EMIS Group plc Half year results presentation 2017
Introduction Solid underlying financial performance in the first half. • Introduction Andy Thorburn Peter Southby • Financial review Chief Executive Officer Chief Financial Officer • Operational review • Summary and outlook EMIS Group plc Half year results presentation for the six months ended 30 June 2017 2
Financial review Peter Southby Chief Financial Officer
Financial highlights Results in line with the Board’s expectations Total revenue Recurring revenue Adjusted operating Cash generated profit 1 from operations 2 £79.2m +1% £66.8m £26.0m £17.5m +4% -1% +1% 2016 H1: £78.7m 2016 H1: £64.0m 2016 H1: £17.7m 2016 H1: £25.7m Net cash Adjusted EPS 1 Interim dividend £10.5m 22.2p 12.9p +£10.9m unchanged +10% 2016 H2: £0.4m net debt 2016 H1: 22.2p 2016 H1: 11.7p 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 the cash impact of exceptional items of £2.7m (2016 H1: £1.8m) and of capitalised development costs of £2.1m (2016 H1: £2.9m). EMIS Group plc Half year results presentation for the six months ended 30 June 2017 4
Financial review – income statement Solid, consistent performance H1 H2 H1 £m 2016 2016 2017 Revenue 78.7 80.0 79.2 Adjusted operating profit 17.7 21.1 17.5 Capitalised development costs 2.9 2.8 2.2 Amortisation – development costs (3.0) (3.0) (3.3) Amortisation – acquired intangibles (3.3) (3.4) (3.4) Finance costs (0.2) (0.1) (0.2) JV/associate 0.3 0.2 0.4 Exceptionals (2.2) (4.5) (2.5) Profit before tax 12.2 13.1 10.7 Tax (2.4) (2.8) (2.1) Non-controlling interest (0.4) (0.6) (0.4) Earnings 9.4 9.7 8.2 Adjusted EPS 22.2p 27.2p 22.2p Reported EPS 14.9p 15.5p 13.1p • Revenue increase includes Intrelate acquisition (£0.5m in H1 2017) with organic growth in EMIS Care and CCMH offset by tighter NHS spending in Acute and other discretionary areas such as hardware. • Overall adjusted operating profit down by 1% but excluding Patient investment up 4% with tight cost control. • Exceptionals in H1 2017 and 2016 relate to reorganisation/cost reduction programme costs with H2 2016 also including impairment charge and gain on sale of associate. • 2017 effective tax rate 19.2%. EMIS Group plc Half year results presentation for the six months ended 30 June 2017 5
Financial review – segmental analysis Balance of steady progress and investment H1 2016 H2 2016 H1 2017 Primary Primary Primary Community Community Specialist Community Community Specialist Community Community Specialist & £m Acute Care Pharmacy & Care Patient Total Acute Care Pharmacy & Care Patient Total Acute Care Pharmacy Care Patient Total Revenue 60.3 10.4 7.0 1.0 78.7 60.3 11.0 7.2 1.5 80.0 58.5 10.9 8.4 1.4 79.2 Recurring revenue 48.6 8.5 6.7 0.2 64.0 48.7 8.6 7.0 0.2 64.5 49.2 9.1 8.3 0.2 66.8 Adjusted segmental profit 15.3 2.2 0.4 0.5 18.4 18.5 2.7 (0.2) 1.0 22.0 16.1 2.6 (0.1) (0.3) 18.3 Group costs (0.7) (0.9) (0.8) Adjusted operating profit 17.7 21.1 17.5 Adjusted operating margin 25.4% 21.4% 5.2% 53.6% 22.5% 30.7% 24.0% (2.2%) 61.2% 26.3% 27.5% 23.8% (0.7%) (22.6%) 22.1% Development costs capitalised 2.0 0.9 – – 2.9 1.8 1.0 – – 2.8 2.2 – – – 2.2 Amortisation of development costs (3.0) – – – (3.0) (3.0) – – – (3.0) (3.2) (0.1) – – (3.3) Amortisation of acquired intangible (2.7) (0.3) (0.3) – (3.3) (2.7) (0.3) (0.4) – (3.4) (2.8) (0.3) (0.3) – (3.4) assets • Primary, Community & Acute Care: reduced revenue in Acute and some discretionary Primary Care streams, but cost control ensured profit growth. • Community Pharmacy: steady growth as Proscript Connect roll-out starts at scale in H2. • Specialist & Care: new contracts driving revenue growth but holding back profit in short term. • Patient: results reflect investment in building platforms for future growth. EMIS Group plc Half year results presentation for the six months ended 30 June 2017 6
Financial review – revenue analysis Stronger recurring mix H1 H2 H1 £m Nature 2016 2016 2017 Recurring 64.0 64.5 66.8 Non-recurring 14.7 15.5 12.4 Total 78.7 80.0 79.2 Licences mainly recurring 26.8 28.0 27.4 Maintenance and software support recurring 18.9 19.7 20.6 Other support services mainly recurring 14.7 14.6 16.1 Training/consultancy/implementation non-recurring 7.6 7.0 5.5 Hosting recurring 6.4 6.7 5.6 Hardware non-recurring 4.3 4.0 4.0 Total 78.7 80.0 79.2 • Good visibility through sustained recurring revenue growth. • EMIS Care driving higher other support services revenues, offset by quieter period in Acute Care and lower discretionary NHS spending, e.g. on hardware/hosting. EMIS Group plc Half year results presentation for the six months ended 30 June 2017 7
Financial review – cash flow Positive cash flows maintained H1 H2 H1 £m 2016 2016 2017 Operating profit before exceptionals 14.3 17.5 13.0 • Adjusted cash from operations up 4% to £28.7m. Depreciation and amortisation 10.1 9.7 10.0 • Working capital inflow as expected in H1. Working capital 5.7 (11.0) 7.4 • Cash cost of exceptionals relates to reorganisation/cost reduction programme costs. Share-based payments 0.3 0.2 0.4 • Capex includes: Cash flow from operating activities 30.4 16.4 30.8 • £2.3m of computer equipment (of which £1.1m is funded). Development costs capitalised (2.9) (2.8) (2.1) • £0.9m of programme assets in EMIS Care. Adjusted cash from operations 27.5 13.6 28.7 • Other in H2 2016 includes £1.5m proceeds from sale of Cash cost of exceptionals (1.8) (1.3) (2.7) Pharmacy2U associate. Cash from operations 25.7 12.3 26.0 • Net cash at £10.5m (improved from £0.4m net debt at last year Business combinations (3.0) (0.8) – end). Net capital expenditure (2.9) (3.0) (3.6) Transactions in own shares 0.3 0.3 (0.1) Tax (3.5) (4.2) (3.7) Dividends (6.7) (7.3) (7.4) Other (0.1) 1.6 (0.3) Change in net cash/(debt) 9.8 (1.1) 10.9 Closing net cash/(debt) 0.7 (0.4) 10.5 EMIS Group plc Half year results presentation for the six months ended 30 June 2017 8
Financial review – balance sheet Solid balance sheet gives flexibility H1 H2 H1 £m 2016 2016 2017 • Strong debt-free balance sheet with £10.5m net cash. Goodwill 54.4 50.3 50.3 Acquired intangible assets 39.2 36.5 33.1 • New debt facilities secured at 30 June 2017 at reduced cost (£30.0m RCF/overdraft plus £30.0m accordion, three-to-five year Development costs 21.2 20.9 19.8 term). Property, plant and equipment and 24.3 25.4 24.2 • Increased deferred income provides good revenue visibility. purchased intangible assets • All acquisitions now fully paid. Associate, JV and other current 37.9 41.9 44.8 assets • Cost of interim dividend £8.1m. Deferred income (32.6) (28.4) (37.4) Other current liabilities (24.4) (23.0) (21.3) Deferred tax (9.8) (9.1) (8.4) Net cash/(debt) 0.7 (0.4) 10.5 Net assets 110.9 114.1 115.6 EMIS Group plc Half year results presentation for the six months ended 30 June 2017 9
Financial review – financial guidance and trends Factors affecting future financial performance Patient Contract assets Capital expenditure • Level of investment to increase in H2 with • Deferred income release and related • Expect 2017 to be at similar level to 2015 year-on-year impact of c. £3.5m. 2018 depreciation to remain similar in H2 and and 2016. result projected to be at broadly similar 2018. level to 2017. Working capital IFRS 15 Revenue Staff costs • No material changes expected on • Some expansion in areas of business • Full year exceptional reorganisation cost adoption of new revenue recognition growth, but at lower levels than in 2016. expected to be at least £4.0m, saving a standard, effective 2018. minimum of £3.5m in year and £4.5m in Dividends 2018. H2 staff costs net of exceptionals Share-based payments likely to be slightly higher than H1. • 10% increase for interim dividend (£8.1m • Charge expected to increase in H2 with in October) historically matched for final Development costs recent awards with annual run rate of c. dividend. £1.0m. • Expect amortisation to continue to track ahead of capitalisation, although some Tax rate capitalisation of Patient costs likely from H2 onwards. • Expected to remain close to UK statutory rate. EMIS Group plc Half year results presentation for the six months ended 30 June 2017 10
Operational Review Andy Thorburn Chief Executive Officer
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