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ASW's plan to resume acquisitions promises to accelerate its growth
November 5, 2014

Weathering the economic downturn has required government departments and companies alike to cut costs and run more efficiently. Many have turned to Advanced Computer Software (ASW), helping the group to grow its first-half cash profit - excluding one-off acquisition and restructuring costs - by 14 per cent to about £25m.

IC TIP: Buy at 107p

Cash profit at ASW's business solutions division climbed 13 per cent to over £19m as it completed the group's largest ever contract with Northern Ireland Department of Health. It also implemented a suite of mobile apps for Aer Lingus to improve the Irish airline’s procurement process.

The group also made gains in its health and care division, which helps clinicians access patients' records on the move and share them with other healthcare providers. Thirteen NHS trusts have chosen it as their preferred system supplier, including mental health specialist Tavistock and Portman in north London.

Strong cash conversion allowed AWS to reduce net debt by 23 per cent to £38m. It now plans to resume making acquisitions - a strategy that has paid off handsomely in the past. For example, it purchased its health and care business in 2008, and augmented it with a further six acquisitions that brought it into the mental health and hospice markets, among others.

Broker Arden Partners expects full-year pre-tax profit of £44.1m, giving EPS of 7.1p, up from £38.5m and 6.2p.

ADVANCED COMPUTER SOFTWARE (ASW)
ORD PRICE:107pMARKET VALUE:£513m
TOUCH:107-108p12-MONTH HIGH:129pLOW: 89p 
DIVIDEND YIELD:0.4%PE RATIO:32
NET ASSET VALUE:37p*NET DEBT:21%

Half-year to 31 AugTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2013994.80.9nil
20141087.81.3nil
% change+9+63+44-

*Includes intangible assets of £263m, or 55p a share