‘Head-scratching’ share plunge for leading medical software firm

Medical software firm EMIS will be ‘right at the heart of the UK’s coronavirus response’ and expects little impact on its £159.5m-a-year revenues, announced today – yet has suffered a ‘head-scratching’ near-10% share price drop.

EMIS is an integrated software provider whose software links together GP practices, pharmacy management, hospitals and hospices across the UK.

Established in Yorkshire in the 1980s, the firm now supports 10,000 British healthcare organisations, meaning it will have a vital role to play in coordinating medical services over the coming weeks and months of coronavirus disruption.

Its full-year revenues – posted today – show a strong growth in revenues of 7% to £159.5m, with recurring revenues accounting for £125m of that. Underlying operating profits were up 9% to £39.3m.

Share dividends grew 10% on last year – yet despite the firm anticipating no major disruption during coronavirus, its shares fell 9.6% in early trading.

Nicholas Hyett, Equity Analyst at Hargreaves Lansdown: “EMIS’s GP practice and pharmacy management software will be right at the heart of the UK’s coronavirus response, yet the group expects to see relatively little impact from the virus outbreak.

“Its GP customers are signed up to long-term contracts and although the group is making certain services available to customers free of charge and rolling out coronavirus-specific functionality, the cost of doing so is minimal.

“It’s an indication of the fundamental attractiveness of the software as a service (SaaS) model. Building the platform is expensive, time-consuming and requires significant expertise – however adding another customer is essentially costless. That makes EMIS very cash generative with a reasonably low cost base – both excellent qualities in the current climate. Add in a net cash position and the group should be well placed to withstand the market turmoil.

“That makes today’s share price fall a bit of a head-scratcher for us. Smaller companies are always more vulnerable in a downturn, and for all its recent success EMIS is still relatively small with a market cap of less than £500m. It will also be suffering from the general market sell-off. Nonetheless management might not be totally unjustified in feeling they’ve been hard done by today.”