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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Craneware Plc | LSE:CRW | London | Ordinary Share | GB00B2425G68 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 2,290.00 | 2,250.00 | 2,300.00 | 0.00 | 07:30:33 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Prepackaged Software | 174.02M | 9.23M | 0.2626 | 86.63 | 799.83M |
From Apr 2019 to Apr 2024
TIDMCRW
RNS Number : 3465Y
Craneware plc
08 September 2015
Craneware plc
("Craneware", "the Group" or the "Company")
Final Results
8 September 2015 - Craneware plc (AIM: CRW.L), the market leader in automated revenue integrity solutions for the US healthcare market, announces its results for the year ended 30 June 2015.
Financial Highlights (US dollars)
-- Total Contract Value in the year continues at record levels of $72.9m (FY14: $71.0m) -- Revenue increased to $44.8m (FY14: $42.6m) -- Adjusted EBITDA(1.) increased by 10% to $14.4m (FY14: $13.1m) -- Profit before tax increased to $12.5m (FY14: $11.3m)
-- Basic adjusted EPS increased to $0.378 (FY14: $0.340) and adjusted diluted EPS has increased to $0.375 (FY14: $0.338)
-- Positive operational cash flow of $22.0m (FY14: $10.2m) -- Cash at year end $41.8m (2014: $32.6m) after payment of $5.4m dividend to shareholders
-- Proposed final dividend of 7.7p (12.1 cents) per share giving a total dividend for the year of 14.0p (22.0 cents) per share (2014: 12.5p (21.37 cents) per share)
(1.) Adjusted EBITDA refers to earnings before acquisition and share related transaction costs, interest, tax, depreciation, amortisation and share based payments.
Operational Highlights
-- US healthcare market evolving as predicted towards value-based care with a critical dependency on accurate financial data
-- Launch of Craneware's Value Cycle strategy at HFMA ANI 2015
-- Continued investment in the product suite and the development of a new fourth Gateway product in the Patient Access and consumerism market
-- Data Analytics capability added through partnership -- Dollar renewal rates above 100% -- Total visible revenue increased to $123.4m (FY14 same 3 year period: $111.9m)
Keith Neilson, CEO of Craneware plc commented, "This year has seen Craneware continue its record level of sales, but perhaps more importantly has seen the anticipated emergence of a high growth financial analytics and performance market. Major changes in reimbursement and care delivery models have made understanding and reducing the cost of care mission-critical for every healthcare provider in the US. As we expand our offerings into this value-driven healthcare market and pioneer the Value Cycle, we are confident that our position as a trusted financial performance partner will strengthen. This provides a significant opportunity for the expansion of Craneware. This opportunity combined with the business' financial strength means we look to the future with confidence."
For further information, please contact:
Craneware plc Peel Hunt Alma +44 (0)131 550 +44 (0)20 7418 +44 (0)7515 805 3100 8900 218 Keith Neilson, Dan Webster Hilary Buchanan CEO Craig Preston, Richard Kauffer Josh Royston CFO
About Craneware
Founded in 1999, Craneware has headquarters in Edinburgh, Scotland with offices in Atlanta, Arizona, Massachusetts and Tennessee employing over 200 staff. Craneware is the leader in automated revenue integrity solutions that improve financial performance for healthcare organisations. Craneware's market-driven, SaaS solutions help hospitals and other healthcare providers more effectively price, charge, code and retain earned revenue for patient care services and supplies. This optimises reimbursement, increases operational efficiency and minimises compliance risk. By partnering with Craneware, clients achieve the visibility required to identify, address and prevent revenue leakage. To learn more, visit craneware.com
Chairman's statement
I am pleased to report that the solid performance in the first half of the year continued into the second half, with total contract value reported ("TCV") continuing at record levels. The sound financial management of the business means this has flowed through into good growth in EBITDA and a strong cash balance.
The total value of contracts signed in the year increased to $72.9m (FY14: $71.0m). As the Group's revenue recognition policy retains focus on long term sustainable growth and mitigates against year on year fluctuations in the total value of contracts signed, the vast majority of the revenue from these sales has not been recognised in the year to 30 June 2015, and will instead benefit future years. Revenues increased by 5% to $44.8m (FY14: $42.6m) and adjusted EBITDA increased by 10% to $14.4m (FY14: $13.1m).
Other key performance indicators for the Group continue to trend well including renewals above 100% (by $ value) in the year. Additionally, cash generation was strong resulting in cash reserves of $41.8m at 30 June 2015 (2014 $32.6m), after having returned $5.4m to shareholders in dividends and completed a share buy-back of $3.6m of shares in the year. This, as previously reported, included the scheduled clearing of accrued revenue balances relating to a third party contract.
The US healthcare market continues to evolve as we have predicted towards value-based care. While financial metrics clearly remain an important tool for hospital boards to measure their performance, there is now a growing focus on the value being delivered to patients. The new value-driven healthcare market is reorienting around best outcomes for best cost. Craneware's product suite is ideally positioned to support the market in this evolution and we believe we have a continued, significant market opportunity ahead of us.
Looking forward we are confident that the levels of contracted revenue secured in the current and prior periods coupled with the opportunities for our enhanced and expanding range of products and solutions will enable us to deliver future sustainable growth.
I would like to take this opportunity to thank our employees for their hard work and dedication, and our shareholders for your support throughout the period.
George Elliott
Chairman
7 September 2015
Strategic Report
We believe that over the first 16 years of the business we successfully anticipated the majority of the stages that have occurred in the evolution of the US healthcare industry and aligned our business to succeed in that market in a timely fashion. This has resulted in over a quarter of all US hospitals using one or more elements of our software and $123.4m of future visible revenue.
We are now poised to enter the next phase of growth for Craneware which will see the expansion and positioning of our product suite into other areas of the hospital, supporting the drive towards value-based care. This is the key development in the US healthcare industry in the year and has spurred this next stage evolution of our marketplace. Where hospital CFOs were previously focused on financial metrics, such as billing and reimbursement to ensure the wellbeing of their businesses, changes to the reimbursement and care delivery models mean their focus must now expand to include operational efficiency and quality of care. The new, value-driven healthcare market is reorienting around best outcomes for best cost.
Craneware's product suite is ideally positioned to support the market in this evolution, helping healthcare providers drive their value cycle through the discovery, conversion and optimisation of their assets.
Market and Strategy
Overview
There are many factors driving the growth of healthcare expenditures. One is the aging of the US population. The so-called "baby boomers" have reached, or are soon to reach, retirement age pushing the number of Americans aged 65 or older to an all-time high. At the same time, utilisation of health services, including those over the age of 65, has increased dramatically.
While the need to address the healthcare requirements of a more consumptive population grows more urgent, the existing healthcare system is struggling. Hospital operating margins continue to be under pressure and there is still significant waste and inefficiency. Hospital leadership teams are focusing on controlling costs, while consumers are faced with fast-rising out-of-pocket costs.
Concurrently, the number of people insured is growing due in large part to the Affordable Care Act, with an additional 16 million Americans having access to compensated care since passage of the Act, increasing the demand for healthcare.
Combine these factors with the introduction of a consumer healthcare model that shifts significant payment responsibility to the patient, via high deductible plans, and it is evident that US healthcare providers are facing significant changes in their business model which creates new challenges. Hospitals that historically have managed several business relationships (State and Federal authorities, insurance companies and large employers) for their reimbursement in addition now face a considerable Business to Consumer (the Patient) model. The implications of this new purchaser of healthcare is a different kind of transparency demand; Healthcare consumerisation.
To successfully manage the cultural change toward greater operational efficiency and quality care delivery there are significant challenges that provider executives will need to address.
We believe by using advanced analysis of clinical, operational and financial data to drive quality outcomes and make intelligent cost-management decisions, healthcare organisations can meet these challenges.
Emerging, large, high growth market for financial analytics and performance platforms
Major changes in reimbursement and care delivery models have made understanding and controlling the cost of care mission-critical for every healthcare stakeholder in the US.
The movement from traditional revenue cycle management and managing the "top line" to a margin and outcomes management approach of improving the "bottom line" is driving the need to understand cost at a much deeper level.
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The end result is an emerging, large, high-growth market for financial analytics and performance platforms that help providers understand and drive out cost on a continuous basis.
Three data sets need to be analysed: financial, operational and clinical
Hospital management teams now need to be able to analyse three sets of data to ensure the success of their businesses: financial, operational and clinical.
A key element of a healthcare system's success is in understanding and managing the financial data associated with an episode of care. From prior authorisation to charge capture to claims billing to denials and audit management, this has historically been looked at as the revenue cycle. Craneware has long been a leader in this space, pioneering chargemaster automation and building solutions around optimising reimbursement, increasing operational efficiency and mitigating compliance risk in order to achieve revenue integrity.
At the same time, systems must utilise operational data - including cost analysis, pricing, and financial planning - to manage the operational and cost side of their financial equations.
Finally there is clinical data critical to successful outcomes. A new paradigm for success is focused on: the right patient, right place, right diagnosis, and the right treatment. When done in the appropriate setting and cost, patient outcomes are optimised, as well as providing a more predictable financial outcome that allows for investment in the future.
All of these elements must be considered, measured and monitored, in order to achieve the dual goals of patient health and financial health. Together these vital factors become the value cycle.
Delivering the Value Cycle
The Value Cycle is the process and culture by which healthcare providers pursue quality patient outcomes and optimal financial performance, through the management of clinical, operational and financial assets.
Without this data, and the insight into that data, to enable action, healthcare systems cannot optimally fulfil their core values and mission aspirations.
Craneware's software operates in this value cycle which systems are moving towards. Our solutions monitor the points in their system where clinical and operational data transform into financial transactions, delivering value in the discovery, conversion and optimisation of these assets.
Craneware's Product Roadmap, Trisus Enterprise Value Platform
Over the coming months and years Craneware solutions will be strengthened and combined in an enterprise platform to enable value discovery, conversion and optimisation for our clients both in areas that are familiar to us today but also in a more expanded range of areas as we leverage the data assets we have built over the years.
The distribution agreement signed with Aridhia in February 2015 added data analytics alongside our products, which give us the ability to draw benchmarks from our customers' underlying data and our proprietary data sets and provide insight into their hospital operations.
As Craneware's tools are updated to strengthen their effectiveness within the value cycle, they will each become a constituent part of a new cloud-based platform, named Trisus that gives even more powerful insights into disparate localised data sets, normalising that data in order to report it in ways that enable informed operational decisions.
The acquisition of Kestros Limited in August 2014, renamed Craneware Health, is enabling us to develop a new fourth Gateway product in the Patient Access and consumerism area which is on track for launch in the next financial year while we continue to bring enhancements to this product for the UK market. This is the start of our integrated mobile strategy.
Ultimately the current product portfolio will converge into Trisus Enterprise Value Suite, combining revenue integrity, cost management and decision enablement functionality in a versatile, customisable solution that fully delivers on Craneware's primary purpose to help healthcare systems improve margins and enhance patient outcomes.
Operational Review
The Group delivered good levels of sales to all segments of the US healthcare market, demonstrating continued sales momentum and the benefits of a supportive market environment. Whilst revenue growth in the year was relatively modest we have delivered adjusted EBITDA and EPS growth of 10% and 11% respectively, while continuing to invest in the future of the business. Continued sales momentum during the period has resulted in an increase in revenue to be recognised in future years, providing us with a growing platform on which to build.
The period has seen a wealth of operational successes, particularly focused around building the strength and value of our product suite. We launched several enhancements to our existing products and secured the first sales for the newly established 'Craneware Health' division, formed following the acquisition of Kestros Health. We also secured the exclusive US distribution rights to a data analytics platform called Analytixagility developed by Aridhia, already highly thought of in the UK market. This will add greater depth to our product suite in future periods and allow our customers to benefit from the wealth of data that has already been collected by our software.
The sales pipeline continues to be at a record high across all strata of hospital, providing confidence that we are on the right path towards accelerated revenue and profit growth in future years.
Sales and Marketing
The average length of new hospital contracts continues to be in-line with our historical norms of approximately five years. Where Craneware enters into new product contracts with its existing customers, contracts are occasionally made co-terminus with the customer's existing contracts, and as such, the average length of these contracts remains greater than three years, in-line with our expectations.
The sales mix remained healthy throughout the period with comparable level of sales between new customers and existing customers, both mid-contract and at renewal time. Similarly, splits between the revenue cycle family of products, services and the other product families were evenly spread. We would expect to see the other families' percentage of sales continue to increase in future years as the value cycle gains further traction.
Awards
Once again, two of our solutions ranked first in two distinct revenue cycle categories in the annual "2014 Best in KLAS Awards: Software & Services" report, published in January 2015. In this new KLAS report, Craneware's flagship product, Chargemaster Toolkit(R), earned the number one ranking in the "Revenue Cycle - Chargemaster Management" market category for the ninth consecutive year, and Craneware's Bill Analyzer software ranked number one in the "Revenue Cycle - Charge Capture" category, winning a "Category Leader" designation award for the fourth year in a row.
Financial Review
Revenues reported for the financial year under review were $44.8m (FY14: $42.6m) which has resulted in an adjusted EBITDA of $14.4m (FY14: $13.1m). This growth is reflective of the continued record levels of contracts (TCV) in the year translating into long term but increasing levels of revenue and adjusted EBITDA growth.
Overall the total contract value of sales recorded in the year was $72.9m (FY14: $71.0), this includes both new sales and renewals of customers coming to the end of their current contracts. The Group's business model and associated revenue recognition policies mean sales and revenue have separate meanings and cannot be interchanged. As it is highly likely that sales levels will fluctuate between individual years, the annuity SaaS (Software-as-a-Service) business model adopted by the Group delivers a 'smoothing' of these fluctuations and provides for more even and consistent growth over the long term, and as such the vast majority of the revenue from these sales has not been recognised in the current year and will instead benefit future years.
During the year we have leveraged the significant investment in prior years in the increased bandwidth and expertise of our sales function to deliver higher levels of sales. With the successes seen in these areas we have re-targeted our investment increasingly towards our product management and development functions. This has supported the progression of the 'Café' research, discussed in detail in the prior year report, to the announcement and product roadmap for our new cloud based 'Trisus' platform.
Our average contract for a new hospital customers continues to be five years, with contracts for customers renewing and buying additional products part way through an existing contract both averaging over three years, continuing to be above our historical norms.
Renewal rates by dollar value is a financial metric which specifically ties to the three year visible revenue detailed below. This metric at 113% is within expected norms of 85-115% including cross sell to renewing clients. Variations are driven by the timing of individual renewals, additional product sales and contract negotiation or cancellation. The current and previous financial years have seen a significant proportion of our customer base renew on multiyear contracts. As a result the number of customers due to renew in the coming year is less, which whilst not impacting revenue may impact the total value of renewal contracts signed.
Business Model
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The Group continues to recognise the vast majority of revenue under its annuity SaaS revenue recognition model. The strategy behind this business model is to ensure the long term growth and stability of the Group. The annuity SaaS business model adopted by the Group delivers a 'smoothing' of any sales fluctuations and focusing on growth over the long term. Under this model we recognise software licence revenue and any minimum payments due from our 'other route to market' contracts evenly over the life of the underlying signed contracts. As we sign new hospital contracts over an average life of five years, we will see the revenue from any new sales over this underlying contract term.
As well as the incremental licence revenues we generate from each new sale, we normally expect to deliver an associated professional services engagement. This revenue is typically recognised as we deliver the service to the customer, usually on a percentage of completion basis. The nature and scope of these engagements will vary depending on both our customer needs and which of our solutions they have contracted for. However these engagements will always include the implementation of the software as well as training the hospital staff in its use. As a result of the different types of professional services engagement, the period over which we deliver the services and consequently recognise all associated revenue will vary, however we would normally expect to recognise this revenue over the first year of the contract.
In any individual year we would normally expect around 10% to 20% of revenues reported by the Group, to be from services performed.
Sales, Revenue and Revenue Visibility
The difference between revenue and sales under the annuity SaaS business model continues to be demonstrated by reviewing the last six years sales levels to the reported revenue numbers. In the table below we show our total contracts signed in the relevant years between sales of new products (to both new and existing hospital clients) and clients who are renewing their contracts at the end of their terms, our total sales and compare this total to the revenue reported.
Hot Features
Premium
Fiscal Year 2011 2012 2013 2014 2015
$m $m $m $m $m
New Product
Sales 16.9 21.6* 20.8 35.1 35.9
Renewals** 7.5 12.7 17.7 35.9 37.0
----- ------ ----- ----- -----
Total Contract
Value 24.4 34.3 38.5 71.0 72.9
Reported
Revenue 38.1 41.1 41.5 42.6 44.8
.
*FY12 included the large white label and reseller agreement that added $7.5m to new product sales and therefore total contract value in the year, with the $3.5m white label revenue recognised in the year and the remaining $4m recognised over the related 28 month period.
** As the Group signs new customer contracts for between three to nine years, the number and value of customers' contracts coming to the end of their term ("renewal") will vary in any one year. This variation along with whether customers auto-renew on a one year basis or renegotiate their contracts for up to a further nine years, will impact the total contract value of renewals in any one year.
However, as well as the vast majority of the revenue from any new sale not being recognised in the year of sale, the financial statements do not represent the valuable 'asset' this contracted, but not recognised, revenue represents to the Group. The balance of this unrecognised revenue gives the Group, "Future Revenue Visibility".
The revenue that is under contract and will be recognised in future years, plus the revenue that is subject to the renewal of the contract at the end of its original life, forms an annuity base of revenue for the Group that increases with each new sale.
The Group illustrates this annuity base and the asset the contracted but yet to be recognised revenue represents, through its "Three Year Visible Revenue" metric. This metric includes:
-- Future revenue under contract; -- Revenue generated from renewals (calculated at 100% dollar value renewal). -- Other recurring revenue;
The different categories of revenue reflect any inherent future risk in recognising these revenues. Future revenue under contract, is, as the title suggests, subject to an underlying contract and therefore only has to be invoiced to be recognised in the respective years (subject to future collection risk that exists with all revenue). Renewal revenues are contracts coming to the end of their original contract term (e.g. five years) and will require their contracts to be renegotiated and renewed for the revenue to be recognised. The average value of customers renewed in any period (including cross sell and upsell to those customers on renewal) is over 100% renewals by dollar value therefore it is reasonable to conclude little additional risk is associated to this revenue. The final category "Other recurring revenue" is revenue that we would expect to recur in the future but is monthly or transactional in its nature and as such there is potential for this revenue not to be recognised in future years.
The Group's total visible revenue for the three years as at 30 June 2015 (i.e. visible revenue for FY2016, FY2017 and FY2018) shows how, combined with renewals and other recurring revenue, we expect the current excess of contracted value of sales to revenue reported to benefit the Group in this next three year period. The total of this visible revenue is $123.4m and breaks down as follows:
-- Future revenue under contract contributing $93.1m of which $38.8m is expected to be recognised in FY16, $30.3m in FY17 and $24.0m in FY18.
-- Revenue generated from renewal activities contributing $28.9m; being $3.0m in FY16, $9.8m in FY17 and $16.1m in FY18.
-- Other revenue identified as recurring in nature of $1.4m.
Gross Margins
The gross profit for the year was $42.4m (FY14: $40.6m) which represents a stable gross margin percentage of 95% in both the current and prior year. We historically expect the gross profit margin to be between 90 to 95% and the continued stability of the gross profit margin towards the top of this range reflect the correct matching of incremental costs incurred as a result of sales with the associated revenue being recorded.
Earnings
The Group presents an adjusted earnings figure as a supplement to the IFRS based earnings figures. The Group uses this adjusted measure in our operational and financial decision making as it excludes certain one-off costs, so as to focus on what the Group regards as a more reliable indicator of the underlying operating performance. We believe the use of this measure is consistent with other similar companies and is frequently used by analysts, investors and other interested parties.
Adjusted earnings represent operating profits excluding costs incurred as a result of acquisition related activities, share related costs including IFRS 2 share based payments charge, depreciation and amortisation ("Adjusted EBITDA").
Adjusted EBITDA has grown in the year to $14.4m (FY14: $13.1m) an increase of 10%. This reflects an Adjusted EBITDA margin of 32.0% (FY14: 30.7%). This is consistent with the Group's measured approach to the release of additional investment, continuing to make investments in line with the revenue growth occurring, whilst continually managing to ensure the efficiency of the investments we make.
Operating Expenses
Net operating expenses (to adjusted EBITDA) have, through the re-focusing of the non-recurring investment spend in prior years, only increased marginally to $28.0m (FY14: $27.6m) despite the investments made in the areas referred to earlier. Going forward we will continue to invest in the future growth of the Group whilst looking to leverage the investments we have made to date. Continued investment in line with the revenue growth of the Group will provide us the opportunity to deliver on the Group's strategy.
Innovation will continue to be core to the Group's future. As discussed earlier in the Operational Review, the 'Café' project has moved forward with the announcement of the 'Trisus' platform. This platform will be a focus of our investment in the coming years and as a result levels of capitalised development will return to our historical norms, having been minimal in the prior year whilst we were in the research phase of this project. We continue to invest in overall product development. In this current year we have invested $7.0m after capitalising $0.8m (FY14: $0.1m), this compares to $7.0m in the prior year after capitalisation.
Cash
We measure the quality of our earnings through our ability to convert them into operating cash. During the year we have seen exceptional levels of cash conversion, this has been due, in part, to the previously discussed accrued revenue relating to a partner contract clearing the Group's balance sheet. However, even after adjusting for this, we still have very high levels of cash conversion (over 100% of adjusted EBITDA) which has enabled us to grow our cash reserves to $41.8m (FY14: $32.6m). These cash levels are after paying $2.5m in taxation (FY14: $2.2m), completing a share buy-back utilising $3.6m (detailed below) and a further $5.4m (FY14: $5.4m) returned to our shareholders by way of dividends.
We retain a significant level of cash reserves and balance sheet strength to fund acquisitions as suitable opportunities arise.
Balance Sheet
The Group maintains a strong balance sheet position with rigorous controls over working capital.
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The levels of trade and other receivables has reduced in comparison to the prior year. This is primarily a result of the accrued revenue amount that related to the guaranteed minimum revenues associated to a partner deal entered into in February 2012. This accrued balance relating to this contract reached its maximum level of $4m at 30 June 2014, at which point it was invoiced in line with the underlying contractual terms and was recorded in trade receivables. As reported previously this balance has now been cleared.
The prepayment related to sales commission has increased, as expected, in the year from $2.4m to $3.2m. The prepayment results from sales commissions being based on the total value of the contract sold, however as only a small proportion of revenue from the contract value is recognised in the year, we only recorded the equivalent percentage of the sales commission cost. As we only pay the sales commission upon receipt of the first annual payment from the customer, we remain cash flow positive from any new sale.
Deferred income levels reflects the amounts of the revenue under contract that we have invoiced and/or been paid for in the year, but have yet to recognise as revenue. This balance is a subset of the total visible revenue we describe above and reflected through our three year visible revenue metric.
Deferred income, accrued income and the prepayment of sales commissions all arise as a result of our annuity SaaS business model described above and we will always expect them to be part of our balance sheet. They arise where the cash profile of our contracts does not exactly match how revenue and related expenses are recorded in the income statement. Overall levels of deferred income are significantly more than accrued income and the prepayment of sales commissions, confirming we remain cash flow positive in regards to how we recognise revenue from our contracts.
Acquisition of Kestros Limited and other share related transactions
On 28 August 2014, Craneware acquired the entire share capital of Kestros Limited (now trading as Craneware Health) for a maximum consideration of $2.14m (GBP1.25m) which will be adjusted according to revenue milestones. GBP150,000 of the consideration has been paid in cash, the remainder of the consideration was satisfied through the issue of 211,539 ordinary shares at the then market price of GBP5.20. Full details of the provisional acquisition accounting for this acquisition are detailed in note 12, with the majority of the purchase price relating to the intellectual property.
The acquired assets and intellectual property of this emerging technology company, will provide Craneware with a technology platform in the high growth Patient Access market, addressing the growing level of consumerisation within the healthcare industry.
Prior to this acquisition, on 16 July 2014, the Company completed a 'share buy-back' of 393,816 shares at a price of 527.5p per share, with these shares being immediately cancelled. In addition, options were exercised pursuant to the Company's share option schemes, resulting in the allotment of 6,096 new ordinary shares.
The net effect of these three transactions was to reduce the Company's issued share capital by 176,181 (less than 1% of the total issued share capital) to a total issued share capital at 30 June 2015 of 26,832,582 ordinary shares.
Currency
The functional currency for the Group (and cash reserves) is US Dollars. Whilst the majority of our cost base is US located and therefore US Dollar denominated, we do have approximately one quarter of the cost base based in the UK relating primarily to our UK employees (and therefore denominated in Sterling). As a result, we continue to closely monitor the Sterling to US Dollar exchange rate, and where appropriate consider hedging strategies. During the year, we have been impacted through exchange rate movements, with the average exchange rate throughout the year being $1.5750 as compared to $1.6262 in the prior year. However, this has been immaterial to our results.
Taxation
The Group's effective tax rate remains dependent on the proportion of profits generated in the UK and the US and the applicable tax rates in the respective jurisdictions. As detailed above, the sales performance in the current and previous years has increased the levels of income in both jurisdictions, and as such we continue to see our effective tax rate return to more 'normalised' levels. However this will be impacted by the levels of professional services delivered in the US in any one year. As result of mix of profits in the current year effective tax rate is 25% (FY14: 24%). Effective tax rates in any one year will reflect, the relative tax rates in the UK and the US, the ratio of underlying professional services to software licence revenues and the overall levels of sales increase.
EPS
In the year adjusted EPS has increased to $0.378 (FY14: $0.340) and adjusted diluted EPS has increased to $0.375 (FY14: $0.338). The increase in EPS is driven by the increased levels of EBITDA with the effects of the increased effective tax rate and the reduction in the issued share capital being immaterial.
Dividend
The Board recommends a final dividend of 7.7p (12.1 cents) per share giving a total dividend for the year of 14.0p (22.0 cents) per share (2014: 12.5p (21.37 cents) per share). Subject to confirmation at the Annual General Meeting, the final dividend will be paid on 15 December 2015 to shareholders on the register as at 20 November 2015, with a corresponding ex-Dividend date of 19 November 2015.
The final dividend of 7.7p per share is capable of being paid in US dollars subject to a shareholder having registered to receive their dividend in US dollars under the Company's Dividend Currency Election, or who register to do so by the close of business on 20 November 2015. The exact amount to be paid will be calculated by reference to the exchange rate to be announced on 20 November 2015. The final dividend referred to above in US dollars of 12.1 cents is given as an example only using the Balance Sheet date exchange rate of $1.5717/GBP1 and may differ from that finally announced.
Outlook
This year has seen Craneware continue its record level of sales, but perhaps more importantly has seen the anticipated emergence of a high growth financial analytics and performance market. Major changes in reimbursement and care delivery models have made understanding and reducing the cost of care mission-critical for every healthcare provider in the US. As we expand our offerings into this value-driven healthcare market and pioneer the Value Cycle, we are confident that our position as a trusted financial performance partner will strengthen. This provides a significant opportunity for the expansion of Craneware. This opportunity combined with the business' financial strength means we look to the future with confidence.
Keith Neilson Craig Preston Chief Executive Officer Chief Financial Officer 7 September 2015 7 September 2015
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2015
Total Total
2015 2014
Notes $'000 $'000
---------------------------------- ------ --------- ---------
Continuing operations:
Revenue 3 44,817 42,574
Cost of sales (2,421) (1,943)
--------- ---------
Gross profit 42,396 40,631
Operating expenses 4 (29,984) (29,407)
--------- ---------
Operating profit 12,412 11,224
Analysed as:
Adjusted EBITDA* 14,356 13,069
Acquistion costs and share
related transactions (219) -
Share based payments (247) (198)
Depreciation of plant and
equipment (467) (575)
Amortisation of intangible
assets (1,011) (1,072)
---------------------------------- ------ --------- ---------
Finance income 84 66
--------- ---------
Profit before taxation 12,496 11,290
Tax on profit on ordinary
activities 5 (3,108) (2,680)
--------- ---------
Profit for the year attributable
to owners of the parent 9,388 8,610
---------------------------------- ------ --------- ---------
Total comprehensive income
attributable to owners of
the parent 9,388 8,610
---------------------------------- ------ --------- ---------
(1.) Adjusted EBITDA is defined as operating profit before share based payments, depreciation, amortisation, acquisition costs and share related transactions.
Earnings per share for the year attributable to equity holders
Notes 2015 2014
----------------------- ------ ------ ------
Basic ($ per share) 7a 0.350 0.319
*Adjusted Basic ($
per share) 7a 0.378 0.340
Diluted ($ per share) 7b 0.348 0.317
*Adjusted Diluted ($
per share) 7b 0.375 0.338
----------------------- ------ ------ ------
* Adjusted Earnings per share calculations allow for the tax adjusted acquisition costs and share related transactions together with amortisation on acquired intangible assets to better understand the underlying performance and a better comparison with previous years.
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Statement of Changes in Equity for the year ended 30 June 2015
Share
Share Premium Other Retained Total
Capital Account Reserves Earnings Equity
$'000 $'000 $'000 $'000 $'000
---------------------------------- -------- -------- --------- --------- --------
At 1 July 2013 539 15,496 212 25,074 41,321
Total comprehensive income
- profit for the year - - - 8,610 8,610
Transactions with owners:
Share-based payments - - 198 146 344
Impact of share options
exercised/lapsed - - (175) 175 -
Dividends (Note 6) - - - (5,359) (5,359)
----------------------------------
At 30 June 2014 539 15,496 235 28,646 44,916
Total comprehensive income
- profit for the year - - - 9,388 9,388
Transactions with owners:
Share-based payments - - 247 182 429
Impact of share options
exercised/lapsed - 40 (104) 104 40
Issue of Ordinary shares
related to business combination 4 1,820 - - 1,824
Buy Back of Ordinary
Share (7) - - (3,572) (3,579)
Dividends (Note 6) - - - (5,388) (5,388)
----------------------------------
At 30 June 2015 536 17,356 378 29,360 47,630
---------------------------------- -------- -------- --------- --------- --------
Consolidated Balance Sheet as at 30 June 2015
Notes 2015 2014
$'000 $'000
---------------------------------- ------ ------- -------
ASSETS
Non-Current Assets
Plant and equipment 1,242 1,329
Intangible assets 8 16,196 14,325
Trade and other receivables 9 2,432 1,890
Deferred tax 1,510 1,644
21,380 19,188
------- -------
Current Assets
Trade and other receivables 9 15,010 20,946
Current tax assets - 110
Cash and cash equivalents 41,832 32,613
56,842 53,669
------- -------
Total Assets 78,222 72,857
---------------------------------- ------ ------- -------
EQUITY AND LIABILITIES
Non-Current Liabilities
Deferred income 819 2,077
819 2,077
------- -------
Current Liabilities
Deferred income 22,460 19,355
Current tax liabilities 1,289 1,136
Trade and other payables 6,024 5,373
29,773 25,864
------- -------
Total Liabilities 30,592 27,941
------- -------
Equity
Share capital 10 536 539
Share premium account 17,356 15,496
Other reserves 378 235
Retained earnings 29,360 28,646
Total Equity 47,630 44,916
------- -------
Total Equity and Liabilities 78,222 72,857
---------------------------------- ------ ------- -------
Statement of Cash Flows for the year ended 30 June 2015
Notes 2015 2014
$'000 $'000
--------------------------------- ------ -------- --------
Cash flows from operating
activities
Cash generated from operations 11 22,025 10,197
Interest received 84 66
Tax paid (2,527) (2,154)
--------------------------------- ------ -------- --------
Net cash from operating
activities 19,582 8,109
Cash flows from investing
activities
Purchase of plant and
equipment (378) (308)
Capitalised intangible
assets 8 (811) (106)
Acquisition of subsidiary,
net of cash acquired 12 (247) -
--------------------------------- ------ -------- --------
Net cash used in investing
activities (1,436) (414)
Cash flows from financing
activities
Dividends paid to company
shareholders 6 (5,388) (5,359)
Buy back of Ordinary Shares (3,579) -
Proceeds from issuance
of shares 40 -
--------------------------------- ------ -------- --------
Net cash used in financing
activities (8,927) (5,359)
Net increase in cash and
cash equivalents 9,219 2,336
Cash and cash equivalents
at the start of the year 32.613 30,277
Cash and cash equivalents
at the end of the year 41,832 32,613
--------------------------------- ------ -------- --------
Notes to the Financial Statements
General Information
Craneware plc (the Company) is a public limited company incorporated and domiciled in Scotland. The Company has a primary listing on the AIM stock exchange. The principal activity of the Company continues to be the development, licensing and ongoing support of computer software for the US healthcare industry.
Basis of Preparation
The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union, IFRS IC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historic cost convention and prepared on a going concern basis. The applicable accounting policies are set out below, together with an explanation of where changes have been made to previous policies on the adoption of new accounting standards in the year, if relevant.
The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.
The Company and its subsidiary undertakings are referred to in this report as the Group.
1. Selected principal accounting policies
The principal accounting policies adopted in the preparation of these accounts are set out below. These policies have been consistently applied, unless otherwise stated.
Reporting currency
The Directors consider that as the Group's revenues are primarily denominated in US dollars the Company's principal functional currency is the US dollar. The Group's financial statements are therefore prepared in US dollars.
Currency translation
Transactions denominated in foreign currencies are translated into US dollars at the rate of exchange ruling at the date of the transaction. The average exchange rate during the course of the year was $1.5750/GBP1 (2014: $1.6262/GBP1). Monetary assets and liabilities expressed in foreign currencies are translated into US dollars at rates of exchange ruling at the Balance Sheet date $1.5717/GBP1 (2014 : $1.7099/GBP1). Exchange gains or losses arising upon subsequent settlement of the transactions and from translation at the Balance Sheet date, are included within the related category of expense where separately identifiable, or administrative expenses.
Revenue recognition
The Group follows the principles of IAS 18, "Revenue Recognition", in determining appropriate revenue recognition policies. In principle revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow into the Group.
Revenue is derived from sales of, and distribution agreements relating to, software licenses and professional services (including installation). Revenue is recognised when (i) persuasive evidence of an arrangement exists; (ii) the customer has access and right to use our software; (iii) the sales price can be reasonably measured; and (iv) collectability is reasonably assured.
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Revenue from standard licensed products which are not modified to meet the specific requirements of each customer is recognised from the point at which the customer has access and right to use our software. This right to use software will be for the period covered under contract and, as a result, our annuity based revenue model recognises the licensed software revenue over the life of this contract. This policy is consistent with the Company's products providing customers with a service through the delivery of, and access to, software solutions (Software-as-a-Service ("SaaS")), and results in revenue being recognised over the period that these services are delivered to customers. Incremental costs directly attributable in securing the contract are charged equally over the life of the contract and as a consequence are matched to revenue recognised. Any deferred contract costs are included in, both current and non-current, trade and other receivables.
'White-labelling' or other 'Paid for development work' is generally provided on a fixed price basis and as such revenue is recognised based on the percentage completion or delivery of the relevant project. Where percentage completion is used it is estimated based on the total number of hours performed on the project compared to the total number of hours expected to complete the project. Where contracts underlying these projects contain material obligations, revenue is deferred and only recognised when all the obligations under the engagement have been fulfilled.
Revenue from all professional services is recognised as the applicable services are provided. Where professional services engagements contain material obligations, revenue is recognised when all the obligations under the engagement have been fulfilled. Where professional services engagements are provided on a fixed price basis, revenue is recognised based on the percentage completion of the relevant engagement. Percentage completion is estimated based on the total number of hours performed on the project compared to the total number of hours expected to complete the project.Notes to the Financial Statements (continued)
Software and professional services sold via a distribution agreement will normally follow the above recognition policies.
Should any contracts contain non-standard clauses, revenue recognition will be in accordance with the underlying contractual terms which will normally result in recognition of revenue being deferred until all material obligations are satisfied.
The excess of amounts invoiced over revenue recognised are included in deferred income. If the amount of revenue recognised exceeds the amount invoiced the excess is included within accrued income.
Intangible Assets
(a) Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition. Goodwill is capitalised and recognised as a non-current asset in accordance with IFRS 3 and is tested for impairment annually, or on such occasions that events or changes in circumstances indicate that the value might be impaired.
Goodwill is allocated to cash generating units for the purpose of impairment testing. The allocation is made to those cash-generating units that are expected to benefit from the business combination in which the goodwill arose.
(b) Proprietary software
Proprietary software acquired in a business combination is recognised at fair value at the acquisition date. Proprietary software has a finite life and is carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the associated costs over their estimated useful lives of 5 years.
(c) Contractual customer relationships
Contractual customer relationships acquired in a business combination are recognised at fair value at the acquisition date. The contractual customer relations have a finite useful economic life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected life of the customer relationship which has been assessed as 10 years.
(d) Research and Development expenditure
Expenditure associated with developing and maintaining the Group's software products is recognised as incurred. Where, however, new product development projects are technically feasible, production and sale is intended, a market exists, expenditure can be measured reliably, and sufficient resources are available to complete such projects, development expenditure is capitalised until initial commercialisation of the product, and thereafter amortised on a straight-line basis over its estimated useful life, which has been assessed as 5 years. Staff costs and specific third party costs involved with the development of the software are included within amounts capitalised.
(e) Computer software
Impairment of non-financial assets
At each reporting date the Group considers the carrying amount of its tangible and intangible assets including goodwill to determine whether there is any indication that those assets have suffered an impairment loss. If there is such an indication, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any) through determining the value in use of the cash generating unit that the asset relates to. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the impairment loss is recognised as an expense.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset. A reversal of an impairment loss is recognised as income immediately. Impairment losses relating to goodwill are not reversed.
Taxation
The charge for taxation is based on the profit for the period as adjusted for items which are non-assessable or disallowable. It is calculated using taxation rates that have been enacted or substantively enacted by the Balance Sheet date.
Deferred taxation is computed using the liability method. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using enacted rates and laws that will be in effect when the differences are expected to reverse. The deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will arise against which the temporary differences will be utilised.
Deferred tax is provided on temporary differences arising on investments in subsidiaries except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets and liabilities arising in the same tax jurisdiction are offset.
In the UK and the US, the Group is entitled to a tax deduction for amounts treated as compensation on exercise of certain employee share options under each jurisdiction's tax rules. As explained under "Share-based payments", a compensation expense is recorded in the Group's Statement of Comprehensive Income over the period from the grant date to the vesting date of the relevant options. As there is a temporary difference between the accounting and tax bases a deferred tax asset is recorded. The deferred tax asset arising is calculated by comparing the estimated amount of tax deduction to be obtained in the future (based on the Company's share price at the Balance Sheet date) with the cumulative amount of the compensation expense recorded in the Statement of Comprehensive Income. If the amount of estimated future tax deduction exceeds the cumulative amount of the remuneration expense at the statutory rate, the excess is recorded directly in equity against retained earnings.
Share-based payments
The Group grants share options to certain employees. In accordance with IFRS 2, "Share-Based Payments" equity-settled share-based payments are measured at fair value at the date of grant. Fair value is measured by use of the Black-Scholes pricing model as appropriately amended. The fair value determined at the date of grant of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the number of shares that will eventually vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the Statement of Comprehensive Income, with a corresponding adjustment to equity. When the options are exercised the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital and share premium.
The share-based payments charge is included in net operating expenses and is also included in 'Other reserves'.
2. Critical accounting estimates and judgements
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The preparation of financial statements in accordance with IFRS requires the Directors to make critical accounting estimates and judgements that affect the amounts reported in the financial statements and accompanying notes. The estimates and assumptions that have a significant risk of causing material adjustment to the carrying value of assets and liabilities within the next financial year are discussed below:-
-- Impairment assessment:- the Group tests annually whether Goodwill has suffered any impairment and for other assets including acquired intangibles at any point where there are indications of impairment. This requires an estimation of the value in use of the applicable cash generating unit to which the Goodwill and other assets relate. Estimating the value in use requires the Group to make an estimate of the expected future cashflows from the specific cash generating unit using certain key assumptions including growth rates and a discount rate. Reasonable changes to these assumptions such as increasing the discount rate by 5% (20% to 25%) and decreasing the long term growth rate applied to revenues by 1% (2% to 1%) would still result in no impairment.
-- Provisions for income taxes:- the Group is subject to tax in the UK and US and this requires the Directors to regularly assess the applicability of its transfer pricing policy.
3. Revenue
The chief operating decision maker has been identified as the Board of Directors. The Group revenue is derived almost entirely from the sale of software licences, white labelling and professional services (including installation) to hospitals within the United States of America. Consequently the Board has determined that Group supplies only one geographical market place and as such revenue is presented in line with management information without the need for additional segmental analysis. All of the Group assets are located in the United States of America with the exception of the Parent Company's, the net assets of which are disclosed separately on the Company Balance Sheet and are located in the UK.
2015 2014
$'000 $'000
----------------------- ------- -------
Software licencing 38,842 37,717
White labeling - -
Professional services 5,975 4,857
Total revenue 44,817 42,574
----------------------- ------- -------
4. Operating expenses
Operating expenses are comprised
of the following:-
2015 2014
$'000 $'000
------------------------------------- ------- -------
Sales and marketing expenses 7,930 8,482
Client servicing 7,965 7,461
Research and development 6,985 6,979
Administrative expenses 5,222 4,594
Acquisition Costs 219 -
Share-based payments 247 198
Depreciation of plant and equipment 467 575
Amortisation of intangible assets 1,011 1,072
Exchange (gain)/loss (62) 46
Operating expenses 29,984 29,407
------------------------------------- ------- -------
5. Tax on profit on ordinary activities
2015 2014
$'000 $'000
-------------------------------------- ------ ------
Profit on ordinary activities before
tax 12,496 11,290
Current tax
Corporation tax on profits of the
year 2,765 2,542
Foreign exchange on taxation in
the year (59) (36)
Adjustments for prior years 86 57
-------------------------------------- ------ ------
Total current tax charge 2,792 2,563
Deferred tax
Origination & reversal of timing
differences 114 63
Adjustments for prior years 202 55
Change in tax rate - (1)
-------------------------------------- ------ ------
Total deferred tax charge(credit) 316 117
-------------------------------------- ------ ------
Tax on profit on ordinary activities 3,108 2,680
-------------------------------------- ------ ------
The difference between the current tax charge
on ordinary activities for the year, reported
in the consolidated Statement of Comprehensive
Income, and the current tax charge that would
result from applying a relevant standard rate
of tax to the profit on ordinary activities
before tax, is explained as follows:
Profit on ordinary activities at
the UK tax rate 20.75% (2014: 22.5%) 2,592 2,541
Effects of:
Adjustment in respect of prior years 288 112
Change in tax rate - (1)
Additional US taxes on profits/losses
39% (2014: 39%) 319 89
Foreign Exchange (59) (36)
Expenses not deductible for tax
purposes (32) (25)
Total tax charge 3,108 2,680
-------------------------------------- ------ ------
6. Dividends
The dividends paid during the year were as follows:-
2015 2014
$'000 $'000
----------------------------------- ------ ------
Final dividend, re 30 June 2014
- 11.63 cents (6.8 pence)/share 2,863 2,783
Interim dividend, re 30 June 2015
- 9.8 cents (6.3 pence)/share 2,525 2,576
Total dividends paid to Company
shareholders in the year 5,388 5,359
----------------------------------- ------ ------
The proposed final dividend for 30 June 2015 is subject to approval by the shareholders at the Annual General Meeting and has not been included as a liability in these accounts.
7. Earnings per share a) Basic
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of shares in issue during the year.
2015 2014
--------------------------------------- ---------- ----------
Profit attributable to equity
holders of the Company ($'000) 9,388 8,610
Weighted average number of ordinary
shares in issue (thousands) 26,815 27,009
Basic earnings per share ($ per
share) 0.350 0.319
--------------------------------------- ---------- ----------
Profit attributable to equity
holders of Company ($'000) 9,388 8,610
Tax Adjusted acquisition costs,
share related transactions and
amortisation of acquired intangibles
($'000) 749 574
Adjusted Profit attributable to
equity holders ($'000) 10,137 9,184
--------------------------------------- ---------- ----------
Weighted average number of ordinary
shares in issue (thousands) 26,815 27,009
Adjusted Basic earnings per share
($ per share) 0.378 0.340
--------------------------------------- ---------- ----------
b) Diluted
For diluted earnings per share, the weighted average number of ordinary shares calculated above is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has one category of dilutive potential ordinary shares, being those granted to Directors and employees under the share option scheme.
2015 2014
--------------------------------------- ------------- ----------
Profit attributable to equity
holders of the Company ($'000) 9,388 8,610
Weighted average number of ordinary
shares in issue (thousands) 26,815 27,009
Adjustments for:- Share options
(thousands) 188 162
Weighted average number of ordinary
shares for diluted earnings per
share (thousands) 27,003 27,171
Diluted earnings per share ($
per share) 0.348 0.317
--------------------------------------- ------------- ----------
Profit attributable to equity
holders of Company ($'000) 9,388 8,610
Tax Adjusted acquisition costs,
share related transactions and
amortisation of acquired intangibles
($'000) 749 574
Adjusted Profit attributable to
equity holders ($'000) 10,137 9,184
--------------------------------------- ------------- ----------
Weighted average number of ordinary
shares in issue (thousands) 26,815 27,009
Adjustments for:- Share options
(thousands) 188 162
--------------------------------------- ------------- ----------
Weighted average number of ordinary
shares for diluted earnings per
share (thousands) 27,003 27,171
Adjusted Diluted earnings per
share ($ per share) 0.375 0.338
--------------------------------------- ------------- ----------
8. Intangible assets
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Goodwill and Other Intangible assets
Goodwill Customer Proprietary Development Computer
Relationships Software Costs Software Total
$'000 $'000 $'000 $'000 $'000 $'000
---------------- --------- -------------- ------------ ------------ --------- -------
Cost
At 1 July
2014 11,188 2,964 1,222 3,035 862 19,271
Additions - - - 761 50 811
Acquisition
of subsidiary
(Note 12) 250 - 1,821 - - 2,071
At 30 June
2015 11,438 2,964 3,043 3,796 912 22,153
---------------- --------- -------------- ------------ ------------ --------- -------
Accumulated
amortization
At 1 July
2014 - 1,054 814 2,457 621 4,946
Charge for
the year - 330 244 302 135 1,011
At 30 June
2015 - 1,384 1,058 2,759 756 5,957
Net Book
Value at
30 June 2015 11,438 1,580 1,985 1,037 156 16,196
---------------- --------- -------------- ------------ ------------ --------- -------
Cost
At 1 July
2013 11,188 2,964 1,222 3,004 787 19,165
Additions - - - 31 75 106
At 30 June
2014 11,188 2,964 1,222 3,035 862 19,271
---------------- --------- -------------- ------------ ------------ --------- -------
Accumulated
amortisation
At 1 July
2013 - 724 570 2,101 479 3,874
Charge for
the year - 330 244 356 142 1,072
At 30 June
2014 - 1,054 814 2,457 621 4,946
Net Book
Value at
30 June 2014 11,188 1,910 408 578 241 14,325
---------------- --------- -------------- ------------ ------------ --------- -------
In accordance with the Group's accounting policy, the carrying values of goodwill and other intangible assets are reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill arose on the acquisition of Craneware InSight Inc.
The carrying values are assessed for impairment purposes by calculating the value in use (net present value (NPV) of future cashflows) of the Craneware InSight cash generating unit. The goodwill impairment review assesses whether the carrying value of goodwill is supported by the NPV of the future cashflows based on management forecasts for 5 years and then using an assumed sliding scale annual growth rate which is trending down to give a long-term growth rate of 2% in the residual years of the assessed period. Management have made the judgement that this long-term growth rate does not exceed the long-term average growth rate for the industry and also estimated a pre-tax discount rate of 20%.
Sensitivity analysis was performed using a combination of different annual growth rates and a range of different weighted average cost of capital rates. Management concluded that the tempered growth rates resulting in 2% during the residual period and the pre-tax discount rate of 20% were appropriate in view of all relevant factors and reasonable scenarios and that there is currently sufficient headroom over the carrying value of the assets in the acquired business that any reasonable change to key assumptions is not believed to result in impairment.
9. Trade and other receivables
2015 2014
$'000 $'000
-------------------------------- -------- --------
Trade receivables 11,917 16,589
Less: provision for impairment
of trade receivables (779) (658)
-------------------------------- -------- --------
Net trade receivables 11,138 15,931
Other receivables 99 175
Prepayments and accrued
income 3,032 4,382
Deferred Contract Costs 3,173 2,348
-------------------------------- -------- --------
17,442 22,836
Less non-current trade
receivables: - -
Deferred Contract Costs (2,432) (1,890)
Current portion 15,010 20,946
-------------------------------- -------- --------
10. Share capital
Authorised
2015 2014
Number $'000 Number $'000
---------------------- ----------- ------ ----------- ------
Equity share capital
Ordinary shares of
1p each 50,000,000 1,014 50,000,000 1,014
---------------------- ----------- ------ ----------- ------
Allotted called-up and fully paid
2015 2014
Number $'000 Number $'000
---------------------- ----------- ------ ----------- ------
Equity share capital
Ordinary shares of
1p each 26,832,582 536 27,008,763 539
---------------------- ----------- ------ ----------- ------
The movement in share capital during the year is presented as follows:
-- 6,096 Ordinary Share options were exercised in the year, as detailed in the Remuneration Committee Report on page 37.
-- 393,816 Ordinary Share options were bought back on the 21 July 2014 as equity at a price of $9.09 (GBP5.275).
-- 211,539 Ordinary Share options were issued on the 26 August 2014 as equity in respect of the consideration for Craneware health acquisition at a price of $8.62 (GBP5.20).
11. Cash flow generated from operating activities
Reconciliation of profit before
tax to net cash inflow from operating
activities
2015 2014
$'000 $'000
-------------------------------- ------- --------
Profit before tax 12,496 11,290
Finance income (84) (66)
Depreciation on plant and
equipment 467 575
Amortisation on intangible
assets 1,011 1,072
Share-based payments 247 198
Movements in working capital:
(Increase)/decrease in
trade and other receivables 5,422 (7,708)
Increase/(decrease) in
trade and other payables 2,466 4,836
Cash generated from operations 22,025 10,197
-------------------------------- ------- --------
12. Acquisition of Subsidiary: Craneware Health
On 26th August 2014, the Company acquired 100% of the issued share capital of Kestros Ltd. The total consideration for the acquisition along with the fair value of the identified assets and assumed liabilities is shown below:
Fair Value
Adjustments Provisional
Book 31-Dec-14 Fair
Recognised amounts Value Value
of identifiable assets $'000
acquired and liabilities $'000 $'000
assumed
------------------------------- -------- ------------- --------------
2 - 2
101 1,720 1,821
33 - 33
43 - 43
(35) - (35)
-------- ------------- --------------
144 1,720 1,864
-------- ------------- --------------
250
--------------
2,114
--------------
Tangibles fixed assets
Plant and Equipment
Intangibles assets
Proprietary Software
Other assets and liabilities
Trade and other receivables
Bank and cash balances
Trade and other payables
Goodwill
Fair Value
$'000
Satisfied by
----------------------------------------- ------
Cash 290
Ordinary Shares issued - 211,539 shares
at $8.623 (GBP5.20) 1,824
------
2,114
Bank balances and cash acquired 43
Cash consideration (290)
----------------------------------------- ------
Net Cash on acquisition (247)
----------------------------------------- ------
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