Exhibit 1: EMIS results highlights
£'000s |
FY18 |
FY19e |
FY19 |
Diff |
y-o-y |
Revenues |
149,710 |
157,962 |
159,507 |
1.0% |
6.5% |
Normalised operating profit |
32,991 |
39,769 |
40,794 |
2.6% |
23.7% |
Normalised operating margin |
22.0% |
25.2% |
25.6% |
0.4% |
|
Reported operating profit |
27,680 |
27,552 |
26,827 |
(2.6%) |
(3.1%) |
EMIS adjusted operating profit |
35,890 |
38,388 |
39,273 |
2.3% |
9.4% |
Adjusted operating margin |
24.0% |
24.3% |
24.6% |
0.3% |
|
Normalised EPS - p |
40.4 |
51.5 |
53.5 |
3.9% |
32.2% |
Reported EPS - p |
36.1 |
36.7 |
36.0 |
(1.9%) |
(0.1%) |
EMIS diluted adjusted EPS - p |
45.0 |
49.3 |
51.1 |
3.7% |
13.4% |
Dividend per share - p |
28.4 |
31.2 |
31.2 |
0.0% |
9.9% |
Net cash/(debt) - excluding lease liabilities |
15,620 |
30,856 |
31,099 |
0.8% |
99.1% |
Source: EMIS accounts, Edison Investment Research estimates. Note: Normalised: excludes amortisation of acquired intangibles, share-based payments and exceptionals; Adjusted: cash accounts for development costs, excludes amortisation of acquired intangibles and exceptionals.
The company reported FY19 results slightly ahead of our forecasts. Revenues grew 6.5% y-o-y and were 1% ahead of our forecast. Normalised and adjusted operating profit were 2.6% and 2.3% ahead of forecast and increased 23.7% and 9.4%, respectively, year-on-year. Adjusted diluted EPS was 3.7% ahead of our forecast, mainly due to a lower than expected tax charge. Reported EPS was lower than expected mainly due to higher than forecast exceptional costs (£5.36m versus £3.15m forecast). The company announced a final dividend of 15.6p, resulting in a full year dividend of 31.2p (+10% y-o-y). Net cash at year-end was £31.1m, an increase of £15.5m over the year. Adjusting out the cash costs of exceptional items, cash flow from operations was £1.4m lower year-on-year reflecting a one-off working capital increase at the end of FY19 as the payment arrangements switched from GPSoC to GP IT Futures.
Exhibit 2: Divisional performance
£m |
FY18 |
FY19e |
FY19 |
Diff |
y-o-y |
Revenues |
|
|
|
|
|
EMIS Health |
99.3 |
100.8 |
100.9 |
0.1% |
1.6% |
EMIS Enterprise |
50.4 |
57.2 |
58.6 |
2.6% |
16.3% |
Total |
149.7 |
158.0 |
159.5 |
1.0% |
6.5% |
Adjusted operating profit |
|
|
|
|
|
EMIS Health |
25.2 |
24.3 |
23.3 |
(4.3%) |
(7.7%) |
EMIS Enterprise |
12.8 |
15.8 |
17.5 |
11.0% |
37.0% |
Central costs |
(2.1) |
(1.7) |
(1.5) |
(11.4%) |
(28.0%) |
Total adjusted operating profit |
35.9 |
38.4 |
39.3 |
2.3% |
9.4% |
Reported operating profit |
|
|
|
|
|
EMIS Health |
19.2 |
18.2 |
16.0 |
(12.0%) |
(16.4%) |
EMIS Enterprise |
10.6 |
11.0 |
12.3 |
11.4% |
16.2% |
Central costs |
(2.1) |
(1.7) |
(1.5) |
(11.4%) |
(28.0%) |
Total reported operating profit |
27.7 |
27.6 |
26.8 |
(2.6%) |
(3.1%) |
Adjusted operating margin |
|
|
|
|
|
EMIS Health |
25.4% |
24.1% |
23.1% |
(1.1%) |
(2.3%) |
EMIS Enterprise |
25.4% |
27.6% |
29.9% |
2.3% |
4.5% |
Total adjusted operating margin |
24.0% |
24.3% |
24.6% |
0.3% |
0.6% |
Reported operating margin |
|
|
|
|
|
EMIS Health |
19.3% |
18.1% |
15.9% |
(2.2%) |
(3.4%) |
EMIS Enterprise |
21.0% |
19.3% |
21.0% |
1.7% |
(0.0%) |
Total reported operating margin |
18.5% |
17.4% |
16.8% |
(0.6%) |
(1.7%) |
Source: EMIS accounts, Edison Investment Research estimates
EMIS Health: Investment reduces profitability
EMIS Health saw 1.6% revenue growth but a 7.7% decline in adjusted operating profit year-on-year. This was mainly due to increased investment in developing the EMIS-X platform. On an operational basis:
The company maintained its 57% market share of UK GPs.
In October 2019, EMIS was appointed to the GP IT Futures framework in England, which went into effect on 1 January 2020 and replaced the previous GP System of Choice (GPSoC) framework. EMIS Web was updated in 2019 to meet the initial contract requirements and will be further developed in 2020.
Earlier in 2019, EMIS was also appointed to the Scottish GP framework (NSS) and is currently working to deliver the technology required for this framework.
In Northern Ireland, EMIS has completed the roll-out of EMIS Web.
In Wales, the company continues to support its existing customer base, despite not being selected for the new framework. As one of the selected suppliers has since had its contract cancelled by NHS Wales, GP practices have not yet been able to shift away from EMIS.
EMIS increased its market share from 20% to 21% and remains the number two provider in this market.
EMIS increased its share of the A&E market from 22% to 23% moving to market leadership.
The division migrated its support and service function onto a single customer and internal platform, ServiceNow, and co-located two of its support teams to improve efficiency. By offering improved digital-first options for support, the company has been able to reduce headcount in this area.
Egton saw strong sales of its service to digitise legacy paper records. The market is working towards the target of being fully digitised by 2024.
The division is focused on the development of EMIS-X, which it wants to deploy first in the Scottish and English GP markets when ready. This is likely to be in 2021.
EMIS Enterprise: Helped by one-off licence sales
EMIS Enterprise saw revenue growth of 16.3% in FY19 with adjusted operating profit increasing 37.0% and the margin increasing from 25.4% to 29.9%. Revenue growth was mainly due to the signing of several perpetual licences for current products and some that were about to go end-of-life. High-margin licences boosted divisional operating profit.
Despite seeing a small reduction in market share (from 37% to 36%) as a few sites decided not to upgrade to ProScript Connect, the company now has sole leadership of this market. The rollout of ProScript Connect was completed during 2019, reaching nearly 5,200 pharmacies, and means that all pharmacies are using the same system, which should result in efficiencies for product support and development.
Two solutions for the Falsified Medicines Directive (FMD) were released to the community pharmacy and hospital pharmacy customer base. A pilot of the Patient Group Directions (PGD) functionality was completed and the company plans to launch this as part of ProScript Connect.
The company continued to develop its existing Electronic Prescribing and Medicines Administration (ePMA) system and is working with customers to bring them all onto the same version of the software.
The number of Patient Access registered users increased by 40% to 8.4 million by year-end; 6.7m GP appointments and 20.2m repeat prescriptions were booked via the app. After a successful pilot, EMIS has launched the ability to book community pharmacy appointments through the app. In H219, 14,000 appointments were booked by 11,500 users, and in February 2020 the service was live with more than 800 pharmacy branches across 22 organisations. The community pharmacy booking services is the first service available from the group’s marketplace and uses the EMIS-X appointment engine. Pharmacists that use ProScript Connect are able to send an electronic consultation summary back to the patient record held within EMIS Web.
Community pharmacy acquisition post year-end
On 9 March, the company acquired Pinnacle Health Partnership LLP and Pinnacle Systems Management Ltd, owners and operators of the PharmOutcomes platform. PharmOutcomes is a web-based service management solution used by more than 11,000 community pharmacies to record and manage nationally and locally commissioned patient services such as flu vaccinations, the Community Pharmacist Consultation Service and hospital discharge referral management. The platform supports local and national level analysis and reporting on the effectiveness of commissioned services.
EMIS paid £3m on a cash and debt free basis, with up to £4m in contingent consideration payable in cash if certain performance targets are met in FY20 and FY21. In FY19, the business generated revenue of £1.9m and profit of £0.4m.
The company believes this service will integrate well with its existing Community Pharmacy business and may open up the possibility of selling to more pharmacies than the group’s existing 5,200 base.
