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UPDATE - Allocate Software hits new records as NHS demand grows

Published: 10:40 21 Jul 2014 EDT

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--adds broker comment, more detail --

Tighter control of hospital staffing has led a surge in orders for Allocate Software’s (LON:ALL) new SafeCare product.

Allocate only launched SafeCare late last year but the number of UK hospitals using it has rapidly risen to 37.

An overhaul of NHS staffing policies following the Mid-Staffs scandal and various reports into what went wrong boosted Allocate’s business all round.

Overall, 147 major agreements with UK hospitals were signed across its product portfolio during the year, demand that led to a record year for earnings and 19% growth in UK revenues, which exceeded both the company’s own expectations as well as the markets’.

Ian Bowles, Allocate’s chief executive, said: “The number of new healthcare customer agreements for HealthRoster, Cloud and SafeCare exceeded management expectations, primarily because our suite of applications is so closely aligned with the needs of the NHS.”

He added the company had worked with its NHS customers, especially nursing directors, to analyse how the staffing changes proposed last year would affect staff roles and had tailored its products to meet these needs.

Total revenue  increased by 8% to £40mln (2013: £37.1mln) in the year to May, while underlying profit (EBITDA) jumped by 44% to 6.9mln. 

At the pre-tax level, Allocate swung to a profit to £2.89mln from a loss of £2.39mln, while net cash climbed to £13.7mln (2013: £9.1mln). The dividend for the year rises 10% to 1.45p per share.

Bowles said revenue, EBITDA and cash rose to their highest ever levels, with the EBITDA margin progressing by four percentage points over 2013.”  

Iit was also its most balanced performance as there was not one significant transaction and the Australia and Sweden businesses also had good years. The proportion of recurring revenues also rose to 47% of the total. 

This year so far had seen the sales momentum continue, he added, with a very strong pipeline for core product Healthroster, while SafeCare’s rapid adoption had continued while  more customers are switching to the cloud-based product suite.

Brokers said the latest results were stronger than they expected.

Numis noted that healthcare bookings (value of business signed) were £41.2mln or £6.5mln greater than revenue, while over 90% of new or renewed Healthroster licences were also on a term/rental basis, which is strong indicator for the furtre.

Numis expects revenues to rise to £41.9mln in the current year with underlying profits of £7.4mln. Its recommendation is ‘buy’ with a 151p price target.

Shares today were 115p.

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