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THE MISSION GROUP PLC — Earnings Release 2013
Mar 20, 2014
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Earnings Release
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RNS Number : 7346C
EMIS Group PLC
20 March 2014
20 March 2014
EMIS Group plc
("EMIS Group" or "the Group")
Preliminary Results for the financial year ended 31 December 2013
EMIS Group plc (AIM: EMIS.L), the UK leader in connected healthcare software and services, today announces its results for the year ended 31 December 2013.
Financial highlights
| 2013 | 2012 | Increase | |
| Total revenue | £105.5m | £86.3m | 22% |
| Recurring revenue | £81.4m | £69.4m | 17% |
| Operating profit | |||
| · reported | £24.9m | £24.1m | 3% |
| · adjusted(1) | £26.1m | £22.8m | 14% |
| Cash generated from operations(2) | £32.6m | £27.4m | 19% |
| Net (debt)/cash | £(13.5m) | £7.7m | |
| Earnings per share | |||
| · reported | 32.6p | 32.5p | |
| · adjusted(1) | 34.0p | 30.8p | 11% |
| Dividends | |||
| § proposed final | 8.0p | 7.1p | 13% |
| § total for year | 16.0p | 14.2p | 13% |
(1) Excludes exceptional items, 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 £6.1m (2012: £5.3m).
Operational highlights
Overall results in line with expectations:
o Positive contribution from 2013 acquisitions
o Net debt reduced from pro forma £18.7m, as announced at the time of acquisition of Ascribe, to £13.5m
Primary & Community Care
o UK primary care software market leading position maintained with market share of 53.0% (5,232 GP practices) (2012: 51.2% (5,113 GP practices))
o Doubling of GP practices live with EMIS Web to 3,327 (2012: 1,635)
o Community Child and Mental Health (CCMH) focus showing results in contract wins and an unprecedented level of bid activity
Community Pharmacy
o High street pharmacy numbers increased to 4,781 community pharmacies, 35.3% of the UK market (2012: 4,595 pharmacies, 34.8%)
o Medicines Manager developed, piloted and ready for launch
Secondary & Specialist Care
o Acquisitions deliver strategic platform for integrated care with Ascribe providing substantial UK presence in PAS, A&E, Pharmacy and Mental Health, and Digital Healthcare being England's market leader for diabetic eye screening software and services
o Post acquisition, Ascribe secured several significant contracts and Digital Healthcare now rolling out upgraded diabetic eye screening software.
Current trading and outlook:
§ Group continues to trade in line with management expectations and with continuing strong revenue visibility
§ Current number of EMIS Web GP practices installed stands at 3,453 with all the remaining English estate having either placed an order or currently using the familiarisation service. Balance of the English EMIS Web GP installations expected throughout 2014
§ GPSoCR Lot 1 negotiations expected to conclude shortly
§ CCMH presence and pipeline strengthening further
§ Organisational and product integration of both Digital Healthcare and Ascribe progressing well including interoperability of the acquired product sets with EMIS Web for GPs
Chris Spencer, Chief Executive Officer of EMIS Group, said:
"EMIS Group has had an exceptionally productive year with the accelerated roll-out of EMIS Web for GPs, the acquisitions and integration of Digital Healthcare and Ascribe completing our strategic platform for integrated care, strong organic revenue growth and a high level of profitability maintained.
"As financial and demographic factors continue to impact the NHS, EMIS Group confidently expects to remain at the heart of healthcare IT with our strategic mission of integrating healthcare systems spanning primary, CCMH, community pharmacy, secondary and specialist care."
There will be an analyst meeting today at 10:15am for a 10:30am start at Numis Securities, 10 Paternoster Square, London EC4M 7LT. Please contact Giles Robinson at MHP Communications on 0203 128 8788, [email protected], for details.
Enquiries:
For further information, contact:
EMIS Group plc Tel: 0113 380 3000
Chris Spencer, CEO
Peter Southby, CFO
Numis Securities Limited (Nominated Adviser & Broker) Tel: 020 7260 1000
Michael Meade/Simon Willis/James Black
MHP Communications Tel: 020 3128 8788
Reg Hoare/James White/Giles Robinson
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. Through integration and interoperability, EMIS Group helps clinicians share vital information, facilitating better, more efficient healthcare and supporting longer and healthier lives.
EMIS Group serves the following healthcare settings:
• Primary and Community Care, under the EMIS brand, the UK leader in clinical IT systems for GPs and commissioners. EMIS Group 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. EMIS's patient.co.uk website is the UK's leading independent provider of patient-centric medical and well-being information and related transactional services.
• Community Pharmacy, under the Rx Systems brand, the UK's single most used integrated community pharmacy and retail system.
• Secondary and Specialist Care, under the Ascribe and Digital Healthcare brands. Ascribe is a leading software provider to 70% 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. Digital Healthcare is England's leading provider of diabetic eye screening and other ophthalmology-related solutions.
These markets are also supported, under the Egton brand, by the provision of specialist ICT infrastructure, software, hardware and engineering services.
CHIEF EXECUTIVE'S OVERVIEW
EMIS Group has had an exceptionally productive year with the accelerated roll-out of EMIS Web for GPs, the acquisition and integration of Digital Healthcare and Ascribe (delivering a strategic platform for integrated care), strong organic revenue growth and a high level of profitability maintained.
As the Group moves towards the effective completion of the roll-out of EMIS Web to GPs in England it sees substantial medium and long term growth opportunities especially related to health record sharing across the Group's own product suite and with third party products. The Medical Interoperability Gateway ("MIG"), from the Group's joint venture Healthcare Gateway Limited ("HGL"), now gives access to virtually all UK primary care and community health records. The Health Application Platform ("HAP") from Ascribe gives access to EMIS Group and third party health records in secondary care. The MIG and the HAP, coupled with other products and tools, like the Group's Medicine Manager for community pharmacy, increasingly facilitate integrated care across the whole "healthcare economy": primary, community, child and mental health ("CCMH"), community pharmacy, secondary and specialist care.
Health Minister, Jeremy Hunt, speaking at Cambridge Health Network on 5 February 2014 described certain things as "absolute givens": that the NHS will become totally dependent on personal and population level electronic health records and that patients will take charge of their own "health destinies". EMIS Group is closely aligned in facilitating those trends in healthcare: first, as custodian of not only the cradle-to-grave GP record but also of millions of the more episodic records created in CCMH, community pharmacy, secondary and other settings; second through Patient Access, the Group's patient transactional service made available through patient.co.uk which is already used by millions of patients and clinicians every month.
OPERATIONAL REVIEW
The Group, through its subsidiaries EMIS, Rx Systems, Digital Healthcare and Ascribe, is a major provider of healthcare software, information technology and related services in the UK. The Group is unique in holding a strong market position in every major area of UK healthcare IT.
Primary & Community Care
Primary Care
EMIS remains the clear UK GP software market leader and grew its market share during 2013 to 53.0% (5,232 GP practices) (2012: 51.2% (5,113 GP practices)). The primary care user base remains loyal and 76 % of EMIS's English GP practices have used an EMIS system for over 10 years. This growth and loyalty is in the face of practice consolidation, competitor activity, the alternative single system choices of a small number of clinical commissioning groups (CCGs) and the risk of churn created by the estate-wide migration from older EMIS products to EMIS Web for GPs (the Group's transformational healthcare IT system).
Renegotiation of the expanded English GP Systems of Choice (GPSoC) Framework continues with intended conclusion of Lot 1 by 31 March 2014. Until then, the previous framework has been deemed to remain in place to secure vital continuity of service. Discussions have begun regarding GPSoC Lots 2 and 3 and the renewal of the GP system framework for Northern Ireland.
Following the phased withdrawal of CSC's iSoft product from the UK primary care market, 269 former iSoft practices migrated to EMIS in England during the year. The Group ultimately expects to win around three-quarters of the former iSoft English estate and approximately two-thirds of the total iSoft estate of 492 practices. A number of the iSoft sites are in Wales where NHS Wales began rolling out a centrally hosted IT service to its GPs with EMIS Web customer acceptance testing being concluded in March 2013 and the first EMIS Web practice going live in June.
EMIS Web GP
Throughout the year, the primary care division maintained the rollout to GP practices of EMIS Web. At the end of 2013 there were 3,327 live EMIS Web practices in England and Wales (representing 74% of EMIS's total GP estate in those countries and an increase of 1,692 practices during the year). The remaining 1,196 practices have all either placed an order or are in the EMIS Web familiarisation service.
EMIS Web mobile was completed, tested and released in early 2013 enabling GPs, and others in CCMH and other integrated care settings, to access the core elements of EMIS Web on a tablet device when working away from their clinical base.
EMIS Web Community, Child and Mental Health
EMIS has a growing presence in CCMH, where the procurements are led by CCGs. An experienced Director of CCMH joined the Group in June 2013, further strengthening and focussing the CCMH team following additional investment in development, product, support and sales specialists. CCMH and integrated care functionality relating to cross-organisational tasks was released in May 2013 and cross-organisational appointments were released in July. EMIS Web is now used in at least 205 clinical settings beyond primary care.
In Camden, the North London CCG is using data-sharing to help clinicians integrate care across primary, community, secondary and specialist care. Subject to patient consent at the point of care, clinicians have a secure view of vital medical information held in GP records, using EMIS Web in key clinical areas including community: diabetes, chronic kidney disease, geriatrics, heart failure, chronic obstructive pulmonary disease and memory service. Using EMIS Web's search and reports facility, clinicians treating 1407 patients in the diabetes service reduced the did not attend rate from 26 per cent in 2012 to 10 per cent in 2013. It is also helping them to triage care more effectively.
In London, in April, EMIS signed the T30 Framework to supply clinical information systems to 30 community and mental health trusts in London and the South. In Glasgow, EMIS implemented the first phase of a contract to share information on 240,000 children across a range of community services. As the second half of the year progressed, bid activity increased markedly and the Group secured new CCMH contracts for EMIS Web in:
· Bromley, replacing a Servelec RiO system, providing all community services to 350,000 local adults and children. The system will deliver a common patient record, shared with local GPs, and central functions such as appointment booking. Productivity is already up by 20 per cent along with improved clinical outcomes. For example, leg ulcer healing rates are down from 21 weeks to five;
· East London Urgent Care Centre, helping prevent unnecessary admissions to Newham Hospital A&E department, caring for over 70,000 patients a year. After only using EMIS Web for two months, the centre surpassed a target to refer no more than a quarter of patients to A&E by using two-way patient record sharing with local GPs.
Unprecedented tender activity continued throughout the second half and into 2014.
Patient.co.uk
Patient.co.uk, the Group's website that helps patients play a key part in their own care through access to clinically reviewed health and well-being information and the gateway for transactional healthcare services, saw a rapid growth in patient and clinical visitors during the period. In January 2013, the site had 5m unique visitors and 11m page impressions; by December, following further enhancements to the content and functionality of the site, this had risen to 11m unique visitors and 21m page impressions. The division also developed and released patient-focussed apps including the UK's first Patient Access App launched on 13 March 2013 at the NHS Innovation Expo.
Community Pharmacy
Rx Systems provides healthcare IT, software, and services to 35.3% (2012: 34.8%) of UK high street pharmacies. ProScript, the Group's community pharmacy software, is the single most widely used dispensary management system in the UK. To complement and expand ProScript into pharmacy retail systems, Multepos Computer Systems Limited was acquired on 14 January 2013 for a net cash consideration of £0.7 million financed from the Group's existing cash resources. Multepos was quickly integrated within the first half of the year.
Rx Systems also had a successful year organically: growing its user base; creating, piloting and preparing for the formal launch of Medicine Manager, new functionality facilitating information flow between GP practices and community pharmacies, with pilot sites starting to go live in April 2013; and drawing up detailed plans for the development of its next generation integrated community pharmacy software.
Secondary and Specialist Care
On 5 August 2013, the Group acquired Digital Healthcare for a net cash consideration of £3.1m. Digital Healthcare is a leading provider of diabetic eye screening and other ophthalmology-related solutions. In England it has a market share of 80% and it also has a well-established international presence. As well as a strong position in a profitable specialist niche market, adjacent to EMIS Group's presence in primary care, CCMH, community pharmacy, secondary and specialist systems, Digital Healthcare also provides opportunities for hosting and delivering fully managed ophthalmology-related services.
On 16 September 2013, the Group acquired Ascribe for an initial enterprise value of £57.5m (with an associated placing of 4.4m new shares raising £26.3m net of expenses) and further cash payments contingent on performance of up to £3.0m. Ascribe is a well-established UK based healthcare software and IT services provider, principally focused on Hospital Pharmacy, A&E, Mental Health and Patient Administration Systems (PAS)/Electronic Patient Records (EPR), with a high level of penetration into NHS secondary care organisations. 70% of the UK NHS Acute Trusts and Boards use at least one Ascribe solution. Ascribe's suite of solutions and its HAP facilitate significant cross-selling opportunities and growth through interoperability and/or integration with EMIS Group's primary, CCMH, community pharmacy and specialist solutions. Ascribe also has international reach with 18% of its recurring revenue derived from Australasia.
The organisational and product integrations of both Digital Healthcare and Ascribe are progressing well. Since acquisition, Ascribe has secured several significant contracts to supply clinical IT solutions to major NHS hospital trusts, including Doncaster & Bassetlaw and South Devon. Digital Healthcare is also progressing well as the first supplier to widely roll-out upgraded diabetic eye screening software to deliver the new Common Pathway required by Public Health England as well as over 50 enhancements requested by clinicians. Both businesses operate similar business models to EMIS, with a high proportion of recurring revenues.
As stated at the time of their respective acquisitions, both businesses are expected to enhance earnings in the first full year of ownership in 2014. Specifically, the acquisition of Ascribe is expected to deliver £0.5m savings from synergies this year, with further potential future efficiencies and economies of scale.
FINANCIAL REVIEW
In the year ended 31 December 2013 the Group again delivered strong organic growth in revenue and operating profit, complemented by positive contributions from the acquisitions made in the period.
Adjusted operating profit for the year as set out in the table below was £26.1m (2012: £22.8m) while operating profit was £24.9m (2012: £24.1m).
| Selected financial extracts (rounded) | 2013 | 2012 | |||||
| Primary & Community Care £m |
Community Pharmacy £m |
Secondary & Specialist Care £m |
Total £m |
Primary & Community Care £m |
Community Pharmacy £m |
Total £m |
|
| Revenue | 80.0 | 17.0 | 8.5 | 105.5 | 69.8 | 16.5 | 86.3 |
| Segmental operating profit | 23.6 | 3.0 | 0.3 | 26.9 | 22.5 | 3.0 | 25.5 |
| Development costs capitalised | (5.3) | - | (0.8) | (6.1) | (5.3) | - | (5.3) |
| Amortisation of intangibles(1) | 3.9 | 0.9 | 1.3 | 6.1 | 2.7 | 0.8 | 3.5 |
| Adjusted segmental operating profit |
22.2 | 3.9 | 0.8 | 26.9 | 19.9 | 3.8 | 23.7 |
| Group expenses | (0.8) | (0.9) | |||||
| Adjusted operating profit(2) |
26.1 | 22.8 | |||||
| 2013 Pence |
2012 Pence |
||||||
| Earnings per share - reported | 32.6 | 32.5 | |||||
| Earnings per share - adjusted | 34.0 | 30.8 | |||||
| (1) Includes amortisation of development costs and acquired intangibles | |||||||
| (2) Adjusted to exclude exceptional transaction costs of £1.1m (2012: £0.4m) |
Revenue
Group revenue from continuing operations increased by 22% to £105.5m (2012: £86.3m), including revenue from acquisitions during the year of £9.0m.
The 12% organic growth in the year was driven by a strong performance in the Primary and Community Care business due to the roll-out of the EMIS Web product, with the size of the estate doubling during the course of the year.
Performance in the Community Pharmacy business benefitted from continued gains in the estate and from the cross-selling of additional services, including Electronic Point-of-Sale systems delivered by the Multepos acquisition completed in January 2013. The comparative figures for this segment include £1.6m one-off revenue associated with the roll-out of the electronic prescription service (EPS) which has effectively been replaced by new, recurring, revenues in 2013.
Secondary and Specialist Care reflects the post-acquisition results of the Digital Healthcare and Ascribe businesses from August and September respectively. Both acquisitions have performed well in their early months as part of the Group, with momentum building into the new financial year.
Revenue Mix
Group recurring revenue, principally licensing, maintenance & software support, hosting and other support services was £81.4m (2012: £69.4m). This represented 77% of total revenue and provides a strong platform for the business to continue to invest with confidence in developing future products and services.
Key drivers of revenue growth within the Group included the following:
· hosting, which increased to £14.3m (2012: £9.0m), as a result of the further market penetration of the EMIS Web product;
· training, consultancy and implementation, which increased to £12.1m (2012: £6.5m) with EMIS Web roll-out related revenue in Primary Care complemented by new revenues in the Secondary sector;
· maintenance & software support, driven by incremental revenues from the acquisitions completed in the year to £17.7m (2012: £13.3m);
· licences, which increased to £40.0m (2012: £38.2m), due principally to growth in the Primary Care and Community Pharmacy estates;
· an increase in hardware revenues to £6.9m (2012: £5.2m) with growth in the provision of hardware by Egton to the Group's customers; and
· other support services, where the reduction in EPS roll-out revenue was offset by growth in EPS support and new revenues from the acquisitions, resulting in total revenues of £14.5m (2012: £14.1m).
Profitability
Adjusted operating profit increased by 14% to £26.1m (2012: £22.8m), including £0.9m from acquisitions in the year. The Primary and Community Care business was the key driver behind the 10% organic growth in the year, principally due to the continued successful roll-out of the hosted EMIS Web GP product.
As expected, staff costs continued to rise with average staff numbers (excluding acquisitions) increasing to 1,239 (2012: 1,116). This was a result of the recruitment undertaken in 2012. By contrast, in 2013, headcount (excluding acquisitions) remained broadly unchanged. Including acquired businesses, the Group employed 1,574 staff at the year-end (2012: 1,236).
Adjusted operating profit included the benefit of £0.3m (2012: £nil) of Research & Development tax credits under the "Above The Line" arrangements in effect from 1 April 2013. In previous periods tax credits in this area have been recognised as a component of the income tax charge.
After accounting for the capitalisation and amortisation of development costs, the amortisation of acquired intangibles and exceptional transaction costs of £1.1m, operating profit was £24.9m (2012: £24.1m), an increase of 3%.
Taxation
The tax charge for the year of £4.7m is after taking into account a reduction in the provision for deferred tax of £1.0m arising from a lowering of the future rate of corporation tax from 23% to 20%.
Earnings per share ("EPS")
Adjusted basic and diluted EPS increased by 11% to 34.0p (2012: 30.8p and 30.7p respectively). The statutory basic and diluted EPS from continuing operations were both 32.6p (2012: 32.5p).
Dividend
Subject to shareholder approval at the Annual General Meeting on 30 April 2014, the Board proposes an increase in the final dividend to 8.0p (2012: 7.1p) per ordinary share payable on 2 May 2014 to shareholders on the register at the close of business on 11 April 2014. This would make a total dividend of 16.0p (2012: 14.2p) per ordinary share for 2013, an increase of 13% higher than the prior year, reflecting the Board's commitment to increasing the dividend and its confidence in the Group's future prospects.
Cash flow
The principal movements in net debt were as follows:
| 2013 £m |
2012 £m |
|
| Cash from operations: | ||
| Cash generated from operations | 38.7 | 32.7 |
| Less: internal development costs capitalised | (6.1) | (5.3) |
| Net cash generated from operations | 32.6 | 27.4 |
| Business combinations | (57.5) | (0.8) |
| Placing proceeds | 26.3 | - |
| Net capital expenditure | (8.7) | (12.8) |
| Transactions in own shares | 0.6 | (1.8) |
| Tax | (5.1) | (4.6) |
| Dividends | (9.1) | (7.7) |
| Other | (0.3) | - |
| (53.8) | (27.7) | |
| Change in net debt in the year | (21.2) | (0.3) |
| Net (debt)/cash at end of year (note 8) | (13.5) | 7.7 |
Net cash generated from operations was 19% higher than the previous year at £32.6m (2012: £27.4m) reflecting a stronger working capital performance and growth in the business. The Group typically has a seasonal cash flow profile, with stronger inflows in the first half reflecting the timing of annual licence renewals.
The Group completed three acquisitions in the year (Multepos, Digital Healthcare and Ascribe) for net cash consideration of £57.5m. The Ascribe acquisition was part funded by a placing of 4.4m shares in September 2013 at £6.15 per share which raised a net £26.3m after expenses.
Net capital expenditure reduced to £8.7m (2012: £12.8m), comprised primarily of investment in hosting assets, computer equipment and additional freehold premises in central Leeds for warehousing, engineering services and hosting.
The Group's Employee Benefit Trust received £0.6m (2012: net expenditure of £1.8m) for shares transferred in connection with the Group's share schemes. After tax and dividends, the total net cash outflow of £21.2m resulted in a year end net debt of £13.5m (2012: net cash of £7.7m), comprised of cash of £4.2m and bank debt of £17.7m. At 31 December 2013, the Group had available bank debt facilities of £33.0m, including a £16.0m Revolving Credit Facility committed until 2017 of which £15.0m was undrawn.
SUMMARY AND OUTLOOK
EMIS Group continues to trade in line with the Board's expectations, with continuing strong revenue visibility and improved profit performance in the second half of 2013 continuing into 2014, principally due to the ongoing growth in the EMIS Web GP estate. This momentum and the benefits of last year's acquisitions provide confidence that further progress will be achieved in the current year.
A successful outcome to the GPSoC framework renegotiation and completing the roll-out of EMIS Web GP in England through 2014 remain two of the key objectives for the primary care division. Other high priority objectives for the Group include capitalising on the post National Programme re-letting of contracts in the CCMH and secondary markets, continuing to focus on the integration of Ascribe and Digital Healthcare with the Group (both at an organisational and product level) and optimising development delivery and other operational efficiencies. Meeting these objectives will deliver strong and sustainable growth during 2014 and beyond.
As financial and demographic factors continue to impact on the NHS, EMIS Group confidently expects to remain at the heart of healthcare IT while taking further and significant steps towards its strategic vision of integrated healthcare systems joining primary, community, secondary and specialist care.
GROUP STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2013
| Note | 2013 £'000 |
2012 £'000 |
||
| Revenue | 2 | 105,542 | 86,333 | |
| Costs: | ||||
| Changes in inventories | 174 | (179) | ||
| Cost of goods and services | (11,954) | (10,712) | ||
| Staff costs | (42,522) | (32,818) | ||
| Other operating expenses1 | (16,773) | (12,560) | ||
| Depreciation of property, plant and equipment | (3,286) | (2,349) | ||
| Amortisation of intangible assets | (6,236) | (3,604) | ||
| Adjusted operating profit | 26,065 | 22,820 | ||
| Development costs capitalised | 6,098 | 5,330 | ||
| Exceptional transaction costs | (1,144) | (435) | ||
| Amortisation of intangible assets2 | (6,074) | (3,604) | ||
| Operating profit | 2 | 24,945 | 24,111 | |
| Finance income | 20 | 54 | ||
| Finance costs | (262) | (130) | ||
| Share of result of associate | 20 | (2) | ||
| Share of result of joint venture | (88) | 26 | ||
| Profit before taxation | 24,635 | 24,059 | ||
| Income tax expense | 3 | (4,706) | (4,625) | |
| Profit for the year | 19,929 | 19,434 | ||
| Other comprehensive income | ||||
| Items that may be reclassified to profit or loss | ||||
| Currency translation differences | (22) | - | ||
| Other comprehensive income | (22) | - | ||
| Total comprehensive income for the year | 19,907 | 19,434 | ||
| Attributable to: | ||||
| - equity holders of the parent | 19,369 | 18,932 | ||
| - non-controlling interest in subsidiary company | 538 | 502 | ||
| Total comprehensive income for the year | 19,907 | 19,434 | ||
| Earnings per share attributable to equity holders of the parent | 4 | Pence | Pence | |
| Basic | 32.6 | 32.5 | ||
| Diluted | 32.6 | 32.5 |
1 Including contract asset depreciation of £3,241,000 (2012: £2,589,000) and exceptional transaction costs of £1,144,000 (2012: £435,000).
2 Excluding amortisation of computer software purchased externally of £162,000. In 2012 the equivalent amortisation of £56,000 was not excluded on materiality grounds.
GROUP BALANCE SHEET
as at 31 December 2013
| ## Note | 2013 £'000 |
2012 £'000 |
|
| ASSETS | |||
| Non-current assets | |||
| Goodwill | 60,135 | 21,951 | |
| Other intangible assets | 6 | 67,204 | 30,838 |
| Property, plant and equipment | 24,610 | 22,144 | |
| Investment in joint venture and associates | 2,760 | 2,740 | |
| 154,709 | 77,673 | ||
| Current assets | |||
| Inventories | 1,431 | 1,243 | |
| Trade and other receivables | 21,448 | 15,188 | |
| Cash and cash equivalents | 8 | 4,167 | 11,107 |
| 27,046 | 27,538 | ||
| Total assets | 181,755 | 105,211 | |
| LIABILITIES | |||
| Current liabilities | |||
| Trade and other payables | (16,705) | (12,426) | |
| Current tax liabilities | (2,341) | (1,919) | |
| Bank loans | 8 | (7,902) | (396) |
| Contingent acquisition consideration | (3,000) | - | |
| Deferred income | (25,453) | (15,857) | |
| (55,401) | (30,598) | ||
| Non-current liabilities | |||
| Bank loans | 8 | (9,756) | (3,000) |
| Deferred tax liability | (11,481) | (7,548) | |
| Contingent acquisition consideration | (994) | - | |
| (22,231) | (10,548) | ||
| Total liabilities | (77,632) | (41,146) | |
| NET ASSETS | 104,123 | 64,065 | |
| EQUITY | |||
| Ordinary share capital | 633 | 586 | |
| Share premium | 51,045 | 24,767 | |
| Own shares held in trust | (2,325) | (2,877) | |
| Retained earnings | 48,522 | 38,076 | |
| Other reserve | 2,197 | - | |
| Equity attributable to owners of the parent | 100,072 | 60,552 | |
| Non-controlling interests | 4,051 | 3,513 | |
| TOTAL EQUITY | 104,123 | 64,065 | |
GROUP STATEMENT OF CASH FLOWS
for the year ended 31 December 2013
| Note | 2013 £'000 |
2012 £'000 |
|
| Cash generated from operations | 7 | 38,725 | 32,732 |
| Finance costs | (600) | (114) | |
| Finance income | 20 | 54 | |
| Tax paid | (5,073) | (4,566) | |
| Net cash generated from operating activities | 33,072 | 28,106 | |
| Cash flows from investing activities Purchase of property, plant and equipment |
(8,403) | (12,491) | |
| Proceeds from sale of property, plant and equipment | 219 | 245 | |
| Internally developed software | (6,098) | (5,330) | |
| Purchase of software | (524) | (521) | |
| Business combinations | (57,534) | (757) | |
| Net cash used in investing activities | (72,340) | (18,854) | |
| Cash flows from financing activities | |||
| Share placing | 26,322 | - | |
| Transactions in own shares held in trust | 552 | (1,816) | |
| Bank loan repayments | (2,400) | (1,200) | |
| Bank loans drawn down | 17,000 | - | |
| Dividends paid | 5 | (9,146) | (7,735) |
| Net cash generated from/(used in) financing activities | 32,328 | (10,751) | |
| Net decrease in cash and cash equivalents | (6,940) | (1,499) | |
| Cash and cash equivalents at beginning of year | 11,107 | 12,606 | |
| Cash and cash equivalents at end of year | 8 | 4,167 | 11,107 |
GROUP STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2013
| Share capital |
Share premium |
Own shares held in trust |
Retained earnings |
Other reserve | Non -controlling interest |
Total equity |
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance at 1 January 2012 | 586 | 24,767 | (1,061) | 26,789 | - | 3,011 | 54,092 |
| Profit for the year | - | - | - | 18,932 | - | 502 | 19,434 |
| Transactions with owners | |||||||
| Share acquisitions less sales | - | - | (1,816) | - | - | - | (1,816) |
| Share-based payments | - | - | - | 90 | - | - | 90 |
| Dividends paid (note 5) | - | - | - | (7,735) | - | - | (7,735) |
| Balance at 1 January 2013 | 586 | 24,767 | (2,877) | 38,076 | - | 3,513 | 64,065 |
| Profit for the year | - | - | - | 19,391 | - | 538 | 19,929 |
| Transactions with owners | |||||||
| Share placing | 44 | 26,278 | - | - | - | - | 26,322 |
| Shares issued | 3 | - | - | - | 2,219 | - | 2,222 |
| Share acquisitions less sales | - | - | 552 | - | - | - | 552 |
| Share-based payments | - | - | - | 195 | - | - | 195 |
| Deferred tax in relation to share-based payments | - | - | - | 6 | - | - | 6 |
| Dividends paid (note 5) | - | - | - | (9,146) | - | - | (9,146) |
| Other comprehensive income | |||||||
| Currency translation differences | - | - | - | - | (22) | - | (22) |
| Balance at 31 December 2013 | 633 | 51,045 | (2,325) | 48,522 | 2,197 | 4,051 | 104,123 |
NOTES TO THE PRELIMINARY ANNOUNCEMENT
for the year ended 31 December 2013
1. Basis of preparation
The financial information set out in this preliminary announcement does not constitute the company's statutory financial statements for the years ended 31 December 2013 or 2012 but is derived from those financial statements.
Statutory financial statements for 2012 have been delivered to the registrar of companies, and those for 2013 will be delivered in due course. The auditors have reported on those financial statements; their reports were (i) unqualified (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The statutory financial statements for the year ended 31 December 2013 will be posted no later than 1 April 2014 to shareholders and, once approved, will be delivered to the Registrar of Companies following the Annual General Meeting on 30 April 2014.
Copies of the Annual Report and Financial Statements for the year ended 31 December 2013 will be available on the Company's website www.emis-online.com/investors from 1 April 2014 and from the Company Secretary, EMIS Group plc, Rawdon House, Green Lane, Yeadon, Leeds LS19 7BY.
2. Segmental information
IFRS 8 'Operating Segments' provides for segmental information disclosure on the basis of information reported internally to the chief operating decision-maker for decision-making purposes. The Group considers that this role is performed by the main Board of directors.
Following the acquisitions made in the year, the Group now has three operating segments, involved with the supply and support of software and related services, as set out below:
(a) Primary & Community Care (previously described as "EMIS");
(b) Community Pharmacy (previously described as "RX" and including the acquired Multepos business); and
(c) Secondary & Specialist Care (including the acquired Ascribe and Digital Healthcare businesses).
Each operating segment is assessed by the Board based on a measure of adjusted operating profit. This measurement basis excludes exceptional costs, 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 costs, cash and cash equivalents and bank and other loans are not allocated to segments, as group and financing activities are not segment-specific.
| 2013 | 2012 | |||||||
| Primary & Community Care £'000 |
Community Pharmacy £'000 |
Secondary & Specialist Care £'000 |
Total £'000 |
Primary & Community Care £'000 |
Community Pharmacy £'000 |
Total £'000 |
||
| Revenue | 80,065 | 16,980 | 8,497 | 105,542 | 69,757 | 16,576 | 86,333 | |
| Adjusted segmental operating profit as reported internally | 22,159 | 3,869 | 822 | 26,850 | 19,901 | 3,831 | 23,732 | |
| Development costs capitalised | 5,271 | 22 | 805 | 6,098 | 5,330 | - | 5,330 | |
| Amortisation | ||||||||
| - of development costs | (1,836) | - | (40) | (1,876) | (621) | - | (621) | |
| - of acquired intangible assets | (2,076) | (851) | (1,271) | (4,198) | (2,132) | (851) | (2,983) | |
| Segmental operating profit | 23,518 | 3,040 | 316 | 26,874 | 22,478 | 2,980 | 25,458 | |
| Group operating expenses | (785) | (912) | ||||||
| Exceptional transaction costs | (1,144) | (435) | ||||||
| Operating profit | 24,945 | 24,111 | ||||||
| Net finance costs | (242) | (76) | ||||||
| Share of result of associates | 20 | (2) | ||||||
| Share of result of joint venture | (88) | 26 | ||||||
| Profit before taxation | 24,635 | 24,059 | ||||||
Revenue excludes intra-group transactions on normal commercial terms from the Primary & Community Care segment to the Community Pharmacy segment totalling £3,073,000 (2012: £2,179,000).
Revenue of approximately £75,884,000 (2012: £60,201,000) is derived from the NHS and related bodies.
Revenue of £3,182,000 (2012: £2,948,000) is derived from customers outside the United Kingdom.
Exceptional transaction costs relate to professional fees incurred in the business acquisitions made during the year.
| 3. Income tax expense | 2013 £'000 |
2012 £'000 |
| Income tax: | ||
| - current tax charge | 6,147 | 5,164 |
| Total current tax | 6,147 | 5,164 |
| Deferred tax: | ||
| - current period | (1,441) | (539) |
| Total deferred tax | (1,441) | (539) |
| Total tax charge in Group statement of comprehensive income | 4,706 | 4,625 |
| Factors affecting the tax charge for the year: | ||
| Profit before taxation | 24,635 | 24,059 |
| Profit before taxation multiplied by the average domestic income tax rate in the UK of 23.25% (2012: 24.5%) | 5,728 | 5,894 |
| Tax effects of: | ||
| - expenses not deductible for tax purposes | 60 | 133 |
| - research and development enhanced relief | (139) | (434) |
| - joint venture/associate reported net of tax | 17 | (6) |
| - deferred tax rate change | (960) | (962) |
| Tax charge for the year | 4,706 | 4,625 |
| 4. Earnings per share ("EPS") | ||
| The calculation of basic and diluted earnings per share is based on the following earnings and numbers of shares: | ||
| Earnings | 2013 £'000 |
2012 £'000 |
| Basic earnings attributable to equity holders | 19,391 | 18,932 |
| Exceptional transaction costs | 1,144 | 435 |
| Development costs capitalised | (6,098) | (5,330) |
| Amortisation of development costs and acquired intangible assets | 6,074 | 3,604 |
| Tax and non-controlling interest effect of above items | (287) | 249 |
| Adjusted earnings attributable to equity holders | 20,224 | 17,890 |
| Weighted average number of ordinary shares | 2013 Number '000 |
2012 Number '000 |
| Total shares in issue | 59,946 | 58,550 |
| Held as own shares in Treasury by Employee Benefit Trust | (506) | (381) |
| For basic EPS calculations | 59,440 | 58,169 |
| Effect of potentially dilutive share options | 114 | 79 |
| For diluted EPS calculations | 59,554 | 58,248 |
| Earnings per share | 2013 Pence |
2012 Pence |
| Basic | 32.6 | 32.5 |
| Adjusted | 34.0 | 30.8 |
| Basic diluted | 32.6 | 32.5 |
| Adjusted diluted | 34.0 | 30.7 |
| 5. Dividends | 2013 £'000 |
2012 £'000 |
| Final dividend for the year to 31 December 2011 of 6.2p | - | 3,618 |
| Interim dividend for the year to 31 December 2012 of 7.1p | - | 4,117 |
| Final dividend for the year to 31 December 2012 of 7.1p | 4,120 | - |
| Interim dividend for the year to 31 December 2013 of 8.0p | 5,026 | - |
| 9,146 | 7,735 |
A final dividend for the year to 31 December 2013 of 8.0p amounting to approximately £5,030,000 will be proposed at the Annual General Meeting on 30 April 2014. If approved, this dividend will be paid on 2 May 2014 to shareholders on the register on 11 April 2014. The dividend is not accounted for as a liability in these financial statements and will be accounted for as an appropriation of revenue reserves in the year to 31 December 2014.
6. 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 2012 | - | 10,709 | 8,797 | 18,864 | 38,370 |
| Additions | 521 | 5,330 | - | - | 5,851 |
| At 31 December 2012 | 521 | 16,039 | 8,797 | 18,864 | 44,221 |
| Additions | 524 | 6,098 | 25,327 | 10,653 | 42,602 |
| At 31 December 2013 | 1,045 | 22,137 | 34,124 | 29,517 | 86,823 |
| Accumulated amortisation | |||||
| At 1 January 2012 | - | 158 | 5,202 | 4,419 | 9,779 |
| Charged in year | 56 | 621 | 1,558 | 1,369 | 3,604 |
| At 31 December 2012 | 56 | 779 | 6,760 | 5,788 | 13,383 |
| Charged in year | 162 | 1,876 | 2,498 | 1,700 | 6,236 |
| At 31 December 2013 | 218 | 2,655 | 9,258 | 7,488 | 19,619 |
| Net book value | |||||
| At 31 December 2013 | 827 | 19,482 | 24,866 | 22,029 | 67,204 |
| At 31 December 2012 | 465 | 15,260 | 2,037 | 13,076 | 30,838 |
| At 1 January 2012 | - | 10,551 | 3,595 | 14,445 | 28,591 |
| 7. Cash generated from operations | ||
| 2013 £'000 |
2012 £'000 |
|
| Profit before taxation | 24,635 | 24,059 |
| Finance income | (20) | (54) |
| Finance costs | 262 | 130 |
| Share of result of associates | (20) | 2 |
| Share of result of joint venture | 88 | (26) |
| Operating profit | 24,945 | 24,111 |
| Adjustment for non-cash items: | ||
| Amortisation of intangible assets | 6,236 | 3,604 |
| Depreciation of property, plant and equipment | 6,527 | 4,938 |
| Share-based payments | 195 | 90 |
| Operating cash flow before changes in working capital | 37,903 | 32,743 |
| Changes in working capital: | ||
| (Increase)/decrease in inventory | (174) | 179 |
| Decrease/(increase) in trade and other receivables | 1,132 | (3,191) |
| (Decrease)/increase in trade and other payables | (177) | 3,282 |
| Increase/(decrease) in deferred income | 41 | (281) |
| Cash generated from operations | 38,725 | 32,732 |
8. Change in net (debt)/cash
| 2012 £'000 |
Cash flow £'000 |
2013 £'000 |
|
| Cash and cash equivalents | 11,107 | (6,940) | 4,167 |
| Bank loans due within one year | (396) | (7,506) | (7,902) |
| Bank loans due after one year | (3,000) | (6,756) | (9,756) |
| Net cash/(debt) | 7,711 | (21,202) | (13,491) |
9. Business combinations
On 14 January 2013 the Group acquired the 75% of share capital of Multepos Computer Systems Limited (Multepos) which it did not already own, to enable further expansion of electronic point-of-sale services to the community pharmacy customer base. Multepos had not previously been consolidated as it was not material to the financial statements.
On 3 August 2013 the Group acquired 100% of the share capital of Digital Healthcare Limited, a leading provider of diabetic eye screening software and services, giving the Group a strong position in a niche market adjacent to the Group's core presence in GP and Community Pharmacy systems.
On 16 September 2013 the Group completed the acquisition of 100% of the share capital of Ascribe Group Limited (Ascribe), a well-established software and IT services provider to the UK's secondary healthcare market, giving the Group a significant market position in several areas strategically adjacent to but not overlapping with its existing core offerings.
These acquisitions are consistent with EMIS Group's strategy of providing integrated cross-organisationalhealthcare systems.
The provisional fair values of the net assets acquired, consideration paid and goodwill arising on these transactions is shown in the table below.
| Multepos | Digital Healthcare | Ascribe | Total | |
| £'000 | £'000 | £'000 | £'000 | |
| Goodwill | 658 | 2,470 | 35,056 | 38,184 |
| Intangible assets acquired: | ||||
| - Computer software | - | 1,011 | 24,316 | 25,327 |
| - Customer relationships | - | 1,711 | 8,942 | 10,653 |
| Property, plant and equipment | 3 | 22 | 788 | 813 |
| Inventories | 8 | 6 | - | 14 |
| Trade and other receivables | 61 | 754 | 7,198 | 8,013 |
| Cash and cash equivalents | 103 | 1,837 | 3,031 | 4,971 |
| Trade and other payables | (67) | (852) | (3,404) | (4,323) |
| Deferred income | - | (1,525) | (8,030) | (9,555) |
| Deferred tax | - | (544) | (4,832) | (5,376) |
| Total net assets | 766 | 4,890 | 63,065 | 68,721 |
| Consideration: | ||||
| Cash consideration | 766 | 4,890 | 56,849 | 62,505 |
| New share capital issued to vendors | - | - | 2,222 | 2,222 |
| Contingent consideration | - | - | 3,994 | 3,994 |
| Total consideration | 766 | 4,890 | 63,065 | 68,721 |
| Cash and cash equivalent balances acquired | (103) | (1,837) | (3,031) | (4,971) |
| New share capital issued to vendors | - | - | (2,222) | (2,222) |
| Contingent consideration | - | - | (3,994) | (3,994) |
| Net proceeds from share placing | - | - | (26,322) | (26,322) |
| Net cash cost of acquisition | 663 | 3,053 | 27,496 | 31,212 |
Goodwill relates principally to the experienced staff within the business.
Provisional fair values of assets and liabilities represent the best estimate of the fair values at the dates of acquisition. As permitted by IFRS 3 (Revised) 'Business Combinations', these provisional amounts can be amended for a period of up to 12 months following acquisition if subsequent information becomes available which changes the estimates of fair values at the dates of acquisition.
Since acquisition the contribution of the acquired businesses to Group revenue and Group adjusted operating profit has been: Multepos £730,000 and £102,000; Digital Healthcare £1,309,000 and £200,000; and Ascribe £7,188,000 and £622,000.
Had all acquisitions occurred on 1 January 2013 the revenue and adjusted operating profit for the year would have been: Multepos £762,000 and £107,000; Digital Healthcare £3,249,000 and £348,000; and Ascribe £24,927,000 and £3,037,000.
Contingent consideration for the Ascribe acquisition consists of payments of up to £3,000,000 contingent upon Ascribe achieving certain key operational and financial milestones in the 12 month period post acquisition. A further £994,000 is contingent on the realisation of a specific tax claim, to the extent that the Group is able to realise such claim for cash within an agreed timeframe.
In relation to the acquisitions and their financing, costs of £1,144,000 have been expensed in the statement of comprehensive income, £738,000 of share placing costs have been charged to share premium and £370,000 of bank arrangement fees have been recorded on the balance sheet and are being amortised over the life of the Group's bank facilities.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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