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 2

Peter Southby Chief Financial Officer EMIS Group 3

Financial highlights Results broadly in line with the Board’s expectations Total Recurring Adjusted group Cash generated operating profit 1 from operations 2 revenue revenue £78.7m £64.0m £17.7m £27.5m + 1% + 6% + 5% unchanged 2015 H1: £77.8m 2015 H1: £60.5m 2015 H1: £16.9m 2015 H1: £27.5m Reported: £12.1m (2015 H1: £13.8m) Adjusted EPS 1 Interim dividend Net cash £0.7m 22.2p 11.7p + £9.8m + 8% + 10% 2015 H1: 20.5p 2015 H1: 10.6p 2015 H2: £9.1m net debt Reported: 14.9p (2015 H1: 16.6p) 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 of £2.9m (2015 H1: £3.1m). 4

Financial review - income statement H1 H2 H1 % change £m 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%) • 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%. 5

Financial review - segmental analysis H1 2015 H2 2015 H1 2016 Primary & Secondary Primary & Secondary Primary & Secondary £m Community Community & Specialist Community Community & Specialist Community Community & Specialist Care Pharmacy Care Total Care Pharmacy Care Total Care Pharmacy 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 13.4 1.9 2.3 17.6 16.2 2.4 1.9 20.5 14.7 2.2 1.5 18.4 segmental profit Group costs (0.7) (0.8) (0.7) Adjusted operating 16.9 19.7 17.7 profit Adjusted operating 28.6% 20.1% 10.7% 21.7% 34.4% 22.3% 9.2% 25.1% 30.1% 21.4% 7.6% 22.5% margin Development costs 1.6 0.5 1.0 3.1 1.5 0.5 1.1 3.1 1.1 0.9 0.9 2.9 capitalised Amortisation of (2.6) - (0.4) (3.0) (2.8) - (0.5) (3.3) (2.3) - (0.7) (3.0) development costs Amortisation of acquired (0.4) (0.3) (2.5) (3.2) (0.5) (0.3) (2.5) (3.3) (0.5) (0.3) (2.5) (3.3) intangible assets • 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 out starting in H2. • Secondary & Specialist Care performance behind expectations with higher new contract costs in Specialist, but H2 expected to be stronger. 6

Financial review - revenue analysis Revenue £m Nature H1 2015 H2 2015 H1 2016 mainly Licences 24.7 25.6 26.8 recurring Maintenance and software support 18.6 19.3 18.9 recurring mainly Other support services 15.3 15.3 14.7 recurring Training/consultancy/implementation 7.5 8.6 7.6 non-recurring Hosting 6.7 6.4 6.4 recurring Hardware 5.0 2.9 4.3 non-recurring 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 • 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

Financial review - cash flow H1 2015 H2 2015 H1 2016 £m • Cash from operations unchanged at Operating profit before exceptionals 13.8 16.1 14.3 £27.5m, with strong H1 weighted cash Depreciation and amortisation 10.6 10.7 10.1 flows. Working capital 5.9 (15.1) 5.7 • Working capital inflow as expected in H1. Share based payments 0.3 0.4 0.3 • Business combinations payment is final Cash flow from operating activities 30.6 12.1 30.4 instalment of Medical Imaging (£3.0m). (2.9) Development costs capitalised (3.1) (3.1) • Capex includes: Cash from operations 27.5 9.0 27.5 • £2.1m of Computer equipment (of Business combinations (2.3) (2.9) (3.0) which £1.6m is funded). • £0.4m in relation to EMIS India. Net capital expenditure (3.5) (3.7) (2.9) • Other includes £1.8m cash impact of cost Transactions in own shares 0.3 0.3 0.3 reduction programme and £2.1m minority Tax (2.9) (4.0) (3.5) shareholder dividend in H2 2015. Dividends (5.8) (6.6) (6.7) • Net cash at £0.7m (improved from £9.1m Other (0.2) (2.5) (1.9) net debt at last year end) further improved since by the £1.5m P2U disposal. Change in net cash/(debt) 13.1 (10.4) 9.8 Closing net cash/(debt) 1.3 (9.1) 0.7 8

Financial review - balance sheet £m H1 2015 H2 2015 H1 2016 • Strong balance sheet with low gearing Goodwill 68.6 54.4 54.4 (£4.6m in cash / £3.9m debt). Acquired intangible assets 44.1 42.6 39.2 • Bank facilities for renewal mid-2017 Development costs 21.5 21.2 21.2 (£20.0m Term/RCF/Overdraft). Property, plant and equipment and 25.5 25.2 24.3 • Deferred income provides good revenue purchased intangible assets visibility. Associate, JV and other current assets 37.0 35.2 37.9 • All acquisitions now fully paid. Deferred income (37.9) (28.0) (32.6) • Cost of interim dividend £7.4m. 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 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. 10

Chris Spencer Chief Executive Officer EMIS Group 11 11

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 * Digital Health Intelligence Market Forecast, NHS IT spend in the UK, 2015 – 21 12

Overview – NHS IT Spending • 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 Parliament 1 • “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 13