TIDMCRW
RNS Number : 3426L
Craneware plc
05 September 2023
Craneware plc
("Craneware" or the "Company" or the "Group")
2023 Final Results
Growth in key financial metrics, closing the year on an
improving trajectory
5 September 2023 - Craneware (AIM: CRW.L), the market leader in
Value Cycle software solutions for the US healthcare market,
announces its audited results for the year ended 30 June 2023.
Financial Highlights (US dollars)
-- Revenue increased 5% to $174.0m (FY22: $165.5m)
-- Adjusted EBITDA (1) increased 6% to $54.9m (FY22: $51.8m)
-- Annual Recurring Revenue (2) increased to $169.0m (H1 FY22:
$166.4m), with an associated Net Revenue Retention(3) value of 100%
(FY22: n/a)
-- Statutory Profit before tax $13.1m (FY22: $13.1m)
-- Basic adjusted EPS (1) 87.0 cents (FY22: 89.0 cents) and
adjusted diluted EPS 86.3 cents (FY22: 88.1 cents)
-- Basic EPS 26.3 cents (FY22: 26.8 cents) and diluted EPS 26.1 cents (FY22: 26.5 cents)
-- Robust Operating Cash Conversion (4) at 92% of Adjusted EBITDA (FY22: 80%)
-- Total Cash and cash equivalents $78.5m (FY22: $47.2m)
-- Total Bank Debt $83.0m (FY22: $111.6m)
-- Proposed final dividend of 16.0p per share (20.19 cents)
(FY22: 15.5p, 18.80 cents) giving a total dividend for the year of
28.5p per share (35.95 cents) (FY22: 28.0p, 33.96 cents) up 2%
(1) Certain financial measures are not determined under IFRS and
are alternative performance measures as described in Note 16
(2) Annual Recurring Revenue "ARR" includes the annual value of
licence and related recurring revenues including transaction
revenues as at 30 June 2023 that are subject to underlying
contracts and where revenue is being recognised at the reporting
date
(3) Net Revenue Retention i s the percentage of revenue retained
from existing customers over the measurement period, taking into
account both churn and expansion sales
(4) Operating Cash Conversion is cash generated from operations
(as per Note 16), adjusted to exclude cash payments for exceptional
items and movements in cash held on behalf of customers, divided by
adjusted EBITDA
(5) When we refer to 'Craneware', or 'The Craneware Group' or
'Group' in the annual report we mean the group of companies having
Craneware plc as its parent and therefore these words are used
interchangeably
Operational Highlights
-- Migration of customers onto the Trisus platform now complete,
providing the foundation for future product and customer
expansion
-- Trisus Chargemaster secured first place in the Chargemaster
Management category of the "2023 Best In KLAS Awards: Software
& Services" - a record 13th time for the Group, demonstrating
the success of the migration process and enhancements made to the
underlying application
-- Strong levels of customer retention, maintained at +90% in the year
-- Continued investment in R&D and innovation to capitalise
on the growing market opportunity, including the recent launch of
Trisus Labor Productivity, addressing the highest single cost
category for any healthcare organisation
-- Total R&D costs that have been capitalised are already
covered by the total value of contracts written for the Trisus
related products
-- First third-party partner applications are now accessing the
Trisus platform, with the potential to add to ARR in future
years
Outlook
-- COVID-19 public health emergency in the US formally declared
over in May 2023, providing a more supportive market backdrop at
the end of the year and into Q1 FY24
-- Continued post-period sales momentum and a growing pipeline of opportunities
-- Well positioned for FY24 and beyond with balance sheet
strength, high levels of ARR and early signs of increasing customer
confidence
Keith Neilson, CEO of Craneware plc commented :
"This robust set of results is testament to the resilience of
the Group through what was a prolonged period of disruption across
the US healthcare landscape.
" With t he COVID-19 public health emergency in the US formally
declared over in May 2023 and the related pressures on hospitals
starting to ease, we have begun to see US hospitals return their
attention to providing Value-Based Care and investing in
digitalisation, using data insights provided by the Trisus platform
to transform and improve their processes and control their costs.
We remain committed to providing the tools our customers need to
manage their operations and finances more efficiently, as we seek
to transform the business of US healthcare together.
"Against this backdrop, we are pleased to have seen the strong
sales momentum seen at the close of the year carry through into the
start of the new financial year , resulting in a growing sales
pipeline. We are confident that our resilient business model,
extensive customer base, high levels of Annual Recurring Revenue,
together with our strategy for delivering growth centred on the
expansion of the Trisus platform, will enable us to create further
long-term value for all our stakeholders."
For further information, please contact:
Craneware plc +44 (0)131 550 3100
Keith Neilson, CEO
Craig Preston, CFO
Alma (Financial PR) +44 (0)20 3405 0205
Caroline Forde, Joe Pederzolli, Kinvara Verdon craneware@almapr.co.uk
Peel Hunt (NOMAD and Joint Broker) +44 (0)20 7418 8900
N eil Patel, Paul Gillam, Richard Chambers
Investec Bank PLC (Joint Broker) +44 (0)20 7597 5970
Patrick Robb, Henry Reast, Cameron MacRitchie
Berenberg (Joint Broker ) +44 (0)20 3207 7800
Mark Whitmore, Richard Andrews, Dan Gee-Summons
About Craneware
The Craneware Group (AIM:CRW.L), the market leader in automated
value cycle solutions, including 340B management, collaborates with
U.S. healthcare providers to plan, execute, and monitor operational
and financial performance so they can continue to deliver quality
care to their communities. Customers choose The Craneware Group's
Trisus data and applications platform as their key to navigating
the journey to financially sustainable value-based care. Trisus
combines revenue integrity, cost management, 340B performance, and
decision enablement into a single, SaaS-based platform. Trisus
Chargemaster secured top ranking in the Chargemaster Management
category of the "2023 Best in KLAS Awards: Software & Services"
and is part of an extensive value cycle management suite. The
Craneware Group - transforming the business of healthcare.
Learn more at www.thecranewaregroup.com
Chair's Statement
In a year marked by the continuation of the Public Health
Emergency in response to the pandemic, I am pleased to report on a
period of robust performance. While we did not achieve the revenue
growth we anticipated at the start of the year, due to the Group's
services related lines of business taking longer to recover than
previously expected, the team nonetheless delivered growth in key
financial metrics, continued to execute on our product migration
strategy, and closed the year on an improving trading
trajectory.
With the Public Health Emergency in the US now declared over,
attention is returning to improving the value and resilience of the
healthcare system. Through Trisus, our cloud-based data analytics
and intelligence platform, we can be a central player in the
digitalisation of US healthcare. The team is focused on capturing
this opportunity through product expansion and the delivery of
value to our extensive customer base.
Steady, profitable growth
Group revenues for the year increased 5% to $174.0m (FY22:
$165.5m) with an adjusted EBITDA increase of 6% to $54.9m (FY22:
$51.8m) maintaining our target EBITDA margin of above 30%. Within
this, software and related revenue increased by 5% to $159.1m,
accounting for 92% of revenue. This growth, coupled with healthy
levels of customer retention, at above 90%, drove growth in
underlying ARR to $169.0m (31 December 2022: $166.4m), with an
associated Net Revenue Retention value in excess of 100%.
As at 30 June 2023, the Group maintained strong total cash and
cash equivalent balances of $78.5m (30 June 2022: $47.2m) with a
reduced total bank debt of $83.0m (30 June 2022: $111.6m).
The Group's strong cash generation and high levels of revenue
visibility provides the Board with the confidence to maintain our
investment levels in the business, to support our growth
aspirations.
A valuable position from which to build
We hold an enviable central position within the US healthcare
industry, with approximately 40% of registered US hospitals as
Craneware customers, including more than 12,000 US hospitals,
health systems, affiliated retail pharmacies and clinics, and data
sets covering more than 175 million unique patient encounters.
The successful completion in the year of the migration of
customers onto Trisus provides the foundation for future growth
acceleration. Looking ahead, we will continue to seek ways to
extend our Trisus platform, through product development,
partnerships and M&A.
Increasing our Board expertise
We were delighted to welcome Anne McCune, a new Non-executive
Director, to the Board in November. Anne is a recognised leader in
the US Healthcare industry, who has served as a senior Executive
for several leading academic hospital and physician centres and as
a Managing Director in healthcare consulting firms. Anne is
currently a Community Board member of the Strategy and
Transformation committee at Salinas Valley Memorial Healthcare
System in California.
Making a positive contribution to society
Our purpose is to transform the business of healthcare through
the profound impact our solutions deliver, enabling our customers
to deliver quality care to their communities.
The tangible positive impact our solutions can make on the lives
of others continues to be a great motivator for our talented team.
The Craneware Group has always had a strong commitment to social
responsibility and community engagement, which has been enhanced by
the integration of our 340B offerings in recent years. As a Group,
we have developed many initiatives over the past several years
which contribute to our sustainability credentials, and we continue
to develop a number of programmes and opportunities to positively
impact the community around us.
The Group has always been cognisant of the importance of
sustainability and Environmental, Social and Governance ('ESG')
matters, particularly in the context of the Group's Purpose.
However, we recognise that these areas are constantly evolving and
that organisations must continually strive to do more and as such
an ESG Committee has been established. We detail more of the impact
the Group makes, within the communities we serve, in our ESG
Statement within the Annual Report.
On behalf of the Board, I would like to thank all of The
Craneware Group team for their continued passion and commitment to
serving our customers.
An improving outlook
The breadth of solutions The Craneware Group can provide, as
well as the power of its operational and administrative platform
and data, give the Board confidence in the Group's ability to
provide the insights its customers need to deliver greater value
healthcare to their communities.
With the sales growth experienced in the final quarter of the
year delivering incremental revenues, combined with further
momentum in the current period, the Group has seen a positive start
to trading in the new financial year.
The Group's balance sheet strength, high levels of ARR and early
signs of increasing customer confidence, leave the Group well
positioned for FY24 and beyond.
Will Whitehorn
Chair
4 September 2023
Strategic Report
We are pleased to have delivered a robust financial performance
in the year, achieving growth in revenue and EBITDA whilst
maintaining a strong balance sheet. These results demonstrate the
resilience of the Group through a prolonged period of disruption
across the US healthcare landscape and I am grateful for the team's
hard work and dedication, amidst a challenging environment.
We successfully completed our primary strategic focus for the
year - the migration of customers onto Trisus, our cloud-based
platform. With the transition complete, we can focus on the
continued expansion of the Trisus product offering, which we
anticipate will in turn drive customer expansion.
While remaining cognisant of the challenges our customers and
partners continue to face, we are encouraged by improving prospects
across our market. The COVID-19 public health emergency in the US
was formally declared over in May 2023, and with the related
pressures on hospitals starting to ease we are seeing attention
turn to the improvement of hospitals' underlying operations and
financial performance. This was reflected in a healthy close to the
financial year, as we saw an increasing number of opportunities
enter our pipeline in Q4, with momentum carrying over to the new
financial year.
Market - supportive underlying trends
The US healthcare market continues to experience challenges
across three broad areas: clinical, financial and operational.
The clinical arena is grappling with issues such as the impact
of the opioid epidemic, a mental health crisis and an aging
population increasing the demand for services around chronic
conditions and long-term care. Financially the cost of healthcare
in the US has been increasing significantly, including the cost of
prescription drugs, medical procedures and associated insurance
premiums. Meanwhile, against this backdrop, operational pressures
are increasing, with managers having to navigate issues such as a
shortage of healthcare professionals and wage inflation.
Addressing the challenges through data and insights
The combination of these factors means our customers are being
asked to do more, with less. We believe the key to successfully
achieving that, while improving patient care, is through accurate,
accessible and meaningful data and insights, providing the ability
to deliver enhanced services, improved infrastructure, governance
and the ability to make smarter choices around resource
allocation.
However, to make those smarter choices our customers need to
manage and analyse vast amounts of data, which presents significant
and costly considerations for hospitals, like scalability,
interoperability, processing costs, security, and compliance.
Our vision is for the Trisus platform and its applications to
address these challenges, providing connected technology in the
cloud. Our Trisus platform and applications combine revenue
integrity, cost management and decision enablement into a single
cloud-based platform. Through our Data Foundations programme of
work, Trisus brings together siloed data from the various existing
software systems in a hospital or healthcare system, normalises
that data and applies prescriptive analytics to provide insights to
support informed decision making regarding a hospital's finances
and operations, in one place.
This digitalisation of healthcare and improvement of processes
through the use of data insights, as opposed to merely digitising
healthcare, for example recording an individual healthcare
encounter in an electronic form such as the recent move to
electronic health records, provides the foundation for Value Based
Care and enables the transformation of the business of
healthcare.
We provide customers with the ability to build effective
strategies related to revenue, pricing, cost, and compliance to
mitigate the internal and external challenges described above,
delivering real financial returns and freeing up resources that can
be re-invested and re-deployed by healthcare providers to support
the clinical care of their communities and tackle their clinical
challenges.
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 delivered data aggregation and intelligence
platform which will be the foundation for our future growth.
We are building on top of Trisus to strengthen our current
products, leverage our data assets to expand our offering,
integrate third party solutions to the platform and benefit from
the scalability of cloud-technology.
Through our 20+ year history in the US healthcare market, we
have collected our own unique and extensive data set, which we
believe contains the insights that will generate our products of
the future. While we have always had a team analysing this data,
the growth in AI and machine learning means it is now easier and
faster to do so. Meanwhile, we are also using AI to make our coding
more efficient and productive.
Two Growth Pillars
Our growth strategy has two fundamental growth pillars:
1. The transition of our customers to cloud delivered versions
of our existing on-premise solutions, to act as a gateway to the
benefits and additional applications on the Trisus platform
We are pleased to now have all our customers connected to, and
benefiting from, the Trisus platform.
Of particular importance has been the migration of our previous
flagship application, Chargemaster Toolkit, customers onto our
Trisus Chargemaster offering. This has been carried out in phases
over the last 36 months, as we have expanded the functionality of
Trisus Chargemaster.
We were delighted Trisus Chargemaster secured first place in the
Chargemaster Management category of the "2023 Best In KLAS Awards:
Software & Services" during the year. For The Craneware Group,
this is a record 13(th) time, more than any other vendor in our
space. The award demonstrates the success of the migration process,
the enhancements made to the application and the high levels of
customer support delivered by our teams.
All existing products now available as Trisus solutions, which
will be further enhanced
During the year we continued to re-engineer our existing
offerings into cloud-based applications - improving the benefits of
our offerings to customers to facilitate the smooth transition onto
Trisus. This continual improvement will be an ongoing process. The
depth of our product offering continues to grow through the mining
of the proprietary and regulatory data that we collect, identifying
new ways the data can illuminate and support decision making within
the hospital provider environment. We now have datasets for over
175 million unique patient encounters, providing incredibly
valuable insights for our customers.
Whilst our Revenue Integrity and 340B related applications sit
on different technology stacks within the Trisus platform, they
both supplement and further enrich the Trisus data sets. Eventually
the work we are doing with our Trisus Data Foundations programme
will enable the full integration of these stacks, making our
offerings yet more attractive to customers as the speed and depth
of insights available is increased.
The four Medication related Trisus applications launched last
year, replacing and adding to our non-340B pharmacy offerings, have
been well received and we anticipate will support expansion sales
in current and future periods.
Data Foundations increasing the interoperability of applications
to increase speed of entry to the platform and facilitate cross
sale
As part of our Data Foundations programme of work, we are
utilising the advances in AI and data processing to increase the
interoperability and connectivity of our applications, while making
the platform's back-end processes more efficient and effective. For
example, new customers coming onto the Trisus platform will only
require one data feed, thus accelerating entry to the platform and
its benefits.
Six application suites
The Trisus applications have now been grouped into six Trisus(R)
Optimization Suites , bringing together the applications that
address specific strategic issues facing healthcare providers and
are powered by the same sub-set of customer data. Through bringing
the applications into suites, we aim to make it easier for our
customers to identify which of our multiple additional applications
are likely to unlock immediate value and address their challenges
most effectively, based on their existing data within the Trisus
platform.
The product portfolios are: Trisus Pricing Integrity, Trisus
Data Integrity, Trisus Business of Pharmacy, Trisus Revenue
Protection Optimization, Trisus Charge Capture Optimization and
Trisus Value-based Margin & Productivity.
Launch of Trisus Labor Productivity
Towards the end of the financial year we were pleased to launch
a new application, Trisus Labor Productivity, to encouraging early
feedback, addressing the concerns of the market around effectively
managing the workforce. Staff costs represent the single highest
cost for any healthcare organisation. In addition, staffing
shortages have resulted in a need to do more with less. Trisus
Labor Productivity enables our customers to optimise their staffing
by department or organisation, providing insights into daily
staffing and productivity outcomes using detailed analytics and
predictive modelling, thereby reducing costs and confusion for
greater efficiency. The application also integrates payroll,
timecard, hospital EMR/ADT events, and general ledger costs in one
location for reporting, analysis, and strategic management of the
workforce.
2. Value driven Customer Expansion
It is the intention that the product enhancements and expansion
described above will facilitate cross sell and upsell to existing
customers, alongside an increase in average contract value to new
customers. The addition of new customers and the expansion with
existing customers will in turn drive growth in ARR.
ARR at 30 June 2023 increased in the six months to $169.0m from
$166.4m reported at 31 December 2022, demonstrating the Group's
continued high levels of contracted revenue visibility. We continue
to see the opportunity to accelerate ARR growth over the medium
term, as we unlock the considerable cross and upsell opportunities
within our enlarged customer base. The Group is now in a position
to report a Net Revenue Retention figure, from the point of our
first ARR calculation, which was 100% for the six months to 30 June
2023. Customer retention for the year exceeded 90%, which is
testament to the value Craneware brings to its customer base.
With the first stage of cloud-based enhancements for existing
products now complete, we can turn our focus to the development of
new applications and the extension of existing applications, to
expand our capabilities and provide benefits to our customers. We
anticipate this in turn will facilitate a greater level of cross
sale and product penetration across our extensive customer base
over time.
We also continue to see considerable cross sale opportunity
between our 340B and Revenue Integrity customers and this will be
an ongoing area of focus.
We are encouraged to see expansion sales to existing customers
represent 81% of our total 'new' sales in the year, demonstrating
the positive response of our customers to the increased ROI derived
from the uptake of additional cloud applications. However, this
does mean our sales to new customers as a percentage of our total
new sales is behind historical norms, consistent with the narrative
reported by other vendors that support hospitals. We expect to see
this mix move back towards our historical norms in the near term,
as healthcare is once again returning its focus to Value Based Care
now the impacts of the pandemic are dissipating.
We also formalised our partnering processes during the year,
with the aim of hosting third party application providers on the
platform. In the future, revenue from these partnerships, which are
not directly derived from Trisus applications, will be categorised
as third party revenues while they are in the test phase. Once
their value to customers has been proven, we will seek to
transition into recurring revenue models, adding to our ARR.
Due to recent hospital fears surrounding cyber security, the
market environment is hindering new customer growth by smaller
software providers, and we therefore anticipate that this will
encourage smaller software providers to see the value of their
applications being delivered through the Trisus platform, a
certified HITRUST partner. In turn, our customers will benefit from
complementary applications which will help them derive greater
insight into their operations and financial performance without
increasing their exposure to cyberthreats while we will benefit
from a revenue share with the partner.
While organic growth across our portfolio remains the priority,
we continue to evaluate the market for M&A opportunities 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: the addition of
relevant data sets; the extension of the customer base; the
expansion of expertise; and the addition of applications suitable
for the US hospital market. We view our partnering programme as a
potential for building a pipeline of future M&A activity based
on the mutual benefits derived by both partners.
Our People and Community
Central to our Purpose is how we support our customers and, in
turn, how they support their communities and how we collectively
work towards delivering our strategy as a team within The Craneware
Group. Our solutions benefit society; they continue to deliver
value for our customers, through the provision of accurate
financial data, insight and analytics, that can be reinvested to
support our customers in the provision of care to their
communities. In addition, our 340B pharmacy solutions enable our
customers to generate cost savings which go directly to the
provision of care for the underserved in their communities. The
Craneware Group is also directly involved with the 340B Matters
initiative, which aims to educate the market regarding the
importance of the 340B program for the non-profit healthcare
facilities that provide accessible and affordable care within their
communities.
We recognise the value of our employees and that supporting our
customers and the achievements of the Group is due to their
efforts. Our team is a talented mix of employees from diverse
backgrounds, which brings a high level of innovation and
collaboration. We believe in the importance of fostering a team
environment while also celebrating the individuals within the team.
We continue to invest in the team, our facilities and working
practices and we welcome feedback and suggestions for improvements
through a range of employee engagement mechanisms.
Complementing our Purpose and reflecting the causes which are
important to our employees, our team, has meant that, for many
years, the Group has continually developed a number of programmes
and opportunities to positively and directly impact the community
around us. This has been achieved with our initiatives driven by
our employees through Craneware Cares and the Craneware Cares
Foundation.
Craneware has advanced and supported many social initiatives and
continues to do so. However, we are conscious of the need to
coordinate all of our ESG-related initiatives and policies,
including environmental considerations, to enable greater alignment
to our ESG focus areas and also recognising the general increased
interest in ESG-related credentials by our stakeholders. With these
considerations in mind, we established an ESG Committee during the
year. We provide further details of these activities and the ESG
Committee with our ESG Statement.
Financial Review
For the year ended 30 June 2023, The Craneware Group is
reporting an increase in revenue of 5% to $174.0m (FY22: $165.5m)
and a 6% increase in adjusted EBITDA to $54.9m (FY22: $51.8m).
These results reflect a robust revenue performance against the
backdrop of an industry recovering from and dealing with the
aftereffects of the COVID-19 public health emergency. The challenge
for our customers has, inevitably, impacted on Craneware, despite
the solid performance of our annual software licence revenues, we
have not yet seen the return of our professional services to the
expected pre-pandemic levels as a percentage of our revenues.
All industries and companies, including US healthcare and
Craneware, have had to meet the challenges of the current
macro-economic climate, including rising wage, medication, and
supply cost inflation as well as key staffing shortages. Craneware
has been successful in navigating these inflationary challenges
during the year, and as such we have delivered an adjusted EBITDA
performance in line with the Board's expectations. Our Adjusted
earnings per share, however, has been impacted by the significant
increases in interest rates that have occurred. With the interest
we paid in the year increasing from $3.1m to $6.5m, our interest
charge increased by 28% to $6.4m (FY22: $5.0m). In addition, our
amortisation charge increased by 32% or $1.9m from the previous
year. As a result, we are reporting a 2% reduction in our adjusted
earnings per share to 87.0 cents per share (FY22: 89.0 cents per
share).
The increased scale and our enlarged portfolio of products
following the successful integration of Sentry Data Systems, mean
we can do even more to support our customers as they look beyond
the impact of the pandemic and return their focus to the delivery
of Value Based Care. The need for accurate financial data,
supporting analytics and the insights those analytics can bring has
never been more important.
Underlying Business Model, Professional Services, and other
revenue
The new contracts we sign with our customers provide a licence
for the customer to access specified products throughout their
licence period. At the end of an existing licence period, or at a
mutually agreed earlier date, we look to renew these contracts with
our customers.
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.
In addition to the licence fees, we have a number of 340B
customers whose underlying contracts provide for a number of
associated transactional services in addition to their licences.
These transactional services, whilst highly dependable and
recurring over the life of the contract, see some variation period
to period based on the volume of transactions. Transactional
services are recognised as we provide the service, and we are
contractually able to invoice the customer.
In any year, we also expect revenue to be recognised from
providing professional and consulting services to our customers.
These revenues are usually recognised as we deliver the service to
the customer, on a percentage of completion basis. As we have
previously reported, the challenges US hospitals have had regarding
shortages of available staff have continued to impact our ability
to deliver professional services throughout the year. As a result,
we have not seen the return in our professional services revenues
expected and as such we are reporting Professional Service in the
year of $13.7m (FY22: $13.9m).
This year, for the first time, we are reporting Other Revenue of
$1.1m (FY22: $nil). These revenues are derived from our ability to
leverage the Trisus platform in new and innovative ways. This was
both through new ways to use our data assets to directly support
our customers, and through hosting third-party applications on the
platform. These revenues are recognised at the point we are able to
invoice our customers. They are not, initially, deemed recurring in
their nature, however once proven we expect many of these revenue
opportunities to deliver future annual recurring revenue.
Annual Recurring Revenue
By renewing our 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
add to this recurring revenue.
Annual Recurring Revenue ("ARR") demonstrates the annual value
of licence and transactional revenues that are subject to
underlying contracts.
At our interim results we tightened our definition of ARR to
only include the annualised effect of bookings that are subject to
an underlying contract and have generated revenue by the reporting
date. This was done to better align future growth of ARR to near
term revenue growth as well as facilitate the calculation of a Net
Revenue Retention metric. This change primarily relates to the
exclusion of contract pharmacy bookings where go live has not yet
happened and therefore they have not contributed to revenue in the
year.
As a result, ARR is now defined as the annual value of licence
and related recurring revenues including transaction revenues as at
the Balance Sheet date that are subject to underlying contracts and
where revenue is being recognised at the reporting date .
ARR at 30 June 2023 increased to $169.0m from the $166.4m
reported at 31 December 2022, demonstrating the Group's continued
high levels of contracted revenue visibility. The Group is also
reporting Net Revenue Retention for the first time, from the point
of our first ARR calculation, which was 100% for the six months to
30 June 2023. Customer retention for the year exceeded 90%, which
is testament to the value Craneware brings to its customer
base.
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 and the direct costs of
professional services employees who deliver the services required
to meet our contractual obligations.
The gross profit for FY23 was $148.4m (FY22: $142.4m). This
represents a gross margin percentage of 85% (FY22: 86%) which is in
line with the expected Gross Margins of the Group.
Operating Expenses
Net operating expenses (to Adjusted EBITDA) increased 3% to
$93.5m (FY22: $90.6m), which is a below inflation increase,
reflecting our ongoing prudent cost control, including our ability
to balance our investment between the US and the UK (and the
associated Sterling exchange rate). This ultimately allows us to
continue to deliver an Adjusted EBITDA margin of +30%.
Product innovation and enhancement continues to be core to this
future and our ability to achieve our potential. We continue to
pursue our buy, build, or partner strategy to build out the Trisus
platform and its portfolio of products. As we are cash generative,
we are able to use our cash reserves to further "build" alongside
the acquisition activities in the year and therefore continue to
invest significant resource in R&D.
The total cost of development in the year was $50.6m (FY22:
$51.1m). We continue to capitalise only the costs that relate to
projects (including enhancements to our existing products) that
have yet to be released to the market and will deliver new "future
economic benefit" to the Group. With the total amount capitalised
in the year, being $15.0m (FY22: $13.5m) representing 30% of total
R&D spend in FY23 (FY22: 26%), which is still below our
historical norms of 35 to 40% of total R&D spend.
We continue to believe this investment is an efficient and
cost-effective way to further build out our Value Cycle strategy
alongside any acquisition strategy. As specific products are made
available to relevant customers, the associated development costs
capitalised are amortised and charged to the Group's income
statement over their estimated useful economic life, thereby
correctly matching costs to the resulting revenues.
Net Impairment reversal/(charge) on financial and contract
assets
This relates to the movement in the provision for the impairment
of trade receivables in the year. Following the considerable
efforts in this year since the acquisition of Sentry and our
ongoing relationships with customers across the Group we are seeing
a reversal in the year of $2.1m (FY22: charge of $0.5m).
Adjusted EBITDA and Profit before taxation
To supplement the financial measures defined under IFRS the
Group presents certain non-GAAP (alternative) performance measures
as detailed in Note 16. 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 uses 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, its integration 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 $0.5m (FY22: $2.1m) have been
identified as exceptional. These relate primarily to the one-off
costs associated with the back-office systems integration of
Sentry. As such, these costs were adjusted from earnings in
presenting Adjusted EBITDA.
Adjusted EBITDA has grown in the year to $54.9m (FY22: $51.8m)
an increase of 6%. This reflects an Adjusted EBITDA margin of 32%
(FY22: 31%), confirming we continue to meet our target of a
combined Group adjusted EBITDA margin of 30+%.
Following the amortisation charge relating to acquired
intangible assets relating to the Sentry acquisition of $20.9m
(FY22: $20.2m), profit before taxation reported in the year is
$13.1m (FY22: $13.1m).
Taxation
The Group generates profits in both the UK and the US. The
Group's effective tax rate is primarily dependent on the applicable
tax rates in these respective jurisdictions. Following the Sentry
acquisition, whose profits are solely generated in the US, the
Group now generates a higher proportion of its profits there.
Following the substantive enactment of the increase in UK
corporation tax rate to 25% effective from 1 April 2023, the UK
corporation tax rate for the financial year increased from 19% to
20.5%.
Other factors impacting the effective tax rate include tax
deductibility of amortisation of acquired intangibles, tax losses
brought forward in the new enlarged group and the number of share
options exercised and the associated tax treatment. Reconciliation
of the tax charge for the year can be seen in Note 5. As a result,
the effective tax rate for the year ended 30 June 2023 is 29%
(FY22: 28%).
EPS
The Group presents an Alternative Performance Measure of
Adjusted EPS, to provide consistency to other listed companies.
Both Basic and Diluted Adjusted EPS are calculated excluding costs
incurred as a result of acquisition and share related activities,
being $0.4m (tax adjusted) in the year (FY22: $1.6m) and
amortisation of acquired intangibles of $20.9m (FY22: $20.2m).
Adjusted EPS, despite increased levels of Adjusted EBITDA, has
decreased 2% to $0.870 (FY22: $0.890) a s a result of increased
bank interest charges and intangible amortisation in the year.
Adjusted diluted EPS has decreased to $0.863 (FY22: $0.881). Basic
EPS in the period reduced to $0.263 (FY22: $0.268) and Diluted EPS
reduced to $0.261 (FY22: $0.265).
Prior Year Restatements
As reported in the prior year Financial Statements, the Group
completed its assessment of the fair value of the assets and
liabilities acquired and the consolidated balance sheet and on the
12 month anniversary of the Sentry acquisition the "window" to
complete this assessment closed.
However, during the current year, the Group has identified an
item of disclosure that requires adjustment and, following the
completion of the various US tax returns, two matters relating to
the tax balances recorded in the opening balance sheet of the
acquired business where the incorrect fair value had been assessed.
None of the items impact the Consolidated Statement of
Comprehensive Income nor any profit measures reported by the Group
in the prior year.
Disclosure adjustment
Deferred Income, non-current and current liabilities - following
a review of deferred income acquired through the Sentry
acquisition, we have identified $4.8m of deferred income which
should have been disclosed as a non-current rather than a current
liability, and as such this has been corrected.
There is no change to the recorded Total Assets and Liabilities
of the Group as a result of these disclosure restatements.
Taxation adjustments
Deferred and current Taxation - Following completion of the
current year tax returns it was identified that an asset class
included in the opening balance sheet of the Sentry acquisition had
incorrectly been given a "tax basis" and as such the deferred tax
liability included $3.2m and the tax debtor included $0.4m
incorrectly in relation to this asset class (with the net balance
being in Goodwill). To correct this both the deferred tax liability
and tax debtor have been reduced and Goodwill has been reduced by
the net amount of $2.8m.
Provision for Sales Taxes due - In the period since the
acquisition of Sentry, we have worked diligently to ensure the
acquired companies were in good standing with all the States in
which they operated. As part of this process we identified two
States where there were amounts due in respect of periods prior to
the acquisition. Whilst we continue to work to reduce any
liability, a provision should have been made in respect of the net
amounts that were potentially due - being $0.4m and as such this
provision has been made as part of this re-statement.
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 consolidated cash flow
statement).
In the year, we have made improvements in the Operating Cash
Conversion of Sentry and as a result achieved Operating Cash
Conversion across the combined Group of 92% in the year (FY22:
80%).
We continue to invest in our future and return funds to our
shareholder base via our progressive dividend policy, returning
$12.1m in the current year (FY22: $13.0m), the reduction being due
to exchange rates and the majority of our dividends being paid in
Sterling.
Also, as part of the funding for the acquisition of Sentry, the
Group entered into a debt facility and during FY22 drew down $120m
of secured funding provided by our consortium of banking partners.
This facility was provided on a 3+1+1 year term basis. During the
year, $28m (FY22: $8m) of the loan has been repaid, $8m of the term
loan on schedule and the amount drawn down on the Revolving Credit
Facility was reduced by $20m. All covenants have been met, and the
second extension of the term has been agreed. We continue to thank
our banking partners, alongside our shareholders, for their
continued support of our growth strategy.
Cash reserves at the year-end were $78.5m (FY22: $47.2).
Restricted cash was disclosed separately in the prior year. As the
Group is unable to hold these amounts outside of its own treasury
facilities, these "restricted cash" balances have now been
incorporated within cash and cash equivalents for FY23 rather than
being classified separately on the face of the balance sheet (FY22:
$1.3m). Total borrowings of $83.0m (FY22: $111.6m) gives the Group
both significant liquidity and a strong balance sheet.
Share Buy Back
On 12 April 2023, the Group commenced a share buyback programme
(of up to GBP5m). The shares purchased through this programme are
held in treasury and will be used to satisfy employee share plan
awards. The programme is being undertaken using a phased approach.
The programme is operating under the authority granted to the
Company by shareholders at the Company's Annual General Meeting,
held on 15 November 2022, and within the regulatory guidance on the
quantity of shares the Company may purchase on any single day.
Under this programme we have purchased 223,632 Ordinary Shares
(FY22: nil) at a total cost of GBP3.09m ($3.87m). These shares
represent 0.63% of the Company's issued Ordinary Shares and are
being held in treasury. The Board considers that a share buyback
provides an optimal use of cash to deliver value for shareholders
by offsetting future dilution from existing employee share plans
and as such the share buyback programme continued after 30 June
2023 and is ongoing at the time of approval of this report.
Balance sheet
Within the balance sheet, 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
Annual Recurring Revenue described above and future performance
obligations detailed in Note 3.
Deferred income, accrued income, and the prepayment of sales
commissions all arise as a result of our 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 regard to how we account for our
contracts.
Currency
The functional currency for the Group, debt 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 was $1.2043 as
compared to $1.3317 in the prior year. The exchange rate at the
Balance Sheet date was $1.2619 (FY22: $1.2128).
Dividend
In proposing a final dividend, the Board has carefully
considered a number of factors including the prevailing
macro-economic climate, the Group's trading performance, our
current and future cash generation and our continued desire to
recognise the support our shareholders provide. After carefully
weighing up these factors, the Board proposes a final dividend of
16.0p (20.19 cents) per share giving a total dividend for the year
of 28.5p (35.95 cents) per share (FY22: 28p (33.96 cents) per
share), an increase of 2%. Subject to approval at the Annual
General Meeting, the final dividend will be paid on 15 December
2023 to shareholders on the register as at 24 November 2023, with a
corresponding ex-Dividend date of 23 November 2023.
The final dividend of 16.0p per share is capable of being paid
in US dollars subject to a shareholder having registered to receive
their dividend in US dollars under the Company's Dividend Currency
Election, or who register to do so by the close of business on 24
November 2023. The exact amount to be paid will be calculated by
reference to the exchange rate to be announced on 24 November 2023.
The final dividend referred to above in US dollars of 20.19 cents
is given as an example only using the Balance Sheet date exchange
rate of $1.2619/GBP1 and may differ from that finally
announced.
Outlook
With t he COVID-19 public health emergency in the US formally
declared over in May 2023 and the related pressures on hospitals
starting to ease, we have begun to see US hospitals return their
attention to providing Value-Based Care and investing in
digitalisation, using data insights provided by the Trisus platform
to transform and improve their processes and control their costs.
We remain committed to providing the tools our customers need to
manage their operations and finances more efficiently, as we seek
to transform the business of US healthcare together.
Against this backdrop, we are pleased to have seen the strong
sales momentum seen at the close of the year carry through into the
start of the new financial year , resulting in a growing sales
pipeline. We are confident that our resilient business model,
extensive customer base, high levels of Annual Recurring Revenue,
together with our strategy for delivering growth centred on the
expansion of the Trisus platform, will enable us to create further
long-term value for all our stakeholders.
Keith Neilson Craig Preston
CEO Craneware plc CFO Craneware plc
4 September 2023 4 September 2023
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2023
Total Total
2023 2022
Notes $'000 $'000
--------------------------------------------- ------ ---------- ----------
Continuing operations:
Revenue 3 174,018 165,544
Cost of sales (25,576) (23,178)
---------- ----------
Gross profit 148,442 142,366
Other income 600 551
Operating expenses 4 (131,876) (124,324)
Net impairment reversal/ (charge) on
financial and contract assets 4 2,062 (461)
---------- ----------
Operating profit 4 19,228 18,132
Analysed as:
Adjusted EBITDA(1) 54,892 51,757
Share based payments (2,992) (2,116)
Depreciation of property, plant and
equipment (3,451) (3,259)
Exceptional Costs(2) 4 (510) (2,106)
Amortisation of intangible assets -
other (7,781) (5,905)
Amortisation of intangible assets -
acquired intangibles (20,930) (20,239)
--------------------------------------------- ------ ---------- ----------
Finance income 214 1
Finance expense (6,357) (5,031)
---------- ----------
Profit before taxation 13,085 13,102
Tax on profit on ordinary activities 5 (3,853) (3,693)
---------- ----------
Profit for the year attributable to
owners of the parent 9,232 9,409
Other comprehensive income
Items that may be reclassified subsequently
to profit or loss
Currency translation reserve movement - 42
---------- ----------
Total items that may be reclassified
subsequently to profit or loss - 42
--------------------------------------------- ------ ---------- ----------
Total comprehensive income attributable
to owners of the parent 9,232 9,451
--------------------------------------------- ------ ---------- ----------
1. See Note 16 for explanation of Alternative Performance Measures.
2. Exceptional items relate to integration costs associated with
the purchase of Sentry Data Systems, Inc (FY22: legal and
professional fees associated with acquisition of Sentry Data
Systems and related integration costs).
Earnings per share for the year attributable to equity
holders
Notes 2023 2022
--------------------------------- ------ ------ ------
Basic ($ per share) 7 0.263 0.268
*Adjusted Basic ($ per share) 7 0.870 0.890
Diluted ($ per share) 7 0.261 0.265
*Adjusted Diluted ($ per share) 7 0.863 0.881
--------------------------------- ------ ------ ------
* Adjusted Earnings per share calculations allow for the tax
adjusted acquisition costs and share related transactions (if
applicable in the year) together with amortisation on acquired
intangible assets.
Statement of Changes in Equity for the year ended 30 June
2023
Share Capital
Share Premium Treasury Redemption Merger Other Retained Total
Capital Account Shares Reserve Reserve Reserves Earnings Equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
--------------------------- -------- -------- --------- ----------- -------- --------- --------- ---------
At 1 July 2021 624 21,097 - 9 186,993 4,728 46,828 260,279
Total comprehensive
income - profit
for the year - - - - - - 9,409 9,409
Total other comprehensive
expense - - - - - - 42 42
Transactions with
owners:
Share-based payments - - - - - 2,294 - 2,294
Share issue 35 76,107 - - (12) - - 76,130
Purchase of own
shares through EBT - - - - - - (1,726) (1,726)
Deferred tax taken
directly to equity - - - - - - (366) (366)
Impact of share
options and awards
exercised/lapsed - - - - - (1,089) 1,025 (64)
Dividends (Note
6) - - - - - - (12,976) (12,976)
---------------------------
At 30 June 2022 659 97,204 - 9 186,981 5,933 42,236 333,022
Total comprehensive
income - profit
for the year - - - - - - 9,232 9,232
Transactions with
owners:
Share-based payments - - - - - 3,231 - 3,231
Purchase of own
shares through EBT - - - - - - (179) (179)
Purchase of own
shares through share
buyback - - (3,865) - - - - (3,865)
Deferred tax taken
directly to equity - - - - - - (1,004) (1,004)
Impact of share
options and awards
exercised/lapsed - - 128 - - (2,324) 1,719 (477)
Dividends (Note
6) - - - - - - (12,119) (12,119)
---------------------------
At 30 June 2023 659 97,204 (3,737) 9 186,981 6,840 39,885 327,841
--------------------------- -------- -------- --------- ----------- -------- --------- --------- ---------
Co nsolidated Balance Sheet as at 30 June 2023
Restated
Notes 2023 2022
$'000 $'000
----------------------------------------------- ------ -------- ---------
ASSETS
Non-Current Assets
Property, plant and equipment 8,464 8,819
Intangible assets - goodwill 9 235,236 235,236
Intangible assets - acquired intangibles 9 166,327 187,257
Intangible assets - other 9 50,230 43,430
Trade and other receivables 10 2,758 3,234
463,015 477,976
-------- ---------
Current Assets
Trade and other receivables 10 35,424 39,584
Cash and cash equivalents 78,537 47,157
Restricted cash - 1,251
113,961 87,992
-------- ---------
Total Assets 576,976 565,968
----------------------------------------------- ------ -------- ---------
EQUITY AND LIABILITIES
Non-Current Liabilities
Borrowings 13 75,033 103,589
Deferred income 2,875 4,792
Leased property 2,224 1,206
Hire purchase equipment 44 290
Deferred tax 11 41,337 44,417
Other provisions 243 568
-------- ---------
121,756 154,862
-------- ---------
Current Liabilities
Borrowings 13 8,000 8,000
Deferred income 49,643 53,930
Amounts held on behalf of customers 51,220 672
Tax payable 2,565 -
Trade and other payables 14 15,951 15,482
127,379 78,084
-------- ---------
Total Liabilities 249,135 232,946
-------- ---------
Equity
Share capital 659 659
Share premium account 97,204 97,204
Treasury shares (3,737) -
Capital redemption reserve 9 9
Merger reserve 186,981 186,981
Other reserves 6,840 5,933
Retained earnings 39,885 42,236
Total Equity 327,841 333,022
-------- ---------
Total Equity and Liabilities 576,976 565,968
----------------------------------------------- ------ -------- ---------
Consolidated Statement of Cash Flows for the year ended 30 June
2023
Notes 2023 2022
$'000 $'000
-------------------------------------------- ------ --------- ----------
Cash flows from operating activities
Cash generated from operations 12 100,591 32,943
Tax paid (1,843) (5,979)
-------------------------------------------- ------ --------- ----------
Net cash generated from operating
activities 98,748 26,964
Cash flows from investing activities
Acquisition of subsidiary, net of
cash acquired 8 - (293,288)
Purchase of property, plant and equipment (520) (353)
Capitalised intangible assets 9 (15,031) (13,680)
Interest received 214 1
-------------------------------------------- ------ --------- ----------
Net cash used in investing activities (15,337) (307,320)
Cash flows from financing activities
Dividends paid to company shareholders 6 (12,119) (12,976)
Share issue professional fees - (263)
Paid up share capital - 236
Proceeds from issuance of treasury
shares 138 -
Proceeds from borrowings - 120,000
Loan arrangement fees (252) (268)
Repayment of borrowings 13 (28,000) (8,000)
Interest on borrowings (6,503) (3,080)
Purchase of own shares by EBT (179) (1,726)
Share buyback programme (3,815) -
Payment of lease liabilities (2,552) (2,027)
-------------------------------------------- ------ --------- ----------
Net cash (used in)/ generated from
financing activities (53,282) 91,896
Net increase/ (decrease) in cash
and cash equivalents 30,129 (188,460)
Cash and cash equivalents at the start
of the year 47,157 235,617
Restricted cash previously excluded
from cashflow* 1,251 -
Cash and cash equivalents at the
end of the year 78,537 47,157
-------------------------------------------- ------ --------- ----------
*Restricted cash was not included within cash and cash
equivalents on the Balance Sheet or within the Cashflow in the
prior period. As the Group is unable to hold these amounts outside
of its own treasury facilities, these "restricted cash" balances
are now incorporated within cash and cash equivalents for FY23 and
are therefore included with the Cashflow Statement for the current
year.
Notes to the Financial Statements
General Information
Craneware plc ("the Company") is a public limited company
incorporated and domiciled in Scotland. The Company has a primary
listing on the Alternative Investment Market ('AIM') of the London
stock Exchange. The principal activity of the Company continues to
be the development, licensing and ongoing support of computer
software for the US healthcare industry.
Basis of preparation
The financial statements of the Group and the Company are
prepared in accordance with UK adopted international accounting
standards (International Financial Reporting Standards ("IFRS"))
and the applicable legal requirements of the Companies Act
2006.
The Group and the Company financial statements have been
prepared under the historic cost convention and prepared on a going
concern basis. The Strategic Report 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.
The Directors have prepared cash flow forecasts covering a
period of over twelve months from the date of approval of these
financial statements. These forecasts include consideration of
severe but plausible downsides, should these events occur, the
Group would have sufficient funds to meet its liabilities as they
fall due for that period. These scenarios anticipate a zero-growth
scenario, such that the only sales made by the Group would be to
replace losses of existing long-term contracts. Under this basis,
without the need to make cost savings, the Group remained in
compliance with its covenants and had no need to draw upon the
committed undrawn facility.
Based on this assessment, the Directors 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 the
Company financial statements.
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. Selected principal accounting policies
The principal accounting policies adopted in the preparation of
these financial statements are set out below. These policies have
been consistently applied, unless otherwise stated.
Reporting currency
The Directors consider that, as the Group's revenues are
primarily denominated in US dollars, the Company's principal
functional currency is the US dollar. The Group's financial
statements are therefore prepared in US dollars.
Currency translation
Transactions denominated in currencies other than US dollars are
translated into US dollars at the rate of exchange ruling at the
date of the transaction. The average exchange rate during the
course of the year was $1.2043/GBP1 (FY22: $1.3317/GBP1). Monetary
assets and liabilities expressed in foreign currencies are
translated into US dollars at rates of exchange ruling at the
Balance Sheet date $1.2619 /GBP1 (FY22: $1.2128/GBP1). 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.
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 Consolidated
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; and
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 and
transactional fees.
Revenue from software licenses
Revenue from both on premise 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; and
-- 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.
Revenue from transactional services
Transactional service fees are recognised at the point in time
when the service is provided.
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 non-recurring events.
These are disclosed separately where it is considered it provides
additional useful information to the users of the financial
statements.
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. "Share-based payments" are recorded
in the Group's Consolidated 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 Consolidated 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 useful economic 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) 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 fifteen years.
(d) Development costs
Expenditure associated with developing and maintaining the
Group's software products is recognised as incurred.
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.
Employee 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.
(f) Trademarks
Trademarks acquired in a business combination are initially
measured at fair value at the acquisition date. Trademarks have a
finite useful economic life and are 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 up to ten years.
Impairment of non-financial assets
At each reporting date the Group considers the carrying amount
of its tangible and intangible assets including goodwill to
determine whether there is any indication that those assets have
suffered an impairment loss. If there is such an indication, the
recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any) through determining the
value in use of the cash generating unit that the asset relates
to.
Where it is not possible to estimate the recoverable amount of
an individual asset, the Group estimates the recoverable amount of
the cash generating unit to which the asset belongs.
If the recoverable amount of an asset is estimated to be less
than its carrying amount, the impairment loss is recognised as an
expense.
Where an impairment loss subsequently reverses, the carrying
amount of the asset is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had
no impairment loss been recognised for the asset. A reversal of an
impairment loss is recognised as income immediately. Impairment
losses relating to goodwill are not reversed.
Treasury shares
Treasury Shares are Ordinary Shares of the Company which are
purchased by the Company in a share buyback programme and held for
the purpose of satisfying employee share plan awards. The
consideration paid, including any directly attributable costs, for
the Company's shares held in treasury is deducted from equity in
the Treasury Shares reserve until the shares are transferred or
disposed. When these shares in the Company are transferred to
employees, in accordance with employee share plans, the cost is
transferred from the Treasury Shares reserve to retained
earnings.
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 a period of up to 15 years.
-- Intangible assets acquired and liabilities assumed: the Group
measured assets acquired and liabilities assumed on the acquisition
of Sentry at their fair value on acquisition. Assessing the fair
value required the use of a number of assumptions and estimates in
relation to future cash flows generated by the assets and the use
of valuation techniques. The assumptions were based on the best
information available to management and valuation techniques were
supported by third party valuation experts. The valuations methods
used for the intangibles acquired were:
o Customer relationships - the residual income method was used
for arriving at the fair value of this asset. This calculates the
residual profit attributable less the appropriate returns for all
other assets that benefit the business.
o Proprietary software - the cost approach was used in
determining the fair value of this asset. This method estimates the
cost to replicate the asset as at the purchase date using current
prices for time and materials adding an appropriate margin and
opportunity cost.
o Trademarks - the relief from royalty method was used to
provide the fair value of this asset. This uses an estimate of the
cost savings that accrue on an intangible asset that would
otherwise incur royalties or licence fees on revenues generated
from the use of the asset.
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 appropriateness 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. Revenue
The chief operating decision maker has been identified as the
Board of Directors. The Group revenue is derived almost entirely
from the sale of software licences and professional services
(including installation) to hospitals within the US. 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.
2023 2022
$'000 $'000
----------------------- -------- --------
Software licensing 143,125 137,956
Professional services 13,741 13,893
Transactional fees 16,018 13,695
Other revenue 1,134 -
Total revenue 174,018 165,544
----------------------- -------- --------
Contract assets
The Group has recognised the following assets related to
contracts with customers:
2023 2022
$'000 $'000
-------------------------------------------- ------ ------
Prepaid commissions and royalties < 1 year 2,206 2,504
Prepaid commissions and royalties > 1 year 2,758 3,208
Total contract assets 4,964 5,712
-------------------------------------------- ------ ------
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 2022 were $2.5m.
Contract liabilities
The following table shows the total contract liabilities from
software license and professional service contracts:
2023 2022
$'000 $'000
---------------------------- ------- -------
Software licensing 47,037 53,596
Professional services 5,481 5,126
Total contract liabilities 52,518 58,722
---------------------------- ------- -------
Contract liabilities are included within deferred income in the
Balance Sheet.
Revenue of $53.7m was recognised during the year in relation to
contract liabilities as of 30 June 2022.
The following table shows the aggregate transaction price
allocated to performance obligations that are partially or fully
unsatisfied from software license and professional service
contracts.
Total unsatisfied Expected recognition
performance < 1 1 to 2 to > 3
obligations year 2 years 3 years years
Revenue expected to be
recognised $'000 $'000 $'000 $'000 $'000
------------------------------ ------------------ -------- --------- --------- -------
At 30 June 2023
* Software 348,919 124,279 99,613 67,757 57,270
* Professional services 14,376 8,313 3,207 1,981 875
Total at 30 June 2023 363,295 132,592 102,820 69,738 58,145
------------------------------ ------------------ -------- --------- --------- -------
At 30 June 2022
* Software 370,081 137,234 102,247 71,642 58,958
* Professional services 13,274 6,891 3,080 1,910 1,393
------------------------------ ------------------ -------- --------- --------- -------
Total at 30 June 2022 383,355 144,125 105,327 73,552 60,351
------------------------------ ------------------ -------- --------- --------- -------
Revenue of $144.1m was recognised during the year in relation to
unsatisfied performance obligations as of 30 June 2022.
The majority of these performance obligations are unbilled at
the Balance Sheet date and therefore not reflected in these
financial statements.
4. Operating profit
The following items have been included in arriving at operating
profit:
2023 2022
$'000 $'000
----------------------------------------------- --------- --------
Employee costs 87,755 88,698
Employee costs capitalised (10,261) (9,584)
Depreciation of property, plant and equipment 3,451 3,259
Amortisation of intangible assets - other 7,781 5,905
Amortisation of intangible assets - acquired
intangibles 20,930 20,239
Impairment of trade receivables 463 77
Exceptional items* 510 2,106
Operating lease rents for premises - 72
----------------------------------------------- --------- --------
* Exceptional items relate to integration costs associated with
the purchase of Sentry Data Systems, Inc (FY22: exceptional items
relate to legal and professional fees associated with a successful
acquisition and related integration costs).
Included in reaching operating profit is the movement in the
provision for impairment of trade receivables during the year of a
$1,971,000 credit, plus $91,000 net impairment credit for trade
receivables recognised directly in operating costs.
5. Tax on profit on ordinary activities
2023 2022
$'000 $'000
--------------------------------------------------- --------- ------
Profit on ordinary activities before tax 13,085 13,102
Current tax
Corporation tax on profits of the year 5,596 2,774
Adjustments for prior years 1,080 94
--------------------------------------------------- --------- ------
Total current tax charge 6,676 2,868
Deferred tax
Deferred tax for current year (3,324) 842
Adjustments for prior years 485 9
Change in UK tax rate 16 (26)
Total deferred tax (credit)/charge (2,823) 825
--------------------------------------------------- --------- ------
Tax on profit on ordinary activities 3,853 3,693
--------------------------------------------------- --------- ------
The difference between the current tax charge on ordinary
activities for the year, reported in the consolidated Statement
of Comprehensive Income, and the current tax charge that would
result from applying a relevant standard rate of tax to the
profit on ordinary activities before tax, is explained as
follows:
Profit on ordinary activities at the UK tax
rate 20.5% (2022 19%) 2,682 2,490
Effects of:
Adjustment for prior years 1,566 103
Change in tax rate on opening deferred tax
balance 23 (26)
Change in tax rate on closing deferred tax
balance - 339
Additional US taxes on profits 25% (2022:
25%) 392 328
Internally developed software 628 -
Expenses not deductible for tax purposes 246 119
Income not taxable in the period (1,004) -
Spot rate remeasurement 240 39
Use of tax losses (427) -
(Deduction)/expense on share plan charges (535) 301
Other 42 -
Total tax charge 3,853 3,693
--------------------------------------------------- --------- ------
6. Dividends
The dividends paid during the year were as follows:-
2023 2022
$'000 $'000
---------------------------------------------- ------- -------
Final dividend, re 30 June 2022 - 18.80
cents (15.5 pence)/share 6,645 7,227
Interim dividend, re 30 June 2023 - 15.13
cents (12.5 pence)/share 5,474 5,749
Total dividends paid to Company shareholders
in the year 12,119 12,976
---------------------------------------------- ------- -------
Prior year:
Final dividend 21.47 cents (15.5 pence)/share
Interim dividend 16.88 cents (12.5 pence)/share
The proposed final dividend 20.19 cents (16 pence), as noted in
the Financial Review section of the Strategic Report, for the year
ended 30 June 2023 is subject to approval by the shareholders at
the Annual General Meeting and has not been included as a liability
in these financial statements.
7. Earnings per share
The calculation of basic and diluted earnings per share is based
on the following data:
Weighted average number of shares
2023 2022
No. of Shares No. of Shares
000s 000s
------------------------------------------------ -------------- --------------
Weighted average number of Ordinary Shares
for the purpose of basic earnings per share 35,146 35,110
------------------------------------------------ -------------- --------------
Effect of dilutive potential Ordinary Shares:
share options and LTIPs 289 367
------------------------------------------------ -------------- --------------
Weighted average number of Ordinary Shares
for the purpose of diluted earnings per share 35,435 35,477
------------------------------------------------ -------------- --------------
The Group has one category of dilutive potential Ordinary
shares, being those granted to Directors and employees under the
employee share plans.
Shares held by the Employee Benefit Trust and Treasury Shares
held directly by the Company are excluded from the weighted average
number of Ordinary shares for the purposes of basic earnings per
share.
Profit for year
2023 2022
$'000 $'000
----------------------------------------------------- ------- -------
Profit for the year attributable to equity holders
of the parent 9,232 9,409
Acquisition and associated share placing costs
(tax adjusted) - 1,279
Acquisition integration costs (tax adjusted) 405 325
Amortisation of acquired intangibles (tax adjusted) 20,930 20,238
----------------------------------------------------- ------- -------
Adjusted profit for the year attributable to
equity holders of the parent 30,567 31,251
----------------------------------------------------- ------- -------
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.
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
2023 2022
cents cents
---------------------- ------ ------
Basic EPS 26.3 26.8
Diluted EPS 26.1 26.5
Adjusted basic EPS 87.0 89.0
Adjusted diluted EPS 86.3 88.1
---------------------- ------ ------
8. Business Combinations
Year ended 30 June 2023
There were no business combinations in the year ended 30 June
2023.
Year ended 30 June 2022
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 the pharmacy procurement,
compliance and utilisation management, based in Florida, USA. For
further information on the reasons for the acquisition see Note 25
of the annual report for the year ended 30 June 2021. The aggregate
consideration for the acquisition of Sentry on a cash free/ debt
free basis 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 deal was funded by $297.0m (as adjusted) of cash and $75.9m
from the issue of 2,507,348 new ordinary shares at fair value on 12
July 2021 (measured using the closing market price of the Company's
ordinary shares on that date). The cash consideration was funded
from the Group's existing cash resources, $120m from a new debt
facility and $187.3m net proceeds from a share placing completed in
June 2021.
Details of the purchase consideration, net assets acquired and
goodwill, were as follows:
$'000
--------------------------------------------- --------
Cash paid (net of working capital adjusted) 297,015
Shares issued (fair value) 75,905
Total purchase consideration 372,920
----------------------------------------------- --------
The fair values for assets and liabilities recognised as a
result of the acquisition were as follows:
Restated
Fair value
$'000
----------------------------------------- ------------
Non-Current assets
Property, plant and equipment 9,179
Intangible assets - customer relations 151,000
Intangible asset - proprietary software 51,496
Intangible assets - trademarks 5,000
Intangible assets - other 3,762
Other contract assets 376
------------------------------------------- ------------
Total non-current assets 220,813
------------------------------------------- ------------
Current assets
----------------------------------------- ------------
Trade and other receivables 13,254
Cash and cash equivalents 3,727
Restricted cash 1,880
------------------------------------------- ------------
Total current assets 18,861
------------------------------------------- ------------
Non-current liabilities
----------------------------------------- ------------
Leased property > 1 year 1,540
Leased equipment > 1 year 1,146
Deferred tax 48,685
------------------------------------------- ------------
Total non-current liabilities 51,371
------------------------------------------- ------------
Current liabilities
Deferred income 27,164
Trade and other payables 12,267
------------------------------------------- ------------
Total current liabilities 39,431
------------------------------------------- ------------
Net identifiable assets acquired 148,872
Add: goodwill 224,048
Total consideration 372,920
------------------------------------------- ------------
The goodwill is attributable to Sentry's strong position in the
market and synergies expected to arise after the company's
acquisition of these new subsidiaries.
The fair value of the acquired customer list and customer
contracts of $151m, proprietary software of $51.5m and trademarks
of $5.0m have been valued as per the details in Note 2. Deferred
tax of $37.8m, $9.7m (restated) and $1.2m has been provided
respectively in relation to these intangible assets.
Acquisition related costs of $2.1m (FY21: $6.5m) were included
within exceptional costs in profit and loss in the year ended 30
June 2022.
The fair value of trade and other receivables is $13.7m and
includes trade receivables with a fair value of $9.5m. The gross
contractual amount for trade receivables due is $12.7m of which
$3.2m was expected to be uncollectible.
Sentry contributed revenue of $94.7m and net profit of $1.6m to
the Group for the period from 13 July 2021 to 30 June 2022. If the
acquisition had occurred on 1 July 2021, consolidated revenue and
consolidated profit after tax for the year ended 30 June 2022 would
have been $168.2m and $9.5m respectively.
See Note 15 for details of the restatement in the prior
year.
9. Intangible assets
Goodwill Customer Proprietary Development Computer
Relationships Software Trademarks Costs Software Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
------------------ --------- -------------- ------------ ----------- ------------ --------- ----------
Cost
At 1 July 2022 235,486 153,964 52,724 5,000 56,096 4,840 508,110
Additions - - - - 14,960 71 15,031
Reclassification - - - - - (450) (450)
At 30 June 2023 235,486 153,964 52,724 5,000 71,056 4,461 522,691
------------------ --------- -------------- ------------ ----------- ------------ --------- ----------
Accumulated amortisation and
impairment
At 1 July 2022 250 12,706 11,187 538 15,607 1,899 42,187
Charge for the
year - 10,067 10,307 556 6,477 1,304 28,711
At 30 June 2023 250 22,773 21,494 1,094 22,084 3,203 70,898
Net Book Value
at 30 June 2023 235,236 131,191 31,230 3,906 48,972 1,258 451,793
------------------ --------- -------------- ------------ ----------- ------------ --------- ----------
Cost
At 1 July 2021 11,438 2,964 3,043 - 42,976 1,004 61,425
Additions - - - - 13,506 174 13,680
Acquisition of
subsidiary -
restated 224,048 151,000 51,496 5,000 - 3,762 435,306
Disposals - - (1,815) - (386) (100) (2,301)
At 30 June 2022
- restated 235,486 153,964 52,724 5,000 56,096 4,840 508,110
------------------ --------- -------------- ------------ ----------- ------------ --------- ----------
Accumulated amortisation and
impairment
At 1 July 2021 250 2,964 3,043 - 11,324 734 18,315
Charge for the
year - 9,742 9,959 538 4,669 1,236 26,144
Amortisation
on disposal - - (1,815) - (386) (71) (2,272)
At 30 June 2022 250 12,706 11,187 538 15,607 1,899 42,187
Net Book Value
at 30 June 2022
- restated 235,236 141,258 41,537 4,462 40,489 2,941 465,923
------------------ --------- -------------- ------------ ----------- ------------ --------- ----------
See Note 15 for details of the restatement in the prior
year.
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 subsidiaries and is split into the
following CGUs:
Restated
2023 2022
$'000 $'000
------------------- -------- ---------
Craneware InSight 11,188 11,188
Sentry 224,048 224,048
Total Goodwill 235,236 235,236
------------------- -------- ---------
Craneware InSight
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.
Sentry
The carrying values are assessed for impairment purposes by
calculating the value in use of the Sentry 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 Sentry acquisition.
The key assumptions in assessing value in use for the CGU's
are:
Growth rate in Post-tax discount
perpetuity rate
2023 2022 2023 2022
------------------- -------- ------- --------- ---------
Craneware InSight 2.0% 2.0% 9.0% 12.1%
Sentry 2.0% 2.0% 9.0% 9.5%
------------------- -------- ------- --------- ---------
After the initial term of 5 years, the Group applied a growth
rate for each CGU. These take into consideration the customer bases
and expected revenue commitments from it, anticipated additional
sales to both existing and new customers and market trends
currently seen and those expected in the future.
The Group has assessed events and circumstances in the year and
the assets and liabilities of the business cash-generating unit;
this assessment has confirmed that no significant events or
circumstances occurred in the year and that the assets and
liabilities showed no significant change from last year.
After review of future forecasts, the Group confirmed the growth
forecast for the next five years showed that the recoverable amount
would continue to exceed the carrying value. There are no
reasonable possible changes in assumptions that would result in an
impairment. Certain disclosures, including sensitivities, relating
to goodwill have not been made, given the significant headroom on
impairment testing.
10. Trade and other receivables
Restated
2023 2022
$'000 $'000
----------------------------------- -------- ---------
Trade receivables 27,594 34,730
Less: provision for impairment of
trade receivables (3,421) (5,855)
----------------------------------- -------- ---------
Net trade receivables 24,173 28,875
Other receivables 1,024 827
Current tax receivable - 2,932
Prepayments and accrued income 8,270 4,714
Deferred Contract Costs 4,715 5,470
----------------------------------- -------- ---------
38,182 42,818
Less non-current receivables:
Prepayments - (26)
Deferred Contract Costs (2,758) (3,208)
Current portion 35,424 39,584
----------------------------------- -------- ---------
See Note 15 for details of the restatement in the prior
year.
11. Deferred tax
Deferred tax is calculated in full on the temporary differences
under the liability method using a rate of tax of 25% (FY22: 25%)
in the UK and 25% (FY22: 25%) in the US including a provision for
state taxes.
See Note 15 for details of the restatement in the prior
year.
Restated
2023 2022
$'000 $'000
------------------------------------------ --------- ---------
At 1 July (44,417) 5,459
Credit/ (charge) to comprehensive income 4,084 (825)
Transfer direct to equity (1,004) (366)
Deferred tax arising on acquisitions - (48,685)
At 30 June (41,337) (44,417)
------------------------------------------ --------- ---------
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 liability at 30 June 2023 was $41,337,000 (FY22: net deferred
tax liability $44,417,000 restated).
Deferred tax assets - recognised
Short term Share
timing differences Loses options Total
$'000 $'000 $'000 $'000
-------------------------------------- -------------------- ------- --------- --------
A 1 July 2022 3,926 293 3,201 7,420
Credited to comprehensive income 585 135 160 880
Charged to equity - - (1,004) (1,004)
-------------------------------------- -------------------- ------- --------- --------
Total provided at 30 June
2023 4,511 428 2,357 7,296
-------------------------------------- -------------------- ------- --------- --------
At 1 July 2021 759 1,058 3,924 5,741
Credited/ (charged) to comprehensive
income 3,167 (765) (357) 2,045
Charged to equity - - (366) (366)
-------------------------------------- -------------------- ------- --------- --------
Total provided at 30 June 2022 3,926 293 3,201 7,420
-------------------------------------- -------------------- ------- --------- --------
Deferred tax liabilities - recognised
Long term Accelerated
timing differences tax depreciation Total
$'000 $'000 $'000
-------------------------------------- -------------------- ------------------ ---------
A 1 July 2022 (47,921) (3,916) (51,837)
Credited to comprehensive income 3,543 (339) 3,204
--------------------------------------- -------------------- ------------------ ---------
Total provided at 30 June
2023 (44,378) (4,255) (48,633)
--------------------------------------- -------------------- ------------------ ---------
At 1 July 2021 - (282) (282)
Credited/ (charged) to comprehensive
income 764 (3,634) (2,870)
Arising on acquisition - restated (48,685) - (48,685)
--------------------------------------- -------------------- ------------------ ---------
Total provided at 30 June 2022
- restated (47,921) (3,916) (51,837)
--------------------------------------- -------------------- ------------------ ---------
Restated
2023 2022
$'000 $'000
-------------------------------------------- --------- ---------
Deferred tax assets:
Deferred tax assets to be recovered after
more than 1 year 6,867 7,126
Deferred tax assets to be recovered within
1 year 429 294
7,296 7,420
-------------------------------------------- --------- ---------
Deferred tax liabilities:
Deferred tax liabilities to be recovered
after more than 1 year (43,633) (46,837)
Deferred tax liabilities to be recovered
within 1 year (5,000) (5,000)
(48,633) (51,837)
-------------------------------------------- --------- ---------
Net deferred tax liability (41,337) (44,417)
-------------------------------------------- --------- ---------
12. Cash flow generated from operating activities
Reconciliation of profit before taxation to net cash inflow
from operating activities
2023 2022
$'000 $'000
----------------------------------------------- -------- ---------
Profit before tax 13,085 13,102
Finance income (214) (1)
Finance expense 6,357 5,031
Depreciation on property, plant and equipment 3,451 3,259
Amortisation on intangible assets - other 7,781 5,905
Amortisation on intangible assets - acquired
intangibles 20,930 20,239
Loss/ (gain) on disposals 7 (5)
Share-based payments 2,992 2,116
Movements in working capital:
Decrease/ (increase) in trade and other
receivables 1,116 (3,203)
Decrease in trade and other payables (5,462) (13,500)
Increase in amounts held on behalf of
customers 50,548 -
Cash generated from operations 100,591 32,943
----------------------------------------------- -------- ---------
See Note 15 for details for restatement in the prior year.
13. Borrowings
The debt facility comprises a term loan of $24m (FY22: $32m)
which is repayable in quarterly instalments over 5 years up to 30
June 2026, and a revolving loan facility of $100m of which $60m
(FY22: $80m) is drawn down and which expires on 7 June 2026. During
the year, $8m was repaid on the term loan and $20m was repaid on
the revolving credit facility.
Interest is charged on the facility on a daily basis at margin
and compounded reference rate. The margin is related to the
leverage of the Group as defined in the loan agreement. As the
leverage of the Group strengthens, the applicable margin
reduces.
The facility 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
assets of the Company and specified assets of the Group.
2023 2022
$'000 $'000
----------------------------------------- ------- --------
Current interest bearing borrowings 8,000 8,000
Non current interest bearing borrowings 75,033 103,589
Total 83,033 111,589
----------------------------------------- ------- --------
Arrangement fees paid in advance of the setting up of the
facility are being recognised over the life of the facility in
operating costs. The remaining balance of unamortised fees and
interest at 30 June 2023 is $0.97m (FY22: $3.2m).
See Note 16 for a reconciliation between borrowings, cash and
net borrowings.
Loan covenants
Under the facilities the Group is required to meet quarterly
covenants tests in respect of:
a) Adjusted leverage which is the ratio of total net debt on the
last day of the relevant period to adjusted EBITDA.
b) Cash flow cover which is the ratio of cashflow to net finance
charges in respect of the relevant period.
The Group complied with these ratios throughout the reporting
period.
Financing arrangements
The Group's undrawn borrowing facilities were as follows:
2023 2022
$'000 $'000
------------------------------ ------- -------
Revolving facilities 40,000 20,000
Undrawn borrowing facilities 40,000 20,000
------------------------------ ------- -------
14. Trade and other payables
Restated
2023 2022
$'000 $'000
----------------------------- ------- ---------
Trade payables 4,005 3,587
Lease creditor due < 1 year 1,389 2,439
Other provisions < 1 year 420 379
Social security and PAYE 1,299 2,705
Other creditors 237 128
Accruals 8,466 6,222
Advance payments 135 22
Trade and other payables 15,951 15,482
----------------------------- ------- ---------
Other provisions relate to employer taxes due in relation to
employee share awards from the 2007 Share Option Plan payable on
exercise of options of $59,000 (FY22: $17,000) and potential sales
tax due in relation to audits in respect of Sentry Data Systems for
periods prior to the acquisition of $362,000 (FY22: $362,000
restated).
See Note 15 for details of the restatement in the prior
year.
15. Prior year restatement
Deferred revenue in Sentry opening balance sheet
On acquisition of Sentry Data Systems, Inc. in FY22, $4.792m of
the deferred revenue for one contract recorded in the Sentry
opening balance sheet related to a period more than one year from
30 June 2022. This was disclosed as less than one year on the prior
year balance sheet. The balance sheet has been restated to reflect
the long term portion of the deferred revenue on the closing
balance sheet. There was no impact on the opening balance sheet at
1 July 2021.
Restated Adjustment
Balance sheet extract 2022 2022 2022
$'000 $'000 $'000
------------------------- --------- ----------- --------
Non-current liabilities
Deferred income 4,792 4,792 -
--------- ----------- --------
158,051 4,792 153,259
--------- ----------- --------
Current liabilities
Deferred income 53,930 (4,792) 58,722
--------- ----------- --------
77,722 (4,792) 82,514
--------- ----------- --------
Total liabilities 235,773 - 235,773
------------------------- --------- ----------- --------
Deferred tax, current tax, sales tax and goodwill on
acquisition
On acquisition of Sentry Data Systems, Inc. in FY22, $51.874m of
the deferred tax liabilities and $1.100m of corporation tax
receivables were recognised at 30 June 2022, with the other side
going against goodwill. Following the completion of the FY22 tax
returns it was identified that an asset class included in the fair
value of assets and liabilities recognised on acquisition
liabilities has incorrectly been given a 'tax basis' and as such
the deferred tax liability included $3.189m and the tax debtor
included $0.417m incorrectly in relation to this asset class.
In the period since acquisition, it has been identified that
there are two states in which Sentry Data Systems, Inc operates
where amounts are due in respect of sales tax for periods prior to
the acquisition. A provision should have been made in respect of
these amounts as part of the fair value of assets and liabilities
recognised on acquisition. A provision of $0.362m should have been
included on acquisition.
The balance sheet has been restated to reflect the reduction in
the deferred tax liability on acquisition of $3.189m, an increase
in trade and other payables of $0.362m on acquisition, a decrease
in trade and other receivables of $0.417m on acquisition and a
corresponding reduction in goodwill of $2.410m. While these
adjustments have decreased total assets and total liabilities by
$2.410m each, there is no impact on nets assets. There was no
impact on the opening balance sheet at 1 July 2021.
Restated Adjustment
Balance sheet extract 2022 2022 2022
$'000 $'000 $'000
------------------------------ --------- ----------- --------
Non-current assets
Intangible assets - goodwill 235,236 (2,410) 237,646
--------- ----------- --------
477,976 (2,410) 480,386
Current assets
Trade and other receivables 39,584 (417) 40,001
--------- ----------- --------
87,992 (417) 88,409
------------------------------ --------- ----------- --------
Total assets 565,968 (2,827) 568,795
------------------------------ --------- ----------- --------
Equity and Liabilities
Non-current liabilities
Deferred tax 44,417 (3,189) 47,606
--------- ----------- --------
154,862 (3,189) 158,051
--------- ----------- --------
Current liabilities
Trade and other payables 15,482 362 15,120
--------- ----------- --------
78,084 362 77,722
------------------------------ --------- ----------- --------
Total liabilities 232,946 (2,827) 235,773
------------------------------ --------- ----------- --------
Total equity and liabilities 565,968 (2,827) 568,795
------------------------------ --------- ----------- --------
Note 8 Business combinations has been updated to reduce the
deferred tax liability on acquisition by $3.189m, increase trade
and other payables by $0.362m and decrease in trade and other
receivables by $0.417m with a respective decrease to goodwill on
acquisition of $2.410m.
Restated Adjustment
Note 8 extract 2022 2022 2022
$'000 $'000 $'000
---------------------------------- --------- ----------- --------
Current assets
Trade and other receivables 13,254 (417) 13,671
---------------------------------- --------- ----------- --------
Total current assets 18,861 (417) 19,278
---------------------------------- --------- ----------- --------
Non-current liabilities
Deferred tax 48,685 (3,189) 51,874
--------- ----------- --------
Total non-current liabilities 51,371 (3,189) 54,560
---------------------------------- --------- ----------- --------
Current liabilities
Trade and other payables 12,267 362 11,905
---------------------------------- --------- ----------- --------
Total current liabilities 39,431 362 39,069
---------------------------------- --------- ----------- --------
Net identifiable assets acquired 148,872 2,410 146,462
Add: goodwill 224,048 (2,410) 226,458
--------- ----------- --------
Total consideration 372,920 - 372,920
---------------------------------- --------- ----------- --------
The fair value of the acquired customer list and customer
contracts of $151m, proprietary software of $51.5m and trademarks
of $5.0m have been valued as per the details in Note 2. Deferred
tax of $37.8m, $9.7m restated (FY22: $12.9m) and $1.2m has been
provided respectively in relation to these intangible assets.
Note 9 Intangible assets has been updated to reflect the
reduction in goodwill on acquisition of $2.410m.
Note 9 extract Goodwill Total
$'000 $'000
------------------------------------------- --------- --------
Cost
Acquisition of subsidiary - restated 224,048 435,306
-------------------------------------------- --------- --------
At 30 June 2022 - restated 235,486 508,110
-------------------------------------------- --------- --------
Net Book Value at 30 June 2022 - restated 235,236 465,923
-------------------------------------------- --------- --------
Cost
Acquisition of subsidiary - adjusted (2,410) (2,410)
-------------------------------------------- --------- --------
At 30 June 2022 - adjusted (2,410) (2,410)
-------------------------------------------- --------- --------
Net Book Value at 30 June 2022 - adjusted (2,410) (2,410)
-------------------------------------------- --------- --------
Cost
Acquisition of subsidiary 226,458 437,716
-------------------------------------------- --------- --------
At 30 June 2022 237,896 510,520
-------------------------------------------- --------- --------
Net Book Value at 30 June 2022 237,646 468,333
-------------------------------------------- --------- --------
Restated Adjustment
2022 2022 2022
$'000 $'000 $'000
------------------- --------- ----------- --------
Craneware InSight 11,188 - 11,188
Sentry 224,048 (2,410) 226,458
--------- ----------- --------
Total Goodwill 235,236 (2,410) 237,646
------------------- --------- ----------- --------
Note 10 Trade and other receivables has been updated to reflect
the reduction in tax receivable of $0.417m.
Restated Adjustment
Note 10 extract 2022 2022 2022
$'000 $'000 $'000
------------------------ --------- ----------- -------
Current tax receivable 2,932 (417) 3,349
--------- ----------- -------
42,818 (417) 43,235
Current portion 39,584 (417) 40,001
------------------------ --------- ----------- -------
Note 11 Deferred tax has been updated to reflect the reduction
in deferred tax liabilities on acquisition of $3.189m.
Restated Adjustment
Note 11 extract 2022 2022 2022
$'000 $'000 $'000
------------------------------------- --------- ----------- ---------
Deferred tax arising on acquisition (48,685) 3,189 (51,874)
At 30 June (44,417) 3,189 (47,606)
------------------------------------- --------- ----------- ---------
Long term
Deferred tax liabilities - recognised timing differences Total
$'000 $'000
------------------------------------------- -------------------- ---------
Arising on acquisition - restated (48,685) (48,685)
Total provided at 30 June 2022 - restated (47,921) (51,837)
-------------------------------------------- -------------------- ---------
Arising on acquisition - adjusted 3,189 3,189
-------------------------------------------- -------------------- ---------
Total provided at 30 June 2022 - adjusted 3,189 3,189
-------------------------------------------- -------------------- ---------
Arising on acquisition (51,874) (51,874)
-------------------------------------------- -------------------- ---------
Total provided at 30 June 2022 (51,110) (55,026)
-------------------------------------------- -------------------- ---------
The analysis if deferred tax assets and liabilities is as
follows:
Restated Adjustment
2022 2022 2022
$'000 $'000 $'000
----------------------------------- --------- ----------- ---------
Deferred tax liabilities:
Deferred tax liabilities to be
recovered after more than 1 year (46,837) 3,189 (50,026)
(51,837) 3,189 (55,026)
----------------------------------- --------- ----------- ---------
Net deferred tax liabilities (44,417) 3,189 (47,606)
----------------------------------- --------- ----------- ---------
Note 14 has been updated to reflect the inclusion of the
provision for sales taxes of $0.362m.
Restated Adjustment
2022 2022 2022
$'000 $'000 $'000
--------------------------- --------- ----------- -------
Other provisions < 1 year 379 362 17
Trade and other payables 15,482 362 15,120
--------------------------- --------- ----------- -------
Other provisions relate to employer taxes due in relation to
employee share awards from the 2007 Share Option Plan payable on
exercise of options of $59,000 (FY22: $17,000) and potential sales
tax due in relation to audits in respect of Sentry Data Systems for
periods prior to the acquisition of $362,000 (FY22: $362,000
restated, FY22: nil).
16. 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.
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.
Adjusted EBITDA
Adjusted EBITDA refers to earnings before interest, tax,
depreciation, amortisation, exceptional items and share based
payments.
2023 2022
$'000 $'000
--------------------------------------- ------- -------
Operating profit 19,228 18,132
Depreciation of property, plant and
equipment 3,451 3,259
Amortisation of intangible assets -
other 7,781 5,905
Amortisation of intangible assets -
acquired intangibles 20,930 20,239
Share based payments 2,992 2,116
Exceptional items - acquisition and
associated share placing - 1,705
Exceptional items - integration costs 510 401
----------------------------------------
Adjusted EBITDA 54,892 51,757
---------------------------------------- ------- -------
Adjusted earnings per share (EPS)
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. See Note 7 for the calculation.
Operating Cash Conversion
Operating Cash Conversion is calculated as cash generated from
operations (as per Note 12), adjusted to exclude cash payments for
exceptional items, divided by adjusted EBITDA.
2023 2022
$'000 $'000
--------------------------------------------------- --------- -------
Cash generated from operations (Note 12) 100,591 32,943
Total exceptional items 510 2,106
Movement in amounts held on behalf of customers
(Note 12) (50,548) -
Accrued exceptional items at the start of
the period paid in the current period 60 5,509
Accrued exceptional items at the end of
the period (92) (60)
Trade payable exceptional items at the start
of the period paid in the current period 12 683
Trade payables cash exceptional items at
the end of the period - (12)
----------------------------------------------------
Cash generated from operations before exceptional
items 50,533 41,169
Adjusted EBITDA 54,892 51,757
Operating Cash Conversion 92.1% 79.5%
---------------------------------------------------- --------- -------
Adjusted PBT
Adjusted PBT refers to profit before tax adjusted for
exceptional items and amortisation of acquired intangibles.
2023 2022
$'000 $'000
------------------------------------------------ ------- -------
Profit before taxation 13,085 13,102
Amortisation of intangible assets - acquired
intangibles 20,930 20,239
Exceptional items - acquisition and associated
share placing - 1,705
Exceptional items - integration costs 510 401
-------------------------------------------------
Adjusted PBT 34,525 35,447
------------------------------------------------- ------- -------
Net Borrowings
Net Borrowings refers to net balance of short term borrowings,
long term borrowings and cash and cash equivalents (excluding
restricted cash in prior year).
2023 2022
$'000 $'000
--------------------------- --------- ----------
Cash and cash equivalents 78,537 47,157
Borrowings (Note 13) (83,033) (111,589)
Net Borrowings (4,496) (64,432)
---------------------------- --------- ----------
Lease liabilities are excluded from borrowings for the purpose
of net borrowings.
Total Sales
Total Sales refer to the total value of contracts signed in the
year, consisting of New Sales and Renewals.
New Sales
New Sales refer to the total value of contracts with new
customers or new products to existing customers at some time in
their underlying contract.
Annual Recurring Revenue
Annual Recurring Revenue includes the annual value of license
and transaction revenues at 30 June 2023 that are subject to
underlying contracts.
Net Revenue Retention
Net revenue retention is the percentage of revenue retained from
existing customers over the measurement period, taking into account
both churn and expansion sales.
Revenue Growth
Revenue Growth is the increase in Revenue in the current year
compared to the prior year expressed as a percentage of the
previous year Revenue.
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END
FR DGGDCGDGDGXS
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September 05, 2023 02:00 ET (06:00 GMT)
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