The headline numbers from Allocate Software’s full year results tell far from the whole story. They show revenue in the year to the end of May up by 1% at £37.1m and EBITDA down by 25% to £4.8m. At group level, organic revenue declined by 5% compared to 2012. At the same time operating costs increased by 6%, driving down margins, as a result of costs associated with the acquisition of RealTime (see here) and higher sales commissions paid against the bookings of products with recurring revenue.
But look under the covers and in many respects the provider of workforce and compliance optimisation software has had a good year. Healthcare revenue increased by 10% (3% organically) to £29.3m driven largely by growth in recurring revenue as customers took advantage of Allocate’s new cloud offering and other multi-year sales, and by growth in the Nordics region. The UK Healthcare business grew by 15% and recurring revenue increased by 13% to £17.6m, or 47% of total revenue (43% in FY12). The Maritime business also had a good year reporting a 33% increase in revenue to £2.8m.
The declines in revenue came from Defence - which brought in £5m compared to £7.6m the year before (that’s a solid performance given that it benefited from a significant licence deal in 2012) – and poor performances from the HealthAssure application (where the non-renewal rate from former PCTs was higher than expected) and the Dynamic Change business.
Overall, the picture painted by Allocate’s FY13 results is one of a business with a strong core in healthcare sector, particularly in the UK and Nordics, that is well positioned for future growth - although perhaps not the kind of growth that would be required to meet CEO Ian Bowles’ ambitious target of £100m turnover by FY16/17.