Final Results

RNS Number : 1837D

EMIS Group PLC

18 March 2011

 



                                                                                                                        18 March 2011

EMIS Group plc

Preliminary Results for the financial year ended 31 December 2010

EMIS Group plc ("EMIS Group" or "the Group"),  the UK's leading supplier of clinical software and related services to GPs and other healthcare practitioners, today announces its results for the year ended 31 December 2010.

Financial highlights

	2010	2009	Increase
Total revenue	£62.4m	£57.7m	8%
Core activities(1) (EMIS/RX Systems):
§ recurring revenue	£50.8m	£42.7m	19%
§ operating profit	£19.6m	£17.0m	15%
Adjusted operating profit(2)	£17.6m	£15.8m	11%
Cash generated from operations	£22.2m	£19.9m	£2.3m
Net cash/(debt))	£1.7m	£(1.7m)	£3.4m
EPS	19.84p	19.88p	(0.2)%
EPS - adjusted(3)	21.78p	19.88p	10%
Dividends:
§ proposed final	5.6p	-	-
§ total dividend for year	11.2p	-	-

⁽¹⁾          Excludes the Canadian operation discontinued post year end.

⁽²⁾          Adjusted operating profit includes flotation and other transaction costs of £1.26m.

⁽³⁾          Calculation of 2010 adjusted EPS excludes flotation and other transaction costs of £1.26m less related tax relief of £0.16m.

Operational highlights⁽¹⁾ 

§ UK GP software market leading position:

o  growth in UK market share to 53.8% (2009: 52.5%)

o  5,576 EMIS GP practices at year end (2009: 5,377 EMIS GP practices)

o  market share in Scotland increased from 12.7% to 51.5% by year end

§ EMIS Web accredited in September 2010 and controlled roll-out commenced
By the year end:

o  44 GP practices installed

o  433 orders placed

o  1,665 orders for the EMIS Web familiarisation service

§ RX Systems:

o  alignment on track

o  high street pharmacy market share increased from 20.5% to 25%

§ Strategic review of Canadian operation concluded and managed exit underway

§ Transformation of healthcare delivery in the UK opening up new markets for EMIS Web:

o  in January 2011 EMIS won a five year contract, with an initial value of £1.8 million, to deliver a shared patient healthcare record for primary healthcare teams across Cheshire

o  EMIS continues to pilot EMIS Web across a variety of healthcare sectors in Liverpool, London and Cumbria

§ EMIS chosen to provide electronic healthcare records for the Australian Department  of Defence under a five year contract

 ⁽¹⁾  EMIS and RX Systems data estimated based on subsidiary company records showing customers installed and ordered (by contract or letter of intent) as at 31 December 2010

Sean Riddell,Chief Executive of EMIS Group, said:

"2010 was a busy year for EMIS Group. In our core business we have achieved accreditation and started the controlled roll-out of EMIS Web, our transformational next generation healthcare IT system. Working with GPs and commissioning groups to fulfil the objectives described in the NHS White Paper, we are already seeing a high level of intent to upgrade. Of the first wave of 52 GP consortia announced, representing 22% of England's GP practices, 77% are already EMIS users. These pathfinder organisations will shape the way that GP consortia operate in the future.

"We made the strategic acquisition of RX Systems, significantly increased our market share in Scotland, formed a joint venture to deliver wider interoperability through Healthcare Gateway, progressed existing and new extended primary care and community projects in Liverpool, London, Cumbria and Cheshire and extended our international reach into Australia.

"We remain focussed on cross-organisational healthcare and are confident that we can help healthcare professionals to deliver clinical benefit and improved efficiency through our software and services." 

There will be an analyst meeting at 9.30am today at Evolution Securities, 100 Wood Street, London, EC2V 7AN.  Please contact Giles Robinson at MHP Communications on 0203 128 8100 for details.

Enquiries:

For further information, contact:

EMIS Group plc                                                        Tel: [phone]

Sean Riddell, Chief Executive

Evolution Securities Limited                     

Leeds                                                                          Tel: [phone]

Joanne Lake/Peter Steel

London                                                                        Tel: [phone]

Andrew Fairclough/Adam Strachan

MHP Communications                                             Tel: [phone]

Reg Hoare/James White/Giles Robinson

Notes to Editors

EMIS Group plc ("EMIS Group" or "the Group"), through its subsidiaries Egton Medical Information Systems Limited ("EMIS") and RX Systems Limited ("RX Systems"), is the UK's leading supplier of clinical software and related services to GPs and other healthcare practitioners. 53.8% of GP practices and 25% of high street pharmacies in the UK⁽¹⁾ use an EMIS or RX clinical system.

Established in 1987, EMIS' shares were admitted to trading on AIM under the symbol EMIS.L in March 2010.

EMIS Group's core activities include software licensing and support, hosting, hardware sales, hardware support and maintenance services, third party software sales and training services.

The EMIS software includes all of the functionality specified in NHS accreditation standards for GPs, including holding the patient's cradle-to-grave electronic healthcare record, practice appointment booking systems and consultation and intelligent prescribing modules.

EMIS Web represents the next generation of clinical software systems and the board believes it has the potential to transform the delivery of healthcare by enabling GPs and other healthcare practitioners to connect with each other and securely share access to a patient's cradle-to-grave electronic health record.

In August 2010, EMIS Group acquired 78.9% of RX Systems Limited, a supplier of integrated pharmacy and retail systems for high street pharmacies. RX has a significant customer base of over 3,000 pharmacies, representing a 25% share of this market⁽¹⁾.

⁽¹⁾ EMIS and RX Systems data estimated based on company records showing customers installed and ordered (by contract or letter of intent) as at 31 December 2010

Chief Executive's Overview

Introduction

EMIS Group, through its subsidiary companies EMIS and RX Systems, is a major provider of healthcare IT, software and services in the UK. EMIS is the UK GP software market leader with 53.8% (5,576) of UK GP practices and over 60% of the cradle-to-grave electronic healthcare records. RX Systems provides healthcare IT, software and services to 25% of UK high street pharmacies.

EMIS Group's objective is to improve patient healthcare via the provision of healthcare IT, software and services.  To achieve this,the Group's strategy is to join up the patient's electronic healthcare record across the many clinicians and organisations that assist in the patient journey. We maintain a "healthcare first" ethos in delivering this cross-organisational healthcare.

The NHS in England is undergoing a combination of political upheaval and austerity challenges and has moved its position away from the development of centralised national systems to a "connect all" strategy. This has been further defined in a Government White Paper, which confirms the ring fencing of the public health budget, the increase in real terms of NHS spending, sharing of information being the key to better care, outcomes and reduced cost, and devolved power for commissioning services passing to local consortia of GP practices. With over 60% of cradle-to-grave electronic healthcare records in the UK and the cross- organisational functionality of EMIS Web, EMIS is well positioned for future growth in the environment of the recently proposed NHS strategic changes.

The envisaged transformation of healthcare delivery opens up new markets for EMIS Web. In addition to the 157,000 staff currently based in GP practices, 292,000 staff work in extended primary and community healthcare, representing additional potential markets for EMIS. EMIS Web is already live in these new markets with strategic healthcare partners including the NHS in Tower Hamlets,  Cumbria and, latterly, Cheshire where EMIS Web will become the main clinical information system for the whole primary healthcare team of approximately 4,000 clinicians working across a diverse range of healthcare settings. In Liverpool, we have successfully linked primary, out of hours and secondary healthcare IT systems. This improves patient care and delivers significant efficiencies by providing vital patient information at the point of need. With the formal accreditation process for EMIS Web now complete, this is a model that we intend to replicate in other healthcare communities.

Operational Review

EMIS' core business remains stable and continues to perform well, responding to the ongoing change within the NHS. Our overall UK market share as a result of gaining 398 GP practices in Scotland has increased from 52.5% to 53.8%. 

During 2010, core recurring income from licensing and software support increased by 8.9% to £31.7 million compared with £29.1 million in 2009, arising mainly from an increase in accredited hosting deployments.  608 practices were migrated to EMIS-hosted servers during the year.

Income from hardware sales, engineering services and training reduced to £21.7 million (2009: £24.8 million).  Not unsurprisingly, discretionary spend on hardware, engineering services and training was affected by pressure on NHS budgets and political uncertainty. It also appears that some spending is being deferred in anticipation of the roll-out of EMIS Web.  We expect that pressure on NHS budgets will continue to impact discretionary spend. 

Scotland represents a significant area of new business growth for the future.  NHS Scotland opted to replace the legacy GP System ("GPASS") used by 683 practices and, in January 2010, selected EMIS as one of only two systems to which GPASS practices could upgrade. Health Boards in Scotland that have already recommended EMIS software to replace the GPASS system include the largest, NHS Greater Glasgow and Clyde. EMIS' market share in Scotland grew from 12.7% (132 practices at 1 January 2010) to 51.5% (530 practices, installed or ordered at 31 December 2010). The additional revenue will largely fall into 2011 onwards.

During 2010, EMIS achieved its major objective for the year; the accreditation of EMIS Web, and then focussed on commencement of the controlled roll-out of EMIS Web to GP practices.  At the same time, we began to put in place the significant internal resource which will be required to accelerate the roll-out of EMIS Web whilst continuing to meet customer expectations.

As at 31 December 2010, installation had been completed at 44 GP practices, 433 orders had been placed for EMIS Web systems and orders had been received from 1,665 GP practices for the familiarisation service, which allows GP practices to run EMIS Web alongside their existing system before upgrading. Since the year end, installation has been completed at a further 33 GP practices.

As part of the Group's strategy to deliver cross-organisational healthcare, we are also in negotiation with a number of NHS Primary Care Trusts ("PCTs") and GP Consortia regarding the implementation of EMIS Web for use in extended primary and community healthcare. This has led to a number of successes with contracts signed with the NHS in Tower Hamlets, Liverpool, Cheshire and Cumbria.

Also in line with our strategy of joining up healthcare, in August 2010, the Group acquired 78.9% of RX Systems, a supplier of pharmacy and integrated retail systems for a consideration of up to £10.1m (including a completion accounts net assets adjustment).  The non-controlling shareholding has been retained by a strategic partner that itself runs over 500 high street pharmacies in the UK and provides invaluable domain knowledge and assistance. At acquisition, RX Systems had a significant UK-wide customer base of 2,500 pharmacies, representing a 20.5% share of this market.  By the end of 2010, during a successful integration period, RX Systems' market share in the UK had risen from 20.5% to 25%. The Group's alignment team had also begun work on a number of significant projects that can be exploited for the benefit of both businesses.

Close interoperability between pharmacy and GP software systems will enable streamlining of the prescription process and links into the patient electronic healthcare record. Provision of EMIS' proprietary patient information leaflets and drugs information leaflets will also broaden the healthcare knowledge available to pharmacists and patients in the high street.  

As stated at the half year, EMIS Inc, the Group's Canadian subsidiary, had not made the progress previously anticipated. Action was taken, staff numbers reduced and a strategic review commenced. Since the year end, the strategic review has been concluded and a managed exit is now underway.

Healthcare Gateway Limited, a 50:50 joint venture company, was established with In Practice Systems Limited ("INPS") to facilitate the sharing and transfer of patient data.  This allows real time interoperability between GPs using EMIS Web, those using INPS software and other healthcare professionals within the NHS. It has the potential to significantly increase efficiency in the NHS as well as help practitioners to improve patient care. EMIS and INPS software users in the UK represent circa 75% of GP practices and together hold approximately 46 million electronic healthcare records.

The development of this healthcare gateway has been driven by demand from the NHS and other healthcare providers to move to a "connect all" ethos. The need for wider access to a critical mass of cradle-to-grave electronic healthcare records is increasingly important given the drive to deliver more NHS services in the community. It is expected that both the NHS and other software providers seeking to further connect computer systems in the NHS will buy services from Healthcare Gateway and product development and marketing are well underway.

In 2010, we have delivered on key promises we made at the time of our IPO, namely the successful accreditation and commencement of controlled roll-out of EMIS Web, the significant increase in our market share in Scotland, and progress in facilitating the delivery of cross-organisational healthcare through the acquisition of RX Systems and our joint venture with INPS.

Financial Review 

EMIS Group is in a period of transition from a locally hosted healthcare IT software company, with servers predominantly based at the user's premises, typically those of GPs, to a business that will primarily provide hosted software and services from its own data centres and with a variety of users across primary, extended primary and community care settings. 

A key area of focus of the Group during 2010 was to start to put in place the infrastructure that will facilitate this transition. This will continue during 2011.

With this background of investment and at this early stage, it is pleasing to report an increase in pre tax profit for the year amounting to £16.1m (2009: £14.5m).

Selected financial extracts	2010			2009
CORE BUSINESS1	EMIS £m	RX Systems £m	EMIS and RX Systems combined £m	EMIS £m
Revenue	56.9	5.0	61.9	57.7
including:
Core recurring revenue:	46.6	4.2	50.8	42.7
Core business operating profit :	19.4	0.2	19.6	17.0
- Add amortisation	2.1	0.3	2.4	2.1
- Deduct capitalised development costs	(3.8)	-	(3.8)	(4.6)
Adjusted core business operating profit	17.7	0.5	18.2	14.5
			Group
			2010	2009
Cash and receivables less current bank debt and payables			£5.0m	£4.6m
			Pence	Pence
EPS - basic and diluted(1)			19.84	19.88
EPS - adjusted(2)			21.78	19.88

⁽¹⁾ Excluding EMIS Inc

⁽²⁾ Calculation of 2010 adjusted EPS excludes flotation and other transaction costs of £1.26m less related tax relief of £0.16m.

Revenue

Total Group revenue was £62.4m, an increase of £4.7m over 2009.

As indicated above, core business recurring revenue, which excludes Canada, increased by £8.1m (19%) to £50.8m (2009: £42.7m).  This includes hosting to Connecting for Health standards, which commenced at the end of December 2009 and generated revenues of £4.5m in 2010.

The increased core recurring revenue was partly offset by a reduction in PCT spending on hardware and other services being generally lower margin revenue streams. As a result, recurring revenue was 82% of core revenue, up from 74% for 2009.

Profitability

Operating profit, adjusted to add back flotation and other transaction costs of £1.26m, was £17.6m (2009: £15.8m), an increase of 11.4%.  Excluding Canada, core business operating profit increased by £2.6m to £19.6m (2009: £17.0m).

Stripping out the capitalised internal development costs and amortisation of intangibles, the adjusted operating profit from our core business was £18.2m (2009: £14.5m).

The increase of £359,000 in the intangibles amortisation charge this year to £2.4m (2009: £2.1m) arises mainly on the RX Systems' acquisition.

Taxation

Our percentage tax charge is high as the losses of the Group's Canadian subsidiary cannot be offset against UK profits for tax purposes.  The overall rate reduced over the second half of 2010 as the benefit of the recent restructuring of the Canadian subsidiary took effect. It also reflects the reduction of the anticipated future corporation tax rate, from 28% to 27%, on the year end deferred taxation provision held to offset the future amortisation of intangible assets.

Earnings per share ("EPS")

Basic and diluted EPS was 19.84p as against 19.88p for 2009. EPS, adjusted for flotation and other transaction costs, net of applicable tax relief, amounting to £1.1m was 21.78p (2009: 19.88p). 

Since the flotation in March 2010, the Group has been funded principally by equity, whereas previously it had a shareholder loan of £23m.

Cash

The flotation in March 2010 raised £50m gross, £25m for the Group (£23.2m net of costs) and £25m less costs for existing shareholders.  The Group net proceeds were used principally to repay loans made available by the Group's founder shareholders of £23m.  

Other principal cash movements were as follows:

	2010 £m	2009 £m
Cash from operations:
Generated	22.2	19.9
Less internal development costs capitalised	(3.8)	(4.6)
	18.4	15.3
Used for:
Acquisition of 78.9% of RX Systems (net of RX cash)	(3.1)	-
Net capex	(5.3)	(3.8)
Repayment of bank loans	(1.2)	(6.6)
Share issues	24.0	-
Repayment of shareholder loans	(23.0)	-
Bank and other interest	(0.4)	(2.6)
Taxation	(3.9)	(3.1)
Interim dividend	(3.3)	-
	16.2	16.1
Cash increase (decrease) in year	2.2	(0.8)

RX Systems Acquisition

In August 2010 the Group acquired 78.9% of RX Systems Limited, a supplier of integrated pharmacy and retail systems for high street pharmacies. RX Systems has performed in line with management expectations since acquisition, contributing revenue of £4.98m and operating profit (before deduction of intangibles amortisation) of £0.55m to the group's 2010 results. RX Systems' market share has now grown to 25% and the Group's alignment team has identified a number of significant synergies to be exploited by both businesses in 2011 and beyond.

Dividend

The Directors have adopted a progressive dividend policy. Subject to shareholder approval at the Annual General Meeting on 24 May 2011, the board proposes paying a final dividend of 5.6p per ordinary share on 30 May 2011 to shareholders on the register at the close of business on 26 April 2011. This would make a total dividend of 11.2p per ordinary share for 2010.

Our People and the Board

EMIS Group remains at heart a people business with a "healthcare first" ethos and reputation built on the efforts of its employees. We would like to take this opportunity to thank all our employees for their commitment and hard work without which this year could not have been such a success. 

In particular, we would like to thank founder Tony Jones who stepped down as Chair of the Board of Directors on 17 March 2011 after making a 20 year contribution to the Group. We would also like to welcome Mike O'Leary who was appointed in his place on the same day.

Current trading and outlook

Since the year end, trading has continued in line with management expectations.

As stated at the time of our IPO, EMIS supplies GP software and certain other services in England under a framework agreement extended in June 2009 until August 2011. It is expected that this will be further extended until August 2013 in accordance with provisions contained in the agreement.

Strong revenue visibility, subject to the anticipated extension of the GPSoC agreement, continues into 2011 with recurring revenues expected to rise.

The controlled roll-out of EMIS Web is progressing as planned and the additional resources are being put in place in anticipation of a managed acceleration in the roll-out rate in the second half of the year. The intention remains to maximise deployment while minimising customer impact.  33 GP sites have been installed so far in 2011 with 247 further install dates given.

We believe that there will be further growth in revenues from the accelerated roll-out of EMIS Web, increasing hosting revenues and greater RX Systems' revenues, but that current pressure on customers' discretionary hardware and engineering services spend will continue during 2011. We therefore expect revenues in 2011 to be weighted towards the second half of the year.

As already indicated, EMIS Inc, having not made the progress previously anticipated, a managed exit is now underway. We expect that the 2011 Canadian loss, including the costs of the managed exit, will amount to £1.1m, of which £0.9m will be a cash cost.  There will also be an impairment charge of £1.4m.

Anticipating the recent White Paper on the NHS, EMIS' product strategy, coupled with its extensive and loyal GP user base and "healthcare first" ethos, places EMIS in a strong position to benefit from the transfer of PCT budgets to GP consortia and the focus on patients rather than administrative organisations. 

In the case of extended primary and community healthcare systems, NHS organisations in Liverpool and Cumbria both signed pathfinder agreements in May 2010 from which revenues of £120k arose and this is expected to increase throughout 2011.  Furthermore, in January 2011, we signed a five year contract with an initial value of £1.8m to deliver a shared care record for primary healthcare teams across Cheshire. In March 2011, through Healthcare Gateway, we also began to pilot the transfer of discharge summaries and sharing of detailed electronic healthcare records in London and Cumbria.

EMIS continues to supply healthcare software to the MoD in the UK and has built on this success with a contract win, in February 2011, as part of prime contractor, CSC's, bid to provide an e-health system to the Australian government for use by its armed forces. It is expected that development customisation work will take place in 2011, with implementation starting in 2012.  This has been described by the Commander of Australia's Joint Health Command as "…a significant milestone in the delivery of an electronic health information system."

Finally, RX Systems brings the opportunity to link GP practices with high street pharmacists and so help pharmacists to expand their services, work more efficiently, and play a greater role in the wider healthcare team.  The alignment of RX Systems is proceeding in accordance with management expectations and significant synergies have been identified which will offer opportunities during 2011 and beyond.

We are confident that we have put in place solid foundations for future growth.  We will continue to build on these foundations and are pleased with progress and performance to date, of which our employees can rightfully be proud.

Basis of preparation

The financial information in this document is abridged and does not constitute the Company's statutory financial statements for the year ended 31 December 2010. The financial information has been extracted from the financial statements for the year ended 31 December 2010, which were approved by the board on 17 March 2011 and on which the auditors' have reported without qualification.

The statutory financial statements for the year ended 31 December 2010 will be posted no later than 18 April 2011 to shareholders and, once approved, will be delivered to the Registrar of Companies following the Annual General Meeting on 24 May 2011.

Copies of the Annual Report and Financial Statements  for the year ended 31 December will be available on the Company's website www.emis-online.com/investors and from the Company Secretary, EMIS Group plc, Fulford Grange Micklefield Lane, Rawdon, Leeds LS19 6BA.

GROUP STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2010

			2010  £'000	2009  £'000
Continuing Operations
Revenue			62,393	57,696
Costs:
Changes in inventories			(40)	(498)
Cost of goods and services			(9,174)	(9,022)
Staff costs			(23,390)	(21,820)
Flotation and other transaction costs			(1,258)	-
Other operating expenses
- (including contract asset depreciation)			(8,278)	(6,209)
Earnings before interest, taxes, depreciation and amortisation ("EBITDA")			20,253	20,147
Depreciation of property, plant and equipment			(1,448)	(2,299)
Amortisation of intangible assets			(2,433)	(2,074)
Operating profit			16,372	15,774
Finance income			51	62
Finance costs			(426)	(1,572)
Share of profit of associate			109	198
Profit before taxation			16,106	14,462
Income tax expense			(4,868)	(4,521)
Total comprehensive income/ Profit for the year			11,238	9,941
Attributable to:
- equity holders of the parent			11,194	9,941
- non-controlling interest in subsidiary company			44	-
Total comprehensive income for the year			11,238	9,941
Earnings per share
- Basic and diluted			19.84p	19.88p

GROUP AND PARENT COMPANY BALANCE SHEETS

as at 31 December 2010

		Group		Company
		2010  £'000	2009  £'000	2010  £'000	2009  £'000
ASSETS
Non-current assets Goodwill		21,951	15,853	-	-
Other intangible assets		29,284	21,055	-	-
Property, plant and equipment		12,058	9,506	-	-
Investments in subsidiaries			-	48,165	38,034
Investment in associates		2,661	2,552	-	-
		65,954	48,966	48,165	38,034
Current assets
Inventories		668	674	-	-
Trade and other receivables		9,082	7,500	399	611
Amount owed by subsidiary company		-	-	-	239
Cash and cash equivalents		7,442	5,221	14	25
		17,192	13,395	413	875
Total assets		83,146	62,361	48,578	38,909
LIABILITIES
Current liabilities
Trade and other payables		(5,169)	(3,381)	-	(571)
Current tax liabilities		(5,103)	(3,516)		-
Bank loans		(1,184)	(1,184)	(1,184)	(1,184)
Amount owed to subsidiary company		-	-	(9,100)	-
Contingent consideration re acquisition		(189)	-	(189)	-
Deferred income		(10,888)	(7,613)		-
		(22,533)	(15,694)	(10,473)	(1,755)
Non-current liabilities
Bank and other loans		(4,580)	(5,763)	(4,580)	(5,764)
Contingent consideration re acquisition		(757)	-	(757)	-
Other loans		-	(23,000)	-	(23,000)
Deferred tax liability		(8,494)	(6,524)	-	-
		(13,831)	(35,287)	(5,337)	(28,764)
Total liabilities		(36,364)	(50,981)	(15,810)	(30,519)
NET ASSETS		46,782	11,380	32,768	8,390
EQUITY
Ordinary share capital		586	500	586	500
Share premium		24,767	-	24,767	-
Own shares held in trust		(120)	-	(120)	-
Retained earnings		18,796	10,880	7,535	7,890
Equity attributable to owners of the parent		44,029	11,380	32,768	8,390
Non-controlling interests		2,753	-	-	-
TOTAL EQUITY		46,782	11,380	32,768	8,390

GROUP AND PARENT COMPANY STATEMENTS OF CHANGES IN EQUITY

for the year ended 31 December 2010

	Share  capital	Share premium	Retained  earnings	Non -controlling interest	Own shares held in trust	Total  Equity
	£'000	£'000	£'000	£'000	£'000	£'000
Group
Balance at 1 January 2009	500	-	939	-	-	1,439
Total comprehensive income
-profit for the year	-	-	9,941	-	-	9,941
Balance at 1 January 2010	500		10,880	-	-	11,380
Arising on acquisition of RX Systems	-	-	-	2,709	-	2,709
Share acquisitions less sales in year	-	-	-	-	(120)	(120)
Transactions with owners
- proceeds from shares issued	86	24,767	-	-	-	24,853
Total comprehensive income
-profit for the year	-	-	11,194	44	-	11,238
Dividend (note 14)	-	-	(3,278)	-	-	(3,278)
Balance at 31 December 2010	586	24,767	18,796	2,753	(120)	46,782

	Share  capital	Share premium	Retained  earnings	Own shares held in trust	Total  Equity
	£'000	£'000	£'000	£'000	£'000
Company
Balance at 1 January 2009	500	-	(1,872)	-	(1,372)
Total comprehensive income
-profit for the year	-	-	9,762	-	9,762
Balance at 1 January 2010	500	-	7,890	-	8,390
Share acquisitions less sales in year	-	-	-	(120)	(120)
Transactions with owners
- proceeds from shares issued	86	24,767	-	-	24,853
Total comprehensive income
-profit for the year attributable to equity holders of the company	-	-	2,923	-	2,923
Dividend (note 14)	-	-	(3,278)	-	(3,278)
Balance at 31 December 2010	586	24,767	7,535	(120)	32,768

GROUP AND PARENT COMPANY STATEMENTS OF CASH FLOWS

for the year ended 31 December 2010

		Group		Company
		2010  £'000	2009  £'000	2010  £'000	2009  £'000
Cash flows from operating activities
Cash generated from operations		22,181	19,864	(2,162)	(31)
Interest paid		(409)	(2,161)	(373)	(2,132)
Settlement of financial derivative		-	(524)	-	(524)
Interest received		51	62	-	-
Tax (paid)/received		(3,889)	(3,127)	611	575
Net cash generated from/(used in) operating activities		17,934	14,114	(1,924)	(2,112)
Cash flows from investing activities Purchase of property, plant and equipment		(5,611)	(4,113)	-	-
Proceeds from sale of property, plant and equipment		291	295	-	-
Internally developed software		(3,801)	(4,520)	-	-
Loans from subsidiary company-increase (decrease)		-	-	9,339	(17,950)
Dividends received		-	-	4,500	26,700
Purchase of subsidiary (group - net of cash acquired)		(3,144)	-	(8,478)	-
Net cash (used in)/generated from investing activities		(12,265)	(8,338)	5,361	8,750
Cash flows from financing activities Proceeds from issue of ordinary shares		24,146	-	24,146	-
Transactions in own shares held in trust		(116)	-	(116)	-
Bank term loan repayments		(1,200)	(6,625)	(1,200)	(6,625)
Shareholder loans repaid		(23,000)	-	(23,000)	-
Dividend paid		(3,278)	-	(3,278)	-
Net cash used in financing activities		(3,448)	(6,625)	(3,448)	(6,625)
Net increase/(decrease) in cash and cash equivalents		2,221	(849)	(11)	13
Cash and cash equivalents at beginning of year		5,221	6,070	25	12
Cash and cash equivalents at end of year		7,442	5,221	14	25

NOTES TO THE EXTRACTS

Cash generated from operations	Group		Company
	2010  £'000	2009  £'000	2010  £'000	2009  £'000
Profit before tax	16,106	14,462	2,573	8,757
Amortisation of intangible assets	2,433	2,074	-	-
Depreciation of property, plant and equipment	2,949	2,384	-	-
Decrease in inventory	40	498	-	-
(Increase) in trade and other receivables	(35)	(1,959)	(48)	-
Decrease in trade and other payables	(1,142)	(2,235)	(572)	(14)
Increase in deferred income	1,568	3,328	-	-
Finance income	(51)	(62)	(4,500)	(10,864)
Finance costs	426	1,572	389	2,090
Share of profit of associate	(109)	(198)	-	-
Profit on transactions in own shares	(4)	-	(4)	-
Net cash flow from operating activities	22,181	19,864	(2,162)	(31)

Operating segments

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 of directors.

Following the acquisition of RX Systems during the year, the group now has two principal operating segments, both involved with the supply and support of software and related services, namely (a) the EMIS business principally relating to GP practices and (b) the RX Systems business, relating to community pharmacies.

Healthcare Gateway Limited ("HGL") was formed during the year and is a joint venture with In Practice Systems Limited to enable the sharing of patient data via a medical interoperability gateway.  Although the project is still in its development stage, it is a distinct activity from which significant revenue flows are anticipated, and the board has concluded that, although it does not meet the quantitative thresholds required by IFRS 8, it closely monitors this segment and should be reported.

The board also regards the Canadian operation (Emis Inc.) as a distinct geographical operating segment.  EMIS Inc. is engaged in an economic environment that is subject to risks and returns that are different to those of the rest of the group and although it does not meet the quantitative thresholds required by IFRS 8, the board has concluded that, as it is closely monitoring  this segment, it should also be reported.

Each operating segment is assessed by the board based on a measure of adjusted EBITDA.  This measurement basis excludes the effects of non-recurring expenditure from the operating segments such as restructuring costs and goodwill impairments.  Interest income and expenditure, cash and cash equivalents and bank and other loans are not allocated to segments, as this type of activity is managed by the board.

Segmental reporting

	2010			2009
	Revenue		Operating  profit	Revenue	Operating  profit
	£'000		£'000	£'000	£'000
Continuing operations
EMIS	56,922		19,433	57,234	17,042
RX  Systems (5 month period)	4,978		195	-	-
EMIS Inc. - Canada	493		(1,961)	462	(1,268)
HGL - joint venture expenses	-		(37)	-	-
Total segments	62,393		17,630	57,696	15,774
Flotation and other transaction costs,			(1,258)		-
Total operating profit			16,372		15,774
Finance costs less finance income			(375)		(1,510)
Share of profit of associate			109		198
Profit for the financial year before taxation			16,106		14,462
Depreciation and amortisation is charged in  the  above segmental analysis as follows:
- EMIS			4,869			4,323
- RX Systems			385			-
- EMIS Inc - Canada			130			135

Revenue excludes inter-group transactions.

Revenue within the EMIS segment of approximately £52.2m (2009 £51.5m) is derived from the NHS and related bodies.

	2010				2009
	EMIS  £'000	RX  £'000	EMIS Inc £'000	Total  £'000	EMIS  £'000	EMIS Inc  £'000			Total  £'000
Total segmental assets	70,365	2,184	494	73,043	53,935	653			54,588
Total segmental liabilities	(24,652)	(4,915)	(87)	(29,654)	(20,762)	(272)			(21,034)
	45,713	(2,731)	407	43,389	33,173	381			33,554
Unallocated assets:
Investment in associate				2,661					2,552
Cash  and  equivalents				7,442					5,221
Unallocated liabilities:
- bank and other loans				(5,764)					(29,947)
- Contingent consideration				(946)
Shareholders equity				46,782				11,380

The company's 50% share of the HGL current assets and current liabilities amount to £19,000 and £65,000 respectively.

Finance income	2010  £'000	2009  £'000
Bank interest	48	62
Profit on sale of own shares	3	-
	51	62

Finance costs	2010  £'000	2009  £'000
Bank loans	159	469
Other loans	197	1,081
Exchange loss	54	29
Amortisation of bank loan issue costs	16	16
Interest rate swap fair value gain	-	(23)
	426	1,572

Operating profit	2010  £'000	2009  £'000
The following have been included in arriving at operating profit:
Research and development expenditure	5,124	6,521
Development expenditure capitalised	(3,801)	(4,520)
Depreciation of property, plant and equipment
- depreciation of owned assets	2,951	2,384
Amortisation of intangible assets
- arising on business combinations	2,431	2,074
- internally generated	2	-
Operating lease rentals
- land and buildings	444	372
- plant and equipment	40	12
Net foreign exchange losses	16	29
The total research and development cost shown above of £5,124,000 (2009: £6,521,000), consists of the direct salary and national insurance costs of relevant UK and Canadian staff and the costs of Australian based staff.  Software development costs amounting to £3,801,000 (2009: £4,520,000) have, in accordance with the criteria set out in IAS 38, been capitalised.

Income tax expense	2010  £'000	2009  £'000
Income tax:
- current tax charge	4,841	3,632
- prior year tax charge	(14)	(80)
Total current tax	4,827	3,552
Deferred taxation:
- current period	41	969
Total deferred tax	41	969
Total tax charge in consolidated statement of comprehensive income	4,868	4,521
Factors affecting the tax charge for the year:
Profit before tax	16,106	14,462
Profit before taxation multiplied by the domestic income tax rate in the UK of 28% (2009 - 28%)	4,510	4,049
Tax effects of:
- expenses not deductible for tax purposes	174	10
- future relief not provided for on Canadian loss	549	690
- exchange rate loss	-	(93)
- profit of associate company	(31)	(55)
- adjustments for prior period:	(14)	(80)
- deferred tax rate change	(320)	-
Tax charge for the year	4,868	4,521

Earnings per share

The basic earnings per share ("EPS") has been calculated by dividing the net profit attributable to ordinary shareholders by the weighted average number of shares in issue during the relevant period as follows:

	2010			2009
	Earnings £'000	No. of shares	Amount per share	Earnings £'000	No. of shares	Amount per share
Basic EPS:
Earnings attributable to ordinary shareholders	11,194	56,426,582	19.84p	9,941	50,000,000	19.88p

The issued ordinary share capital of the company was subdivided from £1 shares into one penny shares on 29 March 2010.  However, for consistency, the number of shares shown above assumes that one penny shares were in issue throughout. 

The number of shares stated for 2010 is a weighted average, taking into account the issue of 8,333,334 shares on 29 March 2010 and 216,683 shares on 19 August 2010.  

There has been no dilution of shareholders interests during the year.

Post balance sheet event

Discontinued operation

EMIS has caused to be developed, and configured, software specifically for the Canadian healthcare market.  However, EMIS Inc, the group's Canadian subsidiary, through which this activity has been conducted, has not made the progress that had been hoped for.  This resulted in a reduction of staff numbers during the year and a strategic options review going through into 2011. That process has now been concluded and EMIS has commenced a managed exit.

It is anticipated at the present time that the 2011 Canadian fair value losses will be in the region of £1.1 million.  There will also be an impairment charge of £1.4 million.

 

END

 

 

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