EMIS Group plc 2014 Final Results Presentation

Introduction & Agenda

Introduction Chris Spencer

Financial review Peter Southby

Operational review Chris Spencer

Summary and outlook Chris Spencer

2

Financial reviewPeter SouthbyChief Financial OfficerEMIS Group

3

Financial highlights

Overall results in line with expectations• Positive contribution from acquisitions and strong organic growth

Group revenue £137.6m (2013: £105.5m), up 30% (organic 11%)

Recurring revenue £102.7m (2013: £81.4m), up 26%

Adjusted group operating profit1 £32.6m (2013: £26.1m), up 25% (organic 16%)• Reported - £29.1m (2013: £24.9m), up 17%

Cash generated from operations2 £38.3m (2013: £32.6m), up 17%

Net debt £11.8m (2013: £13.5m), down 13%

Adjusted EPS1 39.5p (2013: 34.0p), up 16%• Reported – 35.3p (2013: 32.6p), up 8%

Total dividend 18.4p (2013: 16.0p), up 15%• Including final dividend of 9.2p (2013: 8.0p), up 15%

4

1 Excludes release of contingent acquisition consideration, exceptional items, capitalisation and amortisation of development costs and amortisation of acquired intangibles. EPS calculations also adjust for related tax and non-controlling interest impact.

2 Adjusted to exclude development costs capitalised of £6.5m (2013: £6.1m).

Financial review - income statement

5

• Revenue increase driven by acquisitions, EMIS Web GP roll-out and Child Community & Mental Health (CCMH) wins - total organic increase 11%

• Adjusted operating profit up by 25% - 16% organic

• Exceptionals in 2014 relates to release of contingent acquisition consideration

• 2014 effective tax rate 21.5%

£m H1 H2 FY FY2014 2014 2014 2013 % change

Revenue 66.4 71.2 137.6 105.5 30%

Adjusted operating profit 14.6 18.0 32.6 26.1 25%

Capitalised development costs 3.5 3.0 6.5 6.1

Amortisation (5.2) (5.7) (10.9) (6.1)

Finance costs (0.3) (0.2) (0.5) (0.3)

Exceptionals/other - 0.8 0.8 (1.2)

Profit before tax 12.6 15.9 28.5 24.6

Tax (2.7) (3.0) (5.7) (4.7)

Non-controlling interest (0.4) (0.3) (0.7) (0.5)

Earnings 9.5 12.6 22.1 19.4

Adjusted EPS 17.3p 22.2p 39.5p 34.0p 16%

Reported EPS 15.2p 20.1p 35.3p 32.6p 8%

Organic/acquisitions - income statement

6

£m Organic Organic Organic Acquisitions Acquisitions2014 2013 % change 20141 20131

Revenue 108.1 97.0 11% 29.5 8.5

Recurring revenue 84.9 76.6 11% 17.8 4.8

Cost of sales (11.8) (11.2) 5% (1.0) (0.6)

Staff costs (including capitalised development costs) (45.2) (43.2) 5% (19.9) (5.4)

Other operating expenses (14.1) (10.8) 31% (4.8) (1.6)

Contract asset depreciation (3.8) (3.3) 16% - -

Depreciation/purchased software amortisation (4.0) (3.2) 21% (0.4) (0.1)

Adjusted operating profit 29.2 25.3 16% 3.4 0.8

Development costs capitalised 4.7 5.3 -10% 1.8 0.8

Amortisation of development costs (4.3) (1.8) 131% (0.4) (0.1)

Amortisation of acquired intangibles (1.8) (2.9) -37% (4.4) (1.3)

Operating profit (pre-exceptional items) 27.8 25.9 8% 0.4 0.2

• Strong organic growth complemented by contributions from acquisitions

1 Includes results from acquisition of Digital Healthcare (August 2013), Ascribe (September 2013) and Indigo 4 (July 2014).

Financial review - segmental analysis

7

• Primary & Community Care growth driven by EMIS Web GP penetration, CCMH, project engineering

• Community Pharmacy growth supporting investment in new product for piloting later this year

• Secondary & Specialist Care includes full year contribution from Ascribe and Digital Healthcare acquisitions and part period contribution from Indigo 4 and Medical Imaging

£m

2014 2013Primary &

Community Care

Community Pharmacy

Secondary & Specialist

Care Total

Primary & Community

CareCommunity Pharmacy

Secondary & Specialist

Care Total % change

Revenue 89.7 18.4 29.5 137.6 80.0 17.0 8.5 105.5 30%

Recurring revenue 69.6 15.3 17.8 102.7 62.3 14.3 4.8 81.4 26%

Adjusted segmental profit 26.4 3.9 3.4 33.7 22.2 3.9 0.8 26.9 25%

Group costs (1.1) (0.8)

Adjusted operating profit 32.6 26.1 25%

Adjusted operating margin

29.5% 21.0% 11.6% 23.7% 27.7% 22.8% 9.7% 24.7%

Development costs capitalised 4.0 0.8 1.8 6.6 5.3 - 0.8 6.1

Amortisation of development costs (4.3) - (0.4) (4.7) (1.8) - (0.1) (1.9)

Amortisation of acquired intangible assets

(1.1) (0.7) (4.4) (6.2) (2.1) (0.9) (1.2) (4.2)

Revenue

Profit

Financial review - revenue analysis

• Good visibility through recurring revenue growth of £21.3m – organic £8.3m, acquisitions £13.0m

• EMIS Web roll-out driving growth in Hosting (though some revenues now in Maintenance & software support)

• Acquisitions impact mainly in Maintenance & software support, Training/consultancy/implementation and Other support services

8

£m 2014 % of revenues 2013 % of revenues

Licences 43.8 32% 40.0 38%

Maintenance & software support 33.4 24% 17.7 17%

Hosting 14.0 10% 14.3 14%

Hardware 7.9 6% 6.9 6%

Training/consultancy/implementation 16.9 12% 12.1 11%

Other support services 21.6 16% 14.5 14%

Total 137.6 100% 105.5 100%

Recurring 102.7 75% 81.4 77%

Non-recurring 34.9 25% 24.1 23%

Total 137.6 100% 105.5 100%

Revenue

Financial review - cash flow

9

• Cash from operations up 17% at £38.3m, with strong H1 weighted cash flows

• Working capital outflow with R&D tax credits, contract timings

• Business combinations:• Indigo 4 (£3.8m)• Medical Imaging (£6.5m)

• Capex includes:• Computer equipment (£4.0m)• Arrivals screens software (£1.2m)• Motor vehicles (£1.1m)• Refurbishment (£1.1m)

• EBT share purchase (£2.0m)

• Net debt at £11.8m (down from £13.5m at last year end)

£m 2014 2013

Operating profit 29.1 24.9

Depreciation and amortisation 19.0 12.8Release of contingent acquisition consideration (0.9) -

Working capital/share based payments (2.4) 1.0

Cash flow from operating activities 44.8 38.7

Development costs capitalised (6.5) (6.1)

Cash from operations 38.3 32.6

Business combinations (10.3) (57.5)

Placing proceeds - 26.3

Net capital expenditure (8.3) (8.7)

Transactions in own shares (1.5) 0.6

Tax (5.2) (5.1)

Dividends (10.8) (9.1)

Other (0.5) (0.3)

Change in net debt 1.7 (21.2)

Financial review - balance sheet

10

• Strong balance sheet with low gearing (£6.9m in cash / £18.8m debt)

• Bank facilities secured to 2017 (£26.0m Term/RCF)

• Deferred income growth provides good revenue visibility

• Cost of final dividend £5.8m

£m 2014 2013

Goodwill 68.6 60.1

Acquired intangible assets 47.3 46.9

Development costs 21.4 19.5

Property, plant & equipment and purchased intangible assets 26.5 25.4

Associate and other current assets 32.9 25.6

Deferred income (30.0) (25.4)

Contingent consideration (5.3) (4.0)

Other current liabilities (22.0) (19.0)

Deferred tax (12.7) (11.5)

Net debt (11.8) (13.5)

Net assets 114.9 104.1

Financial review - financial guidance and trends

Acquisitions• Indigo 4 (acquired July 2014 for net £3.8m cash consideration (all paid) and with revenues of £2.5m and profit of

£0.7m historically)

• Medical Imaging (acquired December 2014 for net £6.5m cash consideration (plus up to £3.0m contingent) and with revenues of £6.3m and profit of £1.3m historically)

• Acquired intangible amortisation increasing to £6.4m in 2015 with new acquisitions’ impact replacing fully amortised software for EMIS and Rx Systems

Share-based payments• Charge increasing in 2015 with recent awards

Tax rate• Expected to remain close to UK statutory rate

Development costs• Continued capitalisation only where IFRS criteria met

• Amortisation increasing in line with EMIS Web GP estate and Ascribe

• Expect capitalisation and amortisation to be broadly equal in 2015

Capital expenditure• Expect 2015 to be lower overall (change in car funding)

11

12

Operational reviewChris SpencerChief Executive OfficerEMIS Group

12

Group Strategy

Strong focus on strategic matters maintained. Group strategic priorities for 2014 included:

Strategic customer engagement• GP Systems of Choice (GPSoC) framework procurement successfully completed (Lots 1 and 2) • Maintained engagement with evolving organisational structures in primary care – federated and enterprise• Doubled 100% EMIS CCGs /Trusts & Boards• Procurement engagement began with first “supermarket” pharmacy customer• Pioneer (pan-healthcare) economies identified and engagement began

Divisional restructuring/integration• Management structure re-designed and all positions filled • Primary Care (EMIS Web) Community and Children’s and Secondary Care Mental Health teams merged

Group product integration• Integrated product roadmap developed and implementation begun• Primary Care (EMIS Web) Community and Children’s and Secondary Care Mental Health product roadmaps aligned• EMIS Health holistic branding for 2015

Optimisation of software specification and development• Medicine Manager/Electronic Health Record Viewer completed and began to be rolled-out • Development of Community Pharmacy next generation product continued to plan• Public Health England update developed and implemented across the whole of the English diabetic retinopathy

estate

Enterprise and commissioning products• Solutions to meet new organisational needs in primary care created and released • Group Health Analytics Service established

13

Operational Highlights – strong and busy year

Strong and busy year• Financial performance in line with management expectations• Integration of products under way and being rolled out• First integrated contract win in Gibraltar• 11% organic revenue growth and positive contribution from acquisitions

Primary & Community Care• UK primary care market share rose slightly• GPSoC Framework agreement (Lots 1 & 2) secured• 4,261 live EMIS Web GP practices (31 December 2013: 3,327)• Momentum continues in CCMH: contract wins in excess of £14m, full pipeline,

implementations in hand and market share grown from 3% to 8%

14

Operational Highlights – strong and busy year

Community Pharmacy• Maintained significant user base and market share• Ongoing development of next generation software to address both existing and

“supermarket” users• Launched and began to roll out innovative integrated products connecting GPs,

pharmacists and patients

Secondary & Specialist Care• Major contract wins secured in hospitals, strong order book and pipeline of further

opportunities notably pan-Wales A&E• Acquired Indigo 4 providing messaging and order communications solutions and market

share• Development and roll-out of upgraded diabetic retinopathy software in England

complete• Acquired Medical Imaging providing service provision capability and market share

15

Operational review – Primary Care

• Majority market share maintained

• GPSoC Lots 1 & 2 successfully concluded

• Northern Ireland renewal successfully concluded

• EMIS Web roll-out in England almost complete

• Business continues to perform well

16

Operational review – Child Community & Mental Health

Expanding team and contracts

New functionality developed and released

Contract wins in (from)• Blackpool (n/a)• Southport and Ormskirk (n/a)• North Somerset (Servelec)• Sirona (South Gloucestershire) (Servelec)• Bristol (Servelec)• Glasgow (n/a)• South Tyneside (n/a)• First Community (Servelec)• Leeds (Occupational Health) (n/a)• St Andrew’s (Physical Health) (n/a)• Gibraltar (n/a)

Value of wins in excess of £14m

Strong and growing pipeline

Market share grown from 3% at end of 2013 to 8% at end of 2014

17

Operational review – Online / Hardware & Engineering

Online and Patient Services• Ongoing growth in visitor base• New apps launched including Apple Healthkit• GPSoC Lot 1 mini-competition concluded• Ready for patient transactional services

Hardware & Engineering• Windows 7 rollout continues• Purchase of automated arrivals systems software• Opens up secondary care market• Integration of group engineering

18

Operational Review – Community Pharmacy

Estate and market share maintained

Launched:• Medicines Manager• GP Record Viewer• My Local Pharmacy App

Market divided into independents and supermarkets

Next generation product in development

Poised for growth into supermarkets

19

Operational Review – Secondary & Specialist

Secondary care• 2014 financial contribution below expectations but strategic

rationale confirmed• Deferred consideration period over, enabling stronger

integration• New Managing Director appointed• Strong order book and pipeline• Won pan-Wales A&E contract• Acquired Indigo 4 – integration tools – performing in line with

expections

Specialist care - Ophthalmology • Grew market share• Won hosted services bids in Kent and Wales• Completed Common Pathway rollout to all England• Acquired into fully managed ophthalmology services market

furthering strategic opportunity identified when acquiring Digital Healthcare

Integrated care• Won first whole healthcare economy contract affirming

integrated care approach including acquisition in secondary care

20

Markets, Competitors & Growth Opportunities

21

Growth opportunities• Primary Care & Commissioning – Wales, NI, NPfIT re-procurement, Scotland, Patient Access • CCMH – remaining Southern procurement and the North 180 – targeting 10% overall market share • Community Pharmacy – balance independent estate and new “supermarket” estate• Secondary & Specialist – on-going acute procurements post NPfIT to integrate with primary care and

ophthalmology related services

(Source: EMIS and competitor data estimated based on company records)

Introducing EMIS Health - our integrated brand

22

An integrated brand for an integrated group

Roll-out during 2015

Summary and outlook – considerable confidence

Group continues to trade well, in line with management’s expectations

Considerable confidence in 2015:• Ongoing growth from EMIS Web in primary care • Opportunities for growth in CCMH, Community

Pharmacy, Secondary and Specialist Care • Strong revenue visibility • Strong cross-group order books and pipelines• Earnings enhancement of 2013 and 2014 acquisitions

Post National Programme growth opportunities continue in CCMH & Secondary Care and begin in Primary Care (2016)

Cross-party support for integrated careBaroness Hanham. Chair of NHS Monitor: “Integrated care has to be the future. Not only because it means that people can have more tailored and individual plans for their care, it should mean that they do not need to attend hospital for check-up or treatments so frequently.

And it may mean that, ultimately, by joining-up resources there can be a rebalancing of expenditure between health settings and between health and social care.”

23

Slide 23

CS26 Labour’s ten-year plan for health and care. includes “joining up services from home to hospital” and “an NHS for the whole person”.Chris Spencer, 01/03/2015

Questions?

Appendix

5 year financial record

26

EMIS GP market share by country

27

Country EMIS estate % InPS estate % TPP estate % Other % Total

England 4,239 53.8 1,041 13.2 2,468 31.3 132 1.7 7,880

Scotland 511 51.7 478 48.3 - - - - 989

Wales 193 42.1 260 56.6 - - 6 1.3 459

Northern Ireland 197 56.3 125 35.7 - - 28 8.0 350

UK Total 5,140 53.1 1,904 19.7 2,468 25.5 166 1.7 9,678

(EMIS and competitor data estimated based on company records showing customers installed as at 31 December 2014)

NHS – Five Year Forward View (5YFV)

28

The basic problem

29

5YFV - broad consensus on a better future

• Radical upgrade in prevention and public health

• Patients gain far greater control of their own care

• NHS to take decisive steps to break barriers in how care is provided

• England too diverse for a ‘one size fits all’ care model

• Foundation of NHS care will remain list-based primary care

30

5YFV - NHS to break “artificial boundaries”

• Hospital vs Primary Care• Health vs Social Care• Generalist vs Specialist• Family Doctor vs Hospital• Physical Health vs Mental Health• Prevention vs Treatment

31

5YFV - new models of care

Primary and Acute Care Systems (PACS)

• Vertically integrated Primary and Acute Care Systems (PACS)

• Single organisations provide NHS list-based GP and hospital services, together with mental health and community care services

• In some circumstances e.g. where local general practice under strain and GP recruitment proving hard – hospitals will be permitted to open their own GP surgeries with registered lists

• At most radical, PACS would take accountability for whole health needs of a registered list of patients, under a delegated capitated budget. Similar to Accountable Care Organisations emerging in a number of other countries

32

5YFV - 5YFV - new models of care

Multispecialty Community Providers (MCPs)

• Primary care of the future will build on strengths of ‘expert generalists’: proactively targeting patients with complex ongoing needs (e.g. frail elderly/those with chronic conditions)

• Future models to expand leadership of primary care to include nurses, therapists and other community based professionals

• NHS will facilitate formation of extended group practices – federations, networks or single organisations

• These extended group practices could:– employ senior nurses, consultant physicians, geriatricians, paediatricians and psychiatrists to work alongside

community nurses, therapists, pharmacists, psychologists, social workers, and other staff– shift the majority of outpatient consultations and ambulatory care out of hospital settings. – take over the running of local community hospitals which could substantially expand their diagnostic services as

well as other services such as dialysis and chemotherapy

• GPs in the MCPs could directly admit patients into acute hospitals

• MCPs could take on delegated responsibility for managing the health service budget for their registered patients

• Where funding pooled with local authorities, the combined health and social care budget could be delegated to Multispecialty Community Providers

33

Integrated care improves outcomes

34