DXS International plc : Final Results

3 oktober 2016

DXS INTERNATIONAL PLC
(EPIC: DXSP)

AUDITED FINAL RESULTS 2016

The Directors of DXS International plc ("DXS" or the "Company"), the ISDX quoted developer and supplier of clinical decision support systems to Clinical Commissioning Groups ("CCGs"), GPs, Doctors and healthcare professionals are pleased to announce the Company's Final Results for the 12 months ending 30th April 2016.

Financial and Operational Highlights

The year under review has seen a number of significant achievements:

• Revenue up by 20% to £3.25 million;
• Number of CCGs contracted increased to 40;
• Debt reduced and healthy cash balance of £300,000 at year end;
• Three R&D projects have now reached Pilot phase including major development to core product DXS Point of Care;

Commenting on the results Bob Sutcliffe said;

"The year under report has been challenging, principally as a result of changes within the NHS funding regime, but the Company has continued to grow revenues and maintained its commitment to continual improvement and innovation. The Company is also preparing a major updated version of DXS Point of Care, our core product offering, and offering a Personal Care Record (PCR), The PCR will enable patients to access and own the electronic medical record via an app on their mobile phone or PC."

Contacts:

For further information please contact:

David Immelman, CE0 DXS International plc www.dxs-systems.co.uk	01252 719800
City & Merchant Ltd (Corporate Adviser ) David Papworth	0207 101 7676

About DXS:

DXS International presents up to date treatment guidelines and recommendations, from Clinical Commissioning Groups and other trusted NHS sources, to doctors, nurses and pharmacists in their workflow and during the patient consultation. This effective clinical decision support ultimately translates to improved healthcare outcomes delivered more cost effectively which should significantly contribute towards the NHS achieving its projected efficiency savings.

The following information has been extracted from the Company's audited accounts for the year to 30th April 2016. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'.

The Directors of DXS International plc accept responsibility for this announcement.

CHAIRMAN'S REPORT

We are pleased to report that the year ending April 2016 has again seen a number of significant achievements.

• Revenue grew by 20% compared with 2015.

• Three of DXS's R&D projects have now reached Pilot phase. These are the Personal Care Record, the Interactive Patient Care Pathway and the DXS Referral Management solution.

• New partnerships and collaborations are being formed with providers of additional healthcare functionality. These include the provider of the Personal Care Record, the provider of the Patient Care Pathway, the provider of Medical Devices that integrate into the Personal Care Record, and Kinesis, a solution that enables Consultants to provide virtual opinions on patients on behalf of GPs.

• DXS Point of Care, our generic solution, delivers considerable ROI for its clients: one study showed a £2.7 million reduction in referral costs achieved over a twelve month period.

Revenue grew from £2,723,762 at 30 April 2015 to £3,255,081 at 30 April 2016, a year on year increase of 20%. Currently, we have 40 CCG clients representing 1250 practices. While CCG numbers have increased, practice numbers are declining. This is due to an NHS initiative to encourage smaller practices to merge. In addition, our planned growth has been hampered by the NHS cutting allocated budgets for GPSoC subsidiary solutions and our expectations of future growth from this area are therefore reduced. 

To mitigate the NHS budget cuts, DXS is focusing on accessing new revenue sources coupled with new and innovative solutions. These are:

• Personal Care Record - The personal care record enables a patient to enrol via DXS Point of Care in a GP Practice which will provide the patient with full access to their medical records via an app on their mobile device. The system will automatically detect, for example, that a patient is a diabetic and then send the patient reminders for requisite tests such as blood pressure checks, foot health checks etc that become due. This is in line with NHS priorities and a new budget of £40 million has been made available to CCG's beginning in 2017 to fund a Diabetes initiative.

• Personal Care Pathway - DXS has been working on this solution for approximately three years. This is a complex algorithmic engine that will assess a patient in relation to a recommended treatment protocol and alert clinicians of actions to implement to ensure treatment compliance.

• DXS Referral Management solution - This is an enhancement to the existing DXS Point of Care referring functionality. This area is high on the NHS agenda and DXS are about to pilot our new referring workflow solution. As noted above, the existing payback for users is exceptional and the enhancement will reduce unnecessary referrals to an even greater extent.

• DXS Innovation - This is an initiative where various medical devices are integrated with the Patient's personal care record providing valuable data, such as blood pressure, seamlessly into the patient's personal care record.

• DXS has during the past year ensured that it meets the required levels of conformance which include customer support, content management, clinical safety and disaster backup and management.

Our cash position remains positive and at the year end, cash at bank stood at £315,000.

The audited profit for the year ending 30 April 2016 is £219,089 including the remaining once only write off of £54,000 due to a management share option issue (see Directors Report for more information on this item).

While NHS cuts have seen the company's revenue growth slowed, to an estimated 10% for the year ending April 2017, the Company is actively seeking new sources of revenue for continued growth. An example is our recent submission of a tender for the LPP (London Partnership Program) which should be complete by November 2016.

 I particularly want to thank all DXS staff for their ongoing effort and contribution to ensuring that DXS has achieved FRA and in parallel grown the revenue by a significant margin.

Yours sincerely,

Bob Sutcliffe
Chairman

REPORT OF THE DIRECTORS

The directors present their annual report and the audited financial statements for the year ended 30 April 2016. The Chairman's statement which is included in this report includes a review of the achievements of the Company, the trading performance, financial position and trading prospects.

Directors

The directors for the year were:

D Immelman - CEO
S Bauer - MD
B Sutcliffe - Chair

Principal Activities

The group's principal activities during the period were the development and distribution of clinical decision support to General Practitioners, Nurses and Retail Pharmacies in the United Kingdom and South Africa. The commercial side included the licensing of DXS to various CCG's, the sale of e-detailing opportunities to the pharmaceutical industry, the UK Primary Care sector and the licensing of DXS technology to healthcare publishers.

Principal Risks

Failure to achieve predicted quantities of DXS contracts, particularly due to NHS budget cuts, and slower development of additional revenue streams may result in revenues growing more slowly than anticipated.

Financial Instruments

At this stage the Group is not faced with risk relating to interest rates on loans, credit and liquidity.

Dividend

The Directors do not recommend a dividend.

Research and Development

The Company continues to invest into research and development both locally and internationally. With the rapid emergence of CCGs in the UK healthcare sector and their requirement to achieve billions of pounds of savings, the demands of CCG's for DXS to design and create new solutions to achieve this is on-going. Each newly developed product represents additional potential revenue streams for the Company.

Directors' Responsibilities

The directors are responsible for preparing the financial statements for each financial year. The directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

• Select suitable accounting policies and apply them consistently.

• Make judgments and accounting estimates that are reasonable and prudent.

• State whether UK accounting principles have been followed subject to any material departures  disclosed and explained in the financial statements and,

• Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in the business.

The directors are responsible for keeping proper accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company's auditors are aware of that information.

Approved by the board and signed on its behalf by:

D A Immelman
Director
30 September 2016

STRATEGIC REPORT

Review of the Company's Business

The Company has managed to grow revenues from £2,723,762 at April 2015 to £3,255,081 in April 2016, a rise of 20%. This was attributed to increasing our CCG customers combined with our Pharmaceutical revenue.

The Company managed a profit of £219,089 even after the write off of £54,000 for a "share option valuation". This charge has been provided in terms of current Accounting Standards.

After significant investment of our limited resources it has been frustrating to have the NHS cut budgets for the GPSOC initiative. However the company has been seeking alternative revenue streams for its offering to the UK healthcare market.

While the foregoing has resulted in slower than expected revenue growth, management are optimistic about new opportunities going forward.

Description of Principle Risks and Uncertainties

The principle risk is that a competitor provides the market with a superior Clinical Decision Support Solution and takes market share from DXS. To mitigate this risk DXS continually meets the dynamic needs of its customers through a program of R&D.

A second risk is that of CCG budgets drying up.

Analysis of Business during Year Ending April 2016

Sales growth of 20% was below expectations due to NHS budget cuts. The company is also still waiting for GPSOC to provide DXS with access to a compliant API which will add in excess of £100,000 to our bottom line. The reason is that we still are but not meant to be paying Clinical Systems royalties for access to patient records.

The staff headcount, including freelancers, is approximately 80 and this is considered sufficient for current requirements.

During the past year the Company continues to meet its obligations in terms of its systems and robustness, dictated by NHS requirements. This should continue to offer any customer, whether in the UK or globally, the confidence that DXS is able to deliver a high quality of service and solution and thus provide complete peace of mind.

Financial KPI

Group Revenue £3,255,081 an increase of 20%. Definition: Total Group sales including distribution of clinical decision support to General Practitioners and the licensing of DXS to CCGs and healthcare publishers.

Underlying Group Profit After Tax has declined and this reduction in annual profit from the previous year is largely caused by the write off of deferred development expenditure included in Administrative Expenses. A required write off of £54,000 for a management share option valuation has also been deducted at arriving at the profit- Definition: Underlying profit provides information on the underlying performance of the business adjusting for either income or charges which are both one off or significant.

Earnings Per Share 2016 0.7p, 2015 0.9p. Definition: Earnings per share is the underlying profit divided by the average number of ordinary shares in issue.

ROCE 2016 13%, 2015 18%. Definition: Return on capital employed (ROCE) is the ratio of net operating profit of a company to its capital employed. It measures the profitability of a company by expressing its operating profit as a percentage of its capital employed.

Approved by the board and signed on its behalf by:

D A Immelman

CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 APRIL 2016

					2016		2015
					£		£
Turnover					3,255,081		2,723,762
Cost of sales					(517,991)		(461,608)
					2,737,090		2,262,154
Administrative expenses					(2,612,286)		(2,092,782)
Provision for costs of share option awards					(54,000)		(108,580)
Operating profit/ (loss)					70,804		60,792
Interest received and similar income					2,403		2,170
					73,207		62,962
Interest payable and similar charges					(27,271)		(35,477)
Profit on ordinary activities before taxation					45,936		27,485
Tax on Profit on ordinary activities					173,153		272,290
Profit for the year					219,089		299,775
Profit per share -
- Basic					.7p		.9p
- fully diluted					.6p		.7p

Statement of Other Comprehensive income for the year ended 30 April 2016

				2016		2015
				£		£
Profit for the year				219,089		299,775
Tax on components of other comprehensive income				-		-
Total comprehensive income for the year				219,089		299,775

Statement of Financial Position for the Year Ended 30 April 2016

		Group		Group		Company		Company
		2016		2015		2016		2015
		£		£		£		£
Fixed Assets
Intangible assets		2,111,147		1,868,510		-		-
Tangible assets		11,650		22,132		-		-
Investments		-		-		1,310,696		1,077,528
		2,122,797		1,890,642		1,310,696		1,077,528
Current assets
Debtors: - amounts falling due within one year		1,592,310		1,153,954		60,948		47,650
Cash at Bank and in hand		315,049		480,928		82,517		287,897
		1,907,359		1,634,882		143,465		335,547
Creditors: amounts falling due within one year		(1,197,623)		(1,273,960)		(17,856)		(21,778)
Net current assets		709,736		360,922		125,609		313,769
Total assets less current liabilities		2,832,533		2,251,564		1,436,305		1,391,297
Creditors: amounts falling due after more than one year		(94,849)		(242,128)		-		-
Accruals and Deferred Income		(1,070,844)		(665,081)		-		-
		1,666,840		1,344,355		1,436,305		1,391,297
Capital and reserves
Called up share capital		110,174		108,592		110,174		108,592
Share premium		1,639,523		1,591,709		1,639,523		1,591,709
Provision for costs of share option awards		162,580		108,580		162,580		108,580
Retained earnings		(245,437)		(464,526)		(475,972)		(417,584)
Shareholders' funds		1,666,840		1,344,355		1,436,305		1,391,297

The financial statements were approved and authorised by the Board on

D Immelman Director	S Bauer Director
30 th September	30 th September

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 APRIL 2016

1.     Summary of significant accounting policies

a)     General information and basis of preparation.

DXS International PLC is a public company limited by shares incorporated in England and Wales. The address of the registered office is given in the company information on Page 1 of these financial statements.

The group's principal activities during the year were the development and distribution of clinical decision support to General Practitioners, Nurses and Retail Pharmacies in the United Kingdom and South Africa. The commercial side includes the licensing of DXS products to various CCGs , the sale of e-detailing opportunities to the pharmaceutical industry, the UK Primary Care sector and the licencing of DXS technology to healthcare publishers.

The financial statements have been prepared in accordance with applicable accounting standards including Financial Reporting Standard 102 Applicable in the UK and Republic of Ireland (FRS 102) and the Companies Act 2006. The financial statements have been prepared on a going concern basis under the historical cost convention. The financial statements are prepared in sterling which is the functional currency of the company.

The significant accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented unless otherwise stated. The company adopted FRS 102 in the current year and an explanation of how transition to FRS 102 has affected the reported finance position and performance is given in note 25

b)     Intangible assets

Intangible assets acquired separately from a business are capitalised at cost.

Research and development expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.

Goodwill arising on business combinations is capitalised, classed as an asset on the balance sheet and amortised over its useful life. The period chosen for writing off goodwill is 20 years. The reason for choosing this period is because the directors believe that this is the period of time for the benefit to be received.

Intangible assets are amortised over a straight line basis over their useful lives. The useful lives of intangible assets are as follows:

Intangible type	Useful life	Reasons
Development expenditure	5 years from the date that the specific product is completed and available for distribution	Period of time for benefit to be received
Goodwill	20 years from acquisition of goodwill	Period of time for benefit to be received

c)     Tangible fixed assets

Tangible fixed assets are stated at cost less accumulated depreciation.

Depreciation is provided on all tangible fixed assets at rates calculated to write off the cost, less estimated residual value, of each asset on a systematic basis over its expected useful life as follows:

Plant and equipment      3-4 years straight line

d)     Debtors and creditors receivable/ payable within one year

Debtors and creditors with no stated interest rate and receivable or payable within one year are recorded at transaction price. Any losses arising from impairment are recognised in the profit and loss account in other administration expenses

e)     Loans and borrowings

Loans and borrowings are initially recognised at the transaction price including transaction costs. Subsequently they are measured at amortised cost using an effective interest rate method, less impairment. If an arrangement constitutes a finance transaction it is measured at present value.

f)     Provisions

Provisions are recognised when the company has an obligation at the balance sheet date as a result of a past event. It is probable that an outflow of economic benefit will be required in settlement and the amount can be reliably estimated.

g)     Tax

Current tax represents the amount of tax payable or receivable in respect of the taxable profit for the current or past reporting periods. It is measured at the amount expected to be paid or recovered using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

h)     Turnover and other income

Turnover is measured at the fair value of the consideration received or receivable net of VAT and trade discounts. The policy adopted for the recognition of turnover is as follows:

i)     Foreign currency

Foreign currency transactions are initially recognised by applying to the foreign currency amount the exchange rate between the functional currency and the foreign currency at the date of the transaction.

Monetary assets and liabilities denominated in a foreign currency at the balance sheet date are translated using the closing rate.

The company's principal activities during the year were the development and distribution of clinical decision support to General Practitioners, Nurses and Retail Pharmacies in the United Kingdom and South Africa. The commercial side includes the licensing of DXS products to various CCGs, the sale of e-detailing opportunities to the pharmaceutical industry, the UK Primary Care sector and the licencing of DXS technology to healthcare publishers.

j)     Employee benefits

When employees have rendered service to the company, short term employee benefits to which the employees are entitled are recognised at the undiscounted amount expected to be paid in exchange for that service.

The company operates a defined contribution plan for the benefit of its employees. Contributions are expensed as they become payable.

FRS 102 requires that a provision for holiday pay is provided in the annual accounts.  This provision, not previously made, was included as an adjustment in the 2015 accounts as provided in terms of the transitional rules of FRS 102.

k)     Leases 
Rentals payable and receivable under operating leases are charged to the profit and loss account on a straight line basis over the period of the lease

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