Thank you for your timely and considered post.
I'll lay my reasoning out clearly so others can scrutinise it:
Why did I dismiss my earlier discussion of the 2 claims as a red-herring for the chat?
(a) Claims were made that: (1) ALC has not been growing in the past 12 months and (2) the industry has moved on from modular sales.
(b) It was demonstrated that the claims did not have a basis in fact. (1) The balance sheet showed clear growth across multiple metrics (both good and bad). (2) There was no evidence of the industry “moving on” from modular procurement. Rather, by thinking through the proposition, none of its required indicators were observed and further issues surfaced (such as on-going modular sales).
(c) As the claims did not come from fact, I asked myself: where did they come from?
(d) Correctly or incorrectly, I inferred (from post-December 2021 commentary here and elsewhere e.g. Claude Walker, private correspondence, investor questioning in webcasts and my own doubts), that uncertainty over the Silverlink acquisition was the cause.
(e) In turn, it was appropriate and beneficial to steer the discussion toward a consideration of Silverlink. (It is often referenced but seldom robustly examined.)
What
would not be beneficial is the commencement of a back-and-forth further drawing out my prior discussion. I am trying to get us away from the faulty-logic identified. (When a flawed argument is discerned, I set it aside and move on impartially. We all make mistakes and that’s perfectly fine; we’re among fellow investors here. Indeed, I jumbled the geographical usage of the terms ‘EMR’ and ‘EPR’; I thank you warmly for correcting my error.)
I am further reassured in denouncing my own commentary as a red herring; see it’s already misleading us into quibbling over sales figures*, number of contracts**, true growth vs costs***, how do you define modular?****, and whether my “explanation is nice for people who are not in healthcare stocks or…ops.” (Careful, you never know.)
I am happy to discuss your points (as evidenced below). However, I am cognisant that it will merely become a face-saving back-and-forth whilst distracting the entire chat from the majority’s core concern:
what were the merits and downsides of the Silverlink acquisition? And what influence has it had on our share price? I would welcome a consideration of this rather than my own prolixity.
---
*Where did I get the 87.4m sales over 2 FYs figure?
(a) Pg.3 of the FY22 annual report (AR) colourfully broadcasts annual sales at 57.5m.
(b) Pg.4 of the FY23 AR again loudly broadcasts sales at 29.0.
(c) 57.5 + 29.0 = 86.5m in sales over 2 years.
And where did I get the additional 0.9m?
(d) (ALC’s sloppy communication continues
Elsewhere, FY23 sales have been listed at 29.9m (e.g. see pg. 1 of the FY23 Q4 report), hence 86.5 became 87.4. However, it would have been wiser to go with the AR’s figures; I concede I should have left the 0.9m out.
(e) Also, regarding your follow-up question on the same topic: "
what does the modular strategy have to do with it [recurring revenue and total revenue]?" The modular strategy is a sales strategy (among other functions). Companies derive revenue and recurring revenue from the sales they make...(I'm surprised I have to clarify this.) So the success or failure of our modular strategy will directly affect our revenue. The 86.5m in sales in the past 2 years suggests the strategy has achieved some success especially as KQ advised (at around 15:50 mark of the Q1 webcast) that our aim is to generate about 30m sales annually. (Of course this success needs to be weighed against costs and all-or-nothing conclusions avoided.)
**
How many contracts has ALC signed in the last 24 months?
Excellent question! Again, ALC’s communication can definitely improve! This would be a great figure to provide. (The ARs do go into some detail at least.)
As a starting point, the aforementioned 86.5m in sales suggests they’ve done quite a bit!
The question is difficult to answer as the company is far more guarded about contract details nowadays. Nonetheless, a lazy scroll of the following bears fruit: pg.5 FY22 AR, pg.7 FY23 AR, pg.2 Q4 FY22 report and pg.1 of the Q1 FY24 report.
These reveal:
1. Bolton NHS upgrades
2. East Lancashire upgrades
3. Derby and Burton renewal
4. NT Health upgrades
5. Hereford and Worcestershire upgrades
6. NHS Tayside upgrades
7. Dartford and Graveshire upgrades
8. Te Whatu Ora new contract
9. Q1 FY24 unspecified NHS new contract
10. Western Health Victoria upgrades
11. Alfred Health upgrades
12. Sydney LHD and RPA renewal
13. Southampton NHS new contract (in Q2 2023) and expansion (in Q4)
…and if we add in the ones we were asked to exclude:
14. Wolverhampton NHS PAS renewal
15. Dorset NHS PAS renewal
16. Moorfields hospital PAS renewal
17. Liverpool hospital PAS renewal
18. Leidos (ADF) expansion.
Don't be surprised if I’ve missed some (e.g. the NSW Enterprise Bus extension and Calvary Health come to mind); I didn’t need to look very hard.
**What does ALC’s true growth look like vs costs?
The answer is twice apparent in my last post:
(a) Over 1 year: 17% revenue growth vs 26% staff cost growth = no ‘true’ growth. (I note this is a most coarse application of mathematics but, alas, it is a victim of its progenitor question.)
(b) Over 5 years: 140% revenue growth vs 154% staff cost growth = no ‘true’ growth.
&
(c) “Unfortunately,
profitability has hovered just out of reach for several years as
staff costs slightly outpace revenue growth."
****What does modular mean to me?
(a) A module is a ‘part’ or ‘unit’ within a greater whole. In the context of ALC’s sales, a module is a stand-alone product (e.g. SmartPage, Miya Flow) that can be operate within, or independent from, ALC’s other products such as the flagship Miya Precision platform.
(b) This ‘bit by bit’ strategy means customers don’t need to go ‘all-in’ from the outset. The alleged absence of new customers alongside the growth in recurring revenue indicates that existing clients are making-up the difference (i.e. purchasing more modules over time). The above-list of
18 purchasers further demonstrates this.
(Mercifully I’ll leave it here: a tete-a-tete over the meaning of ‘modular’ and its application to ALC’s sales strategy is the last thing anyone wants to read more of.)
