LONDON (ShareCast) - Shares in Scotland-based software developer Craneware nose-dived more than 30%, or 170p, after both Investec and Brewin Dolphin downgraded the firm from buy to hold.

The brokers' decisions came despite a 12% increase in first half year revenue from $16.6m. The results include, for the first time, a full six month contribution from Craneware InSight.

Craneware InSight has had mixed results during the six months to the 31st of December. Despite achieving initial new sales, including cross selling into the existing Craneware customer base, revenue and adjusted earnins before interest, taxes, depreciation, and amortization (EBITDA) are behind the board's expectations.

"A significant factor to this is the cessation of a contract administered through a third party, resulting from that third party losing its contract with the end hospital network," the firm said. "The company is currently in discussions with the new administering agents of the hospital network to replace these contracts. However, this has negatively impacted group adjusted EBITDA by approximately $0.7m during the period and is currently subject to legal review by Craneware as it examines its options to enforce its contractual rights and remedies."

Sales cycles have extended, the firm added, which the firm attributes to an unexpectedly high percentage of healthcare providers choosing to focus on achieving the 31 December 2011 deadline for the first Electronic Health Records Incentive Payments.

The share price fell fell 32.63% to 170.5p by 16:37.

NR

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