Allocate Software, an Aim-listed provider of workforce and compliance applications, sounded uncharacteristically cautious in its Q3 trading update today. Like many of its peers, Allocate, which now derives c80% of its revenue from healthcare, is feeling the effects of the uncertainty in the UK health market pending organisational change (see What would ‘Liberating the NHS’ mean for SITS suppliers?). Despite strong demand in the UK for its Healthroster and other products, Allocate has seen a slowdown in the final contract signature approval cycle, which has impacted the number of deals signed with the NHS in the quarter.
The abolition of Primary Care Trusts and the creation of GP Consortia have implications for Allocate because its customer base includes PCTs. But it has also meant that, although engagement levels haven’t tailed off, customers are reluctant to ink the final contract for fear that they won’t be in the job next month, or the organisation they work for might have changed. That’s despite the fact that Allocate’s products are just the sort of thing the NHS really needs to improve efficiency and cut costs. (When we met Allocate CEO Ian Bowles earlier this month he gave us plenty of examples – something as simple as web timesheets, for example, enabled an NHS Trust with 3,500 staff to save the equivalent of 2,000 staff hours per month or more than 50 FTEs).
Indeed, we wouldn’t want to overplay the doom and gloom. Allocate still closed a ‘material number’ of contracts with the UK NHS during the period and its Swedish and Australian businesses are meeting expectations. Moreover, Bowles’ expectations for the full year remain unchanged - consensus forecasts suggest revenues of around £28.5m, close to 30% growth – although that is clearly dependent on the speed of closure of multiple transactions in the pipeline.