EMIS Group plc
Annual Report and
Accounts 2010
Healthcare
without boundaries
Business and financial review
A year of strengthening our foundations
EMIS Group plc is the UK’s leading supplier
of clinical software and related services to
GPs and other healthcare practitioners,
with approximately 39 million patient records
in the UK held on EMIS’ software.
Established in 1987, EMIS’ core activities include software licensing
and support, hosting, hardware sales and maintenance services,
third party software sales and training services.
The EMIS software includes all of the functionality as specified
in NHS accreditation standards for GPs, including holding
the patient’s cradle-to-grave healthcare record, practice
appointment booking systems and consultation and intelligent
prescribing modules.
EMIS was admitted to AIM on 29 March 2010.
Discover more online
Visit our online report for additional features
and supporting content:
ar10.emis-online.com
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GP market share
53.8%
EMIS GP practices
5,576
Pharmacy market share
25%
Number of retail pharmacies
over
3,000
Revenue
+8%
£62.4m
Adjusted operating profit
+11%
£17.6m
Adjusted cash generated
from operations(1)
+20%
£18.4m
Total dividend for the year
Adjusted earnings per share
11.2p
+10%
21.78p
(1) Cash generated from operations less
internal development costs capitalised.
IFC A year of strengthening
our foundations
A brief outline of the company’s
financial and operational
achievements of the year
02 Our highlights
A brief outline of the company’s
highlights of the year
03 Our business
A brief outline of the company’s
business model
04 Chief executive’s overview
The Chief Executive’s overview
of the performance for the year
06 Business review
06 Operational review
Report on the company’s
operational performance
10 Financial review
The Finance Director’s report
on the company’s operational
and financial performance
14 Corporate social responsibility
An account of how the company
has adhered to its responsibilities
to its employees, environment
and the community
17 Directors
Brief biographies of all directors
of the company
18 Advisers and shareholder information
19 Directors’ report
23 Directors’ remuneration report
25 Corporate governance report
28 Independent auditors’ report
29 Group statement of
comprehensive income
30 Group and parent company
balance sheets
31 Group and parent company
statements of changes in equity
32 Group and parent company
statements of cash flows
33 Notes to the financial statements
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EMIS Group plc Annual Report and Accounts 2010
EMIS Group plc Annual Report and Accounts 2010
01
Business and financial review
Our highlights
Financial highlights
Total revenue
Core activities(1) (EMIS/RX Systems):
– recurring revenue
– operating profit
Adjusted operating profit(2)
Cash generated from operations
Net cash/(debt)
EPS
EPS – adjusted(3)
Dividends:
– proposed final
– total dividend for year
2010
2009
Increase
£62.4m £57.7m
8%
£50.8m £42.7m
£19.6m £17.0m
£17.6m £15.8m
£22.2m £19.9m
19%
15%
11%
£2.3m
£(1.7m) £3.4m
19.88p
19.88p
(0.2)%
10%
£1.7m
19.84p
21.78p
5.6p
11.2p
—
—
—
—
(1) Excludes the Canadian operation discontinued post year end.
(2) Adjusted operating profit includes flotation and other transaction costs of £1.26m.
(3) Calculation of 2010 adjusted EPS excludes flotation and other transaction costs of £1.26m less related tax relief of £0.16m.
Operational highlights(1)
A UK GP software market leading position:
A growth in UK market share to 53.8% (2009: 52.5%)
A 5,576 EMIS GP practices at year end (2009: 5,377 EMIS GP practices)
A market share in Scotland increased from 12.7% to 51.5% by year end
A EMIS Web accredited September 2010 and controlled roll-out commenced.
By the year end:
A 44 GP practices installed
A 433 orders placed
A 1,665 orders for the EMIS Web familiarisation service
A RX Systems:
A alignment on track
A high street pharmacy market share increased from 20.5% to 25.0%
A Strategic review of Canadian operation concluded and managed exit underway.
A Transformation of healthcare delivery in the UK opening up new markets for EMIS Web:
A in January 2011 EMIS won a five year contract, with an initial value of £1.8m, to deliver a shared patient healthcare
record for primary healthcare teams across Cheshire
A EMIS continues to pilot EMIS Web across a variety of healthcare sectors in Liverpool, London and Cumbria
A EMIS chosen to provide electronic healthcare records for the Australian Department of Defence
under a five year contract.
(1) EMIS and RX Systems data estimated based on subsidiary company records showing customers installed or ordered (by contract or letter of intent)
as at 31 December 2010.
02
Annual Report and Accounts 2010 EMIS Group plc
Our business
EMIS Group plc, through its subsidiaries Egton Medical
Information Systems Limited and RX Systems Limited,
is the UK’s leading supplier of clinical software and
related services to GPs and other healthcare practitioners.
The Group’s core activities include software licensing
and support, hosting, hardware sales and maintenance
services, third party software sales and training services.
Our business
Healthcare core products
A EMIS Web is the first new clinical
system available to GPs in eleven
years. Transforming patient care
and NHS efficiency by allowing
primary, secondary and community
healthcare practitioners to view
and contribute to a patient’s
cradle‑to‑grave healthcare record.
A EMIS PCS is a fully integrated,
intuitive GP clinical system. The
popular Windows-based system
is used by general practices
throughout the UK, helping to
streamline practice efficiency
and maximise QOF points.
Pharmacy
A RX Systems Limited
In August 2010, EMIS acquired 78.9%
of RX Systems Limited (RX Systems),
a supplier of integrated pharmacy
and retail systems for community
pharmacies. RX Systems has a
significant customer base of over
3,000 pharmacies and a 25% share
of this market.
A Pharmacy2U is one of the larger
dedicated mail order and online
NHS pharmacy companies of
its type in the UK. EMIS has a
20% shareholding.
A EMIS Dental is designed to support
the detailed care processes involved
in the encounters between the
patient and the dental professional,
as well as the smooth day to day
running of the dental practice.
A EMIS LV was originally launched
in the late 1980s and has been the
most widely used clinical system
for over two decades.
A QUTE brings together primary
and secondary care records which
enables GPs to view a continuum
of care, admin staff to easily reconcile
cost information and PCTs and
commissioners to carry out
detailed searches and reports.
Ministry of Defence (MoD)
A In 1995 EMIS was selected to
provide the MoD with their Primary
Health Care Information System
software which is now installed
in over 200 sites worldwide.
A Awarded a five year contract
in February 2011, as part of
prime contractor, CSC’s, bid to
provide an e-health system to the
Australian Government for use by
its armed forces.
Sharing patient data
A Healthcare Gateway
A 50:50 joint venture company was
established with INPS in June 2010
to facilitate the sharing of patient
data via a medical interoperability
gateway (MIG).
Read about how our business functions in
the real world through our case studies:
and on our website:
p05-13
www.emis-
online.com
EMIS Group plc Annual Report and Accounts 2010
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Business and financial review
Chief executive’s overview
Sean Riddell
Chief Executive
“ 2010 has been a busy year for EMIS Group. In our core business we have
achieved accreditation and started the controlled roll‑out of EMIS Web,
our transformational next generation healthcare IT system. Working
with GPs and commissioning groups to fulfil the objectives described
in the NHS White Paper, we are already seeing a high level of intent to
upgrade. Of the first wave of 52 GP consortia announced to date, representing
22% of England’s GP practices, 77% are already EMIS users. These pathfinder
organisations will shape the way that GP consortia operate in the future.
We made the strategic acquisition of RX Systems, significantly increased
our market share in Scotland, formed a joint venture to deliver wider
interoperability through Healthcare Gateway, progressed existing and
new extended primary care and community projects in Liverpool,
London, Cumbria and Cheshire and extended our international reach
into Australia.
We remain focussed on cross‑organisational healthcare and are
confident that we can help healthcare professionals to deliver clinical
benefit and improved efficiency through our software and services.”
EMIS Group, through its subsidiary
companies EMIS and RX Systems, is a
major provider of healthcare IT, software
and services in the UK. EMIS is the UK
GP software market leader with 53.8%
(5,576) of UK GP practices and over
60% of the cradle-to-grave electronic
healthcare records. RX Systems provides
healthcare IT, software and services to
25% of UK high street pharmacies.
EMIS Group’s objective is to improve
patient healthcare via the provision of
healthcare IT, software and services.
To achieve this, the group’s strategy
is to join up the patient’s electronic
healthcare record across the many
clinicians and organisations that assist
in the patient journey. We maintain a
“healthcare first” ethos in delivering this
cross‑organisational healthcare.
The NHS in England is undergoing a
combination of political upheaval and
austerity challenges and has moved its
position away from the development
of centralised national systems to a
“connect all” strategy. This has been
further defined in a Government White
Paper, which confirms the ring fencing
of the public health budget, the increase
in real terms of NHS spending, sharing
of information being the key to better
care, outcomes and reduced cost,
and devolved power for commissioning
services passing to local consortia
of GP practices. With over 60% of
cradle‑to‑grave electronic healthcare
EMIS Group won IPO of the
Year at the Quoted Company
Awards 2011.
04
Annual Report and Accounts 2010 EMIS Group plc
20+ years track record of
organic growth
EMIS was established in 1987 and has since
grown organically, reinvesting its earnings to
fund further growth for over 20 years
In Cheshire EMIS Web
will allow primary
and secondary care
clinicians to access vital
information about their
patients’ health and
for the whole team
to work together to
provide joined‑up care.
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records in the UK and the
cross-organisational functionality of
EMIS Web, EMIS is well positioned for
future growth in the environment of the
recently proposed NHS strategic changes.
The envisaged transformation of
healthcare delivery opens up new
markets for EMIS Web. In addition to
the estimated 157,000 staff currently
based in GP practices, 292,000 staff
work in extended primary and community
healthcare, representing additional
potential markets for EMIS. EMIS Web
is already live in these new markets
with strategic healthcare partners
including the NHS in Tower Hamlets,
Cumbria and, latterly, Cheshire where
EMIS Web will become the main
clinical information system for the
whole primary healthcare team of
approximately 4,000 clinicians working
across a diverse range of healthcare
settings. In Liverpool, we have
successfully linked primary, out of
hours and secondary healthcare IT
systems. This improves patient care
and delivers significant efficiencies
by providing vital patient information
at the point of need. With the formal
accreditation process for EMIS Web
now complete, this is a model that
we intend to replicate in other
healthcare communities.
Sean Riddell
Chief Executive
17 March 2011
The Cheshire initiative will be a major implementation of the
EMIS Web cross-organisational healthcare system outside
GP surgeries, with 933 EMIS Web access points installed
in acute trusts, mental health facilities, clinics and some
community facilities.
Using EMIS Web, the whole primary healthcare team,
approximately 4,000 health professionals including
community nurses and physiotherapists, will be able to
record their own patient interventions in the software.
Clinicians across primary and secondary care will also
be able to view relevant information from the GP patient
record, subject to patient consent and locally agreed
data‑sharing protocols.
EMIS Group plc Annual Report and Accounts 2010
05
Business and financial review
Business review
Thousands of patients
in Cumbria are benefiting
from care closer to home,
thanks to seamless
data sharing across
a large rural area
using EMIS Web.
Operational review
EMIS’ core business remains stable
and continues to perform well,
responding to the ongoing change
within the NHS. Our overall UK market
share as a result of gaining 398 GP
practices in Scotland has increased
from 52.5% to 53.8%.
During 2010, core recurring income
from licensing and software support
increased by 8.9% to £31.7m compared
with £29.1m in 2009, arising mainly
from an increase in accredited hosting
deployments. 608 practices were
migrated to EMIS-hosted servers
during the year.
Income from hardware sales,
engineering services and training
reduced to £21.7m (2009: £24.8m).
Not surprisingly, discretionary spend
on hardware, engineering services and
training was affected by pressure on
NHS budgets and political uncertainty.
It also appears that some spending is
being deferred in anticipation of the
roll-out of EMIS Web. We expect that
pressure on NHS budgets will continue
to impact discretionary spend.
Scotland represents a significant area
of new business growth for the future.
NHS Scotland opted to replace the
legacy GP System (GPASS) used by
683 practices and, in January 2010,
selected EMIS as one of only two
systems to which GPASS practices
Delivering joined-up care in Cumbria
GP practices in South Lakes are using
EMIS Web, with patient permission,
to securely share patient information
with a range of community health teams.
14 out of 22 GP practices in the area
– serving 75,000 patients – are now
streaming patient information via EMIS
Web, facilitating use by colleagues
working in other areas of healthcare.
More GP practices are expected to
join the scheme, which would bring
the total patient coverage to 110,000.
06
Annual Report and Accounts 2010 EMIS Group plc
High visibility of earnings
with recurring revenues
EMIS Group has high visibility of earnings with the
majority of its income coming from annual licence
fees and related support contracts.
GP market share(1)
Scotland
Market share
51.5%
530
No. of practices
England
Market share
55.8%
4,736
No. of practices
Northern Ireland
Market share
42.5%
151
No. of practices
Wales
Market share
32.1%
159
No. of practices
could upgrade. Health Boards in
Scotland that have already recommended
EMIS software to replace the GPASS
system include the largest, NHS Greater
Glasgow and Clyde. EMIS’ market
share in Scotland grew from 12.7% (132
practices at 1 January 2010) to 51.5%
(530 practices, installed or ordered at
31 December 2010). The additional
revenue will largely fall into 2011 onwards.
During 2010, EMIS achieved its major
objective for the year; the accreditation
of EMIS Web, and then focussed on
commencement of the controlled
roll-out of EMIS Web to GP practices.
At the same time, we began to put in
place the significant internal resource
which will be required to accelerate the
roll-out of EMIS Web whilst continuing
to meet customer expectations.
As at 31 December 2010, installation
had been completed at 44 GP practices,
433 orders had been placed for
EMIS Web systems and orders had
been received from 1,665 GP practices
for the familiarisation service, which
allows GP practices to run EMIS Web
alongside their existing system before
upgrading. Since the year end,
installation has been completed
at a further 33 GP practices.
(1) EMIS data estimated based on company records showing
customers installed or ordered (by contract or letter of intent)
as at 31 December 2010.
“ Using EMIS Web means patient care
can become safer and more efficient.”
Dr William Lumb
Sedbergh Health Centre
For further information
on this story visit:
www.emis-online.
com/casestudies
EMIS Group plc Annual Report and Accounts 2010
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Business and financial review
Business review
continued
The acquisition of
RX Systems represents
a unique strategic
opportunity for EMIS
to develop further
its presence in this
adjacent segment
of the healthcare
IT market.
Operational review continued
As part of the group’s strategy to
deliver cross-organisational healthcare,
we are also in negotiation with a
number of NHS Primary Care Trusts
(PCTs) and GP consortia regarding the
implementation of EMIS Web for use
in extended primary and community
healthcare. This has led to a number of
successes with contracts signed with
the NHS in Tower Hamlets, Liverpool,
Cheshire and Cumbria.
Also in line with our strategy of joining
up healthcare, in August 2010, the
group acquired 78.9% of RX Systems,
a supplier of pharmacy and integrated
retail systems for a consideration of up
to £10.1m (including a completion
accounts net assets adjustment).
The non‑controlling shareholding has
been retained by a strategic partner
that itself runs over 500 high street
pharmacies in the UK and provides
invaluable domain knowledge and
assistance. At acquisition, RX Systems
had a significant UK-wide customer base
of 2,500 pharmacies, representing
a 20.5% share of this market. By
the end of 2010, during a successful
integration period, RX Systems’ market
share in the UK had risen from 20.5%
to 25%. The group’s alignment team
had also begun work on a number of
significant projects that can be exploited
for the benefit of both businesses.
Delivering integrated pharmacy systems
Operating throughout the UK,
RX Systems has developed a range
of integrated pharmacy and retail
systems and services for the community
pharmacy, including its core product,
ProScript®, a Windows-based dispensary
management system. The company
also provides information required under
the NHS IT programme for pharmacist
audit and remuneration purposes.
08
Annual Report and Accounts 2010 EMIS Group plc
Targeted acquisitive growth
EMIS Group plc acquired 78.9% of the issued
share capital of RX Systems Limited, a pharmacy
software and services company.
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The development of this healthcare
gateway has been driven by demand
from the NHS and other healthcare
providers to move to a “connect all”
ethos. The need for wider access
to a critical mass of cradle‑to‑grave
electronic healthcare records is
increasingly important given the drive
to deliver more NHS services in the
community. It is expected that both
the NHS and other software providers
seeking to further connect computer
systems in the NHS will buy services
from Healthcare Gateway and product
development and marketing are
well underway.
In 2010, we have delivered on key
promises we made at the time of our
IPO, namely the successful accreditation
and commencement of controlled
roll-out of EMIS Web, the significant
increase in our market share in Scotland,
and progress in facilitating the delivery
of cross‑organisational healthcare
through the acquisition of RX Systems
and our joint venture with INPS.
Close interoperability between pharmacy
and GP software systems will enable
streamlining of the prescription process
and links into the patient electronic
healthcare record. Provision of EMIS’
proprietary patient information leaflets
and drugs information leaflets will also
broaden the healthcare knowledge
available to pharmacists and patients
in the high street.
As stated at the half year, EMIS Inc.,
the group’s Canadian subsidiary,
had not made the progress previously
anticipated. Action was taken, staff
numbers reduced and a strategic
review commenced. Since the year
end, the strategic review has been
concluded and a managed exit is
now underway.
Healthcare Gateway Limited, a 50:50
joint venture company, was established
with In Practice Systems Limited (INPS)
to facilitate the sharing and transfer
of patient data. This allows real time
interoperability between GPs using
EMIS Web, those using INPS software
and other healthcare professionals
within the NHS. It has the potential to
significantly increase efficiency in the
NHS as well as help practitioners to
improve patient care. EMIS and INPS
software users in the UK represent circa
75% of GP practices and together hold
approximately 46 million electronic
healthcare records.
“ RX Systems software has a strong reputation and a
loyal community pharmacy customer base. Joining
forces enables both EMIS and RX Systems to identify
the best way to provide GPs and pharmacists with
appropriate levels of interoperability to further improve
patient care and efficiencies in the prescribing
environment. This means real benefits for patients,
GPs and pharmacists alike.”
For further information
on this story visit:
www.emis-online.
com/investors
Sean Riddell
Chief Executive
EMIS Group plc
EMIS Group plc Annual Report and Accounts 2010
09
Business and financial review
Business review
continued
‘‘ EMIS Group is in a period of transition from a locally hosted healthcare
IT software company, with servers predominantly based at the user’s
premises, typically those of GPs, to a business that will primarily provide
hosted software and services from its own data centres and with a variety
of users across primary, extended primary and community care settings.
A key area of focus of the group during 2010 was to start to put in place
the infrastructure that will facilitate this transition. This will continue
during 2011.’’
Phillip Woodrow
Finance Director
Financial review
With this background of investment
and at this early stage, it is pleasing
to report increased pre-tax profits
for the year amounting to £16.1m
(2009: £14.5m).
Revenue
Total group revenue was £62.4m,
an increase of £4.7m over 2009.
As indicated above, core business
recurring revenue, which excludes
Canada, increased by £8.1m (19%)
to £50.8m (2009: £42.7m). This includes
hosting to Connecting for Health
standards, which commenced at the
end of December 2009 and generated
revenues of £4.5m in 2010.
The increased core recurring revenue
was partly offset by a reduction in
PCT spending on hardware and other
services being generally lower margin
revenue streams. As a result, recurring
revenue was 82% of core revenue,
up from 74% for 2009.
Selected financial extracts
Core business(1)
Revenue
Including:
Core recurring revenue
Core business operating profit:
– add amortisation
– deduct capitalised development costs
Adjusted core business operating profit
Cash and receivables less current bank debt and payables
EPS – basic and diluted(1)
EPS – adjusted(2)
(1) Excluding EMIS Inc.
2010
2009
EMIS
and RX
Systems
combined
£m
RX
Systems
£m
5.0
61.9
EMIS
£m
56.9
EMIS
£m
57.7
46.6
4.2
50.8
42.7
19.4
2.1
(3.8)
17.7
0.2
0.3
—
0.5
19.6
2.4
(3.8)
18.2
Group
2010
£m
5.0
17.0
2.1
(4.6)
14.5
2009
£m
4.6
Pence
Pence
19.84
21.78
19.88
19.88
(2) Calculation of 2010 adjusted EPS excludes flotation and other transaction costs of £1.26m less related tax relief of £0.16m.
10
Annual Report and Accounts 2010 EMIS Group plc
Profitable and cash generative
The group is profitable, generating an operating
profit of approximately £16.4m on turnover
of approximately £62.4m for the financial
year ended 31 December 2010.
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(before deduction of intangibles
amortisation) of £0.55m to the group’s
2010 results. RX Systems’ market
share has now grown to 25% and the
group’s alignment team has identified
a number of significant synergies to be
exploited by both businesses in 2011
and beyond.
Dividend
The directors have adopted a progressive
dividend policy. Subject to shareholder
approval at the Annual General Meeting
on 24 May 2011, the board proposes
paying a final dividend of 5.6p per
ordinary share on 30 May 2011 to
shareholders on the register at the
close of business on 26 April 2011.
This would make a total dividend of
11.2p per ordinary share for 2010.
Profitability
Operating profit, adjusted to add back
flotation and other transaction costs of
£1.26m, was £17.6m (2009: £15.8m),
an increase of 11.4%. Excluding Canada,
core business operating profit increased
by £2.6m to £19.6m (2009: £17.0m).
Stripping out the capitalised internal
development costs and amortisation
of intangibles, the adjusted operating
profit from our core business was
£18.2m (2009: £14.5m).
The increase of £359,000 in the
intangibles amortisation charge this
year to £2.4m (2009: £2.1m) arises
mainly on the RX Systems’ acquisition.
Taxation
Our percentage tax charge is high as
the losses of the group’s Canadian
subsidiary cannot be offset against UK
profits for tax purposes. The overall
rate reduced over the second half of
2010 as the benefit of the recent
restructuring of the Canadian subsidiary
took effect. It also reflects the reduction
of the anticipated future corporation
tax rate, from 28% to 27%, on the year
end deferred taxation provision held
to offset the future amortisation of
intangible assets.
Earnings per share (EPS)
Basic and diluted EPS was 19.84p as
against 19.88p for 2009. EPS, adjusted
for flotation and other transaction costs,
net of applicable tax relief, amounting
to £1.1m was 21.78p (2009: 19.88p).
Since the flotation in March 2010, the
group has been funded principally by
equity, whereas previously it had a
shareholder loan of £23m.
Cash
The flotation in March 2010 raised £50m
gross, £25m for the group (£23.2m net
of costs) and £25m less costs for
existing shareholders. The group net
proceeds were used principally to repay
loans made available by the group’s
founder shareholders of £23m. Other
principal cash movements are shown
in the table below.
RX Systems acquisition
In August 2010 the group acquired
78.9% of RX Systems Limited, a
supplier of integrated pharmacy and
retail systems for high street pharmacies.
RX Systems has performed in line with
management expectations since
acquisition, contributing revenue
of £4.98m and operating profit
Cash movements in year
Cash from operations:
Generated
Less internal development costs capitalised
Used for/other movements:
Acquisition of 78.9% of RX Systems (net of RX own cash)
Net spending on computers, cars, etc.
Bank term loan repayments
Share issues
Repayment of shareholder loans
Bank and other interest
Tax paid
Interim dividend paid
Cash increase/(decrease) in year
EMIS Group plc Annual Report and Accounts 2010
2010
£m
2009
£m
22.2
(3.8)
18.4
(3.1)
(5.3)
(1.2)
24.0
(23.0)
(0.4)
(3.9)
(3.3)
19.9
(4.6)
15.3
—
(3.8)
(6.6)
—
—
(2.6)
(3.1)
—
(16.2)
(16.1)
2.2
(0.8)
11
Business and financial review
Business review
continued
Healthcare
Gateway Limited,
a joint venture
company between
leading GP software
providers EMIS and
INPS, has been
awarded NHS
Interoperability
Toolkit (ITK)
accreditation
for its Medical
Interoperability
Gateway (MIG)
product.
Our people and the board
EMIS Group remains at heart a people
business with a “healthcare first” ethos
and reputation built on the efforts of its
employees. We would like to take this
opportunity to thank all our employees
for their commitment and hard work
without which this year could not
have been such a success.
In particular, we would like to thank
founder Tony Jones who stepped down
as chair of the board of directors
on 17 March 2011 after making a
20 year contribution to the group.
We would also like to welcome
Mike O’Leary who was appointed
in his place on the same day.
Current trading and outlook
Since the year end, trading has continued
in line with management expectations.
As stated at the time of our IPO, EMIS
supplies GP software and certain other
services in England under a framework
agreement extended in June 2009 until
August 2011. It is expected that this will
be further extended until August 2013
in accordance with provisions contained
in the agreement.
Strong revenue visibility, subject to the
anticipated extension of the GPSoC
agreement, continues into 2011 with
recurring revenues expected to rise.
Delivering efficiencies
The MIG – one of the first products
to receive ITK accreditation – is a
new secure gateway that will open up
access to the patient records held by
the 75% of GP practices using EMIS
and INPS systems. It will provide
two-way access to the records for
relevant NHS professionals.
By sharing real-time patient information
at the point of need, it has the potential
to significantly increase NHS efficiency
as well as to improve patient care.
12
Annual Report and Accounts 2010 EMIS Group plc
History of successful product
development
EMIS Web is evidence of the group’s ongoing
ability to innovate and lead the market with
new product developments.
The controlled roll-out of EMIS Web
is progressing as planned and the
additional resources are being put in
place in anticipation of a managed
acceleration in the roll‑out rate in the
second half of the year. The intention
remains to maximise deployment while
minimising customer impact. 33 GP
sites have been installed so far in 2011,
with 247 further install dates given.
We believe that there will be further growth
in revenues from the accelerated roll‑out
of EMIS Web, increasing hosting revenues
and greater RX Systems’ revenues, but
that current pressure on customers’
discretionary hardware and engineering
services spend will continue during 2011.
We therefore expect revenues in 2011 to
be weighted towards the second half of
the year.
As already indicated, EMIS Inc., having
not made the progress previously
anticipated, a managed exit is now
underway. We expect that the 2011
Canadian loss, including the costs of the
managed exit, will amount to £1.1m of
which £0.9m will be a cash cost.
There will also be an impairment
charge of £1.4m.
Anticipating the recent White Paper on
the NHS, EMIS’ product strategy, coupled
with its extensive and loyal GP user base
and “healthcare first” ethos, places EMIS
in a strong position to benefit from the
transfer of PCT budgets to GP consortia
and the focus on patients rather than
administrative organisations.
In the case of extended primary and
community healthcare systems, NHS
organisations in Liverpool and Cumbria
both signed pathfinder agreements in
May 2010 from which revenues of £58k
arose and this is expected to increase
throughout 2011. Furthermore,
in January 2011, we signed a five year
contract with a minimum value of £1.8m
to deliver a shared care record for primary
healthcare teams across Cheshire. In
March 2011, through Healthcare Gateway,
we also began to pilot the transfer
of discharge summaries and sharing
of detailed electronic healthcare
records in London and Cumbria.
EMIS continues to supply healthcare
software to the MoD in the UK and has
built on this success with a contract win,
in February 2011, as part of prime
contractor, CSC’s, bid to provide an
e-health system to the Australian
Government for use by its armed forces.
It is expected that development
customisation work will take place in
2011, with implementation starting in
2012. This has been described by the
Commander of Australia’s Joint Health
Command as “…a significant milestone
in the delivery of an electronic health
information system”.
Finally, RX Systems brings the opportunity
to link GP practices with high street
pharmacists and so help pharmacists
to expand their services, work more
efficiently, and play a greater role in the
wider healthcare team. The alignment of
RX Systems is proceeding in accordance
with management expectations and
significant synergies have been identified
which will offer opportunities during 2011
and beyond.
We are confident that we have put in
place solid foundations for future growth.
We will continue to build on these
foundations and are pleased with
progress and performance to date,
of which our employees can rightfully
be proud.
Sean Riddell
Chief Executive
17 March 2011
Phillip Woodrow
Finance Director
17 March 2011
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“ We are excited about the potential of the
MIG to transform NHS efficiency and patient
care by seamlessly connecting different
healthcare professionals. Receiving ITK
accreditation demonstrates the robustness
of the technology and will provide extra
reassurance for our customers.”
For further information
on this story visit:
www.emis-online.
com/news
Peter Anderson
Commercial Director
Healthcare Gateway Limited
EMIS Group plc Annual Report and Accounts 2010
13
Corporate governance
Corporate social responsibility
Healthcare software
is a business where
relationships are key.
Delivering better
services for patients
and reducing NHS
costs underpins
everything we do.
We have a clear strategy for further growth
and this cannot be achieved without
a commitment to retain, engage and
develop our people as well as developing
key relationships with customers,
suppliers, shareholders and the
communities in which we work and live.
Following admission to AIM, the company
has taken the opportunity to review
the many examples of good CSR
practice already in place and the key
aim in the coming year is to build the
framework and implement a sound
CSR strategy.
The EMIS Group Corporate Social
Responsibility Policy was approved by
the board during the year and is available
on the group’s website. The Policy covers
the key areas of:
A Employees
A Health and Safety
A Engagement with the Wider Community
A Environment
A Ethical Business Practices
Employees
Employees are central to the sustained
success of the business. It is essential
we recruit and retain the right candidates
to support the development of the
business. To better equip managers
who are recruiting new employees,
a series of recruitment workshops
have been delivered.
QResearch
QResearch® is a large consolidated
database derived from the anonymised
health records of over twelve million
patients. This is a not-for-profit health
research project.
The data currently comes from 602
general practices using the EMIS
clinical computer system. The practices
are spread throughout the UK and
include data from patients who are
14
Annual Report and Accounts 2010 EMIS Group plc
A framework for
responsible business
The group is committed to working in
collaboration with employees, customers,
suppliers, shareholders and communities.
All employees attend a comprehensive
induction programme shortly after
joining the company to gain a wider
understanding of the business.
Sean Riddell, our Chief Executive,
attends these courses and personally
welcomes all new starters when available.
After twelve months’ employment,
all UK employees can participate in
The EMIS Group plc Share Incentive
Plan (the “SIP”). The SIP enables
employees to buy shares out of pre-tax
salary each month and receive one
matching share for every four purchased.
172 employees currently participate
which is 23% of the eligible workforce.
Employee development is a key factor
in attracting and retaining the right
people. In 2010 over 500 staff attended
training courses. There are more than
60 on-line e-learning solutions and a
number of face-to-face courses available
to employees covering not only technical
areas but also professional development.
Health and Safety
EMIS is committed to the promotion
of a positive safety culture. A health
and safety committee meets on a regular
basis to discuss all relevant health and
safety issues and the EMIS Group
board receives quarterly health and
safety reports. The committee has
access to specialist external health
and safety advice as required.
All accidents and incidents are monitored
and reviewed so that action can be
taken where necessary.
All employees attend a tailored health
and safety induction which includes
manual handling training and how to
undertake display screen equipment
assessments. The results of all risk
assessments are recorded and any
required actions followed up by
the competent person.
Fleet drivers are issued with a safety
pack and a comprehensive handbook
covering the health and safety
guidelines for employees driving
company vehicles.
Community
Employees engage in a wide range
of activities to raise money for local
and national charities. These include
sporting events, raffles and dress
down days. The company makes a
number of charitable donations each
year and sponsors sports kit for local
school football teams.
The company provides work experience
for students, supports college
apprenticeships, provides extended
work placements and has attended a
recruitment fair held at a local school.
The company facilitates the giving
of blood by arranging for the National
Blood Service to visit the head office
once a quarter.
It is recognised that there is a desire
amongst staff to engage with the wider
community and that a community
engagement programme can be a
factor in the recruitment and retention
of employees. A key focus in the
coming year will be looking to what
more the company can do to enable
wider community engagement by
developing key strategic partnerships
and a structured approach.
Environment
As a responsible employer, the company
is committed to the minimisation of waste
and the reduction of the amount of energy
consumed. Recycling, in particular of
IT equipment, is encouraged wherever
possible. Any disposal of IT waste is
carried out in an appropriate manner
in accordance with the Hazardous
Waste Directive.
The company promotes a purchasing
policy which gives preference, as far as
practicable, to those products and
services which cause the least harm
to the environment. When conducting
supplier reviews, the company ensures
that all suppliers adhere wherever
possible to recommended environmental
policy regulations.
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currently registered with the practices
as well as patients who have died or left.
Historical records extend back to the
early 1990s making it one of the largest
and richest general practice databases
in the world. The aim is to develop and
maintain a high quality database of
general practice derived data for
use in ethical medical research.
For further
information on
corporate governance:
www.emis-online.
com/investors
EMIS Group plc Annual Report and Accounts 2010
15
Corporate governance
Corporate social responsibility
continued
Environment continued
The environmental policy seeks to
ensure compliance with environmental
legislation and that waste production
is minimised. A review of this activity
to identify new opportunities for
waste reduction will be undertaken.
A paper-light policy is in force
throughout the company to
reduce deforestation.
A review of the car fleet led to the
introduction of vehicles with low carbon
emissions to reduce the environmental
impact of business travel.
Ethical business practices
All the group’s policies detail the
standards expected throughout the
group, including free and fair competition,
the prohibition of bribery, the honest
and fair dealing with suppliers, to
ensure the welfare of workers and that
employment conditions within the supply
chain meet or exceed internationally
recognised standards.
Objectives for 2011
A To work with Business in the Community to
complete an audit of current CSR activity.
A To develop a tailored action plan for integrating
responsible business practice throughout
the business.
A To develop an employee engagement plan
to help employees gain an understanding
of their importance in the successful
implementation of the CSR action plan.
A To increase employee awareness of
environmental issues and their role in
reducing environmental impacts.
A To ensure compliance with legal requirements
and good practice by further reviewing the
current processes in place for recording and
monitoring accidents and risk assessments.
A To devise new processes to facilitate and
support volunteering opportunities.
A To introduce a policy whereby EMIS commits,
within defined parameters, to match charitable
contributions raised by staff.
Accident record(1)
RIDDOR reportable accidents
Minor recorded injuries
Accident rate per 100 employees
(1) Excluding RX Systems.
2010
0
68
9 9
2009
0
69
16
Annual Report and Accounts 2010 EMIS Group plc
Directors
Anthony (Tony) Jones (63) A, R(c), N(c)
Non-executive Chairman
A co-founder of EMIS, Tony headed up the commercial and
strategic direction of EMIS from its inception until 2006 and
remained as Executive Chairman until April 2008. Tony was
appointed Non-executive Chairman of EMIS Group in
May 2008. Prior to establishing EMIS, Tony was a Northern
Regional Director for Compass Group. Tony retired from
the board on 17 March 2011.
Sean Riddell (46)
Chief Executive
Sean has 20 years’ experience of IT within the healthcare
sector, all gained with the group. Sean joined EMIS in 1989
as a Field Support Manager. Sean’s initial role then developed
into a broader sales and marketing role for the group.
Sean was initially appointed to the EMIS board in 1999 and
became Managing Director of EMIS in September 2006.
He was then appointed Managing Director of EMIS Group
upon its incorporation in April 2008 and became
Chief Executive on the group’s admission to AIM. Sean
worked for Provident Financial Group as a Business
Information Analyst prior to joining EMIS and has a degree
in Psychology. Sean is also a non-executive director of
Pharmacy2U Limited and Healthcare Gateway Limited.
Robin Taylor (59) A(c), R, N
Non-executive Director
Robin joined EMIS Group as an independent non-executive
director on 1 March 2010. He was formerly Finance Director
of Intec Telecom Systems plc (Intec), a main market publicly
listed company which he joined on 1 March 2007 from
YFD Ltd, a provider of financial director services. During
2005 and 2006, Robin worked as an independent
consultant. From 2000 to 2005, Robin was Group Finance
Director of ITNET plc and previously he was Chief Financial
Officer and Director of Business Development of JBA Holdings plc.
Prior to that, Robin held a variety of financial and general
management roles in both Europe and North America.
Robin is a member of the Institute of Chartered Accountants
of Scotland and a non-executive director of Covalent
Software Ltd.
From 18 March 2011, Robin will become the chair of the
remuneration committee.
Phillip Woodrow (63)
Finance Director
Phillip joined EMIS Group as Finance Director in April 2008
on completion of the management buy-out. Prior to joining
EMIS, Phillip was a partner in Baker Tilly and from 1988 to
1993, Phillip acted as Secretary to the Inspectors in relation
to a major DTI investigation.
Phillip joined Smith & Hayward, a predecessor firm of Baker
Tilly, in 1965 qualifying as a Chartered Accountant in 1970
and becoming a partner of that firm in 1972. Phillip is
also a non-executive director of Bradford City Challenge
Foundation Limited, a charitable organisation providing
funding to local charities in the Bradford area. Phillip is a
Fellow of the Institute of Chartered Accountants in England
and Wales.
Dr David Stables (52)
Director of Development Strategy
David has over 25 years’ experience in healthcare IT.
A co-founder of EMIS he developed an electronic medical
record system to alert GPs to potential prescribing errors
and to help with diagnosis and, in 1987, was instrumental
in the development of the first EMIS system that managed
patient records within a GP practice. David was appointed
Medical Director of EMIS in the same year. In 2009, David
was appointed Director of Development Strategy.
David qualified in Medicine at Dundee University in 1981,
entered general practice in 1984 at Egton Surgery and
was a partner in that practice from 1987 to 1991.
Mike O’Leary (58)
Non-executive Chairman
Mike was appointed to the board of EMIS Group
on 17 March 2011. He has 20 years of main board
experience in a public company environment, including
both FTSE100 and FTSE250. On appointment Mike
became a member of the audit and remuneration
committee and chair of the nomination committee.
Mike is currently a non-executive director of Headlam Group plc,
Psion plc and he is also Chairman of Digital Healthcare
Limited (a Cambridge based supplier of software to the
UK Diabetic Retinopathy Screening Programme).
He was formerly Chief Executive of Marlborough Stirling plc,
Chief Executive of Huon Corporation and an executive
director of MISYS plc.
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A – Audit committee member
R – Remuneration committee member
N – Nomination committee member
(c) – Chair
EMIS Group plc Annual Report and Accounts 2010
17
Corporate governance
Advisers and shareholder information
Registered office
EMIS Group plc
Fulford Grange
Micklefield Lane
Rawdon
Leeds LS19 6BA
Tel: 0113 380 3000
www.emis-online.com
Company registration number
6553923
Nominated adviser and broker
Evolution Securities Limited
Kings House
1 King Street
Leeds LS1 2HH
Auditors
Baker Tilly UK Audit LLP
2 Whitehall Quay
Leeds LS1 4HG
Registrars
Capita Registrars Limited
The Registry
34 Beckenham Road
Beckenham BR3 4TU
Financial PR
MHP Communications
60 Great Portland Street
London W1W 7RT
Legal advisers to the company
as to English law
Cobbetts LLP
No. 1 Whitehall Riverside
Leeds LS1 4BN
Internet
The group operates a website which can be found at
www.emis-online.com. This site is regularly updated to
provide information about the group. In particular, the share
price and all of the group’s press releases and
announcements can be found on the site.
Registrar
Any enquiries concerning your shareholding should be
addressed to the company’s registrar. The registrar
should be notified promptly of any change in a shareholder’s
address or other details: Capita Registrars Limited,
The Registry, 34 Beckenham Road, Beckenham BR3 4TU,
Tel: 0871 664 0300. The registrar’s website is
www.capitaregistrars.com. This will give you access to
your personal shareholding by means of your investor code
which is printed on your share certificate or statement of
holding. A user ID and password will be sent to you once
you have registered on site.
Shareholder security
Shareholders are advised to be wary of any unsolicited
advice, offers to buy shares at a discount, or offers of free
reports about the company. Details of any share dealing
facilities that the company endorses will be included in
company mailings or on our website. More detailed inform ation
can be found at www.moneymadeclear.fsa.gov.uk.
Payment of dividends
Shareholders may find it more convenient to make
arrangements to have dividends paid directly to their bank
account. The advantages of this are that the dividend is
credited to a shareholder’s bank account on the payment
date, there is no need to present cheques for payment and
there is no risk of cheques being lost in the post. To set up a
dividend mandate or to change an existing mandate, please
contact Capita Registrars, our registrar, whose contact
details appear above.
Share dealing services
The sale or purchase of shares must be done through
a stockbroker or share dealing service provider.
The London Stock Exchange provides a “Locate a broker”
facility on its website which gives details of a number of
companies offering share dealing services. For more
information, please visit the private investors section at
www.londonstockexchange.com. Please note that the
directors of the company are not seeking to encourage
shareholders to either buy or to sell shares. Shareholders
in any doubt about what action to take are recommended
to seek financial advice from an independent financial
adviser authorised pursuant to the Financial Services
and Markets Act 2000.
Share price information
The latest information on the share price is available at
www.emis-online.com/investors.
18
Annual Report and Accounts 2010 EMIS Group plc
Directors’ report
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The directors have pleasure in presenting their report and audited financial statements for the year ended 31 December 2010.
General information and principal activities
EMIS Group plc (“the company” or “the parent company”) converted to public limited company status on 19 March 2010
and acquired a listing on AIM on 29 March 2010. The company was formerly called EMIS Group Limited. The company
is the parent company of trading subsidiary companies (together “the group”), the principal trading subsidiaries being
Egton Medical Information Systems Limited (“EMIS”) and RX Systems Limited (“RX Systems”).
The company is incorporated in England and Wales and domiciled in the UK. The address of its registered office is
Fulford Grange, Micklefield Lane, Rawdon, Leeds LS19 6BA.
The principal activity of the group is the design of computer software for healthcare professions, mainly general
practitioners and, following the acquisition of RX Systems during the year, pharmacists also, together with the supply
and support of computer systems for the healthcare profession and other users.
A review of the development of the group’s business during the year, including KPIs, the principal risks and uncertainties
facing the group and its future prospects are included in the Chief Executive’s operational review and the Financial review
which should be read in conjunction with this report.
The directors have monitored the performance of the group by reference to certain financial and non-financial key
performance indicators (KPIs). The financial indicators include profitability, revenues, cash generation and basic and diluted
earnings per share. Non-financial KPIs include the number of deployments, customer satisfaction and staff turnover.
Acquisitions
The group acquired 78.9% of the issued capital of RX Systems, a pharmacy software and services company; further
details of the acquisition are given in the Financial review.
Joint venture
The group established a 50:50 joint venture, Healthcare Gateway Limited with In Practice Systems Limited. Further details
of the joint venture are given in the Operational review.
Dividends
The directors have adopted a progressive dividend policy. Subject to shareholder approval at the Annual General Meeting
(AGM) on 24 May 2011, the board proposes paying a final dividend of 5.6p per ordinary share on 30 May 2011 to
shareholders on the register at the close of business on 26 April 2011. This would make a total dividend of 11.2p per ordinary
share for 2010.
Directors and their interests
The directors of the company who served during the year ended 31 December 2010 are as follows:
Anthony (Tony) Jones
Sean Riddell
Phillip Woodrow
Dr David Stables
Robin Taylor
Biographies of the directors can be found on page 17.
The board was pleased to announce the appointment, as Non-executive Chairman, on 17 March 2011, of
Michael (Mike) O’Leary and his biography is on page 17. With the appointment of Mike O’Leary, Tony Jones
retired from the board.
The company’s Articles of Association require that any director appointed since the last AGM shall only hold office until
the next AGM and shall then be subject to election. Therefore, Mike O’Leary will seek election at the AGM to be held on
24 May 2011.
Directors are subject to re-election at intervals of not more than three years and as each of the directors were re-elected
at the AGM in 2010, no director will be required to retire at the 2011 AGM.
Details of directors’ remuneration, service agreements and interests in the share capital of the company, are given in the
Directors’ remuneration report.
No director has had any material interest in any contract of significance with the company or any of its subsidiaries during
the year under review.
EMIS Group plc Annual Report and Accounts 2010
19
Corporate governance
Directors’ report
continued
Research and development
Development work continued during the year on EMIS Web, a next generation clinical software system which enables GPs
and other healthcare practitioners to connect with each other and securely share real time access to a patient’s
cradle-to-grave electronic health record.
Formal accreditation of EMIS Web, for use in primary care, was obtained on 7 September 2010. Development work continues both
on EMIS Web for GPs and to further develop EMIS Web into extended primary care and community/cross-organisational settings.
Development expenditure in the year amounted to £5.1m (2009: £6.5m) of which £3.8m (2009: £4.5m) was capitalised.
Creditor payment policy and practice
It is the policy and normal practice of the group to make payments due to suppliers in accordance with agreed terms
and conditions, generally within 30 days. This policy will also be applied for 2011.
Trade payables at 31 December 2010 represent an average of 40 days’ goods and services supplied (2009: 58 days).
Share capital
As at 17 March 2011, the company had 58,550,017 ordinary shares of one penny each in issue. The shares are traded
on AIM, a market operated by the London Stock Exchange plc. The rights and obligations attached to the shares are
set out in the company’s Articles of Association which are available on the company’s website.
During the year the company established an Employee Benefit Trust (EBT) to hold shares in the company to facilitate
share-based emolument payments. As at 31 December 2010 the EBT held 32,377 ordinary shares of one penny each,
on which it has waived its right to dividends.
Substantial interests in shares
As at 17 March 2011, the company had been notified of the following substantial interests in 3% or more in its ordinary shares:
Number of
shares
8,292,605
7,189,623
5,508,580
4,422,724
4,394,090
4,193,430
3,623,694
2,728,961
% issued
capital
14.16
12.28
9.41
7.55
7.50
7.16
6.19
4.66
Sean Riddell
Dr Peter Sowerby
Andrew Whitwam
Dr David Stables(1)
Phillip Woodrow
Standard Life Investments Limited
Tony Jones(2)
Gary Shuckford
(1)
The shares indicated alongside Dr David Stables are held on trust and legally owned by the Dr P R Sowerby No. 2 Discretionary Settlement (as to 2,211,362)
and by the trustees of the Dr P R Sowerby No. 4 Discretionary Settlement (as to 2,211,362). The trustees are Tony Jones, Dr David Stables and Rachel Stables.
(2)
The shares indicated alongside Tony Jones are held on trust and legally owned by the trustees of the Dr P R Sowerby No. 1 Discretionary Settlement (as to 1,811,847)
and by the trustees of the Dr P R Sowerby No. 3 Discretionary Settlement (as to 1,811,847). The trustees are Phillip Woodrow, Tony Jones, Dr David Stables and
Victoria Jones.
Directors’ indemnities
As permitted by the Articles of Association, the directors would be indemnified in respect of proceedings which might
be brought by a third party.
Principal risks and uncertainties
The UK Government is undertaking a programme of major change within healthcare, and although this will provide significant
growth opportunities for the company, due to the present uncertainties within the NHS, it could also introduce some future
risk of delay to the roll-out of EMIS Web in the later stages. As stated at the time of the company’s listing on AIM, EMIS
supplies GP software and certain other services in England under a framework agreement extended in June 2009 until
August 2011. The directors expect that this will be further extended until 2013 in accordance with provisions contained
in the agreement. Whilst the directors consider that renegotiation may represent an opportunity to retain or improve the
present position, they recognise that there is a risk that this will not be possible in the present climate of austerity.
The previous Government’s policy of a single supplier, now in the course of being abandoned, has given competitors opportunity,
within certain areas in England, to try to erode the company’s market share in those areas. This risk is being mitigated by growth in
other parts of the UK, the development of the interoperability agenda through Healthcare Gateway, and the development of EMIS Web.
20
Annual Report and Accounts 2010 EMIS Group plc
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Principal risks and uncertainties continued
The further development and roll-out of EMIS Web presents both opportunities and risks. Any major software development
is inherently subject to risk. However, by using extensive internal and external testing procedures and controls, the company
has mitigated the risk of delay or failure as far as is possible.
The principal financial risks are disclosed in note 4 to the accounts.
Employees
The group’s policy is to ensure the adequate provision for the welfare, health and safety of its employees and of other
people who may be affected by its activities.
The group encourages the involvement of its employees and employees are made aware of significant matters through
informal briefings, team meetings and the company’s website and intranet.
During the year the board established The EMIS Group plc Share Incentive Plan and further details are contained in the
Directors’ remuneration report and note 29 to the accounts.
The group treats applications for employment for disabled persons equally with those of other applicants having regard to
their ability, experience and the requirements of the job. Where existing employees become disabled every effort is made
to provide them with continuing suitable work within the group.
Charitable and political donations
The group made charitable donations amounting to £7,986 (2009: £12,803) during the year. No political donations were
made in either year.
Post balance sheet events
During the year, EMIS Inc., the group’s Canadian subsidiary, had not made the progress previously anticipated. Action
was taken, staff numbers reduced and a strategic review commenced. Since the year end, the strategic review has been
concluded and a managed exit is now underway.
Going concern
After careful enquiry and review of available financial information, including projections of profitability and cash flows for the
two years to 31 December 2012, the directors have formed the conclusion that the company and the group have adequate
resources to continue to operate for the foreseeable future and that it is therefore appropriate to continue to adopt the
going concern basis of accounting in the preparation of the consolidated and company financial statements.
AGM notice
The notice convening the AGM to be held on 24 May 2011, together with an explanation of the resolutions to be proposed
at the meeting, is contained in a separate circular to shareholders.
Statement of directors’ responsibilities
The directors are responsible for preparing the Directors’ report and the financial statements in accordance with applicable
law and regulations.
Company law requires the directors to prepare group and company financial statements for each financial year. The directors
have elected under company law to prepare group financial statements in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union (EU) and have elected under company law to prepare the company
financial statements in accordance with IFRS as adopted by the EU.
The financial statements are required by law and IFRS adopted by the EU to present fairly the financial position of the group
and the company and the financial performance of the group. The Companies Act 2006 provides in relation to such financial
statements that references in the relevant part of that Act to financial statements giving a true and fair view are references
to their achieving a fair presentation.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the group and the company and of the profit or loss of the group and the company
for that period.
EMIS Group plc Annual Report and Accounts 2010
21
Corporate governance
Directors’ report
continued
Statement of directors’ responsibilities continued
In preparing the group and company financial statements, the directors are required to:
a. select suitable accounting policies and then apply them consistently;
b. make judgements and accounting estimates that are reasonable and prudent;
c. state whether they have been prepared in accordance with IFRSs adopted by the EU; and
d. prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group
and the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s
and the company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and
the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the group and the company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Auditors and statement as to disclosure of information to auditors
The directors who were in office on the date of approval of these financial statements have confirmed, as far as they are
aware, that there is no relevant audit information of which the auditors are unaware. Each of the directors has confirmed
that they have taken all the steps that they ought to have taken as directors in order to make themselves aware of any
relevant audit information and to establish that it has been communicated to the auditors.
The auditors, Baker Tilly UK Audit LLP, have indicated their willingness to be re-appointed and a resolution that they be
re-appointed will be proposed at the AGM.
Corporate governance
The company’s statement on corporate governance can be found in the Corporate governance report on pages 25 to 27
of this annual report and accounts. The Corporate governance report forms part of this Directors’ report and is incorporated
into it by cross-reference.
By order of the board
Chris Spencer
Company Secretary
17 March 2011
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Annual Report and Accounts 2010 EMIS Group plc
Directors’ remuneration report
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This report sets out the remuneration policy of EMIS Group plc (“the company” or “the parent company”) and its
subsidiaries (together “the group”). As a company listed on AIM, the company is not required to comply with the Directors’
Remuneration Regulations 2002 (“the Regulations”). The board has, however, adopted many of the best practice
provisions set out in the Regulations and these are referred to in the report below.
Remuneration committee
After the appointment of Mike O’Leary, the remuneration committee will be chaired by Robin Taylor. It has been chaired
to date by Tony Jones. The committee has clearly defined written terms of reference which are reviewed annually by the
board. These are available on the website, www.emis-online.com/investors. The committee may invite anyone it deems
appropriate to attend and advise at meetings and the committee chairman attends the AGM to answer any shareholder
questions on the activities of the committee. The Company Secretary acts as secretary of the committee.
The committee is responsible for establishing a formal and transparent procedure for developing policy on executive
remuneration and to set the remuneration of the directors. This includes agreeing with the board the framework for
remuneration of the Chief Executive, all other executive directors, the Company Secretary and such other members of
the executive management as it is designated to consider.
The overall policy of the board is to ensure that members of the board and executive management are provided with
appropriate incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their
contribution to the success of the group, including where appropriate, bonuses, incentive payments and the award
of share options. The committee annually considers the need to appoint external consultants to help define overall
remuneration policy.
The principal elements of relevant executive remuneration packages are detailed below:
Basic salary – basic salaries are reviewed annually by the committee, taking into account changes in individual position
and responsibility and individual and group performance. Salaries are compared against the market level for companies
of a similar size and complexity.
Benefits – benefits principally include a car (or allowance).
Performance related bonus – bonus arrangements are determined by the committee. There is no unconditional right
to receive a bonus. The committee can also make one off bonus payments to reflect exceptional performance or
special circumstances.
Pensions – there are no obligatory group-wide pension arrangements. A director of one subsidiary company participates
in a subsidiary company pension plan and contributions are made to the personal pension plans of other executives.
The group makes contributions to the private pension schemes of the executive directors as identified in the remuneration
table overleaf. The group provides access to a stakeholder pension scheme which all staff are eligible to join on
commencing employment.
Share option schemes – during the year the group established The EMIS Group plc Share Incentive Plan (“the SIP”) for
UK employees employed by the group for at least twelve months. The SIP enables employees to buy shares out of pre-tax
salary each month and receive one matching share for every four purchased. None of the company’s executive directors
participate in the SIP because they have been advised this would not be appropriate.
Further details on the SIP are contained in note 29 to the accounts.
The directors believe it is important to motivate and reward senior key employees and executives and to do so in a proper
manner that aligns their interests with those of the shareholders. Accordingly the company is seeking approval at the AGM
on 24 May 2011 for a Company Share Option Plan subject to HMRC approval and an unapproved share option scheme in
which certain key executives and employees will be invited to participate at the discretion of the committee. It is anticipated
that grants will be made under the new share schemes in 2011.
Shares subscribed or subscription options granted under any share incentive arrangements proposed by the group will
be limited, in total, to no more than 10% of the company’s issued share capital from time to time in any ten year period.
Options under these arrangements will be subject to specified performance criteria, thereby linking remuneration to
the performance of the group. Further details of the proposed schemes are contained in the Notice of Meeting and
Guidance to Shareholders.
EMIS Group plc Annual Report and Accounts 2010
23
Corporate governance
Directors’ remuneration report
continued
Service contracts
The company entered into service agreements with the executive directors on 24 March 2010. In all cases these can be
terminated by either party on twelve months’ notice. No service contract provides for the payments of pre-determined
amounts in the event of early termination. Copies of the executive directors’ service contracts will be available for
inspection prior to and during the AGM.
Non-executive directors
The Chairman and senior non-executive director do not have service agreements and were appointed by letter of
appointment. The appointments commenced on 1 March 2010 and both are terminable by six months’ notice on either
side (with Tony Jones’ contract also being terminable forthwith on the appointment of an independent non-executive
chairman). The Chairman and senior non-executive director are not eligible for pensions, share incentives or bonus.
Mike O’Leary’s appointment, on 17 March 2011, was also by letter of engagement, for an initial term of three years unless
terminated earlier by either party giving not less than three months’ written notice.
Directors’ interests
The interests of the directors over the ordinary shares of the company are as follows:
The shares indicated alongside Dr David Stables are held on trust and legally owned by the trustees of the Dr P R Sowerby No. 2 Discretionary Settlement (as to 2,211,362)
and by the trustees of the Dr P R Sowerby No. 4 Discretionary Settlement (as to 2,211,362). The trustees are Tony Jones, Dr David Stables and Rachel Stables.
(2)
The shares indicated alongside Tony Jones are held on trust and legally owned by the trustees of the Dr P R Sowerby No. 1 Discretionary Settlement (as to 1,811,847)
and by the trustees of the Dr P R Sowerby No. 3 Discretionary Settlement (as to 1,811,847). The trustees are Phillip Woodrow, Tony Jones, Dr David Stables and
Victoria Jones.
Directors’ remuneration
Number of
shares at
17 March
2011
8,292,605
4,422,724(1)
4,394,090
3,623,694(2)
—
% issued
capital
14.16
7.55
7.50
6.19
—
2010
2009
Salary/
fees
£
Benefits in
kind/car
allowance
£
Bonus
£
Total1
£ £
Total1
164,560
154,275
154,275
64,500
27,083
— 10,738 175,298 302,320
— 26,472 180,747 255,087
— 12,342 166,617 290,759
—
—
934 65,434 154,901
— 27,083 —
Sean Riddell
Dr David Stables
Phillip Woodrow
Tony Jones
Robin Taylor
(1)
Executive directors
Sean Riddell
Dr David Stables
Phillip Woodrow
Non-executive directors
Tony Jones
Robin Taylor
(1)
In addition to the above, in each year the company has made contributions to executive directors’ pension arrangements of £15,000 for Sean Riddell
and Phillip Woodrow respectively and £15,775 for David Stables.
On behalf of the remuneration committee
Tony Jones
Chairman
17 March 2011
24
Annual Report and Accounts 2010 EMIS Group plc
Corporate governance report
EMIS Group plc (“the company” or “the parent company”) and its subsidiaries (together “the group”) is committed to
high standards of corporate governance and the board acknowledges the importance of the principles set out in the UK
Corporate Governance Code published by the Financial Reporting Council in June 2010 (formerly the Combined Code (2008)
(“the Code”)).
Although the Code is not mandatory for companies admitted to AIM, following admission in March 2010, the company
has made significant progress by establishing a framework and adopting and implementing of policies and procedures
designed to comply with the Code as far as reasonably practicable and appropriate for a company of this size and
complexity. The report below sets out how the principles in the Code have been applied during the year under review.
The board
At the start of the year the board of EMIS Group (“the board”) consisted of: Anthony (Tony) Jones, Non-executive Chairman;
Sean Riddell, Chief Executive; Phillip Woodrow, Finance Director; and Dr David Stables, Director of Development Strategy.
Robin Taylor was appointed as a non-executive director on 1 March 2010. He is the Senior Non-executive Director and
the board considers him to be independent as defined in the Code.
Tony Jones served as Executive Chairman until April 2008 and following a brief sabbatical stepped back from day-to-day
executive responsibility and became Non-executive Chairman. As referred to in the AIM admission document, the intention
has been to appoint an experienced independent non-executive chairman. After a detailed and stringent recruitment process, the
board is pleased to announce the appointment, as Non-executive Chairman, on 17 March 2011, of Michael (Mike) O’Leary,
who, on appointment, met the Code requirements for independence. The Chairman’s other significant commitments are
disclosed in his biography on page 17.
With the appointment of Mike O’Leary, Tony Jones duly retired from the board. The board extends its thanks to Tony
for his unique and outstanding contribution to the success of the group as a founder, CEO and, latterly, Chairman.
The board considers the current balance of skills and experience appropriate for the business following its admission
to AIM.
The roles of the Chairman and Chief Executive are separate and defined in writing.
The Chairman is responsible for the leadership and effectiveness of the board.
The board is responsible to shareholders for the overall strategy and direction of the group. It has a schedule of matters
reserved to it including but not limited to, decisions on strategy and risk management, approval of budgets, acquisitions
and disposals, major capital expenditure, legal and insurance issues, board structure and the appointment of advisers.
In some areas responsibility is delegated to committees of the board within clearly defined terms of reference. The terms
of reference for the board can be found at www.emis-online.com/investors.
Once the strategic and financial objectives of the company have been set by the board it is the role of the Chief Executive
to ensure that, through the day-to-day management of the group’s business, they are achieved.
All directors are subject to election by the shareholders at the next general meeting following appointment to the board
and to re-election at intervals of not more than three years.
Biographies of the directors are on page 17.
The directors have access to the advice and services of the Company Secretary, who is responsible for ensuring that
board procedures and applicable rules and regulations are complied with. There is a procedure for the directors to take
independent professional advice at the company’s expense if required in the performance of their duties and appropriate
insurance cover is in place in respect of legal action against the directors. The company has adopted a share dealing
code for directors and senior employees.
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EMIS Group plc Annual Report and Accounts 2010
25
Corporate governance
Corporate governance report
continued
The board continued
The number of board and committee meetings attended by each of the directors during the period from admission on
29 March 2010 to 31 December 2010 was as follows:
Number of meetings in period
Attendance:
Executive directors
Sean Riddell
Phillip Woodrow
Dr David Stables
Non-executive directors
Tony Jones
Robin Taylor
Full
board
9
9/9
9/9
9/9
9/9
9/9
Audit Remuneration Nomination
committee
2
committee
2
committee
2
—
2/2
—
2/2
2/2
—
—
—
2/2
2/2
—
—
—
2/2
2/2
Board effectiveness
The board has extensive operational experience and, of the directors, Sean Riddell and Dr David Stables have extensive
knowledge of the healthcare IT sector. After the recent admission to AIM a succession matrix was produced and
considered. Following the appointment of the new Non-executive Chairman, a formal appraisal of the effectiveness of
the board and each board committee will be carried out in the next financial year. The Chairman will be responsible for
the evaluation process which will consider any training or development needs of individual directors and the overall
effectiveness of the board. The process will also give consideration to environmental, social and governance issues as
appropriate. New directors receive a comprehensive pack of information, attend a tailored induction programme and
meet senior managers and all directors are encouraged to attend other relevant training courses and events.
Investor relations
Meetings with analysts and institutional shareholders are held following the interim and preliminary results announcements
and on an ad hoc basis. Feedback from these meetings and regular market updates prepared by the company’s
broker are presented to the board. The Chairman and the Senior Non-executive Director are available to shareholders to
discuss strategy and governance issues. In accordance with AIM Rule 26, there is an investors section on the company’s
website, www.emis-online.com/investors, which is kept up to date.
Annual General Meeting (AGM)
At the AGM, separate resolutions will be proposed for each substantially different issue. Proxy votes are disclosed by
means of an announcement on the London Stock Exchange and via the group’s website.
Board committees
The board has formally established three committees during the year, with clearly defined written terms which are reviewed
annually by the board. Membership is as shown in the table above. The terms of reference of the committees are available
on the company’s website. The role and work of the committees is outlined below.
Audit committee
The audit committee is chaired by Robin Taylor, who is considered to have relevant financial experience. Robin’s biography
is included on page 17. Other directors and representatives of the external auditor attend by invitation.
In discharging its responsibilities as outlined in the terms of reference, the role of the committee has included the reviewing
and monitoring of:
A the annual report and accounts and preliminary and interim results statements of the company;
A the appropriateness of accounting policies and the critical accounting estimates and judgements;
A the relevance of developments in accounting and reporting requirements;
A the effectiveness of internal controls and risk management systems;
A the auditors’ plan for the year-end audit;
26
Annual Report and Accounts 2010 EMIS Group plc
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Board committees continued
Audit committee continued
A the formal engagement terms, performance, objectivity and independence of the auditors, including the extent
of non-audit work undertaken by the auditors; and
A the audit and non-audit fees of the auditors. These are set out in note 10 to the accounts.
The committee has recommended to the board that a resolution re-appointing Baker Tilly UK Audit LLP as external
auditors be put to the shareholders at the AGM.
Remuneration committee
After the appointment of Mike O’Leary, the remuneration committee will be chaired by Robin Taylor. It has been chaired to
date by Tony Jones and has met twice during the year. The committee is responsible for establishing a formal and
transparent procedure for developing policy on executive remuneration and for setting the remuneration of individual
directors. Full details of the work of the committee, the directors’ remuneration and remuneration policy are set out in
the Directors’ remuneration report on pages 23 and 24.
Nomination committee
The nomination committee has been chaired to date by Tony Jones and has met twice in the year. The committee is
responsible for leading the board appointments process and for considering the size, structure and composition of the board.
Robin Taylor, the other member of the committee, was recruited as an independent non-executive director as part of a
formal recruitment process, from a list proposed by the company’s advisers. Robin has many years’ experience as a
public company finance director and his biography is shown on page 17.
Non-executive directors are subject to re-election in the same way as executive directors. The former Chairman and the
Senior Non-executive Director were appointed on 1 March 2010 by letters of engagement terminable by six months’ notice
on either side.
Mike O’Leary’s appointment, on 17 March 2011, was also by letter of engagement, for an initial term of three years unless
terminated earlier by either party giving not less than three months’ written notice.
As previously stated, Tony Jones retired from the board and Mike O’Leary was appointed as Non-executive Chairman,
with effect from 17 March 2011. The services of an independent external recruitment consultant were utilised to identify
the most suitable candidates, using a detailed specification taking account of the current balance of skills, knowledge
and experience of the board.
The committee has also considered succession planning for the board and senior managers within the group.
Internal control and risk management
The board is responsible for the group’s system of internal controls, including reviewing the effectiveness of these controls
and the processes in place for risk management. The processes and procedures in place are designed to manage rather
than eliminate risk and can therefore only provide a reasonable and not an absolute assurance against material misstatements
or losses.
Executive directors of each group company have a close involvement with all day-to-day operations and also meet with staff
on a regular basis to identify and review business risks, the controls needed to minimise those risks and the effectiveness
of controls in place. Business risks are monitored and updated on a regular basis. Insurance is in place where appropriate.
The group has extensive quality assurance processes by virtue of its internal quality assurance department which audits
all non-financial processes and procedures. There are clearly defined roles, responsibilities and limits on authority in place.
The group has five current ISO registrations including ISO27001 – Information Security.
During the year the board, independently and through the audit committee, has reviewed and is satisfied with the adequacy
of the group’s internal financial controls. These include an annual budgetary process which is reviewed and approved by the
board. The actual results are monitored against budget at each board meeting and forecasts are revisited on a rolling basis.
The committee has also considered the need for a whistle blowing policy and, in the light of the company’s current training
for the Bribery Act and operational framework, has deferred proposing such a policy until further review.
Financial policies and approval procedures are in place which cover a number of key areas such as credit control and
expenditure authorisation. A comprehensive monthly financial reporting system is in place which covers, amongst other
things, operating results, cash flow, assets and liabilities and comparisons against budgets.
There is currently no internal audit function and this will be reviewed on an annual basis as the group evolves.
EMIS Group plc Annual Report and Accounts 2010
27
Financial statements
Independent auditors’ report
to the members of EMIS Group plc
We have audited the group and parent company financial statements (“the financial statements”) which comprise the Group
Statement of Comprehensive Income, the Group and Parent Company Balance Sheets, the Group and Parent Company
Statements of Cash Flow, the Group and Parent Company Statements of Changes in Equity and the related notes. The financial
reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are
required to state to them in an auditors’ 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 and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As more fully explained in the Directors’ Responsibilities Statement set out on pages 21 and 22, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is
to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards
for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB’s website at http://www.frc.org.uk/
apb/scope/private.cfm.
Opinion on the financial statements
In our opinion:
A the financial statements give a true and fair view of the state of the group’s and the parent’s affairs as at 31 December 2010
and of the group’s profit for the year then ended;
A the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
A the parent financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the Companies Act 2006; and
A the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if,
in our opinion:
A adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
A the parent company financial statements are not in agreement with the accounting records and returns; or
A certain disclosures of directors’ remuneration specified by law are not made; or
A we have not received all the information and explanations we require for our audit.
Richard King (Senior Statutory Auditor)
For and on behalf of BAKER TILLY UK AUDIT LLP
Statutory Auditor
Chartered Accountants
2 Whitehall Quay
Leeds LS1 4HG
17 March 2011
28
Annual Report and Accounts 2010 EMIS Group plc
Group statement of comprehensive income
for the year ended 31 December 2010
Continuing operations
Revenue
Costs:
Changes in inventories
Cost of goods and services
Staff costs
Flotation and other transaction costs
Other operating expenses:
– including contract asset depreciation
Earnings before interest, taxes, depreciation and amortisation (EBITDA)
Depreciation of property, plant and equipment
Amortisation of intangible assets
Operating profit
Finance income
Finance costs
Share of profit of associate
Profit before taxation
Income tax expense
Total comprehensive income/profit for the year
Attributable to:
– equity holders of the parent
– non-controlling interest in subsidiary company
Total comprehensive income for the year
Earnings per share
Basic and diluted
The notes on pages 33 to 56 are an integral part of these consolidated financial statements.
Notes
2010
£’000
2009
£’000
5 62,393
57,696
(40)
(9,174)
(498)
(9,022)
11 (23,390) (21,820)
—
(1,258)
6
(8,278)
(6,209)
20,253
(1,448)
(2,433)
17
16
20,147
(2,299)
(2,074)
7 16,372
51
8
(426)
9
109
15,774
62
(1,572)
198
16,106
(4,868)
12
14,462
(4,521)
11,238
9,941
11,194
9,941
44 —
11,238
9,941
13 19.84p 19.88p
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EMIS Group plc Annual Report and Accounts 2010
29
Financial statements
Group and parent company balance sheets
as at 31 December 2010
Group
Company
Notes
2010
£’000
2009
£’000
2010
£’000
2009
£’000
ASSETS
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investments in subsidiaries
Investment in associates
Current assets
Inventories
Trade and other receivables
Amount owed by subsidiary company
Cash and cash equivalents
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Current tax liabilities
Bank loans
Amount owed to subsidiary company
Contingent consideration re acquisition
Deferred income
Non-current liabilities
Bank and other loans
Contingent consideration re acquisition
Other loans
Deferred tax liability
15 21,951 15,853
16 29,284 21,055
17 12,058
9,506
—
18
2,661
19
—
—
—
—
—
—
— 48,165 38,034
—
—
65,954 48,966 48,165 38,034
2,552
20
21
22
668
9,082
—
7,442
—
674
611
7,500
239
—
25
5,221
17,192 13,395
875
83,146 62,361 48,578 38,909
—
399
—
14
413
24
25
26
33
—
(5,169)
—
(5,103)
(1,184)
(1,184)
(9,100)
—
(189)
(189)
(10,888)
—
(22,533) (15,694) (10,473)
(3,381)
(3,516)
(1,184)
—
—
(7,613)
(571)
—
(1,184)
—
—
—
(1,756)
26
33
26
27
(4,580)
(757)
—
—
(4,580)
(757)
—
(8,494)
(5,764)
(5,763)
—
—
(23,000)
(23,000)
—
(6,524)
(13,831) (35,287)
(5,337) (28,763)
(36,364) (50,981) (15,810) (30,519)
8,390
46,782 11,380 32,768
Total liabilities
NET ASSETS
EQUITY
Ordinary share capital
Share premium
Own shares held in trust
Retained earnings
Equity attributable to owners of the parent
Non-controlling interests
TOTAL EQUITY
The notes on pages 33 to 56 are an integral part of these consolidated financial statements.
28
586
28 24,767
(120)
29
2,753
500
586
500
— 24,767 —
(120) —
—
7,535
18,796 10,880
44,029 11,380 32,768
—
46,782 11,380 32,768
—
7,890
8,390
—
8,390
The financial statements on pages 29 to 56 were approved by the board of directors and authorised for issue on 17 March 2011
and are signed on its behalf by:
Sean Riddell
Chief Executive
Phillip Woodrow
Finance Director
30
Annual Report and Accounts 2010 EMIS Group plc
Group and parent company statements of changes in equity
for the year ended 31 December 2010
Group
Balance at 1 January 2009
Total comprehensive income
– profit for the year
Balance at 1 January 2010
Arising on acquisition of RX Systems
Share acquisitions less sales in year
Transactions with owners
– proceeds from shares issued
Total comprehensive income
– profit for the year
Dividend (note 14)
Balance at 31 December 2010
Share
premium
£’000
Retained
earnings
£’000
Non-
controlling
interest
£’000
Own
shares
held
in trust
£’000
Total
equity
£’000
—
—
—
—
—
939
—
—
1,439
9,941
10,880
—
—
—
—
2,709
—
—
—
—
(120)
9,941
11,380
2,709
(120)
Share
capital
£’000
500
—
500
—
—
86 24,767
—
—
—
24,853
—
—
11,194
—
(3,278)
—
586 24,767 18,796
44
—
2,753
—
—
11,238
(3,278)
(120) 46,782
Company
Share
capital
£’000
Share
premium
£’000
—
500
Balance at 1 January 2009
Total comprehensive income
– profit for the year
Balance at 1 January 2010
Share acquisitions less sales in year
Transactions with owners
– proceeds from shares issued
Total comprehensive income
– profit for the year attributable to equity holders of the company
Dividend (note 14)
Balance at 31 December 2010
The notes on pages 33 to 56 are an integral part of these consolidated financial statements.
—
—
586 24,767
—
500
—
86 24,767
—
—
—
—
—
Retained
earnings
£’000
(1,872)
9,762
7,890
—
Own
shares
held
in trust
£’000
Total
equity
£’000
—
(1,372)
—
—
(120)
9,762
8,390
(120)
—
—
24,853
2,923
(3,278)
7,535
—
—
2,923
(3,278)
(120) 32,768
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EMIS Group plc Annual Report and Accounts 2010
31
Financial statements
Group and parent company statements of cash flows
for the year ended 31 December 2010
Cash flows from operating activities
Cash generated from operations
Interest paid
Settlement of financial derivative
Interest received
Tax (paid)/received
Net cash generated from/(used in) operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Internally developed software
Loans from subsidiary company – increase/(decrease)
Dividends received
Purchase of subsidiary (group – net of cash acquired)
Net cash (used in)/generated from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Transactions in own shares held in trust
Bank term loan repayments
Shareholder loans repaid
Dividend paid
Net cash used in financing activities
Group
Company
Notes
2010
£’000
2009
£’000
2010
£’000
2009
£’000
32 22,181
(409)
—
51
(3,889)
17,934
19,864
(2,161)
(524)
62
(3,127)
14,114
(2,162)
(373)
—
—
611
(1,924)
(31)
(2,132)
(524)
—
575
(2,112)
(5,611)
291
(3,801)
—
—
(3,144)
(12,265)
33
24,146
(116)
(1,200)
(23,000)
(3,278)
(3,448)
(4,113)
295
(4,520)
—
—
—
— —
—
—
9,339
4,500
(8,478)
(8,338) 5,361
—
—
(17,950)
26,700
—
8,750
— 24,146 —
(116) —
—
(6,625)
(1,200)
— (23,000)
—
(6,625)
(3,278) —
(3,448)
(6,625)
—
(6,625)
13
12
25
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
2,221
5,221
(849)
6,070
(11)
25
Cash and cash equivalents at end of year
The notes on pages 33 to 56 form an integral part of these consolidated financial statements.
7,442
5,221
14
32
Annual Report and Accounts 2010 EMIS Group plc
Notes to the financial statements
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1. General information
EMIS Group plc (“the company” or “the parent company”) converted to plc status on 19 March 2010 and acquired a listing
on AIM on 29 March 2010. The company was formerly called EMIS Group Limited.
The company is the parent company of subsidiary companies (together “the group”) whose activities consist of the design
of computer software for healthcare professions, principally general practitioners and pharmacists, together with the supply
and support of computer systems for the healthcare profession and other users.
The company is incorporated in England and Wales and domiciled in the UK. The address of its registered office is
Fulford Grange, Micklefield Lane, Rawdon, Leeds LS19 6BA.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies
have been applied consistently to all periods presented.
2.1 Basis of preparation
The financial statements have been prepared under the historical cost convention and in accordance with International
Financial Reporting Standards (IFRS) as endorsed by the European Union, International Financial Reporting Interpretations
Committee (IFRIC) interpretations and with those parts of the Companies Act 2006 applicable to companies reporting
under IFRS.
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of
critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and of revenues
and expenses. It also requires management to exercise its judgement in the application of accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
company or group financial statements are disclosed in note 3.
2.1.1 Going concern
After careful enquiry and review of available financial information, including projections of profitability and cash flows
for the two years to 31 December 2012, the directors have formed the conclusion that the company and the group
have adequate resources to continue to operate for the foreseeable future and that it is therefore appropriate to continue
to adopt the going concern basis of accounting in the preparation of the consolidated and company financial statements.
2.2 Parent company statement of comprehensive income
As permitted by Section 408 of the Companies Act 2006, the parent company has not presented its own statement
of comprehensive income. The profit of the parent company for the year was £2,923,000 (2009: £9,762,000).
2.3 Changes in accounting policy and disclosure
(a) New and amended standards adopted by the group
The following new standards and amendments to standards are mandatory for the first time for the financial year beginning
1 January 2010:
IFRS 3 (revised) “Business combinations” and consequential amendments to IAS 27 “Consolidated and separate financial
statements”, IAS 28 “Investments in associates”, and IAS 31 “Interests in joint ventures”, are effective prospectively to
business combinations for which the acquisition date is on or after the beginning of the first annual reporting period
beginning on or after 1 July 2009.
The revised standard continues to apply the acquisition method to business combinations but with some significant changes
compared with IFRS 3. For example, all payments to purchase a business are recorded at fair value at the acquisition date, with
contingent payments classified as debt subsequently re-measured through the statement of comprehensive income. There is a
choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the entity acquired either at fair value or
at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs are expensed.
The revised standard was applied to the acquisition of the controlling interest in RX Systems Limited (“RX Systems”) during
the year. Acquisition-related costs of £299,000 have been recognised in the consolidated statement of comprehensive income,
which previously would have been included in the consideration for the business combination. The group has chosen
to recognise the non-controlling interest at fair value of £2,709,000 for this acquisition rather than the proportionate share
of net assets of £1,423,000, which is also allowed. Previously there was no choice, and the non-controlling interest would
have been recognised at the proportionate share (21.1%) of the net assets of RX Systems of £1,423,000. See note 33 for
further details of the RX Systems business combination.
EMIS Group plc Annual Report and Accounts 2010
33
Financial statements
Notes to the financial statements
continued
2. Summary of significant accounting policies continued
2.3 Changes in accounting policy and disclosure continued
(a) New and amended standards adopted by the group continued
IAS 27 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no
change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies
the accounting when control is lost. There have been no transactions with non-controlling interests and IAS 27 (revised)
has had no impact on the current period.
IAS 38 (amendment) “Intangible assets”, effective 1 January 2010, clarifies guidance in measuring the fair value of an
intangible asset acquired in a business combination and permits the grouping of intangible assets as a single asset if each
asset has a similar useful economic life.
(b) New and amended standards, and interpretations mandatory for the first time for the financial year beginning 1 January 2010
but not currently relevant to the group (although they may affect the accounting for future transactions and events)
Standard/interpretation
IFRIC 17
IFRIC 18
IFRIC 9
IFRIC 16
IAS 36 (amendment)
IFRS 2 (amendments)
IAS 1 (amendment)
IFRS 5 (amendment)
“Distribution of non-cash assets to owners”
“Transfers of assets from customers”
“ Re-assessment of embedded derivatives” and IAS 39
“Financial instruments: Recognition and measurement”
“Hedges of a net investment in a foreign operation”
”Impairment of assets”
“Group cash-settled share-based payment transactions”
“Presentation of financial statements” – note of clarification
“ Non-current assets held for sale and discontinued operations”
– note of clarification
Effective date:
periods commencing
on or after
1 July 2009
1 July 2009
1 July 2009
1 July 2009
1 January 2010
1 January 2010
(c) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2010
and not early adopted
None of the following changes would have had any material impact on the group and the parent company financial
statements had they been in force during the period under review and adopted:
Standard
IFRS 9
IAS 24 (revised)
Amendment to IAS 32
IFRIC 19
Amendments to IFRIC 14
“Financial instruments” – issued November 2009
“ Related party disclosures”
– issued November 2009
“ Classification of rights issues”
– issued October 2009
“ Extinguishing financial liabilities with
equity instruments”
“Prepayments of a minimum funding requirement”
Effective date:
periods commencing
on or after
Endorsed
1 January 2013 Not yet endorsed
1 January 2011 Not yet endorsed
1 February 2010
1 July 2010 Not yet endorsed
1 January 2011
2.4 Basis of consolidation
The consolidated financial statements of the group incorporate the financial statements of the parent company together
with those of its trading subsidiary companies, Egton Medical Information Systems Limited (EMIS), EMIS Inc. (a company
registered in Canada) and RX Systems Limited (acquired during the year), the two non-trading subsidiaries, EMIS
Professional Publishing Limited and Pathway Trust Limited and the newly formed joint venture company, Healthcare
Gateway Limited.
34
Annual Report and Accounts 2010 EMIS Group plc
2. Summary of significant accounting policies continued
2.4 Basis of consolidation continued
Subsidiaries
Subsidiaries are entities over which the group has the power to govern the financial and operating policies so as to obtain
economic benefits from their activities.
The group has used the acquisition method of accounting to account for business combinations. The consideration
transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity
interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from
a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at
the acquisition date. The group recognises any non-controlling interest in the acquiree either at fair value or at the
non-controlling interest’s proportionate share of the acquiree’s net assets on an acquisition-by-acquisition basis.
The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair
value of the separable identifiable net assets acquired and liabilities incurred or assumed at the acquisition date is
recorded as purchased goodwill. Provision is made for any impairment.
Inter-company transactions, balances and unrealised gains and losses on transactions between group companies are
eliminated on consolidation. Accounting policies previously applied by acquired subsidiaries are changed as necessary
to comply with accounting policies adopted by the group.
In the parent company balance sheet, investments in subsidiaries are recorded at the fair value cost and are tested for
impairment when there is objective evidence of impairment. Any such impairment losses are recognised in the income
statement in the period they occur.
Associates
An associate is an entity over which the group is in a position to exercise significant influence, but not control or joint
control, through participation in financial and operating policy decisions.
Investments in associates are recognised in the group financial statements using the equity method of accounting and
initially carried in the balance sheet at cost. The carrying value of investments (including any goodwill) is tested for
impairment when there is objective evidence of impairment and is stated net of any impairment loss. The group’s share
of post acquisition profits or losses is recognised in the consolidated statement of comprehensive income and its share
of post acquisition movements in reserves is recognised in reserves. Unrealised gains and losses on group transactions
with the associates are eliminated to the extent of the group’s interest in the associate. Where necessary, adjustments
are made to bring the accounting policies used into line with those used by the group.
Interest in joint venture
A joint venture is a contractual arrangement whereby the group and other parties undertake economic activities that are
subject to “joint control”, which requires that the strategic financial and operating policy decisions relating to the activities
require the unanimous consent of the parties sharing control.
The group reports its interest in the jointly controlled entity using proportionate consolidation, the group’s share of the
assets, liabilities, income, expenses and cash flows being combined with the equivalent items in the results on
a line-by-line basis.
2.5 Operating and geographical segments
Operating and geographical segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing
performance of the operating and geographical segments, has been identified as the parent company board of directors.
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EMIS Group plc Annual Report and Accounts 2010
35
Financial statements
Notes to the financial statements
continued
2. Summary of significant accounting policies continued
2.6 Revenue recognition
Revenue is recognised at the fair value of the right to the consideration received or receivable for goods sold and services
provided in the normal course of business during the year. Revenue is shown net of value added tax, returns, rebates and
discounts and after eliminating sales within the group.
The group recognises revenue when the amount can be reliably measured and when it is probable that future economic
benefits will flow to the entity and when specific criteria have been met for each of the group’s activities, as described below:
A revenue from licences, maintenance, support and similar services is credited to deferred income and released on a
straight-line basis over the period of supply;
A revenue from training and other similar services is recognised when the service is delivered;
A revenue from system installations and upgrades is recognised when delivery to a customer has occurred with no significant
vendor obligations remaining and where the collection of the resulting receivable is considered probable. In instances where
a significant vendor obligation exists, revenue recognition is delayed until the obligation has been satisfied; and
A revenue from other hardware and consumables sales is recognised when ownership passes.
EMIS has a contract in relation to the provision of General Practitioner Systems of Choice (GPSoC), as extended to include
the supply of data centre hosted services to National Health Service Connecting for Health (NHS CfH) standards. The group
recognises revenue from this contract as follows:
A provision of infrastructure and hardware – in line with and approximates to the anticipated life of the related assets as
capitalised within property, plant and equipment; and
A other services are recognised when delivered or over the period of supply as appropriate.
Invoices raised in advance of the provision of services to customers are recorded in the balance sheet as deferred income
and included within current liabilities.
Where group recognition criteria exists but no invoice to the customer has been raised at the period end, revenue is
recognised as normal and included as accrued income within trade and other receivables on the balance sheet.
2.7 Operating profit
Operating profit relates to profit before finance income, finance costs, share of profit of associate and income tax expense.
2.8 Intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition of a subsidiary compared with the fair value at the date of
acquisition of the net identifiable assets acquired. Goodwill does not have a finite life, is not subject to amortisation and
is reviewed annually for impairment and whenever there is an indication that there may be impairment.
Any impairment is recognised immediately in the income statement and is not subsequently reversed. For the purpose
of impairment testing, goodwill is allocated to those cash generating units or groups of cash generating units that are
expected to benefit from the business combination and which represent the lowest level within the entity at which the
goodwill is monitored for internal management purposes.
(b) Computer software
The costs of maintaining computer software are recognised as expenses of the period in which incurred.
Development costs that are directly attributable to the design, development and testing of identifiable and unique software
products controlled by the group are recognised as intangible assets from the point in time that:
A it becomes probable a project will be a success;
A the project or product is technically and commercially feasible;
A the development costs can be measured reliably; and
A sufficient resources are available to complete the development and use the asset.
Development costs that have previously been recognised as an expense are not recognised as an asset in a
subsequent period.
36
Annual Report and Accounts 2010 EMIS Group plc
2. Summary of significant accounting policies continued
2.8 Intangible assets continued
(b) Computer software continued
Software acquired by the group on the purchase of subsidiary undertakings that meets the above criteria is included
initially in intangible assets at fair value at the acquisition date. In relation to EMIS, the multi-period excess earnings
method was used, and as regards RX Systems the income (relief from royalty) basis was applied. The capitalised costs
of internally developed software consist only of the directly attributable development employee costs.
All capitalised software has a finite useful life and is carried at the amount recognised initially less accumulated
amortisation and any accumulated impairment losses.
Amortisation of software acquired on business combinations is calculated using the straight-line method over a six year
estimated useful life in relation to EMIS and over a four year estimated useful life in relation to RX Systems.
Expenditure on internally developed software principally consists of the costs to date of EMIS Web, a “next generation”
clinical software product, the costs of which have been capitalised to the extent of the criteria set out above. Accreditation
for use within the GP market was obtained on 7 September 2010, allowing the product to become available over time for
use by GPs and following which the group has commenced a controlled roll-out programme.
Amortisation of EMIS Web software will follow the roll-out programme so as to reflect the availability of the software to GPs
and the pattern of the future economic benefits that are expected to flow from its use, using an amortisation period of
eight years from installation.
(c) Customer relationships
Customer relationships acquired with subsidiary companies are recognised at fair value at the acquisition date using
the multi-period excess earnings method. Customer relationships have a finite useful life and are carried at cost less
accumulated amortisation. Amortisation is calculated using the straight-line method over the expected life of the customer
relationship. Customer relationship assets are impaired if the relationship with the customer ceases.
EMIS customer relationships are being amortised over 15 years and those of RX Systems over ten years.
(d) Amortisation
Each of the amortisation provisions charged against the profits of the year is included in the “Amortisation of intangible
assets” line item of the income statement.
2.9 Property, plant and equipment
Fixed assets acquired with subsidiary companies are recognised at the fair value cost at the date of acquisition.
Subsequent acquisitions are stated at historical cost. Depreciation is provided on all tangible fixed assets other than
freehold land to write assets down to their estimated residual value over their estimated useful lives at the following
annual rates:
Freehold property
Leasehold property
Computer equipment
2% straight-line
20% straight-line
33% straight-line
Fixtures, fittings and equipment
25% reducing balance
Fixtures, fittings and equipment – RX Systems
20% straight-line
Motor vehicles
20% straight-line
Those fixed assets acquired with EMIS and EMIS Inc. on 4 April 2008 and depreciated using the straight-line basis have
the above annual rates applied using each asset’s original cost and original date of acquisition.
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EMIS Group plc Annual Report and Accounts 2010
37
Financial statements
Notes to the financial statements
continued
2. Summary of significant accounting policies continued
2.10 Impairment of property, plant and equipment and intangible assets excluding goodwill
At each year end, the group reviews the carrying amounts of its property, plant and intangible assets to determine whether
there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
An impairment loss is recognised whenever the carrying amount of an asset, or its cash generating unit, exceeds the
asset’s recoverable amount. Impairment losses are recognised as an expense.
The recoverable amount of assets is the greater of fair value less costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate
largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the
asset belongs.
2.11 Taxation
The taxation expense charged in the consolidated statement of comprehensive income represents the sum of the current
tax expense and the deferred tax expense.
The tax currently payable is based on the taxable profit for the year. Taxable profit differs from accounting profit as reported
in the income statement because it excludes items of income or expense that are taxable or deductible in other years and
it further excludes items that are never taxable or deductible. The group liability for current tax is measured using tax rates
that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and
liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is
accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the
temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction which affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and
associates, except where the group is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability
is settled based upon tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is
charged or credited in the comprehensive income statement, except when it relates to items credited or charged directly to
equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and
liabilities and the deferred tax relates to income tax levied by the same tax authorities on either:
A the same taxable entity; or
A different taxable entities which intend to settle current tax assets and liabilities on a net basis or to realise and settle
them simultaneously in each future period when the significant deferred tax assets and liabilities are expected to be
realised or settled.
2.12 Leasing
Operating lease annual rentals are charged in the consolidated statement of comprehensive income on a straight-line
basis over the term of each lease.
2.13 Share incentive plan
The fair value of free shares allocated to members of the share incentive plan (see note 29) is accounted for within
staff costs.
2.14 Retirement benefit costs
The costs charged in the financial statements represent contributions payable by the group during the period into publicly
or privately administered defined contribution pension plans on a mandatory, contractual or voluntary basis. The group has
no further payment obligations once the contributions have been paid. Differences between contributions payable in the
period and contributions actually paid are shown as either accruals or prepayments in the balance sheet.
38
Annual Report and Accounts 2010 EMIS Group plc
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2. Summary of significant accounting policies continued
2.15 Functional and presentational currency
The financial statements are presented in sterling, which is also the functional currency of the parent company.
2.16 Foreign currencies
Assets and liabilities denominated in currencies other than the functional currency of the parent company are translated
at the rate of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling
at the date of the transaction. All differences are taken to the consolidated statement of comprehensive income.
As regards EMIS Inc., on consolidation the assets and liabilities have been translated into the group’s presentational
currency at the rate ruling at the balance sheet date and the results have been translated at the average rate for the period.
Material exchange differences arising are dealt with through reserves.
2.17 Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is based upon estimated
selling price less further costs expected to be incurred to completion and disposal. Provision is made for obsolete
and slow-moving items.
2.18 Own shares held in trust
The shares in the company held by The EMIS Group plc Employee Benefits Trust are stated at fair value and presented as
a reduction of shareholders’ equity (see note 29). Gains and losses on transaction in the company’s own shares are not
recognised in the income statement.
2.19 Financial instruments
Financial assets and financial liabilities are recognised in the group balance sheet when the group becomes a party to the
contractual provisions of the instrument.
(a) Financial assets
Trade receivables
Trade receivables are amounts due from customers for goods sold and services provided in the ordinary course of business.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less provision for impairment. A provision for impairment of trade receivables is established when the
carrying value of the receivable exceeds the present value of the future cash flows discounted using the original effective
interest rate.
Investments
Investments in subsidiaries, associates and joint ventures are recorded at cost in the company balance sheet. They are
tested for impairment when there is objective evidence of impairment. Any impairment losses are recognised in the income
statement in the period they occur.
Cash and cash equivalents
In the consolidated statement of cash flows, cash and cash equivalents include cash in hand and at bank. There are no
bank deposits with maturity dates of more than three months.
(b) Financial liabilities
The group’s financial liabilities, all of which are held for trading, are classed as level one financial instruments in the fair
value hierarchy.
Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business
from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. Trade payables
are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Bank and other borrowings
Bank and other loans are recorded initially at their fair value, net of issue costs. Issue costs are charged to the statement
of comprehensive income over the term of the instrument at a constant rate on the carrying amount. Such instruments are
subsequently carried at their amortised cost.
Equity instruments
Equity instruments issued by the company are recorded at fair value on initial recognition net of transaction costs.
2.20 Dividends
Interim dividends are recognised as distributions in the accounts when paid. Final dividends are recognised in the
accounts in the year in which they are approved by shareholders.
EMIS Group plc Annual Report and Accounts 2010
39
Financial statements
Notes to the financial statements
continued
3. Critical accounting estimates and judgements
Accounting estimates and judgements are based on past experience together with expectations relating to and evaluation
of future events that are believed to be reasonable at the present time. Due to the inherent uncertainty involved in making
these estimates and judgements, actual outcomes could be different. The critical estimates, assumptions and judgements
made in arriving at the amounts recognised in the group financial statements that have a significant risk of causing a
material adjustment to the carrying values of assets and liabilities within the next financial year are as follows:
3.1 Intangible assets acquired through business combinations
The company has made two significant acquisitions to date. On 4 April 2008 it acquired all of the share capital of EMIS
together with its subsidiary, EMIS Inc. and on 1 August 2010 it acquired 78.9% of the share capital of RX Systems. As part
of the fair value exercises in relation to those acquisitions, intangible assets not separately recognised in the accounts of
the acquiree were identified and measured at fair value. The valuation of these assets relies on various assumptions, including
future revenues and costs derived from those assets and the selection of appropriate discount rates in order to calculate
acquisition values. Amortisation rates are as set out in the Summary of significant accounting policies (notes 2.8 and 2.9).
3.2 Development costs
As set out in the accounting policy note 2.8(b), software development costs are capitalised and are amortised over their
estimated useful lives in accordance with the policies set out in that note. Useful lives are based on management
estimates of the period that assets are expected to generate revenue. These estimates are reviewed periodically for
continued appropriateness. Changes to estimates can result in variations in carrying values and amounts charged to
the consolidated statement of comprehensive income from period to period.
4. Financial risk management
4.1 Financial risk factors
The group’s activities expose it to financial risks including credit risk, liquidity risk, interest rate risk, foreign currency risk
and price risk. The group manages these risks through an effective risk management programme that seeks to minimise
potential adverse effects on the group’s performance.
Exposure to financial risks is monitored by the finance/administration department under policies approved by the board.
An assessment of the risks is provided to the board at regular intervals and is discussed to ensure that the risk mitigation
procedures are compliant with group policy and that any new risks are appropriately managed.
Credit risk
The group’s credit risk is primarily attributable to its trade receivables, balance sheet amounts for which are stated net
of allowances for any estimated irrecoverable amounts.
There is some concentration of risk, as EMIS has significant dealings with Connecting for Health (an agency of the
National Health Service) and with Primary Care Trusts. However, EMIS has long standing relationships with its large
number of end users and in addition to the normal credit management processes, the nature of these relationships
assist management in controlling its credit risk.
Credit risk also arises on cash and cash equivalents placed with the group’s two main banks, both of which are within the UK.
Liquidity risk
Management controls and monitors the group’s cash flow on a regular basis, including forecasting future cash flows,
to ensure that it has sufficient financial resources to meet the obligations of the group as they fall due.
A detailed analysis of group debt together with the maturity profile is disclosed in note 26.
Interest rate risk
The company has exposure to interest rate risk in relation to its bank debt amounting to £5.8m. Details of the interest rates
and repayment terms are disclosed in note 26.
The group current assets include cash and cash equivalents at the year end amounting to £7.4m, on which interest
received is subject to fluctuations in market rates.
40
Annual Report and Accounts 2010 EMIS Group plc
4. Financial risk management continued
4.1 Financial risk factors continued
Foreign currency risk
A foreign currency risk arises in relation to the funding of EMIS Inc., which operates in Canadian dollars. The group has
developed software for the Canadian market and EMIS Inc. was formed in 2005 to take this forward. The company is not
yet profitable and is funded by periodic transfers of sterling from the UK.
Price risk
As at the year end the group has only limited exposure to price risk. However, significant changes are being made within
the NHS and at some time during the period 2011 to 2013 there will be price renegotiations.
4.2 Capital risk management
The group defines the capital that it manages as the group’s total equity, including non-controlling interests.
The group’s objectives when managing capital are:
A to safeguard the group’s ability to continue as a going concern, so that it can continue to provide returns to investors
and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital;
A to provide an adequate return to shareholders based on the level of risk undertaken;
A to have financial resources available to allow the group to invest in areas that may deliver future benefits and returns
to shareholders and other stakeholders; and
A to maintain financial resources sufficient to mitigate against risks and unforeseen events.
The group is profitable and has high cash conversion. As a result, capital risk is not significant for the group and measurement
of capital management is not a tool used in the internal management reporting procedures of the group.
5. Operating segments
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 of directors.
Following the acquisition of RX Systems during the year, the group now has two principal operating segments, both involved
with the supply and support of software and related services, namely (a) the EMIS business principally relating to GP practices
and (b) the RX Systems business, relating to community pharmacies.
Healthcare Gateway Limited (HGL) was formed during the year and is a joint venture with In Practice Systems Limited to
enable the sharing of patient data via a medical interoperability gateway. Although the project is still in its development
stage, it is a distinct activity from which significant revenue flows are anticipated, and the board has concluded that,
although it does not meet the quantitative thresholds required by IFRS 8, it closely monitors this segment and should
be reported.
The board also regards the Canadian operation (Emis Inc.) as a distinct geographical operating segment. EMIS Inc. is
engaged in an economic environment that is subject to risks and returns that are different to those of the rest of the group
and although it does not meet the quantitative thresholds required by IFRS 8, the board has concluded that, as it is closely
monitoring this segment, it should also be reported.
Each operating segment is assessed by the board based on a measure of adjusted EBITDA. This measurement basis
excludes the effects of non-recurring expenditure from the operating segments such as restructuring costs and goodwill
impairments. Interest income and expenditure, cash and cash equivalents and bank and other loans are not allocated to
segments, as this type of activity is managed by the board.
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EMIS Group plc Annual Report and Accounts 2010
41
Financial statements
Notes to the financial statements
continued
5. Operating segments continued
Segmental reporting
Continuing operations
EMIS
RX Systems (five month period)
EMIS Inc. – Canada
HGL – joint venture expenses
Total segments
Flotation and other transaction costs
Total operating profit
Finance costs less finance income
Share of profit of associate
Profit for the financial year before taxation
2010
2009
Revenue
£’000
Operating
profit
£’000
Revenue
£’000
Operating
profit
£’000
—
462
—
4,978
493
—
195
(1,961)
(37)
56,922 19,433 57,234 17,042
—
(1,268)
—
62,393 17,630 57,696 15,774
—
15,774
(1,510)
198
14,462
(1,258)
16,372
(375)
109
16,106
Depreciation and amortisation is charged in the above segmental analysis as follows:
– EMIS
– RX Systems
– EMIS Inc. – Canada
Revenue excludes inter-group transactions.
4,869
385
130
4,323
—
135
Revenue within the EMIS segment of approximately £52.2m (2009: £51.5m) is derived from the NHS and related bodies.
Total segmental assets
Total segmental liabilities
2010
2009
EMIS
£’000
70,365
(24,652)
45,713
RX
£’000
2,184
(4,915)
(2,731)
EMIS Inc.
Total
EMIS
£’000
£’000
£’000
494 73,043 53,935
(87) (29,654) (20,762)
407 43,389 33,173
EMIS Inc.
Total
£’000
£’000
653 54,588
(272)
(21,034)
381 33,554
Unallocated assets:
– investment in associate
– cash and equivalents
Unallocated liabilities:
– bank and other loans
– contingent consideration
Shareholders’ equity
The company’s 50% share of the HGL current assets and current liabilities amount to £19,000 and £65,000 respectively.
(5,764)
(946)
46,782
2,661
7,442
—
(29,947)
11,380
2,552
5,221
42
Annual Report and Accounts 2010 EMIS Group plc
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6. Other operating expenses by function
Administration costs
Establishment costs
Motor, travel and selling costs
Contract asset depreciation
Total other operating expenses
7. Operating profit
2010
£’000
3,505
1,134
2,136
1,503
8,278
2009
£’000
3,125
1,098
1,901
85
6,209
2010
£’000
2009
£’000
The following have been included in arriving at operating profit:
Research and development expenditure
Development expenditure capitalised
Depreciation of property, plant and equipment:
– depreciation of owned assets
Amortisation of intangible assets:
– arising on business combinations
– internally generated
Operating lease rentals:
– land and buildings
– plant and equipment
Net foreign exchange losses
The total research and development cost shown above of £5,124,000 (2009: £6,521,000) consists of the direct salary and
national insurance costs of relevant UK and Canadian staff and the costs of Australian based staff. Software development
costs amounting to £3,801,000 (2009: £4,520,000) have, in accordance with the criteria set out in IAS 38, been capitalised.
5,124
(3,801)
444
40
16
2,431
2
2,951
372
12
29
2,074
—
6,521
(4,520)
2,384
8. Finance income
Bank interest
Profit on sale of own shares
9. Finance costs
Bank loans
Other loans
Exchange loss
Amortisation of bank loan issue costs
Interest rate swap fair value gain
2010
£’000
48
3
51
2010
£’000
159
197
54
16
—
426
2009
£’000
62
—
62
2009
£’000
469
1,081
29
16
(23)
1,572
EMIS Group plc Annual Report and Accounts 2010
43
Financial statements
Notes to the financial statements
continued
10. Auditors’ remuneration
Baker Tilly UK Audit LLP
Audit services:
– statutory audit of parent and consolidated accounts
– audit of accounts of subsidiary
– audit of associated pension scheme
Other services:
– review of interim results
Baker Tilly Tax and Advisory Services LLP
Taxation services:
– compliance services
– advisory services
Other services:
– accounting services
Baker Tilly Corporate Finance LLP
Transaction services
2010
£’000
2009
£’000
22
42
—
10
16
43
—
190
323
10
30
2
—
9
18
3
—
72
11. Employee costs
The average monthly number of persons (including directors) employed by the group during the year was as follows:
Management and administration
Software support and development
Maintenance
Others
Staff costs for above persons:
– wages and salaries
– social security costs
– pension costs – defined contribution plans
– share-based payments
2010
Number
2009
Number
107
344
299
73
823
2010
£’000
139
304
283
71
797
2009
£’000
24,653
2,335
193
10
27,191
24,047
2,217
76
—
26,340
Staff costs includes amounts charged to the income statement and amounts capitalised as part of development costs.
44
Annual Report and Accounts 2010 EMIS Group plc
12. Income tax expense
Income tax:
– current tax charge
– prior year tax charge
Total current tax
Deferred taxation:
– current period
Total deferred tax
Total tax charge in consolidated statement of comprehensive income
Factors affecting the tax charge for the year:
– profit before tax
Profit before taxation multiplied by the domestic income tax rate in the UK of 28% (2009: 28%)
Tax effects of:
– expenses not deductible for tax purposes
– future relief not provided for on Canadian loss
– exchange rate loss
– profit of associate company
– adjustments for the prior period
– deferred tax rate change
Tax charge for the year
2010
£’000
2009
£’000
4,841
(14)
4,827
41
41
4,868
3,632
(80)
3,552
969
969
4,521
16,106
4,510
14,462
4,049
174
549
—
(31)
(14)
(320)
4,868
10
690
(93)
(55)
(80)
—
4,521
13. Earnings per share
The basic earnings per share (EPS) has been calculated by dividing the net profit attributable to ordinary shareholders by
the weighted average number of shares in issue during the relevant period as follows:
Basic EPS:
– earnings attributable
to ordinary shareholders
2010
2009
Earnings
£’000
Number of Amount per
share
shares
Earnings
£’000
Number of
shares
Amount per
per share
11,194 56,426,582 19.84p
9,941
50,000,000
19.88p
The issued ordinary share capital of the company was subdivided from £1 shares into one penny shares on 29 March 2010.
However, for consistency, the number of shares shown above assumes that one penny shares were in issue throughout.
The number of shares stated for 2010 is a weighted average, taking into account the issue of 8,333,334 shares on 29 March 2010
and 216,683 shares on 19 August 2010.
There has been no dilution of shareholders interests during the year.
14. Dividends
Interim dividend for the year to 31 December 2010 of 5.6p
A final dividend for the year ended 31 December 2010 of 5.6p amounting to £3,278,800 will be proposed at the 2011
Annual General Meeting. If approved, this dividend will be paid on 30 May 2011 to shareholders on the register on
26 April 2011. The dividend is not accounted for as a liability in these accounts and will be accounted for as an
appropriation of revenue reserves in the year to 31 December 2011.
3,278
2010
£’000
2009
£’000
—
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EMIS Group plc Annual Report and Accounts 2010
45
Financial statements
Notes to the financial statements
continued
15. Goodwill
Group
Cost and net book amount
2009
As at 1 January 2009
Movements in year
As at 31 December 2009
2010
As at 1 January 2010
Arising on acquisition of RX Systems
£’000
15,853
—
15,853
15,853
6,098
21,951
Allocated to the group’s cash generating units as follows:
15,853
– EMIS
– RX Systems
6,098
The carrying value of goodwill represents the excess of the acquisition cost over the fair value of the net identifiable assets
of the acquired subsidiaries at the date of acquisition.
Impairment tests for goodwill
Goodwill is allocated to the group’s cash generating units (CGUs) identified according to operating segment.
An operating segment-level summary of the goodwill is presented below:
EMIS
RX Systems
2010
£’000
15,853
6,098
21,951
Each allocation is tested annually for impairment and to confirm that no impairment of the goodwill is necessary,
management has compared the carrying value to the value in use.
2009
£’000
15,853
—
15,853
The value in use for each allocation has been calculated using internal group budgets for the three years ending
31 December 2013 to forecast pre-tax cash flows from each CGU. These cash flows have then been extrapolated for
a further two years assuming average annual growth rates of 3.5% for EMIS (2009: 10%) and 4.0% for RX Systems, until
31 December 2015 and then in perpetuity. The pre-tax cash flows for the five year period have been discounted back to
31 December 2010 using weighted average costs of capital of 9% in relation to EMIS (2009: 9%) and 13% for RX Systems.
The exercise has confirmed that there has been no impairment. Sensitivity analysis has then been performed on the inputs,
which continues to indicate that no impairment is required.
46
Annual Report and Accounts 2010 EMIS Group plc
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a
n
n
c
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v
v
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w
w
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a
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r
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n
n
a
a
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n
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i
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a
a
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c
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a
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s
t
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m
m
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n
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t
t
s
s
16. Other intangible assets
Computer
Customer
software relationships
£’000
£’000
Total
£’000
—
Group
Cost
As at 1 January 2009
2009 additions – internally developed
As at 31 December 2009
2010 additions – internally developed
– acquisition of RX Systems
As at 31 December 2010
Amortisation and impairment
As at 1 January 2009
In year to 31 December 2009
As at 31 December 2009
In year to 31 December 2010
As at 31 December 2010
Net book value
As at 31 December 2010
As at 31 December 2009
As at 1 January 2009
Customer relationships have a remaining amortisation period of 13 years (2009: 14 years) for EMIS and 9.6 years for
RX Systems.
7,700 13,100 20,800
4,520
4,520
12,220 13,100 25,320
3,801
6,861
17,118 18,864 35,982
13,471 15,813 29,284
9,974 11,081 21,055
18,609
6,737 11,872
(963)
(1,283)
(2,246)
(1,401)
(3,647)
(1,228)
(791)
(2,019)
(1,032)
(3,051)
(2,191)
(2,074)
(4,265)
(2,433)
(6,698)
3,801
1,097
—
5,764
The accounting policy for internally developed software is set out in note 2.8. The remaining amortisation period is
approximately eight years (2009: eight years). The EMIS and RX Systems acquired software have remaining amortisation
periods of 3.3 years (2009: 4.3 years) and 3.6 years respectively.
EMIS Group plc Annual Report and Accounts 2010
47
Financial statements
Notes to the financial statements
continued
17. Property, plant and equipment
Land and
buildings
£’000
Computer
equipment
£’000
Fixtures,
fittings and
equipment
£’000
Motor
vehicles
£’000
Total
£’000
3,432
108
—
3,540
19
20
—
3,579
830
294
—
1,124
102
137
—
1,363
2,658
2,957
(215)
5,400
4,422
24
(2)
9,844
9,656
2,736
4,113
754
(478)
(693)
3,012 13,076
5,611
1,068
181
—
(1,075)
(1,077)
3,005 17,791
Group
Cost
As at 1 January 2009
Additions in 2009
Disposals in 2009
As at 31 December 2009
Additions in 2010
Acquisition of RX Systems
Disposals in 2010
As at 31 December 2010
Accumulated depreciation and impairment losses
As at 1 January 2009
Charged in 2009
On disposals in 2009
As at 31 December 2009
Charged in 2010
On disposals in 2010
As at 31 December 2010
Net book value
As at 31 December 2010
As at 31 December 2009
As at 1 January 2009
Included within property, plant and equipment are assets (“contract assets”) allocated to the data centre hosting services
contract (see note 2.6 – Revenue recognition for further details) with an original cost of £6,858,000 and accumulated depreciation
of £2,171,000, including depreciation of £1,503,000 charged in the year. The net book value amounts to £4,687,000.
702
894
(332)
1,264
574
(786)
1,052
669
1,248
(95)
1,822
2,144
—
3,966
1,953 12,058
9,506
1,748
8,073
2,034
144
196
—
340
153
—
493
68
76
—
144
78
—
222
1,583
2,414
(427)
3,570
2,949
(786)
5,733
3,357
3,396
3,364
5,878
3,578
1,989
870
784
686
18. Investments in subsidiaries
Company
Cost and net book value
53,871
As at 1 January 2009
(15,837)
Deduct intra-group dividend paid in 2009 out of pre-acquisition profits
38,034
As at 31 December 2009
10,131
Addition in 2010 – RX Systems (note 33)
As at 31 December 2010
48,165
The company’s investments in its subsidiaries (and those investments of EMIS) are recorded at fair value cost, which is the
fair value of the consideration paid and payable.
£’000
48
Annual Report and Accounts 2010 EMIS Group plc
100
78.9
100
100
100
2009
£’000
2,354
—
198
2,552
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18. Investments in subsidiaries continued
Details of the subsidiary companies are as follows:
Name and nature of business
Egton Medical Information Systems Limited (EMIS)
– medical IT systems
RX Systems Limited
– pharmacy IT systems
Subsidiary companies of EMIS:
EMIS Inc.
– medical systems
EMIS Professional Publishing Limited
– dormant
Pathway Trust Limited
– dormant
All subsidiary undertakings are included in the consolidation.
Country of
registration
and operation
Class of share
% of voting
power held
England
£1 ordinary
England
£1 ordinary
Canada
$1 Class A
England
£1 ordinary
England
£1 ordinary
19. Investment in associates
Group
As at 1 January
Acquisition in year
Share of profit for year
As at 31 December
The company has two associates, Pharmacy2U Limited (P2U) and Multepos Computer Systems Limited (Multepos).
Both are unlisted companies incorporated in the UK.
2010
£’000
2,552
—
109
2,661
The principal activity of P2U is the operation of an internet mail order pharmacy and the group has a 20% ownership and
voting interest.
Multepos was acquired as part of the RX Systems transaction and is in the process of developing a pharmacy electronic
point of sale system, which would enable RX to enhance the services it provides to its user base. The trading results for
the period to date and the net assets of Multepos are not material and have not been recognised in the group accounts.
The investment is owned by RX Systems and the group has a 20% ownership and 25% voting interest.
2010
£’000
2009
£’000
Aggregate amounts relating to P2U are as follows:
Assets
Liabilities
Revenues
Profit before taxation
Profit after taxation
20. Inventories
Group
Finished goods
No inventory write downs have been required.
6,114
(3,369)
5,401
(3,201)
18,780 16,869
973
989
758
545
2010
£’000
668
2009
£’000
674
EMIS Group plc Annual Report and Accounts 2010
49
Financial statements
Notes to the financial statements
continued
21. Trade and other receivables
Current
Trade and other receivables
Prepayments and accrued income
Income tax
22. Cash and cash equivalents
Cash at bank
Group
Company
2010
£’000
2009
£’000
2010
£’000
6,946
2,136
—
9,082
5,764
1,736
—
7,500
—
48
351
399
2009
£’000
—
—
611
611
Group
Company
2010
£’000
7,442
2009
£’000
5,221
2010
£’000
14
2009
£’000
25
23. Credit quality of financial assets
The group’s financial assets, all of which are held for trading, are classed as level one financial instruments in the fair value
hierarchy. The amounts of the maximum exposure to credit risk at the reporting date are as follows:
Trade and other receivables
Cash at bank
No collateral security is held.
Trade and other receivables
Reporting date balances fall within the following categories:
EMIS
UK governmental health bodies:
– agencies (e.g. Connecting for Health)
– others (e.g. Primary Care Trusts)
RX Systems
– group and independent high street pharmacies
– distributors
Other third party debtors across the group
Group
Company
2010
£’000
6,946
7,442
2009
£’000
5,764
5,221
14,388 10,985
2010
£’000
—
14
14
2009
£’000
—
25
25
Group
2010
£’000
2009
£’000
3,220
818
3,726
1,007
1,282
591
1,035
6,946
—
—
1,031
5,764
Trade and other receivables are mainly due one month following the date of the invoice. At the reporting date the aged
analysis of trade and other receivables is as follows:
December
November
October and earlier
Other than trivial amounts, no provision for impairment of trade receivables has been required.
Group
2010
£’000
6,257
415
274
6,946
2009
£’000
4,023
941
800
5,764
50
Annual Report and Accounts 2010 EMIS Group plc
23. Credit quality of financial assets continued
Cash at bank
The Moody’s long term credit ratings and balances are as follows:
A1
Aa3
Other balances
24. Trade and other payables
Current
Trade payables
Accrued expenses
25. Current tax liabilities
Corporation tax
Other tax and social security
26. Borrowings
Company and group
Non-current
Bank loans – secured
Other loans
Current
Bank loans – secured
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n
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t
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s
Group
2010
£’000
2,402
4,945
95
7,442
2009
£’000
5,194
—
27
5,221
Group
Company
2010
£’000
2009
£’000
2010
£’000
3,531
1,638
5,169
2,192
1,189
3,381
—
—
—
Group
Company
2010
£’000
2,572
2,531
5,103
2009
£’000
1,634
1,882
3,516
2010
£’000
—
—
—
2009
£’000
—
571
571
2009
£’000
—
—
—
2010
£’000
2009
£’000
4,580
5,763
— 23,000
4,580 28,763
1,184
1,184
5,764 29,947
Bank loans consist of a term loan to March 2013 amounting to £2,800,000 at 31 December 2010, repayable by equal
monthly instalments of £100,000, and a mortgage loan of £3,000,000 repayable on 31 March 2014. The term loan bears
interest at 2% over LIBOR and the mortgage loan is at 1.75% over LIBOR.
The bank loans are secured by mortgage debentures providing fixed and floating charges over the group’s assets
and undertaking.
Other loans, which were subordinated in favour of the bank and bore interest at 2% over LIBOR, were repaid in full on
29 March 2010.
The fair value of non-current borrowings carried at £4,580,000 (2009: £28,763,000) as shown above is estimated to have
a fair value of £4,527,000 (2009: £28,292,000). The fair values are based on cash flows discounted using a rate based on
the borrowing rate of 2.87% (2009: 2.78%).
The fair value of current borrowings equals their carrying amount, as the impact of discounting is not significant.
EMIS Group plc Annual Report and Accounts 2010
51
Financial statements
Notes to the financial statements
continued
26. Borrowings continued
Analysis of debt maturity:
2010
£’000
2009
£’000
Amounts payable:
In one year or less
In more than one year but not more than two years
In more than two years but not more than five years
In five years or more
Debt issue costs to be amortised over outstanding term
1,200
1,200
4,600
— 23,000
(53)
5,764 29,947
The company has an undrawn bank revolving credit facility, arranged at the time of the RX Systems acquisition, of £5,000,000
which expires on 19 August 2012.
1,200
1,200
3,400
(36)
27. Deferred tax
Plant and
equipment
£’000
286
(147)
—
—
—
—
—
139
Intangible
assets
£’000
(5,210)
—
581
(1,266)
—
—
—
(5,895)
Derivative
financial
instruments
£’000
153
—
—
—
(147)
(6)
—
—
Property
£’000
(784)
—
—
—
—
—
16
(768)
As at 1 January 2009
Charge to income
Intangibles amortisation
Development costs
Settlement of derivative
Derivative fair value gain
Depreciation on building
As at 31 December 2009
Business combination:
– acquired provision
– intangibles fair value
Charge to income
Intangibles amortisation
Development costs
Depreciation on building
Effect of rate change
As at 31 December 2010
Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances
(after offset) for financial reporting purposes:
—
(1,921)
—
681
(1,064)
—
293
(7,906)
—
—
—
—
—
16
27
(725)
(8)
—
6
—
—
—
—
137
—
—
—
—
—
—
—
—
Total
£’000
(5,555)
(147)
581
(1,266)
(147)
(6)
16
(6,524)
(8)
(1,921)
6
681
(1,064)
16
320
(8,494)
Deferred tax liabilities
Deferred tax assets
2010
£’000
(8,634)
140
(8,494)
2009
£’000
(6,663)
139
(6,524)
52
Annual Report and Accounts 2010 EMIS Group plc
28. Share capital and premium
As at 1 January 2009 and 1 January 2010
29 March 2010:
Conversion from £1 shares to shares of one penny
Proceeds from shares issued:
– 29 March 2010
Acquisition of subsidiary (note 33)
Ordinary shares
Number
500,000
49,500,000
8,333,334
216,683
58,550,017
Share
premium
£’000
—
—
Total
£’000
500
—
24,063
704
24,767
24,146
707
25,353
£’000
500
—
83
3
586
The company was admitted to the Alternative Investment Market (AIM) on 29 March 2010. As part of that process the
existing ordinary shares of £1 each were converted into 50,000,000 ordinary shares of one penny each. A further 8,333,334
shares of one penny each (representing 14.29% of the enlarged equity) were issued at £3.00 a share, raising a gross
amount of £25,000,000 less related costs charged to the share premium account of £854,359. The net proceeds were
used to repay founders loans of £23,000,000 (note 26).
The company issued 216,683 ordinary shares of one penny each at 326.3p (representing 0.37% of the enlarged equity)
on 19 August 2010 in connection with the acquisition of RX Systems (note 33).
All issued shares are fully paid. There were no movements in the share capital of the company during 2010.
29. Share-based payments
The company operates an Inland Revenue approved share incentive plan, which commenced October 2010 and is open
to all UK employees. Those joining contribute a maximum of £1,500 a year, or 10% of salary, whichever is smaller, which
is used to acquire shares in the company at market price from the EMIS Group plc Employee Benefits Trust, which was
established during the year to hold shares in the company to facilitate share-based emolument payments.
For every four shares acquired by employees the company adds one free share. The free shares allocated to members
of the scheme during the period October to December 2010 had a value of £10,000.
30. Operating lease commitments
The future aggregate minimum lease commitments under non-cancellable operating leases as follows:
Group
Land and buildings:
– due within one year
– due between two and five years
– due in more than five years
Plant and machinery:
– due within one year
– due between two and five years
– due in more than five years
2010
£’000
462
617
—
2009
£’000
281
456
501
88
164
29
1,360
10
14
—
1,262
31. Capital commitments
At 31 December 2010 the group had capital commitments in respect of motor vehicles amounting to £50,000 (2009: £336,000).
B
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s
s
EMIS Group plc Annual Report and Accounts 2010
53
Financial statements
Notes to the financial statements
continued
32. Cash generated from operations
Profit before tax
Amortisation of intangible assets
Depreciation of property, plant and equipment
Decrease in inventory
(Increase) in trade and other receivables
Decrease in trade and other payables
Increase in deferred income
Finance income
Finance costs
Share of profit of associate
Profit on transactions in own shares
Net cash flow from operating activities
Group
Company
2010
£’000
16,106
2,433
2,949
40
(35)
(1,142)
1,568
(51)
426
(109)
(4)
22,181
2009
£’000
14,462
2,074
2,384
498
(1,959)
(2,235)
3,328
(62)
1,572
(198)
—
19,864
2010
£’000
2,573
—
—
— —
(48) —
(572)
— —
2009
£’000
8,757
—
—
(14)
(4,500) (10,864)
2,090
389
— —
(4) —
(2,162)
(31)
33. Business combinations
During the year EMIS Group plc acquired 78.9% of the called up ordinary share capital of RX Systems Limited (“RX Systems”),
an unlisted company. The transaction was finalised on 19 August 2010. The economic benefits passed with effect from
1 August 2010, which has been regarded as the acquisition date.
RX Systems is a pharmacy software and services company and the acquisition of RX represents a strategic opportunity
for EMIS to develop into this adjacent segment of the healthcare IT market to further its objective of joining up healthcare IT.
The goodwill of £6,098,000 arising from the acquisition principally relates to the inherent workforce and market share.
None of the goodwill recognised is expected to be deductible for income tax purposes.
The table below summarises the consideration paid for RX Systems and the fair value amounts as at the acquisition date
of the assets acquired and liabilities assumed, as well as the fair value at that date of the non-controlling interest in RX.
Consideration
Cash
Equity instruments (216,683 ordinary shares)
Contingent consideration:
– current
– non-current
Total consideration
Recognised amounts of identifiable assets acquired and liabilities assumed
Customer contracts and relationships (included in intangibles) (note 16)
ProScript Technology (included in intangibles) (note 16)
Property, fixtures, fittings and equipment (note 17)
Investment in associates (note 19)
Inventories
Trade and other receivables
Trade and other payables
Deferred income
Deferred tax liabilities (note 27)
Cash and cash equivalents
Total identifiable net assets
Non-controlling interest
Goodwill
Acquisition-related costs
£’000
8,478
707
189
757
10,131
5,764
1,097
181
—
34
1,547
(3,579)
(1,707)
(1,929)
5,334
6,742
(2,709)
6,098
10,131
299
54
Annual Report and Accounts 2010 EMIS Group plc
33. Business combinations continued
Acquisition-related costs are included in flotation, acquisition and other transaction costs in the consolidated statement
of comprehensive income for the year ended 31 December 2010.
The fair value attributed to the 216,683 ordinary shares in the company issued as equity consideration was based on the
average closing price for the 30 day period prior to the transaction. There were no material identifiable issuance costs.
The contingent consideration arrangement requires the company to pay the RX Systems vendor shareholders a maximum
of £0.95m. The contingent consideration is based on a formula and accrues on achievement of annualised operating profits
within the range of between £1,680,000 and £2,400,000 for the five month period and the succeeding twelve month period
following completion. It is fully expected that the maximum amount will become payable and this has accordingly been
regarded as the fair value as at 1 August 2010.
RX Systems has an associated company investment which has a cost and book value of £150,000 (note 19), the fair value
of which is nil.
The trade and other receivables amounting to £1,547,000 consist principally of trade debtors. The only fair value adjustment
required is with regard to a loan of £38,000 to the associated company, which has been included at a fair value of nil.
The fair value of the acquired identifiable intangible assets of £6,861,000 is provisional pending receipt of the final
valuations for those assets.
RX Systems has a non-controlling interest (NCI). The amount recognised, amounting to £2,709,000, uses the “fair value
method” of measurement. This method recognises the amount of the proportionate share of the whole of the goodwill of
RX within that figure as well as the proportion of the identifiable net assets attributable to the NCI.
The total consideration payable for RX Systems amounting to £10,131,000 was based on the proportion of RX acquired
in relation to the value of RX as a whole and accordingly did not include any control premium.
It is considered that no difference exists between the per share value of the company’s controlling interest and that of the NCI.
A deferred taxation provision of £1,921,000 arises on the intangible assets acquired and this amount also forms part of the
goodwill recognised on this acquisition. No other fair value adjustments have been required.
The revenue included in the consolidated statement of comprehensive income is for the period 1 August to 31 December 2010,
amounting to £4,978,000, with a profit contribution (after deduction of amortisation of intangibles) of £215,000.
Had RX Systems been part of the EMIS Group throughout 2010, unaudited pro forma figures for the year to 31 December 2010
would have shown revenue of £11,648,000, profit after amortisation of intangibles and before taxation of £954,000, a tax
charge of £140,000 and a post tax profit of £814,000.
With regard to the EMIS acquisition on 4 April 2008, the fair values of acquired assets and liabilities, including goodwill,
previously disclosed as provisional, have been finalised in the current year with no material changes to the fair values
disclosed in the 2008 Directors’ report and accounts.
34. Pension commitments
The group defined contribution pension scheme was wound up during 2009, no contributions to that scheme having been
made during that year.
The total costs charged to income consist of £98,000 (2009: £56,000) representing EMIS contributions payable to individual
personal pension plans, £34,000 in relation to RX Systems group and personal pension arrangements and £53,000
(2009: £63,000) in relation to employees of the group’s subsidiary in Canada.
Canadian employees are members of a federally-managed retirement benefit plan operated by the Government of Canada,
known as the Canada Pension Plan (CPP). EMIS Inc. is required to contribute 4.95% of gross pensionable earnings to the
retirement benefit plan to fund the benefits. The only obligation of the group with respect to the retirement benefit plan is
to make the specified contributions.
B
B
u
u
s
s
i
i
n
n
e
e
s
s
s
s
a
a
n
n
d
d
fi
fi
n
n
a
a
n
n
c
c
i
i
a
a
l
l
r
r
e
e
v
v
i
i
e
e
w
w
C
C
o
o
r
r
p
p
o
o
r
r
a
a
t
t
e
e
g
g
o
o
v
v
e
e
r
r
n
n
a
a
n
n
c
c
e
e
i
i
F
F
n
n
a
a
n
n
c
c
i
i
a
a
l
l
s
s
t
t
a
a
t
t
e
e
m
m
e
e
n
n
t
t
s
s
EMIS Group plc Annual Report and Accounts 2010
55
Financial statements
Notes to the financial statements
continued
35. Related party transactions
Key management compensation
Key management includes directors (executive and non-executive) of the parent and UK subsidiary companies,
the Company Secretary and certain departmental heads. The compensation paid or payable to key management for
employee services is shown below:
Salaries and other short-term employee benefits
Post retirement benefits
Directors’ emoluments
Aggregate emoluments
Pension costs – defined contribution plans
2010
£’000
1,638
76
2010
£’000
770
53
823
Retirement benefits are accruing to three (2009: five) directors under defined contribution personal pension schemes.
Highest paid director:
– aggregate emoluments
– pension costs – defined contribution plans
Transactions between the group and its associate – Pharmacy2U Limited:
Sales of goods in period
Amounts owed by/to related party at period end
199
15
214
2010
£’000
32
—
2009
£’000
2,376
76
2009
£’000
1,754
76
1,830
347
15
362
2009
£’000
47
—
Transactions with directors
During the period certain directors had transactions with the group resulting in the following outstanding debtors:
W A Jones
31 December
2010
£’000
—
Maximum
in period
£’000
2
1 January
2010
£’000
2
36. Post balance sheet event
Discontinued operation
EMIS has caused to be developed, and configured, software specifically for the Canadian healthcare market. However,
EMIS Inc. the group’s Canadian subsidiary, through which this activity has been conducted, has not made the progress
that had been hoped for. This resulted in a reduction of staff numbers during the year and a strategic options review going
through into 2011. That process has now been concluded and EMIS has commenced a managed exit.
It is anticipated at the present time that the 2011 Canadian fair value losses will be in the region of £1.1m. There will also
be an impairment charge of £1.4m.
56
Annual Report and Accounts 2010 EMIS Group plc
The group’s commitment to environmental issues is reflected in this
Annual Report which has been printed on Revive 50 White Silk, a recycled
paper stock containing 50% recovered waste and 50% virgin fibre.
This report was printed by Pureprint Group using their environmental print
technology which minimises the impact of printing on the environment.
Vegetable based inks have been used and 99% of dry waste is diverted
from landfill. Pureprint Group is a CarbonNeutral® company.
EMIS Group plc
Fulford Grange
Micklefield Lane
Rawdon
Leeds LS19 6BA
Tel: 0113 380 3000
www.emis-online.com