TIDMCRW
RNS Number : 5739N
Craneware plc
10 September 2013
Craneware plc
("Craneware", "the Group" or the "Company")
Final Results
10 September 2013 - Craneware plc (AIM: CRW.L), the market
leader in automated revenue integrity solutions for the US
healthcare market, announces its results for the year ended 30 June
2013.
Financial Highlights (US dollars)
-- Revenue increased 1% to $41.5m (2012: $41.1m)
-- Adjusted EBITDA(1) increased 4% to $12.4m (2012: $11.9m)
-- Adjusted profit before taxation increased 4% to $11.2m (2012: $10.8m)
-- Profit before tax decreased 5% to $10.6m (2012: $11.2m)
-- Basic adjusted EPS increased 4% to 32.9 cents (2012: 31.6
cents), basic EPS decreased 7% to 30.7 cents (2012: 33.0 cents)
-- Cash at year end $30.3m (2012: $28.8m) after returning $4.7m
to shareholders by way of dividends
-- Proposed final dividend of 6.3p (9.6 cents) per share giving
total dividend for the year of 11.5p (17.4 cents) (2012: 10.5p
/15.9 cents 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
-- Underlying growth in sales to individual hospitals and small hospital groups
-- Exited the year with significantly higher sales run rate than at the start
-- Renewal rates over 100% of dollar value
-- Products achieved top rankings within their divisions of the KLAS industry awards
-- Hospitals continue to face growing financial and
administrative pressure including increased audit activity and
significant backlogs in the appeal process
-- Key appointments increase bandwidth of senior management team
Keith Neilson, CEO of Craneware commented: "Overall Group
revenue reported in the year was marginally ahead of that of last
year, masking the steady growth through the year in sales to
individual hospitals, which was very encouraging and a reflection
of the more stable trading environment. The strengthening of sales
activity has continued and trading in the first few months of the
new financial year has been healthy. With a product suite that
addresses many of the fundamental financial issues besetting
healthcare providers in the US, an invigorated sales team and a
more stable trading environment, we are confident Craneware has the
platform to deliver increased shareholder value in the years
ahead."
For further information, please contact:
Craneware plc Peel Hunt Newgate Threadneedle
+44 (0)131 550 +44 (0)20 7418 +44 (0)20 7653
3100 8900 9850
Keith Neilson, Dan Webster Caroline Evans-Jones
CEO
Craig Preston, Richard Kauffer Fiona Conroy
CFO
Heather Armstrong
About Craneware
Founded in 1999, Craneware has headquarters in Edinburgh,
Scotland with offices in Atlanta, Arizona, Massachusetts and
Tennessee employing over 200 staff. Craneware is the leader in
automated revenue integrity solutions that improve financial
performance for healthcare organisations. Craneware's
market-driven, SaaS solutions help hospitals and other healthcare
providers more effectively price, charge, code and retain earned
revenue for patient care services and supplies. This optimises
reimbursement, increases operational efficiency and minimises
compliance risk. By partnering with Craneware, clients achieve the
visibility required to identify, address and prevent revenue
leakage. To learn more, visit craneware.com.
Chairman's Statement
This has been a year of consolidation for Craneware, in which we
have taken advantage of changes within the industry to recruit high
calibre individuals into the business, improve our sales process
and further develop our products to help ensure the revenue
integrity of our customers.
Overall Group revenue reported in the year was marginally ahead
of that of last year, masking the steady growth through the year in
sales to individual hospitals, which was very encouraging and a
reflection of the more stable trading environment. The Group
remained very profitable, with adjusted EBITDA increasing by 4% to
$12.4m and adjusted EPS increasing 4% to 32.9 cents. Craneware
continues to benefit from strong operational cash flow, closing the
year with a cash balance of $30.3m (30 June 2012: $28.8m). The
confidence the Board has in the business means we are pleased to
recommend an increased final dividend of 6.3p (9.6 cents) per share
giving a total dividend for the year of 11.5p (17.4 cents) (2012:
10.5p (15.9 cents) per share).
Despite strong growth in the small and medium tier of the
market, Craneware did not achieve a significant sale to the larger
end of the healthcare market in the year under review via either
large hospital groups or other routes to market, such as contracts
with IT businesses or consultancies. Although these opportunities
remain significant prospects for the Group, they are, because of
their nature, inherently difficult to forecast. We believe that in
the current market environment of consolidation in the healthcare
industry, a modified approach is required to secure these types of
deals and we have just completed the first stage of the
restructuring of our organisation to work with these prospects more
effectively. We are confident that our market leading products and
proven customer successes mean we are well positioned to secure
this business once revenue integrity moves up their corporate
agenda.
I am pleased to report that trading in the current year has
begun well, in line with management's forecasts. With an underlying
base of annuity revenue, renewal rates of over 100% by dollar value
and a quarter of all US healthcare providers as customers,
Craneware has a strong foundation for success. Our products
consistently outperform our competitors' solutions, delivering
transparent and highly measurable cost savings and efficiencies to
our customers. With a high proportion of the market still relying
on manual processes and an ever increasing level of auditing
pressure on hospitals, the Board is confident of Craneware's
ability to grow its revenues and profits.
I would like to take this opportunity to thank our staff for
their commitment and enthusiasm and our shareholders for the
support they have demonstrated this year.
George Elliott
Chairman
9 September 2013
Operational Review
Introduction
As predicted, during the year under review we have seen the US
healthcare market continue to evolve. Our focus over the year has
been to ensure Craneware has the right people, products and
strategy to succeed in this developing market. With the leading
products in the market, $12.4m of EBITDA profit secured in the year
and $30.3m of cash at the year end, the Company is in a very strong
position.
We are pleased to report that we saw a general strengthening of
trading conditions through the year, as the disruption caused by
the introduction of Electronic Healthcare Incentive payments in
2011/12 continued to dissipate. This resulted in a steady increase
in sales through the year to individual hospitals and smaller
groups, and we exited the year with a significantly higher sales
run rate than at the start.
What also became apparent through the course of the year was the
decreasing predictability around sales to larger hospital groups
and other significant routes to market. The consolidation taking
place at the larger end of the market both disrupted our
discussions in this area and made them more complex. For the first
time since our IPO in 2007, we did not achieve our historical run
rate of one or two larger deals, which has impacted our reported
results.
It is encouraging to note that whilst renewal rates may
fluctuate between periods, renewal rates for the whole year ending
the 30 June 2013 were above our benchmark of 100% of dollar value.
It is evident that, once in place, Craneware's revenue integrity
solutions are considered vital for ensuring the financial strength
of a hospital.
We continued to invest in the development and enhancement of our
product suite in the year, and our products continue to lead the
revenue integrity industry, once again holding their top rankings
within their divisions in the KLAS industry awards.
US Healthcare Market
As the shape of healthcare reform in the US starts to solidify,
following the Supreme Court's ruling on 6 December 2012 which
upheld the Affordable Healthcare Act as constitutional, there was
an increase in the year in consolidation among the hospital groups.
45% of the market is now part of a large Integrated Delivery
Network, rather than 41% in the prior year. These hospital groups
have been formed to achieve efficiencies through scale and we
believe will seek corporate-wide software solutions to improve the
efficiencies and financial strength of their group hospitals, an
area in which Craneware is particularly competitive.
This consolidation has continued against a background of
increasing scrutiny of the smallest rural hospitals in the Critical
Access Hospital (CAH) Market as the federal government continues to
look at budget deficit reduction plans. Since 1997 these hospitals
have had a protected status receiving 101% of cost from the state
and federal government to ensure financial viability and provide
healthcare in remote rural communities. Management believe that the
proposed stricter enforcement of the current qualifying criteria
for these hospitals has refocused their need for Revenue Integrity
solutions. With their higher level of financial constraints and
lower staff levels, Craneware will address their unique needs with
our new hybrid technology and services solutions.
Medicare's Recovery Auditors continue to step up the volume of
activity that identifies and recovers overpayments made to US
Hospitals by the Medicare program. The American Hospital
Association (AHA) reported a dramatic increase in Recovery Audit
activity in the 2(nd) quarter of 2013, up 47% compared to the 4(th)
quarter of 2012. 40% of claims reviewed were denied and total
overpayments identified by Recovery Auditors now exceed $2.2
billion. To make matters worse for hospitals, the Center for
Medicare and Medicaid (CMS) recently initiated a pilot in 11 States
that allow Recovery Auditors to perform pre-payment audits in
addition to the program's traditional three year retrospective
audit. Prepayment audits deny payment before the claim is
adjudicated and force hospitals to enter Medicare's five level
appeal process if they want to be paid for services already
provided.
The AHA report indicates an increasing number of denied claims
are now appealed (40%, although the Craneware average is higher
still at 51%) compared to prior years (29%) resulting in
significant backlogs in the appeal process. For example, the
Administrative Law Judge level (3(rd) level of appeal) states a
hearing must be held within 90 days of a request for hearing,
however the average time is now reported as 321 days. The AHA
reports that three-quarters of all appeals are delayed in the
appeal process which at the present can take up to two years to
close. On a national level, 70% of all cases appealed are
overturned in favour of the hospital. Craneware average is 88%,
which results in a 63% improvement for customers using Craneware
solutions in successfully appealed denials against the national
average.
A recent report from the Office of the Inspector General
recommended further steps be implemented by CMS to increase the
level of evaluation of hospitals in the area of fraud.
The current trends therefore reveal increased audit activity,
increased appeal activity, significant backlogs in the appeal
process but the findings clearly show a preponderance of rulings in
favour of hospitals. The administrative and financial burdens for
hospitals are great but CMS is not showing any signs of reducing
its audit practices.
Strategy
Our vision is to be the partner healthcare providers rely on to
improve and sustain strong financial performance through revenue
integrity.
Our strategy is to provide software solutions that help
customers at the points in their system where clinical and
operational data transform into financial transactions. Our
solutions automate data normalization, combining disparate data
sets while maintaining the localised context. This produces
valuable, actionable information and creates organisation-wide
visibility and accountability.
Our solutions enable our customers to optimise reimbursement;
increase operational efficiency; minimise compliance risk; and
manage audits.
Craneware's software is predominantly sold directly by the
Company to hospitals. Its customer base comprises 12% critical
access hospitals, 36% independent community hospitals and 52% IDN
hospitals (hospitals which form part of a larger "integrated
delivery network" of healthcare providers), demonstrating the
Company's historical success at selling into all parts of the
market.
Over the past year, it has become apparent that there is an
increased opportunity for sales of Craneware's solutions to
organisations at the larger end of the scale, whether they are
large hospital groups, formed through market consolidation, or
large IT businesses or consultancies. However, sales to these
larger organisations are naturally more complex and therefore
harder to forecast.
The Board has taken the decision to implement changes across the
business; augmenting domain knowledge at the PLC Board level with
at least one new non-executive director sourced directly from the
hospital market, also creating two senior management positions, and
aligning operations to the expanded opportunities at the larger end
of our stated six other routes to market: IDN's & Large
Hospital Systems, Business Process Outsourcers/Consultants (BPO),
Hardware Vendors, Software Vendors, Group Purchasing Organisations
(GPO's) and Content Acquirers. This enables Craneware to more
effectively deal with the challenges and opportunities facing the
organisation today and those that management believe the Group will
face in the future.
The first new senior management position is that of Chief
Marketing Officer (CMO), which brings together Marketing, Product
Management and Corporate Development. This will enhance the
capabilities of the Group, as we seek to increase the awareness of
Craneware and its solutions with all the levels of senior
management within the teams of these larger organisations and
identify further corporate development opportunities for
Craneware.
As our business increases in size, revenue related to services
is also expected to grow, in proportion with the whole. We have
created the new position of Executive Vice President Revenue
Integrity Operations, (EVP RIO) to concentrate efforts in this
area. This role has been created to combine our strengths in
Customer Support, Professional Services and Healthcare Consulting
in a new department that will be responsible for meeting all our
customers' Revenue Integrity needs. Healthcare consulting will join
the award winning Customer Support team and our Professional
Services team. These teams will provide consulting services that
use our products on behalf of customers in addition to the work
done by Professional Services that enables our customers to get the
most out of using our software themselves.
M&A
The sales challenges that have been seen by Craneware and others
throughout the last few years within the healthcare market due to
the previous uncertainty of the political and legislative landscape
have weakened many Healthcare IT companies to the point that strong
and financially stable companies like Craneware can take advantage
of depressed valuations to complete M&A activity. This combined
with the settling of health reforms makes M&A activity an
attractive means for Craneware to expand either market reach or the
product portfolio. The Board is therefore alert to M&A
opportunities.
Sales and Marketing
The levels of corporate activity in our market enabled us to
increase our recruitment activity in the year, securing many high
calibre people at various positions throughout the Company,
particularly within the sales team including a new Executive Vice
President of Sales.
We have been pleased with the initial indications of success for
the sales team in the year, with a steady increase throughout the
year of activity and contracts signed at each point in the sales
pipeline and across all three sales regions. Sales momentum as we
exited the year is significantly up on where we started the year
with the sales team focused on delivery and having the right tools
to do so.
The average length of new customer contracts continues to be
in-line with our historical norms of 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.
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.
For FY14 the sales teams have been specifically incentivised to
complete cross product sales.
As the RAC programme continues to expand we have seen a
particularly strong period for our InSight Audit solution for the
management of the audit process and the associated Appeals
processing service. The strength of InSight Audit's performance in
the year reinforces management's view that it is a Gateway Product
and is reflective of hospitals positively responding to defending
themselves against RAC denials and Craneware's ability to support
them in this effort.
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 and provided with
the monetary protections and safe guards that only Craneware can
provide.
Focus on Gateway products
Within three of our four product families, we have identified
"Gateway" solutions, being a product or service that can form a
bridgehead into a customer, allowing further products to be sold at
a later date. These three products are Pharmacy ChargeLink
(Supplies Management Family), Chargemaster Toolkit (Revenue Cycle
Family) and Insight Audit (Audit and Revenue Recovery Family). A
fourth gateway product is being developed from innovative new
product combinations in our Access Management and Strategic Pricing
family.
During the year we have begun the development of a set of hybrid
solutions, which combine services with some of our core products to
enable them to be implemented at smaller hospitals that do not have
their own internal revenue integrity teams. We expect these
solutions to be released during the course of the year. These
solutions are particularly suited to the 1,329 Critical Access
Hospitals as their status continues to be reviewed and complement
the Appeals services work that sits alongside our Insight Audit
Product in our Revenue Integrity Operations team.
Financial Review
The results we are reporting are in line with the guidance given
in our trading statement of 26 June 2013. The backdrop to these
results has been a year of consolidation, both within Craneware and
within the larger US Healthcare market.
We have built on the investments made in prior years, the
initial indications of success of which have been our sales to
individual hospitals and small hospital groups. In addition we have
continued to increase the bandwidth of our senior management team,
at the Operations Board and at the PLC Board where we are close to
announcing at least one non-executive director who will add
significant market experience.
As expected the US Healthcare market continues to evolve. The
ever increasing financial pressures on US hospitals have led to a
number of hospitals consolidating to achieve efficiencies, through
both scale and sharing best practice. Reducing re-imbursement
rates, increasing self pay reliance and the year on year growth of
RAC denials all combine to continually add pressure to the
financial margins of US hospitals.
However, despite the many successes we have seen in the current
year, the financial results reported have been significantly
impacted by this consolidation in the US Healthcare market. This
consolidation has resulted in delays to our sales negotiations with
these larger hospital groups and other routes to market. As a
result of these delays, for the first time since coming to the
public market in 2007, this year's financial results did not
benefit from any revenue contribution from new sales to this
segment of our market.
Through the combination of these various factors, we are
reporting revenue of $41.5m (FY12: $41.1m) and adjusted EBITDA of
$12.4m (FY12: 11.9m).
Business Model
The Group's business model and its underlying revenue
recognition policies remain consistent with prior years. The Group
continues to recognise revenue primarily under its annuity
Software-as-a-Service (SaaS) revenue recognition policies with
these revenues accounting for between 75% to 80% of all revenue
recognised in any one year. Under this model we recognise software
licence revenue and any minimum payments due from our 'other route
to market' contracts evenly over the life of the underlying signed
contracts.
As we sign new customers, we normally expect to deliver a
professional services engagement. This relates to implementation of
the software as well as training the hospital staff in its use. As
part of this process we provide further assistance to the hospital
to develop its processes, assisting in the delivery of best
practice, whilst ensuring the software is utilised to its maximum
potential. Within any individual contract we would expect these
services to account for 12% to 20% of the total contract value
(dependent on the product and needs of the individual hospital).
However of total Group revenue in any one year we would expect
services revenues to account for between 10% to 20% of revenue.
This revenue is typically recognised as the service is delivered,
usually on a percentage of completion basis.
Our third revenue model is a result of the ClaimTrust, Inc.
acquisition in 2011. For revenue recognition purposes it is
effectively the same recognition as the normal annuity SaaS model
described above. It is recurring in its nature, however, it is not
signed under long term non-breakable contracts and is invoiced
monthly in arrears rather than annual in advance, therefore we
believe it does not include the inherent advantages of the
Craneware annuity SaaS revenue model. This revenue currently
accounts for less than 10% of total revenues in any one year and as
contracts for both new and existing customers of the InSight
product range are being signed under the annuity SaaS model, we
would expect the proportion of revenue derived from this model to
reduce over time.
As a result of these revenue recognition models, based on our
historical average contract life for new hospitals of 5 years, the
maximum value of an average contract that can be recognised as
revenue in any one year is 20% plus the value of associated
services that have been delivered. In all cases, if the contract
contains any material contingencies or any increased risk of
collection is identified, revenue is deferred until the contingency
or the increased risk of collection is satisfied, at which point
the revenue that has been deferred is released and the revenue
recognition is 'caught up' to the level that would have been
recognised had there been no deferral.
Revenue
We are reporting revenue for the year of $41.5m (2012: $41.1m).
Underlying this marginal growth in revenue we have seen an increase
in our direct sales to individual and smaller groups of hospitals,
and the sales momentum as we exited the year continues to build.
However these successes are masked by the Group being unable to
conclude any large sales in the year to either large hospital
groups or our other routes to market. As described earlier in this
report, due to the ongoing consolidation in our marketplace these
deals, whilst increasing in size, have also increased in complexity
and as a result determining when these deals will close and
therefore contribute to revenue, is difficult to forecast.
In the prior year, two such deals did sign and contribute to new
revenue for that year. One included a 'white-labelling fee' of
$3.5m which, as all associated professional services were completed
in the year, was fully recognised as revenue in the Financial Year
2012. This revenue was not repeated in the current year, and as a
result our Professional Services (including white-labelling)
recognised in the year has fallen from $7.1m (or 17% of Group
revenue) in FY12 to $5.3m (or 13% of Group Revenue) in FY13 despite
underlying professional services growing by 47%. As this white
labelling revenue was not repeated, it has effectively been
replaced with new software and services revenue in reporting total
Group Revenue of $41.5m.
Whilst professional services revenue at 13% of Group revenue is
still within our expected range of 10% to 20% of our revenue in any
one year, we retain the capacity within our existing business model
to expand this revenue stream contributing to future years' revenue
growth.
Earnings
As a result of our 2011 acquisition of ClaimTrust, Inc., the
Group introduced an 'Adjusted' earnings metrics to adjust for
one-off acquisition costs. In the prior year this resulted in the
one-off benefit of $0.95m relating to the release of the provision
for contingent consideration being removed. In the current year,
there have been no further benefits or charges of this nature;
however this prior year adjustment still impacts the comparatives
reported. We continue to believe the disclosure of these adjusted
earnings metrics is consistent with other acquisitive companies and
that it allows for a more accurate understanding of the underlying
profit generated from operations and for a direct comparison year
on year.
Adjusted earnings before interest, taxation, share based
payments, depreciation and amortisation ("EBITDA") has grown
marginally in the year to $12.4m (FY12: $11.9m) an increase of 4%.
This reflects a stable Adjusted EBITDA margin of c29%. This is
consistent with the Group's measured approach to the release of
additional investment, continuing to make investments in line with
the revenue growth occurring, whilst continually looking to ensure
the efficiency of the investments we make.
Revenue Visibility and other KPI's
Through the business model we utilise, the additional new sales
we make in any given year build on our annuity base of revenues.
This annuity base of revenue allows us to better plan our
investment strategy in advance, and whilst in any one year we will
always rely on additional sales in the year to generate growth, we
enter our next financial year with a significant percentage of that
year's revenue targets already under contract. The Group
illustrates this annuity base through its "Three Year Visible
Revenue" metric. This metric includes:
-- Future revenue under contract;
-- Revenue generated from renewals (calculated at 100% dollar value renewal).
-- InSight revenue identified as recurring in nature (subject to
an estimated churn rate of 8% per year);
The different categories of revenue reflect any inherent future
risk in recognising these revenues. Future revenue under contract,
is, as the title suggests, subject to an underlying contract and
therefore only has to be invoiced to be recognised in the
respective years (subject to future collection risk that exists
with all revenue). Renewal revenues are contracts coming to the end
of their original contract term (e.g. 5 years) and will require
their contracts to be renewed for the revenue to be recognised,
however as we track our renewal metric, and consistently report
over 100% renewals by dollar value, it is reasonable to conclude
minimal additional risk is associated to this revenue. The final
category "InSight revenue identified as recurring in nature" is
revenue that we would expect to recur in the future but as the
underlying contracts are not long term in their nature or contain
break clauses there is potential for this revenue not to be
recognised in future years, however we apply an estimated 8% churn
rate to make allowance for this risk.
To better aid understanding, the three year visible revenue as
at 30 June 2013 (i.e. visible revenue for FY2014, FY2015 and
FY2016) is presented against the visible revenue for the same three
year period as at 30 June 2012. This therefore demonstrates the
growth in our annuity base of revenues, which translates to visible
revenue for the next three years to 30 June 2016 of $109.5m from
$105.5m at 30 June 2012. This breaks down as follows:
-- InSight revenue identified as recurring in nature of $8.1m.
-- Revenue generated from renewal activities contributing
$40.8m; being $5.4m in FY14, $15.0m in FY15 and $20.4m in FY16.
-- Future revenue under contract contributing $60.6m of which
$30.4m is expected to be recognised in FY14, $17.7m in FY15 and
$12.5m in FY16.
Average length of contracts signed with new customers in the
period is in line with our historical normal average contract
length of 5 years, this is following a dip in the prior year to 4
years. The product attachment rate, being the average number of our
nine products that are in place across our entire customer base,
has remained steady at 1.6 products. The remaining 7.4 reflects the
significant cross sell opportunity that still exists for the
Group.
Operating Expenses
With our measured investment strategy, our net operating
expenses (before acquisition benefits/costs, share based payments,
depreciation and amortisation) have remained stable at $27.0m
(FY12: $27.6m). We continue to look to leverage the investments we
have made in prior years, as well as make further targeted
investment going forward, as we continue to increase sales levels
and hospital customer numbers.
As innovation will continue to be core to the Group's future we
continue to invest in Product Development spend which has remained
at c$7m. We continue to capitalise very low levels of Development
spend with $0.1m capitalised in the year (FY12: $0.3m).
Cash
We measure the quality of our earnings through our ability to
convert them into operating cash. As in prior years, we have very
high levels of cash conversion which has enabled us to grow our
cash reserves to $30.3m (FY12: $28.8m). These cash levels are after
paying $3.4m in taxation (FY12: $1.3m) and a further $4.7m (FY12:
$4.1m) to our shareholders by way of dividends.
We retain a significant level of cash reserves to fund 'bolt-on'
acquisitions if suitable opportunities arise.
Balance Sheet
The Group maintains a strong balance sheet position, not only
through our significant cash balance but with rigorous controls
over working capital and no debt.
Currency
The reporting currency for the Group (and cash reserves) is US
Dollars. Whilst the majority of our cost base is US located and
therefore US Dollar denominated, we do have approximately one
quarter of the cost base based in the UK relating primarily to our
UK employees (and therefore denominated in Sterling). As a result,
we continue to closely monitor the Sterling to US Dollar exchange
rate, and where appropriate consider hedging strategies. During the
year, we have not seen a significant impact through exchange rate
movements, with the average exchange rate throughout the year being
$1.5685 as compared to $1.5840 in the prior year.
Taxation
The Group's effective tax rate remains dependent on the
proportion of profits generated in the UK and the US and the
applicable tax rates in the respective jurisdictions. As detailed
above, the current year has seen levels of professional services
revenues generated at the lower end of the 10% to 20% of revenue
range we would normally anticipate in our business model. As all
professional services are delivered in the US, the resulting lower
levels of this revenue has reduced the levels of income subject to
taxation in the US against our historical norms. This combined with
the reducing tax rate in the UK and our continued ability to agree
enhanced Research and Development tax relief has resulted in an
effective tax rate of 21.8% (FY12: 20.6%). Effective tax rates will
increase in future years if the ratio of underlying professional
services to software license revenues increases.
EPS
As with EBITDA, the Group is reporting an Adjusted EPS figure,
with the prior year's EPS figure having been adjusting for the
$0.95m of contingent consideration provision released.
In the year adjusted EPS has increased to $0.329 (FY12: $0.316)
and adjusted diluted EPS has increased to $0.328 (FY12: $0.315).
The increase in EPS is driven by the levels of EBITDA and the
continued lower than historically expected effective tax.
Dividend
The Board recommends a final dividend of 6.3p (9.6 cents) per
share giving a total dividend for the year of 11.5p (17.4 cents)
per share (2012: 10.5p (15.9 cents) per share). Subject to
confirmation at the Annual General Meeting, the final dividend will
be paid on 13th December 2013 to shareholders on the register as at
15th November 2013, with a corresponding ex-Dividend date of 13th
November 2013.
The final dividend of 6.3p 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 15th
November 2013. The exact amount to be paid will be calculated by
reference to the exchange rate to be announced on 15th November
2013. The final dividend referred to above in US dollars of 9.6
cents is given as an example only using the Balance Sheet date
exchange rate of $1.5167/GBP1 and may differ from that finally
announced.
Outlook
The strengthening of sales activity has continued and trading in
the first few months of the new financial year has been healthy.
With a product suite that addresses many of the fundamental
financial issues besetting healthcare providers in the US, an
invigorated sales team and a more stable trading environment, we
are confident Craneware has the platform to deliver increased
shareholder value in the years ahead.
Keith Neilson Craig Preston
Chief Executive Officer Chief Financial Officer
9 September 2013 9 September 2013
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2013
Total Total
2013 2012
Notes $'000 $'000
---------------------------------- ------ --------- ---------
Continuing operations:
Revenue 3 41,452 41,067
Cost of sales (2,071) (1,556)
--------- ---------
Gross profit 39,381 39,511
Net operating expenses 4 (28,881) (28,416)
--------- ---------
Operating profit 10,500 11,095
Analysed as:
Adjusted EBITDA* 12,357 11,932
Released deferred consideration
on business combination - 954
Share based payments (181) (152)
Depreciation of plant and
equipment (621) (579)
Amortisation of intangible
assets (1,055) (1,060)
---------------------------------- ------ --------- ---------
Finance income 103 107
--------- ---------
Profit before taxation 10,603 11,202
Tax on profit on ordinary
activities 5 (2,307) (2,309)
--------- ---------
Profit for the year attributable
to owners of the parent 8,296 8,893
---------------------------------- ------ --------- ---------
Total comprehensive income
attributable to owners of
the parent 8,296 8,893
---------------------------------- ------ --------- ---------
(1.) Adjusted EBITDA refers to earnings before interest, tax,
depreciation, amortisation, share based payments, released deferred
consideration and transaction related costs
Earnings per share for the year attributable to equity
holders
Notes 2013 2012
----------------------- ------ ------ ------
Basic ($ per share) 7a 0.307 0.330
*Adjusted Basic ($
per share) 7a 0.329 0.316
Diluted ($ per share) 7b 0.306 0.329
*Adjusted Diluted ($
per share) 7b 0.328 0.315
----------------------- ------ ------ ------
*Adjusted Earnings per share calculations allow for the release
of deferred consideration on the business (in the prior year)
together with amortisation on acquired intangible assets to form a
better comparison with previous years.
Statement of Changes in Equity for the year ended 30 June
2013
Share
Share Premium Other Retained Total
Capital Account Reserves Earnings Equity
$'000 $'000 $'000 $'000 $'000
---------------------------- -------- -------- --------- --------- --------
At 1 July 2011 536 15,239 302 16,328 32,405
Total comprehensive income
- profit for the year - - - 8,893 8,893
Transactions with owners:
Share-based payments - - 152 (538) (386)
Impact of share options
exercised/lapsed 2 169 (245) 692 618
Dividends (Note 6) - - - (4,093) (4,093)
----------------------------
At 30 June 2012 538 15,408 209 21,282 37,437
Total comprehensive income
- profit for the year 8,296 8,296
Transactions with owners:
Share-based payments - - 181 15 196
Impact of share options
exercised/lapsed 1 88 (178) 174 85
Dividends (Note 6) - - - (4,693) (4,693)
----------------------------
At 30 June 2013 539 15,496 212 25,074 41,321
---------------------------- -------- -------- --------- --------- --------
Consolidated Balance Sheet as at 30 June 2013
Notes 2013 2012
$'000 $'000
---------------------------------- ------ ------- -------
ASSETS
Non-Current Assets
Plant and equipment 1,596 2,027
Intangible assets 8 15,291 16,010
Deferred tax 1,615 1,470
18,502 19,507
------- -------
Current Assets
Trade and other receivables 15,128 12,560
Current tax assets 468 428
Cash and cash equivalents 30,277 28,790
45,873 41,778
------- -------
Total Assets 64,375 61,285
---------------------------------- ------ ------- -------
EQUITY AND LIABILITIES
Non-Current Liabilities
Deferred income 30 183
30 183
------- -------
Current Liabilities
Deferred income 16,419 15,766
Current tax liabilties 1,055 1,955
Trade and other payables 5,550 5,944
23,024 23,665
------- -------
Total Liabilities 23,054 23,848
------- -------
Equity
Called up share capital 9 539 538
Share premium account 15,496 15,408
Other reserves 212 209
Retained earnings 25,074 21,282
Total Equity 41,321 37,437
------- -------
Total Equity and Liabilities 64,375 61,285
---------------------------------- ------ ------- -------
Statement of Cash Flows for the year ended 30 June 2013
Notes 2013 2012
$'000 $'000
--------------------------------- ------ -------- --------
Cash flows from operating
activities
Cash generated from operations 10 9,891 10,602
Interest received 103 107
Tax paid (3,377) (1,316)
--------------------------------- ------ -------- --------
Net cash from operating
activities 6,617 9,393
Cash flows from investing
activities
Purchase of plant and
equipment (190) (439)
Capitalised intangible
assets 8 (336) (418)
--------------------------------- ------ -------- --------
Net cash used in investing
activities (526) (857)
Cash flows from financing
activities
Dividends paid to company
shareholders 6 (4,693) (4,093)
Proceeds from issuance
of shares 89 171
--------------------------------- ------ -------- --------
Net cash used in financing
activities (4,604) (3,922)
Net increase in cash and
cash equivalents 1,487 4,614
Cash and cash equivalents
at the start of the year 28,790 24,176
Cash and cash equivalents
at the end of the year 30,277 28,790
--------------------------------- ------ -------- --------
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, IFRIC interpretations and with those parts of
the Companies Act 2006 applicable to companies reporting under
IFRS. The consolidated financial statements have been prepared
under the historic cost convention and prepared on a going concern
basis. The applicable accounting policies are set out below,
together with an explanation of where changes have been made to
previous policies on the adoption of new accounting standards in
the year, if relevant.
The preparation of financial statements in conformity with IFRS
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual results ultimately may differ from those
estimates
The Company and its subsidiary undertakings are referred to in
this report as the Group.
1. Selected principal accounting policies
The principal accounting policies adopted in the preparation of
these accounts are set out below. These policies have been
consistently applied, unless otherwise stated.
Reporting currency
The Directors consider that as the Group's revenues are
primarily denominated in US dollars the Company's principal
functional currency is the US dollar. The Group's financial
statements are therefore prepared in US dollars.
Currency translation
Transactions denominated in foreign currencies are translated
into US dollars at the rate of exchange ruling at the date of the
transaction. The average exchange rate during the course of the
year was $1.5685/GBP1 (2012 : $1.5840/GBP1). Monetary assets and
liabilities expressed in foreign currencies are translated into US
dollars at rates of exchange ruling at the Balance Sheet date
$1.5167/GBP1 (2012 : $1.5685/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 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 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.
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
substantive enacted by the Balance Sheet date.
Deferred taxation is computed using the liability method. Under
this method, deferred tax assets and liabilities are determined
based on temporary differences between the financial reporting and
tax bases of assets and liabilities and are measured using enacted
rates and laws that will be in effect when the differences are
expected to reverse. The deferred tax is not accounted for if it
arises from initial recognition of an asset or liability in a
transaction that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred tax assets are
recognised to the extent that it is probable that future taxable
profits will arise against which the temporary differences will be
utilised.
Deferred tax is provided on temporary differences arising on
investments in subsidiaries except where the timing of the reversal
of the temporary difference is controlled by the Group and it is
probable that the temporary difference will not reverse in the
foreseeable future. Deferred tax assets and liabilities arising in
the same tax jurisdiction are offset.
In the UK and the US, the Group is entitled to a tax deduction
for amounts treated as compensation on exercise of certain employee
share options under each jurisdiction's tax rules. As explained
under "Share-based payments", a compensation expense is recorded in
the Group's Statement of Comprehensive Income over the period from
the grant date to the vesting date of the relevant options. As
there is a temporary difference between the accounting and tax
bases a deferred tax asset is recorded. The deferred tax asset
arising is calculated by comparing the estimated amount of tax
deduction to be obtained in the future (based on the Company's
share price at the Balance Sheet date) with the cumulative amount
of the compensation expense recorded in the Statement of
Comprehensive Income. If the amount of estimated future tax
deduction exceeds the cumulative amount of the remuneration expense
at the statutory rate, the excess is recorded directly in equity
against retained earnings.
Share-based payments
The Group grants share options to certain employees. In
accordance with IFRS 2, "Share-Based Payments" equity-settled
share-based payments are measured at fair value at the date of
grant. Fair value is measured by use of the Black-Scholes pricing
model as appropriately amended. The fair value determined at the
date of grant of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on
the Group's estimate of the number of shares that will eventually
vest. Non-market vesting conditions are included in assumptions
about the number of options that are expected to vest. At the end
of each reporting period, the entity revises its estimates of the
number of options that are expected to vest based on the non-market
vesting conditions. It recognises the impact of the revision to
original estimates, if any, in the Statement of Comprehensive
Income, with a corresponding adjustment to equity. When the options
are exercised the Company issues new shares. The proceeds received
net of any directly attributable transaction costs are credited to
share capital and share premium.
The share-based payments charge is included in net operating
expenses and is also included in 'Other reserves'.
2. Critical accounting estimates and judgements
The preparation of financial statements in accordance with IFRS
requires the Directors to make critical accounting estimates and
judgements that affect the amounts reported in the financial
statements and accompanying notes. The estimates and assumptions
that have a significant risk of causing material adjustment to the
carrying value of assets and liabilities within the next financial
year are discussed below:-
-- Impairment assessment:- the Group tests annually whether
Goodwill has suffered any impairment and for other assets including
acquired intangibles at any point where there are indications of
impairment. This requires an estimation of the value in use of the
applicable cash generating unit to which the Goodwill and other
assets relate. Estimating the value in use requires the Group to
make an estimate of the expected future cashflows from the specific
cash generating unit using certain key assumptions including growth
rates and a discount rate. Reasonable changes to these assumptions
such as increasing the discount rate by 5% (20% to 25%) and
decreasing the long term growth rate applied to revenues by 1% (2%
to 1%) would still result in no impairment.
-- Provision for impairment of trade receivables:- the Group
assesses trade receivables for impairment which requires the
Directors to estimate the likelihood of payment forfeiture by
customers.
-- Revenue recognition:- the Group assesses the economic benefit
that will flow from future milestone payments in relation to
sub-licensing partnership arrangements. This requires the Directors
to estimate the likelihood of the Group, its partners, and
sub-licensees meeting their respective commercial milestones and
commitments.
-- Capitalisation of development expenditure:- the Group
capitalises development costs provided the conditions laid out
previously within the accounting policies note have been met.
Consequently the Directors require to continually assess the
commercial potential of each product in development and its useful
life following launch.
-- Provisions for income taxes:-the Group is subject to tax in
the UK and US and this requires the Directors to regularly assess
the applicability of its transfer pricing policy.
3. Revenue
The chief operating decision maker has been identified as the
Board of Directors. The Group revenue is derived 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.
2013 2012
$'000 $'000
----------------------- ------- -------
Software licencing 36,174 34,002
White labelling - 3,500
Professional services 5,278 3,565
Total revenue 41,452 41,067
----------------------- ------- -------
4. Net operating expenses
Net operating expenses are comprised
of the following:-
2013 2012
$'000 $'000
-------------------------------------- ------- -------
Sales and marketing expenses 8,251 8,804
Client servicing 7,306 7,189
Research and development 6,932 6,844
Administrative expenses 4,433 4,763
Release of contingent consideration
on business combination - (954)
Share-based payments (Note 8) 181 152
Depreciation of plant and equipment 621 579
Amortisation of intangible assets 1,055 1,060
Exchange loss/(gain) 102 (21)
Net operating expenses 28,881 28,416
-------------------------------------- ------- -------
5. Tax on profit on ordinary activities
2013 2012
$'000 $'000
-------------------------------------- ------ -------
Profit on ordinary activities before
tax 10,603 11,202
Current tax
Corporation tax on profits of the
year 2,453 3,790
Foreign exchange on taxation in
the year 152 2
Adjustments for prior years (168) (762)
-------------------------------------- ------ -------
Total current tax charge 2,437 3,030
Deferred tax
Origination & reversal of timing
differences 133 (1,371)
Adjustments for prior years (264) 645
Change in tax rate 1 5
-------------------------------------- ------ -------
Total deferred tax (credit) (130) (721)
-------------------------------------- ------ -------
Tax on profit on ordinary activities 2,307 2,309
-------------------------------------- ------ -------
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 23.75% (2012: 25.5%) 2,518 2,857
Effects of:
Adjustment in respect of prior years (432) (117)
Change in tax rate 1 5
Additional US taxes on profits/losses
39% (2012: 39%) 39 (256)
Foreign Exchange 152 2
Non taxable income - (243)
Expenses not deductible for tax
purposes (4) 82
Tax/(deduction) on share plan charges 33 (21)
-------------------------------------- ------ -------
Total tax charge 2,307 2,309
-------------------------------------- ------ -------
6. Dividends
The dividends paid during the year were as follows:-
2013 2012
$'000 $'000
----------------------------------- ------ ------
Final dividend, re 30 June 2012
- 8.9 cents (5.7 pence)/share 2,481 2,036
Interim dividend, re 30 June 2013
- 7.82 cents (5.2 pence)/share 2,212 2,057
Total dividends paid to Company
shareholders in the year 4,693 4,093
----------------------------------- ------ ------
The proposed final dividend for 30 June 2013 is subject to
approval by the shareholders at the Annual General Meeting and has
not been included as a liability in these accounts.
7. Earnings per share
a) Basic
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of shares in issue during the year.
2013 2012
-------------------------------------- ------------ ----------
Profit attributable to equity
holders of the Company ($'000) 8,296 8,893
Weighted average number of ordinary
shares in issue (thousands) 26,998 26,946
Basic earnings per share ($ per
share) 0.307 0.330
-------------------------------------- ------------ ----------
Profit attributable to equity
holders of Company ($'000) 8,296 8,893
Release of deferred consideration
on business combination - (954)
Amortisation of acquired intangibles
($'000) 574 574
Adjusted Profit attributable to
equity holders ($'000) 8,870 8,513
-------------------------------------- ------------ ----------
Weighted average number of ordinary
shares in issue (thousands) 26,998 26,946
Adjusted Basic earnings per share
($ per share) 0.329 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.
2013 2012
-------------------------------------- ---------------- ----------
Profit attributable to equity
holders of the Company ($'000) 8,296 8,893
Weighted average number of ordinary
shares in issue (thousands) 26,998 26,946
Adjustments for:- Share options
(thousands) 69 84
Weighted average number of ordinary
shares for diluted earnings per
share (thousands) 27,067 27,030
Diluted earnings per share ($
per share) 0.306 0.329
-------------------------------------- ---------------- ----------
Profit attributable to equity
holders of Company ($'000) 8,296 8,893
Release of deferred consideration
on business combination - (954)
Amortisation of acquired intangibles
($'000) 574 574
Adjusted Profit attributable to
equity holders ($'000) 8,870 8,513
-------------------------------------- ---------------- ----------
Weighted average number of ordinary
shares in issue (thousands) 26,998 26,946
Adjustments for:- Share options
(thousands) 69 84
-------------------------------------- ---------------- ----------
Weighted average number of ordinary
shares for diluted earnings per
share (thousands) 27,067 27,030
Adjusted Diluted earnings per
share ($ per share) 0.328 0.315
-------------------------------------- ---------------- ----------
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
2012 11,188 2,964 1,222 2,912 543 18,829
Additions - - - 92 244 336
At 30 June
2013 11,188 2,964 1,222 3,004 787 19,165
--------------- --------- -------------- ------------ ------------ --------- -------
Accumulated
amortisation
At 1 July
2012 - 395 326 1,718 380 2,819
Charge for
the year - 329 244 383 99 1,055
At 30 June
2013 - 724 570 2,101 479 3,874
Net Book
Value at
30 June 2013 11,188 2,240 652 903 308 15,291
--------------- --------- -------------- ------------ ------------ --------- -------
Cost
At 1 July
2011 11,188 2,964 1,222 2,584 453 18,411
Additions - - - 328 90 418
At 30 June
2012 11,188 2,964 1,222 2,912 543 18,829
--------------- --------- -------------- ------------ ------------ --------- -------
Accumulated
amortisation
At 1 July
2011 - 66 82 1,308 303 1,759
Charge for
the year 329 244 410 77 1,060
At 30 June
2012 - 395 326 1,718 380 2,819
Net Book
Value at
30 June 2012 11,188 2,569 896 1,194 163 16,010
--------------- --------- -------------- ------------ ------------ --------- -------
In accordance with the Group's accounting policy, the carrying
values of goodwill and other intangible assets are reviewed for
impairment annually or more frequently if events or changes in
circumstances indicate that the asset might be impaired. Goodwill
arose on the acquisition of Craneware InSight Inc.
The carrying values are assessed for impairment purposes by
calculating the value in use (net present value (NPV) of future
cashflows) of the Craneware InSight cash generating unit. The
goodwill impairment review assesses whether the carrying value of
goodwill is supported by the NPV of the future cashflows based on
management forecasts for 5 years and then using an assumed sliding
scale annual growth rate which is trending down to give a long-term
growth rate of 2% in the residual years of the assessed period.
Management have made the judgement that this long-term growth rate
does not exceed the long-term average growth rate for the industry
and also estimated a pre-tax discount rate of 20%.
Sensitivity analysis was performed using a combination of
different annual growth rates and a range of different weighted
average cost of capital rates. Management concluded that the
tempered growth rates resulting in 2% during the residual period
and the pre-tax discount rate of 20% were appropriate in view of
all relevant factors and reasonable scenarios and that there is
currently sufficient headroom over the carrying value of the assets
in the acquired business that any reasonable change to key
assumptions is not believed to result in impairment.
9. Called up share capital
Authorised
2013 2012
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
2013 2012
Number $'000 Number $'000
---------------------- ----------- ------ ----------- ------
Equity share capital
Ordinary shares of
1p each 27,008,763 539 26,991,891 538
---------------------- ----------- ------ ----------- ------
The movement in share capital during the year is represented as
follows:
-- 16,872 Ordinary Share options were exercised in the year.
10. Cash flow generated from operating activities
Reconciliation of profit before
tax to net cash inflow from operating
activities
2013 2012
$'000 $'000
-------------------------------- -------- --------
Profit before tax 10,603 11,202
Finance income (103) (107)
Depreciation on plant and
equipment 621 579
Amortisation on intangible
assets 1,055 1,060
Share-based payments 181 152
Movements in working capital:
(Increase)/decrease in
trade and other receivables (2,721) 611
Increase/(decrease) in
trade and other payables 255 (2,895)
Cash generated from operations 9,891 10,602
-------------------------------- -------- --------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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