Avia Health Informatics Plc : Avia - Interims to Sept 2012

Avia Health Informatics Plc ("Avia" or "the Company") Unaudited Interim Results 27 November 2012

Avia (AIM: AVIA), the developer and provider of clinical decision support systems internationally, announces its unaudited interim results for the six months ended 30 September

2012. Comparative figures relate to the six months ended 30 September 2011 unless otherwise stated.

Financial Highlights

• Revenue of £0.9m (2011: £1.0m)

• Gross profit of £101,000 (2011: £141,000)

• Overheads £579,000 (2011: £626,000)

• Operating loss of £478,000 (2011: £485,000)

• Net cash inflow £37,000 (2011: outflow £281,000)

• Cash position of £137,000 as at 30 September 2012 (30 September 2011: £86,000)

Following the Board changes in August 2012, the group has achieved significant cost reductions in senior and middle management. This, together with other cost savings and consolidation of office locations and functions, has achieved a reduction in expenditure of about £400,000 per annum effective from the middle of the second half of the current financial year.

The Company continues to focus on sales activity and cost control with the aim of achieving significantly reduced losses in the second half of the current financial year and achieving profitability in 2013/14 and beyond.

Enquiries:

Avia Health Informatics Plc	[phone]
Roger Lane-Smith, Non-Executive Chairman Jeremy Dale, Chief Executive
Allenby Capital (Nominated Adviser and Broker)	[phone]
Nick Naylor Mark Connelly

Avia Health Informatics plc Registered in England and Wales Company Number. 06470277

[phone] www.ahi-plc.com

Registered Address:

3 Noble Street, London, EC2V 7EE, United Kingdom

Chairman's Statement

The Company's financial performance in the first 6 months of 2012 was unacceptable. It became clear during the first quarter of the current financial year that the anticipated growth in the Company's business was not materialising and that there was a need for top-level change in direction and senior management. Upon the appointment of Jeremy Dale as Chief Executive and myself as Non-Executive Chairman, there was an immediate need for additional funding and the board implemented a significant cost reduction program and management change to ensure the business remained a going concern. In addition on 4 September 2012, it was announced that we had secured a convertible, interest-free, loan of £350,000 from Advanced Computer Software Group PLC (AIM: ASW) ("ACS").

The Company has now been restructured in order to provide efficiencies and all operational activity has been focussed in Plain Healthcare, under the leadership of Tim Morris, Managing Director of Plain Healthcare and Operations Director of Avia. All staff in the Company are now concentrating on generating sales in the second half of this financial year. The effective use of our customer relationship management system and close monitoring of the sales team has significantly improved the overall visibility of future revenues.

Following several years of investment in product development Plain Healthcare is focused on growth, taking to market products that meet the needs of customers, perform in their sector and that deliver the return on investment expected. Our future performance will be measured on contract wins and an increasing user install base. As we enter 2013 with the establishment of the new CCG structures the business has a strong pipeline of medium term opportunities.

As a result of the changes initiated in August/September, the Company undertook a detailed analysis of its failure to achieve profitability over the last 3 years. As a result, the sales and product development strategies have become more focused on UK sales and measures have been introduced to strengthen the governance of the Company to ensure that the Board has greater transparency and control over expenditure and strategy. The review of the Company's cost base has enabled management and associated changes that will result in savings of about

£400,000 per annum, effective from the middle of the second half of this financial year. This includes a reduction in the previous level of investment in product development, reflecting the

board's strategy to focus activity on generating sales of the current product portfolio. The

reduction in the Company's cost base is in addition to the savings initiated during 2011 that were announced previously.

Financial Report

The consolidated results for the six month period to 30 September 2012 show revenues of

£853,452 (2011: £1,025,479).

The gross profit margin for the period declined moderately from the 13.8% achieved in the first half of the financial year ended 31 March 2011 to 11.8%. Whilst sales decreased due to changes in the provision of out of hours care and delays in the formation of the Clinical Commissioning Groups (CCGs) our costs did not fall proportionately as direct salaries remained largely static from the previous year. Product development costs continue to be capitalised, but only £11,000 was capitalised in the period, some £24,000 less than the same period last year, as more developer time was allocated to product support activities. Accordingly, a higher

Avia Health Informatics plc Registered in England and Wales Company Number. 06470277

[phone] www.ahi-plc.com

Registered Address:

3 Noble Street, London, EC2V 7EE, United Kingdom

proportion of developer salaries were allocated to direct costs, with a consequent negative effect on the gross profit margin.

The loss per share for the period was 7.46p (2011 loss: 7.57p). The cash balance in the group stood at £137,000 at the end of the period (2011: £86,000). Save for the £350,000 interest free convertible loan from ACS, Avia has no borrowings.

Current Trading, Going Concern and Outlook

Resulting from the actions taken in August and September, the Directors anticipate an improved trading performance, although the challenging market conditions in our core UK markets may continue to restrain growth in the near term. Delays in the government health

policy on CCGs have impacted the expected growth in sales of the PathFinderRF product, which

has represented the major investment both in clinical and software development over the previous 12 months. With CCGs currently completing the process of gaining NHS authorisation and budgetary control, we anticipate that we should see the market improving in 2013. Following the recent CCG authorisation process, the Directors are confident that the Company is well-placed to capitalise on new opportunities as they present themselves in the future.

Unaudited Financial Results for the Six Month Period Ended 30 September 2012

The reader is reminded that these are unaudited and, as such, may be subject to material change. Both the audited results for the financial year ended 31 March 2012 and the unaudited results for the first half of the current financial year are prepared on the going concern basis,

which assumes the Group will have sufficient resources to enable it to continue trading for the

foreseeable future. The results for the year ended 31 March 2012 however did contain an

emphasis of matter from Avia's auditors over the Group's ability to continue as a going concern.

Avia Health Informatics plc Registered in England and Wales Company Number. 06470277

[phone] www.ahi-plc.com

Registered Address:

3 Noble Street, London, EC2V 7EE, United Kingdom

Unaudited Financial Results for the six month period ended 30 September 2012 Consolidated Statement of Total Comprehensive Income for the six month period ended 30 September 2012 Unaudited Period ended 30 September 2012 Unaudited Period ended 30 September 2011 Audited Year ended 31 March 2012 £ £ £

Revenue 853,452 1,025,479 2,275,607

Cost of sales (752,861) (884,100) (1,601,775)

Gross Profit 100,591 141,379 673,852

Administrative Expenses (578,512) (626,261) (1,339,709)

Operating Loss (477,921) (484,882) (665,857) Finance Income - - 159 Loss before corporation tax (477,921) (484,882) (665,698) Corporation Tax - - - Loss for the period and total comprehensive income (477,921) (484,882) (665,698) Loss per share expressed in pence per share

Basic and diluted (7.46) (7.57) (10.40)

Avia Health Informatics plc Registered in England and Wales Company Number. 06470277

[phone] www.ahi-plc.com

Registered Address:

3 Noble Street, London, EC2V 7EE, United Kingdom

Consolidated Statement of Financial Position As at 30 September 2012 Unaudited As at 30 September 2012 Unaudited As at 30 September 2011 Audited As at 31 March 2012 Assets Non-Current Assets £ £ £

Intangible Assets 520,218 574,452 568,070

Property, Plant and Equipment 27,485 44,256 39,665

Current Assets

547,703 618,708 607,735

Trade and other receivables 270,484 340,050 425,806

Cash and cash equivalents 136,967 85,654 99,853

	407,451	425,704	525,659
Liabilities
Current Liabilities
Trade and other payables	721,888	463,016	632,138
Deferred Income	250,243	289,636	390,312

Loan 350,000 - -

1,322,131 752,652 1,022,450

Net Current Assets/(Liabilities) (914,680) (326,948) (496,791) Net Assets/(Liabilities) (366,977) 291,760 110,944 Shareholders' Equity

Called Up Share Capital 124,185 124,185 124,185

Share Premium 2,069,837 2,069,837 2,069,837

Reverse Acquisition Reserve (1,795,277) (1,795,277) (1,795,277) Merger Reserve 1,488,489 1,488,489 1,488,489

Retained Earnings (2,254,211) (1,595,474) (1,776,290)

Total Equity (366,977) 291,760 110,944

Avia Health Informatics plc Registered in England and Wales Company Number. 06470277

[phone] www.ahi-plc.com

Registered Address:

3 Noble Street, London, EC2V 7EE, United Kingdom

Consolidated Statement of Cash Flow For the six month period ended 30 September 2012 Unaudited Period ended 30 September 2012 Unaudited Period ended 30 September 2011 Audited Year ended 31 March 2012 Cash Flows from Operating Activities £ £ £

Cash absorbed by operations (301,360) (234,088) (103,831)

Cash flows from investing activities

Purchase of intangible assets (11,256) (35,328) (145,485) Purchase of property, plant and equipment (270) (11,353) (17,413) Interest received - - 159 Net cash absorbed by investing activities (11,526) (46,681) (162,739) Cash flows from financing activities

Loan Received 350,000 - -

Net cash generated from financing activities 350,000 - - Decrease in cash and cash equivalents 37,114 (280,769) (266,570) Cash and cash equivalents at

beginning of period 99,853 366,423 366,423 Cash and cash equivalents at end of period 136,967 85,654 99,853 Note: 1) Reconciliation of loss before income tax to cash generated from operations

Loss before income tax (477,921) (484,882) (665,698) Depreciation Charge 71,558 10,884 138,074

Finance Income - - (159) (406,363) (473,998) (527,783)

Decrease/(Increase) in trade and other

receivables 155,322 302,482 216,726 (Decrease)/Increase in trade, other payables and

deferred income (50,319) (65,572) 207,226

(301,360) (234,088) (103,831)

Avia Health Informatics plc Registered in England and Wales Company Number. 06470277

[phone] www.ahi-plc.com

Registered Address:

3 Noble Street, London, EC2V 7EE, United Kingdom

Notes to Interim Report 1. Interim report

This report was approved by the directors on 26 November 2012.

The information relating to the six month periods to 30 September 2012 and 30 September

2011 is unaudited. The reader's attention is drawn to the text above under the heading beginning "Unaudited Financial Results".

The information relating to the year ended 31 March 2012 is extracted from the audited

Financial Statements of the Company which were published on 18 October 2012.

2. Accounting policies

Basis of accounting

These financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared
under the historical cost convention.

Basis of consolidation and reverse acquisition

On 16 November 2009 following the admission of its shares to trading on AIM, a market operated by the London Stock Exchange, the Company became the legal parent of Plain Healthcare Limited.
The combination has been accounted for as a reverse acquisition as if Plain Healthcare Limited acquired Avia Health Informatics plc. Although these Group financial statements have been issued in the name of the legal parent, the Group's activity is in substance a continuation of that of the legal subsidiary, Plain Healthcare Limited, because after the transaction the former owners of Plain Healthcare Limited gained control of the Group and of the legal parent. The following accounting treatment has been applied in respect of the reverse acquisition:
a) the assets and liabilities of the legal subsidiary are recognised and measured in the Group financial statements at the pre-combination carrying amounts;
b) the retained losses and other equity balances recognised in the Group financial statements to the date of the reverse acquisition reflect the retained loss and other equity balances of Plain
Healthcare Limited immediately before the reverse acquisition, and its results for the period
from 1 April 2009 to the date of the reverse acquisition. However, the equity structure appearing in the Group financial statements reflects the equity structure of the legal parent, including the equity instruments issued under the share for share exchange to effect the business combination on 16 November 2009. The effect of using the equity structure of the legal parent gives rise to the reverse acquisition reserve;
c) comparative amounts presented in the Group financial statements are those reported in the financial statements of the legal subsidiary, Plain Healthcare Limited, for the period ended 31
March 2009; and
d) no goodwill or fair value adjustments are reflected in the consolidated financial statements because the parent company had not traded prior to the acquisition and did not meet the
definition of a business in accordance with IFRS3. A business combination as defined by this

Avia Health Informatics plc Registered in England and Wales Company Number. 06470277

[phone] www.ahi-plc.com

Registered Address:

3 Noble Street, London, EC2V 7EE, United Kingdom

standard was not therefore considered to have taken place. All differences arising on consolidation are hence taken to the reverse acquisition reserve.

Revenue recognition

The Group sells rights to use its software products under an inclusive licence and maintenance agreement. The fee received from the customer entitles the user to use the software for a limited period of time (typically one year) together with office hours software support and maintenance and ongoing updates to the technical content of the software and any upgrades made to the software functionality. An additional fee is rendered to those customers requiring out of office hours support services.
The Group estimates the value of software sales attributable to ongoing support and upgrades by calculating the direct costs of providing these services and adding a reasonable profit margin of 25 per cent. This proportion of the fee received from the customer is recognised on a straight line basis over the period covered by the invoice to the customer with appropriate amounts being recognised as deferred income. The balance of the fee received is recognised immediately in income. Fees generated for separate out of hours support contracts are recognised on a straight line basis over the period covered by the amounts invoiced to the customer.

Intangible assets - Research and development

The Group has incurred substantial sums in developing and upgrading the Group's products in the period since incorporation and over the period covered by this financial information. One of the criteria for the recognition of development expenditure as an asset is that is must be possible to measure development costs reliably.
In common with many companies of a similar size and which have previously applied UK Generally Accepted Accounting Practice, all development costs incurred up to 31 December
2008 were charged as an expense against profit because the Group had not maintained records which would enable it to retrospectively measure, on a reliable basis, those costs relating to development expenditure, which might otherwise have met the criteria for recognition as an
intangible asset in accordance with International Accounting Standard 18.
Since 1 January 2009 the Group has maintained records which identify costs attributable to individual development projects. Costs are capitalised as intangible assets when they meet the criteria specified below.
Development activities involve a plan or design for the production of new or substantially improved computer software. Development expenditure is capitalised only if development costs can be measured reliably, the software programme is technically and commercially feasible, future economic benefits are probable and the Group intends to have sufficient resources to complete the development and to use, lease or sell the asset. The expenditure capitalised includes only the cost of gross direct labour costs that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in profit or loss as incurred.
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, or internally generated goodwill and brands, is recognised in profit or loss as incurred.

Avia Health Informatics plc Registered in England and Wales Company Number. 06470277

[phone] www.ahi-plc.com

Registered Address:

3 Noble Street, London, EC2V 7EE, United Kingdom

Expenditure on research activities is recognised as an expense in the period in which it is incurred.
Expenditure is accounted for over the period it is anticipated that revenues will be generated from the products produced. This is estimated to be five years from the date the product is complete and available for sale.

Impairment

At each balance sheet date, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered any impairment loss. If any such indications exist, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where the asset does not generate cash
flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre- tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash- generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment is recognised in equity.

Taxation

The tax expense as a charge or credit to profit or loss represents the sum of the tax currently payable and deferred tax. Tax is recognised to the extent that it relates to items recognised directly in equity, in which case it is recognised in the statement of comprehensive income.
Current tax is based on taxable profit for the period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such

Avia Health Informatics plc Registered in England and Wales Company Number. 06470277

[phone] www.ahi-plc.com

Registered Address:

3 Noble Street, London, EC2V 7EE, United Kingdom

assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it related to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

3. Earnings per share

The earnings per share for the six months ended 30 September 2012 have been calculated based on the profit on ordinary activities after taxation by the weighted average number of shares in issue during the period. As there are no dilutive factors, earnings per share is equivalent to the basis loss per share.

4. Segmental Information

A segment is a distinguishable component of the Group that is engaged in providing services in a particular economic environment which have different potentials for future development. The Group operates in only one segment and though there is export revenue this is all within Europe and the Company classifies its operations as a single segment.

5. Statement of Compliance

The financial information set out above does not constitute the Company's statutory report and accounts for the year ended 31 March 2012. Statutory Accounts for 2012 have been delivered to the registrar of companies. The auditor's report in respect of the 2012 accounts was unqualified and did not contain a statement under section 489(2) or 498(3) of the Companies Act 2006. It did, however, indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern, which the auditor drew attention by way of an emphasis of matter.

Avia Health Informatics plc Registered in England and Wales Company Number. 06470277

[phone] www.ahi-plc.com

Registered Address:

3 Noble Street, London, EC2V 7EE, United Kingdom