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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| -10.00 | -0.45% | 2,230.00 | 2,170.00 | 2,250.00 | 2,225.00 | 2,210.00 | 2,210.00 | 16,462 | 16:35:05 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Prepackaged Software | 174.02M | 9.23M | 0.2626 | 84.16 | 776.98M |
From Apr 2019 to Apr 2024
TIDMCRW
RNS Number : 7600E
Craneware plc
03 March 2020
Craneware plc
("Craneware", "the Group" or the "Company")
Interim Results
3 March 2020 - Craneware (AIM: CRW.L), the market leader in Value Cycle software solutions for the US healthcare market, announces its unaudited results for the six months ended 31 December 2019 .
Financial Highlights (US dollars)
-- Revenue of $35.9m (H1 2019: $35.9m) -- Adjusted EBITDA(1) increased 10% to $12.7m (H1 2019: $11.6m) -- Profit before tax increased 3% to $9.6m (H1 2019: $9.3m) -- Adjusted basic EPS(2) increased 3% to 31.1 cents per share (H1 2019: 30.2 cents per share) -- Cash position of $45.0m (H1 2019: $38.7m) -- Interim dividend increased 5% to 11.5p per share (H1 2019: 11p per share)
1. Adjusted EBITDA refers to earnings before interest, tax, depreciation, amortisation, share based payments and acquisition and share transaction related costs.
2. Adjusted Earnings per share (EPS) calculations allow for the tax adjusted acquisition costs and share related transactions together with amortisation on acquired intangible assets
Operational Highlights
-- Strong growth in New Sales, up over 30% compared to H1 2019, 90% of which was expansion sales to existing customers, including increasing product cross sell and sales to new hospitals joining existing healthcare network customers
-- Our new cloud based Trisus solutions accounted for c. 10% of new sales (H1 2019: 6%)
-- Increase in total value of renewals and high number of customer renewals, although renewal statistics dipped to 73% owing to the loss of one customer.
-- Strong sales activity and opportunities across all classes of hospital providers
-- Increased investment in R&D to $10.3m (H1 2019: $9.1m), to take advantage of the growing market opportunity. Capitalisation decreased to $4.0m (H1 2019: $4.4m)
Outlook
-- Strong sales pipeline for the current financial year
-- As at end of February 2020, total visible revenues of $72.2m for the current financial year and $200.8m for the three-year period to June 2022 (H1 2019 same three year period: $190.0m)
-- Board confident in outlook for the full year and beyond, expectations remain unchanged
Keith Neilson, CEO of Craneware plc commented ,
"We are pleased to report on a positive sales performance in the first half of the financial year, with new sales over 30% ahead of the first half in the prior year, reflecting the considerable amount of activity that has taken place across the business since the summer. Whilst this increase will take time to flow through into our reported financials, we are confident that momentum is now back in the business and the size of the opportunity ahead of us remains intact.
"Importantly, the level of Trisus sales grew in the half, with sales of all four of our current Trisus solutions and the pipeline for these products increasing. The transition of our existing product suite onto the Trisus platform is progressing and paves the way for long-term growth, as we provide our customers with the data-driven solutions they require to address the move to value-based care.
"The positive sales performance in the first half has continued to date, and our pipeline continues to grow, underpinned by the o ngoing transition of the US healthcare market to value-based care. The Board's expectations for the full year remain unchanged and we look forward to a return to increased rates of growth in future years. We are focused on execution and with strong operating margins, healthy cash balances and a growing sales pipeline, we continue to be excited by the opportunity ahead."
For further information, please contact:
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Craneware plc Peel Hunt Investec Bank Alma
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+44 (0)131 550 +44 (0)20 7418 +44 (0)20 7597 +44 (0)203 405
3100 8900 5970 0205
Keith Neilson, Dan Webster Patrick Robb Caroline Forde
CEO
Craig Preston, George Sellar Henry Reast Hilary Buchanan
CFO
Andrew Clark Sebastian Lawrence Helena Bogle
About Craneware
Craneware (AIM: CRW.L), the leader in automated value cycle solutions, collaborates with U.S. healthcare providers to plan, execute and monitor value-based economic performance.
Founded in 1999, Craneware is headquartered in Edinburgh, Scotland with offices in Atlanta and Pittsburgh employing over 350 staff. Craneware's value cycle management software suite includes charge capture, strategic pricing, patient engagement, claims analytics, revenue recovery and retention, and cost and margin intelligence solutions.
Learn more at www.craneware.com.
Chairman's Statement
In this, my first report as Chairman of Craneware, I am pleased to provide investors with an update on the progress being made across the business. It is evident to me that I have joined a company with a clear vision and growth strategy, innovative product offering and supportive and extensive customer base.
The launch of three new solutions in the Spring last year caused a temporary hiatus in new sales, however we have seen positive signs that this disruption is behind us and there is a renewed sense of focus across the business. Importantly, the next-generation cloud-based platform on which these solutions sit, Trisus, is proving to be an effective platform which allows our customers to manage financial operations in their hospitals in this new era of value-based care. Trisus provides insights not previously available on the true cost of each individual episode of care, enabling hospital management teams to implement transparent and defensible pricing strategies and provide improved levels of care at sustainable operating margins.
New Sales are over 30% ahead of the comparable period in the prior year, reflecting the considerable amount of activity that has taken place across the business. Encouragingly, 90% of New Sales were expansion sales to existing customers, including increasing product cross sell and sales to new hospitals joining existing healthcare network customers, demonstrating the strength of the product set and depth of customer relationships.
This sales improvement has been driven by an increased number of contracts being secured from delayed H2 FY19 backlog, as well as new opportunities. Trisus sales grew to approximately 10% of New Sales (H1 2019: 6%), demonstrating the potential of these solutions to be catalysts for increased growth rates in the future.
In accordance with the Company's revenue recognition policy, the majority of the revenue resulting from both new sales and contract renewals will be recognised over future periods, providing the Group with long term visibility of revenue under contract.
Revenue was broadly the same as the first half of the prior year at $35.9m (H1 FY19: $35.8m), in line with management expectations for this stage in the year, due to the lower level of sales in the prior year impacting the level of revenue available to be recognised as we entered the current year. Adjusted EBITDA increased 10% to $12.7m (H1 FY19: $11.6m).
The Group maintains healthy cash reserves of $45m (H1 2019: $38.7m), after returning $5.3m to our shareholders through dividends and investing $10.3m (H1 2019: $9.1m) in R&D. Capitalised R&D in the period reduced to $4.0m from $4.4m in the prior period. Positive operating cash conversion combined with the normal seasonal pattern in collections and outflows, has seen operating cash conversion over the 12 months to 31 December 2019 of over 100% and the Board expects this trend to continue.
The Company has access to a further funding facility from the Bank of Scotland of up to $50m and the Board continues to investigate potential acquisition opportunities, in line with our stated strategy.
After the end of the period, I was delighted to welcome two further new Board members, Alistair Erskine and David Kemp, who joined the Board from 24 February 2020 and 1 March 2020 respectively as Independent Non-Executive Directors. Alistair has held a number of senior positions within the US healthcare sector and is currently the Chief Digital Health Officer of Partners HealthCare, a US not-for-profit healthcare system that is a leader in the application of clinical information technology to care delivery. David is currently CFO of John Wood Group plc, the FTSE 250 listed global project management consulting business. Both bring significant experience and expertise to the Board and I look forward to working with them as we work to fulfil our vision of profoundly impacting healthcare.
The positive sales performance in the period, supportive market environment and continued sales momentum mean the Board's expectations for the outturn of the year remain unchanged.
Will Whitehorn
Chairman
2 March 2020
Strategic Report
We are pleased with both the significant amount of operational progress that has been achieved in the period, together with the momentum building for our newly launched cloud-based product suite. The structure of the business has been refreshed, to help agility, foster closer customer relationships and importantly to continue innovation.
Of note in the period was the attainment of HITRUST Common Security Framework Certification for all Trisus solutions. HITRUST certification ensures our hospital providers know that our solutions provide them an integrated approach that is aligned, maintained and comprehensive to support their information risk management and compliance objectives. This certification project was significant and demonstrates our commitment to protect our customers' sensitive data, further differentiating our platform from other non-certified point solutions.
Healthcare providers' requirements for greater insight into cost, margin and the value being derived is as high, if not higher, than ever. The Trisus platform differentiates us from other healthcare solutions vendors, providing substantial benefits for our customers and making a meaningful impact on the value of healthcare delivered by our healthcare providers. Early adopters of the platform are deriving extensive improvements in the financial effectiveness of their hospitals and we anticipate these results will continue to drive customer demand for Craneware solutions in the future.
We continue to make progress in all areas of our product roadmap: the ongoing expansion and development of our cloud-based Trisus Enterprise Value Platform; the continued evolution and support of our existing market-leading product suite as we migrate to Trisus; and the development of new products to sit upon the Trisus platform. All of these solutions will increase our addressable market in the key areas of the Value Cycle and positively impact our customers' ability to deliver quality care to their communities.
We have a significant and growing sales pipeline, which the team is focused on converting. We have been pleased by the strong New Sales performance in the period and have seen early indications that sales cycles are shortening, confirmed by the continued sales momentum witnessed to date. The fundamentals of the business are strong, and while we continuously look to optimise our performance, our opportunity is significant.
Market - the move to value-based care continues at pace
The US healthcare market continues to transition from a fee-for-service reimbursement model, towards value-based care, aiming to redress the current imbalance in the US between spend and clinical outcomes. The US has the highest spend per capita on healthcare but ranks only 37th in the world for clinical outcomes.
Healthcare providers across the US are being asked by the government and the insurance companies to justify the care they provide or risk the withholding of payment. The proportion of value-based care payments is increasing each month, as the industry transitions to this new reimbursement model and it is clear that value-based care is here for the long-term.
Meanwhile healthcare consumers are expecting greater transparency on costs and the ability to comparison shop for the services they require, with new legislation set to be introduced in January 2021 which will mandate pricing visibility.
As a result of these shifting market dynamics, US hospital management teams require a greater level of insight than ever before into their costs and the value being derived from the care they provide. They need to understand where their organisations are at financial risk, so that they can protect their margins, to ensure they are in a position to continue to deliver quality care to their communities both now and in the future.
The ultimate success of value-based care will be reliant on the providers having access to granular data and insightful analytics to identify opportunities to deliver better value. This is a large, growing opportunity for Craneware given the breadth of our customer base, depth of healthcare data contained within our solutions and our specialism in helping hospitals better understand and manage revenue and cost through data-driven solutions.
Re-organisation of the product function to improve agility and innovation
As Craneware enjoys continued success and growth, and pushes towards our longer-term vision and strategy, it is important that we recognise the continued need to focus on execution of our short and medium terms plans. To achieve this, we have evolved our organisational design for our product areas to focus our efforts.
The business now has four functional solution divisions for developing and enhancing product ("Business Functions"), each with defined objectives, talented teams and clear KPIs. The aim of this evolution is to promote innovation, operational excellence and customer intimacy in equal measure, while providing us with the structure to continue to scale.
The four Business Functions are: Platform & Innovation; Revenue Intelligence; Integrated Services Intelligence and Margin & Operational Intelligence (formerly Trisus Healthcare Intelligence), each reporting into a Product Board.
Product management, user interface development, user experience architecture, engineering and quality assurance resources have all been aligned to sit within each of these business functions. Having these resources report directly into the business functions and also maintain an "Agile Guild" like structure allows us to benefit from enhanced discovery activities and deliver products to our customers quicker, but maintain the customer and company benefits of a single over-arching platform supplying a common look and feel, rapid technology choice decisions and innovation.
The leaders of these cross-functional, dedicated core teams come together on our new Product Board which will allow for these self-sufficient Business Functions, with end-to-end product delivery responsibility, to work in a unified manner.
The common goal of the Product Board is a nimble structure enabling us to deliver state of the art solutions that delight our customers.
Platform & Innovation
The Platform & Innovation team is responsible for delivering the Trisus platform backbone including the user experience and the regulatory data that is so important to our customers.
Within the Platform & Innovation business function sits our "Craneware Lab", where we have a team evaluating the data within Trisus alongside the evolving market landscape, using artificial intelligence and machine learning tools, to develop proof of concepts for future product development. Early POC's are already being utilised by the business functions in product enhancements and new product modules that will be commercialised.
Data Interoperability is a new team within this Business Function, responsible for all the ingestion of our data into our "data lake" and serving up that data to our customers and business functions in a secure and efficient manner for their use.
Revenue Intelligence
The Revenue Intelligence business function takes our Revenue Capture, Revenue Integrity and Net Patient Revenue products and combines them into one consolidated area. This business unit has the dual track of enhancing existing product and innovating for the future.
Enhancements to Chargemaster Toolkit and Trisus Claims Informatics and the early prototypes of Trisus Chargemaster are underway. New products in the Net Patient Revenue portfolio will be launched later this year.
The product development work and the strong sales performance for our core product, Chargemaster Toolkit, in the period demonstrate that this business function, despite the inherent challenges involved, is now achieving the balance between innovation and consolidation.
Integrated Services Intelligence
The Integrated Services Intelligence function is responsible for our Supply Chain and Pharmacy Products. With major enhancements to the Pharmacy ChargeLink product, Trisus Supplies and early work on the new Trisus Pharmacy continuing, this team has embraced the innovation culture and is led by an industry expert from the Pharmacy world, ensuring products are not only visionary but will meet our customers' needs of the future, returning them significant ROI in these high cost hospital areas. This effective "margin injection" can be utilised by the facility to provide better outcomes for all and is the genesis for the positive change we are seeing within Pharmacy & Supplies professionals akin to that we saw when revenue integrity professionals took charge of the revenue cycle with Automated Chargemaster tools.
Margin & Operational Intelligence
The Margin & Operational Intelligence business function encompasses our healthcare analytics platform, which integrates clinical, financial and operational patient information to determine the actual cost of patient care, at an individual diagnosis level. Our belief is that only by understanding granular detail in cost and revenue, can a hospital have a truly sustainable financial future.
We are delighted to have secured further multi-year sales of Trisus Healthcare Intelligence. As we continue to add customers to the roster of this business function, we can deliver increasingly sophisticated data insights utilising peer level data, and therefore our ability to impact hospital operations becomes significantly more effective with each customer.
Strategy
Innovation to profoundly impact US healthcare operations which will drive demand and expand our addressable market
Our strategy is to continue to expand our product [suite] coverage of the Value Cycle, having initially built on our established market-leading position in revenue cycle solutions, to delight our customers. The Value Cycle describes a process of improving the value of healthcare and achieving substantially better healthcare outcomes by analysing a hospital's operations and optimising them throughout the full lifecycle of managing a population of covered lives. It includes traditional revenue components such as pricing, charge capture, claims performance and compliance, but also addresses additional dimensions, such as: quality of care, patient satisfaction and engagement, clinical outcomes, operational efficiency, cost and risk management.
We will continue to follow a 'land and expand' customer strategy. We will maximise the benefits our products deliver to our customers, combined with the breadth of this product suite and depth of our long-term product vision to bring new customers into the Group, at increasing average contract sizes, while seeking opportunities to sell additional products to our existing customer base. In the long-term, we believe we have the opportunity to increase our average revenue per customer over 10x through much broader adoption of the Trisus platform tied directly to an ongoing and increasing ROI model for our customers. Each of our products has the ability to pay for the entire customers contract cost in the first year alone. Our customers' success will be our success.
A focus of the new products we are developing is to create 'green field' opportunities, where there is little or no existing competition due to novel combinations of multiple products and by delivering products that, historically due to the complexity of healthcare and lack of reliable data, could not be delivered in the healthcare space. The breadth of our offering, combined with over 20 years of data within a secure sophisticated cloud platform, provides us with a strong competitive position across our target product areas.
Potential to augment organic growth through acquisitions
The Board continues to assess acquisition opportunities to complement the Group's organic growth strategy and increase its product coverage of the Value Cycle. The Board adheres to rigorous criteria to evaluate acquisition opportunities, including quality of earnings, customer relationships, strategic fit and product offering. In addition to the Group's cash reserves, an undrawn $50 million funding facility provides the Group with available resources to carry out strategic acquisitions if, and when, these criteria are met. Areas for consideration include competitors who bring market share; businesses with complementary data sources or products; and international companies with complementary product suites of benefit to our customers, who do not have a foothold in the US.
Sales and Marketing
The strategies implemented at the end of the previous year, such as more standardised legal frameworks and Service Level Agreements for our cloud-based solutions, have improved our contracting processes as we have progressed through the first half of the year and into the second half. We continued to sign contracts with hospitals of all sizes, and across the breadth of our product suite, and the sales pipeline continues to grow.
New Sales increased 30% year over year, and of this figure, expansion sales to existing customers represented 90%, demonstrating our ability to continue to cross sell further solutions, driven by compelling ROIs for our customers.
Sales of Trisus products represented approximately 10% of our enlarged New Sales in the period, increasing from 6% in the first half of the prior year.
An increased number of hospitals renewed their contracts during the period, reflecting a 57% increase by dollar value on the comparable half year period, however as previously reported, we lost a relatively large customer in the period. Due to various factors, including successive management team churn at the customer, the contract was not renewed at its latest renewal point. As a result, our KPI "customer renewals by dollar value" when analysed for the six-month period was 73%, below our historic annual range of 85% - 115%. A loss of a customer in the first half of the year will always, mathematically, have a larger impact on this KPI than in the second half, and we therefore expect this figure to return to within our normal historical range over a 12 month period.
Financial Review
Following the trading update provided on 23 January 2020, we are pleased to confirm an increase in adjusted EBITDA of 10% to $12.7m (7% pre IFRS 16 impact) (H1 2019: $11.6m) with revenues remaining flat at $35.9m (H1 2019: $35.9m) in the six months period to 31 December 2019.
During this period, we saw over 30% increase in new sales (being contracts written with new hospital customers or existing customers purchasing additional products) providing positive indications that the disruptions caused by the launch of three new Trisus solutions in the prior year are behind us. However, our prudent approach to revenue recognition, through our Annuity SaaS business model (described below), means the vast majority of the revenue from these New Sales will only be recognised in future periods.
We have continued to invest throughout the period. Prior year marketing costs that related to our initiatives and product launches in that year did not re-occur in this period, which has enabled us to make additional investment across the business, whilst still delivering the 10% increase in adjusted EBITDA. Investment in R&D increased 13% to $10.3m (H1 2019: $9.1m). Of this investment $4.0m (H1 2019: $4.4m) relates to new product development and enhancements and as such has been capitalised, the balance $6.3m (H1 2019: $4.7m) has been expensed as incurred.
Once a new product or enhancement is made generally available to the market, we begin to amortise the relevant previously capitalised cost. This amortisation has to be charged over the 'useful life' of the associated Intellectual Property. In assessing the useful life, we must continually apply careful judgement based on past experience, advances in product development and also best practice. During the period, we have re-assessed the estimated useful life of our Intellectual Property (more specifically the Trisus enterprise suite of products), to be between 5 and 10 years (H1 2019: 5 years). As this is a change in an accounting estimate, it has been applied on a prospective basis. As a result of this change the total amortisation charge in the period is $1.4m (H1 2019: $1.3m).
In the period, the accounting standard IFRS 16 Leases came into effect and has been adopted by the Group (using the modified retrospective application approach). Under this approach, the impact of applying the standard has been reflected as an adjustment to the opening balance of retained earnings and, as such, the prior period comparatives have not been restated. Full details are provided in the notes to the Financial Statements, however in summary, IFRS 16 requires the recognition of a right of use asset and corresponding lease liability. At transition, leases previously classified as operating leases (under IAS 17) have been measured at the present value of the remaining lease payments, discounted at an incremental borrowing rate. As a result of adopting IFRS 16, during the period, the Group charged $458,489 of depreciation and $50,210 of interest costs against profit. Under IAS 17, a charge of $385,581 would have been made to operating expenses.
Adjusted earnings per share has increased 3% to 31.1 cents per share (H1 2019: 30.2 cents per share).
We continue to maintain healthy cash reserves, which at the period end were $45.0m (H1 2019: $38.7m). We target operating cash conversion of 100% of adjusted EBITDA to operating cash over a 12-month period, and we have exceeded this target the 12 months to 31 December 2019. From our cash reserves, we have returned $5.3m to our shareholders through dividends and made the investments in R&D detailed above.
The Group's Annuity SaaS business model and associated revenue recognition policy is designed to focus on the long-term growth and stability of the Group. The revenue element of new sales related to software licenses, where performance obligations are met over time, results in revenue being recognised over the period the license is provided to the customer (which for a new hospital sale is an average of over four years). In addition, other revenue generated through new sales relates to consulting services and training which are also satisfied over time as the service is provided or the project is delivered.
We have previously identified that there are a number of benefits to this revenue recognition model including high levels of cash conversion and high levels of future years' revenue visibility. To demonstrate the high levels of visible revenue generated the Group reports it's 'Three Year Visible Revenue KPI'. This KPI demonstrates the underlying annuity revenue stream that builds as a result of sales and these revenue recognition policies.
At the date of this report, the Total visible revenue for the three year period 1 July 2019 to 30 June 2022 is $200.8m from $190.0m for the same three year period as at 31 December 2018. Of this, $166.6m relates to 'Revenue under Contract', $33.7m 'Renewal Revenue' and $0.5m of 'Other Recurring Revenue'. 'Revenue under Contract', relates to revenues that are supported by ongoing underlying contracts. 'Renewal Revenue' relates to the amount of revenue which is potentially available for renewal and will be recognised in that fiscal year provided the underlying contracts are renewed. As we sign the renewal contracts, the aggregated related revenue for the new multi-year term moves from 'renewal revenues' to 'revenue under contract'. The final element is 'Other Recurring Revenue, this relates to revenue that is not subject to long term contracts, which can be billable 'per transaction' or a set monthly amount and is usually invoiced on a monthly basis, however it is reasonable to expect it to be recurring in nature.
In producing this KPI, we show our 'Renewal Revenues' at 100% of dollar value. To ensure this assumption is valid, we track and publish our 'Renewal Rate by dollar value' KPI. This KPI measures the average value of customers renewing in the relevant year (including cross sell and upsell to those renewing customers) and we normally expect this KPI to fluctuate within an annual range of 85% to 115% whilst maintaining a long term average of over 100%. In the current period, the unfortunate loss of a larger customer has had a disproportionate impact on this KPI at this interim point of the fiscal year. As a result, the 'Renewal Rate by dollar value' KPI is currently 73%. The dollar impact of this renewal rate has been fully reflected in the $200.8m but as we expect this KPI to return to its historical range over the course of the full year, we have continued to assume 100% of dollar value in regards to future 'Renewal Revenues'.
These high levels of visible revenue provide additional certainty in making our investment decisions and we continue to invest for the future growth of the Group, whilst at all times ensuring the efficiency of all expenditures. This has contributed to our adjusted EBITDA margin, which for the period is 35%. The adjustments we make to both EBITDA and EPS are those normally expected and include, in the prior period, costs related to acquisition and share activity in that period.
We continue to report the results (and hold the cash reserves) of the Group in US Dollars, whilst having approximately twenty five percent of our costs, mainly our UK employees and UK purchases, denominated in Sterling. The average exchange rate for the Company during the reporting period was $1.26/GBP1which compares to $1.30/GBP1 in the corresponding period last year.
Dividend
The Board has resolved to pay an interim dividend of 11.5p (15.1 cents) per ordinary share on 16 April 2020 to those shareholders on the register as at 20 March 2020 (FY19 Interim dividend 11.0p). The ex-dividend date is 19 March 2020.
The interim dividend of 11.5p 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 has registered to do so by the close of business on 20 March 2020. The exact amount to be paid will be calculated by reference to the exchange rate to be announced on 20 March 2020. The interim dividend referred to above in US dollars of 15.1 cents is given as an example only using the Balance Sheet date exchange rate of $1.31/GBP1 and may differ from that finally announced.
Update to the AGM
Following our Annual General Meeting on 12 November 2019, we announced that all resolutions were passed with an over 71% majority, however there were three resolutions that had received a number of votes against. As such, we committed to consult with our shareholders to more fully understand the reasons for these votes against and to carefully reflect on the feedback we received.
We understand the voting in relation to resolution 6 (re-appointment of Colleen Blye) and resolution 9 (re-appointment of PriceWaterhouse Coopers LLP as auditors) was specifically in relation to perceived threats to auditor independence, primarily due to the level of non-audit fees as compared to the level of the audit fees. The votes against Ms. Blye, being, as she chairs the audit committee. The level of non-audit fees was the result of the volume of tax compliance work relating to US State filings with each individual filing attracting a low individual fee. Whilst the Board did not believe this in anyway impaired the auditors' independence, we have noted the views of our shareholders and in the current year have engaged a different tax advisor to assist with this compliance work. We also note that PriceWaterhouseCoopers LLP have, as part of their independence requirements, rotated and appointed a new lead audit partner for the current year's audit.
We understand the voting in relation to resolution 3 (re-appointment of Ron Verni) related to Mr. Verni having served on the Board for over 9 years, and whilst the Board had deemed him independent through his actions, this was not in keeping with the UK Corporate Governance Code. As a result, the ratio of Independent Non-executives to executives on the Board was not in keeping with the Code requirements. Mr. Verni has decided to not seek re-election at the Company's next AGM and, as we announced on 24 February 2020, we have appointed two further Independent Non-executives to the Craneware Board. Mr. Verni will work with these new directors and the Board throughout this transition period.
Outlook
We are pleased with the positive sales performance in the first half of the financial year, with new sales over 30% ahead of the first half in the prior year, reflecting the considerable amount of activity that has taken place across the business since the summer. Whilst this increase will take time to flow through into our reported financials, we are confident that momentum is now back in the business and the size of the opportunity ahead of us remains intact.
Importantly, the level of Trisus sales grew in the half, with sales of all four of our current Trisus solutions and the pipeline for these products increasing. The transition of our existing product suite onto the Trisus platform is progressing and paves the way for long term growth, as we provide our customers with the data-driven solutions they require to address the move to value-based care.
The positive sales performance in the first half has continued to date, and our pipeline continues to grow, underpinned by the ongoing transition of the US healthcare market to value-based care. The Board's expectations for the full year remain unchanged and we look forward to a return to increased rates of growth in future years. We are focused on execution and with strong operating margins, healthy cash balances and a growing sales pipeline, we continue to be excited by the opportunity ahead.
Keith Neilson Craig Preston Chief Executive Officer Chief Financial Officer 2 March 2020 2 March 2020
Craneware plc
Interim Results FY20
Consolidated Statement of Comprehensive Income
H1 2020 H1 2019 FY 2019
Notes $'000 $'000 $'000
----------------------------------------- ------- --------- --------- ---------
Revenue 35,866 35,853 71,401
Cost of sales (2,043) (2,292) (4,394)
--------- --------- ---------
Gross profit 33,823 33,561 67,007
Net operating expenses (24,337) (24,376) (49,003)
--------- --------- ---------
Operating profit 9,486 9,185 18,004
Analysed as:
Adjusted EBITDA(1) 12,687 11,578 23,996
Share-based payments (1,070) (740) (1,296)
Depreciation of plant and equipment (285) (308) (603)
Depreciation of leased properties (458) - -
Exceptional aborted acquisition
costs(2) - - (1,168)
Amortisation of intangible assets (1,388) (1,345) (2,925)
-------------------------------------------------- --------- --------- ---------
Finance income 117 114 318
--------- --------- ---------
Profit before taxation 9,603 9,299 18,322
Tax charge on profit on ordinary
activities (1,629) (1,590) (3,337)
--------- --------- ---------
Profit for the period attributable
to owners of the parent 7,974 7,709 14,985
Other comprehensive income
Items that may be reclassified
subsequently to profit or loss
Currency Translation Reserve movement (34) 22 28
--------- --------- ---------
Total items that may be reclassified
subsequently to profit or loss (34) 22 28
-------------------------------------------------- --------- --------- ---------
Total comprehensive income attributable
to owners of the parent 7,940 7,731 15,013
-------------------------------------------------- --------- --------- ---------
(1) Adjusted EBITDA refers to earnings before interest, tax,
depreciation, amortisation, exceptional items and share based
payments.
(2) Exceptional items relate to legal and professional fees
associated with an aborted potential acquisition.
Earnings per share for the period attributable to equity holders
- Basic ($ per share) 1a 0.297 0.289 0.561
- *Adjusted Basic ($ per share)(3) 1a 0.311 0.302 0.633
- Diluted ($ per share) 1b 0.293 0.283 0.550
- *Adjusted Diluted ($ per share)(3) 1b 0.307 0.296 0.620
----------------------------------------- ------- --------- --------- ---------
(3) Adjusted Earnings per share calculations allow for the tax adjusted acquisition costs and share related transactions (if applicable in the year) together with amortisation on acquired intangible assets.
Craneware plc
Interim Results FY20
Consolidated Statement of Changes in Equity
Capital
Share Redemption Other Retained
Share Capital Premium Reserve Reserves Earnings Total
$'000 $'000 $'000 $'000 $'000 $'000
--------------------------- -------------- --------- ------------ ---------- ---------- --------
At 1 July 2018 534 19,777 9 2,084 29,242 51,646
Total comprehensive
income - profit for
the period - - - - 7,709 7,709
Total other comprehensive
income - - - - 22 22
Transactions with owners
Share-based payments - - - 740 607 1,347
Impact of share options
exercised / lapsed 1 244 - - - 245
Dividend - - - - (4,713) (4,713)
--------------------------- -------------- --------- ------------ ---------- ---------- --------
At 31 December 2018 535 20,021 9 2,824 32,867 56,256
--------------------------- -------------- --------- ------------ ---------- ---------- --------
Total comprehensive
income - profit for
the period - - - - 7,276 7,276
Total other comprehensive
income - - - - 6 6
Transactions with owners
Share-based payments - - - 871 (791) 80
Impact of share options
exercised / lapsed - 1 - (146) 146 1
Dividend - - - - (3,784) (3,784)
At 30 June 2019 535 20,022 9 3,549 35,720 59,835
--------------------------- -------------- --------- ------------ ---------- ---------- --------
Adjustment on initial
application of IFRS
16 - - - - 931 931
Total comprehensive
income - profit for
the period - - - - 7,974 7,974
Total other comprehensive
income - - - - (34) (34)
Transactions with owners
Share-based payments - - - 981 1,079 2,060
Impact of share options
exercised / lapsed 1 1,030 - - - 1,031
Dividend - - - - (5,311) (5,311)
--------------------------- -------------- --------- ------------ ---------- ---------- --------
At 31 December 2019 536 21,052 9 4,530 40,359 66,486
--------------------------- -------------- --------- ------------ ---------- ---------- --------
Craneware plc
Interim Results FY20
Consolidated Balance Sheet as at 31 December 2019
H1 2020 H1 2019 FY2019
Notes $'000 $'000 $'000
------------------------------ ------- -------- -------- --------
ASSETS
Non-Current Assets
Plant and equipment 4,392 1,351 1,274
Intangible assets 33,237 26,359 30,437
Trade and other receivables 2 4,495 5,253 4,946
Deferred Tax 4,439 4,599 3,244
46,563 37,562 39,901
-------- -------- --------
Current Assets
Trade and other receivables 2 20,999 20,852 18,789
Cash and cash equivalents 44,973 38,668 47,611
65,972 59,520 66,400
-------- -------- --------
Total Assets 112,535 97,082 106,301
------------------------------ ------- -------- -------- --------
EQUITY AND LIABILITIES
Non-Current Liabilities
Lease liability > 1 year 2,573 - -
2,573 - -
-------- -------- --------
Current Liabilities
Deferred income 36,568 33,094 37,849
Current tax liabilities 137 420 1,085
Trade and other payables 3 6,771 7,312 7,532
43,476 40,826 46,466
-------- -------- --------
Total Liabilities 46,049 40,826 46,466
-------- -------- --------
Equity
Called up share capital 4 536 535 535
Share premium account 21,052 20,021 20,022
Capital redemption reserve 9 9 9
Other reserves 4,530 2,824 3,549
Retained earnings 40,359 32,867 35,720
Total Equity 66,486 56,256 59,835
-------- -------- --------
Total Equity and Liabilities 112,535 97,082 106,301
------------------------------ ------- -------- -------- --------
Craneware plc
Interim Results FY20
Consolidated Statement of Cash Flow for the six months ended 31 December 2019
H1 2020 H1 2019 FY 2019
Notes $'000 $'000 $'000
----------------------------------------- ------ -------- --------- ---------
Cash flows from operating activities
Cash generated from operations 5 8,978 (3,527) 15,078
Interest received 122 114 318
Tax paid (2,689) (1,413) (1,933)
----------------------------------------- ------ -------- --------- ---------
Net cash from operating activities 6,411 (4,826) 13,463
Cash flows from investing activities
Purchase of plant and equipment (34) (436) (654)
Capitalised intangible assets (4,202) (4,435) (9,780)
----------------------------------------- ------ -------- --------- ---------
Net cash used in investing activities (4,236) (4,871) (10,434)
Cash flows from financing activities
Dividends paid to company shareholders (5,311) (4,713) (8,497)
Proceeds from issuance of shares 942 245 246
Leased property payments (444) - -
----------------------------------------- ------ -------- --------- ---------
Net cash used in financing activities (4,813) (4,468) (8,251)
Net (decrease)/increase in cash
and cash equivalents (2,638) (14,165) (5,222)
Cash and cash equivalents at the
start of the period 47,611 52,833 52,833
Cash and cash equivalents at the
end of the period 44,973 38,668 47,611
----------------------------------------- ------ -------- --------- ---------
Craneware plc
Interim Results FY20
Notes to the Financial Statements
1. Earnings per Share
(a) Basic
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the period.
----------------------------------------------------------------------------
H1 2020 H1 2019 FY 2019
---------------------------------------------- -------- -------- --------
Profit attributable to equity holders
of the Company ($'000) 7,974 7,709 14,985
Weighted average number of ordinary
shares in issue (thousands) 26,827 26,682 26,691
Basic earnings per share ($ per share) 0.297 0.289 0.561
-------- -------- --------
Profit attributable to equity holders
of the Company ($'000) 7,974 7,709 14,985
Adjustments(1) ($'000) 378 353 1,914
-------- -------- --------
Adjusted Profit attributable to equity
holders ($'000) 8,352 8,062 16,899
-------- -------- --------
Weighted average number of ordinary
shares in issue (thousands) 26,827 26,682 26,691
Adjusted Basic earnings per share ($
per share) 0.311 0.302 0.633
-------- -------- --------
(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.
----------------------------------------------------------------------------
H1 2020 H1 2019 FY 2019
---------------------------------------------- -------- -------- --------
Profit attributable to equity holders
of the Company ($'000) 7,974 7,709 14,985
Weighted average number of ordinary
shares in issue (thousands) 26,827 26,682 26,691
Adjustments for: - share options (thousands) 408 561 555
Weighted average number of ordinary
shares for diluted earnings per share
(thousands) 27,235 27,243 27,246
Diluted earnings per share ($ per share) 0.293 0.283 0.550
-------- -------- --------
(1) Relate to aborted acquisition costs, share related activities and amortisation of acquired intangibles if applicable in the period. These adjustments are to focus on what the Group regards as a more reliable indicator of underlying operating performance and are consistent with other similar companies.
H1 2020 H1 2019 FY 2019
---------------------------------------------- -------- -------- --------
Profit attributable to equity holders
of the Company ($'000) 7,974 7,709 14,985
Adjustments(1) ($'000) 378 353 1,914
Adjusted Profit attributable to equity
holders ($'000) 8,352 8,062 16,899
-------- -------- --------
Weighted average number of ordinary
shares in issue (thousands) 26,827 26,682 26,691
Adjustments for: - share options (thousands) 408 561 555
Weighted average number of ordinary
shares for diluted earnings per share
(thousands) 27,235 27,243 27,246
Adjusted Diluted earnings per share
($ per share) 0.307 0.296 0.620
-------- -------- --------
2. Trade and other receivables
H1 2020 H1 2019 FY 2019
$'000 $'000 $'000
----------------------------------------- -------- -------- --------
Trade Receivables 16,138 16,670 15,415
Less: provision for impairment of trade
receivables (1,321) (1,172) (1,246)
-------- -------- --------
Net trade receivables 14,817 15,498 14,169
Other Receivables 2,986 521 308
Prepayments and accrued income 845 2,487 1,924
Deferred Contract Costs 6,846 7,599 7,334
-------- -------- --------
25,494 26,105 23,735
Less non-current receivables: Deferred
Contract Costs (4,495) (5,253) (4,946)
-------- -------- --------
Trade and other receivables 20,999 20,852 18,789
-------- -------- --------
------There is no material difference between the fair value of trade and other receivables and the book value stated above. All amounts included within trade and receivables are classified a financial assets at amortised cost.
3. Trade and other payables
H1 2020 H1 2019 FY 2019
$'000 $'000 $'000
-------- -------- --------
Trade Payables 1,025 841 1,708
Social Security and PAYE 509 425 527
Other Payables 1,055 215 173
Accruals 4,182 5,831 5,124
------ ------ ------
Trade and other payables 6,771 7,312 7,532
------ ------ ------
No derivatives have been entered into in the current reporting period. No other assets or liabilities have been measured at fair value. Trade and other payables are classified as financial liabilities at amortised cost.
4. Called up share capital
H1 2020 H1 2019 FY 2019
Number $'000 Number $'000 Number $'000
---------------------------- ----------- ------ ----------- ------ ----------- ------
Authorised
Equity share capital
Ordinary shares of 1p
each 50,000,000 1,014 50,000,000 1,014 50,000,000 1,014
Allotted called-up and
fully paid
Equity share capital
Ordinary shares of 1p
each 26,826,539 536 26,698,984 535 26,698,984 535
5. Consolidated Cash Flow generated from operating
activities
Reconciliation of profit before taxation to
net cash inflow from operating activities:
H1 2020 H1 2019 FY 2019
$'000 $'000 $'000
------------------------------------- -------- -------- --------
Profit before taxation 9,603 9,299 18,322
Finance income (117) (114) (318)
Finance expense 50 - -
Depreciation on plant and equipment 743 308 603
Amortisation on intangible assets 1,388 1,345 2,925
Share-based payments 1,070 740 1,296
Movements in working capital:
(Increase) in trade and other
receivables (1,760) (8,327) (5,957)
(Decrease) in trade and other
payables (1,999) (6,778) (1,793)
Cash generated from operations 8,978 (3,527) 15,078
------------------------------------- -------- -------- --------
6. Basis of Preparation
The interim financial statements are unaudited and do not constitute statutory accounts as defined in S435 of the Companies Act 2006. These statements have been prepared applying accounting policies that were applied in the preparation of the Group's consolidated accounts for the year ended 30th June 2019 and the changes noted below in section 8. Those accounts, with an unqualified audit report, have been delivered to the Registrar of Companies.
7. Segmental Information
The Directors consider that the Group operates in predominantly one business segment, being the creation of software sold entirely to the US Healthcare Industry, and that there are therefore no additional segmental disclosures to be made in these financial statements.
8. Changes to Significant Accounting Policies
Except as described below, the accounting policies applied in these interim financial statement are the same as those applied in the Group's consolidated financial statements as at and for the year ended 30 June 2019.
The changes in accounting policy set out below will also be reflected in the Group's consolidated financial statements for the year ended 30 June 2020.
IFRS 16 Leases
The Group has adopted IFRS 16 Leases from 1 July 2019 using the modified retrospective application approach. Under the modified retrospective application approach, the impact of initially applying the standard has been reflected as an adjustment to the opening balance of retained earnings as of 1 July 2019 and the comparative period has not been restated.
Under IFRS 16, leases are recognised as a right to use asset and a corresponding liability at the date which the leased asset became available to the Group. At transition, leases classified as operating leases under IAS 17 were measured at the present value of the remaining lease payments, discounted at an incremental borrowing rate which reflects the characteristics of the underlying lease at 1 July 2019. The weighted average rate applied was 3%. Right of use assets are measured at the amount equal to the lease liability.
Each lease payment is allocated between the lease liability and finance cost, which is charged on a straight-line basis over the term of the lease. The right to use asset is depreciated over the shorter of the asset's useful life or the lease term on a straight-line basis. During the six months ended 31 December 2019, the Group recognised $458,489 of depreciation charges and $50,210 of interest costs from leases under IFRS 16. Under IAS 17, a charge of $385,581 would have been debited to the income statement.
On transition to IFRS 16, the Group recognised additional right of use assets and additional lease liabilities, recognising the difference in retained earnings. The Group presents lease liabilities > 1 year on the face of the balance sheet and lease liabilities < 1 year in Other Payables. All right to use assets are leased properties and are recognised within property, plant and equipment. The impact on transition is summarised below.
1 July 2019
$'000
-------------------------------------------- ------------
Right of use assets presented in property,
plant and equipment 3,826
Accrued lease incentives derecognised 931
Lease liabilities < 1 year (836)
Lease liabilities > 1 year (2,990)
---------------------------------------------- ------------
Retained earnings 931
---------------------------------------------- ------------
The group has elected to account for short term leases and leases of low value assets using the practical expedients. The payments are recognised on a straight-line basis over the life of the lease as an expense to the income statement instead of recognising a right-of-use asset and lease liability. Short term leases are those with a lease term of less than 12 months.
The following shows a reconciliation of total operating lease commitments at 30 June 2019 to the lease liabilities recognised at 1 July 2019:
$'000
------------------------------------------------- ------
Total operating lease commitments disclosed
at 30 June 2019 4,067
Discounted using the lessee's incremental
borrowing rate at date of application (232)
Less low value and short term leases recognised
on a straight line basis (9)
--------------------------------------------------- ------
Total lease liability recognised under IFRS
16 at 1 July 2019 3,826
--------------------------------------------------- ------
The Group is not a lessor.
Critical accounting estimates and judgements
Development expenditure is capitalised where specific criteria set by the Group is met. Judgement is required over technically feasibility, commercial viability and the estimated useful life of the products. In assessing the useful life, careful judgement based on past experience, advances in product development and also best practice. During the period, the Group has re-assessed the estimated useful economic life of Intellectual Property to be (more specifically the Trisus enterprise suite of products), to be between 5 and 10 years (2019: 5 years). As this is a change in accounting estimate, it has been applied on a prospective basis. The impact of the change on the period ended 31 December 2019 was a reduction in the amortisation charge of $761,865.
9. Availability of announcement and Half Yearly Financial Report
Copies of this announcement are available on the Company's website, www.craneware.com. Copies of the Interim Report will be posted to shareholders, downloadable from the Company's website and available from the registered office of the Company shortly.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR EAXDAEDAEEFA
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