Advanced Computer Software (ACS) has delivered a solid set of first half results and has good reason to be “increasingly confident” about the outlook for the full year despite tough conditions in the UK public sector market. ACS’ product and service mix is well suited to a market in which both public and private sector customers are looking to improve efficiency and cut costs. And a number of ACS’ initiatives, including its recent partnership with Vodafone in the nursing and care space (see Vodafone partners ACS to target health & care), bode well for the future.
In the six months to the end of August, the health and business management software and services IT firm increased group revenue by 7% (5% organically) to £47.3m. All three divisions reported like-for-like revenue growth – Health & Care grew 5% organically to £10.9m, Business Solutions was up 4% organically to £26.2m and Managed Services (Advanced 365) increased revenue 9% like-for-like to £10.2m. The group grew profitably reporting adjusted EBITDA (before the nasty bits) up 10% to £12m and PBT at £3.7m, almost double what it was a year ago. We are also pleased to see that net debt has fallen - it’s down from £41m in February last year to c£10m today thanks in part to the sale of Cedar HR Software to Capita for £15m in September (see Capita buys police HR software from ACS) – and the forward order book has momentum (it's up 33% to £104m today).
We get the impression that ACS’ three business are beginning to find their rhythm. Cross-selling, primarily between Business Solutions and Managed Services, is now well established with £23m of business done this way already this financial year. ACS’ recent £17m contract with the Northern Ireland Department of Health, Social Care and Public Safety is a great example of the integrated approach paying dividends (see ACS wins in Northern Ireland). Indeed, it’s indicative that ACS’ larger rivals in the UK public sector market are beginning to highlight the group as a ‘new’ competitor in their conversations with us.
As to the outlook, developments such as ACS’ partnership with Vodafone to rollout its mobile health and care solutions (with the prospect of other mobile operators following suit); opportunities for the ex-Adastra business in the NHS 111 market and continued growth in managed services, suggest that CEO Vin Murria’s confidence in second half growth is well-founded. The recent focus has been on organic growth as previous purchases bedded down and we expect more of the same in the second half. But bolt-on acquisitions that meet Vin’s criteria (high recurring revenue, loyal customer base, earnings enhancing) and provide opportunities for cross-selling, will naturally be considered.