Advanced Computer Software Group’s shares higher after it signs £17 million deal

Shares in Advanced Computer Software Group (LON:ASW) were up 6.3 per cent to 42 pence each this lunchtime after this morning’s announcement that it has signed a 10-year, £17 million contract with Northern Ireland’s Department of Health, Social Care and Public Safety.

The deal, to supply a province-wide finance, procurement and logistics IT system, was welcomed by both the company’s house brokers Mirabaud Securities and Singer Capital Markets.

Mirabaud said the contract “continues to demonstrate the positive momentum in the business” and that “with the current valuation looking undemanding on conservative estimates” it reiterated its ‘buy’ recommendation and 60 pence per share target price.

Meanwhile, Singer pointed out that the shares (at their opening price today of 39.5 pence) are trading on a 5.2 times enterprise value-to-EBITDA rating and a 9.5 times price-to-earnings rating. “We believe these are attractive multiples given the resilience the business has shown in the last 18 months and we believe there is more to go for,” said the broker.

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, in this mornings announcement.

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.

Speaking to Proactive Investors later in the morning, Murria told us that a focus on budgets within the NHS “is actually working very favourably for us at the moment”, explaining that adoption of technology by health authorities is driving business. “It’s bringing shared services together. This is saving them a lot of money,” she added.