“I don’t think anything will happen in the next two or three months” he told Proactive Investors. “But the company will continue to make acquisitions over the next 12, 18 and 24 months.”
Bowles was speaking shortly after the release of annual results, which revealed the company’s acquisition strategy and tight financial control is working.
It posted pre-tax profits of £3.5 million, up 38 per cent on the year earlier.
Last year it generated £4.9 million of cash and currently has £2.9 million sitting on its balance sheet.
One obvious use for those funds would be to pay a dividend. However, Bowles rejected this call. “We want to utilise the cash to strengthen the company and scale the company up,” he explained.
“We have made four acquisitions in 36 months. And all of them were good purchases at very good multiples.”
In December it bought Swedish firm Time Care for £8 million, followed in May by the purchase of Dynamic Change, a specialist in the growing healthcare arena, for £8.9 million.
Allocate, which has its own mergers and acquisition specialist, says its current batch of targets span the range from small to large.
And while Bowles said that drawing on cash and debt to fund takeovers would be his preferred route, he won’t balk at tapping the equity market for funds if the right opportunity came along.
“From an investor perspective, if we can do it from cash and debt that is preferable because there is less dilution for existing shareholders,” the Allocate chief executive explained. “But I if we went to our institutional investors with an appropriate acquisition that required us to issue new equity we would get the support we needed.
‘Of the ones that we are currently looking at there is a really broad range. ‘There are a couple of really small complementary application companies that we could probably buy for cash because they are relatively small. There are a couple of others that are in the price range and the size we have already done.
“We are getting to be more ambitious. But the (large) deals are further away and require more detailed consideration before I would be confident enough to put them to the board and eventually put them to shareholders.”
Having demonstrable ability to save public sector bodies time and money means Allocate is still managing to sign up health trusts despite the obvious financial constraints.
“The NHS and military clients have been operating within constrained environments for quite some time,” said Bowles.
“Clearly the austerity measures indicated by the coalition government and the efficiency gains of £20 billion are not going to make the life of CEOs and CFOs in NHS trusts any easier.
“I think the fact of the matter is that when we started selling our products into NHS trusts nobody had a budget. Every business case we built justified the investment on a return on investment basis – spend to save.
“A small trust will save multiple hundreds of thousands of pounds per annum and a large trust will save several million pounds a year.
“Typically you get a complete return on the investment in the first year from using our software.
“We are in the very fortunate position of having a lot of clients we can reference that are prepared to talk to colleagues in other trusts to tell them just how much time and money is being saved.”
http://www.proactiveinvestors.co.uk/companies/news/19661/allocate-software-on-acquisition-path-but-nothing-imminent-19661.html
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