On the face of it half-year results from healthcare IT supplier EMIS (EMIS:AIM) don't look terribly eye-catching. The figures, which you can read for yourself here, are bang in line with expectations, showing 17% overall revenue growth to £77.8 million, implying 8% organic progress and meaning operating profits adjusted for R&D capex and amortisation rose 16% to £16.9 million. But there are a couple of particularly valid points worth making.
First, those good old recurring revenues continue to run ahead of the overall company curve, rising 21% to £60.5 million, or 78% of the total. That means shareholders increasingly know where they stand on day one of the financial year, with any surprises likely to be on the upside, not shock profit warnings.
There's also an encouraging trend of improving profits quality, with rising operating margins. The overall figure was 21.7% in the half, yet that was dragged down by some lower margin earnings from acquisitions. Underlying operating margins rose from 22.1% to 22.5%, implying potential to lift acquired business performance down the line and raise the overall measure.
Read Shares exclusive interview with EMIS CEO Chris Spencer
https://youtu.be/MeUH8FU1hrA
But what also stands out to me is how investors are generally reacting to the company and its shares, on newsflow events or without. Given the hyper-volatile markets of the past month EMIS stock has held up remarkably well. Yes, on Black Monday (24 Aug) the stock did fall, but just 3.2% far less than the FTSE All-Share's 4.5% one day decline, or the 4.4% falls seen across AIM.
EMIS share price close
Friday 21 Aug: 901p
'Black Monday 24 Aug: 871.5p (-3.2%)
Tuesday 25 Aug: 911p (+4.5%)
When global markets appeared to be going to hell in a handcart, EMIS' quality reputation stood it is very good stead. The shares are up more than 5% today to 986p. It might be a bit early for investors to pull out the bunting or throw a cask party, but today's figures do illustrate the increasingly high-quality nature of this business, delivering respectable growth on a pretty respectable valuation. The price to earnings multiple for the year to 31 December 2017 stands at 18.
EMIS remains confident of opportunities across primary, community, children's and mental health (CCMH), community pharmacy and secondary. Re-procurement s opportunities stand out across northern, midland and eastern healthcare trusts down the line.
'Results are as solid as ever and EMIS looks well on track to hit our expectations for the full year,' spell out analysts at N+1 Singer today. 'The move towards integrated care is gaining momentum and we see ongoing opportunities across the group,' they add.
Panmure Gordon's Adam Lawson resists the temptation to raise forecasts but maintain his Buy recommendation and 'increase our target price from £10.46 to £10.63, reflecting the impact of the Pinbellcom acquisition announced in July.'
Numis Securities' Will Wallace is equally upbeat, saying 'we think EMIS has almost unparalleled visibility of organic growth within the UK software sector, and continue to view the shares, on 18.7-times full year 2016 on an enterprise value to net operating profit after tax (EV/NOPAT) as our top pick in the sector.'
'A positive outlook is supported by strong revenue visibility, order book and pipeline, and we continue to see multiple growth opportunities across the business,' concludes Panmure's Lawson.
