Craneware plc
Annual Report and Financial Statements
For the year ended 30 June 2021
Together, We are
Helping healthcare providers further
their mission through optimal
financial and operational performance
Table of
Contents
Financial and Operational Highlights 1
Solutions 2
Chairman’s Statement 4
Strategic Report: Operational and Financial Review 5
Strategic Report: Key Performance Indicators and Principal Risks and Uncertainties 13
Strategic Report: Section 172 (1) Statement 18
Stakeholder Engagement 22
Social Responsibility and Sustainability Statement 27
Directors, Secretary, Advisors and Subsidiaries 30
Board of Directors 31
Directors’ Report 33
Corporate Governance Report 39
Remuneration Committee’s Report 48
Independent Auditors' Report to the members of Craneware plc 57
Consolidated Statement of Comprehensive Income 64
Statements of Changes in Equity 65
Consolidated Balance Sheet 66
Company Balance Sheet 67
Statements of Cash Flows 68
Notes to the Financial Statements 69
Financial and Operational Highlights
Financial
Revenue increase of 6% to $75.6m (FY20: $71.5m)
Adjusted EBITDA1 increased 8% to $27.1m (FY20: $25.2m)
Profit before tax $13.2m (FY20: $19.3m) reflecting one-off exceptional costs associated with acquisition
funding
Basic adjusted EPS1 increased 6% to 69.0 cents (FY20: 65.4 cents) and adjusted diluted EPS increased to
68.1 cents (FY20: 64.4 cents)
Basic EPS 48.1 cents (FY20: 62.8 cents) and diluted EPS 47.5 cents (FY20: 61.9 cents)
Three Year Total Visible Revenue2 (including Sentry contribution from 13th July 2021 onwards) of $471.2m
(FY20 same 3 year period: $196.2m)
Strong operating cash conversion1 at 99% of Adjusted EBITDA (FY20: 92%)
Cash at year-end of $235.6m (FY20: $47.9m) after raising $187.3m (net) via a share placing and prior to
completion of the Sentry acquisition
Proposed final dividend increase to 15.5p per share (21.47 cents) (FY20: 15.0p, 18.45 cents) giving a total
dividend for the year of 27.5p per share (38.10 cents) (FY20: 26.5p, 32.60 cents) up 4%
1 Certain financial measures are not determined under IFRS and are alternative performance measures as described in Note 26 of the
financial statements
2 Refer to the Financial Review section of the Strategic Report for further details
Operational
Total Sales1 for the year increased 19% to $78.1m (FY20: $65.4m)
New Sales1 for the year increased 40% to $42.4m (FY20: $30.4m)
Sales of Trisus Enterprise Value Platform products represented 17% of New Sales in the year (FY20: 14%)
Acceleration of migration of customers to the Trisus platform, with the Trisus user base increasing to over 900
customers (FY20: 200 customers)
Continued investment in R&D and innovation to capitalise on growing market opportunity
The acquisition of Sentry Data Systems, Inc. was completed following the year end, significantly expanding
Craneware’s scale, offering and opportunity
Quick Facts — Financial
$75.6m
Revenue
$27.1m
Adjusted EBITDA1
$13.2m
Profit
69.0¢
Adjusted EPS1
$235.6m
Cash
15.5p
Final Dividend
80
70
60
50
40
30
20
10
0
71.4
71.5
75.6
67.1
57.8
2017
2018
2019
2020
2021
25
20
15
10
5
0
27.1
25.2
24.0
21.6
18.0
2017
2018
2019
2020
2021
70
60
50
40
30
20
10
0
69.0
63.3
65.4
60.2
51.4
2017
2018
2019
2020
2021
1
Craneware plc Annual Report 2021 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.
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®
Trisus® Supply
Utilizes 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.
Charge Capture
& Pricing
SaaS solution that
simplifies the price
modelling process,
creating a repeatable,
well-documented
method to establish
transparent, defensible
and competitive pricing
Trisus Pricing Analyzer™
Physician Revenue Toolkit®
SaaS solutions for
managing physician
group KPIs, charges,
codes, RVUs, fee
schedules, and related
information
Web-based and
mobile-friendly
application for reducing
risk by providing access to
reference and regulatory
resources.
Online Reference Toolkit®
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.
>_
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
available in Trisus Supply
or stand alone. Trisus
Supplies Assistant enables
providers to access
Craneware’s proprietary
supply master catalog and
quickly and correctly code
expensive implants and
devices.
Trisus 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 2021 Solutions for healthcare providers to optimise
financial and operational performance.
InSight Medical Necessity®
A SaaS solution that
provides medical
necessity validation for
all major US payors and
Advance Beneficiary
Notice (ABN) creation. The
software helps reduce
accounts-receivable days
by preventing medical
necessity denials, and
facilitates payment
communication with
patients.
Trisus® 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.
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
InSight Audit®
A comprehensive,
web-based audit
management
application that
empowers healthcare
organisations to manage
government and
commercial audits from
one central location.
Claims
Analytics
Revenue Recovery
& Retention
Cost & Margin
Analytics
Customer Success
Management
An easy, automated
application for hospitals to
meet the 2021 CMS pricing
transparency requirements
for posting both standard
charges and shoppable
services online. Analytics
on patient searches for
shoppable services are
provided back to hospitals
to ensure ongoing, proactive
pricing strategies.
Trisus Pricing Transparency
>_
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.
Customer Success
Management and Consulting
Services
Craneware has the
experienced staff needed
to review denials, write
successful appeals and
overturn improper
denials.
Appeals Service
Patient
Engagement
Web-based, mobile-friendly
supplies lookup
available in Trisus Supply
or stand alone. Trisus
Supplies Assistant enables
providers to access
Craneware’s proprietary
supply master catalog and
quickly and correctly code
expensive implants and
devices.
Trisus 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.
3
Craneware plc Annual Report 2021 Chairman's Statement
In a year still defined by the wider context of a global pandemic, our purpose
has been brought into sharp focus. As we reflect on our mission, I am proud
of the impact Craneware has made in helping our US healthcare customers
improve operational efficiency and margins so that they can continue to
invest in providing quality care for their communities.
Our contribution and continued success are made possible through the
efforts of our dedicated and talented employees who work to push
Craneware closer towards the long-term ambition of being the pre-eminent
company in improving US healthcare. Our teams and customers have shown
great fortitude and adaptability in a complex and challenging pandemic
environment, and on behalf of the Board I would like to extend our
admiration and gratitude.
The Group has made strategic strides in the year through positive sales
momentum, targeted innovation and at the same time sustained customer
retention rates above 90%, all underpinning the foundation for a return to
double-digit organic growth in future years. Continued new product releases
drove strong adoption of Trisus, the Group’s cloud-based Financial and
Operational performance platform, from both new and existing customers.
As a result, New Sales increased 40% to over $42.4m (FY20: $30.4m) with
approximately 50% of Craneware customers now using one or more of
the platform’s products. The building sales momentum translated into an
increase in total recognised revenue of 6% to $75.6m, (FY20: $71.5m), with
Adjusted EBITDA growing 8% to $27.1m (FY20: $25.2m).
Following the year end, the Group completed the acquisition of US-based
Sentry Data Systems, Inc. (“Sentry”), enhancing the Group’s pharmacy
offering and cementing Craneware’s position as a leading provider of Value
Cycle solutions to the US healthcare market. This has provided an immediate
step change in scale to operations and expanded our coverage of the US
Healthcare market with Craneware now serving approximately 40% of all
US hospitals and more than 10,000 clinics and pharmacies. In Sentry we
identified a business aligned to our vision and the combined data sets from
both companies will deliver far-reaching actionable insights for better
operational and strategic decisions such that our customers can spend
dollars far more productively on keeping people well.
The Group’s cash reserves remain healthy, delivering an operating cash
conversion rate of 99%, ahead of the prior year’s 92%. We maintained a
strong balance sheet, with cash of $235.6m at 30 June 2021, including the
net funds of $187.3m received from the equity raise in anticipation of the
acquisition of Sentry (FY20: $47.9m).
A continued focus has been our commitment to social responsibility and
community engagement. Craneware has and continues to develop many
initiatives that contribute to our credentials in these areas. I am particularly
proud of the work of Craneware Cares and the Craneware Cares Foundation,
driven by our employees. Even though they were mostly working from
home through this year, they still managed to help a total of 41 different
charities across the UK and US, including our eight Spotlight Charities.
Our opportunity to effect real change is clear and our ability to execute has
been considerably enhanced. Following a year of heightened pressure, our
US hospital customers are more motivated than ever to implement strategic
and long-term planning and our Trisus platform is specifically designed to
help them achieve this. The high visibility we have over future revenues
combined with our robust financial position gives us the ability to plan and
execute our long-term strategy to serve the best needs of our customers.
We enter the new year with a strong pipeline, supporting the Board’s
confidence in the Group’s continued growth and our ability to increase
stakeholder value.
Will Whitehorn
Chairman
20 September 2021
4
Craneware plc Annual Report 2021 Operational Review
We are pleased to deliver this set of
financial results in the year, with the growth
in customer numbers, New Sales and
Trisus Sales being strong indicators of the
successes being achieved across all three of
our growth pillars, building the foundations
for accelerated growth. Through our Trisus
platform we are at the vanguard of change
in healthcare, a force which continues
to gather momentum. Our strong New
Sales growth demonstrates the relevance
of our offering and we are increasingly
confident in achieving our long-term
vision of becoming the pre-eminent
company in improving US healthcare.
Following our growth in FY21 and the subsequent acquisition of Sentry Data
Systems, Inc. (“Sentry”), approximately 40% of US hospitals are now Craneware
customers, alongside more than 10,000 clinics and retail pharmacies. Our enlarged
scale and capabilities have considerably strengthened our ability to achieve our
mission: to profoundly impact healthcare by improving our customers’ operational
efficiency and margins so they can continue to invest in providing quality care
for their communities. This mission guides our strategy and actions, ensuring
that everything we do has a positive impact on our customers’ performance.
With over 900 US hospitals now interacting with our Trisus platform, contributing
many millions of individual anonymised data points daily, it is an increasingly
powerful source of insight into the ways in which hospital management teams
can improve their financial and operational performance. Our Trisus platform
and applications combine revenue integrity, cost management and decision
enablement into a single cloud-based platform. The platform makes the raw data
taken from multiple disparate systems useable for analysis, resolves communication
gaps between departments, remedies operational inefficiencies and helps to
manage and maintain our customers’ competitive advantage while preserving
margin. In turn, the mitigated risks, efficiencies and returns on investment being
delivered by our applications will provide the confidence and continuity for
our customers to invest in the delivery of quality care to their communities.
The positive progress in the year has been achieved against the ongoing
backdrop of COVID-19. Whilst as a business we continue to be relatively
insulated from the direct impacts of the pandemic, our customers are on the
front-line, managing a constantly evolving and complex situation. Supporting
them and the phenomenal work has been, and will continue to be our top
priority. Never has the need for accurate financial data, insight and analytics
been more important, and we will continue to do all we can to ensure our
customers have the tools they need to maintain the financial health of their
organisations and support them in their long-term strategic ambitions.
Market
The move to value-based care continues at pace
Managing the impact of the COVID-19 pandemic has clearly been the top
priority for all healthcare-related organisations over the past 18 months
and will continue to be so. While elective procedures have increased across
the majority of US States, they are yet to get back to pre-pandemic levels.
However, industry reports suggest that hospital operating margins have
been largely protected through this time.
Operationally, healthcare providers have had to adjust to new methods
of healthcare delivery, while ensuring their financial operations have the
flexibility and agility to charge for those services appropriately, highlighting
the importance of usable financial and operational data. Healthcare
providers’ requirements for greater insight into cost of care, associated
margins and the value being derived is as high, if not higher, than ever.
Against that backdrop, 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 US healthcare between spend
and outcomes. Under value-based care, healthcare providers, including
hospitals and physicians, are paid based on patient health outcomes. A
hospital’s ability to remain financially secure 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. 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.
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.
Both Republicans and Democrats have previously expressed their desire
for healthcare reform and the industry widely anticipates that reform will
remain a key agenda point moving forward, with the drive to derive greater
value from healthcare sitting at its heart. Recent government initiatives have
seen a robust defence of existing healthcare legislation. In addition, the new
administration in the White House has recently expressed the desire to see
an increase in investment into healthcare, both from Private Equity and the
community, which we anticipate will in turn boost operational investments
by healthcare providers.
While other platforms have been designed to address the clinical side of a
hospital, from a competitive positioning perspective, we have created the
market’s only platform addressing the breadth of the value cycle, aiming to
solve inefficiencies and waste across both operational, administrative and
financial functions of a hospital. Through the acquisition of Sentry, we have
created considerable distance between us and other point solution vendors,
in terms of depth of data, breadth of offering, size of customer base and
scale of operations, increasing our ability to address what is a growing and
sustainable, long-term addressable market.
Growth Strategy
Innovation to profoundly impact US healthcare operations which will drive
demand and expand our addressable market
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 the Trisus platform; a sophisticated cloud
data aggregation and intelligence platform which will allow us to migrate
5
Strategic Report: Operational and Financial ReviewCraneware plc Annual Report 2021 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.
2. To continue to enhance the capabilities of the platform through
the addition of new technology layers and applications, developed
through internal R&D, selective M&A and Third-Party Partnerships.
Our software solutions sit at the heart of our customers’ operations, tapping
into the aggregated anonymised data held within Trisus to provide greater
insight and control to their financial operations and thereby optimise their
financial performance.
Three Growth Pillars
Our growth strategy has three fundamental growth pillars:
1. 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.
By the end of June 2021, over 900 customers, approximately half of our
customer base, were utilising one or more of the Trisus applications, with
almost the entirety of the remainder connecting to the platform via the
Trisus Bridge – the first step for significant migration to the platform from
within our user base. This is another positive step forward, from the 500
reported at the half year stage and 200 at the end June 2020, evidence that
both our existing customer base and the wider healthcare provider market
have responded positively to the technological evolution of the Craneware
solution set.
The full Trisus Chargemaster solution, the re-platformed version of our
Chargemaster Toolkit, is on course to be available by the end of calendar
2021. All existing Chargemaster Toolkit customers are now on a hybrid
version, with their data synchronised to the Trisus platform, and using a
single Trisus sign on, meaning migration to the full cloud version and all its
additional functionality will take minutes once launched.
We are commencing the migration of customers to Trisus Chargemaster in
phases, with migration of early adopters now complete. Customer feedback
has been extremely positive, identifying clear additional benefits that the
platform is delivering, including ease of migration, use and deployment
throughout large scale implementations. We are on track to have all
customers migrated to the platform by the end of calendar 2022.
All customers who have signed new contracts for Chargemaster Toolkit in
recent periods have an understood migration plan to Trisus Chargemaster
and recognise this as an easy entry to the Trisus platform.
We have also commenced the migration of early adopter customers to
Trisus Pharmacy Financial Management (TRxFM), a new product, which in
phase one, will sit alongside our on-premise Pharmacy ChargeLink and the
range of pharmacy products will subsequently be expanded to include all
Pharmacy ChargeLink functionality in a new suite of applications. Pharmacy
ChargeLink customers are currently being offered the opportunity to extend
their products with the addition of the cloud based TRxFM, which is a
precursor to further applications in the Trisus Pharmacy suite, the complete
replacement for the on-premise solution. This will continue to be developed
in a modular fashion, allowing customers to select which mix of applications
best suits their needs as they become available. It is anticipated that the
cloud-based replacements for Pharmacy Chargelink (PCL) will be available
Q4 FY22.
All of the acquired customers of Sentry are serviced utilising the Oracle cloud
architecture.
We are continuing to develop the additional functionality of all our cloud
offerings as we move towards general release.
During the first half of the year we announced the availability of Trisus
Pricing Transparency (“TPT”) to all US healthcare providers. This no cost
Trisus solution was developed to enable organisations not only to meet CMS
Pricing Transparency Final Rule requirements (which came into effect in
January 2021) but ensure that organisational pricing data is most accurately
represented for patients on an ongoing basis allowing individuals to “shop”
for their healthcare needs.
Adoption of the module has continued in the second half with and
acceleration of the migration of existing customers to the Trisus platform
alongside take-up by new users. This provides a clear pathway for wider
Trisus application uptake in the future by these new customers and the
significant majority of the 900 Trisus users are now on paid for modules.
Through the growth of our Trisus customer base, and the interaction of
their data with the Trisus platform, we have in excess of 120m individual
anonymised patient encounters recorded on the platform, an increase of
more than 30% over the course of the year. The greater number of data
points, the more powerful the analytics and insights that can be provided to
help hospitals in their financial decision-making. These encounters include
one fifth of all emergency room visits in the US during the last year and
almost one quarter of all hospital admissions.
We will continue to invest in expanding the capabilities of the platform,
developing additional applications and tools, to provide further benefits to
our customers. Following the acquisition of Sentry post year end, the focus is
on the integration of Sentry data onto the platform, adding more contextual
data which will in turn drive the development of more applications and
increase the attractiveness of the platform and provide further reasons for
a healthcare provider to join. We are pleased to confirm that the level of
sales of Trisus applications exceeds 60% of the amount of capitalised R&D
spent on the platform and Trisus applications development to date, already
underwriting the majority of the investment made.
M&A
While organic growth remains a priority, we continue to evaluate the
market and will continue to pursue strategically aligned companies that will
accelerate our growth strategy, although it is unlikely that any acquisitions
in the short-term will be of the relative scale of Sentry. We maintain the
same four key acquisition criteria of which target companies must fit into at
least one, being:
1. the addition of data sets;
2. the extension of the customer base;
3. the expansion of expertise; and
4. the addition of applications suitable for the US hospital market.
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.
6
Strategic Report: Operational and Financial Review [Cont'd]Craneware plc Annual Report 2021 marketing team. Integration of the Sentry team into our organisation is
progressing well, with the various teams now working through their first
100 day integration plans. We have begun the analysis to identify cross-sale
opportunities, with these programmes expected to launch in H2 FY22. The
successful integration of Sentry will be a key focus for the year ahead.
Our People and Community
As part of our commitment to social responsibility and community
engagement, Craneware has continued to develop a number of programs
and opportunities to positively impact the community around us. A number
of years ago, we formed ‘Craneware Cares’, an employee committee that is
aimed at raising awareness and funds for charity. Craneware Cares and its
foundation are integral to our business - ‘better outcomes for all’ is not just a
tag line, it is how we approach our Social agenda.
The focus for 2021 was to help the charities who had been hit by a shortfall
in donations as a result of the COVID-19 pandemic. Craneware Cares
helped over 40 charities across the UK and the US, not only by making cash
donations, but also by providing housing supplies, school supplies, care
bags for children in the foster system, holiday gifts and even chocolate
easter eggs to The Spartans CFA. Some of the charities we supported include
one of our US Spotlight Charities, Guardian Angels Suitcases 4 Kids where
we exceeded our goal and sponsored 24 children in need, the MS Therapy
Centre by raising funds to allow them to purchase essential physiotherapy
equipment so they could continue helping their community, and one of
our UK Spotlight Charities, CERT UK, a 100% volunteer-run organisation
that takes care of people affected by crisis, emergencies created by natural
disasters, to name only a few. 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.
With the addition of Sentry’s solutions we are now directly involved in the
340B Program, assisting eligible healthcare organisations with regulatory
compliance and pharmacy procurement and utilisation that goes with this
program, thereby enabling them to generate cost savings which go directly
to the provision of more care for the underserved in their communities.
3. To grow our customer footprint, through increasing the
attractiveness of our offering and acquiring non-overlapping
customers, which in turn provides further cross-sale opportunities.
We are pleased with the sales activity during the year, which saw New
Sales >40% ahead of the prior year. 26% of these New Sales were to net
new customers. Expansion Sales to existing customers represented 74%,
demonstrating Craneware’s ability to continue to cross sell further solutions.
All sales have been driven by mitigation of risk, efficiency of operations and
compelling ROIs for our customers.
Sales of Trisus products represented 17% of New Sales in the year (FY20:
14%) representing a steadily increasing proportion of sales in addition to the
take up from our customers of the Trisus Pricing Transparency product. We
also saw our first Trisus renewals in the year.
Customer retention has always been strong, and we continued to see our
customer retention rate remain high in the period above 90%.
Acquisition of Sentry Data Systems, Inc.
Sentry Data Systems, Inc. is a leader in pharmacy procurement, compliance
and utilisation management. The successful conclusion of the acquisition
following the end of the year marks a transformational point in our journey,
considerably expanding our customer base, data sets, product offering and
market presence.
The acquisition enhances our focus on pharmacy operations within
healthcare providers, the largest cost area for US hospitals outside the
workforce and extends the reach of our Pharmacy Chargelink product family
within retail and contract specialty pharmacies. Sentry’s 147 million unique
longitudinal patient records collected over a 17 year period will enhance the
power of our Trisus platform and we also envisage significant cross-selling
opportunities will be provided by the complementary nature of Sentry’s
product suite and customer base.
Having known the business and management team for over a decade we
are delighted they are now part of our organisation, with a shared vision
and purpose. Together, we will offer healthcare organisations innovative
new ways to measurably impact operational and financial performance and
generate sustainable margins that can be re-invested in providing better
care for underserved communities.
Following the acquisition, the Group now serves approximately 40 percent
of US hospitals and more than 10,000 clinics and retail pharmacies across
all the major pharmacy brands as well as local community pharmacies and
clinics.
The quality and breadth of the combined data sets from both companies
increases our ability to provide far-reaching actionable insights for better
operational and strategic decisions, enabling further efficiencies in provider
performance so our customers can focus on serving their communities
and healthcare missions. The data will be integrated into the Trisus
platform to help identify new areas of product development to support our
customers. Sentry applications currently reside in modern web architecture
environments and no technical integration is required, just the front end of
the applications will be harmonised to create the same look and feel.
We anticipate benefits of this increased scale to be seen in greater
operational efficiencies across areas such as office space and future
product development and provides for a considerably enlarged sales and
7
Strategic Report: Operational and Financial Review [Cont'd]Craneware plc Annual Report 2021 Financial Review
In a year that has been dominated by the ongoing global pandemic, we are
proud of the progress that Craneware has made, whilst, at all times, focusing
on delivering to our customers. Our customers are on the front line in
dealing with the pandemic and supporting them has been, and will continue
to be, our top priority. The role Craneware continues to play, allowing our
customers to improve operational efficiency and margins so that they can
continue to invest in providing quality care for their communities, has never
been more important.
Through this year, the strength of the Craneware business model, it’s
long term visible revenue, our strong balance sheet and sensible cost
management whilst investing for the future have served us well. This has
allowed us to continue our development of new products, further building
out the depth of the Trisus platform across the Value Cycle, continue our sales
momentum delivering a further increase in New Sales in the year, and see a
return to growth in key financial metrics for the year. Further, post year end,
through the acquisition of Sentry, we have seen a transformational change in
the Group’s scale and operations.
During the year ended 30 June 2021, we saw significant growth in the
Total Contract Value of New Sales of 40% to $42.4m (FY20: $30.4m) which
combined with the total value of renewals signed in the year saw a 19%
increase in the Total Value of all contracts written to $78.1m (FY20: $65.4m).
As a result of our business model, “sales” and “revenue” have very different
meanings and are not interchangeable. With only a small proportion of the
revenue resulting from the sales made in the year impacting on the current
year’s reported revenue, the vast majority is recognised in future years,
providing further long-term visibility over future revenues, supporting our
future growth.
As a result, we are reporting a 6% growth in our Revenue to $75.6m (FY20:
$71.5m) which has contributed to an 8% increase in Adjusted EBITDA in the
period, growing to $27.1m (FY20: $25.2m).
Acquisition of Sentry Data Systems, Inc.
On 7 June 2021 the Board announced the proposed acquisition of SDS
Holdco, Inc., the ultimate holding company of Sentry Data Systems, Inc.. The
acquisition was completed on 12 July 2021. The headline consideration for
the acquisition of Sentry (on a cash free / debt free basis) was $400m, subject
to benchmark level of working capital and other expected adjustments. The
consideration for the acquisition was satisfied by the payment of $312.5m
(as adjusted) in cash and $87.5m by the issuance of 2,507,348 new ordinary
shares in Craneware plc on 14 July 2021.
The cash consideration was funded from a combination of the Group's
existing cash resources, a new secured loan of $120m and the $187.3m net
proceeds of the share placing which completed in June 2021.
The acquisition marks the next stage of Craneware’s growth journey, as
the enlarged Group now serves approximately 40 percent of US hospitals
and more than 10,000 clinics and retail pharmacies. The increased scale
that Sentry brings will deliver greater operational efficiencies across all
areas of the Group, including considerably strengthened sales and product
development teams.
With the completion of this acquisition after the year end Sentry has not
contributed to these results. Also, with the proximity to the publication
of these accounts, we have yet to complete the associated acquisition
accounting. However, where applicable and meaningful to the KPI’s
presented we have included details of Sentry’s expected contribution.
Associated share placing completed (June 2021)
To partly fund the acquisition of Sentry, in June 2021, the Company
completed a share placing which resulted in the allotment of 6,192,652 new
Ordinary Shares at an issue price of £22.00 ($31.05) per share, representing
approximately 23.1% of the issued share capital prior to the placing.
The Placing was conducted through an accelerated bookbuild process and
was effected by way of a cash box structure. This structure was necessary
as the Company was required, by the vendors, to reduce the execution risk
of the acquisition (recognising the normal risk profile of an expected US
purchaser) and, without such certainty, we would likely have been unable to
participate in the acquisition process. Whilst the Placing was not carried out
on a fully pre-emptive basis, we consulted with our major shareholders prior
to the Placing and working with our advisors, respected the principles of pre-
emption through the allocation process.
Underlying Business Model
The new contracts we sign with our customers provide a licence for the
customer to access specified products throughout their licence period. The
underlying licence period of these New Sales are expected to be, on average,
four years. At the end of an existing licence period, or at a mutually agreed
earlier date, we look to renew these contracts with our customers.
The existing contracts within Sentry are similar in their nature albeit are for
a slightly shorter duration. In addition to the licence fees, Sentry can also
provide a number of transactional services to customers, throughout the
life of their underlying contracts. These transactional services, whilst highly
dependable, will see some variation period to period dependent on volume
of transactions.
Under the Group’s business model, we recognise software licence revenue
and any minimum payments due from our ‘other long term’ contracts evenly
over the life of the underlying contract term. Transactional services are
recognised as we provide the service and we are contractually able to invoice
the customer.
By renewing the underlying contracts, and ensuring we continue to deliver
the transactional services to our customers we sustain a highly visible
recurring revenue base, which means sales of new products to existing
customers or sales to new hospital customers are adding to this recurring
revenue.
In addition to the licence revenues recognised in any year, we also expect
revenue to be recognised from providing services to our customers. These
services are typically separately identifiable from any associated licence and
as such, 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
8
Strategic Report: Operational and Financial Review [Cont'd]Craneware plc Annual Report 2021 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.
Sales, Revenue and Revenue Visibility
Total Sales, can be broken down into the total value of contracts with
new customers or new products to existing customers at some time in
their underlying 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 graph 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 results in any individual year do not fully
reflect this valuable ‘asset’ that is contracted, but not yet recognised. As such,
the Group presents its “Revenue Visibility”. This KPI identifies revenues which
we reasonably expect to recognise, over the next three-year period, based
on sales that have already occurred.
With the acquisition of Sentry, the visible revenue derived from the existing
contracts has been included over the three-year period to 30 June 2024.
However, as the acquisition only completed on 12th July, visible revenue
is only included from this date forward (i.e. FY22 includes Sentry visible
revenues from 13th July 2021 to 30 June 2022).
The Three-Year Revenue Visibility KPI is a forward looking KPI and therefore
will always include some judgement, especially in regards to transactional
revenues. To help assess this, we separately identify different categories of
revenue to better reflect the nature of these recurring revenues. This Three-
Year Visible Revenue metric includes:
80
60
future revenue under contract
revenue generated from renewals (calculated at 100% dollar
40
$m
value renewal); and
other recurring revenue, including transactional revenues
20
0
FY17
FY18
FY19
FY20
FY21
Reported Revenue
Revenue
80
60
$m
40
20
0
80
60
$m
40
20
0
80
60
$m
40
20
0
FY17
FY18
FY19
FY17
FY18
FY19
FY20
FY21
Revenue
Revenue
New Sales
80
60
$m
40
20
0
FY17
FY18
FY19
FY17
FY18
FY19
FY20
FY21
New Sales
New Sales
80
60
$m
40
20
FY20
0
40
30
$m
20
10
FY20
0
FY21
FY17
FY18
FY19
FY20
FY21
New Sales
Renewals*
FY21
FY17
FY18
FY19
FY20
FY21
Renewals
* 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 year on 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.
40
40
30
$m
20
10
0
30
$m
20
10
0
FY17
FY18
FY19
FY20
FY21
9
FY17
FY18
FY19
FY20
FY21
Renewals
Renewals
Strategic Report: Operational and Financial Review [Cont'd]Craneware plc Annual Report 2021 Future revenue under contract is, as the title suggests, subject to an
underlying contract and therefore when invoiced, we reasonably expect
to recognise in the respective future years. Renewal revenues relate to the
contracts that are coming to the end of their original contract term 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. Here, we estimate based on past performance a level of revenue we
would reasonably expect to recognise associated to the service provided. No
growth from new sales is assumed to occur when making these estimates.
The Group’s total visible revenue for the three years ended 30 June 2022,
2023 and 2024, including visible revenue from Sentry from the date of
its acquisition, identifies $471.2m of revenue (FY20 same 3 year period:
$196.2m) 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 $270.5m of which
$130.3m is expected to be recognised in FY22, $86.3m in FY23 and
$53.9m in FY24
revenue generated from renewals contributing $160.6m; being
$13.8m in FY22, $57.0m in FY23 and $89.8m in FY24
other revenue identified as recurring in nature of $13.1m in FY22 and
$13.5m in FY23 and FY24
These future revenues, with customers continuing to renew their contracts
with us, expand beyond the three-year time horizon we report on, creating
a dependable base of recurring revenue. This recurring 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
Our gross profit margin is calculated after taking account of 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 FY21 was $70.2m (FY20: $67.0m)
representing a gross margin percentage of 93% (FY20: 94%).
Three Year Visible Revenue
180
160
140
120
$m
100
80
60
40
0
13.1
13.8
130.3
FY22
13.5
57.0
86.3
FY23
13.5
89.8
53.9
FY24
Three years to 30 June 2024
Contracted
Renewals
Other recurring revenue
10
Strategic Report: Operational and Financial Review [Cont'd]Craneware plc Annual Report 2021 Operating Expenses
The increase in net operating expenses (to Adjusted EBITDA) to $43.1m
(FY20: $41.8m) reflects continued investment in our Research &
Development spend combined with prudent cost control across the rest of
the business.
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, alongside
our acquisition activities in the year, we have continued to invest significant
resource in R&D as we build out the Trisus platform and its portfolio of
products. As a result of this investment, the total cost of development in the
year was $24.7m (FY20: $21.6m), a 14% increase which is reflective of the
opportunities in the market for our products. We continue to capitalise only
the costs that relate to projects that bring future economic benefit to the
Group. As a result, the total amount capitalised in the year reduced from 43%
of total R&D spend in FY20 to 41% in the current year, being $10.1m (FY20:
$9.3m).
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 to continue at the same proportion
of revenue in future years 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.
Net Impairment Charge on Financial and Contract Assets
This relates to the movement in the provision for the impairment of trade
receivables in the year (or ‘bad debts’), being $495,000 (FY20: $529,000).
The nature of the market the Group serves and the SaaS based business
model limit the Group’s exposure in this regard, but are required to be shown
separately on the face of the Consolidated Statement of Comprehensive
Income.
Adjusted EBITDA and Profit Before Taxation
To supplement the financial measures defined under IFRS the Group presents
certain non-GAAP (alternative) performance measures. We believe the
use and calculation of these measures are consistent with other similar
listed companies and are frequently used by analysts, investors and other
interested parties in their research.
The Group use these adjusted measures in its operational and financial
decision-making as it excludes certain one-off items, allowing focus on what
the Group regards as a more reliable indicator of the underlying operating
performance.
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”).
In the year total costs of $6.5m have been identified as exceptional. These
include the costs associated with the acquisition of Sentry and its associated
share placing as well as the costs associated with the aborted share placing
in connection with a different acquisition target in August 2020. As such
these costs were adjusted from earnings in presenting Adjusted EBITDA in the
year. No costs were identified as exceptional in the prior year.
Adjusted EBITDA has grown in the year to $27.1m (FY20: $25.2m) an increase
of 8%. This reflects an Adjusted EBITDA margin of 36% (FY20: 35%). This is
consistent with the Group’s continued approach to making investments in
line with the revenue growth and prudent cost management.
Primarily as a result of the costs detailed above as exceptional and an
increase in the IFRS 2 share-based payment charge, profit before taxation
reported in the year has reduced to $13.2m (FY20: $19.3m). The increase in
the share-based payment charge included charges from Long-Term Incentive
Grants made during the period, an adjustment to retention rates and an
increased accrual for estimated employer National Insurance contributions on
the unexercised options granted under the 2007 Share Option Plan.
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 positively affected by the
finalisation of R&D tax relief claims in respect to the prior two years of $1.6m
(FY20: $0.3m) and the R&D tax relief provision for the current year of $0.7m
(FY20: $0.5m). In addition, as a result of UK Corporation tax rates increasing
to 25% from 1 April 2023, closing UK deferred tax assets and liabilities were
revalued which has reduced the current year tax charge by $0.5m (FY20: $nil)
in accordance with the now enacted rate.
As such the current year effective tax rate is 2% (FY20: 13%).
EPS
Regarding EPS, the Group again presents an Alternative Performance
Measure of Adjusted EPS, to provide consistency to other listed companies
and take account of certain one-off events. Both Basic and Diluted Adjusted
EPS are calculated excluding costs incurred as a result of acquisition and
share related activities, being $5.6m (tax adjusted) in the year (FY20: $nil)
and in the prior year amortisation of acquired intangibles of $0.7m.
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 6% to $0.690 (FY20: $0.654) and adjusted diluted EPS has
increased to $0.681 (FY20: $0.644).
Basic EPS in the period reduced to $0.481 (FY20: $0.628) and Diluted EPS
reduced to $0.475 (FY20: $0.619) primarily as a result of the exceptional
items noted above.
11
Strategic Report: Operational and Financial Review [Cont'd]Craneware plc Annual Report 2021 Cash and Bank Facilities
Cash generation and a strong balance sheet have always been a focus of
the Group. Our business model provides the basis for high levels of cash
generation and we continue to monitor the quality of our earnings through
Operating Cash Conversion, this being our ability to convert our Adjusted
EBITDA to “cash generated from operations” (as detailed in the cash flow
statement). We achieved strong Operating Cash Conversion of 99% in the
year (FY20: 92%).
As a result, we are able to continue to invest in our future and return funds
to our shareholders via dividends, returning $9.7m in the current year (FY20:
$9.1m).
As detailed above, to fund the acquisition of Sentry $187.3m (net) was
raised via a share placing in June. As the acquisition did not complete until
post year end, these amounts were held as cash reserves of the Group. As a
result, cash reserves at the year-end were $235.6m (FY20: $47.9m) of which
$48.3m represents operating cash reserves.
Also, as part of the funding for the acquisition of Sentry, the Group entered
into a Debt Facility with Silicon Valley Bank to provide up to a further $140m
of secured funding. As the acquisition did not complete until after that
year end, no draw down on this facility had taken place and as such any
arrangement and other related fees prepaid are recorded in Trade and Other
receivables.
Balance Sheet
The Group maintains a strong balance sheet. Intangible assets have
increased by $6.3m to $43.1m (FY20: $36.8m) primarily as a result of
capitalised development costs in the year net of the amortisation charged.
The level of trade and other receivables has decreased in comparison to
the prior year. This is a result of the factors identified in the prior year
that impacted our cash collections now having returned to a more normal
position.
Deferred income levels reflect the amounts of the revenue under contract
that we have invoiced but have yet to recognise as revenue. This balance is a
subset of the total visible revenue we describe above and reflected through
our three-year visible revenue metric.
Deferred income, accrued income and the prepayment of sales commissions
all arise as a result of our Annuity SaaS business model described above and
we will always expect them to be part of our balance sheet. They arise where
the cash profile of our contracts does not exactly match how revenue and
related expenses are 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 $1.3466 as
compared to $1.2598 in the prior year.
Audit Tender
During the year the Audit Committee conducted an audit tender process for
the Group’s External Audit. As part of this process a number of audit firms
were invited to tender. Details of the process followed and the selection
criteria are provided in the Corporate Governance Report on page 46. As a
result of this process the Board has approved PricewaterhouseCoopers LLP
for recommendation to shareholders, for re-appointment as auditors, at the
Company’s Annual General Meeting to be held in November 2021.
Dividend
In proposing a final dividend, the Board has carefully considered a number
of factors including the prevailing macroeconomic effects of the COVID-19
pandemic, the Group’s trading performance, our current and future cash
generation especially in light of the Sentry acquisition and our continued
desire to recognise the support our shareholders provide. After carefully
weighing up these factors, the Board proposes a final dividend of 15.5p
(21.47 cents) per share giving a total dividend for the year of 27.5p (38.10
cents) per share (FY20: 26.5p (32.60 cents) per share), an increase of 4%.
Subject to approval at the Annual General Meeting, the final dividend will be
paid on 21 December 2021 to shareholders on the register as at 26 November
2021, with a corresponding ex-Dividend date of 25 November 2021.
Outlook
The successful completion of the acquisition of Sentry Data Systems
following the end of the year marks a transformational point in our journey,
considerably expanding our customer base, data sets, product offering and
market presence. Together, we will offer healthcare organisations innovative
new ways to measurably improve operational and financial performance to
generate sustainable margins that they can re-invest to provide better care
for those underserved communities.
With a strong balance sheet, high levels of recurring revenues, high customer
retention rates and visible revenue in the next three years of $471.2m, we
have a strong financial foundation from which to accelerate growth and
investment to fulfil our potential, thereby increasing future shareholder
value.
We have enjoyed early sales momentum across the now enlarged Group
and with our expanded opportunity we look to the future with considerable
excitement and confidence as we work with the Sentry team to transform
the business of US healthcare.
Keith Neilson
Chief Executive Officer
20 September 2021
Craig Preston
Chief Financial Officer
20 September 2021
12
Strategic Report: Operational and Financial Review [Cont'd]Craneware plc Annual Report 2021 The key performance indicators listed below are focused on growing our revenues and improving our revenue mix as well as improving earnings growth for our shareholders
and generating sustainable cashflows. Detailed explanation of the movements is contained in the Financial Review on pages 8 to 12.
Key Performance Indicator Review
Revenue Growth
Revenue
Growth
2021
$75.6m
6%
2020
$71.5m
0%
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
2021
2020
$471.2m
$196.2m
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 to 30 June 2024. Full details of how this is calculated are detailed in the financial review section of the Strategic Report. The KPI
for 2021 includes the visible revenue for Sentry from 13 July 2021 following its acquisition by the Group as detailed in Note 25.
Adjusted EBITDA Growth
Adjusted EBITDA
Growth
2021
$27.1m
8%
2020
$25.2m
5%
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
2021
2020
69.0 cents
65.4 cents
6%
3%
Adjusted EPS growth demonstrates the Group’s overall profitability, adjusted for exceptional items, 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
2021
$78.1m
2020
$65.4m
Total Sales represents to 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 year on 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
Total Cash
Operating Cash
2021
$235.6m
$48.3m
2020
$47.9m
$47.9m
The Group continues to convert very high levels of the Adjusted EBITDA reported in the year into operating cash flows which, having returned $9.7m to shareholders by
dividend during the year and raised $187.3m via share placing, has resulted in cash balances of $235.6m at 30 June 2021. Operating cash of $48.3m at 30 June 2021 excludes
the funds raised via the share placing. Overall operating cash conversion, at 99% for the year ended 30 June 2021, is above the prior year of 92%.
13
Key Performance Indicators and Principal Risks and UncertaintiesCraneware plc Annual Report 2021Strategic Report: Risk Management, 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 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.
Risk Management
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 been at the forefront of the risk
management process during the year and in the prior financial year. 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 has put
in place mitigation wherever possible; further details are provided in the section
below.
The Operations Board is chaired by the Chief Executive Officer and also comprises
the Chief Financial Officer and five further members of the Senior Management
Team. The risk review is exercised through the monthly management reports
and Operations Board meetings and, due to the importance of this topic, there is
a sub-committee of the Operations Board (the Governance Committee, chaired
by the Chief Financial Officer) to ensure there is specific focus on risk review and
risk management. The purpose of the Governance Committee is to function as
a sub-committee of the Operations Board focused on Corporate Governance
responsibilities and risk management.
The Group’s risk and compliance function was expanded during the year. 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 Governance
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 of future strategy around this key business area. In addition, the
Group has a Health & Safety Committee which is also under the supervision of the
Governance Committee.
During the year ended 30 June 2021, as was the case during the prior financial year,
the Governance Committee (chaired by the Chief Financial Officer and joined by the
CEO), had the responsibility of being the COVID-19 response Committee.
The Corporate Governance Report on pages 39 to 47 includes an overview of the
Group’s internal control systems.
Risk Appetite
The Group’s risk appetite is reflected in the way it assesses, scores, ranks and then
manages individual risks. For each identified risk it is characterised, estimated
how often the specified events could occur and a judgement is made regarding
the magnitude of their likely consequences. For each identified risk, the risk
management priorities are decided by evaluating and comparing the level of risk.
This allows each risk to be quantified as to the:
•
•
•
•
•
effect of the risk and its impact;
likelihood of the risk occurring;
consideration of any advantage associated with the risk;
action to avoid or mitigate the risk;
action to take if the risk occurs.
Principal Risks and Uncertainties
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. For each risk an indication is also provided for
the estimated trend in the risk exposure being increased, decreased or relatively
unchanged compared to the prior year.
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 39 to 47.
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. The
acquisition of Sentry both presents the Group with increased opportunities as well
as changes in the risk dynamics which have to be carefully assessed and monitored
in the year ahead.
COVID-19
The Strategic Report on pages 5 to 12 acknowledges the impact COVID-19 has on
our customers and their operations. It also details the financial and operational
impact on Craneware. Whilst as a business Craneware continues to be relatively
insulated from the direct impacts of the pandemic, our customers are on the front-
line. 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.
14
Key Performance Indicators and Principal Risks and Uncertainties [Cont'd]Craneware plc Annual Report 2021Strategic Report: Since mid-March 2020 all of Craneware’s office-based staff have been working remotely from home in line with Government guidelines. This approach 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 Governance Committee continued to have responsibility for being the COVID-19 response Committee throughout the financial year ended 30 June 2021, 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 facilitate regular 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 time for questions and answers to allow any concerns and queries to be addressed. All new
updates are conducted as and when significant changes occur. A dedicated section on the Group’s intranet continues to be maintained with up to date information and the
five stages of COVID-19 indicator.
Operational efforts have been designed with employee safety as a priority. While all office-based employees continued to work from home in the financial year, various
programmes were provided to ensure their safety and wellbeing, including an increased emphasis on mental health awareness and the training of mental health first aiders
within the organisation.
Employees were further supported through this period with the ability to work reduced hours to fit in with their personal circumstances.
Climate Change
Climate change has both immediate effects and progressive, long-term effects on the risk profile of all businesses. In the short-term there is an increasing frequency of
extreme weather events (wind/rain/flood); this may lead to significant changes in certain costs, including but not limited to taxation e.g. on emissions.
The nature of Craneware’s operations, i.e. not manufacturing or transporting goods, means its environmental impact is relatively low compared with other sectors and our
overall risk from climate change is assessed as low. However, all businesses, including Craneware, must recognise the importance of responding appropriately and reducing
their contribution to global climate change.
In regard to specific risks to Craneware; existing resilience plans include mitigation strategies for extreme weather events; energy costs are a small proportion of its costs and
likely regulatory interventions are seen as manageable; and COVID-19 has clearly demonstrated our ability to work together using video conferencing, thereby reducing our
travel requirements. The Group also remains cognisant of the significant reputational risk if it does not continue to respond appropriately to global climate change.
Data and cyber security
Trend since last year: Increased
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.
It is important to continually reinforce the level of awareness of these risks across all Company personnel. While it’s important to have up to date policies and
procedures in place, human error and increasing sophistication of the potential attackers will always pose a risk to organisations.
Mitigating 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 with multiple layers of defences, 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. 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 to be completed by all employees on at least an annual basis and continues to develop and invest in
additional training. The effectiveness of this training is regularly tested and where any shortcomings are identified employees are required to reperform and
supplement their mandatory 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.
15
Key Performance Indicators and Principal Risks and Uncertainties [Cont'd]Craneware plc Annual Report 2021Strategic Report: Intellectual Property Risk
Trend since last year: No change
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.
Mitigating 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. 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: Complexity, Evolution and Reform
Trend since last year: No change
Issue: The US healthcare industry, already a complex and highly regulated environment, 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.
Mitigating 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 24, keep the Group at the forefront of industry developments.
Regulatory Environment
Trend since last year: Increased
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. This risk is also driven by new state-level data privacy legislation which is coming into play on a
rolling basis across the US, in addition to existing GDPR and HIPAA regulations. The Group operates in both the UK and the US and is therefore exposed to the changes
in the political and economic environments of both jurisdictions.
Mitigating Actions: The Group has a Governance 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 the
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
Trend since last year: No change
Issue: The Group has significant operations in both the UK and the US and is therefore exposed to the changes in the political and economic environments of both. This
includes the implications of Brexit and any changes in freedom of movement and international trade.
Mitigating Actions: The Group has experienced Board members and senior management in both countries. The Group’s operations were, until July 2021, evenly
balanced between the two, contributing positively to both economies. Since the completion of the acquisition of Sentry in July, the Group now has a larger presence in
the US. 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-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.
16
Key Performance Indicators and Principal Risks and Uncertainties [Cont'd]Craneware plc Annual Report 2021Strategic Report: Market and Customer Consolidation
Trend since last year: No change
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.
Mitigating 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
Trend since last year: No change
Issue: New entrants to the market or increased competition from existing competitors could significantly impact the Group’s market opportunity
Mitigating 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
Trend since last year: No change
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.
Mitigating Actions: The Group and Board members individually have relevant experience in regard 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 integration of the Sentry business, following its acquisition
by Craneware in July 2021, is being managed on a phased basis, using established change management controls and strong leadership support across the
organisation.
Emerging Risks
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 2021.
Considerations that impact this assessment include the Group’s current financial position, including the addition of the bank facility and other 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 continuing impact of COVID-19 on viability. The impact continues to be largely a lengthening of
sales cycles including renewals and associated upsell and cross sell, as well as, the slowing of cash collection from certain individual customers.
In addition, the Directors assessed the current banking facilities and the Group’s ability to satisfy the terms and covenants of newly added loan agreements, effective from July
2021.
The Directors also considered several 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 earlier in the Strategic Report), 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 scenarios considered
by the Directors in making this assessment, including a scenario which envisages no revenue growth. The Directors confirm that through making sensible changes to the
discretionary cash requirements, they have a reasonable expectation that the Group will be able to withstand the impact of this adverse scenario, should this occur during 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 2021. However, future assessments of the Group’s
prospects are naturally subject to uncertainty that increases with time and therefore future performance cannot be guaranteed.
17
Key Performance Indicators and Principal Risks and Uncertainties [Cont'd]Craneware plc Annual Report 2021Strategic Report: This statement intends to set out how the Directors, both individually and collectively, have had regard to the following factors when undertaking their duties during the year
ended 30 June 2021.
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
f. the need to act fairly as between members of the company.
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 (1) statement in the following
pages:
Section 172 (1) Factor
Examples
Further information on page(s)
Likely consequences of any decision in the long term
Interests of the Company’s employees
Fostering business relationships with suppliers, customers
and others
Impact of operations on the community and the environment
Maintaining a reputation for high standards of business
conduct
• Craneware’s aim, driven by its purpose, of generating long
term value for its stakeholders through its business model
and strategy
• Employee engagement and communication
• Employee wellness programmes
• Craneware Spaces
• Stakeholder engagement activities
• Craneware Cares initiatives
• Consideration of Environmental, Social and Governance
matters
• The promotion of responsible business operations
underpinned by Craneware’s Framework, purpose and
values
Acting fairly as between members of the company
• Shareholder engagement
5 to 17
22 to 24, 27 and 28
24 to 26, 36 and 37
23, 25 and 26, 27 to 29, 36
37 and 39 to 47
25, 37, 43 and 44
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.
Our key stakeholders have an important role to play in the successful operation of our business and our Directors are fully aware of their responsibilities to the Company’s
stakeholders under Section 172 (1) and take their responsibilities seriously. The Directors have oversight of stakeholder matters and the Board factors the needs and concerns
of the Company’s stakeholders into its discussions and decisions in accordance with section172 (1).
These responsibilities are embedded in our culture, our values and our purpose. Our purpose, business model, strategy and Board operations are focused on delivering long-
term benefits for all of our stakeholders while maintaining a high standard of ethical business conduct. 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, but it is important to ensure they are all
treated consistently and fairly. By considering the Group’s purpose 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.
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 22 to 26.
18
Strategic Report: Section 172 (1) StatementCraneware plc Annual Report 2021 The following table summarises some of the significant decisions made by the Board during the year ended 30 June 2021 which demonstrate the way in which the Board has
exercised their section 172 (1) duty and the stakeholder group(s) impacted by these decisions.
Principal decisions /
events
Actions
and impact
COVID-19 response
Trisus Pricing Transparency
(TPT): a free-to-use
application
Whilst as a business Craneware continues to be relatively insulated from the direct impacts of
the COVID-19 pandemic, our customers have and continue to be on the front-line. Supporting
our customers and the phenomenal work their teams continue to provide has been, and will
continue to be, Craneware’s top priority through these times.
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. Details of one initiative during this year, Trisus Pricing Transparency, is outlined
below.
Further details of actions in response to the COVID-19 pandemic are on pages 14 and 15. 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.
In 2020, 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. Throughout 2021 all office-based employees
continued to work from home and the safety and wellbeing of colleagues was, and remains, a
constant significant focus for the Board and the senior management team.
The Governance Committee chaired by the Chief Financial Officer and joined by the Chief
Executive Officer, was given the responsibility, from 2020, of being the COVID-19 response
Committee. Regular updates continue to be provided from the Committee to the Board of
Directors of the Company.
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 continues to be maintained by the Committee with
up to date information.
The Directors maintained an ongoing dialogue with shareholders throughout the period. The
Trading Update published on 8 July 2020 and then the Annual Report 2020 included an
explanation of the impact, as assessed by the Board at that time, of the pandemic on the
Group. This assessment was updated again in the trading update published on 20 January
2021 and in the interim report for the half year to 31 December 2020.
During the year ended 30 June 2021 (as was the case in the prior financial year),
notwithstanding the challenges of the COVID-19 pandemic, the Group 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.
In October 2020, Craneware announced the availability of Trisus Pricing Transparency (‘TPT’)
to all US healthcare providers. This no cost Trisus solution was developed to enable
organisations not only to meet CMS Pricing Transparency Final Rule requirements, which came
into effect in January 2021, but ensure that organisations’ pricing data is most accurately
represented for patients on an ongoing basis on the new Craneware Patient portal allowing
individuals to ‘shop’ for their healthcare needs.
TPT identifies a hospital provider’s top 300 ‘shoppable services’ being the bundles of care most
frequently delivered to patients and recommends which services to publish across a variety of
payors, meeting and going beyond the needs of the regulation. These insights allow hospitals
to make valuable business decisions, inform the overall pricing strategy of the hospital,
monitor patient search behaviour, and rebalance pricing strategies to ensure compliance and
market competitiveness while addressing the pressing problem of transparency of cost for
potential patients.
Key Stakeholder group(s)
affected
Employees
Customers
Shareholders
Community
Government
Suppliers
Customers
19
Strategic Report: Section 172 (1) Statement [Cont'd]Craneware plc Annual Report 2021 Key Stakeholder group(s)
affected
Shareholders
Shareholders
Shareholders
Principal decisions /
events
Actions
and impact
Dividend Policy (interim
dividend paid and
proposed final dividend
for year ended 30 June
2021)
Share Placing
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. Craneware reported positive financial results for the half
year to 31 December 2020 and continued to maintain healthy cash reserves, despite the
macroeconomic uncertainties created by the COVID-19 pandemic. The Board approved the
payment of an increased interim dividend in April 2021 of 12p (16.68 cents) per share (FY20:
interim dividend of 11.5p per share).
Based on the financial position, the cash reserves of the Group, and the covenants applicable
to the new debt facility, it is the intention of the Board to pay a final dividend for the year
ended 30 June 2021. As explained on page 12, the Directors are recommending the payment
of a final dividend of 15.5p (21.47 cents) per share based on the results for 2021. Subject to
approval at the Annual General Meeting, the final dividend will be paid on 21 December 2021
to shareholders on the register as at 26 November 2021.
In reaching these dividend policy decisions, the Board had regard to the need to act fairly
between its shareholders, its lenders and the long-term interests of the business.
Aborted share placing (August 2020)
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 that time.
Share placing completed (June 2021)
In June 2021, the Company completed a share placing which resulted in the allotment of
6,192,652 new Ordinary Shares at an issue price of £22.00 ($31.05) per share, representing
approximately 23.1% of the issued share capital prior to the placing. The new Ordinary Shares
rank pari passu in all respects with the existing Ordinary Shares of the Company, including the
right to receive all dividends and other distributions declared, made or paid after the date of
issue, including the final dividend declared in respect of the year ended 30 June 2021. The
purpose of the share placing was to obtain net proceeds to part fund the acquisition of SDS
Holdco, Inc., the ultimate holding company of Sentry Data Systems, Inc.. Further details are
included in Note 18 to the financial statements.
The Placing was conducted through an accelerated bookbuild process and it was effected by
way of a cash box structure. This Placing structure was chosen as the Company was required to
reduce the execution risk in respect of the acquisition or it would have been unable to
participate in the acquisition process. Whilst the Placing was not carried out on a fully
pre-emptive basis, Craneware consulted with a number of its major shareholders prior to the
Placing and has respected the principles of pre-emption through the allocation process. The
Company was pleased by the support it received from both existing and new shareholders.
20
Strategic Report: Section 172 (1) Statement [Cont'd]Craneware plc Annual Report 2021 Key Stakeholder group(s)
affected
Customers
Shareholders
Employees
Principal decisions /
events
Actions
and impact
On 7 June 2021 the Board announced the proposed acquisition of SDS Holdco, Inc., the
ultimate holding company of Sentry Data Systems, Inc. (“Sentry”). The acquisition was
completed on 12 July 2021. The aggregate consideration for the acquisition of Sentry (on a
cash free / debt free basis) was $400m. The consideration for the acquisition was satisfied as
to $312.5m (as adjusted) in cash and as to $87.5m by the issuance, on 14 July 2021, of
2,507,348 new ordinary shares in Craneware plc. The cash consideration was funded from a
combination of: the Group's existing cash resources; from a new secured debt facility; and the
$187.3m net proceeds of the share placing which completed in June 2021. Further details
regarding the acquisition are contained in Note 25 to the financial statements.
The Board of Directors believe that this acquisition is both strategically and financially
compelling.
Sentry's focus on the hospital link to community pharmacies adds breadth and depth to our
healthcare data, providing extra insight into margin improvement opportunities within
hospital operations and pharmacy costs in particular. As the second largest cost centre for
hospitals after the workforce, this is an important area of focus for hospital management
teams, as they seek to deliver greater value in healthcare. The successful conclusion of the
acquisition of Sentry marks a transformational point in Craneware’s journey, considerably
expanding our customer base, data sets, product offering and market presence. Together, we
will offer healthcare organisations innovative new ways to measurably impact operational
and financial performance and generate sustainable margins that can be re-invested in
providing better care for those who are in need.
Following the acquisition, Craneware now serves approximately 40 percent of US hospitals
and more than 10,000 clinics and retail pharmacies across all the major pharmacy brands as
well as local community pharmacies and clinics. With the quality and breadth of the combined
data sets from both companies, Craneware will deliver far-reaching actionable insights for
better operational and strategic decisions, enabling further efficiencies in provider
performance so Craneware's customers can focus on serving their communities and
healthcare missions.
Acquisition
On behalf of the Board
Craig Preston
Chief Financial Officer
20 September 2021
21
Strategic Report: Section 172 (1) Statement [Cont'd]Craneware plc Annual Report 2021 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 principal decisions and events including
the response to the COVID-19 pandemic and the acquisition of Sentry Data Systems, Inc. (“Sentry”), as outlined in the Section 172 (1) Statement. 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 18.
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.
Employee engagement initiatives have been further developed in the year ended 30 June 2021 using appropriate arrangements while the whole
team worked from home during the year due to the COVID-19 pandemic.
We aim to continue to further enhance employee engagement on an ongoing basis, appropriate to the development and expansion of the team.
How we engage
Employee engagement surveys: We now conduct quarterly employee surveys which are hosted by an external survey vendor. Each 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 nature and format of the questions for this year’s survey were
considered in conjunction with the Employee Advisory Committee.
Employee Advisory Committee (EAC): We launched our EAC during last 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 was established and continues to operate, 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.
During the year, the EAC has supported several initiatives including: development of information regarding career ladders; updates to the format of employee
engagement surveys; consulting on proposed working arrangements when offices re-open; and hosting online informal forums for employees to connect around the
time of our all-employee meetings.
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. The format for this meeting in July 2020 (and again in July 2021) was a virtual event and positive
feedback has been received from employees regarding the format and content of the meeting.
In the year ended 30 June 2021 we decided to bring all employees together again with a mid-year all employee virtual meeting. This provided, amongst other
information, an update for employees on progress with the strategic themes.
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 has also played an important role during the COVID-19 pandemic as the host of the
COVID-19 Information Hub (explained further below). We also use Microsoft Teams channels to communicate general reminders on a group-wide basis for topics
including wellness and benefits.
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.
Craneware Spaces: Towards the end of the prior financial year, we launched a new initiative called Craneware Spaces which are hosted sessions creating safe space
22
Stakeholder Engagement Craneware plc Annual Report 2021 EMPLOYEES
How we engage (continued)
for conversation and community on the topic of racism, diversity, and inclusion. The sessions are led by and involve employees and guest speakers. There has been an
extensive programme of Craneware Spaces sessions provided during the year ended 30 June 2021 involving guest speakers, contributors and employees. In addition, a
section of the intranet has been developed to host links to articles, broadcasts and information regarding diversity and inclusion as well as supporting information
from the Craneware Spaces listening sessions.
COVID-19 response: Appropriate adaptations were made to employee engagement mechanisms, including employee communications, policies and wellness
initiatives, during the year ended 30 June 2020, and continued through the year ended 30 June 2021, with the ongoing 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 in 2020 by the COVID-19 Response Committee, the COVID-19 Information Hub on the Group’s intranet continued to provide a one stop shop for employees to
access latest information. In addition, a 30 minute COVID Q&A is hosted on a regular basis in order for employees to ask live questions of the COVID-19 response 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 also 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.
In addition, an initiative has been established across the organisation by providing education, support and collaboration in regard to day-to-day management
challenges, bridging the gap between on-the-job manager activities and leadership. As an optional program, it offers a series of topics with sessions lead by managers
for managers, offering the participants the forum to discuss and share management challenges and successes. This drives a supportive manager network and culture
where ideas, opportunities and best practices can be shared.
Onboarding: We have a comprehensive onboarding 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.
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 operate 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 granted under these two share option plans in the year ended 30 June 2021 and in the prior year, as
summarised in Note 8 to the financial statements. There has been a good level of participation in the plans, in terms of the numbers of employees who chose to join.
Wellness: We have enhanced our employee wellness programmes again during the financial year and increased the programme content in respect of mental wellness
topics. Employees have volunteered to be Wellness Ambassadors to provide wellness information on the Group’s intranet and support employee wellness events.
During the year members of the team became Mental Health First Aiders, being non-judgemental points of contact and reassurance to anyone experiencing a mental
health issue or a mental health crisis.
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.
23
Stakeholder Engagement [Cont'd]Craneware plc Annual Report 2021 How this was considered in Board discussions and decision making
The results and anonymised feedback received from the employee engagement surveys 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 grants of share options under the all employee SAYE (UK) and ESPP (US) share option plans in the years ended 30 June
2020 and 2021, as summarised in Note 8 to the financial statements and as outlined in the Remuneration Committee’s Report.
Measures exist for the Board and senior management to evaluate Craneware’s workforce composition and to ensure that these trends align with objectives around
diversity and inclusion.
CUSTOMERS
Craneware prioritises customer engagement as a critical component to our long-term partnership success. We recognise the importance of, and are fully
committed to, engaging with our customers in meaningful, two-way conversations. We continually enhance our customers’ experience through several
targeted initiatives that support our award-winning customer success efforts during implementation, professional services engagements, and 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 and informs Craneware of guidance on issues of strategic importance related to our applications and services. In addition to scheduled
meetings, ongoing Craneware Advisory Council member feedback is collected through surveys, mastermind sessions, and thought leadership projects. We were
delighted to welcome more participants into this forum in the year ended 30 June 2021.
Craneware Performance Summit: This event is a broader opportunity to engage customers, providing users of Craneware applications and services with
educational and networking opportunities. The Financial Performance Summit had to be delivered as a virtual event in October 2020. All current customers are invited
to attend this event and, for the first time at a Craneware Financial Performance Summit, healthcare providers who are not customers could attend the event in
October 2020. It had nearly 1,000 registrants and Craneware received positive feedback from participants regarding the content and delivery of the four-day virtual
event. This event will be held virtually again in October 2021.
Educational webinars: Craneware regularly offers complimentary live webinars providing training and thought leadership across our solutions. Webinars cover
educational topics including billing, coding and regulatory changes which impact hospitals’ revenues and costs. These webinars were integral to Craneware’s response
to the COVID-19 pandemic during the past 18 months. In the early months of the 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. This has allowed customers to enjoy access to Craneware Academy developing materials specific to their needs and the use of our solutions. Craneware
Academy also provides a high standard of healthcare financial industry training to support ongoing education. 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 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.
The Craneware Value Cycle Excellence Awards: These awards recognise outstanding customer adopters of Craneware solutions who are driving value cycle
excellence by optimising every opportunity to achieve the best outcome for the best cost.
KLAS results: Craneware is continually recognised by its customers in the annual ‘Best In KLAS’ report. This is a recognition awarded to vendors whose solutions help
healthcare providers deliver better patient care. Craneware has consistently been a leader in the Revenue Cycle – Chargemaster Management category since its
inception 15 years ago
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
24
Stakeholder Engagement [Cont'd]Craneware plc Annual Report 2021 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 usually invited to attend the Annual General Meeting (‘AGM’) of the Company and are encouraged to take the
opportunity to ask questions to the Directors. However, due to the COVID-19 pandemic and Government guidance at the time, the AGM held in November 2020 was
convened as a closed meeting with only the required quorum of shareholders present in person to conduct the formal business of the AGM. Therefore, shareholders
and /or their proxies were not permitted to attend the AGM in person in 2020. Shareholders who wished to vote on any of the resolutions proposed for the AGM were
encouraged to submit their votes in advance by proxy. The proxy voting, for the resolutions proposed for the AGM, could 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 one of the resolutions proposed at the AGM in November 2020 (further information is provided on page 44).
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.
Share Placing (in June 2021): The Section 172 (1) Statement outlines this process including the explanation that the Placing was conducted through an accelerated
bookbuild process and it was effected by way of a cash box structure. Craneware consulted with a number of its major shareholders prior to the Placing and has
respected the principles of pre-emption through the allocation process. The Company was pleased by the support it received from both existing and new shareholders.
Investor conferences: The CEO and / or the CFO regularly attend (which through the pandemic has been virtual attendance) 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, as outlined above, different arrangements had to be made for the AGM in November 2020, due to the 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.
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.
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 charities 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 focus charities supported in the year, Craneware Cares also supported a number of employees’ personal charity
efforts and celebrated global charity initiatives. Craneware Cares and the Craneware Cares Foundation are a central part of life at Craneware. ‘Better Outcomes for All’
is not just a tagline, it is how we approach our charitable giving and corporate responsibility. So even though we remained fully remote through this year Craneware
Cares still managed to help a total of 41 different charities across the UK and US. Craneware Cares helped causes big and small, with not just monetary donations but
also with items including household supplies, school supplies, holiday gifts, and chocolate Easter eggs. The Cares team created a Craneware Cares cookbook and sold it
on Amazon with proceeds being donated to charities through the Craneware Cares Foundation.
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.
25
Stakeholder Engagement [Cont'd]Craneware plc Annual Report 2021 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.
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. The procedures for review and monitoring of our vendor contracts aim to ensure that fair and reasonable contract terms are in
place with suppliers.
Where external vendors are engaged to support the business in a capacity involving sensitive or controlled data sets, members of Craneware’s Security Council conduct
Vendor Secure Assessment Questionnaires to validate the vendors existing security measures. The Company has also implemented a standard Business Associate
Agreement. This agreement establishes clear expectations and requirements on how data will be handled, along with required background checks and training for
employees.
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.
The Board is given updates from management, as appropriate, regarding the Group’s relationships with its material suppliers, including with respect to any material
risks, performance issues or potential future changes.
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, with the health and environmental benefits this brings, 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 virtual meetings, hybrid working practises 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 2021 is on pages 28 and 36 in accordance with the Streamlined Energy and Carbon Reporting (SECR) regulations.
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.
26
Stakeholder Engagement [Cont'd]Craneware plc Annual Report 2021 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.’ This purpose drives our strategy and defines our
“why”.
We aim to operate in a way that allows us to meet the needs of our stakeholders
and have a positive impact on the communities in which we operate and the wider
society. Craneware has developed many initiatives over the past several years
which contribute to its sustainability credentials. We continue to develop a number
of programs and opportunities to positively impact the community around us.
However, we recognise that sustainability is a constantly evolving issue and that
organisations must continually strive to do more.
As an office-based operator using leased facilities, our environmental impact
is comparatively low, this does not in any way relieve us of the obligation to
minimise the environmental impact of our business. We all have a collective
responsibility within society to help contribute towards efforts to address one of the
greatest challenges facing society; climate change and our efforts in this area are
summarised below.
Our Community
Craneware now serves approximately 40 percent of US hospitals and more than
10,000 clinics and retail pharmacies. Our products help deliver value for our
customers through the delivery of accurate financial data, insight and analytics.
We support their financial stability and long-term sustainability so they can focus
and prioritise patient care. Supporting our customers and the vital work their
teams provide has been, and will continue to be, a top priority.
Looking ahead: positive impact on Society following
our Sentry Data Systems, Inc. (“Sentry”) acquisition:
The 340B Drug Pricing Program
The 340B Drug Pricing Program (‘340B Program’) requires drug manufacturers to provide
considerable discounts on outpatient drugs in order to have their drugs covered by Medicaid.
Health Resources and Services Administration (HRSA) (of the US Department of Health and
Human Services) administers the 340B Program. HRSA describes the 340B Program as
enabling ‘covered entities to stretch scarce federal resources as far as possible, reaching more
eligible patients and providing more comprehensive services.’*
Eligible healthcare organisations for the 340B Program include children’s hospitals, Medicare
/ Medicaid Disproportionate Share Hospitals, State AIDS Drug Assistance programs,
HRSA-supported health centres.
Sentry’s solutions are directly involved in the 340B Program, assisting eligible healthcare
organisations with regulatory compliance and pharmacy procurement and utilisation,
thereby enabling them to generate cost savings which go directly to the provision of more
care for the underserved in their communities.
* Source: www.hrsa.gov/opa/index.html
Craneware Cares
Craneware Cares and the Craneware Cares Foundation, driven by our employees,
are a central part of life at Craneware, it is how we approach our charitable giving
and corporate responsibility. It has been in operation for several years and over
this time has expanded its scope and scale of its activities. Even though we were
mostly working from home through this year, Craneware Cares still managed to
help a total of 41 different charities across the UK and US, including our 8 Spotlight
Charities:
• Saheliya (UK) and Black Women’s Health Imperative (US)
• LOVE Gorgie Farm (UK) and Michele’s Rescue (US)
• MS Therapy Centre Lothian (UK) and MyGroundStrokes (US)
• CERT UK (UK) and Guardian Angels Suitcases 4 Kids (US)
Alongside these charities, Craneware Cares continues to support ad-hoc fundraising
and charity work. For example, running opportunities for employees to gift either
presents for local disadvantaged children or contribute to a charity supporting
vulnerable communities during the continuing pandemic as well as supporting a
number of individual employees’ fundraising and requests for charity contributions.
One key company-wide fundraising project was the creation of a Craneware Charity
Cookbook. Many Craneware employees donated recipes and each quarter profits
from sales of the cookbook are given to the Spotlight Charity.
In the financial year ended 30 June 2021, Craneware has contributed a total amount
of $45,368 to UK and US charities across all of our fundraising campaigns and
employee-led donations.
The fundraising activities of Craneware Cares are supplemented by our Volunteer
Time Off programme where Craneware employees take paid leave to support
projects and charities in their communities.
Our People
People are at the heart of every connection we build, whether it be with our
customers or our people. We recognise the value of all our employees and that the
success of Craneware is due to their efforts.
We have a talented mix of employees from diverse backgrounds, which brings a
high level of innovation and collaboration. At the end of the financial year, our
team comprised 39% female and 61% male employees. At Operations Board plus
vice president level, the composition is approximately 35% female and 65% male.
The average base salary for female employees compared to male employees is
approximately 1.14: 1.
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.
Communication and engagement
An inclusive working environment and a culture of openness are maintained by
the regular dissemination of information. Our Employee Advisory Committee
(‘EAC’) comprises a diverse panel of employees whose mission is to enable a high
contribution culture where employees feel empowered, valued, achieve personal
development and contribute effectively.
Further details about the activities of the EAC are contained in the Stakeholder
Engagement section on page 22.
Craneware Wellness
The Craneware Wellness programme is designed to encourage and support
a healthy lifestyle for our employees by connecting one another, providing
educational tools and resources and having fun with challenges and events. This
year we have again enhanced our employee wellness programmes increasing the
programme content in respect of mental wellness topics. During the year members
27
Social Responsibility and Sustainability StatementCraneware plc Annual Report 2021 of the team became Mental Health First Aiders, being non-judgemental points of
contact and reassurance to anyone experiencing a mental health issue or a mental
health crisis.
Craneware Spaces
We launched a new initiative “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. The team is creating a culture where every voice and every perspective
matters. Within our Spaces events we have partnered with not for profit
organisations such as Girl Geek and Stonewall in Scotland to educate our managers
and support us in an objective review of our people policies and practices to ensure
we follow best practices in facilitating an inclusive work environment, and ensuring
we attract diverse talent into the Craneware Group.
Recruitment
Craneware wishes to attract and retain the best people. Our Talent Acquisition team
is responsible for identifying, acquiring, assessing and onboarding new joiners. We
promote our opportunities, internally and externally, through our applicant tracking
system and careers portal and applications are reviewed by our experienced team.
Our Talent Acquisition team have completed unconscious bias training, enabling
them to present an inclusive shortlist of suitable candidates to our hiring managers.
We offer candidates a structured selection process and use a competency based
framework to interview candidates against to ensure consistency and fairness.
Many of our employees are sourced via our Employee Referral Programme. This
programme encourages our team to introduce talented professionals to Craneware
and build our brand within the local business community.
Learning and development
We endeavour to provide an environment and facilities for all employees to
develop their skill sets. An overview of Craneware’s learning and development
programmes and our learning management system is provided in the Stakeholder
Engagement section on pages 22 to 24. Our employees are encouraged to maintain
a personal development plan, linked to an employee’s role and goals, as part of the
contribution management process.
Reward
A fair remuneration policy is adopted throughout Craneware. We value the health
and well-being of our employees and their families. We offer a comprehensive
benefits package to our employees including medical insurance, life assurance,
pension plan, work-life balance benefits.
In order to provide a wider population of employees with an opportunity to become
Craneware shareholders, which promotes alignment to shareholder interests
and aids recruitment and retention, we operate a Save As You Earn (‘SAYE’) share
option plan for UK employees and an Employee Stock Purchase Plan (‘ESPP’) for US
employees. These share option plans were launched in the financial year ended 30
June 2020 with a further grant of share options under these share option plans in
2021.
Our Environment
Craneware aims to minimise any environmental impacts of its business activities.
Sustainable business practices will play an increasingly important part of our
ability to grow and continue to be successful. As a software company, in the UK
we are primarily an office-based operator using leased facilities (more recently
home working) and in the US we operate a very small office footprint with the vast
majority of our employees home working. As a result of what we do, we are not
involved in any energy-intensive processes or generate significant waste. Whilst our
environmental impact is relatively low compared with other sectors, this does not
reduce our commitment to reducing our environmental impact.
The COVID-19 pandemic brought with it a number of operational changes, including
many that reduced our environmental impact. These included our physical offices
being closed to all except a handful of essential employees and a significant
reduction in business travel, especially trans-Atlantic flights. We are developing
new Group-wide strategies to build on what has been achieved so far, including a
new, more flexible hybrid model of working which will enable employees to work
from home more of the time, thereby reducing the impact of commuting upon
the environment, (amongst many other benefits related to remote working) and
further increasing our use of video conferencing to sustain a reduction in business
travel. Where travel is necessary within the US, we have mandated that it be
booked via a travel portal, which enables a data review, as we begin our journey to
more sustainable travel practices.
We do not provide company vehicles to employees or Directors or operate any form
of vehicle fleet and offer our UK employees a cycle to work scheme to promote
healthy living practises and further reducing pollution from daily commuting. We
engage in recycling programmes, wherever possible, within the parameters of
building management for our offices.
We are only at the start of our journey to measure and improve our impact on the
environment, but we are committed to making continuous improvements.
The Group is required to report its energy use and impact under the Streamlined
Energy and Carbon Reporting (SECR) regulations. The data is in respect of the UK
energy usage by the Company in the year ended 30 June 2021, with comparisons
for the prior financial year. Energy usage by subsidiaries which are not in the UK are
outside the scope of this report and therefore are excluded from the figures below.
UK energy use (kWh):
Electricity
Gross emissions in metric tonnes of carbon
dioxide equivalent (CO2e):
Electricity proportionality and
alignment to culture
2021
2020
87,373
96,455
18.55
22.0
Emissions were calculated from using electricity billing information for our UK
properties and the UK government’s 2021 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 UK employee.
Intensity ratio in tonnes of CO2e per UK employee:
2021
0.10
2020
0.13
28
Social Responsibility and Sustainability Statement [Cont'd]Craneware plc Annual Report 2021 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 is considered to be a gold standard for
security frameworks within the healthcare industry.
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). As we move forward, we will also be embracing HITRUST
standards to help us align with new data privacy legislation.
Receiving HITRUST CSF Certification was a significant acknowledgement to the
steadfastness of our employees, systems and technology in this critical area, and
demonstrates to our customers we will remain vigilant in keeping their data secure.
Governance
Recognising the importance of corporate governance matters, Craneware (an
AIM quoted company) has selected the UK Corporate Governance Code 2018 as
its corporate governance framework although this Code has been drafted in the
context of larger, main-market listed companies, our Corporate Governance Report
is set out on pages 39 to 47.
Our purpose, business model, strategy and Board operations are focused on
delivering long-term benefits for all of our stakeholders while maintaining a
high standard of ethical business conduct. These responsibilities are embedded
in our culture, our values and our purpose. We are committed to conducting our
business with honesty and integrity and it is expected that these high standards be
maintained throughout the organisation.
Our Business Ethics Policy is a mandatory policy for all employees and for any
contractors and consultants engaged by us. The Policy includes and explains the
process and arrangements for reporting any ethics violations.
In accordance with The Modern Slavery Act we publish our annual slavery and
human trafficking statement. The latest statement can be found on the Craneware
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.
As a UK company, we are 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.
Whistleblowing Policy
One element of providing a supportive and open culture within the organisation,
is our Whistleblowing Policy and associated annual awareness 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. Craneware’s
Board of Directors has provision to review these arrangements and any reports
arising from their operation.
Information security, data security and data protection
Since Craneware’s inception, the healthcare landscape has evolved and created
new data security challenges for US hospitals and health systems. We have evolved
alongside our customers to meet these challenges. With presence in UK and US,
and as part of the Healthcare industry, Craneware has substantial obligations and
interest in data protection and ensuring access security. Key legislation includes
HIPAA (US) and Data Privacy (US and UK), which has specificity on protecting
patient data and personal data.
We require and compel adherence with all applicable laws and regulations
regarding data privacy and security. In view of the importance of the procedures,
security, regulation and controls around our solutions and customer data,
during the financial year ended 30 June 2020, Craneware achieved HITRUST CSF
Certification for 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
29
Social Responsibility and Sustainability Statement [Cont'd]Craneware plc Annual Report 2021 Directors
Will Whitehorn (non-executive, Chairman)
Keith Neilson
Craig T Preston
Colleen M Blye (Senior independent director)
Russ Rudish (non-executive)
Alistair Erskine (non-executive)
David Kemp (non-executive)
Company Secretary & Registered Office
Craig T Preston
1 Tanfield
Edinburgh
EH3 5DA
Registrars
Independent Auditors
Financial PR
PricewaterhouseCoopers LLP
Atria One
144 Morrison Street
Edinburgh
EH3 8EX
Alma PR
71-73 Carter Lane
London
EC4V 5EQ
Solicitors
Pinsent Masons LLP
Princes Exchange
1 Earl Grey Street
Edinburgh
EH3 9AQ
HSBC Bank plc
7 West Nile Street
Glasgow
G1 2RG
Barclays Commercial Bank
Aurora House
120 Bothwell Street
Glasgow
G2 7JT
Craneware InSight, Inc.
3340 Peachtree Rd NW,
Suite 850
Atlanta, GA 30326
Bryan Cave LLP
One Atlantic Center,
14th Floor
1201 W. Peachtree St. NW.
Atlanta, GA, 30309-3471
Bank of Scotland
The Mound
Edinburgh
EH1 1YZ
Craneware Healthcare
Intelligence , LLC
12570 Perry Highway
Suite 110
Wexford, PA 15090
Nominated Advisors and
Joint Stockbrokers
Peel Hunt LLP
120 London Wall
London
EC2Y 5ET
Joint Stockbrokers
Berenberg, Gossler & Co. KG
60 Threadneedle Street
London
EC2R 8HP
Bankers
The Royal Bank of Scotland plc
36 St. Andrew Square
Edinburgh
EH2 2YB
Clydesdale Bank
20 Waterloo Street
Glasgow
G2 6DB
Link Asset Services Ltd
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Investec Bank plc
30 Gresham Street
London
EC2V 7QP
Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA
95054
Wells Fargo
500 N Magnolia Avenue
8th Floor
Orlando, FL 32803
Subsidiaries and Registered Offices
Craneware US Holdings, Inc.
3340 Peachtree Rd NW,
Suite 850
Atlanta, GA 30326
Craneware, Inc.
3340 Peachtree Rd NW,
Suite 850
Atlanta, GA 30326
Kestros Ltd. t/a Craneware Health
1 Tanfield
Edinburgh
EH3 5DA
30
Directors, Secretary, Advisors and SubsidiariesCraneware plc Annual Report 2021 The Directors of the Company and their responsibilities within the Group are set out below:
Will Whitehorn, 61
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 was appointed
as Chair of Seraphim Space Investment Trust Plc in June 2021, which floated on the LSE in July 2021. He was a founder shareholder
in Purplebricks plc and recently retired as Deputy Chair of Stagecoach Group plc.
Keith Neilson, 52
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. Keith is also proud to be a Patron of the Princes Trust, a charitable organisation that works for
the benefit of young people.
Craig T Preston, 50
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.
31
Board of DirectorsCraneware plc Annual Report 2021 Colleen Blye, 61
Senior independent 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, 69
Non-executive Director
Appointed 28 August 2014
Russ Rudish has more than 40 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 staffing and consulting 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, 51
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, 51
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.
32
Board of Directors [Cont'd]Craneware plc Annual Report 2021 The Directors present herewith their report and the audited consolidated financial
statements for the year ended 30 June 2021.
incorporated into this Report by reference. A description of the principal risks and
uncertainties facing the Group is also presented in the Strategic Report.
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 growth;
visibility of revenue over the next three years; adjusted earnings before interest,
tax, depreciation and amortisation; adjusted earnings per share; total sales;
and cash generation during the year. The adjusted measures are stated before
exceptional costs and share based payments). Detailed information on all matters
required is presented in the Strategic Report contained in pages 5 to 21 and is
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.
Information
Appointment and Reappointment of Directors
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
Section within this Annual Report
Directors’ Report
Corporate Governance Report
Board of Directors
Strategic Report
Remuneration Committee’s Report
Directors’ Report
Stakeholder Engagement
Social Responsibility and Sustainability Statement
Corporate Governance Report
Corporate Governance Report
Remuneration Committee’s Report
Directors’ Report
Corporate Governance Report
Stakeholder Engagement
Directors’ Report
Corporate Governance Report
Stakeholder Engagement
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 Activities
Research and Development
Risk Management
Section 172 Statement
Strategic Report
Directors’ Report
Directors’ Report
Corporate Governance Report
Directors’ 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
Pages
34 and 35
40 to 42
31 and 32
8 to 10
52
36
25
27
40 to 47
42
48 to 56
36 and 37
42
22 to 26
36 and 37
44
22 to 26
37
36
73 and 74
64 to 99
5 to 12
34
38
46 and 47
37
33
5 to 12
34
6 and 11
44 to 47
18 to 21
95 and 96
22 to 26
5 to 21
88
17
33
Directors' ReportCraneware plc Annual Report 2021 Financial Results and Dividends
The Group’s revenue for the year was $75.6m (2020: $71.5m) which has generated
a profit before tax of $13.2m (2020: $19.3m) after exceptional costs of $6.5m
(2020: $nil). The full results for the year, which were approved by the Board
of Directors on 20 September 2021, are set out in the accompanying financial
statements and the notes thereto.
During the year the Company paid an interim dividend of 12.0p (16.68 cents) per
share. The Directors are recommending the payment of a final dividend of 15.5p
(21.47 cents) per share giving a total dividend of 27.5p (38.10 cents) per share
based on the results for 2021 (2020: 26.5p (32.60 cents)). Subject to approval at the
Annual General Meeting, the final dividend will be paid on 21 December 2021 to
shareholders on the register as at 26 November 2021.
Year
FY16
FY17
FY18
FY19
FY20
FY21
Dividends per share
Dividend (pence)
16.5
20.0
24.0
26.0
26.5
27.5 (subject to AGM approval)
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.
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 12. The
Directors regard investment in development activities as a prerequisite for success
in the medium and long-term future. During the year development expenditure
amounted to $24.7m (2020: $21.6m) of which $10.1m (2020: $9.3m) 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.
Subsequent events
Following the announcement on 7 June 2021, regarding the proposed acquisition
of SDS Holdco, Inc. the ultimate holding company of Sentry Data Systems, Inc.
(“Sentry”), the acquisition concluded on 12 July 2021. The aggregate consideration
for the acquisition of Sentry (on a cash free / debt free basis) was $400m with the
consideration also subject to adjustment as against a benchmark level of working
capital, all as calculated and agreed or determined in accordance with the terms
of the agreement relating to the acquisition. The consideration for the acquisition
was satisfied as to $312.5m (as adjusted) in cash and as to $87.5m by the issuance,
on 14 July 2021, of 2,507,348 new ordinary shares in Craneware plc. The cash
consideration was funded from the Group's existing cash resources, $120m from a
new $140m debt facility and the $187.3m net proceeds of the share placing which
completed in June 2021. The new debt facility comprises a term and revolving
facilities agreement and is secured by a Scots law floating charge granted by the
Company, an English law debenture granted by the Company and a New York law
security agreement to which the Company and certain of its subsidiaries are parties.
The securities granted by the Company and the relevant subsidiaries provide
security over all of the assets of the Company and specified assets of the Group.
Further details regarding the acquisition are contained in Note 25 to the financial
statements.
Going Concern
The Strategic Report on pages 5 to 21 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 8 to 12. The Directors, having made suitable enquiries
and analysis of the financial statements, including the consideration of:
• net cash reserves;
• continued cash generation;
• Annuity SaaS business model; and
• the integration of the Sentry Data Systems, Inc. business following its
acquisition in July 2021
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 31 and 32. The Directors who served during the financial year ended 30 June
2021 were:
W Whitehorn (Non-executive Chairman)
K Neilson (Chief Executive Officer)
C T Preston (Chief Financial Officer)
C Blye (Senior Independent Director)
R Rudish (Non-executive Director)
A Erskine (Non-executive Director)
D Kemp (Non-executive Director)
R Verni (Non-executive Director): resigned 17 November 2020
R Verni decided not to seek re-election at the Company’s Annual General Meeting
(‘AGM’) held in November 2020 and stepped down from the Board following the
conclusion of the AGM on 17 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 to stand
34
Directors' Report [Cont'd]Craneware plc Annual Report 2021 for re-appointment. Further details regarding the appointment of directors are
contained in the Corporate Governance Report on pages 39 to 47.
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 52.
Corporate Governance
The Corporate Governance Report on pages 39 to 47 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 2021 was
33,019,191 Ordinary Shares of 1p each (2020: 26,826,539 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.
The ‘subsequent events’ section above refers to the issue of 2,507,348 new ordinary
shares in Craneware plc after the end of the financial year, on 14 July 2021, as part
of the consideration for the acquisition of Sentry. These shares are expected to be
immediately distributed by the vendor of Sentry to the underlying equity holders
of the vendor of Sentry and will be subject to restrictions (subject to customary
exceptions). These restrictions are a twelve month hard lock-up and subsequent
twelve month orderly market arrangements in respect of members of Sentry
management or a six month hard lock-up and subsequent six month orderly
market arrangements in respect of the other underlying equity holders of the
vendor of Sentry.
Purchase of own shares
The Company did not purchase any of its own shares in the year ended 30 June 2021
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 17
November 2020 for the Company to purchase up to 2,682,654 Ordinary Shares. A
resolution to renew this authority will be proposed at the 2021 Annual General
Meeting.
Share capital allotted
In June 2021, the Company completed a share placing which resulted in the
allotment of 6,192,652 new Ordinary Shares at an issue price of £22.00 ($31.05)
per share, representing approximately 23.1% of the issued share capital prior to the
placing. The new Ordinary Shares rank pari passu in all respects with the existing
Ordinary Shares of the Company, including the right to receive all dividends and
other distributions declared, made or paid after the date of issue, including the final
dividend declared in respect of the year ended 30 June 2021. The purpose of the
share placing was to obtain net proceeds to part fund the acquisition of SDS Holdco,
Inc., the ultimate holding company of Sentry Data Systems, Inc. Further details are
included in Note 18 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 2021 the EBT held 348,585 Craneware plc Ordinary Shares (at 30 June 2020:
366,194 Ordinary Shares). The EBT waived its right to dividends in the year ended
30 June 2021. Further details regarding the EBT are contained in Note 18 to the
financial statements.
Employee share plans
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.
Directors and their Interests
The interests of the Directors who held office at 30 June 2021 and up to the date of
this report in the share capital of the company, were as follows:
W Whitehorn
K Neilson
C T Preston
C Blye
R Rudish
2021
No
2,989
2020
No
1,171
3,429,394
3,418,599
89,329
547
1,095
85,927
547
1,095
3,523,354
3,507,339
Directors’ interests in share options are detailed in the Remuneration Committee’s
Report on pages 55 and 56.
35
Directors' Report [Cont'd]Craneware plc Annual Report 2021 Substantial Shareholders
As at 1 September 2021, 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 and 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
4,611,270
3,429,394
2,342,756
2,167,721
2,144,493
1,946,984
1,199,379
1,133,100
% of issued
share capital
12.98
9.65
6.59
6.10
6.04
5.48
3.38
3.19
Liontrust Assset Management
K Neilson
W G Craig
Abry Partners
Canaccord Genuity Group
Sanford DeLand Asset Management
Aberdeen Standard Investments
Fidelity International
Section 172 Statement
The statement, in respect of section 172 (1) of the Companies Act 2006, is on pages
18 to 21.
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 22 to 26.
Corporate Social Responsibility & Environmental Policy
The Group is committed to maintaining a high level of social responsibility as
outlined in the Social Responsibility and Sustainability Statement (on pages
27 to 29) section of this Annual Report. 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 rather than in person meetings, remote working 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.
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
2021, the UK energy used by the Company was 87,373 kWh (2020: 96,455 kWh)
which resulted in emissions of 18.55 tonnes of carbon dioxide equivalent (2020: 22
tonnes). Emissions were calculated from using electricity billing information for our
UK properties and the UK government’s 2021 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 UK employee. For the year ended 30 June 2021 the intensity factor per
employee was 0.10 (2020: 0.13).
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. Further information
about engagement with customers is provided within the Stakeholder Engagement
section and Social Responsibility and Sustainability Statement on pages 24 and 27.
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. For 2021, the focus was on a chosen UK
and US charitable organisation for each quarter of the financial year, selected based
on votes submitted by employees. 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. 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 and Social Responsibility and
Sustainability Statement on pages 25 to 27.
Political Donations
Neither the Company nor its subsidiaries made any donation for political purposes
in fiscal years 2021 or 2020.
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
and 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.
36
Directors' Report [Cont'd]Craneware plc Annual Report 2021 The Group further enhanced its employee wellness programmes during the
financial year and this included a series of initiatives focusing on mental health.
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 with a
further grant of share options under these share schemes in 2021, as detailed on
page 51 of the Remuneration Committee Report.
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.
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.
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 2021 represented, on average 18 days purchases (2020: 17 days) for the
Group and 19 days purchases (2020: 14 days) for the Company.
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 with involvement in several initiatives
during fiscal year 2021. Further details regarding employee engagement are
included on pages 22 to 24. 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 during 2020 and
throughout 2021.
Quarterly employment engagement surveys are 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.
Annual General Meeting
The resolutions to be proposed at the Annual General Meeting (’AGM’), 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 arrangements for the AGM, to be held in
November 2021, are outlined in the Notice of AGM. 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.
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.
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 accounting standards in
conformity with the requirements of the Companies Act 2006.
Under company law the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs of the
Group and the Company and of the profit or loss of the Group for that period. In
preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and
prudent;
37
Directors' Report [Cont'd]Craneware plc Annual Report 2021 • state whether applicable international accounting standards in conformity
with the requirements of the Companies Act 2006 have been followed,
subject to any material departures disclosed and explained in the financial
statements; and
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
The Directors are 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.
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.
Independent 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
20 September 2021
38
Directors' Report [Cont'd]Craneware plc Annual Report 2021 Chair’s Introduction
On behalf of the Board, I am pleased to present our Corporate Governance Report for the year ended 30 June 2021 in the context of the UK Corporate Governance Code 2018 (‘the 2018
Code’), our chosen corporate governance framework.
For the financial year and ongoing, at the time of compiling this report, Craneware is continuing to operate during a global pandemic. Whilst as a business we continue to be relatively
insulated from the direct impacts of the pandemic, our customers continue to be on the front-line. Supporting them and the phenomenal work their teams have done has been, and
will continue to be, our top priority.
During the year the Board oversaw the Group’s progress with the three fundamental pillars of its growth strategy, as explained in my Chairman’s Statement and in the Strategic Report.
This included the successful fund raise and share placing in June 2021 and the announcement of the strategically important acquisition of Sentry which completed in July 2021. This
acquisition resulted in an immediate step change in scale of Craneware’s own operations whilst expanding our coverage of the market with Craneware now serving approximately 40%
of all US hospitals and more than 10,000 clinics and pharmacies.
In these circumstances, good governance and balancing the needs and expectations of our stakeholders has never been a more important responsibility. We thank our shareholders for
their ongoing support and to our other stakeholders, including our employees, during this past year and for the future of the enlarged Craneware Group.
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. The
Board’s section 172 (1) statement and details of our engagement with stakeholders can be found on pages 18 to 26.
Social responsibility and sustainability
We have summarised within our Social Responsibility and Sustainability Statement, on pages 27 to 29, an overview of current programmes and alignment to sustainability principles.
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 continued to monitor how the purpose, vision, strategy and values align to the Group’s culture (page 40 contains further details).
Board composition and evaluation
After 11 years of service to Craneware, Ron Verni decided not to stand for re-election as a Director of the Company at the AGM on 17 November 2020 and he stepped down as a non-
executive director (and Senior Independent Director) at the conclusion of that meeting. We would like to thank Ron for his significant contribution to the Board throughout his tenure
as a non-executive Director of the Company. Following this, Colleen Blye agreed to take over the role as the Senior Independent Director and the Board reviewed the membership of
the Audit and Remuneration Committees, as is explained further in this Report.
With new non-executive Directors, including myself, joining the Board in 2020 it was considered appropriate to conduct a Board evaluation during the year ended 30 June 2021. An
overview of the process is provided in this report and I thank my fellow Board members for their participation in this evaluation.
Annual General Meeting (‘AGM’)
The Board recognises that the AGM is an important event for all shareholders. Unfortunately, due to 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 AGM in November 2020 had to be convened as a closed meeting with only the required quorum of shareholders
present in person. The arrangements for the AGM, to be held in November 2021, are outlined in the Notice of AGM.
Following our Annual General Meeting on 17 November 2020, we announced that all resolutions were passed with an over 72% majority, however there was one resolution, resolution
11, that had received a number of votes against. We understand the voting in relation to resolution 11 (re-appointment of PricewaterhouseCoopers LLP as auditors) was specifically in
relation to the expectation that a competitive audit tender for the external audit services takes place where the existing auditors have been in role for a period of 10 years or longer, in
line with best corporate governance practice. This was fully considered by the Board and resulted in the Audit Committee conducting, on behalf of the Board, a tender for external audit
services during the year, as explained on page 46.
The year ahead
The new financial year started with the exciting news, announced on 13 July 2021, of completion of the acquisition of Sentry. I would like to thank the Board, the Craneware and
Sentry senior management teams and our advisors, in particular, for the significant time, energy and commitment they have provided in the process to complete this acquisition. It
is a great pleasure to welcome the Sentry team to Craneware. The Board is overseeing, within our corporate governance framework, the integration process which is already making
good progress. Underpinned by our purpose, to profoundly impact healthcare by improving healthcare providers’ operational efficiency and margin, it is clear that there are significant
potential positive impacts that the combined team can provide to our stakeholders. This will therefore continue to drive Craneware’s purpose, vision, strategy and values to ensure that
the culture of the integrated organisation is aligned to enable their achievement.
Will Whitehorn
Chairman
20 September 2021
39
Corporate Governance ReportCraneware plc Annual Report 2021 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 2018 (the ‘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.
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 Board seeks to continue to ensure the overarching objective that the
governance of the Company contributes to its long-term sustainable success and
achievement of wider objectives. The Board recognises, as stated in the Code,
that achieving this depends on the way it applies the spirit of the Principles of
the Code. The Company is a smaller company for the purposes of the Code and,
as such, certain provisions of the Code either do not apply 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 2021, with the exception of the following areas that the
Board believes are not appropriate for a Group 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; 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
shareholding requirements and a post-vesting holding period have been
introduced during the year in relation to Long Term Incentive grants
for executive Directors and senior management. These new policies are
considered to promote long-term shareholdings by executive Directors
and senior management that support alignment with long-term
shareholder interests although they do not include post-employment
shareholding requirements.
Further information regarding the Board’s committees is contained in this Corporate
Governance Report and the Remuneration Committee’s Report is on pages 48 to 56.
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 21. 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 Group’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. 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 includes
approval of the Group’s strategy, annual budgets and business plans, acquisitions,
disposals, business development, annual reports and interim statements, plus
any significant financing or funding related matters as well as significant 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.
Board Composition and Division of Responsibilities
Board of Directors
Ronald Verni stepped down as a non-executive Director, and Senior Independent
Director, of the Company at the conclusion of the Company’s AGM on 17 November
2020. Colleen Blye was then appointed by the Board as the Senior Independent
Director, having served on the Board since November 2013.
Therefore, in the period 18 November 2020 to 30 June 2021 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 four further non-executive Directors (each of whom the Board considers to
be independent), Colleen Blye (Senior Independent Director), Russ Rudish, Alistair
40
Corporate Governance Report [Cont'd]Craneware plc Annual Report 2021 Erskine and David Kemp. Detailed biographies of all Directors are contained on
pages 31 and 32.
A summary of the composition of the Board for different periods during the year
ended 30 June 2021 is:
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.
Period
Composition of the Board
The Composition of the Board
Chairman
(Independent on
Appointment)
Executive
Directors
Independent
Non-executive
Directors
The composition of the Board has been designed to give a good mix and balance of
different skill sets, including significant experience in:
1 July to
17 November 2020
From 18 November 2020
Division of Responsibilities
1
1
2
2
5
4
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 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
Summary of Responsibilities
Chairman
Chief Executive Officer
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.
Senior Independent
Director
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.
Non-Executive Directors
The Board has appointed Colleen Blye as Senior Independent Director from 18
November 2020; Ronald Verni served in this role prior to that date. In this role,
Colleen 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.
•
•
•
•
•
•
•
high growth companies;
software and healthcare sectors;
entrepreneurial cultures;
senior financial reporting;
both UK and US companies;
acquisitions; and
other listed companies.
The Board was enhanced last year with the appointments of three new non-
executive directors. 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, completed his eleventh year
of service on the Board in the year ended 30 June 2020. As reported last year, the
Board in making its assessment of independence noted the significant growth and
changes in the Company during this period, this combined with Ronald’s conduct
led the Board to conclude his length of tenure had not affected his independence.
Ronald decided not to seek re-election as a Director of the Company at the AGM in
2020 and therefore stepped down from the Board on 17 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 2021, 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.
The membership of both of the Committees changed during the year:
41
Corporate Governance Report [Cont'd]Craneware plc Annual Report 2021 Audit Committee members
Remuneration Committee members
1 July to 17 November 2020
Colleen Blye (Chair)
Russ Rudish
Ronald Verni
From 18 November 2020
David Kemp (Chair)
Colleen Blye
Alistair Erskine
1 July to 17 November 2020
Ronald Verni (Chair)
Colleen Blye
Russ Rudish
From 18 November 2020
Russ Rudish (Chair)
Colleen Blye
Alistair Erskine
Attendance of Directors at scheduled Board and Committee meetings convened in
the year, along with the number of meetings that they were invited to attend, are
set out below:
No. Meetings in year
Executive Directors
K Neilson
C T Preston
Non-Executive Directors
W Whitehorn
R Verni*
C Blye
R Rudish^
A Erskine^
D Kemp^
Board
10
10/10
10/10
10/10
5/6
9/10
10/10
9/10
9/10
Remuneration
Committee
Audit
Committee
2
-
-
-
1/1
2/2
2/2
1/1
-
2
-
-
-
1/1
1/2
1/1
1/1
1/1
*for this director, who stepped down from the Board during the year, the number of meetings attended is
with reference to those until their date of resignation.
^the membership of the Committees changed during the year, the number of meetings attended is with
reference to those while each non-executive Director was a member of each Committee.
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 Chair then provides a detailed briefing along with the
minutes of the meeting following its conclusion.
As detailed in the Directors’ Report on page 35, 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 regard 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.
It was explained in last year’s annual report that there were three new
appointments to the Board in the year ended 30 June 2020. External independent
search consultancies were engaged by the Board in respect of the formal process to
identify potential candidates for those positions.
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.
Across the Group, at the end of the financial year, the team comprised 39% female
and 61% male employees. At Operations Board plus vice president level, the
composition is approximately 35% female and 65% male.
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 31 and 32. 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.
Succession Planning
During the prior financial year, a new Chair and two new independent non-
executive directors were appointed to the Board. Ronald Verni stepped down from
the Board at the AGM in November 2020. 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.
42
Corporate Governance Report [Cont'd]Craneware plc Annual Report 2021 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.
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.
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 regard 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 have access to and correspond with
the Group’s Operations Board on an informal basis. This 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 last year, a Board evaluation
process was not conducted during that year. A formal Board evaluation process
was conducted in the year ended 30 June 2021. 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 Company Secretary and were reviewed
by the Board as a whole. Overall, the Board concluded that its performance in the
period under review had been satisfactory, however it did recognise the Board
as currently constituted, was relatively new and resolved to monitor its progress
over the coming year including the possibility of supplementing the Board with a
further non-executive Director.
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.
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 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 encouraged
to take the opportunity to ask questions. Unfortunately, different
arrangements had to be made for the AGM in November 2020, due to the
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. The AGM therefore had to be held as a closed meeting with
only the required quorum of shareholders present in person.
• The primary point of contact for shareholders on operational matters
are 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. Colleen Blye, 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.
The Company undertook two share placing processes during the year, the first
in August 2020. Despite a strong oversubscription, the Board decided it would
be in the best interests of the Company and its shareholders not to proceed with
43
Corporate Governance Report [Cont'd]Craneware plc Annual Report 2021 the placing at that time. The second, in June 2021, relating to the acquisition of
Sentry Data Systems Inc., was completed. Craneware consulted with a number
of its major shareholders prior to the Placing and has subsequently held further
calls with analysts and shareholders to provide further details in respect of the
acquisition. The Company was pleased by the support it received from both
existing and new shareholders.
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, in particular in view of the integration process
following the acquistion of Sentry in July 2021.
As explained in the Audit, Risk and Internal Control section of this report, the
Chair of the Audit Committee wrote to the Company’s substantial shareholders to
inform them in advance about the audit tender process and to provide them with
an opportunity to comment on the tendering and appointment of the external
auditor.
The Company’s website (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 35 to 36 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.
Update to the 2020 AGM
Following the AGM that was held on 17 November 2020, the Company
announced that all resolutions were passed and a majority over 72% of the proxy
votes received were ‘for’ each of the resolutions proposed at the AGM however
there were was one resolution (number 11) that had received a number of proxy
votes ‘against’. Following the conclusion of the AGM in November 2020, 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 1 March
2021, to understand the voting in relation to resolution 11 (re-appointment of
PricewaterhouseCoopers LLP as auditors) the Board consulted with shareholders
to more fully understand the reasons for those votes against the resolution and
it is understood that the voting was specifically in relation to the expectation
that a competitive tender for external audit services takes place where the
existing auditors have been in place for a period of 10 years or longer. Although
the Board and the Audit Committee had been satisfied with the performance of
PricewaterhouseCoopers LLP as external auditors, it was concluded that it was
an appropriate time to review the market and conduct a tender. Page 46 outlines
the audit tender process conducted and its outcome.
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 quarterly engagement surveys, which have a high response rate,
Engagement with other key stakeholder groups
The Social Responsibility and Sustainability Statement, the Stakeholder
Engagement section and the Directors’ Report within this Annual Report contain
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. From 1 July 2020 until
17 November 2020, the Audit Committee was chaired by Colleen Blye and its
other members were Ronald Verni and Russ Rudish. From 18 November 2020, the
Audit Committee is chaired by David Kemp and its other members are Colleen
Blye and Alistair Erskine. 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. David Kemp
and Colleen Blye, as current and previous chair of the Audit Committee, have
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 45.
Financial and Business Reporting
The Board recognises its responsibilities, including those statutory responsibilities
laid out on pages 37 and 38. 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 12.
As detailed on page 34 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 2021. The Board has
explained within the Viability Statement section of the Strategic Report on page
17 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, along with a description of the Group’s risk management procedures, are
detailed in the Strategic Report on pages 13 to 17. 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.
44
Corporate Governance Report [Cont'd]Craneware plc Annual Report 2021 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.
The annual financial forecast is reviewed and approved by the Board. Financial
results, with comparisons to 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 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, 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;
• consideration of the points reported by the Financial Reporting Council
from its review of the Group’s Annual Report and financial statements for
the year ended 30 June 2020;
• 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 audit tender process which was conducted during the year;
• the performance and independence of the external auditors. 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;
• the formal engagement terms entered into with the external auditors;
• the provision of tax compliance services to the Group.
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 page17 and 34), 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.
Financial Reporting Council Review
The Conduct Committee of the Financial Reporting Council (‘FRC’) reviewed the
Group’s Annual Report and accounts for the year ended 30 June 2020 as part
of its routine monitoring activity. The Conduct Committee did not report any
material errors in compliance with relevant reporting requirements or require
any corrections. It did make some recommendations to support continuous
improvements in our financial reporting. These have now been addressed by
additional disclosures where material and relevant.
The FRC has requested that we advise shareholders that this review provides
no assurance that the Annual Report and accounts are correct in all material
respects; the FRC’s role is not to verify the information provided but to consider
compliance with reporting requirements. The FRC and its officers, employees and
agents therefore accept no liability for any reliance on its review by the Company
or any third parties, including but not limited to investors and shareholders.
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 2021:
The Audit Committee also reviewed and considered other matters during and
in respect of the financial year ended 30 June 2021 including management’s
assessment of new accounting standards that were not effective for adoption
until after 30 June 2021.
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
judgement and interpretation of both the Group’s policy and 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. In addition, there may be judgement involved in
the assessment of whether or not the intangible assets will generate future
economic benefit sufficient to recover the carrying value of the intangible
asset. 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 2021.
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.
45
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
Provision for income tax
(Group and Company)
Corporate Governance Report [Cont'd]Craneware plc Annual Report 2021 The Audit Committee also reviewed and considered other matters during and
in respect of the financial year ended 30 June 2021 including management’s
assessment of new accounting standards that were not effective for adoption
until after 30 June 2021.
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 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 is considered to be a gold standard for
security frameworks within the healthcare industry. 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). As we move forward, Craneware will also be embracing HITRUST
standards to help us align with new data privacy legislation.
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.
For the Annual General Meeting of the Company held in November 2020, the
resolution for re-appointment of PricewaterhouseCoopers LLP as auditors,
whilst passed, received a number of votes against. The Board consulted with
shareholders to more fully understand the reasons for those votes against the
resolution and it is understood that the voting was specifically in relation to
the expectation that a competitive tender for external audit services takes
place where the existing auditors have been in place for a period of 10 years or
longer. Although the Board and the Audit Committee had been satisfied with
the performance of PricewaterhouseCoopers LLP as external auditors, it was
concluded that it was an appropriate time to review the market and conduct a
tender.
The Audit Committee was responsible for conducting the audit tender process
on behalf of the Board and, based on the Audit Committee’s assessment
of the proposals received from invited audit firms, the Committee made
recommendations to the Board. The Chair of the Audit Committee wrote to
the Company’s substantial shareholders to inform them in advance about the
audit tender process and to provide them with an opportunity to comment on
the tendering and appointment of the external auditor. The Chair of the Audit
Committee and management were available to meet with the invited firms to
assess their proposed approach and ability to meet the Group’s needs. Proposals
compiled by audit firms in response to the invitation to tender were reviewed,
carefully considered and evaluated by a review panel against an agreed range of
factors considered by the Audit Committee to be most relevant and important
to the Group. The Committee felt that the breadth and depth of the proposed
team’s experience of particular relevance to the Group’s business, and geographic
coverage meant that PricewaterhouseCoopers LLP were assessed as being the
most suitable to provide external audit services to the now enlarged Group.
The Board considered the Audit Committee’s recommendation, including the
proposal to appoint a new audit partner to the audit and subsequently approved
PricewaterhouseCoopers LLP for recommendation to shareholders, for re-
appointment as auditors, at the Company’s Annual General Meeting to be held in
November 2021.
PricewaterhouseCoopers LLP, under the new audit partner, Paul Cheshire,
prepared and presented their audit plan to the Audit Committee for the audit
of the full year financial statements. The audit plan identified 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. 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 2021, the
Committee was satisfied that the approach adopted was robust and appropriate
and that their independence and objectivity could be relied upon.
Non-audit services provided by the external auditors
Craneware is an ‘Other Entity of Public Interest’ (‘OEPI’) in accordance with the
definition introduced by the Financial Reporting Council and, consequently,
the Company’s external auditors are only able to perform a limited number of
assurance related non-audit services.
46
Corporate Governance Report [Cont'd]Craneware plc Annual Report 2021 The Audit Committee has 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 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:
• 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 2021, 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 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, from 18
November 2020, the Committee is chaired by Russ Rudish and its other members
are Colleen Blye and Alistair Erskine. Until 17 November 2020, the Committee
was chaired by Ronald Verni and its other members were Colleen Blye and Russ
Rudish. 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 schemes);
• ensuring remuneration is both appropriate to the level of responsibility
and adequate to attract and/or retain Directors and staff of the calibre
required by the Company; and
• ensuring that remuneration is in line with current industry practice.
The Committee has presented its Remuneration Report on pages 48 to 56, 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.
AIM Rule Compliance Report
Craneware plc is quoted on AIM and as a result the Company has complied with
AIM Rule 31 which requires the Company to:
• have in place sufficient procedures, resources and controls to enable its
compliance with the AIM Rules;
• seek advice from its Nominated Advisor (“Nomad”) regarding its
compliance with the AIM Rules whenever appropriate and take that
advice into account;
• provide the Company’s Nomad with any information it reasonably
requests in order for the Nomad to carry out its responsibilities under the
AIM Rules for Nominated Advisors, including any proposed changes to the
Board and provision of draft notifications in advance;
• ensure that each of the Company’s Directors accepts full responsibility,
collectively and individually, for compliance with the AIM Rules; and
• ensure that each Director discloses without delay all information which
the Company needs in order to comply with AIM Rule 17 (Disclosure of
Miscellaneous Information) insofar as that information is known to the
Director or could with reasonable diligence be ascertained by the Director.
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 39 to 47.
Approved by the Board of Directors and signed on behalf of the Board
by:
Craig Preston
Company Secretary
20 September 2021
47
Corporate Governance Report [Cont'd]Craneware plc Annual Report 2021 Chair’s introduction
On behalf of the Board, I am pleased to present the Remuneration Committee’s
Report for the year ended 30 June 2021. I have been a member of this Committee
since November 2016 and I was honoured to be appointed to the role of Chair of
the Remuneration Committee in November 2020, when Ronald Verni retired from
the Board. We were delighted to welcome Alistair Erskine as a member of the
Remuneration Committee from November 2020.
There is no doubt this past year has been a challenging year for all businesses
as they have navigated the challenges brought about by the pandemic, and
Craneware has not been an exception. Remuneration policy and practices have,
rightly, been under an increased level of scrutiny throughout the period and
the work of remuneration committees has involved the requirement to balance
the needs of all stakeholders, including all employees, shareholders and the
wider community. In response to these challenges, I am pleased to report that
Craneware did not need to ask any employees, in either the UK or the US, to take
furlough leave. We have only taken very limited support from both governments,
such as deferring payroll taxes (which are being paid as they fall due).
Our remuneration strategy for executives and senior management is focusing
to an even greater extent on long term growth and retention, rather than
shorter term base salary increases - base salaries were not increased in the year
under review or in the prior year. Our fiscal year, however, finished with much
excitement with the acquisition of Sentry Data Systems, Inc. (“Sentry”) and the
associated fund raise.
As we enter our new fiscal year, the work of the Remuneration Committee will
continue to focus on the long-term strategy; seeking to align our remuneration
policies to the broader interests of our stakeholders. The focus will be on
supporting the successful integration of the Sentry business, retaining key talent,
whilst at all times continuing to promote diversity and fair and equal pay.
On behalf of the Committee, I thank you for your support and we hope that you
find this report informative and helpful. If shareholders have any questions or
comments regarding remuneration matters, the Remuneration Committee will
be delighted to receive them and will respond.
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 47 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 42.
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.
Chair of the Remuneration Committee
As announced in March 2020, Mr Verni decided not to seek re-election at
the Company’s AGM in November 2020 and stepped down from Chair of the
Remuneration Committee and from the Board on 17 November 2020. The
Board reviewed and considered the membership and chair of the Committee
and appointed Russ Rudish as Chair of the Remuneration Committee effective
18 November 2020, having previously served as a member of the Committee for
four years. Alistair Erskine became a member of the Committee on 18 November
2020.
Introduction
Shareholder consultation
This report sets out Craneware plc’s remuneration and benefits provided to
Directors for the financial year ended 30 June 2021. 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 consideration by
shareholders. 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 from 18 November 2020 are Russ Rudish (Chair),
Colleen Blye and Alistair Erskine. In the period from 1 July 2020 until 17
November 2020 the members of the Committee were Ronald Verni (Chair),
Colleen Blye and Russ Rudish. None of the Committee has any personal financial
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 2021. A similar resolution was put to the AGM in November 2020
and was supported by the resolution being passed on a poll vote at that meeting,
with 97.5% 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
48
Remuneration Committee’s ReportCraneware plc Annual Report 2021 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.
For the second consecutive year, in the year ended 30 June 2021, in recognition of
the wider macro-economic environment, no changes were made to the executive
Directors’ base salaries.
(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 5% of basic salary (from November 2020, previously 4% of basic salary; FY20: 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
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 2021 (and the previous financial year),
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 51).
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 2021.
Compliance with Provision 40 of the UK Corporate Governance Code
2018
clarity
The Committee aims to provide clear and transparent disclosures
of Director remuneration arrangements, as set out in this Report.
simplicity
risk
predictability
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
objectives including performance expectations as well as
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.
proportionality
and alignment
to culture
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.
49
Remuneration Committee’s Report [Cont'd]Craneware plc Annual Report 2021 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.
For the year ended 30 June 2021, the Remuneration Committee has concluded
that whilst there is growth the specific targets required have not been met for the
current financial year and therefore no bonus amounts are payable to the executive
Directors.
(v) Share-based 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) can 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
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
analysis continues to be made over multiple years. In addition, in the financial
year ended 30 June 2021, the Committee introduced a Clawback provision, a post
vesting holding period requirement and a shareholding guideline, applicable to the
LTIP awards granted during the year and to all future LTIP awards which are granted
to the executive Directors and to senior management. As the Committee continues
to address these shortfalls as well as an increased focus on long term reward and
retention through the introduction of shareholding requirements and clawback
provisions, it deemed exceptional circumstances existed. As a consequence,
the value of long term incentive awards granted to the executive Directors was
increased to 200% of base salary (previously 100% of base salary). Further details
are provided below.
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.
Post vesting holding period
It was acknowledged in the Remuneration Committee’s Report section of last year’s
Annual Report that, whilst it still not common practice for holding periods to be
applied in respect of AIM listed companies, the Committee 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 policy and transition referred to above, the Committee introduced
a two-year post vesting holding period for LTIP awards (net of associated taxes)
applicable for all awards granted to executive Directors and senior management
on 2 October 2020. The Committee intends that a post vesting holding period
requirement will also apply to future awards granted to the executive Directors and
senior management.
• The Craneware plc Unapproved Company Share Option Plan (2016) (the “
Shareholding guideline
Unapproved Option Plan”).
Although the LTIP is intended to be used as the primary means of incentivising
senior management, 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 going
forward”. The transition to address the shortfalls identified in the benchmarking
A shareholding guideline was introduced, applicable for the executive Directors
and for senior management, effective from October 2020. The guideline expects
executive Directors and senior managers to build up a shareholding equivalent to
200% of base salary. Vested but unexercised share option awards are included in
the shareholding guideline on a net of exercise cost and tax basis. The executive
Directors’ interests in the ordinary shares of the Company, as set out in the Directors’
Report on page 35, exceed the shareholding guideline.
Awards granted under the 2016 share plans in the year ended 30 June 2021
In October 2020, 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 a total of 200% of the basic salary for each of these
directors. These awards are included in the tables on page 56.
50
Remuneration Committee’s Report [Cont'd]Craneware plc Annual Report 2021 Conditional share awards and / or share options were granted to certain other
employees (including senior management) in October 2020 under the 2016 share
plans.
The vesting of the awards, which were granted from the 2016 share plans in
the year ended 30 June 2021, 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 October 2020, 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 2019.
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:
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 2021; one third based on performance over the three years ending 30 June
2022; and the final third based on performance over the three years to 30 June
2023 – resulting in an aggregate five year performance evaluation period. 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 2021
For share options and LTIP awards previously granted to the executive directors: in
October 2020, the first tranche is not due to vest until October 2021; for the share
options and LTIP awards granted in September 2019, the second tranche is not due
to vest until September 2021 and LTIP awards granted in September 2018, the third
tranche is not due to vest until September 2021.
In light of the significant share placing (and associated discount) conducted in June
2021, the Committee concluded testing of TSR performance at 30 June 2021 was
not appropriate. As such, the Committee has exercised its discretion, as permitted
in these circumstances, to defer testing to 30 June 2022 allowing the alignment of
executive and shareholder interests to be maintained. These tranches will now be
tested alongside the tranches scheduled to be tested at that date.
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. The Committee supports this 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 and there was a further grant of share options under both
of these plans in the year ended 30 June 2021, 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 in April 2020, and the
details of the share options granted are contained in the table on page 55.
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”). 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.
51
Remuneration Committee’s Report [Cont'd]Craneware plc Annual Report 2021 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 2021, are contained in Note 8
to the financial statements.
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
C Blye
R Rudish
A Erskine
D Kemp
Contract Date
Founder
15 September 2008
1 January 2020
12 November 2013
28 August 2014
24 February 2020
1 March 2020
Expired Term
Normal Notice Period
Rolling
Rolling
Rolling
Rolling
Rolling
Rolling
Rolling
3 months*
3 months*
1 month
1 month
1 month
1 month
1 month
* The notice terms for Keith Neilson and Craig Preston are normally three months, however in the event of a change of control, these notice periods are automatically extended to twelve months.
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 35.
52
Remuneration Committee’s Report [Cont'd]Craneware plc Annual Report 2021 Directors’ Emoluments (audited)
For Directors who held office during the course of the year, emoluments1 in respect of the year ended 30 June 2021 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 $
Benefits2 $
Bonus $
Pension $
Total 2021 $
Total 2020 $
Executives
K NeilsonA,B
C T PrestonC
Non-Executives
G R Elliott3
W Whitehorn4
D Kemp4
R Verni5
C Blye
R Rudish
A Erskine4
Total
437,496
325,194
-
100,992
59,526
25,295
60,708
56,676
54,216
890
952
-
-
-
-
-
-
-
1,120,103
1,842
-
-
-
-
-
-
-
-
-
-
27,149
15,175
-
-
-
-
-
-
-
465,535
341,321
-
100,992
59,526
25,295
60,708
56,676
54,216
390,225
317,844
32,549
47,242
17,514
60,708
61,596
52,644
14,684
42,324
1,164,269
995,006
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 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
5 R Verni resigned from the Board on 17 November 2020
A In August 2020 K Neilson exercised share options, which were granted in 2010 detailed below, in respect of a total of 13,383 Ordinary Shares in the Company. Based on the share price on the date of exercise, the gain on exercise of those share
options was £175,183.
B The conditional share award, in respect of 8,928 Ordinary Shares in the Company which was granted to K Neilson under the LTIP in January 2018, vested in January 2021. Based on the share price on the vesting date, the value of those Ordinary
Shares was £186,149.
C The conditional share award, in respect of 6,618 Ordinary Shares in the Company which was granted to C T Preston under the LTIP in January 2018, vested in January 2021. Based on the share price on the vesting date, the value of those Ordinary
Shares was £137,985.
The following Directors were paid in Sterling:
Executives
K Neilson(i)
C T Preston(i)
Non-Executives
G R Elliott
W Whitehorn
D Kemp
Total
Salary/Fees £
Benefits £
Bonus £
Pension £
Total 2021 £
Total 2020 £
324,900
241,500
-
75,000
44,206
685,606
661
707
-
-
-
1,368
-
-
-
-
-
-
20,162
11,270
-
-
-
31,432
345,723
253,477
-
75,000
44,206
718,406
309,751
252,297
25,636
37,500
13,902
639,086
Further information regarding Directors’ share options and LTIP awards are contained in the tables on pages 55 and 56.
(i) For the second consecutive year, no changes have been made to either K Neilson or C T Preston’s base salary. However, during the year ended 30 June 2020 K Neilson took a period of 26 days unpaid leave which reduced his total emoluments in that
year. This did not recur in the year to 30 June 2021.
53
Remuneration Committee’s Report [Cont'd]Craneware plc Annual Report 2021 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
54
Remuneration Committee’s Report [Cont'd]Craneware plc Annual Report 2021 Directors’ interests in share options and LTIP awards
Directors’ interests in share options as at 30 June 2021, 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
30/06/20
Granted
During
Year
Exercised
During
Year
Lapsed
During
Year
Held
At
30/06/21
Exercisable from
date
Expiry
date
K Neilson
Share Option Plan 2007
Grant Date
6 Sep 2010
21 Sep 2012
10 Sep 2013
22 Sep 2014
9 Mar 2016
12 Sep 2016
618.0
650.0
621.0
839.0
1066.0
1563.0
401.0
400.0
395.0
522.5
750.0
1177.5
13,383
6,605
34,472
39,090
28,628
36,469
Schedule 4 Option Plan
17 Jan 2018
2445.0
1775.0
1,690
Unapproved Option Plan
17 Jan 2018
5 Sep 2018
2445.0
3488.0
1775.0
2710.0
7,238
5,692
SAYE Option Plan
20 Apr 2020
1432.0
1147.5
1,568
C T Preston
Share Option Plan 2007
Grant Date
9 Mar 2016
1066.0
750.0
26,925
Schedule 4 Option Plan
24 Mar 2017
1544.0
1237.5
2,424
Unapproved Option Plan
24 Mar 2017
17 Jan 2018
5 Sep 2018
1544.0
2445.0
3488.0
1237.5
1775.0
2710.0
6,162
6,618
4,218
SAYE Option Plan
20 Apr 2020
1432.0
1147.5
1,568
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(13,383)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,605
34,472
39,090
28,628
36,469
6 Sep 2013
21 Sep 2015
10 Sep 2016
22 Sep 2017
9 Mar 2019
6 Sept 20
21 Sept 22
10 Sept 23
22 Sept 24
9 Mar 26
12 Sep 2019
12 Sept 26
1,690
17 Jan 2021
17 Jan 28
7,238
5,692
17 Jan 2021
64% vested
17 Jan 28
5 Sep 28
1,568
1 May 2023
1 Nov 23
26,925
9 Mar 2019
9 Mar 26
2,424
24 Mar 2020
24 Mar 27
6,162
6,618
4,218
24 Mar 2020
17 Jan 2021
64% vested
24 Mar 27
17 Jan 28
5 Sep 28
1,568
1 May 2023
1 Nov 23
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.
55
Remuneration Committee’s Report [Cont'd]Craneware plc Annual Report 2021 The maximum number of Ordinary Shares subject to conditional share awards granted to Directors under the LTIP as at 30 June 2021 were as follows, in respect of Directors
who held office during the course of the year:
Grant
Date
Held
At
30/06/20
Granted
During
Year
Released
During
Year
Lapsed
During
Year
Held
At
30/06/21
Share price at
date of grant
(pence)
Normal vesting
date
17 Jan 2018
5 Sep 2018
8,928
5,692
4 Sep 2019
17,100
-
-
-
2 Oct 2020
-
43,176
17 Jan 2018
5 Sep 2018
6,618
4,218
4 Sep 2019
12,710
-
-
-
2 Oct 2020
-
32,093
(8,928)
-
-
-
(6,618)
-
-
-
-
-
-
-
-
-
-
-
-
1,775.0
17 Jan 2021
5,692
2,710.0
5 Sep 2021
17,100
43,176
1,900.0
4 Sep 2022
1,505.0
2 Oct 2023
-
1,775.0
17 Jan 2021
4,218
12,710
32,093
2,710.0
5 Sep 2021
1,900.0
4 Sep 2022
1,505.0
2 Oct 2023
K Neilson
Conditional
share award
Conditional
share award
Conditional
share award
Conditional
share award
C T Preston
Conditional
share award
Conditional
share award
Conditional
share award
Conditional
share award
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 pages 49 and 50. 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:
Russ Rudish
Chairman of the Remuneration Committee
20 September 2021
56
Remuneration Committee’s Report [Cont'd]Craneware plc Annual Report 2021 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 2021 and of the group’s
profit and the group’s and company’s cash flows for the year then ended;
have been properly prepared in accordance with international accounting standards in conformity with the
requirements 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 2021; 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
Audit scope
• We performed an audit of the complete financial information of Craneware plc and Craneware, Inc.
• We also audited material balances in Craneware Insight, Kestros Ltd, Craneware Healthcare Intelligence LLC and Craneware
plc Employee Benefit Trust.
•
Taken together, the entities we audited comprise 100% of Group revenues. All audit work was undertaken by a single
engagement team in the UK.
Key audit matters
• Revenue and deferred income (group and parent)
•
•
Internally developed intangible assets (group and parent)
Impact of Covid-19 (group and parent)
Materiality
• Overall group materiality: US$982,600.00 (2020: US$965,200.00) based on 5% of profit before tax adjusted for exceptional
items. (2020: profit before tax).
• Overall company materiality: US$658,250.00 (2020: US$537,000.00) based on 5% of profit before tax adjusted for
exceptional items.
•
Performance materiality: US$736,950.00 (group) and US$493,700.00 (company).
57
Independent auditors’ report to the members of Craneware plcCraneware plc Annual Report 2021 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.
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.
The key audit matters below are consistent with last year.
How we tailored the audit scope
Key audit matter
How our audit addressed the key audit matter
Revenue and deferred income (Group and Parent)
The Group has revenue of $75,578k (2020: $71,492k)
and deferred income of $33,670k (2020: $37,155k). The
Company has revenue of $43,700k (2020: $38,473k)
and deferred income of $33,670k (2020: $37,154k).
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. The risk has
been identified as being in relation to the correct amount of
revenue not being recognised (accuracy) and revenue being
recognised on fictitious contracts (occurrence).
Internally developed intangible assets (Group and Parent)
As per note 14, the Group has net book value of development
costs capitalised amounting to $31,652k (2020: $25,083k)
and the Company has $31,652k (2020: 25,083k) 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. We consider this as a
key audit matter because there is a risk that the costs being
capitalised are not allowable under IAS 38 and also that the
intangible assets will not generate sufficient economic benefit
to recover the value of the intangible asset.
The movement between the opening and closing deferred
revenue balances 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 key inputs per the accounting policy to
conclude on the accuracy of revenue recognised in the period
and the closing deferred revenue balance. No matters arose
during our testing.
On a sample basis we agreed additions to intangible assets
to supporting documentation, including invoices and time
records. We obtained an understanding for the proportion
of employee costs being capitalised and verified these
against payroll information (for example, payroll reports
and employee registers) and timesheets to verify the amount
of time that employees spend on the capital projects. 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.
58
Independent auditors’ report to the members of Craneware plc [Cont'd]Craneware plc Annual Report 2021 Key audit matter
Impact of Covid-19 (Group and Parent)
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 2021 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.
How our audit addressed the key audit matter
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 Covid-19
had a 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.
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:
Overall
materiality
How we
determined it
Rationale for
benchmark
applied
Financial statement - group
Financial statements - company
US$982,000.00 (2020: US$965,200.00).
US$658,250.00 (2020: US$537,000.00).
5% of profit before tax adjusted for exceptional
items. (2020: profit before tax)
We believe the measure of profit before tax
adjusted for exceptional items is the most
relevant measure to the shareholders to measure
the underlying performance of the Group. In
prior year the benchmark used was profit before
tax.
5% of profit before tax adjusted for exceptional items
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 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 $400,000 and $950,000. Certain components were audited to a
local statutory audit materiality that was also less than our overall group materiality.
59
Independent auditors’ report to the members of Craneware plc [Cont'd]Craneware plc Annual Report 2021 We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of
our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in
determining sample sizes. Our performance materiality was 75% of overall materiality, amounting to US$736,950.00 for the
group financial statements and US$493,700.00 for the company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was
appropriateWe agreed with those charged with governance that we would report to them misstatements identified during our
audit above $49,000 (group audit) (2020: $48,000) and $32,900 (company audit) (2020: $26,850) as well as misstatements
below those amounts that, in our view, warranted reporting for qualitative reasons.
We agreed with those charged with governance that we would report to them misstatements identified during our audit above
$49,000 (group audit) (2020: $48,000) and $32,900 (company audit) (2020: $26,850) as well as misstatements below those
amounts that, in our view, warranted reporting for qualitative reasons.
Going concern
Our evaluation of the directors’ assessment of the group’s and the company’s ability to continue to adopt the going concern basis
of accounting included:
•
evaluating the appropriateness of management’s assessment of the group’s and the Company’s ability to continue as a
going concern, including whether the form (e.g. in-depth knowledge of the business or detailed analysis) is appropriate
given the nature of the group and the Company, consideration of mitigating factors, the period covered is at least 12
months from the date of the financial statements, and all relevant information has been included.
• making inquiries of management as to its knowledge of events or conditions beyond the period of management’s
assessment that may cast significant doubt on the group’s and the Company’s ability to continue as a going concern.
•
•
testing the cash flow forecast for next 12 months within the financial model of the group and the Company.
determining whether a material uncertainty exists related to the events or conditions identified by evaluating magnitude
of potential impact and likelihood of occurrence of those events or conditions.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the group’s and the company’s ability to continue as a going concern for
a period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s and the
company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to
add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered
it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report.
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.
60
Independent auditors’ report to the members of Craneware plc [Cont'd]Craneware plc Annual Report 2021 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 Director’s report, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and
matters as described below.
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
Director's report for the year ended 30 June 2021 is consistent with the financial statements and has been prepared in
accordance with applicable legal requirements.
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 Director's report.
Corporate governance statement
ISAs (UK) require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the
corporate governance statement relating to the company’s compliance with the provisions of the UK Corporate Governance
Code, which the Listing Rules of the Financial Conduct Authority specify for review by auditors of premium listed companies.
Our additional responsibilities with respect to the corporate governance statement as other information are described in the
Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement, included within the Corporate Governance Report is materially consistent with the financial statements
and our knowledge obtained during the audit, and we have nothing material to add or draw attention to in relation to:
•
•
•
•
•
The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are being managed or mitigated;
The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their identification of any material uncertainties to the group’s and
company’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial
statements;
The directors’ explanation as to their assessment of the group’s and company’s prospects, the period this assessment
covers and why the period is appropriate; and
The directors’ statement as to whether they have a reasonable expectation that the company will be able to continue
in operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the group was substantially less in scope than an
audit and only consisted of making inquiries and considering the directors’ process supporting their statement; checking that
the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the
statement is consistent with the financial statements and our knowledge and understanding of the group and company and their
environment obtained in the course of the audit.
61
Independent auditors’ report to the members of Craneware plc [Cont'd]Craneware plc Annual Report 2021 In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
corporate governance statement is materially consistent with the financial statements and our knowledge obtained during the
audit:
•
•
The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable,
and provides the information necessary for the members to assess the group’s and company’s position, performance,
business model and strategy;
The section of the Annual Report that describes the review of effectiveness of risk management and internal control
systems; and
•
The section of the Annual Report describing the work of the audit committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the company’s
compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing
Rules for review by the auditors.
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, 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws
and regulations related to UK and US tax legislation, Health and Safety regulations, AIM Listing Rules and UK Corporate
Governance Code, and we considered the extent to which non-compliance might have a material effect on the financial
statements. We also considered those laws and regulations that have a direct impact on the financial statements such as the
Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial
statements (including the risk of override of controls), and determined that the principal risks were related to posting
inappropriate journal entries and the risk of management bias in accounting estimates. Audit procedures performed by the
engagement team included:
•
Enquiries of management around known or suspected instances of non-compliance with laws and regulations, claims
and litigation, and instances of fraud;
• Understanding of management’s controls designed to prevent and deter irregularities;
• Review of board minutes;
62
Independent auditors’ report to the members of Craneware plc [Cont'd]Craneware plc Annual Report 2021 •
•
Challenging management on assumptions and judgements made in their significant accounting estimates;
Identifying and testing journal entries, including those with unexpected account combinations impacting revenue, and
those with expected words contained within the description.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements.
Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through
collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data
auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete
populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we
will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.
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.
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 obtained 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.
Paul Cheshire (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Edinburgh
20 September 2021
63
Independent auditors’ report to the members of Craneware plc [Cont'd]Craneware plc Annual Report 2021 Consolidated Statement of Comprehensive Income
for the year ended 30 June 2021
Notes
4
5
16
6
8
13
5
14
9
9
10
12
12
Total
2021
$’000
75,578
(5,373)
70,205
37
(56,507)
(495)
13,240
27,111
(2,141)
(1,403)
(6,487)
(3,840)
1
(76)
13,165
(260)
12,905
(126)
(126)
12,779
0.481
0.475
Total
2020
$’000
71,492
(4,518)
66,974
9
(47,248)
(529)
19,206
25,189
(1,318)
(1,489)
-
(3,176)
192
(94)
19,304
(2,468)
16,836
26
26
16,862
0.628
0.619
Continuing operations:
Revenue from contracts with customers
Cost of sales
Gross profit
Other income
Operating expenses
Net impairment charge on financial and contract assets
Operating profit
Analysed as:
Adjusted EBITDA*
Share-based payments
Depreciation of property, plant and equipment
Exceptional costs**
Amortisation of intangible assets
Finance income
Finance expense
Profit before taxation
Tax on profit on ordinary activities
Profit for the year attributable to owners of the parent
Other comprehensive (expense)/income
Items that may be reclassified subsequently to profit or loss
Currency translation reserve movement
Total items that may be reclassified subsequently to profit or loss
Total comprehensive income attributable to owners of the parent
Earnings per share for the year attributable to equity holders
- Basic ($ per share)
- Diluted ($ per share)
The accompanying notes are an integral part of these financial statements.
* See Note 26 for explanation of Alternative Performance Measures.
** Exceptional items relate to legal and professional fees associated with an aborted potential acquisition and a successful acquisition post year end and its associated share placing.
64
Craneware plc Annual Report 2021 Statement of Changes in Equity for the year ended 30 June 2021
Group
At 1 July 2019
Total comprehensive income - profit for the year
Total other comprehensive income
Transactions with owners:
Purchase of own shares through EBT (Note 18)
Share-based payments
Impact of share options exercised/lapsed
Dividends (Note 11)
At 30 June 2020
Total comprehensive income - profit for the year
Total other comprehensive expense
Transactions with owners:
Share-based payments
Share placing
Purchase of own shares through EBT (Note 18)
Deferred tax taken directly to equity
Impact of share options and awards exercised/lapsed
Dividends (Note 11)
At 30 June 2021
Company
At 1 July 2019
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 2020
Total comprehensive income - profit for the year
Transactions with owners:
Share-based payments
Share placing
Deferred tax taken directly to equity
Impact of share options and awards exercised/lapsed
Dividends (Note 11)
At 30 June 2021
The accompanying notes are an integral part of these financial statements.
Share
Capital
$’000
Share
Premium
Account
$’000
Capital
Redemption
Reserve
$’000
Merger
Reserves
$’000
535
20,022
-
-
-
-
1
-
-
-
-
-
1,075
-
536
21,097
-
-
-
88
-
-
-
-
-
-
-
-
-
-
-
-
624
21,097
Share
Capital
$’000
535
-
-
1
-
Share
Premium
Account
$’000
20,022
-
-
1,075
-
536
21,097
-
-
88
-
-
-
-
-
-
-
-
-
624
21,097
9
-
-
-
-
-
-
9
-
-
-
-
-
-
-
-
9
9
-
-
-
-
9
-
-
-
-
-
-
9
Other
Reserves
$’000
3,549
-
-
-
1,176
(577)
-
4,148
-
-
1,332
-
-
-
(752)
Retained
Earnings
$’000
36,790
16,836
26
Total
Equity
$’000
60,905
16,836
26
(1,255)
(1,255)
(890)
175
(9,077)
42,605
12,905
(126)
-
-
(422)
1,212
354
286
674
(9,077)
68,395
12,905
(126)
1,332
187,081
(422)
1,212
(398)
-
(9,700)
(9,700)
Retained
Earnings
$’000
24,649
10,287
(327)
(327)
(9,077)
25,205
13,159
-
-
579
(469)
Total
Equity
$’000
46,678
10,287
(167)
528
(9,077)
48,249
13,159
521
187,081
579
(760)
1,463
-
160
(221)
-
1,402
-
521
-
-
(291)
-
-
-
-
-
-
-
-
-
-
-
186,933
-
-
-
-
-
-
-
-
-
-
-
-
186,933
-
-
-
-
(9,700)
(9,700)
186,993
1,632
28,774
239,129
65
186,993
4,728
46,828
260,279
Capital
Redemption
Reserve
$’000
Merger
Reserves
$’000
Other
Reserves
$’000
Craneware plc Annual Report 2021
Consolidated Balance Sheet as at 30 June 2021
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 liability > 1 year
Other provisions
Current Liabilities
Deferred income
Current tax liabilities
Trade and other payables
Total Liabilities
Equity
Share capital
Share premium account
Capital redemption reserve
Merger reserve
Other reserves
Retained earnings
Total Equity
Total Equity and Liabilities
Registered Number SC196331
Notes
13
14
16
17
16
20
21
18
2021
$’000
2,552
43,110
5,427
5,459
56,548
19,435
235,617
255,052
311,600
1,148
764
1,912
33,670
-
15,739
49,409
51,321
624
21,097
9
186,993
4,728
46,828
260,279
311,600
2020
$’000
3,798
36,783
3,915
2,408
46,904
21,003
47,851
68,854
115,758
2,017
-
2,017
37,155
797
7,394
45,346
47,363
536
21,097
9
-
4,148
42,605
68,395
115,758
The accompanying notes are an integral part of these financial statements.
The financial statements on pages 64 to 97 were approved and authorised for issue by the Board of Directors on 20 September 2021 and signed on its behalf by:
Keith Neilson
Director
66
Craig Preston
Director
Craneware plc Annual Report 2021 Company Balance Sheet as at 30 June 2021
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 liability > 1 year
Other provisions
Current Liabilities
Deferred income
Current tax liabilities
Trade and other payables
Total Liabilities
Equity
Share capital
Share premium account
Capital redemption reserve
Merger reserve
Other reserves
Retained earnings
At 1 July
Profit for the year attributable to owners
Other charges in retained earnings
Total Equity
Total Equity and Liabilities
Registered Number SC196331
Notes
15
13
14
17
16
16
20
21
18
2021
$’000
9,000
1,201
31,885
2,217
6,000
50,303
28,170
230,363
258,533
308,836
387
764
1,151
33,670
-
34,886
68,556
69,707
624
21,097
9
186,993
1,632
28,774
25,205
13,159
(9,500)
239,129
308,836
The accompanying notes are an integral part of these financial statements.
The financial statements on pages 64 to 97 were approved and authorised for issue by the Board of Directors on 20 September 2021 and signed on its behalf by:
Keith Neilson
Director
Craig Preston
Director
2020
$’000
9,000
1,974
25,544
1,139
6,000
43,657
25,567
44,480
70,047
113,704
887
-
887
37,154
361
27,053
64,568
65,455
536
21,097
9
-
1,402
25,205
24,649
10,287
(9,731)
48,249
113,704
67
Craneware plc Annual Report 2021 Statements of Cash Flows for the year ended 30 June 2021
Cash flows from operating activities
Cash generated from operations
Tax paid
Net cash generated from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Capitalised intangible assets
Interest received
Net cash used in investing activities
Cash flows from financing activities
Dividends paid to company shareholders
Shares issued for cash
Paid up share capital
Loan arrangement fees
Purchase of own shares from EBT
Funds returned from/(advanced to) EBT
Payment of lease liabilities
Group
2021
$’000
2020
$’000
Company
2021
$’000
2020
$’000
Notes
19
26,711
(3,174)
23,537
23,134
(2,668)
20,466
19,718
(919)
18,799
23,001
(2,867)
20,134
13
14
11
18
18
18
(159)
(187)
(55)
(90)
(10,167)
(9,522)
(10,136)
(9,515)
1
204
77
408
(10,325)
(9,505)
(10,114)
(9,197)
(9,700)
(9,077)
(9,700)
(9,077)
187,244
88
(1,692)
-
187,244
614
-
(422)
(1,255)
-
-
(964)
(1,003)
-
1,162
-
-
(1,256)
(643)
88
-
-
136
(570)
Net cash generated from/(used in) financing activities
174,554
(10,721)
177,198
(9,814)
Net increase in cash and cash equivalents
Cash and cash equivalents at the start of the year
187,766
240
185,883
47,851
47,611
44,480
1,123
43,357
Cash and cash equivalents at the end of the year
20
235,617
47,851
230,363
44,480
Shares issued for cash includes net proceeds of $187,331,713 related to the share placing in June 2021 (see note 18), being gross proceeds of $192,282,712 less transaction
costs of $4,950,999.
The accompanying notes are an integral part of these financial statements.
68
Craneware plc Annual Report 2021 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 30 of the Annual Report. The principal activity of the Company is
described in the Directors’ Report.
Basis of preparation
The financial statements are prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006
(International Financial Reporting Standards (“IFRS”)) and the applicable legal
requirements of the Companies Act 2006.
The Group and Company financial statements have been prepared under the historic
cost convention and prepared on a going concern basis. See the Directors’ Report
on page 34 for further details on the factors considered in reaching this conclusion.
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.
Currenty 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 $1.3466/£1 (2020: $1.2598/£1).
Monetary assets and liabilities expressed in foreign currencies are translated into
US dollars at rates of exchange ruling at the Balance Sheet date $1.3853/£1 (2020:
$1.2302/£1). Exchange gains or losses arising upon subsequent settlement of the
transactions and from translation at the Balance Sheet date, are included within
the related category of expense where separately identifiable, or administrative
expenses.
New Standards, amendments, and interpretations effective in the
year
The Directors have adopted the following Standards, amendments and
interpretations (where relevant to the Group) and they have concluded that they
have no material financial impact on the financial statements of the Group or
Company.
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*)
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.
Classification of Liabilities as Current or Non-current (Amendments to IAS 1) (effective 1
January 2022*),
Reference to the Conceptual Framework (Amendments to IFRS 3) (effective 1 January 2022*),
Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) (effective 1 January
2022*),
Annual Improvements to IFRS 2018-2020 (effective 1 January 2022*).
*Effective for accounting periods starting on or after this date.
Basis of consolidation
The consolidated Statement of Comprehensive Income, Balance Sheet, Statement of
Changes in Equity and Statement of Cash Flows include the financial statements of
the 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.
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.
Employee Benefit Trust (EBT)
Craneware plc established an employee benefit trust (EBT) in conjunction with the
operation of the Company’s employee share plans for the benefit of the employees
of the Group. While it is run by independent trustees, the assets and liabilities of the
employee benefit trust are viewed to be ultimately under the control of the Board of
directors and hence have been consolidated into the Group results.
Investments in the Company’s own shares held by the EBT are presented as a
deduction from Retained Earnings.
69
Notes to Financial StatementsCraneware plc Annual Report 2021 1. Principal accounting policies [Cont'd]
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 liabilities
resulting from any contingent consideration. Any costs directly attributable to the
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.
Revenue from contracts with customers
The Group follows the principles of IFRS 15, ‘Revenue from Contracts with
Customers’; accordingly, revenue is recognised using the five-step model:
1. Identify the contract;
2. Identify the performance obligations in the contract;
3. Determine the transaction price;
4. Allocate the transaction price to the performance obligations in the
contract;
5. Recognise revenue when or as performance obligations are satisfied.
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 training and consultancy.
Revenue from Software Licenses
Revenue from both on premises and Trisus software licenced products is recognised
from the point at which the customer gains control and the right to use our
software. The following key judgements have been made in relation to revenue
recognition of software license:
• This is right of use software due to the integral updates provided on a
regular basis to keep the software relevant and, as a result, the licenced
software revenue will be recognised over time rather than at a point in
time;
• The software license together with installation, regular updates and access
to support services form a single performance obligation;
• The transaction price is allocated to each distinct one year license period
with annual increases being recognised in the year they apply;
• Discounts in relation to software licenses are 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 professional services
Revenue from all professional services including training and consulting services
is recognised when the performance obligation has been fulfilled and the services
are provided. These services could be provided by a third party and are therefore
considered to be separate performance obligations. 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 complete 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.
‘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.
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 sales commissions on contracts sold and deferred income relating to
license fees billed in advance and recognised over time.
Exceptional items
The Group defines exceptional items as transactions (including costs incurred by the
Group) which relate to material non-recurring events. These are disclosed
70
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 1. Principal accounting policies [Cont'd]
separately where it is considered it provides additional useful information to the
users of the financial statements.
Employee benefits
The Group operates a defined contribution Stakeholder Pension Scheme as
described in Section 3 of Welfare Reform and Pensions Act 1999. Private medical
insurance is also offered to every employee.
Amounts payable in respect of these benefits are charged to the Statement
of Comprehensive Income as they fall due. The Group has no further payment
obligations once the payments have been made. The contributions are recognised
as an employee benefit expense when they are due. Prepaid contributions are
recognised as an asset to the extent that a cash refund or a reduction in future
payments is available.
Share-based payments
The Group grants share options 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’.
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. They are
measured using enacted rates and laws that will be in effect when the differences
are expected to reverse. 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.
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.
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 recognised as a non-current asset in accordance with IFRS
3 and is not amortised.
After initial recognition, goodwill is stated at cost less any accumulated impairment
losses. It tested at least annually for impairment. Any impairment loss is
recognised in the Consolidated Statement of Comprehensive Income.
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.
71
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 1. Principal accounting policies [Cont'd]
Development expenditure is capitalised where new product development projects
• are technically feasible;
• production and sale is intended;
• a market exists;
• expenditure can be measured reliably; and
• sufficient resources are available to complete such projects.
Costs are 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. Expenditure not meeting the above criteria
is expensed as incurred.
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.
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. Each lease payment is allocated
between the lease liability and finance cost, which is charged at a constant periodic
rate over the term of 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.
Investment in subsidiaries
If the recoverable amount of an asset is estimated to be less than its carrying
amount, the impairment loss is recognised as an expense.
Investment in Group undertakings is recorded at cost, which is the fair value of the
consideration paid, less any provision for impairment.
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.
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).
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
Computer equipment
Tenant’s improvements
Office furniture
- over the life of the lease straight line
- Between 20% - 33% straight line
- Between 10% - 20% straight line
- Between 14% - 25% straight line
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 being the invoice value and
subsequently measured at amortised cost using the effective interest method, less
provision for impairments.
72
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 1. Principal accounting policies [Cont'd]
Other reserves
Impairment of financial assets
IFRS 9 uses 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 of the loans. Other debtors consists mainly
of the loan to the Employee Benefit Trust. Therefore the identified impairment loss
was assessed as immaterial for both.
Financial liabilities
Trade payables and other short term liabilities are recognised initially at fair value
and subsequently measured at amortised cost using the effective interest method.
Other provisions
Provisions are recognised where the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
Other provisions relate to employer taxes due in relation to employee share awards
from the 2007 Share Option Plan payable on exercise of options.
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 including any cash held at the balance sheet date by the Employee
Benefit Trust.
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.
Merger reserve
The merger reserve represents the difference between the fair value and nominal
value of shares issued on the acquisition of subsidiary companies where the
company has taken advantage of merger relief.
Other reserves relate to share-based payments and these reserves are not available
for distribution.
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 judgement based on past experience, advances in product
development and also best practice. The Group amortises intangible
assets over 5 to 10 years.
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 Revenue from contracts with customers.
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.
73
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 3. Financial risk management [Cont'd]
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.
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 $2,109,000 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 $159,000 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 30.
(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.
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 $69,000.
Less than 1 year
$'000
Between 1 and 2 years
$'000
Between 2 and 5 years
$'000
Over 5 years
$'000
At 30 June 2020
Trade and other payables
Lease liabilities
At 30 June 2021
Trade and other payables
Lease liabilities
Capital risk management
6,448
946
14,686
1,053
-
999
-
812
-
1,057
-
380
-
126
-
25
Total
$'000
6,448
3,128
14,686
2,270
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.
74
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 4. Revenue from contracts with customers
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 royalties < 1 year
Prepaid commissions and royalties > 1 year
Total contract assets
2021
$’000
61,115
14,463
75,578
2021
$’000
2,483
3,735
6,218
2020
$’000
59,390
12,102
71,492
2020
$’000
2,565
3,915
6,480
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 2020 were
$2.6m.
Contract liabilities
The following table shows the total contract liabilities at 30 June 2021 from software license and professional service contracts:
Software licensing
Professional services
Total revenue
2021
$'000
29,245
4,425
33,670
2020
$'000
30,239
6,916
37,155
Contract liabilities are included within deferred income in the Balance Sheet. Revenue of $37.1m was recognised during the year in relation to contract liabilities as of 30 June
2020.
The following table shows the aggregate transaction price allocated to performance obligations that are partially or fully unsatisfied at 30 June 2021 from software license
and professional service contracts:
Revenue expected to be recognised
Total unsatisfied
performance obligations
$'000
At 30 June 2021
- Software
- Professional services
Total at 30 June 2021
At 30 June 2020
- Software
- Professional services
Total at 30 June 2020
155,617
11,513
167,130
151,383
15,131
166,514
Expected recognition
1 to 2years
$'000
2 to 3 years
$'000
43,485
2,419
45,904
44,028
3,413
47,441
28,282
1,306
29,588
29,756
2,103
31,859
< 1 year
$'000
57,862
6,475
64,337
53,944
8,730
62,674
Revenue of $62.7m was recognised during the year in relation to unsatisfied performance obligations as of 30 June 2020.
The majority of these performance obligations are unbilled at the Balance Sheet date and therefore not reflected in these accounts.
> 3 years
$'000
25,988
1,313
27,301
23,655
885
24,540
75
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 5. Operating expenses
Operating expenses are comprised of 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 items*
Exchange loss
Operating expenses
2021
$'000
6,620
12,615
14,549
9,300
2,141
1,403
3,840
6,487
47
57,002
2020
$'000
7,207
12,330
12,266
9,980
1,318
1,489
3,176
-
11
47,777
* Exceptional items relate to legal and professional fees associated with an aborted potential acquisition of $283,000 and a successful acquisition post year end and its
associated share placing of $6,204,000.
Included in operating expenses is the net impairment charge for the year of $495,000 as per note 16.
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
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
2021
$'000
40,873
(6,797)
1,403
3,840
46
83
2021
$'000
175
2020
$'000
36,045
(5,786)
1,489
3,176
631
117
2020
$'000
145
76
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 7. Staff costs
The average monthly number of people employed by the Group and Company during the year, excluding non-executive Directors, is analysed below:
2021
Group Number
2020
Group Number
2021
Company Number
2020
Company Number
Sales and distribution
Client servicing
Research and development
Administration
Employment costs for all employees excluding non-executive Directors:
Wages and salaries
Social security costs
Other pension costs
Share based payments
Total direct costs of employment
36
108
181
45
370
2021
Group
$'000
34,409
2,975
1,348
2,141
40,873
34
105
166
47
352
2020
Group
$’000
31,049
2,541
1,137
1,318
36,045
1
38
113
36
188
2021
Company
$'000
18,611
1,705
812
1,389
22,517
1
36
98
36
171
2020
Company
$'000
16,279
1,417
632
491
18,819
The remuneration of the highest paid Director including the gain from exercising share options and LTIPs in the year (granted in 2010 and 2018 respectively) is $0.5m
(2020: $0.6m). Full details of Directors’ emoluments and share option exercises are detailed in the Remuneration Committee’s Report on page 53 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 (2020: 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 55 and 56. 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 $2,141,351
(2020: $1,318,175) was recognised in the Statement of Comprehensive Income for the year, as stated in Note 7 above. This comprises a charge of $239,418 (2020: $94,000
credit) relating to the movement in the accrual for estimated employer National Insurance contributions on the unexercised options granted under the 2007 share-based plan
and $1,901,933 (2020: $1,412,175) share-based payment charge split as follows:
Type of award and name of share plan
Share options granted under the 2007 Share Options 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
2021
$'000
-
246
37
69
85
1,465
-
1,902
2020
$'000
2
141
25
13
14
700
517
1,412
77
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 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 2021:
Date of grant
Exercise price
(GBP)
Exercise price
(USD)
Remaining life
at 1 July 2020
(years)
No of options
at 1 July 2020
Granted
Exercised
Lapsed
No of options
at June 2021
Remaining life
at 30 June
2021 (years)
2007 Share Option Plan
06 Sep 2010
04 Sep 2012
21 Sep 2012
10 Sep 2013
22 Sep 2014
09 Mar 2016
£4.01
£3.60
£4.00
£3.95
£5.225
£7.50
12 Sep 2016
£11.775
2016 Unapproved Option Plan
24 Mar 2017
£12.375
17 Jan 2018
£17.750
05 Sep 2018
£27.100
04 Sep 2019
£19.000
02 Oct 2020
£15.050
2016 Schedule 4 Option Plan
24 Mar 2017
£12.375
17 Jan 2018
£17.750
05 Sep 2018
£27.100
04 Sep 2019
£19.000
02 Oct 2020
£15.050
2018 Employee Stock Purchase Plan
24 Mar 2020
£11.475
23 Mar 2021
£18.360
2018 SAYE Option Plan
$6.18
$5.72
$6.50
$6.21
$8.39
$10.66
$15.63
$15.44
$24.45
$34.88
$23.01
$19.36
$15.44
$24.45
$34.88
$23.01
$19.36
$13.34
$25.42
20 Apr 2020
£11.475
$14.32
19 Apr 2021
£18.360
$25.39
78
0.2
2.2
2.2
3.2
4.2
5.7
6.2
6.7
7.5
8.2
9.2
-
6.7
7.5
8.2
9.2
-
1.7
-
3.3
-
18,980
1,725
6,605
47,190
98,528
111,976
36,469
39,974
57,621
43,094
20,113
-
-
-
-
-
-
-
-
-
-
-
-
67,495
19,392
7,463
4,126
7,047
-
21,669
-
42,328
-
-
-
-
-
14,682
-
7,420
-
4,498
(18,980)
-
-
-
(4,112)
(11,220)
-
(4,848)
(4,084)
-
-
-
(3,434)
(704)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,020)
(4,124)
(657)
(3,986)
-
-
(538)
(1,735)
(2,990)
(3,171)
-
(3,602)
(196)
-
1,725
6,605
47,190
94,416
100,756
36,469
35,126
48,517
38,970
19,456
63,509
15,958
6,759
3,588
5,312
11,692
18,498
7,420
38,726
4,302
584,300
94,095
(47,382)
(26,019)
604,994
-
1.2
1.2
2.2
3.2
4.7
5.2
5.7
6.5
7.2
8.2
9.3
5.7
6.5
7.2
8.2
9.3
0.7
1.7
2.3
3.3
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021
8. Share-based payments [Cont'd]
The weighted average share price at the date of exercise of share options in the year ended 30 June 2021 was £19.11 ($25.79) (2020: £21.03 ($26.32)). The market value of
Craneware plc Ordinary Shares at 30 June 2021 was £21.30 ($29.51) per share. The weighted average remaining contractual life of the options outstanding at 30 June 2021 is
5.1 years (2020: 6.2 years).
2021
2020
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 the end of the year
Number of
Options
Weighted average
exercise price (£)
584,300
94,095
(47,382)
(26,019)
604,994
393,523
11.12
15.47
7.79
17.19
11.80
8.92
Numer of
Options
680,404
97,466
(154,794)
(38,776)
584,300
380,841
Weighted average
exercise price (£)
10.22
14.06
7.37
17.70
11.12
7.39
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.
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
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
12 Sep 16
01 Apr 16
09 Mar 16
22 Sep 14
10 Sep 13
$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
$1.78
$8.39
£5.23
3.00
33%
1.33%
2.4%
$8.39
£5.23
36
306,765
$2.28
$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 October 2020, 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 October 2020, in September 2019, in September 2018 and in January 2018
are outlined in the Remuneration Committee’s Report on pages 51.
79
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 8. Share-based payments [Cont'd]
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
20 Oct 20
04 Sep 19
05 Sep 18
£15.050
$19.36
3
52.5%
(0.04%)
£15.050
$19.36
82,177
$3.98
£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 Jan 18
£17.750
$24.45
3
22.8%
0.56%
£17.750
$24.45
88,074
$3.05
24 Mar 17
£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 Employee Stock Purchase Plan (2018)
The Craneware plc SAYE Option 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 and under the SAYE plans in March 2020 and in April 2020 respectively to those employees and to those
Directors who chose to participate. The exercise price of those 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 second grant of share options under the ESPP and under the SAYE plans, to those employees who chose to participate, was in March 2021
and in April 2021 respectively. The exercise price of those share options was at a 15% discount to the Company share price on 22 March 2021 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
19 Apr 21
23 Mar 21
20 Apr 20
24 Mar 20
SAYE
$35.27
£25.50
3
54.2%
0.12%
1.01%
$25.39
£18.360
18
4,498
$16.51
ESPP
$29.91
£21.60
2
57.9%
0.02%
1.01%
$25.42
£18.360
29
7,420
$16.19
SAYE
$25.58
£20.50
3
50.6%
0.11%
1.58%
$14.32
£11.475
67
42,328
$8.89
ESPP
$15.23
£13.10
2
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.
80
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 8. Share-based payments [Cont'd]
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 October 2020, 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 October 2020, in September 2019, in September 2018, and in January 2018, are outlined in the Remuneration
Committee’s Report on pages 51.
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
2021
Number of conditional
share awards
2020
161,826
226,664
(35,421)
(15,169)
337,900
119,088
98,782
(43,538)
(12,506)
161,826
The remaining weighted average contractual life of the conditional share awards outstanding at 30 June 2021 is 1.9 years (at 30 June 2020: 1.6 years).
The fair values of the conditional share awards granted in financial years 2021, 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
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
Other share-based payments
02 Oct 20
04 Sep 19
05 Sep 18
17 Jan 18
24 Mar 17
£15.050
$19.36
3
52.5%
(0.04%)
$9.33
£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
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 156,336 Ordinary Shares were outstanding at 30 June 2021 (159,336 Ordinary Shares at 30 June 2020).
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 in the financial year commencing 1 July 2022 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.
9. Finance income and expense
Finance Income
Deposit interest receivable
Total finance income
Finance Expense
Deposit interest receivable
Interest on lease liabilites
Total finance expense
2021
$'000
1
1
2021
$'000
7
69
76
2020
$'000
192
192
2020
$'000
-
94
94
81
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 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
Deferred tax for current year
Adjustments for prior years
Change in UK tax rate
Total deferred tax charge
Total deferred tax charge
2021
$'000
13,165
3,772
(1,673)
2,099
(1,656)
122
(305)
(1,839)
260
2020
$'000
19,304
2,806
(446)
2,360
108
-
-
108
2,468
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% (2020: 19%)
Effects of:
Adjustment for prior years
Change in tax rate on opening deferred tax balance
Change in tax rate on closing deferred tax balance
Additional US taxes on profits 25% (2020: 25%)
R & D tax credit
Expenses not deductible for tax purposes
Spot rate remeasurement
Deduction on share plan charges
Other
Total tax charge
2,501
(1,551)
(305)
(227)
116
(712)
703
12
(258)
(19)
260
3,666
(446)
-
-
700
(490)
181
-
(793)
(350)
2,468
On 31 March 2021, the UK Government announced an increase in the rate of corporation tax to 25% from 1 April 2023. The change in rate was substantively enacted on 24
May 2021 and therefore the closing UK deferred tax assets and liabilities have been recognised in accordance with the rate enacted.
82
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 11. Dividends
The dividends paid during the year were as follows:
Final dividend, re 30 June 2020 - 19.80 cents (2020: 19.05 cents (15 pence)/ share)
Interim dividend, re 30 June 2021 - 16.68 cents (2020: 19.05 cents (15 pence)/ share)
Total dividends paid to Company shareholders in the year
2021
$’000
5,329
4,371
9,700
2020
$’000
5,311
3,766
9,077
The proposed final dividend of 21.47 cents (15.5 pence), as noted on page 12, for the year ended 30 June 2021 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
The calculation of basic and diluted earnings per share is based on the following data:
Weighted average number of shares
Weighted average number of Ordinary Shares for the purpose of basic earnings per share
Effect of dilutive potential Ordinary Shares: share options and LTIPs
Weighted average number of Ordinary Shares for the purpose of diluted earnings per share
2021
No. of Shares
000s
26,811
374
27,185
The Group has one category of dilutive potential Ordinary shares, being those granted to Directors and employees under the share option schemes.
Shares held by the Employee Benefit Trust are excluded from the weighted average number of Ordinary shares for the purposes of basic earnings per share.
Profit for the year
Profit for the year attributable to equity holders of the parent
Aborted share placing costs (tax adjusted)
Acquisition and associated share placing costs (tax adjusted)
Amortisation of acquired intangibles
Adjusted profit for the year attributable to equity holders of the parent
2021
$'000
12,905
386
5,210
-
18,501
2020
No. of Shares
000s
26,796
404
27,200
2020
$'000
16,836
-
-
688
17,524
Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of shares in issue during the year.
83
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 12. Earnings per share [Cont'd]
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.
Earnings per share
Basic EPS
Diluted EPS
Adjusted basic EPS
Adjusted diluted EPS
13. Property, plant and equipment
Group
Cost
At 1 July 2020
Additions
Disposals
At 30 June 2021
Accumulated depreciation
At 1 July 2020
Charge for the year
Depreciation on disposal
At 30 June 2021
Net Book Value at 30 June 2021
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
84
2021
cents
48.1
47.5
69.0
68.1
Leased
Properties
$’000
Computer
Equipment
$’000
Office
Furniture
$’000
Tenants
Improvements
$’000
3,826
-
-
3,826
917
917
-
1,834
1,992
-
3,826
-
3,826
-
917
917
2,909
2,409
129
(584)
1,954
1,915
355
(584)
1,686
268
2,255
-
154
2,409
1,522
393
1,915
494
713
2
(39)
676
698
8
(37)
669
7
707
-
6
713
679
19
698
15
1,652
28
(2)
1,678
1,272
123
(2)
1,393
285
1,625
-
27
1,652
1,112
160
1,272
380
2020
cents
62.8
61.9
65.4
64.4
Total
$’000
8,600
159
(625)
8,134
4,802
1,403
(623)
5,582
2,552
4,587
3,826
187
8,600
3,313
1,489
4,802
3,798
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021
13. Property, plant and equipment [Cont'd]
Leased properties
All leased properties are right-of-use assets. These properties consist of office spaces used by the Group in the UK and the US. The Group does not have any other right-of-use
assets other than those disclosed under leased properties.
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 (FY20: $917,000) was
recognised during the year in respect of right-of-use assets.
The average lease term is 3 years.
Company
Cost
At 1 July 2020
Additions
Disposals
At 30 June 2021
Accumulated depreciation
At 1 July 2020
Charge for the year
Depreciation on disposal
At 30 June 2021
Net Book Value at 30 June 2021
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
Leased
Properties
$’000
Computer
Equipment
$’000
Office
Furniture
$’000
Tenants
Improvements
$’000
1,988
-
-
1,988
548
549
-
1,097
891
-
1,988
-
1,988
-
548
548
1,440
1,171
54
(210)
1,015
926
169
(210)
885
130
1,088
-
83
1,171
729
197
926
245
492
1
(37)
456
486
4
(37)
453
3
489
-
3
492
472
14
486
6
1,455
-
(1)
1,454
1,172
106
(1)
1,277
177
1,451
-
4
1,455
1,027
145
1,172
283
Total
$’000
5,106
55
(248)
4,913
3,132
828
(248)
3,712
1,201
3,028
1,988
90
5,106
2,228
904
3,132
1,974
85
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021
14. Intangible assets
Goodwill and Other Intangible assets
Group
Cost
At 1 July 2020
Additions
Disposals
At 30 June 2021
Accumulated amortisation and impairment
At 1 July 2020
Charge for the year
Amortisation on disposal
At 30 June 2021
Net Book Value at 30 June 2021
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
Net Book Value at 30 June 2020
Goodwill
$’000
Customer
Relationships
$’000
Proprietary
Software
$’000
Development
Costs
$’000
Computer
Software
$’000
Total
$’000
-
(1,168)
11,438
2,964
3,043
-
-
-
-
-
-
32,877
10,099
-
11,438
2,964
3,043
42,976
250
2,964
3,043
-
-
250
11,188
11,438
-
11,438
250
-
250
11,188
-
-
2,964
-
2,964
-
2,964
2,701
263
2,964
-
7,794
3,530
11,324
31,652
23,549
9,328
32,877
5,698
2,096
7,794
-
-
3,043
-
3,043
-
3,043
2,618
425
3,043
-
25,083
2,104
68
(1,168)
1,004
1,592
310
734
270
1,910
194
2,104
1,200
392
1,592
512
52,426
10,167
(1,168)
61,425
15,643
3,840
(1,168)
18,315
43,110
42,904
9,522
52,426
12,467
3,176
15,643
36,783
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 13.5% (2020: 14.9%), 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% (2020: 2%). These take into consideration 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.
86
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021
14. Intangible assets [Cont'd]
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. Certain disclosures, including sensitivities, relating to goodwill have not
been made, given the significant headroom on impairment testing.
Company
Cost
At 1 July 2020
Additions
Disposals
At 30 June 2021
Accumulated amortisation
At 1 July 2020
Charge for the year
Amortisation on disposal
At 30 June 2021
Net Book Value at 30 June 2021
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
Development
Costs
$’000
Computer
Software
$’000
32,470
10,099
-
42,569
7,387
3,530
-
10,917
31,652
23,142
9,328
32,470
5,451
1,936
7,387
25,083
1,706
37
(1,057)
686
1,245
265
(1,057)
453
233
1,519
187
1,706
932
313
1,245
461
Total
$’000
34,176
10,136
(1,057)
43,255
8,632
3,795
(1,057)
11,370
31,885
24,661
9,515
34,176
6,383
2,249
8,632
25,544
87
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021
15. Investment in subsidiary undertakings
The following information relates to all of the subsidiaries of the Group:
Name of
Company
Craneware US Holdings, Inc.
Craneware, Inc.
Craneware InSight, Inc.
Kestros Ltd. (t/a Craneware Health)
Craneware Healthcare Intelligence, LLC
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Class of
Shares held
Proportion of Nominal Value of
Issued Shares held by Craneware plc
100%
100% (via Craneware US Holdings, Inc.)
100% (via Craneware US Holdings, Inc.)
100%
Name of
Business
Holding company
Sales & Marketing
Product Development &
Professional Services
Software Development
100% (via Craneware US Holdings, Inc.)
Software Development
Craneware US Holdings, Inc. was incorporated on 30 June 2021 in the United States of America and Craneware plc holds 1,000 shares with a nominal value of $0.01 each.
On 30 June 2021, the full share capital of Craneware, Inc. and Craneware InSight, Inc. was transferred from Craneware plc to Craneware US Holdings, Inc. Craneware, Inc. and
Craneware InSight, Inc. are incorporated in the United States of America and have 10,000 (2020: 10,000) and 1,000 (2020: 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 on 30 June 2021 the sole member was transferred from Craneware plc to
Craneware US Holdings, Inc.
Kestros Ltd. (t/a Craneware Health) is incorporated within the United Kingdom and Craneware plc holds 1,075 (2020: 1,075) Ordinary shares respectively with a nominal value
of £1 each.
Cost
At 1 July
Impairment of investment
At 30 June
2021
$'000
9,000
-
9,000
2020
$'000
10,107
(1,107)
9,000
The results of the Subsidiary companies have been included in the consolidated financial statements. Subsidiary registered addresses are listed on Page 30. The carrying
value of the subsidiaries is supported by the underlying net assets.
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.
88
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 16. Trade and other receivables
Trade receivables
Less: provision for impairment of trade receivables
Net trade receivables
Other receivables
Current tax receivable
Amounts owed from group companies
Prepayments and accrued income
Deferred contract costs
Less non-current amounts owed from group companies
Less non-current prepaid loan arrangement fees
Less non-current deferred contract codes
Current portion
Group
Company
2021
$'000
16,450
(2,270)
14,180
302
278
-
4,090
6,012
24,862
-
(1,692)
(3,735)
19,435
2020
$'000
18,171
(1,775)
16,396
172
-
-
2,055
6,295
24,918
-
-
(3,915)
21,003
2021
$'000
16,450
(2,270)
14,180
9,051
750
8,331
1,858
-
34,170
(6,000)
-
-
2020
$'000
18,043
(1,775)
16,268
7,880
-
6,000
1,419
-
31,567
(6,000)
-
-
28,170
25,567
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 2021.
30 June 2021
Expected credit loss rate
Gross carrying amount
Expected credit loss
Net carrying amount
30 June 2020
Expected credit loss rate
Gross carrying amount
Expected credit loss
Net carrying amount
Current
$'000
0.0%
10,667
-
10,667
Current
$’000
0.0%
7,437
-
7,437
<30 days
$'000
30-60 days
$'000
61-90 days
$'000
> 90 days
$'000
3.2%
1,079
34
1,045
1.9%
614
12
602
4.8%
130
6
124
56.0%
3,960
2,218
1,742
<30 days
$’000
30-60 days
$’000
61-90 days
$’000
>90 days
$’000
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
89
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 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
2021
$'000
1,775
631
(46)
(90)
2,270
2020
$'000
1,246
1,250
(631)
(90)
1,775
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 tax
Deferred tax is calculated in full on the temporary differences under the liability method using a rate of tax of 25% (2020: 19%) in the UK and 25% (2020: 25%) in the US
including a provision for state taxes.
The movement on the deferred tax account is shown below:
At 1 July
Credit/ (charge) to comprehensive income
Transfer direct to equity
At 30 June
Group
Company
2021
$'000
2,408
1,839
1,212
5,459
2020
$'000
3,244
(108)
(728)
2,408
2021
$'000
1,139
500
578
2,217
2020
$'000
1,154
172
(187)
1,139
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 2021 was $5,459,310 (2020: $2,408,118).
Deferred tax assets - recognised
Group
At 1 July 2020
(Charged)/ credited to comprehensive income
Credited to equity
Total provided at 30 June 2021
At 1 July 2019
Credited / (charged) to comprehensive income
Credited/ (charged) to equity
Total provided at 30 June 2020
90
Short term
timing
differences
$'000
760
(1)
-
759
219
402
139
760
Losses
$’000
148
910
-
1,058
357
(209)
-
148
Share
Options
$'000
1,983
729
1,212
3,924
2,805
45
(867)
1,983
Total
$’000
2,891
1,638
1,212
5,741
3,381
238
(728)
2,891
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 17. Deferred tax [Cont'd]
Deferred tax liabilities - recognised
Group
At 1 July 2020
Credited to comprehensive income
Total provided at 30 June 2021
At 1 July 2019
Charged to comprehensive income
Total provided at 30 June 2020
The analysis of the deferred tax assets and liabilities is as follows:
Group
Deferred tax assets:
Deferred tax assets to be recovered after more than 1 year
Deferred tax assets to be recovered within 1 year
Deferred tax liabilities:
Deferred tax liabilities to be recovered after more than 1 year
Deferred tax liabilities to be recovered within 1 year
Net deferred tax assets
The Company's deferred tax assets and liabilities are all expected to be recovered in the future.
Deferred tax assets - recognised
Company
At 1 July 2020
(Charged)/ credited to comprehensive income
Credited to equity
Total provided at 30 June 2021
At 1 July 2019
Credited / (charged) to comprehensive income
Charged to equity
Total provided at 30 June 2020
Accelerated tax
depreciation
$'000
(483)
201
(282)
(137)
(346)
(483)
2021
$'000
4,919
822
5,741
(282)
-
(282)
5,459
Short term timing
differences
$'000
317
(139)
-
178
-
317
-
317
Share
Options
$'000
903
573
578
2,054
1,203
(113)
(187)
903
Total
$’000
(483)
201
(282)
(137)
(346)
(483)
2020
$'000
2,743
148
2,891
(335)
(148)
(483)
2,408
Total
$’000
1,220
434
578
2,232
1,203
204
(187)
1,220
91
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 17. Deferred tax [Cont'd]
Deferred tax liabilities - recognised
Company
At 1 July 2020
Credited to comprehensive income
Total provided at 30 June 2021
At 1 July 2019
Charged to comprehensive income
Total provided at 30 June 2020
Accelerated tax
depreciation
$'000
(81)
66
(15)
(49)
(32)
(81)
Total
$’000
(81)
66
(15)
(49)
(32)
(81)
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.
18. Share capital and reserves
(a) 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
Share placing
Allotted and issued in the year on exercise
of employee share options
At 30 June
2021
2020
Number
$’000
Number
50,000,000
1,014
50,000,000
$’000
1,014
2021
2020
Number
$’000
Number
$’000
26,826,539
6,192,652
-
33,019,191
536
88
-
624
26,698,984
-
127,555
26,826,539
535
-
1
536
The Company did not purchase any of its own shares during the financial year ended 30 June 2021 (2020: nil).
Shares issued during the year
In June 2021, the Company completed a placing of 6,192,652 new Ordinary Shares at an issue price of £22.00 ($31.05) per share, representing approximately 23.1% of the
issued share capital prior to the placing. The new Ordinary Shares rank pari passu in all respects with the existing Ordinary Shares of the Company, including the right to
receive all dividends and other distributions declared, made or paid after the date of issue, including the final dividend declared in respect of the year ended 30 June 2021.
The placing raised proceeds of approximately £132,549,237 ($187,080,731) net of transaction costs. The placing was effected by way of a cash box structure, the resulting
transactions satisfied all of the required conditions under section 612 of the Companies Act 2006 to obtain merger relief and therefore the excess of the net proceeds over the
nominal value of the shares issued, of £132,487,307 ($186,993,326), has been credited to a merger reserve rather than to the share premium account. The purpose of the
share placing was to obtain net proceeds to part fund the acquisition of SDS Holdco, Inc., the ultimate holding company of Sentry Data Systems, Inc. (Note 25 contains further
details of this acquisition which completed in July 2021). This merger reserve is not considered to be distributable as a consequence of the net proceeds of the placing being
for a specific acquisition.
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 2021 no Ordinary Shares (2020: 127,555 Ordinary Shares) were issued on the exercise of share options by employees.
92
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 18. Share capital and reserves [Cont'd]
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, JTC
Employer Solutions Trustee Limited. 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 2021 is summarised in the table below.
Loan balance (from Company to the EBT) at 1 July
Exchange gain / (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
2021
$'000
7,709
964
560
(501)
8,732
2020
$.000
7,031
(240)
1,255
(337)
7,709
The EBT purchased 17,087 Craneware plc Ordinary Shares of 1 pence each in the market in the year ended 30 June 2021 (2020: 43,395 Ordinary Shares in the Company were
purchased by the EBT in the market) and the EBT purchased 20,904 Ordinary Shares in the Company off market, based on the prevailing market price per share on the date
of purchase (2020: no Ordinary Shares in the Company were purchased by the EBT off market). As such the net outflow on the Group in the current year as disclosed in the
Statement of Changes in Equity and Consolidated Cashflow Statement is $422,000.
The Shares held by the EBT are utilised to satisfy employee share plan awards and, during the financial year ended 30 June 2021, a total of 55,600 of the Shares from the EBT
(2020: 30,325 Shares) were used to satisfy the exercise of employee share options and employee vested conditional share awards. At 30 June 2021 the EBT held 348,585
Craneware plc Ordinary Shares (at 30 June 2020: 366,194 Ordinary Shares).
(b) Reserves
Share premium account
The share premium represents amounts received in excess of the nominal value of shares issued, net of the direct costs of issuing those shares.
Merger reserve
The merger reserve contains the excess of the net proceeds over the nominal value of shares issued in the situation where the conditions, under section 612 of the Companies
Act 2006, for merger relief are satisfied. As explained in Note 18 (a) above, this merger reserve is not considered to be distributable.
Capital redemption reserve
The capital redemption reserve includes the nominal value of own shares purchased back by the Company and subsequently cancelled. This is not a distributable reserve.
Other reserves
Other reserves are the credit arising on share-based payment charges in relation to the Company’s employee share plans. Amounts are released from this reserve to Retained
Earnings when employee share plan awards are exercised, released or lapsed.
93
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 19. Cash generated from operations
Reconciliation of profit before taxation to net cash generated from operations:
Profit before tax
Finance income
Finance expense
Write off of investment in subsidiary
Depreciation on property, plant and equipment
Amoritsation and impairment on intangible assets
Share-based payments
FX on non cash items
Movements in working capital:
Decrease/ (increase) in trade and other receivables
Increase / (decrease) 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 0.002% (2020: 0.42%).
21. Trade and other payables
Trade payables
Amounts owed to group companies
Lease creditor due < 1 year
Social security and PAYE
Other creditors
Accruals
Advanced payments
Trade and other payables
Group
2021
$'000
2020
$'000
Company
2021
$'000
2020
$'000
13,165
19,304
12,468
10,533
(1)
76
-
1,403
3,840
2,141
(136)
2,026
4,197
(192)
94
-
1,489
3,176
1,318
-
(1,183)
(872)
(75)
47
-
828
3,795
1,389
-
296
970
26,711
23,134
19,718
Group
2021
$'000
Company
2020
$'000
2021
$'000
235,617
47,851
230,363
(261)
47
1,107
904
2,249
488
-
(2,512)
10,446
23,001
2020
$'000
44,480
Group
Company
2021
$'000
1,844
-
1,053
1,556
50
10,808
428
15,739
2020
$'000
719
2021
$'000
1,759
2020
$'000
389
-
29,698
24,943
946
973
49
4,707
-
647
507
-
1,847
428
550
395
-
776
-
7,394
34,886
27,053
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 2021 was 18 days (2020:
17 days). Trade and other payables are classified as financial liabilities at amortised cost.
94
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 22. Contingent liabilities and financial commitments
(a) Capital commitments
The Group has no capital commitments at 30 June 2021 (2020: 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
2021
$'000
5
5
-
10
2020
$'000
10
8
-
18
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 30.
2021
2020
Charged
$
Outstanding
at year end
$
Charged
$
Outstanding
at year end
$
196,895
160,518
764,531
42,325
336,320
1,413,069
55,257
351,792
-
-
-
-
-
-
-
-
189,632
97,305
674,293
33,775
219,486
1,650,746
65,434
305,294
-
-
-
-
-
-
-
-
-
95
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021
23. Related party transactions [Cont'd]
Company
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 Holdings US, Inc. - Subsidiary company
Net operating expenses
Balance
Amounts due to Craneware, Inc. - Subsidiary company
Sales commission
Net operating expenses
Balance
Net Amounts due from Craneware InSight, Inc. - Subsidiary company
Sales commission
Net operating expenses
Balance
Net Amounts due to Kestros Ltd. (t/a Craneware Health) - Subsidiary company
Net operating expenses
Balance
Net Amounts due to Craneware Healthcare Intelligence, LLC - Subsidiary company
Net operating expenses
Balance
2021
2020
Charged
$
Outstanding
at year end
$
196,895
160,518
764,531
42,325
336,320
420,020
23,513
111,150
(2,331,489)
-
-
-
-
-
-
-
-
-
Charged
$
189,632
97,305
674,293
33,775
219,486
382,201
18,806
79,341
-
-
2,331,489
27,625,177
8,882,680
-
-
29,435,053
9,765,798
Outstanding
at year end
$
-
-
-
-
-
-
-
-
-
-
-
-
-
(17,448,082)
-
(17,192,826)
4,299,122
889,652
-
3,233,561
-
1,178,674
(6,062,988)
-
3,712,131
59,813
162,718
-
-
1,627,000
1,901,378
(6,186,704)
(5,462,609)
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 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.
96
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021
24. Ultimate controlling party
The Directors have deemed that there are no controlling parties of the Company.
25. Subsequent events
On 12 July 2021, the Group acquired 100% of the voting rights of SDS Holdco, Inc., the ultimate holding company of Sentry Data Systems, Inc. (‘Sentry’), a leader in pharmacy
procurement, compliance and utilisation, management based in Florida, USA. The reasons for the purchase and expected synergies have been described in the Strategic
Report and in the initial announcement on 7 June 2021.
The aggregate consideration for the acquisition of Sentry on a cash free/ debt free basis was $400m subject to an adjustment against a benchmark level of working capital on
the date of acquisition as calculated and determined in accordance with the terms of the agreement relating to the acquisition.
The consideration for the acquisition was satisfied by $312.5m (as adjusted) in cash and $87.5m by the issuance of 2,507,348 new ordinary shares in Craneware plc on 14 July
2021. The cash consideration was funded from the Group’s existing cash resources, $120m from a new $140m debt facility and $187.3m net proceeds from a share placing
completed in June 2021.
The new debt facility comprises a term and revolving facilities agreement and is secured by a Scots law floating charge granted by the Company, an English law debenture
granted by the Company and a New York law security agreement to which the Company and certain of its subsidiaries are parties. The securities granted by the Company and
the relevant subsidiaries provide security over all of the assets of the Company and specified assets of the Group. Arrangement fees paid in advance in relation to the new debt
facility prior to the year end are included within Trade and Other receivables > 1 year on the Balance Sheet as per Note 16.
Due to the proximity of the acquisition to the publication of these accounts, the Group has not yet completed the acquisition accounting. Therefore not all required IFRS 3
Business Combination disclosures have been included.
26. Alternative performance measures
The Group’s performance is assessed using a number of financial measures which are not defined under IFRS and are therefore non-GAAP (alternative) performance measures.
These are as follows:
•
•
•
•
•
Adjusted EBITDA refers to earnings before interest, tax, depreciation, amortisation, exceptional items and share based payments.
Adjusted earnings per share (EPS) calculations allow for the tax adjusted acquisition costs and share related transactions together with amortisation on
acquired intangibles via business combinations.
Operating cash conversion is calculated as cash generated from operations (as per Note 19) divided by adjusted EBITDA.
Total Sales refer to the total value of contracts signed in the year, consisting of New Sales and Renewals.
New Sales refers to the total value of contracts with new customers or new products to existing customers at some time in their underlying contract.
The Directors believe these measures enable the reader to focus on what the Group regard as a more reliable indicator of the underlying performance of the Group since they
exclude items which are not reflective of the normal course of business, accounting estimates and non-cash items. The adjustments made are consistent and comparable
with other similar companies.
97
Notes to Financial Statements [Cont'd]Craneware plc Annual Report 2021 Notes
98
Craneware plc Annual Report 2021 Notes
99
Craneware plc Annual Report 2021 Notes
100
Craneware plc Annual Report 2021 Notes
101
Craneware plc Annual Report 2021