Emis Group in line with expectations despite NHS funding headwinds

Shares fell in Emis Group as the healthcare software firm reported that its performance was in line with expectations despite headwinds created by the gap in NHS funding, as the company accelerates it implementation plan.

Due to pending changes in NHS models of care, Emis Group decided to accelerate its internal integration in 2017, to bring together its primary, community and secondary care businesses under common leadership.

This would align the company with the NHS's need to deliver more integrated care between hospitals, GPs, and community services and optimise the company’s cost base.

The AIM-listed company said that its consistent with market and was in line with expectations, even in the face of an of an “increasingly difficult environment created by the severe pressures on NHS funds” and the pause on procurement as the NHS's local Sustainability and Transformation Plans (STPs) to address the funding gap emerged.

Part of the STP is to digitally connect the NHS, which the company would be a part of and would benefit.

Emis Group said it benefitted through the year as the NHS implements the stagey through “strong” revenue visibility, market share, and a solid order book and pipeline.

At the end of last year, the company had £400,000 net debt, down from £9.1m, having bought Intrelate, a provider of mobile social care software, for £800,000 in December 2016.

In the primary care division, its market share was maintained and the roll-out of Emis Web for GPs in Northern Ireland is ongoing although more slowly than anticipated.

Market share increased in community, children's and mental health with the new community pharmacy product now accredited throughout the UK and has already been installed in 25 independent pharmacies. The company is preparing to implement the AAH and Lloyds pharmacies contract that will see its market share grow close to 50%.

Secondary care division and, to a lesser extent, community, children's and mental health, were most affected by the pressures on NHS funds.

The company said that although secondary care benefitted from cost-improvement measures taken in the first half of 2016 and performed largely in line with expectations, its performance was held back by costs due to new contracts. Pending improvements, the company is considering a non-cash impairment charge to reflect the delay in contribution created by additional costs.

The company said that it is currently considering a market-place e-commerce platform that connects patients to a network of digital healthcare services, following the appointment of a new chief executive at Patient.info, a provider of medical information.

Outgoing chief executive Chris Spencer, who is to retire at the end of the year, said: "Our businesses have continued to deliver results in line with our expectations, despite headwinds created by the NHS funding gap.

"The NHS's process of planning to bridge its funding gap continues to cause sluggishness in immediate procurements. However, that planning emphasises the group's unique ability to provide software that helps bridge the gap.

"In light of the proactive operational steps we are taking, together with our strong revenue visibility and solid order book and pipeline, we remain confident of overcoming the headwinds and delivering a positive performance in 2017 and beyond."

Shares in Emis Group were down 10.26% to 848.03p at 1259 GMT.