Craneware reported a flat year and cut its near-term expectations, as disruption in a key US drug-pricing programme and a post-year-end cyber attack weighed on the healthcare software company.
The company reset its revenue expectations for the year ahead to broadly match its recurring revenue, about $185m, and launched a review of its cost base to protect margins.
It said it expected to return to growth the following year, but investors aren’t hanging around to see whether this plays out, and shares sank 18% in early trade on Monday.
Craneware said revenue was broadly unchanged at $206.0m in the year to 30 June, though tight cost control lifted adjusted EBITDA 3% to $67.1m and statutory pre-tax profit 7% to $25.8m. Its annual recurring revenue held steady at $185m, cash generation remained strong, and the total dividend was held at 32p.
Growth stalled largely because of upheaval in the “340B” programme, which lets eligible US hospitals buy medicines at a discount.
Regulatory uncertainty and tougher requirements from drug manufacturers meant opportunities that Craneware’s software identified for customers did not convert into revenue, and some signed licence income was deferred.
The company has launched new products to help hospitals navigate the changing rules and expects the programme to become a tailwind in the second half of its new financial year. But this will offer little reassurance to investors sifting through today’s update.
The results were overshadowed by a cyber security incident disclosed in July, after the year-end, in which attackers accessed and extracted some of the group’s data. Craneware said there had been no disruption to customer services and its systems had been independently confirmed secure, but that remediation, including customer and regulatory notifications, would span several financial periods and its full financial impact could not yet be quantified.
This added uncertainty compounds the pain of a poor outlook for Craneware shares.