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

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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