Alcidion investor call. My name's Justin Lewis from Henslow, and I'm very pleased to introduce Rebecca Wilson, Chair of Alcidion, Kate Quirke, CEO, and Matthew Gepp, CFO. Alcidion has announced this morning, as many of you will have seen, the acquisition of Silverlink, a U.K.-based company that provides patient administration software, and in conjunction with that is undertaking a AUD 55 million capital raise, which is being led by Canaccord and Henslow. That capital raise is structured as a AUD 30 million placement and a AUD 25 million under an entitlement issue at AUD 0.25. I think with that, I will hand over to Kate to give the presentation.
If anyone has any questions, please can you put them into the Q&A function on your screen and we will try and get to them at the end of the presentation. Kate, over to you.
Thanks very much, Justin. I'm going to share my screen and take you through the presentation, so I'll just get, make sure I've got that set up appropriately. Justin, you, can you see that? Because you're the only one I can see to give me a thumbs up.
Yeah, I can see that.
Great. That's fantastic. Thank you very much. I think we've just clicked over to good afternoon. Good afternoon, everyone, and thank you for joining us for this investor call at relatively short notice, but that's really how these things happen. Alcidion this morning announced and is very pleased to announce that we've entered into a share purchase agreement for the acquisition of Silverlink. Silverlink are the owners of the Patient Care System, which is a patient administration system, and it's one of the leading independent PAS providers in the U.K. Some of you may be aware that patient administration systems provide the core administrative data that underpins the healthcare system. Combined with our Miya Precision clinical platform, this acquisition is both strategic and transformational for Alcidion.
It will position Alcidion to leverage the capability of Miya Precision. Combining that with the PCS solution will ultimately deliver a cloud-native modern and modular electronic patient record that will rival the global incumbents that are in this space. We refer to that as EPR when in the U.K. market. In Australia it's often referred to as an EMR, or Electronic Medical Record, so I'll try not to be too you know focused on my three letter acronyms as I go through this. This is an extremely exciting opportunity for Alcidion and one we have actually sought as a result of reviewing the market opportunities that are emerging in the U.K. in particular.
In looking, you know, wider at the opportunities that Alcidion has, given the significant differential of our Miya Precision solution in terms of both the architecture and the technology, but also the design and the manner in which we have created one of the unique clinical platforms available in the market today in Miya Precision. In adding that together with the capabilities of a patient administration system like that which we're acquiring from Silverlink, we believe this acquisition will expand the total addressable market for Alcidion, while firmly cementing our position in the U.K. and Australia as a global, and ultimately as a global digital health provider. The acquisition involves the purchase of Silverlink, which is one of the largest and few remaining specialist patient administration systems servicing the U.K. market.
As I mentioned earlier, a PAS, a patient administration system, is the foundation of a hospital's digital health data. It captures all the information about a patient, who they see, where they are, what doctor they went to, how long they were in hospital, what appointments they had, whether on a waiting list and so forth. It is the basis for most government reporting that is done, certainly in Australia, New Zealand and the U.K.. Silverlink themselves has 12 existing, contracts, long-standing contracts, with NHS trusts. The average contract term remaining on those is three years. Importantly, that position will bring positive earnings for Alcidion.
The Silverlink forecast for FY 2022 is AUD 7.8 million in revenue and AUD 4.8 million of EBITDA contribution, so that acquisition will contribute positively to Alcidion's FY 2022 results. As Justin briefly stated, the price of the acquisition is GBP 30 million, or sterling, which at the exchange rate of 54, as stated in the presentation, is around AUD 55.5 million. That's the initial consideration. There is an earn out attached to the re-signing of contracts that are up for renewal in the next 18 months of a further GBP 3 million spread over potentially the 18 months to two years as they are signed. As I mentioned earlier, it's a very strategic acquisition for Alcidion, and it will transform our offering.
It'll allow us to compete in the electronic patient record opportunities, thereby increasing our total addressable market. It'll also increase our U.K. market share, which offers us further cross-selling opportunities as 11 of the customers that come across from Silverlink are in fact new customers to Alcidion. One of them, Harrogate, is an existing customer for Miya Observations and Assessments, and we have already integrated to the Silverlink solution in that customer site. This means that Alcidion has a presence in 26% of the U.K. NHS trusts in the U.K.
This is at a really important time, or inflection point, when the U.K. government has just announced an injection of GBP 2.1 billion for investment in digital health, a lot of which is gonna be focused on implementing modern EPR solutions into the 63 trusts that do not yet have an EPR. Just confirming that an EPR consists of the clinical capability that we have in Miya Precision, as well as the administrative capability and what is required to actually document and maintain the demographics and the administrative data of what happens in a hospital. A combination of what we do with Miya Precision and the PCS solution allows us to position ourselves in that electronic patient record market.
This comes at a time when Alcidion is continuing to cement our position in the global digital health market, as evidenced by the recent contract signing, which was announced late last week, signing of the contract with the Commonwealth of Australia, our first direct contract with the Commonwealth. This is actually the finalization of the contract that was announced back in April, when we indicated that we were preferred provider to deliver an end-to-end health record for Australian Defence Force personnel. The contract has increased in value to an initial contract value of AUD 23.2 million over six years from the earlier stated amount, so it's up just over AUD 2 million.
It has the potential to be worth approximately AUD 50 million over 15 years if the contract renewals and options for Miya Observations are taken up. So for us, this is continued validation of the opportunity that Alcidion has to move into adjacent markets that are not necessarily directly in the hospital sector, and to do so at scale. In terms of where Alcidion is at this point in the year, you those of us who follow us and attend a number of our quarterly results webcasts will know that we usually give an indication of how we're tracking against revenue for the year. We thought it was prudent at this point in time to update the market as to how we are tracking.
As at the 30th of November, we have contracted AUD 18.7 million to be recognized in this financial year, with a further AUD 2.1 scheduled renewal that will be signed during the year and contribute that AUD 2.1 to the final results. That is where we are at the 30th of November if we sold nothing more during the rest of this financial year, and of course we will. You can add to that an expected further AUD 3 million from recognition of revenue from the Commonwealth of Australia contract that we just announced, and a contribution of just over AUD 4 million from the Silverlink acquisition. That's the position we will be in if we sold nothing more.
We do, of course, have a healthy pipeline that continues to see new Miya Precision opportunities come through that pipeline. We believe that this announcement will help us with some of those in terms of acceleration of it moving through the pipeline, but we also are very confident that this announcement will increase the number of opportunities as well in that pipeline to move through in the coming months and years. In terms of the capital raising, Justin touched on some of it. I'll just give you a little bit more detail. We're going to raise AUD 55 million to cover the cost of the acquisition and associated transaction costs. That'll consist of 220 million new ordinary shares being released at a price of AUD 0.25 per new share.
It consists of a AUD 30 million placement, issuing 120 million fully paid ordinary shares under our existing placement capacity. I can't see my slides. There will also be an underwritten one for 10.5 accelerated non-renounceable entitlement offer to raise an additional AUD 25 million via the issue of approximately 100 million fully paid ordinary shares, and information about that will obviously be released shortly. As I said, the proceeds will be used to fund the acquisition of Silverlink. I'll go now into a little bit more detail, but not through every slide that's in the deck. A lot of the information in the deck is for you to read through at your leisure and understand, but I will touch on some of the highlights.
Just wanted to point out, before I move into the detail, that the acquisition of Silverlink's a very important part of our strategy to capture greater market share in the U.K. and elsewhere. We've been working on the acquisitions for some time. You know, these things do take time, and you can't necessarily always predict the point in the market, shall we say, of where you're actually going to land on an agreed share purchase agreement. For us, probably it's landed at a time when we're near the end of the calendar year, and the market is actually highly volatile in this sector. We recognize that for some shareholders, they may consider that a significant discount.
We believe that this is, in fact, where it needed to be at this point in time. We didn't want to delay the acquisition. It's very important in terms of how we position ourselves for future success. There is a lot happening in the U.K. market as a result of the announcements around additional funding, and we think now is the right time to be tackling that market with this significant opportunity that's ahead of us.
We instead of being focused, you know, at this point in what we have no control over, which is what happens in respect of, the markets, it's very important for us, I think, that we focus on building a very significant value for our long-term shareholders in completing this acquisition and continuing to grow the business and develop the business into a global market player. A little bit, I don't really, at this point, need to touch, I don't think, on what Alcidion does. We are very much a player and an emerging and growing player in the digital health market. We're very focused on supporting the workflow of doctors, nurses, and allied health professionals, all clinicians, in supporting their clinical decision-making process, making their lives easier, improving the efficiency of delivery in the healthcare system.
We have very much focused on our Miya Precision platform being the pink area, and the capabilities or the modules that we build off that. People who have heard me speak before will know that we sell the platform with one, many, or all of the modules and capabilities that are listed here. Down here in the gray, the area, these are the systems that we capture data from. We pull data from many solutions across the healthcare system. The key foundational areas of that are the patient administration system and provider directory, which, post the acquisition, we will now have access to in our own suite of solutions. I think a lot of this detail is just giving you additional detail on what I talked about earlier.
I think one of the things that we are going to do post the acquisition to position ourselves is as a provider of a modern modular electronic patient record provider. Many of you may be familiar with some of the large, what we often refer to as monolithic or all-in-one, electronic patient record providers, where you need to take the whole solution to get the value out of it. We're gonna position ourselves quite differently to that, in that we are going to move this solution to a cloud-native environment, and it's going to be modular in nature so that customers can take parts of the solution, or all of the solution, or they can do it over time.
That is what we're hearing from our customers, that they wanna be able to get value quicker, earlier value out of their investments in digital health by doing it in a staged way. I talked earlier about the total addressable market increasing as a result of this acquisition. This is very much focused initially in the U.K. We believe that the combination of Miya Precision and Silverlink is going to be very attractive to those trusts who have not already gone and purchased one of the incumbent one size fits all type EPR solutions, or there are some EPR solutions as well that perhaps do only components of what is required. Our initial target will be to look at the 63 acute trusts.
There are another 100 plus trusts in the U.K. that are focused on mental health and community health that are also part of our total addressable market. These 63 are our initial focus, and they are the ones that the NHS has said they will invest in to ensure that in the next three-five years, they have an equivalent functionality in, from an EPR perspective. The NHS has noted that they want those investments to be in modern modular type EPRs that open up data and do not lock the data in so that it cannot be used to efficiently and effectively run a healthcare service. Beyond the U.K., we ultimately believe in the next few years, we will start to see some real increasing demand for modern patient administration systems in Australia and New Zealand.
At the moment, we still see most Australian sites running legacy patient administration systems. They don't typically buy from the electronic patient record providers. In terms of their PAS, they tend to run standalone patient administration systems, which at this point are 20-25 years old and certainly not cloud-native in their capacities. Post the acquisition, Alcidion will be positioned as providing a modular EPR built for clinicians. Many of you will know our founder, Malcolm Pradhan, obviously comes from a clinical background and has always been very passionate about ensuring that what we build supports clinicians in the process of delivering care to patients. We have the dark blue areas.
We're acquiring the pink area, and we partner with other providers for the light blue areas to complete our EPR offering. Post the acquisition, our box of boxes, as I often refer to it, will now include these modules underneath in the blue and green area, completing a very strong data play and access to data for Alcidion. I'll let you read through the differentials. I think, you know, really the fundamental message to take away is that what we are proposing, what we'll have post this acquisition, is incredibly well aligned with the stated goals of the U.K. NHSX, which was that they want to positively shape the EPR market in England and help local NHS organizations procure new modern solutions and drive wider innovation in the market.
They want their solutions to be open, mobile, modular, and enable ecosystems, the best of breed type concept to be played out, and that is how Miya Precision is extremely well-placed. Just probably the final slide that I really wanted to cover off before I do a quick summary is how this reflects in our market share. We have presence in around 28 sites, 28 trusts with Patientrack or Smartpage and ExtraMed, the solution we acquired earlier in the year. We add the 12 Silverlink sites, and there's two Miya Precision. So that's the U.K. position. Gives us a presence in 38 trusts of the 145 that are acute.
It also significantly increases our presence in the ICS, and the ICS is the future of the NHS, and it actually gives us another addressable market opportunity because it layers over the top of what is happening in a trust, and it brings several trusts together into a region. Integrated care systems are really looking for the type of offering that Alcidion will have post the acquisition. Briefly, there's a lot of information there on Silverlink. I've touched on most of this. The staff, all the software, everything wholly owned within Silverlink related to the PAS. If you look at their website, they did have a small clinical product called CaptureStroke, which we have not acquired. There will be 11 staff coming across.
The Managing Director and the Chief Technical Officer will also be joining Alcidion. These are the customers that we are welcoming into the Alcidion family post the acquisition, and as I mentioned, one of those is a shared trust. From a financials perspective, it's a very predictable revenue stream. These are forecast revenue numbers from Silverlink, but they're at the end of the third quarter, so we're fairly comfortable with how these numbers are looking. It's gonna contribute very positively to us. It has recurring revenue, 95% of which is recurring revenue, 92% gross margins, highly cash generative, and really able to support and contribute to where Alcidion is going, in terms of our market share and in terms of our financial position.
I think I've touched adequately on the acquisition terms, and they're in the documentation that has been released. We are continuing on with our growth in terms of momentum. We are very happy with where we are at the moment in terms of pipeline development. Obviously, the contract with Leidos for the Commonwealth Department of Health is very significant contribution to that. We have had significant wins during the first half and some very successful deployments. Salford went live, so we did an acquisition back in April. One of their very significant projects was the deployment of a command center with Hitachi into Salford being the first site. That is live, and I'm happy to say they're very pleased with the outcomes.
Finally, this acquisition provides Alcidion with immediate access to new IP and product that is important for our positioning in this market. Combination of the two is a very strong offering into our customer base, increases our total addressable market, gives us access to new trusts from a cross-selling perspective. We certainly look forward to the activity around integrating the solutions together. The first point of which will be to make the Alcidion solution, which is currently usually on-prem, available in the cloud, and then ultimately available as part of the same architecture as Miya Precision. I think I've probably covered enough. I will leave the details up there of the capital raising.
I'm very happy at this point to answer any questions that you may have.
Kate, we've got a few questions. Just to remind everybody, if you've got any questions, please stick it in the Q&A function at the bottom of your screen. The first question we have relates to the timing of the impact of the acquisition. It's a two-part question. When can you deploy the PAS system on the cloud and integrate it into your current system? And secondly, how long do you see the impact of cross-selling Miya into the existing Silverlink sites?
Yeah, good. We can immediately integrate with Silverlink now. It doesn't need to be on the cloud for that to occur. As I said, we're already integrated with it at Harrogate. One of the real advantages of Silverlink PAS is it's one of the few patient administration systems I've come across that openly allows two-way integration. That is, it will send its messages out, but it will actually accept data in. One of the reasons for being attracted to this solution is because of that. We will start integration straightaway. Over the next six months, we will port it to the cloud. We will see those opportunities and we will work on that, you know, fairly quickly, fairly promptly in the new year, post-Christmas.
The impact of cross-selling of Miya into existing sites, I mean, we'll start having those conversations immediately. There are some existing Silverlink sites that we have talked to over time. I'm not saying we've got any, you know, very detailed active engagements on at the moment because it just wasn't appropriate to do that whilst you're, you know, undergoing a potential acquisition process. I'm pretty confident that the sales team will be talking to all those Silverlink customers in the next week or two.
Thanks, Kate. Another one regarding the budget in the U.K. and the recent significant amounts that are being spent on digital health. Does this have a more positive impact for you, and how much of that budget is being allocated to PAS systems?
Yeah, absolutely. There is no doubt that some of that GBP 2.1 billion will be allocated, not to PAS, but to electronic patient records, of which a PAS will be a component. In order to actually be competitive in that market, we would need to have our own patient administration system, or partner with somebody who had a PAS so that we could meet the requirements of those procurements. We know that there is a program called Digital Aspirant Plus that has been announced by the U.K., which is gonna be really focused on some trusts being funded to acquire an electronic patient record, and preferably a modern cloud deployable one.
Thank you. Does the new acquisition provide Alcidion with the opportunity to cross-sell within the 50 hospitals that Silverlink are currently contracted with?
Yes, most definitely. We see the fact that these Silverlink sites are sites that haven't gone down the path of a monolithic or a sort of big one of those big U.S. style EPRs makes them an ideal prospect for Alcidion to talk to about Miya Precision. Yes, that is definitely a cross-sell opportunity that we will be tackling fairly quickly.
Right. Another question about Silverlink is how much does Silverlink spend on R&D? I think someone else asked us how many people work in R&D at Silverlink, and what proportion of what it spends on R&D is expensed versus capitalized?
I'll try and pick all those questions backwards. I don't know the exact. I'm wondering whether Matt has actually got the figure.
Yeah. I do.
as to how much R&D. Okay.
I do. Hi, Kate. Hi, everyone. We have five or six of the 11 of the staff we're buying who are coming along with the acquisition are product developers. Just under about half of the staff base are in R&D. In terms of the capitalization of those costs, the numbers you're looking at in this deck do not have any capitalized product development or R&D in there.
Thanks, Matt.
All right, thank you. Another question is how applicable is the Silverlink technology in the Australian and New Zealand market, and are there opportunities here as well as in the U.K.?
Yeah. As I mentioned, there are definitely opportunities ultimately in Australia and New Zealand. It wouldn't be immediately translatable just to pick up the solution as it is and translate it down here, 'cause there's always some kind of localized government requirements in terms of reporting and so forth. The ability to translate from the U.K. to the Australian and New Zealand market is well documented. Many of the solutions that are running today, IPFM, one of them, an iSOFT product, actually came out of the U.K. originally. I actually bought it. I sold it to many people in this part of the world. I'm very familiar with how easy or difficult it is to translate between the U.K., Australia, and New Zealand.
We don't see that we would be going out tomorrow selling the Silverlink PAS into the ANZ market, but we certainly will be doing work towards positioning that probably in the next 12-18 months.
Thanks. Another question we've got here is what level of integration or development work are you required to create a cloud-enabled modular EPR?
Initially we will be porting that just as it is and in its current environment. We have some components of the beginnings of the resources that are required in Miya Precision. We've obviously got we collect patient data. Over time, in the deck you'll see a number of modules. Over time, we will actually move some of that capability into the Miya architecture, it's microservices in terms of the architecture that we use. We will do that probably in line with the customer commitment to actually rolling out the modular PAS and EPR.
One more question. Has not having the PAS module historically been a headwind for you, and how's that gonna change how you sell Miya going forward?
Yeah. I think in some opportunities, yes. First of all, there are opportunities that have come up in the last 12-18 months in the U.K. in particular, where they're looking for a full. They want all of the functions of an EPR, including the PAS. In that sense, we actually haven't even gone for those opportunities. We haven't even put ourselves forward for some of those where they're being very specific about it. We have had South Tees and Dartford, who are our existing Miya Precision customers, run legacy PAS, and frequently ask us what we're gonna do about PAS, because they're very keen to move to a PAS that is built within the Miya Precision environment, which they're currently live with and using and very happy with.
There's been some headwinds in terms of our ability to bid into some opportunities where it says it's mandatory that you have a PAS. At the same time, we have obviously demonstrated that Miya Precision is a very valuable solution in its own right. I think we will have a number of things that this will do. First of all, it increases the total addressable market in that EPR market, so we can go after more EPR opportunities, which are now being funded and accelerated. The people we're having Miya Precision discussions with at the moment have very positively received our acquisition of Silverlink. That will, you know, support and cement our commitment and our demonstrated commitment to the U.K.
While not totally headwinds, there have certainly been some opportunities that I think would have been. We couldn't go for or could have been accelerated by having the access to it.
Okay. There you go. Just a final question. I guess, looking forward, you've had fairly recently some very successful announcements with the federal government and Leidos. Looking forward to the second half of the year, what can people look forward to in terms of contracts and progress?
Well, obviously, second half of the year is usually our busiest time of year in terms of contract announcements. Although, we keep proving that wrong when I say that because this year we've announced the Commonwealth contract, which is obviously significant in December, and last year South Tees was announced, I think, in November. But by and large, you'll see, you generally see more activity in the second half of the year because Q3, financial Q3 is the last quarter of the budget year for the U.K., and Q4 is the last quarter of the budget year for Australia. You know, we are working on opportunities that are in contract negotiation phase. Others are, you know, getting down to downselect phase.
We look forward to continuing to be able to, you know, translate those pipeline opportunities into contracts and announce them where they are of material value.
Great. Kate, well, I think that exhausts just about all the questions. If there are any more that come up, we'll make sure we get back to people individually. In the meantime, just in terms of capitalizing, as we said at the beginning, we're looking at raising AUD 55 million through a AUD 30 million placement and a AUD 25 million entitlement issue, which will be, portion of it will be accelerated. Whilst the book's covered, there is an opportunity to bid both for placement stock and also for sub-underwriting. If you have any interest, please follow up with your contact at either Canaccord or Henslow, and bid by 5 P.M. today.
In the meantime, thank you very much to Kate and the team.
Thank you very much.
Have a good day.
Just to finalize by saying thank you to our shareholders for your ongoing support. We look forward to continuing to keep you updated on our progress.