BUSINESS DESCRIPTION

Allocate Software is a leading provider of workforce management software to the healthcare and other complex regulated industries. Allocate’s mission is to be the leading international provider of SaaS healthcare workforce management software, delivering enhanced value for healthcare systems through significant savings and improved outcomes.

Its core product is used for workforce rostering, time & attendance, and associated compliance workflows (e.g. monitoring and reporting on safe staffing levels). Allocate’s products address a clear and increasingly pressing need for improved staff efficiency, patient safety, and regulatory compliance. The business is a leader in its segments in the UK and Sweden, and has a strong and growing position in Australia.

WHY WE INVESTED

Allocate has a long-term growth opportunity driven by the fundamental needs of its customers for efficiency, compliance and safety. The business has many of the characteristics that HgCapital looks for in an investment: a leader in its sector with strong growth potential, with a large and engaged client base, and a significant and predictable proportion of repeat business.

HOW DO WE INTEND TO CREATE VALUE?

HgCapital will support Allocate’s management team in delivering continued development and sustainable growth of its product portfolio and in improving operational effectiveness. HgCapital will also support Allocate’s management to identify potential bolt-on acquisitions and exploring further international growth beyond its existing markets. Further, there are a number of direct opportunities for collaboration between Allocate and other technology businesses within HgCapital’s existing investment portfolio which will provide the potential for additional growth.

WHAT HAS BEEN ACHIEVED?

Following the appointment of Dr Sati Sian as CEO in September 2015, HgCapital has supported the management through: introductions to senior healthcare experts and systems from our extensive network in the sector; helping to review M&A and partner relationships; and hiring new key personnel. The business has also completed an initiative to increase the level of recurring revenue, reaching c. 74% of the total in the 2016 financial year, compared with c. 50% at the time of investment.

In May, the Mercury Team completed the refinancing of Allocate Software, representing a 30% return on the original investment made.

In November, the company completed the separation of the core Healthcare operations from the Defence & Maritime business unit, spinning this into a new legal entity called Dynama Solutions.

In December, the company completed a small acquisition providing market presence in France.

HOW IS IT PERFORMING?

Allocate reported strong organic revenue growth in the financial year to 31 May 2016 and this has continued to the calendar year end, with 19% revenue growth and 25% for the LTM to 31 December 2016, with recurring revenue growing significantly ahead of this.

Given this strong trading performance, the Company’s valuation of its stake in Allocate Software has risen by £2.5 million over 2016.

HOW WILL WE CRYSTALISE VALUE?

Allocate operates in a valuable, niche sector and we would expect this to attract both trade and financial buyers. An IPO might also be an option.

Sector Location Date of Investment Residual cost £’000 Unrealised Value £’000
TMT UK December 2014 4,094 9,545