EMIS Group plc 2014 Final Results Presentation
Introduction & Agenda Introduction Chris Spencer Financial review Peter Southby Operational review Chris Spencer Summary and outlook Chris Spencer 2
Financial review Peter Southby Chief Financial Officer EMIS Group 3
Financial highlights Overall results in line with expectations • Positive contribution from acquisitions and strong organic growth Group revenue £137.6m (2013: £105.5m), up 30% (organic 11%) Recurring revenue £102.7m (2013: £81.4m), up 26% Adjusted group operating profit 1 £32.6m (2013: £26.1m), up 25% (organic 16%) • Reported - £29.1m (2013: £24.9m), up 17% Cash generated from operations 2 £38.3m (2013: £32.6m), up 17% Net debt £11.8m (2013: £13.5m), down 13% Adjusted EPS 1 39.5p (2013: 34.0p), up 16% • Reported – 35.3p (2013: 32.6p), up 8% Total dividend 18.4p (2013: 16.0p), up 15% • Including final dividend of 9.2p (2013: 8.0p), up 15% 1 Excludes release of contingent acquisition consideration, exceptional items, capitalisation and amortisation of development costs and amortisation of acquired intangibles. EPS calculations also adjust for related tax and non-controlling interest impact. 2 Adjusted to exclude development costs capitalised of £6.5m (2013: £6.1m). 4
Financial review - income statement H1 H2 FY FY £m 2014 2014 2014 2013 % change Revenue 66.4 71.2 137.6 105.5 30% Adjusted operating profit 14.6 18.0 32.6 26.1 25% Capitalised development costs 3.5 3.0 6.5 6.1 (10.9) Amortisation (5.2) (5.7) (6.1) Finance costs (0.3) (0.2) (0.5) (0.3) Exceptionals/other - 0.8 0.8 (1.2) Profit before tax 12.6 15.9 28.5 24.6 Tax (2.7) (3.0) (5.7) (4.7) Non-controlling interest (0.4) (0.3) (0.7) (0.5) Earnings 9.5 12.6 22.1 19.4 Adjusted EPS 17.3p 22.2p 39.5p 34.0p 16% Reported EPS 15.2p 20.1p 35.3p 32.6p 8% • Revenue increase driven by acquisitions, EMIS Web GP roll-out and Child Community & Mental Health (CCMH) wins - total organic increase 11% • Adjusted operating profit up by 25% - 16% organic • Exceptionals in 2014 relates to release of contingent acquisition consideration • 2014 effective tax rate 21.5% 5
Organic/acquisitions - income statement Organic Organic Organic Acquisitions Acquisitions £m 2014 1 2013 1 2014 2013 % change 108.1 97.0 11% 29.5 8.5 Revenue Recurring revenue 84.9 76.6 11% 17.8 4.8 Cost of sales (11.8) (11.2) 5% (1.0) (0.6) Staff costs (including capitalised (45.2) (43.2) 5% (19.9) (5.4) development costs) (14.1) (4.8) Other operating expenses (10.8) 31% (1.6) (3.8) (3.3) 16% - - Contract asset depreciation (4.0) (3.2) 21% (0.4) (0.1) Depreciation/purchased software amortisation 29.2 25.3 16% 3.4 0.8 Adjusted operating profit 4.7 5.3 -10% 1.8 0.8 Development costs capitalised Amortisation of development costs (4.3) (1.8) 131% (0.4) (0.1) Amortisation of acquired intangibles (1.8) (2.9) -37% (4.4) (1.3) Operating profit (pre-exceptional items) 27.8 25.9 8% 0.4 0.2 1 Includes results from acquisition of Digital Healthcare (August 2013), Ascribe (September 2013) and Indigo 4 (July 2014). • Strong organic growth complemented by contributions from acquisitions 6
Financial review - segmental analysis 2014 2013 Primary & Secondary Primary & Secondary & £m Community Community & Specialist Community Community Specialist Care Pharmacy Care Total Care Pharmacy Care Total % change Revenue 89.7 18.4 29.5 137.6 80.0 17.0 8.5 105.5 30% Recurring revenue 69.6 15.3 17.8 102.7 62.3 14.3 4.8 81.4 26% Adjusted segmental 26.4 3.9 3.4 33.7 22.2 3.9 0.8 26.9 25% profit Group costs (1.1) (0.8) Adjusted operating 32.6 26.1 25% profit Adjusted operating Revenue 29.5% 21.0% 11.6% 23.7% 27.7% 22.8% 9.7% 24.7% margin Development costs 4.0 0.8 1.8 6.6 5.3 - 0.8 6.1 capitalised Amortisation of (4.3) - (0.4) (4.7) (1.8) - (0.1) (1.9) development costs Amortisation of acquired intangible (1.1) (0.7) (4.4) (6.2) (2.1) (0.9) (1.2) (4.2) assets • Primary & Community Care growth driven by EMIS Web GP penetration, CCMH, project engineering • Community Pharmacy growth supporting investment in new product for piloting later this Profit year • Secondary & Specialist Care includes full year contribution from Ascribe and Digital Healthcare acquisitions and part period contribution from Indigo 4 and Medical Imaging 7
Financial review - revenue analysis % of £m 2014 2013 % of revenues revenues Licences 43.8 40.0 32% 38% Maintenance & software support 33.4 17.7 24% 17% Hosting 14.0 14.3 10% 14% Hardware 7.9 6.9 6% 6% Training/consultancy/implementation 16.9 12% 12.1 11% Other support services 21.6 14.5 16% 14% Total 137.6 100% 105.5 100% Recurring 102.7 75% 81.4 77% Non-recurring 34.9 24.1 25% 23% Total 137.6 100% 105.5 100% • Good visibility through recurring revenue growth of £21.3m – organic £8.3m, acquisitions £13.0m Revenue • EMIS Web roll-out driving growth in Hosting (though some revenues now in Maintenance & software support) • Acquisitions impact mainly in Maintenance & software support, 8 Training/consultancy/implementation and Other support services
Financial review - cash flow £m 2014 2013 • Cash from operations up 17% at £38.3m, Operating profit 29.1 24.9 with strong H1 weighted cash flows Depreciation and amortisation 19.0 12.8 Release of contingent acquisition • Working capital outflow with R&D tax (0.9) - consideration credits, contract timings Working capital/share based payments (2.4) 1.0 • Business combinations: Cash flow from operating activities 44.8 38.7 • Indigo 4 (£3.8m) • Medical Imaging (£6.5m) Development costs capitalised (6.5) (6.1) 38.3 Cash from operations 32.6 • Capex includes: • Computer equipment (£4.0m) Business combinations (10.3) (57.5) • Arrivals screens software (£1.2m) Placing proceeds - 26.3 • Motor vehicles (£1.1m) • Refurbishment (£1.1m) Net capital expenditure (8.3) (8.7) Transactions in own shares (1.5) 0.6 • EBT share purchase (£2.0m) Tax (5.2) (5.1) • Net debt at £11.8m (down from £13.5m at Dividends (10.8) (9.1) last year end) Other (0.5) (0.3) Change in net debt 1.7 (21.2) 9
Financial review - balance sheet £m 2014 2013 • Strong balance sheet with low gearing Goodwill 68.6 60.1 (£6.9m in cash / £18.8m debt) Acquired intangible assets 47.3 46.9 • Bank facilities secured to 2017 (£26.0m Development costs 21.4 19.5 Term/RCF) Property, plant & equipment and 26.5 25.4 • Deferred income growth provides good purchased intangible assets revenue visibility Associate and other current assets 32.9 25.6 • Cost of final dividend £5.8m Deferred income (30.0) (25.4) Contingent consideration (5.3) (4.0) Other current liabilities (22.0) (19.0) Deferred tax (12.7) (11.5) Net debt (11.8) (13.5) Net assets 114.9 104.1 10
Financial review - financial guidance and trends Acquisitions • Indigo 4 (acquired July 2014 for net £3.8m cash consideration (all paid) and with revenues of £2.5m and profit of £0.7m historically) • Medical Imaging (acquired December 2014 for net £6.5m cash consideration (plus up to £3.0m contingent) and with revenues of £6.3m and profit of £1.3m historically) • Acquired intangible amortisation increasing to £6.4m in 2015 with new acquisitions’ impact replacing fully amortised software for EMIS and Rx Systems Share-based payments • Charge increasing in 2015 with recent awards Tax rate • Expected to remain close to UK statutory rate Development costs • Continued capitalisation only where IFRS criteria met • Amortisation increasing in line with EMIS Web GP estate and Ascribe • Expect capitalisation and amortisation to be broadly equal in 2015 Capital expenditure • Expect 2015 to be lower overall (change in car funding) 11
12 12 Operational review Chief Executive Officer Chris Spencer EMIS Group
Group Strategy Strong focus on strategic matters maintained. Group strategic priorities for 2014 included: Strategic customer engagement • GP Systems of Choice (GPSoC) framework procurement successfully completed (Lots 1 and 2) • Maintained engagement with evolving organisational structures in primary care – federated and enterprise • Doubled 100% EMIS CCGs /Trusts & Boards • Procurement engagement began with first “supermarket” pharmacy customer • Pioneer (pan-healthcare) economies identified and engagement began Divisional restructuring/integration • Management structure re-designed and all positions filled • Primary Care (EMIS Web) Community and Children’s and Secondary Care Mental Health teams merged Group product integration • Integrated product roadmap developed and implementation begun • Primary Care (EMIS Web) Community and Children’s and Secondary Care Mental Health product roadmaps aligned • EMIS Health holistic branding for 2015 Optimisation of software specification and development • Medicine Manager/Electronic Health Record Viewer completed and began to be rolled-out • Development of Community Pharmacy next generation product continued to plan • Public Health England update developed and implemented across the whole of the English diabetic retinopathy estate Enterprise and commissioning products • Solutions to meet new organisational needs in primary care created and released • Group Health Analytics Service established 13
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