computer-desk-doctor-48604

On track

EMIS Group 29 September 2022 Update
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EMIS Group

On track

H122 results

Software and comp services

29 September 2022

Price

1,890p

Market cap

£1,197m

Net cash (£m) at end H122

53.6

Shares in issue

63.3

Free float

98%

Code

EMIS

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

0.9

1.2

35.5

Rel (local)

7.6

6.9

43.2

52-week high/low

1,894p

1,136p

Business description

EMIS is a software supplier to the UK healthcare market, with two divisions. EMIS Health supplies integrated care technology to the NHS, including primary, community, acute and social care. EMIS Enterprise is a business-to-business software provider to the healthcare market, including medicines management, partner businesses, patient-facing services and healthcare analytics.

Next events

N/A

N/A

Analyst

Katherine Thompson

+44 (0)203 077 5730

For the purposes of the Takeover Code, Edison Investment Research is deemed to be connected with EMIS Group.
EMIS Group Group is a research client of Edison Investment Research Limited.

EMIS made steady progress in H122, completing two acquisitions within the EMIS Enterprise business and reporting organic growth in group revenue and adjusted operating profit. A proposed interim dividend of 17.6p is payable on 3 November. The company anticipates that the takeover will complete in Q422.

Year end

Revenue (£m)

PBT*
(£m)

Diluted EPS*
(p)

EMIS adj. dil. EPS** (p)

DPS
(p)

P/E
(x)

12/18

149.7

33.4

40.4

45.0

28.4

46.7

12/19

159.5

41.0

53.5

51.1

31.2

35.3

12/20

159.5

43.4

56.4

50.4

32.0

33.5

12/21

168.2

43.5

55.0

55.5

35.2

34.3

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **EMIS adjusted EPS – cash accounts for development costs and excludes exceptional items and amortisation of acquired intangibles.

Organic revenue growth of 3% in H122

EMIS reported revenue of £87.3m in H122, up 5% y-o-y and 3% on an organic basis. Adjusted operating profit of £22.4m was 12% higher y-o-y or 9% higher on an organic basis. The adjusted operating margin increased by 1.7pp to 25.7%. Net cash at the end of H122 was £53.6m, down from £64.0m at the end of FY21. During H122, the company acquired Edenbridge and FourteenFish for a combined net cash payment of £18.4m and together they contributed revenue of £1.64m and adjusted operating profit of £0.64m in H122.

Takeover progress: Expected to complete in Q422

On 17 June 2022, the boards of Bordeaux and EMIS announced that they had reached agreement on the terms of a recommended all-cash offer pursuant to which Bordeaux, an affiliate of Optum UK and a wholly owned subsidiary of UnitedHealth Group, will acquire the entire issued and to be issued ordinary share capital of EMIS for a price of 1,925p per share. All resolutions were approved by the requisite majorities at both the court meeting and the general meeting held on 9 August, with 99.5% voting in favour of the proposal. A notification has been made and accepted under the NS&I Act and the Secretary of State has confirmed that no further action will be taken in relation to the acquisition. Subject to the Scheme receiving the sanction of the Court, the filing of the Court Order with the Registrar of Companies and the satisfaction of or, where applicable, the waiver of the other Conditions, the Scheme is expected to become effective by the end of 2022.

H122 results review

Exhibit 1 summarises H122 results and Exhibit 2 shows divisional performance.

Exhibit 1: Half-yearly results highlights

£m

H122

H121

y-o-y

Revenues

87.3

83.5

4.5%

Gross margin

91.4%

90.3%

1.1%

EBITDA

27.9

25.7

8.5%

EBITDA margin

31.9%

30.8%

1.2%

Normalised EBIT

22.9

20.4

12.1%

EMIS adjusted EBIT

22.4

20.0

12.1%

Reported EBIT

15.3

16.3

(6.5%)

Normalised EBIT margin

26.2%

24.4%

1.8%

EMIS adjusted EBIT margin

25.7%

24.0%

1.7%

Reported EBIT margin

17.5%

19.5%

(2.1%)

Normalised PBT

23.1

20.5

12.3%

Reported PBT

15.4

16.4

(6.1%)

Normalised net income

18.8

16.5

14.2%

Reported net income

12.3

13.1

(6.5%)

Normalised dil. EPS (p)

29.5

26.0

13.8%

EMIS adjusted diluted EPS (p)

28.9

25.3

14.2%

Reported basic EPS (p)

19.4

20.8

(6.7%)

Net cash

53.6

48.0

11.6%

Source: EMIS

Exhibit 2: Divisional performance, H121-H122

£m

H121

H221

H122

y-o-y

h-o-h

Revenues

 

 

 

 

 

EMIS Health

54.3

53.7

51.3

(5.4%)

-4.4%

EMIS Enterprise

29.3

31.0

35.9

22.8%

15.9%

Total

83.5

84.7

87.3

4.5%

3.0%

Adjusted operating profit

 

 

 

 

 

EMIS Health

12.5

13.8

12.5

(0.0%)

(9.8%)

EMIS Enterprise

8.4

10.6

10.7

28.3%

(20.7%)

Central costs

(0.8)

(0.9)

(0.8)

(7.1%)

(4.1%)

Total adjusted operating profit

20.0

23.5

22.4

12.1%

(14.9%)

Reported operating profit

 

 

 

 

 

EMIS Health

10.6

11.5

11.8

11.4%

(7.8%)

EMIS Enterprise

6.6

8.9

8.5

29.6%

(25.9%)

Central costs

(0.8)

(0.9)

(0.8)

(7.1%)

(4.1%)

Exceptional items

0

0

(4.3)

N/A

N/A

Total reported operating profit

16.3

19.5

15.3

(6.5%)

(16.2%)

Adjusted operating margin

 

 

 

 

 

EMIS Health

23.0%

25.8%

24.3%

1.3%

(1.5%)

EMIS Enterprise

28.6%

34.0%

29.9%

1.3%

(4.2%)

Total adjusted operating margin

24.0%

27.8%

25.7%

1.7%

(2.1%)

Reported operating margin

 

 

 

 

 

EMIS Health

19.5%

21.4%

23.0%

3.5%

1.6%

EMIS Enterprise

22.5%

28.6%

23.7%

1.2%

(4.9%)

Total reported operating margin

19.5%

23.0%

17.5%

(2.1%)

(5.5%)

Source: EMIS

EMIS reported H122 revenue growth of 5% y-o-y and recurring revenue growth of 9% y-o-y. The two acquisitions made in H1, Edenbridge and FourteenFish, together contributed revenue of £1.64m, implying organic revenue growth of 3% y-o-y. Adjusted operating profit increased by 12% y-o-y (9% organic) and the margin increased by 1.7pp y-o-y. The company reported exceptional charges totalling £4.3m: £1.8m for the technology transformation programme (the shift to the cloud) and £2.5m relating to the ongoing takeover of the company; this was the main reason for the year-on-year decline in reported operating profit and EPS. The effective tax rate was 19% in the period. EMIS adjusted EPS increased 14% y-o-y.

On a divisional basis:

EMIS Health: H122 revenue declined 5% y-o-y, reflecting a reduction in hardware sales and a planned reduction in lower-margin resale partner activity. Adjusted operating profit was flat year-on-year due to a better-quality revenue mix and cost control and the margin expanded by 1.3pp y-o-y.

EMIS Enterprise: H122 revenue increased 23% y-o-y, or 17% excluding Edenbridge and FourteenFish. Growth was driven mainly by analytics and partners. Adjusted operating profit increased 28% y-o-y (21% organic) with the margin expanding by 1.3pp y-o-y.

The company reported net cash of £53.6m at the end of H122. The main cash flows in H1 included:

operating cash inflow: £28.4m, which is after cash exceptional costs of £1.1m;

M&A: paid £18.4m for the two acquisitions in H1 and paid £2m in contingent consideration for Pinnacle;

capex: capitalised development costs of £2.1m and other capex of £1.3m; and

dividends: £11.1m.

The company has proposed an interim dividend of 17.6p per share (flat y-o-y) payable on 3 November to shareholders as at 7 October.


Exhibit 3: Financial summary

£'000s

2018

2019

2020

2021

Year end 31 December

PROFIT & LOSS

Revenue

 

 

149,710

159,507

159,453

168,226

Cost of Sales

(14,236)

(15,407)

(20,335)

(16,255)

Gross Profit

135,474

144,100

139,118

151,971

EBITDA

 

 

48,919

55,632

53,536

54,707

Operating Profit (before amort. of acq. intang, SBP and except.)

32,991

40,794

43,020

43,246

EMIS adjusted operating profit

 

 

35,890

39,273

39,266

43,533

Amortisation of acquired intangibles

(6,202)

(7,317)

(6,824)

(5,673)

Exceptionals

1,657

(5,360)

1,802

0

Share-based payments

(766)

(1,290)

(1,440)

(1,788)

Operating Profit

27,680

26,827

36,558

35,785

Net Interest

(180)

(498)

(501)

(426)

Profit Before Tax (norm)

 

 

33,426

41,038

43,377

43,547

Profit Before Tax (FRS 3)

 

 

28,115

27,071

36,915

36,086

Tax

(5,355)

(5,022)

(6,794)

(7,010)

Profit After Tax (norm)

26,447

33,697

35,658

35,065

Profit After Tax (FRS3)

22,760

22,049

30,121

29,076

Average Number of Shares Outstanding (m)

63.0

62.9

62.9

63.0

EPS - normalised & diluted (p)

 

 

40.4

53.5

56.4

55.0

EPS - EMIS adjusted & diluted (p)

 

 

45.0

51.1

50.4

55.5

EPS - FRS 3 (p)

 

 

36.1

36.0

48.1

46.2

Dividend (p)

28.4

31.2

32.0

35.2

Gross Margin (%)

90.5%

90.3%

87.2%

90.3%

EBITDA Margin (%)

32.7%

34.9%

33.6%

32.5%

Operating Margin (before GW and except.) (%)

22.0%

25.6%

27.0%

25.7%

BALANCE SHEET

Fixed Assets

 

 

117,920

101,089

105,518

95,584

Intangible Assets

96,807

82,345

85,295

76,535

Tangible Assets

21,000

18,399

19,870

18,694

Other fixed assets

113

345

353

355

Current Assets

 

 

53,107

67,278

87,170

101,359

Stocks

1,264

657

613

530

Debtors

36,223

33,047

29,993

32,057

Cash

15,620

31,099

53,008

64,042

Current Liabilities

 

 

(60,169)

(55,700)

(63,370)

(61,665)

Creditors

(60,169)

(55,060)

(62,380)

(60,762)

Lease liabilities

0

(640)

(990)

(903)

Short term borrowings

0

0

0

0

Long Term Liabilities

 

 

(8,199)

(8,469)

(10,180)

(6,801)

Long term borrowings

0

0

0

0

Lease liabilities

0

(3,294)

(5,891)

(5,013)

Other long-term liabilities

(8,199)

(5,175)

(4,289)

(1,788)

Net Assets

 

 

102,659

104,198

119,138

128,477

CASH FLOW

Operating Cash Flow

 

 

49,873

50,059

64,138

50,059

Net Interest

(214)

(93)

(54)

(64)

Tax

(5,830)

(4,466)

(11,684)

(7,483)

Capex

(12,767)

(13,119)

(9,491)

(6,405)

Acquisitions/disposals

(9,269)

5,152

(953)

(1,990)

Financing

906

(2,369)

1,324

(780)

Dividends

(21,070)

(18,745)

(19,860)

(21,146)

Net Cash Flow

1,629

16,419

23,420

12,191

Opening net debt/(cash)

 

 

(13,991)

(15,620)

(31,099)

(53,008)

Finance leases initiated

0

(940)

(1,511)

(1,157)

Other

0

0

0

0

Closing net debt/(cash)

 

 

(15,620)

(31,099)

(53,008)

(64,042)

Source: EMIS


General disclaimer and copyright

This report has been commissioned by EMIS Group and prepared and issued by Edison, in consideration of a fee payable by EMIS Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by EMIS Group and prepared and issued by Edison, in consideration of a fee payable by EMIS Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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