Craneware targets US growth

Craneware, the Scottish healthcare software specialist, is hoping to profit from US efforts to cut the cost of healthcare.

The Edinburgh-headquartered concern, founded in 1999, develops a range of software for the US market. An AIM 100 constituent, the shares have powered ahead over the past year as investor interest in the business has increased.

Employing more than 200 people in its offices in Edinburgh and across the US, the company is led by its co-founder and chief executive officer Keith Neilson, who steered Craneware to its AIM debut in 2007, when it raised £20.5 million at 128p a share.

The group develops and sells a range of software products. These include: the Chargemaster Toolkit, for making claims on behalf of the hospital (in the US, healthcare is charged to health insurance companies via the hospitals); the Bill Analyzer, which, as implied, looks at the bills from hospital claims, helping to calculate ‘how much revenue may be leaked with each individual issue’; and the Physician Manager Toolkit, which helps doctors calculate their fees and charges.

Its other solutions include the Patient Charge Estimator, which provides estimates of the charges to patients visiting a hospital, and Supplies ChargeLink, which helps hospitals charge for supplies such as drugs.

Craneware recently issued a solid set of full-year results in which it reported a 19 per cent increase in pre-tax profits to $8.7 million on sales of $38.1 million (2010: $28.4 million). EPS rose from 21.8 cents to 25.6 cents while cash stood at $24.2 million (2010: $29.4 million.)

The results saw Craneware enthuse that it had 1,500 customers in the US using its products, adding that it has ‘some of the largest hospital groups in the US among our growing band of software users’. Craneware acquired US software-as-a-service business ClaimTrust in February in a deal worth $19.5 million. The company notes that it has taken on an additional 250 hospitals as customers as a result of the acquisition.

Craneware is hoping to benefit from the increased cost pressures that the US healthcare system is experiencing. These are due to both the cost of the reforms made by President Obama that have sought to provide healthcare for the 50 million or so Americans without coverage, in addition to the general pressure to cut costs at a time of economic difficulty for the United States.

Neilson argues that the US ‘has to try and squeeze costs to afford to keep their hospitals open’, noting that this strain will be increased by ‘the greater number of patients that will now have access to healthcare’.

Analysts at house broker Peel Hunt are forecasting profits of $13.5 million for the year to June 2012 on turnover of $55.2 million. In 2013, profits of $17.5 million are expected on sales of $68.8 million. The shares also offer a dividend, with 9.7 cents and 10.7 cents a share pencilled in for 2012 and 2013 respectively. The company currently has a net cash position of £16.5 million.

Craneware has seen its share price more than quadruple since IPO, as its range of software and connections in the industry have increased. With net cash, a dividend and some enterprising plans for expansion, the company has strong fundamentals, with the increasing pressures on the US healthcare system likely to bolster its prospects further. Buy