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 Financial Officer • Operational review • Summary and outlook 2 EMIS Group plc Full year results presentation 2017
Financial review Peter Southby Chief Financial Officer
Financial highlights Underlying results in line with the Board’s expectations despite one off costs of £17m Total revenue Recurring revenue Adjusted operating Adjusted operating profit 1 profit excluding Patient £160.4m £133.5m +4% £39.3m +5% £37.4m -3% +1% 2016: £158.7m 2016: £128.5m 2016: £38.8m 2016: £37.3m Cash generated Net cash Adjusted EPS 1 Total dividend from operations 2 £44.4m +17% £14.0m 47.2p 25.8p +£14.4m -4% +10% 2016: £38.0m 2016: £0.4m net debt 2016: 49.4p 2016: 23.4p 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
Financial review – income statement Steady progress maintained H1 H2 FY FY % £m 2017 2017 2017 2016 change Revenue 158.7 +1% 79.2 81.2 160.4 Adjusted operating profit 38.8 -3% 17.5 19.9 37.4 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 (5.2) (2.1) - (2.1) Non-controlling interest (1.0) (0.4) (0.4) (0.8) Earnings 19.1 8.2 (0.2) 8.0 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%. EMIS Group plc Full year results presentation 2017 5
Financial review – segmental analysis Balance of business progress and investment Primary, Primary, Community Community Community Community Specialist & Specialist & & Acute & Acute Pharmacy Pharmacy Care Care Patient Patient Total Total £m 2017 2016 2017 2016 2017 2016 2017 2016 2017 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) • 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. EMIS Group plc Full year results presentation 2017 6
Financial review – revenue analysis Stronger recurring mix £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% • 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. EMIS Group plc Full year results presentation 2017 7
Financial review – cash flow Strong positive cash flows delivered again £m 2017 2016 Operating profit before exceptionals 27.6 31.8 • Reported cash from operations up 17% to £44.4m Depreciation and amortisation 20.8 19.8 (2016: £38.0m) Working capital 5.0 (5.3) • Adjusted cash from operations (before exceptionals) up 21% to £49.6m Share based payments 0.6 0.5 • Both measures stated after Patient investment. Cash flow from operating activities 54.0 46.8 • Working capital improvement on 2016, particularly Development costs capitalised (4.4) (5.7) driven by increase in deferred income. Adjusted cash from operations 49.6 41.1 • Cash cost of exceptionals relates to reorganisation/cost reduction programme costs Cash cost of exceptionals (5.2) (3.1) only. Cash from operations 44.4 38.0 • Capex includes: Business combinations - (3.8) • £4.0m of computer equipment (of which £1.2m is funded). Net capital expenditure (6.6) (5.9) • £1.0m of programme assets in EMIS Care. Transactions in own shares - 0.6 • Other in 2016 includes £1.5m proceeds from sale Tax (8.1) (7.7) of Pharmacy2U associate. Dividends (15.5) (14.0) • Net cash at £14.0m (improved from £0.4m net Other 0.2 1.5 debt at last year end). Change in net cash/(debt) 14.4 8.7 Closing net cash/(debt) 14.0 (0.4) EMIS Group plc Full year results presentation 2017 8
Financial review – balance sheet Solid balance sheet provides resilience £m 2017 2016 Goodwill 50.3 50.3 • Strong debt-free balance sheet with £14.0m net cash. Acquired intangible assets 29.7 36.5 • New debt facilities secured in June 2017 at reduced cost (£30.0m RCF/overdraft plus £30.0m accordion, Development costs 17.9 20.9 three-to-five year term). Property, plant and equipment and computer software used • Increased deferred income provides good revenue 25.0 25.4 internally visibility. • Provision reflects estimate of service level reporting JV and other current assets 43.0 41.9 charges expected to be paid in 2018. Deferred income (33.7) (28.4) • No remaining acquisition consideration. • Cost of final dividend £8.1m. 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 EMIS Group plc Full year results presentation 2017 9
Financial review – guidance and trends Factors affecting future financial performance Patient Share-based payments IFRS 15 Revenue • Increased H2 2017 level of investment to • Charge expected to increase in 2018 with • No material changes expected on be maintained in 2018. recent awards with annual run rate of c. adoption of new revenue recognition £1.0m. standard, effective 2018. Staff costs Tax rate IFRS 9 Financial instruments • Staff numbers and costs likely to increase with additional investment in development • Expected to remain close to UK statutory • No material changes expected on and customer-facing functions. rate. adoption of new revenue recognition standard, effective 2018. Development costs Capital expenditure IFRS 16 Leases • Expect amortisation to continue to track • Expect 2018 to be at similar or slightly ahead of capitalisation, although higher higher level to recent periods. • Will result in most of the Group’s operating level of capitalisation of costs likely from leases coming onto the Balance Sheet, EMIS Web clinical system upgrade. effective 2019. Further guidance on impact Working capital to be provided at the half year. Contract assets • Expect to be broadly neutral in 2018. • Deferred income release and related Dividends depreciation to remain at similar level in 2018. • 10% increase for final dividend (£8.1m in May 2018). EMIS Group plc Full year results presentation 2017 10
Operational review Andy Thorburn Chief Executive Officer
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 12 EMIS Group plc Full year results presentation 2017
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