Introduction & Agenda Introduction Chris Spencer Financial - - PowerPoint PPT Presentation

Introduction & Agenda

Introduction Chris Spencer Financial review Peter Southby Operational review Chris Spencer Summary and outlook Chris Spencer

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Peter Southby

Chief Financial Officer EMIS Group

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Financial highlights

Results broadly in line with the Board’s expectations Total revenue

£78.7m

+ 1%

2015 H1: £77.8m

Recurring revenue

£64.0m

+ 6%

2015 H1: £60.5m

Adjusted group

• perating profit1

£17.7m

+ 5%

2015 H1: £16.9m

Reported: £12.1m (2015 H1: £13.8m)

Cash generated from operations2

£27.5m

unchanged

2015 H1: £27.5m

Net cash

£0.7m

+ £9.8m

2015 H2: £9.1m net debt

Adjusted EPS1

22.2p

+ 8%

2015 H1: 20.5p

Reported: 14.9p (2015 H1: 16.6p)

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Interim dividend

11.7p

+ 10%

2015 H1: 10.6p 1 Excludes exceptional items, the capitalisation and amortisation of development costs and amortisation of acquired intangibles. EPS calculations also adjust for related tax and non-controlling interest impact. 2 Stated before the cash impact of the exceptional item of £1.8m (2015 H1: £nil) and after deduction of capitalised development costs

• f £2.9m (2015 H1: £3.1m).

Financial review - income statement

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• Revenue increase in part due to Pinbellcom acquisition (£0.7m in H1 2016) and other growth in spite of

tighter NHS spending in areas such as Hardware.

• Adjusted operating profit up by 5% with tight cost control.
• Exceptionals in H1 2016 relate to cost reduction programme and in H2 2015 to impairment charges.
• 2016 effective tax rate 19.6%.

£m H1 H2 H1 % change 2015 2015 2016 v H1 2015 Revenue 77.8 78.1 78.7 1% Adjusted operating profit 16.9 19.7 17.7 5% Capitalised development costs 3.1 3.1 2.9 Amortisation – development costs (3.0) (3.3) (3.0) Amortisation – acquired intangibles (3.2) (3.3) (3.3) Finance costs (0.2) (0.3) (0.2) JV/associate

• (0.1)

0.3 Exceptionals

• (18.5)

(2.2) Profit before tax 13.6 (2.7) 12.2 Tax (2.8) (2.8) (2.4) Non-controlling interest (0.4) (0.4) (0.4) Earnings 10.4 (5.9) 9.4 Adjusted EPS 20.5p 24.8p 22.2p 8% Reported EPS 16.6p (9.5)p 14.9p (10%)

Financial review - segmental analysis

• Primary & Community Care growth driven by Child, Community and Mental Health (CCMH);

ePEX transfer from Secondary Care (£0.7m).

• Community Pharmacy growth supporting investment in new ProScript Connect product for roll
• ut starting in H2.
• Secondary & Specialist Care performance behind expectations with higher new contract costs

in Specialist, but H2 expected to be stronger.

£m

H1 2015 H2 2015 H1 2016

Primary & Community Care Community Pharmacy Secondary & Specialist Care Total Primary & Community Care Community Pharmacy Secondary & Specialist Care Total Primary & Community Care Community Pharmacy Secondary & Specialist Care Total

Revenue 46.9 9.8 21.1 77.8 47.0 10.2 20.9 78.1 49.0 10.4 19.3 78.7 Recurring revenue 37.8 8.0 14.7 60.5 39.5 8.6 14.4 62.5 40.4 8.5 15.1 64.0 Adjusted segmental profit 13.4 1.9 2.3 17.6 16.2 2.4 1.9 20.5 14.7 2.2 1.5 18.4 Group costs (0.7) (0.8) (0.7) Adjusted operating profit 16.9 19.7 17.7 Adjusted operating margin

28.6% 20.1% 10.7% 21.7% 34.4% 22.3% 9.2% 25.1% 30.1% 21.4% 7.6% 22.5% Development costs capitalised 1.6 0.5 1.0 3.1 1.5 0.5 1.1 3.1 1.1 0.9 0.9 2.9 Amortisation of development costs (2.6)

• (0.4)

(3.0) (2.8)

• (0.5)

(3.3) (2.3)

• (0.7)

(3.0) Amortisation of acquired intangible assets (0.4) (0.3) (2.5) (3.2) (0.5) (0.3) (2.5) (3.3) (0.5) (0.3) (2.5) (3.3)

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Financial review - revenue analysis

• Good visibility through recurring revenue growth of £3.5m.
• CCMH driving higher licence and implementation revenues, offset by quieter

period in Secondary Care and lower NHS spending on hardware/hosting and project engineering. 7 £m

Nature

H1 2015 H2 2015 H1 2016 Licences

mainly recurring

24.7 25.6 26.8 Maintenance and software support

recurring

18.6 19.3 18.9 Other support services

mainly recurring

15.3 15.3 14.7 Training/consultancy/implementation

non-recurring

7.5 8.6 7.6 Hosting

recurring

6.7 6.4 6.4 Hardware

non-recurring

5.0 2.9 4.3 Total 77.8 78.1 78.7 Recurring 60.5 62.5 64.0 Non-recurring 17.3 15.6 14.7 Total 77.8 78.1 78.7

Revenue

Financial review - cash flow

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• Cash from operations unchanged at

£27.5m, with strong H1 weighted cash flows.

• Working capital inflow as expected in H1.
• Business combinations payment is final

instalment of Medical Imaging (£3.0m).

• Capex includes:
• £2.1m of Computer equipment (of

which £1.6m is funded).

• £0.4m in relation to EMIS India.
• Other includes £1.8m cash impact of cost

reduction programme and £2.1m minority shareholder dividend in H2 2015.

• Net cash at £0.7m (improved from £9.1m

net debt at last year end) further improved since by the £1.5m P2U disposal. £m H1 2015 H2 2015 H1 2016 Operating profit before exceptionals 13.8 16.1 14.3 Depreciation and amortisation 10.6 10.7 10.1 Working capital 5.9 (15.1) 5.7 Share based payments 0.3 0.4 0.3 Cash flow from operating activities 30.6 12.1 30.4 Development costs capitalised (3.1) (3.1) (2.9) Cash from operations 27.5 9.0 27.5 Business combinations (2.3) (2.9) (3.0) Net capital expenditure (3.5) (3.7) (2.9) Transactions in own shares 0.3 0.3 0.3 Tax (2.9) (4.0) (3.5) Dividends (5.8) (6.6) (6.7) Other (0.2) (2.5) (1.9) Change in net cash/(debt) 13.1 (10.4) 9.8 Closing net cash/(debt) 1.3 (9.1) 0.7

Financial review - balance sheet

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• Strong balance sheet with low gearing

(£4.6m in cash / £3.9m debt).

• Bank facilities for renewal mid-2017

(£20.0m Term/RCF/Overdraft).

• Deferred income provides good revenue

visibility.

• All acquisitions now fully paid.
• Cost of interim dividend £7.4m.

£m H1 2015 H2 2015 H1 2016 Goodwill 68.6 54.4 54.4 Acquired intangible assets 44.1 42.6 39.2 Development costs 21.5 21.2 21.2 Property, plant and equipment and purchased intangible assets 25.5 25.2 24.3 Associate, JV and other current assets 37.0 35.2 37.9 Deferred income (37.9) (28.0) (32.6) Contingent consideration (3.0) (3.0)

• Other current liabilities

(24.5) (20.9) (24.4) Deferred tax (11.8) (10.5) (9.8) Net cash/(debt) 1.3 (9.1) 0.7 Net assets 120.8 107.1 110.9

Financial review - financial guidance and trends

Contract assets

• Deferred income release and related depreciation falling in H2 to £0.8m and expected to remain similar in 2017.

Staff costs

• H2 staff costs net of exceptionals likely to be slightly higher than H1.

Share-based payments

• Charge expected to increase in H2 with recent awards with annual run rate of c. £1.0m.

Tax rate

• Expected to remain close to UK statutory rate.
• Future corporation tax rate change expected to result in one off deferred tax benefit of £0.1m at full year 2016.

Development costs

• Expect amortisation to continue to move slightly ahead of capitalisation.

Capital expenditure

• Expect 2016 to be slightly lower overall than 2015.

Working capital

• Some expansion with business growth, but at lower levels than seen in 2015.

Dividends

• 10% increase for interim dividend (£7.4m in October) historically matched for final dividend.

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Chris Spencer

Chief Executive Officer EMIS Group

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Overview – Growth and EU Referendum

• Growth and momentum despite uncertainty:
• Continued growth in revenue - further progress

in operating margin

• Strong market share
• maintained across Group
• increased in CCMH
• prepared for future growth in Community

Pharmacy and EMIS Care

• Operational improvements within Secondary

Care largely complete - benefits expected in H2

• Strong revenue visibility and momentum in order

book and pipeline

• EU Referendum:
• No direct effect
• Increased budgetary burden on NHS e.g. cost of

supplies, continental European staff 12

* Digital Health Intelligence Market Forecast, NHS IT spend in the UK, 2015–21

Overview – NHS IT Spending

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• NHS IT spending*:
• “We are likely to see NHS IT taking up more of the overall NHS budget, even

as this falls as a proportion of GDP.”

• “If our forecast of local NHS IT spending is correct, and the national money

promised for the ‘paperless’ agenda comes on stream, NHS IT spending will increase from £2.6 billion to £3.6 billion; taking its share of the NHS budget from 1.9% to 2.5%.”

*Digital Health Intelligence Market Forecast, NHS IT spend in the UK, 2015–21

• Sustainability and Transformation Plans (STPs) and Local Digital

Roadmaps (LDRs):

• £4.2bn to be spent on NHS IT over the five years of the current Parliament1
• “The distribution of this funding will be linked to the Sustainability and

Transformation Plans that trusts are drawing up to implement the Forward View and the Local Digital Roadmaps that support them; and any local or matched funding linked to it is likely to come on stream in the next two financial years” 2

1 Jeremy Hunt, February 2016 2 Digital Health Intelligence Report on NHS IT Spending in England 2015/16

EMIS Health Primary & Community Care

Revenue up 4%, adjusted operating profit up 10%

EMIS Health Primary Care

• Clear market leader:
• Market share remained at 55%
• 45 CCGs now 100% EMIS Health Primary

Care

• Loyal customers:
• 75% of Group’s English GP practices used

an EMIS Health system for over 10 years

• EMIS Web roll-out continues increasing revenue

and data access:

• Northern Ireland – planned to begin Q4 2016
• Scotland – in procurement
• Wales – discussing renewal

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EMIS Health Child, Community & Mental Health

Market share up to 14%

• Market share growth to 14% - on track to meet FY 2016

target

• NME 180 CCMH opportunities ongoing:
• CSC (TPP) “North, Midlands and East” National

Programme contract re-procurement includes circa 180

• pportunities
• Recent wins, with total contract value over £3.5m, include

(from):

• Stockport – Community (CSC)
• South Tyneside - Child Health (TPP)
• Barts Health - Child Health (n/a)
• East Cheshire - Child Health (HSW)
• CLCH – Community (TPP)
• Croydon - Community/Child Health (EMIS Health - ePEX)
• Jersey Hospice - Community (n/a)
• Strong and growing pipeline
• Connecting care across NHS:
• Delivering faster, better, cheaper care
• Sole supplier across primary care and CCMH in 23

CCGs 15

Patient and Egton

Patient

• Providing trusted clinician-authored information to facilitate

“pre-primary care”

• Monthly traffic again increasing:
• 18.3m unique visitors, 33m page views
• International growth after domain move
• Advertising and transactional services ahead of budget
• Digital leader recruited

Egton

• Non-clinical ICT solutions and services:
• Increase in GP practice Wi-Fi provision
• After period end - £5m, four year contract to provide IT

support, maintenance and hardware to all GP practices in Herts Valleys, East and North Herts, Luton and Bedfordshire.

• Egton Digital (formerly Pinbellcom) performing well:
• Administration, risk and compliance tools for primary and

secondary care

• GP practice websites

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EMIS Health Community Pharmacy

Revenue up 6%, adjusted operating profit up 13% Good results:

• Independent market lead maintained and growth

secured :

• 36% share maintained of overall market
• Cohens and PCT wins for 2016 implementation
• Lloyds Pharmacy implementation in hand:
• Moves business into “supermarkets”
• Increases overall market share close to 50%
• ver next 18 months
• Next generation dispensary management product,

ProScript Connect:

• For independents and supermarkets
• Secured accreditation in Wales and Scotland –

England planned for Q4 2016

• Live pilots in Wales and Scotland and in Lloyds

estate

• EMIS Web for Community Pharmacy:
• In pilot in nine pharmacies
• For community pharmacies wanting to provide

extended primary care e.g. smoking cessation

• r monitoring long term conditions.
• 2017 launch

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EMIS Health Secondary Care:

• Performed largely in line with expectations taking

into account :

• Transfer of ePEX product to Primary &

Community Care

• NHS environment remains very difficult to predict
• Strategic decision to focus on core markets and

products now largely implemented:

• UK and Kenya complete
• Australian service migration arrangements

continue to be negotiated

• Northampton PAS win
• Creating innovative electronic procurement hub:
• Enabling 75% of UK hospitals to minimise errors,

improve care and reduce NHS costs in home care pharmacy

• Scottish Hospital Electronic Prescribing &

Medicines Administration (HePMA) Framework:

• One of only two suppliers appointed
• £15m total contract value
• Strong pipeline

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EMIS Health Secondary & Specialist Care

Revenue down 8%, adjusted operating profit down 35%

EMIS Health Specialist and EMIS Care

Laying the foundations for future growth

EMIS Health Specialist:

• 79% market leading share in retinopathy

screening software maintained

• Engaged in procurement for English single

solution retinopathy software procurement

EMIS Care:

• Market leader in outsourced diabetic eye

screening

• Awarded further 3 year contracts (TCV > £10m)

for screening in:

• Lancashire Lot 1 (from the NHS)
• Lancashire Lot 2 (from the NHS)
• West Yorkshire Lot 2 (from the NHS, EMIS

Care and 1st Retinal Screen)

• To be implemented during 2016/2017:
• Holding back financial performance through

additional implementation costs especially where previously operated by the NHS

• As efficiencies realised profit profile expected to

improve 19

EMIS Health Integrated Care

Progress accelerating

• USP is commitment both to internal integration and also third

party interoperability

• Connected care delivering on promise of faster, better,

cheaper care:

• EMIS Care working on GP integration to support the

Lancashire diabetic eye screening service go-live on 1 October 2016;

• EMIS Web use in Blackpool Teaching Hospitals means

community staff avoid filling in duplicate information in different forms and have more time to focus on patient care;

• Bromley Healthcare where more than 300 clinicians are

accessing real-time patient notes at an estimated saving of an hour a day for each clinician. 20

EMIS Group Markets & Competitors

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EMIS Group Organic Growth Opportunities

• Primary Care & Commissioning:
• Northern Ireland
• Scotland
• Patient and Patient Access
• CCMH:
• NME/North 180
• Targeting 15% overall market share in 2016
• Community Pharmacy:
• Implementation of “supermarket” estate to bring market share

to c 50%

• Further gains in the independent market
• EMIS Web for Community Pharmacy
• Secondary & Specialist:
• Hospital procurements post NHS National Programme for IT
• HePMA
• Pharmacy Hub
• Diabetic retinopathy screening outsourcing
• English single solution retinopathy software procurement
• Integrated care:
• Federations and other responses to new models of care
• Interoperability/partner programme
• Urgent and Emergency care

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Summary and outlook

• Good underlying profit growth in the first half
• Outlook encouraging:
• Board’s expectation for full year unchanged
• Strong revenue visibility with 81% recurring revenue
• Growing market shares – especially CCMH and community

pharmacy

• Good order book and pipelines in all segments
• Secondary Care improved financial performance expected in

H2 2016

• Growth opportunities across all markets

“Despite ongoing post-referendum political and economic uncertainty, the NHS continues to affirm EMIS Group's strategy of providing change-delivering digital technology helping to create faster, cheaper and better care. Matthew Swindells, NHS England’s new national director for commissioning operations and information, announced in his first major speech on 5 July 2016 that funding would be available for ‘change projects’ that require new technology and information to improve the quality and efficiency of care as part of an ‘ecosystem for innovation’ controlled by the patient.”

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Digital Health Intelligence Market Forecast, NHS IT spend in the UK, 2015–21

Questions?

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Appendix

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EMIS Health GP market share by country

(EMIS Health and competitor data estimated based on company records showing customers installed as at 30 June 2016)

Country EMIS Health

%

InPS

%

TPP

%

Other

%

Total England 4,297

56.1

616

8.1

2,656

34.7

87

1.1

7,656 Scotland 507

51.5

477

48.5

• 984

Wales 198

44.6

246

55.4

• 444

Northern Ireland 195

56.0

125

35.9

• 28

8.1

348 UK Total 5,197

55.1

1,464

15.5

2,656

28.2

115

1.2

9,432 26

EMIS Health Integrated Care

Progress accelerating Sustainability and Transformation Plans (STPs) NHS England required every health and care system in England to produce an

• STP. Aim is to support delivery of health and care based on needs of the local
• population. All 44 of the STPS have now been submitted.
• EMIS Health only primary care supplier 100% across a whole STP.

EMIS Health has three 100% areas in primary care:

• Lancashire/South Cumbria
• Bristol/North Somerset/Gloucestershire
• Herefordshire/Worcestershire
• EMIS Health dominant (75%+ primary care penetration) across

further thirteen STPs

• EMIS Health 100% primary care and CCMH services across two

STPs:

• Lancashire/South Cumbria
• Bristol/ North Somerset/Gloucestershire
• EMIS Health dominant (75%+ primary care

penetration) with CCMH services in eight STPs:

• Lancashire/South Cumbria
• Bristol/North Somerset/South Gloucestershire
• North Central London
• Somerset
• Merseyside/Cheshire/Warrington/Wirral
• North Cumbria
• South West London
• Northumberland/Tyne and Wear

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EMIS Health Integrated Care

Progress accelerating Local Digital Roadmaps (LDRs) LDRs led by CCGs. Aim is to set how the ambition of paper-free at point

• f care will be achieved. Initially developed separately, 83 LDRs now

subsumed into 44 STPs. LDRs were due to be submitted by June 30 2016.

• EMIS Health the 100% primary care provider across nine LDR

areas (Blackpool, Bristol, City and Hackney, Dudley, East Lancashire, Herefordshire, South Tyneside, South Worcestershire, and Walsall)

• EMIS Health dominant (75%+ primary care penetration)

across a further twenty LDRs

• EMIS Health has 100% of primary care services and CCMH

services across five LDRs (Blackpool; Bristol; City and Hackney; East Lancashire; South Tyneside)

• EMIS Health dominant (75%+ primary care penetration) with

CCMH services in fourteen LDRs (Blackpool; Bristol; City and Hackney; East Lancashire; South Tyneside; Eastern Cheshire; Liverpool; Sunderland; North Central London; Wirral; Somerset; Waltham Forest and East London; Cumbria; South West London) 28

5 year financial record

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1 Excludes impairment charges, release of contingent acquisition consideration, capitalisation and amortisation of development costs and amortisation of acquired

• intangibles. Earnings per share calculations also adjust for the related tax and non-controlling interest impact.

2 Stated after deduction of capitalised development costs.

Capital markets day, 13 October 2016

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