Stocktube video
04/11/2014

Advanced Computer Software chief on interims, tax inversions and share price

View full size
Additional Information
Market: AIM
Sector: Software & Computer Services
EPIC: ASW
Latest Price: 139.00p  (0.09% Ascending)
52-week High: 139.75p
52-week Low: 90.00p
Market Cap: 665.98M
1 year chart More charts
Deal ASW Tax Free*
*subject to change and depends on individual circumstances.
1 day chart More charts
Advertisement
Watchlist/Portfolio

Add to watchlist:

Only registered members can add into watchlist !

Register here !
Advanced Computer Software Group plc
www.advancedcomputersoftware.com

Advanced is a leading provider of software and IT services to the public, private and not for profit sectors which enable organisations to improve efficiency, reduce costs and drive growth. With approximately 1,900 staff serving 20,000 customers throughout the UK, Advanced is one of the largest listed UK-based software companies.

Pdf

Advanced Computer Software to remind investors of growth potential

October 29 2013, 12:57pm 'With strong execution, particularly on the cross-selling, we believe the group can deliver results above expectations and believe the shares can support a higher valuation rating given its growth profile,' N+1 Singer said.

Interim results from Advanced Computer Software (LON:ASW) on Wednesday represent a chance to restart a share price advance that seems to have stalled.

Having topped out at 97p in mid-June, the share price of the acquisitive software and information technology services provider has mostly been range-bound between 80p and 90p.

This is despite the company winning its largest ever managed services win, worth £14.5mln over five years, in October.

That followed a reassuring trading statement in mid-September that indicated Wednesday’s interims are likely to be in line with management expectations, with revenues up 74% to no less than £99.0mln and adjusted underlying earnings (EBITDA) up 67% to no less than £22.0m.

Both those numbers came as a pleasant surprise to joint broker N+1 Singer, which had pencilled in £96.5mln for sales and £20.9mln for EBITDA.

Meanwhile, the firm’s other broker – Arden Partners – has suggested that well-publicised problems over the summer with the NHS 111 service are weighing on the share price, for no good reason.

NHS Direct recently decided to withdraw from its contract to run part of the NHS 111 non-emergency helpline. Advanced Computer Software (ACS or ASW) is the supplier to a number of 111 providers, including NHS Direct, for integrated call handling and its Adastra Out Of Hours software.

There is no suggestion, however, that ACS’s software has been responsible for the teething problems; the software is proven and is working well, Arden reported.

In any case, any uncertainty over future revenue is limited to a total of £1mln per annum maintenance and managed services from 111 providers, of which Arden estimates half to be from NHS Direct.

“In the context of our £196mln forecast for full year revenue from ASW, this is inconsequential,” the broker maintained.

Meanwhile, there is plenty of growth to go for, according to Panmure Gordon, which rates the shares a ‘buy’ and which has a target price of 110p.

“Multiple growth opportunities within healthcare, business solutions and managed services - as evidenced by the recent announcement of the company’s largest ever managed services win, worth £14.5m over five years – should continue to drive above-market growth. This will enable ACS to keep spinning out impressive amounts of cash, which will either fund the pursuit of additional growth opportunities or potentially turn this into the kind of ‘returns’ stock UK investors so highly value,” suggested Adam Lawson and George O’Connor at Panmure Gordon.

As a returns stock, it is a case of small acorns at the moment, with the group having declared its maiden dividend payment of 0.4p as recently as June of this year, at the time of its full-year results announcement.

On the other score – growth through acquisition – the ACS bandwagon is rolling along at its usual lick. In the first half of the year the company acquired Computer Software Holdings (CSH) for £110mln in cash, and the acquisition could hardly have been more tailor-made for ACS had the company’s chief executive, Vin Murria, rubbed a magic lamp and made a wish.

The purchase had all the usual things ACS looks for in an acquisition: similar but complementary activities; strong cash generation; a high level of recurring revenue from customers who love the product; its own intellectual property; and the opportunity for cross-selling.

On top of that, it is a company senior management knows well, as many of them held prominent positions at CSH when the company was taken private back in 2007.

In the second half of this year, ACS made another purchase which, in Murria’s view, is “a natural fit”. It bought Plain Healthcare, the trading subsidiary of Avia Health Informatics.

“Avia is a business we have been trying to buy for about five years,” chief executive Vin Murria told Proactive Investors at the time of the purchase announcement.

Plain Healthcare developed the Odyssey system which is used by more than 100 NHS customers, and it is already a long-term partner of ACS’s Health & Care business.

Lest the impression is given that ACS is all about bought-in growth, Panmure Gordon notes that the AHC business has apparently continued to show “strong organic growth” and made “excellent progress in all areas”. The 365 managed services business, similarly, has achieved “strong growth” in its recurring managed services revenue, and has “substantially reduced” its exposure to lower-margin hardware sales.

The final word goes to Panmure Gordon.

“Although investors currently have an appetite for blue-sky growth, ACS’s track record, growth potential and ability to generate cash should not be ignored.”

Shares in Advanced Computer Software were up 2.3% to 87.47p in late afternoon trading.

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.