Full-year results from the Human Screen

Acquisitive companies are supposed to accumulate too much debt and expire unable to pay it off, but so far Advanced Computer Software is making so much money from takeovers it’s even considering a dividend.

Highlights

• Adjusted operating profit up 62%
• Return on tangible assets: 13%
• Adjusted net profit of ''14.9m compared to net cash flow of ''21m (''18m after net capital expenditure and development expenditure)
• Net debt down 96% at ''1.1m
• No dividend

The Human Screen comments:

Advanced supplies software, IT, and managed services. It’s grown rapidly by acquisition since cash shell Drury Lane acquired Adastra and its patient management software in 2008 with the aim of consolidating the fragmented healthcare software market. Four years on its biggest division is business solutions (financial management and HR software).

Despite the cost of acquisitions (one in 2011, and one so far in 2012), the company has brought net debt down to close to zero thanks to impressive cash flows this year and the sale of Cedar HR, a police rostering business, for ''15m.

The Human Screen is impressed and surprised by Advanced's performance. Acquisitive companies often accumulate too much debt and expire unable to pay it off, but maybe Advanced was in a buyer’s market during the credit crunch and it’s making so much money its acquisitions it’s even considering a dividend. The decision will be made later this year.

Including net debt, the market values Advanced at ''199m, or 10 times earnings before interest, tax and amortisation).

The Human Screen has spent most of his career avoiding cash shells and acquisitive companies, but he's intrigued by this one.

^HS++ (currently being considered for inclusion in the Thrifty 30)