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Corporate Governance

The Board of Directors (“the Board”) has always recognised the importance and value of good corporate governance and in prior years has sought to comply with both the principles and the spirit of the UK Corporate Governance Code issued in April 2016 where they were considered appropriate for the size of the Group.

Changes to AIM rules on 30 March 2018 required AIM companies to apply a recognised corporate governance code by 28 September 2018.  Under the new rules, the Company is required to comply with the chosen code or explain why it is not complying. The Company has elected to adopt the UK Corporate Governance Code issued in April 2016 (the “Code”) as its corporate governance framework but it is aware that the Code has been drafted in the context of larger, main-market listed companies.  The Board is pleased to report how it has applied the principles and complied with the provisions of the Code in line with best practice and in view of the size of the Company.  This Report sets out how it has complied with the individual provisions and applied the ‘spirit’ of the Code as a whole and explains any areas of non-compliance with the provisions of the Code. The UK Corporate Governance Code is available from the Financial Reporting Council at www.frc.org.uk

The information in this report was reviewed by the Board on 2 September 2019 and will be reviewed annually.

New UK Corporate Governance Code

In July 2018, the Financial Reporting Council published the UK Corporate Governance Code 2018 (the ‘2018 Code’), which is applicable to accounting periods beginning on or after 1 January 2019. The 2018 Code contains a number of new provisions which primarily focus on corporate culture, stakeholder engagement (with specific provisions on workforce engagement), remuneration and succession. The Board will report on compliance with the 2018 Code in next year’s annual report.

Overview: Application of the UK Corporate Governance Code 2016 (the “Code”) 

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 achieve in applying the Code principles. The Company is a smaller company for the purposes of the Code and, as such, certain provisions of the Code either do not apply to the Company or are judged to be disproportionate or less relevant in its case. Where the Company does not comply with any specific Code provision then this is highlighted and explained in this report.

Leadership

The 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.”

Throughout the year under review the Company’s Board has been headed by its Chairman, George Elliott, and comprises two executive Directors: Keith Neilson, Chief Executive Officer; and Craig Preston, Chief Financial Officer; along with three further non-executive Directors (each of whom the Board considers to be independent), Ronald Verni (Senior Independent Director), Colleen Blye and Russ Rudish. Detailed biographies of all Directors are contained in the ‘Board of Directors’ section of this website.  As noted in the Chairman’s Statement within the ‘Final Results’ announcement, for the year ended 30 June 2019, published on 3 September 2019 (which can be viewed in the ‘Announcements’ section of this website), George Elliott will not be standing for re-election as a Director of the Company at the upcoming AGM and will be stepping down as Chairman. The search for his successor is underway. 

The Board meets regularly to discuss and agree on the various matters brought before it, including the Group’s trading results. The Board is well supported by the Group’s Operations Board (details of which are provided below) and a broader senior management team, who collectively have the qualifications and experience necessary for the day to day running of the Group.

There is a formal schedule of matters reserved for the Board, which include approval of the Group’s strategy, annual budgets and business plans, acquisitions, disposals, business development, annual reports and interim statements, plus any significant financing and capital expenditure plans. As part of this schedule, the Board has clearly laid out levels of devolved decision making authority to the Group’s Operations Board.

The Board has further established an Audit Committee and a Remuneration Committee, details of which are provided below. The Board does not have a separate Nominations Committee as the Company has incorporated this function within the remit of the entire Board.  Although not in compliance with Provision B.2.1 of the Code, the Board considers this to be an appropriate arrangement in view of the size of the Group.

Attendance of Directors at Board and Committee meetings convened in the year, along with the number of meetings that they were invited to attend, are set out below:

BoardRemuneration CommitteeAudit Committee
No. Meetings in year823
Executive Directors
Keith Neilson8/8--
C T Preston8/8--
Non Executive Directors
G R Elliott8/8--
R Verni6/82/22/3
C Blye8/82/23/3
R Rudish8/82/23/3

Where any Director has been unable to attend Board or Committee meetings during the year, their input has been provided to the Company Secretary ahead of the meeting. The relevant Chairman then provides a detailed briefing along with the minutes of the meeting following its conclusion.

As detailed in the Directors’ Report within the Annual Report, the Company maintains appropriate insurance cover against legal action brought against Directors and officers. The Company has further indemnified all Directors or other officers against liability incurred by them in the execution or discharge of their duties or exercise of their powers.

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 responsibility for the running of the company’s business. No one individual should have unfettered powers of decision.”

The Board has established clearly defined and well understood roles for the Chairman of the Company and the 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 agreed by the Board, it is the Chief Executive Officer’s responsibility to ensure they are delivered upon. To facilitate this, Keith Neilson as CEO chairs the Group’s Operations Board that comprises the Chief Financial Officer and seven further members of the Senior Management Team. The day-to-day operation of the Group’s business is managed by this Operations Board, subject to the clearly defined authority limits.

The 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 before 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.  George has a depth of experience both as Chairman and a non-executive director for a number of other companies, including other listed companies, details of which can be found in the Directors’ biographies in the ‘Board of Directors’ section of this website.  As noted above, George does not intend to stand for re-election as a Director of the Company at the upcoming AGM and intends to step down as Chairman; the search for his successor is underway.  The Board will ensure that upon appointment of a successor all requirements of the Code relating to this appointment will be met.

Non-Executive Directors

“As part of their role as members of a unitary board, non-executive directors should constructively challenge and help develop proposals on strategy.”

The Board has appointed Ronald Verni as Senior Independent Director. In this role, Ronald provides a sounding board for the Chairman as well as providing an additional channel of contact for shareholders, other Directors or employees, if the need arises.

In addition to matters outlined above, there is regular communication between executive and non-executive Directors, including where appropriate, updates on matters requiring attention prior to the next Board meeting. The non-executive Directors meet, as appropriate but no less than annually, without executive Directors being present and further meet annually without the Chairman present.

Effectiveness

The Composition of the Board

“The Board and its committees should have the appropriate balance of skills, experience, 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 and healthcare sectors;
  • entrepreneurial cultures;
  • senior financial reporting;
  • both UK and US companies;
  • acquisitions; and
  • other listed 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 Group’s values and standards throughout the organisation, whilst remaining focused on their obligations to shareholders and meeting their statutory obligations.

The Board reviews on an annual basis the independence of each non-executive Director. In making this assessment, in addition to considering Provision B.1.1 of the Code, the Board determines whether the Director is independent in character and judgement and whether there are relationships or circumstances which are likely to affect, or could appear to affect, the Director’s judgement. In regards to Ronald Verni, having been appointed on 1 May 2009, he has completed his tenth year of service on the Board this year. The Board in making its assessment of independence has noted the significant growth and changes in the Company during this period, this combined with Ronald’s conduct has led the Board to conclude his length of tenure has not affected his independence. 

In regards to all other non-executive directors, the Board have not identified any matters that would affect their independence.  Code Provision B.2.3 states that any term beyond six years for a non-executive director should be subject to rigorous review, taking into account the need for progressive refreshing of the Board. Following George Elliott’s decision not to stand for re-election as a Director of the Company, the Board reviewed the appointment of Ronald Verni and have concluded that his continued appointment is both beneficial and appropriate and does not present any issues regarding independence.  Colleen Blye will have been a non-executive Director of the Company for more than six years in the year ending 30 June 2020 and the Board will review this appointment in accordance with Code Provision B.2.3.

Appointments to the Board

“There should be a formal, rigorous and transparent procedure for the appointment 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 recruitment agencies, with appropriate consideration being given, in regards to executive appointments, to internal and external candidates. Before undertaking the appointment of a non-executive Director, the Chairman establishes that the prospective Director can give the time and commitment necessary to fulfil their duties, in terms of availability both to prepare for and attend meetings and to discuss matters at other times.

Any conflicts, or potential conflicts, of interest are disclosed and assessed prior to a new Director’s appointment to ensure that there are no matters which would prevent that person from accepting the appointment.  The Group has procedures in place for managing conflicts of interest and Directors have continuing obligations to update the Board on any changes to these conflicts. This process includes relevant disclosure at the beginning of each Board meeting. If any potential conflict of interest arises, the Articles of Association permit the Board to authorise the conflict, subject to such conditions or limitations as the Board may determine.

The Group is supportive of and recognises the importance of diversity, including gender, ethnicity, nationality, skills and experience. This is evident from the diverse, inclusive and breadth and depth of skills and experience within the Craneware team. While not in favour of setting specific targets, in the event that a Board position is required to be filled, during succession planning, the Board will aim to ensure that the search process is sufficiently inclusive to encourage applications from diverse candidates with relevant skills, experience and knowledge, and that the selection process is fair and transparent.

Commitment

“All directors should be able to allocate sufficient time to the company to discharge their responsibilities effectively.”

All Directors recognise the need to allocate sufficient time to the Company for them to be able to meet their responsibilities as Board members. All non-executive Directors’ contracts include minimum time commitments; however these are recognised to be the minimums.

Details of the other directorships held by each Board member are provided in the Directors’ biographies in the ‘Board of Directors’ section of this website. The Board has evaluated the time commitments required by these other roles and does not believe it affects their ability to perform their duties with the Company. No executive Director currently holds any other directorship of a listed company. The non-executive Director contracts are available for inspection at the Company’s registered office and are made available for inspection both before and during the Company’s Annual General Meeting.

Development

“All Directors should receive induction on joining the Board and should regularly update and refresh their skills and knowledge.”

The Chairman is responsible for ensuring that all the Directors continually update their skills, their knowledge and familiarity with the Group in order to fulfil their role on the Board and the Board’s Committees. Updates dealing with changes in legislation and regulation relevant to the Group’s business are provided to the Board by the Company Secretary/Chief Financial Officer and through the Board Committees.

All Directors have access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring that Board procedures are properly complied with and that discussions and decisions are appropriately minuted. Directors may seek independent professional advice at the Company’s expense in furtherance of their duties as Directors. The Board ensures that the Audit and Remuneration Committees are provided with sufficient resources to undertake their duties.

Training in matters relevant to their role on the Board is available to all Directors. New Directors are provided with an induction in order to introduce them to the operations and management of the business.

Information and Support

“The board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties.”

In setting the Board agendas, the Chairman, in conjunction with the Company Secretary, ensures input is gathered from all Directors on matters that should be included. Board papers are then issued in advance of meetings to ensure Board members have appropriate detail in regards to matters that will be covered, thereby encouraging openness and healthy debate.  At a minimum, these board papers include the Financial Results of the Group and a report from both the Chief Executive Officer and the Chief Financial Officer.

In addition, the non-executive Directors periodically meet with the Group’s Operations Board on an informal basis. This provides all Directors with direct access to the senior management of the Group and allows for better understanding of how the strategy set by the Board is being implemented across the Group.

Evaluation

“The Board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors.”

The Board performed a full formal evaluation in the prior financial year.  This was performed by means of a detailed questionnaire to be completed by each Director. This evaluation included a review of the performance of the Chairman and the Board Committees.  The results of the process were collated by the Senior Independent Director and were reviewed by the Board as a whole.

Overall the Board concluded that its performance in the period under review had been satisfactory, however it did identify that adding further non-executive experience could complement the current Board.  The Board is in the process of implementing these recommendations and as such has not performed a review in the current year.  The Board recognises this means the Principle in the Code that expects an annual evaluation process to be conducted, has not been applied in the current year.  However, it is considered by the Board that the procedure for, and frequency of, this formal evaluation process is appropriate and adequate in view of its current size. This review process will be repeated and updated as appropriate.

The Board has considered the Code’s recommendation that the evaluation of the Board be carried out externally at least every three years. The Board recognises this recommendation is applicable to FTSE 350 companies and has determined it was not necessary to carry out an externally facilitated 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 Company’s Articles of Association, at 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 office and may be proposed for re-election. Such a retirement will count in obtaining the number required to retire at the AGM. New Directors, who were not appointed at the previous AGM, automatically retire at their first AGM and, if eligible, can seek re-appointment.

However, the Board recognises the Code’s recommendation that all Directors should stand for re-election every year, and whilst not a requirement, the Board has decided to adopt this recommendation as best practice. As such, all Directors will retire from office at the Company’s forthcoming AGM.  It is the intention of all Directors, apart from George Elliott as explained above, to stand for re-appointment. 

Accountability

Financial and Business Reporting

“The Board should present a fair, balanced and understandable assessment of the company’s position and prospects.”

The Board recognises its responsibilities, including those statutory responsibilities laid out in the ‘Statement of Directors’ Responsibilities’ section of the Directors’ Report contained in the Annual Report (which can be viewed and downloaded from the ‘Financial Reports’ area of this website). An assessment of the Group’s market, business model and performance is presented in the Chairman’s Statement and the Strategic Review sections of the Annual Report.

As detailed in the Directors’ Report within the Annual Report, the Board has confirmed that it is appropriate to adopt the going concern basis in preparing financial statements. The Directors have also explained in the Strategic Report section in the Annual Report their assessment of the prospects of the Company and the Group.

Risk Management and Internal Control

“The Board is responsible for determining the nature and extent of the principal risks it is willing to take in achieving its strategic objectives. The Board should maintain sound risk management and internal control systems.”

The Directors recognise their responsibility for the Group’s system of internal control and have established systems to ensure that an appropriate and reasonable level of oversight and control is provided. These systems, which cover all material controls, including financial, operational and compliance controls are reviewed for effectiveness annually by the Audit Committee and the Board. The Group’s systems of internal control are designed to help the Group meet its business objectives by appropriately managing, rather than eliminating, the risks to those objectives. The controls can only provide reasonable, not absolute, assurance against material misstatement or loss.

The Directors have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity.  The Group maintains its internal risk register that forms the foundation of the Board and the Audit Committee review process. Executive Directors and senior management meet to review both the risks facing the business and the controls established to minimise those risks and their effectiveness in operation on an ongoing basis. The aim of these reviews is to provide reasonable assurance that material risks and problems are identified and appropriate action taken at an early stage.

The risk review is exercised through the monthly management reports and Operations Board meetings and, due to the importance of this topic, a sub-committee of the Operations Board has been formed (the Risk and Governance Committee, chaired by the Chief Financial Officer) to ensure there is specific focus on risk review and risk management.  For each risk identified the control strategy and who is accountable for discharging that strategy is identified and documented in the meeting minutes. During monthly Operations Board meetings, material emerging risks are reviewed with discussion concerning actions to reduce or monitor Group exposure.  In this way, risks are reviewed and updated monthly.  The Group also has a Security Council, chaired by the Chief Information Officer, which meets weekly and reports into the Risk and Governance Committee. The purpose of the Security Council is to assess current technology risks, approval and implementation of mitigation plans and to inform the Chief Information Officer and the Chief Technology Officer of future strategy around this key business area.

The annual financial plan is reviewed and approved by the Board. Financial results, with comparisons to plan and forecast results, are reported on at least a quarterly basis to the Board together with a report on operational achievements, objectives and issues encountered. The quarterly reports are supplemented by interim monthly financial information. Forecasts are updated no less than quarterly in the light of market developments and the underlying performance and expectations. Significant variances from plan are discussed at Board meetings and actions set in place to address them.

Approval levels for authorisation of expenditure are at set levels and cascaded through the management structure with any expenditure in excess of pre-defined levels requiring approval from the executive Directors and selected senior managers.

Measures continue to be taken to review and embed internal controls and risk management procedures into the business processes of the organisation and to deal with areas of improvement which come to the management’s and the Board’s attention. Metrics and quality objectives continue to be actively implemented and monitored as part of a continual improvement programme.

Details of the principal risks and uncertainties facing the Group are detailed in the Strategic Report section of the Annual Report. The principal financial risks are detailed in Note 3 to the financial statements.

Audit Committee and Auditors

“The Board should establish formal and transparent arrangements for considering how they should apply the corporate reporting and risk management and internal control principles and for maintaining an appropriate relationship with the Company’s auditors.”

An Audit Committee has been established to assist the Board with the discharge of its responsibilities in relation to internal and external audits and controls. The Audit Committee will normally meet at least three times a year. The Audit Committee is chaired by Colleen Blye and its other members are Ronald Verni and Russ Rudish. The Chief Financial Officer, Chief Executive Officer and other senior management attend meetings by invitation and the Committee also meets the external auditors without management present. Colleen Blye, as chair of the Audit Committee, has recent and relevant financial experience and the Audit Committee as a whole has significant experience and competence in healthcare and software sectors.

Details of how the Audit Committee has discharged its responsibilities are provided below.

Remuneration

The Level and Components of Remuneration

“Executive Directors’ remuneration should be designed to promote the long-term success of the company.  Performance-related elements should be transparent, stretching and rigorously applied.”

The Company has established a Remuneration Committee to assist the Board in this area. This Committee comprises non-executive Directors and is chaired by Ronald Verni and its other members are Colleen Blye and Russ Rudish. When appropriate Keith Neilson, as Chief Executive Officer, is invited to attend meetings (except where matters under review by the Committee relate to him).

The Committee has responsibility for making recommendations to the Board on the remuneration packages of the executive Directors, the remuneration of the Chairman of the Board and monitor the level and structure of remuneration for senior management, this includes:

  • making recommendations to the Board on the Company’s policy on Directors’ and senior staff remuneration, and to oversee long-term incentive plans (including share option schemes);
  • ensuring remuneration is both appropriate to the level of responsibility and adequate to attract and/or retain Directors and staff of the calibre required by the Company; and
  • ensuring that remuneration is in line with current industry practice.

The Committee has presented its Remuneration Report within the Annual Report, which details the work undertaken operating under its terms of reference (which are available on the Company’s website, here, and at the Company’s registered office) to discharge its responsibilities.

Procedure

“There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his or her own remuneration.”

Details of how the Committee and Board have discharged their responsibilities in this area are detailed in the Remuneration Committee’s Report contained in the Annual Report.

Relations with Shareholders

Dialogue with Shareholders

“There should be a dialogue with shareholders based on mutual understanding of objectives. The Board as a whole has responsibility for ensuring that a satisfactory dialogue with shareholders takes place.”

The Company engages in full and open communication with both institutional and private investors and responds promptly to all queries received. In conjunction with the Company’s brokers and other financial advisors, all relevant news is distributed in a timely fashion through appropriate channels to ensure shareholders are able to access material information on the Company’s progress.

To facilitate this:

  • All shareholders are invited to attend the AGM and are encouraged to take the opportunity to ask questions.
  • The primary point of contact for shareholders on operational matters is Keith Neilson as Chief Executive Officer and Craig Preston as Chief Financial Officer.
  • The primary point of contact for shareholders on corporate governance and other related matters is George Elliott as Chairman. Ronald Verni as Senior Independent Director is available as a point of contact should a shareholder not wish to contact the Chairman for any reason.

Keith Neilson and Craig Preston meet regularly with shareholders, normally immediately following the Company’s half year and full year financial results announcements, to discuss the Group’s performance and answer any questions. The Board monitors the success of these meetings through anonymous evaluations from both shareholders and analysts performed by the Company’s Broker and Financial PR advisor.

On 6 November 2018, the Company held a Capital Markets Day in London for institutional investors and analysts. This provided an insight into Craneware’s Trisus products, including Trisus Healthcare Intelligence. In addition, the presentations discussed the evolution of the US healthcare market. All of the Directors of the Company attended the Capital Markets Day. The presentation slides from the Capital Markets Day can be viewed on the Company’s website within the ‘Financial Reports’ section.

The Company’s website (at www.craneware.com) has a section for investors that contains all publicly available financial information and news on the Company.

Constructive Use of General Meetings

“The Board should use general meetings to communicate with investors and to encourage their participation.”

The Board encourages attendance at its Annual General Meeting (“AGM”) from all shareholders. The Notice of AGM together with all resolutions and explanations of these resolutions are sent at least 20 working days before the meeting. The Company proposes separate resolutions for each substantially separate issue and specifically relating to the report and accounts. All Directors, where possible, make themselves available to answer any questions shareholders may have. All of the Directors of the Company attended the AGM on 6 November 2018. Results of all votes on resolutions are published as soon as practicable on the Company’s website.

The Audit Committee

During the year the Audit Committee, operating under its terms of reference (which are available here and at the Company’s registered office), discharged its responsibilities, including reviewing and monitoring:

  • interim and annual reports information including consideration of the appropriateness of accounting policies and material assumptions and estimates adopted by management;
  • developments in accounting and reporting requirements;
  • external auditors’ plan for the year-end audit of the Company and the Group;
  • the Committee’s effectiveness;
  • the systems of internal control and their effectiveness, reporting and making new recommendations to the Board on the results of the review and receiving regular updates on key risk areas of financial control;
  • the requirements or otherwise for an internal audit function;
  • the performance and independence of the external auditors concluding, in a recommendation to the Board, on the reappointment of the auditors by shareholders at the Annual General Meeting. The auditors provide annually a letter to the Committee confirming their independence and stating the methods they employ to safeguard their independence;
  • the audit and non-audit fees charged by the external auditors; and
  • the formal engagement terms entered into with the external auditors.

In accordance with its terms of reference, the Committee has reported to the Board as to how it has discharged its responsibilities throughout the year.

Significant matters considered in relation to the financial statements

The following table sets out the significant areas considered by the Committee in relation to the Group’s financial statements for the year ended 30 June 2019:

Area of judgement or estimate

Matter considered and Role of the Committee

Revenue and deferred income (Group and Company), including the adoption of IFRS 15 (see note 4 to the financial statements)

Revenue and deferred income are significant amounts in the context of the Consolidated Statement of Comprehensive Income and the Group and Company Balance Sheets respectively. The amount of revenue to be recognised and timing of revenue recognition are determined based on the details and terms contained in the contracts with customers.

The Group adopted IFRS 15 ‘Revenue from Contracts with Customers’ with effect from 1 July 2018 and the Group adopted the modified retrospective approach, which requires opening reserves at 1 July 2018 to be adjusted for the cumulative impact of the change to the new standard on a cumulative effect basis.

Detailed assessments carried out by the Group have shown that the adoption of the five step model does not significantly alter the timing or value of revenue recognised under IFRS 15 compared with the Group’s previous revenue recognition policy. Accordingly, no financial restatement has been made as a result of adopting IFRS 15. 

Further details regarding the adoption of IFRS 15 are included in the Note 1 to the Financial Statements. The Audit Committee reviewed and considered the assessment of IFRS 15 and disclosures regarding its adoption.

Provision for income tax (Group and Company)

The Group is subject to tax in the UK and in the US and this requires the Directors to regularly assess the applicability of its transfer pricing policy relevant to the revenue transactions and costs between companies in the Group.

Internally developed intangible assets (Group and Company)

The Group and the Company capitalise development costs when the conditions for capitalisation, as outlined in the principal accounting policies, have been met. Consequently, the Directors are required to continually assess the commercial potential of each product in development and its useful life following launch. The Committee reviews this area as there is judgement involved in the Directors’ assessment.

Impairment assessment

The carrying amount of the Group’s and the Company’s tangible and intangible assets, including goodwill, is considered at each reporting date to determine whether there is any indication that those assets have suffered an impairment loss. The Committee reviews this assessment. If there is such an indication, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any) through determining the value in use of the cash generating unit that the asset relates to. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs. If the recoverable amount of an asset is estimated to be less than its carrying amount, the impairment loss is recognised as an expense. There are no impairment losses recognised in the financial statements of the Company or of the Group in the year ended 30 June 2019.

The Audit Committee also reviewed and considered other matters during and in respect of the financial year ended 30 June 2019 including management’s assessment of new accounting standards that were not effective for adoption until after 30 June 2019.

The Audit Committee considered and discussed with the rest of the Board whether the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for stakeholders to assess the Group’s position and performance, business model and strategy.

Internal audit arrangements

The Committee has also reviewed the arrangements in place for internal audit and concluded, due to the current size, complexity and internal control environment of the Company and the Group, that a formal internal audit function was not required. The Audit Committee believes that management is able to derive assurance regarding the adequacy and effectiveness of internal controls and risk management procedures, given the close involvement of the Directors and the senior management on a day to day basis, without the need for an internal audit function.

In view of the importance of the procedures, security, regulation and controls around Craneware’s solutions and customer data, the focus for other assurance activities for the Group is in respect of those areas. Craneware is currently working towards accreditation for the HITRUST CSF. Health Information Trust Alliance (‘HITRUST’ Alliance) is a collaboration with healthcare, technology and information security organisation which develops, maintains and provides broad access to its widely adopted common risk and compliance management and de-identification frameworks; related assessment and assurance methodologies; and initiatives advancing cyber sharing, analysis and resilience.  HITRUST has established a ‘common security framework’ (CSF) to address the multitude of security, privacy and regulatory challenges facing organisations. The scope of the HITRUST CSF’s requirements is wide and requires a very high standard of data security arrangements as these have been set in the context of the accreditation being relevant to US healthcare providers with handling sensitive data (Protected Health Information) and impacts in some way all areas of the business (at least in respect of the required enhancement to the Group-wide IT and data security policies).

The Audit Committee will continue to monitor whether there is a requirement for an internal audit function and will report accordingly to the Board.

External audit

Under its terms of reference, the Audit Committee is responsible for monitoring the independence, objectivity and performance of the external auditors, and for making a recommendation to the Board regarding the appointment of external auditors on an annual basis. The Group’s external auditors, PricewaterhouseCoopers LLP, were first appointed as external auditors of the Company for the year ended 30 June 2003.

Each year PricewaterhouseCoopers LLP prepares and presents their audit plan to the Audit Committee for the audit of the full year financial statements. The audit plan identifies what the external auditors consider to be the key audit risks, the planned scope of work, the audit timetable and also details of how they have assessed their independence to be able to undertake the audit work.  As part of ensuring independence, the audit partner within PricewaterhouseCoopers LLP is required to rotate every five years and, accordingly, Kenneth Wilson will step down following the audit of the financial statements for the year ended 30 June 2019 and will be replaced by a new audit partner. The audit plan is reviewed, along with the Committee’s assessment of auditor independence, and is agreed in advance by the Audit Committee.  Having considered the planning work carried out and the results of the audit of the Group and Company financial statements for the year ended 30 June 2019, the Committee was satisfied that the approach adopted was robust and appropriate and that their independence and objectivity could be relied upon.

Non-audit services provided by the external auditors

The Audit Committee has also implemented procedures relating to the provision of non-audit services by the Company’s auditors, which include non-audit work and any related fees over and above a de-minimis level to be approved in advance by the Chairman of the Audit Committee. The policy in respect of services provided by the external auditors is set out below:

The external auditors may be appointed to provide non-audit services where it is in the Group’s best interests to do so, provided a number of criteria are met. These are that the external auditor does not:

  • Audit their own work;
  • Make management decisions for the Group;
  • Create a conflict of interest;
  • Find themselves in the role of an advocate for the Group.

During the year, the Company’s auditors provided certain pieces of non-audit work in relation to US tax compliance matters; in particular, in regards to the individual State Tax Compliance Filings the Group is required to submit. In order to maintain PricewaterhouseCoopers LLP’s independence and objectivity, they conducted their standard independence procedures in relation to those engagements. Details of the fees paid to the auditors for audit and non-audit services are shown in Note 6 to the financial statements.

The Audit Committee has considered the extent and nature of non-audit services and the related fees paid, especially as the total fees paid in relation to the US tax compliance work exceeds the audit fee.  The Committee noted that the compliance work relates to a significant number of separate regulatory filings to each individual State, each commanding a fee that is not material and as such, the Committee has concluded they do not compromise auditor independence.

Whistleblowing Policy

The Group is committed to conducting its business with honesty and integrity and it is expected that these high standards be maintained throughout the organisation. As an element of providing a supportive and open culture within the organisation, the Group has a Whistleblowing Policy and associated annual training. This Policy includes arrangements by which employees, consultants or contractors may, in confidence and also anonymously should they wish, raise concerns regarding possible improprieties in matters of financial reporting or other matters. These concerns would then be investigated and followed up appropriately.

AIM Rule Compliance Report

Craneware plc is quoted on AIM and as a result the Company has complied with AIM Rule 31, which requires the Company to:

  • have in place sufficient procedures, resources and controls to enable its compliance with the AIM Rules;
  • seek advice from its Nominated Advisor (“Nomad”) regarding its compliance with the AIM Rules whenever appropriate and take that advice into account;
  • provide the Company’s Nomad with any information it reasonably requests in order for the Nomad to carry out its responsibilities under the AIM Rules for Nominated Advisors, including any proposed changes to the Board and provision of draft notifications in advance;
  • ensure that each of the Company’s Directors accepts full responsibility, collectively and individually, for compliance with the AIM Rules; and
  • ensure that each Director discloses without delay all information which the Company needs in order to comply with AIM Rule 17 (Disclosure of Miscellaneous Information) insofar as that information is known to the Director or could with reasonable diligence be ascertained by the Director.

Approved by the Board of Directors and signed on behalf of the Board by:

Craig Preston

Company Secretary

2 September 2019