Annual Report • Dec 31, 2014
Annual Report
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Annual Financial Report 2014
Gresham Computing plc
Registered Number 1072032
| DIRECTORS AND ADVISERS | 3 |
|---|---|
| CHAIRMAN'S STATEMENT | 5 |
| STRATEGIC REPORT | 6 |
| CORPORATE GOVERNANCE STATEMENT | 18 |
| DIRECTORS' REPORT | 25 |
| DIRECTORS' REMUNERATION REPORT | 30 |
| STATEMENT OF DIRECTORS' RESPONSIBILITIES | 38 |
| INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF GRESHAM COMPUTING PLC | 39 |
| CONSOLIDATED INCOME STATEMENT | 42 |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | 43 |
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | 44 |
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | 45 |
| CONSOLIDATED STATEMENT OF CASHFLOW | 46 |
| NOTES TO THE FINANCIAL STATEMENTS | 47 |
| COMPANY BALANCE SHEET | 86 |
| NOTES TO THE COMPANY FINANCIAL STATEMENTS | 87 |
Gresham Computing plc Registered Number 1072032 A public limited company incorporated in England and Wales
K Archer Non-Executive Chairman M Royde Senior Non–Executive Director &(UULQJWRQ &KLHI([HFXWLYH2I¿FHU 5*UXEE &KLHI)LQDQFLDO2I¿FHU
J Cathie
Aldermary House 10 – 15 Queen Street London EC4N 1TX
BDO LLP Arcadia House Maritime Walk Ocean Village Southampton SO14 3TL
Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA
N+1 Singer Capital Markets Limited One Bartholomew Lane London EC2N 2AX
Shoosmiths LLP Russell House 1550 Parkway Solent Business Park Whiteley Hampshire PO15 7AG
Ken was appointed to the Board in June 2010 and became Non-Executive Chairman in November 2010. Ken has over 35 years' experience in the IT industry most recently as CEO of SmartStream Technologies following their buyout by TA Associates from 3i. Ken started his career with JP Morgan, where he was VP of information services; he subsequently became CEO of Mercantile Information Services. Prior to joining SmartStream, Ken was President at CSC where he was responsible for European Business Development. He is also a Non-Executive Director of Fidessa group plc
Max was appointed to the Board in August 2009 and is the Group's Senior Non-Executive Director. Max is a Partner at Kestrel Partners LLP, a smaller company fund management business founded in October 2009. He is also a Non-Executive Director of Castle Street Investments plc.
Chris was appointed CEO in 2010 having previously held the position of CFO for six years. Prior to joining Gresham, he worked for Ernst & Young and BDO with a focus on fast growth and listed companies in the technology sector. Chris has a ¿UVWFODVVKRQRXUVGHJUHHLQ%LRFKHPLVWU\DQGLVDIHOORZRIWKH,QVWLWXWHRI&KDUWHUHG\$FFRXQWDQWVLQ(QJODQGDQG:DOHV
Rob was appointed CFO in 2011 having previously joined Gresham as Group Financial Controller in 2009. Rob's has held previous roles with Ernst & Young and Lucite International, and is a member of the Institute of Chartered Accountants of Scotland.
,Q *UHVKDPPDGH JRRG SURJUHVV LQ DWWUDFWLQJ QHZ FXVWRPHUV WR LWV ÀDJVKLS SURGXFW &ODUHWL 7UDQVDFWLRQ &RQWURO ("CTC") and delivering a number of complex implementations for our key customer accounts. Recurring revenues associated with CTC deployments are central to the Company's strategy of building sustainable revenues from institutions engaged in ¿QDQFLDOWUDQVDFWLRQSURFHVVLQJDQG,DPSOHDVHGWRUHSRUWDVLJQL¿FDQWLQFUHDVHLQWKHVHUHYHQXHVZKLFKDUHXSDOPRVW three times in the year, with much more growth to come in 2015.
CTC incorporates class leading Reconciliation and Matching functionality at its core and is being deployed in a variety of ZD\VWRXQGHUSLQWKHLQWHJULW\RI¿QDQFLDOWUDQVDFWLRQVZKLFKÀRZZLWKLQDQGEH\RQGFXVWRPHUV¶LQWHUQDOSURFHVVHVDQG V\VWHPV 7KLV LV HVVHQWLDO WR WKH HI¿FLHQW GHSOR\PHQW RI FDSLWDO WKH UHGXFWLRQ RI WUDGLQJ ULVN DQG PHHWLQJ LQFUHDVLQJ regulatory demands. Ever more complex trading instruments have heightened the need for rapid automation in many market segments which is driving demand for CTC. I am pleased to report that we have more than doubled the number of CTC customers during 2014, with more progress already announced for 2015.
Despite this customer acquisition success we were unable to recognise the level of revenue we had expected in the year due to a number of clients deferring projects at a late stage of the sales cycle, either into the last quarter of 2014 or into 2015. It is a characteristic of our business that such decisions can impact short term reported results whereas the underlying EXVLQHVVUHPDLQVVWURQJDVHYLGHQFHGE\DQXPEHURIVLJQL¿FDQWFXVWRPHUZLQVLQWKHIRXUWKTXDUWHU5HYHQXHIURPWKHVH wins will be mainly recognised in 2015. Our strategy of building a recurring revenue base through a bias towards recurring revenue annuity contracts will serve to mitigate the short term effects of changing customer priorities as these revenues build further in 2015.
:HHQWHUHGZLWKDVWURQJSLSHOLQHIRU&7&DQGZHDUHFRQ¿GHQWRIFRQWLQXLQJRXUSURJUHVVWRZDUGVEHFRPLQJDOHDGLQJ VXSSOLHULQDQHYHULQFUHDVLQJPDUNHWIRU¿QDQFLDOWUDQVDFWLRQFRQWURO
Outside of CTC, our Cash Management solution (in partnership with CashFac), a service provided by our banking clients to their corporate customers, continues to deliver an increasing level of recurring revenue resulting from the Banks' success in growing their client base and hence use of this service. In addition, our legacy software businesses, comprising utility software for the VME operating system, used principally by UK Government, and EDT tape management software, continue to provide valuable contributions to earnings through mainly recurring revenues representing lower risk revenue in the near to medium term.
:HKDYHPDGHVLJQL¿FDQWSURJUHVVZLWKRXUVWUDWHJLFSODQGHYHORSLQJDPDUNHWOHDGLQJDQGYLDEOHSURGXFWLQ&7&FUHDWLQJ an operational platform to deliver growth, winning a high quality base of global CTC customers and building a valuable new CTC recurring revenue stream.
7KH%RDUGEHOLHYHVWKHUHLVQRZDVLJQL¿FDQWPDUNHWRSSRUWXQLW\WRDFFHOHUDWHWKHJURZWKRI&7&DQGWRUHDOLVHRXUYLVLRQRI EHFRPLQJDPDUNHWOHDGHULQUHDOWLPH¿QDQFLDOWUDQVDFWLRQFRQWURO,QRUGHUWRFDSLWDOLVHRQWKLVRSSRUWXQLW\WKH%RDUGKDV decided it is appropriate to introduce new skills and experience to lead the Company through the next phase of its growth. \$FFRUGLQJO\RQ0DUFKZHDQQRXQFHGWKHDSSRLQWPHQWRI,DQ0DQRFKDDV&KLHI([HFXWLYH2I¿FHUHIIHFWLYH-XQH &KULV(UULQJWRQWKHFXUUHQW&KLHI([HFXWLYH2I¿FHUZLOOUHPDLQLQRI¿FHXQWLO,DQ¶VDSSRLQWPHQWEHFRPHVHIIHFWLYH when he will step down from his current role and remain on the Board as a non-executive director.
I am delighted that we have secured someone of Ian's calibre to join Gresham at this exciting time. Ian is a well-respected VRIWZDUHH[HFXWLYHZLWKDSURYHQWUDFNUHFRUGRIVXFFHVVIXOO\WDNLQJVRIWZDUHEXVLQHVVHVDQGJURZLQJWKHPWRVLJQL¿FDQW scale, both in an executive leadership and sales capacity. He is an ideal appointment to advance our strategy and deliver rapid growth.
Chris has been instrumental in Gresham's progress and achievement of our strategic plans. I would like to take this opportunity to thank him for all he has contributed to the Company during his tenure as CEO and I look forward to working with him from June in his new role as a Non-Executive Director as we continue to execute on our strategy.
Shareholders will note that we have now received Court approval to make the necessary changes to our capital structure, WKURXJKFDQFHOODWLRQRIWKHVKDUHSUHPLXPDFFRXQWVXFKWKDWWKH&RPSDQ\KDVWKHÀH[LELOLW\WRSD\GLYLGHQGVDQGPDNH other returns of capital. When the Board considers it appropriate and desirable to do so, having regard to the circumstances at the time, we intend to commence a progressive dividend policy.
7KH*UHVKDPRUJDQLVDWLRQDQGLWVHPSOR\HHVDUH IXOO\DOLJQHGWRJURZLQJSUR¿WDEOHUHYHQXH IURP&7&VDOHVJOREDOO\ , UHPDLQFRQ¿GHQWWKDWRXULQYHVWPHQWVLQVDOHVPDUNHWLQJDQGFOLHQWVXSSRUWZLOOSURYLGHWKHSODWIRUPWRGHOLYHUVKDUHKROGHU value from our ongoing investment in CTC.
I would like to thank the management and staff for their continued support and resolve to achieve success in our pursuit of market leadership in real-time transaction control.
Ken Archer Chairman 23 March 2015
*UHVKDPLVDOHDGLQJVRIWZDUHDQGVHUYLFHVFRPSDQ\WKDWVSHFLDOLVHVLQSURYLGLQJUHDOWLPH¿QDQFLDOWUDQVDFWLRQFRQWURO software to the global matching and reconciliation market. We provide customers with Real-time Financial Certainty© through our innovative software Clareti Transaction Control ("CTC").
We are listed on the main market of the London Stock Exchange with headquarters in London and operations in Australia, Malaysia, North America, Singapore and the United Kingdom.
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We are executing a strategic plan to achieve this objective built around developing, selling and supporting a leading matching and reconciliation software developed by Gresham and called CTC.
Key to our strategy is winning then retaining recurring revenue annuity streams from the sale of our software solutions. Recurring revenues provide high visibility of revenues going into future years and CTC provides the Group with a new source RIWKHVHKLJKPDUJLQUHYHQXHVWRGULYHSUR¿WDEOHJURZWK
To achieve our long term objective, we are following a strategic plan with a focus on CTC (the CTC strategic plan) supported E\DSODQWRVWUHQJWKHQRXUH[LVWLQJEXVLQHVVWKH*HQHUDOVWUDWHJLFSODQ &RUHHOHPHQWVRIWKHVHSODQVDUHVHWRXWEHORZ
The Business Model section sets out how we intend to achieve our long term objective and execute the strategic plan.
We measure progress against delivering our strategic plan by reference to Key Performance Indicators ("KPIs"), more information on which can be found in the KPIs section of this report. We aim to achieve a balance between revenue based KPIs which measure our rate of growth, especially those concerning CTC, and earnings based KPIs in order to drive our long WHUPREMHFWLYHRISUR¿WDEOHJURZWK
We regularly review progress towards our overall objective in the context of strategic plan execution, Business Model, KPIs, WKHPDUNHWDQGFKDQJHVWRULVNVDQGXQFHUWDLQWLHVIDFHGE\WKH*URXS:KHUHQHFHVVDU\ZHFKDQJHPRGLI\RU¿QHWXQH our plans to provide the best chance for the Group to achieve its long term objective.
,Q-XO\ZHLGHQWL¿HGDJDSLQWKHPDUNHWIRUQHZPDWFKLQJDQGUHFRQFLOLDWLRQVRIWZDUHDQGUHVSRQGHGZLWKDVWUDWHJ\ IRU SUR¿WDEOH JURZWK EXLOW DURXQG QHZ VRIWZDUH FDOOHG&7& ,Q VXSSRUW RI WKLV SODQZH FUHDWHG D GHGLFDWHG VRIWZDUH development centre in the UK and staffed it with a new expert team of highly experienced matching and reconciliation software engineers to build CTC. We set about designing and developing CTC using modern tools and techniques to address WKHVLJQL¿FDQWOHYHOVRIPDUNHWDQGFXVWRPHUGHPDQGIRUPRGHUQPDWFKLQJDQGUHFRQFLOLDWLRQVRIWZDUHDGHPDQGXQPHW by other vendors and as discussed further in the Business Model section.
,Q-XO\ZHZRQRXU¿UVWPDMRUFXVWRPHUIRUDQHDUO\YHUVLRQRI&7&DQGLQWKHVHFRQGKDOIRIHVWDEOLVKHGD modest sales capability whilst CTC development progressed. We accelerated the growth of both our development and sales capabilities in both 2013 and 2014 to capitalise on our success with winning new CTC customers and growing market demand for CTC.
Alongside the focus on CTC development and sales, we have built sustainable global business lines to support CTC led YROXPHJURZWKLQFOXGLQJUHJLRQDOPDQDJHPHQWLPSOHPHQWDWLRQWHDPVJOREDOVRIWZDUHVXSSRUW¿QDQFHDQGOHJDO functions. We have also established a CTC graduate intake programme to bring new people and skills into the business in support of our strategic objectives as well as bringing in new experienced hires to the business with excellent skill sets matched to our strategic plan.
As a measure of the execution of our strategic plan to focus on CTC, almost 75% of our total current headcount have joined us in the last 4 years and 20% of that headcount will comprise graduates in 2015.
Our development centre currently has a complement of approximately 40 specialist software developers; we have expanded RXUVDOHVDQGPDUNHWLQJRSHUDWLRQDFURVVDOORIRXUUHJLRQVZLWKSUHVHQFHLQ6\GQH\6LQJDSRUH/RQGRQDQG1HZ<RUN we have a global 24/7 support operation; and we have strengthened and aligned implementation teams.
7KHLQLWLDOSKDVHVRIRXUVWUDWHJLFSODQKDYHWKHUHIRUHEHHQVXFFHVVIXOO\H[HFXWHGFUHDWLQJDYLDEOHDQGPDUNHWOHDGLQJ product in the global matching and reconciliations market, establishing a functional sales team and a sustainable global business to support CTC led volume growth.
:HZLOOFRQWLQXHWRH[HFXWHRXUVWUDWHJLFSODQWRQRZGHOLYHURXUORQJHUWHUPREMHFWLYHRISUR¿WDEOHJURZWKE\FRQWLQXLQJ to invest in product development, winning new CTC customers in our chosen markets and delighting our customers with market-leading implementations and support.
It is important to our strategic plans that we retain and grow other strategic revenues, whilst exiting low margin / low JURZWKEXVLQHVVHVWRNHHSWKH*URXSLQDVWURQJ¿QDQFLDODQGRSHUDWLRQDOSRVLWLRQZKLOVW&7&LVHVWDEOLVKHG
Our strategic plan is to retain and grow revenues from customers that do not, at present, use CTC who remain strategically LPSRUWDQWWRWKH*URXSIRUWKHORQJWHUP7KHVHFXVWRPHUVDUHDOUHDG\EHQH¿WLQJIURPWKH&7&OHGLQYHVWPHQWEHLQJPDGH in the Group, through complementary enhancements to our global service lines. We will continue with our strategic plan to retain and grow non-CTC strategic revenues moving into 2015 and beyond.
In terms of exiting low margin / low growth businesses, this shorter term part of the plan is now substantially complete, but we continue to keep all areas of our business under review. Over time, we expect to exit the next tranche of lower to medium margin businesses where this makes strategic sense and there is an opportunity to redeploy existing resources to focus on CTC.
Central to our strategy is the development of CTC and retention and growth of other higher margin strategic revenues. The business model explains how we intend to achieve our long-term objective and execute the strategic plan.
We sell software based solutions that generate license, support and maintenance and professional services revenues for the Group.
The software element of any solution is licensed to the customer and a license fee is payable either up-front (perpetual license or term license) or under a 'pay as you go' arrangement (recurring license payments), generally with a minimum term.
Our preferred business model is to secure and retain recurring revenue streams because these provide high visibility of revenues going into future years. CTC creates a new route for the Group to build these valuable recurring revenues over the long term. We therefore focus on licensing customers through a recurring licensing model, where appropriate and consistent with customer requirements, whereby we charge annual fees representing combined licensing, support and maintenance. Recurring revenue licensing fees tend to be payable annually in advance.
Where the arrangement follows a more traditional perpetual or term licensing route, we charge support and maintenance fees separately and these tend to be payable annually in advance.
Software licenses typically include use restrictions that ensure the fee payable is consistent with the value being gained E\ WKH FXVWRPHU WKH OLFHQVH IHH VFDOLQJ ZLWK KLJKHU XVDJH ([DPSOHV RIPHWULFV XVHG IRU WKLV VFDOLQJ LQFOXGH QXPEHU of transactions being controlled by the software, number of users, number of reconciliations being managed or other measurable criteria. License fees from usage-based arrangements tend to be payable quarterly in arrears prior to folding into the normal pattern for established usage of annually in advance.
The professional services element of any sale is typically charged on a time and materials basis based on an agreed scope of engagement, payable monthly in arrears.
We typically sign recurring revenue licensing contracts with initial terms of at least 3 years, with automatic continuation at the end of that initial term. We aim to include scheduled increases to all fees by indexation during the term of the contract. Credit terms offered are typically 30 days.
We have established a global team of experienced and well-respected sales professionals that sell direct to customers. 7KHVHGLUHFWVDOHVHIIRUWVDUHIRFXVHGRQJHRJUDSKLFORFDWLRQVZKHUHZHKDYHDSUHVHQFHWRPD[LPLVHRXUHI¿FLHQF\DQG effectiveness in the sales process. We also consider working with customers in new locations where the business case makes sense.
We also make use of sales channels to access a larger addressable market and reach into new locations where we do not have a presence – these channels include parties that 'white label'. We expect that sales channels will feature more in the execution of our strategic plans as CTC becomes established in the market.
Sales and marketing operations are co-ordinated on a global basis by a head of sales and marketing. We pay sales commission at various rates applied to the net value of a sale to incentivise behaviour aligned to our strategic plans.
&7& LV RXU LQQRYDWLYH VRIWZDUH IRU WKH JOREDO PDWFKLQJ PDUNHW &7& LV GHVLJQHG WR SURYLGH RXU ¿QDQFLDO LQVWLWXWLRQV DQGFRUSRUDWHFXVWRPHUVZLWKUHDOWLPH¿QDQFLDOWUDQVDFWLRQFRQWURO\$WWKHFRUHRI&7&LVDYHUVDWLOHKLJKSHUIRUPDQFH transaction matching and reconciliation engine around which we have built innovative and market leading functionality WDUJHWHGDWVSHFL¿F¿QDQFLDOWUDQVDFWLRQFRQWUROUHTXLUHPHQWV\$NH\HOHPHQWRI&7&LVWKH5DSLG2QERDUGLQJ\$FFHOHUDWRU ZKLFKDOORZVFXVWRPHUVWRUDSLGO\FRQ¿JXUHUHFRQFLOLDWLRQVIRUQRQVWDQGDUGLVHGGDWDDQGGLIIHUHQWLDWHVXVLQWKHPDUNHW
Our current focus for CTC is on replacing User Developed Applications (UDAs). UDAs are commonplace at the majority of JOREDO¿QDQFLDOLQVWLWXWLRQVDQGFRUSRUDWHVPRVWRIWHQLQWKHIRUPRIEHVSRNHLQWHUQDOO\GHYHORSHGVROXWLRQVDQGRU([FHO They have been deployed to manage areas of the business which would ordinarily be controlled by enterprise class matching or reconciliation products from external vendors.
+RZHYHUFRPSDQLHV¿QGWKHPVHOYHVXQDEOHWRTXLFNO\DQGVDIHO\PLJUDWHIURPWKHVH8'\$VWRYHQGRUSURGXFWVWKDWDUH¿W for purpose. This is because existing vendor solutions are generally unable to rapidly control the transactions in question; making moving to a vendor solution prohibitively expensive, uncertain in the required project timeframe and in many cases impossible. This 'technology trap' perpetuates the use of UDAs leaving the companies exposed to the associated risks of control breaks, reliance on key people and end of life internal technology, fraud and error.
CTC addresses all these matching and reconciliation issues, allowing customers to rapidly replace UDAs with certainty, whilst providing them with access to innovative functionality and high performance all on one control platform. The proven UDSLGLW\ZLWKZKLFK&7& FDQEH FRQ¿JXUHG DQGEURXJKWLQWRXVHE\ FXVWRPHUVLV D VLJQL¿FDQWGLIIHUHQWLDWRUDQGXQLTXH selling point. Where a business has a large backlog of reconciliations currently being controlled by UDAs, CTC provides a credible and demonstrable migration path to the safety of a controlled vendor product environment. We estimate that 80% of reconciliations across all companies currently employ User Developed Applications, providing a very large market to target with CTC.
2WKHU&7&GLIIHUHQWLDWRUVLQFOXGHVFDODELOLW\WRH[WUHPHYROXPHVÀH[LELOLW\ZLWKDOOGDWDW\SHVVLPSOL¿FDWLRQRISURFHVVHV into one platform and high quality management information. In addition, CTC has been designed from the outset to operate in real-time, as opposed to the industry normal of batch operation, which is becoming a major requirement of customers globally, driven in large part by regulatory pressures.
CVBA is a real-time cash management solution comprising Gresham's Clareti Integration and our partner CashFac's Virtual Bank Technology® (VBT). Two major banks act as our sales channel for this solution. We contract with the bank who host the solution on their corporate banking platform from which they offer their corporate customers access to the cash management solution. The bank channel provides us with indirect access to the bank's extensive customer base, initially in GH¿QHGUHJLRQVEXWZLWKRSSRUWXQLW\IRUH[SDQVLRQWRQHZJHRJUDSKLHVDQGFXVWRPHUV2XUSULPDU\VRXUFHRILQFRPHIURP these channels is recurring revenue based, with a high per transaction element based on usage.
&9%\$SURYLGHVVLJQL¿FDQWFRQWURODQGHI¿FLHQF\LPSURYHPHQWVIRUWKRVHPDQDJLQJFDVKHVSHFLDOO\FOLHQWPRQH\RUFOLHQW funds. Re-keying and other high cost, manually intensive operations are removed allowing the corporate to streamline the entire process of managing individual client funds whilst demonstrating compliance with regulatory requirements.
We provide global support and maintenance for our own VME and EDT software products that are installed in a stable base of major organisations around the world.
We work with customers globally and, consistent with our strategic plan, we have created a sustainable global business model to support CTC led volume growth, including; regional management, implementation teams, 24/7 global software VXSSRUW¿QDQFHDQGOHJDOIXQFWLRQVWRJHWKHUZLWKD&7&JUDGXDWHLQWDNHSURJUDPPH:HFRQWLQXHWRUH¿QHRXUEXVLQHVV lines and infrastructure to best service customer demand.
We control our business through an Executive Management team representing business lines and regions. This team meets regularly to discuss progress with the strategic plan, performance against KPIs, the market, risks and uncertainties and all issues affecting the Group as whole. Formal reports from all members of this team are submitted to the Board for review and discussion on a monthly basis.
:H RSHUDWH JOREDOO\LQ WKUHH UHJLRQV (0(\$ 1RUWK\$PHULFD DQG\$VLD 3DFL¿F :H FXUUHQWO\ KDYH SUHVHQFHLQ\$XVWUDOLD Malaysia, Singapore, UK and US because they are major centres for the business operations of both existing and target customers in our chosen markets.
:HVSOLWRXWEXVLQHVVLQWRWZRPDMRUVHJPHQWV5HDOWLPH)LQDQFLDO6ROXWLRQV³57)6´ DQG6RIWZDUH7KH57)6EXVLQHVV forms the majority of the Group's activity, with the majority of that RTFS activity now CTC based.
:H IRFXV RQ WKH ¿QDQFLDO LQVWLWXWLRQPDUNHW EDQNV DQG QRQEDQN ¿QDQFLDO LQVWLWXWLRQV DV ZHOO DV FHUWDLQ QRQ¿QDQFH vertical markets (corporates). These markets exhibit the right characteristics against which we are best positioned to sell our solutions to replace UDAs, as discussed further in the 'What we sell' CTC section.
,QZHH[SHFWWREHQH¿WIURPQHZVDOHVRSHUDWLRQVHVWDEOLVKHGLQ6LQJDSRUHDQG1HZ<RUNZKHUHZHVHHVLJQL¿FDQW PDUNHWRSSRUWXQLW\6LQJDSRUHEHFDXVHLWLVDIDVWJURZLQJ¿QDQFLDOKXEIRUWKHZLGHU\$VLD3DFL¿FUHJLRQDQG1HZ<RUN EHFDXVHRIWKHODUJHFRQFHQWUDWLRQRI¿QDQFLDOLQVWLWXWLRQVDQGLQSDUWLFXODUWDUJHWFXVWRPHUVRQWKH(DVW&RDVWRI1RUWK America.
We regularly review our chosen geographies and markets to keep them consistent with the progress towards our overall strategic objectives.
The Group actively reviews technical development in its markets with a view to taking advantage of the available opportunities to maintain and improve its competitive position through our own development work. We remain committed to maintaining our ongoing high levels of investment in product development to maintain and extend our competitive position.
We continue to develop CTC in line with an agile development roadmap, delivering new functionality for existing and emerging markets, whilst keeping a balance between development and sales to ensure we deliver committed customer requirements.
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Our business model is to fund strategic plans from working capital.
3HRSOHDUHNH\WR*UHVKDP¶VH[SHUWLVHDQGDELOLW\WRGHOLYHURQDJOREDOEDVLV5HWDLQLQJSHRSOHDQGDOORZLQJWKHPWRIXO¿OO their potential is important. Loss of key people could slow our ability to grow the business and we seek to provide rewards DQGMREIXO¿OPHQWWKDWPLWLJDWHVWKLVULVN:HFRQWLQXHWRLQYHVWLQDJUDGXDWHLQWDNHVFKHPHZKLFKKDVSURYHQVXFFHVVIXO in bringing new ideas and skills into the business.
Each of the Group's business units reviews strategies for retaining staff on an ongoing basis that are appropriate to the local geographic and industry economic climate. These strategies include the provision of competitive terms and conditions, DGPLQLVWUDWLRQRIDQGPDWFKHGFRQWULEXWLRQWRDGH¿QHGFRQWULEXWLRQSHQVLRQVFKHPHFRQVLGHUDWLRQRIIDPLO\DQGSHUVRQDO needs, provision of training where required and, in some cases, share options and bonuses.
Performance based rewards payable to employees in the form of share options and bonus are aligned to achievement of strategic objectives, measured by Group KPIs, and relevant to their role.
Employees are invited to attend regular meetings within individual segments throughout the Group, in addition to regular Group-wide communications. Performance appraisals are made annually or more frequently if required, to ensure that HPSOR\HHVDUHJHWWLQJVXI¿FLHQWVXSSRUWIURPWKH*URXSLQFOXGLQJWUDLQLQJQHHGV LQRUGHUWRVDWLVIDFWRULO\FRPSOHWHWKHLU job requirements.
The Group gives full consideration to applications for employment from disabled persons where the candidate's particular aptitudes and abilities are consistent with adequately meeting the requirements of the job. Opportunities are available to disabled employees for training, career development and promotion. Where existing employees become disabled, it is the Group's policy to provide continuing employment wherever practicable in the same or an alternative position and to provide appropriate training to achieve this aim.
The Group strives to enable equality of opportunity and workplace cultures that promote inclusion. At 31 December 2014 WKH*URXSKDGWKHIROORZLQJVSOLWRIJHQGHURIVWDII
| Female | Male | Total | |
|---|---|---|---|
| Director | - | 5 | 5 |
| Senior Manager | 1 | 7 | 8 |
| Staff | 20 | 102 | 122 |
| 21 | 114 | 135 |
The Group supports the protection of human rights around the world and is guided by fundamental principles such as those in the United Nations Universal Declaration of Human Rights and the International Labour Organisation (ILO) Core &RQYHQWLRQV7KLVVXSSRUWLVUHÀHFWHGLQRXUSROLFLHVDQGDFWLRQVLQWKHFRXQWULHVLQZKLFKZHGREXVLQHVV
The vast majority of our supply chain exists in the countries we operate (staff costs or partner shares mainly) and are well known and managed directly by us. Where we do utilise suppliers in unknown markets, we will not knowingly work with any supplier that does not share our value of human rights and in particular protection of employee rights.
7KHGLUHFWRUVFRQVLGHUWKDWEHFDXVHRIWKHQDWXUHRILWVDFWLYLWLHVWKH*URXSGRHVQRWKDYHDVLJQL¿FDQWLPSDFWRQWKH environment in which it operates. However, the Group recognises the importance of environmental responsibility and seeks, wherever possible, to reduce its environmental impact through focus on areas that it can control such as energy saving, recycling and appropriate disposal of old computer equipment and mobile phones.
We continue to look at ways of controlling our environmental impact. Refer to the Directors' Report on page 25 for our Carbon Reporting disclosures.
We use a number of KPIs to monitor the progress being made with the execution of our strategy and achievement of our overall objectives.
The Group's KPIs have been selected as the most appropriate measures of strategy execution and progress towards DFKLHYHPHQWRIRXURYHUDOOREMHFWLYHV7KH.3,VUHDVRQVIRUWKHLUVHOHFWLRQDQGOLQNVZLWKVWUDWHJ\DUHVHWRXWEHORZ
| KPIs that provide a measure of execution of strategy |
Why the KPI has been selected as a key measure of performance and position |
Element of our strategy measured by KPIs |
|---|---|---|
| CTC revenue | CTC revenue based KPIs measure our progress in executing the Group's CTC led growth strategies. |
&7&VWUDWHJLFSODQ |
| CTC recurring revenue | • concentrate our investment and sales efforts on CTC; |
|
| • create a sustainable global business in support of CTC led volume growth; |
||
| • grow CTC revenues and build a new high margin recurring CTC revenue stream. |
||
| In the short term, these CTC revenue based indicators are considered to be the most important measures of strategy execution. |
||
| Total revenues | Revenue based KPIs measure our progress in exe cuting the Group's strategies aimed at retaining and |
*HQHUDOVWUDWHJLFSODQ |
| Other recurring revenue | growing other strategic revenues. | • retain and grow other strategic revenues. |
| Total recurring revenue | Recurring revenue based KPIs measure our overall | CTC and General strategic plans |
| progress in executing the Group's strategies aimed at growing our recurring revenue base. |
• grow CTC revenues and build a new high margin recurring CTC revenue stream; |
|
| • retain and grow other strategic revenues. |
||
| EBITDA | Earnings based KPIs provide a measure of our prog ress in executing the overall Group strategy to deliver |
All elements of the CTC and General strategic plans. |
| 3UR¿WEHIRUHWD[ | WKHREMHFWLYHRISUR¿WDEOHJURZWK | |
| EBITDA / Total revenue | The EBITDA / Total revenue KPI measures our core SUR¿WDELOLW\E\SUHVHQWLQJHDUQLQJVLQWKHFRQWH[WRI revenues. |
All elements of the CTC and General strategic plans. |
| We believe that a target ratio of >=30% provides a good benchmark measure of return for a product based software company. In achieving our overall objectives, we would expect to come in line with this target in the long term. |
7KH)LQDQFLDO5HYLHZVHFWLRQLQFOXGHVDGLVFXVVLRQRISHUIRUPDQFHLQEDVHGRQWKHVH.3,V1RQ¿QDQFLDOSHUIRUPDQFH LQGLFDWRUVZHUH DOVRLQLWLDOO\ VHW DURXQG H[LWLQJORZPDUJLQ ORZ JURZWK EXVLQHVV EDVHG RQ WKHLGHQWL¿FDWLRQ DQG WKHQ H[HFXWLRQRIDQH[LWRUSUR¿WLPSURYHPHQWSODQ 0HDVXUHPHQWRIQRQ¿QDQFLDOSHUIRUPDQFHZDVEDVHGRQZKHWKHUZH had, or had not, exited low margin / low growth business. As explained elsewhere, this element of the plan is substantially complete with exits and closures executed to plan.
The Board has a standing agenda item to discuss the risks and uncertainties facing the Group together with actions being taken to mitigate them and future potential items for consideration.
7KHSULQFLSDOULVNVDQGXQFHUWDLQWLHVWKDWDIIHFWWKH*URXSDQGRXUDELOLW\WRH[HFXWHWKHVWUDWHJLFSODQDUHDVIROORZV
| Risk | Impact on Group | Assessment of change in risk during year |
Mitigation of risk |
|---|---|---|---|
| Failure to grow CTC revenues and build a new high margin recurring CTC revenue stream |
Central to our strategic plan is the growth of CTC revenues along with a business model for CTC recurring revenue growth. Earnings related growth follows directly from revenue growth. Failure to achieve CTC revenue growth would directly impact our achievement of overall objectives or lengthen the period taken to achieve them. During the year, the risk that we would be unable to sell CTC reduced as we validated the product further in our markets through the robust customer growth achieved. |
We believe that the viability of CTC demonstrated by CTC revenue KPIs in 2014 and a more than doubling of CTC customer numbers is evidence of a lower overall risk of total failure. The risk is now more one of timing of sales, type and quantum of revenues we are able to achieve from CTC. The sales cycle for larger and more complex deals tends to be long and the value involved high – as a result, the timing RIWKHGHDOFORVXUHPD\VLJQL¿FDQWO\ impact reported KPIs in the short term. |
We strengthened our sales operation coming into 2014, with a focus on building visible pipeline going forwards. We are carefully selecting our target geographies and markets to maximize our chances of short term success through sales. We maintain our competitive advantage by delighting our customers and keeping CTC appealing. Our CTC roadmap includes continuous innovation to meet market and customer demand – aimed at keeping us ahead. |
| Development of CTC and sales of CTC become misaligned |
Acceleration of CTC roadmap items or new customer requirements could place undue pressure on the development team, compromising service quality. This could in turn impact our ability to win and retain customers, impacting our strategic plans for revenue growth. |
As we continue to grow CTC sales this risk increases and it will become more critical to ensure that mitigation plans are in place and active, primarily around executive review through regular product board meetings. |
We continue to strengthen our development resource to provide additional capacity whilst we grow CTC sales. Communication lines between sales and development remain strong and a regular executive product board is held to monitor risk and resolve issues. |
| Over reliance on key customers |
The loss of one key customer would have a material impact on our future revenues earnings. Retaining and growing revenues is critical to our achievement of overall objectives. Earnings would be directly affected by a |
This risk continues to become less critical as we began adding new CTC customers and growing revenues generally – thereby spreading the risk of losing one customer. This risk is likely to become less |
Revenue from key CTC customers comprises a growing recurring revenue element which is more predictable than other revenue streams. As the CTC portfolio of customers |
| reduction in revenue. | VLJQL¿FDQWLQIXWXUH\HDUVDVZHJURZ CTC revenues. |
grows and higher margin CTC revenue growth accelerates, reliance on lower margin non-CTC key customers is decreasing. |
|
| 6LJQL¿FDQWGHFOLQHLQ non-CTC revenues |
Whilst CTC revenues are building we are reliant on existing non-CTC revenues. Retaining and growing revenues is critical to our achievement of overall objectives. Earnings would be directly affected by a reduction in non-CTC revenue. |
During the year, this risk became less critical as we began adding new CTC customers and growing revenues – thereby reducing reliance on non-CTC revenues. This risk is likely to become less VLJQL¿FDQWLQIXWXUH\HDUVDVZHJURZ |
Revenues from non-CTC customers are spread across a range of products, geographies and number of customers. 1RQ&7&FXVWRPHUVEHQH¿WIURPWKH business enhancements being made as we focus on CTC deployment |
| CTC revenues. | globally. Central to our strategy is a continued focus on non-CTC revenues but the risk associated with these is reducing each year as we continue to grow CTC. |
||
| Adequacy of funding / liquidity |
Our strategic plans involve investment in CTC development, sales and infrastructure together with a relatively rapid growth in CTC revenues. It is critical that we have adequate funding for the investments required whilst also ensuring that revenue growth is supported by adequate working capital buffers. |
The growing level of CTC revenues associated with an expanding CTC customer base provided more visibility over future CTC revenues allowing us to better manage our funding. We believe that the working capital risk will persist as we grow our CTC revenues and in the long term reach a steady state. |
:HFDUHIXOO\PRQLWRUFDVKÀRZVDQG liquidity to ensure we have adequate funding to meet the needs of our business. Further information concerning KRZZHPRQLWRURXUFDVKÀRZVDQG liquidity can be found in the Financial Review. |
We made good progress with our CTC led strategic plans during 2014, continuing to win high quality and credible CTC customers in our target geographies and markets. We more than doubled the number of CTC customers and increased recognised CTC recurring revenues from £0.4m (in 2013) to £1.0m in the year.
Continuing Operations is analysed excluding exceptional items (there were none in 2014) consistent with the way in which WKH%RDUGUHYLHZVWKH¿QDQFLDOUHVXOWVRIWKH*URXS
| 2014 | 2013 | Variance | |||
|---|---|---|---|---|---|
| £m | £m | £m | % | ||
| Revenue based performance: | |||||
| Real-Time Financial Solutions | CTC revenue KPI |
3.5 | 3.5 | 0.0 | 0% |
| Other RTFS revenue | 6.9 | 8.0 | (1.1) | -14% | |
| 10.4 | 11.5 | (1.1) | -10% | ||
| Software | 2.4 | 2.5 | (0.1) | -4% | |
| Total revenues | KPI | 12.8 | 14.0 | (1.2) | -9% |
| Included in total revenues: | |||||
| CTC recurring revenue KPI | 1.0 | 0.4 | 0.6 | 150% | |
| Other recurring revenu KPI | 5.5 | 5.3 | 0.2 | 4% | |
| Total recurring revenueKPI | 6.5 | 5.7 | 0.8 | 14% | |
| Earnings based performance: | |||||
| Profit before tax | KPI | 0.46 | 1.96 | (1.50) | -77% |
| Interest income | (0.03) | (0.03) | 0.00 | -3% | |
| Amortisation and depreciation | 0.63 | 0.46 | 0.17 | 36% | |
| EBITDA | KPI | 1.06 | 2.39 | (1.33) | -56% |
| EBITDA / Total revenue | KPI | 8% | 17% | -9% | -52% |
| Profit after tax | 1.10 | 2.58 | (1.49) | -58% | |
| Basic Earnings per Share (pence) | 1.77 | 4.42 | (2.65) | -60% |
EBITDA refers to earnings before interest, tax, depreciation and amortisation.
Total revenues were down 9% primarily as a result of a reduction in lower margin non-CTC RTFS revenues, with nearly KDOIRIWKLVGHFUHDVHFDXVHGE\DGYHUVH\$FXUUHQF\PRYHPHQWV7KHSUR¿WDELOLW\LPSDFWRIWKLVUHYHQXHUHGXFWLRQZDV relatively modest with these non-CTC RTFS revenues attracting a lower gross margin, of approximately 15%.
Consistent with our strategy, we continued to grow total recurring revenues, increasing these by 14% in 2014, with the largest growth contribution coming from CTC where recognised recurring revenues more than doubled to £1.0m in the year.
CTC revenues were stable year on year as we continued to perform the work to bring on new customers and build the recurring revenue base. We more than doubled the number of CTC customers and increased CTC recurring revenues from £0.4m (in 2013) to £1.0m in the year.
:LWKRWKHUQRQ&7&SDUWVRIWKHEXVLQHVVLQEDODQFH*URXSSUR¿WDELOLW\LQWKHVKRUWWHUPLVWRDODUJHH[WHQWUHOLDQWRQWKH absolute level of high margin CTC revenues recognised in the year. Whilst we made good progress in winning new CTC customers during the year and building recurring revenues for the long term, a number of new CTC contracts we anticipated IRUZHUHGHIHUUHGWRWKHIRXUWKTXDUWHURIRUPRYHGZKROO\LQWR\$VDFRQVHTXHQFHRXUSUR¿WDELOLW\ was reduced against our expectations and, having invested in sales and marketing early in 2014 in anticipation of winning QHZ&7&FXVWRPHUVRXUSUR¿WDELOLW\DJDLQVWWKHSULRUSHULRGDOVRVXIIHUHG
We made good progress with our CTC led strategic plans during 2014, continuing to win high quality and credible CTC FXVWRPHUVLQRXUWDUJHWJHRJUDSKLHVDQGPDUNHWV
o RQHRIWKHZRUOG¶VODUJHVWEDQNLQJDQG¿QDQFLDOVHUYLFHVRUJDQLVDWLRQVSXUFKDVHG&7&WRDVVLVWZLWKWKH matching and reconciliation of complex and non-standardised transactions in their Investment Bank;
o a global provider of banking and funds management services purchased CTC to offer as a service to its broker dealer customers in North America for the matching and reconciliation of derivative transactions;
The timing of new customers wins in the year was weighted towards the fourth quarter and as a result, much of the new revenue impact of these wins will be recognised in 2015.
We made good progress in rolling out the use of CTC at existing customer sites during the year. At an investment bank, we are well progressed with a major migration project taking their large portfolio of intersystems reconciliations from an old legacy in-house product to CTC – the bank is currently bringing new reconciliations onto CTC at a rate ten times faster than they can achieve with other reconciliation vendor products. During the year, we completed the development of an DGYDQFHGUHFHLYDEOHVPDWFKLQJVROXWLRQZLWKDZKROHVDOHEDQNZKRVH¿UVWFXVWRPHUZHQWOLYHLQWKHVHFRQGKDOIRI± further customers have since been added and we expect this solution to grow further in 2015 as the bank expands globally.
Other customers continued to make more use of CTC in their business, in most cases increasing CTC recurring revenues as a direct result.
We also continued to experience CTC user growth through channel partners, including the wholesale bank discussed above, LQFUHDVLQJLQGLUHFW&7&FXVWRPHUQXPEHUVVLJQL¿FDQWO\LQZLWKJURZWKLQWKHDVVRFLDWHG&7&UHFXUULQJUHYHQXHVLQ 2014 building a stronger source of revenues for 2015.
7KHDEVROXWHYDOXHRI&7&UHFXUULQJUHYHQXHUHFRJQLVHGLQDQ\RQH¿QDQFLDOSHULRGGHSHQGVRQWKHWLPLQJRIQHZFXVWRPHU wins during that period – with customers won later in the period contributing far less recognised revenue than those won at the beginning of the period. It is therefore important to consider the 'run rate' of CTC recurring revenues when assessing XQGHUO\LQJSHUIRUPDQFHEHFDXVHWKLVPHWULFUHYHDOVYLVLELOLW\RIUHYHQXHVIRUIXWXUHSHULRGV7KHIROORZLQJWDEOHLGHQWL¿HV WKH&7&UHFXUULQJUHYHQXHUHFRJQLVHGLQWKHFXUUHQWDQGSULRU¿QDQFLDO\HDUWRJHWKHUZLWKWKHµUXQUDWH¶DFKLHYHGDWWKHHQG RIHDFK¿QDQFLDO\HDU
| CTC revenue | ||||
|---|---|---|---|---|
| 2013 Variance Variance 2014 |
||||
| £m | £m | £m | % | |
| Recurring revenue recognised in the year | 1.0 | 0.4 | 0.6 | 150% |
| Recurring revenue run rate1 31 December |
1.6 | 0.7 | 0.9 | 129% |
1EHLQJ&7&UHFXUULQJUHYHQXHWREHUHFRJQLVHGLQWKHIROORZLQJ¿QDQFLDOSHULRGDULVLQJIURPH[LVWLQJFXVWRPHUFRQWUDFWV
We have CTC recurring revenues arising from existing customer contracts of £1.6m for recognition in 2015, up £0.9m on the levels we had coming into 2014. As we win further CTC customers, this trend of increasing revenue recognised and LQFUHDVLQJUXQUDWHYLVLEOHIRUWKHIROORZLQJ¿QDQFLDO\HDUZLOOFRQWLQXH
A key CTC customer account is one that is capable of generating in excess of £3m in revenues over a 5 year period. During 2014, we won three new key accounts, adding to the three secured in prior periods.
We had three key CTC customer accounts coming in to 2014 that are already generating levels of revenues over a 5 year period in excess of £3m. We will continue working to drive revenues from these accounts and bring the three newer key &7&FXVWRPHUDFFRXQWVVHFXUHGGXULQJLQWRWKHVDPHSUR¿OHLQIXWXUH\HDUV
Key CTC customer accounts are a strong driver for recurring revenue growth. CTC recurring revenues from key customer DFFRXQWVUHFRJQLVHGLQWRWDOOHGPP 7KH&7&UHFXUULQJUHYHQXHUXQUDWHDW'HFHPEHUIRU WKHVHNH\FXVWRPHUDFFRXQWVLVDSSUR[LPDWHO\P'HFHPEHUP
We have also successfully sold further non-CTC RTFS products and services into one of these CTC key customer accounts, FRQWULEXWLQJDIXUWKHUPRIQRQ&7&57)6UHYHQXHVLQP
2WKHU57)6UHYHQXHVUHGXFHGE\PLQPRIZKLFKDURVHIURPDGYHUVH\$);WUDQVODWLRQUDWHVDQGP from lower non-recurring services, some of which was an active decision to reduce lower margin revenues and some from a slightly lower demand for such services. The gross margin associated with this revenue reduction is on average DSSUR[LPDWHO\DQGDVDUHVXOWWKLVLVQRWDPDMRUIDFWRUDIIHFWLQJ*URXSSUR¿WDELOLW\
Whilst lower margin non-recurring revenues reduced year on year, in line with our strategy we still grew other RTFS UHFXUULQJUHYHQXHVE\WRPP
Our Software businesses, comprising VME and EnterpriseDistributape (EDT) continued to generate strong high margin UHYHQXHVVXVWDLQLQJDVWURQJFDVKÀRZEDVHIURPZKLFKWRJURZRXU&7&EXVLQHVV7KHVHEXVLQHVVHVDUHQRZSULPDULO\ recurring revenue based, with over 85% of revenues (or £2.1m) recurring in nature, and whilst revenue attrition is likely to continue we believe that the rate of attrition will be relatively slow and in part offset by indexation increases and a OLPLWHGQXPEHURIQHZOLFHQVLQJRSSRUWXQLWLHV5HYHQXHVIURPERWKWKHVHEXVLQHVVHVDUHPDLQO\GHULYHGIURPVLJQL¿FDQW businesses in Europe and North America.
In 2014, we accelerated the development of CTC in order to meet market demand and service existing customers. Our CTC development cost in 2014 was £3.1m compared to £1.9m in 2013, on which we claim tax allowances as a cash refund equating to approximately 20% of the amount incurred. We plan for CTC development to reduce in 2015 back to a more normal level of activity following completion of certain complex elements of functionality which required additional resources, but which in turn led directly to new recurring revenues.
On 11 March 2013, we disposed of our Banking and Lending business operating in the Caribbean market, allowing us to focus attention on our strategic objectives for CTC in North America. The total consideration received was £0.5m, generating DORVVRQGLVSRVDORIPZLWKDQHWFDVKLQÀRZRIDSSUR[LPDWHO\P7KHUHYHQXHVDVVRFLDWHGZLWKWKLVEXVLQHVV were £0.2m in 2013 (£0.2m of which was recurring revenue) and £1.8m in 2012 (£1.0m of which was recurring revenue). Whilst this business had a relatively high level of recurring revenues, it was not aligned to our strategic plan for retention because of a related high cost base and low growth potential.
This disposal of a subsidiary is presented as within discontinued operations in the Group income statement for 2013.
,QZHFORVHGRXUSD\DEOHV¿QDQFLQJEXVLQHVVZKLFKKDGLQVXI¿FLHQWJURZWKSURVSHFWVDQGZHDUHQRORQJHUVHOOLQJ:H recognised an impairment charge in the Group income statement of £298,000 in respect of this closure, which is disclosed as an Exceptional item in 2013.
7KHIROORZLQJWDEOHVXPPDULVHVWKH*URXS¶VFDVKPRYHPHQWV
| 2014 | 2013 | |
|---|---|---|
| £m | £m | |
| Profit from continuing operations and before exceptional items | 0.5 | 2.0 |
| Exceptional item - impairment charge | - | (0.3) |
| Loss from discontinued operations | - | (0.2) |
| 0.5 | 1.5 | |
| Depreciation, amortisation & impairment | 0.7 | 0.8 |
| Share based payment expense | 0.1 | 0.2 |
| Working capital movements | 1.8 | (1.7) |
| Non-cash disposal entries | - | 0.2 |
| Net income taxes received | - | 0.3 |
| Cash inflow from operations | 3.1 | 1.3 |
| Purchase of property, plant and equipment | (0.2) | (0.6) |
| Payments to acquire intangible fixed assets | (3.3) | (2.3) |
| Disposal of subsidiary undertaking | 0.0 | 0.3 |
| Net cash used in investing activities | (3.5) | (2.6) |
| Net cash from financing | 0.8 | 2.9 |
| Net increase in cash and cash equaivalents | 0.4 | 1.6 |
| Cash at 1 January | 4.4 | 2.9 |
| Exchange adjustments | (0.1) | (0.1) |
| Cash and cash equivalents at end of period | 4.7 | 4.4 |
7KH*URXS¶V¿QDQFLDOSRVLWLRQVWUHQJWKHQHGDW'HFHPEHUZLWKFDVKRIPDQGQRGHEWPDQGQR debt). Two main factors contributed to the increase in cash. Firstly, we controlled working capital closely and achieved a VLJQL¿FDQW£1.8m reversal in working capital during the year. Secondly, the exercise of share options gave rise to a capital FDVKLQÀRZRIP:LWKDQRYHUDOOSUR¿WRIPWKHVHFDVKLQÀRZVZHUHVXI¿FLHQWWRRIIVHWWKHFDVKRXWÀRZVDVVRciated with spend on intangible assets (including £3.1m of CTC development spend) giving rise to a £0.3m overall increase in cash.
7KHREMHFWLYHRIWKHWUHDVXU\WHDPLVWRPDQDJHWKH*URXS¶V¿QDQFLDOULVNFRQVLGHUDQGZKHUHDSSURSULDWHVHFXUHFRVW HIIHFWLYHIXQGLQJIRUWKH*URXS¶VRSHUDWLRQVDQGWRPLQLPLVHWKHDGYHUVHHIIHFWVRIÀXFWXDWLRQVLQWKH¿QDQFLDOPDUNHWVRQ WKHYDOXHRIWKH*URXS¶V¿QDQFLDODVVHWVDQGOLDELOLWLHVRQUHSRUWHGSUR¿WDELOLW\DQGRQWKHFDVKÀRZVRIWKH*URXS7KH treasury team is accountable through the Finance Director to the Board.
7KH*URXS¿QDQFHVLWVDFWLYLWLHVZLWKFDVKDQGVKRUWWHUPGHSRVLWVDVGLVFORVHGLQQRWHDQGWRWKH*URXS¿QDQFLDO VWDWHPHQWV2WKHU¿QDQFLDODVVHWVDQGOLDELOLWLHVVXFKDVWUDGHGHEWRUVDQGWUDGHFUHGLWRUVDULVHGLUHFWO\IURPWKH*URXS¶V operating activities.
:KHUHDSSURSULDWHWKH*URXSHQWHUVLQWR¿QDQFLDOGHULYDWLYHWUDQVDFWLRQVVSHFL¿FDOO\WKURXJKIRUZDUGDQGRSWLRQFXUUHQF\ contracts. The purpose is to manage the currency risks arising from the Group's operations. It is and has been throughout 2014 and 2013 the Group's policy that no trading in derivatives shall be undertaken.
Financial instruments give rise to foreign currency, interest rate, credit and liquidity risk. Information on how these risks arise is set out in note 20, as are the objectives, policies and processes agreed by the Board for their management and the methods used to measure each risk. Derivative instruments are used where appropriate to change the economic FKDUDFWHULVWLFVRI¿QDQFLDOLQVWUXPHQWVLQDFFRUGDQFHZLWKWKH*URXS¶VWUHDVXU\SROLFLHV
Capital comprises the share capital and reserves, and the working capital of the Group as set out in the notes to the Group ¿QDQFLDOVWDWHPHQWV7KHNH\HOHPHQWLVFDVKDQGFDVKHTXLYDOHQWVWRWDOOLQJPIRUWKH\HDUHQGHG'HFHPEHU
7KHSULPDU\REMHFWLYHRIWKH*URXS¶VFDSLWDOPDQDJHPHQWLVWRHQVXUHWKDWLWPDLQWDLQVVXI¿FLHQWIXQGVLQRUGHUWRVXSSRUW its business including planned expansion, fund on-going development and maximise shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions as is discussed in note 20. To maintain or adjust the capital structure, the Group may issue new shares subject always to the rules governing such new issues.
No changes were made in the Capital management objectives, policies or processes during the year ended 31 December 2014.
For the year ended 31 December 2014, the Group has recorded a net tax credit of £0.6m, mainly comprising an R&D tax FUHGLWP 7KH*URXS¶VDFFXPXODWHGGHIHUUHGWD[DVVHWRIPZLOOUHYHUVHDVDQRQFDVKWD[DWLRQFKDUJH to the income statement in future periods whilst the R&D tax credits are receivable in cash during the year following recognition.
\$W'HFHPEHUWKH*URXSKDGXQUHFRJQLVHGWD[ORVVHVFDUULHGIRUZDUGIRURIIVHWDJDLQVWIXWXUHWUDGLQJSUR¿WVRI PP \$VDUHVXOWWKH*URXSKDVQRPDWHULDOWD[FKDUJHRUOLDELOLW\DQGUHPDLQVVKHOWHUHGIURP8.WD[ in particular.
\$VSUHYLRXVO\DQQRXQFHGRQ-XQH,DQ0DQRFKDZLOOMRLQWKH&RPSDQ\DV&KLHI([HFXWLYH2I¿FHU\$WWKDWSRLQW, will change role to that of non-executive director, taking up a position vacated by Hamish Purdey who left the Company in -DQXDU\WRFRQFHQWUDWHRQKLVQHZUROHDV&KLHI([HFXWLYH2I¿FHURI,QWHOOLÀR
Ian is an excellent choice to lead the Company and I look forward to working with him as we continue delivery of our CTC led growth strategy.
7KH¿UVWTXDUWHURIKDVVWDUWHGZHOOZLWKDWUDGLQJSHUIRUPDQFHLQWKH¿UVWWZRPRQWKVVLJQL¿FDQWO\VWURQJHUWKDQIRU WKHFRPSDUDWLYH¿UVWTXDUWHURI2XU¿QDQFLDOSRVLWLRQUHPDLQVVWURQJ
9LVLELOLW\RYHUUHYHQXHVIRUUHFRJQLWLRQKDVLQFUHDVHGVLJQL¿FDQWO\FRPSDUHGZLWKWKHSULRUSHULRG:HHQWHU ZLWKKLJKYLVLELOLW\RYHUQHDUO\RIRXUSODQQHGWRWDOUHYHQXHVIRUHQWHULQJ WKHPDMRULW\RIZKLFKLV FRQWUDFWHG:HKDYHDVWURQJ&7&SLSHOLQHDQGDUHFRQ¿GHQWRIGHOLYHULQJWKHEDODQFHRIUHYHQXHVLQWRPHHWRXUSODQ
In January 2015, a major European investment bank purchased CTC to provide control over its adherence to certain transaction reporting regulations, compliance with which is enforced in this case by the UK Financial Conduct Authority. 7KHEDQN¶VWUDQVDFWLRQGDWDZLOOEHYDOLGDWHGE\WKH&7&FRQWUROSODWIRUPDJDLQVWVSHFL¿F\$SSURYHG5HSRUWLQJ0HFKDQLVP formats and rules, prior to being reported.
In February 2015, we extended an existing customer's use of CTC, increasing the associated recurring CTC revenues from the account, providing further evidence of a trend that continues to develop across our CTC customer base.
:H DUH FRQ¿GHQW RIPDNLQJ IXUWKHU SURJUHVVZLWK&7&LQ DQG ¿UPO\ EHOLHYH WKDW H[HFXWLQJ RXU VWUDWHJLF SODQV WR DFKLHYHORQJWHUPSUR¿WDEOHJURZWKDQGVKDUHKROGHUYDOXHUHPDLQRQWUDFN:HFRQWLQXHWRZLQGLUHFWDQGLQGLUHFW&7& customers and grow CTC recurring revenues in line with our strategy.
7KHLQYHVWPHQWVZHKDYHPDGHLQFRPPHUFLDOLVLQJ&7&KDYHGHOLYHUHGJRRGSURJUHVVLQWKH¿QDOTXDUWHURIWKH\HDUERWK LQWHUPVRIQHZFXVWRPHUVDQGTXDOL¿HGSURVSHFWV:HKDYHDVWURQJRUGHUERRNRIZRUNDQGTXDOL¿HGSLSHOLQHIRU and beyond.
The team remains ambitious and excited about the future of the Company.
On behalf of the Board
Chris Errington &KLHI([HFXWLYH2I¿FHU 23 March 2015
The Group is committed to meeting high standards of corporate governance and as such the Board acknowledges its contribution to achieving management accountability, improving risk management and ultimately to creating shareholder value. This statement explains how the Company has applied the main and supporting principles of corporate governance and describes the Company's compliance with the provisions of the UK Corporate Governance Code published in September E\ WKH )LQDQFLDO 5HSRUWLQJ &RXQFLO DQG DYDLODEOH DW KWWSZZZIUFRUJXN \$OO UHIHUHQFHV WR WKH &RPSDQ\ DUH LQ respect of the statutory entity Gresham Computing plc, which is the ultimate parent undertaking of the Gresham group of companies.
The Company has complied with the relevant provisions ("Provisions") set out in the UK Corporate Governance Code 2012 WKH³&RGH´ WKURXJKRXWWKH\HDUZLWKWKHH[FHSWLRQRIWKHPDWWHUVUHIHUUHGWREHORZ
Provision B1.1 requires the Company to have independent non-executive directors and provision B1.2 also requires that the board should have at least two independent non-executive directors. The Company did not comply with these provisions. The Board does not have any non-executive directors considered independent as a result of the participation of all directors in the Group's share option scheme during the year, and in respect of M Royde, as a result of his interest in Kestrel Opportunities and its interest in Gresham as noted on page 26. The need for and appointment of independent non-executive directors is however kept under review taking into account changes in the Company's size, complexity and circumstances.
The absence of non-executive directors deemed independent also leads to the Company not complying with the following 3URYLVLRQV
Provisions B2.1, B2.2 and B2.4 require the formation of a nomination committee to lead and oversee the application of Code principles as they relate to Board and senior management appointments. The Company does not have a nomination committee as the Board is relatively small and all directors are consulted in reaching a consensual and collective decision over Board appointments. The Board considers that the input from all directors is important given the size of the Company and such input does not disrupt the normal operations of the Board. The need for a nomination committee is however kept under review taking into account changes in the Company's size, complexity and circumstances.
3URYLVLRQ%UHTXLUHVQRQH[HFXWLYHGLUHFWRUVWREHDSSRLQWHGIRUDVSHFL¿HGWHUPVXEMHFWWRUHHOHFWLRQDQGWRVWDWXWRU\ provisions relating to the removal of a director. The Company does not comply with this provision as non-executive directors DUHDSSRLQWHGZLWKXQVSHFL¿HGWHUPVEXWWKHVHDSSRLQWPHQWVDUHWHUPLQDEOHE\WKUHHPRQWKV¶QRWLFHIURPHLWKHUSDUW\
The Board currently comprises the non-executive chairman, the senior non-executive director, the chief executive and WKHFKLHI¿QDQFLDORI¿FHU7KH%RDUGGRHVQRWKDYHDQ\QRQH[HFXWLYHGLUHFWRUVFRQVLGHUHGLQGHSHQGHQWDVDUHVXOWRIWKH SDUWLFLSDWLRQRIDOOGLUHFWRUVLQWKH*URXS¶VVKDUHRSWLRQVFKHPHGXULQJWKH\HDUDQGVSHFL¿FDOO\LQUHVSHFWRI05R\GHDV a result of his interest in Kestrel Opportunities and its interest in Gresham as noted on page 26.
The roles of chairman and chief executive are distinct, set out in writing and agreed by the Board. The chairman is responsible for the effectiveness of the Board and ensuring communication with shareholders and the chief executive is accountable for the management of the Group.
Non-executive directors constructively challenge and assist in the development of strategy. They scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance.
The Senior Non-Executive Director, M Royde, is available to shareholders if they have concerns which contact through the normal channels of chairman or chief executive has failed to resolve or for which such contact is inappropriate.
The Company consulted with major shareholders prior to the appointments of M Royde and K Archer and prior to the establishment of the Group's share option scheme and grant of options to non-executive and executive directors. The Board keeps the requirement for non-executive independence under regular review, taking into account changes in circumstances and maintaining a regular dialogue with shareholders.
8SXQWLO0DUFK5*UXEEWKH&KLHI)LQDQFLDO2I¿FHUDOVRKHOGWKHSRVWRI&RPSDQ\6HFUHWDU\2Q0DUFK5 Grubb resigned as Company Secretary and on the same day J Cathie was appointed Company Secretary. J Cathie is not a director of the Company. The appointment and removal of the Company Secretary is a matter for the board as a whole.
The Board is responsible to shareholders for the proper management of the Group. A statement of the directors' responsibilities LQUHVSHFWRIWKH¿QDQFLDOVWDWHPHQWVLVVHWRXWRQSDJHDQGDVWDWHPHQWRQJRLQJFRQFHUQLVJLYHQRQSDJH
7KH%RDUGQRUPDOO\PHHWVRQFHDPRQWKDQGKDVDIRUPDOVFKHGXOHRIPDWWHUVVSHFL¿FDOO\UHVHUYHGWRLWIRUGHFLVLRQ7KHVH include strategic planning, business acquisitions and disposals, authorisation of major capital expenditure and material XQXVXDO FRQWUDFWXDO DUUDQJHPHQWV VHWWLQJ SROLFLHV IRU WKH FRQGXFW RI EXVLQHVV DQG DSSURYDO RI EXGJHWV DQG ¿QDQFLDO statements. Other matters are delegated to the Executives, supported by policies for reporting to the Board. Presentations are made to the main Board on regular occasions by the executive directors and operational management.
The Company Secretary is responsible to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are complied with, and for advising the Board, through the chairman, on corporate governance matters. The Company maintains appropriate insurance cover in respect of legal action against the Company's directors, but no cover exists in the event that the director is found to have acted fraudulently or dishonestly.
The non-executive chairman and the non-executive director are able to meet without executives present prior to each %RDUGPHHWLQJ7KHDJHQGDDQGUHOHYDQWEULH¿QJSDSHUVIRUHDFK%RDUGPHHWLQJDUHGLVWULEXWHGE\WKH&RPSDQ\6HFUHWDU\ usually a week in advance of each Board meeting.
Where directors have concerns which cannot be resolved about the running of the Company or a proposed action, these concerns are recorded in Board minutes. On resignation, a non-executive director provides a written statement to the chairman for circulation to the Board if there are any such concerns.
7KHIROORZLQJ%RDUGFRPPLWWHHVGHDOZLWKWKHVSHFL¿FDVSHFWVRIWKH*URXS¶VDIIDLUV7HUPVRIUHIHUHQFHRIHDFKFRPPLWWHH explaining its role and the authority delegated to it by the Board, are available on request from the Company Secretary. The FRPPLWWHHFKDLUPHQUHSRUWUHJXODUO\WRWKHZKROH%RDUGDQGDUHUHTXLUHGWRFRQ¿UPWKDWWKHFRPPLWWHHVKDYHVXI¿FLHQW resources to undertake their duties.
The audit committee comprised M Royde (Chairman) and K Archer. The audit committee does not comprise only independent QRQH[HFXWLYHGLUHFWRUVQRULQFOXGHRQHPHPEHUZLWKUHFHQWDQGUHOHYDQW¿QDQFLDOH[SHULHQFHDVUHTXLUHGE\SURYLVLRQ C3.1 of the Code.
7KHUHZHUHWZRDXGLWFRPPLWWHHPHHWLQJVLQUHVSHFWRIWKH¿QDQFLDO\HDUDQGERWKZHUHDWWHQGHGE\WKHOHDGH[WHUQDO audit partner. The role and responsibilities of the audit committee are set out in terms of reference available on request from the Company Secretary and are described in more detail in the Report of the audit committee on page 22.
The remuneration committee comprised M Royde (Chairman) and K Archer. The remuneration committee does not comprise only independent non-executive directors, as required by provision D2.1 of the Code.
Where appropriate, the committee seeks independent advice from remuneration consultants and also consults with the remainder of the Board. The committee is responsible for setting remuneration for all executive directors and the chairman appointed by the Company, including pension rights and provision for compensation payments. The committee also recommends and monitors the level and structure of remuneration for senior management. The remuneration of nonexecutive directors is a matter for the executive members of the Board. The remuneration committee consults with the chief executive concerning the remuneration of other executive directors. Further details of the role and responsibilities of the remuneration committee and its activities during the year are given in the report on directors' remuneration beginning on page 30.
Appointments to the Board are made on merit and against objective criteria. The Board considers all applicants for any appointment with due regard for equality of opportunity, including gender, to create workplace cultures that promote inclusion. Care is taken to ensure that appointees have enough time to devote to the job, especially in the case of chairmanships. The Board keeps under review, and takes appropriate action, to ensure orderly succession for appointments to the Board and to senior management, so as to maintain an appropriate balance of skills and experience within the Group and on the Board.
During 2014 the Board commenced a CEO succession process involving the use of independent search consultants to initially test the market. The process concluded on 5 March 2015 with the appointment of Ian Manocha and an associated change in role for Chris Errington, effective 1 June 2015.
The Code provisions require the formation of a nomination committee to lead and oversee the application of Code principles as they relate to Board and senior management appointments. The Company does not have a nomination committee.
7KH%RDUG FRQVLGHUV WKHRWKHU VLJQL¿FDQW FRPPLWPHQWVRIQRQH[HFXWLYHGLUHFWRUVSULRU WRDSSRLQWPHQW WRHQVXUH WKDW WKH\ KDYH VXI¿FLHQW WLPH WRPHHW ZKDW LV H[SHFWHG RI WKHP DQG NHHSV FKDQJHV WR WKHVH FRPPLWPHQWV XQGHU UHYLHZ The terms and conditions of appointment of non-executive directors are available for inspection by any person at the &RPSDQ\¶VUHJLVWHUHGRI¿FHGXULQJQRUPDOEXVLQHVVKRXUVDQGDWWKH\$*0IRUPLQXWHVSULRUWRWKHPHHWLQJDQGGXULQJ the meeting). K Archer is also a non-executive director of Fidessa group plc, and M Royde is also a non-executive director of Castle Street Investments plc.
The Board as a whole keeps under review the need for independent non-executive directors.
The following table summarises the number of Board and committee meetings held during the year and the attendance record of individual directors.
| Board | Audit Committee(1) |
Remuneration Committee(1) |
|
|---|---|---|---|
| Number of meetings held | 11 | 1 | 1 |
| Number of meetings attended: | |||
| C Errington | 11 | 1 | 1 |
| R Grubb | 11 | 1 | 1 |
| K Archer | 11 | 1 | 1 |
| M Royde | 11 | 1 | 1 |
| H Purdey (2) | 5 | - | - |
(1) Executive directors attend by invitation
(2) Appointed 19 June 2014, resigned 27 January 2015
New directors receive appropriate induction on their appointment to the Board covering the activities of the Group and its NH\EXVLQHVVDQG¿QDQFLDOULVNVWKHWHUPVRIUHIHUHQFHRIWKH%RDUGDQGLWVFRPPLWWHHVDQGWKHODWHVW¿QDQFLDOLQIRUPDWLRQ about the Group.
7KHFKDLUPDQHQVXUHVWKDWGLUHFWRUVXSGDWHWKHLUVNLOOVNQRZOHGJHDQGIDPLOLDULW\ZLWKWKH*URXSUHTXLUHGWRIXO¿OWKHLUUROHV on the Board and on Board committees. Ongoing training is provided as necessary and includes updates from the Company Secretary on changes to the Listing Rules, requirements under the Companies Act and other regulatory matters. Directors may consult with the Company Secretary at any time on matters related to their role on the Board. All directors have access to independent professional advice at the Company's expense where they judge it necessary to discharge their duties, with requests for such advice being authorised by the chairman or the Company Secretary.
The Board has undertaken a formal review encompassing the performance of the Board as a whole, its committees and HDFKGLUHFWRU,QSHUIRUPLQJWKHVHUHYLHZVFULWHULDWKDWDUHWDNHQLQWRDFFRXQWLQFOXGHWKHDELOLW\RIWKHGLUHFWRUWRWDNH WKHSHUVSHFWLYHRIFUHDWLQJVKDUHKROGHUYDOXHWRFRQWULEXWHWRWKHGHYHORSPHQWRIVWUDWHJ\DQGLGHQWL¿FDWLRQRIULVNVWR provide clarity of direction to management; to be a source of wise counsel; to bring a broad perspective to discussions DQGDQXQGHUVWDQGLQJRINH\LVVXHVWRFRPPLWWKHWLPHUHTXLUHGWRIXO¿OWKHUROHDQGWROLVWHQWRDQGUHVSHFWWKHLGHDVRI fellow directors and management.
The Senior Non-Executive Director is responsible for, and has undertaken, the performance evaluation of the chairman, taking into account the views of the executive directors and the criteria above.
All directors are subject to election by shareholders after their appointment and to re-election thereafter at intervals of no more than three years.
1RQH[HFXWLYH GLUHFWRUV DUH DSSRLQWHG IRU LQGH¿QLWH WHUPV DQG DUH WHUPLQDEOH E\ WKUHHPRQWKV¶ QRWLFH IURP HLWKHU WKH Company or the individual. Non-executive directors who have served more than nine years are subject to annual re-election.
7KHFKDLUPDQKDVIRUPDOO\UHYLHZHGWKHSHUIRUPDQFHRI05R\GHDQGVDWLV¿HGKLPVHOIWKDWKLVSHUIRUPDQFHFRQWLQXHVWREH effective and that he continues to demonstrate commitment to the role. The Board have formally reviewed the performance RI.\$UFKHUDQGLVVDWLV¿HGWKDWKLVSHUIRUPDQFHFRQWLQXHVWREHHIIHFWLYHDQGWKDWKHFRQWLQXHVWRGHPRQVWUDWHFRPPLWPHQW to the role.
The Board as a whole is responsible for ensuring that a dialogue is maintained with shareholders based on the mutual understanding of objectives.
Members of the Board meet with major shareholders on a regular basis, including presentations after the Company's announcement of the year end results and at the half year. Non-executives are offered the opportunity to attend meetings with major shareholders and attend on a regular basis.
The Board is kept informed of the views of shareholders at each Board meeting through a report from the chief executive together with formal feedback on shareholders' views gathered and supplied by the Company's advisors. The views of private and smaller shareholders, typically arising from the AGM or from direct contact with the Company, are also communicated to the Board on a regular basis.
M Royde, the senior non-executive director, and K Archer, the non-executive chairman, are available to shareholders if they KDYHFRQFHUQVZKHUHFRQWDFWWKURXJKWKHQRUPDOFKDQQHOVRIFKLHIH[HFXWLYHRI¿FHUKDVIDLOHGWRUHVROYHRUIRUZKLFKVXFK contact is inappropriate.
The Board uses the Annual General Meeting to communicate with private and institutional investors and welcomes their participation.
All members of the Board attended the Company's last AGM and the chairman aims to ensure that all members of the Board will be available at the forthcoming AGM.
Proxy votes are counted and, except where a poll is called, the level of proxies lodged on each resolution, and the balance for and against the resolution and the number of abstentions, is reported after each resolution has been dealt with on a show of hands at the AGM.
Details of resolutions to be proposed at the AGM can be found in the Notice of the Meeting. A separate resolution is proposed for each substantially separate issue including a separate resolution relating to the report and accounts.
The Board is responsible for presenting a balanced and understandable assessment of the Company's position and prospects, extending to interim reports and other price-sensitive public reports and reports to regulators as well as to information required to be presented by statutory requirements. A Statement of the Directors' Responsibilities is set out on page 38.
Management and specialists within the Finance Department are responsible for ensuring the appropriate maintenance of ¿QDQFLDOUHFRUGVDQGSURFHVVHVWKDWHQVXUHDOO¿QDQFLDOLQIRUPDWLRQLVUHOHYDQWUHOLDEOHLQDFFRUGDQFHZLWKWKHDSSOLFDEOH laws and regulations, and distributed both internally and externally in a timely manner. A review of the consolidation DQG¿QDQFLDOVWDWHPHQWVLVFRPSOHWHGE\PDQDJHPHQWWRHQVXUHWKDWWKH¿QDQFLDOSRVLWLRQDQGUHVXOWVRIWKH*URXSDUH DSSURSULDWHO\UHSRUWHG\$OO¿QDQFLDOLQIRUPDWLRQSXEOLVKHGE\WKH*URXSLVVXEMHFWWRWKHDSSURYDORIWKHDXGLWFRPPLWWHH
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The Group operates within a control framework developed and strengthened over a number of years and communicated DVDSSURSULDWHE\DVHULHVRIZULWWHQSURFHGXUHV7KHVHOD\GRZQDFFRXQWLQJSROLFLHVDQG¿QDQFLDOFRQWUROSURFHGXUHVLQ addition to controls of a more operational nature. The key procedures that the directors have established with a view to SURYLGLQJLQWHUQDOFRQWURODUHDVIROORZV
The audit committee is responsible for reviewing the Group's internal control and risk management systems, and reviewing and monitoring the requirement for an internal audit function and the effectiveness of the external audit. Its role includes PRQLWRULQJ WKH LQWHJULW\ RI WKH *URXS¶V ¿QDQFLDO VWDWHPHQWV DQG RWKHU IRUPDO DQQRXQFHPHQWV UHODWLQJ WR WKH *URXS¶V ¿QDQFLDOSHUIRUPDQFHDQGUHYLHZLQJVLJQL¿FDQW¿QDQFLDOUHSRUWLQJMXGJHPHQWVFRQWDLQHGLQWKHP
The audit committee advises the Board on the appointment, reappointment and removal of external auditors, considers their effectiveness and approves their remuneration and terms of engagement, which includes developing and implementing a SROLF\RQWKHSURYLVLRQRIQRQDXGLWVHUYLFHVE\WKHH[WHUQDODXGLW¿UP,WDOVRUHYLHZVDQGPRQLWRUVWKHLQGHSHQGHQFHDQG objectivity of the external auditor.
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7KHFRPPLWWHHKDVPHWZLWKVHQLRUPDQDJHPHQWDQGWKHH[WHUQDODXGLWRUVWRUHYLHZ¿QDQFLDOUHSRUWLQJSULRUWR\HDUHQG DQGDWWKHIXOO\HDULQFOXGLQJGLVFXVVLRQVDVWRWKHVFRSHPDWHULDOLW\WLPLQJDQG¿QGLQJVRIWKHDQQXDODXGLW
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• Capitalised development costs. Development costs are accounted for in accordance with IAS 38 'Intangible Assets', and costs that meet the qualifying criteria are capitalised and systematically amortised over the useful economic life of the intangible asset. Determining whether development costs qualify for capitalisation as intangible assets requires judgement, including estimates of the technical and commercial viability of the asset created, and its applicable useful economic life. These estimates are continually reviewed and updated based on past experience and reviews of competitor products available in the market.
The committee has considered the development costs capitalised, including the technical and commercial feasibility RIWKHSURGXFWEHLQJSURGXFHGDQGDVWRZKHWKHUIXUWKHUFRVWVFRQWLQXHWRIXO¿OWKHUHTXLUHG,\$6FULWHULDRUDUHRI maintenance in nature. The committee's review encompasses direct discussion with Executive and Operational Management, in addition to reviewing monthly formal reporting to the Board on development and associated sales and implementation activity. The committee have concluded treatment of development costs continues to be in line with IFRS requirements.
• 5HYHQXHDQGSUR¿WUHFRJQLWLRQ)L[HGSULFHFRQWUDFWVDUHDFFRXQWHGIRULQDFFRUGDQFHZLWK,\$6µ&RQVWUXFWLRQ&RQ-WUDFWV¶5HYHQXHDQGSUR¿WVDUHUHFRJQLVHGRQDSHUFHQWDJHRIFRPSOHWLRQEDVLVDVFRVWVLQFXUUHGUHODWHWRWRWDOFRVWV for the contract, when the outcome of a contract can be estimated reliably. Determining whether a contract's outcome FDQEHHVWLPDWHGUHOLDEO\UHTXLUHVPDQDJHPHQWWRH[HUFLVHMXGJHPHQWZKLOVWFDOFXODWLRQRIWKHFRQWUDFW¶VSUR¿WUHquires estimates of the total contract costs to completion. Cost estimates and judgements are continually reviewed and updated as determined by events or circumstances.
The committee has reviewed executive and operational management's descriptions and status reports on material work-in-progress through the year, both through direct discussion and formal month-end reporting to the Board. The committee has furthermore considered Management's assessments made on percentage of completion of material work-in-progress, and other judgements such as bundling or unbundling of revenue streams, and the resulting impact RQ UHYHQXHDQGSUR¿W UHFRJQLWLRQ7KH FRPPLWWHHKDV FRQFOXGHG WKDW WKH WLPLQJRI UHYHQXHDQGSUR¿W UHFRJQLWLRQ continues to be in line with IFRS requirements.
• Impairment Reviews. The Group is required to perform impairment reviews of goodwill annually at the reporting date, and in addition performs impairment reviews of capitalised development costs to identify any intangible assets that have a carrying value that is in excess of its recoverable value. Determining the recoverability of an intangible asset requires judgement in both the methodology applied, and the key variables within that methodology. Where it is determined an intangible asset is impaired, its carrying value will be reduced to its recoverable value with the difference recorded as an impairment charge in the income statement.
The committee has considered management's assessments of value-in-use of cash-generating units of intangible DVVHWV SULQFLSDOO\ WKHJRRGZLOO DQG FDSLWDOLVHGGHYHORSPHQW FRVWV DW WKH UHSRUWLQJGDWH7KLVLQFOXGHG VSHFL¿FDOO\ considering and subsequently approving business plans prepared by management supporting the future performance expectations used in the calculation of the value-in-use. The committee has concluded that the value-in-uses calculated for intangible assets are appropriate, and supports the carrying values of intangible assets at the year end, in line with IFRS requirements.
The Board is responsible for maintaining a sound system of internal control to safeguard shareholders' investment and the Company's assets. The directors acknowledge their ultimate responsibility for ensuring that the Group has in place a system RIFRQWUROV¿QDQFLDODQGRWKHUZLVHWKDWLVDSSURSULDWHWRWKHEXVLQHVVHQYLURQPHQWLQZKLFKLWRSHUDWHVDQGWKHULVNVWR which it is exposed.
The Board has reviewed the effectiveness of the Group's system of internal controls during the year. This review covered all PDWHULDOFRQWUROVLQFOXGLQJ¿QDQFLDORSHUDWLRQDODQGFRPSOLDQFHFRQWUROVDQGULVNPDQDJHPHQWV\VWHPV
The Company's system of internal controls is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable but not absolute assurance against material misstatement or loss. \$FWLRQKDVEHHQWDNHQE\WKH%RDUGWRHQKDQFH¿QDQFLDODQGRWKHUFRQWUROVGXULQJWKH\HDU,QDGGLWLRQVWHSVDUHFRQWLQXLQJ to be taken to further embed internal control and risk management processes into the operations of the business and to deal with areas of improvement which come to management's and the Board's attention.
\$QHPEHGGHGRQJRLQJSURFHVVIRULGHQWLI\LQJHYDOXDWLQJDQGPDQDJLQJWKHVLJQL¿FDQWULVNVIDFHGE\WKH*URXSKDVEHHQ LQSODFHWKURXJKRXWWKH\HDUDQGUHPDLQVLQSODFHXSWRWKHGDWHRIWKHDSSURYDORIWKH¿QDQFLDOVWDWHPHQWV7KHSURFHVV is regularly reviewed by the Board and accords with the Internal Control Guidance for directors on the Combined Code produced by the Turnbull working party.
7KHFRPPLWWHHKDVUHYLHZHGDUUDQJHPHQWVE\ZKLFKVWDIIRIWKH&RPSDQ\PD\LQFRQ¿GHQFHUDLVHFRQFHUQVDERXWSRVVLEOH LPSURSULHWLHVLQPDWWHUVRI¿QDQFLDOUHSRUWLQJRURWKHUPDWWHUVDQGFRQFOXGHGWKDWWKH\UHPDLQDSSURSULDWH
During the year, the committee considered the need for a separate internal audit function and its impact on the external audit and concluded that, based on the size of the Group, a separate internal audit function is not necessary at this stage. The need for an internal audit function is reviewed at least annually.
The committee reviews and makes recommendations with regard to the reappointment of the external auditors. In making these recommendations, the committee considers auditor effectiveness and independence, partner rotation and any other factors which may impact the external auditor's reappointment.
The last audit tender process undertaken by the committee was performed in 2010 resulting in the appointment of BDO LLP as external auditors for the year ended 31 December 2010. BDO LLP have continued as external auditor for every year since then including in respect of this Annual Financial Report, and a resolution to re-appoint BDO LLP as the Group's auditor will be put to the forthcoming Annual General Meeting.
The committee discussed and approved the scope of and the fees for the external audit plan and in addition, the Committee FRQVLGHUHGH[WHUQDODXGLW¶VDVVHVVPHQWRIWKHVLJQL¿FDQWULVNVLQWKH*URXS¶V¿QDQFLDOVWDWHPHQWV7KURXJKRXWWKH\HDUWKH Committee tracked these risks and associated work undertaken by external audit has been evaluated.
The committee monitored the conduct and effectiveness of external audit by considering the commercial experience and H[SHUWLVHRIWKHDXGLWRUVSDUWLFXODUO\LQRXULQGXVWU\VHFWRUWKHIXO¿OPHQWRIWKHDJUHHGDXGLWSODQDQGDQ\YDULDWLRQVIURP this plan; and the robustness and of the external auditors in their handling of key accounting and audit judgements.
The committee seeks to maintain auditor objectivity and independence by reviewing and controlling the manner in which non-audit services are awarded to the auditor on at least an annual basis. The Group has a rigorous policy designed to ensure that the auditors' independence is not compromised by their undertaking inappropriate non-audit work. All VLJQL¿FDQWQRQDXGLWZRUNDQGDQ\ZRUNRIDQRQFRPSOLDQFHFRQVXOWDQF\QDWXUHFRPPLVVLRQHGIURPWKHH[WHUQDODXGLWRUV requires audit committee approval.
The committee formally reviews the independence of the external auditors on an annual basis and has undertaken its DQQXDOUHYLHZRIWKHQDWXUHDQGDPRXQWRIQRQDXGLWZRUNXQGHUWDNHQE\WKHH[WHUQDODXGLWRUVDQGVDWLV¿HGLWVHOIWKDWWKHUH is no effect on their independence.
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The Group's business activities, together with the factors likely to affect its future development, performance and position are set out within the Chairman's Statement and Strategic Report. Disclosures in respect of Principal Risks and Uncertainties, People (including employees and disabled employees) and Product Development (incorporating Research & Development DFWLYLWLHV DUHLQFOXGHGZLWKLQWKH6WUDWHJLF5HSRUW,QDGGLWLRQQRWHWRWKH¿QDQFLDOVWDWHPHQWVLQFOXGHVWKH*URXS¶V REMHFWLYHVSROLFLHVDQGSURFHVVHVIRUPDQDJLQJLWVFDSLWDOLWV¿QDQFLDOULVNPDQDJHPHQWREMHFWLYHVGHWDLOVRILWV¿QDQFLDO instruments and hedging activities; and its exposures to credit risk and liquidity risk. Corporate Governance disclosures required with the Director's Report have been included within our Corporate Governance Statement beginning on page 18.
7KH*URXSSUR¿WIRUWKH\HDUDIWHUWD[DWLRQDPRXQWHGWR 7KHGLUHFWRUVGRQRWUHFRPPHQG D¿QDORUGLQDU\GLYLGHQGZKLFKOHDYHVWKHSUR¿WRIWREHDGGHGWRUHVHUYHV1RGLYLGHQGVDUHUHFRPPHQGHG and none were paid in the prior year.
7KH*URXSKDVVXI¿FLHQW¿QDQFLDOUHVRXUFHVWRJHWKHUZLWKJRRGUHODWLRQVKLSVZLWKDQXPEHURIFXVWRPHUVDQGVXSSOLHUV DFURVVGLIIHUHQWJHRJUDSKLFDUHDVDQGLQGXVWULHV7KH*URXSKDVDFFHVVWRDVWURQJXQGHUO\LQJFDVKÀRZDULVLQJIURPORQJ established maintenance businesses with long standing blue chip customers; and strong growth prospects being realised ZLWKLWVÀDJVKLSSURGXFW&7&
After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going FRQFHUQEDVLVLQSUHSDULQJWKHDQQXDOUHSRUWDQG¿QDQFLDOVWDWHPHQWV
On 24 February 2015 at a shareholder general meeting, the Board proposed and the Company's shareholders duly approved resolutions to allow the Company to apply to the High Court of Justice in England and Wales (the "Court") to cancel its Share Premium Account and thereby create distributable reserves to support the Company's ability to declare and pay dividends, and make other returns of capital to shareholders. On 18 March 2015 the Court heard and approved the Company's application.
2Q0DUFKWKH%RDUGDQQRXQFHGWKHDSSRLQWPHQWRI,DQ0DQRFKDDV&KLHI([HFXWLYH2I¿FHUWREHHIIHFWLYHIURP -XQH&KULV(UULQJWRQWKH&RPSDQ\¶VFXUUHQW&KLHI([HFXWLYH2I¿FHUZLOOUHPDLQLQRI¿FHXQWLO,DQ¶VDSSRLQWPHQW becomes effective on 1 June 2015, when he will step down from his current role and remain on the Board as a non-executive director.
The Group has customer relationships with two banking customers within its EMEA RTFS segment and a banking customer ZLWKLQLWV\$3\$&57)6VHJPHQWDOOWKUHHRIZKLFKDUHFRQVLGHUHGE\WKHGLUHFWRUVWREHLQGLYLGXDOO\VLJQL¿FDQWUHODWLRQVKLSV revenue from these relationships individually exceeded 10% of the Group's revenue.
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'XULQJWKH\HDUHQGHG'HFHPEHUWKH&RPSDQ\FKDQJHGLWVUHJLVWHUHGRI¿FHIURP6RSZLWK+RXVH%URRN\$YHQXH Warsash, Southampton SO31 9ZA to Aldermary House, 10 – 15 Queen Street, London, EC4N 1TX.
This section includes our mandatory reporting of greenhouse gas emissions pursuant to the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 ("the Regulations").
2XUUHSRUWLQJ\HDULVWKHVDPHDVRXU¿VFDO\HDUEHLQJWKH\HDUHQGHG'HFHPEHU7KLVJUHHQKRXVHJDVUHSRUWLQJ \HDUKDVEHHQHVWDEOLVKHGWRDOLJQZLWKRXU¿QDQFLDOUHSRUWLQJ\HDU
:HUHSRUWRXUHPLVVLRQVGDWDXVLQJDQRSHUDWLRQDOFRQWURODSSURDFKWRGH¿QHRXURUJDQLVDWLRQDOERXQGDU\ZKLFKPHHWVWKH GH¿QLWLRQDOUHTXLUHPHQWVRIWKH5HJXODWLRQVLQUHVSHFWRIWKRVHHPLVVLRQVIRUZKLFKZHDUHUHVSRQVLEOH:HKDYHUHSRUWHG on all material emission sources which we deem ourselves to be responsible for. These sources align with our operational FRQWURO DQG ¿QDQFLDO FRQWURO ERXQGDULHV :H GR QRW KDYH UHVSRQVLELOLW\ IRU DQ\ HPLVVLRQ VRXUFHV WKDW DUH EH\RQG WKH boundary of our operational control. For example, business travel other than by car (including, for example, commercial ÀLJKWVRUUDLOZD\V DQGIXOO\PDQDJHGRI¿FHVDUHQRWZLWKLQRXURSHUDWLRQDOFRQWURODQGWKHUHIRUHDUHQRWFRQVLGHUHGWR be our responsibility.
7KHPHWKRGRORJ\XVHGWRFDOFXODWHRXUHPLVVLRQVLVEDVHGRQWKH³(QYLURQPHQWDO5HSRUWLQJ*XLGHOLQHVLQFOXGLQJPDQGDWRU\ greenhouse gas emissions reporting guidance" (June 2013) issued by the Department for Environment, Food and Rural Affairs ("DEFRA"). We have also utilised DEFRA's 2014 conversion factors within our reporting methodology.
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| 31 December 2014 |
31 December 2013 |
|
|---|---|---|
| Emmissions from: | ||
| Electricity, heat, steam and cooling purchased for own use - Tonnes of CO2e | 87 | 132 |
| Group's chosen intensity measurement: | ||
| - Emissions reported above normalised to tonnes of CO2e per total GBP1,000,000 revenue | 6.8 | 9.4 |
Emissions data has been reported for our operations in Australia and the UK, with our locations in Malaysia, North America and Singapore considered not material to the scope of this reporting.
,QRUGHUWRH[SUHVVRXUDQQXDOHPLVVLRQVLQUHODWLRQWRDTXDQWL¿DEOHIDFWRUDVVRFLDWHGZLWKRXUDFWLYLWLHVZHKDYHXVHG revenue as our intensity ratio as this is the most relevant indication of our growth and provides for the best comparative measure over time.
7KHGLUHFWRUVDW'HFHPEHUDQGWKHLUFRQQHFWHGSHUVRQVLQWHUHVWVLQWKHVKDUHFDSLWDORIWKH&RPSDQ\DOOEHQH¿FLDOO\ held, other than with respect to options to acquire ordinary shares which are detailed in the analysis of options included in WKHUHSRUWRQGLUHFWRUV¶UHPXQHUDWLRQ DUHDVIROORZV
| Ordinary shares of 5 pence each | ||
|---|---|---|
| 31 December | 1 January | |
| 2014 | 2014 | |
| K Archer | 150,000 | 100,000 |
| M Royde | 42,472 | 42,472 |
| M Royde - Kestrel Opportunities (see note below) | 5,767,164 | 5,217,854 |
| H Purdey(1) | 30,455 | - |
| C Errington | 782,268 | 2,268 |
| R Grubb | 231,405 | 6,405 |
(1) Appointed 19 June 2014, resigned 27 January 2015
05R\GH¶VEHQH¿FLDOLQWHUHVWLQWKHVKDUHFDSLWDORIWKH&RPSDQ\LQFOXGHVVKDUHVKHOGGLUHFWO\E.HVWUHO2SSRUWXQLWLHVD FHOORI*XHUQVH\3RUWIROLRV3&&/LPLWHG.HVWUHO3DUWQHUV//3ZKLFK05R\GHLVDSDUWQHURIDQGKROGVDEHQH¿FLDOLQWHUHVWLQ is the investment manager to Kestrel Opportunities. Kestrel Opportunities' shareholding is disclosed under Major interests (i.e. those >3%) on page 27.
There have been no further changes in the directors' interests disclosed above from 31 December 2014 to 23 March 2015.
The Company has granted an indemnity to one or more of its directors against liability in respect of proceedings brought by third parties, subject to the conditions set out section 234 of the Companies Act 2006. Such qualifying third party indemnity provision remains in force as at the date of approving the directors' report.
'LUHFWRUV¶DQG2I¿FHUV¶OLDELOLW\LQVXUDQFHZLWKDQLQGHPQLW\OLPLWRIPLOOLRQKDVEHHQSXUFKDVHGLQRUGHUWRPLQLPLVHWKH potential impact of proceedings against directors.
7KH&RPSDQ\KDVEHHQQRWL¿HGHLWKHUGLUHFWO\RULQUHVSRQVHWRDVHFWLRQUHTXHVWPDGHRQLWVEHKDOIRIWKHIROORZLQJ LQWHUHVWVUHSUHVHQWLQJRUPRUHRIWKHLVVXHGRUGLQDU\VKDUHFDSLWDORIWKH&RPSDQ\DVDW0DUFK
| Percentage | ||
|---|---|---|
| Number | Held | |
| Schroder Investment Management | 8,440,000 | 13.35% |
| JO Hambro Capital Management | 6,545,000 | 10.35% |
| Kestrel Partners | 5,767,164 | 9.12% |
| Herald Investment Management | 3,868,774 | 6.12% |
| Majedie Asset Management | 3,511,123 | 5.55% |
| Hargreave Hale, stockbrokers | 3,505,000 | 5.54% |
| Mrs MA Green | 3,073,290 | 4.86% |
| Investec Wealth & Investment | 2,748,290 | 4.35% |
| Legal & General Investment Management | 2,275,000 | 3.60% |
| Valentia Discretionary Trust | 2,178,091 | 3.44% |
| Mr Stephen William Purchase | 2,001,678 | 3.17% |
| Artemis Investment Management | 2,000,000 | 3.16% |
No donations were made in 2014 or 2013.
No Social or Community review has been performed for 2014 or 2013.
The special business to be conducted at the AGM covers the directors' authority to allot shares and the partial disapplication of pre-emption rights.
Resolutions will be proposed to renew the authorities given to the directors to allot and grant rights over the un-issued share capital up to a maximum nominal amount of £1,053,891 representing one-third of the issued ordinary share capital as at 23 March 2015 and to allot and grant rights over shares for cash up to a maximum nominal amount of £158,084, UHSUHVHQWLQJRIWKHLVVXHGRUGLQDU\VKDUHFDSLWDODVDW0DUFKZLWKRXW¿UVWPDNLQJDSURUDWDRIIHUWRDOOH[LVWLQJ shareholders.
Further special business to be conducted at the AGM relates to the authority of the Company to make market purchases of its own ordinary shares, and the authority to call meetings (other than annual general meetings) on not less than 14 clear days' notice. Resolutions will be proposed in this regard. In relation to the purchase of own shares, the Company's authority will be limited to 6,323,347 ordinary shares which represents 10% of the issued share capital of the Company as at 23 March 2015.
In the opinion of the directors, the passing of these resolutions is in the best interests of the shareholders.
At 31 December 2014, the Company's issued share capital comprised:
| Number | Nominal | % of total | |
|---|---|---|---|
| value £ | Share capital | ||
| Ordinary shares of £0.05 each | 63,233,478 | 3,161,674 | 100% |
The Company is not aware of any agreements between shareholders that may result in restrictions on the transfer of securities and for voting rights.
During the year-ended 31 December 2014, share options granted under the 2010 Share Option Plans were exercised and the Group issued 2,697,500 (2013: none) ordinary shares accordingly (ranking pari passu with existing shares in issue). See note 22 of the Group Financial Statements for further details.
On 6 December 2013, the Group issued 2,400,000 new ordinary shares (ranking pari passu with existing shares in issue) via a placing to institutional shareholders to contribute to accelerating growth. The shares were issued at a placing price of £1.25 pence raising £2,902,000, after expenses of £98,000.
On a show of hands at a general meeting of the Company every holder of ordinary shares present in person and entitled to vote shall have one vote and on a poll, every member present in person or by proxy and entitled to vote shall have one YRWHIRUHYHU\RUGLQDU\VKDUHKHOG7KHQRWLFHRIWKHJHQHUDOPHHWLQJVSHFL¿HVGHDGOLQHVIRUH[HUFLVLQJYRWLQJULJKWVHLWKHU by proxy notice or present in person or by proxy in relation to resolutions to be passed at general meeting. All proxy votes are counted and the numbers for, against or withheld in relation to each resolution are announced at the annual general meeting and published on the Group's website after the meeting.
There are no restrictions on the transfer of ordinary shares in the Company other than certain restrictions that may from time to time be imposed by laws and regulations (for example, insider trading laws and market requirements relating to close periods).
The Company's articles of association may only be amended by a special resolution at a general meeting of the shareholders. Directors are reappointed by ordinary resolution at a general meeting of the shareholders. The Board can appoint a director but anyone so appointed must be elected by an ordinary resolution at the next annual general meeting. Any director who KDVKHOGRI¿FHIRUPRUHWKDQWKUHH\HDUVVLQFHWKHLUODVWDSSRLQWPHQWPXVWRIIHUWKHPVHOYHVXSIRUUHHOHFWLRQDWWKHDQQXDO general meeting.
Directors' interests in the share capital of the Company are shown in the table on page 26. Major interests (i.e. those >3%) RIZKLFKWKH&RPSDQ\KDVEHHQQRWL¿HGDUHVKRZQRQSDJH
In the event of a change of control of the Company, employee share options granted under the Share Option Plans 2010 will either accelerate vesting, will be rolled-over to the acquiring Company's shares or will lapse, depending on the FLUFXPVWDQFHVRIWKHFKDQJH)XUWKHUGHWDLOVDUHSURYLGHGLQQRWHWRWKH¿QDQFLDOVWDWHPHQWV
7KHUHDUHQRDJUHHPHQWVEHWZHHQWKH*URXSDQGLWVGLUHFWRUVRUHPSOR\HHVSURYLGLQJIRUFRPSHQVDWLRQIRUORVVRIRI¿FHRU employment (whether through resignation, purported redundancy or otherwise) because of a takeover bid.
The directors' existing authorities to allot and grant rights over the un-issued share capital and to allot and grant rights RYHUWKHXQLVVXHGVKDUHFDSLWDOIRUFDVKZLWKRXW¿UVWPDNLQJDSURUDWDRIIHUWRDOOH[LVWLQJVKDUHKROGHUVDUHGXHWRH[SLUH at the upcoming AGM. Resolutions will be put to shareholders at the upcoming AGM of the Company to renew previous authorities granted.
The directors have no existing authorities to buy back shares over and above the authorities conferred by, and subject to, the Companies Act. However, whilst the directors have no present intention to effect any purchase of own shares, the directors will be proposing a resolution at the upcoming AGM of the Company to authorise the Company to make market SXUFKDVHVRIXSWRRIWKHLVVXHGVKDUHFDSLWDORIWKH&RPSDQ\VRDVWRSURYLGHÀH[LELOLW\WRWKH%RDUGLQWKHHYHQWWKDW LWFRQVLGHUVLQWKHIXWXUHWKDWLWZRXOGEHLQWKHEHVWLQWHUHVWVRIVKDUHKROGHUVJHQHUDOO\WRGRVR
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| Section | Topic | Location |
|---|---|---|
| (1) | Interest Capitalised | Not applicable |
| (2) | Publication of unaudited financial information | Not applicable |
| (3) | Deleted | Not applicable |
| (4) | Details of long-term incentive schemes | Not applicable |
| (5) | Waiver of emoluments by a director | Not applicable |
| (6) | Waiver of future emoluments by a director | Not applicable |
| (7) | Non pre-emptive issues of equity for cash | Not applicable |
| (8) | Item (7) in relation to major subsidiary undertakings | Not applicable |
| (9) | Parent participation in a placing by a listed subsidiary | Not applicable |
| (10) | Contracts of significance | Directors' Report, page 25 |
| (11) | Provision of services by a controlling shareholder | Not applicable |
| (12) | Shareholder waivers of dividends | Not applicable |
| (13) | Shareholder waivers of future dividends | Not applicable |
| (14) | Agreements with controlling shareholders | Not applicable |
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5*UXEE Director 0DUFK
The remuneration Committee is chaired by M Royde and K Archer is a member.
The following Directors' Remuneration Report is presented for the year ended 31 December 2014.
7KH*URXS¶VSROLF\RQGLUHFWRUV¶UHPXQHUDWLRQIRUWKHFXUUHQWDQGVXEVHTXHQW¿QDQFLDO\HDUVLVWKDWWKHRYHUDOOUHPXQHUDWLRQ SDFNDJHVKRXOGEHVXI¿FLHQWO\FRPSHWLWLYHWRDWWUDFWUHWDLQDQGPRWLYDWHKLJKTXDOLW\H[HFXWLYHVFDSDEOHRIDFKLHYLQJWKH Group's objectives and thereby enhancing shareholder value. The Group intentionally operates a simple remuneration VWUXFWXUHPDGHXSRIEDVLFVDODU\EHQH¿WVVKDUHRSWLRQVSHUIRUPDQFHUHODWHGERQXVHVDQGSHQVLRQVZLWKDVLJQL¿FDQW proportion based on performance and dependent upon the achievement of demanding targets, which provide a clear link between executive pay and the Group's key strategic objectives. Consideration is given to pay and employment policies elsewhere in the Group, especially when determining annual salary increases by reference to prevailing local market pay rates and overall packages offered.
The main activities of the Committee since the last report were assessing performance of executive directors for the year UHSRUWHGDQGVHWWLQJWDUJHWVIRUWKHIROORZLQJ¿QDQFLDOSHULRGDSSURYLQJSURSRVHGERQXVDQGVKDUHDZDUGVLQWKHSHULRG reviewing the revised remuneration reporting regulations and preparing the Directors' Remuneration Report. The committee makes recommendations to the Board, within agreed terms of reference, on an overall remuneration package for executive directors and other senior executives. The chief executive provides advice in relation to the remuneration of other senior executives.
7KHUHZHUHQRUHPXQHUDWLRQGHFLVLRQVWRPDNHIRUDVH[HFXWLYHSD\EHQH¿WVDQGVKDUHRSWLRQVDZDUGVUHPDLQHGDW the levels set in previous years.
Executive directors' pay continues to be directly aligned to the interests of shareholders including the award of share options with a value proportionate to investor value as expressed through the publically traded share price, in addition to SHUIRUPDQFHUHODWHGERQXVEDVHGRQ*URXS¿QDQFLDOSHUIRUPDQFH
Outside of executive pay, the Remuneration Committee approved a staff bonus scheme and additional pay for K Archer in respect of additional duties performed. There were no share option awards to staff during the year.
This report complies with the requirements of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 as amended in 2013, the provisions of the UK Corporate Governance Code (September 2012) and the Listing Rules.
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The table below sets out the remuneration policy that was approved by shareholders at the 2014 AGM. As the directors are not proposing any changes to this policy it is not required to be put to a further shareholder vote until 2017.
7KH&RPPLWWHHUHVHUYHVWKHULJKWWRPDNHDQ\UHPXQHUDWLRQSD\PHQWVDQGSD\PHQWVIRUORVVRIRI¿FHQRWZLWKVWDQGLQJ that they are not in line with the policy set out below, where the terms of the payment were agreed (i) before the policy came into effect or (ii) at a time when the relevant individual was not a director of the Company and, in the opinion of the Committee, the payment was not in consideration for the individual becoming a director of the Company. For these purposes "payments" includes the Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms of the payment are "agreed" at the time the award is granted.
| Element of remuneration |
How this supports our strategy |
How this is operated | Maximum that may be paid | Framework used to assess performance |
|---|---|---|---|---|
| Base Salary | Supports the recruitment and retention of executive directors of the calibre required to deliver the |
Reviewed annually with any increases applying from 1 April in line with most employees in the Group. |
Increases may be made to take account of changes in an individual's responsibilities, in the case of increased performance from development in a role, or to bring in line with market levels as appropriate. |
In determining appropriate base salary, consideration is given to pay increases for other employees in the Group, comparable pay for similar roles at other similar companies, and individual performance. |
| Pension | Group's strategy. %HQH¿WVSULQFLSDOO\ comprise private healthcare |
Contributions are made by WKH&RPSDQ\WRDGH¿QHG contributions scheme, matching the directors' own contributions. |
Employer contributions up to a maximum of 5% of base salary, in line with other employees in the Group. |
None |
| %HQH¿WV | and death in service insurance. |
Executive Directors are eligible to the same EHQH¿WVDVDOO*URXSVWDII in the geography they operate in. |
Not applicable as premiums are paid by the Company to an external broker to arrange cover, which is in line with other employees in the Group. |
None |
| Annual Bonus | Rewards and incentivises the achievement of the strategic plan as measured by KPIs. |
Where the committee decide to operate an annual bonus, it will establish the objectives which must be met if a cash bonus is to be paid. |
Up to 100% of basic salary dependent on the achievement of performance targets LQFOXGLQJSUR¿WDELOLW\ VHW at the beginning of the year; however the Committee retains discretion to make higher awards in truly exceptional circumstances DVDUHVXOWRIYHU\VLJQL¿FDQW level of Group performance LQFOXGLQJSUR¿WDELOLW\ |
Increased shareholder value through achievement of the strategic plan. |
| 6KDUH2SWLRQSODQ | Directly aligns director (executive & non executive) and senior H[HFXWLYH¿QDQFLDO incentives with returns to shareholders. Financial reward is created through the creation of shareholder value. |
The Committee makes one off share option grants at a point in time and considers enhancing these annually. Where the committee determines it is appropriate, grants PD\LQFOXGHVSHFL¿F performance targets aligned to the strategic plan as vesting conditions. |
Options are granted at an exercise price of not less than 110% of the mid-market price of ordinary shares on the day prior to the date of grant. |
Satisfaction of vesting conditions. |
| Chairman and non-ex ecutive director fees |
Supports the recruitment and retention of the individuals of the calibre required to bring adequate scrutiny to the Group's strategy. |
The level of non-executive directors' remuneration is determined by the executive directors after considering the fee levels in comparable businesses. |
A basic fee is set for normal duties and supplementary fees are paid for any DGGLWLRQDOGXWLHVDW¿[HGGD\ rates. |
Non-executive directors are not eligible for pensions, incentives or any similar payments other than normal out of pocket expenses incurred on behalf of the business. Compensation for loss of RI¿FHLVQRWSD\DEOHWR non-executive directors. |
Executive pay under the above policy is wholly contractually based and represents 100% of maximum remuneration with the exception of any discretionary performance-related bonus awarded in line with the policy outlined above.
The following graphs compare all elements of Executive Director pay in respect of 2014, and proposed for 2015 incorporating WKHIROORZLQJVFHQDULRV
)RUHDFKVFHQDULRWKH¿UVWJUDSKLOOXVWUDWHVWKHVHDPRXQWVLQDPRXQWVWKHVHFRQGJUDSKVKRZVWKHSURSRUWLRQHDFK element is of total pay for the individuals shown.
The Company does not have a nomination committee as the Board is relatively small and all directors are consulted in reaching a consensual and collective decision over Board appointments.
Appointments to the Board are made on merit and against objective criteria. Care is taken to ensure that appointees have enough time to devote to the job, especially in the case of chairmanships. The Board keeps under review, and takes appropriate action, to ensure orderly succession for appointments to the Board and to senior management, so as to maintain an appropriate balance of skills and experience within the Group and on the Board.
There are no predetermined special provisions for executive directors with regard to compensation in the event of loss of RI¿FH7KHUHPXQHUDWLRQFRPPLWWHHFRQVLGHUVWKHFLUFXPVWDQFHVRILQGLYLGXDOFDVHVRIHDUO\WHUPLQDWLRQDQGLQH[FHSWLRQDO circumstances only would recommend compensation payments in excess of the Company's contractual obligations.
The Remuneration Committee considers pay and employment conditions for other senior executives and staff members of the Group when designing and setting executive remuneration. Underpinning all pay is an intention to be fair to all staff of the Group, taking into account the individual's seniority and local market practises.
7KH5HPXQHUDWLRQ&RPPLWWHHLVFRPPLWWHGWRDQRQJRLQJGLDORJXHZLWKVKDUHKROGHUVDQGVHHNVWKHYLHZVRIVLJQL¿FDQW shareholders when any major changes are being made to remuneration arrangements. The Committee takes into account WKHYLHZVRIVLJQL¿FDQWVKDUHKROGHUVZKHQIRUPXODWLQJDQGLPSOHPHQWLQJWKHSROLF\
The Remuneration Committee did not consult with employees when formulating and implementing the policy.
It is the Company's policy to offer directors service contracts terminable with a maximum of 12 months' rolling notice from HLWKHUVLGH1RQHRIWKHQRQH[HFXWLYHGLUHFWRUVKDYHDVHUYLFHFRQWUDFW/HWWHUVRIDSSRLQWPHQWSURYLGHIRUDQLQGH¿QLWH period, terminable by three months' notice from either party.
7KHIROORZLQJWDEOHVHWVRXWWKHVLQJOH¿JXUHIRUWRWDOUHPXQHUDWLRQIRU'LUHFWRUVIRUWKH¿QDQFLDO\HDUVHQGHG'HFHPEHU DQG
| Basic salary and fees |
Benefits Performance in kind related bonus |
Pension Share-based payment |
Total 2014 |
Total 2013 |
|||
|---|---|---|---|---|---|---|---|
| £ | £ | £ | £ | £ | £ | £ | |
| Executive directors: | |||||||
| C Errington | 150,000 | 1,334 | - | 7,500 | - | 158,834 | 158,665 |
| R Grubb | 100,000 | 927 | - | 5,000 | - | 105,927 | 103,504 |
| Non-executive directors: | |||||||
| M Royde | 30,000 | - | - | - | - | 30,000 | 30,000 |
| Ken Archer | 96,750 | - | - | - | - | 96,750 | 80,000 |
| Hamish Purdey(1) | 15,952 | - | - | - | - | 15,952 | - |
| 392,702 | 2,261 | - | 12,500 | - | 391,511 | 372,169 |
(1) Appointed 19 June 2014, resigned 27 January 2015
7KH UHPXQHUDWLRQ SDFNDJH RI HDFK H[HFXWLYH GLUHFWRU LQFOXGHV QRQFDVK EHQH¿WV FRPSULVLQJ WKH SURYLVLRQ RI SULYDWH healthcare and death in service insurance.
During the year ended 31 December 2014 and 2013 the committee did not award any a performance related bonuses in respect of Directors.
7KHUHZHUHQRVKDUHRSWLRQVJUDQWHGGXULQJWKHSHULRGQLO 7KH'LUHFWRU¶VVKDUHRSWLRQVYHVWDVDUHVXOWRIVHUYLFH and therefore on completion of this vesting condition, represent the maximum amount of options vesting during this period. All details in respect of existing director share options grants that have fully vested during the year are included within in the tables below.
The Group operates share option schemes, the Option Schemes 2010, under which executive directors and other senior executives are able to subscribe for ordinary shares in the Company.
Further details concerning the share option schemes in place, including vesting conditions, can be found in note 22 to the *URXS¿QDQFLDOVWDWHPHQWV
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| Options at Granted/ | Options at | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 1 January | (lapsed) Cancelled | Exercised 31 December | Date of Exercise | Date first | Expiry | ||||
| 2014 | 2014 | grant | price exercisable | date | |||||
| C Errington S* | 1,750,000 | - | - | 1,750,000 | - | 31.12.10 | 28p | 31.12.13 | 31.12.20 |
| R Grubb S* | 300,000 | - | - | 300,000 | - | 31.12.10 | 28p | 31.12.13 | 31.12.20 |
| M Royde S, K | 500,000 | - | - | - | 500,000 | 31.12.10 | 28p | 31.12.13 | 31.12.20 |
| K Archer S* | 700,000 | - | - | - | 700,000 | 31.12.10 | 28p | 31.12.13 | 31.12.20 |
S awards granted under the Option S c hemes 2010
K awards granted to K estrel P artners LLP , of whic h M R oyde is a P artner
* options over which the executive has agreed to pay any employer's national insurance arising from the exercise of the options.
The closing market price of the Company's shares on 31 December 2014 was 84.50 pence. During the year, the closing price per ordinary share ranged from 58.00 pence to 140.12 pence.
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The interests of the directors to subscribe for or acquire ordinary shares have not changed since the year end.
C Errington has a service agreement dated 11 January 2005, which is terminable by 12 months' rolling notice from either side. R Grubb has a service agreement dated 18 May 2011, which is terminable by 6 months' rolling notice from either side.
The services of M Royde are provided and invoiced by Kestrel Partners LLP (a company in which he has an ownership interest) under a consultancy agreement dated 19 November 2009 which is terminable by three months' notice from either party.
K Archer has a letter of appointment dated 9 June 2012 which is terminable by three months' notice from either party.
All the director service contracts and letters of appointment are available for inspection by shareholders at the Company's UHJLVWHUHGRI¿FH\$OGHUPDU+RXVH±4XHHQ6WUHHW/RQGRQ(&17;
The key variable element of directors' and senior managers' pay is the award of share options and payments of performancebased annual bonuses. All Director and senior manager performance that directly creates shareholder value will in turn directly increase the value of individuals' share option awards and annual bonus payments awarded.
In addition and where applicable, the Remuneration Committee retain the discretion to pay performance-related bonus within the parameters set out in the Remuneration Policy.
1RSD\PHQWVIRUORVVRIRI¿FHZHUHPDGHGXULQJWKH\HDUHQGHG'HFHPEHUQLO 7KH&RPSDQ\GRHVQRW DQWLFLSDWHDQ\SD\PHQWVIRUORVVRIRI¿FHDVDUHVXOWRIWKHSHQGLQJFKDQJHRI&(2LQ-XQH
The table below sets out the increase in the total remuneration of the CEO and our staff (excluding promotions where relevant). We have selected all staff (around 120 people) for this comparison because it is considered to be the most relevant, due to the structure of total remuneration.
| change in base salary | Bonus payment % of base salary |
|
|---|---|---|
| Chief Executive | 0% | 0% |
| All staff | 2% | 0% |
7KHJUDSKEHORZVKRZVWKHWRWDOVKDUHKROGHUUHWXUQIRUHDFKRIWKHODVW¿YH¿QDQFLDO\HDUVLQWHUPVRIWKHFKDQJHLQYDOXH (with dividends reinvested) of an initial investment of £100 on 31 December 2009 in a holding of the Company's shares against the corresponding total shareholder return in a hypothetical holding of shares in the FTSE TechMark All-Share index.
The FTSE TechMark All-Share was selected as it represents a broad equity market index in which the Company is a constituent member.
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There were no performance-related bonus plans in operation during this period.
7KHVSLNHLQZDVDVVRFLDWHGZLWKWKHFKDQJHLQ&(2DQGWKHDVVRFLDWHGFRPSHQVDWLRQSDLGIRUORVVRIRI¿FHWRWKH previous CEO.
7KHFKDUWEHORZVKRZV WKH WRWDOHPSOR\HHSD\FRVWH[FOXGLQJFDSLWDOLVDWLRQHQWULHV FRPSDUHG WRSUR¿WEHIRUH WD[IRU continuing operations, and before exceptional items) for the years ending 31 December 2014 and 2013.
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The remuneration committee comprised M Royde (Chairman) and K Archer. The remuneration committee does not comprise only independent non-executive directors, as required by provision D2.1 of the Code.
Where appropriate, the committee seeks independent advice from remuneration consultants and also consults with the remainder of the Board. The committee is responsible for setting remuneration for all executive directors and the chairman appointed by the Company, including pension rights and provision for compensation payments. The committee also recommends and monitors the level and structure of remuneration for senior management. The remuneration of nonexecutive directors is a matter for the executive members of the Board, within limits set in the Articles of Association. The remuneration committee consults with the chief executive concerning the remuneration of other executive directors.
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On behalf of the Board
M Royde Chairman of the Remuneration Committee 23 March 2015
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The directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's performance, business model and strategy.
7KHGLUHFWRUVDUHUHVSRQVLEOHIRUHQVXULQJWKHDQQXDOUHSRUWDQGWKH¿QDQFLDOVWDWHPHQWVDUHPDGHDYDLODEOHRQDZHEVLWH Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing WKH SUHSDUDWLRQ DQG GLVVHPLQDWLRQ RI ¿QDQFLDO VWDWHPHQWV ZKLFK PD\ YDU\ IURP OHJLVODWLRQ LQ RWKHU MXULVGLFWLRQV 7KH maintenance and integrity of the Company's website is the responsibility of the directors. The directors' responsibility also H[WHQGVWRWKHRQJRLQJLQWHJULW\RIWKH¿QDQFLDOVWDWHPHQWVFRQWDLQHGWKHUHLQ
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As explained more fully in the statement of directors' responsibilities, the directors are responsible for the preparation of WKH¿QDQFLDOVWDWHPHQWVDQGIRUEHLQJVDWLV¿HGWKDWWKH\JLYHDWUXHDQGIDLUYLHZ2XUUHVSRQVLELOLW\LVWRDXGLWDQGH[SUHVV DQRSLQLRQRQWKH¿QDQFLDOVWDWHPHQWVLQDFFRUGDQFHZLWKDSSOLFDEOHODZDQG,QWHUQDWLRQDO6WDQGDUGVRQ\$XGLWLQJ8.DQG Ireland). Those standards require us to comply with the Financial Reporting Council's (FRC's) Ethical Standards for Auditors.
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
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:HGHWHUPLQHGSODQQLQJPDWHULDOLW\IRUWKH¿QDQFLDOVWDWHPHQWVDVDZKROHWREH,QGHWHUPLQLQJWKLVZHEDVHG our assessment on a level of 1% of consolidated revenue which we believe is a key benchmark used by a member of WKH*URXSLQDVVHVVLQJ¿QDQFLDOSHUIRUPDQFH2QWKHEDVLVRIRXUULVNDVVHVVPHQWWRJHWKHUZLWKRXUDVVHVVPHQWRIWKH FRPSDQ\¶VFRQWUROHQYLURQPHQWRXUMXGJPHQWLVWKDWSHUIRUPDQFHPDWHULDOLW\IRUWKH¿QDQFLDOVWDWHPHQWVVKRXOGEH of planning materiality, namely £100,000. Our objective in adopting this approach is to ensure that total detected and XQGHWHFWHGDXGLWGLIIHUHQFHVGRQRWH[FHHGRXUSODQQLQJPDWHULDOLW\RIIRUWKH¿QDQFLDOVWDWHPHQWVDVDZKROH Materiality levels used for each key component ranged from £44,000 to £99,000. We agreed with the audit committee that we would report to the committee all audit differences in excess of £3,000, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. The Group audit team, based in the UK, performed the audits RIWKHNH\UHSRUWLQJFRPSRQHQWVLQWKH8.DQG1RUWK\$PHULFD7KHDXGLWVRIWKH\$VLD3DFL¿FUHJLRQZHUHSHUIRUPHGE\ component auditors, based in Australia. Detailed instructions were issued and discussed with the component auditors, and WKHVH FRYHUHG WKH VLJQL¿FDQWULVNVLQFOXGLQJ WKH*URXSULVNVRIPDWHULDOPLVVWDWHPHQWGHVFULEHGEHORZ WKDW VKRXOGEH DGGUHVVHGE\WKHDXGLWWHDP7KHJURXSDXGLWWHDPZDVDFWLYHO\LQYROYHGLQGLUHFWLQJWKHDXGLWVWUDWHJ\RIWKH\$VLD3DFL¿F DXGLWUHYLHZHGLQGHWDLOWKH¿QGLQJVDQGFRQVLGHUHGWKHLPSDFWRIWKHVHXSRQWKH*URXSDXGLWRSLQLRQ
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• Development costs – as detailed in the accounting policies, development costs are recognised as an intangible asset LIVSHFL¿FFULWHULDKDYHEHHQPHW8SRQFRPSOHWLRQRIGHYHORSPHQWWKHFRVWVDUHDPRUWLVHGWRWKHLQFRPHVWDWHPHQW over a period ranging from 6 to 20 years. Both the initial conclusion of whether development costs have met the criteria of capitalisation, and the period of amortisation to the income statement require management judgement and therefore have an inherent risk of management override.
We agreed a sample of capitalised costs to underlying supporting documentation and checked that the criteria referred to above had been met. This included discussing the technical feasibility of projects with the development team, as well as reviewing management's estimate of costs to complete projects and projected revenue. Furthermore, we VSHFL¿FDOO\UHYLHZHGFRVWVFDSLWDOLVHGDVHQKDQFHPHQWVWRVRIWZDUHDYDLODEOHIRUVDOHDQGGHWHUPLQHGZKHWKHUVXFK HQKDQFHPHQWVPHWHDFKRIWKH¿YHFULWHULDIRUFDSLWDOLVDWLRQXQGHU,QWHUQDWLRQDO\$FFRXQWLQJ6WDQGDUG
:H LQVSHFWHG HYLGHQFH RI ZKHQ GHYHORSPHQW SURMHFWV ZHUH ¿UVW DYDLODEOH IRU VDOH E\ UHIHUHQFH WR SURGXFW ODXQFK demonstrations and correspondence with potential customers. We performed our own calculation of amortisation charges based on these dates and compared this with management's own calculations. We challenged the amortisation rates used by management against external benchmarking reports of companies operating in the sector, together with internal benchmarking based on legacy software.
• Goodwill and intangible impairment risk - as detailed in the accounting policies, goodwill and capitalised development costs during development are tested for impairment at least annually. Furthermore, once available for use, capitalised development costs are tested for impairment where an indicator of impairment arises. Management's review found no HYLGHQFHRILPSDLUPHQWLQWKHVRIWZDUHRUUHDOWLPH¿QDQFLDOVROXWLRQVFDVKJHQHUDWLQJXQLWV7KLVULVNLVFRQVLGHUHG VLJQL¿FDQWGXHWRWKHOHYHORI MXGJHPHQWLQYROYHGDQGWKHRSSRUWXQLW\IRUPDQDJHPHQWELDVZLWKLQWKHLPSDLUPHQW model assumptions.
We performed a review of the Group's goodwill and intangible assets and examined for indicators of impairment. We DOVR UHYLHZHG LPSDLUPHQW UHYLHZV SUHSDUHG E\PDQDJHPHQW VSHFL¿FDOO\ UHYLHZLQJ WKH LQWHJULW\ RIPDQDJHPHQW¶V value in use model and, with the assistance of our valuation specialists, we challenged the key inputs; those being IRUHFDVWJURZWKUDWHVRSHUDWLQJFDVKÀRZVDQGWKHGLVFRXQWUDWH2XUDXGLWSURFHGXUHVIRUWKHUHYLHZRIRSHUDWLQJ FDVKÀRZVLQFOXGHGDPRQJVWRWKHUVFRPSDULQJWKHIRUHFDVWWRUHFHQW¿QDQFLDOSHUIRUPDQFHDQGEXGJHWVDSSURYHG E\WKH%RDUG&DVKÀRZVIRUHFDVWIRUGHYHORSPHQWSURMHFWVZHUHDVVHVVHGIRUUHDVRQDEOHQHVVDJDLQVWNQRZQVDOHV pipeline opportunities. We also performed our own sensitivity analysis upon the key valuation inputs.
• 5HYHQXHDQGSUR¿WUHFRJQLWLRQZKLFKLVDSUHVXPHGIUDXGULVNXQGHU,6\$V8. ,UHODQG \$VGHWDLOHGLQWKHDFcounting policies, the Group earns revenue from sale of software licenses, rendering of services, subscriptions and PDLQWHQDQFHDQGVROXWLRQVDOHV0DQDJHPHQWH[HUFLVHMXGJHPHQWLQWKHLUDVVHVVPHQWRIWKHXOWLPDWHSUR¿WDELOLW\RI FRQWUDFWVDQGLQSDUWLFXODUWKHVWDJHRIFRPSOHWLRQZKLFKLVDNH\GULYHUIRUWKHUHFRJQLWLRQRIERWKUHYHQXHDQGSUR¿W
:H UHYLHZHGLQ GHWDLO WKH UHYHQXH UHFRJQLWLRQ SULQFLSOHV VXSSRUWLQJ WKH VLJQL¿FDQW QHZ FRQWUDFWVZULWWHQ DQG SHUformed during the year. We inspected particularly solution sales and assessed the appropriateness of unbundling revenue into separate components. We agreed a sample of sales and related costs of sales to supporting contracts and other documentation, including user acceptance evidence and statements of works.
The audit committee's consideration of these judgements is set out on page 23.
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,QSDUWLFXODUZHDUHUHTXLUHGWRFRQVLGHUZKHWKHUZHKDYHLGHQWL¿HGDQ\LQFRQVLVWHQFLHVEHWZHHQRXUNQRZOHGJHDFTXLUHG during the audit and the directors' statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that we communicated to the audit committee which we consider should have been disclosed.
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We have nothing to report in respect of these matters.
Paul Anthony (senior statutory auditor) For and on behalf of BDO LLP, statutory auditor
Southampton United Kingdom 23 March 2015
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
| Notes | 31 December 2014 | 31 December 2013 | ||||
|---|---|---|---|---|---|---|
| Total | Before exceptional items |
Exceptional items |
Total | |||
| £'000 | £'000 | £'000 | £'000 | |||
| CONTINUING OPERATIONS | ||||||
| Revenue | 3,4 | 12,832 | 14,048 | - | 14,048 | |
| Cost of goods sold | (3,409) | (3,773) | (3,773) | |||
| Gross profit | 9,423 | 10,275 | - | 10,275 | ||
| Administrative expenses | (8,991) | (8,340) | (298) | (8,638) | ||
| Operating profit | 5 | 432 | 1,935 | (298) | 1,637 | |
| Finance revenue | 3,8 | 36 | 27 | - | 27 | |
| Finance costs | 8 | (12) | (2) | (2) | ||
| Profit before taxation from continuing operations | 456 | 1,960 | (298) | 1,662 | ||
| Taxation | 9 | 639 | 618 | 618 | ||
| Profit after taxation from continuing operations | 23 | 1,095 | 2,578 | (298) | 2,280 | |
| DISCONTINUED OPERATIONS | ||||||
| Loss after taxation for the period from discontinued operations |
15 | - | (180) | - | (180) | |
| Attributable to owners of the parent | 23 | 1,095 | 2,398 | (298) | 2,100 | |
| Earnings per share - total | ||||||
| Basic earnings per share - pence | 10 | 1.77 | 4.11 | (0.51) | 3.60 | |
| Diluted earnings per share - pence | 10 | 1.62 | 3.70 | (0.46) | 3.24 | |
| Earnings per share - continuing | ||||||
| Basic earnings per share - pence | 10 | 1.77 | 4.42 | (0.51) | 3.91 | |
| Diluted earnings per share - pence | 10 | 1.62 | 3.98 | (0.46) | 3.52 |
| 31 December | 31 December | |
|---|---|---|
| 2014 | 2013 | |
| £'000 | £'000 | |
| Attributable profit for the year | 1,095 | 2,100 |
| Other comprehensive (expense) / income | ||
| Exchange differences on translation of foreign operations | (55) | (428) |
| Exchange differences transferred to income statement on disposal of subsidiary undertaking | - | 145 |
| (55) | (283) | |
| Total comprehensive income for the year | 1,040 | 1,817 |
The tax effect of exchange differences recorded within the Consolidated Statement of Comprehensive Income is a credit of FUHGLWRI
| Notes | 31 December | 31 December | |
|---|---|---|---|
| 2014 | 2013 | ||
| £'000 | £'000 | ||
| Assets | |||
| Non-current assets | |||
| Property, plant and equipment | 12 | 617 | 674 |
| Intangible assets | 13 | 8,313 | 5,495 |
| Deferred tax asset | 9 | 547 | 716 |
| 9,477 | 6,885 | ||
| Current assets | |||
| Trade and other receivables | 16 | 3,303 | 4,862 |
| Income tax receivable | 16 | 1,224 | 415 |
| C ash and cash equivalents | 17 | 4,707 | 4,386 |
| 9,234 | 9,663 | ||
| Total Assets | 18,711 | 16,548 | |
| Equity and Liabilities | |||
| Equity attributable to owners of the parent | |||
| Called up equity share capital | 21 | 3,162 | 3,027 |
| Share premium account | 23 | 16,522 | 15,906 |
| Other reserves | 23 | 313 | 313 |
| Foreign currency translation reserve | 23 | (38) | 17 |
| Retained earnings | 23 | (7,069) | (8,214) |
| Total Equity attributable to owners of the parent | 23 | 12,890 | 11,049 |
| Non-current liabilities | |||
| Deferred income | 18 | 82 | 188 |
| Provisions | 18 | 28 | 21 |
| 110 | 209 | ||
| Current liabilities | |||
| Trade and other payables | 18 | 5,645 | 5,248 |
| Income tax payable | 18 | 58 | 42 |
| Provisions | 18 | 8 | - |
| 5,711 | 5,290 | ||
| Total liabilities | 5,821 | 5,499 | |
| Total Equity and Liabilities | 18,711 | 16,548 |
7KH¿QDQFLDOVWDWHPHQWVZHUHDSSURYHGE\WKH%RDUGRI'LUHFWRUVDQGDXWKRULVHGIRULVVXHRQ0DUFK
On behalf of the Board
C Errington R Grubb 23 March 2015 23 March 2015
| Share capital £'000 |
Share premium £'000 |
Other reserves £'000 |
Currency translation £'000 |
Retained earnings £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|
| At 1 January 2013 | 2,907 | 13,124 | 1,039 | 300 | (11,226) | 6,144 |
| Attributable profit for the period | - | - | - | - | 2,100 | 2,100 |
| Other comprehensive expense | - | - | - | (283) | - | (283) |
| Total comprehensive income | - | - | - | (283) | 2,100 | 1,817 |
| Reserves transfer | - | - | (726) | - | 726 | - |
| Share issue proceeds | 120 | 2,880 | - | - | - | 3,000 |
| Share transaction costs | - | (98) | - | - | - | (98) |
| Share based payment expense | - | - | - | - | 186 | 186 |
| At 31 December 2013 | 3,027 | 15,906 | 313 | 17 | (8,214) | 11,049 |
| Attributable profit for the period | - | - | - | - | 1,095 | 1,095 |
| Other comprehensive expense | - | - | - | (55) | - | (55) |
| Total comprehensive income | - | - | - | (55) | 1,095 | 1,040 |
| Exercise of share options | 135 | 616 | - | - | - | 751 |
| Share based payment expense | - | - | - | - | 50 | 50 |
| At 31 December 2014 | 3,162 | 16,522 | 313 | (38) | (7,069) | 12,890 |
| 31 December | 31 December | ||
|---|---|---|---|
| Notes | 2014 | 2013 | |
| £'000 | £'000 | ||
| C ash flows from operating activities | |||
| Profit before taxation from continuing operations | 456 | 1,662 | |
| Loss before taxation from discontinued operations | - | (180) | |
| Profit before taxation | 456 | 1,482 | |
| Depreciation, amortisation and impairment | 5 | 692 | 820 |
| Share based payment expense | 22 | 50 | 186 |
| Decrease / (Increase) in trade and other receivables | 1,559 | (2,522) | |
| Increase in trade and other payables | 291 | 870 | |
| Movement in provisions | 18 | 15 | (160) |
| Loss on disposal of property, plant and equipment | 6 | 14 | |
| Loss on disposal of subsidiary undertaking | 15 | - | 185 |
| Net finance income | 8 | (24) | (25) |
| C ash inflow from operations | 3,045 | 850 | |
| Net income taxes received | 15 | 343 | |
| Net cash inflow from operating activities | 3,060 | 1,193 | |
| C ash flows from investing activities | |||
| Interest received | 8 | 36 | 27 |
| Other bank charges | (12) | - | |
| Purchase of property, plant and equipment | 12 | (244) | (557) |
| Payments to acquire intangible fixed assets | 13 | (3,238) | (2,271) |
| Disposal of subsidiary undertaking | 15 | - | 324 |
| Net cash used in investing activities | (3,458) | (2,477) | |
| C ash flows from financing activities | |||
| Share Issue | 21 | 751 | 2,902 |
| Net cash generated from financing activities | 751 | 2,902 | |
| Net increase in cash and cash equivalents | 353 | 1,618 | |
| C ash and cash equivalents at beginning of year | 4,386 | 2,891 | |
| Exchange adjustments | (32) | (123) | |
| Cash and cash equivalents at end of year | 17 | 4,707 | 4,386 |
Gresham Computing plc is a public limited company incorporated and domiciled in England and Wales. The Company's ordinary shares are traded as a premium listing on the London Stock Exchange.
7KH ¿QDQFLDO VWDWHPHQWV RI *UHVKDP &RPSXWLQJ SOF DQG LWV VXEVLGLDULHV WKH ³*URXS´ IRU WKH \HDU HQGHG December 2014 were authorised for issue by the Board of directors on 23 March 2015 and the statement of ¿QDQFLDOSRVLWLRQZDVVLJQHGRQWKH%RDUG¶VEHKDOIE\&(UULQJWRQDQG5*UXEE
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The principal accounting policies adopted by the Group are set out below.
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Development costs are accounted for in accordance with IAS 38 'Intangible Assets', and costs that meet the qualifying criteria are capitalised and systematically amortised over the useful economic life of the intangible asset. Determining whether development costs qualify for capitalisation as intangible assets requires judgement, including estimates of the technical and commercial viability of the asset created, and its applicable useful economic life. These estimates are continually reviewed and updated based on past experience and reviews of competitor products available in the market.
The capitalised development cost is disclosed in note 13 and the impairment review performed is disclosed in note 14.
The Group performs impairment reviews at the reporting period end to identify any intangible assets that have a carrying value that is in excess of its recoverable value. Determining the recoverability of an intangible asset requires judgement in both the methodology applied, and the key variables within that methodology. Where it is determined an intangible asset is impaired, its carrying value will be reduced to its recoverable value with the difference recorded as an impairment charge in the income statement.
The intangible asset impairment reviews are disclosed in note 14.
)L[HGSULFHFRQWUDFWVDUHDFFRXQWHG IRULQDFFRUGDQFHZLWK,\$6µ&RQVWUXFWLRQ&RQWUDFWV¶5HYHQXHDQGSUR¿WV are recognised on a percentage-of-completion basis, as costs incurred relate to total costs for the contract, when the outcome of a contract can be estimated reliably. Determining whether a contract's outcome can be estimated UHOLDEO\UHTXLUHVPDQDJHPHQWWRH[HUFLVHMXGJHPHQWZKLOVWFDOFXODWLRQRIWKHFRQWUDFW¶VSUR¿WUHTXLUHVHVWLPDWHV of the total contract costs to completion. Cost estimates and judgements are continually reviewed and updated as determined by events or circumstances.
Revenue recognised in the period is disclosed in note 3, with further analysis provided in note 4.
The assessment of the useful economic life of capitalised development costs is estimated by management based on past experience and reviews of competitor products available in the market.
7KH*URXS¿QDQFLDOVWDWHPHQWVFRQVROLGDWHWKH¿QDQFLDOVWDWHPHQWVRI*UHVKDP&RPSXWLQJSOFDQGWKHHQWLWLHVLW controls (its subsidiaries) drawn up to 31 December each year.
Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases at which point they are deconsolidated. &RQWUROFRPSULVHVWKHSRZHUWRJRYHUQWKH¿QDQFLDODQGRSHUDWLQJSROLFLHVRIWKHLQYHVWHHVRDVWRREWDLQEHQH¿W from its activities and is achieved through direct or indirect ownership of voting rights; currently exercisable or FRQYHUWLEOHSRWHQWLDOYRWLQJULJKWVRUE\ZD\RIFRQWUDFWXDODJUHHPHQW7KH¿QDQFLDOVWDWHPHQWVRIVXEVLGLDULHV are prepared for the same reporting year as the parent Company, using consistent accounting policies. All inter-FRPSDQ\EDODQFHVDQGWUDQVDFWLRQVLQFOXGLQJXQUHDOLVHGSUR¿WVDULVLQJIURPWKHPDUHHOLPLQDWHG
Transactions in foreign currencies are initially recorded in the functional currency by applying an approximation of the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in IRUHLJQFXUUHQFLHVDUHUHWUDQVODWHGDWWKHIXQFWLRQDOFXUUHQF\UDWHRIH[FKDQJHUXOLQJDWWKHVWDWHPHQWRI¿QDQFLDO position date. All differences are taken to the income statement, except when hedge accounting is applied and for differences on monetary assets and liabilities that form part of the Group's net investment in a foreign operation. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in SUR¿WRUORVV
The assets and liabilities of foreign operations are translated into sterling at the rate of exchange ruling at the VWDWHPHQWRI¿QDQFLDOSRVLWLRQGDWH,QFRPHDQGH[SHQVHVDUHWUDQVODWHGDWZHLJKWHGDYHUDJHH[FKDQJHUDWHVIRU the year. The resulting exchange differences are taken directly to a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.
On transition to IFRS from 1 January 2004, the exemption available under IFRS 1 was taken to start the currency translation reserve at nil.
Business combinations on or after 1 January 2004 have been accounted for under IFRS 3 using the purchase method. Any excess of the cost of the business combination over the Group's interest in the net fair value of WKHLGHQWL¿DEOHDVVHWVOLDELOLWLHVDQG FRQWLQJHQWOLDELOLWLHVLV UHFRJQLVHGLQ WKH VWDWHPHQWRI¿QDQFLDOSRVLWLRQDV JRRGZLOODQGLVQRWDPRUWLVHG7R WKHH[WHQW WKDW WKHQHW IDLUYDOXHRI WKHDFTXLUHGHQWLW\¶VLGHQWL¿DEOHDVVHWV liabilities and contingent liabilities is greater than the cost of the investment, a gain is recognised immediately in the income statement. Goodwill recognised as an asset as at 31 December 2003 is recorded at its carrying amount under UK GAAP and is not amortised. Any goodwill asset arising on the acquisition of equity accounted entities is included within the cost of those entities.
After initial recognition, goodwill is stated at cost less any accumulated impairment losses, with the carrying value being reviewed for impairment, at least annually and whenever events or changes in circumstances indicate that the carrying value may be impaired.
For the purpose of impairment testing, goodwill is allocated to the related cash-generating units monitored by management, usually at geographical segment level or statutory company level as the case may be. Where the recoverable amount of the cash-generating unit is less than its carrying amount, including goodwill, an impairment loss is recognised in the income statement.
The carrying amount of goodwill allocated to a cash-generating unit is taken into account when determining the gain or loss on disposal of the unit, or of an operation within it. Goodwill arising on acquisitions prior to 31 December 1997 remains set off directly against reserves even if the related investment becomes impaired or the business is disposed of.
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is UHÀHFWHGLQWKHLQFRPHVWDWHPHQWLQWKH\HDULQZKLFKWKHH[SHQGLWXUHLVLQFXUUHG
,QWDQJLEOHDVVHWVZLWK¿QLWHOLYHVDUHDPRUWLVHGRYHUWKHXVHIXOHFRQRPLFOLIHDQGDVVHVVHGIRULPSDLUPHQWZKHQHYHU there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation PHWKRGIRUDQLQWDQJLEOHDVVHWZLWKD¿QLWHXVHIXOOLIHLVUHYLHZHGDWOHDVWDWHDFK¿QDQFLDO\HDUHQG&KDQJHVLQ WKHH[SHFWHGXVHIXOOLIHRUWKHH[SHFWHGSDWWHUQRIFRQVXPSWLRQRIIXWXUHHFRQRPLFEHQH¿WVHPERGLHGLQWKHDVVHW is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in DFFRXQWLQJHVWLPDWHV7KHDPRUWLVDWLRQH[SHQVHRQLQWDQJLEOHDVVHWVZLWK¿QLWHOLYHVLVUHFRJQLVHGLQWKHLQFRPH statement in the expense category consistent with the function of the intangible asset.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.
3XUFKDVHGLQWDQJLEOHVZLWK¿QLWHOLYHVLQFOXGLQJSXUFKDVHGSDWHQWVNQRZKRZWUDGHPDUNVOLFHQFHVDQGGLVWULEXWLRQ rights are capitalised at cost and amortised on a straight line basis over their estimated useful lives. The estimated useful life of these intangible assets ranges between 2 and 10 years depending on their nature. Amortisation charges in respect of intangible assets are included in administrative expenses.
Research costs are expensed as incurred. Development expenditure on an individual project is recognised as an intangible asset when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will JHQHUDWHIXWXUHHFRQRPLFEHQH¿WVWKHDYDLODELOLW\RIUHVRXUFHVWRFRPSOHWHWKHDVVHWDQGWKHDELOLW\WRPHDVXUH reliably the expenditure during development.
Capitalised product development expenditure is stated at cost less accumulated amortisation and impairment losses. Product development costs that have been capitalised are amortised from the time the product or related enhancement become available for use as part of an version release issued to customers, on a straight-line basis over 6 to 20 years depending on the useful economic life of the asset assessed. During the period of development, the asset is tested for impairment annually.
Property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Cost comprises the aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended.
Depreciation is provided on all property, plant and equipment, other than freehold land, on a straight-line basis over LWVH[SHFWHGXVHIXOOLIHDVIROORZV
The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable, and are written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively.
\$QLWHPRISURSHUW\SODQWDQGHTXLSPHQWLVGHUHFRJQLVHGXSRQGLVSRVDORUZKHQQRIXWXUHHFRQRPLFEHQH¿WVDUH expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset is included in the income statement in the period of derecognition.
\$VVHWVKHOGXQGHU¿QDQFHOHDVHVZKLFK WUDQVIHU WR WKH*URXS VXEVWDQWLDOO\ DOO WKH ULVNV DQGEHQH¿WVLQFLGHQWDO to ownership of the leased item, are capitalised at the inception of the lease, with a corresponding liability being recognised for the lower of the fair value of the leased asset and the present value of the minimum lease payments. /HDVHSD\PHQWVDUHDSSRUWLRQHGEHWZHHQ WKHUHGXFWLRQRI WKHOHDVHOLDELOLW\DQG¿QDQFHFKDUJHVLQ WKHLQFRPH statement so as to achieve a constant rate of interest on the remaining balance of the liability. Assets held under ¿QDQFHOHDVHVDUHGHSUHFLDWHGRYHUWKHVKRUWHURIWKHHVWLPDWHGXVHIXOOLIHRIWKHDVVHWDQGWKHOHDVHWHUP
/HDVHVZKHUHWKHOHVVRUUHWDLQVDVLJQL¿FDQWSRUWLRQRIWKHULVNVDQGEHQH¿WVRIRZQHUVKLSRIWKHDVVHWDUHFODVVL¿HG as operating leases and rentals payable are charged in the income statement on a straight line basis over the lease term.
:KHUHWKH*URXSKDVVSDUHFDSDFLW\LQRI¿FHVKHOGXQGHURSHUDWLQJOHDVHVDQGZKHUHWKHKHDGOHDVHSHUPLWVWKH Group sub leases space acting in a lessor capacity. The rental income is recognised on a straight line basis over the lease term and shown separately from the Group's full obligation under the head operating lease.
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset GRHVQRWJHQHUDWHFDVKLQÀRZVWKDWDUHODUJHO\LQGHSHQGHQWRIWKRVHIURPRWKHUDVVHWVRU*URXSVRIDVVHWV:KHUH the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written GRZQWRLWVUHFRYHUDEOHDPRXQW,QDVVHVVLQJYDOXHLQXVHWKHHVWLPDWHGIXWXUHFDVKÀRZVDUHGLVFRXQWHGWRWKHLU SUHVHQWYDOXHXVLQJDSUHWD[GLVFRXQWUDWHWKDWUHÀHFWVFXUUHQWPDUNHWDVVHVVPHQWVRIWKHWLPHYDOXHRIPRQH\ DQGWKHULVNVVSHFL¿FWRWKHDVVHW,QGHWHUPLQLQJIDLUYDOXHOHVVFRVWVWRVHOODQDSSURSULDWHYDOXDWLRQPRGHOLV used, these calculations corroborated by valuation multiples, or other available fair value indicators. Impairment losses on continuing operations are recognised in the income statement in those expense categories consistent with the function of the impaired asset.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. Impairment charges on goodwill are considered permanent and cannot be reversed. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior \HDUV6XFKUHYHUVDOLVUHFRJQLVHGLQSUR¿WRUORVV\$IWHUVXFKDUHYHUVDOWKHGHSUHFLDWLRQFKDUJHLVDGMXVWHGLQ future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
A provision is recognised when the Group has a legal or constructive obligation as a result of a past event, it is SUREDEOHWKDWDQRXWÀRZRIHFRQRPLFEHQH¿WVZLOOEHUHTXLUHGWRVHWWOHWKHREOLJDWLRQDQGDUHOLDEOHHVWLPDWHFDQ EHPDGHRIWKHDPRXQWRIWKHREOLJDWLRQ,IWKHHIIHFWLVPDWHULDOH[SHFWHGIXWXUHFDVKÀRZVDUHGLVFRXQWHGXVLQJ DFXUUHQWSUHWD[UDWHWKDWUHÀHFWVZKHUHDSSURSULDWHWKHULVNVVSHFL¿FWRWKHOLDELOLW\
Where the Group expects some or all of a provision to be reimbursed, for example under an insurance policy, the reimbursement is recognised as a separate asset but only when recovery is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. Where discounting is used, the LQFUHDVHLQWKHSURYLVLRQGXHWRXQZLQGLQJWKHGLVFRXQWLVUHFRJQLVHGDVD¿QDQFHFRVW
Financial assets are recognised when the Group becomes party to the contracts that give rise to them and are FODVVL¿HGDV¿QDQFLDODVVHWVDWIDLUYDOXHWKURXJKSUR¿WRUORVVORDQVDQGUHFHLYDEOHVKHOGWRPDWXULW\LQYHVWPHQWV RU DV DYDLODEOHIRUVDOH ¿QDQFLDO DVVHWV DV DSSURSULDWH 7KH *URXS GHWHUPLQHV WKH FODVVL¿FDWLRQ RI LWV ¿QDQFLDO DVVHWVDWLQLWLDO UHFRJQLWLRQDQGZKHUHDOORZHGDQGDSSURSULDWH UHHYDOXDWHV WKLVGHVLJQDWLRQDWHDFK¿QDQFLDO \HDUHQG:KHQ¿QDQFLDODVVHWVDUHUHFRJQLVHGLQLWLDOO\WKH\DUHPHDVXUHGDWIDLUYDOXHEHLQJWKHWUDQVDFWLRQSULFH SOXVLQWKHFDVHRI¿QDQFLDODVVHWVQRWDWIDLUYDOXHWKURXJKSUR¿WRUORVVGLUHFWO\DWWULEXWDEOHWUDQVDFWLRQFRVWV 7KH*URXSFRQVLGHUVZKHWKHUDFRQWUDFWFRQWDLQVDQHPEHGGHGGHULYDWLYHZKHQWKHHQWLW\¿UVWEHFRPHVDSDUW\ to it. The embedded derivatives are separated from the host contract if it is not measured at fair value through SUR¿WRUORVVDQGZKHQWKHHFRQRPLFFKDUDFWHULVWLFVDQGULVNVDUHQRWFORVHO\UHODWHGWRWKRVHRIWKHKRVWFRQWUDFW 5HDVVHVVPHQWRQO\RFFXUVLIWKHUHLVDFKDQJHLQWKHWHUPVRIWKHFRQWUDFWWKDWVLJQL¿FDQWO\PRGL¿HVWKHFDVKÀRZV that would otherwise be required.
\$OO UHJXODU ZD\ SXUFKDVHV DQG VDOHV RI ¿QDQFLDO DVVHWV DUH UHFRJQLVHG RQ WKH WUDGH GDWH EHLQJ WKH GDWH WKDW the Group commits to purchase or sell the asset. Regular way transactions require delivery of assets within the timeframe generally established by regulation or convention in the market place. The subsequent measurement of ¿QDQFLDODVVHWVGHSHQGVRQWKHLUFODVVL¿FDWLRQDVIROORZV
/RDQVDQGUHFHLYDEOHVDUHQRQGHULYDWLYH¿QDQFLDODVVHWVZLWK¿[HGRUGHWHUPLQDEOHSD\PHQWVWKDWDUHQRWTXRWHG in an active market, do not qualify as trading assets and have not been designated as either fair value through SUR¿W RU ORVV RU DYDLODEOHIRUVDOH 6XFK DVVHWV DUH LQLWLDOO\ YDOXHG DW IDLU YDOXH DQG FDUULHG DW DPRUWLVHG FRVW XVLQJ WKH HIIHFWLYH LQWHUHVW PHWKRG LI WKH WLPH YDOXH RI PRQH\LV VLJQL¿FDQW *DLQV DQG ORVVHV DUH UHFRJQLVHG in the income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process.
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\$YDLODEOHIRUVDOH¿QDQFLDODVVHWVDUHWKRVHQRQGHULYDWLYH¿QDQFLDODVVHWVWKDWDUHGHVLJQDWHGDVDYDLODEOHIRUVDOH by the directors, taking into account the stage of any marketing or sales activity to promote an end sale. After initial UHFRJQLWLRQ DYDLODEOHIRUVDOH¿QDQFLDO DVVHWV DUHPHDVXUHG DW IDLU YDOXHZLWKJDLQV RUORVVHVEHLQJ UHFRJQLVHG within the Statement of Comprehensive Income until the investment is derecognised or until the investment is determined to be impaired at which time the cumulative gain or loss previously reported in equity is included in the Income Statement.
7KH*URXSDVVHVVHVDWHDFK VWDWHPHQWRI¿QDQFLDOSRVLWLRQGDWHZKHWKHUD¿QDQFLDODVVHWRU*URXSRI¿QDQFLDO assets is impaired.
If there is objective evidence that an impairment loss on assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of HVWLPDWHGIXWXUHFDVKÀRZVH[FOXGLQJIXWXUHFUHGLWORVVHVWKDWKDYHQRWEHHQLQFXUUHG GLVFRXQWHGDWWKH¿QDQFLDO asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced, through the use of an allowance account. The amount of the loss is recognised in administration costs.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.
Trade receivables are recognised and carried at the lower of their original invoiced value and recoverable amount. Where the time value of money is material, receivables are carried at amortised cost. Provision is made when there is objective evidence that the Group will not be able to recover balances in full. Balances are written off when the probability of recovery is assessed as being remote.
In relation to trade receivables, a provision for impairment is made when there is objective evidence (such as the SUREDELOLW\RILQVROYHQF\RUVLJQL¿FDQW¿QDQFHGLI¿FXOWLHVRIWKHGHEWRU WKDWWKH*URXSZLOOQRWEHDEOHWRFROOHFW all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired debts are derecognised when they are assessed as irrecoverable.
Amounts recoverable on contracts represent revenue recognised to date less amounts invoiced to clients. Full provision is made for known or anticipated project losses.
&DVKDQGVKRUWWHUPGHSRVLWVLQWKHVWDWHPHQWRI¿QDQFLDOSRVLWLRQFRPSULVHFDVKDWEDQNVDQGLQKDQGDQGVKRUW term deposits with an original maturity of three months or less.
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Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation DXWKRULWLHVEDVHGRQWD[UDWHVDQGODZVWKDWDUHHQDFWHGRUVXEVWDQWLYHO\HQDFWHGE\WKHVWDWHPHQWRI¿QDQFLDO position date.
R&D tax credits are recognised on an accruals basis and recorded as a credit in the taxation line of the Consolidated Income Statement.
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7KH FDUU\LQJ DPRXQW RI GHIHUUHG LQFRPH WD[ DVVHWV LV UHYLHZHG DW HDFK VWDWHPHQW RI ¿QDQFLDO SRVLWLRQ GDWH Deferred income tax assets and liabilities are offset, only if a legally enforceable right exists to set off current tax assets against current tax liabilities, the deferred income taxes relate to the same taxation authority and that authority permits the Group to make a single net payment.
Income tax is charged or credited to other comprehensive income or directly to equity if it relates to items that are credited or charged to other comprehensive income or directly to equity. Otherwise income tax is recognised in the income statement.
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7KH*URXSXVHVGHULYDWLYH¿QDQFLDOLQVWUXPHQWVVXFKDVIRUZDUGFXUUHQF\FRQWUDFWVWRKHGJHLWVULVNVDVVRFLDWHG ZLWKIRUHLJQFXUUHQF\ÀXFWXDWLRQV6XFKGHULYDWLYH¿QDQFLDOLQVWUXPHQWVDUHLQLWLDOO\UHFRJQLVHGDWIDLUYDOXHRQWKH date on which a derivative contract is entered into and are subsequently re-measured at fair value.
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Revenue, comprising sales of products and services to third parties, is recognised to the extent that it is probable WKDWWKHHFRQRPLFEHQH¿WVZLOOÀRZWRWKH*URXSDQGWKHUHYHQXHFDQEHUHOLDEO\PHDVXUHG5HYHQXHLVPHDVXUHG at the fair value of the consideration received, excluding discounts, rebates, VAT and other sales taxes. The IROORZLQJFULWHULDPXVWDOVREHPHWEHIRUHUHYHQXHLVUHFRJQLVHG
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5HYHQXHDQGSUR¿WV IURP WKHSURYLVLRQRISURIHVVLRQDOVHUYLFHVVXFKDVLPSOHPHQWDWLRQGHYHORSPHQW WUDLQLQJ and consultancy, are recognised on a percentage-of-completion basis, as costs incurred relate to total costs for the contract, when the outcome of a contract can be estimated reliably. Determining whether a contract's outcome FDQEHHVWLPDWHGUHOLDEO\UHTXLUHVPDQDJHPHQWWRH[HUFLVHMXGJHPHQWZKLOVWFDOFXODWLRQRIWKHFRQWUDFW¶VSUR¿W requires estimates of the total contract costs to completion. Cost estimates and judgements are continually reviewed and updated as determined by events or circumstances.
Revenue from subscription and maintenance services is recognised rateably over the period of the contract.
Contracts for the delivery of solutions with multiple elements, typically involving software licences, rendering of services, subscriptions and maintenance, hardware are unbundled where possible and revenue is recognised based on the accounting policy applicable to each constituent part.
Where objective unbundling of a solution is not possible, revenue is recognised as that proportion of the total FRQWUDFWYDOXHZKLFKFRVWVLQFXUUHGWRGDWHEHDUWRWRWDOH[SHFWHGFRVWVIRUWKDWFRQWUDFW3UR¿WLVUHFRJQLVHGRQ VXFKFRQWUDFWVLIWKH¿QDORXWFRPHFDQEHDVVHVVHGZLWKUHDVRQDEOHFHUWDLQW\E\LQFOXGLQJLQWKHLQFRPHVWDWHPHQW revenue and related costs as contract activity progresses.
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Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease term.
Pre-contract costs are expensed as incurred until the Group is appointed preferred bidder. Preferred bidder status SURYLGHVVXI¿FLHQWFRQ¿GHQFHWKDWWKHFRQFOXVLRQRIWKHFRQWUDFWLVSUREDEOHWKHRXWFRPHFDQEHUHOLDEO\PHDVXUHG DQGLVH[SHFWHGWRJHQHUDWHVXI¿FLHQWQHWFDVKLQÀRZVWRHQDEOHUHFRYHU\3UHFRQWUDFWFRVWVLQFXUUHGVXEVHTXHQW to appointment as preferred bidder are capitalised onto the balance sheet under prepayments and accrued income. The prepayment is expensed to the income statement over the period of the contract. Costs, which have been expensed, are not subsequently reinstated when a contract award is achieved.
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award.
Fair value of awards with a market condition based performance target is determined by an external valuer using a Monte Carlo simulation pricing model. In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the Company (market conditions).
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No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is VDWLV¿HGSURYLGHGWKDWDOORWKHUYHVWLQJFRQGLWLRQVDUHVDWLV¿HG
\$WHDFKVWDWHPHQWRI¿QDQFLDOSRVLWLRQGDWHEHIRUHYHVWLQJWKHFXPXODWLYHH[SHQVHLVFDOFXODWHGUHSUHVHQWLQJWKH extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market conditions and of the number of equity instruments that will ultimately vest or, in the case of an instrument subject to a market condition, be treated as vesting as described above. The movement in cumulative H[SHQVH VLQFH WKH SUHYLRXV VWDWHPHQW RI ¿QDQFLDO SRVLWLRQ GDWH LV UHFRJQLVHG LQ WKH LQFRPH VWDWHPHQW ZLWK D corresponding entry in equity.
:KHUHWKHWHUPVRIDQHTXLW\VHWWOHGDZDUGDUHPRGL¿HGRUDQHZDZDUGLVGHVLJQDWHGDVUHSODFLQJDFDQFHOOHG or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair YDOXHRIDQ\PRGL¿FDWLRQEDVHGRQWKHGLIIHUHQFHEHWZHHQWKHIDLUYDOXHRIWKHRULJLQDODZDUGDQGWKHIDLUYDOXHRI WKHPRGL¿HGDZDUGERWKDVPHDVXUHGRQWKHGDWHRIWKHPRGL¿FDWLRQ1RUHGXFWLRQLVUHFRJQLVHGLIWKLVGLIIHUHQFH is negative.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the income statement for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair value being treated as an expense in the income statement.
The share-based payment expense is recognised as a staff cost and the associated credit entry is made against equity.
The Group has taken advantage of the exemption in IFRS 1 in respect of equity-settled awards so as to apply IFRS 2 only to those equity-settled awards granted after 7 November 2002 that had not vested before 1 January 2005.
([FHSWLRQDOLWHPVDUHGLVFORVHGVHSDUDWHO\LQ WKH¿QDQFLDOVWDWHPHQWVZKHUHLWLVQHFHVVDU\ WRGRVR WRSURYLGH IXUWKHUXQGHUVWDQGLQJRIWKH¿QDQFLDOSHUIRUPDQFHRIWKH*URXS7KH\DUHPDWHULDOLWHPVRILQFRPHRUH[SHQVHWKDW KDYHEHHQVKRZQVHSDUDWHO\GXHWRWKHVLJQL¿FDQFHRIWKHLUQDWXUHRUDPRXQW
7KHDFFRXQWLQJSROLFLHVDGRSWHGDUHFRQVLVWHQWZLWKWKRVHRIWKHSUHYLRXV¿QDQFLDO\HDU
7KHIROORZLQJQHZVWDQGDUGVKDYHEHHQDGRSWHGDQGDUHHIIHFWLYHIRUWKHFXUUHQW\HDU
| • IFRS 10 - |
Amendments for investment entities |
|---|---|
| ------------------- | ------------------------------------ |
7KHDGRSWLRQRIWKHVHSURQRXQFHPHQWVKDVQRWLPSDFWHGWKHFODVVL¿FDWLRQRUPHDVXUHPHQWRIWKH*URXS¶VDVVHWV DQGOLDELOLWLHVQRUKDVLWUHVXOWHGLQDQ\DGGLWLRQDOGLVFORVXUH
IASB and IFRIC have issued the following relevant standards and interpretations with an effective date after the GDWHRIWKHVH¿QDQFLDOVWDWHPHQWV
| Standard or interpretation |
Title | Effective from |
|---|---|---|
| IFRS 2 | Amendments for Annual Improvements to IFRSs 2010-2012 Cycle GH¿QLWLRQRIYHVWLQJFRQGLWLRQ |
1 July 2014 |
| IFRS 3 | Amendments for Annual Improvements to IFRSs 2010-2012 Cycle FRQWLQJHQWFRQVLGHUDWLRQ |
1 July 2014 |
| IFRS 3 | Amendments for Annual Improvements to IFRSs 2011-2013 Cycle VFRSHH[FHSWLRQIRUMRLQWYHQWXUHV |
1 July 2014 |
| IFRS 7 | Financial instruments disclosures Annual Improvements WR&\FOH |
1 January 2015 |
| IFRS 8 | Amendments resulting from Annual Improvements 2010-2012 Cy FOHDJJUHJDWLRQRIVHJPHQWVUHFRQFLOLDWLRQRIVHJPHQWDVVHWV |
1 July 2014 |
| IFRS 9 | )LQDOLVHG YHUVLRQ LQFRUSRUDWLQJ UHTXLUHPHQWV IRU FODVVL¿FDWLRQ and measurement, impairment, general hedge accounting and GHUHFRJQLWLRQ |
1 January 2018 |
| IFRS 13 | Amendments resulting from Annual Improvements 2011-2013 Cy FOHVFRSHRIWKHSRUWIROLRH[FHSWLRQLQSDUDJUDSK |
1 July 2014 |
| IFRS 14 | Original issue | 1 January 2016 |
| IFRS 15 | Original issue | 1 January 2017 |
| IAS 1 | Amendments resulting from the disclosure initiative | 1 January 2016 |
| Standard or interpretation |
Title | Effective from |
|---|---|---|
| IAS 16 | Amendments resulting from Annual Improvements 2010-2012 Cycle (proportionate restatement of accumulated depreciation on revaluation) |
1 July 2014 |
| IAS 16 | \$PHQGPHQWVUHJDUGLQJWKHFODUL¿FDWLRQRIDFFHSWDEOHPHWKRGVRI depreciation and amortisation |
1 January 2016 |
| IAS 24 | Amendments resulting from Annual Improvements 2010-2012 Cy cle (management entities) |
1 July 2014 |
| IAS 27 | Amendments reinstating the equity method as an accounting op tion for investments in subsidiaries, joint ventures and associates LQDQHQWLW\¶VVHSDUDWH¿QDQFLDOVWDWHPHQWV |
1 January 2016 |
| IAS 34 | Amendments resulting from September 2014 Annual Improve ments to IFRSs |
1 January 2016 |
| IAS 38 | Amendments resulting from Annual Improvements 2010-2012 Cycle (proportionate restatement of accumulated depreciation on revaluation) |
1 July 2014 |
| IAS 38 | \$PHQGPHQWVUHJDUGLQJWKHFODUL¿FDWLRQRIDFFHSWDEOHPHWKRGVRI depreciation and amortisation |
1 January 2016 |
The Directors do not anticipate that the adoption of the remaining standards and interpretations will have a PDWHULDOLPSDFWRQWKH*URXS¶V¿QDQFLDOVWDWHPHQWVLQWKHSHULRGRILQLWLDODSSOLFDWLRQ
The effective dates stated here are those given in the original IASB/IFRIC standards and interpretations. As the *URXSSUHSDUHVLWV¿QDQFLDOVWDWHPHQWVLQDFFRUGDQFHZLWK,)56DVDGRSWHGE\WKH(XURSHDQ8QLRQWKHDSSOLFDWLRQ of new standards and interpretations will be subject to their having been endorsed for use in the EU via the EU Endorsement mechanism. In the majority of cases this will result in an effective date consistent with that given in the original standard or interpretation but the need for endorsement restricts the Group's discretion to early adopt standards.
5HYHQXHIURPFRQWLQXLQJRSHUDWLRQVGLVFORVHGLQWKHLQFRPHVWDWHPHQWLVDQDO\VHGDVIROORZV
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Rendering of services | 12,832 | 14,024 |
| Rental income | - | 24 |
| 12,832 | 14,048 | |
| Finance revenue | 36 | 27 |
| 12,868 | 14,075 |
7KHVHJPHQWDOGLVFORVXUHVUHÀHFWWKHDQDO\VLVSUHVHQWHGRQDPRQWKO\EDVLVWRWKHFKLHIRSHUDWLQJGHFLVLRQPDNHU RIWKHEXVLQHVVWKH&KLHI([HFXWLYH2I¿FHUDQGWKH%RDUGRI'LUHFWRUV
,QDGGLWLRQVSOLWRIUHYHQXHVDQGQRQFXUUHQWDVVHWVE\8.DQGRYHUVHDVKDYHEHHQLQFOXGHGDVWKH\DUHVSHFL¿FDOO\ required by IFRS 8 Operating Segments.
)RUPDQDJHPHQWSXUSRVHVWKH*URXSLVRUJDQLVHGLQWRWKHIROORZLQJUHSRUWDEOHVHJPHQWVDVIROORZV
"RTFS" refers to Real Time Financial Solutions, and "EMEA" refers to Europe, Middle East and Africa.
Transfer prices between segments are set on an arm's length basis in a manner similar to transactions with third parties. Segment revenue, segment expense and segment result include transfers between business segments. Those transfers are eliminated on consolidation.
5HYHQXH DQG 3UR¿W ORVV DIWHU WD[DWLRQ IRU WKH \HDU HQGHG 'HFHPEHU KDV EHHQ DGMXVWHG WR UHÀHFW discontinued operations to align with presentation of these line items in the Consolidated Income Statement. There are no discontinued operations for the year ended 31 December 2014.
| North | Adjustments, | ||||
|---|---|---|---|---|---|
| Software | America RTFS |
RTFS | central & eliminations |
Consolidated | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenue | |||||
| External customer | 2,421 | - | 10,411 | - | 12,832 |
| Inter-segment | - | - | - | - | - |
| Total revenue | 2,421 | - | 10,411 | - | 12,832 |
| Interest revenue | - | - | - | 36 | 36 |
| Interest expense | - | - | - | (12) | (12) |
| Depreciation | (21) | - | (271) | - | (292) |
| Amortisation | - | - | (400) | - | (400) |
| Impairment (Exceptional item) | - | - | - | - | - |
| Profit / (loss) before taxation from continuing operations |
2,056 | - | (994) | (606) | 456 |
| Taxation | - | - | - | 639 | 639 |
| Profit / (loss) after taxation from continuing operations |
2,056 | - | (994) | 33 | 1,095 |
| Profit / (loss) after taxation from discontinued operations |
- | - | - | - | - |
| Profit / (loss) after taxation | 2,056 | - | (994) | 33 | 1,095 |
| Segment assets | 627 | - | 11,558 | 6,526 | 18,711 |
| Segment liabilities | (674) | - | (5,016) | (131) | (5,821) |
| North America |
Adjustments, central & |
||||
|---|---|---|---|---|---|
| Software | RTFS | RTFS | eliminations | Consolidated | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenue | |||||
| External customer | 2,524 | - | 11,524 | - | 14,048 |
| Inter-segment | - | - | - | - | - |
| Total revenue | 2,524 | - | 11,524 | - | 14,048 |
| Interest revenue | - | - | - | 27 | 27 |
| Interest expense | - | - | - | 2 | 2 |
| Depreciation | (5) | - | (252) | - | (257) |
| Amortisation | (36) | - | (222) | - | (258) |
| Impairment (Exceptional item) | - | - | (298) | - | (298) |
| Profit / (loss) before taxation from continuing operations |
1,926 | - | 364 | (628) | 1,662 |
| Taxation | - | - | - | 618 | 618 |
| Profit / (loss) after taxation from continuing operations |
1,926 | - | 364 | (10) | 2,280 |
| Profit / (loss) after taxation from discontinued operations |
- | (180) | - | - | (180) |
| Profit / (loss) after taxation | 1,926 | (180) | 364 | (10) | 2,100 |
| Segment assets | 651 | - | 10,375 | 5,522 | 16,548 |
| Segment liabilities | (657) | - | (4,654) | (188) | (5,499) |
The Group has customer relationships with two banking customers within its EMEA RTFS segment and a banking customer within its APAC RTFS segment, all three of which are considered by the directors to be individually VLJQL¿FDQWUHODWLRQVKLSVUHYHQXHIURPWKHVHUHODWLRQVKLSVERWKLQGLYLGXDOO\H[FHHGHGRIWKH*URXS¶VUHYHQXH
6HJPHQWSUR¿WORVV UHSUHVHQWVHJPHQWSUR¿WDIWHU WD[SULRU WRDGMXVWPHQWV IRUUHDOORFDWLRQRIVKDUHRSWLRQ charges.
,QZHFORVHGRXUSD\DEOHV¿QDQFLQJEXVLQHVVZKLFKZDVSDUWRIRXU57)6VHJPHQWEXWKDGLQVXI¿FLHQWJURZWK prospects and we are no longer selling. We recognised an impairment charge in the Group income statement of £298,000 in respect of this closure, which is disclosed as an Exceptional item. There were no exceptional items for the year ended 31 December 2014.
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| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Revenues from external customers (by destination) | ||
| EMEA | 7,241 | 6,397 |
| North America | 786 | 1,041 |
| Asia Pacific | 4,805 | 6,610 |
| 12,832 | 14,048 | |
| £'000 | £'000 | |
| Non-current assets | ||
| UK | 8,612 | 5,991 |
| North America | 82 | 35 |
| Asia Pacific | 783 | 859 |
| 9,477 | 6,885 |
Non-current assets consist of property, plant & equipment, intangible assets, and deferred tax assets.
EMEA includes revenue from external customers located primarily in the UK, Germany, Switzerland & Austria.
\$VLD3DFL¿FLQFOXGHVUHYHQXHIURPH[WHUQDOFXVWRPHUVORFDWHGSULPDULO\LQ\$XVWUDOLD0DOD\VLD 6LQJDSRUH
The following disclosures in respect of Consolidated Income Statement items are presented in respect of continuing operations only, with the comparatives restated where appropriate to exclude discontinued operations from these disclosures.
7KH*URXSWUDGLQJSUR¿WLVVWDWHGDIWHUFKDUJLQJFUHGLWLQJ
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Research and development costs written off | 98 | 64 |
| Amortisation of deferred development costs recognised in admin expenses | 329 | 224 |
| Total research and development costs | 427 | 288 |
| Depreciation of property, plant and equipment | 292 | 257 |
| Impairment of deferred development costs recognised in admin expenses (note 13) | - | 298 |
| Amortisation of intangible assets (excluding development costs) | 71 | 34 |
| Total depreciation, impairment and amortisation expense | 363 | 589 |
| Net foreign currency differences - (losses) / gains | (108) | (47) |
| Operating lease payments | ||
| Minimum lease payments | 429 | 408 |
| Sublease income | (23) | (24) |
| 406 | 384 | |
,QZHFORVHGRXUSD\DEOHV¿QDQFLQJEXVLQHVVZKLFKZDVSDUWRIRXU57)6VHJPHQWEXWKDGLQVXI¿FLHQWJURZWK prospects and we are no longer selling. We recognised an impairment charge in the Group income statement of £298,000 in respect of this closure, which is disclosed as an Exceptional item. There were no exceptional items for the year ended 31 December 2014.
7KH*URXSSDLGWKHIROORZLQJDPRXQWVWRLWVDXGLWRUVLQUHVSHFWRIWKHDXGLWRIWKH¿QDQFLDOVWDWHPHQWVDQGIRURWKHU services provided to the Group.
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Audit fees | ||
| Audit of the group financial statements | 18 | 20 |
| Other fees to auditors - auditing the accounts of subsidiaries | 38 | 37 |
| 56 | 57 | |
| Non-audit fees | ||
| Corporate taxation services | 79 | 25 |
| Other | 2 | 7 |
| 81 | 32 |
There were no separate amounts payable to the Group's auditor from discontinued operations in either 2014 or 2013.
The following disclosures in respect of Consolidated Income Statement items are presented in respect of continuing operations only.
| 31 December 2014 | Income Statement |
Development Capitalised |
Total |
|---|---|---|---|
| £'000 | £'000 | £'000 | |
| Wages and salaries | 5,372 | 2,131 | 7,503 |
| Social security costs | 485 | 251 | 736 |
| Other pension costs | 257 | 72 | 329 |
| 6,114 | 2,454 | 8,568 |
| 31 December 2013 | Income Statement |
Development Capitalised |
Total |
|---|---|---|---|
| £'000 | £'000 | £'000 | |
| Wages and salaries | 5,255 | 1,259 | 6,514 |
| Social security costs | 425 | 152 | 577 |
| Other pension costs | 251 | 49 | 300 |
| 5,931 | 1,460 | 7,391 |
,QFOXGHGLQ:DJHVDQGVDODULHVLVDWRWDOH[SHQVHRIVKDUHEDVHGSD\PHQWVRI DOORI which arises from transactions accounted for as equity-settled share-based payment transactions.
7KHDYHUDJHPRQWKO\QXPEHURIHPSOR\HHVGXULQJWKH\HDUZDVPDGHXSDVIROORZV
| 2014 | 2013 | |
|---|---|---|
| Management | 8 | 8 |
| Sales & Administration | 21 | 17 |
| Technical | 79 | 71 |
| 108 | 96 |
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Directors' emoluments | ||
| Remuneration | 377 | 358 |
| Social security costs | 35 | 34 |
| Pension | 13 | 12 |
| Share based payments | - | 91 |
| 425 | 495 | |
| Number of directors accruing benefits under defined contribution schemes | 2 | 2 |
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Finance revenue | ||
| Bank interest receivable | 36 | 27 |
| Total finance revenue | 36 | 27 |
| Finance costs | ||
| Other bank charges | 12 | - |
| Finance charge on provisions | - | 2 |
| Total finance costs | 12 | 2 |
7KHUHZDVQR¿QDQFHUHYHQXHRUFRVWVIURPGLVFRQWLQXHGRSHUDWLRQVLQHLWKHURU
The following disclosures in respect of Consolidated Income Statement items are presented in respect of continuing operations only.
Tax credited in the income statement
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Current income tax | ||
| Overseas tax charge / (credit) - adjustment to previous years | (29) | - |
| Overseas tax charge / (credit) - current year | 69 | - |
| UK Corporation tax charge / (credit) - adjustment to previous years | 29 | - |
| UK Corporation tax charge / (credit) - current year | (877) | (375) |
| Total current income tax | (808) | (375) |
| Deferred income tax | ||
| Derecognition / (recognition) of deferred tax asset | 93 | (257) |
| Tax rate change adjustments | 76 | 14 |
| Total deferred income tax | 169 | (243) |
| Total credit in the income statement | (639) | (618) |
The tax credit in the income statement for the year is lower than the standard rate of corporation tax in the UK of ± 7KHGLIIHUHQFHVDUHUHFRQFLOHGEHORZ
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Profit after taxation - from continuing operations | 456 | 1,662 |
| Accounting profit multiplied by the UK standard rate of | ||
| corporation tax of 21.5% / 23.25% | 98 | 386 |
| Expenses not deductible for tax purposes | 12 | 25 |
| Loss on disposal not deductible for tax purposes | - | 78 |
| Differences in tax rates | 65 | (1) |
| Overseas tax charge / (credit) - adjustment to previous years | (29) | - |
| R&D tax credit - previous year | 29 | - |
| R&D tax credit - current year | (877) | (376) |
| Losses surrendered for R&D tax credit - current year | 1,358 | 795 |
| R&D enhanced relief | (755) | (549) |
| Movement in unrecognised losses carried forward | 449 | (716) |
| Movement in unrecognised temporary differences | (643) | (360) |
| Movement in unrecognised fixed asset temporary differences | 44 | 43 |
| Temporary difference on share based payments | (537) | 43 |
| Prior year adjustments on recognised deferred tax | 71 | - |
| Tax rate change adjustments | 76 | 14 |
| Total tax credit reported in the income statement | (639) | (618) |
7KH*URXSKDVWD[ORVVHVWKDWDUHDYDLODEOHLQGH¿QLWHO\IRURIIVHWDJDLQVWIXWXUHWD[DEOHSUR¿WVRIWKHFRPSDQLHVLQ which the losses arose as analysed in (e) below. Deferred tax assets have not been recognised in respect of these ORVVHVDVWKH\PD\QRWEHXVHGWRRIIVHWWD[DEOHSUR¿WVHOVHZKHUHLQWKH*URXSDQGWKH\KDYHDULVHQLQVXEVLGLDULHV that have been loss-making for some time.
The tax effect of exchange differences recorded within the Consolidated Statement of Comprehensive Income is a FUHGLWRIFUHGLWRI
\$W'HFHPEHUWKHUHZDVQRUHFRJQLVHGGHIHUUHGWD[OLDELOLW\1LO IRUWD[HVWKDWZRXOGEHSD\DEOH on the un-remitted earnings of certain of the Group's subsidiaries, as the Group has determined that undistributed SUR¿WVRILWVVXEVLGLDULHVZLOOQRWEHGLVWULEXWHGLQWKHIRUHVHHDEOHIXWXUH
The temporary differences associated with investments in subsidiaries for which deferred tax liability has not been UHFRJQLVHGDJJUHJDWHWRQLOQLO
Recognised deferred tax
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| 1 January | 716 | 473 |
| Movement in the period | (93) | 257 |
| Impact of change in tax rate | (76) | (14) |
| 31 December | 547 | 716 |
A deferred tax charge of £93,000 has been recognised in the year in respect of tax losses and capital allowances in excess of depreciation and other temporary differences.
7KHGHIHUUHGWD[QRWUHFRJQLVHGLQWKH*URXSVWDWHPHQWRI¿QDQFLDOSRVLWLRQLVDVIROORZV
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Temporary differences | (921) | 878 |
| Tax losses | 2,291 | 1,600 |
| Unrecognised deferred tax asset | 1,370 | 2,478 |
| Gross temporary differences unrecognised | (4,913) | 4,391 |
| Gross tax losses unrecognised | 10,140 | 6,841 |
| Gross deferred tax asset unrecognised | 5,227 | 11,232 |
The Group's recognised and unrecognised deferred tax assets in the UK, Australian and US subsidiaries have been VKRZQDW RI WKHJURVVYDOXH UHVSHFWLYHO\ UHVSHFWLYHO\ EHLQJ WKH substantively enacted rates in these countries.
The following disclosures in respect of Consolidated Income Statement items are presented in respect of total and continuing operations, with the comparatives restated where appropriate to exclude discontinued operations from these disclosures.
%DVLFHDUQLQJVSHUVKDUHDPRXQWVDUHFDOFXODWHGE\GLYLGLQJQHWSUR¿WRUORVVIRUWKH\HDUDWWULEXWDEOHWRRZQHUVRI the parent by the weighted average number of ordinary shares outstanding during the year.
'LOXWHGHDUQLQJVSHUVKDUHDPRXQWVDUHFDOFXODWHGE\GLYLGLQJWKHQHWSUR¿WRUORVVDWWULEXWDEOHWRRZQHUVRIWKH parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares except when such dilutive instruments would reduce the loss per share.
7KHIROORZLQJUHÀHFWVWKHHDUQLQJVDQGVKDUHGDWDXVHGLQWKHEDVLFDQGGLOXWHGHDUQLQJVSHUVKDUHFRPSXWDWLRQV
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Basic weighted average number of shares | 61,992,825 | 58,300,362 |
| Dilutive potential ordinary shares: | ||
| Employee share options - weighted (note 22) | 5,468,653 | 6,425,500 |
| Diluted weighted average number of shares | 67,461,478 | 64,725,862 |
| 31 December 2014 | 31 December 2013 | |||
|---|---|---|---|---|
| Total £'000 |
Before exceptional items £'000 |
Exceptional items £'000 |
Total £'000 |
|
| Earnings attributable to owners of the parent - total | 1,095 | 2,398 | (298) | 2,100 |
| Earnings attributable to owners of the parent - continuing | 1,095 | 2,578 | (298) | 2,280 |
| Earnings per share - total Basic earnings per share - pence Diluted earnings per share - pence Earnings per share - continuing Basic earnings per share - pence Diluted earnings per share - pence |
1.77 1.62 1.77 1.62 |
3.87 3.55 4.16 3.82 |
(0.48) (0.44) (0.48) (0.44) |
3.39 3.11 3.68 3.38 |
| Earnings per share - discontinued Basic earnings per share - pence Diluted earnings per share - pence |
- - |
(0.29) (0.27) |
- - |
(0.29) (0.27) |
During the year-ended 31 December 2014, share options granted under the 2010 Share Option Plans were exercised DQGWKH*URXSLVVXHGQRQH RUGLQDU\VKDUHVDFFRUGLQJO\UDQNLQJSDULSDVVXZLWKH[LVWLQJVKDUHV in issue). See note 22 of the Group Financial Statements for further details.
On 6 December 2013, the Group issued 2,400,000 new ordinary shares (ranking pari passu with existing shares in issue) via a placing to institutional shareholders to contribute to accelerating growth. The shares were issued at a placing price of £1.25 pence raising £2,902,000, after expenses of £98,000.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of this Annual Financial Report.
1RGLYLGHQGVZHUHGHFODUHGRUSDLGGXULQJWKH\HDUDQGQRGLYLGHQGVDUHSURSRVHGIRUDSSURYDODWWKH\$*0 None).
31 December 2014
| Fixtures | Plant and | ||
|---|---|---|---|
| and fittings | equipment | Total | |
| £'000 | £'000 | £'000 | |
| Cost: | |||
| At 1 January 2014 | 562 | 797 | 1,359 |
| Additions | 62 | 182 | 244 |
| Disposals | (47) | (236) | (283) |
| Exchange adjustment | (5) | (5) | (10) |
| At 31 December 2014 | 572 | 738 | 1,310 |
| Depreciation and impairment: | |||
| At 1 January 2014 | (151) | (534) | (685) |
| Charge for year | (133) | (159) | (292) |
| Disposals | 47 | 230 | 277 |
| Exchange adjustment | 3 | 4 | 7 |
| At 31 December 2014 | (234) | (459) | (693) |
| Net carrying amount: | |||
| At 31 December 2014 | 338 | 279 | 617 |
| At 1 January 2014 | 411 | 263 | 674 |
| Fixtures | Plant and | ||
|---|---|---|---|
| and fittings | equipment | Total | |
| £'000 | £'000 | £'000 | |
| Cost: | |||
| At 1 January 2013 | 394 | 1,040 | 1,434 |
| Additions | 464 | 215 | 679 |
| Disposals | (227) | (131) | (358) |
| Disposal of subsidiary (note 15) | (39) | (295) | (334) |
| Exchange adjustment | (30) | (32) | (62) |
| At 31 December 2013 | 562 | 797 | 1,359 |
| Depreciation and impairment: | |||
| At 1 January 2013 | (271) | (836) | (1,107) |
| Charge for year | (135) | (124) | (259) |
| Disposals | 213 | 131 | 344 |
| Disposal of subsidiary (note 15) | 36 | 283 | 319 |
| Exchange adjustment | 6 | 12 | 18 |
| At 31 December 2013 | (151) | (534) | (685) |
| Net carrying amount: | |||
| At 31 December 2013 | 411 | 263 | 674 |
| At 1 January 2013 | 123 | 204 | 327 |
| Development | Patents and | |||
|---|---|---|---|---|
| costs | licences | Goodwill | Total | |
| £'000 | £'000 | £'000 | £'000 | |
| Cost: | ||||
| At 1 January 2014 | 9,100 | 1,429 | 925 | 11,454 |
| Additions | 3,099 | 139 | - | 3,238 |
| Exchange adjustment | 2 | - | (22) | (20) |
| At 31 December 2014 | 12,201 | 1,568 | 903 | 14,672 |
| Amortisation and impairment: | ||||
| At 1 January 2014 | (4,644) | (1,065) | (250) | (5,959) |
| Charge for year | (329) | (71) | - | (400) |
| Exchange adjustment | (2) | 2 | - | - |
| At 31 December 2014 | (4,975) | (1,134) | (250) | (6,359) |
| Net carrying amount: | ||||
| At 31 December 2014 | 7,226 | 434 | 653 | 8,313 |
| At 1 January 2014 | 4,456 | 364 | 675 | 5,495 |
| Development | Patents and | |||
|---|---|---|---|---|
| costs | licences | Goodwill | Total | |
| £'000 | £'000 | £'000 | £'000 | |
| Cost: | ||||
| At 1 January 2013 | 7,846 | 1,050 | 1,064 | 9,960 |
| Additions | 1,890 | 381 | - | 2,271 |
| Disposal of subsidiary (note 15) | (618) | - | - | (618) |
| Exchange adjustment | (18) | (2) | (139) | (159) |
| At 31 December 2013 | 9,100 | 1,429 | 925 | 11,454 |
| Amortisation and impairment: | ||||
| At 1 January 2013 | (4,541) | (1,031) | (250) | (5,822) |
| Charge for year | (229) | (34) | - | (263) |
| Impairment | (298) | - | - | (298) |
| Disposal of subsidiary (note 15) | 406 | - | - | 406 |
| Exchange adjustment | 18 | - | - | 18 |
| At 31 December 2013 | (4,644) | (1,065) | (250) | (5,959) |
| Net carrying amount: | ||||
| At 31 December 2013 | 4,456 | 364 | 675 | 5,495 |
| At 1 January 2013 | 3,305 | 19 | 814 | 4,138 |
Development costs are internally generated and are capitalised at cost. These intangible assets have been assessed DVKDYLQJD¿QLWHOLIHDQGDUHDPRUWLVHGRQDVWUDLJKWOLQHEDVLVRYHUWKHLUXVHIXOOLYHVRIWR\HDUV7KHVHDVVHWV are tested for impairment where an indicator of impairment arises and annually prior to them being made available for use. Development costs have a remaining life of 18 years.
,QZHFORVHGRXUSD\DEOHV¿QDQFLQJEXVLQHVVZKLFKKDGLQVXI¿FLHQWJURZWKSURVSHFWVDQGZHDUHQRORQJHU selling. We recognised an impairment charge in the Group income statement of £298,000 in respect of this closure, which is disclosed as an Exceptional item. The value of the impairment charge is equal to the carrying value of the DVVHWDWWKHSRLQWRILPSDLUPHQW7KHSD\DEOHV¿QDQFLQJEXVLQHVVWKHLPSDLUPHQWUHODWHVWRZDVSDUWRIRXU\$VLD RTFS segment.
Patents and licences are the third party costs incurred in seeking and obtaining protection for certain of the Group's SURGXFWVDQGVHUYLFHV7KHVHLQWDQJLEOHDVVHWVKDYHEHHQDVVHVVHGDVKDYLQJD¿QLWHOLIHDQGDUHEHLQJDPRUWLVHG evenly over their useful economic life, to a maximum of 10 years. Patents have a remaining life of 4 years and licences have a remaining life of 1 to 10 years.
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Goodwill acquired through business combinations has been allocated to one individual cash-generating unit ("CGU"), the lowest level at which goodwill is monitored for internal management purposes, for impairment testing.
Carrying amount of goodwill
| 2014 | 2013 |
|---|---|
| £'000 | £'000 |
| Real-time financial solutions CGU 653 |
675 |
Development costs are reviewed for impairment on an annual basis prior to being made available for use or sooner ZKHUHDQLQGLFDWRURILPSDLUPHQWH[LVWV7KHIROORZLQJWDEOHVXPPDULVHVWKHQHWERRNYDOXHRIGHYHORSPHQWFRVWV
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Real time financial solutions CGU | 7,226 | 4,456 |
,QZHFORVHGRXUSD\DEOHV¿QDQFLQJEXVLQHVVZKLFKKDGLQVXI¿FLHQWJURZWKSURVSHFWVDQGZHDUHQRORQJHU selling. We recognised an impairment charge in the Group income statement of £298,000 in respect of this closure, which is disclosed as an Exceptional item.
The recoverable amount of this CGU has been determined based on a value in use calculation. To calculate this, FDVKÀRZSURMHFWLRQVDUHEDVHGRQ¿QDQFLDOEXGJHWVDSSURYHGE\WKH%RDUGIRUZKLFKDUHH[WUDSRODWHGIRU¿YH years, and extended beyond 5 years which the Board consider appropriate given the long-term opportunities that H[LVWVLQWKH\$VLD3DFL¿F(0(\$DQG1RUWK\$PHULFDQUHJLRQV7KHGLVFRXQWUDWHDSSOLHGWRFDVKÀRZSURMHFWLRQVLV DQGFDVKÀRZVEH\RQGWKH\HDUSHULRGDUHH[WUDSRODWHGXVLQJDJURZWKUDWH that is a prudent approximation to the long term average growth rate for the region in which the CGU operates.
Key assumptions are made by management based on past experience taking into account external sources of information around gross margins, growth rates and discount rates for similar businesses.
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\$FKDQJHLQRXUNH\DVVXPSWLRQLQUHVSHFWWRRSHUDWLQJFDVKÀRZVFRXOGFDXVHWKHFDUU\LQJYDOXHRIWKHJRRGZLOORU development costs to exceed the recoverable amount, resulting in an impairment charge.
:H DUH FRQ¿GHQW WKH DVVXPSWLRQV LQ UHVSHFW RI RSHUDWLQJ FDVKÀRZ UHPDLQ DSSURSULDWH :KHUH WKH RSHUDWLQJ FDVKÀRZVLQFRUSRUDWHSURGXFWVRUVROXWLRQVWKDWZLOOEHVROGLQDQH[LVWLQJNQRZQPDUNHWSDVWH[SHULHQFHLVXVHG DVDJXLGHWRWKHOHYHORIVDOHVDFKLHYDEOHJURZWKUDWHVDQGDVVRFLDWHGPDUJLQV:KHUHWKHRSHUDWLQJFDVKÀRZV incorporate relate to products or solutions that will be sold into a new or emerging market past experience with similar products or solutions is combined with relevant information from external market sources, such as competitor pricing and discussions with potential customers, in arriving at the level of sales achievable, growth rates and associated margins.
Details of the investments in which the Group holds 20% or more of the nominal value of any class of share capital DUHDVIROORZV
| Name of subsidiary company |
Country of incorporation |
Holding (shares) |
Proportion of voting rights and |
Nature of Business |
|---|---|---|---|---|
| shares held | ||||
| Gresham Computer Services Limited | England | Ordinary | 100% | Real time financial solutions |
| Gresham Financial Systems Limited | England | Ordinary | 100% | Real time financial solutions |
| Gresham Enterprise Storage Inc(4) | USA | Ordinary | 100% | Software |
| Gresham Computing Pty Limited(4) | Australia | Ordinary | 100% | Real time financial solutions |
| Gresham Computing Sdn Bhd(1) | Malaysia | Ordinary | 100% | Real time financial solutions |
| Gresham Computing Pte. Limited(2) | Singapore | Ordinary | 100% | Real time financial solutions |
| Gresham Computing Inc(4) | USA | Ordinary | 100% | Real time financial solutions |
| Gresham Consultancy Services Limited(3 England | Ordinary | 100% | Dormant | |
| Casablanca Software Limited(3) | England | Ordinary | 100% | Dormant |
| Circa Selection Limited(3) | England | Ordinary | 100% | Dormant |
| Gresham Technologies Limited(3,5) | England | Ordinary | 100% | Dormant |
| Gresham Telecomputing Limited(3) | England | Ordinary | 100% | Dormant |
| Circa Business Systems Limited(3) | England | Ordinary | 100% | Dormant |
| Cheerkeep Limited(3) | England | Ordinary | 100% | Dormant |
1 held by a subsidiary undertaking
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subsidiary has no requirement for a local statutory audit
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In addition the following wholly owned subsidiaries were dissolved after the year ended 31 December 2014 following DQDSSOLFDWLRQE\WKH&RPSDQ\WRVWULNHRIIYROXQWDULO\
On 11 March 2013, the Group announced it had signed and completed an agreement to sell our 100% equity share interest in Gresham Computing Inc (Canada) ("GCI") to BITSS Global Inc. ("Bevertec").
| 31 December | |
|---|---|
| 2013 | |
| £'000 | |
| Revenue | 232 |
| Cost of goods sold | (11) |
| Gross profit | 221 |
| Administrative expenses | (216) |
| Trading profit | 5 |
| Loss on disposal of subsidiary | (185) |
| Finance revenue | - |
| Finance costs | - |
| Profit / (loss) before taxation | (180) |
| Taxation | - |
| Profit / (loss) after taxation | (180) |
\$VVHWVDQGOLDELOLWLHVGLVSRVHGRIRWKHUWKDQFDVK
| £'000 | |
|---|---|
| Intangible assets | 212 |
| Property, Plant & Equipment | 15 |
| Current assets | 531 |
| Current liabilities | (141) |
| Deferred income | (253) |
| Total assets and (liabilities) disposed of other than cash and cash equivalents | 364 |
| £'000 |
|---|
| 513 |
| (41) |
| 472 |
| (148) |
| 324 |
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| £'000 | |
|---|---|
| Total consideration | 472 |
| Net assets (excluding cash) disposed | (364) |
| 108 | |
| Costs relating to the disposal | (148) |
| Deferred cumulative foreign exchange transferred from equity | (145) |
| Net loss on disposal of Gresham Computing Inc. | (185) |
GCI is included within North America RTFS operating segment as per note 4.
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Trade receivables | 1,794 | 2,981 |
| Provision for impairment | - | - |
| Trade receivables - net | 1,794 | 2,981 |
| Prepayments and accrued income | 1,509 | 1,656 |
| Amounts recoverable on contracts | - | 225 |
| 3,303 | 4,862 | |
| 2014 | 2013 | |
| £'000 | £'000 | |
| Income tax | 1,224 | 415 |
7KHIROORZLQJWDEOHSURYLGHVGLVFORVXUHRIFRQWUDFWVLQSURJUHVVDWWKHVWDWHPHQWRI¿QDQFLDOSRVLWLRQGDWH
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Contracts in progress at the Statement of Financial Position date | ||
| Contract costs incurred plus recognised profits less recognised losses to date | - | 225 |
| Less: progress billings | - | (85) |
| - | 140 | |
| Recognised as: | ||
| Amounts recoverable on contracts | - | 225 |
7UDGHUHFHLYDEOHVDUHGHQRPLQDWHGLQWKHIROORZLQJFXUUHQFLHV
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Sterling | 446 | 1,538 |
| Euro | 141 | 144 |
| US Dollar | 458 | 196 |
| Australian Dollar | 715 | 1,082 |
| Malaysian Ringgit | 35 | 21 |
| 1,794 | 2,981 |
The Group held trade receivables with a value of £635,000 in respect of one RTFS customer at 31 December 2014 FXVWRPHUVZLWKDEDODQFHRI£1,823,000) which were settled during the following January and February. 2WKHUZLVHWKHUHLVQRVLJQL¿FDQWFRQFHQWUDWLRQRIWUDGHUHFHLYDEOHVDURXQGPDMRUFXVWRPHUVLQHLWKHU\HDU7UDGH receivables are non-interest bearing and are generally on 30 – 60 days' terms and are shown net of a provision for impairment.
\$W'HFHPEHUWKHDQDO\VLVRIWUDGHUHFHLYDEOHVWKDWZHUHSDVWGXHEXWQRWLPSDLUHGLVDVIROORZV
| Neither past | ||||||||
|---|---|---|---|---|---|---|---|---|
| due nor | Past due but not impaired | |||||||
| Total | impaired < 30 days | 30 - 60 days | 60 - 90 days | 90 -120 days >120 days | ||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| 2014 | 1,794 | 689 | 780 | 241 | 79 | 5 | - | |
| 2013 | 2,981 | 1,402 | 747 | 756 | 12 | 1 | 63 |
The Group's customers primarily comprise national and international banks, government bodies and substantial private and public companies. As a result, the credit quality of trade receivables that are neither past due nor impaired has been assessed by the directors to be relatively high, taking account of a low historic experience of EDGGHEWVDQGUHODWLYHO\JRRGDJHLQJSUR¿OHV
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Cash at bank and in hand | 4,707 | 4,386 |
&DVKDWEDQNHDUQVLQWHUHVWDWERWK¿[HGWHUPUDWHVDQGÀRDWLQJUDWHVEDVHGRQGDLO\EDQNGHSRVLWUDWHV6KRUW term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. The fair value of cash DQGFDVKHTXLYDOHQWVLVWKHVDPHDVVWDWHGDERYH\$W'HFHPEHUWKH*URXSKDGQLOQLO RIXQ drawn committed borrowing facilities.
)RUWKHSXUSRVHRIWKHFRQVROLGDWHGFDVKÀRZVWDWHPHQWFDVKDQGFDVKHTXLYDOHQWVFRPSULVHVFDVKDWEDQNDQGLQ hand and short-term deposits.
Trade payables, other payables and deferred income are non-interest bearing.
Current
| £'000 | £'000 | |
|---|---|---|
| Trade payables | 588 | 775 |
| Other payables | 1,265 | 1,558 |
| Deferred income | 3,792 | 2,915 |
| 5,645 | 5,248 | |
| 2014 | 2013 | |
| £'000 | £'000 | |
| Income tax payable | 58 | 42 |
| Non-current | ||
| 2014 | 2013 | |
| £'000 | £'000 | |
| Deferred income | 82 | 188 |
| Provisions | ||
| Property | ||
| provisions | ||
| At 1 January 2014 | £'000 | |
| - Current | - | |
| - Non-current | 21 | |
| 21 | ||
| Further amounts provided during the year | 15 | |
| At 31 December 2014 | ||
| - Current | 8 | |
| - Non-current | 28 | |
| 36 |
| Property provisions |
|
|---|---|
| £'000 | |
| At 1 January 2013 | |
| - Current | 126 |
| - Non-current | 53 |
| 179 | |
| Finance charge | 2 |
| Utilised amounts during the period | (181) |
| Further amounts provided during the year | 21 |
| At 31 December 2013 | |
| - Current | - |
| - Non-current | 21 |
| 21 |
The restructuring provision relates to a rationalisation of the Group's property portfolio and the resulting lease liabilities, comprising end of lease dilapidation costs and empty property costs. The provision has been discounted using a range of rates from 0.25% to 5% which the directors consider to be the relevant pre-tax risk based rate applicable to the liability.
The Group has entered into commercial leases on certain properties that have an average minimum duration of between 1 and 5 years. There are no unusual restrictions placed upon the lessee by entering into these leases.
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| Land and buildings |
Other | Total | Land and buildings |
Other | Total | |
|---|---|---|---|---|---|---|
| 2014 | 2014 | 2014 | 2013 | 2013 | 2013 | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Not later than one year | 475 | - | 475 | 317 | 317 | |
| After one but not more than five years | 593 | - | 593 | 799 | - | 799 |
| 1,068 | - | 1,068 | 1,116 | - | 1,116 |
The Group has entered into commercial leases as lessor on an Australian and US property. There are no unusual restrictions placed upon the lessor by entering into these leases.
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| Land and buildings |
Other | Total | Land and buildings |
Other | Total | |
|---|---|---|---|---|---|---|
| 2014 | 2014 | 2014 | 2013 | 2013 | 2013 | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Not later than one year | 38 | - | 38 | - | - | - |
| After one but not more than five years | - | - | - | - | - | - |
| - | - | 38 | - | - | - |
7KH*URXS¶VREMHFWLYHLV WR¿QDQFHWKHEXVLQHVVWKURXJKPDQDJHPHQWRIH[LVWLQJOLTXLGLW\ IRFXVLQJRQZRUNLQJ capital acceleration to cash and converting illiquid assets to liquid assets and ultimately cash. Investments in LQWDQJLEOH¿[HGDVVHWVSURSHUW\SODQWDQGHTXLSPHQWKDYHEHHQPDGHZLWKWKHEHQH¿WRI5HVHDUFK 'HYHORSPHQW tax credits taken as cash.
7KH*URXS¶VSROLF\WRZDUGVXVLQJ¿QDQFLDOLQVWUXPHQWVLVWRPDQDJHFUHGLWOLTXLGLW\DQGFXUUHQF\H[SRVXUHULVN without exposing the Group to undue risk or speculation. The policy is kept under review by the Directors according to the Group's foreign exchange and treasury policy.
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7KH*URXSPRQLWRUVH[SRVXUHWRFUHGLWULVNRQDQRQJRLQJEDVLV7KHULVNRI¿QDQFLDOORVVGXHWRDFRXQWHUSDUW\ failure to honour its obligations arises principally in relation to transactions where the Group provides solutions and services on deferred terms and where it invests or deposits surplus cash.
Group policies are aimed at minimising such losses, and require that deferred terms are granted only to customers who demonstrate an appropriate payment history and satisfy creditworthiness procedures. Individual exposures are monitored with customers subject to credit limits to ensure that the Group's exposure to bad debts is not VLJQL¿FDQW6ROXWLRQVDQGVHUYLFHVPD\EHVROGRQDFDVKZLWKRUGHUEDVLVWRPLWLJDWHFUHGLWULVN%DGGHEWLQVXUDQFH is not carried.
Performance of individual businesses is monitored at both operating unit and Group level allowing the early LGHQWL¿FDWLRQRIPDMRUULVNVDQGUHGXFLQJWKHOLNHOLKRRGRIDQXQPDQDJHGFRQFHQWUDWLRQRIFUHGLWULVN
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The Group has limited exposure to interest rate risk since it has no bank borrowings and interest receivable on cash deposits does not form a material part of Group income.
7KH*URXSGH¿QHVLWVFDSLWDODVWKH*URXS¶VWRWDOHTXLW\DQGPDQDJHVFDSLWDOEDVHGRQWKHOHYHORIQHWFDVKKHOG Its objective when managing capital is to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders, to provide an adequate return to investors based upon the level of risk undertaken, WRKDYHDYDLODEOHWKHQHFHVVDU\¿QDQFLDOUHVRXUFHVWRDOORZWKH*URXSWRLQYHVWLQDUHDVWKDWPD\GHOLYHUIXWXUH EHQH¿WWRLQYHVWRUVDQGPDLQWDLQVXI¿FLHQW¿QDQFLDOUHVRXUFHVWRPLWLJDWHULVNVDQGXQIRUHVHHQHYHQWV
In order to maintain or adjust the capital structure the Group may issue new shares or sell assets to provide additional capital.
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| Less than | Between | Between | |
|---|---|---|---|
| 1 | 1 to 2 | 2 to 5 | |
| year | years | years | |
| £'000 | £'000 | £'000 | |
| Year ended 31 December 2014 | |||
| Provisions | 8 | 12 | 16 |
| 8 | 12 | 16 | |
| Year ended 31 December 2013 | |||
| Provisions | - | - | 21 |
| - | - | 21 |
\$OOFXUUHQWOLDELOLWLHVDUHH[SHFWHGWR IDOOGXHZLWKLQRQH\HDURIWKHVWDWHPHQWRI¿QDQFLDOSRVLWLRQGDWHDWWKHLU carrying amount.
7KH*URXS¶VOLTXLGLW\ULVNIDOOVZLWKLQWKHIROORZLQJPDMRUFDWHJRULHV
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:KHUHDSSURSULDWHGLVFRXQWVDUHRIIHUHGIRUHDUO\SD\PHQWE\FXVWRPHUVDQG¿QDQFHOHDVHDQGGHIHUUHGSD\PHQW arrangements are considered to retain or improve liquidity.
6HWRXWEHORZLVDQDQDO\VLVE\FDWHJRU\RIWKH*URXS¶V¿QDQFLDODVVHWVDQGOLDELOLWLHVWKDWDUHFDUULHGLQWKH¿QDQFLDO VWDWHPHQWVWKHUHLVQRPDWHULDOGLIIHUHQFHEHWZHHQWKHFDUU\LQJDPRXQWVDQGIDLUYDOXHV
| Year ended 31 December 2014 | Note | Loans and receivables |
Fair value through |
Amortised cost |
Total carrying |
|---|---|---|---|---|---|
| profit & loss | amount | ||||
| £'000 | £'000 | £'000 | £'000 | ||
| Financial assets | |||||
| Trade receivables | 1,794 | - | - | 1,794 | |
| Accrued income | 593 | - | - | 593 | |
| Cash and cash equivalents | 4,707 | - | - | 4,707 | |
| 7,094 | - | - | 7,094 | ||
| Financial liabilities | |||||
| Trade payables | - | - | 588 | 588 | |
| Other payables | - | - | 802 | 802 | |
| Provisions | - | - | 36 | 36 | |
| - | - | 1,426 | 1,426 |
| Year ended 31 December 2013 | Note | Loans and receivables |
Fair value through profit & loss |
Amortised cost |
Total carrying amount |
|---|---|---|---|---|---|
| £'000 | £'000 | £'000 | £'000 | ||
| Financial assets | |||||
| Trade receivables | 2,981 | - | - | 2,981 | |
| Accrued income | 1,139 | - | - | 1,139 | |
| Cash and cash equivalents | 4,386 | - | - | 4,386 | |
| 8,506 | - | - | 8,506 | ||
| Financial liabilities | |||||
| Trade payables | - | - | 775 | 775 | |
| Other payables | - | - | 853 | 853 | |
| Provisions | - | - | 21 | 21 | |
| - | - | 1,649 | 1,649 |
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As at 31 December 2014, the Group held a foreign exchange instrument that had been measured at fair value using Level 2 techniques. The Group held no foreign exchange instruments at 31 December 2013.
)LQDQFLDOOLDELOLWLHVUHODWHWRGHULYDWLYH¿QDQFLDOLQVWUXPHQWVZKLFKKDYHDQHJDWLYHIDLUYDOXH)DLUYDOXHLVFDOFXODWHG E\UHIHUHQFHWRFXUUHQWIRUZDUGH[FKDQJHUDWHVIRUFRQWUDFWVZLWKVLPLODUPDWXULW\SUR¿OHV
7KH*URXSKDVH[SRVXUHVWRWKHPDLQFXUUHQF\W\SHV86'ROODU\$XVWUDOLDQ'ROODU0DOD\VLDQ5LQJJLWDQG(XURUDWHV in particular.
Currency exposure arises through intra-group loans and trading balances throughout all Group locations. Natural KHGJLQJLVHPSOR\HGWRWKHH[WHQWSRVVLEOHWRPLQLPLVHQHWH[SRVXUHVKRZHYHUZKHUHVLJQL¿FDQWH[SRVXUHVDULVH outside of intra-group trading, it is Group policy to enter in to formal hedging arrangements where these can be shown to be effective. At 31 December 2014, the Group had the following outstanding vanilla option in respect of DIRUHLJQFXUUHQF\VDOHQLO
| Asset / | |||
|---|---|---|---|
| Rate | (Liability) | ||
| Sell US\$250,000 | 30-Jan-15 | £/US\$ 1.70 | - |
Currency exposures comprise the monetary assets and monetary liabilities of the Group that are not denominated in the functional currency of the operating unit involved, other than those borrowings treated as hedges of foreign equity investments. In general all overseas operating units trade and hold assets and liabilities in their functional currency.
The following table details the Group's sensitivities to a change in sterling exchange rates against the respective foreign currencies. The sensitivities represent management's assessment of the effect on monetary assets of the SRVVLEOHFKDQJHVLQ IRUHLJQH[FKDQJHUDWHVZKLFK IRUDQGWDNHDFFRXQWRIWKHSRWHQWLDOÀXFWXDWLRQV seen in the most recent periods. The sensitivity analysis of the Group's exposure to foreign currency risk at the \HDUHQGKDVEHHQGHWHUPLQHGEDVHGRQWKHDVVXPSWLRQWKDWWKHFKDQJHLVHIIHFWLYHWKURXJKRXWWKH¿QDQFLDO\HDU and all other variables remain constant. The impact of translating the net assets of foreign operations into sterling is excluded from the sensitivity analysis.
\$ SRVLWLYH QXPEHULQGLFDWHV DQLQFUHDVHLQ SUR¿W DIWHU WD[DWLRQ DQG RWKHU FRPSRQHQWV RI HTXLW\ZKHUH VWHUOLQJ weakens against the respective currencies.
The sensitivity to the Canadian dollar is not shown in 2014 as this sensitivity to the Group was largely removed as a result of the disposal of our Canadian operations during 2013.
| Increase/Decrease in exchange rates |
Effect on profit before tax |
|
|---|---|---|
| 2014 | £'000 | |
| Euro | +20% | (51) |
| -20% | 76 | |
| Australian Dollar | +20% | (244) |
| US Dollar | -20% +20% |
367 (158) |
| -20% | 237 | |
| Canadian Dollar | +20% | - |
| -20% | - | |
| Malaysian Ringhit | +20% | (36) |
| -20% | 53 | |
| Singapore Dollar | +20% | (1) |
| -20% | 2 | |
| 2013 | £'000 | |
| Euro | +20% | (48) |
| -20% | 72 | |
| Australian Dollar | +20% | (242) |
| -20% | 364 | |
| US Dollar | +20% | (73) |
| -20% | 109 | |
| Canadian Dollar | +20% | (5) |
| -20% | 7 | |
| Malaysian Ringhit | +20% | (14) |
| Singapore Dollar | -20% +20% -20% |
21 (1) 2 |
The Group has no material exposure to interest rate sensitivities.
| Ordinary shares allotted, called up and fully paid | Number | Nominal value £'000 |
|---|---|---|
| At 1 January 2013 | 58,135,978 | 2,907 |
| Share Placing | 2,400,000 | 120 |
| At 31 December 2013 | 60,535,978 | 3,027 |
| Exercise of Share Options (see note 22) | 2,697,500 | 135 |
| At 31 December 2014 | 63,233,478 | 3,162 |
The Company's ordinary share capital consists of individual share having a nominal value of 5 pence each.
During the year-ended 31 December 2014, share options granted under the 2010 Share Option Plans were exercised DQGWKH*URXSLVVXHGQRQH RUGLQDU\VKDUHVDFFRUGLQJO\UDQNLQJSDULSDVVXZLWKH[LVWLQJVKDUHV in issue). See note 22 of the Group Financial Statements for further details.
At 31 December 2014 and 2013 there were outstanding options granted to acquire ordinary shares in the Company. See note 22 for further details.
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On 6 December 2013, the Group issued 2,400,000 new ordinary shares (ranking pari passu with existing shares in issue) via a placing to institutional shareholders to contribute to accelerating growth. The shares were issued at a placing price of £1.25 pence raising £2,902,000, after expenses of £98,000.
An explanation of the Group's capital management process and objectives is set out in the discussion of capital management on page 16 in the Strategic report and capital risk disclosures in note 20.
The following disclosures are in respect of both the Company and the Group.
The grant of all options and awards is made by the remuneration committee and such grants involve equity settlement. In granting executive share options the remuneration committee has regard to both the participant's level of responsibility within the Group and to individual and Group performance.
The Share Option Schemes 2010 were approved by shareholders on 30 December 2010, with amendments VXEVHTXHQWO\DSSURYHGE\VKDUHKROGHUVRQ0D\7KH6FKHPHVFRQVLVWRI
As its name implies, the EMI Plan operates as an enterprise management incentive scheme complying with the EMI &RGHDQGDFFRUGLQJO\EHLQJHQWLWOHGWRFHUWDLQEHQH¿FLDOWD[WUHDWPHQW
The Unapproved Plan enables the remuneration committee to grant share options in excess of the limits applicable under the EMI Code and / or to employees of the Group who do not qualify for EMI treatment.
The Non Employee Plan enables the remuneration committee to grant share options to persons whose services are made available to the Group without an employment relationship.
The remuneration committee is responsible for administering the Share Option Schemes 2010, and may grant options to acquire Ordinary Shares to any employees and directors of the Group, and retains discretion to impose exercise performance conditions as appropriate. Options are granted free of charge and are non-transferable.
The exercise price per Ordinary Share is determined by the remuneration committee but will not be less than 110% of the middle market price for the dealing day immediately preceding the date of grant of the relevant option.
Options may normally be exercised only on or after the third anniversary of the date of grant subject to completion of any relevant performance criteria; save to the extent that the remuneration committee in its discretion declares any other period for exercise and will lapse on cessation of such employment, save again to the extent the remuneration committee in its discretion allows it to remain exercisable for such period following the cessation as it may determine.
Exercise is permitted in conjunction with a takeover or similar transaction and in such circumstances the vesting period does not apply. In the event of a takeover, an option holder may by agreement with the acquirer exchange his options for options over shares in the acquiring Company.
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Outstanding options to subscribe for ordinary shares of 5p at 31 December 2014, including those noted in the 'LUHFWRUV¶5HPXQHUDWLRQ5HSRUWDUHDVIROORZV
| 2014 Number |
2014 WAEP |
2013 Number |
2013 WAEP |
|
|---|---|---|---|---|
| (pence) | (pence) | |||
| Share Option Schemes 2010 (options) | ||||
| Outstanding at 1 January | 6,925,500 | 37 | 6,728,000 | 35 |
| Granted during the year | - | - | 500,000 | 100 |
| Forfeited during the year | (30,000) | 96 | (302,500) | 28 |
| Exercised during the year | (2,697,500) | 28 | - | - |
| Outstanding at 31 December | 4,198,000 | 47 | 6,925,500 | 37 |
| Exercisable at 31 December | 2,493,000 | 29 | 5,152,500 | 28 |
| Weighted average remaining contractual life (years) | 6.68 | 0.33 |
| Outstanding at 1 January | - | - | 5,000 | 70 |
|---|---|---|---|---|
| Forfeited | - | - | (5,000) | (70) |
| Outstanding at 31 December | - - | - | - | |
| Exercisable at 31 December | - - | - | - |
No price is payable on award of share options.
Outstanding options and awards to subscribe for ordinary shares of 5p at 31 December 2014, including those noted LQWKH'LUHFWRUV¶5HPXQHUDWLRQ5HSRUWVKRZLQJWKHUDQJHRIH[HUFLVHSULFHVDQGGDWHVDUHDVIROORZV
| Number of share options |
Date of grant |
Exercise £ |
Date first price exercisable |
Expiry | Cash date receivable if exercised £ |
|
|---|---|---|---|---|---|---|
| Share Option Schemes 2010 | 2,455,000 | 31-Dec-10 | 0.2805 | 31-Dec-13 | 31-Dec-20 | 688,628 |
| 38,000 | 05-Aug-11 | 0.5803 | 05-Aug-14 | 05-Aug-21 | 22,051 | |
| 1,000,000 | 06-Apr-12 | 0.6424 | 06-Apr-15 | 06-Apr-22 | 642,400 | |
| 100,000 23-May-12 | 0.6105 23-May-15 23-May-22 | 61,050 | ||||
| 135,000 | 15-Aug-12 | 0.6850 | 15-Aug-15 | 15-Aug-22 | 92,475 | |
| 450,000 | 01-Aug-13 | 0.9630 | 01-Aug-16 | 01-Aug-23 | 433,350 | |
| 50,000 | 07-Oct-13 | 1.3230 | 07-Oct-16 | 07-Oct-23 | 66,150 | |
| 2,006,104 |
Outstanding options to subscribe for ordinary shares of 5p at 31 December 2013, including those noted in the 'LUHFWRUV¶5HPXQHUDWLRQ5HSRUWVKRZLQJWKHUDQJHRIH[HUFLVHSULFHVDQGGDWHVDUHDVIROORZV
| Number of share options |
Date of grant |
Exercise £ |
Date first price exercisable |
Expiry | Cash date receivable if exercised £ |
|
|---|---|---|---|---|---|---|
| Share Option Schemes 2010 | 5,152,500 | 31-Dec-10 | 0.2805 | 31-Dec-13 | 31-Dec-20 | 1,445,276 |
| 38,000 | 05-Aug-11 | 0.5803 | 05-Aug-14 | 05-Aug-21 | 22,051 | |
| 1,000,000 | 06-Apr-12 | 0.6424 | 06-Apr-15 | 06-Apr-22 | 642,400 | |
| 100,000 23-May-12 | 0.6105 23-May-15 23-May-22 | 61,050 | ||||
| 135,000 | 15-Aug-12 | 0.6850 | 15-Aug-15 | 15-Aug-22 | 92,475 | |
| 450,000 | 01-Aug-13 | 0.9630 | 01-Aug-16 | 01-Aug-23 | 433,350 | |
| 50,000 | 07-Oct-13 | 1.3230 | 07-Oct-16 | 07-Oct-23 | 66,150 | |
| 2,762,752 |
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The fair value of equity-settled share options granted by the Share Option Schemes 2010 is estimated as at the date of grant using a Black Scholes model, taking into account the terms and conditions upon which the options were granted. In all cases, the exercise price is at least 110% of the market price on the day prior to the date of grant.
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| 2013 grants | 2012 grants | 2011 grants | 2010 grants | |
|---|---|---|---|---|
| Vesting date | 1 Aug 16 to 7 Oct 16 6 Apr 15 to 15 Aug 15 | 5 Aug 14 | 31 Dec 13 | |
| Expiry date (no. of years after grant) | 10 | 10 | 10 | 10 |
| Exercise price | £0.96 - £1.32 | £0.61 - £0.69 | £0.58 | £0.28 |
| Share price at valuation | £0.84 - £1.16 | £0.52 - £0.58 | £0.53 | £0.26 |
| Vested options expected life | 5.6 years | 5.6 years | 5.6 years | 5.9 years |
| Volatility | 20.0% (1) | 30.0% (1) | 46.3% (1) | 43.8% (1) |
| Dividend yield | 0% | 0% | 0% | 0% |
| Risk free rate | 1.0% (2) | 1.0% (2) | 2.7% (2) | 3.5% (2) |
| Impact of continued employment conditions |
30% (3) | 30% (3) | 30% (3) | 30% (3) |
(1) Expected future volatility, based on historical analysis and trend
(2) Spot yield on valuation date of UK government bonds with a comparable maturity date
(3) Attrition rate on average
Vesting of options is reliant on achievement of any relevant performance conditions set by the Remuneration Committee which typically take the form of sales-based targets.
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that PD\RFFXU7KHH[SHFWHGYRODWLOLW\UHÀHFWVWKHDVVXPSWLRQWKDWWKHKLVWRULFDOYRODWLOLW\LVLQGLFDWLYHRIIXWXUHWUHQGV which may also not necessarily be the actual outcome. No other features of options granted were incorporated into the measurement of fair value.
The expense recognised in the income statement for all equity settled share-based payments in respect of employee VHUYLFHVUHFHLYHGLVDVIROORZV
| 2014 | 2013 |
|---|---|
| £'000 | £'000 |
| Expense recognised in respect of share-based payments 50 |
186 |
| Share capital |
Share premium |
Other reserves |
Currency translation |
Retained earnings |
Total | |
|---|---|---|---|---|---|---|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| At 1 January 2013 | 2,907 | 13,124 | 1,039 | 300 | (11,226) | 6,144 |
| Attributable profit for the period | - | - | - | - | 2,100 | 2,100 |
| Other comprehensive expense | - | - | - | (283) | - | (283) |
| Total comprehensive income | - | - | - | (283) | 2,100 | 1,817 |
| Reserves transfer | - | - | (726) | - | 726 | - |
| Share issue proceeds | 120 | 2,880 | - | - | - | 3,000 |
| Share transaction costs | - | (98) | - | - | - | (98) |
| Share based payment expense | - | - | - | - | 186 | 186 |
| At 31 December 2013 | 3,027 | 15,906 | 313 | 17 | (8,214) | 11,049 |
| Attributable profit for the period | - | - | - | - | 1,095 | 1,095 |
| Other comprehensive expense | - | - | - | (55) | - | (55) |
| Total comprehensive income | - | - | - | (55) | 1,095 | 1,040 |
| Exercise of share options | 135 | 616 | - | - | - | 751 |
| Share based payment expense | - | - | - | - | 50 | 50 |
| At 31 December 2014 | 3,162 | 16,522 | 313 | (38) | (7,069) | 12,890 |
7KHEDODQFHFODVVL¿HGDVVKDUHFDSLWDOUHSUHVHQWVWKHQRPLQDOYDOXHDULVLQJIURPWKHLVVXHRIWKH&RPSDQ\¶VHTXLW\ share capital, comprising 5 pence ordinary shares.
During the year-ended 31 December 2014, share options granted under the 2010 Share Option Plans were exercised DQGWKH*URXSLVVXHGQRQH RUGLQDU\VKDUHVDFFRUGLQJO\UDQNLQJSDULSDVVXZLWKH[LVWLQJVKDUHV in issue). See note 22 of the Group Financial Statements for further details.
On 6 December 2013, the Group issued 2,400,000 new ordinary shares (ranking pari passu with existing shares in issue) via a placing to institutional shareholders to contribute to accelerating growth. The shares were issued at a placing price of £1.25 pence raising £2,902,000, after expenses of £98,000.
7KHEDODQFHFODVVL¿HGDVVKDUHSUHPLXPUHSUHVHQWVWKHSUHPLXPDULVLQJIURPWKHLVVXHRIWKH&RPSDQ\¶VHTXLW\ share capital, comprising 5 pence ordinary shares, net of share issue expenses. There are restrictions on the use of the share premium account. It can only be used for bonus issues, to provide for the premium payable on redemption of debentures or to write off preliminary expenses, or expenses of, or commissions paid on, or discounts allowed on, the same issues of shares or debentures of the Company.
7KHEDODQFHFODVVL¿HGDVRWKHUUHVHUYHVFRPSULVHVDVSHFLDOUHVHUYHRI7KHVSHFLDOUHVHUYHDURVHRQWKH cancellation of deferred ordinary shares in June 1992.
The merger reserve of £726,000 recorded in the prior year has been transferred to Retained earnings following the disposals of the associated investments. The merger reserve arose on issue of shares in respect of acquisitions and mergers in the period 1992 to 1999.
7KHFXUUHQF\WUDQVODWLRQUHVHUYHLVXVHGWRUHFRUGH[FKDQJHGLIIHUHQFHVDULVLQJIURPWKHWUDQVODWLRQRIWKH¿QDQFLDO statements of foreign subsidiaries.
The cumulative amount of goodwill written off to reserves at 31 December 2013 and 2012 is £7,326,000. Goodwill previously written off to reserves will remain so written off.
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In the normal course of business, the parent Company has issued general guarantees in respect of the contractual obligations of certain subsidiary undertakings from which no liability is expected to arise.
There is no single party known that the directors consider to be a controlling shareholder or ultimate parent XQGHUWDNLQJ5HIHUWRSDJHIRUGHWDLOVRIDOOVLJQL¿FDQWVKDUHKROGHUVWKDWWKH&RPSDQ\KDVEHHQQRWL¿HGRI
The services of M Royde, Non-Executive Director, are provided and invoiced by Kestrel Partners LLP, a company in which he has an ownership interest. During the year ended 31 December 2014, the Company was charged £30,000 E.HVWUHO3DUWQHUV//3 QRQHRIZKLFKQLO UHPDLQHGXQSDLGDWWKH\HDUHQG7KHWRWDO value of transactions with Kestrel Partners LLP in respect of the provision of M Royde's services is shown in the Directors' Remuneration Report.
On 6 December 2013, the Group issued 2,400,000 new ordinary shares (ranking pari passu with existing shares in issue) via a placing to institutional shareholders to contribute to accelerating growth. The shares were issued at a placing price of £1.25 pence raising £2,902,000, after expenses of £98,000. Of the placing shares, 185,000 were SODFHGZLWK.HVWUHO3DUWQHUV//3ZKLFKLVGHHPHGWREHDUHODWHGSDUW\XQGHUWKH/LVWLQJ5XOHVDQGLVFODVVL¿HGDV a smaller related party transaction for the purposes of the Listing Rules. All amounts due in respect of the placing ZHUHVHWWOHGDVDW'HFHPEHU6XEMHFWWRFHUWDLQLQIRUPDWLRQFRQ¿UPDWLRQVDQGXQGHUWDNLQJVJLYHQWRWKH
| FCA, smaller related party transactions do not require shareholder approval under the Listing Rules. | 31 December 2014 |
31 December 2013 |
|
|---|---|---|---|
| Notes | £'000 | £'000 | |
| Fixed assets | |||
| Investments | 5 | 9,414 | 9,364 |
| 9,414 | 9,364 | ||
| Current assets | |||
| Debtors | 6 | 11,603 | 10,719 |
| Cash at bank and in hand | 2,799 | 3,078 | |
| 14,402 | 13,797 | ||
| C reditors: amounts falling due within one year | 7 | 4,095 | 3,298 |
| Net current assets | 10,307 | 10,499 | |
| Total assets less current liabilities | 19,721 | 19,863 | |
| Capital and reserves | |||
| Called up share capital | 9 | 3,162 | 3,027 |
| Share premium account | 10 | 16,522 | 15,906 |
| Special reserve | 10 | 313 | 313 |
| Merger reserve | 10 | 1,360 | 1,360 |
| Profit and loss account | 10 | (1,636) | (743) |
| Shareholders' funds - equity interests | 10 | 19,721 | 19,863 |
7KH¿QDQFLDOVWDWHPHQWVZHUHDSSURYHGE\WKH%RDUGRI'LUHFWRUVDQGDXWKRULVHGIRULVVXHRQ0DUFK
On behalf of the Board
C Errington R Grubb 23 March 2015 23 March 2015
7KH SDUHQW &RPSDQ\ ¿QDQFLDO VWDWHPHQWV RI *UHVKDP &RPSXWLQJ SOF WKH ³&RPSDQ\´ KDYH EHHQ SUHSDUHG LQ accordance with United Kingdom Generally Accepted Accounting Practices (UK GAAP) and as required by the Companies Act 2006, and were approved for issue on 23 March 2015.
7KH¿QDQFLDOVWDWHPHQWVDUHSUHSDUHGXQGHUWKHKLVWRULFDOFRVWFRQYHQWLRQDVPRGL¿HG IRU¿QDQFLDOLQVWUXPHQWV that are measured at fair value, and are prepared in accordance with applicable accounting standards.
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Investments are recorded at cost less provision for impairment.
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If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present YDOXHRIHVWLPDWHGIXWXUHFDVKÀRZVH[FOXGLQJIXWXUHFUHGLWORVVHVWKDWKDYHQRWEHHQLQFXUUHG GLVFRXQWHGDWWKH ¿QDQFLDODVVHW¶VRULJLQDOHIIHFWLYHLQWHUHVWUDWHLHWKHHIIHFWLYHLQWHUHVWUDWHFRPSXWHGDWLQLWLDOUHFRJQLWLRQ 7KH carrying amount of the asset is reduced, with the amount of the loss recognised in administration costs.
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Where the time value of money is material, other receivables are carried at amortised cost. Provision is made when there is objective evidence that the Company will not be able to recover balances in full. Balances are written off when the probability of recovery is assessed as being remote.
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between WKH&RPSDQ\¶VWD[DEOHSUR¿WVDQGLWVUHVXOWVDVVWDWHGLQWKH¿QDQFLDOVWDWHPHQWVWKDWDULVHIURPWKHLQFOXVLRQRI JDLQVDQGORVVHVLQWD[DVVHVVPHQWVLQSHULRGVGLIIHUHQWIURPWKRVHLQZKLFKWKH\DUHUHFRJQLVHGLQWKH¿QDQFLDO statements. A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis RIDOODYDLODEOHHYLGHQFHLWFDQEHUHJDUGHGDVPRUHOLNHO\WKDQQRWWKDWWKHUHZLOOEHVXLWDEOHWD[DEOHSUR¿WVIURP which the future reversal of the underlying timing differences can be deducted.
Deferred tax is measured, on a undiscounted basis, at rates expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date as they apply in the periods in which the timing differences are expected to reverse.
Transactions denominated in foreign currencies are translated at an approximation of the exchange rate ruling on the date of the transaction.
Assets and liabilities denominated in foreign currencies are translated at the exchange rate ruling on the balance VKHHWGDWH5HVXOWLQJH[FKDQJHJDLQVDQGORVVHVDUHWDNHQWRWKHSUR¿WDQGORVVDFFRXQW
The Company uses forward foreign currency contracts to reduce exposure to movements in foreign exchange rates. 6XFKLQVWUXPHQWVDUHVWDWHGDWIDLUYDOXH*DLQVDQGORVVHVDULVLQJIURPFKDQJHVLQIDLUYDOXHDUHWDNHQWRWKHSUR¿W and loss account in the period.
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The Company has taken advantage of the exemption under FRS 8 from disclosing related party transactions with entities that are wholly owned subsidiary undertakings of the Gresham Computing plc Group.
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No capital contribution is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market FRQGLWLRQLVVDWLV¿HGSURYLGHGWKDWDOORWKHUYHVWLQJFRQGLWLRQVDUHVDWLV¿HG
At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market conditions and of the number of equity instruments that will ultimately vest or, in the case of an instrument subject to a market condition, be treated as vesting as described above. The movement in cumulative expense since the previous balance sheet date is recognised as a capital contribution, with a corresponding entry in equity.
:KHUHWKHWHUPVRIDQHTXLW\VHWWOHGDZDUGDUHPRGL¿HGRUDQHZDZDUGLVGHVLJQDWHGDVUHSODFLQJDFDQFHOOHGRU settled award, the cost based on the original award terms continues to be recognised as a capital contribution over the original vesting period. In addition, an expense is recognised as a capital contribution over the remainder of the QHZYHVWLQJSHULRGIRUWKHLQFUHPHQWDOIDLUYDOXHRIDQ\PRGL¿FDWLRQEDVHGRQWKHGLIIHUHQFHEHWZHHQWKHIDLUYDOXH RIWKHRULJLQDODZDUGDQGWKHIDLUYDOXHRIWKHPRGL¿HGDZDUGERWKDVPHDVXUHGRQWKHGDWHRIWKHPRGL¿FDWLRQ No reduction is recognised if this difference is negative.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the income statement for the award is recorded as a capital contribution immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair value being treated as a capital contribution in the balance sheet.
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Audit of the financial statements | ||
| Audit services - parent | 7 | 7 |
| 7 | 7 | |
| Additional information | ||
| Audit services - group | 13 | 15 |
| Audit services - subsidiaries | 36 | 35 |
| 49 | 50 | |
| Non-audit fees | ||
| Corporate taxation services | 2 | 2 |
| Share option scheme establishment | - | - |
| 2 | 2 | |
Information concerning directors' remuneration and gains on exercise of share options can be found in the Directors' UHPXQHUDWLRQUHSRUWEHJLQQLQJRQSDJHDQGLQQRWHWRWKH*URXS¿QDQFLDOVWDWHPHQWV
1RGLYLGHQGVZHUHGHFODUHGRUSDLGGXULQJWKH\HDUDQGQRGLYLGHQGVDUHSURSRVHGIRUDSSURYDODWWKH\$*0 None).
| Subsidaries | Subsidaries | |
|---|---|---|
| 2014 | 2013 | |
| £'000 | £'000 | |
| Cost: | ||
| At 1 January | 22,956 | 23,585 |
| Disposal of subsidary | - | (781) |
| Capital contribution - share based payments | 50 | 152 |
| At 31 December | 23,006 | 22,956 |
| Impairment provisions: | ||
| At 1 January | 13,592 | 14,353 |
| Disposal of subsidary | - | (761) |
| Impairment charge | - | - |
| At 31 December | 13,592 | 13,592 |
| Net book value: | ||
| At 31 December | 9,414 | 9,364 |
Details of the investments in which the Company holds 20% or more of the nominal value of any class of share FDSLWDODUHDVIROORZV
| Name of subsidiary company |
Country of incorporation |
Holding (shares) |
Proportion of voting rights and shares held |
Nature of Business |
|---|---|---|---|---|
| Gresham Computer Services Limited | England | Ordinary | 100% | Real time financial solutions |
| Gresham Financial Systems Limited | England | Ordinary | 100% | Real time financial solutions |
| Gresham Enterprise Storage Inc(4) | USA | Ordinary | 100% | Software |
| Gresham Computing Pty Limited(4) | Australia | Ordinary | 100% | Real time financial solutions |
| Gresham Computing Sdn Bhd(1) | Malaysia | Ordinary | 100% | Real time financial solutions |
| Gresham Computing Pte. Limited(2) | Singapore | Ordinary | 100% | Real time financial solutions |
| Gresham Computing Inc(4) | USA | Ordinary | 100% | Real time financial solutions |
| Gresham Consultancy Services Limited(3 England | Ordinary | 100% | Dormant | |
| Casablanca Software Limited(3) | England | Ordinary | 100% | Dormant |
| Circa Selection Limited(3) | England | Ordinary | 100% | Dormant |
| Gresham Technologies Limited(3,5) | England | Ordinary | 100% | Dormant |
| Gresham Telecomputing Limited(3) | England | Ordinary | 100% | Dormant |
| Circa Business Systems Limited(3) | England | Ordinary | 100% | Dormant |
| Cheerkeep Limited(3) | England | Ordinary | 100% | Dormant |
1 held by a subsidiary undertaking
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subsidiary has no requirement for a local statutory audit
5QDPHFKDQJHGIURP*UHVKDP6RIWZDUH/LPLWHGRQ0DUFK
On 11 March 2013 the Group disposed of its wholly owned Canadian subsidiary Gresham Computing Inc. The GHWDLOVRIWKHGLVSRVDODUHLQFOXGHGZLWKLQQRWHRIWKH*URXS¿QDQFLDOVWDWHPHQWV
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In addition the following wholly owned subsidiaries were dissolved after the year ended 31 December 2014 following DQDSSOLFDWLRQE\WKH&RPSDQ\WRVWULNHRIIYROXQWDULO\
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Amounts owed by subsidiary undertakings | 11,528 | 10,688 |
| VAT receiveable | 27 | - |
| Prepayments and accrued income | 48 | 31 |
| 11,603 | 10,719 |
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Amounts owed to subsidiary undertakings | 3,995 | 3,126 |
| Trade creditors | 98 | 167 |
| Other creditors and accruals | 2 | 5 |
| 4,095 | 3,298 |
7KH&RPSDQ\KDVDQXQUHFRJQLVHGGHIHUUHGWD[DVVHWDVIROORZV
| 2014 | 2013 | |
|---|---|---|
| £'000 | £'000 | |
| Share based payments | 135 | 233 |
| Tax losses | 79 | 45 |
| 214 | 278 |
| Ordinary shares allotted, called up and fully paid | Number | Nominal value |
|---|---|---|
| £'000 | ||
| At 1 January 2013 | 58,135,978 | 2,907 |
| Share Placing | 2,400,000 | 120 |
| At 31 December 2013 | 60,535,978 | 3,027 |
| Exercise of Share Options (see note 22) | 2,697,500 | 135 |
| At 31 December 2014 | 63,233,478 | 3,162 |
The Company's ordinary share capital consists of individual share having a nominal value of 5 pence each.
During the year-ended 31 December 2014, share options granted under the 2010 Share Option Plans were exercised DQGWKH*URXSLVVXHGQRQH RUGLQDU\VKDUHVDFFRUGLQJO\UDQNLQJSDULSDVVXZLWKH[LVWLQJVKDUHV in issue). See note 22 of the Group Financial Statements for further details.
At 31 December 2014 and 2013 there were outstanding options granted to acquire ordinary shares in the Company. See note 22 of the Group Financial Statements for further details.
7KHUHDUHQRSUHIHUHQFHVKDUHVLQLVVXHQRQH
On 6 December 2013, the Group issued 2,400,000 new ordinary shares (ranking pari passu with existing shares in issue) via a placing to institutional shareholders to contribute to accelerating growth. The shares were issued at a placing price of £1.25 pence raising £2,902,000, after expenses of £98,000.
| Share Capital |
Share Premium |
Special Reserve |
Merger Reserve |
Profit and Loss Account |
Total | |
|---|---|---|---|---|---|---|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| At 1 January 2013 | 2,907 | 13,124 | 313 | 6,609 | (6,699) | 16,254 |
| Share issue proceeds | 120 | 2,880 | - | - | - | 3,000 |
| Share issue transaction costs | - | (98) | - | - | - | (98) |
| Share based payments expense | - | - | - | - | 186 | 186 |
| Retained profit for the year | - | - | - | - | 521 | 521 |
| Impact of disposals on merger reserve | - | - | - | (5,249) | 5,249 | - |
| At 31 December 2013 | 3,027 | 15,906 | 313 | 1,360 | (743) | 19,863 |
| Exercise of share options | 135 | 616 | - | - | - | 751 |
| Share based payments expense | - | - | - | - | 50 | 50 |
| Retained loss for the year | - | - | - | - | (943) | (943) |
| At 31 December 2014 | 3,162 | 16,522 | 313 | 1,360 | (1,636) | 19,721 |
7KHEDODQFHFODVVL¿HGDVVKDUHFDSLWDOUHSUHVHQWVWKHQRPLQDOYDOXHDULVLQJIURPWKHLVVXHRIWKH&RPSDQ\¶VHTXLW\ share capital, comprising 5 pence ordinary shares.
During the year-ended 31 December 2014, share options granted under the 2010 Share Option Plans were exercised DQGWKH*URXSLVVXHGQRQH RUGLQDU\VKDUHVDFFRUGLQJO\UDQNLQJSDULSDVVXZLWKH[LVWLQJVKDUHV in issue). See note 22 of the Group Financial Statements for further details.
On 6 December 2013, the Group issued 2,400,000 new ordinary shares (ranking pari passu with existing shares in issue) via a placing to institutional shareholders to contribute to accelerating growth. The shares were issued at a placing price of £1.25 pence raising £2,902,000, after expenses of £98,000.
7KHEDODQFHFODVVL¿HGDVVKDUHSUHPLXPUHSUHVHQWVWKHSUHPLXPDULVLQJIURPWKHLVVXHRIWKH&RPSDQ\¶VHTXLW\ share capital, comprising 5 pence ordinary shares, net of share issue expenses. There are restrictions on the use of the share premium account. It can only be used for bonus issues, to provide for the premium payable on redemption of debentures or to write off preliminary expenses, or expenses of, or commissions paid on, or discounts allowed on, the same issues of shares or debentures of the Company.
7KHEDODQFHFODVVL¿HGDVRWKHUUHVHUYHVFRPSULVHVDVSHFLDOUHVHUYHRI7KHVSHFLDOUHVHUYHDURVHRQWKH cancellation of deferred ordinary shares in June 1992.
The merger reserve of £726,000 recorded in the prior year has been transferred to Retained earnings following the disposals of the associated investments. The merger reserve arose on issue of shares in respect of acquisitions and mergers in the period 1992 to 1999.
The Company has entered into commercial leases on certain properties that have an average minimum duration of between 1 and 5 years. There are no unusual restrictions placed upon the lessee by entering into these leases.
\$W'HFHPEHUWKH&RPSDQ\KDGDQQXDOFRPPLWPHQWVXQGHUQRQFDQFHOODEOHRSHUDWLQJOHDVHVDVVHWRXWEHORZ
| Land and | Land and | |
|---|---|---|
| buildings | buildings | |
| 2014 | 2013 | |
| £'000 | £'000 | |
| Operating leases which expire: | ||
| Within one year | - | - |
| Within two to five years | 260 | 317 |
| 264 | 317 |
Operating lease agreements where the Group is lessor The Company has no lease arrangements where it is lessor.
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In the normal course of business, the Company has issued general guarantees in respect of the contractual obligations of certain subsidiary undertakings.
Share based payments in respect of both the Company and the Group are disclosed in note 22 of the Group ¿QDQFLDOVWDWHPHQWV
There is no single party known that the directors consider to be a controlling shareholder or ultimate parent XQGHUWDNLQJ5HIHUWRSDJHIRUGHWDLOVRIDOOVLJQL¿FDQWVKDUHKROGHUVWKDWWKH&RPSDQ\KDVEHHQQRWL¿HGRI
The services of M Royde, Non-Executive Director, are provided and invoiced by Kestrel Partners LLP, a company in which he has an ownership interest. During the year ended 31 December 2014, the Company was charged £30,000 E.HVWUHO3DUWQHUV//3 QRQHRIZKLFKQLO UHPDLQHGXQSDLGDWWKH\HDUHQG7KHWRWDO value of transactions with Kestrel Partners LLP in respect of the provision of M Royde's services is shown in the Directors' Remuneration Report.
On 6 December 2013, the Group issued 2,400,000 new ordinary shares (ranking pari passu with existing shares in issue) via a placing to institutional shareholders to contribute to accelerating growth. The shares were issued at a placing price of £1.25 pence raising £2,902,000, after expenses of £98,000. Of the placing shares, 185,000 were SODFHGZLWK.HVWUHO3DUWQHUV//3ZKLFKLVGHHPHGWREHDUHODWHGSDUW\XQGHUWKH/LVWLQJ5XOHVDQGLVFODVVL¿HGDV a smaller related party transaction for the purposes of the Listing Rules. All amounts due in respect of the placing ZHUHVHWWOHGDVDW'HFHPEHU6XEMHFWWRFHUWDLQLQIRUPDWLRQFRQ¿UPDWLRQVDQGXQGHUWDNLQJVJLYHQWRWKH FCA, smaller related party transactions do not require shareholder approval under the Listing Rules.
Aldermary House, 10-15 Queen Street, London, EC4N 1TX [email protected], www.gresham-computing.com
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