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Last close As at 03/02/2023
GBP18.78
▲ 4.00 (0.21%)
Market capitalisation
GBP1,179m
Research: TMT
EMIS’s FY21 revenue and operating profit came in ahead of the top end of consensus, reflecting a year of growth for EMIS Enterprise and more normal trading in EMIS Health after a year helping the NHS to deal with the pandemic. Post year-end, the company bolstered its analytics business with the acquisition of GP practice business intelligence tools provider Edenbridge Healthcare for £4m. We have upgraded our normalised diluted EPS forecasts by 2% in FY21 and 1% in FY22 and FY23.
EMIS Group |
Strong FY21 drives upgrades |
FY21 trading update |
Software & comp services |
20 January 2022 |
Share price performance
Business description
Next events
Analyst
EMIS Group is a research client of Edison Investment Research Limited |
EMIS’s FY21 revenue and operating profit came in ahead of the top end of consensus, reflecting a year of growth for EMIS Enterprise and more normal trading in EMIS Health after a year helping the NHS to deal with the pandemic. Post year-end, the company bolstered its analytics business with the acquisition of GP practice business intelligence tools provider Edenbridge Healthcare for £4m. We have upgraded our normalised diluted EPS forecasts by 2% in FY21 and 1% in FY22 and FY23.
Year end |
Revenue (£m) |
PBT* |
Diluted EPS* |
EMIS adj dil EPS** (p) |
DPS |
P/E |
12/19 |
159.5 |
41.0 |
53.5 |
51.1 |
31.2 |
23.6 |
12/20 |
159.5 |
43.4 |
56.4 |
50.4 |
32.0 |
22.4 |
12/21e |
166.8 |
43.0 |
54.8 |
53.9 |
35.2 |
23.1 |
12/22e |
174.9 |
47.2 |
60.2 |
57.8 |
36.0 |
21.0 |
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.
FY21 results ahead; small analytics acquisition
EMIS reported that FY21 revenue and adjusted operating profit were ahead of FY20 and slightly above the top end of consensus (which stood at £166.1m and £41.6m respectively). Business in the EMIS Health division normalised in the year compared to COVID-focused trading in FY20. The EMIS Enterprise business continues to drive double-digit growth in patient-facing services, analytics and pharmacy. Post year-end, the company acquired business intelligence tools software provider, Edenbridge Healthcare, for £4m in cash (with a further £6m in contingent consideration). Edenbridge's software provides real-time insight to support GP practice access, efficiency, transformation and workforce planning, and will join EMIS Enterprise’s analytics business. EMIS closed the year with net cash of £64m and secured a £60m replacement three-year revolving credit facility, highlighting the availability of cash for further M&A.
Modest EPS upgrades
We have revised our forecasts to reflect stronger than expected FY21 performance and the Edenbridge acquisition. We assume that the high year-end net cash balance (£9m higher than our forecast) resulted from good working capital management. Our normalised diluted EPS forecasts increase by 2.1% in FY21, 1.2% in FY22 and 1.3% in FY23.
Valuation: Earnings growth to drive upside
Compared to a global group of healthcare software peers, EMIS trades at a discount on all profitability valuation metrics. EMIS generates significantly higher operating profit margins but, with slightly slower revenue growth, generates lower earnings growth. Its dividend yield is significantly ahead of the group. Key to closing the discount will be evidence that revenue growth is returning to the company’s medium-term goal of mid- to high single digits, in turn driving stronger earnings growth. We note that EMIS has good visibility (recurring revenue was 79% in H121) and a strong balance sheet with no debt.
Changes to forecasts
Exhibit 1: Changes to forecasts
£'000s |
FY21e |
FY22e |
FY23e |
|||||||||
Old |
New |
Change |
y-o-y |
Old |
New |
Change |
y-o-y |
Old |
New |
Change |
y-o-y |
|
Revenues |
164,113 |
166,813 |
1.6% |
4.6% |
172,741 |
174,941 |
1.3% |
4.9% |
182,448 |
184,648 |
1.2% |
5.5% |
Normalised operating profit |
41,792 |
42,662 |
2.1% |
(0.8%) |
46,329 |
46,881 |
1.2% |
9.9% |
49,198 |
49,858 |
1.3% |
6.3% |
Normalised operating margin |
25.5% |
25.6% |
0.1% |
26.8% |
26.8% |
(0.0%) |
27.0% |
27.0% |
0.0% |
|||
Reported operating profit |
33,636 |
34,507 |
2.6% |
(3.5%) |
40,429 |
40,981 |
1.4% |
18.8% |
44,330 |
44,990 |
1.5% |
9.8% |
EMIS adjusted operating profit |
41,092 |
41,962 |
2.1% |
6.9% |
44,429 |
44,981 |
1.2% |
7.2% |
47,298 |
47,958 |
1.4% |
6.6% |
Adjusted operating margin |
25.0% |
25.2% |
0.1% |
25.7% |
25.7% |
(0.0%) |
25.9% |
26.0% |
0.0% |
|||
Normalised EPS - p |
53.7 |
54.8 |
2.1% |
(2.7%) |
59.5 |
60.2 |
1.2% |
9.8% |
63.1 |
64.0 |
1.3% |
6.3% |
Reported EPS - p |
43.7 |
44.8 |
2.6% |
(6.8%) |
52.5 |
53.2 |
1.4% |
18.6% |
54.3 |
55.1 |
1.5% |
3.6% |
EMIS adjusted EPS - p |
52.8 |
53.9 |
2.1% |
6.9% |
57.1 |
57.8 |
1.2% |
7.1% |
57.3 |
58.1 |
1.4% |
0.6% |
Dividend per share - p |
35.2 |
35.2 |
0.0% |
10.0% |
36.0 |
36.0 |
0.0% |
2.3% |
37.0 |
37.0 |
0.0% |
2.8% |
Net cash/(debt) |
55,322 |
63,972 |
15.6% |
20.7% |
68,045 |
70,086 |
3.0% |
9.6% |
84,175 |
87,004 |
3.4% |
24.1% |
Source: Edison Investment Research
Exhibit 2: Financial summary
£'000s |
2016 |
2017 |
2018 |
2019 |
2020 |
2021e |
2022e |
2023e |
||
Year end 31 December |
||||||||||
PROFIT & LOSS |
||||||||||
Revenue |
|
|
158,712 |
160,354 |
149,710 |
159,507 |
159,453 |
166,813 |
174,941 |
184,648 |
Cost of Sales |
(14,151) |
(14,674) |
(14,236) |
(15,407) |
(20,335) |
(15,757) |
(17,191) |
(18,989) |
||
Gross Profit |
144,561 |
145,680 |
135,474 |
144,100 |
139,118 |
151,056 |
157,750 |
165,659 |
||
EBITDA |
|
|
52,288 |
49,222 |
48,919 |
55,632 |
53,536 |
53,762 |
59,781 |
62,758 |
Operating Profit (before amort. of acq. intang, SBP and except.) |
38,897 |
34,895 |
32,991 |
40,794 |
43,020 |
42,662 |
46,881 |
49,858 |
||
EMIS adjusted operating profit |
|
|
38,753 |
37,406 |
35,890 |
39,273 |
39,266 |
41,962 |
44,981 |
47,958 |
Amortisation of acquired intangibles |
(6,639) |
(6,717) |
(6,202) |
(7,317) |
(6,824) |
(6,555) |
(4,301) |
(3,268) |
||
Exceptionals |
(6,714) |
(16,988) |
1,657 |
(5,360) |
1,802 |
0 |
0 |
0 |
||
Share-based payments |
(473) |
(550) |
(766) |
(1,290) |
(1,440) |
(1,600) |
(1,600) |
(1,600) |
||
Operating Profit |
25,071 |
10,640 |
27,680 |
26,827 |
36,558 |
34,507 |
40,981 |
44,990 |
||
Net Interest |
(237) |
(299) |
(180) |
(498) |
(501) |
(500) |
(500) |
(500) |
||
Profit Before Tax (norm) |
|
|
39,159 |
35,192 |
33,426 |
41,038 |
43,377 |
43,020 |
47,239 |
50,216 |
Profit Before Tax (FRS 3) |
|
|
25,333 |
10,937 |
28,115 |
27,071 |
36,915 |
34,865 |
41,339 |
45,348 |
Tax |
(5,208) |
(2,074) |
(5,355) |
(5,022) |
(6,794) |
(6,624) |
(7,854) |
(10,657) |
||
Profit After Tax (norm) |
32,175 |
27,989 |
26,447 |
33,697 |
35,658 |
34,846 |
38,264 |
40,675 |
||
Profit After Tax (FRS3) |
20,125 |
8,863 |
22,760 |
22,049 |
30,121 |
28,240 |
33,484 |
34,691 |
||
Average Number of Shares Outstanding (m) |
62.8 |
62.9 |
63.0 |
62.9 |
62.9 |
63.0 |
63.0 |
63.0 |
||
EPS - normalised & diluted (p) |
|
|
49.4 |
43.1 |
40.4 |
53.5 |
56.4 |
54.8 |
60.2 |
64.0 |
EPS - EMIS adjusted & diluted (p) |
|
|
49.2 |
47.0 |
45.0 |
51.1 |
50.4 |
53.9 |
57.8 |
58.1 |
EPS - FRS 3 (p) |
|
|
30.4 |
12.8 |
36.1 |
36.0 |
48.1 |
44.8 |
53.2 |
55.1 |
Dividend (p) |
23.4 |
25.8 |
28.4 |
31.2 |
32.0 |
35.2 |
36.0 |
37.0 |
||
Gross Margin (%) |
91.1% |
90.8% |
90.5% |
90.3% |
87.2% |
90.6% |
90.2% |
89.7% |
||
EBITDA Margin (%) |
32.9% |
30.7% |
32.7% |
34.9% |
33.6% |
32.2% |
34.2% |
34.0% |
||
Operating Margin (before GW and except.) (%) |
24.5% |
21.8% |
22.0% |
25.6% |
27.0% |
25.6% |
26.8% |
27.0% |
||
BALANCE SHEET |
||||||||||
Fixed Assets |
|
|
133,292 |
122,979 |
117,920 |
101,089 |
105,518 |
97,721 |
98,178 |
96,168 |
Intangible Assets |
110,953 |
100,844 |
96,807 |
82,345 |
85,295 |
77,440 |
77,039 |
73,671 |
||
Tangible Assets |
22,187 |
22,037 |
21,000 |
18,399 |
19,870 |
19,070 |
19,070 |
19,570 |
||
Other fixed assets |
152 |
98 |
113 |
345 |
353 |
1,211 |
2,069 |
2,927 |
||
Current Assets |
|
|
46,088 |
56,900 |
53,107 |
67,278 |
87,170 |
97,847 |
109,264 |
128,097 |
Stocks |
1,815 |
1,633 |
1,264 |
657 |
613 |
613 |
613 |
613 |
||
Debtors |
39,970 |
40,148 |
36,223 |
33,047 |
29,993 |
29,706 |
34,509 |
36,424 |
||
Cash |
4,303 |
13,991 |
15,620 |
31,099 |
53,008 |
63,972 |
70,086 |
87,004 |
||
Current Liabilities |
|
|
(56,158) |
(65,131) |
(60,169) |
(55,700) |
(63,370) |
(63,743) |
(64,703) |
(68,238) |
Creditors |
(51,425) |
(65,131) |
(60,169) |
(55,060) |
(62,380) |
(62,753) |
(63,713) |
(67,248) |
||
Lease liabilities |
0 |
0 |
0 |
(640) |
(990) |
(990) |
(990) |
(990) |
||
Short term borrowings |
(4,733) |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(9,080) |
(6,734) |
(8,199) |
(8,469) |
(10,180) |
(6,119) |
(4,987) |
(5,592) |
Long term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Lease liabilities |
0 |
0 |
0 |
(3,294) |
(5,891) |
(5,380) |
(4,869) |
(4,358) |
||
Other long-term liabilities |
(9,080) |
(6,734) |
(8,199) |
(5,175) |
(4,289) |
(739) |
(118) |
(1,234) |
||
Net Assets |
|
|
114,142 |
108,014 |
102,659 |
104,198 |
119,138 |
125,706 |
137,752 |
150,434 |
CASH FLOW |
||||||||||
Operating Cash Flow |
|
|
43,657 |
48,834 |
49,873 |
50,059 |
64,138 |
54,421 |
57,939 |
64,378 |
Net Interest |
(324) |
(356) |
(214) |
(93) |
(54) |
(500) |
(500) |
(500) |
||
Tax |
(7,655) |
(8,139) |
(5,830) |
(4,466) |
(11,684) |
(8,174) |
(8,976) |
(9,541) |
||
Capex |
(12,084) |
(11,342) |
(12,767) |
(13,119) |
(9,491) |
(8,000) |
(11,800) |
(12,300) |
||
Acquisitions/disposals |
(1,790) |
329 |
(9,269) |
5,152 |
(953) |
(2,000) |
(6,000) |
0 |
||
Financing |
881 |
571 |
906 |
(2,369) |
1,324 |
(2,000) |
(500) |
(500) |
||
Dividends |
(14,006) |
(15,476) |
(21,070) |
(18,745) |
(19,860) |
(21,272) |
(22,539) |
(23,109) |
||
Net Cash Flow |
8,679 |
14,421 |
1,629 |
16,419 |
23,420 |
12,475 |
7,625 |
18,429 |
||
Opening net debt/(cash) |
|
|
9,109 |
430 |
(13,991) |
(15,620) |
(31,099) |
(53,008) |
(63,972) |
(70,086) |
Finance leases initiated |
0 |
0 |
0 |
(940) |
(1,511) |
(1,511) |
(1,511) |
(1,511) |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
(0) |
||
Closing net debt/(cash) |
|
|
430 |
(13,991) |
(15,620) |
(31,099) |
(53,008) |
(63,972) |
(70,086) |
(87,004) |
Source: EMIS, Edison Investment Research
|
|
Research: Healthcare
Oasmia has announced it has secured a preferential, one-for-five rights issue that will raise gross proceeds of c SEK151m and should alleviate near-term funding requirements. The company’s largest shareholder has agreed to subscribe to its allotment (24.8%) and a consortium of external investors has guaranteed the remainder (75.2%), albeit on a 6.5% cash compensation basis. Subscription rights can be traded from 8 to 17 March. Oasmia has also announced plans to change its name to Vivesto; both this and the rights issue are subject to approval at the EGM planned for 21 February.
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