---Adds comments from broker Numis Securities---

Workforce optimisation specialist Allocate Software (LON:ALL) said the company’s performance in the first half to end-November 2011 was in line with its expectations and it is on track to achieve its revenue and profit targets for the full year.

The pipeline of business in the UK Healthcare sector is robust and continues at recent levels with Time Care in Sweden performing well and the Australian healthcare business continuing to develop. The performance of the Defence sector is also meeting expectations, the group told investors.

The first half saw two important acquisitions: RosterOn in Australia in July and Zircadian in the UK in August, The integration of both is making good progress.

During the first half, Allocate was awarded 12 new contracts for HealthRoster, its e-Rostering application, of which 11 were for the NHS, increasing the total NHS e-Rostering customer base to 156 Trusts. 

In addition, the company won one new HealthRoster contract in Malaysia/Brunei, saw three NHS Trusts extend their HealthRoster licences, won four new customers for Dynamic Change and six new customers for Time Care.

Post half-year end, the Defence business secured a major contract with the Australian Defence Force, a multi-year, multimillion pound license extension to its current license base that will extend the deployment of MAPS to all personnel in the Australian Army.

The Maritime business closed an important new order with engineering, offshore oil and gas company McDermott.

Chief executive Ian Bowles said:  "I am pleased with the momentum and performance of Allocate in this half year. We are experiencing great customer support; in addition prospective customers are selecting our applications following competitive tendering processes.  

“Ideally, I would prefer to see a faster closure rate on some of the NHS transactions but I am reassured by the number of prospects that are coming to market and that NHS Trusts are increasingly engaging with us to discuss their plans. 

"Despite the current environment, I am confident that we remain on track for our full year revenue and profit targets," the CEO added.

Results for the first half will be released in early February 2012.

In a note to clients today Numis Securities analyst David Toms said: “Allocate's H1 trading update indicates a performance in line with management expectations and comments that despite the macroeconomic environment Allocate is ‘on track for our full year revenue and profit targets’. 

“We leave our forecasts unchanged, underpinned by a ‘multimillion GBP license extension’ for the

Australian Army which has occurred early in the second half.”

Numis has a ‘buy’ recommendation for the stock with a 100p a share target price. Going forward the analyst reckons the stock may see a re-rating.

“As we draw nearer to the high visibility revenues from contract extensions and international growth continues, we see good scope for a rerating,” he explained.

Today on AIM Allocate was up 1.5p, or 2 per cent, trading at 79p a share.

Workforce optimisation specialist Allocate Software (LON:ALL) is still underappreciated by the stock market in spite of its strength and long-term growth potential, according to house broker Numis Securities.

In a research note released this morning, Numis highlighted the firm’s robust and improving earnings quality, cross-selling opportunities into its existing customer base and long-term prospects in new international markets.

Earlier this week, Allocate reported that it had managed to increase revenues and operating profits (at the EBITDA level) during the year to the end of May despite tough conditions in its key healthcare markets.

Allocate’s chief executive officer, Ian Bowles, told Proactive Investors that he believes that cost-cutting reforms in the UK’s National Health Service will continue to serve as a boon to the company over the long term. “The predominant reason for these reforms is to save money in the NHS and our software helps it do that,” he said in a phone interview with Proactive Investors on Tuesday.

During the 12 months to May 31, revenue increased 37 per cent to £30.1 million, while EBITDA (earnings before interest, tax, depreciation and amortisation) grew 57 per cent to £5.8 million. 

Recurring revenues grew by 68 per cent to £11.6 million, while licence revenue increased 40 per cent to £13 million. Service and support revenue improved 34 per cent to £16.7 million.

The firm’s HealthRoster software gained 26 new NHS Trust customers during the period, making 145 Trusts with HealthRoster in total at the end of the financial year – representing 35 per cent of the 411 Acute, Mental Health and Primary Care Trusts in England and Wales.

Commenting on the results today, Numis said that Allocate had provided two good datapoints for its cross sales successes: the first being 20 key IT customers (acquired in April 2008) having now purchased HealthRoster, “showing that Allocate can up-sell to acquired customers”; the second being 40 HealthRoster customers purchasing the firm’s doctor rostering software since its launch two years ago, “demonstrating the potential for customers to purchase new products developed organically”.

Numis added: “We estimate that of Allocate’s four major products... on average each NHS Trust has approximately 1.2 products. In our view there is scope for this figure to at least double.”

Numis has a target price of 100 pence for Allocate’s shares, which were trading for 67 pence each by midday today.

Workforce optimisation specialist Allocate Software (LON:ALL) managed to increase revenues and operating profits (at the EBITDA level) during the year to the end of May in spite of tough conditions in its key healthcare markets.

During the 12 months to May 31, revenue increased 37 per cent to £30.1 million, while EBITDA (earnings before interest, tax, depreciation and amortisation) grew 57 per cent to £5.8 million. 

Recurring revenues grew by 68 per cent to £11.6 million, while licence revenue increased 40 per cent to £13 million. Service and support revenue improved 34 per cent to £16.7 million.

The firm’s HealthRoster software gained 26 new NHS Trust customers during the period, making 145 Trusts with HealthRoster in total at the end of the financial year – representing 35 per cent of the 411 Acute, Mental Health and Primary Care Trusts in England and Wales.

Total healthcare customers worldwide now number 450, including 373 NHS Trusts and 62 Swedish customers of the firm’s Time Care business (which Allocate acquired in November 2009).

Allocate said that the Dynamic Change business it acquired last year has recovered from a slow start and has now improved levels of new business as a result of the benefits of integration with the sales and marketing functions of Allocate.

In Australia, Allocate said that rollout has commenced of a state-wide major contract and the firm has additionally won a new state-wide agreement for its HealthRoster BankStaff product (for temporary staffing) in Queensland.

Meanwhile, the firm’s defence business has secured and begun work on a major contract for NATO in Belgium.

Allocate completed two acquisitions after the end of its 2011 financial year. These included the purchase of Australian firm RosterOn, which will increase Allocate’s presence and support its growth in the Asia-Pacific region, and the acquisition of London-based Zircadian Holdings, which is planned to significantly enhance the firm’s product portfolio.

While Allocate’s operating profit and pre-tax profit for 2011 both came in lower, at £866,000 (2010: £1.3 million) and £747,000 (2010: £1.3 million) respectively, this took into account increased amortisation of £4.4 million (2010: £2.1 million) due to acquisitions.

Adjusted earnings per share came in at 23 per cent greater at 6.4 pence during 2011. At the end of May, net cash on Allocate’s balance sheet amounted to £8.4 million (May 31 2010: £2.9 million).

Workforce optimisation specialist Allocate Software (LON:ALL) is paying up to £7 million for a provider of rota-planning software for junior doctors and consultants in the NHS.

Zircadian Holdings supplies its rota-planning systems via a ‘software as a service’ (SaaS) solution, where they are accessed remotely through the Internet.

SaaS is an increasingly common way of providing software since it is easier for developers to update and maintain the software when it is stored on central servers, while users do not have to spend money and take time installing the software on their own computers – they access it via a Web browser instead.

The total consideration being paid by Allocate for Zircadian includes a deferred payment of £1 million that depends on financial targets, as well as £0.5 million dependent on the retention of key staff. Zircadian has net cash of approximately £1 million at 31 July 2011.

Allocate said that most of Zircadian’s contracts are multi-year agreements and that it has 142 healthcare customers in the UK, including 107 NHS Trusts who use Zircadian’s Junior Doctor Portal and 68 using its Consultant Portal.

In the year to the end of March, Zircadian’s unaudited management accounts show a reported £3 million of billings, £2.5 million in recognised revenues and approximately £0.2 million in operating profit on the EBITDA level.

Allocate’s directors believe the acquisition will be earnings enhancing during its first full financial year of ownership, and that the subscription nature of Zircadian’s business model – with high levels of recurring revenue – will enhance revenue visibility.

“We are delighted to conclude our sixth acquisition, one which complements our HealthRoster application well, thereby significantly enhancing the product portfolio and value that we can bring to our customer base both within the NHS and elsewhere,” said Ian Bowles, Allocate’s chief executive officer.

In a note, analyst David Toms at broker Numis said: "We see good opportunities for Zircadian and Allocate to cross-sell their software as well as to tighten the integration between planning a rota and producing a detailed roster."

He added that the broker's forecasts were unchanged for now but would be reviewed in detail at the time of the full year 2011 results in early September.

"We retain our 98 pence target price and Buy recommendation," he said.

The company's shares are currently trading at 66.5 pence each.

Zircadian Holdings supplies its rota-planning systems via a ‘software as a service’ (SaaS) solution, where they are accessed remotely through the Internet.

SaaS is an increasingly common way of providing software since it is easier for developers to update and maintain the software when it is stored on central servers, while users do not have to spend money and take time installing the software on their own computers – they access it via a Web browser instead.

The total consideration being paid by Allocate for Zircadian includes a deferred payment of £1 million that depends on financial targets, as well as £0.5 million dependent on the retention of key staff. Zircadian has net cash of approximately £1 million at 31 July 2011.

Allocate said that most of Zircadian’s contracts are multi-year agreements and that it has 142 healthcare customers in the UK, including 107 NHS Trusts who use Zircadian’s Junior Doctor Portal and 68 using its Consultant Portal.

In the year to the end of March, Zircadian’s unaudited management accounts show a reported £3 million of billings, £2.5 million in recognised revenues and approximately £0.2 million in operating profit on the EBITDA level.

Allocate’s directors believe the acquisition will be earnings enhancing during its first full financial year of ownership, and that the subscription nature of Zircadian’s business model – with high levels of recurring revenue – will enhance revenue visibility.

“We are delighted to conclude our sixth acquisition, one which complements our HealthRoster application well, thereby significantly enhancing the product portfolio and value that we can bring to our customer base both within the NHS and elsewhere,” said Ian Bowles, Allocate’s chief executive officer.

Workforce optimisation technology firm Allocate Software (LON:ALL) has bought Australian rival RosterOn to help it grow its presence in the Australia healthcare market.

Allocate, which is paying A$3 million (or £2 million) for RosterOn, said the acquisition of a local provider of workforce management software with an established installed base of customers is in line with its strategy of providing scale and resources to accelerate its growth in the region.

Melbourne-based RosterOn is mainly focused on the healthcare market, with 70 percent of its revenues coming from 43 healthcare customers. The balance of revenues is spread across multiple sectors, including mining, logistics, manufacturing and retail.

The firm has developed an interpretation engine designed specifically for the Australian work environment, so that its software follows complex rules for wage fixing arrangements relating to minimum pay, minimum number of breaks per hour, minimum level of overtime compensation and pay-related activities (e.g. working through a break).

For the year to the end of June 2011, management accounts show the Australian firm generated approximately A$3 million in revenues and approximately A$0.6 million earnings before interest, tax and amortisation.

Allocate does not expect a complex integration of RosterOn into the enlarged company since key members of RosterOn’s management team are expected to remain in place.

“Acquiring RosterOn reinforces our commitment to the local market and consolidates our position in the Australian healthcare sector,” said Ian Bowles, Allocate’s chief executive officer. “Furthermore, RosterOn brings additional domain expertise and [complementary] applications functionality for healthcare in Australia.”

Allocate also announced today that results for its 2011 financial year would now be released on 5 September, instead of early August.

Iain Bishop joins Allocate from London-listed enterprise software firm Kewill Systems, where he was group CTO. During his five years there Kewill, a supplier of supply chain management software, doubled its turnover and trebled profits as it acquired businesses around the world.

Allocate supplies workforce and compliance optimisation software to blue chip and public sector organisations with large, multi-skilled workforces. Its key vertical markets include healthcare, defence and maritime.

Based in London, the firm provides services and support to an increasing international clientele through regional offices in the UK, Sweden, the US, Australia and Malaysia.

This week Allocate announced that it had had a strong performance during the fourth quarter ended 31 May. 12 new NHS Trusts had purchased its ‘Healthroster’ application, bringing the firm’s list of NHS customers to 145 Trusts.

The firm also saw contracts secured in Australia and the US.

Meanwhile, in the Defence sector Allocate achieved further contracts with the Royal Australian Navy and the British Army. Its Maritime vertical saw an additional licence sale to Maersk Oil Qatar and a significant upgrade of its software to Norwegian Cruise Lines.

Allocate, which expects to report its full results for its 2011 financial year in August, said the performance during the 12 months to 31 May would be in line with expectations.

Numis Securities featured Allocate in its 'Morning Meeting Notes' today, and said the third quarter update showed strong sales into the customer base picking up much of the slack from a relatively slow period for new Healthroster sales.

The broker said that H1 was exceptionally strong this year, and “our forecasts have always reflected an expectation of a slower H2, thus we leave our forecasts unchanged.”

“We leave our … target multiple unchanged, and continue to see upside as the company delivers on its growth ambitions. The recent strength of the shares means our recommendation moves to Hold (from Buy) on an unchanged 96 pence target price. Key risks are timing of large licences and NHS spending,” Numis added.

Earlier this month, Edison Investment Research said that Allocate Software could soon be in for an upward re-rating if its overseas expansion continued.

According to Edison, while the company is looking into further acquisitions, “a platform is now in place to deliver a robust and profitable growth trajectory through expanding into adjacent vertical and geographical markets”.

The research house then described the current rating of 15x earnings with a 7 percent free cash flow yield as “undemanding”.

An upward re-rating could be warranted by further progress overseas, as it would give visibility of further revenue diversification and “make the substantial international opportunity more apparent to investors”, said Edison.

Shares in Allocate have surged from 78 pence at the start of the year to the current 87.5 pence.

Its major product is Healthroster, used to optimise staffing in the health service, where a programme of reform and cutbacks has hit other companies operating in the sector.

However Allocate bucked the trend as it revealed it landed 12 new NHS customers.

In the six months to November 30 sales grew 77 per cent to £15.9 million. Operating cashflow grew to £2.7 million in the period from £1.1 million a year ago, and Allocate now has £5.4 million in the bank, a rise of £900,000 on the same period 12 months ago. 

At the same time, trading profit margins have expanded to 22.6 per cent in the period from 12.5 per cent.

Chief executive Ian Bowles said: “As was indicated in the half year contracts update, taking into account both the positive effect of our overseas expansion and the negative impact of the Government’s White Paper outlining the re-structure of the NHS, we remain on track for our full year revenue and profit targets.” 

He revealed the half year results had been boosted by a large Australian contract landed during the period, but he added: “Whilst this contract will continue to contribute to our revenue growth in the future, I do not expect that the amounts of revenue and profit realized in this period will be repeated at these levels in future periods.” 

The Healthcare division continued to make progress. While the government restructuring of the NHS and, in particular, the abolition of the Primary Care Trusts has had an impact on Dynamic Change – the UK-based software-as-a-service (SaaS) provider of regulatory compliance, corporate governance, risk and performance management for the UK healthcare market it acquired in May 2010 - the impact was less felt at Allocate’s Healthroster business.

The period under review saw 14 new contract wins for its electronic rostering product Healthroster, of which 12 were for the NHS, increasing the total NHS e-Rostering customer base to 131 Trusts. Four NHS Trusts extended their Healthroster licences.

Allocate saw one new Healthroster win in the US and one in Malaysia in the first half.

Dynamic Change won six new customers, however, the restructuring of the NHS has had an adverse effect on the Dynamic Change business which has resulted in a numbers of contracts not being renewed.

The period saw 10 new customer wins for Time Care, the Swedish group that was acquired at the end of 2009.
Allocate’s Defence division completed a substantial new consultancy contract with NATO, carried out more MAPS Defence Suite enhancements for the British Army under their Farrier Programme and started a major new Australian Army project.

 The Maritime division completed the upgrade of for seabed-to-surface engineering and construction contractor Acergy to the latest MAPS Maritime Suite, it completed the first phase of Maersk Oil’s Qatar project completed, and it started the upgrade of Norwegian Cruise Lines’s software suite.

 Allocate chief executive Ian Bowles: "I am very pleased with the performance of Allocate in this half year. We have added good numbers of new customers and a number of our NHS customers extended their contracts. Our customer installed base continues to grow in the UK as well as overseas with a further win in Malaysia and our second Healthroster win in the USA.

"The government restructuring of the NHS and, in particular, the abolition of the PCTs has had an impact on Dynamic Change but less so on our mainstream Healthroster business, as evidenced by the number of new accounts won and the contract extensions. Notwithstanding the macro level slowdown in government spending and the NHS restructuring, we remain on track for our full year revenue and profit targets."

 The company's results for the half year will be released at the end of January 2011.

King has worked with Ernst & Young (NYSE:EY) since 1975, where he is currently Deputy Managing Partner, Ernst & Young, UK and Ireland, with specific responsibility for D&I, Service Quality to major accounts and the partner alumni programme.

During his tenure at Ernst & Young, King led the integration of the UK and Ireland businesses to create a £1 billion practice.

“Richard is a high calibre individual with significant success and experience in the areas of finance, governance and managing change in a large, growing and highly regarded organization.

“His appointment will further strengthen our board as Allocate becomes a larger and more significant player in its markets, both home and abroad,” said Allocate chairman Terry Osborne.

This is the company’s second major personnel move in just a week.

Last Monday, Allocate hired Martin Jeffries as its new international marketing director. Jeffries has previously held senior roles in IT, pharmaceuticals and consulting businesses. Most recently he was Head of Strategy & Programs in Dell Corporation’s Europe Middle-East and Africa (EMEA) division.

Allocate provides workforce optimisation software to a variety of markets, but it is most known for its work with the NHS.

The company’s ‘e-rostering’ software is used to improve efficiency and help healthcare administrators organise their staffing strategies.

According to Allocate, Healthroster can improve the effectiveness of nursing and other clinical staff to better meet patient demand.

During the first quarter, Allocate Software won 14 contracts, including seven new NHS contracts for Healthroster, taking the total NHS e-Rostering customer base to 126 trusts.

Jeffries has previously held senior roles in IT, pharmaceuticals and consulting businesses. Most recently he was Head of Strategy & Programs in Dell Corporation’s Europe Middle-East and Africa (EMEA) division.

"I am delighted to welcome Martin to the Allocate management team,” chief executive Ian Bowles said.

“He brings to the company a wealth of marketing expertise in the healthcare and technology markets, 

“Martin's experience adds to the strength of the Allocate team, as the business continues to grow its operations."

The newly appointed sales director highlighted Allocate’s excellent track record.

Jeffries adds: “Within these challenging global economic times Allocate is well placed to drive it's expertise across a global market looking to address waste and inefficiency.” 

Allocate provides workforce optimisation software to a variety of markets, but it is most known for its work with the NHS.

The company’s ‘e-rostering’ software is used to improve efficiency and help healthcare administrators organise their staffing strategies.

According to Allocate, Healthroster can improve the effectiveness of nursing and other clinical staff to better meet patient demand.