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Craneware reveals surge in new deals

CRANEWARE, the Edinburgh-based software firm, has sealed record contract wins worth more than $70million (£40.8 million) in its latest financial year, a rise in excess of 80 per cent on the $38.5m won last year.

RECORD DEALS: Chief executive Keith Neilson is confident new contracts will bring future financial benefits.
RECORD DEALS: Chief executive Keith Neilson is confident new contracts will bring future financial benefits.

The company, whose systems allow US hospitals to track revenue and information, said the bulk of the financial benefits from the wins will flow through in future years.

It told investors it expects revenue to increase to between $42.2million and $43 million for the year ended June 30, up from $41.5 million.

Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) is anticipated to be in the region of $12.8 million to $13.2 million - in line with expectations.

This compares with EBITDA of $12.4million in 2013.

Craneware cited strong demand in the US for its software solutions, which allow hospitals to accurately collect the revenue they are entitled to. Its systems ensure the accuracy of the data hospitals supply and collect, with separate software tools also provided by the company to allow clients to present data to the relevant authorities for payment.

Craneware noted the supply of larger and more-complex systems is commanding an increasing part of current sales and ensuring a flow of sales opportunities.

And it expects demand for its solutions to rise, as US hospitals face regulatory pressure to accurately collect the revenue they are due.

Asked to pinpoint the reasons for the rise in contract values secured last year, chief executive Keith Neilson said: "It's a good time in the marketplace with the right product. We have a good team that is delivering those just now and delivering on sales and the execution of it. It seems to have come together quite well."

Craneware secured several major deals with US hospital groups in April which will bring in more than $10 million sales over the next seven years. Mr Neilson said the growth in contract wins last year was not down to any one-off major deal.

On last year's figures, he noted: "There's just lots of good-quality deals in there. That has been the positive, I think, for us."

Craneware employs 90 to 95 of its 200 staff in Edinburgh, with the bulk of software development and customer support handled in Scotland.

In the US, the company operates in Atlanta, Arizona, Massachusetts and Tennessee, where staff are largely employed in sales and marketing roles, as well as in the delivery of the software systems for clients.

Investec said Craneware's latest financial year had been marked by the "reappearance of multi-million deals". While the broker noted the company's revenue forecast was three per cent below its expected $43.9m - reflecting marginal second-half growth compared with five per cent in the first half - it highlighted the "long-term recurring revenue profile" for 2016 and 2017 brought by the staggered release dates inherent to the latest contract wins.

The broker retained its recommendation to buy the stock, with its target price unchanged at 645p.

It said in a note for investors: "Patience is required with this investment case, but the prize is exposure to one of the few small cap software stocks with genuine double-digit organic revenue growth potential, twinned with high profitability, in our view."

It added: "Acceleration in revenue growth in FY15E should be a key catalyst for the shares in the current financial year."

Craneware, which is due to announce its full-year results on September 16, is said to have started its current financial year brightly.

Mr Neilson said: "Sales have continued to do well in the couple of weeks after the end of the fiscal year as well, so we are pleased with where we are right at the moment."

Shares in AIM-listed Craneware closed down 2.5p at 527.5p.

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