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Edinburgh firm moves beyond AIM fringe Craneware is one of AIM’s cute smallcap success stories. Such a success that it is now pushing toward midcap status. First incorporated in 1999 in Livingston, Craneware is a successful exporter of pricing and billing software to hospitals in the US. Today the company is headquartered in Edinburgh and has staff at offices in Arizona, Tennessee, Atlanta and Massachusetts.

just two modest acquisitions in the last five years The company joined AIM in September 2007 and paid shareholders a dividend for the full year 2008. The dividend has increased every year since. In the last five years, revenue increases have averaged 9.6% a year. Dividend growth has outstripped this, increasing by an average of 12.8% a year in that time. Much of the revenue growth has been delivered organically, with the company making just two modest acquisitions in the last five years. Craneware’s software products are used by American hospitals to assess and report cost to the patient of the treatment required. Craneware helps hospitals identify billable items in a course of treatment and handles the

workflow should bills be queried. Being embedded in such a vital and high revenue business has made Craneware into the type of company that ticks many boxes for textbook investors. Craneware technology is part of its customers’ day-to-day business. It is deeply embedded in business practice and its users depend on it for their lifeblood. Customers are loathe to cut out or replace such systems. This leads to a high degree of recurring income and pricing power. Craneware’s final results for the year ended June 2015 are a paradigm of how a software company should demonstrate its future earnings stream. Visible revenues (three year horizon) were reported at $123.4m. This comprised $93.1m of contract revenue (each future year is itemised with the results), $28.9m of renewal activities (expected contract renewal income – supported by historical customer behaviours) and $1.4m of other revenues. The total figure was 10.2% ahead of the previous year.

Management are proud of their success at anticipating trends within their target market, particularly the move toward ‘value-driven healthcare’. Commentary in the most recent results described this change as presenting “a significant opportunity for the expansion of Craneware”. That reads more positively than the growth being forecast and perhaps explains why the shares appear to trade on a high rating.

significant premium rating is deserved Past performance suggests a significant premium rating is deserved at Craneware. With directors owning over 26% of the shares, the company is likely to evade the clutches of an acquirer for as long as its founders wish.

Craneware (LON:CRW) FOR High earnings visibility Essential product

ticks many boxes for textbook investors

AGAINST Operates in narrow niche High valuation

The last balance sheet showed cash of $41.8m and total liabilities of $30.6m. More modest earnings growth is forecast this year and next.

Market cap Bid:offer P/E (forecast) Yield (forecast) 52week low:high

£190m 700p:730p 26.6 2.2% 473p:730p


November 2015 AIM Prospector  
November 2015 AIM Prospector  

Featuring NINE AIM companies: ASOS, Cello, Craneware, Fulham Shore, Keywords Studios, MartinCo, Miton Group, NWF, The Mission Marketing Grou...