Craneware shares soar on major US contract win

By PETER RANSCOMBE
Published on 29/02/2012 00:00

SHARES in software firm Craneware jumped by nearly a third yesterday as the Edinburgh-based company hailed its most significant contract to date, sparking talk of it becoming a takeover target.

The firm, which writes programs that make sure American hospitals bill patients for the services they receive, unveiled a deal that will see its software used by government-owned clinics for the first time.

Chief executive Keith Neilson told The Scotsman: “In the UK, we tend to think of the American healthcare market being completely privatised. But the federal and state governments account for about 40 per cent of the $3 trillion [£1.9tn] market and so we’re very excited about this deal.”

Under the contract, Craneware will receive a guaranteed payment of $7.5 million over the next two years, with the initial $3m instalment having already been paid in cash.

Shares in Craneware fell by a third last month after the company warned that the loss of a previous contract would wipe $700,000 off its first-half profits.

Neilson said the latest deal more than made up for the loss of the old contract and the firm’s share price responded, closing up 95p at 400p.

News of the contract win came as Craneware posted a 13 per cent rise in revenue for the six months to 31 December to $18.8m. But pre-tax profits fell by the same percentage to $3.8m.

Jonathan Jackson, head of equities at Killik & Co, said: “The shares are undervalued and could potentially represent an attractive takeover target for a larger US competitor.”

Numis analyst Will Wallis upgraded his recommendation on Craneware from “hold” to “buy”.

He added: “Management appears confident that further large contracts will close in the coming months. This is a fundamentally good-quality business.”