Craneware hoists its divi as orders soar from US market

Pre-tax profits at the Edinburgh-based company – which carries out all of its business in the United States providing finance software for hospitals – rose by 19 per cent to $8.7 million (£5.3m) in the year to 30 June.

Profits were boosted by the takeover in February of US rival ClaimTrust and the rise in the surplus triggered a 10 per cent increase in the total dividend to 8.8p a share.

Additional revenue from the combined Craneware and ClaimTrust business helped to boost turnover by 34 per cent to $38.1m, with three-year visibility for repeat business at $105m, up from $83m in 2010 and including $16m from ClaimTrust.

Analysts are predicting further growth ahead, with Paul Morland at house broker Peel Hunt highlighting the increase in work for recovery audit contractors (RACs).

RACs are sent in to hospitals by the US government to make sure the right bills are being charged to its Medicare and Mediaid programmes.

Keith Neilson, Craneware’s chief executive, told The Scotsman: “The RACs found $90m of over-charges during 2010 and the 2011 total has already reached $590m, with the RACs fining the hospitals a percentage of the total.”

Hospitals turn to software such as that developed by Craneware to make sure they bill patients, healthcare insurers or the US government for the correct amounts and to avoid fines.

Neilson added: “We’re already in about 26 per cent of hospitals in the US and, at the moment, the average hospital only uses one-and-a-half of our nine software packages. So, for those with which we already do business, we’ve got seven-and-a-half to sell and, for the others, we’ve got nine to sell to them – and the total market is worth about $1.8 billion a year.”

Morland also highlighted the opportunity Craneware has to sell software on McKesson’s new Horizon platform. The Scottish company signed a deal with McKesson in 2009 to run its software on the US firm’s IT system but delays in introducing the system have meant that Craneware is yet to benefit from the agreement.

Neilson said: “We are expecting a contribution from Horizon next year – if it gets delayed again then it won’t affect our number but if it really takes off then it would be a welcome boost.”

Ian Spence, an analyst at MegaBuyte, said: “Having executed on its strategy flawlessly since its 2007 initial public offering (IPO), Craneware shares have increased four-fold from their IPO price.

“However, the shares are ‘cheaper’ than they have been for some time. This looks like a real opportunity for investors who may have felt they missed the boat previously.”

Shares closed down 0.67 per cent or 3p at 446.5p, having touched 488.5p earlier in the day.