TIDMCRW
RNS Number : 9361Z
Craneware plc
20 September 2022
Craneware plc
("Craneware" or the "Company" or the "Group")
Final Results
Successful integration of Sentry operations and cloud momentum
provides strong foundation for growth
20 September 2022 - Craneware (AIM: CRW.L), the market leader in
Value Cycle software solutions for the US healthcare market,
announces its audited results for the year ended 30 June 2022.
Financial Highlights (US dollars)
-- Revenue increased 119% to $165.5m (FY21: $75.6m)
-- Adjusted EBITDA(1) increased 91% to $51.8m (FY21: $27.1m)
-- Statutory Profit before tax $13.1m (FY21: $13.2m) reflecting
increased operating profit offset by amortisation of acquired
intangibles and bank interest payments resulting from the Sentry
Data Systems, Inc. ("Sentry") acquisition
-- Basic adjusted EPS(1) increased 29% to 89.0 cents (FY21: 69.0
cents) and adjusted diluted EPS increased to 88.1 cents (FY21: 68.1
cents)
-- Basic EPS 26.8 cents (FY21: 48.1 cents) and diluted EPS 26.5 cents (FY21: 47.5 cents)
-- Annual Recurring Revenue(2) increased by 164% to $170.3m (FY21 $64.5m)
-- Robust operating cash conversion(1) at 80% of Adjusted EBITDA
(FY21: 99%) reflecting different cash generation profiles of
acquired business
-- Operating cash reserves (excluding restricted cash) at
year-end of $47.2m (FY21: $48.3m) and Net Debt of $64.4m (FY21:
$Nil)
-- Proposed final dividend of 15.5p per share (18.80 cents)
(FY21: 15.5p, 21.47 cents) giving a total dividend for the year of
28p per share (33.96 cents) (FY21: 27.5p, 38.10 cents) up 2%
Operational Highlights
-- Sentry and Agilum businesses successfully acquired and
integrated during the year, providing considerably increased scale,
offering, team and market opportunity
-- The enlarged business has successfully rebranded to The Craneware Group(3)
-- Synergies realised have delivered combined target +30%
Adjusted EBITDA(1) margin ahead of schedule
-- Initial cross-sales achieved and pipeline of opportunities is building
-- 80% of ARR now from the Cloud, demonstrating successful execution of cloud strategy
-- Trisus Chargemaster launched and vast majority of customers
expected to have moved to the Trisus platform by end of current
calendar year
-- Continued investment in R&D and innovation to capitalise on growing market opportunity
Outlook
-- Continued sales momentum across the enlarged Group
-- Ongoing, long-term transition to value-based care provides
basis for sustainable future growth
-- Whilst cognisant of ongoing macro-economic challenges that
are faced by our end customers, the Board remains confident in the
continued strong performance of the enlarged Group
(1) Certain financial measures are not determined under IFRS and
are alternative performance measures as described in Note 14.
(2) Annual Recurring Revenue ("ARR") includes the annual value
of licence and transaction revenues as at 30 June 2022 that are
subject to underlying contracts.
(3) When we refer to 'Craneware', or 'The Craneware Group' or
'Group' we mean the group of companies having Craneware plc as its
parent and therefore these words are used interchangeably.
Keith Neilson, CEO of Craneware plc commented :
"We are pleased to be reporting such positive results, which
clearly demonstrate the increased scale of the enlarged Craneware
Group and the breadth of our future opportunity. The addition of
Sentry, which was completed and integrated during the fiscal year,
represents a significant milestone for Craneware.
Whilst we remain cognisant of the ongoing challenges faced by
our customers and partners, we are proud of the manner in which the
Group has dealt with the challenging backdrop during the year. A
focus for the year was to integrate our widened team and this was
achieved with great success. Now, with our expanded and reorganised
team we are confident we will be able to serve the considerable
market need within the US healthcare space through the next stage
of our evolution.
We anticipate accelerated levels of sales moving forward,
delivering our next phase of growth. We have a robust balance
sheet, high recurring revenues and with our high levels of customer
retention, we look to further increase shareholder value."
For further information, please contact:
Craneware plc +44 (0)131 550 3100
Keith Neilson, CEO
Craig Preston, CFO
Alma (Financial PR) +44 (0)20 3405 0205
Caroline Forde, Hilary Buchanan, Joe Pederzolli craneware@almapr.co.uk
Peel Hunt (NOMAD and Joint Broker) +44 (0)20 7418 8900
Dan Webster, Andrew Clark
Investec Bank PLC (Joint Broker) +44 (0)20 7597 5970
Patrick Robb, Henry Reast, Sebastian Lawrence
Berenberg (Joint Broker ) +44 (0)20 3207 7800
Mark Whitmore, Richard Andrews, Alix Mecklenburg-Solodkoff
About Craneware
We at The Craneware Group of companies, including our latest
additions Sentry Data Systems and Agilum Healthcare Intelligence,
passionately believe we can impact healthcare profoundly by
delivering the insights healthcare organisations need to also
transform the business of healthcare. Our shared vision is to be
the operational and financial partner for US healthcare
providers.
Our combined suite of applications and industry-leading team of
experts help our customers contextualise operational, financial,
and clinical data, providing insights that clearly demonstrate what
great looks like. These value cycle insights deliver revenue
integrity and 340B compliance, as well as margin and operational
intelligence - something no other single partner can provide.
Together, approximately 40% of registered US hospitals are now
our customers, including more than 12,000 US hospitals, health
systems and affiliated retail pharmacies and clinics. Our customers
are operating with a financial impact of nearly half a trillion
dollars. We have data sets from customers covering more than 150
million unique patients encounters.
Learn more at www.thecranewaregroup.com
Chair's Statement
I am pleased to report on a year of significant strategic
progress, in which the acquisitions of US-based Sentry Data
Systems, Inc. ("Sentry") and Agilum Healthcare Intelligence, Inc.
("Agilum") (collectively referred to as the acquisition of Sentry),
were successfully completed, considerably increasing the scale of
The Craneware Group, enhancing our pharmacy offering and cementing
Craneware's position as a leading provider of Value Cycle solutions
to the US healthcare market . The combination of the three
organisations paves the way for long-term sustained growth, as
COVID-19 related impediments dissipate, and the Group unlocks the
significant opportunities of our extended product suite. With the
transition of the Craneware offerings to the Cloud, which remains
on track to complete in the current calendar year, and 80% of ARR
now derived from Cloud based solutions, we are confident the
building blocks are in place for our ongoing success.
Financials demonstrate increased scale of the Group
The increased scale of The Craneware Group can be seen in the
financial performance achieved this year. Revenues increased 119%
in the year to $165.5m with an adjusted EBITDA increase of 91% to
$51.8m, achieving the combined Group adjusted EBITDA margin target
of 30% ahead of schedule.
Software revenue and customer retention continues to be robust
across the Group's offerings, as demonstrated by the growth in
underlying ARR to $170.3m (30 June 2021: $64.5m). As previously
reported, professional services revenues continue to be affected by
the impact of the COVID pandemic on hospital workforce and
operations. We are confident we will see professional services
revenues return to pre-COVID levels once hospital staffing
pressures ease.
As at 30 June 2022, the Group had strong operating cash reserves
of $47.2m (30 June 2021: $48.3m) and net debt of $64.4m (30 June
2021: $nil) representing circa 1.2 times reported adjusted EBITDA.
This balance sheet strength, combined with our high levels of ARR,
standing at $170.3m at year end, and the potential for a return to
pre-pandemic levels of professional services revenue, leaves the
Group well positioned for FY23 and beyond.
Investment in innovation provides increased addressable
opportunity
With a customer base representing approximately 40% of
registered US hospitals, including more than 12,000 US hospitals,
health systems, clinics and affiliated retail pharmacies, supported
by access to over 20 years of contextualised healthcare data, we
have an enviable position within the US healthcare industry.
Our investment in innovation and M&A strategy provide us
with a growing solution set to provide further value to our
customers. Following two years of intense pressure on our customers
and healthcare professionals, they are more motivated than ever to
implement strategic and long-term planning. Our Trisus platform is
specifically designed to help them achieve this. While we may see
fluctuations in our professional services revenue in any individual
reporting period, our largely recurring revenue business model
provides us with the revenue visibility to continue to invest in
our people and offering, to capitalise on the significant
opportunity.
Making a positive contribution to society
Our purpose is to transform the business of healthcare through
the profound impact our solutions deliver, enabling our customers
to deliver quality care to their communities.
The tangible positive impact our solutions can make on the lives
of others continues to be a great motivator for our talented team.
The Craneware Group has always had a strong commitment to social
responsibility and community engagement, which has been enhanced by
the integration of our 340B offerings and colleagues. We have been
delighted to welcome the Sentry and Agilum teams into The Craneware
Group as well as additional new colleagues across the Group, on
behalf of the Board, I would like to thank all the enlarged team
for their continued passion and commitment. We detail more of the
impact the Group makes, within the communities we serve, in our ESG
Statement within the Annual Report.
We were pleased to welcome Issy Urquhart, the Group Chief People
Officer to the Craneware plc Board in April this year. Issy has
been central in the successful integration of the Sentry team into
The Craneware Group and the appointment of a leader with her
skillset reflects both the importance the Board places on creating
the right environment for our people to thrive and the increased
scale of The Craneware Group.
Positive Outlook
The strength of the newly enlarged Craneware Group, our high
levels of Annual Recurring Revenue, the breadth of solutions we can
provide and the scale of data flowing through our platform are the
solid foundations for our future sustained growth. Building on
these foundations, whilst remaining cognisant of the challenges our
customers and partners continue to face, the Board remains
confident in Craneware's ability to address the expanded market
opportunity presented.
Will Whitehorn
Chair
Craneware plc
19 September 2022
Strategic Report
We are pleased to be reporting such positive results, which
clearly demonstrate the increased scale of the enlarged Craneware
Group and the breadth of our future market opportunity. The
addition of Sentry, which completed during the fiscal year,
represents a significant milestone for Craneware. We are now
bolstered by the deepened pharmacy data insights within our
platform, the addition of new customers with further products and
expertise. We are delighted to have welcomed the Sentry and Agilum
teams along with their customers to The Craneware Group as we look
forward to our next phase of growth together, in line with our
shared vision of transforming the business of healthcare.
Following Sentry's acquisition, we have seen pleasing initial
cross-sales which we believe are only a glimpse of things to come,
as we look to capitalise on this considerable opportunity moving
forwards. Additionally, we have made good progress in growing the
number of customers on Trisus, our cloud-based platform, with the
vast majority of hospital customers now interacting with the
platform, and we expect to have largely completed the migration of
customers onto the platform by the end of calendar 2022. Having
achieved the scale and integration we had been aiming for during
the period, we now have a solid foundation to move to the next step
of our evolution.
There is great pride across the Group in the way in which the
team has achieved these results amid a significant integration
process and testing macro-economic challenges. Whilst remaining
cognisant of the challenges our customers and partners continue to
face, the strength of the newly enlarged Craneware Group, the
applicability of our powerful data sets and solutions together with
the scale of the opportunity ahead, means the Board remains
confident in the Group's future success.
Market - the move to value-based care continues at pace
As we move through 2022, market conditions are continuing to
normalise following the impact of the COVID pandemic, although
there is still some way to go before full recovery in hospital
workforce and operations to pre-pandemic conditions.
The pandemic ushered in a new era for the industry with
healthcare providers having to adjust to new methods of healthcare
delivery, with a reduced workforce available to them. Financially,
both providers and payers struggled to navigate the rapidly
changing market. However, with the US continuing to lag other
developed nations in terms of life-expectancy while incurring the
highest cost per capita in healthcare spend, the need to provide
increased value in healthcare has continued unabated. We expect
investment across the healthcare industry to deliver this change,
with software and analytics being a key component.
The need for accurate financial data, supporting analytics and
the insights those analytics can bring along with the efficiency of
technology solutions has never been more important. We provide our
customers with access to the market's only platform that directly
and holistically addresses issues pertaining to the value cycle.
Our products and systems, which are built on the insights of our
data, enhance efficiency and helps ensure that both operational and
administrative functions of a hospital are working optimally,
enabling the existing teams to be more effective and efficient in
their roles. Through these insights o ur solutions can deliver real
financial returns and free up resource with a more targeted
approach, that can be re-invested and re-deployed by healthcare
providers to support the clinical care for their communities .
Our customers have remained resilient in the face of this
ongoing challenging and evolving landscape, and we are committed to
providing them with the support to navigate through the future
impacts of the pandemic and deliver value-based care.
Growth Strategy - innovation to profoundly impact US healthcare
operations which will drive demand and expand our addressable
market.
To date, our growth has been driven through increases in market
share and product set penetration (land and expand). In recent
years, we have invested in the development of the Trisus platform;
a sophisticated cloud delivered data aggregation and intelligence
platform which will be the foundation for our future growth as we
migrate our existing on-premise products to the Cloud, leverage our
data assets to expand our offering, integrate third party solutions
to the platform and benefit from the scalability of
cloud-technology.
Three Growth Pillars
Our growth strategy has three fundamental growth pillars:
1. The transition of our customers to cloud delivered versions
of our existing on-premise solutions, to act as a gateway to the
benefits and additional applications on the Trisus platform
We are pleased with the rate at which our customers are
transitioning onto the Trisus platform, and we are on track in our
move to be a fully cloud based provider. We currently have 80% of
our annual recurring revenue (30 June 2021: 16%) being delivered
from cloud based solutions, pointing to the strong progress made
and the Sentry products acquired already being cloud based. There
has been strong adoption of the Trisus Chargemaster offering, the
cloud version of our original Chargemaster Toolkit product and we
anticipate the migration of our existing customers to Trisus to be
largely complete by end of calendar 2022. We are confident in the
value our new Trisus Chargemaster will bring to our customers
through more readily accessible insights into hospital operations
providing a more efficient and effective manner of driving
improvements.
Pharmacy operations within healthcare providers is the largest
cost area for US hospitals apart from staff costs and an area where
we see considerable opportunity to scale our value-focused
solutions. We are continually evolving our full Pharmacy product
suite, due to the dynamic nature of the 340B marketplace, to ensure
our market leading position.
As a result of our R&D in this area and the acquisition of
Sentry, we now have four cloud based pharmacy offerings to take to
market, effectively replacing our existing on-premise offering,
Pharmacy Chargelink (PCL) and 65% of the current PCL customer base
are already scheduled to migrate to the new cloud based
replacements before the end of the calendar year. These four
offerings are: Trisus Pharmacy Financial Management (TRxFM) and
Trisus Medication Formulary, which was launched in the last 12
months, and Trisus Medication Claims and Trisus Medication Compare,
which are both evolutions of two original Sentry products.
While we are planning to refresh the user interface of the
existing Sentry offerings, to create the same look and feel as the
Craneware Trisus platform, they are using established cloud
architecture and do not require technical integration.
2. To continue to enhance the capabilities of the platform
through the addition of new technology layers and applications -
developed through internal R&D, selective M&A and
Third-Party Partnerships.
The dynamic nature of the healthcare market means that we are
constantly developing additional applications and tools to provide
benefits to our customers. We are continuing to see additional
opportunities for the Group as we evolve and expand our
capabilities.
While organic growth remains a priority, we continue to evaluate
the market for M&A opportunities and will continue to pursue
strategically aligned companies that will accelerate our growth
strategy, although it is unlikely that any acquisitions in the
short-term will be of the relative scale of Sentry. We maintain the
same four key acquisition criteria of which target companies must
fit into at least one, being: the addition of relevant data sets;
the extension of the customer base; the expansion of expertise; and
the addition of applications suitable for the US hospital
market.
In evaluating potential acquisition opportunities, the Board
implements a rigorous and disciplined approach to valuation,
seeking to maintain its prudent approach to preserving balance
sheet strength and efficiency for the long-term. Targets that are
profitable with recurring revenue models that provide earnings
accretion within the first 12 months of ownership are
prioritised.
3. To grow our customer footprint, through increasing the
attractiveness of our solutions and acquiring non-overlapping
customers, which in turn provides further expansion
opportunities
In addition to seeing a higher percentage of our ARR driven from
cloud based solutions, we have also seen pleasing ARR growth from
sales activities during the period, including our initial cross
sale successes. ARR for the enlarged Group now stands at $170.3m
(30 June 2021: $64.5m). This provides the foundation for further
growth through our sales successes and high levels of customer
retention, to deliver future organic growth. During the year we
have seen some significant customers transition to Trisus and
extend their long-term relationships with Craneware through both
renewals and extensions to existing contracts, along with
competitive wins in the Chargemaster and Pharmacy space.
We are confident that we will be able to further increase sales
activity in the future with our broadened and improved products and
add to our substantial existing customer base. This success is
underpinned by consistently strong customer retention rates which
remained high in the period at above 90%.
Post-Acquisition Integration Update
We were delighted with the Sentry acquisition integration during
the period. There are strong synergies between the businesses
through the complementary nature of Sentry's product suite and
customer base, which has been typified by the collaboration between
the teams. We have formed one combined management team, including a
new role of Transformation Officer, to oversee the continued
evolution of The Craneware Group with our commitment to a lean
operating model.
We are proud of the manner in which the challenges of
integrating businesses of comparable size have been dealt with by
the team, achieving comparatively strong staff retention rates and
we have successfully achieved the scale and level of integration we
had been targeting.
We are now benefitting from an integrated, well-structured team
which will no doubt drive strong levels of new sales moving
forward.
Our People and Community
Our commitment to our people has always been at the centre of
what we do. We are always reviewing our work practices to ensure
that our employees are receiving maximum support. We provide
further details of these activities with our ESG Statement within
the Annual Report.
Craneware continues to develop many social initiatives, such as
Craneware Cares and the Craneware Cares Foundation which is driven
by our employees. Further, following our acquisition of Sentry, we
have also become directly involved with the 340B Coalition. This
program aims to give back to local communities with vulnerable
populations. Even though our staff were mostly working from home
through this year, they still managed to help a total of 42
different charities across the UK and US, including our four
Spotlight Charities.
We are uniquely positioned to provide the insights our customers
need to manage their operations more efficiently and mitigate risk
while they focus on delivering increased levels of care.
Importantly, in the period our customers have seen in excess of a
$1 billion in benefit from utilising our solutions including a
significant contribution from our 340B offerings, helping to
stretch scarce federal resources as far as possible, reach more
eligible patients and provide more comprehensive services.
Financial Review
We began this financial year as a standalone business, and then
completed the transformational acquisition of Sentry. Whilst the
financial results we are reporting have yet to include a full
twelve-month contribution from this acquisition, they do
demonstrate the significant step change that has occurred within
The Craneware Group. We are pleased to report the successful
integration of Sentry and be able to demonstrate this evolution of
our enlarged Group despite the backdrop of the pandemic and the
challenges this created for all healthcare providers.
For the year ended 30 June 2022, The Craneware Group is
reporting an increase in revenue of 119% to $165.5m (FY21: $75.6m)
and a 91% increase in adjusted EBITDA to $51.8m (FY21: $27.1m).
These results not only demonstrate the new scale of The
Craneware Group but, with our resulting enlarged portfolio of
products and data sets that support them, provide a new
'foundation' for all our key performance metrics. From this
foundation, we can demonstrate future organic growth as we do even
more to support our customers as they meet the challenges of the
post-pandemic macro-environment.
Sentry Acquisition
Our intention to acquire Sentry was originally announced in our
prior financial year (June 2021) and was accompanied by a share
placing which resulted in the allotment of 6,192,652 new ordinary
shares. Following the clearance of the relevant regulatory hurdles,
we completed the acquisition on 12 July 2021. The final
consideration for the acquisition (being on a cash free / debt free
basis and after adjusting for working capital) was $372.9m.
We have completed our assessment of the fair value of the assets
and liabilities acquired and the consolidated balance sheet
presented includes these amounts; as detailed in Note 8, we have
recorded $226.5m of goodwill, having recognised $146.5m of net
assets acquired including the fair value of intangible assets:
customer list and customer contracts of $151m, proprietary software
of $51.5m and trademarks of $5.0m. Deferred tax of $37.8m, $12.9m
and $1.2m has been provided respectively in relation to the fair
value of those intangible assets. Sentry contributed revenue of
$94.7m and net profit of $1.6m to the Group for the period from 13
July 2021 to 30 June 2022.
Underlying Business Model and Professional Services
In Sentry, we have acquired a business model which is similar in
its nature to the existing Craneware Annuity SaaS business model.
The Sentry business also signs multi-year contracts albeit they are
often for a slightly shorter duration, usually three years. In
addition to the licence fees, Sentry also provides a number of
transactional services to customers, throughout the life of their
underlying contracts. These transactional services, whilst highly
dependable, see some variation period to period dependent on volume
of transactions.
As The Craneware Group, the new contracts we sign with our
customers provide a licence for the customer to access specified
products throughout their licence period. At the end of an existing
licence period, or at a mutually agreed earlier date, we look to
renew these contracts with our customers.
Under the Group's business model, we recognise software licence
revenue and any minimum payments due from our 'other long term'
contracts evenly over the life of the underlying contract term.
Transactional services are recognised as we provide the service,
and we are contractually able to invoice the customer.
In addition to the licence revenues recognised in any year, we
also expect revenue to be recognised from providing professional
and consulting services to our customers. These revenues are
usually recognised as we deliver the service to the customer, on a
percentage of completion basis.
The COVID-19 pandemic and the current macro-economic environment
has resulted in shortages of available staff at hospitals which has
continued to impact our ability to deliver professional services to
our full capability, impacting the underlying growth (especially
organic) in the year. As a result, we have experienced a reduction
in our professional services revenues, reducing to $13.9m from
$14.5m in FY21 despite the enlarged Group and well below our
expectations of 15%+ of our combined revenues in any single year
being generated from delivery of these services.
However, we have retained our professional services capacity and
as this, anticipated to be, short-term impact reverses we are well
positioned to return to growth in our professional services
delivery and associated revenue.
Annual Recurring Revenue
By renewing our underlying contracts, and ensuring we continue
to deliver the transactional services to our customers, we sustain
a highly visible recurring revenue base, which means sales of new
products to existing customers or sales to new hospital customers
add to this recurring revenue.
Following the acquisition of Sentry, we have introduced a new
KPI of Annual Recurring Revenue ("ARR") to supplement our existing
financial KPIs. With the increasing standardisation in how SaaS
companies report, this KPI will replace our historic three year
visible revenue KPI. ARR demonstrates the annual value of licence
and transactional revenues that are subject to underlying
contracts.
As at 30 June 2022, ARR had reached a new milestone of $170.3m
(30 June 2021: $64.5m). Within this metric we include the annual
value of licence and recurring transaction revenues as at 30 June
2022 that are subject to underlying contracts. In future years, we
will introduce further KPIs to demonstrate how the underlying
growth of the Group is progressing from this 'foundation', such as
Net Revenue Retention. We believe this will allow even easier
comparison between the Group and its peers.
Gross Margins
Our gross profit margin is calculated after taking account of
the incremental costs we incur to obtain the underlying contracts,
including sales commission contract costs which are charged in line
with the associated revenue recognition.
The gross profit for FY22 was $142.4m (FY21: $70.2m). This
represents a gross margin percentage of 86% (FY21: 93%) which was
expected following the Sentry acquisition and reflects the nature
of the enlarged portfolio of software and services the Group now
delivers. This represents a normal level of Gross Margin, going
forward.
Operating Expenses
The increase in net operating expenses (to Adjusted EBITDA) to
$90.6m (FY21: $43.1m) again reflects the scale of our enlarged
Group. The bringing together of the organisations has delivered on
anticipated synergies to deliver our combined target Adjusted
EBITDA margin of +30% ahead of schedule and has helped to offset
the macro-economic inflationary pressures faced. With the ongoing
macro-economic challenges, our ability to deliver focused
investment whilst retaining our normal prudent cost control is key.
Whilst the majority of our cost base is US-located, our ability to
balance our investment between the US and the UK (and the
associated Sterling exchange rate) will provide an element of
protection against the inflationary pressures that currently
exist.
Product innovation and enhancement continue to be core to this
future and our ability to achieve our potential. We continue to
pursue our buy, build, or partner strategy to build out the Trisus
platform and its portfolio of products. As we are cash generative,
we are able to use our cash reserves to further "build" alongside
the acquisition activities in the year and therefore continue to
invest significant resource in R&D.
The total cost of development in the year was $51.1m (FY21:
$24.7m), a 107% increase primarily as a result of bringing the
R&D departments together. We continue to capitalise only the
costs that relate to projects that bring future economic benefit to
the Group. With a focus in the year on integration activities, the
total amount capitalised in the year reduced from 41% of total
R&D spend in FY21 to 26% in the current year, being $13.5m
(FY21: $10.1m).
We continue to believe this investment is an efficient and
cost-effective way to further build out our Value Cycle strategy
alongside any acquisition strategy. With the completion of our
integration efforts, we expect to see both the levels of
development expense and capitalisation return to our historical
proportion of revenue in future years. As specific products are
made available to relevant customers, the associated development
costs capitalised are amortised and charged to the Group's income
statement over their estimated useful economic life, thereby
correctly matching costs to the resulting revenues.
Net Impairment charge on financial and contract assets
This relates to the movement in the provision for the impairment
of trade receivables in the year, being $461,000 (FY21: $495,000).
The nature of the market the Group serves, and the SaaS based
business model limit the Group's exposure in this regard but are
required to be shown separately on the face of the Consolidated
Statement of Comprehensive Income.
Adjusted EBITDA and Profit before taxation
To supplement the financial measures defined under IFRS the
Group presents certain non-GAAP (alternative) performance measures
as detailed in Note 14. We believe the use and calculation of these
measures are consistent with other similar listed companies and are
frequently used by analysts, investors and other interested parties
in their research.
The Group uses these adjusted measures in its operational and
financial decision-making as it excludes certain one-off items,
allowing focus on what the Group regards as a more reliable
indicator of the underlying operating performance.
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, interest, depreciation and
amortisation ("Adjusted EBITDA").
In the year, total costs of $2.1m (FY21: $6.5m) have been
identified as exceptional. These relate primarily to the costs
associated with the acquisition of Sentry. As such, these costs
were adjusted from earnings in presenting Adjusted EBITDA.
Adjusted EBITDA has grown in the year to $51.8m (FY21: $27.1m)
an increase of 91%. This reflects an Adjusted EBITDA margin of 31%
(FY21: 36%). This result confirms we have achieved our post
acquisition target of returning to a combined Group adjusted EBITDA
margin of 30% ahead of schedule. This is a result of the success of
the integration following the Sentry acquisition and the synergies
the combined organisations have delivered.
Following the amortisation charge relating to acquired
intangible assets relating to the Sentry acquisition of $20.2m
(FY21: $nil), profit before taxation reported in the year is $13.1m
(FY21: $13.2m).
Taxation
The Group generates profits in both the UK and the US. The
Group's effective tax rate is primarily dependent on the applicable
tax rates in these respective jurisdictions. As Sentry has no UK
operations, its profits are solely generated in the US and
therefore the Group now generates a higher proportion of its
profits there.
In prior years, the Company qualified for the enhanced small and
medium-sized enterprises (SME) R&D tax relief in the UK but,
with the increased scale of the Group, this enhanced relief is no
longer applicable to the Group and we now fall into the R&D
Expenditure Credit (RDEC) scheme at reduced rates of relief.
R&D tax relief has reduced in the current year to $0.5m (FY21:
$0.7m) due to the reduced rate of applicable relief. RDEC also
requires the qualifying expenditure to be included as a tax credit
in other income and therefore taxable, rather than a reduction to
the tax charge and ultimately results in a net increase of
$0.4m.
In the year ended 30 June 2021, the effective tax rate had been
further positively affected by the finalisation of R&D tax
relief claims in respect to the prior two years, totalling $1.6m,
along with the estimated R&D tax relief for that year. In
addition, in the year to 30 June 2021, following the substantive
enactment of the increase in UK corporation tax rate to 25%
effective from 1 April 2023, the UK deferred tax assets and
liabilities as at 30 June 2021 were revalued which reduced that
year's tax charge by $0.5m.
Other factors impacting the effective tax rate include tax
deductibility of amortisation of acquired intangibles, tax losses
brought forward in the new enlarged group and the number of share
options exercised and associated tax treatment. Reconciliation of
the tax charge for the year can be seen in Note 5. As a result the
effective tax rate for the year ended 30 June 2022 is 28% (FY21:
2%).
EPS
The Group presents an Alternative Performance Measure of
Adjusted EPS, to provide consistency to other listed companies.
Both Basic and Diluted Adjusted EPS are calculated excluding costs
incurred as a result of acquisition and share related activities,
being $1.6m (tax adjusted) in the year (FY21: $5.6m) and
amortisation of acquired intangibles of $20.2m (FY21: $nil).
Adjusted EPS, after the factors noted above including the
increased levels of Adjusted EBITDA, has increased 29% to $0.890
(FY21: $0.690) and adjusted diluted EPS has increased to $0.881
(FY21: $0.681).
Basic EPS in the period reduced to $0.268 (FY21: $0.481) and
Diluted EPS reduced to $0.265 (FY21: $0.475) primarily as a result
of the exceptional items noted above and bank interest relating to
the new borrowings.
Cash and Bank Facilities
Cash generation and a strong balance sheet have always been a
focus of the Group. Our business model provides the basis for high
levels of cash generation, and we continue to monitor the quality
of our earnings through Operating Cash Conversion, this being our
ability to convert our Adjusted EBITDA to "cash generated from
operations" (as detailed in the consolidated cash flow
statement).
Sentry, prior to its acquisition, whilst cash generative was not
achieving the levels of cash generation achieved by Craneware. In
the year, we have made improvements in the operating cash
conversion of Sentry and as a result achieved Operating Cash
Conversion across the combined Group of 80% in the year after
adjusting for cash outflows relating to exceptional costs accrued
in the prior year (FY21: 99%).
We continue to invest in our future and return funds to our
enlarged shareholder base via dividends, returning $13.0m in the
current year (FY21: $9.7m).
Also, as part of the funding for the acquisition of Sentry, the
Group entered into a debt facility and during the year drew down
$120m of secured funding provided by our consortium of banking
partners. This facility was provided on a 3+1+1 year term basis.
During the year, $8m (FY21: $nil) of the loan has been repaid on
schedule, all covenants have been met, and the first extension of
the term has been agreed. We would like to thank our banking
partners, alongside our shareholders, for their continued support
of our growth strategy.
Cash reserves at the year-end were $47.2m (FY21: $48.3m
operating cash reserves) with net debt of $64.4m (FY21: $nil)
representing a comfortable level of debt for the Group.
Balance sheet
Whilst the consolidated balance sheet has significantly changed
following the Sentry acquisition (details of net assets acquired
are provided in Note 8), the Group maintains a strong balance
sheet.
Within the balance sheet, deferred income levels reflect the
amounts of the revenue under contract that we have invoiced but
have yet to recognise as revenue. This balance is a subset of the
Annual Recurring Revenue described above and future performance
obligations detailed in Note 3.
Deferred income, accrued income and the prepayment of sales
commissions all arise as a result of our 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 any 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, debt 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
quarter of the cost base situated 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 was $1.3317 as
compared to $1.3466 in the prior year. The exchange rate at the
Balance Sheet date was $1.2128 (FY21: $1.3853).
Audit Tender
Following the audit tender process conducted in the prior year,
in which a number of audit firms were invited to tender, the Board
approved PricewaterhouseCoopers LLP for recommendation to
shareholders, for re-appointment as auditors, and this was approved
by shareholders at the Company's Annual General Meeting which was
held in November 2021.
Dividend
In proposing a final dividend, the Board has carefully
considered a number of factors including the prevailing
macro-economic climate, the Group's trading performance, our
current and future cash generation especially in light of the
Sentry acquisition and our continued desire to recognise the
support our shareholders provide. After carefully weighing up these
factors, the Board proposes a final dividend of 15.5p (18.80 cents)
per share giving a total dividend for the year of 28p (33.96 cents)
per share (FY21: 27.5p (38.10 cents) per share), an increase of 2%.
Subject to approval at the Annual General Meeting, the final
dividend will be paid on 16 December 2022 to shareholders on the
register as at 25 November 2022, with a corresponding ex-Dividend
date of 24 November 2022.
The final dividend of 15.5p 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 25
November 2022. The exact amount to be paid will be calculated by
reference to the exchange rate to be announced on 25 November 2022.
The final dividend referred to above in US dollars of 18.80 cents
is given as an example only using the Balance Sheet date exchange
rate of $1.2128/GBP1 and may differ from that finally
announced.
Outlook
Whilst we remain cognisant of the ongoing challenges faced by
our customers and partners, we are proud of the manner in which the
Group has dealt with the challenging backdrop during the year. A
focus for the year was to integrate our widened team and this was
achieved with great success. Now, with our expanded and reorganised
team we are confident we will be able to serve the considerable
market need within the US healthcare space through the next stage
of our evolution.
We anticipate accelerated levels of sales moving forward,
delivering our next phase of growth. We have a robust balance
sheet, high recurring revenues and with our high levels of customer
retention, we look to further increase shareholder value.
Keith Neilson Craig Preston
CEO Craneware plc CFO Craneware plc
19 September 2022 19 September 2022
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2022
Total Total
2022 2021
Notes $'000 $'000
--------------------------------------------- ------ ---------- ---------
Continuing operations:
Revenue 3 165,544 75,578
Cost of sales (23,178) (5,373)
---------- ---------
Gross profit 142,366 70,205
Other income 551 37
Operating expenses 4 (124,324) (56,507)
Net impairment charge on financial
and contract assets 4 (461) (495)
---------- ---------
Operating profit 18,132 13,240
Analysed as:
Adjusted EBITDA(1) 51,757 27,111
Share based payments (2,116) (2,141)
Depreciation of property, plant and
equipment (3,259) (1,403)
Exceptional Costs(2) 8 (2,106) (6,487)
Amortisation of intangible assets -
other (5,905) (3,840)
Amortisation of intangible assets -
acquired intangibles (20,239) -
--------------------------------------------- ------ ---------- ---------
Finance income 1 1
Finance expense (5,031) (76)
---------- ---------
Profit before taxation 13,102 13,165
Tax on profit on ordinary activities 5 (3,693) (260)
---------- ---------
Profit for the year attributable to
owners of the parent 9,409 12,905
Other comprehensive income/ (expense)
Items that may be reclassified subsequently
to profit or loss
Currency translation reserve movement 42 (126)
---------- ---------
Total items that may be reclassified
subsequently to profit or loss 42 (126)
--------------------------------------------- ------ ---------- ---------
Total comprehensive income attributable
to owners of the parent 9,451 12,779
--------------------------------------------- ------ ---------- ---------
1. See Note 14 for explanation of Alternative Performance Measures.
2. Exceptional items relate to legal and professional fees
associated with a successful acquisition and related integration
costs (FY21: legal and professional fees associated with an aborted
potential acquisition in H1 2021 and a successful acquisition
completed post year end its associated share placing).
Earnings per share for the year attributable to equity
holders
Notes 2022 2021
------------------------------- ------ ------ ------
Basic ($ per share) 7 0.268 0.481
*Adjusted Basic ($ per share) 7 0.890 0.690
Diluted ($ per share) 7 0.265 0.475
*Adjusted Diluted ($ per
share) 7 0.881 0.681
------------------------------- ------ ------ ------
* 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
2022
Share Capital
Share Premium Redemption Merger Other Retained Total
Capital Account Reserve Reserve Reserves Earnings Equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000
------------------------------ -------- -------- ----------- -------- --------- --------- ---------
At 30 June 2020 536 21,097 9 - 4,148 42,605 68,395
Total comprehensive
income - profit for
the year - - - - - 12,905 12,905
Total other comprehensive
expense - - - - - (126) (126)
Transactions with owners:
Share-based payments - - - - 1,332 - 1,332
Share placing 88 - - 186,933 - - 187,081
Purchase of own shares
through EBT - - - - - (422) (422)
Deferred tax taken directly
to equity - - - - - 1,212 1,212
Impact of share options
and awards exercised/lapsed - - - - (752) 354 (398)
Dividends (Note 6) - - - - - (9,700) (9,700)
------------------------------
At 30 June 2021 624 21,097 9 186,933 4,728 46,828 260,279
Total comprehensive
income - profit for
the year - - - - - 9,409 9,409
Total other comprehensive
income - - - - - 42 42
Transactions with owners:
Share-based payments - - - - 2,294 - 2,294
Share issue 35 76,107 - (12) - - 76,130
Purchase of own shares
through EBT - - - - - (1,726) (1,726)
Deferred tax taken directly
to equity - - - - - (366) (366)
Impact of share options
and awards exercised/lapsed - - - - (1,089) 1,025 (64)
Dividends (Note 6) - - - - - (12,976) (12,976)
------------------------------
At 30 June 2022 659 97,204 9 186,981 5,933 42,236 333,022
------------------------------ -------- -------- ----------- -------- --------- --------- ---------
Co nsolidated Balance Sheet as at 30 June 2022
Notes 2022 2021
$'000 $'000
----------------------------------------------- ------ -------- --------
ASSETS
Non-Current Assets
Property, plant and equipment 8,819 2,552
Intangible assets - goodwill 9 237,646 11,188
Intangible assets - acquired intangibles 9 187,257 -
Intangible assets - other 9 43,430 31,922
Trade and other receivables 10 3,234 5,427
Deferred tax - 5,459
480,386 56,548
-------- --------
Current Assets
Trade and other receivables 10 40,001 19,435
Cash and cash equivalents 47,157 235,617
Restricted cash 1,251 -
88,409 255,052
-------- --------
Total Assets 568,795 311,600
----------------------------------------------- ------ -------- --------
EQUITY AND LIABILITIES
Non-Current Liabilities
Borrowings 13 103,589 -
Leased property 1,206 1,148
Hire purchase equipment 290 -
Deferred tax 47,606 -
Other provisions 568 764
-------- --------
153,259 1,912
-------- --------
Current Liabilities
Borrowings 13 8,000 -
Deferred income 3 58,722 33,670
Trade and other payables 15,792 15,739
82,514 49,409
-------- --------
Total Liabilities 235,773 51,321
-------- --------
Equity
Share capital 11 659 624
Share premium account 97,204 21,097
Capital redemption reserve 9 9
Merger reserve 186,981 186,993
Other reserves 5,933 4,728
Retained earnings 42,236 46,828
Total Equity 333,022 260,279
-------- --------
Total Equity and Liabilities 568,795 311,600
----------------------------------------------- ------ -------- --------
Consolidated Statement of Cash Flows for the year ended 30 June
2022
Notes 2022 2021
$'000 $'000
------------------------------------------ ------ ---------- ---------
Cash flows from operating activities
Cash generated from operations 12 32,943 26,711
Tax paid (5,979) (3,174)
------------------------------------------ ------ ---------- ---------
Net cash generated from operating
activities 26,964 23,537
Cash flows from investing activities
Acquisition of subsidiary, net
of cash acquired 8 (293,288) -
Purchase of property, plant and
equipment (353) (159)
Capitalised intangible assets 9 (13,680) (10,167)
Interest received 1 1
------------------------------------------ ------ ---------- ---------
Net cash used in investing activities (307,320) (10,325)
Cash flows from financing activities
Dividends paid to company shareholders 6 (12,976) (9,700)
Shares issued for cash 11 - 187,244
Share issue professional fees (263) -
Paid up share capital 11 236 88
Proceeds from borrowings 13 120,000 -
Loan arrangement fees 13 (268) (1,692)
Repayment of borrowings 13 (8,000) -
Interest on borrowings (3,080) -
Purchase of own shares by EBT (1,726) (422)
Payment of lease liabilities (2,027) (964)
------------------------------------------ ------ ---------- ---------
Net cash generated from financing
activities 91,896 174,554
Net (decrease)/ increase in cash
and cash equivalents (188,460) 187,766
Cash and cash equivalents at the
start of the year 235,617 47,851
Cash and cash equivalents at the
end of the year 47,157 235,617
------------------------------------------ ------ ---------- ---------
In FY21 shares issued for cash includes net proceeds of
$187,331,713 related to the share placing in June 2021, being gross
proceeds of $192,282,712 less transaction costs of $4,950,999.
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 of the Group and the Company are
prepared in accordance with UK adopted international accounting
standards (International Financial Reporting Standards ("IFRS"))
and the applicable legal requirements of the Companies Act
2006.
The Group and the Company financial statements have been
prepared under the historic cost convention and prepared on a going
concern basis. The Strategic Report contains information regarding
the Group's activities and an overview of the development of its
products, services and the environment in which it operates. The
Group's revenue, operating results, cash flows and balance sheet
are detailed in the financial statements and explained in the
Financial Review. The Directors, having made suitable enquiries and
analysis of the financial statements, including the consideration
of:
-- net debt;
-- continued cash generation;
-- continued compliance with: debt facility covenants and related payments (Note 13); and
-- SaaS business model
have determined that the Group has adequate resources to
continue in business for the foreseeable future and that it is
therefore appropriate to adopt the going concern basis in preparing
the consolidated and the Company financial statements.
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 year. 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 financial statements 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 $1.3317/GBP1 (2021: $1.3466/GBP1). Monetary
assets and liabilities expressed in foreign currencies are
translated into US dollars at rates of exchange ruling at the
Balance Sheet date $1.2128/GBP1 (2021: $1.3853/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.
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 liabilities resulting from any contingent
consideration. Any costs directly attributable to the 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 a financial asset or financial liability is recognised
in accordance with IFRS 9 in the Statement of Comprehensive Income
and any balances at the Balance Sheet date are categorised as 'fair
value through profit and loss'. 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 Consolidated
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.
Revenue from contracts with customers
The Group follows the principles of IFRS 15, 'Revenue from
Contracts with Customers'; accordingly, revenue is recognised using
the five-step model:
1. Identify the contract;
2. Identify the performance obligations in the contract;
3. Determine the transaction price;
4. Allocate the transaction price to the performance obligations in the contract; and
5. Recognise revenue when or as performance obligations are satisfied.
Revenue is recognised either when the performance obligation in
the contract has been performed (point in time recognition) or over
time as control of the performance obligation is transferred to the
customer.
Revenue is derived from sales of software licences and
professional services including training and consultancy and
transactional fees.
Revenue from software licenses
Revenue from both on premises and Trisus software licenced
products is recognised from the point at which the customer gains
control and the right to use our software. The following key
judgements have been made in relation to revenue recognition of
software license:
-- This is right of use software due to the integral updates
provided on a regular basis to keep the software relevant and, as a
result, the licenced software revenue will be recognised over time
rather than at a point in time;
-- The software license together with installation, regular
updates and access to support services form a single performance
obligation;
-- The transaction price is allocated to each distinct one year
license period with annual increases being recognised in the year
they apply; and
-- Discounts in relation to software licenses are recognised
over the life of the 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.
Revenue from professional services
Revenue from all professional services including training and
consulting services is recognised when the performance obligation
has been fulfilled and the services are provided. These services
could be provided by a third party and are therefore considered to
be separate performance obligations. 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 complete
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.
'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 transactional services
Transactional service fees are recognised at the point in time
when the service is provided.
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 Group
does not have any contracts where a financing component exists
within the contract.
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.
Contract assets include sales commissions and prepaid royalties.
Contract liabilities include unpaid sales commissions on contracts
sold and deferred income relating to license fees billed in advance
and recognised over time.
Exceptional items
The Group defines exceptional items as transactions (including
costs incurred by the Group) which relate to material non-recurring
events. These are disclosed separately where it is considered it
provides additional useful information to the users of the
financial statements.
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 recognised as a non-current asset in accordance with
IFRS 3 and is not amortised.
After initial recognition, goodwill is stated at cost less any
accumulated impairment losses. It tested at least annually for
impairment. Any impairment loss is recognised in the Consolidated
Statement of Comprehensive Income.
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 useful economic 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 five years.
(c) Customer relationships
Contractual customer relationships acquired in a business
combination are recognised at fair value at the acquisition date.
The contractual customer relationships 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 fifteen years.
(d) Development costs
Expenditure associated with developing and maintaining the
Group's software products is recognised as incurred.
Development expenditure is capitalised where 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.
Costs are 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 between five and
ten years. Expenditure not meeting the above criteria is expensed
as incurred.
Employee 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.
(f) Trademarks
Trademarks acquired in a business combination are initially
measured at fair value at the acquisition date. Trademarks have a
finite useful economic life and are 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 up to ten 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. They are measured using
enacted rates and laws that will be in effect when the differences
are expected to reverse. 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 does not affect
accounting or 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 and on the vesting of conditional share awards under
each jurisdiction's tax rules. As explained under "Share-based
payments", a compensation expense is recorded in the Group's
Consolidated Statement of Comprehensive Income over the period from
the grant date to the vesting date of the relevant options and
conditional share awards. 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
Consolidated 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 Consolidated 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 'operating
expenses' with a corresponding increase in 'Other reserves'.
Charges relating to subsidiaries are recharged by Craneware plc to
the relevant subsidiary.
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:
Estimates
-- 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.
-- Useful lives of intangible assets : in assessing useful life,
the Group uses careful judgement based on past experience, advances
in product development and also best practice. The Group amortises
intangible assets over a period of up to 15 years (2021: 5 to 10
years). During the year, the Group has updated the estimated useful
life of Customer Relationships to up to 15 years as a result of the
valuation work performed on the acquisition of Sentry. This has
been applied on a prospective basis. All historic customer
relationship assets were fully amortised at 30 June 2021 and
therefore there is no change to historic asset amortisation as a
result of the change.
-- Intangible assets acquired and liabilities assumed: the Group
has measured assets acquired and liabilities assumed on the
acquisition of Sentry at their fair value on acquisition. Assessing
the fair value required the use of a number of assumptions and
estimates in relation to future cash flows generated by the assets
and the use of valuation techniques. The assumptions were based on
the best information available to management and valuation
techniques were supported by third party valuation experts. The
valuations methods used for the intangibles acquired were
o Customer relationships - the residual income method was used
for arriving at the fair value of this asset. This calculates the
residual profit attributable less the appropriate returns for all
other assets that benefit the business.
o Proprietary software - the cost approach was used in
determining the fair value of this asset. This method estimates the
cost to replicate the asset as at the purchase date using current
prices for time and materials adding an appropriate margin and
opportunity cost.
o Trademarks - the relief from royalty method was used to
provide the fair value of this asset. This uses an estimate of the
cost savings that accrue on an intangible asset that would
otherwise incur royalties or licence fees on revenues generated
from the use of the asset.
Judgements
-- 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.
-- Provisions for income taxes: the Group is subject to tax in
the UK and US and this requires the Directors to regularly assess
the appropriateness of its transfer pricing policy.
-- Revenue recognition : in determining the amount of revenue
and related balance sheet items to be recognised in the period,
management is required to make a number of judgements and
assumptions. These are detailed in Note 1 Revenue from contracts
with customers.
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 US. 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 United Kingdom.
2022 2021
$'000 $'000
----------------------- -------- -------
Software licencing 137,956 61,115
Professional services 13,893 14,463
Transactional fees 13,695 -
Total revenue 165,544 75,578
----------------------- -------- -------
Contract assets
The Group has recognised the following assets related to
contracts with customers:
2022 2021
$'000 $'000
-------------------------------------------- ------ ------
Prepaid commissions and royalties < 1 year 2,504 2,483
Prepaid commissions and royalties > 1 year 3,208 3,735
Total contract assets 5,712 6,218
-------------------------------------------- ------ ------
Contract assets are included within deferred contract costs and
prepayments in the Balance Sheet. Costs recognised during the year
in relation to assets at 30 June 2021 were $2.5m.
Contract liabilities
The following table shows the total contract liabilities at 30
June 2022 from software license and professional service
contracts:
2022 2021
$'000 $'000
---------------------------- ------- -------
Software licencing 53,596 29,245
Professional services 5,126 4,425
Total contract liabilities 58,722 33,670
---------------------------- ------- -------
Contract liabilities are included within deferred income in the
Balance Sheet.
Revenue of $33.0m was recognised during the year in relation to
contract liabilities as of 30 June 2021.
The following table shows the aggregate transaction price
allocated to performance obligations that are partially or fully
unsatisfied at 30 June 2022 from software license and professional
service contracts.
Total unsatisfied Expected recognition
performance < 1 1 to 2 to > 3
obligations year 2 years 3 years years
Revenue expected to be
recognised $'000 $'000 $'000 $'000 $'000
------------------------------ ------------------ -------- --------- --------- -------
At 30 June 2022
* Software 370,081 137,234 102,247 71,642 58,958
* Professional services 13,274 6,891 3,080 1,910 1,393
Total at 30 June 2022 383,355 144,125 105,327 73,552 60,351
------------------------------ ------------------ -------- --------- --------- -------
At 30 June 2021
* Software 155,617 57,862 43,485 28,282 25,988
* Professional services 11,513 6,475 2,419 1,306 1,313
------------------------------ ------------------ -------- --------- --------- -------
Total at 30 June 2021 167,130 64,337 45,904 29,588 27,301
------------------------------ ------------------ -------- --------- --------- -------
Revenue of $64.3m was recognised during the year in relation to
unsatisfied performance obligations as of 30 June 2021.
The majority of these performance obligations are unbilled at
the Balance Sheet date and therefore not reflected in these
financial statements.
4. Operating expenses
2022 2021
$'000 $'000
----------------------------------------------- -------- -------
Sales and marketing expenses 15,268 6,620
Client servicing 17,729 12,615
Research and development 37,584 14,549
Administrative expenses 20,383 9,300
Share-based payments 2,116 2,141
Depreciation of property, plant and equipment 3,259 1,403
Amortisation of intangible assets - other 5,905 3,840
Amortisation of intangible assets - acquired
intangibles 20,239 -
Exceptional costs* 2,106 6,487
Exchange loss 196 47
Operating expenses 124,785 57,002
----------------------------------------------- -------- -------
* Exceptional items relate to legal and professional fees
associated with a successful acquisition and related integration
costs (FY21: legal and professional fees associated with an aborted
potential acquisition in H1 2021 and a successful acquisition
completed post year end its associated share placing).
Included in operating expenses is the movement in the provision
for impairment of trade receivable during the year of $444,000
(FY21: $495,000), plus $17,000 net impairment charge for trade
receivables recognised directly in operating expenses.
5. Tax on profit on ordinary activities
2022 2021
$'000 $'000
--------------------------------------------------- ------- --------
Profit on ordinary activities before tax 13,102 13,165
Current tax
Corporation tax on profits of the year 2,774 3,772
Adjustments for prior years 94 (1,673)
--------------------------------------------------- ------- --------
Total current tax charge 2,868 2,099
Deferred tax
Deferred tax for current year 842 (1,656)
Adjustments for prior years 9 122
Change in UK tax rate (26) (305)
Total deferred tax charge/ (credit) 825 (1,839)
--------------------------------------------------- ------- --------
Tax on profit on ordinary activities 3,693 260
--------------------------------------------------- ------- --------
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% (2021: 19%) 2,490 2,501
Effects of:
Adjustment for prior years 103 (1,551)
Change in tax rate on opening deferred tax
balance (26) (305)
Change in tax rate on closing deferred tax
balance 339 (227)
Additional US taxes on profits 25% (2021:
25%) 328 116
R&D tax credit - (712)
Expenses not deductible for tax purposes 119 703
Spot rate remeasurement 39 12
Expense/ (deduction) on share plan charges 301 (258)
Other - (19)
Total tax charge 3,693 260
--------------------------------------------------- ------- --------
6. Dividends
The dividends paid during the year were as follows:-
2022 2021
$'000 $'000
---------------------------------------------- ------- ------
Final dividend, re 30 June 2021 - 21.47
cents (15.5 pence)/share 7,227 5,329
Interim dividend, re 30 June 2022 - 16.88
cents (12.5 pence)/share 5,749 4,371
Total dividends paid to Company shareholders
in the year 12,976 9,700
---------------------------------------------- ------- ------
Prior year:
Final dividend 19.80 cents (15 pence)/share
Interim dividend 16.68 cents (12 pence)/share
The proposed final dividend 18.80 cents (15.5 pence), as noted
in the Financial Review section of the Strategic Report, for the
year ended 30 June 2022 is subject to approval by the shareholders
at the Annual General Meeting and has not been included as a
liability in these financial statements.
7. Earnings per share
The calculation of basic and diluted earnings per share is based
on the following data:
Weighted average number of shares
2022 2021
No. of Shares No. of Shares
000s 000s
------------------------------------------------ -------------- --------------
Weighted average number of Ordinary Shares
for the purpose of basic earnings per share 35,110 26,811
------------------------------------------------ -------------- --------------
Effect of dilutive potential Ordinary Shares:
share options and LTIPs 367 374
------------------------------------------------ -------------- --------------
Weighted average number of Ordinary Shares
for the purpose of diluted earnings per share 35,477 27,185
------------------------------------------------ -------------- --------------
The Group has one category of dilutive potential Ordinary
shares, being those granted to Directors and employees under the
employee share plans.
Shares held by the Employee Benefit Trust are excluded from the
weighted average number of Ordinary shares for the purposes of
basic earnings per share.
Profit for year
2022 2021
$000's $'000s
---------------------------------------------- ------- -------
Profit for the year attributable to equity
holders of the parent 9,409 12,905
Aborted share placing costs (tax adjusted) - 386
Acquisition and associated share placing
costs (tax adjusted) 1,279 5,210
Acquisition integration costs (tax adjusted) 325 -
Amortisation of acquired intangibles 20,238 -
---------------------------------------------- ------- -------
Adjusted profit for the year attributable
to equity holders of the parent 31,251 18,501
---------------------------------------------- ------- -------
Basic earnings per share are calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of shares in issue during the year.
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.
Earnings per share
2022 2021
cents cents
---------------------- ------ ------
Basic EPS 26.8 48.1
Diluted EPS 26.5 47.5
Adjusted basic EPS 89.0 69.0
Adjusted diluted EPS 88.1 68.1
---------------------- ------ ------
8. Business Combinations
On 12 July 2021, the Group acquired 100% of the voting rights of
SDS Holdco, Inc., the ultimate holding company of Sentry Data
Systems, Inc. ('Sentry'), a leader in the pharmacy procurement,
compliance and utilisation management, based in Florida, USA. For
further information on the reasons for the acquisition see Note 25
of the annual report for the year ended 30 June 2021. The aggregate
consideration for the acquisition of Sentry on a cash free/ debt
free basis subject to an adjustment against a benchmark level of
working capital on the date of acquisition as calculated and
determined in accordance with the terms of the agreement relating
to the acquisition.
The deal was funded by $297.0m (as adjusted) of cash and $75.9m
from the issue of 2,507,348 new ordinary shares at fair value on 12
July 2021 (measured using the closing market price of the Company's
ordinary shares on that date). The cash consideration was funded
from the Group's existing cash resources, $120m from a new debt
facility and $187.3m net proceeds from a share placing completed in
June 2021.
Details of the purchase consideration, net assets acquired and
goodwill, are as follows:
$'000
--------------------------------------------- --------
Cash paid (net of working capital adjusted) 297,015
Shares issued (fair value) 75,905
Total purchase consideration 372,920
----------------------------------------------- --------
The fair values for assets and liabilities recognised as a
result of the acquisition are as follows:
Fair value
$'000
----------------------------------------- -----------
Non-Current assets
Property, plant and equipment 9,179
Intangible assets - customer relations 151,000
Intangible asset - proprietary software 51,496
Intangible assets - trademarks 5,000
Intangible assets - other 3,762
Other contract assets 376
------------------------------------------- -----------
Total non-current assets 220,813
------------------------------------------- -----------
Current assets
----------------------------------------- -----------
Trade and other receivables 13,671
Cash and cash equivalents 3,727
Restricted cash 1,880
------------------------------------------- -----------
Total current assets 19,278
------------------------------------------- -----------
Non-current liabilities
----------------------------------------- -----------
Leased property > 1 year 1,540
Leased equipment > 1 year 1,146
Deferred tax 51,874
------------------------------------------- -----------
Total non-current liabilities 54,560
------------------------------------------- -----------
Current liabilities
Deferred income 27,164
Trade and other payables 11,905
------------------------------------------- -----------
Total current liabilities 39,069
------------------------------------------- -----------
Net identifiable assets acquired 146,462
Add: goodwill 226,458
Total consideration 372,920
------------------------------------------- -----------
The goodwill is attributable to Sentry's strong position in the
market and synergies expected to arise after the company's
acquisition of these new subsidiaries.
The fair value of the acquired customer list and customer
contracts of $151m, proprietary software of $51.5 and trademarks of
$5.0m have been valued as per the details in Note 2. Deferred tax
of $37.8m, $12.9m and $1.2m has been provided respectively in
relation to these intangible assets.
Acquisition related costs of $2.1m (FY21: $6.5m) are included
within exceptional costs in profit and loss.
The fair value of trade and other receivables is $13.7m and
includes trade receivables with a fair value of $9.5m. The gross
contractual amount for trade receivables due is $12.7m of which
$3.2m is expected to be uncollectible.
Sentry contributed revenue of $94.7m and net profit of $1.6m to
the Group for the period from 13 July 2021 to 30 June 2022. If the
acquisition had occurred on 1 July 2021, consolidated revenue and
consolidated profit after tax for the year ended 30 June 2022 would
have been $168.2m and $9.5m respectively.
9. Intangible assets
Goodwill and Other Intangible assets
Goodwill Customer Proprietary Development Computer
Relationships Software Trademarks Costs Software Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
------------------ --------- -------------- ------------ ----------- ------------ --------- --------
Cost
At 1 July 2021 11,438 2,964 3,043 - 42,976 1,004 61,425
Additions - - - - 13,506 174 13,680
Acquisition of
subsidiary 226,458 151,000 51,496 5,000 - 3,762 437,716
Disposals - - (1,815) - (386) (100) (2,301)
At 30 June 2022 237,896 153,964 52,724 5,000 56,096 4,840 510,520
------------------ --------- -------------- ------------ ----------- ------------ --------- --------
Accumulated amortisation and
impairment
At 1 July 2021 250 2,964 3,043 - 11,324 734 18,315
Charge for the
year - 9,742 9,959 538 4,669 1,236 26,144
Amortisation
on disposal - - (1,815) - (386) (71) (2,272)
At 30 June 2022 250 12,706 11,187 538 15,607 1,899 42,187
Net Book Value
at 30 June 2022 237,646 141,258 41,537 4,462 40,489 2,941 468,333
------------------ --------- -------------- ------------ ----------- ------------ --------- --------
Cost
At 1 July 2020 11,438 2,964 3,043 - 32,877 2,104 52,426
Additions - - - - 10,099 68 10,167
Disposals - - - - - (1,168) (1,168)
At 30 June 2021 11,438 2,964 3,043 - 42,976 1,004 61,425
------------------ --------- -------------- ------------ ----------- ------------ --------- --------
Accumulated amortisation and
impairment
At 1 July 2020 250 2,964 3,043 - 7,794 1,592 15,643
Charge for the
year - - - - 3,530 310 3,840
Amortisation
on disposal - - - - - (1,168) (1,168)
At 30 June 2021 250 2,964 3,043 - 11,324 734 18,315
Net Book Value
at 30 June 2021 11,188 - - - 31,652 270 43,110
------------------ --------- -------------- ------------ ----------- ------------ --------- --------
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 subsidiaries and is split into the
following CGUs:
2022 2021
$000's $'000s
------------------- -------- -------
Craneware InSight 11,188 11,188
Sentry 226,458 -
Total Goodwill 237,646 11,188
------------------- -------- -------
Craneware InSight
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.
Sentry
The carrying values are assessed for impairment purposes by
calculating the value in use of the Sentry 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 Sentry acquisition.
The key assumptions in assessing value in use for the CGU's
are:
Growth rate in Post-tax discount
perpetuity rate
2022 2021 2022 2021
------------------- -------- ------- --------- ---------
Craneware InSight 2% 2% 12.1% 13.5%
Sentry 2% - 9.5% -
------------------- -------- ------- --------- ---------
After the initial term of 5 years, the Group applied a growth
rate for each CGU. These take into consideration the customer bases
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 has 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
forecast for the next five years showed 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. Certain disclosures, including sensitivities, relating
to goodwill have not been made, given the significant headroom on
impairment testing.
10. Trade and other receivables
2022 2021
$'000 $'000
----------------------------------- -------- --------
Trade receivables 34,730 16,450
Less: provision for impairment of
trade receivables (5,855) (2,270)
----------------------------------- -------- --------
Net trade receivables 28,875 14,180
Other receivables 827 302
Current tax receivable 3,349 278
Prepayments and accrued income 4,714 4,090
Deferred Contract Costs 5,470 6,012
----------------------------------- -------- --------
43,235 24,862
Less non-current receivables:
Prepayments (26) (1,692)
Deferred Contract Costs (3,208) (3,735)
Current portion 40,001 19,435
----------------------------------- -------- --------
11. Share capital
2022 2021
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
2022 2021
Number $'000 Number $'000
------------------------------------ ----------- ------ ----------- ------
Equity share capital
Ordinary shares of 1p each
------------------------------------ ----------- ------ ----------- ------
At 1 July 33,019,191 624 26,826,539 536
------------------------------------ ----------- ------ ----------- ------
Share placing - - 6,192,652 88
Allotted and issued in the
year as part of the consideration
for the acquisition of Sentry
(Note 8) 2,507,348 34 - -
Allotted and issued in the
year on exercise of employee
share options 15,630 1 - -
------------------------------------ ----------- ------ ----------- ------
At 30 June 35,542,169 659 33,019,191 624
------------------------------------ ----------- ------ ----------- ------
The Company did not purchase any of its own shares during the
financial year ended 30 June 2022 (2021: nil).
Shares issued during the year ended 30 June 2022
On 12 July 2021, 2,507,348 new Ordinary Shares in Craneware plc
were issued as part of the consideration for the acquisition of SDS
Holdco, Inc., the ultimate holding company of Sentry. Note 8
contains further details of this business combination. The fair
value of the consideration given in excess of the nominal value of
these issued Ordinary Shares was $75,870,408 which is included in
the share premium account.
The Company has granted share options and conditional share
awards in respect of its Ordinary Shares. During the year ended 30
June 2022 15,630 Ordinary Shares (2021: no Ordinary Shares) were
issued on the exercise of share options by employees in March 2022.
The exercise price of those share options was GBP11.475 per share
(approximately $15.13 cents per share) and therefore the total
amount received by the Company was $236,464 (GBP179,354) including
share premium totalling $236,258 (GBP179,198) recognised on the
issue of those Ordinary Shares.
12. Cash flow generated from operating activities
Reconciliation of profit before taxation to net
cash inflow from operating activities
2022 2021
$'000 $'000
------------------------------------- --------- -------
Profit before tax 13,102 13,165
Finance income (1) (1)
Finance expense 5,031 76
Depreciation on property, plant and
equipment 3,259 1,403
Amortisation on intangible assets
- other 5,905 3,840
Amortisation on intangible assets
- acquired intangibles 20,239 -
Gain on disposals (5) -
Share-based payments 2,116 2,141
FX on non cash items - (136)
Movements in working capital:
(Increase)/ decrease in trade and
other receivables (3,202) 2,026
(Decrease)/ increase in trade and
other payables (13,500) 4,197
Cash generated from operations 32,943 26,711
------------------------------------- --------- -------
13. Borrowings
In June 2021, the Group entered into a new debt facility to
finance the purchase of Sentry. The total available amount under
the facility is $140m, of which $120m was drawn down on 12 July
2021.
The debt facility comprises a term loan of $40m which is
repayable in quarterly instalments over 5 years up to 30 June 2026,
and a revolving loan facility of $80m which expires on 7 June 2025.
The Group has the ability to extend the revolving loan facility for
an additional one year term. Interest is charged on the facility on
a daily basis at margin and compounded reference rate. The margin
rate was fixed at 2.55% for the first 9 months of the facility
term. Following this initial period, the margin is related to the
leverage of the Group as defined in the loan agreement. As the
leverage of the Group strengthens, the applicable margin
reduces.
The facility is secured by a Scots law floating charge granted
by the Company, an English law debenture granted by the Company and
a New York law security agreement to which the Company and certain
of its subsidiaries are parties. The securities granted by the
Company and the relevant subsidiaries provide security over all
assets of the Company and specified assets of the Group.
2022 2021
$'000 $'000
---------------------------------------- -------- ------
Current interest bearing borrowings 8,000 -
Non current interest bearing borrowings 103,589 -
Total 111,589 -
---------------------------------------- -------- ------
Arrangement fees paid in advance of the setting up of the
facility are being recognised over the life of the facility in
operating costs. The remaining balance of unamortised fees and
interest at 30 June 2022 is $3.2m.
See Note 14 for a reconciliation between borrowings, cash and
net debt.
Loan covenants
Under the facilities the Group is required to meet quarterly
covenants tests in respect of:
a) Adjusted leverage which is the ratio of total net debt on the
last day of the relevant period to adjusted EBITDA.
b) Cash flow cover which is the ratio of cashflow to net finance
charges in respect of the relevant period.
The Group complied with these ratios throughout the reporting
period.
Financing arrangements
The Group's undrawn borrowing facilities were as follows:
2022 2021
$'000 $'000
------------------------------ ------- --------
Term loan - 40,000
Revolving facilities 20,000 100,000
Undrawn borrowing facilities 20,000 140,000
------------------------------ ------- --------
14. Alternative performance measures
The Group's performance is assessed using a number of financial
measures which are not defined under IFRS and are therefore
non-GAAP (alternative) performance measures.
The Directors believe these measures enable the reader to focus
on what the Group regard as a more reliable indicator of the
underlying performance of the Group since they exclude items which
are not reflective of the normal course of business, accounting
estimates and non-cash items. The adjustments made are consistent
and comparable with other similar companies.
Adjusted EBITDA
Adjusted EBITDA refers to earnings before interest, tax,
depreciation, amortisation, exceptional items and share based
payments.
2022 2021
$'000 $'000
------------------------------------------- ------- -------
Operating profit 18,132 13,240
Depreciation of property, plant and
equipment 3,259 1,403
Amortisation of intangible assets -
other 5,905 3,840
Amortisation of intangible assets -
acquired intangibles 20,239 -
Share based payments 2,116 2,141
Exceptional items - aborted share placing - 283
Exceptional items - acquisition and
associated share placing 1,705 6,204
Exceptional items - integration costs 401 -
-------------------------------------------
Adjusted EBITDA 51,757 27,111
-------------------------------------------- ------- -------
Adjusted earnings per share (EPS)
Adjusted earnings per share (EPS) calculations allow for the tax
adjusted acquisition costs and share related transactions together
with amortisation on acquired intangibles via business
combinations. See Note 7 for the calculation.
Operating cash conversion
Operating cash conversion is calculated as cash generated from
operations (as per Note 12), adjusted to exclude cash payments for
exceptional items, divided by adjusted EBITDA.
2022 2021
$'000 $'000
--------------------------------------------------- ------- --------
Cash generated from operations (Note 12) 32,943 26,711
Total exceptional items 2,106 6,487
Accrued exceptional items at the start of
the period paid in the current period 5,509 -
Accrued exceptional items at the end of
the period (60) (5,509)
Trade payable exceptional items at the start
of the period paid in the current period 683 -
Trade payables cash exceptional items at
the end of the period (12) (683)
----------------------------------------------------
Cash generated from operations before exceptional
items 41,169 27,006
Adjusted EBITDA 51,757 27,111
Operating cash conversion 79.5% 99.6%
---------------------------------------------------- ------- --------
Adjusted PBT
Adjusted PBT refers to profit before tax adjusted for
exceptional items and amortisation of acquired intangibles.
2022 2021
$'000 $'000
------------------------------------------------ ------- -------
Profit before taxation 13,102 13,165
Amortisation of intangible assets - acquired
intangibles 20,239 -
Exceptional items - aborted share placing - 283
Exceptional items - acquisition and associated
share placing 1,705 6,204
Exceptional items - integration costs 401 -
------------------------------------------------
Adjusted PBT 35,447 19,652
------------------------------------------------- ------- -------
Net Debt
Net Debt refers to net balance of short term borrowings, long
term borrowings and cash and cash equivalents (excluding restricted
cash).
2022 2021
$'000 $'000
--------------------------- ---------- --------
Cash and cash equivalents 47,147 235,617
Borrowings (Note 13) (111,589) -
Net (debt)/ cash (64,432) 235,617
---------------------------- ---------- --------
Lease liabilities are excluded from borrowings for the purpose
of net debt.
Total Sales
Total Sales refer to the total value of contracts signed in the
year, consisting of New Sales and Renewals.
New Sales
New Sales refer to the total value of contracts with new
customers or new products to existing customers at some time in
their underlying contract.
Annual Recurring Revenue
Annual Recurring Revenue includes the annual value of license
and transaction revenues at 30 June 2022 that are subject to
underlying contracts.
% Annual Recurring Revenue from the Cloud
Annual Recurring Revenue from the Cloud is the Annual Recurring
Revenue as described above relating specifically to cloud-based
products expressed as a percentage of total Annual Recurring
Revenue.
Revenue Growth
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END
FR DBGDCBBBDGDC
(END) Dow Jones Newswires
September 20, 2022 02:00 ET (06:00 GMT)
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