CRANEWARE, the Scottish technology darling that is quietly revolutionising the finances of the US healthcare sector, yesterday posted record results and said that more than a quarter of all American hospitals now used the company's software.
Keith Neilson, chief executive of Craneware, told The Herald: “I regard the remaining 75% as a business opportunity, and I can tell you we have the strongest growth pipeline we’ve ever had, and I expect it to get even stronger.”
The company, which recently moved its headquarters from Livingston, in West Lothian, to Edinburgh, specialises in billing, auditing and management software for US hospitals.
It is also poised to reap rich rewards from the far-reaching overhaul of the US health system that has come about in the wake of Barack Obama’s landmark legislation, which the US President recently described as answering “the call of history”.
Mr Neilson said the company did not expect to benefit from the Obama effect until after 2014, and the current big growth driver is the impact of the US Government- sponsored Revenue Audit Contractors (RAC), a programme created through the Medicare Modernisation Act of 2003 to identify and recover improper Medicare payments paid to healthcare providers.
Craneware’s biggest-selling Chargemaster Toolkit package, designed to reduce mischarging in the outpatient market, is now used in more than 1500 hospitals and healthcare centres across the US, where medical bills are fiendishly complicated.
Mr Neilson, who has been promoting RAC as a major driver of future growth since Craneware’s IPO four years ago, said: “Our software provides control processes that means customers increase their efficiency, which means they can afford to increase their investment on actual healthcare.”
The company yesterday unveiled a 19% jump in pre-tax profits to $8.7 million (£5.3m) for the year to the end of June, compared with $7.3m (£4.5m) in the prior-year period.
At the same time, revenues during the year rose 34% to $38.1m (£23.3m), compared with $28.4m (£17.4m) last time.
In February, the company, which employs 80 of its 210 staff in Scotland, acquired American rival ClaimTrust, allowing it to drive deeper into the lucrative US market. It added some £6m to revenues and another 275 US hospitals to its customer base, significantly increasing its penetration to almost 26% of the American market.
Cash at the year-end slipped to $24.2m (£14.8m), compared with $29.4m (£18m) following a $9m (£5.5m) payment to acquire ClaimTrust.
Shares in Craneware slipped 0.7%, or 3p, to close at 446p.
Nonetheless, Craneware shares have been attractive to investors because of the company’s stable earnings and visibility of forward revenues, and more than trebled since it listed on AIM in September 2007 at 128p.
The group proposed a final dividend of 4.8p per share, giving a total dividend for the year of 8.8p per share, compared with 8p last time. Mr Neilson said: “This has been another year of strong growth for Craneware, both in operational and financial terms, highlighting the strength of our product offering and business model.
“The financial challenges presented by today’s economy and healthcare reform mean it has never been more important for hospitals to increase efficiency and protect revenue in order to meet their objectives of providing increased levels of care to a growing hospital population.”
However, Craneware has also signalled that growth is likely to be even greater in future years.
Under the forthcoming system, US healthcare will, for the first time, provide medical coverage to tens of millions of uninsured Americans.
As they enter the healthcare system, Craneware’s software will continue to slow down the inevitable increases in costs.
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