Positive progress EMIS Group plc Annual report and accounts 2022 Strategic report 1 Highlights 2 Strategic overview 3 At a glance 4 Chair’s statement 6 Chief Executive Officer’s statement 8 Business model 10 Stakeholder engagement 14 Strategy 16 Key performance indicators 18 Alternative performance measures (APMs) 20 Financial review 24 Operational review 28 Principal risks and uncertainties 34 Viability statement 35 ESG report Governance 50 Board of Directors 52 Chair’s introduction to governance 53 Corporate governance statement 59 Report of the audit committee 64 Report of the nomination committee 66 Report of the remuneration committee 69 Directors’ remuneration report 82 Directors’ report 85 Statement of Directors’ responsibilities Financial statements 86 Independent auditor’s report to the members of EMIS Group plc 94 Group statement of comprehensive income 95 Group and parent company balance sheets 96 Group and parent company statements of cash flows 97 Group and parent company statements of changes in equity 98 Notes to the financial statements 123 Five-year Group financial summary 124 Shareholder information Visit our website at www.emisgroupplc.com 1 EMIS Group plc | Annual report and accounts 2022 Financial Total revenue £175.4m +4% Reported operating profit £27.7m -22% Reported operating margin 15.8% -550bps Reported cash generated from operations £48.8m -2% Reported EPS 52.5p +14% Net cash1 £45.9m -28% Recurring revenue1 £143.3m +6% Adjusted operating profit1, 2 £47.7m +10% Adjusted operating margin1, 2 27.2% +130bps Adjusted cash generated from operations1 £54.6m +19% Adjusted EPS1 62.0p +10% Total dividend for the year 38.7p +10% HIGHLIGHTS Business Good results with performance in line with expectations. • Increased dividend for the twelfth consecutive year • EMIS Enterprise – 19% revenue growth reflects acquisitions made and strong growth in the existing business. EMIS Enterprise grew to 46% of the Group’s operating profit in the period • EMIS Health – revenue reduced by 4% given continued strategy of exiting lower margin Resale Partner business. Higher quality revenue mix resulted in marginal increase in adjusted operating profit • Technology development continued in line with the product roadmap with particular progress in community pharmacy and EMIS-X Analytics • Two new EMIS-X Analytics products launched in 2022, Recruit and Pathway: • Recruit provides the technological link to enable efficient recruitment into clinical trials • Pathway utilises clinical intelligence to identify cohorts of patients who are at risk of long-term health conditions • Employee engagement score improved over the course of 2022 in year one of the three-year employer of choice programme • ESG – developed sustainability strategy during the year and adopted a commitment to achieve net zero emissions by 2040 Better care through technology innovation 1 Recurring revenue, adjusted operating profit, adjusted cash generated from operations, adjusted EPS and net cash are all alternative performance measures. See page 18 for further details and reconciliation to the relevant IFRS number. 2 Including a £1.7m contribution from acquisitions and excluding exceptional costs of £12.8m (see note 32). Highlights STRATEGIC REPORT EMIS Group plc | Annual report and accounts 2022 2 Our purpose Our values Our integrated care strategy Our ESG priorities ACHIEVE SUSTAINABLE FINANCIAL GROWTH ENABLE OUR PEOPLE TO THRIVE PROVIDE EXCELLENT CUSTOMER AND PARTNER SERVICE DELIVER INNOVATIVE, RELIABLE, SAFE SOFTWARE RESPONSIBLE Our environmental responsibilities Centring our environmental impact to deliver steady, measurable improvements Delivering social value to our community For EMIS’s actions and technology developments to positively impact UK society Our people and culture To create a supportive, inclusive environment where everybody can thrive, both doing and being their best Our responsibilities as a business Strong ethical governance practices are integral to long- term value creation At a glance page 3 Strategy pages 14 to 15 ESG pages 35 to 49 Strategic overview TO BE THE LEADING PROVIDER OF INNOVATIVE HEALTHCARE TECHNOLOGY THAT IMPROVES PEOPLE’S LIVES COLLABORATIVE SUPPORTIVE TRANSFORMATIVE RESPONSIBLE Business model page 8 3 EMIS Group plc | Annual report and accounts 2022 At a glance OUR PURPOSE To be the leading provider of innovative healthcare technology that improves people’s lives Integrating care settings to improve patient experience and health outcomes Empowering people through online access to clinically authored content and approved services Delivering insight for clinicians, research and life sciences to improve UK health and wellness SEGMENTS BRANDS The clinical software business, supplying essential technology to 10,000 healthcare organisations across every major UK health sector for front line clinical care and to facilitate health research. The UK’s leading independent provider of patient-centric medical and wellbeing information for the UK public, as well as digital front door access to NHS and private services provided in primary care and community pharmacy settings. Primary care 44% of revenue in 2022 #1 in primary care Community care 9% of revenue in 2022 #2 in community Acute care 6% of revenue in 2022 #2 in A&E EMIS HEALTH Medicines management 24% of revenue in 2022 #1 in community pharmacy #1 in community pharmacy service management solutions #2 in hospital pharmacy Partners, analytics and other services 15% of revenue in 2022 175 accredited partners 41 customers using EMIS-X Analytics EMIS ENTERPRISE Patient-facing services 2% of revenue in 2022 #1 independent patient services app Business areas where revenues are generated from delivering core software and ancillary services to NHS organisations. Business areas where revenues are derived predominantly from business-to-business (B2B) healthcare sector sources. Chair’s statement EMIS Group plc | Annual report and accounts 2022 4 Dear Shareholder 2022 has been another positive year for EMIS. The Group grew revenue by 4% and adjusted operating profit by 10% over the prior year, boosted by three bolt-on acquisitions in the year, while accelerating its investment in new technology. As a result of the exceptional programmes running during the year, reported operating profit decreased by 22%. We secured significant new business, especially in our Enterprise segment, while investing in system and service upgrades for existing customers. We continued our investment in new capabilities through the acquisition of three businesses – Edenbridge, FourteenFish and Healthcare Gateway. Edenbridge is a forerunner in the provision of business intelligence tools for GPs, networks and Integrated Care Systems (ICS). FourteenFish delivers leading appraisal and learning toolkits for healthcare professionals. In increasing our ownership from 50% to 100% of Healthcare Gateway, we have added its secure Medical Interoperability Gateway (MIG) between health and social care to our direct technology product portfolio. We believe these to be excellent additions to our overall capabilities. We accelerated our organic investment through our cloud-first strategy. EMIS-X technology is at the forefront of this drive. We issued many enhancements to the technology in 2022, each one improving further the capability of the platform to modernise and expand our existing GP and community pharmacy systems and their operation with other healthcare services. These advancements demonstrate the Group’s commitment to investment in the technology and innovation our customers need to deliver world-class healthcare and directly support the NHS’s focus on integrated care. You can read more about our operational success and financial performance in the operational review on pages 24 to 27 and the financial review on pages 20 to 23. All of this has been achieved against the backdrop of the offer made by a subsidiary of UnitedHealth Group Incorporated to acquire EMIS’s shares, announced on 17 June 2022 (the Proposed Acquisition). This Proposed Acquisition has demanded considerable time and attention from the Board and the senior team but has not distracted the Group from the pursuit of its purpose: to be the leading provider of innovative healthcare technology that improves people’s lives, underpinned by the values of collaboration, responsibility, support and transformation and anchored by a culture of openness, inclusivity and excellence. Investing in our people, embedding our culture EMIS’s employees are key to its success. To advance we need to retain and motivate our talented teams. Leadership and culture play a major part in this. The Board is ultimately responsible for setting the parameters of both and is keen to gain insight into and monitor the priorities and concerns of our people. In this way, the Board ensures that their feedback is taken into account in our decisions. In 2022 we announced our target of becoming an employer of choice by 2025, a goal to be achieved through the provision of a positive and inclusive working environment, where employees feel developed, challenged, rewarded and engaged, where their physical and mental wellbeing is supported and diversity celebrated. The Board receives regular updates on the initiatives underway to improve employee satisfaction and retain our talented performers and I was delighted when our employee engagement survey returned a score of 71, as early as the first year into this programme. I would like to thank each and every one of our employees for their tremendous hard work and commitment throughout 2022 and in 2023 to date. Investing for our planet We made significant advances in our environmental, social and governance (ESG) strategy and governance during the year under review. Building on the materiality assessment carried out in the prior year, the Board took account of the feedback from stakeholders and external experts, articulated a sustainability strategy which sits squarely at the heart of our purpose and approved clear KPIs for ESG in 2022 and beyond which expand on the targets for 2021. In addition to goals and objectives which further our contribution to social value, the KPIs include the Group achieving net zero greenhouse gas emissions (a 90% reduction across all scopes with minimal reliance on offsetting) by 2040, with a 90% reduction across Scope 1 and 2 emissions by 2030 an important milestone on that journey. We are also targeting commitments to a fully sustainable supply chain, continuous improvements in the sustainability of our products and services and embedding a culture in which everyone at EMIS takes personal responsibility for reducing their environmental impact. The creation of a new role of Sustainability Manager within the Group’s organisational structure demonstrates our commitment to our ESG strategy and recruitment to that role has enabled the Group to set firm baselines from which to measure and report on progress against its ESG goals, as we begin the delivery of our social and environmental strategies in 2023. The Board looks forward to seeing and reporting on that progress in action. Another positive year for EMIS STRATEGIC REPORT 5 EMIS Group plc | Annual report and accounts 2022 Providing a positive and inclusive working environment, our focus remains on our future growth strategy in alignment with NHS policy, patient demand for better UK healthcare and new opportunities in EMIS Enterprise markets.” There is more on the Group’s approach to sustainability in the ESG report on pages 35 to 49. Board membership and governance As in prior years, we voluntarily measure our governance as a Board against the requirements of the UK Corporate Governance Code 2018 (the Code). In my view it is appropriate for a company operating in our sector to seek to achieve the highest levels of governance as a core tenet of our culture. In 2022 the Proposed Acquisition has demanded a significant portion of the Board’s time and attention. Making changes to the Board during this period would not be in the best interests of the Company or its stakeholders. I was very pleased, therefore, when Kevin Boyd agreed to remain on the Board beyond his scheduled retirement date at the Annual General Meeting (AGM). He will continue to perform his roles as Chair of the audit committee and Senior Independent Director for the foreseeable future and we are very grateful for his contribution. The Board decided that, in light of other priorities, it was not appropriate to carry out a formal Board evaluation during the year under review. We will review Board, committee and individual Director performance in 2023 in accordance with the Code. I would like to take this opportunity to thank my fellow Board Directors. They too have shown impressive commitment and dedication to the Company in the last year and their ongoing challenge and support are invaluable. Further information is set out in the corporate governance statement on pages 53 to 58. Dividend A final dividend of 21.1p per share is recommended by the Board. This will result in a total dividend for the year of 38.7p. Subject to approval of shareholders at the AGM, the final dividend will be paid on 11 July 2023 to shareholders on the register of members at close of business on 16 June 2023. The Proposed Acquisition In June 2022 we announced that we had reached agreement with Bordeaux UK Holdings Limited, a subsidiary of UnitedHealth Group Incorporated (UHG), on a recommended cash offer to acquire the whole of the issued and to be issued share capital of the Company (the Proposed Acquisition). At the court and general meetings to consider the Proposed Acquisition, the resolutions on this matter were approved by the requisite majorities. In March of this year, the UK’s Competition and Markets Authority (CMA) announced that it had referred the Proposed Acquisition for Phase 2 investigation and on 6 April 2023 we announced, jointly with UHG, our intention to proceed with the Phase 2 investigation. An extension of the long stop date for the Proposed Acquisition to 30 June 2024 has now been agreed with UHG and the Proposed Acquisition remains subject to sanction by the court, as well as other conditions. As a Board, we consider the Proposed Acquisition to be in the best interests of the Company. We thank UHG for their continued interest in EMIS and look forward to continuing to engage collaboratively and constructively with the CMA on the Phase 2 investigation. Outlook We had initially expected a completion date for the Proposed Acquisition in late 2022 or early 2023. It now seems likely that any completion will take place in Q4 2023 or in Q1 2024. While this is of course of interest to our shareholders, employees and other stakeholders, it does not affect the underlying strength of the business or the commitment of the people who work for and with it to achieving its purpose. 2022 has demonstrated that the business is resilient and that the future is positive, irrespective of the current macro-economic challenges or any demands of the Proposed Acquisition. Patrick De Smedt Chair 25 May 2023 EMIS Group plc | Annual report and accounts 2022 6 A positive year of good growth Overview It has been another year of good progress for EMIS Group. The business performed well in 2022, achieving positive results in a changing market and against the backdrop of EMIS agreeing and recommending a cash offer pursuant to which a subsidiary of UnitedHealth Group Incorporated will, subject to regulatory approval, acquire the entire issued and to be issued ordinary share capital of EMIS (as announced on 17 June 2022). Within our two divisions, we have seen strong growth in EMIS Enterprise as we continue to deliver against our strategy and technology roadmap, particularly in community pharmacy and EMIS-X Analytics. EMIS Health achieved its expected performance as we made further progress to execute and accelerate our technology development roadmap, with a focus on business retention in key markets. We continue to invest in improving customer experience with our core systems. The commitment and care demonstrated by our colleagues inspires me every day: across the business we have high-performing teams that put their all into every customer interaction, development detail and internal business process. This underpins our culture of excellence and delivery, leading to consistent year-on-year growth. Excellent operational governance providing the strong foundations for growth We strive to operate to the highest standards of clinical safety, data security and proactive risk mitigation through good business governance: these are the cornerstones of our business and provide the strong foundations for growth. As the demands of our customers continued to increase, during the year we focussed on even more proactive management and mitigation of risk across the business, with an action-driven approach that has included improved internal systems, processes and additional employee training. Positive progress on our environmental, social and governance (ESG) strategy EMIS has had sound governance and social value principles embedded in the culture of the organisation for many years. During 2022, we developed our sustainability strategy, and thanks to the more detailed understanding of our greenhouse gas emissions gained during the year, adopted a commitment to achieve net zero emissions (a 90% reduction across all scopes with minimal reliance on offsetting) by 2040. The Group’s ESG committee continues to ensure that both environmental and social targets and ambitions are embedded into our corporate strategy. Our executive team and Board are committed to managing EMIS’s environmental and social impact, continuing with our very important social purpose and having put in place best practice proactive governance policies and processes. We see sustainability and ESG as central to our decision making and the way we run our business. A great place to work We have made positive progress towards our ambition to become an employer of choice by 2025. Our business is increasingly becoming an inspirational place to work, with a culture where engaged and motivated employees thrive as they contribute strongly to business performance. The employer of choice programme has been central to EMIS’s strategy during 2022, enhancing our existing positive working culture by creating greater engagement between colleagues, focussing on great leadership, excellent enhanced rewards and terms, as well as improving our work environment, processes and external brand recognition. Our metric of success is the employee engagement score, which increased to 71 during 2022, something we are very proud of in year one of our three-year employer of choice programme. Positive progress on our technology roadmap Technology development has continued in line with our product roadmap and we remain committed to investment to drive growth through our strong product portfolio. We are confident that we can deliver on the needs of our core healthcare markets through a development strategy that is closely aligned with NHS strategy and policy, delivering integrated, efficient and intelligent systems underpinned by EMIS-X technology. Continued investment into EMIS-X technology EMIS-X is the platform for modernising and expanding the capabilities of both our core GP and community pharmacy systems. All new software features will be developed on EMIS-X technology, including those to drive greater interoperability and integration with other healthcare systems and services. We continue to invest in the development of EMIS-X technology for our healthcare markets, actionable insight for the research and life sciences market, and digital patient-facing services, with new product releases demonstrating the positive progress made during 2022. Chief Executive Officer’s statement STRATEGIC REPORT 7 EMIS Group plc | Annual report and accounts 2022 Bolt-on acquisitions strengthening and expanding our business EMIS continues to deliver on its strategy of growth by acquisition, principally in the EMIS Enterprise sector, strengthening and expanding our market offers. During the year we completed three bolt-on acquisitions for a total initial net cash consideration of £30.8m: • Edenbridge Healthcare, a leading provider of business intelligence tools for GP practices, federations and commissioners; • FourteenFish, the leading expert in software to support GP medical appraisals and training; and • Healthcare Gateway, the healthcare interoperability specialist that connects data between different healthcare settings. All three acquisitions have made positive contributions to both our market proposition and business performance during the year. Recommended Acquisition of EMIS Group plc by Bordeaux UK Holdings II Limited (Bidco) On 17 June 2022, the Boards of Bordeaux UK Holdings II Limited, an affiliate of Optum UK and a wholly owned subsidiary of UnitedHealth Group Incorporated, and EMIS announced that they had reached agreement on the terms of a recommended all cash offer pursuant to which Bidco will acquire the entire issued and to be issued ordinary share capital of EMIS, to be implemented by means of a court-sanctioned scheme of arrangement (Scheme). On 9 August 2022, EMIS announced that at the Court Meeting to consider the Scheme and the General Meeting to consider the Special Resolution relating to the Proposed Acquisition, all resolutions were approved by the requisite majorities. EMIS further announced that a notification had been made and accepted under the NS&I Act and that the Secretary of State had confirmed that no further action will be taken in relation to the Proposed Acquisition. On 31 March 2023, the United Kingdom’s Competition and Markets Authority (CMA) announced that it had rejected a proposed remedy submitted by Bidco to address the CMA’s competition concerns following its Phase 1 investigation and referred the Proposed Acquisition for a Phase 2 investigation. On 6 April 2023, Bidco and EMIS announced that they intend to proceed with the Phase 2 investigation and will continue to engage constructively and collaboratively with the CMA during this period. On the basis that the CMA has referred the Proposed Acquisition to a Phase 2 investigation, Bidco and EMIS have agreed, with the consent of the Executive of the Panel on Takeovers and Mergers (the Panel), to extend the Long Stop Date for completion of the Proposed Acquisition from 30 June 2023 to 30 June 2024 (subject to the approval of the Court). The Scheme remains subject to Court sanction and the satisfaction of the remaining CMA condition. As regards the remaining substantive regulatory condition, the statutory deadline for the CMA’s Phase 2 investigation is 5 October 2023. Accordingly, based on a typical Phase 2 timetable, EMIS expects the Scheme would become effective in Q4 2023 or Q1 2024. Summary and outlook At the date of this report, almost five months into 2023, we are confident of delivering on our full year expectations. Given the timing of opportunities, this growth is likely to be more weighted to the second half of 2023 than in prior years. On a medium-term view, the NHS has set out a clear strategy for integrated care, requiring high-performing integrated technology systems. It is essential for patient data to be effortlessly and securely available whenever and wherever it is needed for all involved in care – from front line clinicians to research and life science organisations. EMIS remains well placed to deliver the systems that will enable the NHS to realise its ambition of better, faster and proactive preventative care for the UK population. Our technology roadmap remains closely aligned with NHS England strategy and our position on NHS Digital’s new Tech Innovation Framework (TIF) demonstrates our ability to deliver the NHS’s integrated digital future. Andy Thorburn Chief Executive Officer 25 May 2023 Industry insight Our performance culture Andy Thorburn Creating the technology of the future means creating strong, motivated teams in the here and now. Our employer of choice programme has been set out to do just that, covering key aspects of the employee experience from great leadership, to benefits and terms that attract and retain the best employees, to strengthening our culture with regular employee feedback. Earlier this year we were shortlisted at the Best Benefits Awards in the Best Benefits to Support Work-Life Balance and Hybrid Working category, as a milestone of EMIS becoming nationally recognised as a great place to work. We’re proud of our employee engagement score of 71 in the first year of using the global Glint platform for measuring employee satisfaction. Our success as an employer contributes directly to our success as a business. Our performance culture is driven by our business purpose: to be the leading provider of innovative healthcare technology that improves people’s lives. When everyone is unified in the same goal we see teams pulling together, collaborating and delivering on our promises to customers. I’m excited to see where that can take us as we begin to share with our customers and end users new technology developments in the second half of the year. It’s no surprise that we received great feedback about EMIS-X when we demonstrated it to ICS contacts at the NHS Expo earlier this year. The deep level of thought, consideration of customer need, discussion with end users, alignment with NHS policy and clever use of the latest technology and methodology have resulted in some exciting new functionality that I know our development, product and customer teams can’t wait to share with end users. EMIS Group plc | Annual report and accounts 2022 STRATEGIC REPORT 8 Business model Joined-up healthcare through technology • Innovative integrated technology services. • Highly skilled people. • Trusted brand. • Strong relationships strategically aligned with government, partners and the markets we serve. • Strong revenue visibility. • Responsible leadership. • Strong culture of putting both patients and customers first. OUR KEY INPUTS O ut st a n di n g c us to m er s er vi c e a n d s u p p or t M ar ke t- le a di n g cl in ic al t e c hn ol o g y E M I S H e a lt h Integrated healthcare Our four key values underpin everything we do, throughout every area of the business Collaborative EMIS Group is focussed on working as one joined-up team towards collective goals that deliver the Group purpose: to be the leading provider of innovative technology that improves people’s lives. Responsible EMIS Group employees are honest, transparent and act with integrity. EMIS people take ownership of the fact they have an important job to do in supporting UK healthcare. Supportive EMIS Group has a strong culture of caring for employees and customers alike. Throughout the business, people care about and encourage others, so everyone can perform at their best. Transformative EMIS Group helps to improve UK healthcare through its products and services. EMIS employees have a clear understanding of how they can contribute to make a real difference. P r i m a r y c a r e C o m m u ni t y c a r e A c u t e A & E E M I S E n t e r p ri s e A n a l y t i c s P a t i e n t C o m m u n it y p h a r m a c y P a rt n e r s H o s p it a l p h a r m a c y 9 EMIS Group plc | Annual report and accounts 2022 Clinically focussed We enable clinicians to provide safe and efficient care through excellent software and services – helping patients live longer, healthier lives. Trusted supplier Our software and services are used in every major healthcare setting – from GP surgeries to high street pharmacies, community, hospitals and specialist services. Joining up patient care Through innovative technology, we give healthcare professionals access to the information they need to provide the best possible front line healthcare. Care about our customers Clinically led development teams work with our customers to develop systems. That is why we consistently meet the needs of end users. Innovative We are always looking at future technologies and trends to make sure we develop ground- breaking services that benefit patients, clinicians and NHS organisations. Meaningful healthcare insight We facilitate research and insight through analytics, helping the NHS, life sciences and academia discover actionable insight to improve patient outcomes. • Software subscription and support – recurring. • Interface and connectivity charges – mainly recurring. • Other services – mixed recurring/ non-recurring. • Perpetual licences, training, consultancy and implementation – non-recurring. • Hardware and related services – mainly non-recurring. How we generate revenue How we add value 82 82+1818+C Recurring revenue: 82% Non-recurring revenue: 18% Why users, customers and partners choose us CUSTOMERS We help the healthcare industry with actionable insight for better health. 41 customers use EMIS-X Analytics solutions CLINICIANS Our systems and services are designed to support healthcare on the front line. 10,000 healthcare organisations rely on our clinical systems daily UK PUBLIC We provide trusted healthcare information and digital services for the UK general public. 16.1 million Patient Access registered users SHAREHOLDERS We deliver long-term growth in dividends and share price. 38.7p dividend for the year B2B We provide B2B systems and services to enterprise customers in the healthcare market. 5,336 community pharmacies use our software to deliver better customer service and drive up revenue EMPLOYEES Our employees live the EMIS Group values and put customers and patient care at the heart of everything we do. 37.2% of employees are dedicated to front line customer care Financial review page 20 EMIS Group plc | Annual report and accounts 2022 STRATEGIC REPORT 10 BOARD CONSIDERATIONS AND DECISIONS Stakeholder engagement Connecting with key stakeholders Regular updates from the Group executive team (GXT) Throughout the year, the GXT updated the Board with information on important areas of business focus, in particular those relating to our key stakeholders as well as ESG matters. This ensured that the Board had a good understanding of the priorities of each stakeholder group to aid decision making for both the short- and long-term success of the business model. The Board had a particular focus this year on EMIS’s cloud strategy, ESG strategy, data security and customer satisfaction performance, as well as consideration of M&A including the Proposed Acquisition. Direct engagement of Board members The Executive Directors are in daily contact with staff from across the business to understand key topics relating to both employees and customers, sharing regular updates with the Board. The national forums and regular employee engagement surveys provide insight into employee views on both internal and customer-focussed matters. Regular reporting on support performance, customer service and the close collaboration between EMIS and its strategic customers keeps the Board up to date on customer trends and feedback. A number of Board members had meetings with shareholders during the year to discuss strategy and remuneration. S.172 statement UK Companies Act 2006 The Board recognises its responsibility to take into consideration the needs and concerns of its principal stakeholders as part of its discussion and decision-making process. As a Board and a business EMIS strives to care for its colleagues and help customers deliver a better experience for healthcare professionals and their patients, as well as supporting the wider community. Details of how the Group engages with its stakeholders can be found throughout the strategic report on pages 1 to 49 and in the corporate governance statement on pages 53 to 58. Strategy • Considered the importance of ESG to long-term success, setting the ESG priorities for the Group, aligned to the business strategy, to be measured against clear baselines. • Considered linking ESG objectives to remuneration. • Considered and approved the Group’s cloud strategy. • Considered the Proposed Acquisition of the Group, discussing shareholder value. • Discussed and agreed M&A strategy to strengthen the Group’s market offer. Governance • Data security updates were delivered throughout the year, with consideration of stakeholder impact and mitigations against emerging issues. • Received regular updates from the risk management committee. • Agreed the reappointment of Jen Byrne for a further three years. • Agreed the appointment of Kevin Boyd as Senior Independent Director. People and culture • Considered succession planning at senior levels of the business and determined to reduce single points of failure across the organisation. • Considered and approved the continued employer of choice programme. • Received feedback on employee engagement, including the results of the engagement survey. Below is a list of some of the key topics that have been a focus for the Board in 2022, outlining how consideration of stakeholder interests has influenced decisions. The Board reviews key topics through the year, carefully considering stakeholder interests when making decisions on strategically important matters as the Directors discharge their duties in alignment with Section 172 (s.172). These pages outline the priorities of employees, customers and shareholders, how the Board engages with these groups and the impact this has had on decision making throughout the year. 11 EMIS Group plc | Annual report and accounts 2022 CUSTOMERS 1 2 3 4 Link to strategy What is important to them • Technology systems that improve patient outcomes at strategic and end user level. • Satisfaction with both products and customer services. • Two-way collaborative relationships focussed on shared goals. • ICSs, developing the integrated care strategy for the future of a digital NHS. How we engage • Feedback gathered via customer-facing teams is regularly reviewed and considered by the senior team, GXT and Board. • The Group undertakes customer satisfaction surveys and analysis of support statistics to drive continual improvement in customer experience. • The commercial team engages regularly with strategic and national customers with openness and transparency, in the spirit of trust and collaboration to address the healthcare challenges in each nation. This has been particularly prevalent during the pandemic. • A wide range of communication channels are used to keep customers up to date. • We have demonstrated EMIS-X developments to ICSs to positive feedback. Outcomes • More regular customer communications throughout the year including updates on forthcoming releases and details of new functionality. • Improved time from software development to release of new enhancements to meet customer demand. • Daily calls focussed on improving the customer experience to ensure issues and feedback are heard across the business and acted upon promptly. • Improved customer satisfaction scores. • Two-way conversations on customer priorities ensure that customer requirements are built into new enhancements by design. Suzy Foster Chief Executive Officer, EMIS Health and EMIS Enterprise Our customer relationships are key – we aim to consistently delight customers and partners in the way that we deliver our products. This approach is central to our technology development strategy – we’re building the software our customers need with a focus on excellence, creating happy customers, increasing retention and giving us a strong platform for growth.” Engagement in action KEY TO STRATEGIC PRIORITIES 4 Deliver innovative, reliable, safe software 1 Achieve sustainable financial growth 2 Provide excellent customer and partner service 3 Enable our people to thrive EMIS Group plc | Annual report and accounts 2022 STRATEGIC REPORT 12 Stakeholder engagement continued EMPLOYEES 1 2 3 4 Link to strategy What is important to them • Feeling engaged with the business and its overall purpose. • Wellbeing and work-life balance. • Feeling valued, trusted and empowered. • Being fairly rewarded and incentivised for their work. • Feeling proud to work at EMIS. How we engage • The employee forums increase synergy between employees and the leadership team. • Focussed Glint surveys captured employee feedback in key areas of importance to the Group’s people strategy. • Multi-channel employee internal comms to keep everyone engaged with both business priorities and each other as colleagues. Outcomes • Greater Board understanding of employee concerns. • More representation by the senior leadership team at the employee forums to build relationships and increase visibility. • Further improvements to the UK collaboration hubs in alignment with employee feedback. • Continued improvement to benefits for employees in both the UK and India, considering specific requirements of the different cultures and legislative frameworks to deliver benefits that are relevant, useful and support employees in both work and home life. • The engagement score was measured in April and October 2022 and, during this period, increased from 70 to 71, while the gap to the global index reduced by 2 points. This score has been calculated using a new employee feedback measurement platform, Glint, introduced during 2022. This is a new measurement methodology and therefore the score is not comparable to previous years. • Refurbishing and reopening the Chennai office. Jacqui Summons EMIS Group HR Director Our purpose is what unites us: building tech that improves the healthcare of the nation creates a culture of true commitment, drive and focus on doing the best job we can. We’re enabling and motivating our employees to do what they do best by creating an inspirational place to work where everyone can thrive. Our great working culture, enhanced benefits and flexible working approach help us attract and retain the best people.” Engagement in action KEY TO STRATEGIC PRIORITIES 4 Deliver innovative, reliable, safe software 1 Achieve sustainable financial growth 2 Provide excellent customer and partner service 3 Enable our people to thrive 13 EMIS Group plc | Annual report and accounts 2022 SHAREHOLDERS s 1 2 3 4 Link to strategy What is important to them • Understanding progress with the offer. • Staying up to date with EMIS Group strategy and business performance. • EMIS’s ESG strategy. • Timely and relevant communication. • Shareholder value. • Understanding the remuneration policy and management incentivisation. How we engage • Thorough regular reporting content, including the annual report and accounts and half year report. • A multimedia approach with the use of webinars and video interviews to accompany the full and half year results. • Sharing feedback from investors following the twice yearly roadshow meetings with the Board and senior team. Outcomes • The Group takes guidance from its advisers on shareholders’ priorities in planning strategy and communications, to ensure it addresses any new and emerging key topics. • This information is fed into all communication channels, from digital to multimedia to hard copy formats. Peter Southby EMIS Group Chief Financial Officer We have continued our open and transparent approach to investor communications, acknowledging that the offer for the Group has resulted in some changes in approach. Working closely with our brokers, Numis, Andy Thorburn and I make sure that shareholder questions are answered, providing clarity and sharing as much information as we are able to within the confines of commercial confidentiality and the ongoing legal processes.” Engagement in action EMIS Group plc | Annual report and accounts 2022 STRATEGIC REPORT 14 Strategy EMIS continues to deliver its strategy of growth through innovation, modernisation and acquisition of relevant technologies that benefit its customers. The Group is committed to growing the overall business both organically and inorganically while increasing efficiency of operations and continually improving employee satisfaction and customer experience. Organic growth Focussing on quality and innovation in EMIS’s current and evolving product portfolio will drive organic growth in existing EMIS Health markets. Innovation will drive growth into new markets in EMIS Enterprise, including research and life sciences. Elite partnerships EMIS’s partnerships continue to go from strength to strength, contributing positively to the overall Group proposition. EMIS forms elite partnerships to enhance its overall capability, to improve integration for customers and bring solutions to market more quickly. The business proactively identifies gaps in EMIS and partners’ collective capabilities and seeks excellent partner companies to join the programme to broaden the proposition. Targeted M&A EMIS continues to evaluate targeted bolt-on acquisitions to add new capabilities. The successful 2022 acquisitions of Edenbridge, FourteenFish and Healthcare Gateway join the 2020 acquisition of Pinnacle in bringing sector-leading products, strong customer relationships and specialist knowledge, talent and expertise into EMIS Group. Aligned with NHS policy for future growth and success EMIS continues to develop technology in alignment with NHS policy for both integrated healthcare and meaningful, actionable insight through data. The strength of EMIS’s relationship with NHS England means that at every level the business works hand in hand with central policy makers and national project leads to improve health outcomes through technology-led integrated care. Aligning EMIS’s strategy with the NHS’s future direction provides the platform for future growth and success. The next stage of the Group’s evolution ACHIEVE SUSTAINABLE FINANCIAL GROWTH The Group is focussed on growth through technology innovation, positive customer experience and close customer relationships. Growth will enable EMIS’s vision to be the leading provider of innovative technology that improves people’s lives. All stakeholders will benefit from EMIS’s growth, bringing the Group closer to its long-term goal of 30% margin, considering investor priorities. Growth into new markets means customers benefit from better integrated healthcare systems. Employees will benefit from employment opportunities and career progression. Links to KPIs and risks • Every KPI monitors the Group’s progress towards its overall growth strategy. • The mitigation of every adverse risk enables the Group’s growth strategy. Future priorities • Continue to build good momentum for future growth in existing and new markets. • Continue the technology investment programme to accelerate growth, whilst controlling costs and optimising spend. • Consideration of bolt-on acquisitions to expand capabilities in growing markets. Key achievements • Increases in Group revenue, adjusted operating profit and adjusted operating margin. • Recurring revenue grew by 6%, representing 82% of total revenue. • Revenue increased by 19% in EMIS Enterprise. 1 Risk management page 28 Key performance indicators page 16 15 EMIS Group plc | Annual report and accounts 2022 Links to KPIs and risks • Customer satisfaction leading to retention and wins will drive all financial KPIs. • Mitigations relating to healthcare structure and procurement changes ensure that EMIS will stay ahead of all current and future customer needs. Key achievements • Positive improvement in system performance and customer satisfaction. • Continual release of system enhancements throughout 2022. • Close collaboration with ICSs on their locality-wide technology transformation plans to deliver the customer requirements of the future. Future priorities • Maintaining and building on trusted relationships at all levels. • Continue to drive quality into the current product portfolio. • Developing innovative technology to meet future customer priorities, such as advanced interoperability capabilities. PROVIDE EXCELLENT CUSTOMER AND PARTNER SERVICE EMIS’s strategy is to help customers do what they do best: support patient care at every level, from clinicians through to researchers. With a focus on high‑quality service, products and delivery, EMIS’s culture is to consider its customers in every decision. For investors this focus leads to business retention and growth. Users, customers and partners will have the best possible experience with EMIS products and services, leading to a greater sense of job satisfaction and corporate pride for employees. 2 DELIVER INNOVATIVE, RELIABLE, SAFE SOFTWARE Links to KPIs and risks • Measurement of R&D investment will ensure the continued momentum of technology transformation. • Mitigation of risks in technology and software development, people and culture and clinical safety will enable the success of the technology strategy. Key achievements • New innovations released into existing clinical systems across all markets. • New integrated software modules released to GP and pharmacy customers, built on EMIS-X technology. • New EMIS-X Analytics software delivered, linking GPs and the research and life sciences industry to improve patient outcomes. Future priorities • Continue investment in technology, particularly focussed on data and analytics and interoperability. • Deliver cloud-ready, higher quality software at a faster pace. • Optimise efficiency with industry- leading technology development processes such as SAFe. EMIS’s technology innovation strategy centres on accelerating digitisation of the NHS to support better patient outcomes. The efficiency of every transaction in healthcare relies on technology, and customers’ needs are considered in every software release large or small – from national customers such as NHS England to end users. The UK public benefits directly from EMIS’s digital front door services and indirectly from better health outcomes from an efficient and informed digitised healthcare service. 4 Links to KPIs and risks • Continue improving employee engagement scores. • Mitigations relating to people and culture will ensure EMIS can deliver its strategy. Key achievements • New benefits launched in both the UK and Chennai, including enhanced parental leave. • Consistent increase of pension contribution plus increased company contributions to the share incentive plan for UK employees. • Increased employee engagement score to 71. Future priorities • Continue improving employee engagement scores. • Build upon the equity, diversity and inclusion strategy to achieve 40% female representation in senior management positions by the end of 2025. • Reduce gender pay gap to 5% or lower and reduce ethnicity pay gap to 16% or lower. ENABLE OUR PEOPLE TO THRIVE EMIS’s ambition is to become an employer of choice by 2025, creating an inspirational place to work where engaged and motivated employees can thrive as they contribute to EMIS’s purpose. The focus is on setting employees up for success in their career, with benefits that both reward performance and create flexibility to enable work-life balance. Shareholders and customers gain because this approach enables EMIS to attract and retain the best talent, to successfully deliver the Group’s objectives. 3 EMIS Group plc | Annual report and accounts 2022 STRATEGIC REPORT 16 Key performance indicators The Group’s key performance indicators (KPIs) monitor progress towards the achievement of its objectives. Measuring our performance Total revenue2 £175.4m +4%- Adjusted operating profit1,2 £47.7m +10%- Adjusted earnings per share (EPS)1,2 62.0p +10% DESCRIPTION Total revenue is a reflection of the level of business that customers choose to place with the Group. It is important as a measure of the attractiveness of the Group’s products to the market. STRATEGIC FOCUS Total revenue increased by 4% on the previous year. This continued momentum reflects the acquisitions made in the year (contributing £4.4m), together with strong growth within EMIS Enterprise. STRATEGIC FOCUS Adjusted operating profit increased by 10% on the previous year, reflective of the higher quality revenue mix as a result of the strategic exit of lower margin legacy resale partner business, and a £1.7m contributon from acquisitions. The Group’s target continues to be increasing operating margins towards 30%, which implies a faster rate of growth in profit than in revenue, to be delivered by operational leverage and greater efficiency in the Group’s systems. STRATEGIC FOCUS The 10% increase in adjusted EPS in the year was consistent with the increase in adjusted operating profit. As a key measure of shareholder return and driver of executive Long-Term Incentive Plans, EMIS Group’s strategy is to focus on driving improvements in this metric in future through delivering sustainable business growth. DESCRIPTION This is the key measure of the Group’s underlying financial profitability, as defined in the alternative performance measures (APMs) section on page 18, excluding exceptional items and expensing development costs as incurred. DESCRIPTION Adjusted EPS represents the best measure of underlying profit attributable to shareholders, as set out in the APMs section on page 18. 1 1 1 2 2 2 3 3 3 4 4 4 R LINK TO REMUNERATION R R LINK TO STRATEGIC PRIORITIES LINK TO REMUNERATION LINK TO STRATEGIC PRIORITIES LINK TO REMUNERATION LINK TO STRATEGIC PRIORITIES LINK TO REMUNERATION Financial review pages 20 to 23 2020 2021 2022 2019 2018 159.5 168.2 175.4 159.5 170.1 149.7 39.3 39.3 43.5 47.7 35.9 37.6 2020 2021 2022 2019 2018 56.1 62.0 2021 2022 2020 2019 2018 51.4 51.0 47.4 45.1 17 EMIS Group plc | Annual report and accounts 2022 1 2 3 4 Total dividend for the year 38.7p +10% Employee engagement 71- R&D investment2 £22.1m +4% STRATEGIC FOCUS The Board’s recommendation of a 10% increase in dividend is a reflection of the Board’s commitment through the capital allocation policy (see page 82) to increase direct returns to shareholders over time in line with underlying earnings growth. STRATEGIC FOCUS Glint provides a strategic approach to measuring engagement, underpinned by people science methodology, enabling line managers to own the engagement levels of their teams. The index is an average score from two key ratings: “how happy are you working at EMIS Group?” and “I would recommend EMIS Group as a great place to work”. This is an important step to becoming an employer of choice. STRATEGIC FOCUS The increase in R&D investment in the year is reflective of the Group’s commitment to invest to drive growth through a strong product portfolio, including continued investment in EMIS-X technology for healthcare markets, actionable insights for the research and life sciences market and digital patient-facing services. DESCRIPTION This measure records the amount of dividend paid out per share relating to the financial year. DESCRIPTION In 2022 Glint was introduced as an effective, flexible and efficient Group- wide tool to capture and analyse employee feedback, as well as enabling external benchmarking. This is a new measurement methodology and therefore the score is not comparable with prior years. Assessments in April and October 2022 revealed an improvement of 1 over that period. DESCRIPTION This measures the level of R&D investment in the Group’s software products and is a key measure of the Group’s commitment to ensuring that it not only maintains its existing portfolio but is also investing in developing the products of the future. 1 2 3 4 1 2 3 4 R R R LINK TO STRATEGIC PRIORITIES LINK TO REMUNERATION LINK TO STRATEGIC PRIORITIES LINK TO REMUNERATION 2021 2022 2020 2019 2018 81 87 71 70 70 19.0 2021 2022 2020 2019 2018 21.2 21.3 22.1 20.7 18.7 LINK TO STRATEGIC PRIORITIES LINK TO REMUNERATION KEY TO REMUNERATION R Link to remuneration R No link to remuneration KEY TO STRATEGIC PRIORITIES 1 Adjusted operating profit and adjusted EPS are APMs. See page 18 for further details. 2 Continuing operations excluding Specialist & Care business. Continuing operations and discontinued Specialist & Care business. 35.2 38.7 2021 2022 2020 2019 2018 31.2 32.0 28.4 4 Deliver innovative, reliable, safe software 1 Achieve sustainable financial growth 2 Provide excellent customer and partner service 3 Enable our people to thrive EMIS Group plc | Annual report and accounts 2022 STRATEGIC REPORT 18 Alternative performance measures (APMs) This report contains certain financial measures (APMs) that are not defined or recognised under IFRS but are presented to provide readers with additional financial information that is evaluated by management and investors in assessing the performance of the Group. This additional information presented is not uniformly defined by all companies and may not be comparable with similarly titled measures and disclosures by other companies. These measures are unaudited and should not be viewed in isolation or as an alternative to those measures that are derived in accordance with IFRS. Recurring revenue Recurring revenue is the revenue that annually repeats either under contractual arrangement or by predictable customer habit. It highlights how much of the Group’s total revenue is anticipated to repeat in future periods, providing a measure of the financial strength of the Group. It is a measure that is well understood by the Group’s investor and analyst community and is used for internal performance reporting. 2022 £’000 2021 £’000 Reported revenue 175,373 168,226 Non-recurring revenue (32,042) (33,417) Recurring revenue 143,331 134,809 Adjusted operating profit, adjusted operating margin and adjusted earnings per share Adjusted operating profit is operating profit from continuing operations excluding exceptional items, the effect of capitalisation and amortisation of development costs, and the amortisation of acquired intangible assets. The same adjustments are also made in determining the adjusted operating margin of the Group and its segments and also in determining adjusted EPS. The EPS calculation further adjusts for the related tax effects of the operating profit adjustments, and the exceptional fair value gain on previously held interest in joint venture. The Board uses these metrics to assess underlying performance, as: • it excludes exceptional items (items are only classified as exceptional due to their nature or size); • it excludes any one-off goodwill impairment; • by expensing capitalised development costs (and also excluding the impact of the amortisation of these costs) it reflects the underlying in-year cash cost of development of software for external sale, as development is considered to be a core ongoing operating function of the business; and • it excludes the amortisation of acquired intangibles arising from business combinations which varies year on year dependent on the timing and size of any acquisitions. This is consistent with the treatment of the amortisation of the Group’s software developed for external sale. These metrics are used internally for reporting business unit performance and in determining management and executive remuneration. They are commonly used by other software companies and are also well understood by the Group’s investor and analyst community. 2022 £’000 2021 £’000 Reported operating profit 27,746 35,785 Development costs capitalised (4,361) (4,052) Amortisation of computer software developed for external sale 6,349 6,127 Amortisation of intangible assets arising on business combinations 5,190 5,673 Exceptional costs (see note 32) 12,762 — Adjusted operating profit 47,686 43,533 A reconciliation of adjusted earnings used in the adjusted EPS calculations is shown below: 2022 £’000 2021 £’000 Profit attributable to equity holders 33,170 29,076 Development costs capitalised (4,361) (4,052) Amortisation of computer software developed for external sale 6,349 6,127 Amortisation of intangible assets arising on business combinations 5,190 5,673 Exceptional costs 12,762 — Exceptional fair value gain on previously held interest in joint venture (10,706) — Tax effect of above items (3,253) (1,472) Adjusted profit attributable to equity holders 39,151 35,352 The tax effect adjusts for the estimated impact on the income tax expense of the adjusting items, reflecting expenses/income that are not expected to be allowable/chargeable in determining taxable profit, and has been calculated at a rate of 19% (2021: 19%). Adjusted cash generated from operations The Group’s adjusted cash generated from operations adjusts for development costs capitalised and the cash costs of exceptional items, consistent with the adjusted operating profit metric used by the Group. This provides a meaningful metric for the underlying cash the Group generates having accounted for the cash cost of all development expenditure and adding back the cash cost of non-recurring exceptional items. 2022 £’000 2021 £’000 Reported cash generated from operations 48,813 50,059 Development costs capitalised (4,361) (4,052) Cash cost of exceptional items 10,182 — Adjusted cash generated from operations 54,634 46,007 Net cash/(debt) The Group uses net cash/(debt), defined as cash and cash equivalents less total borrowings (excluding IFRS 16 lease liabilities), as a supplementary measure in evaluating its liquidity, as it indicates the level of cash available to the Group and provides an indicator of the overall balance sheet strength. It is used in the calculation of the leverage ratio under its bank facility arrangements. For the year ending 31 December 2022 the Group was in a net cash position, with no borrowings. EMIS Group plc | Annual report and accounts 2022 19 10,000 new appointments created across rural area A rural Primary Care Network (PCN) has increased capacity with the addition of 10,000 appointments, through the creation of a new service model using EMIS technology. Folkestone Hythe and Rural PCN, which has a patient population of 48,000, initially planned to centrally manage an influx of online consultations from across their seven member practices. It soon become apparent, however, that there were far broader opportunities to improve ways of working. Progressing to a centralised hub model underpinned by EMIS technology allowed the team to triage relevant appointments from their network to clinicians across the area, enhancing access for patients and alleviating pressure upon stretched GPs. Andy Gove, Digital Transformation Manager, Folkestone, Hythe and Rural PCN, said: “Digital is at the forefront of efficient healthcare delivery. Evolving the way they work and moving to this new service model has allowed the team to share resources and expertise, increasing clinical capacity to enable better patient care. “It feels like we’ve genuinely made a change in how services are delivered, and for the better. “The staff delivering these services can sign on once and have access to everything that they need, ensuring clinical safety, quality of care and reducing chances of error. Consulting staff have got all the tools they need to complete the consultation and minimise the amount of work they send back to the patients’ registered practices. “The feedback has been positive with the practice and the PCN. We’ve achieved something that is making a positive impact on healthcare delivery. We’ve found it really refreshing and exciting to work in partnership with EMIS.” Dr Rosaline Powell, GP Partner at New Lyminge Surgery, part of the Folkestone Hythe and Rural PCN, added: “We’ve really changed the way that our model of accessing healthcare works; we can efficiently get patients to the right person based on their need. “It will be a big change to let go of what was a traditional GP surgery and how that feels. But it’s necessary to change the way that we work. We’ve had some really good feedback from patients.” Shaun O’Hanlon, EMIS Group Chief Medical Officer, said: “The blueprint created by Folkestone Hythe and Rural PCN can be applied across the country to deliver PCN working at scale to help revitalise primary care.” Case study Visit our website to read more: https://www.emishealth.com/ 10,000 additional primary care appointments made available 48,000 patients benefiting from the new model of primary care EMIS Group plc | Annual report and accounts 2022 STRATEGIC REPORT 20 The results for the year ended 31 December 2022 reflect continued momentum with increases in the Group’s revenue, recurring revenue, adjusted operating profit and adjusted operating margin. Reported operating profit and reported operating margin were reduced as a result of the exceptional costs incurred during the year. As expected, adjusted cash flow from operations was stronger despite continued investment in the business to deliver future growth, as a result of one-off adverse working capital movements in the comparative period. Reported cash flow from operations was 2% lower as a result of the cash cost of the exceptional programmes. Group revenue increased by 4% to £175.4m (2021: £168.2m) and included revenue of £4.4m from the acquisitions of Edenbridge, FourteenFish and Healthcare Gateway completed during the year. Recurring revenue grew by 6% to £143.3m (2021: £134.8m), representing 82% (2021: 80%) of the Group’s total revenue. Adjusted operating profit for the year, as set out in the table below, grew by 10% to £47.7m (2021: £43.5m), including a contribution of £1.7m from acquisitions, and reflecting increases in both recurring and non-recurring revenue and an improved gross margin sales mix, partly offset by higher staff costs and increased operating expenses. With levels of development costs capitalised and amortisation charges broadly similar to the prior year, and £12.8m of exceptional costs, reported operating profit was £27.7m (2021: £35.8m). A reconciliation between the operating profit measures is given in the Group statement of comprehensive income and in the APMs section on page 18. In EMIS Health, overall revenue reduced by 4% to £103.9m (2021: £107.9m) with the continuation of the strategy to exit lower margin Resale Partner business. The higher quality revenue mix resulted in adjusted operating profit marginally increasing to £26.4m (2021: £26.3m), delivered while continuing to invest in developing the strategic roadmap. Recurring revenue reduced only marginally to £88.8m (2021: £89.4m) as the majority of the revenue exited was non-recurring in nature. Reported divisional operating profit was 8% higher at £23.9m (2021: £22.1m) due to a reduction in the level of amortisation of development costs and acquired intangible assets. In EMIS Enterprise, revenue increased by 19% to £71.5m (2021: £60.3m) and recurring revenue increased by 20%, reflecting the FourteenFish and Edenbridge acquisitions together with strong growth in the existing business particularly from analytics and Pinnacle. With the segment continuing to focus on execution in the areas of patient-facing services, analytics and pharmacy, including supporting the NHS Covid-19 vaccination programme through its Pinnacle software, adjusted operating profit increased by 21% to £22.8m (2021: £18.9m) and reported operating profit also increased to £18.1m (2021: £15.4m). Segmental performance The table below sets out the summary segmental performance: EMIS Health EMIS Health EMIS Enterprise EMIS Enterprise Total Total 2022 2021 2022 2021 2022 2021 £’m £’m £’m £’m £’m £’m Revenue 103.9 107.9 71.5 60.3 175.4 168.2 Adjusted segmental operating profit 26.4 26.3 22.8 18.9 49.2 45.2 Group expenses (1.5) (1.7) Adjusted operating profit1 47.7 43.5 Adjusted operating margin 25.4% 24.4% 32.0% 31.4% 27.2% 25.9% Reported segmental operating profit 23.9 22.1 18.1 15.4 42.0 37.5 Group expenses (1.5) (1.7) Exceptional costs (12.8) — Reported operating profit 27.7 35.8 Reported operating margin 23.0% 20.4% 25.4% 25.6% 15.8% 21.3% 1 Excludes capitalisation and amortisation of development costs, amortisation of acquired intangibles and exceptional items. Continued momentum Financial review 21 EMIS Group plc | Annual report and accounts 2022 Software subscriptions and support: 67% Interface and connectivity charges: 13% Other services: 9% Perpetual licences, training, consultancy and implementation: 6% Hardware and related services: 5% Recurring: 82% Non-recurring: 18% 67 67+1313+9+6+5+C 82 82+18+18+C REVENUE ANALYSIS Revenue The analysis of revenue is summarised below with full segmental revenue analysis set out in note 4. • software subscription and support revenue increased to £116.8m (2021: £104.5m), reflecting the impact of the three acquisitions in the year and higher revenues from the Group’s existing customers particularly in analytics, Pinnacle and community; • interface and connectivity charges revenue reduced slightly to £23.6m (2021: £24.3m) as a result of reduced new EMIS Anywhere and Wi-Fi connections following the large demand as a result of the pandemic in the comparative period; • other services revenue reduced slightly to £15.4m (2021: £16.3m) due to lower levels of digitisation project work partly offset by growth in analytics; • perpetual licences, training, consultancy and implementation revenue reduced to £10.6m (2021: £12.4m) with an expected reduction in set-up revenues in relation to the NHS Covid-19 vaccination programme; and • hardware and related services revenue reduced to £9.0m (2021: £10.7m) following a planned reduction in lower margin resale partner activities. The high level of recurring revenue and the strength of the Group’s customer relationships give the business confidence to invest in developing future products and services, while providing good visibility of future financial performance. Profitability Adjusted operating profit increased by 10% on the comparative period at £47.7m (2021: £43.5m), including a £1.7m contribution from acquisitions, with the adjusted operating margin increasing to 27.2% (2021: 25.9%). Total staff costs (including capitalised development costs) were 7% higher than in 2021, reflecting higher package and reward levels for an increasingly skilled and in-demand workforce. Year-end staff numbers increased to 1,539 (2021: 1,429) principally due to the addition of staff of the businesses acquired during the year, while the average headcount was lower at 1,470 (2021: 1,508), with a higher than usual level of unfilled vacancies, notably in India in the first half of the year. Other operating expenses increased with additional costs associated with the technology transformation programme, corporate transaction costs and investment in the Group’s internal systems. While adjusted operating profit moved ahead, reported operating profit reduced to £27.7m (2021: £35.8m), reflecting £12.8m of exceptional costs relating to the technology transformation programme and to corporate transaction costs (including staff costs relating to the cost of time employees spent working directly on supporting these projects, largely relating to roles already in the business where time was diverted to these projects from other value-adding activities and therefore the corresponding cost of these employees would have been included within adjusted operating profit in the prior year). However, profit before tax increased to £38.9m (2021: £36.1m) reflecting an exceptional fair value gain of £10.7m (2021: £nil) on the revaluation of the previously held interest in a joint venture resulting from the Healthcare Gateway acquisition. Taxation The tax charge for the year was £5.8m (2021: £7.0m). The effective tax rate for the year before fair value gains and share of result of joint venture and associate was 20.7% (2021: 19.1%) reflecting a higher level of non-deductible expenditure in the year. Earnings per share (EPS) As there was no change in the Company’s issued share capital during the year, EPS movements were driven largely by changes in adjusted and reported profit. Adjusted basic and diluted EPS were 10% higher at 62.0p and 61.2p respectively (2021: 56.1p and 55.5p). The statutory basic and diluted EPS were also both higher at 52.5p and 51.8p respectively (2021: 46.2p and 45.6p). Dividend Subject to shareholder approval at the AGM on 29 June 2023, the Board proposes an increase in the final dividend to 21.1p (2021: 17.6p) per ordinary share, payable on 11 July 2023 to shareholders on the register at the close of business on 16 June 2023. This would make a total dividend of 38.7p (2021: 35.2p) per ordinary share for 2023. This is 10% higher than in the prior year, reflecting the underlying growth of the Group and its positive future prospects. EMIS Group plc | Annual report and accounts 2022 STRATEGIC REPORT 22 Financial review continued Cash flow and net cash The principal movements in net cash (rounded) were as follows: 2022 2021 £’m £’m Cash from operations: Cash generated from operations 48.8 50.1 Less: capitalised development costs (4.4) (4.1) Adjusted cash generated from operations 54.6 46.0 Cash cost of exceptional items (see note 32) (10.2) — Net cash generated from operations 44.4 46.0 Business combinations (34.6) (2.0) Capital expenditure (2.7) (2.3) Transactions in own shares 0.1 (1.5) Tax (2.7) (7.5) Dividends (22.2) (21.1) Lease payments (1.2) (1.2) Finance/other 0.8 0.6 Change in net cash in the year (18.1) 11.0 Net cash at end of year 45.9 64.0 Cash generated from operations decreased to £48.8m (2021: £50.1m) despite an improvement in working capital movements due to the cash costs of exceptional items. Adjusted cash from operations is stated after deducting capitalised development costs and adjusting for the cash impact of any exceptional items where appropriate. On this adjusted basis, cash flow from operations was 19% higher than in 2021 at £54.6m (2021: £46.0m). Capital expenditure on property, plant and equipment and purchased software excluding capitalised development costs remained tightly controlled at £2.7m (2021: £2.3m). Capital additions in the year included £2.1m on computer equipment, £0.3m on property assets and £0.3m on software. The Group paid initial net cash consideration of £30.8m to acquire the Edenbridge, FourteenFish and Healthcare Gateway businesses in the period, and £3.8m in contingent consideration including the final instalment of £2.0m in respect of the 2020 Pinnacle acquisition and £1.5m in respect of Edenbridge following the achievement of product delivery targets during the year. After transactions in own shares, a reduced level of tax paid due to refunds received relating to prior years, dividends, lease payments and finance/other transactions, the total net cash outflow of £18.1m resulted in a year-end net cash position of £45.9m (2021: £64.0m). As at 31 December 2022, the Group had available undrawn bank facilities of £30.0m in place until December 2024. An accordion arrangement is in place to increase the bank facilities up to £60.0m if required, providing total liquidity of up to £105.9m at the year end. Peter Southby Chief Financial Officer 25 May 2023 23 EMIS Group plc | Annual report and accounts 2022 26.8 35.8 27.7 Reported operating profit3 £27.7m -22% 28.7 Reported earnings per share3 52.5p +14%- 1 Current year figures include a £1.7m contribution from acquisitions and exclude exceptional costs of £12.8m (see note 32). Excludes capitalisation and amortisation of development costs, amortisation of acquired intangibles and exceptional items as set out in the Group statement of comprehensive income on page 94. Earnings per share calculations also adjust for the related tax impact. 2 These are alternative performance measures. See page 18 for further details and reconciliation to the relevant IFRS number. 3 Continuing operations excluding Specialist & Care business. Continuing operations and discontinued Specialist & Care business. 2020 2019 2018 Total revenue3 £175.4m +4%- 130.0 134.8 143.3 35.8 27.7 125.0 Recurring revenue2,3 £143.3m +6% 120.6 140.7 2021 2022 2021 2022 2020 2019 2018 Adjusted operating profit1,2,3 £47.7m +10%- 36.0 48.1 34.7 36.1 2020 2019 2018 2020 2021 2022 2019 2018 159.5 168.2 175.4 159.5 170.1 149.7 39.3 39.3 43.5 47.7 35.9 37.6 2020 2021 2022 Reported cash generated from operations £48.8m -2%- 50.1 64.1 49.9 2020 2019 2018 50.1 48.8 2021 2022 Adjusted cash generated from operations2 £54.6m +19%- 46.3 58.9 54.5 2020 2019 2018 46.0 54.6 2021 2022 2019 2018 46.2 52.5 2021 2022 Reported operating margin3 15.8% -550bps 16.8 22.4 18.5 16.9 2020 2019 2018 21.3 15.8 2021 2022 Adjusted earnings per share1,2,3 62.0p +10%- 56.1 62.0 2021 2022 2020 2019 2018 51.4 51.0 47.4 45.1 Adjusted operating margin1,2,3 27.2% +130bps 25.9 27.2 2021 2022 2020 2019 2018 24.6 24.6 22.1 Total dividend for the year 38.7p +10%- 35.2 38.7 2021 2022 2020 2019 2018 31.2 32.0 28.4 24.0 STRATEGIC REPORT 24 EMIS Group plc | Annual report and accounts 2022 Enabling integrated healthcare in alignment with NHS strategy. Operational review Focussed on integrated care EMIS HEALTH The EMIS Health segment comprises business areas where revenues are generated from delivering core software and ancillary services to NHS organisations. This includes the primary, community and acute A&E markets. Market shares EMIS maintained its UK GP market leadership position with a market share of 58% (2021: 58%). The Group holds the number two market position in acute A&E at 19% (2021: 21%) and in community at 19% (2021: 20%). Strong position in primary care The Group remains well placed for the framework mini-tender processes that are anticipated to take place through the coming years across England, Wales and Northern Ireland. England In England, EMIS was successfully appointed to the Tech Innovation Framework (TIF). The objective of TIF is to encourage innovation and new ways of working, requiring cloud-based systems that are modular, highly interoperable and browser based, delivering both core clinical functions and new, higher spec capabilities. EMIS-X technology meets all of these requirements, ensuring the Group remains well placed to meet NHS England’s technology transformation strategy. The focus for the primary care market is developing EMIS-X functionality for GPs as part of the modernisation programme for EMIS Web. The business expects to begin roll-out of new clinician-facing features during the second half of 2023. NHS England is forming plans for the Digital Primary Care Framework (DPCF), the successor to the existing GP IT Futures Framework, which will open additional opportunities for EMIS. Scotland, Wales and Northern Ireland EMIS continues to work closely with Digital Health Care Wales (DHCW) and the Business Services Organisation (BSO) in Northern Ireland on the development of future plans, aligning software development and roll-out with each national strategy to suit each customer’s different requirements and specifications. EMIS formally withdrew from the Scottish GP IT Re-provisioning Framework during 2022. After extensive evaluation, the Group decided to prioritise the EMIS Web modernisation programme and EMIS-X; it was not practical to do this simultaneously with the bespoke developments required within the timescales of the Scottish framework. The business continues to support its many users in Scotland. Enabling integrated healthcare The NHS continues to focus on integrated care. The 2022 Health and Care Act introduced new legislative measures to make it easier for health and care organisations to deliver joined-up care across multiple different healthcare services. 42 newly formed ICSs are accountable for all care delivered in each ICS locality across England, with a focus on improving care delivery and addressing underlying causes of health inequalities. The NHS recognises that a key component to drive this transformation is integrated technology. Integrating care settings through technology is one of EMIS’s strengths. EMIS is well placed to be at the forefront of NHS change and improvement with a broad reach across key healthcare markets, strong market shares, existing interoperability technology and the ongoing delivery of EMIS-X capabilities, along with the 2022 acquisition of Healthcare Gateway. EMIS is already providing technology to power integrated care between GPs, community pharmacists, community and urgent care centres, emergency departments, primary care network (PCN) hubs and patients. EMIS systems speed up care pathways and allow information to flow securely to every stakeholder involved in a patient’s care. EMIS-X is the platform upon which all future care management, interoperability and integration of systems will be delivered for all core markets, including GPs, community pharmacists and urgent care. Improving customer experience A key priority of the EMIS Web modernisation programme is to ensure that users have a great experience of the system, recognising that some users have encountered issues. The business has a clear action plan in place through the EMIS Web modernisation programme to ensure that the system performs well and meets customers’ needs. EMIS continued to invest in data analytics and its customer service platform to automate early identification and resolution of issues including new incremental tools to proactively analyse EMIS Web performance. Support teams are now better able to spot, diagnose and fix many issues before customers are even impacted. At the same time, we have focussed on a Group-wide “customer first” culture and implemented an executive-led programme for continuous improvement in customer experience to maintain strong focus on customer retention. Reflecting these initiatives, we were pleased to report that customer satisfaction improved during 2022 by 20%. STRATEGIC REPORT 25 EMIS Group plc | Annual report and accounts 2022 Planning ahead, EMIS’s product development roadmap focusses on continuous improvement to the existing product portfolio. The Group has set a clear goal to build excellent software that its busy customers can rely on during vital healthcare interactions with patients. 91 members of the clinical team meticulously oversee new developments, bringing real-life clinical experience from a wide range of settings, from primary care to A&E to community pharmacy. The product experience and design team ensure all new developments meet end users’ needs, keeping every detail of new product development in alignment with market requirements. Changes and improvements to development working processes mean that the business is even more efficient, better able to forecast and plan delivery of software releases, leading to completion of roadmap elements on schedule. Gold standard learning EMIS achieved its 18th successive accreditation by the Learning and Performance Institute and its fourth successive rating of Gold, the highest possible grading. The team helps end users make the most of EMIS software and implement new ways of working so that they can focus their time and energy on patient care. The team delivered 15,000 hours of training during 2022 – upskilling end users and increasing customer satisfaction. 20% improvement in customer satisfaction scores during 2022 Industry insight Joining up care across the community Ian Bailey EMIS Senior Clinical Director, District Nurse, Queen’s Nurse According to NHS England, one in four of us have two or more long-term conditions. This rises to two-thirds of people aged 65 and over. This can make care complicated because different healthcare professionals are responsible for treating each individual condition. Consultations can often be fragmented and individual clinicians may not recognise the combined impact of the conditions and their treatments on a person’s quality of life. There is one way we can simplify this for everyone – with technology. Shared electronic records are essential Clinicians in any multi-disciplinary team need instant, electronic access to a shared care record – whether they are in a clinical room, in the patient’s home or in the car. This helps them make more informed and safer decisions, have more effective conversations with their colleagues and provide patients with the best experience possible. Making connected care more effective This is already making a real-world impact. Under The Liverpool Diabetes Partnership (LDP), clinicians from different teams are using EMIS software to access integrated care records. The result has been providing more care in the community, which means patients are receiving care in their own homes and inappropriate diabetes-related hospital referrals in Liverpool have been reduced by 50%. As nurses, we’re great at establishing relationships with our patients, but imagine how much more powerful and beneficial these could be with the use of the right technology; we could make even more of a difference. EMIS is well placed to be at the forefront of NHS change and improvement, with a broad reach across key healthcare markets STRATEGIC REPORT 26 EMIS Group plc | Annual report and accounts 2022 New services launched for community pharmacists, patients and in the data and analytics space. Operational review continued Opportunity for growth EMIS ENTERPRISE The EMIS Enterprise segment comprises business areas where revenues are derived predominantly from business-to-business healthcare sector sources, including medicines management across both community and hospital pharmacy, the Patient business and the analytics, research and life sciences sector. Market shares The Group maintained its market-leading position in community pharmacy during 2022 of 39% (2021: 39%) and maintained its number two market position in hospital pharmacy with a market share of 33% (2021: 36%). Adding value for community pharmacy customers The community pharmacy industry is expanding beyond its traditional dispensing role into service provision, at the same time as efficiently managing increasing numbers of prescriptions. EMIS plays a vital role, offering community pharmacies technology that supports them to manage increasing demands on their time and resources. EMIS helped community pharmacies with the following services released during 2022: • Adhera dispensing – allowing pharmacy groups to reduce resources required in branch by utilising barcode scanning and packing; and • integration between ProScript Connect and the Pinnacle suite of products to support delivery of the flu service. Further integration functionality will follow. EMIS’s Outcomes4Health remained the solution of choice in primary care and mass vaccination centres for recording Covid-19 vaccinations with a total of 1.3 million first dose vaccines recorded, 2.3 million second dose vaccinations recorded and 23.5 million booster vaccinations recorded in 2022. The NHS England Community Pharmacist Consultation Service (CPCS) launched in April 2022, making it easier for patients to be treated in a pharmacy setting to relieve pressure on GP practices. PharmOutcomes captured more than 85% of the available market, with over 8,900 pharmacies choosing to use the platform to manage this service. More than 4,700 GP practices used the GP CPCS referral solutions offered by EMIS’s PharmOutcomes to refer patients suffering with minor ailments to community pharmacies. More than 500,000 patients have been referred using one of the PharmOutcomes integrated solutions, showing the trend of integrated care between GPs and community pharmacies, supported by EMIS technology. Actionable data insight through EMIS-X Analytics Deriving actionable insight from data is becoming increasingly important to the future of the UK’s healthcare service. The EMIS-X Analytics suite of cloud-based tools enables the NHS, research and life sciences market and academia to carry out meaningful healthcare research at scale to improve long-term patient outcomes. During the period EMIS released two EMIS-X Analytics products: Recruit and Pathway. Recruit provides the technological link between the research and life sciences industry, clinicians and the UK public to enable efficient recruitment into clinical trials. With only 31% of UK clinical trials meeting enrolment goals, the entire industry stands to benefit to facilitate positive change to UK healthcare. The business onboarded its first partner for Recruit during 2022, completing a successful pilot. Three further studies have since gone live in the early part of 2023. One use case of Pathway is to utilise clinical intelligence to identify cohorts of patients who are at risk of long-term health conditions. This is being used to facilitate the NHS England hepatitis C virus elimination programme: healthcare teams are using EMIS software to identify patients who are at risk of hepatitis C so that they can be proactively tested and treated. Patient: connecting the UK directly to healthcare services The “digital front door” for patients to access healthcare services remains vital to NHS policy. EMIS’s Patient business connects the UK’s population directly to healthcare services. Patient Access allows appointment booking for GP and community pharmacy services, as well as private provider healthcare services, and is the UK’s leading independent healthcare app. During the period registered users increased to 16.1 million (2021: 14.0 million), boosted by organic growth and a new development allowing users to log in to Patient Access with their NHS credentials. Patient Access users booked 1.3 million GP appointments (2021: 1.5 million) and ordered 19 million prescriptions (2021: 22 million). Adding the NHS log in increased the number of repeat prescriptions ordered from a six-monthly average of 1.5 million prescriptions per month to 1.9 million prescriptions per month. Patient.info continues to be one of the UK’s leading medical information sites. 67 million unique users viewed 135 million pages during 2022, a resilient performance compared with the prior year, which had been boosted by the heightened interest in health information during the pandemic (2021: 96 million users, 187 million page views). The focus for 2023 and beyond is on providing high-quality content, attracting users to the site as a pipeline for Patient Access services, as well as driving advertising revenue. The business will continue to invest in content during 2023, as well as planning a unified platform to bring Patient.info and Patient Access together, to drive up engagement and revenue. STRATEGIC REPORT 27 EMIS Group plc | Annual report and accounts 2022 Extending the partner programme for a stronger customer proposition The partner programme continued to perform well during 2022. The programme contributes directly to the Group’s strategy of increased customer satisfaction and sustainable financial growth. Enhancing interoperability between products strengthens the Group’s overall proposition, allowing the business to focus on developing its core product set. Customers benefit from a wide range of digital options to improve efficiency and digitise processes. During 2022 EMIS proactively sought partners to join the programme to add new capabilities for customers, with new partners Civica, Hero Health and Scan House joining the programme to add capability in caseload management for community services, PCN patient scheduling and regulatory guidelines summary service respectively. The number of companies partnered with EMIS increased to 175 (2021: 148), partnering either directly with EMIS or through the NHS Digital partner programme. 175 customers now partner with EMIS to offer integrated products Industry insight The evolution of same day emergency care Haidar Samiei EMIS Clinical Director, Consultant Emergency Medicine Physician The same day emergency care model aims to reduce hospital admissions and wait times by treating emergency care patients within the day to avoid patients being admitted whenever possible. We’re already seeing the positive effects of this approach. Model hospital data shows that 80% of patients seen in same day emergency care avoid an overnight stay. As pressures on beds and capacity continues to grow, reducing the length of a patient’s stay by efficiently managing their care is essential. Trusts are examining how their local processes can adapt to provide new, improved patient journeys that free up capacity in the emergency department, as well as improving patient safety, experience and outcomes. We first released additional interoperability functionality into Symphony two years ago, providing invaluable views of information from different sources: GPs, 111, ambulance transfers, and transfer of care from Symphony back to primary care. This will reduce duplication of work between teams, improve safety and – crucially and fundamentally – it will get patients to the right place as quickly as possible. I have noticed more and more trusts locating same day emergency care areas within the emergency department as a new, streamlined way of working. And it’s great to see EMIS software helping this change to happen – we’re enabling hospital departments to share vital emergency department information, such as clock times, clinical data and tracking information. It’s a change that will benefit clinicians and patients alike. The EMIS-X Analytics suite enables meaningful health research to be carried out at scale to improve long- term patient outcomes EMIS Group plc | Annual report and accounts 2022 STRATEGIC REPORT 28 Risk management remains a key priority for EMIS Group to sustain the success of the business in years to come. Each area of the business identifies, evaluates and manages risk according to the Board policy. Principal risks and uncertainties Managing risk for sustainable future success Board of Directors Ownership and monitoring Divisional and functional risk registers GXT Operational risk input Corporate risk review Group internal audit Independent, objective review function The risk management framework The Board is responsible for the proactive risk management policy, to ensure that EMIS Group has an effective framework to manage risk. Each area of the business has a clear focus to identify, evaluate and manage risk in line with Group strategic priorities and risk appetite. The risk management process is overseen by the risk management committee. The committee has formal terms of reference and is chaired by the Chief Financial Officer. Committee meetings are attended by senior management representing all areas of the business, supplemented by subject matter experts who attend on invitation. Risks are evaluated using consistent measurements of likelihood, financial and reputational impact, both before and after mitigating controls are taken into account. Risk registers and risk scores are independently verified by the Director of Group Risk and Internal Audit. A named risk owner is responsible for ensuring that adequate mitigating controls are in place and operating effectively for individual risks and that, where a risk exceeds the Group’s risk appetite, there is an action plan to address this with appropriate timescales. During 2022, internal audit continued to assess the quality of risk documentation to identify and implement areas for improvement in identification, documentation and mitigation of risks. The risk management committee provides regular updates including principal risks, significant risks and emerging risks to the audit committee. Group internal audit provides independent, objective assurance on key risks through a programme of risk-based audit reviews alongside regular internal reviews. This process provides a mechanism for the Board to carry out a robust assessment in reviewing and challenging the principal risks and mitigating controls identified by management and for challenging the potential impact of new emerging risks across the Group. Regular reporting on risks above appetite is provided for discussion at both the GXT and senior leadership team meetings. Significant risks raised within the ESG committee are also reported into the risk management committee where appropriate. Low LIKELIHOOD High Low IMPACT High B E C Principal risks heat map A The risk heat map above provides a graphical representation of the principal risks and uncertainties. It shows the assessment of the relative impact and likelihood of each risk, along with an indication of the year on year movement of each risk described in detail on pages 30 to 33. A Healthcare structure and procurement changes B Technology and software development C People and culture D Information governance and cyber security E Clinical safety D Audit committee Independent review and challenge Risk management committee Review and input 29 EMIS Group plc | Annual report and accounts 2022 Risk appetite The Board, with input from the GXT, has defined its risk appetite across a range of risk categories as outlined opposite, accompanied by detailed statements to support these levels of risk appetite. Although there are areas where EMIS Group is prepared to take higher levels of risk, the risk management framework is designed to manage down to an acceptable level the risk of significant financial or reputational impact, with rewards being commensurate with the level of risk being taken within a reasonable timeframe. These statements provide management with guidance on how much and what types of risk the Board is prepared to accept when management is making business decisions. The Board reviews and revises its risk appetite as its understanding of the level and nature of risk in the business develops or as its appetite for taking risk changes. Acceptable risk appetite levels have remained consistent throughout 2022. Risk appetite parameters are built into the Group’s web‑based risk management application. Any area where exposure is assessed as exceeding the Board’s defined risk appetite is flagged and assigned to specific members of the GXT to determine the action required. The risk management committee monitors these risks and the corresponding remedial action plans. Emerging risks Emerging risks differ from principal risks, or other lesser risks in the risk management system. They have a higher degree of uncertainty around when, or even if, they may occur; therefore, their impact cannot readily be assessed. Emerging risks have the potential to increase in significance and affect the performance of the Group and its ability to meet its strategic objectives. Their timeline may be well beyond the current two-year time horizon applied to future risks. As their status changes and they become more certain and more quantifiable, they may move into the risk registers as clearer, better-defined risks. The risk management committee is the main forum for identifying, assessing and reporting on any significant emerging risks facing the Group. A number of horizon scanning and emerging risk sessions are carried out regularly across the Group to identify and mitigate any such risks which are deemed significant. Examples of emerging risks covered during the year include increased regulatory requirements (e.g. Data Protection and Digital Information Bill), increased competition arising from NHS procurement changes, failure of critical IT infrastructure and specific ESG-related risks including climate change. In addition, the Group continues to review the impact ESG has on its current principal risks. Risk category Risk appetite Overall Low Strategic Medium Financial Low Compliance (legal, regulatory, health and safety, environmental) Low Operational: – Commercial Medium – Sales Medium – Marketing (including product strategy) Medium – People Low – Property Low Technical: – Innovation Medium – Development Low – Release (testing/quality assurance) Low – Implementation Low – Internal IT systems Low Clinical: – Safety Low – Delivery Low Data management: – Information governance (in relation to clinical safety) Low – Information security (in relation to data records and data security) Low Each key risk is assigned to an appropriate individual or discrete operating group and all mitigation and action plans are recorded and monitored. Principal risks The principal risks and uncertainties identified by management, and how they are being managed, are set out on pages 30 to 33. These risks are not intended to be an extensive analysis of all risks that may arise in the ordinary course of business or otherwise. The principal risks facing the Group have not materially changed although a number of additional controls have been put in place during the year. The principal financial risks are separately disclosed in note 3 to the financial statements on page 104. EMIS Group plc | Annual report and accounts 2022 STRATEGIC REPORT 30 Principal risks and uncertainties continued DESCRIPTION OF RISK WHY IS IT A RISK? A Healthcare structure and procurement changes The commercial success of the Group is dependent on the healthcare sector’s strategic direction to use IT to reduce costs and improve efficiency. There is a risk that the Group’s products and services are not in line with the sector’s strategies, or that these will change as healthcare organisations’ plans continue to evolve. Examples of this include the transition from Clinical Commissioning Groups (CCGs) to ICSs (covering Integrated Care Boards and Integrated Care Partnerships) as well the recent merger of NHS Digital with NHS England. The NHS represents a significant proportion of the Group’s revenues; how it is organised and procures goods and services could affect the Group’s ability to sell effectively to this market. There is a risk that new competitors could cause market disruption through customer adoption of new technologies and/or changes in competitor business models. This could include major global technology companies, which may impact the Group’s market share and financial returns. The English primary care market remains the largest single area of revenue for the Group. There is a risk that the Group may not be included on future frameworks which govern procurement in this important area. WHAT COULD CAUSE THE RISK? • Failure to achieve interoperability could have a significant impact on the Group’s ability to meet the government’s healthcare technology requirements and to sell its products and services in the longer term. • Changes in the way healthcare is delivered may impact demand for different solutions. • Increased competition may affect market shares or current pricing. B Technology and software development The Group provides innovative and interoperable IT healthcare systems that are critical to the efficient and effective operation of a wide range of healthcare organisations. Developing excellent, robust and reliable software systems is essential to the ongoing success of the business. The Group’s products may be disrupted by competitors if they develop more innovative technology. Failure to implement cloud-based technologies may have a significant impact in meeting customer demands. To achieve its objectives, the Group has acquired several businesses across a range of healthcare sectors. There is a risk that these businesses do not function effectively as a group, impacting on the success of product integration across the sectors. The technical or physical failure of the Group’s systems could lead to disruption or complete service denial of high-profile public or B2B services. WHAT COULD CAUSE THE RISK? • The failure to monitor and rectify software defects in time could result in reduced customer satisfaction and contractual penalties. • Failure to deliver modern, interoperable software platforms could have a significant impact on the Group’s ability to sell its products and services and upon its reputation as the leading integrated healthcare IT supplier to the NHS. C People and culture The Group is reliant on the skills and knowledge of its people, especially in software development and infrastructure, clinical safety and information technology systems. The risk to the Group is in not being able to recruit or retain an appropriate calibre of employees. Over recent years, the people landscape has altered significantly with changes in career expectations, demands to work more flexibly and aspirations of new market entrants, which has led to an increase in this risk. Whilst significant measures with demonstrable increases in engagement have been implemented to anticipate and adapt to this change, there is a risk that the Group does not optimise its approach which may lead to disruption and uncertainty that could lead to the loss of skills and knowledge. Failure to integrate acquisitions may result in strategic goals, synergies and savings not being met. Failure to recruit or retain appropriate numbers of qualified people in critical areas could lead to a deterioration in quality of products and services. This could result in an inability to meet customers’ needs, loss of business and the failure to deliver expected financial returns. WHAT COULD CAUSE THE RISK? • Low-level engagement caused by a poor culture could risk the retention of critical employees and/or a reduction in productivity and innovation. • Lack of succession planning could lead to the loss of key talent and disruption to the business. • Single points of failure may result in loss of critical knowledge where these are not mitigated. 31 EMIS Group plc | Annual report and accounts 2022 HOW WE MITIGATE THE RISK OPPORTUNITY FOR EMIS GROUP EMIS Group has the following measures in place: • alignment of Group strategy with planned and published government policy on healthcare and technology, ensuring products meet the essential requirements of the NHS’s current and future major frameworks; • close engagement with the NHS at strategic and tactical levels; • increased diversification of the Group’s business, reducing reliance on the NHS as a revenue source with a stated target of achieving a balance between NHS and non-NHS revenues (for example, research and life sciences) over time through organic growth and acquisition; • focus dedicated to ongoing GP IT Futures call off competitions and the recently established TIF; • continued significant investment in clear, product-led strategies; • the provision of extensive integration and interoperability across both Group and third party products driven by EMIS-X, serving both the NHS and the wider healthcare sector; • work to ensure that EMIS Group is seen as a supplier of integrated healthcare IT solutions, regularly monitoring key markets and competitors; and • the continual review of customer experience measures to ensure issues are resolved in a timely manner. The opportunity for EMIS Group is to align its strategy to policy, so that its products and services deliver the integrated and interoperable solutions that the market is seeking to procure. This positions the Group as a trusted high-tech supplier delivering at every level from end user experience through to government strategy. LINK TO STRATEGIC PRIORITIES The Group has in place a range of mitigating controls, including: • continued investment in new development, product and project management talent and technologies; • adoption of strategic product portfolio management; • improved in-life software management processes including for software defects, enhancements and clinical safety; • continued development of best practice standards and ways of working across all areas of the product life cycle, using SAFe methodology; • close liaison between product and sales teams to create commercially attractive product propositions supported by clear product roadmaps; • aligning product and development teams to specific business and strategic areas with cross-functional teams to apply direct feedback from users and customers throughout the software life cycle; • central team responsible for the architecture of the Group’s software, ensuring that its platform continues to evolve as new technologies emerge; and • Board-level responsibility for product and acquisition integration with a clear strategic plan and regular monitoring in light of the changing healthcare market. The opportunity is to build on the Group’s strong history as a market innovator and instigator of positive change, with new software development that is both technologically leading edge and in alignment with customer requirements. LINK TO STRATEGIC PRIORITIES An employer of choice programme has been established to attract, recruit and retain the people the Group needs and enables employees to perform at their best. These objectives are driven by the following: • specific workstreams covering culture, leadership, work environment, employee rewards and terms, processes and employer branding; and • sponsorship, involvement and communication from employees across all areas and levels within the organisation. In addition, the Group continues to maintain and strengthen existing mitigations, including: • clear empowerment and accountability through the Group’s matrix organisational structure; • regular communication and recognition of business values; • introduction of a single integrated system to capture and track actions arising from employee surveys and feedback; • a clear and transparent performance management process; • strong internal communication, particularly extending the “Ask Andy” online Chief Executive Officer Q&A session to include other leaders and “town hall” sessions held across Group departments; • team management objectives included in bonus targets for senior leaders and EMIS Heroes formal recognition programme; • monitoring of succession plans for key senior roles including identification and mitigation of single points of failure; • operating a regularly reviewed and externally benchmarked pay and benefits framework to ensure greater consistency across the Group; • a continued focus on physical, financial and mental wellbeing; and • regular employee forum groups, including an equity, diversity and inclusion group. The Group’s strategy to become an employer of choice will lead to improved recruitment and retention of talent. Attracting and retaining highly skilled, motivated employees will lead to better business performance, enhancing the Group’s good reputation as well as financial return. LINK TO STRATEGIC PRIORITIES KEY TO STRATEGIC PRIORITIES 4 Deliver innovative, reliable and safe software 1 Achieve sustainable financial growth 2 Provide excellent customer and partner service 3 Enable our people to thrive 1 2 3 4 1 2 3 4 1 2 3 4 EMIS Group plc | Annual report and accounts 2022 STRATEGIC REPORT 32 DESCRIPTION OF RISK WHY IS IT A RISK? D Information governance and cyber security The Group holds significant volumes of confidential and sensitive personal data, particularly in the areas of hosting patient care records and processing employee data. Hosting personal data (in particular, special category data such as patient care records) carries risks associated with information security, data protection and system reliability, including loss, theft and corruption of data. Breaches may arise in relation to any of the three pillars of information security: confidentiality, integrity or availability. Most reported data breach incidents are owing to human error in inadvertently disclosing data, but attacks and malware incidents continue to rise. The media reports an increase in blanket attacks by cyber criminals often backed by hostile nation states targeting civilian and commercial organisations, owing to the value of the personal and sensitive data held. Ransomware remains the single biggest threat to organisations and the use of sophisticated phishing and social engineering techniques by cyber criminals persists as the main method of entry and compromise. EMIS Group’s trusted reputation rests on its integrity and the quality of stewardship it applies in respect of its customers’ sensitive data. WHAT COULD CAUSE THE RISK? • The Data Protection Act 2018 (incorporating EU GDPR) and the Networks and Information Systems Directive (NISD) require appropriate and continually maintained data security and information governance controls. The Information Commissioner’s Office (ICO) has leveraged substantial fines to organisations suffering a data breach and found to have weak controls. E Clinical safety As a provider of critical IT systems to healthcare providers, the Group is exposed to a range of clinical risks. Clinical risks associated with the use of clinical content and algorithms in the Group’s products, which clinicians use in day-to-day patient care. For pharmacy software products, similar risks exist around incorrect dosages and labelling of products dispensed. The Group’s Patient business provides technology-based enabling tools for the general public. There are no direct clinical services provided by Patient. There is an ever-increasing use of artificial intelligence and analytics within the healthcare area. As a result, an error might magnify and have a major impact across a larger population of individuals. There is a risk of clinical harm to patients should the software used by healthcare professionals fail to provide accurate, reliable and timely data, including patient allergies, existing medication or other relevant personal information. WHAT COULD CAUSE THE RISK? • Similarly to information governance and cyber security, there is a risk that a clinical incident attributable to an EMIS solution may result in potential “class action” litigation being applied. • These risks may be amplified where Group systems interoperate with third party applications. Principal risks and uncertainties continued 33 EMIS Group plc | Annual report and accounts 2022 HOW WE MITIGATE THE RISK OPPORTUNITY FOR EMIS GROUP An information governance framework has been established including the following key features: • culture placing data and information governance at the heart of the business; • a data governance board is responsible for enforcement of policy and compliance activities; • all employees are required to complete annual information governance and security training, including an NHS e-learning programme; and • key policies and procedures are reviewed annually to meet corporate and regulatory compliance. EMIS has a continual security improvement programme to raise the standards of technical and non-technical controls across the Group through detailed reviews and assessments. This combines an emphasis on security culture and human behaviour with training, education and increasing awareness. The programme includes: • remote working security measures; • penetration testing and vulnerability scanning by accredited managed security providers; • maintaining compliance to ISO 27001, ISO 22301, ISO 9001, ISO 20000, NHS Data Security Toolkit and Cyber Essentials Plus; • comprehensive security education, communication and policy attestation; • cloud security measures for cloud platforms and services; • specialist cyber and data responders to manage breaches; • investment in the latest industry-leading security tools to prevent and detect cyber events/incidents; and • cyber insurance. With a clear, dedicated focus on information governance and cyber security, the Group is able to operate in the healthcare market with confidence in its processes, products and services, inspiring, in turn, confidence in customers and end users. Link to strategic priorities Most clinical risks are allied to other principal risks. Failures in software development, recruitment and information governance could lead to clinical harm to patients. Mitigating actions specific to clinical risk management include: • Group Chief Medical Officer and a network of Clinical Safety Officers in place with responsibility for clinical safety across the Group; • policies and procedures designed to meet the regulatory requirements of NHS Digital’s clinical risk management standards DCB 0129; • policies and processes in place to meet regulatory standards for embedded algorithms and decision support; • accredited clinicians identify and mitigate potential clinical risks in new software development, releases and updates; • weekly KPI reports and a monthly clinical governance board chaired by the Group Chief Medical Officer; and • oversight by external regulators. EMIS Group’s priority is to deliver the highest standards of clinical safety. This is an unswerving focus that runs through the Group’s culture, creating an opportunity to continue to build the trust of the healthcare profession, leading to increased software and service sales and customer retention. Link to strategic priorities KEY TO STRATEGIC PRIORITIES 1 2 3 4 1 2 3 4 4 Deliver innovative, reliable and safe software 1 Achieve sustainable financial growth 2 Provide excellent customer and partner service 3 Enable our people to thrive EMIS Group plc | Annual report and accounts 2022 STRATEGIC REPORT 34 Viability statement The Directors have voluntarily adopted provision 31 of the Code, assessing the prospects of the Group. The Directors have taken into account the Group’s current position and business model and have assessed the potential impact of the principal risks and uncertainties facing the Group. The Directors have determined that the four-year accounting period to 31 December 2026 constitutes an appropriate period over which to assess the Group’s prospects and viability. This is the period focussed on by the Board during its strategic planning process and is consistent with typical contract lengths across much of the Group (three to five years). It is aligned with the Group’s goodwill and other intangible impairment testing and the earlier part of the period is also covered by the Group’s revolving credit facilities, which currently extend to December 2024 with a further one-year extension anticipated, and which the Group expects to be able to renew on comparable terms. While the formal assessment period extends to December 2026, the Board considers that the Group’s longer-term prospects are likely to be positive beyond this time horizon as a result of its investment in innovation, increasing market demand for its products, market growth, strong competitive positions and contractual visibility. The key assumptions underpinning the forecasts are: • integrated care offer maintains the Group’s NHS leadership position; • expanded private sector presence through organic plans; • clinical & data risks are effectively managed; and • the Group is able to hire and retain appropriate technology talent. The above assumptions result in forecasts showing steady revenue growth and stronger operating profit growth which are aligned to the Group’s strategy to achieve sustainable financial growth, and growth in operating margins. For the purpose of making this viability statement, the Board has taken into account its ongoing assessment of the principal risks facing the Group, including those that could potentially threaten its business model, future performance, solvency or liquidity. Each year, the Board considers a medium-term strategic plan, the first year of which represents the Group’s annual operating budget, together with the ability of the Group to raise finance and undertake mitigating actions to avoid the occurrence or reduce the impact of the principal risks. The Board also considered the potential impact of the proposed acquisition on the forecasts and scenarios, and concluded that their was currently no basis for modelling any impact arising directly from a potential future completion. In assessing viability, enhanced modelling and stress testing are performed, using severe but possible scenarios considering the financial impact of risks materialising. The modelled scenarios were: Scenario 1 Increased market competition linked to the GP IT Futures framework (which governs the majority of the Group’s primary care revenues) results in reduction in related revenues. All related revenues reduce by 5% from January 2024, by a further 5% from January 2025 and by a further 10% from January 2026. All other revenues are limited to a 2% growth rate. Link to principal risks and uncertainties: healthcare structure and procurement changes. Scenario 2 The failure to monitor and rectify software defects on a timely basis could result in reduced customer satisfaction. Revenues are reduced by 10% due to customer attrition and staff costs are reduced by 5% from January 2024 in response to customer losses. Link to principal risks and uncertainties: technology and software development. Scenario 3 Failure to recruit or retain appropriate numbers of suitably qualified people in critical areas could lead to a deterioration in the quality of products and services. This could lead to failure to meet customers’ needs, loss of business and the Group failing to deliver expected financial returns. The annual staff attrition rate increases to 25% and new staff are 10% more expensive than leavers resulting in an effective 2.5% increase in staff costs from January 2024 onwards. Link to principal risks and uncertainties: people and culture. Scenario 4 There are failures to comply with information governance legislation, including the EU GDPR. Revenues reduce by 20% from January 2024, staff costs and operating expenses reduce by 10% from January 2024 and a fine of £1m is imposed by the ICO in December 2024. Link to principal risks and uncertainties: information governance and cyber security. The principal risks have informed these scenarios, further details on each of these are set out on pages 30 to 33. The Group’s strong contractual forward visibility of revenues, significant cash resources and strong cash conversion provide some inherent protection against unexpected shocks to the business model. In the event of these scenarios arising, various options are available to the Group in order to maintain liquidity, including: utilisation of undrawn debt facility; reduction to cost base; reduction to future investment capital expenditure; and amendment to dividend policy. The Directors have made their viability assessment based on the following key assumptions: • the political environment in which the NHS exists will not result in major structural change to the market in which the Group operates; and • credit facilities for the business will continue to be available in all plausible market conditions on comparable terms to those currently in place. Taking into account the Group’s current position and principal risks and uncertainties, the Directors confirm that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period to 31 December 2026. 35 EMIS Group plc | Annual report and accounts 2022 Sustainability ESG report A sustainable future 35 years of driving positive change through technology Dear Shareholder I am pleased to present the EMIS Group plc ESG report for the year ended 31 December 2022 on behalf of the Board. The Board recognises the value and importance of a meaningful ESG (sustainability) strategy. Over the past year we have honed our focus on sustainability, by appointing a new Sustainability Manager position and defining a new sustainability strategy. Anchored in our ESG materiality assessment and the areas of most concern to our stakeholders, this strategy, together with the pillars and goals which underpin it, is designed to operate alongside and support the Group’s strategic objectives. We have developed a greater understanding of what is material to our organisation and more clarity on our outward impact, through a detailed process of investigation and principled prioritisation involving multiple stakeholders and supported by external consultancies. To date, this has helped us to identify three of the 17 United Nations Sustainable Development Goals (UN SDGs) on which to focus. These are: UN SDG 5 for gender equality; 12 for responsible consumption and production; and 13 for climate action. These goals provide further impetus to our current positive momentum, enabling us to deliver future improvements that will benefit society, the economy and the environment as we do our part to support countries and nations globally. Efforts have begun to meet specific identified targets and indicators. We will develop measurable reporting on progress against these targets, which will appear in future reports. We continue to focus on identifying any further goals for future alignment. The challenges of the pandemic and increasing socio-economic stress factors have shone an even greater light on the importance of putting our customers and employees first, which is something that EMIS has and always will continue to pride itself on. At EMIS we are driven by our purpose: to be the leading provider of innovative healthcare technology that improves people’s lives. To this end, I am delighted to announce our new vision for sustainability at EMIS, which is underpinned by four pillars: our environmental responsibilities, delivering social value to communities, our people and culture and our business responsibilities. You can read more about this and our net zero (a 90% reduction across all scopes with minimal reliance on offsetting) strategy in the coming pages. We recognise that ESG and sustainability require a continual process of transparency, reassessment, challenge and development for any organisation, and I see abundant evidence of our unwavering commitment to this process. I look forward to providing you with further updates as we continue on our journey. Patrick De Smedt Chair 25 May 2023 STRATEGIC REPORT 36 EMIS Group plc | Annual report and accounts 2022 ESG report continued Materiality assessment The Board continues to focus on understanding the issues that matter most to stakeholders, first identified in the 2021 materiality assessment. It has been a priority throughout 2022 to ensure that there is a strong link between the ESG goals identified and EMIS’s strategic objectives. Regular materiality assessments will continue as part of EMIS’s commitment to sustainability and stakeholder engagement. The graph opposite shows the results of the last assessment, highlighting the matters of most interest or concern to stakeholders and their importance to the business. The GXT continues to focus on gaining a more in-depth understanding of these issues, embedding them into the Group’s strategic goals. Lower Lower Higher Higher BUSINESS IMPACT IMPORTANCE TO STAKEHOLDERS • Training and development • Waste management • Attractiveness to employees • Health, safety and wellbeing • Ethics and compliance • Innovation • Community engagement • Reducing carbon emissions • Sustainable supply chain • Data privacy and security • Diversity and inclusion • Resource efficiency • Modern slavery and human rights To create a supportive, inclusive environment where everybody can thrive, both doing and being their best Environmental sustainability is an integral part of EMIS’s operations and value chain delivered through steady, measurable improvement For every initiative, development, product and service EMIS produces to have a positive impact on UK society Strong and ethical governance practices are integral to EMIS’s long-term sustainable value creation Our people and culture Our environmental responsibilities Delivering social value to communities Our responsibilities as a business Sustainability pillar goals Sustainability strategy pillars Sustainability vision Sustainability is at the heart of our Group purpose, vision and culture. We strive to improve lives both now and in the future, through sustainable business practices and healthcare technology. Sustainability strategy vision and pillar goals 37 EMIS Group plc | Annual report and accounts 2022 Reducing carbon emissions LINK TO STRATEGIC PRIORITIES Managing energy and carbon emissions from direct and indirect operations (Scope 1, 2 and 3), use of renewable energy sources and carbon offsetting. • Measurement and review of additional Scope 3 emissions beyond the ones reported to date. • Implement a plan during 2022 to measure and reduce Scope 3 emissions. • Move to 100% renewable energy contracts for EMIS-owned offices by the end of 2022. • 100% of company cars to be electric by 2026. • Procure responsible carbon offsets for Scope 1 and 2 in 2022. • Move to fully recyclable supply chain for packaging by the end of 2024. • Via an independent third party, EMIS’s Scope 1 to 3 emissions have been measured. • All electricity contracts are now 100% renewable at EMIS owned offices. • 62% of company cars are now either hybrid or fully electric (15% electric vehicles and 47% hybrid vehicles). • Please see below for information on EMIS’s net zero strategy relating to offsetting. • Following the successful introduction of recycled cardboard as packaging, EMIS has continued its commitment to using fully recyclable packaging in its warehouse. Sustainable supply chain LINK TO STRATEGIC PRIORITIES Ensuring that suppliers have strategies and measures in place to drive ongoing improvements to sustainability, including prompt payment and fair terms. Ensuring suppliers are managing their sustainability risks, including human rights, modern slavery and resilience to climate change. • Implement a verifiable ethical supply chain by 2024. • Amend the procurement and contracting governance process during 2022, to include clear measures that support the sustainability strategy. • Hold a supplier event during 2022 to brief suppliers and partners on the Group sustainability strategy, expectations and partnering approach. • EMIS launched its supplier code of conduct in 2023, which sets the expectations that we place upon our supply chain. EMIS is measuring key suppliers’ alignment with its sustainability strategy. • The business is engaging with top tier suppliers to develop plans that support EMIS’s sustainability and net zero strategies. Innovation LINK TO STRATEGIC PRIORITIES Staying at the forefront of technological innovation in healthcare software to provide the highest quality service for customers and integrate green technology opportunities, such as digitising paper processes. • Evaluate environmentally friendly choices for cloud solutions. • Use energy-efficient development code to reduce customers’ power consumption. • Use analytics to identify opportunities for customers to reduce their environmental impact. • Cloud carbon output report. • Measure power consumption of infrastructure on premises. • Use analytics technology to inform the public of environmental factors that may affect their health, such as pollen count. • EMIS is working closely with the relevant suppliers to map its future cloud carbon output. • EMIS now has sight of its Scope 1 and 2 greenhouse gas emissions. • EMIS’s Recruit software is being used to identify patients suitable for clinical research, improving access/outcomes for disadvantaged communities and helping to reduce health inequalities, as well as the identification of a severe asthma cohort. Employer attractiveness LINK TO STRATEGIC PRIORITIES Attracting and retaining top talent and meeting employee expectations by providing competitive salaries and benefits, as well as enhancing diversity and inclusion. • Focus on progressing the employer of choice programme. • Agree employer of choice priorities and implementation dates during 2022. • Create and implement a volunteering policy during 2022. • The employer of choice programme launched in 2022 with a number of workstreams dedicated to delivering its priorities. • An individual volunteering policy was launched in 2022. Diversity and inclusion LINK TO STRATEGIC PRIORITIES Promoting an inclusive culture that respects and values people’s differences and reflects the customers EMIS serves. • To increase gender diversity at Board and senior management level. • At least 33% female representation on the Board by the end of 2023. • 40% female representation in senior management positions by the end of 2025. • Review current gender and ethnicity pay gaps and introduce further corrective measures during 2022. • Reduce gender pay gap to 5% or lower and ethnicity pay gap to 16% or lower during 2022. • As at 31 December 2022, 29% of the Board is female. Succession planning for the Board is on hold due to the Proposed Acquisition. • As at 31 December 2022, 30% of senior managers are female. • Gender and ethnicity pay gaps remain under continued review for improvement. • The gender pay gap in 2022 was 8.8% (2021: 7.6%) and the ethnicity pay gap was 16.2% (2021: 17.5%). PRINCIPLE MATERIALITY ISSUES 2021 PRIORITIES 2022 PROGRESS 2021 KPIS The table below shows the priorities, the corresponding outcome of the materiality assessment and alignment with the Group’s current strategic goals as outlined on pages 14 and 15, with an update on progress. 2 4 2 4 1 2 4 3 3 STRATEGIC REPORT 38 EMIS Group plc | Annual report and accounts 2022 ESG report continued Our environmental responsibilities 2022: establishing EMIS’s baselines to inform strategy EMIS is committed to reducing its environmental impact and has developed a new Group-wide environmental strategy to deliver improvements in this area, anchored in UN SDGs 12 and 13. EMIS aims to place environmental impact at the centre of its operations and value chain, steadily delivering measurable improvements. EMIS will deliver this through four newly established environmental objectives: • reduce EMIS’s directly and indirectly owned and controlled greenhouse gas emissions in the long term; • create a fully sustainable supply chain that enables EMIS’s sustainability strategy goals; • ensure everyone at EMIS takes personal responsibility for mitigating their environmental impact; and • drive continuous improvement in the sustainability of EMIS’s products and services. In support of these objectives, EMIS established its Group-wide greenhouse gas emissions (emissions) during 2022. A specialist consultancy was engaged to measure and analyse emissions data across Scopes 1 (direct emissions), 2 (indirect emissions) and 3 (emissions for which a company is indirectly responsible, up and down its value chain), which has allowed EMIS to confirm its 2021 baseline emissions. Please see Streamlined Energy and Carbon Emissions Reporting (SECR) for more information on pages 40 to 41. Building on the consultancy’s recommendations, EMIS has established a carbon reduction plan (net zero strategy), with the input of stakeholders from across the Group, including its ESG committee. The net zero strategy has led to the development of EMIS’s emissions reduction targets, which, as a key supplier to the NHS, is in full support of the NHS’s net zero plan. The net zero strategy will remain under continued review and will evolve as EMIS improves its emissions data processing, analysis and understanding and in response to continued global market and infrastructure developments. Going forward, EMIS will place only minimal reliance on offsetting to address its residual emissions as appropriate, reviewing its approach to investment in such projects during 2023 with a revised focus on social value. In pursuit of its commitment to reach net zero, EMIS has set a new target to achieve net zero greenhouse gas emissions across all scopes by 2040. The Group aims for a 90% reduction in its Scope 1 and 2 emissions by 2030, which will serve as a milestone on the journey. This will be delivered by focussing on both a near term to 2030 and long term to 2040 science- based approach and milestones, as EMIS is committed to achieving verification with the Science Based Targets Initiative in the future. During 2022, the business identified that emissions data in some categories needs improvement where, for example, some current analysis is based on financial data with emissions factors from DEFRA then applied. This will be addressed as part of EMIS’s near-term strategy through internal developments, utilising current software to its fullest potential, introducing new greenhouse gas emissions data sets and analysis and through supplier engagement focussed on both product and supplier data maturity. In the near-term, EMIS will introduce further energy efficiency upgrades to its owned buildings. EMIS is reviewing employee usage of and interaction with its owned sites through behavioural change in collaboration with the employer of choice programme. This supports the already established commitments to: • deliver a 100% electric vehicle fleet by 2026; • utilise 100% renewable electricity at its owned sites and where EMIS is responsible for the electricity contracts at its leased sites; • use recyclable packaging materials by 2024; • reduce waste through improvements to the business’ packaging materials, refurbishing and reusing end-of-life IT equipment where possible; and • migrate EMIS’s services to the cloud. 92% of EMIS’s 2022 emissions were situated in its supply chain, namely in capital goods and purchased goods and services. As such, in the long term, to 2040 and beyond, EMIS is committed to delivering emissions reductions in this area. During 2022 EMIS began to take proactive steps to address this, including collaboration with its top tier suppliers to ensure alignment with their own emissions reduction trajectories. To drive collective success, EMIS developed a new supplier code of conduct outlining clear measures in support of the sustainability strategy. This will require a certain percentage of the supply chain to deliver commitments to net zero by set deadlines, including the decarbonisation of their products. EMIS’s supplier engagement and communications strategy will continue to evolve and shift as necessary to ensure that suppliers are operating in full support of EMIS’s environmental strategy and decarbonisation efforts in the long term. Further 2022 highlights EMIS retains its accreditation under ISO 14001 Standard for Environmental Management System, which applies to its Leeds, Watford and, as of 2022, Isle of Wight locations. EMIS employees are educated each year on environmental matters with an emphasis on personal responsibility for energy consumption and waste management, which is supported by relevant policies, such as the environmental policy statement. Investment in improvements to the business’ operations and assets continued during 2022 with energy improvements to some of its sites. For more detailed information, please see the SECR section on pages 40 to 41. In April 2022, EMIS marked World Earth Day with an update on the key initiatives EMIS introduced in 2021 to demonstrate the business’ environmental focus, including an update on climate action projects. EMIS employees ordered 26 (2021: seven) electric vehicles via salary sacrifice and, through a third party climate project funding provider, purchased over 600 trees every month using salary sacrifice. EMIS planted 25 new saplings for every new starter to the business, totalling 7,300 trees planted in countries badly affected by deforestation. During the year EMIS donated just under 500 electrical waste items to charities in the UK and Chennai. In the UK, unused furniture was donated to the Salvation Army, education charity Transforming Lives for Good, local charities and Ukrainian families being hosted in the UK. In support of UN SDG 12 responsible consumption and production and 13 climate action 39 EMIS Group plc | Annual report and accounts 2022 Environmental goals timeline During 2022, the temporary cabin buildings at Fulford Grange were dismantled and donated to members of the local community. EMIS continued to support its end customers’ objectives to reduce their carbon footprint providing digital alternatives to original paper-based processes. Examples include patient repeat prescription requests via Patient Access and the electronic prescription request service between GP practices and pharmacies. EMIS also utilised integrated telephony and video to enable digital consultations, reducing or eliminating patients’ need to travel. 2023 priorities The actions below advance the delivery of EMIS’s net zero and environmental strategies: • continue to implement and strengthen the environmental strategy, including progress towards the net zero commitments of the business; • supplier communications and engagement targeting top tier suppliers and upstream leased asset owners to achieve emissions data maturity and decarbonisation; • review software, data processing and reporting to improve emissions data accuracy across all scopes; and • continue to embed environmental awareness and positive behaviour change into the culture of EMIS. Environmental sustainability is an integral part of EMIS’s operations and value chain, delivered through steady, measurable improvement. Case study Reducing our environmental impact by migrating to the cloud Darren Sheavills Chief Architect At EMIS we’re actively seeking ways that we can directly contribute to our organisation’s sustainability goal to achieve net zero GHG emissions across all scopes by 2040. We’re at a very exciting phase in our evolution: designing and building the next generation of healthcare systems and modernising most of our existing systems. Much of this modernisation work includes moving our products, architecture and technology to cloud platforms and services. Sustainability of the cloud By migrating the majority of our software and data workloads into the cloud, we can make use of more efficient technologies and transform the way we work to improve sustainability. Cloud providers have a lower carbon footprint and are more energy efficient than typical on-premises alternatives because they invest in efficient power and cooling technology, operating on energy efficient server populations. Cloud computing workloads reduce impact by taking advantage of shared resources, such as networking, power, cooling and physical facilities. Migration to the cloud is a shared responsibility model for environmental sustainability, and EMIS is following architectural best practices to minimise the impact of our computing workloads by reducing the total resources required to run them. Every action we take to reduce resource usage and increase efficiency contributes to our broader sustainability goals. 2024 2026 2030 2040 Use all recyclable packaging 100% of EMIS fleet to be electric vehicles 90% reduction in Scope 1 and 2 emissions Reduce supply chain and product emissions Upgrade energy efficiency and heating and cooling systems in EMIS- owned buildings Net zero GHG emissions (all scopes) ESG report continued Streamlined Energy and Carbon Reporting (SECR) statement STRATEGIC REPORT 40 EMIS Group plc | Annual report and accounts 2022 Greenhouse gas emissions1 2022 2021 Global Global UK only emissions UK only emissions emissions (excluding UK) 2 emissions (excluding UK) Scope 1 (tCO2e)3 249 — 285 — Scope 2 (tCO2e)4 671 — 697 — Scope 3 (tCO2e) 10,010 78 9,123 60 Total Scope 1, 2 and 3 (tCO2e) 10,930 78 10,105 60 Intensity ratio (tCO2e/£m revenue) 62.3 — 60.1 — Scope 1 (kWh) 1,007,006 — 1,190,065 — Scope 2 (kWh) 3,471,868 — 3,283,624 — Scope 3 (kWh)5 174,764 386,112 76,290 283,971 Total 1, 2 and 3 (kWh) 4,653,638 386,112 4,549,979 283,971 Intensity ratio (kWh/£m revenue) 26,532 — 27,051 — 1 Figures have been rounded to the nearest whole number. 2 For both reporting years, EMIS measured the operational emissions from the Chennai office building, which are accounted for within Scope 3.8 upstream leased assets categories. 3 Scope 1 figures include updated energy consumption data from all UK sites and the 2021 data has been adjusted accordingly. 4 Scope 3 emissions are included for all relevant categories in accordance with the GHG Protocol. The categories included here are Scope 3.1, Scope 3.2, Scope 3.3, Scope 3.4, Scope 3.5, Scope 3.6, Scope 3.7, Scope 3.8, Scope 3.9 and Scope 3.12. 2021 data has been adjusted to include these additional emissions. 5 The UK-based Scope 3 energy consumption sources included here are from vehicles for which EMIS Group supplies fuel for business purposes, such as grey fleet vehicles. Transport and vehicle types for which EMIS Group does not purchase fuel, such as flights and train journeys, have not been included. The global (excluding UK) Scope 3 energy consumption sources included here are the operational energy consumption amounts from the Chennai office. EMIS measures and reports on energy and carbon data across its UK business, providing comprehensive data to assess its overall environmental impact for Scope 1 and 2 and mandatory Scope 3 emissions. Scope 1 covers direct emissions from owned or controlled sources. Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company. Scope 3 emissions include all other indirect emissions that occur in the upstream and downstream activities of EMIS Group, including emissions from the organisation’s operations in Chennai. EMIS’s 2022 SECR statement includes all Scope 1, 2 and 3 energy and carbon emissions for the financial year ended 31 December 2022. In order to compare the 2022 SECR data to prior years, EMIS has recalculated emissions for its 2021 baseline to include a full Scope 1, 2 and 3 energy and carbon inventory. EMIS is now certified as “carbon measured” through Natural Carbon Solutions for its 2021 and 2022 carbon footprints. EMIS’s 2022 SECR statement uses the UK government’s GHG conversion factors for company reporting. The report uses the metric of revenue (£m) as the intensity ratio. Please note that the waste management figures related to EMIS’s leased assets are reported by the owners and controllers of the leased assets. Emissions relating to where EMIS controls the waste contracts were included in the calculations of the total emissions figures below. 41 EMIS Group plc | Annual report and accounts 2022 2021–2022 comparison The following figures compare the difference in emissions and energy consumption across EMIS’s UK-based offices only: • Total Scope 1, 2 and 3 energy consumption for the UK increased by 2%, while total emissions increased by 8%. These increases are largely due to rising Scope 3 emissions sources. As noted in the footnotes above, the figures for 2021 have been recalculated and therefore restated. • Scope 1 (natural gas and vehicle fuels) energy consumption decreased by 15% and emissions by 13%. These reductions are a result of a reduction in natural gas consumption across UK-based offices and lower levels of business miles being completed across the 2022 reporting period. • Scope 2 electricity consumption increased by 6%; however, Scope 2 emissions decreased by 4%. This energy consumption increase is due to the phased reintroduction of employees back into the offices, whilst electric vehicle (EV) charging points installed in staff car parks have allowed employees to charge their vehicles. The decrease in carbon emissions from energy consumption is mainly due to the continual decarbonisation of the UK national grid. • Scope 3 energy consumption (from vehicles for which EMIS supplies fuel for business purposes, such as grey fleet vehicles) increased by 129% and Scope 3 emissions by 10% because of increased activity following the pandemic, largely associated with increasing levels of business travel. The inclusion of emissions from employee commuting for the 2022 SECR report has also contributed to an increase in Scope 3 emissions. Employee commuting emissions were excluded from the 2021 SECR figures as complete and reliable datasets were not available; therefore, the decision was made to exclude emissions from this category until more complete data was sourced. Energy efficiency actions undertaken during the reporting year include: • all EMIS-owned offices being now contractually supplied by 100% renewable energy; • providing employees with free access to EV charging ports at EMIS’s Leeds sites to promote low-carbon technologies; • completing a number of building enhancements including new, more efficient air conditioning units, additional passive infrared sensors to reduce energy consumption, and transitioning away from gas to alternative heating methods in communal areas; and • increasing EMIS’s fleet vehicle types to 15% electric and 47% hybrid (2021: 56% hybrid, no electric). Case study Planting trees in areas badly affected by deforestation Zeeka Simmons Group Functions Co-ordinator We know that sustainability is about providing for the needs of the present, whilst protecting the needs of the future. Global issues can feel out of our reach with many of us not knowing where to start. At EMIS one of the ways that we contribute meaningfully and positively to global environmental challenges is through our partner, Ecologi. Working with Ecologi we’re contributing funding to projects that tackle global environmental issues daily. Planting trees on behalf of our new starters Two years ago we began an employee- driven initiative to start a new Earth Day tradition of planting tree saplings via Ecologi to celebrate all the new starters welcomed to EMIS over the previous twelve months. These trees are planted in areas badly affected by deforestation and over time, as the trees grow, will contribute to increased biodiversity and the restoration of the local geography. Almost 22,000 tree saplings have been purchased on behalf of our new starters joining the business in the last three years, across a number of different projects including mangrove planting in Marotaola, Madagascar, and reforestation in Changlane, Mozambique. Our wider impact The projects we fund also contribute positively and more immediately to supporting the rebuilding of lives in the local community, for example through hiring local people to grow, plant and guard the trees to maturity. This is all made possible through funding via Ecologi. We’ve contributed funding to other projects too, such as peatland restoration and wind power projects across the globe. This again supports the local communities, for example contributing to the education of local children on climate and environmental issues. As well as the new starter initiative, UK colleagues can choose to individually contribute to Ecologi tree planting projects in the last year via salary sacrifice, and in total collectively we’ve contributed more than 36,000 tree saplings. ESG report continued ESG report continued STRATEGIC REPORT 42 EMIS Group plc | Annual report and accounts 2022 Task Force on Climate-Related Financial Disclosures (TCFD) The information below has been disclosed on a voluntary basis to outline the position of the Group with reference to the TCFD recommendations and to summarise the activities undertaken during the year in readiness for formal adoption of TCFD requirements in 2023. TCFD has developed a framework to aid the disclosure of climate-related risks and opportunities. The following climate-related disclosures have been prepared on a basis consistent with the Financial Stability Board’s TCFD requirements, supporting its goal of transparency and reporting of climate-related financial information. The below also shows how EMIS may be exposed to climate risks based on two risk categories: physical risks (arising from changing climate such as floods or storms, or due to shifts in weather patterns) and transition risks (arising during the transition to a low-carbon economy and influenced by changes in policy and regulation). Governance 1. Describe the Board’s oversight of climate-related risks and opportunities • The Board is committed to high standards of corporate governance, ensuring that strong ethical standards are maintained. EMIS’s disclosures give examples of both physical and transition risks. • EMIS created an ESG committee to oversee its sustainability strategy. It sets targets based on the priorities identified, with objectives to assess and manage climate-related risks internally. • The Group balances its corporate and sustainability strategy to ensure business success. Refer to the business responsibilities section on pages 48 to 49 and the risk management section on page 44. 2. Describe management’s role in assessing and managing climate- related risks and opportunities EMIS is accountable and has co-ordinated climate risk matters internally, which are managed by the relevant committees. Refer to the risk management section on page 44. Strategy 3. Describe the climate-related risks and opportunities the organisation has identified over the short, medium and long term Opportunities: EMIS recognises the value and importance of a good sustainability strategy and is embedding climate mitigation strategies into its culture, e.g. delivering employee training on energy consumption, waste management and reporting its carbon emissions. Risk management: EMIS has a clear idea of its ESG priorities and a dedicated ESG committee. Climate risks are identified and monitored through the existing group risk management system. EMIS has identified and analysed climate-related risks and financial impacts in the economies where it operates over different time horizons in its risk management platform. Refer to the Chair’s statement on page 35 and the environment section on pages 38 to 39. 4. Describe the impact of climate- related risks and opportunities on the organisation’s businesses, strategy and financial planning Working with suppliers, customers and partners on an ESG agenda is a priority and as a key supplier to the NHS, EMIS is supporting the NHS’s net zero plan with a commitment to net zero by 2040. EMIS undertakes scenario analysis of its office buildings. Refer to the environment section on pages 38 to 39 and the climate scenario modelling section on page 44. 5. Describe the reliance of the organisation’s strategy, taking into consideration different climate‑related scenarios, including a 2°C or lower scenario EMIS conducted climate modelling analysis in different climate scenarios such as the Paris Aligned 1.5°C (RCP 2.6) and/or 2040 Emissions Peak (RCP 4.5) and/or Business as Usual (RCP 8.5) over different time periods. Refer to the climate scenario modelling section on page 44 and the environment section on pages 38 to 39. TCFD RECOMMENDATIONS DESCRIPTION REPORT SECTION 43 EMIS Group plc | Annual report and accounts 2022 Risk management 6. Describe the organisation’s processes for identifying and assessing climate-related risk The Board has a proactive risk management policy. The risk management committee provides regular updates to the Board. The risk management system tracks audit issues, with automated workflows to ensure actions are remediated on a timely basis with supporting evidence. Refer to the business responsibilities section on pages 48 and 49. 7. Describe the organisation’s processes for managing climate‑related risks The risk management process is overseen by the risk management committee, with climate-related risks reviewed at least twice a year. There are regular internal audits to continue to assess the quality of risk management and implement areas of improvement. Refer to the business responsibilities section on pages 48 and 49 and the risk management section on page 44. 8. Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organisation’s overall risk management EMIS has identified climate-related risks internally and integrated them into its overall risk management, which is routinely reviewed by the risk management committee. This includes horizon scanning sessions with a particular focus on global risks. Refer to the business responsibilities section on pages 48 and 49 and the risk management section on page 44. Metrics and targets 9. Disclose the metrics used by the organisation to assess climate- related risks and opportunities in line with its strategy and risk management process EMIS has undertaken an in-depth review of Scope 1, 2 and 3 emissions calculations and produced a new carbon footprint report after reviewing its business and client portfolio. EMIS will report on energy and carbon data across its business, providing comprehensive data to assess its overall environmental impact for Scope 1 and 2 and mandatory Scope 3. The Group intends to include measurement of other Scope 3 emissions as part of an ongoing commitment to continual improvement. Refer to the environment section on pages 38 and 39 and the climate scenario modelling section on page 44. 10. Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 GHG emissions, and the related risks EMIS discloses Scope 1, 2 and 3 GHG emissions. Refer to the SECR section on pages 40 and 41. 11. Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets EMIS Group supports its customers’ objectives to reduce their carbon footprint and accelerate the transition to net zero. EMIS Group has a net zero plan in line with NHS sustainability charter for suppliers. Climate mitigation targets include carbon neutrality across Scopes 1 and 2 by 2030 supported by targeted emissions reductions by set dates, and net zero emissions across all scopes by 2040, with minimal reliance on offsetting. Refer to the metrics and targets section on page 44 and the environment section on pages 38 and 39. TCFD RECOMMENDATIONS DESCRIPTION REPORT SECTION The table above reflects EMIS’s alignment and provides disclosures against those metrics most relevant to the business. This index either references existing disclosures or responds directly. All reported data is as of and for the year ended 31 December 2022, unless otherwise noted. Governance Climate risk is identified and monitored by the risk management committee. EMIS is establishing effective communication processes with suppliers, clients, business partners and other stakeholders in the value and supply chains on sustainability issues. EMIS encouraged awareness of sustainability among its procurement function through training and online courses. A new procurement process has been established and a supplier code of conduct launched (accessible on the EMIS website). The risk management committee oversees EMIS’s risk management process. Sustainability risks and opportunities were shared directly with the Board in December 2022. EMIS will develop a sustainability policy to reflect its commitment to sustainability and climate risks, as addressed in the sustainability strategy and supported by a communications strategy, including external procurement communications and internal communications via an internal sustainability online hub. Strategy EMIS enhanced its internal reporting infrastructure by developing and optimising its risk management system and implementing ESG-linked KPIs to integrate climate risk for internal monitoring. EMIS carried out climate-related risk modelling analysis via an independent third party, which identified and assessed climate-related risks and potential significant impacts on EMIS Group offices. Climate modelling analysis focussed on at least two different scenarios, Paris Aligned 1.5°C (RCP 2.6) and/or 2040 Emissions Peak (RCP 4.5) and/or Business as Usual (RCP 8.5). EMIS intends to periodically assess the impact of climate risks on the likelihood, magnitude and velocity of other key enterprise risks and provide regular updates to management. STRATEGIC REPORT 44 EMIS Group plc | Annual report and accounts 2022 ESG report continued Risk management EMIS’s established risk management system measures and reports on climate-related risks. Climate-related risks are included with clear risk owners and action plans to mitigate the risks to an acceptable level. Regular updates are provided to the ESG committee and risk management committee on their progress. Horizon scanning is conducted and incorporated into the annual risk management committee agenda with a focus on global risks. EMIS incorporates climate scenario modelling analyses in its risk assessment processes including longer-term risks such as adverse weather events. EMIS has established a system for routine audits and reporting focussed on identifying issues and vulnerabilities and providing communication and collaboration opportunities. An internal audit on sustainability reporting was completed in 2022. Metrics and targets EMIS reports on Scope 1, 2 and 3 emissions across the organisation, calculated in tCO2e. It also will embed climate mitigation targets, e.g. a 90% reduction in Scopes 1 and 2 by 2030 supported by targeted emissions reductions by set dates into its supplier code of conduct to encourage key suppliers and other stakeholders to set their own climate mitigation targets. Further developments will include further sustainability strategy KPIs. This will allow EMIS to create a clear, balanced and reliable internal system for monitoring all targets and risks against the KPIs. It will track its sustainability and climate-related KPIs across its operations and value chain and identify and implement climate adaptation strategies following the climate scenario modelling output. EMIS reports on a voluntary basis into the Carbon Disclosure Project (CDP), supporting its work with the NHS. Climate scenario modelling results EMIS assessed its two Leeds-based office locations for their physical climate risk exposure over the period of 1970 to 2050, using third party climate modelling software. This considers three climate scenarios in line with the 2015 Paris Agreement which are Paris Aligned 1.5°C (RCP 2.6), 2040 Emissions Peak (RCP 4.5) and Business as Usual (RCP 8.5). The climate scenarios analyse the physical climate hazard categories of heat stress, extreme precipitation, flooding, extreme wind and drought. The result quantifies the level of climate risk across EMIS’s owned sites and provides insight into climatic risk evolution under various climate scenarios. The analysis showed the average exposure to hazard-specific risks for the owned site portfolio and indicated how average exposure changes over the short, medium, and long-term across the three different climate scenarios. By 2050, the portfolio’s exposure to drought, wind risk and heat stress is likely to be medium under the Business as Usual scenario. No asset in this portfolio was currently found to be under material risk or to be experiencing significant levels of climate hazard risk higher than medium at present. Historically, these assets would have experienced on average low levels of risk across combined hazards. Projecting future changes under a Business as Usual scenario found no notable changes in the frequency and severity of climate hazards predicted over the short, mid and long-term timescales. It is likely that there will be no assets under higher than medium combined physical risk by 2050. TCFD continued Case study Donating laptops to education in Chennai Narasimhan R Office Admin Manager Government-run schools play a vitally important role in the Indian education system. They are economical and spread uniformly across the state, unlike the privately owned schools. They support the general health and wellbeing of the students, on top of the standard curriculum. To give back to our community and add meaningful social value, EMIS donated laptops to one such school locally in Chennai, the Government Higher Secondary School, Peerkankaranai. The school is funded and run by the Department of School Education, Government of Tamil Nadu, and employs over 70 teaching and non-teaching staff. More than 1,300 children study in this school, many of whom are from families with average or below average incomes. The school is provided with some computers by the State Education Department but not enough for the number of students. We supported the School Authority by donating 20 used, good condition laptops for the school’s computer laboratory facility. In 2022 our operation team visited the school to donate the laptops. In her addressing note to the teachers and the EMIS team, headmistress Mrs M Ponnuthai expressed her gratitude for extending support to the school. It is great to know the positive impact these will be having and we look forward to contributing further to our local community. 45 EMIS Group plc | Annual report and accounts 2022 2022: continuing positive contribution to society The business has four key objectives to deliver social value to communities: • improve health and wellness outcomes for citizens and address health inequality; • deliver a positive outcome to society and the environment in every initiative; • raise awareness and educate the public on global health so they can live healthier lives; and • collaborate with customers, suppliers and partners to enable them to deliver positive social change. As a supplier to the healthcare industry and with the NHS as its largest customer, EMIS’s technological innovations, projects and software have a positive impact on UK society. At an individual level, EMIS helps patients access healthcare services quickly and conveniently. At end user level, the Group’s unswerving commitment to providing excellent technology means that clinicians have the software they need to deliver the best possible patient care. On a national level, EMIS’s collaborative work with government, academic, data and life sciences research organisations means that the business is playing a significant role in new data-led insights that improve population health on a macro scale. EMIS employees make important social contributions on an individual level too: during 2022 the business launched a programme providing UK staff with two days of paid leave per year to allow them to volunteer their time to charity work, enabling opportunities for personal fulfilment by giving back to society. EMIS’s social impact: clinicians EMIS’s purpose is to be the leading provider of innovative healthcare that improves people’s lives. Every development EMIS makes to speed up a clinical process helps the clinician to spend more time on patient care. At individual user level this means more patient engagement. On a macro level those minutes saved add up to increased efficiency of the NHS and reduced costs. An example is the data sharing between PCN hubs and GPs. PCNs are groups of GP practices that work together with other healthcare staff to provide integrated services to the local population. These services might include appointment booking and specialist consultations. With EMIS software, a structured consultation summary is now electronically copied back to the patient’s GP, rather than paper. More than 250 PCN hubs are now using this functionality, which has resulted in over one million consultations being electronically sent back to the GP, saving time and resources. The health of the UK population EMIS has long supported ethical clinical research to facilitate better patient outcomes on a national scale. EMIS co-founded QResearch in 2003, one of the world’s largest research databases of primary care records used for anonymised healthcare research. Much of this research has helped refine and improve patient care for many conditions, such as heart disease and long Covid. Delivering social value to communities EMIS works with many charities to support vulnerable populations – often at no charge to the NHS. This includes work with Sepsis UK, Macmillan and The Terrence Higgins Trust to ensure that best practice and improved care pathways are incorporated into its clinical systems. Moving into the research and life sciences market offers further opportunities to improve healthcare at scale. A 2018 paper by the National Centre for Biotechnology Information notes that only 31% of UK clinical trials meet enrolment goals. With EMIS-X Analytics, the UK life sciences industry and the NHS can more quickly find eligible patients to participate in clinical trials, speeding up this vital activity to improve UK health. Working in close collaboration with the life sciences industry can enable the entire healthcare industry to make big changes. The hepatitis C elimination programme is an example of the difference EMIS is helping to make to the UK population, working with NHS England and Merck Sharp & Dohme (MSD). The programme is working towards a shared goal of eliminating hepatitis C as a major public health issue in England. Kuldip Sembhi, national strategic partnerships programme lead, MSD, explained the difference EMIS has made to the programme: “I wanted to say a massive thank you to EMIS – the developers, testers, architects, project managers, everyone involved, including your senior team, for supporting the conception and development of the pathway module for hepatitis C. “This will benefit the hepatitis C elimination programme enormously. Your technology has enabled searches for patients with undetected hepatitis C: behind each number in the searches is a person – someone that deserves the chance to have a normal and improved life. This is why we do what we do.” Individuals For more than 20 years EMIS has provided reliable, free-of-charge, accurate, GP authored and peer-reviewed health information to the UK general public via Patient.info. The Group is continually improving its information and services for patients, offering a “digital front door” to order repeat prescriptions and book health services, including GP appointments and community pharmacy services such as flu vaccinations or medication usage reviews. EMIS is continually developing its services to offer patients even more value via its Patient Access app. During 2022 this included the release of integrated information leaflets, specific to each individual’s condition or medication, to increase understanding and help patients get in control of their condition. 2023 priorities The actions below will enable the Group to further improve NHS outcomes for individuals and address health inequality during 2023: • centre the delivery of both improved health and wellness outcomes for society and reduced impact on the environment in all innovation; • increase awareness and education for the public on global health matters; and • work in collaboration with customers, suppliers and partners to encourage positive social change. In support of UN SDG 5 gender equality STRATEGIC REPORT 46 EMIS Group plc | Annual report and accounts 2022 Our people and culture 2022: establishing EMIS’s people and culture goals and objectives EMIS is a conscientious employer and takes its responsibility of employing more than 1,500 people in the UK and India seriously. EMIS firmly believes that making positive changes within the organisation contributes to a positive ripple effect on society as a whole. EMIS is committed to ensuring that its actions, working environment and policies continue to prioritise employee wellbeing, growth and the principles of equity, diversity and inclusion. The Group has set objectives accordingly, taking into account stakeholder feedback, and will deliver these through the sustainability, employer of choice and equity, diversity and inclusion programmes: • nurture and grow EMIS’s talent so that everyone has an opportunity to develop; • leverage partnerships and community groups to enhance EMIS’s employer brand; • provide an encouraging, accessible culture that enables everyone at EMIS to do and be their best; and • ensure fair and equitable rewards, benefits and pay. Communication and engagement EMIS culture is built on close collaboration. EMIS’s objective is to create an inspirational place to work with increased employee engagement. The principal metric of success is the employee engagement score, measured by Glint surveys. The H2 2022 engagement score was 71, an increase of one point from H1 2022. With a high employee response rate of 89%, EMIS is confident this is representative of the organisation. The global Glint benchmark reduced by one point in this timeframe so we closed the gap on this from six to four points: something the business sees as a reasonable starting point in the first year of its three-year employer of choice programme. The employee engagement score has been calculated using a new employee feedback measurement platform, Glint, introduced during 2022. This is a new measurement methodology and therefore the score is not comparable to previous years. Colleagues are actively encouraged to share their views, good and bad, through regular employee surveys and the employee forums. Feedback is frequently shared with the Board, the leadership team and through team meetings in the spirit of openly discussing challenges and working to resolve them together. Weekly and monthly internal communications keep colleagues up to date on the business. The Group’s Yammer site has an informal, friendly feel where colleagues are actively encouraged to share their good news and participate in wellbeing initiatives. The regular “Ask Andy” series has continued, with colleagues invited to ask questions to the Chief Executive Officer and the senior team, improving employee engagement, connection to the business purpose and senior leadership visibility. In addition, all business areas have regular team meetings and arrange social activities. The November 2022 Glint survey shows a positive result for EMIS’s internal communications: a strong 62/100 for the statement “there is a good flow of communication between leadership, departments and teams.” This is equal to the global external benchmark and marks a great first year of Glint measurement at EMIS. Equity, diversity and inclusion EMIS remains committed to an equity, diversity and inclusion agenda that influences every part of the employee cycle, including recruitment and induction, ongoing personal development and two-way employee engagement. The Group set goals to have at least 33% female representation on the Board by the end of 2023 and 40% in the senior employee group by the end of 2025. As at 31 December 2022, EMIS’s Board remained at 29% female (2021: 29%) with succession planning on hold due to the Proposed Acquisition and a revised target date to achieve its 33% goal set for end 2024. The senior employee group was 30% female (2021: 32%). During 2022, EMIS conducted detailed analysis on diversity across the Group in a number of different areas, including the overall employee journey and at critical points throughout, as well as undertaking a review of Glint survey responses through an equity, diversity and inclusion lens. With an initial focus on ethnicity and gender, in support of UN SDG 5 gender equality, EMIS benchmarked itself against diversity in the industry and UK workforce through a review of currently published data and census information. Through this process, it has identified opportunities for improvement relating to the gender and ethnicity balance of its workforce, which, whilst reflective of the industry as a whole, has allowed EMIS to recognise its role as a catalyst for industry and social change. These opportunities have been embedded into its developing equity, diversity and inclusion strategy which will launch fully in 2023. The goal is to provide an inclusive, equitable culture and welcome space for everyone to be their whole, authentic selves and reach their full potential. EMIS continued to apply equitable and inclusive approaches to further develop the recruitment and selection process through balanced applications, a review of role requirements and gender-decoded job adverts. EMIS’s employment policies were analysed and updated through an inclusivity lens during 2022 to ensure accessibility. In December 2022, EMIS launched unconscious bias training as a voluntary online education module, which achieved a 94% completion rate of those in receipt. In 2023, EMIS will focus on the development of career opportunities, ensuring equitable and inclusive routes to progression, succession and development. The equity, diversity and inclusion employee-led forum met five times in 2022 and discussed topics such as an annual events calendar to both educate and celebrate diversity. Events marked in 2022 included International Women’s Day, Ramadan and Eid al-Fitr, Pride Month, Black History Month and Diwali. EMIS published data on its gender pay gap for 2021, showing a mean gap of 7.6% (a 1.2% increase from the previous year) for the Group. In 2022, the business continued its focus on reducing the gender pay gap by comparing salaries in pay reviews and continuing to review initiatives that support female employees, including enhancements to both parental and emergency dependants leave policies to help parents balance work and care. Gender pay gap data for 2022 has recently been calculated showing a slight increase in the mean gap from the previous year to 8.8% as a result of a higher proportion of male employees in senior positions. This data was published in April 2023 in line with the guidelines. Work is continuing over time to address the gender pay gap with continued focus on comparing salaries at all levels where there is a gap, and seeking to ensure that EMIS is an attractive employer to all, regardless of gender or background. ESG report continued In support of SDG 5 gender equality Creating a supportive, inclusive environment where everybody can thrive: doing and being their best. 47 EMIS Group plc | Annual report and accounts 2022 The business undertook the second annual review of its ethnicity pay gap and this showed a mean gap of 16.2%, a 1.3% reduction on the previous year (2021: 17.5%). There is continued focus on understanding the detail behind the gap and reducing it in 2023 and beyond. Employer of choice The employer of choice programme, formalised in 2021, is EMIS’s Group- wide strategy to ensure it attracts and retains the best talent, with a culture of high-performing, happy colleagues who are rewarded well. Six key workstreams drive activity and improvement to the business; these are: great leadership, improving processes, raising brand awareness, culture, rewards and benefits and work environment. Achievements from the programme include EMIS’s first Group‑wide Expo in the UK, with an Expo planned in Chennai, to improve communication and engagement, simplifying key internal processes and enhancements to the collaboration hubs to enable connection and team working and fostering a superb culture. The results of the programme in year one can already be seen in the Glint survey feedback: EMIS is above the global benchmark in a number of areas that represent the business’ strong focus on becoming a great place to work: work-life balance (+5 points), benefits (+1 point), work environment (+2 points) equal opportunities (+4 points), feedback (+2 points) and action taking (+2 points), indicating we are listening and providing benefits that our workforce appreciates. Wellbeing The leadership team is encouraged to make discussions on wellbeing a regular feature of team meetings and in staff one-to-ones. Employees benefit from a wide range of free health and wellbeing resources from a third party provider, and support from the Mental Health First Aider programme. The EMIS Heroes recognition programme continues to be widely used by employees and managers to show recognition to their colleagues to say thank you. During 2022 employees sent over 3,000 thank you e-cards to their colleagues, with a quarterly and annual Group-wide recognition initiative rewarding nominated employees. Employee benefits for work-life balance EMIS’s benefits support work-life balance – employee feedback tells us this is a key priority. EMIS’s benefits aim to offer value to all employees, accounting for different lifestyles, family circumstances and cultures, providing plenty of flexibility and choice. EMIS is a mainly homeworking business across the UK and India, providing employees with considerable flexibility of working location. Employees can flex their working hours (appropriate to role) to accommodate personal commitments and interests. They can also apply to work up to four weeks abroad each year. Flexible bank holidays and holiday carry over allow employees to take their leave when it best suits them, for example if certain holidays don’t resonate, such as Christmas or Easter. We offer emergency dependants leave (UK), happiness leave (Chennai) and extended flexible paternity leave and increased full pay maternity leave to help new parents balance work and care (UK and Chennai). Employee benefits tailored to each global location One of EMIS’s strengths is the dual location in both the UK and Chennai, bringing together global talent and expertise. To ensure all employees receive benefits that are meaningful and relevant to them, the following initiatives, some of which were introduced during 2022, are tailored specifically to the cultural and legislative differences between the workforce in the UK and India. UK EMIS’s employee assistance programme offers physical and mental health support and guidance on financial wellbeing to help staff manage both work and life stress. The business offers a healthcare cash plan to all employees, and private healthcare to employees at level five and above. A third party provider is engaged to help employees with guidance on financial matters, especially important when cost of living matters are front of mind. The Share Incentive Plan (SIP) encourages tax-advantaged employee ownership of the Group’s shares and is offered to all UK employees with over six months’ service. Employees continued to benefit from increased Company contributions to the SIP during 2022: for every two shares bought EMIS contributed an additional share. In April 2022, as recognition of contribution to the Group’s success in the last financial year, the Group offered a free award of shares, which was taken up by all 1,016 eligible UK employees. In 2022, 93.2% of UK employees were actively contributing to a pension scheme (2021: 94.8%). New employees are auto-enrolled into the Group scheme. Over the last eight years EMIS has consistently increased pension contributions year on year. By April 2022, standard pension contributions had been uplifted to 11% (5% employee and 6% employer). Whilst EMIS remains committed to increasing pensions overall and to harmonising pensions between employee grades over time, during 2023, the Group has decided to pause on any further increases in employer contributions due to exceptional wider economic circumstances. UK employees benefited from a £200 flexible benefits allowance to contribute towards individual benefit selections, providing additional choice. India Employees in India benefit from free unlimited GP consultations for both themselves and their families. EMIS’s medical insurance programme covers the employee, their spouse and up to four children, including hospitalisation insurance coverage. Many employees in Chennai expressed a preference to return to the office once lockdown restrictions eased, and to support this EMIS provided a return to office allowance to support travel and subsistence for the first three months. Many colleagues moved away from Chennai during Covid-19 so the business provided a relocation settlement to help them move closer to the office if they wished to become office based again. 2023 priorities The actions below will take the business to the next stage on its continual journey to become a great place to work: • launch a revised equity, diversity and inclusion strategy, including continued developments in the areas of accessibility and growth; • review the structure and focus of the equity, diversity and inclusion employee forum; and • continue to progress the Group’s employer of choice programme. STRATEGIC REPORT 48 EMIS Group plc | Annual report and accounts 2022 2022: continuing a strong focus on business governance “Responsible” is one of EMIS’s four values. The business’ governance practices are underpinned by four objectives: • ensure the highest standards of compliance across the business; • drive accountability within our value chain; • robustly monitor progress and actions on sustainability issues; and • ensure clinical safety and data security is at the heart of everything the Group does. Good governance is instrumental to how EMIS operates, whether this is clinical safety of EMIS products, data governance to ensure patient records are secure or corporate governance to ensure that the Group operates effectively. Good governance requires effective leadership, and having the right culture and robust systems and processes in place so everyone knows what to do and how to go about it in the right way. Please refer to the corporate governance statement on pages 53 to 58 for further detail on how the Group operates. Equal opportunities EMIS strives to build an inclusive culture that encourages, supports and celebrates the diverse voices of its employees. The Group is committed to ensuring that its employees and prospective employees are treated fairly and equitably. EMIS is focussed on providing a working environment that operates on equality of opportunity and freedom from harassment or unlawful discrimination on the grounds of race, sex, pregnancy and maternity, marital or civil partnership status, gender reassignment, disability, religion or beliefs, age, or sexual orientation; EMIS’s dignity at work policy sets out this commitment. All employees are treated fairly and equally. The Group treats applications for employment from disabled persons equally to those of other applicants with regard to their ability and experience and the requirements of the job. Where existing employees become disabled, appropriate efforts are made to provide them with continuing suitable work within the Group and to provide retraining if necessary. Further information on EMIS’s equity, diversity and inclusion strategy is available on pages 46 to 47. ESG committee The committee provides a governance framework for the implementation and oversight of ESG priorities and goals. It has 13 members from across the business and is led by the Chief Executive Officer of EMIS Health and Enterprise, assisted by the Company Secretary. The committee updates the Board to inform its regular discussions on ESG matters. The Board will continue to monitor progress during the forthcoming year. Governance is an important part of ensuring EMIS is on track to meet its environmental goals. With the new Sustainability Manager in place, working closely with the risk management committee, a number of sustainability governance processes were put in place during 2022. This includes creating a regular schedule of internal auditing on sustainability, as well as reporting on sustainability risks. During 2022 an audit of the sustainability legislation and reporting forum and framework took place. The forum meets on a quarterly basis to review progress and monitor any changes in sustainability reporting and compliance. Clinical governance Clinical safety is EMIS Group’s number one priority. The Group Chief Medical Officer and a network of experienced working clinicians and Clinical Safety Officers have overall responsibility for clinical safety at EMIS. They work across the organisation and input into development, support and product management processes to ensure clinical safety is embedded in every part of the creation and delivery of healthcare technology. The 91-strong clinical team includes clinicians from a wide range of settings, from primary care to A&E to community pharmacy, to bring real-life clinical experience into the culture of the organisation and educate the rest of the business on the reality of front line healthcare. The team ensures that clinical governance is built into all new software developments by design, right from the very beginning. It is a core part of EMIS culture that everyone has responsibility for clinical governance. The business has an open communication policy when it comes to sharing and escalating concerns. Employees are empowered and encouraged to take ownership of EMIS’s high standards of clinical governance at every level of the organisation. The Group’s regulatory compliance team ensures that all software solutions are compliant with relevant directives pertaining to medical devices, enabling EMIS to safely bring innovative technology to the market such as algorithms and artificial intelligence (AI). Data governance The Group has a responsibility to maintain the highest data governance standards to securely look after the data it holds. EMIS ensures that its data governance processes and policies are kept front of mind for all employees through regular Company updates and internal communications. EMIS’s data governance policy and set of overarching golden rules mandate that anyone processing any personal data (whether patient, customer, consumer or employee) must have relevant approval before they can proceed. Mandatory governance training is issued to all employees and a management dashboard ensures that training is completed. Employees are empowered to know exactly what they should be doing, with the right checks and balances in place, to drive the business forwards within the governance framework. The Group’s ISO 20001 accreditation provides external validation to customers that EMIS’s processes and policies meet international standards. Cyber security Cyber security is a top priority to keep EMIS’s systems and data secure. The Group has deployed new security and monitoring tools in response to the fast evolving cyber threat landscape and has upskilled employees by raising security awareness and promoting good security hygiene. The Group will continue to invest in cyber defences in order to keep pace with evolving threats and will adjust the security strategy and plans accordingly, aligned to the business strategy. Our responsibilities as a business ESG report continued 49 EMIS Group plc | Annual report and accounts 2022 Governance and risk management EMIS Group has strong and established governance processes in place, overseen at an executive level by the Chief Financial Officer. The Group programme management office provides governance of all key initiatives, to ensure that EMIS is investing in the right strategic programmes and projects and is delivering them as efficiently and effectively as possible. The operational executive team is a cross‑functional senior management group to ensure the business meets its KPIs and delivers its key objectives. The risk management committee proactively manages and mitigates risk across the business, with regular meetings and an action driven approach to reducing risk and maximising opportunities. More information on how EMIS Group mitigates risk in the areas of data and clinical security and the role of the risk management committee can be found on pages 32 to 33 and page 28, respectively. Details on EMIS Group’s corporate governance and compliance with the Code can be found on pages 52 to 58. The role of the ESG committee in relation to sustainability risks and information on the Group’s approach to climate-related risk management in accordance with the Task Force on Climate‑Related Financial Disclosures can be found on pages 42 to 44. 2023 priorities The actions below will ensure the Group continues to uphold its commitment to high standards of governance during 2023: • continue to develop the procurement and contracting process in support of the sustainability strategy; • introduce a sustainability policy; • develop regular reporting and monitoring on sustainability issues and strategic progress; • continue to ensure the highest standards of compliance; and • continue to ensure clinical safety and data security are at the heart of all initiatives. The strategic report on pages 1 to 49 is signed on behalf of the Board. Andy Thorburn Chief Executive Officer 25 May 2023 29 29+7171+C Female: 29% Male: 71% Gender diversity Board 32 32+6868+C Female: 30% Male: 70% Senior leadership 35 35+6565+C Female: 37% Male: 63% 25 25+7575+C Female: 25% Male: 75% GXT All employees Strong and ethical governance practices are integral to EMIS’s long‑term sustainable value creation. Keeping data secure: playing our part Lucy Wilkins Security Analyst It’s inherent in EMIS’s culture and values for every individual employee to take precautions to protect the data we process every day. Along with clinical safety, protecting our data is the cornerstone of our business. When keeping data secure, prevention is better than cure, so we train all employees on how to follow information governance regulations to protect our data. We take our guidance from central government and NHS policy, including The Caldicott Guardian Principles and What Good Looks Like Framework. The Caldicott Principles ensure that data is shared for patient care while maintaining patient confidentiality. These principles provide another layer of protection for data on top of our other information governance regulations, like GDPR. What Good Looks Like sets out a framework for best practice in data governance. We share guidance to all employees on how and when to share data and how to escalate any queries or concerns, encouraging an open culture that emphasises the importance of asking questions. This empowers us all to be data guardians at EMIS. GOVERNANCE 50 EMIS Group plc | Annual report and accounts 2022 Board of Directors Patrick De Smedt Non-executive Chair APPOINTED January 2020 BOARD COMMITTEES R N SKILLS AND EXPERIENCE International business experience including a diverse portfolio of main board-level appointments in public and private equity-backed companies varying in size up to multi-billion pound turnover. Entire executive career spent in the software sector, primarily with Microsoft, across a range of largely general management roles throughout Europe. Experience in manufacturing, construction, recruitment and financial services sectors. Expertise in driving innovation and growth, bringing focus to customer centricity and development of successful go-to-market strategies. EXTERNAL APPOINTMENTS CURRENT Senior independent director, PageGroup plc. Non-executive director and chair, Nasstar Holdings Limited. Non-executive director and chair, Bytes Technology Group plc. PREVIOUS Chair of Microsoft Europe, Middle East and Africa, vice president of Microsoft Western Europe, general manager (founder) of Microsoft Benelux, non-executive director of Kodak Alaris Holdings Ltd, non-executive director and chair of the remuneration committee of Victrex plc, senior independent director and chair of the remuneration committee of Morgan Sindall Group plc, senior independent director and chair of the remuneration committee of Anite plc and non-executive interim chair of KCOM Group plc. Andy Thorburn Chief Executive Officer APPOINTED May 2017 BOARD COMMITTEES None SKILLS AND EXPERIENCE Over 20 years’ experience in the software industry in the UK and internationally. Ability to drive significant growth in revenues and profitability for companies through organic growth as well as mergers and acquisitions. Track record in creating value in software and communications industries. Over 30 years’ experience in senior management and executive positions. EXTERNAL APPOINTMENTS CURRENT None. PREVIOUS Group chief operating officer of Digicel Group, chief executive officer of Digicel Caribbean and Central America, chief executive officer of Digicel Jamaica, chief executive officer/president roles at Intec Telecom Systems plc, Chronicle Solutions Ltd and a number of Benchmark Capital Portfolio companies (including Kalido Inc. and Orchestria Ltd) and a managing director within BT Group. Peter Southby Chief Financial Officer APPOINTED October 2012 BOARD COMMITTEES None SKILLS AND EXPERIENCE Over 30 years’ experience in finance, mainly in a public company environment, with over half of this at board level. Strong track record in corporate transactions, including fundraising, acquisitions and disposals. Detailed knowledge of strategy across multiple industry sectors, with a focus on support services. Institute of Chartered Accountants in England and Wales (Fellow). EXTERNAL APPOINTMENTS CURRENT None. PREVIOUS Finance director at ENER-G plc and Augean plc and senior financial positions at White Young Green plc and Leeds United plc having trained with Arthur Andersen as audit manager. Kevin Boyd Senior Independent Non-executive Director APPOINTED May 2014 BOARD COMMITTEES R N A SKILLS AND EXPERIENCE Considerable senior management and listed company experience. Real-time financial experience and software systems knowledge. Experience of running complex business and corporate transactions. Institute of Chartered Accountants in England and Wales (Fellow). Institution of Engineering and Technology (Fellow). EXTERNAL APPOINTMENTS CURRENT Non-executive chair, Genuit Group plc. Non-executive director and audit committee chair, Bodycote plc. PREVIOUS Group chief financial officer, Spirax- Sarco Engineering plc, Oxford Instruments plc and Radstone Technology plc. GOVERNANCE 51 EMIS Group plc | Annual report and accounts 2022 Jen Byrne Independent Non-executive Director APPOINTED May 2019 BOARD COMMITTEES R N A SKILLS AND EXPERIENCE Extensive commercial experience in the global software sector. Strong track record in using technical insight to deliver challenging and technically complex engineering programmes. In-depth knowledge of finance and engineering. A strategic thinker with experience of companies in a growth phase. Strong leadership skills. EXTERNAL APPOINTMENTS CURRENT Chief operating officer, G-Research. Non-executive director, SES S.A. PREVIOUS 23 years at the Lockheed Martin Corporation. Latterly as vice president, Space and Missiles Systems. JP Rangaswami Independent Non‑executive Director APPOINTED March 2021 BOARD COMMITTEES R N A SKILLS AND EXPERIENCE Insightful, independent-minded and a creative technology leader. Highly experienced in the data analytics sector from both operational and strategic data- focussed, technology roles. Specialist experience in data governance, standards, best practices and techniques. Strong understanding of the challenges of working in a regulated environment. EXTERNAL APPOINTMENTS CURRENT Non-executive director, Allfunds Bank SAU. Non-executive director, Allfunds Group plc. Non-executive director, DMGT Limited. Non-executive director, Admiral Group plc. Non-executive director, National Bank of Greece. Trustee, Cumberland Lodge. Trustee, Web Science Trust. PREVIOUS Chief data officer and group head of innovation, Deutsche Bank; chief scientist, Salesforce.com; chief scientist, managing director and chief information officer, BT Group; head of alternative market models and global chief information officer, Dresdner Kleinwort; and various roles with multinational hardware, software, services and consulting organisations. Denise Collis Independent Non‑executive Director APPOINTED October 2021 BOARD COMMITTEES R N A SKILLS AND EXPERIENCE Breadth and depth of international, senior executive and non- executive director experience across various sectors. Expertise in all aspects of human resources, including people strategy, leadership, organisation development, talent management, recruitment, retention and reward. Strong strategic perspective. Passionate advocate of the criticality of the people agenda in driving commercial success. EXTERNAL APPOINTMENTS CURRENT Non-executive director, senior independent director and chair of the remuneration committee, SThree plc. Non-executive director and chair of the remuneration committee, Smiths News plc. Chair of the remuneration and people committee, British Heart Foundation. Fellow, Chartered Institute of Personnel and Development. PREVIOUS Chief people officer, Bupa; group HR director, 3i Group plc; partner and head of HR for the UK, Middle East and Africa, EY LLP; various HR director roles across the financial and business services industries; vice chair, international advisory board, Leeds University Business School; and advisory board member, Exeter University Business School. Executive Non‑executive Board of Directors key A Audit committee N Nomination committee R Remuneration committee Chair of committee Committee membership GOVERNANCE 52 EMIS Group plc | Annual report and accounts 2022 Chair’s introduction to governance Dear Shareholder On behalf of the Board, I present the EMIS Group plc corporate governance report for the year ended 31 December 2022. 2022 was a busy year for the Group and the Board. The Proposed Acquisition was a key area of focus and required significant investment of time and attention from senior management and the Directors. I am pleased, therefore, that the Group continued to make progress in reviewing and advancing its governance framework during this demanding period. As the Group operates within the healthcare sector it is vital that it operates in the “right way”, with a focus on clinical safety and data security. This must be embedded in the Group’s culture, reflected in its strategy and underpinned by prudent and effective controls. The Board is responsible for ensuring that these are all in place and operational, in order to ensure the long-term sustainable success of the Group. Good governance and a strong governance framework are essential to this. This requires internal controls, practices, policies and systems, so that management are able to take appropriate levels of risk anchored by a culture of openness, ethics and values throughout the business. It is not just a question of how the Board itself operates but also of how the Board provides leadership and sets expectations of management. The Board is conscious that, to ensure its own effectiveness, the Board must comprise a diverse group of individuals, each contributing different experiences, skills and backgrounds, in order to succeed in providing independent entrepreneurial leadership. This is also reflected in the wider Group’s priorities for ESG, diversity and inclusion, on which there is more elsewhere in this report. As an AIM-quoted company we have voluntarily chosen to apply the UK Corporate Governance Code 2018 (the Code) as this represents best practice. This governance section (including the corporate governance statement, the Audit committee report, the nomination committee report and the Directors’ remuneration report) provides more detail on our governance framework, including the extent to which we have achieved compliance with the Code. Our statement of compliance can be found on our website at www.emisgroupplc.com/investors/corporate-governance. Patrick De Smedt Chair 25 May 2023 COMPLIANCE STATEMENT This corporate governance statement has been prepared in accordance with the principles of the Code. During the year, the Group was compliant with the Code save that it did not fully comply with Provisions 5, 21, 38 or 41. Details of the extent of this non-compliance, the reasons for it and the steps put in place or to be adopted to address this are set out overleaf in “Compliance with the Code”. 1.Board leadership and Company purpose • Led by a strong and experienced Chair • Alignment of purpose, strategy and values with Group culture • Effective engagement with stakeholders Read more on pages 55 to 56. 2. Division of responsibilities • Majority of independent Directors • Regular dialogue between Board and management • Policies, processes, information, time and resources for effective leadership in place Read more on pages 56 to 57. Good governance and a strong framework 53 EMIS Group plc | Annual report and accounts 2022 Introduction This statement explains the key features of the Group’s governance structure and compliance with the Code. The Code is published by the Financial Reporting Council (FRC) and is available at www.frc.org.uk. Compliance with the Code The Group is committed to achieving and maintaining the highest standards of corporate governance. During 2022, the Group has applied the Principles and complied with the Provisions of the Code, except for: • Provision 5 – in the annual report for 2021, the Group announced that it intended to revise its employee engagement mechanisms in 2022. This review envisaged achieving workforce engagement through a formal schedule of meetings and feedback sessions between Non-executive Directors and employees from across the Group commencing in 2022. These proposals were affected by the Proposed Acquisition timetable and the meetings and sessions did not take place as planned. The Group has nevertheless actively engaged with its workforce, including hosting an all UK staff Expo event (further details below under the heading “Workforce Engagement”). • Provision 21 – no formal annual evaluation of the Board, its committees, Chair and individual Directors was undertaken during 2022. A rigorous review of performance will take place in 2023. Please see further details below under the heading “Board and committee effectiveness”. • Provision 38 – the Group has worked on a phased approach to the alignment of employer pension contributions (including payments in lieu) for Executive Directors with those of the wider workforce. As disclosed in the annual report for 2021, throughout 2022 these contributions for Executive Directors have been capped at 15% of 2020 base salaries, compared with rates for UK staff of between 6% and 10% dependent on seniority, while contributions for any new Executive Directors will be aligned to those for the UK workforce from joining. For 2023, employer pension contribution rates for Executive Directors are aligned with the UK workforce. • Provision 41 – for the reasons set out above in relation to Provision 5, the opportunity to engage with employees on alignment of executive remuneration with wider company pay policy has been constrained. Overall, employee engagement is high and pay policy and implementation are discussed with employees in detail and well understood. Further details on the application of the principles of corporate governance and the Group’s compliance with the Code are set out in the following sections of this Corporate governance statement. 2022 MEMBERSHIP AND BOARD ATTENDANCE The attendance record for Board members during the year ended 31 December 2022 is set out below. There were seven scheduled and six ad hoc meetings held during 2022. Number of meetings Executive Directors Andy Thorburn Peter Southby Non-executive Directors Patrick De Smedt (Chair) Kevin Boyd Jen Byrne JP Rangaswami Denise Collis Andy McKeon1 Attended Not attended 1 Andy McKeon retired from the Board on 28 February 2022. 3. Composition, succession and evaluation • Board with wide experience and relevant skills • Regular review of succession plans Read more on page 58. 4. Audit, risk and internal control • Oversight of internal audits and risk reviews • Formal and transparent policies and procedures in place • Annual review and challenge of the principal and emerging risks in the context of the strategy Read more on page 58. 5. Remuneration • Remuneration policy consistent with the Code and supporting strategy • Executive remuneration aligned to the Group’s purpose and values • Alignment of outcomes with interests of shareholders Read more on page 58. Corporate governance statement GOVERNANCE 54 EMIS Group plc | Annual report and accounts 2022 Corporate governance statement continued STANDING AGENDA ITEMS At each meeting comprehensive Board packs are provided and the following standing items are discussed: • strategy; • financial results and KPIs; • sales pipeline and forecasts; • management accounts and commentary; • reports from the Chief Executive Officer on operational matters and the Chief Financial Officer on financial matters; • mergers and acquisitions; • regular presentations from members of the Group executive team (GXT); • progress reports on major projects; • analysts’ forecasts; • Board committee updates; • investor relations engagement; • legal, governance and regulatory matters; and • implementation of actions agreed at previous meetings. Financial • Financial results announcements, presentations, report and accounts and market updates (annual and half year). • Banking facilities. • 2023 Group budget. • The Group’s viability statement and capital allocation policy, including dividends. Strategic • Review and approval of the Proposed Acquisition. • Review, debate and challenge of the corporate strategy and plan. • ESG matters. • Review and consideration given to M&A targets. Governance • Approval of the reappointment of Jen Byrne. • Approval of the appointment of Kevin Boyd as Senior Independent Director. • Employee engagement and culture. • Risk management and internal controls. • Investor engagement. Operational • Presentations on product roadmap, information security, EMIS-X, service performance and customer service satisfaction strategy. • Group operating model. • Management information and KPIs. • Operational efficiency, including service level reporting. • Group restructuring. KEY TOPICS CONSIDERED BY THE BOARD IN 2022 55 EMIS Group plc | Annual report and accounts 2022 A topical Board calendar is prepared on an annual basis with senior leadership executives regularly invited to present an update on their areas of the business. This is highly valuable in providing further detail to support strategic decisions. In addition, the Board meets on an ad hoc basis as necessary to consider specific issues, such as potential corporate activity, supported by detailed Board papers circulated in advance analysing relevant aspects of the topic under discussion. Materials for ad hoc meetings are circulated as far in advance as is practical. Stakeholder engagement The Board recognises its responsibility to maintain open dialogue with all stakeholders so that it can take into consideration their needs and concerns when it discusses matters and makes decisions. A strong and positive relationship between EMIS and its external stakeholders is an important part of the Group’s culture. Given the business in which the Group operates, our stakeholders include not only shareholders, suppliers and customers and our employees, but also the broader NHS and the patients who are treated using the solutions which we develop. Relations with shareholders Communication between the Group and its shareholders is an essential element of a sound governance framework. The Chief Executive Officer and Chief Financial Officer are the main day-to-day point of engagement with shareholders and prospective investors. During the year, formal programmes of meetings with analysts and institutional shareholders took place, supplemented by ad hoc meetings and calls at other times. Feedback from these meetings, and regular market updates prepared by the Group’s broker, are presented to the Board to ensure the Directors have a good understanding of shareholders’ views. The Chair and the Senior Independent Director are also available separately to shareholders to discuss strategy and governance issues. Feedback from any such communications is provided to the Board at the next scheduled meeting. Specific engagement with a broad range of shareholders took place in 2022, facilitated by the Group’s broker, in relation to the Proposed Acquisition. The Group has a dedicated investors section on its website, www.emisgroupplc.com/investors, together with a wide range of information on the Group’s activities, including all regulatory announcements. Board leadership and Company purpose Role of the Board The Board’s principal role is to promote the long-term sustainable success of the Group by providing effective leadership and establishing and aligning the Group’s purpose, strategy, values and culture. It is responsible for generating shareholder value by developing the overall strategy and supporting the development of the direction of the Group, as well as ensuring that the Group contributes to wider society. The Board is also responsible for overseeing the Group’s external financial and other reporting and for ensuring that appropriate risk management and internal control systems are implemented and maintained. These responsibilities are largely exercised through the audit committee, which reports on its activities on pages 59 to 63. The business model on pages 8 to 9 explains the basis on which the Group generates and preserves value over the longer term. The strategy of the Group and its achievements in 2022 are outlined on pages 14 to 15. The Board recognises the importance of acting with integrity to promote the desired culture across the Group. For more information on the Group’s culture see pages 46 to 47. Board operation The Board meets as often as necessary to discharge its duties, with particular reference to the formal schedule of matters reserved for the Board for decision. The number of Board meetings held during 2022, together with the Directors’ attendance records, is set out on page 53. Details on the number of committee meetings held during the year, together with the Directors’ attendance records, can be found in the committee reports on pages 59, 64 and 66. In terms of Board meeting locations, the Board has adopted a hybrid approach taking protective measures and environmental issues into account. Our people are at the core of our business and employee engagement remains a priority for the Board as outlined on page 46. The Directors have access to the advice and services of the Company Secretary, Christine Benson, who is responsible for ensuring that the Board and its committees’ procedures and applicable rules and regulations are met. The Directors all have access to the Group’s key advisers. If required in the performance of their duties, Directors may take independent professional advice at the Company’s expense. Appropriate insurance cover is in place in respect of legal action against the Directors. The Group has adopted and maintained a share dealing code for Directors and employees in accordance with the Market Abuse Regulation. Board and committee papers are circulated one week in advance of scheduled meetings to enable the Board to review and consider the materials provided. Directors are expected to attend all meetings of the Board and its committees and the AGM, but if unable to do so the Chair will encourage their input in advance of the meeting and the Chair will provide a verbal update following the meeting to complement the minutes. There is ongoing contact between the Chair, Executive Directors and Non- executive Directors between Board meetings. 42+ 42+2929+29+29+C TENURE (BOARD) 0–3 years: 3 4–6 years: 2 7+ years: 2 GOVERNANCE 56 EMIS Group plc | Annual report and accounts 2022 Corporate governance statement continued The Annual General Meeting (AGM) will be held at 11.30 am on 29 June 2023 at the offices of Pinsent Masons, 1 Park Row, Leeds LS1 5AB. The notice of the AGM is available on the Group’s website and sets out the business of the meeting and an explanatory note. In line with good governance, voting on all resolutions at this year’s AGM will be conducted by way of a poll. Workforce engagement As noted above, our people are at the core of our business. The employee forums continue to be an important channel of communication, with a focus on listening to and learning from employee feedback. The forums also provide a sounding board for new ideas and initiatives, ensuring that the business hears and acts on employee insights and viewpoints. In addition, a Group Expo event took place in early 2023 (covering UK staff, with a similar event due to take place in India soon), giving staff an opportunity to learn about the Group and to meet and engage on a scale not seen before across the Group. The Board received regular and comprehensive updates on employee engagement levels, the outcome of engagement surveys and Group culture during 2022. Further information on workforce engagement can be found in the ESG report on page 46 and more detail on how the Group has engaged with its stakeholders can be found in the stakeholder engagement section on pages 10 to 13. Whistleblowing A confidential whistleblowing service is in place where employees can (by phone or email) raise concerns about anything related to EMIS (including breaches of any policies, risks of harm or failure to meet any applicable standards) to an independent organisation. Reports on the use of the service, any significant concerns that have been received, details of investigations carried out and any actions arising as a result are reported to the audit committee on a regular basis. No material issues were raised during the year. Conflicts of interest Directors have a legal duty to avoid conflicts of interest. Prior to appointment, conflicts of interest are disclosed and assessed to ensure that there are no matters which would prevent that person from taking on the appointment. If any potential conflict arises subsequently, the Articles of Association permit the Board to review and (where appropriate) authorise the conflict, subject to such controls or protocols as the Board may determine. In situations where a potential conflict arises, the Director concerned will not be permitted to remain present in any meeting or discussion concerning that conflict, and all material in relation to that matter will be restricted, including Board papers and minutes. Division of responsibilities Board structure Biographies of each Director are provided on pages 50 and 51. Their respective Board and committee responsibilities are outlined below and in the committee reports. There were no changes to the Board’s composition during 2022. Appointments to the Board are led by the nomination committee. Further information on succession planning can be found in the nomination committee’s report on pages 64 to 65. The Board delegates certain responsibilities to the three principal Board committees: • the audit committee; • the remuneration committee; and • the nomination committee. 71 71+2929+C BOARD GENDER Male: 71% Female: 29% These responsibilities are set out in formal terms of reference for each committee, which are available on the Group’s website, www.emisgroupplc.com/investors/corporate-governance, and which are reviewed annually. The Chair of each committee reports to the Board in relation to the committee’s activities and recommendations. Members of the Board who are not members of individual committees may be invited to attend meetings of those committees at the discretion of the respective committee’s Chair; however, they are not permitted to vote in respect of committee business. Chair The roles of the Chair and the Chief Executive Officer are separate and defined in writing. This provides a clear division of responsibilities between the running of the Board and the executive responsibility for running the business. The key responsibilities of the Chair, the Chief Executive Officer and Non-executive Directors are set out below: Patrick De Smedt, as Chair, is responsible for the leadership and effectiveness of the Board. The Chair’s responsibilities include: • chairing the Board, the nomination committee and shareholder meetings (including the AGM); • providing leadership of the Board and ensuring the effectiveness of all aspects of the Board’s role; • offering challenge to the Executive Directors and working closely with the Chief Executive Officer on key strategic decisions; • maintaining a dialogue with major shareholders on governance and other strategic matters, as appropriate; • setting the Board agenda and ensuring all Directors have the opportunity to maximise their contribution to the Board by encouraging open and honest debate and constructive challenge of the Executive Directors; and • undertaking the annual evaluation of the Board and the Directors and building an effective Board. On his appointment, Patrick De Smedt met the Code’s requirement for independence. There have been no significant changes to his other commitments during the year which could impact his ability to perform his duties for the Group. Chief Executive Officer The Chief Executive Officer, Andy Thorburn, is responsible for the implementation of the approved strategic and financial objectives of the Group. To assist in this, the Chief Executive Officer leads the GXT, which consists of the Chief Financial Officer, the Group Chief Operating Officer, the Chief Executive Officer of EMIS Health and Enterprise, the Group HR Director, the Group Chief Medical and Product Officer, the Group Chief Technology Officer and the Group Business Development Director. The GXT has weekly calls with a focus on cross-Group integration and operational performance. 57 EMIS Group plc | Annual report and accounts 2022 Division of responsibilities continued Chief Executive Officer continued Beneath the GXT is the operational executive team (OXT) and during 2022 members of the team met regularly to discuss and collaborate on important operational matters arising. This included status updates on priority projects and product enhancements, material sales and delivery issues and opportunities, and key people changes. In addition, monthly business reviews were held to discuss performance across all key areas of the Group ensuring everyone was up to date and able to prioritise effectively based on a thorough understanding of the interdependencies and risks between areas. This open and collaborative forum contributed to the Group’s success in 2022. The Chief Executive Officer’s responsibilities include: • day-to-day running of the business, accountable to the Board for the Group’s financial and operational performance; • developing and reviewing the Group strategy; • with the Chief Financial Officer, maintaining close contact with the UK government, shareholders and major customers (including the NHS); • with the Chief Financial Officer, approving the detailed budgets; • chairing the GXT to direct and co-ordinate the management of the Group’s business generally; • monitoring the performance of senior managers; and • monitoring the Group’s principal risks. The Board receives regular updates and reports from the senior management committees set up to oversee specific aspects of the business. This includes the risk management committee which reports into the audit committee and the ESG committee. There is more on the work of these committees on pages 59 and 48 respectively. Senior Independent Director The Senior Independent Director acts as a sounding board for the other Directors and conducts the Chair’s annual evaluation. He is also available to Directors and shareholders should a situation arise where it is necessary for concerns to be referred to the Board other than through the Chair or the Chief Executive Officer. Andy McKeon was the Senior Independent Director during 2021 but retired from the Board on 28 February 2022, having served nine years. Kevin Boyd took on the role of Senior Independent Director upon Andy McKeon’s retirement. The Board notes that Kevin Boyd was appointed as a Non-executive Director in May 2014. As such in the ordinary course he would retire from the Board during 2023. However, given the Proposed Acquisition and the anticipated timetable for conclusion of that process, the Board determined that it would be in the best interests of the Group (and its stakeholders) for Kevin Boyd to continue to serve as the Senior Independent Director, the Chair of the audit committee and a Non-executive Director for a limited further period. If, for whatever reason, the Proposed Acquisition does not complete (either at all or in a relatively timely manner) then the Board will revisit this decision accordingly. Non-executive Directors The Non-executive Directors provide independent, constructive challenge and insight to the executive team forming an integral part of the Board’s decision-making process together with the monitoring of management and business performance. 14+ 14+2828+58+58+C BOARD – EXECUTIVE/ NON‑EXECUTIVE MEMBERSHIP Chair – Non-executive: 1 Executive Directors: 2 Non-executive Directors: 4 The Non-executive Directors play a key role in developing and reviewing proposals on strategy, actively participating in the annual strategy forum. They strengthen governance through leading and participating in the Board committees, providing a wide range of experience and independence. This aids the Board in developing a broader understanding and in evaluating the implications, risks and consequences of decisions. Independence Patrick De Smedt, Kevin Boyd, Jen Byrne, JP Rangaswami and Denise Collis were considered by the Board to be independent at the time of their appointments. Each Non-executive Director is considered to be independent as to character and judgement and to be free of relationships and other circumstances that might impact their independence. Following the AGM in 2023, after which Kevin Boyd has agreed to continue to perform his non-executive roles as Senior Independent Director and Chair of the audit committee, Kevin Boyd will have served on the Board for a period of nine years. The Board has reviewed Kevin Boyd’s independence in light of Provision 10 of the Code and determined that Kevin Boyd remains independent notwithstanding his length of tenure. The factors which the Board considers relevant in reaching this conclusion include: that his roles as Chair of the audit committee and Senior Independent Director were first assumed in May 2019 and February 2022 respectively; that individuals holding key positions in management, including the Chief Executive Officer and the Global Director of Risk and Internal Audit, as well as the lead partner of the external auditor, have changed within the period of Kevin Boyd’s appointment; the independence in attitude, thought and relations which Kevin Boyd exhibits in all his dealings with the Company and management; his extensive, ongoing and up to date experience as an independent director and as chair of the audit committee of other listed companies in the UK; and his being well versed in the standards of behaviour, scepticism and discipline required to maintain independence. As stated above, the period of Kevin Boyd’s continued appointment is expected to be limited in time. Appointments of Non-executive Directors are for specific terms (initially for three years) and are subject to statutory provisions relating to the removal of a Director. Time commitments The amount of time that Non-executive Directors are expected to commit to discharge their duties is agreed on an individual basis at the time of appointment and reviewed periodically thereafter. The time commitment agreed takes into account whether the appointee is the Chair or a member of a Board committee and whether the Director has any external executive responsibilities. Typically, this equates to circa two days per month for a Non-executive Director and four days per month for the Chair. As part of the Chair’s annual review of Directors’ performance it was confirmed that each of the Non-executive Directors continues to allocate sufficient time to discharge responsibilities effectively and did so throughout the year. GOVERNANCE 58 EMIS Group plc | Annual report and accounts 2022 Composition, succession and evaluation Nomination committee and diversity The nomination committee is responsible for leading the Board appointments process and for considering the size, structure and composition of the Board. Full details of the work of the committee are set out in the nomination committee report on pages 64 to 65. The Board is satisfied that the size of the Board and its committees and the balance of Executive and Non-executive members is such that no individual or small group of individuals can unduly influence its decisions. The Board is made up of a majority of independent Non-executive Directors. As at the date of this report, the Board comprised the Chair, four independent Non-executive Directors and two Executive Directors who collectively possess an appropriate balance of expertise appropriate to lead the Group’s business. The Non-executive Directors have a broad range of UK and international business knowledge and experience, as well as specific skills in the areas of healthcare, digital technology, finance, corporate transactions and risk management. The Executive Directors do not hold any external directorships. The Board fully endorses and supports the Group’s commitment to diversity and inclusion, as evidenced by the adoption of targets for gender diversity at Board and senior management levels. There is more on this and on the Group’s diversity and inclusion priorities and initiatives on pages 46 to 47. Annual re-election of Directors Directors are subject to election or re-election by shareholders at each AGM. The Board considers that all the Directors continue to be effective and demonstrate an appropriate commitment to their roles. Board and committee effectiveness The Board has extensive operational experience and many years of detailed knowledge of the healthcare sector, both in the UK and overseas. The Board also benefits from significant financial, transactional, risk management and public company expertise. When considering Board appointments, a wide variety of factors are taken into account, including the balance of skills, experience, independence, knowledge of the Group and diversity, including gender. No formal internal Board evaluation was undertaken during 2022 as the expectation of the Board was that the Proposed Acquisition would complete during the course of 2022. However, as the Proposed Acquisition has been further delayed (and may or may not complete) an evaluation of the Board, its committees and individual Director performance will now be undertaken during 2023. Notwithstanding this the Board is nevertheless confident it and each of its committees meets its regulatory requirements and discharges its duties appropriately. Discussions at the Board and each committee are open and constructive, and members are encouraged to express their views in an independent fashion. Appointment and induction The process for the appointment of new Directors is rigorous and transparent. All new Directors undergo a comprehensive induction and development programme which is designed to help Directors to contribute effectively to the Board as quickly as possible. Further information on appointments and induction is contained in the report of the nomination committee on pages 64 to 65. Audit, risk and internal control Audit, risk and internal control are addressed separately in the principal risks and uncertainties on pages 28 to 33 and in the Report of the audit committee on pages 59 to 63. Remuneration Remuneration is addressed separately in the report of the remuneration committee and the Directors’ remuneration report on pages 66 to 81. Christine Benson Company Secretary 25 May 2023 Corporate governance statement continued 59 EMIS Group plc | Annual report and accounts 2022 Report of the audit committee Oversight of the financial reporting process Dear Shareholder I am pleased to present the report of the audit committee for the financial year ended 31 December 2022. The audit committee provided oversight of the financial reporting process to ensure that the information provided to the shareholders is fair, balanced and understandable and allows accurate assessment of the Group’s position, performance, business model and strategy. During the year the committee also continued to oversee the risk management and internal control systems and was satisfied that the controls over the accuracy and consistency of information presented are robust. 2022 MEMBERSHIP AND ATTENDANCE Number of meetings Kevin Boyd (Chair) Jen Byrne JP Rangaswami Denise Collis Attended Not attended • Other regular attendees by invitation are the Chair of the Board, the Chief Executive Officer, the Chief Financial Officer, the Deputy Chief Financial Officer, the Director of Group Risk and Internal Audit, the Head of Internal Audit, representatives from KPMG (external auditor) and the Company Secretary. • The committee meets at least four times a year; it met four times in 2022. • All committee members were considered independent upon their appointment. • Kevin Boyd is considered to have recent and relevant financial experience. • The committee as a whole has significant experience relevant to the industry sector the Group operates in. • The committee Chair provided a verbal update to the Board following each committee meeting. KEY RESPONSIBILITIES The committee reviews its terms of reference annually. These describe the committee’s responsibilities in detail and they are available on the Group’s website. The committee assists the Board in meeting its responsibilities relating to financial reporting and internal control and risk management. It provides oversight and ensures that formal and transparent arrangements are in place in the following areas: • financial reporting, which includes responsibility for reviewing the year-end and half year financial reports; • oversight of the external audit process and management of the relationship with the Group’s external auditor; • risk management and related controls and compliance; • internal audit, including monitoring of the Group’s internal audit function, its processes and findings; and • provision of whistleblowing facilities and prevention of bribery and other types of fraud and corruption. The committee acknowledges and embraces its role in protecting the interests of shareholders. It also considers the interests of other stakeholders and it is committed to monitoring the integrity of the Group’s reporting. GOVERNANCE 60 EMIS Group plc | Annual report and accounts 2022 Report of the audit committee continued Financial reporting • Reviewed the full year results including the annual report and accounts, the preliminary results announcement and the report from the external auditor. • Reviewed the half year results statement. • Provided assurance to the Board that the annual report and accounts is fair, balanced and understandable. • Reviewed the going concern assumption when considering the half year and final results statement and also considered longer-term viability. • Considered the appropriateness of accounting policies, critical accounting judgements and key sources of estimation uncertainty. External audit • Reviewed and approved the 2022 audit plan and strategy including fees. • Agreed the appropriateness of remuneration in respect of audit and non- audit services. Internal audit • Reviewed the key findings from internal audit reports conducted during 2022 and management’s progress in addressing internal audit findings. • Monitored progress against the 2022 approved internal audit plan. • Reviewed and approved the scope and areas of focus for the internal audit plan covering 2023. • Reviewed and approved additional resource to further strengthen the internal audit team. Risk and internal control • Monitored and assessed the Group’s risk management process. • Approved the Group’s risk appetite. • Monitored developments in the Group’s risk management processes by reviewing outputs from the three weekly risk management committee meetings and reviewing risk KPIs. • Assisted the Board in its assessment of the Group’s principal risks and emerging risks and its review of the effectiveness of risk management and internal control processes. • Reviewed the results of the Group’s control and risk self-assessment process. • Ensured information security updates were reviewed regularly by the Board. • Received regular progress reports from senior management in respect of key internal projects, including the Group’s ERP replacement project. • Monitored and reviewed the effectiveness of the Group’s internal audit and finance functions. Other matters • Reviewed the Group’s whistleblowing arrangements, confirming that they are operating effectively. • Monitored training and policy acceptance results for key governance policies, including anti-bribery and corruption. • Reviewed and approved the Group’s whistleblowing, anti-bribery and corruption, code of ethics and anti-tax evasion policies. • Reviewed and approved the Group’s treasury policy. • Reviewed the committee’s terms of reference. • Reviewed the outputs from the committee evaluation. KEY ACTIVITIES IN 2022 61 EMIS Group plc | Annual report and accounts 2022 Composition and governance The Board evaluates committee membership on an annual basis. Biographical details of the Directors are set out on pages 50 and 51. The Board believes that the current members have sufficient skills, qualifications and experience to discharge their duties in accordance with the committee’s terms of reference and that collectively as a committee the members have an appropriately deep understanding of the sector within which the Group operates. All Board members attend each committee meeting. The committee meets with KPMG at least twice a year without executive management present, to discuss matters relating to its remit and any issues relating to the audit. I also meet regularly with the Chief Financial Officer, the Director of Risk and Internal Audit and the lead KPMG partner outside the formal meetings to ensure that any areas for discussion are dealt with on a timely basis. Committee evaluation The audit committee undertakes an annual evaluation of its performance and effectiveness. As the Proposed Acquisition was expected to be completed in 2022, no evaluation took place in 2022. Following the rescheduling of the Proposed Acquisition process, a review of the committee’s performance and effectiveness will be carried out in 2023. Financial reporting The committee reviewed the full year results including the annual report and accounts, the preliminary results announcement and the report from the external auditor. In reviewing the statements and determining whether they were fair, balanced and understandable, the committee considered the work and recommendations of management as well as the report from the external auditor. The committee also reviewed the half year results statement. The committee considered the appropriateness of accounting policies, critical accounting judgements and sources of estimation uncertainty. To do this, the committee reviewed information provided by the Chief Financial Officer and reports from the external auditor setting out its views on the accounting treatments and judgements in the 2022 financial statements. This review included consideration of the appropriateness of the presentation of certain costs as exceptional items, through an assessment of both the types of cost and the nature of those costs, and how they relate to the exceptional programmes running during the year. In preparing the 2022 financial statements, there is judgement relating to the presentation of certain costs as exceptional, and other judgements involving estimations, that could have a material effect on the amounts recognised in the financial statements. These judgements and estimations are detailed below. Key accounting judgements and sources of estimation uncertainty In applying the Group’s accounting policies, various estimates and judgements are made in arriving at the amounts recognised in the financial statements. An other source of estimation uncertainty in the year relates to the carrying value of assets in respect of goodwill within the Pinnacle and Healthcare Gateway CGUs. The carrying value of goodwill is determined with reference to forecast future cashflows which may be sensitive to certain key assumptions, each requiring estimation. The committee has reviewed the future forecasts, including specific consideration of the key assumptions and is satisfied that these are reasonable, that the carrying value of the Group’s goodwill is supportable, and that the disclosures of the sensitivities are sufficiently detailed. During the year the Group completed three business combinations (see note 31) which, in the process of applying IFRS 3, require the estimation of the fair values of identifiable assets acquired and the liabilities assumed as part of the transaction. These fair values have been established in accordance with IFRS 13. The estimated fair values of the computer software assets acquired involved estimation uncertainty in finalising the purchase price allocation as they are sensitive to the forecast future cash flows generated from these assets and the discount rate used in establishing the present value. The goodwill recognised in respect of these business combinations is also sensitive to these assumptions, as any increase or decrease in the estimated fair value of acquired computer software results in a corresponding decrease or increase in the value of goodwill recognised. A judgement (not involving estimation uncertainty) has also been made in applying the recognition criteria of IFRS 3 as part of the assessment of the intangible assets to be recognised as part of the business combinations. Goodwill is also sensitive to the estimated fair value of the previously held 50% interest in Healthcare Gateway Limited (see note 15). This has been estimated based on the total consideration paid by the Group for the remaining 50% interest, less an assumed control premium of 30%. The estimated control premium is another source of estimation uncertainty as the value of goodwill recognised is sensitive to changes in this assumption. Neither of the above were considered major sources of estimation uncertainty in accordance with IAS 1.125. Further details are set out in note 2 to the accounts. The classification of certain costs as exceptional is regarded as a key accounting judgement (see note 32). The committee challenged the key judgements made and has determined the classification of exceptional costs as fair, balanced and understandable. The main rationale used in assessing the classification is to ensure costs are directly attributable to the material non-recurring projects running in the year, so as not to distort the underlying performance of the Group. Further consideration was given to staff costs, that whilst largely relating to roles already in the business that would have comprised part of the overall staff costs in the comparative period, relate to time diverted to exceptional projects from other value-adding activities. Going concern The committee reviewed papers from management on going concern assumptions when considering half year and final results statements and on long-term viability when considering the final results statement. Internal financial projections and the results of stress testing the financial models were taken into account. As part of its review, the committee took into consideration updates provided on the Group’s principal and emerging risks. With respect to the Proposed Acquisition of the Group, the committee considered statements in the announcement made pursuant to rule 2.7 of the Takeover Code, regarding the potential acquirer’s intention to ensure continuity of the Group’s existing business with no material changes to its existing operations for at least a period of twelve months from completion of the Acquisition and concluded that the completion of the Acquisition would not impact the appropriateness of the going concern basis of preparation. External audit In accordance with its terms of reference, the committee annually reviews the audit requirements of the Group and the effectiveness and independence of the incumbent external auditor prior to any decision to reappoint. The committee meets regularly with the external auditor, both with and without management present. The committee is responsible for ensuring that the independence of the Group’s external auditor is not compromised or put at risk of compromise. The committee reviews, challenges and approves both the annual audit plan and output from the audit process as part of assessing the auditor’s expertise and performance. GOVERNANCE 62 EMIS Group plc | Annual report and accounts 2022 Report of the audit committee continued External auditor effectiveness review The auditor is considered to be effective in the performance of its duties. The committee typically uses an annual questionnaire-based approach to gather the opinions of Directors and senior management, with findings (and areas for improvement) shared with the auditor. The external auditor regularly provides information relevant to assuring us about its own independence, objectivity and compliance with regulatory and ethical standards. Provision of non-audit services by the external auditor The audit committee monitors the nature and extent of non-audit services provided by the external auditor. The committee is consulted prior to engagement of the external auditor for non-audit work and formally approves all non-audit services. Consideration is given to any perceived threat to independence prior to the procurement of non-audit services from the external auditor, with other external advisers used where appropriate. A summary of fees paid to KPMG for audit and non-audit services during the year ended 31 December 2022 is provided in note 6 to the financial statements on page 106. Fees for non-audit services continue to be considerably below the 70% cap of the average audit fees for the preceding three-year period as required by regulated EU audit legislation. Internal audit EMIS Group operates an in-house internal audit function, co-sourced with an external audit services provider, which objectively reviews the Group’s internal control processes in accordance with the Audit Charter. The Charter was reviewed and approved by the committee in 2018 and it remained in place and relevant in 2022. The committee previously approved a two-year risk-based audit plan to run from 2022 through to 2023. The plan was formulated utilising input from the Board and committee members, the Group’s external auditor, internal audit co-source partner and using output from the risk management process. The plan remains flexible and includes time for ad hoc investigations and other high-risk assurance work as it arises and as agreed by the committee. The audit plan for 2023 includes key risk areas such as cyber security, business continuity planning and media crisis management, change management, clinical safety, cloud security, data governance and ESG focus areas along with a range of financial processes such as banking procurement and month-end reporting at all locations across the Group including India. Internal audit’s resources are reviewed regularly, and the current combination of internal resources (which increased during the year) and a co-sourced internal audit agreement was determined to be appropriate and sufficient to obtain adequate assurance over the Group’s internal controls and key risks. The co-source arrangement ensures enhanced audit coverage of technical and specialist areas, such as clinical safety, data governance and cyber security where required. During 2020, the Group introduced a control and risk self-assessment process to further embed awareness and responsibility for control and risk within the business. This annual assessment covers key business areas across the Group including functions such as finance, human resources, clinical safety, software development and support operations. The results of the third annual assessment were reported to the committee in December 2022. This showed improvement across the Group and a plan of action for continuous improvement was approved, supported by internal audit reviews continuing in 2023. The Director of Group Risk and Internal Audit maintains independence through direct access to me, without the need to refer to executive management. He attends audit committee meetings by invitation and regularly reports to the committee on internal audit, risk management and corporate governance matters. The committee and I periodically meet with him without management being present. Risk management The committee is responsible for monitoring and developing the effectiveness of risk management and internal control systems on behalf of the Board. The Group has a Board-approved risk management policy and operates a structured risk management process with oversight from the risk management committee, which meets regularly and is chaired by the Chief Financial Officer. The committee reviews action plans and output from risk management committee meetings. During the year, the committee continued to monitor the Group’s risk appetite, which remains unchanged. The committee reviewed the Group’s principal risks to ensure they are being adequately captured and reported to the Board and that the risk disclosures in the annual report and accounts are appropriate. The risk management committee is the recognised forum for identifying, assessing and reporting on any significant emerging risks facing the Group. Emerging risks are defined as particularly uncertain and difficult to quantify but have the potential to become more significant over time. They usually have longer expected timelines than principal risks, or other risks detailed in the risk registers, and the potential impact can increase quickly. For full details of the risk management process, principal risks and risk appetite statements of the Group, see pages 28 to 33. Internal control effectiveness On behalf of the Board, the committee reviews the Group’s internal control arrangements through policies and seeking assurance on the design and effective operation of internal controls. Such arrangements guide and direct the activities of the Group to support delivery of its strategic, financial, operational and other objectives and to safeguard shareholders’ investment and the Group’s assets. The Board recognises that a system of internal control reduces, but cannot eliminate, the likelihood and impact of poor judgement in decision making, human error, deliberate circumvention of control processes by employees and others, management override of controls and the occurrence of unforeseeable circumstances. The Board sets policies and seeks and obtains on an ongoing basis, both directly and through the audit committee, assurance regarding the existence and operation of appropriate internal controls to mitigate key strategic, financial, operational, compliance and reputational risks. Any significant matters raised in reports from management, the external auditor or the Director of Group Risk and Internal Audit are escalated to the committee and subsequently the Board, both of which monitor the progress of remedial actions. The committee is satisfied that appropriate actions have been taken to remedy any significant weaknesses or failures identified as a result of these or other review processes and has reported such to the Board. The key components of the Group’s overall control frameworks, all of which effectively remained in place throughout 2022 and up to the date of approval of this report, are set out below: • delegated limits of authority in place; • an appropriate finance function across the Group with suitably qualified and experienced professionals; • a comprehensive weekly and monthly financial and operational performance reporting system which covers, amongst other things, operating results, cash flow, balance sheet information, forecasts and comparisons against budgets; • letters of representation signed by all senior management and senior Group finance officers in respect of key risks, internal controls, business relationships and financial controls for the financial year under review; 63 EMIS Group plc | Annual report and accounts 2022 • a control and risk self-assessment process, which provides a mechanism for management to assess compliance with key controls across various business areas and against which Group internal audit independently validates management’s assessment; • appropriate project management frameworks and programme governance arrangements to manage change and validate key investment decisions; • a comprehensive suite of policies and procedures along with monitoring of mandatory training and policy acknowledgement across key areas such as ethics, data governance, IT security, whistleblowing and anti- bribery and corruption; • regular meetings of the risk management committee to review and monitor risk and mitigating controls across the Group; and • regular updates to the Board from management on property, insurance, litigation, human resources, corporate social responsibility and health and safety matters. Segregation of duties, authorisation limits and other key internal controls are designed into both system-based and manual processes. These arrangements are reviewed periodically by management, internal quality assurance functions and internal audit to ensure they remain appropriate. The Group has extensive internal quality assurance processes in critical areas of the business and there are functions within the Group that provide assurance and advice covering specialist areas, such as information security and clinical safety. In addition, the Group’s businesses hold seven ISO certifications against the following five standards: ISO 27001: Information Security, ISO 9001: Quality, ISO 20000: Service Management, ISO 14001: Environmental and ISO 22301: Business Continuity. A single management system covers all five standards and five of the seven certifications. Throughout 2022, the Group maintained the ISO certifications both in the UK and India. The Group continues to review and make improvements to the implementation of these standards. In addition, the Group also maintained the Cyber Essentials Plus certification during 2022. Other matters The programme to define, create and embed Group-wide policies in key areas continued throughout 2022 and a number of these are available on the Group’s website. The Group whistleblowing procedures include a confidential reporting hotline operated by an external, independent whistleblowing service provider. The policy and the reporting hotline continue to be internally promoted and all employees were required to acknowledge that they have read and understood the policy and procedures in place during the year. The results of these along with all other mandatory training and policy acknowledgement have been reviewed by the committee regularly. The committee’s action plan for 2023 Looking ahead to 2023, the committee’s focus will remain on the key audit and assurance areas of the business, and on its oversight of financial and other regulatory requirements. The action plan for 2023 will focus on: • reviewing and making recommendations in relation to the statutory, preliminary and half year financial results; • overseeing key financial policies and practices; • assessing the effectiveness of the internal audit function and monitoring its annual plan; • reviewing corporate governance policy and procedure including the whistleblowing and anti-bribery and corruption policies and procedures; • undertaking a thorough review of the annual report and accounts and ensuring that the narrative messages are consistent and accurately reflect the financial statements and that the information as a whole is fair, balanced and understandable; • assessing the appropriateness and effectiveness of the risk management process, including overseeing management letters of representation and control and risk self-assessment; and • continuing to develop the Group’s integrated assurance and internal control models. Kevin Boyd Chair of the audit committee 25 May 2023 GOVERNANCE 64 EMIS Group plc | Annual report and accounts 2022 Report of the nomination committee A robust, sustainable and diverse Board Dear Shareholder I am pleased to present our report for the year ended 31 December 2022, which summarises our membership and activities during the year. Board composition and succession planning The committee is responsible for succession planning and it continues its focus on Board composition, including a review of the skills and experience needed to ensure a robust and sustainable leadership model for the Board, its committees and the wider management team. The committee plays a vital role in ensuring the effectiveness of the Board and its ability to deliver long-term success for the business, including having the appropriate balance of skills, experience and knowledge on the Board to both reflect the changing needs of the business and anticipate and prepare for the future. 2022 MEMBERSHIP AND ATTENDANCE Number of meetings Patrick De Smedt (Chair) Kevin Boyd Jen Byrne JP Rangaswami Denise Collis Attended Not attended • Other regular attendees by invitation are the Chief Executive Officer, Chief Financial Officer and Company Secretary. • The committee meets at least twice a year; it met twice in 2022. • All committee members were considered independent upon their appointment. • The committee Chair provided a verbal update to the Board following each committee meeting. • Non-executive Directors are appointed by a letter of appointment and details of their terms and those of the Executive Directors are set out in the Directors’ remuneration report. KEY RESPONSIBILITIES The committee’s responsibilities are set out in its terms of reference, which are reviewed annually. The terms of reference can be found on the Group’s website at www.emisgroupplc.com. The committee is responsible for: • ensuring that the balance of Directors on the Board remains appropriate as the Group develops to ensure that the business can compete effectively in the marketplace, keeping the composition of the Board (and succession to it) under review; • identifying and nominating candidates to fill Board vacancies as and when they arise; • evaluation of the balance of skills, knowledge, experience and diversity of the Board to ensure the optimum mix; and • consideration of the succession planning for directors and senior managers to ensure that there is a pipeline of high- calibre candidates and that succession is managed smoothly. 65 EMIS Group plc | Annual report and accounts 2022 Succession planning • Review of succession plans for Executive Directors, GXT and critical positions, including the talent pipeline for appointment to the Board. Board and committee composition • Review of Board and committee composition and in particular the skills and experience required for new Non-executive Directors. • Recommended the reappointment of Jen Byrne as a Non-executive Director. • Recommended the appointment of Kevin Boyd as Senior Independent Director. Governance • Reviewed the committee’s terms of reference. • Reviewed the time commitment required for Non-executive Directors. KEY ACTIVITIES IN 2022 Non-executive Director appointment and retirement Having reviewed the balance of skills and pipeline of the Board, and in light of the Proposed Acquisition and the anticipated timetable for that process, it was agreed that the composition of the Board and its remit and scope were sufficient and that it was maintaining a suitable pipeline of candidates in the event that a change was required. As noted in the 2021 annual report and accounts Kevin Boyd took on the role of Senior Independent Director on Andy McKeon’s retirement. In the ordinary course Kevin Boyd would have also retired from the Board in 2023 having served nine years. In light of the Proposed Acquisition the Board determined that it would be in the best interests of the Group (and its stakeholders) for Mr Boyd to continue to serve as a both the Senior Independent Director and a Non-executive Director for a limited further period. Diversity The committee recognises the importance of a diverse Board and is mindful of the issue of Board diversity in its succession plans. It also acknowledges the importance of ensuring that the selection of Directors and, in a wider context, employees throughout the Group should be based upon a range of factors including skills, experience, qualifications, background and values. Accordingly, all vacancies are filled considering these wider factors and are not based to a disproportionate extent on any one factor such as gender or ethnicity. Diversity of the Board remains a key consideration for the committee. In line with the FTSE Women Leaders Review (previously the Hampton‑Alexander Review), our aim remains to have at least 33% female representation on the Board. In light of the delay to the Proposed Acquisition, the date to achieve this goal has been extended to the end of 2024. Diversity remains a key factor in determining appropriate nominations both for the Board and the Group as a whole, as it helps to promote creativity, innovation, debate, understanding and ultimately better overall decision making. Director induction process Following the appointment of any new Director, a full, formal and customised induction to the Group is delivered. On appointment, the Company Secretary provides information on the Group’s business, including: • Board and relevant committee minutes and Board papers from at least the last six months; • key policies, procedures and governance information about the Group, including the whistleblowing policy, anti-bribery and corruption policy, code of ethics and standards of business policy and share dealing code; • analysis of the Company’s key shareholders and share capital; • guidance for Directors on their legal and regulatory responsibilities in an AIM-quoted company; • guidance on corporate governance and Board effectiveness; and • relevant information about the healthcare technology market. As part of the induction process, the new Director: • attends business briefings with the Chief Executive Officer and the Chief Financial Officer; • attends meetings with other members of the GXT; • attends meetings with individuals from around the Group to gain a better understanding of the business and its culture; and • visits all principal UK sites when appropriate to do so. Board evaluation The nomination committee typically undertakes an annual evaluation of its performance and effectiveness. However, no formal internal evaluation was undertaken during 2022 (as the expectation of the nomination committee was that the Proposed Acquisition of the Group would complete during the course of 2022). However, as the Proposed Acquisition has been further delayed (and may or may not complete) an evaluation will now be undertaken during 2023. Notwithstanding this the nomination committee is nevertheless confident it remains an effective body. Patrick De Smedt Chair of the nomination committee 25 May 2023 Reflecting our strategy Report of the remuneration committee Dear Shareholder On behalf of the Board, I am pleased to present the Directors’ remuneration report for the year ended 31 December 2022. It includes my letter, the approved 2022 remuneration policy and the annual report on remuneration, showing how our current policy was applied during the year, outcomes for our Executive Directors and our intentions for 2023. I am also pleased to report that, at our 2022 AGM, the advisory vote on our Remuneration report received 93.55% support, which reinforces our view that our pay policy and its application continue to reflect our business strategy, with remuneration payments that are strongly linked to performance. The Directors’ remuneration report will be presented at the AGM on 29 June 2023 by way of an advisory vote. Corporate performance It has been a good year for EMIS Group with revenue and adjusted operating profit increasing in line with expectations for 2022, against a backdrop of the additional focus of management on the Proposed Acquisition of EMIS by Bordeaux UK Holdings II Limited (Bidco). 2022 MEMBERSHIP AND ATTENDANCE Number of meetings Denise Collis Patrick De Smedt Kevin Boyd Jen Byrne JP Rangaswami Andy McKeon1 Attended Not attended 1 Andy McKeon retired from the Board on 28 February 2022. • Other regular attendees at committee meetings by invitation include the Chief Executive Officer, Chief Financial Officer, Group HR Director and Company Secretary. • Representatives from Mercer Limited, EMIS Group’s independent remuneration adviser, attend on invitation. • The committee meets at least twice a year. It met three times in 2022. • All committee members were considered independent upon their appointment. KEY RESPONSIBILITIES The committee is responsible for: • oversight of overall remuneration policy issues for the Group, including gender pay reporting and adherence to legal obligations such as those relating to the National Living and Minimum Wage; • determining the policy for Executive Director remuneration and setting remuneration for the Chair of the Board, Executive Directors and senior management; • determining the policy for, and scope of, pension and benefits arrangements for each Executive Director and senior management; • approving the design of, and determining targets for, any performance-related pay schemes operated by the Group and approving the total annual payments made under such schemes; • reviewing the design of all share incentive plans for approval by the Board and shareholders and determining each year whether awards will be made and, if so, the overall amount of such awards, the individual awards to Executive Directors and other senior executives and the performance targets to be used; • reviewing and noting annually the remuneration arrangements, policies and trends across the Group; and • reviewing annually the committee’s terms of reference. GOVERNANCE 66 EMIS Group plc | Annual report and accounts 2022 As shareholders are aware, EMIS and Bidco announced on 17 June 2022 that they had reached agreement on the terms of a recommended cash offer by Bidco to acquire the whole of EMIS’s issued and to be issued ordinary share capital. The Proposed Acquisition was expected to complete in the first part of 2023. Following reference of the Proposed Acquisition for a Phase 2 investigation by the CMA, announced in March 2023, and the decision of EMIS and Bidco to proceed with the investigation, the long-stop date for the Proposed Acquisition has now been extended to June 2024. The Proposed Acquisition and, specifically, its potential impact on our workforce and the remuneration structures required to motivate and retain them through an elongated period of uncertainty have been the subject of detailed consideration by the committee throughout the second half of 2022 and 2023 to date. The lack of clarity over the timing of the Proposed Acquisition has resulted in some delay to the Group’s usual timetable for long- and short-term incentive plans. More detail is provided later in the report. The committee has taken overall Group performance, including the experience of shareholders and other stakeholders, into consideration when determining remuneration matters for 2022 and 2023. Remuneration for 2022 Executive Directors were eligible to receive a bonus weighted towards the level of Group adjusted operating profit achieved. Performance targets also included other financial and strategic measures. Performance exceeded target and the remuneration committee therefore approved the payment of bonuses of 119% of salary to each of Andy Thorburn and Peter Southby (being 79.3% of the maximum opportunity). In 2022, the Group granted Long-Term Incentive Plan (LTIP) awards to support and incentivise effective implementation of our published strategy. The structure, amounts and performance targets for these awards were detailed in last year’s Directors’ remuneration report. Details of the LTIP awards that vested in 2022 (with a performance period ending 31 December 2021), and the levels of vesting, were as described in my letter to shareholders and in last year’s Directors’ remuneration report. The committee has determined that the performance conditions of the special four-year (2019-2022) LTIP awards made in June 2019 were partially met, which for participants still in employment with the Group at the appropriate time will result in a vesting of 25.4% of their total award on the fourth anniversary of grant, followed by a holding period ending on the fifth anniversary of grant. The committee has also determined that the performance conditions of the three-year LTIP (2020-2022) awards made in April 2020 were partially met, resulting in the vesting of 60.4% of the total award in May 2023, followed by a holding period ending on the fifth anniversary of grant. Further information on the LTIP awards where performance was measured to the end of 2022, resulting in vesting in 2023, is detailed on pages 78 and 79. As in 2021, pension contributions for the Executive Directors remained capped through calculation by reference to their 2020 base salary. In 2023, employer pension contributions for Executive Directors as a percentage of salary became aligned to the wider UK workforce, being currently 6% of salary. Further details about the variable pay awards are set out in the annual report on remuneration on pages 76 to 81. Discretion The committee has considered whether the formula-driven payouts under the incentive plans and resultant total remuneration for Directors are appropriate, looking at the broader context within which performance has been delivered. Following this review, the committee has not deemed it necessary to make use of its discretionary powers for 2022 outturns. Implementation of policy for 2023 Within the context of the cost-of-living crisis, Andy Thorburn and Peter Southby made a request to the committee not to be included in the annual review of salaries for 2023, in order to allow a total focus on the broader workforce. The committee was supportive of their stance and acceded to their request. Pension contributions for the Executive Directors will continue to be aligned to the wider UK workforce as noted above. Due to uncertainty regarding the timing of the Proposed Acquisition, annual bonus targets and LTIP awards for 2023 are expected to be set and made later in 2023. The Remuneration Policy allows for a single LTIP award of up to 200% of salary. To date, the applied level has been an award of 150% of salary for the Chief Executive Officer and 100% for the Chief Financial Officer. Following a review of the responsibilities and complexity of the Chief Financial Officer role within, but not limited to, the context of the current Proposed Acquisition of EMIS Group by Bidco and taking into account the strength of his contribution to the Company, it has been agreed that the LTIP award for Peter Southby be increased to 150% of his salary (which is unchanged, as noted above). No changes are proposed for Andy Thorburn. Further information on annual bonuses and LTIP awards granted in 2023 will be disclosed in the 2023 annual report and accounts. The annual base fees payable to the Non-executive Directors and Chair have been increased by 6% in 2023 in line with the salary increases awarded to the UK workforce and to take account of market relativity. Committee chair and Senior Independent Director fees have been increased to £10,000. UK Corporate Governance Code The Company is quoted on AIM and voluntarily adopts the Code and the reporting standards reflected in this report. We remain committed to best practice in designing our remuneration policy and have clearly defined terms of reference which are reviewed annually and listed on our website at www.emisgroupplc.com/investors. The committee reviewed its compliance with the Code and concluded that, during the year under review, the remuneration arrangements complied with the Code other than in three respects, namely: • Provision 21: where the annual evaluation of the performance of the Board, its committees, the Chair and individual Directors was postponed until 2023 due to the Proposed Acquisition; • Provision 38: in relation to the alignment of employer’s pension contribution with the wider workforce (note: this has now been addressed in 2023); and • Provision 41: although engagement with employees on alignment of executive remuneration with wider company pay policy has been constrained by the circumstances of the past year, employee engagement is high and the Group’s wider pay policy and implementation are discussed with employees in detail and well understood. 67 EMIS Group plc | Annual report and accounts 2022 Report of the remuneration committee continued Gender and ethnicity pay reporting Data on the gender pay gap for 2021 was published in 2022 and showed a mean gap of 7.6% (a 1.2% increase from the previous year) for the Group. In 2022, there has been a continued focus on reducing the gender pay gap through comparing salaries in any pay reviews and by continuing to review initiatives that support female employees, including recent enhancements to our maternity provisions and emergency dependants leave to help parents balance work and care. Gender pay gap data as at 31 December 2022 shows a slight increase in the mean gap over the prior year to 8.8% as a result of a higher proportion of male employees in senior positions. Work is continuing over time to address the gender pay gap with continued focus on comparing salaries at all levels where there is a gap and through seeking to ensure that EMIS is an attractive employer to all, regardless of gender or background. A review was undertaken for the second time of the Group’s ethnicity pay gap and this showed a mean gap of 16.2% (a 1.3% reduction on the previous year). Understanding the detail behind the gap and reducing it in 2023 and beyond remains an area of focus. There is more on this in our ESG report on pages 46 and 47. Denise Collis Chair of the remuneration committee 25 May 2023 GOVERNANCE 68 EMIS Group plc | Annual report and accounts 2022 Directors’ remuneration • Reviewed and approved Directors’ remuneration. • Reviewed the 2021 Directors’ remuneration report prior to its approval by the Board and subsequent approval by shareholders at the 2022 AGM. • Considered pension contributions and alignment across the Group. Executive remuneration • Reviewed the GXT’s remuneration packages and wider remuneration across the Group with the aim of recognising best practice, aligning with shareholder objectives and encouraging behaviours to maintain the long-term success of the business. • Reviewed Group performance against the 2021 annual bonus plan targets and set metrics to apply to the 2022 bonus plan. • Reviewed LTIP criteria and targets and approved the 2022–2024 awards. • Reviewed performance and approved the outcome of the 2019-2021 LTIP awards. • Considered and kept under review the potential ramifications of the Proposed Acquisition on the Group’s remuneration structures, including its long-term incentive plans. Human resources and policy • Reviewed the gender pay gap and ethnicity pay gap analysis. • Reviewed the policies and incentives implemented across the Group in the last twelve months. • Reviewed the national minimum wage and agreed actions to maintain compliance. Governance • Reviewed compliance with the Code. • Reviewed the committee’s terms of reference. KEY ACTIVITIES IN 2022 69 EMIS Group plc | Annual report and accounts 2022 Directors’ remuneration report Directors’ remuneration policy The directors have decided to prepare voluntarily this Directors’ remuneration report in accordance with Schedule 8 to The Large and Medium- sized Companies and Groups (Accounts and Reports) Regulations 2008 made under the Companies Act 2006, as if those requirements applied to the Company. The remuneration policy aims 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. The policy outlined on pages 69 to 75 was disclosed in the 2021 annual report and accounts and presented to the AGM on 5 May 2022 as part of the advisory vote on the whole Remuneration report, which received 93.55% support. There are no changes to the policy proposed for 2023, although, where relevant, the text in the table below has been updated for implementation in 2023. Policy table The policy table below summarises the key components of remuneration for Executive Directors: Element Operation Opportunity Performance metrics Base salary To recognise the individual’s skills and experience and provide a competitive base reward to attract and retain Executive Directors. Base salaries are usually reviewed annually, taking into account the individual’s performance, responsibility, skills and experience; Group performance and market conditions; salary levels for similar roles at relevant comparators (including companies of a similar size and sector); and pay levels and percentage salary increases across the wider employee population. There is no set maximum. Any changes will normally take effect from 1 April each year. While there is no maximum salary, any increase will typically be in line with those awarded to the wider employee population. The committee has discretion to award higher increases in circumstances that it considers appropriate, such as: • a material change in the size or complexity of the business or responsibility of the role; • development in the role; • changes in market practice; and • moving the salary of a newly appointed Executive Director to be aligned with a market competitive range over time. Details of salary changes will be disclosed in the annual report and accounts in the relevant year. None. Pension To provide a market competitive retirement benefit. The Group makes contributions to the private pension schemes or other appropriate arrangements for the Executive Director. The committee has discretion to authorise cash payments in lieu of pension contribution. Such a payment would not count for bonus or LTIP purposes. Executive Directors receive a contribution or cash payment in lieu of up to 15% of their 2020 base salary. This was capped for 2022 and thereafter employer pension contributions will be aligned to the UK workforce. Pension contributions for any new Executive Director will be aligned to the UK workforce. None. Share Incentive Plan (SIP) To provide market competitive benefits. Open to all UK tax resident employees of participating Group companies with at least six months’ service. The plan is an HMRC tax qualifying plan that allows an employee to purchase shares using gross pay. If an employee agrees to purchase shares, the Group matches purchased shares with an award of matching shares which are subject to continued employment for three years. Dividends accrue on purchased shares and matching shares and are reinvested into additional shares. From time to time, EMIS Group may offer all employees free share awards up to the HMRC approved limits. Participants can purchase shares up to the limits allowed by the legislation from time to time (currently up to £1,800 per tax year). Matching shares may be awarded up to the limits allowed by the legislation from time to time. The Company currently offers to match purchases made through the plan at the rate of one matching share for every two shares purchased. None. GOVERNANCE 70 EMIS Group plc | Annual report and accounts 2022 Directors’ remuneration report continued Directors’ remuneration policy continued Policy table continued Element Operation Opportunity Performance metrics Benefits To provide market competitive benefits. Benefits may include, but are not limited to, a car allowance and life insurance. Executive Directors are eligible for any benefits offered to the wider workforce in their geography. In certain circumstances, the committee may also approve the provision of additional allowances relating to the relocation of an Executive Director and other expatriate benefits to perform his or her role. While no maximum level of benefits has been set, the value of benefits provided is set at a level which the committee considers to be appropriately positioned taking into account the role and individual circumstances; benefits provided are reviewed periodically. Benefits in respect of the year under review are disclosed in the annual report on remuneration. None. Annual bonus To provide an incentive to drive the Executive Directors to deliver stretching performance and growth. Performance measures, targets and weightings are set by the committee at the start of the bonus period. At the end of each bonus period, the committee determines the extent to which targets have been achieved. The committee has the discretion to adjust the formulaic bonus outcomes both upwards (within the plan limits) and downwards to ensure that payments accurately reflect business performance over the performance period, e.g. in the event of unforeseen circumstances outside of management control. At the discretion of the committee, Executive Directors may be required to invest up to 40% of any after tax amount in shares, to be held until the minimum shareholding requirement is met. Bonuses are subject to clawback for a period of one year after award. For Executive Directors, the maximum annual bonus opportunity is up to 150% of base salary. For target performance, the bonus level is up to 50% of the maximum payable for the year. Threshold payments are no more than 25% of the maximum payable for the year. Performance is usually assessed on an annual basis, using a combination of the Group’s main KPIs for the year. Measures may include financial and non-financial metrics as well as the achievement of strategic and personal objectives. A minimum of 80% of the bonus will be determined by financial objectives. The principal financial performance measure currently assessed is Group adjusted operating profit; however, the committee has the discretion to adjust performance measures and weightings to ensure that they continue to be linked to the delivery of Group strategy. The range of performance required under each measure is calibrated with reference to external expectations and the Group’s internal budgets. Any personal element is based on the strength of the Executive Director’s personal performance over the course of the year against agreed objectives. 71 EMIS Group plc | Annual report and accounts 2022 Element Operation Opportunity Performance metrics LTIP To drive sustained business performance, aid retention and align the interest of Executive Directors with shareholders. Awards are made in the form of conditional share awards or nil-cost options which vest subject to the achievement of pre- defined performance conditions normally measured over a three-year period. At the start of each performance period, the committee reviews the award levels and performance conditions to ensure they remain appropriate and sets performance targets that it considers to be appropriately stretching. Following the end of the performance period, and the vesting of any awards, a two‑year “holding period” applies. This may be structured as either: (1) a requirement that the Executive Directors retain for the holding period the shares they acquire, subject to being permitted to dispose of shares to meet any resultant tax liability; or (2) a restriction that prevents the Executive Directors from exercising any vested share awards until the end of the holding period. Where the holding period is operated on the latter basis, the committee may make additional payment (in cash or additional shares) in respect of shares that vest to reflect the value of dividends which would have been paid on these shares during the period beginning with the date of vesting and ending with the date on which the share award may be exercised (and this payment may assume that the dividends were reinvested in additional shares on such basis as the committee may determine). Where awards vest over a longer period than three years, the holding period will be reduced so that the maximum period between an award and the right to dispose of shares will be five years. During the holding period the shares are not subject to performance conditions. LTIP awards are subject to clawback for a period of up to two years following vesting. Ordinarily, a single award of up to 200% of base salary which normally vests after three years may be awarded. Awards to be granted in 2023 have been delayed due to the Proposed Acquisition. It is anticipated that the grant of awards will be made later in the year and more information will be disclosed in a Rgeulatory Information Service annnouncement and in the 2023 annual report and accounts. Awards vest subject to performance measure(s) based on key financial metrics which may include, for example, measures based on earnings per share (EPS) and absolute or relative growth in share price. The committee has discretion to adjust the choice of performance measures and weightings to ensure that they continue to be linked to the delivery of Group strategy. The committee has the discretion to adjust formulaic LTIP outcomes to ensure that payments accurately reflect business performance over the performance period. Share ownership requirements To ensure alignment of the long-term interests of Executive Directors and shareholders. Executive are required to acquire a minimum shareholding equivalent to 200% of base salary for the Chief Executive Officer and 100% of salary for the Chief Financial Officer. Executive Directors are required to retain shares acquired under the LTIP (subject to sales to cover tax liabilities) until they have satisfied the guideline. Not applicable. None. GOVERNANCE 72 EMIS Group plc | Annual report and accounts 2022 Directors’ remuneration report continued Directors’ remuneration policy continued Element Operation Opportunity Performance metrics Post-employment share ownership requirements To ensure alignment of the long-term interests of EMIS and its shareholders post‑employment. Executive Directors are required to hold the lower of their share ownership requirement or their shareholding at the date of leaving. This applies for a period of one year post employment. The requirement applies to shares vesting (net of tax) from awards granted from 2021 onwards only. Not applicable. None. Notes to the policy table Performance measurement selection The aim of the bonus plan is to reward key Executives over and above base salary for the achievement of business objectives. The bonus criteria are selected annually to reflect the Group’s main KPIs for the year and are designed to encourage continuous performance improvement for the Group. Group financial performance targets relating to the bonus plan are set with reference to the Group’s annual budget, which is reviewed and signed off by the Group Board prior to the start of each financial year. Adjusted operating profit is currently used as the principal KPI for the annual bonus plan because it is a clear measure of the underlying financial performance of the Group. LTIP awards are based on EPS growth and Total Shareholder Return (TSR) performance, normally over three years. Targets applying to the bonus and LTIP are reviewed regularly, based on a number of internal and external reference points. Performance targets are set to be stretching but achievable, with regard to the particular strategic priorities and economic environment in a given year. The committee retains the ability to adjust performance measures or targets if events occur (such as a change in Group strategy, a material acquisition and/or a divestment of a Group business or a change in prevailing market conditions) which cause the committee to determine that measures are no longer appropriate and that an amendment is required so that they achieve their original purpose. Awards under the LTIP and deferred share awards may be adjusted in the event of a variation of the Company’s share capital or other relevant event in accordance with the terms of the awards. Malus and clawback provisions Clawback applies if the figures on which awards were based are shown to be inaccurate or there is misconduct by the individual or action which has damaged EMIS Group’s reputation or, in the case of LTIPs, if there is significant deterioration in financial performance. These provisions apply for one year after the award of a bonus and during the two-year retention period for an LTIP. Remuneration policy for other employees The approach to annual salary reviews is consistent across the Group, with consideration given to individual performance, skills, experience and responsibility, Group performance and market conditions, and salary levels for similar roles in relevant comparators. Opportunities and specific performance conditions vary by organisational level with business area-specific metrics incorporated where appropriate. A management group of approximately 200 individuals is eligible to participate in the LTIP and restricted stock. Award sizes vary by organisational level. Specific cash incentives are also in place to motivate, reward and retain staff below Board level. All UK-based employees are eligible to participate in the Company’s SIP scheme on the same terms. Pay scenario charts for Executive Directors The charts below provide estimates of the potential future reward opportunity for each of the two current Executive Directors for 2023 and the potential split between different elements of remuneration under four different scenarios: “minimum”, “target”, “maximum” and “maximum plus 50% share price appreciation” performance. Basic salary and benefits Bonus Long-term incentives CHIEF EXECUTIVE OFFICER – ANDY THORBURN 0 £’000 300 600 900 1,200 1,500 1,800 507 Minimum 2,100 CHIEF FINANCIAL OFFICER – PETER SOUTHBY Maximum 1,786 Maximum plus 986 Target 0 £’000 300 600 900 1,200 1,500 1,800 341 Minimum 2,100 Maximum 1,189 Maximum plus 1,400 623 Target Policy table continued 2,106 73 EMIS Group plc | Annual report and accounts 2022 Potential reward opportunities illustrated on page 72 are based on the remuneration policy, applied to the base salary as at 1 April 2023. It should be noted that LTIP awards granted in a year normally vest following the end of a three-year performance period and the projected value of LTIP amounts excludes the impact of share price movement over the vesting period, except for the “maximum plus 50% share price appreciation” scenario. All other elements of actual pay delivered, however, will be determined by the following factors: Component “Minimum” “Target” “Maximum” “Maximum plus 50% share price appreciation” Fixed Base salary Salary as of 1 April 2023 – Chief Executive Officer £426,420 and Chief Financial Officer £282,412 Pension 6% of salary Other benefits Benefits as provided in the single figure table on page 76 Annual bonus No bonus payable 50% of maximum (75% of salary) 150% of salary As per maximum LTIP No LTIP vesting 25% of maximum (37.5% of salary for Chief Executive Officer and Chief Financial Officer) 150% of salary for Chief Executive Officer and Chief Financial Officer As per maximum with additional 50% share price appreciation Approach to recruitment remuneration – Executive Directors When hiring or appointing a new Executive Director, the committee may make use of any or all of the existing components of remuneration, as follows: Component Approach Maximum value Base salary The base salaries of new appointees will be determined by reference to the individual’s role, responsibilities, experience and skills, relevant market data, internal relativities and their current basic salary. Where new appointees have initial basic salaries set below market rate, any shortfall may be managed with phased increases over a period of years subject to their development in the role. Not applicable. Pension New appointees will be eligible to receive a pension contribution in line with existing policy. SIP New appointees will be eligible to participate in the Company’s HMRC tax qualifying all-employee share scheme, in line with the policy and the eligibility criteria. Benefits New appointees will be eligible to receive benefits in line with the policy. Annual bonus The annual bonus described in the policy table will apply to new appointees with the relevant maximum ordinarily being pro-rated to reflect the proportion of employment over the bonus period. Targets for the individual element will be tailored to the Executive. Up to 150% of salary p.a. LTIP New appointees will be eligible for awards under the LTIP which will normally be on the same terms as awards made to other Executives, as described in the policy table. Up to 200% of salary p.a. In determining appropriate remuneration for a new Executive Director, the committee will take into consideration all relevant factors (including the quantum, nature of remuneration and jurisdiction from which the candidate was recruited) to ensure that the pay arrangements are in the best interests of the Group and its shareholders. The committee may include additional elements of pay which it considers appropriate in circumstances which may include: interim appointments; Non-executive Directors taking on an executive function on a short-term basis; and where the timing of the recruitment means that it would be inappropriate to provide a bonus or LTIP opportunity for the year, in which case the quantum in respect of the opportunity for the year of recruitment may be transferred to the subsequent year in order that reward is provided on a fair and appropriate basis. However, the committee’s discretion is not uncapped. As noted above, salary, pension and benefits will be provided in line with the existing policy and non‑performance‑related incentives (such as a “golden hello”) will not be offered. The committee may alter the performance measures and vesting periods of incentive remuneration and the deferral arrangements for the bonus or holding period for the LTIP to reflect the circumstances of the recruitment. The rationale for any exercise of this discretion will be explained in the following year’s remuneration report. In addition to the above elements of remuneration, the committee may consider it appropriate to grant an award under a different structure in order to facilitate the recruitment of an individual, to replace remuneration, benefits and/or incentive arrangements forfeited on leaving a previous employer. Any “buyout awards” would typically have a fair value no higher than and be receivable no sooner than the awards forfeited. In doing so, the committee will consider relevant factors including any performance conditions attached to these awards, the likelihood of those conditions being met and the proportion of the vesting period remaining. Such awards would typically be subject to clawback. In the event of the appointment of a new Executive Director by way of internal promotion, the remuneration committee will be consistent with the policy for external appointees detailed above. Where an individual has contractual commitments made prior to their promotion to Executive Director level, the Company will continue to honour these arrangements. GOVERNANCE 74 EMIS Group plc | Annual report and accounts 2022 Directors’ remuneration report continued Directors’ remuneration policy Approach to recruitment remuneration – Executive Directors continued External appointments It is the Board’s policy to allow each Executive Director to take up one non-executive position on the board of another company, subject to the prior approval of the Board. Any fee earned in relation to outside appointments is retained by the Executive Director. No such positions were taken and so no such fees were paid during the financial year. Service contracts/letters of appointment The Executive Directors are employed under contracts of employment with the Group. The Non-executive Directors, including the Chair, are appointed under letters of appointment, usually for a term of three years. Executive Directors’ contracts and Non-executive Directors’ letters of appointment and reappointment are available to view at the Company’s Registered Office. Executive Non-executive Andy Thorburn Peter Southby Patrick De Smedt Kevin Boyd Denise Collis JP Rangaswami Jen Byrne Date of contract/ appointment May 2017 October 2012 January 2020 (renewed in 2023) May 2014 (renewed in 2017, 2020 and 2023) October 2021 March 2021 May 2019 (renewed in 2022) Notice period in months Company 12 12 3 3 3 3 3 Director 12 12 3 3 3 3 3 Remuneration policy for the Chair and the Non-executive Directors The Board determines the remuneration policy and level of fees for the Non-executive Directors, within the limits set out in the Articles of Association. The remuneration committee recommends the remuneration policy and level of fees for the Chair of the Board. The policy table below summarises the key components of remuneration for the Chair and Non-executive Directors. Element Operation Opportunity Performance metrics Fees To reflect market competitive rates for the role, as well as individual performance and contribution. The Chair and Non-executive Directors receive a basic fee for their respective roles. Additional fees may be paid to Non‑executive for additional services such as chairing a Board committee or acting as the Senior Independent Non- executive Director. Expenses related to the Non-executive Directors’ duties, such as travel and accommodation or secretarial support, may also be reimbursed. Fees are reviewed annually with reference to information provided by remuneration surveys, the extent of the duties performed, time commitment and the size and complexity of the Group. Fee levels are benchmarked against sector comparators and appropriate listed companies of similar size and complexity. Fee increases are applied in line with the outcome of the annual review. Fees for the year commencing 1 January 2023 are set out in the annual report on remuneration. There is no prescribed maximum fee. It is expected that increases to Non- executive Director fee levels will be in line with salaried employees over the life of the policy. However, in the event that there is a material misalignment with the market or a change in the complexity, responsibility or time commitment required to fulfil a Non-executive Director role, the Board has discretion to make an appropriate adjustment to the fee level. None. 75 EMIS Group plc | Annual report and accounts 2022 Non-executive Directors’ remuneration In the case of hiring or appointing a new Non-executive Director, the committee will follow the policy as set out in the table on page 74. A base fee in line with the prevailing fee schedule would be payable for Board membership, with additional fees payable for additional services, such as chairing a Board committee. Exit payment policy The Company’s policy is to limit any payment made to a departing Director to contractual arrangements and to honour any pre-established commitments. A payment in lieu of notice (consisting of salary, benefits and pension contributions for the relevant portion of the notice period) may be made. As part of this process, the committee will take into consideration the Executive Director’s duty to mitigate their loss. The table below summarises how the awards under the bonus scheme and LTIP are typically treated in different leaver scenarios and a change of control. Whilst the committee retains overall discretion on determining “good leaver” status, it typically defines a “good leaver” in circumstances such as ill health, disability, death, redundancy, or any other reason as the committee decides. Final treatment is subject to the committee’s discretion. The holding period that applies to vested LTIP awards ceases when an individual leaves, subject to any post-employment shareholding requirements that may apply. Reason for leaving Timing of vesting Treatment of awards Annual bonus “Good leaver” Usually paid at the same time as continuing employees. Pro rata payments may also be made early on compassionate grounds to a “good leaver”. Eligible for an award to the extent that performance targets are satisfied and the award is pro-rated for the proportion of the financial year served. “Bad leaver” No annual bonus payable. Not applicable. Change of control Paid immediately on the effective date of change of control. Eligible for an award to the extent that performance targets are satisfied up to the change of control and the award is pro-rated for the proportion of the financial year served to the effective date of change of control. LTIP “Good leaver” – awards which are still subject to performance conditions Continue until the normal vesting date or vest immediately, at the discretion of the committee. In the event of the death of a participant, the award would vest immediately. Outstanding awards vest to the extent the performance conditions are or are reasonably considered to be likely to be satisfied and the awards are pro-rated to reflect the length of the performance period served unless the remuneration committee decides otherwise. In the event of the death of a participant during the performance period, the award would vest in full. “Bad leaver” Outstanding awards are forfeited. Not applicable. Change of control Vest immediately on the effective date of change of control. Outstanding awards vest subject to the satisfaction of performance conditions as at the effective date of change of control, and the award is pro-rated for the proportion of the performance period served to the effective date of change of control unless the remuneration committee decides otherwise. GOVERNANCE 76 EMIS Group plc | Annual report and accounts 2022 Directors’ remuneration report continued Annual report on remuneration The following section provides details of how the remuneration policy was implemented during the financial year ended 31 December 2022. Remuneration committee membership in 2022 The members of the committee and their attendance record at meetings during the year are set out on page 66. During the year, the committee sought internal support from the Chief Executive Officer, the Chief Financial Officer and the Group HR Director, who attend committee meetings by invitation from the Chair, to advise on specific questions raised by the committee and on matters relating to the performance and remuneration of senior managers where it was considered that their attendance would make a significant contribution. None of these officers were present for any discussions that related directly to their own remuneration. The Company Secretary attended each meeting as Secretary to the committee. Independent advice In undertaking its responsibilities, the committee seeks independent external advice as necessary. Since June 2019, Mercer Limited has acted as the independent remuneration adviser to the committee. Mercer Limited is available to provide advice on a wide range of remuneration matters including current market practice, benchmarking of executive pay, LTIP performance measures, the remuneration policy and incentive scheme design and remuneration advice in relation to the Proposed Acquisition. Total adviser fees to the committee during 2022 were £63,000. Mercer Limited is subject to periodic performance evaluation in common with other advisers to the Group. The committee is satisfied that Mercer Limited provides independent remuneration advice to the committee. Mercer Limited is a member and signatory of the Remuneration Consultants Group and voluntarily operates under its Code of Conduct in relation to executive remuneration consulting in the UK, details of which can be found at www.remunerationconsultantsgroup.com. Summary of shareholder voting at the 2022 AGM There was an advisory vote on the ’ remuneration report at the AGM in 2022. Of the 47,277,120 votes cast, 44,226,168 (93.55%) of the votes were in favour of the resolution, with 3,050,302 (6.45%) against and 650 votes withheld. The results of the votes were published on the Group’s website after the meeting. Single total figure of remuneration for Executive Directors (audited) The table below sets out a single figure for the total remuneration received by each Executive Director for the year ended 31 December 2022 and the prior year. Andy Thorburn £’000 Peter Southby £’000 2022 2021 2022 2021 Base salary 423 412 280 273 Taxable benefits1 19 24 18 19 Pension2 62 62 41 41 Annual bonus3 503 558 333 370 Share schemes4 913 494 370 220 Total 1,920 1,550 1,042 923 Split into: Total fixed pay 504 498 339 333 Total variable pay 1,416 1,052 703 590 1 Taxable benefits consist primarily of a car allowance or company car, private medical insurance, business travel and subsistence (where taxable). 2 During the year under review, the Executive Directors received 15% of 2020 base salary as employer contributions. At the request of Andy Thorburn, £41,000 (2021: nil) and Peter Southby, £37,000 (2021: £37,000) of their employer pension contributions were commuted to a cash payment in accordance with the remuneration policy. 3 This is the total bonus earned in respect of performance during the relevant year. Annual bonuses are received in cash. Further details of annual bonus awards for 2022 can be found in the annual report on remuneration on pages 77 to 78. 4 The amounts shown reflect the value of matching shares awarded under the SIP, the value of the free share award made under the SIP, the value of the 2020–2022 LTIP awards vesting in May 2023 (calculated at the closing price on the vesting date of 15 May 2023 of 1,568p) and the expected value of the 2019–2023 special LTIP awards that will vest in June 2023 (calculated using the three-month average share price to 31 December 2022). For the Chief Executive Officer, £336,000 of the value is attributable to share price appreciation and for the Chief Financial Officer £136,000. Further details can be found on page 79. The values shown for 2021 have been restated from those shown in last year’s annual report on remuneration to reflect the share price that applied on 24 April 2022, being the date of vesting of the 2019–2021 LTIP award which vested at 70.48% of maximum (1,310p per share). For the Chief Executive Officer, £99,000 of thiis value is attributable to share price appreciation and for the Chief Financial Officer, £44,000. 77 EMIS Group plc | Annual report and accounts 2022 Single total figure of remuneration for Non-executive Directors (audited) The table below sets out a single figure for the total remuneration received by each Non-executive Director for the year ended 31 December 2022 and the prior year: Board fee £’000 Committee Chair and/or SID fee £’0001 Total fees £’000 2022 2021 2022 2021 2022 2021 Patrick De Smedt 162 160 — — 162 160 Kevin Boyd 46 45 14 8 60 53 Jen Byrne 46 45 — — 46 45 JP Rangaswami2 46 38 — — 46 38 Denise Collis3 46 11 8 2 54 13 Andy McKeon4 8 45 — 6 8 51 1 The payment of fees for the role of Senior Independent Director was introduced in April 2022. The annual fee payable in 2022 was £8,160. 2 JP Rangaswami was appointed to the Board on 1 March 2021. 3 Denise Collis was appointed to the Board on 1 October 2021. 4 Andy McKeon retired from the Board on 28 February 2022. Incentive outcomes for the year ended 31 December 2022 Bonus During the year ended 31 December 2022, Executive Directors were eligible to receive a bonus of up to 150% of salary, depending on the level of Group adjusted operating profit achieved and other financial and strategic targets. Target performance was calibrated to deliver a bonus of 50% of maximum. Bonuses are paid entirely in cash and are subject to clawback. Corporate targets set by the committee require Executive Directors to deliver significant stretch performance to achieve maximum bonus. The targets and actual performance for 2022 were as follows: Performance metric and weighting (% of maximum opportunity) Performance targets Actual performance Group adjusted operating profit (70% weighting) • <£44.25m: no payment; • £44.25m: 14% of maximum bonus; • £46.0m: 35% of maximum bonus; and • ≥£48.5m: 70% of maximum bonus. Performance between points results in a pro rata bonus payment calculated on a straight-line basis. 58.6% Overall revenue growth (6% weighting) • <£172m: no payment; • £172m: 1.2% of maximum bonus; • £176m: 3% of maximum bonus; and • ≥£180m: 6% of maximum bonus. Performance between points results in a pro rata bonus payment calculated on a straight-line basis. 2.7% Revenue growth for Enterprise (6% weighting) • <5% growth: no payment; • 5% growth: 1.2% of maximum bonus; • 10% growth: 3% of maximum bonus; and • ≥15% growth: 6% of maximum bonus. Performance between points results in a pro rata bonus payment calculated on a straight-line basis. 6% GOVERNANCE 78 EMIS Group plc | Annual report and accounts 2022 Directors’ remuneration report continued Annual report on remuneration Performance metric and weighting (% of maximum opportunity) Performance targets Actual performance Non-financial targets (18%, equally weighted across each sub-category) Customer satisfaction: • achieve an average score of at least 0 across the year: 1.2% of maximum; • achieve an average score of at least +5 across the year: 3% of maximum; and • achieve an average score of at least +10 or above across the year: 6% of maximum. Performance between points results in a pro rata bonus payment calculated on a straight-line basis. 6% Employee engagement – increase in score compared to global index: • increase of 1%: 1.2% of maximum; • increase of 2%: 3% of maximum; and • increase of 3%: 6% of maximum. Performance between points results in a pro rata bonus payment calculated on a straight-line basis. 3% ESG targets: • move to 100% renewable energy contracts for EMIS owned offices by end of 2022; • 60% of company cars to be electric or hybrid by end of 2022; and • reduction in GPG to 5% or lower and EPG to 16% or lower. Achieve one of the targets: 1.2% of maximum; Achieve two of the targets: 3% of maximum; Achieve all three of the targets: 6% of maximum. 3% TOTAL 79.3% of maximum opportunity (119% of salary for the CEO and CFO) Based on the above, the committee determined that a total bonus of 119% of salary was achieved for 2022, which it believes to be a fair representation of performance achieved during the year. Long-term incentive awards vesting and exercised For the 2020–2022 LTIP awards granted in April 2020, the performance condition comprised two elements. The first, based on EPS growth over the three years to 31 December 2022 with a weighting of 75% of the award, was partly met, resulting in 35.4% vesting of this element. The second element, based on TSR performance with a weighting of 25% of the award, was fully met resulting in 100% vesting of this element. Overall, therefore, 60.4% of the total award vested in May 2023, subject to continued employment. Vested awards are subject to a holding period ending on the fifth anniversary of grant. The performance targets for this award were as follows: Performance level EPS growth % award to vest TSR % award to vest Below base target Below 5% p.a. 0% Below median 0% Base target 5% p.a. 18.75% Equal to median 6.25% Maximum target 10% p.a. 75.00% Upper quartile 25.00% For the special 2019–2022 LTIP awards granted in June 2019, the performance condition was based on EPS growth over the four years to 31 December 2022. This condition was partly met, resulting in 25.4% vesting in June 2023, subject to continued employment. Vested awards are subject to a holding period ending on the fifth anniversary of grant. The performance targets for this award were as follows: Performance level EPS growth % award to vest Below base target Below 7% p.a. 0% Base target 7% p.a. 0% Maximum target 12% p.a. 100% Incentive outcomes for the year ended 31 December 2022 continued Bonus continued 79 EMIS Group plc | Annual report and accounts 2022 Vesting value of awards vesting in 2023, based on performance to 2022 (audited) On grant At the end of the performance period Number of shares awarded % of salary granted Dividend equivalent accrued during performance period Number of vesting shares Number of shares lapsing Impact of share price performance £'000 Total vesting of award £'000 Andy Thorburn (2020–2022 LTIP) 63,061 150% — 38,088 24,973 224 597 Andy Thorburn (2019–2022 special LTIP) 66,225 200% — 16,821 49,404 112 315 Peter Southby (2020–2022 LTIP) 27,843 100% — 16,817 11,026 99 264 Peter Southby (2019–2022 special LTIP) 21,930 100% — 5,570 16,360 37 104 Scheme interests awarded in 2022 Long-Term Incentive Plan In 2022, the following awards were granted under the LTIP: Executive Director Date of grant Awards made during the year Market price at date of award Normal vesting date Face value at date of award £’000 Andy Thorburn 20 June 2022 46,688 1,370p 8 April 2025 640 Peter Southby 20 June 2022 20,614 1,370p 8 April 2025 282 Performance conditions for 2022 awards The ordinary annual LTIP awards granted in 2022 are subject to two performance targets. 75% of the award is subject to a performance target based on compound annual EPS growth and 25% of the award is subject to a performance target comparing the Company’s TSR against the FTSE SmallCap. Both performance targets are measured over three financial years, 2022 to 2024. Ordinary annual award Performance level EPS growth % award to vest TSR % award to vest Below base target Below 5% p.a. 0% Below median 0% Base target 5% p.a. 18.75% Equal to median 6.25% Maximum target 10% p.a. 75.00% Upper quartile 25.00% To the extent that base target is exceeded, the percentage of award shares vesting increases pro rata between the base target and maximum target. SIP awards During the year under review, Peter Southby was awarded matching shares under the SIP as a result of his personal contributions in acquiring partnership shares. The value of these was less than £1,000. There were no performance conditions attached to the SIP awards. Peter Southby participates in the SIP to the maximum extent permitted by HMRC. Andy Thorburn and Peter Southby received dividend shares on their SIP holding during the year, the value of which was less than £1,000 each. In April 2022, Andy Thorburn and Peter Southby received a free share award under the SIP, both receiving 50 shares. The value of these was less than £1,000 each. Executive Directors may participate in the SIP on the same terms as other UK employees. Ad hoc payments There were no ad hoc payments to any Director for the year ended 31 December 2022 (2021: nil). Loss of office payments (audited) There were no loss of office payments for the year ended 31 December 2022 (2021: nil). Payments to past Directors (audited) There were no payments to past Directors for the year ended 31 December 2022 (2021: nil). Relative importance of spend on pay The table below shows the Group’s expenditure on shareholder distributions (including dividends) and total employee pay expenditure for the financial years ended 31 December 2021 and 31 December 2022. GOVERNANCE 80 EMIS Group plc | Annual report and accounts 2022 Directors’ remuneration report continued Annual report on remuneration Relative importance of spend on pay continued Total employee expenditure Distributions to shareholders 2022 £81.7m £24.4m 2021 £76.4m £22.2m % change 7% 10% TSR performance 31 Dec 12 31 Dec 13 31 Dec 14 31 Dec 15 31 Dec 16 31 Dec 20 31 Dec 22 31 Dec 21 31 Dec 19 31 Dec 17 31 Dec 18 EMIS Group total shareholder return FTSE SmallCap Index 0 50 100 150 200 250 The graph above compares the value of £100 invested in EMIS Group plc shares, including reinvested dividends, with the FTSE SmallCap Index in the last ten years. This index was selected because it is considered to be the most appropriate against which the total shareholder return of the Group should be measured. Historical Chief Executive Officer pay The table below details the Chief Executive Officer’s single total figure of remuneration and incentive outcomes over the relevant financial year: 2015 2016 2017 2018 2019 2020 2021 2022 Andy Thorburn (from 1 May 2017) Chief Executive Officer single figure (£’000) n/a n/a 358 922 814 1,098 1,550 1,920 Annual bonus (% of max) n/a n/a 0% 72% 63% 50% 90% 79% LTIP vesting (% of max) n/a n/a n/a n/a 10% 42% 70% 42% Chris Spencer (retired 30 April 2017) Chief Executive Officer single figure (£’000) 388 607 238 n/a n/a n/a n/a n/a Annual bonus (% of max) 0% 0% 0% n/a n/a n/a n/a n/a LTIP vesting (% of max) 51% 48% 0% n/a n/a n/a n/a n/a Percentage change in Directors’ remuneration The table below sets out the annual percentage change in salary, benefits and bonus for each Director compared with that of the average full-time equivalent total reward for all colleagues in the UK. % change 2020–2021 % change 2021–2022 Director Base salary/fees Benefits Annual bonus Base salary/fees Benefits Annual bonus Andy Thorburn 1% 16% 173% 4% -23% -10% Peter Southby 1% 13% 173% 3% -6% -10% Patrick De Smedt1 32% n/a n/a 1% n/a n/a Kevin Boyd2 0% n/a n/a 13% n/a n/a Jen Byrne 0% n/a n/a 2% n/a n/a JP Rangaswami3 n/a n/a n/a 20% n/a n/a Denise Collis4 n/a n/a n/a 314% n/a n/a Andy McKeon5 -4% n/a n/a -85% n/a n/a Colleagues (average FTE)6 5% -4% 186% 11% -12% 17% 1 Patrick De Smedt joined the Board on 1 January 2020 as a Non-executive Director. His fee increased as at 6 May 2021 when he was appointed Chair of the Board. 2 The percentage increase in Kevin Boyd’s fees in 2022 includes the introduction, in April 2022, of an annual Senior Independent Director fee of £8,160 in accordance with market practice. 3 The percentage increase in JP Rangaswami’s fees in 2022 reflects the date on which he joined the Board in March 2021. 4 The percentage increase in Denise Collis’ fees in 2022 reflects the date on which she joined the Board in October 2021. 5 Andy McKeon retired from the Board on 28 February 2022. 6 Colleagues are those employed by the Group in the UK as this is considered the most relevant comparator group. 81 EMIS Group plc | Annual report and accounts 2022 Directors’ Interests The beneficial interests of the Directors in the ordinary shares of the Company, including those acquired through the SIP, at 31 December 2022 were as follows: Ordinary shares at 31 December 2022 Director Fully owned shares 1 Unvested with performance conditions (at maximum) SIP (unvested without performance conditions) Options exercised during 2022 2 Andy Thorburn 86,045 296,409 476 37,690 Peter Southby 41,849 121,734 1,508 16,641 1 Including those acquired through the exercise of share awards and retained. 2 These options, exercised on 5 December 2022, were nil-cost options awarded on 24 April 2019 under the LTIP, the vesting of which was disclosed in the directors’ remuneration report for 2021. Of those exercised, Andy Thorburn sold 18,155 shares and Peter Southby sold 7,849 shares, in each case to meet tax and other liabilities arising on exercise. The balance of shares vested has been retained by the relevant Director. The exercises and sales were disclosed to the market on 5 December 2022. Since the year end SIP shares have continued to be awarded each month, for which monthly Regulatory Information Service announcements have been made. This has resulted in Peter Southby holding an additional 64 shares, which include matching shares awarded under the SIP which may be subject to forfeiture in certain circumstances. The Executive Directors have a share ownership requirement of 200% of salary for the CEO and 150% of salary for the CFO. As of 31 December 2022, the CEO’s shareholding represented 380% of salary and the CFO’s 297% of salary. Executive Directors are also subject to post-employment shareholding guidelines as detailed in the remuneration policy. Non-executive Director Ordinary shares at 31 December 2022 Patrick De Smedt 10,000 Kevin Boyd 7,000 Jen Byrne — JP Rangaswami — Denise Collis 1,441 Andy McKeon1 4,947 1 Shares held at the date of resignation. Implementation of remuneration policy for 2023 The letter from the Chair of the remuneration committee on pages 66 to 67 includes further detail. Base salary The base salaries for the Executive Directors in 2023 are set out in the table below. Executive Director Base salary from 1 April 2022 to 31 March 2023 Base salary from 1 April 2023 to 31 December 2023 Percentage increase Andy Thorburn £426,420 £426,420 0% Peter Southby £282,412 £282,412 0% Pension For 2023, Executive Directors’ pension contributions will be in line with the wider workforce rate at a rate of 6% of salary. Annual bonus Decisions on bonus awards for 2023 have been delayed due to the Proposed Acquisition. In line with normal practice, information on targets will be disclosed in the 2023 annual report and accounts. LTIP Awards for 2023 have been delayed due to the Proposed Acquisition. It is anticipated that an award will be made later in the year and more information will be disclosed in the 2023 annual report and accounts. SIP Executive Directors will, subject to eligibility, be able to continue to participate in the SIP on the same basis as in 2022. Chair and Non-executive Director fees Fee levels for the Chair and Non-executive Directors are subject to annual review taking into account appropriate comparators and the level of time commitment required. The Chair and Non-Executive Directors’ fees were increased by 6% with effect from 1 April 2023, in alignment with increases in salaries awarded to the wider workforce and to take account of market relativity. Committee chair and Senior Independent Director fees have been increased to £10,000. Denise Collis Chair of the remuneration committee 25 May 2023 GOVERNANCE 82 EMIS Group plc | Annual report and accounts 2022 Directors’ report This section contains the remaining matters on which the Directors are required to report each year. The Company is incorporated in England and Wales and domiciled in the UK with Company Number 06553923. The address of its registered office is Fulford Grange, Micklefield Lane, Rawdon, Leeds LS19 6BA. General information and principal activities EMIS Group plc (the “Company” or the “parent company”) is an AIM‑quoted company. The Company is the parent of a number of trading subsidiary companies. The principal trading subsidiary is Egton Medical Information Systems Limited. EMIS Group is the UK leader in connected healthcare software and systems. Its solutions are widely used across every major UK healthcare setting. EMIS Group’s aim is to be the leading provider of innovative healthcare technology that improves people’s lives. This helps healthcare professionals to deliver better, more efficient healthcare, supporting longer and healthier lives. EMIS Group has two core business segments: EMIS Health and EMIS Enterprise. EMIS Health is a supplier of innovative integrated care technology to the NHS market, including primary, community, acute and social care. EMIS Enterprise is focussed on growth in the B2B technology sector within the healthcare market, including management of medicines, partner businesses, patient-facing services, data and analytics, and research and life sciences. During the year under review, Egton Medical Information Systems Limited acquired: • the entire issued share capital of Edenbridge Healthcare Limited, a leading provider of business intelligence tools for GP practices, federations and commissioners, on 14 January 2022; • the entire issued share capital of FourteenFish Limited, a specialist GP appraisals and training business, on 1 March 2022; and • on 31 October 2022, the remaining 50% interest in the entire share capital of Healthcare Gateway Limited, the healthcare interoperability service provider (through the Medical Interoperability Gateway) in which EMIS previously held a 50% interest. In addition to Edenbridge Healthcare, FourteenFish and Healthcare Gateway, EMIS Group’s brands include: • EMIS, the clinical software business, supplying essential technology to 10,000 healthcare organisations across every major UK health sector; • Patient, the UK’s leading independent provider of patient-centric medical and wellbeing information and digital front door services to the UK public; and • Pinnacle, a leading provider of service management solutions to the community pharmacy market. Details of the recommended cash offer for the whole of the issued and to be issued share capital of EMIS are in the Chair’s opening statement on page 5. Capital allocation policy EMIS Group seeks to deliver high-quality visible earnings, future earnings growth and strong cash returns. The Board has adopted a clear capital allocation policy: • reinvestment for growth – the Group invests in infrastructure, technology and intellectual capital to drive growth in its core markets, through constant product innovation and integration. At the current time, this is demonstrated by significant investment in the EMIS-X platform and by Project Adelaide, moving the business to a cloud‑first strategy; • regular returns to shareholders – the Group pays a regular dividend to shareholders, representing over the medium term around 50% of adjusted earnings; • acquisition – the Group supplements its organic growth by acquiring companies with promising technologies and in markets adjacent to, and consistent with, current capabilities, such as the Healthcare Gateway acquisition that took place on 31 October 2022; and • balance sheet leverage and return of excess capital – the Group will maintain an appropriate balance sheet, consistent with its investment requirements and mindful of the preferences of both shareholders and customers. While the Group is prepared to take on additional debt if circumstances warrant, it aims to return excess capital to shareholders when appropriate. Dividends Subject to shareholder approval at the AGM on 29 June 2023, the Board proposes paying a final dividend of 21.1p per ordinary share (2022: 17.6p) on 11 July 2023 to shareholders on the register at the close of business on 16 June 2023. This would make a total dividend of 38.7p per ordinary share for 2022 (2021: 35.2p). Directors The Directors of the Company who served during the year ended 31 December 2022 and subsequently are as follows: Patrick De Smedt Chair Andy Thorburn Chief Executive Officer Peter Southby Chief Financial Officer Kevin Boyd Senior Independent Non-executive Director Jen Byrne Independent Non-executive Director JP Rangaswami Independent Non-executive Director Denise Collis Independent Non-executive Director Andy McKeon Andy McKeon retired from the Board on 28 February 2022. Re-election of Directors Directors are subject to annual re-election in line with best practice. Directors’ interests Details of Directors’ remuneration and interests in the share capital of the Company are given in the annual report on remuneration on pages 76 to 81. Details of Directors’ service agreements are included in the remuneration policy on page 74. 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. Research and development Research and development expenditure in the year amounted to £22.1m (2021: £21.3m), of which £4.4m (2021: £4.1m) was capitalised. 83 EMIS Group plc | Annual report and accounts 2022 Share capital As at 31 December 2022 and 24 May 2023, the Company had 63,311,396 (31 December 2021: 63,311,396) ordinary shares of 1p each in issue. The shares are traded on AIM, a market operated by the London Stock Exchange. 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. The Company has previously established an Employee Benefit Trust (EBT) to hold shares in the Company to facilitate share-based emolument payments and the Group SIP. During the year, the EBT purchased 22,700 shares in the Company at a cost of £423,031. As at 31 December 2022 the EBT held 69,492 (2021: 317,906) ordinary shares of 1p each. The EBT has waived its right to dividends. Details of ordinary shares under option in respect of the Company’s share schemes are shown in note 25 to the financial statements. The rules of the LTIP and CSOP set out the procedure to be followed in the event of a change of control. Further information is given in the Directors’ remuneration policy on page 75. Purchase of own shares The Directors’ authority to make purchases of the Company’s shares on its behalf is given by resolution of the shareholders annually at the Company’s AGM. There were no share buybacks during the year. Directors’ indemnities and liability insurance As permitted by the Articles of Association, in accordance with Section 234 of the Companies Act 2006, the officers of the Company and its subsidiaries would be indemnified in respect of proceedings which might be brought by a third party. No cover is provided for Directors and officers in respect of any fraudulent or dishonest actions. The Company maintains Directors’ and officers’ liabilities insurance to provide appropriate cover for any legal action brought against its Directors. Employees The Group strives to build an inclusive culture that encourages, supports and celebrates the diverse voices of its employees. The Group is committed to ensuring that all of its employees and prospective employees are treated fairly and equally. EMIS’s Dignity at Work Policy sets out its commitment to provide a working environment that operates on equality of opportunity and freedom from harassment or unlawful discrimination on the grounds of race, sex, pregnancy and maternity, marital or civil partnership status, gender reassignment, disability, religion or beliefs, age, or sexual orientation. All employees are treated fairly and equally. For further information on EMIS Group employees see pages 46 to 47. Ethical business practices The Group has a zero-tolerance approach to bribery and corruption and is committed to ensuring that it has effective processes and procedures in place to counter the risk of bribery and corruption. A formal anti-bribery policy is in place and training for all employees is undertaken annually. The policy and training results are reviewed on a regular basis by the audit committee. The Group has a comprehensive code of ethics and standards of business conduct document, which provides instruction and guidance to employees on expected behaviour when dealing with a wide range of stakeholders. The Group has a whistleblowing policy, which is reviewed annually by the audit committee, and an associated reporting hotline operated by an external provider. Along with other important policies in place across the Group, all employees are required to acknowledge receipt of these three policies and to confirm that they have read and understood them. In addition, the Group has an anti-fraud policy statement and fraud response plan which outlines the Group’s definition and attitude towards fraud and the process to be followed in any suspected instances of such activity. Substantial interests in shares The Company has been notified of the following substantial interests in 3% or more in its ordinary shares: 31 December 2022 27 April 2023 Fund manager % % Bank of America corporation 17.86 11.11 JP Morgan Securities plc 8.04 7.72 Morgan Stanley & Co International plc 7.80 8.44 Bank of New York stock lending collateral account 7.41 9.27 UBS collateral account 7.27 4.22 Societe Generale 5.74 3.33 Sand Grove Capital Management 5.49 7.32 Barclays Capital securities Ltd 5.28 4.88 Goldman Sachs collateral account 4.25 8.05 BNP arbitrage account 3.05 4.78 GOVERNANCE 84 EMIS Group plc | Annual report and accounts 2022 Modern Slavery Act The Group is committed to conducting business responsibly. It seeks to ensure that its supply chains operate to those same high standards, including in relation to employment practices, workplace conditions and, more specifically, the prevention of forced, bonded and trafficked labour. This is upheld through the Group’s policies and processes and is fully supported by the Board. The steps taken to help manage the risks outlined by the legislation are detailed in the Group’s modern slavery statement which is published annually on the EMIS Group website and can be found at www.emisgroupplc.com/investors/corporate-governance. Political donations No political donations were made in 2022 (2021: £nil). Charitable donations In 2022 EMIS made a charitable donation totalling £1,160 to the DEC Ukraine Humanitarian Appeal, matching donations made by employees of Egton Medical Information System in the months of May, June and July 2022 via payroll giving. This financial donation is in addition to the Group’s donations in kind of electrical items and furniture and its programme providing employees two days of annual paid leave for charitable volunteering. See pages 38 to 39 and 45 for more information. Going concern The Group’s activities and an outline of the developments taking place in relation to its products, services and marketplace are considered in the strategic report on pages 1 to 49. A commentary on the revenue, trading results and cash flows is provided in the financial review on pages 20 to 23. Note 3 to the financial statements sets out the Group’s financial risks and the management of capital risks. The Group is profitable and expects to continue to be so, with significant cash resources, a high and continuing level of recurring revenue and also high levels of cash conversion expected for the foreseeable future. The Group has a revolving credit facility of £25.0m and an overdraft facility of £5.0m with Barclays and NatWest, with an accordion arrangement to increase it up to £60m if required. The facility is for an initial three-year period (commencing 15 December 2021) with an option outstanding to extend it for a further year. As at 31 December 2022, the facility was undrawn. As explained in the Chief Executive Officer’s statement on page 7, on 17 June 2022 the Group agreed a proposal for the Group to be acquired by Bordeaux UK Holdings II Limited, an affiliate of Optum Health Solutions (UK) Limited (Optum) and a wholly-owned subsidiary of UnitedHealth Group Incorporated. The Directors have considered statements in the announcement made pursuant to rule 2.7 of the Takeover Code in respect of the Proposed Acquisition, and discussions with Optum senior management, regarding Optum’s intention to ensure continuity of the Group’s existing business with no material changes to its existing operations for at least a period of twelve months from completion of the Acquisition. Considering the above, the Directors have concluded that the completion of this Acquisition would not impact the appropriateness of the going concern basis of preparation of these financial statements. The Directors considered the going concern assumption and after careful enquiry and review of available financial information, including detailed projections of profitability and cash flows for the next two years, the Directors believe that the Group has adequate resources to continue in existence for at least twelve months from the date of approval of the financial statements 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 29 June 2023, together with an explanation of the resolutions to be proposed at the meeting, is contained in a separate circular to shareholders and on the Group’s website at www.emisgroupplc.com/investors/annual-general-meeting. Auditor and statement as to disclosure of information to the auditor 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 auditor is unaware. The Directors have individually confirmed that they have taken all reasonable 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 auditor. The auditor, KPMG LLP, has indicated its willingness to be reappointed and, in accordance with Section 489 of the Companies Act 2006, a resolution for reappointment will be proposed at the AGM. Corporate governance The Company’s corporate governance statement can be found on pages 53 to 58 of this annual report and accounts. The Directors’ report, comprising the strategic report, the corporate governance report and the reports of audit, remuneration and nomination committees, has been approved by the Board and signed on its behalf by: Christine Benson Company Secretary 25 May 2023 Directors’ report continued 85 EMIS Group plc | Annual report and accounts 2022 Statement of Directors’ responsibilities in respect of the annual report and the financial statements The Directors are responsible for preparing the annual report and the Group and parent company financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and parent company financial statements for each financial year. Under the AIM Rules of the London Stock Exchange they are required to prepare the Group financial statements in accordance with UK-adopted international accounting standards and applicable law and they have elected to prepare the parent company financial statements on the same basis. 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 parent company and of the Group’s profit or loss for that period. In preparing each of the Group and parent company financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable, relevant and reliable; • state whether they have been prepared in accordance with UK- adopted international accounting standards; • assess the Group and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and • use the going concern basis of accounting unless they either intend to liquidate the Group or the parent company or to cease operations, or have no realistic alternative but to do so. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. The Directors have decided to prepare voluntarily a Directors’ remuneration report in accordance with Schedule 8 to The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 made under the Companies Act 2006, as if those requirements applied to the Company. The Directors have also decided to prepare voluntarily a Corporate governance statement as if the Company were required to comply with the Listing Rules and the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority in relation to those matters. Under applicable law and regulations, the Directors are also responsible for preparing a strategic report and a Directors’ report that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy. Signed on behalf of the Board Andy Thorburn Peter Southby Chief Executive Officer Chief Financial Officer 25 May 2023 25 May 2023 86 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS Independent auditor’s report to the members of EMIS Group plc 1. Our opinion is unmodified We have audited the financial statements of EMIS Group plc (“the Company”) for the year ended 31 December 2022 which comprise the Group statement of comprehensive income, the Group and parent Company balance sheets, the Group and parent Company statements of cash flows, the Group and parent Company statements of changes in equity, and the related notes, including the accounting policies in note 1. In our opinion: • the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 31 December 2022 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards; • the parent Company financial statements have been properly prepared in accordance with UK-adopted international accounting standards and as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed other entities of public interest. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Overview Materiality: group financial statements as a whole £1.9m (2021: £1.8m) 5.0% of normalised Group profit before tax (2021: 5.0% of Group profit before tax) Coverage 83% of total profits and losses that made up Group profit before tax (2021: 75%) Key audit matters vs 2021 Event driven New: Identification and valuation of intangible assets acquired in business combinations New New: Exceptional items excluded from adjusted operating profit and adjusted earnings per share New Recurring risks Recoverability of parent company’s investment in subsidiaries 87 EMIS Group plc | Annual report and accounts 2022 2. Key audit matters: our assessment of risks of material misstatement Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows: The risk Our response Identification and valuation of intangible assets acquired in business combinations (Other acquired intangible assets of £21.6 million; 2021: £nil) Refer to page 61 (Audit Committee Report), pages 99 and 103 (accounting policy) and page 121 (financial disclosures) Subjective estimate and valuation During the year the Group completed the acquisitions of Edenbridge Healthcare Limited (14 Jan 2022), FourteenFish Limited (1 March 2022) and the remaining share of Healthcare Gateway Limited (31 Oct 2022). The Group has performed fair value assessments of the identified acquired intangible assets arising from these business combinations. The identification of acquired intangible assets involves judgement and the assessment of the fair value of the intangible assets acquired in each business combination involves estimation uncertainty as at the time of each business combination. The estimates made at the point of acquisition include forecasting future performance on a market participant basis. As at the date of the acquisitions, there is a high degree of subjectivity in assessing certain assumptions applied by the Group in the discounted cash flow models used to calculate the acquisition date fair value of these assets, including discount rates, EBIT (“earnings before interest and tax”) growth rates and useful economic lives. The effect of these matters is that, as part of our risk assessment, we determined that the identification of intangible assets involves judgement, and the valuation of identified acquired intangible assets had a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than our materiality for the financial statements as a whole. The financial statements (note 2) discloses the sensitivity estimated by the Group. We performed the tests below rather than seeking to rely on any of the Group’s controls because the nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed procedures described. Our procedures included: • Test of detail: we inspected the share purchase agreements, due diligence documents and board minutes and assessed whether firstly, the purchase price allocation accounting reflected these documents, as well as comparing the intangible assets identified by management to our understanding of the rationale for the purchase based on our inspection of these documents. • Assessment of experts: we assessed the competence, capabilities and objectivity of the external valuation experts engaged by the Group to assist in identifying and valuing the intangible assets acquired by performing independent research on the qualifications and experience of management’s expert, and evaluating the engagement terms. • Our valuation expertise: we involved our own valuation specialists to assist us in assessing the appropriateness of the intangible assets identified, the valuation methodologies applied, and to challenge key assumptions used such as discount rate, growth and customer attrition rates. • Benchmarking assumptions: we challenged the discount rate, EBIT growth rate and useful economic lives by comparing to internally and externally derived data. • Historical comparisons: we assessed the accuracy of the forecasting processes in place for the acquired businesses through comparison of forecasts used in the purchase price allocation exercise to actual results. • Assessing transparency: we considered the adequacy of the Group’s disclosures in respect of the valuation of acquired intangible assets. 88 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS The risk Our response Exceptional items excluded from adjusted operating profit and adjusted earnings per share Exceptional costs: £12.8 million; 2021: £nil) Refer to page 61 (Audit Committee Report), pages 102 and 103 (accounting policy) and page 122 (financial disclosures). Presentation appropriateness The Group presents separately adjusted measures including adjusted operating profit and adjusted earnings per share within the Group statement of comprehensive income. The Group’s key performance indicators and strategic report commentary refer to these ‘adjusted’ measures, as well as those derived on an adopted IFRS basis. The reasoning behind this presentation is set out in the “Alternative performance measures” section of the strategic report. Exceptional items, which are excluded from adjusted operating profit, are not defined by IFRSs and therefore a policy decision is required by the directors to identify such items and to maintain the comparability of results with previous years. There is a risk of management bias in identifying such items. Failure to disclose clearly the nature and impact of exceptional items excluded from adjusted operating profit and the adjusted earnings per share calculation may distort the reader’s view of the financial results for the year. There is a risk that the judgement taken on exceptional items excluded from the reported GAAP measures are not in accordance with the accounting policy approved by the Board. Disclosure quality The disclosures need to include relevant and appropriate explanation of the exceptional items excluded from adjusted operating profit and other related alternative performance measures to ensure these are fair, balanced and understandable. There is a risk that the disclosure does not set out the judgement (see note 2) involved in determining which costs should be presented as ‘exceptional’ and therefore be excluded from ‘adjusted’ measures. We performed the tests below rather than seeking to rely on any of the company’s controls because the nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed procedures described. Our procedures included: • Assessing principles: we critically assessed the Group’s accounting policy for Exceptional Items with reference to the requirements of IAS 1 (paragraph 85) and communicated our challenge of management to the Audit Committee. • Assessing application: we assessed the application of the Group’s accounting policy in respect of exceptional items, evaluating whether each project is material and, due to its nature or size, is appropriately classified as exceptional. We also evaluated the exceptional items to assess whether there was any evidence of management bias. • Assessing balance: we assessed the impact of the exceptional items in the annual report for balance and consistency, challenging whether such items are clearly described. • Assessing transparency: we assessed whether the basis of the exceptional items excluded from the adjusted measures is clearly and accurately described and consistently applied. Independent auditor’s report continued to the members of EMIS Group plc 2. Key audit matters: our assessment of risks of material misstatement continued 89 EMIS Group plc | Annual report and accounts 2022 The risk Our response Recoverability of parent company’s investment in subsidiaries Investment in subsidiaries: £161.9 million; 2021: £112.2million) Refer to page 99 (accounting policy) and page 112 (financial disclosures). Low risk, High value: The carrying amount of the parent company’s investments in subsidiaries represents 82% (2021: 66%) of the parent company’s total assets. Their recoverability is not at a high risk of significant misstatement, or subject to significant judgement. However, due to their materiality in the context of the parent company financial statements, this is considered to be the area that had the greatest effect on our overall parent company audit. We performed the tests below rather than seeking to rely on any of the company’s controls because the nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed procedures described. Our procedures included: • Tests of detail: we compared the carrying amount of 100% of investments with the net assets of the relevant subsidiary included within the group consolidation, to identify whether their net assets, being an approximation of their minimum recoverable amount, were in excess of their carrying value. • Comparing valuations: we compared the carrying amount of the parent company’s investments to the Group’s market capitalisation. For the investments where the carrying amount exceeded the net asset value, our procedures included: • Our sector experience: we evaluated the assumptions used in the applicable impairment models, in particular those relating to projected growth, using our knowledge and historic experience of the trading performance of the underlying Group; and • Benchmarking assumptions: we challenged the Group’s assumptions in relation to key inputs such as projected growth and discount rates to internally and externally derived data. We continue to perform procedures over goodwill impairment: carrying amount of Acute Medicines Management cash generating unit and revenue recognition. However, relative to the new risks identified relating to the identification and valuation of intangible assets acquired in business combinations and presentation of exceptional items, goodwill impairment and revenue recognition were not assessed as the most significant risks in our current year audit and, therefore, they have not been separately identified in our report this year. 2. Key audit matters: our assessment of risks of material misstatement continued 90 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS 3. Our application of materiality and an overview of the scope of our audit Materiality for the Group financial statements as a whole was set at £1.9 million (2021: £1.8 million), determined with reference to a benchmark of Group profit before tax normalised to exclude the exceptional fair value gain on previously held interest in joint venture; exceptional costs as disclosed in note 32, excluding staff costs, of which it represents 5.0% (2021: 5.0% of Group profit before tax). We adjusted for these items because they do not represent the normal, continuing operations of the Group. Materiality for the parent Company financial statements as a whole was set at £1.0 million (2021: £1.3 million), determined with reference to a benchmark of parent company net assets, of which it represents 0.6% (2021: 1.2%). In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole. Performance materiality was set at 75% (2021: 75%) of materiality for the financial statements as a whole, which equates to £1.42 million (2021: £1.35 million) for the Group and £0.75 million (2021: £0.9 million) for the parent Company. We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk. We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £0.095m (2021: £0.090m), in addition to other identified misstatements that warranted reporting on qualitative grounds. Of the Group’s 12 (2021: 22) reporting components, we subjected 4 (2021: 4) to full scope audits for group purposes. The components within the scope of our work accounted for the percentages illustrated opposite. The remaining 3% (2021: 4%) of total Group revenue, 17% (2021: 25%) of total profits and losses that made up Group profit before tax, and 3% (2021: 8%) of total Group assets is represented by 8 (2021: 18) of reporting components, none of which individually represented more than 12.0% (2022: 10.2%) of any of total Group revenue, total profits and losses that made up Group profit before tax or total Group assets. For these components, we performed analysis at an aggregated group level to re-examine our assessment that there were no significant risks of material misstatement within these. In 2022, the profit coverage measure has been changed from Group profit before tax to total profits and losses that made up Group profit before tax. The prior year coverage has been updated accordingly. The work on all components subject to full scope audits for Group purposes, including the audit of the parent Company, was performed by the Group team using component materialities that ranged from £0.7 million to £1.7 million (2021: £0.3 million to £1.5 million), having regard to the mix of size and risk profile of the Group across the components. The scope of the audit work performed was predominately substantive as we placed limited reliance upon the Group’s internal control over financial reporting. Full scope for group audit purposes 2022 Full scope for group audit purposes 2021 Residual components Normalised Group profit before tax Group materiality 95 95+5+I Normalised Group profit before tax £38.0m (2021: Group profit before tax: £36.1m) Group materiality £1.9m (2021: £1.8m) £1.9m Whole financial statements materiality (2021: £1.8m) £1.42m Whole financial statements performance materiality (2021: £1.35m) £1.7m Range of materiality at 4 components (£0.7m – £1.7m) (2021: £0.3m – £1.5m) £0.095m Misstatements reported to the audit committee (2021: £0.09m) 97+ 97+3+I 97 396 96+4+4+I 97% (2021: 96%) GROUP REVENUE 97 97+3+I 92 92+8+8+I 97% (2021: 92%) GROUP TOTAL ASSETS83 83+1717+I 75 75+25+25+I 83% (2021: 75%) TOTAL PROFITS AND LOSSES THAT MADE UP GROUP PROFIT BEFORE TAX 75 25 17 83 92 97 3 8 96 Independent auditor’s report continued to the members of EMIS Group plc 4 91 EMIS Group plc | Annual report and accounts 2022 4. Going concern The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Company or to cease their operations, and as they have concluded that the Group and the Company’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”). We used our knowledge of the Group, its industry, and the general economic environment to identify the inherent risks to its business model and analysed how those risks might affect the Group’s and Company’s financial resources or ability to continue operations over the going concern period. The risk that we considered most likely to adversely affect the Group’s and Company’s available financial resources over this period was: • lower than expected trading volumes; and • the potential impacts of the proposed acquisition of the Group by UnitedHealth Group, as disclosed in the Strategic Report We considered whether these risks could plausibly affect the liquidity in the going concern period by assessing the degree of downside assumption that, individually and collectively, could result in a liquidity issue, taking into account the Group’s current and projected cash and facilities (a reverse stress test). We also assessed the completeness of the going concern disclosure. Our conclusions based on this work: • we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate; • we have not identified, and concur with the directors’ assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Group’s or Company’s ability to continue as a going concern for the going concern period; and • we have nothing material to add or draw attention to in relation to the directors’ statement in note 1 to the financial statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Group and Company’s use of that basis for the going concern period, and we found the going concern disclosure in note 1 to be acceptable. However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group or the Company will continue in operation. 5. Fraud and breaches of laws and regulations – ability to detect Identifying and responding to risks of material misstatement due to fraud To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included: • Enquiring of directors, the audit committee, internal audit and inspection of policy documentation as to the Group’s high-level policies and procedures to prevent and detect fraud, including the internal audit function, and the Group’s channel for “whistleblowing”, as well as whether they have knowledge of any actual, suspected or alleged fraud. • Reading Board, audit committee and remuneration committee minutes. • Considering remuneration incentive schemes and performance targets for directors, including the adjusted operating profit target for management remuneration. • Using analytical procedures to identify any unusual or unexpected relationships. We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit. As required by auditing standards and taking into account possible pressures to meet profit targets and our overall knowledge of the control environment, we perform procedures to address the risk of management override of controls, and the risk of fraudulent revenue recognition in particular: • the risk that revenue is overstated through recording revenues in the wrong period; • the risk of bias in accounting estimates such as the identification and fair value of acquired intangibles on business combinations; and • the risk that Group management may be in a position to make inappropriate accounting entries. We also identified a fraud risk related to classification of exceptional items in response to possible pressures to meet profit targets and external pressures. Further detail in respect of classification of exceptional items is set out in the key audit matter disclosures in section 2 of this report. We also performed procedures including: • Identifying journal entries and other adjustments to test based on risk criteria and comparing the identified entries to supporting documentation for significant components. These included those journals with unexpected account pairings or posted to unusual accounts. • Assessing whether the judgements made are indicative of potential bias. • Selecting a sample of revenue and deferred revenue transactions across the Group and agreeing to supporting documentation to evaluate whether the accounting treatment was in line with relevant accounting standards. 92 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS Independent auditor’s report continued to the members of EMIS Group plc 5. Fraud and breaches of laws and regulations – ability to detect continued Identifying and responding to risks of material misstatement related to compliance with laws and regulations We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience and through discussion with the directors and other management (as required by auditing standards), and from inspection of the Group’s regulatory and legal correspondence and discussed with the directors and other management the policies and procedures regarding compliance with laws and regulations. We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit. The potential effect of these laws and regulations on the financial statements varies considerably. Firstly, the Group is subject to laws and regulations that directly affect the financial statements including financial reporting legislation (including related companies legislation), distributable profits legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items. Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation. We identified the following areas as those most likely to have such an effect: health and safety, data protection, clinical safety, anti-bribery and corruption, employment law and certain aspects of company legislation. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the directors and other management and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach. Context of the ability of the audit to detect fraud or breaches of law or regulation Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non- detection of fraud, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations. 6. We have nothing to report on the other information in the annual report The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information. Strategic report and directors’ report Based solely on our work on the other information: • we have not identified material misstatements in the strategic report and the directors’ report; • in our opinion the information given in those reports for the financial year is consistent with the financial statements; and • in our opinion those reports have been prepared in accordance with the Companies Act 2006. Disclosures of emerging and principal risks and longer-term viability We are required to perform procedures to identify whether there is a material inconsistency between the directors’ disclosures in respect of emerging and principal risks and the viability statement, and the financial statements and our audit knowledge. Based on those procedures, we have nothing material to add or draw attention to in relation to: • the directors’ confirmation within the strategic report that they have carried out a robust assessment of the emerging and principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity; • the Principal risks and uncertainties disclosures describing these risks and how emerging risks are identified, and explaining how they are being managed and mitigated; and • the directors’ explanation in the viability statement of how they have assessed the prospects of the Group, over what period they have done so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements audit. As we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee as to the Group’s and Company’s longer-term viability. 93 EMIS Group plc | Annual report and accounts 2022 6. We have nothing to report on the other information in the Annual Report continued Corporate governance disclosures We are required to perform procedures to identify whether there is a material inconsistency between the directors’ corporate governance disclosures and the financial statements and our audit knowledge. Based on those procedures, we have concluded that each of the following is materially consistent with the financial statements and our audit knowledge: • the directors’ statement that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy; or • the section of the annual report describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee, and how these issues were addressed; and • the section of the annual report that describes the review of the effectiveness of the Group’s risk management and internal control systems. 7. We have nothing to report on the other matters on which we are required to report by exception Under the Companies Act 2006, we are required to report to you if, in our opinion: • 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 • the parent Company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. We have nothing to report in these respects. 8. Respective responsibilities Directors’ responsibilities As explained more fully in their statement set out on page 85, the directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. 9. The purpose of our audit work and to whom we owe our responsibilities 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 auditor’s 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. Christopher Vaulks (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants Quayside House 110 Quayside Newcastle upon Tyne Tyne and Wear NE1 3DX 25 May 2023 94 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS Group statement of comprehensive income for the year ended 31 December 2022 2022 2021 Notes £’000 £’000 Revenue 5 175,373 168,226 Costs: Changes in inventories (12) (83) Cost of goods and services (12,889) (16,172) Staff costs 7 (77,375) (72,303) Other operating expenses (40,411) (26,749) Depreciation of property, plant and equipment (4,915) (4,196) Amortisation of intangible assets 12 (12,025) (12,938) Adjusted operating profit1 47,686 43,533 Development costs capitalised 7, 12 4,361 4,052 Amortisation of intangible assets2 12 (11,539) (11,800) Exceptional costs 32 (12,762) — Operating profit 6 27,746 35,785 Finance income 480 50 Finance costs (531) (476) Share of result of joint venture and associate 15, 16 533 727 Exceptional fair value gain on previously held interest in joint venture 15, 32 10,706 — Profit before taxation 38,934 36,086 Income tax expense 8 (5,764) (7,010) Profit for the period 33,170 29,076 Other comprehensive income Items that may be reclassified to profit or loss Currency translation differences 42 (55) Other comprehensive income 42 (55) Total comprehensive income for the year 33,212 29,021 Attributable to: – equity holders of the parent 33,212 29,021 Total comprehensive income for the year 33,212 29,021 Earnings per share attributable to equity holders of the parent Pence Pence Basic 9 52.5 46.2 Basic diluted 9 51.8 45.6 Adjusted1 9 62.0 56.1 Adjusted diluted1 9 61.2 55.5 1 For an explanation of the alternative performance measures used in this report, please refer to page 18. 2 Excluding amortisation of computer software used internally of £486,000 (2021: £1,138,000). The notes on pages 98 to 122 are an integral part of these consolidated financial statements. 95 EMIS Group plc | Annual report and accounts 2022 Group and parent company balance sheets as at 31 December 2022 Group Company 2022 2021 2022 2021 Notes £’000 £’000 £’000 £’000 Non-current assets Goodwill 11, 31 85,600 52,177 — — Other intangible assets 12, 31 38,588 24,358 473 722 Property, plant and equipment 13 14,803 18,694 — — Investments 14 — — 161,913 112,157 Investment in joint venture and associate 15, 16 199 355 — — 139,190 95,584 162,386 112,879 Current assets Inventories 518 530 — — Current tax assets 254 4,730 — — Trade and other receivables 17 38,889 32,057 1,372 6,542 Cash and cash equivalents 45,918 64,042 34,447 49,471 85,579 101,359 35,819 56,013 Total assets 224,769 196,943 198,205 168,892 Current liabilities Trade and other payables 19 (34,175) (29,180) (1,288) (337) Deferred income (34,342) (29,582) — — Other financial liabilities 23 (1,500) (2,000) (1,500) (2,000) Lease liabilities 26 (705) (903) — — Amounts owed to subsidiary companies — — (35,052) (62,103) (70,722) (61,665) (37,840) (64,440) Non-current liabilities Deferred tax liability 22 (4,916) (1,788) — — Other financial liabilities 23 (3,000) — (3,000) — Lease liabilities 26 (3,660) (5,013) — — (11,576) (6,801) (3,000) — Total liabilities (82,298) (68,466) (40,840) (64,440) Net assets 142,471 128,477 157,365 104,452 Equity Ordinary share capital 24 633 633 633 633 Share premium 24 51,045 51,045 51,045 51,045 Own shares held in trust (4,529) (4,639) — — Retained earnings 93,541 79,699 103,468 50,555 Other reserve 1,781 1,739 2,219 2,219 Total equity 142,471 128,477 157,365 104,452 The notes on pages 98 to 122 are an integral part of these consolidated financial statements. The financial statements on pages 94 to 122 were approved by the Board of Directors and authorised for issue on 25 May 2023 and are signed on its behalf by: Andy Thorburn Peter Southby Chief Executive Officer Chief Financial Officer Company number 06553923 (England and Wales) 96 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS Group Company 2022 2021 2022 2021 Notes £’000 £’000 £’000 £’000 Profit before taxation 38,934 36,086 72,288 19,456 Finance income (480) (50) (396) (88) Finance costs 531 476 171 123 Share of result of joint venture and associate 15, 16 (533) (727) — — Exceptional fair value gain on previously held interest in joint venture 15 (10,706) — — — Dividends received — — (84,083) (21,198) Operating profit/(loss) 27,746 35,785 (12,020) (1,707) Adjustment for non-cash items Amortisation of intangible assets 12 12,025 12,938 249 744 Depreciation of property, plant and equipment 13 4,915 4,196 — — Loss/(profit) on disposal of property, plant and equipment 84 (9) — — Share-based payments 1,933 1,788 — — Impairment of loan receivable from Employee Benefit Trust — — 5,846 — Operating cash flow before changes in working capital 46,703 54,698 (5,925) (963) Changes in working capital Decrease in inventory 12 83 — — (Increase)/decrease in trade and other receivables (5,385) (2,136) (566) 47 Increase/(decrease) in trade and other payables 4,830 (3,007) 951 (989) Increase in deferred income 2,653 421 — — Adjusted cash generated from/(used in) operations 54,634 46,007 (2,960) (1,905) Development costs capitalised 7, 12 4,361 4,052 — — Cash cost of exceptional items (10,182) — (2,580) — Cash generated from/(used in) operations 48,813 50,059 (5,540) (1,905) Finance costs (281) (90) (281) (110) Finance income 336 26 396 88 Tax paid (2,659) (7,483) — — Net cash generated from/(used in) operating activities 46,209 42,512 (5,425) (1,927) Cash flows from investing activities Purchase of property, plant and equipment (2,478) (2,227) — — Proceeds from sale of property, plant and equipment 9 10 — — Development costs capitalised 7, 12 (4,361) (4,052) — — Purchase of software 12 (267) (126) — — Dividends received 15 626 725 — 21,198 Acquisition contingent consideration paid 23 (1,751) — (1,751) — Acquisition of subsidiaries net of cash acquired 31 (30,847) — (19,611) — Net cash (used in)/generated from investing activities (39,069) (5,670) (21,362) 21,198 Cash flows from financing activities Transactions in own shares held in trust 110 (1,505) 352 412 Payment of lease liabilities (1,181) (1,157) — — Contingent consideration 23 (2,000) (2,000) (2,000) (2,000) Dividends paid 10 (22,193) (21,146) (22,193) (21,146) Increase in loan from subsidiary companies — — 37,125 41,728 Decrease in loan from subsidiary companies — — (1,521) (16,500) Increase in loan to Employee Benefit Trust — — — (1,407) Net cash (used in)/generated from financing activities (25,264) (25,808) 11,763 1,087 Net (decrease)/increase in cash and cash equivalents (18,124) 11,034 (15,024) 20,358 Cash and cash equivalents at beginning of year 64,042 53,008 49,471 29,113 Cash and cash equivalents at end of year 45,918 64,042 34,447 49,471 The notes on pages 98 to 122 are an integral part of these consolidated financial statements. Group and parent company statements of cash flows for the year ended 31 December 2022 97 EMIS Group plc | Annual report and accounts 2022 Group and parent company statements of changes in equity for the year ended 31 December 2022 Share Share Own shares Retained Other Total capital premium held in trust earnings reserve equity Group £’000 £’000 £’000 £’000 £’000 £’000 At 1 January 2021 633 51,045 (3,594) 69,260 1,794 119,138 Profit for the year — — — 29,076 — 29,076 Transactions with owners Share acquisitions less sales — — (1,045) — — (1,045) Share-based payments — — — 1,788 — 1,788 Deferred tax in relation to share-based payments — — — 721 — 721 Dividends paid (note 10) — — — (21,146) — (21,146) Other comprehensive income Currency translation differences — — — — (55) (55) At 31 December 2021 633 51,045 (4,639) 79,699 1,739 128,477 Profit for the year — — — 33,170 — 33,170 Transactions with owners Share acquisitions less sales — — 110 — — 110 Share-based payments — — — 1,933 — 1,933 Deferred tax in relation to share-based payments — — — 932 — 932 Dividends paid (note 10) — — — (22,193) — (22,193) Other comprehensive income Currency translation differences — — — — 42 42 At 31 December 2022 633 51,045 (4,529) 93,541 1,781 142,471 Share Share Retained Other Total capital premium earnings reserve equity Company £’000 £’000 £’000 £’000 £’000 At 1 January 2021 633 51,045 49,286 2,219 103,183 Profit for the year — — 19,720 — 19,720 Transactions with owners Share-based payments — — 1,788 — 1,788 Dividends paid (note 10) — — (21,146) — (21,146) Share acquisitions less sales — — 907 — 907 At 31 December 2021 633 51,045 50,555 2,219 104,452 Profit for the year — — 72,821 — 72,821 Transactions with owners Share-based payments — — 1,933 — 1,933 Dividends paid (note 10) — — (22,193) — (22,193) Share acquisitions less sales — — 352 — 352 At 31 December 2022 633 51,045 103,468 2,219 157,365 The notes on pages 98 to 122 are an integral part of these consolidated financial statements. 98 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS Notes to the financial statements for the year ended 31 December 2022 1. 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. 1.1 Basis of preparation The financial statements of the Group and parent company have been prepared in accordance with UK-adopted international accounting standards in conformity with the requirements of the Companies Act 2006 (“adopted IFRS”). For the Group statement of comprehensive income and the Group statement of cash flows, in addition to the results presented in accordance with adopted IFRS, the Board has also disclosed information on what it regards as the underlying performance of the business. Further details on these alternative performance measures (APMs) are provided on page 18. The preparation of financial statements in conformity with adopted IFRS requires the use of accounting estimates and judgements 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 critical accounting judgements and key sources of estimation uncertainty in the 2022 financial statements are set out in note 2. Going concern The Group is profitable and it is anticipated that this will continue. There is a high and continuing level of recurring revenue and high cash conversion. The Group has an undrawn committed £30,000,000 bank facility in place until December 2024, comprising a revolving credit facility of £25,000,000 and an overdraft facility of £5,000,000. The Directors have prepared cash flow forecasts covering a period of at least twelve months from the date of approval of these financial statements. These forecasts include consideration of severe but plausible downside scenarios informed by the principal risks and uncertainties set out in the Strategic report, including increased market competition linked to the GP IT Futures framework, failure to monitor and rectify software defects on a timely basis, failure to recruit or retain appropriate numbers of suitably qualified people in critical areas, and failures to comply with information governance legislation. These forecasts show steady revenue growth and stronger operating profit growth, and the Group continuing to operate with significant cash reserves and not needing to draw on the £30,000,000 bank facility in place under any of the scenarios considered (see note 20). As explained in the Chief Executive Officer’s statement on page 7, on 17 June 2022 the Group agreed a proposal for the Group to be acquired by Bordeaux UK Holdings II Limited, an affiliate of Optum Health Solutions (UK) Limited (“Optum”) and a wholly owned subsidiary of UnitedHealth Group Incorporated. The Directors have considered statements in the announcement made pursuant to rule 2.7 of the Takeover Code in respect of the Proposed Acquisition, and discussions with Optum senior management, regarding Optum’s intention to ensure continuity of the Group’s existing business with no material changes to its existing operations for at least a period of twelve months from completion of the Acquisition. Considering the above, the Directors have concluded that the completion of this Acquisition would not impact the appropriateness of the going concern basis of preparation of these financial statements. The Board also considered the potential impact of the Proposed Acquisition on the cash flow forecasts used in the going concern assessment and concluded that there was currently no basis for modelling any impact arising directly from a potential future completion. Based on this assessment, and notwithstanding the net current liabilities in the Company of £2,021,000, the Directors have a reasonable expectation that the Group and Company have adequate resources to continue in existence for at least twelve months from the date of approval of these financial statements and therefore continue to adopt the going concern basis of accounting in preparing the annual financial statements. 1.2 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 £72,821,000 (2021: £19,720,000). 1.3 Changes in accounting policy and disclosure (a) New and amended standards adopted by the Group The Group has adopted the following new standards, amendments or interpretations in these financial statements: • Reference to the Conceptual Framework – amendments to IFRS 3; • Property, Plant and Equipment (proceeds before intended use) – amendments to IAS 16; • Onerous Contracts (cost of fulfilling a contract) – amendments to IAS 37; and • Annual Improvements to IFRS Standards 2018–2020 Cycle. None of these standards has had a material impact on the financial statements. (b) Adopted IFRS not yet applied A number of new standards, amendments or interpretations have been issued but are not mandatory for the year ended 31 December 2022 and consequently have not been applied by the Group in these financial statements. These standards are not expected to have a material impact on the Group’s results. • IFRS 17 Insurance Contracts; • Amendments to IAS 12 – Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction; • Amendments to IAS 8 – Definition of Accounting Estimates; • Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies; • Amendments to IAS 1 – Classification of Liabilities as Current or Non-Current; and • Amendments to IFRS 16 – Lease Liability in a Sale and Leaseback. 99 EMIS Group plc | Annual report and accounts 2022 1. Summary of significant accounting policies continued 1.4 Basis of consolidation The Group financial statements consolidate those of the Company and of its subsidiary undertakings drawn up to 31 December 2022. Subsidiaries Subsidiaries are entities over which the Company has power, to which the Company has exposure or rights to variable returns and where the Company has an ability to use its power to affect those returns. The Group uses 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. Accounting policies previously applied by acquired subsidiaries are changed as necessary to comply with accounting policies adopted by the Group. Intra-Group transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated on consolidation. In the parent company balance sheet, investments in subsidiaries are recorded at cost and are tested for impairment when there are indicators of impairment. Any such impairment losses are recognised in the income statement in the period in which they occur. The EMIS Group plc Employee Benefit Trust is treated as a separate legal entity within the Group consolidation. Joint ventures and associates A joint venture is a contractual arrangement whereby the Group and other parties undertake economic activities that are subject to “joint control”, which means that the strategic financial and operating policy decisions relating to the relevant activities require the unanimous consent of the parties sharing control. An associate is an entity in which the Group has significant influence, but not control or joint control, over the financial and operating policies. Investments in joint ventures and associates are recognised in the Group financial statements using the equity method of accounting and initially carried on the balance sheet at cost, including any transaction costs. 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 Group statement of comprehensive income and its share of post-acquisition movements in reserves is recognised in reserves. Where necessary, adjustments are made to bring the accounting policies used into line with those used by the Group. Where control of a subsidiary previously held as an investment in joint venture or associate is obtained, the Group remeasures the previously held interest at fair value and takes this amount into account in the determination of goodwill, with any resulting gain or loss recognised in the statement of comprehensive income. 1.5 Operating segments Operating 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 segments, has been identified as the main Board. 1.6 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 (or as) control of goods or services passes to the customer in accordance with when distinct performance obligations are met, and at the amount to which the Group is entitled. Specific criteria in respect of the Group’s revenue categories are described below: • Revenue from subscription fees that contain a right to access software (non-perpetual licences for which the underlying software is not controlled by the customer), maintenance and software support and other support services is recognised on a straight-line basis as performance obligations are met over the period of supply. • Revenue from training, consultancy and system implementations, and revenue from granting a right of use of software (perpetual licences which grant the customer control of the software), is recognised at the point in time that delivery to a customer has occurred with no significant vendor obligations remaining and where the collection of the resulting receivable is considered probable. For long-term software installation contracts (principally within Acute Care), revenue is recognised according to the stage of completion which is measured based on delivery of certain milestones with observable acceptance criteria. • In determining whether a right of use or a right of access to software has been granted, the Group considers whether the contract requires, or the customer reasonably expects, that the Group will undertake activities that significantly affect the software to which the customer has rights, whether those activities would impact the customer, and whether those activities would result in a transfer of a service to the customer as they occur. If all these criteria are met, the Group deems there to have been a grant of a right of access to software and revenue is therefore recognised over the period of supply. • Revenue from interface and connectivity services is recognised over time, as the performance obligations are delivered. Progress is measured using either an input method (where there are significant upfront requirements in order for the Group to deliver obligations under the contract) or on a straight-line basis over the contract term. • Revenue from hardware sales is recognised at the point in time when ownership passes. • Advertising revenue generated in the Patient business is recognised as advertisements are displayed. • Other services revenue includes Digitisation projects for which revenue is recognised based on successful delivery of agreed milestones for both scanning and upload activities, and Managed Service revenues which are recognised over time on a straight-line basis as performance obligations are delivered over the period of supply. 100 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS Notes to the financial statements continued for the year ended 31 December 2022 FINANCIAL STATEMENTS 1. Summary of significant accounting policies continued 1.6 Revenue recognition continued Where invoices are raised in advance of the performance obligations being satisfied, these are recorded on the balance sheet as deferred income. This deferred income relates predominantly to services which are recognised on a straight-line basis over the period of supply. These services are typically invoiced at the beginning of the provision of service and the associated revenue is recognised over this period. These are captured within current liabilities on the basis that they are expected to be recognised in revenue over the next twelve months. Where Group recognition criteria have been met but no invoice to the customer has been raised at the reporting date, revenue is recognised and included as accrued income, within trade and other receivables. 1.7 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 identifiable net assets acquired. Goodwill does not have a finite life and is not subject to amortisation. It is reviewed annually for impairment and whenever there is an indication that there may be impairment. Any impairment is recognised immediately in the statement of comprehensive income and is not subsequently reversed. For the purpose of impairment testing, goodwill is allocated to those cash-generating units (CGUs) or groups of CGUs 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. A CGU is the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups thereof. (b) Computer software developed for external sale Expenditure on software development is capitalised as an intangible asset if it meets the recognition criteria set out in IAS 38 Intangible Assets, requiring it to be probable that the expenditure will generate future economic benefits and can be measured reliably. To meet these criteria, it is necessary to be able to demonstrate, among other things, the technical feasibility of completing the intangible asset so that it will be available for use or sale. The costs incurred in the development stage for substantially new or enhanced products are assessed against the IAS 38 criteria and considered for recognition as an asset when they meet those criteria. These costs are generally incurred in developing the detailed product design, software configuration and interfaces, in the coding of software, in its integration with hardware, and in its testing. Development expenditure directed towards incremental improvements in existing products, remedial work and other maintenance activity does not qualify for recognition as an intangible asset. Where a product is technically feasible, production and sales are intended, a market exists and sufficient resources are available to complete the project, directly attributable development costs (only direct employee costs are assessed as directly attributable) are capitalised and subsequently amortised on a straight-line basis over the estimated useful life, reflecting the pattern of the expected future economic benefits. Where these conditions are not met, development expenditure is recognised as an expense in the period in which it is incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. The estimated useful life for development expenditure is generally between four and six years, based on the anticipated conditions in the market from which economic benefits are expected to be derived for each unique software product. Development expenditure is capitalised in accordance with the criteria of IAS 38 and for this reason is not regarded as a realised loss. (c) Other intangible assets Intangible assets acquired in a business combination are initially recognised at their fair value. Other intangible assets are initially recognised at cost. Intangible assets are subsequently stated at this value less accumulated amortisation and any accumulated impairment losses. Amortisation is recognised in the statement of comprehensive income on a straight-line basis over the estimated useful life of the asset, as shown below: Computer software used internally 4–6 years Computer software acquired on business combinations 4–8 years Customer relationships 7–15 years 1.8 Property, plant and equipment Property, plant and equipment acquired with subsidiary companies is recognised at fair value at the date of acquisition. Other additions are recognised at purchase cost. Depreciation is provided on all property, plant and equipment, other than freehold land, to write assets down to their residual value on a straight-line basis over their estimated useful lives, as shown below: Freehold property 50 years Leasehold property Life of lease Computer equipment 3–6 years Fixtures, fittings and equipment 4–10 years Motor vehicles 5 years 101 EMIS Group plc | Annual report and accounts 2022 1. Summary of significant accounting policies continued 1.9 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 equipment 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 in the Group statement of comprehensive income. 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. 1.10 Taxation The taxation expense charged in the Group statement of comprehensive income represents the sum of the current tax expense and the deferred tax expense. The current tax payable is based on the taxable profit for the year. Taxable profit differs from accounting profit as reported in the Group statement of comprehensive income because it includes or 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 Group statement of comprehensive income, 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: • the same taxable entity; or • 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 deferred tax assets and liabilities are expected to be realised or settled. 1.11 Share-based payments The Group operates equity-settled share schemes for certain employees. The cost of share-based payments is initially measured at fair value at the date of grant, factoring in the impact of any market-based performance conditions. Non-market-based and service-based vesting conditions are not taken into account when estimating fair value, but are factors in determining the number of share options that will eventually vest. The fair values are measured using the Black Scholes and Monte Carlo models. After initial measurement, fair values in relation to equity-settled schemes are not remeasured. The cost of equity-settled share-based payments is recognised in the Group statement of comprehensive income on a straight-line basis over the vesting period with the corresponding amount credited to equity, based on an estimate of the number of shares that will eventually vest. The estimate of the level of vesting is reviewed annually and the charge is adjusted accordingly in respect of non-market-based vesting conditions. All costs relating to equity-settled share based payments are recharged from the Company by way of a decrease to amounts owed to subsidiary companies. 1.12 Retirement benefit costs Contributions payable by the Group during the period into its defined contribution pension plans are recognised in the Group statement of comprehensive income. Differences between contributions payable in the period and contributions actually paid are shown as either accruals or prepayments in the balance sheet. 1.13 Foreign currency Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the statement of comprehensive income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are retranslated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined. The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the Group’s presentational currency at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated at an average rate for the year where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Exchange differences arising from this translation of foreign operations are taken directly to the translation reserve. When a foreign operation is disposed of such that control is lost, the cumulative amount in the translation reserve is reclassified to the statement of comprehensive income as part of the gain or loss on disposal. 102 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS Notes to the financial statements continued for the year ended 31 December 2022 FINANCIAL STATEMENTS 1. Summary of significant accounting policies continued 1.14 Exceptional items Exceptional items are items of income and expense relating to non-recurring projects which are material and, due to their nature or size, are presented separately on the face of the income statement in order to provide an understanding of the Group’s underlying financial performance. Exceptional items are excluded from the Group’s alternative performance measures (APMs), as defined on page 18. 1.15 Inventories Inventories are stated at the lower of weighted average 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. 1.16 Own shares held in trust The shares in the Company held by the EMIS Group plc Employee Benefit Trust are treated as treasury shares, stated at weighted average cost and presented as a reduction of shareholders’ equity (see note 24). Gains and losses on transactions in the Company’s own shares are taken directly to equity. 1.17 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 expected credit losses. A provision for expected credit losses is established using the simplified approach under IFRS 9. Specific provisions are made against high-risk trade receivable balances, where balances are in dispute or where doubt exists about the customer’s ability to pay. Investments Investments in subsidiaries, joint ventures and associates 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, and bank overdrafts. There are no bank deposits with maturity dates of more than one month. Assets held for sale Non-current assets are classified as held for sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use. Such assets are measured at the lower of their carrying amount and fair value less costs to sell. Impairment losses on initial classification as held for sale or held for distribution and subsequent gains and losses on remeasurement are recognised in profit or loss. Once classified as held for sale, intangible assets and property, plant and equipment are no longer amortised or depreciated. (b) Financial liabilities 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. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, where this is different to the initial recognition value. Bank borrowings Bank loans are recorded initially at their fair value, net of issue costs. Issue costs are charged to the Group 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 the fair value of the consideration received. Contingent acquisition consideration Consideration payable as part of the acquisition cost of a business combination is recognised at estimated fair value at the acquisition date. Subsequent changes in the measurement of cash-settled consideration are recognised in the statement of comprehensive income. Contingent consideration paid in the same year as the related acquisition is classified as a cash flow from investing activities. Amounts paid in respect of contingent consideration liabilities recognised in prior years, or amounts paid in excess of previously recognised contingent consideration liabilities are classified as cash flows from financing activities. 1.18 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. 1.19 Leases The Group leases property, office equipment and motor vehicles. The Group is not a lessor. At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. 103 EMIS Group plc | Annual report and accounts 2022 1. Summary of significant accounting policies continued 1.19 Leases continued The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, which is generally the case for leases in the Group, the Group’s incremental borrowing rate adjusted to reflect factors specific to the lease such as the term and the type of asset leased. The lease liability is measured at amortised cost using the effective interest method. In certain circumstances, the lease liability will be remeasured, such as when a change in the Group’s assessment of whether it will exercise a purchase or termination option takes place. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. The Group presents right-of-use assets that do not meet the definition of investment property in property, plant and equipment and lease liabilities on the face of the statement of financial position. The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. 2. Critical accounting judgements and key sources of estimation uncertainty and other areas of estimation In preparing the 2022 financial statements, certain significant judgements, including those involving estimations (which are dealt with below), have been made in the process of applying the Group’s accounting policies. Certain other areas of estimation are also included to provide further useful information for the reader. Classification of costs as exceptional A significant judgement relates to the classification of certain costs as exceptional (see note 32), which has a significant impact on the calculation of certain alternative performance measures (see page 18). The classification of such costs as exceptional was deemed appropriate as they were directly attributable to the material non-recurring projects running in the year. In respect of staff costs, which largely relate to staff already in the business that would have comprised part of the overall staff cost in the comparative period, the time diverted to these projects was from other value-adding activities, and therefore the classification was appropriate to avoid distortion in the underlying performance of the Group. Carrying amount of goodwill Goodwill is reviewed annually for impairment, and whenever there is an indication that there may be an impairment, by comparing the estimated recoverable amount of a CGU (see note 1.7 (a)) with its carrying value. The recoverable amounts of CGUs are derived from an estimated value in use, based on discounted cash flow forecasts which require significant estimates of both future operating cash flows and an appropriate risk adjusted discount rate. These forecasts use the following key assumptions: discount rate, revenue growth and operating profit growth. The value in use, and therefore any potential impairment to the carrying value of goodwill may be sensitive to these assumptions. In respect of the Pinnacle and Healthcare Gateway CGUs, given the relatively lower headroom of the estimated value in use over the carrying value, the recoverable amount is more sensitive to the key assumptions noted above and it is therefore deemed an other source of estimation uncertainty. The extent to which the Directors believe a reasonably possible change in these assumptions could impact the estimated value in use over the carrying value for these CGUs has been disclosed in note 11. As a result of this analysis, the directors have concluded this is a not a major source of estimation uncertainty in accordance with IAS 1.125, but the disclosures are provided as further useful information for the reader. Fair value of acquired intangibles on business combinations During the year the Group completed three business combinations (see note 31) which, in the process of applying IFRS 3, require the estimation of the fair values of identifiable assets acquired and the liabilties assumed as part of these transactions. These fair values have been established in accordance with IFRS 13. Establishing the estimated fair values of the computer software assets involved significant estimation uncertainty as they are sensitive to the forecast future cashflows generated from these assets and the discount rate used in establishing the present value. The goodwill recognised in respect of these business combinations is also sensitive to these assumptions, as any increase or decrease in the estimated fair value of acquired computer software results in a corresponding decrease or increase in the value of goodwill recognised. If the discount rate used in arriving at the estimated fair value of computer software was increased by 2%, this would result in a reduction in the acquisition date estimated fair value of computer software of £252,000, £296,000, and £581,000 for Edenbridge, FourteenFish and Healthcare Gateway respectively. The impact on the current year amortisation charge would be a reduction of £33,000, £35,000 and £12,000 respectively. If the useful economic life of computer software was increased by one year, the acquisition date estimated fair value of computer software would increase by £513,000, £593,000, and £778,000 respectively. The impact on the current year amortisation charge would be a reduction of £21,000, £23,000 and £8,000 respectively. If the forecast future annual profits used in arriving at the estimated fair value of computer software were each reduced by 10%, the acquisition date estimated fair value of computer software would decrease by £499,000, £558,000, and £932,000 respectively. The impact on the current year amortisation charge would be a reduction of £65,000, £66,000 and £19,000 respectively. The estimation of fair values of the identifiable assets acquired and the liabilities assumed as part of these transactions involved estimation uncertainty in finalising the purchase price allocation. As the amounts have now been finalised, the Directors do not consider this to be a major source of estimation uncertainty at the year end, as it is not considered there will be a material reversal in future periods. Goodwill is also sensitive to the estimated fair value of the previously held 50% interest in Healthcare Gateway Limited (see note 15). This has been estimated based on the total consideration paid by the Group for the remaining 50% interest, less an assumed control premium of 30%. The estimated control premium is another source of estimation uncertainty as the value of Goodwill recognised is sensitive to changes in this assumption. This is a not a major source of estimation uncertainty in accordance with IAS 1.125, but discussed here to provide further useful information for the reader. Judgements not involving estimation uncertainty have also been made in applying the recognition criteria of IFRS 3 as part of the assessment of the intangible assets to be recognised as part of the business combinations. 104 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS Notes to the financial statements continued for the year ended 31 December 2022 FINANCIAL STATEMENTS Notes to the financial statements continued for the year ended 31 December 2022 3. Financial risk management 3.1 Financial risk factors The Group’s activities expose it to financial risks including credit risk, liquidity risk, interest rate risk, price risk and foreign exchange risk. The Group manages these risks through a risk management programme that seeks to minimise potential adverse effects on the Group’s performance. Exposure to financial risks is monitored by the finance team under policies approved by the Board and audit committee. 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, which are stated net of allowances for any estimated irrecoverable amounts. However, this risk is mitigated by payment being received in advance for a significant proportion of goods and services provided. There is some concentration of risk, as the Group trades extensively with various parties within the National Health Service. However, the Group has long- standing relationships with these parties, which, in addition to the normal credit management processes, assist management in controlling its credit risk. Credit risk also arises on cash and cash equivalents placed with the Group’s banks. The Group monitors the financial standing of any institution with which it deposits cash and has a formal treasury policy in place covering the maximum amount of cash to be placed with any one institution and the minimum credit rating required. 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. Details of the Group’s borrowings and the maturity profile of the Group’s financial liabilities are disclosed in notes 20 and 21. Interest rate risk The Group has limited exposure to interest rate risk with no borrowings at 31 December 2022. The Group has an undrawn £30,000,000 credit facility in place, further details of which are disclosed in note 20. The Group’s current assets include cash and cash equivalents at the year end amounting to £45,918,000 on which interest received is subject to fluctuations in market rates. Price risk As a significant proportion of the Group’s revenues are secured under framework agreements or other long-term contracts, it has only limited exposure to price risk other than at the point of renegotiation of these frameworks or contracts. Where these negotiations are material, the Group, including the Board, is fully engaged with the process in order to secure the best possible outcome. Foreign exchange risk The Group has limited transactional exposure arising from the purchase of services denominated in a currency other than the functional currency of the purchasing company. The Group also has translation risk arising from the consolidation of foreign operations with functional currency that is different to that of the Group. 3.2 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: • 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 appropriate capital structure to reduce the cost of capital; • to provide an adequate return to shareholders based on the level of risk assumed; • 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 • to maintain financial resources sufficient to mitigate against risks and unforeseen events. The Group is profitable and has high cash conversion with no indebtedness. As a result, capital risk is not significant for the Group and measurement of capital management is not a tool currently used in the internal management reporting procedures of the Group. The Group’s reserves include: Own shares held in trust – an Employee Benefit Trust holds shares in the Company to facilitate share-based payments to employees and the operation of the Group’s Share Incentive Plan. Other reserve – comprises a translation reserve of foreign exchange differences from the translation of the financial statements of overseas operations, and other reserves related to merger reliefs taken under UK law. 105 EMIS Group plc | Annual report and accounts 2022 4. 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. The Directors have presented segmental information to reflect the Group’s structure, activities and the markets being served. The Group has two operating and reportable segments, both involved with the supply and support of connected healthcare software and systems: • EMIS Health; and • EMIS Enterprise. Each operating segment is assessed by the Board based on an adjusted measure of operating profit, as defined in the APMs section on page 18. Group operating expenses, finance income and costs, cash and cash equivalents, and current and deferred tax are not allocated to segments, as income tax, group and financing activities are not segment specific. Segmental information 2022 2021 EMIS EMIS EMIS EMIS Health Enterprise Total Health Enterprise Total £’000 £’000 £’000 £’000 £’000 £’000 Segmental result Revenue 103,910 71,463 175,373 107,953 60,273 168,226 Segmental operating profit as reported internally 26,373 22,864 49,237 26,328 18,921 45,249 Development costs capitalised 2,962 1,399 4,361 2,674 1,378 4,052 Amortisation of development costs (3,591) (2,758) (6,349) (4,155) (1,972) (6,127) Amortisation of acquired intangible assets (1,814) (3,376) (5,190) (2,787) (2,886) (5,673) Segmental operating profit 23,930 18,129 42,059 22,060 15,441 37,501 Group operating expenses (1,551) (1,716) Exceptional costs (12,762) — Operating profit 27,746 35,785 Net finance costs (51) (426) Share of result of joint venture and associate 533 727 Exceptional fair value gain on previously held interest in joint venture 10,706 — Profit before taxation 38,934 36,086 Segmental assets and liabilities Segmental assets as reported internally 35,449 17,498 52,947 34,658 15,927 50,585 Goodwill and other intangible assets 73,226 50,962 124,188 48,564 27,971 76,535 108,675 68,460 177,135 83,222 43,898 127,120 Group assets 1,517 5,426 Investment in joint venture and associate 199 355 Group cash and cash equivalents 45,918 64,042 Total assets 224,769 196,943 Segmental liabilities as reported internally 47,930 28,640 76,570 42,728 23,613 66,341 Group liabilities 5,728 2,125 Total liabilities 82,298 68,466 Other segmental information Additions to property, plant and equipment 1,161 708 1,869 2,292 906 3,198 Depreciation of property, plant and equipment 3,760 1,155 4,915 3,541 655 4,196 Additions to computer software used internally 234 33 267 100 26 126 Amortisation of computer software used internally 392 94 486 797 341 1,138 Revenue excludes intra-group transactions on normal commercial terms from the EMIS Health segment to the EMIS Enterprise segment totalling £2,052,000 (2021: £2,115,000). Revenue of £113,882,000 (2021: £110,910,000) is derived from the NHS and related bodies. Revenue of £3,491,000 (2021: £3,446,000) is derived from customers outside the UK. Non-current assets held outside the UK total £679,000 (2021: £817,000). 106 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS Notes to the financial statements continued for the year ended 31 December 2022 FINANCIAL STATEMENTS 5. Revenue Revenue is analysed as follows: 2022 2021 EMIS Health EMIS Enterprise Total EMIS Health EMIS Enterprise Total £’000 £’000 £’000 £’000 £’000 £’000 Software subscription and support 80,475 36,278 116,753 79,024 25,479 104,503 Interface and connectivity charges 4,077 19,560 23,637 5,411 18,945 24,356 Other services 8,151 7,242 15,393 10,495 5,775 16,270 Perpetual licences, training, consultancy and implementation 6,795 3,832 10,627 7,272 5,150 12,422 Hardware and related services 4,412 4,551 8,963 5,751 4,924 10,675 103,910 71,463 175,373 107,953 60,273 168,226 Of the £7,310,000 accrued income at 31 December 2021, £762,000 remains accrued at 31 December 2022 (2021: £732,000) and £6,548,000 has been invoiced in 2022 (2021: £6,578,000). Other significant movements include £454,000 (2021: £nil) of balances acquired through business combinations and £9,106,000 (2021: £6,628,000) of revenue recognised in the year which was not invoiced at the reporting date. Of the £29,582,000 deferred income at 31 December 2021, £2,089,000 remains deferred at 31 December 2022 (2021: £2,699,000) and £25,525,000 has been recognised as revenue in 2022 (2021: £24,848,000). Other significant movements include £2,107,000 (2021: £nil) of balances acquired through business combinations and £28,940,000 (2021: £24,915,000) of invoices raised in the year which remain deferred at the reporting date. For a description of the revenue recognition policy, including details of which of the above revenue categories are typically recognised at a point in time or over time, see note 1.6. 6. Operating profit 2022 2021 £’000 £’000 The following have been charged in arriving at operating profit: Research and development expenditure 22,100 21,288 Depreciation of property, plant and equipment: – Depreciation of owned assets 3,782 3,169 – Depreciation of leased assets 1,133 1,027 Amortisation of intangible assets: – Computer software used internally 486 1,138 – Computer software developed for external sale 6,349 6,127 – Arising on business combinations 5,190 5,673 Low-value or short-term lease rentals (see note 1.19): – Land and buildings 23 92 – Plant, machinery and motor vehicles 5 74 The total research and development cost shown above of £22,100,000 (2021: £21,288,000) principally relates to relevant staff and directly related costs. Software development costs amounting to £4,361,000 (2021: £4,052,000) have been capitalised in accordance with the criteria set out in IAS 38. Total fees payable by the Group during the year to KPMG LLP in respect of the audit and other services provided were as follows: 2022 2021 £’000 £’000 Audit of these financial statements 400 231 Amounts payable to the Company’s auditor and associated companies in respect of: – Audit of the financial statements of subsidiaries of the Company 100 100 – All other services (including half year review) — 36 500 367 107 EMIS Group plc | Annual report and accounts 2022 7. Employees The average monthly number of people (including Directors) employed by the Group during the year was as follows: 2022 2021 Number Number Software support and development 1,000 1,051 Sales, maintenance and training 305 295 Management and administration 87 90 Others 78 72 1,470 1,508 Staff costs were: 2022 2021 £’000 £’000 Wages and salaries 69,090 63,916 Social security costs 7,487 7,590 Pension costs – defined contribution plans (note 28) 3,043 2,893 Share Incentive Plan (note 25) 183 168 Share option expense (note 25) 1,933 1,788 81,736 76,355 Dealt with as follows: Charged in Group statement of comprehensive income 77,375 72,303 Capitalised in the development of software for external sale 4,361 4,052 81,736 76,355 8. Income tax expense 2022 2021 £’000 £’000 Income tax: – UK current year tax charge 7,034 7,508 – Overseas current year tax charge 181 148 – Adjustment in respect of prior years (249) (452) Total current tax 6,966 7,204 Deferred tax: – UK current year (1,485) (899) – Adjustment in respect of prior years 283 441 – Deferred tax rate change — 264 Total deferred tax (1,202) (194) Total tax charge in Group statement of comprehensive income 5,764 7,010 Factors affecting the tax charge for the year Profit before taxation 38,934 36,086 Taxation at the average UK corporation tax rate of 19% (2021: 19%) 7,397 6,856 Tax effects of: – Expenses not allowable in determining taxable profit 679 64 – Exceptional fair value gain on previously held interest in joint venture not chargeable in determining taxable profit (2,034) — – Adjustment in respect of prior years 34 (11) – Joint venture reported net of tax (101) (138) – Other temporary differences not recognised in deferred tax (174) — – Effect of overseas tax rates (37) (25) – Deferred tax rate change — 264 Tax charge for the year 5,764 7,010 The UK government announced an increase in the corporation tax rate from 19% to 25% with an effective date of 1 April 2023. This increase was substantively enacted on 24 May 2021 and has therefore been used in the calculation of the UK’s deferred tax assets and liabilities as at 31 December 2021 and 31 December 2022. 108 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS Notes to the financial statements continued for the year ended 31 December 2022 FINANCIAL STATEMENTS 9. Earnings per share (EPS) The calculation of basic and diluted EPS is based on the following earnings and numbers of shares: 2022 2021 Earnings £’000 £’000 Basic earnings attributable to equity holders 33,170 29,076 Development costs capitalised (4,361) (4,052) Amortisation of development costs and acquired intangible assets 11,539 11,800 Exceptional costs 12,762 — Exceptional fair value gain on previously held interest in joint venture (10,706) — Tax effect of above items at 19% (2021: 19%) (3,253) (1,472) Adjusted earnings attributable to equity holders 39,151 35,352 2022 2021 Number Number Weighted average number of ordinary shares ‘000 ‘000 Total shares in issue 63,311 63,311 Shares held by Employee Benefit Trust (186) (335) For basic EPS calculations 63,125 62,976 Effect of potentially dilutive share options 848 745 For diluted EPS calculations 63,973 63,721 2022 2021 EPS Pence Pence Basic 52.5 46.2 Basic diluted 51.8 45.6 Adjusted 62.0 56.1 Adjusted diluted 61.2 55.5 10. Dividends 2022 2021 £’000 £’000 Final dividend for the year ended 31 December 2020 of 16.0p — 10,066 Interim dividend for the year ended 31 December 2021 of 17.6p — 11,080 Final dividend for the year ended 31 December 2021 of 17.6p 11,085 — Interim dividend for the year ended 31 December 2022 of 17.6p 11,108 — 22,193 21,146 A final dividend for the year ended 31 December 2022 of 21.1p amounting to approximately £13,303,000 will be proposed at the Annual General Meeting on 29 June 2023. If approved, this dividend will be paid on 11 July 2023 to shareholders on the register on 16 June 2023. The dividend is not accounted for as a liability in these financial statements and will be accounted for as an appropriation of distributable reserves in the year ending 31 December 2023. 109 EMIS Group plc | Annual report and accounts 2022 11. Goodwill EMIS EMIS Total Health Enterprise Group Group £’000 £’000 £’000 Cost At 1 January 2021 41,810 26,550 68,360 Reallocation 1,622 (1,622) — At 31 December 2021 43,432 24,928 68,360 Acquisitions (see note 31) 16,892 16,531 33,423 At 31 December 2022 60,324 41,459 101,783 Accumulated impairment losses At 1 January 2021, 31 December 2021 and 31 December 2022 8,825 7,358 16,183 Net book value At 31 December 2022 51,499 34,101 85,600 At 31 December 2021 34,607 17,570 52,177 At 1 January 2021 32,985 19,192 52,177 Impairment tests for goodwill Goodwill relates predominantly to the value of synergies arising from business combinations and the experience of staff within acquired businesses. Goodwill is allocated to the Group’s cash-generating units (CGUs) that are expected to benefit from that combination based on the relative carrying values of other acquired intangible assets. The carrying amount of goodwill is allocated to CGUs as follows: 2022 2021 £’000 £’000 Primary, Community, Partners & Analytics 23,479 23,479 Acute NHS 11,128 11,128 Community Pharmacy 6,756 6,756 Acute Medicines Management 6,606 6,606 Pinnacle 4,208 4,208 Edenbridge 6,160 — FourteenFish 10,371 — Healthcare Gateway 16,892 — 85,600 52,177 Each allocation of goodwill is tested annually for impairment and, to confirm whether an impairment of the goodwill is necessary, management compares the carrying value to the value in use. The allocation of goodwill arising from the acquisition of Healthcare Gateway is currently provisional (see note 31). The value in use for each CGU has been calculated using internal budgets for the year ending 31 December 2023 to forecast cash flows from each CGU. These cash flows have then been extrapolated for a further four years assuming average annual growth rates of between 3.5% and 17.7% (2021: 3.5%) until 31 December 2027 and then 2.5% into perpetuity (2021: 1%) for all CGUs. The cash flows have been discounted back to 31 December 2022 using a pre-tax discount rate of between 12.3% and 13.9% (2021: 12.3% to 13.9%). The exercise has confirmed that there has been no impairment in any CGU. The key assumptions underpinning the value in use calculation are revenue and operating profit growth, which impact forecast cash flows, and the discount rate. Management has determined the discount rates for each CGU using the UK government 10-year bond yield as the risk free rate of return, adjusted for both the market rate of return based on industry data and any CGU specific risks. Growth rates beyond the budget period are determined based on an assessment of long-term growth rates which takes into account historic data on growth rates of the group, its acquisitions and the growth phase of the CGU. Sensitivity analysis has been performed on the key assumptions which indicated that, with the exceptions of Pinnacle and Healthcare Gateway, no reasonably possible change to these key assumptions would cause an impairment. The carrying value of the Pinnacle CGU is £7,255,000 (including £4,208,000 of Goodwill). The estimated recoverable amount exceeded the carrying value by £942,000 and therefore the Directors concluded no impairment was necessary. However, the recoverable amount is sensitive to reasonably possible changes in the forecast levels of revenue, operating profit and the discount rate applied. If growth in revenue and operating profit were reduced by 3.5% to nil in the medium term, the recoverable amount of the CGU would be comparable to that of its carrying value. An increase in the discount rate of 1.0%, with all other assumptions left unchanged, would reduce the recoverable amount of the CGU to its carrying value. The carrying value of the Healthcare Gateway CGU is £27,184,000 (including £16,892,000 of Goodwill). The estimated recoverable amount exceeded the carrying value by £3,933,000 and therefore the Directors concluded no impairment was necessary. However, the recoverable amount is sensitive to reasonably possible changes in the forecast levels of revenue, operating profit and the discount rate applied. If growth in revenue and operating profit was reduced by 6.0% to 4.0% in the medium term, the recoverable amount of the CGU would be reduced to a level comparable with its carrying value. An increase in the discount rate of 1.1%, with all other assumptions left unchanged, would reduce the recoverable amount of the CGU to its carrying value. The Group has considered the impacts of climate risk on the financial statements and disclosures, including impairment. These are not material. 110 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS Notes to the financial statements continued for the year ended 31 December 2022 FINANCIAL STATEMENTS 12. Other intangible assets Computer Computer Computer software software software acquired on used developed for business Customer internally external sale combinations relationships Total Group £’000 £’000 £’000 £’000 £’000 Cost At 1 January 2021 8,250 64,688 43,330 31,946 148,214 Additions 126 4,052 — — 4,178 At 31 December 2021 8,376 68,740 43,330 31,946 152,392 Acquisition of businesses — — 20,360 1,267 21,627 Additions 267 4,361 — — 4,628 At 31 December 2022 8,643 73,101 63,690 33,213 178,647 Accumulated amortisation and impairment At 1 January 2021 6,318 47,952 35,693 25,133 115,096 Charged in year 1,138 6,127 3,566 2,107 12,938 At 31 December 2021 7,456 54,079 39,259 27,240 128,034 Charged in year 486 6,349 2,967 2,223 12,025 At 31 December 2022 7,942 60,428 42,226 29,463 140,059 Net book value At 31 December 2022 701 12,673 21,464 3,750 38,588 At 31 December 2021 920 14,661 4,071 4,706 24,358 At 1 January 2021 1,932 16,736 7,637 6,813 33,118 The accounting policy for intangible assets is set out in note 1.7. The remaining average amortisation period for software developed for external sale is five (2021: five) years. At 31 December 2022 software acquired on business combinations had a remaining amortisation period of six years for Edenbridge and FourteenFish, seven years for Healthcare Gateway and five years for Pinnacle. Customer relationships have a remaining amortisation period of nine years for Edenbridge and FourteenFish, and ten years for Healthcare Gateway. Company intangible assets comprise computer software developed for external sale with a cost of £3,729,000 (2021: £3,729,000) and accumulated amortisation of £3,256,000 (2021: £3,007,000). 111 EMIS Group plc | Annual report and accounts 2022 13. Property, plant and equipment Fixtures, Land and Computer fittings and Motor buildings equipment equipment vehicles Total Group £’000 £’000 £’000 £’000 £’000 Cost At 1 January 2021 14,413 17,368 4,160 2,172 38,113 Additions 18 2,665 505 10 3,198 Remeasurement of lease asset — — — (142) (142) Disposals (273) (1,096) (403) (24) (1,796) Effect of movements in exchange rates (43) (10) — — (53) At 31 December 2021 14,115 18,927 4,262 2,016 39,320 Additions 113 1,379 366 11 1,869 Acquisition of businesses (see note 31) — 44 2 — 46 Remeasurement of lease asset (835) — — 4 (831) Disposals (636) (125) (65) (1,042) (1,868) Effect of movements in exchange rates 44 — — — 44 At 31 December 2022 12,801 20,225 4,565 989 38,580 Accumulated depreciation and impairment At 1 January 2021 2,808 12,455 1,818 1,162 18,243 Charged in period 942 2,461 386 407 4,196 On disposals (273) (1,096) (403) (24) (1,796) Effect of movements in exchange rates (13) (4) — — (17) At 31 December 2021 3,464 13,816 1,801 1,545 20,626 Charged in period 1,016 3,060 550 289 4,915 On disposals (552) (121) (60) (1,042) (1,775) Effect of movements in exchange rates 11 — — — 11 At 31 December 2022 3,939 16,755 2,291 792 23,777 Net book value At 31 December 2022 8,862 3,470 2,274 197 14,803 At 31 December 2021 10,651 5,111 2,461 471 18,694 At 1 January 2021 11,605 4,913 2,342 1,010 19,870 During the year the Group exercised a break clause on a property lease resulting in a reduction in the lease asset of £835,000 and a corresponding decrease in the lease liability. 112 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS Notes to the financial statements continued for the year ended 31 December 2022 FINANCIAL STATEMENTS 14. Investments Company £’000 At 1 January 2021 106,872 Capital contribution 5,285 At 31 December 2021 112,157 Capital contribution 23,894 Acquisition of businesses 25,862 At 31 December 2022 161,913 On 14 January 2022 the Company acquired 100% of the share capital of Edenbridge Healthcare Limited for total consideration of £10,000,000 and on 1 March 2022 the Company acquired 100% of the share capital of FourteenFish Limited for total consideration of £15,862,000. For further details see note 31. During the year the Company made capital contributions to certain subsidiaries in respect of the capitalisation of intra-group receivable balances totalling £23,894,000 (2021: £5,285,000). Investments are assessed for indicators of impairment annually, and tested for impairment if there are any indicators of impairment. Recoverable amount is calculated based on the value in use of the asset, which is assessed using estimated future cash flows discounted to present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to that asset. In the current financial year no impairment losses were recognised. The undertakings whose results and financial position are consolidated within the Group financial statements for the year ended 31 December 2022 are as follows: % of issued Country of ordinary incorporation shares held ASC Computer Software (NZ) Limited New Zealand 100 ASC Computer Software PTY Limited Australia 100 Ascribe Group Limited England & Wales 100 2 Ascribe Holdings Limited England & Wales 100 Ascribe Limited England & Wales 100 Ascribe Limited (Kenya)1 Kenya 100 Dovetail Digital Limited England & Wales 100 2 Egton Limited1 England & Wales 100 2 Egton Medical Information Systems Limited England & Wales 100 2 EMIS Health Community Pharmacy Limited1 England & Wales 100 2 EMIS Health India Private Limited India 100 2 EMIS Health Limited1 England & Wales 100 2 Footman Walker Associates Limited1 England & Wales 100 Healthcare Gateway Limited England & Wales 100 Patient Platform Limited England & Wales 100 2 Protechnic Exeter Limited1 England & Wales 100 Rx Systems Limited England & Wales 100 2 Pinnacle Systems Management Limited England & Wales 100 2 Pinnacle Health Partnership LLP England & Wales 100 2 Scroll Bidco Limited England & Wales 100 Patient Access Limited1 England & Wales 100 FourteenFish Limited England & Wales 100 2 Edenbridge Healthcare Limited England & Wales 100 2 1 Dormant. 2 Held directly by EMIS Group plc. The above subsidiary undertakings which are not dormant are engaged in providing software and support services to the healthcare market, with the exception of Ascribe Group Limited, Scroll Bidco Limited and Ascribe Holdings Limited which are all holding companies. All undertakings incorporated in England and Wales have a Registered Office of Fulford Grange, Micklefield Lane, Rawdon, Leeds LS19 6BA, with the exception of Ascribe Limited, Patient Platform Limited, Rx Systems Limited, Pinnacle Systems Management Limited, Pinnacle Health Partnership LLP, FourteenFish Limited and Edenbridge Healthcare Limited which, following the appointment of PKF GM to carry out a members’ voluntary liquidations, have a Registered Office of PKF GM, 3rd Floor, One Park Row, Leeds LS1 5HN. Other Registered Offices are as follows: ASC Computer Software (NZ) Limited, Suite 6035, 17b Farnham Street, Parnell, Auckland 1052, New Zealand; ASC Computer Software PTY Limited, Level 22, 567 Collins Street, Melbourne, Victoria, Australia 3000; Ascribe Limited (Kenya), PO Box 40296 – 00100, Nairobi, Kenya; and EMIS Health India Private Limited, Unit No. A1, Level 3, Shriram The Gateway SEZ, No. 16, G.S.T. Road, Perungalathur, Chennai-600 063, India. 113 EMIS Group plc | Annual report and accounts 2022 15. Investment in joint venture Healthcare Gateway Limited (HGL) was a joint venture with In Practice Systems Limited, with the Group previously holding a 50% interest in the ordinary share capital of HGL, acquired on formation for £1. Its purpose is to enable the sharing of patient data via a medical interoperability gateway. On 31 October 2022 the Group acquired a further 50% interest in the ordinary share capital of HGL for cash consideration of £14,000,000, taking its ownership to 100% (see note 31). IFRS 3 requires the Group to remeasure its previously held equity interest in HGL at the acquisition date fair value and recognise any resulting gain or loss in the statement of comprehensive income. The acquisition date fair value of the previously held interest is considered to be equal to the £14,000,000 paid for the remaining 50%, less an estimated 30% control premium. Aggregate results for the period to 31 October 2022, and assets and liabilities as at 31 October 2022 relating to HGL are as follows: 2022 2021 £’000 £’000 Revenues 3,245 4,133 Profit before taxation 1,333 1,756 Profit after taxation 1,079 1,423 Non-current assets 36 48 Current assets 2,269 2,294 Current liabilities (2,170) (2,033) Net assets 135 309 Group’s interest in net assets of investee at beginning of year 150 163 Share of total comprehensive income 539 712 Dividends received (626) (725) Fair value gain on previously held interest in joint venture 10,706 — Fair value included within business combination consideration (see note 31) (10,769) — Group’s interest in net assets of investee at end of year — 150 16. Investment in associate On 20 May 2019 EMIS Group plc acquired a 10% shareholding in Adheradata Limited (Adhera), a privately owned organisation offering a complete dispensing business management solution. The shareholding is in line with the Group’s strategy of identifying sustainable long-term market opportunities delivering connected healthcare systems. The Group’s interest in Adhera has been accounted for as an associate because the Group has determined that it has significant influence due to having the right to meaningful representation on its board of directors. The following table analyses the carrying amount and share of profit of Adhera: 2022 2021 £’000 £’000 Carrying amount of investment in associate 199 205 Share of total comprehensive (loss)/income (6) 15 17. Trade and other receivables Group Company 2022 2021 2022 2021 £’000 £’000 £’000 £’000 Trade receivables and other receivables 20,922 18,108 338 55 Accrued income 10,322 7,310 — — Prepayments 7,645 6,639 1,034 641 Loan to Employee Benefit Trust — — — 5,846 38,889 32,057 1,372 6,542 Prepayments include unamortised bank fees of £130,000 (2021: £20,000). The loan to the Employee Benefit Trust is non-interest bearing and repayable on demand and was fully written off by the Company during the year. 114 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS Notes to the financial statements continued for the year ended 31 December 2022 FINANCIAL STATEMENTS 18. Credit quality of financial assets The amounts of the maximum exposure to credit risk at the reporting date are as follows: Group Company 2022 2021 2022 2021 £’000 £’000 £’000 £’000 Trade receivables and other receivables 20,922 18,108 338 55 Cash at bank 45,918 64,042 34,447 49,471 66,840 82,150 34,785 49,526 No collateral security is held. Trade receivables and other receivables Reporting date balances fall within the following categories: Group 2022 2021 £’000 £’000 UK governmental health bodies 12,192 11,542 Community pharmacies and associated wholesalers 3,268 3,660 Other third party receivables 6,787 3,894 22,247 19,096 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 (based on invoice date) is as follows: Group 2022 2021 £’000 £’000 December 11,500 8,442 November 5,673 4,208 October and earlier 5,074 6,446 Gross carrying amount 22,247 19,096 Impairment provision (1,325) (988) Net carrying amount 20,922 18,108 The charge to the income statement in respect of the impairment provision was £352,000 (2021: £487,000) and utilisation of the provision amounted to £15,000 (2021: £nil). Cash at bank The Group’s cash is held with a number of different banks. The Moody’s long-term credit ratings of those banks and the respective balances held are as follows: Group 2022 2021 £’000 £’000 Aa3 315 889 A1 42,397 60,369 Baa2 — 275 Baa3 3,206 2,509 45,918 64,042 115 EMIS Group plc | Annual report and accounts 2022 19. Trade and other payables Group Company 2022 2021 2022 2021 £’000 £’000 £’000 £’000 Trade payables 4,011 4,543 12 87 Accrued expenses 22,752 17,533 1,276 250 Other tax and social security 7,412 7,104 — — 34,175 29,180 1,288 337 20. Borrowings At 31 December 2022, the Group had available undrawn bank facilities of £30,000,000 committed until December 2024. An accordion arrangement is in place to increase the quantum up to £60,000,000. Unamortised bank fees of £130,000 (2021: £20,000) have been presented within prepayments in trade and other receivables. The financial covenants in place for these facilities are adjusted EBITA interest cover and net debt to adjusted EBITDA leverage. All covenants were comfortably met during the year and are projected to be met for the remaining period of the facilities. The Group’s bank facilities are subject to a change of control clause which, upon the potential completion of the Proposed Acquisition of the Group (see note 30) would give the lenders the right to immediately exit from the facility agreement. As explained further in the Viability Statement on page 34 and the Basis of preparation (see note 1.1), the Group does not anticipate needing to draw down on the facility under any of the scenarios considered. 21. Liquidity risk The following are the contractual maturities of the Group’s financial liabilities, including estimated interest payments: Carrying Contractual Less than More than amount cash flow 1 year 1–2 years 2–5 years 5 years £’000 £’000 £’000 £’000 £’000 £’000 At 31 December 2022 Trade and other payables due within one year 34,175 34,175 34,175 — — — Contingent acquisition consideration 4,500 4,500 1,500 3,000 — — Lease liabilities 4,365 5,534 954 717 1,846 2,017 43,040 44,209 36,629 3,717 1,846 2,017 At 31 December 2021 Trade and other payables due within one year 29,180 29,180 29,180 — — — Contingent acquisition consideration 2,000 2,000 2,000 — — — Lease liabilities 5,916 7,543 1,217 1,011 2,303 3,012 37,096 38,723 32,397 1,011 2,303 3,012 22. Deferred tax Property, Other plant and Intangible temporary equipment assets differences Total Group £’000 £’000 £’000 £’000 At 1 January 2021 1,777 (4,667) 601 (2,289) (Charged)/credited to statement of comprehensive income (906) 168 932 194 Credited to equity — — 721 721 Other balance sheet reclassification (412) — — (412) Effect of movements in exchange rates — — (2) (2) At 31 December 2021 459 (4,499) 2,252 (1,788) (Charged)/credited to statement of comprehensive income (382) 1,701 (117) 1,202 Credited to equity — — 932 932 Acquired on business combinations (see note 31) — (5,264) — (5,264) Effect of movements in exchange rates — — 2 2 At 31 December 2022 77 (8,062) 3,069 (4,916) 116 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS Notes to the financial statements continued for the year ended 31 December 2022 FINANCIAL STATEMENTS 22. Deferred tax continued Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances (before offset) for financial reporting purposes: 2022 2021 £’000 £’000 Deferred tax liabilities (8,221) (4,499) Deferred tax assets 3,305 2,711 Net deferred tax liability (4,916) (1,788) 23. Other financial liabilities 2021 Recognised on business combinations (see note 31) Paid in cash 2022 Company and Group £’000 £’000 £’000 £’000 Current Contingent acquisition consideration – Edenbridge — 3,000 (1,500) 1,500 Contingent acquisition consideration – Pinnacle 2,000 — (2,000) — Contingent acquisition consideration – FourteenFish — 251 (251) — 2,000 3,251 (3,751) 1,500 Non-current Contingent acquisition consideration – Edenbridge — 3,000 — 3,000 The liabilities in respect of Edenbridge are payable based on the achievement of specified revenue targets. Estimated fair value has been measured based on the expected future amounts payable, as the impact of discounting is not material. This has been categorised as a level 3 fair value measurement under IFRS 13, as the inputs to the valuation such as the future performance of Edenbridge, are not based on observable market data. A payment of £1,500,000 was made during the year following the achievement of specified product delivery targets, and the possible minimum and maximum undiscounted amounts of contingent consideration payable in cash are £nil and £4,500,000 respectively. In respect of the Pinnacle contingent acquisition consideration, a payment of £2,000,000 was made during the year following the achievement of specified profit targets. 24. Share capital and share premium Ordinary shares of 1p each Share premium Company and Group Number £’000 £’000 At 1 January 2021, 31 December 2021 and 31 December 2022 63,311,396 633 51,045 All issued shares are fully paid. At 31 December 2022 the EMIS Group plc Employee Benefit Trust held 69,492 shares in the Company (2021: 317,906 shares). During the year the Employee Benefit Trust acquired 22,700 shares, representing less than 0.1% of the issued share capital of the Company, for total consideration of £424,000. During the year the Employee Benefit Trust disposed of 447,515 shares, representing 0.7% of the issued share capital of the Company, for total consideration of £182,000. The maximum number of shares held by the Employee Benefit Trust during the year was 317,906, representing 0.5% of the issued share capital of the Company. 117 EMIS Group plc | Annual report and accounts 2022 25. Share-based payments At 31 December 2022 outstanding awards to subscribe for ordinary shares of 1p each in the Company, granted in accordance with the rules of the EMIS Group share option schemes and the EMIS Group LTIP (including the EMIS Group Restricted Stock Award), were as follows: At At At 1 January 31 December 31 December Date of grant 2021 Granted Lapsed Exercised 2021 Granted Lapsed Exercised 2022 2011 Share Option Plan 20 April 2018 58,014 — (879) (49,224) 7,911 — — (6,153) 1,758 24 April 2019 59,452 — (9,352) — 50,100 — (5,344) (26,052) 18,704 2 April 2020 87,975 — (16,830) — 71,145 — (10,156) — 60,989 7 April 2021 — 82,125 (8,541) — 73,584 — (9,823) — 63,761 205,441 82,125 (35,602) (49,224) 202,740 — (25,323) (32,205) 145,212 Weighted average exercise price 985p 1,140p 1,053p 853p 1,068p 0p 1,072p 1,071p 1,067p EMIS Group LTIP 21 April 2017 2,695 — — (1,670) 1,025 — — (748) 277 1 May 2017 4,540 — — (4,540) — — — — — 4 September 2017 2,239 — — (2,239) — — — — — 20 April 2018 174,460 — (101,583) (67,629) 5,248 — — (4,012) 1,236 6 November 2018 152,595 — (88,809) (61,487) 2,299 — — — 2,299 3 April 2019 22,643 — (13,178) — 9,465 — — (9,465) — 24 April 2019 259,868 — (11,349) — 248,519 — (74,712) (153,139) 20,668 24 June 2019 375,710 — (14,745) — 360,965 — — — 360,965 9 September 2019 21,061 — — — 21,061 — (6,215) (13,380) 1,466 2 April 2020 377,967 — (33,265) — 344,702 — (1,322) — 343,380 18 September 2020 26,997 — (13,143) — 13,854 — — — 13,854 7 April 2021 — 261,229 (22,400) — 238,829 — (7,811) — 231,018 7 October 2021 — 8,015 — — 8,015 — (1,163) — 6,852 8 April 2022 — — — — — 162,034 (7,336) — 154,698 25 April 2022 — — — — — 15,831 — — 15,831 20 June 2022 — — — — — 130,094 — — 130,094 1,420,775 269,244 (298,472) (137,565) 1,253,982 307,959 (98,559) (180,744) 1,282,638 Weighted average exercise price 0p 0p 0p 0p 0p 0p 0p 0p 0p EMIS Group Restricted Stock Award 7 April 2021 — 92,009 (11,169) — 80,840 — (2,482) (19,197) 59,161 7 October 2021 — 4,006 — — 4,006 — (388) (350) 3,268 18 March 2022 — — — — — 9,569 — — 9,569 8 April 2022 — — — — — 49,553 (1,184) — 48,369 25 April 2022 — — — — — 7,913 — — 7,913 20 June 2022 — — — — — 27,126 — — 27,126 — 96,015 (11,169) — 84,846 94,161 (4,054) (19,547) 155,406 Weighted average exercise price 0p 0p 0p 0p 0p 0p 0p 0p 0p The number of vested options which had not been exercised at 31 December 2022 was 58,866 (2021: 25,948). The weighted average share price at the date of exercise for share options exercised in 2022 was £17.33 (2021: £12.48). The parent company operates share option schemes, the HMRC-approved EMIS Group plc 2011 Share Option Plan, an LTIP scheme and Restricted Stock Awards. Tranches of options have been granted at market value to senior members of management under the 2011 Share Option Plan, and at nil cost under the LTIP and Restricted Stock Award scheme. Performance conditions apply to all outstanding awards for the 2011 Share Option Plan and the LTIP scheme. The Restricted Stock Award is not subject to any performance conditions. All options are conditional on the employee completing three years’ service, other than in certain limited circumstances. The Group has no legal or constructive obligation to repurchase or settle any of the options for cash. The key assumptions used in the valuation of share options granted during the year are shown on page 118. The fair values of options are determined using the Black Scholes model, with the impact of any market-based performance conditions determined using a Monte Carlo simulation. 118 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS Notes to the financial statements continued for the year ended 31 December 2022 FINANCIAL STATEMENTS 25. Share-based payments continued EMIS Group LTIP EMIS Group LTIP EMIS Group LTIP EMIS Group RSA EMIS Group RSA EMIS Group RSA Grant date 8 April 2022 25 April 2022 20 June 2022 18 March 2022 18 March 2022 18 March 2022 Exercise period April 2025 –April 2032 April 2025 –April 2032 April 2025 –April 2032 March 2023 –March 2032 March 2024 –March 2032 March 2025 –March 2032 Share price at grant date 1,370p 1,302p 1,870p 1,254p 1,254p 1,254p Exercise price 0p 0p 0p 0p 0p 0p Expected volatility 23% 22% 45% 22% 22% 22% Expected life (years) 3 3 2.8 1 2 3 Risk-free rate 1.55% 1.55% 2.32% 1.41% 1.52% 1.55% Expected dividend yield 2.57% 2.70% 1.88% 2.81% 2.81% 2.81% Fair value per option 1,268p 1,200p 1,767p 1,219p 1,185p 1,153p EMIS Group RSA EMIS Group RSA EMIS Group RSA EMIS Group RSA EMIS Group RSA EMIS Group RSA EMIS Group RSA EMIS Group RSA EMIS Group RSA Grant date 8 April 2022 8 April 2022 8 April 2022 25 April 2022 25 April 2022 25 April 2022 20 June 2022 20 June 2022 20 June 2022 Exercise period April 2023 –April 2032 April 2024 –April 2032 April 2025 –April 2032 April 2023 –April 2032 April 2024 –April 2032 April 2025 –April 2032 April 2023 –April 2032 April 2024 –April 2032 April 2025 –April 2032 Share price at grant date 1,370p 1,370p 1,370p 1,302p 1,302p 1,302p 1,870p 1,870p 1,870p Exercise price 0p 0p 0p 0p 0p 0p 0p 0p 0p Expected volatility 23% 23% 23% 22% 22% 22% 45% 45% 45% Expected life (years) 1 2 3 1 2 3 0.8 1.8 2.8 Risk-free rate 1.41% 1.52% 1.55% 1.22% 1.32% 1.38% 2.26% 2.32% 2.32% Expected dividend yield 2.57% 2.57% 2.57% 2.70% 2.70% 2.70% 1.88% 1.88% 1.88% Fair value per option 1,335p 1,301p 1,268p 1,267p 1,233p 1,201p 1,835p 1,801p 1,767p The expected volatility assumption is based on statistical analysis of the historical volatility of the Company’s share price. The Company also operates an HMRC-approved Share Incentive Plan, which is open to all UK employees with at least six months’ service. Those joining contribute a maximum of the lower of £1,800 a year or 10% of salary. These contributions are used to acquire shares in the Company at market price from the EMIS Group plc Employee Benefit Trust, which holds shares in the Company to satisfy Share Incentive Plan and other employee share scheme requirements. For every two shares acquired by an employee the Company adds one free matching share. The matching shares, together with free shares allocated to members under the scheme during the year, had a value of £683,000 (2021: £663,000). 119 EMIS Group plc | Annual report and accounts 2022 26. Leases The Group leases property, office equipment and motor vehicles. Leases for vehicles typically run for a period of four years, property leases for between five and fifteen years, and office equipment for between five and six years. Some property leases contain extension options or break clauses exercisable by the Group and not by the lessors. The Group reassesses whether it is reasonably certain to exercise the options if there is a significant change in circumstances. Set out below are the carrying amounts of the Group’s right-of-use assets and lease liabilities and the movements during the period: Lease Right-of-use assets liabilities Fixtures, Land and fittings and Motor buildings equipment vehicles Total £’000 £’000 £’000 £’000 £’000 At 1 January 2021 5,214 14 982 6,210 (6,881) Additions — — 10 10 (10) Remeasurement of lease asset and liability — — (142) (142) 142 Depreciation expense (615) (14) (398) (1,027) — Interest expense — — — — (351) Payments — — — — 1,157 Effect of movements in exchange rates (28) — — (28) 27 At 31 December 2021 4,571 — 452 5,023 (5,916) Additions 112 — 11 123 (123) Remeasurement of lease asset and liability (835) — 4 (831) 831 Depreciation expense (853) — (280) (1,133) — Interest expense — — — — (319) Payments — — — — 1,181 Effect of movements in exchange rates 19 — — 19 (19) At 31 December 2022 3,014 — 187 3,201 (4,365) During the year the Group exercised a break clause on a property lease resulting in a reduction in the lease asset of £835,000 and a corresponding decrease in the lease liability. Amounts recognised in the statement of comprehensive income are set out below: 2022 £’000 2021 £’000 Interest on lease liabilities 319 351 Expenses relating to short-term leases 27 166 Expenses relating to leases of low value 1 3 The total cash outflow for all leases (including short term and low value) is shown below: 2022 £’000 2021 £’000 Total cash outflow for leases 1,209 1,326 27. Capital commitments At 31 December 2022 the Group had capital commitments principally in respect of fixtures, fittings and equipment amounting to £198,000 (2021: £99,000). 28. Pension commitments Pension contributions of £3,043,000 (2021: £2,893,000) represent contributions paid on behalf of employees by the Group to various defined contribution schemes. 120 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS Notes to the financial statements continued for the year ended 31 December 2022 FINANCIAL STATEMENTS 29. Related party transactions Key management compensation Key management includes Executive and Non-executive Directors and members of the Group Executive Team. The compensation paid or payable to key management for employee services is shown below: 2022 2021 Key management £’000 £’000 Salaries and other short-term employee benefits 5,192 4,859 Share-based payments 613 939 Termination payments 182 250 Post-retirement benefits 91 189 6,078 6,237 2022 2021 Directors’ emoluments £’000 £’000 Aggregate emoluments 3,077 2,812 Pension costs – defined contribution plans 25 66 3,102 2,878 Retirement benefits are accruing to two (2021: two) Directors under defined contribution personal pension schemes. Aggregate emoluments includes gains on exercise of share options of £1,091,000 (2021: £761,000). 2022 2021 Highest paid Director £’000 £’000 Aggregate emoluments 1,722 1,557 Pension costs – defined contribution plans 21 62 1,743 1,619 Aggregate emoluments includes a gain on exercise of share options of £707,000 (2021: £563,000). The remuneration of the Directors of EMIS Group plc is set out in detail in the Directors’ remuneration report on pages 69 to 81, with the disclosures required under AIM Rule 19 and Schedule 5 shown as audited. Other related party transactions 2022 2021 Transactions between the Group and: £’000 £’000 Joint venture to 31 October 2022 (see note 31) – Healthcare Gateway Limited (HGL) Sales of goods and services during period when HGL was a joint venture 7 83 Amounts owed by joint venture as at 31 October 2022 and 31 December 2021 — 58 Transactions between Company and subsidiaries The Company enters into transactions with its subsidiary undertakings in respect of internal funding and the provision of certain services which are procured by the Company. Such services are recharged based on the utilisation by the subsidiary undertaking. The amounts outstanding from subsidiary undertakings to the Company at 31 December 2022 totalled £nil (2021: £nil). Amounts owed by the Company at 31 December 2022 totalled £35,052,000 (2021: £62,103,000). The Company and certain subsidiary undertakings have given guarantees in support of the Group’s banking facility, a revolving credit facility of £25,000,000 and an overdraft facility of £5,000,000. 30. Subsequent events In June 2022 the Group announced that agreement had been reached with Bordeaux UK Holdings Limited, a subsidiary of UnitedHealth Group Incorporated, on a recommended cash offer to acquire the whole of the issued and to be issued share capital of the Company. In March 2023, the UK’s Competition and Markets Authority announced that it had referred the Proposed Acquisition for Phase 2 investigation and on 6 April 2023 the Group announced, jointly with UHG, its intention to proceed with the Phase 2 investigation. Accordingly, based on a typical Phase 2 timetable, the Group expects the Scheme to become effective in Q4 2023 or Q1 2024. For further details see the Chief Executive Officer’s statement on pages 6 and 7. 121 EMIS Group plc | Annual report and accounts 2022 31. Business combinations On 14 January 2022, the Group completed the acquisition of 100% of the share capital of Edenbridge Healthcare Limited, a leading provider of business intelligence tools for GP practices, federations and commissioners. It expands the Group’s capabilities in the growing analytics markets by providing real-time insight to support GP practice access, efficiency, transformation and workforce planning. EMIS Group acquired the business for £4,000,000 in cash paid from the Group’s existing cash resources, with further cash consideration of up to £6,000,000 payable on the attainment of certain performance targets. On 1 March 2022 the Group completed the acquisition of 100% of the share capital of FourteenFish Limited, bringing a specialist knowledge of GP medical appraisals and training into the Group. FourteenFish is the chosen training system of the Royal College of General Practitioners (RCGP) and strengthens the Group’s training proposition. The Group acquired the business for £15,862,000 in cash paid from the Group’s existing resources. On 31 October 2022 the Group completed the acquisition of the remaining 50% of the share capital of Healthcare Gateway Limited (HGL), increasing the Group’s shareholding to 100%. HGL specialises in medical interoperability through a secure middleware technology known as Medical Interoperability Gateway (MIG). MIG connects over 4,500 health and social care organisations across the UK including NHS Trusts and Integrated Care Systems with real-time patient information. This acquisition reflects the Group’s strategic intent to strongly align with NHS policy, notably in areas of connected care and data analytics. The Group acquired the remaining 50% for £14,000,000 in cash paid from the Group’s existing resources. The fair values of the net assets acquired, consideration paid and goodwill arising on the transactions are shown in the table below: Edenbridge Healthcare FourteenFish Healthcare Gateway Total £’000 £’000 £’000 £’000 Intangible assets – computer software 4,890 5,677 9,793 20,360 Intangible assets – customer relationships 258 430 579 1,267 Property, plant and equipment — 10 36 46 Trade and other receivables 379 189 627 1,195 Cash and cash equivalents 11 1,155 1,598 2,764 Trade and other payables (292) (178) (386) (856) Corporation tax liability — (136) (61) (197) Deferred income (172) (186) (1,749) (2,107) Deferred tax liability (1,234) (1,470) (2,560) (5,264) Total identifiable net assets 3,840 5,491 7,877 17,208 Goodwill 6,160 10,371 16,892 33,423 10,000 15,862 24,769 50,631 Consideration: Cash consideration 4,000 15,611 14,000 33,611 Contingent consideration – cash settled (note 23) 6,000 251 — 6,251 Fair value of previous equity interest — — 10,769 10,769 Total potential consideration 10,000 15,862 24,769 50,631 Cash and cash equivalent balances acquired (11) (1,155) (1,598) (2,764) Contingent consideration not yet settled (4,500) — — (4,500) Fair value of previous equity interest — — (10,769) (10,769) Net cash cost of acquisition paid in period 5,489 14,707 12,402 32,598 Initial cash consideration, net of cash acquired 3,989 14,456 12,402 30,847 Contingent consideration paid 1,500 251 — 1,751 Net cash cost of acquisition paid in period 5,489 14,707 12,402 32,598 The fair values in respect of all acquisitions are finalised. The allocation of goodwill to CGUs is currently provisional in respect of the Healthcare Gateway acquisition, and may subsequently be revised. Goodwill relates principally to anticipated future profit from expansion opportunities and synergies of the businesses, and the experienced staff within the business. None of the goodwill recognised is expected to be deductible for tax purposes. Fair values of assets and liabilities represent the best estimate of the fair values at the date of acquisition. The acquired software and customer relationships were measured at fair value using a multi-period excess earnings valuation technique, which considers the present value of the net cash flows expected to be generated (excluding any cash flows related to contributory assets). The key assumptions used relate to expected future cash flows and the rate used to discount these. For further details of how the estimated fair value of computer software is sensitive to changes in these assumptions see note 2. There have been no material fair value adjustments to any other identifiable assets, as book value is similar to fair value. 122 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS Notes to the financial statements continued for the year ended 31 December 2022 FINANCIAL STATEMENTS 31. Business combinations continued The post-acquisition contribution of the acquired businesses to Group revenue and adjusted operating profit was £4,409,000 and £1,727,000 respectively. Had the acquisitions occurred on 1 January 2022, the Group’s revenue and adjusted operating profit for the year would have been £178,903,000 and £48,939,000 respectively. Acquisition-related other operating costs of £410,000 have been expensed in the statement of comprehensive income. On the date of acquisition, the carrying value of the Group’s previously held 50% equity interest in HGL was £62,000. Upon completion of the acquisition of the remaining 50%, this was remeasured to a fair value of £10,769,000, generating a gain of £10,706,000 recognised on the face of the statement of comprehensive income. The acquisition date fair value of the previously held interest was considered to be equal to the £14,000,000 paid for the remaining 50%, less an estimated 30% control premium. For further details on the contingent consideration arrangements see note 23. 32. Exceptional costs During the year the following costs were incurred in delivering the technology transformation programme as the Group transitions to the cloud and in relation to corporate transaction costs, including the recommended acquisition of EMIS Group Plc by Bordeaux UK Holdings II Limited. These costs have been classified as exceptional owing to the material one-off nature of these projects: 2022 2021 £’000 £’000 Technology transformation programme Staff costs 2,197 — Other operating expenses 5,137 — Depreciation 783 — Amortisation 40 — 8,157 — Corporate transaction costs Staff costs 972 — Other operating expenses 3,633 — 4,605 — Total — Staff costs 3,169 — Other operating expenses 8,770 — Depreciation 783 — Amortisation 40 — 12,762 — Staff costs classified as exceptional reflect the cost of time employees spent working directly on supporting these projects, and relate largely to roles already in the business where time was diverted to these projects from other value-adding activities (and therefore the corresponding cost of these employees would have been included within adjusted operating profit in the prior year). Other operating expenses are third party costs incurred as a direct consequence of the projects. Depreciation and amortisation are the incremental charges incurred either as a result of revisions to the useful lives of existing assets as a result of the projects, or charges arising from assets purchased specifically for the purpose of supporting the technology transformation programme. The cash cost of exceptional items shown on the Group statement of cash flows of £10,182,000 (2021: £nil) relates to the total staff and other operating costs of £11,939,000 (2021: £nil) less an increase in the trade and other payables relating to the projects of £1,757,000 (2021: £nil). During the year the Group recognised an exceptional fair value gain on a previously held interest in a Joint Venture (see note 31) of £10,706,000 (2021: £nil). In line with Group’s accounting policies, this was considered an exceptional item due to its size and one-off nature and has therefore been presented separately on the Group statement of comprehensive income. As it is recognised below reported operating profit, it is not an item taken into account in arriving at adjusted operating profit. For further details of the significant judgements made in determinining the classification of excetional costs see note 2. 123 EMIS Group plc | Annual report and accounts 2022 Five-year Group financial summary 2022 2021 2020 2019 2018 £’000 £’000 £’000 £’000 £’000 Revenue 175,373 168,226 159,453 159,507 170,070 Recurring revenue1 143,331 134,809 130,043 124,969 140,681 Reported operating profit 27,746 35,785 35,776 26,827 28,740 Adjusted operating profit1 47,686 43,533 39,266 39,273 37,608 Profit before tax 38,934 36,086 36,915 27,071 29,170 Earnings per share – basic 52.5p 46.2p 48.1p 36.0p 36.1p Earnings per share – adjusted1 62.0p 56.1p 51.0p 51.4p 47.4p Dividends payable to Company’s shareholders in respect of year 24,411 22,165 20,128 19,593 17,896 Dividends per ordinary share 38.7p 35.2p 32.0p 31.2p 28.4p Total equity 142,471 128,477 119,138 104,198 102,659 Reported cash generated from operations 48,813 50,059 64,138 50,059 49,873 Adjusted cash generated from operations1 54,634 46,007 58,851 46,332 54,469 Net cash1 45,918 64,042 53,008 31,099 15,620 Average number of employees 1,470 1,508 1,579 1,666 2,024 1 The Group’s alternative performance measures (APMs) are defined on page 18. 124 EMIS Group plc | Annual report and accounts 2022 FINANCIAL STATEMENTS Internet The Group’s investor page can be found at www.emisgroupplc.com/investors. 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. The annual report and accounts will be published on www.emisgroupplc.com/investors/financial-reporting-and- presentations. The maintenance and integrity of the website is the responsibility of the Directors. The auditor does not consider these matters. 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 at Link Group, 10th Floor, Central Square, 29 Wellington Street, Leeds LS1 4DL, tel. 0371 664 0300; calls are charged at the standard geographic rate and will vary by provider. If you are outside the UK, please call +44 371 664 0300. Calls outside the UK will be charged at the applicable international rate. The registrar is open between 9.00am and 5.30pm, Monday to Friday excluding public holidays in England and Wales. The registrar’s website is www.signalshares.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. 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 information can be found at www.moneyadviceservice.org.uk. You can find out more information about investment scams and how to protect yourself and report any suspicious telephone calls to the Financial Conduct Authority (FCA) by visiting its website (www.fca.org.uk/scamsmart/resources) or contacting the FCA on 0800 111 6768. Payment of dividends Shareholders may find it more convenient to make arrangements to have dividends paid directly into 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 Link Group, whose details are opposite. Dividend Reinvestment Plan (DRIP) The Company operates a Dividend Reinvestment Plan (DRIP) to provide shareholders the option to reinvest dividends declared in the Company. To find out more and check eligibility to join the DRIP, please visit www.signalshares.com. The DRIP allows shareholders to reinvest dividend payments in purchasing the Company’s shares. For participants in the DRIP, each time a dividend is paid, Link Market Services Trustees Limited (“Link”) will purchase additional shares on their behalf to the value of their dividend. The purchase is of shares already in issue and is made directly from the open market. 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.emisgroupplc.com/investors/shareholder-information. Shareholder information Board Executive Directors Andy Thorburn Chief Executive Officer Peter Southby Chief Financial Officer Non-executive Directors Patrick De Smedt – Chair Kevin Boyd – Senior Independent Non-executive Director Jen Byrne – Independent Non‑executive Director Denise Collis – Independent Non‑executive Director JP Rangaswami – Independent Non-executive Director Company Secretary Christine Benson Company number 06553923 (England and Wales) Registered Office Fulford Grange Micklefield Lane Rawdon Leeds LS19 6BA Auditor KPMG LLP Quayside House 110 Quayside Newcastle upon Tyne Tyne and Wear NE1 3DX Nominated adviser and broker Numis Securities Limited 45 Gresham Street London EC2V 7BF Registrar Link Group 10th Floor, Central Square 29 Wellington Street Leeds LS1 4DL Financial PR MHP Communications 60 Great Portland Street London W1W 7RT Tax adviser Deloitte LLP 1 City Square Leeds LS1 2A Remuneration adviser Mercer Limited 1 Tower Place West Tower Place London EC3R 5BU Legal advisers to the Company Travers Smith LLP 10 Snow Hill London EC1A 2AL Pinsent Masons LLP 1 Park Row Leeds LS1 5AB DAC Beachcroft LLP St Pauls House 23 Park Square South Leeds LS1 2ND Emis Group plc’s commitment to environmental issues is reflected in this Annual Report, which has been printed on Magno Satin, an FSC® certified and other controlled material. This document was printed by L&S using its environmental print technology, which minimises the impact of printing on the environment, with 99% of dry waste diverted from landfill. Both the printer and the paper mill are registered to ISO 14001. EMIS Group plc Registered Office Fulford Grange Micklefield Lane Rawdon Leeds LS19 6BA Tel: 0330 024 1269 www.emisgroupplc.com