Half Yearly Report

RNS Number : 0555Y

EMIS Group PLC

04 September 2015

 

                                                                                                                  4 September 2015

EMIS Group plc

("EMIS Group" or "the Group")

Half Year Results for the six months ended 30 June 2015

EMIS Group plc (AIM: EMIS.L), the UK leader in connected healthcare software and services, today announces its unaudited results for the six months ended 30 June 2015.

Financial highlights

	2015 H1	2014 H1	Change
Revenue
Total revenue	£77.8m	£66.4m	17%
Recurring revenue	£60.5m	£49.9m	21%
Operating profit
Reported	£13.8m	£12.9m	7%
Adjusted1	£16.9m	£14.6m	16%
Cash flow and debt
Cash generated from operations2	£27.5m	£27.0m	2%
Net cash/(debt)	£1.3m	£(0.1m)
Earnings per share
Reported	16.6p	15.2p	9%
Adjusted1	20.5p	17.3p	18%
Interim dividend	10.6p	9.2p	15%

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

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

Operational highlights

Good performance for the half year with both organic and acquired growth:

·    Financial performance in line with the Board's expectations

·    Product integration continues including delivery of Phase 1 of the integrated care contract in Gibraltar, connecting primary care, community services, outpatient clinics, accident & emergency and community pharmacy   

·    8% organic revenue growth and positive contribution from 2014 acquisitions

·    Strong revenue visibility, order book and pipeline

·    Market share:

o  maintained in Primary Care and Community Pharmacy

o  grown further in Community, Children's and Mental Health (CCMH) 

·    Group's clinical software businesses rebranded as EMIS Health to simplify branding message and emphasise strategic commitment to provision of integrated solutions

Primary & Community Care - strong performance: market share maintained, revenue and profits up

·    Market leading position in UK primary care maintained with 54% market share (31 December 2014: 53%)

·    EMIS Web Roll-out programme:

o  complete in England & Wales, progressing in Northern Ireland

o  4,431 EMIS Web GP practices now live  (31 December 2014: 4,261)

·    GP Systems of Choice (GPSoC) Framework agreement (Lot 3) secured

·    CCMH implementations continue to plan, market share grown from 8% to 9%, with contract wins year to date of £6.3m

·    Acquired Pinbellcom on 13 July 2015, a leading supplier of administration and compliance software

Community Pharmacy - robust market share and profitability maintained while innovating

·    Market lead in independent pharmacy maintained with overall 36% share of the combined supermarket and independent market (31 December 2014: 36%)

·    Development of next generation dispensary management software on track for piloting in late 2015, meeting needs of both independent and supermarket users

·    Innovative products connecting GPs, pharmacists and patients now available across the whole pharmacy estate

Secondary & Specialist Care - anticipated earnings enhancement from 2014 acquisitions delivered

·    Secondary Care management team strengthened

·    Major contracts being delivered including unscheduled care (including A&E) across Wales

·    New contract wins; strong order book and pipeline of further opportunities

·    2014 acquisitions Indigo 4 (communications and laboratory messaging) and Medical Imaging (diabetic retinopathy screening service) both performing well

Current Trading & Outlook - continues to be positive

·    Group continues to trade in line with the Board's expectations

·    Strong revenue visibility, order book and pipelines

·    Anticipated earnings enhancement expected to be delivered by 2014 acquisitions

·    Growth opportunities continue in Primary, CCMH, Community Pharmacy and Secondary & Specialist markets

·    Engaged in post-National Programme contract re-procurement opportunity in CCMH and Primary Care

Chris Spencer, Chief Executive Officer of EMIS Group said:

"EMIS Group continues to trade well and in line with the Board's expectations. As well as the Group's strong organic revenue visibility, order book and pipelines, anticipated earnings enhancement continues to be delivered by the Group's 2014 acquisitions.

"Together with our customary growth opportunities across Primary, CCMH, Community Pharmacy and Secondary & Specialist markets, the re-procurement of the former National Programme contracts in the North, Midlands & East of England provides a particular opportunity for the Group in both CCMH and in Primary Care.

"In a speech at the King's Fund, on 16 July 2015, Jeremy Hunt, The Secretary of State for Health for England, said:  '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.' EMIS Group sees this as continuing validation of its strategy of facilitating the delivery of patient-centred care through its unique portfolio of connected products and services."

There will be an analyst meeting today at 09.30 am at MHP Communications, 6 Agar Street, London WC2N 4HN.  Please contact Charlie Barker at MHP Communications on 0203 128 8540, [e-mail], for details.

Enquiries:

For further information, contact:

EMIS Group plc                                                                                                        Tel: [phone]

Chris Spencer, CEO

Peter Southby, CFO

www.emisgroupplc.com

Numis Securities Limited (Nominated Adviser & Broker)                                  Tel: [phone]

Adrian Trimmings/Simon Willis/James Black

MHP Communications                                                                                             Tel: [phone]

Reg Hoare/Giles Robinson/Charlie Barker                

Notes to Editors

EMIS Group is the UK leader in connected healthcare software and services. Its solutions are widely used across every major UK healthcare setting from primary and community care, to high street pharmacies, secondary care and specialist services. EMIS Group helps clinicians, in over 10,000 organisations, share vital information, facilitating better, more efficient healthcare and supporting longer and healthier lives.

EMIS Group serves the following healthcare markets under the EMIS Health brand:

•      Primary and Community Care, the UK leader in clinical IT systems for GPs and commissioners. EMIS Health products, including the flagship EMIS Web, hold over 40 million patient records and are used by nearly 6,000 healthcare organisations, including community-based teams.

•      Community Pharmacy, the UK's single most used integrated community pharmacy and retail system.

•      Secondary and Specialist Care, a leading software provider to 81% of the UK's NHS Acute Trusts and Boards, focused primarily on Hospital Pharmacy, A&E (holding over 30 million patient records), Mental Health and Patient Administration Systems as well as England's leading provider of diabetic eye screening and other ophthalmology-related solutions.

These markets are also supported by other EMIS Group businesses:

•      under the Patient brand, the UK's leading independent provider of patient-centric medical and well-being information and related transactional services

•      under the Egton brand, providing specialist ICT infrastructure, solutions, hardware and engineering services

•      under the EMIS Care brand, providing healthcare screening programmes such as diabetic eye screening programmes

CHIEF EXECUTIVE'S OVERVIEW

EMIS Group has continued its historic momentum: delivering results in line with expectations, with 17% revenue and 16% adjusted operating profit growth and strong organic contributions to both key metrics.

The Group's revenue visibility, order book and pipeline remain strong. The continued organic growth was enhanced by good performances from Indigo 4 and Medical Imaging which were both acquired during the second half of 2014.

In Primary Care and Community Pharmacy market share was maintained, while CCMH further grew its market share and a number of new contracts were secured in Secondary & Specialist Care. CCMH and Secondary Care were especially busy with successful implementations.

The Group's clinical software businesses were rebranded as EMIS Health on 24 June 2015 to simplify the branding message and emphasise the Group's strategic commitment to the provision of integrated solutions to help connect care.

OPERATIONAL REVIEW

The Group, through its Primary & Community Care, Community Pharmacy and Secondary & Specialist Care divisions, is a major provider of healthcare software, information technology and related services in the UK. The Group holds a strong market position in every major area of UK healthcare IT. As a result, the Group is uniquely placed to deliver on its strategy of helping to connect care across every major UK healthcare setting through organic growth, partnering or acquisition. 

Primary & Community Care

Primary Care

The Group's primary care market share rose slightly again to 54% (5,121 GP practices) (31 December 2014: 53% (5,138 GP practices)). 77% of the Group's English GP practices have used an EMIS Health system for over 10 years emphasising the loyalty of the Group's primary care user base.

Following the Group's success in the awarding of Lots 1 & 2 in 2014, the procurement of Lot 3 of the English GPSoC framework was also successfully concluded in the period.  Lot 3, relating to Cross Care Setting Interoperable Services, is supportive of the Group's connected care strategy.

The roll-out programme to EMIS Web for Primary Care in England was completed during the half year along with almost all of the Group's practices in Wales. Piloting and other engagement continues with practices in Northern Ireland, which will have the option to upgrade to EMIS Web from the end of 2015.

EMIS Web CCMH

The CCMH teams continue to be busy in both implementations and new sales. During the period, as part of 38 on-schedule and on-budget implementations, over 2,200 new users were trained. This increases the total number of CCMH users to nearly 12,500. Included in the areas implemented was Cheshire Child Health, where, as an example of the efficiency gains the CCMH software can deliver, the time it takes staff to run the vaccinations and immunisations report fell from five hours (using the previous system) to two minutes (using EMIS Web). 

The Group's significant sales pipeline for its connected care offering (linking with EMIS Web for Primary Care in particular) led to contract wins with a total contract value of £6.3m in the year to date, including:

·   Cheshire and Wirral Partnership NHS Foundation Trust

·   East Cheshire NHS Trust

·   Marie Curie Cancer Care

·   Sentinel Healthcare Southwest Community Interest Company

·   NHS Tayside Health Board

·   St Peter's Hospice

By the end of the period the Group's CCMH market share had risen to 9% compared with 8% at 31 December 2014.

Patient

Patient is the Group's online portal helping patients proactively manage their own care by using clinically reviewed health and well-being information. To move to the next level in national and international engagement, Patient rebranded from Patient.co.uk and moved to a top level domain (Patient.info) in June. 

The core functionality within Patient Access, the Group's patient-facing and on-line services portal, has now been enabled by 99% of all the Group's GP practices (39% at 31 December 2014). This facilitates the patient-facing services procured in Lot 1 of GPSoC, paid-for by the NHS, and this monetisation of Patient Access is expected to begin in the remainder of 2015. 

Non-clinical ICT solutions and services

As announced on 14 July 2015, shortly after the period end, the Group acquired Pinbellcom Group Limited ("Pinbellcom"), a leading supplier of administration and compliance software to both the primary and the secondary care markets, for £3.0m net of cash acquired.

Pinbellcom's product suite is designed to improve the connection of care and administrative efficiency through communication and knowledge sharing. Pinbellcom's products, including Intradoc247 which provides GP practices, Federations and Clinical Commissioning Groups (CCGs) with a comprehensive intranet administration and compliance platform, complement the Group's existing product set. This includes GP Web Solutions, providing practice websites under the Egton brand, which already has 100% penetration in seven CCGs as well as access to a fund worth £6m for GP digital services development services throughout Scotland.

Community Pharmacy

The Group has an overall 36% share of the market for community pharmacy dispensary management systems (31 December 2014: 36%), which comprises independent and supermarket customers. The Group is already the clear leader in the independent community pharmacy market with its ProScript software.

ProScript Connect, the Group's next generation dispensary management software, will assist both existing independent users and potential supermarket users and is to be piloted at the end of 2015.

The Group's suite of integrated products enabling direct connections between pharmacists, GPs and patients is now available across the pharmacy estate. This includes direct electronic transmission of prescriptions along with an electronic patient record and an app for patients to order repeat prescriptions. In addition, EMIS Web for Community Pharmacy has successfully completed end-to-end testing between primary care and community pharmacy. To date four pilot sites have been identified in East London (covering Newham, Hackney & Islington, Lewisham CCG) and a number of Rowlands Pharmacy sites in Liverpool. 

Secondary & Specialist Care

Secondary Care

A new Managing Director of Secondary Care was appointed in February 2015 and a new Secondary Care Commercial Director in May 2015. Good progress has been made in the delivery of unscheduled care across Wales following a formal agreement that enabled the six health boards within NHS Wales to call-off and deploy EMIS Group's clinical information and management solution, Symphony. Other significant implementations include:

·   Frimley Health (accident & emergency)

·   South Devon Healthcare (accident & emergency)

·   Lancashire Care (e-prescribing and medicines administration)

·   Liverpool Heart and Chest Hospital (pharmacy)

·   Hinchingbrooke (electronic document and record management)

In the past few weeks, secondary care contracts have been secured with Virgin Care (system integration consultancy and analytics) and preferred bidder with Guy's and St Thomas' (business intelligence). The strong secondary care pipeline is also expected to lead to further contract wins in the second half of the year.

Indigo 4, a leading supplier of clinical and administrative messaging and order communications solutions to healthcare organisations, acquired in July 2014, has continued to perform well and was earnings enhancing in the period.

Specialist Care

Digital Healthcare, the leading provider of diabetic eye screening and other ophthalmology-related solutions, maintained its considerable market share of 82% (31 December 2014: 82%).

Medical Imaging, market leader in outsourced diabetic eye screening and ophthalmology imaging services, acquired by the Group in December 2014, also performed well and was earnings enhancing in the half year. Medical Imaging is shortly to be rebranded EMIS Care.

The Medical Imaging team is engaged in an unprecedented level of tenders related to outsourcing activity in diabetic eye screening programmes across the country with a total contract value in excess of £70m. These include London, where success as preferred bidder for the £11m, five year tender covering South West London was confirmed after the period end.

Integrated Care

The first phase of the Group's whole healthcare economy contract, to deliver a fully integrated electronic patient record for Gibraltar, went live on 24 June 2015. This links and integrates the Group's products in accident & emergency, outpatient clinics, community services, primary care and community pharmacy.

As well as those in CCMH, other connected care initiatives continued including EMIS Web for Primary Care being installed in the Urgent Care Centre at the Royal Free Hospital's accident & emergency department. This enables clinicians to carry out rapid assessments on an estimated 35,000 patients each year when they arrive seeking emergency care. Aided by information from the GP record, those physicians are now able to immediately discharge 50% of those patients with basic health advice. A further 40% are directed elsewhere for further investigation and treatment. Only 10% of assessed patients are sent on to the main emergency department. As well as assisting with key NHS waiting time key performance indicators, this means emergency doctors and nurses can focus their efforts on the most unwell patients. This is another example of connected care reducing waiting times and improving the overall quality of care.

FINANCIAL REVIEW 

The Group has delivered financial performance for the half year ended 30 June 2015 in line with the Board's expectations. Along with strong organic revenue and profit growth, it is pleasing to report solid results in the two acquired businesses (Indigo 4 and Medical Imaging) in Secondary & Specialist Care for the first full six month period since acquisition.

Group revenue increased by 17% to £77.8m (2014 H1: £66.4m), with organic growth of 8%. Recurring revenue grew strongly to £60.5m (2014 H1: £49.9m) representing 78% of total revenue.

Adjusted operating profit for the period was £16.9m (2014 H1: £14.6m), an increase of 16% including 10% organic growth.

Revenue growth included the following principal areas:

·   licences, which increased to £24.7m (2014 H1: £20.4m), due principally to growth in the Group's estates, in particular within CCMH;

·   maintenance & software support, which grew to £18.6m (2014 H1: £15.5m), including, under the new GPSoC-R framework agreement (from April 2014), some revenues previously categorised within hosting;

·   other support services, where new revenues from the acquisitions more than offset a reduction in project engineering activity resulting in total revenues of £15.3m (2014 H1: £10.3m);

·   training, consultancy and implementation, which reduced to £7.5m (2014 H1: £9.3m), reflecting lower EMIS Web roll-out related revenue in Primary Care;

·   hosting, which reduced to £6.7m (2014 H1: £7.3m), as a result of the reallocation of some revenues to maintenance and software support under the new GPSoC-R framework; and

·   an increase in hardware revenues to £5.0m (2014 H1: £3.6m) with growth in the provision of hardware by Egton to the Group's customers.

The organic operating margin improved from 22.1% to 22.5% with the overall group operating margin (including the lower margin acquired businesses) at 21.7%. The Group employed 1,842 staff at 30 June 2015, which was broadly unchanged over the period.

The Primary & Community Care business again demonstrated strong growth with the roll-out programme for EMIS Web for GPs in England and Wales now completed, and significant momentum for CCMH, while profit in Community Pharmacy was broadly unchanged in anticipation of the launch of its new ProScript Connect product.  The enlarged Secondary & Specialist Care division delivered steady progress in a period of solid operational delivery, with contract wins and strong pipelines expected to translate into stronger full year results.

Adjusted operating profit for the period was £16.9m (2014 H1: £14.6m) with £0.9m of the increase attributable to the 2014 acquisitions in Secondary & Specialist Care. After accounting for the capitalisation and amortisation of development costs and the amortisation of acquired intangibles, operating profit was £13.8m (2014 H1: £12.9m).

The tax charge for the period was broadly unchanged at £2.8m (2014 H1: £2.7m), representing an effective rate of tax of 20.4% (2014 H1: 21.6%).

Adjusted basic and diluted EPS increased by 18% to 20.5p (2014 H1: 17.3p).  As a result of higher amortisation charges, the increase in reported basic and diluted EPS was lower at 9%, taking both measures to 16.6p (2014 H1: 15.2p). 

The Board has resolved to increase the interim dividend by 15% to 10.6p (2014 H1: 9.2p) per share, payable on 30 October 2015 to shareholders on the register at the close of business on 25 September 2015.

Net cash generated from operations after capitalisation of development costs increased by 2% to £27.5m (2014 H1: £27.0m). Net capital expenditure excluding capitalised development costs reduced to £3.5m (2014 H1: £3.8m), including £1.2m for the fit out of new Secondary Care premises in Bolton.  After finance costs, tax, dividends, Employee Benefit Trust transactions and the previously announced £2.3m final payment for the Ascribe acquisition, the Group ended the period with net cash of £1.3m (31 December 2014: net debt of £11.8m; 2014 H1: net debt of £0.1m).

SUMMARY AND OUTLOOK

EMIS Group continues to trade well and in line with the Board's expectations. As well as the Group's strong organic revenue visibility, order book and pipelines, anticipated earnings enhancement continues to be delivered by the Group's 2014 acquisitions.

Together with our customary growth opportunities across Primary, CCMH, Community Pharmacy and Secondary & Specialist markets, the re-procurement of the former National Programme contracts in the North, Midlands & East of England provides a particular opportunity for the Group in both CCMH and in Primary Care.

In a speech at the King's Fund, on 16 July 2015, Jeremy Hunt, The Secretary of State for Health for England, said:  '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.' EMIS Group sees this as continuing validation of its strategy of facilitating the delivery of patient-centred care through its unique portfolio of connected products and services.

Group statement of comprehensive income

for the six months ended 30 June 2015

		Six months ended	Six months ended	Year  ended
		30 June 2015	30 June 2014	31 December 2014
		Unaudited	Unaudited	Audited
	Notes	£'000	£'000	£'000
Revenue	9	77,806	66,377	137,639
Costs:
Changes in inventories		(31)	398	119
Cost of goods and services		(6,911)	(6,815)	(12,901)
Staff costs		(34,467)	(29,265)	(58,571)
Other operating expenses1		(13,661)	(10,464)	(21,799)
Depreciation of property, plant and equipment		(2,390)	(1,903)	(4,005)
Amortisation of intangible assets		(6,498)	(5,412)	(11,361)
Adjusted operating profit		16,917	14,644	32,639
Development costs capitalised		3,093	3,546	6,523
Release of contingent acquisition consideration		-	-	873
Amortisation of intangible assets2		(6,162)	(5,274)	(10,914)
Operating profit		13,848	12,916	29,121
Finance income		26	6	10
Finance costs		(256)	(278)	(553)
Share of result of associate		(172)	(17)	(55)
Share of result of joint venture		106	-	17
Profit before taxation		13,552	12,627	28,540
Income tax expense	10	(2,759)	(2,722)	(5,719)
Profit for the period		10,793	9,905	22,821
Other comprehensive income
Items that may be reclassified to profit or loss
Currency translation differences		(61)	14	(86)
Other comprehensive income		(61)	14	(86)
Total comprehensive income for the period		10,732	9,919	22,735
Attributable to:
- equity holders of the parent		10,353	9,563	22,058
- non-controlling interest in subsidiary company		379	356	677
Total comprehensive income for the period		10,732	9,919	22,735

Earnings per share attributable to equity holders of the parent		Pence	Pence	Pence
Basic	11	16.6	15.2	35.3
Diluted	11	16.6	15.2	35.2

¹ Including contract asset depreciation of £1,735,000 (2014 H1: £1,912,000, 2014 FY: £3,761,000).

² Excluding amortisation of computer software purchased externally of £336,000 (2014 H1: £138,000, 2014 FY: £447,000).

Group balance sheet

as at 30 June 2015

			30 June
		30 June  2015 Unaudited	2014 Unaudited Restated1	31 December 2014 Audited
	Notes	£'000	£'000	£'000
ASSETS
Non-current assets
Goodwill		68,577	59,264	68,577
Other intangible assets	13	68,158	66,685	70,820
Property, plant and equipment		22,975	23,292	24,313
Investment in joint venture and associates		2,533	2,743	2,705
		162,243	151,984	166,415
Current assets
Inventories		1,519	1,829	1,550
Trade and other receivables		32,906	25,531	28,732
Cash and cash equivalents		9,121	11,629	6,939
		43,546	38,989	37,221
Total assets		205,789	190,973	203,636
LIABILITIES
Current liabilities
Trade and other payables		(22,698)	(17,522)	(20,782)
Current tax liabilities		(1,828)	(1,944)	(1,246)
Bank loans		(3,902)	(3,902)	(12,902)
Contingent acquisition consideration		(3,000)	(2,129)	(2,750)
Deferred income		(37,872)	(37,871)	(29,985)
		(69,300)	(63,368)	(67,665)
Non-current liabilities
Bank loans		(3,902)	(7,805)	(5,854)
Deferred tax liability		(11,747)	(11,501)	(12,709)
Contingent acquisition consideration		-	(994)	(2,500)
		(15,649)	(20,300)	(21,063)
Total liabilities		(84,949)	(83,668)	(88,728)
NET ASSETS		120,840	107,305	114,908
EQUITY
Ordinary share capital		633	633	633
Share premium		51,045	51,045	51,045
Own shares held in trust		(3,125)	(4,153)	(3,718)
Retained earnings		65,130	53,162	60,109
Other reserve		2,050	2,211	2,111
Equity attributable to owners of the parent		115,733	102,898	110,180
Non-controlling interests		5,107	4,407	4,728
TOTAL EQUITY		120,840	107,305	114,908

¹  2014 H1 comparatives have been restated in accordance with IFRS 3 (Revised) 'Business Combinations' to reflect changes in the provisional consideration related to the acquisition of Ascribe. Certain changes, totalling £871,000, have resulted from additional information concerning facts and circumstances that existed at the acquisition date and, as such, have been classified as measurement-period adjustments. Goodwill in the prior period has reduced by £871,000, with a corresponding decrease in the consideration liability. There has been no impact on profits in any period.

Group statement of cash flows

for the six months ended 30 June 2015

		Six months	Six months	Year
		ended 30 June	ended 30 June	ended 31 December
		2015	2014	2014
		Unaudited	Unaudited	Audited
	Notes	£'000	£'000	£'000
Cash generated from operations		30,574	30,500	44,856
Finance costs		(208)	(230)	(455)
Finance income		26	6	10
Tax paid		(2,889)	(2,658)	(5,247)
Net cash generated from operating activities		27,503	27,618	39,164
Cash flows from investing activities
Purchase of property, plant and equipment		(3,003)	(2,602)	(6,873)
Proceeds from sale of property, plant and equipment		267	197	291
Development costs capitalised		(3,093)	(3,546)	(6,523)
Purchase of software		(743)	(1,347)	(1,765)
Business combinations		(2,250)	-	(10,250)
Net cash used in investing activities		(8,822)	(7,298)	(25,120)
Cash flows from financing activities
Transactions in own shares held in trust		272	(1,828)	(1,480)
Bank loan repayments		(11,000)	(6,000)	(7,000)
Bank loans drawn down		-	-	8,000
Dividends paid	12	(5,771)	(5,030)	(10,792)
Net cash used in financing activities		(16,499)	(12,858)	(11,272)
Net increase in cash and cash equivalents		2,182	7,462	2,772
Cash and cash equivalents at beginning of period		6,939	4,167	4,167
Cash and cash equivalents at end of period	14	9,121	11,629	6,939
Cash generated from operations
Operating profit		13,848	12,916	29,121
Adjustment for non-cash items:
Amortisation of intangible assets		6,498	5,412	11,361
Depreciation of property, plant and equipment		4,125	3,815	7,766
Release of contingent acquisition consideration		-	-	(873)
Profit on disposal of property, plant and equipment		(53)	(92)	(128)
Share-based payments		342	114	270
Operating cash flow before changes in working capital		24,760	22,165	47,517
Changes in working capital:
Decrease/(increase) in inventory		31	(398)	(119)
Increase in trade and other receivables		(4,000)	(4,518)	(6,912)
Increase in trade and other payables		1,909	833	2,360
Increase in deferred income		7,874	12,418	2,010
Cash generated from operations		30,574	30,500	44,856

Group statement of changes in equity

for the six months ended 30 June 2015

				Own shares			Non-
		Share	Share	held in	Retained	Other	controlling	Total
		capital	premium	trust	earnings	reserve	interest	equity
	Notes	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2014		633	51,045	(2,325)	48,522	2,197	4,051	104,123
Profit for the period		-	-	-	9,549	-	356	9,905
Transactions with owners
Share acquisitions less sales		-	-	(1,828)	-	-	-	(1,828)
Share-based payments		-	-	-	114	-	-	114
Deferred tax in relation to share-based payments		-	-	-	7	-	-	7
Dividends paid		-	-	-	(5,030)	-	-	(5,030)
Other comprehensive income
Currency translation differences		-	-	-	-	14	-	14
Balance at 30 June 2014		633	51,045	(4,153)	53,162	2,211	4,407	107,305
Profit for the period		-	-	-	12,595	-	321	12,916
Transactions with owners
Share acquisitions less sales		-	-	435	(87)	-	-	348
Share-based payments		-	-	-	156	-	-	156
Deferred tax in relation to share-based payments		-	-	-	45	-	-	45
Dividends paid	12	-	-	-	(5,762)	-	-	(5,762)
Other comprehensive income
Currency translation differences		-	-	-	-	(100)	-	(100)
Balance at 31 December 2014		633	51,045	(3,718)	60,109	2,111	4,728	114,908
Profit for the period		-	-	-	10,414	-	379	10,793
Transactions with owners
Share acquisitions less sales		-	-	593	(39)	-	-	554
Share-based payments		-	-	-	342	-	-	342
Deferred tax in relation to share-based payments		-	-	-	75	-	-	75
Dividends paid	12	-	-	-	(5,771)	-	-	(5,771)
Other comprehensive income
Currency translation differences		-	-	-	-	(61)	-	(61)
Balance at 30 June 2015		633	51,045	(3,125)	65,130	2,050	5,107	120,840

Notes to the half year financial statements

1. General information

The financial statements for the six months ended 30 June 2015 and the six months ended 30 June 2014 do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2014 were approved by the Board of Directors on 18 March 2015 and delivered to the Registrar of Companies.  The auditor's report on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 (2) or (3) of the Companies Act 2006.

These condensed half year financial statements were approved for issue by the board of directors on 3 September 2015.

2. Basis of preparation

These condensed half year financial statements for the half year ended 30 June 2015 have been prepared in accordance with the AIM Rules for Companies, comply with IAS 34 'Interim Financial Reporting' as adopted by the European Union and should be read in conjunction with the annual financial statements for the year ended 31 December 2014, which have been prepared in accordance with IFRS as adopted by the European Union.

The Group is profitable and it is anticipated that this will continue. There is a high and continuing level of recurring revenue and high cash conversion is anticipated for the foreseeable future. The Group's existing significant cash resources provide additional comfort that it will continue to be able to meet its bank term loan repayment obligations of £1m per quarter.

Accordingly, after careful enquiry and review of available financial information, the directors have formed the conclusion that the Group has adequate resources to continue to operate for the foreseeable future and that it is therefore appropriate to continue to adopt the going concern basis of accounting in the preparation of these consolidated half year financial statements.

The financial information is presented in sterling, which is the functional currency of EMIS Group. All financial information presented has been rounded to the nearest thousand.

3. Accounting policies

The accounting policies used in preparing these half year financial statements are those the Group expects to apply in its financial statements for the year ending 31 December 2015 and are consistent with those disclosed in the Group's annual report and accounts for the year ended 31 December 2014.

Current taxes on income in the half year period are accrued using the tax rates that would be applicable to expected total annual profits. Deferred taxes on income are calculated based on the standard rates that are enacted as at the balance sheet date.

4. Critical accounting estimates and judgements

Accounting estimates and judgements are based on past experience and expectations relating to and evaluation of future events and are believed to be reasonable at the time of making. Due to the inherent uncertainty involved in making these estimates and judgements, actual future outcomes can be different.

The 2014 Group annual report and accounts includes details of the critical estimates, assumptions and judgements made at that time in arriving at the amounts recognised in those financial statements, which have a significant risk of causing a material adjustment to the carrying values of assets and liabilities within the subsequent financial year.

The critical accounting estimates and judgements made in these condensed consolidated half year financial statements do not differ materially from those applied within the 2014 Group annual report and accounts.

5. Principal risks and uncertainties

The 2014 Group annual report and accounts describes the principal risks and uncertainties that could impact the Group's performance. These relate to healthcare structure and procurement changes, integration, software development and hosting, and recruitment and retention. These remain unchanged since the annual report was published and accordingly are valid for these half year financial statements. The Group operates a structured risk management process, which identifies and evaluates risks and uncertainties and reviews mitigation activity.

6. Financial risk management

The Group's activities expose it to financial risks including credit risk, liquidity risk, interest rate risk and price risk.

These condensed consolidated half year financial statements do not include all financial risk management information and disclosures required in the annual financial statements and therefore should be read in conjunction with the 2014 Group annual report and accounts.

The Group does not engage in significant levels of hedging activity and holds no material derivative financial instruments. Carrying value approximates to fair value for all financial instruments. During 2015 there has been no significant change in business or economic circumstances that affects the fair value of the Group's financial assets and financial liabilities, nor have there been any reclassifications of financial assets or liabilities, nor have there been any changes in any of the Group's risk management policies. Accordingly, the directors, having reviewed IFRS 13 'Fair Value Measurement' and IAS 34 'Interim Financial Reporting', are of the opinion that no additional disclosure is required.

7. Forward-looking statements

Certain statements in this half year report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.

8. Segmental reporting

IFRS 8 'Operating Segments' provides for segmental information disclosure on the basis of information reported internally to the chief operating decision-maker for decision-making purposes. The Group considers that this role is performed by the main Board.

The Group has three operating segments, all involved with the supply and support of connected healthcare software and services:

(a)           Primary & Community Care;

(b)           Community Pharmacy; and

(c)           Secondary & Specialist Care.

Each operating segment is assessed by the Board based on a measure of adjusted operating profit.  This measurement basis excludes exceptional items, the effect of capitalisation and amortisation of development costs, and the amortisation of acquired intangible assets, as the Board considers this to provide the best measure of underlying performance. Group operating expenses, finance income and finance costs are not allocated to segments, as group and financing activities are not segment-specific.

	Six months ended				Six months ended
	30 June 2015				30 June 2014
	Primary & Community Care	Community Pharmacy	Secondary & Specialist Care	Total	Primary & Community Care	Community Pharmacy	Secondary  & Specialist Care	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	46,895	9,778	21,133	77,806	42,836	9,154	14,387	66,377
Segmental operating profit as reported internally	13,408	1,962	2,263	17,633	11,140	2,081	1,913	15,134
Development costs capitalised	1,594	460	1,039	3,093	1,836	401	1,309	3,546
Amortisation of development costs	(2,578)	-	(395)	(2,973)	(1,865)	-	(154)	(2,019)
Amortisation of acquired intangible assets	(396)	(288)	(2,505)	(3,189)	(714)	(425)	(2,116)	(3,255)
Segmental operating profit	12,028	2,134	402	14,564	10,397	2,057	952	13,406
Group operating expenses				(716)				(490)
Operating profit				13,848				12,916
Net finance costs				(230)				(272)
Share of result of associate				(172)				(17)
Share of result of joint venture				106				-
Profit before taxation				13,552				12,627

Revenue excludes intra-group transactions on normal commercial terms from the Primary & Community Care segment to the Community Pharmacy segment totalling £1,809,000 (2014 H1: £1,597,000), from the Primary & Community Care segment to the Secondary & Specialist Care segment totalling £441,000 (2014 H1: £nil), and from the Secondary & Specialist Care segment to the Primary & Community Care segment totalling £32,000 (2014 H1: £nil).

Revenue of approximately £55,784,000 (2014 H1: £48,211,000) is derived from the NHS and related bodies.  Revenue of £3,741,000 (2014 H1: £2,361,000) is derived from customers outside the United Kingdom.

9. Revenue

Revenue is analysed as follows:

	Six months	Six months	Year
	ended 30 June	ended  30 June	ended 31 December
	2015	2014	2014
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Licences	24,686	20,408	43,850
Maintenance and software support	18,626	15,498	33,438
Other support services	15,319	10,268	21,568
Training, consultancy and implementation	7,522	9,288	16,918
Hosting	6,637	7,350	13,968
Hardware	5,016	3,565	7,897
	77,806	66,377	137,639

10. Income tax expense

The tax expense recognised reflects management estimates of the tax charge for the period and has been calculated using the estimated average tax rate of UK corporation tax for the financial year of 20.25% (2014: 21.5%) and, in relation to deferred tax, at the rate of 20% (2014 H1: 20%).

The estimated impact of the future reductions in the UK corporation tax rate, announced in the recent budget, to 19% in 2017 and 18% in 2020, would be to reduce the Group's deferred tax liability by £0.5m.  As neither of the reductions had been substantively enacted as at 30 June 2015, the impact is therefore not reflected in these half year financial statements.

11. Earnings per share ("EPS")

The calculation of basic and diluted earnings per share is based on the following earnings and numbers of shares:

	Six months ended	Six months ended	Year ended
	30 June	30 June	31 December
	2015	2014	2014
	Unaudited	Unaudited	Audited
Earnings	£'000	£'000	£'000
Basic earnings attributable to equity holders	10,414	9,549	22,144
Release of contingent acquisition consideration	-	-	(873)
Development costs capitalised	(3,093)	(3,546)	(6,523)
Amortisation of development costs and acquired intangible assets	6,162	5,274	10,914
Tax and non-controlling interest effect of above items	(598)	(373)	(870)
Adjusted earnings attributable to equity holders	12,885	10,904	24,792
	Number	Number	Number
Weighted average number of ordinary shares	'000	'000	'000
Total shares in issue	63,311	63,311	63,311
Shares held by Employee Benefit Trust	(597)	(435)	(557)
For basic EPS calculations	62,714	62,876	62,754
Effect of potentially dilutive share options	185	68	187
For diluted EPS calculations	62,899	62,944	62,941
Earnings per share	Pence	Pence	Pence
Basic	16.6	15.2	35.3
Adjusted	20.5	17.3	39.5
Basic diluted	16.6	15.2	35.2
Adjusted diluted	20.5	17.3	39.4

12. Dividends

In relation to the 2014 financial year, an interim dividend of 9.2p was paid on 31 October 2014 amounting to £5,762,000 followed by a final dividend of 9.2p on 1 May 2015 amounting to £5,771,000.

For 2015, the directors are proposing an interim dividend of 10.6p, which will be payable on 30 October 2015 to shareholders on the register at 25 September 2015. This interim dividend, which will amount to approximately £6,649,000, has not been recognised as a liability in these half year financial statements.

13. Other intangible assets

	Computer software purchased externally	Computer software developed internally	Computer software acquired on business combinations	Customer relationships	Total
	£'000	£'000	£'000	£'000	£'000
Cost
At 1 January 2014	1,045	22,137	34,124	29,517	86,823
Additions	1,347	3,546	-	-	4,893
At 30 June 2014	2,392	25,683	34,124	29,517	91,716
Additions	418	2,977	1,093	5,596	10,084
At 31 December 2014	2,810	28,660	35,217	35,113	101,800
Additions	743	3,093	-	-	3,836
At 30 June 2015	3,553	31,753	35,217	35,113	105,636
Accumulated amortisation and impairment
At 1 January 2014	218	2,655	9,258	7,488	19,619
Charged in period	138	2,019	2,038	1,217	5,412
At 30 June 2014	356	4,674	11,296	8,705	25,031
Charged in period	309	2,626	1,706	1,308	5,949
At 31 December 2014	665	7,300	13,002	10,013	30,980
Charged in period	336	2,973	1,692	1,497	6,498
At 30 June 2015	1,001	10,273	14,694	11,510	37,478
Net book value
At 30 June 2015	2,552	21,480	20,523	23,603	68,158
At 31 December 2014	2,145	21,360	22,215	25,100	70,820
At 30 June 2014	2,036	21,009	22,828	20,812	66,685
At 1 January 2014	827	19,482	24,866	22,029	67,204

14. Change in net debt

	At 31 December 2014 £'000	Cash flow £'000	Finance costs £'000	At 30 June 2015 £'000
Cash and cash equivalents	6,939	2,182	-	9,121
Bank loans due within one year	(12,902)	9,000	-	(3,902)
Bank loans due after one year	(5,854)	2,000	(48)	(3,902)
Net (debt)/cash	(11,817)	13,182	(48)	1,317

15. Business combinations after the reporting period

On 13 July 2015 the Group acquired 100% of the share capital of Pinbellcom Group Limited, a leading supplier of administration and compliance software to both the primary and the secondary care markets. The acquisition is in line with the Group's strategy of providing connected healthcare IT for patients and those involved in their care.

The provisional fair values of the net assets acquired, consideration paid and goodwill arising on the transaction are shown in the table below. The provisional goodwill relates principally to the experienced staff within the business.

	£'000
Goodwill and other intangible assets	3,294
Property, plant and equipment	12
Trade and other receivables	253
Cash and cash equivalents	484
Trade and other payables	(202)
Deferred income	(377)
Total net assets	3,464
Consideration:
Cash consideration	3,464
Cash and cash equivalent balances acquired	(484)
Net cash cost of acquisition	2,980

 

END

 

 

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