Year end trading update
Advanced Computer Software Group plc (AIM: "ASW", "Advanced", or "the Group"), a leading provider of software and IT services to the UK health, care, public and commercial sectors, announces a trading update for the 12 months ended 28 February 2011.
The Group has continued to perform strongly, with both second half revenues and profits in line with expectations. Full year revenues are expected to be not less than £95m (2010: £30.2m), delivering organic revenue growth for the year of approximately 4%. 55% of the Group's revenues are recurring.
Adjusted EBITDA* is expected to be slightly more than £24m (2010: £7.2m), approximately 21% ahead of the previous year pro-forma** adjusted EBITDA of £19.8m. The Group has benefitted from a substantially reduced cost base, resulting in an improvement of Group operating margin by 3ppts from 22% to 25%.
The Group's operating cash conversion continues to be very strong at approximately 90% (2010: 88%). Net debt was down to £32m (2010: £41m), including cash of £11m.
Vin Murria, Chief Executive, commented:
"2011 has been an excellent year for the Group as we have delivered on our promise to build a strong business focussed on the health, care, public and commercial sectors. We anticipate reporting good organic growth of both revenues and adjusted EBITDA, and excellent cash generation.
"We remain confident that growing interest in our mobile applications for the health and social care markets; the move away from PCTs to GP Consortia following the July 2010 White Paper; and the increased demand for cost-effective hosting and outsourcing from local authorities, will provide exciting opportunities for further growth."
Advanced Health, Care & Public Sector
The Advanced Health, Care and Public Sector division has shown good organic growth of 4% and operating margin improvement of 4ppts to 30%. Within these results, the patient care management sub-division has shown particularly strong organic growth of 10% and operating margin improvement of 3ppts to 32%.
The division continues to focus on meeting both the operational and back office needs of the NHS service providers and local authorities. The core patient care management software is widely used in NHS clinics, call centres, hospices and residential homes and sales of Advanced's mobile solutions, iNurse and iConnect, launched in 2010, have gathered momentum. Now over 5,000 nurses and carers use Advanced' mobile application software and services to take advantage of operating efficiency savings with contracts typically covering a minimum five year term.
The White Paper in July 2010 set out proposals for the transformation of the NHS, including the phasing-out of the Primary Care Trust ("PCT") and the formation of the new Trusts, Care Commissioners and GP Consortia. Advanced's exposure to the demise of the PCT is minimal, potentially dwarfed by the new market opportunity resulting from the creation of these new organisations.
The Comprehensive Spending Review (CSR) in October 2010 emphasised the need for government funded organisations to reduce costs and improve efficiency by measuring and analysing costs to aid better procurement, automating processes to reduce headcount, and sharing overheads to minimise spend. Advanced is well placed, with its combination of deep public sector knowledge and extensive portfolio of business software applications including e-procurement, business intelligence and document management, to assist these organisations to optimise their operating efficiency.
Advanced 365 Managed Services
The results from the Advanced 365 Managed Services division were strong with 16% organic revenue growth and operating margin up 8ppts to 18%.
The focus on being the client's "trusted adviser" led to a 20% growth in application development services sold to new customers such as Readers Digest and Xstrata; and success for the Advanced on Demand solution which added new customers such as Family Mosaic and Plane Handling to its customer list.
Outsourcing and managed services successfully implemented over £3m of recurring new business during the year for customers such as Lyceum Capital, First Assist, Mizuho and ABPI.
Advanced 365 has invested significantly in cloud enablement for all categories of potential cloud users - public, private and application. Over 450 customers are contributing in excess of £16m of revenues to the division from cloud-based services.
Advanced Business Solutions
As previously announced, Advanced Business Solutions had a disappointing first half. Second half revenues were similar to the first half and following a restructuring implemented by a new management team, the operating margin improved by 6ppts to 27%.
As a result of the lower than expected first half performance, both revenue and EBITDA for the year were down 4% on the previous year. However, the sales pipeline is now 44% higher than at the same time in the previous year, and with recent new business wins including London Metal Exchange, Loomis, British Gymnastics, and a partnership with Advanced 365 to open up a pathway for private cloud and SaaS applications, the outlook is promising.
* Adjusted EBITDA is defined as profit before interest, taxation, depreciation, amortisation, reorganisation costs and share based payments
** Pro-forma Adjusted EBITDA is adjusted EBITDA calculated as if all acquisitions were acquired on 1 March 2010
