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EMIS solid in turbulent UK health sector

The healthcare software company has faced up to the challenges of falling NHS spending
September 1, 2017

The beauty of providing data services to big organisations is that once customers sign up, they are likely to stay. That is particularly true in healthcare, where patient information is sensitive and the implications of losing data are high. Software specialist EMIS (EMIS) continues to benefit from these dynamics. Recurring revenue – defined by the group as contracted or habitually repeating sales – rose 4 per cent to £66.8m in the six months to June 2017, and now makes up 84 per cent of total group revenue.

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But the financial struggles of the NHS means new customers are harder to come by. The acute care division has been especially hurt by falling spending by the health service. A reduction in large one-off projects sent revenue here down 14 per cent.

The UK’s pharmacies are also feeling the force of a reduction in NHS spend but – in contrast to the acute care sector – this has had a positive impact on EMIS’s Community Pharmacy (EHCP) segment. To plug the revenue gap left by lower NHS spending, pharmacies are increasingly turning to the software provider in a bid to offer their customers more services.

As a result, EHCP revenue rose 5 per cent, and operating profit rose 16 per cent. The outlook for the division is also buoyant due to the impending rollout of its ProScript Connect dispensary management product into the Celesio pharmacy estate. This is expected to drag EMIS’s share of the UK pharmacy market up from 37 to 50 per cent by the end of 2019.

The outlook is also improving in the group’s two smallest divisions, Specialist & Care (eye screening and other services) and medical information service Patient.info. The former increased its market share from 18 per cent at the year-end to 26 per cent, and the latter reported a 42 per cent rise in revenue in the first half.  

Reported profit was dented by the ‘reorganisation programme’, which resulted in a £2.5m exceptional charge. But lower staff and operating expenses is expected to save £3.5m over the full year. Even so, the ongoing costs of the restructuring means broker Numis expects pre-tax profit and EPS to fall to £37.5m and 47.1p, respectively, in the year to December 2017 (from £39m and 49.2p in 2016).

EMIS (EMIS)    
ORD PRICE:915pMARKET VALUE:£579m
TOUCH:914-917p12-MONTH HIGH:1,050pLOW: 793p
DIVIDEND YIELD:2.7%PE RATIO:32
NET ASSET VALUE:175p*NET CASH:£10.5m
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201678.712.214.911.7
201779.210.713.112.9
% change+1-12-12+10
Ex-div:21 Sep   
Payment:27 Oct   
*Includes intangible assets of £106m, or 168p a share