TIDMCRW
RNS Number : 7912P
Craneware plc
05 September 2017
Craneware plc
("Craneware", "the Group" or the "Company")
Final Results
Double digit revenue and profit growth and successful transition
into execution phase of the growth strategy
5 September 2017 - Craneware plc (AIM: CRW.L), the market leader
in Value Cycle solutions for the US healthcare market, announces
its results for the year ended 30 June 2017.
Financial Highlights (US dollars)
-- Revenue increased 16% to $57.8m (FY16: $49.8m)
-- Adjusted EBITDA(1.) increased 13% to $18.0m (FY16: $15.9m)
-- Profit before tax increased 22% to $16.9m (FY16: $13.9m)
-- Basic adjusted EPS increased 20% to $0.514 (FY16: $0.429) and
adjusted diluted EPS increased to $0.503 (FY16: $0.423)
-- Total visible revenue increased 13% to $163.8m (FY16 same 3 year period: $145.3m)
-- Continued operating cash conversion above 100% of Adjusted EBITDA
-- Cash at year-end of $53.2m (FY16: $48.8m) after payment of
$6.4m dividend to shareholders and increased investment of over
$3.0m in R&D
-- Proposed final dividend of 11.3p (14.71 cents) per share
giving a total dividend for the year of 20.0p (26.04 cents) per
share (FY16: 16.5p (22 cents) per share)
-- Renewal rate remains above 100% by dollar value
(1.) Adjusted EBITDA refers to earnings before acquisition and
share related transaction costs, interest, tax, depreciation,
amortisation and share based payments.
Operational Highlights
-- Continued supportive market environment as the US healthcare
market evolves towards value-based care, with a critical dependency
on accurate financial and operating data
-- Continued high levels of customer acquisition and retention
-- Successful launch of cloud-based Trisus(TM) platform, with
extremely positive customer response
-- Initial sales of Trisus Claims Informatics(TM), the first
product on the Trisus(TM) platform
-- Early adopters secured for Craneware Healthcare Intelligence,
the Group's new business focused on healthcare Cost Analytics and
Resource Efficiency (CARE)
-- Record sales pipeline for the current financial year
Keith Neilson, CEO of Craneware plc commented, "We are delighted
to report that, with record levels of revenue and profitability,
the launch of our Trisus platform with secured sales for the first
Trisus product (Trisus Claims Informatics(TM)), and the launch of
Craneware Healthcare Intelligence, this was the year in which we
saw our unique vision of the Value Cycle, turn from concept to
reality.
"While laying out our vision for the Value Cycle over the last
two years, Craneware has delivered double digit growth in our key
metrics, including revenue and profit, supported by sales success
throughout the period. We have expanded our product suite into the
Value Cycle; developed a new cloud-based technology platform,
Trisus; and created a new Group business, Craneware Healthcare
Intelligence, all significantly increasing the Company's total
addressable market. At the same time we have been investing in
improving our customers' experience and have returned in excess of
$15m to shareholders by way of dividends and share buy backs.
"The unceasing evolution of the US healthcare market towards
value-based care presents us with an ongoing, growing market
opportunity and the investments we have made mean we now have the
potential to deliver against this expanding opportunity. With our
sales pipeline increasing each year, this increased scalability and
opportunity, combined with our high levels of revenue visibility,
strong cash position and extensive customer base provide us with
confidence in Craneware's ongoing success."
For further information, please contact:
Craneware plc Peel Hunt Alma
+44 (0)131 550 +44 (0)20 7418 +44 (0)208 004
3100 8900 4218
Keith Neilson, Dan Webster Caroline Forde
CEO
Craig Preston, Adrian Trimmings Hilary Buchanan
CFO
Robyn Fisher
About Craneware
Craneware is the leader in automated value cycle solutions that
help US provider organisations discover, convert and optimise
assets to achieve best clinical outcomes and financial performance.
Founded in 1999, Craneware has headquarters in Edinburgh, Scotland
with offices in Atlanta, Pittsburgh, Boston and Phoenix employing
over 250 staff. Craneware's market-driven, SaaS solutions normalise
disparate data sets, bringing in up-to-date regulatory and
financial compliance data to deliver value at the points where
clinical and operational data transform into financial
transactions, creating actionable insights that enable informed
tactical and strategic decisions. To learn more, visit
craneware.com and thevaluecycle.com .
Chairman's statement
Strong trading in the year
The Board is pleased to confirm an increase of 16% in revenue
recognised in the year to $57.8m (FY16: $49.8m) and an adjusted
EBITDA increase of 13% to $18.0m (FY16: $15.9m).
The need to drive value in healthcare, and the challenges this
brings, remains a universal topic of focus in the US, providing a
supportive market environment for Craneware through the year. Each
year brings another layer of change within the US healthcare
market, but what remains consistent is the need for our customers'
patients to get better value for their healthcare dollar and for
our customers to gain a greater understanding of their financial
and operational data in order to ensure their long-term financial
health and better outcomes for all.
Our customers are increasingly turning to Craneware as a
strategic partner to provide solutions that will enable them to
preserve revenue and increase the quality of their margins so they
can continue to invest in their future and focus on the wellbeing
of patients. This has been reflected in the Group's continued sales
success in the year. The strong sales from previous years continue
to flow, through to our reported results contributing to current
year revenue and adjusted EBITDA growth.
This year we are reporting New Sales in the year of $35.4m and
Total Value of Contracts of $54.0m. Whilst on the surface not at
the level reported in the prior year for total sales (FY16: $58.6m
and $82.3m respectively), the difference reflects the prior year
announced three large enterprise wide sales, the anticipated impact
of the Trisus migration on contract end dates and the cyclically
low number of customers due for renewal in the year. On a like for
like basis, underlying new sales in the period reflect favourably
compared to the prior year of $34.2m for FY16. These sales have
contributed to a further 13% increase in our three year visible
revenue and continue to support the ongoing growth of the
business.
At the end of current contracts, we expect to see our renewal
rates remain at their current high (well above 100% by dollar
value) as customers move to the improvements brought to them by the
Trisus platform.
Cash generation in the period was strong, resulting in cash
reserves of $53.2m at 30 June 2017 (FY16: $48.8m) after payment of
$6.4m in dividends to shareholders, $5.5m of tax payments and
investing c.$6.6m into new product development and the Employee
Benefit Trust.
Investing for the future
The Group continues to utilise its cash reserves to invest in
our teams, organisation and infrastructure in the US and UK as they
are all crucial elements of our build, buy or partner strategy as
we further develop our Value Cycle platform. This includes further
development of the Trisus Product Suite and Craneware Healthcare
Intelligence, the Group's unique Cost Analytics and Resource
Efficiency (CARE) solution. With our healthy cash balances and an
undrawn $50m funding facility from the Bank of Scotland, we have
the resources to execute upon our strategic vision.
First new product sales demonstrate execution of our vision
We were delighted by the extremely positive customer response to
the launch of our new cloud-based platform, Trisus, with the first
product sales secured towards the end of the year. We believe the
innovation in Trisus positions us firmly at the forefront of an
expanding market opportunity, as the long term shift in US
healthcare to value-based care and increased consumerism continues
unabated. The first product on the platform, Trisus Claims
Informatics was launched in June 2017, with early sales recorded
towards the year end. During the current financial year we
anticipate further product launches on the Trisus platform.
The dedication of our employees in Scotland and the US to our
customers and their passion for innovation are the pillars on which
our ongoing success is built. I would like to take this opportunity
to thank them once again for all their hard work in the year. Their
commitment has ensured Craneware has delivered revenue and profit
growth for each of its ten years as a public company and has
successfully transitioned into the execution phase of our long term
strategy.
Positive outlook for the business
We remain positive that the business environment in the US will
continue to be supportive for our business. The investments we have
made in the business mean we have the product suite, people and
scalability to drive long-term growth and we will continue to build
Craneware with the future opportunity in mind. While always mindful
of the global and US macro environment, the continued sales
success, high levels of revenue visibility, continued cash
generation and a record sales pipeline provide the Board with
confidence in the success of Craneware in the year ahead.
George Elliott
Chairman
4 September 2017
Strategic Report:
Operational Review
With continued sales success and double digit financial growth,
we have been investing in Craneware's product suite and people. We
made these investments to address the challenges we foresaw taking
place in the US healthcare market. Our vision was to be the first
to market with a unique range of broad solutions that help our
customers in the new era of value-based care. We have expanded our
product suite into the Value Cycle, adding new product areas;
developed a new cloud-based technology platform, Trisus, and
created a new Group business, Craneware Healthcare Informatics
addressing the significant healthcare analytics market. This will
enable greater scalability of the business to address the growing
market opportunity.
We are delighted to report that, with the early sales of our
first Trisus product and the roll out to our first Craneware
Healthcare Intelligence customers, this was the year in which we
saw our vision become reality. We will continue to invest in the
expansion of our business to support our customers as they navigate
the ongoing re-imbursement model changes and the move towards
value-based care.
Through these initial product sales we have proven our ability
to execute on our long term vision and are excited by the size of
the opportunity now ahead of us.
Market and Strategy
Market drivers continue unabated
While the US healthcare landscape continues to evolve, the
fundamentals driving a long-term evolution of the landscape remain
the same. The largest healthcare market in the world, the US
consistently continues to fall short in its quest for value for the
healthcare dollars spent. A greater number of people need access to
the healthcare system regardless of any pre-existing medical
condition, a greater proportion of the population will soon reach
the end of their working life and the cost of delivering healthcare
is increasing, all putting an unsustainable burden on the US and
its citizens. New regulations, increasing requirement for reliable
data analytics, emerging medical techniques and technologies, are
all contributing to a major shift in the operational requirements
of US healthcare providers.
These factors are all driving the need for hospitals to have
additional insight into their operational, clinical and financial
data - insight our Value Cycle solutions provide, together with the
tools they need to effect change. In the era of value-based care, a
hospital provider must understand and reduce the cost of care,
increase margins so they can invest in future care delivery and
simultaneously improve patient outcomes. We believe that we are
among the first to market with solutions addressing the move to
value-based care and are committed to continuing to innovate in
this space in response to the needs of our customers.
Meanwhile, as hospital leadership teams are focusing on
controlling costs and increasing levels of care, consumers are
facing ever increasing out-of-pocket costs as the healthcare model
shifts a significant proportion of the payment responsibility to
the patient, via high deductible plans. This is another area of
focus for our expanded Value Cycle product suite.
The nearer-term reforms to healthcare which have been discussed
over the past year, in light of a change in administration, remain
consistent with the need to move toward value-based care - in line
with Craneware's strategy.
Long-term strategy: to continue to expand our coverage of the
Value Cycle
Our strategy is to continue to build on our established
market-leading position in revenue cycle solutions and expand our
product suite coverage of the Value Cycle. By expanding our
offerings into operational areas of the hospital, incorporating
cost management and combining this with data from the revenue cycle
we will provide a unique insight into the management and analysis
of clinical and operational data, providing the best possible
outcomes for all.
Our expansion will be achieved through a combination of
extensions to the current product set; building products through
internal development; targeting potential acquisitions to buy and
partnering with other technology and services companies.
Craneware's Value Cycle solutions provide the financial insight
and actionable data needed to navigate this evolving landscape and
healthcare reform continues to drive a growing demand for all our
products.
Approximately a quarter of all US hospitals are existing
Craneware customers, providing us with a valuable platform for
growth. The insight they provide us drives our strategy and we are
committed to providing them with long-term strategic support.
Product Roadmap
Our product roadmap has four clear areas of focus; the
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; the development of new
products to sit upon the Trisus Platform and the development of
cost analytics software by our newly formed Group company,
Craneware Healthcare Intelligence. All of these solutions will
target areas of the Value Cycle, being 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.
As we undertake these initiatives and consider the market
opportunities these present, the Group has decided to accelerate
investment in many areas as we have decided 'Build' is the favoured
way forward Through the development already carried out over the
last two years, we now have products or partnerships providing us
with access to many of the data sources we require within the key
clinical, operational and financial areas of a hospital's
operations in order to build our full suite of Value Cycle
solutions. Some of these areas now have live Craneware products,
others are now entering development or will do so in the coming
year.
We believe the comprehensive nature of our product portfolio,
the data that this adds and sophistication of our technology
platform, mean Craneware will have the ability to be at the
forefront of innovation within the US healthcare market for many
years to come.
Trisus Enterprise Value Platform
We have now launched the Trisus Enterprise Value platform, the
next generation of innovation in the value cycle. The cloud-based
platform enables a suite of solutions for healthcare providers to
identify and take action on risks related to revenue, cost, and
compliance. We have a roadmap to move all our solutions onto the
platform, as well as continuing to look for innovative combinations
of our data sets into new unique product offerings.
Trisus is designed to be versatile and expandable, growing
alongside our customers as the healthcare industry continues to
evolve. The platform provides an environment to gather, process,
and deliver data across the continuum of care with an open
architecture allowing for synergies between applications. Common
components across applications, such as reporting, data import,
analytics, workflows, user administration, and more, empower teams
within a hospital to collaborate, become more efficient and
productive, and provide better financial outcomes.
As the healthcare environment continues to change, financial,
operational, and clinical outcomes are tied together more than ever
before. Trisus is Craneware's innovative commitment to providing
high-value solutions for providers so they can improve margins and
provide better patient outcomes.
The first product launch took place in June 2017; Trisus Claims
Informatics. This product enables hospitals and healthcare systems
to drive revenue growth and increase compliance by automating
claims review; through analysing for completeness, accuracy, and
patterns of changing charging behaviour.
The Trisus Patient Payment solution was also made available to
early adopters during the year. The solution effectively addresses
growing consumerisation within healthcare. The past five years have
seen an explosion of high-deductible health plans and an increasing
out-of-pocket burden for patients. In many hospitals, patient
payments represents a fast growing proportion of their revenue, yet
is the most difficult and expensive portion to collect with a high
reputational risk associated with pursuing delinquent individuals.
The Trisus Patient Payment Module is a solution designed to
increase patient billing satisfaction through the provision of
flexible, web and mobile-friendly payment options and
simplification of the billing process, while also improving
point-of-service collection rates. Following successful completion
of the early adopter phase we expect full general release later
this calendar year.
Further components of Trisus will be released throughout the
current calendar year and beyond. With the componentised nature of
the Trisus architecture we expect the roadmap for future releases
to accelerate as we complete on these initial solutions.
Craneware Healthcare Intelligence
In the second half of fiscal year 2016, Craneware formed a new
Group company, Craneware Healthcare Intelligence, to develop and
market Cost Analytics and Resource Efficiency (CARE) software to
the US healthcare industry. CARE is a vital component within the
emerging value cycle solutions market. The insight into costs,
combined with correct reimbursement will enable our customers to
better understand and improve their margins; allowing a greater
understanding of resources available to invest and in turn drive
better patient outcomes both today and for the future. With the
additional insight our products provide into Physician variability
across the continuum of care, Craneware is able to demonstrate the
tangible and valuable benefits of combining financial, operational
and clinic data particularly in better patient outcomes. We believe
this area of the value cycle represents a market opportunity
several times larger than that of our existing product
portfolio.
Under the leadership of our SVP, Health Analytics, progress has
continued at pace within this newly formed business. We now have a
team of people in place with the initial phase of product
development complete and the first early adopters secured,
combining our initial models and algorithms with live hospital
data. The results of this phase will provide us with invaluable
insight as we approach general product launch scheduled for later
in the year.
Acquisitions
The Board continues to assess acquisition opportunities to
complement the Group's organic growth strategy and increase our
product coverage of the Value Cycle. The Board adheres to a
rigorous set of criteria to evaluate acquisition opportunities,
including quality of earnings, strategic fit and product offering.
In addition to the Company's cash reserves, an undrawn $50 million
funding facility provides the Company with available resources to
carry out strategic acquisitions if and when these criteria are
met.
Sales and Marketing
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. Going forward the
sales pipeline continues to be at record highs with opportunities
across all strata of hospital, providing confidence that we are on
a continuing path of accelerated revenue and profit growth in
future years.
During the year, sales to existing customers increased as a
proportion of total new sales made. All new hospital sales provide
opportunities for further product sales in the future. The average
length of contracts with new customers continues to be in-line with
our historical norms of approximately five years. This year,
however, for all other contracts we have anticipated the crossover
dates of new product availability on the Trisus Platform and the
impact for each individual customer contract as part of our
migration strategy. It is anticipated that our phased migration of
all current products to the Trisus platform will be complete no
later than 2021. As we factor in the resulting anticipated
migration dates the consequence of this is to reduce the average
effective length of all customer contracts signed in the year to
approximately 4 years. Normalising FY16 contracts to the same
average term and considering just underling contracts (i.e.
excluding the three large system sales announced in the prior year)
like for like sales in FY16 would be $34.2m as compared to $35.4m
in FY17.
At the end of the contract term, we expect to see our renewal
rates remain at their current high levels (well above 100% by
dollar value), along with incremental additional sales, as
customers move to the improvements brought to them by the Trisus
platform.
Awards
Chargemaster Toolkit(R) was named Category Leader in the
"Revenue Cycle - Chargemaster Management" market category for the
eleventh consecutive year in the annual "2017 Best in KLAS Awards:
Software & Services." KLAS's annual "Best in KLAS" report
provides unique insight gathered from thousands of healthcare
organisations across the US. The report includes client
satisfaction scores and benchmark performance metrics.
Financial Review
Following our return to double digit growth in the prior year,
it is pleasing to report this growth has continued in both revenue
and adjusted EBITDA. As such, we are reporting a growth in revenues
for the financial year under review of 16% to $57.8m (FY16: $49.8m)
which has resulted in an adjusted EBITDA of $18.0m (FY16:
$15.9m).
Underlying these results continues to be the contracts we sign
with our hospital customers. These new contracts provide a license
for a customer to access specified products throughout their
license period. This license period on average, for a sale to a new
customer, is five years. In calculating averages, we only take the
contract length up to the first renewal point/break clause for that
specified product.
It is at the end of these license periods or a mutually agreed
earlier date that customers renew with us or will modify contracts
to license the Trisus platform. It is anticipated that future
renewals will be significantly enhanced by the move to Trisus. We
measure renewal rates by dollar value as this specifically ties to
how we are sustaining the underlying annuity base of revenue which
is demonstrated through the three-year visible revenue detailed
below. This metric measures 'last annual value' of all customers
due to renew in the current year and compares it to actual value
these customers renew at (in total), including upsell and
cross-sell i.e. to demonstrate that we are maintaining or
increasing our annuity. This metric for the current year is at
110%.
We further build the annuity with our new product sales to new
or existing customers (part way through their current license
term). These elements make up our Annuity SaaS business model
(which is described in detail below) and is designed to deliver
long term sustainable growth reducing the impact of any short term
fluctuations in sales levels or contract timing.
It is anticipated that our phased migration of all current
products to the Trisus platform will be complete no later than
2021. This has meant that our reported average contract length
across all contracts signed in the year, for the current "specified
products", has been impacted on a case by case basis to reflect
this planned migration. As a result, the average contract length
for all contracts signed in the year reduces from approx. five
years to four years with a resultant effect on calculated Total
Value of Sales in the Year. We are reporting New Sales in the year
of $35.4m and Total Value of Contracts of $54.0m. Whilst on the
surface not at the level reported in the prior year for total
overall sales (FY16: $58.6m and $82.3m respectively) the difference
reflects the prior year announced enterprise wide sales, the
anticipated impact of the Trisus migration on contract end dates
and the cyclically low number of customers due for renewal in the
year. These sales have contributed to a further 13% increase in our
three year visible revenue. This level of sales continues to
support the ongoing growth of the business.
Business Model
The Group's 'Annuity SaaS' business model and associated revenue
recognition is designed to ensure the long-term growth and
stability of the Group. Through this prudent approach to revenue
recognition and consistent application of this model, the Group
ensures it is focused on sustainable growth irrespective of any
short term fluctuations in sales levels. The annuity SaaS business
model delivers a 'smoothing' effect as the majority of the revenue
resulting from all sales in any one period will be recognised over
future periods. Individual sales add to the Group's long term
visibility of revenue under contract.
Under our 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, that provide our customers access to our
products for an average life of five years, we will see the revenue
from any new sales recognised 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
separately identifiable to the licence and is 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% - 20%
of revenues reported by the Group to be from services
performed.
Sales, Revenue and Revenue Visibility
As a result of how revenue is recognised under the Annuity SaaS
business model - 'sales' and 'revenue' have different meanings and
are not interchangeable. The table below shows both our reported
revenues and the total value of contracts signed in the relevant
years split between sales of new products (to both new and existing
hospital customers) and the value of renewing products with
existing customers at the end of their current contract terms.
Fiscal Year 2013 2014 2015 2016 2017**
$m $m $m $m $m
Reported Revenue 41.5 42.6 44.8 49.8 57.8
New Product
Sales 20.8 35.1 35.9 58.6 35.4
Renewals* 17.7 35.9 37.0 23.7 18.6
----- ----- ----- ----- -------
Total Contract
Value (TCV) 38.5 71.0 72.9 82.3 54.0
*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 that
year
** Contract end dates (therefore TCV) impacted by phased Trisus
Migration
As the majority of the revenue resulting from sales in the year
will be recognised over future years, the financial statements do
not appropriately reflect the valuable 'asset' that is this
contracted, but not yet recognised, revenue. As such, at every
reporting period, the Group presents its "Revenue Visibility". This
KPI identifies revenues which we reasonably expect to recognise
over the next three year period, based on sales that have already
occurred. This "Three Year Visible Revenue" metric includes:
-- future revenue under contract
-- revenue generated from renewals (calculated at 100% dollar value renewal)
-- other recurring revenue
As we are signing multi-year contracts with our customers and at
the end of these contracts we are, on average, renewing these
customers at 100% of dollar value, the Group is consistently
building an underlying annuity base of revenue.
The Three Year Revenue Visibility KPI is a forward looking KPI
and therefore will always include some judgement. To help assess
this, we separately identify different categories of revenue to
better 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 once invoiced will
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. As this category of revenue is
assumed to renew at 100% of dollar value, we consistently monitor
and publish this KPI (at each reporting period) to ensure the
reasonableness of this assumption. 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 increased potential for this revenue not to be recognised
in future years, when compared to the other categories.
The Group's total visible revenue for the three years as at 30
June 2017 (i.e. visible revenue for FY18, FY19 and FY20) identifies
$163.8m of revenue which we reasonably expect to benefit the Group
in this next three year period. This visible revenue breaks down as
follows:
-- future revenue under contract contributing $117.9m of which
$50.1m is expected to be recognised in FY18, $38.8m in FY19 and
$29.0m in FY20
-- revenue generated from renewals contributing $45.2m; being
$5.7m in FY18, $14.9m in FY19 and $24.6m in FY20
-- other revenue identified as recurring in nature of $0.7m
Gross Margins
Typically, we expect the gross profit margin to be between 90 -
95%, the gross profit for FY17 was $54.2m (FY16: $46.8m)
representing a gross margin percentage of 93.8% (FY16; 93.9%) which
is towards the top of our historical range. This reflects the
correct matching of incremental costs incurred to obtain the
underlying contracts 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 items, 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 and share related activities,
share related costs including IFRS 2 share based payments charge,
depreciation and amortisation ("Adjusted EBITDA"). In the prior
year this also excluded the 'other income' arising out of the
conclusion of the contingent consideration arising from the prior
year the acquisition of Kestros.
Adjusted EBITDA has grown in the year to $18.0m (FY16: $15.9m)
an increase of 13%. This reflects an Adjusted EBITDA margin of
31.1% (FY16: 31.8%). This is consistent with the Group's continued
approach to making investments in line with the revenue growth. The
Group also takes opportunities where they exist to accelerate
investments in certain areas, such as development, to further build
for future growth whilst continually managing to ensure the
efficiency of the investments we make.
Operating Expenses
The increase in net operating expenses (to Adjusted EBITDA)
reflects our policy of investing in line with revenue growth,
increasing by 17% to $36.2m (FY16: $30.9m). However we have also
taken the opportunity to increase our investment in Product
Development. Product innovation and enhancement continues to be
core to the Group's future; our customers are facing a market that
continues to evolve towards value-based re-imbursements and the
Group is in a unique position with its Value Cycle strategy to help
them meet the challenges these new reimbursement models bring.
The Operating Review provides significant detail of our current
ongoing development programs, including the Trisus platform and the
portfolio of products that will be part of this platform. We
continue our Build, Buy or Partner strategy to build out this
portfolio of products.
As we undertake these initiatives and consider the market
opportunities these present, the Group has decided to accelerate
investment in many areas as we have decided 'Build' is the favoured
way forward. We do this whilst maintaining our current product
offerings and ensuring they remain market-leading. This has
resulted in an increase in the cost of development related to our
current products and therefore charged in the period to $9.1m
(FY16: $7.7m), a 19% increase and therefore ahead of our revenue
growth. In addition, we have made further investments relating to
the development of the new product offerings ("Build"), this
includes our new cost analytics tool 'Trisus CARE'. As these
products have yet to be made available to our customers, the
associated incremental costs have been capitalised, this has
resulted in $3.5m (FY16: $2.0m) of capitalised development spend in
the year. These capitalised amounts represent further investment in
our future and have been undertaken as we have concluded that it
represents the most efficient and cost effective way to fulfil our
Value Cycle strategy. We expect to see both the levels of
development expense and capitalisation continue the current trends
as we progress with building out this solution set.
Cash and Bank Facilities
We measure the quality of our earnings through our ability to
convert them into operating cash. During the year we have seen
continued high levels of cash conversion, achieving over 100%
conversion of our adjusted EBITDA into operating cash.
The success of these very high levels of cash conversion has
enabled us to grow our cash reserves to $53.2m (FY16: $48.8m).
These cash levels are after paying $5.5m in taxation (FY16: $2.3m),
investing $3.1m in our new employee benefits trust, the $3.5m
further investment in new product development and returning $6.4m
(FY16: $6.0m) 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. To
supplement these reserves, the Group retains a funding facility
from the Bank of Scotland of up to $50m. Whilst no draw down of
this facility occurred in the year, the Group continues to
investigate strategic opportunities to add to the Value Cycle
strategy.
Balance Sheet
The Group maintains a strong balance sheet position. The level
of trade and other receivables has decreased in comparison to the
prior year. This is a result of the positive levels of cash
collection, especially during the last quarter of the year.
Every year as we make sales, we pay out amounts relating to
sales commissions, these costs are incremental costs in obtaining
the underlying contracts. Total sales commissions are based on the
total value of the contract sold, however for the purposes of the
Statement of Comprehensive Income, a lower proportion of revenue
from the contract value is recognised in the year, as a result we
charge an equivalent percentage of the sales commission, thereby
properly matching revenue and incremental expense. The resulting
prepayment of $5.9m (FY16: $6.0m) is the balance to be charged
against future profit as we recognise the associated revenue. 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 reflect 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 recognised in the Statement of Comprehensive Income. Overall,
levels of deferred income are significantly more than accrued
income and the prepayment of sales commissions, we therefore remain
cash flow positive in regards to how we recognise revenue from our
contracts.
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, for example as was the case in the
year, consider hedging strategies. During the year, we have seen
some benefit of exchange rate movements, with the average exchange
rate throughout the year being $1.2688 as compared to $1.4837 in
the prior year. This benefit has allowed us to continue to release
further investment whilst maintaining profit margins.
Taxation
The Group generates profits in both the UK and the US, the
overall levels are determined by both the proportion of sales in
the year and the level of professional services income recognised.
The Group's effective tax rate remains dependent on the applicable
tax rates in these respective jurisdictions. In the current year
the effective tax rate has seen the benefit of a tax deduction
related to share option exercises that occurred in the year, as
well as the reducing rate of UK Corporation Tax and as such the
current year effective tax rate is 20% (FY16: 24%).
EPS
In the year adjusted EPS has seen the benefit of the increased
levels of adjusted EBITDA combined with the lower effective tax
rate reported above and as such has increased 20% to $0.514 (FY16:
$0.429) and adjusted diluted EPS has increased to $0.503 (FY16:
$0.423).
Dividend
The Board recommends a final dividend of 11.3p (14.71 cents) per
share giving a total dividend for the year of 20p (26.04 cents) per
share (FY16: 16.5p (22 cents) per share). Subject to confirmation
at the Annual General Meeting, the final dividend will be paid on 7
December 2017 to shareholders on the register as at 10 November
2017, with a corresponding ex-Dividend date of 9 November 2017.
The final dividend of 11.3p 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 10
November 2017. The exact amount to be paid will be calculated by
reference to the exchange rate to be announced on 10 November 2017.
The final dividend referred to above in US dollars of 14.71 cents
is given as an example only using the Balance Sheet date exchange
rate of $1.30197/GBP1 and may differ from that finally
announced.
Outlook
We are delighted to report that, with record levels of revenue
and profitability, the launch of our Trisus platform with sales
secured for the first Trisus product (Trisus Claims
Informatics(TM)), and the launch of Craneware Healthcare
Intelligence, this was the year in which we saw our unique vision
of the Value Cycle turn from concept to reality.
While laying out our vision for the Value Cycle over the last
two years, Craneware has delivered double digit growth in our key
metrics, including revenue and profit, supported by sales success
throughout the period. We have expanded our product suite into the
Value Cycle; developed a new cloud-based technology platform,
Trisus; and created a new Group business, Craneware Healthcare
Intelligence, all significantly increasing the Company's total
addressable market. At the same time we have been investing in
improving our customers' experience and have returned in excess of
$15m to shareholders by way of dividends and share buy backs.
The unceasing evolution of the US healthcare market towards
value-based care presents us with an ongoing, growing market
opportunity and the investments we have made mean we now have the
potential to deliver against this expanding opportunity. With our
sales pipeline increasing each year, this increased scalability and
opportunity, combined with our high levels of revenue visibility,
strong cash position and extensive customer base provide us with
confidence in Craneware's ongoing success.
Keith Neilson Craig Preston
Chief Executive Officer Chief Financial Officer
4 September 2017 4 September 2017
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2017
Total Total
2017 2016
Notes $'000 $'000
-------------------------------------- ------ --------- ---------
Continuing operations:
Revenue 3 57,796 49,846
Cost of sales (3,582) (3,011)
--------- ---------
Gross profit 54,214 46,835
Operating expenses 4 (37,588) (33,024)
--------- ---------
Operating profit 16,626 13,811
Analysed as:
Adjusted EBITDA(1) 18,002 15,863
Acquisition costs and share
related transactions - (556)
Share based payments (283) (251)
Depreciation of plant and
equipment (478) (442)
Contingent consideration on
business combination - 1,005
Amortisation and impairment
of intangible assets (615) (1,808)
-------------------------------------- ------ --------- ---------
Finance income 258 112
--------- ---------
Profit before taxation 16,884 13,923
Tax on profit on ordinary
activities 5 (3,359) (3,348)
--------- ---------
Profit for the year attributable
to owners of the parent 13,525 10,575
Other comprehensive income
Items that may be reclassified
subsequently to profit or
loss
Currency Translation movement 40 -
--------- ---------
Total items that may be reclassified
subsequently to profit or
loss 40 -
-------------------------------------- ------ --------- ---------
Total comprehensive income
attributable to owners of
the parent 13,565 10,575
-------------------------------------- ------ --------- ---------
(1.) Adjusted EBITDA is defined as operating profit before
acquisition costs, share based payments, depreciation, contingent
consideration, amortization, impairment and share related
transactions.
Statement of Changes in Equity for the year ended 30 June
2017
Share
Share Premium Other Retained Total
Capital Account Reserves Earnings Equity
$'000 $'000 $'000 $'000 $'000
---------------------------- -------- -------- --------- --------- --------
At 1 July 2015 536 17,356 378 29,360 47,630
Total comprehensive income
- profit for the year - - - 10,575 10,575
Transactions with owners:
Share-based payments - - 251 210 461
Impact of share options
exercised/lapsed - 95 (74) 74 95
Dividends (Note 6) - - - (5,953) (5,953)
----------------------------
At 30 June 2016 536 17,451 555 34,266 52,808
Total comprehensive income
- profit for the year - - - 13,525 13,525
Total other comprehensive
income - - - 40 40
Transactions with owners:
Treasury shares upon
consolidation of employee
share trusts - - - (3,083) (3,083)
Share-based payments - - 519 1,078 1,597
Impact of share options
exercised/lapsed 1 523 (116) 416 824
Dividends (Note 6) - - - (6,356) (6,356)
----------------------------
At 30 June 2017 537 17,974 958 39,886 59,355
---------------------------- -------- -------- --------- --------- --------
Consolidated Balance Sheet as at 30 June 2017
Notes 2017 2016
$'000 $'000
---------------------------------- ------ ------- -------
ASSETS
Non-Current Assets
Plant and equipment 1,375 1,213
Intangible assets 8 19,845 16,535
Trade and other receivables 9 4,278 4,581
Deferred tax 3,102 1,685
28,600 24,014
------- -------
Current Assets
Trade and other receivables 9 15,381 20,953
Cash and cash equivalents 53,170 48,812
68,551 69,765
------- -------
Total Assets 97,151 93,779
---------------------------------- ------ ------- -------
EQUITY AND LIABILITIES
Non-Current Liabilities
Deferred income - 4
- 4
------- -------
Current Liabilities
Deferred income 29,803 28,963
Current tax liabilities 198 2,353
Trade and other payables 7,795 9,651
37,796 40,967
------- -------
Total Liabilities 37,795 40,971
------- -------
Equity
Share capital 10 537 536
Share premium account 17,974 17,451
Other reserves 958 555
Retained earnings 39,886 34,266
Total Equity 59,355 52,808
------- -------
Total Equity and Liabilities 97,151 93,779
---------------------------------- ------ ------- -------
Statement of Cash Flows for the year ended 30 June 2017
Notes 2017 2016
$'000 $'000
------------------------------------- ------ -------- --------
Cash flows from operating
activities
Cash generated from operations 11 23,068 17,564
Interest received 258 112
Tax paid (5,474) (2,254)
------------------------------------- ------ -------- --------
Net cash from operating
activities 17,852 15,422
Cash flows from investing
activities
Purchase of plant and
equipment (654) (418)
Capitalised intangible
assets 8 (3,925) (2,166)
------------------------------------- ------ -------- --------
Net cash used in investing
activities (4,579) (2,584)
Cash flows from financing
activities
Dividends paid to company
shareholders 6 (6,356) (5,953)
Proceeds from issuance
of shares 524 95
Treasury shares upon consideration
of employee share trusts (3,083) -
------------------------------------- ------ -------- --------
Net cash used in financing
activities (8,915) (5,858)
Net increase in cash and
cash equivalents 4,358 6,980
Cash and cash equivalents
at the start of the year 48,812 41,832
Cash and cash equivalents
at the end of the year 53,170 48,812
------------------------------------- ------ -------- --------
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, International Financial Reporting Standards
Interpretation Committee (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 currencies other than US dollars 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 $1.2688/GBP1 (2016: $1.4837/GBP1). Monetary
assets and liabilities expressed in foreign currencies are
translated into US dollars at rates of exchange ruling at the
Balance Sheet date $1.30197/GBP1 (2016 : $1.3397/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.
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.
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
Costs associated with acquiring computer software and licensed
to-use technology are capitalised as incurred. They are amortised
on a straight-line basis over their useful economic life which is
typically three to five years.
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 and / or conditional share awards
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 using the
Black-Scholes pricing model or the Monte Carlo pricing model, as
appropriately amended, taking into account the terms and conditions
of the share-based awards. 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
and are satisfied by new issued 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
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% (18% to 23%) 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.
-- Capitalisation of development expenditure: - the Group
capitalises development costs provided the aforementioned
conditions have been met. Consequently, the directors require to
continually assess the commercial potential of each product in
development and its useful life following launch.
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.
2017 2016
$'000 $'000
----------------------- ------- -------
Software licencing 49,556 43,170
Professional services 8,240 6,676
Total revenue 57,796 49,846
----------------------- ------- -------
4. Operating expenses
Operating expenses are comprised
of the following:-
2017 2016
$'000 $'000
-------------------------------------- ------- --------
Sales and marketing expenses 7,326 7,634
Client servicing 10,688 9,285
Research and development 9,108 7,668
Administrative expenses 9,216 6,340
Acquisition Costs - 556
Share-based payments 283 251
Depreciation of plant and equipment 478 442
Contingent consideration of business
combination - (1,005)
Amortisation and impairment of
intangible assets 615 1,808
Exchange (gain)/loss (126) 45
Operating expenses 37,588 33,024
-------------------------------------- ------- --------
5. Tax on profit on ordinary activities
2017 2016
$'000 $'000
-------------------------------------- ------ ------
Profit on ordinary activities before
tax 16,884 13,923
Current tax
Corporation tax on profits of the
year 3,463 3,344
Foreign exchange on taxation in
the year (65) 54
Adjustments for prior years 300 (86)
-------------------------------------- ------ ------
Total current tax charge 3,698 3,312
Deferred tax
Origination & reversal of timing
differences (161) 27
Adjustments for prior years (178) 25
Change in tax rate - (16)
-------------------------------------- ------ ------
Total deferred tax charge(credit) (339) 36
-------------------------------------- ------ ------
Tax on profit on ordinary activities 3,359 3,348
-------------------------------------- ------ ------
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 19.75% (2016: 20%) 3,335 2,785
Effects of:
Adjustment in respect of prior years 122 (61)
Change in tax rate - (16)
Additional US taxes on profits/losses
39% (2016: 39%) 209 559
Foreign Exchange (65) 54
Expenses not deductible for tax
purposes (16) 27
Deduction on share plan charges (226) -
Total tax charge 3,359 3,348
-------------------------------------- ------ ------
6. Dividends
The dividends paid during the year were as follows:-
2017 2016
$'000 $'000
----------------------------------- ------ ------
Final dividend, re 30 June 2016
- 12.1 cents (9 pence)/share 3,246 3,097
Interim dividend, re 30 June 2017
- 10.83 cents (8.7 pence)/share 3,110 2,856
Total dividends paid to Company
shareholders in the year 6,356 5,953
----------------------------------- ------ ------
The proposed final dividend for 30 June 2017 is subject to
approval by the shareholders at the Annual General Meeting and has
not been included as a liability in these accounts.
7. Earnings per share
a) Basic
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of shares in issue during the year.
2017 2016
--------------------------------------- ---------- ----------
Profit attributable to equity
holders of the Company ($'000) 13,525 10,575
Weighted average number of ordinary
shares in issue (thousands) 26,934 26,838
Basic earnings per share ($ per
share) 0.502 0.394
--------------------------------------- ---------- ----------
Profit attributable to equity
holders of Company ($'000) 13,525 10,575
Tax Adjusted acquisition costs,
share related transactions and
amortisation of acquired intangibles
($'000) 329 937
Adjusted Profit attributable to
equity holders ($'000) 13,854 11,512
--------------------------------------- ---------- ----------
Weighted average number of ordinary
shares in issue (thousands) 26,934 26,838
Adjusted Basic earnings per share
($ per share) 0.514 0.429
--------------------------------------- ---------- ----------
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.
2017 2016
--------------------------------------- ---------- ----------
Profit attributable to equity
holders of the Company ($'000) 13,525 10,575
Weighted average number of ordinary
shares in issue (thousands) 26,934 26,838
Adjustments for:- Share options
(thousands) 590 345
Weighted average number of ordinary
shares for diluted earnings per
share (thousands) 27,524 27,183
Diluted earnings per share ($
per share) 0.491 0.389
--------------------------------------- ---------- ----------
Profit attributable to equity
holders of Company ($'000) 13,525 10,575
Tax Adjusted acquisition costs,
share related transactions and
amortisation of acquired intangibles
($'000) 329 937
Adjusted Profit attributable to
equity holders ($'000) 13,854 11,512
--------------------------------------- ---------- ----------
Weighted average number of ordinary
shares in issue (thousands) 26,934 26,838
Adjustments for:- Share options
(thousands) 590 345
--------------------------------------- ---------- ----------
Weighted average number of ordinary
shares for diluted earnings per
share (thousands) 27,524 27,183
Adjusted Diluted earnings per
share ($ per share) 0.503 0.423
--------------------------------------- ---------- ----------
8. Intangible assets
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
2016 11,438 2,964 3,043 5,755 993 24,193
Additions - - - 3,482 443 3,925
At 30 June
2017 11,438 2,964 3,043 9,237 1,436 28,118
----------------- --------- -------------- ------------ ------------ --------- -------
Accumulated
amortisation
At 1 July
2016 250 1,713 1,976 2,926 793 7,658
Charge for
the year - 329 - 120 166 615
At 30 June
2017 250 2,042 1,976 3,046 959 8,273
Net Book
Value at
30 June 2017 11,188 922 1,067 6,191 477 19,845
----------------- --------- -------------- ------------ ------------ --------- -------
Cost
At 1 July
2015 11,438 2,964 3,043 3,796 912 22,153
Additions - - - 1,959 207 2,166
Disposals - - - - (126) (126)
----------------- --------- -------------- ------------ ------------ --------- -------
At 30 June
2016 11,438 2,964 3,043 5,755 993 24,193
----------------- --------- -------------- ------------ ------------ --------- -------
Accumulated
amortisation
At 1 July
2015 - 1,384 1,058 2,759 756 5,957
Charge for
the year - 329 163 167 144 803
Impairment
of acquisition 250 - 755 - - 1,005
Amortisation
of disposal - - - - (107) (107)
At 30 June
2016 250 1,713 1,976 2,926 793 7,658
Net Book
Value at
30 June 2016 11,188 1,251 1,067 2,829 200 16,535
----------------- --------- -------------- ------------ ------------ --------- -------
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 core Craneware business cash generating unit.
This is the lowest level of which there are separately identifiable
cash flows to assess the goodwill acquired as part of the Craneware
InSight Inc purchase. 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 five 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 18.5%.
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 18% 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
2017 2016
$'000 $'000
-------------------------------- -------- --------
Trade receivables 13,102 16,504
Less: provision for impairment
of trade receivables (1,353) (1,135)
-------------------------------- -------- --------
Net trade receivables 11,749 15,369
Other receivables 144 1,177
Prepayments and accrued
income 1,826 2,950
Deferred Contract Costs 5,940 6,038
-------------------------------- -------- --------
19,659 25,534
Less non-current trade
receivables: - -
Deferred Contract Costs (4,278) (4,581)
Current portion 15,381 20,953
-------------------------------- -------- --------
10. Share capital
2017 2016
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
2017 2016
Number $'000 Number $'000
---------------------- ----------- ------ ----------- ------
Equity share capital
Ordinary shares of
1p each 26,961,709 537 26,850,248 536
---------------------- ----------- ------ ----------- ------
The movement in share capital during the year is presented as
follows:
-- 111,461 Ordinary Share options were exercised in the year.
11. Cash flow generated from operating activities
Reconciliation of profit before
tax to net cash inflow from operating
activities
2017 2016
$'000 $'000
-------------------------------- -------- --------
Profit before tax 16,884 13,923
Finance income (258) (112)
Depreciation on plant and
equipment 478 442
Amortisation and Impairment
on intangible assets 615 1,808
Share-based payments 283 251
Movements in working capital:
Decrease/(Increase) in
trade and other receivables 6,146 (8,065)
(Decrease)/Increase in
trade and other payables (1,080) 9,317
Cash generated from operations 23,068 17,564
-------------------------------- -------- --------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BIGDCDGGBGRS
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September 05, 2017 02:00 ET (06:00 GMT)
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