Half year results

RNS Number : 6226K

EMIS Group PLC

30 August 2019

 

                                                                                                                     30 August 2019

EMIS Group plc

("EMIS Group" or "the Group")

Half year results for the six months ended 30 June 2019

EMIS Group plc (AIM: EMIS.L), the UK leader in connected healthcare software and systems, today announces its unaudited results for the six months ended 30 June 2019.

Financial highlights

	2019 H1	2018 H1	Change
Revenue
Total revenue	£79.8m	£74.4m	+7%
Recurring revenue1	£60.2m	£59.5m	+1%
Operating profit
Adjusted1	£18.2m	£16.8m	+8%
Reported	£12.0m	£12.4m	-3%
Cash flow and net cash
Cash generated from operations - adjusted1	£27.5m	£33.6m	-18%
Cash generated from operations - reported	£29.8m	£35.0m	-15%
Net cash1	£26.7m	£32.3m	-17%
Earnings per share
Adjusted1	23.7p	21.1p	+12%
Reported	16.6p	16.1p	+3%
Interim dividend	15.6p	14.2p	+10%

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

Operational highlights

Results in line with expectations as EMIS Group continues to execute its strategic plan:

·   Business focussed on EMIS Health and EMIS Enterprise segments

·   Good sales and commercial execution from both segments in H1

·   Leading market share positions maintained during the period

·   Internal operations being aligned with strategic plan

·   ProScript Connect roll-out to direct community pharmacy customers completed as expected

·   GP IT Futures bid for English GP framework submitted - NHS Digital (NHSD) decision expected in the coming months

Good progress on growth initiatives for the mid-term:

·   Successful launch of first online Patient Access marketplace service including EMIS-X appointment module

·   Continued investment in EMIS Web software for GP IT Futures and key roadmap items

·   Making good progress on EMIS-X next generation platform development, with internal milestones being met

Outlook

·   Focussed on execution of strategic plan to provide mid to high single digit revenue growth and improved margins, towards 30%, in the mid-term

·   The Board's expectations for the full year remain unchanged

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

"We have continued to demonstrate good progress in the first half of 2019, delivering positive results in line with the Board's expectations, with both revenue and adjusted operating profit ahead of the comparative period.

"We are well positioned to secure our place on the GP IT Futures framework for GP software in England and continue to invest in patient-facing technology and the next generation EMIS-X platform. With our balance of technology, clinical standards and a continuously improving technical environment, the Group is well placed to deliver on its growth and margin targets."

This announcement contains inside information.

There will be an analyst meeting and conference call today at 9.30am at Numis Securities, 10 Paternoster Square, London EC4M 7LT. Please contact Florence Mayo at MHP Communications on 0203 128 8572, [e-mail], for details. 

 

For further information, contact:

EMIS Group plc                                                                          Tel: [phone]

Andy Thorburn, CEO

Peter Southby, CFO

www.emisgroupplc.com

Numis Securities Limited (nominated adviser and broker)   Tel: [phone]

Oliver Hardy/Simon Willis/James Black

MHP Communications                                                               Tel: [phone]

Reg Hoare/Giles Robinson/Patrick Hanrahan/Florence Mayo

Information for investors, including analyst consensus forecasts, can be found on the Group's website 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 every major UK healthcare setting. 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 focussed on growth in the business-to-business technology sector within the healthcare market, including management of medicines, partner businesses, patient-facing services and UK healthcare blockchain.

EMIS Group's brands include:

•      EMIS Health, supplying innovative and essential technology to 10,000 healthcare users, in the number one or number two market positions in each of its major markets;

•      Patient, the UK's leading independent provider of patient-centric medical and wellbeing information and related transactional services;

•      Egton, providing specialist ICT infrastructure, hardware and engineering services and non-clinical software into health and social care; and

•      Dovetail Lab, a health technology company developing blockchain software to facilitate the integration of healthcare data.

CHIEF EXECUTIVE OFFICER'S OVERVIEW

We made good progress in the first half of 2019. The Group delivered encouraging results in line with the Board's expectations, with both revenue and adjusted operating profit ahead of the comparative period.

We continue to focus our teams on the execution of our 2019 business plan across our key priorities of clinical safety, data security, customer service improvement, building our key products and delivering the financial results for the year. Our plan is intended to provide revenue growth and improved margins, towards 30%, in the medium-term.

As planned, we have organised the business into two focussed segments, EMIS Health and EMIS Enterprise, as we execute our strategy and transition to the next stage of growth. EMIS Health is dedicated to providing joined-up technology for the NHS market. EMIS Enterprise is centred on businesses that predominantly generate private sector revenue in the healthcare market; this includes our consumer offering through Patient as well as business-to-business customers such as Community Pharmacy. As previously announced, the Group completed the disposal of its Specialist & Care business on 2 April 2019, as it was non-core to the Group's operations and future growth strategy.

The two re-presented segments better reflect the Group's activities and the continual drive in the market to deliver joined-up care across different settings. Bringing our business units more closely together will enable us to be even more agile and better aligned to customer needs and market demand.

The GP IT Futures English GP framework renewal process has now moved into the formal procurement phase, with successful bidders expected to be announced in the coming months. The Group has submitted its bid and we believe we are well positioned to be re-awarded a place on the new framework.

High performing teams that deliver business growth

We remain focussed on designing and delivering world-class products that improve patient outcomes. We have invested in our existing talent and made new hires in key strategic areas, including senior management, product management, software development and clinical teams, while streamlining other parts of the business.

Bringing our business segments more closely together has enabled closer cross-business working, to deliver the joined-up technology solutions that the healthcare market needs. An important early example of this is the new community pharmacy appointment booking function in Patient Access, the first release of our patient marketplace services. It closes the loop between patients, GPs and community pharmacists, linking Patient Access with EMIS Web and ProScript Connect. It is the first deployment of EMIS-X technology in a live setting and we are pleased with progress to date.

Strategy for growth

We are focussed on the development of our new, next generation technologies for EMIS Health and EMIS Enterprise that will deliver the Group's strategy to connect up healthcare, in alignment with our five-year product roadmap. This includes EMIS-X and patient marketplace services in Patient Access. To deliver these initiatives, we have continued to invest in our software development teams and we plan to further scale up resources in product management and software development in the second half of 2019.

EMIS Group is committed to the highest standards of both clinical safety and data security. These are the strong cornerstones that will underpin our business growth. We have increased resources in our clinical team, which is vital for patient safety, product insight and design, ensuring that our products are developed according to the needs of our clinical user base. We have also invested in taking our data security, network infrastructure and hosting environment to the next level.

This balance of technology, clinical standards and a continuously improving technical environment means the Group is uniquely placed to offer the market innovative new systems, built on strong foundations. 

Board changes

Robin Taylor retired at the Annual General Meeting (AGM) on 8 May 2019, after nine years of service with EMIS Group as Senior Non-executive Independent Director and Chair of its audit committee. Andy McKeon and Kevin Boyd have taken on the roles of Senior Non-executive Independent Director and Chair of the audit committee respectively. Jennifer Byrne was appointed as an independent Non-executive Director at the close of the 2019 AGM, bringing a wealth of experience in the global software sector to the Board.

On 23 August 2019, David Sides, Non-executive Director, stepped down from the Board and resigned as a director of the Company with immediate effect due to his other executive commitments. 

Our Chairman, Mike O'Leary, will have completed nine years of service in March 2020 and planning is underway to appoint his successor.

Summary and outlook

EMIS Group continues to be well positioned for growth in the mid-term. We are focussed on securing our place on the GP IT Futures framework, as well as increasing growth across the Group.

We believe that making the best use of technology to improve patient care remains a key driver for the healthcare industry, underpinned by NHS policy. We are well placed to turn this vision into reality through our teams and with our technology.

We do not anticipate that Brexit will have a material direct effect on the Group as EMIS Group is neither a significant exporter nor importer of goods or services, nor employs many EU nationals. The Group will continue to monitor the progress of the negotiations of the terms under which the UK will leave the EU given the ongoing lack of certainty in this regard.

Overall, the Board's expectations for the full year remain unchanged.

OPERATIONAL REVIEW
 

EMIS Health

The EMIS Health segment comprises business areas where revenues are generated from NHS organisations. This includes the primary, community and Acute A&E markets as well as the Egton business, which provides specialist ICT infrastructure, hardware and engineering services and non-clinical software into health and social care. The divisional CEO for EMIS Health is Suzy Foster, who joined the Group in April 2019 from Microsoft, whose UK healthcare business she ran for four years.

Market shares

EMIS Health maintained its UK GP market leadership position with a market share of 57% (31 December 2018: 57%).

EMIS Health grew its community market share in the first half, with an increase to 21% (31 December 2018: 20%), maintaining the number two market position.

The Group maintained its market share in Acute A&E at 22% (31 December 2018: 22%) moving to market leadership.

Business update

EMIS Health continues to execute its product roadmap for all its markets and is making good progress on EMIS-X, with internal milestones being met towards an expected first version of the platform during 2020 and an upgraded GP application in 2021. The business continues to work closely with NHSD to deliver the national interoperability programme, reaching the milestone of full roll-out approval in June 2019 for the first phase of GP Connect, NHSD's programme to make GP data securely available in other healthcare settings.

EMIS Health has streamlined its support and service function with migration onto a single customer and internal platform, ServiceNow. It has co-located two of its support teams to improve joined-up working and increase efficiency.

The Group continues to offer products that support the NHS's paperless agenda under the Egton brand. Its service to digitise paper records continued to perform strongly during the period. Online Consult, an online triage service which was launched in 2018, was ordered by five new Clinical Commissioning Groups (CCGs). This will see a combined c.900,000 patients now being able to benefit from improved digital access to primary care services.

Regional primary care markets

The GP IT Futures English GP Framework renewal process in now in the formal procurement phase, with successful bidders expected to be announced in the coming months. The Group continues to believe it is well placed to be awarded a place on the new framework.

During the period EMIS Health achieved a net gain of GP practices versus its competitors across England and Scotland. More CCGs became 100% EMIS Web software users in primary care in England, taking the total to 67 (31 December 2018: 63) in England, 35% of all CCGs.

Following the announcement in February 2019 that EMIS Health had been awarded a place on the NHS National Services Scotland (NSS) framework, the Group is investing in its team and facilities in Scotland, working closely with NSS to align solutions with Scotland's health and care strategy.

In Northern Ireland, EMIS Health has successfully completed upgrading of all its practices to EMIS Web.

EMIS Health continues to support its GP customer base in Wales as practices prepare to transition to other providers following our previously announced planned withdrawal from this market.

Community market

The Group won 69 new contracts in the period, ranging from new software installations in clinical services to smaller contracts for training packages. Seven of these contracts were larger-scale clinical service or community installations with new customers.

EMIS Health made good progress in installing new systems into previously won community, clinical service and hospice customers, as well as releasing software enhancements for a range of features. This included improvements to EMIS Mobile requested by the Healthcare User Group, which represents the community user base.

The focus for this market is on new business wins and customer retention through strong customer relationships and excellent support and service.

Acute A&E market

EMIS Health won two new contracts in the A&E market during the period to deploy its Symphony A&E software.

In the A&E market, the Group is focussed on new business and customer retention through strong customer relationships and in-depth insight into each of its customers' key drivers and strategies. This includes working on ways EMIS Health technology can streamline and offer the best possible care, including delivering connected care. For example, plans are underway to offer appointment booking from 111 services into urgent emergency care using our Symphony product.

EMIS Enterprise

The EMIS Enterprise segment comprises business areas where revenues are predominantly from private sector sources, including medicines management across both community and hospital pharmacy, and the Patient business. The divisional CEO for EMIS Enterprise is Ian Taylor, who joined the Group in 2010 with the acquisition of the Group's Community Pharmacy business.

Market shares

The Group maintained its joint market-leading market share in community pharmacy at 37% (31 December 2018: 37%).

The Group maintained its number two market position in hospital pharmacy with a market share of 35% (31 December 2018: 36%).

Medicines management

EMIS Health released an upgrade to its Electronic Prescribing and Medicines Administration (ePMA) system to provide better functionality and an enhanced experience for end users. The business subsequently secured two contracts for installing ePMA systems to new customers in the period.

The Group-wide solution for the Falsified Medicines Directive (FMD) authenticator was developed and released to both the community pharmacy and hospital pharmacy user base. This is a good example of how the combined medicines management business addresses the same market need in different settings in an efficient and effective way.

The Group continued to perform well in the community pharmacy market. The division completed the deployment of its upgraded ProScript Connect application to all its direct customers within the project timeframe. This is a strong technology foundation that will support community pharmacies as they further adapt to the changing market, supporting the traditional prescription fulfilment business while moving into higher value services both in support of the NHS and in delivering private clinical services under the Patient Group Directions (PGD) initiative.  

Patient

The Group's patient-facing services app, Patient Access, expanded rapidly in the first half of 2019, with 8.0 million registered users (31 December 2018: 7.2 million) booking 3.4 million appointments and 9.7 million repeat prescriptions in the period. There has been a 68% increase in logins, a 64% increase in repeat prescriptions and a 66% increase in appointment bookings, compared to the same period in 2018. The app has a 4.8/5 star rating on the Apple App Store from 227,300 ratings (31 December 2018: 4.8/5 star rating from 150,000 ratings).

Following a successful pilot with the Day Lewis pharmacy group during the first half of the year, in July 2019 Patient extended its Patient Access appointment booking service beyond GP appointments to include services provided by community pharmacies. This is the first release of the Group's Patient Access marketplace services and uses the EMIS-X appointment engine to allow patients to book appointments with participating community pharmacies.

This is aligned with the NHS Long Term Plan, which encourages the provision of selected clinical services in community pharmacy settings. Patient Access supports this by enabling patients to search, view and book services in their local area.

While the marketplace functionality is available to all, regardless of whether or not the patient's record is held by a GP practice using EMIS software, a unique feature of the new service is the ability, with the patient's consent, for pharmacists using ProScript Connect software to send an electronic consultation summary back to the EMIS Web patient medical record, where the GP can review and update the record accordingly. The patient can then access the medical record at any time using the Patient Access medical record viewer. This end-to-end system for provision of pharmacy services ensures greater visibility of out-of-practice treatments for GPs and better control over patient safety and clinical outcomes.

Proxy access, a market-first feature that helps patients to care for their loved ones and dependants by ordering medication or booking appointments on their behalf, was also launched during the first half of the year. This is a much-requested feature by GPs, patients and care providers, and represents a key differentiator for Patient Access. Initial uptake of the feature has been positive.

Other Enterprise markets

The partner programme continues to perform well, with a focus on open Application Programme Interface (API) capabilities to better support interoperability across the market. The partner programme allows third party healthcare technology providers to interoperate with EMIS Health technology, creating a UK healthcare ecosystem. This both supports the Group's growth aspirations and aligns with the strategy for EMIS-X, as well as the NHS aim of system interoperability.

The Group also continues to develop its data analytics platform with the goal of delivering greater insights, with appropriate permissions, for customers of both EMIS Health and EMIS Enterprise. 

In other non-NHS markets, performance was boosted by the sale of the licence of a legacy technology product. The Group will continue to review its portfolio of products and consider its options where there is no natural pathway for a product towards the future EMIS-X platform.

Dovetail, the Group's 2018 acquisition, continues to make progress as the Group works on plans to integrate blockchain into its technology strategy.

FINANCIAL REVIEW 

The Group has delivered positive revenue growth for the half year ended 30 June 2019, accompanied by a similar level of adjusted operating profit growth.

Group revenue increased by 7% to £79.8m (2018 H1: £74.4m). Recurring revenue grew by 1% to £60.2m (2018 H1: £59.5m), representing 76% of the Group's total revenue.

Adjusted operating profit for the period was £18.2m (2018 H1: £16.8m), with revenue growth offset in part by investment in development costs for the new EMIS-X software platform. Reported operating profit, including an exceptional reorganisation cost of £2.2m, was £12.0m (2018 H1: £12.4m).

Segmental performance

Revenue increased by 3% in EMIS Health to £50.3m (2018 H1: £48.6m), with adjusted operating profit slightly lower at £10.8m (2018 H1: £11.2m) partly as a consequence of increased investment in developing the EMIS-X software platform.

Performance in the EMIS Enterprise division reflected a strong performance in the market with revenue increasing by 14% to £29.5m (2018 H1: £25.8m) and adjusted operating profit of £8.1m (2018 H1: £6.7m), which included a number of commercial licence deals for both continuing and legacy products.

Revenue

Revenue is analysed in the following categories:

·   software and software licences, which increased to £35.4m (2018 H1: £32.0m), reflecting a strong overall performance and benefiting from the licensing referred to above;

·   maintenance and software support, which moved forwards to £19.5m (2018 H1: £19.0m) reflecting the solid recurring nature of the Group's customer base;

·   other support services, where revenues were higher at £9.1m (2018 H1: £8.9m), with growth in EMIS Health offsetting a reduction in EMIS Enterprise, including online advertising revenues;

·   hosting, which increased to £6.1m (2018 H1: £5.8m), as a result of more hosted solutions in EMIS Health Community Care;

·   training, consultancy and implementation, which increased to £5.7m (2018 H1: £4.3m), with higher levels of ProScript Connect and Egton patient record digitisation implementations; and

·   hardware revenues, which were lower at £4.0m (2018 H1: £4.4m), driven by reduced sales against a strong comparative of EMIS Anywhere, one of the Group's solutions for remote access to clinical records held in EMIS Health systems.

Full segmental revenue analysis from continuing operations is set out in note 9.

Profitability and dividend

Adjusted operating profit increased by 8% to £18.2m (2018 H1: £16.8m) with the adjusted operating margin slightly ahead at 22.8% (2018 H1: 22.6%).

The Group employed 1,560 staff at 30 June 2019, with the decrease from 2,047 at 31 December 2018 driven principally by the disposal of the Specialist & Care business (366 staff) but also by the Group's reorganisation over the period. This resulted in exceptional costs in the period of £2.2m (2018 H1: £nil) relating to the restructuring of the business into the two re-presented segments and to other organisational changes arising out of investment in improved internal systems.

After accounting for exceptional items, the capitalisation and amortisation of development costs and the amortisation of acquired intangibles, operating profit was slightly lower at £12.0m (2018 H1: £12.4m).

The tax charge for the period was £2.2m (2018 H1: £2.3m), representing an effective rate of tax before share of result of joint venture and associate of 19.1% (2018 H1: 19.1%).

Adjusted basic and diluted EPS from continuing operations increased by 12% and 11% to 23.7p and 23.5p respectively (2018 H1: 21.1p for both measures). The reported basic and diluted EPS were both slightly higher at 16.6p and 16.5p respectively (2018 H1: 16.1p for both measures).

The Board has taken into account the consistent underlying growth of the Group, together with its future prospects, and has therefore declared a 10% increase in the interim dividend to 15.6p (2018 H1: 14.2p) per share, payable on 1 November 2019 to shareholders on the register at the close of business on 27 September 2019.

Disposal

On 2 April 2019, the Group announced the disposal of its Specialist & Care business for a total of up to £14.9m. This is accounted for as a discontinued operation and contributed a profit of £0.5m in the period (2018 H1: £0.4m) as set out in note 11.

Cash flow, net cash and financing

Cash generated from operations was £29.8m (2018 H1: £35.0m), with the reduction driven by timing differences in working capital against a strong comparative period. Adjusted cash from operations is stated after adding back the cash cost of exceptional items of £1.2m (2018 H1: £1.4m) and after deducting capitalised development costs. On this adjusted basis, cash flow from operations was £27.5m (2018 H1: £33.6m).

Net capital expenditure excluding capitalised development costs was slightly lower at £3.2m (2018 H1: £3.6m) and was principally on computer equipment.

The disposal of the Specialist & Care business gave rise to a net cash inflow of £6.2m. The Group paid £1.0m of deferred contingent consideration in respect of the 2018 Dovetail acquisition and also acquired a minority stake in an early-stage pharmacy data business for £0.2m.

After finance costs, lease payments, tax, dividends and Employee Benefit Trust transactions (including a £3.6m purchase of shares (2018 H1: £nil)), the Group ended the period with net cash of £26.7m (31 December 2018: £15.6m; 2018 H1: £32.3m).

At 30 June 2019, the Group had available undrawn bank facilities of £30.0m committed until June 2021, reducing to £15.0m for the twelve month period ending 30 June 2022. An accordion arrangement is in place to increase the quantum up to £60.0m, reducing to £30.0m for the twelve month period ending 30 June 2022.

Independent auditor's report on review of condensed consolidated half year financial statements 

Conclusion

We have been engaged by the company to review the condensed set of financial statements in the half-yearly report for the six months ended 30 June 2019 which comprises Group statement of comprehensive income, Group balance sheet, Group statement of cash flows, Group statement of changes in equity, and the related explanatory notes.   

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the six months ended 30 June 2019 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the AIM Rules. 

Scope of review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  We read the other information contained in the half-yearly report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion. 

Directors' responsibilities 

The half-yearly report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly report in accordance with the AIM Rules. 

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU.  The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU. 

Our responsibility 

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly report based on our review.

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the company in accordance with the terms of our engagement.  Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. 

Frances Simpson (Senior Statutory Auditor)

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants 

1 Sovereign Square

Sovereign Street

Leeds

LS1 4DA

29 August 2019 

 

Group statement of comprehensive income

for the six months ended 30 June 2019

		Six months ended	Six months ended	Year  ended
		30 June 2019	30 June 2018 restated5	31 December 20185
		Unaudited	Unaudited	Audited
	Notes	£'000	£'000	£'000
Continuing operations
Revenue	9	79,778	74,424	149,710
Costs:
Changes in inventories		300	(223)	(369)
Cost of goods and services		(7,425)	(7,985)	(13,867)
Staff costs1		(34,880)	(31,919)	(63,722)
Other operating expenses2		(14,794)	(11,434)	(21,942)
Depreciation of property, plant and equipment		(2,979)	(2,707)	(5,535)
Amortisation of intangible assets		(7,969)	(7,726)	(16,595)
Adjusted operating profit		18,214	16,810	35,890
Development costs capitalised		3,503	2,803	5,782
Amortisation of intangible assets3		(7,535)	(7,183)	(15,649)
Reorganisation costs4		(2,151)	-	-
Service level reporting charges		-	-	1,657
Operating profit		12,031	12,430	27,680
Finance income		23	3	64
Finance costs		(303)	(152)	(244)
Share of result of joint venture and associate		326	318	615
Profit before taxation		12,077	12,599	28,115
Income tax expense	10	(2,247)	(2,342)	(5,355)
Profit for the period from continuing operations		9,830	10,257	22,760
Profit from discontinued operation, net of tax	11	529	381	862
Profit for the period		10,359	10,638	23,622
Other comprehensive income
Items that may be reclassified to profit or loss:
Currency translation differences		31	(44)	(40)
Other comprehensive income		31	(44)	(40)
Total comprehensive income for the period		10,390	10,594	23,582
Attributable to:
- equity holders of the parent		10,464	10,095	22,670
- non-controlling interest in subsidiary company		(74)	499	912
Total comprehensive income for the period		10,390	10,594	23,582

Earnings per share attributable to equity holders of the parent		Pence	Pence	Pence
Basic	12	16.6	16.1	36.1
Diluted	12	16.5	16.1	36.0

¹   Including reorganisation costs of £2,111,000 (2018 H1: £nil; 2018 FY: £nil).

²   Including reorganisation costs of £40,000 (2018 H1: £nil; 2018 FY: £nil) and a credit for service level reporting charges of £nil (2018 H1: £nil; 2018 FY: £1,657,000).

³   Excluding amortisation of computer software used internally of £434,000 (2018 H1: £543,000; 2018 FY: £946,000).

⁴   The reorganisation costs relate to redundancy and restructuring costs, including property exit costs.

⁵   The Group statement of comprehensive income for both HY18 and FY18 has been re-presented to show the results of the Specialist & Care business as a discontinued operation, following its disposal on 2 April 2019. The HY18 statement of comprehensive income has been restated to reclassify contract asset depreciation of £701,000 from other operating expenses to depreciation of property, plant and equipment. This is consistent with the presentation adopted in the FY18 financial statements.

Group balance sheet

as at 30 June 2019

		30 June 2019 Unaudited	30 June 2018 Unaudited	31 December 2018 Audited
	Notes	£'000	£'000	£'000
Non-current assets
Goodwill		47,970	50,336	51,958
Other intangible assets	14	37,545	45,505	44,849
Property, plant and equipment		21,915	21,398	21,000
Investment in joint venture and associate		625	416	113
		108,055	117,655	117,920
Current assets
Inventories		1,564	1,410	1,264
Current tax assets		76	717	-
Trade and other receivables		40,833	41,808	36,223
Cash and cash equivalents		26,732	32,328	15,620
		69,205	76,263	53,107
Total assets		177,260	193,918	171,027
Current liabilities
Trade and other payables		(24,580)	(23,945)	(24,958)
Deferred income		(42,001)	(42,637)	(34,170)
Current tax liabilities		-	-	(29)
Other financial liability	15	(480)	-	(1,012)
Lease liabilities		(592)	-	-
Provision		-	(10,514)	-
		(67,653)	(77,096)	(60,169)
Non-current liabilities
Deferred tax liability		(2,550)	(5,800)	(4,293)
Other financial liabilities	15	(3,579)	-	(3,906)
Lease liabilities		(2,116)	-	-
		(8,245)	(5,800)	(8,199)
Total liabilities		(75,898)	(82,896)	(68,368)
Net assets		101,362	111,022	102,659
Equity
Ordinary share capital		633	633	633
Share premium		51,045	51,045	51,045
Own shares held in trust		(5,275)	(2,140)	(1,913)
Retained earnings		54,145	53,689	51,884
Other reserve		489	2,013	611
Equity attributable to owners of the parent		101,037	105,240	102,260
Non-controlling interest		325	5,782	399
Total equity		101,362	111,022	102,659

Group statement of cash flows

for the six months ended 30 June 2019

		Six months	Six months	Year
		ended 30 June	ended 30 June	ended 31 December
		2019	2018	2018
		Unaudited	Unaudited	Audited
	Notes	£'000	£'000	£'000
Adjusted cash generated from operations		27,491	33,640	54,469
Development costs capitalised		3,503	2,803	5,782
Cash costs of exceptional items		(1,198)	(1,423)	(10,378)
Cash generated from operations		29,796	35,020	49,873
Finance costs		(92)	(102)	(247)
Finance income		23	3	33
Tax paid		(4,134)	(2,170)	(5,830)
Net cash generated from operating activities		25,593	32,751	43,829
Cash flows from investing activities
Purchase of property, plant and equipment		(2,856)	(3,477)	(6,205)
Proceeds from sale of property, plant and equipment		80	87	178
Development costs capitalised		(3,503)	(2,803)	(5,782)
Purchase of software		(439)	(250)	(780)
Dividends received		-	-	600
Business combination		-	-	(1,402)
Acquisition of investment in associate		(176)	-	-
Disposal of discontinued operation, net of cash disposed of		6,194	-	-
Net cash used in investing activities		(700)	(6,443)	(13,391)
Cash flows from financing activities
Transactions in own shares held in trust		(3,361)	153	306
Non-controlling interest dividend paid		-	-	(4,000)
Acquisition of non-controlling interest		-	-	(8,045)
Deferred contingent consideration		(1,012)	-	-
Payment of lease liabilities		(418)	-	-
Dividends paid	13	(8,990)	(8,124)	(17,070)
Net cash used in financing activities		(13,781)	(7,971)	(28,809)
Net increase in cash and cash equivalents		11,112	18,337	1,629
Cash and cash equivalents at beginning of period		15,620	13,991	13,991
Cash and cash equivalents at end of period		26,732	32,328	15,620
Cash generated from operations
Operating profit		12,031	12,430	27,680
Operating profit of discontinued operation		162	476	1,060
Adjustment for non-cash items:
Amortisation of intangible assets		8,134	8,056	17,253
Depreciation of property, plant and equipment		3,159	3,051	6,259
Profit on disposal of property, plant and equipment		(72)	(58)	(119)
Share-based payments		710	383	766
Release of provision		-	-	(1,657)
Operating cash flow before changes in working capital		24,124	24,338	51,242
Changes in working capital:
(Increase)/decrease in inventory		(300)	223	369
(Increase)/decrease in trade and other receivables		(6,763)	(2,436)	2,199
Increase in trade and other payables		3,984	4,668	5,264
Increase in deferred income		8,751	8,901	330
Decrease in provision		-	(674)	(9,531)
Cash generated from operations		29,796	35,020	49,873

Group statement of changes in equity

for the six months ended 30 June 2019

				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
At 1 January 2018		633	51,045	(2,293)	51,289	2,057	5,283	108,014
Profit for the period		-	-	-	10,139	-	499	10,638
Transactions with owners
Share acquisitions less sales		-	-	153	-	-	-	153
Share-based payments		-	-	-	383	-	-	383
Deferred tax in relation to share-based payments		-	-	-	2	-	-	2
Dividends paid		-	-	-	(8,124)	-	-	(8,124)
Other comprehensive income
Currency translation differences		-	-	-	-	(44)	-	(44)
At 30 June 2018		633	51,045	(2,140)	53,689	2,013	5,782	111,022
Profit for the period		-	-	-	12,571	-	413	12,984
Changes in ownership interest
Non-controlling interest acquisition		-	-	-	(5,842)	-	(2,203)	(8,045)
Acquisition of subsidiary with non-controlling interest		-	-	-	-	-	407	407
Transactions with owners
Share acquisitions less sales		-	-	227	-	-	-	227
Share-based payments		-	-	-	383	-	-	383
Deferred tax in relation to share-based payments		-	-	-	29	-	-	29
Dividends paid	13	-	-	-	(8,946)	-	(4,000)	(12,946)
Option over non-controlling interest		-	-	-	-	(2,406)	-	(2,406)
Contingent acquisition consideration		-	-	-	-	1,000	-	1,000
Other comprehensive income
Currency translation differences		-	-	-	-	4	-	4
At 31 December 2018		633	51,045	(1,913)	51,884	611	399	102,659
Adjustment on initial application of IFRS 16	3	-	-	-	(125)	-	-	(125)
Profit for the period		-	-	-	10,433	-	(74)	10,359
Transactions with owners
Share acquisitions less sales		-	-	(3,362)	-	-	-	(3,362)
Share-based payments		-	-	-	710	-	-	710
Deferred tax in relation to share-based payments		-	-	-	233	-	-	233
Dividends paid	13	-	-	-	(8,990)	-	-	(8,990)
Option over non-controlling interest		-	-	-	-	(153)	-	(153)
Other comprehensive income
Currency translation differences		-	-	-	-	31	-	31
At 30 June 2019		633	51,045	(5,275)	54,145	489	325	101,362

Notes to the half year financial statements

1. General information

The financial statements for the six months ended 30 June 2019 and the six months ended 30 June 2018 do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2018 were approved by the Board of Directors on 19 March 2019 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 29 August 2019.

2. Basis of preparation

These condensed half year financial statements for the half year ended 30 June 2019 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 2018, which have been prepared in accordance with International Financial Reporting Standards (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 and banking facilities provide additional comfort that it will continue to be able to meet its cash flow obligations.

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

With the exception of the adoption of IFRS 16 Leases, the accounting policies applied in these interim financial statements are the same as those applied in the Group's annual report and accounts for the year ended 31 December 2018.

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.

IFRS 16 Leases

The Group has adopted IFRS 16 Leases from 1 January 2019, replacing IAS 17, using the modified retrospective approach. The cumulative effect of initial application is recognised in retained earnings at 1 January 2019 and accordingly comparative information presented for 2018 has not been restated.

IFRS 16 has introduced a single on-balance sheet accounting model for lessees. As a result the Group, as a lessee, has recognised right-of-use assets representing its rights to use the underlying assets, and lease liabilities representing its obligation to make lease payments. The Group is not a lessor. The Group presents lease liabilities on the face of the Group balance sheet. The carrying amounts of right-of-use assets are set out below.

	Land and buildings	Fixtures, fittings and equipment	Motor vehicles	Total
	£'000	£'000	£'000	£'000
Balance as at 1 January 2019	2,541	78	912	3,531
Balance as at 30 June 2019	1,571	62	783	2,416

On transition to IFRS 16, the Group recognised additional right-of-use assets and additional lease liabilities, recognising the difference in retained earnings. The impact on transition is summarised below.

	1 January  2019
	£'000
Right-of-use assets presented in property, plant and equipment	3,531
Deferred lease incentives derecognised	128
Lease liabilities	(3,784)
Retained earnings	(125)

At transition, for leases classified as operating leases under IAS 17, lease liabilities were measured at the present value of the remaining lease payments, discounted at an incremental borrowing rate which reflects the characteristics of the underlying lease, at 1 January 2019. The weighted average rate applied is 5.0%. Right-of-use assets are measured at either their carrying amount as if IFRS 16 has been applied since commencement date or an amount equal to the lease liability. This approach has been applied for all leases unless the lease term is twelve months or less or the underlying asset has a low value (less than £4,000). For leases of low value assets, the Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. The table below reconciles the Group's operating lease commitment at 31 December 2018, under IAS 17, to the lease liability now being recognised under IFRS 16.

	1 January  2019
	£'000
Operating lease commitment at 31 December 2018 as disclosed in the Group's consolidated financial statements	5,734
Discounted using the incremental borrowing rate at 1 January 2019	4,824
-      Recognition exemption for leases of low value assets	(10)
-      Recognition exemption for leases with less than twelve months of lease term at transition	(1,030)
Lease liabilities recognised as at 1 January 2019	3,784

In relation to those leases under IFRS 16, the Group now recognises depreciation and interest costs, instead of an operating lease expense. During the six months ended 30 June 2019, this amounted to £382,000 of depreciation charges and £74,000 of interest costs from these leases.

4. Critical accounting judgements and key sources of estimation uncertainty

In preparing the 2019 half year financial statements no judgements have been made in the process of applying the Group's accounting policies, other than those involving estimations, that have a material effect on the amounts recognised in the financial statements. The key source of estimation uncertainty that carries a significant risk of material change to the carrying value of assets and liabilities within the next year is unchanged from the 2018 Group annual report and accounts and is with regard to accounting for business combinations.  Further details are disclosed in note 15.

5. Principal risks and uncertainties

The 2018 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, product integration and interoperability, software (product) development, recruitment and retention, information governance and cyber security, and clinical safety. These remain unchanged since the annual report was published and are not expected to change for the remaining six months of the financial year. The Group operates a structured risk management process, which identifies and evaluates risks and uncertainties and reviews mitigation activity.

It is not anticipated that Brexit will have a material direct effect on the Group as it is not a significant exporter or importer of goods or services. There are potential indirect effects, including exchange rate volatility affecting the value of sterling and increased pressure on NHS budgets, which could have a negative impact on the Group's prospects, but the scale and timing of these is far from certain. The Group will continue to monitor the progress of the negotiations of the terms under which the UK will leave the EU given the ongoing lack of certainty in this area.

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 2018 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 2019, there has not been any significant change in business or economic circumstances that affects the fair value of the Group's financial assets and financial liabilities, any reclassification of financial assets or liabilities, nor 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.

As previously announced, the Directors have revised the segmental information in 2019 to better represent the Group's structure, activities and the markets being served. The Group has two operating and reportable segments, both involved with the supply and support of connected healthcare software and systems:

^·             EMIS Health; and

^·             EMIS Enterprise.

Each operating segment is assessed by the Board based on an adjusted measure of operating profit, as defined in the appendix. Group operating expenses, finance income and costs, and cash and cash equivalents are not allocated to segments, as group and financing activities are not segment specific.

	Six months ended 30 June 2019 Unaudited			Six months ended 30 June 2018 Unaudited
	EMIS Health	EMIS Enterprise	Total	EMIS Health	EMIS Enterprise	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Continuing operations
Revenue	50,272	29,506	79,778	48,641	25,783	74,424
Segmental operating profit as reported internally	10,807	8,142	18,949	11,235	6,715	17,950
Development costs capitalised	2,958	545	3,503	1,282	1,521	2,803
Amortisation of development costs	(2,515)	(1,057)	(3,572)	(3,267)	(887)	(4,154)
Amortisation of acquired intangible assets	(2,033)	(1,930)	(3,963)	(1,602)	(1,427)	(3,029)
Reorganisation costs	(1,975)	(176)	(2,151)	-	-	-
Segmental operating profit	7,242	5,524	12,766	7,648	5,922	13,570
Group operating expenses			(735)			(1,140)
Operating profit			12,031			12,430
Net finance costs			(280)			(149)
Share of result of joint venture and associate			326			318
Profit before taxation from continuing operations			12,077			12,599

The table above sets out the results from continuing operations only and excludes the results of the discontinued Specialist & Care segment, disposed of on 2 April 2019. For the comparative period, central costs previously allocated to the Specialist & Care segment have not been re-allocated on the re-presented segmental basis.

Revenue excludes intra-group transactions on normal commercial terms from the EMIS Health segment to the EMIS Enterprise segment totalling £2,537,000 (2018 H1: £2,284,000) and from the EMIS Enterprise segment to the EMIS Health segment totalling £12,000 (2018 H1: £nil).

Revenue of £49,692,000 (2018 H1: £48,637,000) is derived from the NHS and related bodies. Revenue of £1,939,000 (2018 H1: £5,433,000) is derived from customers outside the United Kingdom.

9. Revenue analysis

Revenue from continuing operations is analysed below.

	Six months ended 30 June 2019 Unaudited			Six months ended 30 June 2018 Unaudited
	EMIS Health	EMIS Enterprise	Total	EMIS Health	EMIS Enterprise	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Software and software licences	19,363	16,007	35,370	18,006	13,978	31,984
Maintenance and software support	15,247	4,234	19,481	15,212	3,825	19,037
Other support services	3,629	5,450	9,079	2,984	5,873	8,857
Hosting	6,052	26	6,078	5,711	95	5,806
Training, consultancy and implementation	3,764	1,937	5,701	3,379	967	4,346
Hardware	2,217	1,852	4,069	3,349	1,045	4,394
	50,272	29,506	79,778	48,641	25,783	74,424

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 19.0% (2018: 19.0%).

11. Discontinued operation

The Group disposed of its Specialist & Care segment on 2 April 2019. Results of this discontinued operation are shown below.

	Six months ended 30 June 2019 Unaudited £'000	Six months ended 30 June 2018 Unaudited £'000	Year ended 31 December 2018 Audited £'000
Revenue	5,180	10,124	20,360
Costs	(5,011)	(9,653)	(19,305)
Results from operating activities	169	471	1,055
Income tax	(32)	(90)	(193)
Results from operating activities, net of tax	137	381	862
Gain on sale of discontinued operation	782	-	-
Disposal related costs	(390)	-	-
Profit from discontinued operation, net of tax	529	381	862
Earnings per share
Basic	0.8p	0.6p	1.4p
Diluted	0.8p	0.6p	1.4p
Cash flows from discontinued operations
Net cash generated from operating activities	1,628	830	2,591
Net cash used in investing activities	(45)	(365)	(571)
Net increase in cash and cash equivalents	1,583	465	2,020

12. Earnings per share (EPS)

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

	Six months ended	Six months ended	Year ended
	30 June	30 June	31 December
	2019	2018	2018
	Unaudited	Unaudited	Audited
Earnings	£'000	£'000	£'000
Basic earnings attributable to equity holders	10,433	10,139	22,710
Profit from discontinued operation, net of tax	(529)	(381)	(862)
Reorganisation costs	2,151	-	-
Service level reporting charges	-	-	(1,657)
Development costs capitalised	(3,503)	(2,803)	(5,782)
Amortisation of development costs and acquired intangible assets	7,535	7,183	15,649
Tax and non-controlling interest effect of above items	(1,167)	(821)	(1,624)
Adjusted earnings attributable to equity holders	14,920	13,317	28,434
	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	(324)	(335)	(320)
For basic EPS calculations	62,987	62,976	62,991
Effect of potentially dilutive share options	419	103	140
For diluted EPS calculations	63,406	63,079	63,131
EPS	Pence	Pence	Pence
Basic	16.6	16.1	36.1
Adjusted	23.7	21.1	45.1
Basic diluted	16.5	16.1	36.0
Adjusted diluted	23.5	21.1	45.0

13. Dividends

In relation to the 2018 financial year, an interim dividend of 14.2p was paid on 2 November 2018 amounting to £8,946,000 followed by a final dividend of 14.2p on 13 May 2019 amounting to £8,990,000.

For 2019, the Directors are proposing an interim dividend of 15.6p, which will be payable on 1 November 2019 to shareholders on the register at 27 September 2019. This interim dividend, which will amount to approximately £9,795,000, has not been recognised as a liability in these half year financial statements.

14. Other intangible assets

	Computer software used internally	Computer software developed for external sale	Computer software acquired on business combinations	Customer relationships	Total
	£'000	£'000	£'000	£'000	£'000
Cost
At 1 January 2018	6,245	44,953	36,320	36,304	123,822
Additions	250	2,803	-	-	3,053
At 30 June 2018	6,495	47,756	36,320	36,304	126,875
Additions	530	2,979	-	-	3,509
Acquisition of business	-	-	5,032	-	5,032
At 31 December 2018	7,025	50,735	41,352	36,304	135,416
Additions	438	3,503	-	-	3,941
Disposal of business	-	-	(1,011)	(5,320)	(6,331)
At 30 June 2019	7,463	54,238	40,341	30,984	133,026
Accumulated amortisation and impairment
At 1 January 2018	3,337	27,097	23,629	19,251	73,314
Charged in period	543	4,154	1,803	1,556	8,056
At 30 June 2018	3,880	31,251	25,432	20,807	81,370
Charged in period	403	5,293	1,944	1,557	9,197
At 31 December 2018	4,283	36,544	27,376	22,364	90,567
Charged in period	434	3,572	2,537	1,591	8,134
Disposal of business	-	-	(716)	(2,504)	(3,220)
At 30 June 2019	4,717	40,116	29,197	21,451	95,481
Net book value
At 30 June 2019	2,746	14,122	11,144	9,533	37,545
At 31 December 2018	2,742	14,191	13,976	13,940	44,849
At 30 June 2018	2,615	16,505	10,888	15,497	45,505
At 1 January 2018	2,908	17,856	12,691	17,053	50,508

15. Other financial liabilities

	Six months ended	Six months ended	Year ended
	30 June	30 June	31 December
	2019	2018	2018
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Current
Contingent acquisition consideration	480	-	1,012
Non-current
Contingent acquisition consideration	1,020	-	1,500
Option over non-controlling interest	2,559	-	2,406
Total	3,579	-	3,906

The current and non-current contingent acquisition consideration liabilities are both cash-settled liabilities arising from the acquisition of Dovetail Lab, payable upon the achievement of revenue targets. During the period a payment of £1,012,000 was made in relation to achievement of specified product delivery targets, and £480,000 was reclassified from non-current to current liabilities. The possible minimum and maximum undiscounted amounts of contingent consideration payable in cash are £nil and £1,500,000 respectively. Estimated fair value has been measured based on the future amounts payable, as the impact of discounting is not significant.

A non-current financial liability of £2,559,000 has been recognised in relation to a put option in place over the 10% share capital not currently owned by EMIS Group plc. The put option has been measured at estimated fair value and is exercisable in 2026 (provided the Group has not exercised the related call option between 2023 and 2025), on an exercise price based on a multiple of operating profit for the preceding year. The expected future payment has been discounted to present value using a risk-adjusted discount rate that reflects the expected maturity profile of the consideration being discounted. The significant unobservable inputs are future operating profit and the risk-adjusted discount rate. The estimated fair value would increase/(decrease) if expected future operating profits were higher/(lower), or if the risk-adjusted discount rate were lower/(higher).
 

Appendix: Alternative performance measures (APMs)

This report contains certain financial measures (APMs) that are not defined or recognised under IFRS but are presented to provide readers with additional financial information that is evaluated by management and investors in assessing the performance of the Group.

This additional information presented is not uniformly defined by all companies and may not be comparable with similarly titled measures and disclosures by other companies. These measures are unaudited and should not be viewed in isolation or as an alternative to those measures that are derived in accordance with IFRS.

Recurring revenue

Recurring revenue is the revenue that annually repeats either under contractual arrangement or by predictable customer habit. It highlights how much of the Group's total revenue is secured and anticipated to repeat in future periods, providing a measure of the financial strength of the business. It is a measure that is well understood by the Group's investor and analyst community and is used for internal performance reporting.

	Six months ended 30 June 2019 £'000	Six months ended 30 June 2018 £'000	Year ended 31 December 2018 £'000
Reported revenue from continuing operations	79,778	74,424	149,710
Non-recurring revenue	(19,545)	(14,971)	(29,160)
Recurring revenue	60,233	59,453	120,550

Adjusted operating profit, adjusted operating margin and adjusted earnings per share

Adjusted operating profit is operating profit from continuing operations excluding exceptional items, goodwill impairment, the effect of capitalisation and amortisation of development costs, and the amortisation of acquired intangible assets. The same adjustments are also made in determining the adjusted operating margin of the Group and its segments and in determining adjusted earnings per share (EPS). The EPS calculation further adjusts for the profit impacts of discontinued operations and the related tax and non-controlling interest impacts of the operating profit adjustments.

The Board considers this adjusted measure of operating profit to provide the best metric of assessing underlying performance, as:

·      it excludes exceptional items (items are only classified as exceptional due to their nature or size);

·      it excludes any one-off goodwill impairment;

·      by expensing capitalised development costs (and also not amortising these costs) it reflects the underlying in-year cash cost of development of software for external sale, as development is considered to be a core ongoing operating function of the business; and

·      it excludes the amortisation of acquired intangibles arising from business combinations which varies year on year dependent on the timing and size of any acquisitions. This is consistent with the presentation of the amortisation of the Group's own software intangibles.

These metrics are used internally for reporting business unit performance and in determining management and executive remuneration. They are commonly used by other software companies, and are also well understood by the Group's investor and analyst community. 

	Six months ended 30 June 2019 £'000	Six months ended 30 June 2018 £'000	Year ended 31 December 2018 £'000
Reported operating profit from continuing operations	12,031	12,430	27,680
Exceptional items	2,151	-	(1,657)
Development costs capitalised	(3,503)	(2,803)	(5,782)
Amortisation of computer software developed for external sale	3,572	4,154	9,447
Amortisation of intangible assets arising on business combinations	3,963	3,029	6,202
Adjusted operating profit from continuing operations	18,214	16,810	35,890

The exceptional item for the six months ended 30 June 2019 relates to redundancy and restructuring costs. The exceptional item for the year ended 31 December 2018 relates to a credit for service level reporting charges.

 

A reconciliation of adjusted earnings used in the adjusted EPS calculations is shown below:

	Six months ended 30 June 2019 £'000	Six months ended 30 June 2018 £'000	Year ended 31 December 2018 £'000
Profit attributable to equity holders	10,433	10,139	22,710
Profit from discontinued operation, net of tax	(529)	(381)	(862)
Exceptional items	2,151	-	(1,657)
Development costs capitalised	(3,503)	(2,803)	(5,782)
Amortisation of computer software developed for external sale	3,572	4,154	9,447
Amortisation of intangible assets arising on business combinations	3,963	3,029	6,202
Tax and non-controlling interest effect of above items	(1,167)	(821)	(1,624)
Adjusted profit attributable to equity holders	14,920	13,317	28,434

Adjusted cash generated from operations

The Group's adjusted cash generated from operations adjusts for capitalised development cost expenditure and the cash costs of exceptional items, consistent with the adjusted operating profit metric used by the Group. This provides a meaningful metric for the underlying cash the Group generates having accounted for the cash cost of all development expenditure and adding back the cash cost of non-recurring exceptional items.

	Six months ended 30 June 2019 £'000	Six months ended 30 June 2018 £'000	Year ended 31 December 2018 £'000
Reported cash generated from operations	29,796	35,020	49,873
Development costs capitalised	(3,503)	(2,803)	(5,782)
Cash cost of exceptional items	1,198	1,423	10,378
Adjusted cash generated from operations	27,491	33,640	54,469

Net cash/(debt)

The Group uses net cash/(debt), defined as cash and cash equivalents less total borrowings (excluding IFRS 16 lease liabilities), as a supplementary measure in evaluating its liquidity, as it indicates the level of cash available to the Group and provides an indicator of the overall balance sheet strength. It is used in the calculation of the leverage ratio under its bank facility arrangements. For the six months ended 30 June 2019 the Group was in a net cash position, with no borrowings.

 

END

 

 

IR CKCDKABKDCFB