TIDMCRW
RNS Number : 9553B
Craneware plc
11 March 2014
Craneware plc
("Craneware", "the Group" or the "Company")
Interim Results
11 March 2014 - 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 2013.
Financial Highlights (US dollars)
-- Revenue increased 5% to $21.1m (H1 2013: $20.1m)
-- Adjusted EBITDA(1) increased 6% to $5.7m (H1 2013: $5.4m)
-- Profit before tax increased 7% to $4.8m (H1 2013: $4.5m)
-- Adjusted basic EPS increased 8% to 14.3 cents per share (H1 2013: 13.2 cents per share)
-- Cash at period end $30.6m (H1 2013: $28.6m and $30.3m at 30 June 2013)
-- Proposed interim dividend of 5.7p per share (H1 2013: 5.2p 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
-- Good sales performance driven by incremental increases in the
number of deals, in the size of hospital groups, the overall deal
size and the number of longer-term contracts
-- 2013 Best in KLAS Awards: Chargemaster Toolkit and Bill Analyzer
-- Good growth in InSight Audit supporting the 'Gateway Products' strategy
-- Supportive market environment - The Affordable Care Act, new
billing models, healthcare consumerisation, RAC and third party
payor audits, market consolidation and affiliations
-- Strong revenue visibility over the remainder of the year and beyond
Keith Neilson, CEO of Craneware commented:
"Craneware remains at the forefront of providing solutions to US
healthcare providers so they can achieve the revenue integrity
required to support improved patient care and outcomes. We have
seen a continued increase in sales during the period, to
progressively larger hospital groups. The US Healthcare market
seems to be settling as strategies are developing to support the
need for change and deal with the uncertainties of the Affordable
Care Act. With a strong product suite, clear strategic direction
and high levels of revenue visibility, we are confident of
continued future 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 its
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
I am pleased to report that the first half of the year has seen
a continued increase in the level of signed sales contracts, with
the other underlying sales metrics trending in a positive
direction. Sales have been delivered across a mix of hospital
types, including, as predicted, increasingly larger hospital
groups, reflecting the natural progression of the sales cycle and
the ongoing investment we have made in our sales operation and its
growing maturity.
Revenues increased by 5% to $21.1m, adjusted EBITDA increased by
6% to $5.7m and adjusted EPS increased by 8% to 14.3 cents. The
Company continued to benefit from strong operational cash flow,
closing the period with a cash balance of $30.6m (31 December 2012:
$28.6m). Visibility over revenue for FY14 has increased to $41.7m
(31 December 2012: $36.7m), providing the Board with increased
confidence in continued growth.
We were pleased to welcome Ms Colleen Blye to the Board as
Non-Executive Director during the period. Ms Blye is the Executive
Vice President and Chief Financial Officer for Catholic Health
Systems of Long Island, an integrated healthcare delivery system
which incorporates six hospitals, three nursing homes, a
community-based agency for persons with special needs, and a
regional home care and hospice group. Ms Blye's greater than 20
years' experience across senior positions within the US healthcare
industry is providing us with valuable insight as we seek to
further develop our market positioning and long term strategy.
With an underlying base of annuity revenue, continued high
customer retention rates and a quarter of all US hospitals as
customers, we are confident that Craneware has a strong foundation
for success. Our products consistently outperform our competitors'
solutions, delivering transparent and highly measurable return on
investment, as well as 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.
The commitment and enthusiasm of our staff continues to be the
basis of our success. I would like to thank them for their efforts
and our shareholders for their continued support during the
period.
George Elliott
Chairman
10 March 2014
Operational Review
Introduction
This has been a positive first half for Craneware. The sales
activity seen in recent periods has, as expected, translated into
increasing levels of new sales. While some of the revenue from
these long term contracts will flow through into the second half of
the current year, our revenue recognition policy means that the
majority of the impact will be felt in future years, adding to our
high levels of revenue visibility.
We previously reported that in the second half of the last
financial year sales to small and medium individual hospitals
accounted for the majority of new contracts signed in that period
and that we anticipated that larger hospitals and hospital groups
would take longer to follow suit due to the comparative complexity
of their buying cycles. We are pleased to report that we have seen
this expected progression in the size of new deals, with an
increased level of sales to larger individual hospitals and
increasing sizes of hospital groups. A number of contracts were
signed in the period, which would previously have been considered
material due to their size, but no longer meet our announcement
criteria as a result of the increasing overall size of the
Company.
We fully expect this trend to continue as the longer buying
cycles of the larger hospital groups catch up with the rest of the
market in due course.
We enter the second half of the year in a strong position. The
Company has increased revenue visibility, strengthened the
management team and increased domain and industry expertise at
Board level which is keenly monitoring the building sales momentum
and future pipeline.
Our focus in the second half of the year will be on addressing
the growing number of opportunities we have to help our customers
address their challenges and continued sales execution.
Market Developments
Recent reports from the Centers for Medicare and Medicaid
Services state that US healthcare spending in 2012 showed its
fourth consecutive year of growth, albeit growing modestly slower
than the economy as a whole in 2012. Overall healthcare spending
increased at a rate of 3.7 percent to $2.8 trillion in 2012. The
share of the US economy devoted to healthcare was therefore 17.2
percent in 2012.
With six main trends affecting US healthcare reimbursement, the
main priority of our customers continues to be providing quality
care to their patients against the background of continuing cuts in
Medicare reimbursements, imposed restructuring of their business
models and increased pressure from payor auditors. These are
discussed in more detail below;
The Affordable Care Act
Although the Affordable Care Act may well evolve again in the
future, the first tangible signs of its implementation are already
being seen. The online Health Insurance Exchanges established under
the Act, which allow individuals and small businesses to purchase
private health insurance, saw very low levels of registration at
first. However, recent reports state that nearly 2.2 million people
have now signed up. December's enrollment (1.8 million) jumped
nearly five times from the number who enrolled in October and
November combined (364,000). Hospitals will shortly begin to see
large numbers of these patients in a setting that will be covered
by at least a basic level of insurance where previously many
hospitals would have been forced to see these patients and write
off much of the treatment costs as charity care. Future supply and
demand curves for hospitals are predicted to remove any current
perceived spare capacity in the industry.
New Billing Models
As part of the Affordable Care Act, healthcare providers and
payors have been asked to consider and implement many new business
models for reimbursement and to reduce their dependence on fee for
service only style payments. This new world may involve
reimbursement coming from a variety of business models alongside
Fee for Service such as Fee for Outcome, Bundled Payments,
Accountable Care organizations and Population Health Management
models. These multiple billing models, move risk more to the
Healthcare provider, therefore creating a greater dependency for
them to claim reimbursement correctly, requiring the accuracy of
data both clinically and financially within their systems to make
accurate assessment of the acquired risk.
Healthcare Consumerisation
With rising costs in Healthcare being transferred
disproportionately from the government and the employer to the
consumer, hospitals have seen more than a trebling of their
reimbursement coming directly from the consumer in the last ten
years. This drive to consumerism and the relative lack of certainty
of payment for the Provider that this brings with it has resulted
in a technology backed focus on correct and efficient patient
registration with payment collections before treatment has been
provided.
RAC and third party Payor Audits
The audit program looks to intensify in the near term with an
additional RAC created in the recent retendering process and the
imminent release of the names of the new successful RAC Auditors
who will carry out this work for the next five years reinforcing
how much pressure is on Healthcare Providers to make sure they are
running this non-core but critical area of their operations
correctly. New rules that state the number of medical chart
requests that a RAC can audit from any one hospital is reduced in
proportion to the number of denials that a hospital has had
historically will be introduced when the new RAC's are in place.
This is widely expected to drive technology solutions elsewhere in
the revenue cycle particularly in charge master and denials
management, to deal with revenue integrity and ultimately attempt
to mitigate the hospitals' exposure to RAC audit risk by correcting
things the first time around.
ICD 10 Coding Transition
From October 2014, hospitals will have to report their claims
with an International Classification of Diagnosis Code Version 10
(ICD 10) replacing the simpler US Version 9 which is currently
mandated. This conversion, although very large in its magnitude and
increased complication for providers, has been scheduled for a long
time (originally scheduled to be implemented 2013) and therefore
the majority of hospitals have detailed and advanced plans to deal
successfully with this conversion. Although getting these codes
wrong on a claim could have a catastrophic effect on a hospital's
reimbursement, the number of hospitals that appear to have not been
successfully testing their claims with this data set is limited and
therefore should not substantially result in a diversion for
hospitals, as long as the payor systems are equally robust. At the
recent Health Information Management Systems Society Annual
convention, ICD 10 conversion was likened to the Y2K problem.
Although potentially critical in nature, few people had a great
deal of remaining exposure to this risk.
Consolidation and Affiliation
As reported in previous periods the increasing trend for
healthcare providers to consolidate and affiliate to share
economies of scale has not abated.
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 to address
the aforementioned healthcare trends and is confident of its
growing prominence within the US healthcare market as it continues
to further develop and enhance in the areas of Patient Access, Data
for Population Health and other business models, Revenue Cycle,
Supply chain and Audit.
Sales and Marketing
The Company delivered a good sales performance in the first half
of the year. This in part reflects the anticipated development of
the natural buying cycle, which saw initial sales to the smaller
more flexible, independent hospitals in the prior year, develop to
now include larger hospitals and larger sized hospital groups. As
previously stated we expect this development of hospital buying
cycles to continue, with the increasing engagement of larger
hospital groups and their inherently more complex buying
decisions.
An example of a hospital group signing in the period was Avera
Health, a large health network of hospitals and clinics in South
Dakota, North Dakota, Minnesota, Iowa and Nebraska, which purchased
InSight Medical Necessity(R) for implementation at 28 of their 33
hospital organisations to provide automated, real-time, validation
of medical necessity.
The investments made in the prior and current period to our
sales team have also added to the sales performance. Reinvigorated
sales management, with the support of the Operations Board, has
reorganised the sales incentivisation structures taking advantage
of recent market conditions to add additional high caliber people
across the sales organisation. These combined with the growing
maturity of the entire sales team leaves us well positioned to
respond to our increasing market opportunity.
The average length of new customer contracts continues to be
in-line with our historical norms of approximately five years,
although we have seen the return of 7 and 9 year contracts in the
period which is reflective of the increasing market confidence.
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.
'Renewal rates by dollar value' is a financial metric which
specifically ties to the revenue visibility for future years This
metric at 94%, is within the historical norms and is reviewed in
the Financial Review section.
The sales mix remained fairly constant throughout the period,
resulting in no change to the overall product attachment rate,
which remained steady at approximately 1.6 products per
customer.
Our Gateway product strategy continues to be positively
received. The increased focus on these products during initial
customer discussions has led to both new hospital sales as well as
the cross sell of the newer Gateway products to our original
customer base. We are seeing evidence that the successes of the
Gateway products leads to customers instigating sales discussions
for other products. In the second half of the prior Financial Year
we identified InSight Audit as the Gateway product for the Audit
and Recovery Product Family. This decision has been supported by
the continued increase of sales of this product, with the number of
products sold in the period now reaching the level of sales
achieved by our original Gateway Product 'Chargemaster Toolkit'. We
continue to look at options for a Gateway product in the Access
Management and Strategic Pricing family and continue to assess the
opportunities for this product family.
A focus of our marketing in the period has been to widen our
marketing to increasingly target the "C suite" and not just the
CFO. The importance of revenue integrity to all healthcare
providers is gaining increasing exposure at the top tier management
of these organisations. We are now seeing acknowledgment across the
"C Suite" that financial and clinical operations have to be aligned
to achieve better quality in healthcare and outcomes.
Awards
We are pleased to report that once again two of our solutions
ranked first in two distinct revenue cycle categories in the annual
"2013 Best in KLAS Awards: Software & Services" report,
published January 2014. In this new KLAS report, Craneware's
flagship product, Chargemaster Toolkit(R), earned the #1 ranking in
the KLAS "Revenue Cycle - Chargemaster Management" market category
for the eighth consecutive year, and Craneware's Bill Analyzer
software ranked #1 in the "Revenue Cycle - Charge Capture," winning
a Category Leader award for the third year running.
Product Development
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.
Product development continues to be focused on supporting this
long term strategy. During the period we have progressed the
initiatives that were launched in the prior year. These include:
continuing to enhance the functionality of current products whilst
investigating the opportunities that integration of current
offerings into new innovative combinations could present;
maintaining the focus on external integration with Healthcare
Information Systems, such as the EPIC patient accounting system, to
ensure we can fully support all our Customers should they decide to
replace their current systems. In conjunction with and in support
of these initiatives we have continued development of our common
software framework, this will provide the foundation for our future
development efforts, significantly decreasing our time to market.
During the period we have neared completion of the development of a
set of hybrid solutions, which combine services with some of our
core products which enables them to be implemented at smaller
hospitals that do not have their own internal revenue integrity
teams. We expect these solutions to be released in the second
half of the year.
Financial Review
For the six month period to 31 December 2013, we are reporting a
5% growth in revenues to $21.1m (H113:$20.1m) and a resulting 6%
increase in adjusted EBITDA(1) to $5.7m (H113: $5.4m).
The majority of the Group's revenue is recognised under the
Annuity SaaS revenue recognition model. This model sees software
licence revenue recognised over the life of the underlying contract
(which as detailed earlier for new hospital sales is an average of
5 years) with any associated professional service revenue
recognised as we deliver the services. As a result of this
conservative revenue recognition model, sales made in any single
period will not contribute significantly to revenues in that
period, instead they will add to 'revenue visibility for future
years' i.e. support and add confidence to the future years growth
rates of the Group. The strategy behind the Group's business model
and revenue recognition policies are to ensure the long term growth
and stability of the Group.
In the period under review, we have seen increasing sales
momentum delivering incremental levels of sales together with a
sales mix which, when compared to last year, includes an increase
in sales to large hospitals and small to medium size hospital
groups and also includes contracts signed for up to 9 years. As a
result of our revenue recognition model, however, we do not see a
significant short term increase in revenue instead we will see the
vast majority of these sales convert to revenue in future years
providing the foundation for further growth in those years.
As a means of demonstrating the growth in this future years
revenue, 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. This KPI helps to demonstrate how the
underlying annuity base of revenue is building each year. This
though is a three year 'snapshot' and does not fully represent the
benefit of new contracts signed for up to 9 years.
At the interim reporting date, the Company reports how that
metric, for the same three year period has moved on i.e.
incorporating the results of the first six months of the three year
KPI. This shows both how renewals have flowed through and how sales
of new products have affected new contracted revenue across the
three years. The total visible revenue for the three year period 1
July 2013 to 30 June 2016 has grown during this six month period to
$114.4m from $109.5m at 30 June 2013. This comprises $79.5m revenue
under contract, $29.7m renewal revenue and $5.2m revenue identified
as recurring in nature (previously referred to as Claimtrust Legacy
Revenue) (at 30 June 2013: $60.6m, $40.8m and $8.1m
respectively).
'Revenue under contract'; relates to revenues that are supported
by underlying contracts. 'Renewal revenue'; at the start of the
year, we 'look forward' and calculate the amount of revenue which
is potentially available to be recognised in each of the three
years 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 revenue identified as recurring in nature;
this was previously called 'Claimtrust Legacy Revenue' as it
related to our February 2011 acquisition. This was revenue that was
subject to long term contracts, but had shortterm break clauses and
was usually invoiced on a monthly basis, however due to the nature
of the underlying services provided, we expected it to be recurring
in nature. Since the integration of Claimtrust we have been, where
possible, refocussing these services towards annuity contracts. In
the period we implemented a significant step in this transition
redeploying the highly skilled healthcare consultants from more
traditional services work to 'contracted engagements' directly
supporting existing customers and potential new software sales.
This results in engagements which are shorter term in nature and
therefore this small element no longer appears in revenue
visibility for future periods. As discussed at the time of our FY13
results this element of revenue visibility will now be labeled
Other Recurring Revenue. This better aligns these consultants to
the long term strategic aims of the Group.
Our renewal rates by dollar value are subject to period to
period fluctuations, however over the course of a full year we
historically see these renewal rates return to over 100% by dollar
value. In the current period we have again seen our renewal rates
dip to 94%. We have witnessed this previously 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. The increased level
of sales in the period combined with the changes made to the sales
incentive structure has and will have an impact on the gross profit
margins, however this investment has been balanced against
investments in other areas. As a result, our adjusted EBITDA margin
for the period is 27% as compared to 26.8% 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 8% to $0.143 per
share (H113 : $0.132) and adjusted diluted EPS increasing to $0.142
(H113: $0.131).
The Group continues to maintain a strong balance sheet, with no
debt and significant cash reserves of $30.6m ($28.6m at 31 December
2012 and $30.3m at 30 June 2013). The cash levels reported are
after returning $2.8m to shareholders by way of dividends and tax
payments of $1.2m in the period. The increase in cash balances is
in contrast to prior years, where the combination of dividends and
tax payments combined with cash cycles in the run up to 31 December
has resulted in a 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 $1.58/GBP1 which was comparable to
the corresponding period last year.
Dividend
The Board has resolved to pay an interim dividend of 5.7p (9.44
cents) per ordinary share in the Company on 25 April 2014 to those
shareholders on the register as at 28 March 2014 (FY13 Interim
dividend 5.2p). The ex-dividend date is 26 March 2014.
The interim dividend of 5.7p per share is capable of being paid
in US dollars subject to a shareholder having registered to receive
their dividend in US dollars under the Company's Dividend Currency
Election, or who has registered to do so by the close of business
on 28 March 2014. The exact amount to be paid will be calculated by
reference to the exchange rate to be announced on 28 March 2014.
The interim dividend referred to above in US dollars of 9.44 cents
is given as an example only using the Balance Sheet date exchange
rate of $1.6563/GBP1 and may differ from that finally
announced.
Outlook
Craneware remains at the forefront of providing solutions to US
healthcare providers so they can achieve the revenue integrity
required to support improved patient care and outcomes.
We have seen a continued increase in sales during the period, to
progressively larger hospital groups. The US Healthcare market
seems to be settling as strategies are developing to support the
need for change and deal with the uncertainties of the Affordable
Care Act. With a strong product suite, clear strategic direction
and high levels of revenue visibility, we are confident of
continued future growth.
Keith Neilson Craig Preston
Chief Executive Officer Chief Financial Officer
10 March 2014 10 March 2014
Craneware PLC
Interim Results FY14
Consolidated Statement of Comprehensive
Income
H1 2014 H1 2013 FY 2013
Notes $'000 $'000 $'000
------------------------------------------ ------- ----------- ----------- -----------
Revenue 21,146 20,131 41,452
Cost of sales (1,199) (836) (2,071)
----------- ----------- -----------
Gross profit 19,947 19,295 39,381
Net operating expenses (15,182) (14,835) (28,881)
----------- ----------- -----------
Operating profit 4,765 4,460 10,500
Analysed as:
Adjusted EBITDA(1) 5,703 5,392 12,357
Share-based payments (96) (95) (181)
Depreciation of plant and equipment (303) (305) (621)
Amortisation of intangible assets (539) (532) (1,055)
--------------------------------------------------- ----------- ----------- -----------
Finance income 31 54 103
----------- ----------- -----------
Profit before taxation 4,796 4,514 10,603
Tax charge on profit on ordinary
activities (1,223) (1,241) (2,307)
----------- ----------- -----------
Profit for the period attributable
to owners of the parent 3,573 3,273 8,296
--------------------------------------------------- ----------- ----------- -----------
Total comprehensive income attributable
to owners of the parent 3,573 3,273 8,296
--------------------------------------------------- ------- ----------- -----------
(1) Adjusted EBITDA is defined as operating profit before,
share based payments, depreciation and amortisation.
Earnings per share for the period attributable to equity holders
- Basic ($ per share) 1a 0.132 0.121 0.307
- *Adjusted Basic ($ per share)(2) 1a 0.143 0.132 0.329
- Diluted ($ per share) 1b 0.132 0.121 0.306
- *Adjusted Diluted ($ per share)(2) 1b 0.142 0.131 0.328
----------- -------- ----------
(2) Adjusted Earnings per share calculations allow for the
amortisation on acquired intangible assets to form a better
comparison with previous periods.
Craneware PLC
Interim Results FY14
Consolidated Statement of Changes in Equity
--------------------------------------------------------------------------------------------------
Retained
Share Capital Share Premium Other Reserves Earnings Total
$'000 $'000 $'000 $'000 $'000
--------------------------- -------------- -------------- --------------- ---------- --------
At 1 July 2012 538 15,408 209 21,282 37,437
Total comprehensive
income - profit for
the period - - - 3,273 3,273
Transactions with owners
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
--------------------------- -------------- -------------- --------------- ---------- --------
Total comprehensive
income - profit for
the period
Transactions with owners - - - 5,023 5,023
Share-based payments - - 86 (37) 49
Impact of share options
exercised 1 88 (128) 124 85
Dividend - - - (2,211) (2,211)
At 30 June 2013 539 15,496 212 25,074 41,321
--------------------------- -------------- -------------- --------------- ---------- --------
Total comprehensive
income - profit for
the period
Transactions with owners - - - 3,573 3,573
Share-based payments - - 97 - 97
Impact of share options
exercised - - (41) 41 -
Dividend - - - (2,783) (2,783)
At 31 December 2013 539 15,496 268 25,905 42,208
--------------------------- -------------- -------------- --------------- ---------- --------
Craneware PLC
Interim Results FY14
Consolidated Balance Sheet as at 31 December
2013
H1 2014 H1 2013 FY2013
Notes $'000 $'000 $'000
-------------------------------- ------- -------- -------- -------
ASSETS
Non-Current Assets
Plant and equipment 1,547 1,834 1,596
Intangible assets 14,812 15,481 15,291
Deferred Tax 1,564 1,673 1,615
17,923 18,988 18,502
-------- -------- -------
Current Assets
Trade and other receivables 2 17,347 13,195 15,128
Current tax assets 377 428 468
Cash and cash equivalents 30,628 28,623 30,277
48,352 42,246 45,873
-------- -------- -------
Total Assets 66,275 61,234 64,375
-------------------------------- ------- -------- -------- -------
EQUITY AND LIABILITIES
Non-Current Liabilities
Deferred income - - 30
- - 30
-------- -------- -------
Current Liabilities
Deferred income 18,362 15,999 16,419
Current tax liabilities 983 1,329 1,055
Trade and other payables 4,722 5,531 5,550
24,067 22,859 23,024
-------- -------- -------
Total Liabilities 24,067 22,859 23,054
-------- -------- -------
Equity
Called up share capital 3 539 538 539
Share premium account 15,496 15,408 15,496
Other reserves 268 254 212
Retained earnings 25,905 22,175 25,074
Total Equity 42,208 38,375 41,321
-------- -------- -------
Total Equity and Liabilities 66,275 61,234 64,375
-------------------------------- ------- -------- -------- -------
Craneware PLC
Interim Results FY14
Consolidated Statement of Cash Flow for the six months ended
31 December 2013
H1 2014 H1 2013 FY 2013
Notes $'000 $'000 $'000
----------------------------------------- ------ -------- -------- --------
Cash flows from operating activities
Cash generated from operations 4 4,601 4,396 9,891
Interest received 31 54 103
Tax paid (1,183) (209) (3,377)
----------------------------------------- ------ -------- -------- --------
Net cash from operating activities 3,449 2,431 6,617
Cash flows from investing activities
Purchase of plant and equipment (254) (112) (190)
Capitalised intangible assets (61) (4) (336)
----------------------------------------- ------ -------- -------- --------
Net cash used in investing activities (315) (116) (526)
Cash flows from financing activities
Dividends paid to company shareholders (2,783) (2,482) (4,693)
Proceeds from issuance of shares - - 89
----------------------------------------- ------ -------- -------- --------
Net cash used in financing activities (2,783) (2,482) (4,604)
Net (decrease)/increase in cash
and cash equivalents 351 (167) 1,487
Cash and cash equivalents at the
start of the period 30,277 28,790 28,790
Cash and cash equivalents at the
end of the period 30,628 28,623 30,277
----------------------------------------- ------ -------- -------- --------
Craneware PLC
Interim Results FY14
Notes to the Financial Statements
1. Earnings per Share
(a) Basic
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the period.
----------------------------------------------------------------------------
H1 2014 H1 2013 FY 2013
---------------------------------------------- -------- -------- --------
Profit attributable to equity holders
of the Company ($'000) 3,573 3,273 8,296
Weighted average number of ordinary
shares in issue (thousands) 27,009 26,992 26,998
Basic earnings per share ($ per share) 0.132 0.121 0.307
-------- -------- --------
Profit attributable to equity holders
of the Company ($'000) 3,573 3,273 8,296
Amortisation of acquired intangibles
($'000) 287 287 574
-------- -------- --------
Adjusted Profit attributable to equity
holders ($'000) 3,860 3,560 8,870
-------- -------- --------
Weighted average number of ordinary
shares in issue (thousands) 27,009 26,992 26,998
Adjusted Basic earnings per share ($
per share) 0.143 0.132 0.329
-------- -------- --------
(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 2014 H1 2013 FY 2013
---------------------------------------------- -------- -------- --------
Profit attributable to equity holders
of the Company ($'000) 3,573 3,273 8,296
Weighted average number of ordinary
shares in issue (thousands) 27,009 26,992 26,998
Adjustments for: - share options (thousands) 141 91 69
Weighted average number of ordinary
shares for diluted earnings per share
(thousands) 27,150 27,083 27,067
Diluted earnings per share ($ per share) 0.132 0.121 0.306
-------- -------- --------
1. Earnings per Share (Cont.)
H1 2014 H1 2013 FY 2013
---------------------------------------------- -------- -------- --------
Profit attributable to equity holders
of the Company ($'000) 3,573 3,273 8,296
Amortisation of acquired intangibles
($'000) 287 287 574
Adjusted Profit attributable to equity
holders ($'000) 3,860 3,560 8,870
-------- -------- --------
Weighted average number of ordinary
shares in issue (thousands) 27,009 26,992 26,998
Adjustments for: - share options (thousands) 141 91 69
Weighted average number of ordinary
shares for diluted earnings per share
(thousands) 27,150 27,083 27,067
Adjusted Diluted earnings per share
($ per share) 0.142 0.131 0.328
-------- -------- --------
2. Trade and other receivables
H1 2014 H1 2013 FY 2013
$'000 $'000 $'000
----------------------------------------- -------- -------- --------
Trade Receivables 9,215 6,690 8,448
Less: provision for impairment of trade
receivables (616) (422) (607)
-------- -------- --------
Net trade receivables 8,599 6,268 7,841
Other Receivables 186 193 203
Prepayments and accrued income 8,562 6,734 7,084
-------- -------- --------
Trade and other receivables 17,347 13,195 15,128
-------- -------- --------
------There is no material difference between the fair value of
trade and other receivables and the book value stated above.
3. Called up share capital
H1 2014 H1 2013 FY 2013
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 27,008,763 539 26,998,408 538 27,008,763 539
4. Consolidated Cash Flow generated from operating
activities
Reconciliation of profit before taxation to
net cash inflow from operating activities:
H1 2014 H1 2013 FY 2013
$'000 $'000 $'000
-------------------------------------- -------- -------- --------
Profit before taxation 4,796 4,514 10,603
Finance income (31) (54) (103)
Depreciation on plant and equipment 303 305 621
Amortisation on intangible assets 539 532 1,055
Share-based payments 96 95 181
Movements in working capital:
(Increase)/decrease in trade
and other receivables (2,693) (787) (2,721)
(Decrease)/increase in trade
and other payables 1,591 (209) 255
Cash generated from operations 4,601 4,396 9,891
-------------------------------------- -------- -------- --------
5. 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 2014. Those
accounts, with an unqualified audit report, have been delivered to
the Registrar of Companies.
6. 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.
7. 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 ($1.6563/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.
8. 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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