Craneware plc Annual Report 2020 Helping healthcare providers further
their mission through optimal
financial performance
Table of
Contents
Financial and Operational Highlights 1
Craneware Solutions 2
Chairman's Statement 4
Strategic Report: Operational Review 5
Strategic Report: Financial Review 7
Strategic Report: Key Performance Indicators and Principal Risks and Uncertainties 12
Strategic Report: Section 172 (1) Statement 16
Stakeholder Engagement 19
Directors, Secretary, Advisors and Subsidiaries 26
Board of Directors 27
Directors' Report 29
Corporate Governance Report 35
Remuneration Committee's Report 45
Independent Auditors’ Report to the Members of Craneware plc 53
Consolidated Statement of Comprehensive Income for the year ended 30 June 2020 58
Statements of Changes in Equity for the year ended 30 June 2020 59
Consolidated Balance Sheet as at 30 June 2020 60
Company Balance Sheet as at 30 June 2020 61
Statements of Cash Flows for the year ended 30 June 2020 62
Notes to the Financial Statements 63
Craneware plc Annual Report 2020 Financial and Operational Highlights
Financial
Revenue of $71.5m (FY19: $71.4m)
Adjusted EBITDA1 increased 5% to $25.2m (FY19: $24.0m)
Profit before tax increased 5% to $19.3m (FY19: $18.3m)
Basic adjusted EPS2 increased 3% to $0.654 (FY19: $0.633) and adjusted diluted EPS
increased to $0.644 (FY19: $0.620)
Basic EPS increased 12% to $0.628 (FY19: $0.561) and diluted EPS increased 13% to
$0.619 (FY19: $0.550)
Three Year Total Visible Revenue3 of $200.1m (FY19 same 3 year period: $197.5m)
Operating cash conversion3 at 92% of Adjusted EBITDA (FY19: 63%)
Cash at year-end of $47.9m (FY19: $47.6m) after having returned $9.1m to shareholders
via dividends
Proposed final dividend of 15p per share (18.45 cents) (FY19: 15.0p, 19.05 cents) giving a
total dividend for the year of 26.5p per share (32.60 cents) (FY19: 26.0p, 33.02 cents)
1 Adjusted EBITDA refers to earnings before interest, tax, depreciation,
amortisation, exceptional items and share based payments.
2 Adjusted Earnings per share (EPS) calculations allow for the tax adjusted acquisition costs and
share related transactions together with amortisation on acquired intangible assets.
3 Refer to the Financial Review section of the Strategic Report for further details.
Operational
Rapid implementation of our business continuity plan and the transition of employees to
remote working with minimal disruption to customers
Total Sales 4 for the year of $65.4m (FY19: $63.1m)
Total Sales to 31 March 2020 tracking 30% ahead of the same period in FY19, impacted
in the final quarter by COVID-19
Sales of Trisus Enterprise Value Platform products represented 14% of New Sales in the
year (FY19: 13%)
Healthy sales mix, with 90% of sales being to existing customers or new hospitals within
existing healthcare system customers, demonstrating the successful execution of our land
and expand strategy
Continued investment in R&D and innovation to capitalise on growing market opportunity
4 Total Sales refers to the total value of contracts signed in the year.
Quick Facts — Financial
$71.5m
Revenue
$25.2m
Adjusted EBITDA1
$19.3m
Profit before tax
65.4¢
Adjusted EPS2
$47.9m
Cash
15p
Final Dividend
80
70
60
50
40
30
20
10
0
71.4
71.5
67.1
57.8
49.8
2016
2017 2018
2019
2020
25
20
15
10
5
0
25.2
24.0
21.6
18.0
15.9
2016
2017 2018
2019
2020
70
60
50
40
30
20
10
0
65.4
63.3
60.2
51.4
42.9
2016
2017 2018
2019
2020
1
Craneware plc Annual Report 2020 Craneware Solutions
Chargemaster Toolkit®
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, and addresses
the challenges that
enterprise chargemaster
data presents to hospitals
by enabling all related
chargemaster data to be
viewed in one place
Trisus® Supply
Utilises foundational data
from the item master, OR
file, purchase history, and
chargemaster to identify
data gaps between the
systems, ensuring every
reimbursable supply,
implant, and device is
billed.
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.
>_
Physician Revenue Toolkit®
SaaS solutions for
managing physician
group KPIs, charges,
codes, RVUs, fee
schedules, and related
information
Charge Capture
& Pricing
Web-based and mobile-
friendly application for
reducing risk by providing
access to reference and
regulatory resources.
Online Reference Toolkit®
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.
Pharmacy ChargeLink®
SaaS solution that
simplifies the price
modelling process,
creating a repeatable,
well-documented
method to establish
transparent, defensible
and competitive pricing.
Trisus® Pricing Analyzer
Integration for
Chargemaster Management
Software that
automatically uploads
chargemaster changes to
the patient billing system
for accurate billing.
Patient
Engagement
Web-based, mobile-
friendly supplies lookup
application available in
Trisus Supply 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.
Supplies Assistant
Craneware Value Cycle Solutions span five product families – Patient Engagement, Charge Capture & Pricing, Claims Analytics, Revenue Recovery & Retention, and Cost & Margin Analytics.
In addition, hospitals of all sizes and types rely on Craneware’s Customer Success Management and other Professional Services to help deliver results that lead to improved financial outcomes.
2
Craneware plc Annual Report 2020 Craneware Solutions
Solutions for healthcare providers to optimise
financial performance.
Trisus® Claims Informatics
Software built on
Craneware’s Trisus
platform that 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.
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.
InSight Audit®
A comprehensive, web-
based audit management
application that
empowers healthcare
organisations to manage
government and
commercial audits from
one central location.
Trisus® Healthcare Intelligence
A cost analytics and
resource efficiency
platform that unites
cost and operational
information across the
provider organisation,
delivering revenue,
cost, and operational
information for each
patient encounter.
Integration for
Chargemaster Management
Patient
Engagement
Claims
Analytics
Revenue Recovery
& Retention
Cost & Margin
Analytics
Customer Success
Management
Analyses, tracks,
trends and reports
on denial data,
providing workflow
for expediting repair
and resubmission of
denied claims.
InSight Denials®
Our consultants provide onsite
staffing and expertise to help
hospitals achieve their financial
goals. Customer Success
Managers design future state
operations, develop policies
and procedures, train staff on
operational tasks, and measure
and report on success metrics
information for each patient
encounter.
Customer Success
Management and Consulting
Services
Craneware has the
experienced staff
needed to review
denials, write successful
appeals and overturn
improper denials.
Appeals Service
Simplifies the process
of providing patient bill
estimates for inpatient
and outpatient services
to improve up-front
collections and reduce
bad debt.
Patient Charge Estimator®
>_
Craneware Value Cycle Solutions span five product families – Patient Engagement, Charge Capture & Pricing, Claims Analytics, Revenue Recovery & Retention, and Cost & Margin Analytics.
In addition, hospitals of all sizes and types rely on Craneware’s Customer Success Management and other Professional Services to help deliver results that lead to improved financial outcomes.
3
Craneware plc Annual Report 2020 Chairman's Statement
This is the first full year I am reporting on as Chairman, and whilst it has not
been the year we would have been anticipating 12 months ago, it has been a
year of growth, development and learning. The pressures faced by the world’s
healthcare industries since the outbreak of the COVID-19 pandemic have
been considerable, and I am proud of the support the Craneware team has
provided to our customers in the US during this time.
COVID-19 had an unprecedented impact on our customers, with their
operations disrupted and repurposed in order to maximise capacity to
deal with the incredibly high demand for emergency services. During this
time, our efforts were focused on supporting our customers whilst they
met the needs of their communities and managed the impact, to them,
of the cessation of elective procedures and associated income. The swift
implementation of our business continuity plan and the transition of
employees to remote working enabled the Group to continue operating with
minimal disruption to customers and I would like to thank all employees for
their utmost professionalism and commitment.
In the first nine months of the year to 31 March 2020, Total Sales were
tracking over 30% higher than in the prior year, demonstrating a
considerably improved performance and strong sales of both our existing and
newly developed cloud-based Trisus applications.
In addition to the impact to our customers, the travel restrictions and
lockdowns imposed due to COVID-19 particularly impacted our sales and
professional services teams’ ability to close sales, deliver their projects and
complete renewals with the associated up-sales in the final quarter. Despite
this challenging environment, Total Sales for the year were ahead of the prior
year at $65.4m (FY19: $63.1m). Recognised revenue was consistent with
the previous year at $71.5m (FY19: $71.4m) and adjusted EBITDA increased
to $25.2m (FY19: $24.0m), reflecting both the impact of IFRS 16 and the
Group’s ongoing careful management of costs and reduction in certain
discretionary spend, such as travel costs in the final quarter. Capitalised R&D
in the period decreased to $9.3m (FY19: $9.6m) despite an overall increase
in our R&D spend, in line with our continued commitment to invest in
innovation, to capture the sizeable opportunity ahead.
Although it is clear COVID-19 held back the Group’s financial growth in the
final quarter of the year, there are many positives to point to in the financials
– with customer churn remaining very low, at less than 10%, and the
Group exiting the year with Total Visible Revenue for the next three years of
$200.1m. We maintain a strong balance sheet with no debt and cash
reserves consistent with the end of the previous year of $47.9m
(30 June 2019: $47.6m).
In the second half of the year, we welcomed Alistair Erskine and David Kemp
to the Board as Independent Non-Executive Directors. Both bring significant
experience and expertise to the Board and I am confident their blend of
extensive industry knowledge and Board experience will be extremely
valuable in helping the Group fulfil its growth ambitions. The Company also
wished all the best to outgoing Chairman, George Elliott, who stepped down
from his position following the AGM, after over 12 years’ outstanding service.
As previously announced, current long-standing Non-Executive Director Ron
Verni will not be standing for re-election at the forthcoming AGM, due to his
length of tenure with the Company, and we thank him for all his guidance
and support.
Following the period end, in August 2020, the Company successfully
launched a placing to take advantage of a small number of identified
acquisition opportunities. Despite the placing seeing strong oversubscription
from both new and existing investors, the Board ultimately took the difficult
decision not to proceed with the proposed fundraise following the news that
the principal acquisition target had agreed terms with a third party. Whilst
a disappointing outcome, we are very grateful for the support shown by our
existing and those new potential investors. The potential for accelerated
growth through M&A activity remains in place and continues to be assessed
by the Board. The Group’s strong balance sheet and undrawn debt facilities
provide the Company with the ability to continue its investment strategy
whilst executing on any market opportunities that arise. Whilst acquisitions
are very much part of our long-term strategy we are still first and foremost
focused on delivering against our considerable organic growth opportunity.
Despite the challenges we have had to navigate over the course of the year,
and into the current financial year, the Group continues to make strides
towards its long-term vision of becoming a leader in Value Cycle software
solutions to US hospitals. The pandemic has reinforced the requirement for
useable financial and operational data, to enable healthcare providers to
respond swiftly to change and continue to deliver outstanding healthcare
services, while ensuring the financial health of their operations.
Craneware’s long-term objective remains intact: to provide the tools to
support US healthcare providers in their mission to deliver increased value
in healthcare. The encouraging sales pipeline we have seen over the year
combined with the significant market opportunity give me confidence that
the Group is on the right trajectory for continued and sustained growth.
I would like to thank all employees across the UK and US for their unwavering
support and hard work throughout the year, especially during these
particularly trying times. It is evident I have joined a company with a strong
set of core values, clear vision and supportive customer base, and I look
forward to being part of its growth journey going forward.
Will Whitehorn
Chairman
18 September 2020
4
Craneware plc Annual Report 2020 Strategic Report:
Operational Review
Our Trading update provided on 8
July 2020 referred to the bravery and
dedication of our customers, who were
and are at the forefront of dealing with
the pandemic; and we again pay tribute
to them for selflessly serving their
communities.
The Group’s continued progress made
throughout this year, despite challenges imposed by the COVID-19 pandemic
in the final quarter, was reassuring. While we as a business were relatively
insulated from the direct impacts of the pandemic, our customers were on
the front-line. Supporting them and the phenomenal work their teams have
done has been, and will continue to be, our top priority.
Following a strong first nine months sales performance, the impact of
COVID-19 delayed our return to growth, however the strength of our
underlying recurring revenue model and high levels of cash conversion
place the Group in a strong ongoing financial position. We continue to make
excellent progress on the execution of our growth strategy, and I am pleased
to report we are on track for all our product suite to be live on the Trisus
platform during 2021. This is a significant milestone that we believe will be
key to unlocking the benefits of the Trisus platform for both our customers
and Craneware.
Our purpose, to profoundly impact healthcare by improving healthcare
providers’ operational efficiency and margin, so they can continue investing
in providing quality care for their communities has never been more
important. The global pandemic has highlighted the importance of usable
financial and operational data and our customers continue to take steps to
create further resilience across their financial operations. We are committed
to partnering with them by providing the platform, regulatory information
and data to enable them to do so. We believe that both the Group and our
customer base are strongly placed to deal with the future impacts of the
pandemic and for our products to be part of the solution in terms of helping
hospital preparedness.
Market
The move to value-based care
The US healthcare market continues to transition from a fee-for-service
reimbursement model, towards value-based care, aiming to redress the
current imbalance in the US between spend and outcomes. The US has the
highest health spending per capita in the world with one of the lowest life
expectancies in the developed world.
Payors (insurance companies, charities, individuals, and Government) are
exerting considerable pressure on US Healthcare providers to deliver better
health outcomes and manage cost. This has brought pressure to move
towards value-based care – a healthcare delivery model in which providers,
including hospitals and physicians, are paid based on patient health
outcomes. A hospital’s ability to participate in a value-based care system
is dependent on the collection of granular data and the use of insightful
analytics to understand the opportunity to deliver better value. As a result,
the North American healthcare analytics market is forecast to grow 29.54%
CAGR from US$3bn in 2020 to US$11bn1 by 2025. This presents a large,
growing opportunity for the Group given Craneware’s specialism in helping
hospitals better understand and manage revenue and cost through data-
driven solutions.
1 North American Healthcare Analytics by Market Data Forecasts.
Growth Strategy
Craneware develops and provides financial and operational optimisation
software and analytics, for US hospitals and clinics, using aggregated
anonymised data. Our on-premise and cloud-based software solutions sit
at the heart of our customers’ operations, helping them to optimise their
financial performance. We are helping to drive a shift in healthcare delivery
and reimbursement through the use of data with powerful and insightful
analytics.
Our long-term strategic aim is to become ubiquitous in US hospitals.
Functioning as the intelligence layer sitting across all other administrative
and financial systems, we aim to deliver the information required to improve
financial and operational performance
To date, our growth has been driven through increases in market share and
product set penetration (land and expand). In recent years, we have invested
in the development of a cloud-based platform; Trisus, a sophisticated cloud
data aggregation and intelligence platform which will allow us to migrate
our existing products to the cloud, leverage our data assets to expand our
offering, integrate third party solutions to the platform and benefit from the
scalability of cloud-technology.
Three Growth Pillars
Our growth strategy has three fundamental growth pillars:
The transition of our customers to cloud-based versions of our existing
on-premise solutions, to act as a gateway to the benefits and additional
applications on the Trisus platform.
To continue to enhance the capabilities of the platform through the addition
of new technology layers and applications, developed through both internal
R&D and selective M&A. Our investment in R&D will continue to grow, in line
with revenue growth, as we fulfil our vision for Trisus.
To grow our customer footprint, through increasing the attractiveness of our
offering and acquiring non-overlapping customers, which in turn to provides
further cross-sale opportunities.
5
Craneware plc Annual Report 2020 Strategic Report:
Operational Review [Cont’d.]
The Trisus platform, our wealth of proprietary data collected over our
20 years of servicing the US healthcare industry and our breadth of
customer base differentiate us from other healthcare solutions vendors,
providing substantial benefits for our customers and making a meaningful
impact on the value of healthcare as a whole. This will result in extensive
improvements to the financial and operational effectiveness of US hospital
providers and thereby drive significant customer demand for Craneware
solutions in the future.
We are on track to transition all our core products to the Trisus platform
during 2021, meaning we are near the completion of the fundamental
building blocks of the next stage of our growth strategy.
M&A
While organic growth remains a priority, as we have publicly stated, we
continue to evaluate the market and will continue to pursue strategically
aligned companies that will accelerate our growth strategy. This is
underpinned by four key acquisition criteria of which target companies must
fit into at least one, being:
the addition of data sets;
the extension of the customer base;
the expansion of expertise;
the addition of applications.
In evaluating acquisition opportunities, the Board implements a strong
valuation discipline seeking to maintain its prudent approach to preserving
balance sheet strength and efficiency for the long-term. Targets that are
profitable with recurring revenue models that provide earnings accretion
within the first 12 months of ownership are prioritised.
Product Roadmap
We are executing on a roadmap to migrate all our solutions onto the Trisus
platform and continue to look for innovative combinations of our data sets
into new unique product offerings.
We are particularly pleased to note how both our existing customer base
and the wider healthcare provider market have responded positively to
the technological evolution of the Craneware solution set, delivered on the
Trisus platform, with over 300 of our customers already utilising one or more
of the native Trisus applications and almost the entirety of the remainder
connecting to it via the Trisus Bridge; this is the first step for significant
migration to the platform from within our user base
Trisus® Chargemaster and Trisus® Pharmacy
We are excited to now be at the stage to start the roll out of the Trisus
versions of our two core product offerings: Trisus Chargemaster, the upgrade
version of our Chargemaster Toolkit, and Trisus Pharmacy, a new product
which in stage one will sit alongside our on-premise Pharmacy ChargeLink,
and subsequently be expanded to include all Pharmacy ChargeLink
functionality.
We will commence the staged migration of our customer base to Trisus
Chargemaster from September this year with customers able to elect, via
their existing installation, whether to remain using the on-premise for a
period of time, or switch to the cloud version.
Both Pharmacy ChargeLink and Trisus Pharmacy will be available to new and
existing customers for the next year, with customers able to select which
application best suits their needs
Sales and Marketing
As highlighted previously, the Company enjoyed positive sales activity in
the first nine months of the year, with Total Sales tracking 30% ahead of
the prior year. We signed contracts with hospitals of all sizes and for all
segments of our product offering, with a particularly strong performance
from Chargemaster Toolkit and encouraging sales of Trisus applications.
Expansion Sales, being new sales made either to existing hospitals, or to
new hospitals within an existing hospital system customer, accounted for
the biggest component of new sales, representing 90%. This demonstrates
our ability to deliver on our “land and expand” strategy, cross selling further
solutions to our extensive customer base, driven by compelling ROIs for our
customers.
Consistent with the prior year, Trisus products represented 14% of our New
Sales in the year (FY19: 13%). All customers who have signed new contracts
for Chargemaster Toolkit in the year have an understood migration plan to
Trisus Chargemaster, which will be rolled out through the course of 2021,
and recognise this as an easy entry to the Trisus platform.
An increased number of hospitals renewed their contracts during the
year, which when netted off against those lost in the period resulted in a
consistent customer retention rate of over 90%. Many of the renewals due
in Q4 which were delayed due to COVID-19 travel restrictions have now
successfully taken place.
6
Craneware plc Annual Report 2020 Strategic Report:
Financial Review
Since the first Financial Review we
published as a listed company back
in 2008, we have regularly referred
to our prudent business model, the
Annuity SaaS business model, which
is focused on long-term sustainable
growth; our healthy, cash positive
balance sheet and our prudent approach
to cost management whilst balancing
Underlying these results are the total value of contracts signed in the year
(“Total Sales”). As detailed, whilst Total Sales had been tracking 30% above
the prior year, we ultimately closed the year marginally ahead at $65.4m
(FY19: $63.1m). As a result of our business model, “sales” and “revenue”
have very different meanings and are not interchangeable. In fact, only a
small proportion of the revenue resulting from the sales made in the year is
recognised in the current year’s reported revenue, instead the vast majority
of the associated revenue is recognised in future years, which delivers the
Group’s long-term visibility over future revenues.
investment for the future. These concepts, which we have followed
throughout our growth as a Group, have served us well as we have navigated
the global uncertainty the COVID-19 pandemic has caused.
The Trading update provided on 8 July 2020 outlined, how, when considering
the financial performance of the Group, the year ended 30 June 2020 should
be viewed in two parts. While the first nine months of trading saw Total
Sales tracking over 30% ahead of the prior year, the final three months saw
our teams’ activities pivot towards the enhanced support of our customers
(and non-customers) as they focused on their mission.
There is no doubt COVID-19 has impacted the financial results for the current
year. For example, the travel restrictions and lockdowns imposed particularly
impacted our sales and professional services teams’ ability to close sales,
deliver their projects and complete renewals with the associated up-sales in
the final quarter. However, the concepts I refer to above combined with the
hard work and dedication of our employees mean we are able to report on
a robust set of financial results and a solid foundation for future growth as
hospitals need for usable financial and operational data intensifies as they
look for further resilience across their financial operations post the pandemic.
Revenues remained consistent at $71.5m (FY19: $71.4m) whilst prudent cost
management and reductions in certain spend, such as travel, saw adjusted
EBITDA increase 5% to $25.2m (FY19: $24.0m). We have also closed the
year with $47.9m (FY19: $47.6m) of cash reserves and visible revenue to be
recognised over the next three years of $200.1m (FY19 same 3 year
period: $197.5m).
The Annuity SaaS Business Model
The new contracts we sign with our customers provide a licence for the
customer to access specified products throughout their licence period. A
new customer will, on average, sign a four year contract and this average
is calculated up to the first renewal point/break clause for any specified
product. At the end of an existing customer’s initial licence period, or at
a mutually agreed earlier date, we look to renew these contracts with our
customers. By renewing these contracts, we are sustaining our underlying
annuity revenue base, which means sales of new products to existing
customers or sales to new hospital customers are adding to this
annuity revenue.
Under the Group’s business model, we have always recognised software
licence revenue and any minimum payments due from our ‘other route to
market’ contracts evenly over the life of the underlying contract term.
In addition to the licence revenues recognised in any year, we also expect
between 10% to 20% of revenue recognised to be from services. The services
we provide generally accompany a new licence sale and are focused on
embedding the software within the customers’ core processes to maximise
the value the software can bring to them. This service is typically separately
identifiable from the licence and the associated revenue is recognised as we
deliver the service to the customer, usually on a percentage of completion
basis. However, the nature and scope of these engagements will vary
depending on both our customers’ needs and which of our solutions they
have contracted for. As a result, the period over which we deliver the services
and consequently recognise the associated revenue will vary.
7
Craneware plc Annual Report 2020 Strategic Report:
Financial Review [Cont’d.]
Sales, Revenue and Revenue Visibility
Our Total Sales is broken down into the total value of contracts with new
customers or new products to existing customers at some time in their
existing contract (“New Sales”) and the total value of contracts of customers
renewing their existing products at the end of their current contract terms
(“Renewals”).
The table below shows the total value of contracts signed in the relevant
years, split between New Sales and Renewals and how these sales have
translated into reported revenue in the corresponding year.
As the majority of the revenue resulting from sales in any one year is
recognised over future years, the financial statements do not fully reflect the
valuable ‘asset’ that is contracted, but not yet recognised, revenue. As such,
at every reporting period, the Group presents its “Revenue Visibility”. This KPI
identifies revenues which we reasonably expect to recognise, as of the first
day of the new Fiscal Year, over the next three-year period, based on sales
that have already occurred.
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.
This Three-Year Visible Revenue metric includes:
future revenue under contract;
revenue generated from renewals (calculated at 100% dollar value
renewal); and
other recurring revenue.
Future revenue under contract is, as the title suggests, subject to an
underlying contract and therefore once invoiced will be recognised in the
respective future 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. four years) and will require their contracts
to be renegotiated and renewed for the revenue to be recognised. To
appropriately represent the quantum of revenue within this category we
present the total of revenue subject to renewal (i.e. 100% of dollar value).
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.
75
50
$m
To ensure the representation of renewal revenues are reasonable in our
visible revenue KPI, we monitor the long-term average to ensure it remains
above 100%. In assessing this long-term average, we would normally
expect this metric to be between 85% and 115%, but recognise a result
25
0
FY16
FY17
Reported Revenue
FY18
Revenue
FY19
FY20
$m
$m
75
50
25
0
75
50
25
0
$m
75
50
25
0
FY16
FY17
FY18
Revenue
New Sales
$m
75
50
25
0
FY16
FY17
FY18
New Sales
75
50
25
0
75
50
25
0
FY16
FY19
FY17
FY20
FY18
Revenue
$m
$m
FY16
FY19
FY17
FY20
FY18
New Sales
FY19
FY20
FY16
FY17
FY18
New Sales
Renewals*
FY19
FY20
FY19
FY16
FY20
FY17
FY18
Renewals
FY19
FY20
*As 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 that year.
75
75
$m
8
50
25
0
FY16
FY17
$m
50
25
0
FY18
Renewals
FY16
FY19
FY17
FY20
FY18
Renewals
FY19
FY20
Craneware plc Annual Report 2020 Strategic Report:
Financial Review [Cont’d.]
outside of this range (both above and below) in a single year is unlikely to
materially impact the long-term average renewal rate. We reported at the
interim results this metric was below this range at 73% following the loss
of a larger customer. Whilst we have seen this metric increase to 80% for
the full year, the impact on sales since March caused it to remain marginally
below our expected range, with certain contract renewal discussions
still ongoing.
The Group’s total visible revenue for the three years as at 30 June 2020 (i.e.
visible revenue for FY21, FY22 and FY23) identifies $200.1m 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 $141.9m of which $62.7m is
expected to be recognised in FY21, $47.4m in FY22 and $31.8m in FY23;
revenue generated from renewals contributing $57.0m; being $6.2m in FY21,
$17.6m in FY22 and $33.2m in FY23;
other revenue identified as recurring in nature of $1.2m.
These future revenues, with customers continuing to renew their contracts
with us, expand beyond the three-year time horizon we report on, creating a
foundation of annuity revenue. This annuity revenue provides the foundation
for future financial growth as well as giving increased certainty to the Board
when making the annual assessment for the Viability Statement.
Gross Margins
Typically, we expect the gross profit margin to be between 90% to 95%
reflecting the incremental costs we incur to obtain the underlying contracts,
including sales commission contract costs which are charged in line with the
associated revenue recognition. The gross profit for FY20 was $67.0m (FY19:
$67.0m) representing a gross margin percentage of 94% (FY19: 94%) which
continues to be within our historical range. This reflects the correct matching
of these incremental costs 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 its
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 (if applicable in the year),
share related costs including IFRS 2 share-based payments charge, interest,
depreciation and amortisation (“Adjusted EBITDA”).
$m
70
60
50
40
30
20
10
0
Three Year Visible Revenue
0.4
6.2
62.7
0.4
17.6
47.4
0.4
33.2
31.8
FY21
FY22
FY23
Contracted
Renewals
Other recurring revenue
As at 30 June 2020
As at 30 June 2020
9
Craneware plc Annual Report 2020 Strategic Report:
Financial Review [Cont’d.]
No costs were identified as exceptional in the current year. However, in the
prior year we incurred $1.2m of professional and other fees relating to a
significant proposed acquisition that ultimately the Board decided not to
enter into in that year, as such these costs were adjusted from earnings in
presenting Adjusted EBITDA in that year.
maintaining and enhancing our current product offerings and ensuring
they remain market-leading. As a result of this investment the total cost of
development in the year was $21.6m (FY19: $20.0m), a 10% increase which
is ahead of our revenue growth and reflective of the opportunities in the
market for our products.
Adjusted EBITDA has grown in the year to $25.2m (FY19: $24.0m) an increase
of 5%. This reflects an Adjusted EBITDA margin of 35% (FY19: 34%). This is
consistent with the Group’s continued approach to making investments in
line with the revenue growth, prudent cost management and reductions in
certain spend, such as travel during the pandemic.
IFRS16 “Leases”
In the year, we have adopted IFRS 16 Leases (using the modified
retrospective application approach). Under this approach, the impact of
initially applying the standard has been reflected as an adjustment to
the opening balance of retained earnings and, as such, the prior period
comparatives have not been restated. However, in summary, IFRS 16
requires leases to be recognised as an asset and a corresponding liability.
At transition, leases previously classified as operating leases (under IAS 17)
have been measured at the present value of the remaining lease payments,
discounted at an incremental borrowing rate. As a result of adopting IFRS 16,
during the period, the Group charged $916,978 of depreciation and $94,193
of interest costs against profit. Under IAS 17, a charge of $726,413 would
have been made.
Operating Expenses
Our Purpose is to profoundly impact healthcare by improving healthcare
providers’ operational efficiency and margin, so they can continue
investing in providing quality care for their communities. Through our
Value Cycle strategy, the Trisus platform and the applications that sit on
it, we are supporting our customers as they tackle the challenges of a
market that continues to evolve towards value-based economics and the
new reimbursement models. If we are to deliver on our potential to both
support our customers in this evolving market place and address the market
opportunity available to us, we must ensure we are building a scalable
business that can meet the future challenges our growth will bring.
The reduction in net operating expenses (to Adjusted EBITDA) to $41.8m
(FY19: $43.0m) reflects continued prudent cost control and reductions in
travel spend from March onwards. The Group always looks to invest in all
areas of the business in line with revenue growth, and we have adhered to
this principle through the current year.
We have remained highly cash generative and as a result we have continued
to use our cash reserves (after returning funds to shareholders via dividends)
to invest in our future. Product innovation and enhancement continue to be
core to this future and our ability to achieve our potential. As such we have
continued to invest significant resource in this area as we build out the Trisus
platform and the portfolio of products that will be part of this platform.
We continue our Build, Buy or Partner strategy to build out this portfolio
of products, recognising Build is often the best way forward. We use our
Agile development methodology to develop innovative new products whilst
From this total investment we have capitalised projects that will bring
future economic benefit to the Group. With the significant increase in our
investment into our development and product management teams we have
ensured costs relating to expanding and training of the new teams are not
capitalised. As a result, the total amount capitalised in the year reduced to
$9.3m (FY19: $9.6m).
The amounts we capitalise represent the cash reserves we have utilised in
the year, to invest in our future. This is an efficient and cost-effective way to
further build out our Value Cycle strategy. We expect to see both the levels
of development expense and capitalisation continue as we progress with
building out this solution set. As specific products are made available to
relevant customers, the associated amounts capitalised are charged to the
Group’s income statement over their estimated useful economic life, thereby
correctly matching costs and the resulting revenues.
In assessing the useful life to correctly match costs and resulting revenues,
we must continually apply careful judgement based on past experience,
advances in product development and also best practice. During the year, we
have re-assessed the estimated useful life of our Intellectual Property (more
specifically the Trisus enterprise suite of products), to be between 5 and 10
years (FY19: 5 years). As this is a change in estimate, it has been applied on
a prospective basis. The impact of this change has been a reduction in the
amortisation charge in the year of $977,008, with the total amortisation
charge in the year being $3.2m (FY19: $2.9m).
Cash and Bank Facilities
Cash generation and maintaining cash reserves have always been a focus
of the Group, but never more so than through this recent period. Our ability
to generate cash has enabled us to navigate the challenges the pandemic
brought without the need to rely on government assistance in either
geography. We have also been able to provide targeted support to our
customers, maintain our investment in our business, continue our investment
in development and return funds to shareholders via dividends.
We have always targeted 100% conversion of our earnings into cash. In
the current year, we were able to use our cash reserves to provide targeted
support to customers who requested it, via payment plans or deferred
payment terms and in doing so recognised we were unlikely to meet this
target in the current year. We did, however, achieve a 92% conversion of our
adjusted EBITDA to cash. Our customers continue to make payments post year
end, including those we have agreed payment plans with, and as a result we
have collected a further $10.6m.
During the year we have returned $9.1m to our shareholders via dividends.
As a result of all these factors, we retain cash reserves of $47.9m
(FY19: $47.6m).
10
Craneware plc Annual Report 2020 Strategic Report:
Financial Review [Cont’d.]
This significant level of cash reserves and our balance sheet strength allows
us to fund acquisitions should suitable opportunities arise. To supplement
these reserves, the Group retains 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 to add to the Value
Cycle strategy.
Balance Sheet
The Group maintains a strong balance sheet position. Intangible assets
have increased by $6.4m to $36.8m (FY19: $30.4m) primarily as a result of
capitalised development costs in the year net of the amortisation charged.
The level of trade and other receivables has increased in comparison to the
prior year. This is a result of the factors identified above that impacted our
cash collection in the year.
Deferred income levels reflect the amounts of the revenue under contract
that we have invoiced and/or been paid for in the year, but we 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 recognised in the Statement of Comprehensive Income.
Overall, levels of deferred income are significantly more than any accrued
income and the prepayment of sales commissions, we therefore remain cash
flow positive in regards to how we account for our contracts.
Currency
The functional currency for the Group, and cash reserves, is US dollars.
Whilst the majority of our cost base is US-located and therefore US dollar
denominated, we have approximately one quarter of the cost base situated
in the UK, relating primarily to our UK employees which is therefore
denominated in Sterling. As a result, we continue to closely monitor the
Sterling to US dollar exchange rate, and where appropriate consider hedging
strategies. The average exchange rate throughout the year being $1.2598 as
compared to $1.2945 in the prior year.
Taxation
The Group generates profits in both the UK and the US. The overall levels
are determined by both the proportion 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 been affected
by R&D tax relief of $0.5m (FY19: $0.4m) and share options issued and
exercised in the year which reduced the tax charge by $0.8m (FY19: $0.4m).
As such the current year effective tax rate is 13% (FY19: 18%).
EPS
In the year being reported adjusted EPS has seen the benefit of the increased
levels of Adjusted EBITDA combined with the effective tax rate reported
above, partially offset by an increase in both the amortisation and share
based payment charges, and as such has increased 3% to $0.654 (FY19:
$0.633) and adjusted diluted EPS has increased to $0.644 (FY19: $0.620).
Dividend
In proposing a final dividend, the Board has carefully considered a number
of factors including the impact of the pandemic, the Group’s trading
performance, our current and future cash generation and our continued
desire to recognise the support our shareholders provide. After carefully
weighing up these factors, the Board proposes a final dividend of 15p (18.45
cents) per share giving a total dividend for the year of 26.5p (32.60 cents)
per share (FY19: 26p (33.02 cents) per share). Subject to approval at the
Annual General Meeting, the final dividend will be paid on 15 December
2020 to shareholders on the register as at 20 November 2020, with a
corresponding ex-Dividend date of 19 November 2020.
The final dividend of 15p 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 20 November 2020. The exact amount to be
paid will be calculated by reference to the exchange rate to be announced
on 20 November 2020. The final dividend referred to above in US dollars
of 18.45 cents is given as an example only using the Balance Sheet date
exchange rate of $1.2302/£1 and may differ from that finally announced.
Outlook
While the disruption and stress of the COVID-19 pandemic has eased in some
areas, many healthcare providers continue to be under considerable pressure
and while a second wholesale lockdown is unlikely, this situation is likely to
continue. On the whole, hospitals now have increased clinical capacity and
the focus has shifted to ensuring robust operational and financial processes
are in place to ensure their financial future.
We have experienced strong sales momentum in Q1 and continue to have
sales discussions with hospitals across the US. We are cautiously optimistic
we are seeing the first signs of sales cycles slowly normalising; however, we
remain cognisant of the ongoing macro uncertainties.
Our passion and purpose is to impact healthcare profoundly by improving
healthcare providers’ operational efficiency and margin, so they can continue
investing in providing quality care for their communities. The challenges
hospitals are currently facing, combined with the ongoing transition to
value-based reimbursement, means this has never been more relevant, or
important, and we will do all we can to support our customers through this
time.
We continue to benefit from a strong balance sheet and high levels of
recurring revenue, entering the new financial year with an annuity revenue
base of over $65m, providing us with a strong foundation for future growth.
Keith Neilson
Chief Executive Officer
18 September 2020
Craig Preston
Chief Financial Officer
18 September 2020
11
Craneware plc Annual Report 2020 Strategic Report:
Key Performance Indicators and Principal Risks and Uncertainties
Key Performance Indicator Review
Revenue Growth
Revenue
Growth
2020
$71.5m
0%
2019
$71.4m
6%
Through the Group’s Annuity SaaS revenue recognition model, underlying sales levels in the current year combine with prior year’s sales and continued high
levels of customer retention, to increase the recurring revenue reported each year. The long-term nature of our contracts supports sustainable growth with the
majority of revenue resulting from current year sales being recognised in future periods.
Three Year Revenue Visibility
Three Year Revenue Visibility
2020
2019
$200.1m
$197.5m
The Group’s revenue recognition model means the full benefit of current year’s sales are not reflected in the current year financial statements. Instead, the
vast majority of any new sales adds to the growth in the underlying ‘annuity’ of recurring revenue. This is demonstrated through the Group’s ‘Three Year
Revenue Visibility’ KPI. This 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 2020. Full details of how this is calculated are detailed in the financial review section of the Strategic Report.
Adjusted EBITDA Growth
Adjusted EBITDA
Growth
2020
$25.2m
5%
2019
$24.0m
11%
We take a measured approach to our investment, ensuring to invest to support the future growth of the Group. The continued revenue growth has allowed
us to both continue and in certain areas accelerate this investment whilst delivering Adjusted EBITDA growth. By taking this approach, we aim to release
additional investment, in line with revenue growth, with the focus on delivering profitable growth to all stakeholders.
Adjusted EPS
Adjusted EPS
Growth
2020
2019
65.4 cents
3%
63.3 cents
5%
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 Group’s effective tax rate remains dependent on the applicable tax rates in each respective jurisdiction.
Total Sales
Total Sales
2020
$65.4m
2019
$63.1m
Total Sales represents the total value of contracts signed in the year. As 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 sales value of renewals in that year.
Cash
Cash
2020
$47.9m
2019
$47.6m
The Group continues to convert very high levels of the Adjusted EBITDA reported in the year into operating cash flows which, having returned $9.1m to
shareholders by dividend during the year, has resulted in cash balances of $47.9m at 30 June 2020. Overall Operating cash conversion, at 92% in the year
ended 30 June 2020, is below our current long-term target of 100% for the reasons explained in the Financial Review section on page 10.
12
Craneware plc Annual Report 2020 Strategic 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. Our approach
to risk management is a key consideration to how we deliver long-term
stakeholder value whilst protecting our business, people, assets, capital and
reputation. The Corporate Governance Report on pages 35 to 44 includes
an overview of the Group’s risk management and internal control systems,
including details of the Group’s Risk and Compliance Committee.
The Board is very much aware that as a public company, reputational
damage is a risk and as such a key concern. Whilst the risks outlined in this
report do not specifically detail the risk from reputational damage, the
potential effects to our reputation are not under-estimated by the Board.
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
COVID-19
The Strategic Report on pages 5 to 11 details the unprecedented impact
COVID-19 has on our customers and their operations. It also details the
financial and operational impact that resulted to Craneware. Whilst the
ongoing situation continues to evolve, we anticipate, based on what is
currently known, under the current climate, that any further business
impact to Craneware operations will not go beyond those identified in
the Strategic Report and future impacts in these areas are expected to
be limited. We have continued to support our US hospital customers to
assist them, where we can, with their challenges and adding value by
ensuring they can maximise their reimbursements and maintain their
financial stability. This in turn gives them the ability to better serve their
communities.
Additional support has been provided to our customers and non-customers
with regular webinars updating the coding and legislation changes being
implemented by the US Government. This provided information needed
to ensure the correct reimbursements could be claimed for treatment of
COVID-19 patients.
Craneware took the decision in mid-March 2020 to implement our business
continuity plan and move all of our office-based staff to remote home
workers ahead of the Government guidelines. This decision was driven
by the desire to protect and safeguard the well-being and health of our
workforce and allowing the continued support to our customers as they
faced the challenge of dealing with COVID-19 patients in their hospitals.
The Risk and Compliance Committee took responsibility for being the
COVID-19 response Committee with the remit to enlist the assistance of
colleagues with specific industry knowledge and expertise to assist the
ongoing task of monitoring and information sharing to both employees and
customers in the UK and in the US.
The COVID-19 response committee ran weekly update calls to inform all
employees of the changes in legislation in both jurisdictions and any policy
changes being implemented by Craneware. These sessions were informative
and also provided question and answer sections to allow any concerns
and queries to be answered. All new updates are conducted as and when
significant changes occur. A dedicated section on the Group’s intranet
is being maintained with up to date information and the five stages of
COVID-19 indicator, currently sitting at stage 2; mandatory work from home.
As all office-based employees moved into a new working from home
environment, various steps were taken to ensure the safety and wellbeing
of these staff members. Craneware benefited hugely from the experience
of having a large percentage of the US workforce already being home based
and therefore was able to pull on that experience to transition the newly
reassigned office-based employees.
With constant wellbeing articles and a check of facilities at home to provide
a comfortable and ergonomically suitable workspace taken, employees were
given the support needed to make this transition as smooth as possible.
Employees were further supported through this period with the ability to
work reduced hours to fit in with their personal circumstances.
Data and cyber security
Issue: Security of customer, commercial, and personal data poses increasing
risks to all businesses, especially against a backdrop of increasingly complex
regulatory environments and safeguards over personal and patient data. The
continually increasing instances of cyber and data-related crime presents a
significant challenge in terms of securing data and systems against attack.
Actions: Whilst it is impossible to completely eliminate data and cyber
security risk, it is clear that effective mitigation now goes beyond
building and operating security controls. The Group continues to invest
in strict physical and data security systems and protocols, including data
loss prevention systems, internal and external threat monitoring. We
deploy comprehensive auditing of our controls and processes targeted
in these areas. The Group has a Security Council, chaired by the Chief
Information Officer, which assesses current technology risks, approval
and implementation of mitigation plans as well as to inform the Chief
Information Officer of future strategy around this key business area.
13
Craneware plc Annual Report 2020 Strategic Report:
Key Performance Indicators and Principal Risks and Uncertainties [Cont’d.]
The Group also recognises and supports (including through ongoing
employee training and applicable policies and procedures) a sustained
evolution of culture within the organisation that embeds security across the
business.
Along that vein, as many studies suggest that employees and contractors are
the most common cause of data breaches, with phishing attacks being the
predominant cause, the Group requires mandatory data security training of
all employees and continues to develop and invest in additional training.
In view of the importance of the procedures, security, regulation and
controls around Craneware’s solutions and customer data, Craneware met
the requirements for and was awarded the HITRUST CSF certification.
Health Information Trust Alliance (‘HITRUST’ Alliance) is a collaboration
with healthcare, technology and information security organisations
which develops, maintains and provides broad access to its widely
adopted common risk and compliance management and de-identification
frameworks; related assessment and assurance methodologies; and
initiatives advancing cyber sharing, analysis and resilience. HITRUST has
established a ‘common security framework’ (CSF) to address the multitude
of security, privacy and regulatory challenges facing organisations. The
scope of the HITRUST CSF’s requirements is wide and requires a very high
standard of data security arrangements as these have been set in the context
of the accreditation being relevant to US healthcare providers with handling
sensitive data (Protected Health Information) and impacts in some way all
areas of the business (at least in respect of the required enhancement to the
Group-wide IT and data security policies). This serves to inform IT Security
roadmaps and significant investments with continued compliance being an
ongoing a focus.
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. The use of third party contractors within the Group’s software
development organisation as well as increasing numbers of customers using
outsourced partners to operate parts of their finance departments, results
in a larger number of third parties having access to the Group’s Intellectual
Property.
Actions: The Group will continue to register its trademarks and protect
access to its confidential information, as appropriate. The Group continues
to include appropriate legal protections in its contractual relations with
customers, suppliers, and employees to ensure legal protections available
are taken advantage of. 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
US Healthcare Evolution and Reform
Issue: The US healthcare industry continues to evolve, with a drive for
increased value from healthcare spend and a shift towards consumerisation.
The US healthcare 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 all levels
of management including the Board of Directors. 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
customer forums.
The Group’s Value Cycle strategy and the ongoing expansion of the Trisus
platform strengthens our position as a trusted financial performance partner
to hospitals. In addition, the Group continues to innovate and develop
further new products to meet evolving market needs, such as the ongoing
development of the Group’s new product in the cost analytics area.
These strategies, in addition to the customer engagement activities outlined
on page 22, keep the Group at the forefront of industry developments.
Regulatory Environment
Issue: The Group operates in an increasingly complex and heavily regulated
market environment. This includes very specific requirements in dealing
with, for example, data privacy, security, labour / employment, anti-kickback
statutes.
Actions: The Group has a Risk and Compliance Committee, comprised of the
Chief Information Officer, Chief People Officer, Chief Financial Officer, and the
Chief Legal Officer to oversee activities and concerns pertaining to the strict
regulatory environment.
All employees and contractors are required to undertake regular mandatory
training in key topics. The Chief Legal Officer is certified in privacy law in the
US and UK. In addition to utilising external experts in the relevant areas,
senior management regularly attend educational events and forums to keep
up to date with evolving regulations.
Political and Macroeconomic Changes
Issue: The Group has significant operations in both the UK and the US
and therefore is exposed to the changes in the political and economic
environments of both. This includes the ongoing Brexit negotiations and any
changes in freedom of movement and international trade.
Actions: The Group has experienced Board members and senior management
in both countries. The Group’s operations are currently evenly balanced
between the two, contributing positively to both economies. Globally
there is a restricted supply of qualified personnel within the technology
sector. Political uncertainty in the world can exacerbate this situation
within specific geographies. To ensure the ongoing availability of qualified
personnel, the Group continues to support training programs both internally
and externally as well as develop third party partnerships. The current multi-
14
Craneware plc Annual Report 2020 Strategic Report:
Key Performance Indicators and Principal Risks and Uncertainties [Cont’d.]
jurisdictional operations of the business substantially mitigate the Group’s
exposure to foreign exchange rates and risk to cross border trade which can
be volatile in times of uncertainty. The Group continues to monitor emerging
news and trends to stay alert to any potential future impacts.
Market Consolidation
Issue: The evolving market in US Healthcare continues to place significant
pressure on Healthcare providers, which is resulting in ongoing market
consolidation. As a result, the Group’s market is increasingly dominated by
larger hospital networks. Failure to enhance products, ensure scalability or
add to the current product suite could significantly limit the Group’s market
opportunity and leave it unable to meet its customers’ evolving needs.
Actions: The Group’s value cycle strategy and Trisus platform, combined with
the ongoing investment in the product suite, positions the Group to provide
scalable solutions to US Healthcare providers of all sizes.
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’s history that exists within its products. The
Group continues to expand and develop its product portfolio and 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 and this experience has been added
to in recent years through key appointments to the Operations Board.
In addition, and where appropriate, the Board appoints independent
professional advisors to assist in the consideration of potential acquisitions
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 35 to 44.
In summary, and as explained in the Operational Review section of this
Strategic Report, 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 employees, alongside responsiveness to
changes, and the opportunities that result, as they arise.
Emerging Risk
In addition to known risks, we are consistently reviewing and re-assessing
other emerging risks and the need for mitigation, as well as reporting to the
Board, as part of our existing risk management processes. These processes
include the identification of relevant internal and external factors and are
designed to capture those emerging risks which are current and those that
will impact future periods.
Viability Statement
In accordance with the UK Corporate Governance Code, the Directors have
considered the viability of the Group over the three year period from
30 June 2020.
Considerations that impact this assessment include the Group’s current
financial position and available financial resources, the Group’s Annuity SaaS
business model as outlined within the Strategic Report, including Revenue
Visibility, the Group’s strategic initiatives, the financial forecasts, the Group’s
cost base and annual forecast.
In the current year this assessment has also included consideration of the
potential impact of COVID-19 on viability. The current impact of this so far,
has been the lengthening of sales cycles especially in the last quarter of the
year ended 30 June 2020 including renewals and associated upsell and
cross sell.
The Directors also considered a number of other factors including the Group’s
risk management and internal control effectiveness and the principal risks
and uncertainties and their likelihood of occurrence within the period of
assessment.
The Directors consider that three years is an appropriate period for this
assessment as it corresponds with the Three Year Revenue Visibility key
performance indicator, as explained in the Strategic Report and the strategic
planning horizon.
The Annuity SaaS business model with its underlying long-term contracts (as
described in the Strategic Report on page 7), high levels of associated cash
generation and long-term focus on customer success provides a foundation
of revenue for future years. This foundation of contracted revenue forms
the basis of the stress testing considered by the Directors in making this
assessment, including a scenario which envisages no further sales or renewal
activity during the assessment period. The Directors confirm that they
have a reasonable expectation that the Group will be able to withstand the
impact of this severe adverse scenario, should this occur in the course of the
three-year assessment period.
The Directors have therefore considered, in making this assessment, the
Group’s current financial position and future prospects and have a reasonable
expectation that the Group will be able to continue in operation and meet
its liabilities as they fall due over the three year period from 30 June 2020.
However, future assessments of the Group’s prospects are naturally subject
to uncertainty that increases with time and therefore future performance
cannot be guaranteed.
15
Craneware plc Annual Report 2020 Strategic Report:
Section 172 (1) Statement
In accordance with the Companies Act 2006, each director of a company has
a duty to promote the success of the company. Section 172(1)(a) to (f) of
the Companies Act 2006 (‘s172 (1)’) requires a director of a company to act
in the way he/she considers, in good faith, would be most likely to promote
the success of the company for the benefit of its members as a whole and, in
doing so have regard (amongst other matters) to:
a. the likely consequences of any decision in the long-term;
b. the interests of the company’s employees;
c. the need to foster the company’s business relationships with suppliers,
customers and others;
d. the impact of the company’s operations on the community and the
environment;
e. the desirability of the company maintaining a reputation for high standards of
business conduct; and
the need to act fairly as between members of the company.
f.
This statement intends to set out how the Directors, both individually and
collectively, have had regard to the above factors when undertaking their
duties during the year ended 30 June 2020. The Directors consider, both
individually and collectively, that they have taken these factors into account
when exercising their duty to promote the success of the Group and of the
Company during the year.
In addition, more information is provided in this annual report relating to
matters relevant to the section 172 statement in the following pages
s172 (1) considerations:
Likely long-term consequences
Interests of the Company’s employees
Business relationships with suppliers,
customers and others
Impact on the community and
the environment
Reputation for high standards of
business conduct
Acting fairly as between members of the
company
Further information
at page(s)
4 to 15
19 to 21; 33
22, 24, 25, 32 and 33
24, 25 and 32
33 and 35 to 44
23, 34, 40 and 41
In discharging their section 172 (1) duty, the Directors have regard for these
factors and take them into consideration when making decisions. Induction
materials provided on appointment include an explanation of Directors’
duties, and the Board is regularly reminded of their duties.
The Directors have oversight of stakeholder matters and have regard for
these matters when making decisions. The Board, led by the Chairman,
ensures that its processes have regard for key stakeholders and that there is
sufficient time, information and understanding to properly take into account
their interests when making decisions and considering their long-term
implications.
The Board recognises that every decision it makes will not always result in
a positive outcome for each of the Group’s stakeholders. By considering the
Group’s purpose, vision and values, together with its strategic priorities and
having a process in place for decision-making the Board does however, aim
to make sure that its decisions are consistent and aligned.
A key consideration of the Board in making its decisions is to balance the
sometimes conflicting needs of the Group’s and the Company’s stakeholders
to ensure they are all treated consistently and fairly. This was demonstrated
through the decisions made in response to the COVID-19 pandemic which are
outlined, in the context of stakeholder considerations, on page 17.
By understanding our stakeholders, the Directors can factor into Board
discussions the potential impact of decisions on relevant stakeholder groups
and consider stakeholder needs and concerns, in accordance with section
172 (1) of the Companies Act 2006. Details of the Group’s key stakeholders
and how we engage with them are set out on pages 19 to 25.
The following table summarises some of the significant decisions made by
the Board during the year ended 30 June 2020 and the stakeholder group(s)
impacted by these decisions.
16
Craneware plc Annual Report 2020 Key Stakeholder
group(s) affected
Customers
Employees
Employees
Customers
Shareholders
Community
Government
Suppliers
Strategic Report:
Section 172 (1) Statement [Cont’d.]
Principal
decisions/events
Re-organisation of the
Product function
Actions and impact
The decision to evolve our organisational design relating to, and focusing on, our product areas was
implemented during the year and this was explained in our interim results announcement on 3 March 2020. The
business now has four functional solution divisions for developing and enhancing product, each with defined
objectives, talented teams and clear KPIs. The aim of this evolution was to promote innovation, operational
excellence and customer intimacy, while providing us with the structure to continue to scale. This is described
further in our Strategic Report on pages 5 to 11.
COVID-19 response
Further details of actions in response to the COVID-19 pandemic are on page 13. The health, safety and
well-being of our employees is a primary focus of the Board and senior management in response to the
pandemic. This focus had to be balanced with maintaining excellent levels of service to our customers.
Craneware instigated an immediate response, focusing primarily on both employees and customers, by putting
measures in place to assist and alleviate issues raised by the significantly challenging situation facing our
customers and the restrictions in response to the pandemic imposed in both the UK and the US.
The Risk and Compliance Committee chaired by the Chief Financial Officer and joined by the CEO, was given the
responsibility of being the COVID-19 response Committee. Regular updates are provided from the Committee to
the Board of Directors of the Company.
As all office-based employees moved into a new working from home environment, various steps were taken to
ensure the safety and wellbeing of these colleagues. Employees were further supported through this period
including the ability to work reduced hours to fit in with their personal circumstances.
Regular Q&A sessions, conducted by the COVID-19 Response Committee by virtual meetings, provided a forum
for employees to receive updates, ask questions and raise concerns. A dedicated section on the Group’s intranet
is being maintained by the Committee with up to date information.
We have continued to support to our US healthcare customers to assist them, where we can, with their
challenges and adding value by ensuring they can maximise their reimbursements and maintain their financial
stability. This in turn gives them the ability to better serve their communities.
The Directors maintained an ongoing dialogue with shareholders throughout the period. The Trading Update
published on 8 July 2020 included an explanation of the impact, as assessed by the Board at that time, of the
pandemic on the Group.
During the financial year ended 30 June 2020, notwithstanding the challenges of the COVID-19 pandemic, the
Group has retained all employee positions and maintained employee remuneration at all levels across the Group.
The Group was able to do this through its own resources and chose to utilise only a minimal amount of COVID-19
related UK or US government support. The Group has continued to pay suppliers in accordance with agreed
terms and has not sought to delay or refuse payment of valid invoices.
Dividend Policy (proposed
final dividend for year
ended 30 June 2020)
The Board considered the current and future liquidity and financial position of the business and potential impact
on dividend policy, particularly in view of the prevailing macroeconomic effects of the COVID-19 pandemic.
Based on the financial position and cash reserves of the Group, the Trading Update published on 8 July 2020
stated the intention of the Board to pay a final dividend for the year ended 30 June 2020. As explained on page
11, the Directors are recommending the payment of a final dividend of 15p (18.45 cents) per share based on the
results for 2020. Subject to approval at the Annual General Meeting, the final dividend will be paid on 15
December 2020 to shareholders on the register as at 20 November 2020.
Shareholders
17
Craneware plc Annual Report 2020 Strategic Report:
Section 172 (1) Statement
Principal
decisions/events
Share option
participation
Actions and impact
In order to provide a wider population of employees with an opportunity to become Craneware shareholders,
which promotes alignment to shareholder interests and aids with recruitment and retention, the Board decided
to implement the SAYE and ESPP all employee share option plans which had been established, and adopted by
shareholders, in 2018.
The Remuneration Committee approved the first grant of share options under the all employee SAYE (UK) and
ESPP (US) share option plans in the year ended 30 June 2020, as summarised in Note 8 to the financial
statements and as outlined on page 48 of the Remuneration Committee’s Report.
Key Stakeholder
group(s) affected
Employees
Shareholders
Appointment of
Non-executive Directors
As stated in the 2019 Annual Report, the Board had identified from its Board evaluation process that adding
further non-executive experience could complement the Board. During the year ended 30 June 2020, Alistair
Erskine and David Kemp were appointed to the Board as independent non-executive directors. As announced in
September 2019, George Elliott stepped down as Chairman of the Board at the Company’s AGM on 12 November
2019, having served as Chairman since August 2007, and William Whitehorn was appointed to the Board as
Chairman on 1 January 2020.
Shareholders
The Board considered each of these appointments in the context of the Board’s balance (including the provisions
of the UK Corporate Governance Code 2018), experience, skills and expertise. Further details regarding the
director appointments during the year are contained within the Corporate Governance Report on pages 35 to 44
and the biographies of the directors are on pages 27 and 28.
Craig Preston
Chief Financial Officer
18 September 2020
18
Craneware plc Annual Report 2020 Stakeholder Engagement
The Board is responsible for leading stakeholder engagement, ensuring that we fulfil our obligations to those impacted by the business. We believe that
considering our stakeholders in key business decisions is fundamental to our ability to drive value creation over the longer term. Our key stakeholder groups
and how we engage with them are summarised in the tables below.
The views of stakeholders have been considered in the scheduled Board and Operations Board meetings as well as in the context of the response to the
COVID-19 pandemic. By understanding our stakeholders, we can factor into the Board’s discussions the potential impact of our decisions on each key
stakeholder group and consider their needs and concerns, in accordance with section 172 (1) of the Companies Act 2006, as outlined on page 16.
Not all information is reported directly to the Board and not all stakeholder engagement takes place directly with the Board. However, the output of this
engagement informs business decisions, with an overview of developments and relevant feedback being reported to the Board. More material matters require
the Board’s consideration, with the Board engaging directly with, primarily, our employees and shareholders.
EMPLOYEES
We recognise the value of our employees and that the success of the Group is due to their efforts. Employee engagement is based on Craneware’s Framework
and core values of honesty, integrity, hard work to the highest quality, service and enjoying the challenge.
Driving employee engagement, empowerment and execution by prioritising the Framework and Lean principles was one of our strategic themes and
outcomes for the year.
How we engage
Annual employee engagement survey: We conduct an annual employee survey which is hosted by an external survey vendor. Our employee engagement
survey gathers employee views, with anonymised responses, on topics including: culture, understanding strategy, working environment, morale, reward,
work-life balance. The survey conducted this year achieved a very high level of response from employees. Satisfaction scores are evaluated to provide a
breadth of context about how employees are feeling and an Employee Engagement Index is also collated and monitored. The annual employee engagement
survey is supplemented by further pulse surveys during the year. Going forward into FY21, our employee engagement survey will be quarterly with updated
questions.
Employee Advisory Committee (EAC): We launched our EAC during the year which comprises a diverse panel of employees who were selected, based on
interested applicants, to represent a cross-section of teams. The mission of the EAC, which meets monthly, is: to enable a high contribution culture where
employees feel empowered, valued, achieve personal development and contribute effectively. The EAC has been established, with the full support of the
Operations Board (which includes the executive Directors and other members of the senior management team), as a forum through which employees can
meaningfully and responsibly participate in an advisory capacity to the Group. The EAC is not a decision-making body. The EAC provides a platform for
information and discussions about issues that are of interest to employees and provide recommendations back to the Operations Board and, if appropriate, to
the Board of Directors.
Annual all-employee meeting: a key part of this meeting is the explanation and roll out of Group-wide strategic themes and outcomes, as agreed by the
Board, and related deliverables (with key performance indicators) to all employees at the start of the financial year. The team is then provided with regular
updates on these strategic themes and progress with deliverables during the year.
All-employee update meetings: on a minimum six monthly basis, usually following the full and half year financial results announcements, an all employee
update meeting is hosted by the CEO and CFO to provide an update to employees on the business. There is always a question and answer section at the end of
these meetings which provides the opportunity for employees to ask the Directors questions.
Ongoing communication: We use the Group-wide intranet, as a main point of communication to share information and updates with employees. The
intranet hosts the employee handbook of policies and procedures in addition to employee, company, and industry news and other departmental and Group-
wide information such as employee wellness activities and Craneware Cares initiatives. The intranet also played an important role during the COVID-19
pandemic as home to the COVID-19 Information Hub (explained further below). Each week a 30 minute Craneware Information Mini Series is held. The
presenter and topic change each week, and is a way for employees to understand what other employees and teams are working on across the business.
19
Craneware plc Annual Report 2020
Stakeholder Engagement [Cont’d.]
EMPLOYEES [Cont'd]
How we engage (continued)
Craneware Spaces: Towards the end of this year we launched a new initiative called Craneware Spaces which are hosted sessions creating safe spaces for
conversation and community on the topic of racism, diversity, and inclusion. The sessions are led by and involve employees and guest speakers.
COVID-19 response: Appropriate adaptations have been made to employee engagement mechanisms, including employee communications, policies and
wellness initiatives, during the year ended 30 June 2020 (and ongoing at the time of compiling this annual report) with the changes to working practices
required due to the COVID-19 pandemic. Employees required regular updates on steps being taken by Craneware, support to understand key policies and
procedures which might be helpful, links to guidance from the government and local authorities, and general wellness support.
Created by the COVID-19 Response Committee, the COVID-19 Information Hub on the Group’s intranet provided a one stop shop for employees to access latest
information. In addition, a 30 minute COVID Q&A is hosted on a bi-weekly basis in order for employees to ask live questions of the COVID-19 team.
Framework: Craneware’s Framework has been at the core of the company since it was first formed. The Framework provides the organisation with a clear
definition of “who we are and how we perform”. It is part of employees onboarding when they join Craneware and underlies, and is interlinked to,
contribution management. The Framework comprises: Craneware’s characteristics and values connecting to each competency, strengthening the way in
which the organisation recognises the Craneware Ethos within employee contribution management.
LEAN Initiatives: Lean methodology is a way of optimising people, resources, effort and energy of an organisation toward creating value for the customer. It
is based on two guiding tenets: continuous improvement; and respect for people. LEAN Methodology reinforces Craneware’s trust, respect and desire to
empower its employees who are responsible for the achievement of the business’ objectives through their daily work. The program was introduced at
Craneware in financial year 2017 and continues to be utilised to drive accountability and discover value in our process to deliver on commitments and
business goals with balanced throughput that matches customers’ needs and sustains company growth.
Contribution management: This links the contribution of each individual to the overall strategic direction of the organisation and provides clarity and
transparency around expectations. The process aims to drive a high contribution culture and it has a direct impact on reward, strategy alignment,
organisational development and the Company ethos. Employees are encouraged to maintain a personal development plan, linked to an employee’s role and
goals, as part of the contribution management process.
Learning and development: Craneware’s employee learning management system (‘LMS’) called the Academy, hosts on demand learning solutions, covering
a wide range of subject matter. Each Craneware employee has a personal log-on and account within the portal system which allows the allocation and
tracking of training for each employee. The system also enables the control of (and tracking of completion of) mandatory and annual training modules. In
addition, a technology specific learning platform called Pluralsight is available for employees in technical roles. The platform delivers training in many areas
of technology, such as coding languages. Three different types of leadership programs exist to bring together and further develop internal leaders. For a
number of years, Craneware has supported a Masters Degree in Business Administration (‘MBA’) program in partnership with University of Strathclyde to
provide employees, who are interested in pursuing an MBA, a way of further developing their business knowledge and leadership potential.
Induction: We have a comprehensive induction programme in place for new members of the team. This includes being assigned a “buddy”, a suite of
introductory information and mandatory training hosted on the LMS. The induction experience is monitored by HR through 30, 60 and 90-day check-ins with
the new employee.
Recognition: Employee recognition is embedded into Craneware’s culture, and includes a broad range of opportunities from casual recognitions to formal
annual peer-nominated awards.
20
Craneware plc Annual Report 2020
Stakeholder Engagement [Cont’d.]
EMPLOYEES [Cont'd]
How we engage (continued)
All-employee share plans: In order to provide a wider population of employees with an opportunity to become Craneware shareholders, which promotes
alignment to shareholder interests and aids with recruitment and retention, we have established a Save As You Earn (‘SAYE’) share option plan for UK
employees and an Employee Stock Purchase Plan (‘ESPP’) for US employees. Share options were first granted under these two share option plans in the year
ended 30 June 2020, as summarised in Note 8 to the financial statements. There was a good level of participation in the plans this year, in terms of the
numbers of employees who chose to join.
Wellness: We have enhanced our employee wellness programmes again during the financial year. Employees have volunteered to be Wellness Ambassadors
to provide wellness information on the Group’s intranet and support employee wellness events.
Community initiatives: Craneware Cares, an employee committee, links an element of employee engagement with relevant community engagement in an
ongoing and active mechanism. Further details are contained in the ‘Community’ section below.
How this was considered in Board discussions and decision making
The results and anonymised feedback received from the annual employee engagement survey are collated and rated to identify any aspects for improvement,
which then guide initiatives to address those areas. The results and anonymised feedback are reviewed and considered by both the senior management team
and also by the Board.
The Board receives regular reports about a range of factors and issues affecting our employees to ensure that appropriate consideration is given and early
action taken where necessary. The Board also regularly considers matters and initiatives as part of its commitment to promote diversity and equality across
all of our teams.
The Remuneration Committee approved the first grant of share options under the all employee SAYE (UK) and ESPP (US) share option plans in the year ended
30 June 2020, as summarised in Note 8 to the financial statements and as outlined on page 48 of the Remuneration Committee’s Report.
Measures exist for the Board and senior management to evaluate Craneware’s workforce structure and to ensure that these trends align with objectives
around diversity and inclusion.
21
Craneware plc Annual Report 2020
Stakeholder Engagement [Cont’d.]
CUSTOMERS
Craneware prioritises customer engagement as a critical component to our long-term success. We recognise the importance of, and are fully
committed to, engaging with our customers in meaningful, two-way conversations. Craneware is also improving our customers’ experience via
several initiatives, in addition to our extensive engagement during implementation, professional services, and from ongoing customer support.
How we engage
Craneware Advisory Council (CAC): This forum represents leadership from both within Craneware, as well as key leaders from our customer organisations.
Through innovative and collaborative focus groups, we collect qualitative feedback, which is prioritised and refined into application features and services.
This enables us to add value for our customers. In addition to scheduled meetings, ongoing Craneware Advisory Council member feedback is collected
through surveys, mastermind sessions, and thought leadership projects.
Craneware Financial Performance Summit: This event is a broader opportunity to engage customers, providing users of Craneware applications and
services with educational and networking opportunities. All current customers are invited to attend this live event, which is held in a different location each
year. In October 2020, the event is being delivered virtually.
LEAN Principles: We employ a consultative approach across all solutions to measurably improve customer financial and operational performance. This
approach is founded upon LEAN principles for effective process development, and includes utilising voice of the customer exercises to develop Critical-To-
Quality trees, discovery questionnaires, role assessments, and application-specific value scorecards.
Educational webinars: Craneware regularly offers complimentary live webinars providing training across our solutions. Webinars also cover educational
industry topics including billing, coding and regulatory changes which impact hospitals’ revenues and costs. As noted on page 13 , these webinars
were integral to Craneware’s response to the COVID-19 pandemic. Craneware’s professionals quickly released new insights that were critical to customers’
management of these coding and operational changes. Using an existing customer engagement channel for webinars, new sessions, specifically designed to
support hospitals and healthcare organisations, were offered to both customers and non-customers as a collaborative measure to support the industry.
Craneware Academy: Craneware Academy is the knowledge centre of Craneware, with a triple aim: professional development, Craneware knowledge,
and industry knowledge. Customer proficiency with their Craneware applications is assessed through courses that provide testing scenarios and hands-on
practice within the system. These courses contribute to levels of Craneware certification, which are celebrated annually.
Customer Care Team: This is a designated team of problem-solving, relationship specialists. Their focus includes partnering with select customers to engage
and optimise the value of the Craneware relationship, including our solutions, services, webinars, and expert advice. This level of service contributes to
customers renewing existing contracts and purchasing additional opportunities.
How this was considered in Board discussions and decision making
Customer feedback regarding the value of Craneware’s applications and services, as well as sales data, is regularly presented to the Board of Directors. These
insights inform strategic decisions.
22
Craneware plc Annual Report 2020
Stakeholder Engagement [Cont’d.]
SHAREHOLDERS
The Company engages in full and open communication with both institutional and private investors and responds promptly to all queries received.
How we engage
In conjunction with the Company’s nominated adviser, all relevant news is distributed in a timely fashion through the regulatory news service of the London
Stock Exchange to ensure shareholders are provided with material information on the Company’s progress.
The primary point of contact for shareholders on operational matters is the CEO and the CFO. The primary point of contact for shareholders on corporate
governance and other related matters is the Chairman. The Senior Independent Director is available as a point of contact should a shareholder not wish to
contact the Chairman for any reason.
Annual General Meeting: All shareholders are invited to attend the Annual General Meeting (‘AGM’) of the Company and are encouraged to take the
opportunity to ask questions to the Directors. The proxy voting, for the resolutions proposed for the AGM, can be submitted to the Company’s Registrar online,
through CREST or by paper forms submitted by post. The Board sought feedback from shareholders during the year to understand the reasons for proxy votes
cast against three of the resolutions proposed at the AGM in November 2019 (further information is provided on page 41).
Meetings: The CEO and the CFO meet regularly with shareholders, normally immediately following the Company’s half year and full year financial results
announcements, to discuss Craneware’s performance and answer any questions.
Investor conferences: The CEO and / or the CFO regularly attend investor conferences which provide an opportunity to meet with both existing and potential
shareholders.
Capital Markets Day: These events are typically arranged by the Company for institutional investors and analysts. The last Capital Markets Day was held in
November 2018 and was attended by all of the Directors of the Company
Website: The Company’s website at www.craneware.com, in compliance with the AIM Rules, has a section for investors which contains all publicly available
financial information and news on the Company.
How this was considered in Board discussions and decision making
The Board monitors the success of CEO and CFO meetings with shareholders through anonymous evaluations from both shareholders and analysts performed
by the Company’s Corporate Broker and Financial PR advisor.
Unfortunately, different arrangements are having to be made for the AGM in November 2020, due to the current public health guidelines in relation to
COVID-19; and consideration for the safety and well-being of our shareholders, the Directors and employees of the Company. This is explained on page 34.
All Board decisions are made with regard for the long-term success of the Group and the Company, which are ultimately aligned to our shareholders’
interests.
23
Craneware plc Annual Report 2020
Stakeholder Engagement [Cont’d.]
COMMUNITY
As part of the commitment to corporate social responsibility and community engagement, Craneware has continued to develop a number of programs
and opportunities to positively impact the community around us.
How we engage
Craneware Cares
The focus of Craneware Cares is to raise awareness and funds for charity in both the UK and the US coordinated through an employee committee, with
donations to US organisations approved and distributed through the Craneware Cares Foundation, an official charitable foundation in the US. With these
initiatives being co-ordinated by an employee committee, Craneware Cares thereby links an element of employee engagement with relevant community
engagement in an ongoing and active mechanism. In addition to the four focus charities supported in the year (two in the UK and two in the US), Craneware
Cares also supported a number of employees’ personal charity efforts and celebrated global charity initiatives. From March 2020 onwards, the UK and US
Craneware Cares committee responded to the pandemic by moving social event funds that could no longer be used into our donation budget to help support
groups in our communities particularly affected by the virus.
Volunteer Time Off program
The fund raising activities of Craneware Cares supplement the Volunteer Time Off program where Craneware employees take paid leave to support projects
and charities in their communities.
How this was considered in Board discussions and decision making
The Board continues to support the operation of Craneware Cares and ensures that budgeted expenditure, to provide donations and matching employee
sponsorship, is included in the financial plan.
24
Craneware plc Annual Report 2020
Stakeholder Engagement [Cont’d.]
OTHER STAKEHOLDER GROUPS
SUPPLIERS
Relationships with suppliers and subcontractors are based on mutual respect, and Craneware 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 contractors.
ENVIRONMENT
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.
How we engage
Suppliers
Our teams interact with our main suppliers on a regular basis to strengthen trading relationships and to ensure that supplier engagements continue to
operate well to support the business. Our vendor contracts review and monitoring procedures aim to ensure that fair and reasonable contract terms are in
place with suppliers.
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
Environment
We engage in recycling programmes where possible within the parameters of building management for our offices. In the UK, we participate in Cyclescheme,
an employee benefit programme which helps facilitate cycling to work by offering discounts on bikes and equipment.
As an office-based operator using leased facilities, our environmental impact is relatively low compared with other sectors. We do not manufacture or
transport goods and the Group does not provide company vehicles to employees or Directors. Recognising that the 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.
Our energy use reporting for the year ended 30 June 2020 is on page 32.
How this was considered in Board discussions and decision making
The Board receives any significant information regarding our suppliers, payment practices and environmental matters in the Board reports.
25
Craneware plc Annual Report 2020
Independent 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
Subsidiaries and
Registered Offices
Craneware, Inc.
3340 Peachtree Rd NE
Suite 850
Atlanta, GA 30326
Craneware InSight, Inc.
3340 Peachtree Rd NE
Suite 850
Atlanta, GA 30326
Kestros Ltd t/a Craneware Health
1 Tanfield
Edinburgh
EH3 5DA
Craneware Healthcare
Intelligence, LLC
12570 Perry Highway
Suite 110
Wexford, PA 15090
Directors, Secretary, Advisors and Subsidiaries
Directors
W Whitehorn (non-executive, Chairman)
K Neilson
C T Preston
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
Wells Fargo
500 N. Magnolia Avenue, 8th Floor
Orlando, FL 32803
Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
R F Verni (non-executive)
C Blye (non-executive)
R Rudish (non-executive)
A Erskine (non-executive)
D Kemp (non-executive)
Company Secretary &
Registered Office
C T Preston
1 Tanfield
Edinburgh
EH3 5DA
Nominated Advisors
Peel Hunt LLP
120 London Wall
London
EC2Y 5ET
Registrars
Link Asset Services Ltd
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Stockbrokers
Peel Hunt LLP
120 London Wall
London
EC2Y 5ET
Investec Bank plc
30 Gresham Street
London
EC2V 7QP
26
Craneware plc Annual Report 2020
Board of Directors
The Directors of the Company and their responsibilities within the Group are set out below:
Will Whitehorn, 60 — Non-Executive Chairman : Appointed 1 January 2020
Will joined Craneware as Chairman of the board on 1 January 2020. Will joined Virgin in 1986 where he established a career as
Sir Richard Branson’s corporate affairs advisor and brand development director for the group globally. He helped develop Virgin
Galactic, Virgin Trains and Virgin Media as businesses and went onto become the first President of Virgin Galactic taking the
business from dream to reality. He is currently Chairman of Good Energy Group plc and a Director of AAC Clyde Space AB and
a member of the Royal Air Force Main Board. He was a founder shareholder in Purplebricks plc and recently retired as Deputy
Chair of Stagecoach Group plc.
Keith Neilson, 51 — 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 value cycle 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 CBI Scotland Council Member
and a board member of 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, 49 — 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.
Ron F Verni, 72 — Non-Executive Director : Appointed 1 May 2009
Ron is currently a director of On Deck Capital. Before that he served on the Board of Directors of Kewill plc., was President &
CEO of Sage Software, Inc., and a member of the Board of Directors of the Sage Group plc. 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 the President and CEO of NEBS Software, Inc., the founder and CEO of ASTEC Software, and Vice
President of Marketing with Automatic Data Processing.
27
Craneware plc Annual Report 2020 Board of Directors [Cont’d.]
Colleen Blye, 60 — Non-Executive Director : Appointed 12 November 2013
Colleen Blye is the Executive Vice President and Chief Financial Officer for Montefiore Health System and Montefiore Medicine.
Montefiore Health System consists of eleven hospitals and an extended care facility; it is a premier academic medical center
and includes Montefiore Medicine. Colleen has a distinguished background in large, complex healthcare organizations. 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, 68 — 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, and StarBridge Advisors, LLC, both healthcare
professional services firms. 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.
David Kemp, 50 — Non-Executive Director : Appointed 1 March 2020
David joined the board as Independent Non-executive director in March 2020. David has extensive UK public company
experience. He is currently CFO of the FTSE 250 listed business, John Wood Group plc, the global projects, operations and
consulting business, a position he has held since 2015. He has held a number of CFO and Non-executive Director positions
over the course of his career and is a member of the Institute of Chartered Accountants.
Alistair Erskine, 50 — Non-Executive Director : Appointed 24 February 2020
Alistair joined the board as Independent Non-executive Director in February 2020. Alistair has held a number of senior
positions within the US healthcare sector. He is currently the Chief Digital Health Officer of Mass General Brigham, a US
not-for-profit healthcare system which is a leader in the application of clinical information technology to care delivery. He
has held academic and government roles, including lecturing at Harvard Medical School and a Board Member of the Health
Information Technology Standards Committee of the Virginia General Assembly. He holds an MBA from MIT with specialism
in Business Analytics and Artificial Intelligence.
28
Craneware plc Annual Report 2020 Directors' Report
The Directors present herewith their report and the audited consolidated financial statements for the year ended 30 June 2020.
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 exceptional costs and share related payments, share based payments, interest, 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 18 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.
The Company has chosen, in accordance with section 414C(11) of the Companies Act 2006, to provide disclosures and information in relation to a number
of matters which are included in the Strategic Report or elsewhere in this Annual Report and are incorporated into this Directors’ Report by reference. These
matters and cross-references to the relevant sections of this Annual Report are shown in the table below.
Directors’ Report, Corporate Governance Report, Stakeholder Engagement
32 and 33,41, 19 to 21
Directors’ Report, Corporate Governance Report, Stakeholder Engagement
32 to 33, 41, 19 to 21
Information
Section within this Annual Report
Appointment and Reappointment of Directors
Directors’ Report, Corporate Governance Report
Biographical Details of the Directors
Business Model
Change of Control
Community and Charitable Giving
Corporate Governance Framework
Directors’ Conflicts of Interest
Directors’ Remuneration
Diversity, Equality and Inclusion
Employee Engagement
Employees with disabilities
Environmental Reporting
Board of Directors
Strategic Report
Remuneration Committee’s Report
Directors’ Report, Stakeholder Engagement
Corporate Governance Report
Corporate Governance Report
Remuneration Committee’s Report
Directors’ Report
Directors’ Report
Financial Instruments and financial risk management
Note 3 to the consolidated financial statements
Financial Results
Consolidated and Company financial statements and accompanying notes
Future developments and strategic priorities
Going Concern statement
Independent Auditor
Modern Slavery Statement
Principal Risks and Uncertainties
Principal Activities
Research and Development
Risk Management
Section 172 Statement
Strategic Report
Directors’ Report
Directors’ Report, Corporate Governance Report
Directors’ Report
Strategic Report
Directors’ Report, Strategic Report
Directors’ Report, Strategic Report
Corporate Governance Report
Strategic Report
Significant Related Party Transactions
Note 23 to the consolidated financial statements
Stakeholder Engagement
Strategic Report
Subsidiary Undertakings
Viability Statement
Stakeholder Engagement
Strategic Report
Note 15 to the financial statements
Strategic Report
Page(s)
30 and 31, 37 to 40
27 and 28
7
49
32, 24
35 to 44
39
49 and 52
33
32
68 and 69
58 to 88
5 to 11
30
34, 43 and 44
33
13 to 15
29, 5 to 11
30, 5 to 6 and 10
41 and 42
16 to 18
87 and 88
19 to 25
5 to 18
81 and 82
15
29
Craneware plc Annual Report 2020 Directors' Report [Cont’d.]
Financial Results and Dividends
The Group’s revenue for the year was $71.5m (2019: $71.4m) which has
generated a profit before tax of $19.3m (2019: $18.3m). The full results for
the year, which were approved by the Board of Directors on 18 September
2020, are set out in the accompanying financial statements and the
notes thereto.
During the year the Company paid an interim dividend of 11.5p (13.46
cents). The Directors are recommending the payment of a final dividend of
15p (18.45 cents) per share giving a total dividend of 26.5p (32.60 cents)
per share based on the results for 2020 (2019: 26p (33.02 cents)). Subject to
approval at the Annual General Meeting, the final dividend will be paid on
15 December 2020 to shareholders on the register as at 20 November 2020.
Dividends/Share (pence)
FY16
FY17
FY18
FY19
FY20
16.5
20.0
24.0
26.0
26.5*
*Subject to approval at AGM
We believe the level of dividend proposed for the year balances the
Company’s stated progressive dividend policy based on the Group’s retained
annual earnings and the current macro-economic climate resulting from the
ongoing pandemic. 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 market. The primary focus of this development continues
to be the enhancement and expansion of the product suite including the
ongoing development of the Trisus platform and its cloud based solutions,
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 11. 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 $21.6m (2019:
$20.0m) of which $9.3m (2019: $9.6m) has been capitalised.
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.
Proposed Placing
On 11 August 2020, the Company announced a proposed placing to
institutional investors in order to raise approximately £80 million before
expenses. Conducted through an accelerated bookbuild process, the
proposed placing was to be of new Ordinary Shares in the Company that
were expected to represent approximately 20% of its then issued share
capital. The net proceeds of the proposed placing were intended to be
used for acquisition opportunities, whilst maintaining the Group’s prudent
balance sheet. Despite the successful launch of the accelerated bookbuild
and a strong oversubscription, on 12 August 2020 the Company announced
that the Board had decided that it would be in the best interests of the
Company and its shareholders not to proceed with the placing at this time.
Going Concern
The Strategic Report on pages 5 to 18 contains information regarding the
Group’s activities and an overview of the development of its products,
services and the environment in which it operates. The Group’s revenue,
operating results, cash flows and balance sheet are detailed in the financial
statements and explained in the Financial Review on pages 7 to 11. The
Directors, having made suitable enquiries and analysis of the financial
statements, including the consideration of:
net 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 the consolidated and Company
financial statements.
Directors
The biographical details of the current serving Directors of the Company are
set out pages 27 and 28. The Directors who served during the financial year
ended 30 June 2020 were:
GR Elliott (Non-executive Chairman) : resigned 12 November 2019
W Whitehorn (Non-executive Chairman) : appointed 1 January 2020
K Neilson (Chief Executive Officer)
CT Preston (Chief Financial Officer)
R Verni (Senior Independent Director)
C Blye (Non-executive Director)
R Rudish (Non-executive Director)
A Erskine (Non-executive Director) : appointed 24 February 2020
D Kemp (Non-executive Director) : appointed 1 March 2020
30
Craneware plc Annual Report 2020 Directors' Report [Cont’d.]
As announced on 3 March 2020, R Verni has decided not to seek re-
election at the Company’s Annual General Meeting (‘AGM’) to be held in
November 2020. New Directors, who were not appointed at the previous
AGM, automatically retire at their first AGM and, if eligible, can seek re-
appointment. The Board recognises the UK Corporate Governance 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,
apart from Ronald Verni as explained above, to stand for re-appointment.
Further details regarding the appointment of directors are contained in the
Corporate Governance Report on pages 35 to 44.
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 49.
Corporate Governance
The Corporate Governance Report on pages 35 to 44 should be read as
forming part of the Directors’ Report.
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. This indemnity was in place during the financial year and is ongoing
up to the date of this report. In addition, the Company has purchased and
maintains appropriate insurance cover against legal action brought against
Directors and officers.
Share Capital
The Company’s issued and fully paid up share capital at 30 June 2020 was
26,826,539 Ordinary Shares of 1p each (2019: 26,698,984 Ordinary Shares).
The shares are traded on the Alternative Investment Market (‘AIM’), a
market operated by the London Stock Exchange. The Company’s Articles of
Association, which are available on the Company’s website
www.craneware.com, contain the details of the rights and obligations
attached to the shares.
Each of the Company’s Ordinary Shares carries the right to one vote at
general meetings of the Company. Further information on the voting and
other rights of shareholders, including deadlines for exercising voting rights,
are set out in the Company’s Articles of Association and in the explanatory
notes that accompany the Notice of the Annual General Meeting, which are
available on the Company’s website www.craneware.com.
Restrictions on transfer of Ordinary Shares
There are no specific restrictions on the transfer of Ordinary Shares in the
Company beyond those required by applicable law under the Articles of
Association or imposed by laws and regulations (such as the Market Abuse
Regulation) and pursuant to the Company’s share dealing code, whereby
Directors and employees are required to obtain clearance to deal in the
Company’s securities.
Purchase of own shares
The Company did not purchase any of its own shares in the year ended 30
June 2020 nor in the year ended 30 June 2020.
Authority for purchase of own shares
Authorisation was given by shareholders at the Annual General Meeting on
12 November 2019 for the Company to purchase up to 2,680,907 Ordinary
Shares. A resolution to renew this authority will be proposed at the 2020
Annual General Meeting.
Share capital allotted
During the year ended 30 June 2020, 127,555 Ordinary Shares (2019: 36,713
Ordinary Shares) were allotted to satisfy employee share options which
were exercised in accordance with The Craneware plc Employee’s Share
Option Plan 2007 and The Craneware plc Unapproved Company Share Option
Plan (2016). Details of the Company’s employee share plans, including
the number of ordinary shares subject to employee share plan awards, are
included in Note 8 to the financial statements.
Employee benefit trust
The Company established an Employee Benefit Trust (EBT), ‘The Craneware
plc Employee Benefit Trust’ during the financial year ended 30 June 2017. As
at 30 June 2020 the EBT held 366,194 Craneware plc Ordinary Shares (at 30
June 2019: 353,124 Ordinary Shares). The EBT waived its right to dividends
in the year ended 30 June 2020. Further details regarding the EBT are
contained in Note 18 to the financial statements.
Directors and their Interests
The interests of the Directors who held office at 30 June 2020 and up to the
date of this report in the share capital of the company, were as follows:-
W Whitehorn
K Neilson
CT Preston
R Verni
C Blye
R Rudish
2020
1,171
3,418,599
85,927
1,095
547
1,095
3,508,434
2019
-
3,382,647
82,103
-
-
-
3,464,750
Directors’ interests in share options are detailed in the Remuneration
Committee’s Report on pages 51 and 52.
31
Craneware plc Annual Report 2020 Directors' Report [Cont’d.]
Substantial Shareholders
As at 1 September 2020, 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. It should be noted that, other than
for K Neilson, W G Craig, these holdings may have changed since the
Company was notified. However, notification of any change is not required
until an applicable threshold is crossed.
No. of
Ordinary
£0.01
Shares
% of
issued
share
capital
Liontrust Asset Management
3,622,164
13.50
K Neilson
W G Craig
Sanford DeLand Asset
Management
3,418,599
12.74
2,342,756
8.73
1,756,000
6.55
Canaccord Genuity Group
1,668,400
AXA Investment Managers
Fidelity International
Rathbones
965,000
846,536
844,840
6.22
3.60
3.16
3.15
Section 172 Statement
The statement, in respect of section 172 (1) of the Companies Act 2006, is
on pages 16 to 18.
Stakeholder Engagement
An explanation of the engagement with stakeholders, examples of how the
Directors have oversight of stakeholder matters and had regard for these
matters when making decisions are included in the Stakeholder Engagement
section on pages 19 to 25.
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 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.
The Group aims to minimise any environmental impacts of its business
activities. As an office-based operator using leased facilities, our
environmental impact is relatively low compared with other sectors. The
Group does not manufacture or transport goods. The Group does not provide
company vehicles to employees or Directors.
32
Office facilities have light timers and sensors to help conserve energy. The
Group actively encourages employees to move to a paperless environment
and reduce printing requirements whenever possible. All offices also have
recycling points for paper, cardboard and plastic throughout the space and
food recycling available in the kitchen areas to reduce waste and encourage
recycling.
We actively promote video conferencing as an alternative to local and
international travel and aim to reduce unnecessary travel whenever possible.
COVID-19 has clearly demonstrated our ability to work together using video
conferencing more frequently. The cycle to work scheme is also available to
all UK based employees.
The Group is required to report its energy use and impact under the
Streamlined Energy and Carbon Reporting (SECR) regulations. For the year
ended 30 June 2020, the UK energy used by the Company was 96,455 kWh
which resulted in emissions of 22 tonnes of carbon dioxide equivalent.
Emissions were calculated from using electricity billing information for
our UK properties and the UK governments 2020 GHG Conversion Factors
Guidance. The Group does not purchase fuel in the UK.
The Group has identified that the key intensity ratio, an expression of the
quantity of emissions in relation to a quantifiable factor of business activity,
is tonnes of CO2e per employee. For the year ended 30 June 2020 the
intensity factor per employee was 0.06.
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.
Community and Charitable Contributions
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.
As part of the Group’s commitment to Corporate Social Responsibility, the
Group has continued to develop its “Craneware Cares” program. The focus
of Craneware Cares is to raise awareness and funds for charity. The focus for
2020 was the support of the Scottish Association for Mental Health and The
Yard in the UK, the Fanconi Anemia Research Fund and Kaboom in the US.
In addition to supporting these focus charities, Craneware Cares initiatives
during the year also provided support and / or donations to several other
charitable organisations in the UK and in the US. For 2021, the focus will
be on a chosen UK and US charitable organisation for each quarter of the
financial year. The fund raising activities of Craneware Cares supplement
the Volunteer Time Off program where Craneware employees take paid leave
to support projects and charities in their communities. Further information
about engagement with the community is provided within the Stakeholder
Engagement section on page 24.
Craneware plc Annual Report 2020 Directors' Report [Cont’d.]
Political Contributions
Neither the Company nor its subsidiaries made any donation for political
purposes in fiscal years 2020 or 2019.
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. Reviews are conducted on a regular basis to ensure that policies
for training, risk assessment, safe working and accident management are
appropriate.
The Group enhanced its employee wellness programmes during the
financial year. 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. Share schemes to encourage involvement
of employees in the Group’s performance have been established and were
launched in the financial year ended 30 June 2020 as detailed on page 48 of
the Remuneration Committee Report.
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 employees.
The general policy of the Group is to welcome employee involvement as
far as it is reasonably practicable. An employee advisory committee was
established in the financial year ended 30 June 2020. Further details
regarding employee engagement are included on pages 19 to 21. Employees
are kept informed by meetings, including the explanation and initiation of
the roll out of Group-wide strategic themes and related deliverables (with
key performance indicators) to all employees at the start of the financial
year with regular updates during the year. In addition, the Group’s UK and
US senior management teams meet regularly to review performance against
the Group’s strategic outcomes and development roadmaps. There are also
frequent postings and information updates available to all employees on the
Group’s intranet. Enhancements were made to the extent and frequency of
employee communications in response to the COVID-19 pandemic.
An annual employment engagement survey is conducted with anonymised
responses collated and rated to identify any aspects for improvement, which
then guide initiatives to address those areas.
The Group maintains core values of honesty, integrity, working hard to
the highest quality, providing excellent 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.
Anti-Slavery and Human Trafficking Policy
The Modern Slavery Act requires the Company to publish an annual slavery
and human trafficking statement. The latest statement can be found on
the Craneware plc website. Neither the Company or any of its subsidiaries
permit, condone or otherwise accept any form of human trafficking or
slavery in its business or supply chains.
Engagement with Suppliers and
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.
As a UK company, Craneware plc is bound by the laws of the UK, including
the Bribery Act 2010, in respect of our conduct within and outside of the UK.
In addition, we uphold all laws relevant to countering bribery and corruption
in all the jurisdictions in which we operate.
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 2020 represented, on average 17 days
purchases (2019: 18 days) for the Group and 14 days purchases (2019: 16
days) for the Company.
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 issued to all shareholders and will be made available on
the Company’s website at www.craneware.com. The Directors consider
that these resolutions are in the best interests of the Company and its
shareholders as a whole. The proxy card for registered shareholders is
distributed along with the notice.
33
Craneware plc Annual Report 2020 The Directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the Group and Company's transactions
and disclose with reasonable accuracy at any time the financial position
of the Group and Company and enable them to ensure that the financial
statements comply with the Companies Act 2006.
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.
Directors’ Confirmations
The Directors consider that the annual report and accounts, taken as a
whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Group’s and the Company’s position
and performance, business model and strategy.
In the case of each Director in office at the date the Directors’ Report is
approved:
so far as the Director is aware, there is no relevant audit information of which
the Group’s and 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 Group’s and Company’s auditors are aware of this
information.
Auditors
The auditors, PricewaterhouseCoopers LLP, have indicated their willingness
to be re-appointed and a resolution for reappointment 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
18 September 2020
Directors' Report [Cont’d.]
Voting at General Meetings of the Company is usually on a show of hands
with every holder of Ordinary Shares present in person and entitled to vote
has one vote. On a poll, every member present in person or by proxy and
entitled to vote has one vote for every Ordinary Share held. The notice of
the Annual General Meeting (‘AGM’) specifies the deadlines for exercising
voting rights either by proxy notice or present in person or by proxy in
relation to resolutions to be passed at the AGM. All proxy votes are counted
and the numbers for, against or withheld in relation to each resolution
are announced at the AGM and the voting results are released as an
announcement after the meeting.
Given the current public health guidelines in relation to COVID-19, and
notwithstanding any revisions to Government guidance at the time of the
AGM to be held in November 2020, the Board has decided that certain
aspects of the process for this year’s AGM will need to be changed. The
AGM will be convened as a closed meeting with only the required quorum
of shareholders present in person (with the meeting facilitated by the
Company) to conduct the formal business of the AGM. As a result, for the
safety and well-being of our shareholders and the Directors and employees
of the Company, shareholders and /or their proxies will not be permitted
to attend the AGM in person this year. Shareholders wishing to vote on any
of the resolutions proposed for the AGM will be encouraged to submit their
votes in advance by proxy using one of the methods referred to in the Notice
of AGM.
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
Company financial statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. 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 and
the Company 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 have been
followed for the group and the company financial statements, 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 also responsible for safeguarding the assets of the Group
and Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
34
Craneware plc Annual Report 2020 Corporate Governance Report
Chairman's Introduction
On behalf of the Board, I am pleased to present our Corporate Governance
Report for the year ended 30 June 2020. This year we are reporting under
the UK Corporate Governance Code 2018 (‘the 2018 Code’) for the first time.
For part of the financial year and ongoing, at the time of compiling this
report, Craneware is operating during a global pandemic. In this situation,
balancing the needs and expectations of our stakeholders has never been a
more important responsibility. Details of how the business has responded to
the challenges of the COVID-19 pandemic are set out in our Strategic Report
on page 13.
Board changes
George Elliott stepped down as Chairman on 12 November 2019 after
serving as Chairman of the Board since the Group joined the AIM market in
2007. The Board and the Group benefitted greatly from George’s supervision,
support and significant commitment and contribution. I was delighted to
join Craneware in January 2020 and to become a member of the Board and
the Craneware team.
The Board has since been delighted to welcome two further new
independent non-executive directors, Alistair Erskine and David Kemp who
joined the Board on 24 February and 1 March 2020 respectively. Alistair
has held a number of senior positions within the US healthcare sector and
is currently the Chief Digital Health Officer of Mass General Brigham, a US
not-for-profit healthcare system that is a leader in the application of clinical
information technology to care delivery. David Kemp is currently CFO of John
Wood Group plc, the FTSE 250 listed global project management consulting
business. Both Alistair and David bring extensive experience and expertise
to the Board and have contributed significantly to Board matters since their
appointments. More information about Alistair and David is contained in the
directors’ biographies on pages 27 and 28.
Purpose, Values and Culture
Our Purpose is to profoundly impact healthcare by improving healthcare
providers’ operational efficiency and margin, so they can continue investing
in providing quality care for their communities. Supporting our purpose
is Craneware’s ethos framework and our core values of honesty, integrity,
working hard to the highest quality, providing excellent service and quality.
During the year, the Board has monitored how the purpose, vision, strategy
and values align to the Group’s culture (page 36 contains further details).
Section 172 and Stakeholder Engagement
A key focus of the 2018 Code is the requirement to report on how the
interests of the Group’s stakeholders and the matters set out in section
172 of the Companies Act 2006 have been considered in Board discussions
and decision making. It is also important for the Board to keep stakeholder
engagement mechanisms under review so that they remain effective. Page
16 to 18 contains the Board’s first section 172 (1) statement. Details of our
engagement with stakeholders can be found on page 19 to 25.
Annual General Meeting (‘AGM’)
The Board recognises that the AGM is an important event for all shareholders
and we would usually encourage all shareholders to attend the AGM.
However, for the AGM that is planned to be held in November 2020, the
arrangements needed to be considered in view of: current public health
guidelines in relation to COVID-19; and the safety and well-being of our
shareholders, the Directors and employees of the Company. The Board has
therefore decided that, in view of this situation, the Company’s AGM will be
convened as a closed meeting with only the required quorum of shareholders
present in person. These arrangements are outlined on page 34 and are
explained within the information accompanying the Notice of AGM.
The year ahead
No doubt, the year ahead will bring with it its own challenges we will have
to navigate but I am confident the Group, as a leader in Value Cycle software
solutions to US hospitals, will continue to support our customers helping to
ensure the financial health of their operations. We will also continue to drive
our purpose, vision, strategy and values to ensure that the culture of the
organisation is aligned to enable their achievement.
Will Whitehorn
Chairman
18 September 2020
35
Craneware plc Annual Report 2020 Corporate Governance Report [Cont’d.]
The Board of Directors ("the Board") has always recognised the importance
and value of good corporate governance and has elected to adopt the UK
Corporate Governance Code as its corporate governance framework but it
is aware that this Code has been drafted in the context of larger, main-
market listed companies. Our 2019 Corporate Governance Report referred
to the 2016 version of the UK Corporate Governance Code however, a new
version of the UK Corporate Governance Code was published in July 2018. As
the 2018 Code is applicable to accounting periods beginning on or after 1
January 2019, this is the first year that the Board is reporting under the 2018
version of the UK Corporate Governance Code (the ‘Code’).
The Board is pleased to report how it has applied the principles and
complied with the provisions of the Code in line with best practice and in
view of the size of the Company. This Report sets out how it has complied
with the individual provisions and applied the ‘spirit’ of the UK Corporate
Governance Code 2018 as a whole and explains any areas of non-compliance
with the provisions of the Code. The UK Corporate Governance Code 2018 is
available from the Financial Reporting Council at www.frc.org.uk.
Overview: Application of the UK Corporate Governance Code 2018
(the “Code”)
The Code itself explains that its set of Principles “emphasise the value
of good corporate governance to long-term sustainable success…the
governance of the company contributes to its long-term sustainable
success and achieves wider objectives. Achieving this depends crucially on
the way boards and companies apply the spirit of the Principles.” It is this
overarching objective that the Board has sought to achieve in applying the
Code principles. The Company is a smaller company for the purposes of the
Code and, as such, certain provisions of the Code either do not apply to the
Company or are judged to be disproportionate or less relevant in its case.
Where the Company does not comply with any specific Code provision then
this is highlighted and explained in this report.
Compliance statement
The Board has complied with the spirit of the UK Corporate Governance Code
2018 and applied the principles and complied with the provisions of the
Code throughout the year ended 30 June 2020, with the exception of the
following areas the Board believes are not appropriate for a company of our
size or steps are ongoing to achieve compliance:
Provision 17: due to the size of the Board a separate nomination
committee has not been established, instead these duties have been
fulfilled by the Board as a whole;
Provision 21: regarding annual Board evaluation, with the changes to
Board composition that occurred throughout the year, no annual Board
evaluation has taken place. This will, however, take place next year
once all current Board members have been in place for at least
12 months; and
Provision 36: concerning the development of a formal policy for post-
employment shareholding requirements. Whilst still not considered
the norm for AIM listed companies, a formal policy regarding minimum
holding requirements and periods have been introduced for future
Long Term Incentive grants for directors and senior management.
Further information regarding the Board’s committees is on page 38 and the
Remuneration Committee’s Report is on pages 45 to 52.
36
Board Leadership and Company Purpose
The role of the Board
The Board is primarily responsible for promoting the long-term success
of the Group and is collectively accountable to shareholders for its proper
management. The Board must balance this responsibility with ensuring that
the Directors have regard for key stakeholders and that there is sufficient
time, information and understanding to properly take into account those
stakeholders’ interests when making decisions and considering their long-
term implications. The Board recognises that effective engagement with key
stakeholders, including employees, customers, shareholders, the community
and suppliers, is a core component of long-term sustainability and success.
Purpose, vision, strategy, values and culture
The Board leads and establishes the Group’s purpose, vision, strategy and
values and ensures that they are being carried out in practice across the
business. The Board provides leadership across the Group and applies a
governance framework to ensure that this is delivered effectively with
appropriate control mechanisms.
The Board is responsible for delivering value for shareholders by setting the
Group’s strategy and overseeing its implementation by the Operations Board.
Our strategy and business model are explained within the Strategic Report
on pages 5 to 18. The Board, at least annually, meets to review the Group’s
strategy, drawing on the wide and varied experience of the Board members,
including detailed healthcare sector knowledge. The Board also receives
regular updates on progress against the agreed strategy at Board meetings.
The Board is responsible for setting the Company’s purpose and values and
ensuring these are aligned with the Group’s culture. Our purpose forms the
basis of Group-wide strategic initiatives each year. Our culture is the way
that we work together and is fundamental to how we operate. Our culture is
underpinned by our Values.
The Board has a fundamental role in shaping our corporate culture defined
by our values and purpose. The Board assesses and monitors the Group’s
culture through regular interaction with management and other colleagues
to ensure that its policies, practices and behaviours are aligned with the
Group’s purpose vision, strategy and values.
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.
Craneware plc Annual Report 2020 Corporate Governance Report [Cont’d.]
Board Composition and Division of Responsibilities
Board of Directors
There were several changes to the Board during the year ended 30 June
2020. George Elliott stepped down as Chairman of the Board at the
Company’s AGM on 12 November 2019. In the period from 13 November
to 31 December 2019, our Senior Independent Director, Ronald Verni, was
interim Chairman. William Whitehorn joined the Board as Chairman on 1
January 2020. Alistair Erskine and David Kemp were appointed as non-
executive directors of the Company on 24 February 2020 and on 1 March
2020 respectively.
Therefore, in the period 1 March 2020 to 30 June 2020 the Company’s Board
comprised of: its Chairman, William Whitehorn; two executive Directors:
Keith Neilson, Chief Executive Officer; and Craig Preston, Chief Financial
Officer; along with five further non-executive Directors (each of whom the
Board considers to be independent), Ronald Verni (Senior Independent
Director), Colleen Blye, Russ Rudish, Alistair Erskine and David Kemp.
Detailed biographies of all Directors are contained on pages 27 and 28.
A summary of the composition of the Board for different periods during the
year ended 30 June 2020 is:
Chairman
(Independent on
Appointment)
Executive
Directors
Independent
Non-executive
Directors
1 July to 12 November 2019
13 November to 31 December
2019
1 January to 23 February 2020
24 February to 29 February
2020
From 1 March 2020
1
interim
1
1
1
2
2
2
2
2
3
3
3
4
5
It was announced in March 2020, and as noted in the Chairman’s Statement
on page 4, that Ronald Verni will not be standing for re-election as a Director
of the Company at the upcoming AGM and will be stepping down as Senior
Independent Director.
Division of Responsibilities
The Board has established clearly defined and well understood roles for the
Chairman of the Company and the Chief Executive Officer. A summary of the
responsibilities of these roles is contained in the table below. 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
Period
Composition of the Board
Senior Independent Director
Operations Board that comprises the Chief Financial Officer and five further
members of the Senior Management Team. The day-to-day operation of the
Group’s business is managed by this Operations Board, subject to the clearly
defined authority limits.
The following table summarises the main responsibilities of the roles of:
Chairman, Chief Executive Officer and Senior Independent Director.
Role
Chairman
Chief Executive Officer
Summary of Responsibilities
The Chairman leads the Board and is responsible for its
overall effectiveness in directing the Company. He
promotes a culture of openness and debate facilitating
constructive Board relations and the effective
contribution of all Non-Executive Directors, and ensures
that the Board receive accurate, timely and clear
information.
The Chief Executive Officer (CEO) ensures that the
strategic and financial objectives, as agreed by the
Board, are delivered upon. To facilitate this, the CEO
chairs the Group’s Operations Board which manages,
subject to the clearly defined authority limits, the
day-to-day operation of the Group’s business.
The Senior Independent Director 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.
The Chairman
William Whitehorn was appointed Chairman of the Board on 1 January 2020
and was independent on appointment, in accordance with Provisions 9 and
10 of the Code.
In the period from 1 July to 12 November 2019, George Elliott was Chairman
of the Board, having served as a Director in that role since August 2007,
shortly before the Company listed on the AIM market. At that time the
then Board satisfied themselves that George was independent, fulfilling
the requirements of the Code. As noted above, George did not stand for re-
election as a Director of the Company at the AGM in 2019 and stepped down
as Chairman on 12 November 2019.
Non-Executive Directors
The 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.
37
Craneware plc Annual Report 2020 Corporate Governance Report [Cont’d.]
The Composition of the Board
The composition of the Board has been designed to give a good mix and
balance of different skill sets, including significant experience in:
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:
high growth companies;
software and healthcare sectors;
entrepreneurial cultures;
senior financial reporting;
both UK and US companies;
acquisitions; and
other listed companies.
The Board has been enhanced during the year with the appointments of
three new directors, as explained above. 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 assessment, in addition to considering
Provision 10 of the Code, 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.
Ronald Verni, having been appointed on 1 May 2009, has completed his
eleventh year of service on the Board this year. The Board in making its
assessment of independence has noted the significant growth and changes
in the Company during this period, this combined with Ronald’s conduct
has led the Board to conclude his length of tenure has not affected his
independence. As stated in the annual report for 2019, following George
Elliott’s decision not to stand for re-election as a Director of the Company
at the 2019 AGM, the Board reviewed the appointment of Ronald Verni
and concluded that his continued appointment is both beneficial and
appropriate, allowing for an appropriate period of succession to the new
Board members and does not present any issues regarding independence.
Ronald has decided not to seek re-election as a Director of the Company at
the AGM to be held in November 2020.
In regards to all of the other non-executive directors, the Board has not
identified any matters that would affect their independence. Throughout
the year ended 30 June 2020, a least half the Board, excluding the Chair,
were non-executive directors whom the Board considers to be independent.
The Board has established an Audit Committee and a Remuneration
Committee, details of which are provided below. The Board does not have
a separate Nomination Committee as the Company has incorporated this
function within the remit of the entire Board. Although not in compliance
with Provision 17 of the Code, the Board considers this to be an appropriate
arrangement in view of the size of the Group.
No. Meetings in year
Executive Directors
K Neilson
C T Preston
Non-Executive Directors
W Whitehorn*
G R Elliott*
R Verni
C Blye
R Rudish
A Erskine*
D Kemp*
Board
10
10/10
10/10
5/5
3/3
10/10
10/10
10/10
5/5
3/4
Remuneration
Committee
Audit
Committee
2
-
-
-
-
2/2
2/2
2/2
-
-
2
-
-
-
-
2/2
2/2
2/2
-
-
* for those directors that were appointed to / stepped down from the Board
during the year, the number of meetings attended is with reference to
those held from / until their date of appointment / resignation.
Where any Director 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 31, 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.
Board Appointments and Evaluation
Appointments 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 Board 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. This includes, prior to appointment, significant
existing commitments being disclosed and assessed along with an indication
of time commitment involved.
38
Craneware plc Annual Report 2020 Corporate Governance Report [Cont’d.]
There were three new appointments to the Board in the year ended 30 June
2020, as explained above. External search consultancies were engaged by
the Board in respect of the formal process to identify potential candidates
for these positions. The search consultancies engaged were: FWB Park
Brown; and WittKieffer. These external search consultancies have no other
connection with the Company or with individual directors.
Any conflicts, or potential conflicts, of interest are disclosed and assessed
prior to a new Director’s appointment to ensure that there are no matters
which would prevent that person from accepting the appointment. The
Group has procedures in place for managing conflicts of interest and
Directors have continuing obligations to update the Board on any changes to
these conflicts. This process includes relevant disclosure at the beginning of
each Board meeting. If any potential conflict of interest arises, the Articles
of Association permit the Board to authorise the conflict, subject to such
conditions or limitations as the Board may determine.
The Group is supportive of and recognises the importance of diversity,
including gender, ethnicity, nationality, skills and experience. This is evident
from the diverse, inclusive and breadth and depth of skills and experience
within the Craneware team. While not in favour of setting specific targets,
in the event that a Board position is required to be filled, during succession
planning, the Board aims to ensure that the search process is sufficiently
inclusive to encourage applications from diverse candidates with relevant
skills, experience and knowledge, and that the selection process is fair and
transparent.
Succession Planning
During the year, the Board has successfully seen the succession of the Chair
and the appointment of two new non-executive directors prior to Ronald
Verni stepping down at the upcoming AGM. Succession plans are in place for
the senior management talent pipeline which are re-visited and reviewed
with the Board as appropriate. The Board takes an active interest in the
quality and development of talent and capabilities within Craneware,
ensuring that appropriate opportunities are in place to develop high-
performing individuals.
Development
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 advising the Board on all
governance matters, 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. The Board ensures that the Audit
and Remuneration Committees are provided with sufficient resources to
undertake their duties.
Across the Group, the team comprises 40% female and 60% male
employees. At Operations Board plus vice president level, the composition is
approximately 41% female and 59% male.
Training in matters relevant to their role on the Board is available to all
Directors. New Directors are provided with an induction in order to introduce
them to the operations and management of the business.
Commitment
All 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 Directors’ biographies on pages 27 and 28. 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 directorship of a listed company. 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.
Information and Support
In setting the Board agendas, the Chairman, in conjunction with the
Company Secretary, ensures input is gathered from all Directors on matters
that should be included. Board papers are then 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. At a minimum, these board papers include the Financial Results of
the Group and a report from both the Chief Executive Officer and the Chief
Financial Officer.
In addition, the non-executive Directors will normally meet periodically
with the Group’s Operations Board on an informal basis. This provides all
Directors with direct access to the senior management of the Group and
allows for better understanding of how the strategy set by the Board is being
implemented across the Group.
Evaluation
With the changes to the Board part way through the year, a Board evaluation
process was not conducted in the year ended 30 June 2020 but it is planned
to conduct a Board evaluation process in the financial year ending 30 June
2021, after the recently appointed Directors have served for at least 12
months. The Board has therefore not complied with Provision 21 of the Code
during the year ended 30 June 2020.
39
Craneware plc Annual Report 2020 Corporate Governance Report [Cont’d.]
The Board will continue to consider the Code’s recommendation that the
evaluation of the Board be carried out with an external evaluator at least
every three years, however, at present, remains of the opinion that with the
current size of the Board this is not required.
The Board last performed a full formal evaluation in the year ended 30 June
2018. This was performed by means of a detailed questionnaire completed
by each Director. This evaluation included a review of the performance of the
Chairman and the Board Committees. The results of the process were collated
by the Senior Independent Director and were reviewed by the Board as a
whole. As explained in 2019 annual report, overall the Board concluded that
its performance in the period under review had been satisfactory, however it
did identify that adding further non-executive experience could complement
the current Board. The Board implemented these recommendations in the
year ended 30 June 2020.
Re-election
Under the Company’s Articles of Association, at every Annual General
Meeting (‘AGM’), at least one-third of the Directors who are subject to
retirement by rotation, are required to retire and may be proposed for re-
election. In addition, any Director who was last appointed or re-appointed
three years or more prior to the AGM is required to retire from office and
may be proposed for re-election. Such a retirement will count in obtaining
the number required to retire at the AGM. New Directors, who were not
appointed at the previous AGM, automatically retire at their first AGM and, if
eligible, can seek re-appointment.
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, apart from Ronald Verni as explained above, to
stand for re-appointment.
Stakeholder Engagement
Shareholders
Dialogue with Shareholders
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 usually invited to attend the AGM and are encouraged to
take the opportunity to ask questions. Unfortunately, different arrangements
are having to be made for the AGM in November 2020, due to the current
public health guidelines in relation to COVID-19; and consideration for the
safety and well-being of our shareholders, the Directors and employees of the
Company. This is explained on page 34.
The primary point of contact for shareholders on operational matters is Keith
Neilson as Chief Executive Officer and Craig Preston as Chief Financial Officer.
The primary point of contact for shareholders on corporate governance and
other related matters is Will Whitehorn as Chairman. Ronald Verni as Senior
Independent Director is available as a point of contact should a shareholder
not wish to contact the Chairman for any reason.
The Board welcomes regular engagement with major shareholders to
understand their views on governance and performance against
our stated strategy.
The Chairman ensures that the Board as a whole has a clear understanding of
the views of shareholders.
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.
On 6 November 2018, the Company held a Capital Markets Day in London for
institutional investors and analysts. This provided an insight into Craneware’s
Trisus products, including Trisus Healthcare Intelligence. In addition, the
presentations discussed the evolution of the US healthcare market. All of the
Directors of the Company attended the Capital Markets Day. The presentation
slides from the Capital Markets Day can be viewed on the Company’s website
at www.craneware.com.
The Company’s website (at www.craneware.com) has a section for investors
that contains all publicly available financial information and news on the
Company.
Details of the Company’s share capital and substantial shareholders are
contained in the Directors’ Report on pages 31 and 32 respectively.
Constructive use of General Meetings
The Board normally encourages attendance at its Annual General
Meeting (‘AGM’) from all shareholders. The Notice of AGM together with
all resolutions and explanations of these resolutions are sent at least
20 working days before the meeting. The Company proposes separate
resolutions for each substantially separate issue and specifically relating
to the report and accounts. 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.
40
Craneware plc Annual Report 2020 Corporate Governance Report [Cont’d.]
Update to the 2019 AGM
Following the AGM that was held on 12 November 2019, the Company
announced that all resolutions were passed and a majority of over 71% of
the proxy votes received were ‘for’ each of the resolutions proposed at the
AGM however there were three resolutions (numbers 3, 6 and 9) that had
received a number of proxy votes ‘against’. As stated following the conclusion
of the AGM in November 2019, the Board committed to consult with the
Company’s shareholders to more fully understand the reasons for those votes
against and to carefully reflect on the feedback received.
As reported within the Company’s interim results announcement on 3 March
2020, the Board understood that the voting in relation to resolution 6 (re-
appointment of Colleen Blye as a director of the Company) and resolution 9
(re-appointment of PricewaterhouseCoopers LLP as auditors) was specifically
in relation to perceived threats to auditor independence, primarily due to
the level of non-audit fees as compared to the level of the audit fees. The
votes against Ms. Blye being as chair of the Audit Committee. The level of
non-audit fees was the result of the volume of tax compliance work relating
to US State filings with each individual filing attaching to a low individual
fee. Whilst the Board did not believe this in any way impaired the auditors’
independence, we have noted the views of our shareholders and in the year
ended 30 June 2020 a different tax advisor has been engaged to assist with
this compliance work. We also note that PricewaterhouseCoopers LLP have,
as part of their independence requirements, rotated and appointed a new
lead audit partner for the audit of the Group and the Company’s financial
statements for the year ended 30 June 2020 with the previous partner
having completed his five year cycle.
The Board understands that the voting in relation to resolution 3 (re-
appointment of Ronald Verni as a director of the Company) related to Mr
Verni having served on the Board for over 9 years and, whilst the Board had
deemed him independent through his actions, this was not in keeping with
the UK Corporate Governance Code. As a result, the ratio of Independent
Non-executives to executives on the Board was not in keeping with the
Code’s requirements. Mr Verni has decided not to seek re-election at the
Company’s next AGM and, as announced on 24 February 2020, the Board has
appointed two further independent non-executive directors to the Board.
Mr Verni is working with these new directors and the rest of the Board
throughout this transition period.
Employee engagement
The Board has decided to utilise alternative workforce engagement
mechanisms, instead of the suggested workforce engagement mechanisms
in the 2018 Code (i.e. a director appointed from the workforce, a formal
workforce advisory panel or a designated non-executive director). Craneware
has established an Employee Advisory Committee and utilises the results and
feedback received from the annonymous annual engagement survey, which
has a high response rate, as well as the other engagement mechanisms
outlined in the Stakeholder Engagement section and in the Directors’ Report
within this Annual Report. The Board considers these employee engagement
mechanisms to be appropriate at this time, in view of the size of the Group,
but will keep these engagement mechanisms under review.
Engagement with other key stakeholder groups
The Stakeholder Engagement section and the Directors’ Report within this
Annual Report contains an overview of the engagement with other key
stakeholder groups including: customers and the community.
Audit, Risk and Internal Control
Audit Committee and Auditors
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 twice a year.
The Audit Committee is chaired by Colleen Blye and its other members are
Ronald Verni and Russ Rudish. 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 chair of the Audit Committee, has recent and relevant
financial experience and the Audit Committee as a whole has significant
experience and competence in healthcare and software sectors.
The terms of reference of the Audit Committee are available on the
Company’s website, at www.craneware.com, and at the Company’s
registered office. Details of how the Audit Committee has discharged its
responsibilities are provided on page 42.
Financial and Business Reporting
The Board recognises its responsibilities, including those statutory
responsibilities laid out on page 34. An assessment of the Group’s market,
business model and performance is presented in the Chairman’s Statement
and the Strategic Report on pages 4 to 11.
As detailed on page 30 of the Directors’ Report, the Board has confirmed
that it is appropriate to adopt the going concern basis in preparing the
consolidated and Company financial statements for the year ended
30 June 2020. The Board has explained within the Viability Statement
section of the Strategic Report on page 15 that it has assessed the prospects
of the Company and the Group, taking into account the Group and the
Company’s current position and principal risks.
Risk Management and Internal Control
Details of the principal risks and uncertainties and emerging risks facing the
Group are detailed in the Strategic Report on pages 13 to 15. The principal
financial risks are detailed in Note 3 to the financial statements.
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, which
cover all material controls, including financial, operational and compliance
controls 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.
41
Craneware plc Annual Report 2020 Corporate Governance Report [Cont’d.]
The Directors have carried out a robust assessment of the principal and
emerging risks facing the Group, including those that would threaten its
business model, future performance, solvency and liquidity. The Group
maintains its internal risk register that forms the foundation of the Board
and the Audit Committee review process. Executive Directors and senior
management meet to review both the risks facing the business and the
controls established to minimise those risks and their effectiveness in
operation on an ongoing basis. The aim of these reviews is to provide
reasonable assurance that material risks and problems are identified and
appropriate action taken at an early stage.
The implications of the COVID-19 pandemic have more recently been at the
forefront of the risk management process and while there remains a level of
uncertainty, management has been considering and evaluating the risk to
the Group’s people, customers, business and operations and putting in place
mitigation wherever possible.
The risk review is exercised through the monthly management reports
and Operations Board meetings and, due to the importance of this topic,
a sub-committee of the Operations Board has been formed (the Risk and
Compliance Committee, chaired by the Chief Financial Officer) to ensure
there is specific focus on risk review and risk management. For each risk
identified the control strategy and who is accountable for discharging that
strategy is identified and documented in the meeting minutes. During
monthly Operations Board meetings, material emerging risks are reviewed
with discussion concerning actions to reduce or monitor Group exposure.
In this way, risks are reviewed and updated monthly. The Group also has
a Security Council, chaired by the Chief Information Officer, which meets
weekly and reports into the Risk and Compliance Committee. The purpose
of the Security Council is to assess current technology risks, approval and
implementation of mitigation plans and to inform the Chief Information
Officer and the Chief Technology Officer of future strategy around this key
business area.
During the year ended 30 June 2020 the Risk and Compliance Committee
(chaired by the Chief Financial Officer and joined by the CEO), was given the
responsibility of being the COVID-19 response Committee.
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
Audit Committee: role, responsibilities and activities during the year
During the year the Audit Committee, operating under its terms of reference
(which are available on the Company’s website, at www.craneware.com, and
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 the Group;
the Committee’s effectiveness;
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 provision of tax compliance services to the Group and, as described above,
the decision to engage a new tax advisor instead of
PricewaterhouseCoopers LLP;
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 and the Board as a whole has considered the impact of
COVID-19 on our Group and Company financial statements. It has reviewed
the Group’s profitability and liquidity as part of a number of forecast
scenarios. As part of this assessment, the Committee has also reviewed the
viability statement and going concern note (as included on page 15 and
page 30 respectively), following which it was agreed that the going concern
basis of accounting continues to be an appropriate basis of preparation for
the financial statements.
In accordance with its terms of reference, the Committee has reported to the
Board as to how it has discharged its responsibilities throughout the year.
42
Craneware plc Annual Report 2020 Corporate Governance Report [Cont’d.]
Significant matters considered in relation to the financial statements
The following table sets out the significant areas considered by the
Committee in relation to the Group’s financial statements for the year ended
30 June 2020:
The Audit Committee also reviewed and considered other matters during and
in respect of the financial year ended 30 June 2020 including management’s
assessment of new accounting standards that were not effective for adoption
until after 30 June 2020.
Area of
judgement or
estimate
Revenue
recognition
(Group and
Company),
including
compliance
with IFRS 15
Internally
developed
intangible
assets (Group
and Company)
Impairment
assessment
Matter considered and Role of the Committee
Revenue and deferred income are significant amounts in the
context of the Consolidated Statement of Comprehensive
Income and the Group and Company Balance Sheets
respectively. The amount of revenue to be recognised and
timing of revenue recognition are determined based on the
details and terms contained in the contracts with customers.
Revenue recognition on non-standard contracts can involve
significant judgment and interpretation of both the Group’s
policy and the newly adopted IFRS 15.
The Group and the Company capitalise development costs
when the conditions for capitalisation, as outlined in the
principal accounting policies, have been met. Consequently,
the Directors are required to continually assess the
commercial potential of each product in development and its
useful life following launch. There is judgement involved in
determining whether or not costs being capitalised meet the
definition of intangible assets under IAS 38 Intangible assets.
The Committee reviews this area as there is judgement
involved in the Directors’ assessment.
The carrying amount of the Group’s and the Company’s
tangible and intangible assets, including goodwill, is
considered at each reporting date to determine whether
there is any indication that those assets have suffered an
impairment loss. The Committee reviews this assessment. 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. There are no impairment losses
recognised in the financial statements of the Group in the
year ended 30 June 2020. In regards to the Company, during
the year the remaining intellectual property in Kestros Ltd
reached the end of its useful life with all relevant code being
fully integrated into the Trisus software. Additionally, the
number of customers using the MiCheckin software is now
minimal. Therefore, the directors decided to provide fully
against the investment in Kestros Ltd within the financial
statements of the Company in the year ended 30 June 2020.
Provision for
income tax
(Group and
Company)
The Group is subject to tax in the UK and in the US and this
requires the Directors to regularly assess the applicability of
its transfer pricing policy relevant to the revenue
transactions and costs between companies in the Group.
The Audit Committee considered and discussed with the rest of the
Board whether the Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for stakeholders to
assess the Group’s position and performance, business model and strategy.
Internal audit arrangements
The Committee has also reviewed the arrangements in place for internal
audit and concluded, due to the current size, complexity and internal control
environment of the Company and the Group, that a formal internal audit
function was not required. The Audit Committee believes that management
is able to derive assurance regarding the adequacy and effectiveness
of internal controls and risk management procedures, given the close
involvement of the Directors and the senior management on a day to day
basis, without the need for an internal audit function.
In view of the importance of the procedures, security, regulation and
controls around Craneware’s solutions and customer data, the focus for
other assurance activities for the Group is in respect of those areas. During
the financial year ended 30 June 2020, Craneware achieved HITRUST CSF
Certification for all of its Trisus and InSight solutions, as well as associated
operational processes. This involved an external, validated audit of
Craneware’s security and data privacy practices. Health Information Trust
Alliance (‘HITRUST’ Alliance) is a collaboration with healthcare, technology
and information security organisation which develops, maintains and
provides broad access to its widely adopted common risk and compliance
management and de-identification frameworks; related assessment and
assurance methodologies; and initiatives advancing cyber sharing, analysis
and resilience. HITRUST has established a ‘common security framework’
(CSF) to address the multitude of security, privacy and regulatory challenges
facing organisations. The scope of the HITRUST CSF’s requirements is
wide and requires a very high standard of data security arrangements as
these have been set in the context of the accreditation being relevant to
US healthcare providers with handling sensitive data (Protected Health
Information) and impacts in some way all areas of the business (at least in
respect of the required enhancement to the Group-wide IT and data
security policies).
The Audit Committee will continue to monitor whether there is a
requirement for an internal audit function and will report accordingly to
the Board.
External audit
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.
43
Craneware plc Annual Report 2020 Corporate Governance Report [Cont’d.]
Each year PricewaterhouseCoopers LLP prepares and presents their
audit plan to the Audit Committee for the audit of the full year financial
statements. The audit plan identifies what the external auditors consider
to be the key audit risks, the planned scope of work, the audit timetable
and also details of how they have assessed their independence to be able
to undertake the audit work. As part of ensuring independence, the audit
partner within PricewaterhouseCoopers LLP is required to rotate every five
years and, accordingly, Kenneth Wilson stepped down following the audit of
the financial statements for the year ended 30 June 2019 and was replaced
by a new audit partner, Lindsay Gardiner. This audit plan is reviewed, along
with the Committee’s assessment of auditor independence, and is agreed
in advance by the Audit Committee. Having considered the planning work
carried out and the results of the audit of the Group and Company financial
statements for the year ended 30 June 2020, the Committee was satisfied
that the approach adopted was robust and appropriate and that their
independence and objectivity could be relied upon.
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, the remuneration
of the Chairman of the Board and setting 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 management 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
Non-audit services provided by the external auditors
The Audit Committee has also implemented procedures relating to the
provision of non-audit services by the Company’s 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. The policy in
respect of services provided by the external auditors is set out below:
The Committee has presented its Remuneration Report on pages 45 to 52,
which details the work undertaken operating under its terms of reference
(which are available on the Company’s website, at www.craneware.com,
and at the Company’s registered office) to discharge its responsibilities. The
Remuneration Committee’s Report also explains the Board’s compliance with
provisions 32 to 41 of the Code.
The external auditors may be appointed to provide non-audit services where
it is in the Group’s best interests to do so, provided a number of criteria are
met. These are that the external auditor does not:
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:
Audit their own work;
Make management decisions for the Group;
Create a conflict of interest;
Find themselves in the role of an advocate for the Group.
Therefore, during the year ended 30 June 2020, the Company’s auditors have
not provided the Group or the Company with any non-audit work. Details of
the fees paid to the auditors for audit and non-audit services are shown in
Note 6 to the financial statements.
Whistleblowing Policy
The Group is committed to conducting its business with honesty and
integrity and it is expected that these high standards be maintained
throughout the organisation. As an element of providing a supportive and
open culture within the organisation, the Group has a Whistleblowing
Policy and associated annual training. This Policy includes arrangements
by which employees, consultants or contractors may, in confidence and
also anonymously should they wish, raise concerns regarding possible
improprieties in matters of financial reporting or other matters. These
concerns would then be investigated and followed up appropriately. The
Board has provision to review these arrangements and any reports arising
from their operation.
Remuneration
The Company has established a Remuneration Committee to assist the Board
in this area. This Committee comprises non-executive Directors and is chaired
by Ronald Verni and its other members are Colleen Blye and Russ Rudish.
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.
In addition, Craneware plc maintains compliance with AIM Rule 26, which specifies
a list of information that the Company is required to make publicly available. AIM
Rule 26 also requires the Company to adopt a corporate governance code and the
Company has chosen the UK Corporate Governance Code 2018, against which the
Directors are responsible for reporting the Company’s compliance as set out on
pages 35 to 44.
Approved by the Board of Directors and signed on behalf of the
Board by:
Craig Preston
Company Secretary
18 September 2020
44
Craneware plc Annual Report 2020 Remuneration Committee's Report
This report sets out Craneware plc’s remuneration and benefits provided to
Directors for the financial year ended 30 June 2020. A resolution to approve
the report will be proposed at the Annual General Meeting (“AGM”) of the
Company at which the financial statements will be presented for approval.
As an AIM listed company, Craneware plc is not required to comply with the
Directors’ Remuneration Report regulations requirements under Main Market
UK Listing Rules or those aspects of the Companies Act 2006 applicable to
listed companies.
Remuneration Committee
The Company has a Remuneration Committee (“the Committee”) in
accordance with the recommendations of the UK Corporate Governance
Code 2018. The members of the Committee are Ronald Verni (Chairman),
Colleen Blye and Russ Rudish. None of the Committee has any personal
financial interests 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 responsibilities of the Remuneration Committee are outlined on page
44 and the Committee’s terms of reference are available on the Company’s
website at www.craneware.com and at the Company’s registered office.
The Company’s Chief Executive Officer will attend meetings on occasion,
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 Committee met twice during the year and the
meeting attendance is shown on page 38.
No Director is involved in any decisions as to his or her own remuneration.
The remuneration of the non-executive Directors, other than the Chairman
of the Board, is determined by the Board as a whole within limits set out
in the Articles of Association. The levels of remuneration for non-executive
Directors are considered to reflect the time commitment and responsibilities
of the role. The non-executive Directors, including the Chairman of the
Board, do not participate in performance related bonus or share-based
incentive arrangements.
Chairman of the Remuneration Committee
As announced in March 2020, Mr Verni has decided not to seek re-election at
the Company’s AGM in November 2020. The Board will review and consider
the membership and chair of the Committee in advance of the AGM.
Shareholder consultation
The Company welcomes dialogue with its shareholders over matters
of remuneration. Shareholders will be informed by the Remuneration
Committee of any future changes in executive Director remuneration policy
in the Remuneration Committee’s Report. In addition, if such policy changes
are considered substantial and after having taken advice from relevant
advisers, significant shareholders will be consulted in advance.
The Directors’ Remuneration Report will be put to an advisory vote at
the AGM in November 2020. A similar resolution was put to the AGM in
November 2019 and was supported by the resolution being passed on a
show of hands at that meeting and with 96.5% of the proxy votes received
cast in favour of the resolution.
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. In addition,
the Remuneration Committee also considers that executive remuneration
policy should not only be easy to understand, but also straightforward and
simple to implement and administer.
During the financial year ended 30 June 2020, notwithstanding the
challenges of the COVID-19 pandemic, the Group has retained all employee
positions and maintained employee remuneration at all levels across the
Group. The Group was able to do this through its own resources and chose to
utilise only a minimal amount of COVID-19 related government support.
The Committee has regard to pay structures across the wider group when
setting the remuneration policy for executive Directors. The Group has
sought to achieve, at a minimum, median levels of pay for all employees
within the organisation. Although the Committee does not formally consult
with employees as part of this process, all members of the Committee are
members of the Board and the Board receives employee updates which
contain, amongst other updates, feedback from employee engagement
surveys which include general views on employee remuneration. The
remuneration policy overall for the executive Directors is more heavily
weighted towards performance-related pay than it is for other employees.
Although more senior roles within the Group are usually eligible to receive
long term incentive awards, the Committee and the rest of the Board wish
to encourage wider share ownership through the operation of the SAYE and
ESPP all employee share option plans (as described on page 48).
The Committee also reviews employee remuneration and related practices
which includes approving the design of, and determining targets for, the
bonus plan which is Group wide and is applicable to all eligible employees.
The targets set under the plan are consistent to all employees, including
executive directors and senior managers. The Committee also authorises the
extent of any annual payments made under the bonus plan. In addition, the
Committee provides guidance on general remuneration practices across the
Group and the Committee is consulted regarding any significant changes in
benefit and pay structures throughout the Group.
The Committee did not appoint a remuneration consultant during the year
ended 30 June 2020.
It is considered that executive Director remuneration policy operated as
intended for the financial year, in terms of company performance and
quantum.
45
Craneware plc Annual Report 2020 Remuneration Committee's Report [Cont’d.]
Compliance with Provision 40 of the UK Corporate Governance Code
2018
clarity
simplicity
risk
predictability
proportionality
and
alignment
to culture
The Committee aims to provide clear and transparent
disclosures of Director remuneration arrangements, as set
out in this Report.
The Remuneration Committee also considers that
executive Director remuneration policy should not only be
easy to understand, but also straightforward and simple
to implement and administer. The Committee aims to
ensure that remuneration arrangements across the Group
are not complex in order to assist with understanding and
engagement.
Performance conditions for bonus and share-based
incentives are considered each year by the Committee in
view of corporate performance expectations and
alignment to shareholder interests. The Committee has
the ability to apply discretion to formulaic outcomes.
Clawback provisions also apply to the LTIP. It is considered
that the annual bonus and long term incentive
arrangements do not encourage inappropriate risk taking.
The executive Director remuneration policy has maximum
opportunity levels for variable components, with actual
incentive outcomes varying depending on the level of
performance achieved against specific measures.
The metrics used to measure performance for the annual
bonus and long term incentives are considered to drive
behaviours that are consistent with the business strategy,
values and culture of the organisation and aligned to
shareholder interests.
Elements of executive Director remuneration
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.
The Company’s policy is that a substantial proportion of the remuneration
of executive Directors should be performance related.
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 for the executive Directors comprises:
(i)
Basic salary
This is normally reviewed annually, or when an individual’s position or
responsibilities change and is normally paid as a fixed cash sum monthly.
(ii)
Pension entitlement
The Company operates an open enrolment pension scheme in which all UK
employees, including executive Directors, are entitled to participate. As part
of this scheme, the Company has matched employee contributions into the
scheme at up to 4% of basic salary. In addition, the Company pays a fixed
sum to a personal pension plan on behalf of the Chief Executive Officer.
The Company will make payments in lieu of pension in the event that an
executive Director has exceeded their pension annual allowance.
(iii)
Benefits in kind
Executive Directors are entitled to private medical insurance, life insurance
and permanent health insurance.
(iv)
Annual performance related bonus
Under the Group’s annual performance related bonus plan, executive
Directors are eligible to earn a cash bonus (non-pensionable) payment based
on targets that are set by the Committee. In determining these targets, the
Committee’s objective is to set stretching targets that reflect challenging
financial performance in the current year, but also provide for the future
growth of the Group. The choice of metrics reflects those that have been
identified as the key, primarily financial, indicators of the Group’s success
against its strategy. Maximum bonus entitlements were set at a level that
allowed additional growth of overall remuneration for out-performance of
targets.
Bonus plan rules are exclusively subject to Remuneration Committee
discretion. This includes but is not limited to whether or not to fund the
bonus plan, to make any payment or the amounts to be paid by way of
bonus under the plan (regardless of whether the Company has achieved
or exceeded the required targets). The Committee has discretion to adjust
the formulaic bonus outcomes both upwards (within the policy limits) and
downwards to ensure alignment of pay with the underlying performance of
the business over the financial year.
In view of the financial results of the Group for the year ended 30 June 2020,
the Remuneration Committee has concluded that targets have not been met
for the current financial year and therefore no bonus amounts are payable to
the executive Directors.
46
Craneware plc Annual Report 2020
Remuneration Committee's Report [Cont’d.]
(v)
Share options and LTIP awards
During the year and historically the Company has operated employee
share plans from which, and at the discretion of the Committee, executive
Directors and other employees (including senior management) could be
granted share-based awards.
The 2016 share plans
The Craneware Employees’ Share Option Plan 2007 (“2007 Share Option
Plan”) was operated by the Company from 2007 and further details
regarding this option plan are provided below. As no further grants could
be made under the 2007 Share Option Plan after its tenth anniversary, the
Company implemented three new discretionary employee share plans in the
year ended 30 June 2017, following approval and authorisation obtained
from shareholders at the Annual General Meeting on 8 November 2016:
The Craneware plc Long Term Incentive Plan (2016) (the “LTIP”);
The Craneware plc Schedule 4 Company Share Option Plan (2016)
(the "Schedule 4 Option Plan”); and
The Craneware plc Unapproved Company Share Option Plan (2016)
(the "Unapproved Option Plan”).
Although the LTIP is intended to be used as the primary means of
incentivising senior management going forward, the Committee was also
of the view that it would be useful for the Company to retain the flexibility
to grant “market value” options if the need arises. Accordingly, two share
option plans were also established as direct replacements for the 2007
Share Option Plan. The Schedule 4 Option Plan allows for the grant of
tax advantaged options to UK based participants over shares worth up to
£30,000 per individual; and the Unapproved Option Plan is used to grant
options where the above limit has been reached or where the relevant
individual is not based in the UK.
It was highlighted in previous benchmarking analysis that executive total
remuneration packages within the Group were below median levels, in
particular the relative proportion of the total remuneration value that
comprises share-based incentives. In view of this, the Committee had
previously disclosed its intention to use LTIPs “as the primary means of
incentivising senior management go forward”. The transition to address the
shortfalls identified in the benchmarking analysis continues to be made
over multiple years. Continuing this transition, in the financial year ended
30 June 2020 the long term incentive grants to the executive Directors
comprised only conditional share awards under the LTIP (rather than, in prior
recent years, half of the grant being LTIP awards and the other half share
options).
If, in any year, executive Directors are given a combination of LTIP awards
and options under the Schedule 4 / Unapproved Option Plans, the same form
of performance condition will apply across each of the arrangements and the
individual limits on participation will take into account both forms of grant.
Clawback provision
The Rules of the LTIP provide for a Clawback provision, in respect of awards
granted under the LTIP, which may be applied in the event of: material
misstatement of financial results; error in the calculation of performance
condition outcomes; and/ or misconduct.
Holding period
Whilst it is still not common practice for holding periods to be applied in
respect of AIM listed companies, the Committee has considered whether
it would be appropriate to introduce a post vesting holding period for LTIP
awards and/or a post-employment shareholding guideline.
As part of the transition in the use of LTIPs referred to above, the Committee
intends to introduce a post vesting holding period for LTIP awards applicable
for those awards proposed to be granted to executive Directors and senior
management during the financial year commencing 1 July 2020. The
Committee also intends to introduce a guideline that executive Directors are
required to hold equivalent to 200% of base salary. Vested but unexercised
awards are included in the shareholding guideline on a net of tax basis.
Awards granted under the 2016 share plans in the year ended 30 June 2020
In September 2019, the Chief Executive Officer and the Chief Financial
Officer were each granted a conditional share award under the LTIP. The total
value of the award at date of grant was equal to 100% of the basic salary
for each of these directors. These awards are included in the tables on page
52. Conditional share awards and / or share options were granted to certain
other employees (including senior management) in September 2019 under
the 2016 share plans.
The vesting of the awards, which were granted from the 2016 share plans
in the year ended 30 June 2020, are subject to performance conditions set
by the Committee that are appropriate to the strategic objectives of the
business, are considered to be challenging and in line with best practice/
investor guidelines and are measured over three years.
For the conditional share awards granted under the LTIP and for share
options granted from the 2016 share option plans in September 2019, the
performance conditions are based on the Company’s total shareholder
return (“TSR”) performance relative to the performance achieved by the
constituent companies in the FTSE AIM 100 Index (the “Comparator Group”).
These performance conditions are the same, but are measured over a
different period, as those applicable for the share plan awards granted to
the executive Directors and to certain other employees (including senior
management) in September 2018. As disclosed in the 2018 Annual Report,
similar performance conditions (but with the comparator group being a
group of comparable companies in the same sector) apply to the conditional
share awards and share options that were granted in March 2017 and in
January 2018.
The performance conditions are assessed over the period of three years,
commencing on the date of grant, during which each company in the
Comparator Group will be ranked in order of TSR performance. Vesting will
then take place as follows:
47
Craneware plc Annual Report 2020 Remuneration Committee's Report [Cont’d.]
Ranking of the Company's TSR
against the Comparator Group
% of Shares comprised in conditional
share award or share option that vest
Below median
Median
Upper quartile or above
0%
25%
100%
Between median and upper quartile
25% – 100% on a straight line basis
The performance condition is measured in three tranches such that one
third of the Ordinary Shares, over which the conditional share awards and /
or the share options subsist, will vest based on performance over the three
years ending on 30 June 2020; one third based on performance over the
three years ending 30 June 2021; and the final third based on performance
over the three years to 30 June 2022 – resulting in an aggregate five year
performance evaluation period. Any tranche (or part thereof) that does not
meet the performance criteria will lapse and not be re-tested in later years.
However, notwithstanding the TSR ranking achieved by the Company, no
part of a share plan award subject to the above conditions will vest unless
the Committee is satisfied that there has been an overall satisfactory and
sustained improvement in the underlying financial performance of the
Company over the relevant period.
If and to the extent that the performance conditions are satisfied and subject
to the award holder’s continued employment within the Craneware Group
throughout the period, the conditional share award will normally vest
three years after the date of grant; and the share options will only become
exercisable three years after the date of grant. Share options will expire, at
the latest, 10 years after the date of grant
Performance condition measurement to 30 June 2020
For share options and LTIP awards granted in January 2018, the third tranche
is not due to vest until January 2021. However, the performance criteria
for each tranche is tested against the Company’s TSR for the three years
to 30 June 2020 compared to the TSR of the companies in the Comparator
Group. Craneware plc’s relative TSR for this period, when ranked against the
Comparator Group was within the upper quartile and therefore this tranche,
being one third of the award, will vest in full.
For share options and LTIP awards granted in September 2019, the first
tranche is not due to vest until September 2020 and for the share options
and LTIP awards granted in September 2018, the second tranche is not due
to vest until September 2020. However, the performance criteria for these
tranches are tested against the Company’s TSR for the three years to 30 June
2020 compared to the TSR of the constituent companies in the FTSE AIM
100 Index. Craneware plc’s relative TSR for this period, when ranked against
that Comparator Group was within the upper quartile and therefore these
tranches, being one third each of the awards, will vest in full.
2007 Share Option Plan
Share options can no longer be granted under this share option plan as it
was established more than ten years ago. The last grant of share options
under this plan occurred in September 2016. Options that were granted
under this scheme in earlier financial years are normally exercisable three
years after the date the options were granted, provided the option holder
is still employed at the date of exercise, subject to the satisfaction of the
applicable performance criteria.
All employee share option plans
In order to provide a wider population of employees with an opportunity to
become Craneware shareholders, which promotes alignment to shareholder
interests and aids with recruitment and retention, a Save As You Earn
(‘SAYE’) share option plan for UK employees and an Employee Stock Purchase
Plan (‘ESPP’) for US employees within the Group were established in the year
ended 30 June 2019. The Committee supports this proposed enhancement
to Craneware’s employee reward offering. The executive Directors are
permitted, if they choose to do so, to participate in the SAYE share option
plan on the same terms as other UK employees. These share option plans
were approved by the shareholders at the 2018 Annual General Meeting.
Share options were first granted under these two share option plans in
the year ended 30 June 2020, as summarised in Note 8 to the financial
statements. The executive Directors chose to participate in the SAYE, in
respect of the first offer of share options under this plan, and the details of
the share options granted are contained in the table on page 51.
SAYE and ESPP share option plans allow employees and executive Directors,
who choose to participate, to contribute regularly to the plans from their net
salary and then to use those funds to buy shares in Craneware plc at the end
of the savings period. This is usually at a discounted purchase price that is
set at the start of the savings period.
Source of shares and dilution limits
The share plans are being operated in conjunction with an Employee
Benefit Trust, The Craneware plc Employee Benefit Trust, (“EBT”) which was
established during the year ended 30 June 2017. Further details regarding
the EBT are contained in Note 18 to the financial statements.
Conditional share awards granted under the LTIP and share options granted
from the share option plans may be satisfied either by the issue of new
Ordinary Shares, the transfer of shares from treasury or the transfer of
existing Ordinary Shares purchased in the market.
In any ten year period, the Company may not issue (or grant rights to issue)
more than 10% of the issued ordinary share capital of the Company under
the LTIP and any other employee share plan adopted by the Company. For
the purpose of this limit:
any Shares which are purchased in the market by the EBT for the purposes of
satisfying Awards will not be counted;
treasury Shares will count as new issue Ordinary Shares unless institutional
investors decide that they need not count;
no account will be taken of any Shares where the right to acquire them was
released or lapsed prior to vesting / exercise; and
no account will be taken of any Shares where the right to acquire them was
granted prior to the Company’s original admission to AIM in 2007.
Details of all share options and conditional share awards, which have been
awarded and had not lapsed or been exercised or released at 30 June 2020,
are contained in Note 8 to the financial statements.
48
Craneware plc Annual Report 2020 Remuneration 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
W Whitehorn
R Verni
C Blye
R Rudish
A Erskine
D Kemp
Contract Date
Unexpired Term
Normal Notice Period
Founder
15 September 2008
1 January 2020
1 May 2009
12 November 2013
28 August 2014
24 February 2020
1 March 2020
Rolling
Rolling
Rolling
Rolling
Rolling
Rolling
Rolling
Rolling
3 months*
3 months*
1 month
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
None of the executive Directors holds any outside appointments with any other publicly traded company.
Directors’ Interests
The Directors’ interests in the ordinary shares of the Company are set out in the Directors’ Report on page 31.
Directors’ Emoluments (audited)
For Directors who held office during the course of the year, emoluments1 in respect of the year ended 30 June 2020 were as follows: (note: with the exception
of R Verni, C Blye, R Rudish and A Erskine, all directors are paid in Sterling; the amounts below are translated into US Dollars at the relevant average exchange
rate for the period being reported)
Salary/Fees ($)
Benefits 2 ($)
Bonus ($)
Pension ($)
2020 Total ($)
2019 Total ($)
Executives
K NeilsonA
C T PrestonB
Non-Executives
G R Elliott3
W Whitehorn4
D Kemp4
R Verni
C Blye
R Rudish
A Erskine4
Total
368,378
304,242
806
868
32,549
47,242
17,514
60,708
61,596
52,644
14,684
-
-
-
-
-
-
-
959,557
1,674
-
-
-
-
-
-
-
-
-
-
21,041
12,734
390,225
317,844
443,272
325,660
-
-
-
-
-
-
-
32,549
47,242
17,514
60,708
61,596
52,644
14,684
91,411
-
-
60,414
54,469
52,644
-
33,775
995,006
1,027,870
1. Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire, or conditional share awards in respect of, ordinary shares in the Company held by the Directors.
2. Benefits represent payments for health insurance, death in service and disability insurance.
3. G R Elliott resigned from the Board on 12 November 2019
4. W Whitehorn, D Kemp and A Erskine were appointed as Directors of the Company during the year ended 30 June 2020 on the dates shown above.
A. In December 2019 K Neilson exercised share options, which were granted in 2009 detailed below, in respect of a total of 10,332 Ordinary Shares in the Company. Based on the share price on the date of exercise, the gain on exercise of those share
options was £201,991
B. The conditional share award, in respect of 8,586 Ordinary Shares in the Company which was granted to C T Preston under the LTIP in March 2017, vested in March 2020. Based on the share price on the vesting date, the value of those Ordinary
Shares was £112,477.
49
Craneware plc Annual Report 2020 Remuneration Committee's Report [Cont’d.]
The following Directors were paid in Sterling:
Executives
K Neilson
C T Preston
Non-Executives
G R Elliott
W Whitehorn
D Kemp
Total
Salary/Fees (£)
Benefits 2 (£)
Bonus (£)
Pension (£)
2020 Total (£)
2019 Total (£)
292,410
241,500
25,636
37,500
13,902
639
689
-
-
-
610,948
1,328
-
-
-
-
-
-
16,702
10,108
309,751
252,297
342,428
251,571
-
-
-
25,636
37,500
13,902
70,615
-
-
26,810
639,086
664,614
Further information regarding Directors’ share options and LTIP awards are contained in the tables on pages 51 and 52.
Total Shareholder Return Performance Graph
The following graph charts the cumulative shareholder return of the Company over the past three years, compared to the FTSE AIM 100 Index and the FTSE
techMARK Focus Index. The FTSE AIM 100 Index provides a comparison to a broad equity market index (of which Craneware is a constituent company). The FTSE
techMARK Focus Index is selected because the constituents of this index are affected by similar economic and commercial factors to Craneware.
50
Craneware plc Annual Report 2020 Remuneration Committee's Report [Cont’d.]
Directors’ interests in share options and LTIP awards
Directors’ interests in share options as at 30 June 2020, in respect of Ordinary Shares of 1p each in Craneware plc, were for the following Directors who held
office during the course of the year:
Exercise Price
(cents)
Exercise Price
(pence)
Held At
30/06/19
Granted
During
Year
Exercised
During Year
Lapsed
During Year
Held At
30/06/20
Exercisable from date
Expiry
date
K Neilson
Share Option Plan 2007
Grant Date
23 Dec 2009
6 Sep 2010
21 Sep 2012
10 Sep 2013
22 Sep 2014
9 Mar 2016
12 Sep 2016
Schedule 4 Option Plan
534.0
618.0
650.0
621.0
839.0
1066.0
1563.0
335.0
401.0
400.0
395.0
523.0
750.0
1177.5
10,332
13,383
6,605
34,472
39,090
28,628
36,469
17 Jan 2018
2445.0
1775.0
1,690
2445.0
3488.0
1775.0
2710.0
7,238
5,848
1432.0
1147.5
-
1,568
Unapproved Option Plan
17 Jan 2018
5 Sep 2018
SAYE Option Plan
20 Apr 2020
C T Preston
Share Option Plan 2007
Grant Date
9 Mar 2016
Schedule 4 Option Plan
Unapproved Option Plan
24 Mar 2017
17 Jan 2018
5 Sep 2018
SAYE Option Plan
20 Apr 2020
1066.0
750.0
26,925
24 Mar 2017
1544.0
1237.5
2,424
1544.0
2445.0
3488.0
1237.5
1775.0
2710.0
6,162
6,618
4,334
1432.0
1147.5
-
1,568
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(10,332)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(156)
-
-
-
-
-
-
23 Dec 2012
23 Dec 2019
13,383
6,605
34,472
39,090
28,628
36,469
6 Sep 2013
6 Sep 2020
21 Sep 2015
21 Sep 2022
10 Sep 2016
10 Sep 2023
22 Sep 2017
22 Sep 2024
9 Mar 2019
9 Mar 2026
12 Sep 2019
12 Sep 2026
1,690
2/3rd vested
17 Jan 2028
7,238
5,692
2/3rd vested
17 Jan 2028
30.67% vested
5 Sep 2028
1,568
1 May 2023
1 Nov 2023
26,925
9 Mar 2019
9 Mar 2026
2,424
24 Mar 2020
24 Mar 2027
6,162
6,618
24 Mar 2020
24 Mar 2027
2/3rd vested
17 Jan 2028
(116)
4,218
30.67% vested
5 Sep 2028
-
1,568
1 May 2023
1 Nov 2023
Information regarding total share options, as granted to Directors and other employees, which were in existence during the year is contained in Note 8 to the
financial statements.
51
Craneware plc Annual Report 2020 Remuneration Committee's Report [Cont’d.]
The maximum number of Ordinary Shares subject to conditional share awards granted to Directors under the LTIP as at 30 June 2020 were as follows, in respect
of Directors who held office during the course of the year:
Grant date
Held At
30/06/19
Granted
During
Year
Released
During Year
Lapsed
During Year
Held At
30/06/20
Share price at date of
grant (pence)
K Neilson
Conditional share award
17 Jan 2018
Conditional share award
Conditional share award
5 Sep 2018
4 Sep 2019
8,928
5,848
-
-
-
17,100
-
-
-
C T Preston
Conditional share award
24 Mar 2017
Conditional share award
17 Jan 2018
Conditional share award
5 Sep 2018
8,586
6,618
4,334
-
-
-
Conditional share award
4 Sep 2019
-
12,710
(8,586)
-
-
-
-
(156)
-
-
-
(116)
8,928
5,692
17,100
-
6,618
4,218
-
12,710
1,775.0
2,710.0
1,900.0
1,237.5
1,775.0
2,710.0
1,900.0
Vesting date
17 Jan 2021
5 Sep 2021
4 Sep 2022
24 Mar 2020
17 Jan 2021
5 Sep 2021
4 Sep 2022
There was no consideration for the grant of these conditional awards and no consideration will be payable by the award holders to receive the Shares from
these awards, if and to the extent that they vest. The entitlement to shares under the LTIP is subject to achieving the performance conditions referred to on
page 48. The table above shows the maximum entitlement and the actual number of shares (if any) that vest from the awards will depend on those conditions
being achieved
On behalf of the Remuneration Committee:
Ronald Verni
Chairman of the Remuneration Committee
18 September 2020
52
Craneware plc Annual Report 2020
Independent Auditors’ Report to the Members of Craneware plc
Report on the audit of the financial statements
Opinion
In our opinion, Craneware plc’s group financial statements and company financial statements (the “financial statements”):
give a true and fair view of the state of the group’s and of the company’s affairs as at 30 June 2020 and of the group’s profit and the group’s and the company’s
cash flows for the year then ended;
have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the company’s
financial statements, as applied in accordance with the provisions of the Companies Act 2006; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Financial Statements (the “Annual Report”), which comprise: the
consolidated and company balance sheets as at 30 June 2020; the consolidated statement of comprehensive income, the statements of cash flows, and the
statements of changes in equity for the year then ended; and the notes to the financial statements, which include a description of the significant
accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are
further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
Our audit approach
Overview
Overall group materiality: $965,200 (2019: $916,000), based on 5% of profit before tax.
Overall company materiality: $537,000 (2019: $695,000), based on 5% of profit before tax.
We performed an audit of the complete financial information of Craneware plc and
Craneware, Inc.
We also audited material balances in Craneware Insight, Inc and
Craneware Healthcare Intelligence LLC.
Taken together, the entities we audited comprise 100% of Group revenues.
All audit work was undertaken by a single engagement team in the UK.
Revenue and deferred income (Group and Company).
Internally developed intangible assets (Group and Company).
Impact of Covid-19 (Group and Company)
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we
looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions
and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls,
including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.
53
Craneware plc Annual Report 2020 Independent Auditors’ Report to the Members of Craneware plc [Cont’d.]
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including
those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as
a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our
audit.
Key audit matter
How our audit addressed the key audit matter
Revenue and deferred income (Group and Company)
The Group has revenue of $71,492k (2019: $71,401k) and deferred income of $37,155k
(2019: $37,849k). The Company has revenue of $38,473k (2019: $37,962k) and
deferred income of $37,154k (2019: $37,848k). These amounts are significant in the
context of the Group statement of comprehensive income and the Group and Company
balance sheets. The amount of revenue to be recognised is determined based on
the contract details. The timing of revenue recognition is dependent on the terms
contained in the contracts with customers. There is a risk that revenue and deferred
income are not recognised appropriately or within the correct period.
Internally developed intangible assets (Group and Company)
The Group has $25,083k (2019: $17,851k) and the Company has $25,083k
(2019: $17,691k) of development costs capitalised on the balance sheet. Development
costs are capitalised when the following criteria have been met: new product
development costs 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. The Directors are required to continually assess the
commercial potential of each product in development in order to determine if costs
can continue to be capitalised. We focus on this area as there is judgement involved in
the Directors’ assessment.
Impact of Covid-19 (Group and Company)
Covid-19 was declared a pandemic by the World Health Organisation on 11 March
2020 and the on-going response is having an unprecedented impact on the wider
economy and it is necessary to consider the impact on Craneware plc.
The impact of Covid-19 has pervasive operational and financial risks, as well as audit
implications. Covid-19 will have both a direct and indirect impact on Craneware’s
financial results as at 30 June 2020 and related financial statement disclosures.
Management and the directors have assessed the impact of Covid-19 and have
determined that the Group and Company continues to operate as normal and the
cash has been collected from the customers as per the contractual terms. In adopting
the going concern basis in preparing these financial statements, management
have considered the impact of the pandemic on the company’s current and future
operations and have concluded that the likely impact is low.
Because of its significance to the financial statements and to our audit, we concluded
that the uncertainty created by the Covid-19 pandemic on the operations of the
company was a key audit matter.
The movement between the opening and closing deferred revenue balance were
reconciled to new invoices raised, transfers to revenue and other adjustments. For
a sample of transactions relating to invoices raised in the period, we agreed the
value of the transaction to the contract, the invoice and cash receipts. We calculated
the expected amount of revenue recognised in the period based upon the contracts
and the the key inputs per the accounting policy to conclude on the accuracy of
revenue recognised in the period and the closing deferred revenue balance. Further
procedures to assess cut-off were performed including testing a sample of revenue
transactions recorded post year end were assessed to conclude that they should not
have been recorded in an earlier period. No matters arose during our testing.
On a sample basis we agreed additions to intangible assets to supporting
documentation, including invoices and time records. The nature of the costs being
capitalised was assessed to ensure it met the accounting requirements to capitalise
and analysis was obtained from the technical team to audit time charged by
employees. Discussions were held with management in order to understand how
all criteria for capitalisation had been met and supporting evidence was obtained
to corroborate this. Regarding recoverability of intangible assets, we assessed the
intangible assets for indications of impairment. No matters arose during our testing.
Our audit addressed the impact of the Covid-19 pandemic on the Group and
Company as follows:
We reviewed management’s Covid-19 impact assessment paper, and corroborated key
aspects to board minutes, and post year end management reports.
We reviewed the group’s viability statement and key assumptions to assess the
downside stressed scenario and confirmed that the Covid-19 had low impact on
entity’s cash and sales forecasts.
We considered the disclosures made by management in the financial statements,
specifically within the Strategic Report, and the Directors’ Report and considered
whether these were in line with our understanding.
Based on the procedures performed, we agreed that management’s assessment in
relation to going concern has appropriately considered the Covid-19 pandemic, and
that management’s assessment of the impact of the pandemic on the company has
been appropriately disclosed within the financial statements.
Our conclusions in relation to going concern are set out later in this report.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into
account the structure of the group and the company, the accounting processes and controls, and the industry in which they operate.
54
Craneware plc Annual Report 2020 Independent Auditors’ Report to the Members of Craneware plc [Cont’d.]
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative
considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement
line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Company financial statements
Overall materiality
$965,200 (2019: $916,000).
$537,000 (2019: $695,000).
How we determined it
5% of profit before tax.
5% of profit before tax.
Rationale for benchmark
applied
Consistent with last year, we have applied this
benchmark, a generally accepted auditing
practice. We also believe the measure of profit
before tax is the measure most commonly used
by the shareholders to measure the performance
of the Group.
Consistent with last year, we have applied this
benchmark, a generally accepted auditing practice.
We also believe the measure of profit before tax is the
measure most commonly used by the shareholders to
measure the performance of the Company.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of materiality allocated
across components was between $537,000 and $790,000. Certain components were audited to a local statutory audit materiality that was also less than our
overall group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above $48,000 (Group audit) (2019: $46,000)
and $26,850 (Company audit) (2019: $34,750) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
Going Concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material to add or draw attention to
in respect of the directors’ statement in the financial statements about whether the
directors considered it appropriate to adopt the going concern basis of accounting in
preparing the financial statements and the directors’ identification of any material
uncertainties to the Group’s and the Company’s ability to continue as a going concern over
a period of at least twelve months from the date of approval of the financial statements.
We have nothing material to add or to draw attention to.
However, because not all future events or conditions can be predicted, this
statement is not a guarantee as to the Group’s and Company’s ability to continue
as a going concern.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The directors
are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an
audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material
misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006 have been
included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006 (CA06) and ISAs (UK) require us also
to report certain opinions and matters as described below (required by ISAs (UK) unless otherwise stated).
55
Craneware plc Annual Report 2020
Independent Auditors’ Report to the Members of Craneware plc [Cont’d.]
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report for the year ended
30 June 2020 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we did not identify any
material misstatements in the Strategic Report and Directors’ Report. (CA06)
The directors’ assessment of the prospects of the group and of the principal risks that would threaten the solvency or liquidity of the group
As a result of the directors’ voluntary reporting on how they have applied the UK Corporate Governance Code (the “Code”), we are required to report to you if we
have anything material to add or draw attention to regarding:
The directors’ confirmation on page 15 of the Annual Report that they have carried out a robust assessment of the principal risks facing the group, including
those that would threaten its business model, future performance, solvency or liquidity.
The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
The directors’ explanation on page 30 of the Annual Report as to how they have assessed the prospects of the group, over what period they have done so
and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the group will be able to
continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any
necessary qualifications or assumptions.
We have nothing to report in respect of this responsibility.
Other Code Provisions
As a result of the directors’ voluntary reporting on how they have applied the Code, we are required to report to you if, in our opinion:
The statement given by the directors, on page 43, that they consider the Annual Report taken as a whole to be fair, balanced and understandable, and
provides the information necessary for the members to assess the group’s and company’s position and performance, business model and strategy is
materially inconsistent with our knowledge of the group and company obtained in the course of performing our audit.
The section of the Annual Report on page 42 describing the work of the Audit Committee does not appropriately address matters communicated by us to
the Audit Committee.
We have nothing to report in respect of this responsibility.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set out on page 40, the directors are responsible for the preparation of the financial
statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such
internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the
group or the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditors’ report.
56
Craneware plc Annual Report 2020 Independent Auditors’ Report to the Members of Craneware plc [Cont’d.]
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the
Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person
to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
we have not received all the information and explanations we require for our audit; or
adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from
branches not visited by us; or
certain disclosures of directors’ remuneration specified by law are not made; or
the company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Lindsay Gardiner (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Edinburgh
18 September 2020
57
Craneware plc Annual Report 2020 Consolidated Statement of Comprehensive Income
for the year ended 30 June 2020
Continuing operations:
Revenue
Cost of sales
Gross profit
Other income
Net operating expenses
Operating profit
Analysed as:
Adjusted EBITDA1
Share based payments
Depreciation of plant and equipment
Exceptional Aborted Acquisition Costs2
Amortisation of intangible assets
Finance income
Finance expense
Profit before taxation
Tax charge on profit on ordinary activities
Profit for the period attributable to owners of the parent
Other comprehensive income / (expense)
Items that may be reclassified subsequently to profit or loss
Currency Translation Reserve movement
Total items that may be reclassified subsequently to profit or loss
Total comprehensive income attributable to owners of the parent
Total
2020
$’000
Total
2019
$’000
Notes
4
5
6
8
13
14
9
10
71,492
(4,518)
66,974
9
71,401
(4,394)
67,007
-
(47,777)
(49,003)
19,206
18,004
25,189
(1,318)
(1,489)
-
(3,176)
192
(94)
19,304
(2,468)
16,836
23,996
(1,296)
(603)
(1,168)
(2,925)
318
0
18,322
(3,337)
14,985
26
26
28
28
16,862
15,013
Earnings per share for the period attributable to equity holders
- Basic ($ per share)
- Diluted ($ per share)
12a
12b
0.628
0.619
0.561
0.55
1Adjusted EBITDA refers to earnings before interest, tax, depreciation, amortisation, exceptional items and share based payments.
2Exceptional items relate to legal and professional fees associated with an aborted potential acquisition.
The accompanying notes are an integral part of these financial statements.
58
Craneware plc Annual Report 2020 Statements of Changes in Equity for the year ended 30 June 2020
Group
At 1 July 2018
Total comprehensive income - profit for the year
Total other comprehensive income
Transactions with owners:
Share-based payments
Impact of share options exercised / lapsed
Dividends (Note 11)
At 30 June 2019
Adjustment on initial application of IFRS16
At 1 July 2019
Total comprehensive income - profit for the year
Total other comprehensive income
Transactions with owners:
Company share movement in employee benefit trust (Note 18)
Share-based payments
Impact of share options and awards exercised / lapsed
Dividends (Note 11)
At 30 June 2020
Company
At 1 July 2018
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 2019
Adjustment on initial application of IFRS16
At 1 July 2019
Total comprehensive income - profit for the year
Transactions with owners:
Share-based payments
Impact of share options and awards exercised / lapsed
Dividends (Note 11)
At 30 June 2020
Share
Capital
$’000
Share
Premium
Account
$’000
Capital
Redemption
Reserve
$’000
534
19,777
-
-
-
1
-
-
-
-
245
-
535
20,022
-
-
535
20,022
-
-
-
-
1
-
-
-
-
-
1,075
-
536
21,097
534
19,777
-
-
1
-
-
-
245
-
535
20,022
-
-
535
20,022
-
-
1
-
-
-
1,075
-
536
21,097
9
-
-
-
-
-
9
-
9
-
-
-
-
-
-
9
9
-
-
-
-
9
-
9
-
-
-
-
9
Other
Reserves1
$’000
Retained
Earnings
$’000
Total
Equity
$’000
2,084
29,242
51,646
-
-
14,985
14,985
28
28
1,611
(146)
(184)
146
1,427
246
-
(8,497)
(8,497)
3,549
35,720
59,835
-
1,070
1,070
3,549
36,790
60,905
-
-
16,836
16,836
26
26
-
(1,255)
(1,255)
1,176
(577)
(890)
175
286
674
-
(9,077)
(9,077)
4,148
42,605
68,395
485
21,159
41,964
-
11,193
11,193
1,011
(33)
(107)
33
904
246
-
(8,497)
(8,497)
1,463
23,781
45,810
-
868
868
1,463
24,649
46,678
-
10,287
10,287
160
(221)
(327)
(327)
(167)
528
-
(9,077)
(9,077)
1,402
25,205
48,249
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.
59
Craneware plc Annual Report 2020
Consolidated Balance Sheet as at 30 June 2020
ASSETS
Non-Current Assets
Property, 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
Lease liabilitity > 1 year
Current Liabilities
Deferred income
Current tax liabilities
Trade and other payables
Total Liabilities
Equity
Share capital
Share premium account
Capital redemption reserve
Other reserves
Retained earnings
Total Equity
Total Equity and Liabilities
Registered Number SC196331
Notes
2020
$’000
2019
$’000
13
14
16
17
16
20
21
18
3,798
36,783
3,915
2,408
46,904
21,003
47,851
68,854
1,274
30,437
4,946
3,244
39,901
18,789
47,611
66,400
115,758
106,301
2,017
-
37,155
797
7,394
45,346
47,363
536
21,097
9
4,148
42,605
68,395
37,849
1,085
7,532
46,466
46,466
535
20,022
9
3,549
35,720
59,835
115,758
106,301
The accompanying notes are an integral part of these financial statements.
The financial statements on pages 58 to 88 were approved and authorised for issue by the Board of Directors on 18 September 2020 and signed on its behalf by:
Keith Neilson
Director
Craig Preston
Director
60
Craneware plc Annual Report 2020 Company Balance Sheet as at 30 June 2020
ASSETS
Non-Current Assets
Investment in subsidiary undertakings
Property, plant and equipment
Intangible assets
Deferred tax
Amounts owed from group companies
Current Assets
Trade and other receivables
Cash and cash equivalents
Total Assets
EQUITY & LIABILITIES
Non-Current Liabilities
Lease liabilitities > 1 year
Current Liabilities
Deferred income
Current tax liabilities
Trade and other payables
Total Liabilities
Equity
Share capital
Share premium account
Capital redemption reserve
Other reserves
Retained earnings
At 1 July
Profit for the year attributable to owners
Other changes in retained earnings
Total Equity
Total Equity and Liabilities
Registered Number SC196331
Notes
2020
$’000
2019
$’000
15
13
14
17
16
16
20
21
18
9,000
1,974
25,544
1,139
6,000
43,657
25,567
44,480
70,047
10,107
800
18,278
1,154
6,000
36,339
22,435
43,357
65,792
113,704
102,131
887
-
37,154
361
27,053
64,568
65,455
536
21,097
9
1,402
25,205
23,781
10,287
(8,863)
48,249
37,848
1,998
16,475
56,321
56,321
535
20,022
9
1,463
23,781
21,159
11,193
(8,571)
45,810
113,704
102,131
The accompanying notes are an integral part of these financial statements.
The financial statements on pages 58 to 88 were approved and authorised for issue by the Board of Directors on 18 September 2020 and signed on its
behalf by:
Keith Neilson
Director
Craig Preston
Director
61
Craneware plc Annual Report 2020 Statements of Cash Flows for the year ended 30 June 2020
Cash flows from operating activities
Cash generated from operations
Interest received
Tax paid
Net cash generated from operating activities
Cash flows from investing activities
Purchase of plant and equipment
Capitalised intangible assets
Net cash used in investing activities
Cash flows from financing activities
Dividends paid to company shareholders
Proceeds from issuance of shares
Company shares acquired by employee benefit trust
Payment of lease liabilities
Net cash used in financing activities
Net cash increase/ (decrease) 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.
Group
Company
2020
$’000
2019
$’000
2020
$’000
2019
$’000
23,134
204
(2,668)
20,670
(187)
(9,522)
(9,709)
(9,077)
614
(1,255)
(1,003)
(10,721)
240
47,611
47,851
15,078
318
(1,933)
13,463
(654)
(9,780)
(10,434)
(8,497)
246
-
-
(8,251)
(5,222)
52,833
47,611
23,001
408
(2,867)
20,542
(90)
(9,515)
(9,605)
(9,077)
1,162
(1,256)
(643)
(9,814)
1,123
43,357
44,480
17,514
313
(32)
17,795
(413)
(9,729)
(10,142)
(8,497)
246
-
-
(8,251)
(598)
43,955
43,357
Notes
19
13
11
20
62
Craneware plc Annual Report 2020 Notes to the Financial Statements
General Information
Craneware plc (the Company) is a public limited company incorporated and
domiciled in Scotland. The Company has a primary listing on the AIM stock
exchange. The address of its registered office and principal place of business
is disclosed on page 26 of the Annual Report. The principal activity of the
Company is described in the Directors’ Report.
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.
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
(IFRSIC) interpretations and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS. The Group and Company
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.
Reporting currency
The Directors consider that as the Group’s revenues are primarily
denominated in US dollars the Company’s principal functional currency is
the US dollar. The Group’s financial statements are therefore prepared in US
dollars.
Currency translation
Transactions denominated in currencies other than US dollars are translated
into US dollars at the rate of exchange ruling at the date of the transaction.
The average exchange rate during the course of the year was $1.2598/£1
(2019: $1.2945/£1). Monetary assets and liabilities expressed in foreign
currencies are translated into US dollars at rates of exchange ruling at the
Balance Sheet date $1.2302/£1 (2019: $1.2695/£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.
Annual improvements 2015-2017 (effective 1 January 2019*) - This set of
annual improvements addresses issues in the 2015-2017 reporting cycle,
which affects four different standards,
IFRS 9, ‘Financial Instruments’ (effective 1 January 2019*),
IFRIC 23, ‘Uncertainty over income tax treatments’ (effective 1 January
2019*),
IAS 12, ‘Income Taxes’ (effective 1 January 2019*),
IAS 28, ‘Investments in associates’ (effective 1 January 2019*).
*Effective for accounting periods starting on or after this date
IFRS 16 Leases
IThe Group has adopted IFRS 16 Leases from 1 July 2019 using the modified
retrospective application approach. Under the modified retrospective
application approach, the impact of initially applying the standard has been
reflected as an adjustment to the opening balance of retained earnings as of
1 July 2019 and the comparative period has not been restated.
The Group has also elected not to reassess whether a contract is or contains
a lease at the date of initial application. Instead, for contracts entered
into before the transition date the Group relied on its assessment made
applying IAS17. Under IFRS 16, leases are recognised as a right to use asset
and a corresponding liability at the date which the leased asset became
available to the Group. At transition, leases classified as operating leases
under IAS 17 were measured at the present value of the remaining lease
payments, discounted at an incremental borrowing rate which reflects the
characteristics of the underlying lease at 1 July 2019. The weighted average
rate applied was 3%. Right of use assets are measured at the amount equal
to the lease liability.
Each lease payment is allocated between the lease liability and finance
cost, which is charged on a straight-line basis over the term of the lease.
The right to use asset is depreciated over the shorter of the asset’s useful
life or the lease term on a straight-line basis. During the year, the Group
recognised $916,978 of depreciation charges and $94,193 of interest costs
from leases under IFRS 16. Under IAS 17, a charge of $726,413 would have
been debited to the income statement.
On transition to IFRS 16, the Group recognised additional right of use
assets and additional lease liabilities, recognising the difference in retained
earnings. The Group presents lease liabilities > 1 year on the face of the
balance sheet and lease liabilities < 1 year in Other Payables.
63
Craneware plc Annual Report 2020 Notes to the Financial Statements [Cont’d.]
1 Principal accounting policies (cont’d.)
All right to use assets are leased properties and are recognised within
property, plant and equipment. The impact on transition is summarised
below:
IFRS 17, ‘Insurance contracts’ (effective 1 January 2021*),
Annual Improvements to IFRS 2018-2020 (effective 1 January 2022*).
*Effective for accounting periods starting on or after this date.
Right of use assets presented in
property, plant and equipment
Accrued lease incentives
derecognised
Lease liabilities < 1 year
Lease liabilities > 1 year
Retained earnings
1 July 2019
$’000
3,826
931
(836)
(2,990)
931
The tax impact of the transition is a credit to reserves of $138,819.
The group has elected to account for short term leases and leases of low
value assets using the practical expedients. The payments are recognised on
a straight-line basis over the life of the lease as an expense to the income
statement instead of recognising a right-of-use asset and lease liability.
Short term leases are those with a lease term of less than 12 months. The
Group is not a lessor.
The following shows a reconciliation of total operating lease commitments
at 30 June 2019 to the lease liabilities recognised at 1 July 2019:
Total operating lease commitments disclosed
at 30 June 2019
Discounted using the lessee's incremental rate
of borrowing at the date of application
Less low value and short term leases
recognised on a straight line basis
Total lease liability recognised under
IFRS 16 at 1 July 2019
$’000
4,067
(232)
(9)
3,826
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) 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.
Amendments to References to Conceptual Framework in IFRS Standards
(effective 1 January 2020*),
Definition of a Business (Amendments to IFRS 3) (effective 1 January 2020*),
Definition of Material (Amendments to IAS 1 and IAS 8)
(effective 1 January 2020*),
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 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 be 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 IFRS 9 in the Statement
of Comprehensive Income and any balances at the Balance Sheet date are
categorised as ‘fair value through profit and loss’. Contingent consideration
that is classified as equity is not re-measured and its subsequent settlement
is accounted for within equity.
Goodwill arising on the acquisition is recognised as an asset and initially
measured at cost, being the excess of fair value of the consideration over
the Group’s assessment of the net fair value of the identifiable assets and
liabilities recognised.
If the Group’s assessment of the net fair value of a subsidiary’s assets and
liabilities had exceeded the fair value of the consideration of the business
combination, then the excess (‘negative goodwill’) would be recognised in
the 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.
64
Craneware plc Annual Report 2020 Notes to the Financial Statements [Cont’d.]
1 Principal accounting policies (cont’d.)
Revenue recognition
The Group follows the principles of IFRS 15, ‘Revenue from Contracts with
Customers’; accordingly revenue is recognised using the five-step model,
requiring the transaction price for each identified contract to be apportioned
to separate performance obligations arising under the contract. Revenue
is recognised either when the performance obligation in the contract has
been performed (point in time recognition) or over time as control of the
performance obligation is transferred to the customer.
Revenue is derived from sales of software licences and professional services
including installation and training.
‘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 licenced products is recognised from the point at
which the customer gains control and the right to use our software. This
right to use software will be for the period covered under contract and, as a
result, the licenced software revenue will be recognised over the life of the
contract. This policy is consistent with the Company’s products providing
customers with a service through the delivery of, and access to, software
solutions (Software-as-a-Service (“SaaS”)), and results in revenue being
recognised over the period that these services are delivered to customers.
Incremental costs directly attributable in securing the contract are charged
equally over the life of the contract and as a consequence are matched to
revenue recognised. Any deferred contract costs are included in both current
and non-current trade and other receivables.
Revenue from all professional services is recognised when the performance
obligation has been fulfilled and the 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 Group does not have any contracts where a financing
component exists within the contract.
The excess of amounts invoiced over revenue recognised are included in
deferred income. If the amount of revenue recognised exceeds the amount
invoiced the excess is included within accrued income.
Contract assets include sales commissions and prepaid royalties. Contract
liabilities include unpaid commissions and deferred income.
Exceptional items
The Group defines exceptional items as costs incurred by the Group which
relate to material non-recurring costs. These are disclosed separately where
it is considered it provides additional useful information to the users of the
financial statements.
Intangible assets
(a) Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the fair value of the identifiable assets and liabilities of a
subsidiary at the date of acquisition. Goodwill is 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.
(c) Contractual customer relationships
Contractual customer relationships acquired in a business combination are
recognised at fair value at the acquisition date. The contractual customer
relationships have a finite useful economic life and are carried at cost less
accumulated amortisation. Amortisation is calculated using the straight-line
method over the expected life of the customer relationship which has been
assessed as up to 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
65
Craneware plc Annual Report 2020 Notes to the Financial Statements [Cont’d.]
1 Principal accounting policies (cont’d.)
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 between five and ten 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 licenced to use
technology are capitalised as incurred. They are amortised on a straight-line
basis over their useful economic life which is typically three to five years.
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.
Property, plant and equipment
All property, plant and equipment are stated at historic cost less
depreciation. Costs are measured at 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. Right-of-use assets
are depreciated over their expected useful lives on the same basis as owned
assets. It is calculated at the following rates:
Leased property
- over the life of the lease straight line
Computer equipment
- Between 20% - 33% straight line
Tenant’s 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.
Leases
When entering into a contract the Group assesses whether or not a lease
exists. A lease exists if a contract conveys a right to control the use of an
asset for a period of time for consideration.
The Group recognises right-of-use assets at cost and lease liabilities at
the lease commencement date based on the present value of future lease
payments. The right-of-use assets are depreciated on a straight-line basis in
line with the Group’s accounting policy for property, plant and equipment.
The lease liabilities are recognised at the present value of the future lease
payments from the commencement date of the lease. Discount rates used
reflect the incremental borrowing rate specific to the lease.
The Group subsequently remeasures the lease liability at each reporting date
by increasing the carrying amount to reflect the interest on the lease liability.
Leases of low value items and short-term leases (leases of less than 12
months at the commencement date) are recognised on a straight-line basis
over the life of the lease as an expense to the income statement instead of
recognising a right-of-use asset and lease liability.
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 does not affect accounting or
taxable profit or loss. Deferred tax assets are recognised to the extent that it
is probable that future taxable profits will arise against which the temporary
differences will be utilised.
66
Craneware plc Annual Report 2020 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
and on the vesting of conditional share awards under each jurisdiction’s
tax rules. As explained under “Share-based payments”, a compensation
expense is recorded in the Group’s Statement of Comprehensive Income over
the period from the grant date to the vesting date of the relevant options
and conditional share awards. As there is a temporary difference between
the accounting and tax bases a deferred tax asset is recorded. The deferred
tax asset arising is calculated by comparing the estimated amount of tax
deduction to be obtained in the future (based on the Company’s share price
at the Balance Sheet date) with the cumulative amount of the compensation
expense recorded in the 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.
Financial assets
The Group classifies its financial assets in the following categories: (i) at
fair value through profit and loss (FVTPL), (ii) financial assets at amortised
cost and (iii) fair value through other comprehensive income (FVTOCI). 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 financial assets at
amortised cost.
Financial assets at amortised cost 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. They
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.
Impariment of financial assets
IFRS 9 replaced the existing incurred loss model with a forward looking
expected credit loss model. The Group recognises an allowance for expected
credit losses (ECLs) for all debt instruments not held at fair value through
profit and loss. ECLs are based on the difference between the contractual
cash flows due in accordance with the contract and all the cash flows the
Group expects to receive.
For trade receivables, the Group applies a simplified approach to calculating
ECLs. Therefore the Group does not track changes in credit risk but instead
recognises a loss allowance based on lifetime ECLS at each reporting date.
The expected credit losses on these trade receivables are estimated using
a provision matrix based on the Group’s historical credit loss experience,
adjusted for management judgement concerning factors that are specific to
the receivables, general economic conditions and assessment of the current
as well as the forecast direction of conditions at the reporting date based
on reasonable and supportable information available. A financial asset
is written off when there is no reasonable expectation of recovering the
contractual cashflow.
Amounts owed from Group companies and other receivables due to the
Company are also subject to the impairment requirements of IFRS 9. All
amounts owed from Group companies are repayable on demand and
sufficient funds are held or are readily available to satisfy repayment
the loans. Other debtors consists mainly of the Employee Benefit Trust.
Therefore the identified impairment loss was assessed as immaterial
for both.
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.
67
Craneware plc Annual Report 2020 Notes to the Financial Statements [Cont’d.]
1 Principal accounting policies (cont’d.)
Share-based payments
The Group grants share options and / or conditional share awards to certain
employees. In accordance with IFRS 2, “Share-Based Payments”, equity-
settled share-based payments are measured at fair value at the date of
grant. Fair value is measured using the Black-Scholes pricing model or
the Monte Carlo pricing model, as appropriately amended, taking into
account the terms and conditions of the share-based awards. The fair value
determined at the date of grant of the equity-settled share-based payments
is expensed on a straight-line basis over the vesting period, based on the
Group’s estimate of the number of shares that will eventually vest. Non-
market vesting conditions are included in assumptions about the number of
options that are expected to vest. At the end of each reporting period, the
entity revises its estimates of the number of options that are expected to
vest based on the non-market vesting conditions. It recognises the impact of
the revision to original estimates, if any, in the Statement of Comprehensive
Income, with a corresponding adjustment to equity. When the options are
exercised and are satisfied by new issued shares, the proceeds received net
of any directly attributable transaction costs are credited to share capital
and share premium.
The share-based payments charge is included in ‘operating expenses’ with a
corresponding increase in ‘Other reserves’.
Share capital
Ordinary shares are classified as equity.
Share Premium
The share premium account represents the difference between the par value
of the shares issued and the subscription or issue price.
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.
2 Critical accounting estimates and judgements
The preparation of financial statements in accordance with IFRS requires
the Directors to make critical accounting estimates and judgements that
affect the amounts reported in the financial statements and accompanying
notes. The estimates and assumptions that have a significant risk of causing
material adjustment to the carrying value of assets and liabilities within the
next financial year are discussed below:
Estimates
Impairment assessment: the Group tests annually whether Goodwill has
suffered any impairment and for other assets including acquired intangibles
at any point where there are indications of impairment. This requires an
estimation of the recoverable amount of the applicable cash generating unit
to which the Goodwill and other assets relate. Estimating the recoverable
amount requires the Group to make an estimate of the expected future cash
flows from the specific cash generating unit using certain key assumptions
including growth rates and a discount rate. These assumptions result in no
impairment in Goodwill.
Useful lives of intangible assets: In assessing useful life, the Group uses
careful judgment based on past experience, advances in product development
and also best practice. During the year, the Group has re-assessed the
estimated useful economic life of Intellectual Property (more specifically Trisus
enterprise suite of products) to be between 5 and 10 years (2019: 5 years). As
this is a change in accounting estimate, it has been applied on a prospective
basis. The impact on the year ended 30 June 2020 was a reduction in the
amortisation charge of $977,008.
Judgements
Capitalisation of development expenditure: the Group capitalises
development costs provided the aforementioned conditions have been met.
Consequently, the Directors require to continually assess the commercial
potential of each product in development and its useful life following launch.
Provisions for income taxes: the Group is subject to tax in the UK and
US and this requires the Directors to regularly assess the applicability of its
transfer pricing policy.
Revenue recognition: in determining the amount of revenue and related
balance sheet items to be recognised in the period, management is required to
make a number of judgements and assumptions. These are detailed in Note 1
and the Financial review section of the Strategic report.
3 Financial risk management
Financial risk factors
The Group’s activities expose it to a variety of financial risks: market
risk (primarily currency risk and cash flow interest rate risk), credit risk,
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
proportion of costs are incurred in Sterling.
68
Craneware plc Annual Report 2020 Notes to the Financial Statements [Cont’d.]
3 Financial risk management (cont’d.)
Management is 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 Board continues to assess the appropriateness of the Group’s hedging policy.
The Directors believe that a 10% change in the value of Sterling relative to the US dollar would impact post-tax profits and equity in the region of $1,853,000
lower/higher respectively as a result of foreign exchange gains/losses on Sterling denominated transactions and the translation of Sterling denominated
current liabilities. The Directors believe that, consistent with the prior year, 10% is appropriate for the sensitivity analysis.
(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 other variables held constant, alter post-tax profit and equity for the year in the region of $115,000 higher/lower
respectively. The Directors believe that 25 basis points is appropriate for the sensitivity analysis based on recent market conditions.
(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.
Credit risk also arises on cash and cash equivalents placed with the Group’s banks. The Group monitors the financial standing of any institution with which it
deposits cash.
(c) Counterparty risk
The Group has significant cash and cash equivalent balances and in order to mitigate the risk of failing institutions management has treasury deposits spread
across a range of reputable banks, the details of which are disclosed on page 26.
(d) Liquidity risk
Management reviews the liquidity position of the Group to ensure that sufficient cash is available to meet the underlying needs of the Group as they fall due
for payment.
The table below analyses the Group’s financial liabilities which will be settled on a net basis into relevant maturity grouping based on the remaining period
from the Balance Sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Less than 1 year
$’000
Between
1 and 2 years
$’000
Between
2 and 5 years
$’000
Over 5 years
$’000
At 30 June 2019
Trade and Other Payables
7,532
At 30 June 2020
Trade and Other Payables
Lease Liabilities
6,448
946
-
-
999
-
-
1,057
-
-
126
Total
$’000
7,532
6,448
3,128
There is no difference between the undiscounted trade and other payable liabilities and the amounts shown in Note 21 as these liabilities are all short term
in nature.
Lease liabilities relate entirely to leases under IFRS 16 and are fixed rate financial liabilities. The difference between the undiscounted cash flows above and
the liabilities are per Note 21 and the Group Balance Sheet is future finance charge on the lease liabilities of $165,000.
Capital risk management
The Group is cash generative and trading is funded internally. As a result, management does 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.
69
Craneware plc Annual Report 2020 Notes to the Financial Statements [Cont’d.]
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
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 United Kingdom.
Software licensing
Professional services
Total revenue
Contract assets
The Group has recognised the following assets related to contracts with customers:
Prepaid commissions and royalities < 1 year
Prepaid commissions and royalities > 1 year
Total contract assets
Contract assets are included within deferred contract costs and prepayments in the Balance Sheet.
Costs recognised during the year in relation to assets at 30 June 2019 were $2.5m.
2020
$’000
59,390
12,102
71,492
2019
$’000
60,488
10,913
71,401
2020
$’000
2,565
3,915
6,480
2019
$’000
2,537
4,946
7,483
Contract liabilities
The following table shows both the total contract liabilities and the aggregate transaction price allocated to performance obligations that are partially or fully
unsatisfied at 30 June 2020 from software license and professional service contracts:
Software licensing
Professional services
Total contract liabilities
2020
$’000
30,239
6,916
37,155
2019
$’000
33,949
3,900
37,849
Contract liabilities are included within deferred income in the Balance Sheet.
Revenue of $37.2m was recognised during the year in relation to unsatisfied performance obligations as of 30 June 2019.
Management expects that 99% of the transaction price allocated to unsatisfied performance obligations as of 30 June 2020 will be recognised as revenue
during the next reporting period ($36.8m).
70
Craneware plc Annual Report 2020 Notes 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
Share-based payments (Note 8)
Depreciation of property, plant and equipment (Note 13)
Amortisation of intangible assets (Note 14)
Exceptional aborted acquisition costs*
Exchange loss
Operating expenses
*Exceptional items relate to legal and professional fees associated with an aborted potential acquisition.
6 Operating profit
The following items have been included in arriving at operating profit:
Staff costs (Note 7)
Staff costs capitalised
Depreciation of property, plant and equipment (Note 13)
Amortisation of intangible assets (Note 14)
Impairment of trade receivables
Operating lease rents for premises
Operating lease rents for premises
Services provided by the Group’s auditors
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
During the year the Group moved from PricewaterhouseCoopers LLP to another provider for all of its tax compliance services.
2020
$’000
7,207
12,330
12,266
9,980
1,318
1,489
3,176
-
11
2019
$’000
9,726
14,086
10,405
8,723
1,296
603
2,925
1,168
71
47,777
49,003
2020
$’000
36,045
(5,786)
1,489
3,176
631
117
878
2020
$’000
145
-
145
2019
$’000
34,714
(5,950)
603
2,925
-
878
775
20189
$’000
84
149
233
71
Craneware plc Annual Report 2020
Notes to the Financial Statements [Cont’d.]
7 Staff costs
The average monthly number of persons employed by the Group and Company 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
2020
Group
Number
2019
Group
Number
2020
Company
Number
2019
Company
Number
34
105
166
47
352
2020
Group
$’000
31,049
2,541
1,137
1,318
36,045
33
113
148
45
339
2019
Group
$’000
29,888
2,488
1,042
1,296
34,714
1
36
98
36
171
-
35
87
33
155
2020
Company
$’000
2019
Company
$’000
16,279
1,417
632
491
18,819
13,345
1,191
530
1,116
16,182
The remuneration of the highest paid Director including the gain from exercising share options in the year (granted in 2009) is $0.6m (2019: $0.4m).
Full details of Directors’ emoluments and share option exercises are detailed in the Remuneration Committee’s Report on page 49 and key management
compensation is given in Note 23, Related Party Transactions. Contributions are made on behalf of two of the executive Directors to a defined contribution
retirement benefit scheme (2019: two).
8 Share-based payments
During the year the Group operated six equity-settled share-based payment plans whereby options over, or conditional awards of, Ordinary Shares in
Craneware plc can be granted to employees and Directors. Directors’ interests in share plan awards are set out in the Remuneration Committee’s Report on
pages 51 and 52. The fair value of the share-based awards is recognised as an expense, with a corresponding increase in equity, during the vesting period. A
total share-based payments expense of $1,318,175 (2019: $1,296,220) was recognised in the Statement of Comprehensive Income for the year, as stated in
Note 7 above. This comprises a credit of $94,000 (2019: $760,610 expense) relating to the movement in the accrual for estimated employer National Insurance
contributions on the unexercised options granted under the 2007 Share Option Plan and $1,412,175 (2019: $535,610) share-based payment charge split
as follows:
Type of award and name of share plan
Share options granted under the 2007 Share Option Plan
Share options granted under the 2016 Unapproved Share Option Plan
Share options granted under the 2016 Schedule 4 Share Option Plan
Share options granted under the 2018 Employee Stock Purchase Plan
Share options granted under the 2018 SAYE Option Plan
Conditional share awards granted under the LTIP
Contingent share awards
Total share-based payments charge
72
2020
$’000
2019
$’000
2
141
25
13
14
700
517
1,412
76
(11)
(10)
-
-
459
22
536
Craneware plc Annual Report 2020 Notes to the Financial Statements [Cont’d.]
8 Share-based payments (cont’d.)
Share option plans
Share options, granted by the Company to employees in respect of the following number of Ordinary Shares, were outstanding at 30 June 2020.
Date of grant
Exercise
price (GBP)
Exercise
price (USD)
Remaining
life at 1
July 2019
(years)
No. of options
at 1 July 2019
Granted
Exercised
Lapsed
No. of
options at 30
June 2020
Remaining
life at 30
June 2020
(years)
£3.35
£4.01
£3.60
£4.00
£3.95
£5.225
£7.50
£7.50
£11.775
2007 Share Option Plan
22 Dec 2009
06 Sep 2010
04 Sep 2012
21 Sep 2012
10 Sep 2013
22 Sep 2014
09 Mar 2016
01 Apr 2016
12 Sep 2016
2016 Unapproved Option Plan
24 Mar 2017
17 Jan 2018
05 Sep 2018
04 Sep 2019
2016 Schedule 4 Option Plan
24 Mar 2017
17 Jan 2018
05 Sep 2018
04 Sep 2019
2018 Employee Stock Purchase Plan
24 Mar 2020
2018 SAYE Option Plan
£12.375
£17.750
£27.100
£19.000
£12.375
£17.750
£27.100
£19.000
£11.475
$5.34
$6.18
$5.72
$6.50
$6.21
$8.39
$10.66
$10.72
$15.63
$15.44
$24.45
$34.88
$23.01
$15.44
$24.45
$34.88
$23.01
$13.34
20 Apr 2020
£11.475
$14.32
0.5
1.2
3.2
3.2
4.2
5.2
6.7
6.8
7.2
7.7
8.5
9.2
-
7.7
8.5
9.2
-
-
-
17,467
20,310
5,178
6,605
50,408
105,578
213,045
10,000
41,263
57,679
67,657
52,494
-
19,392
8,167
5,161
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25,502
-
-
-
7,967
21,669
42,328
(17,467)
(1,330)
(1,725)
-
(3,221)
(4,700)
(98,264)
(10,000)
(4,794)
(13,059)
(234)
-
-
-
-
-
-
-
-
-
-
(1,725)
-
-
(2,350)
(2,805)
-
-
(4,646)
(9,802)
(9,400)
(5,389)
-
(704)
(1,035)
(920)
-
-
-
18,980
1,728
6,605
47,187
98,528
111,976
-
36,469
39,974
57,621
43,094
20,113
19,392
7,463
4,126
7,047
21,669
-
0.2
2.2
2.2
3.2
4.2
5.7
5.8
6.2
6.7
7.5
8.2
9.2
6.7
7.5
8.2
9.2
1.8
42,328
3.3
680,404
97,466 (154,794)
(38,776)
584,300
The weighted average share price at the date of exercise of share options in the year ended 30 June 2020 was £21.03 ($26.32) (2019: £32.83 ($43.17)). The
market value of Craneware plc Ordinary Shares at 30 June 2020 was £17.05 ($20.97) per share. The weighted average remaining contractual life of the options
outstanding at 30 June 2020 is 6.2 years (2019: 6.5 years).
Balance outstanding at beginning of the year
Share options granted during the year
Exercised during the year
Lapsed during the year
Balance outstanding at end of the year
Exercisable at end of the year
2020
2019
Number of Options
Weighted average
exercise price (£)
Number of Options
Weighted average
exercise price (£)
680,404
97,466
(154,794)
(38,776)
584,300
380,841
10.22
14.06
7.37
17.70
11.12
7.39
690,854
60,976
(36,713)
(34,713)
680,404
428,591
8.53
27.10
5.11
11.65
10.22
6.09
The Craneware plc Employees’ Share Option Plan 2007 (‘the 2007 Share Option Plan’)
Options over Ordinary Shares were granted under the 2007 Share Option Plan 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, were granted subject to sufficiently stretching performance conditions. These options are
subject to time-based vesting and are not normally exercisable before the third anniversary of the date of grant. Such options lapse no later than the tenth
anniversary of the date of grant.
73
Craneware plc Annual Report 2020 Notes to the Financial Statements [Cont’d.]
8 Share-based payments (cont’d.)
For share option awards granted under the 2007 Share Option Plan, fair value has been estimated on the date of grant using a Black-Scholes option pricing
model, as appropriately adjusted. The Group estimates the number of options likely to vest by reference to the Group’s employee 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 the IPO to date of
grant, results in an actual volatility calculation for all grants from December 2010. The assumptions applied in the option pricing model, in respect of each
option grant were as follows:
Date of Grant
12-Sep-16
1-Apr-16
9-Mar-16
22-Sep-14
21-Oct-13
10-Sep-13
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
$15.63
£11.775
3.00
16%
0.15%
2.0%
$15.63
£11.775
2
41,263
$1.07
$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
The Craneware plc Unapproved Company Share Option Plan (2016)
The Craneware plc Schedule 4 Company Share Option Plan (2016)
Share options were granted under these Plans to certain employees, senior managers and executive Directors in September 2019, in September 2018,
January 2018 and in March 2017, as summarised in the table below. The exercise price of these share options was at the Company share price on the day
before the grant date. The market-based performance conditions applicable to all of those share options granted in September 2019, in September 2018,
January 2018 and in March 2017 are outlined in the Remuneration Committee’s Report on pages 47 and 48.
The fair value of the share options granted under these two Plans was estimated using a Monte Carlo pricing model, as appropriately adjusted, based on the
following assumptions:
Date of Grant
Share price at date of grant
Share price at date of grant
Vesting period (years)
Expected volatility
Risk free rate
Exercise price
Exercise price
Shares under option at date of grant
Fair value per option
September 4,
2019
September 5,
2018
January 17,
2018
£19.000
$23.01
3
43.5%
0.38%
£19.000
$23.01
33,469
$5.63
£27.100
$34.88
3
26.6%
0.77%
£27.100
$34.88
60,976
$5.88
£17.750
$24.45
3
22.8%
0.56%
£17.750
$24.45
88,074
$3.05
March 24,
2017
£12.375
$15.44
3
20.5%
0.11%
£12.375
$15.44
93,029
$1.55
The expected volatility was determined by calculating the historic volatility of the Group’s share price over the previous three years.
The Craneware plc SAYE Option Plan (2018)
The Craneware plc Employee Stock Purchase Plan (2018)
The Save As You Earn (SAYE) option plan and the Employee Stock Purchase Plan (ESPP) were approved by the Company’s shareholders at the Annual General
Meeting held on 6 November 2018. Share options were first granted under the ESPP in March 2020 to those employees who chose to participate.
74
Craneware plc Annual Report 2020
Notes to the Financial Statements [Cont’d.]
8 Share-based payments (cont’d.)
The first grant of share options under the SAYE plan, to those employees and to the executive Directors who chose to participate, was in April 2020. The exercise
price of these share options was at a 15% discount to the Company share price on 23 March 2020 in accordance with the rules of the ESPP and the SAYE plans.
The fair value of the share options granted under these two Plans was estimated using the Black-Scholes option pricing model, as appropriately adjusted,
based on the following assumptions:
Date of Grant
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
April 20, 2020
March 24, 2020
SAYE
ESPP
$25.58
£20.50
3.00
50.6%
0.11%
1.58%
$14.32
£11.475
67
42,328
$8.89
$15.23
£13.10
2.00
55.8%
0.11%
1.58%
$13.34
£11.475
37
21,669
$8.27
The expected volatility was determined by calculating the historic volatility of the Group’s share price over the previous three and two years respectively.
Long Term Incentive Plan
The Craneware plc Long Term Incentive Plan (2016) (the ‘LTIP’)
Conditional share awards were granted under this Plan to certain senior managers and to the executive Directors in September 2019, in September 2018, in
January 2018 and in March 2017, as summarised in the table below. The market-based performance conditions, measured over three consecutive three year
periods, applicable to those conditional share awards granted in September 2019, in September 2018, in January 2018 and in March 2017, are outlined in the
Remuneration Committee’s Report on pages 47 and 48.
Balance outstanding at 1 July
Awards granted in the year
Vested awards released during the year
Forfeited / lapsed during the year
Balance outstanding at 30 June
Number of conditional
share awards 2020
Number of conditional
share awards 2019
119,088
98,782
(43,538)
(12,506)
161,826
90,842
33,590
-
(5,344)
119,088
The remaining weighted average contractual life of the conditional share awards outstanding at 30 June 2020 is 1.6 years (at 30 June 2019: 1.4 years).
The fair values of the conditional share awards granted in financial years 2020, 2019, 2018 and in 2017 were estimated using the Monte Carlo pricing model, as
appropriately adjusted, with the following main assumptions:
Date of Grant
04 Sep 2019
05 Sep 2018
17 Jan 2018
24 Mar 2017
Share price at date of grant
Share price at date of grant
Vesting period (years)
Expected volatility
Risk free rate
Fair value per conditional share award
£19.000
$23.01
3
43.5%
0.38%
$16.47
£27.100
$34.88
3
26.6%
0.77%
$31.48
£17.750
$24.45
3
22.8%
0.56%
$19.84
£12.375
$15.44
3
20.5%
0.11%
$12.50
Other share based payments
In addition to the employee share plans detailed above, employee contingent share awards have also been granted by the Company. Contingent share awards
in respect of a total of 159,336 Ordinary Shares were outstanding at 30 June 2020 (159,336 Ordinary Shares at 30 June 2019).
75
Craneware plc Annual Report 2020 Notes to the Financial Statements [Cont’d.]
8 Share-based payments (cont’d.)
There are three sets of non-market performance conditions applicable to each of the contingent share awards such that the vesting of each one-third amount
of the award shares is assessed against one of the performance conditions. If the respective performance conditions are achieved, and subject to continuous
employment within the Group throughout the period from the grant date: a maximum of 159,336 award shares will vest on 1 July 2021 at the earliest.
The fair value of the contingent share awards is based on the market value of an Ordinary Share on the date of grant. An assessment of the expected extent
of vesting of the awards is made at the end of each reporting period and the share-based payments expense recognised is adjusted so that over the whole
vesting period the expense recognised is based on the fair value of the quantity of share awards that actually vest. In the year ended 30 June 2020, none of the
expense in respect of these contingent share awards related to employee costs incurred on the eligible development of software (2019: $315,007 capitalised
within development costs).
9 Finance income and expenses
Finance income
Deposit interest receivable
Total finance income
Finance expense
Interest on lease liabilites
Total finance expense
During the year $94,000 of interest costs were recognised in relation to the implementation of IFRS 16.
10 Tax on profit on ordinary activities
Profit on ordinary activities before tax
Current tax
Corporation tax on profits of the year
Adjustments for prior years
Total current tax charge
Deferred tax
Origination & reversal of timing differences
Adjustments for prior years
Total deferred tax charge
Tax on profit on ordinary activities
2020
$’000
192
192
2020
$’000
94
94
2020
$’000
19,304
2,806
(446)
2,360
108
-
108
2,468
20189
$’000
318
318
2019
$’000
-
-
2019
$’000
18,322
3,047
(113)
2,934
323
80
403
3,337
The difference between the current tax charge on ordinary activities for the year, reported in the consolidated Statement of Comprehensive Income,
and the current tax charge that would result from applying a relevant standard rate of tax to the profit on ordinary activities before tax, is explained
as follows:
Profit on ordinary activities at the UK tax rate 19% (2019: 19%)
Effects of:
Adjustment for prior years
Additional US taxes on profits 25% (2019: 25%)
R&D tax credit
Expenses not deductible for tax purposes
Origination and reversal of temporary differences
Deduction on share plan charges
Total tax charge
76
3,666
(446)
700
(490)
181
(350)
(793)
2,468
3,481
(33)
54
(364)
17
561
(379)
3,337
Craneware plc Annual Report 2020
Notes to the Financial Statements [Cont’d.]
11 Dividends
The dividends paid during the year were as follows:
Final dividend, re 30 June 2019 - 19.05 cents (15 pence)/share ( 2019: 18.48 cents (14.0 pence)/share)
Interim dividend, re 30 June 2020 - 15.1 cents (11.5 pence)/share (2019: 13.50 cents (10.0 pence)/share)
Total dividends paid to Company shareholders in the year
2020
$’000
5,311
3,766
9,077
2019
$’000
4,713
3,784
8,497
The proposed final dividend of 18.45 cents (15 pence), as noted on page 11, for the year ended 30 June 2020 is subject to approval by the shareholders at the
Annual General Meeting and has not been included as a liability in these financial statements.
12 Earnings per share
a) Basic
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of shares in issue
during the year.
Profit attributable to equity holders of the Company ($'000)
Weighted average number of Ordinary shares in issue (thousands)
Basic earnings per share ($ per share)
Profit attributable to equity holders of the Company ($'000)
Adjustments* ($'000)
Adjusted Profit attributable to equity holders ($'000)
Weighted average number of Ordinary shares in issue (thousands)
Adjusted Basic earnings per share ($ per share)
2020
16,836
26,796
0.628
16,836
688
17,524
26,796
0.654
2019
14,985
26,691
0.561
14,985
1,914
16,899
26,691
0.633
*Relate to aborted acquisition costs, share related activities and amortisation of acquired intangibles if applicable in the year. These adjustments are to focus on what the Group
regards as a more reliable indicator of the underlying operating performance and are consistent with other similar companies.
77
Craneware plc Annual Report 2020 Notes to the Financial Statements [Cont’d.]
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 ($'000)
Adjustments* ($'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)
2020
16,836
26,796
404
27,200
0.619
16,836
688
17,524
26,796
404
27,200
0.644
2019
14,985
26,691
555
27,246
0.550
14,985
1,914
16,899
26,691
555
27,246
0.620
Relate to aborted acquisition costs, share related activities and amortisation of acquired intangibles if applicable in the year. These adjustments are to focus on what the Group
regards as a more reliable indicator of the underlying operating performance and are consistent with other similar companies..
13 Property, plant and equipment
Group
Cost
At 1 July 2019
Adoption of IFR 16
Additions
At 30 June 2020
Accumulated depreciation
At 1 July 2019
Charge for year
At 30 June 2020
Net Book Value at 30 June 2020
Cost
At 1 July 2018
Additions
Disposals
At 30 June 2019
Accumulated depreciation
At 1 July 2018
Charge for year
Depreciation on disposals
At 30 June 2019
Net Book Value at 30 June 2019
78
Leased
Properties
$’000
Computer
Equipment
$’000
Office
Furniture
$’000
Tenants
Improvements
$’000
-
3,826
-
3,826
-
917
917
2,909
-
-
-
-
-
-
-
-
-
2,255
-
154
2,409
1,522
393
1,915
494
1,755
500
-
2,255
1,109
413
-
1,522
733
707
-
6
713
679
19
698
15
718
7
(18)
707
668
29
(18)
679
28
1,625
-
27
1,652
1,112
160
1,272
380
1,480
147
(2)
1,625
953
161
(2)
1,112
513
Total
$’000
4,587
3,826
187
8,600
3,313
1,489
4,802
3,798
3,953
654
(20)
4,587
2,730
603
(20)
3,313
1,274
Craneware plc Annual Report 2020 Notes to the Financial Statements [Cont’d.]
13 Property, plant and equipment (cont'd.)
Leases properties
All leased properties are right-of-use assets. These properties consist of office spaces used by the Group in the UK and the USA. The Group does not have any
other right-of-use assets other than those disclosed under leased properties.
All right-of-use assets were brought onto the balance sheet on transition to IFRS 16. There were no new right-of-use assets recognised in the period and no
disposals of right-of-use assets in the period. Depreciation of $917,000 was recognised during the year in respect of right-of-use assets.
The average lease term is 4 years
Group
Cost
At 1 July 2019
Adoption of IFRS 16
Additions
At 30 June 2020
Accumulated depreciation
At 1 July 2019
Charge for year
At 30 June 2020
Net Book Value at 30 June 2020
Cost
At 1 July 2018
Additions
At 30 June 2019
Accumulated depreciation
At 1 July 2018
Charge for year
At 30 June 2019
Net Book Value at 30 June 2019
Leased
Properties
$’000
Computer
Equipment
$’000
Office
Furniture
$’000
Tenants
Improvements
$’000
-
1,988
-
1,988
-
548
548
1,440
-
-
-
-
-
-
-
1,088
-
83
1,171
729
197
926
245
809
279
1,088
527
202
729
359
489
-
3
492
472
14
486
6
489
-
489
457
15
472
17
1,451
-
4
1,455
1,027
145
1,172
283
1,317
134
1,451
883
144
1,027
424
Total
$’000
3,028
1,988
90
5,106
2,228
904
3,132
1,974
2,615
413
3,028
1,867
361
2,228
800
79
Craneware plc Annual Report 2020
Notes to the Financial Statements [Cont’d.]
14 Intangible assets
Goodwill and Other Intangible assets
Goodwill
$’000
Customer
Relationships
$’000
Proprietary
Software
$’000
Development
Costs
$’000
Computer
Software
$’000
Group
Cost
At 1 July 2019
Additions
At 30 June 2020
Accumulated amortisation and
impairment
At 1 July 2019
Charge for the year
At 30 June 2020
11,438
-
11,438
250
-
250
Net Book Value at 30 June 2020
11,188
Cost
At 1 July 2018
Additions
At 30 June 2019
Accumulated amortisation and
impairment
At 1 July 2018
Charge for the year
At 30 June 2019
11,438
-
11,438
250
-
250
Net Book Value at 30 June 2019
11,188
2,964
-
2,964
2,701
263
2,964
-
2,964
-
2,964
2,371
330
2,701
263
3,043
-
3,043
2,618
425
3,043
23,549
9,328
32,877
5,698
2,096
7,794
-
25,083
3,043
-
3,043
2,189
429
2,618
425
13,969
9,580
23,549
3,902
1,796
5,698
17,851
1,910
194
2,104
1,200
392
1,592
512
1,395
515
1,910
830
370
1,200
710
Total
$’000
42,904
9,522
52,426
12,467
3,176
15,643
36,783
32,809
10,095
42,904
9,542
2,925
12,467
30,437
In accordance with the Group’s accounting policy, the carrying values of Goodwill and other intangible assets are reviewed for impairment annually or more
frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill arose on the acquisition of Craneware InSight, Inc.
The carrying values are assessed for impairment purposes by calculating the value in use of the core Craneware business cash generating unit. This is the
lowest level of which there are separately identifiable cash flows to assess the Goodwill acquired as part of the Craneware InSight, Inc purchase.
The key assumptions in assessing value in use are the pre-tax discount rate applied of 14.9% (2019: 15.7%), future growth rate of revenue and the operating
margin. After the initial term of 5 years, the Group applied a growth rate in perpetuity of 2% (2019: 2%). These take into account the customer base and
expected revenue commitments from it, anticipated additional sales to both existing and new customers and market trends currently seen and those expected
in the future.
The Group has assessed events and circumstances in the year and the assets and liabilities of the business cash-generating unit; this assessment has confirmed
that no significant events or circumstances occurred in the year and that the assets and liabilities showed no significant change from last year.
After review of future forecasts, the Group confirmed the growth forecast for the next five years showed that the recoverable amount would continue to exceed
the carrying value. There are no reasonable possible changes in assumptions that would result in an impairment.
80
Craneware plc Annual Report 2020
Notes to the Financial Statements [Cont’d.]
14 Intangible assets (cont’d.)
Goodwill and Other Intangible assets (Cont’d.)
Company
Cost
At 1 July 2019
Additions
At 30 June 2020
Accumulated amortisation
At 1 July 2019
Charge for the year
At 30 June 2020
Net Book Value at 30 June 2020
Cost
At 1 July 2018
Additions
At 30 June 2019
Accumulated amortisation
At 1 July 2018
Charge for the year
At 30 June 2019
Net Book Value at 30 June 2019
Development
Costs
$’000
Computer
Software
$’000
23,142
9,328
32,470
5,451
1,936
7,387
25,083
13,549
9,593
23,142
3,815
1,636
5,451
17,691
1,519
187
1,706
932
313
1,245
461
1,068
451
1,519
646
286
932
587
Total
$’000
24,661
9,515
34,176
6,383
2,249
8,632
25,544
14,617
10,044
24,661
4,461
1,922
6,383
18,278
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 Nature of Business
Craneware Inc
Ordinary
Craneware InSight Inc
Ordinary
Kestros Ltd (t/a
Craneware Health)
Ordinary
Craneware Healthcare
Intelligence, LLC
Ordinary
100%
100%
100%
100%
Sales & Marketing
Product Development &
Professional Services
Software Development
Software Development
Craneware, Inc. and Craneware InSight, Inc. are incorporated in the United States of America and Craneware plc holds 10,000 (2019: 10,000) and 1,000 (2019:
1,000) common shares respectively with a nominal value of $0.01 each. Craneware Healthcare Intelligence, LLC is incorporated in the United States of America
and Craneware plc is its sole member. Kestros Ltd (t/a Craneware Health) is incorporated within the United Kingdom and Craneware plc holds 1,075 (2019:
1,075) Ordinary shares respectively with a nominal value of £1 each.
Cost
At 1 July
Impairment of investment
At 30 June
2020
$’000
10,107
(1,107)
9,000
2019
$’000
10,107
-
10,107
81
Craneware plc Annual Report 2020
Notes to the Financial Statements [Cont’d.]
15 Investments in subsidiary undertakings (cont’d.)
During the year, the remaining IP in Kestros Ltd reached the end of its useful life with all relevant code being fully integrated into the Trisus software.
Additionally, the number of customers using the MiCheckin software is now minimal. Therefore, the directors took the decision to provide fully against the
investment in Kestros Ltd.
The results of the Subsidiary companies have been included in the consolidated financial statements. Subsidiary registered addresses are listed on page 26.
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.
16 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
2020
$’000
18,171
(1,775)
16,396
172
-
2,055
6,295
24,918
-
(3,915)
21,003
2019
$’000
15,415
(1,246)
14,169
308
-
1,924
7,334
23,735
-
(4,946)
18,789
2020
$’000
18,043
(1,775)
16,268
7,880
6,000
1,419
-
31,567
(6,000)
-
25,567
2019
$’000
15,271
(1,246)
14,025
7,335
6,000
1,075
-
28,435
(6,000)
-
22,435
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 financial assets at amortised cost.
The $6,000,000 loan due to the Company from Craneware InSight Inc. remains outstanding and is payable on demand; interest is charged quarterly in
accordance with the agreement at LIBOR plus 1%.
Expected credit loss allowance for trade receivables
The following table provides information about the exposure to credit risk and ECLs for trade receivables as at 30 June 2020.
Current
$’000
<30 days
$’000
30 – 60 days
$’000
60 – 90 days
$’000
> 90 days
$’000
0.0%
7,437
-
7,437
1.7%
2,390
41
2,349
1.9%
1,588
30
1,558
2.5%
532
13
519
27.2%
6,224
1,691
4,533
Current
$’000
<30 days
$’000
30 – 60 days
$’000
60 – 90 days
$’000
> 90 days
$’000
0.0%
6,879
-
6,879
2.1%
4,073
86
3,987
1.5%
722
11
711
1.9%
896
17
879
39.8%
2,845
1,132
1,713
30 June 2020
Expected credit loss rate
Gross carrying amount
Expected credit loss
Net carrying amount
30 June 2019
Expected credit loss rate
Gross carrying amount
Expected credit loss
Net carrying amount
82
Craneware plc Annual Report 2020
Notes to the Financial Statements [Cont’d.]
16 Trade and other receivables (cont’d.)
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
2020
$’000
1,246
1,250
(631)
(90)
1,775
2019
$’000
1,072
443
-
(269)
1,246
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.
17 Deferred taxation
Deferred tax is calculated in full on the temporary differences under the liability method using a rate of tax of 19% (2019: 19%) in the UK and 25% (2019:
25%) 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
2020
$’00
3,244
(108)
(728)
2,408
2019
$’000
3,831
(403)
(184)
3,244
2020
$’000
1,154
172
(187)
1,139
2019
$’000
1,204
57
(107)
1,154
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 2020 was $2,408,118 (2019: $3,243,859).
Deferred tax assets - recognised
Group
At 1 July 2019
Credited / (charged) to comprehensive income
Credited / (charged) to equity
Total provided at 30 June 2020
At 1 July 2018
Credited / (charged) to comprehensive income
Charged to equity
Total provided at 30 June 2019
Short term
timing differences
$’000
Losses
$’000
Share Options
$’000
219
402
139
760
801
(582)
-
219
357
(209)
-
148
461
(104)
-
357
2,805
45
(867)
1,983
2,760
229
(184)
2,805
Total
$’000
3,381
238
(728)
2,891
4,022
(457)
(184)
3,381
83
Craneware plc Annual Report 2020
Notes to the Financial Statements [Cont’d.]
17 Deferred taxation (cont'd.)
Deferred tax liabilities - recognised
Group
At 1 July 2019
Charged to comprehensive income
Total provided at 30 June 2020
At 1 July 2018
Credited to comprehensive income
Total provided at 30 June 2019
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
Long-term
Timing differences
$’000
Accelerated
tax
depreciation
$’000
-
-
-
-
-
-
(137)
(346)
(483)
(191)
54
(137)
2020
$’000
2,743
148
2,891
(335)
(148)
(483)
2,408
Total
$’000
(137)
(346)
(483)
(191)
54
(137)
2019
$’000
3,100
281
3,381
-
(137)
(137)
3,244
The Company's Deferred tax assets and liabilities are all expected to be recovered in the future.
Deferred tax assets - recognised
Company
At 1 July 2019
Credited to comprehensive income
Charged to equity
Total provided at 30 June 2020
At 1 July 2018
Credited to comprehensive income
Charged to equity
Total provided at 30 June 2019
Deferred tax liabilities - recognised
Company
At 1 July 2019
Charged to comprehensive income
Total provided at 30 June 2020
At 1 July 2018
Credited to comprehensive income
Total provided at 30 June 2019
Share
Options
$’000
1,203
204
(187)
1,220
1,269
41
(107)
1,203
Accelerated
tax depreciation
$’000
(49)
(32)
(81)
(65)
16
(49)
Total
$’000
1,203
204
(187)
1,220
1,269
41
(107)
1,203
Total
$’000
(49)
(32)
(81)
(65)
16
(49)
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.
84
Craneware plc Annual Report 2020
Notes to the Financial Statements [Cont’d.]
18 Share Capital
Equity share capital
Ordinary shares of 1p each
Allotted called-up and fully paid
Equity share capital
Ordinary shares of 1p each
At 1 July
Allotted and issued in the year on exercise
of employee share options
At 30 June
Share buyback
2020
2019
Number
$’000
Number
50,000,000
1,014
50,000,000
$’000
1,014
2020
2019
Number
$’000
Number
$’000
26,698,984
127,555
26,826,539
535
1
536
26,662,271
36,713
26,698,984
534
1
535
The Company did not purchase any of its own shares during the financial year ended 30 June 2020 (2019: nil).
Shares issued during the year
The Company has granted share options and conditional share awards in respect of its Ordinary Shares and details of these are contained in Note 8. During the
year ended 30 June 2020 a total of 127,555 Ordinary Shares (2019: 36,713 Ordinary Shares) were issued on the exercise of share options by employees.
Employee Benefit Trust
The Company established the ‘The Craneware plc Employee Benefit Trust’ (the EBT) during the year ended 30 June 2017. This is a discretionary trust
established, in conjunction with the operation of the Company’s employee share plans, for the benefit of the employees of the Company and its subsidiaries.
The EBT has an independent trustee, RBC cees Trustee Ltd. The Company has provided a loan to the EBT. The movement in the balance of the loan, which is
denominated in Sterling, from the Company to the EBT during the year ended 30 June 2020 is summarised in the table below.
Loan balance (from Company to the EBT) at 1 July
Exchange loss
Addition to the loan from the Company to the EBT during the year
Partial repayment of loan by the EBT during the year
Loan balance (from Company to the EBT) at 30 June
2020
$’000
7,031
(240)
1,255
(337)
7,709
2019
$’000
7,331
(300)
-
-
7,031
The EBT purchased 43,395 Craneware plc Ordinary Shares of 1 pence each in the market at a weighted average price of £14.22 per share in the year ended
30 June 2020 (2019: no shares in the Company were purchased by the EBT). The Shares held by the EBT are utilised to satisfy employee share plan awards
and, during the financial year ended 30 June 2020, a total of 30,325 of the Shares from the EBT (2019: none) were used to satisfy the exercise of employee
share options and employee vested conditional share awards. At 30 June 2020 the EBT held 366,194 Craneware plc Ordinary Shares (at 30 June 2019: 353,124
Ordinary Shares).
85
Craneware plc Annual Report 2020
Notes to the Financial Statements [Cont’d.]
19 Cash generated from operations
Reconciliation of profit before tax to net cash inflow from operating activities
Profit before tax
Finance income
Finance expense
Write off of investment in subsidairy
Depreciation on property, plant and equipment
Amortisation and Impairment on intangible assets
Share-based payments
Movements in working capital:
(Increase) / decrease in trade and other receivables
(Decrease) / increase in trade and other payables
Cash generated from operations
20 Cash and cash equivalents
Cash at bank and in hand
The effective rates on short term bank deposits were 0.42% (2019: 0.72%)
21 Trade and other payables
Trade payables
Amounts owed to group companies
Lease creditor due < 1 year
Social security and PAYE
Other creditors
Accruals
Group
Company
2019
$’000
19,304
(192)
94
-
1,489
3,176
1,318
(1,183)
(872)
23,134
2018
$’000
18,322
(318)
-
-
603
2,925
1,296
(5,957)
(1,793)
15,078
2019
$’000
10,533
(261)
47
1,107
904
2,249
488
(2,512)
10,446
23,001
Group
Company
2020
$’000
47,851
2019
$’000
47,611
2020
$’000
44,480
Group
Company
2020
$’000
719
-
946
973
49
4,707
7,394
2019
$’000
1,708
-
-
527
173
5,124
7,532
2020
$’000
389
24,943
550
395
-
776
27,053
2018
$’000
13,897
(522)
-
-
361
1,922
1,116
(6,124)
6,864
17,514
2019
$’000
43,357
2019
$’000
1,037
13,440
325
56
1,617
16,475
Amounts owed to Group companies are non-interest bearing and are payable on demand. 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 2020 was 17 days (2019: 18 days). Trade and other payables are classified as financial liabilities at amortised cost.
86
Craneware plc Annual Report 2020
Notes to the Financial Statements [Cont’d.]
22 Contingent liabilities and financial commitments
a) Capital commitments
The Group has no capital commitments at 30 June 2020 (2019: $nil).
b) Lease commitments
The Group leases certain buildings and equipment under short term (less than 12 months) and low value assets. The commitments payable by the Group under
these leases are as follows:
Within one year
Between 1 and 5 years
More than 5 years
2020
$’000
10
8
-
18
2019
$’000
938
2,902
227
4,067
The undiscounted lease liability maturity analysis of leases under IFRS 16 is disclosed in Note 3.
23 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
Fees for services provided as non-executive Directors
Fees
Salaries and short-term employee benefits
Executive Directors
Salaries and short-term employee benefits
Post employment benefits
Share based payments
Other key management
Salaries and short-term employee benefits
Post employment benefits
Share based payments
Subsidiary registered addresses listed on page 26.
Charged
$
189,632
97,305
674,293
33,775
219,486
1,650,746
65,434
305,294
2020
Outstanding
at year end
$
-
-
-
-
-
-
-
-
2019
Outstanding
at year end
$
-
-
-
-
-
-
-
-
Charged
$
167,527
91,411
730,671
38,261
166,377
2,112,587
74,127
285,173
87
Craneware plc Annual Report 2020
Notes to the Financial Statements [Cont’d.]
23 Related party transactions (cont’d.)
Company
Charged
$
Fees for services provided as non-executive Directors
Fees
Salaries and short-term employee benefits
Executive Directors
Salaries and short-term employee benefits
Post employment benefits
Share-based payments
Other key management
Salaries and 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
Net operating expenses
Balance
Net Amounts due from Craneware Health/Kestros - Subsidiary company
Net operating expenses
189,632
97,305
674,293
33,775
219,486
382,201
18,806
79,341
29,435,053
9,765,798
-
1,178,674
-
162,718
Balance
-
Net Amounts due to Craneware Healthcare Intelligence - Subsidiary company
Net operating expenses
1,901,378
2020
Outstanding
at year end
$
-
-
-
-
-
-
-
Charged
$
167,527
91,411
730,671
38,261
166,377
378,510
18,954
72,689
2019
Outstanding
at year end
$
-
-
-
-
-
-
-
-
-
-
(17,192,826)
27,544,819
5,518,344
-
-
-
(9,201,180)
-
(3,712,131)
4,901,823
-
-
6,255,571
-
-
-
1,310,153
-
2,523,000
-
-
-
Balance
-
(5,462,609)
-
(4,495,094)
Note 18 contains details of the transactions and balances between the Company and the employee benefit trust during and at the end of the financial year.
Key management are considered to be the Directors together with the Chief Information Officer, Chief Technology Officer, Chief Marketing Officer, Chief People
Officer, Executive Vice President of Sales and Chief Legal Officer.
There were no other related party transactions in the year which require disclosure in accordance with IAS 24.
24 Ultimate controlling party
The Directors have deemed that there are no controlling parties of the Company.
88
Craneware plc Annual Report 2020 Personal Notes
89
Craneware plc Annual Report 2020