Cashrewards Annual Report 2016

FY2016 Annual Report · Cashrewards

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Craneware plc Annual Report
for the year ended 30 June 2016

About Craneware

Craneware solutions enable healthcare providers to improve margins so they can invest in
quality patient outcomes.

Founded in 1999, Craneware has headquarters in Edinburgh, Scotland with offices in Atlanta,
Boston, Pittsburgh and Phoenix employing over 240 staff. Craneware's market-driven, SaaS
solutions normalise disparate data sets, bringing in up-to-date regulatory and financial
compliance data to deliver value at the points where clinical and operational data transform
into financial transactions, creating actionable insights that enable informed tactical and
strategic decisions.

To learn more, visit craneware.com and thevaluecycle.com.

Contents

Financial and Operational Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Craneware Value Cycle Solutions® . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Chairman’s Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Strategic Report: Operational and Financial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Strategic Report: Key Performance Indicators and Principal Risks and Uncertainties. . . . . . . . 13

Directors, Secretary, and Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Directors’ Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Corporate Governance Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Remuneration Committee's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Independent Auditors’ Report to the Members of Craneware plc . . . . . . . . . . . . . . . . . . . . 28

Consolidated Statement of Comprehensive Income for the year ended 30 June 2016 . . . . . . 30

Statements of Changes in Equity for the year ended 30 June 2016 . . . . . . . . . . . . . . . . . . . 31

Consolidated Balance Sheet as at 30 June 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Company Balance Sheet as at 30 June 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Statements of Cash Flows for the year ended 30 June 2016. . . . . . . . . . . . . . . . . . . . . . . . 34

Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Craneware plc Annual Report 2016Financial and Operational Highlights

Financial
Total Contract Value in the year continues at record levels of $82.3m (FY15: $72.9m)

Quick Facts — Financial

$49.8m

in revenue

$15.9m

in adjusted EBITDA1

$48.8m

cash at year end

16.5p

total dividend for year

new sales increased by 63% to $58.6m (FY15: $35.9m)

renewal rate remains above 100% by dollar value

Revenue increased 11% to $49.8m (FY15: $44.8m)

Adjusted EBITDA1 increased by 10% to $15.9m (FY15: $14.4m)

Profit before tax increased by 10% to $13.9m (FY15: $12.5m)

Basic adjusted EPS increased 13% to $0.429 (FY15: $0.378) and adjusted diluted EPS has

increased to $0.423 (FY15: $0.375)

Continued operating cash conversion above 100% of Adjusted EBITDA

Cash at year-end of $48.8m (FY15: $41.8m) after payment of $6m dividend to

shareholders

Proposed final dividend of 9p (12 cents) per share giving a total dividend for the year of

16.5p (22 cents) per share (FY15: 14p (22 cents) per share)

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

Operational
US healthcare market continues its evolution towards value-based care with a critical

dependency on accurate financial and operating data

Further expansion of the product suite to support the Value Cycle, including:

development of Trisus® Patient Payment, our Patient Engagement gateway product,

on track for launch during calendar 2016

launch of Craneware Healthcare Intelligence, a new group business, developing new
solutions to address an emerging but significant market opportunity for healthcare
cost analytics

Two significant 5 year contract wins in the year for Craneware core value cycle solutions,

worth a combined $15.5m

Continued very high levels of customer retention

Total visible revenue increased 23% to $149.1m (FY15 same 3 year period: $121.1m)

Revenue $m

Adjusted EBITDA $m

Basic adjusted EPS cents/share

49.8

44.8

41.1

41.5

42.6

15.9

14.4

13.1

11.9

12.4

42.9

37.8

32.9

34.0

31.6

2012

2013

2014

2015

2016

2012

2013

2014

2015

2016

2012

2013

2014

2015

2016

1
1

Craneware plc Annual Report 2016Craneware Value Cycle Solutions®

Craneware solutions and services

Craneware Value Cycle Solutions span five product families – Patient Engagement, Charge Capture & Pricing, Coding Integrity, Cost Analytics, and Revenue Collection &
Retention. In addition, hospitals of all sizes and types rely on Craneware’s Professional Services to help deliver results that lead to improved financial outcomes.

Value Cycle Areas

Patient Engagement

Charge Capture & Pricing

Coding Integrity

Cost Analytics

Revenue Recovery & Retention

Medical
Necessity & Prior
Auth

Patient
Responsibility

Business Outcomes

Procedures

Pharmacy

Supplies

Billing & Claims
Analyis

Cost of Care

Audit
Management

Denials
Management

Identify
and correct
discrepancies
between
purchased and
billed drugs

Identify
and correct
discrepancies
between
purchased and
billed supplies

Accurate HCPCS
for billable
supplies

Integrity for all
earned revenue

I.D. and correct
all coding
mistakes

Identify missed
charges

Analyse cost,
utilisation and
reimbursement
to Identify the
most effective
and efficient way
to provide care

Automated audit
tracking and
execution

Automated denial
tracking and
execution

Multiple facility/
department
segmentation and
workflow

Defensible
accrual
and reserve
forecasting

Appeals
workflow

Determine
requirement
for payers:
government &
commercial

Waiver forms
for non-covered
procedures

Multi-attribute
verification

Estimate patient
responsibility

Ensure charge
accuracy

Ensure
chargemaster
accuracy across
enterprise

Creation/
maintenance
of physician fee
schedule

Model contract
proposals

Model net
revenue
reimbursement

Craneware Solutions

InSight Medical
Necessity®

Trisus® Patient
Payment

Chargemaster
Toolkit®

Pharmacy
ChargeLink®

Supplies
ChargeLink®

Trisus® Claims
Informatics

Patient Charge
Estimator®

Physician
Revenue Toolkit®

Supplies
Assistant

Craneware
Healthcare
Intelligence

InSight Audit®

InSight Denials®

Pricing
Analyzer™

Reference Plus™

Craneware Consulting and Professional Services

CDM Review & Educational Review

Pricing Optimization Study

Revenue Integrity Assessments

CDM Standardisation

Supply Banding

Appeal Services

Charge Capture Performance Improvement
Services

Interim & full time Success Management
Services

Trisus® – Craneware's Next Generation of Solutions

The new, value-driven healthcare market is reorienting around best outcomes for best cost, while margin remains the most essential metric for business performance.
The revenue cycle is now part of the larger value cycle, encompassing the systems that not only drive billing performance and compliance, but operational efficiency
and quality of care as well.

In order to build solutions for the value cycle era, Craneware has developed the Trisus solution platform. Supporting a growing number of products, this highly scalable
cloud-based technology platform is capable of integrating data sets across the continuum of care to give clients actionable insights into their processes. Trisus supports
bringing disparate data sets together so that data can be linked and advanced informatics applied. New data sets are easy to plug in, and additional value is realised as the
platform expands.

Craneware solutions are based on an annuity subscription model. Client data is kept secure within healthcare facilities’ own networks or Craneware’s high-security data centre,
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 used throughout the health system, permitting different prescribed levels of interaction with minimal impact to resource-strained
IT teams and busy users.

Craneware plc Annual Report 2016Craneware Value Cycle Solutions® [Cont’d.]

Patient Engagement

InSight Medical Necessity®
A SaaS solution that provides medical necessity
validation for all major U.S. payors and Advance
Beneficiary Notice (ABN) creation. The software
helps reduce accounts-receivable days by preventing
medical necessity denials, and facilitates payment
communication with patients.

Trisus® Patient Payment
A SaaS solution that provides hospitals and health
systems a way to modernise their patient access
process, better manage cash flow, reduce bad debt,
and improve collection rates while minimising
administrative costs.

Patient Charge Estimator®
This SaaS solution simplifies the process of providing
patient bill estimates for inpatient and outpatient
services to improve up-front collections and reduce
bad debt.

Charge Capture & Pricing

Chargemaster Toolkit®,
Chargemaster Corporate Toolkit®
and Chargemaster Toolkit® - CAH
Automated SaaS chargemaster management solutions
for capturing optimal legitimate reimbursement
for providers, while mitigating compliance risk.
Chargemaster Toolkit is customisable for any
organisation, from small community providers to large
healthcare networks.

Chargemaster Toolkit® Discovery Viewer
Chargemaster Toolkit Discovery Viewer addresses
the challenges that enterprise CDM data presents to
hospitals by enabling all related CDM data to be viewed
in one place.

Physician Revenue Toolkit®,
Physician Management Toolkit and
Physician Revenue Toolkit® – Corporate
SaaS solutions for managing physician group KPIs,
charges, codes, RVUs, fee schedules, and related
information.

Pricing Analyzer™
SaaS solution that simplifies the price modelling
process, creating a repeatable, well-documented
method to establish transparent, defensible and
competitive pricing.

Reference Plus™
SaaS solution for providers with less than $44 million in
operating expenses to perform chargemaster analysis,
and efficiently optimise revenue, charge compliance
and coding integrity.

Pharmacy ChargeLink®
Improves charge capture, pricing and cost
management, while simplifying the process for
ensuring drug coding and billing units are complete
and compliant, and establishing and maintaining
a connection between a provider’s pharmaceutical
purchases and billing.

Supplies ChargeLink®
Helps optimise reimbursement for codable supplies by
identifying missing or invalid charges, and establishing
and maintaining a connection between supply
purchase history and chargemaster, helping to ensure
accurate pricing, coding and billing of these supplies.

Supporting Modules

Online Reference Toolkit®
Web-based and mobile-friendly tool for reducing
risk by providing access to reference and regulatory
resources.

Interface Scripting Module
Software that automatically uploads chargemaster
changes to the patient billing system for accurate
billing.

Supplies Assistant
Web-based, mobile-friendly supplies lookup tool
available in Supplies ChargeLink or Online Reference
Toolkit. Supplies Assistant enables providers to access
Craneware’s proprietary supply master catalog and
quickly and correctly code expensive implants and
devices.

Coding Integrity

Trisus® Claims Informatics
Software that automates coding and charge capture
issue identification and resolution for hospitals and
health systems.

Bill Analyzer
Automates claim and coding reviews to identify missed
charges, billing errors, and categorise areas of risk to
help ensure that all legitimate revenue is captured.

Revenue Recovery & Retention

InSight Audit®
A comprehensive, web-based audit management tool
that empowers healthcare organisations to manage
claim audits and workflows from one central location,
leveraging an extensive proprietary knowledgebase
that includes current payment rules, best practices,
templates, checklists, forms, and references for winning
appeals.

InSight Denials®
Analyses, tracks, trends and reports on denial data,
providing workflow tools to distribute denied claims
to the right departments and staff for resubmission.
InSight Denials expedites the repair and resubmission
of denied claims for cross-departmental teams. An
intelligent workflow engine applies client-specific
logic to efficiently distribute denied claims requiring
resubmission to the right departments and individual
team members, and maintains a detailed history of
actions on all claims.

Cost Analytics

Craneware Healthcare Intelligence
A new Craneware plc business, developing new
solutions to address an emerging but significant
market opportunity for healthcare cost analytics.

Professional Services

Craneware Professional Services provides companion
implementation and consulting services that help
clients apply best practices and achieve a fast,
sustainable return on investment. Craneware augments
initial product training with live or self-led web-based
training through the Craneware Performance Center
and optional fee-based training.

Chargemaster Toolkit® is ranked No.1 in the Revenue Cycle –
Chargemaster Management market category for the tenth year
in a row (2006 – 2015/2016.) "2015/2016 Best in KLAS Awards:
Software & Services" report, published January 2016. Data © 2016
KLAS Enterprises, LLC. All rights reserved. www.KLASresearch.com

*HFMA staff and volunteers determined that Craneware's
Chargemaster Toolkit®, Chargemaster Corporate Toolkit®, Bill
Analyzer, Online Reference Toolkit®, and Interface Scripting
Module have met specific criteria developed under the HFMA Peer
Review Process. HFMA does not endorse or guarantee the use of
these products.

Craneware is a Microsoft Gold Partner for Application Development.

Craneware plc Annual Report 2016Chairman’s Statement

“Third consecutive year of record
sales performance and a return
to double digit growth”

George Elliott, Chairman

The Board is pleased to confirm the Group's third
consecutive year of record sales performance and a
return to double digit growth in revenue and adjusted
EBITDA.

combine the mobile platform brought into the Group
last year via the acquisition of Kestros with the
technology from the reseller agreement with VestaCare
announced this year.

With an impressive 63% growth in new sales to
$58.6m (FY15: $35.9m), the total value of contracts
signed in the year increased to $82.3m (FY15: $72.9m).
Underlying this the average new contract length was
maintained at 5 years, renewal rates remained high
(well above 100% by dollar value) and customer
retention continued to be significantly higher than the
industry norm. This has been a truly successful sales
year for the Group.

We are also particularly excited to announce the
launch of Craneware Healthcare Intelligence, a new
Group company. The company has been created to
develop and market cost analytics software to the
US healthcare industry. Initial product is expected
to be launched towards the end of Craneware’s 2017
financial year. This is expected to be a significant new
market opportunity for Craneware and will be a key
area of investment for the Company moving forward.

The Group's revenue recognition policy retains focus on
long term sustainable growth and mitigates against
year on year fluctuations in the total value of contracts
signed. Therefore, the vast majority of the revenue
from these sales has not been recognised in the year to
30 June 2016, and will instead benefit future years.

We are now seeing the impact of this continued period
of record sales levels flow through into our reported
figures. Revenue increased 11% to $49.8m (FY15:
$44.8m) and adjusted EBITDA, increased by 10% to
$15.9m (FY15: $14.4m). Cash generation was strong,
resulting in cash reserves of $48.8m (FY15: $41.8m)
after payment of $6m dividend to shareholders.

Craneware’s solutions span the breadth of the US
healthcare provider landscape, from the smaller rural
hospitals to multi-hospital groups. Sales across all
strata were strong in the year and it was particularly
pleasing to see two significant sales successes into two
large hospital groups. These $7.5m and $8m contracts
demonstrate the value and importance these groups
attribute to the Craneware software solutions in
assisting them to protect their operating margins while
delivering improved outcomes for all.

The US healthcare market continues to evolve as
predicted towards value-based care. The Group’s
strategy is to expand its offerings, providing deeper
insight into a broad range of a hospital’s operations,
analysing and managing data from across the
organisation. Our solutions will enable providers
to improve margins and enhance patient outcomes
so the hospitals can provide quality care to their
communities. To achieve this, we will continue to
utilise a combination of in-house development
expertise, partnerships and targeted acquisitions to
expand our offering.

We have made good progress towards delivering this
vision in the year, with two new areas of product
development in the pipeline. The first to be launched
will be Trisus Patient Payment, our gateway product
within our newly formed Patient Engagement product
family. This will be launched this calendar year and
joins the first product launched on our new cloud-
based platform, Trisus. The product will ultimately

The Board continues to be alert to potential
acquisitions. Strict criteria will be applied to targets to
ensure they both deliver against the product roadmap
while being accretive to the financial strength of the
Group.

As we enter our tenth year since the Company IPO in
2007, I continue to be impressed by the enthusiasm
and commitment shown by our employees across
Scotland and the US. Their passion for service to our
customers and the healthcare industry is a key element
of our success and I would like to take this opportunity
to thank them for all their hard work during the year.

I would like to express particular gratitude to Gordon
Craig, who has decided after 16 years to retire as
CTO and take on a salaried advisory role within the
Company. Gordon has been responsible for product
development during his tenure and hands that on
at this appropriate time. We have seen significant
progress made on the Trisus platform, with the roll out
of the first components of the platform taking place
in the next twelve months. Gordon’s replacement will
join the Company on 12 September, from his role as
a VP (and Fellow) of R&D at a Fortune 10 Healthcare
company. He brings relevant experience of migrating
highly scalable enterprise applications to the cloud
that are HIPAA compliant and process large volumes of
healthcare data.

Neil Heywood who has been a non-executive director
throughout the last 14 years has decided not to stand
for re-election at the forthcoming AGM. I would like to
take this opportunity to thank both Neil and Gordon,
on behalf of the Board, for all their service and support
to the Group and wish them well in their future
endeavours.

The excellent sales performances over the last three
years, the clear strategy for growth and the strong
financial position of Company provide the Board with
confidence in the success of Craneware in the year
ahead.

George Elliott
Chairman
5 September 2016

Craneware plc Annual Report 2016

Strategic Report: Operational and Financial Review

These factors and the challenges they bring to US
healthcare providers drive two major areas of focus
in the comings years – a high growth market for
cost analytics and performance platforms as well as
solutions to manage our customers’ challenges with the
growing levels of direct engagement they have with
consumers.

Delivering the Value Cycle

The Value Cycle is the process and culture by which
healthcare providers pursue quality patient outcomes
and optimal financial performance, through the
management of clinical, operational and financial
assets.

Without this data, and the insight into that data, to
enable action, healthcare systems cannot protect their
margins and provide quality outcomes for all.

Craneware’s Value Cycle solutions support our
customers in this new world of value based
reimbursement. Our solutions monitor the points
in their system where clinical and operational data
transform into financial transactions, delivering value
in the discovery, conversion and optimisation of these
assets.

Our Strategy

Our strategy is to continue to build on our established
market-leading position in revenue cycle solutions,
expanding our product suite coverage of the
Value Cycle. By expanding our offerings in the
cost management area of hospital operations and
combining this with data from the revenue cycle we
will provide a unique insight into the management and
analysis of clinical and operational data.

The expansion will be achieved through a combination
of extensions to the current product set, internal
product development, partnerships with other
technology providers and targeted acquisitions.

Operational Review

We have enjoyed another strong year, delivering
significant operational and financial progress against
our long term strategic objectives.

The US healthcare landscape continues to evolve.
New regulations, increasing requirement for reliable
data analytics, emerging medical techniques and
technologies, are all contributing to a major shift in the
operational needs of US healthcare providers. However,
the one thing that appears unchanged is the need for
quality patient outcomes. At Craneware, we deliver
solutions that help healthcare providers maintain
their financial health so they can concentrate on what
matters most: providing the best possible outcomes
for all.

Three consecutive years of record sales, we believe,
have only scratched the surface of our long term
potential. We have entered the next phase of growth
for Craneware, in which we are expanding our product
suite, whilst supporting our customers as they meet the
challenges value-based care brings.

Market Strategy
Overview

While the need to address the healthcare requirements
of an ageing population grows more urgent, the
growing cost of US healthcare is unsustainable. Hospital
operating margins continue to be under pressure and
there is still significant waste and inefficiency in the
system.

We are approaching an era where, it is expected,
greater than 50% of all US healthcare payments will
have a value-based component. These major changes
in reimbursement and care delivery models have made
understanding and reducing the cost of care, while
improving patient outcomes, mission-critical for every
healthcare provider in the US.

While hospital leadership teams are focusing on
controlling costs and increasing levels of care,
consumers are facing ever increasing out-of-pocket
costs as the healthcare model shifts a significant
proportion of the payment responsibility to the patient,
via high deductible plans.

“We...have only scratched the surface
of our long term potential"

Keith Neilson, CEO and co-founder

“The investment we are making in
our product suite mean our market
opportunity is now several times
larger"

Craig Preston, CFO

Craneware plc Annual Report 2016Strategic Report: Operational and Financial Review [Cont’d.]

Craneware’s Product Roadmap:
Trisus Enterprise Value Platform

We continue to invest in our current solutions set,
however, alongside this investment we have a roadmap
to move all these solutions to a new cloud-based
platform, the Trisus Enterprise Value Suite. Trisus
will combine revenue integrity, cost management
and decision enablement functionality in a versatile,
customisable solution that fully delivers on Craneware's
primary purpose to help healthcare systems improve
margins and enhance patient outcomes. Development
of the Trisus platform continues with a release of the
first elements of the platform scheduled to take place
later this year and throughout calendar 2017.

In addition to our current solution set, we continue to
expand our coverage of the Value Cycle. Our initial area
of focus for this expansion has been within the area
of patient access and engagement - addressing the
growing consumerisation within healthcare.

Patient Access and Engagement: Trisus Patient
Payment

Development of Trisus Patient Payment, a new fourth
gateway product, operating within the patient access
and engagement area, has progressed well in the
year and is on track for launch before the end of this
calendar year.

The ultimate offering will combine the automated
payment technologies and services (VestaPay) provided
by VestaCare, the exclusive value added reseller
agreement signed in January 2016, with Craneware’s
medical necessity and price estimation products as well
as Craneware's mobile patient engagement platform,
which has been developed following the acquisition of
Kestros. Together these will form this enhanced Patient
Engagement solution.

The past five years have seen an explosion of high-
deductible health plans and an increasing out-of-

pocket burden for patients. In many hospitals, patient
payments represents a fast-growing proportion of their
revenue, yet is the most difficult and expensive portion
to collect with a high reputational risk associated
with pursuing delinquent individuals. After decades
of primarily relying on financial transactions with
health plans, Medicare and Medicaid, hospital revenue
cycle and patient access teams are often ill-equipped
to manage effective patient-friendly point-of-service
collections. For the patient, who is often underinsured,
it can be mentally and financially overwhelming to
receive expensive and confusing medical bills after
being discharged.

Trisus Patient Payment is a solution designed to
increase patient billing satisfaction while also
improving point-of-service collection rates.

The solution will be launched by the end of this
calendar year. We will receive an annual license fee
from customers with an additional revenue share
element based on improved collection rates.

New Group company: Craneware Healthcare
Intelligence

In the second half of FY16, Craneware formed a new
Group company, Craneware Healthcare Intelligence,
to develop and market cost analytics software to
the US healthcare industry. Cost analytics are a vital
component within the emerging Value Cycle solutions
market. The understanding of costs, combined with
correct reimbursement will enable our customers to
better understand their margin and in turn drive better
patient outcomes. We believe this area of the Value
Cycle represents a market opportunity several times
larger than that of our existing product portfolio.

Having assessed various acquisition and partnering
options, we concluded that developing our own
solution is the best way to ensure we have a world class
product to take to our customer base.

We have appointed one of the pre-eminent experts
in the field of Cost Analytics in the US as Senior Vice
President, Healthcare Analytics, who will lead this new
development. With 16 years’ experience working with a
major US hospital network, developing and deploying

ground-breaking cost analytics solutions, we believe
our new head of this project gives us a significant
head start in delivering this new solution. We are in
the process of building a complete development and
delivery team and expect to see initial product within
calendar 2017.

Acquisitions

The Board continues to assess opportunities to
complement the Group’s organic growth strategy and
increase speed to market for new products through
acquisition. The Board adheres to a rigorous set of
criteria to analyse acquisition opportunities, including
quality of earnings and product offering. The $50
million funding facility provided by the Bank of
Scotland announced previously combined with our
own cash resources, provides the Company with the
firepower to carry out strategic acquisitions if and
when these criteria are met.

Sales and Marketing

Within our record sales performance, the Group
delivered good levels of sales to all segments of the
US healthcare market, demonstrating continued sales
momentum and the benefits of a supportive market
environment. Going forward the sales pipeline
continues to be at record highs with opportunities
across all strata of hospitals.

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

We were delighted to secure two significant contract
wins within the year. The first contract announced in
January 2016 is expected to deliver $7.5m revenue

Craneware plc Annual Report 2016

Strategic Report: Operational and Financial Review [Cont’d.]

over the initial five year term. The new customer is
a growing hospital operator and consolidator that
manages in excess of 50 hospitals across multiple
US states primarily in non-urban communities.
Chargemaster Corporate Toolkit® will be used
by the group to establish and manage corporate
standardisation across its entire portfolio of owned
and managed facilities. This will enable system-wide
reporting efficiencies and the timely submission of
accurate claims whilst managing billing compliance
risk.

The second contract, secured at the end of the year,
is with another of the US’ largest multi-hospital
groups. Commencing in 2017, the contract is expected
to deliver revenue greater than $8m during the
next five years, as the hospital network rolls out
multiple Craneware core value cycle solutions, led

by Chargemaster Toolkit, Pharmacy ChargeLink and
Supplies ChargeLink.

With these significant contract wins bringing new
hospital systems to the Group, the sales mix saw a
higher percentage of sales to new customers in the
year, however overall the levels of sales between new
customers and existing customers (both mid-contract
and at renewal time) is well balanced. All new hospital
sales provide opportunities for further product sales in
the future.

Awards

Chargemaster Toolkit® was named Category Leader
in the “Revenue Cycle – Chargemaster Management”
market category for the tenth consecutive year in the
annual “2015/2016 Best in KLAS Awards: Software &

Services.” KLAS’s annual “Best in KLAS” report provides
unique insight gathered from thousands of healthcare
organisations across the US. The report includes client
satisfaction scores and benchmark performance
metrics.

Financial Review

In our 6 July trading statement we were pleased to
report our third year of record sales levels. Equally
pleasing was the confirmation of our return to double
digit growth rates for both Revenue and adjusted
EBITDA. This translates to Revenues reported for the
financial year under review of $49.8m (FY15: $44.8m)
which has resulted in an adjusted EBITDA of $15.9m
(FY15: $14.4m).

Our Annuity SaaS business model (which is described

Annuity SaaS Model Sales

New Product Sales
2013

2012

2014

2015

2016

Renewals

New Product Sales

Fiscal Year

New Product Sales
Renewals2
Total Contract Value

Reported Revenue

2012
$m

21.61
12.7
34.3

41.1

2013
$m

20.8
17.7
38.5

41.5

2014
$m

35.1
35.9
71.0

42.6

2015
$m

35.9
37.0
72.9

44.8

2016
$m

58.6
23.7
82.3

49.8

1FY12 included the large white label and reseller agreement that added $7.5m to new product sales and therefore total contract value in the year, with the $3.5m white label revenue
recognised in the year and the remaining $4m recognised over the related 28 month period.

2As the Group signs new customer contracts for between three to nine years, the number and value of customers’ contracts coming to the end of their term (“renewal”) will vary in any one year.
This variation along with whether customers auto-renew on a one year basis or renegotiate their contracts for up to a further nine years, will impact the total contract value of renewals in any one year.

Craneware plc Annual Report 2016

Strategic Report: Operational and Financial Review [Cont’d.]

in the next section) is designed to deliver long term
sustainable growth. Whilst this means the vast
majority of any current year’s sales success is not
reflected in that year’s income statement, it does mean
the majority of the growth in revenues we are currently
reporting is reflective of prior year’s sales successes,
with the sales success of the current year being
available to further benefit future years.

In our revenue visibility KPI detailed below, we already
have visibility over $51.3m of potential revenue for
FY17 prior to any further new product sales being
made.

The total value of contracts written during the year
increased by 13% to $82.3m (FY15: $72.9m). However,
this growth under-represents the true sales success in
the period. Contracts written for new product sales
actually increased 63% to $58.6m (FY15: $35.9m). The
overall growth rate reported was moderated by the
lower number of customers that were coming to the
end of their multi-year contracts and therefore fewer
were due to renew in the year. Whilst this did impact

the Sales KPI, it does mean we have more customers
under contract enjoying the benefits our solutions can
bring.

Our average contract for a new hospital customer
continues to be five years, with contracts for customers
renewing and buying additional products part way
through an existing contract both averaging over
three years, continuing to be in line with our historical
norms.

The sales success of the prior financial years saw a
significant proportion of our customer base renew on
multiyear contracts. As a result, significantly fewer
customers were due to renew in the financial year
under review which whilst not impacting revenue
did impact both the total value of renewal contracts
signed, as detailed above, and the renewal rate by
dollar value metric. The upcoming financial year will
have a similar number of customers due to renew.

Renewal rates by dollar value is a financial metric
which specifically ties to the three-year visible revenue

detailed below. This metric measures ‘last annual value’
of all customers due to renew in the current year and
compares it to actual value these customers renew at
(in total), including upsell and cross-sell. This metric
at 122% is above our expected norms of 85-115%
however with fewer customers being due to renew in
the current year, we do not believe this represents a
change to our future expected range. Variations in our
dollar value renewal rates are driven by the timing
of individual renewals, additional product sales and
contract negotiation or cancellation.

Business Model

The Group recognises the vast majority of revenue
under its ‘Annuity SaaS’ revenue recognition model.
This business model has been consistently applied
throughout the period under review. The strategy
behind this business model is to ensure the long-
term growth and stability of the Group. The annuity
SaaS business model adopted by the Group delivers a
‘smoothing’ of any sales fluctuations and focusing on
growth over the long-term. As a result the majority of

Three Year Visible Revenue

0.4

3.5

47.4

0.2

11.1

37.4

2017

2018

As at 30 June 2016

0.2

19.7

29.2

2019

Other Recurring Revenue

Renewals

Contracted

60.0

50.0

40.0

30.0

20.0

10.0

0.0

Craneware plc Annual Report 2016

Strategic Report: Operational and Financial Review [Cont’d.]

the revenue resulting from all sales will be recognised
over future periods, adding to the Group’s long term
visibility of revenue under contract – as stated in all
our trading and contract win announcements.

Under our model we recognise software licence revenue
and any minimum payments due from our ‘other
route to market’ contracts evenly over the life of the
underlying signed contracts. As we sign new hospital
contracts over an average life of five years, we will see
the revenue from any new sales over this underlying
contract term.

As well as the incremental licence revenues we
generate from each new sale, we normally expect
to deliver an associated professional services
engagement. This revenue is typically recognised as
we deliver the service to the customer, usually on a
percentage of completion basis. The nature and scope
of these engagements will vary depending on both our
customer needs and which of our solutions they have
contracted for. However these engagements will always
include the implementation of the software as well as
training the hospital staff in its use. As a result of the
different types of professional services engagement,
the period over which we deliver the services and
consequently recognise all associated revenue will vary,
however we would normally expect to recognise this
revenue over the first year of the contract.

In any individual year we would normally expect
around 10% - 20% of revenues reported by the Group
to be from services performed.

Sales, Revenue and Revenue Visibility

Under our model ‘revenue’ and ‘sales’ have different
meanings and are not interchangeable. This can be
demonstrated by reviewing the last five years’ sales
levels and comparing these to the reported revenue
numbers. In the table on page 7 we show our total
contracts signed in the relevant years between sales
of new products (to both new and existing hospital
clients) and clients who are renewing their contracts at
the end of their terms, our total sales and compare this
total to the revenue reported.

As the majority of the revenue resulting from all sales
will be recognised over future periods, the financial
statements do not, anywhere, record the valuable
‘asset’ this contracted, but not yet recognised, revenue
represents to the Group. As such, at every reporting
period, the Group presents it’s “Revenue Visibility”. This
KPI identifies revenues which we reasonably expect
to recognise over the next three year period, without
any further new product sales. This “Three Year Visible
Revenue” metric includes:

future revenue under contract

revenue generated from renewals (calculated at

100% dollar value renewal)

other recurring revenue

As we are signing multi-year contracts with our
customers and at the end of these contracts we are, on
average, renewing these customers at 100% of dollar
value, the Group is consistently building an underlying
annuity base of revenue that increases with each new
sale.

The Three Year Revenue Visibility KPI is a forward
looking KPI and therefore will always include some
judgement. To help assess this, we separately identify
different categories of revenue to better reflect any
inherent future risk in recognising these revenues.

Future revenue under contract, is, as the title suggests,
subject to an underlying contract and therefore once
invoiced will be recognised in the respective years
(subject to future collection risk that exists with all
revenue). Renewal revenues are contracts coming to
the end of their original contract term (e.g. five years)
and will require their contracts to be renegotiated
and renewed for the revenue to be recognised. As
this category of revenue is assumed to renew at
100% of dollar value, we consistently monitor and
publish this KPI (at each reporting period) to ensure
the reasonableness of this assumption. The final
category “Other recurring revenue” is revenue that we
would expect to recur in the future but is monthly or
transactional in its nature and as such there is increased
potential for this revenue not to be recognised in future
years, when compared to the other categories.
The Group’s total visible revenue for the three years
as at 30 June 2016 (i.e. visible revenue for FY17, FY18
and FY19) identifies $149.1m of revenue which we

reasonably expect to benefit the Group in this next
three year period. This visible revenue breaks down as
follows:

future revenue under contract contributing
$114.0m of which $47.4m is expected to be
recognised in FY17, $37.4m in FY18 and $29.2m
in FY19

revenue generated from renewals contributing

$34.3m; being $3.5m in FY17, $11.1m in FY18 and
$19.7m in FY19

other revenue identified as recurring in nature of

$0.8m

Gross Margins

We expect the gross profit margin to be between 90 -
95%, the gross profit for the year was $46.8m (FY15:
$42.4m) which represents a gross margin percentage
of 93.9% which is towards the top of our historical
range and therefore reflects the correct matching of
incremental costs incurred as a result of sales with the
associated revenue being recorded.

Earnings

The Group presents an adjusted earnings figure as a
supplement to the IFRS based earnings figures. The
Group uses this adjusted measure in our operational
and financial decision making as it excludes certain
one-off items, so as to focus on what the Group
regards as a more reliable indicator of the underlying
operating performance. We believe the use of this
measure is consistent with other similar companies
and is frequently used by analysts, investors and other
interested parties.

Adjusted earnings represent operating profits
excluding costs incurred as a result of acquisition and
share related activities, share related costs including
IFRS 2 share based payments charge, depreciation,
amortisation and in the current year excludes the ‘other
income’ arising out of the conclusion of the contingent
consideration arising from the prior year Kestros
acquisition (“Adjusted EBITDA”).

Craneware plc Annual Report 2016

Strategic Report: Operational and Financial Review [Cont’d.]

Adjusted EBITDA has grown in the year to $15.9m
(FY15: $14.4m) an increase of 10%. This reflects an
Adjusted EBITDA margin of 31.8% (FY15: 32.0%). This
is consistent with the Group’s measured approach
to continuing to make investments in line with the
revenue growth occurring, whilst continually managing
to ensure the efficiency of the investments we make.

Operating Expenses

The increase in net operating expenses (to Adjusted
EBITDA) reflects our policy of investing in line with
revenue growth increasing over 10% to $30.9m (FY15:
$28.0m). We are now seeing the benefits of our
previous investments, in both management bandwidth
and the Sales and Marketing areas, through our
record sales levels. The resulting revenue increases
have allowed us to expand our investment with the
focus in the past year being in Client Servicing and
Development.

We firmly believe “we win when our client wins” so
ensuring we continue to provide the highest level
of customer support whether during the initial
implementation or later as the customers use our
software during the life cycle of their contract, is
paramount to the Group. We continually rank top in
category in the KLAS scores for our customer support
and through appropriate and targeted investment we
aim to continue this focus on our customers.

Product innovation and enhancement continues to be
core to the Group’s future. The Operating Review
provides significant detail of our current ongoing
development programs, including the Trisus platform
and the portfolio of products that will be part of this

platform, the new gateway product development in the
Patient Access and Engagement arena and the launch
of Craneware Healthcare Intelligence.

As we undertake these initiatives and consider the
market opportunities these present, the Group has
decided to accelerate investment in these areas whilst
maintaining our current product offerings and ensuring
they remain market leading. This has resulted in an
increase in the cost of Development related to our
current products and therefore charged in the period to
$7.7m (FY15: $7.0m), a 10% increase and therefore in
line with our revenue growth. In addition, we have
made further investments to accelerate the
development of the new product offerings. As these
products have yet to be made available to our
customers, the associated incremental costs have been
capitalised, this has resulted in $2.0m (FY15: $0.8m) of
capitalised development spend in the year. We expect
to see both the levels of development expense and
capitalisation continue the current trends as we
continue to build out the solution set that supports the
Value Cycle.

Cash and Bank Facilities

We measure the quality of our earnings through our
ability to convert them into operating cash. During the
year we have seen continued high levels of cash
conversion, achieving over 100% conversion of our
adjusted EBITDA into operating cash. When comparing
to the prior year, the comparative should be adjusted
for the one-time amount of $4m of accrued revenue
relating to a partner contract clearing the Group’s
balance sheet. After adjusting for this amount the
levels of cash generated are consistent.

The success of our very high levels of cash conversion
(over 100% of Adjusted EBITDA) has enabled us to grow
our cash reserves to $48.8m (FY15: $41.8m). These cash
levels are after paying $2.3m in taxation (FY15: $2.5m)
and returning $6.0m (FY15: $5.4m) to our shareholders
by way of dividends.

We retain a significant level of cash reserves and
balance sheet strength to fund acquisitions as suitable
opportunities arise. To supplement these reserves, the
Group announced in our interim report that we had
secured a funding facility from the Bank of Scotland of
up to $50m. Whilst no draw down of this facility
occurred in the year, the Group continues to investigate
strategic opportunities for further its growth strategy.

Balance Sheet

The Group maintains a strong balance sheet position
with rigorous controls over working capital.

The level of trade and other receivables has increased
in comparison to the prior year. This is a result of the
significant level of sales made in the second half of the
year and the associated increase in accounts receivable.
The corresponding increase in Deferred income and our
continued cash collection rates confirm this increase is
solely a result of the increased sales levels.
As we continue to deliver record levels of sales so the
amounts we pay out relating to sales commissions
continue to increase. Total sales commissions are based
on the total value of the contract sold, however for
income statement purposes, only a small proportion of
revenue from the contract value is recognised in the
year, as a result we charge an equivalent percentage of
the sales commission, thereby properly matching
revenue and incremental expense. The resulting
prepayment has increased, as expected, in the year
from $3.2m to $6.0m (resulting from the growth in
new product sales). However, as we only pay the sales
commission upon receipt of the first annual payment
from the customer, we remain cash flow positive from
any new sale.

Craneware plc Annual Report 2016

Strategic Report: Operational and Financial Review [Cont’d.]

Deferred income levels reflect the amounts of the
revenue under contract that we have invoiced and/or
been paid for in the year, but have yet to recognise as
revenue. This balance is a subset of the total visible
revenue we describe above and reflected through our
three year visible revenue metric.

Deferred income, accrued income and the prepayment
of sales commissions all arise as a result of our annuity
SaaS business model described above and we will
always expect them to be part of our balance sheet.
They arise where the cash profile of our contracts does
not exactly match how revenue and related expenses
are recorded in the income statement. Overall levels of
deferred income are significantly more than accrued
income and the prepayment of sales commissions,
confirming we remain cash flow positive in regards to
how we recognise revenue from our contracts.

Conclusion of the Contingent Consideration
arising from the Kestros Limited Acquisition

On 28 August 2014, Craneware acquired the entire
share capital of Kestros Limited (now trading as
Craneware Health) for a maximum consideration of
$2.14m (£1.25m) subject to the achievement of certain
revenue milestones. The contingent consideration
element has now been assessed and as a result the
income statement in the year records other income of
$1.0m (FY15: $Nil). Concurrently the Group has
assessed the original goodwill and associated
intellectual property intangible assets and has reduced
the carrying value of these accordingly. This
impairment of $1.0m is included in the amortisation
charge for intangible assets charged in the year. Both
amounts are recorded as ‘adjustments’ in calculating
Adjusted EBITDA and due to their relative amounts have
no effect on Operating Profit or EPS reported in the
year.

Currency

Dividend

The Board recommends a final dividend of 9.0p (12.1
cents) per share giving a total dividend for the year of
16.5p (22.0 cents) per share (FY15: 14.0p (22 cents) per
share). Subject to confirmation at the Annual General
Meeting, the final dividend will be paid on 8 December
2016 to shareholders on the register as at 11 November
2016, with a corresponding ex-Dividend date of 10
November 2016.

The final dividend of 9p 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 11
November 2016. The exact amount to be paid will be
calculated by reference to the exchange rate to be
announced on 11 November 2016. The final dividend
referred to above in US dollars of 12.1 cents is given as
an example only using the Balance Sheet date
exchange rate of $1.3397/£1 and may differ from that
finally announced.

The functional currency for the Group (and cash
reserves) is US dollars. Whilst the majority of our cost
base is US located and therefore US dollar
denominated, we do have approximately one quarter of
the cost base based in the UK relating primarily to our
UK employees (and therefore denominated in Sterling).
As a result, we continue to closely monitor the Sterling
to US dollar exchange rate, and where appropriate
consider hedging strategies. During the year, we have
seen some benefit of exchange rate movements, with
the average exchange rate throughout the year being
$1.4837 as compared to $1.5750 in the prior year. This
benefit has allowed us to release further investment
whilst maintaining profit margins.

Taxation

The Group generates profits in both the UK and the US,
the overall levels of which are determined by both the
level of sales in the year and the level of professional
services income recognised. The Group’s effective tax
rate remains dependent on the applicable tax rates in
these respective jurisdictions. In the current year the
effective tax rate has seen the benefit of a reducing UK
corporation tax rate and as such the current year
effective tax rate is 24% (FY15: 25%). Effective tax
rates in any one year will reflect the relative tax rates in
the UK and the US, the ratio of underlying professional
services to software licence revenues and the overall
level of sales increase.

EPS

In the year adjusted EPS has increased to $0.429 (FY15:
$0.378) and adjusted diluted EPS has increased to
$0.423 (FY15: $0.375). The increase in EPS is driven by
the increased levels of EBITDA combined with the
overall reduced effective tax rate detailed above.

Craneware plc Annual Report 2016

Strategic Report: Operational and Financial Review [Cont’d.]

Outlook

The IPO of Craneware on AIM in 2007 provided us with
access to capital in order to build a business capable of
delivering on the significant opportunity we could see
approaching within the US healthcare industry. We
have achieved the targets we set the business since
that time, delivering significant revenue and profit
growth, cash generation and other factors such as
expanding our solution suite to better address the
challenges faced by our customers.

Craneware is in a stronger position than ever and we
are passionate about the opportunity ahead. The
double digit growth in our reported revenue and
adjusted EBITDA are only beginning to reflect the
record levels of sales which began three years ago.
Importantly, the investment we are making in our
product suite mean our market opportunity is now
several times larger than it was when we joined AIM in
2007.

The market continues to evolve as we anticipated. US
healthcare providers are seeking the solutions to
address the challenges the new value based
re-imbursement environment brings to them. We
believe the investment we are making to expand the
products in our Value Cycle suite addresses these
challenges and we are now recognised beyond our
original niche within the revenue cycle as a more
strategic provider within a hospital’s financial
operations and their value cycle.
We are confident that the ongoing investment we are
making, combined with our continuing sales successes,
mean we are well positioned to deliver continued
future growth as well as increasing stakeholder value.

Keith Neilson
Chief Executive Officer
5 September 2016

Craig Preston
Chief Financial Officer
5 September 2016

Craneware plc Annual Report 2016

Strategic Report: Key Performance Indicators and Principal Risks and Uncertainties

Key Performance Indicator Review

Revenue Growth

Revenue

Growth

2016

$49.8m

11%

2015

$44.8m

Revenue for the year grew by 11%. Underpinning this return to double digit growth is the increased sales levels seen in prior years plus an increase in new product sales growing
by 63% on the prior year. The Group’s annuity SaaS revenue recognition model means we are beginning to see the full benefit of prior years’ sales and the vast majority of the
current year’s sales will be recognised in later years.

Three Year Revenue Visibility

2016

2015

$149.1m

$123.4m

With the full benefit of current year’s sales not being reflected in the current year financial statements, the Group produces a ‘Three Year Revenue Visibility’ KPI. The metric
compares the growth in the three years contracted revenue; revenue subject to renewal and other recurring revenue, for the same three year period starting 1 July 2016. Full
details of how this is calculated are detailed in the financial review section of the Operational Review. The growth in this metric reflects the growing annuity revenue base that
results from the Group’s Annuity SaaS revenue recognition model which will benefit future years.

Adjusted EBITDA Growth

EBITDA

Growth

2016

$15.9m

10%

2015

$14.4m

10%

We continue to invest to support the future growth of the Group. The increasing revenue growth has allowed us to continue and in certain areas accelerate this investment
whilst maintaining our Group Margins and delivering EBITDA growth. By taking a measured approach to investment we aim to release additional investment, in line with
revenue growth, with the focus on delivering profitable growth to all stakeholders.

Adjusted EPS

Growth

2016

2015

42.8 cents

37.8 cents

13%

11%

Adjusted EPS growth demonstrates the Group’s overall profitability after taking into account the taxation in the year and any changes in share capital. The Group generates
profits in both the UK and the US, the overall level of which is determined by both the level of sales in the year and the level of professional services income. The Group’s
effective tax rate remains dependent on the applicable tax rates in each respective jurisdiction.

Cash

2016

$48.8m

2015

$41.8m

The Group continues to convert very high levels of the Adjusted EBITDA reported in the year into operating cash flows which has resulted in an increase in cash balances of 17%.
Overall Operating cash conversion continues above our long term target of 100%.

Craneware plc Annual Report 2016Strategic Report: Key Performance Indicators and Principal Risks and Uncertainties [Cont’d.]

Principal Risks and Uncertainties

To deliver continued sustainable growth, the Group
recognises the need to minimise the likelihood and
impact of key risks. These risks are both general in
nature i.e., business risks faced by all businesses, and
more specific to the Group and the market in which it
operates. The nature of the US healthcare industry and
associated risks are detailed in the Operational Review
on pages 5 to 12.

The risks outlined here are those principal risks and
uncertainties that are material to the Group. They do
not include all risks associated with the Group and are
not set out in any order of priority.

Management of Growth

Issue: The Group is planning for further significant
growth both organically and through acquisition,
which could place strain on the current management
bandwidth and other resources across the Group.

Actions: The Group has made significant investments
over the prior years to increase bandwidth at both
the Operations and PLC Board levels. The Group’s
annuity SaaS business model combined with the
detailed forecasting processes provide visibility to
expected growth rates. This provides a foundation
when planning in advance, including any additional
resourcing necessary as a result of this growth. To
ensure the correct infrastructure to support growth,
assessments are performed and improvements are
made within systems, policies and procedures and
business controls are upgraded, as appropriate, across
the Group.

US Healthcare Evolution and Reform

Issue: The US healthcare industry continues to evolve,
with the value based reimbursement model and a shift
towards consumerisation, the outcome and nature of
this market is subject to continual change and as such
could impact the Group’s market opportunity.

Actions: The Group has taken steps to ensure it stays at
the forefront of how the industry is interpreting current
proposals and actions they are taking. It has and it
continues to develop significant industry expertise
at both the Operations Board and the PLC Board. It
actively promotes developing further experience
throughout the wider organisation by, amongst other
things:

key hires adding to the industry expertise across the
Group, both at operational and strategic levels;

having independent industry experts attend and
speak at internal and external Company events;

regular attendance by senior management at

healthcare forums and industry education events;
and

client forums.

The Group’s “value cycle” strategy strengthens our
position as a trusted financial performance partner to
hospitals and it continually enhances and expands its
product offerings to meet the evolving challenges.

These strategies keeps the Group at the forefront of
industry developments.

Dependence on Key Executives and Personnel

Issue: Due to the size of the Group significant reliance
is placed on a few members of the executive and senior
management team, the retention of which cannot be
guaranteed.

Actions: The Group has and will continue to expand and
strengthen its senior management team, including
the PLC Board, as appropriate. In the current year, the
Group has developed new programs to identify, train
and mentor the management and talent who will be
the leaders of the future. In regards to retention, the
Remuneration Committee continues to monitor and
develop the remuneration packages of key personnel
to ensure they are both competitive and include
appropriate long term incentives.

Failure to Develop or Acquire
Appropriate Software Solutions

Issue: In an evolving market failure to enhance products
or add to the product suite could significantly limit the
Group’s market opportunity and leave it unable to meet
its customers’ needs.

Actions: The Group’s “Value Cycle” strategy, evolution
of the product suite and Trisus platform that supports
this strategy positions the Group forefront of providing
solutions to help US healthcare providers address the
challenges of value-based reimbursement. In addition
to the first elements of the Trisus platform being
launched in calendar 2017, the Group has invested in
a new gateway product within the patient access and
engagement area and announced the development of a
new product in the cost analytics area.

Intellectual Property Risk

Issue: Failure to protect, register and enforce (if
appropriate) the Group’s Intellectual Property
Rights could materially impact the Group’s future
performance.

Actions: The Group will continue to register its
trademarks and copyrights and protects access to its
confidential information, as appropriate. The Group
would vigorously defend itself against a third-party
claim should any arise. The Group also has in place
strict physical and data security processes and
encryption to protect its intellectual property.

Data and cyber security

Issue: Security of customer, commercial and personal
data poses increasing reputational and financial risk to
all businesses. In particular, the sharp rise in cyber and

data related crime presents a significant challenge in
terms of securing data and systems against attack.

Actions: Whilst it is not possible to completely
eliminate data and cyber security risk, it is clear that
effective mitigation now go beyond building and
operating security controls. While the Group will
continue to invest in the strict physical and data
security systems and protocol and mentioned above it
also carries specific insurance in this regard. The Group
also recognises and supports that a sustained evolution
of culture within the organisation which embeds
security across the business.

Competitive Landscape

Issue: New entrants to the market or increased
competition from existing competitors could
significantly impact the Group’s market opportunity.

Actions: The Group continually monitors its competitive
landscape, including both existing and potential new
market entrants. Significant barriers to entry continue
to exist, including but not limited to the significant
data content built over the Group history which exists
within its products. The Group continues to ensure
its products are platform agnostic and actively seeks
partnerships with other healthcare IT vendors.

Acquisition Risk

Issue: The Group has a stated acquisition strategy. Any
acquisition carries with it an inherent risk, including
failure to identify material matters that could adversely
affect future Group performance.

Actions: The Group and Board members individually
have relevant experience in regards to completing
acquisitions. In addition, and where appropriate, the
Board appoints independent professional advisors to
assist in the consideration of the acquisition and to
assist management in the due diligence process.

The principal financial risks are detailed in Note 3 to the
financial statements. How the Board determines and
manages risks is detailed in the Corporate Governance
report on pages 21 to 24.

In summary, the US healthcare market is not immune
to the macro-economic climate and, with the
increasing focus and requirements of the evolving
healthcare marketplace, the Group expects the
market to continue to be competitive. The Group
aims to remain at the forefront of product innovation
and delivery, through a combination of in-house
development and 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.

Craig Preston
Chief Financial Officer
5 September 2016

Craneware plc Annual Report 2016Independent Auditors

PricewaterhouseCoopers LLP
Chartered Accountants & Statutory Auditors
Atria One
144 Morrison Street
Edinburgh
EH3 8EX

Solicitors

Pinsent Masons LLP
Princes Exchange
1 Earl Grey Street
Edinburgh
EH3 9AQ

Directors, Secretary, and Advisors

Directors

G R Elliott (non-executive, Chairman)
K Neilson
C T Preston
N P Heywood (non-executive)
R F Verni (non-executive)
C Blye (non-executive)
R Rudish (non-executive)

Company Secretary &
Registered Office

C T Preston
1 Tanfield
Edinburgh
EH3 5DA

Stockbrokers and
Nominated Advisors

Peel Hunt LLP
120 London Wall
London
EC2Y 5ET

Registrars

Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU

Bankers

Bank of Scotland
The Mound
Edinburgh
EH1 1YZ

The Royal Bank of Scotland plc
36 St. Andrew Square
Edinburgh
EH2 2YB

Clydesdale Bank
20 Waterloo Street
Glasgow
G2 6DB

Barclays Commercial Bank
Aurora House
120 Bothwell Street
Glasgow
G2 7JT

HSBC Bank plc
7 West Nile Street
Glasgow
G1 2RG

Craneware plc Annual Report 2016
Board of Directors

The Directors of the Company and their responsibilities within the Group are set out below:

George R Elliott, 63 — Non-Executive Chairman :: Appointed 10 August 2007

George is non-executive Chairman of Calnex Solutions Ltd, an Ethernet test equipment manufacturer, Cooper Software Ltd, an enterprise
and business intelligence solution consultancy and Optoscribe Ltd, which develops and supplies high performance 3D waveguide solutions
for the data and telecommunications industries. He is also a non-executive director of Par Equity Holdings Ltd, a venture capital company,
which focuses on early stage high growth potential companies. Since 2007 he has been non-executive chairman/director of a number
of technology companies, including MicroEmissive Displays Group plc, Corsair Components Inc, Kewill plc, Summit Corporation plc and
Cupid plc. From 2000-2007 George was Chief Financial Officer of Wolfson Microelectronics plc, which was 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), a manufacturing and support services provider for software publishers, 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, 47 — 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 UK 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. Keith is
an active member of the Young Presidents Organisation (YPO), a syndicate member and Partner in Par Equity LLP, a board member of Code
Clan, the Scottish Digital Skills Academy and the Scottish North American Business Council (SNABC). Keith is also proud to be a Patron of the
Princes Trust and a Trustee of the Polar Academy both charitable organisations that work for the benefit of young people.

Craig T Preston, 45 — 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, 54 — Non-Executive Director :: Appointed 31 January 2002

Neil is chairman of Codeplay Software Ltd and a non-executive director at DeltaDNA Ltd and Kobojo SAS. He is also a director of Matrix
Alpha Analytics, a company providing services to the hedge fund sector, and an advisory panel member at Par Equity LLP. Previously he was
Chairman of Two Big Ears Ltd and CEO of Quadstone, and a marketing analytics company, and head of the Edinburgh Parallel Computing
Centre at the University of Edinburgh.

Craneware plc Annual Report 2016Board of Directors [Cont’d.]

Ron F Verni, 68 — Non-Executive Director :: Appointed 1 May 2009

Ron is currently a director of On Deck Capital, and on the Board of Advisors of 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.

Colleen Blye, 56 — Non-Executive Director :: Appointed 12 November 2013

Colleen Blye is the Executive Vice President and Chief Financial Officer for Montefiore Health System and Albert Einstein College of Medicine.
Montefiore Health System consists of eleven hospitals and an extended care facility, it is a premier academic medical center and includes
the Albert Einstein College of Medicine. Colleen has a distinguished background in large, complex healthcare organisations. Prior to joining
Montefiore, she served as Executive Vice President and Chief Financial Officer of Catholic Health Services of Long Island, an integrated
healthcare delivery system comprising six hospitals and three nursing homes. Earlier, she served as Executive Vice President for Finance
and Integrated Services at Catholic Health Initiatives, a health system with 102 hospitals across the United States. Her previous experience
includes responsibility for treasury management, revenue cycle, financial reporting and planning, third-party contracting, supply chain,
accounts payable, payroll, and information technology. Colleen Blye is a Certified Public Accountant and a member of the American Institute
of Certified Public Accountants and the Healthcare Financial Management Association.

Russ Rudish, 64 — Non-Executive Director :: Appointed 28 August 2014

Russ Rudish has more than 30 years' experience in serving the healthcare industry, both in the United States and internationally. Russ
holds a directorship in Rudish Health Solutions, LLC, a healthcare consulting firm. Russ is also a principal in Healthcare IT Leaders and
Run Consultants, both of which provide IT staff augmentation services. Between 2006 and 2014, Russ served as partner and Global
Sector Leader for Healthcare at Deloitte Touche Tohmatsu, where he led the $2 billion global consulting, audit, tax and financial advisory
business, developing the firm's global health care strategy. He is an active speaker and contributor to thought leadership on today's most
pressing healthcare business issues.

Craneware plc Annual Report 2016Directors
The Directors of the Company are listed on pages 16
and 17.

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.

Details of the Directors’ service contracts and
their respective notice terms are detailed in the
Remuneration Committee’s Report on page 26.

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 26,850,248 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 17,666 new ordinary shares (2015: 6,096
options were exercised).

Directors and their interests

The interests of the Directors who held office at 30
June 2016 and up to the date of this report in the
share capital of the company, were as follows:-

G R Elliott
N P Heywood
K Neilson

2016

15,650
80,606
3,504,130

3,600,386

2015

15,650
80,606
3,504,130

3,600,386

Directors’ interests in share options are detailed in the
Remuneration Committee’s Report on page 27.

Directors’ Report

The Directors present herewith their report and the
audited consolidated financial statements for the year
ended 30 June 2016.

Principal Activities and Business Review
The Group's principal activity continues to be the
development, licensing and ongoing support of
computer software for the US healthcare industry.

The Company is required by the Companies Act to
include a business review in this report. This includes
an analysis of the development and performance of
the Group during the financial year and its position
at the end of the financial year, including relevant
key performance indicators (principally revenue,
adjusted operating profit (before acquisition costs
and share related payments, share based payments,
depreciation and amortisation), visibility of revenue
over the next three years and cash generation during
the year). Detailed information on all matters required
is presented in the Strategic Report contained in pages
5 to 12 and is incorporated into this report by reference.
A description of the principal risks and uncertainties
facing the Group is also presented in the Strategic
Report.

Where the Directors’ Report, 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.

Financial Results and Dividends
The Group’s revenue for the year was $49.8m (2015:
$44.8m) which has generated an adjusted operating
profit (before acquisition related matters) of $15.0m
(2015: $13.2m). The full results for the year, which were
approved by the Board of Directors on 5 September
2016, are set out in the accompanying financial
statements and the notes thereto.

Dividend/Share (pence)

FY12

FY13

FY14

FY15

FY16

*Subject to Approval at AGM

10.5

11.5

12.5

14.0

16.5

During the year the Company paid an interim dividend
of 7.5p (10.7 cents). The Directors are recommending
the payment of a final dividend of 9p (12.1 cents) per
share giving a total dividend of 16.5p (22.0 cents) per
share based on the results for 2016 (2015: 14p (22.0
cents)). Subject to approval at the Annual General
Meeting, the final dividend will be paid on 8 December
2016 to shareholders on the register as at 20 November
2016.

The level of dividend proposed for the year continues
the Company’s stated 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.

Research and Development Activities
The Group continues its development programme of
software products for the US healthcare industry. The
primary focus of this development continues to be the
enhancement and expansion of the product suite to
support the Group’s Value Cycle strategy. Full details of
the development activities and the Group’s roadmap is
provided in the Strategic Report contained in pages 5
to 12. 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 $7.7m (2015: $7.0m) net of
expenditure capitalised of $2.0m (2015: $0.8m).

Financial Instruments
The financial risk management strategy of the
Group, its exposure to currency risk, interest
rate risk, counterparty risk and liquidity is set
out in Note 3 to the financial statements.

Going Concern

The Directors, having made suitable enquiries and
analysis of the financial statements, including the
consideration of:

cash reserves;

continued cash generation; and

annuity SaaS business model;

have determined that the Group has adequate resources
to continue in business for the foreseeable future and
that it is therefore appropriate to adopt the going
concern basis in preparing these financial statements.

Craneware plc Annual Report 2016Directors’ Report [Cont’d.]

Substantial Shareholders
As at 1 August 2016, 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:

Group’s 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

recycles waste products wherever possible,
encouraging use of environmentally friendly
materials, and disposing safely of any non-
recyclable materials.

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.

No. of
Ordinary
£0.01
Shares

% of
issued
share
capital

4,818,157

17.94

3,504,130

13.05

2,702,563

10.07

2,627,146

1,425,000

1,277,855

9.78

5.31

4.76

1,106,273

4.12

Community

891,718

3.32

873,800

3.25

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.

Liontrust Investment
Partners

K Neilson

W G Craig

Hargreave Hale

AXA Framlington

Baillie Gifford

Shroder Investment
Management
Fidelity Worldwide
Investment

D Paterson

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 them in the execution or
discharge of their duties or exercise of their 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.

Employees and Employee Involvement

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.

Corporate Social Responsibility
& 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

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.

The general policy of the Group is to welcome employee
involvement as far as it is reasonably practicable.
Employees are kept informed by meetings, 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.

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.

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 Group 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.

Policy on Payment of Payables

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.

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 2016
represented, on average 19 days purchases (2015: 16
days) for the Group and 21 days purchases (2015: 19
days) for the Company.

Charitable and Political Contributions

As part of the Group’s commitment to Corporate
Social Responsibility it has continued to develop its
“Craneware Cares” program. The focus of Craneware
Cares is to raise awareness and funds for charity. The
focus for 2016 has been the continued support of the
Polar Academy and the support of this charity whose
aim is to inspire and motivate thousands of young
adults, positively demonstrating that by inspiring
through exploration anybody can achieve their absolute
potential. The Craneware Cares program for fiscal year
2017 has recently been launched in both the UK and
US, this year the Craneware staff have nominated the
Children’s Hospice Association Scotland (CHAS) and the
Shriners Hospital for Children as their selected charities.

Craneware plc Annual Report 2016

Directors’ Report [Cont’d.]

Fund raising activities have already begun and these
supplement the Volunteer Time Off program where
Craneware staff take paid leave to support projects and
charities in their communities.

Neither the Company nor its subsidiaries
made any donation for political purposes
in fiscal years 2016 or 2015.

Annual General Meeting

The resolutions to be proposed at the Annual General
Meeting, 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.

Company Registration

The Company is registered in Scotland as a public
limited company with number SC196331.

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

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.

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
5 September 2016

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;

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;
and

prepare the financial statements on the going

concern basis unless it is inappropriate to presume
that the company will continue in business.

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.

Craneware plc Annual Report 2016
Corporate Governance Report

The Board of Directors ("the Board") acknowledges
the importance and continued applicability for this
reporting period of the principles set out in the UK
Corporate Governance Code issued in April 2016 (the
“Code”). Although the Code is not compulsory for AIM
listed companies, the Board recognises the importance
of good corporate governance practices and therefore
has applied the principles in line with best practice for
an AIM listed company. This Report identifies how it has
complied with both the individual principles and the
‘spirit’ of the Code as a whole.

The Code itself defines the purpose of corporate
governance being “to facilitate effective,
entrepreneurial and prudent management that can
deliver the long-term success of the company.” It is
this overarching objective that the Board has sought to
achieve in applying the Code principles.

Leadership

The role of the Board

“Every Company should be headed by an
effective Board which is collectively responsible
for the long-term success of the company.”

The Company’s Board continues to be headed by its
Chairman George Elliott and comprises two executive
Directors, Keith Neilson, Chief Executive Officer and
Craig Preston, Chief Financial Officer along with four
further non-executive Directors, Ronald Verni (Senior
Independent Director), Neil Heywood, Colleen Blye
and Russ Rudish. Detailed biographies of all Directors
are contained on pages 16 and 17. The Board meets
regularly to discuss and agree on the various matters
brought before it, including the Group’s trading results.
The Board is well supported by the Group’s Operations
Board (details of which are provided below) and a
broader senior management team, who collectively
have the qualifications and experience necessary for the
day to day running of the Group.

There is a formal schedule of matters reserved for the
Board, which include approval of the Group’s strategy,
annual budgets and business plans, acquisitions,
disposals, business development, annual reports and
interim statements, plus any significant financing and
capital expenditure plans. As part of this schedule, the
Board has clearly laid out levels of devolved decision
making authority to the Group’s Operations Board.

The Board has further established an Audit Committee
and a Remuneration Committee details of which are
provided below. The Board does not have a separate
Nominations Committee as the Company has again
taken advantage of the Codes relaxations available
to smaller companies and incorporated this function
within the remit of the entire Board.

Attendance 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:

No. Meetings in year

Executive Directors

K Neilson
C T Preston

Non Executive Directors

G R Elliott

N P Heywood

R Verni

C Blye

R Rudish

d
r
a
o
B

9/9
9/9

9/9

n
o
i
t
a
r
e
n
u
m
e
R

e
e
t
t
i

m
m
o
C

-
-

2/2

e
e
t
t
i

t
i
d
u
A

m
m
o
C

-
-

3/3

2/3

Where any Board member has been unable to attend
Board or Committee meetings during the year, their
input has been provided to the Company Secretary
ahead of the meeting. The relevant Chairman then
provides a detailed briefing along with the minutes of
the meeting following its conclusion.

As detailed in the Directors’ Report on page 19, the
Company maintains appropriate insurance cover against
legal action brought against Directors and officers.
The Company has further indemnified all Directors or
other officers against liability incurred by them in the
execution or discharge of their duties or exercise of their
powers.

Division of Responsibilities
“There should be a clear division of responsibilities at
the head of the company between the running of the
Board and the executive responsible for the running of
the company’s business. No one individual should have
unfettered powers of decision.”

The Board has established 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
Officer’s responsibility to ensure they are delivered
upon. To facilitate this, Keith Neilson as CEO chairs the
Group’s Operations Board which comprises the Chief
Financial Officer and six further members of the Senior
Management Team. The day-to-day operation of the
Group’s business is managed by this Board, subject to
the clearly defined authority limits.

The Chairman

“The chairman is responsible for leadership of the Board
and ensuring its effectiveness on all aspects of its role.”

George Elliott was appointed Chairman of the Board
in August 2007, shortly before the Company listed
on the AIM market. At that time the then Board
satisfied themselves that he was independent,
fulfilling the requirements of the Code.

In setting the Board agendas, the Chairman, in
conjunction with the Company Secretary, ensures input
is gathered from all Board Directors on matters that
should be included. Board papers are issued in advance
of meetings to ensure Board members have appropriate
detail in regards to matters that will be covered, thereby
encouraging openness and healthy debate.

Non-Executive Directors

“As part of their role as members of a unitary board,
non-executive directors should constructively
challenge and help develop proposals on strategy.”

TThe Board has appointed Ronald Verni as Senior
Independent Director. In this role, Ronald provides a
sounding board for the Chairman as well as providing
an additional channel of contact for shareholders, other
Directors or employees, if the need arises.

In addition to matters outlined above, there is regular
communication between executive and non-executive
Directors, including where appropriate, updates
on matters requiring attention prior to the next
Board meeting. The non-executive Directors meet,
as appropriate but no less than annually, without
executive Directors being present and further meet
annually without the Chairman present.

Craneware plc Annual Report 2016

Corporate Governance Report [Cont’d.]

Effectiveness

The Composition of the Board

“The Board and its committees should have the
appropriate balance of skills, experience, independence
and knowledge of the company to enable them to
discharge their respective duties and responsibilities
effectively.”

The composition of the Board has been designed to give
a good mix and balance of different skill sets, including
significant experience in:

high growth companies;

software and healthcare sectors;

entrepreneurial cultures;

senior financial reporting;

both UK and US companies;

acquisitions; and

other listed plc companies.

Through this mix of experience, the Board and
the individual Directors are well positioned to set
the strategic aims of the Company as well as drive
the Group’s values and standards throughout the
organisation, whilst remaining focused on their
obligations to shareholders and meeting their statutory
obligations.

The Board reviews on an annual basis the independence
of each non-executive Director. In making this
consideration the Board determines whether the
Director is independent in character and judgement
and whether there are relationships or circumstances
which are likely to affect, or could appear to affect,
the Director’s judgement. In regards to Neil Heywood,
the Board considered his appointment to the original
Craneware Limited Board in January 2002. Whilst Neil’s
tenure is over 10 years, the Company and the Board
have significantly changed since the Company’s IPO in
2007, as a result of this and Neil’s conduct, the Board
has concluded this has not affected his independence.

Appointments to the Board

“There should be a formal, rigorous and transparent
procedure for the appointment of new directors to
the Board.”

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.

Commitment

“All directors should be able to allocate sufficient
time to the company to discharge their
responsibilities effectively.”

All Board Directors recognise the need to allocate
sufficient time to the Company for them to be able
to meet their responsibilities as Board members. All
non-executive Directors’ contracts include minimum
time commitments; however these are recognised to be
the minimums.

Details of the other directorships held by each Board
member are provided in the Director biographies on
pages 16 and 17. The Board has evaluated the time
commitments required by these other roles and does
not believe it affects their ability to perform their duties
with the Company. No executive Director currently holds
any other plc directorship. The non-executive Director
contracts are available for inspection at the Company’s
registered office and are made available for inspection
both before and during the Company’s Annual General
Meeting.

Development

“The Board should be supplied in a timely manner with
the information in a form and a quality appropriate to
enable it to discharge its duties.”

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.

In addition, the Directors periodically meet with the
Group’s Operations Board on an informal basis. This
provides all Directors with direct access to the senior
management of the Company and allows for better
understanding of how the strategy set by the Board is
being implemented across the Group.

Evaluation

"The Board should undertake a formal and rigorous
annual evaluation of its own performance and
that of its committees and individual directors.”

At the end of the prior financial 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 in the current year were reviewed by the
Board as a whole. This evaluation included a review of
the performance of individual Directors including the
Chairman and the Board Committees. Overall the Board
has concluded that its performance in the period under
review had been satisfactory. This review process will
be repeated and updated as appropriate.

The Board has considered the Code’s recommendation
that the evaluation of the Board be carried out
externally at least every three years. The Board
recognises this recommendation is not applicable to
AIM listed companies and has determined it was not
necessary to carry out an external review in the current
year.

Re-election

“All directors should be submitted for re-election at
regular intervals, subject to continued satisfactory
performance.”

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

Craneware plc Annual Report 2016

Corporate Governance Report [Cont’d.]

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.

However, the Board recognises the Code’s
recommendation that all Directors should stand for
re-election every year, and whilst not a requirement,
the Board has decided to adopt this recommendation as
best practice. As such, all Directors will retire from office
at the Company’s forthcoming AGM. It is the intention
of all Directors, except Neil Heywood, to stand for re-
appointment. As detailed in the Chairman’s Statement
on page 4, Neil has decided, due to his length of tenure
with the Board, not to stand for re-appointment.

Accountability

Financial and Business Reporting

“The Board should present a balanced and
understandable assessment of the company’s position
and prospects.”

The Board recognises its responsibilities, including
those statutory responsibilities laid out on page 20. An
assessment of the Group’s market, business model and
performance is presented in the Chairman’s Statement
and the Strategic Review on pages 4 to 12.

As detailed on page 18 of the Directors’ Report, the
Board has confirmed that it is appropriate to adopt the
going concern basis in preparing financial statements.

Risk Management and Internal Control

“The Board is responsible for determining the nature
and extent of the significant risks it is willing to take
in achieving its strategic objectives. The Board should
maintain sound risk management and internal control
systems.”

The Directors recognise their responsibility for the
Group’s system of internal control, and have established
systems to ensure that an appropriate and reasonable
level of oversight and control is provided. These 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 Group 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. From this
review the Company maintains its internal risk register
which forms the foundation of the Board and the Audit
Committee review process.

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 no less
than 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.

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.

Details of the principal risks and uncertainties facing the
Group are detailed in the Strategic Report on page 14.
The principal financial risks are detailed in Note 3 to the
financial statements.

Audit Committee and Auditors

“The Board should establish formal and transparent
arrangements for considering how they should apply
the corporate reporting risk management and internal
control principles and for maintaining an appropriate
relationship with the Company’s auditor.”

An Audit Committee has been established 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 Colleen Blye and
Ronald 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. Colleen Blye,
as a member of the Audit Committee has recent and
relevant financial experience.

Details of how the Audit Committee has discharged its
responsibilities are provided below.

Remuneration

The Level and Components of Remuneration

“Executive Directors’ remuneration should be designed
to promote the long-term success of the company.
Performance-related elements should be transparent,
stretching and rigorously applied.”

The Company has established a Remuneration
Committee to assist the Board in this area. This
Committee is chaired by Ronald Verni and its other
members are Colleen Blye and Neil Heywood. When
appropriate Keith Neilson, as Chief Executive Officer, is
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 Committee has presented its Remuneration Report
on pages 25 to 27, which details the work undertaken
operating under its terms of reference (which are
available at the Company’s registered office) to
discharge its responsibilities.

Procedure
“There should be a formal and transparent procedure
for developing policy on executive remuneration and for
fixing the remuneration packages of individual directors.
No director should be involved in deciding his or her own
remuneration.””

Details of how the Committee and Board have
discharged their responsibilities in this area are detailed
in the Remuneration Report on pages 25 to 27.

Craneware plc Annual Report 2016

Corporate Governance Report [Cont’d.]

Relations with Shareholders

Dialogue with Shareholders

“There should be a dialogue with shareholders based
on mutual understanding of objectives. The Board as a
whole has responsibility for ensuring that a satisfactory
dialogue with shareholders takes place.”

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 advisors 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.

To facilitate this:

All shareholders are invited to attend the AGM

and are encouraged to take the opportunity to ask
questions.

The primary point of contact for shareholders on

operational matters is Keith Neilson as CEO and Craig
Preston as CFO.

The primary point of contact for shareholders on
corporate governance and other related matters
is George Elliott as Chairman. Ron Verni as Senior
Independent Director is available as a point of
contact should a shareholder not wish to contact the
Chairman for any reason.

Keith Neilson and Craig Preston meet regularly with
shareholders, normally immediately following the
Company’s half year and full year financial results
announcements, to discuss the Group’s performance and
answer any questions. The Board monitors the success
of these meetings through anonymous evaluations
from both shareholders and analysts performed by the
Company’s Broker and Financial PR advisor.

The Company’s website has a section for investors which
contains all publicly available financial information and
news on the Company.

Constructive Use of the AGM

“The Board should use the AGM to communicate with
investors and to encourage their participation”

The Board encourages attendance at its AGM from
all shareholders. The Notice of AGM together with all
resolutions and explanations of these resolutions are
sent at least 21 working days before the meeting. All
Directors, where possible, make themselves available to

answer any questions shareholders may have. Results
of all votes on resolutions are published as soon as
practicable on the Company’s website.

The Audit Committee

During the year the Audit Committee, operating
under its terms of reference (which are available
at the Company’s registered office), 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 Internal Risk Register 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.

The Committee has also 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 auditors 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 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. Details of the fees paid to the auditors for
audit and non-audit services are shown in Note 6 to the
financial statements.

The Audit Committee has considered the level of
non-audit services and the related fees paid and
has concluded they do not compromise auditor
independence.

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 company to:

have in place sufficient procedures, resources and
controls to enable its compliance with the AIM
Rules;

seek advice from its Nominated Advisor (“Nomad”)
regarding its compliance with the AIM Rules
whenever appropriate and take that advice into
account;

provide the Company’s Nomad with any information
it reasonably requests in order for the Nomad to
carry out its responsibilities under the AIM Rules
for Nominated Advisors, including any proposed
changes to the Board and provision of draft
notifications in advance;

ensure that each of the Company’s Directors accepts
full responsibility, collectively and individually, for
compliance with the AIM Rules; and

ensure that each Director discloses without delay
all information which the Company needs in
order to comply with AIM Rule 17 (Disclosure
of Miscellaneous Information) insofar as that
information is known to the Director or could with
reasonable diligence be ascertained by the Director.

Approved by the Board of Directors and signed on
behalf of the Board by:

Craig Preston
Company Secretary
5 September 2016

Craneware plc Annual Report 2016Remuneration Committee's 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 UK Corporate Governance Code. The members
of the Committee are Ronald Verni (Chairman), Neil
Heywood and Colleen Blye. 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 on occasion will
attend 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 are:
basic annual salary and benefits in kind;

annual performance related bonus;

pension entitlement; and

long term incentives (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 holds any outside
appointments with any other publically traded
company.

Directors’ remuneration

The Committee develops overall Directors’
remuneration packages to ensure both the short
and long-term objectives of the Company are
met and potentially exceeded, thereby ensuring
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, or when an
individual’s position or responsibilities change and is
normally paid as a fixed cash sum monthly. In April
2016, Director’s basic salary levels were reviewed as
part of the Group wide remuneration review, and an
adjustment was made to the Chief Financial Officers’
base salary in line with percentage increases across
the Group. In regards to the Chief Executive Officer, no
adjustment was made, however it was acknowledged
that his remuneration remains significantly below
the levels recommended by previous benchmarking
exercises. It is the Remuneration Committees intention
to address this disparity over the coming year.

As required by legislation, the Company has introduced
a Company open enrolment pension scheme in which
all UK employees, including Directors, are entitled to
participate. As part of this scheme, the Company has
matched personal contributions into the scheme, up
to 1%. In addition, 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.
Maximum bonus entitlements were set at a level that
allowed additional growth of overall remuneration for
out-performance of targets but still remains below the
appropriate levels of the benchmarking exercise referred
to above.

As these financial targets were partially met in the
current year, a proportion of the performance related
bonus entitlement has been paid and is detailed in the
table below.

(iii)

Share options and LTIP awards

During the year, the Company operated 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) could be awarded share
options under this scheme.

In the year to 30 June 2016, the executive Directors
were awarded share options under this scheme, details
of which are shown in the table on page 27.

These options are normally exercisable three years
after the date the options were granted, provided the
executive is still employed at the date of exercise. These
options are subject to stringent performance criteria
based on the share price performance in the preceding
three year period as compared to a comparator base of
companies. Each option grant is split into three tranches
(of no more than a 1/3 of the total options granted)
which allows the performance criteria to be assessed
annually (against the preceding three year period). If
performance is below the median of the comparator
group over the relevant three year period then no
options vest that year. The amount of options that vest
increases as performance reaches top quartile when
the relevant tranche of options vests. No more than 1/3
of each option grant can vest in any single year and
options do not become exercisable until three years
from the original grant date. As a result performance
criteria are based on share price performance over a five
year period which must be maintained over that period
if all options granted are to become exercisable.

These performance criteria were met in the current year
and as a result all options that were subject to vesting in
the current year vested but only become exercisable on
the third anniversary of the grant of the original option.

Share option grants in the year remained at a level
consistent with prior years but were still remain below
the levels recommended by previous benchmarking
exercises.

Given that the Share Option Plan is approaching the
tenth anniversary of its original adoption date (beyond
which no further options may be granted pursuant to
its terms), the Company is proposing to implement
replacement arrangements (including a Long Term
Incentive Plan (or “LTIP”)) that will be used to provide
share-based incentives to directors and other senior
executives in the future. Details of these proposals are
contained within the Notice of Annual General Meeting.

Craneware plc Annual Report 2016Remuneration Committee's 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:

K Neilson
C T Preston
G R Elliott**
N P Heywood
R Verni
C Blye
R Rudish

Contract Date

Unexpired Term

Normal Notice Period

Founder
15 September 2008
10 August 2007
11 January 2002
1 May 2009
12 November 2013
28 August 2014

Rolling
Rolling
2 years 11 months
Rolling
Rolling
Rolling
Rolling

*3 months
*3 months
1 month
1 month
1 month
1 month
1 month

* 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.

** During the year, the Company agreed to extend G Elliott’s service contract for a further 3 years, subject to the normal requirement for re-election at the upcoming AGM.

Directors’ Interests

The Directors’ interests in the ordinary shares of the Company are set out in the Directors’ Report on page 18.

Directors’ Emoluments (audited)
For Directors who held office during the course of the year, emoluments1 for the year ending 30 June 2016 were as follows (note: with the exception of R Verni, C Blye and R
Rudish, all directors are paid in UK Sterling; the amounts below are translated at the relevant average exchange rate for period being reported) :

Executives

K Neilson
C T Preston

Non-Executives

G R Elliott
N P Heywood
R Verni
C Blye
R Rudish

Total

Salary/Fees ($)

Benefits 2 ($)

Bonus ($)

Pension ($)

2016 Total ($)

2015 Total ($)

318,569
303,540

96,375
51,531
55,572
49,140
49,632

856
936

159,230
157,590

10,593
3,035

489,248
465,101

421,902
389,805

-
-
-
-
-

-
515
-
-
-

96,375
52,046
55,572
49,140
49,632

97,675
52,748
53,055
47,385
39,585

924,359

1,792

316,820

14,143

1,257,114

1,102,155

1. 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.

2. Benefits represent payments for health insurance, death in service and disability insurance.

The following Directors were paid in Sterling:

Salary/Fees (£)

Benefits (£)

Bonus (£)

Pension (£)

2016 Total (£)

2015 Total (£)

214,713
204,583

64,956

34,731

518,983

577
630

107,356
106,250

7,140
2,046

347

329,786
313,509

267,987
247,601

64,956

35,078

62,016

33,491

1,207

213,606

9,533

743,329

611,095

Executives

K Neilson
C T Preston

Non-Executives

G R Elliott

N P Heywood

Total

Craneware plc Annual Report 2016Remuneration Committee's Report [Cont’d.]

Directors’ interests in share options

Directors’ share options as at 30 June 2016 were in respect of Directors who held office during the course of the year:

Exercise Price
(cents)

Exercise Price
(pence)

Issue
Date

Held At
30/06/15

Granted
During Year

Exercised
During Year

Lapsed
During Year

Held At
30/06/16

Dec-09

Sept-10

Sept-12

Sept-13

Sept-14

Mar-16

Sep-08

Dec-09

Sept-10

Sept-12

Sept-13

Sept-14

Mar-16

Issue
Date

Dec-09

Sept-10

Sept-12

June-13

K Neilson

Ordinary shares

C T Preston

Ordinary shares

534.0

618.0

650.0

621.0

839.0

1066.0

365.0

534.0

618.0

650.0

621.0

839.0

Ordinary shares

1066.0

Employee share options as at 30th June 2016 were:

335.0

401.0

400.0

395.0

523.0

750.0

208.0

335.0

401.0

400.0

395.0

523.0

750.0

Ordinary shares

Exercise Price
(cents)

Exercise Price
(pence)

534.0

618.0

572.0

520.0

621.0

755.0

839.0

1066.0

1072.0

335.0

401.0

360.0

343.0

395.0

467.0

523.0

750.0

On behalf of the Remuneration Committee:

Ronald Verni
Chairman of the Remuneration Committee
5 September 2016

28,580

13,383

17,438

34,472

39,090

28,628

72,115

25,099

11,721

16,027

32,459

36,808

26,925

28,580

13,383

17,438

34,472

39,090

28,628

72,115

25,099

11,721

16,027

32,459

36,808

26,925

Held At
30/06/16

32,355

18.731

40,534

32,051

Held At
30/06/15

32,355

20,061

53,326

32,051

Granted
During Year

Exercised
During Year

Lapsed
During Year

(1,330)

(12,792)

Sept-13

112,637

Oct-13

2,650

Sept-14

220,879

Mar-16

Apr-16

201,904

10,000

(3,544)

(3,545)

105,548

(2,650)

(22,716)

198,163

(2,805)

199,099

10,000

Craneware plc Annual Report 2016Independent Auditors’ Report to the Members of Craneware plc

Report on the financial statements

Our opinion

In our opinion;

Craneware plc’s group financial statements and

parent company financial statements (the “financial
statements”) give a true and fair view of the state
of the group’s and of the parent company’s affairs
as at 30 June 2016 and of the group’s profit and the
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 International Financial
Reporting Standards (“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.

What we have audited

The financial statements, included within
the Annual Report and Financial Statements
(the “Annual Report”), comprise:

elsewhere in the Annual Report, rather than in the
notes to the financial statements. These are cross-
referenced from the financial statements and are
identified as audited.

The financial reporting framework that has been
applied in the preparation of the financial statements is
IFRSs as adopted by the European Union, and applicable
law and, as regards the parent company financial
statements, as applied in accordance with the provisions
of the Companies Act 2006.

In applying the financial reporting framework,
the directors have made a number of subjective
judgements, for example in respect of significant
accounting estimates. In making such estimates, they
have made assumptions and considered future events.

Opinion on other matter prescribed
by the Companies Act 2006

In our opinion, the information given in the Strategic
Report and the Directors’ Report for the financial
year for which the financial statements are prepared
is consistent with the financial statements.

Other matters on which we are required to
report by exception

Adequacy of accounting records and
information and explanations received

the consolidated and company balance sheets as at

30 June 2016;

Under the Companies Act 2006 we are required
to report to you if, in our opinion:

the consolidated statement of comprehensive

income for the year then ended;

we have not received all the information and
explanations we require for our audit; or

the statements of cash flow for the year then ended;
the statements of changes in equity for the year

then ended; and

the notes to the financial statements, which include a
summary of significant accounting policies and other
explanatory information.
Certain required disclosures have been presented

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.

We have no exceptions to report arising from
this responsibility.

Directors’ remuneration

Under the Companies Act 2006 we are required to report
to you if, in our opinion, certain disclosures of directors’
remuneration specified by law are not made. We have
no exceptions to report arising from this responsibility.

Responsibilities for the financial statements
and the audit

Our responsibilities and those of the directors

As explained more fully in the Statement of
Directors' Responsibility set out on page 20, 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 and express an opinion on
the financial statements in accordance with applicable
law and International Standards on Auditing (UK and
Ireland) (“ISAs (UK & 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 parent 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.

What an audit of financial statements involves

We conducted our audit in accordance with
ISAs (UK & Ireland). 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

Craneware plc Annual Report 2016

Independent Auditors’ Report to the Members of Craneware plc [Cont’d.]

of performing the audit. If we become aware of any
apparent material misstatements or inconsistencies we
consider the implications for our report.

Kenneth Wilson
Senior Statutory Auditor
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Edinburgh

5 September 2016

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 the 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.

We primarily focus our work in these areas by assessing
the directors’ judgements against available evidence,
forming our own judgements, and evaluating the
disclosures in the financial statements.

We test and examine information, using sampling and
other auditing techniques, to the extent we consider
necessary to provide a reasonable basis for us to draw
conclusions. We obtain audit evidence through testing
the effectiveness of controls, substantive procedures or
a combination of both.

In addition, we read all the financial and non-financial
information in the Annual Report to identify material
inconsistencies with the audited financial statements
and to identify any information that is apparently
materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course

Notes:

(a) The maintenance and integrity of the Craneware plc website is the responsibility of the directors; the work carried out
by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility
for any changes that may have occurred to the financial statements since they were initially presented on the website.

(b) Legislation in the United Kingdom governing the preparation and dissemination of

financial statements may differ from legislation in other jurisdictions.

Craneware plc Annual Report 2016Consolidated Statement of Comprehensive Income for the year ended 30 June 2016

Continuing operations:

Revenue

Cost of sales

Gross profit

Operating expenses

Operating profit

Analysed as:

Adjusted EBITDA1

Acquisition costs and share related transactions

Share based payments

Depreciation of plant and equipment

Contingent consideration on business combination

Amortisation and impairment of intangible assets

Finance income

Profit before taxation

Tax on profit on ordinary activities

Profit for the year attributable to owners of the parent

Total comprehensive income attributable to owners of the parent

Earnings per share for the year attributable to equity holders

- Basic ($ per share)

- Adjusted Basic ($ per share)2

- Diluted ($ per share)

- Adjusted Diluted ($ per share)2

Notes

Total
2016
$’000

49,846

(3,011)

46,835

Total
2015
$’000

44,817

(2,421)

42,396

(33,024)

(29,984)

13,811

12,412

15,863

14,356

(556)

(251)

(442)

1,005

(219)

(247)

(467)

(1,808)

(1,011)

112

13,923

(3,348)

10,575

12,496

(3,108)

9,388

12a

12b

0.394

0.429

0.389

0.423

0.350

0.378

0.348

0.375

1Adjusted EBITDA is defined as operating profit before acquisition costs, share based payment, depreciation, contingent consideration, amortisation, impairment and
shared related transactions.
2Adjusted Earnings per share calculations allow for the tax adjusted acquisition costs and share related transactions together with amortisation on
acquired intangible assets to be better understood and allow a better comparison of the underlying performance with previous years.

The accompanying notes are an integral part of these financial statements.

Craneware plc Annual Report 2016Statements of Changes in Equity for the year ended 30 June 2016

Group

At 1 July 2014

Total comprehensive income - profit for the year

Transactions with owners:

Share-based payments

Impact of share options exercised/lapsed

Issue of Ordinary shares related to business combination

Buy back of Ordinary shares

Dividends (Note 11)

At 30 June 2015

Total comprehensive income - profit for the year

Transactions with owners:

Share-based payments

Impact of share options exercised/lapsed

Dividends (Note 11)

At 30 June 2016

Company

At 1 July 2014

Total comprehensive income - profit for the year

Transactions with owners:

Share-based payments

Impact of share options exercised/lapsed

Issue of Ordinary shares related to business combination

Buy back of Ordinary shares

Dividends (Note 11)

At 30 June 2015

Total comprehensive income - profit for the year

Transactions with owners:

Share-based payments

Impact of share options lapsed

Dividends (Note 11)

At 30 June 2016

Share
Capital
$’000

Share
Premium
$’000

Other
Reserves1
$’000

539

15,496

(7)

536

1,820

17,356

536

17,451

539

15,496

(7)

536

1,820

17,356

536

17,451

235

247

(104)

378

251

(74)

555

192

145

(52)

285

141

(45)

381

Retained
Earnings
$’000

28,646

9,388

182

104

(3,572)

(5,388)

29,360

10,575

210

(5,953)

34,266

23,850

9,094

177

(3,572)

(5,388)

24,161

8,773

138

(5,953)

27,119

Total Equity
$’000

44,916

9,388

429

1,824

(3,579)

(5,388)

47,630

10,575

461

(5,953)

52,808

40,077

9,094

145

165

1,824

(3,579)

(5,388)

42,338

8,773

141

188

(5,953)

45,487

1Other reserves relate to share-based payments and are detailed in Note 1 and these reserves are not available for distribution.

The accompanying notes are an integral part of these financial statements.

Craneware plc Annual Report 2016Consolidated Balance Sheet as at 30 June 2016

ASSETS
Non-Current Assets
Plant and equipment
Intangible assets
Trade and other receivables
Deferred tax

Current Assets
Trade and other receivables
Cash and cash equivalents

Total Assets

EQUITY & LIABILITIES
Non-Current Liabilities
Deferred income

Current Liabilities
Deferred income
Current tax liabilities
Trade and other payables

Total Liabilities

Equity
Share capital
Share premium account
Other reserves
Retained earnings

Total Equity

Total Equity and Liabilities

Registered Number SC196331

Notes

2016
$’000

2015
$’000

13
14
17
18

17
21

1,213
16,535
4,581
1,685
24,014

20,953
48,812
69,765
93,779

4
4

28,963
2,353
9,651
40,967

40,971

536
17,451
555
34,266

52,808

93,779

1,242
16,196
2,432
1,510
21,380

15,010
41,832
56,842
78,222

819
819

22,460
1,289
6,024
29,773

30,592

539
17,356
378
29,360

47,630

78,222

The accompanying notes are an integral part of these financial statements.

The financial statements on page 30 to 57 were approved and authorised for issue by the Board of Directors on 5 September 2016 and signed on its behalf by:

Keith Neilson
Director

Craig Preston
Director

Craneware plc Annual Report 2016Company Balance Sheet as at 30 June 2016

ASSETS
Non-Current Assets
Investment in subsidiary undertakings
Plant and equipment
Intangible assets
Deferred Tax
Amounts due from subsidiary undertaking

Current Assets
Trade and other receivables
Cash and cash equivalents

Total Assets

EQUITY & LIABILITIES
Non-Current Liabilities
Deferred income

Current Liabilities
Deferred income
Current tax liabilities
Trade and other payables

Total Liabilities

Equity

Share capital
Share premium account
Other reserves
Retained earnings
Total Equity

Total Equity and Liabilities

Registered Number SC196331

Notes

2016
$’000

2015
$’000

15
13
14
18
17

17
21

10,107
838
2,603
405
6,000

19,953

16,573
45,324
61,897

81,850

4
4

27,870
1,019
7,470

36,359

36,363

536
17,451
381
27,119

45,487

81,850

11,112
842
1,050
318
6,000

19,322

11,951
39,932
51,883

71,205

819
819

20,762
1,177
6,109

28,048

28,867

536
17,356
285
24,161

42,338

71,205

The accompanying notes are an integral part of these financial statements.

The financial statements on pages 30 to 57 were approved and authorised for issue by the Board of Directors on 5 September 2016 and signed on its behalf by:

Keith Neilson
Director

Craig Preston
Director

Craneware plc Annual Report 2016Statements of Cash Flows for the year ended 30 June 2016

Cash flows from operating activities
Cash generated from operations
Interest received
Tax paid

Net cash from operating activities

Cash flows from investing activities
Purchase of plant and equipment
Capitalised intangible assets
Acquisition of subsidiary, net of cash acquired

Net cash used in investing activities

Cash flows from financing activities
Dividends paid to company shareholders
Buy back of Ordinary Shares
Proceeds from issuance of shares

Net cash used in financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at the start of the year

Cash and cash equivalents at the end of the year

The accompanying notes are an integral part of these financial statements.

Notes

13
14
16

Group

Company

2016
$’000

2015
$’000

2016
$’000

2015
$’000

17,564
112
(2,254)

15,422

(418)
(2,166)
-

(2,584)

(5,953)
-
95

(5,858)

6,980

41,832

48,812

22,025
84
(2,527)

19,582

(378)
(811)
(247)

(1,436)

(5,388)
(3,579)
40

(8,927)

9,219

32,613

41,832

14,944
245
(1,913)

13,276

(230)
(1,796)
-

(2,026)

(5,953)
-
95

(5,858)

5,392

39,932

45,324

21,953
185
(2,413)

19,725

(148)
(670)
(290)

(1,108)

(5,388)
(3,579)
40

(8,927)

9,690

30,242

39,932

Craneware plc Annual Report 2016Notes to the Financial Statements

General Information

Reporting currency

Craneware plc (the Company) is a public limited
company incorporated and domiciled in Scotland.
The Company has a primary listing on the AIM stock
exchange. The address of its registered office and
principal place of business is disclosed on page 15
of the financial statements. 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
(IFRS), as adopted by the European Union, International
Financial Reporting Standards Interpretation Committee
(IFRS IC) interpretations and with those parts of
the Companies Act 2006 applicable to companies
reporting under IFRS. The consolidated financial
statements have been prepared under the historic cost
convention and prepared on a going concern basis.
The applicable accounting policies are set out below,
together with an explanation of where changes have
been made to previous policies on the adoption of
new accounting standards in the year, if relevant.

The preparation of financial statements in conformity
with IFRS requires the use of estimates and assumptions
that affect the reported amounts of assets and liabilities
at the date of the financial statements and the
reported amounts of revenues and expenses during the
reporting year. Although these estimates are based on
management’s best knowledge of the amount, event or
actions, actual results ultimately may differ from those
estimates.

The Company and its subsidiary undertakings are
referred to in this report as the Group.

1 Principal accounting policies

The principal accounting policies adopted in the
preparation of these financial statements are set out
below. These policies have been consistently applied,
unless otherwise stated.

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

Currency translation

Transactions denominated in foreign currencies are
translated into US dollars at the rate of exchange
ruling at the date of the transaction. The average
exchange rate during the course of the year was
$1.4837/£1 (2015: $1.5750/£1). Monetary assets
and liabilities expressed in foreign currencies are
translated into US dollars at rates of exchange
ruling at the Balance Sheet date $1.3397/£1 (2015:
$1.5717/£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 administrative expenses.

New Standards, amendments and
interpretations effective in the year

The Directors have adopted the following
Standards, amendments and interpretations
(where relevant to the Group and subject to their
endorsement by the EU) and they have concluded
that they have no material financial impact on the
financial statements of the Group or Company.

Annual Improvements 2012 (effective 1 July 2014*),
This set of annual improvements addresses issues
in the 2010-2012 reporting cycle which includes
changes to seven standards, none of which are
expected to have a material impact on the Group.

Annual Improvements 2013 (effective 1 July 2014*),
This set of annual improvements addresses issues
in the 2011-2013 reporting cycle which includes
changes to four standards, none of which are
expected to have a material impact on the Group.

IAS 19, ‘Employee Benefits’ (effective 1 July
2014*),This amendment applies to contributions
from employees or third parties to defined benefit
plans. The objective of this amendments is to

simplify the accounting for contributions that are
independent of the number of years of employee
service, for example, employee contributions that are
calculated according to a fixed percentage of salary.

New Standards, amendments and
interpretations not yet effective

The Directors anticipate that the future adoption
of the following 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 and Company in their current form.
None of the below Standards, amendments or
interpretations have been adopted early but their
potential impact is continually monitored.

Annual improvements 2014 (effective 1 January 2016*),
This set of annual improvements addresses issues in the
2012-2014 reporting cycle which affects four different
standards.

IFRS 2, ‘Share based payments’ (effective 1 January

2018*),

IFRS 9, ‘Financial instruments: classification and
measurement’ (effective 1 January 2018*),

IFRS 10, ‘Consolidated financial statements’

(effective 1 January 2016*),

IFRS 11, ‘Joint arrangements’ (effective 1 January

2016*),

IFRS 14, ‘Regulatory deferral accounts’ (effective 1

January 2016*),

IFRS 16, ‘Leases’ (effective 1 January 2019*),

IAS 1, ‘Presentation of financial statements’

(effective 1 January 2016*),

IAS 7, ‘Statement of Cash Flows’ (effective 1 January

2017*),

IAS 12, ‘Income Taxes’ (effective 1 January 2017*),

IAS 16, ‘Property, plant and equipment’ (effective 1

January 2016*),

IAS 27, ‘Separate financial statements’ (effective 1

January 2016*),

IAS 28 (revised 2011), ‘Investments in associates and

joint ventures’ (effective 1 January 2016*),

IAS 38, ‘Intangible assets’ (effective 1 January

2016*),

IAS 41, ‘Agriculture’ (effective 1 January 2016*).

Craneware plc Annual Report 2016

Notes to the Financial Statements [Cont’d.]

1 Principal accounting policies (cont’d.)

The Directors continue to assess the potential
implications of IFRS 15, ‘Revenue from contracts with
customers’ (effective 1 January 2018). The first year end
that is expected to be affected is 30 June 2019.

*effective for accounting periods starting on or after this date.

Basis of consolidation

The consolidated Statement of Comprehensive Income,
Balance Sheet, Statement of Changes in Equity
and Statement of Cash flows include the financial
statements of the Parent Company and its subsidiaries.
Subsidiaries are all entities over which the Group has
control. The Group controls an entity when the Group
is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability
to affect those returns through its power over the
entity. Subsidiaries are fully consolidated from the
date on which control transferred to the Group and
are deconsolidated from the time control ceases. Intra
Group revenue and profits/(losses) 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 although the Company performance
can been seen in isolation in the Statements of
Changes in Equity. Accounting policies of subsidiaries
have been changed where necessary to ensure
consistency with the policies adopted by the Group.

Business combinations

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

Any contingent consideration to be transferred by the
Group is recognised at fair value at the acquisition
date. Subsequent changes to the fair value of the
contingent consideration that is deemed to be a
financial asset or financial liability is recognised

in accordance with IAS 39 in the Statement of
Comprehensive Income and any balances at the
balance sheet date are catorgorised as ‘fair value
through profit and loss’. Contingent consideration
that is classified as equity is not re-measured and its
subsequent settlement is accounted for within equity.

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

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

In relation to Craneware Health (Kestros Ltd),
there has been an adjustment to the fair
value and this is reflected in Note 17.

Revenue recognition

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

Revenue is derived from sales of, and distribution
agreements relating to, software licences and
professional services (including installation). Revenue
is recognised when (i) persuasive evidence of an
arrangement exists; (ii) the customer has access and
right to use our software; (iii) the sales price can
be reasonably measured; and (iv) collectability is
reasonably assured.
‘White-labelling’ or other ‘Paid for development work’
is generally provided on a fixed price basis and as
such revenue is recognised based on the percentage
completion or delivery of the relevant project. Where
percentage completion is used it is estimated based
on the total number of hours performed on the project
compared to the total number of hours expected to
complete the project. Where contracts underlying
these projects contain material obligations, revenue is
deferred and only recognised when all the obligations
under the engagement have been fulfilled.

Revenue from standard licensed products which are
not modified to meet the specific requirements of each
customer is recognised from the point at which the
customer has access and right to use our software. This
right to use software will be for the period covered
under contract and, as a result, our annuity based
revenue model recognises the licensed software revenue
over the life of this contract. This policy is consistent
with the Company’s products providing customers with
a service through the delivery of, and access to, software
solutions (Software-as-a-Service (“SaaS”)), and results
in revenue being recognised over the period that
these services are delivered to customers. Incremental
costs directly attributable in securing the contract are
charged equally over the life of the contract and as a
consequence are matched to revenue recognised. Any
deferred contract costs are included in, both current and
non-current, trade and other receivables.

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

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

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

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

Craneware plc Annual Report 2016

Notes to the Financial Statements [Cont’d.]

1 Principal accounting policies (cont’d.)

Intangible Assets

(a) Goodwill

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

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

(b) Proprietary software

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

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

(d) Research and Development expenditure

Expenditure associated with developing and
maintaining the Group’s software products is recognised
as incurred. Where, however, new product development
projects are technically feasible, production and
sale is intended, a market exists, expenditure can be

measured reliably, and sufficient resources are available
to complete such projects, development expenditure
is capitalised until initial commercialisation of the
product, and thereafter amortised on a straight-line
basis over its estimated useful life, which has been
assessed as five years. Staff costs and specific third
party costs involved with the development of the
software are included within amounts capitalised.

(e) Computer software

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

Impairment of non-financial assets

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

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

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

Plant and Equipment

All plant and equipment are stated at historical cost less
depreciation, costs include the original purchase price of
the asset and the costs attributable to bring the asset to
its working condition for its intended use. 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
Between 10% - 33% straight line

Tenants improvements -
Between 10% - 20% straight line

Office furniture
Between 14% - 25% straight line

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.

Taxation

The charge for taxation is based on the profit
for the period as adjusted for items which are
non-assessable or disallowable. It is calculated
using taxation rates that have been enacted or
substantively enacted by the Balance Sheet date.

Deferred taxation is computed using the liability
method. Under this method, deferred tax assets
and liabilities are determined based on temporary
differences between the financial reporting and tax
bases of assets and liabilities and are measured using
enacted rates and laws that will be in effect when the
differences are expected to reverse. The deferred tax is
not accounted for if it arises from initial recognition of
an asset or liability in a transaction that at the time of
the transaction affects neither accounting nor taxable
profit or loss. Deferred tax assets are recognised to the
extent that it is probable that future taxable profits will
arise against which the temporary differences will be
utilised.

Craneware plc Annual Report 2016
Notes to the Financial Statements [Cont’d.]

1 Principal accounting policies (cont’d.)

Deferred tax is provided on temporary differences
arising on investments in subsidiaries except where
the timing of the reversal of the temporary difference
is controlled by the Group and it is probable that
the temporary difference will not reverse in the
foreseeable future. Deferred tax assets and liabilities
arising in the same tax jurisdiction are offset.

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

Investment in subsidiaries

Investment in Group undertakings is recorded at
cost, which is the fair value of the consideration
paid, less any provision for impairment.

Kestros Ltd

Kestros Ltd (SC362481), one of Craneware plc's
subsidiaries is exempt from the requirement for its
financial statements to be audited under the provisions
of section 479 A of the Companies Act 2006.

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’ or ‘cash and cash
equivalents’ 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

Trade payables are recognised initially at fair
value and subsequently measured at amortised
cost using the effective interest method.

Cash and cash equivalents

For the purpose of the Statements of Cash flows,
cash and cash equivalents comprise cash on hand,
deposits held with banks and short term highly 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 of these benefits are charged
to the Statement of Comprehensive Income as
they fall due. The Group has no further payment
obligations once the payments have been made. The
contributions are recognised as an employee benefit
expense when they are due. Prepaid contributions
are recognised as an asset to the extent that a cash
refund or a reduction in future payments is available.

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.
Non-market vesting conditions are included in
assumptions about the number of options that are
expected to vest. At the end of each reporting period,
the entity revises its estimates of the number of options
that are expected to vest based on the non-market
vesting conditions. It recognises the impact of the
revision to original estimates, if any, in the Statement
of Comprehensive Income, with a corresponding
adjustment to equity. When the options are exercised
the Company issues new shares. The proceeds received
net of any directly attributable transaction costs
are credited to share capital and share premium.

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

Share capital

Ordinary shares are classified as equity.

Dividends

Dividends are recorded in the financial statements
in the year in which they are approved by
the shareholders. Interim dividends are
recognised as a distribution when paid.

Craneware plc Annual Report 2016

Notes to the Financial Statements [Cont’d.]

2 Critical accounting estimates
and judgements

The preparation of financial statements in accordance
with IFRS requires the Directors to make critical
accounting estimates and judgements that affect the
amounts reported in the financial statements and
accompanying notes. The estimates and assumptions
that have a significant risk of causing material
adjustment to the carrying value of assets and liabilities
within the next financial year are discussed below:-

Contingent consideration:- the contingent

consideration related to the acquisition of Kestros
Limited is measured at fair value which requires
judgement with regards to the likelihood of the
subsidiary acquired meeting the revenue targets
stipulated in the sales and purchase agreement.
The balance was re-measured taking into account
revenue achieved to date and the forecasted revenue
up to the final day of the earn out period.

Impairment assessment:- the Group tests
annually whether Goodwill has suffered any
impairment and for other assets including acquired
intangibles at any point where there are indications
of impairment. This requires an estimation of
the recoverable amount of the applicable cash
generating unit to which the Goodwill and other
assets relate. Estimating the recoverable amount
requires the Group to make an estimate of the
expected future cash flows from the specific cash
generating unit using certain key assumptions
including growth rates and a discount rate.
Reasonable changes to these assumptions such as
increasing the discount rate by 5% (18% to 23%)
and decreasing the long-term growth rate applied
to revenues by 1% (2% to 1%) would still result in
no impairment.

Provisions for income taxes:- the Group is

subject to tax in the UK and US and this requires the
Directors to regularly assess the applicability of its
transfer pricing policy.

Capitalisation of development expenditure:-
the Group capitalises development costs provided
the aforementioned conditions have been met.
Consequently, the directors require to continually
assess the commercial potential of each product in
development and its useful life following launch.

3 Financial risk management

(b) Credit risk

Credit risk is managed on a Group basis. Credit risk
arises from cash and cash equivalents and trade
receivables. In order to minimise the Group’s exposure
to risk, all cash deposits are placed with reputable
banks and financial institutions. The Group’s exposure
to trade receivables is reduced due to contractual terms
which require installation, training, annual licensing
and support fees, to be invoiced annually in advance.

The Group has significant cash and cash equivalent
balances and in order to mitigate the risk of failing
institutions management have treasury deposits
spread across a range of reputable banks, the
details of which are disclosed on page 15.

(d) Liquidity risk

Management review the liquidity position
of the Group to ensure that sufficient cash
is available to meet the underlying needs of
the Group as they fall due for payment.

The table overleaf 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.

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, counterparty risk and liquidity risk.

Risk management is carried out under policies approved
by the Board of Directors. The Board provides written
principles for overall risk management, as well as
written policies covering specific areas, such as foreign
exchange risk, interest rate risk and credit risk.

(a) Market risk

(i) Foreign exchange risk
Foreign exchange risk arises when commercial
transactions or recognised assets or liabilities
are denominated in a currency that is not the
entity’s functional currency. The Group operates
primarily in the US however a significant
proportion of costs are incurred in Sterling.

Management are therefore required to continually
assess the Group’s foreign exchange risk against the
Group’s functional currency, and whether any form of
hedge should be entered into. The Group’s policy has not
been to enter into hedging arrangements, although the
Board continues to assess the appropriateness of this
approach.

The Directors believe that a 10% change in the value
of Sterling relative to the Dollar would impact post-tax
profits and equity between approximately $1,050,000
and $950,000 (dependent on whether lower or higher)
as a result of foreign exchange gains/losses on Sterling
denominated transactions and the translation of
Sterling denominated current liabilities. The Directors
believe that 10% is appropriate for the sensitivity
analysis based on recent movements in the exchange
rates.

(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 and equity for the year in the region
of $109,000 higher/lower respectively. The Directors
believe that 25 basis points is appropriate for the
sensitivity analysis based on recent market conditions.

Craneware plc Annual Report 2016Notes to the Financial Statements [Cont’d.]

3 Financial risk management (cont’d.)

Less than 1 year
$’000

Between
1 and 2 years
$’000

Between
2 and 5 years
$’000

Over 5 years
$’000

At 30 June 2015

Trade and Other Payables

5,573

At 30 June 2016

Trade and Other Payables

9,155

Total
$’000

5,573

9,155

There is no difference between the undiscounted liabilities and the amounts shown in Note 22 as the Group’s financial liabilities are all short term in nature.

Capital risk management
The Group is cash generative and trading is funded internally. As a result, management do not consider capital risk to be significant for the Group. Contracts are normally billed
annually in advance. Assuming timely receivables collection, the Group will have favourable movements from working capital by generating cash ahead of revenue recognition.
Consequently, funds are retained in the business to finance future growth, either organically or by acquisition.

4 Revenue
The chief operating decision maker has been identified as the Board of Directors. The Group revenue is derived almost entirely from the sale of software licences, white labelling
and professional services (including installation) to hospitals within the United States of America. Consequently, the Board has determined that Group supplies only one
geographical market place and as such revenue is presented in line with management information without the need for additional segmental analysis. All of the Group assets are
located in the United States of America with the exception of the Parent Company’s, the net assets of which are disclosed separately on the Company Balance Sheet and are located
in the UK.

Software licensing

Professional services

Total revenue

2016
$’000

43,170

6,676

49,846

2015
$’000

38,842

5,975

44,817

Craneware plc Annual Report 2016Notes to the Financial Statements [Cont’d.]

5 Operating expenses

Operating expenses comprise the following:

Sales and marketing expenses

Client servicing

Research and development

Administrative expenses

Acquisition Costs

Share-based payments (Note 8)

Depreciation of plant and equipment

Contingent consideration of business combination

Amortisation and Impairment of intangible assets

Exchange loss/(gain)

Operating expenses

6 Operating profit
The following items have been included in arriving at operating profit:

Staff costs (Note 7)
Depreciation of plant and equipment
Amortisation of intangible assets
Impairment of intangible assets
Impairment of trade receivables

Operating lease rents for premises

Services provided by the Group’s auditor

During the year the Group obtained the following services from the Group’s auditors as detailed below:

Statutory audit - Parent Company financial statements and consolidation
Tax compliance and other tax services

2016
$’000

7,634

9,285

7,668

6,340

556

251

442

(1,005)

1,808

2015
$’000

7,930

7,965

6,985

5,222

219

247

467

1,011

(62)

33,024

29,984

2016
$’000

22,329
442
803
1,005
381

974

2016
$’000

67
113
180

2015
$’000

19,779
467
1,011
-
213

994

2015
$’000

83
128
211

Craneware plc Annual Report 2016
Notes to the Financial Statements [Cont’d.]

7 Staff costs

The average number of persons employed by the Group during the year, excluding non-executive Directors, is analysed below:

Sales and distribution
Client servicing
Research and development
Administration

Employment costs of all employees excluding non-executive Directors:

Wages and salaries
Social security costs
Other pension costs

Share-based payments

Total direct costs of employment

Highest paid director:

Salary and short-term employee benefits
Other pension costs

Share-based payments

2016
Number

2015
Number

32
78
92
28

36
72
68
26

230

202

2016
$’000

20,254
1,748
76

251

2015
$’000

17,899
1,550
83

247

22,329

19,779

479
11

523

411
11

459

The highest paid Director did not exercise any shares during the year (2015: Nil).

Directors’ emoluments are detailed in the Remuneration Committee’s Report on page 26 and key management compensation is given in the Related Party Transaction note on
pages 56 and 57. Retirement benefits are accruing to three of the Directors under a defined contribution scheme (2015: three).

Craneware plc Annual Report 2016Notes to the Financial Statements [Cont’d.]

8 Share-based payments

The Group has an equity-settled share-based payment scheme, whereby options over shares in Craneware plc can be granted to employees and Directors. A charge is shown in the
Statement of Comprehensive Income of $250,669 (2015: $247,196) as detailed in Note 7 above.

Directors’ and employees’ interests in share options are set out in the Remuneration Committee’s Report on page 27.

The market value of share options exercised during the year ranged from $5.46 (£3.60) to $5.70 (£4.01). The market value at 30 June 2016 was $10.48 (£7.82).

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 Company’s 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

01-Apr-16

09-Mar-16

22-Sep-14

21-Oct-13

10-Sep-13

28-Jun-13

21-Sep-12

04-Sep-12

06-Sep-10

22-Dec-09

Options over Ordinary shares

Share price at date of grant
Share price at date of grant
Vesting period (years)
Expected volatility
Risk free rate
Dividend yield
Exercise price
Exercise price
Number of employees
Shares under option

Fair value per option

$10.72
£7.50
3.00
31%
0.48%
2.0%
$10.72
£7.50
1
10,000

$5.78

$10.66
£7.50
3.00
31%
0.51%
2.0%
$10.66
£7.50
49
257,459

$8.39
£5.23
3.00
33%
1.33%
2.4%
$8.39
£5.14
36
306,765

$1.78

$2.28

$7.55
£4.67
3.00
36%
0.90%
2.8%
$7.55
£4.67
1
3,975

$1.79

$6.21
£3.95
3.00
36%
1.02%
2.8%
$6.21
£3.95
26
321,855

$1.48

$5.20
£3.43
3.00
36%
0.73%
2.7%
$5.20
£3.43
1
48,076

$1.23

$6.50
£4.00
3.00
37%
0.37%
2.6%
$6.50
£4.00
2
100,394

$5.72
£3.60
3.00
37%
0.16%
2.5%
$5.72
£3.60
28
230,034

$6.18
£4.01
3.00
24%
1.18%
2.2%
$6.18
£4.01
20
255,655

$5.34
£3.35
3.00
23%
1.96%
1.5%
$5.34
£3.35
10
170,303

$0.94

$0.82

$1.40

$1.34

Craneware plc Annual Report 2016Notes to the Financial Statements [Cont’d.]

8 Share-based payments (cont’d.)

The following options have been granted over Ordinary shares:

2007 Share Option Plan:

2016 options number

2015 options number

Ordinary share options (£2.08 exercise price)
Outstanding at 1 July
Forfeited
Exercised
Outstanding at 30 June
Ordinary share options (£3.35 exercise price)
Outstanding at 1 July
Forfeited
Exercised
Outstanding at 30 June
Ordinary share options (£4.01 exercise price)
Outstanding at 1 July
Forfeited
Exercised
Outstanding at 30 June
Ordinary share options (£3.60 exercise price)
Outstanding at 1 July
Forfeited
Exercised
Outstanding at 30 June
Ordinary share options (£4.00 exercise price)
Outstanding at 1 July

Forfeited

Outstanding at 30 June
Ordinary share options (£3.43 exercise price)
Outstanding at 1 July
Forfeited
Outstanding at 30 June
Ordinary share options (£3.95 exercise price)
Outstanding at 1 July

Forfeited

Exercised
Outstanding at 30 June
Ordinary share options (£4.67 exercise price)
Outstanding at 1 July
Forfeited
Outstanding at 30 June
Ordinary share options (£5.225 exercise price)
Outstanding at 1 July
Granted
Forfeited
Outstanding at 30 June
Ordinary share options (£7.50 exercise price)
Outstanding at 1 July
Granted
Forfeited
Outstanding at 30 June
Ordinary share options (£7.50 exercise price)
Outstanding at 1 July
Granted
Outstanding at 30 June

72,115
-
-
72,115

86,034
-
-
86,034

45,165
-
(1,330)
43,835

53,326
-
(12,792)
40,534

33,464

32,051
-
32,051

179,568

(3,545)

(3,544)
172,479

2,650
(2,650)
-

296,777
-
(22,716)
274,061

-
257,457
(2,805)
254,652

-
10,000
10,000

72,115
-
-
72,115

86,034
-
-
86,034

52,591
(1,330)
(6,096)
45,165

68,626
(15,300)
-
53,326

33,464

32,051
-
32,051

208,129

(28,561)

-
179,568

2,650
-
2,650

-
306,765
(9,988)
296,777

-
-
-
-

-
-
-

Craneware plc Annual Report 2016
Notes to the Financial Statements [Cont’d.]

9 Finance income

Deposit interest receivable

Total interest receivable

10 Tax on profit on ordinary activities

Profit on ordinary activities before tax

Current tax
Corporation tax on profits of the year
Foreign exchange on taxation in the year

Adjustments for prior years

Total current tax charge

Deferred tax
Origination & reversal of timing differences
Adjustments for prior years

Change in tax rate

Total deferred tax charge

2016
$’000

112

2016
$’000

13,923

3,344
54

(86)

3,312

27
25

(16)

2015
$’000

12,496

2,765
(59)

2,792

114
202

316

Tax on profit on ordinary activities

3,348

3,108

The difference between the current tax charge on ordinary activities for the year, reported in the consolidated Statement of Comprehensive Income, and the current
tax charge that would result from applying a relevant standard rate of tax to the profit on ordinary activities before tax, is explained as follows:

Profit on ordinary activities at the UK tax rate 20% (2015: 20.75%)
Effects of:
Adjustment in respect of prior years
Change in tax rate
Additional US taxes on profit 39% (2015: 39%)
Foreign Exchange

Expenses not deductible for tax purposes

Total tax charge

11 Dividends
The dividends paid during the year were as follows:-

Final dividend, re 30 June 2015 - 12.1 cents (7.7 pence)/share
Interim dividend, re 30 June 2016 - 10.65 cents (7.5 pence)/share

Total dividends paid to Company shareholders in the year

2,785

2,592

(61)
(16)
559
54

288
-
319
(59)

(32)

3,348

3,108

2016
$’000

3,097
2,856

5,953

2015
$’000

2,863
2,525

5,388

The proposed final dividend for 30 June 2016 is subject to approval by the shareholders at the Annual General Meeting and has not been included as a liability in these financial
statements.

Craneware plc Annual Report 2016

Notes to the Financial Statements [Cont’d.]

12 Earnings per share

a) Basic
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of shares in issue during the year.

Profit attributable to equity holders of the Company ($'000)

Weighted average number of Ordinary shares in issue (thousands)

Basic earnings per share ($ per share)

Profit attributable to equity holders of the Company ($'000)

Tax adjusted acquisition costs, share related transactions and amortisation of acquired intangibles ($'000)

Adjusted Profit attributable to equity holders ($'000)

Weighted average number of Ordinary shares in issue (thousands)

Adjusted Basic earnings per share ($ per share)

2016

10,575

26,838

0.394

10,575

937

11,512

26,838

0.429

b) Diluted
For diluted earnings per share, the weighted average number of Ordinary shares calculated above is adjusted to assume conversion of all dilutive potential Ordinary
shares. The Group has one category of dilutive potential Ordinary shares, being those granted to Directors and employees under the share option scheme.

Profit attributable to equity holders of the Company ($'000)

Weighted average number of Ordinary shares in issue (thousands)

Adjustments for Share options (thousands)

Weighted average number of Ordinary shares for diluted earnings per share (thousands)

Diluted earnings per share ($ per share)

Profit attributable to equity holders of the Company ($'000)

Tax adjusted acquisition costs, share related transactions and amortisation of acquired intangibles ($'000)

Adjusted Profit attributable to equity holders ($'000)

Weighted average number of Ordinary shares in issue (thousands)

Adjustments for Share options (thousands)

Weighted average number of Ordinary shares for diluted earnings per share (thousands)

Adjusted Diluted earnings per share ($ per share)

2016

10,575

26,838

345

27,183

0.389

10,575

937

11,512

26,838

345

27,183

0.423

2015

9,388

26,815

0.350

9,388

749

10,137

26,815

0.378

2015

9,388

26,815

188

27,003

0.348

9,388

749

10,137

26,815

188

27,003

0.375

Craneware plc Annual Report 2016
Notes to the Financial Statements [Cont’d.]

13 Plant and equipment

Group

Cost
At 1 July 2015
Additions
Disposals

At 30 June 2016

Accumulated depreciation
At 1 July 2015
Charge for year

Depreciation on disposal

At 30 June 2016

Net Book Value at 30 June 2016
Cost
At 1 July 2014

Additions

Acquisition of subsidiary (Note 16)
At 30 June 2015
Accumulated depreciation

At 1 July 2014

Charge for the year

At 30 June 2015

Net Book Value at 30 June 2015

Company

Cost
At 1 July 2015
Additions

At 30 June 2016

Accumulated depreciation
At 1 July 2015
Charge for year

At 30 June 2016

Net Book Value at 30 June 2016

Cost
At 1 July 2014
Additions

At 30 June 2015

Accumulated depreciation
At 1 July 2014
Charge for year

At 30 June 2015

Net Book Value at 30 June 2015

Computer
Equipment
$’000

Office
Furniture
$’000

Tenants
Improvements
$’000

2,148
391
(258)

2,281

1,812
225

(258)

1,779

502

1,870

276

2
2,148

1,621

191

1,812

336

1,066
15
(36)

1,045

875
76

(31)

920

125

970

-
1,066

750

125

875

191

1,735
15
(107)

1,643

1,020
141

(104)

1,057

586

1,729

-
1,735

869

151

1,020

715

Computer
Equipment
$’000

Office
Furniture
$’000

Tenants
Improvements
$’000

925
200

1,125

757
111

868

257

786
139

925

687
70

757

168

629
15

644

621
3

624

624
5

629

560
61

621

1,514
15

1,529

848
120

968

561

1,510
4

1,514

729
119

848

666

Total
$’000

4,949
421
(401)

4,969

3,707
442

(393)

3,756

1,213

4,569

378

2
4,949

3,240

467

3,707

1,242

Total
$’000

3,068
230

3,298

2,226
234

2,460

838

2,920
148

3,068

1,976
250

2,226

842

Craneware plc Annual Report 2016
Notes to the Financial Statements [Cont’d.]

14 Intangible assets

Goodwill and Other Intangible assets

Group

Cost
At 1 July 2015
Additions
Disposals

At 30 June 2016

Accumulated amortisation
At 1 July 2015
Charge for the year

Impairment of acquisition

Amortisation on disposal

At 30 June 2016

11,438
-

11,438

-
-

250

Net Book Value at 30 June 2016

11,188

Cost

At 1 July 2014

Additions
Acquisition of subsidiary (Note 16)

At 30 June 2015

Accumulated amortisation

At 1 July 2014

Charge for the year

At 30 June 2015

11,188

-
250

11,438

Net Book Value at 30 June 2015

11,438

Goodwill
$’000

Customer
Relationships
$’000

Proprietary
Software
$’000

Development
Costs
$’000

Computer
Software
$’000

2,964
-
-

2,964

1,384
329

1,713

1,251

2,964

-
-

2,964

1,054

330

1,384

1,580

3,043
-

3,043

1,058
163

755

1,976

1,067

1,222

-
1,821

3,043

814

244

1,058

1,985

3,796
1,959
-

5,755

2,759
167

2,926

2,829

3,035

761
-

3,796

2,457

302

2,759

1,037

912
207
(126)

993

756
144

(107)

793

200

862

50
-

912

621

135

756

156

Total
$’000

22,153
2,166
(126)

24,193

5,957
803

1,005

(107)

7,658

16,535

19,271

811
2,071

22,153

4,946

1,011

5,957

16,196

In accordance with the Group’s accounting policy, the carrying values of goodwill and other intangible assets are reviewed for impairment annually or more frequently if events
or changes in circumstances indicate that the asset might be impaired. Goodwill arose on the acquisitions of Craneware InSight Inc and Craneware Health (Kestros Ltd) (although
the Group recognised the impairment in the current year).

The carrying values are assessed for impairment purposes by calculating the value in use (net present value (NPV) of future cashflows) of the core Craneware business cash
generating unit. This is the lowest level of which there are separately identifiable cash flows to assess the goodwill acquired as part of the Craneware InSight Inc purchase. The
goodwill impairment review assesses whether the carrying value of goodwill is supported by the NPV of the future cashflows based on management forecasts for five years and
then using an assumed sliding scale annual growth rate which is trending down to give a long-term growth rate of 2% in the residual years of the assessed period. Management
have made the judgement that this long-term growth rate does not exceed the long-term average growth rate for the industry and also estimated a pre-tax discount rate of
18%.

The carrying amount of the separately identifiable Craneware Health cash generating unit has been reduced to its recoverable amount through recognition of an impairment loss
against goodwill and proprietary software. This loss has been included in operating expenses. The level of sales achieved in the period since the acquisition of Craneware Health
and the sales forecasted in the future have been below what was previously forecasted. Refer to note 16 for further details.

Sensitivity analysis was performed using a combination of different annual growth rates and a range of different weighted average cost of capital rates. Management concluded
that the tempered growth rates resulting in 2% during the residual period and the pre-tax discount rate of 18% were appropriate in view of all relevant factors and reasonable
scenarios and that there is currently sufficient headroom over the carrying value of the assets in the acquired business that any reasonable change to key assumptions is not
believed to result in impairment.

Craneware plc Annual Report 2016

Notes to the Financial Statements [Cont’d.]

14 Intangible assets (cont’d.)

Goodwill and Other Intangible assets (Cont’d.)

Company

Cost
At 1 July 2015
Additions

At 30 June 2016

Accumulated amortisation
At 1 July 2015

Charge for the year

At 30 June 2016

Net Book Value at 30 June 2016

Cost

At 1 July 2014

Additions
At 30 June 2015

Accumulated amortisation

At 1 July 2014

Charge for the year

At 30 June 2015

Net Book Value at 30 June 2015

Development
Costs
$’000

Computer
Software
$’000

3,694
1,648

5,342

2,738

144

2,882

2,460

3,035

659
3,694

2,457

281

2,738

956

589
148

737

495

594

143

578

11
589

392

103

495

Total
$’000

4,283
1,796

6,079

3,233

243

3,476

2,603

3,613

670
4,283

2,849

384

3,233

1,050

15 Investments in subsidiary undertakings

The following information relates to all of the subsidiaries of the Group:-

Name of Company

Class of Shares held

Proportion of
Nominal Value of
Issued Shares held by
Craneware plc

Craneware Inc

Ordinary

Craneware InSight Inc

Ordinary

Craneware Health
(Kestros Ltd)

Ordinary

Craneware Healthcare
Intelligence

Ordinary

100%

Nature of Business

Sales & Marketing

Product Development &
Professional Services

Software Development

Craneware Inc, Craneware InSight Inc and Craneware Healthcare Intelligence, LLC are incorporated in the United States of America and Craneware plc holds 10,000 (2015:
10,000) and 1,000 (2015: 1,000) common shares respectively with a nominal value of $0.01 each. Kestros Ltd (t/a Craneware Health) is incorporated within the United
Kingdom and Craneware plc holds 1,075 (2015: 1,075) Ordinary shares respectively with a nominal value of £1 each.

The results of the Subsidiary companies have been included in the consolidated financial statements.

Kestros Ltd

Kestros Ltd (SC362481), one of Craneware plc's subsidiaries is exempt from the requirement for its financial statements to be audited under the provisions of section 479 A of
the Companies Act 2006.

Craneware plc Annual Report 2016

Notes to the Financial Statements [Cont’d.]

16 Acquisition of subsidiary: Craneware Health

In the prior year, on 26th August 2014, the Company acquired 100% of the issued share capital of Kestros Ltd. The total consideration for the acquisition along with the fair value
of the identified assets and assumed liabilities as acquired are shown below:

Recognised amounts of identifiable assets acquired
and liabilities assumed

Fair Value
Adjustments
31-Dec-14
$’000

Provisional
Fair Value
$’000

Book Value
$’000

Tangibles fixed assets
Plant and Equipment
Intangibles assets

Proprietary Software

Other assets and liabilities
Trade and other receivables
Bank and cash balances
Trade and other payables

Goodwill

Fair Value

Satisfied by

Cash
Ordinary Shares issued – 211,539 shares at $8.623 (£5.20)

Bank balances and cash acquired
Cash consideration

Net Cash on acquisition

101

33
43
(35)

144

1,720

1,821

-
-
-

1,720

33
43
(35)

1,864

250

2,114

$’000

290
1,824

2,114

43
(290)

(247)

The value of the equity consideration was subject to revenue performance criteria through to 31 July 2016 with a potential cash repayment where stipulated revenue targets
were not met. Due to the likelihood of revenue targets not being met a contingent consideration receivable is included in other receivables and disclosed in Note 17. An
impairment charge has also been recognised against Goodwill (reduced by $250,000 to Nil) and a fair value reduction of $754,791 was made to the Proprietary Software.

Opening balance of Contingent consideration
Contingent consideration of Business Combination

Closing Balance

$’000

-
1,005

1,005

Craneware plc Annual Report 2016
Notes to the Financial Statements [Cont’d.]

17 Trade and other receivables

Trade receivables

less: provision for impairment of trade receivables

Net trade receivables
Other receivables
Amounts owed from group companies
Prepayments and accrued income

Deferred Contract Costs

Less non-current receivables:
Deferred Contract Costs

Current portion

Group

Company

2016
$’000

16,504

(1,135)

15,369
1,177
-
2,950

6,038

25,534
-
(4,581)

20,953

2015
$’000

11,917

(779)

11,138
99
-
3,032

3,173

17,442
-
(2,432)

15,010

2016
$’000

15,932

(1,134)

14,798
1,162
6,000
613

22,573
(6,000)
-

16,573

2015
$’000

11,381

(743)

10,638
94
6,000
1,219

17,951
(6,000)
-

11,951

There is no material difference between the fair value of trade and other receivables and the book value stated above. All amounts included within trade and other receivables
are classified as loans and receivables.

Included in other receivables is contingent consideration that Craneware are entitled to claw back in relation to the acquisition of Craneware Health (Kestros Ltd) during the
year ended 30 June 2015. The balance of $1,004,791 has been measured at fair value and as the inputs used in determining the fair value are not based on observable market
data the contingent consideration has been categorised as level 3 under IFRS 13. The fair value of the contingent consideration arrangement of $1,004,791 was estimated by
assessing the expected revenue performance of Craneware Health up to the last day of the earn-out period and the sales performance actually achieved up to the balance sheet
date. The earn out period came to an end on 31 July and subsequent to balance sheet date the claw back amount has been finalised and is in line with the balance recognised at
balance sheet date.

The $6,000,000 loan due to the Company from Craneware InSight Inc. is five years in its duration from the date of issue (the acquisition date) and interest is charged quarterly in
accordance with the agreement at LIBOR plus 1%.

As at 30 June 2016, trade receivables of $1,313,903 (2015: $716,904) were past due and deemed to be impaired. The amount of the provision against these receivables was
$1,135,429 as of 30 June 2016 (2015: $716,904). The individually impaired receivables mainly relate to customers’ financial difficulties and unresolved disputes. It was assessed
a portion of the receivables is expected to be recovered. The ageing of these receivables is as follows:

Less than 30 days past due
30 – 60 days past due
61 – 90 days past due
91 + days past due

2016
$’000

-
117
187
1,010

1,314

2015
$’000

-
-
-
717

717

Craneware plc Annual Report 2016

Notes to the Financial Statements [Cont’d.]

17 Trade and other receivables (cont’d.)

As at 30 June 2016, trade receivables of $7,921,577 (2015: $6,160,565) were past due but not impaired. These relate to a number of customers for whom there is no recent
history of default. The ageing analysis of these trade receivables is as follows:

Less than 30 days past due
31 – 60 days past due
61 – 90 days past due
91 + days past due

2016
$’000

6,279
403
527
713

7,922

2015
$’000

4,335
697
623
506

6,161

As at 30 June 2016, trade receivables of $7,180,798 (2015: $4,871,086) were not past due or impaired, and the Group does not anticipate collection issues. None of these
balances are deemed to be impaired. (2015: $61,854).

Movement on the provision for impairment of trade receivables is as follows:

At 1 July
Provision for receivables impairment on revenue recognised
Receivables written off during year as uncollectable
Unused amounts reversed

At 30 June

2016
$’000

779
499
(25)
(118)

1,135

2015
$’000

658
563
(18)
(424)

779

The creation and release of provision for impaired receivables has been included in net operating expenses in the Statement of Comprehensive Income. Amounts charged to the
allowance account are generally written off when there is no expectation of recovering additional cash.

The other classes within trade and other receivables do not contain impaired assets.

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Group does not hold any collateral as security.

18 Deferred taxation

Deferred tax is calculated in full on the temporary differences under the liability method using a rate of tax of 19% (2015: 20%) in the UK
and 39% (2015: 39%) in the US including a provision for state taxes.

The movement on the deferred tax account is shown below:-

At 1 July
(Charge)/credit to comprehensive income
Transfer direct to equity

At 30 June

Group

Company

2016
$’00
1,510
(36)
211

1,685

2015
$’000
1,644
(316)
182

1,510

2016
$’000
318
(6)
93

405

2015
$’000
156
37
125

318

Craneware plc Annual Report 2016Notes to the Financial Statements [Cont’d.]

18 Deferred taxation (cont'd.)

The movements in deferred tax assets and liabilities during the year are shown below. Deferred tax assets and liabilities are only offset where there is a legally enforceable right
of offset and there is an intention to settle the balances net. The net deferred tax asset at 30 June 2016 was $1,683,964 (2015: $1,510,193).

Deferred tax assets - recognised

Group

At 1 July 2015
(Charged)/Credited to comprehensive income
Credited to equity

Total provided at 30 June 2016

At 1 July 2014
(Charged)/Credited to comprehensive income
Credited to equity

Total provided at 30 June 2015

Deferred tax liabilities - recognised

Group

At 1 July 2015
Credited to comprehensive income

Total provided at 30 June 2016

At 1 July 2014
Credited to comprehensive income

Total provided at 30 June 2015

The analysis of the deferred tax assets and liabilities is as follows:

Group

Deferred tax assets:
Deferred tax assets to be recovered after more than 1 year
Deferred tax assets to be recovered within 1 year

Deferred tax liabilities:
Deferred tax liabilities to be recovered after more than 1 year
Deferred tax liabilities to be recovered within 1 year

Net deferred tax assets

The Company's Deferred tax assets and liabilities are all expected to be recovered in the future.

Losses
$’000

Share Options
$’000

Short term
timing
differences
$’000

435
198
-

633

451
(16)
-

435

1,282
(465)
-

817

2,341
(1,059)
-

1,282

Long-term
Timing
differences
$’000

Accelerated
tax
depreciation
$’000

(454)
454

(732)
170

(562)

(972)
240

(732)

2016
$’000

1,457
790

2,247

(341)
(221)

(562)

1,685

525
61
211

797

278
65
182

525

Total
$’000

(732)
170

(562)

(1,426)
694

(732)

2015
$’000

1,702
540

2,242

(468)
(264)

(732)

1,510

Total
$’000

2,242
(206)
211

2,247

3,070
(1,010)
182

2,242

Craneware plc Annual Report 2016

Notes to the Financial Statements [Cont’d.]

18 Deferred taxation (cont'd.)

Deferred tax assets - recognised

Company

At 1 July 2015
Credited to comprehensive income
Credited to equity

Total provided at 30 June 2016

At 1 July 2014
Credited to comprehensive income
Credited to equity

Total provided at 30 June 2015

Deferred tax liabilities - recognised

Company
At 1 July 2015
Charged to comprehensive income

Total provided at 30 June 2016

At 1 July 2014
Credited to comprehensive income

Total provided at 30 June 2015

Share
Options
$’000

352
20
93

465

200
27
125

352

Accelerated
tax depreciation
$’000
(34)
(26)

(60)

(44)
10

(34)

Total
$’000

352
20
93

465

200
27
125

352

Total
$’000
(34)
(26)

(60)

(44)
10

(34)

The Group continues to monitor the recoverability of deferred tax assets and are satisfied that the continuing profitability will utilise the assets in respect of losses and there
remains the expectation that share options will be exercised which will give rise to the utilisation of the asset in this regard.

19 Share Capital

Equity share capital
Ordinary shares of 1p each

Allotted called-up and fully paid

2016

2015

Number

$’000

Number

50,000,000

1,014

50,000,000

Equity share capital
Ordinary shares of 1p each

26,850,248

536

26,832,582

2016

2015

Number

$’000

Number

The movement in share capital during the year is presented as follows:

17,666 Ordinary Share options were exercised in the year, as detailed in the Remuneration Committee Report on page 27.

$’000

1,014

$’000

536

Craneware plc Annual Report 2016

Notes to the Financial Statements [Cont’d.]

20 Cash flow generated from operating activities

Reconciliation of profit before tax to net cash inflow from operating activities

Profit before tax
Finance income
Depreciation on plant and equipment
Amortisation and Impairment on intangible assets
Share-based payments
Movements in working capital:
(Increase)/Decrease in trade and other receivables
Increase in trade and other payables

Cash generated from operations

21 Cash and cash equivalents

Cash at bank and in hand

The effective rates on short term bank deposits were 0.26% (2015: 0.23%).

22 Trade and other payables

Trade payables
Amounts owed to group companies
Social security and PAYE
Other creditors
Accruals

Group

Company

2016
$’000

13,923
(112)
442
1,808
251

(8,065)
9,317

17,564

2015
$’000

12,496
(84)
467
1,011
247

5,422
2,466

22,025

2016
$’000

11,538
(245)
234
243
141

(3,771)
6,804

14,944

2015
$’000

11,507
(185)
250
384
145

7,497
2,355

21,953

Group

Company

2016
$’000

48,812

2015
$’000

41,832

2016
$’000

45,324

2015
$’000

39,932

Group

Company

2016
$’000

1,473
-
496
63
7,619

9,651

2015
$’000

1,341
-
451
2
4,230

6,024

2016
$’000

400
4,443
223
1
2,403

7,470

2015
$’000

467
3,592
206
1
1,843

6,109

Amounts owed to Group companies on trading financial statements are non-interest bearing and have no fixed repayment terms. Trade payables are settled in accordance with
those terms and conditions agreed, generally within 30 days, provided that all trading terms and conditions on invoices have been met. The Group’s average payment period at
30 June 2016 was 19 days (2015: 16 days). Trade and other payables are classified as financial liability at amortised cost.

Craneware plc Annual Report 2016

Notes to the Financial Statements [Cont’d.]

23 Contingent liabilities and financial commitments

a) Capital commitments

The Group has no capital commitments at 30 June 2016 (2015: $nil)

b) Lease commitments
The Group leases certain land and buildings. The commitments payable by the Group under these operating leases are as follows:

Within one year
Between 2 and 5 years
More than 5 years

2016
$’000

824
3,560
1,693

6,077

2015
$’000

818
4,054
3,021

7,893

The rents payable under these leases are subject to renegotiation at various intervals specified in the leases. The Group pays all insurance, maintenance and repairs of these
properties.

24 Related party transactions

During the year the Group has traded in its normal course of business with shareholders and its wholly owned subsidiary in which Directors and the subsidiary have a material
interest as follows:-

Group

Short-term employee benefits

Post employment benefits

Share-based payments

2016

2015

Charged

154,344
148,421

940,792
13,628
64,347

1,918,469

14,075

131,269

Outstanding
at year end

4,095
-

316,891
-
-

380,943

Charged

140,025
150,423

797,507
14,200
70,574

1,710,387

13,882

107,003

Outstanding
at year end

-
-

163,713
-
-

206,484

Craneware plc Annual Report 2016

Notes to the Financial Statements [Cont’d.]

24 Related party transactions (cont’d.)

Company

Charged

154,344
148,421

Fees for services provided as non-executive Directors
Fees
Short-term employee benefits
Executive Directors
Short-term employee benefits
Post employment benefits
Share-based payments
Other key management
Short-term employee benefits
Post employment benefits
Share-based payments
Amounts due to Craneware Inc - Subsidiary company
Sales commission
Net operating expenses
Balance
Net Amounts due from Craneware InSight Inc - Subsidiary company
Balance
Net Amounts due from Craneware Health/Kestros - Subsidiary company

940,792
13,628
64,347

913,303
14,075
72,578

21,383,869
2,669,387
-

Balance

2016

Outstanding
at year end

4,095
-

316,891
-
-

181,999
-
-

-
-
2,530,272

3,300,809

786,442

2015

Outstanding
at year end

-
-

163,713
-
-

93,005
-
-

-
-
2,109,602

4,249,414

269,041

Charged

140,025
150,423

797,507
14,200
70,574

695,914
13,882
45,800

16,420,947
2,403,678
-

Key management are considered to be the Directors together with the Chief Intelligence Officer, Chief Technology Officer (President of US Operations), the Chief Marketing
Officer, Chief People Officer (from March 2016), EVP of Sales and EVP of Revenue Integrity.

There were no other related party transactions in the year which require disclosure in accordance with IAS 24.

25 Ultimate controlling party

The Directors have deemed that there are no controlling parties of the Company.

Craneware plc Annual Report 2016Personal Notes

Craneware plc Annual Report 2016Craneware plc
1 Tanfield
Edinburgh
EH3 5DA
Scotland, UK
Telephone: +44 [0] 131 550 3100
Facsimile: +44 [0] 131 550 3101

craneware.com

marketing@craneware.com
training@craneware.com
sales@craneware.com
support@craneware.com

Company Registration No. SC196331
Craneware plc