Craneware plc
Annual Report
for the year ended 30 June 2009
Financial Performance Solutions for Hospitals & Healthcare Organisations
History
"One of the tool’s (Pharmacy ChargeLink™) most compelling findings was the volume reconciliation variance
between our drug spend and revenue and usage data. We identified an annual gross revenue variance in
excess of $10 million."
— Parkview Health, Indiana, USA.
"Craneware (Chargemaster Corporate Toolkit®) significantly impacted our financial performance. A $1.6
million annualised incremental revenue gain convinced us we made the right choice."
— Caritas Christi Health Care, Massachusetts, USA.
Keith Neilson, CEO of Craneware, commented,
"The US healthcare system is currently undergoing an unprecedented level of change and public scrutiny.
This, combined with the global economic downturn, means healthcare organisations are experiencing
extraordinary levels of fiscal and legislative pressure. Craneware continues to invest in the development
and deployment of software to help manage these pressures. We believe that our market leading
position and reputation within the industry, combined with our strong business fundamentals, leaves us
well positioned to serve this growing market demand."
Craneware plc (AIM: CRW.L) is recognised as the
leading provider of solutions that improve financial
performance in the US hospital and healthcare
provider markets.
Founded in May 1999, Craneware launched its
first product in October 1999 after signing its first
customer contract the previous month. By the
end of 2000, more than 20 customers were signed
and implemented, establishing the strong growth
pattern that continues today.
In September 2007, Craneware listed on the AIM
market of the London Stock Exchange.
Today, Craneware is headquartered in Livingston,
Scotland, with offices in Florida, Arizona and
Kansas. Employing over 120 staff, Craneware serves
a customer base of more than 1,000 US healthcare
facilities and is respected as a healthcare business
partner known to deliver value, quality, and
outstanding customer service as evidenced by KLAS
results.
Contents
1 Financial and Operational Highlights
2 About Craneware
5 Our Products
6 Chairman’s Statement
7 Operational Review
10 Board of Directors
11 Directors' Report
14 Corporate Governance Report
18 Remuneration Committee Report
20
Independent Auditors' Report
21 Consolidated Income Statement
22 Statements of Changes in Equity
23 Consolidated Balance Sheet
24 Company Balance Sheet
25 Cashflow Statements
26 Notes to the Financial Statements
45 Contact Craneware
Craneware plc
Annual Report 2009
Financial Highlights
Record levels of contracted sales in the year totaling $43.2m (FY08: $25.7m), 68% up on
the previous year, contributing to:
51% increase in future revenues under contract to $60.1m (FY08: $39.9m)
23% increase in revenues to $23.0m (FY08: $18.7m)
Profit before share-based payments, depreciation and amortisation increased 29% to
$5.8m (FY08: $4.5m)
Profit before taxation increased by 40% to $5.9m (FY08: $4.2m)
Cash position increased 24% to $26.2m (FY08: $21.1m)
Basic EPS increased to $0.18 (FY08: $0.14) and diluted to $0.17 (FY08: $0.13)
Final dividend proposed of 2.9p (4.77 cents) per share giving a total dividend for the year
of 4.7p (7.43 cents) per share (FY08: 3.1p (4.96 cents) per share)
Operational Highlights
New product lines contributed $10.1m (23%) to total contracted sales during the year
Extended market reach through partnership deals with Premier, Amerinet and Perot
Signed significant reseller agreement with McKesson Corporation post year-end
Accelerated investment in sales and marketing activities
Proposed US Healthcare reforms drive a trend towards increased regulation and new
market opportunities
Quick Facts — Financial
68%
increase in contracted sales in the year to
record $43.2m
increase in future revenues under contract
51%
23%
29%
increase in revenues to $23.0m
increase in operating profit (before
share-based payments, depreciation and
amortisation) to $5.8m
increase in profit before tax to $5.9m
40%
24%
increase in cash to $26.2m
Key Performance Indicators
IPO
Compound Annualised Growth*
$60m
$50m
$40m
$30m
$20m
$10m
2005
2006
2007
2008
2009
Future revenue under contract
24%
35%
Contracts signed in the year
22%
Revenue recognised in the period
*from 30 June 2005
Craneware plc
Annual Report 2009
1
About Craneware
Background
Craneware is the leading provider of solutions that
improve financial performance for US hospital and
healthcare organisations through strategic pricing,
revenue cycle and supply management solutions.
Founded in 1999, with the introduction of the
US healthcare industry's original chargemaster
management solution, Craneware is celebrating its
10th Anniversary this year. Craneware has established
significant market leadership with a client base of more
than 1,000 healthcare facilities of all sizes, from critical
access hospitals to integrated delivery networks. With
more than 5,700 hospitals in the US, and less than
half of these having purchased a technology-based
chargemaster management solution, there remains
substantial market opportunity.
Craneware solutions support the transformation of
healthcare organisations' revenue integrity processes.
Craneware's market-led revenue management solutions
allow healthcare organisations to quickly see dramatic
advances in sustainable financial and operational
performance improvement. The high level of return
on investment our software delivers to our customers,
combined with our strong partnerships and the growing
pressure on the financial performance of US healthcare
organisations are key reasons Craneware is
well-positioned for growth.
“ We selected Craneware to help us with our
corporate standardisation program. We looked
forward to creating efficiency by linking
chargemaster data across our six hospitals…
engaging clinicians and managers in productive
CDM collaboration…enhancing communication
between departments…and increasing compliance
through consistent assignment of CPT codes.
What we hadn’t anticipated was how significantly
Craneware would impact our bottom line.
A $1.6 million annualised incremental revenue gain
convinced us we made the right choice.”
– Miles Coverdale, Chief Revenue Officer (retired)
– Angela Confoey, Corporate Director CDM
Caritas Christi Health Care, Boston, Massachusetts, USA.
Craneware plc
Annual Report 2009
2
What is driving the growth?
The US healthcare industry is in an historic time
of stimulus and reform. Healthcare organisations
need strong strategic partners to help them improve
operational efficiencies and financial performance, as
well as support compliance. Craneware has a ten-year
history of successfully partnering and providing US
healthcare with solutions that achieve sustainable
improvements in financial performance.
In 2010, US health spending is expected to comprise
17.6 percent of the US economy, or $2.5 trillion. This
represents a full percentage point jump from 2008,
the largest one-year increase recorded since 1960
according to the US Centres for Medicare & Medicaid
Services (CMS). CMS economist Christopher Truffer said,
“We project that the health share of the economy will
increase steadily through 2018.” 1
The US healthcare industry is under tremendous
pressures to reduce healthcare costs – both from the
government and businesses. Reducing administrative
waste is identified as a key to reducing costs.
Craneware is therefore very well-positioned for growth
in today’s quickly evolving US healthcare environment
offering solutions which automate key administrative
processes and support best practices resulting in
sustainable financial performance improvement.
There has been a continuing trend towards
consolidation in the US hospital and health system
market. Consolidation further enhances the need for
new operational efficiencies like those provided by
Craneware’s strategic pricing, revenue cycle and supply
management product families.
The US Department of Health and Human Services is
once again actively using Recovery Audit Contractors
(RACs) to detect and correct improper payments in the
Medicare Fee-For-Service program. Non-compliance
has severe penalties including stiff fines and even
custodial sentences. Hospitals are challenged to ensure
compliance with ever-changing, increasingly complex
regulatory requirements. Craneware solutions not only
help support compliance, they also provide a clear audit
trail. This lessens the risks, while simplifying processes
and reducing costs associated with RAC audits for health
systems.
Thomson Reuters analysis concludes that total
margins for US Hospitals declined last year (2008). The
worst-performing hospitals had margins of negative 7
percent, while the best performing hospitals’ margins
topped 4.5 percent. The trend of declining margins
increases the need for hospitals to improve operational
efficiencies and financial performance using automation
solutions like those provided by Craneware. Craneware
solutions improve accuracy, regulatory compliance
and save significant time, while optimising legitimate
reimbursement.
1 Will Dunham. "Health spending takes rising share of U.S.
economy." Thomson Reuters (Feb. 24, 2009).
Supply chain also represents a significant opportunity
for hospitals to improve financial performance. In
the past, pharmaceutical and supply purchasing
information has remained siloed from billing for
these items. Craneware’s Pharmacy ChargeLink™ is a
first-of-its kind pharmacy application for improving
charge capture, pricing and cost management, which
allows hospitals to access their spending information
and compare it to what they are actually billing. As a
result, Craneware clients are able to clearly identify
where internal processes have broken down and/
or need improvement, how they can get more out of
their purchasing contracts, all while finding millions
in potentially missed revenue. Using Pharmacy
ChargeLink™, a regional hospital in Arizona captured
$1.2 million in lost pharmaceutical reimbursement and
in the Midwestern US, a health system identified an
annual gross revenue variance in excess of $10 million.
These results indicate that Pharmacy ChargeLink is
already delivering excellent returns for many hospitals.
Yet, many other hospitals do not yet realise the
significant amount of revenue that is leaking and being
lost through existing supply management processes.
Pharmacy ChargeLink enables identification of this
potentially missed revenue.
Both US federal and state governments recognise
the concerns of more consumers paying for their
own healthcare. On May 5, 2009, the U.S. Congress
introduced the Health Care Transparency Promotion
Act of 2009, a bipartisan bill that directs states to
establish laws requiring disclosure of information on
hospital charges. The bill also would require hospitals
and health plans to make information on hospital
charges available to the public, and provide estimated
out-of-pocket costs for health care services. Currently,
37 state legislatures have passed some form of pricing
transparency legislation. Hospitals’ need to comply with
these laws requiring greater visibility into procedure
costs. This need is driving sales of Craneware’s Patient
Charge Estimator™. This tool provides clear, accurate
and complete estimates, which not only support
pricing transparency, but also allow hospitals to
outline payment options in advance, increase up-front
collections, reduce bad debt and create a positive
patient experience by communicating financial
expectations before service occurs.
At the 2009 annual conference of the US Healthcare
Financial Management Association, Stewart Hanson,
vice president of healthcare solutions and wholesale
lockbox at Fifth Third Bank, pointed out that Consumer
Directed Healthcare (CDH) is a growing portion of a
$2 trillion market, which increased by 42 percent in
2008 and is expected to reach 14.9 million accounts
by the end of 2009. He also indicated that hospitals
need better tools for calculating patient responsibility.
Craneware’s Patient Charge Estimator™ is the tool US
healthcare organisations need to better serve this
growing CDH market.
In today’s business climate with current market
trends, Craneware solutions are increasingly critical to
healthcare organisations’ financial performance success.
By implementing Craneware's automated software
applications, hospitals are better able to:
increase productivity by improving operational efficiencies,
manage risk by supporting compliance,
improve returns through optimising reimbursement, and
enhance margins by identifying revenues lost through
disconnects or leaks in current business processes.
During the last ten years, Craneware innovation has
played a central role in improving how US healthcare
provider organisations manage their business processes
– effecting swift significant ROI results for these clients.
Additionally, through Craneware User Group Meetings,
Client Advisory Council and online client community,
clients participate in a collaborative network among all
types and sizes of hospitals and health systems, where
they engage in sharing best practices while influencing
new and enhancing existing products. Our confidence is
grounded in this strategic transformation of healthcare
financial processes, which we’ve helped drive on behalf
of clients and which positions Craneware for strong
growth.
Craneware plc
Annual Report 2009
3
Craneware plc
Craneware plc
Annual Report 2009
Annual Report 2008 2008
4
4
Craneware's Financial Performance Solutions
Quick Facts — The Technology
Strategic Pricing Solutions
Revenue Cycle Solutions
Craneware solutions are based on a subscription model
per licensed user. Craneware products employ a mix
of traditional client/server Windows applications and
hosted ASP technologies to provide a comprehensive
enterprise solution for healthcare financial performance
management.
Customer data is always kept secure within healthcare
facilities own networks, compliant with US Health
Insurance Portability and Accountability Act (HIPAA)
regulations related to sensitive patient information.
Only registered users can access Craneware's extensive
knowledge base and regulatory products through
available hospital-based browsers with Internet access.
This allows Craneware's software to be rolled out to a
number of staff within a facility, permitting different
prescribed levels of interaction with minimal impact to
resource-strained IS teams and busy users.
Craneware's products are divided into three product
families, with the Craneware Business Solutions Group
and Decision Dashboard® spanning across all three
families.
Patient Charge Estimator™
Software that supports defensible and transparent
pricing, and simplifies providing estimates for inpatient
and outpatient services
Comparative Pricing Modules
Comparison modules for benchmarking a facility's
current prices against those of similar organisations
based on information derived from Medicare
Fee Schedule Modules
Fee schedule applications for viewing and comparing
a facility's current pricing against published state and
national rates
Pricing Policy Analysis Modules
Analysis modules that establish the accurate price
for medications based on actual acquisition costs
and proposed reimbursement in accordance with
established markup formulas
Supply Management Solutions
Pharmacy ChargeLink™
Pharmacy supply application for improving charge
capture, pricing and cost management, establishing
and maintaining a connection between a hospital’s
pharmaceutical purchases and its chargemaster
Supplies ChargeLink™
Supplies software solution for optimising
reimbursement by establishing and maintaining a
connection between a hospital's supply purchase
history and its chargemaster, helping to ensure
accurate pricing, coding and billing of chargeable
supplies
Chargemaster Toolkit®,
Chargemaster Corporate Toolkit®,
Chargemaster Toolkit® - CAH
Toolset for capturing legitimate reimbursement by
automating chargemaster management processes,
customisable for organisations from small community
hospitals to large healthcare networks
Bill Analyzer
Software for improving charge capture processes by
identifying lost revenue and categorising areas of risk,
resulting in cleaner, more compliant, claims
Online Reference Toolkit®
Web-based tool for reducing risk by providing access to
reference and regulatory resources
Interface Scripting Module
Software for ensuring items are billed accurately by
automatically uploading chargemaster changes to the
patient billing system
Physician Revenue Toolkit® /
Physician Management Toolkit
Software for managing a physician group's charges,
codes, RVUs, fee schedules and related information
– also includes Online Reference Toolkit for physician
billing and, optionally, can track key financial and
operational drivers through data trending with the
addition of Decision Dashboard®
Craneware Business Solutions Group
Services which assist organisations to enhance processes
and implement best practices, resulting in improved
financial performance
Decision Dashboard®
Software providing decision makers with actionable
financial information by monitoring key performance
indicators
No.1 in KLAS
Peer Reviewed by HFMA
Chargemaster Toolkit® is ranked No. 1 in the
Revenue Cycle-Chargemaster Management market
category in the “Top 20 Best in KLAS Awards”
published in December 2008, 2007 and 2006.
The Healthcare Financial Management Association (HFMA) performs an annual independent industry
evaluation. Craneware has achieved HFMA Peer Reviewed status for Craneware's Chargemaster Toolkit®,
Chargemaster Corporate Toolkit®, Bill Analyzer, Online Reference Toolkit® and Interface Scripting
Module. To achieve this status, HFMA interviewed Craneware clients and determined that Craneware
solutions continue to meet the stringent peer review program standards and provide value.
Craneware plc
Annual Report 2009
5
Chairman's Statement
“Craneware has delivered both
revenue and profit growth of
over 20%, achieving greater
than $5 million in operating
profit one year ahead of market
expectations.”
George Elliot, Chairman
These past twelve months have been another
remarkable year in the development of Craneware.
Against a backdrop of a global economic downturn,
Craneware has delivered both revenue and profit growth
of over 20%, achieving greater than $5 million in
operating profit one year ahead of market expectations.
This success has been achieved as a result of our
commitment to our customers and our understanding
of the growing pressures and complex issues they
are currently facing. The US healthcare system is
potentially on the verge of one of the biggest changes
in its history and we are focused on providing our
customers, the healthcare organisations, with the tools
they require to manage this change. We help them run
fiscally successful operations whilst managing risk and
complying with increasing levels of legislation, enabling
them to focus on their primary objective of patient care.
This year has seen the first full year contribution
from our newly launched Patient Charge Estimator
and Pharmacy ChargeLink products and we have
been pleased by the positive market response to
these innovative tools. This has resulted in a $10.1m
contribution from new products lines to total contracted
revenues in the year. We now look forward to the launch
of the next product in our Supply Management family;
Supplies ChargeLink.
We have continued to extend our market reach during
the year, signing new channel partnership agreements
with Premier Purchasing Partners, the largest
healthcare alliance in the U.S., and Amerinet, a leading
national healthcare group purchasing organisation.
Since the year end, we have further expanded our
channel partnerships by signing a new agreement
with McKesson, the world’s largest healthcare services
company.
This extended market reach, broadening product
set and growing customer base, supported by high
levels of revenue visibility give the Board confidence
in continuing our many years of successful growth.
We continue to explore opportunities for growth via
acquisition in line with our M&A strategy.
I would like to thank all of the Craneware staff on both
sides of the Atlantic for their continued hard work and
commitment and look forward to working together to
capitalise on our growing market opportunity.
George Elliott
Chairman
4 September 2009
Craneware plc
Annual Report 2009
6
Operational Review
“Sales performance over the
year, delivered a record $43.2m,
representing a 68% increase on
last year.”
Keith Neilson, CEO and co-founder
“We now have visibility over
$60.1m of contracted revenue
that will be recognised in future
years.”
Craig Preston, CFO
With the U.S. healthcare market undergoing an
unprecedented level of scrutiny and potential upheaval,
Craneware remains focused on the delivery of superior
levels of support to our customers. Fundamental to our
success is the belief that our customers are our strongest
advocates. Through providing them with high levels of
support we are, in turn, experiencing growing demand
for our broadening product set. This is evidenced by
the continued high level of customer renewals and the
increased value and length of our average contract.
These factors, combined with accelerated investment in
sales and marketing, have resulted in a record year of
sales for Craneware, with over $43m in new contracts
being secured in the year, 68% year-on-year growth.
Our annuity revenue recognition policy means that the
majority of the new sales secured in the year will flow
through into revenue in future years, giving us every
confidence in our continued future success.
The Market
With hospitals facing relentless pressure from
demographic shifts, regulatory change, and financial
uncertainty, Craneware solutions drive stronger
financial and operational performance through
more informed, more responsive revenue integrity
management.
The regulatory framework in the U.S. healthcare
industry continues to be the key driver behind the
uptake of our core Revenue Cycle software family.
Whilst there remains uncertainty as to the final format
of President Obama’s Healthcare Reform Plan, it is likely
that the outcome could see more of the 40 million
currently uninsured Americans become eligible for the
State and federally funded healthcare programmes. This
will add in both volume and complexity to an already
highly regulated billing process with which hospitals are
required to comply in order to recoup patient treatment
costs, fuelling demand for our software.
Additionally, while these issues are being debated,
U.S. hospitals continue to be affected by the wider
economic downturn and fiscal pressures. Drug costs are
rising, patient revenue is dropping and balance sheets
have been impacted by the decreasing value of other
investments. Hospital CFOs are therefore seeking areas
for process improvement and enhanced operational
efficiencies whilst delivering high levels of patient care
within a competitive marketplace. Our newly launched
Strategic Pricing and Supply Management product
families have received excellent customer feedback
in these areas, delivering immediate and easily
identifiable return on investment.
We have also seen favourable movement in the
competitive landscape during the year, with 3M
dropping their competitive product in our marketplace
due to internal restructuring. We continue to be the
leader in our fields in terms of hospital numbers and
customer reviews.
Sales and Marketing
We have established a growing reputation within the
broader financial performance improvement market
at the board level within hospitals. As highlighted at
the time of our Interim Results in February, we have
accelerated investment into our sales and marketing
activities with a view to driving forward sales in our
core and new product families. We have increased
our sales team with the addition of new client sales
managers whilst increasing our marketing team with
the addition of product marketing managers.
We have been pleased by the sales performance over
the year, which delivered a record $43.2m, representing
a 68% increase on last year.
We believe the opportunity to further cross-sell from
our enlarged product set is significant, with 23% of the
total contracted sales signed within the year coming
from our new product lines, proving the products
suitably address market needs. With less than 10%
of our current hospital base having more than two
products, we expect to see this momentum maintained
in the coming years as we continue with our cross-sell
marketing initiatives. The average annualised contract
value has increased in the year to $34,891 (2008:
$23,306) reflecting the increased number of products
now being sold. The average length of new contracts
also continues to increase, now standing at over 5.3
years (2008: 4.4 years) adding to our significant revenue
under contract.
Product Development
Building on the success of Patient Charge Estimator and
Pharmacy ChargeLink in the current financial year, this
coming year will see the launch of the next piece of
our Supply Management family; Supplies ChargeLink.
This application establishes and maintains a connection
between the hospital’s supply purchase history and its
charge description master (CDM), enabling the hospital
to optimise reimbursement by ensuring accurate
pricing, coding and billing of chargeable supplies,
targeting what we believe to be a green-field site.
The beta product was demonstrated at the Healthcare
Financial Management Association (HFMA) Conference
in June 2009 and was extremely well-received. We are
therefore on track for the general release of the product
before the end of the current calendar year.
Following the release of Supplies ChargeLink, we will
focus new product development within our Strategic
Pricing family of products with a Pricing Analysis
product. The Strategic Pricing family of products allows
hospitals to address the complex issue of pricing within
their marketplace. Setting pricing within a hospital
has become increasingly important as a management
strategy to combat eroding margins resulting from
increases in cost and payment inadequacies. By setting
an effective pricing strategy, a hospital can quickly
increase profits with confidence. The Pricing Analysis
product will allow a hospital to analyse the effects
of applying specific strategies and their impact on
profitability.
Craneware plc
Annual Report 2009
7
Board Changes
We were delighted to welcome Ron Verni onto the
Board of the Company in May 2009 as a non-executive
director. Ron brings with him extensive experience
in running highly successful, rapidly growing,
international software companies through his time with
Sage Software, Inc and Peachtree Software Inc. amongst
others. We are delighted he has agreed to join our team
and look forward to working with him as we seek to
capitalise on our strong position in the U.S. healthcare
market.
Financial Review
Craneware has delivered another year of strengthened
financial performance.
The total value of contracts signed during the year
increased by over 68%, to $43.2m (2008: $25.7m)
underpinning a 23% increase in revenue, which was
recognised in the year, to $23.0m (2008: $18.7m).
As a result of our annuity revenue recognition model,
the majority of the benefit derived from these new
contract wins and renewals has been to increase our
visibility over future revenues and our confidence in
future performance.
We now have visibility over $60.1m of contracted
revenue that will be recognised in future years. This is
an increase of $20.2m during this year and is in addition
to the $23.0m of revenue that has been recognised
through the Income Statement. Of this future revenue
under contract we have already invoiced $11.1m which
is recorded as deferred income in the balance sheet, the
remaining $49.0m to be invoiced in subsequent years.
Of the future revenue under contract (Figure 1) the
directors consider that $20.7m will be recognised during
FY10 with a further $15.3m and $11.2m respectively to
be recognised in FY11 and FY12. In addition, assuming
as has happened in the year, the total monetary value
of renewed contracts is at least equal to the total
monetary value of contracts that were due to renew,
$2.8m revenues will be recognised from renewal
activity during FY10, with a further $6.2m and $9.8m
respectively in FY11 and FY12 relating to contracts due
for renewal from 1 July 2009 through these years.
Operational Review
The Pricing Analysis product is anticipated to contribute
towards revenue by the end of calendar 2010.
During the year, the Company’s flagship product,
Chargemaster Toolkit®, was once again awarded the
number one position in its category by the prestigious
industry research house KLAS in the U.S., reaffirming
Craneware’s market leading position for the third year
in a row.
Customers
As stated earlier, our customers are a fundamental focus
for Craneware. We were therefore delighted by the high
scores given for our customer service and personnel in
the KLAS market research described above. 63% of the
respondents ranked Craneware as their “Best Software
Vendor” and 100% of respondents ranked Craneware as
their “Best or one of their Best Software Vendors.”
More than 1,000 hospital facilities across 48 States are
now utilising one or more of our software products.
We continue to sign up a broad range of customers in
terms of size from small community hospitals to large
healthcare networks.
For customers coming to the end of their multi-year
contracts, renewal rates remain in line with the high
levels achieved in previous years, and we are pleased
to report that the trend for longer-term contracts has
continued, with our average multi-year contract length
increasing to over 5 years. This commitment from our
customers, including a number of 7 year contracts or
longer, is testimony to our products’ ability to provide
return on investment, tangible cost savings and
regulatory compliance for hospitals across the U.S.
Channel Partners
We have extended our market reach during the year
with the signing of several new partnership agreements
with some of the leading participants in the U.S.
healthcare industry. We expect to continue to utilise
these partnerships as lead generators, supporting our
future growth.
In April 2009 we signed a new 3 year agreement with
Premier Purchasing Partners, the largest healthcare
alliance in the U.S., enabling the sale of Craneware
solutions, including Patient Charge Estimator and
Pharmacy ChargeLink, to the group purchasing
organisation’s 2,100 members and client hospitals, and
more than 54,000 other healthcare providers.
In June 2009 we announced our inclusion in
the Amerinet Alliance for Financial Efficiency, a
collaboration between Amerinet, a leading national
healthcare group, Perot Systems, worldwide provider of
information technology services and business solutions
and Craneware for the co-marketing of our revenue
cycle management solutions.
Since the year end, we have signed a third-party
agreement with McKesson the world’s largest
healthcare services company, who will integrate
Craneware’s Chargemaster Toolkit® software with
McKesson’s next generation hospital information system
(HIS), Horizon Enterprise Revenue Management™
as part of their ongoing legacy system replacement
and upgrading programme. By integrating the two
solutions, McKesson and Craneware are delivering a
synchronised approach to achieving revenue integrity,
which aids hospitals in improving their financial
performance.
$25m
$20m
$15m
$10m
$5m
$0m
$18.3m
$2.4m
$15.9m
Contracted
Renewals
$23.5m
$2.8m
$21.5m
$16.8m
$16.7m
$6.2m
$21.0m
$9.8m
$7.0m
$9.8m
$20.7m
$15.3m
$11.2m
$9.8m
$6.9m
2010
2011
As at 30th June 2009
2011
2012
Figure 1.
2009
2010
As at 30th June 2008
Craneware plc
Annual Report 2008 2008
8
Dividend
Basic and diluted earnings per share were $0.18 (2008:
$0.14) and $0.17 (2008: $0.13) respectively and the
Board recommends a final dividend of 2.9p (4.77 cents)
per share giving a total dividend for the year of 4.7p
(7.43 cents) per share (2008: 3.1p (4.96 cents) per
share). Subject to confirmation at the Annual General
Meeting, the final dividend will be paid on 8 December
to shareholders on the register as at 6 November.
Outlook
Craneware continues to invest in the development
and deployment of its software to help address the
opportunities created by the unprecedented level of
change and public scrutiny facing the US healthcare
system as well as the extraordinary levels of fiscal
and legislative pressure healthcare organisations
are experiencing as a result of the global economic
downturn.
The Channel Partner agreements we now have in place,
including the new McKesson agreement signed since
the year end, confirms our belief in our market leading
position and reputation within the industry. The long
term foundations these agreements provide combined
with our strong business fundamentals and customer
base, leaves us well positioned to serve the growing
market demand.
Keith Neilson
Chief Executive Officer
4 September 2009
Craig Preston
Chief Financial Officer
4 September 2009
Operational Review
As previously stated, for customers coming to the end
of their multi-year contracts, the Company’s renewal
rate remains within the high levels achieved in previous
years. This combined with increased upsell and cross
selling to the renewing hospital base, has resulted in
the total monetary value of the current year renewals
increasing by 114% as compared to the original annuity
value to the Company.
Net operating expenses have risen to $16.3m (2008:
$14.1m) due to the increased investment in product
management and marketing in the year together with
the full year effect of the investments made in FY08 in
the areas of customer support and sales infrastructure.
However, as a proportion of revenues, net operating
expenses have reduced to 71% from 76% in FY08.
As a result of all these factors, profit before share based
payments, depreciation, and amortisation has increased
29% to $5.8m (2008: $4.5m).
Total expenditure on research and development in the
year was $3.0m (2008: $2.6m) after capitalisation of
$0.6m of cost in respect of Supplies ChargeLink (Total
amount capitalised in 2008 $0.5m). We continue to
amortise R&D expenditure capitalised in prior years for
Patient Charge Estimator and Pharmacy ChargeLink.
Under IFRS 2 “Share-Based Payments” the Group’s
earnings have now reflected most of the charge relating
to share options which existed at IPO, as a result the
share based payment charge in the year reduced to
$0.1m (2008: $0.6m).
Profit before tax increased to $5.9m (2008: $4.2m),
whilst profit after tax increased to $4.4m (2008: $3.3m).
Following the increase in trade receivables reported in
the interim report, the second half of the year has seen
a return to normal levels, at $4.4m (2008: $3.8m) of
which over 70% is either within payment terms or not
yet due for payment. Due to our advance annual billing
model ahead of revenue recognition and our continued
focus on the collection of receivables, we reported a net
working capital inflow during the year. This has allowed
cash generated from operations to increase to $7.4m
(2008: $5.0m).
As a result, cash balances have increased to $26.2m as
at 30 June 2009 (2008: $21.1m) after paying $1.9m in
dividends to shareholders during the year.
With the reporting currency (and cash reserves) of
the Company being in US dollars, we have benefited
from a strengthening US dollar during the year on
our UK purchases including the salary costs of our UK
based employees. We entered the current financial
year with an exchange rate of $1.9906:£1 which has
strengthened resulting in an average conversion rate for
the Company during the reporting period of $1.6142:£1.
As highlighted at the time of our Interim Results, we
have taken advantage of the potentially short term
benefits of the strengthening US Dollar to accelerate our
investment in the areas of Product Management and
Marketing.
Craneware plc
Annual Report 2009
9
Board of Directors
The Directors of the Company and their responsibilities within the Group are set out below:
George R Elliott, 56 — Non-Executive Chairman :: Appointed 10 August 2007
Prior to joining Craneware's Board, George was Chief Financial Officer of Wolfson Microelectronics plc, a leading global provider of high
performance semiconductors to the consumer electronics market. Previously, he was Business Development Director at McQueen International
Ltd (now Sykes), where he was responsible for strategic sales and marketing. George is also non-executive Chairman of Corsair Memory Inc and
Scotcloth Ltd and non-executive director of Summit plc (SUMM), Oxonica plc (OXN) and ClearSpeed Technology Ltd. George, formerly a partner
of Grant Thornton, is a member of the Institute of Chartered Accountants of Scotland and has a degree in Accountancy and Finance from Heriot-
Watt University.
Keith Neilson, 40 — Chief Executive Officer :: Founder
Keith co-founded Craneware in 1999 and has served as its CEO ever since. Under Keith’s guidance, Craneware became recognised as the pioneer
in charge capture management and a leading provider of superior products and professional services. Keith’s direction has helped Craneware
to win multiple prestigious awards in such areas as international achievement, business growth strategy and innovation. Keith was named
The Entrepreneurial Exchange’s “Emerging Entrepreneur of the Year 2003” and was a finalist in the 2004 World Young Business Achiever Award,
winning the Award of Excellence in the Business Strategy category. Most recently, he received the U.K. Software & Technology Entrepreneur
of the Year Award from Ernst & Young in 2008. Prior to launching Craneware, Keith worked primarily in international management, where he
handled sales, marketing and technical consulting for companies with operations across the globe. He studied Physics at Heriot-Watt University,
Edinburgh, receiving a bachelor’s degree in 1991.
Craig T Preston, 38 — Chief Financial Officer :: Appointed 15 September 2008
Craig was appointed to the Board on 15 September 2008, just as the company was entering its second year as a publicly traded corporation on the
London Stock Exchange. As CFO, he directs Craneware’s financial operations in both the United Kingdom and United States. Craig has significant
experience in senior financial roles with other private and public technology companies, including those with a multi-national presence. Prior
to Craneware, he was group director of finance and company secretary at Intec Telecom Systems plc. Earlier, he served as corporate development
manager at London Bridge Software plc. During his time there, he also held the role of CFO for Phoenix International, a previously NASDAQ-traded
software company, following its acquisition by London Bridge. Earlier in his career, Craig worked for Deloitte in both the United Kingdom and
United States. Craig has a degree in Accounting and Financial Management from the University of Sheffield. He is also a member of the Institute
of Chartered Accountants in England and Wales.
Neil P Heywood, 47 — Non-Executive Director :: Appointed 31 January 2002
Neil is Managing Director of Matrix Trading Systems and Chairman of Codeplay Software. Prior to Matrix, Neil was co-founder and CEO of Quadstone
from 1995 to 2001. Quadstone won numerous awards for its software and was named best "Small Start-up" of the year at the Financial Times/
BVCA awards in 1999. It was acquired by Portrait Software in 2006. Quadstone was a buy-out from the Edinburgh Parallel Computing Centre, a
department at the University of Edinburgh, which Neil managed. Neil created and executed the commercial strategy that generated revenues in
excess of $15 million. Prior to EPCC, Neil was a co-founder and later Commercial Director of 3L, a software firm specialising in writing C compilers
for parallel computers. 3L was bought by Spectrum Signal Processing, Inc. Neil received his B.Sc. in Computer Science from the University of
Edinburgh in 1984.
Ron F Verni, 62 — Non-Executive Director :: Appointed 1 May 2009
Ron was President & CEO of Sage Software, Inc, and a member of the Board of Directors of the Sage Group, plc. Under his leadership, the company
grew from less than $160 million in revenue to over $1 billion. Ron also engineered over 20 acquisitions and oversaw their successful integration
into the company. Ron was most recently CEO of Corrigo, Inc., a leading Software as a Service (SaaS) company focused on the service sector.
Prior to Sage Software, Ron was President and CEO of Peachtree Software, Inc., a leading pioneer in business management solutions for small to
medium size businesses. Ron also was a Vice President of Marketing with Automatic Data Processing, President and CEO of NEBS Software, Inc.,
and the founder and CEO of ASTEC Software. He has extensive experience in vertical markets, including Healthcare, Accounting, Manufacturing,
Distribution, and Non-Profit. Currently Ron is serving on the Board of Directors of iLumen, and is on the Board of Advisors of company.com,
CEOVentures, and the Robinson College of Business.
Craneware plc
Annual Report 2009
10
Directors' Report
The directors present herewith their report and the
audited financial statements for the year ended 30
June 2009.
Principal Activities
The Group's principal activity continues to be the
development, licensing and post contract support of
computer software for the healthcare industry.
Business Review
Market Position and Products
»
The Group has continued to enhance its product
range and functionality, whilst increasing the number
of hospitals using its software products within its
market in the US. The directors are satisfied with the
performance of the Company and Group for the year
and expect this growth, as set out below, to continue in
future years.
Financial Highlights
»
With the value of total contracts signed in the year
being $43.2m (2008: $25.7m), the Group has increased
revenues by 23.1% to $23.0m and operating profits
from $3.6m to $5.4m, with cash reserves of $26.2m
after paying $1.9m in dividends to shareholders during
the year and future revenue under contract of $60.1m as
at 30 June 2009.
Operational Highlights
»
During the year the Group exceeded the threshold of
1,000 facilities using its software. The new products
introduced during 2008 in the strategic pricing and
supply management areas gained traction with sales
to both new hospitals and into the Group’s existing
customer base. Product development has continued
during the year, resulting in a further product in
the supply management area being made generally
available for sale in fiscal 2010.
Future Developments
»
The Group continues to grow strongly with a positive
outlook going forward as outlined in the Chairman’s
Statement and the Operational Review.
»
Corporate Social Responsibility
and Environmental Policy
The Group is committed to maintaining a high
level of social responsibility. It is the Group’s policy
to support and encourage environmentally sound
business operations, with aspects and impact on
the environment being considered at Board level.
Recognising that the impact over operations have
minimal direct environmental impact, the Group aims
to ensure that:
It meets all statutory obligations;
Where sensible and practical, it encourages working
practices, such as teleconferencing, teleworking
and electronic information exchange that reduce
environmental impact;
Re-cycles waste products wherever possible,
encouraging use of environmentally friendly materials,
and disposing safely of any non-recyclable materials.
Where the Directors’ Report (including the performance
highlights, Chairman’s Statement and Operational
Review) contain forward looking statements, these
are made by the Directors in good faith based on the
information available to them at the time of their
approval of this report. Consequently, such statements
should be treated with caution due to their inherent
uncertainties, including both economic and business
risk factors, underlying such forward looking statements
or information.
Principal Risks and Uncertainties and
Key Performance Indicators (KPIs)
The directors consider that the US healthcare software
market is likely to continue to provide growth
opportunities for the Company’s existing products
and development pipeline. In addition, and with a
continued high contract renewal rate, the Company’s
predominantly annuity-based pricing models and
revenue recognition approach gives a high degree of
revenue visibility and earnings growth predictability.
Nevertheless the market is not immune to the macro-
economic climate and continues to be very competitive.
The Company therefore aims to remain at the forefront
of product innovation and delivery, through a
combination of in-house development whilst assessing
specific acquisition opportunities. This requires the
recruitment, retention, and reward of skilled staff,
alongside a responsiveness to opportunities as they
arise.
With approximately one third of its cost denominated
in Sterling, the Company requires to continually assess
the most appropriate approach to managing its currency
exposure in line with an overall goal of achieving
predictable earnings growth.
The principal financial risks are detailed in Note 3 to the
financial statements.
The directors consider that the following operating
and financial KPIs remain critical to an understanding
of the development, performance, and position of the
business:
Value of contracts written in the year
Revenue
Earnings before interest, taxation, depreciation,
amortisation and share based payments
Cash and receivables
less payables
Deferred income
Further contractual entitlements
Future revenue under contract
2005
$m's
12.8
10.5
2.9
8.9
10.7
14.7
25.4
2006
$m's
15.1
13.2
2007
$m's
20.7
15.1
2008
$m's
25.9
18.7
2009
$m's
43.2
23.0
3.7
3.8
4.5
5.8
10.5
9.5
17.8
27.3
11.4
9.5
23.4
32.9
24.1
10.3
29.6
39.9
27.5
11.1
49.0
60.1
Craneware plc
Annual Report 2009
11
Employee Involvement
The general policy of the Group is to welcome employee
involvement as far as it is reasonably practicable.
Employees are kept informed by meeting, regular
updates and web page postings. In addition the Group’s
UK and US senior management teams, referred to as the
Leadership Group, meet regularly to continually review
and update the Group’s strategic aims and development
roadmaps.
Policy on payment of Creditors
It is the Group’s normal practice to make payments
to suppliers in accordance with agreed terms and
conditions, generally within 30 days, provided that the
supplier has performed in accordance with the relevant
terms and conditions. Trade creditors at 30 June 2009
represented, on average 26 days purchases (2008: 13
days) for the Group and 30 days purchases (2008: 17
days) for the Company.
Charitable and Political Contributions
The Group made charitable contributions of $4,820
during the year relating to corporate participation in
the Highland 100 charitable bike riding events (2008:
$1,382). Neither the Company nor its subsidiary made
any donation for political purposes in 2009 or 2008.
Employment of Disabled Persons
Applications for employment by disabled persons are
always fully considered, bearing in mind the respective
aptitudes and abilities of the applicant concerned.
In the event of members of staff becoming disabled
every effort is made to ensure that their employment
with the Group continues and the appropriate training
is arranged. It is the policy of the Company that the
training, career development and promotion of a
disabled person should, as far as possible, be identical
to that of a person who does not suffer from a disability.
Annual General Meeting
The resolutions to be proposed at the AGM, together
with explanatory notes, appear in a separate Notice
of Annual General Meeting which is sent to all
Shareholders. The proxy card for registered shareholders
is distributed along with the notice.
Directors' Report
Dividends
During the year the Company paid an interim dividend
of 1.8p (2.66 cents). The directors are recommending
the payment of a final dividend of 2.9p (4.77 cents)
per share giving a total dividend of 4.7p (7.43 cents)
per share based on the results for 2009 (2008: 3.1p
(4.96 cents)). Subject to approval at the Annual General
Meeting, the final dividend will be paid on 8 December
to shareholders on the register as at 6 November.
The level of dividend proposed for the year is intended
to deliver a dividend yield the directors believe is
appropriate for a Company of this size and nature.
In future years the directors intend to continue with
a progressive dividend policy based on the Group’s
retained annual earning. The level of distributions will
be subject to the Group’s working capital requirements
and the ongoing needs of the business.
Going Concern
The directors have reviewed the financial forecast for
the Group and consider that it is appropriate to prepare
the financial statements on the going concern basis.
Research and Development activities
The Group continues its development programme
of software products for the US healthcare industry
which includes research and development of new
complimentary products and the enhancements to
the existing portfolio of market leading products. The
directors regard investment in development activities
as a prerequisite for success in the medium and long
term future. During the year development expenditure
amounted to $3.0m (2008: $2.6m) net of expenditure
capitalised of $0.6m (2008: $0.5m).
Power of Directors
The Directors have the power to manage the business
of the Company, subject to the provisions of the
Companies Act, the Memorandum and Articles of
Association of the Company, and to any directions given
by special resolution, including the Company’s power
to purchase its own shares. The Company’s Articles
of Association may only be amended by a special
resolution of the Company’s shareholders.
Authorised and Issued Share Capital
The Company’s authorised share capital at the balance
sheet date was 50,000,000 ordinary shares of 1p each
of which 25,297,750 were issued and fully paid up.
During the year, options were exercised pursuant to
the Company’s share option schemes, resulting in the
allotment of 187,800 new ordinary shares. No further
new ordinary shares have been allotted under these
schemes since the end of the financial year to the date
of this report.
Directors and their interests
The directors of the Company are listed on page 10
Craig Preston was appointed as Chief Financial Officer
on 15 September 2008 and Ron Verni was appointed
as a new non-executive director on 1 May 2009. A M
McDougall resigned on 15 September 2008.
The interests of the directors who held office at 30 June
2009 and up to the date of this report, were as follows:-
G R Elliot
N P Heywood
K Neilson
2009
15,650
145,272
3,887,800
4,048,722
2008
15,650
150,000
3,887,800
4,053,450
Director's interests in share options are detailed in the
Remuneration Committee Report on page 19.
Substantial shareholders
As at the 30 June 2009, the Company had been notified
of the following beneficial interests in 3% or more of
the issued share capital pursuant to section 793 of the
Companies Act 2006:
No. of
Ordinary
£0.01
Shares
% of
issued
share
capital
3,887,800
15.37
3,394,504
13.42
K Neilson
W G Craig
Blackrock Investment Mgmt.
2,558,779
10.11
Standard Life Investments
2,525,336
Fidelity Investments
2,444,700
Artemis Investment Mgmt.
2,280,500
Axa Investment Mgmt.
Aegon Asset Mgmt.
F&C Asset Mgmt.
D W Paterson
Liontrust Asset Mgmt.
1,322,750
1,031,486
843,121
835,900
802,039
9.98
9.66
9.01
5.23
4.08
3.33
3.30
3.17
The total number of shares as at 30 June 2009 was
25,297,750.
Indemnity of Directors and Officers
Under the Company’s Articles of Association and subject
to the provisions of the Companies Acts, the Company
may indemnify any director or other officer against
liability incurred by him in the execution or discharge
of his duties or exercise of his powers, including but not
limited to any liability for the costs of legal proceedings
where judgement is given in their favour. In addition,
the Company has purchased and maintains appropriate
insurance cover against legal action brought against
directors and officers.
Craneware plc
Annual Report 2009
12
Directors' Report
Statement of Directors' Responsibilities
The directors are responsible for preparing the annual report, the directors’ remuneration report and the financial
statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the
directors have prepared the group and parent company financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union. In preparing these financial statements,
the directors have also elected to comply with IFRSs, issued by the International Accounting Standards Board (IASB).
The financial statements are required by law to give a true and fair view of the state of affairs of the Company and
the Group and of the profit or loss of the Group for that year.
In preparing those financial statements, the directors are required to:
Select suitable accounting policies and apply them consistently;
Make judgements and estimates that are reasonable and prudent;
State that the financial statements comply with IFRSs as adopted by the European Union; and
Prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Group and
Company will continue in business, in which case there should be supporting assumptions or qualifications as necessary.
This statement should cover both the Parent Company and the Group as a whole.
Auditors and Disclosure of Information
to Auditors
Each director, as at the date of this report, has
confirmed that insofar as they are aware there is no
relevant audit information (that is, information needed
by the Company’s auditors in connection with preparing
their report) of which the Company’s auditors are
unaware, and they have taken all the steps that they
ought to have taken as a director in order to make
themselves aware of any relevant audit information and
to establish that the Company’s auditors are aware of
that information.
A resolution to reappoint PricewaterhouseCoopers LLP
as auditors will be proposed at the annual general
meeting.
Approved by the Board of Directors and signed on behalf
of the Board by:
The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any
time the financial position of the Company and the Group and for ensuring that the financial statements comply
with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and hence for
taking reasonable steps for the prevention and detection of fraud and other irregularities.
Craig Preston
Company Secretary
4 September 2009
The Directors are responsible for the maintenance and integrity of the corporate and financial information included
on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
Craneware plc
Annual Report 2009
13
Corporate Governance Report
The Board of Directors ("the Board") acknowledge the
importance of the Principles set out in The Combined
Code on Corporate Governance issued by the Financial
Reporting Council in June 2006. Although the Combined
Code is not compulsory for AIM listed companies, the
Board has applied the principles in this statement,
together with the Remuneration Committee Report
set out on page 18 as far as practicable for a public
Company of its size, as follows:
Composition of the Board
The Company is managed by the Board of Directors, now
comprising a non-executive chairman, chief executive
officer, chief financial officer and two independent non-
executive directors.
The composition of the Board changed during the year
with the appointment of Craig Preston as the new Chief
Financial Officer on 15th September 2008, taking over
from A. McDougall who resigned from the same date. In
addition, Ron Verni, was appointed as an independent
non-executive director on 1 May 2009.
The Board is satisfied with the balance between
executive and non-executive directors. The Board
considers that its composition is appropriate in view
of the size and requirements of the Group’s business
and the need to maintain a practical balance between
executive and non-executive directors.
Each member of the Board brings different experience
and skills to the Board and its various committees. The
Board composition is kept under review and, when a
new appointment is to be made, consideration is given
to the particular skills, knowledge and experience that a
potential new member could add to the existing Board
composition. This mix of skills and business experience
is a major contribution to the proper functioning of
the Board, ensuring matters are debated and that no
individual or group dominates the Board decision-
making process.
Each of the executive directors is expected to act in
accordance with ethical principles, including those of
any professional body of which they are a member.
The non-executive directors are a high-calibre and
contribute wide-ranging business and financial
experience to the Board’s decision making process.
The Chairman, George Elliott, holds other directorships,
and the Board has considered the time commitment
required by his other roles and has concluded they do
not detract from his chairmanship of the Company.
At every Annual General Meeting, at least one-third
of the Directors who are subject to retirement by
rotation, are required to retire and may be proposed for
re-election under the retirement by rotation provisions
in the Company’s Articles of Association. In addition,
any Director who was last appointed or re-appointed
three years or more prior to the AGM is required to retire
from office and may be proposed for re-election. Such a
retirement will count in obtaining the number required
to retire at the AGM.
Craneware plc
Annual Report 2009
14
New Directors, who were not appointed at the previous
AGM, automatically retire at their first AGM and,
if eligible, can seek re-appointment. As such Keith
Neilson, Neil Heywood and Ron Verni (being his first
AGM since appointment) will retire from office at
the Company’s forthcoming AGM and stand for re-
appointment.
Since the year end, evaluation of the performance of
the Board, its Committees and individual members
has been conducted. The evaluation took the form of
a questionnaire, discussions at formal Board meetings
and informal meetings between the Chairman and
individual members of the Board.
Functioning of the Board
The Board meets regularly, usually monthly, to discuss
and agree on the various matters brought before it,
including the trading results. The Company has a highly
committed and experienced Board, which is supported
by a senior management team, with the qualification
and experience necessary for the running of the Group.
The Board’s role includes the review of the Company’s
strategy, the consideration and approval of business
plans, significant transactions, and the monitoring
of operational and financial performance. This is
achieved through quarterly reviews by the Board and
supplemented by monthly financial reporting and
forecast updates.
In addition, there is regular communication between
Executive and Non-Executive Directors, where
appropriate, to update the Non-Executive Directors
on matters requiring attention prior to the next Board
meeting. The Non-Executive Directors will meet at least
annually without Executive Directors being present. Due
to the size of the Board during the year it has not been
feasible for the Non-Executive Directors to meet without
the Chairman being present.
The Chairman is responsible for ensuring that all
the Directors continually update their skills, their
knowledge and familiarity with the Group in order
to fulfil their role on the Board and the Board’s
Committees. Updates dealing with changes in
legislation and regulation relevant to the Group’s
business are provided to the Board by the Company
Secretary/Chief Financial Officer and through the Board
Committees.
There is a formal schedule of matters reserved for
the Board for decision, which include approval of
Group strategy, annual budgets and business plans,
acquisitions, disposals, business development, annual
reports and interim statements, any significant
financing and capital expenditure plans. The day-to-
day operation of the Group’s business is delegated to
management, subject to defined authority limits.
All Directors have access to the advice and services
of the Company Secretary, who is responsible to the
Board for ensuring that Board procedures are properly
complied with and that discussions and decisions are
appropriately minuted. Directors may seek independent
professional advice at the Company’s expense in
furtherance of their duties as Directors.
Training in matters relevant to their role on the Board
is available to all Board Directors. New Directors are
provided with an induction in order to introduce them
to the operations and management of the business.
Non-Executive Directors
On 1 May 2009 the Board appointed Ron Verni as an
independent Non-Executive Director.
All Non-Executive Directors serving at the year-end
are considered to be independent, as defined in
Section A3.2 of the Code. They have been appointed
for specified initial terms and provide the necessary
balance to the Executive Directors as a result of their
outside expertise.
In 2007, Neil Heywood received additional non-
recurring fees in respect of advisory services provided
to the Company prior to its admission to AIM. Due to
the nature of these services and the length of time the
services were provided for, the Board has concluded the
payment of these fees did not impair his independence.
Board Committees
The Board has established three Committees to deal
with specific aspects of the Group’s affairs: Audit,
Remuneration and Nomination Committees. The terms
of reference of these Committees are available on
request from the Company.
The Committees now review their terms of reference
and their effectiveness annually and, if necessary,
recommend any changes to the Board. The minutes of
the Committee meetings are available to all Directors
and oral updates are given at Board meetings.
The Audit Committee
The Audit Committee’s role is to assist the Board with
the discharge of its responsibilities in relation to
internal and external audits and controls. The Audit
Committee will normally meet at least three times a
year. The Audit Committee is chaired by Neil Heywood
and its other members are George Elliott and Ron Verni.
The Chief Financial Officer and Chief Executive Officer
attend meetings by invitation and the Committee also
meets the external auditors without management
present. George Elliott, as a member of the Audit
Committee has recent and relevant financial experience.
During the year the Audit Committee, operating under
its terms of reference, discharged its responsibilities,
including reviewing and monitoring:
interim and annual reports information including
consideration of the appropriateness of accounting
policies and material assumptions and estimates adopted
by management;
developments in accounting and reporting requirements;
external auditors’ plan for the year-end audit of the
Company and its subsidiaries;
the Committee’s effectiveness;
Corporate Governance Report
the Risks and Controls Report covering the systems of
internal control and their effectiveness, reporting and
making new recommendations to the Board on the results
of the review and receiving regular updates on key risk
areas of financial control;
the requirements or otherwise for an internal audit
function;
the performance and independence of the external
auditors concluding in a recommendation to the Board on
the reappointment of the auditors by shareholders at the
Annual General Meeting. The auditors provide annually a
letter to the Committee confirming their independence
and stating the methods they employ to safeguard their
independence;
the audit and non-audit fees charged by the external
auditors; and
the formal engagement terms entered
into with the external auditors.
During the year, the Committee reviewed the
arrangements in place for internal audit and concluded,
due to the current size and complexity of the Company
that a formal internal audit function was not required.
The Audit Committee has also implemented procedures
relating to the provision of non-audit services by the
Company auditors, which include requiring non-audit
work and any related fees over and above a deminimis
level to be approved in advance by the Chairman of the
Audit Committee.
The Remuneration Committee
During the year, the Remuneration Committee was
chaired by Neil Heywood (Ron Verni has taken over the
chair of the Committee from the date of this report),
and its other members are George Elliott and Ron Verni.
It is usual for Keith Neilson, as Chief Executive Officer
to be invited to attend meetings except where matters
under review by the Committee relate to him.
The Committee has responsibility for making
recommendations to the Board on the remuneration
packages of the Executive Directors, and monitor
the level and structure of remuneration for senior
management, this includes:
making recommendations to the Board on the Company’s
policy on Directors’ and senior staff remuneration, and to
oversee long term incentive plans (including share option
schemes);
ensuring remuneration is both appropriate to the level
of responsibility and adequate to attract and/or retain
Directors and staff of the calibre required by the Company;
and
ensuring that remuneration is in line with current industry
practice.
The Nomination Committee
The Nomination Committee is chaired by Neil Heywood
and its other members are George Elliott and Ron Verni.
aim of these reviews is to provide reasonable assurance
that material risks and problems are identified and
appropriate action taken at an early stage.
The Board confirms that procedures to identify, evaluate
and manage the significant risks faced by the Group
have been in place throughout the year and up to the
date of approval of the Annual Report.
Financial Control
The annual financial plan is reviewed and approved by
the Board. Financial results with comparisons to plan
and forecast results are reported on at least a quarterly
basis to the Board together with a report on operational
achievements, objectives and issues encountered. The
quarterly reports are supplemented by interim monthly
financial information. Forecasts are updated quarterly
in the light of market developments and the underlying
performance and expectations. Significant variances
from plan are discussed at Board meetings and actions
set in place to address them.
Approval levels for authorisation of expenditure are
at set levels and cascaded through the management
structure with any expenditure in excess of pre-defined
levels requiring approval from the Executive Directors
and selected senior managers.
Quality of Personnel and
Employee Involvement
The Group is committed to attracting and retaining
the highest calibre of personnel. It strives to do this
through, amongst other things, the application of high
standards in recruitment.
The Group is aware of the importance of good
communication in relationships with its staff. The Group
follows a policy of encouraging training and regular
meetings between management and staff in order to
provide a common awareness on the part of the staff of
the financial and economic circumstances affecting the
Company’s performance. Most employees participate
in the growth of the business through the ownership
of share options and participation in the Group bonus
scheme.
Commitment to Continuous Improvement
Measures continue to be taken to review and embed
internal controls and risk management procedures
into the business processes of the organisation and
to deal with areas of improvement which come to the
management’s and the Board’s attention. Metrics and
quality objectives continue to be actively implemented
and monitored as part of a continual improvement
programme.
The role of the Nomination Committee is to assist the
Board in determining the composition and make-up
of the Board. It is also responsible for periodically
reviewing the Board’s structure and identifying
potential candidates to be appointed as directors, as the
need may arise.
Before recommending the appointment of a non-
executive director, the Committee establishes that the
prospective director can give the time and commitment
necessary to fulfil their duties, in terms of availability
both to prepare for and attend meetings and to discuss
matters at other times.
With regard to the appointment of Craig Preston as
the Chief Financial Officer on 15 September 2008 and
the appointment of Ron Verni on 1 May 2009, the
Nomination Committee undertook an extensive search,
supported by an external search firm, and considered
both internal and external candidates for the role.
Attendance at Board and Committee meetings
Attendances of Directors at Board and Committee
meetings convened in the year, along with the number
of meetings that they were invited to attend, are set
out below:
s
n
o
i
t
a
n
m
o
N
i
e
e
t
t
i
m
m
o
C
n
o
i
t
a
r
e
n
u
m
e
R
e
e
t
t
i
m
m
o
C
5
2
d
r
a
o
B
10
t
i
d
u
A
e
e
t
t
i
m
m
o
C
3
10/10
8/8
1/2
10/10
10/10
1/1
5/5
-
-
5/5
5/5
-
2/2
-
-
2/2
2/2
-
1/1
2/2
1/1
2/3
3/3
-
No. Meetings in year
Executive Directors
K Neilson
C T Preston
A M McDougall
Non Executive Directors
G R Elliot
N P Heywood
R Verni
Internal Control
The Directors, who are responsible for the Group’s
system of internal control, have established systems
to ensure that an appropriate and reasonable level
of oversight and control is provided. The systems
are reviewed for effectiveness annually by the Audit
Committee and the Board. The Group’s systems of
internal control are designed to help the Company meet
its business objectives by appropriately managing,
rather than eliminating, the risks to those objectives.
The controls can only provide reasonable, not absolute,
assurance against material misstatement or loss.
Executive Directors and senior management meet
to review both the risks facing the business and the
controls established to minimise those risks and their
effectiveness in operation on an ongoing basis. The
Craneware plc
Annual Report 2009
15
Corporate Governance Report
Business Ethics
The Board recognises that the Company is accountable
to its shareholders and, at the same time, seeks to
take into account the interests of all its stakeholders
including customers, suppliers and subcontractors,
employees, as well as the local community, and the
environment in which it operates.
The Group maintains core values of Honesty, Integrity,
Hard Work, Service and Quality and actively promotes
these values in all activities undertaken on behalf of
the Group.
Customers
The Group treats all its customers with the utmost
respect and seeks to be honest and fair in all
relationships with them. The Group provides its
customers with products and levels of customer service
of outstanding quality.
Suppliers and Subcontractors
Relationships with suppliers and subcontractors are
based on mutual respect, and the Group seeks to be
honest and fair in its relationships with suppliers and
subcontractors, and to honour the terms and conditions
of its agreements in place with such suppliers and
subcontractors.
The Group does not believe that the giving or accepting
of bribes is acceptable business conduct.
Employees
The Group recognises the value of its employees and
that the success of the Group is due to their efforts.
The Group respects the dignity and rights of all its
employees. The Group provides clean, healthy and safe
working conditions. An inclusive working environment
and a culture of openness are maintained by the regular
dissemination of information. The Group endeavours
to provide equal opportunities for all employees and
facilitates the development of employees’ skill sets.
A fair remuneration policy is adopted throughout the
Group.
The Group does not tolerate any sexual, physical
or mental harassment of its employees. The Group
operates an equal opportunities policy and specifically
prohibits discrimination on grounds of colour, ethnic
origin, gender, age, religion, political or other opinion,
disability or sexual orientation. The Group does not
employ underage staff.
Community
The Group seeks to be a good corporate citizen
respecting the laws of the countries in which it operates
and adhering to best social practice where feasible. It
aims to be sensitive to the local community’s cultural
social and economic needs.
Environment
The Group recognises that the nature of its business has
inherently limited impact on the environment. However,
every effort is made to ensure the environmental
impact of the Group’s operational practices is kept to
a minimum, including strict adherence to all statutory
requirements. To this end, a policy of minimising and
recycling waste and conserving energy is pursued
wherever it is viable to do so.
Relations with Shareholders
The Chief Executive Officer and Chief Finance Officer
have, where appropriate, had regular dialogue with
institutional investors and analysts to discuss strategic
and other issues and half-year results.
The Company engages in full and open communication
with both institutional and private investors and
responds promptly to all queries received. In
conjunction with the Company’s brokers and other
financial advisers all relevant news is distributed in a
timely fashion through appropriate channels to ensure
shareholders are able to access material information
on the Company’s progress. The Company’s website
has a section for investors which contains all publicly
available financial information and news on the
Company.
The Company’s Annual Report is circulated to all
shareholders on record and other interested parties, and
may also be requested from the Company’s registered
office. The Company also monitors the opinions of
shareholders and the research published by market
analysts insofar as this is practicable, and responds to
concerns when appropriate. The Company reports half
yearly on its performance, and gives presentations to
institutional investors and analysts and holds one-to-
one briefings with key shareholders. All shareholders
have at least 21 clear days’ notice of the Annual General
Meeting (AGM), which is held at a convenient location
with adequate facilities for the expected audience. The
Directors and Committee Chairmen are available for
questions at the AGM.
Going Concern
The Directors, having made suitable enquiries and
analysis of the accounts, consider 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 financial
statements.
Statement by Directors on Compliance with
the Provisions of the Combined Code
The Board considers that they have complied with the
provisions of The Combined Code, as far as practicable
and appropriate for a public Company of this size, in
accordance with the recommendations on corporate
governance of the Quoted Companies Alliance. The
specific provisions of The Combined Code not yet
adopted are A1.3, A3.3, A6.1, A7.2 and D1.1. It is the
intention of the Group to develop its procedures in
certain areas where it would be valuable to do so.
AIM Rule Compliance Report
Craneware plc is quoted on AIM and, as such under AIM
Rule 31 the Company is required to:
Have in place sufficient procedures, resources and controls
to enable its compliance with the AIM Rules;
Seek advice from its Nominated Advisor (“Nomad”)
regarding its compliance with the AIM Rules whenever
appropriate and take that advice into account;
Provide the Company's Nomad with any information it
reasonably requests in order for the Nomad to carry out
its responsibilities under the AIM Rules for Nominated
Advisors, including any proposed changes to the Board
and provision of draft notifications in advance;
Ensure that each of the Company's Directors accepts full
responsibility, collectively and individually, for compliance
with the AIM Rules; and
Ensure that each Director discloses without delay
all information which the Company needs in
order to comply with AIM Rule 17 (Disclosure of
Miscellaneous Information) insofar as that information
is known to the director or could with reasonable
diligence be ascertained by the director.
Approved by the Board of Directors and signed on behalf
of the Board by:
Craig Preston
Company Secretary
4 September 2009
Craneware plc
Annual Report 2009
16
Craneware plc
Annual Report 2009
17
Remuneration Committee Report
The composition of The Remuneration Committee is outlined in the Corporate Governance Report on page 15.
The Remuneration Committee is responsible for determining and reviewing the terms of appointment and the remuneration of executive Directors. The Committee takes
external advice, as appropriate, on remuneration issues and takes cognisance of major surveys covering all aspects of the pay and benefits of directors and senior executives in
many companies.
Policy
The Committee aims to provide base salaries and benefits which are competitive in the relevant external market and which take account of the Company and individual
performance thus enhancing the Company’s ability to recruit and retain the calibre of individuals required for its continuing business success. It is the policy of the Committee to
provide financial incentives and to reward superior performance over the medium and long term by creating opportunities to enable cash bonuses, benefits packages and share
incentives at all levels throughout the organisation. A large proportion of bonuses are dependent upon the achievement of targets and objectives.
Service Contracts
The executive directors and the non-executive directors are employed under individual employment arrangements or letters of appointment where appropriate, which provide
for three and one months notice respectively by either party.
G R Elliott was appointed Chairman for an initial term of three years commencing 10th August 2007.
Directors' Interests
The Directors’ interests in the ordinary shares of the Company are set out in the Directors’ Report on page 12.
Directors' Emoluments
For Directors who held office during the course of the year, emoluments for the year ending 30 June 2009 were as follows:
Executives
K Neilson
C T Preston
A M McDougall
Non-Executives
G R Elliott
N P Heywood
R Verni
Total
Salary/Fees ($)
Benefits ($)
Bonus ($)
Pension ($)
2009 Total ($)
2008 Total ($)
234,059
163,732
92,148
87,772
42,292
6,667
712
366
454
-
-
-
84,991
110,488
-
-
-
-
8,059
-
-
-
-
-
327,821
274,586
92,602
87,772
42,292
6,667
283,298
-
233,393
89,313
432,888
-
626,670
1,532
195,479
8,059
831,740
1,038,892
• Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire ordinary shares in the Company held by the Directors.
• Benefits represent payments for health insurance.
• Accrued bonuses are included in the above and were approved by the Remuneration Committee.
• With the exception of R Verni, all Directors are paid in UK Sterling; the amounts above are translated at the relevant average exchange rate for period being reported.
All options which were granted or exercised during the year, or are outstanding at 30th June 2009 are over ordinary shares. Options over ordinary shares described as “initial
options” were granted on the day following IPO and are subject to performance criteria. Options over Incentive Shares lapsed at IPO without any such options having been
exercised.
Craneware plc
Annual Report 2009
18
Remuneration Committee Report
Directors' interests in share options
Directors' share options as at 30th June 2009 were, in respect of Directors who held office during the course of the year:
Exercise Price
(cents)
Exercise Price
(pence)
Issue
Date
Held At
30/06/08
Granted
During Year
Exercised
During Year
Lapsed
During Year
Held At
30/06/09
K Neilson
Ordinary shares
(“initial options”)
A M McDougall
Ordinary shares
(“initial options”)
C T Preston
1.991
1.0
Sep-07
20,000
1.991
1.0
Sep-07
98,000
-
-
Ordinary shares
365.0
208.0
Sep-08
-
72,115
Employee share options as at 30th June 2009 were:
Exercise Price
(cents)
Exercise Price
(pence)
Issue
Date
Held At
30/06/08
Granted
During Year
Ordinary shares
0.007
0.0033
May-06
205,800
1.0
Sep-07
1,040,800
0.0033
187.0
211.0
212.0
Sep-07
May-08
Oct-08
Jan-09
50,100
40,600
-
-
14,424
30,000
-
-
-
-
Ordinary shares
(“initial options”)
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
1.991
0.007
369.0
355.3
310.0
On behalf of the Remuneration Committee:
Neil Heywood
Chairman of the Remuneration Committee
4 September 2009
-
-
-
-
20,000
(98,000)
-
-
72,115
Exercised
During Year
(187,800)
Lapsed
During Year
Held At
30/06/09
-
18,000
-
-
-
-
-
(130,500)
910,300
-
-
-
-
50,100
40,600
14,424
30,000
Craneware plc
Annual Report 2009
19
Independent Auditors' Report to the members of Craneware plc
Respective responsibilities of
directors and auditors
Opinion on financial statements
In our opinion:
As explained more fully in the Directors’ Responsibilities
Statement set out on page 13, the directors are
responsible for the preparation of the financial
statements and for being satisfied that they give a true
and fair view. Our responsibility is to audit the financial
statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing
Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared
for and only for the company’s members as a body in
accordance with Sections 495 and 496 of the Companies
Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this
report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements
are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the group’s
and parent company’s circumstances and have been
consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates
made by the directors; and the overall presentation of
the financial statements.
the financial statements give a true and fair view of the
state of the group’s and of the parent company’s affairs as
at 30 June 2009 and of the group’s profit and group’s and
company’s Cashflows for the year then ended;
the group financial statements have been properly prepared
in accordance with IFRSs as adopted by the European Union;
the parent company financial statements have been
properly prepared in accordance with IFRSs as adopted by
the European Union and as applied in accordance with the
provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Opinion on other matters prescribed
by the Companies Act 2006
In our opinion the information given in the Directors’
Report for the financial year for which the financial
statements are prepared is consistent with the financial
statements.
Matters on which we are required
to report by exception
We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
the parent company financial statements are not in
agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law
are not made; or
we have not received all the information and
explanations we require for our audit
Caroline Roxburgh
Senior Statutory Auditor
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Edinburgh
4 September 2009
We have audited the group and parent company
financial statements of Craneware plc for the year
ended 30 June 2009 which comprise the Consolidated
Income Statement, Statement of Changes in Equity,
the Consolidated and Company Balance Sheets, the
Group and Company Cashflow Statements and the
related notes. The financial reporting framework that
has been applied in their preparation is applicable
law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union, as applied
in accordance with the provisions of the Companies Act
2006.
Craneware plc
Annual Report 2009
20
Consolidated Income Statement for the year ended 30 June 2009
Revenue
Cost of sales
Gross profit
Net operating expenses
Operating profit
Analysed as:
Profit before share-based payments, depreciation and amortisation
Share-based payments
Depreciation of plant and equipment
Amortisation of intangible assets
Finance income
Profit before taxation
Tax charge on profit on ordinary activites
Profit for the year
The results relate to continuing operations.
Notes
2009
$'000
2008
$'000
4
5
6
9
10
11
22,993
(1,381)
21,612
18,676
(954)
17,722
(16,262)
(14,141)
5,350
3,581
5,812
(82)
(204)
(176)
520
5,870
(1,422)
4,448
4,516
(634)
(183)
(118)
607
4,188
(899)
3,289
Earnings per share for the period attributable to equity holders
- Basic ($ per share)
- Diluted ($ per share)
Notes
13a
13b
2009
0.177
0.170
2008
0.137
0.130
Craneware plc
Annual Report 2009
21
Statements of Changes in Equity for the year ended 30 June 2009
Notes
Share Capital
$'000
Share Premium Account
$'000
Other Reserves
$'000
Retained Earnings
$'000
2,477
(550)
Group
At 1 July 2007
Share split
Allotment pursuant to IPO
Share-based payments
New shares issued in the year
Options exercised
Retained profit for the year
At 30 June 2008
Share-based payments
Options exercised
Retained profit for the year
Dividends
At 30 June 2009
Company
At 30 June 2007
Share split
Allotment pursuant to IPO
Share-based payments
New shares issued in the year
Options exercised
Retained profit for the year
At 30 June 2008
Share-based payments
Options exercised
Retained profit for the year
Dividends
At 30 June 2009
1
386
14
-
86
22
-
509
-
3
-
-
1,823
(386)
(14)
-
7,852
(22)
-
9,253
-
(3)
-
-
-
-
564
-
-
-
3,041
82
-
-
-
Total
$'000
3,751
-
-
1,121
7,938
-
3,289
16,099
45
-
-
-
557
-
-
3,289
3,296
(37)
-
4,448
4,448
(1,917)
(1,917)
512
9,250
3,123
5,790
18,675
1
386
14
-
86
22
-
509
-
3
-
-
1,823
(386)
(14)
-
7,852
(22)
-
9,253
-
(3)
-
-
1,793
(430)
3,187
-
-
402
-
-
-
2,195
31
-
-
-
-
-
61
-
-
2,560
2,191
38
-
-
-
463
7,938
-
2,560
14,148
69
-
4,117
4,117
(1,917)
(1,917)
512
9,250
2,226
4,429
16,417
12
12
Other reserves relate to share-based payments and are detailed in Note 1, accounting policies, on page 28, and these reserves are not available for distribution.
Craneware plc
Annual Report 2009
22
Consolidated Balance Sheet as at 30 June 2009
ASSETS
Non-Current Assets
Plant and equipment
Intangible assets
Deferred tax
Trade and other receivables
Current Assets
Trade and other receivables
Cash and cash equivalents
Total Assets
EQUITY & LIABILITIES
Non-Current Liabilities
Deferred income
Current Liabilities
Deferred income
Trade and other payables
Total Liabilities
Equity
Called up share capital
Share premium account
Other reserves
Retained earnings
Total Equity
Total Equity and Liabilities
Notes
2009
$'000
2008
$'000
14
15
18
17
17
21
22
19
345
1,206
718
25
415
794
1,075
75
2,294
2,359
5,187
26,169
31,356
33,650
4,685
21,112
25,797
28,156
124
124
444
444
10,964
3,887
9,853
1,760
14,851
11,613
14,975
12,057
512
9,250
3,123
5,790
509
9,253
3,041
3,296
18,675
16,099
33,650
28,156
The financial statements on pages 21 to 44 were approved and authorised for issue by the board of directors on 4 September 2009 and were signed on its behalf by:
Keith Neilson
Director
Craig Preston
Director and Company Secretary
Craneware plc
Annual Report 2009
23
Company Balance Sheet as at 30 June 2009
ASSETS
Non-Current Assets
Investment in subsidiary undertaking
Plant and equipment
Intangible assets
Deferred Tax
Trade and other receivables
Current Assets
Trade and other receivables
Cash and cash equivalents
Total Assets
EQUITY & LIABILITIES
Non-Current Liabilities
Deferred income
Current Liabilities
Deferred income
Trade and other payables
Total Liabilities
Equity
Called up share capital
Share premium account
Other reserves
Retained earnings
Total Equity
Total Equity and Liabilities
Notes
2009
$'000
2008
$'000
16
14
15
18
17
17
21
22
19
-
250
1,198
157
25
-
315
785
281
75
1,630
1,456
4,584
23,959
28,543
30,173
4,437
20,336
24,773
26,229
124
124
444
444
10,964
2,668
9,853
1,784
13,632
11,637
13,756
12,081
512
9,250
2,226
4,429
509
9,253
2,195
2,191
16,417
14,148
30,173
26,229
The financial statements on pages 21 to 44 were approved and authorised for issue by the board of directors on 4 September 2009 and signed on its behalf by:
Keith Neilson
Director
Craig Preston
Director and Company Secretary
Craneware plc
Annual Report 2009
24
Cashflow Statements for the year ended 30 June 2009
Cash flows from operating activities
Cash generated from operations
Interest received
Tax paid
Net cash from operating activities
Cash flows from investing activities
Purchase of plant and equipment
Capitalised intangible assets
Net cash used in investing activities
Cash flows from financing activities
Dividends paid to company shareholders
Net IPO proceeds
Net cash (used)/from in financing activities
Group
Company
2009
$'000
2008
$'000
2009
$'000
2008
$'000
Notes
20
7,378
520
(202)
7,696
(134)
(588)
(722)
4,987
607
(1,495)
4,099
(111)
(478)
(589)
6,145
4,376
520
(464)
6,201
607
(1,168)
3,815
(78)
(583)
(661)
(59)
(474)
(533)
-
7,938
7,938
12
(1,917)
-
(1,917)
-
(1,917)
7,938
7,938
-
(1,917)
Net increase in cash and cash equivalents
Cash and cash equivalents at the start of the year
5,057
21,112
11,448
9,664
3,623
11,220
20,336
9,116
Cash and cash equivalents at the end of the year
26,169
21,112
23,959
20,336
Craneware plc
Annual Report 2009
25
Notes to the Financial Statements
General Information
Craneware plc (the Company) is a public limited
company incorporated in Scotland. The Company has a
primary listing on the AIM stock exchange. The address
of its registered office and principal place of business is
disclosed on page 45 of the annual report. The principal
activity of the Company is described in the directors’
report.
Basis of preparation
The financial statements are prepared in accordance
with International Financial Reporting Standards,
as adopted by the European Union (IFRS), IFRIC
interpretations and with those parts of the Companies
Act 2006 applicable to companies reporting under IFRS.
The financial statements have been prepared under
the historic cost convention. A summary of the more
important accounting policies is 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 applicable.
The preparation of financial statements in conformity
with IFRS requires the use of estimates and assumptions
that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting
period. Although these estimates are based on
management’s best knowledge of the amount, event or
actions, actual results ultimately may differ from those
estimates.
The Company and its subsidiary undertaking are
referred to in this report as the Group.
1 Principal accounting policies
The principal accounting policies adopted in the
preparation of these accounts are set out below.
These policies have been consistently applied, unless
otherwise stated.
Reporting Currency
The Directors consider that as the Group’s revenues
are primarily denominated in US dollars the 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 ($1.6452/£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.
New Standards, amendments and
interpretations effective in the year
IAS 39, ‘Financial instruments: Recognition and
measurement’ and IFRS 7, ‘Financial instruments:
Disclosure’, on the ‘Reclassification of financial assets’
(both effective 1 July 2008*) amendments that permit
reclassification of some financial instruments out of
the fair-value-through-profit-or-loss category and out
of the available-for-sale category. These amendments
have had no impact on the Group financial statements.
IFRIC 9, ‘Re-assessment of embedded derivatives’,
clarifies certain aspects of the treatment of embedded
derivatives under IAS 39, ‘Financial Instruments:
Recognition and Measurement’ (if endorsed: effective
for accounting periods ending 30 June 2009). This
interpretation will have no impact on the Group
financial statements.
IFRIC 12, ‘Service concession arrangements’ (effective
1 January 2008*), applies to contractual arrangements
whereby a private sector operator participates in the
development, financing, operations and maintenance
of infrastructure for public sector services. This
amendment has had no impact on the Group financial
statements.
IFRIC 13, ‘Customer loyalty programmes’ (effective 1
July 2008*), clarifies that where goods or services are
sold together with a customer loyalty incentive, the
arrangement is a multi-element arrangement and the
consideration receivable from the customer is allocated
between components of the arrangement using fair
values. This clarification has had no impact on the Group
financial statements.
IFRIC 14, ‘IAS 19 – The limit on a defined benefit asset,
minimum funding requirements and their interaction
(effective 1 January 2008*), provides guidance on
assessing the limit in IAS 19 on the amount of the
surplus that can be recognised as an asset. It also
explains how the pension asset or liability may be
affected by a statutory or contractual minimum funding
requirement. This interpretation has had no impact on
the Group financial statements.
New Standards, amendments and
interpretations not yet effective
IFRS 1, ‘First time adoption of IFRS’ and IAS 27,
‘Consolidated and separate financial statements’
(effective 1 July 2009*), amendment to allow first-time
adopters to use a deemed cost of either fair value or the
carrying amount under previous accounting practice
to measure initial cost of investment in subsidiaries,
jointly controlled entities and associates in the separate
financial statements. There is no anticipated impact on
the Group financial statements of this amendment.
IFRS 2, ‘Share-based payments’ (effective 1 January
2009*), amendment relating to vesting conditions and
cancellations. There is no anticipated impact on the
Group financial statements of this amendment.
IFRS 3, ‘Business combinations’ and the consequential
amendments to IAS 27, ‘Consolidated and separate
financial statements’ (if endorsed: both effective 1 July
2009*), a comprehensive revision and amendment on
applying the acquisition method. There is no anticipated
material impact on the Group financial statements
should these be endorsed although any future
acquisition costs will be required to be expensed.
IFRS 7, ‘Financial instruments: Disclosure’ (if endorsed:
effective 1 January 2009*), an amendment requiring
enhanced disclosures in respect of fair value
measurement and reinforces existing principles about
liquidity risk. There is no material impact anticipated on
the Group financial statements should this amendment
be endorsed, although it is likely to result in some
enhanced disclosure requirements.
IFRS 8, ‘Operating segments’ (effective 1 January
2009*), replaces IAS 14, ‘Segment reporting’. The
new standard requires a ‘managed approach’, under
which segment information is presented on the same
basis as that used for internal reporting purposes.
There is no anticipated impact on the Group financial
statements although this will be continually assessed
by management as reportable operating segments will
be subject to change based on amendments to internal
reporting.
IAS 1, ‘Presentation of financial statements’ (effective
1 January 2009*). a revision of the standard that will
affect the way financial statements are presented.
Management is assessing the affects of the revised
disclosure requirements of this standard; although no
material impact on the Group financial statements is
anticipated.
Craneware plc
Annual Report 2009
26
Notes to the Financial Statements
IAS 23, ‘Borrowing costs’ (effective 1 January 2009*),
is amended to remove the option to immediately
expense borrowing costs that are directly attributable
to a qualifying asset. This amendment will not have any
impact on the Group financial statements.
IAS 32, ‘Financial instruments: Presentation’ and IAS
1, ‘Presentation of financial statements on puttable
financial instruments and obligations arising on
liquidation’ (effective 1 January 2009*). These
amendments will not have any anticipated impact on
the Group financial statements.
IAS 39, ‘Financial instruments: Recognition and
measurement’ (if endorsed: effective 1 July 2009*),
to clarify two hedge accounting issues: inflation in a
financial hedged item and one-sided risk in a hedged
item. There is no anticipated impact on the Group
financial statements should this amendment be
endorsed.
IFRIC 15, ‘Agreements for construction of real estates’
(effective 1 January 2009*), provides additional clarity
in applying either ‘Revenue’ or ‘Construction contracts’
to specific contracts. This interpretation will have no
anticipated impact on the Group financial statements.
IFRIC 16, ‘Hedges of a net investment in a foreign
operation’ (effective 1 October 2008*), provides
additional clarification on the accounting treatment in
respect of net investment hedging. This interpretation
will have no anticipated impact on the Group financial
statements.
IFRIC 17, ‘Distributions on Non-cash Assets to Owners’
(effective 1 July 2009*), a clarification of recognition,
measurement and disclosure. This interpretation will
have no impact on the Group financial statements.
IFRIC 18, ‘Transfers of assets from customers’ (effective
1 July 2009*), a clarification of the accounting
arrangements where an item of property, plant and
equipment which is provided by the customer is used to
provide an ongoing service. This interpretation will have
no impact on the Group financial statements.
The directors anticipate that the future adoption of
these standards, amendments and interpretations
(where relevant to the Group) will have no material
financial impact on the financial statements of the
Group. None of the above standards, amendments or
interpretations have been adopted early.
*Effective for accounting periods starting on or after this date.
Basis of consolidation
The consolidated income statement and balance
sheet include the accounts of the Parent Company
and its subsidiary. Intra Group revenue and profits
are eliminated on consolidation and all sales and
profit figures relate to external transactions only. As
permitted by Section 408(4) of the Companies Act 2006,
the income statement of the Parent Company is not
presented.
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 comprises the value of software license
sales, installation, training, maintenance and support
services, and consulting engagements. Revenue
is recognised when (i) persuasive evidence of an
arrangement exists; (ii) delivery has occurred or services
have been rendered; (iii) the sales price has been fixed
and determinable; and (iv) collectability is reasonably
assured.
For software arrangements with multiple elements,
revenue is recognised dependent on whether vendor-
specific objective evidence (“VSOE”) of fair value
exists for each of the elements. VSOE is determined
by reference to sales to external customers made on a
stand-alone basis. Where there is no VSOE revenue is
recognised rateably over the full term of each contract.
Revenue from standard license products which are not
modified to meet the specific requirements of each
customer is recognised when the risks and rewards
of ownership of the product are transferred to the
customer.
Revenue from installation and training is recognised
as services are provided, and from consulting
engagements when all obligations under the consulting
agreement have been fulfilled.
Software sub licensed to third parties is recognised
in accordance with the underlying contractual
agreements. Where separate services are delivered,
revenue is recognised on delivery of the service.
The excess of amounts invoiced and future invoicing
over revenue recognised is included in deferred Income.
If the amount of revenue recognised exceeds the
amounts invoiced the excess amount is included within
accounts receivable.
Plant and Equipment
All equipment and fixtures are stated at historical cost
less depreciation. Depreciation is provided to write off
the cost less estimated residual values of tangible fixed
assets over their expected useful lives. It is calculated at
the following rates:
Computer equipment — 33% straight line
Tenants improvements — 20% straight line
— 25% straight line
Office furniture
Where the carrying amount of an asset is greater than
its estimated recoverable amount, it is written down
immediately to its recoverable amount.
Gains and losses on disposal of assets are included in
operating profit.
Repairs and maintenance are charged to the income
statement during the financial year in which they are
incurred. The cost of major renovations is included in
the carrying amount of the assets when it is probable
that future economic benefits in excess of the originally
assessed standard of performance of the existing asset
will flow to the Group.
Acquired Intangible Assets
Computer software and licensed to-use technology are
capitalised at cost and amortised on a straight-line
basis over a prudent estimate of the time that the Group
is expected to benefit from them, which is typically
three to five years.
Intangible Assets – 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. Staff costs and specific third party costs
involved with the development of the software are
included within amounts capitalised.
Impairment Tests
The Group considers whether there is any indication
that non-current assets are impaired on an annual basis.
If there is such an indication, the Group carries out an
impairment test by measuring the assets’ recoverable
amount, which is the higher of the assets’ fair value less
costs to sell and their value in use. If the recoverable
amount is less than the carrying amount an impairment
loss is recognised.
Craneware plc
Annual Report 2009
27
Employee Benefits
The Group operates a defined contribution Stakeholder
Pension Scheme as described in Section 3 of Welfare
Reform and Pensions Act 1999. Private medical
insurance is also offered to every employee. Amounts
payable in respect to these benefits are charged to the
income statement as they fall due.
Share-Based Payments
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.
The share-based payments charge is included in net
operating expenses and is also included in ‘Other
reserves'.
Dividends
Dividends are recorded in the accounts in the year in
which they are approved by the shareholders. Interim
dividends are recognised as a distribution when paid.
Notes to the Financial Statements
Taxation
The charge for taxation is based on the profit for
the period and takes into account deferred taxation.
Taxation is computed using the liability method. Under
this method, deferred tax assets and liabilities are
determined based on temporary differences between
the financial reporting and tax bases of assets and
liabilities and are measured using enacted rates and
laws that will be in effect when the differences are
expected to reverse. The deferred tax is not accounted
for if it arises from initial recognition of an asset
or liability in a transaction that at the time of the
transaction affects neither accounting nor taxable profit
or loss. Deferred tax assets are recognised to the extent
that it is probable that future taxable profits will arise
against which the temporary differences will be utilised.
Deferred tax is provided on temporary differences
arising on investments in subsidiaries except where
the timing of the reversal of the temporary difference
is controlled by the Group and it is probable that the
temporary difference will not reverse in the foreseeable
future. Deferred tax assets and liabilities arising in the
same tax jurisdiction are offset.
In the UK and the US, the Group is entitled to a tax
deduction for amounts treated as compensation on
exercise of certain employee share options under each
jurisdiction’s tax rules. As explained under “Share-based
payments” below, a compensation expense is recorded
in the Group’s income statement 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
income statement. 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.
Investments in subsidiary
The investment in subsidiary is stated at cost less any
provision for impairment.
Operating leases
The costs of operating leases are charged on a straight
line basis over the duration of the leases in arriving at
operating profit.
Grants
Grants are recognised at their fair value where there is a
reasonable assurance that the grant will be received and
the Company will comply with all conditions pertaining
to the grant. Government grants relating to costs are
deferred and recognised in the income statement over
the period necessary to match them with the costs that
they are intended to compensate.
Financial assets
The Group classifies its financial assets in the following
categories: (i) at fair value through profit and loss,
(ii) loans and receivables and (iii) available for sale.
The classification depends on the purpose for which
the financial assets were acquired. Management
determines the classification of its financial assets at
initial recognition. At each balance sheet date included
in the financial information, the Group held only items
classified as loans and receivables.
Loans and receivables are non-derivative financial
assets with fixed or determinable payments that are not
quoted in an active market. They are included in current
assets, except for maturities greater than 12 months
after the balance sheet date. These are classified as non-
current assets. Loans and receivables are classified as
‘trade and other receivables’ in the balance sheet.
Trade receivables are recognised initially at fair value
and subsequently measured at amortised cost using
the effective interest method, less provision for
impairments. A provision for impairment of trade
receivables is established when there is objective
evidence that the Group will not be able to collect
all amounts due according the original terms of
the receivables. Significant financial difficulties of
the debtor, probability that the debtor will enter
bankruptcy or financial reorganisation, and default or
delinquency in payments (more than 90 days overdue)
are considered indicators that the trade receivable is
impaired. The amount of the provision is the difference
between the asset’s carrying amount and the present
value of the estimated future cash flows, discounted at
the original effective interest rate. The carrying amount
of the asset is reduced through the use of an allowance
account, and the amount of the loss is recognised in
the income statement within ‘net operating expenses’.
When a trade receivable is uncollectible, it is written
off against the allowance account for trade receivables.
Subsequent recoveries of amounts previously written
off are credited against net operating expenses in the
income statement.
Financial liabilities
The only financial liability held by the Group at each
balance sheet date included in the financial information
is trade payables. Trade payables are recognised initially
at fair value and subsequently measured at amortised
cost using the effective interest method.
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 cash flow
statement, cash and cash equivalents comprise of cash
on hand, deposits held with banks and short term high
liquid investments.
Craneware plc
Annual Report 2009
28
Notes to the Financial Statements
2 Critical accounting estimates and
3 Financial risk management
judgements
The preparation of financial statements in accordance
with generally accepted accounting principles 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:-
Provision for impairment of trade receivables:-
the Group assesses trade receivables for impairment
which requires the directors to estimate the likelihood of
payment forfeiture by customers.
Revenue recognition:-
the Group assesses the economic benefit that will
flow from future milestone payments in relation to
sub-licensing partnership arrangements. This requires
the directors to estimate the likelihood of the Group, its
partners, and sub-licensees meeting their respective
commercial milestones and commitments.
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 applicability
of its transfer pricing policy.
Share-based payments:-
the Group requires to make a charge to reflect the value
of share-based equity-settled payments in the period.
At each grant of options and balance sheet date, the
directors are required to consider whether there has been
a change in the fair value of share options due to factors
including number of expected participants.
Financial risk factors
The Group’s activities expose it to a variety of financial
risks: market risk (primarily currency risk and cash flow
interest rate risk), credit risk and liquidity risk.
Risk management is carried out under policies approved
by the board of directors. The board provides written
principles for overall risk management, as well as
written policies covering specific areas, such as foreign
exchange risk, interest rate risk and credit risk.
(a) Market risk
(i) Foreign exchange risk
Foreign exchange risk arises when commercial
transactions or recognised assets or liabilities are
denominated in a currency that is not the entity’s
functional currency. The Group operates primarily in
the US however a significant proportion of costs are
incurred in Sterling.
Management are therefore required to continually
assess the Group’s foreign exchange risk against the
Group’s functional currency, and whether any form of
hedge should be entered into. The Group’s policy has not
been to enter into hedging arrangements, although the
Board continues to assess the appropriateness of this
approach.
The directors believe that a 10% change in the value
of Sterling relative to the Dollar would impact post-
tax profits by approximately $600,000 as a result of
foreign exchange gains/losses on Sterling denominated
transactions and the translation of Sterling
denominated current liabilities.
(ii) Cash flow and interest rate risk
The Group has no significant interest-bearing assets or
liabilities, other than cash held on deposit at variable
rates. The directors believe that a 25 basis point move
in interest rates would, with all variables held constant,
alter post-tax profit for the year in the region of $60,000
higher/lower respectively.
(b) Credit risk
Credit risk is managed on a Group basis. Credit risk
arises from cash and cash equivalents and trade
receivables. In order to minimise the Group’s exposure
to risk, all cash deposits are placed with reputable banks
and financial institutions. The Group’s exposure to trade
receivables is reduced due to contractual terms which
require installation, training, annual licensing and
support fees, to be invoiced annually in advance.
(c) Liquidity risk
Management review the liquidity position of the Group
to ensure that sufficient cash is available to meet the
underlying needs of the Group as they fall due for
payment.
The table below analyses the Group’s financial liabilities
which will be settled on a net basis into relevant
maturity grouping based on the remaining period from
the balance sheet date to the contractual maturity date.
The amounts disclosed in the table are the contractual
undiscounted cash flows
There is no difference between the undiscounted
liabilities and the amounts shown in Note 22 as the
Group's financial liabilities are all short term in nature.
Capital risk management
The Group is cash generative and trading is funded
internally. As a result, management do not consider
capital risk to be significant for the Group. Contracts are
normally billed annually in advance. Assuming timely
receivables collection, the Group will have favourable
movements from working capital by generating cash
ahead of revenue recognition. Consequently funds are
retained in the business to finance future growth, either
organically or by acquisition.
4 Revenue
The Group revenue is derived entirely from the sale,
supply, installation and ongoing support of software
products to hospitals within the United States of
America and is deemed to have no other segments.
At 30 June 2008
Trade Payables
At 30 June 2009
Trade Payables
Less than 1 year $'000
Between 1 & 2 years $'000
Between 2 & 5 years $'000
257
551
-
-
-
-
Over 5 years
$'000
-
-
Total
$'000
257
551
Craneware plc
Annual Report 2009
29
Notes to the Financial Statements
5 Net operating expenses
Net operating expenses are made up as follows:-
Sales and marketing expenses
Client Servicing
Research and development
Administrative expenses
Share-based payments
Depreciation of plant and equipment
Amortisation of intangible assets
Exchange loss
Net operating expenses
6 Operating profit
The following items have been included in arriving at operating profit:-
Staff costs
Depreciation of plant and equipment
Amortisation of intangible assets
Impairment of trade receivables
Purchased licences expensed
Operating lease rents for premises
Services provided by the Group's auditor
During the year the Group obtained the following services from the Group's auditors as detailed below:-
Statutory audit - Group
Tax compliance and other tax services
Employee incentive advice
Other assurance services
Reporting accountants at IPO
7 Grant
Grants received / receivable in the year
2009
$'000
6,110
4,017
2,960
2,662
82
204
176
51
2008
$'000
4,857
3,359
2,623
2,319
634
183
118
48
16,262
14,141
Notes
8
2009
$'000
10,247
204
176
247
233
232
2009
$'000
60
59
-
4
-
123
2009
$'000
-
2008
$'000
9,217
183
118
110
73
256
2008
$'000
96
64
90
116
356
722
2008
$'000
399
The grant receivable in the prior year related to an application made by the Group for a RSA grant. The criteria to qualify for this consisted of adding to existing development and
support staff. This grant was not shown separately on the income statement but reduced the prior year net operating expenses.
Craneware plc
Annual Report 2009
30
Notes to the Financial Statements
8 Staff costs
The average number of persons employed by the Group during the year, excluding non-executive directors, is analysed below:-
Sales and distribution
Client Servicing
Research and development
Administration
Employment costs of all employees excluding non-executive directors:-
Wages and salaries
Social security costs
Post employment benefits
Share-based payments
Total direct costs of employment
Highest paid director:-
Salary and short-term employee benefits
Post employment benefits
Share-based payments
2009
Number
26
40
35
16
117
2009
$'000
9,211
929
25
82
10,247
320
8
3
331
2008
Number
21
31
31
17
100
2008
$'000
7,760
803
20
634
9,217
233
-
53
286
Director’s emoluments are detailed in the Remuneration Committee Report on page 18 and key management compensation is given in the Related Party Transaction note on
pages 43 and 44. Retirement benefits are accruing to 1 of the executive directors under a defined contribution scheme (2008: 1).
9 Share-based payments
The Group has an equity-settled share-based payment scheme, whereby options over shares in Craneware plc can be granted to employees and directors. A charge is shown in
the income statement of $81,847 (2008: $633,554) as detailed in Note 8 above.
Options issued under the 2006 Share Options Plan over Ordinary shares and Incentive shares were granted at par and have been adjusted to reflect the 299 for 1 share split.
Options over Ordinary shares vested on admission to AIM on 13 September 2007 and became fully exercisable on that date, whilst options over Incentive shares lapsed at this
event. Outstanding options lapse upon leaving employment or if not exercised within 10 years from the date of grant. Directors and employees interests in share options are set
out in the Remuneration Committee Report on page 19.
The market value of share options exercised during the year ranged from $3.14 (£2.20) to $3.86 (£2.267). The market value at 30 June 2009 was $3.85 (£2.34).
Under the 2007 Share Options Plan, options over a maximum of 1,400,000 ordinary shares (“initial options”) were granted on 14 September 2007 shortly after admission to
AIM with an exercise price of $0.02 (£0.01) per share. These options are subject to performance targets, will not normally vest until 1 October 2010, and will lapse upon leaving
employment or 30 April 2011.
Other options over ordinary shares under the 2007 Share Options Plan may be granted with an exercise price no less than the market value of the Ordinary shares on the date of
grant, and in the case of the directors of the Company will be granted subject to sufficiently stretching performance targets. These options will be subject to time based vesting
and will not normally be exercisable before the third anniversary of grant. Such options will lapse on the tenth anniversary of grant.
The fair value of options granted was estimated on the date of grant using the Black-Scholes option pricing model as appropriately adjusted. The Company estimates the number
of options likely to vest by reference to the Group’s staff retention rate, and expenses the fair value over the relevant vesting period. Volatility has been estimated by reference to
similar companies whose shares are traded on a recognised stock exchange.
Craneware plc
Annual Report 2009
31
Notes to the Financial Statements
9 Share-based payments (continued)
The assumptions for each option grant were as follows:
Date of Grant
05-Jan-09
21-Oct-08
08-Sep-08
02-May-08
14-Sep-07
13-Sep-07
16-Mar-07
26-Oct-06
11-May-06
Share price at date of grant
$3.10
$3.55
$3.65
$3.69
$2.60
$2.60
$2.06*
$1.97*
$1.87*
Share price at date of grant
£2.12
£2.11
£2.08
£1.87
£1.28
£1.28
£1.06*
£1.04*
£0.99*
Vesting period (years)
Expected volatility
Risk free rate
Dividend yield
Options over Ordinary shares
Exercise price
Exercise price
Number of employees
Shares under option
Fair value per option
Options over Incentive shares
Exercise price
Exercise price
Number of employees
Shares under option
Weighted average fair value per option
* At directors' valuation prior to IPO.
3.00
40%
3.00
40%
3.00
40%
3.00
40%
3.04
40%
0.00
40%
0.45
40%
0.84
40%
1.30
40%
2.10% 3.82%
4.41%
5.00%
5.75%
5.75%
5.25%
4.75%
4.50%
1.5%
1.5%
1.5%
1%
1%
1%
2%
2%
2%
$3.10
$3.55
$3.65
$3.69
$0.02
0.007¢
0.007¢
0.007¢
0.007¢
£2.12
£2.11
£2.08
£1.87
£0.01 0.0033p
0.0033p 0.0033p
0.0033p
1
1
1
1
84
1
19
5
48
30,000
14,424
72,115
40,600 1,400,000
50,100
56,700
16,200 1,412,700
$0.85
$1.01
$1.67
$1.11
$0.95
$2.60
$2.04
$1.93
$1.82
0.001¢
0.001¢
0.001¢
0.0003p 0.0003p
0.0003p
18
5
42
147,900
15,000 1,104,000
$0.004
$0.037
$0.131
The following options have been granted over Ordinary shares and Incentive shares:
2009
Options Number
2008
Options Number
2006 Share Option Plan:-
Ordinary share options (0.0033p exercise price)
Outstanding at 1 July
Granted
Forfeited
Exercised
Outstanding at 30 June
Incentive share options (0.0003p exercise price)
Outstanding at 1 July
Granted
Forfeited
Outstanding at 30 June
Craneware plc
Annual Report 2009
32
255,900
-
-
(187,800)
68,100
-
-
-
-
1,480,800
50,100
(191,580)
(1,083,420)
255,900
1,266,900
-
(1,266,900)
-
Notes to the Financial Statements
9 Share-based payments
The following options have been granted over Ordinary shares and Incentive shares:
2007 Share Option Plan:-
Initial options of ordinary shares (£0.01 exercise price)
Outstanding at 1 July
Granted
Forfeited
Exercised
2009
Options Number
2008
Options Number
1,158,800
-
(228,500)
-
-
1,400,000
(241,200)
-
Outstanding at 30 June
930,300
1,158,800
Ordinary share options (£1.87 exercise price)
Outstanding at 1 July
Granted
Forfeited
Outstanding at 30 June
Ordinary share options (£2.08 exercise price)
Outstanding at 1 July
Granted
Forfeited
Outstanding at 30 June
Ordinary share options (£2.11 exercise price)
Outstanding at 1 July
Granted
Forfeited
Outstanding at 30 June
Ordinary share options (£2.12 exercise price)
Outstanding at 1 July
Granted
Forfeited
Outstanding at 30 June
10 Finance Income
Deposit interest receivable
Other interest receivable
Total interest receivable
40,600
-
-
40,600
-
72,115
-
72,115
-
14,424
-
14,424
-
30,000
-
30,000
2009
$'000
472
48
520
-
40,600
-
40,600
-
-
-
-
-
-
-
-
-
-
-
-
2008
$'000
607
-
607
Craneware plc
Annual Report 2009
33
Notes to the Financial Statements
11 Tax on profit on ordinary activities
Profit on ordinary activities before tax
Current tax
Corporation tax on profits of the period
Foreign exchange on taxation in the year
Adjustments for prior years
Total current tax charge
Deferred tax
Origination & reversal of timing differences
Adjustments for prior periods
Total deferred tax charge
Tax on profit on ordinary activities
2009
$'000
5,870
1,620
24
(543)
1,101
122
199
321
1,422
2008
$'000
4,188
701
-
(8)
693
206
-
206
899
The difference between the current tax charge on ordinary activities for the year, reported in the income statement, 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 28% (2008: 29.5%)
Effects of
Adjustment in respect of prior years
Current tax
Deferred tax
State tax
Additional US tax on profit/(losses) 34% (2008: 34%)
Foreign exchange
Expenses not deductible for tax purposes
Non-taxable income
Tax deduction on share plan charges
Adjustment to rate at which deferred tax will unwind
Total tax charge
12 Dividends
The dividends paid during the year were as follows:-
Final dividend, re 30 June 2008 - 4.96 cents (3.1 pence)/share
Interim dividend, re 30 June 2009 - 2.66 cents (1.8 pence)/share
Total dividends paid to company shareholders in the year
1,644
1,235
(543)
199
43
51
24
17
-
(13)
-
1,422
2009
$'000
1,172
745
1,917
(8)
31
49
(40)
-
79
(61)
(375)
(11)
899
2008
$'000
-
-
-
The proposed final dividend is subject to approval by the shareholders at the Annual General Meeting and has not been included as a
liability in these accounts.
Craneware plc
Annual Report 2009
34
Notes to the Financial Statements
13 Earnings per share
(a) Basic
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number
of shares in issue during the year.
Profit attributable to equity holders of the Company ($'000)
Weighted average number of ordinary shares in issue ('000)
Basic earnings per share ($ per share)
(b) Diluted
2009
4,448
25,187
0.177
2008
3,289
23,964
0.137
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 share options granted to
directors and employees under the share option scheme (Note 9).
Profit attributable to equity holders of the Company ($'000)
Weighted average number of ordinary shares in issue ('000)
Adjustment for Share options ('000)
Weighted average number of ordinary shares for diluted
earnings per share ('000)
Basic earnings per share ($ per share)
2009
4,448
25,187
1,007
26,194
0.170
2008
3,289
23,964
1,408
25,372
0.130
Craneware plc
Annual Report 2009
35
Notes to the Financial Statements
14 Plant and equipment
Group
Cost
At 1 July 2008
Additions
At 30 June 2009
Depreciation
At 1 July 2008
Charge for the year
At 30 June 2009
Net book value at 30 June 2009
Cost
At 1 July 2007
Additions
At 30 June 2008
Depreciation
At 1 July 2007
Charge for the year
At 30 June 2008
Net book value at 30 June 2008
Company
Cost
At 1 July 2008
Additions
At 30 June 2009
Depreciation
At 1 July 2008
Charge for the year
At 30 June 2009
Net book value at 30 June 2009
Cost
At 1 July 2007
Additions
At 30 June 2008
Depreciation
At 1 July 2007
Charge for the year
At 30 June 2008
Net book value at 30 June 2008
Craneware plc
Annual Report 2009
36
Computer Equipment
$'000
Office Furniture
$'000
Tenants Improvements
$'000
611
98
709
464
106
570
139
528
83
611
370
94
464
147
370
43
413
292
58
350
63
328
42
370
237
55
292
78
239
26
265
138
48
186
79
213
26
239
98
40
138
101
173
25
198
103
35
138
60
158
15
173
75
28
103
70
323
10
333
156
50
206
127
321
2
323
107
49
156
167
323
10
333
156
50
206
127
321
2
323
107
49
156
167
Total
$'000
1,173
134
1,307
758
204
962
345
1,062
111
1,173
575
183
758
415
866
78
944
551
143
694
250
807
59
866
419
132
551
315
Notes to the Financial Statements
15 Intangible assets
Research & Development, plus computer software:-
In Process R & D
$'000
Group
Computer Software
$'000
Total
$'000
In Process R & D
$'000
Company
Computer Software
$'000
1,317
569
1,886
599
126
725
1,161
867
450
1,317
536
63
599
718
252
19
271
176
50
226
45
224
28
252
121
55
176
76
1,569
588
2,157
775
176
951
1,317
569
1,886
599
126
725
1,206
1,161
1,091
478
1,569
657
118
775
794
867
450
1,317
536
63
599
718
194
14
208
127
44
171
37
170
24
194
83
44
127
67
Total
$'000
1,511
538
2,094
726
170
896
1,198
1,037
474
1,511
619
107
726
785
Cost
At 1 July 2008
Additions
At 30 June 2009
Amortisation
At 1 July 2008
Charge for the year
At 30 June 2009
NBV at 30 June 2009
Cost
At 1 July 2007
Additions
At 30 June 2008
Amortisation
At 1 July 2007
Charge for the year
At 30 June 2008
NBV at 30 June 2008
16 Investment in subsidiary undertaking
The following information relates to the subsidiary which, in the opinion of the directors, principally affected the profits or assets of the
Group:-
Name of Company
Class of Shares held
Proportion of Nominal Value of
Issued Shares held by Craneware
plc
Craneware Inc.
Ordinary
100%
Nature of Business
Sales & Marketing
The above Company is incorporated in the United States of America and Craneware plc hold 10,000 (2008: 10,000) common shares with a
nominal value of $0.01 each. The results of the Subsidiary Company have been included in the consolidated financial statements.
Craneware plc
Annual Report 2009
37
Notes to the Financial Statements
17 Trade and other receivables
Trade receivables
less: provision for impairment of trade receivables
Net trade receivables
Other receivables
Prepayments and accrued income
Less non-current trade receivables
Current portion
Group
Company
2009
$'000
4,371
(322)
4,049
84
1,079
5,212
(25)
5,187
2008
$'000
3,808
(196)
3,612
68
1,080
4,760
(75)
4,685
2009
$'000
4,371
(322)
4,049
34
526
4,609
(25)
4,584
2008
$'000
3,808
(196)
3,612
63
837
4,512
(75)
4,437
There is no material difference between the fair value of trade and other receivables and the book value stated above.
As at 30 June 2009, trade receivables of $300,919 (2008: $256,842) were past due and therefore deemed to be impaired. The amount of the
provision against these receivables was $275,119 as of 30 June 2009 (2008: $196,296). The individually impaired receivables mainly relate to
clients’ financial difficulties and unresolved disputes. It was assessed a portion of the receivables is expected to be recovered.
The ageing of these receivables is as follows:-
2009
$'000
26
-
16
-
259
301
2008
$'000
23
-
23
-
211
257
Less than 30 days past due
30 – 60 days past due
61 – 90 days past due
91 – 120 days past due
121+ days past due
Craneware plc
Annual Report 2009
38
Notes to the Financial Statements
17 Trade and other receivables
As at 30 June 2009, trade receivables of $860,989 (2008: $1,218,915) were past due but not impaired. These relate to a number of clients for
whom there is no recent history of default.
The ageing analysis of these trade receivables is as follows:
Less than 30 days past due
31 – 60 days past due
61 – 90 days past due
91 – 120 days past due
121+ days past due
2009
$'000
581
106
83
-
91
861
2008
$'000
489
176
148
55
351
1,219
As at 30 June 2009, trade receivables of $3,162,080 (2008: $2,331,946) were not past due or impaired, and the Group does not anticipate
collection issues. A further $46,861 (2008: $Nil) was not past due but deemed to be impaired due to a client in financial difficulty.
Movement on the provision for impairment of trade receivables is as follows:
At 1 July
Provision for receivables impairment on revenue recognised
Receivables written off during year as uncollectable
Unused amounts reversed
At 30 June
2009
$'000
196
305
(122)
(57)
322
2008
$'000
271
189
(155)
(109)
196
The creation and release of provision for impaired receivables has been included in net operating expenses in the income statement.
Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash.
The other classes within trade and other receivables do not contain impaired assets.
The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Group does not
hold any collateral as security.
Craneware plc
Annual Report 2009
39
Notes to the Financial Statements
18 Deferred taxation
Deferred tax is calculated in full on the temporary differences under the liability method using a rate of tax of 28% (2008: 28%) in the UK and
39% (2008: 39%) in the US including a provision for state taxes.
The movement on the deferred tax account is shown below:-
At 1 July 2008
Income statement charge
Transfer direct to equity
At 30 June 2009
Group
2009
$'000
1,075
(321)
(36)
718
2008
$'000
810
(206)
471
1,075
Company
2009
$'000
281
(162)
38
157
2008
$'000
460
(240)
61
281
The movements in deferred tax assets and liabilities during the year are shown below. Deferred tax assets and liabilities are only offset where
there is a legally enforceable right of offset and there is an intention to settle the balances net. The net deferred tax asset to be recovered
from 30 June 2009 was $718,361 (2008: $1,075,367).
Losses
$'000
479
(232)
(247)
-
-
232
247
479
Share
Options
$'000
567
(128)
211
650
758
(415)
224
567
Total
$'000
1,142
(360)
(36)
746
841
(170)
471
1,142
Deferred tax assets - recognised
Group
At 1 July 2008
Charged to income statement
(Charged)/credited to equity
Total provided at 30 June 2009
At 1 July 2007
Charged to income statement
Credited to equity
Total provided at 30 June 2008
Deferred tax liabilities - recognised
Group
At 1 July 2008
Credited to income statement
Total provided at 30 June 2009
At 1 July 2007
Charged to income statement
Total provided at 30 June 2008
Accelerated
accounting
depreciation
$'000
Short term
timing
differences
$'000
7
-
-
7
4
3
-
7
Accelerated
tax
depreciation
$'000
(67)
39
(28)
(31)
(36)
(67)
89
-
-
89
79
10
-
89
Total
$'000
(67)
39
(28)
(31)
(36)
(67)
Craneware plc
Annual Report 2009
40
Notes to the Financial Statements
18 Deferred taxation
Deferred tax assets - recognised
Company
At 1 July 2008
Charged to income statement
Credited to equity
Total provided at 30 June 2009
At 1 July 2007
Charged to income statement
Credited to equity
Total provided at 30 June 2008
Deferred tax liabilities - recognised
Company
At 1 July 2008
Credited to income statement
Total provided at 30 June 2009
At 1 July 2007
Charged to income statement
Total provided at 30 June 2008
19 Called up share capital
Authorised
Equity share capital
Losses
$'000
-
-
-
-
-
-
-
-
Share
Options
$'000
348
(201)
38
185
492
(204)
60
348
Total
$'000
348
(201)
38
185
492
(204)
60
348
Accelerated
accounting
depreciation
$'000
Short term
timing
differences
$'000
-
-
-
-
-
-
-
-
Accelerated
tax
depreciation
$'000
(67)
39
(28)
(32)
(35)
(67)
-
-
-
-
-
-
-
-
Total
$'000
(67)
39
(28)
(32)
(35)
(67)
2009
2008
Number
$'000
Number
$'000
Ordinary shares of 1p each
50,000,000
1,014
50,000,000
1,014
Allotted called-up and fully paid
Equity share capital
Ordinary shares of 1p each
25,297,750
512
25,109,950
509
The movement in share capital during the year is represented as follows:-
187,800 Ordinary Share options were exercised in the year, as detailed in the Remuneration Committee Report on page 19.
Craneware plc
Annual Report 2009
41
Notes to the Financial Statements
20 Cash flow generated from operating activities
Reconciliation of profit before tax to net cash inflow from operating activities:-
Profit before tax
Finance income
Depreciation on plant and equipment
Amortisation on intangible assets
Share-based payments
Less US employer tax on exercise of options
Less related professional fees
Movements in working capital:
Decrease in inventory
Increase in trade and other receivables
Increase in trade and other payables
Cash generated from operations
21 Cash and cash equivalents
Cash at bank and in hand
The effective rates on short term bank deposits were 2.23% (2008: 3.55%).
22 Trade and other payables - current
Trade payables
Amounts owed to group companies
Social security and PAYE
Corporation tax
Accruals
Advance receipts
Group
Company
2009
$'000
5,870
(520)
204
176
82
-
-
-
(452)
2,018
7,378
2008
$'000
4,188
(607)
183
118
634
(58)
(12)
8
(669)
1,202
4,987
2009
$'000
5,012
(520)
143
170
32
-
-
-
(96)
1,404
6,145
2008
$'000
3,557
(607)
132
107
414
-
(12)
-
(580)
1,365
4,376
Group
Company
2009
$'000
2008
$'000
2009
$'000
2008
$'000
26,169
21,112
23,959
20,336
Group
Company
2009
$'000
551
-
120
775
2,303
138
3,887
2008
$'000
257
-
125
(124)
1,354
148
1,760
2009
$'000
133
791
120
421
1,065
138
2,668
2008
$'000
169
551
125
151
640
148
1,784
Amounts owed to Group companies are non interest bearing and have no fixed repayment terms. Trade payables are settled in accordance
with those terms and conditions agreed, generally within 30 days, provided that all trading terms and conditions on invoices have been met.
The Group’s average payment period at 30 June 2009 was 26 days (2008: 13 days).
Craneware plc
Annual Report 2009
42
Notes to the Financial Statements
23 Contingent liabilities and financial commitments
(a) Capital commitments
The Group has no capital commitments at 30 June 2009 (2008: $nil).
(b) Lease commitments
The Group leases certain land and buildings. The commitments payable by the Group under these leases are as follows:-
Within one year
Between 2 and 5 years
2009
$'000
203
164
367
2008
$'000
240
489
729
The rents payable under these leases are subject to renegotiation at various intervals specified in the leases. The Group pays all insurance,
maintenance and repairs of these properties.
24 Related party transactions
During the year the Group has traded in its normal course of business with shareholders, consultancy businesses and its wholly owned
subsidiary in which directors, former directors and the subsidiary have a material interest as follows:-
Group
Investor monitoring fees
Fees for services provided as Non-Executive Directors
Fees
Salaries and short-term employee benefits
Executive Directors
2009
2008
Charged
$
-
48,959
87,772
Outstanding
at year end
$
-
Charged
$
6,321
Outstanding
at year end
$
-
6,788
-
432,888
89,313
4,678
-
Salaries and short-term employee benefits
686,950
195,479
506,671
64,132
Post employment benefits
Share-based payments
Other Key Management
8,059
34,683
-
-
10,020
55,213
Salaries and short-term employee benefits
1,082,650
199,982
Post employment benefits
Share-based payments
8,059
10,766
-
-
825,347
10,020
248,806
-
-
96,198
-
-
Craneware plc
Annual Report 2009
43
Notes to the Financial Statements
24 Related party transactions (continued)
Company
Investor monitoring fees
Fees for services provided as Non-Executive Directors
Fees
Salaries and short-term employee benefits
Executive Directors
2009
2008
Charged
$
-
48,959
87,772
Outstanding
at year end
$
-
Charged
$
6,321
Outstanding
at year end
$
-
6,788
432,888
-
89,313
4,678
-
Salaries and short-term employee benefits
686,950
195,479
506,671
64,132
Post employment benefits
Share-based payments
Other Key Management
8,059
34,683
-
-
10,020
55,213
-
-
Salaries and short-term employee benefits
536,009
169,982
486,434
64,132
Post employment benefits
Share-based payments
Amounts due to Craneware Inc. - subsidiary company
Sales commission
Net operating expenses
Balance (Note 22)
8,059
3,064
10,452,304
1,876,245
-
-
-
-
10,020
197,560
8,005,396
1,778,079
-
-
-
-
-
791,411
-
551,046
Key management are considered to be the directors together with the Chief Operating Officer, Chief Technology Officer, the President of
Craneware Inc. and the Head of Marketing (appointed to the Operations Board at the start of the year).
There were no other related party transactions in the year which require disclosure in accordance with IAS 24.
25 Ultimate controlling party
The directors have deemed that there are no controlling parties of the Company.
Craneware plc
Craneware plc
Annual Report 2009
Annual Report 2009
44
44
Contact Craneware
Directors, Secretary and Advisors
Support & Information
Directors and Officials
Bankers
Client training/support:
+1 888 601 4162
support@craneware.com
training@craneware.com
Sales:
+1 877 624 2792
sales@craneware.com
Careers:
+44 (0)1506 407666
hr@craneware.com
General enquiries:
+1 407 384 1711
info@craneware.com
Investor information:
+44 (0) 207 651 8688
ICIS
UK Headquarters
Craneware plc
Rosebank Business Park
Kirkton Campus
Livingston
West Lothian EH54 7EJ
United Kingdom
Fax: +44 (0)1506 407667
USA Headquarters
Craneware, Inc.
5770 Hoffner Ave., Suite 102
Orlando, FL 32822-4809
USA
Fax: +1 407 384 9413
Directors
The Royal Bank of Scotland plc
G R Elliott [Chairman, non-executive]
K Neilson
N P Heywood [non-executive]
A M McDougall (Resigned 15/09/2008)
C T Preston (Appointed 15/09/2008)
R F Verni [non-executive] (Appointed 01/05/2009)
Secretary and Registered Office
C T Preston
Rosebank Business Park
Kirkton Campus
Livingston
EH54 7EJ
Brokers & Nominated Advisors
36 St. Andrew Square
Edinburgh
EH2 2YB
Clydesdale Bank
20 Waterloo Street
Glasgow
G2 6DB
Barclays Commercial Bank
Aurora House
120 Bothwell Street
Glasgow
G2 7JT
HSBC Bank plc
7 West Nile Street
Glasgow
G1 2RG
KBC Peel Hunt Ltd
111 Old Broad Street
London
EC2N 1PH
Registrars
Capita Registrars Ltd
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Registered Auditors
PricewaterhouseCoopers LLP
Erskine House
68-73 Queen Street
Edinburgh
EH2 4NH
Solicitors
McGrigors LLP
Princes Exchange
1 Earl Grey Street
Edinburgh
EH3 9AQ
Craneware plc
Annual Report 2009
45
craneware.com
marketing@craneware.com
training@craneware.com
sales@craneware.com
support@craneware.com
Craneware plc
Rosebank Business Park
Kirkton Campus
Livingston
EH54 7EJ, UK
Tel: (+44) 01506 407 666
Fax: (+44) 01506 407 667
Company Registration No. SC196331
Craneware plc