RNS Number:9174Y
Patientline PLC
25 June 2007
Press Release Patientline plc
Thames Valley Court, 183-187 Bath Rd,
Slough SL1 4AA UK
Tel: +44 (0) 1753 896000
Fax: +44 (0) 1753 896153
www.patientline.co.uk
For release at: 7.00am, 25 June 2007
Patientline plc
Preliminary Announcement of the results for the year ended 30 March 2007
Financial Highlights
*Revenue was #43.0 million (2006 #47.8 million)
*EBITDA before exceptional items was #12.1 million (2006 #18.4 million)
*Operating loss before exceptional items was #7.2 million (2006 #3.7 million)
*Cash generated from operations was #17.5 million (2006 #20.9 million)
*Net borrowings were #76.9 million (2006 #85.7 million)
*Revenues per terminal per day declined by 6.4% to #1.62
Operating Highlights
*Clear business plan, focused on maximising return on investment
within the UK
*Loss making US operations closed
*Continental Europe operations sold - proceeds less disposal costs
#7.5 million
*Withdrawal from loss making hospitals
*Implemented new entertainment bundle, introducing a range of new innovative
services and packages to drive up terminal revenues
*Substantial focus on improving system uptime and enhancing service levels
*PPRG report left little prospect of positive outcome
Year ended Year ended
30 Mar 2007 31 Mar 2006* Change
#m #m %
------------------------------------------------------------------------------
Continuing operations - UK
Revenue 43.0 47.8 - 10%
EBITDA before exceptional items 12.1 18.4 - 34%
Operating loss before exceptional items (7.2) (3.7) + 93%
Operating loss before and after taxation
before exceptional items (15.1) (10.4) + 45%
Cash generated from operations 17.5 20.9 - 16%
Net borrowings (76.9) (85.7) - 10%
Pence Pence
------------------------------------------------------------------------------
Loss per share - continuing operations (32.6) (25.8) + 26%
* The 2006 results have been restated to reflect the Dutch and North American
businesses discontinued in 2007. The continuing operations represent the UK
business alone.
Commenting on the Annual results, Geoff White, Chairman of Patientline, said:
'The internal restructuring in the past year has been successfully achieved.
Patientline is now a solely UK business with net debt reducing by 10% in the
year to c.#77m. The next stage of the restructuring involves achieving a
sustainable level of bank debt. This task is our number 1 priority in the
coming year.'
Enquiries
Patientline plc 0845 414 6000 Blythe Weigh Communications 020 7138 3206
Geoff White, Chairman Tim Blythe
Brent Marshall, Finance Director
Chairman's Statement
The UK business of Patientline was established to provide hospital patients with
individual bedside entertainment (TV, radio, games and internet) and telephony
at no cost to NHS Trusts or the UK taxpayer.
Additionally, these bedside units were intended to provide the vehicle for the
Department of Health's vision of efficient services, such as Electronic Patient
Records, Electronic Menu Display, Electronic Meal Ordering and other value
adding services for which Patientline's equipment was designed.
The marketplace for the UK business has proved to be very challenging and
Patientline has suffered declining revenue per terminal per day (RPTPD),
year-on-year. For example, the table below demonstrates a decline in RPTPD
over the last three years.
Years ended March 2004 2005 2006 2007
------------------------------------------------------------
RPTPD #1.97 #1.87 #1.73 #1.62
Annual decline 5.1% 7.5% 6.4%
The main long term drivers of this challenging environment are:
Deflation in Telecoms pricing
Reduction in higher-earning UK hospital beds
Reduced treatment times in hospitals
Increase in mobile phone usage
In addition, the NHS ethos is antipathetic to the very idea of patients being
charged for anything whilst in hospital.
The failure by Trusts to generally adopt Electronic Patient Records and other
electronic services has further reduced Patientline's revenues from those
originally forecast in the business model developed by the Company in response
to the Government's Patient Power programme. This reduced financial performance
has left the Company unable to decrease the debt arising from the Company's
investment in hospital infrastructure and bedside units that are now
over-specified and over-priced for their more limited role as patient
entertainment and communication units.
Since my appointment in April 2006 the strategy has been to effect a turnaround
of Patientline. This involves a number of steps:
1. Introduce turnaround skills to the business
The appointment of Nick Winks in May 2006 and Brent Marshall in December 2006
and the appointment of Close Brothers Corporate Finance as financial advisers
in November 2006 were all integral to this step.
2. Focus management on the UK business
The Company announced the closure of its North American business in November
2006. The business made an operating loss of #1.5m in the year ended
31 March 2006 and an operating loss of #0.6m, before exceptional items, during
the current year and your Board determined that there was no prospect of selling
the US subsidiary.
The Dutch business (Patientline BV and its subsidiaries) was sold on 28 March
2007 for proceeds, less disposal costs, of #7.5m following a detailed review of
its operations and future prospects. The business made an operating profit of
#0.9m in the period up to disposal (2006: #1.1m). Like the UK business,
Patientline BV faced competitive challenges from the use of mobile phones on
wards. Additionally, the level of cash generated after interest payments was
deemed insufficient to fund Patientline BV's capital requirements.
3. Stabilise revenues
During 2006 the Company conducted many trials at individual hospitals to
establish what product ideas and pricing would appeal to hospital patients. A
new Entertainment Bundle, comprising television, games and internet usage, at a
competitively reduced price was introduced successfully in April 2007. At the
same time outgoing call charges were increased, which has not proved successful
and this will be reviewed. Additionally, an enhanced system for notifying
friends and family of a patient's personal bedside phone number was introduced.
Other initiatives linked to higher generation of non-patient revenues have also
been introduced, including working in conjunction with the NHS to deliver an
introductory video system for patients recently arrived in hospital. We are also
exploring other possibilities such as translation services and bed management
systems. Further initiatives are planned in 2007.
4. Introduce a performance culture
During the year many performance initiatives were launched, including financial
target setting for staff to promote the Company's services, focused training of
hospital-based employees to sell the Company's systems and the requirement for
head office staff to work within hospitals so that they are familiar with the
challenges faced by their on-site colleagues.
Cost cutting initiatives were implemented including a reduction in head office
staff, the removal of layers of management in the field, the targeting of low
contribution hospitals to withdraw services or to enter into more beneficial
arrangements, a process efficiency review of the Company's operations and the
reduction of capital expenditure.
5. Reduce bank debt
The sale of Patientline BV reduced bank debt by c.10% to #80.2m but even this
figure is too high to be sustainable. There was hope that the Patient Power
Review Group established by the Department of Health might prove helpful in this
regard but, after a year of discussion, this avenue appears closed.
The Company, with the support of its bankers, is exploring ways in which some
elements of the current debt might be restructured. An important element of any
debt restructuring initiative would be to allow headroom for further investment
in capital equipment. Currently, we are not in this position and the business
cannot continue year after year with the minimal level of investment in new
equipment that we currently make. About 25% of our installed BSUs are early
models, which are now overdue for replacement. We hope to put proposals to
shareholders in due course regarding a possible solution to these issues.
Trading of continuing operations
All numbers are quoted before exceptional items and after discontinued
activities.
Prior year comparatives are shown in brackets.
Revenue for the year declined by #4.8m to #43.0m (#47.8m). EBITDA declined by
#6.3m to #12.1m (#18.4m) reflecting lower revenue, higher investment in customer
facing staff, increased expenditure on repairs and maintenance applied to
improving the uptime of bedside equipment and partially offset by
rationalisation and efficiency savings together with lower head office costs.
The average number of installed terminals during the year reduced to 73,390
(74,389) and the total number installed at the year end was about 72,000. The
traditional measure of Revenue Per Terminal Per Day (RPTPD) fell by c.6% to
#1.62 (#1.73). The RPTPD was adversely affected by ward closures, reduction in
the length of hospital stays and a concerted effort by the NHS, particularly at
the end of the year, to reduce costs and to achieve breakeven within the
National Health Service. It is more meaningful to split RPTPD between revenue
generated from the bedside (BedRPTPD) and incoming revenue driven by friends and
family (F&FRPTPD). The Company has far more influence over the former as it has
direct contact with its customers. Friends and family are remote from the
Company and more affected by issues reported in the media. BedRPTPD fell by c.1%
to #0.77 (#0.78) whilst F&FRPTPD fell to a much greater degree by c.11% to
#0.85 (#0.95). Incoming call charges have been the subject of much adverse
publicity and detailed discussions have taken place with the Department of
Health (DH) to try to address this, (see below).
Whilst net cash creation was lower than the previous year, due to the issues
mentioned above, the business still demonstrated strong cash generation from
operations of #17.5m (#20.9m). Net borrowings fell by 10% to #76.9m (#85.7m),
due mainly to scheduled loan repayments of #1.2m and the application of net cash
generated from the sale of the Dutch subsidiary of #7.3m. The net cash generated
of #7.3m was derived from net proceeds of #7.5m, less cash in the business on
disposal of #0.2m. Net borrowings comprise bank borrowings of #80.2m, offset by
cash and cash equivalents of #3.3m.
Department of Health (DH)
As reported in detail in my statement last year and in the interim report,
extensive discussions have been held with the DH to try to resolve the issue of
the high charges for incoming calls. As acknowledged by Ofcom these charges
arose from the necessity for the Company to earn an adequate return on its
c.#170m investment in hospital infrastructure and bedside equipment installed
at no charge to the NHS Trusts, the Government or the Tax Payer. This equipment
was designed to a high specification, consistent with the ambitions of the DH,
not only to provide communications and entertainment to the bedside but also to
be capable of supporting Electronic Patient Records, Electronic Menu Display,
Electronic Meal Ordering and other value adding services. As mentioned in my
earlier remarks, to date the majority of these facilities have not been adopted
by hospitals and yet the Company has come under enormous pressure to
unilaterally reduce incoming call charges. Discussions with the DH have not been
fruitful.
Investment
The continuing Group spent #3.3m (#11.9m) on the purchase of equipment during
the year. Until the debt is restructured the policy going forward will be to
concentrate on utilising the current installed base to the full with further
investment only taking place where there is a compelling case to do so.
Banking Arrangements
The Royal Bank of Scotland has continued in its role as the lead bank in the
current syndicated facility of #86.2 million, the agreement for which was
renegotiated in December 2006 and amended in June 2007. Other members of the
syndicate are HBOS, HSBC and IKB, all of whom, together with the Royal Bank of
Scotland, have been very supportive throughout the period.
Board
Phil Dennis (10 April 2007) and Barclay Douglas (17 April 2007) left the Board
on the dates shown. I should like to take this opportunity of thanking them for
their hard work and commitment and to wish them well in the future. The Board
will seek a replacement for Barclay Douglas in due course.
Brent Marshall joined the Board as Finance Director on 10 April 2007. Brent has
held a number of executive finance roles and is also an experienced turnaround
executive, being a Member of both the Society of Turnaround Professionals and
the Association of Business Recovery Professionals.
Nick Winks who joined the Board on 18 May 2006 was promoted to Chief Executive
on 25 January 2007.
Outlook
In addition to providing patients with individual bedside entertainment and
telephony units, the Company will continue to actively promote its equipment to
NHS Trusts as a means of embracing the Government's National Programme for IT.
It will do this by highlighting the savings that can be made from paperless
information management and processing systems such as Electronic Patient
Records, Electronic Menu Display, Electronic Menu Ordering and other similar
electronic services. In a hospital environment, viewed by many as being
financially constrained, the savings and efficiencies facilitated by our systems
would assist the NHS in meeting some of its objectives.
In summary, the Company faces some very difficult challenges as outlined above.
However, if its balance sheet can be restructured so that the amount of debt is
reduced to a sustainable level, then with its strong cashflow profile and
ongoing focus on enhancing services to customers, combined with continuous
improvement to efficiencies and further investment in equipment, the Company's
future prospects would be transformed.
Geoff White
Chairman
25 June 2007
Group Income Statement
Year ended 30 March 2007
Pre-exceptional Exceptional Total
items items
(Note 3)
Notes #'000 #'000 #'000
------------------------------------------------------------------------------
Continuing operations
Revenue 2 43,049 - 43,049
Staff costs 3 (17,459) (363) (17,822)
Telecoms and
other service
related costs 3 (3,363) - (3,363)
Infrastructure
support costs 3 (5,774) (295) (6,069)
Raw material and
consumables used 3 (924) (740) (1,664)
Other operating
expenses 3 (3,433) (100) (3,533)
------------------------------------------------------------------------------
EBITDA 2, 3 12,096 (1,498) 10,598
Depreciation and
amortisation (19,303) - (19,303)
Impairment of non-current assets 3 (25) (13,589) (13,614)
------------------------------------------------------------------------------
Operating loss 2, 3 (7,232) (15,087) (22,319)
Finance costs 4 (7,890) - (7,890)
------------------------------------------------------------------------------
Loss before taxation and discontinued
operations (15,122) (15,087) (30,209)
Taxation - - -
------------------------------------------------------------------------------
Loss after taxation before
discontinued operations for the year (15,122) (15,087) (30,209)
Loss from discontinued operations after
taxation 2, 5 (1,944) (1,084) (3,028)
------------------------------------------------------------------------------
Loss for the year attributable to
equity shareholders (17,066) (16,171) (33,237)
==============================================================================
Earnings per share 6 Pence
Loss per share - basic and diluted
- Continuing operations (32.6)
- Discontinued operations (3.3)
------------------------------------------------------------------------------
Total loss per share (35.9)
==============================================================================
Group Income Statement
Year ended 31 March 2006
Pre-exceptional Exceptional Total
items items Restated
(Note 3) (Note 1)
Notes #'000 #'000 #'000
------------------------------------------------------------------------------
Continuing operations
Revenue 2 47,775 - 47,775
Staff costs 3 (18,240) (184) (18,424)
Telecoms andother service
related costs 3 (3,560) - (3,560)
Infrastructure support costs 3 (3,540) - (3,540)
Raw material and consumables used 3 (946) (500) (1,446)
Other operating expenses 3 (3,094) (518) (3,612)
------------------------------------------------------------------------------
EBITDA 2, 3 18,395 (1,202) 17,193
Depreciation and amortisation (22,142) - (22,142)
Impairment of non-current assets 3 - (12,209) (12,209)
------------------------------------------------------------------------------
Operating loss 2, 3 (3,747) (13,411) (17,158)
Finance costs 4 (6,670) - (6,670)
------------------------------------------------------------------------------
Loss before taxation and
discontinued operations (10,417) (13,411) (23,828)
Taxation - - -
------------------------------------------------------------------------------
Loss after taxation before discontinued
operations for the year (10,417) (13,411) (23,828)
Loss from discontinued
operations after taxation 2, 5 (1,106) - (1,106)
------------------------------------------------------------------------------
Loss for the year attributable to
equity shareholders (11,523) (13,411) (24,934)
==============================================================================
Earnings per share 6 Pence
Loss per share - basic and diluted
- Continuing operations (25.8)
- Discontinued operations (1.2)
------------------------------------------------------------------------------
Total loss per share (27.0)
==============================================================================
Group Balance Sheet
As at 30 March 2007
Notes As at As at
Mar 2007 31 Mar 2006
#'000 #'000
------------------------------------------------------------------------------
ASSETS
Non-current assets
Property, plant and equipment 57,175 90,959
Goodwill 430 5,054
Other intangible assets - 1,563
------------------------------------------------------------------------------
57,605 97,576
Current assets
Inventories 222 1,022
Trade and other receivables 2,357 4,220
Cash and cash equivalents 7 3,285 1,806
------------------------------------------------------------------------------
5,864 7,048
------------------------------------------------------------------------------
TOTAL ASSETS 63,469 104,624
==============================================================================
LIABILITIES
Current liabilities
Borrowings 7 56 3,032
Trade and other payables 10,777 11,273
Current tax liabilities - 195
------------------------------------------------------------------------------
10,833 14,500
Non-current liabilities
Borrowings 7 80,120 84,494
Derivative financial instruments 290 1,513
------------------------------------------------------------------------------
80,410 86,007
------------------------------------------------------------------------------
Total liabilities 91,243 100,507
SHAREHOLDERS' (DEFICIT)/EQUITY
Share capital 8 4,623 4,623
Share premium account 8 76,882 76,882
Other reserves 8 591 (637)
Retained earnings 8 (109,870) (76,751)
------------------------------------------------------------------------------
Total shareholders' (deficit)/equity (27,774) 4,117
------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' (DEFICT)/EQUITY AND
LIABILITIES 63,469 104,624
==============================================================================
Group Cash Flow Statement
Year ended 30 March 2007
Notes Year ended Year ended
30 Mar 2007 31 Mar 2006
(Restated)
(Note 1)
#'000 #'000
------------------------------------------------------------------------------
Cash flows from operating activities
Loss for the year beofore taxation
- continuing operations (30,209) (23,828)
- discontined operations (1,004) (891)
Loss before taxation on disposal of Dutch Business (1,838) -
------------------------------------------------------------------------------
Loss for the year before taxation (33,051) (24,719)
Depreciation and other non-cash items:
Depreciation 20,437 22,334
Amortisation 659 1,070
Impairment of non-current assets 14,460 12,209
Reversal of prior impairment of non-current
assets (790) -
Loss on disposal of non-current assets - 167
Loss on disposal of subsidiary 1,838 -
Share-based payments 311 (38)
Movement in other reserves 160 (14)
Decrease in operating receivables 269 2,574
Decrease/(increase) in inventories 738 (207)
Increase in operating payables 4,344 334
Finance costs 8,118 7,215
------------------------------------------------------------------------------
Cash generated from operations 17,493 20,925
Tax paid (65) (381)
------------------------------------------------------------------------------
Net cash flows from operating activities 17,428 20,544
(including net cash flows from discontinued
operating activities) 1,009 535
Cash flows from investing activities
Acquisition of businesses (net of cash
acquired) - (238)
Disposal of subsidiaries, net of cash
disposed of 5 7,274 -
Purchase of property, plant and equipment (4,859) (24,035)
Expenditure on product development - (1,122)
------------------------------------------------------------------------------
Net cash flows from investing activities 2,415 (25,395)
(including net cash flows from discontinued
investing activities) 5,868 (2,644)
Cash flows from financing activities
(Decrease)/increase in borrowings (net of
debt issue costs) (8,109) 7,227
Net interest paid (9,747) (5,300)
Payments in respect of derivative financial
instruments (508) (473)
------------------------------------------------------------------------------
Net cash flows from financing activities (18,364) 1,454
(including net cash flows from discontinued - -
financing activities)
Increase/(decrease) in cash and cash
equivalents for the year 1,479 (3,397)
Cash and cash equivalents at start of year 1,806 5,203
------------------------------------------------------------------------------
Cash and cash equivalents at end of year 7 3,285 1,806
==============================================================================
Statement of Group Total Recognised Income and Expense
Year ended 30 March 2007
Year ended Year ended
30 Mar 2007 31 Mar 2006
#'000 #'000
------------------------------------------------------------------------------
Loss for the year (33,237) (24,934)
Cash flow hedges - effective portion of changes
in fair value 875 (336)
Exchange differences on retranslation of overseas
net investments of the Group 160 (14)
------------------------------------------------------------------------------
Income and expense recognised directly in equity 1,035 (350)
------------------------------------------------------------------------------
Group total recognised income and expense for the
year attributable to equity shareholders (32,202) (25,284)
==============================================================================
Notes to the Preliminary Announcement
1 Basis of presentation of the Accounts
The financial information for the year ended 30 March 2007 has been extracted
from the 30 March 2007 Annual Report and Accounts which have been audited by
Tenon Audit Limited, who have given an unqualified audit opinion. The Group's
financial statements were authorised for issue by the Board of Directors on 25
June 2007.
The Accounts for the year ended 30 March 2007 are expected to be filed following
the Company's Annual General Meeting to be held on 27 September 2007. The
Company's Annual Report and Accounts will be mailed to shareholders in July
2007.
The accounts have been prepared in accordance with International Financial
Reporting Standards as adopted by the EU ('adopted IFRS'). The comparative
financial information for the year ended 31 March 2006 has been extracted from
the published financial statements of Patientline plc with the exception of the
items noted below.
The income statement format has been changed from an expenses by function to an
expenses by nature format which provides enhanced disclosure of the Group's
expenses. These adjustments are presentational and have no impact on the results
or net assets of the Group as previously reported.
Restatements
The Group Income Statement for the year ended 31 March 2006 has been restated in
accordance with the requirements of IFRS 5 - Non-current Assets Held for Sale
and Discontinued Operations to reflect the results of businesses discontinued in
the year ended 30 March 2007 on one line on the face of the income statement for
the year ended 31 March 2006. See note 2 for the business results analysed
between continuing and discontinued operations.
The Group Cash Flow Statement for the year ended 31 March 2006 has been restated
in order to provide more detail and therefore clarity on cash flows from
operating activities, such as working capital movements. It has also been
restated to provide details of cash flows from discontinued operations.
Going concern
The financial statements at 30 March 2007 show that the Group generated a
pre-exceptional loss of #15.1 million from continuing operations and had net
liabilities of #27.8 million. Cash generated from operations was #17.5 million.
Management's 3 year plan and latest cash flow forecasts indicate that it has
sufficient funding to continue as a going concern for the foreseeable future.
Whilst trading continues to be challenging it will enact appropriate mitigating
actions as necessary to ensure sufficiency of working capital. These may include
raising additional finance, rescheduling debt, driving cost reduction and sales
initiatives and reviewing the operating plan.
On 21 June 2007 the Group's bank facilities were amended with the revised
facility comprising a term loan facility of #65.7 million, a #15.5 million
multi-currency revolving credit facility and a #5 million overdraft facility. As
part of this revision, the facility repayment profile has been further modified
to defer substantially all capital repayments until November 2008 and the
financial covenants modified such that no tests of financial covenants are
required, apart from capital expenditure levels, until 30 June 2008.
The covenants within the revised bank facilities require that, in the event of
receipt of any monies from the Department of Health in compensation for the
reduction of incoming call charges or from NHS Trusts following the sale of
capital assets, the bank facilities will be subject to renegotiation on terms
acceptable to all parties within 30 days of the receipt of these monies.
These revised bank facilities provide the Company with secure funding until 30
June 2008. These facilities will need to be renegotiated or be in the process of
renegotiation to allow a successful going concern review prior to the approval
by the Directors in December 2007 of the Interim Accounts for financial year
ending 28 March 2008.
Foreign exchange rates
The results and cash flows of overseas subsidiaries are translated into Sterling
using average rates of exchange for the period. The principal rates were as
follows:
Year ended Year ended
30 Mar 2007 31 Mar 2006
------------------------------------------------------------------------------
Average
Euro 1.48 1.47
US Dollar 1.89 1.79
Closing
Euro 1.47 1.43
US Dollar 1.96 1.73
2 Segmental analysis
For management purposes, the Group is organised into three geographical
divisions, the United Kingdom, Rest of Europe and North America. These divisions
are the basis on which the Group reports its primary segment information. The
Directors consider the business and geographical segments to be the same and
therefore segmental analysis is disclosed for the primary segment only. All
revenue is generated from the sale of services, with the exception of North
America where revenue is generated from the sale of goods.
The Dutch business was sold on 28 March 2007. This disposal has resulted in all
other European activity outside the United Kingdom ceasing. On 1 November 2006
it was announced that the North American business was to be closed. The business
ceased operation on 19 January 2007.
As a result the Rest of Europe and North American business segments have been
disclosed as discontinued in the year. The comparative data for the year ended
31 March 2006 has been restated to show these businesses as discontinued.
See note 5 for further information in respect of the Rest of Europe and North
American business segments.
Year ended 30 Mar 2007 Continuing
operations Discontinued operations
------------------------------------------------------------------------------
Segment United Rest of North Total
Kingdom Europe America
#'000 #'000 #'000 #'000
------------------------------------------------------------------------------
Revenue 43,049 7,030 51 7,081
EBITDA pre-exceptional items 12,096 2,677 (575) 2,102
Operating(loss)/profit
pre-exceptional items (7,232) 934 (626) 308
Exceptional items (15,087) - (1,084) (1,084)
------------------------------------------------------------------------------
Operating(loss)/profit (22,319) 934 (1,710) (776)
Finance costs (7,890) (228)
------------------------------------------------------------------------------
Pre-tax loss
for the year (30,209) (1,004)
Taxation - (186)
------------------------------------------------------------------------------
Loss for the year (30,209) (1,190)
==============================================================================
Year ended 31 Mar 2006 Continuing
operations Discontinued operations
------------------------------------------------------------------------------
Segment United Rest of North Total
Kingdom Europe America
#'000 #'000 #'000 #'000
------------------------------------------------------------------------------
Revenue 47,775 6,848 785 7,633
EBITDA pre-exceptional items 18,395 2,376 (1,460) 916
Operating(loss)/profit
pre-exceptional items (3,747) 1,118 (1,464) (346)
Exceptional items (13,411) - - -
------------------------------------------------------------------------------
Operating(loss)/profit (17,158) 1,118 (1,464) (346)
Finance costs (6,670) (545)
------------------------------------------------------------------------------
Pre-tax loss for the year (23,828) (891)
Taxation - (215)
------------------------------------------------------------------------------
Loss for the year (23,828) (1,106)
==============================================================================
As at 30 Mar As at 31 Mar
2007 2006
#'000 #'000
------------------------------------------------------------------------------
Total operating assets
United Kingdom 59,754 96,314
Rest of Europe - 7,060
North America - 1,132
------------------------------------------------------------------------------
59,754 104,506
Total operating liabilities
United Kingdom (10,777) (9,413)
Rest of Europe - (5,867)
North America - (2,930)
------------------------------------------------------------------------------
(10,777) (18,210)
Net operating assets 48,977 86,296
Non-operating assets
Goodwill 430 5,054
Net borrowings (76,891) (85,720)
Derivative financial instruments (290) (1,513)
------------------------------------------------------------------------------
Total shareholders' (deficit)/equity (27,774) 4,117
Capital expenditure
United Kingdom 3,328 12,426
Rest of Europe 1,519 2,482
North America - 28
------------------------------------------------------------------------------
4,847 14,936
Depreciation and amortisation (before impairment)
United Kingdom (19,302) (22,142)
Rest of Europe (1,743) (1,258)
North America (51) (4)
------------------------------------------------------------------------------
(21,096) (23,404)
==============================================================================
3 Exceptional items
Exceptional items in the year are analysed as follows:
Year ended Year ended
30 Mar 2007 31 Mar 2006
#'000 #'000
------------------------------------------------------------------------------
Impairment of non-current assets
North America - impairment 56 -
UK - impairment 14,379 12,209
UK - reversal of previous impairment (790) -
------------------------------------------------------------------------------
UK - net impairment 13,589 12,209
------------------------------------------------------------------------------
13,645 12,209
UK restructuring and repair and maintenance costs
Staff costs 190 -
Infrastructure support costs 295 -
UK costs associated with Department of Health, Ofcom,
EGM and other charges
Staff costs 173 184
Raw materials and consumables used 740 500
Other operating expenses 100 518
North American costs
Staff costs 297 -
Changes in inventories of finished goods 731 -
------------------------------------------------------------------------------
2,526 1,202
------------------------------------------------------------------------------
16,171 13,411
==============================================================================
Analysed between:
Continuing operations - United Kingdom 15,087 13,411
Discontinued operations - North America 1,084 -
------------------------------------------------------------------------------
16,171 13,411
==============================================================================
Impairment of UK non-current assets
In the year ended 31 March 2006 the Group recognised a #12.2 million impairment
of UK non-current assets reflecting the UK market environment.
During the year ended 30 March 2007 the UK market environment continued to be
challenging. Impairment testing was performed at the year end. This resulted in
an impairment charge of #14.4 million in respect of a number of cash generating
units and a reversal of previous impairment charges of #0.8 million at other
cash generating units.
The reversal of impairment provisions arose where the economic performance had
improved over that anticipated at the prior year end or site installations
previously not expected to be completed were finalised thereby increasing
revenues and site profitability.
An impairment provision is made when the net book value of a cash-generating
units within non-current assets exceeds the present value of future cash flows.
During the year ended 30 March 2007 the definition of a cash generating unit was
updated from a trust arrangement to an individual hospital site basis to reflect
the management strategy of focussing on economically viable sites. Of the total
impairment of #14.4 million, #1.9 million has resulted from the change in
definition of a cash generating unit.
UK restructuring and repair and maintenance costs
A charge of #0.2 million was recognised in the year following the head office
redundancy programme implemented in July 2006. A further charge of #0.3 million
arose during this period resulting from actions taken to clear a backlog of
repairs to bedside systems.
Expenses connected with the Department of Health review, the Ofcom
investigation, EGM and other charges
During the year ended 30 March 2007 the Company entered into discussions with
the Department of Health with a view to procuring a financial contribution for
the Company. One-off costs associated with this activity totalled #0.3 million.
An exceptional expense of #0.7 million was recognised in the year in respect of
amounts to be paid to a capital equipment supplier on the termination of a
supply contract.
In the year ended 31 March 2006 exceptional costs were incurred of #0.2 million,
#0.5 million and #0.5 million in respect of costs associated with an Ofcom
investigation, legal and advisory fees in connection with an EGM and changes in
the senior management team and other charges connected with the halting of
investment in UK hospitals respectively.
North American costs
An exceptional expense of #1.1 million has been recognised in the year ended 30
March 2007 in respect of the North American business, being #0.7 million for the
write down of US inventory to net realisable value, #0.3 million for staff
costs, and #0.1 million impairment of non-current assets. This business ceased
operation on 19 January 2007.
4 Finance costs
Year ended Year ended
30 Mar 2007 31 Mar 2006
#'000 #'000
------------------------------------------------------------------------------
Interest expense on bank loans and overdraft 6,746 6,572
Other finance charges 1,372 643
------------------------------------------------------------------------------
Total finance costs 8,118 7,215
Finance costs - discontinued operations (228) (545)
------------------------------------------------------------------------------
Finance costs - continuing operations 7,890 6,670
5 Discontinued operations
Loss from discontinued operations after tax
Year ended Year ended
30 Mar 2007 31 Mar 2006
#'000 #'000
------------------------------------------------------------------------------
Rest of Europe
Pre-tax profit of discontinued operations 706 806
Tax in respect of profit of discontinued
operations (186) (215)
------------------------------------------------------------------------------
Profit of Rest of Europe operations 520 591
North America
Pre-tax loss of discontinued operations (1,710) (1,697)
Tax in respect of loss of discontinued operations - -
------------------------------------------------------------------------------
Loss of North American operations (1,710) (1,697)
Loss of discontinued operations (see note 2) (1,190) (1,106)
------------------------------------------------------------------------------
Loss on disposal of Dutch business
Pre-tax loss on disposal of Dutch business (1,838) -
Tax in respect of disposal of Dutch business - -
------------------------------------------------------------------------------
Loss recognised on the disposal of Dutch business (1,838) -
------------------------------------------------------------------------------
Loss from discontinued operations after tax (3,028) (1,106)
==============================================================================
Disposal of Dutch business
The Dutch business was sold on 28 March 2007. This disposal has resulted in all
other European activity outside the United Kingdom ceasing.
The aggregate gross cash consideration, including the repayment of inter-company
loans was #8.5 million, after a tax adjustment of #0.1 million. The transaction
comprised sale of the entire share capital of Patientline BV together with its
wholly owned subsidiary Patientline Exploitatie BV. The resultant profit on
disposal before goodwill was #0.7 million, and loss on disposal after goodwill
was #1.8 million. There is no taxation charge associated with the disposal.
#'000
------------------------------------------------------------------------------
Gross cash consideration 8,502
Net expenses (965)
Net assets sold (7,011)
Translation reserve 134
------------------------------------------------------------------------------
Profit on the sale of net assets before the write off of goodwill 660
Goodwill written off (2,498)
------------------------------------------------------------------------------
Net loss on disposal (1,838)
==============================================================================
Cash received 8,502
Net expenses paid (965)
Cash disposed of (263)
------------------------------------------------------------------------------
Net cash inflow on disposal 7,274
==============================================================================
Closure of North American operation
On 1 November 2006 it was announced that the North American business was to be
closed. The business ceased operation on 19 January 2007.
6 Earnings per share
The calculation of the loss per ordinary share is based on losses of #33,237,000
(2006: #24,934,000) and on a weighted average of 92.5 million (2006: 92.5
million) ordinary shares in issue during the year. The impact of outstanding
share options on earnings per share is not dilutive.
7 Borrowings
As at As at
30 Mar 2007 31 Mar 2006
#'000 #'000
------------------------------------------------------------------------------
Bank loan - current portion of bank loans 56 3,032
Bank loan - non-current portion of bank loans 80,120 84,494
------------------------------------------------------------------------------
Total borrowings 80,176 87,526
------------------------------------------------------------------------------
Borrowings are repayable as follows:
Within one year 56 3,032
Between one to two years 33,841 12,782
Between two to five years 46,279 53,425
In five years or more - 18,287
------------------------------------------------------------------------------
Total borrowings 80,176 87,526
------------------------------------------------------------------------------
Borrowings analysed gross of unamortised deferred borrowing
costs are repayable as follows:
Within one year 1,000 4,000
Between one to two years 34,633 13,611
Between two to five years 46,967 54,736
In five years or more - 18,287
------------------------------------------------------------------------------
Gross borrowings 82,600 90,634
Unamortised deferred borrowing costs (2,424) (3,108)
------------------------------------------------------------------------------
Total borrowings 80,176 87,526
------------------------------------------------------------------------------
Borrowing facilities
On 29 November 2004 a bank facility was agreed, comprising a committed facility
of #105 million with a further #5 million working capital facility. These
facilities were revised on 28 November 2005 to provide a term loan facility of
#75 million, a #15.5 million multi-currency revolving credit facility and a #5
million overdraft facility. On 11 December 2006 these facilities were amended
with the revised facility comprising a term loan facility of #73 million, a
#15.5 million multi-currency revolving credit facility and a #5 million
overdraft facility. As part of this revision, the facility repayment profile was
modified to defer substantially all capital repayments until May 2008 and the
financial covenants modified such that no tests of financial covenants were
required, apart from capital expenditure levels, until 31 March 2008.
In return, a fee equivalent to 10% of Patientline plc's market capitalisation is
payable to the Company's lenders. The fee is payable at any time prior to 31
March 2008 only at the option of the Company. Between 31 March 2008 and 31 March
2011 payment of the fee can be demanded at any time by any of the members of the
Company's banking syndicate. If the option to pay the fee is exercised by the
Company prior to 31 March 2008, the fee is payable only in ordinary shares of
the Company. If any of the members of the Company's banking syndicate serves
notice for payment of the fee between 31 March 2008 and 31 March 2011 the
Company has the option to settle the fee either in cash or in ordinary shares of
the Company.
In order to secure maximum flexibility in the options available to settle the
fee described above, approval was sought and obtained from the shareholders on
28 March 2007 to permit the Company to buy back a maximum of 10% of the share
capital and to sell any or all such shares which are purchased and held in
treasury for cash (which would include satisfying a liability to the Company's
banking syndicate) as if the statutory pre-emption rights which would otherwise
apply did not apply to any such sale. If the Directors believe that purchase of
the shares would represent the optimum settlement mechanism for the fee at the
relevant time, the Board will instruct the Company's brokers to purchase the
shares required to settle the fee. The Directors have no present intention of
purchasing shares and do not intend to do so until the working capital position
is such that it is prudent to do so.
This fee has been determined to be a cash-settled equity based payment. The fair
value of the fee was determined to be #517,000 at 11 December 2006, being the
date of the transaction. The expense has been included within deferred borrowing
costs associated with the facility agreement. The fair value of the fee at 30
March 2007 was #231,000 and the change in fair value has been adjusted within
deferred borrowing costs and accruals as required.
On 21 June 2007 these facilities were further amended with the revised facility
comprising a term loan facility of #65.7 million, a #15.5 million multi-currency
revolving credit facility and a #5 million overdraft facility. As part of this
most recent revision, the facility repayment profile has been further modified
to defer substantially all capital repayments until November 2008 and the
financial covenants modified such that no tests of financial covenants are
required, apart from capital expenditure levels, until 30 June 2008.
The covenants within the revised bank facilities require that, in the event of
receipt of any monies from the Department of Health in compensation for the
reduction of incoming call charges or from NHS Trusts following the sale of
capital assets, the bank facilities will be subject to renegotiation on terms
acceptable to all parties within 30 days of the receipt of these monies.
These revised bank facilities provide the Company with secure funding until 30
June 2008. These facilities will need to be renegotiated or be in the process of
renegotiation to allow a successful going concern review prior to the approval
by the Directors in December 2007 of the Interim Accounts for financial year
ending 28 March 2008.
Analysis of movements in net borrowings
Year to 30 Mar 2007
At Non-cash At
1 Apr 2006 Cash flow changes 30 Mar 2007
#'000 #'000 #'000 #'000
------------------------------------------------------------------------------
Cash at bank and in hand 1,806 1,479 - 3,285
Borrowings - current (3,032) 1,275 1,701 (56)
Borrowings - non-current (84,494) 6,834 (2,460) (80,120)
------------------------------------------------------------------------------
Total (85,720) 9,588 (759) (76,891)
Year to 31 Mar 2006
At Non-cash At
26 Mar 2005 Cash flow changes 31 Mar 2006
#'000 #'000 #'000 #'000
------------------------------------------------------------------------------
Cash at bank and in hand 5,203 (3,397) - 1,806
Borrowings - current - - (3,032) (3,032)
Borrowings - non-current (80,560) (7,227) 3,293 (84,494)
------------------------------------------------------------------------------
Total (75,357) (10,624) 261 (85,720)
==============================================================================
8 Reconciliation of movements in equity
Share- Cap-
based Invest ital
Share Share Trans- Hedg- pay- -ment re- Ret- Total
capital prem- lation ing ment in own demp- ained equity
ium res- res- res- shares tion earn-
erve erve erve reserve ings
#'000 #'000 #'000 #'000 #'000 #'000 #'000
#'000 #'000
-------------------------------------------------------------------------------
Balance at 26
March 2005 4,623 76,882 (28) (307) 220 (135) 1 (51,817) 29,439
Total recognised
income and expense - - (14) (336) - - - (24,934) (25,284)
Equity settled
share-
based payment
transactions - - - - 45 (83) - - (38)
-------------------------------------------------------------------------------
Balance at 31
March 2006 4,623 76,882 (42) (643) 265 (218) 1 (76,751) 4,117
Total recognised
income and expense - - 160 875 - - - (33,237)(32,202)
Transfer to
Reatained earnings
on disposal of
foreign operation - - (118) - - - - 118 -
Equity settled
share- based
payment transactions - - - - 357 (46) - - 311
-------------------------------------------------------------------------------
Balance at 30
March 2007 4,623 76,882 - 232 622 (264) 1 (109,870)(27,774)
===============================================================================
9 Post balance sheet events
On 10 April 2007 #1.4 million of the bank facility was repaid.
On 21 June 2007 the Group's bank facilities were further amended with the
revised facility comprising a term loan facility of #65.7 million, a
#15.5 million multi-currency revolving credit facility and a #5 million
overdraft facility. See note 7 for further details.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PUUBCQUPMGRP
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