REG-Misys PLC <MSY.L> Interim Results - Part 1
Released: 24/01/2008
RNS Number:4270M
Misys PLC
24 January 2008
MISYS plc
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 NOVEMBER 2007
Misys revenue and profit improvement on track
Misys plc, the global application software and services company, today (24
January 2008) announces its interim results for the six months ended 30 November
2007.
KEY HIGHLIGHTS
Misys delivers on key strategic imperatives
- Major partnerships announced - iMedica, SAP, HCL, Wipro, Digital China
- Cost take out programme firmly on track - full year target £10m net
savings
- Margin improvement achieved, enabling reinvestment
- Positioned for growth in key target markets - India, China, Middle East
- Balance sheet de-leveraged and asset base aligned to strategy
- Accountable management team in place and delivering results
FINANCIAL PERFORMANCE
- Like for like revenue up 3%: £230m (2006: £223m)
- Operating profit up 19%: £25m (2006: £21m)
- Like for like operating profit1 up 27%: £35m (2006: £27m)
- Total order intake up 3%: £110m (2006: £107m)
- Adjusted basic earnings per share2: 6.3p (2006: 6.4p)
- Adjusted basic from continuing operations(3): 5.1p (2006: 3.4p)
- Interim dividend: 2.96p, up 5%
- Net funds: £27m (2006: net debt £136m)
MIKE LAWRIE, CHIEF EXECUTIVE COMMENTED:
"Our first half financial performance clearly shows that we are delivering in
line with the strategy we set out in March last year. Our Healthcare division
has stabilised and is positioned for growth; Banking and Treasury & Capital
Markets both continue to make good progress with a number of new name wins; and
we are seeing strong growth from our newly established Global Services unit.
We have rebalanced our portfolio to focus on the highest growth areas of the
markets we serve and we are partnering to address new markets. Last week we
announced a strategic relationship with Digital China which will enable us to
access the important and growing Chinese market. This complements other key
partnerships we have executed, including with HCL, which enables us to access
India, one of the world's other great growth economies.
We are building for the future and investing to drive long term growth. These
results are another data point which evidence that Misys is beginning to grow
and deliver on its promises to customers and shareholders."
WEBCAST
A live webcast of the presentation to analysts will be available on the
Company's website at www.misys.com from 09.00 today and will be available to
view on demand from approximately 14.00.
A listen only dial in facility will also be available. To access this please
dial +44 (0) 20 7806 1961.
A results interview with Mike Lawrie, Chief Executive will be available from
07.00 on www.misys.com and on www.cantos.com.
ANALYST / INVESTOR ENQUIRIES
Alex Dee
Tel: +44 (0) 20 7368 2336
Mob: +44 (0) 7989 017 979
Email: alex.dee@misys.com
MEDIA ENQUIRIES
Josh Rosenstock
Tel: +44 (0) 20 7368 2327
Mob: +44 (0) 7921 910 914
Email: josh.rosenstock@misys.com
ABOUT MISYS PLC
Misys plc (FTSE: MSY.L), provides integrated, comprehensive solutions that
deliver significant results to organisations in the financial services and
healthcare industries. We maximise value for our customers by combining our deep
knowledge of their business with our commitment to their success.
In banking and treasury and capital markets, Misys is a market leader, with over
1,200 customers, including all of the world's top 50 banks. In healthcare, Misys
is a market leader, serving more than 100,000 physicians in 18,000 practice
locations and 600 home care providers. Misys employs around 4,500 people who
serve customers in more than 120 countries.
We aspire to be the world's best application software and services company,
delivering results for the most important industries in the world.
Misys: Experience, Solutions, Results
NOTES TO FINANCIAL PERFORMANCE
(1) Excludes exceptional items, gains and losses on embedded derivatives,
amortisation of acquired intangibles, translation exchange differences
recycled from reserves and the impact of acquisitions and disposals and
is stated at constant exchange rates.
(2) Excludes exceptional items, gains and losses on embedded derivatives,
amortisation of acquired intangibles and the impact of translation exchange
differences recycled from reserves.
(3) Excludes the results from discontinued operations, exceptional items, gains
and losses on embedded derivatives, amortisation of acquired intangibles and
the impact of translation exchange differences recycled from reserves.
SUMMARY RESULTS
----------------------- ----------- ----------- -----------
Reported Like for like Like for like
revenues revenues margin
(note 2)
H1 2007/08 H1 2006/07 H1 2007/08 H1 2006/07 H1 2007/08 H1 2006/07
£m £m £m £m % %
----------------------- ------ ------- ------ ------- ------- -------
Banking 74 72 74 71 11 9
Treasury & Capital
Markets 63 61 63 60 20 21
Healthcare 93 100 93 92 19 12
Central Services - - - - - -
----------------------- ------ ------- ------ ------- ------ -------
Continuing operations 230 233 230 223 15 12
----------------------- ------ ------- ------ ------- ------- -------
----------------------- ----------- ----------- -----------
Reported Adjusted Like for like
operating operating operating
profit profit profit
(note 1) (note 2)
H1 2007/08 H1 2006/07 H1 2007/08 H1 2006/07 H1 2007/08 H1 2006/07
£m £m £m £m £m £m
----------------------- ------ ------- ------ ------- ------- -------
Banking 5 6 8 8 8 7
Treasury & Capital
Markets 12 12 13 12 13 12
Healthcare 13 12 17 12 17 11
Central Services (5) (9) (3) (3) (3) (3)
----------------------- ------ ------- ------ ------- ------- -------
Continuing operations 25 21 35 29 35 27
----------------------- ------ ------- ------ ------- ------- -------
Reported Adjusted
(note 1)
H1 2007/08 H1 2006/07 H1 2007/08 H1 2006/07
£m £m £m £m
Profit before taxation 21 13 31 21
Profit after taxation 16 9 24 17
Profit for the period for discontinued
operations (note 3) 79 14 6 14
Basic earnings per share 19.6p 4.8p 6.3p 6.4
Proposed interim dividend per share 2.96p 2.82p
Netfunds(debt) 27 (136)
1. Adjusted operating profit is stated before exceptional items, gains and
losses on embedded derivatives, amortisation of acquired intangibles and the
impact of translation exchange differences recycled from reserves.
a. Exceptional items consist of: cost of turnaround programme £7.9m
(2006:£1.3m); cost of terminated offer process in Central Services £nil
(2006: £4.7m)
and profit on disposal of businesses in Banking £nil (2006: £1.0m).
b. Loss on embedded derivatives in Banking £1.5m (2006: £0.9m) and Treasury &
Capital Markets £0.2m (2006: £nil).
c. Amortisation of acquired intangibles in Banking £0.7m (2006: £1.4m) and
Healthcare £0.6m (2006: £0.6m).
d. Translation exchange differences recycled from reserves in Central Services
£0.9m gain (2006: £nil).
2. Like for like results are stated before exceptional items, gains and losses
on embedded derivatives, amortisation of acquired intangibles, translation
exchange differences recycled from reserves and the impact of acquisitions
and disposals in the current and prior period. Figures are quoted in sterling
using average exchange rates for the six months ended 30 November 2007.
a. The businesses acquired in the prior period contributed no incremental
revenue and incremental adjusted operating profit for Treasury & Capital
Markets: £0.2m (2006: £nil).
b. The businesses disposed of in the prior period contributed incremental
revenue for Banking: £nil (2006: £0.2m), and operating profit at £nil
(2006:£nil).
c. Restating the results for 2006 using the average exchange rates for 2007
has decreased 2006 revenues by £9.6m (Banking: £0.3m; Treasury & Capital
Markets: £2.0m; Healthcare: £7.3m) and operating profit £1.6m (Banking:
£0.8m; Treasury & Capital Markets: gain of 0.2m; Healthcare: £1.0m). The
most significant impact is from the movement in the US dollar, where the
average exchange rate in 2007 was US$2.03:£1 compared to US$1.87:£1 in
2006.
3. Included within discontinued operations are: the profit on disposal of Sesame
£0.7m (2006: £nil); and the disposal of the CPR and Diagnostics businesses of
£75.8m (2006: £nil) completed in the first half of 2007/08 as part of the
company's exit from the Hospital Systems segment of the Healthcare division.
These businesses contributed profit after tax: for Sesame £0.7m (2006: £9.6m);
and Hospital Systems £77.8m (2006: £4.6m).
CHIEF EXECUTIVE'S STATEMENT
My first year as Chief Executive of Misys has delivered major change in the
structure of our business, the de-leveraging of the balance sheet, as well as a
laser focus on delivering value for our customers and positioning the business
to provide increased returns for shareholders.
Misys serves two of the most important sectors in the IT market: banking is the
largest, and healthcare is the fastest growing. We have a market leading
customer base in each of our main business units and are positioning the
business for long term growth.
We are listening to our customers and delivering products and services to the
marketplace which are receiving a positive response. We are revitalising the
organisation, with a new management team and significant new appointments across
all levels of the organisation.
We are building a Global Services business that is becoming an important new
revenue stream and we continue to partner with major international leaders in
order to access new markets and expand our distribution capability.
We are delivering innovative new ways of working in healthcare and financial
services through our Open Source Solutions division.
Software as a Service (SaaS), Application Service Provider (ASP) and Transaction
Services offerings are growing parts of our business and becoming more important
to our customers and our revenue growth going forward. A growing proportion of
our revenue now derives from sales which are subscription based and we expect
this to continue as our business develops. In addition, revenue from our Global
Services unit is also growing faster than ILF. We therefore expect that ILF
order intake will continue to become a less important indicator of future
performance across the business. In order to give a fuller picture of our order
intake and underlying business performance we are showing order intake for
Global Services and in Healthcare we show order intake for the new Misys MyWay
solution and for Payerpath, our transaction processing business.
Our people, products and customer base are our greatest assets. We have a clear
strategy in place, we are executing and we are beginning to see some operational
improvements.
Following the re-balancing of our portfolio to higher growth markets we are in a
net cash position which gives us a strong financial footing. Our cost take out
programme is firmly on track and is enabling reinvestment in the business as
well as helping to drive margin improvement. We have delivered revenue growth
across all business units and this is another data point which demonstrates that
we are delivering on our strategy. We are laying the foundations for future
growth and remain absolutely focussed on delivering value to our customers and
improving returns to all our shareholders.
FINANCIAL SUMMARY
The information in this section is presented on an as reported basis unless
otherwise stated.
In the six months ended 30 November 2007 revenues were £230m, 1% below the
previous year, partly due to an adverse movement in the US dollar exchange rate,
to a degree offset by increases in both our Banking and Treasury & Capital
Markets businesses. Operating profit for continuing operations was £25m (2006:
£21m) and on a like for like basis was £35m (2006: £27m). Basic earnings per
share were 19.6p (2006: 4.8p) with the increase largely represented by the
profit generated from the sale of the Diagnostic Information and CPR businesses.
Adjusted earnings per share were 6.3p (2006: 6.4p). The Board is declaring an
interim dividend of 2.96p per share, an increase of 5% on the prior year interim
dividend. The Group was in a net funds position of £27m (2006: Net debt of
£136m).
OUTLOOK
Despite global economic uncertainty we have to date seen no material change in
the buying patterns of our target customers and remain confident that we will
achieve results for the full year in line with expectations.
BUSINESS PERFORMANCE AND FINANCIAL REVIEW
The information in this section is presented on a like for like basis. The like
for like results are stated before exceptional items, gains and losses on
embedded derivatives, amortisation of acquired intangibles, translation exchange
differences recycled from reserves and the impact of acquisitions and disposals
in the current and prior periods. All figures are quoted in sterling using
average exchange rates for the six months ended 30 November 2007.
Overview
Revenue from continuing operations for the half year at £230m was 3% above last
year with Banking showing a 4% increase, Treasury & Capital Markets a 6%
increase and Healthcare a marginal increase in revenues. Operating profit at
£35m was 27% above the same period last year with an increase in operating
margin from 12% to 15%.
Misys Banking
Market conditions
The portion of the banking market which Misys serves is generally strong, albeit
with significant regional variations. The Middle East is growing strongly,
fuelled by petrodollars. Banking services are growing in many African countries
and the Asia Pacific region is benefiting from high GDP growth in many countries
and increased demand for a range of banking services. Russia is showing the
highest growth in banking revenues, driven by massive demand for consumer
credit. Despite the sub prime credit crunch most banks in the US and Europe are
continuing with business initiatives to globalise and expand into faster growing
regions whilst also driving operating efficiencies.
Trading performance
--------------------------------- --------- --------- ---------
Continuing operations First half First half Change
all figures in £ millions 2007/08 2006/07
--------------------------------- --------- --------- ---------
Revenue 74 71 +4%
ILF 19 19 -1%
Maintenance 36 35 +4%
Global Services 19 17 +12%
Adjusted operating profit 8 7 +17%
Operating margin 11% 9%
--------------------------------- --------- --------- ---------
Total revenue at £74m was 4% ahead of last year. Total order intake was £37m, up
3% compared to the same period last year.
Initial Licence Fees ('ILF') revenue was down 1% at £19m, and ILF order intake
at £18m was up 6%.
Maintenance revenue at £36m was 4% higher than the same period last year. This
growth continues to reflect the value of our extensive and stable customer base.
Global Services revenue of £19m increased by 12% as a result of our drive to
offer our customers solutions and not just applications, Global Services order
intake was £18m comparable to the same period last year.
Operating profit up 17% at £8m reflects an operating margin of 11%, which
increased from 9% in the same period last year reflecting some of the benefits
from actions taken on cost control.
Business performance
Misys Banking had a good first half with strong demand across the product range
and a number of new name wins from customers in emerging markets. The management
team has been focused on driving growth, in particular in emerging markets where
new go to market initiatives are underway. Enhancing current product quality is
a further focus area as is delivery of Misys BankFusion, which provides a
roadmap for future upgrades to the existing customer base. Misys BankFusion will
be the first fully Java enabled Services-Oriented Architecture (SOA) universal
banking solution in the marketplace. The development is on track and we are
working closely with a Tier 1 bank in southern Africa who will be the first
implementation.
Achieving six new name wins demonstrates that customers are responding
positively to our offering and have confidence in Misys for the long term.
Contracts signed during the period included:
-Albaraka Banking Group (ABG), one of the world's foremost Islamic Banking
specialists, signed an agreement to use Misys Equation (Islamic) to
streamline operations, improve the retail and Islamic banking services it
provides its customers, and to enable expansion into new territories. The
Misys solution will be implemented in three of ABG's subsidiary offices in
Bahrain over the next twelve months and in Beirut and Durban thereafter,
rolling it out at the same time across the three countries' branch networks.
Misys Equation (Islamic) will provide the bank with the ability to satisfy
the increasing demand of ABG's customers for products and services that
strictly conform to the principles of the Shari'a.
-With the objective of automating its retail banking processes while
minimising operational risk Public Bank Berhad in Colombo, Sri Lanka (PBSL)
selected Misys Equation 3.82, the latest version of the core banking system,
which was implemented at the bank in record time, just 3 weeks. As well as
providing PBSL with an automated system to manage branch and product
expansion, Misys Equation 3.82 was able to improve system performance and
security.
-SOYUZ Bank, one of the fastest growing universal banks in Russia, chose
Misys Equation having evaluated several solutions in the market, including
one from Infosys. The bank selected Misys because of its many implementation
successes in the region, the level of localisation of the solution and the
experienced Global Services staff that are ensuring the project success.
This solution, together with Misys Trade Innovation, will enable SOYUZ Bank
to support the whole of its universal banking business, significantly
reducing operating costs and improving reporting and analytical facilities.
-Norddeutsche Landesbank Girozentrale, one of Germany's most prestigious
banking groups, has chosen Misys Midas Plus as its strategic core banking
platform and it will initially run the group's banking operations in London,
New York, Singapore and Shanghai, with the plan that every subsidiary within
the bank's worldwide operation will be run on Misys Midas Plus.
-Following a multiple vendor evaluation including Temenos, Infosys and
China Systems, Indian Overseas Bank in Singapore selected Misys Midas Plus,
to introduce new products and client services to support business expansion,
deliver new levels of customer satisfaction and improve operational
performance while enabling market leading international standards in
accounting and regulatory compliance and controls. The bank will benefit
from a market proven suite of fully integrated banking application modules,
including Misys Trade Innovation for trade finance, Integrated Finance
Manager (IFM) for internet banking, cashier for branch teller services and
sophisticated capabilities for Watch List Checking and Suspicious Activity
Monitoring.
-Following the launch of our strategic partnership with HCL Technologies
in October 2007 Misys announced that Maybank, Malaysia's largest bank and
leading trade finance service provider, has introduced online trade finance
services via Maybank2e.net by implementing Misys Trade Portal. This provides
greater convenience and will increase productivity and efficiency to
businesses for their trade financing needs. HCL has a strong presence in
Malaysia, and will deliver integration services and first line local support
for Maybank, which is critical to their objectives. Maybank chose HCL's
services capabilities and Misys' world-class solution over solutions from
China Systems and specialist Trade Finance vendors, such as Surecomp, ACI
and CSI BankTrade.
Misys continues to develop its products and win industry recognition. In
September Misys launched Misys Trade Portal for Multi-Bank, a secure hosted
service that provides banks and their customers with a comprehensive means of
processing, reviewing and managing through a single web-based portal all their
transactions. This includes Letters of Credit, Collections, Guarantees,
Financing or Open Account-based transactions. Misys is the first specialist
trade finance solutions provider that offers this solution, giving corporate
clients consolidated access to multiple banks at the same time through a single
source. It provides corporates with the ability to capitalise on an innovative
and customisable financial supply chain solution that meets their increasingly
complex demands. In October Misys was named as winner of the first Islamic
banking awards from World Finance magazine. The award recognises Misys for its
contribution to the Islamic Banking industry over the last two decades of
operations in the Middle East. It is through this valuable experience that Misys
has been able to develop Misys Equation (Islamic), which has embedded fully
Shari'a-compliant Islamic functionality into Misys Equation's internationally
proven solution.
Misys Treasury & Capital Markets
Market conditions
The Treasury & Capital Markets business continues to benefit from the shift away
from internal IT expenditure towards external investment, the consolidation of
systems and vendor relationships, and the growth of some of the emerging
economies in Asia. The key priorities of the financial institutions continue to
be improvement of operational efficiencies, consolidation of multiple systems,
outsourcing of work to select strategic vendors, and upgrading software
functionality to meet the needs of their businesses.
During the first half of the Misys fiscal year, financial institutions,
primarily in the United States, experienced difficulties created by the sub
prime mortgage difficulties and lack of liquidity in the overall credit
markets. Financial institutions, however, were not equally affected. IT
spending patterns were varied, depending upon their strategic priorities and the
growth of trading and lending in different parts of the world. If anything, the
emphasis on operational efficiency, compliance and risk management strengthened
in the first half. In some sectors, trading volumes grew necessitating upgrades
to systems with greater processing power. Most parts of Asia and the Middle
East were largely insulated from the economic issues in the United States.
China's entry into the World Trade Organization, and the opening of its
financial markets, drove new systems purchases.
Trading performance
--------------------------------- --------- --------- ---------
Continuing operations First half First half Change
all figures in £ millions 2007/08 2006/07
--------------------------------- --------- --------- ---------
Revenue 63 60 +6%
ILF 17 19 -8%
Maintenance 27 26 +5%
Global Services 13 9 +44%
Other 6 6 -2%
Adjusted operating profit 13 12 +1%
Operating margin 20% 21%
--------------------------------- --------- --------- ---------
Total revenue at £63m was 6% ahead of last year. Total order intake at £28m was
up 5% from the comparable period last year.
ILF revenue was down 8% at £17m and the ILF order intake at £13m was down 23%
compared to the same period last year as a result of internal sales execution
issues. These issues have been addressed with the introduction of a new sales
implementation process which had previously been introduced with much success in
Banking.
Global Services revenue of £13m increased by 44%, exceeding our internal targets
and underscoring strong demand for our new service offerings. Global Services
order intake was £15m up 60% on the comparable period showing strong
performance.
Maintenance revenue at £27m was 5% higher than the same period last year,
following a very strong first half in 2006/07.
Operating profit at £13m reflects an operating margin of 20%, a reduction of 1%
driven by reinvestment in the business to drive long term revenue growth.
Business performance
During the first six months of the year Misys Treasury & Capital Markets signed
a number of new contracts, including seven new name wins. Demand for our
solutions in Asia and emerging markets remains strong. The management team has
been focused on building delivery capacity and continuing to innovate to capture
market demand. Treasury & Capital Markets' services revenues, in line with
strategy, grew significantly, increasing 44% on the previous period. Despite
the difficulties facing some institutions from global credit issues, IT spending
by banks varies, and although banks are prioritising their spending we continue
to make good progress with our market leading solutions.
Recent customer successes include:
-Gnupur, an Icelandic investment company has signed a deal with Misys, to
implement Misys Summit ASP (Application Service Provider) hosted service.
Misys Summit ASP is the web-hosted version of the Misys Summit FT treasury
solution and offers rapid delivery along with sophisticated trader tools and
risk management for handling all instrument classes front-to-back. The
solution will enable the wealth management firm to automate processing and
provide complete management over the trade lifecycle. Automating the trade
process will reduce the operational risks associated with manual data entry.
-In September we announced that Kazkommertsbank, the largest bank in
Kazakhstan, had purchased Misys Summit in a strategic move to establish an
integrated system for cross-asset and front-to-back processing of a range of
financial instruments. A further rollout in Russia is also planned. The
decision to purchase a sophisticated, high-end solution responds to growing
market needs for monitoring credit and market risk limits, as well as to
improve automation in generating confirmations and SWIFT Messages. As a
long-term investment the bank is also looking to introduce more complex
products like derivatives and hybrids in the future and needed a solution
that would meet these future needs.
-Bank of Communications, Hong Kong Branch extended its relationship with
Misys to create full straight through processing ("STP") in front, middle
and back office operations handling credit derivatives, fixed income and
structured products. The bank will increase its utilisation of Misys Summit,
by introducing new modules in FX and Money Markets for front office
operations and additional modules for derivatives, fixed income and all
structured products across its middle and back offices. The deal signifies a
move to operate all asset classes on a common platform in the future and
strengthens the bank's ability to meet regulatory compliance requirements
and increase operational effectiveness.
Misys Summit is one of the world's most powerful treasury and capital markets
software solutions and incorporates unique MUST (Multi-Underlying Structured
Trade) accounting for structured products. It was initially evaluated against
systems from Wall Street Systems, Sophis, Murex, and Sungard before being chosen
to replace a vanilla instruments software package from Reuters Kondor+.
-The Philippines' largest bank, Metropolitan Bank and Trust Company
(Metrobank) signed a new deal with Misys to upgrade the core treasury system
at its central treasury dealing room in Manila. Metrobank will upgrade its
existing system Misys Opics, with Misys's new best of breed solution, Misys
Opics Plus. It will also license the latest advanced risk and portfolio
management tool Misys Opics Risk Plus, and specialist monitoring solution,
Misys Eagleye, to boost internal controls and compliance. With regulatory
changes easing restrictions on foreign exchange trading and the use of
hedging instruments, the bank is seeking to reduce transaction costs,
increase automation and boost risk management as it processes higher volumes
resulting from a more free flow of capital. Prior to the new deal the Bank
had also identified significant manual processing in some of its non-core
treasury activities which it plans to simplify and automate as part of the
upgrade.
Misys Opics Plus leverages a tiered architecture to provide a comprehensive
trade lifecycle solution for processing instruments with speed, giving users
real-time information. It also uses XML standards to seamlessly integrate with
other applications. At Metrobank it will enable automation of the entire deal
lifecycle, promoting higher levels of STP for a broader range of asset classes
in treasury, derivatives and capital markets products, and will support all the
bank's treasury activities including pre-deal checks, automated deal capture and
profit and loss analysis among other functions. In addition it will support the
booking and risk management of a complex trading operation using a range of
derivatives products such as Swaps, Options, Credit Derivatives and retail
structured products.
-Bohai Bank, the first national joint stock bank to be set up in China
since 1996, went live in July with Misys Opics Risk Plus at its head office
in Tianjin. Misys Opics Risk Plus will provide a complete risk management
tool for the bank helping it to reduce treasury costs and increase returns
through improved accuracy of market valuations within the bank's portfolio.
-Also in China, China Merchants Bank (CMB), one of China's leading
financial institutions, went live with Misys Opics Risk Plus at its head
office in Shenzhen. CMB became one of the first banks in China to install a
first generation Misys Opics solution in 2004. As the risk management
mandate has continued to evolve, CMB needed a more complex risk management
solution and chose to leverage its strategic relationship with Misys.
-In November, Landesbank Baden-Wurttemberg (LBBW) implemented Misys Opics
Plus. LBBW has been seeking to expand coverage in Over the Counter (OTC)
complex options, a key product type in the bank's growth strategy for
financial markets, and following a strategic review, chose to work with
Misys as a beta customer for the new complex options module. Completing the
implementation will now greatly strengthen LBBW's product offering to its
customers. The bank also sought to strengthen its back office technology for
improved STP and decided to become one of the first institutions globally to
upgrade to Misys Opics Plus 1.6, an award-winning front-to-back, cross-asset
solution that processes a wide range of financial instruments. The Misys
Opics Plus solution handles vanilla and complex derivatives, fixed income,
and equity and treasury trades and enables higher volume trading, better
risk management, and increased margins through greater operational
efficiencies. In LBBW it will be used as platform for all Money Market and
FX transactions.
Misys Treasury & Capital Markets continues to innovate and in June Misys
announced that banks and hedge funds will be able to access new hosted solutions
for derivatives processing, treasury operations and loan syndication following
the launch of a new 'Software as a Service' (SaaS) programme. SaaS can reduce
capital outlay for customers who pay a monthly rental for the service. Misys'
SaaS programme will see hosted services options option across the Treasury &
Capital Markets solution suite - Misys Summit, Opics Plus and Loan IQ. The
solutions will enable many larger banks to remove the capital expense associated
with software and hardware, and dramatically reduce the IT resources necessary
to operate mission critical capital markets systems. Other benefits will include
speeding up time to enter new markets for hedge funds, investment companies and
banking institutions, while the risk of testing new market operations for banks
will also be lowered.
In September, Misys launched a new confirmation matching module for OTC
Derivatives which went live in more than 800 of the world's largest corporates
and financial institutions, enabling automated post-trade confirmation matching
in OTC Derivatives and Commodities for the first time through Misys Treasury
Plus. The release of the latest version of Misys' confirmation matching
solution, Misys Treasury Plus v1.5, introduces a revolutionary Instrument Wizard
which adapts the SaaS solution's unique technology to a much broader range of
capital markets instruments. Corporate treasurers, compliance officers and their
banking counterparties, who need to reduce the window of risk between trade date
and confirmation, will now be able to use this functionality across a wider
variety of capital market instruments. A confirmation process that normally
takes three to ten days can be reduced to less than 24 hours.
In June the technology leadership of Misys Treasury & Capital Markets was
acknowledged by the international Financial Times publication, The Banker, in
its annual Technology Awards. Misys won the "Best Sell-Side Innovation" category
with its treasury and capital markets solution, Misys Summit FT. Key to the
award was the re-architected credit derivatives platform within Summit FT,
introduced last year to deliver innovative multi-asset class systems to global
banks with the ability to handle highly complex trades across their
front-to-back office functions. According to The Banker, "Misys' re-architecture
of the Summit solution stood out in this category."
Misys Healthcare
Market conditions
Issues with the cost and quality of healthcare continue to rank as a primary
concern among the American public. As the 2008 Presidential election season
swings into high gear, quality of care, access to care and cost containment are
emerging as constant themes across the political spectrum. We anticipate that
the growing sense of urgency for change to the status quo will result in
improved marketplace acceptance for the idea that electronic medical records can
play a pivotal role in solving many of the issues, such as cost and quality,
facing the American healthcare system. Enterprise health systems across America
are beginning to see the use of connected, interoperable electronic medical
record systems as a competitive opportunity, and changes in legislation have
increased the attractiveness of hospitals' funding of these systems. Value-based
assessments that balance quality versus cost - such as "pay for performance"
approaches - continue to gain favour among payers in the United States, which
may increase demand for systems that allow physicians to easily demonstrate
quality of care.
Trading performance
--------------------------------- --------- --------- ---------
Continuing operations First half First half Change
all figures in £ millions 2007/08 2006/07
--------------------------------- --------- --------- ---------
Revenues 93 92 +0%
ILF 12 12 -5%
Maintenance 35 32 +7%
Transaction processing 36 33 +8%
Global Services 6 8 -15%
Hardware 4 7 -36%
Adjusted operating profit 17 11 +55%
Operating margin 19% 12%
--------------------------------- --------- --------- ---------
Total revenue at £93m was slightly ahead of the same period last year. Total
order intake was £46m up 1% on the comparable period last year.
ILF revenue at £12m was 5% below the same period last year. ILF order intake was
£7m, down 34% on the same period last year. Misys MyWay, launched in late
October to fill a portfolio gap with small physicians practices delivered order
intake of £3m, with customers responding positively to the new offering.
Global Services revenue was £6m down 15%. Global Services order intake was £5m,
down 23% on the comparable period.
Transaction services revenue grew by 8% to £36m driven by the continued roll out
of our Payerpath solution. Payerpath order intake was £31m, up 5% from the
previous comparable period.
Our installed base is strong and maintenance revenue is showing good growth at
£35m, 7% ahead of the same period last year, confirming the stability of the
base.
We are seeing evidence that the corrective actions taken to get the Healthcare
business positioned for growth are having a positive effect. We rebalanced the
business portfolio to focus on our core strength in the United States ambulatory
market, where we are a market leader. In October we launched Misys MyWay, the
Electronic Medical Record (EMR) and practice management solution, which is
available as a hosted service and targeted at small physician practices. This
has been very well received by customers and we are encouraged by early orders.
Operating profit at £17m was 55% ahead of last year, reflecting an operating
margin of 19% which increased from 12% in the same period last year. The margin
improvement has been driven principally by cost control, including the
right-sizing of our business and aligning the structure to the strategy, which
contributed to operating margin being ahead of our internal projections for the
half. Following the disposal of our Diagnostic Information business and our CPR
business both of which had high margins we expect the full year margin to be
around 15% as we reinvest in the business to drive future revenue growth.
Business performance
Misys Healthcare is well positioned for growth as the results of management
actions begin to come through. The Healthcare management team has focused on
stabilising the business and aligning the organisational structure to the
strategy in order to drive faster growth, efficiency and lower operating costs.
Following the disposals of our Diagnostics Information and CPR businesses Misys
Healthcare is now totally focused on the ambulatory space and has gone from a
business with 5 siloed units to a functionally aligned organisation reducing
overlap, accelerating decision making and significantly reducing operating cost.
In October we launched Misys MyWay, an integrated solution designed for small
medical practices and solo practitioners that delivers full-featured
capabilities for EMR, practice management and claims management. Available as a
hosted solution, and recently announced as an on-premise solution as well, Misys
MyWay offers an unbeatable value proposition and makes sophisticated healthcare
technology easier to access for smaller physician practices. These are the first
in a family of Misys MyWay offerings to be introduced in the coming months to
help accelerate the adoption of EMR technology among smaller physician practices
where EMR adoption remains in the single digits. These offerings will complement
the company's existing portfolio of solutions for larger practices and
post-acute healthcare providers.
During the first six months of the year Misys Healthcare announced a series of
new customer wins and expansions that indicate growing marketplace momentum for
its software and services. New and existing customers have chosen Misys to drive
efficiency and productivity as well as higher quality patient care.
Industry-leading solutions, built around Misys EMR, Misys Vision, Misys Tiger
and Misys Payerpath are increasingly being selected ahead of competitor
offerings by both individual and multi-practice group purchases.
Recent customer successes include:
-The Southview Medical Group, PC, a 28-physician multi-specialty group on
the campus of St. Vincent's Hospital in Birmingham, Alabama which recently
purchased Misys Vision, Misys EMR, and Misys Payerpath as an integrated
solution delivering practice management, EMR, and claims management
capabilities. Misys beat numerous practice management and EMR vendors to win
this contract based on a demonstrated ability to match practice workflows.
-Greater Metropolitan Orthopaedics in Clinton, Maryland, selected Misys
EMR as a complement to its existing Misys Tiger practice management system.
The competitive win was based on Misys EMR's point-of-care clinical
abilities - a primary consideration for the four orthopaedic practice
locations - as well as Misys's reputation, stability and strong presence in
Maryland.
-The Transylvania Community Hospital, in Brevard, NC, selected Misys Tiger
and Misys EMR as the start of a multi-phase community vision that will
enable stakeholders to share health information and improve efficiencies in
the healthcare delivery system. The hospital and its physicians chose Misys
as their strategic IT partner for outpatient physician offices because of
the preference for Misys in existing practices. The investment will support
the community vision of integrating physicians and serve as the foundation
for creating a longitudinal community EMR to support patient care.
-Abingdon Physician Partners, the 16-provider, multi-specialty practice in
Abingdon, Virginia, will be deploying Misys Vision as its enterprise-grade
practice management system.
-The Hospital of Saint Raphael, New Haven, Connecticut, is deploying
US$0.6m of Misys systems and services as part of a grant from the Center for
Community Health Leadership. Focused on Misys EMR and building a connected
data-sharing community that will link EMR systems with the hospital's
Electronic Health Record (EHR) capabilities, Saint Raphael's plans to
establish an ASP environment to support practices which prefer not to manage
the required technical complexities. The initial phase of the comprehensive
project will automate the data collection of clinical information in the
hospital's clinics and provide access to community health information for
faculty physicians in the Saint Raphael Healthcare System, as well as those
private physician practices electing to implement Misys EMR capabilities.
-Blount Memorial Hospital in Maryville, Tennessee expanded its Misys
relationship with the award of a contract for Misys EMR. The 304-bed
community-owned facility, with more than 160 active medical staff
physicians, based its decision on the long-standing level of service and
support received from Misys in previous years.
The Center for Community Health Leadership, an organisation sponsored by Misys
Healthcare announced the successful recipient of a US$3 million grant of leading
healthcare technology. The winner of this grant is Tampa Bay, Florida, who beat
more than 90 other communities to win the grant. The Center for Community Health
Leadership selected the Tampa Bay area as a Center grant recipient because of
the area's reputation for healthcare excellence and their commitment to making
the idea of community data sharing a reality. The Tampa Bay area, including
several surrounding cities, is home to more than 3 million residents.
Tampa Bay is the second community to receive grants of EHR software from the
Center for Community Health Leadership, following New Haven, Connecticut. The
software will enable caregivers in the Tampa Bay area to share information in a
secure and appropriate way, leading to reduced costs, enhanced healthcare
information adoption and more efficient and effective patient care.
Misys Global Services
Total revenue, included in the business units above, was £38m up 14%.
We continue to ramp up our services business and have entered into partnership
with both HCL and Wipro Technologies which will drive growth and increase our
capacity to deliver efficiently to customers. We also completed the management
team, bringing in seasoned executives from major technology companies with
proven track records to lead the teams in Healthcare and Treasury & Capital
Markets.
During the period we continued to make progress with our global service
offerings and have secured customers for the Misys Opics Plus and Misys Midas
Plus upgrade solution centre. In addition, Misys Academy, which offers an
end-to-end Education Strategy for customers continues to develop. Customer
response to the Learning Suite, a remote learning tool, has been positive with
several major banks already utilising the service. The Learning Suite enables
our customers to train their end users on their own specific business processes,
with the flexibility of learning any time, anywhere driving efficiency and
productivity improvements.
Misys Open Source Solutions
In June we announced the formation of Misys Open Source Solutions which will
create and drive innovation internally and within the wider marketplace. Bob
Barthelmes, the General Manager, has recruited his management team and is
driving two key initiatives which leverage Misys' core strengths in financial
services and healthcare. In October Misys took the lead in innovation by
announcing that the Connect interoperability healthcare product would be made
available to the open source community; a pioneering first step towards
establishing open standards in the US health care market. We have begun to
release the source code and continue to work with the open source community and
partners to drive this important initiative forward.
Misys has also engaged with a number of industry partners in laying the
groundwork for the launch of an open source carbon trading community with focus
on the creation of a well organised, freely accessible, carbon information
portal and the development and release to the open source community of a carbon
trading application.
OTHER FINANCIAL INFORMATION
Unless otherwise stated, the information in this section is presented on a
statutory basis.
Acquisitions and disposals
There were no acquisitions in the current period.
The businesses disposed of during the period have been classified as
discontinued operations (see note 5 to the condensed financial statements).
Cash flow, interest charges and borrowings
Net cash flow from operating activities, which includes taxes and net interest
paid, saw an outflow of £26m compared with a cash outflow of £13m last year.
Cash inflow from investing activities was £163m primarily due to the disposal of
businesses, compared to a cash outflow of £14m last year.
Capitalised development costs at £6m were £2m below last year.
Net funds at 30 November 2007 were £27m compared with net debt of £136m at 30
November 2006 and £91m at 31 May 2007. Following the disposals made in the past
six months the Group's credit needs have reduced resulting in a repayment of
long-term borrowing. The net interest payable at £3m was £5m below last year
reflecting lower average borrowings. Interest cover was over 12 times.
Profit before tax and earnings per share
Profit before tax from continuing operations at £21m was £8m above last year.
The taxation charge on ordinary activities at £5m is £1m more than the prior
year. The underlying effective tax rate on the adjusted profit before tax for
continuing operations (adjusted to exclude exceptional items, gains and losses
on embedded derivatives, amortisation of acquired intangibles and the impact of
translation exchange differences recycled from reserves) at 21% is slightly
ahead of last year.
Profit for the period from discontinued operations after tax at £79m, including
£73m profit on disposal of businesses, is £64m ahead of last year. Total profit
attributable to shareholders at £95m was £72m ahead of last year.
Basic earnings per share ('EPS') at 19.6p were 14.8p higher than the previous
year due to the disposal of businesses. Adjusted basic EPS (adjusted to exclude
exceptional items, gains and losses on embedded derivatives, amortisation of
acquired intangibles and the impact of translation exchange differences recycled
from reserves) at 6.3p was marginally below the prior year. A detailed
reconciliation of basic to adjusted basic EPS is set out in note 4. In the
opinion of the Directors, the adjusted basic EPS provides more comparable and
representative information on the continuing and established trading activities
of the Company.
Principal risks and uncertainties
Our principal risks and uncertainties for the remaining six months of the
financial year remain as stated on pages 32-34 of our 2007 Annual Report which
is available on our website at www.misys.com.
Consolidated income statement for the six months to 30 November 2007
all figures in £ millions First half First half Year 2006/07
2007/08 2006/07
---------------------------------- --------- -------- -------
Continuing operations
Revenue (note 2) 229.9 232.6 469.7
---------------------------------- --------- -------- -------
Operating profit before exceptional
items 32.7 25.9 55.8
Exceptional items (note 3) (7.9) (5.0) (37.0)
---------------------------------- --------- -------- -------
Operating profit (note 2) 24.8 20.9 18.8
---------------------------------- --------- -------- -------
Finance costs (4.4) (8.2) (15.2)
Finance income 1.0 0.2 0.4
---------------------------------- --------- -------- -------
Net finance costs (note 6) (3.4) (8.0) (14.8)
---------------------------------- --------- -------- -------
Profit before taxation 21.4 12.9 4.0
Taxation (note 7) (5.3) (4.3) (3.1)
---------------------------------- --------- -------- -------
Profit after taxation from
continuing operations 16.1 8.6 0.9
---------------------------------- --------- -------- -------
Discontinued operations
Profit after taxation and before
exceptional items 5.7 14.2 34.0
Exceptional items after taxation 72.8 - (19.9)
---------------------------------- --------- -------- -------
Profit after taxation from
discontinued operations (note 5) 78.5 14.2 14.1
---------------------------------- --------- -------- -------
Profit for the period and
attributable to shareholders of
Misys plc 94.6 22.8 15.0
---------------------------------- --------- -------- -------
pence pence pence
---------------------------------- --------- -------- -------
Basic earnings per share (note 4) 19.6 4.8 3.1
Diluted earnings per share (note 4) 19.5 4.7 3.1
---------------------------------- --------- -------- -------
Statement of recognised income and expenditure for the six months to 30 November 2007
------------------------------------ ------- -------- -------
all figures in £ millions First half First half Year
2007/08 2006/07 2006/07
------------------------------------ ------- -------- -------
Exchange differences on translation of
foreign operations (1.8) (2.2) (0.8)
Actuarial losses on defined benefit pension
schemes (0.5) (0.3) (1.1)
Taxation credit on items taken directly to or
transferred from equity - - 0.2
------------------------------------ ------- -------- -------
Net expense recognised directly in equity (2.3) (2.5) (1.7)
Net profit for the period 94.6 22.8 15.0
------------------------------------ ------- -------- -------
Attributable to shareholders of Misys plc 92.3 20.3 13.3
------------------------------------ ------- -------- -------
Consolidated statement of cash flows for the six months to 30 November 2007
---------------------------------- ---------- ------- -------
all figures in £ millions First half First half Year
2007/08 2006/07 2006/07
---------------------------------- ---------- ------- -------
Operating activities
Net cash flow generated from operations (13.2) 2.7 85.5
Net interest paid (4.3) (6.9) (12.6)
Taxation paid (8.6) (9.2) (17.1)
---------------------------------- ---------- ------- -------
Net cash flow from operating activities (26.1) (13.4) 55.8
More to follow, for following part double-click [nRN1X4270M]
