TIDMEMIS
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 GBP159.5m GBP159.5m -
Recurring revenue(1) GBP130.0m GBP125.0m 4%
Operating profit
Adjusted(1) GBP39.3m GBP39.3m -
Reported GBP35.8m GBP26.8m 33%
Cash flow and net cash
Cash generated from operations
- adjusted(1) GBP58.9m GBP46.3m 27%
Cash generated from operations
- reported GBP64.1m GBP50.1m 28%
Net cash(1) GBP53.0m GBP31.1m 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
GBP130.0m, representing 82% of total revenue (2019: 78 %), GBP28m
of new business delivered in the period and strong cash position of
GBP53.0m (2019: GBP31.1m)
-- 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 for details.
Enquiries:
For further information, contact:
EMIS Group plc Tel: 0330 024 1269
Andy Thorburn, CEO
Peter Southby, CFO
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 .
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 GBP28m 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 GBP159.5m (2019: GBP159.5m) included revenue of
GBP2.2m from the Pinnacle acquisition, completed on 9 March 2020.
Recurring revenue grew by 4% to GBP130.0m (2019: GBP125.0m),
representing 82% (2019: 78%) of the Group's total revenue.
Adjusted operating profit for the year, as set out in the table
below, was GBP39.3m (2019: GBP39.3m), including GBP0.7m from
Pinnacle. Reported operating profit, in the absence of any
exceptional charges and including the release of contingent
acquisition consideration of GBP1.0m, increased to GBP35.8m (2019:
GBP26.8m). 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
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'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
GBP107.8m (2019: GBP100.9m). These additional sales and reduced
operating costs delivered an 8% increase in adjusted operating
profit to GBP25.1m (2019: GBP23.3m), 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 GBP51.7m (2019: GBP58.6m) and adjusted operating profit reduced
by 10% to GBP15.7m (2019: GBP17.5m).
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 GBP99.5m (2019:
GBP94.2m), reflecting the inclusion of the acquired Pinnacle
revenues and higher revenues from the Group's existing
customers;
-- interface and connectivity charges , lower at GBP20.3m (2019:
GBP21.8m) with business growth offset by a particularly strong
comparative period for partner on-boarding;
-- hardware and related services , which grew to GBP17.3m (2019:
GBP13.2m) as a result of Covid-19 related hardware sales in the
primary care market;
-- other services , where revenues were higher at GBP13.4m
(2019: GBP12.0m) with increased digitisation project work; and
-- perpetual licences, training, consultancy and implementation
, where lower revenues of GBP9.0m (2019: GBP18.3m) 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 GBP39.3m (2019: GBP39.3m). 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 GBP21.2m (2019: GBP20.7m). 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 GBP35.8m (2019:
GBP26.8m), 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 GBP0.8m 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 GBP6.8m (2019: GBP5.0m). 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
GBPm GBPm
----------------------------------------- ------- -------
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 GBP64.1m (2019:
GBP50.1m). Adjusted cash from operations is stated after adding
back the cash cost of items relating to the 2019 exceptional
reorganisation costs of GBP1.3m (2019: GBP3.6m) 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 GBP7.3m 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 GBP2.9m. It also paid a final balance of GBP0.8m of
deferred contingent consideration further to the 2018 Dovetail
acquisition and GBP0.6m for the acquisition of the remaining 10%
share capital of Dovetail. The Group received GBP0.8m 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 GBP0.4m (2019:
GBP5.6m). Capital additions in the year included GBP1.8m on
computer equipment, GBP0.4m on internal systems and software and
GBP0.7m on property assets offset by proceeds from sales
(principally of the former head office property) of GBP2.5m (2019:
GBP0.2m).
After transactions in own shares, tax, dividends, lease payments
and finance/other transactions, the total net cash inflow of
GBP21.9m resulted in a year-end net cash position of GBP53.0m
(2019: GBP31.1m). At 31 December 2020, the Group had available
undrawn bank facilities of GBP30.0m committed until June 2021,
reducing to GBP15.0m for the twelve-month period ending 30 June
2022. An accordion arrangement is in place to increase the quantum
up to GBP60.0m, reducing to GBP30.0m for the twelve-month period
ending 30 June 2022.
Group statement of comprehensive income
for the year ended 31 December 2020
2020 2019
Notes GBP'000 GBP'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 GBPnil (2019:
GBP4,160,000).
(2) Including an exceptional credit from release of contingent
acquisition consideration of GBP1,020,000 (2019: GBPnil) and
exceptional reorganisation costs of GBPnil (2019: GBP1,200,000)
(3) Excluding amortisation of computer software used internally
of GBP1,151,000 (2019: GBP884,000).
(4) During the year the Group received GBP782,000 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
2020 2019
Notes GBP'000 GBP'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
2020 2019
Notes GBP'000 GBP'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
Own
shares
held
Share Share in Retained Other Non-controlling Total
capital premium trust earnings reserve interest equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 GBP3,017,000 (2019: GBP4,442,000). Revenue of
GBP112,711,000 (2019: GBP98,994,000) is derived from the NHS and
related bodies. Revenue of GBP3,990,000 (2019: GBP5,022,000) 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 EMIS EMIS
Health Enterprise Total Health Enterprise Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'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
GBP'000 GBP'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 GBPnil
(2019: GBP1,018,000) 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 GBP214,000 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 GBP300,000.
6. Earnings per share (EPS)
The calculation of basic and diluted EPS is based on the following earnings and numbers of
shares:
2020 2019
Earnings GBP'000 GBP'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
-------------------------------------------------------------------------- --------- ---------
2020 2019
Number Number
Weighted average number of ordinary shares '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
-------------------------------------------------------------------------- --------- ---------
2020 2019
EPS 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
GBP'000 GBP'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 GBP10,067,000 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 Computer
software software
Computer developed acquired
software for external on business Customer
used internally sale combinations relationships Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'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 GBPnil and GBP4,000,000
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 GBP555,000. 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 GBP40,000 increase since the
2019 year end, the fair value of the put option liability at the
point of de-recognition was GBP2,728,000, and therefore the Group
statement of changes in equity shows a net movement of GBP2,688,000
within Other Reserves.
In respect of the Dovetail contingent acquisition consideration,
a payment of GBP480,000 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 GBP1,020,000.
A further payment of GBP320,000 was made during the year in
respect of equity-settled contingent acquisition consideration
initially recognised at a fair value of GBP1,000,000, resulting in
a corresponding debit to Other Reserves, and the remaining
equity-settled deferred consideration of GBP680,000 was
reclassified to retained earnings.
The two payments together resulted in a total cash outflow of
GBP800,000. 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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'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:
GBP'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 GBP2,198,000 and
GBP696,000 respectively. Had the acquisition occurred on 1 January
2020, the Group's revenue and adjusted operating profit for the
period would have been GBP159,945,000 and GBP39,389,000
respectively.
In relation to the acquisition, costs of GBP184,000 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
GBP'000 GBP'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
GBP'000 GBP'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
GBP'000 GBP'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
GBP'000 GBP'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.
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