Shares in Craneware plunge as company cuts revenue outlook

Investors brushed aside higher profits and strong cash generation at Craneware after the Scottish software company reset its financial expectations for the coming year, signalling that growth had stalled amid disruption in the US healthcare market.

Lingering uncertainty around a summer cyber attack also contributed to a decline of nearly 25% in the Edinburgh -based company's price following the release of its annual results this morning. AIM-listed Craneware said it now expects revenue for the year to June 2027 to be in the region of $185 million, a decline of more than 10% from $206m previously.

The disruption in the key US market is linked to a long-running federal scheme, the 340B programme, that allows eligible hospitals and clinics serving lower-income communities to buy medicines at discounted prices. Craneware has built a substantial business helping healthcare providers manage participation in the programme and maximise the financial benefits available through it.

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However, pharmaceutical manufacturers have been pushing for tougher reporting requirements and a move towards rebate-based processes, rather than discounts being applied at the point of purchase. That uncertainty has left many healthcare providers reluctant to commit to new projects until the regulatory picture becomes clearer.

Craneware said customers continued to identify opportunities through its software, but expected growth in 340B-related revenues failed to materialise during the second half of the financial year.

The security issue is potentially more difficult for investors to assess. In July, Craneware disclosed that unauthorised parties had gained access to part of its data. The company said at the time that there had been no disruption to customer services or core operations, and that independent investigators had found no evidence of any continuing compromise of its systems.

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However, the ultimate financial consequences remain unknown. Craneware has confirmed that employee data and a subset of customer and partner records were accessed, with customer notifications and regulatory reporting ongoing. The company has warned that remediation could span several financial periods and has notified authorities including the UK's Information Commissioner's Office and the FBI.

Against that backdrop, management said it was taking a prudent approach to forecasting.

Revenue during the year to June 2026 was broadly unchanged at $206m, compared with $205.7m a year earlier. Adjusted earnings increased 3% to $67.1m, pre-tax profit rose 7% to $25.8m, and operating cash conversion improved to 98%.

Founded in Edinburgh in 1999, Craneware has grown into one of Scotland's largest listed software companies. The business generates almost all of its revenues from the US healthcare market while maintaining its headquarters in the Scottish capital.

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The group, headed by chief executive Keith Neilson, has 200 employees in the UK made up mainly of product developers and engineers. It employs roughly another 600 people in the US following the £283m acquisition of Florida-based Sentry in 2021.

Mr Neilson said the long-term investment case remains intact, and that "340B conditions should become progressively more supportive" going forward.

"Looking ahead, our financial resilience, deep integration into core customer workflows and proprietary data provide a strong long-term foundation for sustained value generation, as we support our customers in transforming the business of healthcare," he added.

However, the accounts also noted that management has decided to launch a cost review alongside its revenue downgrade.

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"Following the post-year-end cyber security incident and the reset of medium-term revenue assumptions, the board has initiated a comprehensive review of the cost base," the company stated. "The review is intended to ensure that expenditure remains aligned with the revised planning framework while protecting customer service, cyber security, regulatory compliance and the product investments most likely to generate sustainable future returns."

Investors are likely to view the review as an acknowledgement that the business may need to adapt to a lower-growth environment while uncertainty persists over both the 340B market and the eventual fallout from the cyber attack.

The immediate challenge for Craneware is not convincing hospitals to use its software, but rather persuading investors that the coming year is a temporary setback rather than a more fundamental slowdown.

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