T o t a l l y p l c A n n u a l R e p o r t f o r t h e y e a r e n d e d 3 1 M a r c h 2 0 2 0 HIGH-QUALITY HEALTHCARE SERVICES ACROSS THE UK Annual Report for the year ended 31 March 2020 URGENT CARE PLANNED CARE INSOURCING DELIVERING EXCELLENCE We at Totally plc make a difference to people’s lives by delivering high-quality care services in local hospitals and community settings via telephone, video and face-to-face consultations. www.totallyplc.com Strategic Report 01 2019/20 highlights 02 What we do 03 Our strategic roadmap 04 Chairman’s statement 05 Chief Executive Officer’s review 08 Our business model 10 Our divisions 13 Our strategy and KPIs 14 Clinical quality review 18 Financial review 21 Risk management 22 Principal risks and uncertainties 23 Section 172 statement Governance 24 Board of Directors 26 Senior Management 27 Chairman’s introduction to governance 28 Corporate governance report 32 Report of the Nomination Committee 33 Report of the Audit Committee 35 Directors’ remuneration report 38 Directors’ report 40 Energy and emissions report 41 Statement of Directors’ responsibilities Financial Statements 42 Independent auditor’s report 47 48 49 Consolidated statement of profit or loss and other comprehensive income Consolidated statement of changes in equity Consolidated and Company statements of financial position 50 Consolidated cash flow statement 51 Notes to the financial statements 80 Company information 2019/20 highlights A RECORD YEAR FOR THE GROUP FINANCIAL HIGHLIGHTS Revenue Total of all revenue generated by the Group. £105.9m +35.8% 105.9 78.0 42.5 0.5 4.0 Underlying EBITDA Adjusted for items as disclosed in note 8 of the financial statements. £4.0m +265% Cash Total of all cash held across the Group. £8.9m +19% 4.0 10.2 8.9 7.5 1.1 (0.4) (1.2) 0.2 1.0 0.4 2015 2016 2018* 2019 2020 2015 2016 2018* 2019 2020 * 15-month period. 2015 2016 2018* 2019 2020 OPERATIONAL HIGHLIGHTS KEY NUMBERS • Successfully completed acquisition of Greenbrook Healthcare in June 2019. • Secured new Urgent Treatment Centre contract in Watford for our Urgent Care division. • Secured largest dermatology contract to date for About Health in Manchester. • Launched new Insourcing start-up business, Totally Healthcare, in October 2019, delivering Insourcing services across the UK and Ireland. • Continued to provide frontline healthcare services supporting the NHS to manage the COVID-19 pandemic. of registered services rated as ‘Good’ by the Care Quality Commission (CQC) 97% £0.5m 1.3m maiden dividend calls to our 111 service (pre-COVID-19) 01 Annual Report for the year ended 31 March 2020 Totally plcSTRATEGIC REPORT What we do DELIVERING CARE ACROSS THE UK AND IRELAND OUR DIVISIONS URGENT CARE Supporting people to access the most appropriate care quickly and close to home. We do this by using our expertise and our people focused commitment. PLANNED CARE Providing access to services locally for outpatient and physiotherapy. Assisting with ensuring patients access the right level of care by delivering referral management services. INSOURCING Reducing waiting lists in local hospitals by working with the very best clinicians and clinical teams while designing services to meet local needs. Revenue Revenue 91.1% £96.5m £8.4m91+ 92+ Find out more on page 10 Find out more on page 11 (2019: £69.7m) (2019: £8.4m) 7.9% Revenue 1.0% £1.0m 991 Find out more on page 12 (2019: N/A) 02 Totally plc Annual Report for the year ended 31 March 2020STRATEGIC REPORTN 8 N 9 N Our strategic roadmap ADDRESSING THE CHALLENGES OF HEALTHCARE DEMAND OUR MISSION To be a high-quality partner of choice to the NHS and Healthcare sectors across the UK and Ireland. OUR VISION URGENT CARE PLANNED CARE INSOURCING Delivering urgent care services across England in partnership with the NHS. Our services include: • NHS 111 • GP Out of Hours • Clinical Assessment services • Urgent Treatment Centres Working in partnership to provide outpatient and referral management services to the NHS, delivering physiotherapy and podiatry services to patients in GP surgeries, community centres and prisons across England. Reducing hospital waiting lists in multiple clinical specialities by delivering bespoke insourcing solutions delivered in hospitals across the UK and Ireland. OUR STRATEGY Totally plc is currently engaged in delivering a progressive “buy and build” consolidation strategy within the UK and Ireland’s fragmented healthcare market. OUR VALUES Patients are our priority. We are kind, supportive, open and honest. We provide quality care: safe, reliable, timely. We do our best: responsible for our actions, learning from successes and mistakes, avoiding a blame culture. We are resourceful: safe, efficient, innovating. We work effectively in teams, across organisational barriers and we are mutually accountable. 03 STRATEGIC REPORTAnnual Report for the year ended 31 March 2020 Totally plc Chairman’s statement EXCELLENT RESULTS Subject to shareholder approval at the upcoming AGM the final dividend will be paid in October 2020. With the expertise of our leadership teams, we will continue to ensure our services respond to any changes in demand we receive and that we support our staff to deliver exceptional services in partnership with the NHS and other public sector bodies across the UK and Ireland. Whilst the way we secure new business has changed, the demand for our services is not expected to diminish. During the year, we completed the acquisition of Greenbrook Healthcare, which increased our presence across London in Urgent Care. You will read throughout this report the progress that has been made with integrating Greenbrook Healthcare into our Urgent Care division and harnessing technology will continue to build to our market-leading position. The Group also launched its Insourcing business, Totally Healthcare, which during its first few months of operations secured contracts across the UK and Ireland delivering bespoke services to reduce hospital waiting lists. Already its reputation is for delivering services quickly, efficiently and of high quality to every patient treated. Of course, these services were put on hold during the pandemic as all elective healthcare was suspended to focus on managing COVID-19. Totally Healthcare is now back working and supporting hospitals plan for how they reduce the waiting times and waiting lists which have increased during the first half of 2020. We will continue to invest in this part of the Group to ensure its growth is supported to respond to the obvious increased demand. We all know that cash is a seen as a barometer of the success of any business and we reported £8.9m cash at the bank at year end, an accurate reflection of the efforts of all our support teams to ensure we operationally deliver across the business. All of this has been achieved during the most testing times which reflects the outstanding commitment and expertise of everyone across the Group for which I commend them. We must also thank our investors for their continued support which enables us to continue to deliver our strategic intentions of becoming a partner of choice for the delivery of healthcare services across the UK. Bob Holt OBE Chairman 14 July 2020 The year ended 31 March 2020 was a good year for Totally plc delivering profit before depreciation and amortisation during times of unrivalled political instability which included BREXIT and a General Election, followed by the worldwide pandemic of COVID-19 which has impacted on every person and every business. Totally plc’s strategy has always been to support the NHS to manage the pressures and demands placed upon healthcare services. The COVID-19 pandemic is no exception, and everyone at Totally has stood shoulder to shoulder with the NHS and delivered patient-facing services throughout this period and continues to do so. At the time of writing, we are still very much in a period of uncertainty as everyone works together to ensure services are robust and ready for any second wave of demand. What is very clear to the Board of Totally plc is that our strategy has been, and continues to be, correctly focused during these unprecedented times. While we expect the business to grow in 2021 and beyond, due to current run rates and new contract wins, the timing of new tenders, which is a key part of our growth plans, remains uncertain due to the COVID-19 pandemic and its impact on the NHS. We are therefore unable to give firm guidance at this stage on our growth expectations for the current financial year and the Board has considered it appropriate for market forecasts to be withdrawn at this time. The medium to long-term outlook and trajectory of the business however remains unchanged. Shareholders should also be pleased that we expect continued growth in operating cash flow and the Board therefore remains committed not only to the payment of dividends but also in continuing with our progressive dividend policy. Accordingly, the Board is pleased to propose a maiden final dividend of 0.25 pence per share taking the total dividends for the year to 0.50 pence per share. Our journey: Progressive buy and build strategy 2016 2017 2019 Mar Jun Nov Oct Jun Oct Premier Physical Health (Planned Care) About Health (Planned Care) Optimum Healthcare Services (Planned Care) Vocare (Urgent Care) Greenbrook Healthcare (Urgent Care) Totally Healthcare (Insourcing) launched 04 Totally plc Annual Report for the year ended 31 March 2020STRATEGIC REPORT Chief Executive Officer’s review BUILDING PARTNERSHIPS Introduction I am pleased to report excellent progress across the Group with a strong set of results during a year when we saw many external challenges including the COVID-19 pandemic which impacted all of our businesses towards the end of the reporting period. Our management team has seized every opportunity presented to them to strengthen our market position and support the delivery of healthcare services across our three divisions. Demand for our services continues to be strong, on the back of our reputation for the delivery of high-quality services. 31 out of 32 of our registered services with the Care Quality Commission (“CQC”) are rated as Good, which is an excellent position to grow from, and it has been pleasing to see continuing improvement in our CQC ratings reflecting the high-quality care we provide. Our three distinct business divisions, Urgent Care, Planned Care and Insourcing provide a portfolio of services across the UK and Ireland built on the expertise and commitment of our people, ensuring the patients we treat receive the highest quality of care quickly and efficiently. We work in partnership with healthcare organisations across the UK, supporting them to manage demand for services. Whilst we expect the business to grow during 2020/21 and the medium to long-term outlook for the business remains unchanged, we are unable to give clear guidance at this stage of the impact of COVID-19 for the current financial year and as such the Board has resolved to withdraw market forecasts at this time. Each of our divisions has been affected in different ways by the COVID-19 pandemic. Despite this, the demand for many of our services remains strong. COVID-19 has though inevitably resulted in delays being encountered with the NHS awarding tenders, and there has been an impact on the near-term visibility for growth, particularly in Planned Care. We continue to support the NHS by working on the frontline delivering services to manage the demand from the pandemic but also respond to the need to reduce waiting times and waiting lists due to the suspension of elective healthcare services. Of course, our results demonstrate the significant progress we have made, regardless of external forces. Including the largest to date within our Planned Care division to deliver dermatology outpatient services across Manchester. In addition, we have continued to secure a number of vital contract extensions in both Urgent Care and Planned Care which underpin our foundations for continued growth - in excess of £20m of contract extensions were secured in the period under review. Building on our strategy During the year, we have focused on delivering services across the Group that are sustainable and reactive to changes in demand. • High-quality has to be at the centre of everything we do. • Our reputation is built upon this core requirement. • Geography: during the year, we have successfully expanded our footprint across the UK and Ireland and are now delivering services across England, Scotland, Wales, Northern Ireland and the Republic of Ireland. • Diversification across our divisions: ensuring we deliver models of care across all areas of high demand in the healthcare sector and that our divisions support each other by “cross-selling” services to both existing and potential new customers. • Learning from everything we do, both positive and negative, and ensuring we stay ahead of our competition with our approach to disrupting care models and delivering real tangible benefits. • Supporting our people and investing in them as they are at the core of what we do. The future I would like to re-emphasise my confidence in the team of people we have and their ability to grow the business organically and via acquisitions, as well as continually reviewing and developing the range of services we offer. We are positioned to further build on our market-leading positions in all of our divisions. Building on our strong relationships with our commissioners and supporting government bodies to proactively manage the demands placed on healthcare services during unprecedented events such as the recent COVID-19 pandemic when we experienced major increases in demand for our services, specifically in NHS 111, we were able, with the dedication of our people, to stand shoulder to shoulder with other healthcare professionals, and deliver services 24/7 across England supporting everyone by providing the high-quality services we are known to deliver. I look forward to updating you further as we continue to expand our services across the UK. 05 Annual Report for the year ended 31 March 2020 Totally plcSTRATEGIC REPORT Chief Executive Officer’s review continued STRATEGIC REPORT Focused for growth Our vision is to become the partner of choice to the NHS and healthcare sectors across the UK and Ireland. It is by continually investing in our strategy that we aim to deliver strong growth, both organically and through acquisition. To deliver this, we focus on key areas: • Service offering differentiation. • Unlike many of our competitors, we benefit from having expertise and experience in our leadership teams that allow us to continually expand the range of services we provide and expand our footprint across the UK and Ireland. • Do what we say we are going to do – we place patient care at the heart of every decision we make. Doing things right the first time is the most effective and efficient way of delivering the best services possible. Our solid reputation that has been built over many years acts as a catalyst, attracting the best people into our business. • Delivering excellence – we always aim to deliver services on terms that benefit both parties. This means that through continual improvements and commercial management we continually review and improve. Our disciplined approach to how we do business enables us to contribute at all levels across the healthcare spectrum due to the respect we have earned with our commissioners and healthcare policymakers. Our strategy remains to become the partner of choice for the NHS and other healthcare bodies to respond to increases in demand for services whatever the cause may be. How we changed the way we work during 2019 Since acquiring Greenbrook Healthcare in June 2019, we have taken the opportunity to review our care delivery models in our Urgent Treatment Centres (“UTCs”) across the country to ensure we retain our competitive advantage to remain the largest independent provider of UTCs across England. This has involved a critical review of all aspects of the care pathways across both Vocare and Greenbrook Healthcare taking the best from both and delivering excellence to the patients we see. Our staff take pride in what they do and deliver services with a passion and experience that sets us apart. Despite the difficult political backdrop, which resulted in the number of tendering opportunities being significantly reduced (as a result of BREXIT, General Election, COVID-19), we have secured new business, and we opened our new Urgent Treatment Centre in Watford in July 2019 (delayed opening due to COVID-19). We have retained contracts to continue the delivery of services in our UTCs, 111 and numerous others services across England. During the summer of 2019, we embedded our new delivery structure with the creation of our three delivery divisions. • Urgent Care – details found on page 10. • Planned Care – details found on page 11. • Insourcing – details found on page 12. In early 2020, it became clear that the UK was about to be impacted by the worldwide pandemic, COVID-19. Healthcare providers braced themselves as demand to access services escalated. Our delivery divisions were all impacted differently. Urgent Care saw demand increase in excess of 200% above normal levels for access to its NHS 111 services across the country. Vocare is our specialist provider of 111 systems responded accordingly and worked tirelessly, shoulder to shoulder, with NHS England to coordinate the delivery of core 111 services alongside new services targeted for the management of COVID-19 and onboarding additional staff to help meet the unprecedented demand. Vocare quickly mobilised its Emergency Preparedness, Resilience and Response processes to ensure every part of the business and every member of staff were supported during the ever-changing landscape. This was supported by our Business Continuity Plan activation across the Totally plc Group to ensure government guidance was quickly adopted and implemented. Our UTCs and GP Out of Hours services saw a decline in demand which meant that staff could be redeployed to where demand was increasing while still enabling all of our business to support its people by observing social distancing and isolation requirements and applying them across all staff groups. 06 Totally plc Annual Report for the year ended 31 March 2020STRATEGIC REPORT The Board and the management team could not be prouder of the way our people responded during this time and we must ensure they know how valued they are by Totally plc and the businesses within it. Our internal mandatory systems for Staff Absence Management (“SAMS”) was reviewed and adapted to ensure every member of staff who needed to be absent from the workplace was supported by a clinician to ensure national guidance and advice was followed. This involved many changes including: • Increased working from home with the provision of equipment to enable this change. • Increased use of video meetings and clinical consultations. • Decrease in working from offices where home working is possible and for those services where office working is essential changes made to the workplace to meet the latest advice. This included: • Increase spaces for work with social distancing. • Provision of PPE. • Increased workplace cleaning regimes. • Provision of more space for essential call centre capacity. All of the above resulted in a minimum number of staff being furloughed or made redundant while working through the pandemic. Our Planned Care and Insourcing divisions saw contracts being paused whilst all elective healthcare services were stopped across the UK with the above processes enabled to ensure staff were clear about the impact on their roles. During that period waiting lists and referrals for healthcare services increased and our businesses became ready to support the remobilisation of services as required over the coming months. All of the above ensured that Totally plc as a group of businesses was able to not only support the NHS during the COVID-19 pandemic, but also demonstrated how to approach service delivery during such times. Our strategy remains as a partner of choice for the NHS and other healthcare bodies to respond to increases in demand for services whatever the cause may be. The Board and the management team could not be prouder of the way our people responded during this time and we must ensure they know how valued they are by Totally plc and the businesses within it. Wendy Lawrence Chief Executive Officer 14 July 2020 07 07 Annual Report for the year ended 31 March 2020 Totally plcSTRATEGIC REPORT Our business model DELIVERING DIVERSE BESPOKE HEALTHCARE SOLUTIONS We support NHS partners by managing demand and delivering high-quality services to patients across the UK and Ireland. OUR KEY RESOURCES WHAT WE DO People Our people are our greatest asset. We aim to use our expertise and our people’s passionate commitment to excellence in ways that help individuals and the businesses we work with. Services We are perfectly positioned to deliver market-leading services and respond to demands faced by healthcare providers. Leadership Our leadership teams have a vast knowledge of the services we deliver. We always work closely with our patients to understand their needs. Experience We have a wealth of experience delivered over many years providing a diverse range of responsive, high-quality services. We work with commissioners to improve the local delivery of healthcare. URGENT CARE PLANNED CARE INSOURCING UNDERPINNED BY... Strategy Delivering diverse bespoke healthcare solutions in partnership with the NHS. Human resources Our people’s passion and commitment to deliver excellence. 08 Totally plc Annual Report for the year ended 31 March 2020STRATEGIC REPORT WHAT MAKES US DIFFERENT 1 2 3 4 5 6 Differentiated Through our service offerings in highly-regulated services. Experienced leadership Our management team has extensive experience in delivering results in our sector and has developed robust bespoke delivery models to strengthen operations and ongoing focus on efficiency, savings, safety and quality. Clients’ needs Good contract base with recurring revenues across ever-increasing commissioner portfolio – responsive to clients’ needs. Strong performance A national delivery platform for care across the UK with robust customer and patient relationships. Strong brands Trusted to deliver services to a growing population. Responsive to commissioner population needs As evidenced in the recent COVID-19 pandemic, where our Urgent Care service was commissioned to work to deliver patient-faced services through this period. THE VALUE WE CREATE Clients We deliver high-quality, efficient services all within a complex, highly-regulated system. Patients We provide safe, high-quality, quick access to healthcare services. People We offer interesting, challenging careers in a well-managed, growing business that provides opportunities for development and progression. Shareholders We deliver services in non-volatile environments with predictable recurring revenues and cash flows underpinned by long running, stable contracts. Finance Financially sound and well-positioned for further scale to deliver diversity through the creation of three distinct divisions. Stakeholders Every decision we make is taken with our stakeholders in mind and what’s best for them in the long term. Read more about our stakeholders and how we engage with them on page 23. 09 Annual Report for the year ended 31 March 2020 Totally plcSTRATEGIC REPORT Our divisions URGENT CARE Andy Gregory Managing Director • Working shoulder to shoulder with the NHS delivering frontline healthcare services. • Providing the whole spectrum of urgent care services across England. What is Urgent Care? Urgent and Emergency Care (“UEC”) services perform a critical role in keeping the population healthy. Both urgent and emergency care services play a specific part in supporting patients to receive the right care, by the right person, as quickly as possible. To help relieve pressure on A&E departments and to ensure patients get the right care, it is important to understand the difference between urgent and emergency care: Emergency: Life threatening illnesses or accidents which require immediate, intensive treatment. Services that should be accessed in an emergency include ambulance (via 999) and emergency departments. Urgent: An illness or injury that requires urgent attention but is not a life-threatening situation. Urgent care services include a phone consultation through the NHS 111 Clinical Assessment Service, to access pharmacy advice, out-of-hours GP appointments, and/or referral to an Urgent Treatment Centre (“UTC”). If the patient is unsure what service is needed, NHS 111 can help to assess and direct to the appropriate service/s. Our Urgent Care division provides all of these services working with several commissioners across England. Providing a 24/7 urgent care service, accessible via NHS 111, which can provide medical advice remotely and if necessary, refer directly to UTCs, GPs (in and out of hours), and other community services (pharmacy etc.), as well as ambulance and hospital services, is at the core of our Urgent Care division. During the COVID-19 pandemic, our Urgent Care division worked shoulder to shoulder with the NHS delivering all of the above services as well as delivering new services specifically designed to support patients presenting with COVID-19 symptoms. We continue to work with the NHS at a strategic level to ensure everything is done to enable our staff to continue to provide services safely during the next phase of the pandemic. calls to 111 in 2019/20 (pre-COVID-19 impact) 1.3m 18,000+ c. 1.0m GP out of hours service visits in 2019/20 patients treated in our Urgent Care Centres in 2019/20 10 STRATEGIC REPORTTotally plc Annual Report for the year ended 31 March 2020 PLANNED CARE Richard Benson Managing Director • Ensuring quick access to specialist elective services. • Providing high quality services in community settings, workplaces and prisons across England. referrals from primary care practitioners in 2019/20 65,000+ 125,000+ 42,000 people treated in our physiotherapy and podiatry clinics during 2019/20 people treated in our dermatology clinics across England What is Planned Care? Planned Care is often known as elective care. People on a planned care pathway are likely to start their journey with a visit to a health professional in primary care, most commonly their GP. Together they will make a decision about possible options and discuss whether a referral to another service is needed. When a referral is made, the appointment may take place in a hospital setting but, there are also a number of planned care providers in the community. The businesses within our Planned Care division provide services in the community, usually within GP surgeries or community health centres. We also provide services within workplaces and many prisons across England. There are lots of specialities that come under the remit of planned care, including: • Audiology; • Cardiology; • Dermatology; • Ear, nose and throat; • Gynaecology; • Ophthalmology; • Respiratory medicine; • Rheumatology; • Trauma and orthopaedics; and • Therapies: Physiotherapy, Occupational Therapy and Podiatry. About Health is a leading specialist provider of dermatology services and also provide referral management services, which help to ensure that patients requiring referral into more specialist services can access those services quickly and efficiently. Plans to expand the number of specialities that About Health support is in place. Our physiotherapy businesses, Premier Physical Healthcare and Optimum Sports Performance, both provide a range of services to patients requiring physiotherapy support. This is provided in a number of settings with face to face services including GP surgeries, health centres and prisons across England but also using technology which provides access to individual care plan and exercise regimes as well as access to the patient’s physiotherapist. Podiatry services are also provided by Premier Physical Healthcare. The demand for planned care services is increasing following the recent COVID-19 pandemic during which time all planned care services were put on hold. Waiting lists for planned care services have risen during this period. Our Planned Care division is now remobilising services, in line with new COVID-19 guidance and continuing to work alongside the NHS to ensure patients can access services quickly and safely. 11 Annual Report for the year ended 31 March 2020 Totally plcSTRATEGIC REPORT Our divisions continued INSOURCING Marie Lee Managing Director • Launched in 2019. • Helping reduce patient waiting lists. • Delivering bespoke, high-quality insourcing solutions with a reputation for service excellence for both patients and hospitals. 99% of the patients we have treated said the quality of care they received was either excellent (62%) or very good (37%) of patients felt they were treated with dignity and respect 100% Experts Led by a passionate experienced team of insourcing experts 12 What is Insourcing? Launched in October 2019 Totally Healthcare is part of Totally plc delivering Insourcing services to hospitals across the UK and Ireland. Insourcing is where hospitals subcontract medical services/ procedures to providers who use the host hospitals’ premises and equipment for service delivery. The care is typically given out of hours (weekends/bank holidays) when the premises/ equipment is not being used by the hospitals making efficient use of the infrastructure. Providers bring in their teams of consultants and nurses and work across specialities such as endoscopy, ophthalmology, ear nose and throat (“ENT”), orthopaedics, urology and plastics. Activities include diagnostics, day-case surgery and outpatient activity. The main value of insourcing is in helping hospitals reduce long patient waiting lists which can cause hospitals care quality, operational or financial problems. In many cases, hospitals are unable to reduce these lists effectively without external support. The insourcing market size in the UK and Ireland is estimated to be £125m to £150m. 4.5m NHS patients are on the waiting list in England alone, an increase of 0.3m in twelve months, and approximately 0.6m patients were waiting longer than NHS England’s 18-week target. Only just over 50% of specialities in England’s NHS Trusts are meeting the target. Totally Healthcare’s competitive advantage will stem from the ability of its key management to sell and deliver bespoke, high-quality insourcing solutions and build a reputation for service excellence for both patients and hospitals. The problems that Totally Healthcare solves • Many hospitals are unable to meet the increasing demand for their services, driven by demographic (ageing population) or other changes to the healthcare system – such as the recent COVID-19 pandemic, which resulted in the suspension of all routine/planned care. • Once waiting lists have built up a hospital may find it extremely challenging to reduce them again. Demand simply outstrips the capacity available. • £1.6bn was spent by the NHS in private hospitals in 2017 (source: Laing & Buisson); there is an opportunity for some of this work to be done using insourcing instead of outsourcing. • We will differentiate ourselves from our competitors by ensuring we deliver the very best level of service quality to every patient and we will do this by engaging the very best consultants and clinical support teams from across the UK and Ireland. Feedback from patients already treated by Totally Healthcare is excellent and contained within our website. STRATEGIC REPORTTotally plc Annual Report for the year ended 31 March 2020 Our strategy and KPIs OUR STRATEGY FOR GROWTH CORE MARKET GROWTH MARKET SHARE GAINS SYNERGIES • Increasing demand for healthcare services. • Increasing demographic population. • Services offering differentiation. • Competitive advantage to remain the largest independent provider of Urgent Treatment Centres across the country. • Major increases in demand for 111 services. • The delivery of bespoke, high-quality insourcing solutions across the UK. • Strong relationships with our commissioners and healthcare providers. • Supporting Government bodies to manage demand on healthcare services. • Through continual improvements and commercial management, we continually review and improve. PARTNERSHIPS NEW ACQUISITIONS STRATEGIC RELATIONSHIPS • Delivering services across the UK • Successfully completed in partnership with the NHS. • Expanding into new markets, acquisition of Greenbrook Healthcare (Urgent Care). for example healthcare in Ireland. • Providing insourcing solutions • We place patient care at the heart of every decision we make. to an emerging market. • Our shareholders and key stakeholders. • NHS and healthcare providers. • Patients and staff. KEY PERFORMANCE INDICATORS Revenue Total of all revenue generated by the Group. £105.9m +35.8% Underlying EBITDA Adjusted for items as disclosed in note 8 of the financial statements. £4.0m +265% Cash Total of all cash held across the Group. £8.9m +19% 105.9 78.0 4.0 10.2 8.9 7.5 42.5 0.5 4.0 1.1 (0.4) (1.2) 0.2 1.0 0.4 2015 2016 2018* 2019 2020 2015 2016 2018* 2019 2020 * 15-month period. 2015 2016 2018* 2019 2020 13 STRATEGIC REPORTAnnual Report for the year ended 31 March 2020 Totally plc Clinical quality review QUALITY AND RELIABILITY Gloria Cooke Clinical Quality Director For all of us, 2019/20 has been a truly extraordinary year and providing urgent care through a viral pandemic really tested all our systems. But the year was about more than COVID-19; although sometimes it is hard to remember that now. This review highlights that even in extraordinary times the improvement journey continues for Totally plc. Clinical governance overview – Group Our aim never changes. Right care, first time. If we do that we reduce waits, reduce complaints and incidents and raise the number of our patients and clients who are pleased with the care they have received. Crucially too, we save money – waste is reduced, duplication of effort goes and instead we spend it on giving and improving care rather than investigating failings. Indeed, our reputation with regulators, commissioners and patients relies on it. Internal inspections Led by our Clinical Audit and Effectiveness Manager, our internal inspection schedule continued throughout the first three quarters of the year, ceasing only when the pandemic prevented travel. In that year, further evidence was gained of how this process successfully drives up quality standards, as we have seen in step-change improvements in services we have inspected more than once. Reassuringly too, these inspection findings have correlated closely with what CQC inspectors subsequently found at their inspections, so we know we are on the right track. Therefore, when pandemic control is gained nationally, we will start inspections again, but in the meantime, remote models of measurement will be continued. 14 Safeguarding Prompted by Group growth, a root-and-branch review of Safeguarding in Totally plc during last year led to strengthening of our Safeguarding systems. Ensuring we properly support our clinicians to safeguard vulnerable patients is a key part of our responsibilities as providers, and it is one we do not take lightly. Building on safeguarding foundations we have created so far, we will embed improved structures across the Group in 2020/21. Clinical innovation During 2019, Dean Payne was appointed as our first Director of Clinical Innovation. Dean is a physiotherapist and entrepreneur with endless energy for improving healthcare. His academic background and research and commercial experience perfectly fit him for this role, which helps keep us at the cutting-edge of high-quality, sustainable health care. Dean works within my team which means he has access to audit, analytical and clinical governance skills - all essential to efficiently test, evaluate and implement innovative approaches into practice. Dean works with clinicians and leaders throughout the Group, harvesting and developing their ideas to design trials whenever a good business and clinical case can be made. COVID-19 Of course, in the last quarter of our financial year the pandemic hit. Working in partnership with the NHS meant that we needed to nimbly and contribute our range of services to assist with what quickly became a national crisis. Our 111 services responded diligently to massively increased demand while clinicians working face-to-face with patients had to adapt quickly to a whole new way of working. We were dealing with a perfect storm: on one hand huge demands from worried and sick patients and, on the other, an increasing staff absence rate; either because they were poorly or vulnerable themselves or were isolating because of symptomatic family members. Clinicians and others offered to redeploy to where their skills were most needed and an appeal to recently retired staff to return to help with the pandemic was responded to enthusiastically. Environmental and practice changes were made so we could make the workplace safer for our telephony and office staff, home-visiting and Urgent Treatment Centre clinicians alike. We adopted a nation-wide approach to PPE procurement and distribution, which ensured good control and maintenance of availability. Totally plc Annual Report for the year ended 31 March 2020STRATEGIC REPORT Keeping the frontline staffed was key to maintaining care but dealing with changing and sometimes complex government guidance was a major challenge to us. We successfully addressed this through developing an in-house sickness absence management scheme which meant that staff were clinically assessed individually for levels of vulnerability so that we could redeploy them appropriately and safely. Stringent sickness absence management, redeployment options and other “back to work” measures resulted in good staff attendance and therefore safe service provision overall. Communications with staff were stepped up with bulletins and Zoom briefings and staff tell us they felt well supported during a period of anxiety. Our COVID-19 Incident Response process continues and will no doubt influence our work throughout 2020/21 and we remain alert to national or local prevalence, but we are proud that throughout the Group our staff have significantly contributed to the nation’s response so far and tribute should be paid to the skill, professionalism and massive efforts which were needed to do this. No systems or processes, however good, can compensate for a disengaged workforce. Our clinical governance structure Infrastructure Our changed Clinical Governance Structure continues to ensure strong connectivity and transparency “floor to board” and the following graphic illustrates how our new arrangements will provide for that. CQC status I’m delighted that our CQC profile continues to improve year-on-year which I show below: CQC site status Good Requires improvement Inadequate 2018 50% 35% 15% 2019 90% 10% – 2020 97% 3% – These figures now include About Health (part of our Planned Care Division), which had its first-ever CQC Inspection during 2019, and Greenbrook Healthcare. I am pleased to report that About Health’s services were rated as Good and it was great to see that the hard work and commitment of the team was recognised. Totally plc Board Group Clinical Governance Board (GCGB) Clinical Policy Group e r a C t n e g r U e r a C d e n n a P l g n i c r u o s n I Quality Performance Committee Vocare Greenbrook About Health, Optimum SPC, Premier Physical Healthcare Quality and Safety Committee Quality and Safety Committee Totally Healthcare Clinical Governance Committee 15 Annual Report for the year ended 31 March 2020 Totally plcSTRATEGIC REPORT Clinical quality review continued SOME DIVISIONAL ACHIEVEMENTS DURING 2019 INSOURCING URGENT CARE We have been delighted with the feedback observed from the beginning of Totally Healthcare’s services. They have delivered a high number of cases safely and to an enviable standard of patient satisfaction. Patient feedback “Overall, how would you rate the care you received?” 111 patient feedback A recent study in 111 has shown very encouraging levels of patient satisfaction. This is a high-volume service, often dealing with distressing and/or high-risk care and the helpfulness and empathy of the staff dealing with patients initially, together with the clinical care they receive, is very important to get right. It can be seen from this report that levels of satisfaction are high and are consistent even during times of significantly raised throughput in the winter months. Excellent 62% Very good 37% Fair 1% NHS111 Patient feedback Did you find the service helpful? 62+ 295 completed questionnaires Following the pandemic, Totally Healthcare is back to work and growing, providing more and more care to patients who have suffered long and worrying waits for care and we will be tracking those services to provide assurance and drive improvements wherever we can. Demonstrating Totally Healthcare’s standards to commissioners is key to giving assurance of safety for NHS Trusts and crucially patients, faced with long and lengthening waiting lists. Dec ’19 Following the pandemic, Totally Healthcare is back to work and growing, providing more and more care to patients who have suffered long and worrying waits for care and we will be tracking those services to provide assurance and drive improvements wherever we can. 16 Quite or very helpful Not very helpful Not helpful at all No response Aug ’19 Sep ’19 Oct ’19 Dec ’19 Delivering best practice in medicines management Because of the known dangers of antibiotic misuse and the risks that this brings both to us and the next generations, NICE has set national targets to reduce overall antibiotic prescribing by 15% by 2024. This graph shows our success in reducing antibiotic prescription for Upper Respiratory Tract Infections so far in one region. Our medical managers, working with our Head of Medicines Management, worked hard to support clinicians in achieving this significant result and in this way we have avoided many harmful and expensive courses of antibiotics being given to our patients. Antibiotic Prescribing for URTI: Central Region 2019 35% N a t i o n a l l A c t i o n P a n & A u d i t s I n t r o d u c e d 22.5% 19.5% 2024 National Target (20%) Q1 Q2 Q3 Prescribing habits measured against compliance to NICE guidelines for Antimicrobial Stewardship 2016 and the target being to achieve the Government’s “Tackling antimicrobial resistance 2019–2024 The UK’s five-year national action plan. Published 24 January 2019” that looks to reduce UK antimicrobial use in humans by 15% by 2024. Totally plc Annual Report for the year ended 31 March 2020STRATEGIC REPORT 37 + 1 + N Another example of success is in reducing prescription of certain potentially harmful drugs outside NICE guidelines. Diazepam is now a controlled drug, largely because of its addictive potential and that newer, better drugs with fewer side effects should be used instead. This graph shows reduction in the use of Diazepam over two years and demonstrates increased safety for patients. Diazepam Prescribing: Urgent Care Prescription Rates Rate = No. of Diazepam Px/No. of attendances X 1000 i i i G u d a n c e D s s e m n a t e d & A u d i t s C o m m e n c e d 4.6 2017 3 2 2018 2019 Providing care remotely massively drives efficiency for patients and staff alike, saving thousands of needless appointments, inconvenience and travel etc. In this way we have delivered care to 7,000 + patients so far and were able to provide care throughout the pandemic. Number of self-management programmes assigned to patients during 2019-20 1,000 900 800 700 600 500 400 300 Prescribing habits were measured against NICE guidelines to reduce the inappropriate prescribing of drugs of potential misuse. Standards were taken from the following three sets of NICE guidance and introduced and disseminated to all clinicians in 2017. These are re-issued every six months in the clinical briefings. The target was to try and continuously reduce the overall prescribing. NICE (2011) Alcohol-use disorders: diagnosis, assessment and management of harmful drinking and alcohol dependence. NICE (2015) Generalised anxiety disorder. NICE (2017) Back pain – low (without radiculopathy. PLANNED CARE Our Planned Care division falls into two broad service areas – therapies (physiotherapy and podiatry) and out-patient care (predominantly in dermatology). Delivery and monitoring of Remote Rehabilitation Programmes Delivery of services via a video channel Collection and analysis of outcome data via platform Innovations in therapy The project to do this is in three phases: the first in which, after assessment by a physiotherapist, patients are prescribed a comprehensive rehabilitation plan to be delivered using patients’ smartphones or tablets and using an online patient portal for messaging. This allows us to monitor patient metrics and therefore their progress, as well as providing secure messaging between the patient and their physiotherapist. Apr 19 Jun 19 Aug 19 Oct 19 Dec 19 Feb 20 Patients Platform In the second (present) phase, we are building on phase one’s success by adding video consultation into the package. This brings back a missing interactive visual element into the physio/patient consultation and will enhance care and effectiveness further. The third phase begins shortly, during which we will be evaluating the findings of this project in terms of patient acceptability, care costs and clinical benefits - all of which will help us identify its full potentials. Already we have some early results in terms of Patient-Reported Outcome Measures (“PROMs”) which show good levels of improvement in symptom and condition management. Conclusion 2019/20 might not have been the year I foresaw when I wrote last year’s report, but it is one in which I believe we have shown success, resilience and reliability. During a year of very significant growth for the Group, and a pandemic for the nation, Totally plc has still managed to further develop the quality and safety of our services which, I believe is a huge credit to the leaders, clinicians and support staff who have all contributed and I thank them all. Gloria Cooke Clinical Quality Director 14 July 2020 17 Annual Report for the year ended 31 March 2020 Totally plcSTRATEGIC REPORT Financial review WELL POSITIONED FOR FURTHER SCALE This improved performance has resulted in a reduction in provisions relating to performance-related incentives of £1m. Underlying gross margin is therefore 17.2%. All of our businesses continually review service delivery models and this approach has supported us through our response to the global pandemic. By utilising additional technology, reducing face to face contact, delivering 111 24/7 and flexing our services we have continued to deliver sustainable support to our partners, the NHS. The Group posted an EBITDA, excluding exceptional costs relating to the acquisition and impairment of goodwill, of £4.0m. The loss before tax of £3.4m is stated after an amortisation charge of £2.8m relating to the intangible value of contracts acquired. 31 March 2020 31 March 2019 Revenue Gross profit EBITDA Exceptional items Depreciation Amortisation Operating loss Loss before tax Net assets Cash £105.9m £19.2m £4.0m (£2.0m) (£2.0m) (£3.1m) (£3.1m) (£3.4m) £34.4m £8.9m £78.0m £12.1m £1.1m £0.1m (£0.6m) (£2.2m) (£1.6m) (£1.8m) £25.9m £7.5m A prudent view of Planned Care growth has been considered in light of the COVID-19 pandemic. As a consequence, we recognised an impairment of goodwill relating to this cash generating unit (“CGU”). The carrying value of goodwill in relation to this CGU following impairment is £7.8m. Exceptional items Acquisition-related costs Impairment of goodwill Revaluation of contingent consideration Other exceptional costs Total exceptional items Tax (credit)/charge attributable to exceptional items Total exceptional items after tax 12 months to 31 March 2020 £000 12 months to 31 March 2019 £000 528 1,500 — — 2,028 (100) 1,928 465 2,000 (2,668) 77 (126) 404 278 Lisa Barter, ACA Finance Director The acquisition of a quality urgent care provider, Greenbrook Healthcare and the creation of a new business in Insourcing have strengthened the financial performance of the Group. Growth in revenue was 35.8% year on year at £105.9m, and the Group generated a loss before tax of £3.4m (2019: £1.8m loss). Underlying EBITDA increased by 265% to £4.0m. This includes a £1.6m positive impact relating to IFRS 16. The Group is cash generative and responded with the distribution of our maiden dividend in February 2020. The Board is also proposing the payment of a full-year dividend of 0.25p per share, payable in October 2020. The intention is to consider future dividend payments based upon the trading performance of the Group. Growth in revenues was 35.8% primarily driven by the in-year acquisition, bringing revenues to £105.9m. New contract wins were adversely impacted by the uncertainty created by BREXIT and the General Election. NHS commissioning understandably paused during this time; nonetheless, the Group was able to secure extensions of several existing contracts across the Group, plus a significant new contract for Planned Care, in Manchester. The new Insourcing business delivered over £1m in revenues in its first period of trading. Gross margin improved to 18.1% from 15.5%, largely as a result of improved performance in the underlying Urgent Care business. 18 Totally plc Annual Report for the year ended 31 March 2020STRATEGIC REPORT Acquisition costs The acquisition costs comprised legal, professional and other related expenditure and amounted to £0.5m (2019: £0.5m). Cash flow statement Cash generated from operating activities is positive in the year reflecting improved underlying profitability of the Group. Cash outflow relating to the acquisition of Greenbrook, net of cash acquired was £8.0m. The acquisition was funded by the issue of share capital, net of expenses of £9.3m. In June 2019, the Company issued 97,390,939 new ordinary shares of 10p each. The Company also issued 25,000,000 new ordinary shares of 10p each as part of the consideration for the acquisition of Greenbrook Healthcare (Hounslow) Limited and Greenbrook Healthcare (Earl’s Court) Limited on the same date. 31 March 2020 31 March 2019 Net cash flows from operating activities Net cash flows from investing activities Net cash flows from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year £2.9m (£1.8m) (£8.6m) (£0.9m) £7.1m — £1.4m (£2.7m) £7.5m £10.2m £8.9m £7.5m The impact of adopting IFRS 16 on the Consolidated Cash Flow Statement is to increase operating cash flows and decrease financing cash flows by £1,744,000 respectively. Maiden final dividend We remain committed to the payment of dividends as we believe this reflects our confidence in the Company’s future prospects. The Board is therefore pleased to be recommending to shareholders a maiden final dividend of 0.25p per share. This, together with the interim dividend of 0.25p per share paid in February 2020, makes a total dividend for the year of 0.50p per share. Subject to approval by shareholders at the Annual General Meeting to be held on 7 September 2020, the final dividend will be paid on 16 October 2020 to shareholders on the register as at the close of business on 18 September 2020. The shares will be marked ex-dividend on 17 September 2020. Acquisition of Greenbrook Healthcare On 20 June 2019, the Company completed the acquisition of the entire share capital of Greenbrook Healthcare (Hounslow) Limited and the convertible loan note in Greenbrook Healthcare (Earl’s Court) Limited for a maximum consideration of £11.5m on a cash-free and debt-free basis with a normalised level of working capital. The table opposite sets out the adjustments to the purchase price to reflect a normalised level of working capital which has resulted in additional consideration payable of £4.7m. Greenbrook is one of the leading providers of Urgent Care Centres in London. The company was acquired as part of the Group’s stated “buy and build” strategy and to bring new and complementary routes to the existing healthcare services offered by the Group. Greenbrook’s Urgent Care services provide synergies with Totally plc’s existing subsidiary businesses, in particular Vocare, and complements its business model of providing preventative and responsive healthcare in out-of-hospital settings to improve people’s health, reduce NHS healthcare reliance, re-admissions and emergency admissions to hospital. The assets and liabilities as at 20 June 2019 arising from the acquisition were as follows: Property, plant and equipment Intangible assets: customer contracts Right-of-use assets Trade receivables and other debtors Cash in hand Trade and other payables Lease liabilities Onerous contracts Deferred tax Convertible loan notes Net assets acquired Goodwill Total consideration Satisfied by: Cash Ordinary shares issued Carrying amount £000 Fair value adjustment £000 317 — Fair value £000 317 — 1,425 9,354 — 9,354 1,425 4,712 5,781 (6,964) (1,425) — (34) (50) 3,762 (763) — 4,712 — 5,781 (7,727) — (1,425) (529) (1,472) (50) 10,386 5,850 16,236 (529) (1,438) — 6,624 13,736 2,500 16,236 The goodwill is attributable to the knowledge and expertise of the workforce and the operating synergies that arise from the Group’s strengthened market position. Any impairment charges will not be deductible for tax purposes. Included in the fair value of Greenbrook are provisions for additional costs or potential costs that existed at the time of acquisition. Changes in accounting policies The Group adopted IFRS 16 with a transition date of 1 April 2019. The Group has chosen not to restate comparatives on adoption and, therefore, the revised requirements are not reflected in the prior year financial statements. Rather, these changes have been processed at the date of initial application and recognised in the opening equity balances. Details of the impact this standard has had are given on page 20. 19 Annual Report for the year ended 31 March 2020 Totally plcSTRATEGIC REPORT Financial review continued Changes in accounting policies continued IFRS 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, together with options to exclude leases where the lease term is twelve months or less, or where the underlying asset is of low value. IFRS 16 substantially carries forward the lessor accounting in IAS 17, with the distinction between operating leases and finance leases being retained. The Group does not have significant leasing activities acting as a lessor. As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for most leases. However, the Group has elected not to recognise right-of-use assets and lease liabilities for some leases of low value assets based on the value of the underlying asset when new or for short-term leases with a lease term of twelve months or less. On adoption the Group recognised right-of-use assets at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments. Lease liabilities are measured at the present value of the remaining lease payments, discounted using the Group’s incremental borrowing rate as at 1 April 2019. The Group’s incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions. The impact of adopting IFRS 16 on the Consolidated Statement of Profit or Loss is to increase profit before exceptional items by £1,636,000, increase depreciation by £1,509,000 and increase finance costs by £235,000. The impact of adopting IFRS 16 on the statement of financial position can be seen below: 31 March 2019 £000 IFRS 16 £000 1 April 2019 £000 Assets Right-of-use assets Prepaid rent Liabilities Lease liabilities — 57 57 — 4,083 (57) 4,026 4,083 — 4,083 4,026 4,026 The impact of adopting IFRS 16 on the Consolidated Cash Flow Statement is to increase operating cash flows and decrease financing cash flows by £1,744,000 respectively. The following table reconciles the minimum lease commitments disclosed in the Group’s 31 March 2019 financial statements to the amount of lease liabilities recognised on 1 April 2019. 1 April 2019 £000 Minimum operating lease commitment at 31 March 2019 Previously unrecognised commitments Less: short-term leases not recognised under IFRS 16 Less: low value leases not recognised under IFRS 16 Less: licences not considered leases under IFRS 16 Undiscounted lease payments Less: effect of discounting using the incremental borrowing rate Lease liability as at 1 April 2019 5,295 151 (71) (17) (434) 4,924 (898) 4,026 Lisa Barter, ACA Finance Director 14 July 2020 20 Totally plc Annual Report for the year ended 31 March 2020STRATEGIC REPORT Risk management OUR APPROACH TO RISK The process defines responsibilities for risk management and associated governance arrangements including reporting arrangements to the Board via divisional leads. It is intended to promote and embed best practice throughout the Group and applies to all levels of risk. This facilitates a dynamic approach to risk management across the Group, thereby enabling the Board to remain sighted on the highest-level risks and assure itself that appropriate mechanisms of control are in place within each division. To support the development of a proactive risk management approach and Board Assurance Framework across the organisation, the Group commits to: • Embed effective organisational governance arrangements that respond to strategic change, hold our services to account for ensuring appropriate patient safeguards regarding quality safety and patient experience are in place, support high-quality and effective service delivery and receive assurances in these respects. Statement of intent The Group attaches great importance to the effective management of risks that may be faced by patients, members of the public, managers and staff, partners and other stakeholders, and by the Group itself. The Group does not, therefore, aim to create a risk-free environment, but rather one in which risk is considered as a matter of course and appropriately identified and controlled. Where possible, the Group will involve stakeholders in its risk management processes and will work in partnership to identify, prioritise and control shared risks across the Group – just as we did during the COVID-19 pandemic response. The Group is committed to making risk management a core organisational process and ensuring that it becomes an integral part of its philosophy, practices and business planning and that responsibility for its implementation is accepted at all levels of the Group. It is imperative that a culture of transparency and honest reporting is promoted and upheld throughout the Group to ensure risks are properly identified, evaluated, documented and managed. The Group is committed to developing a strategy which provides a robust framework that is underpinned by the concepts of effective governance and other systems of internal control that enable the identification and management of both acceptable and unacceptable risks. • Ensure that all staff are accountable and responsible. • To put in place a robust risk management framework that delivers compliance with regulatory standards across the Group. The Group’s financial risk management objectives and exposure to those risks is detailed in note 24 Financial instruments. Board Audit Committee Divisional Senior Management Internal Control Manager Compliance teams Third party reviews Policies, procedures, reporting and review 21 Annual Report for the year ended 31 March 2020 Totally plcSTRATEGIC REPORT Principal risks and uncertainties PRINCIPAL RISKS We have detailed, comprehensive risk management processes across our businesses which include: • ISO accreditation processes and accreditations. • Care Quality Commission reviews. Internal service reviews to maintain clinical standards. • Emergency Planning, Resilience and Response (“EPRR”). • Business continuity planning (“BCP”). We continually review our internal systems and processes and work closely with policymakers and clients to understand how our marketplace is changing. More information on how we manage risk can be found in our Corporate Governance Report on pages 27 to 31. Our major risks and uncertainties identified at this time are shown opposite. 22 CHANGES IN GOVERNMENT POLICIES The public sector across the UK and Ireland provides 99% of our revenue, so our business is heavily dependent on policies adopted by the UK and Irish healthcare bodies. Diversity across our business delivery models enables us to manage the risks and focus efforts on those markets where we can see the opportunity of earning a predictable return. We also always ensure we are linked strategically to policymakers, utilising our networks to ensure we are aware of planned changes and can respond accordingly. TENDERING FOR NEW WORK We stay ahead of other providers by continually innovating and investing in our care delivery models as well as supporting the national agenda for moving to an outcome based commissioner process. POOR CARE DELIVERY Healthcare is a highly regulated industry and therefore it is vital that we closely manage the quality of the care we deliver. PEOPLE Our employees are passionate about making a difference in the healthcare sector. And we know the work of each one of us contributes to improving people’s lives. DIGITAL FAILURE Performance of systems is clearly managed by our digital team who ensure contingency and business continuity plans are continually reviewed and adjusted. FINANCIAL LIQUIDITY Cash flows are actively monitored by our finance team, managing liquidity risks while maintaining liquidity requirements. Exposure to risk is detailed in note 24. Totally plc Annual Report for the year ended 31 March 2020STRATEGIC REPORT Section 172 statement Section 172 of the Companies Act 2006 requires Directors to take into consideration the interests of stakeholders and other matters in their decision making. The Directors continue to have regard to the interests of the Group’s employees and other stakeholders, including the impact of its activities on communities, the environment and the Group’s reputation when making decisions. Acting in good faith and fairly between members, the Directors consider what is most likely to promote the success of the Group and its members in every decision made. The Directors are fully aware of their responsibilities to ensure that the Group is successful under Section 172 of the Companies Act 2006. Stakeholders As a Board we regularly review our principal stakeholders and how we engage with them. The Group views its investors, customers (commissioners and patients), clinical regulators and employees as its principal stakeholders. All concerns or thoughts of our stakeholders are discussed at Board level and by direct engagement with stakeholders themselves. Every decision we make is taken with our stakeholders in mind and what’s best for them in the long term. Below we highlight how we engage with our stakeholders and the outcomes: Stakeholder Type of engagement Outcomes Investors • AIM compliant website with investor relations section • Proactive investor relations including PR support, use of social media and direct interactions • Regular investor meetings and direct calls with our Group CEO • Stock exchanges announcements, regular press releases and social media updates Investors’ opinions and feedback are considered when discussing strategy, performance and remuneration policies Commissioners • A focus across the Group on the needs of our commissioners • Operational relationships to ensure with an emphasis on assisting with strategic reviews and innovation to promote best practice • Direct engagement with commissioners and healthcare we work with commissioners on best practice to deliver optimum healthcare for local communities strategists by several Board members and senior colleagues within our subsidiary companies • Commissioner feedback is considered when delivering local services • Review of care pathways and innovation opportunities through • Deliver high-quality clinical services embedded work practices led by Board members • Maintain strong relationships to ensure we can respond to any new demands placed on healthcare (such as pandemics) • Be considered as a preferred partner for the delivery of healthcare services by contributing to strategic planning forums and maintaining relationships with healthcare policymakers • Established robust “Board to floor” emergency planning processes which can be mobilised quickly supported by professional corporate functions (such as recruitment and finance) to enable delivery • Ability to respond quickly to new demands for services (example COVID-19) Clinical regulators • Ensure our recruitment practices reflect best practice to ensure we can provide safe services and attract and retain the best staff • Work closely with Care Quality Commission and other healthcare regulators to ensure we influence strategy and can comply with all requirements • Improve our ability to attract the best staff who understand how to provide safe clinical services • Support our staff with training and audits to ensure delivery of high-quality clinical services Patients • Collect patient feedback to feedback across the organisations • Seen as a trusted provider of healthcare to improve what we do by patients and commissioners • Respond proactively and professionally to all complaints ensuring • Ability to support staff and patients for that learning is taken from each event and embedded into future practice positive benefits for both Employees • Open forum meetings for all employees with Board members and other senior managers • Best practice recruitment processes and remuneration packages to attract and retain the best staff • Proactive Learning and Development strategy • Enables staff to hear from and speak to leaders across the organisation for open discussions • Ensure staff maintain compulsory registrations and training as required This Strategic Report was approved by the Board of Directors on 14 July 2020. Wendy Lawrence Chief Executive Officer 23 Annual Report for the year ended 31 March 2020 Totally plcSTRATEGIC REPORT Board of Directors EXTENSIVE EXPERIENCE Robert (Bob) Holt OBE Chairman Wendy Lawrence Chief Executive Officer Lisa Barter, ACA Finance Director Gloria Cooke Clinical Quality Director Appointment as Finance Director Lisa was appointed Finance Director and an Executive Director in October 2017. Appointment Gloria was appointed Clinical Quality Director in May 2016 and an Executive Director in December 2017. Key strengths Lisa has spent over 15 years leading finance in the independent healthcare sector and has been a qualified accountant since 1996. Lisa has experience in SME, private equity and plc settings. Experience and skills Lisa is a Charted Accountant and has extensive experience in leading finance within the independent healthcare sector. Her experience includes M&A activity as well as extensive involvement in restructuring and reorganisation of rapidly growing businesses and start ups. Prior to joining Totally plc in October 2017, Lisa held a number of senior finance roles, most notably within Care UK, for over ten years. Lisa qualified with Ernst & Young LLP and has held finance management roles with both Hewlett-Packard and Oracle Corporation. Key strengths Gloria has vast experience in healthcare delivery and leadership. She left the NHS in 2013 and continued her practise in large scale transformational projects as Programme Director in different healthcare regions in England and Wales. She undertook complex service reviews and fulfilled interim roles as Director of Nursing, Transformation Director and Chief Operating Officer for trusts throughout England. Experience and skills Gloria’s long career in healthcare successfully covered three key areas: clinical practice; general operational management and healthcare transformation. Qualifying as a nurse in both adult and children’s care Gloria had a long clinical career in emergency and paediatric services. Following MBA qualification, she led a successful general management career, taking up ever more senior leadership roles in large acute trusts throughout the North and Midlands. During this time Gloria’s track record of transforming inefficient teams and services into high performing ones developed. Gloria holds non-executive roles in non-healthcare organisations. A N R Appointment as Chairman Bob was appointed Chairman of Totally plc in September 2015. Appointment as Chief Executive Wendy was appointed as Chief Executive Officer in February 2013. Key strengths Bob is an experienced manager and developer of service businesses. He has an extensive track record, spanning over 35 years, of growing businesses and providing executive leadership to navigate businesses through challenging market conditions. Experience and skills Bob was latterly Chairman of Mears Group plc for over 23 years, until his retirement from the Board in January 2019. Bob is currently Chairman of Sureserve Group plc and a Director of several other businesses and was awarded an OBE in January 2016. Key strengths Wendy has over 37 years of senior healthcare experience within the NHS, private and US healthcare systems. She was running her own successful business before joining Totally plc and developing the current strategy to become a leading partner for delivering high-quality healthcare services across the UK and Ireland. Experience and skills Wendy has successfully led and delivered numerous complex change projects. She remains committed to developing and providing the very best healthcare services to patients in every aspect of care delivery. Wendy continues to work closely with healthcare policymakers and utilises her knowledge, skills and experience to influence the future of healthcare across the UK and beyond. She is an experienced executive coach who supports individuals and organisations to succeed. Key to Committees Audit Committee Nomination Committee Remuneration Committee Chair of Committee A N R 24 GOVERNANCETotally plc Annual Report for the year ended 31 March 2020 Michael Steel Executive Director Anthony (Tony) Bourne Non-Executive Director Michael Rogers Non-Executive Director N R A Appointment to the Board Michael was appointed as Executive Director for Totally plc in June 2019 and resigned with effect from 10 July 2020. Key strengths Michael has over 20 years of experience in business growth and the strategic development of business. Experience and skills Michael co-founded Greenbrook Healthcare in 2007 and as CEO led the growth and development of the company. Upon completion of the acquisition by Totally plc in June 2019, Michael was appointed to the Board of Totally plc and took on the Executive Director role of Chief Operating Officer for the Urgent Care and Planned Care divisions. Prior to Greenbrook Healthcare, Michael spent 14 years in strategy consulting as a partner for Roland Berger Strategy Consultants and as a project manager for Booz Allen & Hamilton where he focused on growth and strategy. He also founded and built his own 30-person consulting firm which was successfully sold to Roland Berger. Michael has an MBA from INSEAD business school and a Master’s degree in Economics from Oxford University. Appointment to the Board Tony was appointed as a Non-Executive Director for Totally plc in October 2015. Key strengths Tony has extensive business, healthcare and finance experience. Experience and skills Tony is currently a Non-Executive Director of Barchester, one of the UK’s largest operators of residential care homes, and Spire Healthcare Group Plc, one of the largest private health groups in the UK, and London Stock Exchange-listed company. He is also Chairman of CW+ (formerly the Chelsea and Westminster Health Charity), one of the largest NHS charities and, before that, was Chief Executive of the British Medical Association. Previously Tony was in investment banking for over 25 years, as a partner at Hawkpoint, an independent corporate finance advisory firm, and as the global head of the equities division and a member of the managing board of BNP Paribas. Tony has also spent nine years as a Non-Executive Director at Southern Housing Group and at Scope, one of the UK’s largest charities which focuses on cerebral palsy. Appointment to the Board Michael was appointed as Non-Executive Director for Totally plc in December 2015. Key strengths Mike has extensive business and healthcare delivery experience. Experience and skills Michael has over 30 years’ experience in healthcare services and social care services provisions. From April 2007 to June 2017, he was a Non-Executive Director of Mears Group plc, the provider of support services to the social housing and care sectors in the UK, which is listed on the main market of the London Stock Exchange. In 1976, Michael was appointed as Managing Director of the British Nursing Association. In 1988 he became the Chief Executive of Nestor BNA plc when the group floated on the London Stock Exchange. Michael remained here until 1996, prior to founding Careforce group plc in 1999, which floated on AIM in 2004. Careforce Group plc completed a number of acquisitions to become one of the UK’s leading domiciliary care providers, prior to its acquisition by Mears in 2007, following which Michael joined the Mears Board until his resignation. He is currently Chairman of Eastern Fostering Services Ltd, a provider of foster care services in East Anglia. Diversity, independence and experience Gender Tenure Male 58% Female 42% 1–4 years 58% 5–8 Years 42% 4258 5842 5842 5020 Executive 58% Healthcare 50% Sector experience Board composition Non-Executive 42% Business 20% Finance 20% Governance 10% 25 Annual Report for the year ended 31 March 2020 Totally plcGOVERNANCE+ 20 + 10 L L L L Senior Management HIGHLY SKILLED MANAGEMENT Richard Benson Managing Director Planned Care Andy Gregory Managing Director Urgent Care Marie Lee Managing Director Insourcing Appointment Richard was appointed Managing Director in August 2019. Appointment Andy was appointed Managing Director in March 2020. Appointment Marie was appointed as Managing Director in September 2019. Key strengths Richard is skilled in developing and leading high performing teams in the health sector. He founded and grew a successful healthcare business and brings strategic leadership to the task of consolidating and growing the businesses within the Planned Care division. Experience and skills Richard has almost 30 years’ experience in the NHS and independent healthcare sector. He has held Board-level positions in NHS commissioning organisations and was a founding Director of About Health, which was acquired by Totally plc in 2016. He has previously been an Associate of the NHS Modernisation Agency and a faculty member of Birmingham University’s Health Service Management Centre. Key strengths Andy is an experienced strategic leader to the NHS and independent sector and has a track record of leading large-scale complex change across healthcare sectors. Experience and skills With a career spanning 29 years in healthcare, Andy has extensive experience in delivering large complex change projects as well as business integration and business turn-around projects. Andy has an MBA (Keele University) and has been through a number of nationally recognised leadership programmes and is a Kings Fund Alumni member and contributor. Key strengths Marie has more than 17 years’ Board-level experience of delivering successful clinical insourcing services across public sector hospitals throughout the UK and Ireland. Experience and skills Marie was one of the original founders and CEO of Medinet, a healthcare insourcing business. Marie has worked with more than 100 hospitals across the UK and Ireland, helping to reduce patient waiting times through the delivery of cost-effective clinical services. 26 GOVERNANCETotally plc Annual Report for the year ended 31 March 2020 Chairman’s introduction to governance STRONG GOVERNANCE FRAMEWORK Strong corporate governance is fundamental to the effective management of the business and delivery of long-term shareholder value and is for the wider benefit of the Company, its employees, customers and suppliers. I am pleased to introduce the Company’s 2020 Corporate Governance Report. Strong corporate governance is fundamental to the effective management of the business and delivery of long-term shareholder value and is for the wider benefit of the Company, its employees, customers and suppliers. The Board considers that the future success of the Company is dependent upon a commitment to a strong governance framework throughout the business. The Company applies the governance principles of the Quoted Companies Alliance Corporate Governance Code 2018 (“QCA Code”), on the basis that it is the most appropriate governance code for the Group, having regard to its strategy, size, stage of development and resources. The QCA code focuses on ten principles and a set of disclosures. The details of how Totally plc complies with the principles that are stated in the QCA code are in the explanations to follow, within the Board Committee reports and on the Company’s website at www.totallyplc.com. Board composition has changed during the year with the appointment of Michael Steel as an Executive Director, following the acquisition of the Greenbrook Healthcare business. Michael resigned post financial year end on 10 July 2020. Bob Holt OBE Chairman 14 July 2020 27 GOVERNANCE Corporate governance report Statement of compliance with the QCA Corporate Governance Code The Board has adopted the QCA Corporate Governance Code and in the table below the Board sets out how it complies with the principles of the Code. Deliver growth Governance principles Compliant Further reading 1. Establish a strategy and business model which promote long-term value for shareholders Pages 2 – 13 and 29 https://www.totallyplc.com/about-us/ our-strategy 2. Seek to understand and meet shareholder needs and expectations 3. Take into account wider stakeholder and social responsibilities and their implications for long‑term success 4. Embed effective risk management, considering both opportunities and threats, throughout the organisation 5. Maintain the Board as a well functioning, balanced team led by the Chair 6. Ensure that between them the Directors have the necessary up to date experience, skills and capabilities 7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement 8. Promote a corporate culture that is based on ethical values and behaviours 9. Maintain governance structures and processes that are fit for purpose and support good decision making by the Board 10. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders Pages 27 – 31 https://www.totallyplc.com/investor-relations/ corporate-governance Pages 23 and 29 https://www.totallyplc.com Pages 21, 22 and 29 Pages 24, 25, 29 and 30 https://totallyplc.com/about-us/ board-and-management Pages 24, 25 and 30 https://totallyplc.com/about-us/ board-and-management Page 30 Pages 2 – 13 and 27 – 31 https://www.totallyplc.com/about-us Page 31 https://www.totallyplc.com/investor-relations/ corporate-governance Pages 1 – 39 https://www.totallyplc.com/investor-relations/ corporate-governance https://www.totallyplc.com/investor-relations/ reports-documents Maintain a dynamic management framework Build trust 28 GOVERNANCETotally plc Annual Report for the year ended 31 March 2020 Principle 1 – Establish a strategy and business model which promote long‑term value for shareholders Totally plc is a leading out-of-hospital healthcare provider. The business operates through three delivery divisions, the third of which was started during the year: • Urgent Care – Urgent Treatment Centres (“UTCs”) – managing the “front door “ to A&E Departments, NHS 111, GP Out of Hours services and Clinical Assessment Services (“CAS”) telephonic access to multidisciplinary teams of clinicians. • Planned Care – Community Outpatient Services including specialist dermatology and cardiology, Referral Management Systems (“RMS”) in partnership with the NHS to improve GP referrals, physiotherapy – full musculoskeletal services to GP surgeries, health centres, prisons and gyms – and Health Coaching supporting long-term condition management and early discharge services. • Insourcing – Totally Healthcare was established in October 2019 to target the insourcing market in the UK and Ireland, and to assist with the reduction of patient waiting lists. The Company’s focus remains on helping patients to avoid hospital and protecting the A&E department. Totally’s strategy is explained fully within our Strategic Report, which is contained within pages 1 to 23 of this Annual Report. The Principal Risks and Uncertainties to the business are detailed on pages 21 and 22 of this Annual Report. Principle 2 – Seek to understand and meet shareholder needs and expectations The Board recognises the importance of active shareholder dialogue with both institutional and private shareholders, and this is led by the Chairman and the Chief Executive Officer. The detail of how the Company addresses these matters is fully contained within the Principle 2 note in the Corporate Governance section of the website at www.totallyplc.com/ investor-relations/corporate-governance. Following both the annual and interim results announcements, meetings are held with analysts, private investors and institutional investors of the Company. The Company’s website also has details of public announcements, Annual and Interim Reports and investor presentations. The Annual General Meeting (“AGM”) of the Company remains a key focus on allowing the Directors to meet with shareholders and to provide an opportunity to give an update on the Company’s performance. It also gives shareholders the opportunity to ask questions of the Directors, either in the formal AGM proceedings or informally after the event. Principle 3 – Take into account wider stakeholder and social responsibilities and their implications for long‑term success The Board is conscious that its long-term success depends upon its interaction with its wider stakeholder base – patients, commissioning groups, staff, regulators and the wider community. Totally plc operates in a heavily regulated sector where its work is subject to independent audit and review by Clinical Commissioning Groups and the Care Quality Commission (“CQC”). Formal or informal feedback is encouraged by staff and from other stakeholders through, amongst other routes, the Contact Us section of the Company website at www.totallyplc.com. Regular staff dialogue is maintained through Totally News – a Company-wide newsletter and regular staff meetings. Principle 4 – Embed effective risk management, considering both opportunities and threats throughout the organisation Details of the risks and uncertainties faced by the Group, and actions to mitigate risk can be found in the Principal Risks and Uncertainties section of this Report and Accounts on pages 21 and 22. The business operates in a highly regulated market with activities complying to NHS operational and administrative procedures. Risk management is a core focus of the Board, and this is reviewed at each Board meeting. Detailed feedback is received from each operating subsidiary, together with external regulatory bodies, at these meetings. Formal risk registers for the business are reviewed regularly by the Board. Operational risk and any newly identified risk to the business is also considered. Regular dialogue is maintained with Commissioning Groups, the CQC, NHS England and with our insurers. The Company maintains appropriate levels of insurance cover. Principle 5 – Maintain the Board as a well functioning, balanced team led by the Chair The Board, led by the Chairman, is responsible for the overall management of the Group including the approval and implementation of the Group’s objectives and strategy, budgets, operational performance along with the maintenance of sound internal control, corporate governance and risk management procedures. The Board of Directors comprises of a Non-Executive Chairman, two further Non-Executive Directors and four Executive Directors. All Non-Executive Directors are considered to be independent. Details of the Directors, including brief biographies, Committee membership, key strengths and experience, skills and qualifications, can be found on pages 24 and 25 of this Annual Report. The work of the Board is supported by Audit, Remuneration and Nomination Committees, membership of which is made up of the Non-Executive Directors. There is a formal Schedule of Matters reserved for the Board and this along with the Board Committee terms of reference may be found on the Company’s website at www.totallyplc.com/investor-relations/ corporate-governance. 29 Annual Report for the year ended 31 March 2020 Totally plcGOVERNANCE Corporate governance report continued Principle 5 – Maintain the Board as a well functioning, balanced team led by the Chair continued The table below summarises the membership of the Board, the Board Committees and the attendance record of the Directors. The Directors are mindful of the need to maintain gender and equality balance to the Board. Sector-specific training for the Directors is maintained through regular business updates from the Executive Directors and briefings from external advisers. Board scheduled meeting Audit Remuneration Nomination External professional advice has only been sought for routine business matters. Director Executive Directors Wendy Lawrence Lisa Barter Gloria Cooke Michael Steel1 Non-Executive Directors Bob Holt Michael Rogers Tony Bourne 6/6 6/6 6/6 4/4 6/6 5/6 5/6 — — — — 3/3 3/3 — — — — — 2/2 — 2/2 — — — — 2/2 — 2/2 1. Michael Steel was appointed to the Board on 20 June 2019 and resigned on 10 July 2020. All Directors are required to commit sufficient time to their respective roles to discharge their duties adequately. Directors retire by rotation and are subject to re-election at the AGM of the Company. The Board has considered the independence of the Non-Executive Directors and the table below sets out their appointment date and those considered to be independent. Each of the Directors is subject to either an Executive Service Agreement or a letter of appointment. Directors during the year Independent/ Not Independent Date of appointment Role Independent 15 September 2015 Bob Holt Michael Rogers Tony Bourne Non-Executive Chairman Non-Executive Director Non-Executive Director Independent Independent Wendy Lawrence Chief Executive Officer Not Independent Finance Director Not Independent 7 December 2015 5 October 2015 15 February 2013 23 October 2017 Clinical Quality Director Not Independent 4 December 2017 Executive Director Not Independent 20 June 2019 (resigned 10 July 2020) Lisa Barter Gloria Cooke Michael Steel Principle 6 – Ensure that between them the Directors have the necessary up to date experience, skills and capabilities The Board considers that there is currently an appropriate balance between sector, financial and public market skills and experience at Board level. Directors’ biographies including details of their key strengths and experience and their skills and qualifications can be found on pages 24 and 25 of this Annual Report. 30 Principle 7 – Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement While it had previously been agreed to undertake an internal Board evaluation process during the financial year, the considerable work necessary to achieve the acquisition and integration of the Greenbrook Healthcare business, along with the changes to the plc Board and Senior Management team as a result of that acquisition, meant that the evaluation was deferred. The Board has agreed that a formal external Board evaluation will be undertaken during the current year. This will take into account both the requirements of the QCA Corporate Governance Code (2018) and the Financial Reporting Council’s Guidance on Board Effectiveness. There is a performance evaluation undertaken of all Directors being proposed for re-election to ensure their performance continues to be effective and in the case of Non-Executive Directors that their continuing independence and time commitment to the role is demonstrated. Principle 8 – Promote a corporate culture that is based on ethical values and behaviours Page 3 of the current Annual Report sets out Totally’s mission and values, all of which underpin how the Group is run. This culture is consistent with the Company’s strategy, further details of which are set out within the Strategic Report section of this Annual Report, on pages 1 to 23. Given the nature of the Group’s activities, Totally plc is subject to significant external scrutiny from Commissioning Groups and Regulators. The business is fully compliant with all NHS requirements for governance, information security and quality management. The Company has in place: • Formalised whistleblowing procedures for staff, contractors and agency staff to raise concerns relating to danger, fraud or other illegal or unethical conduct. • A Group Anti-Slavery and Human Trafficking policy statement in relation to the Modern Slavery Act 2015. • A Company Code of Conduct. • An Anti-Corruption Policy relating to compliance with the Bribery Act 2010. • Measures to take appropriate actions to comply with the provisions of the Market Abuse Regulations together with a Share Dealing Policy. • The Group has complied with the provision of statutory information relating to the Gender Pay Gap legislation and Payment Practices regime. GOVERNANCETotally plc Annual Report for the year ended 31 March 2020 Principle 9 – Maintain governance structures and processes that are fit for purpose and support good decision making by the Board The Company Secretary works closely with the Chairman and the Chairman of the various Board Committees to ensure that Board procedures, including setting agendas and the timely distribution of papers are complied with and that there are good communication flows between the Board and its Committees, and between senior management and Non-Executive Directors. There is a formal agenda at each Board meeting which includes an operational update from the Chief Executive Officer, financial updates from the Finance Director and a detailed clinical quality update, including any interface with regulators from the Clinical Quality Director. The reports from the Executive Directors cover all business units within the Group and also covers new business opportunities. Strategic issues are dealt with at each Board meeting by the Chairman. Within the annual calendar of Board meetings, there is normally an annual budget presentation at which the Senior Management team presents its budget for the forthcoming financial year. The Non-Executive Directors are encouraged to attend visits to the individual operating businesses to discuss performance and other issues with the management teams. During the course of the year, other matters considered by the Board have included annual and half-year results announcements, AGM resolutions, interactions with NHS England and the CQC, reports from the Group Clinical Governance Board, principal risks and uncertainties, shareholder communications and management incentivisation. Board papers are circulated to the Directors at least three clear business days in advance of the meetings to enable proper consideration of the content of the papers. The Chairman maintains regular contact with the Non-Executive Directors outside of formal Board meetings. The roles of all Board members are as detailed below: Position Responsibilities Name Non-Executive Chairman Bob Holt Chief Executive Officer Wendy Lawrence Leads the Board and assists the Chief Executive Officer in developing Company strategy. Ensures an effective link between shareholders and the Board. Assists the Chairman to develop strategies. Implements policies and strategies agreed by the Board and manages the business. Finance Director Lisa Barter Develops, implements and monitors financial strategy of the business. All Directors have access to the support and advice of the Company Secretary as required. Directors are also able to take independent professional advice at the Company’s expense in the furtherance of their duties where considered necessary. Position Responsibilities Name Group Company Secretary John Charlton Provides guidance on all matters of corporate governance. Ensures a good flow of information within the Board and its Committees. Board Committees There are three Board Committees, all with formally delegated powers – an Audit Committee, a Remuneration Committee and a Nomination Committee. All are chaired by and comprise of the Non-Executive Directors. The terms of reference for all Board Committees are reviewed regularly and can be found on the Company website at www.totallyplc.com/investor-relations/corporate-governance. Committee Chairs attend the Company AGM and are available to answer any questions from shareholders regarding the activities of the Committees. Principle 10 – Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders The Board maintains an active dialogue with institutional and private shareholders and employees – both employee shareholders and others. The Company’s website includes a specific Investor Relations section containing all RNS announcements, share price information and details of significant shareholders, corporate governance and annual documents are available for download at www.totallyplc.com/investor-relations. The website also provides details for contacting the Company on any issues. The AGM remains an important opportunity for the Board to engage with shareholders. Formal questions may be tabled to the Board during the AGM, or asked informally in conversation after the AGM. There is feedback to the full Board of any shareholder interaction at each Board meeting. This year’s AGM will be held on Monday 7 September 2020, and full details of venue and resolutions proposed may be found in the Notice of Meeting enclosed with these accounts or on the Company website. Approved by order of the Board. Clinical Quality Director Executive Director Gloria Cooke Develops, implements and monitors clinical quality and is Executive lead for safeguarding. Bob Holt OBE Chairman 14 July 2020 Michael Steel Assists CEO with the review of strategic matters and operational delivery. Non-Executive Directors Mike Rogers/ Tony Bourne Provide constructive challenge to the Executive Directors. 31 Annual Report for the year ended 31 March 2020 Totally plcGOVERNANCE Report of the Nomination Committee Membership of the Nomination Committee and activities during the year The Nomination Committee comprises of Tony Bourne, Non-Executive Director and Bob Holt, Non-Executive Chairman. Both served during the year. Tony Bourne became Chairman of the Committee on 24 October 2017. Details of attendance records during the period can be found on page 30. In June 2019 Totally plc completed on the acquisition of Greenbrook Healthcare and following the acquisition, Michael Steel, formerly Chief Executive of Greenbrook Healthcare, joined the Board as an Executive Director. The Board, therefore, comprises of four Executive Directors and three Non-Executive Directors. Given the transformational nature of the Greenbrook acquisition for Totally’s position within the Urgent Care market, the Nomination Committee reviewed the incentivisation of the key Executive Directors of the enlarged Group to ensure that they were aligned with the creation of shareholder value. A new long-term incentive plan (“LTIP”) was put in place for the Chief Executive Officer, Finance Director, Clinical Quality Director and the Executive Director in June 2019. Any award is subject to share price growth hurdles and has a three-year vesting period. Full details are contained within the Admission Document, which may be found at www.totallyplc.com/investor-relations/reports-documents. The Board acknowledges that diversity extends beyond the boardroom and supports the management efforts to building a diverse organisation. When considering the optimum composition of the Board, it is believed all appointments should be made on merit while ensuring an appropriate balance of skills and experience within the Board. The work of the Committee during the period has primarily been in supporting the Executive Directors in their review of Senior Management positions within the business, both at Group level and in the Executive management of the operating subsidiaries. Following the acquisition of Greenbrook Healthcare, the work that was already underway with the integration of the Vocare business and the creation of Totally Healthcare in October 2019, the Board confirmed the strategy of operating through three delivery divisions – Urgent Care, Planned Care and Insourcing. Senior appointments across all three delivery divisions were overseen by the Nomination Committee, following recommendations by the Executive Directors. As reported previously, the Committee had considered implementing the process of a formal Board evaluation, and it was agreed that initially this would be undertaken through an internal process led by the Non-Executive Directors. This process was halted following the change in Board structure as a result of the Greenbrook acquisition. The Board has however agreed that an external Board evaluation process will be commenced in the current year, given that the Board structure is stable. Full details will be reported in future Nomination Committee reports. Tony Bourne Chairman of the Nomination Committee 14 July 2020 Tony Bourne Chairman of the Nomination Committee The key responsibilities of the Nomination Committee are to: • Review the structure, size and composition of the Board, including the skills, knowledge, experience and diversity of Directors. • Develop a strategy for succession planning for both Directors and other senior Executives. • Identify and nominate for approval by the Board candidates to fill Board and other senior vacancies. • Keep under review the leadership needs of the Company. The focus of the Committee during the coming financial year will be: • To complete the Board evaluation process. • To review the Executive/Non-Executive balance of the Board. • To review succession planning within the business. • To review incentivisation arrangements for senior management teams within the business. 32 GOVERNANCETotally plc Annual Report for the year ended 31 March 2020 Report of the Audit Committee Michael Rogers Chairman of the Audit Committee The key responsibilities of the Audit Committee include: • Reviewing and monitoring the integrity of the Group’s annual and interim financial statements and accompanying reports. • Reporting on the appropriateness of accounting policies and practices. • Reviewing and monitoring the effectiveness of the Group’s internal controls and risk management systems. • Reviewing the effectiveness of the Group’s internal audit process and to approve the forward audit plan. • Making recommendations to the Board in relation to the appointment and removal of the external auditor. • Reviewing and monitoring the external auditor’s independence, objectivity and the effectiveness of the audit process. • Reviewing and monitoring the extent of the non-audit work undertaken by the Group’s external auditor. • Reviewing the adequacy and effectiveness of the Group’s whistleblowing and anti-bribery policy and procedures. • Reviewing the Group’s risk management procedures. Membership of the Audit Committee and activities during the year The members of the Committee are Michael Rogers, Non-Executive Director who acts as Committee Chairman and Bob Holt, Non-Executive Chairman. The Committee is comprised of financially literate members with the requisite ability and experience to enable the Committee to discharge its responsibilities. The Committee met three times during the period. Meetings are attended by Committee members and, by invitation, the Finance Director, Senior Management and representatives from the external auditors. Once a year, the Committee will meet separately with the external auditors without management being present. The Committee’s terms of reference are available to view at www.totallyplc/investorrelations. The primary function of the Audit Committee is to assist the Board in discharging the responsibilities concerning financial reporting and external and internal controls. During the period covered by this report, the Committee undertook the following: • Reviewed the key accounting considerations and judgements reflected in the Group’s results for the six-month period ended 30 September 2019. • Continued to support the Board with a review of accounting procedures and policies as part of the integration process following the Vocare acquisition. • Supported the Nomination Committee and Board in the appointments to the new Integrated Finance function following the acquisition of Vocare. During the course of the year a Group Central Finance team was established at the Derby Head Office, following the relocation of the Head Office from London. This has seen the consolidation of Finance teams from the various operating subsidiaries into the centre. • With the acquisition of Greenbrook Healthcare in June 2019 further consolidation of finance teams was undertaken to reflect the three operating divisions of the business – Urgent Care, Planned Care and Insourcing. • Reviewed and agreed the external auditors’ audit plan in advance of its audit for the year ended 31 March 2020. • Reviewed and approved the non-audit assignments undertaken by the external auditor for the year ended 31 March 2020. • Reviewed risk management procedures within the business together with a detailed review of the Group Risk Registers. • Considered, together with the Board, the principal risks and uncertainties review. 33 Annual Report for the year ended 31 March 2020 Totally plcGOVERNANCE Report of the Audit Committee continued A summary of the key risks from the Group Risk Register is presented to the Audit Committee on a semi-annual basis. The risks and uncertainties which are judged currently to have the most significant impact on the Group’s long-term performance and prospects are set out in the Principal Risks and Uncertainties section on page 22 of this Annual Report. Following the year end, the Committee has met to approve the Group’s Annual Report and financial statements. Michael Rogers Chairman of the Audit Committee 14 July 2020 External auditor RPG has remained as the Group’s auditors for the period under review. The Board is aware that the effectiveness and independence of the external auditor is central to ensuring the integrity of the Group’s published accounts. In line with standard audit practice, the audit partner was rotated at the start of the financial year. The Audit Committee took the following steps to ensure auditor independence was not compromised: • Reviewed the Group’s relationship with RPG and assessed the levels of controls and procedures in place to ensure the required level of independence and that the Group has an objective and professional relationship with RPG. • The Audit Committee reviews all fees paid for the audit and all non-audit fees with a view to assessing the reasonableness of fees, and any independence issues that may have arisen or may potentially arise in the future. Risk management and internal controls The Audit Committee is responsible for monitoring the financial reporting process and for reviewing the effectiveness of the Group’s systems of internal controls. Any system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve business objectives. The Board can only provide reasonable and not absolute assurance against material misstatement or loss. There is an established and transparent organisational structure in place, with appropriate defined authority levels. Day to day running of the Group is delegated to the Executive Directors of the Group, who meet with operational and financial management from each business area on a monthly basis. Key financial and operational measurements are reported on a monthly basis and are measured against budget and reforecasts. The Group maintains a Group Risk Register and individual risk registers for each business within the Group. These outline the key risks faced by the Group, including their impact and likelihood and relevant mitigation controls and actions. The Group and business unit risk registers are reviewed and updated by management on a monthly basis. 34 GOVERNANCETotally plc Annual Report for the year ended 31 March 2020 Directors’ remuneration report Tony Bourne Chairman of the Remuneration Committee The key responsibilities of the Remuneration Committee are to: • Develop remuneration packages which motivate Directors and support the delivery of business objectives in the short, medium and longer term. • Align the interests of the Executive Directors with the interests of long-term shareholders. • Encourage Executives to operate within the risk parameters set by the Board. • Ensure that the Company can recruit and retain high quality Executives through packages which are fair and attractive, but not excessive. This is the Directors’ Remuneration Report for the year ended 31 March 2020. Pages 36 and 37 provide details of each Director’s pay and benefits in the period to 31 March 2020. The members of the Committee are Tony Bourne, Non-Executive Director who acts as Committee Chairman and Bob Holt, Non-Executive Chairman. The Committee met twice during the period. Responsibilities and work of the Remuneration Committee The primary function of the Remuneration Committee is to review the remuneration of the Executive Directors and to monitor the remuneration of the Group’s Senior Management. The remuneration strategy and policy for all staff is also reviewed annually by the Committee. During the course of the financial year the Committee reviewed and assisted with the development of the following aspects: • The acquisition of the Greenbrook Healthcare businesses in June 2019 led to a further period of review and integration of roles and responsibilities within the enlarged business and followed on from the previous work undertaken as a result of the acquisition of Vocare in October 2017. The Committee assisted with aspects of the remuneration for the new Executive and Senior Management roles within the new structure. • During the year the strategic focus of the business was developed further to concentrate around three core areas – Planned Care, Urgent Care and Insourcing. Remuneration strategies were developed to reflect the new leadership roles within each of the three divisions. • Totally Healthcare – the business’ new Insourcing division was established in October 2019 and the Committee assisted the Executive Directors with establishing a focused remuneration strategy for the management team brought in to develop this part of the business. • The Committee also oversaw the adoption of the Totally plc LTIP Plan (Long-Term Incentive Plan) and the awards made to initial participants. Full details of the LTIP Plan Rules, awards made and performance conditions can be found from page 126 of the Placing, Open Offer and Admission Document relating to the Greenbrook acquisition which can be found at www.totallyplc.com/investor-relations/reports-documents. • A review was undertaken during the year of Executive and Non-Executive remuneration. Awards were made to Wendy Lawrence, Lisa Barter and Gloria Cooke, effective from 1 August 2019. • With regards to the Chairman, Bob Holt, who has served as Chairman since September 2015, the achievement of a pre-exceptional EBITDA performance of £1.1m for the financial year triggered a review of his fees. Bob Holt excluded himself from the Committee review of this matter, and the Independent Non-Executive Directors reviewed the matter. Bob Holt had not taken any fees since the date of his appointment in September 2015. After discussion it was agreed that Bob Holt should be awarded an annual fee as Chairman of £40,000, commencing 1 August 2019. The full terms of reference of the Committee are available on the Company’s website – www.totallyplc.com/ investor-relations/corporate-governance. 35 Annual Report for the year ended 31 March 2020 Totally plcGOVERNANCE Directors’ remuneration report continued Remuneration Policy It is the focus of the Remuneration Committee to ensure that a Director’s remuneration encourages, reinforces and rewards the growth of shareholder value while promoting the long-term success of the Company. Remuneration Policy is intended to support the business needs of the Company through ensuring the ability to attract, retain and motivate senior leaders of a high calibre while remaining competitive and providing an appropriate incentive for good performance. Executive Directors’ remuneration should also: • Align Executives with the best interests of the Company’s shareholders and other relevant stakeholders through a weighting on performance-related pay. • Be consistent with all regulatory and corporate governance requirements. • Be clear, straightforward and transparent while supporting the delivery of strategic objectives. • Be consistent with the Group’s risk policies and systems to guard against inappropriate risk-taking. The Committee seeks external guidance and benchmarking of remuneration strategies to assist the formulation of the Group Remuneration Policy. Disclosure of Directors’ remuneration – single total figure of remuneration (audited information) The table below reports the total remuneration received in respect of qualifying services by each Director during the period ended 31 March 2020: Total salary and fees Taxable benefits Annual bonus Long-term incentive Pensions-related benefits Total remuneration 2020 £000 2019 £000 2020 £000 2019 £000 2020 £000 2019 £000 2020 £000 2019 £000 2020 £000 2019 £000 2020 £000 2019 £000 Executive Directors Wendy Lawrence Lisa Barter Gloria Cooke Michael Steel1 Non-Executive Directors Don Baladasan Bob Holt Tony Bourne Mike Rogers 161 119 108 156 — 27 25 25 140 105 102 — 23 — 25 25 621 420 1 2 2 — — — — — 5 2 1 — — — — — — 3 40 25 20 — — — — — 85 — — — — — — — — — — — — — — — — — — — — — — — — — — — 24 12 — — — — — — 36 21 11 10 — — — — — 42 226 158 130 156 — 27 25 25 163 117 112 — 23 — 25 25 747 465 1. Michael Steel was appointed to the Board on 20 June 2019 and resigned on 10 July 2020. Annual bonus Performance bonuses in respect of the financial year 2018/19 were paid following release of the audited accounts to: • Wendy Lawrence £40,000 • Lisa Barter • Gloria Cooke £25,000 £20,000 The awards reflected operational turnaround of the Vocare business with 97% registered services being rated as Good by the CQC as well as achievement of pre-exceptional EBITDA of £1.1m. No such bonus has yet been approved for the financial year 2019/20. EMI approved options, CSOP and unapproved option schemes No awards were made to Executive Directors under the above schemes during the financial year. 36 GOVERNANCETotally plc Annual Report for the year ended 31 March 2020 Long-Term Incentive Plan (2019) (“LTIP”) The Totally plc Long-Term Incentive Plan (2019) was established during the year. The purpose of the Plan was to recognise the importance in retaining certain key individuals to drive the integration and development of the business for the future. Shareholders approved the LTIP arrangements with effect from the Greenbrook Admission Document. Awards will vest on a sliding scale dependent on the achievement of share price hurdles measured at the vesting date from 25% of any award at a share price of 35p to 100% at 55p per share. Full details of the Plan arrangements can be found from page 126 of the Greenbrook Admission Document, which can be found at www.totallyplc.com/investor-relations/reports-documents. A summary of option scheme awards, CSOP awards and unapproved share options Name of Director Scheme Wendy Lawrence EMI approved options CSOP Unapproved options LTIP Total CSOP Lisa Barter Unapproved options LTIP Total Gloria Cooke CSOP Michael Steel LTIP Total LTIP Total Number of options as at 31.03.2019 Granted during the period Lapsed during the period Exercised during the period Number of options as at 31.03.2020 Date from which exercisable Expiry date 250,000 74,000 176,000 — — — — 3,000,000 500,000 3,000,000 74,000 26,000 — — — 1,500,000 100,000 1,500,000 50,000 — — 1,500,000 50,000 1,500,000 — 1,500,000 — 1,500,000 — — — — — — — — — — — — — — — 250,000 11 Nov 18 11 Nov 25 — 74,000 31 Jan 21 31 Jan 28 — 176,000 31 Jan 21 31 Jan 28 — 3,000,000 20 Jun 22 20 Dec 25 — 3,500,000 — — 74,000 31 Jan 21 31 Jan 28 26,000 31 Jan 21 31 Jan 28 — 1,500,000 20 Jun 22 20 Dec 25 — 1,600,000 — 50,000 31 Jan 21 31 Jan 28 — 1,500,000 20 Jun 22 20 Dec 25 — 1,550,000 — 1,500,000 20 Jun 22 20 Dec 25 — 1,500,000 Long-term incentive vesting There were no long-term incentive awards capable of vesting during the period reported. Shareholder dilution In accordance with the investor guidelines and the rules of the Company’s share schemes, the Company can issue a maximum of 10% of its issued share capital in a rolling ten-year period to employees to satisfy vesting under all its share plans. Of this 10%, the Company can issue 5% to satisfy awards under discretionary or Executive plans. Service contracts and letters of appointment The table below summarises the service contracts of the Executive Directors and Non-Executive Directors. Date of contract/letter of appointment Notice period by Company Notice period by Director Executive Directors Wendy Lawrence Lisa Barter Gloria Cooke Michael Steel1 Non-Executive Directors Bob Holt Mike Rogers Tony Bourne 15 Feb 2013 23 Oct 2017 19 July 2016 31 May 2019 15 Sept 2015 7 Dec 2015 5 Oct 2015 6 months 3 months 3 months 6 months 3 months 3 months 3 months 1. Michael Steel was appointed to the Board on 20 June 2019 and resigned on 10 July 2020. Remuneration in the wider Group Within the wider Group employee salaries and benefit levels are set taking into account prevailing market conditions. The Group encourages share ownership by employees by offering a Sharesave (“SAYE”) Scheme. Tony Bourne Chairman of the Remuneration Committee 14 July 2020 6 months 3 months 3 months 6 months 3 months 3 months 3 months 37 Annual Report for the year ended 31 March 2020 Totally plcGOVERNANCE Directors’ report The Directors present their Annual Report and the audited Consolidated Financial Statements for the year ended 31 March 2020. General information The Company was incorporated as a public company limited by shares in England and Wales on 28 October 1999, with registered number 03870101. It is domiciled in the UK. The Company is listed on the AIM market of the London Stock Exchange. The Company’s registered address is Cardinal Square West, 10 Nottingham Road, Derby DE1 3QT. Principal activities The Group aims to become a leading out-of-hospital healthcare provider in the UK, helping to address some of the biggest challenges faced by the UK healthcare sector. Out-of-hospital services include care in the community, GP surgeries, patients’ homes, prisons and other public sector organisations, places of work as well as mobile locations and urgent care solutions. Results and dividends The results for the period are set out in the Consolidated Statement of Profit and Loss and Other Comprehensive Income on page 47. The Directors recommend the payment of a final dividend of 0.25p per share on 16 October 2020 subject to approval at the Annual General Meeting on 7 September 2020, with a record date of 18 September 2020. Directors and Directors’ interests The Directors who held office during the period and to date were as follows: • Bob Holt OBE • Wendy Lawrence • Lisa Barter • Tony Bourne • Michael Rogers • Gloria Cooke • Michael Steel (appointed on 20 June 2019 and resigned on 10 July 2020) Biographical details and Committee membership for Directors appear on pages 24 and 25. Directors retire by rotation in line with the Articles of Association and the following Directors will seek re-election at the Annual General Meeting to be held on 7 September 2020: • Lisa Barter • Gloria Cooke The Directors who held office during the financial year had the following interests in the shares of the Company: Bob Holt Wendy Lawrence Lisa Barter Gloria Cooke Mike Rogers Tony Bourne Michael Steel 31 March 2020 Ordinary shares of 10p each held 31 March 2019 Ordinary shares of 10p each held 1,299,482 1,018,447 93,609 105,833 50,500 150,000 161,000 7,676,851 60,666 5,000 — 16,000 161,000 — Michael Steel was appointed as a Director on 20 June 2020 and resigned on 10 July 2020. Details of Directors’ emoluments and interest in share options are disclosed in the Directors’ Remuneration Report on pages 36 and 37. No Director has had a material interest in any contract of significance in relation to the business of the Company, or any of its subsidiary undertakings during the financial year or had such at the end of the financial year. Substantial shareholdings and share capital As at 21 June 2020, being the latest practical date prior to the publication of this document, the Company has been advised of the following interests in 3% or more of the Company’s ordinary share capital based on the 182,186,111 ordinary shares in issue at 21 June 2020. Fund manager Number of shares % of ISC Miton Asset Management Limited 25,716,835 14.12% Cavendish Asset Management Limited 15,000,000 Columbia Threadneedle Investments 11,532,834 David and Monique Newlands 10,075,000 Liontrust Investment Partners LLP Michael Steel (Executive Director) Harwood Capital LLP Richard Sneller Unicorn Asset Management Limited Daniel Annetts 8,136,423 7,676,851 7,330,000 7,300,000 5,759,291 5,619,596 8.23% 6.33% 5.53% 4.47% 4.21% 4.02% 4.00% 3.16% 3.08% The Company has one class of share in issue, being ordinary shares with a nominal value of 10p each. As at 31 March 2020 there were 182,186,111 shares in issue. 38 GOVERNANCETotally plc Annual Report for the year ended 31 March 2020 Annual General Meeting A separate notice convening the Annual General Meeting of the Company to be held at Cardinal Square, First Floor-West, 10 Nottingham Road, Derby DE1 3QT on 7 September 2020 will be sent out with this Annual Report and Financial Statements. Corporate governance The Company’s statement on corporate governance can be found in the Chairman’s Introduction to Governance and the Corporate Governance Report on pages 27 to 31. The Corporate Governance Report forms part of this Directors’ Report and is incorporated into it by cross reference. Section 172 statement The required statement under Section 172 of the Companies Act 2006 is contained within the Strategic Report on page 23. Events after the reporting period There were no disclosable events. Independent auditor The auditor, RPG Crouch Chapman LLP, has indicated its willingness under Section 489 of the Companies Act 2006 to continue in office and a resolution that it be re-appointed will be proposed at the AGM. Statement as to disclosure of information to auditor Each of the persons who is a Director at the date of approval of this Annual Report confirms that: • In so far as the Director is aware, there is no relevant audit information of which the Company’s auditor is unaware. • The Director has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006. By order of the Board John Charlton Group Company Secretary 14 July 2020 Directors’ indemnity The Company’s Articles of Association provide, subject to the provisions of UK legislation, an indemnity for Directors and officers of the Company and the Group in respect of liabilities that they may incur in the discharge of their duties or the exercise of their powers, including any liability relating to the defence of any proceedings brought against them which relate to anything done or omitted, or alleged to have been done or omitted, by them as officers or employees of the Company and the Group. Directors and officers’ liability insurance is in place in respect of all the Company’s Directors. Directors’ powers As set out in the Company’s Articles of Association, the business of the Company is managed by the Board who may exercise all powers of the Company. Our people It is the Group’s policy to consider all job applications on a fair basis free from discrimination on the basis of age, sex, race, ethnicity, religion, sexual orientation or disability not related to job performance. Every consideration is given to applications for employment from disabled persons, where the requirements of the job may be adequately covered by a disabled person. Where existing employees become disabled, it is the Group’s policy wherever practicable to provide continuing employment under normal terms and conditions and to provide training and career development wherever appropriate. The Group values the involvement of its employees and encourages the development of employee involvement in each of its operating businesses through both formal and informal meetings. The Group ensures that all employees are made aware of significant matters affecting the performance of the Group by way of employee forums, information bulletins, informal meetings, team briefings, internal newsletters and the Group’s website. Participation in the growth of Totally plc is encouraged by offering all eligible employees the opportunity to participate in the Company’s Save As You Earn (“SAYE”) Scheme. Principal risks and uncertainties Details of the principal risks and uncertainties faced by the Group can be found in the Strategic Report on page 22. Future developments The Group remains committed to its buy and build strategy. Details of the future developments for the Group can be found in the Strategic Report on pages 1 to 23. Financial instruments An explanation of the Group’s treasury policies and existing financial instruments are set out in note 24 of the financial statements. Donations The Group made charitable donations in the period of £nil. The Group made no political donations during the period. 39 Annual Report for the year ended 31 March 2020 Totally plcGOVERNANCE A significant proportion of the Group’s consumption and emissions arise from transportation, which is being managed as follows: • during the year the Group began moving towards using vehicles with start/stop functions for out-of-hours services and will continue to promote the use of energy-efficient vehicles; and • mileage claims relating to site visits by support teams are being minimised by promoting video conferencing and the use of public transport where video conferencing is not possible. Energy intensity metric An energy intensity metric has been calculated using the number of tonnes of CO2 emitted per £m of total sales revenue, to provide a metric against which the Group will measure current and future energy usage performance. This measure takes account of the differing consumption between divisions and the respective revenue of those divisions. 5.09 tonnes energy intensity metric Energy and emissions report Reduction of energy usage and the associated emissions should be the aim for all companies and the Group is no different. The Group implemented the Streamlined Energy and Carbon Reporting (“SECR”) requirements in the year, and the results are shown below. In supporting the NHS and other healthcare bodies, the Group occupies a number of sites within hospitals and clinics across the UK and we are not liable for energy costs in 98% of our sites. Nonetheless the Group prioritises energy saving and is reviewing sites where operational control could be possible in order to reduce energy usage. Total consumption of energy supplies (20019/20 Consumption kwh) Utility and scope* Grid-supplied electricity (scope 2) 478 Natural gas (scope 1) 259 Transportation (scope 1) 1,533 2,270 2111 239 540 Total emissions from energy usage (20019/20 Consumption CO2) Utility and scope* Grid-supplied electricity (scope 2) 122 Natural gas (scope 1) 48 Transportation (scope 1) 370 * Scope 1 are direct emissions relating to natural gas and transportation fuel and scope 2 are indirect emissions relating to the purchase of electricity. Scope 1 and 2 consumption and CO2 emissions have been calculated in line with 2013 UK Government environmental reporting guidance, using the UK Government’s 2019 emissions conversion factor database v1.01 40 GOVERNANCETotally plc Annual Report for the year ended 31 March 2020 + 68 + L + 68 + L Statement of Directors’ responsibilities In respect of the Annual Report and the Financial Statements Website publication The Directors are responsible for ensuring the Annual Report and the financial statements are made available on a website. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein. This responsibility statement was approved by the Board of Directors on 14 July 2020 and is signed on its behalf by: Bob Holt OBE Chairman Lisa Barter, ACA Finance Director 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 financial statements for each financial year. Under that law the Directors have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union and the Company financial statements in accordance with UK GAAP. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period. The Directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on AIM. 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 they have been prepared in accordance with IFRSs as adopted by the European Union, 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 Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 41 Annual Report for the year ended 31 March 2020 Totally plcGOVERNANCE Independent auditor’s report to the members of Totally plc for the period ended 31 March 2020 Our opinion on the financial statements We have audited the financial statements of Totally plc (“the Company”) and its subsidiaries (“the Group”) for the year ended 31 March 2020 which comprise the Consolidated Statement of Profit or Loss and Other Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows, the Company Statement of Financial Position, the Company Statement of Changes in Equity and the related 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 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 affairs of the Group and of the Company as at 31 March 2020 and of the Group’s loss for the year then ended; • the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; • the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under those standards are 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 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. Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where: • the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or • the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue. Key audit matters Key audit matters are those matters that, in our professional judgement, 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 we identified (whether or not due to fraud), including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. The matter identified was 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. 42 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020 Key audit matters continued Key audit matter Carrying value of intangible assets The most significant assets of the Group as at 31 March 2020 are intangible assets at £39.7m comprising £30.5m of goodwill arising on acquisition of subsidiaries and other intangibles of £9.2m. In accordance with IAS36 Impairment of Assets, management are required to conduct annual impairment tests for goodwill. Given the subjectivity and number of estimates involved in any such assessment, we considered this to be a significant risk of material statement. As part of their annual impairment review, management have prepared cash flow models for each cash generating unit to which goodwill relates to enable comparison of their value in use to net carrying values at 31 March 2020. An impairment charge of £1.5m has been made in the year against the carrying value of the planned care cash generating unit. How our audit addressed the key audit matter Our work involved the following: • Reviewing the impairment model provided and checking that the value in use model meets the requirements of the accounting standard; • Testing the mathematical integrity of the cash flow model in order to ensure the basis of preparation of the model; • Discussing the assumptions used with management and obtaining details to support the key assumptions; • Challenging the assumptions used by reference to past results; • Considering the impact of COVID 19 on operations based on results post year end; and • Sensitising the expected cash flows for key assumptions. Key observations Based on our audit work, we have concluded that the valuation of non-current assets is accounted for in line with the Group’s accounting policies and IAS 36 Impairment of Assets. We concur with the impairment recorded by management and consider that the disclosures in note 14 to the financial statements appropriately describe the judgements made by management. Recognition of right‑of‑use‑assets and leased liabilities in accordance with IFRS 16 (Group and Company) The Group adopted IFRS 16 Leases of Assets with effect from 1 April 2019. IFRS 16 replaces the existing standard IAS 17 and specifies how a business should recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring the lessee to recognise assets and liabilities for all leases unless the lease term is twelve months or less or the underlying asset has a low value. • Considering completeness by testing the reconciliation • Verified the accuracy of the underlying lease data by Our audit work included, but was not restricted to: to the Group’s operating lease commitments; Determining the value of the right-of use assets and lease liabilities requires management to make judgements over key estimates and assumptions, including the certainty of lease term renewals and determination of appropriate discount rates to be applied. agreeing a sample of leases to original contract or other supporting information, and agreed the integrity and mechanical accuracy of the IFRS 16 calculations for each lease sampled through recalculation of the expected IFRS 16 adjustment; • Assessed the appropriateness of the discount rates applied in determining lease liabilities; and Our specific audit focus was on the recognition of right-of-use assets and lease liabilities considering the following areas of risk: • Assessed whether the disclosures within the financial statements are appropriate and complete. • The underlying lease data used to calculate the impact is incomplete and/or inaccurate; • Specific assumptions applied to determine the discount rates and lease term renewals; and • The disclosures in the financial statements are insufficient especially as to the transitional impact. Key observations Based on our audit work, we have concluded that the implementation of IFRS 16 has been correctly performed in accordance with the modified retrospective transition requirements of the standard. 43 FINANCIAL STATEMENTSAnnual Report for the year ended 31 March 2020 Totally plc Independent auditor’s report continued to the members of Totally plc for the period ended 31 March 2020 Key audit matters continued Key audit matter Accounting for business combination During the year, the Group acquired Greenbrook healthcare for £16.2m payable in cash and shares. This transaction is accounted for as a business combination under IFRS 3. This involves recognising the fair valuation of all identifiable assets and liabilities arising on the acquisition. The fair valuation is an extremely complex area and involves the use of a number of estimates. As such we consider this to be a significant risk of material misstatement. Revenue recognition Urgent Care provides a range of services such as the NHS 111 service, urgent care services and GP out of hours services under multi-year contracts with the NHS and other organisations. Many of these contracts are individually material and contain provisions for the clawback of revenue by the customer dependent on activity based key performance indicators KPIs. Although there should be annual reviews where final contract values are agreed this process can take an extended period. We therefore identified revenue recognition as a significant risk. How our audit addressed the key audit matter Our work involved: • Confirming consideration to signed purchase agreement and completion statement; • Agreeing net assets acquired to the completion statement; • Reviewing the assets and liabilities in the completion accounts and if any adjustments would be required to reflect their fair value at acquisition date; • Reviewing the underlying activity of the acquiree, discussed with management and considered other information to establish if any other identifiable assets and liabilities could exist; • Considering the methodology used by management to measure the fair value adjustments and agree to supporting documentation; and • Reviewing the disclosures required under IFRS 3 and ensuring that these are appropriately reflected in the business combination note in the financial statements. Key observations Based on our audit work, we have concluded that the acquisition was been accounted for appropriately under IFRS 3 and that the fair values are appropriately derived. We concur with the disclosures made by management in note 18 to the financial statements which appropriately describe the judgements made by management. Our audit work included, but was not restricted to: • Reconciling expected income for a sample of revenue contracts to amounts reported in the accounts; • Reviewing activity performance reports for a sample of revenue contracts against KPI requirements and assessing the adequacy of provisions recognised; and • Review of settlement of contract values after the year end. Key observations Based on our audit work, we have concluded that revenue has been recognised appropriately and provisions recognised for clawback related to KPIs are considered to be reasonable. All key matters noted above have been discussed with the Audit Committee. 44 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020 Our application of materiality We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Our basis for the determination of materiality has remained consistent with the prior year. Given the changes to the Group in recent periods and the fluctuations in profit, we consider revenue to be the most significant determinant of the Group’s financial performance used by the users of the financial statements. A rate of 1% was used which is consistent with the prior year. Whilst materiality for the financial statements as a whole was £1,050,000 (2019: £780,000), each significant component of the Group was audited to a lower level of materiality. The Company materiality was £600,000 (2019: £480,000), based on 1.5% of gross assets (2019: 2%) as that is deemed the considered the most appropriate measure for a holding company. The increases in both levels of materiality is due to the acquisition of Greenbrook Healthcare in the year leading to an increase in revenue at Group level and an increase in gross assets at Company level representing the investment made. The other components materiality levels varied from £640,000 to £50,000. Performance materiality is the application of materiality at the individual account or balance level set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. Performance materiality for the Group was set at £750,000 for low risk audit areas representing 75% of materiality based upon our assessment of expected misstatements and the control environment. Performance materiality of £500,000 was used for areas considered to be higher risk, representing 50% of overall materiality. The same percentages were applied to each component’s materiality calculations. We agreed with the Audit Committee that we would report on all differences in excess of 5% of materiality relating to the Group financial statements. We also report to the Audit Committee on financial statement disclosure matters identified when assessing the overall consistency and presentation of the consolidated financial statements. An overview of the scope of our audit The Group audit was scoped by re-confirming our understanding of the business, Group structure, systems and processes and the internal control environment. All of the components are based in the UK and a full scope statutory audit was completed by RPG Crouch Chapman LLP in respect of each. Other information The Directors are responsible for the other information. The other information comprises the information included in the Annual Report, 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 this other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by 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. 45 FINANCIAL STATEMENTSAnnual Report for the year ended 31 March 2020 Totally plc Independent auditor’s report continued to the members of Totally plc for the period ended 31 March 2020 Matters on which we are required to report by exception 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. 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, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements 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 As explained more fully in the Statement of Directors’ Responsibilities on page 41, 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 aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. 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. Use of our report This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and 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. Colin Turnbull ACA Senior Statutory Auditor for and on behalf of RPG Crouch Chapman LLP Statutory Auditor, Chartered Accountants 62 Wilson Street London EC2A 2BU 14 July 2020 RPG Crouch Chapman LLP is a limited liability partnership registered in England and Wales (with registered number OC375705). 46 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020 Consolidated statement of profit or loss and other comprehensive income For the year ended 31 March 2020 Continuing operations Revenue Cost of sales Gross profit Administrative expenses Profit before exceptional items Exceptional items Profit before interest, tax and depreciation Depreciation and amortisation Operating loss Finance income Finance costs Loss before taxation Income tax credit Loss for the year attributable to the equity shareholders of the parent company Other comprehensive income Total comprehensive loss for the year net of tax attributable to the equity shareholders of the parent company Loss per share From continuing operations: Basic Diluted 12 months to 31 March 2020 £000 12 months to 31 March 2019 £000 105,948 78,007 (86,772) (65,939) 19,176 12,068 (15,140) (10,962) 4,036 (2,028) 2,008 (5,122) (3,114) 6 (302) 1,106 126 1,232 (2,822) (1,590) 3 (228) (3,410) (1,815) 577 313 (2,833) (1,502) — — (2,833) (1,502) 12 months to 31 March 2020 Pence 12 months to 31 March 2019 Pence (1.82) (1.82) (2.51) (2.51) Note 6 8 9 10 11 12 Note 25b 25b 47 FINANCIAL STATEMENTSAnnual Report for the year ended 31 March 2020 Totally plc Consolidated statement of changes in equity For the year ended 31 March 2020 At 1 April 2018 Total comprehensive loss for the year Credit on issue of warrants and options At 31 March 2019 Total comprehensive loss for the year Cancellation of share premium account Issue of shares Expenses attached to equity issue Dividend payment Credit on issue of warrants and options At 31 March 2020 Note 25c 25a 13 26c Share capital £000 5,979 — — Share premium £000 16,408 — — 5,979 16,408 — — 12,240 — — — 18,219 — — — — — — Retained earnings £000 4,951 (1,502) 43 3,492 (2,833) — (450) (455) 64 Equity shareholders’ funds £000 27,338 (1,502) 43 25,879 (2,833) — 12,240 (450) (455) 64 16,226 34,445 (16,408) 16,408 The Company Statement of Changes in Equity can be found in note 27. The accompanying notes on pages 51 to 79 form part of the financial statements. 48 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020 Consolidated and Company statements of financial position As at 31 March 2020 Non-current assets Intangible assets Property, plant and equipment Right-of-use assets Investments in subsidiaries Deferred tax Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets Current liabilities Trade and other payables Contingent consideration Lease liabilities Non-current liabilities Trade and other payables Lease liabilities Deferred tax Total liabilities Net current liabilities Net assets Shareholders’ equity Called up share capital Share premium Retained earnings Equity shareholders’ funds Consolidated Company Note 31 March 2020 £000 31 March 2019 £000 31 March 2020 £000 31 March 2019 £000 14 15 16 17 12 19 20 21 22 16 21 16 12 39,631 789 4,129 — 408 28,824 599 — — 158 9 43 288 26 43 — 38,149 21,835 — — 44,957 29,581 38,489 21,904 77 11,370 8,923 20,370 65,327 68 8,606 7,520 16,194 45,775 — 728 718 1,446 39,935 — 677 1,254 1,931 23,835 (24,367) (18,784) (13,457) (5,362) (271) (1,449) (322) (5) (271) (58) (322) — (26,087) (19,111) (13,786) (5,684) (786) (2,729) (1,280) (4,795) (768) (3) (14) (785) (18) (234) — (252) (16) — — (16) (30,882) (19,896) (5,717) 34,445 (2,917) 25,879 (14,038) (12,340) (5,700) (3,753) 25,897 18,135 25a 25c 25d 18,219 — 16,226 34,445 5,979 16,408 3,492 25,879 18,219 — 7,678 25,897 5,979 16,408 (4,252) 18,135 These financial statements were approved by the Board of Directors on 14 July 2020 and were signed on its behalf by: Wendy Lawrence Director Totally plc Lisa Barter, ACA Director Company registration no: 3870101 (England and Wales) The accompanying notes on pages 51 to 79 form part of the financial statements. 49 FINANCIAL STATEMENTSAnnual Report for the year ended 31 March 2020 Totally plc Consolidated cash flow statement For the year ended 31 March 2020 Cash flows from operating activities Loss for the year Adjustments for: - options and warrants charge - depreciation and amortisation - impairment of goodwill - tax income recognised in profit or loss - finance income - finance costs - revaluation of contingent consideration Movements in working capital: - inventories - movement in trade and other receivables - movement in trade and other payables Cash used for operations - income tax (paid)/received Net cash flows from operating activities Cash flows from investing activities Purchase of property, plant and equipment Additions of intangible assets Acquisition of subsidiaries, net of cash acquired Contingent consideration paid Net cash flows from investing activities Cash flows from financing activities Issue of share capital Expenses attached to equity issue Dividends paid to the holders of the parent Interest paid Principal paid on lease liabilities Net cash flows from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year The accompanying notes on pages 51 to 79 form part of the financial statements. Note 31 March 2020 £000 31 March 2019 £000 (2,833) (1,502) 25 14-16 14 10 11 22 15 14 18 22 64 5,122 1,500 (577) (6) 302 — (8) 1,891 (2,452) 3,003 (104) 2,899 (397) (192) (7,955) (51) (8,595) 25a 9,739 13 16 (450) (455) (97) (1,638) 7,099 1,403 7,520 8,923 43 2,822 2,000 (313) — 112 (2,668) 10 1,100 (3,457) (1,853) 39 (1,814) (265) (491) — (130) (886) — — — (4) (4) (2,704) 10,224 7,520 50 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020 Notes to the financial statements For the year ended 31 March 2020 1. General information Totally plc is a public limited company (“the Company”) incorporated in the United Kingdom under the Companies Act 2006 (registration number 3870101). The Company is domiciled in the United Kingdom and its registered address is Cardinal Square West, 10 Nottingham Road, Derby DE1 3QT. The Company’s ordinary shares are traded on the AlM market of the London Stock Exchange (“AIM”). The Group’s principal activities are the provision of innovative and consolidatory solutions to the healthcare sector, which are provided by the Group’s wholly owned subsidiaries. The Company’s principal activity is to provide management services to its subsidiaries. 2. Authorisation of financial statements and statement of compliance The financial statements for the year ended 31 March 2020 were authorised for issue by the Board of Directors and the Statements of Financial Position were signed on the Board’s behalf by Wendy Lawrence and Lisa Barter on 14 July 2020. The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) and International Financial Reporting Interpretations Committee (“IFRIC”) interpretations as endorsed by the European Union (“EU”), and bearing in mind those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements of the Company have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”). The financial statements have been prepared under the historical cost convention and in accordance with the Companies Act 2006. In preparing its financial statements the Company has taken advantage of all disclosure exemptions conferred by FRS 101. Therefore, the Company’s financial statements do not include: • certain comparative information as otherwise required by EU endorsed IFRSs; • certain disclosures regarding the Company’s capital; • a statement of cash flows; • the effect of future accounting standards not yet adopted; • the disclosure of the remuneration of key management personnel; and • disclosure of related party transactions with wholly owned fellow group companies. In addition, and in accordance with FRS 101, further disclosure exemptions have been adopted because equivalent disclosures are included in the consolidated financial statements of Totally plc. The Company’s financial statements do not include certain disclosures in respect of: • share-based payments; and • fair value measurement (other than certain disclosures required as a result of recording financial instruments at fair value). As permitted by Section 408 of the Companies Act 2006 no income statement is presented for the Company. The Company made a loss of £3,637,000 for the year ended 31 March 2020 (2019: loss £2,511,000). 3. Basis of preparation The Consolidated and Company Financial Statements have been prepared on the historical cost basis and are presented in Sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated. The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report on pages 1 to 23. The financial position of the Group is described in the Financial Review on pages 18 to 20 and the Group’s approach to risk is detailed on pages 21 and 22 and in note 24. The Group has consistently had net current liabilities in recent reporting periods which reflects the nature of the contractual terms with customers and suppliers. The Group carefully manages financial resources, closely monitoring the working capital cycle and has long-term contracts with a number of customers and suppliers across different geographic areas within the United Kingdom and industries. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook. The Directors have produced forecasts that have been sensitised to reflect plausible downside scenarios including as a result of the COVID-19 pandemic and its impact on the Group’s operations given the nature of its contracts with customers and the customer base. These demonstrate the Group is forecast to generate profit before interest, depreciation and amortisation in the year ending 31 March 2021 and beyond and that the Group has sufficient cash reserves to enable the Group to meet its obligations as they fall due for a period of at least 12 months from the date of signing of these financial statements. As such, the Directors are satisfied that the Group has adequate resources to continue to operate for the foreseeable future. For this reason they continue to adopt the going concern basis for preparing these financial statements. 51 FINANCIAL STATEMENTSAnnual Report for the year ended 31 March 2020 Totally plc 4. Summary of significant accounting policies Basis of consolidation The Group’s financial statements include the results of the Company and its subsidiaries, all of which are prepared up to the same date as the parent company. Subsidiaries Subsidiaries are all entities over which the Company has the ability to exercise control and are accounted for as subsidiaries. The trading results of subsidiaries acquired or disposed of during the period end are included in the income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. All intra-group transactions, balances, income and expenditure are eliminated on consolidation. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Company. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at fair value at the acquisition date irrespective of the extent of any non-controlling interest. The excess of cost of acquisition over the fair values of the Group’s share of identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair value of identifiable net assets acquired (i.e. discount on acquisition) is recognised directly in the income statement. All acquisition expenses have been reported within the income statement immediately. Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Where necessary, adjustments are made to the financial information of subsidiaries to bring the accounting policies used in line with those used by other members of the Group. Revenue recognition Revenue is generated by providing insourcing, planned care and urgent care services. Services are provided through short-term and long-term contracts. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. Insourcing Revenue is recognised as services are provided. Revenue is recognised in the month when the service is provided, as this is the point when revenue activity can be reliably measured. Planned care services Revenue represents invoiced sales of services to regional Care Commissioning Groups of the National Health Service. Revenue is recognised in the month when the service is provided, as this is the point when revenue activity can be reliably measured. Revenue can be subject to clawback adjustments based on performance against criteria as detailed in the individual contracts. Urgent care services Revenue is recognised as services are provided. Revenue is recognised in the month when the service is provided, as this is the point when revenue activity can be reliably measured. Revenue can be subject to clawback adjustments based on performance against criteria as detailed in the individual contracts. All revenue originates in the United Kingdom. Finance income Finance income comprises bank interest received, recognised on an accruals basis. Finance costs Finance costs comprise bank charges and interest on leases recognised under IFRS 16. The prior year also included the unwinding of the fair value adjustment of the contingent consideration. Property, plant and equipment Property, plant and equipment is carried at cost less accumulated depreciation and any recognised impairment in value. Cost comprises the aggregate amount paid to acquire assets and includes costs directly attributable to making the asset capable of operating as intended. 52 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020Notes to the financial statements continuedFor the year ended 31 March 2020 4. Summary of significant accounting policies continued Property, plant and equipment continued Depreciation is calculated to write down the cost of the assets to their residual values by equal instalments over the estimated useful economic lives as follows: Motor vehicles Computer equipment Plant and machinery and Office equipment Freehold property improvements and Short leasehold property – – – – 3 and 5 years 2 and 5 years 2 to 5 years 3 to 10 years The assets’ residual values, useful lives and methods of depreciation are reviewed, and adjusted if appropriate on an annual basis. An asset is de-recognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the period that the asset is de-recognised. Inventories Inventories are valued at the lower of cost and net realisable value. In general, costs are determined on a first in first out basis and includes all direct expenditure based on a normal level of activity. Net realisable value is the price at which the stocks can be sold in the normal course of business after allowing for the costs of realisation and where appropriate for the costs of conversion from its existing state to a finished condition. Intangible assets other than goodwill Intangible assets other than goodwill comprise computer software and customer contracts and relationships. Computer software is recognised at cost and subsequently amortised over its expected useful economic life of three years. Customer contracts and the related customer relationships were acquired in business combinations and recognised separately from goodwill. They are initially recognised at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, these assets are amortised over the expected life of contracts and reported at cost less accumulated amortisation and accumulated impairment losses. Assets are reviewed for impairment on at least an annual basis and the estimates used in this review are discussed in note 5. Goodwill Goodwill represents the excess of the fair value of the consideration of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is considered to have an indefinite useful life. Goodwill is tested for impairment annually and again whenever indicators of impairment are detected and is carried at cost less any provision for impairment. Impairment of non-current assets For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (“CGUs”) or groups of CGUs that is expected to benefit from the synergies of the combination. These comprise Urgent Care and Planned Care segments and at 31 March 2020 the goodwill allocated to each amounted to £23,169,000 and £7,836,000 respectively. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods. The value of the goodwill was tested for impairment during the current financial year by means of comparing the recoverable amount of each CGU or group of CGUs with the carrying value of its goodwill, see note 14. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Trade and other receivables Trade receivables, which are generally received by the end of month following terms, are recognised and carried at the lower of their original invoiced value less provision for expected credit losses. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and short-term deposits with an original maturity of three months or less. Trade and other payables Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Trade and other payables are recognised at original cost. 53 FINANCIAL STATEMENTSAnnual Report for the year ended 31 March 2020 Totally plc 4. Summary of significant accounting policies continued Borrowings Borrowings are initially recognised at fair value, being proceeds received less directly attributable transaction costs incurred. Borrowings are subsequently measured at amortised cost with any transaction costs amortised to the income statement over the period of the borrowings using the effective interest method. Foreign currencies transactions Transactions denominated in foreign currencies are translated at the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the period end are translated at the exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Leased assets Until 31 March 2019, leases of property, plant and equipment were classified as either finance leases or operating leases. From 1 April 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Company. Details of the implementation are included in note 30. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of fixed lease payments. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset with similar terms, security and conditions. Lease payments are allocated between principal and finance costs. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are measured at cost comprising the initial measurement of lease liability, any lease payments made at or before the commencement date less any lease incentives received, and any initial direct costs. Right-of-use assets are depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Payments associated with short-term leases of equipment and vehicles and all leases of assets considered low value are recognised as an expense in profit or loss on a straight-line basis. Short-term leases are leases with a lease term of twelve months or less. Onerous contracts An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The difference between expected revenue and directly attributable and unavoidable costs is provided for at each reporting date. Exceptional items Exceptional items are those items that, in the Directors’ view, are required to be separately disclosed by virtue of their size or incidence to enable a full understanding of the Group’s financial performance. Income taxes Current income tax assets and liabilities are measured at the amount expected to be recovered or paid to the taxation authorities based on tax rates and laws that are enacted or substantively enacted by the period end date. Deferred income tax is recognised using the balance sheet liability method, providing for temporary differences between the tax bases and the accounting bases of assets and liabilities. Deferred income tax is calculated on an undiscounted basis at the tax rates that are expected to apply in the period when the liability is settled and the asset is realised, based on tax rates and laws enacted or substantively enacted at the period end date. Deferred income tax liabilities are recognised for all temporary differences, except for an asset or liability in a transaction that is not a business combination, and at the time of the transaction affects neither the accounting profit nor taxable profit or loss. Deferred income tax is charged or credited to the income statement, except when it relates to items charged or credited to equity, in which case the deferred tax is also dealt with in equity. Deferred income tax assets and liabilities are offset against each other only when the Company has a legally enforceable right to do so. Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences can be utilised. Retirement benefits The Group operates a defined contribution plan. A defined contribution plan is a pension plan under which the employer pays fixed contribution into a separate entity. Contributions payable to the plan are charged to the income statement in the period to which they relate. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. 54 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020Notes to the financial statements continuedFor the year ended 31 March 2020 4. Summary of significant accounting policies continued Company only accounting policies The following principal accounting policies have been applied: Investments Fixed asset investments are stated at cost less provisions for diminution in value. Deferred tax Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the Company Statement of Financial Position differs from its tax base, except for differences arising on: • the initial recognition of goodwill; • the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and • investments in subsidiaries where the Company is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future. Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities or assets are settled or recovered. Deferred tax balances are not discounted. Share-based payments The Group provides benefits to employees (including Directors) of the Group in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares. The fair value of the employee services rendered is determined by reference to the fair value of the shares awarded or options granted, Share options are valued using the Black Scholes pricing model, or the Monte Carlo model where performance-based market vesting conditions apply. This fair value is charged to the income statement over the vesting period of the share-based payment scheme, with the corresponding increase in equity. The value of the charge is adjusted in the income statement over the remainder of the vesting period to reflect expected and actual levels of options vesting, with the corresponding adjustment made in equity. Standards adopted in the year During the year the Group adopted IFRS 16 with a transition date of 1 April 2019. Details of the impact are given in notes 16 and 30. There have been no other standards adopted that have had a material impact on the financial statements and no standards adopted in advance of their implementation dates. Standards, interpretations and amendments not yet effective There are a number of standards, amendments to standards, and interpretations which have been issued by the International Accounting Standards Board (“IASB”) that are effective in future accounting periods that the Group has decided not to adopt early. The following amendments are effective for the period beginning 1 April 2020: • IAS 1 Presentation of Financial Statements; • IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendment – Definition of Material); and • IFRS 3 Business Combinations (Amendment – Definition of Business). In January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine whether liabilities are classified as current or non-current. These amendments clarify that current or non-current classification is based on whether an entity has a right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. The Group does not believe that the amendments to IAS 1 will have a significant impact on the classification of its liabilities. 55 FINANCIAL STATEMENTSAnnual Report for the year ended 31 March 2020 Totally plc 5. Significant accounting judgements, estimates and assumptions The Group makes judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The resulting accounting estimates calculated using these judgements and assumptions will, by definition, seldom equal the related actual results but are based on historical experience and expectations of future events. The Group’s estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods. Judgements The Directors consider that there are no significant judgements that have an impact on the Group’s accounting policies. Estimates Following the assessment of the recoverable amount of goodwill allocated to the Planned Care segment, to which goodwill of £7,836,000 is allocated, the Directors consider that the recoverable amount of goodwill allocated to this segment is most sensitive to the achievement of future budgets. Budgets comprise forecasts of revenue, staff costs and overheads based on current and anticipated market conditions that have been considered and approved by the Board. A significant proportion of the cost allocated to both CGUs is staff costs, hence the Group’s commitment to its staff and patients. The sensitivity analysis in respect of the recoverable amount of each CGU is presented in note 14. Fair value assets and liabilities arising on business combination During the year, the Group completed the acquisition of Greenbrook Healthcare (Hounslow) Limited and Greenbrook Healthcare (Earls Court) Limited. This has been accounted for as a business combination which requires the fair valuation of assets and liabilities at the acquisition date. This can involve the identification of further intangible assets which were not recognised in the acquired entities’ books. In determining the fair value of the intangibles, the Directors have considered the underlying nature of the assets and employed valuation techniques based on forecast earnings to estimate the value of the intangibles arising as highlighted in note 18. The most significant assumption is around the assumption of contract renewals which itself is based on the past history of renewals as achieved by the acquiree. Should this assumption not be made the intangibles asset valuation at the acquisition would reduce by £4.2m with goodwill increasing by the same amount. 6. Revenue A breakdown of revenue by the revenue streams detailed in the accounting policies is shown below: Insourcing Planned care services Urgent care services Total 12 months to 31 March 2020 £000 12 months to 31 March 2019 £000 1,006 8,444 96,498 105,948 30 8,427 69,550 78,007 All revenue is recognised as the services are provided and in accordance with the accounting policies detailed in note 4. The following table provides information on contract assets and contract liabilities from contracts with customers: Contract assets Contract liabilities Total 12 months to 31 March 2020 £000 12 months to 31 March 2019 £000 3,479 (2,159) 720 1,503 (3,341) (1,838) Contract assets and contract liabilities relate to amounts recognised in respect of accrued and deferred income for contracts with customers and are included within “trade and other receivables” and “trade and other payables” respectively on the face of the statement of financial position. Contract assets primarily relate to the Company’s rights to consideration for services provided but not billed. The contract assets are transferred to trade receivables when the rights become unconditional which is upon agreement by the CCG. Contract liabilities primarily relate to advance consideration received from customers and provision for clawback adjustments on contracts with customers based on contractual performance. Management estimates the level of revenue subject to clawback and makes a provision under the variable consideration constraint within IFRS 15. These amounts are subject to negotiation with agreement generally within one to two years, however management do not consider these to be a significant estimate given the status of negotiations. 56 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020Notes to the financial statements continuedFor the year ended 31 March 2020 6. Revenue continued The significant movements in contract assets in the periods ended 31 March 2020 and 31 March 2019 are detailed below: Brought forward Acquired on business combination Provided Utilised Total 12 months to 31 March 2020 £000 12 months to 31 March 2019 £000 1,503 511 13,363 (11,898) 3,479 1,189 — 5,357 (5,043) 1,503 The significant movements in contract liabilities in the periods ended 31 March 2020 and 31 March 2019 are detailed below: Brought forward Acquired on business combination Provided Utilised Total 12 months to 31 March 2020 £000 12 months to 31 March 2019 £000 3,341 222 3,438 (4,842) 2,159 3,416 — 3,645 (3,720) 3,341 7. Segmental reporting Segment information is presented in respect of the Group’s operating segments. Segments are determined by reference to the internal reports reviewed by the Board. Management has determined the operating segments based on the information provided to the Executive Management team (the Chief Operating Decision Maker (“CODM”) for the Group) to make operational decisions on the management of the Group. As noted in the Strategic Report, management considers there to be three operating segments being Urgent Care, Planned Care and Insourcing. Management has considered the economic characteristics, similarity of services, customers, sales methods and regulatory environment of its non-urgent care services. In doing so it has been concluded that they should be aggregated into one “Other” segment for reporting in the financial statements. This aggregated information provides users with the financial information needed to evaluate the business and the environment in which it operates. The segmental analysis on page 58 is split as follows: • Urgent Care; and • Other – Insourcing, Planned Care and costs of corporate functions and Group eliminations. The Group’s management reporting and controlling systems use the accounting policies that are the same as those referred to in note 4. Segmental analysis – segment measures The Group measures the performance of its operating segments through a measure of segment profit or loss which is referred to as EBITDA. This measure is reported to the CODM for the purposes of resource allocation and assessment of performance. Interest income, interest expense and income tax expense are not included in the EBITDA profit measure which is reviewed by the CODM. Tax and treasury balances are managed centrally. Segment assets and liabilities are not regularly reviewed by the CODM. The Group has elected, as provided under IFRS 8 “Operating Segments” (amended 2009) not to disclose segment assets or liabilities as these amounts are not regularly provided to the CODM. In the years ended 31 March 2020 and 31 March 2019, all segments operated solely in the UK, and as a result no geographical breakdown is provided. 57 FINANCIAL STATEMENTSAnnual Report for the year ended 31 March 2020 Totally plc 7. Segmental reporting continued Primary reporting format – business segments The table below sets out information for the Group’s business segments for the years ended 31 March 2020 and 31 March 2019. Segment revenue represents revenue from external and internal customers arising from the sale of services. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Analysis by business segment 12 months to 31 March 2020 12 months to 31 March 2019 Urgent Care £000 Other £000 Total £000 Urgent Care £000 Other £000 Total £000 Group revenue 96,498 9,450 105,948 69,550 8,457 78,007 Operating profit/(loss) before exceptional items Acquisition-related costs Impairment of goodwill Revaluation of contingent consideration Other exceptional costs Operating profit/(loss) before interest, tax and depreciation Depreciation and amortisation Operating profit/(loss) Finance costs Profit/(loss) before tax Income tax credit/(charge) Profit/(loss) after tax 8. Exceptional items 6,877 — — — — 6,877 (4,777) 2,100 (203) 1,897 577 (2,841) (528) (1,500) — — (4,869) (345) (5,214) (93) (5,307) — 4,036 (528) (1,500) — — 2,008 (5,122) (3,114) (296) (3,410) 577 2,474 (5,307) (2,833) 2,953 — — — — 2,953 (2,749) 204 (110) 94 313 407 (1,847) (465) (2,000) 2,668 (77) (1,721) (73) (1,794) (115) (1,909) — (1,909) 1,106 (465) (2,000) 2,668 (77) 1,232 (2,822) (1,590) (225) (1,815) 313 (1,502) Acquisition-related costs Impairment of goodwill Revaluation of contingent consideration Other exceptional costs Total exceptional items Tax (credit)/charge attributable to exceptional items Total exceptional items after tax 12 months to 31 March 2020 £000 12 months to 31 March 2019 £000 528 1,500 — — 2,028 (100) 1,928 465 2,000 (2,668) 77 (126) 404 278 58 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020Notes to the financial statements continuedFor the year ended 31 March 2020 9. Loss before taxation Loss before taxation is stated after charging/(crediting): Share-based payments Operating lease rentals:* - land and buildings - other Defined contribution pension schemes Expenses in connection with the acquisition of subsidiaries Depreciation and amortisation Fair value adjustments of onerous contracts Revaluation of contingent consideration Auditors’ remuneration: - fees payable to the Company’s auditors for the audit of the parent company and consolidated financial statements - the audit of the Company’s subsidiaries** Fees payable to the Company’s auditors for the other services: - other services - tax compliance services 12 months to 31 March 2020 £000 12 months to 31 March 2019 £000 64 — — 2,882 528 5,122 670 — 31 92 34 8 43 1,690 135 2,344 465 2,822 — (2,668) 18 106 47 8 * IFRS 16 was implemented on 1 April 2019 using the modified retrospective method and, as a result, the comparative amounts for lease payments remain in the income statement. ** The audit fees for the Company’s subsidiaries include VAT as some subsidiaries have a partial exemption scheme and some are not VAT registered. 10. Finance income Bank interest received Total finance income 11. Finance costs Bank charges Interest on lease liabilities Loss on foreign exchange Loan interest Other finance costs Total finance costs 12 months to 31 March 2020 £000 12 months to 31 March 2019 £000 6 6 3 3 12 months to 31 March 2020 £000 12 months to 31 March 2019 £000 10 235 2 51 4 302 15 — — 3 210 228 Other finance costs for the 12 months to 31 March 2019 include the unwinding of the fair value adjustments to the dilapidations provisions and contingent considerations. The fair value adjustments are based on net present values, discounted at 10%. 59 FINANCIAL STATEMENTSAnnual Report for the year ended 31 March 2020 Totally plc 12. Taxation (a) Taxation charge Current tax expense Current tax on loss for the period Adjustments in respect of prior periods Deferred tax expense Origination and reversal of timing differences Adjustments in respect of prior periods Total tax credit 12 months to 31 March 2020 £000 12 months to 31 March 2019 £000 (50) 1 (49) (542) 14 (528) (577) — (31) (31) (186) (96) (282) (313) (b) Taxation reconciliation The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to profit for the year are as follows: Loss on ordinary activities before tax Taxation at the standard UK income tax of 19% (2019: 19%) Expenses not deductible for tax purposes Origination and reversal of timing differences Deferred tax asset not recognised Adjustments in respect of prior periods Other Total tax credited in the income statement 12 months to 31 March 2020 £000 12 months to 31 March 2019 £000 (3,410) (1,815) (648) 236 (528) 362 1 — (577) (345) (95) (186) 464 (127) (24) (313) (c) Deferred tax Estimated tax losses of approximately £11,500,000 (2019: £8,000,000) are available to relieve future profits of the Group in respect of which no deferred tax asset has been recognised due to uncertainty as to the timing and tax rate at which these losses will be utilised against future taxable profit streams. A deferred tax asset of £408,000 (2019: £158,000) has been recognised in relation to accelerated capital allowances and other timing differences where utilisation against future profits is considered to be more certain. Group Assets Accelerated capital allowances Other timing differences Total deferred tax asset Group Liabilities Accelerated capital allowances Other timing differences Total deferred tax liability 60 2020 £000 49 359 408 2020 £000 44 1,236 1,280 2019 £000 49 109 158 2019 £000 — 14 14 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020Notes to the financial statements continuedFor the year ended 31 March 2020 13. Ordinary dividends Group and Company Interim dividend paid for the year ended 31 March 2020 (period ended 31 March 2019: £nil) Amounts recognised as distributions to owners of the parent 2020 £000 455 455 2019 £000 — — No final dividend has been approved for the year ended 31 March 2020 as at the date of approval of these financial statements. 14. Intangible assets Group Cost At 1 April 2019 Additions Acquisition of Greenbrook At 31 March 2020 Amortisation At 1 April 2019 Amortisation charge At 31 March 2020 Accumulated impairment losses At 1 April 2019 Impairment loss for the year At 31 March 2020 Net book value At 31 March 2020 At 31 March 2019 Group Cost At 1 April 2018 Additions Acquisition of Vocare Disposals At 31 March 2019 Amortisation At 1 April 2018 Amortisation charge At 31 March 2019 Accumulated impairment losses At 1 April 2018 Impairment loss for the year At 31 March 2019 Net book value At 31 March 2019 At 31 March 2018 Development costs £000 Computer software £000 Customer contracts and relationships £000 Goodwill £000 Total £000 28,160 36,875 — 5,850 34,010 192 15,204 52,271 — — — 2,000 1,500 3,500 5,312 3,089 8,401 2,739 1,500 4,239 5,863 — 9,354 15,217 3,690 2,800 6,490 — — — 8,727 2,173 30,510 26,160 39,631 28,824 739 — — 739 — — — 739 — 739 — — 2,113 192 — 2,305 1,622 289 1,911 — — — 394 491 Development costs £000 Computer software £000 Customer contracts and relationships £000 Goodwill £000 Total £000 739 — — — 1,950 167 — (4) 5,863 26,563 35,115 — — — — 1,597 — 167 1,597 (4) 739 2,113 5,863 28,160 36,875 — — — 739 — 739 — — 1,147 475 1,622 — — — 491 803 1,967 1,723 3,690 — — — — — — — 2,000 2,000 3,114 2,198 5,312 739 2,000 2,739 2,173 3,896 26,160 26,563 28,824 31,262 61 FINANCIAL STATEMENTSAnnual Report for the year ended 31 March 2020 Totally plc 14. Intangible assets continued Company Cost At 1 April 2019 Additions At 31 March 2020 Amortisation At 1 April 2019 Amortisation charge At 31 March 2020 Net book value At 31 March 2020 At 31 March 2019 Company Cost At 1 April 2018 Additions At 31 March 2019 Amortisation At 1 April 2018 Amortisation charge At 31 March 2019 Net book value At 31 March 2019 At 31 March 2018 Computer software £000 51 — 51 25 17 42 9 26 Computer software £000 38 13 51 10 15 25 26 28 Total £000 51 — 51 25 17 42 9 26 Total £000 38 13 51 10 15 25 26 28 Customer contracts and relationships represents the acquired contracts and relationships on the respective acquisitions. They have been recognised at the discounted expected profitability of contracts over the expected life, including anticipated contract renewals. The projected profitability has considered historic gross profit and directly attributable overheads. The contract values are amortised on a straight-line basis over the life of the contracts as per note 4. The Group tests goodwill annually for impairment, or more frequently if there are any indications that goodwill might be impaired. For the periods ending 31 March 2019 and 31 March 2020, the recoverable amount of the cash-generating units (“CGUs”) was determined based on value-in-use calculations which require the use of assumptions. The value in use was calculated by discounting cash flow projections based on financial budgets approved by management covering a three-year period to 31 March 2023 along with discounted cash flows into perpetuity with the assumption of no growth in EBITDA following a three-year period. Cash flows for the impairment testing at 31 March 2020 and 31 March 2019 were discounted at a rate of 10% for all CGUs. 62 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020Notes to the financial statements continuedFor the year ended 31 March 2020 14. Intangible assets continued The assumptions used in the three-year forecast to 31 March 2023 were as follows: Urgent Care Revenue growth Budgeted gross margin % administrative expenses to revenue Planned Care Revenue growth Budgeted gross margin % administrative expenses to revenue Year ended 31 March 2021 % Year ended 31 March 2022 % Year ended 31 March 2023 % 2 17 11 (37) 24 22 2 17 11 60 22 15 2 17 11 14 22 14 The assumptions noted above are determined by management, based on past performance, current knowledge of future plans, the nature of contracts with customers and performance to date, and after taking into account the expected impact of COVID-19. Given the nature of Urgent Care’s operations, that CGU has not been adversely affected and the projections are largely based on current year results and historic trends. It is anticipated that Planned Care will be more significantly impacted by COVID-19 which is indicated in the projected decline for the year ended 31 March 2021, with the CGU thereafter returning to historic growth levels. A CGU-level summary of goodwill is shown below: Goodwill At 1 April 2019 Acquisition of Greenbrook Impairment loss At 31 March 2020 Urgent Care £000 Other £000 Total £000 16,824 5,850 — 22,674 9,336 — (1,500) 7,836 26,160 5,850 (1,500) 30,510 Sensitivity analysis The Group has conducted a sensitivity analysis of the impairment test to changes in key assumptions used to determine the recoverable amount for each CGU to which goodwill is allocated. The Directors believe that a reasonable possible change in the key assumptions on which the recoverable amount of Urgent Care CGU is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the related CGU and therefore no impairment would be required. As noted above, following the impairment review the carrying amount of the Planned Care CGU was deemed to be in excess of its recoverable amount and an impairment loss was recognised during the year. The sensitivity analysis conducted for the impairment test on the Planned Care CGU produced the following results: • A 1% underperformance in budgeted gross profit margin is considered reasonably possible based on past experience and would lead to an additional impairment charge of £813,000. • A 1% decline in forecast revenue would result in an additional impairment charge of £790,000. • A 1% increase in the budgeted admin percentage against revenue would result in an additional impairment charge of £808,000. The most significant assumption relates to the timing of recommencement of normalised trading and the length of the COVID-19 pandemic. As an alternative model, the Directors have projected that revenue in the year ended 31 March 2022 remains at the level of presently-secured contracts and a return thereafter to the historic growth trend. In this scenario, a further impairment of £4.0m would be included. 63 FINANCIAL STATEMENTSAnnual Report for the year ended 31 March 2020 Totally plc 15. Property, plant and equipment Group Cost At 1 April 2019 Additions Acquisition of Greenbrook At 31 March 2020 Depreciation At 1 April 2019 Provided in the period At 31 March 2020 Net book value At 31 March 2020 At 31 March 2019 Motor vehicles £000 Freehold property improvements £000 Plant machinery £000 Office equipment £000 Short leasehold property £000 Computer equipment £000 Total £000 133 — — 133 123 7 130 3 10 1,139 — — 1,139 1,009 81 1,090 49 130 367 7 — 374 315 28 343 31 52 1,439 77 82 1,598 1,268 121 1,389 209 171 14 1 88 103 1 23 24 79 13 2,185 5,277 312 147 2,644 1,962 264 2,226 418 223 397 317 5,991 4,678 524 5,202 789 599 The net book value of motor vehicles includes £3,000 (31 March 2019: £8,000) in relation to assets held under leases. For the period ending 31 March 2020 these assets are considered low value and therefore have not been recognised as a right-of-use assets under IFRS 16. Group Cost At 1 April 2018 Additions Disposals At 31 March 2019 Depreciation At 1 April 2018 Disposals Provided in the period At 31 March 2019 Net book value At 31 March 2019 At 31 March 2018 Motor vehicles £000 Freehold property improvements £000 Plant machinery £000 Office equipment £000 Short leasehold property £000 Computer equipment £000 Total £000 133 — — 133 119 — 4 123 10 14 1,145 — (6) 1,139 875 (3) 137 1,009 130 270 360 12 (5) 367 287 (1) 29 315 52 73 1,314 133 (8) 1,439 1,092 (6) 182 1,268 171 222 32 14 (32) 14 32 (32) 1 1 13 — 2,081 5,065 106 (2) 265 (53) 2,185 5,277 1,680 — 282 1,962 223 401 4,085 (42) 635 4,678 599 980 The net book value of motor vehicles includes £8,000 (31 March 2018: £14,000) in relation to assets held under leases. 64 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020Notes to the financial statements continuedFor the year ended 31 March 2020 15. Property, plant and equipment continued Company Cost At 1 April 2019 Additions At 31 March 2020 Depreciation At 1 April 2019 Provided in the period At 31 March 2020 Net book value At 31 March 2020 At 31 March 2019 Company Cost At 1 April 2018 Additions At 31 March 2019 Depreciation At 1 April 2018 Provided in the period At 31 March 2019 Net book value At 31 March 2019 At 31 March 2018 Office equipment £000 Short leasehold property £000 Computer equipment £000 25 13 38 4 11 15 23 21 7 1 8 — 3 3 5 7 38 9 47 23 9 32 15 15 Office equipment £000 Short leasehold property £000 Computer equipment £000 2 23 25 2 2 4 21 — — 7 7 — — — 7 — 31 7 38 12 11 23 15 19 Total £000 70 23 93 27 23 50 43 43 Total £000 33 37 70 14 13 27 43 19 16. Right-of-use assets and lease liabilities All leases are accounted for by recognising a right-of-use asset and a lease liability except for: • leases of low value assets; • leases with a duration of twelve months or less; and • licence arrangements falling under the scope of IFRIC 12. IFRS 16 was adopted on 1 April 2019 without restatement of comparative figures. For an explanation of the transitional requirements that were applied as at 1 April 2019, see note 30. The following policies apply subsequent to the date of initial application, 1 April 2019. Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless this is not readily determinable, in which case the Group’s incremental borrowing rate on commencement of the lease is used (see note 30). Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate. Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for lease payments made at or before commencement of the lease. Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term. 65 FINANCIAL STATEMENTSAnnual Report for the year ended 31 March 2020 Totally plc 16. Right-of-use assets and lease liabilities continued Right-of-use assets Cost At 1 April 2019 Additions Acquisition of Greenbrook At 31 March 2020 Depreciation Provided in the period At 31 March 2020 Net book value At 31 March 2020 Lease liabilities At 1 April 2019 Additions Acquisition of Greenbrook Interest expense Lease payments At 31 March 2020 Leasehold property £000 4,079 130 1,414 5,623 1,505 1,505 Group Computer equipment £000 4 — 11 15 4 4 Company Leasehold equipment £000 348 — — 348 60 60 Total £000 348 — — 348 60 60 Total £000 4,083 130 1,425 5,638 1,509 1,509 4,118 11 4,129 288 288 Group Leasehold property £000 Computer equipment £000 Motor vehicles £000 4,017 130 1,414 234 (1,630) 4,165 4 — 11 — (5) 10 5 — — 1 (3) 3 Total £000 4,026 130 1,425 235 (1,638) 4,178 Generally, there are no extension or termination options on the property or equipment leases. Maturity analysis Up to 3 months Between 3 and 12 months Between 1 and 2 years Between 2 and 5 years Over 5 years Total Short-term lease expense Low value lease expense Aggregate undiscounted commitments for short-term leases 66 Company Leasehold equipment £000 348 — — 9 (65) 292 Group £000 375 1,074 458 885 1,386 4,178 Total £000 348 — — 9 (65) 292 Company £000 14 44 60 174 — 292 2020 £000 88 10 60 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020Notes to the financial statements continuedFor the year ended 31 March 2020 17. Investments in subsidiaries Company Investments in share capital of subsidiaries. Cost At 1 April 2019 Additions At 31 March 2020 Net book value At 31 March 2020 At 31 March 2019 Cost At 1 April 2018 Additions Adjustment to contingent consideration* At 31 March 2019 Net book value At 31 March 2019 At 31 March 2018 Total £000 21,835 16,314 38,149 38,149 21,835 Total £000 24,503 — (2,668) 21,835 21,835 24,503 * Investments were adjusted during the period to reflect the decrease in the fair value of contingent consideration payable on acquisition of subsidiaries. The subsidiary companies at 31 March 2020, all of which have been consolidated, are as follows. All shares are held directly by the Company except My Clinical Coach Ltd which is wholly owned by Totally Health Ltd, and those marked below: Subsidiary undertakings Totally Health Limited My Clinical Coach Limited Country of incorporation Percentage of equity capital held Nature of business England and Wales 100% Bespoke IT healthcare solutions England and Wales 100% Direct to consumer health coaching services Premier Physical Healthcare Limited** England and Wales 100% Physiotherapy and podiatry service About Health Limited England and Wales 100% Dermatology service Optimum Sports Performance Centre Limited*** England and Wales 100% Physiotherapy service Vocare Limited**** Totally Healthcare Limited England and Wales 100% Urgent care service England and Wales 100% Hospital insourcing service Greenbrook Healthcare (Hounslow) Limited ***** England and Wales 100% Urgent care service ** The subsidiaries of Premier Physical Healthcare Limited, all of which have been consolidated, at 31 March 2020 are as follows: Subsidiary undertakings Premier Ergonomics Limited Core Ergonomics Limited Country of incorporation Percentage of equity capital held Nature of business England and Wales 100% Provision of ergonomic risk assessments England and Wales 90% Provision of online health and safety risk assessments 67 FINANCIAL STATEMENTSAnnual Report for the year ended 31 March 2020 Totally plc 17. Investments in subsidiaries continued Company continued *** The subsidiaries of Optimum Sports Performance Centre Limited, all of which have been consolidated, at 31 March 2020 are as follows: Subsidiary undertakings Country of incorporation Percentage of equity capital held Nature of business Optimum Fitness (HCS) Limited England and Wales 100% Optimum Occupational Health Limited England and Wales 100% Optimum Healthcare Solutions Limited England and Wales 100% Optimum Elite Fitness Limited Optimum Physiotherapy Limited England and Wales 100% England and Wales 100% Dormant Dormant Dormant Dormant Dormant **** The subsidiaries of Vocare Limited, all of which have been consolidated, at 31 March 2020 are as follows: Subsidiary undertakings Country of incorporation Percentage of equity capital held Nature of business Staffordshire Doctors Urgent Care Limited England and Wales 100% Urgent care service Primary Care North East Community Interest Company England and Wales 66.67% Urgent care service Teeside Primary Care Community Interest Company England and Wales 100% Urgent care service Tyneside Primary Care Community Interest Company England and Wales 100% Urgent care service Teeside Urgent Care Community Interest Company England and Wales 100% Urgent care service Yorkshire Doctors Urgent Care (YDUC) Limited England and Wales 100% Somerset Doctors Urgent Care Limited England and Wales 100% Northern Doctors Offender Health Limited England and Wales 100% Northern Doctors Urgent Care Limited England and Wales 100% Bath & North East Doctors Urgent Care Limited England and Wales 100% Dormant Dormant Dormant Dormant Dormant ***** The subsidiary of Greenbrook Healthcare (Hounslow) Limited, which has been consolidated, at 31 March 2020 is as follows: Subsidiary undertakings Country of incorporation Percentage of equity capital held Nature of business Greenbrook Healthcare (Surrey) Limited England and Wales 100% Urgent care service The Company also has an investment in a convertible loan note in Greenbrook Healthcare (Earl’s Court) Limited which transfers significant control over the entity to Totally plc. Greenbrook Healthcare (Earl’s Court) Limited has therefore been consolidated at 31 March 2020. The registered office of all of the above companies is Cardinal Square West, 10 Nottingham Road, Derby, DE1 3QT. 18. Business combination Summary of acquisition On 20 June 2019, the Company completed the acquisition of the entire share capital of Greenbrook Healthcare (Hounslow) Limited and the convertible loan note in Greenbrook Healthcare (Earl’s Court) Limited for a consideration of £11.5m on a cash free and debt free basis with a normalised level of working capital. The table on page 69 sets out the adjustments to the purchase price to reflect a normalised level of working capital which has resulted in an additional consideration payable of £4.7m. Greenbrook is one of the leading providers of Urgent Care Centres in London. The company was acquired as part of the Group’s stated “buy and build“ strategy and to bring new and complementary routes to the existing healthcare services offered by the Group. Greenbrook’s urgent care services provide synergies with Totally’s existing subsidiary businesses, in particular Vocare, and complements its business model of providing preventative and responsive healthcare in out-of-hospital settings in order to improve people’s health and reduce NHS healthcare reliance, re-admissions and emergency admissions to hospital. 68 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020Notes to the financial statements continuedFor the year ended 31 March 2020 18. Business combination continued Summary of acquisition continued The assets and liabilities as at 20 June 2019 arising from the acquisition were as follows: Property, plant and equipment Right-of-use assets Intangible assets: customer contracts Trade receivables and other debtors Cash in hand Trade and other payables Lease liabilities Onerous contracts Deferred tax Convertible loan notes Net assets acquired Goodwill Total consideration Satisfied by: Cash Ordinary shares issued Carrying amount £000 317 1,425 — 4,712 5,781 (6,964) (1,425) — (34) (50) 3,762 Fair value adjustment £000 — — 9,354 — — (763) — (529) (1,438) — 6,624 Fair value £000 317 1,425 9,354 4,712 5,781 (7,727) (1,425) (529) (1,472) (50) 10,386 5,850 16,236 13,736 2,500 16,236 The goodwill is attributable to the knowledge and expertise of the workforce and the operating synergies that arise from the Group’s strengthened market position. Any impairment charges will not be deductible for tax purposes. There were no acquisitions in the year ending 31 March 2019. Acquired receivables The fair value of acquired trade receivables is £3,766,000. The gross contractual amount for trade receivables due is £3,770,000; no loss allowance was recognised on acquisition. Revenue and profit contribution The acquired business contributed revenues of £32,766,000 and a profit before tax of £483,000 (loss before tax of £590,000 including consolidation adjustments) to the Group for the period from 20 June 2019 to 31 March 2020. The consolidation adjustments principally include the additional amortisation on the intangible assets acquired. If the acquisition had occurred on 1 April 2019, consolidated revenue and profit before tax for the year ended 31 March 2020 would have been £42,123,000 and £787,000 (loss before tax of £721,000 including consolidation adjustments) respectively. Net cash flow arising on acquisition Cash consideration Less: cash and cash equivalents acquired £000 13,736 (5,781) 7,955 69 FINANCIAL STATEMENTSAnnual Report for the year ended 31 March 2020 Totally plc 19. Inventories Consumables Goods for resale 20. Trade and other receivables Trade receivables Other receivables Social security and other taxes Prepayments and accrued income Amounts owed by Group undertakings Group 31 March 2020 £000 Group 31 March 2019 £000 21 56 77 31 37 68 Group 31 March 2020 £000 Group 31 March 2019 £000 Company 31 March 2020 £000 Company 31 March 2019 £000 5,116 63 19 6,172 — 11,370 3,156 718 42 4,690 — 8,606 — 5 19 129 575 728 153 5 36 51 432 677 The creation of provision for impaired trade receivables is included in administration costs in the income statement. The ageing analysis of trade receivables is as follows: Under three months Three to six months Group 31 March 2020 £000 Group 31 March 2019 £000 Company 31 March 2020 £000 Company 31 March 2019 £000 3,228 1,888 5,116 2,074 1,082 3,156 — — — 153 — 153 There has been limited experience of bad debts over the history of the Group and therefore the provision for expected credit losses in each period is immaterial. Other non-trade receivables do not contain impaired assets. Amounts owed by Group undertakings are repayable on demand with no fixed repayment date. 21. Trade and other payables Current Trade payables Social security and other taxes Other creditors Corporation tax Accruals and deferred income Amounts owing to Group undertakings Non-current Accruals and deferred income Group 31 March 2020 £000 Group 31 March 2019 £000 Company 31 March 2020 £000 Company 31 March 2019 £000 7,587 1,849 555 19 6,897 1,233 485 — 14,357 10,169 — — 24,367 18,784 786 786 768 768 116 135 23 — 127 13,056 13,457 18 18 220 33 176 — 433 4,500 5,362 16 16 Trade payables and accruals principally comprise amounts outstanding from purchases and ongoing costs. The Directors consider that the carrying amount of trade payables approximates to their fair value. Amounts owed to Group undertakings are repayable on demand with no fixed repayment date. 70 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020Notes to the financial statements continuedFor the year ended 31 March 2020 22. Contingent consideration At 1 April 2018 Paid in the period Revaluation of contingent consideration Discount unwind in the period At 31 March 2019 Paid in the period At 31 March 2020 Premier Physical Healthcare £000 About Health £000 968 — (1,011) 43 — — — 1,587 — (1,657) 70 — — — Vocare £000 452 (130) — — 322 (51) 271 Total 2020 £000 3,007 (130) (2,668) 113 322 (51) 271 The remaining balance of contingent consideration relates to salary advances repayable quarterly as and when repaid by employees, and is classed as current in both years. 23. Financial liabilities – borrowings Undrawn facilities As at 31 March 2020 and 31 March 2019 the Group had no overdraft facilities. Other borrowings As at 31 March 2020 and 31 March 2019 the Group had the following lease liabilities: Current Non-current 31 March 2020 £000 31 March 2019 £000 1,449 2,729 4,178 5 3 8 The maturity of discounted lease liabilities relating to right-of-use is assets is shown in note 16. 24. Financial instruments The Group’s financial instruments comprise cash and various items, such as trade receivables and trade payables, that arise directly from the Group’s activities and expose the Group to a number of risks including capital management risk, credit risk and liquidity risk. Fair values of financial instruments For the following financial assets and liabilities: lease liabilities, trade and other payables, trade and other receivables and cash at bank and in hand, the carrying amount approximates the fair value of the instrument due to their short-term nature. The Group’s activities expose it to a number of risks including capital management risk, credit risk and liquidity risk. The policies for managing these risks are regularly reviewed and agreed by the Board. It is the Group’s policy that no trading in financial instruments should be undertaken. Capital management risk The Group’s main objective when managing capital is to protect returns to shareholders by ensuring the Group will continue to trade for the foreseeable future. The Group also aims to optimise its capital structure of debt and equity so as to minimise its cost of capital. The Group in particular reviews its levels of borrowing and the repayment dates, setting these out against forecast cash flows and reviewing the level of available funds. The capital structure of the Group currently consists of cash and cash equivalents and equity attributable to holders of the parent, comprising issued share capital, reserves and retained earnings. The Group continually looks at having the most appropriate capital structure to enable it to maximise value to all stakeholders. In the future, as the Group executes its expansion strategy, debt may be considered as part of the most appropriate capital structure. If debt were to be introduced the Group will review the gearing ratio to monitor the capital return. This ratio would be calculated as the total borrowings divided by total capital. Total borrowings include “current and non-current borrowings” as shown in the Consolidated Statement of Financial Position. Total capital is calculated as “equity” as shown in the Consolidated Statement of Financial Position plus total borrowings. The Group remains financed by its share capital and reserves and expects to fund future working capital through equity. The table on page 72 details analysis of the Group’s capital management structure. 71 FINANCIAL STATEMENTSAnnual Report for the year ended 31 March 2020 Totally plc 24. Financial instruments continued Capital management risk continued Lease liabilities Cash and cash equivalents Net cash Equity Debt to equity ratio 31 March 2020 £000 31 March 2019 £000 (4,178) 8,923 4,747 34,445 12.13% (8) 7,520 7,512 25,879 0.03% The increase in the debt to equity ratio for the year ended 31 March 2020 resulted from the adoption of IFRS 16, which led to significant new liabilities being recorded in the statement of financial position from 1 April 2019 onwards. Interest rate risk The Group’s interest rate exposure arises mainly from the interest-bearing borrowings as disclosed in note 16. All of the Group’s facilities were floating rates excluding interest on finance leases, which exposed the entity to cash flow risk. As at 31 March 2020 there are no loans outstanding and no undrawn overdraft facilities available to the Group. Repayments and inferred interest rates applicable to leases recognised on right-of-use assets are fixed and there is no material exposure to interest rate risk. Foreign exchange risk The Group operates mostly in the United Kingdom and as such the majority of the Group and Company’s financial assets and liabilities are denominated in Sterling, and there is no material exposure to exchange risk. Credit risk The Group’s credit risk primarily relates to trade and other receivables and accrued income. The amounts presented in the statement of financial position are net of allowances for doubtful receivables made by the Group’s management. Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and controls relating to customer credit management. Credit limits are established for all customers and are based inter alia on credit checks. Outstanding customer receivables are regularly monitored and an ageing analysis of trade receivables is shown in note 20. The majority of the Group’s customer base relates to Clinical Commissioning Groups and, of the trade receivables outstanding at 31 March 2020, 88% has been recovered as at the date of this report. Given the nature of this customer base, it is not anticipated that COVID-19 will lead to a material increase in expected credit losses. Liquidity risk Cash balances and borrowings are managed so as to maximise interest earned and minimise interest paid, while maintaining the liquidity requirements of the business. When seeking borrowings, the Directors consider the commercial terms available and, in consultation with their advisers, consider whether such terms should be fixed or variable and are appropriate to the business. The Group has consistently had net current liabilities in recent reporting periods which reflects the nature of the contractual terms with customers and suppliers. Further detail on the ageing analysis of trade receivables is shown in note 20. The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table below are the contractual undiscounted cash flows. Less than one year Between one and two years Between two and five years Over five years 31 March 2020 Trade and other payables £000 Lease liabilities £000 31 March 2019 Total £000 Trade and other payables £000 Lease liabilities £000 22,189 — 1,558 — 23,747 1,573 527 1,034 1,523 4,657 23,762 15,433 527 2,592 1,523 — 1,558 — 28,404 16,991 5 3 — — 8 Total £000 15,438 3 1,558 — 16,999 72 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020Notes to the financial statements continuedFor the year ended 31 March 2020 25. Share capital and reserves (a) Share capital Allotted, called up and fully paid (2019: 59,795,172) 182,186,111 ordinary shares of 10p each 2020 2019 18,219 5,979 The ordinary shares carry full voting rights, the right to attend general meetings of the Company and full rights to receive dividends. The shares do not confer any right of redemption. (1) In June 2019, the Company issued 97,390,939 new ordinary shares of 10p each, for total proceeds of £9,739,000. (2) In June 2019, the Company issued 25,000,000 new ordinary shares of 10p each as part of the consideration for the acquisition of Greenbrook Healthcare (Hounslow) Limited and Greenbrook Healthcare (Surrey) Limited. (b) Loss/earnings per share Loss before exceptional items Effect of exceptional items Loss attributable to owners of the parent 12 months to 31 March 2020 12 months to 31 March 2019 Earnings £000 (905) (1,928) Basic loss per share (0.58)p (1.24)p Diluted loss per share (0.58)p (1.24)p Earnings £000 (1,224) (278) Basic loss per share (2.05)p (0.46)p Diluted loss per share (2.05)p (0.46)p (2,833) (1.82)p (1.82)p (1,502) (2.51)p (2.51)p Weighted average number of ordinary shares Dilutive effect of shares from share options Fully diluted weighted average number of ordinary shares 2020 £000 2019 £000 155,696 59,795 — — 155,696 59,795 Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year. Dilutive potential ordinary shares are those share options granted to employees where the exercise price is less than the average market price of the Company’s ordinary shares during the period. For diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares unless there is a loss before exceptional items. As the Group has made a loss in the period, all share options and warrants are anti-dilutive and therefore have no impact on the calculation of diluted loss per share. (c) Share premium account The share premium account represents the amounts received by the Company on the issue of ordinary shares that are in excess of the nominal value of the issued shares. Directly attributable issue costs are charged to the share premium account. During the year the Company’s share premium account was cancelled, confirmed by an order of the High Court of Justice pursuant to Section 648 of the Companies Act 2006. Distributable reserves of £16,408,000 arose upon cancellation, which became effective on 5 November 2019. (d) Retained earnings This reserve records the accumulated profits and losses of the Group less dividends paid. Effective on 5 November 2019, the Company’s share premium account was cancelled, confirmed by an order of the High Court of Justice pursuant to Section 648 of the Companies Act 2006. 73 FINANCIAL STATEMENTSAnnual Report for the year ended 31 March 2020 Totally plc 25. Share capital and reserves continued (e) Share options During the year to 31 March 2020, 3,382,200 share options were granted under a SAYE scheme. Details of all options in issue during the period are as follows: Grant date 11/11/2015 11/11/2016 29/12/2017 31/01/2018 31/01/2018 20/06/2019 31/12/2019 Exercise period 10 years 3 years 3 years 3 years 3 years 3 years 3 years 44.0p 46.0p 27.0p 40.5p 40.5p 0.0p 10.0p Exercise price Outstanding at start of period Issued in period Residual at 31 March 2020 Exercisable at 31 March 2020 250,000 77,476 1,345,299 263,000 202,000 — — — — — Surrendered/ cancelled in period — (782) (877,310) — — 250,000 76,694 467,989 263,000 202,000 — 10,500,000 (1,500,000) 9,000,000 — 3,382,200 (36,000) 3,346,200 250,000 76,694 — — — — — 2,137,775 13,882,200 (2,414,092) 13,605,883 326,694 (f) Share warrants Details of all warrants in issue during the year to 31 March 2020 are as follows: Grant date 30/09/2008 08/10/2009 Exercise period Exercise price Outstanding at start of period Issued in period No expiry date Within 10 years of grant date 100p 100p 350,000 1,667 351,667 — — — Expired/ exercised in period Residual at 31 March 2020 — 350,000 (1,667) (1,667) — 350,000 26. Share-based employee remuneration During the period ended 31 March 2020, the Group and Company had three share-based payment arrangements as described below. (a) Employee Share Options In January 2018, the Company introduced the Totally plc Company Share Option Plan to replace the existing EMI Scheme. The Plan is designed to help recruit and retain employees of the Group and motivate them to achieve the Group’s business objectives. The Plan allows the Company to grant tax-effective incentives to employees known as CSOP options. Options granted will vest on the third anniversary of the date of grant and will expire on the tenth anniversary of the date of the grant. The Company also has options in issue under the Totally plc Unapproved Share Option Plan. Options granted under this scheme will vest on the third anniversary of the date of the grant and will expire on the tenth anniversary of the date of the grant. The estimated fair value of each option has been calculated using the Black Scholes option pricing model for the different options granted. The estimated fair value of outstanding options varies between 10.0p and 11.0p. The model inputs for the 2019 scheme are share price at grant date, exercise price, expected volatility of 29%, contractual life of three years, and a risk-free interest rate of 4%. A reconciliation of option movements over the period is shown in note 25. The volatility of the Company’s share price on each date of grant was calculated as the average of the standard deviations of daily continuously compounded returns on the stock of the Company, calculated back over a period commensurate with the expected life of the option. The risk-free rate used is the yield to maturity on the date of grant, with term to maturity equal to the expected life of the option. It is assumed that options will be exercised within two years of the date on which they vest. 74 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020Notes to the financial statements continuedFor the year ended 31 March 2020 26. Share-based employee remuneration continued (a) Employee Share Options continued Outstanding at 1 April Granted Exercised Surrendered/cancelled Outstanding at 31 March 2020/31 March 2019 Range of exercise price (pence) Weighted average exercise price (pence) Weighted average remaining life years – expected Weighted average remaining life years – contractual 31 March 2020 Number 000s 31 March 2020 Weighted average price Pence 31 March 2019 Number 000s 31 March 2019 Weighted average price Pence 2,138 3,382 — (914) 4,606 33 10 — 26 17 2,442 — — (304) 2,138 34 — — 41 33 31 March 2020 31 March 2019 10–46 27–46 17 3 3 33 4 4 (b) Warrants The estimated fair value of each warrant was calculated using the Black Scholes option pricing model for differing warrants granted. The estimated fair value of warrants varied between 0.01p and 0.49p. The full cost of the warrants was recognised at the date of grant. (c) Save As You Earn (“SAYE”) scheme The SAYE was introduced in December 2016 following shareholder approval. Options are granted for a period of three years. Options are exercisable at a price based on the quoted market price of the Company’s shares at the time of invitation, discounted by up to 20%. Options are forfeited if the employee leaves the Group before the options vest which impacts on the number of options expected to vest. If an employee stops saving but continues in employment, this is treated as a cancellation which results in an acceleration of the share-based payment charge in the income statement. Principal terms of SAYE schemes Number of options Maximum award limit under the plan will be limited to a contribution of £500 per month Exercise price Vesting period 10p, 27p and 46p Three years Performance conditions None Expiry conditions Options are forfeited if the employee leaves the Group before the options have vested The Group recognised the following share-based payment expenses during the period: Expense arising from issue of share options – equity settled Expense arising from issue of share warrants – equity settled SAYE 31 March 2020 £000 31 March 2019 £000 — — 64 64 10 — 33 43 75 FINANCIAL STATEMENTSAnnual Report for the year ended 31 March 2020 Totally plc Notes to the financial statements continued For the year ended 31 March 2020 26. Share-based employee remuneration continued (d) Long-term Incentive Plan (2019) (“LTIP”) The Totally plc Long-Term Incentive Plan (2019) was established during the year. The purpose of the Plan was to recognise the importance in retaining certain key individuals to drive the integration and development of the business for the future. Shareholders approved the LTIP arrangements with effect from the Greenbrook Admission Document. Awards will vest on a sliding scale dependent on the achievement of share price hurdles measured at the vesting date from 25% of any award at a share price of 35p to 100% at 55p per share. Full details of the Plan arrangements can be found from page 126 of the Greenbrook Admission Document, which can be found at www.totallyplc.com/investor-relations/reports-documents. The estimated fair value of each option has been calculated using the Monte Carlo option pricing model for the different options granted. The model inputs are share price at grant date, exercise price, expected volatility of 56.1%, expected dividends expressed as a dividend yield of 2.5%, contractual life of three years, and a risk free interest rate of 0.57%. A reconciliation of option movements over the period is shown in note 25. Outstanding at 1 April Granted Exercised Surrendered/cancelled Outstanding at 31 March 2020 Range of exercise price (pence) Weighted average exercise price (pence) Weighted average remaining life years – expected Weighted average remaining life years – contractual 27. Company statement of changes in equity Company At 1 April 2018 Loss for the period Share-based credit At 31 March 2019 Loss for the period Cancellation of share premium account Share issue Expenses attached to equity issue Dividend paid Share-based credit At 31 March 2020 31 March 2020 Number 000s — 10,500,000 — (1,500,000) 9,000,000 Retained earnings £000 (1,784) (2,511) 43 (4,252) (3,637) 16,408 — (450) (455) 64 31 March 2020 Weighted average price Pence — — — — — 31 March 2020 — — 3 3 Equity shareholders’ funds £000 20,603 (2,511) 43 18,135 (3,637) — 12,240 (450) (455) 64 7,678 25,897 Share capital £000 Share premium £000 5,979 16,408 — — — — 5,979 16,408 — — 12,240 — — — 18,219 — (16,408) — — — — — The loss for the period dealt with in the financial statements of the parent company is shown above. As permitted by Section 408 of the Companies Act 2006, no separate income statement is presented in respect of the parent company. 76 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020 28. Employee information The average number of persons employed by the Group (including Directors) during the period, analysed by category, was as follows: Operational Support Staff costs for the above employees and Directors: Wages and salaries Social security costs Share-based payments Pension costs The remuneration of the Directors together with other key management personnel is set out below: Short-term employee benefits Post-employment benefits Share-based payments Of which Directors’ remuneration is as follows: Short-term employee benefits Post-employment benefits Share-based payments Number of employees 12 months to 31 March 2020 12 months to 31 March 2019 1,403 249 1,652 1,411 192 1,603 12 months to 31 March 2020 £000 12 months to 31 March 2019 £000 37,180 3,374 64 2,882 43,500 32,780 2,919 43 2,344 38,086 12 months to 31 March 2020 £000 12 months to 31 March 2019 £000 1,944 112 20 2,076 1,497 106 12 1,615 12 months to 31 March 2020 £000 12 months to 31 March 2019 £000 711 36 17 764 423 42 17 482 Further information about the remuneration of individual Directors is provided in the audited part of the Directors’ Remuneration Report on pages 35 to 37. The share-based remuneration for employees and Directors was as follows: Share-based payments SAYE 12 months to 31 March 2020 12 months to 31 March 2019 Key management personnel £000 Directors £000 15 2 17 2 1 3 Staff £000 13 31 44 Total £000 Directors £000 Key management personnel £000 30 34 64 16 1 17 (4) (1) (5) Staff £000 (3) 33 30 Further information about share-based payments is provided in note 25. Total £000 9 33 42 77 FINANCIAL STATEMENTSAnnual Report for the year ended 31 March 2020 Totally plc Notes to the financial statements continued For the year ended 31 March 2020 29. Related party transactions Group The Group has taken advantage of the exemption available under IAS 2 Related Party Disclosures not to disclose details of transactions between Group undertakings which are eliminated on consolidation. Key management compensation is shown in note 28. Company Funds are transferred within the Group dependent on the operational needs of individual companies and the Directors do not consider it meaningful to set out the gross amounts of transfers between companies. In the year to 31 March 2020 an impairment charge of £478,000 was made against an amount owed to the Company by a subsidiary. No such impairment was made in the year to 31 March 2019. Amounts owed to and from subsidiary undertakings are shown in notes 19 and 20. As at 31 March 2020 there were no loans to Directors (2019: £nil). 30. Effects of changes in accounting policies The Group adopted IFRS 16 with a transition date of 1 April 2020. The Group has chosen not to restate comparatives on adoption and, therefore, the revised requirements are not reflected in the prior year financial statements. Rather, these changes have been processed at the date of initial application and recognised in the opening equity balances. Details of the impact this standard has had are given below. IFRS 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, together with options to exclude leases where the lease term is twelve months or less, or where the underlying asset is of low value. IFRS 16 substantially carries forward the lessor accounting in IAS 17, with the distinction between operating leases and finance leases being retained. The Group does not have significant leasing activities acting as a lessor. As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for most leases. However, the Group has elected not to recognise right-of-use assets and lease liabilities for some leases of low value assets based on the value of the underlying asset when new or for short-term leases with a lease term of twelve months or less. On adoption the Group recognised right-of-use assets at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments. Lease liabilities are measured at the present value of the remaining lease payments, discounted using the Group’s incremental borrowing rate of 2.49% as at 1 April 2020. The Group’s incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions. The impact of adopting IFRS 16 on the Consolidated Statement of Profit or Loss is to increase profit before exceptional items by £1,636,000, increase depreciation by £1,509,000 and increase finance costs by £235,000. The impact of adopting IFRS 16 on the Statement of Financial Position can be seen below: Assets Right-of-use assets Prepaid rent Liabilities Lease liabilities 31 March 2019 £000 IFRS 16 £000 1 April 2019 £000 — 57 57 — 4,083 (57) 4,026 4,083 — 4,083 4,026 4,026 The impact of adopting IFRS 16 on the Consolidated Cash Flow Statement is to increase operating cash flows and decrease financing cash flows by £1,744,000 respectively. 78 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020 30. Effects of changes in accounting policies continued The following table reconciles the minimum lease commitments disclosed in the Group’s 31 March 2019 financial statements to the amount of lease liabilities recognised on 1 April 2019. Minimum operating lease commitment at 31 March 2019 Previously unrecognised commitments Less: short-term leases not recognised under IFRS 16 Less: low value leases not recognised under IFRS 16 Less: licences not considered leases under IFRS 16 Undiscounted lease payments Less: effect of discounting using the incremental borrowing rate Lease liability as at 1 April 2019 1 April 2019 £000 5,295 151 (71) (17) (434) 4,924 (898) 4,026 The impact of adopting IFRS 16 on the Company Statement of Profit or Loss is to increase profit before exceptional items by £66,000, increase depreciation by £61,000, and increase finance costs by £9,000. The impact of adopting IFRS 16 on the Company Statement of Financial Position can be seen below: Assets Right-of-use assets Liabilities Lease liabilities 31 March 2019 £000 IFRS 16 £000 1 April 2020 £000 — — 348 348 348 348 The impact of adopting IFRS 16 on the Company Cash Flow Statement is to increase operating cash flows and decrease financing cash flows by £70,000 respectively. The following table reconciles the minimum lease commitments disclosed in the Company’s 31 March 2019 financial statements to the amount of lease liabilities recognised on 1 April 2019. Minimum operating lease commitment at 31 March 2019 Less: short-term leases not recognised under IFRS 16 Undiscounted lease payments Less: effect of discounting using the incremental borrowing rate Lease liability as at 1 April 2019 1 April 2020 £000 368 (2) 366 (18) 348 31. Changes in liabilities arising from financing activities The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated cash flow statement as cash flows from financing activities. Lease liabilities Note 16 Non-cash changes 01 April 2019 Reported £000 IFRS 16 implementation £000 8 8 4,026 4,026 Other non - cash changes Cash changes 01 April 2019 Restated £000 4,034 4,034 Acquisition of subsidiary £000 1,425 1,425 New leases £000 130 130 Other changes £000 227 227 Financing cash flows £000 (1,638) (1,638) 31 March 2020 £000 4,178 4,178 The financing cash flows represent the payments for lease liabilities as presented in the cash flow statement. Other changes include interest accruals and payments. 79 FINANCIAL STATEMENTSAnnual Report for the year ended 31 March 2020 Totally plc Company information Company information Registration number 03870101 (England and Wales) Directors Bob Holt (Chairman) Wendy Lawrence (CEO) Lisa Barter (Finance Director) Gloria Cooke (Clinical Quality Director) Michael Steel (Executive Director) (appointed 20 June 2019 and resigned 10 July 2020) Tony Bourne (Non-Executive Director) Mike Rogers (Non-Executive Director) Group Company Secretary John Charlton Legal advisers BPE Solicitors LLP St James House St James Square Cheltenham GL50 3PR Tel: +44 (0)1242 224433 Registered office Cardinal Square West 10 Nottingham Road Derby DE1 3QT Tel: +44 (0)20 3866 3330 Auditors RPG Crouch Chapman LLP 62 Wilson Street London EC2A 2BU Tel: +44 (0)20 7782 0007 Nominated adviser and joint broker Allenby Capital Limited 5 St. Helen’s Place London EC3A 6AB Tel: +44 (0)20 3328 5656 Joint broker Canaccord Genuity Ltd 88 Wood Street London EC2V 7QR Tel: +44 (0)20 7523 8000 Financial PR Yellow Jersey PR 7th Floor, 22 Upper Ground London SE1 9PD Tel: +44 (0)203 735 8918 Bankers National Westminster Bank Plc 9th Floor 3 Shortlands Hammersmith London W6 8DA Registrar Share Registrars Limited The Courtyard 17 West Street Farnham Surrey GU9 7DR Tel: +44 (0)125 282 1390 Discover more online totallyplc.com Follow our business on LinkedIn linkedin.com/company/totally-plc Follow our corporate news feeds on Twitter @totallyplc 80 FINANCIAL STATEMENTSTotally plc Annual Report for the year ended 31 March 2020 CBP003913 Totally plc’s commitment to environmental issues is reflected in this Annual Report, which has been printed on GalerieArt Satin, an FSC® certified material. This document was printed by Park Communications using its environmental print technology, which minimises the impact of printing on the environment, with 99% of dry waste diverted from landfill. Both the printer and the paper mill are registered to ISO 14001. T o t a l l y p l c A n n u a l R e p o r t f o r t h e y e a r e n d e d 3 1 M a r c h 2 0 2 0 Totally plc Cardinal Square West 10 Nottingham Road Derby DE1 3QT +44 (0)20 3866 3330 info@totallyplc.com
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