Medica Group Annual Report 2017

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FY2017 Annual Report · Medica Group

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FOCUSED
ON DELIVERING
QUALITY RESULTS

ANNUAL REPORT AND ACCOUNTS 2017
REGISTERED COMPANY NUMBER 08497963

MEDICA GROUP PLC

THE LEADING
INDEPENDENT
UK PROVIDER
OF RADIOLOGY
REPORTING

1.5m

REPORTS A YEAR

Overview

Highlights

At a Glance

Strategic Report

Chairman’s Statement

Investment Case

Market Overview

Business Model

In focus - clinical quality

Radiologist Q&A

Chief Executive’s Review

Financial Review

Governance

Board of Directors

Corporate Governance Report

Report of the Audit Committee

Report of the Nominations Committee

Remuneration Committee Report

Directors’ Report

Independent Auditor’s Report
to the Members of Medica Group Plc

Financial Statements

Consolidated income statement and
consolidated statement of
comprehensive income

Consolidated statement of financial position 63

Consolidated statement of cash flows

Consolidated statement of changes in equity 65

Notes to the financial statements

Company statement of financial position

Company statement of changes in equity

Notes to the financial statements continued 86

Company information

IBC

HIGHLIGHTS

ANOTHER YEAR OF
STRONG GROWTH

FINANCIAL

18.2%
82%
*

REVENUE INCREASE

48.7%

GROSS PROFIT MARGIN

CASH CONVERSION

28.1%
**

ADJUSTED OPERATING
PROFIT MARGIN

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OPERATIONAL HIGHLIGHTS

> total number of reported body parts increased by

7.7%, from 1.35m in 2016 to 1.46m in 2017

• nightHawk volume increased by 31.1%

• cross-sectional volume increased by 23.8%

> Recruitment has again been strong throughout
2017, with the total number of radiologists
(including radiographers and rheumatologists)
contracting with Medica standing at 306 as at
december 2017. this represents a net increase
of 58 year-on-year

> Medica provided services to 103 nHs trusts and

private providers in 2017 (2016: 99)

* eBItdA cash conversion is detailed in note 31
** Adjusted operating profit margin is detailed in note 31

www.medicagroup.co.uk
Visit us for our latest news and developments

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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AT A GLANCE

MEDICA IS THE LARGEST
TELERADIOLOGY PROVIDER
BY REVENUE IN THE UK

WHAT IS TELERADIOLOGY?

WHAT WE DO

Medica provides outsourced interpretation and
reporting on MRI, CT and plain film images. The
Company currently offers three primary services to
hospital radiology departments: NightHawk, an out-of-
hours service, routine cross-sectional (Routine CS)
reporting on MRI and CT scans, and routine plain film
(Routine PF) reporting on x-ray images.

Primary services:

NightHawk

Routine CS/PF

out-of-hours emergency
ct and MR reporting in
less than an hour.

Routine teleradiology
reporting of cross-
sectional and plain film
images.

Other services include:

DayHawk

Fast day-time reporting
(<60 minutes).

Colonography

sub-speciality ‘virtual
colonoscopy’ service.

DXA

Flexible reporting by uK
rheumatologists.

Radiographer reporting

Quality assured
radiographer plain film
reporting service.

Audit

Highly experienced and
robust external auditing
service.

Mammography

sub-speciality
symptomatic breast
reporting.

teleradiology is the electronic transmission of
radiological patient images, including plain film x-rays
(pF), computerised tomography (ct) scans and
magnetic resonance imaging (MRI) scans, from one
location to another, for the purposes of diagnostic
interpretation and reporting. through teleradiology,
images can be transmitted from the hospital setting,
where the images are created, to a radiologist who can
review and report on the images remotely. In the case of
Medica, these are consultant Radiologists specialising in
the relevant field, who typically report on the image
from their own home or from one of Medica’s dedicated
reporting centres. teleradiology improves patient care
by enabling radiologists to provide their services
remotely, thereby facilitating the rapid availability of
trained specialists 24 hours a day, 365 days a year.

24/7 365

RAPID AVAILABILITY OF
TRAINED SPECIALISTS

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

Unique technical
solution to ensure
optimal patient care.

HOW WE DO IT

HOSPITALS

Patient Booking /
Reporting System
(RIS)

Patient
Scan

Image Store
(PACS)

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Radiologist
reports
directly
into hospital
RIS

Secure Medica Firewall

Medica
Group

Current
and Historic
Images

Medica Radiologist
(Home Office/Hub)

Medica Server/
PACS

Medica has a bespoke IT platform
that provides market-leading
linkage between a hospital’s
Radiology Information System (RIS)
and Consultant Radiologists who
contract with Medica.

this link to the hospital RIs is a key
advantage Medica has over
competitors in the teleradiology
market. this unique linkage offers
Medica’s contracted radiologists
equivalence to nHs in-house
reporting by providing the same
radiology history and previous
images that an in-house radiologist
would have access to.

What this means
direct access to the hospital’s RIs
system and thus to a patients’
historical clinical records allows
Medica radiologists to give the most
complete and accurate reports
adhering to the highest standards,
in the same way that the hospital-
based radiologist does.

Among other benefits, Medica offers
hospital radiology departments the
ability to manage their workflow
more efficiently and flexibly, and
provides rapid access to specialist
consultant Radiologists, who may
not be available to that hospital at
the relevant time, or at all.

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Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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CHAIRMAN’S STATEMENT

A STRONG PLATFORM
FOR FUTURE GROWTH

RoY dAVIs
CHAIRMAN

I am pleased to provide my
Chairman’s statement for
Medica Group Plc’s
first year as a public
company.

Medica Group Plc
Medica Group Plc
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AnnuAl RepoRt And Accounts 2017
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306

RADIOLOGISTS CONTRACTING
WITH MEDICA

In 2017, Medica continued to grow
strongly and achieved another
impressive set of results. the Group
saw growth across its main
teleradiology offerings with revenue
increasing by 18% on last year. this
growth has been underpinned by
strong recruitment in the period
which saw a net increase of 58
radiologists on the prior year.

In March 2017, Medica successfully
listed on the Main Market of the
london stock exchange, raising
gross proceeds of £15m for the
company, which were used to pay
down the net debt of the Group to
approximately £10m. By the end of
the year cash generation had further
reduced the net debt to £5m and
Medica’s strengthened financial
position provides us with a strong
platform to support growth and
future development of the Group.
Medica is well placed to pursue
further organic and other growth
opportunities to generate long-term
value for shareholders.

the teleradiology market continued
to develop and demand from clients
grew strongly as nHs trusts
continued to face capacity pressure
and seek efficient solutions of high
clinical quality.

Medica’s strategy remains to
provide the highest quality clinical
services and to promote

improvements in clinical quality
across the uK. Medica’s goal is to
work in partnership with nHs trusts
and independent providers to
reduce waiting times and improve
patient outcomes. through this
approach, Medica can continue to
lead the growth of teleradiology in
the uK.

Medica’s key focus is to support
nHs trusts at a time when they are
dealing with increased demands for
reporting against a backdrop of
limited in-house capacity. through
investments in clinical process and
technology Medica is able to
provide a high quality clinical
service to its clients’ patients in a
timely and cost-effective manner.
Increasingly Medica is able to
partner with clients to bridge
geographical and specialist gaps
across the uK.

Recruitment of radiologists has
been strong in 2017 and is expected
to continue to be so as Medica
focuses on improving the radiologist
reporting experience with Medica
through strong technical support
and robust clinical governance.
despite the relatively low
proportion of reporting currently
outsourced, the company’s
investment to increase the
productivity of its radiologists is
important in increasing the overall
reporting capacity in the uK.

Medica’s employees have performed
exceptionally well again in 2017
supporting clients and radiologists
and always focused on trying to
ensure the best patient care. I have
been impressed with the level of
professionalism and dedication
since joining Medica and express my
gratitude on behalf of the Board to
all of our staff for their contributions
during the year.

the Board has adopted a
progressive dividend policy for the
company from Admission, which
seeks to maximise shareholder value
and reflect Medica’s strong earnings
and cash flow characteristics, while
allowing it to retain sufficient capital
to fund ongoing operating
requirements and to invest in the
Group’s long-term growth.
Following the interim dividend of
0.55 pence for the period to 30
June 2017, the Board proposes a
final dividend of 1.10 pence for the
year ended 31 december 2017.

the Group has performed well in
2017 and I believe we are well
positioned to continue to create
value for all shareholders by
delivering high levels of service to
our clients and helping to improve
patient outcomes.

ROY DAVIS
chairman

Medica Group Plc
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INVESTMENT CASE

A STRONG FOUNDATION
FOR SUSTAINABLE
PROFITABLE GROWTH

LARGE POOL OF
CONSULTANT
RADIOLOGISTS

Medica contracts with 306 uK consultant
Radiologists, enabling us to provide increased
capacity for our customers and a breadth of
specialisms that an individual customer may not
be able to employ.

STRONG CLINICAL
GOVERNANCE

We have established a highly experienced,
market leading clinical governance function.
the quality of our own internal clinical oversight
has led to some customers approaching us to
audit their own internal radiology departments.

see more on page 12

EXPERIENCED TEAM

the senior management team has been with the
business for an average of more than five years and
includes a previous president of the British Institute
of Radiology.

see more on page 26

ROBUST & SCALABLE
TECHNICAL
PLATFORM

We have invested in our bespoke It platform to
provide a robust and secure connection with
hospital radiology systems that can deliver a simple
and quick service with enhanced functionality,
ultimately improving patient outcomes, and
providing a bespoke linkage between our
customers and Medica Radiologists.

our It and services platform gives us the scope to
continue growth in existing service lines, but also
the ability to service different customer groups and
to add new service lines.

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24mins

AVERAGE NIGHTHAWK
TURN AROUND TIME

FAVOURABLE MACRO
MARKET DYNAMICS

the number of scans is increasing, underpinned by
the drive for early diagnosis and preventative
healthcare. the shortage of radiologist capacity in
hospitals is supporting the trend towards
outsourcing, as is the increasing cultural acceptance
of teleradiology.

STRONG
FINANCIAL
PERFORMANCE

Medica has enjoyed strong growth in recent
years, and this continued throughout 2016,
with Group revenues growing by 18.2%
to £33.7m (2016: £28.5m) and eBItdA
growing by 15% to £10.6m (2016: £9.2m).

see more on page 20

CASH GENERATION

the Group continues to deliver strong cash
generation with operating cash flow before tax and
exceptional costs at £8.7m (2016: £7.7m) due to an
increase in eBItdA and efficient use of working
capital, offset by expansionary capex incurred in
order to deploy additional radiologists and new
customers. All of this resulted in eBItdA cash flow
conversion of 82% (2016: 84%).

HIGH LEVELS OF
REPEAT REVENUES

over 80% of revenue in the financial year ended
31 december 2017 was derived from customers
who had worked with Medica for more than
three years, with strong revenue growth even
from customers who have worked with Medica
for over five years.

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MARKET OVERVIEW

A GROWTH MARKET

Strong demand driven by NHS and
independent healthcare groups.

An increase in volume and complexity of diagnostic
imaging examinations, a shortfall in the supply of
specialist radiologists and a requirement to update
working practices to support a 7 day NHS combine to
drive growth in teleradiology.

Market Drivers

Growth in A&e admissions

Requiring diagnostic imaging, national Institute for
clinical excellence (nIce) guidelines evolving to include
more diagnostic imaging.

The need for examinations continues to grow
the overall market by number of examinations is growing,
with cross-sectional ct and MRI scans growing
significantly faster than plain film examinations. the Royal
college of Radiologists has forecast significant growth in
demand for examinations. In england from 2013-2016 the
number of ct and MRI scans respectively rose by more
than 30% – three times more than the rate of
workforce growth.

An ageing demographic

Structural shortage of radiologists

Hospitals have struggled to add sufficient specialist
radiologist capacity, particularly in certain areas within
the uK. the national shortage of radiologist capacity in
the market to meet rising demand, exacerbated at a
local level due to geographical nuances has resulted in
the increased need to use existing radiologist capacity
within the market more efficiently – Medica Group offer
this solution.

While new consultant Radiologists are being trained,
the net increase (after retirement of existing
radiologists) is not sufficient to meet the demand.
According to the RcR* the uK has the third lowest
number of radiologist per population in the eu, with 7.5
radiologists per 100,000 patients – the eu average is
12.7 per 100,000. In addition, increased regional
shortages can be an issue, as can access to consultant
Radiologists who are experts in specialist areas.

* the RcR clinical Radiology uK Workforce census 2016 report, 2016.

Move to 7-day working expected to further drive

growth

technical advances

Means that more conditions are suitable for diagnostic
reporting and more images being produced per scan.

early diagnosis

Resulting in improved patient outcomes and reduction
in overall cost.

Industry expectations

For increased diagnostic response and reduced
turnaround time, particularly for stroke and cancer care,
becoming more demanding.

Demand has been
highlighted with the news
that Clinical Radiology is now
on the national shortage
occupation list.

Medica Group Plc
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8

even with our support the Royal college of Radiologists
stated 230,000 patients are currently waiting over a
month for their radiology reports. Key findings from the
RcR clinical Radiology uK Workforce census 2016
report show that 8.5% of nHs radiologist posts were
vacant in 2016, of which 61% were unfilled for more than
a year. the resulting shortage means that in 2016, 97%
of nHs radiology departments were unable to meet
their reporting requirements. Medica Group are well
placed to support the nHs to meet this capacity gap.

Demand for radiographer reporting
Radiologists are increasingly required to change their job
plans away from plain film, towards cross-sectional and
Interventional work to meet local needs. Retiring
radiologists also often undertake a higher than average
percentage of plain Film reporting. these factors
combine to result in a decrease of radiologist plain film
reporting capacity. Radiographer Reporting is widely
adopted within the nHs and Medica Group are working
with Radiographers to offer high quality capacity and
expertise. In 2017 the percentage of our plain Film
reporting undertaken by radiographers rose to 14%.

Demand for specialist services

the range of diagnostic imaging examinations being
performed increases each year as technology improves.
Working alongside our clients Medica are developing a
range of specialist Reporting services. these allow us
to provide additional capacity to supplement local
resources, or to provide reporting capability which is
not available from local staff. services such as ct
colonoscopy (ctc) and dXA reporting are already well
established and will be joined in 2018 by specialist
cardiac reporting, enhanced scope in nuclear Medicine
examinations and tailored cancer Reporting (RecIst).

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230k patients waiting
over 1 month for
radiology reports.

97% of radiology
departments unable to
meet requirements.

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Medica Group Plc
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BUSINESS MODEL

CREATING VALUE

We use our resources and competitive
advantage to create value that is
shared with our stakeholders

INPUTS

WHAT WE DO

Resources

We are the uK market leader by revenue in the provision of teleradiology services, i.e. the outsourced
interpretation and reporting on radiology images.

Our people and expertise:
A dedicated and skilled team
of over 89 staff, 306
consultant Radiologists and a
healthy recruitment pipeline.

Technology:
Bespoke It platform that
provides market-leading
linkage between a hospital’s
Radiology Information system
(RIs) and consultant
Radiologists who contract
with Medica.

Relationships:
We are a respected partner
to clients including
the nHs, private hospital
groups and diagnostic
imaging firms.

103

ORGANISATIONS CONNECTED
TO THAT CAN USE OUR
TELERADIOLOGY SERVICES

OUR CORE SERVICES
Routine: Routine teleradiology reporting of cross-sectional and plain film images – 48 hour turnaround time.

NightHawk: out-of-hours emergency ct and MR reporting – less than 60 minutes.

timely and accurate reporting of images is the most critical aspect of emergency teleradiology. to achieve
this, Medica has invested heavily in its technical platform and this has enabled the achievement of an
average turnaround time of 24 minutes, which compares favourably with a typical contracted service level
turnaround time of 60 minutes; the Group’s average turnaround time for nightHawk reports is believed by
the directors to be considerably shorter than the industry average.
ROUTINE CS

ROUTINE PF

NIGHTHAWK

37.2%

OF REVENUES

10.9%

OF REVENUES

49.8%

OF REVENUES

DayHawk: Fast day-time reporting (<60 minutes).

Radiographer reporting: Quality assured radiographer plain film reporting service 14% of plain Film
Reporting completed by Radiographers in 2017.

Radiographer Reporting, utilising highly skilled and qualified radiographers, in addition to Medica
Radiologists, to conduct pF reporting.

Medica’s deployment of Advanced practitioner Radiographers for pF reporting is focused on areas where
radiographers are already widely utilised for this purpose in the nHs. underpinned by the Group’s reputation for
clinical excellence, the service has now been introduced to a number of clients. the introduction of Radiographer
plain Film Reporting allows more Medica Radiologist capacity to be focused on cross-sectional reporting.

the directors believe that the Group is now well-positioned to tackle the excess plain Film reporting demand seen
in the nHs by utilising Reporting Radiographers. As a result, Radiographer plain Film continues to represent a
growth opportunity for the company and an enhancement of the support we are able to offer our customers.

our new specialist services:

CT colonography: sub-
speciality ‘virtual colonoscopy’
service.

Duel Energy X-ray
Absorptiometry (DXA):
Flexible reporting by uK
rheumatologists.

PET CT

RECIST

Cardiac CT

Multi-parametirc Prostate MRI

Nuclear Medicine

Clinical Audit: Highly
experienced and robust
external auditing service.

+1.5m

EXAMINATIONS PER YEAR

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Reinvestment

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HOW WE CREATE VALUE

OUTCOMES

What sets us apart:

strong clinical governance

our scale and breadth of speciality interests

our link to the hospital RIs system allows Medica’s
Radiologists not only to view the scan in question,
but also to see a patient’s radiology history, including
previous scans

We contract with the largest pool of consultant
Radiologists outside of the nHs, all of whom have a
minimum of two years’ experience

our average turnaround time is believed to be
considerably shorter than the average (including
in-house radiology departments)

HOW WE WILL MAXIMISE VALUE CREATION

Our strategy:

drive core services

Grow non-nHs

develop new
service lines

offer clinical audit

Radiographer reporting

For Our clients:
timely turnaround, including out-of-hours,
assisting hospitals to manage workloads across a
wide range of subspecialist expertise, and helping
patient outcomes via the rapid availability of
trained specialists 24 hours per day, 365 days per
year.

For Our radiologists:
Attractive and flexible terms, with ability to work
from home and to focus on speciality interests.

Our Clinical governance
As the provider of a highly skilled clinical service,
Medica places clinical governance and quality
assurance and improvement at the heart of its
service offering. the Group has an established
Medical Advisory Board (MAB) and a separate
clinical Advisory Group (cAG). the clinical
governance processes and outputs are overseen
by the clinical Governance committee.

A role of clinical governance is to review
radiologist performance and in doing so, strive for
continuous improvement in the standard of
reporting of Medica Radiologists. An example of
this is the regular sharing of case reviews among
the entire radiologist reporting group, detailing
complex cases and acting as learning and
development tool for Medica Radiologists. there
are also a number of clinical speciality leads
within the Group, who specialise in a particular
field of radiology, and who help the Group
maintain best-in-class service.

Reinvestment

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IN FOCUS

CLINICAL
QUALITY

Focused on delivering quality results

THE BENEFITS

Highly experienced clinical
governance structure

Market leading controls and
support process in place

> strong leadership from Medical
director and clinical Advisory
Group consisting of five members,
including past presidents of the
British Institute of Radiology
(BIR).

> clinical support comprising seven
members of clinical services and
Quality and 12 clinical speciality
leads.

Stringent clinical selection
and recruitment

established and stringent clinical
selection and recruitment process in
line with GMc standards for the
recruitment of doctors.

All Medica radiologists are
required to:

> be on the GMc specialist Register

for clinical Radiology

> have a minimum of two years in

an nHs consultant post.

clinical support and Audit providing
Quality Assurance, Quality control
and clinical education

> All new radiologists’ initial

reporting is audited.

> ongoing programme of auditing

reporting.

> clinical output monitored in
regular clinical Governance
meetings.

> developed radiologist

management and response to
concerns policy and learning and
development support tools.

> the quality of our clinical

Governance function has led to
customers approaching us to
audit their own internal radiology
departments.

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AnnuAl RepoRt And Accounts 2017

dR stepHen dAVIes
MEDICAL DIRECTOR

STATEMENT FROM THE
MEDICAL DIRECTOR DR STEPHEN DAVIES

clinical quality is a cornerstone of the clinical governance in Medica. peer review and
client feedback provides data that guides the continuous learning approach that
Medica encourages its radiologists to adopt. this is in line with the Royal college of
Radiologists guidance on ‘learning from discrepancies’.

Medica works in partnership with its clients in the investigation and reporting of
clinical incidents. Where there are individual or organisational learning points,
Medica’s learning culture and processes provides a path for quality improvement.

clinical collaboration and development is evident in our nightHawk service and in the
development of special service lines. nightHawk services are embracing national
initiatives in the areas of acute stroke and major trauma management. Key service
developments underway are in the special service lines for cardiac and prostate
imaging. We expect to see further developments in the next 12 months in the special
service lines.

Working in partnership with our client healthcare providers to deliver an effective
clinical service has been a key focus in 2017 and will continue. the clinical leadership
has taken a ‘hands-on’ approach visiting clients and understanding at first hand the
key success factors for each client. the quality assurance processes provide
opportunities for Medica to provide support and advice in areas such as
image quality and protocols.

Medica has invested in growing the clinical Advisory structure in 2017 with further
development plans in 2018. this is to support the growth and diversification of our
clinical service and meet the expected clinical quality standards of our clients.

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RADIOLOGIST Q&A

dR MAXIne MuRRAY
RADIOLOGIST

What is your role within Medica and tell us a little
more about what you do?

I have several different roles at Medica. I have been a
reporter for three years, mostly reporting neurology and
chest scans, but I am also an auditor and arbitrator,
providing
feedback to other radiologists on their
discrepancies. until recently, I was also clinical lead for
chest radiology, providing educational reviews to share
interesting cases and learning points with other Medica
radiologists and providing a second opinion on difficult/
complex cases. I was also involved in assessing potential
new areas for development in Medica including the use of
artificial intelligence (AI) to measure and monitor lung
nodules and to assess severity of disease in patients with
emphysema.

I am a trained appraiser and carry out regular appraisals
on Medica radiologists for whom Medica is their designated
body. I am also involved in writing annual reports for
Medica radiologists to present at their nHs appraisals.

I sit on the clinical governance committee which meets
fortnightly to review all serious discrepancies, root cause
analyses and any concerns about performance of
radiologists or radiographers.

I was appointed as clinical audit lead on 1st January 2018.

It’s true to say now that NHS radiologists balance a
variety of responsibilities – working in the NHS,
out-of-hours, in private practice, for teleradiology
providers and teaching and research. You’ve also
chosen to adopt the modern concept of a ‘portfolio
career’ why was this attractive to you?

I enjoy the variety of my job. I can report from the
convenience of my own home without constant interruptions
which means I can really focus on what I am doing and
provide timely and accurate reports. My reporting lists are
tailored to my areas of expertise and by reporting for a
number of specialist neurological centres, I feel I have been
able to develop my expertise. there is no pressure to hurry

the reports and I have the time to look up interesting cases
as I go along which is great for learning. It can be quite
isolating working as a teleradiologist, but Medica has a
panel of clinical leads who are available to discuss interesting
or difficult cases, which is a great support. I get to meet
other radiologists in my role as appraiser and I work as part
of a team with regular video-conferencing for the
governance committee. My hours for Medica are flexible
which means that I have been able to take up a post at
Brighton and sussex Medical school teaching the year two
students which I thoroughly enjoy.

How important is it to strike work/life balance as a
consultant radiologist and how has teleradiology
helped you achieve that?

Having commuted to work for 15 years in the nHs, I now
report from home which means that I don’t waste 2–3
hours per day travelling. the hours that I decide to work
are flexible and I frequently have afternoons free, having
reported
in the morning. this flexibility has been
particularly important to me owing to serious illness in a
close family member.

With the majority of your doctors being remote
how do you manage performance and quality and
how do you quality assure your service?

the performance of all Medica radiologists is reviewed
annually by a member of the clinical governance
committee. this
that continuing
involves ensuring
professional development (cpd) is up to date and relevant
to the doctor’s scope of practice, a review of their job plan
to ensure that the doctor is not working excessive hours,
and a review of discrepancies with the learning points
which have arisen through reflection.

Medica also provide monthly educational reviews for
radiologists which are based around interesting and
informative cases which have been reviewed at the clinical
governance committee. Medica radiologists are also asked
to submit interesting cases to an educational folder for
inclusion in these reviews.

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Urgent cases can be turned around
in less than 24 minutes, which is
clearly of benefit to patients.

Does Medica’s approach to Clinical Governance and
Quality Assurance differ from the NHS and how?

Tell us about the support network for doctors who
work for Medica?

All Medica radiologists undertake an entry audit in which
all of their initial reports are audited for discrepancies.
provided this is satisfactory they are then subjected to an
ongoing background audit of a set percentage of their
reporting.

Medica radiologists receive a monthly report which details
their level of discrepancy and compares this with the
Medica average. All radiologists also receive an annual
written report concerning their volume of reporting and
discrepancy details for them to present at their nHs
appraisal.

In the nHs it is unusual to have regular audit of a
radiologist’s work and most discrepancies are raised on an
informal, ad hoc basis, often through discrepancy review
meetings. Most nHs radiologists are not aware of their
individual discrepancy rates.

Even the best doctors make some mistakes, how do
you reduce this risk and manage errors when they
do occur?

Mistakes are an inevitable part of clinical practice. By
lists to a particular radiologist’s
tailoring reporting
experience, Medica is able to reduce the risk of radiologists
reporting beyond their expertise. However, when mistakes
are made, it is important to learn from them. errors can be
raised by individual trusts or through the Medica audit
process. Medica radiologists are asked to reflect in writing
upon their errors and to identify specific areas where they
could improve their practice. At the end of the year, Medica
radiologists are asked to review all of their discrepancies,
looking for patterns or trends which might be amenable to
improvement. this might, for example, involve using a
checklist to ensure that reports are comprehensive or may
identify areas of the literature to review.

Working as a teleradiologist can be quite isolating but
Medica provides a number of levels of support for
radiologists. on a daily basis, there is access to technical
support by telephone 24 hours a day. the support team
are courteous and efficient and are able to escalate
technical issues that they themselves are unable to deal
with. there is also a system whereby radiologists can seek
a second opinion from specialist radiologists for difficult or
unusual cases.
In terms of clinical governance, all
radiologists are provided with a monthly summary of their
discrepancy rates but there is also a bespoke appraisal
system for those radiologists that work outside the nHs
for whom Medica is their designated body. Appraisals are
conducted annually by trained appraisers and are signed
off by dr stephen davies as Responsible officer.

The demand for teleradiology is growing and we
have touched upon how this set-up benefits the
NHS and doctors, tell us how the teleradiology
set-up impacts patient care?

Radiology is becoming increasingly sub-specialised and
individual trusts may have difficulty providing an expert
opinion, particularly at short notice. teleradiology
companies have access to a broad cross-section of
expertise amongst their reporting radiologists and are in
an excellent position to provide timely, expert advice.
urgent cases can be turned around in less than 24 minutes,
which is clearly of benefit to patients.

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CHIEF EXECUTIVE’S REVIEW

ANOTHER YEAR OF
STRONG GROWTH

JoHn GRAHAM
CHIEF EXECUTIVE

I am proud to present my
Chief Executive’s review for
Medica Group Plc’s first year
as a public company.

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Introduction
I am delighted to present my chief
executive’s Review statement for
Medica’s first year as a public
company. 2017 has been a milestone
year in the development of the
Group with the successful listing on
the Main Market of the london
stock exchange an important step
in Medica’s development.

the business has continued to
develop throughout the year,
improving services to clients,
growing volumes and engaging with
increasing numbers of radiologists
whilst at the same time adapting to
life as a public company.

I would like to thank the whole
Medica team for their hard work
and dedication this year and we are
well positioned to take advantage of
the many growth opportunities we
see before us. our clinical, technical
and operational excellence
combined with financial strength
and our new profile as a public
company give Medica a great
platform to develop its services in
teleradiology and beyond.

Delivered robust volume growth
this has been another strong year of
double-digit growth for Medica with
revenue increasing by 18.2% from
last year. the Group has successfully
grown organically year-on-year
through the continued successful
deployment of new clients and by
increasing the revenue generated
from existing customers, which has
been the main driver of revenue
growth in the year.

significantly volume growth was
driven by both nightHawk and
Routine cross-sectional (cs),
computerised tomography (ct) and
magnetic resonance imaging (MRI)
reporting which saw scan volumes
increase by 31.1% and 23.8%

respectively. Routine plain Film
x-ray (pF) decreased by 5.9%.

this growth in volume is being
driven by several factors. the overall
market dynamics remain a key
driver with the number of ct and
MRI scans performed across the uK
increasing year-on-year and
continued shortages of radiologists
to provide increasingly complex
diagnostic reports. Medica, as the
market leader in teleradiology, are
leading the way to support the nHs
through the use of technology to
bridge geographical and specialist
gaps in resource and using its
technical and clinical infrastructure
to increase reporting productivity.

the high quality of Medica’s clinical
governance process has given
clients more confidence in
outsourcing. Increasingly nHs
trusts are planning their activities
around a deeper partnership with
Medica and our services are more
embedded within departments than
ever before. Although the overall
proportion of scans outsourced
remains modest the proportion is
growing as the market develops.
Medica continues to attract new
clients but the primary reason for
growth is through additional
reporting for existing customers.

Gross profit margin edged down
from 49.8% to 48.7% as anticipated,
reflecting the ongoing renewal of
the Group’s contracts at marginally
lower prices as the teleradiology
market develops and outsourcing
becomes normal practice. Increases
in sales volume for our nHs services
more than offset the reduction in
average price in 2017 from
anticipated pricing pressures.

Recruitment
Recruitment remained a key focus
during 2017 and we significantly
increased the number of radiologists
from 248 at the start of the year to
306 at 31st december to meet
growing market demand. Investment
in recruitment, retention and training
are priorities for the business as we
seek to ensure radiologists are
supported at all times, that the
reporting experience is as smooth
and efficient as possible and that
radiologists can work in a high
quality clinical environment.

Word of mouth recommendations
from existing Medica radiologists
who contract with the Group has
become the most significant factor
in bringing new radiologists into the
recruitment process to be converted
by our skilled recruitment team. In
addition, the Group maintains a
presence at many specialist and
national events and maintains a
database of candidates for
recruitment. Medica’s recruitment
pipeline remains stronger than ever.

Continued investment
and development
during 2017 we have continued to
invest in our clinical governance,
technical and operational
infrastructure and processes and we
continue to raise the bar for the
quality of teleradiology services in
the uK.

the clinical governance base is
arguably the strongest element of
Medica’s offering giving clients the
confidence to outsource greater
volumes and more complex work.
Work in this area has continued
apace in 2017 with particular
emphasis on improving the quality
of clinical internal audit and
managing clinical issues.

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CHIEF EXECUTIVE’S REVIEW CONTINUED

As volumes grow it is important to
continue to improve the operational
processes so as to be able to deal
with increasing volume whilst
minimising cost increases.
considerable effort has gone into
refining workflow management
processes and as the proportion of
more specialist exams increases, the
balancing of capacity and demand
in a timely manner is more
important than ever.

there has been considerable
investment in Medica’s technical
platform in recent years which
continued in 2017. As the volume of
scans and the number of clients and
radiologists continued to grow the
scalable platform has expanded but
it has been important that Medica
has continued to innovate and
improve its systems and that
information security has remained
at the heart of all we do.

Strategy
the directors have to date focused
on building a platform that can
deliver a high quality teleradiology
service to the Group’s core
customer base of nHs hospitals,
centred on its nightHawk and
Routine offerings.

the Group’s strategy can be broadly
categorised into three areas:
developing the core business;
accelerating the expansion into
areas closely related to the core
business; and broader
diversification.

Developing the core business
the Group’s core strategy remains
to develop and grow its business by
adding additional Medica reporting
capacity to meet growing demand,
maintaining the highest clinical
standards and continuing to win
new work for its existing
service lines.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

Having invested in the Group’s It
and services platform, both in terms
of the technical and clinical aspects
and the ongoing recruitment of
Medica radiologists, the directors
believe that the business can
continue to grow strongly within its
existing service lines. continual
development of the current core
services, improving the offering to
clients and the radiologist
experience as well as improving the
efficiency of Medica’s internal
infrastructure are a key part of
Medica’s strategy.

Medica will continue to improve the
workflow for clients and radiologists
and a good example is the
forthcoming launch of a new
nightHawk portal and process. this
will bring considerable advances for
both clients and our radiologists
and enable improved efficiency and
performance in the specialist
emergency services Medica can
offer.

Increasing specialisation of
radiologists and demand from
clients will evolve the Routine cs
service line and using Medica’s
substantial and growing pool of
specialist radiologists, Medica can
offer national cover to the nHs for
specialist reporting services.

Radiographer reporting is a key
growth area for the core business.
launched in August 2016 this
service has been grown in a steady
and controlled way and advanced
practitioner radiographers represent
an increasing part of Medica’s
routine pF capacity, representing
14% of the total pF exams in 2017.
underpinned by strong clinical
governance growing this service can
play an important role in the nHs
managing their waiting times and
minimising backlogs.

there are also further opportunities
in the independent sector and
internationally that can expand
Medica’s core business.

Accelerating expansion into
related areas
Medica has developed specialist
reporting lines including virtual
colonoscopy and dual energy x-ray
absorptiometry (dXA) osteoporosis
scanning. the service lines have
been developed with specialists but
currently form a small part of
Medica’s business and the next
stage is to increase the number of
clients using these services.

Most recently we have developed a
cardiac reporting service, which has
launched in the first quarter of 2018
and there are other specialist
services currently under
development. After an initial piloting
stage these services can be
expanded to new and existing
clients.

the Group has a strong clinical
governance structure, including an
internal clinical audit function
focused on maintaining the high
clinical and service standards of
Medica radiologists. Having been
approached by our customers and
others to audit their own in-house
radiology departments, there is a
clear opportunity to market this
service to existing and new clients.
Medica has developed bespoke
software in 2017 to facilitate this
service with a view to growing
demand in 2018.

Broader Opportunities
the directors believe that there are
a number of wider tele-health and
broader healthcare opportunities
that the Group would be well-placed
to take advantage of.

these are considered longer-term
opportunities and would likely
require investment in additional
expertise to augment that already in
place and, in some circumstances,
may be better achieved through
acquisition. the Board intends to
develop plans for some of these
opportunities in coming periods.

Outlook
looking forward to 2018, the year
has started well, with trading in line
with the Board’s expectations. the
prospects for new work from
existing and new clients and the
pipeline for recruiting radiologists in
the new financial year continues to
be strong which gives me
confidence in our outlook for 2018.

As the market evolves the Board is
confident that, in the short to
medium term, Medica will continue
to grow revenues at a double-digit
rate similar to that seen in 2017.

JOHN GRAHAM
chief executive officer
12 March 2018

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Medica Group Plc
AnnuAl RepoRt And Accounts 2017

FINANCIAL REVIEW

POSITIVE POSITION
FOR FUTURE GROWTH

tonY lee
CHIEF FINANCIAL OFFICER

Medica’s strong
growth has continued
throughout 2017.

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A review of the business during the
year, its strategy and business
model, future developments, and its
position at the year-end is included
within the chairman and chief
executive’s Reviews on pages 4-5
and 16-19. Both these reports form
an integral part of the
strategic Report.

Trading results
Medica has enjoyed strong growth
in recent years, and this continued
throughout 2017, with Group
revenues growing by 18.2% to
£33.7m (2016: £28.5m) and adjusted
operating profit growing by 16.4% to
£9.5m (2016: £8.1m).

net profit increased by 30.6% from
£3.32m to £4.33m and adjusted basic
earnings per share increased by
20.2% from 3.32 pence to 3.99 pence.
Adjusted profit after tax increased
by 51% from £4.98m to £7.52m and
adjusted basic earnings per share
increased by 39.0% from 4.98 pence
to 6.92 pence. A full reconciliation
between statutory and adjusted
profit metrics is shown in note 31.

Revenue
Revenue growth has been driven by
an increase in the number of
nightHawk and Routine cs scans
which Medica has reported upon.

• nightHawk revenues increased to
£16.8m, a 24.1% increase from
2016 revenue of £13.5m. the
increase in volumes and revenue
was due to continued growth in
existing clients’ emergency
service requirements as the
number of A&e admissions and
the proportion of patients
requiring a scan both increase
and trusts expand the scope of
the services they procure, as well
as new client wins.

• Routine cross-sectional revenues

increased to £12.5m, a 19.4%
increase from 2016 revenue of
£10.5m. similarly to nightHawk,
growth has been driven primarily
through existing customers as their
scan volumes increased and Medica
enhanced its partnership with
trusts reporting a greater quantity
and proportion of their work, as
well as new customer wins.

• plain Film revenues decreased to

£3.7m, a 5.4% decrease from 2016
revenue of £3.9m. during the
period, plain Film volumes were
actively managed so as to focus
on the faster growing Routine
cross-sectional service.

Radiographer reporting, from
launching in August 2016, started in
a controlled way but increased
during the year.

our continued ability to recruit and
retain radiologists is a key driver of
revenue growth. Medica added an
additional net 58 reporters in 2017
and at 31 december 2017 there were
a total of 306 with whom Medica
contracted, which is a record high
for the company.

Gross margins
Gross profit margin for the year was
48.7% (2016: 49.8%).

Gross profit margin edged down in
the year as expected. there are a
number of contributing factors with
the main reason being ongoing
renewal of contracts often through
migration to framework agreements.
there has been downward pressure
on prices for some time as volumes
increase and this is expected to
continue. the reduction in average
price has been more than
compensated by increases in volume.

the company looks to achieve a
similar gross margin across each of
its service lines. In 2017, the gross
margins for each service line were
as follows:
• nightHawk:
• Routine cross-sectional:
• Routine plain Film:

50.5%
52.1%
49.4%

the only costs included within cost
of sales relate to the costs of paying
Medica’s radiologists and internal
clinical audit costs. Internal clinical
audit costs which can be significant
are not included within the
individual service line gross profit
figures above.

Adjusted operating profit
Adjusted operating profit for the
year grew to £9.5m, a 16.4%
increase from 2016 levels of £8.1m.

the successful listing in March 2017
led to customary additional costs
which represented 7% of total
overheads in the year. overheads
remained controlled in the period,
increasing only 10% on a like for like
basis on the prior year compared to
an increase in revenues of 18% with
adjusted operating profit growth
constrained by margin contraction.

the adjusted operating profit for the
period of £9.5m was 16.4% higher
than 2016 (£8.1m), which represents
continuing good progress for the
business. despite the additional
costs of being a public company the
adjusted operating profit margin
only reduced moderately from
28.5% in 2016 to 28.1% in 2017.

Exceptional costs
the total costs of listing on the
london stock exchange were
£2.6m, of which £0.8m were
recognised in 2016 and £1.8m in
2017. of these costs £0.2m was
deducted from the share premium
account and £2.4m over the two
years has been presented as
exceptional items on the income
statement. these costs have been
added back in to calculate adjusted
operating profit and adjusted
earnings per share.

In addition, part of the proceeds
were used to repay bank debt, and
previously capitalised fees of £0.6m
have been presented as exceptional
financing costs and have also been
added back in to calculate adjusted
profit before tax and adjusted
earnings per share.

Net finance expense
Finance costs were £0.7m for the
year (2016: £2.2m). the Group
refinanced its existing debt facility
at listing post the year end, with the
net proceeds of the Ipo used to pay
net debt down to approximately
£10m, reducing its bank debt and
repaying loan notes from cBpe
capital llp, the majority owners of
Medica prior to the Ipo, in full.

Taxation
the Group has incurred a tax charge
of £1.3m in the year ended 31
december 2017, compared with
£1.0m in the year ended
31 december 2016.

Earnings per share
Adjusted earnings per share
increased by 39.0% to 6.92 pence,
reflecting the growth in the business
and the altered capital structure post
listing. normal earnings per share
increased by 20.2% to 3.99 pence.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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FINANCIAL REVIEW CONTINUED

the servers installed with customers,
radiologists’ workstations and
infrastructure technology. the
growth in property, plant and
equipment reflects the net increase,
i.e. after depreciation, of additional
capital expenditure for new
customers and new radiologists and
software for new projects.

Key Performance Indicators
(KPIs)
the Board receives monthly KpIs on
the Group. these include clinical and
operational performance
measurements such as turnaround
times and clinical audit results as
well as financial KpIs.

As noted above 2017 was a year of
record volume and as the business
grows a key challenge for the Group
is to maintain turnaround times
ahead of contractual agreements
with clients. during 2017 turnaround
times remained consistent with
2016’s performance.

clinical quality is a key part of
Medica’s performance and we have
a robust system of internal clinical
audit where 10% of nightHawk and
cross-sectional exams and 2% of
plain Film exams are reviewed.
during 2017 the Group continued
to meet its targets for clinical audit
rates.

the key financial KpI is adjusted
eBItdA which was £10.6m for the
year to 31 december 2017 (£9.2m
for the year to 31 december 2016).

Dividends
the Board has adopted a progressive
dividend policy, following the interim
dividend of 0.55 pence the Board
proposes a maiden final dividend of
1.10 pence per share to give a total
dividend for the year ended 31
december 2017 of 1.65p per share.
this will, subject to approval by
shareholders at the annual general
meeting on 23 May 2018, be paid on
22 June to shareholders listed on the
register on 1 June.

Cash flow
the Group continues to deliver
strong cash generation with
operating cash flow before tax and
exceptional Ipo costs of £8.7m
(2016: £7.7m).

eBItdA cash flow conversion was
82% (2016: 84%). cash flow from
operating activities was £5.5m (2016:
£6.8m), the reduction being due to
exceptional costs. there was a
moderate increase in trade debtors
caused by small delays in clients
settling their invoices. this was limited
in number and delays due to changes
in their administrative processes. the
business continues to generate strong
cash flows from its core business.

capex for the year was £1.8m (2016:
£1.2m) as the business continued to
invest in its infrastructure to support
volume growth and to improve its
efficiency and service offering.

Net debt
the company used the net
proceeds of the Ipo to fund the
repayment of the £6.9m of
outstanding loan notes held by
cBpe as well as contributing to the
repayment of £8.6m of the Group’s
outstanding indebtedness under the
Group’s existing term loan and
revolving credit facilities, which the
directors believe will result in an
appropriate level of gearing going

forward, given the size of the Group
and the company’s status as a listed
company. Following this repayment,
the company had net debt of
approximately £10m which reduced
to £5m as the business generated
cash during the year.

on 7 March 2017, the Group entered
into a new facilities agreement (the
‘new Facilities’) for the purpose of
refinancing that part of the facilities
that were not repaid out of the
proceeds of the offer. under the
new Facilities, up to £13m in
aggregate is available to the Group
under a £12m term loan facility and
a £1m revolving credit facility. Both
facilities will mature on 6 March
2022, being the fifth anniversary of
entry into the new Facilities. Interest
is payable under the new Facilities
at the rate of lIBoR + 1.75. As at the
balance sheet date, the revolving
credit facility was undrawn.

Intangible assets
As at the year-end, total intangible
assets were £25.2m (31 december
2016: £25.3m). the Group’s
intangible assets are the goodwill of
£15.9m and other intangible assets
from the acquisition by the
company of Medica Reporting
limited in May 2013. In addition,
there is a small proportion, which at
the year-end was £1.3m (year ended
31 december 2015: £0.6m), in
relation to purchased software and
certain capitalised development
software and licences. the main
addition during the year was the
renewal of Medica’s pAcs system
contract for a five-year period.

Property, plant and equipment
As at the year-end, total value of
property, plant and equipment was
£1.9m (31 december 2016: £1.8m).
property, plant and equipment
primarily relate to computer
equipment, the majority of which is

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

Principal risks and uncertainties
there are potential risks and uncertainties which could impact the Group’s performance and these are considered
by the Board on a regular basis. the Board robustly considers the risks of all significant business decisions, changes
in the external environment and in the Group’s operations. the key risks affecting the business are as follows:

RISK DESCRIPTION

MITIGATING ACTIVITIES AND
COUNTERMEASURES

2017 COMMENTARY

Clinical quality risk
Medica provides radiology reports
which form an integral and essential
part of the clinical management
process for patients. Inaccurate
reporting could lead to patient harm
and reputational impairment for the
company. error is inherent in all
radiology practice.

Retaining and growing reporting
capacity
the performance of the Group depends
on its ability to grow its reporting
capacity and any reduction in reporting
capacity or any increase in reporting
costs could negatively impact the Group’s
business, results of operations, financial
condition or prospects. If the Group’s
costs increase, its results of operations
and financial condition could be
materially adversely affected.

Reputational risk
Quality deficiencies or other issues
affecting the Group’s accreditations
and registrations could adversely
impact Medica’s reputation and ability
to market its services effectively and
could have a negative impact on the
Group’s business, results of operations,
financial condition and prospects.

the mitigation is the presence of strong
clinical governance with quality
assurance and quality improvement. the
reporting radiologists must carry
personal indemnity which minimises the
financial risk to Medica.

the Group has continued
to maintain the
appropriate level of clinical
audit and to invest in its
clinical quality.

the Group has and continues to invest in
its recruitment activities with a
dedicated recruitment team and a
presence at radiology events across the
uK. the reputation of Medica’s clinical
governance and word of mouth is a key
part of recruitment strategy. Retention
policy is based on providing a
comprehensive support structure to
Medica radiologists from all parts of the
business.

the Group has and continues to invest
significant resources in its clinical
governance structure and processes and
maintains all relevant certifications

the Group has increased
its radiologist numbers to
306, maintains a
dedicated recruitment
team and continues to
have a strong pipeline of
new recruits.

during 2017 we
successfully maintained
Iso9001:2015 and
Iso27001:2013
certifications as well as
maintaining our IG toolkit
compliance and IsAs
accreditation.

Failure to retain key management
the Group’s executive management
team is critical to its continued
performance.

As noted in the remuneration report, the
Group has policies in place to retain and
motivate key management which are
kept under regular review.

no change.

Industry risk
Future changes in healthcare regulation
are difficult to predict and may constrain
the Group or require it to materially alter
the way in which it operates.

the Group monitors change in
regulation and on an ongoing basis.

no significant changes in
regulation occurred in
2017.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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FINANCIAL REVIEW CONTINUED

RISK DESCRIPTION

MITIGATING ACTIVITIES AND
COUNTERMEASURES

2017 COMMENTARY

the Group focuses on providing a high
quality, value for money service and
maintains close communication with
clients through its account management
team.

the Group has maintained
performance throughout
2017 and continues to
develop its services and
be valued by clients.

the Group is monitoring
signs of increasing
restraints on nHs budgets.

Operating risk
the Group currently derives
substantially all of its revenue from the
nHs through nHs trusts and the
reduction of such revenue could
adversely impact the Group’s business,
results of operations and financial
condition. the Group’s revenue from
nHs trusts is not subject to any
minimum purchase commitment and
any reduction in demand for the
Group’s services could have a material
adverse effect on its business, results
of operations and financial condition.
there is a risk of increased pricing
pressure from the nHs for
teleradiology services.

Data protection risk
the Group is subject to regulations
relating to personal information. Any
failure to adequately protect its
customers’ patients’ personal data could
expose the Group to liability.

the Group minimises the amount of data
it holds, maintains the Iso 27001
accreditation and carries out regular
tests on its data security systems.

the group successfully
maintained its Iso27001
certification and IG toolkit
compliance during 2017.
the group are also working
towards full GdpR
compliance before the 25
May 2018 deadline. no data
breaches occurred during
2017.

the Group continues to
maintain clear
communication with
clients and develop its
service to meet client
expectations.

the Group has continued
to invest in its platform
and improve efficiency.

the Group is carefully
monitoring AI
opportunities which have
become more prominent
in 2017.

Competition risk
significant competition could adversely
affect the Group’s business, financial
condition and prospects.

the Group focuses on providing a high
quality, value for money service and
maintains close communication with
clients through its account management
team.

Technology risk
the Group’s business could be
disrupted if its information systems fail
or if its databases are destroyed or
damaged.

Artificial intelligence could play a role
in radiology diagnosis and this
represents both a risk and an
opportunity.

the Group has invested significantly
in its It platform and has an in-house
team that maintains and improves
performance of the It systems. the
Group continues to keep up to date
with innovations in AI and other areas.

Medica Group Plc
Medica Group Plc
AnnuAl RepoRt And Accounts 2017
AnnuAl RepoRt And Accounts 2017

24
24

Financial risk management
the directors have outlined the key
financial risks facing the business
and have discussed the processes in
place to mitigate these risks, in note
25.

Social, community and human
rights issues
Medica is committed to the
principles of responsible business;
this is achieved by acting in an
ethical manner, developing positive
relationships with suppliers, and
recruiting and retaining successful
and responsible employees.

Whilst Medica does not have a
specific human rights policy, it does
have policies covering equal
opportunities and Anti-bribery that
adhere to internationally proclaimed
human rights principles.

Environment
Medica actively considers its
environmental impact and we are
conscious of playing our part in
tackling climate change. As a
technology-based Group with most
staff employed in one office location
and radiologists contracted mainly
from their own homes, we believe
our own environmental footprint is
small.

this is the first year the Group has
measured greenhouse gas emissions
and has reviewed and applied the
scope of the Greenhouse Gas
protocol in accordance with the
companies Act 2006.

scope 1: direct emissions that result
from activities with the Group’s
control in connection with the
combustion of fuel.

scope 2: Indirect emissions from any
electricity, heat or steam the Group
purchases and uses.

scope 3: Any other indirect
emissions from sources outside the
Group’s direct control.

the Group does not purchase or
combust fuel directly so the scope 1
emission for the year is zero. scope
2 emissions are limited to the
Group’s head office building and the
calculations are derived from
electricity meter readings. the
scope 2 GHG emissions for 2017 are
22.6 tonnes of carbon dioxide
equivalent. the Group has chosen
this year not to make the voluntary
disclosure for scope 3 emissions.

our greenhouse gas emissions have
been calculated on a per full time
equivalent employee ratio. this
intensity metric is the best measure
available to the Group given the
nature of the business, and the
absence of a similar business to
benchmark against.

the emissions per employee for
2017 are 0.25 tonnes of carbon
dioxide equivalent.

Employees
our people are our most valued
asset, they are vital to Medica’s
success and growth and we are
proud of the mixture of talent and
experience they bring. We strive to
make Medica a great place to work
and this enables us to attract and
retain the best talent and provide
the best service for both our clients
and radiologists.

Medica has a firm commitment to
equality of opportunity in all our
employment policies, practices and
procedures. our recruitment and
selection processes are geared to
selecting the best candidate
regardless of their age, gender,
sexuality, full or part-time status,
disability and marital status. We
recognise that a diverse workforce
will provide a wide range of

perspectives that promotes
innovation and business success.
the Group has a formal equal
opportunities policy to ensure no
employee or applicant is
discriminated against.

At 31 december 2017, the Group had
88 full time employees and 5 part
time staff of which 66 were male
and 27 were female. of the senior
members of management, four were
male and one was female.

this report was approved by the
Board on 12 March 2018 and signed
on its behalf.

ANTHONY LEE
chief Financial officer
12 March 2018

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Medica Group Plc
Medica Group Plc
AnnuAl RepoRt And Accounts 2017
AnnuAl RepoRt And Accounts 2017

25
25

BOARD OF DIRECTORS

ROY DAVIS
Independent Chairman

JOHN GRAHAM
Chief Executive Officer

Roy is the company’s chairman. Roy served as the chief executive
officer of optos plc, a leading opthalmology medical device
business, from 2008 until June 2016 when he stepped down
following that company’s acquisition by nikon. Before joining
optos, he served from 2007 as chief executive officer of Gyrus
Group plc, a leading medical device company, prior to its
acquisition by the olympus corporation of Japan in 2008, having
previously served as chief operating officer of Gyrus from 2003.

John joined Medica as chief executive in July 2011. John brings a
wealth of experience from his previous healthcare role as Managing
director of Allied Respiratory, a subsidiary of Allied Healthcare
group, where he turned a loss-making business into a successful
company before leading the sale of Allied Respiratory to Air
liquide. He subsequently remained with Air liquide, managing the
standalone Allied Respiratory business and then leading the
integration of their uK acquisitions.

prior to this, Roy was ceo of nteRA, a nanotechnology company,
and spent almost ten years with Arthur d little, the global
management consulting company, where he was Vice president
and Global Head of its operations management business. He has
also held senior positions with tricom, Reuters and Molex. Roy
holds a mechanical engineering degree from the university of
southampton and an MBA from the london Business school.

prior to his time with Allied Respiratory, John held various chief
executive and senior operational positions on the boards of both
public and private companies in sectors including consumer
products, manufacturing and distribution.

TONY LEE
Chief Financial Officer

tony lee joined Medica in 2009 and became Finance director and
company secretary in 2013. prior to joining the Group, he was an
accounts manager at sellens French chartered Accountants where
he worked for nine years. tony is an FccA and has a politics
degree from lancaster university.

DR STEPHEN DAVIES MA, FRCP, FRCR
Medical Director and Responsible Officer

stephen joined Medica in May 2013 as Medical director. He has
responsibility for clinical Governance and oversight of the clinical
strategy, and is the Group’s Responsible officer under the GMc
designated Body scheme. stephen was an nHs consultant
Radiologist at cwm taf university Health Board from 1991
until 2016.

stephen undertook pre-clinical studies at cambridge and his
clinical studies at the Royal london Hospital. He is a past president
of both the British Institute of Radiology and the uK Radiology
congress. In october 2015, he was awarded the distinguished
service Medal by the British Institute of Radiology. He has had
educational leadership positions as Associate dean in the
university of Wales and educational engagement with the Royal
college of Radiologists.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

STEVE WHITTERN
Senior Independent Non-Executive Director

PROFESSOR MIKE BEWICK
Independent Non-Executive Director

steve currently serves as Finance director of dignity plc, the only
listed provider of funeral-related services. He joined dignity in 1999
from KpMG and was appointed Finance director at the beginning
of 2009, having spent the previous two years as Financial
controller, being responsible for the Group’s finance function.
during his time with dignity, steve has led various leveraged
refinancings and returns of capital as well as managing the debt
and equity funding for a £58 million acquisition in 2013. He is an
FcA and holds a mathematics degree from Warwick university.

Having started his career in hospital medicine (specialising in
oncology), Mike became a General practitioner in 1989 and was a
partner in a local Gp practice in cumbria for 20 years until 2009.
Alongside his general practice, he developed an interest in
education and assessment and became a senior examiner and
chair of Assessment at the Royal college of General practitioners.
In 2008, he was recruited to be the Medical director for the
cumbria primary care trust, subsequently serving as Regional
Managing director for nHs england, and in 2013 became the
national deputy Medical director for nHs england, reporting to sir
Bruce Keogh. Mike took early retirement from the nHs in 2015. He
undertook his pre-clinical and clinical studies at st Mary’s Hospital
Medical school, london.

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ANAND JAIN
Non-Executive Director

Anand joined Medica in May 2013 as a non-executive director and
has supported the business in formulating and executing its
strategy. He is a partner in cBpe capital and a member of its
investment committee. since joining cBpe capital in 2007, he has
been involved in numerous investments, but has a particular focus
on businesses in the healthcare and pharmaceutical sector.

prior to joining cBpe capital, Anand qualified as a chartered
accountant with Arthur Andersen in 2000, thereafter spending
seven years in the corporate Finance department of Arthur
Andersen and then deloitte. He has a degree in mathematics from
the university of nottingham.

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Medica Group Plc
AnnuAl RepoRt And Accounts 2017

27
27

CORPORATE GOVERNANCE REPORT

Introduction
the following sections explain how the company
applies the main provisions set out in the uK corporate
Governance code 2016 (the code) issued by the
Financial Reporting council (FRc), as required by the
listing Rules of the Financial Reporting council (FRc)
and meets the relevant information provisions of the
disclosure and transparency rules of the FcA.

the corporate governance report covers:

• the Group’s governance principles and structure.
• the composition and role of the Board and its

committees.

• Relations with the Group’s shareholders.
• the reports of the Audit and nomination committees.
• the Remuneration committee report and policy.

the Group’s principal risks and uncertainties are
described on pages 23 to 24. the director’s report on
pages 54 to 56 also contains information required to be
included in the statement of corporate governance.

Statement of Compliance
Medica Group plc became a public company upon
admission to the Main Market of the london stock
exchange on 21 March 2017. prior to this date the
company was not subject to the uK corporate
Governance code 2016 and did not adopt the provisions
on a voluntary basis but did develop the mechanisms to
apply the code post listing.

since admission the Group has developed its
governance processes and procedures further and this
report details how the Group has applied the principles
of the code. For the period after admission the Group
has complied with the principles and provisions of the
code.

Governance Principles
Good governance is important at all levels in the
organisation and the Board is committed to maintaining
the highest standards for the Group. All shareholders
and other stakeholders should have confidence in the
governance of the Group and the Board has adopted
the core Governance principles as set out in the code.

Leadership

Effectiveness

OUR
GOVERNANCE
PRINCIPLES

Accountability

Remuneration

Shareholder
Relations

Leadership – the Board is collectively responsible for
the long-term success of the company and will operate
according to the principles of sound governance.

Effectiveness – the Board is committed to be strong,
open and effective and will maintain the appropriate
balance of skills, experience, independence and
knowledge of the company.

Accountability – the Board will present a fair, balanced
and understandable assessment of the Group’s position
and prospects and will ensure the implementation and
measurement of effective controls.

Remuneration – the Board will ensure executive
remuneration is designed to promote the long-term
success of the Group and that a formal and transparent
procedure for developing policy on executive
remuneration is adhered to.

Relations with shareholders – the Board will maintain
a strong, open and transparent two-way dialogue with
shareholders based on the mutual understanding
of objectives.

Board of Directors

Principal Committees

Audit

nomination

Remuneration

Audit Committee

Nomination Committee

Remuneration Committee

Chairperson
steve Whittern

Chairperson
Roy davis

Chairperson
Mike Bewick

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

The role of the Board
the Board are collectively responsible to shareholders
for the overall direction of the Group. the Board’s
primary aim is to promote the long-term success of the
Group whilst ensuring the highest standards of
corporate governance.

the Board are responsible for:

• overall leadership of the Group.
• setting and reviewing strategic aims and objectives

of the Group.

• oversight of the Groups operations including

management, planning and operating systems.
• Monitoring and management of key business risks

and internal controls.

• Approving annual budgets and reviewing
performance against aims and objectives.
• Approval of significant financial expenditure

including mergers and acquisitions.

• Approval of structural changes to the Group.
• Approval of Board membership and other senior
management appointments or management
structural changes.

• proposing and making dividend payments to

shareholders.

Division of Responsibilities
The Chairman
the chairman is responsible for chairing the Board
meetings and setting the agenda to ensure that all
important matters are discussed. the chairman ensures
the Board functions effectively in all aspects of its role,
upholding and maintaining the highest levels of
integrity, probity and corporate governance. the
chairman facilitates the contribution of non-executive
directors and ensures there is effective communication
with stakeholders.

The Chief Executive and other Executive Directors
the chief executive and other executive directors are
responsible for the operational management and
control of the Group. the executive team formulate and
propose strategy to the Board and implement the
strategy once it is adopted by the Board.

Non-Executive Directors
the non-executive directors are responsible for
scrutinising, measuring and reviewing the performance
of the executive team. non-executive directors
assist in the development and review of the
performance, strategy, financial management and
risk management systems for the Group. there are
four non-executive directors.

Senior Independent Director
the senior Independent non-executive provides a
sounding board for the chairman and acts as an
intermediary for other directors if needed.

Board Committees
there are three standing committees of the Board: the
Audit committee; the Remuneration committee; and
the nominations committee. the terms of reference for

the committees are available on the Medica Group
website and their reports are set out on pages 32 to 53.

The Audit Committee
the Audit committee is responsible for monitoring and
reviewing the integrity of the financial reporting
process, risk management and internal control, ensuring
compliance with uK reporting standards.

Remuneration Committee
the Remuneration committee is responsible for the
development and implementation of the Groups
remuneration framework and policies for directors and
to ensure that these support the strategic aims of a
business while also complying with the requirements of
regulation.

Nomination Committee
the nomination committee is responsible for the
structure of the Board, providing advice on Board and
senior Management appointments and succession
planning and monitoring the composition of the Board
and its committees.

Board composition and independence
At the date of this report the Board comprises three
executive directors and four non-executive directors.
the profiles of all directors are detailed on pages 26
to 27 and the Board considers that the directors and
senior management team have the appropriate skills
and experience.

the company regards Roy davis, steve Whittern and
professor Mike Bewick, each of whom were recruited at
the time of the company’s initial public offering and
have had no prior association with the Group, as
‘independent non-executive directors’ within the
meaning of the uK corporate Governance code and
free from any business or other relationship that could
materially interfere with the exercise of their
independent judgement.

the senior Independent director has an important role
on the Board in leading on corporate governance issues
and being available to shareholders if they have
concerns which contact through the normal channels of
the chairman, chief executive officer or other
executive directors has failed to resolve or for which
such contact is inappropriate. steve Whittern has
been appointed as the company’s senior
Independent director.

the Board is satisfied that all directors are able to
allocate an appropriate amount of time to meet their
obligations as directors.

each of the directors will retire and stand for re-election
every three years. All of the directors retired and were
re-elected at the first Annual General Meeting held after
Admission.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

29
29

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CORPORATE GOVERNANCE REPORT CONTINUED

Board Operation
there are usually 11 scheduled Board meetings each
year including one meeting dedicated to the
consideration of the Group’s strategy. Additional
meetings can be arranged at short notice at the request
of any director. In addition to scheduled Board
meetings there is a regular informal dialogue between
all directors.

the Board also receives copies of broker reports and
press information relating to the Group.

When directors are unable to attend a meeting, they are
advised of the matters to be discussed and given an
opportunity to make their views known to the chairman
prior to the meeting. such views can be included in the
minutes of the meeting if necessary.

directors receive Board papers well in advance of
meetings to allow sufficient time for review and
consideration so that they can make informed decisions
at Board meetings. directors receive monthly
management and financial reports on the operational
and financial performance of the business setting out
actual and forecast financial performance against
approved budgets and other key performance
indicators.

the Board receives and review the minutes of the
quarterly meetings of the Medical Advisory Board and
receives updates on clinical and regulatory matters
from the Medical director. the Board complies with its
obligations to nHs england as a designated Body with
the Medical director also the Group’s Responsible officer.

the minutes of Board meetings are taken by the
company secretary and are approved at the next
meeting.

All director’s received training during the year on their
duties and responsibilities as directors of a public
company and this will be refreshed annually. All
directors are able to request access to additional
training as appropriate and all directors are able to take
independent professional advice relating to their duties
if necessary at the company’s expense.

Board and Committee attendance
the attendance of Board members at meetings are
shown below. the attendance of executive directors at
committee meetings was by invitation. the company
secretary is also secretary to each of the committees.

Board

Audit

Remuneration

nomination

Total meetings

Roy davis

steve Whittern

professor Mike Bewick

Anand Jain

John Graham

dr stephen davies

Anthony lee

n/a

Activities of the Board
the primary focus for the Board at the start of the year was to lead the Group through the Initial public offering
and admission to the Main Market of the london stock exchange. the Board ensured all appropriate due diligence,
legal and regulatory requirements were met and that all stakeholders were represented in the process. post
Admission the Board focused on its core areas of responsibility and the key activities for the year are set out below.

Strategy and Direction
the Group’s core strategy and direction was set out in detail in the Group’s prospectus prior to admission and has
been reviewed and monitored by the Board throughout the period. In november the Board together with members
of the senior management team held a two-day meeting to review and assess the core business strategy and the
wider opportunities and risks for the business. the Board reviewed and approved the budget for 2018 and the
longer-term business plan.

Performance Monitoring
the Board reviewed monthly updates on the business performance in relation to analyst forecasts and business
plan. the Board reviews monthly updates on the market and commercial opportunities as well as recruitment
activities and other key performance indicators.

Shareholder Engagement
the Board received investor feedback from the executive directors throughout the year, particularly following
results announcements and investor roadshows. the Board received monthly reports on shareholder composition
and analysis of significant changes to the shareholder register.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

Governance and Risk
the Board keeps key risk areas under constant review
with a detailed review performed as part of the
prospectus and upon approval of the Group’s interim
and full year results. during the year regular updates
were received by the Board on specific areas of clinical
risk and clinical litigation as well as on cyber security.
the principal risks and uncertainties are included in the
Financial Review on pages 20 to 25.

Board evaluation
After the year-end the nominations committee
coordinated an internal self-assessment Board
evaluation. directors were invited to provide feedback
via the company secretary on Board and committee
performance and answer key questions relating to the
Board’s strengths, improvements during the year and
areas for additional focus.

the evaluation concluded that the Board and its
committees continue to operate effectively with strong
individual contributions from executive directors, open
constructive debate and a good balance of support and
challenge from non-executives.

Risk management and internal controls
the Board is responsible for maintaining a sound system
of internal controls, including financial, operational and
compliance controls and risk management, and reviews
the effectiveness of the system at least annually in order
to safeguard shareholders’ investment and the company’s
assets. the system is designed to manage rather than
eliminate risk and can provide only reasonable and not
absolute assurance against material misstatement or loss.

the Board confirms that there is an ongoing process for
identifying, evaluating and managing the significant
risks faced by the company and that this process is
regularly reviewed by the Board. the Board has
reviewed the effectiveness of the system of internal
control and the process for identifying and evaluating
the significant risks affecting the business and the
policies and procedures by which these risks are
managed. Management are responsible for the
identification and evaluation of significant risks
applicable to their areas of business together with the
design and operation of suitable internal controls.

Relationship with Shareholders
the Group recognises the importance of clear
communication with shareholders. Regular contact with
institutional investors, fund managers and analysts is
maintained by the chief executive and the chief
Financial officer to discuss information made public by
the Group. the Board receives reports of these
meetings and any significant issues raised are discussed
by the Board. Where appropriate or if requested such
meetings could include either or both the chairman or
senior Independent director. the chairman is also
available to discuss governance and strategy matters
with the major shareholders.

Board committees at the AGM on 23 May 2018. At least
20 days’ notice will be given ahead of that meeting. the
Annual Report and Accounts are made available to all
shareholders at least 20 days before the AGM.

the Board may, subject to the uK companies Act 2006
and the passing of the appropriate resolutions at a
General Meeting, issue shares within the limits prescribed
within the resolutions. At the 2017 AGM held on 28 June
2017, the directors were authorised to issue new ordinary
shares, (i) up to a maximum of £148,148.16 nominal value
(which at the time represented approximately two thirds
of the company’s issued ordinary share capital) in
connection with a rights issue and (ii) in any other case,
up to a maximum of £74,074.08 nominal value (which at
the time represented approximately one third of the
company’s issued ordinary share capital) and to disapply
pre-emption rights up to approximately 5% of the
company’s issued ordinary share capital and an
additional 5% authority only in connection with an
acquisition or specified capital investment.

In addition, at the company’s 2017 AGM, the Board was
authorised to make market purchases of its ordinary
shares, up to a maximum of 11,111,111 ordinary shares
representing approximately 10% of the company’s issued
ordinary share capital and within the limits prescribed in
the resolution until the earlier of the conclusion of the
company’s 2018 AGM and 27 september 2018. these
authorities are renewed annually and authority will be
sought at the company’s 2018 AGM.

substantial shareholdings of 3% or more that have been
notified to the Group are disclosed in the director’s
report on pages 54 to 56.

Summary
the directors consider that this Annual Report and
Accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Group’s performance,
business model, risks and strategy. In order to assess
whether the Annual Report and Accounts were fair
balanced and understandable the Board received an
early draft to enable time for review and comment.

the Audit committee then met to consider the criteria
for a fair, balanced and understandable Annual Report
and to review the process underpinning the compilation
and assurance of the report, in relation to financial and
non-financial management information. At the meeting
they considered the Annual Report and Accounts as a
whole and discussed the tone, balance and language of
the document, being mindful of the uK reporting
requirements and consistency between narrative
sections and financial statements. As part of the
process the Board considered the Group’s reporting
governance framework and the views of the external
auditor as reported to the Audit committee.

By order of the Board

the AGM provides an opportunity to meet the Board. All
shareholders are free to attend and put questions to any
director and in particular the chairman of each of the

ANTHONY LEE
company secretary
12 March 2018

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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REPORT OF THE AUDIT COMMITTEE

Introduction
the committee works with the full Board to fulfil its
oversight responsibilities. Its primary functions are to:

• Monitor the integrity of the financial statements and

other information provided to shareholders to ensure
they represent a clear and accurate assessment of
the Group’s position, performance, strategy and
prospects.

• consider the financial statements and recommend to

the Board on whether the Annual Report and
Accounts, taken as a whole, is fair, balanced,
understandable and provides information necessary
for shareholders to assess the performance, business
model and strategy of the Group.

• Review significant financial reporting issues and

judgements contained in the financial statements.
• Review the systems of accounting, internal control

and risk management.

• Monitor and review the significant risks identified by
the Group as well as the management and mitigation
of those risks.

• Make recommendations in relation to the

appointment of the external auditors, including their
remuneration and the provision by them of any
non-audit services.

• oversee and maintain an appropriate relationship
with the Group’s external auditors and review the
effectiveness, independence and objectivity of the
external audit process.

• Monitor and review the arrangements by which

employees can, in confidence, raise concerns about
any possible improprieties in financial and other
matters (such as compliance with the Bribery Act).

Membership and meetings
the Audit committee is chaired by steve Whittern, and
its other members are Roy davis and professor Mike
Bewick all of whom are considered independent. the
directors consider that steve Whittern has recent and
relevant financial experience. the Audit committee
meets up to four times per year in the ordinary course
at times driven by the company’s reporting cycle and
otherwise as circumstances require.

the committee met three times in 2017 and all
members attended each meeting. the Finance director,
the chief executive and the non-Independent non-
executive director attended meetings by invitation.

STEVE WHITTERN
chairman of the Audit committee

The Audit Committee assists
the Board in discharging its
responsibilities in relation to
financial reporting, risk
management and external and
internal controls. The ultimate
responsibility for reviewing and
approving the Annual Report
and Accounts and the half-
yearly reports remains with the
Board. The Audit Committee
gives due consideration to laws
and regulations, the provisions
of the UK Corporate
Governance Code and the
requirements of the Listing
Rules.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

Principal activities for the year
during 2017 the primary activities of the committee
were in relation to the Group’s reporting cycle.

• It reviewed the financial statements in the 2016 and
2017 Annual Report and Accounts and the 2017
Interim Report. As part of this review the committee
received reports from the external auditors on their
audit of that Annual Report and their review of the
interim results. It also reviewed the preliminary and
Interim Announcements made to the london
stock exchange.

• Formally reviewed the going concern assumptions
adopted in the preparation of the 2016 and 2017
financial statements.

• the committee discussed the annual external audit
plan in advance of the period end with the external
auditors, which addressed the planned audit
approach to key accounting areas.

• the committee discussed the auditor’s views on key
judgement areas and audit findings relating to key
accounting matters at the conclusion of the audit.

the committee considered the main audit risk raised by
Grant thornton in the audit of the 2017 financial
statements as revenue recognition and discussed with
them how this was to be addressed. the committee
noted the transactional nature of the business and
considered the treatment of Ipo related transaction
costs. they also noted that revenue recognition was not
an area that relied on significant judgement and also
considered the potential impact of new accounting
standards effective in 2018. the committee supported
Grant thornton’s approach and detailed transactional
testing.

Non-audit services provided by the external auditor
non-audit services provided by the company’s auditor
are kept under review by the committee. these will
generally be compliance services but for the 2017
financial year the auditors acted as Reporting
accountants in relation to the Group’s listing. the
committee ensures that the auditor’s objectivity and
independence are safeguarded by means of the use of
separate teams of staff and by ensuring that the level
of fees is not material to either the company or the
auditors.

the report from Grant thornton uK llp confirming
their independence and objectivity was reviewed by the
chairman of the Audit committee and the Finance
director. the level of fees paid to Grant thornton uK
llp for non-audit services is not regarded to conflict
with auditor independence.

Fees payable to the auditors are set out in note 6 on
page 72.

Effectiveness and independence of external auditor
Grant thornton uK llp has been the external auditor to
Medica Group plc since 2013. As part of this year’s
decision to recommend the reappointment of the
auditor, the committee has taken into account the
tenure of the auditor and the need to consider at least
every ten years whether there should be a full tender
process.

there are no contractual obligations that restrict the
Audit committee’s choice of external auditor.

In accordance with the auditor independence
requirements of the revised ethical standard effective
11 June 2016, Grant thornton uK llp’s appointment as
auditor cannot be extended beyond the year ending
31 december 2027 without an open tender process
taking place. subject to reappointment as part of such
an open tender process. Grant thornton uK llp could
serve as auditor for a further ten years subsequent to
the audit for the year ending 31 december 2027.

Grant thornton uK llp no longer provide corporation
tax compliance services to the company.

the committee is also responsible for advising the
Board on the appointment of the auditor, assessing their
independence and formulating policy on the award of
non-audit work. non-audit work is only awarded to the
auditors after due consideration of matters of
objectivity, independence, costs, quality of service and
efficiency. As a consequence of its satisfaction with the
results of its review of the activities outlined above, the
committee has recommended to the Board that the
external auditors are reappointed by shareholders at the
Annual General Meeting.

At the conclusion of each year’s audit, the performance
of the external auditor is reviewed by the committee
with the executive directors covering such areas as
quality of audit team, business understanding, audit
approach and process management. Where
appropriate, actions are agreed against the points
raised and subsequently monitored for progress.

the chair of the committee meets with the external
auditors without management present at least twice a
year.

Internal audit function
the committee concluded in 2017 that there was no
requirement for the Group to have an internal audit
function due to its size and complexity. the committee
will consider the need for an internal audit function on
an annual basis.

STEVE WHITTERN
chairman of the Audit committee
12 March 2018

Medica Group Plc
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REPORT OF THE NOMINATIONS COMMITTEE

Introduction
the primary functions of the committee are:
• to review and make recommendations on any

changes on the size, structure and composition of
the Board.

• to provide a formal, rigorous and transparent
procedure for identifying and nominating new
directors to the Board.

• to review the succession planning for the Group as
a whole and for key Board positions in particular.

• to review and evaluate the performance of

the Board.

Membership and meetings
Roy davis is the chair of the committee and the other
members are steve Whittern, Mike Bewick and Anand
Jain. the nomination committee meets once a year in
the ordinary course and otherwise as circumstances
require. during 2017 the committee met once and all
members attended.

Board induction
All Board members undertook induction training on
their responsibilities and duties as directors prior to the
Initial public offering.

Activities in 2017
the committee met once in 2017 and reviewed the
composition of the Board and the processes
surrounding succession planning. the committee
concluded that the current Board size and structure was
suitable for the business to continue to develop.

ROY DAVIS
chairman of nominations committee
12 March 2018

ROY DAVIS
chairman of nominations committee

The Nomination Committee’s
role is to regularly review the
structure, size and composition
of the Board to ensure the skills,
knowledge and experience
matches the requirements of
the business.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

REMUNERATION COMMITTEE REPORT
letteR FRoM tHe ReMuneRAtIon coMMIttee cHAIRMAn

Dear Shareholder
As chairman of the Remuneration committee (the
‘committee’), I am pleased to present Medica Group’s
first Remuneration committee report (‘Report’) as a
listed company, for the financial year ended 31
december 2017. In line with the reporting Regulations,
this Report is split into the following three sections:

this Annual statement and high level summary (‘our
Remuneration policy at a glance’).

the directors’ Remuneration policy, which will be put to
a binding shareholder vote at the Annual General
Meeting (‘AGM’) to be held on 23 May 2018.

our Annual Report on Remuneration, detailing director
remuneration for the financial year ending on 31
december 2017, and the proposed implementation of
our Remuneration policy for 2018, which is subject to an
advisory shareholder vote at our AGM.

Committee members and independence
I chair the committee, and my fellow committee members
are Roy davis and steve Whittern. the members of the
committee and any person attending its meetings do not
participate in any decision on their own remuneration. In
accordance with the uK corporate Governance code, at
least two members of the committee are independent
non-executive directors. the committee will meet up to
three times per year in the ordinary course and otherwise
as circumstances require.

Key areas of responsibility
the committee’s key areas of responsibility include to:
• develop and recommend Medica’s policy on

executive remuneration.

• determine the levels of remuneration for executive

directors and the company secretary.

• prepare an annual remuneration report for approval

by shareholders at the Annual General Meeting.

• ensure compliance with the uK Governance code in

relation to remuneration wherever possible.

detailed responsibilities are set out in the committee’s
terms of reference which can be found on the investor
section of the Medica website.

Activities of the Committee during the period
the committee met formally once during the period
from listing to 31 december 2017, and also spent a
significant amount of time during the period (including
before listing) in finalising executive remuneration
arrangements to ensure these were appropriate for
Medica and reflect best practice.

Our approach to developing Medica’s
Remuneration Policy
our aim is for remuneration at Medica to reflect its
culture and support the delivery of its business strategy.
the aim of the remuneration strategy is to attract, retain
and motivate the best talent to help ensure continued
growth and success as Medica enters its next stage of
its development, operating in a listed company
environment. Remuneration levels for the executive

directors and senior management have been set at the
lower quartile levels that are considered by the
committee to be adequate for the size and nature of the
business. As the business matures, the committee
anticipates that it will consider increasing pay levels
commensurate with the size and complexity of the
business. performance related pay will form a significant
part of the remuneration package of the executive
directors and senior managers and will be based on
performance targets, as relevant. the committee have
taken specialist, independent advice,
in order to ensure that the policies and remuneration
structure are appropriate for the listed company
environment and reflects current best practice.

our Remuneration policy (the ‘policy’) is intended to
operate for a three-year period from the 2018 AGM. the
committee believes that its approach to remuneration
will support the delivery of Medica’s aims during its initial
years as a public company, and will continue to evolve in
the future as Medica establishes itself as a listed
company. the key features of our policy are summarised
on pages 36 to 38 (‘our Remuneration policy at a
glance’) and the details are set out on pages 39 to 48.

the committee intends that the proposed approach to
implementing the policy set out in this report will
continue to ensure close alignment of executive pay
outcomes with Medica’s performance in 2018 and the
longer-term success of Medica. performance related pay
will form a significant part of the remuneration package
of the executive directors and senior management to
achieve a high performance culture without undue
risk-taking or unsustainable company performance.

the annual bonus for 2018 will be based on achievement
of financial targets relating to company profit.

the vesting of psp awards to be made in 2018 will be
based on two performance measures selected to
reinforce our strategic drivers and support alignment of
executive director pay outcomes with shareholder
interests through direct linkage to longer-term
shareholder value creation. 50% of the 2017 psp award
will vest based on three-year eps growth, with the
remaining 50% vesting based on Medica’s absolute
total shareholder Return over a three-year period. eps
growth for the calculation of psp awards is adjusted for
exceptional items, details of which are on note 7 of the
Financial statements.

We hope that you find this report sets out clearly our
proposed policy and how we intend to implement it, as
well as the rationale for our decisions. the policy will be
submitted for shareholder approval at the AGM. the
committee believes that the policy and the approach to
its implementation in 2018 are in the best interests of all
shareholders, and we hope that you will support it at
our AGM.

MIKE BEWICK
chairman of the Remuneration committee
12 March 2018

Medica Group Plc
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REMUNERATION COMMITTEE REPORT
ouR ReMuneRAtIon polIcY At A GlAnce

Developing our remuneration policy
the committee has developed the proposed policy set
out on pages 39 to 48, the key elements of which are
set out below. the basic elements of Medica’s proposed
policy were outlined in Medica’s prospectus dated 16
March 2017. since listing, the committee reviewed and
further developed the proposed policy based on
external advice from its independent remuneration
consultants, Mercer limited, and having regard to the
delivery of Medica’s strategy and its long-term success.
no changes have been made to the broad policy
elements outlined in the prospectus, except that Medica
is proposing to adopt a tax advantaged company share
option plan.

the proposed policy is intended to become effective
from the 2018 AGM (subject to shareholder approval).

Remuneration principles
the proposed policy is based on the remuneration
principles (see page 39) adopted by the committee. the
application of these principles ensures that remuneration
outcomes are aligned with Medica’s strategy and
performance both in the short and long term.

Shareholder consultation
the views of shareholders are important to us and the
proposed policy will be subject to a binding vote at the
AGM on 23 May 2018. the committee is aware of the
guidelines issued by investor bodies on corporate
governance, in particular the importance of aligning
remuneration with performance, and ensuring that
policies are broadly consistent with those applying to
the wider workforce. the committee is keen to foster an
open and transparent approach to setting and
determining outcomes against its policy and will review
voting outcomes from our first AGM and engage with
our largest shareholders on any proposed changes to
our policy in the future.

this report has been prepared in accordance with the
provisions of the companies Act 2006 and schedule 8
of the large and Medium-sized companies and Groups
(Accounts and Reports) Regulations 2008 (as
amended). It also meets the requirements of the uKlA’s
listing Rules.

In accordance with the Regulations, the following
sections of the Remuneration Report are subject to
audit: the single total figure of remuneration for
executive directors and non-executive directors, and
accompanying notes (pages 49 to 53), scheme interests
awarded during the financial year (page 50), exit
payments made in the year (page 51), payments to past
directors (page 51) and the statement of directors’
shareholdings (page 53). the remaining sections of
the report are not subject to audit.

Components of remuneration
the remuneration package for the executive directors
comprises both fixed and variable elements consistent
with our remuneration principles.

Fixed Components

Base salary

ceo – John Graham

cFo – Anthony lee

£200,000

£140,000

Medical director – dr stephen davies

£200,000

Policy
the executive directors’ salary was set on listing and
is positioned to reflect each individual’s professional
experience and level of responsibility in their role.
the committee considers that base salaries remain
significantly below market levels, and this will be factored
into discussion on the levels of variable remuneration as
well as being factored into future salary increases.

salaries will typically be reviewed on an annual basis.
the committee will consider increasing salaries over
time subject to strong personal and company
performance and considering levels of salaries in
the market.

Pension and other benefits

pension

ceo – John Graham

cFo – Anthony lee

7% of base salary

6% of base salary

Medical director – dr stephen davies 6% of base salary1

1. dr stephen davies has elected not to receive pension contributions

but instead to receive a cash equivalent.

Benefits

ceo – John Graham

cFo – Anthony lee

Medical director – dr stephen davies

£–

John Graham, Anthony lee and dr stephen davies all
have death in service benefits of 4x salary as do all
employees.

Policy
executive directors may receive a contribution of up to
10% of base salary to a personal pension plan, a cash
allowance or a combination of these. All staff including
executive directors receive death in service benefits at
4x salary. other benefits are set at a level considered
appropriate and consistent with the wider workforce.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

Variable Components
Annual bonus

Maximum bonus opportunities for 2017

ceo – John Graham

cFo – Anthony lee

Medical director – dr stephen davies

performance measures

eBIt

100% of base salary

Weighting

100%

Policy
Maximum bonus opportunities for the financial year ending 31 december 2018 will be 100%, and for future awards
this will not exceed 150% other than in exceptional circumstances. For executive directors, it is expected that not
more than 75% of any annual bonus will be payable in cash and the balance will be made in the form of an award
over Medica’s shares granted under the deferred Bonus plan (‘dBp’), which will then vest after a period not
expected to be less than two years, broadly subject to continued employment. cash bonuses will be subject to
clawback provisions as will dBp awards, as set out in the rules of the annual bonus plan and dBp. the level of
deferral and period for deferral may change in relation to future financial years.

up to 60% of the bonus opportunity will payout for on-target performance. no pay-out for below threshold
performance.

performance measures, targets and weightings are set by the committee at the start of each year. After the end of
the financial year the committee determines the level of bonus to be paid based on performance. 100% of the
bonus will be based on achievement of financial targets relating to company profit. these targets will be disclosed
as part of the disclosure accompanying any pay outs of annual bonus.

Malus and clawback provisions apply under certain circumstances.

Performance Share Plan (‘PSP’)

Award levels for 2017

ceo – John Graham

cFo – Anthony lee

Medical director – dr stephen davies

performance measures

3-year eps growth

3-year absolute tsR growth

150% of base salary

Weighting

50%

Policy
Awards granted under the psp (‘psp Awards’) will take the form of an option to acquire shares for nil consideration.

the maximum award opportunity is normally 100% of base salary. A psp Award may be granted in excess of this
limit, but only in circumstances which the committee in its absolute discretion considers to be sufficiently
exceptional to justify the grant of a psp Award in excess of such limit and any such psp Award will not, in any
circumstances, exceed 200% of the individual’s basic salary at the date of grant. psp Awards granted on listing in
March 2017 were at 150% of basic salary.

prior to awards being granted each year the performance conditions and targets are set by the committee to
ensure they are stretching and aligned with Medica’s strategy. For psp Awards granted in 2017, 25% of an award
will vest at threshold performance, 70% at median and 100% vesting at maximum (and a straight-line sliding scale
between these points). Future psp Awards granted to executive directors will normally have a performance period
of at least three years and normally a minimum normal vesting period of three years. they will also normally be
subject to a further holding period, after the end of the normal vesting period of a minimum of two years.

Malus and clawback provisions apply under certain circumstances.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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REMUNERATION COMMITTEE REPORT
ouR ReMuneRAtIon polIcY At A GlAnce CONTINUED

Pay at risk

Pay scenarios (£’000s)

Fixed
30%

Variable
70%

Shareholding requirements

ceo

cFo

Medical director

Annual
bonus
28%

LTIP
42%

800

700

600

500

400

300

200

100

300

210

60
14

200
14

60
12

200
12

147

42
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200

140

210

140
8

140

Min. On

Max. Min. On

Max.

Target

John Graham

Stephen Davies Anthony Lee

Salary

Pension

Annual Bonus

PSP

100% of base salary

executive directors will have five years during which to build up the required ordinary shareholding after
commencing employment.

Remuneration for the wider workforce
Remuneration for the wider workforce is determined based on broadly consistent principles as those for executive
directors. Annual salary reviews take into account Medica’s performance, local pay and market conditions to
ensure that reward at Medica remains competitive. Incentive arrangements are in place for some employees below
the executive level. Medica operates a tax-advantaged save-As-You-earn option plan in which participation is
offered to all employees (including executive directors) of the group who are eligible to participate. Medica is
also proposing to adopt a tax-advantaged company share option plan under which awards of market value
options over shares worth not more than £30,000 can be granted to employees (including executive directors)
of the group.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

REMUNERATION COMMITTEE REPORT
ReMuneRAtIon polIcY RepoRt

this section of the report sets out the policy for the directors that has been developed to reflect the guiding
principles set out on page 35. this policy Report will be put before shareholders for approval at our 2018 AGM.
the committee intends that the policy will come into effect from that date (23 May 2018) for a period of up to
three years.

2018 Remuneration Policy for the Executive Directors

purpose and link to strategy operation

opportunity

performance measures

n/a

there is no maximum
salary payable to
executive directors.
salaries will be set on a
case-by-case basis to
reflect the role and the
experience and
qualifications of the
individual.

Base salaries for the year
under review and the
following year, as well as
the rationale for any
increases, will be
disclosed in the relevant
year’s Annual Report on
Remuneration.

Base salary

to attract and retain
talented executive
directors to deliver
Medica’s strategy, by
ensuring base
salaries and the
implied total
packages are
competitive in
relevant talent
markets, while not
overpaying.

Base salaries will be reviewed by
the committee annually, and
benchmarked periodically against
relevant competitor companies.

the executive directors’ salary is
positioned to reflect each individual’s
professional experience and level of
responsibility in their role.

In deciding base salary levels, the
committee considers personal
performance including the individual’s
contribution to the achievement of
Medica’s strategic objectives. the
committee will also consider
employment conditions and salary
levels across Medica, and prevailing
market conditions.

Base salary increases for the executive
directors will normally be aligned with
those of the wider workforce, but may
be made above this level in exceptional
circumstances such as a material change
in responsibilities, size or complexity of
the role, or if a director was intentionally
appointed on a below-market salary. the
committee considers that base salaries
for executive directors remain
significantly below market levels, and
this will be factored into future salary
increases.

the committee will consider increasing
salaries over time subject
to strong personal and company
performance and considering levels
of salaries in the market.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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REMUNERATION COMMITTEE REPORT
ReMuneRAtIon polIcY RepoRt CONTINUED

purpose and link to strategy operation

opportunity

performance measures

Pension

to provide an
appropriate level of
post-retirement
benefit for executive
directors.

Other benefits2

to provide non-cash
benefits which are
competitive in the
market in which the
executive director is
employed.

executive directors may receive a
contribution to a personal pension
plan, a cash allowance in lieu, or a
combination thereof.

executive directors are
eligible for a company
contribution from Medica
of up to 10% of salary.

n/a

salary is the only element of
remuneration that is pensionable.

Medica provides death in service
benefits to its executive directors.

Medica may provide benefits in kind
where the Remuneration committee
considers appropriate. executive
directors may also be provided certain
other benefits to take account of
individual circumstances such as, but
not limited to, payment of tax, financial,
and/or legal adviser fees, relocation
expenses and housing allowance
(including associated interest, penalties
or fees plus, in certain circumstances
or where the committee consider it
appropriate, any tax incurred on such
benefits).

executive directors may also be
offered any other future benefits made
available to all senior employees. this
may include participation in any share
Incentive plan that is offered to all
employees (or all employees who meet
certain qualifying criteria) on the same
terms.

n/a

details of the pension
contributions made to
executive directors
during the year are
disclosed in the Annual
Report on Remuneration.

Benefits for executive
directors are set at
a level which the
committee considers
appropriate compared to
wider employee benefits,
as well as competitive
practices in relevant
markets.

the value of annual
benefits will normally not
exceed 10% of salary, and
it is not anticipated that
the costs of benefits
provided will increase
significantly in the
financial years over which
this policy will apply,
although the committee
retains discretion to
approve non-material
increases in cost. In
addition, the committee
retains discretion to
approve a higher cost
in exceptional
circumstances (e.g. to
facilitate recruitment,
relocation, expatriation,
etc.) or in circumstances
where factors outside
Medica’s control have
changed (e.g. market
increases in insurance
costs).

Benefits in respect of the
year under review are
disclosed in the Annual
Report on Remuneration.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

purpose and link to strategy operation

opportunity

performance measures

Annual bonus

to incentivise
executive directors
to deliver strong
financial and non-
financial performance
on an annual basis
and reward the
delivery of Medica’s
strategic aims that
will underpin the
longer-term health
and growth of the
business.

deferral into shares
enhances alignment
with shareholders.

Performance Share
Plan (PSP)

to align the interests
of executive
directors and
shareholders in
growing the value
of Medica over the
long term.

performance measures, targets and
weightings are set by the committee at
the start of the year. After the end of the
financial year, the committee determines
the level of bonus to be paid, taking into
account the extent to which these targets
have been achieved.

the normal maximum
annual bonus opportunity
is 100% of base salary. this
may be exceeded in
exceptional circumstances,
but can never exceed
150% of base salary.

Bonuses are based
on achievement of
company financial
performance targets
relating to profit over
the financial year.

to the extent that the performance
criteria have been met, at least 25%
of the annual bonus awards will be
deferred into awards over shares in
Medica under the deferred Bonus plan
(‘dBp’). the remainder of the bonus
will be paid in cash.

Awards under the dBp are not subject
to further performance conditions and
vest after two years, broadly subject to
continued employment.

dividend equivalents may be awarded
in respect of dBp awards (as set out in
the notes to the policy table).

Malus and clawback provisions apply to
the annual bonus and dBp awards in
certain circumstances (as set out in the
notes to the policy table).

executive directors are eligible to receive
annual awards of an option to acquire
shares in Medica for nil consideration.

prior to awards being granted each year,
the performance conditions and targets
are agreed and set to ensure they remain
appropriately stretching and aligned to
Medica’s strategy.

Awards granted under the psp to
executive directors will normally have a
performance period of not less than three
years and normally a minimum normal
vesting period of three years. they will
normally be subject to an additional
holding period of two years after the
normal vesting period. If the performance
targets have not been met at the end of
the relevant performance period, awards
will not vest.

dividend equivalents may be awarded
in respect of psp awards (as set out in
the notes to the policy table).

psp awards granted to executive
directors will be subject to malus and
clawback provisions, as set out in the
notes to the policy table.

the payout for on-target
performance is up to 60%
of maximum; below
threshold performance
results in nil payout.

the current maximum
bonus opportunities for
each of the executive
directors are disclosed in
the Annual Report on
Remuneration.

Malus and clawback
provisions apply to
the annual bonus and
dBp awards in certain
circumstances

Further details,
including the
performance targets,
will be disclosed in
the relevant Annual
Report on
Remuneration.

the normal maximum
annual psp opportunity is
100% of base salary. the
committee has discretion
to award up to 200% of
base salary in exceptional
circumstances.

In respect of psp awards
granted on listing, 25% of
an award will vest if
performance against each
performance condition is
at threshold, 70% if it is at
median and 100% if it is at
maximum, with straight-
line vesting in between.

Further details of the psp
awards granted to each of
the executive directors
will be disclosed in the
relevant Annual Report on
Remuneration.

Vesting of the psp is
subject to continued
employment during
the normal vesting
period and the
achievement of
performance
conditions aligned
with Medica’s
strategic plan and
shareholder value
creation. psp awards
granted in 2018 will
be based on a
combination of eps
growth and absolute
total shareholder
Return.

Further details,
including the
performance targets
attached to psp
awards in respect of
each year, will be
disclosed in the
relevant Annual
Report on
Remuneration.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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REMUNERATION COMMITTEE REPORT
ReMuneRAtIon polIcY RepoRt CONTINUED

purpose and link to strategy operation

opportunity

performance measures

csop options cannot be
granted to any individual
over shares exceeding
£30,000 market value as
at the date of grant (or
such other figure as is
permitted by the relevant
legislation).

Vesting of csop
options may be (but
does not need to be)
subject to the
achievement of
performance
conditions.

n/a

employees are limited to
saving a maximum in line
with the maximum
monthly savings limit
imposed by the
committee (which will not
exceed the limits imposed
by legislation, currently
£500 per month) at the
time they are invited to
participate.

Company Share
Option Plan (CSOP)

to align the interests
of employees and
shareholders in
growing the value
of Medica over the
long term.

All employees, including executive
directors, are eligible to receive annual
awards of an option to acquire shares in
Medica for an amount that is not less
than the market value of the Medica
shares at the date of grant.

Save-As-You-Earn
(SAYE) plan

to align the interests
of employees and
shareholders by
encouraging all
employees to buy
and own Medica
shares.

Awards granted under the csop will
normally have a vesting period of not
less than three years. Awards may, but
do not need to be, subject to
performance conditions and targets.

executive directors are entitled to
participate in Medica’s all-employee
sAYe plan on identical terms as other
eligible employees. All employees,
including executive directors, may
make monthly savings over a period of
three or five years (or other period set
out in the relevant legislation). each
employee who participates is also
granted an option to acquire shares at a
price that is not less than 80% of the
market value of the shares on the date
that invitations to participate are issued.
the number of shares subject to each
option will be the number of shares
which have an aggregate option
exercise price as near to, but not
exceeding, the projected proceeds of
the sAYe savings contract (i.e. the
accumulated savings plus any bonus/
interest payable).

the operation of the sAYe plan will be
in line with the legislative requirements
that apply to plans of this type.
executive directors will not receive any
preferential terms compared to the
wider employee group.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

Notes to the Policy Table

Approach to target setting and performance measure selection
the committee considers carefully the selection of performance measures at the start of each performance cycle,
taking into consideration Medica’s strategic objectives and the macroeconomic environment.

Annual bonus measures are selected to align with Medica’s short-term KpIs. Measures may change from year to year
(subject to the policy), and the rationale for any changes to the bonus measures selected will therefore be disclosed in
the relevant Annual Report on Remuneration.

psp performance measures are selected to ensure they reward delivery of Medica’s strategy and growth in
shareholder value over a multi-year period, and are intended to align executive directors’ interests with those of
shareholders. the performance measures applicable to the psp awards to be granted in 2018 (subject to
shareholder approval of the policy) will be based as to 50% on eps growth and as to 50% on absolute total
shareholder Return over a three-year period. the committee considers these measures align executive incentives
to Medica’s strategy and shareholder interests.

targets are set to be stretching but achievable over the three-year performance period. eps targets are set taking
account of multiple relevant reference points, including internal forecasts, external expectations for future
performance at both Medica and its closest sector peers, and typical performance ranges for those measures at
other Ftse companies of comparable size and complexity.

until an award over shares under the dBp or psp has been exercised and the shares which are subject to the
relevant award have been issued or transferred to the award holder, the award holder has no entitlement to
dividends or other distributions payable by reference to a record date preceding the date of such issue or transfer.
the committee can, however, determine that dividend equivalents will be awarded. If dividend equivalents are
awarded, whenever a dividend or other distribution is paid by Medica in respect of its shares and the vesting date
of the dBp or psp award (including any additional holding period that applies to the psp award) has not passed,
the number of shares which are subject to the dBp or psp award will be increased to reflect the value of the
dividend. the committee can determine that dividend equivalents will be paid in either shares or in cash.

Share ownership guidelines
the committee recognises the importance of aligning executive directors’ and shareholders’ interests through
significant shareholdings in Medica. Medica’s shareholding policy is 100% of base salary for executive directors.
the executive directors will have five years in which to build up the required ordinary shareholding after
commencing employment.

details of the executive directors’ current personal shareholdings are provided in on page 53.

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Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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REMUNERATION COMMITTEE REPORT
ReMuneRAtIon polIcY RepoRt CONTINUED

Pay-for-performance: scenario analysis
the charts below provide an estimate of the potential future reward opportunities for the executive directors, and
the potential split between the different elements of remuneration under three different performance scenarios:
‘Maximum’, ‘on-target’ and ‘Minimum’.

potential reward opportunities are based on the forward-looking policy applied to 2018 base salaries and incentive
opportunities. note that the psp awards granted to executive directors will not normally vest until the third
anniversary of the date of grant, and will then normally be subject to an additional two-year holding period before
the awards can be exercised. the projected value excludes the impact of share price movement or dividend
equivalent payments.

Director Pay Scenario 2018 (£’000s)

800

700

600

500

400

300

200

100

210

60
14

200

300

200
14

200

210

60
12

200

300

200
12

200

147

42
8

140

210

140
8

140

Min.

On
Target

Max.

Min.

On
Target

Max.

Min.

On
Target

Max.

John Graham

Stephen Davies

Anthony Lee

Salary

Pension

Annual Bonus

PSP

Executive Director service contracts
In accordance with general market practice, each of the executive directors has a rolling service contract. the
executive directors’ service contracts (copies of which are available to view at Medica’s registered office) are each
terminable on 12 months’ notice from either party. this practice will also apply for any new executive directors. the
following table shows the date of the service contract for each executive director that served during the year:

executive director

John Graham

Anthony lee

position

ceo

cFo

dr stephen davies

Medical director

date of appointment

date of service agreement

1 May 2013

14 May 2013

15 March 2017

Exit payments policy
Medica’s policy on termination payments is to consider the circumstances on a case-by-case basis, taking into
account the relevant contractual terms in the executive’s service contract and the circumstances of termination.
executive directors’ contracts provide for the payment of a pre-determined sum in the event of termination of
employment in certain circumstances (but excluding circumstances where Medica is entitled to dismiss without
compensation), comprising base salary, pension allowance and benefits in respect of the unexpired portion of the
notice period. termination payments may take the form of payments in lieu of notice.

If the employment is terminated by Medica, the committee retains the discretion to settle any other amount the
committee considers reasonable to the executive director including in settlement of claims, in respect of legal fees
incurred in connection with the termination and fees for outplacement services and relocation costs.

In additional to contractual provisions, the table below summarises how awards under each discretionary incentive
plan are typically treated in specific circumstances, with (where relevant) the final treatment remaining subject to
the committee’s discretion as provided under the rules of the plan. In the event of termination, any outstanding
options granted under the sAYe scheme and any awards made under a share Incentive plan that may be
established by Medica will be treated in accordance with the rules of the scheme, which do not include discretion.

disclosure in relation to any departing executive director, including details of any remuneration payment made to
him after he ceases will be made in the relevant Annual Report on Remuneration.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

Treatment of awards on cessation of employment/change of control

Reason for cessation

calculation of vesting/payment

timing of vesting/payment

Annual bonus

death or other
circumstance as
the committee
determines

All other reasons

change of control

Deferred Bonus Plan

death

Ill health, injury,
disability, redundancy,
or sale of the employing
company or business

All other reasons
(including resignation or
dismissal for cause)

change of control

Performance Share Plan

death

Ill health, injury,
disability, redundancy,
or sale of the employing
company or business

the bonus will remain payable on the normal payment date,
subject to the performance targets having been met and
pro-rated for the proportion of the performance year worked
(unless the committee waives pro-rating). the bonus is paid
wholly in cash (i.e. not subject to deferral) unless the committee
determines otherwise.

At the usual
payment date

no bonus will be paid for the financial year. Bonus lapses if
employment ceases at any time prior to the payment date.

not applicable

the committee may determine the extent to which applicable
performance targets have been met as at the date of the change
of control, and calculate the bonus accordingly, pro-rated for
the proportion of the performance year which has elapsed
before the change of control event. the committee has
discretion to waive performance conditions and pro-rating. the
bonus is paid wholly in cash (i.e. not subject to deferral).

on change of control

the committee may in its absolute discretion, permit exercise
of awards within the 12-month period immediately following
death. Awards will be pro-rated for the proportion of the vesting
period worked (unless the committee waives pro-rating).

on death

Awards may be retained and exercised during the six months
following the vesting date (or if later six months after the date
of cessation). the committee may, however, in its absolute
discretion permit awards to be exercised within such period
following cessation of employment as the committee
determines. Awards will be pro-rated for the proportion of
the vesting period worked (unless the committee waives
pro-rating).

Awards normally lapse on cessation of employment or if earlier
when the employee gives or is given notice to cease
employment, unless the committee determines within three
months of cessation of employment to permit the holder to keep
his awards and exercise them on such terms and within such
period following the vesting date as the committee determines.
the committee can determine the extent to which the award
will vest.

dBp Awards may be exercised for a six-month period following
such event or immediately prior to such event. Awards will not
be subject to pro-rating.

At the normal
vesting date
unless discretion is
exercised (and then
on cessation of
employment)

not applicable,
unless discretion is
exercised (and then
not earlier than the
normal vesting date)

on change of control

the committee may in its absolute discretion, permit exercise of
awards within the 12-month period immediately following death.
Awards will be pro-rated for the proportion of the normal
vesting period (not including any additional holding period)
worked, unless the committee waives pro-rating.

Awards may be retained and exercised during the six months
following the normal vesting date (not including any additional
holding period), or if later six months after the date of cessation.
the committee may, however, in its absolute discretion permit
awards to be exercised within such period following cessation of
employment as the committee determines. Awards will be
pro-rated for the proportion of the normal vesting period (not
including any additional holding period) worked, unless the
committee waives pro-rating.

on death

At the normal
vesting date
unless discretion is
exercised (and then
on cessation of
employment)

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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ReMuneRAtIon polIcY RepoRt CONTINUED

Reason for cessation

calculation of vesting/payment

Awards normally lapse on cessation of employment or if earlier
when the employee gives or is given notice to cease
employment, unless the committee determines within three
months of cessation of employment to permit the holder to keep
his awards and exercise them on such terms and within such
period following the later of the normal vesting date (not
including any additional holding period) or cessation of
employment, as the committee determines. the committee can
determine the extent to which the award will vest.

Awards may be exercised for a six-month period following such
event or immediately prior to such event to the extent that
performance conditions have been met and pro-rated for the
proportion of the normal vesting period (not including any
additional holding period) that has elapsed as at the change of
control event. the committee has discretion to waive
performance conditions and pro-rating.

timing of vesting/payment

not applicable,
unless discretion is
exercised (and then
not earlier than the
normal vesting date)

on change of control

All other reasons
(including resignation
or dismissal for cause)

change of control

Company Share Option
Plan

death

options can be exercised within the 12-month period
immediately following death (to the extent that any
performance conditions have been satisfied and pro-rated for
the proportion of the vesting period worked). the committee
has discretion to waive performance conditions and pro-rating.

on death

Injury, disability,
redundancy, retirement,
or sale of the employing
company or business

options can be exercised within the six months following the
date of cessation (to the extent that any performance conditions
have been satisfied) and pro-rated for the proportion of the
vesting period worked. the committee has discretion to waive
performance conditions and pro-rating.

on cessation of
employment

All other reasons
(including resignation
or dismissal for cause)

change of control

options normally lapse on cessation of employment or if earlier
when the employee gives or is given notice to cease
employment, unless the committee determines within three
months of cessation of employment to permit the holder to keep
his options and exercise them on such terms and within such
period as the committee determines. the committee can
determine the extent to which the award will vest.

not applicable,
unless discretion is
exercised (and then
not earlier than
cessation of
employment)

Awards may be exercised for a six-month period following such
event to the extent that performance conditions have been met
and pro-rated for the proportion of the vesting period that has
elapsed as at the change of control event. the committee has
discretion to waive performance conditions and pro-rating. If
the change of control event would stop the option qualifying for
csop tax relief, options can only be exercised within 20 days
after the takeover event.

on change of control

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

Approach to remuneration on recruitment
External appointments
In cases of hiring or appointing a new executive director from outside Medica, the committee may make use of all
existing components of remuneration set out in the policy table, up to the disclosed maximum opportunities
(where applicable).

When determining the remuneration package for a new executive director, the committee will take into account all
relevant factors based on the circumstances at that time to ensure that arrangements are in the best interests of
Medica and its shareholders. this may include factors such as the experience and skills of the individual, internal
comparisons and relevant market data.

the committee may also make an award in respect of a new appointment to ‘buy out’ incentive arrangements
forfeited on leaving a previous employer, i.e. over and above the maximum limits on incentive opportunities set out
in the policy table. In doing so, the committee will consider relevant factors, including any performance conditions
attached to these awards, the likelihood of those conditions being met, and the time over which they would have
vested. the intention is that the expected value of any buy-out award would be no higher than the expected value
of the forfeited arrangements, and that the structure will replicate (as far as reasonably possible) that of the awards
being forfeited. the committee may consider it appropriate to structure ‘buy-out’ awards differently from the
structure described in the policy table, exercising the discretion available under uKlA listing Rule 9.4.2R where
necessary to make a one-off award to an executive director in this context. the committee may also permit
Medica to indemnify a new appointment as executive director for any claims that may be made against him by a
previous employer in connection with a breach of restrictive covenants or similar restrictions that the new
appointment may have breached by taking up employment with Medica.

Internal promotion
Where a new executive director is appointed by way of internal promotion, the policy will be consistent with that
for external appointees, as detailed above (other than in relation to ‘buy-out’ awards). Any commitments made
prior to an individual’s promotion will continue to be honoured even if they would not otherwise be consistent
with the policy prevailing when the commitment is fulfilled, although Medica may, where appropriate, seek to
revise an individual’s existing service contract on promotion to ensure it aligns with other executive directors and
good practice.

disclosure on the remuneration structure of any new executive director, including details of any ‘buy-out’ awards,
will be disclosed in the Rns notification made at the time of appointment and in the Annual Report on
Remuneration for the year in which recruitment occurred.

External appointments held by Executive Directors
executive directors may accept up to one external appointment subject to approval by the Board, there being no
conflicts of interest and the appointment not leading to deterioration in the individual’s performance. executive
directors may retain the fees paid for such roles. details of external appointments and the associated fees received
will be included in the Annual Report on Remuneration.

Consideration of conditions elsewhere in Medica
the committee seeks to promote and maintain good relations with employees as part of its broader employee
engagement strategy, considers pay practices across Medica and is mindful of the salary increases applying across
the rest of the business in relevant markets when considering any increases to salaries for executive directors.
However, the committee does not currently consult with employees on its executive remuneration policy.

Consideration of shareholder views
the committee will take into consideration all shareholder views received during the year and at the Annual
General Meeting each year, as well as guidance from shareholder representative bodies more broadly, in shaping
Medica’s implementation of its policy, as well as any future changes to policy. It is the committee’s intention to
consult with major shareholders in advance of making any material changes to remuneration arrangements.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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REMUNERATION COMMITTEE REPORT
ReMuneRAtIon polIcY RepoRt CONTINUED

Remuneration policy for the Non-Executive Directors
details of the policy on fees paid to our non-executive directors are set out in the table below:

purpose and link to strategy operation

opportunity

performance
measures

Non-Executive
Director fees

to attract and retain
non-executive
directors of the
highest calibre with
broad commercial
and other experience
relevant to Medica.

the fees of the chairman are determined by the
committee. the fees paid to non-executive
directors are determined by the chairman and
executive directors.

Fee levels are reviewed annually taking into
account external advice on best practice and
competitive levels, in particular at other Ftse
companies of comparable size and complexity.
time commitment, committee participation and
chairing are also taken into account when
reviewing fees.

chairman and non-executive director fees are
paid in cash.

the committee reimburses the chairman and
non-executive directors for reasonable expenses
in performing their duties and may settle any tax
incurred in relation to these expenses. For any
non-executive director that is based overseas,
Medica will meet travel and accommodation
expenditure as required to fulfil their non-
executive duties.

the fees paid to the chairman and non-executive
directors are disclosed in the Annual Report on
Remuneration.

current fees are as
follows:

n/a

Roy davis:
£100,000
steve Whittern:
£60,000
professor Mike
Bewick: £50,000
Anand Jain:
£42,000*

Fee increases will
be applied taking
into account the
outcome of the
annual review.

level of any fees to
be reviewed by the
Board

* the fees of Anand
Jain are paid to
cBpe in respect of
Mr Jain’s services

non-executive directors are not eligible to join Medica’s pension, incentives or share schemes or to participate in
any of Medica’s other benefit arrangements.

In recruiting a new non-executive director, the committee will use the policy set out above.

Non-Executive Director letters of appointment
none of the non-executive directors has a service contract with Medica. they do have letters of appointment for
an initial period of three years and continuing thereafter subject to termination upon at least three months’ notice
(six months’ notice in respect of Roy davis). the dates relating to the appointments of the chairman and non-
executive directors who served during the reporting period are as follows:

director

Roy davis

Role

Independent chairman

date of appointment date of letter of appointment

1 March 2017

15 March 2017

steve Whittern

senior Independent non-executive director

1 March 2017

15 March 2017

professor Mike Bewick

Independent non-executive director

1 March 2017

15 March 2017

Anand Jain

non-executive director

2 May 2013

15 March 2017

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

REMUNERATION COMMITTEE REPORT
AnnuAl RepoRt on ReMuneRAtIon

this section of the Remuneration Report provides details of how our policy was implemented during the financial year
ended 31 december 2017 (since listing), and how it will be implemented during the year ending 31 december 2018.

Committee membership in 2017
the committee is currently composed of three non-executive directors:

Mike Bewick
Roy davis
steve Whittern – senior Independent non-executive director

– committee chairman (independent)
– non-executive chairman (independent)

the committee met formally once during the period from listing to 31 december 2017. All of the committee
members attended this meeting.

the committee is responsible for assisting the Board in determining its responsibilities in relation to remuneration,
including making recommendations to the Board on Medica’s policy on executive remuneration (including setting
the over-arching principles, parameters and governance framework of Medica’s remuneration policy) and
determining the individual remuneration and benefits packages of each of the executive directors and the
company secretary. the committee will also ensure compliance with the uK corporate Governance code in
relation to remuneration wherever possible.

Advisers
Mercer limited supported Medica on remuneration-related matters in the build up to the listing. the committee
formally appointed Mercer limited as its independent adviser. Mercer limited reports to the committee chairman.
Mercer limited is a member of the Remuneration consultants’ Group and, as such, voluntarily operates under the
code of conduct in relation to executive remuneration consulting in the uK (www.remunerationconsultantsgroup.
com). Mercer limited does not have any other connection with Medica and is considered to be independent by the
committee. Fees paid to Mercer limited are determined on a time and materials basis, and totalled £12,000
(excluding expenses and VAt) from listing to 31 december 2017 in their capacity as advisers to the committee.

eversheds sutherland (International) llp provided legal advice to Medica in relation to incentive arrangements
prior to and since listing. eversheds sutherland provides legal advice to Medica generally.

Statement of voting at the Annual General Meeting
Medica will be proposing resolutions to shareholders in respect of its policy and its Annual Report on
Remuneration for the first time at the Annual General Meeting to be held on 23 May 2018. the percentage of votes
cast for and against and the number of votes withheld will be reported in the next Remuneration Report.

Single total figure of remuneration for Executive Directors (audited)
the table below sets out a single figure for the total remuneration received by each executive director for the
financial years ending 2016 and 2017. As Medica listed in March 2017, part of the 2017 and all of the 2016
remuneration relates to the period when Medica was privately owned. the values of each element of remuneration
are based on the actual value delivered, where known.

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director

John Graham

Anthony lee

dr stephen davies

Kevin terrins

Martin Wells

Base
salary
‘000

taxable
Benefits1
‘000

Annual
bonus
‘000

psp
‘000

pension
benefit
‘000

other
‘000

total
‘000

£191,250

£123,750

£193,333

£16,667

£nil

£nil £13,387

£nil £204,637

£nil

£7,425

£nil

£131,175

£nil £9,000

£nil £202,333

£nil

£1,000

£nil

£17,667

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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AnnuAl RepoRt on ReMuneRAtIon CONTINUED

2016 Director’s remuneration

director

John Graham

Anthony lee

dr stephen davies

Kevin terrins

Martin Wells

Base
salary
‘000

taxable
Benefits1
‘000

£165,000

£75,000

£124,667

£nil

Annual
bonus
‘000

£nil

psp
‘000

pension
benefit
‘000

other
‘000

total
‘000

£nil £11,550

£nil £176,550

£nil £4,500

£nil

£79,500

£nil

£nil £124,667

£100,000

£nil £4,000

£nil £6,000

£nil £110,000

£100,000

£nil £4,000

£nil £6,000

£nil £110,000

1. Medica provides death in service benefits to its executive directors.
2. psp Awards granted in 2017 will be shown in the single total figure of remuneration table for the 2019 financial year (to the extent vested).
3 Figures for Kevin terrins and Martin Wells are to 28th February 2017 as they both resigned as directors on 1st March 2017.

Incentive outcomes for the year ended 31 December 2017 (audited)
Annual bonus in respect of performance in the 2017 financial year
the payments under the annual bonus for 2017 have been waived by the directors.

director

John Graham

Anthony lee

dr stephen davies

Maximum
opportunity

Bonus outcome
(% of max)

salary earned for the financial
year to 31 december 2017

Bonus for the financial

year to 31 december 2017

100% of salary

nil%

£191,250

£123,750

£193,333

£nil

details of disclosure of targets – to be confirmed:

Although targets in relation to the 2017 financial year are not disclosed, it is the committee’s intention going
forward to disclose annual bonus targets retrospectively, at the same time as the performance outcome is
disclosed in the remuneration report after the end of each financial year, but only to the extent they are not
considered commercially sensitive.

Share incentive awards awarded in 2017 (audited)
Performance Share Plan (PSP)
on the date of listing, executive directors and other key executives were granted awards under the psp,
comprising a grant of options to acquire shares at nil cost. Awards granted to executive directors under the psp on
the date of listing were granted in respect of shares with a market value equal to 150% of base salary, determined
using the price of Medica’s shares on listing (135 pence). the committee regarded this level of award as necessary
to incentivise executive directors while base salaries remained below market levels. these awards will vest after a
three-year period, broadly subject to continued employment and the achievement of performance measures, and
will also be subject to a further two-year holding period after the end of the normal vesting period. they will vest
50% depending on eps growth and 50% on absolute tsR over the performance period.

If the minimum eps growth target is met, 12.5% of the psp Award will vest. If the minimum tsR growth target is
met, 12.5% of the psp Award will vest.

none of the executive directors participated in the sAYe plan in 2017.

director

date of grant

Vehicle

number awarded

exercise price

Face value

Vesting date

expiry date

John Graham 21 March 2017

Anthony lee 21 March 2017

dr stephen
davies

21 March 2017

psp – nil cost
share options

222,222

nil

£300,000 21 March 2020 21 March 2027

155,555

nil

£210,000 21 March 2020 21 March 2027

222,222

nil

£300,000 21 March 2020 21 March 2027

1. the awards are performance share awards, for which no exercise price is payable.
2. the face value of the awards has been calculating using the share price at the date of grant, being the listing price of Medica’s shares on listing

(135 pence). this assumes that the performance targets are met in full. Actual value at vesting will depend on the extent to which the awards vest,
the share price at the date of vesting, and any dividend equivalents payable on vested shares.

3. there will be a two-year holding period following the normal vesting period for psp awards granted in 2017.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

Single total figure of remuneration for Non-Executive Directors (audited)
the table below sets out a single figure for the total remuneration received by each non-executive director for the
financial years ended 31 december 2016 and 31 december 2017. each of Roy davis, steve Whittern and professor
Mike Berwick were appointed on 1 March 2017 so the figures reflect the fees from that date and no prior year
figures have been shown. In respect of Anand Jain, part of the 2017 and all of the 2016 remuneration relates to the
period when Medica was privately owned.

director

Roy davis

steve Whittern

professor Mike Bewick

Anand Jain1

Fees1

total

£75,000

£45,000

£37,500

£42,000

1. the fees of Anand Jain are paid to cBpe in respect of Mr Jain’s services. the fees were the same in 2016 as in 2017.

Percentage change in CEO remuneration
the ceo’s total remuneration increased by 16% from 2016 to 2017.

Relative importance of spend on pay
there were no dividends paid or share buybacks implemented or other significant distributions, payments or
other uses of profit or cashflow in the 2017 financial year which the directors consider relevant in assisting an
understanding of the relative importance of spend on pay. total staff costs – disclosed in the notes to the Financial
statements – were £3,574,000 for the same period.

FY17

FY16

% change

Payments for loss of office (audited)
no payments for loss of office were made to directors during the year.

Payments to past Directors (audited)
no payments were made to past directors in the year.

External appointments
no executive director currently holds any external appointments.

distributions to
shareholders
(£’000)

total employee
pay
(£’000)

611

nil

n/a

3,574

3,048

17%

Review of past performance
this graph shows Medica’s total shareholder Return (tsR) compared to the Ftse small cap Index. the comparison is
made between the date of listing (21 March 2017) and 31 december 2017. the Ftse small cap Index was chosen as the
comparator because Medica is part of this group.

TSR chart for 2017 DRR
Growth in the value of a hypothetical £100 holding from listing to 31 december 2017

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21-Mar-17

31-Dec-17

Medica Group
FTSE SmallCap

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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AnnuAl RepoRt on ReMuneRAtIon CONTINUED

the table below details the ceo’s single total figure of remuneration and incentive outcomes over the same period:

ceo

ceo single figure

Annual bonus (% max)

psp vesting (% max)

2017

John Graham

£204,637

nil%

n/a

Implementation of Executive Director Remuneration Policy for 2018
Base salary
Base salaries were set on listing taking into account each individual’s professional experience and level of
responsibility in their role. the committee considers that base salaries remain significantly below market levels,
and this will be factored into discussion on the levels of variable remuneration as well as being factored into
future salary increases. the current salaries of the executive directors, effective from listing, are set out below:

director

John Graham

Anthony lee

dr stephen davies

Base salary

£200,000

£140,000

£200,000

executive director salary levels will remain at these levels for 2018, but may be increased in future years.

Pension
John Graham receives pension contributions of 7% of his salary. Anthony lee receives pension contributions of 6%
of his salary. dr stephen davies receives a cash allowance equal to 6% of his salary in lieu of pension contributions.

Annual bonus
For 2018, the executive directors will have a maximum bonus opportunity of 100% of salary. no more than 75% of
any annual bonus will be payable in cash and the balance will be made in the form of a dBp award over shares,
which will then vest after a period of not less than two years, broadly subject to continued employment. cash
bonuses will be subject to clawback provisions as will dBp awards, as set out in the rules of the annual bonus plan
and dBp. the level of deferral and period for deferral may change in relation to future financial years.

the annual bonus for 2018 will be based 100% on achievement of company financial targets relating to profits.

the committee will normally disclose the annual bonus targets retrospectively in next year’s Annual Report on
Remuneration. In the event the Board considers these targets to remain commercially sensitive, they will be
disclosed as soon as possible once they are no longer considered to be sensitive.

Performance Share Plan (‘PSP’)
In 2018, the executive directors will receive nil cost options under the Medica Group psp, with face values of 150%
of salary.

the 2018 psp awards will vest after three years, subject to the following performance measures and will be subject
to a further 2 year holding period following the end of the normal vesting period:

performance measures

3-year eps growth

3-year absolute tsR growth

Weighting

50%

Absolute tsR growth has been selected by the committee to closely align executive interests with those of
shareholders. Medica’s tsR performance will be measured over the three-year period commencing 1 January 2018.

eps growth has been selected by the committee because it closely aligns with, and incentivises delivery of,
Medica’s strategy. the eps growth will be measured over the three-year period commencing 1 January 2018.

the performance target ranges have been set at stretching levels taking into account both internal and external
forecasts. the maximum vesting level is set to represent very stretching performance.

In line with our policy, psp awards will also be subject to Medica’s malus and clawback provisions.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

Implementation of Non-Executive Director Remuneration Policy for 2018
non-executive director fees were set on listing taking into account competitive practice for similar roles. the
current fees payable to the non-executive directors are set out below:

Role

chairman

senior Independent non-executive director

Independent non-executive director

non-executive director (payable to cBpe in respect of Mr Jain’s services)

non-executive director fees will remain at these levels for 2018.

Fee

£100,000

£60,000

£50,000

£42,000

Directors’ shareholdings (audited)
the table below sets out details of the current shareholdings of each director (and any relevant connected
persons) as at 31 december 2017 and, for executive directors, compares this to their shareholding guideline as set
out below. no prior year data is available given listing occurred on 21 March 2017. the executive directors are
subject to shareholding guidelines of 100% of salary, which they have met.

director

John Graham

Anthony lee

dr stephen davies

Roy davis

steve Whittern

professor Mike Bewick

Anand Jain3

options

owned

outright or
vested1 , 2

unvested and
not subject to
performance

unvested and
subject to
performance

Vested but not
exercised

unvested and
not subject to
performance

current
shareholding
(% salary)

shareholding
guideline
(% salary)

3,608,248

515,464

1,546,392

37,037

11,111

–

nil

–

nil

–

nil

–

222,222

3,726%

155,555

222,222

760%

1,597%

–

100%

–

current holding measured by reference to the middle market quotation of Medica’s share price on 29 december 2017 (206.5 pence) and as a
percentage of base salary at 31 december 2017.
no further shares were acquired by the directors between 31 december 2017 and 9 March 2018, being the latest practicable date prior to
publication of this Annual Report.

3 no shares are owned by Anand Jain but cBpe nominees limited hold 8,220,551 ordinary shares as at 9 March 2018.

the directors’ Remuneration Report has been approved by the Board and signed on its behalf by:

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chairman of the Remuneration committee
12 March 2018

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Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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DIRECTORS’ REPORT

the directors are pleased to present their report to shareholders and the audited financial statements for Medica
Group plc and its subsidiaries for the year ended 31 december 2017. the company registration number of Medica
Group plc is 08497963. the principal activity is that of teleradiology and the business model is set out on pages
10 to 11.

Statement of Directors responsibilities
the directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulations.

company law requires the directors to prepare Group and parent financial statements for each financial year.

under that law the directors are required to prepare the Group financial statements in accordance with
International Financial Reporting standards (IFRss) as adopted by the european union and have elected to prepare
the parent company financial statements in accordance with united Kingdom Generally Accepted Accounting
practice (united Kingdom Accounting standards and applicable laws, including FRs 101 “Reduced disclosure
Framework”). 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 and profit or loss of the company and Group for that
period. In preparing these financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable IFRss and uK Accounting standards have been followed, subject to any material

departures disclosed and explained in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the

company will continue in business.

the directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
company’s transactions and disclose with reasonable accuracy at any time the financial position of the company
and enable them to ensure that the financial statements and the Remuneration Report comply with the companies
Act 2006 and Article 4 of the IAs Regulation. they are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

the directors confirm that:

• so far as each director is aware, there is no relevant audit information of which the company’s auditor is

unaware; and

• the directors have taken all the steps that they ought to have taken as directors in order to make themselves

aware of any relevant audit information and to establish that the company’s auditor is aware of that information.

the directors are responsible for preparing the Annual Report in accordance with applicable law and regulations.
Having taken advice from the Audit committee, the directors consider the Annual Report and the financial
statements, taken as a whole, provides the information necessary to assess the company’s performance, business
model and strategy and is fair, balanced and understandable.

the directors are responsible for the maintenance and integrity of the corporate and financial information included
on the company’s website. legislation in the united Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.

to the best of our knowledge:

• the Group financial statements, prepared in accordance with IFRss as adopted by the european union, give a

true and fair view of the assets, liabilities, financial position and profit or loss of the company and the
undertakings included in the consolidation taken as a whole;

• the parent company financial statements, prepared in accordance with united Kingdom Generally Accepted

Accounting practice, give a true and fair view of the assets, liabilities, financial position and profit or loss of the
company; and

• the Annual Report, including the strategic report, includes a fair review of the development and performance of
the business and the position of the company and the undertakings included in the consolidation taken as a
whole, together with a description of the principal risks and uncertainties that they face.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

Principal risks and uncertainties
the principal risks and uncertainties are set out in the financial review on pages 23 to 24.

Results and dividends
the results for 2017 are set out in the financial statements on pages 62 to 88.

An interim dividend of 0.55 pence per ordinary share was paid to shareholders on 26 october 2017. the Board has
proposed a final dividend of 1.10 pence (2016: nil pence) per share, which, subject to approval at the AGM, will be
paid on 22 June 2018 to shareholders on the register at close of business on 1 June 2018.

Review of the period
A comprehensive analysis of the Group’s progress and development is set out in the strategic Report on pages 4 to
22 which includes the chairman’s statement, chief executive’s Review and Financial Review. this analysis includes
comments on the position of the Group at the end of the financial period.

Significant events after the year-end
there have been no significant events after year-end.

Capital structure
the company’s share capital is divided into 111,111,114 ordinary shares of £0.02 each with voting rights. note 22
explains the changes to the capital structure during the year.

Significant shareholdings
As at 31 december 2017 and 9 March 2018, the directors were aware of the following interests in 3% or more of the
voting rights of the issued ordinary share capital. these shareholdings are as notified to the company through a
tR-1 as per the listing rules.

cBpe nominees limited

J M Graham

old Mutual plc

standard life Aberdeen plc

GVQ Investment Management limited

liontrust Investment partners llp

Hargreave Hale limited

As at 31 december 2017

As at 9 March 2018

number of
ordinary
shares in issue
held

percentage of
ordinary

shares in issue

number of
ordinary
shares in issue
held

percentage of
ordinary
shares in issue

8,220,551

7.40% 8,220,551

3,608,248

3.25% 3,608,248

7.40%

3.25%

20,742,529

18.66% 20,742,529

18.66%

8,879,083

7.99% 8,879,083

5,255,556

4.73% 6,255,038

5,561,315

5.01%

5,561,315

4,316,965

3.89% 4,316,965

7.99%

5.63%

5.01%

3.89%

3.60%

the Independent Investment trust plc

4,000,000

3.60% 4,000,000

Related party transactions
details of all related party transactions are set out in note 28 to the Financial statements.

CO2 Emissions
the Group’s co2 emissions are disclosed on page 25 of the Financial Review.

Director’s insurance
the Group maintains appropriate insurance cover in respect of any legal action against its directors including in
respect of the prospectus issued for the initial public offering.

Corporate governance
the directors’ statement on corporate Governance is set out on pages 28 to 31 and forms part of this report.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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DIRECTORS’ REPORT CONTINUED

Going concern assessment
the consolidated financial statements have been prepared on the going concern basis on the assumption that the
Group continues in existence for the foreseeable future. the directors of Medica Group plc have assessed the
current financial position of the Group, along with future cash flow requirements, to determine if the Group has the
financial resources to continue as a going concern for a period of at least 12 months from the approval of the
accounts. the directors have concluded that the Group will be able to continue in operation and meet its liabilities
as they fall due for the foreseeable future and are satisfied that it is appropriate to adopt the going concern basis
of preparation in the financial statements.

Viability statement
In accordance with provision c.2.2 of the uK corporate Governance code, the directors have assessed the viability
of the company over a three-year period to 31 december 2020. the directors believe this period to be appropriate
as the Group’s strategic review considered by the Board encompasses this period. In making their assessment, the
directors have considered the Group’s current financial position and performance, cash flow projections, including
future capital expenditure, in relation to the availability of finance and funding facilities and have considered these
factors in relation to the principal risks and uncertainties which are included in the directors’ Report.

during the year to 31 december 2017, the Board carried out a robust assessment of the principal risks facing the
Group, including those that would threaten its business model, future performance, solvency or liquidity. the
directors believe that the Group is well placed to manage its business risks successfully, having taken into account
the Group’s principal risks and uncertainties. Accordingly, the Board believes that, taking into account the Group’s
current position, and subject to the principal risks faced by the business, the Group will be able to continue in
operation and to meet its liabilities as they fall due for the period up to 31 december 2020.

the directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the company’s position and
performance, business model and strategy.

Future outlook
the strategy of the business is set out in the chief executive’s Review on pages 16 to 19.

Annual General Meeting
Medica’s Annual General Meeting is scheduled to take place on 23 May 2018.

Directors
the directors who served during the year were as follows:

Roy davis
steve Whittern
professor Mike Bewick
dr stephen davies
John Graham
Anand Jain
Anthony lee
Kevin terrins
Martin Wells

All of the above directors are male.

Resigned 1 March 2017
Resigned 1 March 2017

Auditors
the auditors Grant thornton uK llp, will be proposed for reappointment in accordance with section 485 of the
companies Act 2006.

this report was approved by the Board on 12 March 2018 and signed on its behalf.

ANTHONY LEE
chief Financial officer

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF MEDICA GROUP PLC

Opinion

Our opinion on the financial statements is unmodified
We have audited the Financial statements of Medica Group plc (the ‘parent company’) and its subsidiaries (the
‘Group’) for the year ended 31 december 2017 which comprise the consolidated Income statement and
consolidated statement of comprehensive Income, the consolidated statement of Financial position, the
consolidated statement of cash Flows, the consolidated statement of changes in equity, the company
statement of Financial position, the company statement of changes in equity and notes to the Financial
statements, including a summary of significant accounting policies. the financial reporting framework that has
been applied in the preparation of the Group Financial statements is applicable law and International Financial
Reporting standards (IFRss) as adopted by the european union. the financial reporting framework that has been
applied in the preparation of the parent company Financial statements is applicable law and united Kingdom
Accounting standards, including Financial Reporting standard 101 ‘Reduced disclosure Framework’ (united
Kingdom Generally Accepted Accounting practice).

In our opinion:
• the Financial statements give a true and fair view of the state of the Group’s and of the parent company’s

affairs as at 31 december 2017 and of the Group’s profit for the year then ended;

• the Group Financial statements have been properly prepared in accordance with IFRss as adopted by the

european union;

• the parent company Financial statements have been properly prepared in accordance with united Kingdom

Generally Accepted Accounting practice;

• the Financial statements have been prepared in accordance with the requirements of the companies Act 2006

and, as regards the Group Financial statements, Article 4 of the IAs Regulation.

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 further described in the Auditor’s responsibilities for the audit of
the Financial 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 Financial statements in the uK,
including the FRc’s ethical standard as applied to listed public interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.

Who we are reporting to
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 for no other purpose. to the fullest
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, for our audit work, for this report, or for the opinions we have formed.

Conclusions relating to principal risks, going concern and viability statement
We have nothing to report in respect of the following information in the Annual Report, in relation to which the
IsAs (uK) require us to report to you whether we have anything material to add or draw attention to:
• the disclosures in the strategic Report set out on pages 23 to 24 that describe the principal risks and explain

how they are being managed or mitigated;

• the directors’ confirmation, set out on page 56 of the directors’ Report that they have carried out a robust

assessment of the principal risks facing the Group, including those that would threaten its business model, future
performance, solvency or liquidity;

• the directors’ statement, set out on page 56 of the directors’ Report about whether the directors considered it

appropriate to adopt the going concern basis of accounting in preparing the Financial statements and the
directors’ identification of any material uncertainties to the Group and the parent company’s ability to continue
to do so over a period of at least 12 months from the date of approval of the Financial statements;

• whether the directors’ statement relating to going concern required under the listing Rules in accordance with

listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or

• the directors’ explanation, set out on page 56 of the directors’ Report as to how they have assessed the
prospects of the Group, over what period they have done so and why they consider that period to be
appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due over the period of their assessment, including any
related disclosures drawing attention to any necessary qualifications or assumptions.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

57
57

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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF MEDICA GROUP PLC CONTINUED

Overview of our audit approach
• the key audit matter was identified as revenue recognition, particularly the risk around the

occurrence of revenue;

• overall Group materiality: £476,000 which represents 4.5% of the Group’s Adjusted eBItdA;

and

• We performed full scope audit procedures over all Group entities at the sole operating location

in the united Kingdom.

Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
Financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. these matters included those that had the greatest effect on: the
overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.
these matters were addressed in the context of our audit of the Financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.

Key Audit Matter – Group

How the matter was addressed in the audit – Group

Revenue recognition

Revenue is recognised
throughout the Group as the fair
value of consideration receivable
in respect of the provision of
services in relation to the
completion of radiology reports.
Revenue is recognised at the
point at which the radiology
report is submitted to the
hospital’s RIs (Radiology
Information system) and, as
such, revenue is recognised once
the service has been provided
and delivered to the customer.

determining the amount of
revenue to be recognised does
not require significant
management judgement or
estimation, due to the stage of
completion being final at the
time the report is submitted.

However, due to the volume of
transactions that occur during
the year, we identified the
occurrence of revenue and the
existence of the associated
receivables as a significant risk.
this was the most significant
assessed risk of material
misstatement.

our audit work included, but was not restricted to:
• gaining an understanding of the processes and controls implemented by the
Group to identify, measure and recognise revenue, and assessing the design
effectiveness of those processes and controls, particularly in relation to the
accurate extraction of data from the picture Archiving and communications
system (‘pAcs’), as relevant to the recognition of revenue;

• testing the validity of the data extracted from the pAcs, including: (i) an It

specialist review of the coding of the computer algorithm used to extract data
to gain comfort over the accuracy of the extracted data; (ii) for a sample of
the extracted data, verifying that the underlying radiology reports have been
included on the applicable hospital’s Radiology Information system and that
they had therefore been appropriately submitted; and (iii) for a sample of the
extracted data, verifying through examination of customer contracts and
other correspondence that the pricing rates applied were in accordance with
contractual agreements as appropriate;

• considering the appropriateness of the Group’s revenue recognition policy in
accordance with International Accounting standard 18: ‘Revenue’ and testing
a sample of revenue items to verify that they were recorded in line with that
policy;

• testing a sample of revenue items recognised during the year to determine the

existence and occurrence of that revenue by agreeing each item to an
underlying customer contract or relationship and to pAcs data;

• testing a sample of year end receivables by directly obtaining confirmations

from the customers; and where such a confirmation response was not
received, conducting alternative procedures, including the verification of
subsequent cash receipts and examination of source documents to gain
comfort over the existence of year end receivables.

the Group’s accounting policy on revenue recognition is disclosed in note 3.2 to
the Financial statements and related disclosures are included in note 5. the
Audit committee identified revenue recognition as a significant matter in its
report on page 33, where the Audit committee also described the consideration
that it has given to address this matter.

Key observations
overall, based on our audit work, our assessment is that the processes applied in
recording radiology reporting transactions resulted in appropriate recognition of
revenue and associated receivables in the financial statements and our testing
did not identify any material misstatements.

no key audit matters were identified in respect of the parent company Financial statements.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

Our application of materiality
We define materiality as the magnitude of misstatement in the Financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in
determining the nature, timing and extent of our audit work and in evaluating the results of that work.

Materiality was determined as follows:

Materiality measure

Group

Parent Company

Financial statements
as a whole

performance materiality
used to drive the extent
of our testing

£476,000 which is 4.5% of the Group’s
earnings Before Interest, taxes,
depreciation, and Amortisation excluding
exceptional Items (‘Adjusted eBItdA’). this
benchmark is considered the most
appropriate because this is the key
performance measure used by the Board of
directors to report to investors on the
financial performance of the Group.

Materiality for the current year is higher
than the level that we determined for the
year ended 31 december 2016 to reflect the
increase in the Group’s Adjusted eBItdA in
the year ended 31 december 2017.

£428,000 which is 2% of the parent
company’s total Assets, capped at 90% of
the Group materiality. total Assets is
considered the most appropriate
benchmark because the company is
primarily an investment holding entity.

Materiality for the current year is higher
than the level that we determined for the
year ended 31 december 2016 to reflect the
increase in the company’s total Assets in
the year ended 31 december 2017.

75% of financial statement materiality.

specific materiality for:
directors’ remuneration
and related party
transactions

£1,000 based on our view that directors’
remuneration and related party transactions
would be considered material by nature by
the users of the Financial statements.

communication of
misstatements to the
Audit committee

£23,000 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.

£21,000 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.

the graphs below illustrate how materiality interacts with the applicable benchmark which we considered to be an
appropriate basis on which to base our materiality.

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Group

Parent
Company

476,000

428,000

10,581,000

21,815,000

Materiality

Adjusted EBITDA

Total Assets

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Medica Group Plc
AnnuAl RepoRt And Accounts 2017

INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF MEDICA GROUP PLC CONTINUED

An overview of the scope of our audit
As all Group operations are based in the uK and subject to statutory audit, all components of the Group were
subjected to a comprehensive audit approach. our audit approach was based on a thorough understanding of the
Group’s business and is risk-based, and in particular included:
• performing an evaluation of the design effectiveness of controls over key financial statement risks identified as

part of our risk assessment process;

• gaining an understanding of the financial reporting and accounts production process; and
• undertaking substantive testing on significant transactions, balances and disclosures, the extent of which was

based on various factors such as our overall assessment of the control environment, the effectiveness of controls
over individual systems and the management of specific risks.

the scope of the current year audit has remained consistent with that of the prior year.

Other information
the directors are responsible for the other information. the other information comprises the information included
in the Annual Report set out on pages 1 to 56, other than the Financial statements and our Auditor’s Report
thereon. our opinion on the Financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the Financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the Financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the Financial statements or a material misstatement of the other information. If, based on the work
we have performed, we conclude that there is a material misstatement of the other information, we are required to
report that fact.

We have nothing to report in this regard.

In this context, we also have nothing to report in regard to our responsibility to specifically address the following
items in the other information and to report as uncorrected material misstatements of the other information where
we conclude that those items meet the following conditions:
• Fair, balanced and understandable set out on page 31 – the statement given by the directors that they consider
the Annual Report and Financial statements taken as a whole is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group’s performance, business model and strategy, is
materially inconsistent with our knowledge obtained in the audit; or

• Audit committee reporting set out on pages 32 and 33 – the section describing the work of the Audit committee

does not appropriately address matters communicated by us to the Audit committee; or

• directors’ statement of compliance with the uK corporate Governance code set out on page 28 – the parts of
the directors’ statement required under the listing Rules relating to the company’s compliance with the uK
corporate Governance code containing provisions specified for review by the auditor in accordance with listing
Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the uK corporate Governance
code.

Our opinions on other matters prescribed by the Companies Act 2006 are unmodified
In our opinion, the part of the directors’ Remuneration Report to be audited has been properly prepared in
accordance with the companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic Report and the directors’ Report for the financial year for which the

Financial statements are prepared is consistent with the Financial 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 under the Companies Act 2006
In the light of the knowledge and understanding of the Group and the parent company and its environment
obtained in the course of the audit, we have not identified material misstatements in the strategic Report or the
directors’ Report.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which 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 for our audit have

not been received from branches not visited by us; or

• the parent company Financial statements and the part of the directors’ Remuneration Report to be audited are

not in agreement with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.

Responsibilities of Directors for the Financial Statements
As explained more fully in the directors’ Responsibilities statement set out on page 54, the directors are
responsible for the preparation of the Financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary to enable the preparation of Financial
statements that are free from material misstatement, whether due to fraud or error.

In preparing the Financial statements, the directors are responsible for assessing the Group’s and the 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 Financial statements as a whole are free from
material misstatement, whether due to fraud 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 from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these Financial statements.

We are responsible for obtaining reasonable assurance that the Financial statements taken as a whole are free
from material misstatement, whether caused by fraud or error. owing to the inherent limitations of an audit, there is
an unavoidable risk that material misstatements of the Financial statements may not be detected, even though the
audit is properly planned and performed in accordance with the IsAs (uK). our audit approach is a risk-based
approach and is explained more fully in the ‘An overview of the scope of our audit’ section of our Audit Report.

A further description of our responsibilities for the audit of the Financial statements is located on the Financial
Reporting council’s website at: www.frc.org.uk/auditorsresponsibilities. this description forms part of our Auditor’s
Report.

Other matters which we are required to address
We were appointed by the Board of directors on 6 August 2013 to audit the Financial statements for the period
ending 31 december 2013 and subsequent financial periods.

the period of total uninterrupted engagement is five years, covering the periods ending 31 december 2013 to 31
december 2017.

the non-audit services prohibited by the FRc’s ethical standard were not provided to the Group or the parent
company and we remain independent of the Group and the parent company in conducting our audit.

our audit opinion is consistent with the additional report to the Audit committee.

JONATHAN MAILE BSC (HONS) FCA
senior statutory Auditor
for and on behalf of Grant thornton uK llp
statutory Auditor, chartered Accountants
crawley
date: 12 March 2018

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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CONSOLIDATED INCOME STATEMENT AND
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 december 2017

Revenue
cost of sales

Gross profit
Administration expenses

operating profit
other expenses – exceptional items

operating profit after exceptional items
Finance income
exceptional finance costs
Finance costs

Profit before tax

Analysed as
Adjusted EBITDA
exceptional items
share based payments charge
exceptional finance costs
Finance costs
Finance income
depreciation
Amortisation

Profit before tax

Income tax charge
Profit attributable to equity holders of the parent

Statement of Comprehensive Income
Profit for the year
other comprehensive income
Total comprehensive profit for the year attributable to owners of the parent

Profit per share (basic and diluted)
Basic profit per ordinary share (pence)

diluted profit per ordinary share (pence)

31 December
2017
£’000

31 december
2016
£’000

note

33,715
(17,282)

16,433
(7,917)

8,516
(1,661)

6,855
50
(582)
(661)

28,522
(14,313)

14,209
(6,993)

7,216
(757)

6,459
10
–
(2,181)

5,662

4,288

10,582
(1,661)
(74)
(582)
(661)
50
(775)
(1,217)

9,229
(757)
–
–
(2,181)
10
(883)
(1,130)

5,662

4,288

(1,331)
4,331

(971)
3,317

4,331
–
4,331

3.99p

3.96p

3,317
–
3,317

3.32p

6
7

8
9
9

9
9
8
15
14

the notes and accounting policies on pages 66 to 83 form an integral part of these financial statements.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
COMPANY REGISTRATION 08497963
As at 31 december 2017

Non-current assets
Goodwill
other intangible assets
property, plant and equipment

Current assets
trade and other receivables
cash and cash equivalents

Current liabilities
trade and other payables
Borrowings
derivative financial instruments

Non-current liabilities
Borrowings and other financial liabilities
deferred tax

Net assets

Equity
share capital
share premium
Retained profit

Total equity

note

13
14
15

At 31
December
2017
£’000

At 31
december
2016
£’000

15,948
9,218
1,880

15,948
9,402
1,835

27,046

27,185

8,210
6,907

6,073
4,713

15,117

10,786

18
19
24

(3,932)
–
(14)

(3,283)
(1,362)
(52)

(3,946)

(4,697)

20 (11,888) (25,369)
(1,596)
16

(1,429)

(13,317) (26,965)

24,900

6,309

22
22
22

222
14,721
9,957

146
1,309
4,854

24,900

6,309

the notes and accounting policies on pages 66 to 83 form an integral part of these financial statements.

the financial statements on pages 62 to 83 were authorised for issue by the Board of directors on 12 March 2018
and were signed on its behalf by:

JOHN GRAHAM
director

ANTHONY LEE
director

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CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 december 2017

Operating activities
profit for the year
Add taxation

profit before tax
Adjustments for:
depreciation
Amortisation
share based payments
Finance income
exceptional finance costs
Finance costs
Changes in:
(Increase) in trade and other receivables
decrease/increase in trade and other payables
Movement of derivative financial instruments
tax paid

cash inflow from operating activities
Investing activities
purchase of property, plant and equipment
purchase of software intangibles
Interest received

cash outflow from investing activities
Cash flows from financing activities
loan finance raised
equity funds raised
costs of equity funds raised
Repayment of borrowings
loan fees paid for refinancing
dividends paid to ordinary shareholders
Interest paid

net cash outflow from financing

Net change in cash and cash equivalents

Movement in net cash
cash and cash equivalents, beginning of period
Increase in cash and cash equivalents
Cash and cash equivalents, end of period

12 months
ended 31
December
2017
£’000

12 months
ended 31
december
2016
£’000

4,331
1,331

3,317
971

5,662

4,288

775
1,217
74
(12)
582
661

883
1,130
–
(10)
–
2,181

(2,138)
(365)
(38)
(904)

(1,740)
949
30
(924)

5,514

6,787

(820)
(612)
12

(789)
(438)
10

(1,420)

(1,217)

–
15,000
(203)
(15,270)
(130)
(611)
(686)

13,600
–
–
(15,150)
(476)
–
(916)

(1,900)

(2,942)

2,194

2,628

4,713
2,194
6,907

2,085
2,628
4,713

the notes and accounting policies on pages 66 to 83 form an integral part of these financial statements.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 december 2017

At 1 January 2016

profit and total comprehensive income for the period

At 1 January 2017

cancellation of share premium
shares issued during the year
share issue costs
dividends paid to ordinary shareholders
equity settled share based payments

Transactions with owner

profit and total comprehensive income for the period

At 31 December 2017

share
capital
£’000

share
premium
£’000

146

1,309

–

Retained
earnings
£’000

1,537

3,317

total
equity
£’000

2,992

3,317

146

1,309

4,854

6,309

–
76
–
–
–

–

(1,309)
14,924
(203)
–
–

1,309
–
–
(611)
74

–
15,000
(203)
(611)
74

13,412

772

14,260

–

4,331

222

14,721

9,957 24,900

the notes and accounting policies on pages 66 to 83 form an integral part of these financial statements.

details in the movement in equity and debt following the admission to the Main Market of the london stock
exchange on 21 March 2017 are shown in notes 20 and 21.

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NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 december 2017

1 Medica Group Plc
Medica Group plc (‘the company’) was incorporated in england and Wales on 22 April 2013 under the companies
Act 2006 (registration number 08497963) and is domiciled in the united Kingdom. Its registered office and
principal place of business is Havelock place, Havelock Road, Hastings, east sussex, tn34 1BG.

the consolidated financial statements of the Group for the year ended 31 december 2017 (including comparatives)
comprise the company and its subsidiaries (together referred to as ‘the Group’). the Group’s principal activity is
the provision of teleradiology reporting and it is the leading independent provider in the uK. the Group’s business
activities, together with the factors likely to affect its future development, performance and position are set out in
the chairman’s and chief executive’s Reports on pages 4–5 and 16–19. In addition, note 25 to the financial
statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and its exposure to credit risk and liquidity risk.

2 Basis of preparation
2.1. Basis of preparation
the consolidated financial statements of Medica Group plc and its subsidiary undertakings (together ‘the Group’)
for the 12 months ended 31 december 2017 have been prepared by the directors of Medica Group plc.

the consolidated financial statements of the Group have been prepared in accordance with International Financial
Reporting standards (‘IFRs’) and IFRIc interpretations as adopted by the european union (eu) and the companies
Act 2006 applicable to companies reporting under IFRs.

the preparation of consolidated financial statements in conformity with IFRs requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of applying the
Group’s accounting policies. the areas involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4 to the
financial statements.

the consolidated financial statements are presented in £ (sterling), the presentational and functional currency of
the company, rounded to the nearest £’000.

2.2. Going concern
the directors of Medica Group plc have assessed the current financial position of the Group, along with future cash
flow requirements to determine if the Group has the financial resources to continue as a going concern for a period
of at least 12 months from the approval of the accounts. As a result of this review the directors of Medica Group plc
have concluded that it is appropriate that Medica Group plc be considered a going concern. For this reason, they
have adopted the going concern basis in preparing the financial statements. the financial statements do not
include any adjustments that would result in the going concern basis of preparation being inappropriate.

2.3. Adoption of new and revised standards
new and amended standards issued in the year have not had a significant impact on the financial statements. At
the date of authorisation of these financial statements, certain new standards, amendments and interpretations to
existing standards have been published by the IAsB and adopted by the eu but are not yet effective, and have not
been adopted early by the Group. Management anticipates that all of the relevant pronouncements will be adopted
in the Group’s accounting policies for the first period beginning after the effective date of the pronouncement.
Information on new standards, amendments and interpretations that are expected to be relevant to the Group’s
financial statements is provided below. certain other new standards and interpretations have been issued but are
not expected to have a material impact on the Group’s financial statements.
• IFRs 9 ‘Financial Instruments’, effective 1 January 2018.
• IFRs 15 ‘Revenue from contracts with customers’, effective date 1 January 2018.
• IFRs 16 ‘leases’, effective date 1 January 2019 (endorsed by the eu).

Based on the Group’s historic transaction history and anticipated future transaction profile IFRs 9 is not expected
to have a significant impact on the measurement financial instruments, however there will be minor changes to the
disclosures in the financial statements in order to comply with the new standard.

the impact of IFRs 15 has been assessed and is not expected to have an impact on revenue recognition, however
there will be minor changes to the disclosures in the financial statements in order to comply with the new standard.
If the standard had been applied to the financial statements for the year ended 31 december 2017 there would have
been no impact on revenue recognition. IFRs 16 will impact the measurement and disclosure of lease liabilities, and
the liabilities shown on the Group’s balance sheet.

A number of IFRs and IFRIc interpretations are also currently in issue which are not relevant for the Group’s
activities and which have not therefore been adopted in preparing these financial statements.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

3. Summary of accounting policies
these accounting policies have been used throughout all periods presented in the financial statements, except
where the Group has applied certain accounting policies and exemptions upon transition to IFRs.

3.1. Basis of consolidation
the Group financial statements consolidate those of the parent company and all of its subsidiary undertakings
drawn up to 31 december 2017. All subsidiaries have the same reporting date and use accounting policies
consistent with those of the parent company. Medica Group plc (‘the Group’) controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the subsidiary and has the ability to affect
those returns through its power over the entity. subsidiaries are fully consolidated from the date on which control
is transferred to the Group.

unrealised gains and losses on transactions between Group companies are eliminated. Amounts reported in the
financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting
policies adopted by the Group.

Business combinations are dealt with by the acquisition method. the acquisition method involves the recognition at
fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition
date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to
acquisition. on initial recognition, the assets and liabilities of the subsidiary are included in the consolidated
statement of financial position at their fair values, which are also used as the basis for subsequent measurement in
accordance with the Group accounting policies. Goodwill is stated after separating out identifiable intangible
assets. Goodwill represents the excess of acquisition cost over the fair value of the Group’s share of the identifiable
net assets of the acquired subsidiary at the date of acquisition.

profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are
recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable.

3.2. Revenue
Revenue is measured at the fair value of the consideration received or receivable and represents amounts
receivable for services provided in the normal course of business, net of discounts and sales related taxes.

Revenue is recognised when the amount of revenue can be measured reliably, it is probable that the economic
benefits associated with the transaction will flow to the entity, the costs incurred or to be incurred can be
measured reliably and when the criteria for each of the Group’s different activities have been met.

Radiology image submissions: the service is deemed to have been provided, and subsequent revenue recognised,
when the company submits its radiology report to the customer. Revenue for all service lines are recognised on the
same basis.

3.3. Interest income/Interest expense
Interest income and expenses are reported on an accrual basis using the effective interest method.

3.4. Segment reporting
IFRs 8 requires operating segments to be identified on the same basis as is used internally for the review of
performance and allocation of resources by the Group chief executive (chief operating decision maker – codM).

the Board has reviewed the Group and all revenues are functional activities of teleradiology reporting and these
activities take place on an integrated basis. the senior executive team reviews the financial information on an
integrated basis for the Group as a whole.

3.5. Leasing
Management applies judgement in considering the substance of a lease agreement and whether it transfers
substantially all the risks and rewards incidental to ownership of the leased asset. Key factors considered include
the length of the lease term in relation to the economic life of the asset, the present value of the minimum lease
payments in relation to the asset’s fair value, and whether the Group obtains ownership of the asset at the end of
the lease term.

Operating leases
All other leases are treated as operating leases. Where the Group is a lessee, payments on operating lease
agreements are recognised as an expense on a straight-line basis over the lease term. Associated costs, such as
maintenance and insurance, are expensed as incurred. Benefits received and receivable as an incentive to enter into
an operating lease are also spread on a straight-line basis over the lease term.

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AnnuAl RepoRt And Accounts 2017

NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 december 2017

3. Summary of accounting policies continued
3.6. Property, plant and equipment
property, plant and equipment are stated at historical cost less accumulated depreciation and impairment.
depreciation is calculated to write down the cost less estimated residual value of all property, plant and equipment
by equal annual instalments over their expected useful lives less estimated residual values, using the straight-line
method. the rates generally applicable are:

computer equipment
leasehold improvements

–
–

25% per annum
over the life of the lease term

the gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as
the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

the assets’ residual value and useful lives are reviewed, and adjusted if required, at each balance sheet date. the
carrying amount of an asset is written down immediately to its recoverable amount if the carrying amount is
greater than its estimated recoverable amount.

3.7. Impairment of property, plant and equipment
At each balance sheet date, the Group reviews the carrying amounts of its property, plant and equipment 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). Where 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.

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.

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.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or 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 (cash-generating unit) in prior years.

A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant assets are carried at
a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

3.8. Goodwill and other intangible assets
An intangible asset, which is an identifiable non-monetary asset without physical substance, is recognised to the
extent that it is probable that the expected future economic benefits attributable to the asset will flow to the Group
and that its cost can be measured reliably. the asset is deemed to be identifiable when it is separable or when it
arises from contractual or other legal rights.

Intangible assets acquired as part of a business combination, are shown at fair value at the date of the acquisition
less accumulated amortisation. Amortisation is charged on a straight-line basis through the profit or loss. the rates
applicable, which represent the directors’ best estimate of the useful economic life, are:
• customer relationships – 15 years.
• software and technology – 10 years for assets purchased as part of the acquisition of Medica Reporting limited

in 2013, software licences purchased since then are amortised over their term.

• Brands – 20 years.

Internal development costs
expenditure on the research phase of projects to develop new projects is recognised as an expense as incurred.

costs that are directly attributable to a project’s development phase are recognised as intangible assets, provided
they meet the following recognition requirements:
• the development costs can be measured reliably;
• the project is technically and commercially feasible;
• the Group intends to and has sufficient resources to complete the project;

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

• the Group has the ability to use or sell the software; and
• the software will generate probable future economic benefits.

3.8. Goodwill and other intangible assets
development costs not meeting these criteria for capitalisation are expensed as incurred.

directly attributable costs include employee costs incurred on software development along with an appropriate
portion of relevant overheads and borrowing costs.

3.9. Impairment of intangible assets
Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units
and is not amortised but tested annually for impairment. Impairment losses in respect of goodwill cannot be
subsequently reversed.

At each balance sheet date, the Group performs an annual impairment review of goodwill and any intangible assets
with an indefinite useful economic life. the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any). Where 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.

Recoverable amount is the higher of fair value less costs to sell and value in use.

An impairment loss is reversed if the asset’s or cash-generating unit’s recoverable amount exceeds its carrying
amount.

Other intangible assets
other intangible assets are not tested for impairment annually, only when there is an objective indicator of
impairment. Where an impairment indicator is identified an impairment test is carried out by comparing the
carrying of the assets with its recoverable amount. If the recoverable amount of an asset is estimated to be less
than its carrying amount, the carrying amount is reduced to its recoverable amount. An impairment loss is
recognised immediately in profit or loss.

3.10. Taxation
tax expenses recognised in profit or loss comprise the sum of the tax currently payable and deferred tax not
recognised in other comprehensive income or directly in equity.

Current tax
the tax currently payable is based on taxable profit for the year. taxable profit differs from profit as reported in the
statement of comprehensive income because it excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable or deductible. the Group’s liability for current tax
is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax
deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit, and are accounted for using
the liability method. deferred tax liabilities are generally recognised for all taxable temporary differences, and
deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is
probable that taxable profits will be available against which those deductible temporary differences can be
recognised. such assets and liabilities are not recognised if the temporary difference arises from goodwill or from
the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit.

deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries
except where the Group is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future. deferred tax assets arising from deductible
temporary differences associated with such investments are only recognised to the extent that it is probable that
there will be sufficient taxable profits against which to recognise the benefits of the temporary differences and
they are expected to reverse in the foreseeable future.

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AnnuAl RepoRt And Accounts 2017

NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 december 2017

the carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is
no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which
the liability is settled or the asset recognised based on tax rates (and tax laws) that have been enacted or
substantively enacted by the balance sheet date. the measurement of deferred tax liabilities and assets reflects the
tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover
or settle the carrying amount of its assets and liabilities.

deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.

3. Summary of accounting policies continued
3.11. Financial instruments
Recognition, initial measurement and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual
provisions of the financial instrument and are measured initially at fair value adjusted for transaction costs, except
for those carried at fair value through profit or loss which are measured initially at fair value. subsequent
measurement of financial assets and financial liabilities is described below.

Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or
when the financial asset and substantially all the risks and rewards are transferred.

Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or
expires. An exchange between an existing borrower and lender of debt instruments with substantially different
terms shall be accounted for as an extinguishment of the original financial liability and the recognition of a new
financial liability. similarly, substantial modification of the terms of an existing financial liability shall be accounted
for as an extinguishment of the original liability and the recognition of a financial liability. A substantial modification
of terms occurs when the discounted present value of the cash flows under the new terms is at least 10% different
from the discounted present value of the remaining cash flows of the original facility.

the only types of financial assets held by the Group are loans, receivables and derivative financial instruments.

Loans and receivables
loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. After initial recognition, these are measured at amortised cost using the effective interest
method, less provision for impairment. discounting is omitted where the effect of discounting is immaterial. the
Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments.

Individually significant receivables are considered for impairment when they are past due or when other objective
evidence is received that a specific counterparty will default. Receivables that are not considered to be individually
impaired are reviewed for impairment in groups, which are determined by reference to the industry and region of
the counterparty and other shared credit risk characteristics. the impairment loss estimate is then based on recent
historical counterparty default rates for each identified group.

Derivative financial instruments
the Group utilises interest rate swaps, derivative financial instruments are recognised at fair value at the end of the
year with changes in fair value recognised in the income statement.

Classification and subsequent measurement of financial liabilities
the Group’s financial liabilities include borrowings, trade and other payables and derivative financial instruments.
Financial liabilities are measured subsequently at amortised cost using the effective interest method except for
derivatives. the only derivatives held by the Group are interest rate swaps which have been included at fair value.
Financial liabilities designated at FVtpl, which are carried subsequently at fair value with gains or losses
recognised in profit or loss. please see note 24 for the fair value hierarchy.

3.12. Equity, reserves and dividend payments
share capital represents the nominal value of shares that have been issued.

share premium includes any premiums received on issue of share capital. Any transaction costs associated with the
issuing of shares are deducted from share premium, net of any related income tax benefits.

Retained earnings include all current and prior period retained profits or losses.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

dividend distributions payable to equity shareholders are included in ‘other liabilities’ when the dividends have
been approved in a general meeting prior to the reporting date.

3.13. Exceptional items
exceptional items are items that are unusual because of their size, nature or incidence and which the directors
consider should be disclosed separately to enable a full understanding of the Group’s results.

3.14. Employee benefits
short-term employee benefits and contributions to defined contribution plans are recognised as an expense in the
period in which they are incurred.

3.15. Share based payments
the Group has applied the requirements of IFRs share based payments.

the Group issues share based payments to certain employees. the fair value determined at the grant date is
expensed on a straight line basis over the vesting period, based on the Group’s estimate of shares that will
eventually vest. Fair value is measured by use of an appropriate valuation model. the Black-scholes option pricing
model has been used to value the non-market based conditions part of the performance share plan (psp) and a
Binomial model has been used to value the market based conditions part.

4 Critical accounting judgements and key sources of estimation uncertainty
the preparation of financial statements under IFRs requires the Group to make estimates and assumptions that
affect the application of policies and reported amounts. estimates and judgements are continually evaluated and
are based on historical experience and other factors including expectations of future events that are believed to be
reasonable under the circumstances. Actual results may differ from these estimates. the estimates and
assumptions which have a risk of causing a material adjustment to the carrying amount of assets and liabilities are
discussed below.

4.1. Key judgements and sources of estimation uncertainty
The useful life of acquired intangible assets
the Group recognises the intangible assets acquired as part of business combinations at fair value at the date of
acquisition. the determination of these fair values were determined by experts engaged by management and
based upon management’s and the directors’ judgement and includes assumptions on the timing and amount of
future incremental cash flows generated by the assets and selection of an appropriate discount rate. Furthermore,
management have estimated the expected useful lives of intangible assets and charged amortisation on these
assets accordingly. At the reporting date no impairments to other intangible assets were recognised in the period.

the directors considered the estimates of the useful economic life of intangible assets acquired in May 2013 as part
of the purchase of Medica Reporting limited. the directors considered the strength of the Medica brand in the
teleradiology and wider healthcare sector and noted that the transaction was limited to a change of equity
ownership. the brand is expected to continue to be used for the foreseeable future. In assessing the useful
economic life of customer relationships the directors considered the importance of long term relationships given
the limited number of nHs trusts and the fact that the majority of revenue came from long standing clients. In
assessing the useful economic life of the technology purchased the directors considered that the technology was
core to the business and whilst requiring ongoing investment was not expected to fundamentally change for a
considerable period.

5 Segment reporting
Management prepare and monitor financial information for the Group’s three primary service lines (Routine
cross-sectional, Routine plain Film and nightHawk) on a regular basis. this financial information is reviewed and
used by the chief operational decisions Maker (considered to be the chief executive officer) in managing the
operating activities of the Group. IFRs 8 sets out certain thresholds in determining whether reportable operating
segments exist, and all of the three primary service lines exceed these thresholds. However, IFRs 8 permits the
aggregation of operating segments where these services lines are similar in nature, service delivery processes,
types or classes of customers, and regulatory factors. Management consider it is most appropriate to aggregate
the three service lines into one teleradiology operating segment due to the similarities in respect of these factors.
As a result all teleradiology activities are presented as one operating segment.

Medica Group plc has identified only one geographic area, the uK. As a result of this and there being only one
operating segment as described above, no analysis has been provided. no customer accounted for more than 10%
of the Group’s revenues.

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Medica Group Plc
AnnuAl RepoRt And Accounts 2017

NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 december 2017

the Group identified four revenue streams, nightHawk, Routine cross-sectional, Routine plain Film and other. the
analysis of revenue by each stream is detailed below.

nightHawk
Routine cross-sectional
Routine plain Film
Independent and specialist

6 Operating profit and profit before taxation
the operating profit and the profit before taxation are stated after:

Fees payable to the company’s auditor for the audit of the company’s annual accounts
the audit of the company’s subsidiaries pursuant to legislation

Total audit fees
taxation compliance services
other assurance services

Total non-audit fees

total fees paid to company’s auditor

operating lease rentals – land and buildings
depreciation: property, plant and equipment
Amortisation of intangible fixed assets on acquisition
Amortisation of intangible fixed assets on other assets

7 Exceptional items

costs incurred in respect of Initial public offering

2017
£’000

16,798
12,542
3,665
710

2016
£’000

13,536
10,508
3,876
602

33,715

28,522

2017
£’000

46
3

49
–
127

127

176

52
775
870
347

2017
£’000

1,661

2016
£’000

53
2

55
–
216

216

271

52
883
870
260

2016
£’000

757

the above costs were incurred in respect of the company’s refinancing and listing on the stock exchange in March
2017. Although some of the costs are allowable for corporation tax purposes, a large proportion of the costs are
deemed capital in nature and therefore are not allowable for tax purposes; the tax effect is not considered material
by the directors. Management identified a portion of the exceptional Ipo costs as relating to the issue of new
shares and subsequently £203,000 has been recognised in equity in 2017.

exceptional finance costs are detailed in note 9.

8 Finance income

Interest on cash and cash equivalents
Fair value movement on derivative financial instruments

9 Finance costs

Bank interest
Amortisation of loan arrangement fees expense
exceptional loan arrangement fees expense
Interest on secured loan notes
Fair value movement on derivative financial instruments

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

2017
£’000

12
38

2017
£’000

414
68
582
179
–

2016
£’000

10
–

2016
£’000

978
291
–
882
30

1,243

2,181

As part of the listing process the debt owing to lloyds bank was partially settled and the pre-existing debt agreement
was amended so as to include Medica Group plc as the primary borrower. owing to this, transaction costs of £582,000
(£512,000 in respect of bank loan and £70,000 in respect of loan notes) which were initially incurred as a result of the
previous borrowing arrangement were recognised as an exceptional finance cost in the income statement.

10 Tax expense

Major components of tax expense:

Current tax:
uK current tax expense
prior year adjustment

total current tax

Deferred tax:
originations and reversal of temporary differences
effect of rate change

total deferred tax

Tax expense on ordinary activities

2017
£’000

2016
£’000

1,544
(45)

1,214
6

1,499

1,220

(168)
–

(168)

1,331

(189)
(60)

(249)

971

Reconciliation of tax expense:
uK corporation tax is assessed on the profit on ordinary activities for the year and is higher than (2016: higher than)
the standard rate of corporation tax in the uK of 19.25% (2016: 20%).

the charge for the year can be reconciled to the loss per the income statement as follows:

Reconciliation of effective tax rate:

profit on ordinary activities before tax
Income tax using the company’s domestic tax rate 19.25% (2016: 20%)
effect of:
expenses not deductible for tax purposes
prior year adjustment – current tax
effect of tax rate change – deferred tax

total tax charge for period

2017
£’000

5,662
1,090

286
(45)
–

1,331

2016
£’000

4,288
858

167
6
(60)

971

11 Earnings per share
Both the basic and diluted profit per share have been calculated using the profit after tax attributable to
shareholders of Medica Group plc as the numerator. the calculation of the basic profit per share is based on the
profit attributable to ordinary shareholders divided by the weighted average number of shares in issue during
the year.

profit for the year attributable to ordinary shareholders
exceptional items
exceptional finance costs

profit for the year before exceptional items attributable to ordinary shareholders
share based payments charge
Refinance costs
Amortisation of acquired intangibles

Adjusted profit for the period attributable to ordinary shareholders

Weighted average number of ordinary shares

dilutive effect of share options

Weighted average number of ordinary shares
Basic profit per ordinary share (pence)

diluted profit per ordinary share (pence)

Adjusted basic profit per ordinary share (pence)

Adjusted diluted profit per ordinary share (pence)

2017
£’000

4,331
1,661
582

6,574
74
–
870

7,518

2016
£’000

3,317
757
–

4,074
–
39
870

4,983

108,675,802

100,000,002

746,264

–

109,422,066
3.99p

100,000,002
3.32p

3.96p

6.92p

6.87p

3.32p

4.98p

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 december 2017

11 Earnings per share continued
on 15 March 2017, the subdivision of the 1,455,000 ordinary shares of £0.10 each was approved so that each
ordinary share of £0.10 each was sub-divided into 50 ordinary shares of 0.2p and by way of a bonus issue the
company allotted 27,250,002 ordinary shares of 0.2p each at nominal value to its existing shareholders pro rata to
their existing shareholdings. the weighted average number of ordinary shares after these transactions amounted
to 100,000,002 and in accordance with IAs33 the earnings per share calculation has been retrospectively adjusted.

All share options outstanding under the performance share plan were dilutive as at 31 december 2017. there were
no further instruments that had a potentially dilutive effect.

12 Directors and employees
the average number of persons (including directors) employed by the Group during the years were:

clinical Governance
Business development & recruitment
service delivery & nightHawk
It, deployment and development
Finance
executive team
non-executive directors

the aggregate cost of these employees was:

Wages and salaries
social security costs
pension contributions
share based payments charge

directors’ emoluments paid during the period and included in the above figures were:

emoluments

2017
Number

2016
number

7
9
41
18
5
6
3

7
10
40
15
5
5
–

2017
£’000

3,015
330
155
74

2016
£’000

2,693
251
104
–

3,574

3,048

2017
£’000

741

2016
£’000

573

the highest paid director received emoluments totalling £191,250 (2016: £165,000). the value of the company’s
contribution paid to a defined contribution pension scheme in respect of the highest paid director amounted to
£13,387 (2016: £11,550). during the year retirement benefits accrued to five directors (2016: four) in respect of
defined contribution pension schemes. At the year end owing to director resignations during the year, retirement
benefits were accruing to three directors.

Key management of the Group are the executive members of Medica Group plc’s Board of directors and two senior
managers. Key management personnel remuneration includes the following expenses:

salaries including bonuses
social security costs
pensions
share based payments charge

Key management personnel compensation

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

2017
£’000

793
100
47
74

1,014

2016
£’000

573
85
28
–

686

13 Goodwill

Cost
At 31 december 2015 and december 2016
Additions

At 31 december 2016 and december 2017

Goodwill
£’000

total
£’000

15,948
–

15,948

Goodwill is not amortised, but tested annually for impairment. the directors have assessed goodwill for
impairment by reference to fair value as indicated by the market value of the company’s equity at the balance
sheet date after allowing for an estimation of selling costs. there is only one cash-generating unit and the goodwill
relates entirely to the acquisition of Medica Reporting limited (MRl) in 2013, and MRl accounts for all of the
Group’s revenue and operating activity (other than finance charges relating to the bank loans and loan notes which
are recorded in intermediate parent entities). the fair value of the Group as indicated by the market value of its
equity at the balance sheet date is in excess of £150m, providing substantial headroom over the carrying amount of
goodwill and estimated selling costs.

14 Intangible assets

Cost
At 31 december 2015
Additions

At 31 december 2016

Additions

At 31 December 2017

Amortisation
At 31 december 2015
charge for the year

At 31 december 2016

charge for the year

At 31 December 2017

Net book value
At 31 December 2017

At 31 december 2016

At 31 december 2015

customer
relationships
£’000

software
and
technology
£’000

Brand
£’000

total
£’000

6,461
–

6,461

3,922
438

4,360

–

1,033

2,317
–

2,317

–

12,700
438

13,138

1,033

6,461

5,393

2,317

14,171

1,150
431

1,581

431

1,147
583

1,730

670

2,012

2,400

309
116

425

116

541

2,606
1,130

3,736

1,217

4,953

4,449

2,993

4,880

2,630

1,776

1,892

9,218

9,402

5,311

2,775

2,008

10,094

Amortisation has been included in administrative expenses in the consolidated statement of comprehensive
income and the estimated remaining useful life of each class of asset at 31 december 2017 was as follows:

customer relationships
software and technology (acquired in 2013)
software and technology (licences since 2013)
Brand

11 years
6 years
over licence period
16 years

At the year ended 31 december 2017, £70,000 of development costs have been capitalised as internally generated
software and technology intangibles. these have not been shown separately as they are not deemed to be material
to the financial statements.

Included in software additions is an accrual of £421,000 which will be paid in 2018 and is not recognised in the
cashflow statement on page 63.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 december 2017

15 Property, plant and equipment

Cost
At 31 december 2015
Additions

At 31 december 2016
Additions
disposals

At 31 December 2017

Depreciation and impairment
At 31 december 2015
charge for the year

At 31 december 2016

charge for the year
disposals

At 31 December 2017

Net book value
At 31 December 2017

At 31 december 2016

At 31 december 2015

leasehold
improvements
£’000

computer
equipment
£’000

total
£’000

3,456
789

4,245
820
(121)

3,359
789

4,148
820
(121)

4,847

4,944

1,501
860

2,361

752
(121)

1,527
883

2,410

775
(121)

2,992

3,064

1,855

1,787

1,858

1,880

1,835

1,929

97
–

97
–
–

26
23

23
–

All depreciation charges are included within administrative expenses in the consolidated statement of
comprehensive income.

As referred to in note 20, all assets have been pledged as security for the Group’s borrowings and are subject to a
fixed and floating charge.

16 Deferred taxation assets and liabilities
deferred tax included in the statement of financial position is as follows:

Deferred tax liabilities
Accelerated capital allowances
deferred tax on share based payments
deferred tax on intangible assets

Reconciliation of movement in deferred tax

As at 1 January 2016
Recognised in the income statement

As at 31 December 2016

Recognised in the income statement

As at 31 December 2017

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

2017
£’000

2016
£’000

74
(38)
1,393

1,429

19
–
1,577

1,596

depreciation
in excess of
capital
allowances
£’000

1,846
(249)

total
£’000

1,846
(249)

1,597

(168)

1,429

17 Trade and other receivables

trade receivables
prepayments and accrued income

2017
£’000

7,840
370

8,210

2016
£’000

5,622
451

6,073

All trade receivable amounts are short term. All of the Group’s trade and other receivables have been reviewed for
indicators of impairment. the carrying value is considered a fair approximation of their fair value. the Group’s
management considers that all the above financial assets are of good credit quality.

In addition, some of the unimpaired trade receivables of the Group are past due as at the reporting date. the age
of financial assets past due, but not impaired, is as follows:

More than three months but not more than six months
More than six months but not more than one year
More than one year

18 Trade and other payables

trade payables
corporation tax
other taxation and social security
Accruals

2017
£’000

914
8
–

922

2017
£’000

1,822
1,212
103
795

2016
£’000

106
–
–

106

2016
£’000

1,567
617
81
1,018

3,932

3,283

All amounts are short term and the directors consider that the carrying value of trade and other payables are
considered to be a reasonable approximation of fair value. the contractual maturity of all amounts above are within
one year of the balance sheet date.

the average credit period taken for trade purchases was 40 days (2016 – 40 days).

19 Borrowings due within one year

Bank loans

20 Borrowings due in more than one year
20.1. Borrowings due in more than one year

2017
£’000

–

2016
£’000

1,362

2017
£’000

2016
£’000

secured loan notes and accrued interest thereon, net of debt issuance costs (cBpe loan notes)
Bank loans

–
11,888

6,686
18,683

11,888

25,369

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Medica Group Plc
AnnuAl RepoRt And Accounts 2017

NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 december 2017

20 Borrowings due in more than one year continued
20.2. Maturity of the Group’s non-derivative financial liabilities (including interest payments

where applicable)

Maturity of debt:
due within one year
due between 2–5 years

Bank loan

£000

286
12,930

the above amounts reflect the contractual undiscounted cash flows, which may differ from the carrying values of
the liabilities at the reporting date. the maturity analysis above assumes that interest rates remain as they were at
31 december 2017.

on 21 March 2017 the Group was admitted to the Main Market of the london stock exchange. part of the funds raised
were used to repay the bank loan of £20m in a subsidiary company. A new bank loan was taken out by Medica Group
plc of £12m which is repayable in five years. the refinancing exercise described above has been accounted for as an
extinguishment of a financial liability as the terms of the loan agreement were substantially modified. consequently
as disclosed in note 9 capitalised loan arrangement costs of £512,000 were expensed to the consolidated Income
statement as an exceptional finance cost. the directors consider that it is appropriate to consider these costs as
exceptional items as the refinancing was directly related to the Initial public offering in March 2017.

the bank loan is secured by way of a fixed and floating charge over all of the assets of the Group up to £12m.

on 21 March 2017 the full amount of loan notes and accrued interest from cBpe capital, of £6.9m were repaid in full. the
refinancing exercise described above has been accounted for as an extinguishment of a financial liability as the financial
liability was settled. consequently as disclosed in note 9 capitalised loan arrangement costs of £70,000 were expensed to
the consolidated Income statement as an exceptional finance cost. the directors consider that it is appropriate to
consider these costs as exceptional items as the refinancing was directly related to the Initial public offering in March 2017.

21 Reconciliation of liabilities arising from financing activities

1st January 2017
Cash flows:
– Interest
– Repayment
– Arrangement fees

Non Cash:
– Interest
– Amortisation of arrangement fees
– Amortisation of exceptional arrangement fees

31st December 2017

22 Equity
Ordinary share capital issued and fully paid

111,111,114 ordinary shares of £0.02

1,200,000 A ordinary shares of £0.10

255,000 ordinary shares of £0.10

Total ordinary share capital of the Company

short term long term

Bank
borrowings

loan notes

total

1,362

18,683

6,686

26,731

–
(1,602)
–

(508)
(6,900)
(130)

(178)
(6,768)
–

(686)
(15,270)
(130)

(1,602)

(7,538)

(6,946) (16,086)

–
40
200

240

414
18
311

743

179
10
71

593
68
582

260

1,243

–

11,888

–

11,888

At 31
December
2017
£’000

222

–

222

At 31
december
2016
£’000

–

120

146

on 15 March 2017, the subdivision of the 1,455,000 A ordinary shares and ordinary shares of £0.10 each was
approved so that each ordinary share of £0.10 each was sub-divided into 50 ordinary shares of 0.2p and by way
of a bonus issue the company allotted 27,250,002 ordinary shares of 0.2p each at nominal value to its existing
shareholders pro rata to their existing shareholdings.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

on 16 March 2017, an offer prospectus was published in which the selling shareholders offered 78,865,979 existing
shares, in aggregate, for sale and the company offered 11,111,112 new shares for subscription. the new shares rank
pari passu in all respects with the existing shares and carry the right to receive all dividends and distributions. the
company received consideration of £15m which was in part used for the settlement of loan notes and refinancing
of bank debt that was outstanding prior to the listing.

on 21 March 2017, Medica Group plc was admitted to the premium listing segment of the official list and to trading
on the london stock exchange’s Main Market for listed securities. the total number of shares in issue at Admission
was 111,111,114 shares of 0.2p each.

Rights attributable to issued shares
Any profits which the company determines to distribute in any financial year shall be paid on the ordinary shares.
every holder of an ordinary share is entitled to one vote and has one vote for every share for which they are a holder.

on a return of capital on liquidation, capital reduction or otherwise, the surplus assets of the company remaining
after the payment of its liabilities shall be applied in distributing the balance of such assets amongst the holders of
the ordinary shares.

Voting rights
the holders of ordinary shares are entitled to receive notice of and attend and vote at any general meeting of the
company.

Share premium
proceeds received in addition to the nominal value of the shares issued during the year have been included in share
premium.

on 28 February 2017, the entire amount standing to the credit of the company’s share premium account, being
£1,309,000, was cancelled and £1,309,000 was credited to the profit and loss account on the company’s statement
of Financial position. this exercise was completed in order to facilitate the reregistration of the company as a public
limited company by ensuring that a minimum level of distributable reserves existed at the reregistration date.

Retained profit
Retained earnings include current and prior period retained profit and losses.

23 Undertakings included in the financial statements
the consolidated financial statements include:

Medica Reporting services limited
Medica Reporting Finance limited
Medica Reporting limited

ordinary
ordinary
ordinary

england & Wales
england & Wales
england & Wales

Holding company
100%
100%
Holding company
100% teleradiology reporting

class of
share held

country of incorporation

proportion held

nature of business

24 Financial instruments
Categories of financial instruments

Financial assets
loans and receivables
cash and bank balances

Financial liabilities at amortised cost
trade and other payables (trade payables and accruals)
Borrowings within one year
Borrowings due in more than one year

Financial liabilities at fair value through profit and loss

derivatives

As at 31
December
2017
£’000

As at 31
december
2016
£’000

7,840
6,907

5,622
4,713

14,747

10,335

(2,617)
–

(2,585)
(1,362)
(11,888) (25,369)

(14,505) (29,316)

(14)

(52)

A description of the Group’s financial instrument risks, including risk management objectives and policies, is given
in note 25.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 december 2017

24 Financial instruments continued
24.1. Fair value measurement of financial instruments
the methods used to measure financial assets and liabilities reported at fair value are described below.

Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into
three levels of fair value hierarchy. the three levels are defined based on the observability of significant inputs to
the measurement as follows:

level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.
level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

the fair values of interest rate swaps are categorised within level 2 of the fair value hierarchy. the Group’s interest
rate swaps are not traded in active markets. these have been fair valued using observable interest rates
corresponding to the maturity of the contract. outstanding derivatives at the reporting date are included under the
appropriate format heading depending on the nature of the derivative.

25 Financial instruments risk
25.1. Risk management objectives and policies
the Group is exposed to various risks in relation to financial instruments. the Group’s financial assets and liabilities
by category are summarised in note 24. the Group’s financial instruments (other than derivatives) comprise cash
and liquid resources and various items, such as trade receivables and trade payables that arise directly from its
operations. the main purpose of these financial instruments is to raise finance for the Group’s operations. the
principal financial risks faced by the Group are liquidity, credit and interest rate risks. the Group is not exposed to
transactional foreign currency risks, as all of its activities are based in the uK.

the Group’s risk management is coordinated at its headquarters, in close cooperation with the Board of directors,
and focuses on actively securing the Group’s short to medium-term cash flows by minimising the exposure to
volatile financial markets. long-term financial investments are managed to generate lasting returns.

the Group does not actively engage in the trading of financial assets for speculative purposes nor does it write
options. the most significant financial risks to which the Group is exposed are described below.

Credit risk
the Group’s principal financial assets are cash and cash equivalents and trade and other receivables. the Group
has no significant credit risk. the maximum exposure to credit risk is that shown within the balance sheet. All
amounts are short term and management consider the amounts to be of good credit quality. For a summary of
financial assets past due, but not impaired, please see note 17.

Liquidity/funding risk
the Group’s funding strategy is to ensure a mix of funding sources offering flexibility and cost-effectiveness to
match the requirements of the Group. operating subsidiaries are financed by retained profits. the Group manages
liquidity risk by maintaining adequate reserves and agreed committed banking facilities. For a summary of non-
derivative financial liabilities that have contractual maturities (including interest payment where applicable) please
see note 20.

Interest rate risk
the Group holds the majority of its cash and cash equivalents in corporate current accounts. these accounts offer
a competitive interest rate with the advantage of quick access to the funds. At the end of the year all of the Group’s
bank loans bore a variable rate of interest of lIBoR plus 1.75%. However part of the interest rate risk was mitigated
as £6.7m is subject to an interest rate swap, effectively fixing the lIBoR at 0.7675% and the interest rate paid at
approximately 2.5% for this part of the loan.

Capital risk management
the Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern,
in order to provide returns for shareholders and benefits for other stakeholders and to maintain a capital structure
that optimises the cost of capital.

the Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximising the return to stakeholders through the optimisation of the debt and equity balance.

the capital structure of the Group consists of debt, which includes loans, other borrowings and the loan notes
disclosed in notes 19 and 20; cash and cash equivalents as disclosed in the statement of financial position; and

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as
disclosed in the consolidated statement of changes in equity.

the gearing ratios at the end of the reporting periods were as follows:

debt due within one year
debt due in more than one year
cash and bank balances

net debt
total equity

total capital

net debt to total capital

2017
£’000

2016
£’000

–
11,888
(6,907)

1,362
25,369
(4,713)

4,981
24,900

22,018
6,309

29,881

28,327

17%

78%

debt is defined as long- and short-term borrowings (excluding derivatives). equity includes all capital and reserves
of the Group that are managed as capital.

Sensitivity analysis
the £12m in bank loans is at a variable interest rate of lIBoR plus 1.75% and therefore represents a potential risk
that the fair value of the Group’s future cash flows may fluctuate because of changes in market interest rates.
Interest rate swap arrangements were used throughout the year ending 31 december 2017 and as at that date,
which had the effect of fixing £6.7m of bank loans at an approximate fixed interest rate 2.5% per annum. the effect
of changes in market interest rates did not have a material effect on valuation of the interest rate swaps
themselves. Accordingly, the amount of debt outstanding as at 31 december 2017 considered to be exposed to
interest rate risk was limited to £5.3m. A sensitivity analysis based upon this amount has been prepared and is
presented below.

At 31 december 2017, if lIBoR had been 100 basis points higher, with all other variables held constant, post-tax
profit for the year and total equity would have been reduced by £53,000, arising as a result of higher interest
expense on variable borrowings.

26 Share based payments
under the Group’s share based incentive scheme the following expense was charged.

performance share plan
share save scheme

total charge

2017
£’000

74
–

All share based payment schemes related to equity settled awards only.

Performance share plan
the performance share plan is a ‘free’ share award with an effective exercise price of £nil. For scheme participants,
half the award is based on earnings per share (eps) and half is based on total shareholder Return (tsR). the
performance period is three years and there is an additional holding period of two years. Accordingly the vesting
period is deemed to be five years. Further information is set out in the report of the Remuneration committee on
pages 35 to 53.

outstanding at beginning of period
Granted during period
dividend equivalent in period
exercised during period
lapsed during period

outstanding at the end of period

exercisable at end of period

2017
Awards
Number

–
866,665
1,820
–

(122,222)

746,263

–

the remaining weighted average contractual life is 4.25 years. the options that lapsed during the year were due to
the departure of a scheme participant from the company.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 december 2017

26 Share based payments continued
the Group engaged external consultants to calculate the fair value of the awards at the date of grant. the valuation
model used to calculate the fair value of the awards was the Black-scholes model for the non-market based awards
and a binomial model for market based awards.

share price at date of grant
exercise price
expected volatility
expected life
Risk free rate
expected dividend yield
Average fair value of award per share

2017
Awards

£1.35
£nil
26.2%
5 years
0.5%
0%
£1.19

SAYE scheme
the sAYe scheme is an all-employee HMRc approved tax-advantaged share scheme. the scheme involves
employees saving a set amount from their salary for a period of three years. At the end of the three years the
employee is offered an opportunity to purchase shares based on the amount saved at an option price set at the
start of the period. the exercise price for awards granted in 2017 was £1.86 and by the end of the year employees
have saved a total of £40,000 into the scheme. In light of this the directors have concluded that any share based
payments charge arising in 2017 are not material and therefore not accounted for it.

27 Financial commitments
the Group leases an office building under an operating lease. the term of the operating lease is ten years with a
break clause at five years after the commencement of the lease. the future minimum rentals payable under non-
cancellable operating leases are as follows:

less than one year
Between 2 and 5 years
over 5 years

At 31
December
2017
£000

At 31
december
2016
£000

78
58
–

136

78
136
–

214

the present values of the future rental payments were not materially different to the amounts above.

28 Transactions with Directors and other related parties
Included in administrative costs are £42,600 (2016: £43,500) in respect of fees payable to cBpe nominees limited
for services of the Investor director to the Group. cpBe nominees ltd are considered a related party as they had a
controlling interest in the Group prior to 21 March 2017.

Key management personnel (which the Group defines as the Board of directors and two senior managers)
remuneration is disclosed in note 12.

on 2 May 2013 Medica Group plc issued £18.4m in loan notes to cBpe nominees ltd. In accordance with the terms
of the loan note dated 2 May 2013, interest accrued quarterly on the principal amount of the loan notes outstanding
and unpaid interest was rolled up and compounded at the end of each quarter.

on 21 March 2017 the outstanding loan notes and accrued interest of £6.9m were repaid in full. Interest charges of
£178,000 (31 december 2016: £882,000), have been recognised in the consolidated statement of comprehensive
income.

All transactions with related parties were on an arm’s length basis.

29 Controlling party
there is no overall controlling party of the Group following the admission of the company’s ordinary shares onto
the premium listing segment of the official list and to trading on the london stock exchange’s Main Market for
listed securities on 21 March 2017.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

30 Post balance sheet events
there are no post balance sheet events.

31 Reconciliation of non-IFRS financial KPIs
the Group uses a number of key performance indicators to monitor the performance of its business. this note
reconciles these key performance indicators to individual lines in the financial statements.

In the directors’ view it is important to consider the underlying performance of the business during the year.
therefore the directors have used certain Alternative performance Measures (ApMs) which are not IFRs-compliant
metrics. the main effect has been that the exceptional items relating to the Ipo in March 2017 have been excluded
from the ApMs. the ApMs are consistent with those established within the Ipo prospectus and the prior year
annual report. It is the directors’ intention to monitor and reassess the appropriateness of the ApMs in future years.

Reconciliation of adjusted operating profit
operating profit before exceptional items
Adjustments for:
Amortisation of acquired intangibles
share based payments
Refinance costs

Adjusted operating profit
Adjusted operating profit margin
Reconciliation of adjusted profit before tax
profit for the year
Adjustments for:
Amortisation of acquired intangibles
exceptional items
exceptional finance costs
share based payments
Refinance costs

Adjusted profit after tax
Income tax charge

Adjusted profit before tax
Reconciliation of EBITDA cash conversion percentage*
cash inflow from operating activities
Adjustments for:
tax paid
exceptional items per income statement
non cash movement in exceptional items

operating cashflow before tax and exceptional items
Adjusted eBItdA
eBItdA cash conversion rate*
Reconciliation of net debt
cash and equivalents
Borrowings due within one year
Borrowings due after one year

net debt

31
December
2017
£’000

31
december
2016
£’000

8,516

7,216

870
74
–

870
–
39

9,460
28.1%

8,125
28.5%

4,331

3,317

870
1,661
582
74
–

7,518
1,331

8,849

870
757
–
–
39

4,983
971

5,954

5,514

6,787

904
1,661
612

8,691
10,582
82.1%

924
757
(750)

7,718
9,229
83.6%

6,907
–

4,713
(1,362)
(11,888) (25,369)

(4,981) (22,018)

* the eBItdA cash conversion percentage calculation has been updated to take account of non-cash movements in exceptional items to provide a

more appropriate figure for operating cashflow before tax and exceptional items. the 2016 comparative figure has been restated for
consistency. this reflects the calculations used in the day to day management of the business.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

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COMPANY STATEMENT OF FINANCIAL POSITION
COMPANY REGISTRATION 08497963
As at 31 december 2017

Fixed asset investments
Investments in subsidiaries
Current assets
debtors
deferred tax
Creditors: amounts falling due within one year
Accruals

Total assets less current liabilities

Non-current liabilities
Borrowings

Net assets

Capital and reserves
called up share capital
share premium account
profit and loss account

Total equity

parent company profit for the year

note

At 31
December
2017
£’000

At 31
december
2016
£’000

1,455

30,318
38

(208)

–
–

–

31,603

1,455

(11,888)

–

19,715

1,455

35
35

222
14,721
4,772

19,715

4,000

146
1,309
–

1,455

–

the financial statements on pages 84 to 88 were approved and authorised for issue by the Board of directors on 12
March 2018 and were signed on its behalf by:

JOHN GRAHAM
Director

ANTHONY LEE
Director

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 december 2017

At 1 January 2016

profit and total comprehensive income for the period

At 1 January 2017

cancellation of share premium
shares issued during the year
share issue costs
dividends paid to ordinary shareholders
equity settled share based payments

Transactions with owner

profit and total comprehensive income for the period

At 31 December 2017

share
capital
£’000

share
premium
£’000

Retained
earnings
£’000

146

1,309

–

146

1,309

–

total
equity
£’000

1,455

–

1,455

–
76
–
–
–

–

(1,309)
14,924
(203)
–
–

1,309
–
–
(611)
74

–
15,000
(203)
(611)
74

13,412

772

14,260

–

4,000

222

14,721

4,772

19,715

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Medica Group Plc
AnnuAl RepoRt And Accounts 2017

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

32 Accounting policies
the financial statements have been prepared in accordance with applicable accounting standards including
Financial Reporting standard 101, the Financial Reporting standard Applicable in the uK and Republic of Ireland
(FRs 101), and the companies Act 2006. the financial statements have been prepared on a going concern basis
under the historical cost convention, modified to include certain items at fair value. the financial statements are
prepared in sterling which is the functional currency of the company.

Exemptions
the directors have taken advantage of the exemption available under section 408 of the companies Act 2006
and not presented a profit and loss account for the company alone. In addition, the directors have taken
exemption from providing a cash flow statement and financial instruments disclosures as these are provided
within the Group accounts.

In preparing these financial statements the company has taken advantage of all disclosure exemptions conferred
by FRs 101. therefore, these company financial statements do not include:
• A statement of cash flows and related notes
• the requirements of IAs 24 related party disclosures to disclose related party transactions entered in to

between two or more members of the group as they are wholly owned within the group

• the effect of future accounting standards not adopted
• disclosure of key management personnel compensation
• disclosure in respect of financial instruments (other than disclosures required as a result of recording financial

instruments at fair value)

• share based payment disclosures required under IFRs 2

Going concern
the directors of Medica Group plc have assessed the current financial position of the Group, along with future cash
flow requirements, to determine if the Group has the financial resources to continue as a going concern for the
foreseeable future. the directors of Medica Group plc have concluded that it is appropriate that Medica Group plc
be considered a going concern. For this reason, they have adopted the going concern basis in preparing the
financial statements. the financial statements do not include any adjustments that would result in the going
concern basis of preparation being inappropriate.

Investments
Investments are recognised initially at fair value which is normally the transaction price excluding transaction costs.
subsequently, they are measured at cost less impairment.

Financial instruments
see note 3.11 of the Group accounts.

Share capital and reserves
share capital represents the nominal value of shares that have been issued.

Retained earnings include all current and prior period retained profits or losses. they also include charges related
to share based employee remuneration.

dividend distributions payable to equity shareholders are included in ‘other liabilities’ when the dividends have
been approved in a general meeting prior to the reporting date.

Significant judgements and estimates
the directors review annually whether there have been any indicators of impairment of investments. Where an
impairment indicator is identified an impairment test is carried out by comparing the carrying of the assets with its
recoverable amount. If the recoverable amount of an asset is estimated to be less than its carrying amount, the
carrying amount is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or
loss.

33 Directors and employees
the directors and other key management personnel were the only employees of the company during the year. the
disclosures in respect of key management personnel have been provided in note 12 of the Group financial
statements.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017

34 Investments in subsidiaries and associates
Investments

At 31 december 2016
Additions
Impairment

At 31 december 2017

2017
£000

1,455
–
–

1,455

Investments have been assessed for impairment and the Board has reviewed the funds successfully raised through
the Initial public offering on 21 March 2017, and the fair value of the Group as indicated by the market value of its
equity at the balance sheet date both of which valued the company in excess of £150m. Given the valuation, the
Board is comfortable that the investments are not impaired.

At 31 december 2017, the company had the following subsidiary undertakings.

Medica Reporting services limited ordinary
ordinary
Medica Reporting Finance limited
ordinary
Medica Reporting limited

england & Wales
england & Wales
england & Wales

100%
100%
100%

Holding company
Holding company
teleradiology reporting

class of share held

country of incorporation

proportion held

nature of business

35 Capital and reserves
Ordinary Share capital issued and fully paid

111,111,114 ordinary shares of £0.02
1,200,000 A ordinary shares of £0.10
255,000 ordinary shares of £0.10

Total Ordinary Share capital of the Company

At 31
December
2017
£000

At 31
december
2016
£000

222
–
–

222

–
120
26

146

on 15 March 2017, the subdivision of the 1,455,000 A ordinary shares and ordinary shares of £0.10 each was
approved so that each ordinary share of £0.10 each was sub-divided into 50 ordinary shares of 0.2 pence and by
way of a bonus issue the company allotted 27,250,002 ordinary shares of 0.2 pence each at nominal value to its
existing shareholders pro rata to their existing shareholdings.

Voting rights
the holders of ordinary shares are entitled to receive notice of and attend and vote at any general meeting of the
company.

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Medica Group Plc
AnnuAl RepoRt And Accounts 2017

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Share premium
proceeds received in addition to the nominal value of the shares issued during the year have been included in share
premium.

on 28 February 2017, the entire amount standing to the credit of the company’s share premium account, being
£1,309,000, was cancelled and £1,309,000 was credited to the profit and loss account on the company’s
statement of Financial position. this exercise was completed in order to facilitate the reregistration of the
company as a public limited company by ensuring that a minimum level of distributable reserves existed at the
reregistration date.

Retained profit
Retained earnings include current and prior period retained profit and losses.

36 Borrowings
on 21 March 2017 the bank loan to Medica Reporting Finance limited was repaid and a new loan of £12m was taken
out by Medica Group plc (parent company).

see note 20 for details of the movement in borrowings during the year.

37 Debtors
the debtor balance of £30.3m relates to amounts owed from subsidiaries. the balance can be called for repayment
on demand by the company or repaid at any time at the option of the subsidiary. In the directors view the entire
outstanding balance could be settled by the relevant subsidiary within one year of the balance sheet date and as
such the directors are satisfied that there is no indication of impairment.

38 Related parties
see note 28 in the Group Financial statements for related parties information.

39 Post balance sheet events
there were no post balance sheet events.

Medica Group Plc
AnnuAl RepoRt And Accounts 2017