Healthcare without boundaries EMIS Group plc H1 2013 Results Presentation Chris Spencer – CEO September 2013 Peter Southby – CFO
Introduction Chris Spencer CEO
Agenda • Introduction Chris Spencer • Financial Review Peter Southby • Operational Review Chris Spencer • Summary and Outlook Chris Spencer 3
Financial review Peter Southby CFO
Financial highlights • Total revenue of £47.1m (2012 H1: £42.3m), up 11% • Recurring revenue of £36.0m (2012 H1: £34.4m), up 5% • Group operating profit: - Reported - £12.1m (2012 H1: £12.1m) - Adjusted (1) - £11.6m (2012 H1: £11.5m) • Net cash generated from operations (2) of £19.0m (2012 H1: £21.7m) • Net cash at £14.8m (2012 H1: £17.7m) • EPS: - Reported – 15.62p (2012 H1: 16.32p) - Adjusted (1) – 14.89p (2012 H1: 15.58p) • Interim dividend 8.0p (2012 H1: 7.1p), up 13% (1) Excludes capitalisation and amortisation of development costs and amortisation of acquired intangibles. For EPS also adjusts for related tax impact. (2) Stated after deduction of development costs capitalised of £2.7m (2012 H1: £2.2m). 5
Income statement H1 H2 H1 % Change % Change £m 2012 2012 2013 Vs. H1 2012 Vs. H2 2012 11% 7% Revenue 42.3 44.0 47.1 Adjusted operating profit 11.5 11.3 11.6 - 2% Capitalised development costs 2.2 3.1 2.7 Amortisation (1.7) (1.9) (2.2) Exceptionals/other 0.1 (0.5) (0.1) Profit before tax 12.1 12.0 12.0 Tax (2.3) (2.3) (2.7) MI/other (0.3) (0.3) (0.2) Earnings 9.5 9.4 9.1 Adjusted EPS 15.6p 15.2p 14.9p -4% -2% -4% -3% Reported EPS 16.3p 16.2p 15.6p • Revenue increase driven by EMIS Web roll-out • Adjusted operating profit ahead despite 22% staff costs increase and reduced Defence revenues • 2013 underlying tax rate 22% excluding deferred tax rate change • EPS comparatives affected by deferred tax rate change in 2012 – H2 2013 similar effect anticipated 6
Segmental analysis EMIS RX Total % % £m (rounded) H1 H2 H1 H1 H2 H1 H1 H2 H1 Change Change Vs. H1 Vs. H2 „12 „12 „13 „12 „12 „13 „12 „12 „13 „12 „12 Revenue 34.2 35.6 38.7 8.1 8.4 8.4 42.3 44.0 47.1 11% 7% Recurring revenue 28.2 28.5 29.0 6.2 6.5 7.0 34.4 35.0 36.0 5% 3% Segmental 11.0 11.5 10.9 1.3 1.7 1.6 12.3 13.2 12.5 operating profit Capitalised (2.2) (3.1) (2.7) - - - (2.2) (3.1) (2.7) development costs Amortisation 1.2 1.5 1.7 0.4 0.4 0.5 1.6 1.9 2.2 Adjusted 10.0 9.9 9.9 1.7 2.1 2.1 11.7 12.0 12.0 segmental profit Group costs (0.2) (0.7) (0.4) Adjusted operating 11.5 11.3 11.6 - 2% profit • EMIS growth driven by EMIS Web roll-out including hosting, training but lower Defence revenues • Cost base scaled up with average staff numbers 20% higher vs H1 2012 • RX benefited from growth in estate and Multepos acquisition 7
Core business analysis % % Change Change H1 % of H2 % of H1 % of Vs. H1 Vs. H2 £m 2012 sales 2012 sales 2013 sales 2012 2012 Licenses & software support 17.8 18.6 19.1 42% 42% 40% 7% 3% Other support services 9.9 12.2 11.6 23% 28% 25% 17% -5% Hosting 3.9 5.1 6.3 9% 12% 13% 62% 24% Hardware and training 7.0 6.1 7.9 17% 14% 17% 13% 30% Other 3.7 2.0 2.2 9% 4% 5% -41% 10% Total 42.3 44.0 47.1 100% 100% 100% 11% 7% Recurring 34.4 35.0 36.0 81% 80% 76% 5% 3% Non-recurring 7.9 9.0 11.1 19% 20% 24% 41% 23% Total 42.3 44.0 47.1 100% 100% 100% 11% 7% • Recurring revenue growth in both EMIS and RX • Non-recurring revenue growth in Egton Network Services, Training • Growth in hosting and training driven by EMIS Web roll-out • Other includes Defence business 8
Cash flow H1 H2 H1 2012 2012 2013 £m • Working capital impact of NHS Operating profit 12.1 12.1 12.1 reorganisation resolved post period Depreciation and amortisation 4.0 4.5 5.1 • Cash from operations at £19.0m Working capital 7.8 (7.8) 4.5 • Business combinations for Multepos Cash flow from operating activities 23.9 8.8 21.7 acquisition (Digital Healthcare £3.1m Development costs capitalised (2.2) (3.1) (2.7) post period) Cash from operations 21.7 5.7 19.0 • Capex includes: Business combinations (0.8) - (0.7) • Hosting assets (£2.6m) Net capex (5.9) (6.9) (5.2) • Warehouse purchase (£1.5m) Transactions in own shares 0.2 (2.0) 0.2 • Motor vehicles (£0.5m) Tax paid (1.9) (2.7) (2.1) • Net cash increased to £14.8m Dividends (3.6) (4.1) (4.1) Change in net cash 9.7 (10.0) 7.1 9
Balance sheet H1 H2 H1 £m 2012 2012 2013 Goodwill 22.0 22.0 22.6 • Strong balance sheet with £17.8m in Other intangible assets 29.1 30.8 31.6 cash/£3.0m debt • Goodwill on Multepos acquisition Property, plant & equipment 18.4 22.1 24.1 • Investment in PPE slowing Associate and other current 17.0 19.2 23.8 assets • Temporary debtor increase now Deferred income (22.0) (15.9) (24.6) reversed Other current liabilities (16.6) (14.3) (15.1) • Increase in deferred income provides good revenue visibility Deferred tax (7.5) (7.5) (7.6) • Deferred tax balance doesn‟t yet Net cash 17.7 7.7 14.8 reflect future corporation rate change to 20% Net assets 58.1 64.1 69.6 10
Financial Guidance and Trends • Tax rate: - Impact of deferred tax rate change in H2 (c. £1.0m) - Presentational change with “Above the line” R&D tax credits • Development costs: - Continued capitalisation only where IFRS criteria met - Amortisation increasing with EMIS Web roll-out • Share-based payment charge to increase with recent awards and Remuneration Committee review of senior incentivisation • Capex reduced in H2, together with improved debtor position, expected to produce positive cash flow despite usual seasonality • Digital Healthcare revenue c. £3.4m p.a., expecting double-digit margin in 2014 • Overall H2 performance expected to be stronger than H1, driven by EMIS segment • 2014 will see reduction in the revenue and costs associated with EMIS Web roll-out 11
Operational Review Chris Spencer CEO
Operational Highlights • UK GP software market leading position maintained: - UK market share 52.4% (5,170 GP practices) (2012 H2: 51.2% (5,113 GP Practices)) • EMIS Web GP roll-out proceeding as planned - by the period end : - 2,580 GP practices live (2012 H2: 1,635) - 948 unfulfilled orders (2012 H2: 1,252) - 1,663 practices in EMIS Web GP familiarisation service (2012 H2: 2,564) • New GP sites wins: - 174 migrations from iSoft in England - Roll-out of EMIS Web in Wales begun • RX Systems: - High street pharmacy estate grown with market share of 34.9% (4,727 pharmacies) (2012 H2: 34.8% (4,595 pharmacies)) • EMIS Web CCMH projects start to bear fruit e.g. in Glasgow • Healthcare Gateway pilots continue to turn to full agreements and TPP agreement signed • Digital Healthcare acquisition concluded 13
Operational review – EMIS GP systems • EMIS Web roll-out continues on plan • Business continues to perform well despite competition • UK market leading position extended • PCT to CCG transition managed • GP Systems of Choice framework agreement – extension in hand • Hub office in Scotland opened • iSoft/NHS Wales opportunities 14
EMIS Web GP • Accelerated roll-out to GPs maintained: - 2,580 GP practices live (2012 H2: 1,635) - 948 unfulfilled orders (2012 H2: 1,252) - 1,663 practices in EMIS Web GP familiarisation service (2012 H2: 2,564) - Total orders as at 5 September 2013: 3,625 - Gross wins circa 220 practices - Gross losses circa 60 practices - West London 130 sites at risk • Maximum delivery capability of 200 EMIS Web practices and likely average of 150 maintained • EMIS Web Mobile released 15
Rx Systems • Estate grown with market share at 34.9% (4,727 pharmacies (2012 H2: 34.8% (4,595 pharmacies)) • Since acquisition RX has almost doubled its revenues, profits, customer base and market share • Acquired and successfully integrated Multepos in January 2013 • Piloted Medicine Manager sites in EMIS Web GP 16
EMIS Web CCMH & Integrated Care • Director of CCMH appointed and ring fenced development and sales resource further strengthened • CCMH Pathfinder projects progressing well but commercial return remains slower than expected • Glasgow project commenced • By period end, 202 (2012 H2:195) healthcare services using EMIS Web for the delivery of integrated care • Digital Healthcare acquisition for £3.1m • Healthcare Gateway concludes agreement with TPP 17
Digital Healthcare • Leading provider of diabetic retinopathy screening and other ophthalmology-related solutions • England and Wales market share in excess of 75% • Strong position in profitable niche market adjacent to Group's core in GP and Community Pharmacy core • Matches cross-organisational healthcare strategy • Group opportunities: • Hosted services • Full managed Diabetic Retinopathy screening service 18
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