EMIS Group plc 2015 final results presentation
Introduction & Agenda Introduction Chris Spencer Financial review Peter Southby Operational review Chris Spencer Summary and outlook Chris Spencer 2
Overview – another strong year for EMIS Group • Major provider of UK healthcare software, information technology and related services • Strong revenue visibility, order book and pipeline - 20% growth in recurring revenue • Maintained or grown already strong market share in every major area of healthcare: Primary & Community, Community Pharmacy and Secondary & Specialist • Clinical software businesses rebranded as EMIS Health - simplifies branding message and emphasises strategic commitment to integrated solutions helping connect care • Can facilitate the NHS’s connected care strategy across every major UK healthcare setting through organic growth, partnering or acquisition • In a unique position 3
Peter Southby Chief Financial Officer EMIS Group 4
Financial highlights Results in line with the Board’s expectations • Positive contribution from organic growth and acquisitions Total Recurring Adjusted group Cash generated revenue revenue operating profit 1 from operations 2 £36.6m £155.9m £123.0m £36.5m + 13% (organic 5%) + 20% (organic 8%) + 12% (organic 7%) - 5% 2014: £137.6m 2014: £102.7m 2014: £32.6m 2014: £38.3m Reported: £11.4m (2014: £29.1m) Net debt Adjusted EPS 1 Total dividend £9.1m 45.3p 21.2p - £2.7m + 15% + 15% 2014: 39.5p 2014: £11.8m 2014: 18.4p Reported: 7.1p (2014: 35.3p) Including final dividend of 10.6p (2014: 9.2p) 1 Excludes impairment charges, release of contingent acquisition consideration, 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 after deduction of capitalised development costs of £6.2m (2014: £6.5m). 5
Financial review - income statement H1 H2 FY FY % £m 2015 2015 2015 2014 change Revenue 77.8 78.1 155.9 137.6 13% Adjusted operating profit 16.9 19.7 36.6 32.6 12% Capitalised development costs 3.1 3.1 6.2 6.5 Amortisation – development costs (3.0) (3.3) (6.3) (4.7) Amortisation – acquired intangibles (3.2) (3.3) (6.5) (6.2) Finance costs (0.2) (0.3) (0.5) (0.5) Exceptionals/other - (18.6) (18.6) 0.8 Profit before tax 13.6 (2.7) 10.9 28.5 Tax (2.8) (2.8) (5.6) (5.7) Non-controlling interest (0.4) (0.4) (0.8) (0.7) Earnings 10.4 (5.9) 4.5 22.1 Adjusted EPS 20.5p 24.8p 45.3p 39.5p 15% Reported EPS 16.6p (9.5p) 7.2p 35.3p • Revenue increase driven by acquisitions and community, children’s and mental health (CCMH) wins - total organic increase 5% despite lower EMIS Web for GP roll-out related revenues. • Adjusted operating profit up by 12% - 7% organic. • Exceptionals in H2 2015 relate to impairment charges for Secondary Care business (£16.2m) and minority investment in Pharmacy2U (£2.3m). In 2014, credit reflects release of contingent acquisition consideration. • 2015 effective tax rate 20.2%. 6
Financial review - organic/acquisitions income statement Organic Organic Organic % Acquisitions Acquisitions £m 2015 1 2014 1 2015 2014 Increase Revenue 142.2 136.0 5% 13.7 1.6 Recurring revenue 110.1 101.6 8% 12.9 1.1 Cost of sales (12.9) (12.7) 2% - (0.1) Staff costs (including capitalised (67.6) (64.1) 5% (6.1) (1.0) development costs) Other operating expenses (18.8) (18.8) - (5.4) (0.1) Contract asset depreciation (3.2) (3.8) -16% - - Depreciation/amortisation of software used (5.1) (4.4) 29% (0.2) - internally Adjusted operating profit 34.6 32.2 7% 2.0 0.4 Development costs capitalised 6.2 6.5 -5% - - Amortisation of development costs (6.3) (4.7) 47% - - -11% Amortisation of acquired intangibles (5.6) (6.0) (0.9) (0.2) Operating profit (pre-exceptional items) 28.9 28.0 3% 1.1 0.2 1 Includes results from acquisitions of Indigo 4 (July 2014), Medical Imaging (December 2014) and Pinbellcom (July 2015). • Consistent organic growth with strong focus on cost complemented by strategic bolt-on acquisitions. 7
Financial review - segmental analysis 2015 2014 Primary & Secondary & Primary & £m Community Community Specialist Community Community Secondary & Care Pharmacy Care Total Care Pharmacy Specialist Care Total Revenue 93.9 20.0 42.0 155.9 89.7 18.4 29.5 137.6 Recurring revenue 77.3 16.6 29.1 123.0 69.6 15.3 17.8 102.7 Adjusted segmental 29.6 4.3 4.2 38.1 26.4 3.9 3.4 33.7 profit Group costs (1.5) (1.1) Adjusted operating profit 36.6 32.6 Adjusted operating 31.5% 21.2% 10.0% 23.4% 29.5% 21.0% 11.6% 23.7% margin Development costs capitalised 3.1 1.0 2.1 6.2 4.0 0.8 1.8 6.6 Amortisation of development (5.4) - (0.9) (6.3) (4.3) - (0.4) (4.7) costs Amortisation of acquired (0.9) (0.6) (5.0) (6.5) (1.1) (0.7) (4.4) (6.2) intangible assets • Primary & Community Care growth driven by new contracts in community, children’s and mental health (CCMH) and by completion of EMIS Web GP roll-out in England and Wales. • Community Pharmacy growth supporting investment in new ProScript Connect product for launch later this year. • Secondary & Specialist Care has grown profit despite challenging period for Secondary. • Margin improvement in organic business and more to come from Secondary & Specialist. 8
Financial review - revenue analysis £m 2015 2014 Nature mainly Licences 50.3 43.8 recurring Maintenance and software support 37.9 33.4 recurring mainly Other support services 30.6 21.6 recurring Training/consultancy/implementation 16.1 16.9 non-recurring Hosting 13.1 14.0 recurring Hardware 7.9 7.9 non-recurring Total 155.9 137.6 Recurring 123.0 102.7 Non-recurring 32.9 34.9 Total 155.9 137.6 • Good visibility through recurring revenue growth of £20.3m – organic £8.5m, acquisitions £11.8m. • Acquisitions impact mainly other support services (Medical Imaging). • Achieving full EMIS Web roll-out in England and Wales results in lower training/consultancy/implementation revenues. 9
Financial review - cash flow £m 2015 2014 • Cash from operations at £36.5m, slightly down on 2014 Operating profit 11.4 29.1 • Working capital outflows in particular: Depreciation and amortisation 21.3 19.0 • Reduction in creditors (£2.5m one off supplier balances and £1.1m bonus accrual at end of Impairment charges 18.5 - 2014 not repeated in 2015) Release of contingent acquisition • Reduction in deferred income (£2.6m net release - (0.9) consideration to revenue for funded hosting assets (offset by Working capital (9.2) (2.7) lower CapEx) and £1.3m release for Defence licences paid in advance) Share based payments 0.7 0.3 • Increase in debtors (£0.8m growth in CCMH, Cash flow from operating activities 42.7 44.8 £0.5m timing of GPSoC payments) Development costs capitalised (6.2) (6.5) • Business combinations: Cash from operations 36.5 38.3 • Final Ascribe earnout payment (£2.25m) • Pinbellcom (£3.0m) Business combinations (5.2) (10.3) Net capital expenditure (7.2) (8.3) • Capex includes: Transactions in own shares 0.6 (1.5) • Secondary Care office fit out (£1.6m) • Other property improvements (£1.5m) Tax (6.9) (5.2) • Computer equipment (£2.9m) Dividends (12.4) (10.8) • ERP system (£1.3m) Other (2.7) (0.5) • Other includes £2.1m minority shareholder dividend Change in net debt 2.7 1.7 Closing net debt (9.1) (11.8) 10
Financial review - balance sheet £m 2015 2014 Goodwill 54.4 68.6 • Strong balance sheet maintained after impairment charges, with low gearing Acquired intangible assets 42.6 47.3 (£4.7m in cash / £13.8m debt). Development costs 21.2 21.4 • Bank facilities secured to 2017 (£22.0m Term/RCF/overdraft). Property, plant and equipment and 25.2 26.5 computer software used internally • Deferred income provides good revenue Associate, JV and other current assets 35.2 32.9 visibility. Deferred income (28.0) (30.0) • Contingent consideration is for Medical Imaging. Contingent consideration (3.0) (5.3) • Cost of final dividend £6.7m. Other current liabilities (20.9) (22.0) Deferred tax (10.5) (12.7) Net debt (9.1) (11.8) Net assets 107.1 114.9 11
Financial review - financial guidance and trends Acquisitions • Pinbellcom acquired July 2015 for net £3.0m cash consideration and with last financial year revenues of £1.2m and profit of £0.4m. Contract assets • Revenue and related depreciation expected to remain broadly level in 2016 (subject to timing of CapEx). Staff costs • Redundancy costs taken in H1 with benefit accruing in H2. Share-based payments • Charge increasing into 2016 with recent awards. Tax rate • Expected to remain close to UK statutory rate. Development costs • Expect capitalisation and amortisation to continue to be broadly equal. Capital expenditure • Expect 2016 to be higher with an increase in funded hosting CapEx. Working capital • Some expansion with business growth, but at lower levels than seen in 2015. Dividends • Progressive dividend policy maintained with growth tracking EPS. 12
Chris Spencer Chief Executive Officer EMIS Group 13 13
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