..with a sick looking share price.
This is an AIM listed stock with a market capitalization of £375 million which describes itself as the UK’s leading supplier of healthcare software to GP's and a major software supplier to high street pharmacies. I think this is interesting because GP's are getting bigger budgets and a greater role in healthcare provision and the government is also trying to make greater use of patient data to improve health outcomes and efficiency in the NHS, although I see there have been some delays to the roll out of this on privacy concerns.
Their business provides a range of services across healthcare. This is broken down as follows:
Healthcare Record Systems
EMIS Web allows primary, secondary and community healthcare practitioners to view and contribute to a patient’s cradle-to-grave electronic healthcare record. This can improve patient care and increases efficiency. As at 30 June 2013 they had a UK GP market share of 52.4%.
RX Systems is a major supplier of software to pharmacists with a UK market share at 30 June 2013 of 34.9%. Their ProScript software is the most widely used community pharmacy dispensary management system in the UK, efficiently managing the dispensary process, labelling and endorsing patient records, ordering and stock control.
Egton specialises in the supply of ICT infrastructure, application software and value added services to healthcare and other public and private sector organisations.
Healthcare Gateway facilitates the sharing of patient data via the medical interoperability gateway (MIG). EMIS IQ meets the demand for high quality clinical and management information to support the national General Practice Extraction Service (GPES).
Patient.co.uk is the leading independent health information and healthcare transactional site. It helps patients play a key part in their own care with an information library, health apps, on line and mobile services such as GP appointment booking and repeat prescription ordering.
Brief Highlights from Last years full year figures are:
Turnover £86.3 million with £69.4 million or 80.4% recurring and an operating profit of £22.8 million for an operating margin of 26.4%. They reported earnings of 30.76 pence and a dividend of 14.2 pence. They also did a couple of acquisitions last year (2013) spending £57.5 million and moved into a net debt position of £13.5 million at the year end having had net cash of £7.7 million at the end of 2012. These acquisitions were funded by a placing at 615 pence which raised £27 million and a new £32 million debt facility.
This year they are expected to report around 35 pence and a 16 pence dividend which is then forecast to rise to 39.7 pence and 17.6 pence which at the current price close to 600 pence leaves it on around a market rating of 15x with a 3% yield for the year to December 2014 growing at around mid teens rate. So it is certainly not cheap, but I think it looks quite good quality given that it supplies the healthcare industry, has high market shares and a high degree of recurring revenue. This is demonstrated by the return on capital employed (ROCE) of 31.3% and the operating margin of 26.4%. On Stockopedia it get a 98 on quality (100 is best). For an AIM stock it has quite good institutional backing with Standard Life owning 9.4%, Schroders - 5.63%, Liontrust and Investec around 5% each. In fact major shareholders make up around 69% of the shares so they are probably quite tightly held, although the share price momentum has been surprisingly poor.
The reason for suggesting you check up on it now is that they have final results next week on 20th March, which could remind the market of its existence and maybe act as a catalyst to help turn around the depressed share price. Given the share price trend it will be interesting to see how the results are received and what they have to say about the outlook as they sounded pretty positive in the year end trading update in back in January when they said:
"Trading for the year was in line with the Board's expectations with continued organic growth in revenues and profits together with positive contributions from the two acquisitions completed during the second half of the year. The Group has continued to gain market share in each division during the period." They also mentioned progress being made with the renewal of the English GP Systems of Choice (GPSoC) Framework which is due to be concluded by 31 March 2014. This seems to be a contract that is up for grabs that EMIS is on the short list for, so I guess this could either be a positive or a negative depending on the outcome.
On this basis I have taken a small position as I like the quality and the value is OK, if not outstanding. Probably not one to rush out and buy but certainly worth watching I think, although I could be wrong.