Announcement PDF Annual Report 2023 Doctor Care Anywhere Group PLC (Company Number 08915336) (ARBN 645 163 873) Our Vision: To be the primary care provider of choice for digital healthcare. Our Purpose: To provide quality care to patients by offering 24/7 access to clinical services 365 days a year. 2 Doctor Care Anywhere | Annual Report 2023 Contents Strategic Report Chair and CEO’s Letter 6 Section 172 Statement 10 Operating and Financial Review 12 Clinical Risk Review 19 Report of the Directors Directors’ Report 21 Corporate Governance statement 29 Appendix A 40 Remuneration and Nominations Committee Chair’s Letter 44 Remuneration Report 45 Directors’ Declaration 52 Directors’ Responsibility Statement 53 Financial Statements Financial Statements 54 Independent Auditor’s Report 90 Shareholder Information 96 Corporate Directory 98 Doctor Care Anywhere | Annual Report 2023 3 Executive Summary Services overview Efficient workforce utilisation to treat a wide range of conditions at scale Patient Comes to DCA for healthcare need MyHealth Health Navigator Health and wellbeing toolkit Assigns patient to most appropriate treatment pathway Virtual GP Virtual Nurses Access to GPs within 4-8 hours, 24 hours a day, 7 days a week Treatment by Advanced Practitioners for for Nurse Practitioners conditions not requiring a GP (for release inin Q2Q2 2023) =(for release 2023) Specialist review Diagnostic tests Review of diagnostic test results, advising on treatment plan If required, diagnostic tests (i.e., MRI, x-ray, bloods) can be arranged with 3rd parties For patients For payors Faster access Differentiated model Better clinician outcomes Cost savings Transparency Better clinician outcomes 4 Doctor Care Anywhere | Annual Report 2023 For healthcare professionals Convenience and flexibility Training and support For Doctor Care Anywhere Ability to treat broad range of health conditions Efficient utilisation of clinicians FY23 results overview £38.5m 730,600 535,000 Revenue (A$72.6m) consultations delivered consultations delivered to returning patients +31% on FY22 +19% on FY22 Demonstrating quality and retention value of service EBITDA loss reduced to £5.9m (A$11.1m) 66% Reduction on FY22 46.0% Gross Profit Margin Up 4ppt on FY22, showing benefit of implementing Mixed Clinical Workforce Doctor Care Anywhere | Annual Report 2023 5 6 Doctor Care Anywhere | Annual Report 2023 Chair’s Letter A year of growth and progress 2023 was a challenging environment for early-stage technology businesses, with capital scarce and valuations much reduced. In this environment it has been particularly important for DCA to focus on delivering change, reducing losses and sourcing new capital to provide a solid platform for growth. With that in mind, it is very pleasing to report continued growth and good operational and financial performance, and our Convertible Loan Note financing (completed in January 2024). The Company has implemented a major change in operating model with the introduction of Mixed Clinical Workforce, improving clinician capacity and reducing cost to serve, and continued to strengthen our technology platform, on which our clinicians successfully delivered over 730,000 consultations in 2023. Our patients continued to value our service, as evidenced by excellent net promoter scores and high levels of repeat patients, and our employee engagement has risen strongly, reflecting the improving performance and culture of the business. The Company exited the year having met all market financial guidance. Corporate changes Looking forward to 2024 In March 2023, Richard Dammery, Vanessa Wallace and Simon Calver stepped down from the Board having served the Company diligently since before the Company’s listing. As a result, DCA’s Board is now fully UK domiciled, consistent with the Company’s stated aim of being UK focused. This was followed in July by the appointment of Dr. Aleksandra (“Ola”) Spencer as an independent Non-Executive Director, completing the Board restructure and ensuring a wide range of executive and health sector experience on the Board. Progress made in 2023 puts DCA in a much stronger position heading into 2024. We have a stronger balance sheet, are on a clear path to profitability and are actively working to diversify our clients and propositions in the year ahead. Ben Kent joined as interim CEO in February 2023 and has led the Company through this successful year. The Board was pleased to appoint Ben as permanent CEO in March 2024, to lead DCA through our next chapter of growth and diversification. DCA also changed auditors in the year, with Crowe U.K. LLP being appointed in November 2023 following a competitive tender process. Grant Thornton LLP have therefore resigned as DCA’s auditors, however they will continue to provide tax advisory services. Shareholder approval of this appointment will be sought at the Annual General Meeting in April. The UK private healthcare market has grown strongly during 2023; private healthcare admissions for hospital care rose by 7% year on year in the first nine months of 2023, and the sector is expected to continue to grow in the medium term due to an ageing population, ongoing pressure on the UK’s National Health Service, and growing demand from employers to support the health, wellbeing and productivity of their workforce. All of this bodes well for our opportunity to grow the business over the coming years, in our ambition to be the UK’s leading private digitally enabled primary care provider. Finally, I would like to thank the team at DCA for all their excellent work in 2023. The impressive improvement in performance in 2023 could not have been achieved without their diligence, hard work and professionalism. The Company is in excellent hands going forward. John Stier John Stier Chair, Independent Non-Executive Director 27th March 2024 Doctor Care Anywhere | Annual Report 2023 7 CEO’s Letter Overview 2023 has been a year of effective delivery for Doctor Care Anywhere (“DCA”): we have implemented a new operating model; our technology platform has reliably supported significant volume growth; we have grown revenue and gross margin and reduced our cost base; we have met all our financial market guidance targets in 2023 and are on track to achieve positive EBITDA in early 2024. We have also strengthened our balance sheet with the Convertible Loan Note issue, completed in January 2024. With our changing contractual arrangements with AXA, we are actively progressing the opportunity to extend our proposition and expand our client base. Operational Performance We delivered good growth vs 2022 in all our key measures: we grew activated lives to over 1 million (up 21%), and delivered 730,000 consultations (up 19%), generating revenue of £38.5 million (up 31%). Through growth, margin improvement and cost reduction we have reduced our net losses from £22.0m to £10.0m. We managed over 40,000 diagnostic referrals for AXA members. Our technology platform was resilient and has the capacity to support further growth over the coming years. Evolving our relationship with AXA Health DCA has been working with AXA Health since 2015; we have developed a range of services to support AXA Health’s members, and AXA Health has supported DCA’s development both as its primary customer and, through the December 2022 Loan facility, as a provider of funds. During the second half of the year, we revisited the contractual basis of our relationship and the mutual exclusivity obligation on both parties, which currently ensures that AXA Health uses only DCA’s services for supply of virtual consultations to its members, but also prevents DCA from offering its services to AXA Health’s competitors. We therefore agreed that DCA should have the opportunity to diversify its client base and sources of revenue, so that it can be a resilient long-term provider of high-quality healthcare services to AXA Health. To support DCA’s continuing development and diversification, in October 2023 AXA Health and DCA agreed Heads of Terms to make the following changes to their contractual relationship: • DCA and AXA Health will remove their exclusivity obligations so that DCA can provide its services to other health benefits and healthcare providers (including other private medical insurers and cashplan providers), while ensuring that this does not compromise the quality and availability of its service to AXA Health • AXA Health confirmed its continuing commitment to DCA as its provider of virtual primary care consultations, subject to ongoing contractual rights • DCA will continue to manage diagnostic referrals for AXA Health members; but the joint venture structure will be unwound. • The existing contractual arrangements, through which AXA Health and DCA share the benefits of managing patients through a diagnostic pathway, will continue to operate under the Master Services Agreement • The Joint Venture Agreement will be terminated and the joint venture company, Doctor at Hand Diagnostics Limited (“JVCo”), will be wound up • The intellectual property owned by JVCo (consisting principally of the technology that enables diagnostic referral pathway management) will be transferred to DCA Change in operating model In May 2023 we implemented an important change in our operating model, with the introduction of Mixed Clinical Workforce (MCW): DCA now offers consultations with both GPs and ANPs (Advanced Nurse Practitioners). ANPs are nurses who have undertaken a Master’s level degree in clinical practice. They have the authority to make autonomous decisions in the assessment, diagnosis and treatment of patients with complex clinical issues. The launch of MCW improves our clinician supply while reducing our average cost to serve. With the launch of MCW, we also introduced our Health Navigator, new technology that guides patients to the appropriate clinician and appointment length based on their clinical need. This capability helps to enhance the patient experience and manage our clinical resources effectively. We are pleased that our Net Promoter Score (NPS) has averaged over 75 throughout 2023, with patients rating their experience with our new ANP colleagues equally as highly as our GP workforce. Care pathways The Company made progress with its secondary care proposition, which integrates primary and secondary care through the provision of GP consultations, diagnostic tests and review of these tests by specialist consultants. Following agreement of these Heads of Terms, DCA and AXA Health are working together to finalise the detailed amendments to be made to the Master Services Agreement, Joint Venture Agreement, and Development Agreement, and expect to conclude these contractual changes in the first half of 2024. This is an important change for the Company, as it provides us with the opportunity to diversify our client base; in parallel, we will strive to ensure that we continue to serve AXA with quality and value, so that it has no incentive to engage with other service providers. 8 Doctor Care Anywhere | Annual Report 2023 Focus on the UK market In July we completed the sale of the GP2U business to Connected Medical Solutions Ltd, trading as My Emergency Doctor (MED), for consideration of A$3.0m (£1.6m), of which $0.5m was paid in cash and A$2.5m was paid in shares of the acquiring company. While the business delivers valued health services to Australian patients, the Board concluded that it was not core to our strategy of focusing on the UK market, and its sale reduced ongoing annual losses by £0.5m. Delivering high quality health care Quality underpins everything we do. Supporting our patients with safe and effective primary care services is the foundation of our business. Our team of clinicians and clinical managers, together with their support colleagues, work diligently to ensure that our business reliably delivers on that commitment. We have extensive clinical quality and governance processes which touch every facet of our operations. Over the past year, Doctor Care Anywhere has delivered over 700,000 appointments to patients with no occurrences of reportable patient harm. DCA is regulated by the Care Quality Commission. The CQC undertook a routine inspection of DCA in Q3 2023; we were praised in many areas, particularly in how we safeguard adults and children, as well as providing good levels of caring, effective, and responsive care for our patients. We were very disappointed that, while our business was assessed to be adequate overall, we were given a rating of “Requires Improvement”, with observations relating to recruitment documentation and auditing procedures. Since the inspection we have put in place enhancements to our policies and procedures to reflect the feedback from the inspection, and also adapted our continuous improvement programme, which includes effectiveness reviews and Quality Statement monitoring, and provides ongoing assurance of compliance with CQC regulations. Managing environmental and social impact Like many other organisations, we are conscious of the risks play in addressing those. We might not face the same scale of issues as other businesses, but we do have a responsibility to contribute to the government’s aim of net zero carbon emissions by 2050. Like other businesses, we assess and report on our carbon footprint, from emissions and waste to paper consumption and single-use plastic, and we will work to reduce our footprint over time. During the year we substantially reduced our office space, which has contributed to the halving of our estimated Greenhouse Gas and Consumption emissions. (A$0.0875), which represented a premium of 94% to the closing share price prior to the announcement. The Convertible Note financing will support our medium-term growth by allowing us to re-invest our cash resources into the business and capitalise on the opportunities in front of us. We were pleased to welcome AXA Health and Axia Investments Limited, a private client fund, as the principal investors in the Notes. Building our team Our progress in 2023 has been achieved through the skills and commitment of our team of clinicians and support colleagues, and they can be proud of the progress that we have made. I am delighted that our colleague engagement has also increased substantially, reflecting the team’s success, with our employee Net Promoter Score (eNPS) rising from 26 in January to 45 in September. This level of score is classified as “Outstanding”. Our goal in 2024 is to build on the progress this year, so that we are regarded as a great place to work. During the year we have strengthened our leadership team to make sure we have the skills and experience to realise DCA’s potential: our new Chief Technology Officer, Luis De Miguel Puig, joined the business in September 2023; we are building our proposition and business development teams; and Seema Sangar joined us in March 2024 as Chief Financial Officer. I am pleased to welcome these new colleagues to DCA and I look forward to building the business with my team over the coming years. Developing the business in 2024 After a year of operational change and delivery, our focus in 2024 is on business development - focusing on expanding our client base – and proposition development. We will add more flexibility to our consultation service, build new digital health pathways, and use technology more and more in our offering. In parallel, we will continue to drive operational efficiency, in pursuit of our financial targets of profitability and cash generation. 2024 has started well as DCA completed 68,200 consultations in January and 64,300 consultations in February - these are the highest consultation volumes in these months in DCA’s history. I am delighted that the Board has confirmed me as permanent Chief Executive Officer of DCA, and also invited me to join the Board. It is a privilege to lead DCA, and my team and I are excited about the opportunity to grow the business, as we develop our proposition to meet the health needs of our patients and clients. Strengthening our balance sheet At the end of 2022, we secured a £10m Loan Facility with AXA Health, which we drew down in tranches through the course of 2023. In December 2023 we announced the issue of a £10.6 million Convertible Loan Note, subject to shareholder approval. In January 2024 we were pleased to receive that approval and to complete the refinancing; the proceeds of the Convertible Loan Note were used to repay the AXA Loan Facility. The Convertible Loan Notes are repayable by 31 December 2027, and bear a zero coupon. This means that there is no requirement for payments of principal or interest over the life of the Notes. The Notes have a conversion price of £0.0459 Ben Kent Chief Executive Officer 27th March 2024 Doctor Care Anywhere | Annual Report 2023 9 Section 172 Statement The Company is regulated under both UK company law and the Australian Stock Exchange listing rules. Section 172 of the Companies Act 2006 (UK) requires that directors of a Company act in good faith to promote the success of the Company for all stakeholders. The directors consider that throughout the year, having regard to the matters set out in s.172(1)(a)(f) of the Companies Act 2006, they acted in good faith and undertook actions that would be most likely to promote the success of the Company for the benefit of its members as a whole, having regard to the interests of all stakeholders, including employees, customers, suppliers, and the wider community. Through an open and transparent dialogue with our key stakeholders, the directors have been able to develop a clear understanding of their needs, assess their perspectives and monitor their impact on the Company’s strategic ambition and culture. As part of the Board’s decision-making process, the Board and its Committees consider the potential impact of decisions on relevant stakeholders while also having regard to a number of broader factors, including the impact of the Company’s operations on the community and environment, responsible business practices and the likely consequences of decisions in the long term. The Company is also listed on the Australian Stock Exchange, and as such must comply with the ASX Listing Rules and the Corporate Governance Principles and Recommendations, designed to ensure high quality corporate governance by Australian listed entities. This statement sets out the matters considered under each subsection of s.172(1) (a)-(f). A. The likely consequences of any decision in the long term 2023 was another year of transformation, culminating in the refinancing of the previous AXA loan through a convertible loan note issue in December 2023. The Company also invested in new ways of working which are proving successful and which the Board expects to build on in future. The convertible loan note arrangement, together with the anticipated relaxation of certain restrictions in our key relationship with AXA, are expected to offer opportunities for our employees, customers, shareholders and other stakeholders to further secure the Company’s long-term sustainable and profitable future. In coming to its decisions, the Board carefully assesses the likely consequences of each decision in the long term, and how that decision aligns with the strategy, purpose, values and desired culture of the Company. During the year, the directors made decisions based on board papers, presentations from the executive management team, information documents, discussions with external advisors and reports from independent advisers. B. The interests of the Company’s employees The Board and executive management regularly consult with the Company’s employees about a range of matters including decisions about the Company’s operations, funding, leadership and culture. The Company encourages its employees to feed back their views through employee surveys, the results of which are analysed and, where possible, changes are implemented. Throughout 2023, employees were able to participate in monthly “town hall” meetings giving them the opportunity to contribute to the Company’s plans and give feedback on Board and executive decisions. C. The need to foster the company’s business relationships with suppliers, customers and others The directors oversee the Company’s strategy and operations to develop and maintain mutually beneficial business relationships with all our partners, suppliers, government agencies and other stakeholders. The directors continue to work closely with AXA PPP Healthcare Group Limited, the Company’s primary partner. The Company seeks to ensure that proposed changes are managed carefully and that the outcome benefits both parties. Opportunities to improve the Company’s offer to other customers and potential customers are also being actively explored. The Company is in dialogue with several major organisations in the telehealth market. Finally, the Company maintains an open, transparent and co-operative relationship with key regulators, continuously seeking ways to develop its practice to the highest standards. The directors continue to ensure that suppliers are paid in a timely manner. 10 Doctor Care Anywhere | Annual Report 2023 D. The impact of the Company’s operations on the community and the environment The directors regularly consider the impact their decisions will have on the community. The Company provides an innovative primary and secondary healthcare service using technology, principally seeking to provide easy access to healthcare services in its core markets. The directors also consider environmental impacts. Given the service is principally provided via a telehealth platform, the environmental impact of delivery of our services is low. The introduction of our Mixed Clinical Workforce approach has enabled us to reach more patients and handle consultations more effectively using the combined expertise of our team of doctors and Advanced Nurse Practitioners. E. The desirability of the company maintaining a reputation for high standards of business conduct At all times the directors seek to ensure that the Company, through the Board’s oversight, adheres to high standards of corporate governance. The Company continues to comply with the ASX’s Corporate Governance Principles and Recommendations, the primary mechanism for Australian listed companies to demonstrate high standards of corporate governance. The Company also maintains a Code of Conduct and Board Charter. The Company maintains an externally managed whistleblower hotline service. The Board receives regular reports on any concerns raised and ensures that appropriate action is taken to respond. The Board has set clear improvement objectives with regard to corporate culture and embedding good practice and high standards across the business. F. The need to act fairly between members of the Company The Board ensures that all shareholders/Chess Depository Instrument holders have the opportunity to express their concerns to the Board throughout the year by having access to the Chair, and through investor briefings. The Company also complies with Australian continuous disclosure obligations, thereby ensuring that all shareholders/Chess Depository Instrument holders have access to the same information about material matters at the same time. The AGM allows an opportunity for shareholders to ask questions and to discuss issues in more depth with the Board of Directors. Directors who hold shares in the Company routinely declare their conflicts in substantive transactions that affect the Company. Where a conflict is present, the director in question does not participate in deliberations. Doctor Care Anywhere | Annual Report 2023 11 Operational Performance Activated Lives reached 1,048,400 at 31 December 2023, representing a net increase of 179,500 (20.7%) above 31 December 2022. There is further growth potential in activated lives given the Company’s existing base of 3.0 million Eligible Lives, together with growth in patients from new clients. Consultation volumes grew significantly in FY23, totalling 730,600 for the period (including 12,200 GP2U consultations), an increase of 116,400 (19.0%) over FY22 (which included 25,600 GP2U consultations). Consultation growth was supported by the Company’s strong repeat user rate, with 535,000 consultations delivered to returning patients in FY23, representing 73% of total consultations. Growth in the Company’s repeat user rate validates the investment made in acquiring new patients during the year, with these new patients expected to continue to utilise the Company’s services in FY24 and beyond, building the operational scale which will underpin a profitable future. Consultation volumes in 2H23 were 355,200, 5.7% lower than volumes in 1H23, due to the UK’s mild early winter, limited marketing of our services by AXA and the sale of GP2U in July 2023. 2H23 volumes were 14.1% higher than 2H22. 12 Doctor Care Anywhere | Annual Report 2023 Financial Performance Summary of FY 2023 Consolidated Statement of Comprehensive Income £ in millions FY23 FY22 Variance % 2H 23 1H 23 Variance % Utilisation revenue 36.0 27.1 8.9 32.8% 18.1 17.9 0.3 1.4% Subscription revenue 2.5 2.2 0.3 12.1% 1.2 1.3 (0.1) (8.0%) Revenue 38.5 29.3 9.1 31.2% 19.3 19.2 0.1 0.8% Cost of sales (20.8) (17.0) (3.8) (22.2%) (10.0) (10.8) 0.9 7.9% Gross profit 17.7 12.3 5.4 43.7% 9.3 8.3 1.0 12.0% 46.0% 42.0% 4.0% 48.4% 43.6% 4.8% Operating costs (6.9) (6.3) (0.6) (9.2%) (3.2) (3.6) 0.4 10.8% Contribution 10.8 6.0 4.8 79.8% 6.1 4.7 1.4 29.6% Contribution margin 28.1% 20.5% 7.6% 31.6% 24.6% 7.0% Sales and marketing (0.7) (1.9) 1.1 61.8% (0.3) (0.4) 0.1 27.8% Technology (3.4) (7.4) 4.0 54.3% (1.9) (1.5) (0.4) (25.7%) General and administration (12.9) (15.6) 2.7 17.3% (6.2) (6.7) 0.4 6.7% Other operating income 0.3 0.6 (0.3) (46.1%) 0.0 0.3 (0.3) (91.4%) Share based payment (0.1) 1.2 (1.3) (106.8%) (0.1) (0.0) (0.0) (291.1%) Non-operating costs (16.7) (23.0) 6.3 27.3% (8.4) (8.3) (0.2) (1.8%) - (0.1) 0.1 100.0% (0.0) 0.0 (0.1) (200.0%) EBITDA (5.9) (17.1) 11.2 65.5% (2.3) (3.5) 1.2 33.6% Depreciation and amortisation (2.5) (2.1) (0.4) (21.5%) (1.4) (1.1) (0.3) (27.8%) EBIT (8.4) (19.1) 10.7 56.1% (3.8) (4.6) 0.9 19.0% Finance income/(expense) (0.5) (0.0) (0.4) (838.0%) (0.3) (0.2) (0.1) (36.3%) Loss before tax (8.9) (19.2) 10.3 53.8% (4.0) (4.8) 0.8 16.8% 0.7 0.3 0.4 170.2% 0.1 0.6 (0.4) (75.7%) Loss after tax (8.2) (18.9) 10.8 56.9% (3.9) (4.3) 0.4 9.1% Results from discontinued operations (1.9) (3.1) 1.2 39.2% 0.1 (1.9) 2.0 105.3% (10.0) (22.0) 12.0 54.4% (3.8) (6.2) 2.4 38.7% Gross profit margin Share of JV net loss Tax Net loss Please note numbers in the above table are subject to rounding differences. Doctor Care Anywhere | Annual Report 2023 13 Financial Performance cont. Revenue for FY23 was £38.5 million, up 31.2% on FY22. The main driver of revenue growth was the increase in consultations between the two periods and an annual price increase agreed with AXA in 1H 23. The price increase also contributed to 2H23 revenue increasing by 0.8% over 1H23 despite the reduction in volumes. Gross profit has grown significantly, both year on year and half year on half year: FY23 gross profit was £17.7 million, up 43.7% on FY22. Gross profit margin for FY23 was 46.0%, up 4.0ppt on FY22. Gross profit for 2H23 was £9.3 million, up 12.0% on 1H23. Gross profit margin for 2H23 was 48.4%, up 4.8ppt on 1H23. Contribution for FY23 was £10.8million, up 80.0% on FY22. Contribution margin for FY23 was 28.1%, up 7.6ppt on FY22. Contribution for 2H23 was £6.1 million, up 29.6% on 1H23. Contribution margin for 2H23 was 31.6%, up 7.0ppt on 1H23. The improvements in gross and contribution margin have been driven principally by the launch of the Company’s Mixed Clinical Workforce proposition in June 2023, together with the increase in revenue per consultation from annual price increases. Margin improvement continued throughout 2H23 such that DCA’s Q4 gross margin guidance of 50%-55% and Q4 contribution margin guidance of 35%-40% were both met. These significantly improved margins put DCA in an improved position going into 2024. Normalising for the one-off restructuring costs of £1.6m incurred in 1H22, and for share based payments in both years, nonoperating costs in FY23 decreased 26.4% on FY22, to £16.6 million. This was driven by the full year impact of the restructuring work undertaken in 1H22 to reduce the business’ ongoing costs, together with further cost reduction and efficiency measures implemented in 2H22 and FY23. Non-operating costs increased by 1.2% between 1H23 and 2H23. This was primarily due to a reduction in the capitalisation rate of technology work following the go-live of Mixed Clinical workforce, as 2H23 work was more focussed on BAU and non-capitalisable discovery projects. This led to a £0.4m rise in technology costs expensed in the period which was more than offset by a total £0.5m reduction in general and administration and sales and marketing costs between the two periods. Adjusting for restructuring costs and share based payments, EBITDA loss in FY23 was £5.8m, an improvement of £10.9m year on year. This was driven by revenue growth, margin improvement and a focus on productivity in the business. DCA exited the year with £6.1m cash and its £10.0m AXA loan facility fully drawn down. This loan was refinanced in January 2024 on completion of the convertible loan note financing, with no cash repayments due until 31 December 2027. This strengthening of the Company’s balance sheet puts the Company in an excellen