with pricing commensurate with their utilisation. We also expect this loss to be made up by a new large contract that we expect to announce before the end of the financial year. We're also gaining traction within the private market, having just secured a new Attend Anywhere contract in the occupational health sector

Despite FY25 seeing lower revenue than the previous year, we are very well positioned to capitalise on the new Labour government's priorities and expect to generate new growth from FY26 and beyond.

Induction Healthcare Group Plc

Condensed Consolidated Statement of Comprehensive Income (Unaudited)

For the six months ended 30 September 2024

Induction Healthcare Group Plc

Condensed Consolidated Statement of Comprehensive Income (Unaudited)

For the six months ended 30 September 2024

Induction Healthcare Group Plc

Condensed Consolidated Statement of Financial Position

As at 30 September 2024