It hasn't been an easy year for software provider Craneware, which has seen its shares slide sharply since last autumn. Yet it remains a highly profitable company with a strong market position and a convincing growth story - so now could be a canny time to buy.
Craneware's software helps US hospitals process and analyse payments. The big problem this year – and the main reason for a profit warning in July - was that hospital managers have been so focused on transferring patients' health records away from pen and paper to electronic databases that they have had no time to improve revenue collection. They, therefore, delayed and deferred orders with Craneware, particularly in the run-up to a year-end deadline for receiving government incentive payments.
Chief executive Keith Neilson says sales activity returned to its normal pattern after the deadline passed, so growth should be faster in the current year. Over half of US hospitals still use manual revenue-processing systems, so plenty of contracts remain to be won. Meanwhile, the financial position is strong, with no debt and a cash balance that's worth a fifth of the group's market value.
Broker Brewin Dolphin expects adjusted pre-tax profit of $12.7m for 2013, giving EPS of 32.4¢ ($10.8m and 31.6¢ in 2012).
CRANEWARE (CRW) | ||||
|---|---|---|---|---|
| ORD PRICE: | 350p | MARKET VALUE: | £95m | |
| TOUCH: | 335-355p | 12-MONTH HIGH: | 609p | 255p |
| DIVIDEND YIELD: | 3.0% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 139¢* | NET CASH: | $28.8m | |
| Year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 18.7 | 4.19 | 13.7 | 3.1 |
| 2009 | 23.0 | 5.87 | 17.7 | 4.7 |
| 2010 | 28.4 | 7.26 | 21.8 | 8.0 |
| 2011 | 38.1 | 8.65 | 23.1 | 8.8 |
| 2012 | 41.1 | 11.2 | 33.0 | 10.5 |
| % change | +8 | +29 | +43 | +19 |
Ex-div: 7 Nov Payment: 7 Dec *Includes intangible assets of $16m, or 59¢ a share £=$1.59 | ||||
