Final Results

RNS Number : 8091N

Medilink-Global UK Limited

17 June 2010

 

17 June 2010

 

Medilink-Global UK Limited

('Medilink' or the 'Group')

 

Final Results for the year ended 31 December 2009

 

Medilink-Global UK Limited (AIM: MEDI), the electronic health card network service provider, announces its final results for the year ended 31 December 2009.

 

Financial highlights

 

·; Revenue of £1.24 million (Revenue for the 7 months ended 31 December 2008: £578,000).

 

·; Loss before tax of £942,000 (Loss before tax for the 7 months ended 31 December 2008: £38,000).

 

·; Revenues were generated from Malaysia (61%), Singapore (30%) and China (9%).

 

Operational highlights

 

·; On 1 April 2009, the company entered into an arrangement with Aviva Limited to provide cross border administration and Provider Network Management Services for Thailand, Malaysia and Singapore.

 

·; On 1 June 2009, the company entered into an arrangement with AXA Affin General Insurance Berhad to provide Emergency Medical Assistance (EMA) Facilitation services.

 

·; On 1 January 2010, the company entered into an arrangement with Qualitas to provide localized administration and Provider Network Management Services for Malaysia Out-Patient services.

 

·; Renewal of Third Party Administrator ("TPA") contract and new TPA contracts secured in China:

 

o On 5 June 2009, the company entered into a 3 year contract with Aviva-Cofco Life Insurance Co. Ltd;

o On 1 February 2010, the company entered into a 3 year contract with Global Benefits Group;

o On 12 February 2010, the company entered into a 2 year contract with American International Assurance Company (Bermuda) Limited;

o On 10 March 2009, the company entered into one year contract with automatic renewal for another year with Winterthur Insurance (Asia) Ltd. Shanghai Branch; and

o Generali China Life Insurance Co. Ltd TPA contract in China renewed during 2009 for 3 years.

 

·; Acquisition of a TPA company in Singapore, Lifeinc Holdings Pte Ltd, with existing clients and extensive healthcare provider network.

 

·; Won maiden TPA contracts in Thailand during the first quarter of 2009.

 

Enquiries

 

MediLink-Global UK Limited Shia Kok Fat, Chief Executive Officer www.medilink-global.com	Tel: + 603 2296 3028
Allenby Capital Limited Nick Athanas/James Reeve	Tel: +44 (0)20 3328 5656

 

 

Chairman's Statement

 

Medilink-Global UK Limited is pleased to present the Group's results for the year ended 31 December 2009.

 

OVERVIEW

The 2009 financial year has been a challenging year for Medilink striving to expand its regional healthcare provider network with a particular emphasis on the People's Republic of China and thereby increasing its market share in the South East Asia region. The Group's strategy remains focused on laying the foundations for its overall business expansion in China.

 

FINANCIAL REVIEW

The Group's 2008 comparative figures represent 7 months operating results for the period from June 2008 to December 2008 following the formation of the Group in May 2008. On this basis while it is difficult to make direct comparisons with the previous one, on a pro rata basis revenues increased by over 40%. This was mainly as a result of the infusion of income following the acquisition of Lifeinc Holdings Pte Ltd, our wholly owned subsidiary in Singapore, in April 2009.

 

The Group recorded revenues of £1.24 million and a loss after taxation of £924,000 for the year ended 31st December 2009. While the Malaysia operations continued to generate the majority of the Group revenues of 61%, Singapore made a significant contribution of 30% and China registered 9%. One of the main factors behind the loss suffered during the year was the significant step up in operating costs in China, which were necessarily incurred in providing the infrastructure to underpin the anticipated growth in that country. Other factors that adversely affected the results during the year were the amortisation of intangible assets (£104,000), an unrealised foreign exchange loss (£50,000) and the share of loss of the associate company in Thailand (£38,000).

 

GROUP'S OPERATIONS REVIEW

The Group's efforts in expanding its regional healthcare provider network and the provision and maintaining of high quality TPA services further strengthened our position as the leading regional TPA services provider in China and the South East Asian region. Our position was reinforced by the numerous new TPA contracts secured during the year together with the renewal of existing contracts as detailed in the Highlights of this Annual Report.

 

The main business of the Group, which provides the bulk of the revenue continues to be third party administrator services together with significant contributions from maintenance fee income and one off terminal sales in 2009. There were also one off software license fees and associated maintenance fees, which while not significant in 2009 are forecast to have a greater impact in 2010. The Group is always examining new business opportunities and in collaboration with the Development Tourist Corporation of Malaysia's Ministry of Tourism have made an agreement to provide accident insurance cover for all in-bound tourists to Malaysia. This will generate additional income for the Group in 2010 and alongside such value added services such as Medical Second Opinion and Medical Assistance support.

 

China operations recorded significant losses in the early part of the year but steadily improved over the year and achieved breakeven in the month of December 2009. As our setup in China is relatively new as compared with Malaysia operations thus, the average monthly revenue per employee during the year for China operations of £312 was much lower than £1,431 for Malaysia operations. We expect the monthly average revenue per employee for China will improve significantly as the business matures. Sales for the first quarter of 2010 were encouraging due to an increase in members from one insurance company. Our China operations recorded a profit for the first two months of 2010 and now much of the infrastructure is in place, costs should only rise marginally in 2010 and consequently revenues are expected to rise to a level which should produce a positive contribution for the year. To date the number of healthcare providers operating in our network in China has reached 226. Although this falls short of our original target of 1,000, we have revised the time frame to achieving this target by the end of 2011.

 

The acquisition of the wholly owned subsidiary in Singapore, Lifeinc Holdings Pte Ltd, was completed in April 2009. As a result, the Group inherited a well established healthcare provider network and a strong customer base in Singapore. The strategic importance of this acquisition has become apparent in the light of many of the international insurance companies establishing their Asia Pacific head offices in Singapore. Medilink's strong foothold in Singapore is essential to facilitate future collaboration with these insurance companies. It is worth mentioning that as a result of this acquisition we inherited an important customer, OCBC Bank Ltd.

 

In the first quarter of 2009 our associated company in Thailand secured its maiden TPA contract with Thai Insurance Public Company Limited, a local insurance company. This contract started to generate revenue in November 2009. We expect Thailand operations will continue to sustain minor losses for another year before moving into profit in 2011. To date, there are 101 healthcare providers in our network in Thailand. We have now revised our plan to form a network of 250 healthcare providers instead of the original 500 previously planned following a careful assessment of the request made by our local and cross border customers. We hope this will be achieved by the end of 2010.

 

The core business conducted by our Malaysia operations remains strong and are expected to continue to grow and provide a healthy contribution to the Group's performance for 2010.

 

PROSPECTS

Having set up an appropriate infrastructure from an operational, people and system perspective and having made significant progress in signing additional TPA contracts with a number of new insurers in China, we are hopeful of very bright prospects for a significant improvement in the Group's financial performance for the financial year ending 2010.

 

The Group will leverage on its regional presence in China and South East Asia in general and by capitalising on the expertise of our management, personnel and capital resources together with the considerable potential of our business partners, will hope to build our customer base and maximise our top line growth. We will continue to strengthen all areas of the organisation and maintain our position as a leading regional TPA with a global servicing capacity.

 

ACKNOWLEDGMENTS

On behalf of the board, I would like to extend our heartfelt thanks to our business partners, customers, associates, healthcare providers and valued shareholders for their support throughout the year. We would also wish to thank the management and staff of the entire Medilink-Global Group for their continued loyalty and commitment in discharging their duties.

 

 

 

 

Norman Lott

Chairman

16 June 2010

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2009

 

 

	Note	Year ended	Period ended
		2009	2008
		£'000	£'000
Revenue		1,243	578
Cost of sales		(843)	(360)
Gross profit	3	400	218
Other income		(45)	63
Administrative expenses		(1,256)	(292)
Operating loss		(901)	(11)
Share of associate undertakings' loss		(38)	(23)
Finance expenses		(3)	(4)
Loss before taxation		(942)	(38)
Taxation	4	18	(7)
Loss after taxation attributable to equity holders		(924)	(45)
Other comprehensive income
Exchange differences on translation of foreign operations		-	(34)
Total comprehensive income for the year attributable to equity holders		(924)	(79)
Loss per ordinary share (pence)	7
Basic		(0.89)	(0.07)
Diluted*		(0.89)	(0.07)

 

 

* In accordance with IAS 33 "Earnings per share" and as the Group has reported a loss for the period the shares are not diluted. The Group have not issued any instruments with dilutive effects.

 

All operations of the company are continuing.

 

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 31 DECEMBER 2009

 

 

	Note	2009	2008
ASSETS		£'000	£'000
Non-current assets
Property, plant and equipment		236	223
Intangible assets	5	4,413	4,282
Interest in associated company		17	20
Total non-current assets		4,666	4,525
Current assets
Inventories		-	51
Trade receivables		435	230
Other receivables		349	173
Cash and cash equivalents		315	1,156
Total current assets		1,099	1,610
TOTAL ASSETS		5,765	6,135
EQUITY
Equity attributable to the equity holders of Medilink-Global UK Ltd:
Share capital		5,193	5,167
Share premium		737	678
Reserves		(909)	(79)
Total equity		5,021	5,766
Current liabilities
Trade payables		108	88
Other payables		485	142
Advance from directors		71	46
Bank borrowings		12	14
Hire purchase liabilities		3	3
Current tax payable		-	1
Total current liabilities		679	294
Non-current liabilities
Hire purchase liabilities		8	12
Bank borrowings		1	14
Deferred tax		56	49
Total non-current liabilities		65	75
TOTAL EQUITY AND LIABILITIES		5,765	6,135

 

 

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2009

 

 

	Year ended	Period ended
	2009	2008
Cash flows from operating activities	£'000	£'000
Loss before taxation	(942)	(38)
Adjustments for:
Amortisation of intangible assets	104	45
Depreciation of property, plant and equipment	114	22
Provision for bonus payable in shares	94	-
Share of loss of associated company	38	23
Finance costs	3	4
Cash from operating activities before changes in working capital	(589)	56
Decrease / (increase) in Inventories	51	(51)
(Increase) / decrease in trade and other receivables	(381)	62
Increase / (decrease) in trade and other payables	388	(38)
Cash flow from operations	(531)	29
Tax paid	(4)	(32)
Interest paid	(3)	(4)
Net cash flow from operations	(538)	(7)
Investing activities
Purchase of property, plant and equipment	(127)	(193)
Cash & cash equivalent of subsidiaries at the date of acquisition	-	91
Acquisition of subsidiary	(208)	-
Investment in associated company	(35)	(43)
Cash flow used in investing activities	(370)	(145)
Financing activities
Proceeds from issue of shares	97	2,399
Share issue costs	(11)	(1,054)
Repayment of bank borrowings	(15)	(2)
Repayment of hire purchase liabilities	(4)	(1)
Cash flow from financing activities	67	1,342
Net (decrease) / increase in cash and cash equivalents	(841)	1,190
Effect of exchange rate changes	-	(34)
Cash and cash equivalents at the beginning of the period	1,156	-
Cash and cash equivalents at the end of the period	315	1,156

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2009

 

 

	Share capital	Share premium	Exchange reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000
As at Date of Incorporation	-	-	-	-	-
Loss for the period	-	-	-	(45)	(45)
Exchange differences	-	-	(34)	-	(34)
Total comprehensive income for the period	-	-	(34)	(45)	(79)
Issue of shares	5,167	1,732	-	-	6,899
Share issue costs	-	(1,054)	-	-	(1,054)
Balance as at 31 December 2008	5,167	678	(34)	(45)	5,766
Loss for the year	-	-	-	(924)	(924)
Total comprehensive income for the year	-	-	-	(924)	(924)
Provision for bonus payable in shares	-	-	-	94	94
Issue of shares	26	70	-	-	96
Share issue costs	-	(11)	-	-	(11)
Balance as at 31 December 2009	5,193	737	(34)	(875)	5,021

 

 

SELECTED NOTES TO THE FINANCIAL INFORMATION

FOR THE YEAR ENDED 31 DECEMBER 2009

 

1. Basis of Preparation

 

The financial information has been prepared in accordance with International Financial Reporting Standards and using accounting policies which are consistent with those adopted in the financial statements.

 

The financial information set out in this announcement does not constitute the Group's statutory financial statements for the period ended 31 December 2009, but was derived from those financial statements. The auditors have reported on the statutory financial statements for the period ended 31 December 2009; this report was unqualified.

 

The financial information set out in this announcement was approved by the board on 16th June 2010.

 

The directors do not recommend the payment of a dividend.

 

 

2. Operating segments

 

The Group has adopted IFRS 8 Operating Segments with effect from 1 January 2009. Per IFRS 8 operating segments are based on internal reports about components of the group, which are regularly reviewed and used by the Board of Directors being the Chief Operating Decision Maker ("CODM") for strategic decision making and resource allocation, in order to allocate resources to the segment and to assess its performance. The Group's reportable operating segments are as follows:

 

i) Third party administrator

ii) Software licensing

 

The CODM monitors the operating results of each segment for the purpose of performance assessments and making decisions on resource allocation. The management has organised the entity based on differences in products and services. Third party administrator segment is derived from aggregating China, Malaysia and Singapore entity while Software licensing segment represent a single entity from Malaysia. Performance is based on external and internal revenue generations and profit before tax, which the CODM believes are the most relevant in evaluating the results relative to other entities in the industry. Segment assets and liabilities are presented inclusive of inter segment balances, as inter-segment pricing. Information regarding each of the operations of each reportable segment is included below.

 

2009	Third party administrator	Software licensing	Consolidation	Total
	£'000	£'000	£'000	£'000
External revenue	1,096	147	-	1,243
Internal revenue	-	69	(69)	-
Total revenue	1,096	216	(69)	1,243
Interest revenue	1	-	-	1
Interest expenses	(3)	-	-	(3)
Depreciation and amortization	(196)	(21)	-	(217)
Corporation tax	17	1	-	18
Earning before tax (EBT)	(932)	(10)	-	(942)
Assets	7,766	250	(2,251)	5,765
Liabilities	(1,935)	(176)	1,367	(744)

 

(i) The assets of third party administrator are including the goodwill on consolidation of £4,138,000 (2008: £4,078,000)

 

Revenues from two customers amounted to £349,000: ING Insurance Bhd £204,000 and AXA Insurance Bhd £145,000 (2008: £302,000: ING Insurance Bhd £187,000 and AXA Insurance Bhd £115,000), arising from sales by third party administrator segment.

 

2008	Third party administrator	Software licensing	Consolidation	Total
	£'000	£'000	£'000	£'000
External revenue	431	147	-	578
Internal revenue	-	10	(10)	-
Total revenue	431	157	(10)	578
Interest revenue	1	-	-	1
Interest expenses	(4)	-	-	(4)
Depreciation and amortization	(56)	(11)	-	(67)
Income tax	(4)	(3)	-	(7)
Earning before tax (EBT)	(52)	14	-	(38)
Assets	6,948	197	(1,010)	6,135
Liabilities	(849)	(110)	590	(369)

 

(i) The assets of third party administrator are including the goodwill on consolidation of £4,078,000.

 

The geographical split of revenue and non-current assets arises as follows:

 

2009	UK	Singapore	China	Malaysia		Total
	£'000	£'000	£'000	£'000		£'000
Revenue	-	374	112	757		1,243
Intangible assets	275	-	-	-		275
Goodwill	4,138	-	-	-		4,138
PPE	-	21	44	171		236

 

2008	UK	Singapore	China	Malaysia		Total
	£'000	£'000	£'000	£'000		£'000
Revenue	-	-	29	549		578
Intangible assets	204	-	-	-		204
Goodwill	4,078	-	-	-		4,078
PPE	-	-	4	219		223

 

 

3. Loss from operations

 

Loss from operation has been arrived at after charging:

 

	2009	Period ended 31 December 2008
	£'000	£'000
Depreciation	114	22
Amortisation of intangible assets	104	45
Auditors remuneration - audit of the company accounts	31	5
- non -audit services	7	1

 

 

4. Taxation

 

	2009	Period ended 31 December 2008
	£'000	£'000
Current tax charge	(3)	-
Deferred tax	21	7
	18	7
Factors affecting tax charge:
Loss before tax	(978)	(38)
Tax on ordinary activities at 17% (2008:17%)	(166)	(6)
Tax effects of:
- Non taxable income - unrealised foreign exchange gain	(1)	(13)
- Non deductible amortization	18	8
- Non deductible losses of the Company subsidiaries	143	6
- Non deductible losses of associates	6	5
- Non deductible expenses	3	-
- Other	36	-
- Deferred tax	(21)	(7)
	18	(7)

The applicable tax of the Group is derived from the consolidation of all Group companies applicable tax band on their domestic tax rates.

 

 

 

5. Intangible assets

 

2009	Intellectual Property
	Goodwill	Trademark	System software	Contracted customers	Total
Cost	£'000	£'000	£'000	£'000	£'000
As at 1 January 2009	4,078		138	111	4,327
Acquisition of subsidiary	60	2	71	102	235
As at 31 December 2009	4,138	2	209	213	4,562
Amortisation
As at 1 January 2009	-	-	30	15	45
Amortisation	-	2	38	64	104
As at 31 December 2009	-	2	68	79	149
Net book value
As at 31 December 2009	4,138	-	141	134	4,413

 

 

Description of intangibles

 

Goodwill arising on the acquisition of the subsidiaries represents the excess of the cost of acquisition over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiaries recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. The carrying value of Goodwill is allocated to the respective segments as follows: -

 

 

 

 

	2009 £'000	2008 £'000
Third party administrator	4,057	3,997
Software licensing	81	81
Total carrying value of Goodwill	4,138	4,078

 

System software comprises Electronics Claims Clearance System and Loyalty Programme software. The system software is initially recognised based on the cost that would be incurred in re-creating the asset and is subsequently amortised based on straight-line method over a period of three years. Contracted customers are the existing customers of the acquired subsidiaries. The contracted customers are initially recognised based on the estimated net present value of the service contracts entered into between the customers and subsidiaries acquired and is subsequently amortised based on straight-line method over a period of five years. The recoverable amount of cash generating unit is determined based on value in use calculation as set out below.

 

The intangible assets are tested for impairment as part of the cash-generating unit to which it belongs. The carrying amount of the cash generating units are tested for impairment based on 5 years discounted cash flow method for the period from year 2010 to year 2014 at the discount rate of 8% and the expected annual growth rate based on the Group historical record for each cash-generating unit range from 10% to 50%.

 

Acquisition of Lifeinc Holdings Pte Ltd

Purchase consideration	Book value	Adjustment	Fair value
	£'000	£'000	£'000
Cash	112	-	112
Shares	96	-	96
Total purchase consideration	208	-	208
Fair value of net assets acquired	-	-
Intangible fixed assets acquired (Note 10)	-	(175)	(175)
Deferred tax liabilities	-	27	27
Goodwill	208	(148)	60

 

Goodwill includes a well established healthcare provider network which brings with its expected future growth in Singapore.

Acquisition of subsidiary, net of cash and cash equivalents acquired
	£'000
Property, plant and equipment	-
Trade and other receivables	-
Cash and cash equivalents	-
Inventories	-
Total liabilities	-
Net total asset acquired	-
Deferred tax	-
Total consideration	208
Payment through shares	(96)
Cash consideration	112
Cash payment made in the previous year	-
Cash consideration paid during the year	112
Cash and cash equivalents acquired	-
Acquisition of subsidiaries, net of cash and cash equivalents acquired	112

 

 

 

 

The revenue and profit and loss of Lifeinc Holdings Pte Ltd for the year are as follows: -

 

	2009 £'000	2008 £'000
Revenue	373	-
Net loss	(19)	-

 

 

6. Share capital

 

The Company has one class of ordinary share capital which carry no rights to fixed income, any preferences or restrictions.

 

Authorised share capital:

 

	2009	2008
Authorised:	£'000	£'000
200,000,000 Ordinary shares of 5p each	10,000	10,000
Issued:
103,865,847 Ordinary shares of 5p each	5,193
103,330,630		5,167

 

Share issues during year:

 

2009		Shares	Share capital	Share premium
	Note	No.	£'000	£'000
As at 1 January 2009		103,330,630	5,167	678
Issued on 30 June 2009	i)	535,217	26	70
Less: share issue costs		-	-	(11)
At 31 December 2009		103,865,847	5,193	737

 

i) On 30 June 2009, 535,217 ordinary shares of 5p were issued at 18p per share to the vendors as the final and full payment for the purchase consideration of Lifeinc Holdings Pte Ltd.

 

2008		Shares	Share capital	Share premium
	Note		£'000	£'000
Issued on 7 January 2008	i)	2,000	-	-
Issued on 12 May 2008	ii)	90,000,000	4,500	-
Issued on 18 November 2008	iii)	13,328,630	667	1,732
Less: share issue costs		-	-	(1,054)
At 31 December 2008		103,330,630	5,167	678

 

i) On 7 January 2008, 2,000 ordinary shares of 5p were issued for cash of 5p per share

ii) On 12 May 2008, 90,000,000 ordinary shares of 5p were issued in respect of the transfer of 100% of the issued shares in the capital of Medilink-Global (Asia) Pte Ltd.

iii) On 18 November 2008, 13,328,630 ordinary shares of 5p were issued for cash of 18p per share, representing a premium of 13p per share.

 

7. Loss per share

 

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period. In accordance with IAS 33 and as the Group has reported a loss for the period the shares are not diluted.

 

	31.12.2009	31.12.2008
Loss after taxation (£'000)	(924)	(45)
Basic weighted average shares in issue	103,600,438	60,057,432
Basic and diluted loss per share based on issued share capital as at 31 December (pence)	(0.89)	(0.07)

 

8. Post balance sheet events

 

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