Allocate Software has strong momentum despite NHS uncertainty, says boss

Staff rostering specialist Allocate Software (LON:ALL) said today underlying revenues grew in its latest half-year as momentum continued to build in its core NHS market.

Revenues overall rose to £16 million from £15.9 million in the half year to November, with underlying sales up by 15% excluding acquisitions and a £3 million contract in Australia in the previous year.

Allocate added eleven new NHS trusts to the customer list for its core HealthRoster staff scheduling software during the half.

That was similar to the 12 added in the same period in the previous year and in spite of the uncertainty caused by proposed reforms to the NHS.

Chief executive Ian Bowles said it showed that the NHS was still investing with the company.

“If you look at our healthcare revenue in general, it is only £400-500,000 behind this time last year when we had in excess of £3 million from the Australian healthcare deal.”

“It adds a real strong underlying momentum to the business” he said. “Organic underlying growth in healthcare was 14%, which in this day and age is not too shabby.”

“We expect this year to secure a similar number of HealthRoster agreements to those contracted last year and the recently acquired Zircadian business is performing in line with our expectation,“ he added.

The absence of the Australian contract meant underlying profits fell from £3.8 million to £1.6 million, while the impact of NHS changes on primary care trusts (PCTs) meant Allocate also wrote down the value of its Dynamic Change business by £3.9 million.

The proposed winding of down of the commissioning functions of PCTs has affected Dynamic Change, but Bowles said that the group had taken a number of initiatives to revitalise the business and to leverage its strength in Acute Trusts.

“These initiatives are progressing well, momentum is building and I am confident that this business will continue to recover,” he added.

Dynamic Change recently signed its largest ever contract for its HealthAssure product, he added.

The PCT provision, plus costs for acquisitions Zircadian and Rosteron and the absence of the Australian contract meant an overall loss of £6.57 million for the half year.

Brokers though left forecasts for the full year unchanged and expect a stronger second half as more HealthRoster contracts come through.

Allocate’s defence arm also recently secured an extension to its multi-million pound contract with the Australian Defence Force, which will mean a £2 million boost to full year revenues. The contract runs for three years and is worth nearer to £4.5 million when support and maintenance is included.

These support and other recurring revenues are a growing feature of Allocate’s model.

Licence revenue in the first half overall was £5.4m (2010: £7.7m), while services and support revenue grew by 29% to £10.6m (2010: £8.2m). Recurring revenues now account for 47% of the total.

Bowles said it had grown from nothing over the past 3-4 years, but added he will be more comfortable when the recurring total reaches 65%. 

Allocate now has 143 NHS trust customers using HealthRoster, which includes three that extended their contracts during the period just ended.

That makes 11 in total that have renewed HealthRoster, which has a 100% success rate for renewals.

Those 143 Trusts represents 45% of 316 Acute, Mental Health and Primary Care Trusts in England and Wale. Total Healthcare customers worldwide now number 462, including 297 NHS Trusts and 51 customers of Time Care in Sweden.

“The continued organic growth and momentum across the enlarged group makes for a confident outlook for the rest of the year,” Bowles added.