26th Feb 2008 07:01
Craneware plc26 February 2008 Craneware plc ("Craneware" or the "Company") INTERIM RESULTS 26 February 2008 - Craneware plc, (AIM: CRW) a leader in revenue cyclemanagement software solutions for the US healthcare market, is pleased toannounce interim results for the half year ended 31 December 2007. Highlights - Revenues increased by 24% to $8.7m (H107: $7.0m) - Profit before share based payments, depreciation and amortisation increased 21% to $2.0m (H107: $1.68m) - Basic EPS of $0.064 (H107: $0.026) - Successful Placing and IPO on AIM in September 2007 raising £5.4 million prior to expenses to fund continued expansion into the US healthcare market - 96 new hospitals added in the half, bringing total number to 878 - Flagship product, Chargemaster Toolkit(R), was also once again named top in its class by the prestigious industry research house KLAS in the US - Launch of Patient Charge EstimatorTM and Pharmacy ChargeLinkTM Keith Neilson, CEO of Craneware commented, "We are very pleased with theperformance of the Company having successfully executed on our plan andpositioned ourselves well for future growth. We have attained, and maintained, anumber one position in the market, significantly grown our customer base anddelivered new products into the market. These are being well received and thebroadening of the product range coupled with our improved sales execution meanswe are expanding our footprint within each customer and across the market as awhole. Recent legislative changes have and will continue to work in our favour.Our pipeline is strong and we are therefore confident of a successful outcomefor the year." For further information, please contact: Craneware plc KBC Peel Hunt ICIS+44 (0)1506 407 666 +44 (0)20 7418 8900 +44 (0)20 7651 8688Keith Neilson, CEO Oliver Scott Tom MoriartySandy McDougall, CFO Deon Veldtman Caroline Evans-Jones About Craneware Founded in 1999, Craneware has headquarters in Livingston, Scotland, withoffices in Florida, Arizona and Kansas, employing approximately 100 staff. TheCompany's flagship product, Chargemaster Toolkit(R), assists US healthcareproviders in reducing billing errors, ensuring the timely and accuratesubmission of claims and managing compliance risk. More information aboutCraneware plc and its services can be found on-line at the Company's corporatewebsite, www.craneware.com Chairman's Statement I am delighted to be able to report that Craneware has delivered according toits plan at the time of IPO in September last year. The transformation into apublic company has served to strengthen our position within the market. The increase in customer numbers during the period is of course especiallyencouraging, with Craneware's software now in operation in 878 hospitals across48 states. This spread illustrates the significant market presence of theCompany, and is a testament to the quality of our Chargemaster Toolkit(R) whichis a market leading product in the US healthcare industry. The potential forfurther growth continues to be significant with legislative changes and fiscalpressures on hospitals meaning that billing procedures in the healthcareindustry are facing more scrutiny than ever. These market drivers combined with strong H1 figures, in particular the 50%increase in new business wins, means that Craneware is on track for a successfulyear and we expect to see this momentum continue into 2009 and beyond. The Boardwould like to take this opportunity to thank our teams in Scotland and the USfor their continued hard work and dedication, without which our evolution into asuccessful public company would not have been possible. George Elliott, Chairman26th February 2008 CEO Review In these interim results, our first since our successful IPO last year, we arepleased to report that we have made significant headway in all areas of thebusiness. As planned we have expanded our customer base, grown our market shareand recently launched new products to support future growth. The Market Legislative changes and fiscal pressures on healthcare costs continue to be thekey drivers of growth in our target market of US hospitals. Most recently,Medicaid and Medicare have announced new measures requiring every US state tohave a Recovery Audit Contractor (RAC) in place by 1st of January 2010 who willhave powers to audit hospital claims back to the 1st October 2007 looking forerrors. Given the logistical problems inherent in attempting to comply with suchregulations in a timely and accurate manner Craneware's software solutions arebecoming an increasingly compelling proposition for the greater than 50% of UShospitals that still do not have a technology based solution to this issue. Wetherefore expect this legislation to continue to drive growth at a steady ratethrough 2010 and beyond. Sales and Marketing The sales and marketing function of the business has performed very well in theperiod with the end result being a like for like increase of 50% in contractwins over the comparable period last year. This is in terms of both dollarvalue and number of new hospitals under contract. Over the last three years, our Marketing Group has been working closely with ourcustomers on many projects for future product development. The culmination oftwo of those projects has seen the recent introduction of two new productfamilies to the Craneware brand. Ahead of schedule, the first two products ofthese families were launched at the end of H1. We continue to sell to the same demographic in the market and whilst theabsolute number of hospitals is stable across the US, there are many which stilldo not have a technology solution and in those that do we are well positioned toincrease the level of penetration in each hospital given our broadeningcapabilities and product range. The pricing environment continues to besupportive and we are pleased to report that our market driven price increaseshave been accepted. Given our success in sales and marketing we believe weare continuing to outsell our competition and increase our market share. Product Development The main focus in the period with regards to product development was the launchof two major new product lines as part of the next generation of Craneware'srange of software. In November, we launched Patient Charge EstimatorTM, whichenables hospitals to efficiently and accurately provide prospective patientswith estimates of procedural charges. Hospitals are then able to use thisinformation to obtain prepayments thereby reducing their bad debt provisionsfrom those patients. In January, just post the close of the half, we launchedPharmacy ChargeLinkTM enabling hospitals to improve the buying, billing andreimbursement of pharmacy items. The first stage of the integration of these products into our marketing strategyis underway, and will be completed by the end of 2008. These products are takingthe Company into parallel areas giving us the opportunity to tackle new areaswithin our market. Further improvements in functionality across the productrange have also boosted our position in the market and we were delighted thatduring the period our flagship product, Chargemaster Toolkit(R), was also onceagain named top in its class by the prestigious industry research house KLAS inthe US. We have carried out additional improvements to our software to aid integration,particularly in enabling our software to "talk to" a number of other softwareproducts commonly in use across multiple hospital departments. This hasbroadened the appeal of our offering and we have also white-labelled some of ourproducts during the period. We continue to investigate other ways in which tointegrate our software with third party products. Channel Partners We continue to pursue the development of our third party channels to market andhave made significant progress in the period. Amerinet continues to deliverleads and sales and we saw our first sales coming through our partner Premierduring the period. Since the period end, we also saw our first sale come throughCerner Corporation, a leading US supplier of healthcare IT systems. We willcontinue to explore opportunities with regards to additional partnerships. Management Change and Appointments Whilst there have been no major structural changes to our business we were verypleased in the half to announce the promotion of James Wilson to President ofCraneware, Inc. our US subsidiary. Financial Review On 13th September 2007, the Group raised £5.4 million (prior to expenses of£1.6m) through a placing by KBC Peel Hunt of 4,247,830 new Ordinary Shares atthe Placing Price of 128p per share. The funds raised via the Placing have beenutilised to strengthen the balance sheet in order to facilitate continuedproduct development and future strategic acquisitions. As reported in our H1 Trading Update on 11th January 2008, we increased newsales bookings and hospital wins by approximately 50% over the comparable periodlast year, whilst launching two new product families ahead of plan andexpectations. We continue to be satisfied that the level of renewals continuesto exceed 90% for hospitals whose multi-year contracts expired during the firsthalf of the year. With an annuity revenue recognition model, the highlypredictable and favourable effect of higher new business levels has allowed usto accelerate our investment in promoting and further developing our customersupport and sales infrastructure for PCE and PCL. As regards revenue visibility, the Group had $32.9m of future revenue undercontract at 30th June 2007. New business and renewal activity in H108 added$12.9m, whilst $8.7m revenue was recognised through the Income Statement duringthe period. This has increased future revenue under contract to $37.1m at 31stDecember 2007, of which $10.2m is shown as deferred revenue with the balance of$26.9m to be invoiced in future periods. Of the future revenue under contract asat 31st December 2007, the Directors consider that $17.7m will be recognisedduring FY08 with a further $12.4m and $7.7m respectively to be recognised inFY09 and FY10. In addition, assuming all contracts renew with no cancellations,$0.2m revenues will be recognised from renewal activity during H208, with afurther $3.5m and $7.9m respectively in FY09 and FY10 relating to contracts duefor renewal from H208 to the end of FY10. Following the change in pricing model in 2005 the long term element of deferredrevenues continues to reduce as such contracts mature. The overall level ofdeferred revenue has increased from $9.5m to $10.2m over H108 following newbusiness wins, impacting favourably upon working capital and cash generated fromoperations. Under IFRS 2 "Share-Based Payments" the Group's earnings have now reflected mostof the charge in FY07 and H108 relating to share options which existed at IPO.The lower tax charge, and related reduction in tax payable, reflects the taxdeductions originating from the exercise of such options during H1. R&D expenditure on PCE and PCL continues to be capitalised during H1 withamortisation starting in H2 following initial sales of these new products. Tradeand other payables are relatively constant throughout the period from H107through FY07 to H108, when the timing effect of Corporation Tax payments areadjusted. The Group continues to hold the IPO proceeds in GBP to meet expected UK costsover the period to June 2009. Nevertheless GBP cash balances require to bere-valued each month-end and this has resulted in a charge of $129,000 during H1as the US dollar strengthened to 1.985 at 31st December from 2.028 at IPO on13th September. The natural hedge position will cause this to unwind by the endof FY09. Outlook We are very pleased with the performance of the Company having successfullyexecuted on our plan and positioned ourselves well for future growth. We haveattained, and maintained, a number one position in the market, significantlygrown our customer base and delivered new products into the market. These arebeing well received and the broadening of the product range coupled with ourimproved sales execution means we are expanding our footprint within eachcustomer and across the market as a whole. Recent legislative changes have andwill continue to work in our favour. Our pipeline is strong and we are thereforeconfident of a successful outcome for the year. Keith Neilson, Chief Executive Officer26th February 2008 Craneware PLCInterim Results FY08Consolidated Income Statement H1 2008 H1 2007 FY 2007 $'000 $'000 $'000 Revenue 8,693 7,026 15,111Cost of sales (587) (362) (808)Gross profit 8,106 6,664 14,303Net operating expenses (6,796) (6,122) (12,906)Operating profit 1,310 542 1,397 Analysed as:Profit before share based payments, depreciation andAmortisation 2,034 1,680 3,796Share based payments (606) (1,052) (2,191)Depreciation of plant and equipment (90) (62) (152)Amortisation of intangible assets (28) (24) (56) Finance income 310 224 446Profit before taxation 1,620 766 1,843Tax charge (150) (261) (627)Profit for the year 1,470 505 1,216 Earnings per share for profit attributable toequity holders of the Company during the Half Year - Basic ($ per share) 0.064 0.026 0.061 - Diluted ($ per share) 0.06 0.023 0.054 Craneware PLCInterim Results FY08Consolidated balance sheet as at 31 December 2007 H1 2008 HI 2007 FY 2007 $'000 $'000 $'000ASSETS Non-Current AssetsPlant and equipment 435 492 487Intangible assets 719 271 434Deferred Tax 300 450 810Trade and other receivables 75 - 75 1,529 1,213 1,806 Current AssetsInventory - 88 8Trade and other receivables * 4,804 3,513 4,016Cash and cash equivalents 18,923 10,184 9,664 23,727 13,785 13,688 Total Assets 25,256 14,998 15,494 EQUITY AND LIABILITIES Non-Current LiabilitiesDeferred income 561 1,609 903 561 1,609 903 Current LiabilitiesDeferred income 9,663 7,516 8,579Trade and other payables 1,333 2,837 2,261 10,996 10,353 10,840 Total Liabilities 11,557 11,962 11,743 EquityCalled up share capital 505 1 1Share premium account 9,261 1,823 1,823Other reserves 3,014 1,338 2,477Retained earnings 919 (126) (550)Total Equity 13,699 3,036 3,751 Total Equity and Liabilities 25,256 14,998 15,494* includes $374k corporation tax receivable in current period Craneware PLC Interim Results FY08Consolidated cashflow statement for the six months ended 31 December 2007 Notes H1 2008 HI 2007 FY 2007 $'000 $'000 $'000 Cash flows from operating activities Cash generated from operations 3 2,205 450 2,626 Interest received 310 224 446 Tax (paid) / refunded (777) - (1,638) Net cash from operating activities 1,738 674 1,434 Cash flows from investing activities Purchase of plant and equipment (58) (419) (504) Capitalised intangible assets (312) (238) (433) Net cash used in investing activities (370) (657) (937) Cash flows from financing activities Dividends paid to company shareholders (1,000) Gross proceeds from the Placing 10,503 - - Less costs for the Placing (2,612) - - Net cash used in financing activities 7,891 - (1,000) Net (decrease) / increase in cash and cash equivalents 9,259 17 (503) Cash and cash equivalents at the start of the year 9,664 10,167 10,167 Cash and cash equivalents at the end of the year 18,923 10,184 9,664 Craneware PLC Interim Results FY08 Notes to the Financial Statements 1 Earnings per Share (a) Basic H1 2008 H1 2007 FY 2007 Profit attributable to equity holders of the Company ($'000) 1,470 505 1,216 Weighted average number of ordinary shares in issue (thousands) 22,870 19,799 19,799 Basic earnings per share ($ per share) 0.064 0.026 0.061 (b) Diluted H1 2008 H1 2007 FY 2007 Profit attributable to equity holders of the Company ($'000) 1,470 505 1,216 Weighted average number of ordinary shares in issue (thousands) 22,870 19,799 19,799 Adjustments for: - share options (thousands) 1,637 2,524 2,719 Weighted average number of ordinary shares for 24,507 22,323 22,518diluted earnings per share (thousands) Diluted earnings per share ($ per share) 0.060 0.023 0.054 2 Called up share capital H1 2008 H1/FY 2007 Number $'000 Number $'000Allotted called-up and fully paidEquity share capitalOrdinary shares of 1p each 24,963,850 505 50,500 1Ordinary A shares of 1p each - - 13,093 - AuthorisedEquity share capitalOrdinary shares of 1p each 50,000,000 1,014 9,980,361 165Ordinary A shares of 1p each - - 19,639 -Incentive shares of 0.1p each - - 5,087 - 3 Cash flow generated from operating activitiesReconciliation of profit before tax to net cash inflow from operatingactivities Group H1 2008 H1 2007 FY 2007 $'000 $'000 $'000Profit before tax 1,620 766 1,843Finance income (310) (224) (446)Depreciation on plant and equipment 90 62 152Amortisation on intangible assets 28 24 56Share based payments 606 1,052 2,191Movements in working capital:Decrease / (increase) in inventory 8 (69) 11(Increase) / decrease in trade and other (414) (478) (1,056)receivables(Decrease) / increase in trade and other payables 577 (683) (125)Cash generated from operations 2,205 450 2,626 4. Basis of Preparation The interim financial statements are unaudited and do not constitute statutoryaccounts as defined in S240 of the Companies Act 1985. These statements havebeen prepared applying accounting policies that were applied in the preparationof the Group's consolidated accounts for the year ended 30th June 2007. Thoseaccounts, with an unqualified audit report, have been delivered to the Registrarof Companies. 5. Segmental Information The Directors consider that the Group operates in one business segment, beingthe creation of software sold entirely to the US Healthcare Industry, and thatthere are therefore no additional segmental discolsures to be made in thesefinancial statements. The interim report was approved by the Board of Directors on 22nd February 2008. Significant Accounting Policies The significant accounting policies adopted in the preparation of thesestatements are set out below. 6. Reporting Currency The Directors consider that as the Group's revenues are primarily denominated inUS dollars the principal functional currency is the US dollar. The Group'sfinancial statements are therefore prepared in US dollars. 7. Currency Translation Transactions denominated in foreign currencies are translated into US dollars atthe rate of exchange ruling at the date of the transaction. Monetary assets andliabilities expressed in foreign currencies are translated into US dollars atrates of exchange ruling at the balance sheet date. Exchange gains or lossesarising upon subsequent settlement of the transactions and from translation atthe balance sheet date, are included within the related category of expensewhere separately identifiable, or in general and administrative expenses. 8. Revenue Recognition The Group follows the principles of IAS 18, "Revenue Recognition", indetermining appropriate revenue recognition policies. In principle revenue isrecognised to the extent that it is probable that the economic benefitsassociated with the transaction will flow into the Group. Revenue comprises the value of software license sales, installation, training,maintenance and support services, and consulting engagements. Revenue isrecognised when (i) persuasive evidence of an arrangement exists; (ii) deliveryhas occurred or services have been rendered; (iii) the sales price has beenfixed and determinable; and (iv) collectability is reasonably assured. For software arrangements with multiple elements, revenue is recogniseddependent on whether vendor-specific objective evidence ("VSOE") of fair valueexists for each of the elements. VSOE is determined by reference to sales toexternal customers made on a stand-alone basis. Where there is no VSOE revenueis recognised rateably over the full term of each contract. Revenue from standard license products which are not modified to meet thespecific requirements of each customer is recognised when the risks and rewardsof ownership of the product are transferred to the customer. from consultingengagements when all obligations under the consulting agreement have beenfulfilled. Revenue from installation and training is recognised as services are provided,and Software sub licensed to third parties is recognised in accordance with theunderlying contractual agreements. Where separate services are delivered,revenue is recognised on delivery of the service. All other revenue isrecognised rateably over the term of the sub licence agreement. The excess of amounts invoiced and future invoicing over revenue recognised, isincluded in deferred revenue. If the amount of revenue recognised exceeds theamounts invoiced the excess amount is included within accounts receivable. 9. Intangible Assets - Research and Development Expenditure Expenditure associated with developing and maintaining the Group's softwareproducts are recognised as incurred. Where, however, new product developmentprojects are technically feasible, production and sale is intended, a marketexists, expenditure can be measured reliably, and sufficient resources areavailable to complete such projects, development expenditure is capitaliseduntil initial commercialisation of the product, and thereafter amortised on astraight-line basis over its estimated useful life. Staff costs and specificthird party costs involved with the development of the software are includedwithin amounts capitalised. The Group considers whether there is any indication that capitalised developmentexpenditure may be impaired on an annual basis. If there is such an indication,the Group carries out an impairment test by measuring the assets' recoverableamount, which is the higher of the assets' fair value less costs to sell andtheir value in use. If the recoverable amount is less than the carrying amount,an impairment loss is recognised. 10. Cash Cash and cash equivalents include cash in hand, deposits held with banks andshort term highly liquid investments. For the purpose of the cash flowstatement, cash and cash equivalents comprise of cash on hand, deposits heldwith banks and short term high liquid investments. 11. Share-Based Payments and Taxation Implications The Group issues equity-settled share-based payments to certain employees. Inaccordance with IFRS 2, "Share-Based Payments" equity-settled share-basedpayments are measured at fair value at the date of grant. Fair value is measuredby use of the Black-Scholes pricing model as amended to cater for share optionsin issue where vesting is based on future valuation performance conditions. Thefair value determined at the date of grant of the equity-settled share-basedpayments is expensed on a straight-line basis over the vesting period, based onthe Group's estimate of the number of shares that will eventually vest. The share-based payments charge is shown separately on the income statement andis also included in 'Other reserves'. In the UK and the US, the Group is entitled to a tax deduction for amountstreated as compensation on exercise of certain employee share options under eachjurisdiction's tax rules. As explained under "Share-based payments", acompensation expense is recorded in the Group's income statement over the periodfrom the grant date to the vesting date of the relevant options. As there is atemporary difference between the accounting and tax bases a deferred tax assetis recorded. The deferred tax asset arising is calculated by comparing theestimated amount of tax deduction to be obtained in the future (based on theCompany's share price at the balance sheet date) with the cumulative amount ofthe compensation expense recorded in the income statement. If the amount ofestimated future tax deduction exceeds the cumulative amount of the remunerationexpense at the statutory rate, the excess is recorded directly in equity againstretained earnings. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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