EMIS’s AGM update confirms the business is trading in line with expectations. As expected, new business is taking a back seat while the NHS concentrates on fighting the COVID-19 pandemic and EMIS has dedicated resources to helping frontline staff as well as supporting research efforts. As long as new business gradually improves through H2, EMIS anticipates meeting FY20 expectations; we maintain our estimates.
EMIS is focused on supporting its customer base in dealing with the COVID-19 pandemic. As well as meeting its regular service-level obligations, the company has created a dedicated team to support requests from NHS and community pharmacy customers for functionality changes and patient-related, data-driven insights. This includes involvement in the PRINCIPLE trial (run by the Nuffield Department of Primary Care at the University of Oxford and the Royal College of GPs) that is testing treatments for high-risk patients who have just started to show symptoms. The Patient Access service has seen the number of registered users grow to 10 million from 8.4 million at the end of FY19 and Patient’s coronavirus hub has been accessed 3.4m times by 2.6 million people.
Trading in the year to date is in line with expectations: recurring revenues are on track while new business is lower than in FY19 with a focus on lower-margin hardware. EMIS is closely controlling costs but has no plans to furlough staff and will maintain its investment in EMIS-X. As long as new business gradually improves through H2, EMIS anticipates meeting market expectations for FY20. Net cash at the end of April was £40m with undrawn banking facilities of £60m available.
The stock is 27% higher than the trough in March and trades at a discount to peers on a P/E basis despite having superior profitability. It is further supported with a dividend yield of 3%. With a strong balance sheet, a high level of recurring revenues (c 80%) and technology that is likely to be in strong demand during and after the pandemic, we view this stock as one of the safer places to invest during this crisis.