EMIS Group plc Full year results presentation 2017 Introduction - - PowerPoint PPT Presentation

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emis group plc full year results presentation 2017
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EMIS Group plc Full year results presentation 2017 Introduction - - PowerPoint PPT Presentation

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EMIS Group plc Full year results presentation 2017 Introduction Strong financial position with underlying growth despite one off costs Introduction Andy Thorburn Peter Southby Financial review Chief Executive Officer Chief

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EMIS Group plc Full year results presentation 2017

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EMIS Group plc Full year results presentation 2017 2

Introduction

Strong financial position with underlying growth despite one off costs

  • Introduction
  • Financial review
  • Operational review
  • Summary and outlook

Andy Thorburn Chief Executive Officer Peter Southby Chief Financial Officer

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SLIDE 3

Financial review

Peter Southby Chief Financial Officer

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SLIDE 4

Financial highlights

Total revenue

£160.4m

+1%

Recurring revenue

£133.5m +4%

Adjusted operating profit1

£37.4m -3%

Adjusted operating profit excluding Patient

£39.3m +5%

  • 1. Excludes exceptional items, the capitalisation and amortisation of development costs, and the amortisation of acquired intangibles. EPS calculations also adjust for the related

tax and non-controlling interest impact.

  • 2. Stated after deduction of capitalised development costs of £4.4m (2016: £5.7m) and of the cash impact of exceptional items of £5.2m (2016: £3.1m).

EMIS Group plc Full year results presentation 2017 4

2016: £158.7m 2016: £128.5m 2016: £38.8m 2016: £37.3m

Net cash

£14.0m

2016: £0.4m net debt

+£14.4m

Adjusted EPS1

47.2p

2016: 49.4p

  • 4%

Total dividend

25.8p

2016: 23.4p

+10%

Cash generated from operations2

£44.4m +17%

2016: £38.0m

Underlying results in line with the Board’s expectations despite one off costs of £17m

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SLIDE 5

£m H1 H2 FY FY % 2017 2017 2017 2016 change Revenue 79.2 81.2 160.4 158.7 +1% Adjusted operating profit 17.5 19.9 37.4 38.8

  • 3%

Capitalised development costs 2.2 2.2 4.4 5.7 Amortisation – development costs (3.3) (4.2) (7.5) (6.0) Amortisation – acquired intangibles (3.4) (3.3) (6.7) (6.7) Finance costs (0.2) (0.1) (0.3) (0.3) JV/associate 0.4 0.2 0.6 0.5 Exceptionals (2.5) (14.5) (17.0) (6.7) Profit before tax 10.7 0.2 10.9 25.3 Tax (2.1)

  • (2.1)

(5.2) Non-controlling interest (0.4) (0.4) (0.8) (1.0) Earnings 8.2 (0.2) 8.0 19.1 Adjusted EPS 22.2p 25.0p 47.2p 49.4p Reported EPS 13.1p (0.3p) 12.8p 30.4p

  • Revenue increase includes £0.9m from 2016 Intrelate acquisition and varied performance across the Group.
  • Headline adjusted operating profit down by 3% but this includes £3.5m investment in Patient. Excluding this, underlying profit was up

by 5%.

  • Exceptionals relate to reorganisation costs (£5.8m) and service level reporting charges (£11.2m).
  • 2017 effective tax rate 19.8%.

Financial review – income statement

Steady progress maintained

EMIS Group plc Full year results presentation 2017 5

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EMIS Group plc Full year results presentation 2017 6

Financial review – segmental analysis

Balance of business progress and investment

  • Primary, Community & Acute Care: reduced revenue in Acute and some

discretionary Primary Care streams, but cost control ensured profit growth.

  • Community Pharmacy: continued growth with ProScript Connect roll-out.
  • Specialist & Care: new contracts driving revenue growth. Profit held back in

short term by implementation costs but improving trend during year.

  • Patient: results reflect investment in building platforms for future growth.

£m

Primary, Community & Acute 2017 Primary, Community & Acute 2016 Community Pharmacy 2017 Community Pharmacy 2016 Specialist & Care 2017 Specialist & Care 2016 Patient 2017 Patient 2016 Total 2017 Total 2016

Revenue 117.6 120.5 21.9 21.4 18.0 14.2 2.9 2.6 160.4 158.7 Recurring revenue 96.4 97.3 18.9 17.1 17.7 13.7 0.5 0.4 133.5 128.5 Adjusted segmental profit 34.9 33.8 5.6 4.9 0.2 0.2 (1.9) 1.5 38.8 40.4 Group costs (1.4) (1.6) Adjusted operating profit 37.4 38.8

Adjusted operating margin 29.7% 28.0% 25.7% 22.8% 0.8% 1.5% (65.9)% 58.2% 23.3% 24.4%

Development costs capitalised 3.8 3.8

  • 1.9
  • 0.6
  • 4.4

5.7 Amortisation of development costs (7.3) (6.0) (0.2)

  • (7.5)

(6.0) Amortisation of acquired intangible assets (5.5) (5.4) (0.6) (0.6) (0.6) (0.7)

  • (6.7)

(6.7)

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EMIS Group plc Full year results presentation 2017 7

Financial review – revenue analysis

Stronger recurring mix

  • Good visibility through sustained recurring revenue growth of £5m in year.
  • Maintenance and software support growth also reflects stability and growth in core estate.
  • EMIS Care driving higher other support services revenues.
  • Quieter period in Primary, Community & Acute Care for new implementations.
  • Lower discretionary NHS spending, e.g. on hosting and hardware.

£m 2017 2016 % change Recurring 133.5 128.5 +4% Non-recurring 26.9 30.2

  • 11%

Total 160.4 158.7 +1% £m Nature 2017 2016 % change Licences mainly recurring 55.1 54.8 +1% Maintenance and software support recurring 41.4 38.6 +7% Other support services mainly recurring 32.5 29.3 +11% Training/consultancy/implementation non-recurring 12.4 14.6

  • 15%

Hosting recurring 11.6 13.1

  • 12%

Hardware non-recurring 7.4 8.3

  • 11%

Total 160.4 158.7 +1%

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EMIS Group plc Full year results presentation 2017 8

Financial review – cash flow

Strong positive cash flows delivered again

  • Reported cash from operations up 17% to £44.4m

(2016: £38.0m)

  • Adjusted cash from operations (before

exceptionals) up 21% to £49.6m

  • Both measures stated after Patient investment.
  • Working capital improvement on 2016, particularly

driven by increase in deferred income.

  • Cash cost of exceptionals relates to

reorganisation/cost reduction programme costs

  • nly.
  • Capex includes:
  • £4.0m of computer equipment (of which

£1.2m is funded).

  • £1.0m of programme assets in EMIS Care.
  • Other in 2016 includes £1.5m proceeds from sale
  • f Pharmacy2U associate.
  • Net cash at £14.0m (improved from £0.4m net

debt at last year end). £m 2017 2016 Operating profit before exceptionals 27.6 31.8 Depreciation and amortisation 20.8 19.8 Working capital 5.0 (5.3) Share based payments 0.6 0.5 Cash flow from operating activities 54.0 46.8 Development costs capitalised (4.4) (5.7) Adjusted cash from operations 49.6 41.1 Cash cost of exceptionals (5.2) (3.1) Cash from operations 44.4 38.0 Business combinations

  • (3.8)

Net capital expenditure (6.6) (5.9) Transactions in own shares

  • 0.6

Tax (8.1) (7.7) Dividends (15.5) (14.0) Other 0.2 1.5 Change in net cash/(debt) 14.4 8.7 Closing net cash/(debt) 14.0 (0.4)

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EMIS Group plc Full year results presentation 2017 9

Financial review – balance sheet

Solid balance sheet provides resilience

  • Strong debt-free balance sheet with £14.0m net

cash.

  • New debt facilities secured in June 2017 at reduced

cost (£30.0m RCF/overdraft plus £30.0m accordion, three-to-five year term).

  • Increased deferred income provides good revenue

visibility.

  • Provision reflects estimate of service level reporting

charges expected to be paid in 2018.

  • No remaining acquisition consideration.
  • Cost of final dividend £8.1m.

£m 2017 2016 Goodwill 50.3 50.3 Acquired intangible assets 29.7 36.5 Development costs 17.9 20.9 Property, plant and equipment and computer software used internally 25.0 25.4 JV and other current assets 43.0 41.9 Deferred income (33.7) (28.4) Other current liabilities (20.2) (23.0) Provision (11.2)

  • Deferred tax

(6.8) (9.1) Net cash/(debt) 14.0 (0.4) Net assets 108.0 114.1

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EMIS Group plc Full year results presentation 2017 10

Financial review – guidance and trends

Patient

  • Increased H2 2017 level of investment to

be maintained in 2018.

Staff costs

  • Staff numbers and costs likely to increase

with additional investment in development and customer-facing functions.

Development costs

  • Expect amortisation to continue to track

ahead of capitalisation, although higher level of capitalisation of costs likely from EMIS Web clinical system upgrade.

Contract assets

  • Deferred income release and related

depreciation to remain at similar level in 2018.

Share-based payments

  • Charge expected to increase in 2018 with

recent awards with annual run rate of c. £1.0m.

Tax rate

  • Expected to remain close to UK statutory

rate.

Capital expenditure

  • Expect 2018 to be at similar or slightly

higher level to recent periods.

Working capital

  • Expect to be broadly neutral in 2018.

Dividends

  • 10% increase for final dividend (£8.1m in

May 2018).

IFRS 15 Revenue

  • No material changes expected on

adoption of new revenue recognition standard, effective 2018.

IFRS 9 Financial instruments

  • No material changes expected on

adoption of new revenue recognition standard, effective 2018.

IFRS 16 Leases

  • Will result in most of the Group’s operating

leases coming onto the Balance Sheet, effective 2019. Further guidance on impact to be provided at the half year.

Factors affecting future financial performance

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Operational review

Andy Thorburn Chief Executive Officer

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2017 – overview

  • Solid underlying financial performance in a year of change
  • Focus on operational execution in H2
  • Share price negatively impacted due to SLA issue

communicated to market in January 2018

  • Group financially strong with high recurring revenues

EMIS Group plc Full year results presentation 2017 12

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Execution – what we delivered in 2017

Primary, Community & Acute Care Community Pharmacy Specialist & Care Patient Primary Care market leadership maintained, with growth to 56% Moved to joint market leadership with 37% market share Maintained market leading position in Specialist (76%) and Care (26%) Website upgrade attracting 15 million unique users per month Community market share growth to 17% - moving up to number two position Roll out of ProScript Connect

  • n track

Revenue growth and

  • perational

efficiencies New Patient Access app built and in final NHS approvals Maintained market share in Acute, improvements in revenue and cost control Focus on EMIS Web for Pharmacy to open up Patient Group Directions market Returned to profit in H2 Marketplace design completed; focus on Pharmacy solutions first

EMIS Group plc Full year results presentation 2017 13

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14

Strong market share positions maintained

Primary:

EMIS Health 56% TPP 30% Vision 13% Others 1%

Specialist Care:

EMIS Health 76% Health Intelligence 15% Health Information Systems 8%

Community Pharmacy:

EMIS Health 37% Cegedim 37% Lloyds 9%

EMIS Group 2017 revenue

Source: EMIS Group and competitor data estimated based on company records as at 31 December 2017.

Care:

NHS 59% EMIS Care 26% Health intelligence 15%

Patient Community:

TPP 22% EMIS Health 17% DXC 10% Servelec 9%

Acute:

Pharmacy JAC 50% EMIS Health 29% HP Enterprise Services 4% A&E DXC Technology 24% EMIS Health 19% Cerner 12% System C 10% PAS DXC Technology 38% System C 13% Cerner 12% Silverlink 8% EMIS Health 6%

EMIS Group plc Full year results presentation 2017

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EMIS Group plc Full year results presentation 2017 15

EMIS Health GP market share by country

Country EMIS Health

%

TPP

%

INPS

%

Other

%

Total England 4,197

57

2,703

37

409

5

58

1

7,367 Scotland 519

54

  • 444

46

  • 963

Wales 195

45

  • 236

55

  • 431

Northern Ireland 183

55

  • 122

37

27

8

332 UK Total 5,094

56

2,703

30

1,211

13

85

1

9,093

EMIS Health and competitor data estimated based on company records showing number of practices installed as at 31 December 2017.

  • Wales loss starts to reduce market share from 2019
  • More than 4,500 practices using EMIS Web in the UK
  • 57% England market share is a new record for Primary Care
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2018 key projects

1. IT Futures

  • GPSoC extended to December 2018, in discussion to extend to

December 2019

  • Formal procurement process for replacement contract, IT Futures,

expected to begin later this year

2. EMIS Web upgrade

  • Meet the emerging new models of care
  • Flexible and adaptable software platform

3. NHS Digital SLA issues

  • Working collaboratively on settlement and prevention of future issues
  • Reviews of other contracts, to date no other material breaches found

EMIS Group plc Full year results presentation 2017 16

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NHS Digital SLA impact

  • £11.2m exceptional cost in 2017

– Settlement with NHSD – Backlog remediation – Professional fees

  • Operational cost increase for key projects

– £3m in 2018 – £2m in 2019 – Normalised in 2020

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2018 market drivers

Primary, Community & Acute Care Community Pharmacy Specialist & Care Patient Efficiency is essential: demand

  • n NHS services

rising by 4% p.a. as spend per person is falling Patient Group Directions (PGD) – minor clinical services delivered by pharmacies Increased diabetes spending – predicted 1 in 10 people with type 2 diabetes by 2034 NHS Forward View promotes increased patient self-care to reduce pressure on NHS Community care increasingly important Drive for new revenue streams NHS focused on

  • utsourced model

More long term conditions driving citizen demand New models of care mean data sharing is increasingly important 2016 Murray Review – drive to integrate pharmacy with other healthcare sectors NHS spending on diabetes increased by 72% from 2006/7 to 2016/17 NHS Innovation Accelerator promotes innovation in the self-care space

EMIS Group plc Full year results presentation 2017 18

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Opportunities for growth

  • Patient investment continues

building foundations for future growth

  • Focus on Dispensing Doctors

growth opportunity following formal approval

  • Develop our Acute medicines

management business

EMIS Group plc Full year results presentation 2017 19

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Opportunities for growth

  • Build on our number two

position in Community with more growth expected

  • Execute our growth model in

Community Pharmacy with expanded capabilities

  • Continue our operational

improvement plan in Specialist & Care

EMIS Group plc Full year results presentation 2017 20

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2018 outlook and summary

  • 2017 – underlying profit growth continued
  • >90% of 2017 revenue already secured for 2018
  • Improving performance culture
  • Business impacted by legacy issues (and exceptional charges) which

we are resolving

  • Focus on executing key projects including IT Futures, EMIS Web

upgrade and SLA settlement

  • Continued execution of our market development and growth
  • pportunities
  • Strengthen alignment with strategic priorities of key customers

At the heart of the connected IT future of the NHS

EMIS Group plc Full year results presentation 2017 21

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Questions?

22

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EMIS Group plc Full year results presentation 2017 23

Five-year Group financial summary

  • 1. Excludes exceptional items, the capitalisation and amortisation of development costs, and the amortisation of acquired intangibles. EPS calculations also adjust for the related

tax and non-controlling interest impact.

  • 2. Stated after deduction of capitalised development costs of £4.4m (2016: £5.7m) and of the cash impact of exceptional items of £5.2m (2016: £3.1m).