Totally plc (AIM: TLY), the provider of a range of healthcare services across the UK and Ireland, has announced its results for the 12-month period ended 31 March 2020.
Operational highlights
· Successfully completed acquisition of Greenbrook Healthcare in June 2019 via reverse takeover
· Greenbrook Healthcare secured new Urgent Treatment Centre contract in Watford for the Company’s Urgent Care division
· Secured largest dermatology contract to date for About Health in Manchester
· Launched new Insourcing start-up business, Totally Healthcare, in October 2019 delivering Insourcing services across the UK and Ireland
· Continued to provide frontline healthcare services supporting the NHS to manage the COVID-19 pandemic
· 97% of registered services rated as ‘Good’ by the Care Quality Commission (CQC)
Financial highlights
· Revenue up 35.8% to £105.9m (2019: £78.0m)
· Gross margin improved to 18.1% (2019: 15.5%)
· Underlying EBITDA* up 265% to £4.0m** (2019: £1.1m)
· Loss before tax of £3.4m (2019: £1.8m)
· Cash up 19% to £8.9m as at 31 March 2020 (31 March 2019: £7.5m)
· Paid a maiden interim dividend to shareholders in February 2020 of 0.25p per share
*Earnings before interest, tax, depreciation and amortisation, before exceptional items outlined in the notes to the financial statements
**Includes £1.6m impact relating to implementation of IFRS 16
Post period end highlights
· Significant contract extensions awarded to Vocare worth a total of £19.5m
· Mobilisation and restart of Planned Care and Insourcing care divisions
· Continued support to NHS across all operating divisions in response to COVID-19
· Maiden final dividend of 0.25 pence per share proposed bringing total dividend for the year to 0.50 pence per share
CHAIRMAN’S STATEMENT
The year ended 31 March 2020 was a good year for Totally delivering profit before depreciation and amortisation during times of unrivalled political instability which included BREXIT and a General Election followed by the worldwide pandemic of COVID-19 which has impacted on every person and every business.
Totally’s strategy has always been to support the NHS to manage the pressures and demands placed upon healthcare services. The COVID-19 pandemic is no exception, and everyone at Totally has stood shoulder to shoulder with the NHS and delivered patient-facing services throughout this period and continues to do so. At the time of writing, we are still very much in a period of uncertainty as everyone works together to ensure services are robust and ready for any second wave of demand. What is very clear to the Board of Totally is that our strategy has been, and continues to be, correctly focused during these unprecedented times.
Whilst we expect the business to grow in 2021 and beyond, due to current run rates and new contract wins, the timing of new tenders, which is a key part of our growth plans, remains uncertain due to the COVID-19 pandemic and its impact on the NHS. We are therefore unable to give firm guidance at this stage on our growth expectations for the current financial year and the Board has considered it appropriate for market forecasts to be withdrawn at this time. The medium to long term outlook and trajectory of the business however remains unchanged. Shareholders should also be pleased that we expect continued growth in operating cash flow and the Board therefore remain committed not only to the payment of dividends but also in continuing with our progressive dividend policy. Accordingly, the Board is pleased to propose a maiden final dividend of 0.25 pence per share taking the total dividends for the year to 0.50 pence per share. Subject to shareholder approval at the upcoming AGM the final dividend will be paid in October 2020.
With the expertise of our leadership teams, we will continue to ensure our services respond to any changes in demand we receive and that we support our staff to deliver exceptional services in partnership with the NHS and other public sector bodies across the UK and Ireland. Whilst the way we secure new business has changed, the demand for our services is not expected to diminish.
During the year, we completed the acquisition of Greenbrook Healthcare, which increased our presence across London in Urgent Care. You will read throughout this report the progress that’s been made with integrating Greenbrook Healthcare into our Urgent Care Division and harnessing technology will continue to build to our market-leading position.
The Group also launched its Insourcing business, Totally Healthcare, which during its first few months of operations secured contracts across the UK and Ireland delivering services to provide bespoke services to reduce hospital waiting lists. Already its reputation is for delivering services quickly, efficiently and of high quality to every patient treated. Of course, these services were put on hold during the pandemic as all elective healthcare services were suspended to focus on managing COVID-19. Totally Healthcare is now back working and supporting hospitals plan for how they reduce the waiting times and waiting lists which have increased during the first half of 2020.
We all know that cash is a seen as a barometer of the success of any business and we reported £8.9m cash at the bank at year end, an accurate reflection of the efforts of all our support teams to ensure we operationally deliver across the business.
All of this has been achieved during the most testing times which reflects the outstanding commitment and expertise of everyone across the Group for which I commend them. We must also thank our investors for their continued support which enables us to continue to deliver our strategic intentions of becoming a partner of choice for the delivery of healthcare services across the UK.
Bob Holt OBE
Chairman
7 July 2020
CHIEF EXECUTIVE OFFICER’S REVIEW
Building strong partnerships with a reputation for delivering high‑quality care even during the most difficult times
I am pleased to report excellent progress across the Group with a strong set of results during a year when we saw many external challenges including the Covid-19 pandemic which impacted all of our businesses towards the end of the reporting period.
Our management team has seized every opportunity presented to them to strengthen our market position and support the delivery of healthcare services across our three divisions.
Demand for our services continues to be strong, on the back of our reputation for delivery of high-quality services. 26 out of 27 of our registered services with the Care Quality Commission are rated as good, an excellent position to grow from and it has been pleasing to see continuing improvement in our CQC ratings reflecting the high-quality care we provide.
Our three distinct business divisions – Urgent Care, Planned Care and Insourcing – provide a portfolio of healthcare services across the UK and Ireland built on the expertise and commitment of our people, ensuring the patients we treat receive the highest quality of care quickly and efficiently. We partner with healthcare organisations across the UK supporting them to manage demand for services.
We continue to support the NHS by working on the frontline delivering services to manage the demand from the Covid-19 pandemic but also respond to the need to reduce waiting times and waiting lists due to the suspension of elective healthcare services.
Whilst we expect the business to grow during 2020/21 and the medium to long term outlook for the business remains unchanged, we are unable to give clear guidance at this stage of the impact of COVID-19 on the current financial year and as such the Board has resolved to withdraw market forecasts at this time. Each of our divisions has been affected in different ways by the COVID-19 pandemic and demand for many of our services remains strong. COVID-19 has though inevitably resulted in delays being encountered with the NHS awarding tenders and there has been an impact on the near-term visibility for growth, particularly in Planned Care.
Of course, our results demonstrate the significant progress we have made, regardless of external forces. New contracts were secured across the three divisions, including the largest to date within our Planned care division to deliver Dermatology outpatient services across Manchester. In addition, we have continued to secure a number of vital contract extensions in both Urgent Care and Planned Care which underpin our foundations for continued growth -in excess of £20m of contract extensions were secured in the period under review.
Building on our Strategy
During the year, we have focused on delivering services across the Group that are sustainable and reactive to changes in demand.
· High-quality: has to be at the centre of everything we do. Our reputation is built upon this core requirement.
· Geography: during the year, we have successfully expanded our footprint across the UK and Ireland and are now delivering services across England, Scotland, Wales, Northern Ireland and the Republic of Ireland.
· Diversification: across our divisions ensuring we deliver models of care across all areas of high demand in the healthcare sector and that our divisions support each other by “cross-selling” services to both existing and potential new customers.
· Learning: from everything we do, both positive and negative, and ensuring we stay ahead of our competition with our approach to disrupting care models and delivering real tangible benefits.
· Supporting: our people and investing in them as they are at the core of what we do.
The Future
I would like to re-emphasise my confidence in the team of people we have and their ability to grow the business organically and via acquisitions, as well as continually review and develop the range of services we offer.
We are well positioned to further build on our market-leading positions in all of our divisions. Building on our strong relationships with our commissioners and supporting government bodies to proactively manage the demands placed on healthcare services during unprecedented events such as the recent Covid-19 pandemic when we experienced major increases in demand for our services, specifically in NHS 111. We were able, with the dedication of our people, to stand shoulder to shoulder with other healthcare professionals, and deliver services 24/7 across England supporting everyone by providing the high-quality services we are known to deliver.
I look forward to updating you further as we continue to expand our services across the UK
Wendy Lawrence
Chief Executive Officer
7 July 2020
STRATEGIC REVIEW
Operational changes during the period
Since acquiring Greenbrook Healthcare in June 2019, we have taken the opportunity to review our care delivery models in our Urgent Treatment Centres across the country to ensure we retain our competitive advantage to remain the largest independent provider of UTCs across England.
This has involved a critical review of all aspects of the care pathways across both Vocare and Greenbrook Healthcare taking the best from both and delivering excellence to the patients we see. Our staff take pride in what they do and deliver services with a passion and experience that sets us apart.
Despite the difficult political backdrop, which resulted in the number of tendering opportunities being significantly reduced (Brexit, General Election, COVID-19), we have secured new business, and opened our new Urgent Treatment Centre in Watford in July 2019 (delayed opening due to COVID-19). We have retained contracts to continue the delivery of services in our UTCs, 111 and numerous other services across England.
During the summer of 2019, we embedded our new delivery structure with the creation of our three delivery divisions.
· Urgent Care
· Planned Care
· Insourcing
Early in 2020, it became clear that the UK was about to be impacted by the worldwide pandemic, COVID-19. Healthcare providers braced themselves as demand to access services escalated. Our delivery divisions were all impacted differently.
Urgent Care saw demand increase in excess of 200% above normal levels for access to its NHS 111 services across the country. Vocare who is our specialist provider of 111 systems responded accordingly and worked tirelessly, shoulder to shoulder, with NHS England to coordinate the delivery of core 111 services alongside new services targeted for the management of COVID-19 and onboarding additional staff to help meet the unprecedented demand.
Vocare quickly mobilised its Emergency Preparedness, Resilience and Response processes to ensure every part of the business and every member of staff were supported during the ever-changing landscape. This was supported by our Business Continuity Plan activation across the Totally Group to ensure government guidance was quickly adopted and implemented.
Our Urgent Treatment Centres and GP Out of Hours services saw a decline in demand which meant that staff could be redeployed to where demand was increasing while still enabling all of our business to support its people by observing social distancing and isolation requirements and applying them across all staff groups.
Our internal mandatory systems for Staff Absence Management (SAMS) was reviewed and adapted to ensure every member of staff who needed to be absent from the workplace was supported by a clinician to ensure national guidance and advice was followed. This involved many changes including:
· Increased working from home with the provision of equipment to enable this change.
· Increased use of video meetings and clinical consultations.
· Decrease in working from offices where home working is possible and for those services where office working is essential changes made to the workplace to meet the latest advice. This included:
o Increased spaces for work for social distancing.
o Provision of PPE.
o Increased workplace cleaning regimes.
o Provision of more space for essential call centre capacity.
All of the above resulted in a minimum number of staff being furloughed or made redundant while working through the pandemic.
Our Planned Care and Insourcing divisions saw contracts paused whilst all elective healthcare services were stopped across the UK. During that period waiting lists and referrals for healthcare services increased with estimates from the NHS of over 10million people now waiting for treatment. Whilst our planned care division prepares for services to restart, our insourcing business, Totally Healthcare resumed some of its services in early June.
Whilst no tenders have been issued by the NHS in recent months, the Group has put in place extensions to a number of existing contracts across its operating subsidiaries and we anticipate this continuing. New business is currently being secured as a result of the Group’s national coverage, existing relationships and partnering arrangements.
All of the above ensured that Totally as a group of businesses were able to not only support the NHS during the COVID-19 pandemic, but also demonstrated how to approach service delivery during such times. Our strategy remains as being regarded as a partner of choice for the NHS and other healthcare bodies to respond to increases in demand for services whatever the cause may be.
The Board and the management team could not be prouder of the way our people responded during this time and we must ensure they know how valued they are by Totally plc and the businesses within it.
FINANCIAL REVIEW
The results reflect a successful year for the Group; well positioned for further scale and delivering diversification through the creation of three distinct divisions.
The acquisition of a quality urgent care provider, Greenbrook Healthcare and the creation of a new business in Insourcing have strengthened the financial performance of the Group. Growth in revenue was 35.8% year on year at £105.9m, and the Group generated a loss before tax of £3.4m (2019: £1.8m loss). Underlying EBITDA increased by 265% to £4.0m. This includes a £1.6m positive impact relating to IFRS 16.
The Group is cash generative and responded with the distribution of our maiden dividend in February 2020. The Board is also proposing the payment of a full year dividend of 0.25 pence per share, payable in October 2020. The intention is to consider future dividend payments based upon the trading performance of the Group.
Growth in revenues was 35.8% primarily driven by the in-year acquisition, bringing revenues to £105.9m. New contract wins were adversely impacted by the uncertainty created by Brexit and the general election. NHS commissioning understandably paused during this time; nonetheless, the Group was able to secure extensions of several existing contracts across the Group, plus a significant new contract for Planned Care, in Manchester. The new Insourcing division delivered over £1m in revenues in its first period of trading.
Gross margin improved to 18.1% from 15.5%, largely as a result of improved performance in the underlying Urgent Care division. This improved performance has resulted in a reduction in provisions relating to performance related incentives of £1m. Underlying margin is therefore 17.2%.
All of our businesses continually review service delivery models and this approach has supported us through our response to the global pandemic. By utilising additional technology, reducing face to face contact, delivering 111 24/7 and flexing our services we have continued to deliver sustainable support to our partners, the NHS.
The Group posted an EBITDA, excluding exceptional costs relating to the acquisition and impairment of goodwill, of £4.0m. The loss before tax of £3.4m is stated after an amortisation charge of £2.8m relating to the intangible value of contracts acquired.
| 31 March 2020 | 31 March 2019 | |
| Revenue | 105.9 | 78.0 |
| Gross profit | 19.2 | 12.1 |
| EBITDA | 4.0 | 1.1 |
| Exceptional items | (2.0) | 0.1 |
| Depreciation | (2.0) | (0.6) |
| Amortisation | (3.1) | (2.2) |
| Operating loss | (3.1) | (1.6) |
| Loss before tax | (3.4) | (1.8) |
| Net assets | 34.4 | 25.9 |
| Cash | 8.9 | 7.5 |
A prudent view of growth in Planned Care revenues has been considered in light of the impact of the COVID-19 pandemic. As a consequence, we recognised an impairment of goodwill relating to this cash generating unit (CGU). The carrying value of goodwill in relation to this CGU after impairment is £7.8m.
| 12 months to | 12 months to | |
| 31 March 2020 | 31 March 2019 | |
| £000 | £000 | |
| Acquisition-related costs | 528 | 465 |
| Impairment of goodwill | 1,500 | 2,000 |
| Revaluation of contingent consideration | 0 | (2,668) |
| Other exceptional costs | 0 | 77 |
| Total exceptional items | 2,028 | (126) |
| Tax credit attributable to exceptional items | (100) | 404 |
| Total exceptional items after tax | 1,928 | 278 |
Acquisition costs
The acquisition costs comprised legal, professional and other related expenditure and amounted to £0.5m (2019: £0.5m).
Cash flow statement
Cash generated from operating activities is positive in the year reflecting improved underlying profitability of the Group. Cash outflow relating to the acquisition of Greenbrook, net of cash acquired was £8.0m. The acquisition was funded by the issue of share capital, net of expenses of £9.3m.
In June 2019, the Company issued 97,390,939 new ordinary shares of 10 pence each. The Company also issued 25,000,000 new ordinary shares of 10 pence each as part of the consideration for the acquisition of Greenbrook Healthcare (Hounslow) Limited and Greenbrook Healthcare (Earl’s Court) Limited on the same date.
| 31 March 2020 | 31 March 2019 | |
| Net cash flows from operating activities | 2.9 | (1.8) |
| Net cash flows from investing activities | (8.6) | (0.9) |
| Net cash flows from financing activities | 7.1 | 0 |
| Net increase/(decrease) in cash and cash equivalents | 1.4 | (2.7) |
| Cash and cash equivalents at the beginning of the year | 7.5 | 10.2 |
| Cash and cash equivalents at the end of the year | 8.9 | 7.5 |
Maiden final dividend
We remain committed to the payment of dividends as we believe this reflects our confidence in the Company’s future prospects. The Board is therefore pleased to be recommending to shareholders a maiden final dividend of 0.25 pence per share. This, together with the interim dividend of 0.25 pence per share paid in February 2020, makes a total dividend for the year of 0.50 pence per share. Subject to approval by shareholders at the Annual General Meeting to be held on 7 September 2020, the final dividend will be paid on 16 October 2020 to shareholders on the register as at the close of business on 18 September 2020. The shares will be marked ex-dividend on 17 September 2020.
Acquisition of Greenbrook Healthcare
On 20 June 2019, the Company completed the acquisition of the entire share capital of Greenbrook Healthcare (Hounslow) Limited and the convertible loan note in Greenbrook Healthcare (Earl’s Court) Limited for a maximum consideration of £11.5m on a cash-free and debt-free basis with a normalised level of working capital. The table below sets out the adjustments to the purchase price to reflect a normalised level of working capital which has resulted in additional consideration payable of £4.7m.
Greenbrook is one of the leading providers of Urgent Care Centres in London. The company was acquired as part of the Group’s stated “buy and build” strategy and to bring new and complementary routes to the existing healthcare services offered by the Group. Greenbrook’s Urgent Care services provide synergies with Totally’s existing subsidiary businesses, in particular Vocare, and complements its business model of providing preventative and responsive healthcare in out-of-hospital settings to improve people’s health, reduce NHS healthcare reliance, re-admissions and emergency admissions to hospital.
The assets and liabilities as at 20 June 2019 arising from the acquisition were as follows:
| Carrying | Fair value | Fair | |
| amount | adjustment | value | |
| £000 | £000 | £000 | |
| Property, plant and equipment | 308 | 0 | 308 |
| Intangible assets: customer contracts | 0 | 9,354 | 9,354 |
| Right-of-use assets | 1,425 | 0 | 1,425 |
| Trade receivables and other debtors | 4,712 | 0 | 4,712 |
| Cash in hand | 5,781 | 0 | 5,781 |
| Trade and other payables | (6,955) | (763) | (7,718) |
| Lease liabilities | (1,425) | 0 | (1,425) |
| Onerous contracts | 0 | (529) | (529) |
| Deferred tax | (34) | (1,438) | (1,472) |
| Convertible loan notes | (50) | 0 | (50) |
| Net assets acquired | 3,762 | 6,624 | 10,386 |
| Goodwill | 5,850 | ||
| Total consideration | 16,236 | ||
| Satisfied by: | |||
| Cash | 13,736 | ||
| Ordinary shares issued | 2,500 | ||
| 16,236 |
The goodwill is attributable to the knowledge and expertise of the workforce, the expectation of future contracts and the operating synergies that arise from the Group’s strengthened market position. Any impairment charges will not be deductible for tax purposes.
Included in the fair value of Greenbrook are provisions for additional costs or potential costs that existed at the time of acquisition.
Changes in accounting policies
The Group adopted IFRS 16 with a transition date of 1 April 2019. The Group has chosen not to restate comparatives on adoption and, therefore, the revised requirements are not reflected in the prior year financial statements. Rather, these changes have been processed at the date of initial application and recognised in the opening equity balances. Details of the impact this standard has had are given below.
IFRS 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, together with options to exclude leases where the lease term is twelve months or less, or where the underlying asset is of low value. IFRS 16 substantially carries forward the lessor accounting in IAS 17, with the distinction between operating leases and finance leases being retained. The Group does not have significant leasing activities acting as a lessor.
As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for most leases. However, the Group has elected not to recognise right-of-use assets and lease liabilities for some leases of low value assets based on the value of the underlying asset when new or for short-term leases with a lease term of twelve months or less.
On adoption the Group recognised right-of-use assets at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments. Lease liabilities are measured at the present value of the remaining lease payments, discounted using the Group’s incremental borrowing rate as at 1 April 2019. The Group’s incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions.
The impact of adopting IFRS 16 on the Consolidated Statement of Profit or Loss is to increase profit before exceptional items by £1,636,000, increase depreciation by £1,509,000 and increase finance costs by £235,000.
The impact of adopting IFRS 16 on the Consolidated Statement of Financial Position can be seen below:
| 31 March 2019 | IFRS 16 | 1 April 2019 | |
| £000 | £000 | £000 | |
| Assets | |||
| Right-of-use assets | – | 4,083 | 4,083 |
| Prepaid rent | – | (57) | (57) |
| Liabilities | |||
| Lease liabilities | – | 4,026 | 4,026 |
The impact of adopting IFRS 16 on the Consolidated Cash Flow Statement is to increase operating cash flows and decrease financing cash flows by £1,744,000 respectively. The following table reconciles the minimum lease commitments disclosed in the Group’s 31 March 2019 financial statements to the amount of lease liabilities recognised on 1 April 2019.
| £000 | ||
| Minimum operating lease commitment at 31 March 2019 | 5,295 | |
| Inclusion of previously unrecognised commitments | 151 | |
| Less: short-term leases not recognised under IFRS 16 | (71) | |
| Less: low value leases not recognised under IFRS 16 | (17) | |
| Less: licences not considered leases under IFRS 16 | (434) | |
| Undiscounted lease payments | 4,924 | |
| Less: effect of discounting using the incremental borrowing rate | (898) | |
| Lease liability as at 1 April 2019 | 4,026 |
