Allocate Software: Robust H2, Prospects Look Good
Edison | Jun 16, 2014 06:51AM ET
Allocate Software Plc (LONDON:ALLA) full year trading update confirms that revenues were in line with expectations, while EBITDA and cash generation were ahead, with strong uptake of Allocate cloud boosting both cash generation and recurring revenues. With HealthRoster’s market position in the NHS looking rock-solid and SafeCare offering a promising source of incremental revenue streams, prospects for 2015 look good. We do not believe these prospects are reflected in the company’s rating of 14.3x FY15 P/E ratio.
Robust demand for HealthRoster and better than anticipated uptake of Allocate Cloud again delivered the strong H2 to meet our FY sales estimate. Revenues in the core healthcare operations grew by an estimated 18% y-o-y (all organic) offset by declines in the lumpy maritime and defence businesses. Demand for HealthRoster was supported by a combination of wins in greenfield sites, competitive displacements and the favourable licensing renewal cycle, with the renewal rate maintained at 100%. Uptake of Allocate Cloud continues to exceed expectations, improving the recurring revenue mix and contributing to the company’s strong cash performance. This progress was offset by slower progress with the medics products, while Patient Flow is yet to make further headway.
h3 SafeCare and HealthRoster V10 support prospects/h3Scope for cross-selling should be enhanced by good progress in migrating NHS trusts to HealthRoster V10, which interfaces with Allocate’s new generation of in-house developed products (33% of trusts now live). 15% of Allocate’s NHS customers have contracted to use the first product of the company’s SafeCare suite, developed to support the drive to improve the transparency of NHS staffing levels. In SafeCare, we feel Allocate now has an in-house developed product with clear potential to generate a significant incremental revenue stream, building on the platform established in the NHS through HealthRoster.
h3 Valuation: Does not reflect potential/h3We have nudged up our FY14 EBITDA and EPS by 4%, with year-end net cash moving up by 10% to £13m. We are leaving our FY15 P&L estimates unchanged, but believe that both years of forecasts are conservative. The FY15e P/E of 14.3x (a c 15% discount to European healthcare software peers) does not seem to factor in the strength of the company’s position in the NHS, scope for cross-selling driven growth, cash generation and balance sheet strength (net cash is close to 20% of the market capitalisation).
Get The News You Want
To Read the Entire Report Please Click on the pdf File Below
/h3
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.