Advanced Computer Software (LON:ASW) may have paid its maiden dividend, but this is still very much a growth company, and is not likely to become a dividend stock anytime soon.
Speaking to Proactive Investors, the software and information technology firm’s relatively new chief financial officer (CFO), Guy Millward, confirmed that focus remains on growth, both organically and through acquisition.
“We’ve announced our maiden dividend … it’s something shareholders like to see, it’s a good discipline to get into,” Millward said. However, he added the group is still “very much in growth mode”, with the implication being that money is better spent driving growth in the top line and profits than in bumping up the dividend each year by huge amounts.
On the subject of acquisitions, Barbara Firth, Millward’s predecessor as CFO, said integration of the recent acquisition of Computer Software Holdings (CSH) is “going very well”.
Firth is now chief operating officer (COO) responsible for acquisitions and integration, and, like Advanced Computer Software’s (ACS) chief executive, Vin Murria, and chairman, Michael Jackson, she is a former director of CSH, so she knows the business very well.
That knowledge, along with the due diligence performed before the acquisition, enabled ACS to implement cost-saving synergies “on day two of the acquisition”, but Firth says there are still lots more cost savings to come.
“Both companies have lots of subsidiaries, with various offices scattered around the country, and we’re expecting to close six or seven down in the next 18 months.”
The acquisition is not about cutting costs, however; as is always the case with ACS, the name of the game is to drive growth through investment in the business and exploitation of cross-selling opportunities.
“We tend to spend the cost savings on other parts of the business, so we might make a saving on, let’s say, admin staff, so we’ll spend that on sales staff,” Firth explained.
Firth said the CSH business had not changed a lot since she left the company to hook up once more with former colleagues at ACS, but the company had been run from the point of view of containing costs, rather than driving growth. Just in case you are not getting the message, this is not the ACS way.
“We’re prepared to invest money in sales and marketing, and we can turn that [cost saving ethos] round very easily, to turn it into the sort of business we would have built, which is a sales-orientated business,” Firth declared.
Picking up the story, Millward said that future contracted revenue at the end of February 2013, factoring in CSH (which was actually acquired in March), increased by £79.1mln from a year earlier to £189.1mln.
Millward said the consensus forecasts out there for the current financial year (to end-February 2014) is for revenue of £201mln.
“We had £138mln of that contracted on day one to deliver … so about 70% [of the consensus revenue forecast figure]. We can see another 15% coming from repeat business from existing customers, and then the other 15% is new.”