Induction Healthcare Group PLC
Annual Report 2023

Plain-text annual report

About us We are a leading digital health company committed to improving the infrastructu re of care delivery. Our products facilitate efficient patient and care team engagement, combining digital with in‑person care delivery – we call this ‘flexible care’. Our products power remote consultations, capture patient reported data and empower patients to self-manage their care pathway. We are passionate about designing around the needs of the patient and we sharply focus on the delivery of cost and efficiency benefits to hospitals, regional care systems and governments. l in the British Isles. Index of contents Contents Overview Business highlights Strategic report Chair’s statement CEO statement Our Product Market 1 1 2 2 4 6 Financial review 10 Strategic Report 13 S172 Statement 14 Principal risks and uncertainties 17 Governance 23 Directors Biographies 23 Corporate Governance Report 24 Remuneration Committee Report 27 Audit Committee Report Nomination Committee Report Directors’ report Statement of Directors’ responsibilities Financial Statements 30 32 33 35 36 Independent auditors’ report 36 Consolidated Statement of Comprehensive Income 43 Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes (forming part of the financial statements) Company Statement of Financial Position Company Statement of Changes in Equity 44 45 46 47 92 93 Company Cash Flow Statement 94 Notes to the company financial statements 95 Additional Information 102 Company Information 102 Glossary 103 Induction Healthcare Annual Report & Accounts 2023 Business headlines Revenue from customer contracts Year ending Pro-forma Year ending 1 31 March 2023 31 March 2022 £13.6m £12.1m 2 i w e v r e v O • First full year of revenue from Induction Attend Anywhere • EBITD A 3 Y ear ending EBITD A 3 Ye a r e n d i n g 31 Marc h 2023 £(4.8m) 3 1 Ma rch 2 0 2 2 • £(5.3m) Induction Zesty revenues significantly up with strong sales pipeline growth into FY24 Induction Attend Anywhere national contract renewals with NHS Scotland and NHS Wales Cash on hand as at 31 March 2023 £4.3m (2022: £7.5m) 4 ARR As at 31 March 2023 £13.5m (2022: £12.3m) • Business rightsizing programme completed by year-end • Adjusted EBITDA loss £(3.6m) (2022 loss £(3.8m)) after adjusting for non-cash, exceptional items see page 11. • Induction Switch product divested (post-period end) 1 Reported revenue from continuing operations is stated after reclassifying assets held for sale under IFRS5 (Induction Switch and Induction Guidance £0.7m). These product assets were held for sale at year end 31 March 2023 and classified under discontinued operations (Total recognised revenue from continuing operations £12.9m plus discontinuing operations £0.7m was £13.6m).. 2 Reported revenue from customer contracts as at 31 March 2022 is stated after the application of IFRS3 being a fair value adjustment (£4.2m) relating to the deferred revenue acquired as part of the Attend Anywhere Pty Limited acquisition in June 2021. Had this adjustment not been applied, pro-forma recognised revenue from customer contracts for the year would have been £12.1m compared with the reported figure of £7.9m. See page 10. 3 EBITDA is Operating Loss from continuing operations (£17.4m) before depreciation £0.1m, amortisation £4.8m and non-cash impairment £7.7m. 4 Annual Recurring Revenue (“ARR”) is defined as annualised contracted Software-as-a-Servic e (“SaaS”) fee. ARR is calculated as the annually recurring licence fees from contracts existing at 31 March 2023 that expire on 1 April 2023 or later. It represents the annualised value of the recurring revenue base that is expected to be carried into future periods, and its growth is a forward-looking indicator of reported recurring revenue growth. ARR differs from recognised revenue due to the timing of revenue recognition, which includes amounts for partial years based on contract start dates, whereas ARR is an annualised amount. Recognised revenue also includes non-recurring non-SaaS fees. 1 Induction Healthcare Strategic Report Annual Report & Accounts 2022 Chair’s statement The year ending March 2023 has been a particularly challenging period for Induction Healthcare Group plc (“Induction”). The Group has faced both market challenges, as the NHS has struggled to come to terms with the new post Covid reality, and internal challenges precipitated by our own managerial failings. As a Board we recognised and addressed both of these strong headwinds, putting in place a series of measures which have been both painful and absolutely necessary, but which have been vindicated. Attend Anywhere is a video platform specifically designed for clinicians and hospitals and their patients and has several unique features which directly address these needs. However, these features are costly to support and it is often tempting for hospital trusts to opt for Microsoft Teams or similar which are perceived as being ‘free’. Despite these pressures Attend Anywhere has retained most, if not all, of its share – retaining Wales, Scotland and many of the English Trusts, demonstrating the benefits of a health-specific application. As reported at the time, last year’s financial audit was severely delayed and this, combined with other key indicators, led the Board to conclude that significant changes were necessary to the management and internal processes of the company. Having reached the middle of the first quarter of financial year 2024, it is apparent that, the strong medicine we have administered to the business is having a positive impact and, although it is too early to be definitive, the future looks distinctly brighter. Market opportunities are also opening up as Government policy stabilises in the post Johnson/Truss era. The lack of healthcare policy consistency immediately post Covid era as well as the lack of clarity over central funding characterised most of the financial year. As waiting lists expanded and as the Department of Health struggled to line up behind clear, funded policies to address the problem, the previously announced commitments to invest in digital platforms were constantly delayed. As a consequence, expectations of growth, particularly with NHS commissioning groups for our appointment setting platform Zesty were seriously delayed. By early 2023 it was becoming clear that a more consistent and properly funded digital approach to the challenge of cutting waiting times was emanating from the Department of Health. It is from this revised approach that Induction hopes to benefit from over the coming year and the current indications are positive. At the same time as our expected growth in the Zesty platform has been delayed by policy indecision so also our video conferencing platform (Attend Anywhere) has come under pricing and competitive pressure from a combination of post Covid changes in usage patterns and a more active challenge to our previously strong market position. In December 2022 we replaced the senior management with an interim team - with the Chair stepping into the executive role, Paul Tambeau moving to interim COO and John McIntosh interim CFO position. The Board and the executive moved quickly to stem the cash outflows and to create a sustainable business that would ensure that we have no requirement to come to the market for more cash. Our previous CEO (James Balmain) moved to a commercial sales position focused on Zesty. This move ideally suited his skills and expertise and his ongoing activity in this role, as well as providing the link between sales and product definition, is proving invaluable. The ‘right sizing’ of Induction necessitated cutting both our ambitions, our activities, and our headcount. We put on hold our ambition to grow by acquisition and at the same time we significantly reduced the breadth of our activities. We cut out non- core activity (i.e. activity that doesn’t relate exclusively to secondary healthcare) and set about divesting our non-core assets (the clinical apps comprising Switch and Guidance). At the same time, we reduced our headcount and associated cost base by circa 30%. We also ruthlessly examined our hosting cost base and have seen that cost fall by over 35%. The resulting rightsizing programme has eliminated annualised expenditure of c. £6 million, putting the Group on a sustainable footing for the future. All cash costs relating to the Group’s restructuring have been fully recognised in the results to 31 March 2023. The full year results outcome was an EBITDA loss on continuing operations which narrowed to £4.8m (2022: £5.3m) with the right- sizing process completing in March 2023. To this end the full year results before tax for 31 March 2023 are a watershed, reflecting the impact of certain material non-cash impairment charges. Inclusive of a non-cash impairment charge of £7.7m (2022: £ nil), the Group’s loss for the year reached £17.4m (2022: Loss £8.4m). 2 Induction Healthcare Annual Report & Accounts 2023 These measures were painful on every level, however we now have a sustainable business which is smaller, leaner and significantly more focused. We also have a business which is better able to meet the digital challenges, as well as the opportunities, that the fast-changing NHS presents. In response to the challenge we faced in the middle of last year we have also sought to enhance our Board – both in terms of people and our processes. To this end we appointed Ian Johnson as our senior non-executive director. Ian has a wealth of experience in the healthcare environment. Meanwhile we said farewell to Leslie-Ann Reed who resigned at the end of her term in October 2023. More recently, and subsequent to the end of the financial year (May 2023), we announced that Hugo Stephenson, a director and founder, resigned at the end of his term. We thank both for their service to Induction. Consistent with our commitment to hire a permanent leadership team, Paul Tambeau (CEO) and John McIntosh (CFO) were appointed to the board on 30 June 2023. At the same time, with the outlook more positive, I stepped back to the non-executive Chair position. Whilst, as a Board, we know that these changes have been fundamental to a sustainable future, we also know that they would not have been made possible without the drive and support of our leadership teams and all employees – across all the geographies we operate in. As a result of their action and determination we can look forward to significantly improved prospects for 2024 and we genuinely thank them for their part in turning our business around. Finally, it remains for me to thank our long-suffering shareholders. You have placed your confidence in the Board, the leadership team and in me. I believe that in time we will justify that confidence. Christopher Samler Non-executive Chair 28 July 2023 3 Induction Healthcare Strategic Report Annual Report & Accounts 2023 Chief Executives Officer’s Review Double Digit Growth FY23 saw a 12.1% increase in recognized revenue from all operations and 9.7% increase in ARR. Whilst this partly relates to the business being able to recognize a full year of Attend Anywhere revenue, our main growth engine was Zesty, growing from £1.5m in FY22 to £2.2m in FY23. In addition to this growth within Zesty, there are a number of Trusts which have purchased Zesty via our partners Oracle Cerner and SystemC for deployment in FY24 but are yet to be recognized as contracted ARR while we finalise flow-through contracting with our partner. Induction also played a leadership role in partnering with the NHS Wayfinder Programme in embedding core Zesty functionality into the NHS App, including single sign-on. This will position Induction well for growth into the future as the NHS seeks to move more patient-facing activities into the NHS App. With our Attend Anywhere business, we were pleased to renew our national contract with NHS Scotland contract for 3 years, and our NHS Wales national contract for another 1 year, with the option to renew for an additional year. We retained a large proportion of our NHS England contracts despite challenging market conditions. Market Conditions Impacting Growth Renewals in our Attend Anywhere business, especially within NHS England, were under pressure as the national funding that supported these contracts during COVID came to an end. This put downward pressure on pricing as Trusts, many of which are already under financial constraint, had to find budget to fund the renewal. We were successful at renewing 81% of these contracts. With the NHS’s national contract with Microsoft, we also saw Trusts looking at Teams as an alternative solution. Whilst Teams doesn’t have some of the health-specific capability of Attend Anywhere, such as robust waiting room functionality, we’ve had to work with Trusts in recognizing the administrative burden this would put on them. Finally, with the health care sector moving to more in-person appointments following COVID, we have seen a decline in usage of video consultations. Our Customer Success team has prioritized getting closer to our customers to help drive utilization and to help generate continuing value for patients and clinicians. Notwithstanding the strong growth in our Zesty business, there were delays in the NHS Wayfinder program as well as the provision of national funding for Trusts to procure a portal. NHS procurement cycles and processes also factored into our growth in FY23. Business Rightsizing & Focus In the last quarter of FY23, we executed a plan to right- size the business and get our costs in check so that Induction was on a more sustainable footing. This involved reducing the Group’s headcount (across a mix of employees and contractors) across our global team. It also involved reducing our operating costs, particularly web hosting and professional fees. The result of this program was circa 30% being cut from the c.£1.5m monthly operating costs incurred at the beginning of the final quarter of the year. In completing the restructuring, we also reshaped business processes and provided a much-needed focus to all areas of the Group’s operation. The result is a better understanding of the economics of our products and where and how it should be playing to maximize margin. In March 2023, we gained approval of our FY24 Operating Plan and Budget which built on our approach of closely managing costs, focusing on key priorities, and delivering value to the customer. In focusing the business on our core strategy, we had to look at our product suite. With the development of a new integrated product strategy, our focus going forward will be on supporting the interactions between care teams and patients. That meant we have decided to divest assets that don’t align with this strategy, notably Induction Switch and Induction Guidance. The Induction Switch business was subsequently sold for a material undisclosed sum post year end. We also decided to shut down our Booking application since much of this functionality sits within Zesty, and it wasn’t generating sufficient revenue to justify significant investments required to upgrade the technology. Finally, in the short term, we are going to be focused on the UK market. International growth is an important part of the Group’s future, but only once we have stabilized the UK business and matured our business operations to take on new territories. 4 Induction Healthcare Strategic Report Annual Report & Accounts 2023 Chief Executives Officer’s Review (continued) Looking Ahead with Renewed Focus Within our FY24 Operating Plan, we’re going to be focused on executing on 4 Key Goals: • To b e a profitable and sustainable growing busin e ss to d e liver our commitments to sha re h o l d e rs. This involves strengthening our sales capabilities and capitalizing on near-term growth opportunities. We are working to industrialise systems and processes within the business to ensure we continue to closely monitor our cost base. • To successfully develop our Integrated Product. We are investing in bringing functionality from Zesty, Attend Anywhere and FormBuilder together for customers in a way that enables us to be responsive to customer needs. With these building blocks in place, we will be looking at how we expand our capabilities to meet growing customer needs. • To b e customer centric and commercial i n e ve ryth i n g w e d o . We will get closer to our customers to truly understand their pressures and how we can support them. Our customers also have valuable insight into how our integrated product should develop. Outlook As we execute on our plan, we believe there are market factors that can generate new growth for the business. Underlying demand for digital healthcare services is growing as the NHS seek to make up for COVID-driven backlogs, while at the same time treating new patients. This has resulted in potential new funding streams from the NHS to tackle these challenges, presenting a strong opportunity for the business going forward. The NHS continues to prioritize further developments within the NHS App, enabling Induction to become more embedded in the health ecosystem. There is also new funding available to Trusts to procure or enhance their patient portals, which Induction is well positioned to capitalize on. We’re also seeing increasing demand for integrating the capabilities of both our Zesty and Attend Anywhere platforms, creating a better experience for clinicians and patients. Given the rightsizing changes we have already implemented, and the growth opportunities in front of us, we are confident this puts the Group in a sustainable position. • To i mplement a n d co n ti n u o u sl y d e ve l o p a n i n cl u si ve , p e rformance driven and rewarding employee exp e ri e n ce . We are investing in the growth and development of our people as we seek to build a culture where people want to grow their careers. Paul Tambeau CEO 28 July 2023 5 Induction Healthcare Strategic Report Annual Report & Accounts 2023 Our Products and Markets Our Market Challenge In quarter four of FY23 we took on our greatest challenge as a growing business. Despite the effectiveness of our core technologies and the resilience of our customer base, we needed to right size our business and refresh our leadership team. The outcome is a fresh go-to-market approach, and operational focus on building a strong foundation for sustainable growth in FY24. How we have changed Challenge Sustainable growth Refresh Leadership Strategy Execution of cost containment . Augmented board skills . Refresh C-Suite . Turnaround experience Sustainable budget . Achieve cost reduction . Margin strengthening Actions . Christopher Samler became non-exec Chair. . Ian Johnson as Senior Independent Director . Interim COO (now CEO)1 . Interim CFO (now CFO) 1 . James Balmain stepped into a commercial role . Successful Q4 cost containment process. . Reduced web hosting costs. . Headcount reduction Refresh Market Response Integrated product Redefine & validate integrated product Created integrated product roadmap. . Redefined the customer offering . Goal delivery aligned with staff performance review and incentives Divestment of non- core assets Core business focus . Effect separation of non-core product. Successful post year end divestment of Induction Switch, our directory app; Induction Guidance product asset ready for sale. 1: The Company announced the appointment of Paul Tambeau as CEO and John McIntosh as CFO on 30 June 2023. Our Market context There is no doubt that the NHS is going through one of its most challenging times and Induction is responding to this challenge by providing healthcare customers in the NHS with services that address the goal of delivering digital service pathways and reduce waiting list pressures on an overstretched NHS. . 6 Induction Healthcare Strategic Report Annual Report & Accounts 2023 Strategic Report (continued) Induction product capabilities meet our healthcare customers’ needs Induction is well positioned to help our healthcare customers tackle their strategic priorities. Our integrated product strategy maps our vision of a highly effective, secure, convenient secondary care patient pathway aligned with our customers’ needs. Healthcare system challenges Healthcare Provider needs Induction capabilities that m eet needs Shortage of healthcare workers Patient self service Flexible working Strained hospital capacity Cost reduction Remote risk assessment Early discharge Patient self-service Efficiency in secondary care patient pathways Treat based on need Flexible working Eliminate waste paper Reduce administration Improve utilization of physical space Insights on outcomes to improve decision making Self-service appointment management Patient initiated follow ups (PIFU) Forms Remote consultations Self-service appointment management Patient initiated follow ups (PIFU) Forms Remote consultations Digital documents & letters Analytics Sustainable operations & net zero Eliminate documentation Reduce travel Digital documents & letters Remote consultations I N D U C T O N I I N T E G R A T E D P R O D U C T We see these capabilities as a key opportunity for Induction, not just to support the long-term strategic objectives for NHS structures, but to deliver early success, through our integrated product. Our Integrated product solution: • • • Delivers a secure, convenient, efficient service providing effective healthcare specific video conferencing support and digital pathways across a trust or nation region which is accessible to all. Helps tackle health inequity by offering a safe space for people to access their secondary care provider; and Provides analytical insight to inform healthcare planning by providing a regional and national picture of the changing needs and issues of accessing secondary care. 7 Induction Healthcare Strategic Report Annual Report & Accounts 2023 Product suite – our integrated products Zesty is a comprehensive solution that delivers tangible benefits to patients and providers. With Zesty, healthcare providers can increase efficiency, reduce administrative burden, and improve patient satisfaction. Patients benefit from a convenient and secure healthcare experience, resulting in improved outcomes and better overall health. At Induction Healthcare, we are committed to transforming healthcare delivery through innovative technology solutions like Zesty. Induction Zesty Induction Zesty (“Zesty”) is an innovative digital platform that transforms the healthcare experience for patients and providers alike. Zesty is a user-friendly, secure, and efficient solution that streamlines the patient journey from appointment booking to post- appointment follow-up. Our value proposition is centred around three key benefits: • C o n ve n i e n ce : With Zesty, patients can book appointments, manage their healthcare records, and communicate with their healthcare providers at any time, from anywhere. No more waiting on hold or scheduling appointments during office hours. Zesty makes healthcare accessible and convenient for all. • Effici e n cy: Zesty's intelligent scheduling system optimizes clinic schedules, reducing wait times and minimizing patient no-shows. Our platform also automates appointment reminders and follow- up communications, allowing providers to focus on delivering high-quality care rather than administrative tasks. • Se cu ri ty: Zesty is built with robust security features to ensure patient data is protected at all times. Our platform is fully compliant with GDPR, HIPAA, and NHS Digital security standards, providing patients with peace of mind knowing their sensitive information is safe and secure. 8 Induction Healthcare Strategic Report Annual Report & Accounts 2023 Our platform is built with industry-leading security and privacy features to ensure patient information is protected at all times. Healthcare providers can deliver personalized care and treatment plans that meet patients' unique needs, resulting in better outcomes and improved patient satisfaction. Attend Anywhere is a comprehensive solution that delivers tangible benefits to patients, healthcare providers, and the broader healthcare system. With Attend Anywhere, healthcare providers can increase efficiency, reduce wait times, and improve patient outcomes. Patients benefit from a more convenient and accessible healthcare experience, resulting in better health outcomes and improved quality of life. At Induction Healthcare, we are committed to transforming healthcare delivery through innovative technology solutions like Attend Anywhere. Guidance remains a trusted standard for clinical content distribution. It has been adopted across the NHS (in 75% of Acute Trusts), hitting 15 million page views in FY23. Induction Attend Anywhere Induction Attend Anywhere (“Attend Anywhere”) - A powerful platform that connects patients and healthcare providers in a secure and user-friendly virtual environment. Our platform is designed to improve access to care, reduce waiting times, and enhance the overall patient experience. Our value proposition is centred around three key benefits: • Acce ss: Attend Anywhere makes healthcare more accessible by eliminating geographic and logistical barriers. Patients can connect with healthcare providers from the comfort of their own home, eliminating the need to travel long distances or take time off work for an appointment. This is particularly beneficial for patients with mobility issues, chronic conditions, or those who live in remote areas. • C o nvenience : Attend Anywhere is easy to use, intuitive, and available on any device with an internet connection. Patients can schedule appointments, conduct video consultations, and receive medical advice and treatment from their healthcare provider without leaving their home or office. • Qu a l i ty: Attend Anywhere provides a high-quality, secure, and reliable virtual environment that enables patients and healthcare providers to communicate effectively. Induction FormBuilder FormBuilder enables our customers to digitise clinical and administrative forms. This means that standard forms can be safely and efficiently assigned to end users in electronic format through the Zesty patient portal. Our customers end users are able to respond using their own portal (on mobile device or PC) and results are collated and can be viewed electronically. Induction Guidance While Induction Guidance is not within our core suite of products, it continues to provide medical organisations with the ability to collaboratively create, edit and publish their own local medical guidelines in a secure and locally administrated environment. 9 Induction Healthcare Strategic Report Annual Report & Accounts 2023 Financial review Strong renewals – rightsizing programme completed - non-core asset divested Revenue The twelve months to 31st March 2023 was the first period the Group has benefited from a full year of recognised revenue from its Induction Attend Anywhere acquisition. Revenue from contracts with customers for the year to 31 March 2023 per table below was £13.6m (pro-forma 2022: £12.1m). Excluding a non-cash accounting adjustment revenues from all operations grew 12.1% in the year to 31 March 2023. In our prior year reporting for the twelve months to 31st March 2022 we applied an adjustment to revenues to account for IFRS 3 requirements. Consequently, as a more appropriate year on year comparison, recognised revenue for the year of reporting should be compared with prior year pro-forma full year revenue. This period end also saw our non-core products, Switch and Guidance being put up for sale. These two product assets will be classified as discontinued operations on the face of the P&L under IFRS5 – as assets held for sale) Revenue analysis 31 March 2023 £000 31 March 2022 £000 Re- presented Revenues from customer contracts 1 Non-cash IFRS3 adjustment 2 13,584 12,116 (74) (4,209) Revenue from all operations 13,510 7,907 Revenue - Discontinued operations 3 627 6764 Reported revenue Revenue - continuing operations 12,884 4 7,231 1 Reported revenue from continuing operations is stated after reclassifying assets held for sale under IFRS5 (Induction Switch and Induction Guidance £0.6m). These product assets were held for sale at year end 31 March 2023 and classified under discontinued operations (Total recognised revenue from continuing operations £12.9m, plus IFRS3 adjustment (£0.1m) and discontinued operations £0.6m was £13.6m, 2022: £12.1m). 2 Reported revenue from customer contracts as at 31 March 2022 is stated after the application of IFRS3 being a fair value adjustment (£4.2m) relating to the deferred revenue acquired as part of the Attend Anywhere Pty Limited acquisition in June 2021. Had this adjustment not been applied, pro-forma revenues from contracts with customers would have been £12.1m. 3 Revenue from product assets (Induction Switch and Induction Guidance) is disclosed under IFRS5 as assets held for sale. 4 After excluding discontinued operations revenue (£0.6m). comparative recognised 2022 revenue was £0.7m. For reference only the The majority of the Group’s revenue came from Induction Attend Anywhere which has grown by 9.9% to £10.8m (2022: £9.8m1), while revenue from Induction Zesty has leapt to £2.2m (2022: £1.5m). Induction’s other clinical apps (Switch and Guidance) delivered £0.6m (2022: £0.7m). The headwinds which curtailed revenue growth in the second half of the year predicated a rightsizing programme to bring the Group’s cost base into line with our sustainable revenue growth. The restructuring was completed by year end and all associated costs have been provided for in the year to 31st March 2023. While focus is on sustainable recognised revenue growth management also takes note of ARR. ARR differs from recognised revenue due to the timing of revenue recognition, which includes amounts for partial years based on contract start dates, whereas ARR is an annualised amount. Recognised revenue also includes non-recurring non-SaaS fees. ARR from all operations as at 1st April 2023 was £13.5m (2022: £12.3m). This represented the annualised value of the recurring revenue base that expected to be carried into future periods, and its growth is a forward-looking indication of recurring revenue growth. Gross profit Reported Gross profit was £8.1 million (2022: £5.0 million) with gross margin steady at 63.1% versus prior year reported margin (2022: 63.1%). Direct costs are predominantly made up of web hosting expenses, sales and delivery staff costs. The year-on- year increase in gross profit is not directly attributable to revenue growth due to the prior year FY22 accounts reporting revenue from customer contracts after IFRS 3 fair value adjustment. Had the prior year IFRS 3 adjustment not been applied prior year Group revenues would have been £12.1m on a pro-forma basis. Given the consistent year-on-year gross margin percentage, growth of gross profit is more comparable to recognised revenue growth from customer contracts of 12.1% as described in the Revenue section above. Capitalised development costs Development expenses for the year were £9.3m (2022: £6.0m) an increase of £3.3m. The reported cost increase for the year to 31 March 2023 is made up of two components: a lower level of capitalised development cost of £2.2m; and, an increase of development expenses of £1.1m. Prior year additions to internally generated intangible assets were £3.1m reflecting the amount capitalised in the year to 31 March 2022. The comparable figure for the period to 31 March 2023 is £0.8m. This capitalised development expense movement has been charged directly to the income statement rather than being capitalised in the year. In determining the amounts to be capitalised management makes assumptions regarding the percentage of staff time spent on development activities. There is a high level of estimation uncertainty over the estimates, as the ability to reliably track time is inhibited by the time recording method. The nature of the features developed during the year do not meet the criteria for capitalisation under IAS38. This conclusion resulted in costs, which would otherwise have been taken to the balance sheet, being charged directly to the operating costs of the business. As a result of this decision the reported development expenses more closely represent the development cash outflows experienced by the business in the year of reporting. 10 Induction Healthcare Strategic Report Annual Report & Accounts 2023 Impairment charge Management performed an impairment review as at 31 March 2023 in accordance with IAS 36 ‘Impairment of assets’. The resulting non-cash impairment charge of £7.7m is explained in further detail in note 17 – Goodwill, within the financial statements. Operating expenses Excluding the adjusting items depreciation, amortisation and share based payments, operating expenses grew by £2.4m driven by increased development expenses and restructuring costs. Core performance measures Our rightsizing programme resulted in restructuring costs of £0.8m being charged to the income statement. By the 31st March 2023 the cost containment action had resulted in monthly cost reductions of the order of £0.5m - the equivalent of an annualised £6.0m reduction in cash outflow. The Group’s Operating Plan is focused on sustainable growth. Management considers that EBITDA is the key operating metric to towards the Group’s performance and progress measure sustainable growth. In addition, the Group also measures and presents performance in relation to various other non-GAAP measures, such as gross margin, and revenue growth. ARR is considered useful to determine long term revenue growth, viewed in the context of sustainable growth. Adjusted EBITDA results are prepared to provide a more comparable indication of the Group’s core business performance by removing the impact of certain items including exceptional items (material and non-operating related costs), and other, non-trading, items that are reported separately. Adjusted results exclude items as set out in the consolidated statement of comprehensive income. Adjusted EBITDA loss was £3.6m (Re-presented 2022: £3.8m). 31/03/2023 £m 31/03/2022 £m Re- presented Loss for the year Loss from discontinued operations Loss before tax from continuing operations Add: Impairment losses Add: Depreciation and amortisation Operating loss before depreciation, amortisation and impairment Adjusted for exceptional and non-cash costs: (18.3) (0.9) (17.4) 7.7 4.9 9.5 0.4 (9.1) - 3.8 (4.8) (5.3) – Acquisition and fundraise related transacti on costs1 – Other exceptional items1 – Share based payments (non-cash) Adjusted Operating profit/(loss) before, depreciation, amortisation, impairment and exceptional costs (“Adjusted EBITDA”) Adjusted EBITDA from continuing operations 1Restructuring costs. * Reference only - 0.8 0.4 0.5 0.4 0.6 (3.6) (3.6) (3.8) (3.8) 11 Cash Cash as at 31 March 2023 was £4.3m (2022: £7.5m). As focused on cost described above, the Leadership Team containment and cash conservation during the last quarter of the year. Processes around cash have been revisited to ensure projected business needs are sustainable. We continue to tightly manage our cost base which, as at 31 March 2023, was reduced by over 30% on a monthly basis from the level at the beginning of 2023. Going concern The Group incurred an operating loss on continuing operations of £4.8m for the year ended 31 March 2023 (2022 £4.8m), however, it had net assets of £24.3m inclusive of £4.3m of cash and cash equivalents. Management has performed a going concern analysis as described in the Directors report. The liquidity of the group is judged sufficient to meet the cash needs of the Group as they fall due. The directors have considered the applicability of the going concern basis in the preparation of the financial statements. This included a review of financial results, internal budgets and cash flow forecasts to 31 October 2024, including downside scenarios. Assets and Liabilities Goodwill as at 31 March 2023 of £10.6m (2022: £19.8m) and intangibles of £15.3m (2022: £21.0m) are derived from the earlier acquisitions, Attend Anywhere Pty Limited, Zesty Limited and Horizon Strategic Partners Limited. Following a review of the carrying value of the assets a non-cash impairment charge of £7.7m has been applied. Refer to note 17 of the financial statements. Trade Receivables were £2.7m (2022: £3.3m) reflecting increased collection activity at the period end. Trade payables were £2.7m (2022: £3.4m) in part reflecting the impact of the right sizing programme reduced monthly costs. Taxation Current tax receivable £1.1m (2022: £1.2m) consists of Research and Development tax credits due to the Group for current and prior years. Post year end the Group received £0.3m of tax R&D reclaim. In spite of the delay to the repayments we expect further receipts in due course after appropriate follow-up. Loss before tax The Group net loss before tax was £17.4m (2022: loss of £9.1 million (re-presented)) the year-on-year change is driven by a non-cash impairment charge of £7.7m. See note 17 to the financial statements. Discontinued operations During the year ending 31 March 2023 the Group classified the Induction Switch and Induction Guidance products as being held for sale, as a result of a decision to focus on patient facing Induction Healthcare Strategic Report Annual Report & Accounts 2023 products in the secondary care market. This resulted in removal of discontinued operations losses of £0.8m (for reference: 2022 £0.4m) from the Group profit and loss. Refer to note 13 for further details. Principal risks and uncertainties. As more fully described in the Directors’ Report and notes to the financial statements in the annual report, the amounts and timing of future revenues remain uncertain. However, the executive has taken significant steps, which we believe mitigate the Group’s risks. John McIntosh Chief Financial Officer 28 July 2023 12 Induction Healthcare Strategic Report Annual Report & Accounts 2023 Strategic Report Our model Our products are designed for integration with existing hospital IT systems, a key sales advantage for healthcare providers looking to leverage legacy investments and avoid workflow disruption. The ability to integrate is the reason we have been able to work with so many NHS trusts. Revenue is primarily generated from licensed subscription services, but we also collect fees for initial implementation. Work continues to onboard implementation partners, reducing our reliance on a professional services type model. Partnerships Using our advanced integration capability, we have developed valuable partnerships with large incumbent health IT suppliers to facilitate and enhance our routes to market. As part of the value-added reseller agreements with our partners, such as Cerner Corporation (NASDAQ: CERN) and System C, clients can access our products without an extensive procurement process. Environmental Social Governance (ESG) Sustainability is an important value for the Induction Healthcare Group. Our digital product, by nature, reduces unnecessary travel to hospitals and eliminates cumbersome and costly administration providing our customers and end users with a valuable additional benefit. We are partnered with Amazon Web Services (AWS) who host our technology platform, which allows the Group to benefit from their low emission data centre strategy. We have committed to delivering an Environmental, Social and corporate Governance (ESG) strategy for 2023 as part of our Group business plan, which is sponsored at Executive level. This includes a Carbon Reduction Plan in development that details our organisational carbon footprint and supports UK NHS's 2040 (Carbon Footprint). Environmental We have a hybrid working structure which requires a relatively small office base for meetings with desks used on a rotational basis. In the UK we utilise office space via The WeWork group which has committed to 100% renewable energy by 2025. One of the largest sources of energy usage from the digital healthcare industry is the transfer and storage of data. Our primary environmental energy impact comes from data centre usage. AWS, our main data centre partner providing on-demand cloud computing, is continuously working to increase the efficiency of its facilities, and its scale allows it to achieve higher resource utilisation and efficiency than typical on- premises data centres. AWS is on a path to 100% renewable use. Our footprint will change as AWS moves to powering its operations with 100% renewable energy by 2025. Employees The Group places significant value on the involvement of its employees and they are not only regularly briefed on the Group’s activities, but encouraged to express their views at quarterly Town Hall gatherings. Employee opinion and engagement is sought and measured utilising anonymous survey and feedback tools within Culture amp online tool. The Group monitors its turnover rates, which is seeks to mitigate, aiming to structure staff compensation at competitive rates in order to attract and retain high calibre personnel. The Group aims to ensure all individuals - regardless of race, age, gender, disability, sexuality or socio-economic background have access to opportunities with the Group. Our employee assistance programme (EAP) provided by Bupa and Lifeworks, is an employee benefit that provides staff with support and practical advice on issues that might be impacting their health and performance. To underline our commitment to staff the Group has introduced Thrive, a leading mental wellbeing digital tool, used and recommended by the NHS, for use by individuals in the workplace to help prevent mental health conditions. This initiative has the aim of increasing staff wellbeing and productivity. Community and Human Rights The directors recognise the Group has a duty to be a good corporate citizen and to respect and comply with the laws and regulations of the countries of operation and the fundamental rights and freedoms afforded to individuals. . The Group has been working with a third-party sustainability specialist, Supercritical (http://gosupercritical.com), to measure our carbon footprint and prepare a carbon reduction plan. We have formalised travel policies, with an objective to minimise travel and benefit from reduced emissions including: • A business travel policy to avoid private car where possible and reduce business travel flights; • Optimising our cloud use with the assistance of Amazon Web Services. • A hardware policy to, where possible, to extend the average lifecycle of products. We are committed to commissioning an independent footprint report annually and intend to publish our Net Zero commitments through our company website. 13 Induction Healthcare Strategic Report Annual Report & Accounts 2023 S172 Statement This section serves as our section 172 statement and should be read in conjunction with other information included in this Annual Report and Accounts. Engagement with our members and wider stakeholder groups plays an essential role throughout our business. (Further information in contained in this report’s Corporate Governance Statement and in the Directors’ Report.). The Directors, in good faith, have taken decisions that they consider are most likely to promote the success of the Company for the benefit of its stakeholders, having regard to the matters set out in s172(1)(a-f) of the Companies Act 2006: • The likely long-term consequences of any decision; The long-term success of the Company is always a key factor when making strategic decisions. It is important that our shareholders understand our strategic priorities and ambition, their views inform our decision-making. • The interests of the Company employees; Our employees are the main asset of the Company and their wellbeing and development are at the heart of our strategy for success. • relationships with suppliers, customers and others; The need to foster the Company’s business The Company regularly meets with key suppliers and customers to review operations and plans and explores mutually beneficial future actions. • community and the environment; The impact of the Company’s operations on the Due to the nature of its commercial activities, the Company believes that it has no appreciable impact on the environment, although it does take reasonable measures to ensure that it procures its office supplies from environmentally friendly and sustainable sources . The desirability of the Company maintaining a reputation for high standards of business conduct; Integrity is embedded the Company’s culture. The Directors believe that it is important to maintain a high standard of ethical values and seek to ensure that this continues to be shared by all employees. The need to act fairly as between shareholders of the Company In making decisions, the Directors aim to strike a fair balance among all stakeholders. The Board regularly reviews our principal stakeholders and how we engage with them. The stakeholder voice is brought into the boardroom throughout the annual cycle through information provided by management and also by direct engagement with stakeholders themselves. • • 14 Induction Healthcare Strategic Report Annual Report & Accounts 2023 S172 Statement (continued) The Board considered the interests of and the impact on all stakeholders when making a number of key decisions during the year, as demonstrated by the following examples: S t ak eholder Why we engage How we engage In ve sto rs It is important that our shareholders understand our strategic priorities, and that their views inform our decision making. Shareholder views are sought in connection with significant matters and taken into account by the Board in reaching critical decisions. We aim to provide transparency and clarity about our results and long-term strategy to build trust in our future plans. • Meeting and discussions throughout the year • Reports and analysis on shareholdings • Annual, Half Year Results and AGM • Company website and investor news section • Stock exchange announcements • Analyst research Emp l o ye e s R e g u l a to rs Our people are our most valuable asset. We rely on their skills, experience, knowledge and effort to deliver our vision to provide technology to the healthcare community. We value all staff including contractors and ensure our communications are to all participants to ensure there is transparency across the business. Effective staff engagement leads to greater wellbeing, promoting a successful team orientated culture. Operations are subject to a wide range of listing requirements, regulatory and legal frameworks, including regulation of clinical products, data protection, tax, employment, and contractual terms. • • • • • • • • Enhanced company-wide Town Hall sessions incorporating staff Q&A sessions Use of informal communication channels Employee benefits (Bupa EAP, Worklife) Wellbeing tools (Culture-amp, Thrive) Learning / development budget per person. Flexible hybrid working Long term nominal share options Personal, team and corporate objectives. • Governance, Risk and Compliance policy • Audit committee updates at Board meetings • Regular Risk Register review • Informing the board of key drivers of regulatory requirements requiring attention Working with underwriters, accreditors on controls and certification reviews Work with Clinicians to evaluate our products • • Su p p l y C h a i n A robust and transparent supply chain results in greater visibility, leading to lower exposure to risks and disruptions. • Trusted supplier partnerships • Our key suppliers are predominantly software technology providers requiring strong two-way working relationship. • Board review of material changes to supply chain • Risk mitigation planning Pa rtn e rsh i p s a nd end users Our partners allow us to develop our products to meet the needs of hospitals that we cannot reach directly. We partner with companies that can advance our products through complementary technologies, delivering a wider distribution channel. • Obtain regular feedback from our users and clients to ensure that we are consistently delivering to high performance standards. • Monitoring and influencing the quality of our customers’ experience. • Arrange forums on user experience. 15 Induction Healthcare Strategic Report Annual Report & Accounts 2023 S t ak eholder Why we engage How we engage C u sto me rs Communication with our customers is fundamental to understanding how we may continue to add value to solve strategic and operational issues through our digital solutions. . ESG Our staff value their work developing high quality digital services which by their nature deliver a positive outcome for the NHS and the wider community, • We and our customer partners understand the importance of coordinated activities. This ensures that we achieve our joint objective of providing a high level of service and successful delivery. • Regular meetings with customers -these meetings provide us with valuable feedback regarding market requirements and competitive issues. • We generate employment among a diverse workforce in a number of international communities. • We are required to demonstrate our environmental impact as part of our sales process. • We contribute to a reduction of environmental costs, through lower carbon usage via reduced webhosting costs, reduced transport on our roads and elimination of paperwork and document distribution. At the end of the annual reporting period, the Board continue to have regard to the interests of the Group’s stakeholders, including the potential impact of the Group’s future activities on the community, the environment and the Company’s reputation when making decisions. This was especially impactful during the right-sizing programme conducted, where the Board balanced the needs of various stakeholder groups to achieve a successful outcome. 16 Induction Healthcare Strategic Report Annual Report & Accounts 2023 Principal risks and uncertainties The Group is exposed to a variety of risks and actively manages them through risk management procedures. As a public company operating in a highly regulated competitive space, it is vital that the Group governs and manages its risks in order to achieve compliance with legal and regulatory obligations. Risk Management The Board, assisted by the Audit Committee, is ultimately responsible for oversight of risk management. The Group’s process for the identification, assessment and management of risks in the business, has been augmented by the implementation of a Governance Risk & Compliance (GRC) policy which is driven and monitored by our Leadership Team. The Audit Committee reviews the systems of internal control for the Group alongside the Leadership Team’s process for risk management and periodically reports its findings to the Board. Internal systems of control The Group maintains systems of internal control taking into account its risk profile and applicable regulatory and legal requirements. Details of the Group’s financial risk management objectives and policies, and exposure to foreign exchange risk, market risk, credit risk and liquidity risk are given in note XX to the consolidated financial statements.. Registering and reviewing risks The Group identifies and assesses each identified risk based on the impact and likelihood, and then applies mitigating actions appropriately. Each risk is scaled, based on the likelihood of occurrence and severity of impact, and risks scored accordingly, with high-risk areas receiving the most attention. The risk register is reviewed and updated to capture and identify any new risks and opportunities, and to improve the mitigating actions. The Leadership Team review all identified risks and assign actions on a quarterly basis. Such risks are reported to and reviewed by the Board and Audit Committee. Set out in the table overleaf are the principal risks and uncertainties that the Directors consider could impact the business. The Board recognizes that the nature and scope of risks can change and that there may be other risks to which the Group is exposed and so this list is not intended to be exhaustive. t r o p e R i c g e t a r t S 17 Induction Healthcare Strategic Report Annual Report & Accounts 2023 Principal risks and uncertainties (continued) Strategic Risks Risk Political The risk has increased The risk has decreased The risk has not changed materially since last year Description and impact Key mitigating activities Trend The Group has a significant customer base in public sector health bodies. A change in either policy or spending priorities by the current or a future Government could materially impact the Group. Potential impact: • Delayed spending or change in National Health Service commissioning budgets • Our primary revenue model is Saas based recurring revenue to deliver a stable base of contracted visible cashflow. • Our development priorities are to ensure we remain at the heart of our customer’s operations, delivering cost efficiencies and value for money whatever the political environment. • Continuous investment in the development of the platforms to ensure they remain relevant, competitive and attractive to users as well as customers. Economic environment The Group could be affected by overall economic and political conditions in the UK and globally including the risk of a recession, persistently high inflation and currency fluctuations. Potential impact: • Inflationary and macro-economic events may have an impact on our costs and our customers’ funding sources (NHS funding decisions). • We continued to monitor our economic horizon and take pro-active action, both to reduce risk but also to capitalize on any opportunities that arise. • Where possible we contract multi-year Saas based ARR terms, protecting the business from cyclical macro events. The Group is a low energy user, however, like any other business in this economic environment we must manage overhead inflation, which we seek to manage via indexation clauses in our customer engagements where we can, and by maintaining tight budgetary cost control. 18 Induction Healthcare Strategic Report Annual Report & Accounts 2023 Principal risks and uncertainties (continued) Operational Risks Risk Description and impact Key mitigating activities Trend Product development, technological change and competition Ability to grow and sell effectively • We engage in regular customer dialogue to define future use cases for our products to ensure that the product offerings are validated. • We focus our development efforts on features that meet an identified market requirement and our internal processes review and prioritise projects most likely to generate sufficient revenue to fund their development. • Maintaining market knowledge and monitoring competitor developments and technologies. • The Group has engaged experienced sales leadership and is providing support to its customer facing teams to ensure they are selling effectively and engaging with our customers on a regular basis. • Upfront business approval controls have been implemented to ensure we are only bidding for work that has a suitable opportunity for a profitable, cash return, and review controls to ensure once we are committed with a customer, the agreed terms are monitored. • The implementation of a Group-wide CRM system in 2023 will provide significant benefit in terms of broader and deeper customer insight and data. The Group operates in a highly competitive market and also faces competition from products developed, marketed and supplied by companies with significantly greater resources. Potential impact: • Competitor products or technologies emerge that may render existing products and services uncompetitive or impaired, and may exert downward pressures on the pricing of existing products and services, impacting financial returns. The Group’s growth strategy has, until 2022, centred around the acquisition of businesses which broaden and enhance existing operations. While our acquisition strategy is currently paused the Group must rely on the effectiveness of its Sales and Marketing team to grow the business. It is imperative we have effective sales and marketing models, methodologies and techniques to effectively realize our investments in software products and to recover the direct costs of associated delivery (and obtain sufficient margin to meet indirect costs) and that this is done in a profitable and cash generative way. Potential impacts: Investment returns not achieved and shareholder value eroded. t r o p e R i c g e t a r t S 19 t r o p e R i c g e t a r t S Induction Healthcare Strategic Report Annual Report & Accounts 2023 Principal risks and uncertainties (continued) Operational Risks Risk Description and impact Key mitigating activities Trend Information security The Group is dependent on its IT infrastructure, whereby loss/ corruption of the application software, infrastructure failure, damage or denial of service to the infrastructure could cause serious business interruption and a decline in user confidence. Cyber security attacks are prevalent and becoming more sophisticated. Potential impacts: • Internal impact due to releasing software that doesn’t function as intended; and • The Group has in place systems and processes for the classificatio n and control of access to information within a number of areas of the business, and the security around access to information continues to be strengthened by the enforcemen t of enhanced security processes and practices. Changes to our products are subject to rigorous QA and product acceptance before they are released to users. • Maintenance of backups allowing roll back to previous versions if a new release fails. • External parties disrupt the platform or cause failure by a key outsourced provider. • Evaluation of all third-party suppliers, ensuring that they have appropriate recovery processes. Business growth is constrained by not having appropriate people resources There is a risk that, in a highly competitive talent landscape, the Group cannot attract and retain sufficient highly skilled and dedicated staff. Potential impacts: • Adverse effect on ability to manage and grow the business. • The loss of key individuals could have an adverse effect on the ability to grow revenues. • The Group is accredited to Cyber Essentials Plus standard and has recently successfully completed its annual ISO 27001 certification audit. This security standard specifies the requirements for establishing, implementing, maintaining and continually improving an information security management system. • The Leadership team has recently been refreshed and is incentivised towards achievement of core Goals. • The Leadership Team regularly reviews our key budget milestones to ensure appropriate decisions are made in a timely manner. • Retention strategies are in place for employees including market-level compensation and incentives, ongoing training and development and performance reviews. • Regular reviews of resource dependency and succession planning for key roles. • Focus on developing a strong and cohesive culture across the organization. 20 Induction Healthcare Governance Annual Report & Accounts 2023 Principal risks and uncertainties (continued) Risk Description and impact Key mitigating activities Trend • The Board and management team have extensive experience working in and supplying to the NHS and relationships with key NHS decision makers, and therefore the Group is well placed to navigate the myriad NHS organisations. • While the Group cannot mitigate the political risk entirely, there is cross party support for the use of technology in the NHS which will help reduce both political and pricing risk. Customer concentration risk The primary customer of the Group is the NHS which is a complex series of connected organisations. The procurement process can be onerous and very lengthy, increasing the risk that revenues fall short of expectation. Potential impacts: • Changes to Government policies can have a material impact on companies supplying the NHS, both in terms of changes in direction as well as structural changes which can delay or even negate the Group’s ability to derive revenues. • NHS operates against a backdrop of regular funding reviews and this could have a negative impact on pricing. Compliance Risks Risk Description and impact Key mitigating activities Trend Data protection and privacy Compliance with laws and regulations Regulatory compliance is a key risk for the Group, not only in terms of the General Data Protection Regulations (GDPR) but also specific restrictions relating potentially to medical devices, clinical governance including patient safety and information governance including confidentiality and security. Potential Impacts: • Failure to comply with regulations could have a material impact on the Group’s reputation, fines or late filings penalties, and financial results. The risk of insufficient evaluation and non-compliance with legislation and regulation in the markets in which Induction operates. Potential Impacts: • Failure to comply with regulations could have a material impact on the Group’s reputation, fines or late filings penalties, and financial results. • The Group has a dedicated Data Protection Officer and a separate Head of Information Security to oversee data protection compliance and security. • Regular review of legislation and Group policies. • Policies applying to relevant staff on [ list of GDPR areas] • Maintenance appropriate expertise and experience in clinical and information governance. • Independent third-party audits and reviews are conducted. • The Group maintains an in-house legal function and uses external legal and tax counsel to advise on legal, tax and regulatory requirements. • The Group’s Governance and Regulatory Compliance committee is focused on the regulatory risk for product development and operational delivery. • The Data Protection Officer, Medical Director and Head of Information Security sit on the GRC committee headed by the Senior Information Risk Officer. t r o p e R i c g e t a r t S 21 Induction Healthcare Governance Annual Report & Accounts 2023 Principal risks and uncertainties (continued) Financial Risks Risk Description and Impact Key mitigating activities Trend Foreign currency risk The risk of significant un-favourable foreign exchange movements. The Group’s webhosting costs are denominated in US dollars whereas the Group’s revenues are GBP denominated. In addition, due to its Australian subsidiary Attend Anywhere Pty Ltd, there is some exposure to the Australian dollar. Potential impact: • Unfavourable FX impact on cash costs of converting currency and financial statement reporting of foreign exchange movement. • Customer contracts are maintained in GBP. • Consideration of currency hedging is regularly reviewed where appropriate. • Surplus cash balances are transferred to the UK to minimize any exposure to non-GBP currencies. Risk Description and Impact Key mitigating activities Trend Liquidity risk The risk of the Group not being able to meet its financial obligations as they fall due. • The Group rigorously manages its cash resources. Operating expenses are closely monitored and management will continue to assess the appropriate level of expenditure against budgetary milestones. • The Board regularly monitors the cash position of the Group and ongoing cash requirements. We have systems, controls, and processes to manage expenditure in line with budgets, and cash is managed through rolling cashflow forecasts which are updated at least monthly. By order of the Board John McIntosh Chief Financial Officer 28 July 2023 22 Induction Healthcare Governance Annual Report & Accounts 2023 Directors’ Biographies Christopher Samler – Non-Executive Chair (appointed 8 June 2022) Appointed to the Chair of Induction Healthcare in June 2022, Christopher has experience as Chief Executive Officer (CEO) and Chair of quoted companies (both Main Market and AIM) and private businesses in the education, healthcare, services and technology sectors. He has significant experience supporting growth for businesses across the U.S., Europe, Asia, Latin America and the Middle East. Christopher started his career in the British Army before joining The Boston Consulting Group as an analyst, leading to a variety of senior management positions at Baxter International, the US-based healthcare multinational. Christopher was CEO of several fast-growing venture capital backed healthcare businesses including Imutran Ltd, and Weston Medical plc, which he took through three venture capital funding rounds to an IPO on the Main Market of the London Stock Exchange in 2000. In 2004, Christopher co-founded Iceni Capital LLP, a private equity / venture capital firm focused on providing capital and operational support to fast growing UK companies in the services sector. He has Chaired a number of high growth technology, healthcare and service companies including TQ Education & Training which was sold to Pearson plc, AirPortr, Sphonic Solutions (recently sold to Signicat AS), Bubble and Tristel plc. Christopher holds an MA (hons) from the University of Oxford and an MBA from the Harvard Business School Jane Silber – Non-Executive Director Jane joined the Board on 1 April 2019. Jane is an experienced IT senior executive. She is the Non‑executive Chair of Diffblue Ltd and VONQ B.V., as well as a non-executive board member of Weaveworks Ltd and Canonical Ltd. She also serves as an advisor for numerous tech start-ups. Previously she was CEO of Canonical for seven years, which followed a seven-year period as its Chief Operating Officer. With experience in the US, Japan and the UK, she has spent her entire career in software engineering and IT management, starting as a software developer and rising through various leadership roles. She holds a BS from Haverford College, an MS from Vanderbilt University and an MBA from Oxford University. Jane is Chair of the Remuneration Committee and, also serves on the Audit and Nomination Committees. Andy Williams – Non-Executive Director Andy was appointed to the board on 8 June 2020 having formerly served as Chair at Zesty Limited since 26 July 2018. In addition to his role at Induction, Andy was Chair of Docly AB and was until recently,a non- executive director at Logex Group. His most recent full-time role was CEO of NHS Digital, the government body responsible for technology and data for the NHS. Prior to that, his career was in the technology industry, holding a wide variety of senior roles in IBM, Alcatel-Lucent and CSC. He holds an MA in mathematics and engineering from Cambridge University. Andy is Chair of the Audit Committee and, also serves on the Remuneration and Nomination Committees. Ian Jonhson – Senior Independent Director (appointed 2 December 2022) Ian has spent his business career in life science and was founder and CEO of Biotrace International PLC, which was a listed company until its sale to 3M in December 2006. Ian is currently Executive Chairman of Niox Group plc and was recently Senior Independent Director of Clinigen plc until its sale to Triton. Previous roles include Executive Chairman of Bioquell PLC, non-executive Chairman of Redcentric plc, Quantum Pharma PLC, Cyprotex PLC and Celsis Group Ltd. and non-executive Director of Ergomed PLC. He has also served on the boards of various other public and private companies including Aim listed companies; Evans Analytical Group and AOI Medical Inc. Ian studied at Cardiff University obtaining a B.Sc. and M.Sc. in Microbiology. He is a Chartered Biologist, a Fellow of the Royal Society of Biology and a member of the Institute of Directors. Paul T ambeau - Chief Executive Officer (appointed 30 J une 2023) Paul started his career in management consulting, spending 11 years on strategy and transformation engagements within Canada’s public and private health sectors. This included 3 years in KPMG’s national health care strategy practice. Over the last 7 years, he has held senior executive roles in digital health companies in Canada and the UK, Before joining Induction in 2022, Paul was Chief Commercial Officer at Doctor Care Anywhere, where he helped deliver a 300% increase in revenue growth. He also helped launch the internet hospital programme with a leading UK health insurer, including the commercial negotiations for a joint venture. Paul began his career in management consulting in North America, including KPMG Canada’s national health care strategy practice. Paul holds an MBA with Distinction from the University of Edinburgh, and a Bachelor of Arts (Honours) from Wilfrid Laurier University in Waterloo, Canada. J ohn Mc Intos h - Chief Financial Officer (appointed 30 J une 2023) After qualifying with Deloitte in 1994, John worked with Sony Corporation, global advertising agency DMB&B and the BBC, before focusing towards online, and multi-media businesses. John has worked as a consultant CFO, interim Finance Director and Group CFO for public and private entities in the UK, USA, and Europe. John was Director, CFO of Bidstack Group plc for three years until 2021, where he led the business through its successful admission to AIM in September 2018, to become a multi-market international Ad-tech business. Prior to this, he was interim FD then Board member for three years of Anglo- Australian services group Progility plc leading its reverse takeover onto AIM in 2013. He was also CFO and Chief Operating Officer for DCD Media plc for six years until 2012. John holds a Bachelor of Commerce (Hons) from the University of Edinburgh and is a member of the Institute of Chartered Accountants of Scotland. e c n a n r e v o G 23 Induction Healthcare Governance Annual Report & Accounts 2023 Corporate Governance Report for Induction Healthcare Group PLC Chair’s Introduction I have pleasure in introducing our Corporate Governance Statement. The Board is committed to supporting high standards of corporate governance. We consider that a solid foundation of good governance and best practice is needed to help the Group profitably and effectively support our user base, both clinical teams and patients. In this section of the Annual Report we set out our governance framework and describe our approach to good corporate governance throughout the Company and its subsidiaries (‘the Group’). As Chair, my primary responsibility is to lead the Board effectively and ensure that the Group’s corporate governance is appropriate and adopted across all our business activities. I am also responsible for ensuring that, as a Board, we examine the key operational and financial issues affecting our strategy. We have had a number of Board changes during the year and since our year-end. Throughout the year of audit we had four independent Non-Executive Directors; Leslie-Ann Reed, Jane Silber, Ian Johnson and Andy Williams. Ian Johnson was appointed as our Senior Independent Director (SID) on 2 December 2022. On 2 December 2022, Leslie-Ann Reed’s whose term came to an end stepped down from the board. On 5 May 2023 Hugo Stephenson’s term also came to an end and he stepped down from the board. Our Executive Directors during the year were James Balmain (resigned 9 January 2023) and Guy Mitchell (resigned 6 December 2022). From 9 December 2023, I was appointed to the position of Interim Executive Chair. I am pleased to confirm that on the 30th June 2023 Paul Tambeau, who had been interim COO since December 2022, was appointed CEO. At the same time, John McIntosh, interim CFO since December 2022, was appointed CFO. Both joined the board on the same date. We follow the Quoted Companies Alliance (“QCA”) Corporate Governance Code (the ‘Code’) and we continue to believe that this is the most appropriate Code for us as an AIM listed company. The report below is organised under headings which show how the Group has complied with the ten broad principles of the Code which all support the Group’s medium to long-term progress. Christopher Samler Executive Chair 28 July 2023 Statement of Compliance with the QCA Corporate Governance Code Strategy and Business Model Principle 1 of the Code requires that companies establish a strategy and business model which promote long-term value for shareholders. The Group is a healthcare technology business focused on streamlining the delivery of care by healthcare professionals, and our strategy is articulated in the Strategic Report on pages 13. Our Section 172 e c n a n r e v o G statement, which is set out on page 14 shows how the Directors have fulfilled their duties and obligations to ensure the long-term success of the business. The Executive Directors and senior leadership team meet throughout the year to discuss strategy and the Group’s long-term growth. The Board, in turn, debates strategy at every Board meeting and monitors progress against the strategic plan. The active challenge provided by the Non-Executive Directors to the Executive helps shape our strategy. The CFO maintains a strategic risk register and reports periodically to the Board on the how the Group mitigates major perceived risk and protects the company from unnecessary potential risk. Shareholder Relations Under Principle 2 of the Code, the Company must seek to understand and meet shareholder needs and expectations. The Company is committed to listening to, and openly communicating with, its shareholders to ensure that its business, strategy, and performance are clearly understood and supported. During the year, the Board, and particularly the executive team, has maintained an open communication with investors, and the sell-side research community. This will be an increasing area of focus for the new Chair in the future believe that this is the best way to ensure the company understands what is expected of it in its efforts to drive enhanced value for our shareholders. The Executive Directors provide the Board with feedback from all meetings and communications with shareholders and the Board is provided with an analysis of investor base changes on a regular basis. Further information on investor sentiment is provided to the Board by the Company’s Nominated Advisors. The Board is also mindful of the importance of its retail shareholders and we aim to provide meaningful information for all our investors, but particularly our retail shareholders, via our website www.inductionhealthcare.com. Our website also offers a facility to sign up for email alert notifications of Company news and regulatory announcements. Our Stakeholders Principle 3 of the Code requires that the Company takes into account wider stakeholder and social responsibilities and their implications for long-term success. The Company’s stakeholders include shareholders, employees, its registered users, its customers, and its business suppliers. The Board values the opinions of the stakeholders in the business and will regularly seek to ensure that the views of its shareholders, suppliers, and partners are known and, where relevant to the success of our business, are acted upon. The Board considers investors’ views and feedback following investor roadshows and individual directors update the Board on any ad hoc meetings with investors throughout the year. One of our most important stakeholder groups is our employees. The Company engages regularly with its employees and monitors closely the views and concerns. 24 Induction Healthcare Governance Annual Report & Accounts 2023 Corporate Governance Report for Induction Healthcare Group PLC (continued) raised. We communicate thoroughly with all stakeholders and use the experience we gain from those interactions to inform our strategy. experience, skills, and capabilities. The balance, skills and experience of the Board were evaluated during the year ended 31 March 2023. Risk Management Principle 4 of the Code requires that the Company embed effective risk management, considering both opportunities and threats, throughout the organisation. The Board, assisted by the Audit Committee, is ultimately responsible for overseeing management’s activities in identifying, evaluating, and managing the risks facing the Group. The environment in which we operate is constantly evolving and can be affected by external factors that are outside of our control and which may impact on us operationally. The Group implements a risk management policy which defines the Group’s risk appetite. The Board supported by its Leadership Team periodically reviews a matrix of the key risks which sets out how these are managed and mitigated through internal and other controls and processes. The significant risks and related mitigation and control are disclosed in the Strategic Review on pages 17 to 21. The Board Principle 5 of the Code requires the maintenance of the board as a well-functioning, balanced team led by the chair. Our current board consists of the Chair, and three Non- Executive Directors. The Chair and three Non- Executive Directors are all considered to be independent. The current Board has one female and three male Directors. The balance, skills and experience of the Board is evaluated throughout the year. The Board holds between six and eight scheduled meetings a year and attendance at these meetings is set out below on page 26. There are also numerous ad hoc meetings where matters of importance have arisen between scheduled meetings. There are three Board Committees: the Audit Committee, the Remuneration Committee, and the Nomination Committee, which are chaired by Andy Williams, Jane Silber, and Andy Williams respectively. Attendance at those meetings is set out on page 26. Directors are expected to attend all meetings of the Board, and of the Committees on which they sit, and to devote sufficient time to the Group’s affairs to enable them to fulfil their duties as Directors. In the event that Directors are unable to attend a meeting, their comments on papers to be considered at the meeting will be discussed in advance with the Chair, so that their contribution can be included as part of the wider Board discussion. Directors’ Skills and Capabilities Principle 6 of the Code requires that the Directors ensure that between them, they have the necessary up-to-date The biographies of Board members are set out on page 23. The role of the Non-Executive Directors is to bring valuable judgement and insight to Board deliberations and decisions. The Non-Executive Directors are all experienced and influential individuals whose blend of skills and business experience contributes to the proper functioning of the Board and its Committees, ensuring that matters are fully debated and that no individual or group dominates the Board’s decision-making processes. The Board is assisted by a range of external advisors, including the nominated advisor, strategic communication consultants, legal advisers, and tax consultants. The Board training and development needs are met with the support of our Nominated Adviser (NOMAD) and our advisors. The Board is provided with regular updates on governance developments and the Company Secretary takes minutes at all Board and Committee meetings. Board Performance and Evaluations Principle 7 of the Code requires that the Board and Committees evaluate their own performance based on clear and relevant objectives and seek continuous improvement. The Chair ensures that the Board reflects on its own performance at the beginning and end of each Board meeting. This “temperature check” ensures that all board members have an opportunity to consider whether the Board has worked effectively or if there are issues that need more discussion. The Board conducted a formal Board evaluation during the year under review with actions identified and implemented. A further formal Board evaluation will be carried out in 2023 and the Board evaluation process itself will continue to be refined. Prior to the proposal for re-election at the AGM, the performance of the Non-Executive Directors is reconsidered to ensure they remain effective in their role and, where appropriate, that they retain their independence. Succession planning for the Board was considered at the Nomination Committee and is an ongoing topic of discussion. Corporate Culture Principle 8 of the Code requires that the Company promote a corporate culture that is based on ethical values and behaviours. The Company has an entrepreneurial and innovative culture underpinned by sound governance, and policies and processes that ensure we do business in a fair and ethical 25 Induction Healthcare Governance Annual Report & Accounts 2023 way and reflect the healthcare markets in which we operate. The Board seeks to lead by example and ensures that all strategic decisions are taken fairly, with due process and are in the best interests of the Company and its stakeholders. Governance Structure Principle 9 of the Code requires that the Company maintain governance structures and processes that are fit for purpose and support good decision making by the board. The respective responsibilities of the Chair is clearly understood. The Chair is responsible for leading the Board, facilitating the effective contribution of all members, and ensuring that it operates effectively in the interests of the shareholders. The Executive Chair is responsible for the leadership of the business and implementation of the strategy. In turn our Non‑Executive Directors provide effective challenge and help develop proposals on strategy whilst ensuring that they satisfy themselves as to the integrity of the financial reporting systems, internal controls, and the risk management system. The whole Board ensures that corporate performance is monitored and adequately reported to shareholders. Shareholder and Stakeholder Communications Principle 10 of the Code requires that the Company communicate how the Group is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders. The Board attaches great importance to communication with both institutional and private shareholders in reporting and demonstrating good corporate governance practices to create a sustainable, growing, profitable and successful business. The Directors regularly communicated with investors and the Group operates an investor relations website at www.inductionhealth care.com/. The website contains details of the Group and its activities, its regulatory announcements, and sets out the governance of the Group. Board Committees The Board has delegated and empowered a Remuneration Committee, Nomination Committee and an Audit Committee, each of which is accountable to the Board on all matters within its remit. A summary of the responsibilities of each Committee and their work during the year follows. e c n a n r e v o G The Company Secretary acts as secretary to all the Board’s Committees supported by the Executives to ensure that each Committee receives information and papers in a timely manner to enable full and proper consideration to be given to the relevant items of business. Christopher Samler1 Christopher Spencer 2 Hugo Stephenson Andy Williams Leslie-Ann Reed3 Jane Silber Ian Johnson 4 James Balmain5 Guy Mitchell 6 Board Audit Committee Remuneration Committee Nomination Committee 9 of 12 3 of 12 12 of 12 12 of 12 4 of 12 12 of 12 5 of 12 10 of 12 7 of 12 No. of meetings 4 of 4 0 of 4 N/a 4 of 4 1 of 4 4 of 4 N/a N/a N/a 5 of 6 3 of 6 N/a 6 of 6 1 of 6 6 of 6 N/a N/a N/a 0 of 1 0 of 1 N/a 0 of 1 1 of 1 1 of 1 N/a N/a N/a 1.Christopher Samler was appointed in June 2022 and therefore did not attend all meetings held during the year. 2. Christopher Spencer resigned as a director in June 2022 and therefore did not attend all meetings held during the year. 3.Leslie Ann Reed resigned as a director in December 2022 and therefore did not attend all meetings held during the year. 4 Ian Johnson was appointed in December 2022 and therefore did not attend all meetings held during the year. 5. James Balmain resigned as a director in January 2023 and therefore did not attend all meetings held during the year. 6 Guy Mitchell resigned as a director in December 2022 and therefore did not attend all meetings held during the year. 26 Induction Healthcare Governance Annual Report & Accounts 2023 Remuneration Committee Report On behalf of the Remuneration Committee, I am pleased to present the Remuneration Committee report for the year ended 31 March 2023. In this report, we provide you with an overview of the Committee’s priorities and performance during the year, in addition to details regarding the Director’s Remuneration Report. Committee Members Jane Silber (Chair) Leslie-Ann Reed (resigned 2 December 2022) Christopher Spencer (resigned 7 June 2022) Andy Williams Christopher Samler (appointed to Remuneration committee on 7 June 2022) Committee Responsibilities The Committee is primarily responsible for: • Setting the remuneration policy for all executive directors and the Company’s Chair; • Recommending and monitoring the levels and structure of remuneration for senior management; and • Reviewing the ongoing appropriateness and relevance of the remuneration policy. The Work of the Committee The objective of the Company’s remuneration policy is to facilitate the recruitment and retention of executives of an appropriate calibre, to ensure that the Executive Directors of the Company are provided with appropriate incentive to encourage enhanced performance and are rewarded fairly and responsibly for their individual contributions to the success of the Company in the year. The remuneration policy has regard to the risk appetite of the Company and alignment to the Company’s long strategic term goals. The Remuneration committee held six formal meetings during the year as set out on page 26 and held a number of informal meetings and telephone calls between scheduled meetings. The Remuneration committee considered the following items during the year: Bonus Plan LTIP LTIP Remuneration Terms of Reference Remuneration Policy Review of the FY24 Bonus Plan Review of the Scheme Rules Review of awards to staff Review of proposed staff pay awards Review of the terms of reference Review of the Remuneration Policy Directors Remuneration Report The Remuneration that the Company offers to its Executive Directors continues to be based on four principal components: • Basic Salaries and benefits. Basic salaries are determined by the Remuneration Committee with reference to bench‑ marked salaries paid in AIM‑quoted and other Technology businesses of similar size and complexity. It is intended that the guaranteed pay should be at or near the median level. Benefits in kind relate to health insurance. • Pensions. The Group operates a defined contribution pension scheme for all Executive Directors and employees. Only basic salaries are pensionable. • Short‑term incentives. Bonuses are payable to staff according to the achievement by the Group determined by key measurable objectives and growth targets. • Long-term incentives. The Company operates a share option scheme under which share options are normally granted on passing probation or ad-hoc on individual performance. Options normally vest over three years, with a third vesting after twelve months and the remainder quarterly over the subsequent two years and can be exercised (once fully vested) until the tenth anniversary. The number of shares granted is based on a fixed market value of shares on the date of the grant, so the individual only benefits if there has been a share price growth. The share option scheme is overseen by the Remuneration Committee which eligible individuals may be invited to participate, including the level of awards. The Remuneration Committee is currently reviewing the structure of the share option scheme. 27 Induction Healthcare Governance Annual Report & Accounts 2023 Andy Williams was awarded an increase at the time of his appointment as Chair of the Audit Committee. Christopher Samler was awarded an increase to reflect his interim position as Executive Chair. No other salary increases were awarded to any other Executive Director or Non-Executive Directors for FY23. Remuneration received by Directors for the year ended 31 March 2023 (audited) The following represents remuneration received by directors during the year. Salary and Fees Pension Bonus Other Total Remuneration FY22 FY23 FY22 FY23 FY22 FY23 FY22 FY23 FY22 FY23 Executive Hugo Stephenson 184,683 James Balmain Guy Mitchell Non-Executive Christopher Samler Christopher Spencer Ian Johnson Leslie-Ann Reed Andy Williams Jane Silber 55,000 - 40,000 35,000 40,000 49,364 238,769 177,784 67,500 126,750 - 18,244 22,158 17,778 3,375 6,300 – – 227,050 110,813 20,250 10,125 – 3,086 – – 202,927 49,364 491,063 308,779 143,494 91,125 2,404 319 - 103,978 - - - - - - 103,978 e c n a n r e v o G 10,208 13,182 26,667 43,353 40,000 2,475 - – – 1,800 459 - – – 1,800 – - – – – – - – – – – - – – – – - – – – 57,475 10,668 - 13,182 26,667 40,000 35,000 43,353 41,800 41,800 660,952 591,286 48,052 26,337 247,300 120,938 3,086 2,723 959,390 741,285 Four directors received retirement benefits in the form of defined contribution pension scheme contributions, accruing in respect of qualifying services. Contributions paid to a pension scheme in respect of directors’ qualifying services for the highest paid director were £0.02m (2022: £0.02m). The following represents share-based remuneration received by directors during the prior years. Director James Balmain James Balmain Date of Grant 8th June 2020 1st April 2021 Exercise price (£) 0.005 0.005 Number of shares 745,559 Market value of award 734,376 Performance conditions Exercisable Exercisable from to no 08/06/2021 08/06/2031 5,803 6,239 no 01/04/2022 01/04/2032 28 Induction Healthcare Governance Annual Report & Accounts 2023 Remuneration Committee Report (continued) Directors’ shareholding and share interests Share ownership plays a key role in the alignment of our executives with the interests of shareholders. The table below sets out the number of shares held or potentially held by executive and non-executive directors (including their connected persons where relevant) as at 31 March 2023 and 31 March 2022. Name Hugo Stephenson Christopher Samler Jane Silber Andy Williams Ian Johnson Beneficially owned shares at 31 March 2022 Beneficially owned shares at 31 March 2023 8,891,730 8,891,730 - 266,667 8,696 419,495 889,968 20,000 8,696 - Jane Silber Remuneration Committee Chair 28 July 2023 Number of unvested options at 31 March 2022 (Audited) – - – – Number of vested options at 31 March 2022 (Audited) – - – – Granted (Audited) – - – – Award description – - – – Number of unvested options at 31 March 2023 (Audited) – - – – Number of vested options at 31 March 2023 (Audited) – - – – 29 Induction Healthcare Governance Annual Report & Accounts 2023 Audit Committee Report On behalf of the Audit Committee, I am pleased to present the Audit Committee report for the year ended 31 March 2023. In this report, we provide you with an overview of the Committee’s priorities and performance during the year, in addition to details regarding the audit and risk management policies approved by the Committee for implementation throughout the Group Committee Members Leslie-Ann Reed (Chair until 2 December 2022) Andy Williams (Chair from 3 December 2022) Jane Silber Christopher Spencer (resigned 7 June 2022) Christopher Samler (appointed on 7 June 2022) Committee Responsibilities The Committee is primarily responsible for: • Oversight of the Group’s risk management framework and mitigating actions; • Monitoring the effectiveness of internal controls; • Ensuring that the Group’s financial performance is properly measured and reported, through review of the annual and half‑year financial statements, accounting policies and significant reporting judgements; • Identification of adjusting items and the presentation of Alternative Performance Measures (“APMs”) and the judgement used in terms of which costs or credits are not associated with the underlying trading of the Group or otherwise impact the comparability of the Group’s results year on year; and • Oversight of the annual audit and its effectiveness, including the objectivity and independence of the external auditor. e c n a n r e v o G The Work of the Committee The Audit Committee continued to review and establish the procedures and systems necessary to ensure robust standards of financial control. The Chief Financial Officer is invited to attend all meetings, while other senior financial managers will attend as appropriate. The external auditor attends the meetings to discuss the planning and conclusions of their work. The Audit Committee is able to call for information from management and external consultants with the external auditors directly if required. The objectivity and independence of the external auditors is safeguarded by reviewing the auditors’ formal planning proposal and monitoring relationships between key audit staff and the Company. The Audit Committee held four formal meetings during the year as set out on page 26 and considered the following items during the year: Whistleblowing Review of arrangements in place Bribery Interim Results Review of arrangements in place The Committee reviewed and approved the interim results, Full Year Results Revenue recognition Going Concern Valuation and amortization, impairment Internal Audit External Audit Terms of Reference The Committee also reviewed and approved the full year results through review of the annual report with a focus on revenue recognition, valuation and impairment of goodwill/intan gib les. The Audit Committee was satisfied that management’s judgement in the absence of explicit performance obligations and the consequential recognition of revenue and deferred revenue in the accounts was reasonable. The Committee undertook reviews of the Company’s going concern status at the half and full year period ends. The Audit Committee was satisfied that the basis for adopting the going concern basis in preparing the Group and Company financial statements. The Audit Committee reviewed the basis of capitalisation and amortisation and considered the intangible value attributed to its intangible software development costs. The Audit Committee was satisfied that the forecast cash flows from the anticipated level of future revenues, supported by customer interest and the sales pipeline, are sufficient to support the carrying values. The Committee reviewed the need for an internal auditor and agreed that the Company was of not yet of sufficient size or complexity to merit a separate internal audit function. The Committee reviewed the independence and objectivity of the newly appointed external auditor, Crowe UK LLP; their plan for the full year audit, advisory fees and the effectiveness of the audit process. Reviewed terms of reference. 30 Induction Healthcare Governance Annual Report & Accounts 2023 External Auditor The Audit Committee appointed a new external auditor Crowe UK LLP in December 2022 and monitors the relationship, to ensure that auditor independence and objectivity are maintained. A summary of remuneration paid to the external auditor is provided in note 7 of the financial statements. The external auditor does not provide any material non-audit services to the Company or its subsidiaries. Being satisfied with the external auditor’s work for the year under review and of the external auditor’s independence, the Audit Committee recommended that the Board reappoint the External Auditor. The value of the non-audit services provided by the Auditor is zero. Having reviewed the auditor’s independence and performance, the Audit Committee has concluded that this is effective. Andy Williams Audit Committee Chair 28 July 2023 31 Induction Healthcare Governance Annual Report & Accounts 2023 Nomination Committee Report On behalf of the Board, I am pleased to present the Nomination Committee report of the Company for the year ended 31 March 2023. Committee Members Andy Williams (Chair) Christopher Spencer (resigned 7 June 2022) Jane Silber Christopher Samler (appointed 07 June 2022) Committee Responsibilities The Nomination Committee is responsible for reviewing the structure, size, and composition (including the skills, knowledge, experience, and diversity) of the board and making recommendations to the board with regard to any changes. The Work of the Committee The Nomination Committee met formally once during the year and held a number of informal meetings and telephone calls between the scheduled meeting. Appointment of Directors The Board asked the Committee to consider the suitability of Ian Johnson for the position of Senior Independent Director on the Board. The Committee recommended this appointment and Ian Johnson joined the Board on 2 December 2022. Succession Planning During the year, the Committee considered the positions of the Executive Directors and short term and long term succession planning for the Executive Directors and the Chairs of the various Committees. Their discussions took into account the needs of the business and the preferences of the individuals under discussion. The recommendations of the Committee were communicated to the full Board and resulted in the appointment of Christopher Samler as Chair, and subsequently as interim Executive Chair following the resignation of James Balmain as CEO in January 2023. Andy Williams was appointed as Chair of the Audit Committee. Following the appointment of Paul Tambeau as Interim COO and John McIntosh as Interim CFO in December 2022, both were confirmed as CEO and CFO respectively on 30 June 2023. Change of Company Secretary After the resignation by Guy Mitchell as Company Secretary, Louise Torr was appointed to this role in January 2023. Induction of new directors New directors are taken through a comprehensive induction programme which is tailored to their individual needs and understanding. Andy Williams Nomination Committee Chair 28 July 2023 32 Induction Healthcare Governance Annual Report & Accounts 2023 Directors’ report The Directors are pleased to present the Directors’ report to shareholders and the audited financial statements for the year ended 31 March 2023. Corporate governance The Directors’ statement on Corporate Governance is set out on pages 23 to 35 and forms part of this report. Principal activity and business model Going Concern The principal activity and business model are set out in the Strategic Report on page 13. Results and dividends The results for the year to 31 March 2023 are set out in the financial statements on pages 43 to 91. The Directors do not propose payment of a dividend for 2023 (2022: £Nil). Review of the year and outlook A summary of the Group’s progress and development is set out in the Chair’s review and Chief Executive Officer’s review, and the Financial Review, which form part of the Strategic Report on pages 2 to 13. This analysis includes comments on the position of the Group at the end of the financial year, an indication of likely future developments in the business of the Group and details of the Group’s development activities. The outlook of the business is set out in the Strategic Report on page 5. Significant events after the year‑end On the 30th June 2023 the Group announced the completion of the sale of Switch, a directory app, for an undisclosed sum. This is in line with the previously announced strategy to focus on sustainable growth and allows additional cost savings to be applied. The revenues of Switch are disclosed as part of the discontinued operations. Further details to be found at note 13. Directors’ insurance An insurance policy is maintained by the Group which insures the Directors of the Group against certain liabilities arising in the conduct of their duties. Capital structure The Company’s share capital is divided into 92,380,300 ordinary shares of £0.005 each with voting rights. Related party transactions Details of all related party transactions are set out in Note 29 to the Financial Statements. In assessing the appropriateness of the going concern assumption, Directors has reviewed the ability to continue operating over the period to 31 October 2024 to take into account the operating cycle of the group. The Directors have also reviewed other relevant information, together with considering scenarios with adverse impacts across the Group’s principal risks relating to: revenue reductions from either non- renewals of major contracts with customers or downward price pressures; non-materialisation of forecast sales to new customers and delays in securing new contracts with customers or delayed cash inflows. The severe but plausible downside scenario has indicated that cash balances are their lowest in April 2024 before increasing again in May 2024 in line with the Group’s operating cycle. At this low point, cash balances remain positive. The Directors believe they can timeously respond to decreases in cash inflows by taking mitigating actions. The Directors have applied significant judgement regarding renewals of existing contracts with major customers, in particular NHS customers. The Directors have made this judgement after considering the UK budget announcement in November 2022 and funding confirmation in July 2023. Whilst there remains uncertainty as to the specifics of the NHS funding plan following the budget announcement, the Directors note that NHS funding generally was increased and there was a focus on NHS efficiency, which the Group’s products / services are designed to assist with. Therefore, the Directors believe that the judgement they have made is appropriate based upon information available at that point. After due consideration, the Directors have concluded that there is a reasonable expectation that the Group and Company have adequate resources to meet their liabilities as they fall due for the period to 31 October 2024, and therefore these financial statements are prepared on a going concern basis. Annual General Meeting The date of the 2023 Annual General Meeting of the Company can be found in the Notice of Meeting which is available in the Investor Section of the Company’s website at www.inductionhealthcare.com. Research and development The assessment of when development expenditure meets the recognition criteria required for capitalisation requires judgement as to the technical feasibility and commercial viability of products and ideas that are under development. The Group capitalised £0.8m of development costs (2022: £3.1m). e c n a n r e v o G 33 Induction Healthcare Governance Annual Report & Accounts 2023 Financial instruments The financial risk management objectives and policies of the Group, including credit risk, interest rate risk and currency risk are provided in Note 28 of the accounts. Directors The Directors who held office during the year were as follows: • Christopher Samler (appointed 7 June 2022) • Jane Silber • Andy Williams • Ian Johnson (appointed 2 December 2022) • Christopher Spencer (resigned 7 June 2022) • Leslie-Ann Reed (resigned 2 December 2022) • Guy Mitchell (resigned 5 December 2022) • James Balmain (resigned 9 January 2022) • Hugo Stephenson (resigned on 5 May 2023) Political contributions Neither the Group nor any of its subsidiaries made any disclosable political donations or incurred any disclosable political expenditure during the year (2022: £Nil). Disclosure of information to auditor The Directors who held office at the date of approval of this Directors’ report confirm that, so far as they are each aware, there is no relevant audit information of which the company’s auditor is unaware; and each Director has taken all the steps that he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the company’s auditors is aware of that information. Auditor Crowe U.K. LLP were appointed as the Group external auditor at the AGM on 11 January 2023. By order of the board John McIntosh Chief Financial Officer 28 July 2023 34 Induction Healthcare Governance Annual Report & Accounts 2023 Statement of Directors’ responsibilities in respect of the annual report and the financial statements The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report and a Directors’ Report that complies with that law and those regulations. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. e c n a n r e v o G The directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare group and parent company financial statements for each financial year. Under the AIM Rules of the London Stock Exchange they are required to prepare the Group financial statements in accordance with UK-adopted international accounting standards and they have elected to prepare the parent Company financial statements on the same basis. 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 Group and parent Company and of the Group’s profit or loss for that period. In preparing each of the Group and parent Company financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable, relevant and reliable; • state whether they have been prepared in accordance with UK-adopted international accounting standards; • assess the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and • use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so. 35 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Independent Auditors’ report to the members of Induction Healthcare Group Plc Opinion We have audited the f inancial statements of Induction Healthcare Group Plc (the “Parent Company”) and its subsidiaries (the “Group”) f or the period ended 31 March 2023, which comprise: • • • • • the Group statement of comprehensive income f or the year ended 31 March 2023; the Group and parent company statements of f inancial position as at 31 March 2023; the Group and parent company statements of changes in equity f or the year then ended; the Group and parent company statements of cash f lows f or the year then ended; and the notes to the f inancial statements, including a summary of signif icant accounting policies. The f inancial reporting f ramework that has been applied in the preparation of the f inancial statements is applicable law and accordance with UK adopted international accounting standardsand, as regards the parent company f inancial statements, as applied in accordance with the provisions of the Companies Act 2006. In our opinion: • • • • the f inancial statements give a true and f air view of the state of the Group’s and of the Parent Company's af f airs as at 31 March 2023 and of the Group’s loss f or the year then ended; the group f inancial statements have been properly prepared in accordance with UK adopted international accounting standards; the parent company f inancial statements have been properly prepared in accordance with UK adopted international accounting standards in conf ormity with the requirements of the Companies Act 2006; and the f inancial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are f urther described in the Auditor’s responsibilities f or the audit of the f inancial statements section of our report. We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the f inancial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have f ulf illed our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is suf f icient and appropriate to provide a basis f or our opinion. Conclusions relating to going concern In auditing the f inancial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the f inancial statements is appropriate. Our evaluation of the directors’ assessment of the Group’s and Parent Company’s ability to continue to adopt the going concern basis of accounting included • Understanding the system of internal control over the cash f low management and budgeting processes; • Assessing the adequacy of the period covered in management going concern assessment; • Conf irming the reasonability of the inputs and assumptions in the budgets as well as identif ying which inputs had been subjected to stress testing and how the results of the stress testing impacted the conclusions; • Validating that the cost savings identif ied by management in the last quarter of the year ended 31 March 2023 have been realised in the f irst quarter of the year ended 31 March 2024 and ensuring that the f orecast savings over the assessment period are consistent with this; • Ensuring that these f orecasts are consistent with those used f or impairment assessment; 36 Induction Healthcare Financial Statements Annual Report & Accounts 2023 • Perf orming a retrospective review on the f igures to mitigate the risk of management bias; • Challenging other potential mitigating actions to improve liquidity in addition; • Reviewing and incorporating any post balance sheet events that could impact the conclusions on going concern; and • Assessing the completeness and accuracy of the matters described in the going concern disclosure within the signif icant accounting policies as set out in Note 2.2. Based on the work we have perf ormed, we have not identif ied any material uncertainties relating to events or conditions that, individually or collectively, may cast signif icant doubt on the Group’s and Parent Company's ability to continue as a going concern f or a period of at least twelve months f rom when the f inancial statements are authorised f or issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Overview of our audit approach Materiality In planning and perf orming our audit we applied the concept of materiality. An item is considered material if it could reasonably be expected to change the economic decisions of a user of the f inancial statements. We used the concept of materiality to both f ocus our testing and to evaluate the impact of misstatements identif ied. Based on our prof essional judgement, we determined overall materiality f or the Group f inancial statements as a whole to be £500,000 based on a 5% loss bef ore tax adjusted f or impairment charges. Materiality f or the Parent Company f inancial statements as a whole was set at £90,000 based on 0.3% of net assets. We use a dif f erent level of materiality (‘perf ormance materiality’) to determine the extent of our testing f or the audit of the f inancial statements. Perf ormance materiality is set based on the audit materiality as adjusted f or the judgements made as to the entity risk and our evaluation of the specif ic risk of each audit area having regard to the internal control environment. This is set at £350,000 f or the group and £54,000 f or the parent. We reviewed this during the audit but considered that it remained set at an appropriate amount. Where considered appropriate perf ormance materiality may be reduced to a lower level, such as, for related party transactions and directors’ remuneration. We agreed with the Audit Committee to report to it all identif ied errors in excess of £25,000. Errors below that threshold would also be reported to it if , in our opinion as auditor, disclosure was required on qualitative grounds. Overview of the scope of our audit Our engagement was in respect of the audit of the Group’s consolidated f inancial statements and those of the Parent Company. Our audit approach was developed by obtaining a thorough understanding of the Group’s activities and is risk based. Based on this understanding we assessed those aspects of the Group and Subsidiary Companies’ transactions and balances which were most likely to give rise to a material misstatement and were most susceptible to irregularities including f raud or error. Specif ically, we identif ied what we considered to be key audit matters and planned our audit approach accordingly. We undertook a combination of analytical procedures and substantive testing on signif icant transactions, balances and disclosures, the extent of which was based on various f actors such as our overall assessment of the control environment, the ef f ectiveness of controls over individual systems and the management of specif ic risks. We conducted specif ic audit procedures in relation to all entities within the Group without the use of component auditors. Not all group companies were within the scope of audit testing as some were dormant with minimal to no transactions during the year under review. Key Audit Matters 37 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Key audit matters are those matters that, in our prof essional judgement, were of most signif icance in our audit of the f inancial statements of the current period and include the most signif icant assessed risks of material misstatement (whether or not due to f raud) that we identif ied. These matters included those which had the greatest ef f ect on the overall audit strategy, the allocation of resources in the audit; and directing the ef f orts of the engagement team. These matters were addressed in the context of our audit of the f inancial statements as a whole, and in f orming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identif ied by our audit. Key audit matter Revenue Recognition Refer to page 10 (directors’ report), page 43, (Consolidated Statement of Comprehensive Income), pages 50-52 (Notes to the Consolidated Financial Statements – Note 1.5 Accounting policies), Note 6, pages 72-76, (financial disclosures). Revenue is recognised in accordance with the accounting policy set out f inancial the statements. Revenue f rom contracts with customers including discontinued operations for the year to 31 March 2023 was £13.6m (2022: £7.9m). in The group has a number of dif ferent revenue streams with dif f erent revenue recognition points, including licence revenue recognised overtime. Errors in the recognition of revenue could materially misstate f inancial statements and key investor metrics. the Revenue is a signif icant risk area as judgements are required in determining the appropriate revenue recognition point. Valuation of intangibles including Goodwill Refer to page 11 (directors’ report), page 44 (Consolidated balance sheet), pages 50,54- 56 (Notes to the Consolidated Financial Statements – Note 1 and 5 Accounting and policies, judgements), Note 17&18, pages 75-79 (financial disclosures). Accounting estimates The carrying value of goodwill and other intangible assets at 31 March 2023 were £10.3 million and £15.2 million respectively. 38 How the scope of our audit addressed the key audit matter f ocused on assessing that revenue Our work accounting policies were compliant with IFRS and validating that revenue is recognised in accordance with the accounting policies and that cut of f was correctly applied through testing. We understood and walked through the revenue recognition process and the related systems of internal control. We tested substantively the processing of revenue across all dif f erent products and service of f erings to ensure that the processes are in place to recognise revenue in the appropriate periods. Substantively tested the contract assets and liabilities to test the accuracy of the revenue recognised to contractual terms and supporting evidence. We ensured that revenue was recognised in the correct accounting period through review of sample of contracts to conf irm when perf ormance obligations were met and also reviewing sampled invoices af ter the end of the reporting period. We conf irmed the accuracy of the calculation of any income balances. This def erred and accrued the risk of additionally gave us comf ort over management override or f inancial reporting. f raudulent We reviewed revenue disclosures and segmental reporting to ensure compliance with the underlying accounting standards. The key components of our review covered broadly the f ollowing: - Appropriateness of key assumptions and judgments including the discount rate. - Adequacy of disclosures, including around the sensitivities attached to key assumptions. - Appropriateness of CGUs and accuracy of the asset allocations to those CGUs. We perf ormed the f ollowing procedures in order to address the risks around the impairment: We evaluated, in comparison to the requirements set out in IAS 36, management’s assessment (using Induction Healthcare Financial Statements Annual Report & Accounts 2023 The Management perf ormed an impairment review as at 31 March 2023 in accordance with IAS 36 ‘Impairment of assets’. resulting impairment charge of £7.7m is explained in f urther detail in note 17 within the f inancial statements. The Group’s intangible assets comprise of goodwill arising on acquisition of subsidiaries, sof tware customer developments. relationships and When assessing the carrying value of goodwill intangible assets, management makes and judgements regarding the appropriate cash generating unit, strategy, f uture trading and prof itability and the assumptions underlying these. We considered the risk that goodwill and/or other intangible assets were impaired. The key judgements are in relation to growth and prof itability. Changes in these f actors could result in an impairment to the carrying value of the goodwill and intangible assets. Capitalisation of intangible assets (Notes Refer to page 10-11 (directors’ report), page 44 (Consolidated balance sheet), pages the Consolidat ed to 50,54-56 Financial Statements – Note 1 and 5 Accounting policies, Accounting estimates and judgements), Note 18, pages 79 (financial disclosures). The carrying value of other intangible assets including capitalised development costs as at 31 March 2023 was £15.2 million. Additions to internally generated intangible assets was for the year ended 31 March 2023 is £0.8m. in The risk on the capitalisation of the intangibles to appropriateness of was management’s judgements concerning whether the capitalisation criteria have been met. relation There was also the risk of errors in the capturing of relevant costs resulting in misstatements in the amount being capitalised. 39 discounted cash f low models) as to whether goodwill and other intangible assets were impaired. We reviewed, challenged and considered management’s impairment and f air value models as appropriate and their key estimates, including the discount rate. We reviewed the appropriateness and consistency of the process f or making such estimates. We have also reviewed the constitution of CGU’s identif ied by the management. We obtained management’s discounted cash f low models supporting the intangible asset valuation. We challenged the key assumptions into the model, including the f orecast revenue and EBITDA, discount rates and growth rates. We compared cash f low f orecasts used in the impairment review to historical perf ormance and f orecasts used in the assessment of going concern and challenged where f orecasts indicated perf ormance that deviated signif icantly from historical perf ormance, in the absence of signif icant changes in the business or market environment. Discount rates and growth rates were benchmarked to our knowledge of sector perf ormance, to evaluate the reasonableness of these assumptions. We used an in-house valuations expert to assist with the assessment of the discount rate. Sensitivity analysis was perf ormed on the key assumptions such as growth, margin and discount rates to identif y those assumptions to which the goodwill or intangible asset valuation was highly sensitive. We reviewed the disclosures made in respect of impairment, including those made as signif icant estimates and judgements. Our audit procedures in this area included: Obtaining management’s assessment of the development projects undertaken and whether they met, or not, the capitalisation criteria in IAS 38. Testing, on a sample basis, capitalised costs through to supporting documentation. For projects where capitalisation has occurred obtaining evidence to support the technical f easibility and commercial viability. Understanding management’s basis f or determining qualif ying costs. Reviewing the sources of these costs by obtaining third party invoices or receipts, payroll records, etc. Understanding management’s assessment and judgement around which percentage or ratio of costs incurred in respect of sof tware developers should be capitalised or not by holding discussions with management’s technical/project heads. Induction Healthcare Financial Statements Annual Report & Accounts 2023 Reviewing management’s assessment of each capitalizable cost against the requirements of IAS 38 f or capitalisation. assessment Reviewing management’s and determination of the basis f or amortisation and reviewing the amortisation of each item of capitalised development costs f eature relating developed and ensuring no errors in determination of the charge f or the year to each Reviewing the adequacy of disclosure. Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole. They were not designed to enable us to express an opinion on these matters individually and we express no such opinion. Other information The directors are responsible f or the other inf ormation. The other inf ormation comprises the inf ormation included in the annual report, other than the f inancial statements and our auditor’s report thereon. Our opinion on the f inancial statements does not cover the other inf ormation and, except to the extent otherwise explicitly stated in our report, we do not express any f orm of assurance conclusion thereon. In connection with our audit of the f inancial statements, our responsibility is to read the other inf ormation and, in doing so, consider whether the other inf ormation is materially inconsistent with the f inancial statements, or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identif y such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the f inancial statements or a material misstatement of the other inf ormation. If , based on the work we have perf ormed, we conclude that there is a material misstatement of this other inf ormation, we are required to report that f act. We have nothing to report in this regard. Opinion on other matter prescribed by the Companies Act 2006 In our opinion based on the work undertaken in the course of our audit • • the inf ormation given in the strategic report and the directors' report f or the f inancial year f or which the f inancial statements are prepared is consistent with the f inancial statements; and the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identif ied material misstatements in the strategic report or the directors’ report. We have nothing to report in respect of the f ollowing matters where the Companies Act 2006 requires us to report to you if , in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate f or our audit have not been received f rom branches not visited by us; or the parent company f inancial statements are not in agreement with the accounting records and returns; or certain disclosures of directors' remuneration specif ied by law are not made; or • • 40 Induction Healthcare Financial Statements Annual Report & Accounts 2023 • we have not received all the inf ormation and explanations we require f or our audit. Responsibilities of the directors for the financial statements As explained more f ully in the directors’ responsibilities statement set out on page 35, the directors are responsible f or the preparation of the f inancial statements and f or being satisf ied that they give a true and f air view, and f or such internal control as the directors determine is necessary to enable the preparation of f inancial statements that are f ree f rom material misstatement, whether due to f raud or error. In preparing the f inancial statements, the directors are responsible f or assessing the group’s and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the f inancial statements as a whole are f ree f rom material misstatement, whether due to f raud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise f rom f raud or error and are considered material if , individually or in the aggregate, they could reasonably be expected to inf luence the economic decisions of users taken on the basis of these f inancial statements. Irregularities, including f raud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including f raud. The extent to which our procedures are capable of detecting irregularities, including f raud is detailed below: We obtained an understanding of the legal and regulatory f rameworks that are applicable to the Group and the procedures in place f or ensuring compliance. Based on our understanding of the Group and industry, discussions with management and the Board of Directors we identif ied f inancial reporting standards and Companies Act 2006 as having a direct ef f ect on the amounts and disclosures in the f inancial statements. Our work included direct enquiry of management, reviewing Board and relevant committee minutes and inspection of correspondence. As part of our audit planning process, we assessed the dif f erent areas of the f inancial statements, including disclosures, f or the risk of material misstatement. This included considering the risk of f raud where direct enquiries were made of management and those charged with governance concerning both whether they had any knowledge of actual or suspected f raud and their assessment of the susceptibility of f raud. We considered the risk was greater in areas involving signif icant management estimate or judgement. Based on this assessment we designed audit procedures to f ocus on key areas of estimate or judgement, this included specif ic testing of journal transactions, both at the year end and throughout the year. Other laws and regulations where non-compliance may have a material ef f ect on the Group's operations are Data Protection and GDPR. Our audit procedures included: - - - - - - enquiry of management about the Group's policies, procedures and related controls regarding compliance with laws and regulations and if there are any known instances of non-compliance including f raud; examining supporting documents f or all material balances, transactions and disclosures; review of minutes of meetings of the Board of Directors; enquiry of management about litigations and claims; evaluation of the selection and application of accounting policies related to subjective measurements and complex transactions, in particular those items included in the Key Audit Matters; analytical procedures to identif y any unusual or unexpected relationships; 41 Induction Healthcare Financial Statements Annual Report & Accounts 2023 - - testing the appropriateness of journal entries recorded in the general ledger and other adjustments made in the preparation of the f inancial statements; and review of accounting estimates f or biases. Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements of the f inancial statements may not be detected, even though the audit is properly planned and perf ormed in accordance with the ISAs (UK). We are not responsible f or preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations. The potential ef f ects of inherent limitations are particularly signif icant in the case of misstatement resulting f rom f raud because f raud may involve sophisticated and caref ully organized schemes designed to conceal it, including deliberate f ailure to record transactions, collusion or intentional misrepresentations being made to us. A f urther description of our responsibilities f or the audit of the f inancial statements is located on the Financial Reporting Council’s website at: www.f rc.org.uk/auditorsresponsibilities. This description f orms part of our auditor’s report. Use of our report This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and f or no other purpose. To the f ullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, f or our audit work, f or this report, or f or the opinions we have f ormed. Matthew Stallabrass (Senior Statutory Auditor) f or and on behalf of Crowe U.K. LLP Statutory Auditor London 28 July 2023 42 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Consolidated Statement of Comprehensive Income For the year ended 31 March 2023 Note 2023 £000 2022 £000 Re-presented C o n ti n u i n g o p e ra ti o n s R e ve n u e fro m co n tra cts w i th cu sto me rs Cost of sales Gro ss p ro fi t Sales and marketing expenses Administrative expenses Development expenses Impairment losses Loss from operations Finance income Finance expense Loss before tax Tax credit Loss for the year from continuing operations Discontinued operations Loss from discontinued operations, net of tax Loss for the year 6 17 7 11 11 12 13 Oth e r co mp re h e n si ve i n co me Exchange gains/(losses) arising on translation on foreign operations Exchange gains / (losses) on translation of foreign operations reclassified to profit and loss during the year Oth e r co mp re h e n si ve i n co me fo r th e ye a r, n e t o f ta x To ta l co mp re h e n si ve i n co me 1 2 ,8 8 4 (4 ,7 5 4 ) 8 ,1 3 0 (1 ,5 2 3 ) (6 ,9 5 2 ) (9 ,2 8 7 ) (7 ,7 4 8 ) (1 7 ,3 8 0 ) 1 (7 ) (1 7 ,3 8 6 ) 7 9 8 (1 6 ,5 8 8 ) (7 9 5 ) (1 7 ,3 8 3 ) (1 6 2 ) (8 0 1 ) (9 6 3 ) (1 8 ,3 4 6 ) 7,231 (2,751) 4,987 (1,092) (7,260) (5,256) — (9,129) 1 (30) (9,158) 1,082 (8,432) (356) (8,432) 801 9 810 (7,266) L o ss p e r sh a re a ttri b u ta b l e to th e o rd i n a ry e q u i ty h o l d e rs o f th e p a re n t Basic Diluted L o ss p e r sh a re fro m co n ti n u i n g o p e ra ti o n s a ttri b u ta b l e to th e o rd i n a ry e q u i ty h o l d e rs o f th e p a re n t Basic Diluted (0 .1 9 ) (0 .1 9 ) (0 .1 8 ) (0 .1 8 ) 14 14 14 14 The Notes on pages 47 to 91 form an integral part of these financial statements. 43 (0.10) (0.10) (0.10) (0.10) s t n e m e t a t S l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 Consolidated Statement of Financial Position As at 31 March 2023 Asse ts N o n -cu rre n t a sse ts Property, plant and equipment Intangible assets Goodwill Deferred tax assets To ta l n o n -cu rre n t a sse ts C u rre n t a sse ts Contract assets Trade and other receivables Current tax receivable Cash and cash equivalents Assets held for sale To ta l cu rre n t a sse ts To ta l a sse ts L i a b i l i ti e s N o n -cu rre n t l i a b i l i ti e s Contract liabilities Deferred tax liability Other financial liabilities To ta l n o n -cu rre n t l i a b i l i ti e s C u rre n t l i a b i l i ti e s Trade and other payables Provisions Contract liabilities Current tax payable Liabilities associated with assets held for sale Other financial liabilities To ta l cu rre n t l i a b i l i ti e s To ta l l i a b i l i ti e s N e t a sse ts Eq u i ty a ttri b u ta b l e to e q u i ty h o l d e rs o f th e p a re n t Share capital Share premium reserve Merger reserve Foreign exchange reserve Other reserves Retained earnings To ta l e q u i ty Note 2023 £000 2022 £000 19 18 17 12 21 20 12 22 24 12 30 23 25 24 12 13 30 26 27 27 27 10 27 9 1 5 ,2 5 1 1 0 ,6 8 5 5 5 6 2 6 ,5 0 1 1 ,2 2 8 2 ,6 7 2 1 ,1 7 5 4 ,2 8 7 2 ,4 7 4 1 1 ,8 3 6 3 8 ,3 3 7 3 ,5 8 8 3 ,8 7 0 5 6 7 ,5 1 4 2 ,7 1 3 5 2 8 2 ,1 9 8 — 1 ,0 1 6 7 2 6 ,5 2 7 1 4 ,0 4 1 2 4 ,2 9 6 244 20,962 19,758 1,540 42,504 786 3,347 1,240 7,496 — 12,869 55,373 326 5,851 128 6,305 3,365 — 2,579 789 — 72 6,805 13,110 42,263 4 6 2 4 1 ,6 6 5 2 0 ,2 0 5 (1 6 2 ) 1 ,5 7 8 (3 9 ,4 5 2 ) 2 4 ,2 9 6 460 41,665 20,205 801 1,405 (22,273) 42,263 The Notes on pages 47 to 91 form an integral part of these financial statements. The financial statements on 49 to 93 were approved and authorised for issue by the board of Directors on 28 July 2023 and were signed on its behalf by: John McIntosh Director Company registered number: 11852026 44 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Consolidated Statement of Changes in Equity As at 31 March 2023 At 31 March 20 2 1 a n d 1 Ap ri l 2 0 2 1 C o mp re h e n si ve i n co me fo r th e ye a r Loss for the year Other comprehensive gain / (loss) for the year To tal comprehensive income for the ye a r Transactions with owners, re co rd e d d i re ctl y i n e q u i ty Issue of ordinary shares Issue of shares as consideration for a business combination Equity settled share-based payments Share-issue costs Reclassification of equity To tal contributions by an d d i stributions to o w n e rs At 31 March 2022 and 1 April 2022 C o mp re h e n si ve i n co me fo r th e ye a r Loss for the year Other comprehensive income / (loss) for the year To tal comprehensive income for the ye a r Transactions with owners, re co rd e d d i re ctl y i n e q u i ty Issue of shares on exercise of equity settled share-based payments Equity settled share-based payments To tal contributions by an d d i stributions to o w n e rs At 31 March 2023 Note Share capital £000 Share premium £000 2 1 0 1 8 ,4 3 2 Merger reserve £000 1 0 ,8 7 9 Foreign exchange reserve £000 (9 ) Other reserves £000 Retained earnings £000 Total equity £000 7 9 2 (1 3,839 ) 1 6 ,4 6 5 — — — — — — 179 24,821 — — — — 71 — — — — 8,928 — (1,190) (398) — — 398 250 23,233 9,326 — 810 810 — — — — — — — — — — — 613 — — 613 (8,434) (8,434) — 810 (8,434) (7,624) — 25,000 — — — — — 8,999 613 (1,190) — 33,422 4 6 0 4 1 ,6 6 5 2 0 ,2 0 5 8 0 1 1 ,4 0 5 (2 2,273 ) 4 2 ,2 6 3 — — — 2 — — — — — — — — — — — 2 — 4 6 2 4 1 ,6 6 5 2 0 ,2 0 5 — — — (17,383) (17,383) (963) — — (963) (963) — (17,383) (18,346) — — — (1 6 2 ) (204) 204 377 — 173 204 2 377 379 1 ,5 7 8 (3 9,452 ) 2 4 ,2 9 6 15 15 10 15 10 10 The notes on pages 47 to 91 form part of these financial statements. 45 s t n e m e t a t S l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 Consolidated Statement of Cash Flows For the year ended 31 March 2023 C a sh fl o w s fro m o p e ra ti n g a cti vi ti e s Loss for the year Ad j u stme n ts fo r Depreciation of property, plant and equipment Amortisation of intangible fixed assets Impairment losses on intangible assets Finance income Finance expense Fair value adjustments on financial liabilities Share-based payment expense Net foreign exchange loss/(gain) Income tax charge/(credit) Mo ve me n ts i n w o rki n g ca p i ta l : Decrease/(Increase) in trade and other receivables and contract assets (Decrease)/Increase in trade and other payables and contract liabilities Interest received Interest paid Income taxes received Income taxes paid N e t ca sh u se d i n o p e ra ti n g a cti vi ti e s C a sh fl o w s fro m/(u se d i n ) i n ve sti n g a cti vi ti e s Acquisition of subsidiary, net of cash acquired Purchases of property, plant and equipment Payment of software development costs N e t ca sh u se d i n i n ve sti n g a cti vi ti e s C a sh fl o w s fro m/(u se d i n ) fi n a n ci n g a cti vi ti e s Issue of ordinary shares Proceeds on other financial liabilities Share issue costs Repayment of bank borrowings Payment of lease liabilities N e t ca sh fro m/(u se d i n ) fi n a n ci n g a cti vi ti e s N e t ca sh i n cre a se /(d e cre a se ) i n ca sh a n d ca sh e q u i va l e n ts Cash and cash equivalents at the beginning of year Exchange gains/(losses) on cash and cash equivalents C a sh a n d ca sh e q u i va l e n ts a t th e e n d o f th e ye a r The notes on pages 47 to 91 form part of these financial statements. Notes 2023 £000 2022 £000 (1 7 ,3 8 3 ) (8,434) 19 18 17 11 11 2 8 1 0 12 11 11 15 19 7 15 2 8 1 1 9 4 ,7 2 6 7 ,7 4 8 (1 ) 7 — 3 7 7 6 3 (7 9 8 ) (5 ,1 4 2 ) 1 6 6 2 ,9 7 2 1 (7 ) 65 (863) (2 ,8 0 8 ) 28 3,785 — (1) 30 — 613 — (1,146) (5,125) 1,661 1,115 1 (30) 458 (141) (2,061) — (1 7 ) (8 1 0 ) (8 2 7 ) (13,486) (256) (3,090) (16,832) 2 — — — (7 2 ) (7 0 ) (3 ,7 0 5 ) 7 ,4 9 6 4 9 6 4 ,2 8 7 25,000 210 (1,190) — (12) 24,008 5,115 2,472 (91) 7,496 46 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) 1. Ba si s o f p re p a ra ti o n Both the financial statements of the Group and the financial statements of the Company have been prepared in accordance with UK-adopted international accounting standards (“UK-Adopted IFRS”). They were authorised for issue by the Group’s board of directors on 28th July 2023. Details of the Group’s accounting policies, including changes during the year, are included in note 2. These financial statements are presented in pound sterling, which is the Group’s presentational currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated. In preparing these financial statements, management has made judgements, estimates and assumptions that affect the application of the Group accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to estimates are recognised prospectively. The areas where judgements and estimates have been made in preparing the financial statements and their effects are disclosed in note 5. The financial statements have been prepared on the historical cost basis. 2. Acco u n ti n g p o l i ci e s 2 .1 Ba si s o f co n so l i d a ti o n The consolidated financial statements incorporate the financial statements of the Group and entities (including structured entities) controlled by the Group and its subsidiaries. Control is achieved when the Group: - - - has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Group has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Group considers all relevant facts and circumstances in assessing whether or not the Group’s voting rights in an investee are sufficient to give it power, including: - the size of the Group’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; potential voting rights held by the Group, other vote holders or other parties; rights arising from other contractual arrangements; and any additional facts and circumstances that indicate that the Group has, or does not have, the current ability to direct the relevant activities at this time that decisions need to be made, including voting patterns at previous shareholders’ meetings. - - - Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Group gains control until the date when the Group ceases to control the subsidiary. s t n e m e t a t S Profit or loss and each component of other comprehensive income are attributed to the owners of the Group and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Group and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. 47 l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. There are no restrictions on the ability of the parent and subsidiaries to transfer cash or other assets to or from other entities within the group. There are no restrictions that may restrict dividends and other capital distributions within the group. There are no restrictions on the ability of the group to access or use the assets and settle the liabilities of the group. 2 .2 Go i n g co n ce rn The Group has recognised total revenues during the year of £13.6m (2022: £7.9m) and had cash balances at 31 March 2023 of £4.3m (2022: £7.49m) with cash outflows from operating activities during the year of £2.8m (2022: £2.06m). During the year ended 31 March 2023, the Group successfully completed a right-sizing programme, estimated to deliver c. 30% reduction in costs. In assessing the appropriateness of the going concern assumption, the Board of Directors (“the Directors”) has reviewed the ability to continue operating over the period to 30 June 2025 (“the going concern period”). The Directors have also reviewed other relevant information, together with considering scenarios with adverse impacts across the Group’s principal risks relating to: revenue reductions from either non-renewals of major contracts with customers or downward price pressures; non-materialisation of forecast sales to new customers and delays in securing new contracts with customers resulting in delayed cash inflows. These risks are further connected to macro-economic conditions and the UK government’s fiscal policy, in particular the funding and support to the group’s customers which are primarily NHS Trusts and other government bodies. The Directors determined that the forecast period extends to 30 June 2025 to take into account the operating cycle of the group, which sees significant contract renewals in March 2025, with cash inflows received in April and May 2025 . The Directors’ cash inflows under the base case of going concern assessment assumes all existing customer contracts with major customers will be renewed when they come due within the forecast period at the same contract terms. It also includes assumptions regarding growth in revenues due to new customer contracts, and growth in revenues due to sales of new products to existing customers. The base case going concern assessment cash outflows allows investment in the full range of planned market and product development activities, through increased employee-related and other spend to achieve revenue targets over this forecast period. The Directors have considered a severe but plausible downside scenario whereby the Group is impacted by: reductions in revenue arising from either non-renewals of some major customer contracts or downward price pressure; non-materialisation of some forecast sales to new customers and three to six-month delays in securing some contracts with new customers resulting in delays in SaaS revenues and cash inflows, with associated reductions in incremental costs directly linked to revenue generation. The severe but plausible downside scenario has indicated that cash balances are their lowest in April 2024 before increasing again in May 2024 in line with the Group’s operating cycle. At this low point, cash balances remain positive. Under a more severe scenario, the Directors believe they can timeously respond to decreases in cash inflows by taking mitigating actions to reduce costs. These include but are not limited to; delays in hiring new employees; delays in hiring new contractors; and reducing discretionary spend through, for example, reducing professional and consulting expenditure and contractor costs. In determining that there is no material uncertainty related to going concern, the Directors have applied significant judgement regarding renewals of existing contracts with major customers, in particular NHS customers. The Directors have made this judgement after considering the UK budget announcement in November 2022. Whilst there remains uncertainty as to the specifics of the NHS funding plan following the budget announcement, the Directors note that NHS funding generally was increased and there was a focus on NHS efficiency, which the Group’s products / services are designed to assist with. Therefore, the Directors believe that the judgement they have made is appropriate based upon information available at that point. 48 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 2 . Acco u n ti n g p o l i ci e s (co n ti n u e d ) 2 .2 Go i n g co n ce rn (co n ti n u e d ) After due consideration, the Directors have concluded that there is a reasonable expectation that the Group and Company have adequate resources to meet their liabilities as they fall due for the period to 30 June 2025, and therefore these financial statements are prepared on a going concern basis. 2 .3 Bu si n e ss co mb i n a ti o n s Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that: 1 deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 respectively; liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 at the acquisition date (see note 1.8); and assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard. When an operation is classified as a discontinued operation, the comparative statement of profit or loss and OCI is re- presented as if the operation had been discontinued from the start of the comparative year. 2 3 Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition date fair values and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates, with the corresponding gain or loss being recognised in profit or loss. When a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured to its acquisition date fair value and the resulting gain or loss, if any, is recognised in profit or loss. 49 s t n e m e t a t S l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 2 . Acco u n ti n g p o l i ci e s (co n ti n u e d ) 2 .3 Bu si n e ss co mb i n a ti o n s (co n ti n u e d ) Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date. 2 .4 Go o d w i l l Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business (see note 2.3) less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. 2 .5 R e ve n u e Licenced subscription services The Group is in the business of providing a right-to-access to its proprietary software applications, as software-as- a- service (“SaaS”). Management have determined that it provides a right-to-access based on the fact that the customer simultaneously receives and consumes the benefit from the performance of providing access to the proprietary applications. Revenue from the sale of licenced software is recognised when control of the goods or services are transferred to the customer, either after user acceptance testing or go-live and at the point where there are no further outstanding significant commitments relating to the sale. Revenue is recognised over time, over the length of the subscription period on a straight- line basis. Revenue is recognised at an amount that reflects the consideration to which the Group is entitled to in exchange for those services. For contracts with value-added reseller customers, revenue is presented net of amounts payable to these customers. The transaction price is determined based on the standard list price in line with the Group’s pricing policy. Revenue is therefore shown net of value added tax and trade discounts and is reported for healthcare institutions and resellers where the Group has a value-added reseller agreement, whereby healthcare institutions and resellers are charged a subscription/ licence fee for making the applications available to users. 50 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 2 . Acco u n ti n g p o l i ci e s (co n ti n u e d ) 2 .5 R e ve n u e (co n ti n u e d ) Control is transferred, and performance obligations are satisfied over time over the subscription period and therefore this revenue is recognised rateably over the period of the subscription. For arrangements which contain set-up services, the period of the subscription commences once set-up services have been fully provided. Payment is due within 30 days of date of invoice. The Group did not enter into any transactions with variable consideration, rights of return, volume rebates or significant financing components during the year. The Group does not have any warranty obligations. The Group has elected to use the practical expedient to disregard the significant financing component for contracts with a subscription period of 12 months or less. With regards to principal versus agent considerations, the Group acts as principal in its contracts with resellers. As such the Group recognises revenue net of any commissions. The performance obligations of the Group as applicable to contracts with resellers do not differ from those arising on direct contracts with end customers. Set-up services Set-up services vary depending on the scope and complexity of the engagement and type of software service provided. Examples of such services include system configuration, project management, testing assistance and database consulting. Where software requires installation effort, set-up services are deemed to be essential to the functionality of the licence and therefore impacts the timing of the software licence recognition, as control does not transfer until such set-up services have been fully provided. Set-up services are considered fully provided on either the go-live date or date of completion of user acceptance testing, as specified in each contract. Such set-up services are not considered a separate performance obligation and are combined with the corresponding licence subscription fee and recognised rateably over the subscription period. Certain of the group’s services require set-up effort, these are considered to be essential to the functionality of the software and are not considered to be separate performance obligations and do not affect the timing of revenue recognition for licensed subscriptions. Contract terms Management considers termination clauses and renewal clauses on a contract-by-contract basis to determine if such clauses grant a material right to the customer. Where management have determined that such material rights exist, these impact the contractual licenced subscription period. Management also assess whether material rights represent separate performance obligations. For the avoidance of doubt, any references to “subscription period” or “subscription term” in these financial statements includes extensions of contractual licence or subscription periods in instances (if any) where management have determined that a material right exists. Software support and maintenance fees Unless separately specified, software support and maintenance services are included in licence fees under in the Group contracts. Support and maintenance fees are recognised as a separate performance obligation as they are distinct due to the fact that the customer derives a benefit from these services together with the access to the Group’s applications. For example, the customer receives a distinct benefit from the provision of support services in dealing with any issues that arise from the use of the applications, whereas the licence fees provide access to these applications. Support and maintenance fees are recognised as revenue in line with the licensed subscription revenues, from the date at which any set-up services have been fully provided (ie. go-live date or user acceptance date). The transaction price is determined with reference to the standalone selling price of the services based on historical contracted amounts agreed. Management have assessed whether any contracts contain specified upgrade rights and have concluded that no contracts contain material upgrade rights and therefore these are not accounted for as separate performance obligations. 51 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 2 . Acco u n ti n g p o l i ci e s (co n ti n u e d ) 2 .5 R e ve n u e (co n ti n u e d ) Text and SMS revenues Text and SMS revenues are recognised at a point in time and in line with usage. Other revenues Where ad-hoc development or consulting activities are undertaken for customers, the revenue from these is recognised at a point in time, when control of the service passes to the customer and there are no further outstanding significant commitments in relation to the sale. Contract assets and liabilities A contract asset is initially recognised for approved renewals of subscriptions, where the customer continues to have access to the applications but has not been invoiced for the subscription renewal. Upon receipt of a purchase order from the customer and invoicing by the Group, the balance is reclassified to trade receivables. A contract liability is recognised if a payment is received from a customer in advance of the subscription period to which that payment relates. s t n e m e t a t S l i a c n a n F i The Group has incurred sales commission costs to obtain contracts with customers during the year. Management have elected to apply the exemption from capitalisation of these costs for contracts with a term of 12 months or less. For contracts with terms longer than 12 months, costs are capitalised and amortised over the initial subscription period and the extended period under anticipated renewals. The Group has incurred costs to fulfil contracts with customers during the year, specifically related to the provision of set-up services. Such costs are capitalised as contract costs and amortised through cost of sales over the licenced subscription period from the date of the completion of the set-up services. 2 .6 Fo re i g n cu rre n cy In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non- monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. For the purposes of presenting these financial statements, the assets and liabilities of the Group’s foreign operations are translated into pounds using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity. 2 .7 Emp l o ye e b e n e fi ts Short-term and other long-term employee benefits A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service. Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service. Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Group in respect of services provided by employees 52 Induction Healthcare Financial Statements Annual Report & Accounts 2023 up to the reporting date. Notes (forming part of the financial statements) (continued) 2 . Acco u n ti n g p o l i ci e s (co n ti n u e d ) 2 .8 Sh a re -b a se d p a yme n ts Share-based payment transactions of the Group Equity settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity- settled share-based transactions are set out in note 10. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight- line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve. 2 .9 Ta xa ti o n Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the consolidated income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or substantively enacted at the statement of financial position date, and any adjustment to tax payable in respect of previous periods. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the statement of financial position date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used. Expenses and assets are recognised net of the amount of sales tax, except: - When the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item, as applicable - When receivables and payables are stated with the amount of sales tax included The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. 53 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 2 . Acco u n ti n g p o l i ci e s (co n ti n u e d ) 2 .9 Ta xa ti o n (co n ti n u e d ) Research and development tax credits claimed from HM Revenue & Customs are taken as a credit in the period in which the qualifying research and development costs are incurred unless there is uncertainty over the amount and timing of the credits. During the year ended 31 March 2022 a credit was recognised in respect of the claim submitted for the year ended 31 March 2020 in respect of two subsidiary entities. This credit was not recognised in prior years as there was uncertainty regarding the amount and timing of the credits due to there being no past experience of claims being received. These credits were therefore only recognised when approved by HMRC. A credit was also recognised in respect of the claim for the years ended 31 March 2021 and 31 March 2022 for those subsidiary entities, these claims have not yet been submitted to HM Revenue & Customs. 2 .1 0 Pro p e rty, p l a n t a n d e q u i p me n t Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment. Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss. Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Group. Depreciation is provided on all other items of property, plant and equipment so as to write off their carrying value over their expected useful economic lives. It is provided at the following range: Useful life Amortisation method Straight line over the expected life of the asset Straight line over the expected life of the asset Fixtures and fittings 5 years Computer Equipment 3 years 2 .1 1 In ta n g i b l e a sse ts Intangible assets acquired separately Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses. Technology 3 – 10 years Useful life Amortisation method Straight line over the expected life of the asset Acquired Internally generated or acquired Users 3 – 10 years Straight line over the expected life of the asset Acquired Trade Name 3 – 10 years Straight line over the expected life of the asset Acquired Capitalised development costs 3 – 5 years Straight line over the expected life of the asset Internally developed s t n e m e t a t S l i a c n a n F i Internally-generated intangible assets Expenditure on research activities is recognised as an expense in the period in which it is incurred. 54 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 2 . Acco u n ti n g p o l i ci e s (co n ti n u e d ) 2 .1 1 In ta n g i b l e a sse ts (co n ti n u e d ) An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated: - the technical feasibility of completing the intangible asset so that it will be available for use or sale; - the intention to complete the intangible asset and use or sell it; - the ability to use or sell the intangible asset; - how the intangible asset will generate probable future economic benefits; , including through contracts with new customers, reductions in the cost of delivering the Group’s products, and by enhancing the likelihood of contract renewals - the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and - the ability to measure reliably the expenditure attributable to the intangible asset during its development. The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally- generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Intangible assets acquired in a business combination Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. 2 .12 Impairment of non-financial assets (exclud i n g i n ve n to ri e s, i n ve stme n t p ro p e rti e s a n d d e fe rre d ta x a sse ts) Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value-in-use and fair value less costs to sell), the asset is written down accordingly. Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest group of assets to which it belongs for which there are separately identifiable cash flows; its cash generating units (‘CGUs’). Goodwill is allocated on initial recognition to each of the Group’s CGUs that are expected to benefit from a business combination that gives rise to the goodwill. Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised in other comprehensive income. An impairment loss recognised for goodwill is not reversed. 2 .1 3 Imp a i rme n t o f ta n g i b l e a n d i n ta n g i b l e a sse ts o th e r th a n g o o d w i l l At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a 55 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 2 . Acco u n ti n g p o l i ci e s (co n ti n u e d ) 2 .1 3 Imp a i rme n t o f ta n g i b l e a n d i n ta n g i b l e a sse ts o th e r th a n g o o d w i l l (co n ti n u e d ) reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs of disposal and value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss. 2 .1 4 Fi n a n ci a l i n stru me n ts Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. Classification of financial instruments Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions: - they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and - where the instrument will or may be settled in Induction Healthcare Group plc’s own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of Induction Healthcare Group plc’s own equity instruments or is a derivative that will be settled by the company exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments. 56 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 2 . Acco u n ti n g p o l i ci e s (co n ti n u e d ) 2 .1 4 Fi n a n ci a l i n stru me n ts (co n ti n u e d ) To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of Induction Healthcare Group plc’s own shares, the amounts presented in the financial statements for called up share capital and share premium account exclude amounts in relation to those shares. Recognition and initial measurement Non-derivative financial instruments comprise other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. All financial assets and liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are initially measured at fair value plus, for items measured at amortised cost, transaction costs directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price. Financial assets – classification and subsequent measurement On initial recognition, a financial asset is classified as measured at amortised cost or fair value through profit or loss (“FVTPL”). The Group has no financial assets measured at fair value through other comprehensive income (“FVOCI”). A financial asset is measured at amortised cost if it is both: held within a business model whose objective is to hold assets to collect contractual cash flows; and its contractual terms give rise to cash flows that are solely payments of principal and interest on the amount outstanding. Financial assets – classification and subsequent measurement For the purposes of this assessment, “principal” is defined as the fair value of the financial asset on initial recognition, and “interest” is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding. In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument, including any terms which may affect the timing or amount of contractual cash flows. All financial assets not measured at amortised cost are measured at FVTPL. Financial assets at FVTPL are subsequently measured at fair value with net gains and losses, including any interest or dividend income, recognised in profit or loss. Financial assets measured at amortised cost are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses, and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss. Financial liabilities – classification and subsequent measurement Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. All other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss. 57 s t n e m e t a t S l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 2 . Acco u n ti n g p o l i ci e s (co n ti n u e d ) 2 .1 4 Fi n a n ci a l i n stru me n ts (co n ti n u e d ) Measurement and recognition of expected credit losses The Group recognises loss allowances for expected credit losses (“ECLs”) on contract assets and financial assets measured at amortised cost. The Group measures loss allowances at an amount equal to lifetime ECLs, except for cash and cash equivalents which is measured using 12-month ECLs. ECLs are a probability-weighted estimate of credit losses and are measured as the present value of all cash shortfalls expected on financial assets, using the effective interest rate of the financial asset. Lifetime ECLs are the ECLs which result from all possible default events over the expected life of a financial instrument. When determining ECLs, the Group considers reasonable and supportable qualitative and quantitative information that is relevant and available without undue cost or effort. The Group considers a financial asset to be in default when the borrower is unlikely to pay its obligations to the Group in full without recourse by the Group to actions such as realising security (if any held) or when the financial asset is more than 90 days overdue. Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. The carrying amount of a financial asset is written off when the Group has no reasonable expectation of recovering a financial asset in its entirety or a portion thereof. Derecognition The Group derecognises a financial asset when the contractual rights to receive cash flows from the asset expire, or when it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership are transferred. The Group derecognises a financial liability when its contractual obligations are discharged, cancelled, or expire. Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose only of the consolidated cash flow statement. Business model assessment The Group makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level as this best reflects the way the business is managed, and information provided to management. The assessment includes consideration of the stated objectives of the portfolio, the performance of the portfolio, the risks that affect the performance of the business model, and the frequency, volume and timing of sales of financial assets. 2 .1 5 D e fi n e d co n tri b u ti o n sch e me s Contributions to defined contribution pension schemes are charged to the statement of comprehensive income in the year to which they relate. 2 .1 6 C o st o f sa l e s Cost of sales consists of the direct costs associated with the Group’s proprietary application. These include costs incurred for server hosting, costs incurred to obtain a contract such as sales commission, and costs incurred to deliver on a contract. Costs incurred to deliver on a contract are staff costs, which are allocated to cost of sales based on an estimation of the proportion of time spent on each contract. 2 .1 7 Se g me n ta l re p o rti n g For management purposes, the Group is organised into business units based on its products and services, with separate revenue streams being generated by different business units. These business units operate on a shared cost base. The Board is the Chief Operating Decision Maker (“CODM”) and monitors the operating results of the consolidated Group for the purposes of making decisions about resource allocation and 58 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 2 . Acco u n ti n g p o l i ci e s (co n ti n u e d ) 2 .1 7 Se g me n ta l re p o rti n g (co n ti n u e d ) performance assessment. Therefore, management have determined that the Group has one reportable segment. 2 .1 8 L e a se s At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. At commencement of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. This includes leases of property. The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the lessee’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased. Lease payments included in the measurement of the lease liability comprise the following: - fixed payments, including in-substance fixed payments; The lease liability is measured at amortised cost using the effective interest method. The Group presents right-of-use assets that do not meet the definition of investment property in ‘property, plant and equipment’ and lease liabilities in ‘other financial liabilities in the statement of financial position. 2 .1 9 N o n -cu rre n t a sse ts h e l d fo r sa l e The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of an asset (disposal group), excluding finance costs and income tax expense. The criteria for held for sale classification is regarded as met only when the sale is highly probable, and the asset or disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the plan to sell the asset and the sale expected to be completed within one year from the date of the classification. 59 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 2 . Acco u n ti n g p o l i ci e s (co n ti n u e d ) 2 .1 9 N o n -cu rre n t a sse ts h e l d fo r sa l e (co n ti n u e d ) Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale. Assets and liabilities classified as held for sale are presented separately as current items in the statement of financial position. Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of profit or loss. Additional disclosures are provided in Note 14. All other notes to the financial statements include amounts for continuing operations, unless indicated otherwise. 3. R e p o rti n g e n ti ty Induction Healthcare Group plc is a company incorporated, domiciled and registered in England and Wales in the United Kingdom. Its principal activity is the provision of software to healthcare professionals. The registered number is 11852026 and the registered address is 20 St. Dunstan’s Hill, London, United Kingdom, EC3R 8HL. These financial statements include the consolidated financial information of Induction Healthcare Group plc (the “Company”) and its subsidiaries (together referred to as the “Group”). Details of Induction Healthcare Group plc’s subsidiaries are included in Note 17. The Group has only one reportable segment. 4. N e w sta n d a rd s, i n te rp re ta ti o n s a n d a me n d me n ts No new standards or interpretations have had any impact on the recognition, measurement or disclosures of the Group. The Group has not early-adopted any standards in issue but yet effective. 5. Acco u n ti n g e sti ma te s a n d j u d g e me n ts 5 .1 Si g n i fi ca n t j u d g e me n ts Development costs The Group capitalises costs for product development projects. Initial capitalisation of costs is based on management’s judgement that technological and economic feasibility is confirmed. Significant judgement is applied by management in determining the point at which technical feasibility is reached, as well as determining the economic feasibility of the project/feature. Technological feasibility is achieved at the point at which the product, project or feature is determined to be technically capable of being built which the Group assess with reference to the functionality of other products in the market, and the Group has assessed it has the resources available to complete the development. 60 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 5 Acco u n ti n g e sti ma te s a n d j u d g e me n ts (co n ti n u e d ) 5 .1 Si g n i fi ca n t j u d g e me n ts (co n ti n u e d ) Economic feasibility is achieved when a market for the product has been identified and management have determined that the product will generate future economic benefits, which can be demonstrated by either charging the customer incremental licence fees for a new feature, generating internal const savings to the Group, or increased likelihood of customer renewals. The judgement is most significant where the future economic benefit of a project is determined to be in the form of increased likelihood of customer contract renewals, where evidence of customer likelihood to renew due to a particular project is uncertain and subjective. Of the additions to internally generated intangible assets disclosed in Note 5.2, £0.2m of additions capitalised by Zesty Limited (2022: £Nil) and £0.2m of additions capitalised by Attend Anywhere Limited (2022: £Nil) were deemed to generate probable future economic benefit via customer renewals. In concluding on the judgement whether economic feasibility has been met, management have considered correspondence with customers; past trends in renewal rates; feature differentiation for which there is demand, and whether the functionality of other similar product features in the market indicates economic feasibility. Going concern The directors have applied judgement in assessing that no material uncertainty exists over going concern as part of their going concern assessment. Refer to note 2.2 for full details. Non-current assets held for sale Management have applied significant judgement in determining whether the planned disposal of the Induction Switch and Induction Guidance disposal groups meet the requirements of IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”. Management have concluded that the disposal groups are available for immediate sale in their present condition subject only to terms that are usual and customary for sales of such disposal groups, and the sale of these disposal groups are highly probably, based on the actions taken by management to commence the active marketing of the disposal groups. The Induction Switch disposal group was sold post-year end, refer Note 32. 5 .2 Si g n i fi ca n t e sti ma te s a n d a ssu mp ti o n s Development costs In determining the amounts to be capitalised, management makes assumptions regarding the percentage of employee time spent on development activities. At 31 March 2023 the carrying amount of capitalised development costs was £4.5m (2022: £5.9m), of which £1.9m relates to Zesty Limited (2022: £2.2m) and £2.5m to Attend Anywhere Limited (2022 £3.2m). This included additions to internally generated intangible assets of £0.8m (2022: £3.1m), of which £0.5m relates to Zesty Limited (2022: £1.2m) and £0.3m to Attend Anywhere Limited (2022: £1.6m). In determining the estimated percentage of time, management considers: the role of the employee; whether the activity is of a research nature (which is not capitalised); whether the standard activities the employee performs are project or customer specific (not capitalised) or related to the development of the products of the entity; and an estimate of other time spent on administrative activities such as training. The percentage of time capitalized is determined on an individual employee basis and is reflective of the time spent purely on developing the products and services of the group for sale to a range of customers. There is a high level of estimation uncertainty to the estimates used, as there is no time tracking system in place for employees to record time spent on a certain activity at the point at which that time is incurred. Development costs capitalised are highly sensitive to the percentages used. During the year ended 31 March 2023, the average percentage of development costs capitalised, as a percentage of total staff costs for development related employees was 15% or £0.8m (2022: 60% or £3.1m). A reasonably possible decrease of 5 percentage points would result in a decrease in the costs capitalised during the year of £0.3m, resulting in a corresponding decrease in the capitalised development cost balance and an increase in losses for the year. 5 percentage points is considered a reasonably possible change in the capitalisation percentage for an individual employee’s time, based on management’s historical experience in the variability of time spent on development activities. 61 s t n e m e t a t S l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 5 Acco u n ti n g e sti ma te s a n d j u d g e me n ts (co n ti n u e d ) 5 .2 Si g n i fi ca n t e sti ma te s a n d a ssu mp ti o n s (co n ti n u e d ) Impairment of goodwill Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value-in-use. The impairment assessment performed for the purposes of goodwill impairment, includes both goodwill and other intangible assets. For the Induction Zesty and Induction Attend Anywhere CGU’s, management do not calculate the fair value less costs of disposal, as reliable inputs to fair value are not available for the assets, and therefore the recoverable amount is the value-in-use. As a result of the planned disposal of the Induction Guidance disposal group (which aligns to the grouping of assets used for the Induction Guidance CGU), the carrying amount of the Induction Guidance CGU will be recovered primarily through sale rather than use, and therefore the recoverable amount was determined to be the fair value less costs of disposal. The value-in-use (“VIU”) calculation is based on a Discounted Cash Flow (“DCF”) model. The cash flows are derived from the budget for the next two years and projections for another three years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the performance of the assets of the CGU being tested (including those related to research and development activities performed to create new feature functionality). The recoverable amount is sensitive to the discount rate used for the DCF model; the expected future cash-inflows and cash outflows; and the growth rate used for extrapolation purposes. Management considers EBITDA to be representative of future cash-inflows and outflows. These estimates are most relevant to goodwill recognised by the Group and apply to the Induction Zesty and Induction Attend Anywhere CGU’s. The key assumptions in the VIU assessments are related to the estimation of the discount rate and the cash inflows and outflows which determine EBITDA. The primary source of estimation uncertainty arises from the combined impact of reasonably possible changes in two or more of the above assumptions. Cash inflows are primarily influenced by assumptions about existing customers’ renewal rates; sales of additional services to existing customers; sales made to new customers; the price of the services and the timing of the completion of set-up activities for new customers (or “go-lives”). The major sources of estimation uncertainty in determining cash inflows are the renewal rates of contracts with customers, the number of new customers contracted in a period, and the timing of the completion of set-up activities for these new customers. Cash outflows are primarily influenced by employee and non-employee workforce costs, supplier costs such as cloud hosting costs, and an allocation of corporate overheads. Based on the sensitivity analysis performed by management, none of the assumptions mentioned above give rise to significant estimation uncertainty (or an impairment) on an individual basis, but do so in aggregate. In measuring the fair value of the Induction Guidance CGU, management has adopted an expected value income approach. Management developed a set of discrete potential outcomes and assigned probabilities to the estimated consideration derived from these (the “probability weighted outcomes”). The costs of disposal have been estimated based on historical costs for similar transactions entered into by the group. Refer to Note 13 for further information. The key assumptions used to determine the recoverable amount for the different CGUs, including a sensitivity analysis, are disclosed and further explained in Note 17. The carrying amount of each CGU is disclosed in Note 17. 62 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 5 Acco u n ti n g e sti ma te s a n d j u d g e me n ts (co n ti n u e d ) 5 .3 Oth e r j u d g e me n ts Recognition of deferred tax assets Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies. The Group has £26m (2022: £16.9m) of tax losses carried forward. These losses relate to subsidiaries that have a history of losses and do not expire. Some of these subsidiaries neither have any taxable temporary difference nor any tax planning opportunities available that could partly support the recognition of these losses as deferred tax assets. Two subsidiaries have future taxable profits and deferred tax liabilities, and the Group has recognised deferred tax assets on the tax losses carried forward to the extent that there are sufficient offsetting deferred tax liabilities. If the Group was able to recognise all unrecognised deferred tax assets, profit and equity would have increased by £6.5m (2022: £2.9m). This is not considered to be a reasonably possible outcome. Further details on taxes are disclosed in Note 12. 5 .4 Oth e r e sti ma te s Valuation of acquired intangibles During the year ended 31 March 2022, management made estimates in determining the value of intangible assets (comprising technology and customer related intangibles) acquired in its business combinations. Due to numerous assumptions made on variables within the valuation, there is a high level of estimation uncertainty. These estimations were classified as significant in the financial statements for the year ended 31 March 2022, but are not considered significant for the year ended 31 March 2023. This is due to the fact that the estimation uncertainty only affects the amortisation expense recognized during the year ended 31 March 2023. The assumptions applied in valuing the technology related intangible assets include projections of cash inflows from contracts with customers, the obsolescence rate, profit margins, corporate tax rates, contributory asset charges and the discount rate applied to cash flows. Projections of cash inflows from contracts with customers are influenced by customer attrition rate assumptions and pricing assumptions. The obsolescence rate represents a rate at which the technology become obsolete, which is a proxy for the number of years over which the Group updates and replaces the underlying software in order to maintain existing competitiveness. The valuation of technology assets is most sensitive to cash inflows from contracts with customers and obsolescence rates. The assumptions applied in valuing the customer related intangible are projections of cash inflows from contracts with customers, profit margins, corporate tax, working capital requirements, commission rates paid to resellers under the “without” scenario and the discount rate. Projections of cash inflows from contracts with customers are influenced by customer attrition rate assumptions and pricing assumptions. The value of the customer related intangible is most sensitive to the cash inflows from contracts with customers. The post-tax discount rate used in the valuations was 16%. Management have also determined and disclosed sensitivities of the valuations to these assumptions. Please refer to Note 15 for more information. 63 s t n e m e t a t S l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 6. R e ve n u e During the year ended 31 March 2023, the Group classified the Induction Switch and Induction Guidance products as disposal groups held for sale (refer Note 13). Consequently, revenues from contracts with customers arising from these products have been presented as part of results from discontinued operations. Revenues as presented in this note include only revenues from continuing operations, and comparative amounts for the year ended 31 March 2022 have been re-presented to exclude the impact of discontinued operations. The following is an analysis of the Group’s revenue for the year from continuing operations: Provision of software (including set-up services of £0.1m (2022: £0.2m)) Post-contract support and maintenance Text message revenue Professional services To ta l re ve n u e fro m co n tra cts w i th cu sto me rs 2023 £000 1 1 ,7 0 3 258 4 3 1 4 9 2 1 2 ,8 8 4 2022 £000 Re- presented 6,711 217 303 — 7,231 Revenue from the provision of software of £11.7m (2022: £6.7m) is shown after IFRS 3 related adjustments of £0.07m (2022: £4.2m)). This includes £0.05m related to Induction Zesty (2022: £0.07m) and £0.02m related to Induction Attend Anywhere (2022: £4.2m). As a result of applying IFRS 3 in accounting for acquisitions, the Group is required to determine the fair value of all acquired assets and liabilities. This includes determining the fair value of the contract liabilities (“deferred income”) of the acquiree. The following is an analysis of revenue from continuing operations by country of destination: United Kingdom Europe United States Rest of World To ta l re ve n u e fro m co n tra cts w i th cu sto me rs 2023 £000 1 2 ,8 8 4 — — — 1 2 ,8 8 4 2022 £000 Re- presented 7,231 — — — 7,231 Revenue from the United Kingdom of £12.8m (2022: £7.2m) is shown after IFRS 3 related adjustments of £0.07m (2022: £4.2m). The following is an analysis of revenue by product line. Attend Anywhere Pty Ltd (Induction Attend Anywhere) was acquired on 9 June 2021, refer to Note 15 for further information. Revenues for Induction Guidance and Induction Switch have been included in the results of discontinuing operations, refer Note 13. 2023 £000 1 0 ,7 0 9 2,175 1 2 ,8 8 4 2022 £000 Re- presented 5,715 1,516 7,231 Induction Attend Anywhere Induction Zesty 64 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 6 . R e ve n u e (co n ti n u e d ) The following represents the timing of revenue recognition: Services transferred over time Services at point in time 2023 £000 1 1 ,9 6 1 9 2 3 1 2 ,8 8 4 2022 £000 Re- presented 6,918 313 7,231 The following represents the transaction prices allocated to performance obligations that are unsatisfied or partially satisfied at 31 March 2023, and the timing of the recognition of revenue from these balances. Within one year More than one year 2023 £000 1 ,3 3 0 171 1 ,5 0 1 2022 £000 985 321 1,306 7. Exp e n se s b y n a tu re fo r co n ti n u i n g o p e ra ti o n s The following represents expenses incurred during the year, by nature. These amounts exclude the results of discontinued operations, which are presented separately in Note 13. 2023 £000 2022 £000 9 ,6 3 0 1 1 9 4 ,5 1 4 7 ,7 4 8 2 ,7 5 6 — — 5 1 2 (8 0 5 ) 3 7 7 7,859 29 3,785 — 2,366 423 108 459 (3,090) 613 2023 £000 9 3 9 3 — — 9 3 2022 £000 795 795 8 8 803 Employee costs Depreciation of property, plant and equipment Amortisation of intangible assets Impairment of goodwill and intangible assets Contractors’ costs Acquisition related transaction costs Fundraise related transaction costs recognised in profit and loss Professional and legal fees Research and development expense capitalised Share-based payment charge 8. Au d i to rs re mu n e ra ti o n Audit of these financial statements To ta l a u d i t fe e s Interim financial statement review To ta l n o n -a u d i t fe e s To ta l a u d i t a n d n o n -a u d i t fe e s 65 s t n e m e t a t S l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 9. Emp l o ye e b e n e fi t e xp e n se s fo r co n ti n u i n g o p e ra ti o n s The following represents employee benefit expenses from continuing operations. Employee b e n e fi t e xp e n se s (i n cl u d i n g d i re cto rs) co mp ri se : Wages and salaries Social security costs Defined contribution pension cost Share-based payment expenses Other employee benefits To ta l e mp l o ye e b e n e fi t e xp e n se 2023 £000 2022 £000 6 ,9 3 4 8 0 1 3 5 9 3 6 1 1 ,1 7 5 9 ,6 3 0 5,735 551 309 613 651 7,859 The monthly average number of persons, including the directors, employed by the Group during the year was as follows: Development Sales and Marketing Delivery and Support General and Administrative To ta l Ave ra g e FTE 2023 No. of employees 2022 No. of employees 3 6 1 3 1 1 23 8 3 40 10 8 19 77 The remuneration of the highest paid director was £0.3m (2022: £0.3m). Included in other employee benefits is a bonus of £0.03m (2022: £0.4m). The Group operates a defined contribution pension plan which was put in place in October 2018. The total expense relating to the plan in the year was £0.8m (2022: £0.3m). 10. Sh a re -b a se d p a yme n ts 1 0 .1 D e ta i l s o f th e e mp l o ye e sh a re o p ti o n o f th e Gro u p On the admission to the AIM market on 22 May 2019, the Group established the Non-tax Advantaged Share Option Plan (“the NTA Plan”) which awards executive directors, management and other employees share options. The awards are granted in the form of share options over ordinary shares of £0.005 each with the intent of normal vesting after a minimum period of three years from the date of grant, and an exercise price of £0.005 per option. Vesting is subject to continued services of the participant. No options issued during the year had any vesting conditions other than service conditions attached. The Group accounts for the plan as an equity settled plan. During the year ended 31 March 2021, the Group amended the vesting periods in the NTA Plan. The vesting periods were amended to allow for vesting in tranches, whereby one-third of the options awarded vest after one year of service, and the remaining two-thirds of the options vest on a quarterly basis over the remaining two years. No changes were made to the plan in the year ended 31 March 2023. 1 0 .2 Exp e n se re co g n i se d d u ri n g th e ye a r The expense recognised for employee services received during the year is as follows. This includes £0.01m related to discontinued operations. Expense arising from equity settled share-based payment transactions To ta l e xp e n se a ri si n g fro m sh a re -b a se d p a yme n t tra n sa cti o n s 2023 £000 3 7 7 3 7 7 2022 £000 613 613 66 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 1 0 Sh a re -b a se d p a yme n ts (co n ti n u e d ) 1 0 .3 Fa i r va l u e o f sh a re o p ti o n s g ra n te d i n th e ye a r The fair value of share options is estimated at the grant date using a Black-Scholes-Merton model, taking into account the terms and conditions on which the options were granted. The expected life of share options is based on current expectations and is not necessarily indicative of exercise patterns that may occur. Due to the fact that the Induction Healthcare Group plc does not have listed share data for the same period as the expected life of the share options, the expected volatility is based on an average of the volatilities of comparable companies in comparative industries and of the same market capitalisation as the Group. This volatility reflects an assumption that the volatility is indicative of future trends, which may not necessarily be the actual outcome. The weighted average remaining contractual life for the share options outstanding as at 31 March 2023 was 1.16 years (2022: 2.16). Options expire after 10 years. The weighted average fair value of options granted during the year was £Nil (2022: £1.05). The following share-based payment arrangements were in existence during the current and prior years: Weighted average grant date fair value £ Exercise price £ Expected volatility % Option life years Risk Free interest rate % Dividend rate % 1 0 .4 Mo ve me n ts i n sh a re o p ti o n s d u ri n g th e ye a r The following reconciles the share options outstanding at the beginning and end of the year: Year to 31 March 2023 0 .9 6 0 .0 0 5 5 0 .0 0 3 .9 8 0 .6 2 — Year to 31 March 2022 1.05 0.005 50.00 3.98 0.62 — Balance at the beginning of the year Granted during the year Forfeited during the year Exercised during the year Ou tsta n d i n g a t 3 1 Ma rch Exercisable at 31 March 2023 11. Fi n a n ce i n co me a n d e xp e n se Fi n a n ce i n co me Interest on: – Bank deposits To ta l fi n a n ce i n co me Fi n a n ce e xp e n se Finance costs on other financial liabilities Finance costs on lease liabilities To ta l fi n a n ce e xp e n se N e t fi n a n ce (e xp e n se )/i n co me re co g n i se d i n p ro fi t o r l o ss 67 2023 Number of options (‘000) 2022 Number of options (‘000) 2 ,2 0 0 ,4 8 3 2,589,231 115,180 — (503,928) (2 0 3 ,7 2 5 ) (3 8 7 ,8 7 2 ) — 1 ,6 0 8 ,8 8 6 2,200,483 1 ,4 4 2 ,3 3 5 1,388,724 2023 £000 2022 £000 s t n e m e t a t S l i a c n a n F i 1 1 1 6 7 (6 ) 1 1 29 1 30 (29) Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 12. Ta x e xp e n se 1 2 .1 In co me ta x re co g n i se d i n p ro fi t o r l o ss The below table illustrates income tax related to continuing operations, recognised in profit or loss. Income tax related to discontinued operations is disclosed in Note 13. C u rre n t ta x Corporation tax expense Prior year adjustment in respect of research & development tax credit To ta l cu rre n t ta x D e fe rre d ta x e xp e n se Origination and reversal of timing differences Prior year deferred tax movement To ta l d e fe rre d ta x Ta x i n co me o n l o ss o n o rd i n a ry a cti vi ti e s 2023 £000 2022 £000 2 - 2 (8 0 0 ) - (8 0 0 ) (7 9 8 ) 361 (764) (405) (438) 297 (735) (1,140) The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to losses for the year are as follows: Loss for the year Tax at the standard rate of corporation tax of 19% (2022: 20.13%) Research & development tax relief Expenses not deductible for tax purposes Share-based payments Prior year adjustments – research and development tax relief Prior year adjustments on deferred tax Deferred tax not recognised Other timing differences Difference in overseas tax rates Effective rate change Income not taxable To ta l ta x i n co me 2023 £000 (1 7 ,3 8 6 ) (3 ,3 0 3 ) - 1 ,6 4 7 - - - 2 ,0 7 5 (1 ,0 9 9 ) (1 0 4 ) (8 0 ) 6 6 (7 9 8 ) 2022 £000 (9,574) (1,927) (292) 1,674 123 (722) (297) 303 109 328 (429) - (1,140) 1 2 .1 In co me ta x re co g n i se d i n p ro fi t o r l o ss (co n ti n u e d ) Expenses not deductible for tax purposes primarily relate to the impairment of the investment in Induction Healthcare Limited in the standalone financial statements of Induction Healthcare Group plc (refer to Note 5 in the Company financial statements), and also to unrealised foreign exchange differences on foreign currency cash balances in one subsidiary, which are deductible only once these are realised (ie. on settlement of the balance). Deferred tax not recognised relates to unused tax losses carried forward, for which deferred tax assets are only recognised to the extent that there are deferred tax liabilities available with the same tax authority and which will be unwound in the same period as the deferred tax asset. Other timing differences relate to a variety of immaterial timing differences other than those related to intangible assets or tax losses. Changes in tax rates and factors affecting the future tax charges The main rate of corporation tax will increase from 19% to 25% with effect from 1 April 2023. This change was introduced by Finance Bill 2021 which was substantially enacted on 24 May 2021. Therefore, the timing differences for the UK companies are recognised at 25% for deferred tax purposes. 68 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 1 2 Ta x e xp e n se (co n ti n u e d ) The rate of corporation tax is 25% in Australia for the 2022-23 income year. 1 2 .2 C u rre n t ta x a sse ts a n d l i a b i l i ti e s C u rre n t ta x a sse ts R&D tax credit receivable C u rre n t ta x l i a b i l i ti e s Corporation tax liability in Australia 2023 £000 2022 £000 1 ,1 7 5 1,240 - 1 ,1 7 5 (789) 451 Current tax assets relate to research and development tax credits in respect of 2 subsidiaries, for the years ended 31 March 2020, 31 March 2021 and 31 March 2022. A claim of £0.3m for the year ended 31 March 2020 was settled post-year end for one subsidiary. 1 2 .3 D e fe rre d ta x b a l a n ce s A deferred tax liability of £2.9m (2022: £3.7m) has been recognised in relation to the fair value of intangible assets acquired in a business combination. A deferred tax liability of £Nil (2022: £1.05m) has been recognised in relation to the fair value adjustments to contract liabilities acquired in business combinations. A deferred tax asset of £0.5m (2022: £0.7m) was recognised in relation to unused tax losses acquired in business combinations. This deferred tax asset was recognised only to the extent that there are deferred tax liabilities available with the same tax authority and which will be unwound in the same period as the deferred tax asset. A deferred tax asset of £6.5m (2022: £4.2m) has not been recognised due to uncertainty over future taxable profits in the relevant subsidiaries with tax losses. The unrecognised deferred tax asset includes those in relation to tax losses of £26m (2022: £17m). These amounts exclude amounts related to Horizon Strategic Partners Limited, which is expected to generate profits and for which a deferred tax asset of £0.2m (2022: £0.05m) has been recognised. They also exclude those for Zesty Limited, where deferred tax assets have been recognised in relation to the deferred tax liabilities for the intangible fixed assets acquired through business combinations. A deferred tax asset of £0.4m (2022:£0.6m) has been recognised for Zesty Limited. 1 2 .3 D e fe rre d ta x b a l a n ce s (co n ti n u e d ) The following is the analysis of deferred tax assets/(liabilities) presented in the statement of financial position: Deferred tax assets Deferred tax liabilities Deferred tax liabilities in relation to: Intangible assets Tax losses carried forward Other To ta l d e fe rre d ta x l i a b i l i ty 69 2023 £000 5 5 6 (3 ,8 7 0 ) (3 ,3 1 4 ) 2022 £000 1,540 (5,851) (4,311) 2023 £000 (3 ,8 1 3 ) 4 7 0 2 9 (3 ,3 1 4 ) 2022 £000 (5,780) 1,309 160 (4,311) s t n e m e t a t S l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 1 2 Ta x e xp e n se (co n ti n u e d ) 1 2 .4 R e co n ci l i a ti o n o f d e fe rre d ta x l i a b i l i ti e s, n e t Opening deferred tax balance at tax rate of 2 5 % Deferred tax acquired in business combinations Tax expense during the period recognised in profit or loss Prior year movements C l o si n g d e fe rre d ta x a t ta x ra te o f 2 5 % 1 2 .5 Mo ve me n t i n d e fe rre d ta x b a l a n ce s 2022 £000 (4 ,2 8 7 ) - 8 0 0 1 7 3 (3 ,3 1 4 ) 2022 £000 (168) (4,878) 438 297 (4,311) 2023 Intangible assets Tax losses Other 1 April 2022 (Net) £000 (5,780) 1,309 160 Recognised in profit or loss £000 1,976 (838) (131) Acquired in business combination £000 Other movements £000 — — — — — — C losing deferred tax at tax rate o f 2 5 % (4,311) 798 2022 Intangible assets Tax losses Other 1 April 2021 (Net) £000 (1,047) 880 — Recognised in profit or loss £000 889 429 1,195 C losing deferred tax at tax rate o f 2 5 % 167 735 Acquired in business combination £000 Other movements £000 (3,798) — (1,057) (4,855) 30 — 21 51 31 March 2023 (Net) £000 (3,813) 470 28 (3,314) 31 March 2022 (Net) £000 (5,780) 1,309 160 (4,311) Deferred Tax Assets £000 57 470 28 556 Deferred Tax Assets £000 60 1,309 171 1,540 Deferred Tax Liabilities £000 (3,870) — — (3,870) Deferred Tax Liabilities £000 (5,840) — (11) (5,851) 13. D i sco n ti n u e d o p e ra ti o n s a n d d i sp o sa l g ro u p s h e l d fo r sa l e During the year ended 31 March 2023, management committed to a plan to sell both the Induction Switch and Induction Guidance product lines and all related assets and liabilities, following a strategic decision to place greater focus on the Group's key patient-facing applications. The Induction Switch and Induction Guidance product lines were therefore classified as disposal groups held for sale for the first time in the year ended 31 March 2023. The grouping of assets aligns to that previously reported for impairment assessment purposes for the Induction Switch and Induction Guidance CGU’s. The comparative consolidated statement of profit or loss and OCI has been re-presented to present the results of discontinued operations separately from continuing operations. 70 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 1 3 D i sco n ti n u e d o p e ra ti o n s a n d d i sp o sa l g ro u p s h e l d fo r sa l e (co n ti n u e d ) 1 3 .1 R e su l ts o f d i sco n ti n u e d o p e ra ti o n s The following are the results of discontinued operations: Revenue Expenses Pro fi t / (l o ss) fro m o p e ra ti n g a cti vi ti e s Income tax Profit / (l o ss) fro m o p e ra ti n g a cti vi ti e s, n e t o f ta x Loss on remeasurement of discontinued operation Income tax on gain / (loss) on remeasurement of discontinued operation Profit / (loss) from discontinu e d o p e ra ti o n s, n e t o f ta x Induction Switch Induction Guidance Total 2023 £000 4 (4 9 9 ) (4 9 5 ) — (4 9 5 ) — — (4 9 5 ) 2022 £000 Re- presented 34 (524) (490) — (490) — — (490) 2023 £000 622 (9 9 6 ) (3 7 4 ) 74 (300) — — (300) 2022 £000 Re- presented 642 (566) 76 2023 £000 626 (1 ,4 9 5 ) (8 6 9 ) 2022 £000 Re- presented 676 (1,090) (414) 58 134 — — 134 74 (795) — — (795) 58 (356) — — (356) The loss from the discontinued operations is attributable entirely to the owners of the Group. 1 3 .2 C a sh fl o w s fro m / (u se d i n ) d i sco n ti n u e d o p e ra ti o n s The following are the cash flows from / (used in) discontinued operations: Net cash flows from / (used in) operating activities Net cash flows from / (used in) investing activities Net cash flows from / (used in) financing activities 1 3 .3 In d u cti o n Sw i tch d i sp o sa l g ro u p Induction Switch Induction Guidance Total 2023 £000 (4 9 5 ) — — 2023 £000 (22) (4) (781) 2023 £000 (517) (4) (781) The sale of the Induction Switch disposal group was finalised in June 2023 (refer to Note 32 for further details on subsequent events). The Group did not recognise a gain or loss on remeasurement of the disposal group to fair value less costs to sell, as the fair value less costs to sell exceeds the carrying value of the disposal group. The Group did not recognise impairment losses or gains on the remeasurement of the disposal group held for sale. There were no income or expenses included in OCI relating to the disposal group. As the Group presents one operating segment, the disposal group was not presented separately within any operating segment. The disposal has a nil impact on the financial position of the Group, as the assets to which the disposal relates were fully impaired during the year ended 31 March 2021 as part of the impairment of the Induction Switch CGU. The non-recurring fair value measurement of the disposal group has been recognised as a Level 2 fair value based on the inputs used to determine fair value. The fair value was determined using inputs that are directly observable for the disposal group, being the price as per the Asset Purchase Agreement that was concluded in June 2023. Agreement on price was reached prior to 31 March 2023. 71 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 1 3 D i sco n ti n u e d o p e ra ti o n s a n d d i sp o sa l g ro u p s h e l d fo r sa l e (co n ti n u e d ) 1 3 .4 In d u cti o n Gu i d a n ce d i sp o sa l g ro u p The Group did not recognise a loss on remeasurement of the Induction Guidance disposal group to fair value less costs to sell, as the fair value less costs to sell exceeds the carrying value of the disposal group. The Group did not recognise impairment losses or gains on the remeasurement of the disposal group held for sale. There were no income or expenses included in OCI relating to the disposal group. As the Group presents one operating segment, the Induction Guidance disposal group was not presented separately within any operating segment. The effect of disposal on the financial position of the Group are as follows: Assets and liabilities of disposal group held for sale Deferred tax assets Goodwill Intangible assets Contract assets Trade and other receivables Asse ts h e l d fo r sa l e Deferred tax liabilities Contract liabilities Trade and other payables L i a b i l i ti e s h e l d fo r sa l e 2023 £000 185 857 1,238 40 154 2 ,4 7 4 (270) (629) (117) (1 ,0 1 6 ) The non-recurring fair value measurement of the disposal group has been recognised as a Level 3 fair value based on the inputs used to determine fair value. The fair value as determined using inputs that are based on valuation methodologies commonly used in the primary industry that the Induction Guidance disposal group operates in. 14. L o ss p e r sh a re 14.1 Ba si c l o ss p e r sh a re From continuing operations attributable to the ordinary equity holders of the Group To tal basic loss p e r sh a re a ttri b u ta b l e to th e o rd i n a ry e q u i ty h o l d e rs o f th e Gro u p 1 4 .2 D i l u te d l o ss p e r sh a re From continuing operations attributable to the ordinary equity holders of the Group To tal diluted loss per share attrib u ta b l e to th e o rd i n a ry e q u i ty h o l d e rs o f th e Gro u p 1 4 .3 R e co n ci l i a ti o n o f l o ss u se d i n ca l cu l a ti n g l o ss p e r sh a re 2023 £ (0 .1 8 ) (0 .1 9 ) 2023 £ (0 .1 8 ) (0 .1 9 ) 2022 £ (0.10) (0.10) 2022 £ (0.10) (0.10) 2023 £000 2022 £000 Re-presented L o ss a ttri b u ta b l e to th e o rd i n a ry e q u i ty h o l d e rs o f th e Gro u p u se d i n ca l cu l a ti n g b a si c l o ss p e r sh a re a n d d i l u te d l o ss p e r sh a re : From continuing operations From discontinued operations (1 6 ,5 8 8 ) (7 9 5 ) (1 7 ,3 8 3 ) (8,076) (356) (8,432) 72 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 1 4 L o ss p e r sh a re (co n ti n u e d ) 1 4 .4 We i g h te d a ve ra g e n u mb e r o f sh a re s u se d a s th e d e n o mi n a to r Shares in issue at the beginning of the period Shares issued Issue of ordinary shares on exercise of equity settled share-based payments Shares issued on business combination Issu e d o rd i n a ry sh a re s a s a t th e e n d o f th e p e ri o d 2023 number 2022 number 9 2 ,0 5 0 ,7 2 7 42,050,728 — 35,714,285 — — 14,285,714 9 2 ,3 8 0 ,3 0 0 92,050,727 3 2 9 ,5 7 3 Weighted average number of ordinary shares used as the denominator in calculating basic loss per share 9 2 ,370,36 7 82,461,686 During the year ended 31 March 2023, the Group issued 329,573 shares to option holders who exercised options held under the equity settled share-based payments scheme, the NTA Plan. Refer to Note 10 for further details on the plan. 15. Bu si n e ss co mb i n a ti o n s co mp l e te d i n th e p ri o r ye a r 1 5 .1 Su b si d i a ry Acq u i re d On 9 June 2021, Induction Healthcare Group plc acquired 83.5% of the share capital of Attend Anywhere Pty Limited and 100% of the share capital of A.C.N. 167 231 307 PTY Ltd (“A.C.N.”), which owns 16.5% of the share capital of Attend Anywhere Pty Limited, thereby obtaining 100% control over Attend Anywhere Pty Limited. Attend Anywhere Pty Limited owns 100% of the share capital of Attend Anywhere Limited, a UK subsidiary. The consideration included cash consideration of £16.4m, plus the issue of 14,285,714 new ordinary shares which had a fair value of £9m. This brought the total consideration to £25.4m prior to transaction costs. Attend Anywhere is a leading provider of video consultations in the UK secondary care market, holding national contracts with NHS Scotland, NHS Wales and the HSE in Ireland, alongside a number of regional contracts in England. Attend Anywhere’s proprietary technology, allows users to easily access and use the video service via a common browser, without the need for plug-ins or downloading a native app. 1 5 .1 Su b si d i a ry Acq u i re d (co n ti n u e d ) The Group’s strategy is to build a leading and future-forward integrated virtual care platform, incorporating patient onboarding, clinical guidelines, digital communications, online appointment management and, via the acquisition of Attend Anywhere, video consultations. While the current focus is on secondary care, there is scope to migrate into allied care settings, such as primary care, mental health and community care. Attend Anywhere is a clear strategic fit with Induction and the acquisition will provide a number of commercial, operational and financial benefits, which are expected to create value for shareholders. Name Attend Anywhere Pty Limited Provision of video consulting Principal Activity Date of Acquisition 09/06/2021 Proportion of voting equity interest acquired 83.50% Consideration transferred £000 21,207 software A.C.N. 167 231 307 PTY Ltd Holding Company 09/06/2021 100% 4,191 Attend Anywhere Limited Provision of support services to group entities 09/06/2021 100% (indirect) — 73 s t n e m e t a t S l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 1 5 . Bu si n e ss co mb i n a ti o n s co mp l e te d i n th e p ri o r ye a r (co n ti n u e d ) 1 5 .2 C o n si d e ra ti o n tra n sfe rre d The following represents the consideration transferred to the owners of Attend Anywhere Pty Limited, A.C.N. 167 231 307 PTY Ltd and Attend Anywhere Limited. Share consideration Cash consideration To ta l co n si d e ra ti o n tra n sfe rre d 2022 £000 9,000 16,398 2 5 ,3 9 8 The fair value of cash consideration equals its carrying value. The fair value of the equity consideration has been determined with reference to the market value of the shares of Induction Healthcare Group plc immediately prior to the issue of the consideration shares, adjusted for the impact of a lack of marketability discount of 10%. The lack of marketability discount arises as a result of restrictions on the trading of the shares issued to the former owners of Attend Anywhere Pty Limited and A.C.N 167 231 307 Pty Ltd as consideration for the acquisition of the company, for a period after the acquisition. Restrictions on trading of shares extend for 12 months after acquisition date and share prices may be affected once these restrictions cease. 1 5 .3 Asse ts a cq u i re d a n d l i a b i l i ti e s re co g n i se d a t th e d a te o f a cq u i si ti o n The following represents assets acquired and liabilities recognised on acquisition. All amounts are final and not provisional. Intangible assets Cash and cash equivalents Other current assets Deferred tax liability Other non-current liabilities Contract liabilities Other current liabilities To ta l i d e n ti fi a b l e n e t a sse ts a t fa i r va l u e 2022 £000 15,193 2,912 4,751 (4,856) (85) (1,782) (746) 1 5 ,3 8 6 The separately identifiable intangible assets and valuation techniques used to measure the fair value of these material assets acquired were as follows: As s e t s a c q u i r e d Valuation technique C u stomer contracts and rela ti o n sh i p s Income Approach: With and without method. This method estimates the value of customer related assets by quantifying the impact on cash flows under a scenario in which the customer-related assets must be replaced. The projected revenues, operating expenses, and cash flows are calculated in a “With” and “Without” scenario, and the differential between the cash flows from the two scenarios serve as the basis for estimating the fair value of the customer-related asset. Excess Earnings Method: a stream of revenue and expenses are identified with a particular group of assets that are necessary to support the earnings associated with the subject intangible asset. By identifying and subtracting contributory assets, the residual earnings are estimated to be attributable to the subject intangible asset and are discounted to present value at an appropriate discount rate. An obsolescence rate of 25% is applied to the forecasts used in the valuation model. Te ch n o l o g y 74 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 1 5 . Bu si n e ss co mb i n a ti o n s co mp l e te d i n th e p ri o r ye a r (co n ti n u e d ) 1 5 .3 Asse ts a cq u i re d a n d l i a b i l i ti e s re co g n i se d a t th e d a te o f a cq u i si ti o n (co n ti n u e d ) C o n tra ct l i a b i l i ti e s The fair value of the of the deferred revenue liability has been determined using the bottom-up approach. Under this approach the fair value is determined to be equal to the costs still to be incurred in fulfilling the performance obligations related to the contract liability, plus an associated profit on these costs. The costs still to be incurred in satisfying the remaining performance obligations are hosting fees, staff costs to support the operation of the platform and provide support and maintenance and other software fees necessary for the operation of the platform. A mark-up on cost to be incurred in fulfilling the performance obligation of 28% was applied. 1 5 .4 Go o d w i l l a ri si n g o n a cq u i si ti o n The following represents goodwill arising on acquisition Consideration transferred at fair value Total identifiable net assets at fair value Go o d w i l l a ri si n g o n a cq u i si ti o n 2022 £000 25,398 (15,386) 1 0 ,0 1 2 Goodwill arising on acquisition relates to the strategic fit with the existing products of the Group and strengthened market position for the Group. Goodwill includes intangible assets that were not valued separately, such as the assembled workforce, potential savings for economies of scale, and potential development of further product offerings using existing know-how in the business acquired. 1 5 .5 An a l ysi s o f ca sh fl o w s o n a cq u i si ti o n Consideration paid in cash Transaction costs attributable to the issuance of shares (included in cash flows from financing activities, net of tax) Less: cash and cash equivalent balances acquired N e t ca sh o u tfl o w s o n a cq u i si ti o n 2022 £000 (16,398) — 2,912 (1 3 ,4 8 7 ) Acquisition related costs of £423k were recognised in administrative expenses. 1 5 .6 Imp a ct o f a cq u i si ti o n o n th e re su l ts o f th e Gro u p From the date of acquisition, Attend Anywhere Pty Limited and A.C.N. 167 231 307 PTY Ltd contributed £5.7m to the revenue of the group and profit before tax of £1.1m. The Group has not disclosed the impact to revenue and profit before tax for the 12 month period under IFRS3.B64, as it is impracticable to determine the impact of the IFRS 3 fair value adjustment to contract liabilities (“deferred income”) at 1 April 2021. 75 s t n e m e t a t S l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 1 5 . Bu si n e ss co mb i n a ti o n s co mp l e te d i n th e p ri o r ye a r (co n ti n u e d ) 1 5 .7 Se n si ti vi ty a n a l ysi s The valuation of acquired technology assets and customer related assets is most sensitive to changes in the assumptions made regarding cash inflows / revenues. The primary assumptions that influence cash inflows / revenues for both the technology assets and customer relate assets are the customer attrition rate and growth in contract prices for forecasted contracts with customers. The reasonable range of outcomes and sensitivity analysis is presented on an aggregate basis as cash inflows from contracts with customers. A 15 percentage point difference downwards and 5 percentage point difference upwards in cash inflows from contracts with customers in each forecast year is considered a reasonable possible range, based on management’s understanding of potential pricing pressures and renewal probabilities for contracts at the next renewal date. In addition, the valuation of technology assets is also sensitive to changes in the annual obsolescence rate. A 5 percentage point variation in the obsolescence rate is considered reasonably possible based on a change of one year in the useful economic life of the asset. The following table demonstrates the impact of a reasonably possible range of outcomes on the valuation of technology assets. Input Cash inflows from contracts with customers Cash inflows from contracts with customers Obsolescence rate Obsolescence rate Sensitivity range Increase / (decrease) in value of asset 2022 £000 (1,128) 367 1,424 (979) -15% +5% -5% +5% The valuation of acquired customer related assets is most sensitive to changes in the assumptions made regarding cash inflows / revenues. Cash inflows from contracts with customers represents the cash inflows from contracts with customers in all forecast years which are primarily influenced by the customer attrition rates of existing customers and contract pricing. The following table demonstrates the impact of a reasonably possible range of outcomes on the valuation of customer related intangible assets. Input Cash inflows from contracts with customers Cash inflows from contracts with customers Sensitivity range Increase / (decrease) in value of asset 2022 £000 -15% +5% (1,410) 470 76 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 16. Su b si d i a ri e s Details of the Group’s subsidiaries at the end of the reporting period are as follows: oportion of ownership interest in ordinary shares and voting power held by the Group (%) Name of subsidiary Induction Healthcare Limited Registered number 11232772 30 Crown Place, Registered Address Earl Street, London. EC2A 4ES Induction Healthcare (UK) Limited 11237890 30 Crown Place, Earl Street, London. EC2A 4ES Place of incorporation and operation United Kingdom Directly owned by the Company √ United Kingdom Principal activity Investment holding company Provision of software to healthcare providers 2023 100% 2022 100% 100% 100% Induction Healthcare Pty Ltd 625119397 Level 2, Suite 2.03, 574 St. Kilda Road, Melbourne, Victoria, 3001 Provision of software to healthcare providers Australia 100% 100% Podmedics Limited 06840040 30 Crown Place, Earl Street, London. EC2A 4ES Horizon Strategic Partners Limited 06285278 30 Crown Place, Earl Street, London. EC2A 4ES Zesty Limited 08294659 30 Crown Place, Earl Street, London. EC2A 4ES United Kingdom United Kingdom United Kingdom Provision of software to healthcare providers Provision of software to healthcare providers Provision of software to healthcare providers √ 100% 100% √ 100% 100% √ 100% 100% Attend Anywhere Pty Ltd 081211707 Level 2, Suite 2.03, 574 St. Kilda Road, Melbourne, Victoria, 3001 Provision of software to healthcare providers Attend Anywhere Limited 11883931 30 Crown Place, Earl Street, London. EC2A 4ES A.C.N. 167 231 307 Pty Ltd 167231307 Level 2, Suite 2.03, 574 St. Kilda Road, Melbourne, Victoria, 3001 Provision of software to healthcare providers Investment Holding Company All subsidiaries have reporting periods that end on 31 March 2023. Australia √ 100% 100% United Kingdom 100% 100% Australia √ 100% 100% Induction Healthcare Limited (registered number 11232772), Induction Healthcare (UK) Limited (registered number 11237890), Podmedics Limited (registered number 06840040), Horizon Strategic Partners Limited (registered number 06285278) Zesty Limited (registered number 08294659) and Attend Anywhere Limited (registered number 11883931) have taken advantage of the exemption from audit under section 479A of the Companies Act 2006, and Induction Healthcare Group plc has provided a parental guarantee in accordance with section 479C of the Companies Act 2006. 77 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 17. Go o d w i l l 1 7 .1 C a rryi n g a mo u n t o f g o o d w i l l The following represents the carrying value of goodwill as at 31 March 2023. Cost Accumulated impairment The following reconciles goodwill at the beginning and end of the period. C o st At 1 April Additions as a result of business combinations Transferred to assets of disposal groups held for sale Translation differences At 31 March Accu mu l a te d i mp a i rme n t At 1 April Impairment charge Transferred to assets of disposal groups held for sale At 31 March 2023 £000 1 8 ,1 6 4 (7 ,4 7 9 ) 1 0 ,6 8 5 2022 £000 20,175 (417) 19,758 2023 £000 2022 £000 2 0 ,1 7 5 — (1 ,5 5 3 ) (4 5 8 ) 1 8 ,1 6 4 4 1 7 7 ,7 5 8 (6 9 6 ) 7 ,4 7 9 9,790 10,012 — 373 20,175 — 417 — 417 The net carrying value of goodwill transferred to assets of disposal groups held for sale was £0.8m. During the year ended 31 March 2023, the Group classified the Induction Switch and Induction Guidance CGU’s as disposal groups held for sale, refer to Note 13. As a result, goodwill balances relating to these CGU’s have been reclassified to assets held for sale, after the impairment losses detailed below were recognized. 1 7 .2 Al l o ca ti o n o f g o o d w i l l to ca sh g e n e ra ti n g u n i ts Goodwill is allocated to the Group’s cash generating unit as follows: Induction Attend Anywhere Induction Zesty Induction Guidance Induction Switch 2023 £000 9 ,9 2 8 7 5 7 — — 1 0 ,6 8 5 2022 £000 10,385 8,237 1,136 — 19,758 The Attend Anywhere CGU consists of the assets and cash flows related to the Attend Anywhere video consultation product. The Zesty CGU consists of the assets and cash flows related to the Zesty patient portal product. The Induction Guidance CGU consists of the assets and cash flows related to the Induction Guidance product line (formerly MicroGuide, acquired as part of the acquisition of Horizon Strategic Partners). The Induction Switch CGU consists of the assets and cash flows related to the Induction Switch app. Goodwill in relation to the Induction Guidance and Induction Switch CGU’s have been re-classified to assets of disposal groups held for sale in accordance with IFRS 5 “Non-current assets held for sale and discontinued operations. Refer Note 13 for more information. 78 s t n e m e t a t S l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 1 7 . Go o d w i l l (co n ti n u e d ) 1 7 .3 R e co ve ra b l e a mo u n t, ca rryi n g a mo u n t a n d h e a d ro o m / i mp a i rme n t l o sse s During the year ended 31 March 2023, the Group recognised impairment losses of £7.7m on goodwill. These have been presented separately in the consolidated statement of comprehensive income as “impairment losses”. There have been no reversals of previously recognised impairment losses. There have been no impairment losses, or reversals of impairment losses on revalued assets during the period. The following table illustrates the recoverable amount, carrying amount and headroom for each of the CGU’s. The recoverable amounts of the Induction Zesty and Induction Attend Anywhere CGU’s were determined to be the value-in-use (“VIU”). Due to the decision to dispose of the Induction Guidance CGU (refer Note 13), the carrying amount will be recovered primarily through sale and therefore the recoverable amount was determined as the fair value less costs of disposal (“FVLCD"). Induction Attend Anywhere Induction Zesty Induction Guidance Induction Switch Goodwill allocated 2023 £000 Carrying amount of CGU (incl. goodwill) 2023 £000 2022 £000 2022 £000 Recoverable amount Headroom / (Impairment) 2023 £000 2022 £000 2023 £000 2022 £000 9 ,9 2 8 10,385 2 1 ,4 6 6 29,302 2 7 ,4 2 8 34,252 5 ,9 6 2 4,950 7 5 7 8,237 3 5 1 8,293 3 5 1 19,111 (7 ,4 7 9 ) 10,818 — — 1 0 ,6 8 5 1,136 — 19,758 2 ,2 4 1 — 2 4 ,0 5 8 4,292 — 41,887 1 ,9 6 2 — 2 9 ,7 4 1 6,243 — 59,606 (2 7 9 ) — (1 ,7 9 6 ) 1,951 — 17,719 The recoverable amount of the Induction Switch CGU continues to be £nil as at 31 March 2023 (2022: £nil). During the year ended 31 March 2023, the Group classified this CGU as a disposal group held for sale (refer Note 13) and the sale of this disposal group was finalized in June 2023 (refer Note 32). The Induction Guidance CGU was impaired during the year ended 31 March 2023 as a result of the intention to dispose of the CGU and the fact that its fair value less costs of disposal is therefore its recoverable amount. The non-recurring fair value measurement of the disposal group has been recognised as a Level 3 fair value based on the inputs used to determine fair value. The fair value was determined using an expected value income approach, and using inputs such as income multiples that are commonly used in the primary industry that the Induction Guidance disposal group operates in. The Induction Zesty CGU was impaired during the year ended 31 March 2023 as a result of challenging macroeconomic conditions in the primary market in which it operates, which has resulted in slower than expected growth, and therefore lower net cash flows used in the VIU assessment. The following table illustrates the key discount and growth rate assumptions applied for each CGU: Pre-tax discount rate Long term average growth rate Forecast period length (years) Induction Attend Anywhere Induction Zesty* Induction Guidance* * Cash flows beyond the five-year period are extrapolated using a declining growth rate, determined using the H-model. The H-model uses a gradually declining growth rate of between 10% to 2.5 %, with a higher growth component beyond the five-year forecast period as inputs to estimate the present value of the higher growth component 2022% 13.6% 15.2% 13.7% 2023% 2 .5 % 2.5-1 0 % n /a 2022% 2.5% 2.5-10% 2.5-10% 2023 % 1 6 .3 % 1 5 .0 % n /a 2023 5 5 n /a 2022 5 5 5 79 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 1 7 . Go o d w i l l (co n ti n u e d ) 1 7 .4 Ke y a ssu mp ti o n s u se d i n va l u e -i n -u se ca l cu l a ti o n s a n d se n si ti vi ty to ch a n g e s i n a ssu mp ti o n s The calculation of value-in-use for the Induction Zesty and Induction Attend Anywhere CGU’s is most sensitive to the following assumptions: - Earnings before interest, tax, depreciation and amortisation (“EBITDA”). EBITDA is significantly influenced by cash inflows and cash outflows. - Discount rates EBITD A EBITDA is determined by deducting the budgeted costs to be incurred (cash outflows) from payments received from customers (cash inflows). Cash in-and-outflows are determined based on detailed budgets for the first two years of the forecast period, and then extrapolated for the remaining forecast period using an appropriately declining growth rate to reach the terminal growth rate. Detailed budgets for cash inflows from payments received from customers are determined using assumptions on existing customer renewal rates; sales of additional services to existing customers; sales made to new customers; pricing assumptions based on a standard price list as determined by the Group’s pricing policy, and assumptions regarding the timing of the completion of set-up activities for new customers (or “go-lives”). Cash outflows primarily consist of employee and non-employee workforce costs, supplier costs such as cloud hosting costs; and an allocation of the corporate overhead costs. During the year ended 31 March 2023, a reasonably possible decrease of 5% in EBITDA would not have resulted in an impairment the Induction Attend Anywhere CGU. A decrease of 19.9% would have resulted in the impairment of the Attend Anywhere CGU. During the year ended 31 March 2023, a reasonably possible rise in the pre-tax discount rate of 1% in the Attend Anywhere CGU would not have resulted in an impairment of the Attend Anywhere CGU. A rise in the pre-tax discount rate of 3.3% to 19.6% in the Induction Attend Anywhere CGU would have resulted in the elimination of the headroom of the CGU. During the year ended 31 March 2023, a reasonably possible decrease of 5% in EBITDA would have resulted in the elimination of the £0.3m headroom of the Induction Zesty CGU. A decrease of 3.5% would have resulted in the full impairment of the Induction Zesty CGU. During the year ended 31 March 2023, a reasonably possible rise in the pre-tax discount rate of 0.3% to 15.3% in the Zesty CGU would not have resulted in the elimination of the headroom of the Induction Zesty CGU. Management have sensitised the EBITDA assumption below for the Induction Attend Anywhere and Induction Zesty CGU’s. Induction Attend Anywhere Induction Zesty Reasonably possible decrease % 2023 Impact of reasonably possible decrease 2023 5% 5% (1 ,5 0 1 ) (6 6 7 ) % decrease resulting in impairment 2023 1 9 .9 % 3 .5 % 5% is considered to be a reasonably possible decrease for the Induction Attend Anywhere CGU due to the maturity of the products, high renewal rates, and lower reliance on new customer wins within this CGU. D i sco u n t ra te s Discount rates represent the current market assessment of the risks specific to each CGU, taking into account the time value of money and individual risks of the underlying assets that have been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Group and is derived from the weighted average cost of capital (“WACC”). 80 s t n e m e t a t S l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 1 7 . Go o d w i l l (co n ti n u e d ) 1 7 .4 Key assumptions used in value-i n -u se ca l cu l a ti o n s a n d se n si ti vi ty to ch a n g e s i n a ssu mp ti o n s (co n ti n u e d ) D i sco u n t ra te s (co n ti n u e d ) The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Group’s investors. The cost of debt is based on the interest-bearing borrowings the Group is obliged to service. These were £Nil for the year ended 31 March 2023 (2022: £Nil). The beta factors were first evaluated in the year ended 31 March 2020, based on publicly available market data, and re-evaluated in the year ended 31 March 2022. These remain relevant for the year ended 31 March 2023. Adjustments to the discount rate are made to factor in the specific amount and timing of the future cash flows arising from income tax in order to reflect a pre-tax discount rate. The assumptions made in determining the discount rate were updated during the year ended 31 March 2022 to reflect the changes in the nature of the business as a result of the acquisition of Attend Anywhere Pty Ltd, however this did not result in a change in the post-tax discount rate for the Group. Discount rates are reviewed each year. Pre-tax discount rates as disclosed above are dependent on the tax rates in the jurisdiction where the CGU is based and therefore differ from the Group’s WACC. One percentage point is considered a reasonably possible increase in the discount rate. Induction Attend Anywhere Induction Zesty Impact of reasonably possible percentage point increase in discount rate 2023 (2 ,0 9 3 ) (9 3 4 ) 2022 (2,552) (1,995) Percentage point increase resulting in impairment 2022 2023 2.1% 9.5% 3.3% 0.3% 81 s t n e m e t a t S l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 18. In ta n g i b l e a sse ts C o st At 31 March 2021 Additions – internally developed Acquired through business combinations Translation differences At 31 March 2022 Additions – internally developed Transferred to assets of disposal groups held for sale Translation differences At 31 March 2023 Accu mu l a te d a mo rti sa ti o n a n d i mp a i rme n t At 31 March 2021 Charge for the year Translation differences At 31 March 2022 Charge for the year Transferred to assets of disposal groups held for sale Translation differences At 31 March 2023 N e t b o o k va l u e At 31 March 2022 At 31 March 2023 Trade name £000 Users £000 Technology £000 Total £000 6 3 3 — — — 6 3 3 — (264) — 3 6 9 8 3 61 — 1 4 4 62 (102) — 1 0 4 489 2 6 5 1 ,4 2 6 — 7,713 321 9 ,4 6 0 — (919) (394) 8 ,1 4 7 2 6 5 1,067 54 1 ,3 8 6 1,620 (355) (395) 6 ,4 4 6 8 ,5 0 5 3,090 7,480 398 1 7 ,4 1 4 809 (1,024) (556) 1 6 ,6 4 3 2 ,2 7 3 2,658 83 5 ,0 1 4 3,034 (513) 13 3,090 15,193 719 2 7 ,5 0 7 809 (2,207) (950) 2 5 ,1 5 9 2 ,6 2 1 3,786 137 6 ,5 4 4 4,716 (970) (382) 2 ,2 5 6 7 ,5 4 8 9 ,9 0 8 8,074 5 ,8 9 1 12,400 9 ,0 9 5 20,963 1 5 ,2 5 1 82 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 19. Pro p e rty, p l a n t a n d e q u i p me n t C o st At 3 1 Ma rch 2 0 2 1 Additions Acquired through business combinations At 3 1 Ma rch 2 0 2 2 Additions Disposals Translation differences At 31 March 2023 Accu mu l a te d d e p re ci a ti o n a n d i mp a i rme n t At 3 1 Ma rch 2 0 2 1 Provided during the year Acquired through business combinations Disposals Translation difference At 3 1 Ma rch 2 0 2 2 Provided during the year Disposals Translation difference At 31 March 2023 N e t b o o k va l u e At 31 March 2022 At 31 March 2023 20. Tra d e a n d o th e r re ce i va b l e s Trade receivables Tra d e re ce i va b l e s n e t Fixtures and fittings £000 Computer equipment £000 Right-of- use asset – Buildings £000 Total £000 3 — — 3 — — — 3 2 — — 1 — 3 — — — 3 — — 2 8 46 50 1 2 4 13 (98) (2) 3 7 14 1 50 13 — 78 50 (98) (2) 28 46 9 — 211 — 2 1 1 — (201) (10) — — 12 — — 1 1 3 70 (78) (4) — 3 1 257 50 3 3 8 13 (298) (12) 4 1 1 6 13 50 14 1 9 4 120 (176) (6) 3 2 198 — 244 9 2023 £000 2022 £000 2 ,0 6 9 2 ,0 6 9 2 ,0 6 9 1 2 5 1 2 6 3 5 2 2 ,6 7 2 2,900 2,900 2,900 251 80 116 3,347 To tal financial assets other than cash and cash equivalents classifi e d a s l o a n s a n d re ce i va b l e s Prepayments Social security and other taxes receivable Other receivables To ta l tra d e a n d o th e r re ce i va b l e s The carrying value of trade and other receivables classified as loans and receivables approximates fair value. Trade receivables are non-interest bearing and are generally on terms of 30 days. Included within trade and other receivables is £nil expected to be recovered in more than 12 months (2022: £nil). An allowance for expected credit losses is not material to the Group, due to the nature of the customers of the Group (primarily NHS), for which the risk of default has been assessed to be negligible. Other receivables of £0.3m (2022: £0.1m) include deposits held with a financial institution as guarantee for amounts owing under a lease of £0.1m (2022: £0.1m) and sub-lease receivables of £0.1m (2022: £Nil). 83 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 21. C o n tra ct a sse ts 2 1 .1 C o n tra ct a sse ts The below tables reconcile the movement in contract assets during the year. Ba l a n ce a t 1 Ap ri l Transfers from contract assets to contract liabilities, on invoice of accrued amounts Additions for subscriptions commenced, not yet invoiced Impairment of a contract asset Changes due to business combinations Translation differences Ba l a n ce a t 3 1 Ma rch 2 1 .2 C o n tra ct co sts to o b ta i n a co n tra ct The below table reconciles the movement in contract costs to obtain a contract. Ba l a n ce a t 1 Ap ri l Contracts costs – to obtain a contract Amortisation of contract costs to obtain a contract Translation differences Ba l a n ce a t 3 1 Ma rch 2 1 .3 C o n tra ct co sts to fu l fi l l a co n tra ct The below table reconciles the movement in contract costs to fulfil a contract. Ba l a n ce a t 1 Ap ri l Contract costs – to fulfil a contract Amortisation of contract costs to fulfil a contract Ba l a n ce a t 3 1 Ma rch 22. C a sh a n d ca sh e q u i va l e n ts 2023 £000 2 7 6 (2 ,7 9 9 ) 3 ,2 0 8 — — (1 5 ) 6 7 0 2022 £000 35 (1,732) 1,745 (1) 228 1 276 2023 £000 3 4 5 6 0 8 (6 2 3 ) 4 8 3 7 8 2022 £000 25 355 (35) — 345 2023 £000 1 6 5 3 4 8 (3 3 3 ) 1 8 0 2022 £000 95 121 (51) 165 Cash at banks and on hand Short-term deposits C a sh and cash equivalents per the statement of fi n a n ci a l p o si ti o n a n d ca sh fl o w sta te me n t 4 ,2 8 7 — 4 ,2 8 7 6,996 500 7,496 2023 £000 2022 £000 Cash at banks earn interest at floating rates based on daily bank deposit rates. Short-term deposits are made on weekly basis, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. 84 s t n e m e t a t S l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 23. Tra d e a n d o th e r p a ya b l e s Trade payables Other payables Accruals To tal financial liabilities, excluding loans and bo rro w i n g s, cl a ssi fi e d a s fi n a n ci a l l i a b i l i ti e s me a su re d a t a mo rti se d co st Other payables tax and social security payments To ta l tra d e a n d o th e r p a ya b l e s Current taxation payable 8 4 8 6 5 1 ,0 9 6 2 ,0 0 9 7 0 4 2 ,7 1 2 — 901 108 2,120 3,129 238 3,367 789 2023 £000 2022 £000 The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates to fair value. Included within trade and other payables is £nil expected to be settled in more than 12 months (2022: £nil). All trade and other payables are non-interest bearing and are normally settled on 30 day terms. 24. C o n tra ct l i a b i l i ti e s Current Non-current To ta l co n tra ct l i a b i l i ti e s Ba l a n ce a t 1 Ap ri l Revenue recognised Increases due to cash received excluding amounts recognized as revenue during the year Changes due to business combinations Other changes (including transfers from contract assets on invoice of accrued amounts) Translation differences Transfers to liabilities associated with disposal groups held for sale Ba l a n ce a t 3 1 Ma rch 2023 £000 2023 £000 2022 £000 3 ,5 8 8 2 ,1 9 8 5 ,7 8 6 2,580 326 2,906 2 ,9 0 6 (9 ,6 8 4 ) 1 3 ,8 8 5 — (2 6 7 ) (4 1 9 ) (6 3 5 ) 5 ,7 8 6 2022 £000 1,214 (6,215) 7,576 1,782 (1,733) 282 2,906 Other changes (including transfers from contract assets on invoice of accrued amounts) relates to the offsetting of contract asset (“accrued income”) balances for subscriptions that have renewed but have not yet been invoiced, against contract liabilities (“deferred income”), when those accrued balances are invoiced (and therefore derecognised). Since the revenue has been recognised already through accrued income, this offset is required in order to ensure the contract liabilities balance represents the balance of performance obligations not yet satisfied. 25. Pro vi si o n s C a rryi n g a mo u n t Balance at 1 April 2022 Additions Balance at 31 March 2023 85 Onerous contracts £000 Restructuring and termination £000 — 104 1 0 4 — 424 4 2 4 Total £000 — 528 5 2 8 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 2 5 Pro vi si o n s (co n ti n u e d ) The provision for onerous contracts consists of the unavoidable costs of performance against non-healthcare contracts. The provision for restructuring and termination costs relates to costs committed to as a result of the right-sizing of the Group’s activities during the year ended 31 March 2023. All provisions are expected to realise within 12 months from 31 March 2023. 26. Sh a re ca p i ta l For the purposes of the Group’s capital management, capital includes issued share capital, share premium and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Group’s capital management is to maximise shareholder value. The Group manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. The Group does not have any interest-bearing loans and borrowings. There have been no changes to the Group’s capital management policies and processes during the year ended 31 March 2023. Au th o ri se d Sh a re s tre a te d a s e q u i ty Ordinary shares of £0.0050 each Issu e d a n d fu l l y p a i d 2023 Number (‘000) 2023 £000 2022 Number (‘000) 2022 £000 9 2 ,3 8 0 9 2 ,3 8 0 4 6 2 4 6 2 92,051 92,051 460 460 Ord i n a ry sh a re s o f £ 0 .0 0 5 0 e a ch At 1 April Issue of ordinary shares Issue of shares as consideration for a business combination Issue of shares on exercise of equity settled share-based payments At 31 March 2023 Number (‘000) 2023 £000 2022 Number (‘000) 2022 £000 9 2 ,0 5 1 — — 3 2 9 9 2 ,3 8 0 4 6 0 — — 2 4 6 2 42,052 35,714 14,285 — 92,051 210 179 71 — 460 The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of Induction Healthcare Group plc. On 9 June 2021, the Group acquired Attend Anywhere Pty Ltd (“Attend Anywhere”). The consideration included the issue of 14,285,714 new Ordinary Shares (the “Consideration Shares”). (Refer Note 15 for further details). As part of the transaction, on 8 June 2021, the Company announced that it had raised £25m through a placing of 35,714,285 new Ordinary Shares at a price of 70p per share. s t n e m e t a t S The number of share options granted to employees of the Group that are exercisable at 31 March 2023 is 1,442,335 (2022: 1,388,724). An equivalent number of shares will be issued in future on exercise of the options by employees. 86 l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 27. R e se rve s The following represents the movement in the share premium: 2 7 .1 Sh a re p re mi u m At 1 April Issue of ordinary shares Transaction costs on issue of shares Reclassification to merger reserve At 31 March 2022 £000 2023 £000 4 1 ,6 6 5 — — — 4 1 ,6 6 5 18,432 24,821 (1,190) (398) 41,665 During the year ended 31 March 2020, Induction Healthcare Group plc acquired Podmedics Limited in a share- for-share exchange. £0.4m of the purchase consideration was accounted for as share premium. However, during the year ended 31 March 2022 management assessed that the conditions set out in section 612 of the Companies Act 2006 were met at the acquisition date, and therefore the difference between the fair value of the shares issued and the nominal value have been reclassified from share premium to the merger reserve. This was reclassified in the year ended 31 March 2022 rather than treated as a prior period adjustment, as it was neither quantitatively nor qualitatively material. 2 7 .2 Fo re i g n e xch a n g e re se rve The translation reserve comprises all foreign exchange differences arising since 5 March 2018 (date of incorporation) from the translation of the financial information of foreign operations. 2 7 .3 Me rg e r re se rve During the year ended 31 March 2022, Induction Healthcare Group plc acquired 83.5% of the share capital of Attend Anywhere Pty Limited and 100% of the share capital of A.C.N. 167 231 307 PTY Ltd, which owns 16.5% of the share capital of Attend Anywhere, thereby obtaining 100% control over Attend Anywhere. Attend Anywhere Pty Limited owns 100% of the share capital of Attend Anywhere Limited, a UK subsidiary. Prior to the acquisition, a fundraise of £25m was held which led to the issue of 35,714,285 New Ordinary Shares. The consideration included payments of £0.8m in cash for the purchase of net assets at the completion date, cash consideration of £15.6m, plus the issue of 14,285,714 New Ordinary Shares which had a fair value of £9m. The acquisition was effected by way of a share-for-share exchange, whereby the shareholders the above entities exchanged their shares for an equivalent number of shares in Induction Healthcare Group plc. The difference between the nominal amount of the shares and the fair value of the shares has been recognised in the merger reserve. Where the conditions set out in section 612 of the Companies Act 2006 or equivalent sections of previous Companies Acts are met, shares issued as part of the consideration in a business combination are measured at their fair value in the Consolidated Statement of Financial Position, and the difference between the nominal value and fair value of the shares issued is recognised in the merger reserve. The following represents the movement in the merger reserve during the year. At 1 April Issue of shares as consideration for a business combination Reclassification from share premium At 31 March 2023 £000 2 0 ,2 0 5 — — 2 0 ,2 0 5 2022 £000 10,879 8,928 398 20,205 87 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 2 7 R e se rve s (co n ti n u e d ) 2 7 .3 Me rg e r re se rve (co n ti n u e d ) During the year ended 31 March 2020, Induction Healthcare Group plc acquired Podmedics Limited in a share- for-share exchange. £0.4m of the purchase consideration was accounted for as share premium. However, during the year ended 31 March 2022 management have assessed that the conditions set out in section 612 of the Companies Act 2006 were met at the acquisition date, and therefore the difference between the fair value of the shares issued and the nominal value have been reclassified from share premium to the merger reserve. This has been reclassified in the year ended 31 March 2022 rather than treated as a prior period adjustment, as it is neither quantitatively nor qualitatively material. 2 7 .4 Oth e r re se rve s Other reserves arise from the Group’s equity settled share option scheme. The reserve represents the value of stock options in issues and still to be exercised. The cumulative value of the reserve is decreased for forfeitures. Upon exercise of options by option holders, the difference between fair value and exercise price is reclassified from other reserves to retained earnings/ (losses). Refer to Note 10 for further details. 28. Fi n a n ci a l i n stru me n ts, fa i r va l u e s a n d ri sk ma n a g e me n t 2 8 .1 Fi n a n ci a l a sse ts The following table shows the carrying amounts and fair values of financial instruments as at 31 March 2023 and 31 March 2022. For financial assets not measured at fair value, the carrying amount is considered to be a reasonable approximation of fair value. Fi n a n ci a l a sse ts me a su re d a t a mo rti se d co st Trade receivables Other receivables Prepayments Social security and other taxes receivable Cash and cash equivalents Current tax receivable 2023 £000 2022 £000 2 ,0 6 9 351 1 2 5 1 2 6 4 ,2 8 7 1 3 4 7 ,0 9 2 2,900 116 251 80 7,496 1,322 12,165 The business does not hold any other form of financial assets. Management have assessed that the fair values of cash and short-term deposits and other receivables approximate their carrying amounts largely due to the short-term maturities of these instruments. 2 8 .2 Fi n a n ci a l l i a b i l i ti e s The following table shows the carrying amounts and fair values of financial liabilities as at 31 March 2023 and 31 March 2022. For financial liabilities not measured at fair value, the carrying amount is considered to be a reasonable approximation of fair value. Fi n a n ci a l l i a b i l i ti e s me a su re d a t a mo rti se d co st Trade and other payables Lease liabilities (included in “other financial liabilities”) 2023 £000 2022 £000 2 ,7 1 2 1 2 8 2 ,8 4 0 3,367 199 3,566 2 8 .3 Fi n a n ci a l ri sk ma n a g e me n t o b j e cti ve s The Group’s principal financial liabilities, comprise loans and borrowings, and trade and other payables. The main purpose of these financial liabilities is to finance the Group’s operations. The Group’s principal financial assets include trade receivables, and cash and short-term deposits that derive directly from its operations. 88 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 2 8 Fi n a n ci a l i n stru me n ts, fa i r va l u e s a n d ri sk ma n a g e me n t (co n ti n u e d ) 2 8 .3 Fi n a n ci a l ri sk ma n a g e me n t o b j e cti ve s (co n ti n u e d ) The Group has exposure to the following principal financial risks in the operation and management of its business: Market risk Foreign currency risk; Credit risk; and Liquidity risk 2 8 .4 Ma rke t ri sk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, such as foreign exchange rates, interest rates and equity prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk. Interest rate risk is not considered to be material to the Group. The Group is not exposed to any other market risks aside from foreign currency risk. s t n e m e t a t S l i a c n a n F i 2 8 .5 Fo re i g n cu rre n cy ri sk ma n a g e me n t Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities (when revenue or expense is denominated in a foreign currency) and the Group’s net investments in foreign subsidiaries. The Group’s main exposure is to the United States dollar and the Australian dollar. The Group’s exposure to the US dollar is as a result of web hosting costs, which forms the majority of cost of sales, being denominated in US dollars. The Group’s exposure to the Australian dollar is as a result of the Group’s operations in Australia related to Attend Anywhere Pty Limited. The Group’s exposure to foreign currency risk has increased since the year ended 31 March 2022 as a result of the acquisition of Attend Anywhere, which has a functional currency of Australian dollar. The Group has a bank account denominated in Australian dollars and the Group’s exposure to foreign exchange risk is limited by ensuring the Group has enough cash in this account to cover approximately six months of expenditure. The Group’s exposure to foreign currency risk is as follows. This is based on the carrying amount for monetary financial instruments based on notional amounts. Sensitivity analysis has not been presented as the effects of reasonably possible strengthening or weakening of the foreign currencies below would not have a material impact on the Group’s financial information. 2 0 2 2 Australian dollar US dollar Euro Sterling 2 0 2 3 Australian dollar US dollar Euro Sterling Liabilities £000 Assets £000 (2,049) — — (1,642) 70 44 10 10,270 (3,691) 10,394 (8 7 4 ) — — (1 ,8 3 9 ) (2 ,7 1 3 ) 1 9 6 — — 6 ,1 6 0 6 ,3 5 6 2 8 .6 C re d i t ri sk ma n a g e me n t Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s receivables from customers and investment securities. 89 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 2 8 Fi n a n ci a l i n stru me n ts, fa i r va l u e s a n d ri sk ma n a g e me n t (co n ti n u e d ) 2 8 .6 C re d i t ri sk ma n a g e me n t (co n ti n u e d ) The Group’s principal financial assets are cash and cash equivalents, trade receivables, other financial assets, and other receivables, the carrying values of which represent the Group’s maximum exposure to credit risk in relation to financial assets, as shown in this note. The Group’s credit risk is primarily attributable to its cash and cash equivalents. The credit risk arising from cash and cash equivalents is limited because the counterparties are banks with Triple-A credit-ratings assigned by international credit rating agencies. The credit risk arising from trade receivables and contract assets is assessed as limited, due to the nature of the counterparties, which consist of primarily NHS customers. Therefore, no provision for expected credit losses has been recognised on trade receivables or contract assets. Contract asset balances below relate only to accrued income, as contract costs are not subject to credit risk management as these costs are already incurred and capitalised. 2 0 2 2 Trade receivables Contract assets 2 0 2 3 Trade receivables Contract assets Current £000 <30 days £000 30 – 60 days £000 60 – 90 days £000 >91 days £000 2,259 276 1 ,1 9 5 6 6 9 430 — 9 2 8 — 64 — 1 6 — 144 — — — 3 — 66 — 2 8 .7 L i q u i d i ty ri sk ma n a g e me n t Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s treasury policies are designed to ensure that sufficient cash is available to support current and future business requirements. Cash management is a core feature of the Group’s business model and rolling cash flow forecasts, updated on at least a monthly basis, are reviewed to manage these requirements. The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include contractual interest payments and exclude the impact of netting agreements. 2 0 2 2 Trade payables Lease liabilities (included in “other financial liabilities”) 2 0 2 3 Trade payables Lease liabilities (included in “other financial liabilities”) Carrying amount £000 Total £000 cash flows Less than 12 months £000 1 -5 years £000 ore than 5 years £000 4,154 231 4,154 231 4,154 79 — 152 2 ,7 1 3 1 2 7 2 ,7 1 3 1 2 7 2 ,7 1 3 7 2 — 5 5 — — — — 29. R e l a te d p a rty tra n sa cti o n s Balances and transactions between the Group and its subsidiaries, which are related parties of the Group, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below. 2 9 .1 Id e n ti ti e s o f re l a te d p a rti e s w i th w h o m th e Gro u p h a s tra n sa cte d Note 16 provides information about the Group’s structure, including subsidiaries and the holding company. The related parties with whom the Group has transacted are i) the subsidiaries within the group and ii) key management personnel. 90 s t n e m e t a t S l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes (forming part of the financial statements) (continued) 2 9 R e l a te d Pa rty tra n sa cti o n s (co n ti n u e d ) 2 9 .2 C o mp e n sa ti o n o f ke y ma n a g e me n t p e rso n n e l The remuneration of the directors and other members of key management personnel during the year was as follows: Short-term employee benefits Post-employment pension and other benefits Termination benefits Share-based payment transactions Bonus Other benefits To ta l co mp e n sa ti o n p a i d to ke y ma n a g e me n t p e rso n n e l 2023 £000 1 ,2 0 9 3 7 1 8 7 2 8 6 1 9 3 4 1,916 2022 £000 1,249 76 — 246 342 3 1,916 Key management remuneration comprises short-term benefits only. The remuneration of the highest paid director was £0.3m (2022: £0.3m). 30. L e a se s The Group leases office space. The lease was entered into during the year ended 31 March 2022. The lease runs for a period of 3 years, with an option to renew the lease after that date. Lease payments increase at a rate of 3% per annum, on the anniversary of the lease commencement date. The group has recognised a right of use asset and lease liability for this lease. The group does not have any other leases, including those that are short term and/or leases of low value items. During the year ended 31 March 2023, the Group entered into a sub-lease agreement for the above lease. This sub-lease was signed during the year ended 31 March 2023 and is effective on 1 April 2023 for a term of one year and ten months. Therefore no sub-lease payments have been recognised in the year ended 31 March 2023. The sub-lease has been accounted for as a finance lease, and a lease receivable of £0.1m has been recognised and included in trade and other receivables. Right of use assets that meet the definition of property, plant and equipment have been presented as part of property, plant and equipment, refer Note 19. During the year ended 31 March 2023, the Group vacated the premises that are subject to the lease, and entered into a sub-lease for the premises, which is accounted for as a finance lease. Consequently, the right-of-use-asset has been fully depreciated in the year ended 31 March 2023. The related lease liability has been presented as part of “Other financial liabilities” and disclosures are included in Note 28. 31. C o n ti n g e n t l i a b i l i ti e s As at 31 March 2023 the Group had £nil contingent consideration liabilities (2022: £nil). 32. Eve n ts a fte r th e re p o rti n g d a te On the 30th June 2023 the Group announced the completion of the sale of Switch, a directory app, for an undisclosed sum. This is in line with the previously announced strategy to focus on sustainable growth and allows additional cost savings to be applied. The revenues of Switch are disclosed as part of the discontinued operations. Further details to be found on page 13. 91 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Company Statement of Financial Position as at 31 March 2023 Asse ts N o n -cu rre n t a sse ts Investments in subsidiaries Amounts receivable from group companies Total non-current assets C u rre n t a sse ts Trade and other receivables To ta l a sse ts L i a b i l i ti e s C u rre n t l i a b i l i ti e s Trade and other payables Total current liabilities To ta l l i a b i l i ti e s N e t a sse ts Issu e d ca p i ta l a n d re se rve s Share capital Share premium Other reserves Merger reserve Retained earnings TOTAL EQU ITY Note 2023 £’000 2022 £’000 4 5 2 9 ,2 4 6 4 ,5 8 5 3 3 ,8 3 1 41,009 4,585 45,594 3 5 3 3 ,8 6 6 — 45,594 6 8 9 9 9 9 1 ,0 6 6 1 ,0 6 6 1 ,0 6 6 667 667 667 3 2 ,8 0 0 44,927 4 6 2 4 1 ,6 6 5 1 ,5 7 8 2 0 ,2 0 5 (3 1 ,1 1 0 ) 3 2 ,8 0 0 460 41,665 1,405 20,205 (18,808) 44,927 The loss for the year for the Company was £12.5m (2022: £7.2m). The notes on pages 97 to 103 form an integral part of these Financial Statements. s t n e m e t a t S l i a c n a n F i The financial statements were approved and authorised for issue by the board of directors on 28 July 2023 and were signed on its behalf by: John McIntosh Director Company registered number: 11852026 92 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Company Statement of Changes in Equity for the year ended 31 March 2023 At 1 April 2021 Total comprehensive loss for the year Loss for the year To ta l co mp re h e n si ve l o ss fo r th e ye a r Transaction s w i th o w n e rs, i n th e i r ca p a ci ty a s o w n e rs Issue of ordinary shares Issue of ordinary shares as consideration for a business combination Share-issue costs Equity-settled share-based payments Reclassification of equity To tal contributions by and distributions to o w n e rs At 31 March 2022 Total comprehensive loss for the year Loss for the year To ta l co mp re h e n si ve l o ss fo r th e ye a r Transaction s w i th o w n e rs, i n th e i r ca p a ci ty a s o w n e rs Issue of ordinary shares on exercise of equity settled share-based payments Equity-settled share-based payments To tal contributions by and distributions to o w n e rs 72 — — 2 5 0 4 6 0 — — 2 — 2 hare premium erger reserve Sh are capital S £’000 M £’000 ther reserves £’000 Retained earnings £’000 Total equity £’000 792 (11,596) 18,717 210 18,432 — — — — 178 24,822 O £’000 10,879 — — — — (1,191) 8,928 — (398) 398 — — — — — 613 — (7,212) (7,212) (7 ,2 1 2 ) (7 ,2 1 2 ) — — — — — 25,000 9,000 (1,191) 613 — 3 3 ,4 2 2 2 3 ,2 3 3 9 ,3 2 6 6 1 3 4 1 ,6 6 5 2 0 ,2 0 5 1 ,4 0 5 (1 8 ,8 0 8 ) 44,927 — — — — — — — — — — — — (12,506) (12,506) (1 2 ,5 0 6 ) (1 2 ,5 0 6 ) (205) 378 205 — 2 378 1 7 3 2 0 5 3 8 0 At 31 March 2023 4 6 2 4 1 ,6 6 5 2 0 ,2 0 5 1 ,5 7 8 (3 1 ,1 1 0 ) 3 2 ,8 0 0 The notes on pages 97 to 103 form an integral part of these Financial Statements. 93 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Company Cash Flow Statement for the year ended 31 March 2023 C a sh fl o w s fro m o p e ra ti n g a cti vi ti e s Loss for the year Ad j u stme n ts fo r — Other non-cash movements (Increase) / decrease in amounts due from group companies N e t ca sh u se d i n o p e ra ti n g a cti vi ti e s C a sh fl o w s fro m i n ve sti n g a cti vi ti e s Payments for acquiring businesses, net of cash acquired Payments for Issue of shares on exercise of equity settled share-based payments N e t ca sh fro m i n ve sti n g a cti vi ti e s C a sh fl o w s fro m fi n a n ci n g a cti vi ti e s Share issue proceeds Share issue costs N e t ca sh fro m fi n a n ci n g a cti vi ti e s N e t mo ve me n t i n ca sh e q u i va l e n ts C a sh a n d ca sh e q u i va l e n ts a t th e b e g i n n i n g o f th e ye a r C a sh a n d ca sh e q u i va l e n ts a t th e e n d o f th e ye a r The notes on pages 97 to 103 form an integral part of these Financial Statements. 2023 £’000 2022 £’000 (1 2 ,8 5 8 ) (7,208) (3 5 ) 12,686 (2 0 7 ) — 2 0 7 2 0 7 — — — — — 24 (7,184) — — — — — — — — — s t n e m e t a t S l i a c n a n F i 94 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes to the company financial statements 1 . Acco u n ti n g p o l i ci e s 1 .1 Go i n g co n ce rn The Company operates as an investment company for the Induction Healthcare Group plc, holding investments in subsidiaries financed by Group companies. As the Company is an intrinsic part of the Group’s structure, the Directors have a reasonable expectation that Group companies will continue to support the Company through trading and cash generated from trading until the end of the going concern forecast period at 30 June 2025. On this reason, the Directors have adopted the going concern assumption in preparing the financial statements. Please refer to Note 2.2 in the consolidated financial statements for Induction Healthcare Group plc for going concern considerations for the Group. 1 .2 Sh a re -b a se d p a yme n ts Where the Company grants share-based awards over its own shares in exchange for employee services rendered to its subsidiaries, it recognises an increase to the cost of investment equivalent to the share-based payment expense recognised in the consolidated financial statements and a corresponding credit in other reserves in equity. The Company does not recharge the obligation to settle equity-settled share option awards relating to employees employed by UK subsidiaries to the subsidiary. The Company recognises in its individual financial statements an allocated percentage of the share-based payment charge for employees performing some duties for the Company. Therefore, the cost of investment increases by the share-based payment expense recognised in the consolidated financial statements net of amounts relating to services supplied to the company. Refer to Note 2 of the consolidated financial statements for the accounting policy in respect of share-based payments. 1 .3 Fi n a n ci a l i n stru me n ts Financial assets and liabilities are recognised on the Company statement of financial position when the Company becomes a contractual party to the instrument. When financial instruments are recognised initially, they are measured at fair value, which is the transaction price plus, in the case of financial assets and financial liabilities not measured at fair value through profit and loss, directly attributable transaction costs. Management calculate the weighted-average loss rate in measuring the expected credit loss allowance for intra- group receivables. The credit risk exposure of intra-group receivables arises from the loan receivable from Induction Healthcare Limited, due to its investment in Induction Healthcare (UK) Limited and the fact that the CGU to which Induction Healthcare (UK) Limited is allocated is the Induction Switch CGU, which remains impaired. The expected credit loss (“ECL”) provision is calculated as a weighted average expected value of the range of outcomes with regards to default on repayment of the intra-group receivable. The range of outcomes is binary (ie. either default or no default) and a range of probabilities of 20% to 80% is allocated to each scenario. 1 .4 In ve stme n ts i n su b si d i a ri e s Investments in subsidiaries are held at cost less accumulated impairment losses. 1 .5 C a sh fl o w sta te me n t Induction Healthcare Group plc does not have a bank account. Management have applied judgement and elected to present a cash flow statement. 2 . R e p o rti n g e n ti ty Induction Healthcare Group Plc (the ‘Company’) is a public company incorporated, domiciled and registered in England in the United Kingdom. The Company’s registered office is at 20 St Dunstan’s Hill, London, EC3R 8HL. The Company’s principal activity is the provision of software to healthcare professionals. 3 . Ba si s o f p re p a ra ti o n The financial statements have been prepared in accordance with UK-adopted international accounting standards (“UK- adopted IFRS”). Details of the Company’s accounting policies, including changes during the year, are included in note 1. 95 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes to the company financial statements (continued) 3 . Ba si s o f p re p a ra ti o n (co n ti n u e d ) The Company has taken advantage of the exemption available under section 408 of the Companies Act 2006 and elected not to present its own Income statement or Statement of Comprehensive Income in these financial statements. The financial statements have been prepared on the historical cost basis. These financial statements are presented in pound sterling, which is the Company’s functional currency. All amounts have been rounded to the nearest thousand pounds, unless otherwise indicated. 4 . Ju d g e me n ts a n d e sti ma te s In preparing these financial statements, management has made judgements, estimates and assumptions that affect the application of the Company accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively. There are no estimates that result in significant estimation uncertainty during the year ended 31 March 2023. 5 . In ve stme n ts i n su b si d i a ri e s The investments in subsidiaries represent the investments of Induction Healthcare plc in Attend Anywhere Pty Limited and A.C.N. 167 231 307 PTY Ltd, which were acquired during the year. It also represents investment in Induction Healthcare Limited, Horizon Strategic Partners Limited and Zesty Limited (acquired in prior year). All of the entities are wholly owned subsidiaries of the company. A full list of subsidiaries is included in Note 17 of the consolidated financial statements for the Group. During the year ended 31 March 2023, management performed an impairment assessment of the investments in subsidiaries. As a result, management impaired the investment in Zesty Limited by £11.7m (2022: £Nil). The recoverable amount of the investment in Zesty Limited is the value-in-use as determined for the purposes of the goodwill impairment assessment of the Induction Zesty CGU in the consolidated financial statements of the Group. Refer note 17 in the consolidated financial statements. In addition, management impaired the investment in Horizon Strategic Partners Limited by £0.28m (2022: £Nil). The recoverable amount of the investment in Horizon Strategic Partners Limited is the fair value less costs-of-disposal as determined for the purposes of the goodwill impairment assessment of the Induction Guidance CGU in the consolidated financial statements of the Group. Refer note 17 in the consolidated financial statements. The investments in Attend Anywhere Pty Limited and A.C.N. 167 231 307 PTY Ltd (“A.C.N.”) are not impaired, as the recoverable amounts exceeds the costs of the investments. During the year, the Company advanced £0.08m (2022: £6.8m) to Induction Healthcare Limited, in order to fund the continued operation of the Group, specifically the Induction Switch CGU and group-wide corporate costs. This has been accounted for as a capital contribution and therefore an increase in the investment in Induction Healthcare Limited. The Company has then impaired the investment in Induction Healthcare Limited by £0.08m (2022: £6.8m), due to the fact that the Induction Switch CGU remains impaired and has been classified as held for sale in the consolidated financial statements of the Group, and there is no expectation of repayment of these amounts by Induction Healthcare Limited in the near future. This has been included in the loss for the year for Induction Healthcare Group plc. The recoverable amount of the investment is £Nil (2022: £Nil). 96 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes to the company financial statements (continued) 5 . In ve stme n ts i n su b si d i a i re s (co n ti n u e d ) During the year ended 31 March 2022, on 9 June 2021, Induction Healthcare Group plc acquired 83.5% of the share capital of Attend Anywhere Pty Limited and 100% of the share capital of A.C.N. 167 231 307 PTY Ltd (“A.C.N.”), which owns 16.5% of the share capital of Attend Anywhere, thereby obtaining 100% control over Attend Anywhere. Attend Anywhere Pty Limited owns 100% of the share capital of Attend Anywhere Limited, a UK subsidiary. Prior to the acquisition, a fundraise of £25m was held which led to the issue of 35,714,285 New Ordinary Shares. The consideration included payments of £0.8m in cash for the purchase of net assets at the completion date, cash consideration of £15.6m, plus the issue of 14,285,714 New Ordinary Shares which had a fair value of £9m. This brings the total consideration to £25.4m prior to transaction costs. Ba l a n ce a t 1 Ap ri l Acquisitions of new subsidiaries Share-based payments Capital contribution Impairment Ba l a n ce a t 3 1 Ma rch 2023 £’000 4 1 ,0 0 9 — 4 0 2 8 2 (1 2 ,2 4 7 ) 2 9 ,2 4 6 2022 £’000 14,639 25,797 621 6,834 (6,882) 41,009 6 . Amo u n ts re ce i va b l e fro m g ro u p co mp a n i e s Amounts receivable from group companies comprise loans due from group companies of £4.6m (2022: £4.6m). The loans are interest free and repayable on demand. Lifetime expected credit losses of £10.5m (2022: £10.5m) have been recognised on amounts due from group companies. These amounts have been classified as non- current, as there is no intention to demand repayment of these amounts within 12 months from 31 March 2023. Ba l a n ce a t 1 Ap ri l Net settlement of amounts owed to group companies Provision for expected credit losses Amo u n ts re ce i va b l e fro m g ro u p co mp a n i e s To ta l n o n -cu rre n t p o rti o n 2023 £’000 4 ,5 8 5 — — 4 ,5 8 5 4 ,5 8 5 2022 £’000 12,668 (2,333) (5,750) 4,585 4,585 The carrying value of trade and other receivables classified as loans and receivables approximates fair value. The gross carrying value of amounts receivable from group companies, prior to the application of the expected credit loss provision (“ECL”) is £15.1m. This is wholly due from Induction Healthcare Limited. Amounts receivable from Induction Healthcare Limited are considered to have a high credit risk. Default for amounts due from group companies is defined as a scenario where the entity will not be able to recover the amount owing through any means, such as repayments on the loan, distribution of dividends or the sale of the asset. It is the policy of the entity to not write-off amounts due from group companies. 97 s t n e m e t a t S l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes to the company financial statements (continued) 7 . Tra d e a n d o th e r p a ya b l e s The following table summarises the balance of trade and other payables. The amounts owed to group companies represent £0.8m (2022: £0.6m). This is an interest free arrangement and is repayable on demand. Trade payables Accruals Amounts due to group companies To ta l cu rre n t p o rti o n 8 . Sh a re ca p i ta l 2023 £,000 1 7 3 7 5 8 1 8 1 ,0 6 6 2022 £,000 — 42 625 667 For the purposes of the Group’s capital management, capital includes issued share capital, share premium and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Group’s capital management is to maximise shareholder value. The Group manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. The Group does not have any interest bearing loans and borrowings. There have been no changes to the Group’s capital management policies and processes during the year ended 31 March 2023. Au th o ri se d Sh a re s tre a te d a s e q u i ty Ordinary shares of £0.0050 each Issu e d a n d fu l l y p a i d Ord i n a ry sh a re s o f £ 0 .0 0 5 0 e a ch At 1 April Issue of ordinary shares Issue of ordinary shares on exercise of equity settled share-based payments Issue of shares as consideration for a business combination At 31 March 2023 Number (‘000) 2023 £000 2022 umber (‘000) 2022 £000 9 2 ,3 8 0 9 2 ,3 8 0 4 6 2 4 6 2 92,051 92,051 460 460 2023 Number (‘000) 2023 £000 2022 umber (‘000) 2022 £000 9 2 ,0 5 1 — 3 2 9 — 9 2 ,3 8 0 4 6 0 — 2 — 4 6 2 42,052 35,714 — 14,286 92,051 210 179 — 71 460 The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of Induction Healthcare Group plc. On 9 June 2021, the Group acquired Attend Anywhere Pty Ltd (“Attend Anywhere”). The consideration included the issue of 14,285,714 new Ordinary Shares (the “Consideration Shares”). (Refer Note 15 for further details). As part of the transaction, on 8 June 2021, the Company announced that it had raised £25m through a placing of 35,714,285 new Ordinary Shares at a price of 70p per share. Induction Healthcare Group plc does not operate a bank account, and cash inflows from the fundraise were received by a subsidiary entity, Induction Healthcare Limited. 98 s t n e m e t a t S l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes to the company financial statements (continued) • R e se rve s 9 .1 Sh a re p re mi u m Ordinary shares of £0.0050 each At 1 April Issue of shares Transaction costs on issue of shares Reclassification of equity At 31 March 2023 £,000 2022 £,000 41,665 — — — 41,665 18,432 24,821 (1,190) (398) 41,665 During the year ended 31 March 2020, Induction Healthcare Group plc acquired Podmedics Limited in a share- for-share exchange. £0.4m of the purchase consideration was accounted for as share premium. However, during the year ended 31 March 2022 management have assessed that the conditions set out in section 612 of the Companies Act 2006 were met at the acquisition date, and therefore the difference between the fair value of the shares issued and the nominal value have been reclassified from share premium to the merger reserve. 9 .2 Me rg e r re se rve On 9 June 2021, Induction Healthcare Group plc acquired 83.5% of the share capital of Attend Anywhere Pty Limited and 100% of the share capital of A.C.N. 167 231 307 PTY Ltd (“A.C.N.”), which owns 16.5% of the share capital of Attend Anywhere, thereby obtaining 100% control over Attend Anywhere. Attend Anywhere Pty Limited owns 100% of the share capital of Attend Anywhere Limited, a UK subsidiary. Prior to the acquisition, a fundraise of £25m was held which led to the issue of 35,714,285 New Ordinary Shares. The consideration included payments of £0.8m in cash for the purchase of net assets at the completion date, cash consideration of £15.6m, plus the issue of 14,285,714 New Ordinary Shares which had a fair value of £9m. This brings the total consideration to £25.4m prior to transaction costs. This acquisition was effected by way of a share- for-share exchange, whereby the shareholders of Attend Anywhere Pty Limited and A.C.N. 167 231 307 exchanged their shares for an equivalent number of shares in Induction Healthcare Group plc. The difference between the nominal amount of the shares and the fair value of the shares has been recognised in the merger reserve. Where the conditions set out in section 612 of the Companies Act 2006 or equivalent sections of previous Companies Acts are met, shares issued as part of the consideration in a business combination are measured at their fair value in the Consolidated Statement of Financial Position, and the difference between the nominal value and fair value of the shares issued is recognised in the merger reserve. 99 Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes to the company financial statements (continued) 9 . R e se rve s (co n ti n u e d ) 9 .2 Me rg e r re se rve (co n ti n u e d ) The following represents the movement in the merger reserve: At 1 April Issue of shares as consideration for a business combination Reclassification of equity At 31 March 2023 £000 2 0 ,2 0 5 — — 2 0 ,2 0 5 2022 £000 10,879 8,928 398 20,205 During the year ended 31 March 2020, Induction Healthcare Group plc acquired Podmedics Limited in a share- for-share exchange. £0.4m of the purchase consideration was accounted for as share premium. However, during the year ended 31 March 2022 management have assessed that the conditions set out in section 612 of the Companies Act 2006 were met at the acquisition date, and therefore the difference between the fair value of the shares issued and the nominal value have been reclassified from share premium to the merger reserve. 9 .3 Oth e r re se rve s Other reserves arise from the Group’s equity settled share option scheme. Refer to Note 10 in the consolidated group financial statements for further details. 1 0 . R e l a te d p a rty tra n sa cti o n s Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below. 1 0 .1 Id e n ti ti e s o f re l a te d p a rti e s w i th w h o m th e Gro u p h a s tra n sa cte d Note 16 in the consolidated financial statements provides information about the Group’s structure, including subsidiaries and the holding company. The related parties with whom the Group has transacted are i) the subsidiaries within the group and ii) key management personnel. 1 0 .2 C o mp e n sa ti o n o f ke y ma n a g e me n t p e rso n n e l The remuneration of the directors and other members of key management personnel during the year was as follows: Short-term employee benefits Post-employment pension and other benefits Termination benefits Share-based payment transactions Bonus Other benefits To ta l co mp e n sa ti o n p a i d to ke y ma n a g e me n t p e rso n n e l 2023 £000 1 ,2 0 9 3 7 1 8 7 2 8 6 1 9 3 4 1 ,9 1 6 2022 £000 1,249 76 — 246 342 3 1,916 Key management remuneration comprises short-term benefits only. The remuneration of the highest paid director was £0.3m (2022: £0.3m). Directors’ remuneration has been disclosed in the Directors’ report. Refer to pages 27 and 28, tables “Directors remuneration”. 100 s t n e m e t a t S l i a c n a n F i s t n e m e t a t S l i a c n a n F i Induction Healthcare Financial Statements Annual Report & Accounts 2023 Notes to the company financial statements (continued) 1 0 . R e l a te d p a rty tra n sa cti o n s (co n ti n u e d ) 1 0 .3 Tra n sa cti o n s w i th su b si d i a ri e s Included in amounts due from group companies is an amount of £4.6m (2022: £4.7m) due from Induction Healthcare Limited. This arose as a result of loans made to Induction Healthcare Limited as intermediate holding company to fund the operations of the group. The loan carries interest at 0% and is repayable on demand. Included in trade and other payables is an amount of £0.6m (2022: £0.3m) due to Induction Healthcare (UK) Limited. This arose as a result of payments made by Induction Healthcare (UK) Limited on behalf of Induction Healthcare Group plc. The loan carries interest at 0% and is repayable on demand. Included in trade and other payables is an amount of £0.02m (2022: £0.02m) due to Induction Healthcare Pty Ltd. This arose as a result of payments made by Induction Healthcare Pty Ltd on behalf of Induction Healthcare Group plc. The loan carries interest at 0% and is repayable on demand. Included in trade and other payables is an amount of £0.02m (2022: £0.02m) due to Zesty Limited. This arose as a result of payments made by Zesty Limited on behalf of Induction Healthcare Group plc. The loan carries interest at 0% and is repayable on demand. 1 1 . Eve n ts a fte r th e re p o rti n g d a te There were no material events after the reporting date that have an impact on these financial statements. 101 Induction Healthcare Financial Statements Annual Report & Accounts 2023 I n d uction He a l t h c a r e Additional Information Annual Report & Accounts 2023 Company Information Non-Executive Chair Non-Executive Director Non-Executive Director Non-Executive Director Chief Executive Officer Chief Financial Officer Solicitors Pinsent Masons LLP Third Floor Quay 2 139 Fountainbridge Edinburgh EH3 9QG Nominated advisers and brokers Singer Capital Markets 1 Bartholomew Lane London EC2N 2AX Registered Office C/O Pinsent Masons 30 Crown Place London EC2A 4ES Registered Number 11852026 Company Website www.inductionhealthcare.com n o i t a m r o f n I l a n o i t i d d A Directors Christopher Samler Jane Silber Andrew Williams Ian Johnson Paul Tambeau John McIntosh Secretary Louise Torr C/O Pinsent Masons 30 Crown Place London EC2A 4ES Auditors Crowe LLP 55 Ludgate Hill London EC4M 7JW Primary Bankers HSBC Bank Ltd 172 Upper Richmond Road London SW15 2SH 102 I n d u c t i o n H e a l t h c a r e Glossary Al te rn a ti ve In ve stme n t Ma rke t (AIM) An n u a l Ge n e ra l Me e ti n g (AGM) Attend Anywhere Pty Ltd (Attend Anywhere, Induction Attend An yw h e re ) El e ctro n i c Me d i ca l R e co rd (EMR ) Ea rnings Before Interest, Tax, Depreciation and Amortisa ti o n (EBITD A) Ge n e ra l D a ta Pro te cti o n R e g u l a ti o n (GD PR ) H o rizon Strategic Partners Limited (Induction Guidance, Horizon and Mi cro g u i d e ) In duction Healthcare Gro u p PL C (Gro u p , In d u cti o n , In d u cti o n H e a l th ca re a n d C o mp a n y) In i ti a l Pu b l i c Offe ri n g (IPO) Mo n th l y re cu rri n g re ve n u e (MR R ) N a ti o n a l H e a l th Syste m (N H S) Podmedi cs L i mi te d (Po d me d i cs, In d u cti o n Sw i tch ) R e tu rn o n In ve stme n t (R OI) So ftw a re a s a se rvi ce (Sa a S) Th e Quoted Companies Al l i a n ce (th e QC A C o d e ) Ze sty L i mi te d (In d u cti o n Ze sty, Ze sty) 103 

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