EMIS – Vital Pandemic Role See Revenue Climb But Earnings Quality A Question

EMIS – Vital Pandemic Role See Revenue Climb But Earnings Quality A Question
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Emis Group Plc (LON:EMIS) reported first half revenues of £83.5m, up 7% year-on-year. That reflects particularly strong growth in EMIS Enterprise, following the introduction of a national vaccination system to record and communicate vaccination status across the NHS and to individuals.

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Q2 2021 hedge fund letters, conferences and more

Operating profits rose 13% to £20.0m, although cash conversion declined as the benefits of delayed VAT payments during the pandemic unwound.

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The group announced an interim dividend of 17.6%, up 10% year-on-year.

EMIS shares fell 1.0% in early trading.

Impressive Growth In EMIS Enterprise

“EMIS’ role delivering digital services to GPs and community pharmacies made it a crucial lynchpin in the pandemic response. Its Outcomes4Health product was at one point the only system capable of recording vaccines done outside a hospital setting, and has recorded 66 million vaccines to date. Together with growth in its Patient Access product, that drove impressive growth in EMIS Enterprise – which services private sector providers. That in turn has driven a 10% increase in the dividend this half.

However, we have some worries about the quality of the current revenue surge. Recurring subscription revenues, which still account for nearly 80% of total group revenue, have seen growth slow this half and cash flow has gone backwards (albeit mainly down to a VAT bill from 2020). One off revenues are great, but recurring revenues are better. Some of the revenue shift can be put down to training sales delayed during the pandemic, but it’s not a feature we’d like to see become a trend.”

Article by Nicholas Hyett, Equity Analyst at Hargreaves Lansdown

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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