Preparing for the next stage of growth

EMIS Group 4 September 2018 Update
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EMIS Group

Preparing for the next stage of growth

H118 results

Software & comp services

4 September 2018

Price

983p

Market cap

£622m

Net cash (£m) at end H118

32.3

Shares in issue

63.3m

Free float

98%

Code

EMIS

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

8.0

5.0

7.9

Rel (local)

9.8

7.5

6.3

52-week high/low

1017p

705p

Business description

EMIS is a clinical software supplier to the primary, community and acute care markets in the UK, as well as providing software to the community pharmacy and specialist ophthalmology markets. Its Patient business provides medical and well-being information as well as transactional services to patients.

Next events

FY18 trading update

January 2019

Analysts

Katherine Thompson

+44 (0)20 3077 5730

Dan Ridsdale

+44 (0)20 3077 5729

EMIS Group is a research client of Edison Investment Research Limited

EMIS saw revenue growth from all divisions in H1, which helped to offset the additional costs incurred to strengthen service delivery. The company has worked hard to resolve customer support issues in primary care and is now focused on the IT Futures procurement bid in England. Investment in Patient is ongoing and the company expects to unveil its longer-term growth strategy at its capital markets day on 29 November. We have upgraded our revenue forecasts for FY18-20, but our adjusted operating profit and EPS forecasts are substantially unchanged.

Year end

Revenue (£m)

PBT*
(£m)

Dil EPS*
(p)

EMIS adj. dil. EPS** (p)

DPS
(p)

P/E
(x)

12/17

160.4

35.2

43.1

47.0

25.8

22.8

12/18e

170.4

36.9

45.2

46.7

28.4

21.8

12/19e

176.3

39.8

48.7

48.4

29.8

20.2

12/20e

183.6

43.0

53.2

53.3

31.4

18.5

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.

Improving service delivery; preparing for growth

EMIS reported y-o-y revenue growth of 6.8% in H118, with growth from every division. Recurring revenues increased 4% y-o-y. Adjusted operating profit increased marginally over the period – investments in the Patient business combined with the increased headcount in Primary, Community and Acute Care to deal with customer support issues offset the upside from revenue growth in Community Pharmacy and Specialist and Care. EMIS noted that if the investment in Patient is excluded, adjusted operating profit increased 8% y-o-y. Net cash grew to £32.3m at the end of H118 from £14.0m at the end of FY17. The company announced an interim dividend of 14.2p (+10% y-o-y), ahead of our forecast.

Earnings forecasts substantially unchanged

We have increased our revenue forecasts to reflect the stronger than expected performance in H1: FY18e +2.8%, FY19e +2.7% and FY20e +2.9%. At the same time, we have raised our operating cost assumptions to reflect the increased investment in service delivery and the transition to IFRS16 in FY19. This results in minimal changes to adjusted operating profit and EMIS adjusted EPS. We have raised our dividend forecasts for all three years.

Valuation: IT Futures and growth strategy key to upside

EMIS is trading on 21.8x FY18e EPS and 20.2 FY19e EPS, at a 25% and 20% discount respectively to its peer group median. Although EMIS is more profitable than its peers, it lags in terms of revenue and earnings growth. Evidence of an acceleration of earnings growth will be key to share price upside – in the shorter term, this could include positive news on the English primary care procurement, and in the longer term, evidence that the investment in Patient is paying off as well as more information on the growth strategy. Strong cash generation underpins the 3% dividend yield.

Review of H118 results

Exhibit 1: EMIS half-year results

£m

H118

H117

% y-o-y

Revenues

84.5

79.2

6.8%

Gross margin (%)

90.4%

90.1%

0.3%

EBITDA

24.7

23.5

5.1%

EBITDA margin (%)

29.2%

29.7%

(0.5%)

Normalised EBIT

16.4

16.7

(2.2%)

EMIS adjusted EBIT

17.6

17.5

0.6%

Reported EBIT

12.9

10.5

23.3%

Normalised EBIT margin (%)

19.4%

21.1%

(1.8%)

EMIS adjusted EBIT margin (%)

20.8%

22.1%

(1.3%)

Reported EBIT margin (%)

15.3%

13.2%

2.0%

Net interest income

(0.2)

(0.2)

2.7%

Normalised PBT

16.5

16.9

(2.4%)

Reported PBT

13.1

10.7

22.5%

Tax

(2.4)

(2.1)

18.5%

Normalised net income after Minority Interests

12.7

13.2

(3.4%)

Reported net income after Minority Interests

10.1

8.2

23.1%

Normalised diluted EPS (p)

20.2

20.9

(3.5%)

EMIS adjusted diluted EPS (p)

22.1

22.1

0.0%

Reported basic EPS (p)

16.1

13.1

22.9%

Net cash

32.3

10.5

208.2%

Source: EMIS, Edison Investment Research

Exhibit 2: EMIS divisional half-yearly results

£m

H118

H117

% y-o-y

Revenues

Primary, Community and Acute Care (PCA)

60.60

58.48

3.6%

Community Pharmacy (CP)

12.32

10.85

13.5%

Specialist and Care (S&C)

10.12

8.41

20.4%

Patient

1.50

1.45

3.9%

Total

84.55

79.19

6.8%

Adjusted operating profit

 

 

 

Primary, Community and Acute Care

16.10

16.11

(0.0%)

Community Pharmacy

3.52

2.58

36.4%

Specialist and Care

0.38

(0.06)

N/A

Patient

(1.67)

(0.33)

409.8%

Central costs

(0.71)

(0.79)

(10.2%)

Total adjusted operating profit

17.62

17.51

0.6%

Reported operating profit

 

 

 

Primary, Community and Acute Care

11.36

9.76

16.3%

Community Pharmacy

2.92

2.21

32.3%

Specialist and Care

0.05

(0.39)

N/A

Patient

(0.71)

(0.33)

116.5%

Central costs

(0.71)

(0.79)

(10.2%)

Total reported operating profit

12.91

10.47

23.3%

Adjusted operating margin (%)

 

 

 

Primary, Community and Acute Care

26.6%

27.5%

(1.0%)

Community Pharmacy

28.5%

23.8%

4.8%

Specialist and Care

3.7%

(0.7%)

4.4%

Patient

(111.1%)

(22.6%)

(88.4%)

Total adjusted operating margin (%)

20.8%

22.%1

(1.3%)

Source: EMIS

EMIS reported y-o-y revenue growth of 6.8%, with growth from every division. Recurring revenues increased 4% y-o-y. Adjusted operating profit increased marginally over the period – investments in the Patient business combined with the increased headcount in PC&A to deal with customer support issues offset the upside from revenue growth in CP and S&C. The company noted that if the investment in Patient is excluded, adjusted operating profit increased 8% y-o-y.

The company incurred an effective tax rate of 19.1% in H118, resulting in flat EMIS adjusted diluted EPS on a year-on-year basis. The company ended H118 with net cash of £32.3m, up from £10.5m a year ago and £14.0m at the end of FY17. We note that the company has not yet finalised the amount it owes to NHS Digital (provided for last year as an £11.2m exceptional item). The company expects the amount to be covered by the charge already taken – we believe this is likely to be paid out in H218.

The company announced a 10% y-o-y increase in the interim dividend to 14.2p, ahead of our 13.4p forecast.

Business update

Update on short-term priorities

When we wrote after FY17 results, we highlighted that the company had three short-term priorities.

Resolve the primary care support issue

The shift from GPSoC to IT Futures

Upgrade EMIS Web

The company believes it has made good progress in resolving the customer support issue in Primary Care. Support and development headcount was increased to deal with the backlog of software issues and to make sure that on an ongoing basis, EMIS can continue to meet NHS Digital service level agreements, which it has done since 1 July. The company noted that as well as bringing Primary Care service levels up to the required level, it has also worked on completing outstanding commercial agreements in Community and Acute Care. It has invested in the leadership team for the wider group, with a focus on service delivery, with the current team of 46 including 18 new hires.

In late March, NHS Digital confirmed that the GPSoC framework would be extended until the end of 2019, to give it more time to develop the new IT Futures framework. EMIS has just received the first set of information from NHS Digital regarding requirements, and expects two more releases of information over the next few months. The company can have a dialogue with NHS Digital up until the end of this year. From the start of next year, the formal bid process begins, with each prospective technology supplier submitting their proposals to NHS Digital The company expects that the new framework will be agreed by next summer.

Alongside this, the company is looking to upgrade EMIS Web. This is somewhat of a chicken-and-egg scenario – the company will need to be sure that it can support all of the requirements of the new framework, but does not want to fix its technology roadmap before the full scope of requirements, and confirmation that it has been successful in being selected to go on the framework, have been received. It is currently talking to user groups in primary and community care to create a user-defined roadmap for the upgrades and is starting to develop an understanding of the requirements of IT Futures. Unlike the introduction of EMIS Web, upgrades are likely to be put through on a modular basis, and will not require EMIS staff on GP premises to effect the upgrades.

Long-term growth plan nearing completion

The company has indicated for several months that it is defining its long-term growth strategy and is working on its five-year product roadmap. It plans to unveil this at its capital markets day on 29 November. We assume that by then, the company will have a clearer picture of the requirements and opportunities thrown up by IT Futures.

Primary, Community and Acute Care: Investing in service delivery

PCA grew revenues 3.6% y-o-y while maintaining flat adjusted operating profit. Upside from the one-off Australian licence sale in Acute was offset by the costs of extra headcount brought in to improve the Primary Care support function.

In Primary Care, market share in the UK was maintained at 56%. This business continues to participate in the Scotland bid for primary care, where it currently has 54% market share and generates revenues of c £2.5m pa. Management noted that it has finite resources and depending on the requirements for both the new Scottish framework and IT Futures, it may have to make decision on whether it can continue to be involved in Scotland. The division’s Egton business is seeing growth in several areas: CCG (Clinical Commissioning Group)-funded NHS Wi-Fi, paper records digitisation services and automated arrivals kiosks.

Community Care won several new contracts, increasing market share by 1% to 18%. A new Windows-based mobile app was released in beta for “clinicians on the go”.

The Acute business increased its market share of the hospital pharmacy business by 3% to 32% (maintained No 2 position) and maintained its No 2 position and 19% market share in A&E. Despite its announced withdrawal from the Australian market, it signed a licence for legacy software in the Northern Territory in Australia and agreed a support and maintenance contract until the customer has switched to a new software provider.

Community Pharmacy: Revenue and profit growth

CP saw strong revenue growth of 13.5% y-o-y and adjusted operating profit growth of 36.4%.The business maintained its market share at 37%. The roll-out of ProScript Connect across the direct estate continued (2,277 customers now upgraded; 69% of direct estate) as well as across the Celesio independent estate (880 sites upgraded; 44% of estate). While the shift to ProScript Connect in itself does not increase revenues, the new software provides opportunities for EMIS to sell add-on modules and hardware.

Celesio has decided not to roll ProScript Connect out to its Lloyds Pharmacies estate – we had expected this to take EMIS’s market share up to nearly 50%. EMIS believes that this process may be restarted at some point in the future.

Specialist and Care: Back on track

New Care screening programmes that started in H117 contributed to the strong y-o-y revenue growth of 20.4% for S&C. The division was profitable at the adjusted operating profit level, increasing from a margin of 2.0% in H217 to 3.7% in H118.

Patient: Early days

The Patient business is still in investment mode. The business released a new version of Patient Access during H118 which is now being used by 2.2m patients. Management presented some usage statistics for Access, showing that in H118 monthly users increased 34% y-o-y, log-ins increased 21%, medical record views 49%, appointments booked 14% and repeat prescriptions 27%. As the company views Patient Access as the gateway to NHS services and third-party healthcare offerings, this bodes well for the development of the Patient business in the longer term.

The Patient.info part of the business saw average page views per month increase from 25m in H217 to 26m in H118, after the upgrade of the website in H217. Since the end of H118, a change in Google algorithms has reduced traffic to the site and this is likely to have a negative impact on advertising revenues in H218. We note that Patient.info has been affected by Google search algorithms changing in the past; in our view this is an ongoing cost of doing business when the majority of traffic is generated via Google.

Outlook and changes to forecasts

The company traded in line with expectations in H118 and management anticipates that it will meet the board’s expectations for the full year. We have made the following changes to our forecasts:

Revenues: we have reflected the one-off licence sale in Acute, and increased our forecasts for Specialist and Care, based on H1 performance. We have increased our Community Pharmacy forecast for FY18, reflecting the strong performance in H118, but we have removed any revenues from Lloyds pharmacies until the ProScript Connect roll-out is resumed.

Adjusted operating profit: we make minimal changes in FY18, assuming that increased headcount for support and development counteracts the increase in revenues. For FY19 and FY20, we have reflected the shift to IFRS 16, removing c £1.75m of operating lease expenditure and adding in £1.45m of depreciation and £0.3m in interest charges.

Dividend: we have increased this in FY18-20 to reflect the higher than expected interim dividend.

Net cash: we have added £8m to debt in FY19 reflecting the capitalisation of operating leases. We have also reflected the changes in HMRC deadlines for paying corporation tax. As a very large corporation (taxable profits of at least £20m per annum), EMIS currently pays tax for a given fiscal year in months seven and 10 of the current year and months one and four of the following year. For fiscal years starting on or after 1 April 2019 (ie FY20 for EMIS), this will shift to months 3, 6, 9 and 12 in the current year. Consequently. EMIS will end up paying 18 months of tax in FY20 before reverting to 12 months in FY21.

Exhibit 3: Changes to forecasts

£'000s

FY18e

FY18e

Change

y-o-y

FY19e

FY19e

Change

y-o-y

FY20e

FY20e

Change

y-o-y

Old

New

Old

New

Old

New

Revenues

165,748

170,420

2.8%

6.3%

171,567

176,280

2.7%

3.4%

178,455

183,644

2.9%

4.2%

Normalised operating profit

36,200

36,360

0.4%

4.2%

39,230

39,429

0.5%

8.4%

42,263

42,630

0.9%

8.1%

Reported operating profit

28,482

28,642

0.6%

169.2%

31,512

31,711

0.6%

10.7%

34,784

35,151

1.1%

10.8%

EMIS adjusted operating profit

37,156

37,336

0.5%

-0.2%

39,028

39,257

0.6%

5.1%

42,304

42,689

0.9%

8.7%

Normalised EPS (p)

45.0

45.2

0.5%

4.9%

48.7

48.7

-0.1%

7.7%

53.1

53.2

0.3%

9.4%

Reported EPS (p)

35.3

35.9

1.8%

180.7%

39.0

39.0

-0.1%

8.6%

43.6

43.8

0.4%

12.2%

EMIS adjusted EPS (p)

46.5

46.7

0.5%

-0.7%

48.4

48.4

0.0%

3.6%

53.2

53.3

0.3%

10.2%

Net cash/(debt)

17,682

17,796

0.6%

27.2%

32,072

24,693

-23.0%

38.8%

49,049

37,838

-22.9%

53.2%

Source: Edison Investment Research

Valuation

The EMIS share price has now recovered to the level it was at before the NHS Digital support issue was announced. However it continues to trade at a discount to peers on a P/E and EV/EBITDA basis for FY18e and FY19e. In terms of profitability, EMIS performs at the top end of the range; however, limited revenue growth means that its earnings growth lags its peers. With the Primary Care business support issues seemingly resolved, this removes one obstacle to share price recovery. Uncertainty over the outcome of IT Futures as well as the wait to hear the company’s long-term strategy are likely to weigh on the share price in the short term. A credible plan to drive growth above the low-to-mid single digits currently forecast is likely to be the first trigger for share price upside.

Exhibit 4: Peer group valuation multiples

 

EV/sales (x)

P/E (x)

EV/EBIT (x)

EV/EBITDA (x)

Dividend yield (%)

2017

2018e

2019e

2017

2018e

2019e

2017

2018e

2019e

2017

2018e

2019e

2017

2018e

2019e

EMIS

3.9

3.7

3.6

22.8

21.8

20.2

18.2

17.4

16.1

12.9

12.5

11.7

2.6%

2.9%

3.0%

EMIS (cash R&D)

3.9

3.7

3.6

20.9

21.0

20.3

17.0

17.0

16.2

 

AllScripts

2.5

2.1

2.0

23.6

19.2

16.9

17.1

16.3

14.7

12.2

10.8

9.9

0.0%

0.0%

0.0%

athenahealth

5.1

4.7

4.2

62.1

35.8

31.7

35.9

27.3

23.9

20.7

17.2

15.1

0.0%

0.0%

0.0%

Cegedim

1.5

1.4

1.4

35.0

16.4

13.2

18.1

16.9

14.5

8.7

8.2

7.5

0.0%

0.4%

1.9%

Cerner

4.1

3.9

3.6

27.4

26.0

23.4

18.2

19.3

16.9

12.7

13.1

11.8

0.0%

0.0%

0.0%

Craneware

11.0

9.5

8.3

54.3

46.5

39.9

37.7

31.6

26.9

34.7

29.6

25.5

1.0%

1.1%

1.1%

CompuGroup

5.1

4.2

4.2

60.4

23.0

22.4

33.4

20.4

20.2

23.1

16.4

16.2

0.0%

0.8%

0.8%

Nexus

3.4

3.0

2.8

42.3

32.8

27.3

30.0

23.2

19.5

16.9

14.8

13.0

0.6%

0.6%

0.6%

Quality Systems

2.8

2.7

2.6

32.7

32.4

28.6

23.9

18.8

17.9

15.8

0.0%

0.0%

0.0%

 

 

Average

4.4

3.9

3.6

42.2

29.0

25.4

26.8

22.1

19.5

18.5

16.0

14.4

0.2%

0.4%

0.6%

Median

3.7

3.4

3.2

38.6

29.2

25.3

27.0

20.4

19.5

17.8

15.6

14.0

0.0%

0.2%

0.3%

EMIS vs peer median (%)

(25)

(20)

(22)

(18)

Source: Edison Investment Research, Bloomberg (as at 3 September)

Exhibit 5: Peer group financial metrics

 

 

Market

EBIT margin (%)

EBITDA margin (%)

Rev growth (%)

EPS growth (%)

Y/E

cap (m)

2017

2018e

2019e

2017

2018e

2019e

2017

2018e

2019e

2017

2018e

2019e

EMIS

31-Dec

£622

21.8%

21.3%

22.4%

30.7%

29.8%

30.7%

1.0%

6.3%

3.4%

(12.9)%

4.9%

7.7%

EMIS (cash R&D)

23.3%

21.9%

22.3%

(4.4)%

(0.7)%

10.2%

 

 

AllScripts

31-Dec

$2,551

14.7%

12.8%

13.6%

20.7%

19.5%

20.2%

16.5%

20.2%

4.9%

12.7%

22.7%

13.9%

athenahealth

31-Dec

$6,233

14.3%

17.0%

17.7%

24.8%

27.1%

28.1%

12.7%

10.5%

9.9%

30.5%

73.5%

12.7%

Cegedim

31-Dec

€ 441

8.2%

8.5%

9.5%

16.9%

17.6%

18.3%

6.5%

2.7%

4.2%

(160)%

113.9%

24.2%

Cerner

31-Dec

$21,421

22.4%

20.1%

21.2%

32.0%

29.7%

30.3%

7.2%

5.2%

8.3%

3.5%

5.1%

11.3%

Craneware

30-Jun

£611

29.1%

30.0%

30.7%

31.7%

32.0%

32.4%

16.0%

16.0%

14.6%

10.7%

16.7%

16.5%

CompuGroup

31-Dec

€ 2,666

15.3%

20.4%

21.1%

22.1%

25.3%

26.2%

4.0%

22.9%

(2.3)%

(12.6)%

162%

2.5%

Nexus

31-Dec

€ 413

11.2%

13.0%

14.3%

19.9%

20.4%

21.4%

11.2%

11.3%

8.3%

17.9%

29.0%

20.0%

Quality Systems

31-Mar

$1,470

11.6%

11.6%

12.4%

14.8%

15.3%

16.3%

4.2%

2.1%

5.7%

(14.6)%

1.0%

13.2%

 

 

Average

15.9%

16.7%

17.6%

22.9%

23.4%

24.2%

9.8%

11.3%

6.7%

6.9%

44.4%

12.9%

Median

 

 

14.5%

15.0%

16.0%

21.4%

22.9%

23.8%

9.2%

10.9%

7.0%

7.1%

25.9%

13.5%

Source: Edison Investment Research, Bloomberg (as at 3 September)

Exhibit 6: Financial summary

£'000s

2014

2015

2016

2017

2018e

2019e

2020e

Year end 31 December

PROFIT & LOSS

Revenue

 

 

137,639

155,898

158,712

160,354

170,420

176,280

183,644

Cost of Sales

(12,782)

(12,955)

(14,151)

(14,674)

(15,934)

(16,870)

(17,832)

Gross Profit

124,857

142,943

144,561

145,680

154,486

159,410

165,812

EBITDA

 

 

47,645

51,964

52,288

49,222

50,722

54,181

57,718

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

34,787

37,123

38,897

34,895

36,360

39,429

42,630

EMIS adjusted operating profit

 

 

32,639

36,553

38,753

37,406

37,336

39,257

42,689

Amortisation of acquired intangibles

(6,269)

(6,509)

(6,639)

(6,717)

(6,718)

(6,718)

(6,479)

Exceptionals

873

(18,500)

(6,714)

(16,988)

0

0

0

Share-based payments

(270)

(684)

(473)

(550)

(1,000)

(1,000)

(1,000)

Operating Profit

29,121

11,430

25,071

10,640

28,642

31,711

35,151

Net Interest

(543)

(449)

(237)

(299)

(50)

(300)

(300)

Profit Before Tax (norm)

 

 

34,206

36,625

39,159

35,192

36,946

39,765

42,966

Profit Before Tax (FRS 3)

 

 

28,540

10,932

25,333

10,937

29,228

32,047

35,487

Tax

(5,719)

(5,558)

(5,208)

(2,074)

(5,583)

(6,409)

(6,742)

Profit After Tax (norm)

27,617

29,801

32,175

27,989

29,557

31,812

34,802

Profit After Tax (FRS3)

22,821

5,374

20,125

8,863

23,645

25,638

28,744

Average Number of Shares Outstanding (m)

62.8

62.7

62.8

62.9

63.0

63.0

63.0

EPS - normalised & diluted (p)

 

 

42.8

46.0

49.4

43.1

45.2

48.7

53.2

EPS - EMIS adjusted & diluted (p)

 

 

39.4

45.1

49.2

47.0

46.7

48.4

53.3

EPS - FRS 3 (p)

 

 

35.3

7.2

30.4

12.8

35.9

39.0

43.8

Dividend (p)

18.4

21.2

23.4

25.8

28.4

29.8

31.4

Gross Margin (%)

90.7%

91.7%

91.1%

90.8%

90.7%

90.4%

90.3%

EBITDA Margin (%)

34.6%

33.3%

32.9%

30.7%

29.8%

30.7%

31.4%

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

25.3%

23.8%

24.5%

21.8%

21.3%

22.4%

23.2%

BALANCE SHEET

Fixed Assets

 

 

166,415

143,546

133,292

122,979

114,899

113,429

104,862

Intangible Assets

139,397

121,383

110,953

100,844

91,764

83,844

75,927

Tangible Assets

24,313

22,032

22,187

22,037

23,037

29,487

28,837

Other fixed assets

2,705

131

152

98

98

98

98

Current Assets

 

 

37,221

39,800

46,088

56,900

61,917

78,275

91,257

Stocks

1,550

1,206

1,815

1,633

1,633

1,633

1,633

Debtors

28,732

33,893

39,970

40,148

42,488

43,949

45,785

Cash

6,939

4,701

4,303

13,991

17,796

32,693

43,838

Current Liabilities

 

 

(67,665)

(63,819)

(56,158)

(65,131)

(57,329)

(61,300)

(63,778)

Creditors

(54,763)

(51,960)

(51,425)

(65,131)

(57,329)

(59,300)

(61,778)

Short term borrowings

(12,902)

(11,859)

(4,733)

0

0

(2,000)

(2,000)

Long Term Liabilities

 

 

(21,063)

(12,481)

(9,080)

(6,734)

(6,827)

(13,109)

(7,133)

Long term borrowings

(5,854)

(1,951)

0

0

0

(6,000)

(4,000)

Other long term liabilities

(15,209)

(10,530)

(9,080)

(6,734)

(6,827)

(7,109)

(3,133)

Net Assets

 

 

114,908

107,046

114,142

108,014

112,659

117,294

125,208

CASH FLOW

Operating Cash Flow

 

 

44,856

42,711

43,657

48,834

40,580

54,691

58,359

Net Interest

(445)

(422)

(324)

(356)

50

(200)

(200)

Tax

(5,247)

(6,896)

(7,655)

(8,139)

(6,168)

(7,671)

(12,140)

Capex

(15,161)

(14,058)

(12,084)

(11,342)

(13,000)

(13,000)

(13,000)

Acquisitions/disposals

(9,959)

(4,587)

(1,790)

329

0

0

0

Financing

(1,578)

492

881

571

(500)

(500)

(500)

Dividends

(10,792)

(14,532)

(14,006)

(15,476)

(17,157)

(18,424)

(19,373)

Net Cash Flow

1,674

2,708

8,679

14,421

3,805

14,897

13,146

Opening net debt/(cash)

 

 

13,491

11,817

9,109

430

(13,991)

(17,796)

(24,693)

HP finance leases initiated

0

0

0

0

0

(8,000)

0

Other

0

0

0

0

0

0

0

Closing net debt/(cash)

 

 

11,817

9,109

430

(13,991)

(17,796)

(24,693)

(37,838)

Source: EMIS, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by EMIS Group and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

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Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by EMIS Group and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

295 Madison Avenue, 18th Floor

10017, New York

US

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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