TIDMCRW
RNS Number : 9681G
Craneware plc
10 March 2015
10 March 2015
Craneware plc
("Craneware", "the Group" or the "Company")
Interim Results
10 March 2015 - 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 2014.
Financial Highlights (US dollars)
-- Total contract value signed in the period increased 13%
-- Revenue increased 2% to $21.6m (H1 2014: $21.1m)
-- Adjusted EBITDA(1) increased 10% to $6.3m (H1 2014: $5.7m)
-- Profit before tax increased 10% to $5.3m (H1 2014: $4.8m)
-- Adjusted basic EPS increased 15% to 16.5 cents per share (H1 2014: 14.3cents per share)
-- Cash at period end $36.4m (H1 2014: $30.6m)
-- Proposed interim dividend of 6.3p per share (H1 2014: 5.7p per share)
(1.) Adjusted EBITDA refers to earnings before interest, tax,
depreciation, amortisation and share based payments that include
acquisition and share transaction related costs.
Operational Highlights
-- Continued sales momentum in H1
-- Strong performance in "2014 Best in KLAS Awards"
-- First sale by Craneware Health, previously Kestros Health
-- Continued product development and enhancement
Keith Neilson, CEO of Craneware commented:
"We have seen a continued increase in sales during the period,
building on the record year in 2014 and this, combined with
Craneware's strong product suite, clear strategic direction and
high levels of revenue visibility, means that we look to the future
with confidence."
For further information, please contact:
Craneware plc Peel Hunt Newgate
+44 (0)131 550 3100 +44 (0)20 7418 8900 +44 (0)20 7653 9850
Keith Neilson, CEO Dan Webster Tim Thompson
Craig Preston, CFO Richard Kauffer Edward Treadwell
About Craneware
Founded in 1999, Craneware has headquarters in Edinburgh,
Scotland with offices in Georgia, 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 Statement
I am pleased to report that Craneware has delivered a positive
first half of the year; building on the record sales performance of
the prior year and securing sales within each strata of the market.
We have seen an increase of 13% in the total contract value signed
in the first half of the year, compared to the first half of the
prior year, reaffirming the increased confidence we have seen
within the healthcare market. These sales will primarily contribute
to revenue recognised in future periods in line with the Company's
revenue recognition policy.
We are an innovative business committed to supplying healthcare
providers with market leading tools to achieve the revenue
integrity required to support improved patient care and outcomes.
We were delighted to achieve increasing scores for our products
from the prestigious industry research house KLAS, at their annual
awards, announced recently. Our technological capabilities continue
to expand with the team from Kestros, acquired in August 2014,
having integrated well and securing their first contract as
'Craneware Health', to a NHS Trust. Our main focus for this
technology will be its use as a platform for entry into the high
growth Patient Access market - a market being driven by the
increasing levels of consumerism within US & UK healthcare. We
are seeing increased appetite for our revenue integrity solutions
as the US continues to develop multiple "Fee for Value" business
models in its ongoing evolution of healthcare.
The Company delivered a solid financial performance in the
period. Revenues increased by 2% to $21.6m (H1 2014: $21.1m),
adjusted EBITDA increased 10% to $6.3m (H1 2014: $5.7m) and
adjusted EPS increased by 15% to 16.5 cents (H1 2014: 14.3 cents).
Craneware continued to benefit from strong operational cash flow,
ending the period with a cash balance of $36.4m (31 December 2013:
$30.6m) having returned $2.9m to shareholders in dividends and
completed a share buy-back of $3.6m of shares in the period. This,
as previously reported, included the scheduled clearing of accrued
revenue balances relating to a third party contract. Renewal rates
amongst our customers remained high, at greater than 100% by dollar
value.
Looking forward we are confident that the high levels of
contracted revenue secured in prior periods coupled with the market
opportunities for our enhanced and expanding range of products and
solutions will enable us to deliver future sustainable growth.
I would like to take this opportunity to thank our employees for
their hard work and dedication, and our shareholders for your
support throughout the period.
George Elliott
Chairman
9 March 2015
Strategic Report: Operational & Financial Review
Our sales pipeline reported at the end of the prior period has
allowed us to enjoy a positive start to the year, with good levels
of sales to all segments of the US healthcare market, demonstrating
continued sales momentum and the benefits of a supportive market
environment. While revenue growth in the period has been modest we
have delivered adjusted EBITDA and EPS growth in excess of 10%
while continuing to invest in the future of the business. Continued
sales momentum during the period has resulted in an increase in
revenue to be recognised in future years, providing us with a
growing platform on which to build.
The period has seen a wealth of operational successes,
particularly focused around building the strength and value of our
product suite. In addition we will benefit from the recently
awarded higher scores within the KLAS industry awards for two of
our products. We have launched several enhancements to our existing
products and secured the first sales for the newly established
'Craneware Health' division. Product developments will see cloud
versions of our products launched as technology platforms in these
areas continue to strengthen and we develop out our Craneware
Application Framework for Enterprise (CAFÉ). We also secured the
exclusive US distribution rights to a data analytics platform
called Analytixagility developed by Aridhia, already highly thought
of in the UK market. This will add greater depth to our product
suite in future periods and allow us and our customers to leverage
both our own and their data assets.
The sales pipeline continues to be at a record high across all
strata of hospital, providing confidence that we are on the right
path towards accelerated revenue and profit growth in future
years.
Market Developments
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. They
are seeking the means to manage the impact of consumerism of their
businesses (there are currently hundreds of billions of dollars of
self-pay debt sitting on hospitals balance sheets), which are no
longer solely B2B but now increasingly B2C in nature as well.
Of note during the period has been the cessation of the RAC
Audit re-tendering process while legal challenges to the new
procurement process progress, meaning the current incumbents have
resumed their auditing of hospitals with vigour. We anticipate this
to drive an uptick in sales of our audit product and associated
transactional revenue in the second half of the year and future
years.
During January 2015, Medicare and several large hospital systems
and insurers reaffirmed their commitment to Fee for Value business
models proposing targets and timelines for their adoption.
Sales and Marketing
The Group delivered a good sales performance in the period. The
increased level of total contract value in the period was also a
result of continued investments in the sales force through
increased capacity at a sales leadership level, training and a new
competitive incentive scheme to drive this performance.
The average length of new hospital contracts continues to be
in-line with our historical norms of approximately 5 years. Where
Craneware enters into new product contracts with its existing
customers, contracts are occasionally made co-terminus with the
customer's existing contracts, and as such, the average length of
these contracts remains 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 greater than 100%, is within expected norms of 85-115%
including cross sell of further products to renewing customers.
Length of our average contract for renewals was stable in the
period.
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.
We are today announcing that we have secured a distribution
partnership for a data analytics platform called Analytixagility,
from a UK based company Aridhia, which is highly regarded in the
NHS within the UK. Craneware is the exclusive distributor for the
solution set in the US.
We are now seeing acknowledgment across the Boards and
management teams of hospitals that financial and clinical
operations have to be aligned financially to drive better
healthcare and therefore better patient outcomes. In October 2014
we held our first Revenue Integrity Summit in Las Vegas. The Summit
brought Craneware customers together to share insights and
strategies on how health systems can master today's complex
challenges and achieve sustainable revenue integrity.
Dr. M. Jocelyn Elders, the sixteenth Surgeon General of the
United States, was the Summit's final speaker, bringing unique
insight into payor-provider relations and the role of the Federal
Government in healthcare.
Awards
Once again, two of our solutions ranked first in two distinct
revenue cycle categories in the annual "2014 Best in KLAS Awards:
Software & Services" report, published in January 2015. In this
new KLAS report, Craneware's flagship product, Chargemaster
Toolkit(R), earned the number one ranking in the "Revenue Cycle -
Chargemaster Management" market category for the ninth consecutive
year, and Craneware's Bill Analyzer software ranked number one in
the "Revenue Cycle - Charge Capture" category, winning a "Category
Leader" designation award for the fourth year in a row.
Product Development
Our strategy is to provide software and solutions that empower
healthcare providers to proactively manage their overall financial
performance. We accomplish this by monitoring the points in their
system where clinical and operational data transform into financial
transactions, delivering value in the discovery, conversion and
optimisation of these financial assets. Our solutions automate the
normalisation of disparate clinical, operational, and financial
data sets, enabling informed tactical and strategic decisions.
We consistently receive feedback from our customers that the
implementation of our software can have a profound effect on a
hospital's operations, enabling the rapid identification of
significant amounts of dollars in missed revenue, overspend on
their cost base or incorrect billing which could lead to lost
income and ultimately fines.
Through the distribution agreement with Aridhia, we are now in a
position to enhance these findings with data analytics that sit
alongside our products and draw benchmarks from underlying data
from our customer footprint and proprietary data sets and provide
insight into their hospital operations. Efforts will be focused
initially on the areas of Readmission identification and prevention
which is a key component of any Fee for Value based business
model.
The acquisition of Kestros Limited in August 2014, now renamed
Craneware Health, is enabling us to develop a new fourth Gateway
product in the Patient Access and consumerism area which is on
track for launch in the next financial year while we continue to
bring enhancements to this product for our domestic market.
The first half of the year saw the launch of our hybrid solution
which combines services with some of our core products, enabling
them to be implemented on a services basis at smaller hospitals
that do not have their own internal revenue integrity teams. The
period also saw enhancement releases of CMT, Bill Analyzer and
Payment Analyzer giving greater levels of scalability and preparing
for the next evolution of these products in a cloud based
environment utilising the Craneware Application Framework for
Enterprise (CAFÉ) .
In conjunction with and in support of these initiatives, the
continued development of our common software framework, CAFÉ will
provide the foundation for our future development efforts,
significantly decreasing our time to market. Product development
continues to be focused on supporting this long term strategy,
innovative packaging of existing and new solutions as well as
utilising technology to further enhance options for products to
move further on to the cloud and mobile platforms.
Financial Review
For the six month period to 31 December 2014 we are reporting
revenues of $21.6m (H114: $21.1m), an increase of 2% over the same
period in the prior year. This combined with our continued focused
investment spend has delivered an increase of 10% in adjusted
EBITDA to $6.3m (H114: $5.7m) and ultimately a 15% increase in
adjusted basic earnings per share to 16.5 cents (H114: 14.3
cents).
A highlight of the period has been our cash generation, with our
adjusted EBITDA to operating cash conversion exceeding 180%
resulting in cash at the period end of $36.4m (H114: $30.6m).
Whilst it is expected that cash conversion will fluctuate year on
year, a focus on a long term average of 100% EBITDA to operating
cash conversion ensures the quality of underlying earnings. A large
partner contract signed in February 2012 saw the Group building up
accrued revenue balances from this date to 30 June 2014 as we
followed our standard revenue recognition policy, albeit not
collecting cash upfront (being guaranteed minimums this would not
be appropriate). As previously disclosed, protections and
performance in the contract meant it was appropriate for the Group
to recognise the revenue under our standard recognition policy
whilst recognising it would impact our cash conversion ratios in
those years. This accrued revenue was invoiced at 30 June 2014 and
has substantially cleared in the period (the remaining balance
relating to an outstanding project) and as such is a contributing
factor in this cash conversion performance.
The positive sales momentum has resulted in the total value of
contracts written in the period increasing by 13% as compared to
this same period last year. The Group's conservative Annuity SaaS
business model means the vast majority of the benefit from these
sales is not seen in the period under review, instead it adds to
'revenue visibility for future years' which support the future
growth of the Group. This is a result of software licence revenue
being recognised over the life of the underlying contract (which
for a new hospital sale is an average of 5 years) and any
associated professional services revenue is recognised as we
deliver the services. The benefit of the Annuity SaaS revenue
recognition model is it retains focus on the long term growth and
stability of the Group, rather than overly focusing on short term
KPI's and rewards.
At the end of each financial year, the Group reports its Three
Year Visible Revenue KPI. This KPI shows the strength of the
underlying annuity revenue stream that is building with each new
sale. At the subsequent half year reporting period, we report how
that metric for the same three year period has built. This
demonstrates both the effect of new sales and renewals in the
period, although it is only a three year 'snapshot'. The total
visible revenue for the three year period 1 July 2014 to 30 June
2017 has grown during this six month period to $119.9m from $112.8m
at 30 June 2014. This comprises $98.0m 'Revenue under Contract',
$20.1m 'Renewal Revenue' and $1.8m of 'Other Recurring
Revenue'.
'Revenue under Contract', relates to revenues that are supported
by underlying contracts. 'Renewal Revenue'; at each reporting date,
we 'look forward' and calculate the amount of revenue which is
potentially available and could be recognised in each fiscal year
of the three year period but that requires an underlying contract
to be renewed. In calculating this, we assume a 100% dollar value
renewal level. As the renewals occur, the aggregated related
revenue for all of the three years, moves from 'Renewal Revenue' to
'Revenue under Contract'. The final element is 'Other Recurring
Revenue, this relates to revenue that is not subject to long term
contracts, which can be billable 'per transaction' or a set monthly
amount and is usually invoiced on a monthly basis, however it is
reasonable to expect to be recurring in nature.
Due to the way we show our 'Renewal Revenue' in our revenue
visibility graph (i.e. at 100% of dollar value), we track our
renewal rate by dollar value KPI to ensure our 100% assumption in
producing our revenue visibility KPI is still appropriate. We
expect to see this KPI fluctuate year on year with our historic
range being 85% to 115% and in the period are reporting a renewal
rate by dollar value (including upsell and cross sell) of 104%.
On the 28 August, the Group announced the acquisition of Kestros
Limited for a maximum consideration of GBP1.25m, of which
GBP150,000 was paid in cash, the remainder saw 211,539 new ordinary
shares being allotted in favour of the vendor. Full details of the
provisional acquisition accounting for this acquisition are
detailed in note 5.
Shortly before this acquisition, on 16th July, the Group
completed a share buyback of 393,816 shares at a price of 527.5p
per share and these shares were immediately cancelled. The net
result of these two transactions has been to reduce the Company's
issued share capital by 182,277 ordinary shares.
We continue to target our investment as appropriate for the
future growth of the Group, whilst ensuring the efficiency of all
expenditures. This has contributed to our adjusted EBITDA margin
which for the period is 29% as compared to 27% in the same period
in the prior year. Ultimately the increase in EBITDA, as well as a
continued beneficial effect from the reduction in corporation tax
rates in the UK, has resulted in the adjusted basic EPS increasing
by 15% to 16.5 cents per share (H114: 14.3 cents) and adjusted
diluted EPS increasing to 16.4 cents (H114: 14.2 cents). The
adjustments we make to both these metrics are those normally
expected and include acquisition and share related costs in the
period.
The Group continues to maintain a strong balance sheet, with no
debt and significant cash reserves of $36.4m ($30.6m at 31 December
2013 and $32.6m at 30 June 2014). The cash levels reported are
after returning $2.9m to shareholders by way of dividends, $3.6m
related to the share buyback and tax payments of $1.2m in the
period. Continued 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 $1.63/GBP1 which was compares to
$1.58/GBP1 in the corresponding period last year.
Dividend
The Board has resolved to pay an interim dividend of 6.3p (9.8
cents) per ordinary share in the Company on 24 April 2015 to those
shareholders on the register as at 27 March 2015 (FY14 Interim
dividend 5.7p). The ex-dividend date is 26 March 2015.
The interim 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 has registered to do so by the close of business
on 27 March 2015. The exact amount to be paid will be calculated by
reference to the exchange rate to be announced on 27 March 2015.
The interim dividend referred to above in US dollars of 9.8 cents
is given as an example only using the Balance Sheet date exchange
rate of $1.56/GBP1 and may differ from that finally announced.
Outlook
Craneware's opportunity lies in our ability to capitalise on the
wealth of knowledge contained within our data sets and client base
to produce innovative solutions that help hospitals stay
financially healthy so that they can improve the health of their
patients. To support this vision, we will continue to listen to our
customers and the issues they face, investigate further the
implications of consumerism and ensure we are developing
effectively and efficiently.
Objectives for the second half of the year will be the migration
of the first of our products fully onto our CAFÉ architecture, and
the building out of the Craneware Health product set for market
entry in the next financial year.
We have seen a continued increase in sales during the period,
building on the record year in 2014 and this, combined with
Craneware's strong product suite, clear strategic direction and
high levels of revenue visibility means that we look to the future
with confidence.
Keith Neilson Craig Preston
Chief Executive Officer Chief Financial Officer
9 March 2015 9 March 2015
Craneware PLC
Interim Results FY15
Consolidated Statement of Comprehensive
Income
H1 2015 H1 2014 FY 2014
Notes $'000 $'000 $'000
------------------------------------------- ------- ----------- ----------- -----------
Revenue 21,573 21,146 42,574
Cost of sales (1,181) (1,199) (1,943)
----------- ----------- -----------
Gross profit 20,392 19,947 40,631
Net operating expenses (15,179) (15,182) (29,407)
----------- ----------- -----------
Operating profit 5,213 4,765 11,224
Analysed as:
Adjusted EBITDA(1) 6,293 5,703 13,069
Acquisition costs and share related
transactions (154) - -
Share-based payments (117) (96) (198)
Depreciation of plant and equipment (259) (303) (575)
Amortisation of intangible assets (550) (539) (1,072)
---------------------------------------------------- ----------- ----------- -----------
Finance income 41 31 66
----------- ----------- -----------
Profit before taxation 5,254 4,796 11,290
Tax charge on profit on ordinary
activities (1,260) (1,223) (2,680)
----------- ----------- -----------
Profit for the period attributable
to owners of the parent 3,994 3,573 8,610
---------------------------------------------------- ----------- ----------- -----------
Total comprehensive income attributable
to owners of the parent 3,994 3,573 8,610
---------------------------------------------------- ------- ----------- -----------
(1) Adjusted EBITDA is defined as operating profit before,
share based payments, depreciation, amortisation, acquisition
costs and share related transactions.
Earnings per share for the period attributable to equity holders
- Basic ($ per share) 1a 0.149 0.132 0.319
- *Adjusted Basic ($ per share)(2) 1a 0.165 0.143 0.340
- Diluted ($ per share) 1b 0.148 0.132 0.317
- *Adjusted Diluted ($ per share)(2) 1b 0.164 0.142 0.338
----------- -------- ----------
(2) Adjusted Earnings per share calculations allow for the tax
adjusted acquisition costs and share related transactions together
with amortisation on acquired intangible assets to form a better
comparison with previous periods.
Craneware PLC
Interim Results FY15
Consolidated Statement of Changes in Equity
--------------------------------------------------------------------------------------------------
Retained
Share Capital Share Premium Other Reserves Earnings Total
$'000 $'000 $'000 $'000 $'000
--------------------------- -------------- -------------- --------------- ---------- --------
At 1 July 2013 539 15,496 212 25,074 41,321
Total comprehensive
income - profit for
the period - - - 3,573 3,573
Transactions with owners
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
--------------------------- -------------- -------------- --------------- ---------- --------
Total comprehensive
income - profit for
the period
Transactions with owners - - - 5,037 5,037
Share-based payments - - 101 146 247
Impact of share options
exercised - - (134) 134 -
Dividend - - - (2,576) (2,576)
At 30 June 2014 539 15,496 235 28,646 44,916
--------------------------- -------------- -------------- --------------- ---------- --------
Total comprehensive
income - profit for
the period
Transactions with owners - - - 3,994 3,994
Share-based payments - - 117 - 117
Impact of share options
exercised - 40 (54) 54 40
Issue of Ordinary shares
related to business
combination 4 1,820 - - 1,824
Buy back of Ordinary
shares (7) (3,572) - - (3,579)
Dividend - - - (2,864) (2,864)
At 31 December 2014 536 13,784 298 29,830 44,448
--------------------------- -------------- -------------- --------------- ---------- --------
Craneware PLC
Interim Results FY15
Consolidated Balance Sheet as at 31 December
2014
H1 2015 H1 2014 FY2014
Notes $'000 $'000 $'000
-------------------------------- ------- -------- -------- -------
ASSETS
Non-Current Assets
Plant and equipment 1,147 1,547 1,329
Intangible assets 15,956 14,812 14,325
Trade and other receivables 2 2,193 - 1,890
Deferred Tax 1,810 1,564 1,644
21,106 17,923 19,188
-------- -------- -------
Current Assets
Trade and other receivables 2 16,041 17,347 20,946
Current tax assets 110 377 110
Cash and cash equivalents 36,374 30,628 32,613
52,525 48,352 53,669
-------- -------- -------
Total Assets 73,631 66,275 72,857
-------------------------------- ------- -------- -------- -------
EQUITY AND LIABILITIES
Non-Current Liabilities
Deferred income 1,355 - 2,077
1,355 - 2,077
-------- -------- -------
Current Liabilities
Deferred income 22,254 18,362 19,355
Current tax liabilities 1,351 983 1,136
Trade and other payables 4,223 4,722 5,373
27,828 24,067 25,864
-------- -------- -------
Total Liabilities 29,183 24,067 27,941
-------- -------- -------
Equity
Called up share capital 3 536 539 539
Share premium account 13,784 15,496 15,496
Other reserves 298 268 235
Retained earnings 29,830 25,905 28,646
Total Equity 44,448 42,208 44,916
-------- -------- -------
Total Equity and Liabilities 73,631 66,275 72,857
-------------------------------- ------- -------- -------- -------
Craneware PLC
Interim Results FY15
Consolidated Statement of Cash Flow for the six months ended
31 December 2014
H1 2015 H1 2014 FY 2014
Notes $'000 $'000 $'000
------------------------------------------- ------ -------- -------- --------
Cash flows from operating activities
Cash generated from operations 4 11,772 4,601 10,197
Interest received 41 31 66
Tax paid (1,218) (1,183) (2,154)
------------------------------------------- ------ -------- -------- --------
Net cash from operating activities 10,595 3,449 8,109
Cash flows from investing activities
Purchase of plant and equipment (74) (254) (308)
Acquisition of subisidiary, net
of cash acquired 5 (247) - -
Capitalised intangible assets (110) (61) (106)
------------------------------------------- ------ -------- -------- --------
Net cash used in investing activities (431) (315) (414)
Cash flows from financing activities
Dividends paid to company shareholders (2,864) (2,783) (5,359)
Buy back of Ordinary shares (3,579) - -
Proceeds from issuance of shares 40 - -
------------------------------------------- ------ -------- -------- --------
Net cash used in financing activities (6,403) (2,783) (5,359)
Net increase in cash and cash equivalents 3,761 351 2,336
Cash and cash equivalents at the
start of the period 32,613 30,277 30,277
Cash and cash equivalents at the
end of the period 36,374 30,628 32,613
------------------------------------------- ------ -------- -------- --------
Craneware PLC
Interim Results FY15
Notes to the Financial Statements
1. Earnings per Share
(a) Basic
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the period.
----------------------------------------------------------------------------
H1 2015 H1 2014 FY 2014
---------------------------------------------- -------- -------- --------
Profit attributable to equity holders
of the Company ($'000) 3,994 3,573 8,610
Weighted average number of ordinary
shares in issue (thousands) 26,797 27,009 27,009
Basic earnings per share ($ per share) 0.149 0.132 0.319
-------- -------- --------
Profit attributable to equity holders
of the Company ($'000) 3,994 3,573 8,610
Tax adjusted acquisition costs, share
related transactions and amortisation
of acquired intangibles ($'000) 422 287 574
-------- -------- --------
Adjusted Profit attributable to equity
holders ($'000) 4,416 3,860 9,184
-------- -------- --------
Weighted average number of ordinary
shares in issue (thousands) 26,797 27,009 27,009
Adjusted Basic earnings per share ($
per share) 0.165 0.143 0.340
-------- -------- --------
(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 2015 H1 2014 FY 2014
---------------------------------------------- -------- -------- --------
Profit attributable to equity holders
of the Company ($'000) 3,994 3,573 8,610
Weighted average number of ordinary
shares in issue (thousands) 26,797 27,009 27,009
Adjustments for: - share options (thousands) 162 141 162
Weighted average number of ordinary
shares for diluted earnings per share
(thousands) 26,959 27,150 27,171
Diluted earnings per share ($ per share) 0.148 0.132 0.317
-------- -------- --------
1. Earnings per Share (Cont.)
H1 2015 H1 2014 FY 2014
---------------------------------------------- -------- -------- --------
Profit attributable to equity holders
of the Company ($'000) 3,994 3,573 8,610
Tax adjusted acquisition costs, share
related transactions and amortisation
of acquired intangibles ($'000) 422 287 574
Adjusted Profit attributable to equity
holders ($'000) 4,416 3,860 9,184
-------- -------- --------
Weighted average number of ordinary
shares in issue (thousands) 26,797 27,009 27,009
Adjustments for: - share options (thousands) 162 141 162
Weighted average number of ordinary
shares for diluted earnings per share
(thousands) 26,959 27,150 27,171
Adjusted Diluted earnings per share
($ per share) 0.164 0.142 0.338
-------- -------- --------
2. Trade and other receivables
H1 2015 H1 2014 FY 2014
$'000 $'000 $'000
----------------------------------------- -------- -------- --------
Trade Receivables 11,975 9,215 16,589
Less: provision for impairment of trade
receivables (778) (616) (658)
-------- -------- --------
Net trade receivables 11,197 8,599 15,931
Other Receivables 95 186 175
Prepayments and accrued income 4,128 8,562 4,382
Deferred Contract Costs 2,814 - 2,348
-------- -------- --------
18,234 17,347 22,836
Less non-current receivables: Deferred
Contract Costs (2,193) - (1,890)
-------- -------- --------
Trade and other receivables 16,041 17,347 20,946
-------- -------- --------
------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 2015 H1 2014 FY 2014
Number $'000 Number $'000 Number $'000
--------------------------------- -------------- ------ ----------- ------ ------------- ---------
Authorised
Equity share capital
Ordinary shares of 1p
each 50,000,000 1,014 50,000,000 1,014 50,000,000 1,014
Allotted called-up and
fully paid
Equity share capital
Ordinary shares of 1p
each 26,832,582 536 27,008,763 539 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 2015 H1 2014 FY 2014
$'000 $'000 $'000
--------------------------------------------- ---------- ----------- -------------
Profit before taxation 5,254 4,796 11,290
Finance income (41) (31) (66)
Depreciation on plant and equipment 259 303 575
Amortisation on intangible assets 550 539 1,072
Share-based payments 117 96 198
Movements in working capital:
Decrease/(increase) in trade
and other receivables 4,635 (2,693) (7,708)
Increase in trade and other
payables 998 1,591 4,836
Cash generated from operations 11,772 4,601 10,197
--------------------------------------------- ---------- ----------- -------------
5. Acquisition of subsidiary: Kestros Ltd
On 26(th) August 2014, the Company acquired 100% of the issued
share capital of Kestros Ltd. The total consideration for the
acquisition along with the fair value of the identified assets and
assumed liabilities is shown below:
Fair Value
Adjustments Provisional
Book Value 31-Dec-14 Fair Value
Recognised amounts of identifiable
assets acquired and liabilities $'000 $'000 $'000
assumed
-------------------------------------- ------------- ------------- --------------
2 - 2
101 1,720 1,821
33 - 33
43 - 43
(35) - (35)
------------- ------------- --------------
144 1,720 1,864
------------- ------------- --------------
250
--------------
2,114
--------------
Tangibles fixed assets
Plant and Equipment
Intangibles assets
Proprietary Software
Other assets and liabilities
Trade and other receivables
Bank and cash balances
Trade and other payables
Goodwill
Fair Value
Satisfied by $'000
------------------------------------------------------------- ------
Cash 290
Ordinary Shares issued - 211,539 shares at $8.623 (GBP5.20) 1,824
------
2,114
------
Bank balances and cash acquired 43
Cash consideration (290)
------------------------------------------------------------- ------
Net Cash on acquisition (247)
------------------------------------------------------------- ------
The value of the equity consideration is subject to revenue
performance criteria through to 31 July 2016 and in the unlikely
event that these Revenue targets are not meet then a proportion of
the consideration is repayable. Management believe that the revenue
targets are easily achievable and as such the Fair Value of the
transaction is deemed to be equal to the amount paid at
acquisition. The acquisition costs, including all due diligence
costs that relate to the transaction have been expensed as
operating costs in compliance with IFRS 3 (revised). Had Kestros
Ltd been consolidated from 1 July 2014, the consolidated statement
of comprehensive income would be materially unaffected.
Goodwill of $250,000 has been recognised on acquisition and is
attributable to future software and the assembled workforce.
The initial accounting for the business combination is
incomplete as at 31 December 2014 and is based on provisional
amounts.
6. Basis of Preparation
The interim financial statements are unaudited and do not
constitute statutory accounts as defined in S435 of the Companies
Act 2006. These statements have been prepared applying accounting
policies that were applied in the preparation of the Group's
consolidated accounts for the year ended 30th June 2014. Those
accounts, with an unqualified audit report, have been delivered to
the Registrar of Companies.
7. Segmental Information
The Directors consider that the Group operates in predominantly
one business segment, being the creation of software sold entirely
to the US Healthcare Industry, and that there are therefore no
additional segmental disclosures to be made in these financial
statements.
8. 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 ($1.5593/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.
9. Availability of announcement and Half Yearly Financial
Report
Copies of this announcement are available on the Company's
website, www.craneware.com. Copies of the Interim Report will be
posted to shareholders, downloadable from the Company's website and
available from the registered office of the Company shortly.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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