Craneware pins hopes on post-Covid customer surge

In May this year, the US declared an end to the Covid-19 public health emergency. For many members of the public, whose lives had more or less returned to normal, this would have seemed like a mere formality. But for businesses operating in the healthcare space, such as specialist software group Craneware (CRW), the official end of the pandemic was a positive sign for business.

“We have begun to see US hospitals return their attention to providing value-based care and investing in digitalisation,” said Craneware chief executive Keith Neilson. The company, which counts some 40 per cent of US hospitals as its customers, saw profits stagnate in recent years as cost pressures weighed on health systems. 

However, management reported “an increasing number of opportunities” entered its pipeline in the fourth quarter, with this momentum carrying over into the new financial year. These green shoots aren’t yet visible in Craneware’s accounts, although there were reasons for optimism. Firstly, the group’s operating cash conversion reached 92 per cent of its adjusted Ebitda figure – up from 80 per cent in 2022.

It also finished moving its customers onto Trisus, its cloud-based data analytics platform. “We also see scope for a reacceleration of growth due to a renewed focus on new customer wins and upsells after the disruption caused by migrating customers to the cloud,” wrote Panmure Gordon analysts in a 5 September note.

FactSet broker consensus puts Craneware’s price/earnings multiple at just over 20 times for the current financial year. This isn’t cheap – but we think the group’s growth potential just about justifies it. A speculative buy.

Last IC view: Buy, 1,481p, 6 March 2023