Unaudited half year results
07/09/2023 07:00
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RNS Number : 6253L EMIS Group PLC 07 September 2023
7 September 2023
EMIS Group plc
("EMIS Group" or "the Group")
Unaudited half year results for the six months ended 30 June 2023
"Positive first half with solid underlying organic growth."
EMIS Group plc (AIM: EMIS.L), the UK leader in connected healthcare software
and systems, today announces its unaudited results for the six months ended 30
June 2023.
Financial highlights
2023 H1 2022 H1 Change
Revenue
Total revenue £88.8m £87.3m +2%
Recurring revenue(1) £76.0m £71.8m +6%
Operating profit
Adjusted(1) £23.9m £22.4m +7%
Reported £12.7m £15.3m -17%
Operating margin
Adjusted(1) 26.9% 25.7% +120 bps
Reported 14.3% 17.5% -320 bps
Cash flow and net cash
Cash generated from operations - adjusted(1) £20.7m £27.4m -24%
Cash generated from operations - reported £17.2m £28.4m -39%
Net cash(1) £48.5m £53.6m -10%
Earnings per share
Adjusted(1) 29.7p 29.1p +2%
Reported 15.1p 19.4p -22%
Interim dividend 21.3p 17.6p +21%
(1 ) For an explanation of the alternative performance measures used in this
report, please refer to the appendix.
Positive H1 results - in line with the Board's expectations
· A positive H1 with revenue and adjusted operating profit in line with
expectations. The Group continues to perform well with good visibility and
high levels of recurring revenue
· EMIS Enterprise - good progress with significant new customer wins in
Community Pharmacy, further development of Pinnacle and expansion of the
Group's data solutions portfolio
· EMIS Health - continued strength of relationships with NHS customers
alongside accelerating investment in its technology, cloud refresh strategy
and EMIS Web service improvements
Outlook - consistent delivery of revenue growth
· Focussed on delivering consistent revenue growth in line with our
business plan
· Expected business wins in EMIS Enterprise fuelling good progress
· The Group remains well placed for growth with a technology strategy
that is in alignment with NHS policy
Recommended acquisition of EMIS Group and interim dividend
· On 17 June 2022, the terms of a recommended all cash offer pursuant to
which a wholly‐owned subsidiary of UnitedHealth Group Incorporated will
acquire the entire issued and to be issued ordinary share capital of EMIS was
announced (the "Acquisition"), to be implemented by means of a
Court-sanctioned scheme of arrangement (the "Scheme")
· On 11 August 2023, the United Kingdom's Competition and Markets
Authority (the "CMA") published its provisional findings from its Phase 2
investigation, provisionally clearing the Acquisition. The CMA invited
responses to its provisional findings from interested parties by 1 September
2023, which will be considered ahead of the CMA issuing its final report by 5
October 2023
· In accordance with the terms of the Acquisition, provided that the
Scheme has not become effective before 7 October 2023, EMIS shareholders are
entitled to receive a 2023 interim dividend of up to 21.3p per share (if
declared) without any reduction to the Acquisition cash consideration of
1,925p per EMIS share
· The EMIS Board has therefore declared an interim dividend of 21.3p per
share (2022 H1: 17.6p) payable on 23 October 2023 to EMIS shareholders on the
register at the close of business on 6 October 2023. The interim dividend is
conditional on the Scheme not having become effective prior to 7 October 2023
and, if paid, will be paid without any reduction to the Acquisition cash
consideration of 1,925p per EMIS share
Andy Thorburn, Chief Executive Officer of EMIS Group, said:
"The first half of the year has been positive and in line with our
expectations. The business continues to perform well, building on its strong
foundations, with solid organic growth, good visibility and increasing levels
of recurring revenue.
"EMIS continues to focus on developing its technology and cloud refresh
strategy to support its customer base in both the NHS and enterprise segments,
as well as continuing investment in EMIS Web. Our strategy to address the
needs of the healthcare sector as it increases its reliance on data remains
focussed and relevant and we therefore look forward with confidence.
"We expect to be able to provide a further update on our Acquisition once the
CMA has issued its final report and, in the meantime, we are pleased to have
declared an interim dividend."
Enquiries:
For further information, contact:
MHP
Tel: 020 3128 8567
Reg Hoare/Ollie Hoare/Matthew Taylor/Pauline Guenot
emis@mhpgroup.com
Numis Securities Limited (nominated adviser and broker)
Tel: 020 7260 1000
Josh Hughes/Simon Willis
* Information for investors 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, patient-facing services, data and analytics, and research
and life sciences.
LEI: 213800K474ZZK76NX913
CHIEF EXECUTIVE OFFICER'S OVERVIEW
The first half of the year has been positive. The business continues to
perform well, building on strong foundations, with solid organic growth, good
visibility and increasing levels of recurring revenue.
In EMIS Health, our relationships with our NHS customers remained strong, as
we continued to support them in a changing market with ongoing investment to
advance our technology and cloud refresh strategy. Revenue and profit
increased over the prior period, bolstered by the contribution from the
Healthcare Gateway business acquired in 2022, which more than offset the
ongoing planned reduction in lower margin resale partner activities.
In EMIS Enterprise, there was a good performance with results slightly higher
than a strong 2022 H1 comparative. We secured significant new customer wins in
Community Pharmacy, developed further our Pinnacle business, which we expect
to continue to grow once the strong Covid-related one-off contracts have
completed, and continued to expand our data solutions portfolio.
The Group retains a strong balance sheet, with net cash at 30 June 2023 of
£48.5m (31 December 2022: £45.9m).
Connected care market and technology
EMIS continues to invest in its development roadmap to deliver intelligent and
interoperable patient, clinical and pharmacy point of care systems in
alignment with UK healthcare strategy, as exemplified by the establishment of
42 Integrated Care Boards ("ICBs") in England.
ICBs are now the contracting parties for EMIS Web. We expect some ICBs will
tender for primary care systems in the coming months, potentially under new
NHS England frameworks. We expect to be confirmed on the new primary care
framework by the end of the year, along with a number of new market entrants.
In line with our plans to release incremental functionality on a regular basis
we introduced EMIS-X GP functionality to 2000 GP desktops in July 2023 with
the new Clinical Views particularly well received. The migration of EMIS Web
to the cloud with AWS is now underway with expected completion in the first
half of 2024. At 30 June 2023, EMIS-X Analytics had been procured for 26% of
ICBs.
The scale of change has resulted in some service challenges with EMIS Web in
Q2. We have reacted positively to these challenges with significant
infrastructure and network upgrades completed in July 2023, the deployment of
a major EMIS Web upgrade with 64-bit capability, incremental usability
improvements deployed every week during 2023 to date and improving system
speed and performance in August 2023.
Smarter use of data to support UK healthcare and life sciences
The adoption of data-informed technology continues to be a major focus of the
NHS to increase system efficiency, improve patient outcomes, improve the
experience of delivering care and reduce health inequalities.
We made a number of advances to support the goal of the Department for Health
and Social Care and the Office for Life Sciences to embed clinical research in
the NHS. Our EMIS Recruit tool was scaled nationally and is now available for
all GP practices in England to use without charge. We are making steady
progress in this area as we build relevant case studies and references. We
believe that our EMIS Recruit product is a strong offering with exciting
future growth prospects, and we are delighted that over 630 practices have
signed up to the tool, providing circa 6.75 million patients with automated
access to clinical research opportunities.
During the period we also launched Proxemis, a joint venture with the Nuffield
Department of Primary Care at the University of Oxford, to conduct end-to-end,
data-enabled clinical trials in primary care settings.
Our Sustainability strategy
Our focus in the first half of the year has been on developing our
sustainability strategy; this follows the work to establish our greenhouse gas
emissions baseline for 2021 and 2022 emissions, as well as understanding our
social impact. The strategy contains dedicated goals and objectives across
four new pillars - our environmental responsibilities; our people and culture;
delivering social value to communities; and our responsibilities as a business
- in support of new targets to achieve net zero emissions by 2040. We will
launch the strategy and our newly established sustainability team in Q4 2023,
ensuring that we continue to support our stakeholders in their journeys
towards sustainability.
Becoming an employer of choice
We continue to make good progress towards our ambition of becoming an employer
of choice by 2025. The first half of 2023 saw our first ever EXPO events in
the UK and India, bringing all our people together to ensure everyone
understands how their role contributes to the overall success of the business.
We continue to focus on attracting and retaining the best talent, through
developing great leadership, building our external profile and delivering high
levels of staff engagement.
Recommended acquisition of EMIS Group Plc by Bordeaux UK Holdings II Limited
("BidCo")
On 17 June 2022, the Boards of BidCo and EMIS announced that they had reached
agreement on the terms of a recommended all cash offer pursuant to which
BidCo, an affiliate of Optum Health Solutions (UK) Limited and a
wholly‐owned subsidiary of UnitedHealth Group Incorporated, will acquire the
entire issued and to be issued ordinary share capital of EMIS by way of a
scheme of arrangement.
On 9 August 2022, EMIS announced that, at the court meeting to consider the
Scheme and the general meeting to consider the special resolution relating to
the Acquisition, all resolutions were approved by the requisite majorities.
On 31 March 2023, the CMA announced that it had referred the Acquisition for a
Phase 2 investigation and on 6 April 2023 EMIS and BidCo announced that they
would proceed with this investigation.
On 11 August 2023, the CMA published its provisional findings from its Phase 2
investigation, provisionally clearing the Acquisition. The CMA invited
responses to its provisional findings from third parties by 1 September 2023,
which will be considered ahead of the CMA issuing its final report by 5
October 2023. BidCo and EMIS expects to be able to provide a further update
once the CMA has issued its final report.
The Scheme remains subject to the sanction by the Court at the court sanction
hearing and the satisfaction (or, where applicable, the waiver) of the
conditions to the Scheme set out in paragraphs 1, 2(c) and 4 of Part A of Part
3 of Scheme Document published on 8 July 2022. In particular, the Scheme
remains subject to the conditions set out in paragraphs 4(b) and (c) of Part A
of Part 3 of the Scheme Document which will continue to apply to the Scheme
and to the Phase 2 investigation outcomes (subject to the Rule 13.5 of the
Takeover Code).
Dividend
In accordance with the terms of the Acquisition, provided that the Scheme has
not become effective before 7 October 2023, EMIS shareholders are entitled to
receive a 2023 interim dividend of up to 21.3p per share (if declared) without
any reduction on the Acquisition cash consideration of 1,925p per EMIS share.
Having carefully considered the solid trading performance of the Group,
together with the consistent underlying growth of the Group and its future
prospects, the Board has therefore today declared an interim dividend of 21.3p
per share (2022 H1: 17.6p) payable on 23 October 2023 to EMIS shareholders on
the register at the close of business on 6 October 2023 and with an
ex-dividend date of 5 October 2023. The interim dividend is conditional on
the Scheme
not having become effective prior to 7 October 2023 and, if paid, will be paid
without any reduction to the Acquisition cash consideration of 1,925p per EMIS
share.
Summary and outlook
It has been a positive first half of the year with a solid performance from
the business. EMIS continues to focus on developing its technology and cloud
refresh strategy to support its customer base. Our strategy to address the
needs of the healthcare sector as it increases its reliance on data remains
focussed and relevant and we therefore look forward with confidence.
FINANCIAL REVIEW
The Group performed well in the period with revenue, recurring revenue,
adjusted operating profit and margin all higher than for the comparative
period. Reported operating profit and margin were lower than the comparative
period primarily due to higher exceptional costs incurred in the period
relating to the technology transformation programme and to corporate
transaction costs. Adjusted cash from operations was lower than the
comparative period as a result of short-term working capital factors, with
reported cash generated from operations also held back by higher levels of
cash exceptional costs.
Group revenue increased by 2% to £88.8m (2022 H1: £87.3m), while recurring
revenue grew by 6% to £76.0m (2022 H1: £71.8m), representing 86% (2022 H1:
82%) of the Group's total revenue.
Adjusted operating profit for the period was £23.9m (2022 H1: £22.4m), with
strong growth in recurring revenue partly offset by lower non-recurring
revenues, higher staff costs and increased operating expenses. With a similar
level of development costs capitalised, and higher exceptional costs of £8.4m
(2022 H1: £4.3m) related to technology transformation and corporate
transaction costs, reported operating profit reduced to £12.7m (2022 H1:
£15.3m).
Segmental performance
In EMIS Health, revenue increased to £52.8m (2022 H1: £51.3m), including
£1.9m from the 2022 Healthcare Gateway acquisition and reflecting the ongoing
steady planned reduction in lower margin resale partner activities.
Encouragingly, the delivery run rate of previously secured digitisation
contracts increased towards the end of the half year. This higher quality
revenue mix and tight cost control resulted in an increased adjusted operating
profit of £14.0m (2022 H1: £12.5m). Reported divisional operating profit was
also higher at £12.8m (2022 H1: £11.8m) including an increase in the
amortisation in respect of acquired intangible assets following the
acquisition of Healthcare Gateway.
In EMIS Enterprise, revenue was slightly higher at £36.0m (2022 H1: £35.9m)
with growth in analytics offsetting reductions in Pinnacle and Partners as a
result of some significant one-offs in the prior year. Adjusted operating
profit also marginally increased to £10.8m (2022 H1: £10.7m) and reported
operating profit increased to £9.1m (2022 H1: £8.5m) following a reduction
in the amortisation of development costs.
Revenue
The analysis of revenue is summarised below with full segmental revenue
analysis set out in note 9.
· software subscription and support revenue increased to £61.1m (2022 H1:
£56.3m), reflecting higher revenue from the Group's existing customers
particularly in analytics and community and the benefit of the Healthcare
Gateway acquisition;
· interface and connectivity charges decreased to £11.5m (2022 H1:
£13.3m), as a result of lower levels of one-off elite partner sales in the
partners business compared to the prior period;
· other services revenue was lower at £7.0m (2022 H1: £8.5m),
principally due to a reduction in revenue from data extraction services as
customers move onto the group's modern analytics platform;
· hardware and related services revenue increased to £5.3m (2022 H1:
£4.6m), despite the planned reduction in lower margin resale partner
activities as a result of a significant increase in new site installations in
community pharmacy which will continue into the second half of the year; and
· perpetual licences, training, consultancy and implementation revenue was
lower at £3.9m (2022 H1: £4.6m), with a reduction in the NHS Covid-19
vaccination programme as expected and in customer-funded development work.
Profitability
Adjusted operating profit increased by 7% to £23.9m (2022 H1: £22.4m) with
the adjusted operating margin increasing to 26.9% (2022 H1: 25.7%), reflecting
the stronger sales mix and tight cost control.
The Group employed 1,560 staff at 30 June 2023, increasing slightly from the
1,539 at 31 December 2022. Other operating expenses increased with additional
costs associated with the Group's investment in technology and information
security.
During the period exceptional costs were incurred in delivering the technology
transformation programme as the Group transitions to the cloud and in relation
to corporate transaction costs due to the recommended acquisition of EMIS
Group Plc by Bordeaux UK Holdings II Limited.
Taking into account these increased exceptional costs, and a similar level of
capitalisation of development costs and amortisation charges, reported
operating profit was lower at £12.7m (2022 H1: £15.3m).
The tax charge for the period was £3.6m (2022 H1: £3.2m), representing an
effective rate of tax before share of result of joint venture and associate
and non-deductible exceptional costs of 23.0% (2022 H1: 19.0%), with the
increase reflecting the higher headline corporation tax rate of 25.0% from
April 2023.
Adjusted basic and diluted EPS both increased by 2% to 29.7p and 29.3p
respectively (2022 H1: 29.1p and 28.9p). The reported basic and diluted EPS
were both lower at 15.1p and 14.9p respectively (2022 H1: 19.4p and 19.2p).
Cash flow, net cash and financing
Cash generated from operations was £17.2m (2022 H1: £28.4m), with the
reduction resulting from temporary adverse working capital movements due to
increased inventory ahead of the planned on-boarding of a number of new sites
in Community Pharmacy together with a short-term delay in cash receipts
following the significant NHS reorganisation in the period. Adjusted cash from
operations, stated after deducting capitalised development costs and adjusting
for the cash impact of exceptional items, decreased to £20.7m (2022 H1:
£27.4m).
Gross capital expenditure on property, plant and equipment and purchased
software excluding capitalised development costs remained tightly controlled
at £0.8m (2022 H1: £1.3m).
The Group paid £0.7m of deferred consideration in respect of the 2022
Edenbridge acquisition and £6.0m (2022 H1: £nil) to acquire shares to
satisfy future requirements of employee share schemes, partially offset by
£0.4m (2022 H1: £0.4m) received for shares transferred to employees.
There were no dividends paid during the period (2022 H1: £11.1m), with the
payment of the final dividend for 2022 being made in July 2023.
After finance income and costs, lease payments, and tax, the Group ended the
period with net cash of £48.5m (31 December 2022: £45.9m; 2022 H1: £53.6m).
As at 30 June 2023, the Group had available undrawn bank facilities of £30.0m
in place until December 2024. An accordion arrangement is in place to increase
the quantum up to £60.0m if required.
Group statement of comprehensive income
for the six months ended 30 June 2023
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
Revenue 9 88,759 87,271 175,373
Costs:
Changes in inventories 1,933 178 (12)
Cost of goods and services (7,469) (7,682) (12,889)
Staff costs (39,687) (37,121) (77,375)
Other operating expenses (23,102) (19,935) (40,411)
Depreciation of property, plant and equipment (2,602) (2,210) (4,915)
Amortisation of intangible assets 14 (5,175) (5,248) (12,025)
Adjusted operating profit 23,909 22,430 47,686
Development costs capitalised 14 2,102 2,113 4,361
Amortisation of intangible assets1 14 (4,922) (5,019) (11,539)
Exceptional costs 13 (8,432) (4,271) (12,762)
Operating profit 12,657 15,253 27,746
Finance income 684 143 480
Finance costs (179) (257) (531)
Share of result of joint venture and associate - 309 533
Exceptional fair value gain on previously held interest in joint venture - - 10,706
Profit before taxation 13,162 15,448 38,934
Income tax expense 10 (3,600) (3,195) (5,764)
Profit for the period 9,562 12,253 33,170
Other comprehensive income
Items that may be reclassified to profit or loss:
Currency translation differences (187) 167 42
Other comprehensive income (187) 167 42
Total comprehensive income for the period 9,375 12,420 33,212
Attributable to:
- equity holders of the parent 9,375 12,420 33,212
Earnings per share attributable to equity holders of the parent Pence Pence Pence
Basic 11 15.1 19.4 52.5
Basic diluted 11 14.9 19.2 51.8
Adjusted 11 29.7 29.1 62.0
Adjusted diluted 11 29.3 28.9 61.2
1 Excluding amortisation of computer software used internally of
£253,000 (2022 H1: £229,000; 2022 FY: £486,000).
Group balance sheet
as at 30 June 2023
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
Non-current assets
Goodwill 85,600 68,003 85,600
Other intangible assets 14 35,541 33,445 38,588
Property, plant and equipment 12,632 16,705 14,803
Investment in joint venture and associate 199 258 199
133,972 118,411 139,190
Current assets
Inventories 2,451 708 518
Current tax assets 1,070 5,682 254
Trade and other receivables 50,846 43,350 38,889
Cash and cash equivalents 48,500 53,610 45,918
102,867 103,350 85,579
Total assets 236,839 221,761 224,769
Current liabilities
Trade and other payables (34,640) (29,273) (34,175)
Deferred income (43,485) (45,686) (34,342)
Accrued dividend 12 (13,331) - -
Other financial liabilities 15 (3,759) (3,251) (1,500)
Lease liabilities (612) (797) (705)
(95,827) (79,007) (70,722)
Non-current liabilities
Deferred tax liability (5,261) (4,459) (4,916)
Other financial liabilities 15 - (3,000) (3,000)
Lease liabilities (3,313) (4,590) (3,660)
(8,574) (12,049) (11,576)
Total liabilities (104,401) (91,056) (82,298)
Net assets 132,438 130,705 142,471
Equity
Ordinary share capital 633 633 633
Share premium 51,045 51,045 51,045
Own shares held in trust (10,156) (4,263) (4,529)
Retained earnings 89,322 81,384 93,541
Other reserve 1,594 1,906 1,781
Total equity 132,438 130,705 142,471
Group statement of cash flows
for the six months ended 30 June 2023
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
Profit before taxation 13,162 15,448 38,934
Finance income (684) (143) (480)
Finance costs 179 257 531
Share of result of joint venture - (309) (533)
Exceptional fair value gain on previously held interest in joint venture - - (10,706)
Operating profit 12,657 15,253 27,746
Adjustment for non-cash items
Amortisation of intangible assets 5,175 5,248 12,025
Depreciation of property, plant and equipment 2,602 2,210 4,915
(Profit)/loss on disposal of property, plant and equipment (3) (6) 84
Share-based payments 1,054 898 1,933
Operating cash flow before changes in working capital 21,485 23,603 46,703
Changes in working capital
(Increase)/decrease in inventory (1,933) (178) 12
Increase in trade and other receivables (11,113) (11,521) (5,385)
Increase in trade and other payables 698 748 4,830
Increase in deferred income 8,072 15,746 2,653
Adjusted cash generated from operations 20,749 27,360 54,634
Development costs capitalised 14 2,102 2,113 4,361
Cash costs of exceptional items (5,642) (1,075) (10,182)
Cash generated from operations 17,209 28,398 48,813
Finance costs (20) (239) (281)
Finance income 670 49 336
Tax paid (5,572) (3,878) (2,659)
Net cash generated from operating activities 12,287 24,330 46,209
Cash flows from investing activities
Purchase of property, plant and equipment (743) (1,296) (2,478)
Proceeds from sale of property, plant and equipment 6 9 9
Development costs capitalised 14 (2,102) (2,113) (4,361)
Purchase of software 14 (26) (59) (267)
Dividends received - 406 626
Acquisition contingent consideration paid - - (1,751)
Acquisition of subsidiaries net of cash acquired - (18,432) (30,847)
Net cash used in investing activities (2,865) (21,485) (39,069)
Cash flows from financing activities
Transactions in own shares held in trust (5,627) 376 110
Payment of lease liabilities (472) (568) (1,181)
Contingent consideration 15 (741) (2,000) (2,000)
Dividends paid 12 - (11,085) (22,193)
Net cash used in financing activities (6,840) (13,277) (25,264)
Net increase/(decrease) in cash and cash equivalents 2,582 (10,432) (18,124)
Cash and cash equivalents at beginning of period 45,918 64,042 64,042
Cash and cash equivalents at end of period 48,500 53,610 45,918
Group statement of changes in equity
for the six months ended 30 June 2023
Own shares
Share Share held in Retained Other Total
capital premium trust earnings reserve equity
Notes £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 (audited) 633 51,045 (4,639) 79,699 1,739 128,477
Profit for the period - - - 12,253 - 12,253
Transactions with owners
Share acquisitions less sales - - 376 - - 376
Share-based payments - - - 898 - 898
Deferred tax in relation to share-based payments - - - (381) - (381)
Dividends paid - - - (11,085) - (11,085)
Other comprehensive income
Currency translation differences - - - - 167 167
At 30 June 2022 (unaudited) 633 51,045 (4,263) 81,384 1,906 130,705
Profit for the period - - - 20,917 - 20,917
Transactions with owners
Share acquisitions less sales - - (266) - - (266)
Share-based payments - - - 1,035 - 1,035
Deferred tax in relation to share-based payments - - - 1,313 - 1,313
Dividends paid 12 - - - (11,108) - (11,108)
Other comprehensive income
Currency translation differences - - - - (125) (125)
At 31 December 2022 (audited) 633 51,045 (4,529) 93,541 1,781 142,471
Profit for the period - - - 9,562 - 9,562
Transactions with owners
Share acquisitions less sales - - (5,627) - - (5,627)
Share-based payments - - - 1,054 - 1,054
Deferred tax in relation to share-based payments - - - (1,504) - (1,504)
Dividends accrued 12 - - - (13,331) - (13,331)
Other comprehensive income
Currency translation differences - - - - (187) (187)
At 30 June 2023 (unaudited) 633 51,045 (10,156) 89,322 1,594 132,438
Notes to the unaudited consolidated half year financial statements
1. General information
The unaudited consolidated half year financial statements for the six months
ended 30 June 2023 and the six months ended 30 June 2022 do not constitute
statutory accounts within the meaning of Section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2022 were approved by
the Board of Directors on 25 May 2023 and delivered to the Registrar of
Companies. The auditor's report on those accounts was unqualified, did not
contain an emphasis of matter paragraph and did not contain any statement
under Section 498 (2) or (3) of the Companies Act 2006.
These condensed half year financial statements were approved for issue by the
Board of Directors on 7 September 2023 and were not independently reviewed by
the Group's auditor.
2. Basis of preparation
These condensed half year financial statements for the half year ended 30 June
2023 have been prepared in accordance with the AIM Rules for Companies, comply
with IAS 34 Interim Financial Reporting and should be read in conjunction with
the annual financial statements for the year ended 31 December 2022, which
have been prepared in accordance with UK-adopted international accounting
standards in conformity with the requirements of the Companies Act 2006
("adopted IFRS").
The financial information is presented in sterling, which is the functional
currency of EMIS Group. All financial information presented has been rounded
to the nearest thousand.
Going concern
The Group is profitable and it is anticipated that this will continue. There
is a high and continuing level of recurring revenue and high cash conversion.
The Group has an undrawn committed £30m bank facility in place until December
2024, comprising a revolving credit facility of £25m and an overdraft
facility of £5m.
The Directors have prepared cash flow forecasts covering a period of at least
twelve months from the date of approval of these condensed half year financial
statements. These forecasts, including consideration of severe but plausible
downside scenarios informed by the principal risks and uncertainties set out
in the strategic report of the Group's annual report and accounts for the year
ended 31 December 2022, including increased market competition, failure to
monitor and rectify software defects on a timely basis, failure to recruit or
retain appropriate numbers of suitably qualified people in critical areas, and
failures to comply with information governance legislation. The forecasts show
the Group continuing to operate with significant cash reserves and not needing
to draw on the £30m bank facility in place under any of the scenarios
considered.
As explained in the Chief Executive Officer's statement within the annual
financial statements for the year ended 31 December 2022, on 17 June 2022 the
Group agreed a proposal for the group to be acquired by Bordeaux UK Holdings
II Limited, an affiliate of Optum Health Solutions (UK) Limited ("Optum") and
a wholly owned subsidiary of UnitedHealth Group Incorporated. The Directors
have considered statements in the announcement made pursuant to rule 2.7 of
the takeover code in respect of the Proposed Acquisition, and discussions with
Optum senior management, regarding Optum's intention to ensure continuity of
the Group's existing business with no material changes to its existing
operations for at least a period of twelve months from completion of the
Acquisition. Considering the above, the Directors have concluded that the
completion of this acquisition would not impact the appropriateness of the
going concern basis of preparation of the financial statements. The Board also
considered the potential impact of the Proposed Acquisition on the cash flow
forecasts used in the going concern assessment and concluded that there was
currently no basis for modelling any impact arising directly from a potential
future completion.
Based on this assessment the Directors have a reasonable expectation that the
Group has adequate resources to continue in existence for at least twelve
months from the date of approval of these half year financial statements and
therefore continue to adopt the going concern basis of accounting in preparing
these condensed half year financial statements.
3. Accounting policies
The accounting policies applied in these half year financial statements are
the same as those applied in the Group's annual report and accounts for the
year ended 31 December 2022.
Current taxes on income in the half year period are accrued using the tax
rates that would be applicable to expected total annual profits. Deferred
taxes on income are calculated based on the standard rates that are enacted as
at the balance sheet date.
4. Critical accounting judgements and key sources of estimation uncertainty
In preparing the 2023 half year financial statements certain significant
judgements, including those involving estimations, have been made in the
process of applying the Group's accounting policies. There are no new
significant judgements and key sources of estimation uncertainty in addition
to those described in the 2022 Group annual report and accounts.
5. Principal risks and uncertainties
The 2022 Group annual report and accounts describes the principal risks and
uncertainties that could impact the Group's performance. These risks relate to
healthcare structure and procurement changes, technology and software
development, people and culture, information governance and cyber security,
and clinical safety. These remain unchanged since the annual report was
published and are not expected to change for the remaining six months of the
financial year. The Group operates a structured risk management process, which
identifies and evaluates risks and uncertainties and reviews mitigation
activity.
6. Financial risk management
The Group's activities expose it to financial risks including credit risk,
liquidity risk, interest rate risk, price risk, and foreign exchange risk.
These condensed consolidated half year financial statements do not include all
financial risk management information and disclosures required in the annual
financial statements and therefore should be read in conjunction with the 2022
Group annual report and accounts.
7. Forward-looking statements
Certain statements in this half year report are forward-looking. Although the
Group believes that the expectations reflected in these forward-looking
statements are reasonable, it can give no assurance that these expectations
will prove to have been correct. Because these statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by these forward-looking statements.
8. Segmental reporting
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, EMIS Health and EMIS Enterprise, both
involved with the supply and support of connected healthcare software and
systems.
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
taxes are not allocated to segments, as income tax, group and financing
activities are not segment-specific.
Six months ended Six months ended
30 June 2023 30 June 2022
Unaudited Unaudited
EMIS EMIS Total EMIS EMIS Total
Health Enterprise Health Enterprise
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 52,783 35,976 88,759 51,334 35,937 87,271
Segmental operating profit as reported internally 14,009 10,763 24,772 12,478 10,732 23,210
Development costs capitalised 1,529 573 2,102 1,720 393 2,113
Amortisation of development costs (1,259) (459) (1,718) (1,614) (956) (2,570)
Amortisation of acquired intangible assets (1,436) (1,768) (3,204) (795) (1,654) (2,449)
Segmental operating profit 12,843 9,109 21,952 11,789 8,515 20,304
Group operating expenses (863) (780)
Exceptional costs (8,432) (4,271)
Operating profit 12,657 15,253
Net finance income/(costs) 505 (114)
Share of result of joint venture and associate - 309
Profit before taxation 13,162 15,448
Revenue of £59,935,000 (2022 H1: £58,231,000) is derived from the NHS and
related bodies. Revenue of £1,347,000 (2022 H1: £1,609,000) is derived from
customers outside the United Kingdom.
9. Revenue analysis
Revenue is analysed as follows:
Six months ended Six months ended
30 June 2023 30 June 2022
Unaudited Unaudited
EMIS EMIS Total EMIS EMIS Total
Health Enterprise Health Enterprise
£'000 £'000 £'000 £'000 £'000 £'000
Software subscription and support 42,058 19,021 61,079 39,667 16,668 56,335
Interface and connectivity charges 1,544 9,946 11,490 2,188 11,101 13,289
Other services 4,248 2,769 7,017 4,167 4,353 8,520
Hardware and related services 2,053 3,249 5,302 2,243 2,284 4,527
Perpetual licences, training, consultancy and implementation 2,880 991 3,871 3,069 1,531 4,600
52,783 35,976 88,759 51,334 35,937 87,271
10. Income tax expense
The tax expense recognised reflects management estimates of the tax charge for
the period and has been calculated using the estimated average tax rate of UK
corporation tax for the financial year of 23.5% (2022: 19.0%).
Deferred tax balances have been calculated at 25.0%, being the rate
substantively enacted at the balance sheet date.
11. Earnings per share (EPS)
The calculation of basic and diluted EPS is based on the following earnings
and numbers of shares:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
Earnings £'000 £'000 £'000
Profit attributable to equity holders 9,562 12,253 33,170
Development costs capitalised (2,102) (2,113) (4,361)
Amortisation of development costs and acquired intangible assets 4,922 5,019 11,539
Exceptional costs 8,432 4,271 12,762
Exceptional fair value gain on previously held interest in joint venture - - (10,706)
Tax effect of above items at 23.5% (2022: 19.0%) (2,059) (1,043) (3,253)
Adjusted earnings attributable to equity holders 18,755 18,387 39,151
Number Number Number
Weighted average number of ordinary shares '000 '000 '000
Total shares in issue 63,311 63,311 63,311
Shares held by Employee Benefit Trust (127) (233) (186)
For basic EPS calculations 63,184 63,078 63,125
Effect of potentially dilutive share options 815 641 848
For diluted EPS calculations 63,999 63,719 63,973
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
EPS Pence Pence Pence
Basic 15.1 19.4 52.5
Basic diluted 14.9 19.2 51.8
Adjusted 29.7 29.1 62.0
Adjusted diluted 29.3 28.9 61.2
12. Dividends
In relation to the 2022 financial year, an interim dividend of 17.6p was paid
on 3 November 2022 amounting to £11,108,000. A final dividend of 21.1p,
amounting to £13,331,000, was approved at the Annual General Meeting on 29
June 2023 and was paid on 11 July 2023. This final dividend has been
recognised as a liability in these half year financial statements.
For the 2023 financial year, the Directors have declared an interim dividend
of 21.3p, which is conditional on the acquisition of EMIS Group plc by
Bordeaux Holdings II Limited not having completed before 7 October 2023. The
interim dividend will be payable on 23 October 2023 to shareholders on the
register at the close of business on 6 October 2023. This interim dividend,
which will amount to approximately £13,452,000, has not been recognised as a
liability in these half year financial statements.
13. Exceptional costs
During the period the following costs were incurred in delivering the
technology transformation programme as the Group transitions to the cloud and
in relation to corporate transaction costs related to the recommended
acquisition of EMIS Group Plc by Bordeaux UK Holdings II Limited. These costs
have been classified as exceptional owing to the material one-off nature of
these projects:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Technology transformation programme
Staff costs 1,120 - 2,197
Other operating expenses 3,114 1,565 5,137
Depreciation of property, plant and equipment 1,031 201 783
Amortisation of intangible assets 60 - 40
5,325 1,766 8,157
Corporate transaction costs
Staff costs 615 - 972
Other operating expenses 2,492 2,505 3,633
3,107 2,505 4,605
Total
Staff costs 1,735 - 3,169
Other operating expenses 5,606 4,070 8,770
Depreciation of property, plant and equipment 1,031 201 783
Amortisation of intangible assets 60 - 40
8,432 4,271 12,762
Staff costs classified as exceptional reflect the cost of time employees spent
working directly on supporting these projects and relate largely to roles
already in the business where time was diverted to these projects from other
value-adding activities. Other operating expenses are third party costs
incurred as a direct consequence of the projects. Depreciation and
amortisation are the incremental charges incurred either as a result of
revisions to the useful lives of existing assets as a result of the projects,
or charges arising from assets purchased specifically for the purpose of
supporting the technology transformation programme.
The cash cost of exceptional items shown on the Group statement of cash flows
of £5,642,000 (2022 H1: £1,075,000) relates to the total staff and other
operating costs of £7,341,000 (2022 H1: £4,070,000) less an increase in the
trade and other payables relating to the projects of £1,699,000 (2022 H1:
£2,995,000).
14. Other intangible assets
Computer Computer
Computer software software
software developed acquired
used for external on business Customer
internally sale combinations relationships Total
£'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2022 8,376 68,740 43,330 31,946 152,392
Additions 59 2,113 - - 2,172
Acquisition of businesses - - 10,612 1,551 12,163
At 30 June 2022 8,435 70,853 53,942 33,497 166,727
Additions 208 2,248 - - 2,456
Acquisition of businesses - - 9,748 (284) 9,464
At 31 December 2022 8,643 73,101 63,690 33,213 178,647
Additions 26 2,102 - - 2,128
At 30 June 2023 8,669 75,203 63,690 33,213 180,775
Accumulated amortisation and impairment
At 1 January 2022 7,456 54,079 39,259 27,240 128,034
Charged in period 229 2,570 1,338 1,111 5,248
At 30 June 2022 7,685 56,649 40,597 28,351 133,282
Charged in period 257 3,779 1,629 1,112 6,777
At 31 December 2022 7,942 60,428 42,226 29,463 140,059
Charged in period 253 1,718 2,090 1,114 5,175
At 30 June 2023 8,195 62,146 44,316 30,577 145,234
Net book value
At 30 June 2023 474 13,057 19,374 2,636 35,541
At 31 December 2022 701 12,673 21,464 3,750 38,588
At 30 June 2022 750 14,204 13,345 5,146 33,445
At 1 January 2022 920 14,661 4,071 4,706 24,358
15. Other financial liabilities
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Current
Contingent acquisition consideration - Edenbridge 3,759 3,000 1,500
Contingent acquisition consideration - FourteenFish - 251 -
Total 3,759 3,251 1,500
Non-current
Contingent acquisition consideration - Edenbridge - 3,000 3,000
Total - 3,000 3,000
The liability in respect of Edenbridge is payable based on the achievement of
specified revenue targets. 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 Edenbridge,
are not based on observable market data.
In respect of the Edenbridge contingent acquisition consideration, a payment
of £741,000 was made during the period and £3,000,000 was reclassified from
non-current to current.
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 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.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
£'000 £'000 £'000
Reported revenue 88,759 87,271 175,373
Non-recurring revenue (12,740) (15,459) (32,042)
Recurring revenue 76,019 71,812 143,331
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 effect of the
operating profit adjustments, and the exceptional fair value gain on
previously held interest in joint venture.
The Board uses these metrics to assess 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 excluding the
impact of the amortisation of 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 treatment of the
amortisation of the Group's software developed for external sale.
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.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
£'000 £'000 £'000
Reported operating profit 12,657 15,253 27,746
Development costs capitalised (2,102) (2,113) (4,361)
Amortisation of computer software developed for external sale 1,718 2,570 6,349
Amortisation of intangible assets arising on business combinations 3,204 2,449 5,190
Exceptional costs (see note 13) 8,432 4,271 12,762
Adjusted operating profit 23,909 22,430 47,686
A reconciliation of adjusted earnings used in the adjusted EPS calculations is
shown below:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
£'000 £'000 £'000
Profit attributable to equity holders 9,562 12,253 33,170
Development costs capitalised (2,102) (2,113) (4,361)
Amortisation of computer software developed for external sale 1,718 2,570 6,349
Amortisation of intangible assets arising on business combinations 3,204 2,449 5,190
Exceptional costs 8,432 4,271 12,762
Exceptional fair value gain on previously held interest in joint venture - - (10,706)
Tax effect of above items at 23.5% (2022: 19%) (2,059) (1,043) (3,253)
Adjusted profit attributable to equity holders 18,755 18,387 39,151
The tax effect adjusts for the estimated impact on the income tax expense of
the adjusting items, reflecting expenses/income that are not expected to be
allowable/chargeable in determining taxable profit, and has been calculated at
a rate of 23.5% (2022: 19%).
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.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
£'000 £'000 £'000
Reported cash generated from operations 17,209 28,398 48,813
Development costs capitalised (2,102) (2,113) (4,361)
Cash cost of exceptional items 5,642 1,075 10,182
Adjusted cash generated from operations 20,749 27,360 54,634
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 six months ended 30 June 2023 the Group was in
a net cash position, with no borrowings.
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