Advanced Computer Software's Murria sets out her ambitious expansion plans

ADVANCED Computer Software (LON:ASW) has come a long way in a short space of time.

From barely registering on the radar screen two years ago, its turnover today is approaching £100 million.

Chief executive Vin Murria is the driving force behind the company.

She has an incredible track record honed at software firm Kewill Systems and following that at Computer Software Group. Her expertise is buying and building businesses.

At CSG she turned a £3 million struggler into an operation that was eventually sold for £500 million, making 16 acquisitions and completing a merger in the process.

In the past two years at ACS, which provides software for the healthcare sector, police forces and banks, she has completed six deals, the biggest of which was COA Solutions, bought February for £100 million.

Murria shows no sign of flagging. In the next three years she hopes to have built a £200-£300 million turnover company and currently has a handful of acquisition opportunities on the back burner.

She is looking at bolt-on opportunities of the order of £5 million and “a couple of larger deals”.

By “larger” Murria means takeovers of the order of £50 million. The group has a £55 million debt facility, while investors will back the ACS boss if she wishes to issue shares.

So the major transactions will in all likelihood be a mix of cash and equity.

The group has its own deal team in-house and a very sensible acquisition strategy.

“We haven’t  corporate finance houses, we analyse the market ourselves,” she tells Proactive Investors.

“We know most people in the sector ... sometimes people bring us relationships.

"We are never going to pay over the odds. But we also try to do the right thing. The founders we buy from all say we are good people to deal with.

“The key is to make sure the acquisitions fit well. If you chase too hard then you won’t get the price. However with the big deals you have to move quickly.”

There may be the opportunity to expand beyond the UK. ACS already has a base in India, while the US also looks attractive.

The company has three major businesses. The biggest (and the one people tend to obsess about) is the healthcare operation, which provides back office and analytical software across the gamut from primary care trusts to private providers such Harmony, Bupa and Care UK.

The group also has a growing and vibrant business intelligence, analytics and accounting applications operation as well as a managed services arm, which will benefit from the move towards outsourcing.

The healthcare division tends to worry the lay investor, particularly in the wake of George Osborne’s Comprehensive Spending Review, which will see some big cuts to central and local government budgets.

But careful scrutiny of the figures shows that only a small portion of ACS's revenues are actually subject to the austerity drive in Whitehall and the town halls.

Yes, there are big public sector contracts such as the police duty scheduling and rostering work it does for 37 constabularies across Britain.  However its role is crucial and it would be costly and counter-productive to cancel the deals.

Other public sector mandates are done on a recurring revenue basis, which leaves around £2 million at risk to the cuts.

“Yes we have an incredibly strong healthcare business, but we also have an equally strong commercial base,” says Murria.

“We are nicely diversified to have the best of both worlds.”

However any impact from the austerity measures is likely to be counter-balanced by NHS reforms - specifically the coalition’s plans to introduce GP consortia, which will hand control of budgets back to doctors.

The consortia will of course need the sort of back-office, accounting and analytical software provided by ACS.

“People ask me if we planned it that way (to take advantage of the reforms),” Murria says.

“I tell them yes, but we certainly didn’t expect things to move so quickly. GP consortia are absolutely spot on for us.”

However the near-term focus is on the COA deal and extracting cost savings and synergies from the enlarged business that should act as a buffer against any future cuts.

Cross selling contracts worth more than £6m have been signed with new customers, including a fully outsourced managed service agreement with the Nursing & Midwifery Council, while a full suite of accounting software has been sold as a managed service to Reader’s Digest.

And more than £2m of annualised cost savings have been identified since the acquisition of COA in February.

Last month’s update from the company reflected this progress as the group said first half EBITDA would be ahead of the market’s expectations at no less than £12 million.

“As a business we are doing very well,” says Murria. 

“We tend to be strong on our message but conservative on our numbers. We never over-egg it.

“What we are not in for is to take short-cuts. We want to build a great business that will be here in 10, 20 or 30 years time.

“None of us are here for short term gain. We are in that fantastic position of all having been very successful. We don’t need to take short-cuts.”