Today’s news of significant multi-year contracts with two new US hospital providers is further firm evidence of Craneware’s (CRW:AIM) investment quality. Investors are certainly pleased with the latest progress, sending its shares up 6% to £16.92.

Edinburgh-based Craneware largely supplies innovative financial analysis tools to hospitals in the US.

Its cloud-based technology solutions help hospitals and other healthcare providers more effectively price, charge, code and retain earned revenue for patient care services and supplies.

The company has been busy adding extra tools and services to its platform over the past year or two and that investment really seems to be paying off, something Shares flagged at £11.95 in May last year.

IMPRESSIVE NEW BUSINESS

One contract announced today, worth $5m over its initial term, is for the deployment of Craneware’s value cycle product suite across 20 hospitals helping them improve revenue integrity. According to Shares’ sources, Craneware beat off an incumbent rival supplier to win the deal.

The other contract, worth $3.5m over its initial term, sees an innovative surgical hospital deploy Craneware’s Trisus Platform, which was only launched in summer 2017. Apparently, the customer looks to differentiate its offering from the competition, and saw the Trisus suite of products as a key pillar in its innovation strategy.

STICKY CUSTOMERS

Investors should remember that Craneware typically enjoys a very loyal relationship with customers – about 85% of annual revenue is recurring – so both of today’s agreements could run far longer than initial terms, which we speculate to be three years.

‘This confirms our view that Craneware has truly entered its next growth phase,’ say analysts at stockbroker Peel Hunt.

While Peel Hunt has resisted the temptation to lift earnings forecasts for the moment, existing expectations already factor in substantial growth.

Revenue for the financial year to 30 June 2018 and the next two years imply average annual growth of 19%, with similar average pre-tax profit progress implied over the same period.


Issue Date: 13 Feb 2018