DXS International plc : Final Results

DXS INTERNATIONAL PLC

Final Results for the year ended 30 April 2017

The Board of DXS International plc ("the Company") is pleased to announce its audited Final Results for the year ended 30 April 2017.

Although the past year has been challenging with continuing uncertainty and changes within the NHS the company achieved:

• continued growth of 5% in turnover;
• a profit of £224,122
• invested £704,336 in R&D.

Our new products are receiving extremely positive feedback. For example, our Best Triage solution launched earlier this year has been extremely successful with 42% of referrals being redirected resulting in time and cost savings. We also now have a full time tendering team and have procured three new NHS tenders in the past 10 months.

Three new products are being launched in an exciting pilot to manage hypertension. These products, MyVytalCare, MedXPert and Innovation, automate patients at home, taking blood pressure readings, receiving these electronically at the practice, analysing the readings and communicating with the patient via our app. Finally, our system automatically makes treatment recommendations to both doctor and patient. This is the future of healthcare and the Company is well positioned to capitalise on this opportunity as a result of continued re-investment in research and development.

David Immelman (Chief Executive) commented:

"While NHS cuts and changes have slowed our growth for the year ending April 2017, the Company is confident, based on the positive reception we are receiving for our new initiatives, that these new revenue streams will begin to gain traction in the coming months and years. The year ending 2018 is expected to see a time of consolidation with our new products followed by a fast growth of revenue and profits in 2019.

We are committed to improving our communication to our loyal shareholders ensuring that you are well informed of our progress and achievements".

The Directors accept responsibility for this announcement.

For further information please contact:

Note to Editors:

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 2017.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.

CHAIRMAN'S REPORT

The year 2016-2017 has been a challenging year with continuing uncertainty and changes within the NHS resulting in frustration for its solution providers both large and small alike. Funding restrictions caused the NHS to change the direction of the GPSoc programme, which the company was pursuing. However, the tide is changing once again.

Nevertheless, we did manage to achieve continued growth of 5% in turnover and a profit of £224,122 including investment of £704,336 on R&D. Our tendering team, a result of lessons learned during GPSoC, are aggressively monitoring tenders and as a result we have just been awarded a tender to supply three of our solutions. These include DXS PoC, MyVytalCare (our new app) and DXS Devices. During the year we also were awarded membership of the London Procurement Partnership (LPP) which has an anticipated spend of approximately £1.3 billion over three years. On 16 May 2017 DXS was notified that it had won a four-year procurement framework tender award issued by NHS Shared Services. NHS Shared Business Services is a major procurer of goods and services for and on behalf of NHS England and other public-sector organisations. DXS scored 85.75 per cent in the Lot 3 category (Technology Enabled Care) coming fourth out of 11 finalists which included multinationals such as Philips Electronics UK Ltd and iHealthLabs EUROPE SARL.

In addition our New Triage Plus solution has been running at pilot sites at one of our CCG clients and results are good. We are now receiving significant interest from additional clients to implement this exciting product.

All of the foregoing is clear evidence that our vision some years ago of the direction of travel of healthcare was correct and that the considerable investment we have made in R&D has been fully justified. We are aligned and ready to capitalise on the NHS's mission of focusing on patients with Long Term Conditions and its endeavour to keep these patients compliant with best treatment evidence and protocols. Focusing on people with Long Term Conditions (LTC's) is seen as one of the key strategies for the NHS to achieve its required savings of more than £20 billion. It is these 15 million people that consume 70% of the NHS's £120 billion annual budget.

In summary, DXS is entering this market by leveraging of our existing product, DXS Point of Care and offering the following suite to help the NHS achieve their goal.

DXS have four new products aimed at reducing hospital admissions, that we have begun taking to market:

• DXS Best Triage Plus - We now have our first two clients that have purchased this Referral Management Solution. It is aimed at reducing unwarranted referrals and is currently running at a RMC (Referral Management Centre). Feedback is good and interest has been shown by a number of new potential customers.
   
• DXS MyVytalCare - The personal care record enables a patient to enrol via DXS Point of Care in a GP Practice which then provides the patient with full access to their medical records via an app on their mobile device. The system automatically detects, for example, that a patient is a diabetic and then sends the patient reminders for requisite tests such as blood pressure checks, foot health checks etc that become due.
   
• DXS MedXPert - This product places a patient onto a NICE (National Institute of Clinical Excellence) Pathway for a particular condition, eg Hypertension. Using our proprietary algorithm, we assess a patient in relation to a recommended treatment protocol and alerts clinicians of actions to implement to ensure treatment compliance.
   
• 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.

To market and sell these solutions we are using a combination of digital marketing and our knowledgeable and effective sales team. To provide you with more insight into these products please go to the following links:

• http://www.dxs-systems.co.uk/in-touch-july2017.pdf
   
• (http://myvytalcare.com/MyVytalCare%20Intro.mp4);

While NHS cuts and changes have slowed our growth for the year ending April 2017, the Company is confident, based on the positive reception we are receiving for the above initiatives, that these new revenue streams will begin to gain traction in the coming months and years.

We are committed to providing you our loyal shareholders with improved communication and will be sending you invites to webinars from time to time where you can speak with our CEO.

I commend the DXS staff for tenaciously riding out the past storms and have faith that the next three years will be the most exciting in the company's history. 

Yours sincerely,

Bob Sutcliffe
Chairman

DIRECTORS

Dr Robert Sutcliffe (66) - Non-Executive Chairman

Bob Sutcliffe is a Chartered Accountant who has strong financial and leadership skills, developed in both public and private sectors. His roles have included Finance Director, Commercial Director, Managing Director, Chief Executive and Chairman. More recently he has used his experience as an interim executive, managing change processes and turnaround.

David Immelman (61) - Founder & CEO

David is the founder of DXS. An entrepreneur by nature, David has initiated a number of businesses in the information, technology and communication sectors. He was a founding member of a diverse South African communication group with a range of media subsidiaries and holdings. For the past 11 years, David has dedicated himself to building DXS.

Steven Bauer (45) - Sales Director

Following his various Sales Management roles, Steven joined DXS at its inception. Steven trained in the life sciences, is a holder of the CIM Professional Postgraduate Diploma in Marketing and Pharma Mini-MBA, and manages the UK business. Steven has built DXS UK from inception to its position today, including managing relationships with clinical system suppliers, content providers and all UK customers. Steven brings significant experience in pharmaceutical promotion and electronic media to the DXS group.

REPORT OF THE DIRECTORS

The directors present their annual report and the audited financial statements for the year ended 30 April 2017. 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 recent 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 and during this financial year have invested £704,336. With the consolidation of CCGs in the UK healthcare sector and the emergence of GP Federations and their requirement to achieve billions of pounds of savings, the need 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:

DA Immelman
Director

13 September 2017

STRATEGIC REPORT

Review of the Company's Business

The Company has managed to grow revenues from £3,255,081 at April 2016 to £3,428,632 in April 2017, a rise of 5%.

The Company managed a profit of £224,122 even after significant increased investment of £704,336 in R&D for our new product lines.

NHS budget cuts at a national level have proved frustrating, however, we are targeting alternative budgets that exist across many different levels and healthcare sectors.

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 NHS budgets drying up.

Analysis of Business during Year Ending April 2017

Sales growth of 5% was below expectations due to NHS budget cuts. The company continues to wait for GPSOC to provide DXS with access to a compliant API which will add in excess of £100,000 to our bottom line. In the interim we continue to pay the Clinical System Suppliers unnecessary royalties for access to patient records.

The staff headcount, including freelancers, is approximately 90 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 £3,428,632 an increase of 5%. 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 slightly. 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.

·           Amortisation of deferred Research and Development expenditure in 2017 was £326,895 and in 2016 £286,169.

·           Earnings Per Share 2017 0.7p, 2016 0.7p. Definition: Earnings per share is the underlying profit divided by the average number of ordinary shares in issue.

·           ROCE 2017 13%, 2016 13%. 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 Immelman

FINANCIAL STATEMENTS

INCOME STATEMENT
Year Ended 30 April 2017

Statement of Financial Position
as at 30 APRIL 2017

The Financial Statements were approved and authorised for issue by the Board on 13 September 2017.

Signed on behalf of the board of directors

D Immelman                                              S Bauer
Director                                                      Director

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 APRIL 2017

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.

(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:

Provision is made for any impairment.

(c)     Tangible fixed assets

The company capitalises items purchased as Tangible Fixed Assets which have a cost in excess of £500.

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 -

Sale of services

Turnover is from the sale of opportunities to the pharmaceutical industry and the UK Primary Care sector and is recognised over the term of service contract and is apportioned on a time basis representing the delivery of the service.

(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
(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.

(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.

(l)      Share option Scheme Accounting Policy

The company recognised as an expense, the fair value of share options granted over their vesting period. The fair value is calculated by applying an option pricing model.

Factors affecting the model are : expected volatility, exercise price, weighted average share price, option life and risk free interest rate. In respect of options granted by the company -

- uses the Black Scholes calculator as the option pricing model,

- calculates volatility using the Adam Greene Volatility method using an average share price over the previous 104 weeks,

- the directors base their calculations on an option life of 2 years

(m)    Key judgements and Key accounting estimates

There are no Key judgements or Key Accounting estimates with a material effect on the carrying value of assets and liabilities.