Half Yearly Report

RNS Number : 1547L

EMIS Group PLC

31 August 2012

 



31 August 2012

EMIS Group plc

("EMIS Group" or "the Group")

Half Year Results for the Six Months ended 30 June 2012

EMIS Group plc (AIM: EMIS), the UK's leading supplier of clinical  software and related services to GP practices and other healthcare practitioners and a major software supplier to high street pharmacies, today announces its unaudited results for the six months ended 30 June 2012.

Financial highlights

	2012 H1	2011 H1	Increase
Revenue	£42.3m	£35.5m	19%
§ Recurring revenue	£34.4m	£29.9m	15%
Operating profit
·    reported	£12.1m	£10.2m	19%
·    adjusted(1)	£11.5m	£10.0m	15%
Cash generated from continuing operations(2)	£21.7m	£19.5m	£2.2m
Net cash	£17.7m	£12.8m	£4.9m
EPS from continuing operations	16.32p	13.10p	25%
Interim Dividend	7.1p	6.2p	15%

⁽¹⁾          The calculation excludes capitalised development costs and adds back all amortisation charged in the period.

⁽²⁾          Stated after deduction of capitalised development costs of £2.2m (2011 H1: £1.7m). 

Operational highlights

·     Market leading position maintained, with a GP market share of 52.2% (5,290 GP Practices) (31 December 2011 53.1% (5,397GP Practices))

·     Awarded one of only two Framework Agreements for the supply of a managed GP service solution in Wales

·     EMIS Web GP roll-out accelerating as planned and at 30 June 2012 there were:

o  747 live EMIS Web GP practices (31 December 2011: 360) with a further 215 deployed between the period end and 30 August 2012;

o  1,385 unfulfilled orders for EMIS Web GP (31 December 2011: 1,205); and

o  2,753 GP practices in the Familiarisation Service (31 December 2011: 2,359).

·     EMIS Web Integrated Care software covering 68 clinical specialities and over 5,300 seats

·     RX Systems, the Group's UK pharmacy system provider continues to grow, with market share of 36% (4,541 pharmacies) (31 December 2011: 34.4% (4,338 pharmacies))

Sean Riddell,Chief Executive of EMIS Group, said:

 "EMIS Group has had a busy and successful first half, with a strong financial performance across the board. We have accelerated the roll-out to GPs of EMIS Web, our transformational healthcare system, whilst RX Systems continues to grow its market share. We remain confident in the full year outlook and encouraged by the Group's longer term prospects."

There will be an analyst meeting at 11.00 am on 31 August 2012 at Numis Securities Limited, London Stock Exchange Building, 10 Paternoster Square, London, EC4M 7LT. 

Please contact Giles Robinson at MHP on 020 3128 8100 for details.

Enquiries:

For further information, contact:

EMIS Group plc                                                                                            Tel: [phone]

Sean Riddell, CEO

www.emis-online.com

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

Michael Meade/Simon Willis/James Black

MHP Communications                                                                                 Tel: [phone]

Reg Hoare/James White/Giles Robinson

Notes to Editors

EMIS Group is the UK's leading supplier of clinical software and related services to GP practices and other healthcare practitioners and a major supplier to high street pharmacies. 52.2%^* of GP Practices in the UK have an EMIS Group system. In addition, 36.0%^* of high street pharmacies have an RX Systems application.

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

The Group's software includes all of the functionality specified in NHS accreditation standards for GPs, including holding the patient's "cradle to grave" electronic healthcare record, practice appointment booking systems and consultation and intelligent prescribing modules as well as a full range of high street pharmacy software products and related services.

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

Established in 1987, EMIS Group' shares were listed on AIM under the trading symbol EMIS.L following a successful fundraising in March 2010.

 (^*EMIS data estimated based on company records showing customers installed or ordered (by contract or letter of intent) as at 30 June 2012. RX Systems data is based on company records to 30 June 2012 and latest available data from The National Pharmaceutical Association as at March 2010.)

Chief Executive's Overview

EMIS Group has had a busy and successful first half, with a strong financial performance across the board. It remains the leading software supplier for GP practices and a major provider of high street pharmacy software across the UK. 

As stressed most recently in "The Power of Information", the NHS in England's new IT strategy document, the NHS is committed to the approach of joining up healthcare by connecting healthcare IT systems. This supersedes the former "replace all" strategy of the National Programme for IT/Connecting for Health with the "Centre getting out of the way". This approach is intended to help software developers to innovate and expressly puts information and IT at the heart of new ways of working.

The English Health and Social Care Bill has now been enacted. As part of government devolution of power for commissioning services to local consortia of GPs and other clinicians (Clinical Commissioning Groups, CCGs), it is proposed that government will no longer be signing central contracts for local IT in the health and social care sector. Moving towards 2016, when the Local Service Provider contracts wind down, the balance of funding and responsibility for IT is intended to increasingly become truly local.

The NHS' new IT strategy and the English Health and Social Care Act are both closely aligned with EMIS' own strategy of delivering cross-organisational healthcare systems through EMIS Web, Healthcare Gateway and RX Systems and the Group continues to benefit from this strong positioning.

Financial Review 

Total group revenue in H1 was £42.3m (2011 H1: £35.5m) - a 19.2% increase, all of it organic - including recurring revenue of £34.4m - 81% of total revenue (2011 H1: £29.9m - 84%).

EMIS revenue grew by 17.2% to £34.1m (2011: H1 £29.1m) including recurring revenue of £28.2m - 83% (2011 H1: £24.5m - 84%). Recurring revenue includes EMIS Web GP Hosting and annuity revenue amounting to £3.9m (2011 H1: £2.8m).

RX Systems has again grown market share. Revenue grew by 26.6% to £8.1m (2011 H1: £6.4m). Recurring revenue was £6.2m, representing 77% of total revenue (2011 H1: £5.4m - 84%).

Group revenue regarded as non-recurring (hardware, training and other discretionary spending) rose to £7.9m (2011 H1: £5.6m) an increase of 41.1%, mainly due to increased training and deployment income, which within EMIS related to EMIS Web, and in RX Systems, to electronic prescribing.

Group operating profit amounted to £12.1m (2011 H1: £10.2m), an increase of 18.6%, reflecting increased contributions from both EMIS and RX Systems as indicated in the segmental analysis set out in note 9 to the financial statements.

During H1 the Group generated cash from continuing operations, net of all development costs, of £21.7m (2011 H1: £19.5m). Deferred income balances continued to increase and at 30 June 2012 amounted to £22.0m (31 December 2011: £16.1m). Capital expenditure, excluding development costs, including EMIS Web hosting assets acquired and ongoing refurbishment works to the head office acquired in December 2011, amounted to £5.9m.

The Group continued to be highly cash generative with cash of £21.7m and bank debt of £4.0m at 30 June 2012 (31 December 2011: cash £12.6m; bank debt £4.6m).

Earnings per share from continuing operations increased by 24.6% to 16.32p (2011 H1: 13.10p).

Operational Review

Introduction

EMIS Group, through its subsidiaries EMIS and RX Systems, is a major provider of healthcare software, information technology and services in the UK. EMIS is the UK GP software market leader with 52.2% (31 December 2011: 53.1%) of UK GP practices.  RX Systems provides healthcare IT, software and services to 36% (31 December 2011: 34.4%) of UK high street pharmacies.

EMIS Group's core objective is to improve patient care by developing systems to help clinicians and others involved in patient care to create and mobilise each patient's electronic healthcare record. 

The Group continues to make significant progress towards delivery of cross organisational, integrated healthcare systems: an objective aligned with UK NHS strategies. The NHS in England has published its 10 year IT strategy document. Key aspects of that strategy are:

·     information driving integrated care across the entire health & social care sector;

·     patient electronic access to GP records by 2015;

·     online booking of GP appointments;

·     interoperability and the widespread use of modern technology being essential; and

·     "The Centre getting out of the way";

all of which reinforce EMIS Group's strong position.

The accelerating roll out of EMIS Web to GPs and other Group projects represent substantial growth opportunities for the Group.

EMIS GP Systems

Our core clinical systems software business continued to perform well with the overall performance during the period slightly ahead of management's expectations.  EMIS remains the software supplier of choice for GP practices across the UK. 

EMIS' GP practice market share in the UK, at the period end, is broadly unchanged at 52.2% (31 December 2011 53.1%), emphasising the entrenched nature of healthcare IT, with over 70% of our GP users having used EMIS software for over 10 years.

In England, preliminary discussions about the renewal of the GPSoC Framework have begun but these are still at an early stage.

In Wales, EMIS has been successful in securing one of only two Framework Agreements for the supply of a managed GP service solution. A series of marketing road shows is presently taking place across Wales.

EMIS Web GP

During 2012 H1, the roll-out of EMIS Web to GP practices accelerated as expected and, at the period end, there were 747 live EMIS Web GP practices (31 December 2011: 360) with 121 installed in June 2012. There were also 1,385 unfulfilled orders for EMIS Web GP and 2,753 GP practices in the Familiarisation Service (1,205 and 2,359 respectively as at 31 December 2011). The Group also put in place the majority of the people and processes necessary to support the accelerating roll-out of EMIS Web GP with a capacity of up to circa 200 EMIS Web practice deployments per month by September 2012.  Between the period end and 30 August 2012 EMIS Web GP has been deployed in a further 215 GP practices.

EMIS Web Integrated Care

The English NHS remains committed to the approach of connecting and joining up healthcare IT systems rather than expecting everyone to use the same technology. This approach expressly puts information and IT at the heart of new ways of working. Unlike previous information strategies, this new strategy does not seek to reinvent large-scale, centrally controlled information systems or set out detailed mechanisms for delivery. Instead, it provides a route map to a transformation in the way healthcare information is collected and used.

Central government is, through the Health and Social Care Act, devolving a budget of £60 billion to CCGs to locally commission clinical services in England. From 2016, the official end of the National Programme for IT, when the centrally held contracts wind down, the balance of funding and responsibility for IT is intended to increasingly become local.

This ongoing strategy will further open markets for:

·     EMIS Web (in integrated care settings);

·     EMIS IQ (EMIS' healthcare business intelligence operation);

·     Patient.co.uk (our patient information website to help patients play a key part in their own care and, ultimately, become users of EMIS Group's integrated healthcare systems); and

·     the MIG (EMIS' medical interoperability gateway provided through Healthcare Gateway, the 50:50 joint venture company established with INPS to facilitate the wider sharing of patient data).

The Group's software development roadmap is expanding to anticipate these and other emerging opportunities.

RX Systems

RX Systems has continued to grow, installing its software at 203 sites in the period and building its market share to 4,541 sites (36%) (31 December 2011: 4,338 sites (34.4%)).

RX Systems is also looking at other opportunities in its market including facilitating retail over the counter sales (as opposed to prescriptions) by pharmacies through the further enhancement and roll out of electronic point of sale software.

Dividend

In line with its progressive dividend policy, the Board has resolved to pay an interim dividend of 7.1p per share (H1 2011: interim 6.2p) an increase of 14.5% on the ordinary shares of 1p each in the share capital of the Group on 26 October 2012 to shareholders on the register at the close of business on 21 September 2012.

Management and Resources

The senior management team of EMIS was augmented during the first half, including the appointments of a new Chief Operating Officer and a Chief Technology Officer. In addition, significant further development resource continues to be added to address emerging Group healthcare IT opportunities in integrated care and elsewhere.

On 13 July 2012, the Group announced the forthcoming retirement of its CFO, Phillip Woodrow. Phillip will be succeeded by Peter Southby. Peter will join the Group from ENER-G plc where he is the Group Finance Director, formerly having been Group Finance Director of Augean plc. Peter will join the Group no later than mid-November 2012 and there will be an appropriate hand over period.

Summary and Outlook

We welcome moves within the NHS to facilitate local decisions, local clinical leadership and "the centre getting out of the way" by giving responsibility for decision-making and commissioning of healthcare services to GPs and other clinicians.

Our well established strategy of delivering cross-organisational healthcare systems through EMIS Web, Healthcare Gateway and RX Systems, remains completely aligned with NHS strategy and EMIS Group looks forward to continuing to assist healthcare professionals to securely share patient data in a time efficient and cost effective manner.

EMIS Group has traded slightly ahead of management expectations in the first half.  As in previous years, the Group continues to benefit from significant revenue visibility into the second half with recurring revenues expected to be maintained at high levels.  We remain confident in the full year outlook and encouraged by the Group's longer term prospects.

Consolidated statement of comprehensive income

for the six months ended 30 June 2012

	Six months	Six months	Year ended
	to 30 June	to 30 June	31 December
	2012	2011	2011
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Continuing operations
Revenue	42,267	35,459	73,238
Costs:
Changes in inventories	(602)	117	854
Cost of goods	(5,210)	(5,619)	(11,713)
Staff costs	(15,618)	(12,758)	(26,022)
Other operating expenses - including contract asset depreciation of £1,150,000 (2011 H1: £844,000, 2011 FY: £1,909,000)	(5,894)	(4,822)	(10,272)
Earnings before interest, taxes, depreciation and amortisation (EBITDA)	14,943	12,377	26,085
Depreciation of property, plant and equipment	(1,216)	(653)	(1,486)
Amortisation of intangible assets	(1,669)	(1,479)	(3,081)
Operating profit	12,058	10,245	21,518
Finance income	50	12	100
Finance costs	(67)	(91)	(148)
Share of profit of associate	-	58	81
Share of joint venture profit (loss)	18	-	(116)
Profit before taxation	12,059	10,224	21,435
Income tax expense	(2,295)	(2,430)	(4,391)
Profit from continuing operations	9,764	7,794	17,044
Discontinued operations
- loss from discontinued operations	-	(1,839)	(1,894)
Total comprehensive income/profit for the period	9,764	5,955	15,150
Attributable to:
- equity holders of the parent	9,525	5,833	14,892
- non-controlling interest in subsidiary company	239	122	258
Total comprehensive income	9,764	5,955	15,150
Earnings per share attributable to equity holders of the parent - basic and diluted:
	Pence	Pence	Pence
	per	per	per
	share	share	share
- from continuing operations	16.32	13.10	28.71
- from discontinued operations	-	(3.14)	(3.24)
	16.32	9.96	25.47

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

Consolidated balance sheet as at 30 June 2012
	30 June	30 June	31 December
	2012	2011	2011
	£'000	£'000	£'000
ASSETS
Non-current assets
Goodwill	21,951	21,951	21,951
Other intangible assets	29,127	28,038	28,591
Property, plant and equipment	18,379	12,628	14,836
Investment in joint venture	-	-	-
Investment in associate	2,742	2,719	2,742
	72,199	65,336	68,120
Current assets
Inventories	820	687	1,422
Trade and other receivables	13,437	11,544	11,971
Cash and cash equivalents	21,696	18,008	12,606
	35,953	30,239	25,999
Total assets	108,152	95,575	94,119
LIABILITIES
Current liabilities
Trade and other payables	(10,396)	(5,672)	(6,324)
Current tax liabilities	(6,235)	(7,061)	(4,141)
Bank loans	(988)	(1,184)	(1,184)
Contingent consideration re acquisition	-	(757)	(757)
Deferred income	(22,039)	(19,707)	(16,138)
	(39,658)	(34,381)	(28,544)
Non-current liabilities
Bank loans	(3,000)	(3,988)	(3,396)
Deferred tax liability	(7,472)	(7,747)	(8,087)
	(10,472)	(11,735)	(11,483)
Total liabilities	(50,130)	(46,116)	(40,027)
NET ASSETS	58,022	49,459	54,092
EQUITY
Ordinary share capital	586	586	586
Share premium account	24,767	24,767	24,767
Own shares held in trust	(3,289)	(120)	(1,061)
Retained earnings	32,708	21,351	26,789
Equity attributable to owners of the parent	54,772	46,584	51,081
Non-controlling interests	3,250	2,875	3,011
TOTAL EQUITY	58,022	49,459	54,092

The above consolidated balance sheet should be read in conjunction with the accompanying notes.

Consolidated statement of changes in equity for the six months ended 30 June 2012
				Non-	Own shares
	Share	Share	Retained	controlling	held in	Total
	capital	premium	earnings	interest	trust	equity
Group	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2011	586	24,767	18,796	2,753	(120)	46,782
Total comprehensive income
- profit for the period	-	-	5,833	122	-	5,955
Dividend (note 12)	-	-	(3,278)	-	-	(3,278)
Balance at 30 June 2011	586	24,767	21,351	2,875	(120)	49,459
- share acquisitions less sales	-	-	-	-	(941)	(941)
- value of employee services	-	-	7	-	-	7
Total comprehensive income
- profit for the period	-	-	9,059	136	-	9,195
Dividend (note 12)	-	-	(3,628)	-	-	(3,628)
Balance at 31 December 2011	586	24,767	26,789	3,011	(1,061)	54,092
- share acquisitions less sales	-	-	-	-	(2,228)	(2,228)
- value of employee services	-	-	12	-	-	12
Total comprehensive income
- profit for the period	-	-	9,525	239	-	9,764
Dividend (note 12)	-	-	(3,618)	-	-	(3,618)
Balance at 30 June 2012	586	24,767	32,708	3,250	(3,289)	58,022

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Consolidated statement of cash flows

for the six months ended 30 June 2012

	Six months	Six months	Year ended
	to 30 June	to 30 June	31 December
	2012	2011	2011
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Cash flows from operating activities:
- continuing operations	23,945	21,164	30,913
- discontinued operations (outflow)	-	(631)	(766)
Cash generated from operations	23,945	20,533	30,147
Interest paid	(56)	(91)	(132)
Interest received	50	12	100
Tax paid	(1,907)	(2,280)	(5,674)
Net cash generated from operating activities	22,032	18,174	24,441
Cash flows from investing activities
Continuing operations:
- purchase of property, plant and equipment	(6,040)	(2,464)	(6,699)
- proceeds from sale of property, plant and equipment	130	408	465
- internally developed software	(2,205)	(1,674)	(3,830)
Contingent consideration paid re acquisition	(757)	-	(189)
Net cash used in investing activities	(8,872)	(3,730)	(10,253)
Cash flows from financing activities
Transactions in own shares held in trust	148	-	(918)
Bank term loan repayments	(600)	(600)	(1,200)
Dividends paid	(3,618)	(3,278)	(6,906)
Net cash used in financing activities	(4,070)	(3,878)	(9,024)
Net increase in cash and cash equivalents	9,090	10,566	5,164
Cash and cash equivalents at beginning of period	12,606	7,442	7,442
Cash and cash equivalents at end of period	21,696	18,008	12,606

Cash generated from continuing operations:
Operating profit	12,058	10,245	21,518
Adjustment for non-cash items:
Amortisation of intangible assets	1,669	1,479	3,081
Depreciation of property, plant and equipment	2,366	1,497	3,395
Loss (profit) on transactions in own shares	3	-	(23)
Charge for share based remuneration	12	-	7
Joint venture profit (loss) adjusted on indebtedness	18	-	(116)
Operating cash flow before changes in working capital	16,126	13,221	27,862
Changes in working capital:
Decrease (increase)  in inventory	602	(19)	(754)
(Increase) in trade and other receivables	(1,466)	(2,462)	(2,889)
Increase in trade and other payables	2,782	1,605	1,444
Increase in deferred income	5,901	8,819	5,250
Cash flow from operating activities	23,945	21,164	30,913

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

Notes to the financial statements

1. General information     

EMIS Group plc is the parent company of subsidiary companies whose activities consist of the design, development, supply and support of computer software and systems for healthcare professionals, principally general practitioners and pharmacists, and other users.

The Company is a public limited liability company registered in England (number 06553923). The address of its registered office is Fulford Grange, Micklefield Lane, Rawdon, Leeds LS19 6BA.

The Company has a listing on AIM, a market operated by the London Stock Exchange.

This interim financial information has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively, Adopted IFRS).

The financial information for the six months ended 30 June 2012 and the six months ended 30 June 2011 do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The information is unaudited and does not constitute the Group's statutory financial statements for those periods. The comparative financial information for the year ended 31 December 2011 has, however, been derived from the audited statutory financial statements for that year. A copy of those statutory financial statements has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not include any matters in relation to which auditors draw attention by way of emphasis without qualifying their report and did not require any statement under Section 498 of the Companies Act 2006.

These condensed consolidated interim financial results were approved for issue by the Board of Directors on 30 August 2012.

2. Basis of preparation

These condensed consolidated interim financial statements for the half-year ended 30 June 2012 have been prepared in accordance with the AIM Rules for Companies and 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 2011, which have been prepared in accordance with IFRS as adopted by the European Union.

The Group is profitable and it is anticipated that this will continue. There is a high and continuing level of recurring revenue and high cash conversion is anticipated for the foreseeable future. The Group also has significant cash resources to more than cover its bank borrowings of £4.0million, which are repayable by March 2014.

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 interim financial statements.

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

3. Accounting policies

The accounting policies used in preparing these interim financial results are those the Group expects to apply in its financial statements for the year ending 31 December 2012 and are consistent with those disclosed in the Group's annual report and accounts for the year ended 31 December 2011.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

4. Critical accounting estimates and judgements

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

Within the 2011 Group annual report and accounts are set out details of the critical estimates, assumptions and judgements, made at that time in arriving at the amounts recognised in those financial statements, which have a significant risk of causing a material adjustment to the carrying values of assets and liabilities within the subsequent financial year.

The critical accounting estimates and judgements made in these condensed consolidated interim financial statements do not differ materially from those applied within the 2011 Group annual report and accounts.

5. Principal risks and uncertainties

The 2011 Group annual report and accounts set out the principal risks and uncertainties that could impact the Group's performance. These relate to the UK Government programme of major change within healthcare, the previous Government's policy of a single supplier, the future renegotiation of the English framework agreement and the development and roll out of hosted software. These remain unchanged since the annual report was published and accordingly are valid for these interim financial statements. The Group operates a structured risk management process, which identifies and evaluates risks and uncertainties and reviews mitigation activity.

6. Financial risk management

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

These interim condensed consolidated financial statements do not include all financial risk management information and disclosures required in the annual financial statements and should be read in conjunction with the 2011 Group annual report and accounts.

During 2012 there has been no significant change in the business or economic circumstances that affect the fair value of the Group's financial assets and financial liabilities, nor has there been any reclassifications of financial assets or liabilities and there have been no changes in the risk management department or in any of the Group's risk management policies.

7. Forward-looking statements 

Certain statements in this interim 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. Holiday pay

International Accounting Standard 19 "Employee Benefits" requires that accumulating compensated absences be recognised in financial statements.

The Group has a calendar year holiday cycle and entitlement cannot be carried forward from one year to the next. Accordingly, as at 31 December each year no provision for the cost of outstanding holiday entitlement is required. As at 30 June 2012 a provision amounting to £452,000 (30 June 2011: £383,000) has been necessary.

9. Segmental reporting

(a) Operating segments

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

The Board considers the business from both a product and geographic perspective and considers that there are two principal operating segments, both involved in the supply and support of software and related services, namely: (a) the EMIS business, principally relating to primary care and integrated care; and (b) the RX Systems business, relating to community pharmacies.

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

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

 (b) Segmental reporting

Revenue excludes intra-group transactions and is from external customers

	Six months ended			Six months ended
	30 June 2012			30 June 2011
	EMIS  £'000	RX  £'000	Total  £'000	EMIS  £'000	RX  £'000	Total  £'000
Continuing operations
Revenue	34,133	8,134	42,267	29,065	6,394	35,459
Segmental EBITDA (before contract asset depreciation)	14,465	1,827	16,292	12,442	1,164	13,606
Total depreciation	(2,303)	(63)	(2,366)	(1,463)	(34)	(1,497)
Segmental operating profit as reported internally	12,162	1,764	13,926	10,979	1,130	12,109
Amortisation
- on acquired assets	(1,038)	(425)	(1,463)	(1,038)	(425)	(1,463)
- on internally developed assets	(206)	-	(206)	(16)	-	(16)
Segmental operating profit for reporting purposes	10,918	1,339	12,257	9,925	705	10,630
Group operating expenses			(199)			(303)
Share of HGL joint venture loss			-			(82)
Total operating profit			12,058			10,245
Finance costs net of income			(17)			(79)
Share of profit of associate			-			58
Share of HGL joint venture profit			18			-
Profit for the financial period before taxation			12,059			10,224

	30 June 2012				30 June 2011
	EMIS	RX	Total	EMIS		RX	Total
	£'000	£'000	£'000	£'000		£'000	£'000
Segmental assets as reported internally	29,939	2,692	32,631	22,181		2,354	24,535
Other segmental assets:
- Goodwill and intangible assets	39,749	11,329	51,078	37,810		12,179	49,989
	69,688	14,021	83,709	59,991		14,533	74,524
Non segmental assets:
- Group			5				38
- Investment in associate and joint venture			2,742				2,719
- cash and equivalents			21,696				18,008
- discontinued operation			-				286
Total assets as reported			108,152				95,575
Segmental liabilities as reported internally:	30,212	6,028	36,240	26,261		5,981	32,242
Other segmental liabilities	6,239	1,233	7,472	6,163		1,584	7,747
	36,451	7,261	43,712	32,424		7,565	39,989
Non segmental liabilities:
- Group			2,430				25
- bank loans			3,988				5,172
- contingent consideration			-				757
- discontinued operation			-				173
Total liabilities as reported			50,130				46,116

10. Discontinued operations

The prior period discontinued operation relates to the results to cessation of trading and the sale of the majority of the assets of EMIS Inc., a wholly owned Canadian-incorporated subsidiary, which at 30 June 2012 is in the process of being wound up.

11. Income tax

The tax expense recognised is based on management estimates of the tax charge for the period and has been calculated using the estimated average annual tax rate of UK Corporation Tax of 24.5% (2011: 26.5%) and in relation to deferred taxation, at the rate of 24% (2011: 26%).

12. Dividends

In relation to the 2011 financial year, an interim dividend of 6.2p was paid on 21 October 2011 amounting to £3,630,000, followed by a final dividend of 6.2p on 30 April 2012 amounting to £3,618,000.

For 2012, the Directors are proposing an interim dividend of 7.1p, which will be payable on 26 October 2012 to shareholders on the register at 21 September 2012. This interim dividend, which will amount to approximately £4,117,000, has not been recognised as a liability in this interim report.

13. Capital expenditure

Six months ended 30 June 2012	Tangible and
	intangible assets
	(unaudited)
	£'000
Opening net book amount 1 January 2012	65,378
Additions:
- internally generated software	2,205
- data centre hosting contract assets	2,577
- other acquisitions	3,463
Net book value of disposals	(130)
Depreciation and amortisation	(4,036)
Closing net book amount 30 June 2012	69,457

Six months ended 30 June 2011	Tangible and
	intangible assets
	(unaudited)
	£'000
Opening net book amount 1 January 2011	63,293
Additions:
- internally generated software	1,674
- data centre hosting contract assets	770
- other acquisitions	1,694
Net book value of disposals	(236)
Depreciation and amortisation	(3,136)
Discontinued operation - impairment of intangible assets	(1,442)
Closing net book amount 30 June 2011	62,617

14. Equity

Through on-market purchases, on 29 June 2012, the EMIS Group plc Employee Benefits Trust ("EBT") acquired 400,000 shares in the Company. The total amount payable to acquire the shares was £2,391,000, which has, together with the cost of shares already held by the EBT, been deducted from shareholders' equity. The shares are held to facilitate future share based emolument payments.

15. Related party transactions

Key management compensation

Key management includes directors (executive and non-executive) of the parent and subsidiary companies, the company secretary and certain departmental heads. The compensation paid or payable to key management for employee services is shown below:  

	Six months ended
	30 June 2012	30 June 2011
	£'000	£'000
Salaries and other short-term benefits	1,001	827
Post-employment benefits	140	67
Share-based payments	2	-

Independent Review Report to EMIS Group plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the interim report for the six months ended 30 June 2012 which comprises the consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity, consolidated statement of cash flows and the related explanatory notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company 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. Our review work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review 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 formed.

Directors' responsibilities

The interim report, is the responsibility of, and has been approved by the Directors. The Directors are responsible for preparing and presenting the interim report in accordance with the AIM Rules of the London Stock Exchange.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards and International Financial Reporting Interpretations Committee pronouncements as adopted by the European Union. The condensed set of financial statements included in this interim report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting" as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim report based on our review.

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 United Kingdom. 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. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) 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.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union, and the AIM Rules of the London Stock Exchange.

Baker Tilly UK Audit LLP

Chartered Accountants

2 Whitehall Quay
Leeds LS1 4HG
30 August 2012

 

END

 

 

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