Alcidion Group Limited (ALC) Earnings Call Transcript & Summary

Good morning, everyone, and a warm welcome to Alcidion's presentation of results for the first half of FY '22. We appreciate your interest, and thank you for joining the call. I'm Kerstin Wahlqvist, the leading Investor Relations Manager for Alcidion, a role I've recently taken in half. I'd like to begin by acknowledging the traditional owners and custodians of the land -- the very land on which we work and meet today, and we pay our respects to the elders, past, present and emerging. I send our respects to Aboriginal and Torres Strait Islander people who have joined us on the call today. In terms of format this morning, Alcidion's Managing Director, Kate Quirke, will provide a short presentation. And we'll have some time for questions at the end of the presentation as well. [Operator Instructions] Some questions have been logged prior to the call starting and we'll address those at the end of the presentation as well. Joining us on the call this morning, we have Matt Gepp, Alcidion's CFO, who's going to have a run at the financial results. And we're also joined by Rebecca Wilson, Chair of Alcidion; and Lynette Ousby, Managing Director of our U.K. operations. With that, over to you, Kate.

Thank you very much, Kerstin, and thanks, everyone, for joining us this morning. First, my apologies that the call's a little earlier than has been the norm for us. Most of you will probably not have had a chance to go through the documents that were lodged this morning. The time is -- due to the fact that I'm currently in the U.K. visiting customers and our team for the first time in 2 years and so we moved this call a little earlier due to the time difference and a heavy schedule of travel and meetings ahead of Lynette and I tomorrow. So I hope you can understand that change. And also, I got to apologize for any noise you might hear outside. I'm not sure if any of you follow the weather conditions we've been having in the U.K. We've had a couple of storms come through and I heard some were -- some people chopping down trees outside my window. So a bit of chainsaw work's been going on. I am currently presenting to you from Burnley, which is in the North, in Lancashire, where our -- one of our major office is. So as I said, I'm here visiting a number of trusts, current customers and prospective ones as well as spending some time with our local team. That team, basically in the U.K., numbered around 12 people last year in March 2020 and now numbers nearly 50. We've completed 2 acquisitions here in the last 3 years and have added 22 heads both through those acquisitions, but the rest of the growth has actually been a result of the success in the organic business here in the U.K. So I'd like to acknowledge the U.K. team and their efforts over the last 2 years under the leadership of our U.K. MD, Lynette, who's on the call. Much has been done in that time to position Alcidion as a leading supplier of digital technology to the NHS and whilst I've only been here a couple of days thus far and still suffering a little bit from jet lag, I can clearly see and hear from our customers the impact our technology's having. And I'm actually really looking forward to the rest of the week and hearing more from some of our clients and how they've progressed. Equally exciting this week was the restarting of in-person health care conferences. Earlier in the week -- this week Monday, Tuesday, Alcidion attended its first in-person conference and trade exhibition in nearly 2 years, which was the Australian Institute of Digital Health one that was held in Melbourne. And a lot of customer interaction, we had a stand there and trade exhibition. All the reports I'm getting from the team, we've got a great excitement and interest in everyone coming back together. But what's really important about it is it's a very important post-COVID step, and it's one of the important sources for pipeline development for us that's not been possible in recent times due to COVID. Early next month, we'll be presenting at the U.K. equivalent, which is Digital Health Rewired. So we're seeing positive signs emerging in our industry, which has been impacted so much and even more so in the second year of COVID. So today I'm going to talk you through a short presentation that summarizes the Appendix 4D that's been released, summarize some of the business activities of the first half. I do acknowledge that a lot of what I'll cover today has been covered in the Appendix 4C quarterly update that we did, which was only 3 weeks ago. As Kerstin said, at the end of the call, there will be opportunity for questions, plus some that we've already lodged previously. Can we just move slide, Kerstin? If you recall -- thank you. The first half of financial year '22 has definitely been a transformational one for Alcidion, a significant step in our goal of becoming a leading global health care technology movement company. In December, as many of you all know, we signed the largest contract in the company's history and we completed the acquisition of Silverlink, which -- all of which enables us to take on global vendors with our proposition of a cloud-native, modern and modular EPR offering, which is resonating well with our market and our customers. Despite the challenging conditions we've had across those markets, during the first half, we've strengthened and grown the business, which include new sales with a total contract value of $30.4 million. And that did include, of course, the major health care IT contract with the Commonwealth of Australia, which -- the project which is now underway, and we're very much very important delivering that, the foundational component that Alcidion's providing in that consortium, which is for the longitudinal health record or the accumulation and consolidation of all health care interactions from each individual being able to be seen as a single view over the life of their health care interactions. And whilst it was significant by size and duration and our first Commonwealth contract, the opportunity also demonstrates the scalability and capability of Alcidion's fruition to address the challenge of integrating care across all health care sectors, and obviously during COVID, we've seen that expand to beyond hospitals and general practitioners and radiology, pathology providers to actually providing care in the home and the community. Also in the first half, we completed the successful acquisition of Silverlink, which as I've pointed out before, is one of the last remaining patient administration solutions in the U.K., independent. And we did -- to support that, we did a $55 million capital raise just on that very strategic and important acquisition for us. And I think it's really important to point out that these activities are firmly in line with the company's strategic plan in terms of both timing and activity. We will go in to discuss the financials in a little bit more detail on the next slide. But from our perspective, all indicators are progressing in the right direction. So in summary, we added $30.4 million in new revenue compared to $17.4 million at the same time last year. We've got $27.1 million in revenue currently conducted, but we expect a revenue this year with another half of the year sales still to come that's going to impact that. We delivered revenue of $12.9 million in the first half, which is 16% up on the prior calendar period, and a loss of $3.2 million underlying EBITDA losses, which is in line with our expectations. As indicated, as the -- when we did the full year results, we had a number of planned hires that are part of our growth strategy that we were not able to make in the prior financial year. They were -- we continue to execute and make those as planned, and we're now seeing the cost of damage through the full half year. As reported in the quarterly, cash at the end of the half stands at $18.9 million. Important to note, all of that has been achieved despite the challenging conditions that our customers are operating within. And they have been very challenging this last year as COVID has hit volume hard with regard to Australia and the U.K. To a lesser degree, maybe in New Zealand, but then they have been fairly contained and locked down. So whilst the surging of the pandemic brought many opportunities for digital health, the intensity of the second year has had an impact, I think. And we've been seeing it and I know that others and other suppliers and vendors and partners of ours have similarly been seeing it. But in the second year, the intensity of the COVID situation on the staff in health care delivery has certainly slowed down some of the procurement and decision-making and has had that impact for most of the financial year. So given that, we're very pleased with the half year result we've been able to achieve, which are very positive in terms of continued revenue growth and continued interest in Alcidion solutions. Next slide, please, Kerstin. Sorry, just the operational highlights, many of which I've covered off previously and I won't talk to each of those detail about -- but just to reiterate how transformational that first half has been and how we've executed on the plan that we set for ourselves. Largest-ever contract signed, foundational component of the longitudinal health record, contract with the Commonwealth, very significant in size, duration, recurring -- creating recurring revenue for Alcidion, initially for a 6-year period. The contract itself actually to extend out to 15 years and has the potential also to include Miya Observations and Assessments. So worth approximately $50 million to -- so in that 15 years. The acquisition of Silverlink contributes significantly to our product and solution strategy, both in the short term and longer term. That acquisition provides us with core patient administration capability, over our -- expand our overall product offering and positions Alcidion strongly in being able to provide an alternative solution to the electronic patient records that are in the market at the moment and one which aligns very much with the strategy that we're seeing emerging from our customers around native, modern and modular and being able to provide value quickly to customers in terms of the speed of implementation, which we've been able to demonstrate in all of our sites, but particularly here in the U.K. over the last 12 months. Silverlink is expected -- is performing as expected, with the forecast that they provided during due diligence of revenue of $7.8 million and EBITDA contribution of about $4.8 million on track. So that's all very positive. The announcement has been well received by the health care industry and by our customers. I'm actually visiting one of our Silverlink customers tomorrow, and I'm really looking forward to seeing firsthand their solution in action and discussing with them our plans for the future road map. And that road map is talking about how to combine the capabilities of the Silverlink patient care system with Miya Precision. The Silverlink is very much now part of the wider Alcidion U.K. team. I met with them today, although we didn't have everyone come together, they were part of a virtual meeting. And we're now planning the full integration and merging of capabilities of the solutions. I think I've touched before on other contracts signed during the half included significant strategic contract with Sydney Local Health District, which is allowing us to demonstrate how Miya Precision supports virtual care or remote patient monitoring or care in the home, lots of words used to describe what is a very similar component and that allowed us also to develop and release during that half our Miya Care solution, which is a mobile application for patients to interact with Miya Precision and their data, again, increasing the pool and the strength of the data that Alcidion is collecting in health care and supporting our caregivers and clinicians to be able to provide the best possible care that they can in the home. We also saw additional contracts signed for ExtraMed, one was a 3-year renewal, and then another was an expansion into an existing patient record Miya Observations customer, which demonstrated again execution on our strategy, which was inquiring some of these U.K. companies that had existing footprint we'd be able to take Alcidion solutions into those markets. I'd like to now hand over to Matt, who's going to go over the H1 results in a little bit more detail to -- move to the next slide, Kerstin. Over to you, Matt.

Thank you, Kate, and good morning to all the shareholders and investors who have joined us today for the presentation. I'll reiterate what Kate said, it has been an extremely good half for us here at Alcidion. Next page. So looking at the P&L, as Kate already touched on, the business delivered a 16% increase in revenue versus the prior year. Pleasing to see the steady shift towards recurring revenue that we are delivering in the business, and we saw a 40% increase on the prior year recurring revenue to $8.8 million in this half. 58% of total revenue in these results is recurring compared to 56% in the prior year. We only need to look back 3 years to 2019 where less than half of our revenue was recurring. So that's a very good trend that we're seeing there. Equally, it was pleasing to see revenue growth in both ANZ and the U.K. business in the half versus prior year. Looking at the gross profit. It increased 12%, slightly less than the revenue, to $10.9 million, with margin percentage dropping 3 points from 88% to 85%. The percentage decrease was expected and is due to a high proportion of resold product revenue that's contained in these results compared to the prior year. And while that resold revenue delivers a pretty solid incremental margin, it does put pressure on the percentage GP, which is typically led by our own products, which delivers in the high 80s to low 90s in terms of margin percentage. We talked quite a bit about forward sales costs in the full year presentation in September last year. The business has been investing in staff for growth. We made a number of new hires in the prior year Q4 and in Q1 and Q2 of this year. But the full effect of those hires from Q4 last year is seen in these H1 staff cost numbers, which also includes full 6 months of the 11 ExtraMed staff who joined us last April. Overall staff costs were up $3 million or 34% on the prior year, and that increase is consistent with our expectations for the half. So that's talking about the large numbers there. That leaves us with an underlying EBITDA loss of $3.2 million that was delivered for the half. Again, this result is consistent with our expectations for the period. It's worth pointing out that during the period, the business incurred significant expenditure in relation to the acquisition of Silverlink. These costs are consistent with an acquisition of this size. And along with the noncash cost of the options has been excluded from the underlying EBITDA number of $3.2 million that we're talking through today. I know we're on the P&L page, but I'm going to touch on cash. We ended the half year with $18.9 million in cash. You will see from the cash flow in the 4D that's a very busy cash flow for half year with $56.5 million spent on the acquisition and gross receipts from the cap raise of $55 million. I will draw your attention now to the H1 cash receipt of $15.4 million, and that's a 52% increase on the prior year H1 cash receipts of $10.8 million. The business delivered positive operating cash flow in Q4, but did deliver a negative operating cash flow for the half of $1.9 million. That is an improvement though on the $1.3 million negative cash flow of the prior year results. It's also worth pointing out that 3 of our last 4 quarterly cash flows have delivered positive operating cash flow. I'll just point out one final thing on this slide before we move on, that these half year results we're looking at today do include 15 days of trading from the Silverlink acquisition. And Kate's already said it, I'm going to say again, I'm happy to say that 2 months into the acquisition following the completion, that our business is performing exactly in line with our expectations that we formed during due diligence. So if we can move on to the next slide please, Kerstin. All right then. We have a rather impressive contracted revenue graph here. The business ended the half with contracted revenue of $27.1 million and that surpasses the prior year full year revenue of $25.9 million. So it's a good place for us to be at this point in the year. That's 25% ahead of the $21.7 million contracted revenue at the same time last year. We also have a further $1.9 million of renewal revenue in the pipeline that we fully expect to be converted to revenues by the end of the year. The recurring revenue of $18.7 million represents 69% of the total contracted revenue. That's marginally up on the actual numbers we delivered for H1 of 58% and a full 5 percentage points higher than the contracted revenue at the same time last year or the recurring portion, I mean. I'll address your questions on our financials at the end of the presser, and I will hand back over to Kate to go on to the next slide.

Couldn't find my get-off-mute button. Thanks very much, Matt. So this -- I have touched a little bit on the momentum but I think this is worth looking at in a little bit more detail what has been achieved in this first half. We are very pleased with the progress we've made in terms of the growth of business in the inorganic terms. As I've already outlined, we've signed a number of significant contracts in addition to the contract with the Commonwealth. And all of them demonstrate execution of our business strategy, major long-term contracts that expand our market beyond those state-based health care systems, has demonstrated success with expansion into remote and out-of-hospital care, demonstrated in the upsell of opportunities that the acquisition of companies like ExtraMed provide. That's all been achieved in the half. We continue to sign many contracts for ongoing services work alongside renewals, particularly in Australia. And that demonstrates the continued relationship we have with our customers. We've spoken in times in the past about how important ongoing positive referenceable relationships are with our customers. So they continue to contribute to a strong revenue position as well. Despite the customers being under enormous pressure from COVID, we have continued to be able to demonstrate our ability to successfully deploy the software once they've bought it as well and deliver that value to customers. And we delivered on really significant go-live projects, the software project with ExtraMed, and that has been very well received and now look at what happens in terms of growing that out further. We have the pilot evaluation of Better Meds in New Zealand, which is live, and we're continuing to work with them in terms of their evaluation of that program of work. Recently, a couple of you may have seen on social media that we see our customers demonstrating and promoting the positive results that they get from solutions that they implement from us. A recent implementation of Miya Observations in Scotland at Lanarkshire has been reporting very positive measurable results from the implementation of Miya Observations and Assessments. They've reported 100% completion of all vital signs as a result of the implementation of Patientrack, which is up 30% -- up from what was only 31% successfully completed before. And this is critical because vital signs convert to an early warning score algorithm. That algorithm then alerts the clinical team for patients that are at risk of deterioration, thereby increasing patient safety and reducing adverse events and, in many cases, saving lives. And our customers are out there doing that work, measuring the benefits of the solutions that we're implementing and then promoting it for us. The next slide, please, Kerstin. I won't talk a lot more, I don't think at this point, about Silverlink. I'm going to hand over to Lynette to have a word about the U.K. position. We've talked about how important the acquisition is. We only made the acquisition in December. We announced it to the market in December. So we have had very positive ongoing conversations with customers, with the NHS about the positioning and what we're doing, but it's too early to expect that to turn into contracts at this point, but certainly, it is having a very positive impact on the pipeline. Next slide, please, Kerstin. As many of you are aware, we have been focused on continuing to position Alcidion as a key provider to the NHS. And I thought, seeing we're in their time zone, it's a great opportunity for Lynette just to give you a brief update on how she sees the Alcidion position in the U.K. Over to you, Lynette.

Thanks, Kate. For over the last 2 years, the U.K. is well-documented as being heavily impacted by COVID and the admissions that come through our health system. The result of that is also the backlog now that we're seeing in treatment beyond COVID, whether that be as a result of COVID, so we're seeing an increase in long COVID, but also patients that were in the system for other treatment that has been postponed. So in terms of our COVID experience, year 1, and the NHS is very much focused on swift procurement to support immediate needs, of which Alcidion was well positioned to respond to. That was both with existing customers and new customers. The focus now and where Alcidion is absolutely positioning itself to help is around the backlog of patients and how do we move these patients through their systems, through the care setting, ensure that the right patient's in the right place and in the right care and moving those pathways along as quickly as possible using digital solutions. The 3 programs that are being announced and being rolled out at the moment such as the leveling up program, the elective recovery fund and the Digital Aspirant Plus. Alcidion is well placed to respond to all of these challenges as money flows out of the system and these initiatives to deal with the COVID recovery plans. We have material opportunity in the U.K. to both upsell to our existing base but also the new positioning with our modular -- modern, modular EPR as a result of the past acquisition of Silverlink. There are a number of upcoming procurements under the Digital Aspirant Plus initiative, the new EPR initiatives that looks at solving these challenges in a different way. Over 60 trusts are looking to either move to a new modern, modular EPR or have an alternative need to modernize their current digital position, and we can focus on these sites as an immediate market opportunity. We have a unique advantage that we can both address their EPR needs or increase their digital maturity incrementally by introducing modules such as Miya Flow and Miya Observations. The position of the ICS as a layer is bolstered in terms at the moment in the U.K. They are becoming the barrier to digital solution and it's an emerging opportunity and a very exciting opportunity, but it is still evolving in terms of the procurement process. So we're navigating our way around that. There are some cases it's having an initial impact in terms of slowing down the procurement with the extra layer of governance, but then it's also great opportunity as ICSs tend to get the best proactive solution and move it out into the region. And as our presence is already very strong at 45% have sold around ICSs, we are seeing this is a very positive emerging opportunity. Back over to you, Kate.

Thanks. Thanks, Kerstin. We'll move to that, to the final slide on outlook. So just for everyone to give you sort of an overview of outlook from here. Our pipeline remains very strong, supported by solid contracted revenue of $27.1 million, plus the further $1.9 million we expect to sign and that's with our other opportunities being converted in the second half. The pipeline does continue to grow, and it's been bolstered by some further opportunities due to the acquisitions, albeit, as I've said just recently, it takes some time for us to work through the sales cycle. As I've said before, and I will -- if it continues to be the case, there are a number of Miya opportunities in contract discussion phase and I had indicated, we're working with those customers in an environment that is challenging for them in terms of their ability to get the focus on decision-making when they've got frontliner workers, who would normally be involved in these types of procurement, still actively out treating the large number of patients we have in hospital with COVID. But we feel very positive about seeing more of those come to fruition in the second half. We -- as Lynette has alluded to, the opportunity for Miya Flow and Access is a result of a worldwide backlog, same backlog, same focus information we're seeing in Australia as we've seen in the U.K. around being able to efficiently move patients through the hospital, particularly in people here in the U.K. waiting for care and that's urgent -- semi-urgent care. So there's an enormous focus on how you can deploy digital strategy to assist this and we are in an excellent position and well placed to do that. The feedback in response to the acquisition of Silverlink has been very positive, and our customers are increasingly beginning to understand the power and the value that can come from that combined offering. As you, as shareholders, those of you certainly that have been following us for some time, you're aware that the second half is traditionally a stronger half in new sales for us, notwithstanding the fact that we had our largest sale ever in Q2. So we're actually -- we're expecting to see further contract announcements in the second half and to continue to move on the project milestones of those that we've already sold because our revenue in the second half also relies on us being able to deliver on those projects. And all of that is in an environment where the health systems are under strain and patients are looking to be treated more quickly. So we are also on track to deliver a full year underlying positive EBITDA as indicated at the beginning of the year. As always, I would like to thank you for your continued support of Alcidion. We're very confident in our long-term strategy and our ability to execute. Thanks for your attendance, and I'm happy to move on to Q&A.

Thanks, Kate. All right. Well, we do have a couple of questions in the queue. I'll kick off with this one. You've previously stated that you expected to break even in FY '22. Given the H1 EBITDA loss, are you still confident in achieving this?

I think, as I stated, we are still expecting to achieve positive EBITDA -- underlying EBITDA. We've got a strong pipeline. We've got projects that are moving through and -- such as the Commonwealth project and delivering on their milestones. I think we've had some one-off costs related to acquisitions and so forth, which will move out of that and focus on the underlying EBITDA. But yes, all things continuing as planned, we expect to deliver a positive underlying EBITDA.

Okay. We've also had a few questions around share price. In light of the current market conditions, perhaps you could comment on your robustness to that share price.

I'm happy to pick that one up, Kerstin. I suppose, as a Board, our role is really to focus on the delivery of long-term shareholder value over those kind of short-term fluctuations in the share price that are outside of our control. This half, we delivered our largest single contract ever while completing the transformational acquisition of Silverlink, which really sets us up to become a meaningful player in that EPR market globally. And the Board, we're really confident that the value of those contracts and others will certainly play out over the coming months. And yes, we also had continued growth in our revenue half-on-half and expect it continue going forward.

Thanks.

Kerstin, before you ask a question, you might stop -- first stop sharing the screen so we haven't got such a huge, blank screen.

Yes, sure. All right. I had a next question. You mentioned Patient Flow receiving increased interest levels from customers. Could you talk to this and what this means for Miya sales?

So look, I mean I think I probably covered it quite well in the presentation and Lynette also talked about it. In all our markets, there is enormous pressure in relation to backlog. We had elective surgery pretty well stopped for the best part of a year, if not more. There's an enormous number of patients that meant to move efficiently through the system. Miya Precision was initially built -- its first capabilities have been around patient flow, patient access, got proven capability in Australia, New Zealand and the U.K. for this and I'm very much -- we're very much focusing our marketing efforts and our sales efforts on this being a very key entry point for Alcidion Miya Precision.

Next question. Why is the Australian health care industry or Australian hospitals not being as heavily targeted in respect to digitization?

I think I'm not sure if you mean targeted by us in that question. I think someone launched this but whether that question is raised in general -- if you're talking about us, it's on the contrary. We're doing quite a lot of work in Australia. We continue to see this as a key market opportunity. To be clear, the 2 main states, Victoria and New South Wales, have been pretty impacted by COVID. So we have definitely seen an impact on procurement costs in Australia, but I'm confident we'll see further contracts in that market. If you're talking about the Australian market in terms of investment in digitalization, I think we have seen a lot of investment in the last 12 months but have been very focused on COVID vaccine and COVID health care systems, and less so in hospital base systems except for virtual care. So a lot of investment and procurement going into virtual care. I think we're seeing increasing interest now in patient flow. Alcidion's well positioned in both of those areas of virtual care and patient flow. So we look forward to seeing those come to fruition. I can't talk about the speed of that, but I just -- I don't know how quick those procurements will be but there's certainly increasing interest.

Our next question. How does our team demonstrate to hospital clients that discharged patients have lower rates of readmission by better adherence in medication?

Well, firstly, we agree that avoidable readmissions are a significant problem for patients and also that the hospitals are increasing their financial penalty as that occurs. Our product offering with Miya Precision, which is targeting out-of-hospital care, specifically looks at how we can reduce the risk of going from hospital -- from home to hospital, but also we've built in algorithms and capabilities to identify at-risk components of patients and the work we're doing at Alcidion today is absolutely focused on how we can reduce readmissions to hospitals. And adherence to medication is only one of the many triggers that can lead to a readmission from hospital care. And social circumstances impact has generally a large impact as to whether they end up back in hospital.

Great. Thanks, Kate. Next question, I think, is from Elyse Shapiro. Are you still expecting further contracts by the end of March in the U.K. as you previously stated? And what does the pipeline look like compared to a few months ago?

I think I probably answered that as well. I can't tell you whether they're going to be signed this side of March or in early April because, in fact, the financial year ends on the 7th of April, I believe. But we are working on some of those opportunities. There are -- even though there are other opportunities in the U.K. that we'll see potentially in this half but may not be before March. So yes, I am here. We're visiting the people this week, but I can't make any promises on exactly when that will fall. The pipeline remains healthy, continues to grow. I sat in the office today and watched Lynette and the team. They're certainly very busy and very active with a number of opportunities in the pipeline.

Great. Next question from [ Peter Lim ]. Can you provide more detail of the components of the top line revenue growth, i.e., how much of it is due to Silverlink?

May I?

Go for it, Matt.

Okay. Well, Silverlink was in the business 15 days. So the revenue they contributed to the half was only about AUD 350,000.

Great. Another question, actually, can you provide your current ARR for the U.K. market?

The short answer's no. It's not a number we disclose. And also ARR is not a term that we use in the business or stated publicly. Our revenue is not annual recurring revenue, it's recurring revenue. So it might recur annually. It might recur every 2 years or 3 years. So we just have to be careful about that distinction. But yes, we don't disclose the split between the ANZ and U.K. business publicly at the moment.

Next question. Can you provide an update on U.K. customer feedback on Miya Precision? Is there growing interest from prospective customers and feedback from companies who've purchased to our team?

You can take that one, Lynette.

So Miya Precision went live in Dartford first at the end of the half. They -- so they went with Miya Observations or Patientrack, but then there's -- now they are live with Miya Flow. We are doing measurement so that we can support this progression with data. But the reaction from the clinical staff and the operational staff has been extremely positive. It's also generated a lot of interest with the body that was formally known as NHSX, which is now known as NHSEI. We are also watching that with a keen eye and are very supportive of what we've achieved there. And sales teams will go out in the next 6 months with their version of Flow, but they have gone live Observations. We have got a very strong perception in the U.K. market of our ability to deliver on our commitments made to customers. They are both reference sites, they're a very positive reference site, very open to investment side. We will do more published information of how we built the clinics then when we can support that perception, as I said, with true impact data.

Thanks, Lynette. Next question. Given the cash on hand, is this going to be amassed for further acquisitions?

Look, I think we'd like to bear down the very significant acquisition that we've already made. So we're very focused on that at the moment. Look, I'm not saying that we're not going to consider further acquisitions, but it's certainly not a key part of our strategic plan in the short term. We very much got a lot that we want to do to demonstrate the value from the assets through acquisitions that we did in 2021.

Great. This one's for Kate and [ Beck ]. Can you provide an overview of the kind of the company culture that you're trying to foster and build in Alcidion? And how does this support operational performance?

I'm happy to have -- to jump in. And Kate, you can build on this if you wish. And thank you for your questions you asked. Yes, I think given that Alcidion is a high-growth business that while we also need to remain very focused on execution at this point in time, that really reflects the culture that not only are we trying to create but we are really sort of seeing the across the organization, and that is one that has equal part of an entrepreneurial mindset where we need to continue to be at the fore of our industry, but also really mature and focused on delivering for our customers and that really describes what we're really trying to achieve. I think the other thing I would say too is clearly we had a lot of acquisitions over the last couple of years, and there's a real conscious program to make sure that we're really bringing in what could be quite disparate cultures to ensure that we unify those in the way that we think is both beneficial to the business. Kate, I'm sure you have quite a bit to add to that.

No, that's a very good answer. I do agree. We definitely focus on the culture of openness, sharing direct and clear communication so that we can continue to kind of support each other.

Thanks to both of you. Next question. Wages are such a high percentage of sales. Will it continue to grow or will sales income outpace wage increase?

I mean yes, I mean, that's our plan. We were always going to build a base which we could maintain the organic growth of the business. We are still -- we've just come into that phase of kind of leveling out that investment. And as sales continue to grow, you will see that outpace our costs.

Thanks, Kate. In terms of GP margin, how do you think about the second half against the backdrop of the large contracts executed and potentially more retail products?

Want me to take that one, Kate?

You can, although probably not as I would comment necessarily on the contracts that are coming down the pipeline.

Yes. Yes, exactly. Look, the -- based on the contract of revenue right now, we're expecting margin in H2 to be higher than margin in H1, particularly because we'll have 6 months of the Silverlink business in H2, which typically trades at 89% to 91% margin. So on that basis, I'm expecting it to go up. That being said, if we do make new sales into 3 and 4 that have a resale component, then that will put pressure on the GP percentage. So that's just the maths of those deals, and it's still positive incremental margin for us.

Thanks, Matt. Okay. You have -- next question. You've completed what appears to be a very sticky acquisition in Silverlink. Can you comment on what this means in the U.K. market and how it's been received by both clients and potential customers?

Want me to take that, Kate?

Yes, please, Lynette.

So it was very positively received. I expected it to be very positively received, but it was beyond my expectations. It's not just from our existing customers or our potential customers. It's actually from the market as well and it's from, as I said, the central or the NHSEI, whether that's partners or potential partners or people who want to work with us. But also recently, the minimum viable product release that is coming into the public domain, which talks about the expectation of digital maturity. The response plays really well into our acquisition as well. So it's given us more depth to our conversation. It's been able to open doors that weren't necessarily open for us before who may have a legacy file set. We're looking to change that. I think we're definitely aligned, as I've said, with the MVP. So it went very well and yes, a lot better. We had a great pouring of inquiries post the announcement in particular, so hoping to build on that.

Thanks, Lynette. And just one last one. Any kind of comment on the overall U.K. market.

I think I've covered that in what I've got to say. We are uniquely placed to be able to answer a lot of the challenges that are here in the U.K. Kate's over here taking the role of #1 salesperson this week for whole pipe. So we are very encouraged. We haven't lost out due to the -- due to some of the pivoting in terms of priorities. But the pivot has turned in the direction that we wanted it to, which is around patient flow. So we're very encouraged about what's happening here now.

All right. Well, thank you to Kate and [ Beck ] and Matt and Lynette for taking all the questions. That brings us to the conclusion of our Q&A session and to today's update. So it just remains to me to hand back to you, Kate, now for some final remarks.

Thanks, Kerstin, to everyone on the panel. Look, in summary, as I said at the outset, it's been a transformational 6 months for Alcidion. It's a been very exciting time for us. We're very pleased and proud of what we've achieved in this first half and very much looking forward to building on it in the second half. We signed our largest contract, which provides strong validation for what we've been saying we can do. We completed a strategic acquisition, which provides us critical elements to establish the EPR offering. And whilst we've had to address the challenges of COVID, including the speed of procurement and contract negotiations, we had seen assuring and growth to the pipeline in the second half of the year. So we're very confident that we've got a product offering right with a strong balance sheet. The market is looking at what we're doing, and I very much look forward to updating the market and what we believe will be a very positive H2. We will -- notwithstanding all of the things that I said before. As always, thank you to shareholders for your continued support, and we are always, as I said, open to responding to your questions and queries. We have brought Investor Relations in-house with Kerstin, so very much open to responding to any questions that we haven't got to today. I thank you very much for time and interest, and I hope you have a fabulous day. Thank you.