Healthcare software and services firm EMIS and Promethean World, a provider of interactive education technology, broke the IPO drought this morning by announcing their intentions to float on the London Stock Exchange. They are the first significant UK technology IPOs since TeleCity in October 2007 (see A resurgence of UK Tech IPOs?).
We’re most interested in EMIS, which provides software and services to the UK primary care market. It confirmed rumours of its intention to float on AIM and raise £50m by placing 25% of its share capital. That would give the group, which generated an operating profit of £15.8m on revenues of £58m in FY09 (FY08: £54.7m turnover and £8.2m operating profit), a market capitalisation of £200m.
A rich valuation
That’s a pretty rich valuation, but not impossible given the heat in healthcare IT market at the moment. Although it’s difficult to draw a direct comparison, Vin Murria’s Advanced Computer Software (ACS) is paying £100m in cash for COA Solutions, which had a turnover of £59.8m in FY09. But she admitted she would have had to pay upwards of 3x revenues for a pure-play healthcare business (see A Tale of Two Women) and effectively got the non-healthcare bits of COA for free. When I spoke to EMIS CEO Sean Riddell earlier this morning he said initial reactions to the IPO had been extremely positive. The fact that EMIS is virtually debt-free, is not VC-backed, has a long history and a clear direction of travel all help to support the valuation, he said.
EMIS has over a 50% market share in GP systems in the UK and an extremely loyal and vocal customer base. The company was founded by a couple of GPs in Egton, Yorkshire, in the 1980s and built on the premise of software 'by doctors for doctors'. Initially, the 'ruthless standardisation' of the National Programme for IT in the NHS (NPfIT) threatened its business but EMIS' users fought back and the GP Systems of Choice (GPSoC) framework secured its future in the UK market. Today the NHS' emphasis on connectivity, interoperability and putting primary care at the heart of the healthcare system, all play to EMIS' strengths.
The flexibility to acquire
Sean, who took over the helm from the founders relatively recently, is excited about the improvements in transparency and governance that an AIM listing will bring a private company like EMIS. He confirmed the flotation would also provide the flexibility required to fund bolt-on acquisitions as the Yorkshire-based firm looks to develop its potential across the whole healthcare spectrum including primary, secondary and community care settings.
A key part of this strategy is EMIS’ new product, EMIS Web, which is due for launch later this year. We were pretty impressed with EMIS Web when we saw it last year (see eHealth in the UK: Decentralisation & Interoperability rule) and it sounds as if trials with some 9 million patient records at Tower Hamlets, Liverpool and Gateshead are progressing well. EMIS Web’s ability to enable GPs and other healthcare professionals to securely share patient data, thereby saving time and money and reducing risk, fits well with the current trends in the UK healthcare market. Indeed, Sean told me this morning that its use has transformed the delivery of healthcare in the pilots – minor surgery units, for example, have, by cutting out paperwork, managed to reduce the waiting time for surgery from 9 months to the same day in some cases.
A strong competitor for ACS & InPractice
Although it’s clearly early days, EMIS wants to extend this cross-organisational healthcare connectivity both organically and through potential acquisitions. That might mean bolt-on acquisitions in any area that would benefit from improved access to the ‘cradle to grave’ patient record displayed in EMIS Web – areas like hospital pharmacy, urgent care or mental health spring to mind. In short, much the same strategy that ACS has been pursuing. Indeed, I’ve no doubt that Vin would have had EMIS in her sights if only they had been be prepared to sell. For now she has her hands full with COA Solutions and it will be interesting to see how ACS’ strategy evolves in light of that acquisition. Other application providers in the UK healthcare market – including EMIS’ main competitor in the UK GP market, INPS (In Practice Systems) - will also be keeping a close, an increasingly nervous, eye on developments at EMIS.
Promethean’s IPO
For the record, Promethean’s flotation on the Main Market of LSE is expected to be completed in March. It had revenues of £205.1m in FY09, up 36% on the previous year, and an EBITDA of £33.9m (+33% on FY08). The company’s main focus is interactive display and learner response systems but it also has a user-focused software suite, ActivInspire. Headquartered in Blackburn, it addresses the global market and employs over 870 people.
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