25 May 2023

EMIS Group plc

("EMIS Group", "the Group" or "EMIS")

 

Preliminary results for the year ended 31 December 2022

 

"Good performance in line with expectations"

 

EMIS Group plc (AIM: EMIS.L), the UK leader in connected healthcare software and services, today announces its preliminary results for the year ended 31 December 2022.

 

 

Financial highlights

	2022	2021	Change
Revenue
Total revenue	£175.4m	£168.2m	+4%
Recurring revenue1	£143.3m	£134.8m	+6%
Operating profit
Adjusted1, 2	£47.7m	£43.5m	+10%
Reported	£27.7m	£35.8m	-22%
Operating margin
Adjusted1, 2	27.2%	25.9%	+130 bps
Reported	15.8%	21.3%	-550 bps
Cash flow and net cash
Cash generated from operations - adjusted1	£54.6m	£46.0m	+19%
Cash generated from operations - reported	£48.8m	£50.1m	-2%
Net cash1	£45.9m	£64.0m	-28%
Earnings per share
Adjusted1	62.0p	56.1p	+10%
Reported	52.5p	46.2p	+14%
Dividends
Proposed final	21.1p	17.6p	+20%
Total for year	38.7p	35.2p	+10%

 

¹   Recurring revenue, adjusted operating profit, adjusted cash generated from operations, adjusted EPS and net cash are all alternative performance measures, for further details and reconciliation to the relevant IFRS number please refer to the appendix. 

²   Including a £1.7m contribution from acquisitions and excluding exceptional costs of £12.8m (see note 12).

 

Business highlights - good results with performance in line with expectations

 

·    Increased dividend for the twelfth consecutive year

·    EMIS Enterprise - 19% revenue growth reflects acquisitions made and strong growth in the existing business. EMIS Enterprise grew to 46% of the Group's operating profit in the period

·    EMIS Health - revenue reduced by 4% given continued strategy of exiting lower margin Resale Partner business. Higher quality revenue mix resulted in marginal increase in adjusted operating profit

·    Technology development continued in line with the product roadmap with particular progress in community pharmacy and EMIS-X Analytics

·    Two new EMIS-X Analytics products launched in 2022, Recruit and Pathway:

o  Recruit provides the technological link to enable efficient recruitment into clinical trials

o  Pathway utilises clinical intelligence to identify cohorts of patients who are at risk of long-term health conditions

·    Employee engagement score improved over the course of 2022 in year one of the three-year employer of choice programme

·    ESG - developed sustainability strategy during the year and adopted a commitment to achieve net zero emissions by 2040

Outlook - confident of delivering for all stakeholders  

 

·    Confident of delivering on full year expectations for 2023

·    Well placed to deliver the systems that will enable the NHS to realise its ambition of better, faster and proactive preventative care for the UK population

·    Technology roadmap remains closely aligned with NHS England strategy and EMIS's position on NHS Digital's new Tech Innovation Framework (TIF) demonstrates the Group's ability to deliver the NHS's integrated digital future

·    Strong balance sheet provides platform to deliver growth ambitions

·    Confident of EMIS's strategy, technology roadmap and ability to deliver consistent good performance over the medium term

Recommended acquisition of EMIS Group

 

·   On 17 June 2022, the terms of a recommended all cash offer pursuant to which a wholly‐owned subsidiary of UnitedHealth Group ("Bidco") will acquire EMIS was announced, to be implemented by means of a Court-sanctioned scheme of arrangement ("the Scheme")

·   On 31 March 2023, the United Kingdom's Competition and Markets Authority (the "CMA") announced that it had rejected a proposed remedy submitted by Bidco to address the CMA's competition concerns following its Phase 1 investigation and referred the Acquisition for a Phase 2 investigation

·   On 6 April 2023, Bidco and EMIS announced that they intend to proceed with the Phase 2 investigation. On the basis that the CMA has referred the Acquisition to a Phase 2 investigation, Bidco and EMIS have agreed (subject to Court consent) to extend the Long Stop Date for completion of the Acquisition from 30 June 2023 to 30 June 2024

·   The Scheme remains subject to Court sanction and the satisfaction of the remaining CMA condition

·   EMIS now expects the Scheme to become effective in Q4 2023 or Q1 2024

 

Andy Thorburn, Chief Executive Officer of EMIS Group, said:

 

"It has been another year of good progress for EMIS Group. The business performed well, achieving positive results in a changing market and against the backdrop of agreeing and recommending an offer for the Group, which remains subject to completion.

 

"EMIS remains well placed to deliver the systems that will enable the NHS to realise its ambition of better, faster and proactive preventative care for the UK population. Our technology roadmap remains closely aligned with NHS England strategy and our position on NHS Digital's new Tech Innovation Framework (TIF) demonstrates our ability to deliver the NHS's integrated digital future.

 

"We are confident of our strategy, technology roadmap and ability to deliver consistent good performance over the medium term."

A video recording of the full year results presentation will be available on the Group's website from 8.00am today, at www.emisgroupplc.com/investors.

 

Enquiries:

 

For further information, contact:

 

EMIS Group plc	Tel: 0330 024 1269
Andy Thorburn, CEO Peter Southby, CFO www.emisgroupplc.com @EMISGroup
Numis Securities Limited (Nominated Adviser and Broker)	Tel: 020 7260 1000
Josh Hughes/Simon Willis
MHP Communications	Tel: 020 3128 8567
Reg Hoare/Ollie Hoare/Matthew Taylor/Pauline Guenot	emis@mhpgroup.com

          

Information for investors can be found at www.emisgroupplc.com/investors.

 

Notes to Editors

 

EMIS Group is the UK leader in connected healthcare software and systems. Its solutions are widely used across major UK healthcare settings. EMIS Group's aim is to join up healthcare through innovative technology, helping to deliver better health outcomes to the UK population, supporting longer and healthier lives.

 

EMIS Group has two core business segments: EMIS Health and EMIS Enterprise.

 

EMIS Health is a supplier of innovative integrated care technology to the NHS, including primary, community, acute and social care.

 

EMIS Enterprise is focused on growth in the business-to-business technology sector within the healthcare market, including management of medicines, partner businesses, patient-facing services, data and analytics, and research and life sciences.

 

 
LEI: 213800K474ZZK76NX913]

 

 

 

CHIEF EXECUTIVE OFFICER'S STATEMENT

 

Overview

It has been another year of good progress for EMIS Group. The business performed well in 2022, achieving positive results in a changing market and against the backdrop of EMIS agreeing and recommending a cash offer pursuant to which a subsidiary of UnitedHealth Group Incorporated will, subject to regulatory approval, acquire the entire issued and to be issued ordinary share capital of EMIS (as announced on 17 June 2022).

 

Within our two divisions, we have seen strong growth in EMIS Enterprise as we continue to deliver against our strategy and technology roadmap, particularly in community pharmacy and EMIS-X Analytics.

 

EMIS Health achieved its expected performance as we made further progress to execute and accelerate our technology development roadmap, with a focus on business retention in key markets. We continue to invest in improving customer experience with our core systems.

 

The commitment and care demonstrated by our colleagues inspires me every day: across the business we have high-performing teams that put their all into every customer interaction, development detail and internal business process. This underpins our culture of excellence and delivery, leading to consistent year-on-year growth.

 

Excellent operational governance providing the strong foundations for growth

We strive to operate to the highest standards of clinical safety, data security and proactive risk mitigation through good business governance: these are the cornerstones of our business and provide the strong foundations for growth.

 

As the demands of our customers continued to increase, during the year we focussed on even more proactive management and mitigation of risk across the business, with an action-driven approach that has included improved internal systems, processes and additional employee training.

 

Positive progress on our environmental, social and governance (ESG) strategy

EMIS has had sound governance and social value principles embedded in the culture of the organisation for many years. During 2022, we developed our sustainability strategy, and thanks to the more detailed understanding of our greenhouse gas emissions gained during the year, adopted a commitment to achieve net zero emissions (a 90% reduction across all scopes with minimal reliance on offsetting) by 2040. The Group's ESG committee continues to ensure that both environmental and social targets and ambitions are embedded into our corporate strategy.

 

Our executive team and Board are committed to managing EMIS's environmental and social impact, continuing with our very important social purpose and having put in place best practice proactive governance policies and processes. We see sustainability and ESG as central to our decision making and the way we run our business.

 

A great place to work

We have made positive progress towards our ambition to become an employer of choice by 2025. Our business is increasingly becoming an inspirational place to work, with a culture where engaged and motivated employees thrive as they contribute strongly to business performance.

 

The employer of choice programme has been central to EMIS's strategy during 2022, enhancing our existing positive working culture by creating greater engagement between colleagues, focussing on great leadership, excellent enhanced rewards and terms, as well as improving our work environment, processes and external brand recognition.

 

Our metric of success is the employee engagement score, which increased to 71 during 2022, something we are very proud of in year one of our three-year employer of choice programme.

 

Positive progress on our technology roadmap

Technology development has continued in line with our product roadmap and we remain committed to investment to drive growth through our strong product portfolio. We are confident that we can deliver on the needs of our core healthcare markets through a development strategy that is closely aligned with NHS strategy and policy, delivering integrated, efficient and intelligent systems underpinned by EMIS-X technology.

 

Continued investment into EMIS-X technology 

EMIS-X is the platform for modernising and expanding the capabilities of both our core GP and community pharmacy systems. All new software features will be developed on EMIS-X technology, including those to drive greater interoperability and integration with other healthcare systems and services.

 

We continue to invest in the development of EMIS-X technology for our healthcare markets, actionable insight for the research and life sciences market, and digital patient-facing services, with new product releases demonstrating the positive progress made during 2022.

 

Bolt-on acquisitions strengthening and expanding our business

EMIS continues to deliver on its strategy of growth by acquisition, principally in the EMIS Enterprise sector, strengthening and expanding our market offers. During the year we completed three bolt-on acquisitions for a total initial net cash consideration of £30.8m:

 

·    Edenbridge Healthcare, a leading provider of business intelligence tools for GP practices, federations and commissioners;

·    FourteenFish, the leading expert in software to support GP medical appraisals and training; and

·    Healthcare Gateway, the healthcare interoperability specialist that connects data between different healthcare settings.

All three acquisitions have made positive contributions to both our market proposition and business performance during the year.

 

Recommended acquisition of EMIS Group plc by Bordeaux UK Holdings II Limited (Bidco)

On 17 June 2022, the Boards of Bordeaux UK Holdings II Limited, an affiliate of Optum UK and a wholly-owned subsidiary of UnitedHealth Group Incorporated, and EMIS announced that they had reached agreement on the terms of a recommended all cash offer pursuant to which Bidco will acquire the entire issued and to be issued ordinary share capital of EMIS, to be implemented by means of a court-sanctioned scheme of arrangement (Scheme).

 

On 9 August 2022, EMIS announced that at the Court Meeting to consider the Scheme and the General Meeting to consider the Special Resolution relating to the Proposed Acquisition, all resolutions were approved by the requisite majorities. EMIS further announced that a notification had been made and accepted under the NS&I Act and that the Secretary of State had confirmed that no further action will be taken in relation to the Proposed Acquisition.

 

On 31 March 2023, the United Kingdom's Competition and Markets Authority (the "CMA") announced that it had rejected a proposed remedy submitted by Bidco to address the CMA's competition concerns following its Phase 1 investigation and referred the Proposed Acquisition for a Phase 2 investigation.

 

On 6 April 2023, Bidco and EMIS announced that they intend to proceed with the Phase 2 investigation and will continue to engage constructively and collaboratively with the CMA during this period. On the basis that the CMA has referred the Proposed Acquisition to a Phase 2 investigation, Bidco and EMIS have agreed, with the consent of the Executive of the Panel on Takeovers and Mergers (the "Panel"), to extend the Long Stop Date for completion of the Acquisition from 30 June 2023 to 30 June 2024 (subject to the approval of the Court). The Scheme remains subject to Court sanction and the satisfaction of the remaining CMA condition. As regards the remaining substantive regulatory condition, the statutory deadline for the CMA's Phase 2 investigation is 5 October 2023. Accordingly, based on a typical Phase 2 timetable, EMIS expects the Scheme would become effective in Q4 2023 or Q1 2024.

 

Summary and outlook

Now almost five months into the current financial year, we are confident of delivering on our full year expectations. Given the timing of opportunities, this growth is likely to be more weighted to the second half than in prior years.

 

On a medium-term view, the NHS has set out a clear strategy for integrated care, requiring high-performing integrated technology systems. It is essential for patient data to be effortlessly and securely available whenever and wherever it is needed for all involved in care - from front line clinicians to research and life science organisations.

 

EMIS remains well placed to deliver the systems that will enable the NHS to realise its ambition of better, faster and proactive preventative care for the UK population. Our technology roadmap remains closely aligned with NHS England strategy and our position on NHS Digital's new Tech Innovation Framework (TIF) demonstrates our ability to deliver the NHS's integrated digital future.

 

 

OPERATIONAL REVIEW

 

EMIS Health

The EMIS Health segment comprises business areas where revenues are generated from delivering core software and ancillary services to NHS organisations. This includes the primary, community and acute A&E markets.

 

Market shares

EMIS maintained its UK GP market leadership position with a market share of 58% (2021: 58%). The Group holds the number two market position in acute A&E at 19% (2021: 21%) and in community at 19% (2021: 20%).

 

Strong position in primary care

The Group remains well placed for the framework mini-tender processes that are anticipated to take place through the coming years across England, Wales and Northern Ireland.

 

England

In England, EMIS was successfully appointed to the Tech Innovation Framework (TIF). The objective of TIF is to encourage innovation and new ways of working, requiring cloud-based systems that are modular, highly interoperable and browser based, delivering both core clinical functions and new, higher spec capabilities. EMIS-X technology meets all of these requirements, ensuring the Group remains well placed to meet NHS England's technology transformation strategy.

 

The focus for the primary care market is developing EMIS-X functionality for GPs as part of the modernisation programme for EMIS Web. The business expects to begin roll-out of new clinician-facing features during the second half of 2023.

 

NHS England is forming plans for the Digital Primary Care Framework (DPCF), the successor to the existing GP IT Futures Framework, which will open additional opportunities for EMIS.

 

Scotland, Wales and Northern Ireland

EMIS continues to work closely with Digital Health Care Wales (DHCW) and the Business Services Organisation (BSO) in Northern Ireland on the development of future plans, aligning software development and roll-out with each national strategy to suit each customer's different requirements and specifications.

 

EMIS formally withdrew from the Scottish GP IT Re-provisioning Framework during 2022. After extensive evaluation, the Group decided to prioritise the EMIS Web modernisation programme and EMIS-X; it was not practical to do this simultaneously with the bespoke developments required within the timescales of the Scottish framework. The business continues to support its many users in Scotland.

 

Enabling integrated healthcare

The NHS continues to focus on integrated care. The 2022 Health and Care Act introduced new legislative measures to make it easier for health and care organisations to deliver joined-up care across multiple different healthcare services. 42 newly formed Integrated Care Systems (ICSs) are accountable for all care delivered in each ICS locality across England, with a focus on improving care delivery and addressing underlying causes of health inequalities. The NHS recognises that a key component to drive this transformation is integrated technology.

 

Integrating care settings through technology is one of EMIS's strengths. EMIS is well placed to be at the forefront of NHS change and improvement with a broad reach across key healthcare markets, strong market shares, existing interoperability technology and the ongoing delivery of EMIS-X capabilities, along with the 2022 acquisition of Healthcare Gateway.

 

EMIS is already providing technology to power integrated care between GPs, community pharmacists, community and urgent care centres, emergency departments, primary care network (PCN) hubs and patients. EMIS systems speed up care pathways and allow information to flow securely to every stakeholder involved in a patient's care.

 

EMIS-X is the platform upon which all future care management, interoperability and integration of systems will be delivered for all core markets, including GPs, community pharmacists and urgent care.

Improving customer experience

A key priority of the EMIS Web modernisation programme is to ensure that users have a great experience of the system, recognising that some users have encountered issues. The business has a clear action plan in place through the EMIS Web modernisation programme to ensure that the system performs well and meets customers' needs.

 

EMIS continued to invest in data analytics and its customer service platform to automate early identification and resolution of issues including new incremental tools to proactively analyse EMIS Web performance.  Support teams are now better able to spot, diagnose and fix many issues before customers are even impacted.

 

At the same time, we have focussed on a Group-wide "customer first" culture and implemented an executive-led programme for continuous improvement in customer experience to maintain strong focus on customer retention.

 

Reflecting these initiatives, we were pleased to report that customer satisfaction improved during 2022 by 20%.

 

Planning ahead, EMIS's product development roadmap focuses on continuous improvement to the existing product portfolio. The Group has set a clear goal to build excellent software that its busy customers can rely on during vital healthcare interactions with patients. 91 members of the clinical team meticulously oversee new developments, bringing real-life clinical experience from a wide range of settings, from primary care to A&E to community pharmacy. The product experience and design team ensure all new developments meet end users' needs, keeping every detail of new product development in alignment with market requirements.

 

Changes and improvements to development working processes mean that the business is even more efficient, better able to forecast and plan delivery of software releases, leading to completion of roadmap elements on schedule.

 

Gold standard learning

EMIS achieved its 18th successive accreditation by the Learning and Performance Institute and its fourth successive rating of Gold, the highest possible grading. The team helps end users make the most of EMIS software and implement new ways of working so that they can focus their time and energy on patient care. The team delivered 15,000 hours of training during 2022 - upskilling end users and increasing customer satisfaction.

 

EMIS Enterprise

The EMIS Enterprise segment comprises business areas where revenues are derived predominantly from business-to-business healthcare sector sources, including medicines management across both community and hospital pharmacy, the Patient business and the analytics, research and life sciences sector.

 

Market shares

The Group maintained its market-leading position in community pharmacy during 2022 of 39% (2021: 39%) and maintained its number two market position in hospital pharmacy with a market share of 33% (2021: 36%).

 

Adding value for community pharmacy customers

The community pharmacy industry is expanding beyond its traditional dispensing role into service provision, at the same time as efficiently managing increasing numbers of prescriptions. EMIS plays a vital role, offering community pharmacies technology that supports them to manage increasing demands on their time and resources.

 

EMIS helped community pharmacies with the following services released during 2022:

 

·    Adhera dispensing - allowing pharmacy groups to reduce resources required in branch by utilising barcode scanning and packing; and

·    integration between ProScript Connect and the Pinnacle suite of products to support delivery of the flu service. Further integration functionality will follow.

EMIS's Outcomes4Health remained the solution of choice in primary care and mass vaccination centres for recording Covid-19 vaccinations with a total of 1.3 million first dose vaccines recorded, 2.3 million second dose vaccinations recorded and 23.5 million booster vaccinations recorded in 2022.

 

The NHS England Community Pharmacist Consultation Service (CPCS) launched in April 2022, making it easier for patients to be treated in a pharmacy setting to relieve pressure on GP practices. PharmOutcomes captured more than 85% of the available market, with over 8,900 pharmacies choosing to use the platform to manage this service.

 

More than 4,700 GP practices used the GP CPCS referral solutions offered by EMIS's PharmOutcomes to refer patients suffering with minor ailments to community pharmacies. More than 500,000 patients have been referred using one of the PharmOutcomes integrated solutions, showing the trend of integrated care between GPs and community pharmacies, supported by EMIS technology.

 

Actionable data insight through EMIS-X Analytics

Deriving actionable insight from data is becoming increasingly important to the future of the UK's healthcare service. The EMIS-X Analytics suite of cloud-based tools enables the NHS, research and life sciences market and academia to carry out meaningful healthcare research at scale to improve long-term patient outcomes. 

 

During the period EMIS released two EMIS-X Analytics products: Recruit and Pathway. Recruit provides the technological link between the research and life sciences industry, clinicians and the UK public to enable efficient recruitment into clinical trials. With only 31% of UK clinical trials meeting enrolment goals, the entire industry stands to benefit to facilitate positive change to UK healthcare. The business onboarded its first partner for Recruit during 2022, completing a successful pilot. Three further studies have since gone live in the early part of 2023.

 

One use case of Pathway is to utilise clinical intelligence to identify cohorts of patients who are at risk of long-term health conditions. This is being used to facilitate the NHS England hepatitis C virus elimination programme: healthcare teams are using EMIS software to identify patients who are at risk of hepatitis C so that they can be proactively tested and treated.

 

Patient: connecting the UK directly to healthcare services

The "digital front door" for patients to access healthcare services remains vital to NHS policy. EMIS's Patient business connects the UK's population directly to healthcare services.

 

Patient Access allows appointment booking for GP and community pharmacy services, as well as private provider healthcare services, and is the UK's leading independent healthcare app. During the period registered users increased to 16.1 million (2021: 14.0 million), boosted by organic growth and a new development allowing users to log in to Patient Access with their NHS credentials. Patient Access users booked 1.3 million GP appointments (2021: 1.5 million) and ordered 19 million prescriptions (2021: 22 million).  Adding the NHS log in increased the number of repeat prescriptions ordered from a six-monthly average of 1.5 million prescriptions per month to 1.9 million prescriptions per month.

 

Patient.info continues to be one of the UK's leading medical information sites. 67 million unique users viewed 135 million pages during 2022, a resilient performance compared with the prior year, which had been boosted by the heightened interest in health information during the pandemic (2021: 96 million users, 187 million page views). The focus for 2023 and beyond is on providing high-quality content, attracting users to the site as a pipeline for Patient Access services, as well as driving advertising revenue.

 

The business will continue to invest in content during 2023, as well as planning a unified platform to bring Patient.info and Patient Access together, to drive up engagement and revenue.

 

Extending the partner programme for a stronger customer proposition

The partner programme continued to perform well during 2022. The programme contributes directly to the Group's strategy of increased customer satisfaction and sustainable financial growth. Enhancing interoperability between products strengthens the Group's overall proposition, allowing the business to focus on developing its core product set. Customers benefit from a wide range of digital options to improve efficiency and digitise processes.

 

During 2022 EMIS proactively sought partners to join the programme to add new capabilities for customers, with new partners Civica, Hero Health and Scan House joining the programme to add capability in caseload management for community services, PCN patient scheduling and regulatory guidelines summary service respectively.

 

The number of companies partnered with EMIS increased to 175 (2021: 148), partnering either directly with EMIS or through the NHS Digital partner programme.

 

 

FINANCIAL REVIEW

 

The results for the year ended 31 December 2022 reflect continued momentum with increases in the Group's revenue, recurring revenue, adjusted operating profit and adjusted operating margin. Reported operating profit and reported operating margin were reduced as a result of the exceptional costs incurred during the year. As expected, adjusted cash flow from operations was stronger despite continued investment in the business to deliver future growth, as a result of one-off adverse working capital movements in the comparative period. Reported cash flow from operations was 2% lower as a result of the cash cost of the exceptional programmes.

 

Group revenue increased by 4% to £175.4m (2021: £168.2m) and included revenue of £4.4m from the acquisitions of Edenbridge, FourteenFish and Healthcare Gateway completed during the year. Recurring revenue grew by 6% to £143.3m (2021: £134.8m), representing 82% (2021: 80%) of the Group's total revenue.

 

Adjusted operating profit for the year, as set out in the table below, grew by 10% to £47.7m (2021: £43.5m), including a contribution of £1.7m from acquisitions, and reflecting increases in both recurring and non-recurring revenue and an improved gross margin sales mix, partly offset by higher staff costs and increased operating expenses. With levels of development costs capitalised and amortisation charges broadly similar to the prior year, and £12.8m of exceptional costs, reported operating profit was £27.7m (2021: £35.8m). A reconciliation between the operating profit measures is given in the Group statement of comprehensive income and in the appendix to this report.

 

 

Segmental performance

The table below sets out the summary segmental performance:

 

	EMIS Health	EMIS Health	EMIS Enterprise	EMIS Enterprise	Total	Total
	2022	2021	2022	2021	2022	2021
	£'m	£'m	£'m	£'m	£'m	£'m
Revenue	103.9	107.9	71.5	60.3	175.4	168.2
Adjusted segmental operating profit	26.4	26.3	22.8	18.9	49.2	45.2
Group expenses					(1.5)	(1.7)
Adjusted operating profit1					47.7	43.5
Adjusted operating margin	25.4%	24.4%	32.0%	31.4%	27.2%	25.9%
Reported segmental operating profit	23.9	22.1	18.1	15.4	42.0	37.5
Group expenses					(1.5)	(1.7)
Exceptional costs					(12.8)	-
Reported operating profit					27.7	35.8
Reported operating margin	23.0%	20.4%	25.4%	25.6%	15.8%	21.3%

1.     Excludes capitalisation and amortisation of development costs, amortisation of acquired intangibles and exceptional items.

 

In EMIS Health, overall revenue reduced by 4% to £103.9m (2021: £107.9m) with the continuation of the strategy to exit lower margin Resale Partner business. The higher quality revenue mix resulted in adjusted operating profit marginally increasing to £26.4m (2021: £26.3m), delivered while continuing to invest in developing the strategic roadmap.  Recurring revenue reduced only marginally to £88.8m (2021: £89.4m) as the majority of the revenue exited was non-recurring in nature.  Reported divisional operating profit was 8% higher at £23.9m (2021: £22.1m) due to a reduction in the level of amortisation of development costs and acquired intangible assets.

 

In EMIS Enterprise, revenue increased by 19% to £71.5m (2021: £60.3m) and recurring revenue increased by 20%, reflecting the FourteenFish and Edenbridge acquisitions together with strong growth in the existing business particularly from analytics and Pinnacle. With the segment continuing to focus on execution in the areas of patient-facing services, analytics and pharmacy, including supporting the NHS Covid-19 vaccination programme through its Pinnacle software, adjusted operating profit increased by 21% to £22.8m (2021: £18.9m) and reported operating profit also increased to £18.1m (2021: £15.4m).

 

Revenue

The analysis of revenue is summarised below with full segmental revenue analysis set out in note 4.

 

·    software subscription and support revenue increased to £116.8m (2021: £104.5m), reflecting the impact of the three acquisitions in the year and higher revenues from the Group's existing customers particularly in analytics, Pinnacle and community;

·    interface and connectivity charges revenue reduced slightly to £23.6m (2021: £24.3m) as a result of reduced new EMIS Anywhere and Wi-Fi connections following the large demand as a result of the pandemic in the comparative period;

·    other services revenue reduced slightly to £15.4m (2021: £16.3m) due to lower levels of digitisation project work partly offset by growth in analytics;

·    perpetual licences, training, consultancy and implementation revenue reduced to £10.6m (2021: £12.4m) with an expected reduction in set-up revenues in relation to the NHS Covid-19 vaccination programme; and

·    hardware and related services revenue reduced to £9.0m (2021: £10.7m) following a planned reduction in lower margin resale partner activities.

 

The high level of recurring revenue and the strength of the Group's customer relationships give the business confidence to invest in developing future products and services, while providing good visibility of future financial performance.

 

Profitability

Adjusted operating profit increased by 10% on the comparative period at £47.7m (2021: £43.5m), including a £1.7m contribution from acquisitions, with the adjusted operating margin increasing to 27.2% (2021: 25.9%).

 

Total staff costs (including capitalised development costs) were 7% higher than in 2021, reflecting higher package and reward levels for an increasingly skilled and in-demand workforce. Year-end staff numbers increased to 1,539 (2021: 1,429) principally due to the addition of staff of the businesses acquired during the year, while the average headcount was lower at 1,470 (2021: 1,508), with a higher than usual level of unfilled vacancies, notably in India in the first half of the year.

 

Other operating expenses increased with additional costs associated with the technology transformation programme, corporate transaction costs and investment in the Group's internal systems.

 

While adjusted operating profit moved ahead, reported operating profit reduced to £27.7m (2021: £35.8m), reflecting £12.8m of exceptional costs relating to the technology transformation programme and to corporate transaction costs (including staff costs relating to the cost of time employees spent working directly on supporting these projects, largely relating to roles already in the business where time was diverted to these projects from other value-adding activities and therefore the corresponding cost of these employees would have been included within adjusted operating profit in the prior year). However, profit before tax increased to £38.9m (2021: £36.1m) reflecting an exceptional fair value gain of £10.7m (2021: £nil) on the revaluation of the previously held interest in a joint venture resulting from the Healthcare Gateway acquisition.

 

Taxation

The tax charge for the year was £5.8m (2021: £7.0m). The effective tax rate for the year before fair value gains and share of result of joint venture and associate was 20.7% (2021: 19.1%) reflecting a higher level of non-deductible expenditure in the year.

 

Earnings per share (EPS)

As there was no change in the Company's issued share capital during the year, EPS movements were driven largely by changes in adjusted and reported profit. Adjusted basic and diluted EPS were 10% higher at 62.0p and 61.2p respectively (2021: 56.1p and 55.5p). The statutory basic and diluted EPS were also both higher at 52.5p and 51.8p respectively (2021: 46.2p and 45.6p).

 

Dividend

Subject to shareholder approval at the Annual General Meeting on 29 June 2023, the Board proposes an increase in the final dividend to 21.1p (2021: 17.6p) per ordinary share, payable on 11 July 2023 to shareholders on the register at the close of business on 16 June 2023. This would make a total dividend of 38.7p (2021: 35.2p) per ordinary share for 2023. This is 10% higher than in the prior year, reflecting the underlying growth of the Group and its positive future prospects. 

 

 

Cash flow and net cash

The principal movements in net cash (rounded) were as follows:

	2022	2021
	£m	£m
Cash from operations:
Cash generated from operations	48.8	50.1
Less: capitalised development costs	(4.4)	(4.1)
Adjusted cash generated from operations	54.6	46.0
Cash cost of exceptional items	(10.2)	-
Net cash generated from operations	44.4	46.0
Business combinations	(34.6)	(2.0)
Capital expenditure	(2.7)	(2.3)
Transactions in own shares	0.1	(1.5)
Tax	(2.7)	(7.5)
Dividends	(22.2)	(21.1)
Lease payments	(1.2)	(1.2)
Finance/other	0.8	0.6
Change in net cash in the year	(18.1)	11.0
Net cash at end of year	45.9	64.0

 

Cash generated from operations decreased to £48.8m (2021: £50.1m) despite an improvement in working capital movements due to the cash costs of exceptional items. Adjusted cash from operations is stated after deducting capitalised development costs and adjusting for the cash impact of any exceptional items where appropriate. On this adjusted basis, cash flow from operations was 19% higher than in 2021 at £54.6m (2021: £46.0m).

 

Capital expenditure on property, plant and equipment and purchased software excluding capitalised development costs remained tightly controlled at £2.7m (2021: £2.3m). Capital additions in the year included £2.1m on computer equipment, £0.3m on property assets and £0.3m on software.

 

The Group paid initial net cash consideration of £30.8m to acquire the Edenbridge, FourteenFish and Healthcare Gateway businesses in the period, and £3.8m in contingent consideration including the final instalment of £2.0m in respect of the 2020 Pinnacle acquisition and £1.5m in respect of Edenbridge following the achievement of product delivery targets during the year.

                                                          

After transactions in own shares, a reduced level of tax paid due to refunds received relating to prior years, dividends, lease payments and finance/other transactions, the total net cash outflow of £18.1m resulted in a year-end net cash position of £45.9m (2021: £64.0m).

 

As at 31 December 2022, the Group had available undrawn bank facilities of £30.0m in place until December 2024. An accordion arrangement is in place to increase the bank facilities up to £60.0m if required, providing total liquidity of up to £105.9m at the year end.

Group statement of comprehensive income

for the year ended 31 December 2022

 

		Notes	2022 £'000	2021 £'000
Revenue		3,4	175,373	168,226
Costs
Changes in inventories			(12)	(83)
Cost of goods and services			(12,889)	(16,172)
Staff costs			(77,375)	(72,303)
Other operating expenses			(40,411)	(26,749)
Depreciation of property, plant and equipment			(4,915)	(4,196)
Amortisation of intangible assets		9	(12,025)	(12,938)
Adjusted operating profit1			47,686	43,533
Development costs capitalised		9	4,361	4,052
Amortisation of intangible assets2		9	(11,539)	(11,800)
Exceptional costs		12	(12,762)	-
Operating profit		3	27,746	35,785
Finance income			480	50
Finance costs			(531)	(476)
Share of result of joint venture and associate			533	727
Exceptional fair value gain on previously held interest in joint venture		12, 13	10,706	-
Profit before taxation			38,934	36,086
Income tax expense		5	(5,764)	(7,010)
Profit for the period			33,170	29,076
Other comprehensive income
Items that may be reclassified to profit or loss
Currency translation differences			42	(55)
Other comprehensive income			42	(55)
Total comprehensive income for the year			33,212	29,021
Attributable to:
- equity holders of the parent			33,212	29,021
Total comprehensive income for the year			33,212	29,021
Earnings per share attributable to equity holders of the parent		6	Pence	Pence
Basic			52.5	46.2
Basic diluted			51.8	45.6
Adjusted1			62.0	56.1
Adjusted diluted1			61.2	55.5

 

¹             For an explanation of the alternative performance measures used in this report, please refer to the appendix.

²             Excluding amortisation of computer software used internally of £486,000 (2021: £1,138,000).

 

 

Group balance sheet

as at 31 December 2022

 

 

	Notes	2022 £'000	2021 £'000
Non-current assets
Goodwill	8, 13	85,600	52,177
Other intangible assets	9, 13	38,588	24,358
Property, plant and equipment		14,803	18,694
Investment in joint venture and associate		199	355
		139,190	95,584
Current assets
Inventories		518	530
Current tax assets		254	4,730
Trade and other receivables		38,889	32,057
Cash and cash equivalents		45,918	64,042
		85,579	101,359
Total assets		224,769	196,943
Current liabilities
Trade and other payables		(34,175)	(29,180)
Deferred income		(34,342)	(29,582)
Other financial liabilities	10	(1,500)	(2,000)
Lease liabilities	11	(705)	(903)
		(70,722)	(61,665)
Non-current liabilities
Deferred tax liability		(4,916)	(1,788)
Other financial liabilities	10	(3,000)	-
Lease liabilities	11	(3,660)	(5,013)
		(11,576)	(6,801)
Total liabilities		(82,298)	(68,466)
Net assets		142,471	128,477
Equity
Ordinary share capital		633	633
Share premium		51,045	51,045
Own shares held in trust		(4,529)	(4,639)
Retained earnings		93,541	79,699
Other reserve		1,781	1,739
Total equity		142,471	128,477

 

Group statement of cash flows

for the year ended 31 December 2022

 

	Notes	2022 £'000	2021 £'000
Profit before taxation		38,934	36,086
Finance income		(480)	(50)
Finance costs		531	476
Share of result of joint venture and associate		(533)	(727)
Exceptional fair value gain on previously held interest in joint venture	13	(10,706)	-
Operating profit		27,746	35,785
Adjustments for non-cash items
Amortisation of intangible assets	9	12,025	12,938
Depreciation of property, plant and equipment		4,915	4,196
Loss/(profit) on disposal of property, plant and equipment		84	(9)
Share-based payments		1,933	1,788
Operating cash flow before changes in working capital		46,703	54,698
Changes in working capital
Decrease in inventory		12	83
Increase in trade and other receivables		(5,385)	(2,136)
Increase/(decrease) in trade and other payables		4,830	(3,007)
Increase in deferred income		2,653	421
Adjusted cash generated from operations		54,634	46,007
Development costs capitalised		4,361	4,052
Cash cost of exceptional items		(10,182)	-
Cash generated from operations		48,813	50,059
Finance costs		(281)	(90)
Finance income		336	26
Tax paid		(2,659)	(7,483)
Net cash generated from operating activities		46,209	42,512
Cash flows from investing activities
Purchase of property, plant and equipment		(2,478)	(2,227)
Proceeds from sale of property, plant and equipment		9	10
Development costs capitalised	9	(4,361)	(4,052)
Purchase of software	9	(267)	(126)
Dividends received		626	725
Acquisition contingent consideration paid	10	(1,751)	-
Acquisition of subsidiaries net of cash acquired	13	(30,847)	-
Net cash used in investing activities		(39,069)	(5,670)
Cash flows from financing activities
Transactions in own shares held in trust		110	(1,505)
Payment of lease liabilities	11	(1,181)	(1,157)
Contingent consideration	10	(2,000)	(2,000)
Dividends paid	7	(22,193)	(21,146)
Net cash used in financing activities		(25,264)	(25,808)
Net (decrease)/increase in cash and cash equivalents		(18,124)	11,034
Cash and cash equivalents at beginning of year		64,042	53,008
Cash and cash equivalents at end of year		45,918	64,042

 

 

 

 

Group statement of changes in equity

for the year ended 31 December 2022

 

		Share capital	Share premium	Own shares held  in trust	Retained  earnings	Other reserve	Total  equity
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2021		633	51,045	(3,594)	69,260	1,794	119,138
Profit for the year		-	-	-	29,076	-	29,076
Transactions with owners
Share acquisitions less sales		-	-	(1,045)	-	-	(1,045)
Share-based payments		-	-	-	1,788	-	1,788
Deferred tax in relation to share-based payments		-	-	-	721	-	721
Dividends paid	7	-	-	-	(21,146)	-	(21,146)
Other comprehensive income
Currency translation differences		-	-	-	-	(55)	(55)
At 31 December 2021		633	51,045	(4,639)	79,699	1,739	128,477
Profit for the year		-	-	-	33,170	-	33,170
Transactions with owners
Share acquisitions less sales		-	-	110	-	-	110
Share-based payments		-	-	-	1,933	-	1,933
Deferred tax in relation to share-based payments		-	-	-	932	-	932
Dividends paid	7	-	-	-	(22,193)	-	(22,193)
Other comprehensive income
Currency translation differences		-	-	-	-	42	42
At 31 December 2022		633	51,045	(4,529)	93,541	1,781	142,471