TIDMCRW
RNS Number : 6425Z
Craneware plc
04 September 2018
Craneware plc
("Craneware", "the Group" or the "Company")
Final Results
4 September 2018 - Craneware (AIM: CRW.L), the market leader in
Value Cycle solutions for the US healthcare market, announces its
audited results for the year ended 30 June 2018.
Financial Highlights (US dollars)
-- Revenue increased 16% to $67.1m (FY17: $57.8m)
-- Adjusted EBITDA(1.) increased 20% to $21.6m (FY17: $18.0m)
-- Profit before tax increased 12% to $18.9m (FY17: $16.9m)
-- Basic adjusted EPS(2.) increased 17% to $0.602 (FY17: $0.514)
and adjusted diluted EPS increased to $0.591 (FY17: $0.503)
-- Total visible revenue increased 20% to $192.9m (FY17 same 3 year period: $160.7m)
-- Continued operating cash conversion above 100% of Adjusted EBITDA
-- Renewal rate remains above 100% by dollar value
-- Cash at year-end of $52.8m (FY17: $53.2m) after having
returned $23.2m to shareholders via a share buyback and dividends,
while also investing $4.2m in the Employee Benefit Trust
-- Proposed final dividend of 14.0p (18.48 cents) (FY17: 11.3p,
14.71 cents) per share giving a total dividend for the year of
24.0p (36.68 cents) (FY17: 20.0p, 26.04 cents) per share
(1.) Adjusted EBITDA refers to earnings before interest, tax,
depreciation, amortisation and share based payments.
(2.) Adjusted Earnings per share calculations allow for the tax
adjusted acquisition costs and share related transactions together
with amortisation on acquired intangible assets.
Operational Highlights
-- Over 100% increase in new sales in the year, including five
significant contracts wins or contract extensions
-- Continued supportive market environment as the US healthcare
market evolves towards value-based care, with a critical dependency
on accurate financial and operating data
-- Continued high levels of customer acquisition and retention
-- Increasing market engagement with newly launched cloud-based platform, Trisus(TM)
-- Strong sales and opportunities across the product suite and
across all classes of hospital providers, including for the first
Trisus product: Trisus Claims Informatics
-- Early adopters reporting positive results for our new
Craneware Healthcare Intelligence software, the next Trisus
software release
Outlook
-- Record sales pipeline for the current financial year
-- Board confident in outlook for the year and beyond
Keith Neilson, CEO of Craneware plc commented, "While the past
year has been outstanding in terms of financial results and
operational progress, this is by no means the end of the journey
and we are excited by the far greater opportunity that lies ahead.
It is clear that the investments we have made into the
organisation's design, people and products are delivering excellent
results, and we will continue to invest in our people and business
to ensure we have the capabilities to succeed. We believe that the
breadth of our customer base and the quantity of data within our
solutions means we have the opportunity to sit at the heart of the
move to value-based economics; collating and analysing the
information that will support hospital-wide decision making and
ultimately have a positive impact on the quality of healthcare.
"With an ongoing, growing market opportunity, a record sales
pipeline and increasing long-term revenue visibility, we enter the
new financial year with great confidence for the future and the
ongoing success of the business."
For further information, please contact:
Craneware plc +44 (0)131 550 3100
Keith Neilson, CEO / Craig Preston,
CFO
Peel Hunt (NOMAD and Joint Broker) +44 (0)20 7418 8900
Dan Webster/ George Sellar
Investec Bank (Joint Broker) +44 (0) 20 7597 5970
Patrick Robb/ Sebastian Lawrence/
Henry Reast
Alma (Financial PR) +44 (0)208 004 4217
Caroline Forde/ Robyn Fisher/ Josh
Royston
About Craneware
Craneware enables healthcare providers to improve margins and
enhance patient outcomes so they can continue to provide quality
outcomes for all.
Craneware is the leader in automated Value Cycle solutions that
help US Healthcare provider organisations discover, convert and
optimise assets to achieve best clinical outcomes and financial
performance. Founded in 1999, Craneware is headquartered in
Edinburgh, Scotland with offices in Atlanta and Pittsburgh
employing over 320 staff. Craneware's market-driven, SaaS solutions
normalise disparate data sets, bringing in up-to-date regulatory
and financial compliance data to deliver value at the points where
clinical and operational data transform into financial
transactions, creating actionable insights that enable informed
tactical and strategic decisions. To learn more, visit
craneware.com and thevaluecycle.com.
Learn more at www.craneware.com.
Chairman's Statement
I am delighted to report on another outstanding trading
performance by the Group, with underlying new sales increasing by
over 100%. Growth is being driven by the investments we have made
into the business across our operations, people and product suite,
and the supportive market environment. We now have the right
structure and capabilities to capitalise on what we believe to be a
significant, long-term growth opportunity supporting the movement
of the US healthcare industry towards value-based care.
This enhanced positioning can be seen in the financial metrics.
Revenue increased 16% to $67.1m (FY17: $57.8m) and adjusted EBITDA
increased 20% to $21.6m (FY17: $18.0m). It is particularly pleasing
to note the continued strong cash conversion of the Group,
demonstrating the high quality of our earnings. The Group had cash
reserves at the end of the year of $52.8m, a return to the level
seen at the end of the previous financial year (FY17: $53.2m),
after having returned $23.2m to shareholders via a share buyback
and dividends, while also investing a further $4.2m in the Employee
Benefit Trust during the year.
Sales in the year amounted to $98.6m (FY17: $54.0m) of which
$71.3m and $27.3m were new sales and renewals, respectively (FY17:
$35.4m and $18.6m respectively). The continued sales success,
combined with renewals remaining above 100% (by dollar value), has
once again delivered very high levels of revenue visibility that
supports our continued future growth.
It is clear that Craneware has an exciting opportunity in front
of it, supporting healthcare providers in the transition to
value-based care. In an era of increasing scrutiny and the need to
drive value in healthcare, the insight our suite of products
provides will be crucial in ensuring our customers' long-term
financial health and their ability to deliver better clinical
outcomes for all their communities. As Craneware approaches its
twentieth anniversary as a business, the data that the software has
collected and the strong relationships we have forged with our
customers, mean we are in a unique position to provide genuine
insight into the economics of healthcare provision. Our mission is
to identify and build solutions that will enable our customers to
unlock the value of that data so that they can thrive in a new
value-based environment, delivering better outcomes for all their
patients, staff and stakeholders.
The strong progress within the business can be seen in the
successful initial sales of the first Trisus product, which sits
upon our newly launched cloud-based platform, the exciting results
being delivered by our trial analytics customers and the expansion
of our customer base. We now supply one or more of our solutions to
a third of all US hospitals, with a strong pipeline of additional
opportunities.
Alongside technology innovation and organic growth strategies,
we continue to monitor potential acquisitions and with our healthy
cash balance and a $50m funding facility in place, we have the
resources to execute upon our strategic vision should an
appropriate acquisition target arise. Strict criteria continue to
be applied to potential acquisition targets ensuring that they
would enhance our hospital footprint, data sets or our product
roadmap so that they are quickly accretive to both the financial
and operational strength of the Group.
As we enter the new financial year, we remain positive that the
business environment in the US will continue to be supportive of
Craneware, given our unique ability to support our customers. Our
expanded market opportunity, double digit growth rates, record
sales pipeline and increasing long-term revenue visibility provide
the Board with confidence in achieving a successful outcome to the
current year and beyond.
I would like to thank all our employees across the UK and US for
their continued dedication and passion for our customers. They are
the backbone on which the success of the Company has been formed,
and grown. Twenty years ago, Craneware was a small group of people
with a big vision - a notion that they could deliver a solution
that would positively influence the United States healthcare
market. Today, there are more than 320 of us serving a third of US
hospitals and health systems, with a financial impact of over a
quarter of a trillion dollars. Each year, approximately 200 million
encounters are provided by Craneware customers to their patients.
These customers chose Craneware to help them grow and protect their
future vision, their legacy.
As we look to the next twenty years, I am confident we have the
right people in place to build Craneware to a significant scale
that will deliver on the sizeable opportunity that it has created,
to profoundly impact healthcare delivery and improve the value
achieved from the vast amount spent on healthcare world-wide.
George Elliott
Chairman
3 September 2018
Strategic Report
Introduction
We have enjoyed another excellent year, with the strong
financial results just one proof point of the successful execution
of our strategy. Our double-digit revenue and EBITDA growth rates
are an indication not only of the success of the investments we
have made into people, products and operations, but also the
growing urgency now being felt within the US healthcare market to
find a means to successfully adapt to the new environment of
value-based care and to deliver value for the healthcare spend.
The combination of our significant expertise and experience in
the US healthcare industry, the data that our solutions have
gathered, and the continued investment into the expansion of our
product suite means we are well positioned to provide the insight
our customers need to thrive in this new era of value-based care
and make a meaningful impact on the quality of US healthcare.
Market and Strategy
The ongoing evolution of the US healthcare industry towards the
provision of value-based care, puts the emphasis onto the
healthcare provider to ensure they are delivering the right care,
in the right place and at the right cost. This is a significant
shift away from the historic fee-for-service environment and
requires every hospital CFO to have a far greater understanding of
their costs and the value they provide.
The need to drive value in healthcare, and the challenges this
brings, provide an ongoing supportive market environment for
Craneware due to our ability to help our customers meet these
challenges. Recent market developments include the announcement in
August by the US Centers for Medicare and Medicaid Services (CMS),
the US state and federal healthcare coverage programmes, of the
overhaul of the 'meaningful use' programme which includes emphasis
on measures that require the exchange of health information between
providers and patients, a key capability of our Trisus platform.
The new policies aim to bring the US closer to the creation of a
patient-centred healthcare system by increasing pricing
transparency and fluid information exchange.
Three years ago, we developed the idea of the 'Value Cycle',
being the process and culture by which healthcare providers pursue
quality patient outcomes and optimal financial performance, through
the management of clinical, operational and financial data assets.
Craneware's Value Cycle solutions provide the financial insight and
actionable data needed to navigate this evolving and unchartered
landscape.
Our strategy is to continue to build on our established
market-leading position in revenue cycle solutions and expand our
product suite coverage of the Value Cycle. By expanding our
offerings into operational areas of the hospital, incorporating
cost management and combining this with data from the revenue
cycle, we will provide a comprehensive insight into the management
and analysis of clinical and operational data, providing the best
possible outcomes for all.
The expansion of our solutions is being achieved through a
combination of extensions to the current product set; building
products through internal development; targeting potential
acquisitions and partnering with other technology and services
companies.
Product Roadmap
We continue to make progress in all areas of our product
roadmap: the development of our cloud-based Trisus Enterprise Value
Platform; the continued evolution and support of our existing
market-leading product suite as we migrate to Trisus and the
development of new products to sit upon the Trisus Platform
including the development of our cost analytics software. All of
these solutions will increase our coverage of the key areas of the
Value Cycle and therefore increase our addressable market.
Trisus Enterprise Value Platform
In 2017 we launched the Trisus Enterprise Value platform. This
cloud-based platform provides a suite of solutions for healthcare
providers to identify and take action on risks related to revenue,
cost, and compliance. It is designed to be versatile and
expandable, growing alongside our customers as the healthcare
industry continues to evolve. The platform provides an environment
to gather, process, and deliver data across the continuum of care
with an open architecture and common components, allowing for
synergies between applications.
The first product on the platform, Trisus Claims Informatics,
was released in June 2017, with a good level of early sales secured
during the year. This product enables hospitals and healthcare
systems to drive revenue growth and increase compliance by
automating claims review and analysing claims for completeness,
accuracy, and patterns of changing charging behaviour.
Trisus Supply was released in an early adopter version in June
2018. This unique solution aligns data across the supply item
master database, the Operating Room supply database, and the
chargemaster. Healthcare organisations need revenue preservation,
data reliability, and critical analytics to address the
ever-growing cost of supplies and medical devices, which when
combined with pharmacy are expected to be higher than labour costs
by 2020. With Trisus Supply, providers can ensure their high-dollar
medical devices and supplies are accounted for, managed, and
reimbursed properly increasing both compliance and revenue.
By the end of 2018, we are expecting a generally available
version of Trisus Pricing Analyzer, our solution assisting
healthcare organisations create transparent, defensible, and
competitive pricing strategies. As government regulations begin
requiring hospitals to publish their pricing schedules for
procedures in 2019, providers will need to ensure their pricing
strategies are in-line with their patient demographics and
competitive hospitals. Trisus Pricing Analyzer will contain
contract modelling tools, which assess all reimbursement
methodologies by payor to identify net patient revenue
opportunities, which enhance the predictive modelling used to
create strategic pricing. This automated solution provides speed
and flexibility to adapt to regulatory, payor contract, and market
changes throughout the year.
We are executing on a roadmap to migrate all our solutions onto
the Trisus platform, as well as continuing to look for innovative
combinations of our data sets into new unique product offerings. As
part of this roadmap we expect to see further hybrid solutions
combining: the best of existing software regardless of the
development origin, including outside of Craneware; elements of the
Trisus platform; new Trisus products; and new early adopter Trisus
enabled versions of other existing solutions.
We are particularly pleased to note how both our existing
customer base and the wider healthcare provider market have
responded positively to the technological evolution of the
Craneware solution set, delivered on the Trisus platform. We have
seen many of our existing customers implement the Trisus Bridge
over the year, a connector layer linking their existing on premise
Craneware solutions to the advanced functionality of Trisus in the
cloud. This provides us with confidence in the successful long-term
transition of all our products to the cloud platform.
Craneware Healthcare Intelligence
In the second half of the 2016 financial year, Craneware formed
a new wholly owned Group company, Craneware Healthcare
Intelligence, LLC, to develop Cost Analytics and Resource
Efficiency software to the US healthcare industry. This is a vital
component within the emerging value cycle solutions market,
representing a market opportunity several times larger than that of
our existing product portfolio.
The aim of the business is to provide our customers with an
understanding of the true cost of every episode of care given to
their patients. Most hospitals' accounting systems are set up to
collect financial data in aggregate and average metrics. This
structure, while useful in a fee-for-service system, does not
adequately support the shift to quality-centric healthcare delivery
system that provides true value. Our Healthcare Intelligence
platform unites cost and operational information across the
provider organisation, delivering revenue, cost, and operational
information for each patient encounter. It enables understanding of
the critical components of operational metrics and expenses across
the entire episode of care.
In 2017 we engaged with two hospitals, in Missouri and
Pennsylvania, to run trial implementations of the software under
the pilot phase of release, combining our Healthcare Intelligence
models with live hospital data. Both implementations were
successful and have led to multi-year contracts for the solution as
well as providing valuable development information as we move
towards general release. We have hired team members through the
year and now have 15 employees and have plans to increase the team.
The Group has hired a dedicated VP of Sales and we expect to see
marketing activity increase in the year ahead.
Sales and Marketing
We have seen substantial, positive sales momentum, securing a
high level of new sales in the year across all sizes, classes and
types of hospital customer. This sales momentum has continued into
the new financial year and the sales pipeline continues to be at
record highs, all combining to provide further confidence of
accelerated revenue and profit growth by supplying products that
are meeting real world customer needs.
During the year, sales to both new and existing customers grew
in absolute terms, with sales to new hospitals becoming the larger
proportion of the overall sales mix, increasing our platform for
future sales. Of particular note in the year has been the strength
of sales of our Pharmacy ChargeLink solution (PCL), which for the
first time in its history was the Company's largest selling
product. This is particularly pleasing given the strategic aim in
the year to leverage the strength of our customer communities to
assist in the development and promotion of our solutions. PCL has
been championed by a number of our larger customers particularly as
they attempt to understand the growing impact that pharmacy costs
have on their organisation, as well as other customers who are in
the process of migrating patient accounting systems.
The average length of contracts with new customers continues to
be in-line with our historical norms of approximately five years.
As with last year, for all other contracts we have anticipated the
crossover dates of new product availability on the Trisus platform
and the impact for each individual customer contract as part of our
migration strategy. It is anticipated that our phased migration of
all current products to the Trisus platform will be complete no
later than 2021. With the adoption of the Trisus Bridge by the
majority of our customer base, we are now able to offer customers a
viable and secure method of transitioning to our cloud based
platform at a pace that suits them.
At the end of any contract term, we expect to see our renewal
rates remain at their current high levels (well above 100% by
dollar value), along with additional sales, as customers move to
the improvements brought to them by the Trisus platform.
Significant contract wins
Alongside excellent levels of sales to individuals and mid-sized
hospital groups, we were delighted to secure five significant
contracts during the year, ranging from $3.5m to $16m in value.
These included extensions with existing customers to roll out our
solutions to newly acquired facilities, network roll outs to new
customers following successful trials, new customers carrying out
major systems changes and sales of the newly launched Trisus Claims
Informatics and Pharmacy ChargeLink. These contracts demonstrate
both the relevance of Craneware at an enterprise-wide level and the
importance of Craneware Value Cycle solutions to customers that are
looking for innovation to help them realise their strategic
financial goals as they evolve in a value-based world. Almost the
entirety of revenue from these sales will be recognised in future
years, adding to our growing visibility of future revenue.
Awards
Chargemaster Toolkit(R) was named Category Leader in the
"Revenue Cycle - Chargemaster Management" market category for the
twelfth consecutive year in the annual "2018 Best in KLAS Awards:
Software & Services." KLAS's annual "Best in KLAS" report
provides unique insight gathered from thousands of healthcare
organisations across the US. The report includes customer
satisfaction scores and benchmark performance metrics.
Acquisitions
The Board continues to assess acquisition opportunities to
complement the Group's organic growth strategy and increase our
product coverage of the Value Cycle. The Board adheres to a
rigorous criteria to evaluate acquisition opportunities, including
quality of earnings, customer relationships, strategic fit and
product offering. In addition to the Company's cash reserves, an
undrawn $50 million funding facility provides the Company with
available resources to carry out strategic acquisitions if, and
when, these criteria are met. Areas for consideration will include:
competitors who bring market share; businesses with complementary
data sources; or international companies with complementary product
suites of benefit to our customers, who do not have a foothold in
the US.
Financial Review
It is pleasing to report that our double-digit revenue growth
has continued for a third successive year and Adjusted EBITDA has
accelerated, growing to 20%. Accordingly, we are reporting a growth
in revenue of 16% to $67.1m (FY17: $57.8m) and an adjusted EBITDA
of $21.6m (FY17: $18.0m).
However, the true success of the year, underlying these results
continues to be the contracts we sign with our hospital customers,
our "sales". In the year, we have seen significant sales success
delivering an increase of over 100% in new sales contracts, signing
$71.3m of new total contract value with new and existing customers.
At the end of these initial licence periods, or at a mutually
agreed earlier date, we renew our licences with our customers,
these "renewals" contributed an additional $27.3m to sales in the
period. As a result we are reporting the total value of contracts
signed in the year of $98.6m (FY17: $54.0m).
As demonstrated by the numbers reported above, and as a result
of our business model, "sales" and "revenue" have very different
meanings and are not interchangeable. In fact, only a small
proportion of the revenue resulting from the sales made in the year
is recognised in the current year's reported revenue, instead the
vast majority of the associated revenue is recognised in future
years, adding to the Group's long-term visibility of future
revenue.
New contracts provide a licence for a customer to access
specified products throughout their licence period. This licence
period on average, for a sale to a new customer, is five years. In
calculating averages, we only take the contract length up to the
first renewal point/break clause for that specified product. By
renewing these contracts when they come to the end of their initial
term, we ensure we are sustaining and, with new hospital sales,
building our underlying annuity revenue base. It is for this
reason, we measure our renewal rates by dollar value. We do this by
measuring the 'last annual value' of all customers due to renew in
the current year and compare it to actual value these customers
renew at (in total), including up-sell and cross-sell. This metric
for the current year is at 114%.
Through our business model and resulting revenue recognition,
the Group ensures that it is focused on building its underlying
annuity revenue base to deliver sustainable growth.
Business Model
Under the Group's 'Annuity SaaS' business model we recognise
software licence revenue and any minimum payments due from our
'other route to market' contracts evenly over the life of the
underlying signed contracts. As we sign new hospital contracts for
an average life of five years, we will see the revenue from any new
sales recognised over this underlying contract term.
As well as the incremental licence revenues we generate from
each new sale, we normally expect to deliver an associated
professional services engagement to assist our customers in
embedding the software within their core processes to maximise the
value the software can bring to them. This revenue is typically
separately identifiable from the licence and is recognised as we
deliver the service to the customer, usually on a percentage of
completion basis. The nature and scope of these engagements will
vary depending on both our customer needs and which of our
solutions they have contracted for. However these engagements will
always include the implementation of the software as well as
training the hospital staff in its use. As a result of the
different types of professional services engagement, the period
over which we deliver the services and consequently recognise all
associated revenue will vary, however we would normally expect to
recognise this revenue over the first year of the contract.
In any individual year, we would normally expect around 10% -
20% of revenues reported by the Group to be from services
performed.
Sales, Revenue and Revenue Visibility
The table below shows the total value of contracts signed in the
relevant years, split between sales of new products (to both new
and existing hospital customers) and the value of renewing products
with existing customers at the end of their current contract terms,
and how these sales have translated into reported revenue in the
corresponding year.
Fiscal Year 2014 2015 2016 2017 2018
$m $m $m $m $m
Reported Revenue 42.6 44.8 49.8 57.8 67.1
----- ----- ----- ----- -----
New Product Sales 35.1 35.9 58.6 35.4 71.3
Renewals* 35.9 37.0 23.7 18.6 27.3
----- ----- ----- ----- -----
Total Contract
Value (TCV) 71.0 72.9 82.3 54.0 98.6
*As the Group signs new customer contracts for between three to
nine years, the number and value of customers' contracts coming to
the end of their term ("renewal") will vary in any one year. This
variation along with whether customers auto-renew on a one year
basis or renegotiate their contracts for up to a further nine
years, will impact the total contract value of renewals in that
year
As the majority of the revenue resulting from sales in any one
year will be recognised over future years, the financial statements
do not fully reflect the valuable 'asset' that is contracted, but
not yet recognised, revenue. As such, at every reporting period,
the Group presents its "Revenue Visibility". This KPI identifies
revenues which we reasonably expect to recognise over the next
three year period, based on sales that have already occurred. This
"Three Year Visible Revenue" metric includes:
-- future revenue under contract
-- revenue generated from renewals (calculated at 100% dollar value renewal)
-- other recurring revenue
Through this metric we can demonstrate how the underlying
annuity base of revenue is building as we sign new multi-year
contracts with our customers and at the end of these contracts by,
on average, renewing these customers at 100% of dollar value.
The Three Year Revenue Visibility KPI is a forward looking KPI
and therefore will always include some judgement. To help assess
this, we separately identify different categories of revenue to
better reflect any inherent future risk in recognising these
revenues. Future revenue under contract, is, as the title suggests,
subject to an underlying contract and therefore once invoiced will
be recognised in the respective future years (subject to future
collection risk that exists with all revenue). Renewal revenues are
contracts coming to the end of their original contract term (e.g.
five years) and will require their contracts to be renegotiated and
renewed for the revenue to be recognised. As this category of
revenue is assumed to renew at 100% of dollar value, we
consistently monitor and publish this KPI (at each reporting
period) to ensure the reasonableness of this assumption. The final
category "Other recurring revenue" is revenue that we would expect
to recur in the future but is monthly or transactional in its
nature and as such there is increased potential for this revenue
not to be recognised in future years, when compared to the other
categories.
The Group's total visible revenue for the three years as at 30
June 2018 (i.e. visible revenue for FY19, FY20 and FY21) identifies
$192.9m of revenue which we reasonably expect to benefit the Group
in this next three year period. This visible revenue breaks down as
follows:
-- future revenue under contract contributing $140.6m of which
$59.8m is expected to be recognised in FY19, $46.3m in FY20 and
$34.5m in FY21
-- revenue generated from renewals contributing $51.7m; being
$6.1m in FY19, $16.9m in FY20 and $28.7m in FY21
-- other revenue identified as recurring in nature of $0.6m
Gross Margins
Typically, we expect the gross profit margin to be between 90% -
95% reflecting the incremental costs we incur to obtain the
underlying contracts. The gross profit for FY18 was $63.7m (FY17:
$54.2m) representing a gross margin percentage of 94.9% (FY17:
93.8%) which is towards the top of our historical range. This
reflects the correct matching of these incremental costs with the
associated revenue being recorded.
Earnings
The Group presents an adjusted earnings figure as a supplement
to the IFRS based earnings figures. The Group uses this adjusted
measure in our operational and financial decision-making as it
excludes certain one-off items, so as to focus on what the Group
regards as a more reliable indicator of the underlying operating
performance. We believe the use of this measure is consistent with
other similar companies and is frequently used by analysts,
investors and other interested parties.
Adjusted earnings represent operating profits excluding costs
incurred as a result of acquisition and share related activities
(if applicable in the year), share related costs including IFRS 2
share based payments charge, depreciation and amortisation
("Adjusted EBITDA").
Adjusted EBITDA has grown in the year to $21.6m (FY17: $18.0m)
an increase of 20%. This reflects an Adjusted EBITDA margin of
32.2% (FY17: 31.1%). This is consistent with the Group's continued
approach to making investments in line with the revenue growth. The
Group also takes opportunities where they exist to accelerate
investments in certain areas, such as development (detailed below),
to further build for future growth whilst continually managing to
ensure the efficiency of the investments we make.
Operating Expenses
The increase in net operating expenses (to Adjusted EBITDA)
reflects our policy of investing in line with revenue growth,
increasing by 16% to $42.0m (FY17: $36.2m). As detailed in the
Operating Review, product innovation and enhancement continues to
be core to the Group's future; our customers are facing a market
that continues to evolve towards value-based economics and the
Group is in a unique position with its Value Cycle strategy to help
them meet the challenges these new reimbursement models bring. As
such we continue to invest significant resource in this area as we
build out the Trisus Platform and the portfolio of products that
will be part of this platform.
We continue our Build, Buy or Partner strategy to build out this
portfolio of products, recognising 'Build' is often the best way
forward. We undertake the development of innovative new products
whilst maintaining our current product offerings and ensuring they
remain market-leading. As a result of this investment the total
cost of development in the year was $17.9m (FY17: $12.3m), a 46%
increase which is ahead of our revenue growth and reflective of the
opportunities in the market for our products. From this total
investment we have capitalised very specific projects relating to
the development of the new product offerings ("Build"), which
includes our new Trisus products and the Trisus Bridge extension of
the Trisus platform, as well as our new cost analytics and
Healthcare Intelligence product. With the significant investment
into our development and product management teams we have ensured
costs relating to expanding and training the new teams are not
capitalised. As a result the total amount capitalised in the year
was $4.7m (FY17: $3.5m). These capitalised amounts represent
further investment in our future and are an efficient and cost
effective way to further build out our Value Cycle strategy. We
expect to see both the levels of development expense and
capitalisation continue at the current trends as we progress with
building out this solution set. As specific products are made
available to relevant customers, the associated amounts capitalised
are charged to the Group's income statement over their estimated
useful economic life.
Cash and Bank Facilities
We measure the quality of our earnings through our ability to
convert them into operating cash. During the year we have seen
continued high levels of cash conversion, achieving over 100%
conversion of our adjusted EBITDA into operating cash.
During the year we have returned $23.2m to our shareholders
through a share buyback (detailed below) in January of $15.4m and
dividends paid in the year of $7.8m. In addition we have provided
additional funding to our Employee Benefits Trust of $4.2m. The
success of our very high levels of cash conversion has enabled us
to return our end of year cash balances to $52.8m, a level
equivalent to the prior year balance of $53.2m.
We retain a significant level of cash reserves and balance sheet
strength to fund acquisitions as suitable opportunities arise. To
supplement these reserves, the Group retains a funding facility
from the Bank of Scotland of up to $50m. Whilst no draw down of
this facility occurred in the year, the Group continues to
investigate strategic opportunities to add to the Value Cycle
strategy.
Balance Sheet
The Group maintains a strong balance sheet position. The level
of trade and other receivables has decreased in comparison to the
prior year. This is a result of the positive levels of cash
collection, especially during the last quarter of the year.
Every year as we make sales, we pay out amounts relating to
sales commissions; these costs are incremental costs in obtaining
the underlying contracts. Total sales commissions are based on the
total value of the contract sold; however for the purposes of the
Statement of Comprehensive Income, a lower proportion of revenue
from the contract value is recognised in the year. As a result we
charge an equivalent percentage of the sales commission, thereby
properly matching revenue and incremental expense. The resulting
prepayment of $7.5m (FY17: $5.9m) is the balance to be charged to
the Group's income statement as we recognise the associated
revenue. As we only pay the sales commission upon receipt of the
first annual payment from the customer, we remain cash flow
positive from any new sale.
Deferred income levels reflect the amounts of the revenue under
contract that we have invoiced and/or been paid for in the year,
but have yet to recognise as revenue. This balance is a subset of
the total visible revenue we describe above and reflected through
our three year visible revenue metric.
Deferred income, accrued income and the prepayment of sales
commissions all arise as a result of our Annuity SaaS business
model described above and we will always expect them to be part of
our balance sheet. They arise where the cash profile of our
contracts does not exactly match how revenue and related expenses
are recognised in the Statement of Comprehensive Income. Overall,
levels of deferred income are significantly more than accrued
income and the prepayment of sales commissions, we therefore remain
cash flow positive in regards to how we account for our
contracts.
Currency
The functional currency for the Group, and cash reserves, is US
dollars. Whilst the majority of our cost base is US-located and
therefore US dollar denominated, we have approximately one third of
the cost base based in the UK, relating primarily to our UK
employees which is therefore denominated in Sterling. As a result,
we continue to closely monitor the Sterling to US dollar exchange
rate, and where appropriate consider hedging strategies. The
average exchange rate throughout the year being $1.3472 as compared
to $1.2688 in the prior year.
Taxation
The Group generates profits in both the UK and the US, the
overall levels are determined by both the proportion of sales in
the year and the level of professional services income recognised.
The Group's effective tax rate remains dependent on the applicable
tax rates in these respective jurisdictions. In the current year
the effective tax rate has seen the benefit of a tax deduction
related to share option exercises that occurred in the year
reducing the tax charge by $1.4m (FY17: $0.2m) and increased
R&D tax relief of $0.3m. This benefit has been reduced by $0.5m
as a result of revaluing of the deferred tax asset, originally
established for US tax losses as part of the accounting for the
FY11 acquisition of Claimtrust Inc., following the change in US
Federal Tax rates in January 2018. As such the current year
effective tax rate is 17% (FY17: 20%).
EPS
In the year being reported adjusted EPS has seen the benefit of
the increased levels of Adjusted EBITDA combined with the lower
effective tax rate reported above, offset by an increase in both
the amortisation and share based payment charges, and as such has
increased 17% to $0.602 (FY17: $0.514) and adjusted diluted EPS has
increased to $0.591 (FY17: $0.503).
Dividend
The Board recommends a final dividend of 14p (18.48 cents) per
share giving a total dividend for the year of 24p (36.68 cents) per
share (FY17: 20p (26.04 cents) per share). Subject to confirmation
at the Annual General Meeting, the final dividend will be paid on 6
December 2018 to shareholders on the register as at 9 November
2018, with a corresponding ex-Dividend date of 8 November 2018.
The final dividend of 14p per share is capable of being paid in
US dollars subject to a shareholder having registered to receive
their dividend in US dollars under the Company's Dividend Currency
Election, or who register to do so by the close of business on 9
November 2018. The exact amount to be paid will be calculated by
reference to the exchange rate to be announced on 9 November 2018.
The final dividend referred to above in US dollars of 18.48 cents
is given as an example only using the Balance Sheet date exchange
rate of $1.3198/GBP1 and may differ from that finally
announced.
Outlook
While the past year has been outstanding in terms of financial
results and operational progress, this is by no means the end of
the journey and we are excited by the far greater opportunity that
lies ahead. It is clear that the investments we have made into the
organisation's design, people and products are delivering excellent
results, and we will continue to invest in our people and business
to ensure we have the capabilities to succeed. We believe that the
breadth of our customer base and the quantity of data within our
solutions means we have the opportunity to sit at the heart of the
move to value-based economics; collating and analysing the
information that will support hospital-wide decision making and
ultimately have a positive impact on the quality of healthcare.
With an ongoing, growing market opportunity, a record sales
pipeline and increasing long-term revenue visibility, we enter the
new financial year with great confidence for the future and the
ongoing success of the business.
Keith Neilson Craig Preston
Chief Executive Officer Chief Financial Officer
3 September 2018 3 September 2018
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2018
Total Total
2018 2017
Notes $'000 $'000
--------------------------------------------- ------ --------- ---------
Continuing operations:
Revenue 3 67,067 57,796
Cost of sales (3,407) (3,582)
--------- ---------
Gross profit 63,660 54,214
Operating expenses 4 (44,968) (37,588)
--------- ---------
Operating profit 18,692 16,626
Analysed as:
Adjusted EBITDA(1) 21,611 18,002
Share based payments (663) (283)
Depreciation of plant and equipment (578) (478)
Amortisation of intangible assets (1,678) (615)
--------------------------------------------- ------ --------- ---------
Finance income 241 258
--------- ---------
Profit before taxation 18,933 16,884
Tax on profit on ordinary activities 5 (3,136) (3,359)
--------- ---------
Profit for the year attributable to
owners of the parent 15,797 13,525
Other comprehensive (expense) / income
Items that may be reclassified subsequently
to profit or loss
Currency Translation movement (10) 40
--------- ---------
Total items that may be reclassified
subsequently to profit or loss (10) 40
--------------------------------------------- ------ --------- ---------
Total comprehensive income attributable
to owners of the parent 15,787 13,565
--------------------------------------------- ------ --------- ---------
1. Adjusted EBITDA is defined as operating profit before share
based payments, depreciation and amortisation
Earnings per share for the year attributable to equity
holders
Notes 2018 2017
------------------------------- ------ ------ ------
Basic ($ per share) 7a 0.590 0.502
*Adjusted Basic ($ per share) 7a 0.602 0.514
Diluted ($ per share) 7b 0.579 0.491
*Adjusted Diluted ($ per
share) 7b 0.591 0.503
------------------------------- ------ ------ ------
* Adjusted Earnings per share calculations allow for the tax
adjusted acquisition costs and share related transactions (if
applicable in the year) together with amortisation on acquired
intangible assets.
Statement of Changes in Equity for the year ended 30 June
2018
Share Capital
Share Premium Redemption Other Retained Total
Capital Account Reserve Reserves Earnings Equity
$'000 $'000 $'000 $'000 $'000 $'000
---------------------------- -------- -------- ----------- --------- --------- ---------
At 1 July 2016 536 17,451 - 555 34,266 52,808
Total comprehensive income
- profit for the year - - - - 13,525 13,525
Total other comprehensive
income - - - - 40 40
Transactions with owners:
Company shares acquired
by employee benefit trust - - - - (3,083) (3,083)
Share-based payments - - - 519 1,078 1,597
Impact of share options
exercised/lapsed 1 523 - (116) 416 824
Dividends (Note 6) - - - - (6,356) (6,356)
----------------------------
At 30 June 2017 537 17,974 - 958 39,886 59,355
Total comprehensive income
- profit for the year
Total other comprehensive
income - - - - 15,797 15,797
Transactions with owners: - - - - (10) (10)
Company share movement
in employee benefit trust - - - - (4,248) (4,248)
Buyback and cancellation
of shares (9) - 9 - (15,378) (15,378)
Share-based payments - - - 1,503 634 2,137
Impact of share options
exercised/lapsed 6 1,803 - (377) 378 1,810
Dividends (Note 6) - - - - (7,817) (7,817)
----------------------------
At 30 June 2018 534 19,777 9 2,084 29,242 51,646
---------------------------- -------- -------- ----------- --------- --------- ---------
Consolidated Balance Sheet as at 30 June 2018
Notes 2018 2017
$'000 $'000
---------------------------------- ------ ------- -------
ASSETS
Non-Current Assets
Plant and equipment 1,223 1,375
Intangible assets 8 23,267 19,845
Trade and other receivables 9 5,275 4,278
Deferred tax 3,831 3,102
33,596 28,600
------- -------
Current Assets
Trade and other receivables 9 12,503 15,381
Cash and cash equivalents 52,833 53,170
65,336 68,551
------- -------
Total Assets 98,932 97,151
---------------------------------- ------ ------- -------
EQUITY AND LIABILITIES
Current Liabilities
Deferred income 35,371 29,803
Current tax liabilities 80 198
Trade and other payables 11,835 7,795
47,286 37,796
------- -------
Total Liabilities 47,286 37,796
------- -------
Equity
Share capital 10 534 537
Share premium account 19,777 17,974
Capital redemption reserve 9 -
Other reserves 2,084 958
Retained earnings 29,242 39,886
Total Equity 51,646 59,355
------- -------
Total Equity and Liabilities 98,932 97,151
---------------------------------- ------ ------- -------
Statement of Cash Flows for the year ended 30 June 2018
Notes 2018 2017
$'000 $'000
------------------------------------------ ------ --------- --------
Cash flows from operating activities
Cash generated from operations 11 33,110 23,068
Interest received 227 258
Tax paid (3,349) (5,474)
------------------------------------------ ------ --------- --------
Net cash from operating activities 29,988 17,852
Cash flows from investing activities
Purchase of plant and equipment (434) (654)
Capitalised intangible assets (4,258) (3,925)
------------------------------------------ ------ --------- --------
Net cash used in investing activities (4,692) (4,579)
Cash flows from financing activities
Dividends paid to company shareholders 6 (7,817) (6,356)
Proceeds from issuance of shares 1,810 524
Company share movement in employee
benefit trust (4,248) (3,083)
Buy back of ordinary shares (15,378) -
------------------------------------------ ------ --------- --------
Net cash used in financing activities (25,633) (8,915)
Net (decrease) / increase in cash
and cash equivalents (337) 4,358
Cash and cash equivalents at the
start of the year 53,170 48,812
Cash and cash equivalents at the
end of the year 52,833 53,170
------------------------------------------ ------ --------- --------
Notes to the Financial Statements
General Information
Craneware plc (the Company) is a public limited company
incorporated and domiciled in Scotland. The Company has a primary
listing on the AIM stock exchange. The principal activity of the
Company continues to be the development, licensing and ongoing
support of computer software for the US healthcare industry.
Basis of Preparation
The financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS), as adopted by
the European Union, International Financial Reporting Standards
Interpretation Committee (IFRS IC) interpretations and with those
parts of the Companies Act 2006 applicable to companies reporting
under IFRS. The consolidated financial statements have been
prepared under the historic cost convention and prepared on a going
concern basis. The applicable accounting policies are set out
below, together with an explanation of where changes have been made
to previous policies on the adoption of new accounting standards in
the year, if relevant.
The preparation of financial statements in conformity with IFRS
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual results ultimately may differ from those
estimates.
The Company and its subsidiary undertakings are referred to in
this report as the Group.
1. Selected principal accounting policies
The principal accounting policies adopted in the preparation of
these accounts are set out below. These policies have been
consistently applied, unless otherwise stated.
Reporting currency
The Directors consider that as the Group's revenues are
primarily denominated in US dollars the Company's principal
functional currency is the US dollar. The Group's financial
statements are therefore prepared in US dollars.
Currency translation
Transactions denominated in currencies other than US dollars are
translated into US dollars at the rate of exchange ruling at the
date of the transaction. The average exchange rate during the
course of the year was $1.3472/GBP1 (2017: $1.2688/GBP1). Monetary
assets and liabilities expressed in foreign currencies are
translated into US dollars at rates of exchange ruling at the
Balance Sheet date $1.31977/GBP1 (2017 : $1.30197/GBP1). Exchange
gains or losses arising upon subsequent settlement of the
transactions and from translation at the Balance Sheet date, are
included within the related category of expense where separately
identifiable, or administrative expenses.
Revenue recognition
The Group follows the principles of IAS 18, "Revenue
Recognition", in determining appropriate revenue recognition
policies. In principle revenue is recognised to the extent that it
is probable that the economic benefits associated with the
transaction will flow into the Group.
Revenue is derived from sales of, and distribution agreements
relating to, software licences 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 licenced 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 licenced software revenue over the life of
this contract. This policy is consistent with the Company's
products providing customers with a service through the delivery
of, and access to, software solutions (Software-as-a-Service
("SaaS")), and results in revenue being recognised over the period
that these services are delivered to customers. Incremental costs
directly attributable in securing the contract are charged equally
over the life of the contract and as a consequence are matched to
revenue recognised. Any deferred contract costs are included in,
both current and non-current, trade and other receivables.
'White-labelling' or other 'Paid for development work' is
generally provided on a fixed price basis and as such revenue is
recognised based on the percentage completion or delivery of the
relevant project. Where percentage completion is used it is
estimated based on the total number of hours performed on the
project compared to the total number of hours expected to complete
the project. Where contracts underlying these projects contain
material obligations, revenue is deferred and only recognised when
all the obligations under the engagement have been fulfilled.
Revenue from all professional services is recognised as the
applicable services are provided. Where professional services
engagements contain material obligations, revenue is recognised
when all the obligations under the engagement have been fulfilled.
Where professional services engagements are provided on a fixed
price basis, revenue is recognised based on the percentage
completion of the relevant engagement. Percentage completion is
estimated based on the total number of hours performed on the
project compared to the total number of hours expected to complete
the project.
Software and professional services sold via a distribution
agreement will normally follow the above recognition policies.
Should any contracts contain non-standard clauses, revenue
recognition will be in accordance with the underlying contractual
terms which will normally result in recognition of revenue being
deferred until all material obligations are satisfied.
The excess of amounts invoiced over revenue recognised are
included in deferred income. If the amount of revenue recognised
exceeds the amount invoiced the excess is included within accrued
income.
Intangible Assets
(a) Goodwill
Goodwill arising on consolidation represents the excess of the
cost of acquisition over the fair value of the identifiable assets
and liabilities of a subsidiary at the date of acquisition.
Goodwill is capitalised and recognised as a non-current asset in
accordance with IFRS 3 and is tested for impairment annually, or on
such occasions that events or changes in circumstances indicate
that the value might be impaired.
Goodwill is allocated to cash generating units for the purpose
of impairment testing. The allocation is made to those
cash-generating units that are expected to benefit from the
business combination in which the goodwill arose.
(b) Proprietary software
Proprietary software acquired in a business combination is
recognised at fair value at the acquisition date. Proprietary
software has a finite life and is carried at cost less accumulated
amortisation. Amortisation is calculated using the straight-line
method to allocate the associated costs over their estimated useful
lives of 5 years.
(c) Contractual customer relationships
Contractual customer relationships acquired in a business
combination are recognised at fair value at the acquisition date.
The contractual customer relations have a finite useful economic
life and are carried at cost less accumulated amortisation.
Amortisation is calculated using the straight-line method over the
expected life of the customer relationship which has been assessed
as up to 10 years.
(d) Research and Development expenditure
Expenditure associated with developing and maintaining the
Group's software products is recognised as incurred. Where,
however, new product development projects are technically feasible,
production and sale is intended, a market exists, expenditure can
be measured reliably, and sufficient resources are available to
complete such projects, development expenditure is capitalised
until initial commercialisation of the product, and thereafter
amortised on a straight-line basis over its estimated useful life,
which has been assessed as 5 years. Staff costs and specific third
party costs involved with the development of the software are
included within amounts capitalised.
(e) Computer software
Costs associated with acquiring computer software and licenced
to-use technology are capitalised as incurred. They are amortised
on a straight-line basis over their useful economic life which is
typically three to five years.
Impairment of non-financial assets
At each reporting date the Group considers the carrying amount
of its tangible and intangible assets including goodwill to
determine whether there is any indication that those assets have
suffered an impairment loss. If there is such an indication, the
recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any) through determining the
value in use of the cash generating unit that the asset relates to.
Where it is not possible to estimate the recoverable amount of an
individual asset, the Group estimates the recoverable amount of the
cash generating unit to which the asset belongs.
If the recoverable amount of an asset is estimated to be less
than its carrying amount, the impairment loss is recognised as an
expense.
Where an impairment loss subsequently reverses, the carrying
amount of the asset is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had
no impairment loss been recognised for the asset. A reversal of an
impairment loss is recognised as income immediately. Impairment
losses relating to goodwill are not reversed.
Taxation
The charge for taxation is based on the profit for the period as
adjusted for items which are non-assessable or disallowable. It is
calculated using taxation rates that have been enacted or
substantively enacted by the Balance Sheet date.
Deferred taxation is computed using the liability method. Under
this method, deferred tax assets and liabilities are determined
based on temporary differences between the financial reporting and
tax bases of assets and liabilities and are measured using enacted
rates and laws that will be in effect when the differences are
expected to reverse. The deferred tax is not accounted for if it
arises from initial recognition of an asset or liability in a
transaction that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred tax assets are
recognised to the extent that it is probable that future taxable
profits will arise against which the temporary differences will be
utilised.
Deferred tax is provided on temporary differences arising on
investments in subsidiaries except where the timing of the reversal
of the temporary difference is controlled by the Group and it is
probable that the temporary difference will not reverse in the
foreseeable future. Deferred tax assets and liabilities arising in
the same tax jurisdiction are offset.
In the UK and the US, the Group is entitled to a tax deduction
for amounts treated as compensation on exercise of certain employee
share options under each jurisdiction's tax rules. As explained
under "Share-based payments", a compensation expense is recorded in
the Group's Statement of Comprehensive Income over the period from
the grant date to the vesting date of the relevant options. As
there is a temporary difference between the accounting and tax
bases a deferred tax asset is recorded. The deferred tax asset
arising is calculated by comparing the estimated amount of tax
deduction to be obtained in the future (based on the Company's
share price at the Balance Sheet date) with the cumulative amount
of the compensation expense recorded in the Statement of
Comprehensive Income. If the amount of estimated future tax
deduction exceeds the cumulative amount of the remuneration expense
at the statutory rate, the excess is recorded directly in equity
against retained earnings.
Share-based payments
The Group grants share options and / or conditional share awards
to certain employees. In accordance with IFRS 2, "Share-Based
Payments", equity-settled share-based payments are measured at fair
value at the date of grant. Fair value is measured using the
Black-Scholes pricing model or the Monte Carlo pricing model, as
appropriately amended, taking into account the terms and conditions
of the share-based awards. The fair value determined at the date of
grant of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Group's
estimate of the number of shares that will eventually vest.
Non-market vesting conditions are included in assumptions about the
number of options that are expected to vest. At the end of each
reporting period, the entity revises its estimates of the number of
options that are expected to vest based on the non-market vesting
conditions. It recognises the impact of the revision to original
estimates, if any, in the Statement of Comprehensive Income, with a
corresponding adjustment to equity. When the options are exercised
and are satisfied by new issued shares, the proceeds received net
of any directly attributable transaction costs are credited to
share capital and share premium.
The share-based payments charge is included in net operating
expenses and is also included in 'Other reserves'.
2. Critical accounting estimates and judgements
The preparation of financial statements in accordance with IFRS
requires the Directors to make critical accounting estimates and
judgements that affect the amounts reported in the financial
statements and accompanying notes. The estimates and assumptions
that have a significant risk of causing material adjustment to the
carrying value of assets and liabilities within the next financial
year are discussed below:-
-- Impairment assessment: - the Group tests annually whether
Goodwill has suffered any impairment and for other assets including
acquired intangibles at any point where there are indications of
impairment. This requires an estimation of the recoverable amount
of the applicable cash generating unit to which the Goodwill and
other assets relate. Estimating the recoverable amount requires the
Group to make an estimate of the expected future cash flows from
the specific cash generating unit using certain key assumptions
including growth rates and a discount rate. These assumptions
result in no impairment in goodwill.
-- Provisions for income taxes: - the Group is subject to tax in
the UK and US and this requires the Directors to regularly assess
the applicability of its transfer pricing policy.
-- Capitalisation of development expenditure: - the Group
capitalises development costs provided the aforementioned
conditions have been met. Consequently, the directors require to
continually assess the commercial potential of each product in
development and its useful life following launch.
3. Revenue
The chief operating decision maker has been identified as the
Board of Directors. The Group revenue is derived almost entirely
from the sale of software licences and professional services
(including installation) to hospitals within the United States of
America. Consequently, the Board has determined that Group supplies
only one geographical market place and as such revenue is presented
in line with management information without the need for additional
segmental analysis. All of the Group assets are located in the
United States of America with the exception of the Parent
Company's, the net assets of which are disclosed separately on the
Company Balance Sheet and are located in the UK.
2018 2017
$'000 $'000
----------------------- ------- -------
Software licencing 56,346 49,556
Professional services 10,721 8,240
Total revenue 67,067 57,796
----------------------- ------- -------
4. Operating expenses
Operating expenses are comprised of the following:
2018 2017
$'000 $'000
---------------------------------------------------- ------- -------
Sales and marketing expenses 8,257 7,326
Client servicing 11,981 10,688
Research and development 13,174 9,108
Administrative expenses 8,736 9,216
Share-based payments 663 283
Depreciation of plant and equipment 578 478
Amortisation of intangible assets 1,678 615
Exchange (gain) (99) (126)
Operating expenses 44,968 37,588
---------------------------------------------------- ------- -------
5. Tax on profit on ordinary activities
2018 2017
$'000 $'000
----------------------------------------------------- ------- ------
Profit on ordinary activities before tax 18,933 16,884
Current tax
Corporation tax on profits of the year 3,536 3,463
Foreign exchange on taxation in the year - (65)
Adjustments for prior years (305) 300
----------------------------------------------------- ------- ------
Total current tax charge 3,231 3,698
Deferred tax
Origination & reversal of timing differences 382 (161)
Adjustments for prior years (8) (178)
Change in tax rate (469) -
----------------------------------------------------- ------- ------
Total deferred tax (credit) (95) (339)
----------------------------------------------------- ------- ------
Tax on profit on ordinary activities 3,136 3,359
----------------------------------------------------- ------- ------
The difference between the current tax charge on ordinary
activities for the year, reported in the consolidated Statement
of Comprehensive Income, and the current tax charge that would
result from applying a relevant standard rate of tax to the
profit on ordinary activities before tax, is explained as
follows:
Profit on ordinary activities at the UK tax
rate 19% (2017: 19.75%) 3,597 3,335
Effects of:
Adjustment for prior years (313) 122
Change in tax rate (469) -
Additional US taxes on profits 32% (2017:
39%) 1,137 209
Foreign Exchange - (65)
R & D tax credit (327) -
Expenses not deductible for tax purposes 29 (16)
Origination and reversal of temporary differences 847 -
Deduction on share plan charges (1,365) (226)
Total tax charge 3,136 3,359
----------------------------------------------------- ------- ------
6. Dividends
The dividends paid during the year were as follows:-
2018 2017
$'000 $'000
---------------------------------------------- ------ ------
Final dividend, re 30 June 2017 - 14.71
cents (11.3 pence)/share 4,065 3,246
Interim dividend, re 30 June 2018 - 13.5
cents (10 pence)/share 3,752 3,110
Total dividends paid to Company shareholders
in the year 7,817 6,356
---------------------------------------------- ------ ------
Prior year:
Final dividend 12.1 cents (9 pence) / share
Interim dividend 10.83 cents (8.7 pence) / share
The proposed final dividend 18.48 cents (14 pence), as noted in
the Financial Review section of the Strategic Report, for 30 June
2018 is subject to approval by the shareholders at the Annual
General Meeting and has not been included as a liability in these
accounts.
7. Earnings per share
a) Basic
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of shares in issue during the year.
2018 2017
------------------------------------------------ ------- ----------
Profit attributable to equity holders of
the Company ($'000) 15,797 13,525
Weighted average number of ordinary shares
in issue (thousands) 26,790 26,934
Basic earnings per share ($ per share) 0.590 0.502
------------------------------------------------ ------- ----------
Profit attributable to equity holders of
Company ($'000) 15,797 13,525
Adjustments* ($'000) 329 329
Adjusted Profit attributable to equity holders
($'000) 16,126 13,854
------------------------------------------------ ------- ----------
Weighted average number of ordinary shares
in issue (thousands) 26,790 26,934
Adjusted Basic earnings per share ($ per
share) 0.602 0.514
------------------------------------------------ ------- ----------
*Relate to acquisition, share related activities and
amortisation of acquired intangibles if applicable in the year.
These adjustments are to focus on what the Group regards as a more
reliable indicator of the underlying operating performance and are
consistent with other similar companies.
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.
2018 2017
------------------------------------------------ ------- ----------
Profit attributable to equity holders of
the Company ($'000) 15,797 13,525
Weighted average number of ordinary shares
in issue (thousands) 26,790 26,934
Adjustments for:- Share options (thousands) 492 590
Weighted average number of ordinary shares
for diluted earnings per share (thousands) 27,282 27,524
Diluted earnings per share ($ per share) 0.579 0.491
------------------------------------------------ ------- ----------
Profit attributable to equity holders of
Company ($'000) 15,797 13,525
Adjustments* ($'000) 329 329
Adjusted Profit attributable to equity holders
($'000) 16,126 13,854
------------------------------------------------ ------- ----------
Weighted average number of ordinary shares
in issue (thousands) 26,790 26,934
Adjustments for:- Share options (thousands) 492 590
------------------------------------------------ ------- ----------
Weighted average number of ordinary shares
for diluted earnings per share (thousands) 27,282 27,524
Adjusted Diluted earnings per share ($ per
share) 0.591 0.503
------------------------------------------------ ------- ----------
*Relate to acquisition, share related activities and
amortisation of acquired intangibles if applicable in the year.
These adjustments are to focus on what the Group regards as a more
reliable indicator of the underlying operating performance and are
consistent with other similar companies.
8. Intangible assets
Goodwill and Other Intangible assets
Goodwill Customer Proprietary Development Computer
Relationships Software Costs Software Total
$'000 $'000 $'000 $'000 $'000 $'000
------------------ --------- -------------- ------------ ------------ --------- -------
Cost
At 1 July 2017 11,438 2,964 3,043 9,237 1,436 28,118
Additions - - - 4,732 368 5,100
Disposals - - - - (409) (409)
At 30 June 2018 11,438 2,964 3,043 13,969 1,395 32,809
------------------ --------- -------------- ------------ ------------ --------- -------
Accumulated
amortisation
At 1 July 2017 250 2,042 1,976 3,046 959 8,273
Charge for the
year - 329 213 856 280 1,678
Amortisation
on disposals - - - - (409) (409)
At 30 June 2018 250 2,371 2,189 3,902 830 9,542
Net Book Value
at 30 June 2018 11,188 593 854 10,067 565 23,267
------------------ --------- -------------- ------------ ------------ --------- -------
Cost
At 1 July 2016 11,438 2,964 3,043 5,755 993 24,193
Additions - - - 3,482 443 3,925
At 30 June 2017 11,438 2,964 3,043 9,237 1,436 28,118
------------------ --------- -------------- ------------ ------------ --------- -------
Accumulated
amortisation
At 1 July 2016 250 1,713 1,976 2,926 793 7,658
Charge for the
year - 329 - 120 166 615
At 30 June 2017 250 2,042 1,976 3,046 959 8,273
Net Book Value
at 30 June 2017 11,188 922 1,067 6,191 477 19,845
------------------ --------- -------------- ------------ ------------ --------- -------
In accordance with the Group's accounting policy, the carrying
values of goodwill and other intangible assets are reviewed for
impairment annually or more frequently if events or changes in
circumstances indicate that the asset might be impaired. Goodwill
arose on the acquisition of Craneware InSight Inc.
The carrying values are assessed for impairment purposes by
calculating the value in use of the core Craneware business cash
generating unit. This is the lowest level of which there are
separately identifiable cash flows to assess the goodwill acquired
as part of the Craneware InSight Inc purchase.
The key assumptions in assessing value in use are the discount
rate applied, future growth rate of revenue and the operating
margin. These take into account the customer base and expected
revenue commitments from it, anticipated additional sales to both
existing and new customers and market trends currently seen and
those expected in the future.
The Group have assessed events and circumstances in the year and
the assets and liabilities of the business cash-generating unit;
this assessment has confirmed that no significant events or
circumstances occurred in the year and that the assets and
liabilities showed no significant change from last year.
After review of future forecasts, the Group confirmed the growth
for next five years was consistent with last year's growth
calculations confirming that the recoverable amount would continue
to exceed the carrying value. There are no reasonable possible
changes in assumptions that would result in an impairment.
9. Trade and other receivables
2018 2017
$'000 $'000
----------------------------------- -------- --------
Trade receivables 9,215 13,102
Less: provision for impairment of
trade receivables (1,072) (1,353)
----------------------------------- -------- --------
Net trade receivables 8,143 11,749
Other receivables 230 144
Prepayments and accrued income 1,904 1,826
Deferred Contract Costs 7,501 5,940
----------------------------------- -------- --------
17,778 19,659
Less non-current receivables: - -
Deferred Contract Costs (5,275) (4,278)
Current portion 12,503 15,381
----------------------------------- -------- --------
10. Share capital
2018 2017
Number $'000 Number $'000
---------------------------- ----------- ------ ----------- ------
Equity share capital
Ordinary shares of 1p each 50,000,000 1,014 50,000,000 1,014
---------------------------- ----------- ------ ----------- ------
Allotted called-up and fully paid
2018 2017
Number $'000 Number $'000
------------------------------- ----------- ------ ----------- ------
Equity share capital
Ordinary shares of 1p each
------------------------------- ----------- ------ ----------- ------
At 1 July 26,961,709 537 26,850,248 536
------------------------------- ----------- ------ ----------- ------
Cancelled, following purchase
by Company of own shares (628,869) (9) - -
------------------------------- ----------- ------ ----------- ------
Allotted and issued in the
year on exercise of employee
share options 329,431 6 111,461 1
------------------------------- ----------- ------ ----------- ------
At 30 June 26,662,271 534 26,961,709 537
------------------------------- ----------- ------ ----------- ------
11. Cash flow generated from operating activities
Reconciliation of profit before taxation to
net cash inflow from operating activities
2018 2017
$'000 $'000
----------------------------------------- ------- --------
Profit before tax 18,933 16,884
Finance income (241) (258)
Depreciation on plant and equipment 578 478
Amortisation and Impairment on
intangible assets 1,678 615
Share-based payments 663 283
Loss on disposals 10 -
Movements in working capital:
Decrease in trade and other receivables 1,881 6,146
Increase / (Decrease) in trade
and other payables 9,608 (1,080)
Cash generated from operations 33,110 23,068
----------------------------------------- ------- --------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR DGGDCSGGBGIX
(END) Dow Jones Newswires
September 04, 2018 02:00 ET (06:00 GMT)
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