Healthcare and business software group Advanced Computer Software (LON:ASW) is beefing up its cloud computing and managed services operations with the acquisition of Fabric Technologies for £4.6 million cash. 

Fabric has about 160 UK mid-market customers in banking and other professional services sectors and offers outsourced managed services and implementation and communications services.

ACS said the deal would be immediately earnings enhancing as Fabric has strong recurring revenues, while it would also strengthen its managed services division and gives cross-selling opportunities. 

Fabric, which has 95 employees, generated sales of £11.2m in 2010 and made £0.5 million profits. It will be integrated in ACS’s cloud-computing Advanced 365 Managed Services division based in London. The consideration includes £0.4 million depending on its performance.

Vin Murria, ACS’s chief executive, said: "This earnings-enhancing acquisition forms part of the group's strategy to identify and acquire high quality complementary businesses to strengthen its 365 Managed Services division. 

Fabric's market-leading offerings will help drive further cross-selling of managed services into the group's 7,000 strong customer base.” 

ACS has three divisions: Advanced Health & Care, which services the NHS and private healthcare sector; Advance Business Solutions and Advanced 365, which supplies managed services.

Murria added the company is looking for further acquisitions in the Health & Care and Business Solutions divisions.

Healthcare and business software supplier Advanced Computer Software (LON:ASW) was applauded by analysts after releasing an upbeat trading update this morning.

ACS said all of its divisions grew sales, with managed services up by 16 per cent, healthcare up by 8 per cent and business solutions by 6 per cent.

Broker Collins Stewart said although it had anticipated good growth in managed services, “the progress in health & care and business solutions is very pleasing against an uncertain economic backdrop”.

Collin Stewart said it was leaving forecasts for ACS unchanged but it expects to move them up in June when the preliminary results are released. 

ACS said that underlying profits increased by 9 per cent and will be at least £24m against £22.1 million.

The software company is also to consider paying dividends next year.

Ongoing revenue in the year to February rose by 10 per cent to £98 million from £89.2 million, with organic growth at 8 per cent.

ACS added it had benefited from cross selling of cloud-based solutions, which included a £17 million contract with the Northern Ireland Department of Health, Social care and Public Safety.

Vin Murria, ACS’s chief executive, said that the sales growth was also underpinned by growing demand for its mobile applications for the health and community care markets.

ACS’ iNurse and iConnect applications now have over 13,000 users in total, a 200 per cent rise on the previous year. 

This demand is being driven by continued expansion of the mobile solutions market and increasing demand for cost-effective, cloud-based shared services and outsourcing solutions, Murria added. 

Net debt at the year was down to £1 million from £31 million and Murria said the company will move into net cash position by the next half-year.

"The group is trading well and is positioned for further growth in the year ahead, both organically and by acquisition,” Murria added.

The share price rose by 2.5 per cent to 51.4 pence.

Ongoing revenue in the year to February rose by 10 per cent to £98 million from £89.2 million, with organic growth at 8 per cent.

Underlying profits have increased by 9 per cent and will be at least £24m against £22.1 million, ACS said.

The software group said all of its divisions grew sales, with managed services up by 16 per cent, healthcare up by 8 per cent and business solutions by 6 per cent.

ACS added it had benefited from cross selling of cloud solutions, which has included a £17 million contract with the Northern Ireland Department of Health, Social care and Public Safety.

Vin Murria, ACS’s chief executive, said that the growth was also underpinned by growing demand for its mobile applications for the health and community care markets.

ACS’ iNurse and iConnect applications now have over 13,000 users in total, a 200 per cent rise on the previous year 

This demand is being driven by continued expansion of the mobile solutions market and increasing demand for cost-effective, cloud-based shared services and outsourcing solutions, Murria added, 

Net debt at the year was down to £1 million from £31 million and Murria said the company will move into net cash position by the next half-year adding that the group will review its dividend policy at that time.

"The group is trading well and is positioned for further growth in the year ahead, both organically and by acquisition,” Murria added.

Advanced Computer Software announced robust half-year results, in which the firm reported a seven per-cent increase in revenue during the six months to August 31 and 14 per cent growth in adjust pre-tax profit.

Group revenue was £47.3 million (H1 2011: £44.2 million) while adjusted pre-tax profit came in at £10.4 million (H1 2011: £9.1 million). Adjusted earnings per share were up nine per cent at 2.4 pence.

In a note titled “Encouraging set of interims”, independent broker Collins Stewart commented: “Against a backdrop in its core markets that is flat at best, it is clear that ACS is winning market share. Its integrated portfolio of software solutions and service are playing well to the general theme of increased efficiency and cost reduction. We are particularly pleased to see the Business Solutions division recording organic growth in the period as we had previously pencilled in flat revenues for the full year.”

Collins Stewart added that it expects margins “to continue their upwards trajectory on the back of cross-selling and leveraging of its hosting capabilities”.

House broker Singer Capital Markets noted that the firm reduced its net debt to £10 million following the disposal of the non-core Cedar HR Software business. It also noted that opportunities remain both within and outside of the public sector as customers continue to look for ways to improve efficiency and cut costs. “With the strong execution we have seen so far, a good order book, and nearly 60 per cent recurring revenues, we are confident of a positive outturn for the rest of the year,” it said

Collins Stewart forecasts sales of £96.6 million for the year to February 2012, compared to the £95.3 million that Advanced Computer Software generated in its last financial year. EBITDA is estimated at £24.5 million (2011: £24.1 million).

Collins Stewart has set a target price of 56 pence for the shares, which were trading for 44.25 pence each during late-morning trading today.

Group revenue was £47.3 million (H1 2011: £44.2 million) while adjusted pre-tax profit came in at £10.4 million (H1 2011: £9.1 million). Adjusted earnings per share were up nine per cent at 2.4 pence.

Advanced Computer Software, which supplies IT systems and software to key vertical markets including the health sector, put the performance down to strong organic growth across all of its divisions. The firm’s Health & Care division grew by five per cent, while the Business Solutions and Managed Services divisions saw growth of four per cent and nine per cent respectively.

“We have continued to grow revenue and profitability whilst also significantly reducing our net debt by over £30 million – from £41 million in February 2010 to approximately £10 million as of today’s date,” said Vin Murria, Advanced Computer Software’s chief executive officer. “We see good growth opportunities for our portfolio of products in both the public and private sectors as these organisations seek efficiency gains and cost reductions.”

Murria also said that an integrated approach to how the firm supplies its systems and software was responsible for it increased its order book from £78 million at the year-end stage to more than £100 million today, with the group having achieved more than £23 million of cross selling so far this financial year.

Advanced Computer Software Group (LON:ASW) announced this morning that it has signed a 10-year, £17 million contract with Northern Ireland’s Department of Health, Social Care and Public Safety to supply a province-wide finance, procurement and logistics IT system.

The IT system is part of the ‘Business Services Transformation Programme’ that is aimed at saving Northern Ireland’s health and social care services more than £8 million per annum over a 10-year contract. The contract will help to streamline processes as well as reduce administration and purchasing costs, said Advanced Computer Software today.

“This key contract win is a clear demonstration of our group-wide capabilities to provide a range of interlocking services and products to enable our customers to materially improve their operational efficiencies and reduce costs,” commented Vin Murria, Advanced Computer Software’s chief executive.

Advanced Computer Software supplies patient management software to the healthcare sector and back office systems for business and organisations that are both in the public and commercial sectors. The firm’s annual turnover is more than £95 million, with 850 staff serving approximately 7,000 customers in the UK.

Originally established to consolidate the fragmented ‘primary care’ software market, the group now comprises three divisions aimed at addressing the needs of both public and private sector organisations. Its Health and Care division sells a range of products to the National Health Service and the private sector, including: patient workflow and case management for social care providers; mobile applications for care in the community; and rostering applications for social care settings.

Andrew Darley, analyst at broker finnCap, said the firm's prelims had provided solid delivery of forecasts and impressive cash generation to reduce net debt £10million, to £31million, during the year.

"The restated divisional splits show the significant capabilities in managed services and business solutions which highlight the potential for further delivery into the health & care sector, as well as the existing public and commercial sector customer bases.

"With ongoing acquisition risk reduced in materiality terms thanks to the £95 million established revenue stream, ASW is set to continue to show solid growth with outperformance potential," he said.

It is buying CareSys Software, a provider of software and IT services for patient care, for £2.6 million in cash. 

The purchase will be immediately earnings enhancing, the company said.

CareSys has annualised sales of £1.8 million and EBITDA of £480,000 with more than 55 per cent recurring revenues. 

The deal also strengthens the position of Advanced's Health and Care division as a supplier of software to care homes, community care centres and hospices. It now serves more than 1,000 care providers across the UK. 

Chief executive Vin Murria: "The acquisition of CareSys strengthens our product portfolio in the community care sector and brings new clients that could benefit from other products and services provided by the Advanced Group.”

CareSys is the company’s third acquisition of 2010, the biggest of which was the £100 million takeover of COA Solutions in February.

That transaction added £58 million of annual revenues and has transformed the group.

Advanced supplies outsourced IT services to both the public and private sector. 

It serves 344 of the 392 NHS trusts in the UK - providing anything from Blackberry apps for busy district nurses through to full back office support for care providers. 

It also carries out workforce scheduling for 37 police constabularies and manages more than 5.7 million procurement transactions for the health service.

Chief executive Murria has a formidable track record for building businesses in the IT sector, and in ACS has created a significant business in a very short space of time.

Turnover is predicted to hit £94 million this year, which is amazing when you realise that turnover for 14 months to February 2009 was just £4 million.

Murria is a veteran of the enterprise software sector, having spent 16 years at Kewill Systems, where she reached the position of chief operating officer. 

She made a name for herself as a chief executive when she significantly boosted returns for shareholders of fellow AIM-quoted firm Computer Software Group during her tenure in charge.

Murria joined CSG in mid-2002, when it was still known as Software for Sport, as a non-executive director representing the interests of substantial shareholder Elderstreet and by January 2003 she had been appointed chief executive.

CSG was a business turning over less than £3m per year when Murria arrived, but by the time the group was sold four years later it had become the figure had leapt to almost £80 million.

More importantly, it had changed from being a firm that was posting £1.4m per year in losses to a diversified group that was achieving an annualised proforma profit before tax of more than £10m.

Singer said the update shows a management team delivering against expectations despite general concerns on public sector spending.

ACS expects to report first half revenues to be in line with market expectations and adjusted EBITDA to be ahead of expectations.

Revenues for the half year ended August 31 2010 are expected to rise to £47.3 million from £11 million a year earlier and the EBITDA figure is expected to be no less than £12 million, up from £3 million in the previous year.

Singer noted that the UK government’s October Spending Review is on the horizon, but “we believe this start to the year provides a strong underpinning to the full year forecasts and reinforces our view that the management is fully capable of exploiting the opportunities it is facing. At 10X feb’11 P/E, we see current levels as attractive.”