Friday, 30 January 2009

Misys ‘optimistic’ on interim results

(By Anthony Miller). Misys filled in the detail presaged in its upbeat trading update earlier this month (see Misys moves forwards at half-time) with a generally good – but mixed – set of half-time results (to 30th Nov. ’08) reflecting its ‘business of three halves’.

Misys’ core banking business (30% group revs) showed the best results in terms of new licence revenues – up 14% like-for like (LFL) – a great result. Maintenance revenues rose 1% and services by 5%, both pretty much what you would expect in the current climate. Margins jumped from 12% to 17%. Much play was given to Misys’ partnership with Indian SI HCL, who Misys is using to drive emerging market sales and implementations with some early successes.

The Treasury and Capital markets (TCM) business (26% group revs) took an 8% LFL hit on licence revenues (1H08 was a particularly strong period for TCM) but saw maintenance revs rise 9% and services by a whopping +17%. However, services order intake fell 5%, so we wouldn’t expect the same growth in H2. Margins tricked up from 19% to 21%.

Allscripts-Misys Healthcare Solutions Inc – to give the merged healthcare business its full title – is a bit more complex due to the slight misalignment of reporting periods between Allscripts and Misys. It also has more working parts. Broadly speaking, licence and ASP revs grew 3%, maintenance +11%, transaction processing +7%, services +28% (!!) and hardware +12%, all LFL. Margins were up from 15% to 17%.

Misys really is pinning its healthcare business growth hopes on the US government’s recently proposed $20bn stimulus to promote the use of electronic health records across the US. I’ve said before I’m not so sanguine as they about this because, while grants will help cover the physicians’ raw software costs, I’m not sure how far they go towards covering the cost of conversion of the paper mountain of medical records in a typical physician’s practice into electronic format. At least, though, the US government is letting the industry decide what products it wants to use, rather than try to impose a solution like our government has been doing in the NHS (and I think we all know where that seems to be leading to).

Misys CEO Mike Lawrie is pretty bullish about these results – with some justification I think – and remains ‘optimistic’ about achieving FY results in line with market expectations.

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