Commenting on the trading update, Mike Lawrie, Chief Executive, Misys, said:

“The trading update shows that our Banking businesses are making progress while our Healthcare business is behind the performance of its peers.  We are taking action to remedy this.  Misys is a business with great assets and opportunities; our task is to leverage these to drive real sustainable shareholder value. Since I joined Misys six weeks ago we have launched a number of initiatives to improve performance and confidence in the business.”

Adjusted basic EPS* expected in the range of 5.5p to 6.0p per share

1. Banking (like for like**): ILF order intake inline with last year at £36m, total revenues up 7%
2. Healthcare (like for like**): ILF order intake down 23% at £21m, total revenues down 3%
3. Strong growth in maintenance revenue streams in our Banking and Healthcare divisions
4. Sesame: strong operating profit improvement

Both our core businesses are in attractive and growing markets. In Banking, customer response to our rejuvenated Treasury & Capital Markets portfolio continues to be positive and its leadership has capitalised on a buoyant global market with sales to a number of new name customers.  Core Banking is making good progress, following its creation in Spring 2006, which streamlined our retail and wholesale operations.

In Healthcare, as previously indicated in our October Trading Update, ILF order intake in Physician Systems has slowed significantly and it is now clear that ILF order intake across the division as a whole has been behind the performance of the market.  This has resulted from various factors.   Internally, we had a number of sales execution issues such as changes to the sales force deployment models and compensation schemes. These were compounded by external factors such as the uncertainty around the Offer Process relating to Misys plc and increased pricing and competitive pressure at the small community physicians end of the market.

A number of actions have been taken in order to address these issues and improve Healthcare’s performance.  These have included management change within the Physicians business, the introduction of new integrated sales disciplines and action to increase lead generation and improve pipeline management.  Misys Vision is now also being sold into the mid-market to improve our competitive position. The relaxation of the Stark laws now allows hospitals to subsidise electronic medical record (EMR) purchases for physicians in the community which will change the dynamics of this market.    This has resulted in an opportunity for us to sell Misys EMR via hospitals.

We believe we have begun to see some benefit from the actions taken to date.    Whilst it is too early to tell if these actions will, over time, fully address the shortfall, the early indications are encouraging.

Revenues were up 7%, and on an as reported basis revenues were also up 7%.   ILF revenues increased by 7% and ILF order intake was the same as in the comparable period last year.

As a result of the larger professional services element in our recent contracts, professional services revenues increased by 11%.  Maintenance revenues increased by 5% which is above the growth levels we have seen in recent years.

Operating margin is expected to be between 14% and 15%, in comparison with 12% in the comparable period last year. 

Revenues were down 3%, and on an as reported basis revenues were down 6%.  ILF revenues were down 15% and ILF order intake decreased by 23%.  As a result of the lower ILF revenues and order intake professional services revenues decreased by 11%.

Despite the ILF performance, maintenance revenues continued to grow, increasing by 9%.   We have begun to see the benefits of the Payerpath acquisition with transaction processing revenues 7% higher on an as reported basis, 2% higher on a like for like basis.

As previously announced, the purchase of Payerpath, together with other assets in the physicians market which we acquired towards the end of the last financial year, is expected to give rise to operating losses of £3m in the year to 31 May 2007 with £2m of this incurred in the first half of the year. Thereafter, we expect Payerpath to contribute to operating profit.  To date we have exceeded our projections at the time of acquisition in selling the Payerpath product to our existing customer base and have realised price improvement in line with our expectations

Operating margin is expected to be around 13% compared to 15% in the same period last year as a result of the impact of the acquisitions, without which it would have remained at around 15%.

Sesame has capitalised on positive market sentiment and strong demand for key products, with improved productivity as a key success driver.

Revenues in Sesame were 3% higher than in the comparable period in the prior year which primarily reflects an increase in Registered Individual (RI) productivity.  Around 1,450 financial advisers have been recruited into the Sesame Select open multi-tie proposition.   As expected, a number of these advisers have transferred from our existing propositions, contributing to a reduction in the membership of both Sesame Network and Sesame Direct.  Operating margin improved to just over 4% compared to 2% in the first half of last year. 

Group costs will be approximately £2m above the same period last year.  This includes £1.1m for payments to Kevin Lomax in relation to his stepping down as Chief Executive on 2 October 2006, in line with his contractual entitlements, which includes a deferred mitigation element.  In addition there is a non-cash accounting charge of £0.4m relating to his share option entitlements

The first half total also includes consultancy costs relating to a number of initiatives commenced in November 2006.

An analysis of exceptional items can be found in the Notes to this trading update; the principal item relates to the costs of the terminated Offer Process of £4m.

Retranslating the results for the six months to November 2005 using the average exchange rates for the six months to November 2006 decreases 2005 revenues by £10m and adjusted operating profit by £2m and this is reflected in the like for like comparative results. The most significant impact is from the movement in the US dollar, where the average exchange rate for the six months to November 2006 was US$1.8748:£1 compared to US$1.7775:£1 for the six months to November 2005. The US $ exchange rate at 30 November 2006 was US$1.9691:£1. If we were to retranslate our 2006 results at the closing exchange rates at 30 November 2006 instead of the average rates for the period this would result in revenue and adjusted operating profit decreasing by approximately £9m and £1m respectively.

Net interest payable and other finance costs are expected to be a little over £6m.

Adjusted basic EPS for the period is expected to be in the range of 5.5p to 6.0p per share, based on a weighted average number of shares in issue of 478m, compared to 485m for the comparable period last year.

During the second half of 2006 the Group disposed of its General Insurance business, which is disclosed as a discontinued operation within the financial statements.  The General Insurance business contributed profit before taxation of £7m in the first half of last year, these profits being included within adjusted EPS.

 

Alex DeeTel: +44 (0) 20 7368 2336
Mob: +44 (0) 7989 017 979
Email: alex.dee@misys.co.uk

About Misys plcMisys plc (FTSE: MSY), the global software and solutions company, is one of the world’s largest and longest-established providers of industry-specific software. Founded in 1979, Misys serves the international banking and healthcare industries, combining technological expertise with in-depth understanding of customers’ markets and operational needs. In banking Misys is a market leader with over 1,200 customers, including 49 of the world’s top 50 banks. In healthcare Misys is also a market leader, serving more than 110,000 physicians in 18,000 practice locations, 1,200 hospitals and 600 home care providers. Through Sesame, a wholly-owned subsidiary, the company is also a leading provider of support services to financial advisers in the UK. Misys employs around 6,000 people who serve customers in more than 120 countries. For more information, visit www.misys.com