TIDMEMIS

RNS Number : 1816L

EMIS Group PLC

09 September 2021

9 September 2021

EMIS Group plc

("EMIS Group" or "the Group")

Half year results for the six months ended 30 June 2021

"A positive first half in line with our strategic focus on growth."

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 2021.

Financial highlights

 
                                         2021 H1         2020 H1        Change 
 Revenue 
 Total revenue                          GBP83.5m        GBP78.1m           +7% 
 Recurring revenue(1)                   GBP65.8m        GBP63.5m           +4% 
 
 Operating profit 
 Adjusted(1)                            GBP20.0m        GBP17.8m          +13% 
 Reported                               GBP16.3m        GBP16.6m           -2% 
 
 Cash flow and net cash 
 Cash generated from operations 
  - adjusted(1)                         GBP14.9m        GBP33.8m          -56% 
 Cash generated from operations 
  - reported                            GBP17.0m        GBP36.6m          -53% 
 Net cash(1)                            GBP48.0m        GBP44.1m           +9% 
 
 Earnings per share 
 Adjusted(1)                               25.6p           23.1p          +11% 
 Reported                                  20.8p           22.9p           -9% 
 
 Interim dividend                          17.6p           16.0p          +10% 
 

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

H1 results - slightly ahead of the Board's expectations

-- A positive H1 with revenue and adjusted operating profit ahead of both 2020 H1 and 2019 H1's results

-- Building solid foundations for the future with recurring revenue increasing by 4%, representing 79% of total revenue

-- Cash flow reduced by one-off working capital factors, including the repayment of GBP7.3m VAT deferred from 2020 H1

-- Good performance from sales, account management and delivery teams, returning to business as usual

-- EMIS Enterprise boosted by use of the Outcomes4Health solution to support the Covid-19 vaccination roll-out in England

   --    Dividend growth returns to pre-Covid-19 levels of 10% 

Operational highlights - focus on growth

-- EMIS Group is engaged with senior NHS and enterprise business leaders on the future of the healthcare market post Covid-19

-- Well positioned to meet the emerging integrated care systems' (ICSs') needs through the investments made in technology, especially analytics, data integration and interoperability capabilities

-- Continued focus on improving customer experience with good progress in the period, particularly with respect to the success of digital support channels

-- On track to complete the next stage of EMIS-X through deployment of the fast healthcare interoperability resource (FHIR) layer as planned

Group outlook - confidence in future performance

   --    A clear line of sight to meet Board expectations for the second half of the year* 

-- The Group's connected care strategy positively reflects the needs of the market both now and post Covid-19, working closely with customers to develop the capabilities they require

-- Focussed on consistent growth in the next stage of the Group's evolution organically, with strategic partners, as well as through targeted M&A

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

"It has been a positive first half with good performance from the business, particularly in the sales, account management and delivery teams in both EMIS Health and EMIS Enterprise. We are returning to business as usual following the challenges of the pandemic during 2020 and we have maintained our investment in, and focus on, growth.

"We believe our connected care strategy positively reflects the needs of the healthcare market as it emerges from Covid-19, with an increased focus on data capabilities. We are working closely with our customers at both strategic and local levels to address their priorities.

"We have a clear line of sight to meet Board expectations for the second half of the year and look forward to the future with confidence."

There will be a hybrid results presentation today at 9.00am for analysts, with the option to dial into the webcast and conference call or to physically attend the presentation. Please contact Florence Mayo at MHP Communications on 020 3128 8572, or email emis@mhpc.com for details.

Enquiries:

For further information, contact:

EMIS Group plc Tel: 0113 380 3000

Andy Thorburn, CEO

Peter Southby, CFO

www.emisgroupplc.com

@EMISGroup

   Numis Securities Limited (nominated adviser and broker)                 Tel: 020 7260 1000 

Josh Hughes/Simon Willis/James Black

MHP Communications Tel: 020 3128 8572

   Reg Hoare/James Bavister/Florence Mayo                                               emis@mhpc.com 

* 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 analytics.

LEI: 213800K474ZZK76NX913

CHIEF EXECUTIVE OFFICER'S OVERVIEW

EMIS Group has had a positive first half of the year. Trading for the period has been slightly ahead of the Board's expectations and recurring revenue continues to grow. We have seen operational activities return to business as usual despite the continuing challenges of Covid-19, whilst maintaining a strong market share in our key business areas and continuing investment for future growth. Both revenue and adjusted operating profit were ahead of the comparative period last year and 2019. Reported operating profit was slightly lower than the comparative period.

The EMIS Health segment reported small increases in both recurring and non-recurring revenues. The business continues to deliver the requirements of the GP IT Futures contract to its core primary care market, meeting the immediate needs of NHS Digital (NHSD), aligning with GP users' needs for now and the future and continuing to support the national Covid-19 programme of work.

The EMIS Enterprise segment reported strong growth in both recurring and non-recurring revenue. This performance was boosted by a positive contribution from the Pinnacle business (acquired in March 2020) supporting the Covid-19 vaccination roll-out in England. The business continues to focus on growth in patient-facing digital services, analytics and pharmacy and through the partner programme.

Connected care strategy

The future of the healthcare sector is connected care. We anticipate that the focus on integrated care systems (ICSs) will develop over the next few years as policies begin to take shape at both central and local NHS level.

Initial discussions indicate that data management will be at the heart of the NHS ICS strategy, which aligns with our investments in EMIS-X Analytics, FHIR and our connected care capabilities. We also continue to invest in connecting up our digital, pharmacy and life sciences capabilities to drive future growth.

The Group's development roadmap continues at pace. We have detailed development plans for all of our product areas, utilising an agile development approach to bring new applications and product enhancements to market more quickly with a combination of in-house development and partner technology in a composite model. Updated product roadmaps will be released across all key market settings during the second half of 2021.

We are on track to complete the next stage of EMIS-X this year through deployment of the national standard interoperability layer, FHIR, as planned.

During the first half of 2021 we completed Patient's transition into the matrix structure of EMIS Group. This enables us to continue moving forward as one joined-up organisation, reflecting our connected care strategy in alignment with NHS policy.

Focussed on growth

The Group is focussed on delivering consistent growth in the coming years. EMIS Health is formally approved on 15 NHS frameworks, meaning we are well placed to serve the requirements of ICSs for interoperable technology systems that not only serve frontline clinicians but are capable of supporting healthcare analytics at scale for risk stratification, resource planning and machine learning to support clinical decision making. Data management will be at the heart of this and our investments in EMIS-X Analytics and EMIS-X interoperability capabilities position us well for the emerging ICS market.

In EMIS Enterprise we are focussed on four key areas for growth:

   --    increasing our digital patient-facing services; 
   --    expanding the partner programme; 
   --    growth and investment into pharmacy; and 
   --    developing the life sciences market with EMIS-X Analytics. 

There are opportunities in community pharmacy as this sector takes on increased responsibility for frontline care under the patient group directions (PGD) initiative, which will see an increasing range of healthcare services provided in a pharmacy setting. This will lead to growth in the number and breadth of patient-facing services that are available to book via Patient Access. The EMIS partner programme is expected to drive growth through the creation of a complete technology ecosystem for customers.

Working effectively during the pandemic

I continue to be impressed by the dedication and commitment of our employees in the UK and India, particularly during successive lockdowns. Our people are passionate about supporting the NHS in its delivery of patient care, and we continued to see our high-performing teams fulfil this despite the challenges of the pandemic. In recognition of the exceptional efforts to support our customers through the pandemic, we rewarded all team members with a one-off cash bonus in the first half of this year.

We continued to make employee wellbeing a priority during the first half of 2021, with a focus on internal communications and on promoting our established mental health first aider programme. We encourage a strong ethos of supporting each other and this is a cornerstone of EMIS's flexible working culture. An employee survey in June 2021 showed that 86% agree or strongly agree that as part of a remote workforce they feel engaged with the business.

Another important focus for the first half of 2021 has been developing our environmental, social and governance (ESG) proposition, drawing together a number of existing initiatives already underway in the Group. The Board has approved the plan and we will shortly create a formal committee to strengthen and develop our ESG strategy.

Summary and outlook

EMIS Group continues to be well positioned for growth, with rapidly evolving technology and data platforms that are aligned with the evolution of the healthcare market.

With our connected care strategy and focus on the areas of analytics, data integration and interoperability, we are well positioned to deliver the connected care solutions that will be required by the emerging ICSs.

The Pinnacle acquisition in 2020 has strengthened our community pharmacy proposition; we will continue to grow the Group organically through and with partners and, additionally, with targeted acquisitions.

EMIS Group continues to increase its strong recurring revenue as a foundation for investment for growth. We are engaged with senior NHS and enterprise business leaders on the future of the healthcare market following the pandemic. Our clinical systems have been central to the UK's testing and vaccination programmes and, just as we are able to deliver the NHS's digital requirements for the national Covid-19 programme of work, our strategic roadmap aims to do the same for the NHS's long-term modernisation agenda.

EMIS Group retains significant cash resources and bank facilities to consider further acquisitions to build both the scale and capabilities of the Group in existing and adjacent markets.

We have a clear line of sight to meet Board expectations for the second half of the year and look forward to the future with confidence.

OPERATIONAL REVIEW

EMIS Health

The EMIS Health segment comprises business areas where revenue is generated from NHS organisations. This includes the primary, community and emergency care markets as well as specialist ICT infrastructure, hardware and engineering services and non-clinical software. There have been no material changes to market shares in key markets.

Supporting NHS Digital

The Group is working in close partnership with NHSD as it continues to develop its national interoperability strategy, with EMIS enabling the technical delivery of plans. The clinical coding standard, SNOMED CT, is now aligned to international standards under NHSD's direction and EMIS is an early phase partner for new GP Connect capabilities, focussed on the FHIR standard for exchanging healthcare information.

As well as delivering against the GP IT Futures framework, the business continued to support NHSD with Covid-19-related projects. Its online test results system, Keystone, was scaled up to manage the transmission of up to 10 million test results per day into GP records through interoperability. EMIS released new technology to support GPs through the vaccination programme and supported NHS England with its daily Covid-19 reporting requirements.

Regional update

EMIS Health continues to compete successfully across its estate. The Group is well placed for the framework mini-tender processes that are anticipated to occur through the coming years in both Scotland and England.

In Scotland, as an approved supplier on the NHS National Services Scotland (NSS) framework, EMIS Health continues to work closely with NSS to deliver the technology to support its health and care strategy.

In Northern Ireland, EMIS Health continues to supply EMIS Web to GP customers, who are now benefiting from GP2GP functionality, which allows patients' electronic health records to be transferred securely and quickly between their old and new practices when they change GPs.

EMIS Health continues to support its customers in Wales, pending the outcome of the new Digital Health and Care Wales primary care framework tender process. No end users have moved away from EMIS systems since the framework altered in early 2018.

Strong performance in support and service

EMIS continues to prioritise customer experience and has dedicated teams working to take the performance to the next level. The use of digital support channels continued to increase, with 70% of tickets received and resolved digitally (2020: 50%), following the Group's 2019 investment into ServiceNow.

During the period the Group accelerated the pace of end user software update releases, to deploy new functionality to customers in a faster timeframe. The business also began to use the advanced data science technology of EMIS-X Analytics to analyse reporting trends and spot potential problems at an early stage, to be able to speed up resolving or preventing unexpected issues.

EMIS Enterprise

The EMIS Enterprise segment comprises business areas where revenue is predominantly from private sector sources, including medicines management across both community and hospital pharmacies, life sciences, the partner programme and patient-facing digital services.

There have been no material changes in the market shares of any key markets in which EMIS Enterprise operates.

Supporting the Covid-19 vaccination programme

In late 2020 EMIS adapted the Outcomes4Health system (acquired with the Pinnacle business) to build a national vaccination system at an unprecedented pace.

During the first half of the year, Outcomes4Health was the only point of care system able to record vaccinations in a non-hospital setting. To date, 66 million vaccinations have been recorded in Outcomes4Health, transferred through interoperability to the National Immunisation Management System (NIMS) and then into GP clinical systems the next day. This enables crucial vaccination status information to be shared with GP records and patients via the NHS App or Patient Access.

Continued use of the platform is expected as the UK moves into the next phases of the vaccination programme, with developments planned to support the delivery of both flu and Covid-19 vaccinations.

Community pharmacy

The community pharmacy area of the business continued to perform well during the first half of 2021.

The NHS Long Term Plan, published in January 2019, outlined the intention for a greater range of clinical services to be provided in a community pharmacy setting to alleviate pressure on primary care. Secure exchange of data between systems will be key and EMIS has boosted its capacity to develop and deliver interoperability features into its pharmacy systems.

EMIS continues to integrate Pinnacle systems with its flagship clinical systems for GPs and community pharmacies. This includes functionality to support the NHS GP Community Pharmacist Consultation Service (GP CPCS), supporting triage from primary care into community pharmacy for minor illnesses.

The business also launched a new solution to support the national Discharge Medicines Service (DMS) across England, supporting secure transfer of clinical information at the point of patient discharge from hospital clinical systems to their chosen community pharmacy.

Moving forwards with digital patient-facing services

Patient Access remains the number one app for primary care patient-facing services in England and increased its registered users to 13.0 million during the period (31 December 2020: 11.7 million ) . Patients continue to utilise digital solutions to access primary care services, with 11.5 million repeat prescriptions ordered in the first half of 2021, in line with the comparative period (2020: 11.7 million).

Patient Access is evolving from its strong foundations as the leading provider of primary care digital services into a healthcare ecosystem app with a broader range of services. This includes a new opt-in service for personalised healthcare content to support medication compliance through increased knowledge. Smart Pharmacy, a new pilot service, enables patients to order, track and opt for home delivery of their medications from their local pharmacy.

Community pharmacy appointment booking continues to develop, with the service now live in 1,600 branches of 248 pharmacy organisations. The business continues to expand the range of bookable services through the Patient Access marketplace, including blood and Covid-19 testing, and to increase the network of service providers.

The evolution of the partner programme

To offer customers a greater range of functionality, the business continues to proactively seek third party partners to add new and different capabilities to the overall ecosystem.

As a focus area of growth, EMIS has evolved the programme into two different types of partner relationships. Elite partners will bring strategically important core capabilities such as document management, video consulting and referral functionality to "plug into" in-house technology and provide the fully rounded EMIS solution.

Resale partners continue to offer a wide range of products and services that interoperate and exchange data seamlessly with EMIS clinical systems, including clinical devices such as spirometry and ECG monitors. The partner programme will continue to grow in line with end user requirements and NHS strategy, to drive business growth and promote core customer retention.

EMIS-X Analytics

We believe that the future of preventative healthcare will be driven through analysis of data. National and local strategy will be informed by proactively identifying patients most at risk, to focus resources where they are most needed.

EMIS-X Analytics technology generates insights from data, which can be integrated back into the clinical workflow, to build in artificial intelligence (AI) that can help improve patient outcomes on both a national level and at the point of care.

EMIS continues to work on a pilot programme with one of the top five global pharmaceutical companies to implement AI into EMIS Web via EMIS-X Analytics technology. The collaboration aids early detection of atrial fibrillation to reduce occurrence of strokes across the UK population and is an example of how EMIS-X Analytics technology can identify conditions that have not yet been detected.

EMIS's strategy for EMIS-X Analytics is in alignment with policy: two recently released policy papers from the Department of Health and Social Care and the Department for Business, Energy and Industrial Strategy highlight the requirement for the integration of clinical research into the healthcare industry and provision of secure access for healthcare professionals.

The positive customer response to EMIS-X Analytics continues since its launch in October 2020. Following completion of a successful six-month pilot, many pilot customers have moved to the next stage of adopting the technology, ranging from simplified access to data for population health to appointment planning during the pandemic. We have closed two EMIS-X Analytics deals in the first half of 2021 and we expect more to follow.

Supporting research into Covid-19 with EMIS-X Analytics technology

A collaboration between EMIS and the national open-source research platform OpenSAFELY is delivering important new insights into Covid-19, including findings on the underreporting of long Covid. EMIS and OpenSAFELY have created a secure, trusted research environment within EMIS-X Analytics to support this.

Other research projects in this collaboration are investigating the uptake of the UK Covid-19 vaccination programme, including analysis of regional and demographic coverage.

FINANCIAL REVIEW

It was pleasing to see the improved momentum of the latter part of 2020 maintained into the first half of 2021, despite the further lockdown in the early months of this year. The Group's revenue, recurring revenue, adjusted operating profit and margin were all higher compared to both the comparative period and 2019 H1. As expected, reported operating profit and margin were slightly lower and cash flow was less strong than the comparative period as Covid-19-related VAT deferrals unwound and investment in the business to deliver future growth was maintained.

Group revenue increased by 7% to GBP83.5m (2020 H1: GBP78.1m), including revenue of GBP3.3m (2020 H1: GBP0.7m) from the March 2020 Pinnacle acquisition. Recurring revenue grew by 4% to GBP65.8m (2020 H1: GBP63.5m), representing 79% (2020 H1: 81%) of the Group's total revenue.

Adjusted operating profit for the period was GBP20.0m (2020 H1: GBP17.8m), with increases in both recurring and non-recurring revenue and a more normalised gross margin sales mix partly offset by higher staff costs and increased operating expenses. With a lower level of development costs capitalised, reported operating profit reduced to GBP16.3m (2020 H1: GBP16.6m).

Segmental performance

In EMIS Health, revenue reflected a more normalised trading period for the segment with the comparative period having included higher than usual hardware sales. Overall revenue was marginally higher at GBP54.3m (2020 H1: GBP54.0m) but within this recurring revenue increased by 3%. This higher quality revenue mix resulted in an increased adjusted operating profit of GBP12.5m (2020 H1: GBP11.9m), delivered while continuing to invest in developing the strategic roadmap. Conversely, reported divisional operating profit was lower at GBP10.6m (2021 H1: GBP13.1m) due to a reduction in the level of capitalised development costs.

In EMIS Enterprise, revenue increased by 21% to GBP29.3m (2020 H1: GBP24.1m) and recurring revenue increased by 6%, reflecting an improved market and a relatively weak comparative period which was affected by the first lockdown. With the segment focussed on executing in the areas of patient-facing services, analytics and pharmacy, including supporting the NHS Covid-19 vaccination programme through its Pinnacle software, adjusted operating profit increased by 28% to GBP8.4m (2020 H1: GBP6.5m) and reported operating profit also increased to GBP6.6m (2020 H1: GBP4.2m).

Revenue

The analysis of revenue is summarised below with full segmental revenue analysis set out in note 9 .

-- software subscription and support revenue increased to GBP50.9m (2020 H1: GBP48.9m), reflecting higher revenue from the Group's existing customers;

-- interface and connectivity charges increased to GBP12.1m (2020 H1: GBP9.7m), as a result of increased on-boarding within the partner programme;

-- other services revenue was higher at GBP7.9m (2020 H1: GBP6.7m), principally due to increased activity in digitisation projects and growth in analytics;

-- hardware and related services revenue reduced to a more normal level at GBP6.4m (2020 H1: GBP9.6m), after the pandemic had driven higher short-term demand in the primary care market in the comparative period; and

-- perpetual licences, training, consultancy and implementation revenue was higher at GBP6.2m (2020 H1: GBP3.2m), with an increasing level of project work across the business including one-off revenues in relation to the NHS Covid-19 vaccination programme.

Profitability and dividend

Adjusted operating profit increased by 13% to GBP20.0m (2020 H1: GBP17.8m) with the adjusted operating margin increasing to 24.0% (2020 H1: 22.8%), reflecting the stronger sales mix.

The Group employed 1,515 staff at 30 June 2021, with the decrease from 1,591 at 31 December 2020 principally as a result of vacancies in the Indian development team which are expected to be filled in the second half of the year. Average staff costs increased with the timing and quantum of bonus and share scheme charges. Other operating expenses increased with additional costs associated with the technology transformation programme, including Microsoft and AWS.

With a lower level of capitalisation of development costs due to teams focussing more on improving customer experience, and with amortisation overall remaining broadly consistent, reported operating profit was lower at GBP16.3m (2020 H1: GBP16.6m).

The tax charge for the period was GBP3.3m (2020 H1: GBP3.4m), including GBP0.3m resulting from the recalculation of deferred tax at the increased future rate of 25%. The tax charge represented an effective rate of tax before the deferred tax rate change, other income and share of result of joint venture and associate of 19.1% (2020 H1: 19.2%).

Adjusted basic and diluted EPS increased by 11% and 10% to 25.6p and 25.3p respectively (2020 H1: 23.1p and 22.9p). The reported basic and diluted EPS were both lower at 20.8p and 20.6p respectively (2020 H1: 22.9p and 22.8p).

The Board has carefully considered the more encouraging trading environment experienced in 2021, together with the consistent underlying growth of the Group and its future prospects, and has declared a 10% increase in the interim dividend to 17.6p per share (2020 H1: 16.0p), payable on 4 November 2021 to shareholders on the register at the close of business on 8 October 2021.

Cash flow, net cash and financing

Cash generated from operations was GBP17.0m (2020 H1: GBP36.6m), with the decrease due principally to working capital movements. In particular, this reflected the repayment of GBP7.3m of VAT, the deferral of which had benefitted the comparative period, and also some short-term delayed debtor payments which were received in early July. Adjusted cash from operations, stated after deducting capitalised development costs and adjusting for the cash impact of any exceptional items where appropriate, decreased to GBP14.9m (2020 H1: GBP33.8m).

Gross capital expenditure on property, plant and equipment and purchased software excluding capitalised development costs remained tightly controlled at GBP1.6m (2020 H1: GBP0.9m).

The Group paid GBP2.0m of deferred consideration in respect of the 2020 acquisition of the Pinnacle business and GBP2.4m to acquire shares to satisfy future requirements of employee share schemes, partially offset by GBP0.6m received for shares transferred to employees.

After finance costs, lease payments, tax, and dividends, the Group ended the period with net cash of GBP48.0m (31 December 2020: GBP53.0m; 2020 H1: GBP44.1m).

As at 30 June 2021, the Group had available undrawn bank facilities of GBP15.0m in place until 30 June 2022. An accordion arrangement is in place to increase the quantum up to GBP30.0m if required.

INDEPENT REVIEW REPORT TO EMIS GROUP PLC

Conclusion

We have been engaged by the company to review the condensed set of financial statements in the half-yearly results for the six months ended 30 June 2021 which comprises the 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 2021 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted for use in the UK 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 latest annual financial statements of the group were prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and the next annual financial statements will be prepared in accordance with UK-adopted international accounting standards. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly report in accordance with IAS 34 as adopted for use in the UK.

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.

Francis Simpson

for and on behalf of KPMG LLP

Chartered Accountants

1 Sovereign Square, Sovereign Street, Leeds, LS1 4DA

8 September 2021

Group statement of comprehensive income

for the six months ended 30 June 2021

 
                                             Six months  Six months         Year 
                                                  ended       ended        ended 
                                                30 June     30 June  31 December 
                                                   2021        2020         2020 
                                              Unaudited   Unaudited      Audited 
                                      Notes     GBP'000     GBP'000      GBP'000 
 -----------------------------------  -----  ----------  ----------  ----------- 
 Revenue                                  9      83,512      78,118      159,453 
 Costs: 
 Changes in inventories                              51         940         (47) 
 Cost of goods and services                     (8,159)    (12,426)     (20,288) 
 Staff costs                                   (36,864)    (29,680)     (63,374) 
 Other operating expenses                      (13,662)    (12,002)     (22,628) 
 Depreciation of property, plant 
  and equipment                                 (2,173)     (2,601)      (5,089) 
 Amortisation of intangible assets              (6,391)     (5,718)     (12,251) 
 -----------------------------------  -----  ----------  ----------  ----------- 
 Adjusted operating profit                       20,011      17,772       39,266 
 Development costs capitalised                    2,112       4,096        6,590 
 Amortisation of intangible assets1             (5,809)     (5,237)     (11,100) 
 Release of contingent acquisition 
  consideration                                       -           -        1,020 
 -----------------------------------  -----  ----------  ----------  ----------- 
 Operating profit                                16,314      16,631       35,776 
 Finance income                                      11         201           89 
 Finance costs                                    (241)       (322)        (590) 
 Share of result of joint venture 
  and associate                                     361         424          858 
 Other income2                                        -         782          782 
 -----------------------------------  -----  ----------  ----------  ----------- 
 Profit before taxation                          16,445      17,716       36,915 
 Income tax expense                      10     (3,335)     (3,384)      (6,794) 
 -----------------------------------  -----  ----------  ----------  ----------- 
 Profit for the period                           13,110      14,332       30,121 
 -----------------------------------  -----  ----------  ----------  ----------- 
 Other comprehensive income 
 Items that may be reclassified 
  to profit or loss: 
 Currency translation differences                 (120)          76         (41) 
 -----------------------------------  -----  ----------  ----------  ----------- 
 Other comprehensive income                       (120)          76         (41) 
 -----------------------------------  -----  ----------  ----------  ----------- 
 Total comprehensive income for 
  the period                                     12,990      14,408       30,080 
 -----------------------------------  -----  ----------  ----------  ----------- 
 Attributable to: 
 - equity holders of the parent                  12,990      14,479       30,207 
 - non-controlling interest in 
  subsidiary company                                  -        (71)        (127) 
 -----------------------------------  -----  ----------  ----------  ----------- 
 Total comprehensive income for 
  the period                                     12,990      14,408       30,080 
 -----------------------------------  -----  ----------  ----------  ----------- 
 
 
 Earnings per share attributable 
  to equity holders of the parent       Pence  Pence  Pence 
 ---------------------------------      -----  -----  ----- 
 Basic                              11   20.8   22.9   48.1 
 Basic diluted                      11   20.6   22.8   47.6 
 Adjusted                           11   25.6   23.1   51.0 
 Adjusted diluted                   11   25.3   22.9   50.4 
 ---------------------------------      -----  -----  ----- 
 

1 Excluding amortisation of computer software used internally of GBP582,000 (2020 H1: GBP481,000; 2020 FY: GBP1,151,000).

2 During the prior period the Group received GBP782,000 of previously unrecognised additional consideration in relation to the 2019 disposal of the Specialist & Care business.

Group balance sheet

as at 30 June 2021

 
                                           30 June    30 June  31 December 
                                              2021       2020         2020 
                                         Unaudited  Unaudited      Audited 
                                  Notes    GBP'000    GBP'000      GBP'000 
--------------------------------  -----  ---------  ---------  ----------- 
Non-current assets 
Goodwill                                    52,177     52,146       52,177 
Other intangible assets              13     28,914     36,801       33,118 
Property, plant and equipment               18,959     20,591       19,870 
Investment in joint venture and 
 associate                                     714        769          353 
--------------------------------  -----  ---------  ---------  ----------- 
                                           100,764    110,307      105,518 
--------------------------------  -----  ---------  ---------  ----------- 
Current assets 
Inventories                                    664      1,600          613 
Current tax assets                           3,274        247        3,556 
Trade and other receivables                 45,343     32,414       29,993 
Cash and cash equivalents                   48,044     44,122       53,008 
--------------------------------  -----  ---------  ---------  ----------- 
                                            97,325     78,383       87,170 
--------------------------------  -----  ---------  ---------  ----------- 
Total assets                               198,089    188,690      192,688 
--------------------------------  -----  ---------  ---------  ----------- 
Current liabilities 
Trade and other payables                  (26,810)   (26,050)     (31,219) 
Deferred income                           (39,836)   (37,017)     (29,161) 
Other financial liabilities          14    (2,000)    (2,480)      (2,000) 
Lease liabilities                    15      (867)      (973)        (990) 
--------------------------------  -----  ---------  ---------  ----------- 
                                          (69,513)   (66,520)     (63,370) 
--------------------------------  -----  ---------  ---------  ----------- 
Non-current liabilities 
Deferred tax liability                     (2,245)    (1,711)      (2,289) 
Other financial liabilities          14          -    (5,268)      (2,000) 
Lease liabilities                    15    (5,398)    (6,307)      (5,891) 
--------------------------------  -----  ---------  ---------  ----------- 
                                           (7,643)   (13,286)     (10,180) 
--------------------------------  -----  ---------  ---------  ----------- 
Total liabilities                         (77,156)   (79,806)     (73,550) 
--------------------------------  -----  ---------  ---------  ----------- 
Net assets                                 120,933    108,884      119,138 
--------------------------------  -----  ---------  ---------  ----------- 
Equity 
Ordinary share capital                         633        633          633 
Share premium                               51,045     51,045       51,045 
Own shares held in trust                   (5,434)    (4,810)      (3,594) 
Retained earnings                           73,015     61,948       69,260 
Other reserve                                1,674      (137)        1,794 
--------------------------------  -----  ---------  ---------  ----------- 
Equity attributable to owners 
 of the parent                             120,933    108,679      119,138 
Non-controlling interest                         -        205            - 
--------------------------------  -----  ---------  ---------  ----------- 
Total equity                               120,933    108,884      119,138 
--------------------------------  -----  ---------  ---------  ----------- 
 

Group statement of cash flows

for the six months ended 30 June 2021

 
                                                Six months  Six months         Year 
                                                     ended       ended        ended 
                                                   30 June     30 June  31 December 
                                                      2021        2020         2020 
                                                 Unaudited   Unaudited      Audited 
                                         Notes     GBP'000     GBP'000      GBP'000 
 
 Profit before taxation                             16,445      17,716       36,915 
 Finance income                                       (11)       (201)         (89) 
 Finance costs                                         241         322          590 
 Share of result of joint venture                    (361)       (424)        (858) 
 Other income                                            -       (782)        (782) 
 --------------------------------------  -----  ----------  ----------  ----------- 
 Operating profit                                   16,314      16,631       35,776 
 Adjustment for non-cash items 
 Amortisation of intangible assets                   6,391       5,718       12,251 
 Depreciation of property, plant 
  and equipment                                      2,173       2,601        5,089 
 (Profit)/loss on disposal of 
  property, plant and equipment                        (7)          32           43 
 Share-based payments                                  824         230        1,440 
 --------------------------------------  -----  ----------  ----------  ----------- 
 Operating cash flow before changes 
  in working capital                                25,695      25,212       53,579 
 Changes in working capital 
 (Increase)/decrease in inventory                     (51)       (940)           47 
 (Increase)/decrease in trade 
  and other receivables                           (13,857)       2,619        3,197 
 (Decrease)/increase in trade 
  and other payables                               (4,407)       2,508        7,751 
 Increase/(decrease) in deferred 
  income                                             9,637       7,169        (436) 
 --------------------------------------  -----  ----------  ----------  ----------- 
 Adjusted cash generated from 
  operations                                        14,905      33,775       58,851 
 Development costs capitalised                       2,112       4,096        6,590 
 Cash costs of exceptional items                         -     (1,303)      (1,303) 
 --------------------------------------  -----  ----------  ----------  ----------- 
 Cash generated from operations                     17,017      36,568       64,138 
 Finance costs                                        (42)        (82)        (141) 
 Finance income                                         10          86           87 
 Tax paid                                          (3,789)     (7,723)     (11,684) 
 --------------------------------------  -----  ----------  ----------  ----------- 
 Net cash generated from operating 
  activities                                        13,196      28,849       52,400 
 --------------------------------------  -----  ----------  ----------  ----------- 
 Cash flows from investing activities 
 Purchase of property, plant and 
  equipment                                        (1,501)       (850)      (2,449) 
 Proceeds from sale of property, 
  plant and equipment                                    7       2,478        2,500 
 Development costs capitalised                     (2,112)     (4,096)      (6,590) 
 Purchase of software                                 (75)        (96)        (452) 
 Dividends received                                      -           -          850 
 Business combination                                    -     (2,880)      (2,880) 
 Disposal of discontinued operation, 
  net of cash disposed of                                -         782          782 
 --------------------------------------  -----  ----------  ----------  ----------- 
 Net cash used in investing activities             (3,681)     (4,662)      (8,239) 
 --------------------------------------  -----  ----------  ----------  ----------- 
 Cash flows from financing activities 
 Transactions in own shares held 
  in trust                                         (1,840)         211          474 
 Payment of lease liabilities               15       (573)       (777)      (1,511) 
 Contingent consideration                          (2,000)       (800)        (800) 
 Dividends paid                             12    (10,066)     (9,798)     (19,860) 
 Acquisition of non-controlling 
  interest                                               -           -        (555) 
 --------------------------------------  -----  ----------  ----------  ----------- 
 Net cash used in financing activities            (14,479)    (11,164)     (22,252) 
 --------------------------------------  -----  ----------  ----------  ----------- 
 Net (decrease)/increase in cash 
  and cash equivalents                             (4,964)      13,023       21,909 
 Cash and cash equivalents at 
  beginning of period                               53,008      31,099       31,099 
 --------------------------------------  -----  ----------  ----------  ----------- 
 Cash and cash equivalents at 
  end of period                                     48,044      44,122       53,008 
 --------------------------------------  -----  ----------  ----------  ----------- 
 

Group statement of changes in equity

for the six months ended 30 June 2021

 
                                                            Own shares                            Non- 
                                                                  held 
                                            Share    Share          in  Retained    Other  controlling     Total 
                                          capital  premium       trust  earnings  reserve     interest    equity 
                                   Notes  GBP'000  GBP'000     GBP'000   GBP'000  GBP'000      GBP'000   GBP'000 
---------------------------------  -----  -------  -------  ----------  --------  -------  -----------  -------- 
At 1 January 2020                             633   51,045     (5,021)    57,118      147          276   104,198 
Profit for the period                           -        -           -    14,403        -         (71)    14,332 
Transactions with owners 
Share acquisitions less 
 sales                                          -        -         211         -        -            -       211 
Share-based payments                            -        -           -       230        -            -       230 
Deferred tax in relation 
 to share-based payments                        -        -           -       (5)        -            -       (5) 
Dividends paid                                  -        -           -   (9,798)        -            -   (9,798) 
Contingent acquisition 
 consideration                                  -        -           -         -    (320)            -     (320) 
Option over non-controlling 
 interest                                       -        -           -         -     (40)            -      (40) 
Other comprehensive income 
Currency translation differences                -        -           -         -       76            -        76 
---------------------------------  -----  -------  -------  ----------  --------  -------  -----------  -------- 
At 30 June 2020                               633   51,045     (4,810)    61,948    (137)          205   108,884 
Profit for the period                           -        -           -    15,845        -         (56)    15,789 
Changes in ownership interest 
Non-controlling interest 
 acquisition                                    -        -           -     (406)        -        (149)     (555) 
Transactions with owners 
Share acquisitions less 
 sales                                          -        -       1,216         -        -            -     1,216 
Share-based payments                            -        -           -     1,210        -            -     1,210 
Deferred tax in relation 
 to share-based payments                        -        -           -        45        -            -        45 
Dividends paid                        12        -        -           -  (10,062)        -            -  (10,062) 
Contingent acquisition 
 consideration                                  -        -           -       680    (680)            -         - 
Option over non-controlling 
 interest                                       -        -           -         -    2,728            -     2,728 
Other comprehensive income 
Currency translation differences                -        -           -         -    (117)            -     (117) 
---------------------------------  -----  -------  -------  ----------  --------  -------  -----------  -------- 
At 31 December 2020                           633   51,045     (3,594)    69,260    1,794            -   119,138 
Profit for the period                           -        -           -    13,110        -            -    13,110 
Transactions with owners 
Share acquisitions less 
 sales                                          -        -     (1,840)         -        -            -   (1,840) 
Share-based payments                            -        -           -       824        -            -       824 
Deferred tax in relation 
 to share-based payments                        -        -           -     (113)        -            -     (113) 
Dividends paid                        12        -        -           -  (10,066)        -            -  (10,066) 
Other comprehensive income 
Currency translation differences                -        -           -         -    (120)            -     (120) 
---------------------------------  -----  -------  -------  ----------  --------  -------  -----------  -------- 
At 30 June 2021                               633   51,045     (5,434)    73,015    1,674            -   120,933 
---------------------------------  -----  -------  -------  ----------  --------  -------  -----------  -------- 
 

Notes to the half year financial statements

1. General information

The financial statements for the six months ended 30 June 2021 and the six months ended 30 June 2020 do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2020 were approved by the Board of Directors on 17 March 2021 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 8 September 2021.

2. Basis of preparation

These condensed half year financial statements for the half year ended 30 June 2021 have been prepared in accordance with the AIM Rules for Companies, comply with IAS 34 Interim Financial Reporting and should be read in conjunction with the annual financial statements for the year ended 31 December 2020, which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 ("adopted IFRS").

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.

Going concern

The Group is profitable and cash generative and it is anticipated that this will continue. There is a high and continuing level of recurring revenue and high cash conversion.

The Directors have prepared cash flow forecasts covering a period of at least twelve months from the date of approval of these condensed half year financial statements. These forecasts, including consideration of reasonably possible downside scenarios linked to the principal risks and uncertainties set out in the strategic report of the Group's annual report and accounts for the year ended 31 December 2020, show that the Group will continue to operate with significant cash reserves and would not need to utilise the facility in place under any of the scenarios considered. Based on this assessment the Directors have a reasonable expectation that the Group has adequate resources to continue in existence for at least twelve months from the date of approval of these half year financial statements and therefore continue to adopt the going concern basis of accounting in preparing these condensed half year financial statements.

3. Accounting policies

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 2020.

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.

4. Critical accounting judgements and key sources of estimation uncertainty

In preparing the 2021 half year financial statements no significant judgements have been made in the process of applying the Group's accounting policies, and no significant estimations have been made that could have a material effect on the amounts recognised in the financial statements.

5. Principal risks and uncertainties

The 2020 Group annual report and accounts describes the principal risks and uncertainties that could impact the Group's performance. These risks relate to healthcare structure and procurement changes, software (product) development, people and culture, 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.

Covid-19 was described as an emerging risk in the 2020 Group annual report; however, the Board no longer regards this as an emerging risk which could materially impact the business, as the Group has proven its ability to continue to operate normally over an extended period of time including homeworking and video conferencing.

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 2020 Group annual report and accounts.

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.

The Directors have presented segmental information to reflect 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, cash and cash equivalents, and current and deferred taxes are not allocated to segments, as income tax, group and financing activities are not segment-specific.

 
                                            Six months ended               Six months ended 
                                               30 June 2021                   30 June 2020 
                                                Unaudited                      Unaudited 
                                      -----------------------------  ----------------------------- 
                                         EMIS         EMIS              EMIS         EMIS 
                                       Health   Enterprise    Total   Health   Enterprise    Total 
                                      GBP'000      GBP'000  GBP'000  GBP'000      GBP'000  GBP'000 
------------------------------------  -------  -----------  -------  -------  -----------  ------- 
Revenue                                54,254       29,258   83,512   54,003       24,115   78,118 
------------------------------------  -------  -----------  -------  -------  -----------  ------- 
Segmental operating profit 
 as reported internally                12,484        8,367   20,851   11,929        6,521   18,450 
Development costs capitalised           1,286          826    2,112    3,737          359    4,096 
Amortisation of development 
 costs                                (1,555)        (991)  (2,546)    (844)        (880)  (1,724) 
Amortisation of acquired intangible 
 assets                               (1,633)      (1,630)  (3,263)  (1,717)      (1,796)  (3,513) 
------------------------------------  -------  -----------  -------  -------  -----------  ------- 
Segmental operating profit             10,582        6,572   17,154   13,105        4,204   17,309 
Group operating expenses                                      (840)                          (678) 
------------------------------------  -------  -----------  -------  -------  -----------  ------- 
Operating profit                                             16,314                         16,631 
Net finance costs                                             (230)                          (121) 
Share of result of joint venture 
 and associate                                                  361                            424 
Other income                                                      -                            782 
------------------------------------  -------  -----------  -------  -------  -----------  ------- 
Profit before taxation                                       16,445                         17,716 
------------------------------------  -------  -----------  -------  -------  -----------  ------- 
 

Revenue excludes intra-group transactions on normal commercial terms from the EMIS Health segment to the EMIS Enterprise segment totalling GBP1,185,000 (2020 H1: GBP1,399,000).

Revenue of GBP54,173,000 (2020 H1: GBP55,826,000) is derived from the NHS and related bodies. Revenue of GBP1,765,000 (2020 H1: GBP1,861,000) is derived from customers outside the United Kingdom.

9. Revenue analysis

Revenue is analysed as follows:

 
                                        Six months ended               Six months ended 
                                           30 June 2021                   30 June 2020 
                                            Unaudited                      Unaudited 
                                  -----------------------------  ----------------------------- 
                                     EMIS         EMIS              EMIS         EMIS 
                                   Health   Enterprise    Total   Health   Enterprise    Total 
                                  GBP'000      GBP'000  GBP'000  GBP'000      GBP'000  GBP'000 
--------------------------------  -------  -----------  -------  -------  -----------  ------- 
Software subscription and 
 support                           38,909       11,975   50,884   38,075       10,794   48,869 
Interface and connectivity 
 charges                            3,007        9,088   12,095    2,234        7,483    9,717 
Other services                      5,124        2,788    7,912    4,168        2,582    6,750 
Hardware and related services       3,693        2,692    6,385    7,607        2,013    9,620 
Perpetual licences, training, 
 consultancy and implementation     3,521        2,715    6,236    1,919        1,243    3,162 
--------------------------------  -------  -----------  -------  -------  -----------  ------- 
                                   54,254       29,258   83,512   54,003       24,115   78,118 
--------------------------------  -------  -----------  -------  -------  -----------  ------- 
 

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% (2020: 19%). In March 2021 the UK government announced that the UK corporation tax rate for large companies would rise to 25% from 1 April 2023. This resulted in a one-off deferred tax charge of GBP261,000 in the period, with a corresponding increase in the Group's net deferred tax liability.

11. Earnings per share (EPS)

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

 
                                                  Six months  Six months         Year 
                                                       ended       ended        ended 
                                                     30 June     30 June  31 December 
                                                        2021        2020         2020 
                                                   Unaudited   Unaudited      Audited 
Earnings                                             GBP'000     GBP'000      GBP'000 
------------------------------------------------  ----------  ----------  ----------- 
Profit for the period                                 13,110      14,332       30,121 
Total comprehensive income attributable to 
 non-controlling interest                                  -          71          127 
------------------------------------------------  ----------  ----------  ----------- 
Basic earnings attributable to equity holders         13,110      14,403       30,248 
Development costs capitalised                        (2,112)     (4,096)      (6,590) 
Amortisation of development costs and acquired 
 intangible assets                                     5,809       5,237       11,100 
Release of contingent acquisition consideration            -           -      (1,020) 
Other income                                               -       (782)        (782) 
Tax and non-controlling interest effect of 
 above items                                           (703)       (258)        (925) 
------------------------------------------------  ----------  ----------  ----------- 
Adjusted earnings attributable to equity 
 holders                                              16,104      14,504       32,031 
------------------------------------------------  ----------  ----------  ----------- 
 
                                                      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                  (346)       (479)        (447) 
------------------------------------------------  ----------  ----------  ----------- 
For basic EPS calculations                            62,965      62,832       62,864 
Effect of potentially dilutive share options             582         368          634 
------------------------------------------------  ----------  ----------  ----------- 
For diluted EPS calculations                          63,547      63,200       63,498 
------------------------------------------------  ----------  ----------  ----------- 
 
 
                   Six months  Six months         Year 
                        ended       ended        ended 
                      30 June     30 June  31 December 
                         2021        2020         2020 
                    Unaudited   Unaudited      Audited 
EPS                     Pence       Pence        Pence 
-----------------  ----------  ----------  ----------- 
Basic                    20.8        22.9         48.1 
Basic diluted            20.6        22.8         47.6 
Adjusted                 25.6        23.1         51.0 
Adjusted diluted         25.3        22.9         50.4 
-----------------  ----------  ----------  ----------- 
 

12. Dividends

In relation to the 2020 financial year, an interim dividend of 16.0p was paid on 5 November 2020 amounting to GBP10,062,000, followed by a final dividend of 16.0p on 14 May 2021 amounting to GBP10,066,000.

For the 2021 financial year, the Directors are proposing an interim dividend of 17.6p, which will be payable on 4 November 2021 to shareholders on the register at 8 October 2021. This interim dividend, which will amount to approximately GBP11,085,000, has not been recognised as a liability in these half year financial statements.

13. Other intangible assets

 
                                                          Computer      Computer 
                                            Computer      software      software 
                                            software     developed      acquired 
                                                used  for external   on business       Customer 
                                          internally          sale  combinations  relationships    Total 
                                             GBP'000       GBP'000       GBP'000        GBP'000  GBP'000 
----------------------------------------  ----------  ------------  ------------  -------------  ------- 
Cost 
At 1 January 2020                              7,798        58,098        40,341         30,984  137,221 
Additions                                         96         4,096             -              -    4,192 
Acquisition of business                            -             -         2,989            962    3,951 
----------------------------------------  ----------  ------------  ------------  -------------  ------- 
At 30 June 2020                                7,894        62,194        43,330         31,946  145,364 
Additions                                        356         2,494             -              -    2,850 
----------------------------------------  ----------  ------------  ------------  -------------  ------- 
At 31 December 2020                            8,250        64,688        43,330         31,946  148,214 
Additions                                         75         2,112             -              -    2,187 
----------------------------------------  ----------  ------------  ------------  -------------  ------- 
At 30 June 2021                                8,325        66,800        43,330         31,946  150,401 
----------------------------------------  ----------  ------------  ------------  -------------  ------- 
Accumulated amortisation and impairment 
At 1 January 2020                              5,167        43,676        31,281         22,721  102,845 
Charged in period                                481         1,724         2,202          1,311    5,718 
----------------------------------------  ----------  ------------  ------------  -------------  ------- 
At 30 June 2020                                5,648        45,400        33,483         24,032  108,563 
Charged in period                                670         2,552         2,210          1,101    6,533 
----------------------------------------  ----------  ------------  ------------  -------------  ------- 
At 31 December 2020                            6,318        47,952        35,693         25,133  115,096 
Charged in period                                582         2,546         2,210          1,053    6,391 
----------------------------------------  ----------  ------------  ------------  -------------  ------- 
At 30 June 2021                                6,900        50,498        37,903         26,186  121,487 
----------------------------------------  ----------  ------------  ------------  -------------  ------- 
Net book value 
At 30 June 2021                                1,425        16,302         5,427          5,760   28,914 
At 31 December 2020                            1,932        16,736         7,637          6,813   33,118 
At 30 June 2020                                2,246        16,794         9,847          7,914   36,801 
At 1 January 2020                              2,631        14,422         9,060          8,263   34,376 
----------------------------------------  ----------  ------------  ------------  -------------  ------- 
 

14. Other financial liabilities

 
                                                  Six months  Six months         Year 
                                                       ended       ended        ended 
                                                     30 June     30 June  31 December 
                                                        2021        2020         2020 
                                                   Unaudited   Unaudited      Audited 
                                                     GBP'000     GBP'000      GBP'000 
------------------------------------------------  ----------  ----------  ----------- 
Current 
Contingent acquisition consideration - Pinnacle        2,000       2,000        2,000 
Contingent acquisition consideration - Dovetail            -         480            - 
------------------------------------------------  ----------  ----------  ----------- 
Total                                                  2,000       2,480        2,000 
------------------------------------------------  ----------  ----------  ----------- 
Non-current 
Contingent acquisition consideration - Pinnacle            -       2,000        2,000 
Contingent acquisition consideration - Dovetail            -         540            - 
Option over non-controlling interest                       -       2,728            - 
------------------------------------------------  ----------  ----------  ----------- 
Total                                                      -       5,268        2,000 
------------------------------------------------  ----------  ----------  ----------- 
 

In respect of the Pinnacle contingent acquisition consideration, a payment of GBP2,000,000 was made during the period, and a liability of GBP2,000,000 was reclassified from non-current to current liabilities.

15. Leases

Set out below are the carrying amounts of the Group's right-of-use assets and lease liabilities and the movements during the period:

 
                                                                                  Lease 
                                             Right-of-use assets            liabilities 
                                   ---------------------------------------  ----------- 
                                              Fixtures, 
                                        Land   fittings 
                                         and        and     Motor 
                                   buildings  equipment  vehicles    Total 
                                     GBP'000    GBP'000   GBP'000  GBP'000      GBP'000 
---------------------------------  ---------  ---------  --------  -------  ----------- 
As at 1 January 2020                   2,639         46       886    3,571      (3,934) 
Additions                              3,391          -       389    3,780      (3,780) 
Acquisition of business                  151          -         -      151        (156) 
Depreciation expense                   (367)       (16)     (294)    (677)            - 
Interest expense                           -          -         -        -        (191) 
Payments                                   -          -         -        -          777 
Effect of movements in exchange 
 rates                                   (6)          -         -      (6)            4 
---------------------------------  ---------  ---------  --------  -------  ----------- 
As at 30 June 2020                     5,808         30       981    6,819      (7,280) 
Additions                                 31          -       270      301        (301) 
Depreciation expense                   (491)       (16)     (269)    (776)            - 
Interest expense                           -          -         -        -        (195) 
Payments                                   -          -         -        -          731 
Effect of movements in exchange 
 rates                                 (134)          -         -    (134)          164 
---------------------------------  ---------  ---------  --------  -------  ----------- 
As at 31 December 2020                 5,214         14       982    6,210      (6,881) 
Additions                                  -          -        10       10         (10) 
Remeasurement of lease asset and 
 liability                                 -          -     (154)    (154)          154 
Depreciation expense                   (315)       (14)     (198)    (527)            - 
Interest expense                           -          -         -        -        (180) 
Payments                                   -          -         -        -          573 
Effect of movements in exchange 
 rates                                  (66)          -         -     (66)           79 
---------------------------------  ---------  ---------  --------  -------  ----------- 
As at 30 June 2021                     4,833          -       640    5,473      (6,265) 
---------------------------------  ---------  ---------  --------  -------  ----------- 
 

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 Group. 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  Six months         Year 
                             ended       ended        ended 
                           30 June     30 June  31 December 
                              2021        2020         2020 
                           GBP'000     GBP'000      GBP'000 
----------------------  ----------  ----------  ----------- 
Reported revenue            83,512      78,118      159,453 
Non-recurring revenue     (17,690)    (14,640)     (29,410) 
----------------------  ----------  ----------  ----------- 
Recurring revenue           65,822      63,478      130,043 
----------------------  ----------  ----------  ----------- 
 

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

Adjusted operating profit is operating profit from continuing operations excluding exceptional items, 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  Six months         Year 
                                                     ended       ended        ended 
                                                   30 June     30 June  31 December 
                                                      2021        2020         2020 
                                                   GBP'000     GBP'000      GBP'000 
----------------------------------------------  ----------  ----------  ----------- 
Reported operating profit                           16,314      16,631       35,776 
Development costs capitalised                      (2,112)     (4,096)      (6,590) 
Amortisation of computer software developed 
 for external sale                                   2,546       1,724        4,276 
Exceptional release of contingent acquisition 
 consideration                                           -           -      (1,020) 
Amortisation of intangible assets arising 
 on business combinations                            3,263       3,513        6,824 
----------------------------------------------  ----------  ----------  ----------- 
Adjusted operating profit                           20,011      17,772       39,266 
----------------------------------------------  ----------  ----------  ----------- 
 

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

 
                                                 Six months  Six months         Year 
                                                      ended       ended        ended 
                                                    30 June     30 June  31 December 
                                                       2021        2020         2020 
                                                    GBP'000     GBP'000      GBP'000 
-----------------------------------------------  ----------  ----------  ----------- 
Profit attributable to equity holders                13,110      14,403       30,248 
Development costs capitalised                       (2,112)     (4,096)      (6,590) 
Amortisation of computer software developed 
 for external sale                                    2,546       1,724        4,276 
Amortisation of intangible assets arising 
 on business combinations                             3,263       3,513        6,824 
Exceptional release of contingent acquisition 
 consideration                                            -           -      (1,020) 
Other income                                              -       (782)        (782) 
Tax and non-controlling interest effect of 
 above items                                          (703)       (258)        (925) 
-----------------------------------------------  ----------  ----------  ----------- 
Adjusted profit attributable to equity holders       16,104      14,504       32,031 
-----------------------------------------------  ----------  ----------  ----------- 
 

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  Six months         Year 
                                               ended       ended        ended 
                                             30 June     30 June  31 December 
                                                2021        2020         2020 
                                             GBP'000     GBP'000      GBP'000 
----------------------------------------  ----------  ----------  ----------- 
Reported cash generated from operations       17,017      36,568       64,138 
Development costs capitalised                (2,112)     (4,096)      (6,590) 
Cash cost of exceptional items                     -       1,303        1,303 
----------------------------------------  ----------  ----------  ----------- 
Adjusted cash generated from operations       14,905      33,775       58,851 
----------------------------------------  ----------  ----------  ----------- 
 

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 2021 the Group was in a net cash position, with no borrowings.

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END

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September 09, 2021 02:00 ET (06:00 GMT)

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