Emis hits new highs

A solemn note on which to start. But, since then, Emis has given cause for increasing optimism – helping to lift its shares to a recent all-time high. For one thing, it settled with NHS Digital – ultimately paying out £1.7m less than expected. Now, the government’s £450m ‘GP IT Futures framework’ could be a catalyst for growth. This aims to “create an open, competitive market to encourage the best technology companies to invest in the NHS”. It replaces the current framework, ‘GP Systems of Choice’ (GPSoC), which currently represents the largest single source of revenue for Emis.

True, there’s a risk that it won’t be included on the new framework. Upon reviewing its latest preliminary numbers, we retained a ‘hold’ call – explaining that we’d rather monitor the procurement process from the sidelines. But we now see grounds for encouragement as the procurement phase begins, including Mr Thorburn's purchase of £50,000-worth of shares last month at 1,131p. Emis, which is currently market leader in GP software, thinks it is well positioned in the pre-procurement phase, especially given its “strategy and roadmap for a new and enhanced cloud-based clinical platform” (named Emis-X), which “further aligns the group with NHS England's strategy”.

Last week's AGM statement provided further reassurance. “Pre-procurement engagement with NHS Digital continues positively, with the formal GP IT Futures procurement process expected to begin in the coming weeks”. According to NHS Digital, procurement will begin shortly with the issue of tender invitations. Existing arrangements under the GPSoC framework will end by December 2019. The new arrangements will then be in place for all practices across England.

Meanwhile, high levels of recurring revenue constitute a feather in Emis’s cap. For 2018, these rose by 5 per cent to £141m – representing 83 per cent of the top line, in keeping with the prior year. Meanwhile, reported operating profits should be taken with a small pinch of salt, having been flattered by 2017’s (overgenerous) provision charge. But adjusted profits still edged up 1 per cent.

Another plus point for Emis is its solid cash generation. Adjusted cash from operations climbed by a tenth to £54.5m for the respective period, supporting a decent dividend hike and providing money to invest in the group's growth plans. The cash position will also get a boost from the sale of Emis's non-core specialist and care division for £14.9m, which was announced a few weeks ago.