TIDMCRW
RNS Number : 6339Y
Craneware plc
26 February 2013
Craneware plc
("Craneware", "the Group" or the "Company")
Interim Results
26 February 2013 - Craneware plc (AIM: CRW.L), the market leader
in automated revenue integrity solutions for the US healthcare
market, announces its unaudited results for the six months ended 31
December 2012.
Financial Highlights (US dollars)
-- Revenue increased 7% to $20.1m (H112: $18.8m)
-- Adjusted EBITDA(1) increased 15% to $5.4m (H112: $4.7m )
-- Profit before tax $4.5m (H112: $3.8m)
-- Adjusted basic EPS increased 18% to 13.2 cents per share (H112: 11.2 cents)
-- Cash at period end $28.6m (H112: $23.6m) from $28.8m at 30 June 2012
-- Proposed interim dividend of 5.2p (H112: 4.8p per share)
(1.) Adjusted EBITDA refers to earnings before interest, tax,
depreciation, amortisation, share based payments, released deferred
consideration and transaction related costs
Operational Highlights
-- 2012 Best in KLAS Awards: Software & Services
-- Particularly strong performance from InSight Audit
-- Supportive market environment
-- Good revenue visibility over the remainder of the year
Keith Neilson, CEO of Craneware commented:
"This has been a positive trading period for Craneware. Sales
activity is ahead of the same period last year and is now starting
to translate into revenue growth. The relevance of our product set
continues to strengthen in the evolving healthcare landscape with
the developments within the US healthcare market supportive of the
Group's long-term strategy and growth.""
For further information, please contact:
Craneware plc Peel Hunt Newgate Threadneedle
+44 (0)131 550 3100 +44 (0)20 7418 8900 +44 (0)20 7653 9850
Keith Neilson, CEO Dan Webster Caroline Evans-Jones
Craig Preston, CFO Richard Kauffer Fiona Conroy
Heather Armstrong
About Craneware
Craneware is the leader in automated revenue integrity solutions
that improve financial performance and mitigate risk for US
healthcare organisations. Founded in 1999, Craneware has
headquarters in Edinburgh, Scotland with offices in Atlanta,
Boston, Nashville and Phoenix employing more than 200 staff.
Craneware's market-driven, SaaS solutions help hospitals and other
healthcare providers more effectively price, charge, code and
retain earned revenue for patient care services and supplies. This
optimises reimbursement, increases operational efficiency and
minimises compliance risk. By partnering with Craneware, clients
achieve the visibility required to identify, address and prevent
revenue leakage. To learn more, visit craneware.com and
stoptheleakage.com
Chairman's Statement
Craneware enjoyed a more settled trading environment during the
six months to December 2012 compared to the corresponding period
last year. Revenues increased by 7% to $20.1m, adjusted EBITDA
increased by 15% to $5.4m and adjusted EPS increased by 18% to 13.2
cents. The Company continued to benefit from strong operational
cash flow, closing the period with a cash balance of $28.6m (31
December 2011: $23.6m). Visibility over revenue for FY13 has
increased to $39.7m (31 December 2011: $33.4m), providing the Board
with increased confidence in continued growth.
We believe the disruption to our market caused by the focus on
Electronic Health Records incentive payments has largely
dissipated, freeing up hospital resource to focus on other areas of
technology investment. This, combined with the ongoing focus of our
sales operation, has had a positive effect on sales activity and
execution.
New sales were secured across all sections of the customer base,
from individual hospitals through to integrated delivery networks
(IDNs). The increased sales activity noted when we published our
final results in September 2012 flowed through into an increase in
revenue during the period. I am pleased to report that sales
activity has remained high as we entered the second half of the
year, significantly ahead of activity in the same period in the
prior financial year.
Our vision is to be the partner healthcare providers rely on to
improve and sustain strong financial performance through revenue
integrity. With approximately a quarter of all US hospitals as
customers, our central position in this growing area of the US
healthcare market continues to be attractive to a wide range of
possible partners, providing us with potential additional future
channels to market.
While the Board remains cautious on timing, we are confident
that our comprehensive suite of revenue integrity solutions,
focused sales operation and large and clear market opportunity,
mean Craneware is well positioned to increase its market share.
I would like to take this opportunity to thank our staff for
their commitment and enthusiasm and our shareholders for their
continued support.
George Elliott
Chairman
26 February 2013
Operational Review
Introduction
Craneware's vision is to be the partner healthcare providers
rely on to improve and sustain strong financial performance through
revenue integrity. We provide the solutions for our clients to be
financially healthy so that they can continue to provide quality
care to their patients. Whilst incentive payments for the
implementation of Electronic Healthcare Records caused some
disruption to our market in the previous financial year, we are
confident that the growing fiscal and legislative pressures on US
hospitals means that revenue integrity is an area that hospitals
simply cannot afford to ignore.
Our strategy is to provide software solutions that help
customers at the points in their systems where clinical and
operational data transform into financial transactions. Our
solutions automate data normalisation, combining disparate data
sets while maintaining the localised context. This produces
valuable, actionable information and creates organisation-wide
visibility and accountability. We consistently receive feedback
from our customers that through the implementation of our software
they are able to rapidly identify significant amounts of dollars in
missed revenue, overspend or incorrect billing which could lead to
lost income and indeed fines.
Our focus during the first half of the year has been on
execution; seeking to grow the awareness of our solutions within
our market, while ensuring we have the correct products, processes
and people in place to drive the business forward.
Market Developments
The overall US healthcare market has seen some interesting
developments in recent months. The Supreme Court's ruling on 6
December 2012, upholding the Affordable Healthcare Act as
constitutional, sent a clear message that the changes to the
healthcare system and the financial pressures associated with it
are permanent.
At the same time, some of the cost-savings and efficiencies
introduced in recent years are now starting to have a demonstrable
effect, with the annual growth in Medicare spending now contained
within the government's cap of 1% of GDP. It appears that the US
healthcare market is beginning to embrace the changes forced upon
it, seeking means to control costs while maintaining high levels of
patient care.
A development that is expected to have a direct positive impact
on Craneware's market has been the possible extension from 2014
onwards of the look-back for the Recovery Audit Contractors from
three to five years. The administrative pressure already being
placed on hospitals by these types of audits is considerable, and
the extension by a further two years on the look-back period could
have significant repercussions on administrative teams. Craneware's
Audits and Denials solutions considerably ease these pressures and
once established as part of a hospital's good governance process
have been shown to be new Gatekeeper products for the remainder of
the Craneware solution set. This increases the number of routes
into any prospective customer.
The competitive landscape remains largely unchanged, with new
entrants to the market generally seeking to establish partnerships
or joint go-to-market strategies. Management believes Craneware has
the most extensive suite of revenue integrity solutions currently
available and is confident of its growing prominence within the US
healthcare market.
Sales and Marketing
We believe the structural changes made to our direct sales team
during the previous year are starting to have a material impact on
sales. Experienced Regional Vice Presidents oversee each of our
three geographical regions, and each has a team comprised of mixed
experience and skill sets. We have seen a good level of sales
activity across each of the three regions. Following thorough
internal and external training on our enlarged product set and
increased market opportunities presented by various US healthcare
reforms, we are confident that we have a sales team focused on
delivery and with the right tools to do so.
The average length of new customer contracts continues to be
in-line with our historical norms of approximately five years.
Where Craneware enters into new product contracts with its existing
customers, contracts are typically made co-terminus with the
customer's existing contracts, and as such the average length of
these contracts is greater than three years, in-line with our
expectations.
Whilst slightly below historic levels, renewal rates remain
high, at 94% by dollar value. We have experienced this level of
renewal previously and expect to seea return to over 100% by the
next reporting period.
The sales mix remained fairly constant through the period,
resulting in no change to the overall product attachment rate,
which remained steady at approximately 1.6 products per customer.
It was encouraging to note, however, a particularly strong close to
the period by InSight Audit, our solution for the management of the
audit process. The strength of InSight Audit's performance in the
latter months reinforces management's view that it has the
potential to be a Gatekeeper Product, similar to Chargemaster
Toolkit and Pharmacy ChargeLink, providing an additional entry
point to new customers.
Additional Routes to Market
Craneware continues to explore many opportunities to extend its
routes to market outside of direct sales to hospitals, working on a
number of major contract opportunities which all have the ability
to yield significant potential revenues. These potential contracts
follow the same revenue recognition methodology as an individual
hospital and group hospital contracts; although the sales approach
for each of these six different categories of deal is quite
different.
The six categories are IDN's & Large Hospital Systems,
Business Process Outsourcers/Consultants (BPO), Hardware Vendors,
Software Vendors, Group Purchasing Organisations (GPO's) and
Content Acquirers.
Craneware is working on opportunities in each of these areas,
however given the increasing overall size of Craneware's annual
revenue, the size of any deal required to be announced separately
to the market has also increased. Therefore only the very largest
of contracts will be announced individually in the future.
Awards
Craneware's solutions once again received industry recognition
in the period, with two of its solutions ranking first in two
separate revenue cycle categories in the annual "2012 Best in KLAS
Awards: Software & Services" report. KLAS, the leading source
of healthcare information technology vendor performance metrics,
determines its rankings based on the overall customer satisfaction
score for a vendor's products. KLAS rankings also are based on
direct, detailed feedback from healthcare providers across North
America.
Craneware's flagship product, Chargemaster Toolkit, was ranked
as the number one software in the "Revenue Cycle - Chargemaster
Management" market category for the seventh consecutive year, and
Craneware's Bill Analyzer solution ranked first in the "Revenue
Cycle - Other" category for the second year in a row.
Comments collected by KLAS during the evaluation included, "Most
of the time, people don't even know their chargemaster is dirty,
but looking into a [chargemaster management] system is worth the
time. In our first year using Chargemaster Toolkit, we easily made
over $1M," and "Craneware Bill Analyzer reviews our claims and
identifies areas where we could be billing differently ... In the
first year, we found $700,000 in net revenue that we had been
giving up."
Product Development
Product development continues to be focused on enhancements to
functionality of current products and the integration of those
products in new innovative combinations. The direction of the
product set moves consistently with the long-term strategic
positioning of Craneware as the revenue integrity partner of
choice. Integration, both within the solution set itself, and
externally with the Healthcare Information Systems, has also been a
focus, particularly with the EPIC patient accounting system to
ensure that all Craneware customers currently in the midst of the
replacement of their system are fully supported.
Financial Review
As announced in our trading statement on 21 January 2013, we are
reporting a 7% growth in revenues to $20.1m (H112: $18.8m) which
has resulted in a growth of our adjusted EBITDA(1) to $5.4m, this
being a 15% increase over the prior period (H112: $4.7m) .
As anticipated in our FY12 results, the increased levels of
sales activity we saw begin in H212 have started to contribute to
revenue growth in the latter half of this six month reporting
period. However, with the Group's annuity SaaS business model and
the resulting revenue recognition policies, a significant
proportion of license revenues generated from any new sale are
recognised in later periods.
At the end of each financial year, the Company reports its
'Three Year Visible Revenue' KPI which identifies the amount of
visible revenue either contracted or highly likely to be booked in
the next three year period.
At the end of the subsequent half year, the Company reports how
that metric, for the same three year period, has moved on, now that
the Company is 6 months into that period. This shows both how
renewals have flowed through and how sales of new products have
affected new contracted revenue across the three years within the 6
months. The total visible revenue for the three year period 1 July
2012 to 30 June 2015 has grown during this six month period to
$111.9m from $108.7m at 30 June 2012. This comprises $74.5m revenue
under contract, $26.6m renewal revenue and $10.8m Claimtrust legacy
revenue (at 30 June 2012: $59.9m, $38.0m and $10.8m
respectively).
'Revenue under contract', relates to revenues that are supported
by underlying contracts. 'Renewal Revenue'; at each reporting date,
we 'look forward' and calculate the amount of revenue which is
potentially available and could be recognised in each fiscal year
of the three year period but that requires an underlying contract
to be renewed. In calculating this, we assume a 100% dollar value
renewal level. As the renewals occur, the aggregated related
revenue for all of the three years, moves from 'Renewal revenues'
to 'revenue under contract'. The final element is 'Claimtrust
Legacy Revenue'. This relates to our February 2011 acquisition.
This is revenue that is not subject to long term contracts and is
usually invoiced on a monthly basis, but that we would expect to be
recurring in nature. With Craneware typically writing multi-year
contracts (which are included in 'revenue under contract'), and
having successfully completed the integration, we would not expect
to see this type of visible revenue grow in the future.
During the period we have seen our Dollar value renewal rate (as
referred to above) for the period, drop from its historical norms
of above 100% dollar value to 94%. However this modest dip only
relates to a very small number of hospitals not signing new
contracts prior to period end. We have witnessed this previously as
timing issues around period end and we do not believe this is
representative of a longer term trend. The financial effect of the
periods renewal rate is fully reflected in each of the years
forming our 'three year visible revenue' KPI above.
Within our operating expenses we have continued to invest as
appropriate for the future growth of the Group. However the
continued control over costs whilst continuing to leverage the
'cost base' acquired with the Claimtrust Inc acquisition in
February 2011, has resulted in net operating expenses increasing by
only $0.52m to $14.83m (H112: $14.31m). As a result our adjusted
EBITDA margin for the period is 26.8% as compared to 24.8% in the
same period in the prior year.
Ultimately the increase in EBITDA, as well as a small beneficial
effect from the reduction in corporation tax rates in the UK, has
resulted in the adjusted basic EPS increasing by 18% to $0.132 per
share (H112 : $0.112) and adjusted diluted EPS increasing to $0.131
(H112: $0.111).
The Group continues to maintain a strong Balance Sheet, with no
debt and significant cash reserves of $28.6m ($23.6m at 31 December
2011 and $28.8m at 30 June 2012). The cash levels reported are
after returning $2.5m to shareholders by way of dividends and tax
payments of $2m in the period. Consistent with prior years, the
combination of these payments and cash cycles in the run up to 31
December has resulted in the slight reduction in the cash balances.
Continued healthy cash collections since the period end ensures the
Group retains healthy cash reserves which in turn provides for
further future investment including potential 'bolt on'
acquisitions should such opportunities arise.
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, being our UK employees and purchases,
denominated in Sterling. The average exchange rate for the Company
during the reporting period was $1.59/GBP1 which was comparable to
the corresponding period last year.
Dividend
The Board has resolved to pay an interim dividend of 5.2p (8.45
cents) per ordinary share in the Company on 12 April 2013 to those
shareholders on the register as at 15 March 2013 (FY12 Interim
dividend 4.8p). The ex-dividend date is 13 March 2013.
The interim dividend of 5.2p 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 15 March 2013. The exact amount to be paid will be calculated by
reference to the exchange rate to be announced on 15 March 2013.
The interim dividend referred to above in US dollars of 8.45 cents
is given as an example only using the Balance Sheet date exchange
rate of $1.6255/GBP1 and may differ from that finally
announced.
Outlook
This has been a positive trading period for Craneware. Sales
activity is ahead of the same period last year and is now starting
to translate into revenue growth. The relevance of our product set
continues to strengthen in the evolving healthcare landscape with
the developments within the US healthcare market supportive of the
Group's long-term strategy and growth.
Keith Neilson Craig Preston
Chief Executive Officer Chief Financial Officer
26 February 2013 26 February 2013
Craneware PLC
Interim Results FY13
Consolidated Statement of Comprehensive
Income
H1 2013 H1 2012 FY 2012
Notes $'000 $'000 $'000
------------------------------------------ ------- ----------- ----------- -----------
Revenue 20,131 18,754 41,067
Cost of sales (836) (658) (1,556)
----------- ----------- -----------
Gross profit 19,295 18,096 39,511
Net operating expenses (14,835) (14,312) (28,416)
----------- ----------- -----------
Operating profit 4,460 3,784 11,095
Analysed as:
Adjusted EBITDA(1) 5,392 4,655 11,932
Release deferred consideration
on business combination - - 954
Share-based payments (95) (68) (152)
Depreciation of plant and equipment (305) (276) (579)
Amortisation of intangible assets (532) (527) (1,060)
--------------------------------------------------- ----------- ----------- -----------
Finance income 54 37 107
----------- ----------- -----------
Profit before taxation 4,514 3,821 11.202
Tax charge on profit on ordinary
activities (1,241) (1,089) (2,309)
----------- ----------- -----------
Profit for the period attributable
to owners of the parent 3,273 2,732 8,893
--------------------------------------------------- ----------- ----------- -----------
Total comprehensive income attributable
to owners of the parent 3,273 2,732 8,893
--------------------------------------------------- ------- ----------- -----------
(1) Adjusted EBITDA is defined as operating profit before
released deferred consideration, share based payments, depreciation
and amortisation.
Earnings per share for the period attributable to equity holders
- Basic ($ per share) 1a 0.121 0.102 0.330
- *Adjusted Basic ($ per share)(2) 1a 0.132 0.112 0.316
- Diluted ($ per share) 1b 0.121 0.101 0.329
- *Adjusted Diluted ($ per share)(2) 1b 0.131 0.111 0.315
----------- -------- ----------
(2) Adjusted Earnings per share calculations allow for the
release of deferred consideration on the business combination
together with amortisation on acquired intangible assets to form a
better comparison with previous periods.
Craneware PLC
Interim Results FY13
Consolidated Statement of Changes in Equity
--------------------------------------------------------------------------------------------------
Retained
Share Capital Share Premium Other Reserves Earnings Total
$'000 $'000 $'000 $'000 $'000
--------------------------- -------------- -------------- --------------- ---------- --------
At 1 July 2011 536 15,239 302 16,328 32,405
Total comprehensive
income - profit for
the period - - - 2,732 2,732
Transactions with owners
Share-based payments - - 68 (498) (430)
Impact of share options
exercised 2 169 (155) 603 619
Dividend - - - (2,036) (2,036)
--------------------------- -------------- -------------- --------------- ---------- --------
At 31 December 2011 538 15,408 215 17,129 33,290
--------------------------- -------------- -------------- --------------- ---------- --------
Total comprehensive
income - profit for
the period
Transactions with owners - - - 6,160 6,160
Share-based payments - - 84 (40) 44
Impact of share options
exercised - - (90) 90 -
Dividend - - - (2,057) (2,057)
At 30 June 2012 538 15,408 209 21,282 37,437
--------------------------- -------------- -------------- --------------- ---------- --------
Total comprehensive
income - profit for
the period
Transactions with owners - - - 3,273 3,273
Share-based payments - - 95 52 147
Impact of share options
exercised - - (50) 50 -
Dividend - - - (2,482) (2,482)
At 31 December 2012 538 15,408 254 22,175 38,375
--------------------------- -------------- -------------- --------------- ---------- --------
Craneware PLC
Interim Results FY13
Consolidated Balance Sheet as at 31 December
2012
H1 2013 H1 2012 FY2012
Notes $'000 $'000 $'000
-------------------------------- ------- -------- -------- -------
ASSETS
Non-Current Assets
Plant and equipment 1,834 2,182 2,027
Intangible assets 15,481 17,449 16,010
Deferred Tax 1,673 269 1,470
18,988 19,900 19,507
-------- -------- -------
Current Assets
Trade and other receivables 13,195 12,933 12,560
Cash and cash equivalents 28,623 23,621 28,790
41,818 36,554 41,350
-------- -------- -------
Total Assets 60,806 56,454 60,857
-------------------------------- ------- -------- -------- -------
EQUITY AND LIABILITIES
Non-Current Liabilities
Contingent consideration - 954 -
Deferred income - 73 183
- 1,027 183
-------- -------- -------
Current Liabilities
Deferred income 15,999 15,740 15,766
Current tax liabilities 901 1,060 1,527
Trade and other payables 5,531 5,337 5,944
22,431 22,137 23,237
-------- -------- -------
Total Liabilities 22,431 23,164 23,420
-------- -------- -------
Equity
Called up share capital 2 538 538 538
Share premium account 15,408 15,408 15,408
Other reserves 254 215 209
Retained earnings 22,175 17,129 21,282
Total Equity 38,375 33,290 37,437
-------- -------- -------
Total Equity and Liabilities 60,806 56,454 60,857
-------------------------------- ------- -------- -------- -------
Craneware PLC
Interim Results FY13
Consolidated Statement of Cash Flow for the six months ended
31 December 2012
H1 2013 H1 2012 FY 2012
Notes $'000 $'000 $'000
----------------------------------------- ------ -------- -------- --------
Cash flows from operating activities
Cash generated from operations 3 4,396 2,501 10,602
Interest received 54 37 107
Tax paid (2,019) (689) (1,316)
----------------------------------------- ------ -------- -------- --------
Net cash from operating activities 2,431 1,849 9,393
Cash flows from investing activities
Purchase of plant and equipment (112) (291) (439)
Capitalised intangible assets (4) (248) (418)
----------------------------------------- ------ -------- -------- --------
Net cash used in investing activities (116) (539) (857)
Cash flows from financing activities
Dividends paid to company shareholders (2,482) (2,036) (4,093)
Proceeds from issuance of shares - 171 171
----------------------------------------- ------ -------- -------- --------
Net cash used in financing activities (2,482) (1,865) (3,922)
Net (decrease)/increase in cash
and cash equivalents (167) (555) 4,614
Cash and cash equivalents at the
start of the period 28,790 24,176 24,176
Cash and cash equivalents at the
end of the period 28,623 23,621 28,790
----------------------------------------- ------ -------- -------- --------
Craneware PLC
Interim Results FY13
Notes to the Financial Statements
1. Earnings per Share
(a) Basic
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the period.
----------------------------------------------------------------------------
H1 2013 H1 2012 FY 2012
---------------------------------------------- -------- -------- --------
Profit attributable to equity holders
of the Company ($'000) 3,273 2,732 8,893
Weighted average number of ordinary
shares in issue (thousands) 26,992 26,905 26,946
Basic earnings per share ($ per share) 0.121 0.102 0.330
-------- -------- --------
Profit attributable to equity holders
of the Company ($'000) 3,273 2,732 8,893
Release of deferred consideration on
business combination - - (954)
Amortisation of acquired intangibles
($'000) 287 287 574
-------- -------- --------
Adjusted Profit attributable to equity
holders ($'000) 3,560 3,019 8,513
-------- -------- --------
Weighted average number of ordinary
shares in issue (thousands) 26,992 26,905 26,946
Adjusted Basic earnings per share ($
per share) 0.132 0.112 0.316
-------- -------- --------
(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 2013 H1 2012 FY 2012
---------------------------------------------- -------- -------- --------
Profit attributable to equity holders
of the Company ($'000) 3,273 2,732 8,893
Weighted average number of ordinary
shares in issue (thousands) 26,992 26,905 26,946
Adjustments for: - share options (thousands) 91 170 84
Weighted average number of ordinary
shares for diluted earnings per share
(thousands) 27,083 27,075 27,030
Diluted earnings per share ($ per share) 0.121 0.101 0.329
-------- -------- --------
1. Earnings per Share (Cont.)
H1 2013 H1 2012 FY 2012
---------------------------------------------- -------- -------- --------
Profit attributable to equity holders
of the Company ($'000) 3,273 2,732 8,893
Release of deferred consideration on
business combination - - (954)
Amortisation of acquired intangibles
($'000) 287 287 574
Adjusted Profit attributable to equity
holders ($'000) 3,560 3,019 8,513
-------- -------- --------
Weighted average number of ordinary
shares in issue (thousands) 26,992 26,905 26,946
Adjustments for: - share options (thousands) 91 170 84
Weighted average number of ordinary
shares for diluted earnings per share
(thousands) 27,083 27,075 27,030
Adjusted Diluted earnings per share
($ per share) 0.131 0.111 0.315
-------- -------- --------
2. Called up share capital
H1 2013 H1 2012 FY 2012
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 26,998,408 538 26,987,018 538 26,991,891 538
3. Consolidated Cash Flow generated from operating
activities
Reconciliation of profit before taxation to
net cash inflow from operating activities:
H1 2013 H1 2012 FY 2012
$'000 $'000 $'000
------------------------------------- -------- -------- --------
Profit before taxation 4,514 3,821 11,202
Finance income (54) (37) (107)
Depreciation on plant and equipment 305 276 579
Amortisation on intangible assets 532 527 1,060
Share-based payments 95 68 152
Movements in working capital:
(Increase)/decrease in trade
and other receivables (787) 238 611
(Decrease)/increase in trade
and other payables (209) (2,392) (2,895)
Cash generated from operations 4,396 2,501 10,602
------------------------------------- -------- -------- --------
4. 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 2012. Those
accounts, with an unqualified audit report, have been delivered to
the Registrar of Companies.
5. Segmental Information
The Directors consider that the Group operates in 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.
6. Significant Accounting Policies
The significant accounting policies adopted in the preparation
of these statements are set out below.
Reporting Currency
The Directors consider that as the Group's revenues are
primarily denominated in US dollars the principal functional
currency is the US dollar. The Group's financial statements are
therefore prepared in US dollars.
Currency Translation
Transactions denominated in foreign currencies are translated
into US dollars at the rate of exchange ruling at the date of the
transaction. Monetary assets and liabilities expressed in foreign
currencies are translated into US dollars at rates of exchange
ruling at the Balance Sheet date ($1.6255/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 in
general and 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.
'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 obligation, 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.
Business combinations
The acquisition of subsidiaries is accounted for using the
purchase method. The cost of the acquisition is measured at the
aggregate of the fair values, at the acquisition date, of assets
given, liabilities incurred or assumed, and the equity issued by
the Group. The consideration transferred includes the fair value of
any assets or liability resulting from a contingent consideration
and acquisition costs are expensed as incurred.
Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is
deemed to be an asset or liability is recognised in accordance with
IAS 39 in the Statement of Comprehensive Income. Contingent
consideration that is classified as equity is not re-measured and
its subsequent settlement is accounted for within equity.
Goodwill arising on the acquisition is recognised as an asset
and initially measured at cost, being the excess of fair value of
the consideration over the Group's assessment of the net fair value
of the identifiable assets and liabilities recognised.
If the Group's assessment of the net fair value of a
subsidiary's assets and liabilities had exceeded the fair value of
the consideration of the business combination then the excess
('negative goodwill') would be recognised in the Statement of
Comprehensive Income immediately. The fair value of the
identifiable assets and liabilities assumed on acquisition are
brought onto the Balance Sheet at their fair value at the date of
acquisition.
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 are 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 3 to 5 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.
Cash and Cash Equivalents
Cash and cash equivalents include cash in hand, deposits held
with banks and short term highly liquid investments. For the
purpose of the Statement of Cash flow, cash and cash equivalents
comprise of cash on hand, deposits held with banks and short term
high liquid investments.
Share-Based Payments and Taxation Implications
The Group grants share options to certain employees. In
accordance with IFRS 2, "Share-Based Payments" equity-settled
share-based payments are measured at fair value at the date of
grant. Fair value is measured by use of the Black-Scholes pricing
model as appropriately amended. The fair value determined at the
date of grant of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on
the Group's estimate of the number of shares that will eventually
vest. Non-market vesting conditions are included in assumptions
about the number of options that are expected to vest. At the end
of each reporting period, the entity revises its estimates of the
number of options that are expected to vest based on the non-market
vesting conditions. It recognises the impact of the revision to
original estimates, if any, in the Statement of Comprehensive
Income, with a corresponding adjustment to equity. When the options
are exercised the Company issues new shares. The proceeds received
net of any directly attributable transaction costs are credited to
share capital and share premium.
The share-based payments charge is included in net operating
expenses and is also included in 'Other reserves'.
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. 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.
7. 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 company news service from the London Stock Exchange
END
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