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1、Craneware plc Annual Reportfor the year ended 30 June 2014Cranewareplc AnnualReport2014About CranewareCraneware is the leader in automated revenue integrity solutions that improve financial performance and mitigate risk for US healthcare organisations.Founded in 1999,Craneware has headquarters in Ed
2、inburgh,Scotland with offices in Atlanta,Boston,Nashville and Phoenix employing approximately 200 staff.Cranewares market-driven,SaaS solutions help hospitals and other healthcare providers more effectively price,charge,code and retain earned revenue for patient care services and supplies.This optim
3、ises reimbursement,increases operational efficiency and minimises compliance risk.By partnering with Craneware,clients achieve the visibility required to identify,address and prevent revenue leakage.To learn more,visit and .ContentsFinancial and Operational Highlights .1Craneware Revenue Integrity S
4、olutions .2Chairmans Statement .4Strategic Report:Operational and Financial Review .5Strategic Report:Key Performance Indicators and Principal Risks and Uncertainties.13Directors,Secretary,and Advisors .15Board of Directors.16Directors Report.18Corporate Governance Report.21Remuneration Committee Re
5、port .25Independent Auditors Report to the Members of Craneware plc .28Consolidated Statement of Comprehensive Income for the year ended 30 June 2014 .29Statements of Changes in Equity for the year ended 30 June 2014 .30Consolidated Balance Sheet as at 30 June 2014 .31Company Balance Sheet as at 30
6、June 2014.32Statements of Cash Flows for the year ended 30 June 2014.33Notes to the Financial Statements .341Cranewareplc AnnualReport2014Financial and Operational HighlightsQuick Facts Financial$42.6min revenue$13.1min adjusted EBITDA1$32.6mcash at year end12.5ptotal dividend for yearFinancial Reco
7、rd total contract value signed in the year of$71.0m(FY13:$38.5m)Revenue increased to$42.6m(2013:$41.5m)Adjusted EBITDA1 increased to$13.1m(2013:$12.4m)Adjusted profit before taxation increased to$11.9m(2013:$11.2m)Profit before tax increased to$11.3m(2013:$10.6m)Basic adjusted EPS increased to 34.0
8、cents(2013:32.9 cents),basic EPS increased to 31.9 cents(2013:30.7 cents)Positive operational cash flow of$10.2m(2013:$9.9m)Cash at year end$32.6m(2013:$30.3m)after payment of$5.4m dividends to shareholders Proposed final dividend of 6.8p(11.63 cents)per share giving total dividend for the year of 1
9、2.5p(21.37 cents)(2013:11.5p/17.4 cents per share)1 Adjusted EBITDA refers to earnings before interest,tax,depreciation,amortisation and share based payments.Operational Leading indicators of customer confidence in the US healthcare market:Sales to all strata of hospitalsReturn of 7 and 9 year contr
10、actsDollar renewal rates continue to be strong,within historic rangeLonger average renewal contract lengthsStrong sales momentum and pipeline continue into FY15 Supportive market environment for Craneware products due to continued regulatory and fiscal pressures on US healthcare providers Continued
11、investment in product suite:Major enhancement releases to gateway productsFurthering enterprise capabilities across product familiesPost year end launch of Reference Plus;andAcquisition of Kestros Limited Revenue$mAdjusted EBITDA$mBasic adjusted EPS cents/share501540123030925202015106103500020122013
12、20142010201141.111.931.641.512.432.942.613.134.028.47.621.838.110.125.635201220132014201020112012201320142010201112Cranewareplc AnnualReport2014Quick Facts The TechnologyCraneware solutions are based on an annuity subscription model.Craneware products employ a mix of traditional client/server Window
13、s applications and hosted ASP technologies to provide a comprehensive enterprise solution for healthcare financial performance management.Client data is always kept secure within healthcare facilities own networks or Cranewares high-security data centre,compliant with US Health Insurance Portability
14、 and Accountability Act(HIPAA)regulations related to sensitive patient information.Only registered users can access Cranewares extensive knowledge base and regulatory products through available hospital-based browsers with Internet access.This allows Cranewares software to be rolled out to a number
15、of staff in a facility,permitting different prescribed levels of interaction with minimal impact to resource-strained IS teams and busy users.Craneware Revenue Integrity Solutions encompass five product families Patient Access,Charge Capture&Pricing,Coding Integrity,Revenue Collection&Retention,Data
16、&Decision Enablement.Craneware Revenue Integrity SolutionsCraneware Products and ServicesMedical Necessity+Prior Auth.Patient Responsibility Procedures Pharmacy Supplies Billing+Claims Analysis Audit Management Denials Management Remittance Auditing Patient Access Charge Capture and Pricing Coding I
17、ntegrity Revenue Recovery and Retention Determine requirement for payers:government&commercial Waiver forms for non-covered procedures Multi-attribute verification Import patient demographics Estimate patient responsibility Ensure charge accuracy Ensure chargemaster accuracy across enterprise Creati
18、on/mainten-ance of physician fee schedule Model contract proposals Model net revenue reimbursement Identify and correct discrepancies between purchased and billed drugs Identify and correct discrepancies between purchased and billed supplies Accurate HCPCS for billable supplies Integrity for all ear
19、ned revenue Identify and correct all coding mistakes Identify missed charges Automated audit tracking and execution Defensible accrual and reserve forecasting Appeals workflow Automated denial tracking and execution Multiple facility/department segmentation and workflow Payer compliance Underpayment
20、 notification Business Outcomes Products and Solutions InSight Medical Necessity Patient Charge Estimator Chargemaster Toolkit Chargemaster Corporate Toolkit Physician Revenue Toolkit Physician Revenue Toolkit-Corporate Pricing Analyzer Reference Plus Pharmacy ChargeLink Supplies ChargeLink Supplies
21、 Assistant Bill Analyzer InSight Audit InSight Denials InSight Payment Variance Analyzer Data Analysis&Decision Enablement Consulting and Professional Services Craneware Revenue Integrity Solutions 3Cranewareplc AnnualReport2014Craneware Revenue Integrity Solutions Contd.Cranewares Chargemaster Tool
22、kit is ranked No.1 in the Revenue Cycle Chargemaster Management market category and Bill Analyzer is ranked No.1 in the Revenue Cycle Charge Capture market category in the“2013 Best in KLAS Awards:Software&Services”report,published January 2014.www.KLAS Data 2014 KLAS Enterprises,LLC.All rights rese
23、rved.Healthcare Financial Management Association staff and volunteers determined that Cranewares Chargemaster Toolkit,Chargemaster Corporate Toolkit,Bill Analyzer,Online Reference Toolkit,and Interface Scripting Module have met specific criteria developed under the HFMA Peer Review Process.HFMA does
24、 not endorse or guarantee the use of these products.Craneware is a Microsoft Silver Independent Software Vendor.Pricing Analyzersoftware simplifies the price modeling process,creating a repeatable,well-documented method to establish transparent,defensible and competitive pricing.Reference Plusprovid
25、es a platform for hospitals with less than$44 million in operating expenses to perform chargemaster analysis and efficiently achieve appropriate revenue optimisation and compliant charging whilst accessing reference and regulatory resources for coding integrity.Pharmacy ChargeLinkimproves charge cap
26、ture,pricing and cost management,while simplifying the process for ensuring drug coding and billing units are complete and compliant,and establishing and maintaining a connection between a hospitals pharmaceutical purchases and billing.Supplies ChargeLinkhelps optimise reimbursement for codable supp
27、lies by identifying missing or invalid charges,and establishing and maintaining a connection between a hospitals supply purchase history and its chargemaster,which helps ensure accurate pricing,coding and billing of these supplies.Supporting Modules Online Reference Toolkit is an HFMA Peer-Reviewed
28、web-based tool for reducing risk by providing access to reference and regulatory resources.Interface Scripting Module is HFMA Peer-Reviewed software that automatically uploads chargemaster changes to the patient billing system for accurate billing.Coding IntegrityBill Analyzer software automates cla
29、im and coding reviews to identify missed charges,billing errors,and categorise areas of risk to help ensure that all legitimate revenue is captured.Bill Analyzer ranks#1 in its KLAS Revenue Cycle category for the third consecutive year.Revenue Recovery&RetentionInSight Auditsoftware is a comprehensi
30、ve,web-based audit management tool that empowers healthcare organisations to manage claim audits and workflow from one central location,leveraging an extensive proprietary knowledgebase that includes current payment rules,best practices,templates,checklists,forms,and references for winning appeals.I
31、nSight Payment Variance Analyzeridentifies,tracks and helps eliminate revenue lost in the form of underpaid claims.InSight Denialsanalyses,tracks,trends and reports on denial data,providing workflow tools to distribute denied claims to the right departments and staff for resubmission.Professional Se
32、rvicesCraneware Professional Services provide companion implementation and consulting services that help clients apply best practices and achieve a fast,sustainable return-on-investment.Craneware augments initial product training with live or self-led web-based training through the Craneware Perform
33、ance Center and optional fee-based training.Patient AccessPatient Charge Estimatorsoftware simplifies the process of providing patient bill estimates for inpatient and outpatient services to improve upfront collections and reduce bad debt.InSight Medical Necessityprovides medical necessity validatio
34、n for all major US payors and Advance Beneficiary Notice(ABN)creation.The software helps reduce accounts-receivable days by preventing medical necessity denials,and facilitates payment communication with patients.Charge Capture&PricingChargemaster Toolkit,Chargemaster Corporate Toolkit and Chargemas
35、ter Toolkit-CAH automate chargemaster management processes for capturing optimal legitimate reimbursement for hospitals and mitigating compliance risk.The Toolkit is customisable for any organisation,from small community hospitals to large healthcare networks.Physician Revenue Toolkit,Physician Mana
36、gement Toolkit and Physician Revenue Toolkit Corporateare for managing physician group charges,codes,RVUs,fee schedules,and related information.Online Reference Toolkit is included for physician billing.The corporate version manages charges to a corporate standard.The management version includes Dec
37、ision Dashboard which tracks Key Performance Indicators(KPIs)for strategic physician group charge management.4Cranewareplc AnnualReport2014“Increased sales activityhas resulted in a record sales performance for the Group.”George Elliott,ChairmanChairmans StatementI am pleased to report that followin
38、g a promising first half,the increased sales activity which had been building over prior years has resulted in a record sales performance for the Group during the year.The marketplace for our products is developing as we had anticipated,with sales now coming from both individual hospitals and larger
39、 hospital groups.This trend has continued in the first months of the new fiscal year and we expect this to continue in a positive manner in the year ahead.The strength of our business model,which spreads the value of each contract over its lifetime,is such that these sales successes are building a s
40、olid platform of future revenue on which the business will grow.The total value of contracts signed in the year increased by 84%to$71.0m(FY13:$38.5m).In accordance with the Groups revenue recognition policy,the vast majority of the revenue from these sales will benefit future years.Revenues increase
41、d to$42.6m,adjusted EBITDA increased to$13.1m and adjusted EPS increased to 34.0 cents.The Group continued to benefit from strong operational cash flow,closing the period with a cash balance of$32.6m(30 June 2013:$30.3m).We are now benefiting from the restructuring of the business in previous period
42、s,achieving record sales and ensuring scalability and sustainability for the future.We continue to invest in our products and people to ensure that we remain at the forefront of this evolving sector of the US healthcare IT market,the worlds largest IT industry.With the acquisition of Kestros Limited
43、,an emerging technology player in the patient access market,after the year end,the Group is well positioned to develop solutions to address the ongoing consumerisation trend within healthcare on both sides of the Atlantic.The market environment for the business remains positive.Cranewares growing pr
44、oduct set addresses many of the problems facing US healthcare organisations and the Group is increasing in strategic importance to its customer base.I am pleased to report that we recruited Colleen Blye and Russ Rudish to the Board in November 2013 and August 2014 respectively.Colleen and Russ will
45、be able to provide significant additional insight into the challenges facing US healthcare organisations.With a quarter of US hospitals as customers,high levels of visibility over future revenue,a significantly strengthened operating structure and enhanced product set,we are confident in the ongoing
46、 success of the Group.I would like to thank our staff for their enthusiasm and commitment.It is their passion that is the basis of our success.Lastly,I would like to thank you,our shareholders,for your support.George Elliott Chairman 15 September 20145Cranewareplc AnnualReport2014“We have seen a sig
47、nificant increase in the total value of contracts signed across both new hospitals and existing customers.”Keith Neilson,CEO and co-founder“We have made significant investments in prior years,which have strengthened the Group.”Craig Preston,CFOStrategic Report:Operational and Financial ReviewIntrodu
48、ctionWe are pleased to have delivered a strong year,showing progress in each of our five key strategic focus areas.These have resulted in increased relevance to our customers when considering their strategy for funding the effective delivery of healthcare in an evolving market.These areas are,in the
49、 short to medium term:to strengthen and leverage our dominant position in the automated Chargemaster market to facilitate a greater understanding of the true value of this strategic asset to hospitals;to continue to invest and grow our Gateway solutions;and to establish revenue and market penetratio
50、n for a Gateway product in the Patient Access and hospital consumerisation arena.The two other areas of focus are more medium to long-term,being:to invest and grow our data analytics platform;and to continue to seek alternative channels to market.We have made good progress in each of these five area
51、s over the course of the year.As a result we have seen a significant increase in the total value of contacts signed across both new hospitals and existing customers taking new product in the year,a positive leading indicator of future growth.While revenue and EBITDA growth in the year has been modes
52、t,the high levels of sales during the year have resulted in an increase in revenue which will be recognised in future years,providing us with a growing platform on which to build.The majority of the larger contract wins in the year were secured in the second half of the year and are seen as the begi
53、nning of the return of sales to large hospital groups from our pipeline.These large deals,which contributed approximately a quarter of the total contract value in the period,had been missing from results in the previous two years.The sales pipeline continues to be at a record high across all strata
54、of hospital,providing us with strong prospects for sales in the current year and beyond.Craneware has progressed considerably since its IPO in 2007.We have a broader product set.We address many more of the key issues experienced by healthcare providers as they strive for revenue integrity.We have co
55、nsiderably increased scalability and management bandwidth.Additionally,we have a greater level of industry expertise within the business,providing us with better insight into the problems our customers face.We are effectively maturing from being a single product company,known primarily for its autom
56、ated Chargemaster Toolkit,to a leader in the evolving revenue integrity marketplace.With a quarter of US hospitals already using at least one of our products,our vision is to be the partner healthcare providers rely on to improve and sustain strong financial performance with revenue integrity throug
57、h the management of their cost base whilst ensuring receipt of all legitimate reimbursement.We believe that this will provide the financial foundations for sustainable improvements to patient care for the future.As we look to this year,our long-term strategy and focus remain consistent and build upo
58、n last years successes by concentrating efforts on four key areas:increase the awareness of Cranewares strategic relevance in the evolution of the financing and effectiveness of healthcare;continue the sales momentum gained last year across all strata of hospitals;ensure the success of our customers
59、,confident in the knowledge that their success will lead to our success;and finally to continue to be innovative in the combinations of Revenue Integrity solutions that we bring to market and as we develop our future product sets to include data analytics and robust consumerisation solutions.We are
60、confident that with this strategy we are on the right path towards accelerated revenue and profit growth in future years.6Cranewareplc AnnualReport2014Strategic Report:Operational and Financial Review Contd.to audit requests within tight deadlines,coordinating to provide auditors with complete medic
61、al records and documentation from multiple systems,and to show that care provided meets criteria as medically necessary,and to effectively manage related payment appeals.The Medicare Recovery Audit Programme is also in a period of transition.In order to complete all outstanding claim reviews and rel
62、ated processes by the end date of the current Recovery Auditors contracts,there is a delay in the procurement process for the ensuing round of contracts to be awarded to the next set of Recovery Auditors.In the meantime,the current Recovery Audit Programme contracts have been extended so that these
63、active Recovery Auditors can continue sending additional documentation requests and initiating automated reviews,however their activities after June 1,2014 are limited until new contracts are awarded.Healthcare providers currently have billions of dollars in denied payments tied up in a massive back
64、log of appeal cases.The backlog is causing wait times of two or more years for appeal resolution.In May 2014,the American Hospital Association filed a lawsuit to compel Medicare to meet its stated requirement of 90-day appeal resolution.In an attempt to clear this backlog,Medicare has begun offering
65、 partial payment on these claims if providers agree to drop their appeal.The Recovery Audit Programmes success has also led to the growth of audits as a method for commercial insurers as well as other government agencies such as Medicaid to categorise payments being made to hospitals as improper unt
66、il the hospital defends its reimbursement.These trends all reinforce the business need for hospitals to mitigate their exposure to the risk of having their revenue reduced by ensuring they have the correct processes and tools to ensure Revenue Integrity in the initial instance and to be able to trac
67、k,trend,and manage the variety of financial audits that hospitals face in todays healthcare environment.The charge is the common unit of measurement across all new business models that enables healthcare organisations to ensure they bill accurately for all services provided.To disperse the payments
68、to varied providers in risk-sharing organisations,accurate charges enable each party to identify their portion of care.Population health management requires accurate charges as the basis for measuring cost-per-patient and cost-per-patient-type.As multiple reimbursement models move more risk to the h
69、ealthcare provider,they also create a greater dependency for them to claim reimbursement correctly,requiring the accuracy of data both clinically and financially within their systems to make correct assessment of the acquired risk.Residing at the points in a health system where clinical and operatio
70、nal data transform into financial transactions,the chargemaster is central to the quality drive,serving as the logical control point for data normalisation that combines disparate data sets whilst maintaining the localised context.Measuring a health systems operations from the viewpoint of its charg
71、emaster enables the creation of organisation-wide visibility and accountability,whilst proffering valuable,actionable information regardless of the reimbursement models chosen.Healthcare ConsumerisationWith rising costs in healthcare being transferred disproportionately from the government,insurers
72、and the employer to the consumer,hospitals have seen more than a trebling of their reimbursement coming directly from the consumer in the last ten years.This drive to consumerism and the need for healthcare organisations to focus on patient-direct billing as never before has resulted in a technology
73、-backed focus on correct and efficient patient registration with payment arrangements and collections before the provision of treatment.Payor AuditsWith more than$3.7 billion in Medicare funds recouped from hospitals and other healthcare providers in the twelve months prior to June 30,2014 alone,the
74、 Recovery Audit Programme has been a financial boom for Medicare.Medicare recovery audits continue to put strong pressure on hospitals,as hospitals must respond Market DevelopmentsThe US healthcare market,worth more than$2.8 trillion,is quickly evolving and continues to grow through 2014.Healthcare
75、expenditure in the United States is expected to increase to approximately$3.3 trillion in 2015,reaching 18%of GDP.*With six main trends affecting US healthcare reimbursement,outlined below,the main priority of our customers continues to be providing quality care to their patients against the backgro
76、und of continuing cuts in Medicare reimbursements,imposed restructuring of their business models and increased pressure from payor auditors.The Affordable Care ActImpacts of the Affordable Care Act are well underway.The online Health Insurance Exchanges established under the Act,which allow individu
77、als and small businesses to purchase private health insurance,resulted in enrollments from over 8 million people in the Health Insurance Marketplace according to a May 2014 press release from the US Department of Health and Human Services.Hospitals will shortly begin to see large numbers of these pa
78、tients in a setting that will be covered by at least a basic level of insurance where previously many hospitals would have been forced to see these patients and write off much of the treatment costs as charity care.Future supply and demand curves for hospitals are predicted to remove any current per
79、ceived spare capacity in the industry.New Reimbursement ModelsAs part of the Affordable Care Act,healthcare providers and payors have been asked to consider and implement a wide range of new business models for managing healthcare and related reimbursement to reduce dependence on fee-for-service-onl
80、y style payments.This involves reimbursement coming from a variety of healthcare business payment models.Alongside fee-for-service-based payment and bundled payment,US healthcare is working toward outcomes-based payment and is organising other new risk-sharing models for efficient population health
81、management.*Source:The US Centers for Medicare&Medicaid Services,Office of the Actuary,“National Health Expenditure Projections and Selected Economic Indicators,Levels and Annual Percent Change:Calendar Years 2006-2022,”which incorporate estimates from June 2013 of Gross Domestic Product.7Cranewarep
82、lc AnnualReport2014ICD-10 Coding TransitionFor the fourth time,the compliance deadline has been delayed for US hospitals and health systems to have to report their claims with an International Classification of Diagnosis Code Version 10(ICD-10)replacing the simpler version 9,which is currently manda
83、ted for the US.Although very large in its magnitude and increased complication for providers,as this conversion from ICD-9 to ICD-10 has been scheduled for a long time(with the most recent delay moving the US compliance deadline from October 2014 to October 2015)the majority of hospitals have had ti
84、me to detail and advance their plans to deal successfully with this conversion.Although getting these codes wrong on a claim could have a catastrophic effect on a hospitals reimbursement,the number of hospitals that appear to have not been successfully testing their claims with this data set is limi
85、ted and therefore should not substantially result in a diversion for hospitals,as long as the payor systems are equally robust.Consolidation and AffiliationAs reported in previous periods,the increasing trend for healthcare providers to consolidate and affiliate to share economies of scale continues
86、.This has introduced more complex operational challenges for hospitals as they choose to run their operations over many disparate Patient Accounting Systems from different vendors or consolidate onto one patient accounting platform from a single vendor.This decision has accelerated the migration of
87、healthcare providers into other Patient Accounting System platforms with the need for tools to monitor this progress and compensate for functionality that previously existed in legacy systems.Management believes Craneware has the most extensive suite of revenue integrity solutions to address the afo
88、rementioned healthcare trends and is confident of its growing prominence within the US healthcare market as it continues to further develop and enhance its solutions for Patient Access,Charge Capture&Pricing,Coding Integrity,Revenue Collection&Retention,Data&Decision Enablement,which encompass the s
89、pan of the revenue cycle,supply chain and audit areas in US healthcare organisations.Sales and MarketingThe Group delivered an outstanding sales performance in the year,in part reflecting the anticipated development of the natural buying cycle,with the increasing engagement of larger hospital groups
90、 and their inherently more complex buying decisions.Total contract sales values of$71.0m were a result of the investments made into the sales force over the last two years through increased capacity at a sales leadership level,training and a new competitive incentive scheme to drive this performance
91、.The average length of new customer contracts continues to be in line with our historical norms of approximately five years,although we have seen the return of seven and nine year contracts in the year,which is reflective of the increasing market confidence of our customers.Where Craneware enters in
92、to new product contracts with its existing customers,contracts are typically made co-terminus with the customers existing contracts,and as such,the average length of these contracts remains greater than three years,in line with our expectations.Renewal rates by dollar value is a financial metric tha
93、t specifically ties to the revenue visibility for future years.This metric,at 95%,is within expected norms of 85-115%including cross-selling of further products to renewing clients.Variations are driven by the timing of individual renewals,additional product sales and contract negotiation or cancell
94、ation.Length of our average contract for renewals in the period has increased to four years,a significant increase from two and a half years previously,driven by an active engagement with clients on one-year evergreen auto-renew contracts to sign new multi-year contracts.The sales mix remained fairl
95、y constant throughout the period,resulting in no change to the overall product attachment rate,which remained steady at approximately 1.6 products per customer.We have made further strides in the promotion and market acceptance of our other Gateway products,outside of Chargemaster Toolkit.In a year
96、of record total sales,the sales of Chargemaster Toolkit and our other two gateway products Pharmacy ChargeLink and InSight Audit was approximately in the ratio of 3:2:1.Our marketing focus has been on developing messaging that builds on our historic brand values but highlights in a more contemporary
97、 setting the strategic relevance of our assets in the effective running of hospital operations across multiple disciplines targeting the“C Suite”including the CFO of healthcare providers.The importance of revenue integrity to all healthcare providers is gaining increasing exposure at the top tier ma
98、nagement of these organisations as there is a growing realisation that under new payment models,cost base management and receipt of legitimate reimbursement combine to ensure revenue Integrity which is far more critical than just monitoring and managing Revenue Cycle alone.We are now seeing acknowle
99、dgment across the“C Suite”that financial and clinical operations have to be aligned financially to drive better healthcare and therefore better patient outcomes.Awards Once again two of our solutions ranked first in two distinct revenue cycle categories in the annual“2013 Best in KLAS Awards:Softwar
100、e&Services”report,published January 2014.In this KLAS report,Cranewares flagship product,Chargemaster Toolkit,earned the#1 ranking in the KLAS“Revenue Cycle Chargemaster Management”market category for the eighth consecutive year,and Cranewares Bill Analyzer software ranked#1 in the“Revenue Cycle Cha
101、rge Capture,”winning a Category Leader award for the third year running.In June 2014,the Healthcare Financial Management Association(HFMA)recognised five Craneware products at HFMAs 2014 Annual National Institute in Las Vegas,for earning the Peer Reviewed by HFMA standard every year since 2004,the f
102、irst year of the Peer Review program.This is a testament to Craneware solutions ability to effectively enable hospitals and health systems to achieve revenue integrity.The Craneware products receiving this distinction include Chargemaster Toolkit,Chargemaster Corporate Toolkit,Online Reference Toolk
103、it,Interface Scripting Module,and Bill Analyzer:the only healthcare products and services to earn this designation every year since the inception of the program.Strategic Report:Operational and Financial Review Contd.8Cranewareplc AnnualReport2014Strategic Report:Operational and Financial Review Con
104、td.Product DevelopmentOur strategy is to provide software solutions that help customers at the points in their systems where clinical and operational data transform into financial transactions.Our solutions automate data normalisation,combining disparate data sets while maintaining the localised con
105、text.This produces valuable,actionable information and creates organisation-wide visibility and accountability.We consistently receive feedback from our customers that the implementation of our software can have a profound effect on hospital operations,enabling the rapid identification of significan
106、t amounts of dollars in missed revenue,overspend on their cost base or incorrect billing that could lead to lost income and fines.We want to enhance these findings with data analytics that sit natively within our products and draw benchmarks from underlying data from our customer footprint and propr
107、ietary data sets.During the year we have progressed the initiatives that were launched in the prior year.These include continuing to enhance the functionality of current products whilst investigating the opportunities that integration of current offerings into new innovative combinations could prese
108、nt;leveraging our competencies to help clients that are in a consolidation phase(as target or acquirer)to better understand synergies from their combined financial operations regardless of patient accounting platform.Craneware provides an enterprise-wide view,and management believe this is a substan
109、tial competitive advantage.We maintain our focus on external integration with Healthcare Information Systems,such as the EPIC patient accounting system,to ensure we can fully support all our customers should they decide to replace their current systems.With the acquisition of Kestros Limited post ye
110、ar-end it is expected that we will be able to use technology already proven by them to develop a new fourth Gateway product in the Patient Access and Consumerisation area for intended FY16 launch.During the year we completed the development of a hybrid solution,which combines services with some of o
111、ur core products that enables them to be implemented at smaller hospitals that do not have their own internal revenue integrity teams.This solution was subsequently launched on the 2nd of September 2014.In conjunction with and in support of these initiatives,we have continued development of our comm
112、on software framework.This will provide the foundation for our future development efforts,significantly decreasing our time to market.Product development continues to be focused on supporting this long-term strategy as well as utilising technology to further enhance options for products to move furt
113、her on to the cloud and mobile platforms.Financial ReviewRevenues reported for the financial year under review were$42.6m(FY13:$41.5m)which has resulted in an adjusted EBITDA of$13.1m(FY13:$12.4m).We have made significant investments in prior years,which have strengthened the Group in many ways,and
114、positioned Craneware for its next stage of growth.In addition to the ongoing investments we make to our product suites,we have further invested in our people,both increasing the management bandwidth and the levels of expertise across the Group.A major focus of our investment has been in our sales fo
115、rce.Here,as reported previously,we have made key hires into the sales leadership level increasing the previous capacity;have developed our core sales force through enhanced training initiatives;implemented additional sales support and contracting functions to ensure we maximise the capacity of indiv
116、idual sales managers and have redesigned sales incentive plans to ensure we drive the performance we expect.These investments were initially made in a market environment that was in the early stages of recovery.In the prior year,we reported that we had seen the return of individual hospitals and sma
117、ll hospital groups as purchasing entities.As expected,this trend has continued to develop with our current year sales including sales to all types of hospital entities,from individual hospitals to the large multi-hospital network sales that have been announced during the year.It is pleasing that thr
118、ough both the anticipated development of our US health provider marketplace and its increasing refocus on revenue integrity combined with the investments we have made,we have delivered a record sales performance in the year,delivering a total value of contracts(sales)signed during the year of$71.0m(
119、FY13:$38.5m).Due to the Groups business model,these sales represent a leading indicator of future growth,not significantly impacting financial results in the year in which they are signed.Business ModelAs a result of the Groups business model and associated revenue recognition policies,sales and rev
120、enue have separate meanings and cannot be interchanged.The Group continues to recognise the vast majority of revenue under its annuity Software-as-a-Service(SaaS)revenue recognition model.The strategy behind this business model is to ensure the long-term growth and stability of the Group.As it is hi
121、ghly likely the levels of sales will fluctuate between individual years,the Annuity SaaS business model adopted by the Group delivers a smoothing of these fluctuations and provides for more even and consistent growth over the long term.Under this model,we recognise software licence revenue and any m
122、inimum payments due from our other route to market contracts evenly over the life of the underlying signed contracts.As we sign new hospital contracts over an average life of five years,we will see the benefit of any new sales over this underlying contract term.As well as the incremental licence rev
123、enues we generate from each new sale,we normally expect to deliver an associated professional services engagement.This revenue is typically recognised as we deliver the service to the customer,usually on a percentage of completion basis.The nature and scope of these engagements will vary depending o
124、n both our customer needs and which of our solutions they have licenced.However these engagements will always include the implementation of the software as well as training the hospital staff in its use.9Cranewareplc AnnualReport2014As a result of the different types of professional services engagem
125、ents,the period over which we deliver the services and consequently recognise all associated revenue will vary,however we would normally expect to recognise this revenue over the first year of the contract.In any individual year we would normally expect between 10%to 20%of revenues reported by the G
126、roup to be from services performed.Our final revenue model results from the ClaimTrust,Inc.acquisition in 2011.As the company has now been fully integrated,the ongoing transition of customers to the Annuity SaaS business model,and the redeployment of their highly skilled healthcare consultants from
127、more traditional services work to contracted engagements that directly support existing customers and potential new software sales,means this revenue now represents less than 5%of total Group Revenues reported.This revenue model results in revenue still being recognised monthly(as billed)and is recu
128、rring in its nature,but as it is not signed under long term non-breakable contracts it does not deliver the same advantages as the Annuity SaaS model.As a result of these revenue recognition models,based on our average contract life for new hospitals of five years,the maximum value of an average con
129、tract that is expected to be recognised as revenue in any one year is 20%plus the value of associated services that have been delivered.In all cases,should the contract contain any material contingencies or any increased risk of collection is identified,revenue is deferred until the contingency or o
130、therwise is satisfied,at which point the revenue that has been deferred is released and the revenue recognition is caught up to the level that would have been recognised had there been no deferral.Sales,Revenue Reported and Revenue VisibilityThe difference between revenue and sales under the Annuity
131、 SaaS business model can be demonstrated by reviewing the last five years sales levels to the reported revenue numbers.In the table below we show our total contracts signed in the relevant years between sales of new products(to both new and existing hospital clients)and clients who are renewing thei
132、r contracts at the end of their terms,our total sales and compare this total to the revenue reported.Strategic Report:Operational and Financial Review Contd.1 FY10 included the large reseller agreement with Premier,Inc.that added$15m to the new product sales and therefore total contract value in the
133、 year,with revenue being recognised over ten years.2FY12 included the large white label and reseller agreement that added$7.5m to new product sales and therefore total contract value in the year,with the$3.5m white label revenue recognised in the year and the remaining$4m recognised over the related
134、 28 month period.3As the Group signs new customer contracts for between three to nine years,the number and value of customers contracts coming to the end of their term(“Renewal”)will vary in any one year.This variation along with whether customers auto-renew on a one year basis or renegotiate their
135、contracts for up to a further nine years,will impact the total contract value of renewals in any one year.Annuity SaaS Model SalesFiscal Year2009$m2010$m2011$m2012$m2013$m2014$mNew Product Sales25.444.1116.921.6220.835.1Renewals317.814.07.512.717.735.9Total Contract Value43.258.124.434.338.571.0Repo
136、rted Revenue23.028.438.141.141.542.610Cranewareplc AnnualReport2014Strategic Report:Operational and Financial Review Contd.As described above,the advantages of the Groups business model is to protect against short term fluctuations in sales levels,thereby promoting long-term growth and stability.The
137、 majority of the revenue from any new sale will not be recognised in the year of sale.Instead,this balance of unrecognised revenue leads to Future Revenue Visibility.This is revenue that is under contract,that is going to be recognised in future years,and subject to the renewal of the contract at th
138、e end of its original life,forms an annuity base of revenue for the Group that increases with each new sale.The Group illustrates this annuity base through its“Three Year Visible Revenue”metric.This metric includes:Future revenue under contract;Revenue generated from renewals(calculated at 100%dolla
139、r-value renewal).Other recurring revenue(subject to an estimated churn rate of 8%per year);The different categories of revenue reflect any inherent future risk in recognising these revenues.Future revenue under contract,is,as the title suggests,subject to an underlying contract and therefore only ha
140、s to be invoiced to be recognised in the respective years(subject to future collection risk that exists with all revenue).Renewal revenues are contracts coming to the end of their original contract term(e.g.five years)and will require their contracts to be renegotiated and renewed for the revenue to
141、 be recognised.The average value of customers renewed in any period(including cross sell and upsell to those customers on renewal)is over 100%renewals by dollar value therefore it is reasonable to conclude little additional risk is associated to this revenue.The final category“Other recurring revenu
142、e”is revenue that we would expect to recur in the future but as the underlying contracts are not long term in their nature or contain break clauses,there is potential for this revenue not to be recognised in future years,however we apply an estimated 8%churn rate to make allowance for this risk.The
143、Groups total visible revenue for the three years as at 30 June 2014(i.e.visible revenue for FY2015,FY2016 and FY2017)shows how,combined with renewals and other recurring revenue,we expect the current excess of contracted value of sales to revenue reported to benefit the Group in this next three year
144、 period.The total of this visible revenue is$112.8m and breaks down as follows:Future revenue under contract contributing$76.4m of which$32.0m is expected to be recognised in FY15,$24.9m in FY16 and$19.5m in FY17.Revenue generated from renewal activities contributing$33.3m;being$5.2m in FY15,$11.3m
145、in FY16 and$16.8m in FY17.InSight revenue identified as recurring in nature of$3.1m.RevenueWe are reporting revenue for the year of$42.6m(2013:$41.5m).Underlying this marginal growth in revenue we have seen the return of sales to large hospital networks,as well as the return of seven and nine year c
146、ontracts.As anticipated,the redeployment of the skilled healthcare consultants from more traditional services work(part of the ClaimTrust,Inc.acquired contracts)to contracted engagements directly supporting existing customers and supporting potential new software sales has had an impact on levels of
147、 professional services revenues delivered in the year.This has reduced from$5.3m in FY13 to$4.9m in FY14,however this transition effect is expected to be short term in nature and professional services revenue at 11%of Group revenue is still within our expected range of 10%to 20%of our revenue in any
148、 one year.We retain the capacity within our existing business model and as a result of the sales performance in the year we expect this revenue stream to expand and contribute to future years revenue growth.Gross MarginsThe Gross Profit for the year was$40.6m(FY13:$39.4m)which represents a stable gr
149、oss margin percentage of 95%in both the current and prior year.Included within the Groups cost of sale is the commissions paid to sales managers on execution of contracts.As detailed earlier the Three Year Visible Revenue11Cranewareplc AnnualReport2014Strategic Report:Operational and Financial Revie
150、w Contd.Group has introduced a new competitive sales incentive scheme,and this combined with the significant increase in the total value of sales contracts in the year has resulted in higher levels of commissions being earned in the current year.The new IFRS15 Revenue Standard,expected to be adopted
151、 in the EU in the future,has an effective date for accounting periods on or after 1 January 2017.Whilst yet to fully assess the impact of the full standard,part of this standard codifies the accounting for sales commissions on long-term contracts,which our licence contracts effectively are.The appro
152、ach is consistent with the outcome required by current GAAP and would be the approach expected under US GAAP,and as such the Group is charging sales commissions earned under the new incentive scheme in the year over the life of the underlying contracts.The result of this is a consistent Gross Margin
153、 of 95%and deferred contract costs recorded in the balance sheet of$2.3m that will be charged to cost of sales in line with the recognition of the related revenue.Due to new commission plan and the associated level of sales that have resulted,not to take this approach would result in profitable long
154、-term contracts signed in the year,being represented as loss-making in their first reporting period solely as a result of mismatching costs incurred with how the Annuity business models evenly recognise revenues.As a result,the current year commission charge is materially in line with the prior peri
155、od.EarningsAdjusted earnings before interest,taxation,share based payments,depreciation and amortisation(“Adjusted EBITDA”)has grown in the year to$13.1m(FY13:$12.4m)an increase of 6%.This reflects an Adjusted EBITDA margin of 30.7%(FY13:29.8%).This is consistent with the Groups measured approach to
156、 the release of additional investment,continuing to make investments in line with the revenue growth occurring,whilst continually managing to ensure the efficiency of the investments we make.Operating ExpensesNet operating expenses(before share based payments,depreciation and amortisation)have,despi
157、te the investments we have made in key areas,only increased marginally to$27.6m(FY13:$27.0m).We continue to invest in the future growth of the Group whilst looking to leverage the investments we have made in prior years.Continued investment in line with the growth of the Group will provide us the op
158、portunity to deliver on the Groups strategy.As innovation will continue to be core to the Groups future we continue to invest in Product Development spend,which has remained at$7.0m with no significant amounts capitalised in the year.Cash We measure the quality of our earnings through our ability to
159、 convert them into operating cash.As in prior years,we have very high levels of cash conversion that has enabled us to grow our cash reserves to$32.6m(FY13:$30.3m).These cash levels are after paying$2.2m in taxation(FY13:$3.4m)and a further$5.4m(FY13:$4.7m)to our shareholders by way of dividends.We
160、retain a significant level of cash reserves to fund bolt-on acquisitions as suitable opportunities arise.Balance Sheet The Group maintains a strong balance sheet position,not only through our significant cash balance but with rigorous controls over working capital and no debt.As a result of the guar
161、anteed minimum revenues associated to a partner deal entered into in February 2012,we have been building up an accrued revenue balance as we recognised the associated revenue under our normal revenue recognition model.This accrued balance reached its maximum level of$4m at 30 June 2014,at which poin
162、t it was invoiced in line with the underlying contractual terms and was recorded in Trade Receivables.Since the year end,$3.6m of this balance has been cleared.The remaining amounts relate to an ongoing project and these amounts will be fully paid by February 2015.The underlying contract with this p
163、artner has been renewed for a minimum further term of one year,allowing them on a non-exclusive basis to sell our white-labelled software on a value added reseller basis to State and Federal customers,however no further contracted revenues were due as at 30 June 2014.No amounts relating to this cont
164、ract are included in our three year visible revenue detailed earlier.Post Balance Sheet Event:Acquisition of Kestros LimitedOn 28 August 2014,Craneware acquired the entire share capital of Kestros Limited for a maximum consideration of$2.14m(1.25m)that will be adjusted according to revenue milestone
165、s.150,000 of the consideration has been paid in cash with the remainder paid in new Craneware equity.The acquired assets and intellectual property of this emerging Scottish technology company,will provide Craneware with a technology platform in the high growth Patient Access market,addressing the gr
166、owing level of consumerisation within Healthcare.12Cranewareplc AnnualReport2014Strategic Report:Operational and Financial Review Contd.CurrencyThe reporting currency for the Group(and cash reserves)is US Dollars.Whilst the majority of our cost base is US located and therefore US Dollar denominated,
167、we do have approximately one quarter of the cost base based in the UK relating primarily to our UK employees(and therefore denominated in Sterling).As a result,we continue to closely monitor the Sterling to US Dollar exchange rate,and where appropriate consider hedging strategies.During the year,we
168、have been impacted through exchange rate movements,with the average exchange rate throughout the year being$1.6262 as compared to$1.5685 in the prior year.However,this has been immaterial to our results.TaxationThe Groups effective tax rate remains dependent on the proportion of profits generated in
169、 the UK and the US and the applicable tax rates in the respective jurisdictions.As detailed above,the sales performance in the year has increased the levels of income in both jurisdictions,and as detailed in previous years we are as a result seeing our effective tax rate return to more normalised le
170、vels.However this has been partially offset by the reduction in the levels of professional services revenue generated in the year.As all professional services are delivered in the US,the resulting lower levels of this revenue impacts the overall total income subject to taxation in the US.As result o
171、f the higher taxation levels in the US,the current years effective tax rate is 24%(FY13:22%).Effective tax rates will increase in future years if the ratio of underlying professional services to software license revenues increases and the overall levels of sales increase.EPSIn the year adjusted EPS
172、has increased to$0.340(FY13:$0.329)and adjusted diluted EPS has increased to$0.338(FY13:$0.328).The increase in EPS is driven by the increased levels of EBITDA but has been impacted by the increasing effective tax rate.DividendThe Board recommends a final dividend of 6.8p(11.63 cents)per share givin
173、g a total dividend for the year of 12.5p(21.37 cents)per share(2013:11.5p(17.4 cents)per share).Subject to confirmation at the Annual General Meeting,the final dividend will be paid on 16th December 2014 to shareholders on the register as at 14th November 2014,with a corresponding ex-Dividend date o
174、f 13th November 2014.The final dividend of 6.8p 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 Companys Dividend Currency Election,or who register to do so by the close of business on 14th November 2014.Th
175、e exact amount to be paid will be calculated by reference to the exchange rate to be announced on 14th November 2014.The final dividend referred to above in US dollars of 11.63 cents is given as an example only using the Balance Sheet date exchange rate of$1.7099/1 and may differ from that finally a
176、nnounced.OutlookWe have been pleased with the Groups performance in the year.We have seen signs of growing customer confidence and believe Craneware is increasingly well positioned to address a growing market opportunity in what is the largest software vertical in the world;the US healthcare market.
177、Craneware remains at the forefront of providing solutions to US healthcare providers to help them achieve revenue integrity through the management of their cost base whilst ensuring receipt of all legitimate reimbursement.We believe true revenue integrity is required if healthcare providers are to c
178、ontinue to support improved patient care and clinical outcomes.Investments in the business mean we have the people and the expertise in place to take us through the next stage of growth,building on our record sales performance.We have had a strong start to the current year,carrying on the momentum f
179、rom the previous year and are confident we have the platform to deliver ongoing increased stakeholder value.Keith Neilson Chief Executive OfficerCraig Preston Chief Financial Officer 15 September 201413Cranewareplc AnnualReport2014Strategic Report:Key Performance Indicators and Principal Risks and U
180、ncertaintiesKey Performance Indicator ReviewRevenue Growth2014 2013 Revenue$42.6m$41.5mGrowth3%1%Revenue for the year grew by 3%,whilst still below our historical norms,has increased over the prior year.The Groups Annuity SaaS revenue recognition model means the full benefit of current years sales w
181、ill be recognised in later years.Adjusted EBITDA Growth2014 2013 EBITDA$13.1m$12.4mGrowth6%4%We continue to invest in the future growth of the Group whilst looking to leverage the investments we have made in prior years.By taking a measured approach to investment we aim to release additional investm
182、ent,in line with revenue growth,with the focus on delivering profitable growth to all stakeholders.Adjusted EPS2014 2013 Adjusted EPS34.0 cents32.9 centsGrowth3%4%Adjusted EPS growth is a factor of the the Groups overall profitability after taking into account the taxation in the year.The Groups eff
183、ective tax rate remains dependent on the proportion of profits generated in the UK and the US and the applicable tax rates in the respective jurisdictions,which is a function of both the level of sales in the year and the level of professional services income.Cash2014 2013 Cash$32.6m$30.3Operating C
184、ash Flow Generation$10.2m$9.9mThe Group continues to convert very high levels of the Adjusted EBITDA reported in the year into Operating Cash flows.From these cash flows tax of$2.2m has been paid and$5.4m has been returned to our shareholders by way of dividends.This has resulted in a net increase i
185、n cash of 8%over the prior year.Three Year Revenue Visibility2014 2013 Three Year Revenue Visibility$112.8m$103.0m*Three year revenue visibility was adjusted during FY13 to reflect the redeployment of skilled healthcare consultants from more traditional services work(part of the ClaimTrust Inc acqui
186、red contracts)to contracted engagements directly supporting existing customers and supporting potential new software salesThe three year revenue visibility metric compares the three years contracted,revenue subject to renewal and other recurring revenue,for the three year period starting 1 July 2014
187、.Full details of how this is calculated are detailed in the financial review section of the Operational Review.The growth in this metric is a result of sales in the year and reflects the growing annuity revenue base that results.14Cranewareplc AnnualReport2014Principal Risks and Uncertainties To del
188、iver continued sustainable growth,the Group recognises the need to minimise the likelihood and impact of key risks.These risks are both general in nature,i.e.,business risks faced by all businesses,and more specific to the Group and the market in which it operates.The nature of the US healthcare ind
189、ustry and associated risks are detailed in the Operational and Financial Review on pages 5 to 12.The risks outlined here are those principal risks and uncertainties that are material to the Group.They do not include all risks associated with the Group and are not set out in any order of priority.US
190、Healthcare Evolution and ReformIssue:The US healthcare industry continues to evolve,with the emergence of new payer models and a shift towards consumerisation,the outcome and nature of this market is subject to continual change and as such could impact the Groups market opportunity.Actions:The Group
191、 has taken steps to ensure it stays at the forefront of how the industry is interpreting current proposals and actions they are taking.It does this through,amongst other things,its:Key hires adding to the industry expertise across the Group,both at operational and strategic levels;Having independent
192、 industry experts attend and speak at internal and external Company events;Regular attendance by senior management at healthcare forums and industry education events;and Client forums.Significant industry expertise has been added at both the Operations Board and the PLC Board.These Boards come toget
193、her at periodic intervals to review developments in the market and provide direct input to the Groups ongoing strategy appraisal and product development.Competitive LandscapeIssue:New entrants to the market or increased competition from existing competitors could significantly impact the Groups mark
194、et opportunity.Actions:The Group continually monitors its competitive landscape,including both existing and potential new market entrants.Significant barriers to entry continue to exist,including but not limited to the significant data content built over the Group history that exists within the prod
195、ucts.The Group continues to ensure its products are platform agnostic and actively seeks partnerships with other healthcare IT vendors.Management of GrowthIssue:The Group continues to plan for significant growth both organically and through acquisition,which could place strain on the current managem
196、ent and other resources of the Group.Actions:The Group has made significant investments over the prior years to increase bandwidth at both the Operations and PLC Board levels.The Groups annuity SaaS(“Software as a Service”)business model combined with the detailed forecasting processes provide visib
197、ility to expected growth rates.This provides a foundation when planning in advance,including any additional resourcing necessary as a result of this growth.To ensure the correct infrastructure to support growth,assessments are performed and improvements are made within systems,policies and procedure
198、s and business controls are upgraded,as appropriate,across the Group.Dependence on Key Executives and PersonnelIssue:Due to the size of the Group,significant reliance is placed on a few members of the executive and senior management team,the retention of which cannot be guaranteed.Actions:The Group
199、has significantly expanded and strengthened its senior management team,with three new appointments to the Operations Board having been made in the prior year.In addition,the Group has utilised its leadership framework to help develop its leaders of the future.In regards to retention,the Remuneration
200、 Committee continues to monitor and develop the remuneration packages of key personnel to ensure they are both competitive and include appropriate long-term incentives.Failure to develop or acquire appropriate software solutionsIssue:Reliance on a small number of products could significantly limit t
201、he Groups market opportunity and leave it unable to meet its customers needs.Actions:Whilst remaining focused on its core revenue integrity market the Group has both internally developed and acquired a total product suite of nine core products(from the original one in 2007).The Group publishes its p
202、roduct attachment rate during every reporting period and has a medium term strategic goal of generating no more than 55%of its revenue in any year,from any one product.Intellectual Property RiskIssue:Failure to protect,register and enforce (if appropriate)the Groups Intellectual Property Rights coul
203、d materially impact the Groups future performance.Actions:The Group will continue to register its trademarks and copyrights and protects access to its confidential information,as appropriate.The Group would vigorously defend itself against a third-party claim should any arise.The Group also has in p
204、lace strict physical and data security processes and encryption to protect its intellectual property.Acquisition RiskIssue:The Group has a stated acquisition strategy.Any acquisition carries with it an inherent risk,including failure to identify material matters that could adversely affect future Gr
205、oup performance.Actions:The Group has increasing experience of acquisitions and Board members individually have significant experience in regards to completing acquisitions,gained prior to joining the Group.In addition,and where appropriate,the Board appoints independent professional advisors to ass
206、ist in the consideration of the acquisition and to assist management in the due diligence process.The principal financial risks are detailed in Note 3 to the financial statements.How the Board determines and manages risks is detailed in the Corporate Governance report on pages 21 to 24.In summary,th
207、e US healthcare market is not immune to the macro-economic climate and,with the increasing focus and requirements of the evolving healthcare marketplace,the Group expects the market to continue to be competitive.The Group therefore aims to remain at the forefront of product innovation and delivery,t
208、hrough a combination of in-house development and specific acquisition opportunities.This requires the recruitment,retention,and reward of skilled staff,alongside responsiveness to changes,and the opportunities that result,as they arise.Craig Preston Chief Financial Officer 15 September 2014Strategic
209、 Report:Key Performance Indicators and Principal Risks and Uncertainties Contd.15Cranewareplc AnnualReport2014Directors,Secretary,and AdvisorsDirectorsG R Elliott(Chairman,non-executive)K Neilson C T Preston N P Heywood(non-executive)R F Verni(non-executive)C Blye(non-executive),appointed 12 Novembe
210、r 2013 R Rudish(non-executive),appointed 28 August 2014Company Secretary&Registered OfficeC T Preston1 Tanfield Edinburgh EH3 5DAStockbrokers and Nominated AdvisorsPeel Hunt LLP120 London Wall London EC2Y 5ETRegistrarsCapita Registrars LtdThe Registry 34 Beckenham Road Beckenham Kent BR3 4TUBankersT
211、he Royal Bank of Scotland plc36 St.Andrew Square Edinburgh EH2 2YBClydesdale Bank20 Waterloo Street Glasgow G2 6DBBarclays Commercial BankAurora House 120 Bothwell Street Glasgow G2 7JTHSBC Bank plc7 West Nile Street Glasgow G1 2RGLloyds TSBHenry Duncan House 120 George Street Edinburgh EH2 4LHIndep
212、endent AuditorsPricewaterhouseCoopers LLPChartered Accountants&Statutory Auditors Atria One 144 Morrison Street Edinburgh EH3 8EXSolicitorsPinsent Masons LLPPrinces Exchange 1 Earl Grey Street Edinburgh EH3 9AQ 16Cranewareplc AnnualReport2014Board of DirectorsGeorge R Elliott,61 Non-Executive Chairm
213、an:Appointed 10 August 2007George is non-executive Chairman of Cupid plc,an online dating and data company,Calnex Solutions Ltd,an Ethernet test equipment manufacturer and Cooper Software Ltd,an ERP systems integrator and is also a non-executive director of Two Big Ears Ltd,which develops audio cont
214、ent and development tools for emerging mobile technologies.Since 2007 he has been non-executive chairman/director of a number of technology companies,including MicroEmissive Displays Group plc,Corsair Components Inc,Kewill plc,and Summit Corporation plc.From 2000-2007 George was Chief Financial Offi
215、cer of Wolfson Microelectronics plc,a leading global provider of high performance mixed-signal semiconductors to the consumer electronics market.Previously,he was Business Development Director at McQueen International Ltd(now Sykes),a manufacturing and support services provider,where he was responsi
216、ble for strategic sales and marketing.George,formerly a partner of Grant Thornton,is a member of the Institute of Chartered Accountants of Scotland and has a degree in Accountancy and Finance from Heriot-Watt University.Keith Neilson,45 Chief Executive Officer:Co-founderKeith co-founded Craneware in
217、 1999 and has served as its CEO ever since.Under Keiths guidance,Craneware became recognised as the pioneer in revenue integrity management and a leading provider of superior products and professional services.Keiths direction has helped Craneware to win multiple prestigious awards in such areas as
218、international achievement,business growth strategy and innovation.Keith was named The Entrepreneurial Exchanges“Emerging Entrepreneur of the Year 2003”and was a finalist in the 2004 World Young Business Achiever Award,winning the Award of Excellence in the Business Strategy category.He received the
219、UK Software&Technology Entrepreneur of the Year Award from Ernst&Young in 2008 and was the Insider Elite Young Business Leader of the Year in 2009.Prior to launching Craneware,Keith worked primarily in international management,where he handled sales,marketing and technical consulting for companies w
220、ith operations around the world.He studied Physics at Heriot-Watt University,Edinburgh,receiving a bachelors degree in 1991.Keith is a syndicate member and Partner in Par Equity LLP.Keith is also proud to be a Patron of the Princes Trust and a Trustee of the Polar Academy both charitable organisatio
221、ns that work for the benefit of young people.Craig T Preston,43 Chief Financial Officer:Appointed 15 September 2008Craig was appointed to the Board on 15 September 2008,just as the company was entering its second year as a publicly traded corporation on the London Stock Exchange.As CFO,he directs Cr
222、anewares financial operations in both the United Kingdom and United States.Craig has significant experience in senior financial roles with other private and public technology companies,including those with a multi-national presence.Prior to Craneware,he was group director of finance and company secr
223、etary at Intec Telecom Systems plc.Earlier,he served as corporate development manager at London Bridge Software plc.During his time there,he also held the role of CFO for Phoenix International,a previously NASDAQ-traded software company,following its acquisition by London Bridge.Earlier in his caree
224、r,Craig worked for Deloitte in both the United Kingdom and United States.Craig has a degree in Accounting and Financial Management from the University of Sheffield.He is also a member of the Institute of Chartered Accountants in England and Wales.Neil P Heywood,52 Non-Executive Director:Appointed 31
225、 January 2002Neil is chairman of Codeplay Software Ltd and Two Big Ears Ltd,and a non-executive director at Games Analytics Ltd.He is also a director of Matrix Alpha Analytics,a company providing services to the hedge fund sector,and an advisory panel member at Par Equity LLP.Previously he was CEO o
226、f Quadstone,a marketing analytics company,and head of the Edinburgh Parallel Computing Centre at the University of Edinburgh.17Cranewareplc AnnualReport2014Ron F Verni,66 Non-Executive Director:Appointed 1 May 2009Ron is currently a director of On Deck Capital,and on the Board of Advisors of the Rob
227、inson College of Business.Before that he was President&CEO of Sage Software,Inc,and a member of the Board of Directors of the Sage Group plc.Under his leadership,the company grew from less than$160 million in revenue to over$1 billion,from under 1,000 employees to over 5,000,and from 1 million busin
228、ess customers to over 2.5 million.Ron also engineered over 20 acquisitions and oversaw their successful integration into the company.Prior to Sage Software,Ron was President and CEO of Peachtree Software,Inc.,a leading pioneer in business management solutions for small to medium size businesses.Ron
229、also was a Vice President of Marketing with Automatic Data Processing,President and CEO of NEBS Software,Inc.,and the founder and CEO of ASTEC Software.Colleen Blye,54 Non-Executive Director:Appointed 12 November 2013Colleen Blye is the Executive Vice President and Chief Financial Officer for Cathol
230、ic Health Systems of Long Island(CHS),an integrated healthcare delivery system which includes six hospitals,three nursing homes,a regional home care and hospice group and a community-based agency for persons with special needs.Colleen Blye joined CHS in 2010 from Catholic Health Initiatives(CHI),whe
231、re she served as Executive Vice President and Chief Financial Officer since 2005.She was with CHI for over twenty years,serving in various roles of increasing responsibility.Ms.Blye started her career in Finance with Ernst and Young in Philadelphia,PA.She has been a certified public accountant since
232、 1984 and is a member of the American Institute of Certified Public Accountants,and the Pennsylvania Institute of Public Accountants.She is also a member of the Healthcare Financial Management Association.Russ Rudish,62 Non-Executive Director:Appointed 28 August 2014Russ Rudish has more than 30 year
233、s experience in serving the healthcare industry,both in the United States and internationally.Russs most recent role was Global Sector Leader for Healthcare at Deloitte Touche Tohmatsu,where he led the$2 billion global consulting,audit,tax and financial advisory business,developing the firms Global
234、health care strategy.Russ joined Deloitte in 2006 from Eclipsys Corp.,which was acquired by Allscripts in 2010.He is an active speaker and contributor to thought leadership on todays most pressing Healthcare business issues.Russ holds a directorship in Rudish Health Solutions LLC.He previously held
235、a partnership in Deloitte LLC,from 2006-2014.Board of Directors Contd.18Cranewareplc AnnualReport2014Directors ReportThe directors present herewith their report and the audited consolidated financial statements for the year ended 30 June 2014.Principal Activities and Business ReviewThe Groups princi
236、pal activity continues to be the development,licensing and ongoing support of computer software for the US healthcare industry.The Company is required by the Companies Act to include a business review in this report.This includes an analysis of the development and performance of the Group during the
237、 financial year and its position at the end of the financial year,including relevant key performance indicators principally revenue,adjusted operating profit(before acquisition costs,share based payments,depreciation and amortisation),visibility of revenue over the next three years and cash generati
238、on during the year.Detailed information on all matters required is presented in the Strategic Report contained on pages 5 to 14 and is incorporated into this report by reference.A description of the principal risks and uncertainties facing the Group is also presented in the Strategic Report.Where th
239、e Directors Report,Chairmans Statement and Operational Review contain forward looking statements,these are made by the Directors in good faith,based on the information available to them at the time of their approval of this report.Consequently,such statements should be treated with caution due to th
240、eir inherent uncertainties,including both economic and business risk factors underlying such forward looking statements or information.Financial Results and DividendsThe Groups revenue for the year was$42.6m(2013:$41.5m)which has generated an adjusted operating profit(before acquisition related matt
241、ers)of$11.8m(2013:$11.1m).The full results for the year,which were approved by the Board of Directors on 15 September 2014,are set out in the accompanying financial statements and the notes thereto.During the year the Company paid an interim dividend of 5.7p(9.46 cents).The Directors are recommendin
242、g the payment of a final dividend of 6.8p(11.63 cents)per share giving a total dividend of 12.5p(21.37 cents)per share based on the results for 2014(2013:11.5p(17.4 cents).Subject to approval at the Annual General Meeting,the final dividend will be paid on 16 December 2014 to shareholders on the reg
243、ister as at 14 November 2014.The level of dividend proposed for the year continues the Companys stated progressive dividend policy based on the Groups retained annual earnings.The level of distributions will be subject to the Groups working capital requirements and the ongoing needs of the business.
244、Research and Development ActivitiesThe Group continues its development programme of software products for the US healthcare industry that includes research and development of new complementary products,integration(where appropriate)of products acquired through the ClaimTrust Inc and Kestros Limited
245、acquisitions and the enhancements to the Groups existing portfolio of market-leading products.The Directors regard investment in development activities as a prerequisite for success in the medium and long-term future.During the year development expenditure amounted to$7.0m(2013:$6.9m)net of expendit
246、ure capitalised of$0.1m(2013:$0.1m).Financial InstrumentsThe financial risk management strategy of the Group,its exposure to currency risk,interest rate risk,counterparty risk and liquidity is set out in Note 3 to the Financial Statements.Going ConcernThe Directors,having made suitable enquiries and
247、 analysis of the accounts,including the consideration of:cash reserves;no debt or debt related covenants;continued cash generation;and Annuity SaaS business model;have determined that the Group has adequate resources to continue in business for the foreseeable future and that it is therefore appropr
248、iate to adopt the going concern basis in preparing these financial statements.DirectorsThe Directors of the Company are listed on page 16 and 17.The Directors have the power to manage the business of the Company,subject to the provisions of the Companies Act,the Memorandum and Articles of Associatio
249、n of the Company,and to any directions given by special resolution,including the Companys power to purchase its own shares.The Companys Articles of Association may only be amended by a special resolution of the Companys shareholders.Details of the Directors service contracts and their respective not
250、ice terms are detailed in the Remuneration Committee Report on page 26.Authorised and Issued Share CapitalThe Companys authorised share capital at the Balance Sheet date was 50,000,000 ordinary shares of 1p each of which 27,008,763 were issued and fully paid up.During the year,no options were exerci
251、sed pursuant to the Companys share option schemes.(2013:16,872 new ordinary shares were exercised).Subsequent to the Balance Sheet date,on the 16 July 2014 the Company purchased for cancellation a total of 393,816 issued ordinary shares and on 1 September 2014 the company allotted 211,539 ordinary s
252、hares in respect of the acquisition of Kestros Limited.Consequently at the date of this report 26,826,486 ordinary shares of 1p each were issued and fully paid up.Directors and their interestsThe interests of the Directors who held office at 30 June 2014 and up to the date of this report in the shar
253、e capital of the company,were as follows:-20142013G R Elliott15,65015,650N P Heywood96,356130,356K Neilson3,488,3803,471,5293,600,3863,617,535Directors interests in share options are detailed in the Remuneration Committee Report on page 27.11.512.5*FY13FY14FY10FY11Dividends/Share(pence)*Subject to a
254、pproval at AGM8.08.810.5FY1219Cranewareplc AnnualReport2014Directors Report Contd.Substantial shareholdersAs at 1 September 2014,the Company had been notified of the following beneficial interests in 3%or more of the issued share capital pursuant to section 793 of the Companies Act 2006:No.of Ordina
255、ry 0.01 Shares%of issued share capitalLiontrust Investment Partners4,220,81315.73K Neilson3,488,38013.00W G Craig2,702,56310.07Artemis Investment Management2,188,7388.16Hargreave Hale1,957,2857.30Fidelity Worldwide Investments 1,542,6105.75AXA Framlington1,425,0005.31Baillie Gifford1,308,1994.88Shro
256、der Investment Management1,040,0003.88D Paterson873,8003.26The total number of shares as at 30 June 2014 was 27,008,763 and at 1 September 2014 was 26,826,486.Indemnity of Directors and OfficersUnder the Companys Articles of Association and subject to the provisions of the Companies Act,the Company
257、may and has indemnified all Directors or other officers against liability incurred by them in the execution or discharge of their duties or exercise of their powers,including but not limited to any liability for the costs of legal proceedings where judgement is given in their favour.In addition,the
258、Company has purchased and maintains appropriate insurance cover against legal action brought against Directors and officers.Corporate Social Responsibility&Environmental PolicyThe Group is committed to maintaining a high level of social responsibility.It is the Groups policy to support and encourage
259、 environmentally sound business operations,with aspects and impact on the environment being considered at Board level.Recognising that the Groups operations have minimal direct environmental impact,the Group aims to ensure that:it meets all statutory obligations;where sensible and practical,it encou
260、rages working practices,such as teleconferencing,teleworking and electronic information exchange that reduce environmental impact;and re-cycles waste products wherever possible,encouraging use of environmentally friendly materials,and disposing safely of any non-recyclable materials.CustomersThe Gro
261、up treats all its customers with the utmost respect and seeks to be honest and fair in all relationships with them.The Group provides its customers with products and levels of customer service of outstanding quality.CommunityThe Group seeks to be a good corporate citizen respecting the laws of the c
262、ountries in which it operates and adhering to best social practice where feasible.It aims to be sensitive to the local communitys cultural,social and economic needs.Employees and Employee InvolvementThe Group recognises the value of its employees and that the success of the Group is due to their eff
263、orts.The Group respects the dignity and rights of all its employees.The Group provides clean,healthy and safe working conditions.An inclusive working environment and a culture of openness are maintained by the regular dissemination of information.The Group endeavours to provide equal opportunities f
264、or all employees and facilitates the development of employees skill sets.A fair remuneration policy is adopted throughout the Group.The Group does not tolerate any sexual,physical or mental harassment of its employees.The Group operates an equal opportunities policy and specifically prohibits discri
265、mination on grounds of colour,ethnic origin,gender,age,religion,political or other opinion,disability or sexual orientation.The Group does not employ underage staff.The general policy of the Group is to welcome employee involvement as far as it is reasonably practicable.Employees are kept informed b
266、y meetings,regular updates and web page postings.In addition the Groups UK and US senior management teams meet regularly to review performance against the Groups strategic aims and development roadmaps.The Group maintains core values of Honesty,Integrity,Hard Work,Service and Quality and actively pr
267、omotes these values in all activities undertaken on behalf of the Group.Employment of Disabled PersonsApplications for employment by disabled persons are always fully considered,bearing in mind the respective aptitudes and abilities of the applicant concerned.In the event of members of staff becomin
268、g disabled every effort is made to ensure that their employment with the Group continues and the appropriate training is arranged.It is the policy of the Group that the training,career development and promotion of a disabled person should,as far as possible,is identical to that of a person who does
269、not suffer from a disability.20Cranewareplc AnnualReport2014Policy on payment of PayablesRelationships with suppliers and subcontractors are based on mutual respect,and the Group seeks to be honest and fair in its relationships with suppliers and subcontractors,and to honour the terms and conditions
270、 of its agreements in place with such suppliers and subcontractors.The Group does not believe that the giving or accepting of bribes is acceptable business conduct.It is the Groups normal practice to make payments to suppliers in accordance with agreed terms and conditions,generally within 30 days,p
271、rovided that the supplier has performed in accordance with the relevant terms and conditions.Trade payables at 30 June 2014 represented,on average 19 days purchases (2013:16 days)for the Group and 16 days purchases(2013:22 days)for the Company.Charitable and Political ContributionsAs part of the Gro
272、ups commitment to Corporate Social Responsibility it has continued to develop the Craneware Cares program.The focus of Craneware Cares is to raise awareness and funds for charity.Following on from 2013,Craneware Cares initiatives included staff at the Craneware headquarters in Edinburgh undertaking
273、the Walk the West Highland Way in a challenging 30 hours,96-mile hike across many of Scotlands iconic mountains and glens specifically to raise awareness and funds for Alzheimer charities,and raised more than$37,000.The focus for 2014 has been to support the Polar Academy where staff at Craneware ha
274、ve given their time and expertise to help support this charity to deliver its aim of inspiring and motivating thousands of young adults,positively demonstrating that by“inspiring through exploration”anybody can achieve their absolute potential.Neither the Company nor its subsidiaries made any donati
275、on for political purposes in fiscal years 2014 or 2013.Post Balance Sheet EventsOn 28 August 2014,Craneware acquired 100%of issued share capital of Kestros Ltd for a maximum consideration of$2.14m(1.25m),which will be adjusted according to Revenue milestones.The Directors are yet to complete the acq
276、uisition accounting for the new business combination.Annual General MeetingThe resolutions to be proposed at the AGM,together with explanatory notes,appear in a separate Notice of Annual General Meeting which is sent to all shareholders.The proxy card for registered shareholders is distributed along
277、 with the notice.Company RegistrationThe Company is registered in Scotland as a public limited company with number SC196331.Statement of Directors ResponsibilitiesThe Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulati
278、ons.Company law requires the Directors to prepare financial statements for each financial year.Under that law the Directors have prepared the Group and Parent Company financial statements in accordance with International Financial Reporting Standards(IFRSs)as adopted by the European Union.In prepari
279、ng these financial statements,the Directors have also elected to comply with IFRSs,issued by the International Accounting Standards Board(IASB).Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affa
280、irs of the Group and the Company and of the profit or loss of the Group for that period.In preparing these financial statements,the Directors are required to:select suitable accounting policies and then apply them consistently;make judgements and accounting estimates that are reasonable and prudent;
281、state whether applicable IFRSs as adopted by the European Union and IFRSs issued by IASB have been followed,subject to any material departures disclosed and explained in the financial statements;and prepare the financial statements on the going concern basis unless it is inappropriate to presume tha
282、t the Company will continue in business.The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Companys transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ens
283、ure that the financial statements comply with the Companies Act 2006.They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.The Directors are responsible for the maint
284、enance and integrity of the Companys website.Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.Auditors and Disclosure of Information to AuditorsEach Director,as at the date of this report,has conf
285、irmed that insofar as they are aware there is no relevant audit information(that is,information needed by the Companys auditors in connection with preparing their report)of which the Companys auditors are unaware,and they have taken all the steps that they ought to have taken as a Director in order
286、to make themselves aware of any relevant audit information and to establish that the Companys auditors are aware of that information.A resolution to reappoint PricewaterhouseCoopers LLP as auditors will be proposed at the Annual General Meeting.Approved by the Board of Directors and signed on behalf
287、 of the Board by:Craig Preston Company Secretary 15 September 2014Directors Report Contd.21Cranewareplc AnnualReport2014Corporate Governance ReportThe Board of Directors(the Board)acknowledge the importance of the Principles set out in The UK Corporate Governance Code issued in September 2012(the“Co
288、de”).Although the Code is not compulsory for AIM listed companies,the Board recognises the importance of good corporate governance practices and therefore has applied the principles as far as practicable for a public company of its size.This Report identifies how it has complied with both the indivi
289、dual principles and the spirit of the Code as a whole.The Code itself defines the purpose of corporate governance being“to facilitate effective,entrepreneurial and prudent management that can deliver the long-term success of the Company;”it is this overarching objective that the Board has sought to
290、achieve in applying the Code s principles.LeadershipThe role of the Board“Every Company should be headed by an effective Board which is collectively responsible for the long-term success of the company”The Companys Board continues to be headed by its Chairman George Elliott and comprises two executi
291、ve Directors,Keith Neilson,Chief Executive Officer and Craig Preston,Chief Financial Officer along with four further non-executive Directors,Ron Verni(Senior Independent Director),Neil Heywood,Colleen Blye(appointed November 2013)and Russ Rudish(appointed August 2014).Detailed biographies of all Dir
292、ectors are contained on page 16 and 17.The Board meets regularly,usually monthly,to discuss and agree on the various matters brought before it,including the Groups trading results.The Board is well supported by the Groups Operations Board(details of which are provided below)and a broader senior mana
293、gement team,who collectively have the qualifications and experience necessary for the day to day running of the Group.There is a formal schedule of matters reserved for the Board,which include approval of the Groups strategy,annual budgets and business plans,acquisitions,disposals,business developme
294、nt,annual reports and interim statements,plus any significant financing and capital expenditure plans.As part of this schedule,the Board has clearly laid out levels of devolved decision making authority to the Groups Operations Board.The Board has further established an Audit Committee and a Remuner
295、ation Committee details of which are provided below.George Elliott was a member of both these committees during the year,in addition to the two independent non-executives.In deciding this,the Company had taken advantage of the Codes relaxations available to smaller companies.However following the ap
296、pointment of Colleen Blye to these committees in March,George Elliott stepped down from both.The Board does not have a separate Nominations Committee as the Company has again taken advantage of the Codes relaxations available to smaller companies and incorporated this function within the remit of th
297、e entire Board.In the year it was determined appropriate to add a further independent non-executive Director which resulted in the appointment of Russ Rudish as detailed above.Attendance of Directors at Board and Committee meetings convened in the year,along with the number of meetings that they wer
298、e invited to attend,are set out below:BoardNominations CommitteeRemuneration CommitteeAudit CommitteeNo.Meetings in year11-23Executive DirectorsK Neilson11/11-C T Preston11/11-Non Executive DirectorsG R Elliott11/11-2/22/2N P Heywood10/11-2/23/3R Verni11/11-2/23/3Colleen Blye7/8-1/1 Where any Board
299、member has been unable to attend Board or Committee meetings during the year,their input has been provided to the Company Secretary ahead of the meeting.The relevant Chairman then provides a detailed briefing along with the minutes of the meeting following its conclusion.As detailed in the Directors
300、 Report on page 19,the Company maintains appropriate insurance cover against legal action brought against Directors and officers.The Company has further indemnified all Directors or other officers against liability incurred by them in the execution or discharge of their duties or exercise of their p
301、owers.Division of Responsibilities“There should be a clear division of responsibilities at the head of the company between the running of the Board and the executive responsible for the running of the companys business.No one individual should have unfettered powers of decision”The Board has establi
302、shed clearly defined and well understood roles for George Elliott as Chairman of the Company,and Keith Neilson as Chief Executive Officer.The Chairman is responsible for the leadership of the Board,ensuring its effectiveness and setting its agenda.Once strategic and financial objectives have been ag
303、reed by the Board,it is the Chief Executive Officers responsibility to ensure they are delivered upon.To facilitate this,Keith Neilson as CEO chairs the Groups Operations Board which comprises the Chief Financial Officer and six further members of the Senior Management Team.The day-to-day operation
304、of the Groups business is managed by this Board,subject to the clearly defined authority limits.The Chairman“The chairman is responsible for leadership of the Board and ensuring its effectiveness on all aspects of its role”George Elliott was appointed Chairman of the Board in August 2007,shortly bef
305、ore the Company listed on the AIM market.At that time the then Board satisfied themselves that he was independent,fulfilling the requirements of the Code.In setting the Board agendas,the Chairman,in conjunction with the Company Secretary,ensures input is gathered from all Board Directors on matters
306、that should be included.Board papers are issued in advance of meetings to ensure Board members have appropriate detail in regards to matters that will be covered,thereby encouraging openness and healthy debate.Non-Executive Directors“As part of their role as members of a unitary board,non-executive
307、directors should constructively challenge and help develop proposals on strategy.”The Board has appointed Ron Verni as Senior Independent Director.In this role,Ron provides a sounding board for the Chairman as well as providing an additional channel of contact for shareholders,other Directors or emp
308、loyees,if the need arises.In addition to matters outlined above,there is regular communication between executive and non-executive Directors,including where appropriate,updates on matters requiring attention prior to the next Board meeting.The non-executive Directors meet,as appropriate but no less
309、than annually,without executive Directors being present and further meet annually without the Chairman present.22Cranewareplc AnnualReport2014Corporate Governance Report Contd.EffectivenessThe Composition of the Board“The Board and its committees should have the appropriate balance of skills,experie
310、nce,independence and knowledge of the company to enable them to discharge their respective duties and responsibilities effectively”The composition of the Board has been designed to give a good mix and balance of different skill sets,including significant experience in:High growth companies;Software
311、and healthcare sectors;Entrepreneurial cultures;Both UK and US companies;Acquisitions;and Other listed plc companies.Through this mix of experience the Board and the individual Directors are well positioned to set the strategic aims of the Company as well as drive the Groups values and standards thr
312、oughout the organisation,whilst remaining focused on their obligations to shareholders and meeting their statutory obligations.The Board reviews on an annual basis the independence of each non-executive Director.In making this consideration the Board determines whether the Director is independent in
313、 character and judgement and whether there are relationships or circumstances which are likely to affect,or could appear to affect,the Directors judgement.In regards to Neil Heywood,the Board considered his appointment to the original Craneware Limited Board being in January 2002.Whilst Neils tenure
314、 is over ten years,the Company and the Board have significantly changed since the Companys IPO in 2007,as a result of this and Neils conduct,the Board has concluded this has not affected his independence.Appointments to the Board“There should be a formal,rigorous and transparent procedure for the ap
315、pointment of new directors to the Board”When a new appointment to the Board is to be made,consideration is given to the particular skills,knowledge and experience that a potential new member could add to the existing Board composition.A formal process is then undertaken,usually involving external re
316、cruitment agencies(as was the case with the appointment of Colleen Blye),with appropriate consideration being given,in regards to executive appointments,to internal and external candidates.Before undertaking the appointment of a non-executive Director,the Chairman establishes that the prospective Di
317、rector can give the time and commitment necessary to fulfil their duties,in terms of availability both to prepare for and attend meetings and to discuss matters at other times.Commitment“All directors should be able to allocate sufficient time to the company to discharge their responsibilities effec
318、tively”All Board Directors recognise the need to allocate sufficient time to the Company for them to be able to meet their responsibilities as Board members.All non-executive Directors contracts include minimum time commitments;however these are recognised to be the minimums.Details of the other dir
319、ectorships held by each Board member are provided in the Director Biographies on pages 16 and 17.The Board has evaluated the time commitments required by these other roles and does not believe it affects their ability to perform their duties with the Company.No executive Director currently holds any
320、 other plc directorship.The non-executive Director contracts are available for inspection at the Companys registered office and are made available for inspection both before and during the Companys Annual General Meeting.Development“The Board should be supplied in a timely manner with the informatio
321、n in a form and a quality appropriate to enable it to discharge its duties”The Chairman is responsible for ensuring that all the Directors continually update their skills,their knowledge and familiarity with the Group in order to fulfil their role on the Board and the Boards Committees.Updates deali
322、ng with changes in legislation and regulation relevant to the Groups business are provided to the Board by the Company Secretary/Chief Financial Officer and through the Board Committees.All Directors have access to the advice and services of the Company Secretary,who is responsible to the Board for
323、ensuring that Board procedures are properly complied with and that discussions and decisions are appropriately minuted.Directors may seek independent professional advice at the Companys expense in furtherance of their duties as Directors.Training in matters relevant to their role on the Board is ava
324、ilable to all Board Directors.New Directors are provided with an induction in order to introduce them to the operations and management of the business.In addition,the non-executive Directors periodically meet with the Groupss Operations Board on an informal basis.This provides all Directors with dir
325、ect access to the senior management of the Company and allows for better understanding of how the strategy set by the Board is being implemented across the Group.Evaluation“The Board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and indivi
326、dual directors”In the current year,a formal evaluation was conducted by means of a detailed questionnaire which was completed by each Director.The results of this process were collated by the Chairman and were presented to the Board as a whole.This evaluation included a review of the performance of
327、individual Directors including the Chairman and the Board Committees.Based on this evaluation,the Board has taken steps to implement certain agreed upon suggestions which has resulted in the recruitment of Russ Rudish as a further independent non-executive Director,but overall has concluded that its
328、 performance in the past year had been satisfactory.This review process will be repeated and updated as appropriate.The Board has considered the Codes recommendation that the evaluation of the Board be carried out externally at least every three years.The Board recognises this recommendation is not
329、applicable to AIM listed companies and has determined it was not necessary to carry out an external review in the current year.Re-election“All directors should be submitted for re-election at regular intervals,subject to continued satisfactory performance”Under the Companys Articles of Association,a
330、t every Annual General Meeting,at least one-third of the Directors who are subject to retirement by rotation,are required to retire and may be proposed for re-election.In addition,any Director who was last appointed or re-appointed three years or more prior to the AGM is required to retire from offi
331、ce and may be proposed for re-election.Such a retirement will count in obtaining the number required to retire at the AGM.New Directors,who were not appointed at the previous AGM,automatically retire at their first AGM and,if eligible,can seek re-appointment.23Cranewareplc AnnualReport2014However,th
332、e Board recognises the Codes recommendation that all Directors should stand for re-election every year,and whilst not a requirement,the Board has decided to adopt this recommendation as best practice.As such,all Directors will retire from office at the Companys forthcoming AGM and stand for re-appoi
333、ntment.AccountabilityFinancial and Business Reporting“The Board should present a balanced and understandable assessment of the Companys position and prospects”The Board recognises its responsibilities,including those statutory responsibilities laid out on page 20.An assessment of the Groups market,business model and performance is presented in the Chairmans Statement and the Operational and Financ
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