EMIS Group plc 2015 half year results presentation

Introduction & Agenda

Introduction Chris Spencer

Financial review Peter Southby

Operational review Chris Spencer

Summary and outlook Chris Spencer

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Peter SouthbyChief Financial OfficerEMIS Group

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Financial highlights

Overall results in line with expectations•Positive contribution from acquisitions and strong organic growth

Total revenue £77.8m (2014 H1: £66.4m), up 17% (organic 8%)

Recurring revenue £60.5m (2014 H1: £49.9m), up 21% (organic 9%)

Adjusted group operating profit1 £16.9m (2014 H1: £14.6m), up 16% (organic 10%)•Reported: £13.8m (2014 H1: £12.9m), up 7%

Cash generated from operations2 £27.5m (2014 H1: £27.0m), up 2%

Net cash £1.3m (2014 H2: net debt £11.8m)

Adjusted EPS1 20.5p (2014 H1: 17.3p), up 18%•Reported: 16.6p (2014 H1: 15.2p), up 9%

Interim dividend 10.6p (2014 H1: 9.2p), up 15%

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1 Excludes capitalisation and amortisation of development costs and amortisation of acquired intangibles. EPS calculations also adjust for related tax and non-controlling interest impact.

2 Stated after deduction of capitalised development costs of £3.1m (2014 H1: £3.5m).

Financial review - income statement

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• Revenue increase driven by acquisitions, EMIS Web GP roll-out and community, children’s and mental health (CCMH) wins - total organic increase 8%.

• Adjusted operating profit up by 16% - 10% organic.

• Exceptionals in H2 2014 relate to release of contingent acquisition consideration.

• 2015 effective tax rate 20.4%.

£m H1 H2 H1 % change

2014 2014 2015 v H1 2014

Revenue 66.4 71.2 77.8 17%

Adjusted operating profit 14.6 18.0 16.9 16%

Capitalised development costs 3.5 3.0 3.1  Amortisation (5.2) (5.7) (6.2)  Finance costs (0.3) (0.2) (0.2)  Exceptionals/other - 0.8 -  Profit before tax 12.6 15.9 13.6  

Tax (2.7) (3.0) (2.8)  Non-controlling interest (0.4) (0.3) (0.4)  Earnings 9.5 12.6 10.4  Adjusted EPS 17.3p 22.2p 20.5p 18%

Reported EPS 15.2p 20.1p 16.6p 9%

Financial review - organic/acquisitions income statement

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• Consistent organic growth complemented by strategic bolt-on acquisitions.

1 Includes results from acquisitions of Indigo 4 (July 2014) and Medical Imaging (December 2014).

£m Organic Organic Organic Organic % Acquisitions Acquisitions

H1 2014 H2 2014 H1 2015 Increase H2 20141 H1 20151

Revenue 66.4 69.6 71.4 8% 1.6 6.4

Recurring revenue 49.9 51.7 54.5 9% 1.1 6.0

Cost of sales (6.4) (6.3) (6.5) 2% (0.1) (0.4)

Staff costs (including capitalised dev costs)

(32.8) (31.3) (34.2) 4% (1.0) (3.4)

Other operating expenses (8.6) (10.2) (10.3) 20% (0.1) (1.6)

Contract asset depreciation (1.9) (1.9) (1.7) -9% - -

Depreciation/purchased software amortisation

(2.1) (2.3) (2.7) 29% - (0.1)

Adjusted operating profit 14.6 17.6 16.0 10% 0.4 0.9

Development costs capitalised 3.5 3.0 3.1 -13% - -

Amortisation of development costs (2.0) (2.7) (3.0) 47% - -

Amortisation of acquired intangibles (3.2) (2.8) (2.8) -13% (0.2) (0.4)

Operating profit (pre-exceptional items)

12.9 15.1 13.3 3% 0.2 0.5

Financial review - segmental analysis

• Primary & Community Care growth driven by EMIS Web GP penetration and related revenue streams, and by new contracts in community, children’s and mental health.

• Community Pharmacy growth supporting investment in new ProScript Connect product for piloting later this year.

• Secondary & Specialist Care includes first half year contribution from Medical Imaging.

£m

H1 2014 H2 2014 H1 2015

Primary & Community

CareCommunity Pharmacy

Secondary & Specialist

Care Total

Primary & Community

CareCommunity Pharmacy

Secondary & Specialist

Care Total

Primary & Community

CareCommunity Pharmacy

Secondary &

Specialist Care Total

Revenue 42.8 9.2 14.4 66.4 46.9 9.2 15.1 71.2 46.9 9.8 21.1 77.8

Recurring revenue 33.7 7.6 8.6 49.9 35.9 7.7 9.2 52.8 37.8 8.0 14.7 60.5

Adjusted segmental profit

11.1 2.1 1.9 15.1 15.3 1.8 1.5 18.6 13.4 1.9 2.3 17.6

Group costs (0.5) (0.6) (0.7)

Adjusted operating profit

14.6 18.0 16.9

Adjusted operating margin

26.0% 22.7% 13.3% 22.1% 32.7% 19.2% 10.0% 25.3% 28.6% 20.1% 10.7% 21.7%

Development costs capitalised

1.8 0.4 1.3 3.5 2.2 0.4 0.5 3.1 1.6 0.5 1.0 3.1

Amortisation of development costs

(1.9) - (0.1) (2.0) (2.4) - (0.3) (2.7) (2.6) - (0.4) (3.0)

Amortisation of acquired intangible assets

(0.7) (0.4) (2.1) (3.2) (0.4) (0.3) (2.3) (3.0) (0.4) (0.3) (2.5) (3.2)

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Financial review - revenue analysis

• Good visibility through recurring revenue growth of £10.6m – organic £4.6m, acquisitions £6.0m.

• Acquisitions impact mainly other support services (Medical Imaging).

• Achieving full EMIS Web roll-out in England and Wales resulting in lower training/consultancy/implementation revenues.8

£m Nature H1 2014 H2 2014 H1 2015

Licencesmainly

recurring 20.4 23.4 24.7

Maintenance and software support recurring 15.5 17.9 18.6

Other support servicesmainly

recurring 10.3 11.3 15.3

Training/consultancy/implementation non-recurring 9.3 7.6 7.5

Hosting recurring 7.3 6.7 6.7

Hardware non-recurring 3.6 4.3 5.0

Total 66.4 71.2 77.8

         

Recurring 49.9 52.8 60.5

Non-recurring 16.5 18.4 17.3

Total 66.4 71.2 77.8

Revenue

Financial review - cash flow

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• Cash from operations up 2% at £27.5m, with strong H1 weighted cash flows.

• Working capital inflow with strong H1 weighted cash flows.

• Business combinations:• final Ascribe payment (£2.3m)• Pinbellcom (£3.0m) post period

end.

• Capex includes:• Secondary Care office fit out

(£1.2m)• Computer equipment (£1.0m)• ERP system (£0.5m).

• Net cash at £1.3m (improved from £11.8m net debt at last year end).

£m H1 2014 H2 2014 H1 2015

Operating profit 12.9 16.2 13.8

Depreciation and amortisation 9.1 9.9 10.6

Release of contingent acquisition consideration

- (0.9) -

Working capital/share based payments 8.5 (10.8) 6.2

Cash flow from operating activities 30.5 14.4 30.6

Development costs capitalised (3.5) (3.0) (3.1)

Cash from operations 27.0 11.4 27.5

Business combinations - (10.3) (2.3)

Net capital expenditure (3.8) (4.6) (3.5)

Transactions in own shares (1.8) 0.3 0.3

Tax (2.7) (2.5) (2.9)

Dividends (5.0) (5.8) (5.8)

Other (0.3) (0.2) (0.2)

Change in net debt 13.4 (11.7) 13.1

Closing net (debt)/cash (0.1) (11.8) 1.3

Financial review - balance sheet

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• Strong balance sheet with low gearing (£9.1m in cash / £7.8m debt).

• Bank facilities secured to 2017 (£24.0m Term/RCF).

• Deferred income provides good revenue visibility.

• Contingent consideration is for Medical Imaging.

• Cost of interim dividend £6.6m.

£m H1 2014 H2 2014 H1 2015

Goodwill 59.2 68.6 68.6

Acquired intangible assets 43.6 47.3 44.1

Development costs 21.0 21.4 21.5

Property, plant and equipment and purchased intangible assets

25.3 26.5 25.5

Associate and other current assets 30.2 32.9 37.0

Deferred income (37.9) (30.0) (37.9)

Contingent consideration (3.1) (5.3) (3.0)

Other current liabilities (19.4) (22.0) (24.5)

Deferred tax (11.5) (12.7) (11.8)

Net (debt)/cash (0.1) (11.8) 1.3

Net assets 107.3 114.9 120.8

Financial review - financial guidance and trends

Acquisitions•Pinbellcom acquired July 2015 for net £3.0m cash consideration and with last financial year revenues of £1.2m and profit of £0.4m.

Contract assets•Deferred income and related depreciation falling in H2 to £1.5m and expected to fall further in 2016.

Share-based payments•Charge increasing into 2016 with recent awards.

Tax rate•Expected to remain close to UK statutory rate.

•Future corporation tax rate changes expected to result in one off deferred tax benefit of £0.5m at full year 2015.

Development costs•Expect capitalisation and amortisation to continue to be broadly equal.

Capital expenditure•Expect 2015 to be lower overall, office fit out expenditure notwithstanding.

Dividends•15% increase for interim dividend (£6.6m in October) historically matched for final dividend.

•Community pharmacy internal dividend of £10.0m to be paid in H2 (21% to minority shareholder).

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Chris SpencerChief Executive OfficerEMIS Group

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EMIS Group brand hierarchy

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Clinical software and services

Provision of healthcare screening

Patient-facing and online services

Non-clinical ICT solutions and services

Operational highlights - trading well

Good performance with organic and acquired growth• Financial performance in line with Board expectations • Integration of products ongoing including roll out in Gibraltar of connected EMIS Health

primary care, community services, outpatient clinics, accident and emergency, and community pharmacy software

• 8% organic revenue growth and positive contribution from 2014 acquisitions• Strong revenue visibility, order book, and pipeline • Market share maintained or grown• Software businesses rebranded as EMIS Health.

Primary and community careStrong performance: market share maintained, revenue and profits up• UK primary care market share again rose slightly• EMIS Web GP:

• roll-out complete in England & Wales and progressing in Northern Ireland• 4,431 live EMIS Web GP practices (31 December 2014: 4,261)

• GPSoC Framework agreement (Lot 3) secured • CCMH: contract wins and implementation continue to plan and market share grown from

8% to 9%• Acquired Pinbellcom leading supplier of GP administration and compliance software.

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Operational highlights - trading well

Community pharmacy Robust market share and profitability maintained while innovating• Market lead in independent pharmacy maintained• Next generation dispensary management software on track for piloting with independent and

supermarket users• Innovative integrated products connecting GPs, pharmacists and patients available across

whole estate.

Secondary and specialist care Anticipated earnings enhancement from 2014 acquisitions delivered• Management team strengthened• Major contracts being delivered including pan-Wales A&E• New contract wins, strong order book and pipeline of further opportunities • Indigo 4 (messaging and order communications solutions) and Medical Imaging (service

provision capability) performing well.

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Operational review - primary care

• Majority market share rose slightly

• 77% of Group’s English GP practices have used an EMIS Health system for over 10 years

• GPSoC Lot 3 successfully concluded supporting connected care strategy

• EMIS Web roll-out in England and Wales complete

• Northern Ireland pilots in hand

• Primary Care business performing strongly.

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Operational review - community, children’s and mental health

• Implementing winsBT “Southern” National Programme contract re-procurement

• Engaged in circa 180 CCMH opportunities in NME CSC “North, Midlands and East” National Programme contract re-procurement Includes opportunities that are:

• Organic (EMIS Health already)• Replacement (third party supplier currently)• New (no system at present)

• USP is connected care across EMIS Health - delivering faster, better, cheaper care

• Contract wins include amongst others (from)• NHS Tayside Health Board (organic)• Cheshire and Wirral Partnership NHS Foundation Trust (organic)• East Cheshire NHS Trust (organic)• Marie Curie Cancer Care (new)• Sentinel Healthcare Southwest Community Interest Company (replacement - TPP)• St Peter’s Hospice (replacement - SMI)

• Total contract value of wins year to date in excess of £6m

• Strong/growing pipeline

• Market share grown from 8% at end of 2014 to 9%.

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Operational review – on-line / non-clinical solutions and services

Patient - patient facing and on-line services:• Moved to top level domain to give global reach - Patient.info• Rebranded as Patient• 99% of all GP practices now enabled on-line patient services• GPSoC monetisation expected by end of 2015.

Egton – non-clinical ICT solutions and services:Pinbellcom purchased• Adds Intranet administration and compliance platform:

• Document management• Communication• HR and practice management• Compliance

• Complements existing GP non-clinical offerings.

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Operational review - community pharmacy

• Clear lead maintained in independent market with ProScript

• ProScript Connect, next generation dispensary management product, for independents and supermarkets, piloting end of 2015

• Integrated products now available across whole estate:

• Medicines Manager• GP Record Viewer• My Local Pharmacy App

• EMIS Web for Community Pharmacy completed internal testing and pilot sites identified

• Poised for growth into supermarkets.

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Operational review - secondary and specialist care

Secondary care:• New Managing Director and Commercial Director• Implementations in hand:

• Pan-Wales (unscheduled care)

• Frimley Health (accident and emergency)

• South Devon Healthcare (accident and emergency)

• Lancashire Care (e-prescribing and medicines administration)

• Liverpool Heart and Chest Hospital (pharmacy)

• Hinchingbrooke (electronic document and record management)

• Contract wins include:• Virgin Care• Guy’s

• Strong pipeline• Indigo 4 – integration tools – continued to perform well.

Specialist Care – ophthalmology:• Software market share maintained• Medical Imaging (outsourced screening services,

to be renamed EMIS Care) performed well• Unprecedented level of eye-screening outsourcing tenders• Preferred bidder £11m, 5 year outsourcing contract for South West

London.

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Operational review - integrated care

• First phase of Gibraltar whole healthcare economy contract live on 24 June 2015

• Links and integrates Group’s products in:• accident and emergency• outpatient clinics• community services• primary care• community pharmacy

• USP in CCMH and elsewhere is integration with

EMIS Web for primary care

• Third party interoperability ongoing including:• Virgin• Liverpool (including Social Care with Liquid Logic)• Founder signatory to the TechUK Interoperability

Charter • Connected care delivering on promise of faster,

better, cheaper care.

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EMIS Group strategic priorities 2015

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Summary and outlook - continues to be positive

• Group continues to trade in line with Board expectations

• Ongoing confidence:• Strong revenue visibility, order book and pipeline• Ongoing earnings enhancement expected from 2014

acquisitions • Continuing opportunities for growth in primary care,

CCMH, community pharmacy, secondary and specialist care.

“Within the next five years our electronic health records will be available seamlessly in every care setting. You will be able to access them, share them, mark preferences, and shape the care that you want around them.”

Jeremy Hunt, Secretary of State for Health for England, speech at the King’s Fund - 16 July 2015

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Questions?

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Appendix

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• Primary care and commissioningNI, NME 180, Scotland, Patient Access

• CCMHNME 180 - targeting 10% overall UK market share

• Community pharmacy Balance independent estate and new supermarket estate

• Secondary and specialist careOn-going acute procurements post National Programme to integrate with primary and community care. Ophthalmology related service outsourcing.

(Source: EMIS and competitor data estimated based on company records)

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EMIS Group - markets, competitors and growth opportunities

EMIS Health primary care - GP market share by country

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CountryEMIS

Health% InPS % TPP % Other % Total

England 4,213 54.2 886 11.4 2,567 33.0 109 1.4 7,775

Scotland 512 51.8 477 48.2 - - - - 989

Wales 199 44.1 252 55.9 - - - - 451

Northern Ireland

197 56.3 125 35.7 - - 28 8.0 350

UK Total 5,121 53.5 1,740 18.2 2,567 26.9 137 1.4 9,565

(EMIS Health and competitor data estimated based on company records showing customers installed as at 30 June 2015) (EMIS Health and competitor data estimated based on company records showing customers installed as at 30 June 2015)

EMIS Health and Care - ophthalmology software and services in England

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What is integrated care?

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Long term ConditionManagement

Discharge Summaries

Unscheduled Care

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YouTube demonstration of EMIS Health connected care

EMIS Health - real connected care

http://bit.ly/RichardRedV2

Pre EMIS Web GP Record Viewer

Post EMIS Web GP Record

Viewer

Number of Patients

33 23

Average Age 70.7 y 70.3 y

Average length of stay

25.5 days 14.9 days

% Medication with error

50.4% 20.4%

% Allergies with error

11.4% 0%

EMIS Group - safer care through record sharing

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Source:East Lancashire Hospitals NHS Trust, Medical Assessment UnitDr B U Adam, Dr J Dean