REG - EMIS Group PLC - Final Results
18/03/2021 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20210318:nRSR6322Sa&default-theme=true
RNS Number : 6322S EMIS Group PLC 18 March 2021
18 March 2021
EMIS Group plc
("EMIS Group", "the Group" or "EMIS")
Final Results for the year ended 31 December 2020
EMIS Group plc (AIM: EMIS.L), the UK leader in connected healthcare software
and services, today announces its final results for the year ended 31 December
2020.
Financial highlights
2020 2019 Change
Revenue
Total revenue £159.5m £159.5m -
Recurring revenue(1) £130.0m £125.0m 4%
Operating profit
Adjusted(1) £39.3m £39.3m -
Reported £35.8m £26.8m 33%
Cash flow and net cash
Cash generated from operations - adjusted(1) £58.9m £46.3m 27%
Cash generated from operations - reported £64.1m £50.1m 28%
Net cash(1) £53.0m £31.1m 70%
Earnings per share
Adjusted(1) 51.0p 51.4p (1%)
Reported 48.1p 36.0p 34%
Dividends
Proposed final 16.0p 15.6p 3%
Total for year 32.0p 31.2p 3%
(1 )For an explanation of the alternative performance measures used in
this report, please refer to the appendix.
Business highlights
Resilient financial performance and further strategic progress:
· Revenues, adjusted operating profit and adjusted operating margin
maintained while recurring revenue, cash flow and reported operating profit
all increased
· Successful transition to GP IT Futures framework, with leadership
positions maintained or improved in key NHS markets
· Resilient business model with recurring revenue up 4% to £130.0m,
representing 82% of total revenue (2019: 78%), £28m of new business
delivered in the period and strong cash position of £53.0m (2019: £31.1m)
· Increased final dividend for tenth consecutive year
Well positioned to meet evolving requirements of healthcare sector today and
in the future:
· The Group's Pinnacle product became the system used by healthcare
professionals throughout England delivering Covid-19 vaccinations to capture
and share essential immunisation information
o deployed in almost 1,400 vaccination centres and has supported 14.9m
vaccinations (as at 1 March 2021)
· Positive response to EMIS-X Analytics since launch in October 2020
o supported large-scale epidemiological Covid-19 research with NHS England,
Oxford University and the London School of Tropical Hygiene & Medicine
o contracted with Oxford University and a global, science-led
biopharmaceutical business to undertake a major clinical research project in
the treatment of Covid-19
· Significantly increased usage of services provided by the Patient
Access app and website, driven by increased demand for digital routes to
healthcare during the pandemic, providing platform for future growth
· Supported community pharmacies to play a greater role in alleviating
pressure on the NHS through managing and delivering repeat prescriptions and
offering digital consultations
· Partner programme performed strongly with increasing choice of
accredited software systems and services, further developing this powerful
ecosystem
Outlook
· EMIS Group is well positioned to respond to the challenges our
customers face with a combination of innovative technology, 82% recurring
revenue and leading market shares
· EMIS-X offers significant potential to grow the business in both the
NHS and life sciences sectors in the mid-term
· Flexible business model will enable the Group to adapt to proposed
changes to NHS organisational structure
· Current trading in line with expectations, with a good pipeline of
opportunities
· Expect to return to growth in 2021, with new product developments
leading to opportunities for higher growth levels in 2022 and beyond
Andy Thorburn, Chief Executive Officer of EMIS Group, said:
"2020 has been another year of positive progress for EMIS Group, during which
healthcare has been at the centre of the global agenda. The front line
response to the pandemic has been outstanding and I am proud of all my
colleagues who have stepped up and helped our NHS heroes in every possible
way, from supporting the clinicians delivering patient care on the front line
to playing a vital role in England's vaccination programme.
"While Covid-19 presented unprecedented challenges to the sector, it has also
been a catalyst for change, leading to a more rapid adoption of digital
healthcare that is here to stay. We believe that EMIS Group is well positioned
to respond to the challenges our customers face, with a combination of our
innovative technology, leading market shares and strong recurring revenues
that enable us to invest with confidence.
"Our product development investment means our current and emerging software is
well suited to meet the evolving requirements of the healthcare sector. We
remain focussed on the vision of a digital, connected healthcare world and we
look forward to achieving great results for our customers, colleagues and
shareholders."
There will be a webcast and conference call of the results today at 9.00am for
analysts and investors. Please contact Pandora Yadgaroff at MHP Communications
on 020 3128 8168 or email emis@mhpc.com (mailto:emis@mhpc.com) for details.
Enquiries:
For further information, contact:
EMIS Group
plc
Tel: 0330 024 1269
Andy Thorburn, CEO
Peter Southby, CFO
www.emisgroupplc.com (http://www.emisgroupplc.com)
@EMISGroup
Numis Securities Limited (Nominated Adviser & Broker)
Tel: 020 7260 1000
Oliver Hardy/Simon Willis/James Black
MHP
Communications
Tel: 020 3128 8168
Reg Hoare/Giles Robinson/Florence Mayo/Pandora Yadgaroff
emis@mhpc.com
Information for investors, including analyst consensus forecasts, can be found
on the Group's website at www.emisgroupplc.com/investors
(http://www.emisgroupplc.com/investors) .
Notes to Editors
EMIS Group is the UK leader in connected healthcare software and systems. Its
solutions are widely used across every major UK healthcare setting. EMIS
Group's aim is to join up healthcare through innovative technology, helping to
deliver better health outcomes to the UK population, supporting longer and
healthier lives.
EMIS Group has two core business segments: EMIS Health and EMIS Enterprise.
EMIS Health is a supplier of innovative integrated care technology to the NHS,
including primary, community, acute and social care.
EMIS Enterprise is focussed on growth in the business-to-business technology
sector within the healthcare market, including management of medicines,
partner businesses, life sciences and patient-facing services.
LEI: 213800K474ZZK76NX913
CHIEF EXECUTIVE OFFICER'S STATEMENT
Overview
2020 has been another year of positive progress for EMIS Group. While Covid-19
presented unprecedented challenges to the healthcare sector, it has also been
a catalyst for change, leading to a more rapid adoption of digital healthcare
that is here to stay. EMIS reacted quickly to the changing needs of our
customers with a focus on supporting both the NHS and our colleagues through
the pandemic in every way we can.
EMIS Group delivered a resilient financial performance during the period, with
revenue and adjusted operating profit at very similar levels to 2019, while
reported operating profit grew strongly. Over the year we increased our cash
position by 70% and are pleased to be able to recommend an increased final
dividend for the tenth consecutive year.
Our NHS and community pharmacy customers have done an incredible job in 2020,
as have all our partners in the UK healthcare sector. The front line response
to the pandemic has been outstanding and I am delighted to say that all my
colleagues at EMIS have stepped up and helped our NHS heroes in every possible
way, making a strong social contribution by supporting the clinicians that are
delivering patient care on the front line.
Operational execution
EMIS's responsiveness and adaptability during the pandemic has enabled us to
manage the business well throughout this challenging time. Early preparation
meant that we moved 99% of our people to homeworking in both the UK and India
ahead of the first formal lockdown announcement in March 2020. We received
positive feedback from our customers throughout this period and were pleased
to support the NHS front line appropriately.
Our combination of homeworking and on-site working enabled us to continue to
provide technical support to our end users during this busy time without any
interruption to service. Importantly, no staff were furloughed and no
redundancies took place during lockdown.
Our robust business model has been the foundation for our performance this
year, with 82% recurring revenue (2019: 78%). In addition, our account
management and sales model has yielded good results with £28m of new business
delivered in the year.
The new business product mix delivered during 2020 was different to what we
had expected at the start of the year, as a direct consequence of the
pandemic. For example, we saw higher than usual hardware sales resulting from
the need for rapid deployment of mobile working solutions during lockdown.
Growth was delayed in some areas of the business, such as in the uptake of
Patient marketplace services and sales in the community pharmacy market, as
patients made fewer visits to community pharmacies during the first lockdown.
We have made further improvements in our customer support area, with formal
service level agreement (SLA) performance significantly improving year on
year. We are focussed on continuous improvement in customer and partner
satisfaction in 2021 and beyond.
Pinnacle acquisition and integration
The business was strengthened in March 2020 with the acquisition of Pinnacle,
owners and operators of the widely-used PharmOutcomes platform. The company
has integrated well into the Group, both culturally and operationally,
especially considering it was acquired at the beginning of the pandemic.
Almost immediately following the acquisition, Pinnacle began working with the
Patient team to provide a new GP patient referral service as part of Patient
Access for Professionals, called Patient Access Connect. This allows practice
staff to triage patients and refer them to a community pharmacist in instances
where they do not need to see a GP, such as for a minor illness consultation.
Interoperability is progressing well between Pinnacle's core PharmOutcomes
system and our existing community pharmacy system, ProScript Connect. In the
summer, the two systems began to successfully exchange data to enable
pharmacists to check for shielding patients who needed their medicines to be
home delivered during the pandemic.
From December onwards, Pinnacle's Outcomes4Health system became the system
used by healthcare professionals throughout England delivering vaccinations to
capture and share essential immunisation information. It is being used by
healthcare professionals in GP-led primary care, community pharmacy and mass
vaccination centres, linking directly with the National Immunisation
Management Service (NIMS) for vital data exchange and sharing Covid-19
vaccination data back into the GP record. By 1 March 2021, Outcomes4Health had
been deployed in almost 1,400 vaccination centres and has supported 14.9m
vaccinations, as well as underpinning the NHS daily reporting on vaccination
delivery.
Our product roadmap
We continued to bring new talent into our global development team during the
pandemic and now have 687 people in our core product development team
representing 45% of our employees, with our team in Chennai continuing to go
from strength to strength. This number has increased from 417 in 2018, with
the growth funded through efficiency enhancements in other parts of our
business.
Technology development continued in line with our product roadmap, including
the early release of EMIS-X Analytics during the year, and we remain committed
to continuing investment in new technology through 2021 and beyond.
The positive customer response to EMIS-X Analytics has been particularly
encouraging since its launch in October 2020. We have secured pilot contracts
with 25 NHS organisations for use of our Explorer analytics product to analyse
and drive improvements to healthcare in local populations, including winter
planning and identifying Covid-19 hotspots in the local area. We have been
supporting large-scale epidemiological Covid-19 research with NHS England and
researchers from Oxford University and the London School of Tropical Hygiene
& Medicine, and have contracted with Oxford University and a global,
science-led biopharmaceutical business to help recruit and screen patients for
a major clinical research project in the treatment of Covid-19.
In addition we are collaborating with one of the top five global
pharmaceutical companies to implement a neural network, and the first
non-image based artificial intelligence deployed in healthcare, into EMIS Web
to aid early detection of atrial fibrillation and reduce occurrence of strokes
across the UK population.
Our culture
Our culture continues to evolve positively. During 2020 we moved to a flexible
working culture, becoming a primarily homeworking business with plans for our
office spaces to be transformed into collaboration hubs for team working,
meetings and cross-group teamwork. We made this change in consultation with
our staff, after our mid-year survey showed that 96% of UK staff were happy to
work from home.
Following an employee survey on our culture at the beginning of 2020, we
launched our updated corporate values in the second half of the year. The
values are supportive, responsible, transformative and collaborative and they
capture the essence of what makes EMIS a great place to work both in the UK
and in India. We are committed to embedding these values as part of our Group
culture through employee engagement and communication as we look to live the
values during 2021 and beyond.
We believe it is very important to recognise our team members for the positive
contributions they make on a daily basis, and so employee reward and
recognition was another key focus area for us in 2020. This included the
launch of a new "on demand" system where managers can immediately recognise
great behaviour or achievements and reward the individual on the spot.
Employee wellbeing was also a big focus for us during 2020, with 28 volunteers
trained as mental health first aiders for their colleagues. Their proactive
engagement this year has made a notable difference across the business with a
number of staff members personally recognising the invaluable support these
volunteers have delivered in this area.
Focus on growth
With these solid foundations in place, the senior management team is focussed
on translating our product development investment into growth. We expect to
return to growth in 2021 and to build market momentum with our new product
developments, which will lead to opportunities for higher levels of growth in
2022 and beyond.
Evolution of NHS structure
Integrated Care System (ICS) organisations have been growing in importance in
recent years. These organisations are responsible for strategic plans to
improve care for their local populations, including a focus on digital health.
To succeed, ICSs will need effective, integrated solutions that enable data to
flow between different healthcare settings and systems, including shared care
records and population-level analytics. Our product development strategy is
aligned with these priorities, for both existing and new products, and we have
already restructured our sales and account teams in response to the growing
importance of ICSs.
In February 2021, the Secretary of State for Health and Social Care proposed
that ICSs be formalised as statutory legal bodies, in a White Paper entitled
"Integration and Innovation: working together to improve health and social
care for all." Under these proposals, ICSs would replace Clinical
Commissioning Groups (CCGs) and partner with hospital trusts and social care
services, holding the local budget. ICSs would be required to demonstrate
integrated care pathways, underpinned by a new data sharing strategy.
We continue to closely monitor changes to the NHS organisational structure and
as always, we will respond accordingly and adapt our business model as
appropriate. We do not believe that the changes proposed in the White Paper
are likely to have any material impact on the Group.
Summary and outlook
It is a privilege to lead EMIS Group.
Covid-19 has put healthcare at the centre of the global agenda. We believe
that EMIS is well positioned to respond to the challenges our customers face
in 2021 and beyond, with a combination of our innovative technology, leading
market shares and strong recurring revenues that enable us to invest with
confidence. The product development investment we have made in recent years
means our current and emerging software is well suited to meet the evolving
requirements of the healthcare sector both today and in the future.
As we now move forward, our customers require innovation and new solutions.
EMIS remains focussed on the vision of a digital, connected healthcare world
and we look forward to achieving great results for our customers, colleagues
and shareholders.
OPERATIONAL REVIEW
EMIS Health
The EMIS Health segment comprises business areas where revenues are generated
from NHS organisations. This includes the primary, community and acute A&E
markets and operates under the EMIS brand.
Market shares
EMIS maintained its UK GP market leadership position with a market share of
57% (2019: 57%). The Group holds a joint market leadership position in Acute
A&E at 21% (2019: 23%) and the number two market position in community at
20% (2019: 21%).
NHS primary care frameworks
EMIS transitioned to the GP IT Futures framework in January 2020. The
framework governs the provision of the majority of EMIS Group's clinical IT
system-related services to GPs in England and is due for review in March 2023.
The related Digital Buying Catalogue, which facilitates procurement, will run
on an ongoing basis.
EMIS developed a number of enhanced features in EMIS Web during 2020 in
response to the framework, including capability for Fast Healthcare
Interoperability Resource (FHIR) - a standard for exchanging healthcare
information - an upgrade to the SNOMED CT clinical coding standard and
integration with the Medicines and Healthcare products Regulatory Agency
(MHRA) Yellow Card for reporting medication contraindications.
Framework mini-tender processes are anticipated to occur on a regular basis
through the coming years in both Scotland and England. This has reinforced the
clear focus of the Group to provide products that exceed customer expectations
and to excel in customer service and delivery.
In Scotland, as an approved supplier on the NHS National Services Scotland
(NSS) framework, EMIS continues to work closely with NSS to deliver the
technology to support its health and care strategy. EMIS continues to keep the
existing GP system, PCS, up to date for its Scottish customers, such as adding
new clinical code terms to support the management of Covid-19, raising flags
for patients on the shielding list and delivering population data for Public
Health Scotland.
In Northern Ireland, EMIS has secured an extension to the GP Systems of Choice
(GPSoC) framework until April 2022 so that it can continue to provide GP
systems under the existing arrangements. EMIS is working on various Northern
Ireland-specific enhancements to EMIS Web and continues to support its
Covid-19 response.
EMIS has agreed a further extension to provide primary care systems in Wales
as NHS Wales Informatics Service (NWIS) published its new framework in March
2021. EMIS and NWIS continue to work together on strategic projects to
accelerate the digitisation of unscheduled care, such as refreshing the
technology infrastructure.
Continued focus on EMIS-X
The development of EMIS-X continues. The development roadmap is linked to
strategic customer priorities, with close alignment of the product,
development and delivery functions. EMIS's 89-strong clinical team (2019: 71)
continues to play a vital role throughout the development process, ensuring
that EMIS's products and systems deliver what front line clinicians need on a
daily basis.
Working with technology partners, EMIS-X will bring to the market the very
best combination of in-house and partner technology as the platform for all
future EMIS clinical systems.
Improving customer experience
EMIS is focussed on its relationships with customers in all major markets,
with the intention that all customer touchpoints provide a high-quality
experience for the end user.
In 2019, EMIS upgraded its support and service platform to ServiceNow,
enabling support to be delivered digitally as well as through more traditional
routes such as ringing into a call centre. During 2020 usage of digital
support channels increased, with 66% of support incidents being logged
digitally by the end of the year (2019: 30%).
EMIS's support services will continue to improve during 2021. The Group's new
in-house dashboard will give a detailed insight into support performance,
helping to pinpoint emerging trends before they become a problem and enabling
more proactive management of issues. It will give a greater oversight of call
and digital chat statistics, to highlight where any improvements can be made
to make customer service even better.
Enhanced features for Symphony customers
EMIS continues to develop new functionality into existing systems,
particularly to enable interoperability.
In September 2020, EMIS's Symphony became the first system accredited by NHS
Digital to support direct electronic appointment booking from 111. Call
handlers send referral appointments directly into an Emergency Department,
urgent treatment centre or same day emergency care environment using Symphony.
This supports the NHS Long Term Plan for the 111 service to become the first
line of defence for urgent care.
As well as integration with 111, Symphony 3.0 was updated to enable improved
workflows and help manage social distancing.
EMIS Enterprise
The EMIS Enterprise segment comprises business areas where revenues are
derived predominantly from business-to-business healthcare sector sources,
including medicines management across both community and hospital pharmacy,
the Patient business and the life sciences sector. It operates under the EMIS
and Patient brands.
Market shares
The Group improved its market-leading position in community pharmacy during
2020 at 38% (2019: 36%) and its number two market position in hospital
pharmacy with a market share of 36% (2019: 35%).
Supporting community pharmacies to play a greater role
The NHS Long Term Plan outlined the intention for a greater range of clinical
services to be provided in a community pharmacy setting to alleviate pressure
on primary care.
During 2020, EMIS launched Clinical Service Hub (CSH) in ProScript Connect,
which enables customers to deliver and record services they provide under the
Patient Group Direction (PGD) initiative. Patients are able to book these
services via Patient Access.
CSH is the first cloud-based ProScript Connect module to be developed,
offering the potential for further interoperability and additional services in
future.
The pandemic changed the way community pharmacists deliver their services and
EMIS successfully provided solutions to manage and deliver repeat
prescriptions and offer digital consultations.
Patient: delivering digitally
During 2020, as a direct consequence of the pandemic, the UK public needed
digital routes to healthcare more than ever before. This was reflected in
increased usage of the healthcare services provided by the Patient Access app
and website.
Registered users increased during the year to 11.7m and subsequently to 12.0m
in February 2021 (2019: 8.4m):
· booking 2.5m digital or face-to-face GP appointments (2019: 6.7m), a
reduction from the previous year reflecting the lower numbers of GP
appointments across the sector due to the pandemic;
· ordering 23.5m repeat prescriptions (2019: 20.2m); and
· booking 41,415 private pharmacy consultations and 15,356 pharmacy NHS
flu vaccinations across web, iOS and Android (2019: 14,000 pharmacy
consultations and 8,700 flu vaccinations).
Patient.info continues to be one of the UK's leading medical information
sites, offering more than 6,000 patient-facing and professional articles
including over 100 about Covid-19. 80m unique users viewed 166m pages during
2020 (2019: 42m users, 109m page views).
The increase in usage of both the website and the existing Patient Access
services provides a platform for growth of future Patient Access offerings, as
the NHS increasingly looks to provide the UK public with a digital front door
to healthcare services.
Patient Access will be launching its new Smart Pharmacy service during 2021,
which will enable patients to order, track, and opt for home delivery of their
medications from their local pharmacy. It offers community pharmacies a strong
proposition in the face of increasing online competition as Smart Pharmacy
will provide patients with regular updates on the progress of their
prescription, taking pressure from the front desk of busy GP practices.
Another new service successfully launched recently has been a Patient and
Pinnacle co-developed solution for community pharmacists to provide minor
ailment treatments under the Public Health England Community Pharmacy
Consultation Service (CPCS) framework. A new signposting feature in EMIS Web,
called Patient Access Connect, allows clinicians and surgery staff to directly
refer patients to their local pharmacy.
The partner programme: a powerful ecosystem
The partner programme continued to perform strongly in 2020 with the number of
partners offering products that interoperate with EMIS clinical systems
increasing to 143 (2019: 113). The Group continues its approach of partnering
with best of breed technology to provide solutions to its customers. No single
business can offer everything in a market as complex and varied as healthcare,
but together EMIS's ecosystem can solve problems for customers in a better and
faster way. EMIS already offers a strong proposition through EMIS Web and in
future the business will develop even more integration through EMIS-X.
With the increased focus on the digitisation of healthcare, the EMIS partner
programme has been strengthened during 2020 with the addition of companies
such as Arc Health, providing technology to enable video consultation in care
homes.
EMIS-X Analytics opportunities in enterprise markets
In 2020, Explorer and Visualiser, the first products from the EMIS-X Analytics
suite, were launched to the market. EMIS-X Analytics is a high performance
cloud analytics suite that provides a range of powerful processing tools
designed to curate, aggregate and query large healthcare data sets at speed
and scale. It offers significant potential for EMIS Group to grow the business
over time with opportunities in both the NHS and life sciences.
EMIS-X Analytics has been used to facilitate a number of national and regional
Covid-19 research programmes, such as NHS England's OpenSAFELY programme, a
collaboration between the University of Oxford, the London School of Tropical
Hygiene and Medicine and system suppliers. Led by NHS doctors Ben Goldacre and
Liam Smeeth, OpenSAFELY is a new secure analytics platform for electronic
health records in the NHS, created to deliver urgent results during the
pandemic.
FINANCIAL REVIEW
The results for the year ended 31 December 2020 represent a creditable
performance given the challenges faced by the business during the Covid-19
lockdown periods. The Group's revenues, adjusted operating profit and adjusted
operating margin were unchanged on the comparative period while recurring
revenue, cash flow and reported operating profit and margin all increased.
Group revenue of £159.5m (2019: £159.5m) included revenue of £2.2m from the
Pinnacle acquisition, completed on 9 March 2020. Recurring revenue grew by 4%
to £130.0m (2019: £125.0m), representing 82% (2019: 78%) of the Group's
total revenue.
Adjusted operating profit for the year, as set out in the table below, was
£39.3m (2019: £39.3m), including £0.7m from Pinnacle. Reported operating
profit, in the absence of any exceptional charges and including the release of
contingent acquisition consideration of £1.0m, increased to £35.8m (2019:
£26.8m). A reconciliation between the operating profit measures is given in
the Group statement of comprehensive income and in the appendix to this
report.
Segmental performance
The table below sets out the summary segmental performance:
EMIS Health EMIS Health EMIS Enterprise EMIS Enterprise Total Total
2020 2019 2020 2019 2020 2019
£'m £'m £'m £'m £'m £'m
Revenue 107.8 100.9 51.7 58.6 159.5 159.5
Adjusted segmental operating profit 25.1 23.3 15.7 17.5 40.8 40.8
Group expenses (1.5) (1.5)
Adjusted operating profit(1) 39.3 39.3
Adjusted operating margin 23.3% 23.1% 30.4% 29.9% 24.6% 24.6%
1. Excludes capitalisation and amortisation of development costs,
amortisation of acquired intangibles and exceptional items.
Driven in part by higher than usual hardware sales resulting from the need for
rapid deployment of mobile working solutions during lockdown, revenue
increased by 7% in EMIS Health to £107.8m (2019: £100.9m). These additional
sales and reduced operating costs delivered an 8% increase in adjusted
operating profit to £25.1m (2019: £23.3m), notwithstanding the Group's
continued investment in developing its strategic roadmap.
While recurring revenue increased, performance in the EMIS Enterprise division
reflected a subdued market and a strong comparative period. In the absence of
significant licence deals and with delayed implementations during lockdown,
revenue was 12% lower at £51.7m (2019: £58.6m) and adjusted operating profit
reduced by 10% to £15.7m (2019: £17.5m).
Revenue
The NHS GP IT Futures framework, governing over a quarter of the Group's
revenues, took effect in 2020. This introduced a single "software as a service
payment" for GP systems in England and therefore, in order to better reflect
the evolution of the business and its core revenue streams monitored
internally, the Group has revised the way in which it analyses revenue. The
revised analysis of revenue from continuing operations is summarised below:
· software subscription and support, higher at £99.5m (2019: £94.2m),
reflecting the inclusion of the acquired Pinnacle revenues and higher revenues
from the Group's existing customers;
· interface and connectivity charges, lower at £20.3m (2019: £21.8m)
with business growth offset by a particularly strong comparative period for
partner on-boarding;
· hardware and related services, which grew to £17.3m (2019: £13.2m)
as a result of Covid-19 related hardware sales in the primary care market;
· other services, where revenues were higher at £13.4m (2019: £12.0m)
with increased digitisation project work; and
· perpetual licences, training, consultancy and implementation, where
lower revenues of £9.0m (2019: £18.3m) reflected the unusually high level of
licence deals in the comparative period and reduced implementation activity
during the Covid-19 lockdowns.
The high level of recurring revenue and the strength of the Group's customer
relationships give the business confidence to invest in developing future
products and services, while providing good visibility of future financial
performance.
Profitability
Adjusted operating profit was unchanged on the comparative period at £39.3m
(2019: £39.3m). This was delivered despite a lower gross margin revenue mix
by careful cost control through the year, while at the same time increasing
the level of investment in development to £21.2m (2019: £20.7m). The
adjusted operating margin was also consistent with the comparative period at
24.6% (2019: 24.6%).
Total staff costs excluding exceptional reorganisation costs were 1% lower
than in 2019, although year-end staff numbers increased to 1,591 (2019: 1,527)
and the average headcount was also marginally higher at 1,579 (2019: 1,575).
The increase in staff numbers was driven principally by the expansion of the
Indian development team to 410 people (2019: 332).
Reported operating profit increased by 33% to £35.8m (2019: £26.8m),
reflecting the release of contingent consideration no longer payable on the
2018 Dovetail acquisition, the absence of exceptional reorganisation costs in
2020, and lower levels of capitalised development cost amortisation charge.
During the year a final contingent payment under the sale agreement of £0.8m
was received from the acquirer for the Specialist & Care business,
disposed of in 2019, and this payment was recognised as other income.
Taxation
The tax charge for the year was £6.8m (2019: £5.0m). The effective tax rate
for the year before the deferred tax rate change, release of contingent
acquisition consideration, other income and share of result of joint venture
and associate was 19.1% (2019: 19.2%).
Earnings per share (EPS)
Adjusted basic and diluted EPS were 1% lower at 51.0p and 50.4p respectively
(2019: 51.4p and 51.1p). The statutory basic and diluted EPS were both higher
at 48.1p and 47.6p respectively (2019: 36.0p and 35.8p).
Dividend
Subject to shareholder approval at the Annual General Meeting on 6 May 2021,
the Board proposes an increase in the final dividend to 16.0p (2019: 15.6p)
per ordinary share, payable on 14 May 2021 to shareholders on the register at
the close of business on 16 April 2021. This would make a total dividend of
32.0p (2019: 31.2p) per ordinary share for 2019. This is 3% higher than in
the prior year, reflecting a balance of the challenging trading environment
experienced in 2020 with the consistent underlying growth of the Group and its
positive future prospects.
Cash flow and net cash
The principal movements in net cash (rounded) were as follows:
2020 2019
£m £m
Cash from operations:
Cash generated from operations 64.1 50.1
Less: capitalised development costs (6.6) (7.4)
Adjusted cash generated from operations 58.8 46.3
Cash cost of exceptional items (1.3) (3.6)
Net cash generated from operations 57.5 42.7
Business combinations (4.2) (1.2)
Business disposal 0.8 6.2
Net capital expenditure (0.4) (5.6)
Transactions in own shares 0.5 (3.1)
Tax (11.7) (4.5)
Dividends (19.9) (18.7)
Lease payments (1.5) (0.9)
Finance/other 0.8 0.6
Change in net cash in the year 21.9 15.5
Net cash at end of year 53.0 31.1
Cash generated from operations increased to £64.1m (2019: £50.1m). Adjusted
cash from operations is stated after adding back the cash cost of items
relating to the 2019 exceptional reorganisation costs of £1.3m (2019: £3.6m)
and after deducting capitalised development costs. On this adjusted basis,
cash flow from operations was 27% higher than in 2019, due to improved working
capital including £7.3m of VAT payments deferred until 2021.
The Group completed the acquisition of the Pinnacle business during the year
for initial cash consideration, net of cash acquired, of £2.9m. It also paid
a final balance of £0.8m of deferred contingent consideration further to the
2018 Dovetail acquisition and £0.6m for the acquisition of the remaining 10%
share capital of Dovetail. The Group received £0.8m of consideration in
respect of the 2019 disposal of the Specialist & Care business.
Net cash spent on capital expenditure (excluding capitalised development
costs) was tightly controlled at £0.4m (2019: £5.6m). Capital additions in
the year included £1.8m on computer equipment, £0.4m on internal systems and
software and £0.7m on property assets offset by proceeds from sales
(principally of the former head office property) of £2.5m (2019: £0.2m).
After transactions in own shares, tax, dividends, lease payments and
finance/other transactions, the total net cash inflow of £21.9m resulted in a
year-end net cash position of £53.0m (2019: £31.1m). At 31 December 2020,
the Group had available undrawn bank facilities of £30.0m committed until
June 2021, reducing to £15.0m for the twelve-month period ending 30 June
2022. An accordion arrangement is in place to increase the quantum up to
£60.0m, reducing to £30.0m for the twelve-month period ending 30 June 2022.
Group statement of comprehensive income
for the year ended 31 December 2020
Notes 2020 2019
£'000 £'000
Revenue 2,3 159,453 159,507
Costs
Changes in inventories (47) (607)
Cost of goods and services (20,288) (14,800)
Staff costs(1) (63,374) (67,519)
Other operating expenses(2) (22,628) (27,599)
Depreciation of property, plant and equipment (5,089) (6,822)
Amortisation of intangible assets 8 (12,251) (15,333)
Adjusted operating profit 39,266 39,273
Development costs capitalised 8 6,590 7,363
Amortisation of intangible assets(3) 8 (11,100) (14,449)
Reorganisation costs 4 - (5,360)
Release of contingent acquisition consideration 4 1,020 -
Operating profit 2 35,776 26,827
Finance income 89 97
Finance costs (590) (595)
Share of result of joint venture and associate 858 742
Other income(4) 782 -
Profit before taxation 36,915 27,071
Income tax expense 5 (6,794) (5,022)
Profit for the period from continuing operations 30,121 22,049
Profit from discontinued operation, net of tax - 476
Profit for the period 30,121 22,525
Other comprehensive income
Items that may be reclassified to profit or loss
Currency translation differences (41) (182)
Other comprehensive income (41) (182)
Total comprehensive income for the year 30,080 22,343
Attributable to:
- equity holders of the parent 30,207 22,476
- non-controlling interest in subsidiary company (127) (133)
Total comprehensive income for the year 30,080 22,343
Earnings per share attributable to equity holders of the parent 6 Pence Pence
Basic 48.1 36.0
Basic diluted 47.6 35.8
Basic - continuing operations 48.1 35.3
Basic diluted - continuing operations 47.6 35.1
Adjusted 51.0 51.4
Adjusted diluted 50.4 51.1
(1 )Including exceptional reorganisation costs of £nil (2019: £4,160,000).
( )
(2 )Including an exceptional credit from release of contingent acquisition
consideration of £1,020,000 (2019: £nil) and exceptional reorganisation
costs of £nil (2019: £1,200,000)
( )
(3 )Excluding amortisation of computer software used internally of
£1,151,000 (2019: £884,000).
( )
(4) During the year the Group received £782,000 of previously unrecognised
additional consideration in relation to the prior year disposal of the
Specialist & Care business.
Group balance sheet
as at 31 December 2020
Notes 2020 2019
£'000 £'000
Non-current assets
Goodwill 52,177 47,969
Other intangible assets 8 33,118 34,376
Property, plant and equipment 19,870 18,399
Investment in joint venture and associate 353 345
105,518 101,089
Current assets
Inventories 613 657
Current tax assets 3,556 -
Trade and other receivables 29,993 33,047
Property asset held for sale - 2,475
Cash and cash equivalents 53,008 31,099
87,170 67,278
Total assets 192,688 168,367
Current liabilities
Trade and other payables (31,219) (23,437)
Deferred income (29,161) (28,820)
Current tax liabilities - (2,323)
Other financial liabilities 9 (2,000) (480)
Lease liabilities 10 (990) (640)
(63,370) (55,700)
Non-current liabilities
Deferred tax liability (2,289) (1,467)
Other financial liabilities 9 (2,000) (3,708)
Lease liabilities 10 (5,891) (3,294)
(10,180) (8,469)
Total liabilities (73,550) (64,169)
Net assets 119,138 104,198
Equity
Ordinary share capital 633 633
Share premium 51,045 51,045
Own shares held in trust (3,594) (5,021)
Retained earnings 69,260 57,118
Other reserve 1,794 147
Equity attributable to owners of the parent 119,138 103,922
Non-controlling interest - 276
Total equity 119,138 104,198
Group statement of cash flows
for the year ended 31 December 2020
Notes 2020 2019
£'000 £'000
Profit before taxation 36,915 27,071
Finance income (89) (97)
Finance costs 590 595
Share of result of joint venture (858) (742)
Other income (782) -
Operating profit 35,776 26,827
Operating profit of discontinued operation - 162
Adjustments for non-cash items
Amortisation of intangible assets 12,251 15,498
Depreciation of property, plant and equipment 5,089 7,001
Release of contingent acquisition consideration (1,020) -
Impairment loss on remeasurement of property asset held for sale - 254
Loss on disposal of property, plant and equipment 43 544
Share-based payments 1,440 1,290
Operating cash flow before changes in working capital 53,579 51,576
Changes in working capital
Decrease in inventory 47 607
Decrease/(increase) in trade and other receivables 3,197 (316)
Increase in trade and other payables 7,751 2,623
Decrease in deferred income (436) (4,431)
Adjusted cash generated from operations 58,851 46,332
Development costs capitalised 6,590 7,363
Cash cost of exceptional items (1,303) (3,636)
Cash generated from operations 64,138 50,059
Finance costs (141) (186)
Finance income 87 93
Tax paid (11,684) (4,466)
Net cash generated from operating activities 52,400 45,500
Cash flows from investing activities
Purchase of property, plant and equipment (2,449) (4,983)
Proceeds from sale of property, plant and equipment 2,500 151
Development costs capitalised 8 (6,590) (7,363)
Purchase of software 8 (452) (773)
Dividends received 850 700
Business combination 11 (2,880) -
Acquisition of associate - (190)
Disposal of discontinued operation, net of cash disposed of 782 6,203
Net cash used in investing activities (8,239) (6,255)
Cash flows from financing activities
Transactions in own shares held in trust 474 (3,069)
Payment of lease liabilities (1,511) (940)
Deferred contingent consideration 9 (800) (1,012)
Dividends paid 7 (19,860) (18,745)
Acquisition of non-controlling interest 9 (555) -
Net cash used in financing activities (22,252) (23,766)
Net increase in cash and cash equivalents 21,909 15,479
Cash and cash equivalents at beginning of year 31,099 15,620
Cash and cash equivalents at end of year 53,008 31,099
Group statement of changes in equity
for the year ended 31 December 2020
Share Share Own Retained Other reserve Non-controlling Total
capital premium shares held earnings interest equity
in trust
Notes £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2019 633 51,045 (1,913) 51,884 611 399 102,659
Adjustment on initial application of IFRS 16 - - - (125) - - (125)
Profit for the year - - - 22,658 - (133) 22,525
Transactions with owners
Share acquisitions less sales - - (3,108) - - 10 (3,098)
Share-based payments - - - 1,290 - - 1,290
Deferred tax in relation to share-based payments - - - 156 - - 156
Dividends paid 7 - - - (18,745) - - (18,745)
Option over non-controlling interest 9 - - - - (282) - (282)
Other comprehensive income
Currency translation differences - - - - (182) - (182)
At 31 December 2019 633 51,045 (5,021) 57,118 147 276 104,198
Profit for the year - - - 30,248 - (127) 30,121
Changes in ownership interest
Non-controlling interest acquisition 9 - - - (406) - (149) (555)
Transactions with owners
Share acquisitions less sales - - 1,427 - - - 1,427
Share-based payments - - - 1,440 - - 1,440
Deferred tax in relation to share-based payments - - - 40 - - 40
Dividends paid 7 - - - (19,860) - - (19,860)
Contingent acquisition consideration 9 - - - 680 (1,000) - (320)
Option over non-controlling interest 9 - - - - 2,688 - 2,688
Other comprehensive income
Currency translation differences - - - - (41) - (41)
At 31 December 2020 633 51,045 (3,594) 69,260 1,794 - 119,138
Notes to the preliminary announcement
for the year ended 31 December 2020
1. Basis of preparation
The financial information set out in this preliminary announcement does not
constitute the company's statutory financial statements for the years ended 31
December 2020 or 2019 but is derived from those financial statements.
Statutory financial statements for 2019 have been delivered to the registrar
of companies and those for 2020 will be delivered in due course. The auditors
have reported on those financial statements; their reports were (i)
unqualified (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
The statutory financial statements for the year ended 31 December 2020 will be
posted no later than 30 March 2021 to shareholders and, once approved, will be
delivered to the Registrar of Companies following the Annual General Meeting
on 6 May 2021.
Copies of the Annual Report and financial statements for the year ended 31
December 2020 will be available on the company's website
(https://www.emisgroupplc.com/investors) from 30 March 2021 and from the
Company Secretary, EMIS Group plc, Fulford Grange, Micklefield Lane, Rawdon,
Leeds, LS19 6BA.
2. Segmental information
IFRS 8 Operating Segments provides for segmental information disclosure on the
basis of information reported internally to the chief operating decision-maker
for decision-making purposes. The Group considers that this role is performed
by the main Board.
The Directors have presented segmental information to reflect the Group's
structure, activities and the markets being served. The Group has two
operating and reportable segments, both involved with the supply and support
of connected healthcare software and systems:
(· )EMIS Health; and
(· )EMIS Enterprise.
Each operating segment is assessed by the Board based on an adjusted measure
of operating profit, as defined in the appendix. Group operating expenses,
finance income and costs, cash and cash equivalents, and current and deferred
tax are not allocated to segments, as income tax, group and financing
activities are not segment-specific.
The previously reported Specialist & Care operating segment was classified
as a discontinued operation following its sale on 2 April 2019 and therefore
the information presented below relates to continuing operations only.
2020 2019
EMIS Health EMIS Enterprise Total EMIS Health EMIS Enterprise Total
£'000 £'000 £'000 £'000 £'000 £'000
Segmental result
Revenue 107,773 51,680 159,453 100,858 58,649 159,507
Segmental operating profit as reported internally 25,088 15,688 40,776 23,268 17,511 40,779
Development costs capitalised 4,643 1,947 6,590 6,216 1,147 7,363
Amortisation of development costs (2,559) (1,717) (4,276) (5,500) (1,632) (7,132)
Amortisation of acquired intangible assets (3,350) (3,474) (6,824) (3,813) (3,504) (7,317)
Release of contingent acquisition consideration - 1,020 1,020 - - -
Reorganisation costs - - - (4,135) (1,225) (5,360)
Segmental operating profit 23,822 13,464 37,286 16,036 12,297 28,333
Group operating expenses (1,510) (1,506)
Operating profit 35,776 26,827
Net finance costs (501) (498)
Share of result of joint venture and associate 858 742
Other income 782 -
Profit before taxation 36,915 27,071
Revenue excludes intra-group transactions on normal commercial terms from the
EMIS Health segment to the EMIS Enterprise segment totalling £3,017,000
(2019: £4,442,000). Revenue of £112,711,000 (2019: £98,994,000) is derived
from the NHS and related bodies. Revenue of £3,990,000 (2019: £5,022,000) is
derived from customers outside the UK.
3. Revenue analysis
Following the 1 January 2020 commencement of the NHS GP IT Futures framework
governing over a quarter of the Group's revenues, which introduced a single
software as a service payment for GP Systems in England, and in order to
better reflect the evolution of the business and its core revenue streams
monitored internally, the Group has revised the way in which it analyses
revenue. The revised analysis of revenue from continuing operations, including
comparative information restated on the same basis, is presented below.
2020 2019
EMIS EMIS Total EMIS EMIS Total
Health Enterprise Health Enterprise
£'000 £'000 £'000 £'000 £'000 £'000
Software subscription and support 77,032 22,456 99,488 73,451 20,730 94,181
Interface and connectivity charges 5,023 15,261 20,284 2,892 18,957 21,849
Hardware and related services 12,799 4,502 17,301 8,056 5,103 13,159
Other services 7,795 5,602 13,397 7,929 4,101 12,030
Perpetual licences, training, consultancy and implementation 5,124 3,859 8,983 8,530 9,758 18,288
107,773 51,680 159,453 100,858 58,649 159,507
4. Exceptional items
2020 2019
£'000 £'000
Reorganisation costs - (5,360)
Release of contingent acquisition consideration 1,020 -
1,020 (5,360)
The reorganisation costs in 2019 relate to redundancy and restructuring costs,
including property exit costs.
5. Income tax expense
2020 2019
£'000 £'000
Income tax:
- UK current year tax charge 7,159 7,305
- Overseas current year tax charge 184 199
- Adjustment in respect of prior years (656) (370)
Total current tax 6,687 7,134
Deferred tax:
- UK current year (792) (2,456)
- Adjustment in respect of prior years 685 344
- Deferred tax rate change 214 -
Total deferred tax 107 (2,112)
Total tax charge in Group statement of comprehensive income 6,794 5,022
Factors affecting the tax charge for the year
Profit before taxation 36,915 27,071
Taxation at the average UK corporation tax rate of 19% (2019: 19%) 7,014 5,143
Tax effects of:
- (Income)/expenses not chargeable/allowable in determining taxable profit (315) 31
- Adjustment in respect of prior years 29 (26)
- Joint venture reported net of tax (163) (141)
- Effect of overseas tax rates 15 15
- Deferred tax rate change 214 -
Tax charge for the year 6,794 5,022
The total current year tax charge includes a credit of £nil (2019:
£1,018,000) in respect of exceptional items.
The decision of the UK government not to reduce the UK corporation tax rate
from 19% to 17% from 1 April 2020 resulted in a one-off deferred tax charge of
£214,000 in the year, with a corresponding increase in the Group's net
deferred tax liability. In March 2021 the UK government announced that the UK
corporation tax rate for large companies would rise to 25% from 1 April 2023.
However, as this had not been substantively enacted at the balance sheet date,
deferred tax assets and liabilities have not been remeasured. Had the change
been substantively enacted at the balance sheet date, the estimated impact
would be to increase the Group's net deferred tax liability by approximately
£300,000.
6. Earnings per share (EPS)
The calculation of basic and diluted EPS is based on the following earnings
and numbers of shares:
Earnings 2020 2019
£'000 £'000
Profit for the period 30,121 22,525
Total comprehensive income attributable to non-controlling interest 127 133
Basic earnings attributable to equity holders 30,248 22,658
Profit from discontinued operation, net of tax - (476)
Basic earnings from continuing operations attributable to equity holders 30,248 22,182
Development costs capitalised (6,590) (7,363)
Amortisation of development costs and acquired intangible assets 11,100 14,449
Reorganisation costs - 5,360
Release of contingent acquisition consideration (1,020) -
Other income (782) -
Tax and non-controlling interest effect of above items (925) (2,319)
Adjusted earnings attributable to equity holders 32,031 32,309
Weighted average number of ordinary shares 2020 2019
Number Number
'000 '000
Total shares in issue 63,311 63,311
Shares held by Employee Benefit Trust (447) (425)
For basic EPS calculations 62,864 62,886
Effect of potentially dilutive share options 634 378
For diluted EPS calculations 63,498 63,264
EPS 2020 2019
Pence Pence
Basic 48.1 36.0
Basic diluted 47.6 35.8
Basic - continuing operations 48.1 35.3
Basic diluted - continuing operations 47.6 35.1
Adjusted 51.0 51.4
Adjusted diluted 50.4 51.1
7. Dividends 2020 2019
£'000 £'000
Final dividend for the year ended 31 December 2018 of 14.2p - 8,950
Interim dividend for the year ended 31 December 2019 of 15.6p - 9,795
Final dividend for the year ended 31 December 2019 of 15.6p 9,798 -
Interim dividend for the year ended 31 December 2020 of 16.0p 10,062 -
19,860 18,745
A final dividend for the year ended 31 December 2020 of 16.0p amounting to
approximately £10,067,000 will be proposed at the Annual General Meeting on 6
May 2021. If approved, this dividend will be paid on 14 May 2020 to
shareholders on the register on 15 April 2020. The dividend is not accounted
for as a liability in these financial statements and will be accounted for as
an appropriation of distributable reserves in the year ending 31 December
2021.
8. Other intangible assets
Computer software used internally Computer software developed for external sale Computer software acquired on business combinations Customer relationships Total
£'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2019 7,025 50,735 41,352 36,304 135,416
Additions 773 7,363 - - 8,136
Disposal of business - - (1,011) (5,320) (6,331)
At 31 December 2019 7,798 58,098 40,341 30,984 137,221
Additions 452 6,590 - - 7,042
Acquisition of business - - 2,989 962 3,951
At 31 December 2020 8,250 64,688 43,330 31,946 148,214
Accumulated amortisation and impairment
At 1 January 2019 4,283 36,544 27,376 22,364 90,567
Charged in year - continuing 884 7,132 4,589 2,728 15,333
Charged in year - discontinued - - 32 133 165
Disposal of business - - (716) (2,504) (3,220)
At 31 December 2019 5,167 43,676 31,281 22,721 102,845
Charged in year - continuing 1,151 4,276 4,412 2,412 12,251
At 31 December 2020 6,318 47,952 35,693 25,133 115,096
Net book value
At 31 December 2020 1,932 16,736 7,637 6,813 33,118
At 31 December 2019 2,631 14,422 9,060 8,263 34,376
At 1 January 2019 2,742 14,191 13,976 13,940 44,849
9. Other financial liabilities
2020 2019
£'000 £'000
Current
Contingent acquisition consideration - Pinnacle 2,000 -
Contingent acquisition consideration - Dovetail - 480
Total 2,000 480
Non-current
Contingent acquisition consideration - Pinnacle 2,000 -
Contingent acquisition consideration - Dovetail - 1,020
Option over non-controlling interest - 2,688
Total 2,000 3,708
The current and non-current contingent consideration liabilities in respect of
the Pinnacle acquisition are both payable in cash upon the achievement of
specified profit targets. The possible minimum and maximum undiscounted
amounts of contingent consideration payable in cash are £nil and £4,000,000
respectively. Estimated fair value has been measured based on the expected
future amounts payable, as the impact of discounting is not material. This has
been categorised as a level 3 fair value measurement under IFRS 13, as the
inputs to the valuation such as the future performance of Pinnacle, are not
based on observable market data.
During the year the Group acquired the remaining non-controlling interest in
Dovetail for a cash payment of £555,000. Consequently the non-current
financial liability in respect of the put option in place over the
non-controlling interest was extinguished and the related liability
de-recognised, with a corresponding movement within Other Reserves. Following
a £40,000 increase since the 2019 year end, the fair value of the put option
liability at the point of de-recognition was £2,728,000, and therefore the
Group statement of changes in equity shows a net movement of £2,688,000
within Other Reserves.
In respect of the Dovetail contingent acquisition consideration, a payment of
£480,000 was made during the year following the achievement of specified
revenue targets, and additionally it was agreed that no further amounts would
be payable, resulting in a corresponding credit to the Group statement of
comprehensive income of £1,020,000.
A further payment of £320,000 was made during the year in respect of
equity-settled contingent acquisition consideration initially recognised at a
fair value of £1,000,000, resulting in a corresponding debit to Other
Reserves, and the remaining equity-settled deferred consideration of £680,000
was reclassified to retained earnings.
The two payments together resulted in a total cash outflow of £800,000. The
transactions have been accounted for in accordance with the Group's accounting
policy on financial instruments as set out in note 1.17 to the Annual Report
and Accounts.
10. Leases
Set out below are the carrying amounts of the Group's right-of-use assets and
lease liabilities and the movements during the period:
Right-of-use assets Lease liabilities
Fixtures,
Land Fittings and Motor
and buildings equipment vehicles Total
£'000 £'000 £'000 £'000 £'000
As at 1 January 2019 2,541 78 912 3,531 (3,784)
Additions 1,419 - 468 1,887 (1,887)
Disposal of business (820) - - (820) 820
Depreciation expense (360) (32) (494) (886) -
Interest expense - - - - (181)
Payments - - - - 940
Effect of movements in exchange rates (141) - - (141) 158
As at 31 December 2019 2,639 46 886 3,571 (3,934)
Additions 3,422 - 659 4,081 (4,081)
Acquisition of business 151 - - 151 (156)
Depreciation expense (858) (32) (563) (1,453) -
Interest expense - - - - (386)
Payments - - - - 1,508
Effect of movements in exchange rates (140) - - (140) 168
As at 31 December 2020 5,214 14 982 6,210 (6,881)
11. Business combination
On 9 March 2020, the Group completed the acquisition of Pinnacle Health
Partnership LLP and Pinnacle Systems Management Limited, owners and operators
of the widely-used PharmOutcomes platform.
PharmOutcomes is a secure, web-based service management solution used by more
than 11,000 community pharmacies to record and manage nationally and locally
commissioned patient services such as flu vaccinations, the Community
Pharmacist Consultation Service and hospital discharge referral management. It
allows local and national level analysis and reporting on the effectiveness of
commissioned services, helping to improve the management of community pharmacy
services.
The fair values of the net assets acquired, consideration paid and goodwill
arising on the transaction are shown in the table below:
£'000
Intangible assets - computer software 2,989
Intangible assets - customer relationships 962
Property, plant and equipment 204
Inventories 3
Trade and other receivables 507
Cash and cash equivalents 873
Trade and other payables (307)
Deferred income (777)
Lease liabilities (156)
Deferred tax liability (753)
Total identifiable net assets 3,545
Goodwill 4,208
7,753
Consideration:
Cash consideration 3,753
Contingent consideration - cash-settled (note 9) 4,000
Total potential consideration 7,753
Cash and cash equivalent balances acquired (873)
Contingent consideration not yet settled (4,000)
Net cash cost of acquisition paid in year 2,880
Goodwill relates principally to the experienced staff within the business.
Fair values of assets and liabilities represent the best estimate of the fair
values at the date of acquisition. The acquired software was measured at fair
value using a multi period excess earnings valuation technique, which
considers the present value of the net cash flows expected to be generated
(excluding any cash flows related to contributory assets).
The post-acquisition contribution of the acquired business to Group revenue
and adjusted operating profit was £2,198,000 and £696,000 respectively. Had
the acquisition occurred on 1 January 2020, the Group's revenue and adjusted
operating profit for the period would have been £159,945,000 and £39,389,000
respectively.
In relation to the acquisition, costs of £184,000 have been expensed in the
statement of comprehensive income.
Appendix: Alternative performance measures (APMs)
This report contains certain financial measures (APMs) that are not defined or
recognised under IFRS but are presented to provide readers with additional
financial information that is evaluated by management and investors in
assessing the performance of the Group.
This additional information presented is not uniformly defined by all
companies and may not be comparable with similarly titled measures and
disclosures by other companies. These measures are unaudited and should not be
viewed in isolation or as an alternative to those measures that are derived in
accordance with IFRS.
Recurring revenue
Recurring revenue is the revenue that annually repeats either under
contractual arrangement or by predictable customer habit. It highlights how
much of the Group's total revenue is secured and anticipated to repeat in
future periods, providing a measure of the financial strength of the Group. It
is a measure that is well understood by the Group's investor and analyst
community and is used for internal performance reporting.
2020 2019
£'000 £'000
Reported revenue 159,453 159,507
Non-recurring revenue (29,410) (34,538)
Recurring revenue 130,043 124,969
Adjusted operating profit, adjusted operating margin and adjusted earnings per
share
Adjusted operating profit is operating profit from continuing operations
excluding exceptional items, the effect of capitalisation and amortisation of
development costs, and the amortisation of acquired intangible assets. The
same adjustments are also made in determining the adjusted operating margin of
the Group and its segments and also in determining adjusted earnings per share
(EPS). The EPS calculation further adjusts for the related tax and
non-controlling interest effects of the operating profit adjustments.
The Board considers this adjusted measure of operating profit to provide the
best metric of assessing underlying performance, as:
· it excludes exceptional items (items are only classified as
exceptional due to their nature or size);
· it excludes any one-off goodwill impairment;
· by expensing capitalised development costs (and also not
amortising these costs) it reflects the underlying in-year cash cost of
development of software for external sale, as development is considered to be
a core ongoing operating function of the business; and
· it excludes the amortisation of acquired intangibles arising from
business combinations which varies year on year dependent on the timing and
size of any acquisitions. This is consistent with the presentation of the
amortisation of Group's own software intangibles.
These metrics are used internally for reporting business unit performance and
in determining management and executive remuneration. They are commonly used
by other software companies and are also well understood by the Group's
investor and analyst community.
2020 2019
£'000 £'000
Reported operating profit 35,776 26,827
Development costs capitalised (6,590) (7,363)
Amortisation of computer software developed for external sale 4,276 7,132
Amortisation of intangible assets arising on business combinations 6,824 7,317
Exceptional reorganisation costs - 5,360
Exceptional release of contingent acquisition consideration (1,020) -
Adjusted operating profit 39,266 39,273
A reconciliation of adjusted earnings used in the adjusted EPS calculations is
shown below:
2020 2019
£'000 £'000
Profit attributable to equity holders 30,248 22,658
Profit from discontinued operation, net of tax - (476)
Development costs capitalised (6,590) (7,363)
Amortisation of computer software developed for external sale 4,276 7,132
Amortisation of intangible assets arising on business combinations 6,824 7,317
Exceptional reorganisation costs - 5,360
Exceptional release of contingent acquisition consideration (1,020) -
Other income (782) -
Tax and non-controlling interest effect of above items (925) (2,319)
Adjusted profit attributable to equity holders 32,031 32,309
Adjusted cash generated from operations
The Group's adjusted cash generated from operations adjusts for development
costs capitalised and the cash costs of exceptional items, consistent with the
adjusted operating profit metric used by the Group. This provides a meaningful
metric for the underlying cash the Group generates having accounted for the
cash cost of all development expenditure and adding back the cash cost of
non-recurring exceptional items.
2020 2019
£'000 £'000
Reported cash generated from operations 64,138 50,059
Development costs capitalised (6,590) (7,363)
Cash cost of exceptional items 1,303 3,636
Adjusted cash generated from operations 58,851 46,332
Net cash/(debt)
The Group uses net cash/(debt), defined as cash and cash equivalents less
total borrowings (excluding IFRS 16 lease liabilities), as a supplementary
measure in evaluating its liquidity, as it indicates the level of cash
available to the Group and provides an indicator of the overall balance sheet
strength. It is used in the calculation of the leverage ratio under its bank
facility arrangements. For the year ending 31 December 2020 the Group was in a
net cash position, with no borrowings.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR FZGMFRNVGMZMRecent news on EMIS
See all newsREG - Competition and Mkts - Merger Update: Pharmacy2U/Lloyds Direct
AnnouncementREG - Competition and Mkts - Merger Update: Pharmacy2u/Lloyds Direct
AnnouncementREG-Magnetar Capital Partners LP: Form 8.3 - EMIS Group Plc
AnnouncementREG - EMIS Group PLC - De-listing and cancellation of trading
AnnouncementREG - AIM EMIS Group PLC - Cancellation - EMIS Group PLC
Announcement