Half-year Report

RNS Number : 6750Y

Craneware plc

07 March 2017

 

Craneware plc

("Craneware", "the Group" or the "Company")

Interim Results

7 March 2017 - Craneware (AIM: CRW.L), the market leader in Value Cycle solutions for the US healthcare market, announces its unaudited results for the six months ended 31 December 2016.

Financial Highlights (US dollars)

• Revenue increased 16% to $26.8m (H1 2016: $23.1m)
• Adjusted EBITDA¹ increased 16% to $8.2m (H1 2016: $7.1m)
• Profit before tax increased 23% to $7.5m (H1 2016: $6.1m)
• Adjusted basic EPS increased 15% to 21.6 cents per share (H1 2016: 18.8 cents per share)
• Strong cash position maintained at $45m (H1 2016: $45m) following dividend payment of $3.2m and investments of $4.5m made during the period
• Proposed interim dividend increased 16% to 8.7p (H1 2016: 7.5p per share)

1.   Adjusted EBITDA refers to earnings before interest, tax, depreciation, amortisation, share based payments and acquisition and share transaction related costs.

Operational Highlights

• Consensus for the need to drive value in US Healthcare provides supportive market dynamics
• Continued growth supported by underlying sales and sales pipelines
• Expansion of the Value Cycle solution suite on track with initial components of the cloud-based Trisus Enterprise Value Platform being rolled out during the calendar year
• Positive progress with Craneware Healthcare Intelligence, a new solution set developed to address the significant market opportunity for healthcare cost analytics
• Total visible revenue of over $55.4m for the current year and $155.5m for the three year period to June 2019 (H1 2016 same three year period: $128.1m)
• Board confident in outlook for the year

Keith Neilson, CEO of Craneware plc commented, "The first half of the year has been a period of successful execution against our stated growth strategy, delivering accelerated growth at both the revenue and adjusted EBITDA level. During the period we have taken significant strides forward in terms of delivering our expanded product suite, educating our market place and also further investing in our people.  These ongoing achievements mean we are well positioned to deliver against a market opportunity that is now considerably larger than at any other point in our history.

"Against a backdrop of the recent US Presidential election, the overriding consensus for the need to drive value in US Healthcare has been re-affirmed.  There is ongoing support for the move to value-based care and increasing consumerism. Our Value Cycle software suite will continue to help US Healthcare providers meet the challenges they will face as they navigate the ongoing re-imbursement model changes. 

"These supportive market drivers, our investment for the future and our continued profitable growth give us confidence in continuing to deliver value for our stakeholders."

For further information, please contact:

Craneware plc	Peel Hunt	Alma
[phone]	[phone]	[phone]
Keith Neilson, CEO	Dan Webster	Caroline Forde
Craig Preston, CFO	Adrian Trimmings George Sellar	Hilary Buchanan Robyn McConnachie
		Josh Royston

About Craneware

Craneware enables healthcare providers to improve margins and enhance patient outcomes so they can continue to provide quality outcomes for all.

Craneware is the leader in automated value cycle solutions that help US Healthcare provider organisations discover, convert and optimise assets to achieve best clinical outcomes and financial performance. Founded in 1999, Craneware is headquartered in Edinburgh, Scotland with offices in Atlanta, Boston and Phoenix employing over 250 staff. Craneware's market-driven, SaaS solutions normalise disparate data sets, bringing in up-to-date regulatory and financial compliance data to deliver value at the points where clinical and operational data transform into financial transactions, creating actionable insights that enable informed tactical and strategic decisions. To learn more, visit craneware.com and thevaluecycle.com.

 

Chairman Statement

I am pleased to report on a positive first half of the year, trading slightly ahead of expectations.  Revenue increased 16% to $26.8m (H1 2016: $23.1m) and adjusted EBITDA increased 16% to $8.2m (H1 2016: $7.1m), showing an acceleration from the growth achieved in the prior year. It is particularly pleasing to be able to deliver these levels of growth, whilst continuing to invest for the future. Healthy levels of cash generation in the period resulted in cash reserves of $45m (H1 2016: $45m) after returning $3.2m to shareholders in dividends and investing c.$4.5m into new product development and our Employee Benefit Trust.

Continued sales success and renewals remaining within the expected range support continued future growth. In accordance with the Company's revenue recognition policy, the majority of revenue resulting from sales in the period will be recognised over future periods, adding to the Group's long-term visibility of revenue under contract. 

Our new CTO has integrated into the business well.  With his guidance, the expansion of our Value Cycle solutions has continued during the period.  The launch of the first products on the cloud-based Trisus platform have recently moved from beta users to revenue generating early adopters and are on track for general release in the coming months. The expansion of our Craneware Healthcare Intelligence team and completion of their products are progressing according to plan. 

Although the recent change of administration within the US may change some of the details of healthcare reform, it is clear that the fundamentals driving the reform are consistent with those of the previous administration. A greater number of people need access to the healthcare system regardless of any pre-existing medical condition, a greater proportion of the population will soon reach the end of their working life and the cost of delivering healthcare is increasing, all putting an unsustainable burden on the US and its citizens. This is driving the need for hospitals to have additional insight into their operational, clinical and financial data - insight our Value Cycle solutions provide, together with the tools they need to effect change.

We have continued to invest in our teams, organisation and infrastructure in the US and UK as they are all crucial elements of our build, buy or partner strategy as we develop our Value Cycle platform. Craneware Healthcare Intelligence is an example of a cost effective investment in building a unique cost analytics solution which enhances our primary purpose, to help US Healthcare providers improve margins so they can invest in quality patient outcomes.

With our healthy cash balances and a $50m funding facility we have the resources to execute upon our strategic vision whilst keeping net debt at reasonable levels should either build or partnership not be the appropriate option. Strict criteria continue to be applied to potential acquisition targets to ensure that they enhance our product roadmap and are accretive to the financial strength of the Group.

With over 75% of our investment in the US and our continued commitment to grow both our US and UK operations, we remain positive that the business environment in the US will continue to be supportive of our Group. While always mindful of the global and US macro environment, the growth in the period, high levels of revenue visibility, continued cash generation and a healthy sales pipeline, gives the Board confidence in meeting market expectations for the full year.

George Elliott

Chairman
6 March 2017

 

Introduction

We have enjoyed a strong first half of the year, delivering against our short and long-term strategic objectives. Trading has been positive and there is much excitement within the business around the development of Trisus and our Craneware Healthcare Intelligence product suites. Through investment in our people, products and infrastructure, we have put in place the foundations for long-term growth and scalability. We are now building upon this as we see our strategy become a reality. Against the backdrop of the wider macro environment, we have executed strongly and believe the Company is well positioned for continued growth.

Market & Strategy

The US healthcare landscape continues to evolve. A recent survey by KPMG found that 50% of hospital groups in the US are already receiving some form of value-based reimbursement, putting providers at risk for the cost and quality of care they deliver. This is clear evidence that the anticipated change towards value-based care is now a reality. These major, long-term structural changes in reimbursement and care delivery models require a mission critical, new way of thinking. A hospital provider must understand and reduce the cost of care, increase margins so they can invest in future care delivery and simultaneously improve patient outcomes.

Craneware delivers solutions that help healthcare providers maintain their financial health so they can concentrate on what matters most. Our strategy is to continue to build on our established market-leading position in revenue cycle solutions and expand our product suite coverage of the Value Cycle. By expanding our offerings in operational areas of the hospital, incorporating cost management and combining this with data from the revenue cycle we will provide a unique insight into the management and analysis of clinical and operational data, providing the best possible outcomes for all.

Our expansion will be achieved through a combination of extensions to the current product set; building products through internal development, targeting potential acquisitions to buy and partnering with other technology and services companies.

The fundamentals driving a long-term evolving landscape remain the same, and the nearer-term reforms to healthcare in the US in light of a change in administration remain consistent with the need to move toward value-based care - in line with Craneware's strategy.

The new administration in the US has currently laid out five principles for their healthcare reform of which Craneware can be a meaningful component in delivering all of these.

The five principles for Healthcare reform as laid out by President Trump;

"Firstly, we should ensure that American citizens with pre-existing conditions have access to coverage, and that we have a stable transition for those currently enrolled in the healthcare exchanges.

"Secondly, we should help American citizens purchase their own coverage, through the use of tax credits and expanded Health Savings Accounts --- but it must be the plan they want, not the plan forced on them by the Government.

"Thirdly, we should give State Governors the resources and flexibility they need with Medicaid to make sure no one is left out.

"Fourthly, we should implement legal reforms that protect patients and doctors from unnecessary costs that drive up the price of insurance - and work to bring down the artificially high price of drugs and bring them down immediately.

"Finally, the time has come to give Americans the freedom to purchase health insurance across State lines --- creating a truly competitive national marketplace that will bring cost down and provide far better care."

So how does Craneware address the five principles of reform for providers?

Achieving the first, second and third principles requires providers to ensure financial strength while investing in care settings that will often deal with patients who have costly chronic conditions. Overall, volumes of care demand would be expected to increase. The proportion of funding for treatment that is routed from the patient (rather than directly from government agencies or insurers) to the provider is likely to continue to increase (driving consumerisation). Overall payments to providers may well decrease, particularly for low income patients and children, through a reduction in Medicaid. To that end, care delivered to these populations must be done in a cost effective way that is scalable, enables affordable insurance coverage and surety of collection to allow this model to be sustainable. This has been the primary purpose of Craneware's core products demonstrated over the last 18 years.

Within our extended product set there are further examples of our growing relevance to providers. Craneware Healthcare Intelligence (CHI) allows providers to gain a greater understanding of the true cost of individual patient care episodes. This is critically important as the cost of care can vary dramatically from patient to patient. When pre-existing conditions are taken into consideration this variance will be greater. This perhaps highlights the need for variable pricing for pre-existing conditions which will most likely be proposed, tied to breaks in patient coverage due to a change in employment or other circumstances.

The expected continuation of the increasing trend in high-deductible health plans and a growing out-of-pocket burden for patients means providers must find a way to collect this fast-growing share of revenue. Craneware Trisus Patient Payment addresses this opportunity by giving providers the ability to verify eligibility and enrol patients in convenient payment plans that automatically adjust from estimate to final bill, overall simplifying the billing process with bill consolidation and text notifications.

The most likely outcome of the intention to move more control to State level is block grants for Medicaid. This will add a layer of financial complexity that increases further as Insurance Companies from different States can operate across State borders as proposed in the fifth principle and will introduce a further level of complexity and sophistication to be required within Enterprise wide solutions. Craneware is uniquely positioned to provide strategic guidance through insight gleaned across its nationwide customer footprint - allowing providers to manage how they handle care when dealing with insurers in multiple jurisdictions, and deal with varying reimbursement and differing margins.

The fourth principle appears to support efforts to reduce malpractice insurance and tort reform, which on the surface doesn't immediately impact Craneware. However, Craneware Healthcare Analytics leverages physician variability information to provide the transparency into clinical behaviour needed to achieve the best possible patient outcomes, monitor and then educate and reinforce what "good" looks like for clinical staff, reducing the likelihood of malpractice. There also appears to be some intent to decrease regulation with an eye toward measuring "quality" while the provider still needs to measure activity, productivity and margin - the primary goal of most Craneware products. Pharmacy Chargelink and Supply Chargelink help providers tackle high drug costs by providing insight and tools needed to manage any drug or supply price change, and suggest cheaper generic and clinical equivalence alternatives when appropriate.

Craneware's Value Cycle solutions provide the financial insight and actionable data needed to navigate this evolving landscape and healthcare reform should continue to drive a growing demand for all our products.

Approximately a quarter of all US hospitals are existing Craneware customers, providing us with a valuable platform for growth. The insight they provide us is what is driving our strategy and we are committed to providing them with long-term strategic support.

Product Roadmap

The move to Trisus

We continue to invest in our current solutions set. However, alongside this investment we have a roadmap to move all these solutions to a new cloud-based platform, the Trisus Enterprise Value Platform. Trisus combines revenue integrity, cost management and decision enablement functionality in a versatile, customisable solution that fully delivers on Craneware's primary purpose, to help healthcare providers improve margins and enhance patient outcomes.

Development of the Trisus platform has progressed well during the period. The Trisus Patient Payment solution is now available to early adopters. The solution effectively addresses growing consumerisation within healthcare. The past five years have seen an explosion of high-deductible health plans and an increasing out-of-pocket burden for patients. In many hospitals, patient payments represents a fast growing proportion of their revenue, yet is the most difficult and expensive portion to collect with a high reputational risk associated with pursuing delinquent individuals. The Trisus Patient Payment Module is a solution designed to increase patient billing satisfaction through the provision of flexible, web and mobile-friendly payment options and simplification of the billing process, while also improving point-of-service collection rates.  Following successful completion of the early adopter phase we expect full general release later this calendar year.

Trisus Claims Informatics will be released on the platform in the current fiscal year. This has just moved from beta phase to the recruitment of early adopters. Further components of Trisus will be released throughout the current calendar year and beyond.  With the componentised nature of the Trisus architecture we expect the roadmap for future releases to accelerate as we complete on these initial solutions.

Craneware Healthcare Intelligence

In the second half of the last fiscal year, Craneware formed a new Group company, Craneware Healthcare Intelligence, to develop and market cost analytics software to the US healthcare industry. Cost analytics is a vital component within the emerging value cycle solutions market. The understanding of costs, combined with correct reimbursement will enable our customers to better understand and improve their margin; allowing greater resources to be available to invest and in turn driving better patient outcomes both today and for the future. With the additional insight our products provide into Physician variability across the continuum of care, Craneware is able to demonstrate the tangible and valuable benefits of combining financial, operational and clinic data particularly in better patient outcomes. We believe this area of the value cycle represents a market opportunity several times larger than that of our existing product portfolio.

Under the leadership of our SVP, Health Analytics, progress has continued at pace within this newly formed business. We now have a team of people in place with the initial phase of product development complete and customer discussions underway. The next phase of development is to combine our initial models and algorithms with live hospital data.  The results of this phase will provide us with invaluable insight as we approach product launch.  

Sales and Marketing

We were pleased to secure a good level of new sales in the period across all strata of hospital. The sales pipeline continues to be at record highs, providing confidence that we are on the right path towards accelerated revenue and profit growth in future years.

The sales mix remained healthy throughout the period with comparable level of sales between new customers and existing customers.

The average length of new hospital contracts continues to be consistent with our historical norms of approximately five years. Where Craneware enters into new product contracts with its existing customers, contracts are occasionally made co-terminus with the customer's existing contracts, and as such, the average length of these contracts remains greater than three years, in line with our expectations.

Awards

Chargemaster Toolkit® was named Category Leader in the "Revenue Cycle - Chargemaster Management" market category for the eleventh consecutive year in the annual "2017 Best in KLAS Awards: Software & Services." KLAS's annual "Best in KLAS" report provides unique insight gathered from thousands of healthcare organisations across the US. The report includes client satisfaction scores and benchmark performance metrics.

Acquisitions

The Board continues to look for acquisition opportunities to complement the Group's organic growth strategy and increase our product coverage of the Value Cycle. The Board adheres to a rigorous set of criteria to evaluate acquisition opportunities, including quality of earnings, strategic fit and product offering.  In addition to the Company's cash reserves, a $50 million funding facility provides the Company with available resources to carry out strategic acquisitions if and when these criteria are met.

Financial Review

We are pleased to announce revenues in the period of $26.8m (H116: $23.1m) a 16% increase.  This increase was matched at the adjusted EBITDA level which also increased 16% to $8.2m (H116: $7.1m). This has ultimately led to a 15% increase in adjusted earnings per share to 21.6 cents per share compared with 18.8 cents per share for this same period last year.  All underlying metrics continue to be in line with our historical norms.

We continue to deliver high levels of cash generation and are on target to convert 100% of adjusted EBITDA to operating cash over the full fiscal year. In the period, as is expected, we converted 90% of our adjusted EBITDA to operating cash. From this cash generation we have:

• returned $3.2m to our shareholders by way of dividends (H116: $3.1m),
• paid $3.4m in tax (H116: $1.6m) which includes additional payments on account in the US,
• invested an additional $1.3m on new product development, in addition to our normal R&D spend, and
• Invested $3.1m in our Employee Benefit Trust which purchased shares to fulfil future Long Term Incentive exercises. 

We have made these investments whilst maintaining cash reserves of $45m (H116: $45m) at the period end.

We continue to see a good level of sales which support our growth expectations.  During the period sales were evenly split between new hospitals and existing customers.  The lower percentage of sales to customers on renewal as compared to other types of sale is reflective of the lower than usual number of renewals due in the period and the size of those customers due to renew. This is purely a factor of timing. Renewal rates at 99% by dollar value are again within our historical range of 85% to 115% and are reflective of the number and mix of customers that were due to renew in the period.

Our Annuity SaaS business model and associated revenue recognition policy results in software licence revenue being recognised over the life of the underlying contract (which for a new hospital sale is an average of five years) and any associated professional services revenue is recognised as we deliver the services i.e. on a percentage of completion basis. The benefit of this conservative revenue recognition model is it retains focus on the long-term growth and stability of the Group.

At the end of each financial year, the Group reports its Three Year Visible Revenue KPI. This KPI shows the strength of the underlying annuity revenue stream that is building as a result of sales and these revenue recognition policies.  At the subsequent half year reporting period, we report how that metric for the same three year period has progressed and therefore show how visible revenue for the current and future years is building towards our expectations.

We now have visibility of revenues of $55.4m for the current year before any further sales are made in the second half.  In regards to total visible revenue for the three year period 1 July 2016 to 30 June 2019 has grown to $155.5m from $128.1m for the same three year period at 31 December 2015. 

Our total visible revenue of $155.5m comprises $127.9m 'Revenue under Contract', $27.1m 'Renewal Revenue' and $0.5m of 'Other Recurring Revenue'.  'Revenue under Contract', relates to revenues that are supported by underlying contracts. 'Renewal Revenue' relates to the amount of revenue which is potentially available for renewal and could be recognised in each fiscal year provided the underlying contracts are renewed.  In calculating this, we assume a 100% dollar value renewal level.  As we sign renewal contracts for on average over three years, as the renewals occur the aggregated related revenue for all of the three years shown moves from 'renewal revenues' to 'revenue under contract'. The final element is 'Other Recurring Revenue', this relates to revenue that is not subject to long term contracts, which can be billable 'per transaction' or a set monthly amount and is usually invoiced on a monthly basis, however it is reasonable to expect it to be recurring in nature.

As we show our 'Renewal Revenue' in our revenue visibility graph at 100% of dollar value, we track and publish our 'Renewal Rate by dollar value KPI' to ensure our 100% assumption in producing our revenue visibility KPI is still appropriate. This KPI measures the average value of customers renewing in the relevant period (including cross sell and upsell to those renewing customers). 

These high levels of visible revenue provide certainty in investment decisions. However following the Brexit vote, we saw significant volatility in exchange rates and as such took the decision to hedge our sterling requirements for the fiscal year, thereby providing certainty to the cost side of our investment decisions as well. We continue to make these investment decisions as appropriate for the future growth of the Group, whilst consistently ensuring the efficiency of all expenditures.  This has contributed to our adjusted EBITDA margin, which for the period is 31%. The adjustments we make to both EBITDA and EPS are those normally expected and include costs related to acquisition and share activity in the period.

We continue to report the results (and hold the cash reserves) of the Group in US Dollars, whilst having approximately twenty five percent of our costs, mainly our UK employees and purchases, denominated in Sterling. The average exchange rate for the Company during the reporting period was $1.27/£1 which compares to $1.53/£1 in the corresponding period last year.

Dividend

The Board has resolved to pay an interim dividend of 8.7p (10.7 cents) per ordinary share on 20 April 2017 to those shareholders on the register as at 31 March 2017 (FY16 Interim dividend 7.5p). The ex-dividend date is 30 March 2017.

The interim dividend of 8.7p per share is capable of being paid in US dollars subject to a shareholder having registered to receive their dividend in US dollars under the Company's Dividend Currency Election, or who has registered to do so by the close of business on 31 March 2017. The exact amount to be paid will be calculated by reference to the exchange rate to be announced on 31 March 2017. The interim dividend referred to above in US dollars of 10.7 cents is given as an example only using the Balance Sheet date exchange rate of $1.23/£1 and may differ from that finally announced.

Outlook

The first half of the year has been a period of successful execution against our stated growth strategy, delivering accelerated growth at both the revenue and adjusted EBITDA level. During the period, we have taken significant strides forward in terms of delivering our expanded product suite, educating our market place and further investing in our people.  These ongoing achievements mean we are well positioned to deliver against a market opportunity that is now considerably larger than at any other point in our history.

Against a backdrop of the recent US Presidential election, the overriding consensus for the need to drive value in US Healthcare has been re-affirmed.  There is ongoing support for the move to value-based care and increasing consumerism. Our Value Cycle software suite will continue to help US Healthcare providers meet the challenges they will face as they navigate the ongoing re-imbursement model changes. 

These supportive market drivers, our investment for the future and our continued profitable growth give us confidence in continuing to deliver value for our stakeholders.

Keith Neilson Chief Executive Officer 6 March 2017

Craig Preston Chief Financial Officer 6 March 2017

 

Craneware PLC Interim Results FY17 Consolidated Statement of Comprehensive Income
		H1 2017		H1 2016		FY 2016
	Notes	$'000		$'000		$'000
Revenue		26,790		23,117		49,846
Cost of sales		(1,619)		(1,319)		(3,011)
Gross profit		25,171		21,798		46,835
Net operating expenses		(17,751)		(15,699)		(33,024)
Operating profit		7,420		6,099		13,811
Analysed as:
Adjusted EBITDA1		8,217		7,065		15,863
Acquisition costs and share related transactions		(26)		(165)		(556)
Share-based payments		(127)		(116)		(251)
Depreciation of plant and equipment		(353)		(217)		(442)
Contingent consideration on business combination		-		-		1,005
Amortisation of intangible assets		(291)		(468)		(1,808)
Finance income		88		44		112
Profit before taxation		7,508		6,143		13,923
Tax charge on profit on ordinary activities		(1,884)		(1,520)		(3,348)
Profit for the period attributable to owners of the parent		5,624		4,623		10,525
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Cash flow hedge reserve movement, net of tax		(527)		-		-
Currency Translation Reserve movement		183		-		-
Total items that may be reclassified subsequently to profit or loss		(344)		-		-
Total comprehensive income attributable to owners of the parent			5,280	4,623		10,525
1Adjusted EBITDA is defined as operating profit before, share based payments, depreciation, amortisation, acquisition costs and share related transactions.
Earnings per share for the period attributable to equity holders
- Basic ($ per share)  - *Adjusted Basic ($ per share)2	1a 1a		0.209 0.216		0.172 0.188		0.394 0.429
- Diluted ($ per share)                      - *Adjusted Diluted ($ per share)2	1b 1b		0.205 0.212		0.170 0.186		0.389 0.423

²Adjusted Earnings per share calculations allow for the tax adjusted acquisition costs and share related transactions together with amortisation on acquired intangible assets to form a better comparison of the underlying performance with previous periods.

Craneware PLC
Interim Results FY17
Consolidated Statement of Changes in Equity
	Share Capital	Share Premium	Other Reserves	Retained Earnings	Total
	$'000	$'000	$'000	$'000	$'000
At 1 July 2015	536	17,356	378	29,360	47,630
Total comprehensive income - profit for the period	-	-	-	4,623	4,623
Transactions with owners Share-based payments	-	-	115	-	115
Impact of share options exercised	-	19	(33)	33	19
Dividend	-	-	-	(3,097)	(3,097)
At 31 December 2015	536	17,375	460	30,919	49,290
Total comprehensive income - profit for the period Transactions with owners	-	-	-	5,952	5,952
Share-based payments	-	-	136	210	346
Impact of share options exercised	-	76	(41)	(41)	76
Dividend	-	-	-	(2,856)	(2,856)
At 30 June 2016	536	17,451	555	34,266	52,808
Total comprehensive income - profit for the period	-	-	-	5,624	5,624
Total other comprehensive income Transactions with owners	-	-	-	(344)	(344)
Treasury shares upon consolidation of employee share trusts	-	-	-	(3,083)	(3,083)
Share-based payments	-	-	127	-	127
Impact of share options exercised	1	481	(71)	68	479
Dividend	-	-	-	(3,246)	(3,246)
At 31 December 2016	537	17,932	611	33,285	52,365

 

Craneware PLC Interim Results FY17 Consolidated Balance Sheet as at 31 December 2016
		H1 2017	H1 2016	FY2016
	Notes	$'000	$'000	$'000
ASSETS
Non-Current Assets
Plant and equipment		1,392	1,205	1,213
Intangible assets		17,510	16,505	16,535
Trade and other receivables	2	4,172	2,527	4,581
Deferred Tax		1,819	1,697	1,685
		24,893	21,934	24,014
Current Assets
Trade and other receivables	2	17,679	13,427	20,953
Current tax assets		-	79	-
Cash and cash equivalents		45,098	44,980	48,812
		62,777	58,486	69,765
Total Assets		87,670	80,420	93,779
EQUITY AND LIABILITIES
Non-Current Liabilities
Deferred income		20	480	4
		20	480	4
Current Liabilities
Deferred income Current tax liabilities		27,649 490	24,049 1,459	28,963 2,353
Trade and other payables	3	7,146	5,142	9,651
		35,285	30,650	40,967
Total Liabilities		35,305	31,130	40,971
Equity
Called up share capital	4	537	536	536
Share premium account		17,932	17,375	17,451
Other reserves		611	460	555
Retained earnings		33,285	30,919	34,266
Total Equity		52,365	49,290	52,808
Total Equity and Liabilities		87,670	80,420	93,779

 

Craneware PLC Interim Results FY17 Consolidated Statement of Cash Flow for the six months ended 31 December 2016
		H1 2017	H1 2016	FY 2016
	Notes	$'000	$'000	$'000
Cash flows from operating activities
Cash generated from operations	5	7,411	8,771	17,564
Interest received		88	44	112
Tax paid		(3,403)	(1,620)	(2,254)
Net cash from operating activities		4,096	7,195	15,422
Cash flows from investing activities
Purchase of plant and equipment		(512)	(182)	(418)
Capitalised intangible assets		(1,452)	(788)	(2,166)
Net cash used in investing activities		(1,964)	(970)	(2,584)
Cash flows from financing activities
Dividends paid to company shareholders		(3,246)	(3,097)	(5,953)
Proceeds from issuance of shares		483	20	95
Treasury shares upon consolidation of employee     Share trusts		(3,083)	-	-
Net cash used in financing activities		(5,846)	(3,077)	(5,858)
Net (decrease)/increase in cash and cash equivalents		(3,714)	3,148	6,980
Cash and cash equivalents at the start of the period		48,812	41,832	41,832
Cash and cash equivalents at the end of the period		45,098	44,980	48,812

 

Craneware PLC

Interim Results FY17

Notes to the Financial Statements

1. Earnings per Share
(a)        Basic Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.
	H1 2017	H1 2016	FY 2016
Profit attributable to equity holders of the Company ($'000)	5,624	4,623	10,575
Weighted average number of ordinary shares in issue (thousands)	26,908	26,833	26,838
Basic earnings per share ($ per share)	0.209	0.172	0.394
Profit attributable to equity holders of the Company ($'000)	5,624	4,623	10,575
Tax adjusted acquisition costs, share related transactions and amortisation of acquired intangibles ($'000)	190	419	937
Adjusted Profit attributable to equity holders ($'000)	5,814	5,042	11,512
Weighted average number of ordinary shares in issue (thousands)	26,908	26,833	26,838
Adjusted Basic earnings per share ($ per share)	0.216	0.188	0.429
(b)        Diluted For diluted earnings per share, the weighted average number of ordinary shares calculated above is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has one category of dilutive potential ordinary shares, being those granted to Directors and employees under the share option scheme.
	H1 2017	H1 2016	FY 2016
Profit attributable to equity holders of the Company ($'000)	5,624	4,623	10,575
Weighted average number of ordinary shares in issue (thousands)	26,908	26,833	26,838
Adjustments for: - share options (thousands)	490	329	345
Weighted average number of ordinary shares for diluted earnings per share (thousands)	27,397	27,162	27,183
Diluted earnings per share ($ per share)	0.205	0.170	0.389

1.  Earnings per share (Cont.)

	H1 2017	H1 2016	FY 2016
Profit attributable to equity holders of the Company ($'000)	5,624	4,623	10,575
Tax adjusted acquisition costs, share related transactions and amortisation of acquired intangibles ($'000)	190	419	937
Adjusted Profit attributable to equity holders ($'000)	5,814	5,042	11,512
Weighted average number of ordinary shares in issue (thousands)	26,908	26,833	26,838
Adjustments for: - share options (thousands)	490	329	345
Weighted average number of ordinary shares for diluted earnings per share (thousands)	27,397	27,162	27,183
Adjusted Diluted earnings per share ($ per share)	0.212	0.186	0.423

2. Trade and other receivables

	H1 2017	H1 2016	FY 2016
	$'000	$'000	$'000
Trade Receivables	14,389	10,051	16,504
Less: provision for impairment of trade receivables	(1,244)	(789)	(1,135)
Net trade receivables	13,145	9,262	15,369
Other Receivables	176	90	1,177
Prepayments and accrued income	2,808	3,240	2,950
Deferred Contract Costs	5,722	3,362	6,038
	21,851	15,954	25,534
Less non-current receivables: Deferred Contract Costs	(4,172)	(2,527)	(4,581)
Trade and other receivables	17,679	13,427	20,953

There is no material difference between the fair value of trade and other receivables and the book value stated above.

3. Trade and other payables

	H1 2017	H1 2016	FY 2016
	$'000	$'000	$'000

Trade Payables	1,247	776	1,473
Social Security and PAYE	205	373	496
Derivatives used for Hedging	658	-	-
Other Payables	66	33	63
Accruals	4,970	3,960	7,619
Trade and other payables	7,146	5,142	9,651

Derivatives held for hedging have been measured at fair value. The inputs used in determining the fair value are based on observable market data therefore the balances are categorised as level 2 under IFRS 13. No other assets or liabilities have been measured at fair value.

4. Called up share capital
	H1 2017		H1 2016		FY 2016
	Number	$'000	Number	$'000	Number	$'000
Authorised
Equity share capital
Ordinary shares of 1p each	50,000,000	1,014	50,000,000	1,014	50,000,000	1,014
Allotted called-up and fully paid
Equity share capital
Ordinary shares of 1p each	26,958,488	537	26,836,032	536	26,850,248	536

5. Consolidated Cash Flow generated from operating activities
Reconciliation of profit before taxation to net cash inflow from operating activities:
	H1 2017	H1 2016	FY 2016
	$'000	$'000	$'000
Profit before taxation	7,506	6,143	13,923
Finance income	(88)	(44)	(112)
Depreciation on plant and equipment	353	217	442
Amortisation on intangible assets	291	468	1,808
Share-based payments	127	116	251
Movements in working capital:
Decrease/(Increase) in trade and other receivables	3,682	1,501	(8,065)
(Decrease)/Increase in trade and other payables	(4,460)	370	9,317
Cash generated from operations	7,411	8,771	17,564

6. Basis of Preparation

The interim financial statements are unaudited and do not constitute statutory accounts as defined in S435 of the Companies Act 2006. These statements have been prepared applying accounting policies that were applied in the preparation of the Group's consolidated accounts for the year ended 30th June 2016. Those accounts, with an unqualified audit report, have been delivered to the Registrar of Companies.

7. Segmental Information

The Directors consider that the Group operates in a predominantly one business segment, being the creation of software sold entirely to the US Healthcare Industry, and that there are therefore no additional segmental disclosures to be made in these financial statements.

8. Significant Accounting Policies

The significant accounting policies adopted in the preparation of these statements are set out below.

Reporting Currency

The Directors consider that as the Group's revenues are primarily denominated in US dollars the principal functional currency is the US dollar. The Group's financial statements are therefore prepared in US dollars.

Currency Translation

Transactions denominated in foreign currencies are translated into US dollars at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities expressed in foreign currencies are translated into US dollars at rates of exchange ruling at the Balance Sheet date ($1.4802/£1). Exchange gains or losses arising upon subsequent settlement of the transactions and from translation at the Balance Sheet date, are included within the related category of expense where separately identifiable, or in general and administrative expenses.

Revenue Recognition

The Group follows the principles of IAS 18, "Revenue Recognition", in determining appropriate revenue recognition policies. In principle revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow into the Group.

Revenue is derived from sales of, and distribution agreements relating to, software licenses and professional services (including installation).  Revenue is recognised when (i) persuasive evidence of an arrangement exists; (ii) the customer has access and right to use our software; (iii) the sales price can be reasonably measured; and (iv) collectability is reasonably assured.

Revenue from standard licensed products which are not modified to meet the specific requirements of each customer is recognised from the point at which the customer has access and right to use our software.  This right to use software will be for the period covered under contract and, as a result our annuity based revenue model, recognises the licensed software revenue over the life of this contract.  This policy is consistent with the Company's products providing customers with a service through the delivery of, and access to, software solutions (Software-as-a-Service ("SaaS")), and results in revenue being recognised over the period that these services are delivered to customers.

'White-labelling' or other 'Paid for development work' is generally provided on a fixed price basis and as such revenue is recognised based on the percentage completion or delivery of the relevant project.  Where percentage completion is used it is estimated based on the total number of hours performed on the project compared to the total number of hours expected to complete the project. Where contracts underlying these projects contain material obligations, revenue is deferred and only recognised when all the obligations under the engagement have been fulfilled.

Revenue from all professional services is recognised as the applicable services are provided.  Where professional services engagements contain material obligation, revenue is recognised when all the obligations under the engagement have been fulfilled. Where professional services engagements are provided on a fixed price basis, revenue is recognised based on the percentage completion of the relevant engagement.  Percentage completion is estimated based on the total number of hours performed on the project compared to the total number of hours expected to complete the project.

Software and professional services sold via a distribution agreement will normally follow the above recognition policies.

Should any contracts contain non-standard clauses, revenue recognition will be in accordance with the underlying contractual terms which will normally result in recognition of revenue being deferred until all material obligations are satisfied.

The excess of amounts invoiced over revenue recognised are included in deferred income.  If the amount of revenue recognised exceeds the amount invoiced the excess is included within accrued income.

Business combinations

The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the acquisition date, of assets given, liabilities incurred or assumed, and the equity issued by the Group. The consideration transferred includes the fair value of any assets or liability resulting from a contingent consideration and acquisition costs are expensed as incurred.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 in the Statement of Comprehensive Income. Contingent consideration that is classified as equity is not re-measured and its subsequent settlement is accounted for within equity.

Goodwill arising on the acquisition is recognised as an asset and initially measured at cost, being the excess of fair value of the consideration over the Group's assessment of the net fair value of the identifiable assets and liabilities recognised.

If the Group's assessment of the net fair value of a subsidiary's assets and liabilities had exceeded the fair value of the consideration of the business combination then the excess ('negative goodwill') would be recognised in the Statement of Comprehensive Income immediately. The fair value of the identifiable assets and liabilities assumed on acquisition are brought onto the Balance Sheet at their fair value at the date of acquisition.

Intangible Assets

(a)        Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition. Goodwill is capitalised and recognised as a non-current asset in accordance with IFRS 3 and is tested for impairment annually, or on such occasions that events or changes in circumstances indicate that the value might be impaired.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units that are expected to benefit from the business combination in which the goodwill arose.

(b)        Proprietary software

Proprietary software acquired in a business combination is recognised at fair value at the acquisition date. Proprietary software has a finite life and is carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the associated costs over their estimated useful lives of 5 years.

(c)        Contractual Customer relationships

Contractual customer relationships acquired in a business combination are recognised at fair value at the acquisition date. The contractual customer relations have a finite useful economic life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected life of the customer relationship which has been assessed as 10 years.

(d)        Research and Development Expenditure

Expenditure associated with developing and maintaining the Group's software products are recognised as incurred. Where, however, new product development projects are technically feasible, production and sale is intended, a market exists, expenditure can be measured reliably, and sufficient resources are available to complete such projects, development expenditure is capitalised until initial commercialisation of the product, and thereafter amortised on a straight-line basis over its estimated useful life, which has been assessed as 5 years. Staff costs and specific third party costs involved with the development of the software are included within amounts capitalised.

(e)        Computer software

Costs associated with acquiring computer software and licensed to-use technology are capitalised as incurred. They are amortised on a straight-line basis over their useful economic life which is typically 3 to 5 years.

Impairment of non-financial assets

At each reporting date the Group considers the carrying amount of its tangible and intangible assets including goodwill to determine whether there is any indication that those assets have suffered an impairment loss. If there is such an indication, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any) through determining the value in use of the cash generating unit that the asset relates to. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the impairment loss is recognised as an expense.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset. A reversal of an impairment loss is recognised as income immediately. Impairment losses relating to goodwill are not reversed.

Cash and Cash Equivalents

Cash and cash equivalents include cash in hand, deposits held with banks and short term highly liquid investments.  For the purpose of the Statement of Cash flow, cash and cash equivalents comprise of cash on hand, deposits held with banks and short term high liquid investments.

Share-Based Payments and Taxation Implications

The Group grants share options to certain employees.  In accordance with IFRS 2, "Share-Based Payments" equity-settled share-based payments are measured at fair value at the date of grant. Fair value is measured by use of the Black-Scholes pricing model as appropriately amended. The fair value determined at the date of grant of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the number of shares that will eventually vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the Statement of Comprehensive Income, with a corresponding adjustment to equity. When the options are exercised the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital and share premium.

The share-based payments charge is included in net operating expenses and is also included in 'Other reserves'.

In the UK and the US, the Group is entitled to a tax deduction for amounts treated as compensation on exercise of certain employee share options under each jurisdiction's tax rules. A compensation expense is recorded in the Group's Statement of Comprehensive Income over the period from the grant date to the vesting date of the relevant options.  As there is a temporary difference between the accounting and tax bases a deferred tax asset is recorded.  The deferred tax asset arising is calculated by comparing the estimated amount of tax deduction to be obtained in the future (based on the Company's share price at the Balance Sheet date) with the cumulative amount of the compensation expense recorded in the Statement of Comprehensive Income.  If the amount of estimated future tax deduction exceeds the cumulative amount of the remuneration expense at the statutory rate, the excess is recorded directly in equity against retained earnings.

9. Availability of announcement and Half Yearly Financial Report

Copies of this announcement are available on the Company's website, www.craneware.com. Copies of the Interim Report will be posted to shareholders, downloadable from the Company's website and available from the registered office of the Company shortly.

 

END

 

 

IR EANDKEESXEFF