Craneware plc
Annual Report
for the year ended 30 June 2010
integrity solutions that
Craneware plc (AIM: CRW.L) is recognised as the leader in
automated revenue
improve US
healthcare providers' financial performance. Revenue Integrity
is an approach to revenue management focused on achieving
optimal legitimate reimbursement, operational efficiency and
compliance with government regulations. Craneware Software-
as-a-Service (SaaS) solutions support the transformation of
provider organisations' revenue integrity processes. There are
three major families of Craneware solutions: Revenue Cycle,
Strategic Pricing and Supply Management.
in May 1999, Craneware
chargemaster management
introduced the
solution
Founded
first
for US
automated
hospitals and health systems in October that year. By the end of
2000, more than 20 customers were signed and implemented,
establishing the strong growth pattern that continues today.
Craneware's solutions now help more than 1,000 healthcare
providers – ranging from small community hospitals to large
healthcare networks.
In September 2007, Craneware listed on the AIM market of the
London Stock Exchange. Today, Craneware employs more than
140 staff and is headquartered in Scotland, with offices in the
US. At a time when it is more critical than ever for healthcare
providers to improve reimbursement and operational efficiency
whilst reducing compliance risk, Craneware solutions deliver
results, efficiently helping customers establish a solid
foundation for financial performance improvement.
Contents
1 Financial and Operational Highlights
2 The Foundations for Continued Growth…
3 Craneware Innovation
4 Craneware Revenue Integrity Solutions™
6 Chairman's Statement
7 Operational Review
10 Board of Directors
11 Directors' Report
14 Corporate Governance Report
17 Remuneration Committee Report
20
Independent Auditors' Report
21 Consolidated Statement of Comprehensive Income
22 Statements of Changes in Equity
23 Consolidated Balance Sheet
24 Company Balance Sheet
25 Statements of Cash Flows
26 Notes to the Financial Statements
45 Contact Craneware / Directors, Secretary and Advisors
Financial Highlights
Recordlevelsofcontractedsalesintheyeartotaling$58.1m(2009:$43.2m),
34%uponthepreviousyear,contributingto:
49%increaseinfuturerevenuesundercontractto$89.8m(2009:$60.1m)
23%increaseinrevenuesto$28.4m(2009:$23.0m)
EBITDA*increased31%to$7.6m(2009:$5.8m)
Profitbeforetaxationincreasedby24%to$7.3m(2009:$5.9m)
Cashpositionincreased13%to$29.4m(2009:$26.1m),
afterpayingdividendsof$3.0mintheyear(2009:$1.9m)
BasicEPSincreasedto$0.22(2009:$0.18)anddilutedto$0.21(2009:$0.17)
Finaldividendproposedof3.3p(4.94cents)pershare,givingatotaldividendforthe
yearof8.0p(11.99cents)pershare(2009:4.7p(7.43cents)pershare)
* EBITDA refers to earnings before interest, tax, depreciation, amortisation and share based payments
Operational Highlights
Launchandfirstsalesoffifthproduct,SuppliesChargeLink®
Significantinvestmentinsalesandmarketingcapacityduringtheyear.
Strengthenedmarketpositionthroughsigningintheyearoftwosignificant
partnershipswithPremierHealthcareAllianceandMcKessonCorporation.
Signingofseveralmajormulti-sitecontracts,includingwithIntermountainHealthcare,
describedbyPresidentObamaandotherU.S.leadersas"amodelfortherestofthe
nation".
Quick Facts — Financial
34%
increase in contracted sales in the year to
record $58.1m
49%
increase in future revenues under
contract
increase in revenues to $28.4m
increase in EBITDA* to $7.6m
23%
31%
24%
13%
increase in cash to $29.4m
increase in profit before tax to $7.3m
Key Performance Indicators
IPO
2005
2006
2007
Future revenue under contract
Contracts signed in the year
Revenue recognised in the period
2008
2009
2010
Compound Annualised Growth*
29%
35%
22%
*from 30 June 2005
$70m
$60m
$50m
$40m
$30m
$20m
$10m
Craneware plc
Annual Report 2010
1
The Foundations for Continued Growth…
Healthcare Reform
The US Healthcare industry is undergoing significant
transformation that presents further opportunities
for Craneware. On March 23, 2010 the Affordable Care
Act became US law, ushering in an era of Healthcare
Reform with the following key objectives:
control costs with improved quality
increase the number of Americans with insurance
coverage
improve healthcare efficiencies and consistency, and
increase the emphasis on the compliance and
accountability of healthcare organisation
Growing Complexity of Challenges
Facing US Hospitals
Lower reimbursements from the US Medicaid
and Medicare programs (scheduled to begin in
2011) and growing risk exposure due to increased
regulatory compliance requirements and enforcement
initiatives make it critically important that healthcare
organisations capture all the reimbursement owed
to them, ensure visibility into what they spend on
supplies, and ensure that they price, charge, and code
effectively and defensibly. Craneware’s innovative
software solutions help them efficiently achieve all of
these critical and increasingly strenuous demands.
Increased Patient Numbers
The number of Americans with insurance coverage
is expected to significantly increase patient
volumes, amplifying hospitals’ needs for Craneware’s
automated solutions that help accurately price,
charge and code for patient care services and
supplies. In this environment it will be even more
vital that hospitals ensure they are capturing all of
the revenue to which they are entitled. Automated
solutions like those provided by Craneware are
central to hospitals’ financial performance success
in today’s climate of reform. Yet, of the more than
5,815 US hospitals, less than half have an automated
chargemaster management solution today.
Consolidation Driving Requirement
for Uniform Processes
As the industry trend toward consolidation continues
and US hospitals deal with integration pressures,
the need for new operational efficiencies like those
provided by Craneware solutions is of paramount
importance to achieve the objectives of Healthcare
Reform. Craneware Revenue Integrity Solutions put
more efficient processes in place whilst embedding
the hospital culture with a better, more accurate and
accountable way of doing business.
Increased Compliance Risk
Compliance requirements are constantly changing
in the US and will become even more complex in the
future. On a weekly basis, hospitals receive changes
to rules and regulations directly related to their
charges. Managing the volume and complexity of
regulations is an increasing problem that requires
consistent controls within a fluid environment.
Craneware plc
Annual Report 2010
2
Client Engagement Driving Innovation
The cornerstone of Craneware’s strong repeat business
is our client loyalty model and we take great pride in
the fact that our first client remains a client today.
Through Craneware User Group Meetings, Client
Advisory Council and online client community, clients
are engaged in a collaborative network among all
sizes and types of hospitals and health systems,
where they share best practices and discuss industry
developments. Craneware’s new products are born
from these forums, meaning that as our new tools
are introduced they exactly address the demands of
healthcare organisations.
Our most recently launched solution, Supplies
ChargeLink® is an example of this industry led
innovation. Many hospital CFOs say they are now
looking for new efficiencies in their supply chain to
help them control costs and offset the scheduled
reimbursement cuts from Medicare and Medicaid.
Craneware’s Supplies ChargeLink® provides them
previously unattainable visibility into the supply
chain and the supply item revenue stream. This helps
hospitals achieve sustainable improvements in supply
chain financial performance.
Committed to Sustainable Improvements
in Healthcare Financial Performance
In this climate of change, healthcare organisations
need strong strategic partners to help them
increase operational efficiencies, improve financial
performance and reduce compliance risks. Craneware
is committed to continuing to build on its eleven year
history of successfully partnering and providing US
healthcare with innovative solutions that achieve
sustainable improvements in financial performance.
Outdated reference information and manual
processes inevitably lead to errors and inaccurate
reimbursement. Given the complicated regulations
governing the industry, opportunities exist for
interpreting rules and regulations differently, thereby
increasing financial and compliance risks.
To stay abreast of these changing compliance
requirements, automation like that provided by
Craneware is crucial. Yet, today most US hospitals
lack an effective means of monitoring ever-changing
Medicare and Medicaid regulations to ensure both
ongoing compliance and proper reimbursement.
Penalties for non-compliance range from loss of
payment for services rendered, to stiff fines and even
imprisonment.
The Affordable Care Act includes a series of provisions
to fight non-compliance. Non-compliance is
considered fraud even if committed in error. The new
rules strengthen and expand CMS’ fraud prevention
efforts. A Center for Program Integrity has been
created at CMS that is focused on identifying and
stopping fraud. There is also now a significant
increase in the number of auditors charged with
recovering funds paid to hospitals through Medicare
and Medicaid programs. A recovery audit contractor
(RAC) is paid a contingency fee by CMS that can
range from 9% to 12.50% of overpayments and
underpayments successfully collected from hospitals'
Medicare and Medicaid reimbursement.
Craneware Revenue Integrity Solutions help hospitals
keep track of constantly changing regulations, while
ensuring an adequate internal audit trail to defend
revenues received. Our software automates access
to the most current regulatory guidelines, while
facilitating effective communication between
clinical and financial staff to support accurate
decision-making.
With a sustainable revenue integrity program we’ve achieved a goal of sustained
positive financial performance, which allowed us to contribute over $200 million
in charity care during 2009.
— Todd Craghead, vice president of revenue cycle at Intermountain Healthcare,
recognised as “model for the rest of the nation” by U.S. President Obama.
Quick Fact — US Health Spending…
Even against a backdrop of cost control and a focus on efficiencies, the US health spending is still expected to
comprise 17.6 % of the US economy, or $2.5 trillion in 2010. This is a jump from 16.6 % in 2008 according to the
US Centres for Medicare & Medicaid Services (CMS) who also predict that the health share of the economy will
increase steadily until 2018.
Craneware plc
Annual Report 2010
Craneware Innovation
Craneware introduced the industry's original
automated chargemaster management solution more
than ten years ago. Today, Craneware's automated
Revenue Integrity Solutions™ have grown to include
three product families: Strategic Pricing, Revenue
Cycle and Supply Management. Craneware SaaS
solutions provide a level of visibility that allows
provider organisations to identify the root causes
of their revenue leakage and more accurately price,
charge and code for services and supplies related to
patient care.
Craneware innovation is market-driven, meaning we
look to the market in order to identify opportunities
where automation can help provider organisations
improve financial performance. Then, we work with
our customers to bring solutions to the industry
that meet actual needs. Through Craneware User
Groups, Client Advisory Council, and the online client
community, customers participate in a collaborative
network, where they share best practices while
enhancing existing and influencing new products
and services. This network is a resource for ongoing
dialogue. Customers are so passionate about their
business process improvements and results achieved
using Craneware solutions that they regularly appear
alongside Craneware experts at industry trade shows
and events.
Craneware continues to invest in innovating new
solutions for customers. The most recent solution
announced to help hospitals address revenue
leakage is Supplies ChargeLink®. According to a
2009 Healthcare Financial Management Association
member survey, the majority of US hospitals believe
they are compensated for less than half of their
reimbursable supplies. This new product supports
revenue integrity by linking providers' supply and
financial systems so that they can see where they're
not charging for supplies that they should charge for.
Industry experts estimate that, on average, US
hospital systems are wasting $4 million annually
in excess supplies costs due to the lack of business
intelligence within their supply chains. Over the
next few years, as providers focus on increasing
revenue, reducing costs and regulatory compliance,
experts predict that the importance of solid business
intelligence and the demand for powerful analytic
tools will grow in healthcare. Supplies ChargeLink
provides the unmatched supply chain visibility
that hospitals need to optimise their supplies
management.
Hospitals must focus on financial performance and
process improvements to thrive in the atmosphere
of healthcare reform. One of the nine strategies for
success most commonly identified by healthcare
financial executives who responded to HFMA's
April 2009 Healthcare Financial Pulse survey
was, “engaging staff in financial performance
improvement”. This is exactly what Craneware's
software aims to achieve. Craneware software
engages and empowers financial staff with the tools
and streamlined workflow processes needed for
improved financial performance. In addition, clinical
staffs are engaged through the LiteView, Workflow,
and Best Practice features of Chargemaster Toolkit, as
well as Bill Analyzer process analysis that specifically
facilitates effective collaboration between clinical and
financial staff.
Craneware SaaS automation empowers healthcare
financial managers with unmatched visibility into
their business, flagged exceptions to industry best
practices requiring attention, ability to perform
“what-if” pricing analysis, dashboards, both
standardised and self-service reporting and
analytics, and more.
Supplies Data Flow – The Ideal Model
Procurement
Inventory Clinical Processing
Hospital Accounting Billing
Reimbursement
Wholesale Distributor
Manufacturer
Materials
Management
Patient
Chargemaster
Billing System
Payer
Payment
Data Elements
Manufacturer Details
Purchased Quantity
Purchased Unit of Measure
(UOM)
Purchase Price
Description
Units Used
Description
Billing UOM
Billing Quantity
Service Code
CPT® Code
Revenue Code
Billed Quantity
Billed Price
Payment Details
Craneware plc
Annual Report 2010
3
Craneware Revenue Integrity Solutions™
Quick Facts — The Technology
Revenue Cycle Solutions [cont'd.]
Strategic Pricing Solutions [cont'd.]
Chargemaster Corporate
Standardisation Services
Professional Services project management to fast
track corporate chargemaster standardisation.
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 Module
Analysis modules that establish the accurate price
for medications based on actual acquisition costs
and proposed reimbursement in accordance with
established mark-up 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.
Pharmacy ChargeLink®
Implementation
Professional Services that ensure an efficient return on
investment from Pharmacy ChargeLink and implement
best practices for ongoing use, which includes an
expert review of 12 months of pharmacy purchase
history and chargemaster data for reimbursable
medications, reporting and training.
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.
Supplies ChargeLink®
Implementation
Professional Services to ensure an efficient return on
investment from Supplies ChargeLink and implement
best practices for ongoing use including data review,
reporting and training.
Craneware solutions are based on an annuity
subscription model. 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 Revenue Integrity Solutions are
divided into three product families with Decision
Dashboard® spanning across all three families.
Revenue Cycle Solutions
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 and
for retrospectively identifying trends and correcting
issues within an organisation's charge capture process
that lead to lost revenue.
Charge Capture Performance
Improvement Services
Professional Services based on analytic review of Bill
Analyzer data that identifies areas of highest financial
risk, evaluates root causes of missing charges, and
provides an action plan and customised process to
improve charge capture that avoids additional staff
resources and implements an expedited learning
curve leading to a sustainable process for ongoing
financial improvement
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®.
Online Reference Toolkit®
Web-based tool for reducing risk by providing access
to reference and regulatory resources.
Decision Dashboard®
Software providing decision makers with actionable
financial information by monitoring key performance
indicators.
Interface Scripting Module
Software for ensuring items are billed accurately by
automatically uploading chargemaster changes to the
patient billing system.
Chargemaster Maintenance
Process Assessment, Design and
Implementation
Professional Services that define and implement
best-practices, decision-making and maintenance
protocols, which engage key stakeholders in a well
controlled, defensible chargemaster management
process including custom setup of the Chargemaster
Toolkit Request and Workflow modules.
Chargemaster Quality Review and
Education
Professional Services that optimize the chargemaster
maintenance process via Craneware's Chargemaster
Toolkit, establishing best practices and leadership
process and improvement training.
Craneware plc
Annual Report 2010
4
Strategic Pricing Solutions
Patient Charge Estimator™
Software that supports defensible and transparent
pricing, and simplifies providing estimates for
inpatient and outpatient services.
Patient Charge Estimator™
Implementation
Professional Services to maximise immediate return
on investment and establish an effective business
process for ongoing use of the tool. Includes: policy,
procedure and process design to improve upfront
collections, and to achieve quick and accurate
estimates. The service also includes documented
evaluations and recommendations, templates for
patient estimate letters, scripts for staff, onsite
training, and software setup and implementation.
Peer Reviewed by HFMA
Healthcare Financial Management Association (HFMA) performs
an annual independent industry evaluation. Craneware has
achieved Peer Review 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
programme standards and provide value.
No.1 in KLAS for 4 consecutive years
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 2009, 2008, 2007 and 2006.
Craneware plc
Annual Report 2010
5
Chairman's Statement
“Cranewarehasenjoyedanother
excellentyear,deliveringrecord
salesanddevelopingthe
foundationsforcontinued
success.”
George Elliot, Chairman
Craneware has enjoyed another excellent year,
delivering record sales and developing the
foundations for continued success. With contracted
sales growth of 34%, recorded revenues and profits
have both grown by over 20%. Importantly we now
have over $89m of contracted revenue, an increase
of 48%, to be recognised in future years, providing
us with excellent visibility for several years ahead.
The planned investment in the infrastructure of
the business continues to increase its scalability
and our market position has been significantly
strengthened through several key alliances with some
of the world’s largest healthcare organisations.
While uncertainty prevails regarding the final
form of U.S. healthcare reforms, what is certain is
that healthcare organisations are seeking ways to
increase efficiencies whilst still providing high levels
of patient care. This is at the heart of the Craneware
offering and I believe our best of breed products
and our commitment to supporting our customers
in meeting the increasing pressures being placed
upon them, is the foundation of our success.
This has been a record sales year for Craneware,
however the Board believes that the full effect of
healthcare reforms and the U.S. Stimulus package is
yet to flow through and will have a greater impact
in future years, presenting some significant new
growth opportunities for the Company. For instance,
tools previously developed specifically for current
hospital customers who own physician practices are
seeing increased demand from the wider market as
a result of an anticipated trend of hospitals moving
back into the ownership of physician practices.
Craneware’s network in the U.S. healthcare market
has been considerably strengthened during the
year, with two of the largest organisations in
the market, McKesson and Premier, formalising
partnerships with us. Not only does this provide
us with an enhanced route to market, but is also a
compelling endorsement of Craneware’s valuable
position at the heart of our marketplace.
We have invested significantly in our direct sales
teams during the year, bringing on board additional
product and client managers across the U.S. We
have also opened a new office in Atlanta on 1st
July, giving us a presence at the hub of the U.S.
healthcare industry. We are confident that we
are currently well resourced and have the means
to achieve significant scale in the years ahead,
both organically and through acquisition.
We have been pleased with the initial response to
our newly launched Supplies ChargeLink and are
on course to launch our sixth product, Value-based
Pricing Analyzer, at the end of the calendar year.
We have a strong portfolio of both established
and new products and are pleased to have seen
the average number of products per customer
increase during the year from 1.4 to 1.6.
The strength of our customer base, the quality of
our products and the developments taking place
in U.S. healthcare gives the Board confidence
that we have many years of growth ahead.
I would like to thank all the Craneware
team, partners and particularly customers
for their continued support.
George Elliott, Chairman
3 September 2010
Craneware plc
Annual Report 2010
6
Operational Review
“…strongsalesperformanceduring
theyeardeliveringarecord$58.1m
ofcontractedsalesandhaveevery
reasontobelievewecanimprove
onthisintheyearsahead.”
Keith Neilson, CEO and co-founder
“…afurtheryearofstrengthened
financialperformance…provides
Cranewarewithvisibilityover
$89.8moffuturerevenue
undercontract.”
Craig Preston, CFO
This has been an extremely positive year for
Craneware. We have invested considerable efforts
in developing the scalability of the business
and expanding our position in the marketplace.
Throughout the year we have maintained our market
focus and believe both our ability to mitigate risk and
drive through efficiencies continues to earn loyalty
from our expanding customer base. We are confident
therefore that we are in an extremely strong position
in terms of products and customers and our focus in
the year ahead will be on continued improvement
seeking operational excellence.
We are delighted to have signed several significant
deals during the year with some of the U.S.’s leading
hospital systems including Intermountain Healthcare,
which has been described by President Obama and
other U.S. leaders as a model for the rest of the
nation. We view our interaction with each customer
as a long-term partnership and this year we have
increased the level of training and support we offer to
all our customers in order to ensure they receive high
levels of value and return on investment from our
products. We believe this customer focus is vital for
our continued success and is an area in which we will
continue to invest.
The investment in our sales and marketing
capabilities and U.S. infrastructure over the year
has been transformational, preparing us for the
next stage of development. With these first steps
now complete we are now in a position to build on
our current partnership agreements, seek further
alliances and enhance our go-to-market strategy
through selective acquisitions.
The Market
President Obama’s healthcare reforms mean that by
2014 it is estimated approximately 40 million U.S.
citizens who are currently uninsured will become
eligible for healthcare assistance through the state
and federal Medicare and Medicaid programmes.
While the final form of the legislation is yet to
be decided, what is clear is that hospitals will be
required to provide healthcare facilities and services
to an increasing number of patients, at a lower
level of reimbursement per individual. Efficiency
and return on investment, two of the main business
drivers behind Craneware’s product families, are
now therefore areas of paramount importance to
management teams when making their buying
decisions.
$25.8 billion of funds within the American Recovery
and Reinvestment Act announced in February 2009
were allocated to the U.S. healthcare industry.
However the rules by which healthcare organisations
can apply for the funds are only now coming into
effect. Capital expenditure by hospitals in general
during the year therefore remained at a low level,
impacted by the global economic conditions. The
effect of this constrained expenditure on Craneware
has been minimised as our software generally sits
within operational budgets, however it may well
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prove that as more funds flow into hospitals we
will see a general upswing in the market and direct
benefits to our partners such as McKesson.
The introduction of Revenue Audit Contractors as of
1st January 2010 has generated some movement in
our market place, but as previously stated we believe
the real impetus from this will come in 2011 and
2012.
Another encouraging development during the
year, a result of the healthcare reforms, has been
some early evidence of a reversal of a previous
trend, which saw hospitals moving away from the
ownership of physician practices. The apparent shift
in this trend could mean a reopening of a significant
additional marketplace which Craneware would
be well positioned to service through its physician
based products which were developed for the large
hospital owned physician practices and have been
kept current for the installed customer base that
despite previous wider market trends, retained their
physician groups.
It is evident that the U.S. healthcare market is only
at the very first stages of reform. Regardless of
the various options that the reform may take, the
Board believes Craneware is well-placed to meet
the growing needs of its customers and become
the technology vendor of choice to deliver revenue
integrity to healthcare organisations.
Sales and Marketing
As planned, this year saw the continued accelerated
investment into our sales and marketing capabilities.
We have added new sales distribution staff, including
client sales managers, assistant sales managers and
additional telephone support. Our new office opened
in Atlanta just following the close of the year, on 1st
July and will be home to our training facilities. This is
a focal centre for our U.S. operations, positioning us
in the heart of the U.S. healthcare industry.
We have now substantially completed the
restructuring of our sales team, which has increased
by 37% since the start of the year. We have been
pleased by a strong sales performance during the
year delivering a record $58.1m of contracted sales
(an increase of 34% on FY09: $43.2m) and have every
reason to believe we can improve on this in the years
ahead.
The average length of new contracts has stabilised as
predicted at approximately 5 years.
We believe the opportunity for further cross-sales
from our enlarged product set to be significant.
With less than 40% 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.
Internally Craneware is targeting a revenue split
of no more than 50% from any one product by the
start of FY14 (1 July 2013) and is confident that it
is achieving the correct additional balance of non-
chargemaster sales to achieve this.
Craneware plc
Annual Report 2010
7
reaffirming our number one position in the industry
and our focus on customer commitment. We were
particularly pleased to see that 97% of respondents
highlighted Craneware as being part of their long-
term strategy.
For customers coming to the end of their multi-year
contracts, renewal rates remain in line with the high
levels achieved in previous years.
Channel Partners
We have made considerable progress in the year in
strengthening our partnerships; these enhance our go
to market strategy and provide a strong endorsement
of Craneware’s central position in the U.S. Healthcare
IT market.
At the start of the financial year we signed a third
party agreement with McKesson the world’s largest
healthcare services company, to 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.
Early sales through the partnership have all been
delivered to plan, with a healthy pipeline for the
future.
Beyond the Horizon system we have developed,
and are in the process of developing further, direct
interfaces to the main McKesson legacy systems
(Star, HealthQuest & the Series range), meaning
current customers of McKesson will be able to easily
implement integrated Craneware products in the
future.
In April 2010 we were pleased to announce the
expansion of our relationship with the Premier
healthcare alliance. The new deal between Craneware
and Premier is a five-year reseller agreement, with
a minimum value of $15 million. Premier has begun
marketing our solutions to its 2,300 not-for-profit
hospital alliance members and we have been
pleased by the strong commitment shown by both
parties in creating a successful partnership. All the
initial deliverables under the agreement have been
successfully completed and we are actively seeking
opportunities for further expansion of the agreement
going forward.
Partnerships are an important part of the future
development of Craneware and we will continue to
invest time and resource into expanding this area.
Financial Review
The financial results represent a further year of
strengthened financial performance. Craneware has
delivered another record sales year increasing the
total value of contracts signed (our sales) during
the year by 34% to $58.1m (2009: $43.2m), whilst
continuing to invest for further future success.
Craneware recognises revenue through its annuity
revenue recognition model. This model sees
software licence revenue recognised over the life
of the contracts we sign (which during the year
has remained stable at an average contract life of
5 years), with any associated professional services
revenue recognised as we deliver the services. As
a result of this revenue recognition model, the
maximum value of an average contract that can be
recognised as revenue in the current year is 20% plus
the value of associated professional services that
have been delivered.
Operational Review [Cont'd.]
Product Development
Craneware continues to invest in product
development to further its position as the vendor of
choice for solutions which sit in and around the point
where clinical data turns into financial data.
This year saw the successful launch of Supplies
ChargeLink, a new product in our Supply
Management family. Early sales have met
management’s expectations and are in line with
the early successes of the other products we have
launched post-IPO. We believe the potential market
for this product to be significant, with more than
half of US hospitals believing they are not fully
reimbursed for their supplies and over three-quarters
having no automated process to attempt to do so. We
have been pleased with the initial market response to
the product following its launch in December 2009.
We intend for new product momentum to continue
through the remainder of 2010, with the launch of
our sixth product, Value-based Pricing Analyzer which
is part of the Strategic Pricing family, planned for Q4
of the current calendar year.
Again, we believe the market opportunity for this
product to be significant. Replacing consultants and
manual processes, Value-based Pricing Analyzer helps
hospitals more effectively, accurately and sustainably
manage their pricing strategies for drugs and
supplies, optimising their financial performance while
making strategic decisions in both a transparent and
defensible manner. Customers can use Value-based
Pricing Analyzer to balance the reimbursement, cost
and market considerations that drive pricing. The tool
allows hospitals to create multiple pricing scenarios
detailed down to the service level, or aggregated to
the facility or care network as a whole. The product is
anticipated to start contributing towards revenue by
the end of calendar 2010.
Customers
Well over 1,000 hospital facilities across 48 States
utilise 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
some of the largest healthcare networks such as
Intermountain Healthcare and North Shore-LIJ.
In response to customer feedback we introduced
a training and certification programme in our
products during the year and our user groups
now carry official CPE (Continuing Professional
Education) certification. We also extended our online
classroom tools to include branded certification in
the usage and implementation of our software and
the environment that it goes into, with the first
accreditation certificates awarded to customers who
have successfully completed courses.
We were delighted that during the year not only was
our core product, Chargemaster Toolkit® once again
awarded the number one position in its category by
the prestigious U.S. industry research house KLAS, but
we succeeded in increasing our scores year on year,
Craneware plc
Annual Report 2010
8
Figure1.
“…visibilityover$89.8mof
futurerevenue…”
Operational Review
This model has delivered the benefit of significant
yet steady revenue growth during the year, whilst
further building the already sizeable revenues under
contract which will be recognised in future years. This
highly predictable future revenue stream allows us to
invest in the future of our business whilst delivering
year on year increases in our operating margins.
As a result of this recognition model, against our
34% increase in total contracts signed during the
year, we have increased our reported revenues by
23% to $28.4m (2009: $23.0m), the balance of these
sales increasing our future revenues under contract
(Figure 1.). This now provides Craneware with
visibility over $89.8m of future revenue (representing
over 3 times current year reported revenues and
an increase of 49% or $29.7m over fiscal 2009). Of
this future revenue under contract we have already
invoiced $13.9m which is recorded as deferred
income in the balance sheet, the remaining $75.9m
to be invoiced in subsequent years.
Of this $89.8m of future revenue, the Directors
consider that $25.7m will be recognised during FY11
with a further $19.7m and $15.4m respectively to be
recognised in FY12 and FY13. 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, $2.7m revenues will be recognised from
renewal activity during FY11, with a further $7.6m
and $11.9m respectively in FY12 and FY13 relating to
contracts due for renewal from 1 July 2010 through
these years.
We have continued our planned investment during
the year, increasing our sales and marketing spend
by 16% to $7.1m (2009: $6.1m) and product
development by 28% to $3.8m after capitalising
$0.5m of costs relating to new products (2009:
$3.0m after capitalising $0.6m of costs relating
to new products). Through these investments and
the full year effect of our investment in product
management and marketing made in the prior year,
net operating expenses have risen to $18.8m (2009:
$16.3m). However, as a proportion of revenues, net
operating expenses have reduced to 66% from 71%
in FY09.
In regards to 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 115% as compared to the original
annuity revenue value to the Company.
As a result of all these factors, earnings before
interest, taxation, share based payments,
depreciation, and amortisation (“EBITDA”) has
increased 31% to $7.6m (2009: $5.8m) and the
associated EBITDA margin has increased to 26.8%
(2009: 25.3%).
We continue to measure the quality of these earnings
through our ability to convert them into operating
cash. We are pleased to report that for the second
successive year we have collected more than 100%
of our EBITDA as operating cash. This has resulted
in the Group’s cash balance increasing to $29.4m
(2009: $26.1m) despite, during the year, having paid
over $2.0m in taxation and returning $3.0m to our
shareholders by way of dividend payments.
The Group maintains a strong balance sheet position,
not only through our significant cash balance but
with rigorous controls over working capital. At 30
June 2010 we have seen an increase in our net trade
receivables balance increasing to $7.1m from $4.0m
in the prior year. This has been the result of the
increase in sales during the year and some significant
invoice milestones having been reached on a number
of the large contracts we have previously announced.
This increase in trade receivables has resulted in an
expected corresponding increase in our deferred
income balance. As at the balance sheet date, $5.4m
of the trade receivables balance was not yet due, and
since the balance sheet date we have collected $4.1m
of the total balance.
With the reporting currency (and cash reserves) of
the Company being in US Dollars, and approximately
one third of the cost base being based in the UK
relating primarily to our UK employees (and therefore
denominated in Sterling), we continue to closely
monitor the Sterling to US Dollar exchange rate,
and where appropriate consider hedging strategies.
During the year, we have not seen a significant impact
through exchange rate movements, with the average
exchange rate throughout the year being $1.5821 as
compared to $1.6142 in the prior year.
Dividend
Basic and diluted earnings per share were $0.22
(FY09: $0.18) and $0.21 (FY09: $0.17) respectively
and the Board recommends a final dividend of 3.3p
(4.94 cents) per share giving a total dividend for
the year of 8.0p (11.99 cents) per share (2009: 4.7p
(7.43 cents) per share). Subject to confirmation at
the Annual General Meeting, the final dividend will
be paid on 8 December 2010 to shareholders on the
register as at 12 November 2010.
The final dividend of 3.3p per share is capable of
being paid in US dollars subject to a shareholder
having registered to receive their dividend in US
dollars under the Company's Dividend Currency
Election, or who register to do so by the close of
business on 12 November 2010. The exact amount
to be paid will be calculated by reference to the
exchange rate to be announced on 12 November
2010. The final dividend referred to above in US
dollars of 4.94 cents is given as an example only using
the Balance Sheet date exchange rate of $1.4961/£1
and may differ from that finally announced.
M&A
The Board has evaluated a number of M&A
opportunities throughout the course of the year
but to date has not concluded on an opportunity
that would have been sufficiently accretive to merit
investment. We continue to have a healthy pipeline of
new opportunities which we are evaluating.
Outlook
Whilst this has been a record year for sales, perhaps
more significant has been the investment we have
made in the business over the year. We have increased
our sales team, expanded our network of alliances
and enhanced our product set and customer offering.
The U.S. healthcare industry is starting to debate
the early effects of the reforms which were outlined
in January 2010 and will gradually be introduced
over the next eight years, meaning the drivers for
growth in coming years could be yet higher than
those which we have experienced this year. Our focus
on the mitigation of risk for our customers, and the
delivery of financial and operational efficiencies
means we are extremely well positioned to benefit
from the unprecedented changes we expect to see
in healthcare in the U.S., no matter the final form of
healthcare reform.
These factors, plus the $89.8m of revenues we
currently have under contract for future years gives
us high levels of confidence in our success in the
years ahead. With industry leading product sets and
an enviable customer base our focus now will be
on achieving operational excellence and providing
the next generation of solutions to help with the
challenges of healthcare reform that face our
customers.
Keith Neilson, Chief Executive Officer
Craig Preston, Chief Financial Officer
3 September 2010
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2007
2008
2009
2010
2007
2008
2009
2010
Craneware plc
Annual Report 2010
9
Board of Directors
The Directors of the Company and their responsibilities within the Group are set out below:
George R Elliott, 57 — Non-Executive Chairman :: Appointed 10 August 2007
George is non-executive Chairman of EasyDate plc (EZD), Corsair Memory Inc, and Scotcloth Ltd. He is also a non-executive Director of
Summit Corporation plc (SUMM) and Oxonica plc. From 2000-2007 George was Chief Financial Officer of Wolfson Microelectronics plc (WLF),
a leading global provider of high performance mixed-signal 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,
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, 41 — Chief Executive Officer :: Co-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 revenue integrity 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. He received the U.K. Software & Technology
Entrepreneur of the Year Award from Ernst & Young in 2008 and was the Insider Elite Young Business Leader of the Year in 2009. Prior to
launching Craneware, Keith worked primarily in international management, where he handled sales, marketing and technical consulting for
companies with operations around the world. He studied Physics at Heriot-Watt University, Edinburgh, receiving a bachelor’s degree in 1991.
Craig T Preston, 39 — 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, 48 — 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. Prior to EPCC, Neil was a co-founder and later
Commercial Director of 3L, a software firm specialising in software 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 is currently a director of ILumen, Inc., and on the Board of Advisors of Company.com, CEO Ventures, and the Robinson College of Business.
Before that he 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, from under 1,000 employees to over 5,000, and from 1 million
business customers to over 2.5 million. Ron also engineered over 20 acquisitions and oversaw their successful integration into the company.
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.
Craneware plc
Annual Report 2010
10
Directors' Report
The Directors present herewith their report and the
audited financial statements for the year ended 30
June 2010.
Principal Activities
The Group's principal activity continues to be the
development, licensing and post contract support of
computer software for the US healthcare industry.
Company Registration
The Company is registered in Scotland as a public
limited company with number SC196231.
Business Review
» Market Position and Products
Craneware continues to be a leading provider of
solutions that improve financial performance for US
hospitals and healthcare organisations. Full details
of the Company’s market position and products are
given in the Operational Review. 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.
The Company opened a new office in Atlanta, Georgia,
just following the close of the year on 1st July. It will
be home to our training facilities, and replaces our
offices in Kansas. In addition to Atlanta, the Company
retains its head office in Florida and its office in
Arizona.
» Financial Highlights
With the value of total contracts signed in the year
increasing 34% to $58.1m (2009: $43.2m), the
Group has increased revenues by 23.5% to $28.4m;
operating profits from $5.4m to $7.1m and future
revenue under contract of $89.8m (as at 30 June
2010). Cash reserves increased to $29.4m (2009:
$26.1m) after paying $2.0m in taxation and $3.0m in
dividends to shareholders during the year.
» Operational Highlights & 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; and
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,
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.
With approximately one third of its cost denominated
in Sterling, the Company continually assesses the
most appropriate approach to managing its currency
exposure in line with an overall goal of achieving
predictable earnings growth.
Nevertheless the market is not immune to the macro-
economic climate and, with the increasing focus and
requirements of the proposed Healthcare reform,
the Group expects the market to continue to be very
competitive. The Group 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 responsiveness to changes,
and the opportunities that result, as they arise.
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
Deferredincome
Furthercontractualentitlements
Future revenue under contract
2006
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Craneware plc
Annual Report 2010
11
Directors' Report [Cont'd.]
Dividends
During the year the Company paid an interim
dividend of 4.7p (7.05 cents). The Directors are
recommending the payment of a final dividend of
3.3p (4.94 cents) per share giving a total dividend of
8.0p (11.99 cents) per share based on the results for
2010 (2009: 4.7p (7.43 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 12 November 2010.
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 earnings. The level of
distributions will be subject to the Group’s working
capital requirements and the ongoing needs of the
business.
Dividends/Share (pence)
*Subject to approval at 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 these
financial statements.
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 Group’s 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 $3.8 (2009:
$3.0m) net of expenditure capitalised of $0.5m
(2009: $0.6m).
2007
2008
2009
2010
Directors
The Directors of the Company are listed on page 10.
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.
During the year the Company’s Articles of Association
were amended, via a special resolution approved
at the Company’s Annual General Meeting, to bring
them into line with the provisions of the Companies
Act 2006.
Details of the Directors service contracts and
their respective notice terms are detailed in the
Remuneration Committee Report on page 18.
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 25,365,850 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 68,100 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 interests of the Directors who held office at 30
June 2010 and up to the date of this report, were as
follows:-
G R Elliot
N P Heywood
K Neilson
2010
15,650
127,926
3,398,044
3,541,620
2009
15,650
145,272
3,887,800
4,048,722
Director's interests in share options are detailed in
the Remuneration Committee Report on page 19.
Substantial shareholders
As at the 1 September 2010, 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
3,398,044
13.40
K Neilson
Standard Life Investments
3,202,589
12.63
W G Craig
3,149,626
12.42
Blackrock Investment
Management
2,520,427
9.94
Fidelity Investments
2,446,410
9.64
Artemis Investment
Management
1,391,105
5.48
Aegon Asset Management
1,385,769
Axa Investment Managers
1,370,000
F&C Asset Management
857,143
5.46
5.40
3.38
Liontrust Asset
Management
792,792
3.13
The total number of shares as at 30 June 2010
and 1 September 2010 was 25,365,850.
Indemnity of Directors and Officers
Under the Company’s Articles of Association and
subject to the provisions of the Companies Act, the
Company may and has indemnified all Directors or
other officers 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 2010
12
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:
Craig Preston
Company Secretary
3 September 2010
Directors' Report
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
meet regularly to review performance against the
Group’s strategic aims and development roadmaps.
Policy on payment of Payables
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 payables at 30
June 2010 represented, on average 25 days purchases
(2009: 26 days) for the Group and 26 days purchases
(2009: 30 days) for the Company.
Charitable and Political Contributions
The Group made charitable contributions of $5,401
during the year relating to corporate participation in
the Highland 100 charitable bike riding events (2009:
$4,820). Neither the Company nor its subsidiary made
any donation for political purposes in fiscal years
2010 or 2009.
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.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual
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).
Under company law the Directors must not approve
the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs
of the Group and the Company and of the profit or
loss of the Group for that period. In preparing these
financial statements, the Directors are required to:
select suitable accounting policies and then apply them
consistently;
make judgements and accounting estimates that are
reasonable and prudent; and
state whether applicable IFRSs as adopted by the
European Union and IFRSs issued by IASB have been
followed, subject to any material departures disclosed
and explained in the financial statements
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the company’s transactions and disclose with
reasonable accuracy at any time the financial position
of the company and the group and enable them to
ensure that the financial statements comply with
the Companies Act 2006. They are also responsible
for safeguarding the assets of the Company and
the Group and hence for taking reasonable steps
for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance
and integrity of the company’s website. Legislation in
the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
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Craneware plc
Annual Report 2010
13
Craneware plc
Annual Report 2010
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 as applicable under
the Listing Rules of the UK Listing Authority (the
“Code”). Although the Code is not compulsory for AIM
listed companies, the Board has applied its principles
as far as practicable for a public Company of its size in
this Report and the Remuneration Committee Report
beginning on page 17:
The Board
The Code requires the Company to have an effective
Board whose role is to develop strategy and provide
leadership to the Company as a whole, as well as
ensuring a framework of controls exist which allow
for the identification, assessment and management of
risk, ultimately taking collective responsibility for the
success of the Company.
Through the leadership of the Chairman, the
Board sets the Company’s strategic goals, ensuring
obligations to shareholders are met. 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,
interim statements, and any significant financing and
capital expenditure plans.
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.
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 and further meet annually without the
Chairman present.
Through these and the measures outlined below, the
Board believes it has met its requirements in this area.
Role of the Chairman and
Chief Executive Officer
The Code requires that there should be a clear
division of responsibilities between the running of
the Board and the executive responsible for running
the company’s business, so as to ensure that no one
person has unrestricted powers of decision.
The Board has met this requirement by establishing
clearly defined and well understood roles for George
Elliott as Chairman of the Company, and Keith
Neilson as Chief Executive Officer. The Chairman is
responsible for the leadership of the Board, ensuring
its effectiveness and setting its agenda. Once strategic
and financial objectives have been agreed by the
Board, it is the Chief Executive Officers responsibility
to ensure they are delivered upon. To facilitate
Craneware plc
Annual Report 2010
14
this, the Chief Executive Officer chairs the Group’s
Operations board which additionally comprises the
Chief Financial Officer and the Senior Management
Team. The day-to-day operation of the Group’s
business is managed by this board, subject to clearly
defined authority limits.
The Chairman, in conjunction with the Company
Secretary, agrees Board agendas and ensures the
Board are supplied with information that is timely,
accurate and clear on all aspects of the Company’s
business, thereby enabling the Board to fulfil its
duties.
The Chairman, George Elliott, holds other
directorships, as detailed in his biography on page
10. 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.
Composition of and Appointments
to the Board
The Code requires that there should be a balance of
Executive and Non-Executive Directors and when
appointing new Directors to the Board there should
be a formal, rigorous and transparent procedure.
The Board comprises a Non-Executive Chairman,
Chief Executive Officer, Chief Financial Officer and
two independent Non-Executive Directors. Short
Biographies of the Directors are given on page 10.
All Non-Executive Directors serving at the year-end
are considered to be independent. Non-Executive
Directors are paid a bonus, capped at 10% of their
current year salary and fees; however the Board does
not consider this to affect their independence.
The Board is satisfied with this 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 as this
mix of skills and business experience is a major
contribution to the proper functioning of the Board,
helping to ensure matters are fully debated and that
no individual or group dominates the Board decision-
making process.
When a new appointment to the Board 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. A formal process is then undertaken,
usually involving external recruitment agencies, with
appropriate consideration being given, in regards
to Executive appointments, to internal and external
candidates. Before undertaking the appointment of
a Non-Executive Director, the Chairman 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.
Information and development
A further principle of the Code is that information of a
sufficient quality is supplied to the Board in a timely
manner.
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.
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.
Performance Evaluation
The Code requires the Board to undertake a formal
and rigorous evaluation of its own performance
annually and that of its Committees and individual
Directors.
During the year, a formal evaluation was conducted
by means of a detailed questionnaire which was
completed by each Director. The results of this process
were collated by the Chairman and were presented to
the Board as a whole. Based on this evaluation, the
Board has taken steps to implement certain agreed
upon suggestions, but overall has concluded that its
performance in the past year had been satisfactory.
Re-election
Under the Code, Directors should offer themselves
for re-election at regular intervals and under
the Company’s Articles of Association, 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. 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.
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,
George Elliott and Craig Preston will retire from office
at the Company’s forthcoming AGM and stand for
re-appointment.
Corporate Governance Report
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.
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:
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No. Meetings in year
Executive Directors
K Neilson
C T Preston
Non Executive Directors
G R Elliot
N P Heywood
R Verni
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, Chief Executive
Officer and other senior management 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;
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.
Under its terms of reference the Audit Committee
is responsible for monitoring the independence,
objectivity and performance of the external auditors,
and for making a recommendation to the Board
regarding the appointment of external auditors
on an annual basis. The Group’s external auditors,
PricewaterhouseCoopers LLP, were first appointed as
external auditor of the Company for the year ended
30 June 2003.
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 de-minimis level to be approved in
advance by the Chairman of the Audit Committee.
The Remuneration Committee
The Remuneration Committee was chaired by Ron
Verni and its other members are George Elliott and
Neil Heywood. 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.
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.
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 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.
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Craneware plc
Annual Report 2010
15
AIM Rule Compliance Report
Craneware plc is quoted on AIM and as a result the
Company has complied with AIM Rule 31 which
requires the following:
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
3 September 2010
Corporate Governance Report [Cont'd.]
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. A number of
employees participate in the growth of the business
through the ownership of share options with all
employees participating 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.
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
shareholders and analysts to discuss strategic and
other issues including the Company’s financial 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.
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.
Craneware plc
Annual Report 2010
16
Remuneration Committee Report
This report sets out Craneware plc’s remuneration
and benefits for the financial year under review. A
resolution to approve the report will be proposed
at the Annual General Meeting of the Company at
which the financial statements will be presented for
approval.
Remuneration Committee
The Company has a Remuneration Committee
(“the Committee”) in accordance with the
recommendations of the Combined Code. The
members of the Committee are Ron Verni (Chairman),
Neil Heywood and George Elliott. None of the
Committee has any personal financial interests, other
than as shareholders, in matters directly decided
by this Committee, nor are there any conflicts of
interests arising from cross directorships or day to day
involvement in the running of the business.
The Company’s Chief Executive Officer often attends
meetings, at the invitation of the Committee, to
advise on operational aspects of implementing
existing and proposed policies. The Company
Secretary acts as secretary to the Committee.
Under the Committee chairman’s direction, the
Chief Executive Officer and the Company Secretary
have responsibility for ensuring the Committee has
the information relevant to its deliberations. In
formulating its policies, the Committee has access,
as required, to professional advice from outside
the Company and to publicly available reports and
statistics.
The remuneration of the non-executive Directors is
determined by the Board as a whole within limits set
out in the Articles of Association.
Policy
Executive remuneration packages are designed to
attract, motivate and retain Directors of the calibre
necessary to achieve the Group’s growth objectives
and to reward them for enhancing shareholder value.
The main elements of the remuneration package for
Executive Directors and senior management are:
Basic annual salary and benefits in kind;
Annual performance related bonus;
Pension entitlement; and,
Share Option awards.
The Company’s policy is that a substantial proportion
of the remuneration of Executive Directors should be
performance related.
None of the Executive Directors hold any outside
appointments.
Directors remuneration
In assessing all aspects of the package provided, the
Committee compares packages offered by similar
AIM listed companies. The Committee has designed
the overall Director’s remuneration packages to
ensure both the short and long term objectives of the
Company are met and potentially exceeded and also
that the Directors are incentivised to maximise return
to the Company’s shareholders.
The remuneration package comprises:
(i) Basic Salary and pension entitlement
This is normally reviewed annually, usually in
September, or when an individual’s position or
responsibilities change and is normally paid as a fixed
cash sum monthly.
In regards to pension entitlement, the Company pays
a fixed sum to a personal pension plan on behalf of
the Chief Executive Officer.
(ii) Annual Performance Related Bonus
Under the annual performance related bonus
plan Executive Directors are eligible to earn a cash
bonus payment based on targets that are set by
the Committee. In determining these targets, the
Committee’s objective is to set targets that reflect
challenging financial performance in the current
year, but also provide for the future growth of the
Company, measures adopted relate to profitability,
first year value and total contract value of new sales
in the year.
(iii) Share options
The Company operates the Craneware Employees’
Share Option Plan 2007 (“Share Option Plan”) from
which, and at the discretion of the Committee,
Executive Directors and other employees (including
senior management) may be awarded share options
under this scheme.
During the year, the Executive Directors were awarded
share options under this scheme, details of which
are shown in the table on page 19. These options are
subject to performance criteria based on long term
shareholder returns.
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-
4
2
Craneware plc
Annual Report 2010
17
Remuneration Committee Report [Cont'd.]
Service Contracts
The Executive Directors and the Non-Executive Directors are employed under individual employment arrangements or letters of appointment where appropriate. Details of
these service contracts are set out below.
George Elliott was appointed Chairman for an initial term of three years commencing 10 August 2007, during the year the Board extended the term of his contract for a
further three years.
Executives
KNeilson
CTPreston
Non-Executives
GRElliott
NPHeywood
RVerni
Contract Date
Unexpired Term
Normal Notice Period
Founder
15September2008
Rolling
Rolling
10August2007
11January2002
1May2009
2years11months
Rolling
Rolling
*3months
*3months
1month
1month
1month
* The notice terms for Keith Neilson and Craig Preston are normally three months, however in the event of a change of control, these notice periods are automatically extended to twelve months.
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 2010 were as follows:
Salary/Fees ($)
Benefits ($)
Bonus ($)
Pension ($)
2010 Total ($)
2009 Total ($)
Executives
KNeilson
CTPreston
Non-Executives
GRElliott
NPHeywood
RVerni
Total
245,681
217,203
92,550
47,984
45,149
697
600
149,610
149,610
7,910
-
403,898
367,413
327,821
*274,586
-
-
-
7,855
4,219
4,480
-
-
-
100,405
52,203
49,629
973,548
87,772
42,292
**6,667
739,138
648,567
1,297
315,774
7,910
• 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.
*Appointed to the Board on 15 September 2008
** Appointed to the Board on 1 May 2009
Craneware plc
Annual Report 2010
18
Remuneration Committee Report
Directors' interests in share options
Directors' share options as at 30th June 2010 were, in respect of Directors who held office during the course of the year:
Exercise Price
(cents)
Exercise Price
(pence)
Issue
Date
Held At
30/06/09
Granted
During Year
Exercised
During Year
Lapsed
During Year
Held At
30/06/10
K Neilson
Ordinaryshares
(“initialoptions”)
Ordinaryshares
C T Preston
Ordinaryshares
Ordinaryshares
1.991
534.0
365.0
534.0
1.0
Sep-07
20,000
-
335.0
Dec-09
-
42,870
208.0
335.0
Sep-08
Dec-09
72,115
-
-
37,649
-
-
-
-
-
-
-
-
20,000
42,870
72,115
37,649
Employee share options as at 30th June 2010 were:
Exercise Price
(cents)
Exercise Price
(pence)
Issue
Date
Ordinaryshares
0.007
0.0033
May-06
Held At
30/06/09
18,000
1.0
Sep-07
910,300
Granted
During Year
-
-
-
-
-
-
-
-
44,285
89,784
50,100
40,600
14,424
30,000
0.0033
187.0
211.0
212.0
343.0
335.0
Sep-07
May-08
Oct-08
Jan-09
Oct-09
Dec-09
Ordinaryshares
(“initialoptions”)
Ordinaryshares
Ordinaryshares
Ordinaryshares
Ordinaryshares
Ordinaryshares
Ordinaryshares
1.991
0.007
369.0
355.3
310.0
542.0
534.0
On behalf of the Remuneration Committee:
Ron Verni
Chairman of the Remuneration Committee
3 September 2010
Exercised
During Year
(18,000)
Lapsed
During Year
Held At
30/06/10
-
-
-
(1,200)
909,100
(50,100)
-
-
-
-
-
-
-
-
-
40,600
14,424
(30,000)
-
-
-
44,285
89,784
Craneware plc
Annual Report 2010
19
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2
Independent Auditors' Report to the members of Craneware plc
We have audited the Group and Parent Company
financial statements (the ‘‘financial statements’’)
of Craneware plc for the year ended 30 June 2010
which comprise the Consolidated Statement of
Comprehensive Income, the Group and Company
Statement of Changes in Equity, the Consolidated and
Company Balance Sheets, the Group and Company
Statements of Cash Flows 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 and, as regards
the Parent Company financial statements, as applied
in accordance with the provisions of the Companies
Act 2006.
Respective responsibilities of
Directors and auditors
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 Chapter 3 of Part 16 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.
Opinion on financial statements
In our opinion:
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 2010 and of the Group’s profit and
Group’s and the Parent Company’s Cash Flows 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
Mark Hoskyns-Abrahall
Senior Statutory Auditor
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Edinburgh
3 September 2010
Craneware plc
Annual Report 2010
20
Consolidated Statement of Comprehensive Income for the year ended 30 June 2010
Revenue
Costofsales
Gross profit
Netoperatingexpenses
Operating profit
Analysed as:
Profitbeforeshare-basedpayments,depreciationandamortisation
Share-basedpayments
Depreciationofplantandequipment
Amortisationofintangibleassets
Financeincome
Profit before taxation
Taxchargeonprofitonordinaryactivites
Profit for the year
The results relate to continuing operations.
The accompanying notes are an integral part of these financial statements.
Earnings per share for the year attributable to equity holders
-Basic($pershare)
-Diluted($pershare)
Notes
2010
$'000
2009
$'000
4
5
6
8
9
10
28,397
(2,553)
25,844
22,993
(1,381)
21,612
(18,781)
(16,262)
7,063
5,350
7,622
(114)
(192)
(253)
195
7,258
(1,733)
5,525
5,812
(82)
(204)
(176)
520
5,870
(1,422)
4,448
Notes
12a
12b
2010
0.218
0.210
2009
0.177
0.170
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Craneware plc
Annual Report 2010
21
Statements of Changes in Equity for the year ended 30 June 2010
Notes
Share Capital
$'000
Share Premium Account
$'000
Other Reserves
$'000
Retained Earnings
$'000
Group
At1July2008
Share-basedpayments
Losses
Optionsexercised
Retainedprofitfortheyear
Dividends
At30June2009
Share-basedpayments
Optionsexercised
Retainedprofitfortheyear
Dividends
At 30 June 2010
Company
At1July2008
Share-basedpayments
Optionsexercised
Retainedprofitfortheyear
Dividends
At30June2009
Share-basedpayments
Optionsexercised
Retainedprofitfortheyear
Dividends
At 30 June 2010
509
9,253
-
-
3
-
-
-
-
(3)
-
-
512
9,250
-
-
-
-
-
-
-
-
3,041
82
-
-
-
-
3,123
114
-
-
-
Total
$'000
16,099
293
(248)
3,296
211
(248)
-
-
4,448
4,448
(1,917)
5,790
730
-
(1,917)
18,675
844
-
5,525
5,525
(2,992)
(2,992)
512
9,250
3,237
9,053
22,052
509
9,253
-
3
-
-
-
(3)
-
-
512
9,250
-
-
-
-
-
-
-
-
2,195
31
-
-
-
2,226
52
-
-
-
2,191
14,148
38
-
69
-
4,117
4,117
(1,917)
(1,917)
4,429
16,417
131
-
183
-
4,877
4,877
(2,992)
(2,992)
512
9,250
2,278
6,445
18,485
11
11
11
11
The accompanying notes are an integral part of these financial statements.
Other reserves relate to share-based payments and are detailed in Note 1 and these reserves are not available for distribution.
Craneware plc
Annual Report 2010
22
Consolidated Balance Sheet as at 30 June 2010
ASSETS
Non-Current Assets
Plantandequipment
Intangibleassets
Deferredtax
Tradeandotherreceivables
Current Assets
Tradeandotherreceivables
Cashandcashequivalents
Total Assets
EQUITY & LIABILITIES
Non-Current Liabilities
Deferredincome
Current Liabilities
Deferredincome
Tradeandotherpayables
Total Liabilities
Equity
Calledupsharecapital
Sharepremiumaccount
Otherreserves
Retainedearnings
Total Equity
Total Equity and Liabilities
Notes
2010
$'000
2009
$'000
13
14
17
16
16
20
281
1,474
1,521
-
345
1,206
718
25
3,276
2,294
8,596
29,442
38,038
41,314
5,187
26,169
31,356
33,650
218
218
124
124
13,660
10,964
21
5,384
3,887
19,044
14,851
19,262
14,975
18
512
9,250
3,237
9,053
512
9,250
3,123
5,790
22,052
18,675
41,314
33,650
The accompanying notes are an integral part of these financial statements.
The financial statements on pages 21 to 42 were approved and authorised for issue by the board of Directors on 3 September 2010 and signed on its behalf by:
Keith Neilson
Director
Craig Preston
Director and Company Secretary
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s
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2
Craneware plc
Annual Report 2010
23
Company Balance Sheet as at 30 June 2010
ASSETS
Non-Current Assets
Investmentinsubsidiaryundertaking
Plantandequipment
Intangibleassets
DeferredTax
Tradeandotherreceivables
Current Assets
Tradeandotherreceivables
Cashandcashequivalents
Total Assets
EQUITY & LIABILITIES
Non-Current Liabilities
Deferredincome
Current Liabilities
Deferredincome
Tradeandotherpayables
Total Liabilities
Equity
Calledupsharecapital
Sharepremiumaccount
Otherreserves
Retainedearnings
Total Equity
Total Equity and Liabilities
Notes
2010
$'000
2009
$'000
15
13
14
17
16
16
20
21
18
-
159
1,467
284
-
-
250
1,198
157
25
1,910
1,630
7,670
28,213
35,883
37,793
4,584
23,959
28,543
30,173
218
218
124
124
13,660
5,430
19,090
19,308
512
9,250
2,278
6,445
18,485
37,793
10,964
2,668
13,632
13,756
512
9,250
2,226
4,429
16,417
30,173
The accompanying notes are an integral part of these financial statements.
The financial statements on pages 21 to 42 were approved and authorised for issue by the board of Directors on 3 September 2010 and signed on its behalf by:
Keith Neilson
Director
Craig Preston
Director and Company Secretary
Craneware plc
Annual Report 2010
24
Statements of Cash Flows for the year ended 30 June 2010
Cash Flows from operating activities
Cashgeneratedfromoperations
Interestreceived
Taxpaid
Netcashfromoperatingactivities
Cash Flows from investing activities
Purchaseofplantandequipment
Capitalisedintangibleassets
Netcashusedininvestingactivities
Cash Flows from financing activities
Dividendspaidtocompanyshareholders
Netcash(used)infinancingactivities
Notes
19
Group
Company
2010
$'000
2009
$'000
2010
$'000
2009
$'000
8,906
195
(2,188)
6,913
(127)
(521)
(648)
7,378
520
(202)
7,696
(134)
(588)
(722)
8,572
195
(966)
7,801
(37)
(518)
(555)
6,145
520
(464)
6,201
(78)
(583)
(661)
11
(2,992)
(1,917)
(2,992)
(1,917)
(2,992)
(1,917)
(2,992)
(1,917)
Net increase in cash and cash equivalents
Cashandcashequivalentsatthestartoftheyear
3,273
5,057
4,254
3,623
26,169
21,112
23,959
20,336
Cash and cash equivalents at the end of the year
29,442
26,169
28,213
23,959
The accompanying notes are an integral part of these financial statements.
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Craneware plc
Annual Report 2010
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 $1.4961/£1 (2009:
$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
IFRS 1, ‘First time adoption of IFRS’ and IAS 27,
‘Consolidated and separate financial statements’
(effective 1 July 2009*), an 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 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. The amendment
provides additional clarification that only service
and performance conditions are vesting conditions
and therefore all other features are required to be
included in the grant date fair value. There is no
impact on the Group financial statements of this
amendment.
IFRS 3, ‘Business combinations’ and the consequential
revisions to IAS 27, ‘Consolidated and separate
financial statements’ (both effective 1 July 2009*),
set out a comprehensive set of revisions on applying
the acquisition method. However, there is no impact
on the Group financial statements although any
future acquisition costs will now be required to be
expensed.
IFRS 7, ‘Financial instruments: Disclosure’ (effective 1
January 2009*), an amendment requiring enhanced
disclosures in respect of fair value measurement and
reinforces existing principles about liquidity risk. In
particular, the amendment requires that a maturity
analysis of financial assets held for managing
liquidity risk be given if it better serves the users of
the financial statements. There is no material impact
on the Group financial statements.
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 impact on the Group financial statements at
this time 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
prohibits the presentation of items of income and
expense in the statement of recognised gains
and losses. It requires entities to adopt either
one performance statement (the statement of
comprehensive income) or two statements (income
statement in addition to the former). Owner changes
in equity are show in a statement of changes in
equity. The Group financial statements have reflected
these requirements and there is no material impact
on either results or presentation.
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 does not have
any impact on the financial statements as the Group
has no borrowings.
IAS 32, ‘Financial instruments: Presentation’ and IAS
1, ‘Presentation of financial statements on putable
financial instruments and obligations arising on
liquidation’ (effective 1 January 2009*). These
amendments have no impact on the Group financial
statements.
IAS 39, ‘Financial instruments: Recognition and
measurement’ (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 no impact on the Group financial statements
regarding this amendment.
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 has
no 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. The interpretation has
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 has no impact on the Group financial
statements.
Craneware plc
Annual Report 2010
26
Notes to the Financial Statements
New Standards, amendments and
interpretations not yet effective
IFRS 2, ‘Share-based payments’ (effective 1 January
2010*), amendment relating to group cash-settled
share based payment transactions.
IFRS 9, ‘Financial instruments’ (effective 1 January
2013*). IFRS 9 is a work in progress and will
eventually replace IAS 39 ‘Financial Instruments:
Recognition and Measurement’ in its entirety.
IAS 24, ‘Related party disclosures’ (effective 1 January
2011*), revision to simplify the definition of a related
party and a partial exception for related party
transactions with government-related entities.
IAS 32, ‘Financial instruments: Presentation’
(effective 1 February 2010*) amendment relating to
classification of rights issues.
IFRIC 19, ‘Extinguishing financial liabilities with
equity instruments’ (effective 1 July 2010*) a
clarification of the requirements of IFRS when an
entity renegotiates the terms of a financial liability
with its creditors and the creditors accept the
entities shares or equity instruments as full or partial
settlement.
Amendments resulting from the IASB’s annual
improvement project.
The Directors anticipate that the future adoption of
these standards, amendments and interpretations
(where relevant to the Group and subject to their
endorsement by the EU) 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 statement of comprehensive income
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 statement of comprehensive income 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, professional services (included installation),
support services and distribution agreements.
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, which generally is over the period of
the underlying contract.
Revenue from professional services, including
consulting, is recognised as the applicable services
are provided, and from consulting engagements
when all obligations under the consulting agreement
have been fulfilled.
Software and distribution agreement with third
parties are 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
statement of comprehensive income 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.
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Craneware plc
Annual Report 2010
27
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 Statements of
Cash Flows, cash and cash equivalents comprise of
cash on hand, deposits held with banks and short
term high liquid investments.
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 Statement of Comprehensive Income
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 [Cont'd.]
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 statement of comprehensive
income over the period from the grant date to the
vesting date of the relevant options. As there is a
temporary difference between the accounting and tax
bases a deferred tax asset is recorded. The deferred
tax asset arising is calculated by comparing the
estimated amount of tax deduction to be obtained in
the future (based on the Company’s share price at the
balance sheet date) with the cumulative amount of
the compensation expense recorded in the statement
of comprehensive income. If the amount of estimated
future tax deduction exceeds the cumulative amount
of the remuneration expense at the statutory rate, the
excess is recorded directly in equity against retained
earnings.
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.
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 to 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
statement of comprehensive income 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 statement of
comprehensive income.
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.
Craneware plc
Annual Report 2010
28
Notes to the Financial Statements
2Critical accounting estimates
and 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
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.
3Financial risk management
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)Marketrisk
(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
pre-tax profits by approximately $675,000 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)Creditrisk
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)Liquidityrisk
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 21 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.
4Revenue
The Chief Operating Decision Maker has been
identified as the Board of Directors. 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. Consequently the Board have determined
that Group supplies only one geographical market
place and as such revenue is presented in line with
management information without the need for
additional segmental analysis.
At30June2009
Less than 1 year $'000
Between 1 & 2 years $'000
Between 2 & 5 years $'000
TradePayables
At 30 June 2010
Trade Payables
551
588
-
-
-
-
Over 5 years
$'000
-
-
Total
$'000
551
588
Craneware plc
Annual Report 2010
29
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e
n
t
7
-
9
6
D
i
r
e
c
t
o
r
s
'
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e
p
o
r
t
B
o
a
r
d
o
f
D
i
r
e
c
t
o
r
s
1
1
-
1
3
1
0
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
R
e
p
o
r
t
R
e
m
u
n
e
r
a
t
i
o
n
C
o
m
m
i
t
t
e
e
R
e
p
o
r
t
1
7
-
1
9
1
4
-
1
6
A
u
d
i
t
o
r
s
R
e
p
o
r
t
P
r
i
m
a
r
y
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
2
1
-
2
5
2
0
N
o
t
e
s
t
o
t
h
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
2
6
-
4
2
Notes to the Financial Statements [Cont'd.]
5Net operating expenses
Net operating expenses are comprised of the following:-
Salesandmarketingexpenses
ClientServicing
Researchanddevelopment
Administrativeexpenses
Share-basedpayments
Depreciationofplantandequipment
Amortisationofintangibleassets
Exchange(gain)/loss
Net operating expenses
6Operating profit
The following items have been included in arriving at operating profit:-
Staffcosts
Depreciationofplantandequipment
Amortisationofintangibleassets
Impairmentoftradereceivables
Purchasedlicencesexpensed
Operatingleaserentsforpremises
Notes
7
Services provided by the Group's auditor
During the year the Group obtained the following services from the Group's auditors as detailed below:-
Statutoryaudit-Group
Taxcomplianceandothertaxservices
Employeeincentiveadvice
Otherassuranceservices
7Staff costs
The average number of persons employed by the Group during the year, excluding Non-Executive Directors, is analysed below:-
Salesanddistribution
ClientServicing
Researchanddevelopment
Administration
Employment costs of all employees excluding Non-Executive Directors:-
Wagesandsalaries
Socialsecuritycosts
Postemploymentbenefits
Share-basedpayments
Total direct costs of employment
Highestpaiddirector:-
Salaryandshort-termemployeebenefits
Postemploymentbenefits
Share-basedpayments
2010
$'000
7,102
4,037
3,785
3,314
114
192
253
(16)
2009
$'000
6,110
4,017
2,960
2,662
82
204
176
51
18,781
16,262
2010
$'000
12,196
192
253
202
957
263
2010
$'000
64
54
3
3
124
2010
Number
33
41
39
18
131
2010
$'000
10,952
1,114
16
114
12,196
396
8
6
410
2009
$'000
10,247
204
176
247
233
232
2009
$'000
60
59
-
4
123
2009
Number
26
40
35
16
117
2009
$'000
9,211
929
25
82
10,247
320
8
3
331
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
page 42. Retirement benefits are accruing to one of the Executive Directors under a defined contribution scheme (2009: 1).
Craneware plc
Annual Report 2010
30
Notes to the Financial Statements
8Share-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 Statement of Comprehensive Income $113,589 (2009: $81,847) as detailed in Note 7.
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 $5.34 (£3.56) to $5.93 (£4.11). The market value at 30 June 2010 was $5.98 (£4.00).
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. A sufficiently long trading
history of the Companies own share price, dating from IPO to date of grant, results in an actual volatility calculation for all grants from December 2010. Prior to this date
volatility had to be estimated by reference to similar companies whose shares are traded on a recognised stock exchange.
The assumptions for each option grant were as follows:
Date of Grant
22-Dec-09
14-Oct-09
05-Jan-09
21-Oct-08
08-Sep-08
02-May-08
14-Sep-07
13-Sep-07
Options over Ordinary shares
Sharepriceatdateofgrant
$5.34
$5.42
$3.10
$3.55
$3.65
Sharepriceatdateofgrant
£3.35
£3.43
£2.12
£2.11
£2.08
Vestingperiod(years)
Expectedvolatility
Riskfreerate
Dividendyield
Exerciseprice
Exerciseprice
Numberofemployees
Sharesunderoption
Fairvalueperoption
$3.69
£1.87
3.00
40%
$2.60
£1.28
3.04
40%
$2.60
£1.28
0.00
40%
3.00
23%
3.00
40%
3.00
40%
3.00
40%
3.00
40%
1.96%
1.86%
2.10%
3.82%
4.41%
5.00%
5.75%
5.75%
1.50%
1.4%
1.5%
1.5%
1.5%
$5.34
$5.42
$3.10
$3.55
$3.65
£3.35
£3.43
£2.12
£2.11
£2.08
1%
$3.69
£1.87
1%
1%
$0.02
0.007¢
£0.01
0.0033p
10
1
1
1
1
1
84
1
170,303
44,285
30,000
14,424
72,115
40,600 1,400,000
50,100
$1.34
$1.37
$0.85
$1.01
$1.67
$1.11
$0.95
$2.60
Craneware plc
Annual Report 2010
31
O
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r
a
t
i
o
n
a
l
R
e
v
i
e
w
C
h
a
i
r
m
a
n
'
s
S
t
a
t
e
m
e
n
t
7
-
9
6
D
i
r
e
c
t
o
r
s
'
R
e
p
o
r
t
B
o
a
r
d
o
f
D
i
r
e
c
t
o
r
s
1
1
-
1
3
1
0
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
R
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p
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t
R
e
m
u
n
e
r
a
t
i
o
n
C
o
m
m
i
t
t
e
e
R
e
p
o
r
t
1
7
-
1
9
1
4
-
1
6
A
u
d
i
t
o
r
s
R
e
p
o
r
t
P
r
i
m
a
r
y
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
2
1
-
2
5
2
0
N
o
t
e
s
t
o
t
h
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
2
6
-
4
2
Notes to the Financial Statements [Cont'd.]
8Share-based payments (continued)
The following options have been granted over Ordinary shares:
2006 Share Option Plan:-
Ordinary share options (0.0033p exercise price)
Outstandingat1July
Granted
Forfeited
Exercised
Outstanding at 30 June
2007 Share Option Plan:-
Initial options of ordinary shares (£0.01 exercise price)
Outstandingat1July
Granted
Forfeited
Exercised
Outstanding at 30 June
Ordinary share options (£1.87 exercise price)
Outstandingat1July
Granted
Forfeited
Outstanding at 30 June
Ordinary share options (£2.08 exercise price)
Outstandingat1July
Granted
Forfeited
Outstanding at 30 June
Ordinary share options (£2.11 exercise price)
Outstandingat1July
Granted
Forfeited
Outstanding at 30 June
Ordinary share options (£2.12 exercise price)
Outstandingat1July
Granted
Forfeited
Outstanding at 30 June
Ordinary share options (£3.43 exercise price)
Outstandingat1July
Granted
Forfeited
Outstanding at 30 June
Ordinary share options (£3.35 exercise price)
Outstandingat1July
Granted
Forfeited
Outstanding at 30 June
Craneware plc
Annual Report 2010
32
2010
Options Number
2009
Options Number
68,100
255,900
-
-
(68,100)
-
-
-
(187,800)
68,100
930,300
1,158,800
-
(1,200)
-
929,100
40,600
-
-
40,600
72,115
-
-
72,115
14,424
-
-
14,424
30,000
-
(30,000)
-
-
44,285
-
44,285
-
170,303
-
170,303
-
(228,500)
-
930,300
40,600
-
-
40,600
-
72,115
-
72,115
-
14,424
-
14,424
-
30,000
-
30,000
-
-
-
-
-
-
-
-
Notes to the Financial Statements
9Finance Income
Depositinterestreceivable
Otherinterestreceivable
Total interest receivable
10Tax on profit on ordinary activities
Profitonordinaryactivitiesbeforetax
Current tax
Corporationtaxonprofitsoftheperiod
Foreignexchangeontaxationintheyear
Adjustmentsforprioryears
Totalcurrenttaxcharge
Deferred tax
Origination&reversaloftimingdifferences
Adjustmentsforpriorperiods
Totaldeferredtax(credit)/charge
Tax on profit on ordinary activities
2010
$'000
195
-
195
2010
$'000
7,258
2,005
58
(257)
1,806
(73)
-
(73)
1,733
2009
$'000
472
48
520
2009
$'000
5,870
1,620
24
(543)
1,101
122
199
321
1,422
Thedifferencebetweenthecurrenttaxchargeonordinaryactivitiesfortheyear,reportedintheconsolidatedstatementof
comprehensiveincome,andthecurrenttaxchargethatwouldresultfromapplyingarelevantstandardrateoftaxtotheprofiton
ordinaryactivitiesbeforetax,isexplainedasfollows:
ProfitonordinaryactivitiesattheUKtaxrate28%(2009:28%)
Effectsof
Adjustmentinrespectofprioryears
2,032
1,644
Currenttax
Deferredtax
Statetax
AdditionalUStaxonprofit34%(2009:34%)
Foreignexchange
Expensesnotdeductiblefortaxpurposes
Taxdeductiononshareplancharges
Total tax charge
11Dividends
The dividends paid during the year were as follows:-
Finaldividend,re30June2009–4.76cents(2.9pence)/share
Interimdividend,re30June2010–7.05cents(4.7pence)/share
Total dividends paid to company shareholders in the year
(257)
-
49
59
(33)
(1)
(116)
1,733
2010
$'000
1,220
1,772
2,992
(543)
199
43
51
24
17
(13)
1,422
2009
$'000
1,172
745
1,917
TheproposedfinaldividendissubjecttoapprovalbytheshareholdersattheAnnualGeneralMeetingandhasnotbeenincludedasa
liabilityintheseaccounts.
Craneware plc
Annual Report 2010
33
O
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n
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l
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v
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C
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a
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a
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S
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m
e
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7
-
9
6
D
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p
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c
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s
1
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1
3
1
0
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m
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p
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1
7
-
1
9
1
4
-
1
6
A
u
d
i
t
o
r
s
R
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p
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t
P
r
i
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a
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y
F
i
n
a
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c
i
a
l
S
t
a
t
e
m
e
n
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s
2
1
-
2
5
2
0
N
o
t
e
s
t
o
t
h
e
F
i
n
a
n
c
i
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S
t
a
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e
m
e
n
t
s
2
6
-
4
2
Notes to the Financial Statements [Cont'd.]
12Earnings per share
(a) Basic
BasicearningspershareiscalculatedbydividingtheprofitattributabletoequityholdersoftheCompanybytheweightedaverage
numberofsharesinissueduringtheyear.
ProfitattributabletoequityholdersoftheCompany($’000)
Weightedaveragenumberofordinarysharesinissue(thousands)
Basic earnings per share ($ per share)
(b) Diluted
2010
5,525
25,315
0.218
2009
4,448
25,187
0.177
Fordilutedearningspershare,theweightedaveragenumberofordinarysharescalculatedaboveisadjustedtoassumeconversionofall
dilutivepotentialordinaryshares.TheGrouphasonecategoryofdilutivepotentialordinaryshares,beingthoseshareoptionsgranted
toDirectorsandemployeesundertheshareoptionscheme(Note8).
ProfitattributabletoequityholdersoftheCompany($'000)
Weightedaveragenumberofordinarysharesinissue('000)
AdjustmentforShareoptions('000)
Weightedaveragenumberofordinarysharesfordiluted
earningspershare('000)
Diluted earnings per share ($ per share)
2010
5,525
25,315
1,005
26,320
0.210
2009
4,448
25,187
1,007
26,194
0.170
Craneware plc
Annual Report 2010
34
Notes to the Financial Statements
13Plant and equipment
Group
Cost
At1July2009
Additions
At30June2010
Depreciation
At1July2009
Chargeforyear
At30June2010
Net book value at 30 June 2010
Cost
At1July2008
Additions
At30June2009
Depreciation
At1July2008
Chargefortheyear
At30June2009
Netbookvalueat30June2009
Company
Cost
At1July2009
Additions
At30June2010
Depreciation
At1July2009
Chargeforyear
At30June2010
Net book value at 30 June 2010
Cost
At1July2008
Additions
At30June2009
Depreciation
At1July2008
Chargeforyear
At30June2009
Netbookvalueat30June2009
Computer Equipment
$'000
Office Furniture
$'000
Tenants Improvements
$'000
709
95
804
570
95
665
139
611
98
709
464
106
570
139
413
34
447
350
45
395
52
370
43
413
292
58
350
63
265
22
287
185
46
231
56
239
26
265
138
48
186
79
198
-
198
137
34
171
27
173
25
198
103
35
138
60
333
10
343
206
51
257
86
323
10
333
156
50
206
127
333
3
336
206
50
256
80
323
10
333
156
50
206
127
O
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r
a
t
i
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l
R
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a
i
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m
a
n
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s
S
t
a
t
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m
e
n
t
7
-
9
6
D
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s
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p
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B
o
a
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f
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c
t
o
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s
1
1
-
1
3
1
0
C
o
r
p
o
r
a
t
e
G
o
v
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r
n
a
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c
e
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p
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e
m
u
n
e
r
a
t
i
o
n
C
o
m
m
i
t
t
e
e
R
e
p
o
r
t
1
7
-
1
9
1
4
-
1
6
A
u
d
i
t
o
r
s
R
e
p
o
r
t
P
r
i
m
a
r
y
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
2
1
-
2
5
2
0
N
o
t
e
s
t
o
t
h
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
2
6
-
4
2
Total
$'000
1,307
127
1,434
961
192
1,153
281
1173
134
1,307
758
204
962
345
944
37
981
693
129
822
159
866
78
944
551
143
694
250
Craneware plc
Annual Report 2010
35
Notes to the Financial Statements [Cont'd.]
14Intangible assets
Research&Development,pluscomputersoftware:-
In Process R & D
$'000
Group
Computer Software
$'000
Total
$'000
In Process R & D
$'000
Company
Computer Software
$'000
Cost
At1July2009
Additions
At30June2010
Amortisation
At1July2009
Chargefortheyear
At30June2010
1,886
499
2,385
725
219
944
NBV at 30 June 2010
1,441
Cost
At1July2008
Additions
At30June2009
Amortisation
At1July2008
Chargefortheyear
At30June2009
NBVat30June2009
1,317
569
1,886
599
126
725
1,161
271
22
293
226
34
260
33
252
19
271
176
50
226
45
2,157
521
2,678
951
253
1,204
1,474
1,569
588
2,157
775
176
951
1,886
499
2,385
725
219
944
1,441
1,317
569
1,886
599
126
725
1,206
1,161
208
19
227
172
29
201
26
194
14
208
127
44
171
37
Total
$'000
2,094
518
2,612
897
248
1,145
1,467
1,511
583
2,094
726
170
896
1,198
15Investment in subsidiary undertaking
Thefollowinginformationrelatestothesubsidiarywhich,intheopinionoftheDirectors,principallyaffectedtheprofitsorassetsofthe
Group:-
NameofCompany
ClassofSharesheld
ProportionofNominalValueofIssued
SharesheldbyCranewareplc
CranewareInc.
Ordinary
100%
NatureofBusiness
Sales&Marketing
TheaboveCompanyisincorporatedintheUnitedStatesofAmericaandCranewareplchold10,000(2009:10,000)commonshareswith
anominalvalueof$0.01each.TheresultsoftheSubsidiaryCompanyhavebeenincludedintheconsolidatedfinancialstatements.
Craneware plc
Annual Report 2010
36
Notes to the Financial Statements
16Trade and other receivables
Tradereceivables
less:provisionforimpairmentoftradereceivables
Nettradereceivables
Otherreceivables
Prepaymentsandaccruedincome
Lessnon-currenttradereceivables
Current portion
Group
Company
2010
$'000
7,507
(445)
7,062
288
1,246
8,596
-
8,596
2009
$'000
4,371
(322)
4,049
84
1,079
5,212
(25)
5,187
2010
$'000
7,507
(445)
7,062
58
550
7,670
-
7,670
2009
$'000
4,371
(322)
4,049
34
526
4,609
(25)
4,584
Thereisnomaterialdifferencebetweenthefairvalueoftradeandotherreceivablesandthebookvaluestatedabove.
Asat30June2010,tradereceivablesof$538,666(2009:$300,919)werepastdueandthereforedeemedtobeimpaired.Theamount
oftheprovisionagainstthesereceivableswas$437,337asof30June2010(2009:$275,119).Theindividuallyimpairedreceivables
mainlyrelatetocustomers’financialdifficultiesandunresolveddisputes.Itwasassessedaportionofthereceivablesisexpectedtobe
recovered.
Theageingofthesereceivablesisasfollows:-
Lessthan30dayspastdue
30–60dayspastdue
61–90dayspastdue
91+dayspastdue
2010
$'000
-
1
31
507
539
2009
$'000
26
-
16
259
301
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s
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7
-
9
6
D
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s
1
1
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3
1
0
C
o
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C
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m
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R
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p
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1
7
-
1
9
1
4
-
1
6
A
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r
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y
F
i
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a
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c
i
a
l
S
t
a
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e
m
e
n
t
s
2
1
-
2
5
2
0
N
o
t
e
s
t
o
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h
e
F
i
n
a
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c
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S
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a
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m
e
n
t
s
2
6
-
4
2
Craneware plc
Annual Report 2010
37
Notes to the Financial Statements [Cont'd.]
16Trade and other receivables (continued)
Asat30June2010,tradereceivablesof$1,576,109(2009:$860,989)werepastduebutnotimpaired.Theserelatetoanumberof
customersforwhomthereisnorecenthistoryofdefault.
Theageinganalysisofthesetradereceivablesisasfollows:-
Lessthan30dayspastdue
31–60dayspastdue
61–90dayspastdue
91+dayspastdue
2010
$'000
731
467
119
259
1,576
2009
$'000
581
106
83
91
861
Asat30June2010,tradereceivablesof$5,384,874(2009:$3,162,080)werenotpastdueorimpaired,andtheGroupdoesnotanticipate
collectionissues.Afurther$7,500(2009:$46,861)wasnotpastduebutdeemedtobeimpairedduetoaclientinfinancialdifficulty.
Movementontheprovisionforimpairmentoftradereceivablesisasfollows:
At1July
Provisionforreceivablesimpairmentonrevenuerecognised
Receivableswrittenoffduringyearasuncollectable
Unusedamountsreversed
At 30 June
2010
$'000
322
269
(79)
(67)
445
2009
$'000
196
305
(122)
(57)
322
Thecreationandreleaseofprovisionforimpairedreceivableshasbeenincludedinnetoperatingexpensesintheincomestatement.
Amountschargedtotheallowanceaccountaregenerallywrittenoffwhenthereisnoexpectationofrecoveringadditionalcash.
Theotherclasseswithintradeandotherreceivablesdonotcontainimpairedassets.
Themaximumexposuretocreditriskatthereportingdateisthefairvalueofeachclassofreceivablementionedabove.TheGroup
doesnotholdanycollateralassecurity.
Craneware plc
Annual Report 2010
38
Notes to the Financial Statements
17Deferred taxation
Deferredtaxiscalculatedinfullonthetemporarydifferencesundertheliabilitymethodusingarateoftaxof28%(2009:28%)intheUK
and39%(2009:39%)intheUSincludingaprovisionforstatetaxes.
Themovementonthedeferredtaxaccountisshownbelow:-
At1July
Credit/(charge)tocomprehensiveincome
Transferdirecttoequity
At 30 June
Group
2010
$'000
718
73
730
1,521
2009
$'000
1,075
(321)
(36)
718
Company
2010
$'000
157
(4)
131
284
2009
$'000
281
(162)
38
157
Themovementsindeferredtaxassetsandliabilitiesduringtheyearareshownbelow.Deferredtaxassetsandliabilitiesareonlyoffset
wherethereisalegallyenforceablerightofoffsetandthereisanintentiontosettlethebalancesnet.Thenetdeferredtaxassettobe
recoveredfrom30June2010was$1,520,735(2009:$718,361).
Losses
$'000
-
-
-
-
479
(232)
(247)
-
Share
Options
$'000
650
50
730
Group
Total
$'000
746
50
730
1,430
1,526
567
(128)
211
650
1,142
(360)
(36)
746
Deferred tax assets - recognised
Group
At1July2009
Creditedtocomprehensiveincome
Creditedtoequity
Total provided at 30 June 2010
At1July2008
Chargedtocomprehensiveincome
(Charged)/creditedtoequity
Totalprovidedat30June2009
Deferred tax liabilities - recognised
Group
At1July2009
Creditedtocomprehensiveincome
Total provided at 30 June 2010
At1July2008
Creditedtocomprehensiveincome
Totalprovidedat30June2009
Accelerated
accounting
depreciation
$'000
Short term
timing
differences
$'000
7
-
-
7
7
-
-
7
Accelerated tax
depreciation
$'000
(28)
23
(5)
(67)
39
(28)
89
-
-
89
89
-
-
89
Group
Total
$'000
(28)
23
(5)
(67)
39
(28)
O
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m
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s
2
1
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5
2
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s
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h
e
F
i
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m
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s
2
6
-
4
2
Craneware plc
Annual Report 2010
39
Notes to the Financial Statements [Cont'd.]
17Deferred taxation (continued)
Deferred tax assets - recognised
Company
At1July2009
Chargedtocomprehensiveincome
Creditedtoequity
Total provided at 30 June 2010
At1July2008
Chargedtocomprehensiveincome
Creditedtoequity
Totalprovidedat30June2009
Deferred tax liabilities - recognised
Company
At1July2009
Creditedtocomprehensiveincome
Total provided at 30 June 2010
At1July2008
Creditedtocomprehensiveincome
Totalprovidedat30June2009
18Called up share capital
Authorised
Equitysharecapital
Ordinarysharesof1peach
Allotted called-up and fully paid
Equitysharecapital
Ordinarysharesof1peach
Losses
$'000
-
-
-
-
-
-
-
-
Share
Options
$'000
185
(27)
131
289
348
(201)
38
185
Company
Total
$'000
185
(27)
131
289
348
(201)
38
185
Accelerated
accounting
depreciation
$'000
Short term
timing
differences
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Accelerated tax
depreciation
$'000
Company
Total
$'000
(28)
23
(5)
(67)
39
(28)
(28)
23
(5)
(67)
39
(28)
2010
2009
Number
$'000
Number
$'000
50,000,000
1,014
50,000,000
1,014
25,365,850
512
25,297,750
512
Themovementinsharecapitalduringtheyearisrepresentedasfollows:-
68,100OrdinaryShareoptionswereexercisedintheyear,asdetailedintheRemunerationCommitteeReportonpage19.
19Cash flow generated from operating activities
Reconciliationofprofitbeforetaxtonetcashinflowfromoperatingactivities:-
Profitbeforetax
Financeincome
Depreciationonplantandequipment
Amortisationonintangibleassets
Share-basedpayments
Movements in working capital:
Increaseintradeandotherreceivables
Increaseintradeandotherpayables
Cash generated from operations
Craneware plc
Annual Report 2010
40
Group
2010
$'000
7,258
(195)
192
253
114
(3,385)
4,669
8,906
Company
2010
$'000
2009
$'000
6,280
(195)
129
248
52
(1,030)
3,088
8,572
5,012
(520)
143
170
32
(96)
1,404
6,145
2009
$'000
5,870
(520)
204
176
82
(452)
2,018
7,378
Notes to the Financial Statements
20Cash and cash equivalents
Cash at bank and in hand
Theeffectiveratesonshorttermbankdepositswere0.73%(2009:2.23%).
21Trade and other payables - current
Tradepayables
Amountsowedtogroupcompanies
SocialsecurityandPAYE
Corporationtax
Accruals
Advancereceipts
Group
Company
2010
$'000
2009
$'000
2010
$'000
2009
$'000
29,442
26,169
28,213
23,959
Group
Company
2010
$'000
588
-
72
392
4,104
228
5,384
2009
$'000
551
-
120
775
2,303
138
3,887
2010
$'000
229
2,822
72
854
1,225
228
5,430
2009
$'000
133
791
120
421
1,065
138
2,668
AmountsowedtoGroupcompaniesarenoninterestbearingandhavenofixedrepaymentterms.Tradepayablesaresettledin
accordancewiththosetermsandconditionsagreed,generallywithin30days,providedthatalltradingtermsandconditionson
invoiceshavebeenmet.TheGroup’saveragepaymentperiodat30June2010was25days(2009:26days).
22Contingent liabilities and financial commitments
(a) Capital commitments
TheGrouphasnocapitalcommitmentsat30June2010(2009:$nil).
(b) Lease commitments
TheGroupleasescertainlandandbuildings.ThecommitmentspayablebytheGroupundertheseleasesareasfollows:-
Withinoneyear
Between2and5years
Morethan5years
2010
$'000
198
647
276
1,121
2009
$'000
203
164
-
367
Therentspayableundertheseleasesaresubjecttorenegotiationatvariousintervalsspecifiedintheleases.
TheGrouppaysallinsurance,maintenanceandrepairsoftheseproperties.
O
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1
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1
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1
4
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6
A
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F
i
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S
t
a
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m
e
n
t
s
2
1
-
2
5
2
0
N
o
t
e
s
t
o
t
h
e
F
i
n
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m
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s
2
6
-
4
2
Craneware plc
Annual Report 2010
41
Notes to the Financial Statements
23Related party transactions
DuringtheyeartheGrouphastradedinitsnormalcourseofbusinesswithshareholders,consultancybusinessesanditswhollyowned
subsidiaryinwhichDirectors,formerDirectorsandthesubsidiaryhaveamaterialinterestasfollows:-
2010
2009
Group
Charged
$
Outstanding
at year end
$
Fees for services provided as Non-Executive Directors
Fees
Salariesandshort-termemployeebenefits
101,832
100,405
15,970
7,855
Charged
$
48,959
87,772
Outstanding
at year end
$
6,788
-
Executive Directors
Salariesandshort-termemployeebenefits
763,401
299,220
686,950
195,479
Postemploymentbenefits
Share-basedpayments
Other Key Management
7,910
30,590
-
-
8,059
34,683
-
-
Salariesandshort-termemployeebenefits
1,374,746
473,830
1,082,650
199,982
Postemploymentbenefits
Share-basedpayments
Company
7,910
26,388
Charged
$
-
-
Outstanding
at year end
$
Fees for services provided as Non-Executive Directors
Fees
Salariesandshort-termemployeebenefits
101,832
100,405
15,970
7,855
8,059
10,766
Charged
$
48,959
87,772
-
-
Outstanding
at year end
$
6,788
-
Executive Directors
Salariesandshort-termemployeebenefits
763,401
299,220
686,950
195,479
Postemploymentbenefits
Share-basedpayments
Other Key Management
7,910
30,590
-
-
8,059
34,683
-
-
Salariesandshort-termemployeebenefits
675,940
299,220
536,009
169,982
Postemploymentbenefits
Share-basedpayments
Amounts due to Craneware Inc. - subsidiary
company
Salescommission
Netoperatingexpenses
Balance(Note21)
7,910
8,377
13,118,407
2,682,527
-
-
-
-
8,059
3,064
10,452,304
1,876,245
-
-
-
-
-
2,822,295
-
791,411
KeymanagementareconsideredtobetheDirectorstogetherwiththeChiefOperatingOfficer,ChiefTechnologyOfficer,theHeadof
Marketing,theoutgoingPresidentofCranewareIncandtheincomingExecutiveVicePresidentofSales(appointedtotheOperations
Boardduringtheyear).
TherewerenootherrelatedpartytransactionsintheyearwhichrequiredisclosureinaccordancewithIAS24.
24Ultimate controlling party
TheDirectorshavedeemedthattherearenocontrollingpartiesoftheCompany.
Craneware plc
Annual Report 2010
42
Personal Notes
O
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a
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R
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s
2
6
-
4
2
Craneware plc
Annual Report 2010
43
Personal Notes
Craneware plc
Annual Report 2010
44
Contact Craneware
Directors, Secretary and Advisors
Support & Information
Directors and Officials
Bankers
Client training/support:
+18886014162
support@craneware.com
training@craneware.com
Sales:
+18776242792
sales@craneware.com
Careers:
+44(0)1506407666
careers@craneware.com
General enquiries:
+44(0)1506407666(UK)
+14043642032(USA)
info@craneware.com
Investor information:
+44(0)2076539850
ThreadneedleCommunications
UK Headquarters
Craneware plc
RosebankBusinessPark
KirktonCampus
Livingston
EH547EJ
UnitedKingdom
Fax:+44(0)1506407667
USA Administrative Office
Craneware, Inc.
3340PeachtreeRoadNE,Suite850
Atlanta,GA30326
USA
Fax:+14043642033
Directors
The Royal Bank of Scotland plc
36St.AndrewSquare
Edinburgh
EH22YB
Clydesdale Bank
20WaterlooStreet
Glasgow
G26DB
Barclays Commercial Bank
AuroraHouse
120BothwellStreet
Glasgow
G27JT
HSBC Bank plc
7WestNileStreet
Glasgow
G12RG
Lloyds TSB
HenryDuncanHouse
120GeorgeStreet
Edinburgh
EH24LH
GRElliott[Chairman,non-executive]
KNeilson
NPHeywood[non-executive]
CTPreston
RFVerni[non-executive]
Secretary and Registered Office
C T Preston
RosebankBusinessPark
KirktonCampus
Livingston
EH547EJ
Brokers & Nominated Advisors
KBC Peel Hunt Ltd
111OldBroadStreet
London
EC2N1PH
Registrars
Capita Registrars Ltd
TheRegistry
34BeckenhamRoad
Beckenham
Kent
BR34TU
Registered Auditors
PricewaterhouseCoopers LLP
ErskineHouse
68-73QueenStreet
Edinburgh
EH24NH
Solicitors
McGrigors LLP
PrincesExchange
1EarlGreyStreet
Edinburgh
EH39AQ
Craneware plc
Annual Report 2010
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