Back office workforce optimisation

Transcription

1 intelligent operations management Mobile Social Cloud Information Back office workforce optimisation eg solutions plc Annual Report and Accounts for the year ended Stock exchange code: EGS

2 eg solutions plc Annual Report & Accounts for the year ended eg solutions plc Annual Report Contents Strategic Report IFC Who We Are 01 Our Performance in 03 Chairman s Statement 04 Chief Executive s Statement 06 Chief Financial Officer s Statement 08 eg at a Glance 10 Our Marketplace 12 Our Customers 14 Financial Review 16 Corporate Social Responsibility Governance 18 Board of Directors 20 Corporate Governance 21 Directors Report 22 Directors Responsibilities in the Preparation of the Financial Statements 23 Independent Auditor s Report to the Members of eg Solutions plc Financials 24 Consolidated Statement of Comprehensive Income 25 Consolidated Statement of Financial Position 26 Company Statement of Financial Position 27 Consolidated Statement of Cash Flows 28 Company Statement of Cash Flows 29 Consolidated Statement of Changes in Equity 30 Company Statement of Changes in Equity 31 Notes to the Group Financial Statements Shareholder Information 55 Notice of Meeting 58 Advisers Who We Are eg solutions is a back office workforce optimisation software Company. eg pioneered this new market space and developed the most complete, purpose built workforce optimisation software for back offices - the only solution that manages work, people and end-to-end processes wherever they are undertaken, anywhere in the world. Our software is now used by leading UK, international and global companies in multiple industry sectors including financial services, healthcare and utilities. Using our forecasting, scheduling, real-time work management and operational analytics capabilities, we deliver measureable improvements in service, quality, productivity and regulatory compliance. When supported by our implementation and training services we guarantee return on investment in short timescales. Regardless of who is serving the customer - call centre, back offices, branches or the field - our solutions provide true insight into the full customer service process and promote world-class operational management capability.

3 Strategic Report Our Performance in Profit/(Loss) Before Tax 0.41m 128% ( : ( 1.48m)) Revenue 7.54m 69% ( : 4.46m) Net Cash/(Debt) 4.30m 1477% ( : ( 0.31m)) 0.41m 7.54m 4.3m ( 1.48m) 4.46m ( 0.31m) Gross Margin 70% 5% ( : 65%) Gross Profit* 5.27m 59% ( : 2.90m) Earnings/(Loss) Per Share Diluted (p) 3.5p 139% (: Restated (8.9p)) 01 70% 5.27m 3.5p 65% 2.90m (8.9p) Adjusted EBITDA 1.26m 351% ( : ( 0.50m)) 1.26m ( 0.50m) * Prior period restated for reallocation of amortisation from cost of sales to administrative expenses Adjusted EBITDA is stated prior to charges in respect of share based payments of 46k (: 95k) and before exceptional remuneration costs of nil (: 343k) Restated Operational Highlights Contracted order book for the next two years of 7.64m (: 6.04m) up 27% Contracted order book over the next four years at 15.44m up 1.80m since December Placing completed pre year end raising 3.19m (before expenses) to support growth together with conversion of 0.55m convertible loan notes issued to equity Ten significant contract wins, including further development of new Utilities vertical and first wins in Telecoms and Local Government Strengthened Board and Management Team

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5 Strategic Report Chairman s Statement Duncan McIntyre Chairman Overview FY was a transformational year for the Group with record revenues and a significant return to profitability. When I joined the Board we had limited financial resources, market expectations of 5.00m turnover, a demoralised workforce and management team and lack of appropriate Board structure. However, our key stakeholders customers, employees and shareholders continued to be supportive as they believed in the Group and the significant potential of this new and emerging market. The Board would like to thank these stakeholders for their support and patience. The plan we established at the start of the year built upon the investments made and the product set of the Group and I am delighted that this has delivered an exceptional year of growth in all key metrics. We have achieved 69% growth in turnover, returned to profitability, re-established cash generation, built a strong management team and Board and restored morale within the business. We have also achieved a substantial increase in recurring revenues providing improved visibility and quality of earnings. These are significant achievements given the position the Group was in just a year ago. We will continue to invest in our market leading product, whilst also building the sales and marketing required to enable us to earn our place as the global leader in the market we pioneered. The increase in demand for back office workforce optimisation solutions has been triggered by the ongoing global trend of businesses looking to improve customer service, operational efficiency, cost control and risk management. The Group s products deliver guaranteed benefits for its customers in each of these key result areas and it has an enviable track record of successful implementations and customer retention. This market demand, together with our ability to develop and deliver products which meet our customer needs, provides a firm foundation for the Group. The investments we have made in the Group this year have further strengthened our market position and were underpinned by the placing we completed in January. The successful raise of 3.19m, in addition to the 0.55m of convertible loan notes issued in February, was a strong endorsement of our strategy. Board Developments The last financial year also saw the Board strengthened through the appointment of a number of new Directors, alongside myself and Elizabeth, bringing with them extensive relevant experience that is already benefitting the business. Following my appointment as Non- Executive Chairman, John Brougham and Mark Brady were both appointed as independent Non-Executive Directors, Jonathan Kay was appointed Chief Financial Officer and Elizabeth Gooch was confirmed as the Chief Executive Officer. Current Trading & Outlook FY was a year of transformation for the Group. Building on the steps we have taken to build a robust platform for growth during the past year, the Board is confident that the Group is well positioned to continue momentum into the coming year. We will continue to invest in our market leading product, whilst also building the sales and marketing required to enable us to earn our place as the global leader in the market we pioneered. We will also complement organic growth with strategic acquisitions as and when opportunities arise. We look forward to continuing to deliver value for our customers and excellent results for our shareholders. Duncan McIntyre Chairman 24 March 03

6 eg solutions plc Annual Report & Accounts for the year ended Stock Code: EGS Chief Executive s Statement 04 Elizabeth Gooch Chief Executive Officer Overview In FY a number of the strategies that we had invested in prior to the last financial year began to be realised. Following our acquisition of Xtaq Limited in FY2011 we converted their pilot projects into successful customer implementations. We then invested in these and a number of other pilot projects with global and international customers, all with significantly greater roll-out potential than our traditional UK customer base. In 2012 we secured a strategic partnership with Aspect Software Inc. to support roll-out to these customers as well as distribute our product throughout the world. We also launched our Managed Cloud Services solution. All of these strategies depressed our financial results during this period but the investments were made with the intention of benefitting our prospects and performance for the future. The challenges and changes during our 2013 financial year created a difficult period, but with renewed focus we have now begun to realise their potential. These contracts also led to a 20% increase in the user base of our software, to over 100,000 licences sold in the UK and globally. I am therefore delighted that in FY each of these investments has contributed to transforming our results: We have secured ten significant contract wins in the period, when previously this has been on average three to four, including roll-outs to global customers, partner sales in new territories and contract wins in three new verticals. Customers in these verticals have benefited from our development strategy of building products that address cross-sector issues. These customers have also achieved the same benefits as those in our traditional markets. As a result of our investment in our partnership distribution channel and our global customers, international sales now account for 37% of our turnover and we intend to continue investment in this growth area in the coming years. Finally, our Managed Cloud Services solution is gaining traction leading to a significant increase in recurring revenues, a record order book of 15.44m, and improved visibility/quality of earnings. Our renewed focus on cost control together with the significant increase in revenue has also contributed to the return to profitability and cash generation. FY has therefore been a year in which we have re-established the fundamentals of the business, delivered strong financial performance including record revenue levels, and laid the foundations for sustainable growth in the future. Market Development The emerging back office optimisation market continues to develop. Businesses are seeking to improve the end customer experience across multiple channels, optimise their use of resources across these channels and maintain compliance with regulatory and security requirements. With the increase in digital business, customer transactions are shifting from the traditional and physical to data centric methods giving rise to an increase in transactions across all channels. At the same time customers now expect near or real-time responses, regardless of how they transact, and a key driver for businesses is to significantly reduce complex back office processing time and achieve real-time insight into the whole customer eco-system. Investment in the back office has traditionally been a low priority but it can no longer be ignored. It is a major contributor to the success of the customer experience and, according to Frost & Sullivan s recent report, can often be the engine that drives organisational performance from behind the scenes.

7 Strategic Report Core functionality within the eg operational intelligence software suite was designed to address these requirements: Multi-channel transaction capture to provide a single view of all work regardless of channel. Real-time, multi-level, multi-dimensional operational intelligence for customer operations and customer experience management. Efficient allocation of work to an increasingly disparate, mobile workforce wherever it is in the world, together with the means to automatically evaluate their performance. We are therefore well placed to support both the digital and omni-channel requirements of our customers; enabling them to deliver consistent service and optimise performance across all channels regardless of where their workforce is and, at the same time, providing true insight into the end-to-end customer journey. Customer Base Growth As a result of the increased need for optimisation tools for complex processing areas, demand from new and existing customers has been strong. During the period a total of ten significant contract wins were secured, further penetrating our key global market sectors. The Group increased its footprint in existing market verticals such as financial services, but also successfully developed business in new verticals. Major new contracts announced during the period include: In February, a contract win with an international telecoms provider In March, a contract win with another new utility customer In April, a contract win from a global bank (existing client) worth approximately $1.06m In August, a contract win with a major third party outsourcing company (existing client) expected to be worth in excess of 1.20m In January, a contract win within Local Government worth at least 1.60m over four years. These contracts also led to a 20% increase in the user base of our software, to over 100,000 licences sold in the UK and globally. Product Development We have continued to invest in our market leading software to ensure we can continue to meet customer requirements out of the box. This has always been a unique selling point for our product, enabling our customers to quickly realise benefits and achieve guaranteed return on investment. The latest version of the eg operational intelligence software suite was launched in London on 25 March. This version provides further enhancements to our core products as well as the platform for delivery of eg mobile. Our mobile product will allow management teams to monitor the operational health of their back office operations in realtime from mobile devices using a rich dashboard and alerting app. This will provide customer operations teams with early visibility into potential service issues as well as better engage the workforce in achieving the organisations objectives. We have also developed major enhancements to our strategic planning and forecasting module during FY. These include improved modelling features enabling planners to model resource forecasts based on complex business scenarios and continuously monitor progress against forecasts or contractual obligations, such as Service Level Agreements, in real-time. eg mobile and our new Strategic Planning and Forecasting product will be released shortly. People In March Duncan McIntyre agreed to join our Board as Non-Executive Chairman. His experience of building successful international businesses quickly made a positive impact on the Group. He has built a new Board, improved our communications within the City, led our financing activities and re-established a culture of success and support. The eg Board now consists of individuals with substantial experience of growing listed and private companies, as well as providing high levels of governance. The Group has benefited from their deep understanding of technology markets, strong City reputations and passion for developing effective management teams. Our new management structure includes a number of senior hires in key areas of the business and good progress is being made to build a successful team to deliver our strategy. Over the coming year we will continue to invest further to ensure that business momentum is maintained and customer satisfaction continues. In October Paul Hoban advised us of his intention to resign as Group Chief Financial Officer. Paul will leave us in April having built a strong financial reporting function within the Group and we wish him well with his future endeavours. Jonathan Kay joined us in December to replace Paul and work alongside me to develop our team to drive profitable growth. The whole eg team worked extremely hard during the year to deliver excellent results for our customers throughout the world. I would like to thank them for their contribution and continuing commitment. Elizabeth Gooch Chief Executive Officer 24 March 05

8 eg solutions plc Annual Report & Accounts for the year ended Stock Code: EGS Chief Financial Officer s Statement 06 Jonathan Kay Chief Financial Officer Financial Results Revenue for the year ended increased 69% to 7.54m (: 4.46m). Software licences, maintenance and software services contributed 68% of total revenue (: 76%) with the balance coming from implementation and training services. Revenue included one-time licence fees and one-off support services revenue totalling 1.06m. Particularly pleasing was the fact the Group achieved a profit before tax of 0.41m (: loss 1.48m) and Adjusted EBITDA increased to 1.26m (: loss of 0.50m). During the period recurring revenues increased significantly. eg s order book now stands at 15.44m to be recognised over the next 4 years. During the period recurring revenues increased significantly. eg s order book now stands at 15.44m to be recognised over the next 4 years. Overall gross margin improved 5% to 70% (: 65%) as a result of improved utilisation in our Implementation, Training and Professional Services teams. Administrative expenses increased to 4.75m (: 4.38m) following investment in management and sales. As at net cash was 4.30m (: net debt 0.31m) following investment in research and development of 0.85m (: 0.80m), and cash generated from financing activities of 3.76m (: 1.24m). In April a share placing raised 0.23m allowing equity support from the Non- Executive Directors. A further placing was completed in January raising 3.19m (before expenses) to support growth with conversion of 0.55m convertible loan notes also issued to equity. Cash generated from operating activities was 1.73m for the period (: cash used in operating activities 0.43m). Earnings per share on a basic and fully diluted basis was 3.6p and 3.5p respectively. In the prior year the basic earnings per share was (8.9p) and on a fully diluted basis (8.9p). The Group has benefited from the favourable tax relief given on development expenditure. The effective rate on taxation credit is 33% (: effective rate of tax credit 14%). The Board has decided not to recommend payment of a dividend. Jonathan Kay Chief Financial Officer 24 March

9 Strategic Report Case Study eg operational intelligence is a comprehensive back office workforce optimisation application providing real-time, historic and predictive visibility of operational performance and pinch points. Our Team Managers now have information available in real-time to enable them to manage, monitor and improve performance. By deploying the eg operational intelligence software suite and benefiting from the eg principles of operational management, BES are now able to ensure best practice is followed and improved throughout our operation. BES Utilities Client BES Utilities eg were engaged to help BES Utilities develop a comprehensive back office workforce optimisation solution building on existing software solutions to fill gaps in their Management Information and management capability by deploying the eg operational intelligence software suite supported by the eg principles of operational management. Objectives Build on existing software solutions and processes to provide a comprehensive back office workforce optimisation solution to support future growth. Results BES Utilities were able to identify 20% additional capacity, which has helped to support their future growth plans. BES Utilities are able to benefit from improved management control and visibility in real-time. Understanding of work demand in each function now shows where workforce capacity exists on an ongoing basis. Solution BES Utilities had been developing their suite of systems over a number of years to help manage customer interactions and eg operational intelligence has now been deployed alongside this core platform. This provides improved real-time management information to help BES Utilities manage their work and people more effectively, across various teams and functions such as Debt Collection, Metering, Customer Services, Change of Tenancy and Supply Administration. eg work manager data connector was a key component in the solution, used to consume data files sent at frequent intervals from the BES platform. This solution enabled cases to be created and tagged with all of the information Team Managers require to prioritise and distribute work to the individuals within their teams. This is achieved utilising standard functionality and its simplicity from an end user perspective meant that the training overhead was minimal. The Future Utilising standard process dashboards and Management Information available in eg operational intelligence, BES Utilities are now monitoring and managing end-to-end processing to understand where further process efficiencies can be achieved to reduce processing time and improved customer experience. 07

10 eg solutions plc Annual Report & Accounts for the year ended Stock Code: EGS eg at a Glance Enterprise Workforce Optimisation solutions for the Back Office Operational Intelligence Software Suite Implementation & Training Services Operational Management Practice & Accredited Training 08 Most complete purpose built Back Office WFO Software Suite Implementation methodology based on production management techniques Fixed cost, fixed timescale and guaranteed benefit implementations with ROI in 6 months 20-40% improvement in productivity while improving the end customer experience Transforming Back Office Operations Delivering Guaranteed Benefits in Customer Service, Operational Efficiency & Compliance Developed market leading Back Office Workforce Optimisation product and pioneered a new technology market. International blue chip client base of over 50 major brands; financial services, outsourcers & utilities. High client retention rates and referenceability 100,000+ licences $3.0 bn market potential rapidly emerging with few competitors Initial IPO June 2005 to develop product and market Rapid deployment methodology providing guaranteed ROI for global customers. Re-seller agreement with Aspect software 50+ Major brands Over 100,000 licences sold throughout the world. Increasing recurring revenues with Managed Cloud Services $3.0bn Market potential Strategic objective to become the undisputed global market leader

11 Strategic Report Our Values Leadership One Team Work Ethic Personal Integrity Results Driven Inspiring Fit, Fast, Flexible, Fun Can-Do Attitude Plain Speaking & Honest Challenging Responsive Never, Ever Give Up Interpersonal Sensitivity Make a Difference Make it Work (Pragmatic) Empowering Proactive Quality & Consistency Non-judgemental Make it Sustainable 09 Improving Sharing (Skills & Knowledge) Deliver What We Promise Loyal & Trustworthy Deliver Solutions Strong & Resilient Considerate Pace, Energy & Enthusiasm Dependable / Reliable Process Driven Our Credentials eg solutions is a provider of enterprise workforce optimisation software, specialising in the back office. eg pioneered this new market space and developed the most complete, purpose built workforce optimisation software for back offices. Tried, tested and proven software suite and operational management methodology International blue chip client base in multiple industry sectors, including financial services, healthcare, telecoms, utilities and local government. Unique software capability and rapid deployment methodology Fixed cost, fixed timescale and guaranteed benefits implementations 20 40% improvement in productivity while improving the end customer experience. eg was the best fit for our requirements and has provided the governance to keep control of the work we deliver both to our back office and front office Advisors across our three UK sites. The benefits have met our expectations and we have achieved further efficiencies by sending work to Advisors who have available capacity. This has helped to reinforce our goal of making all Advisors multi-skilled to help maximise first contact resolution rates to drive increased customer satisfaction. Managing Director of Fusion, Part of the BGL Group

12 eg solutions plc Annual Report & Accounts for the year ended Stock Code: EGS Our Marketplace eg pioneered the back office workforce optimisation software market a rapidly emerging market with few direct competitors. 10 Market Definition The term back office has been traditionally used to define staff involved in all business functions that are critical to the efficient delivery of goods and services, but which are, for the most part, unseen by the customer. Despite its less strategic image, the back office is a major contributor to the success of any business, and has the ability to significantly impact the Customer Experience. Customer expectations are met and exceeded when back office work is done efficiently. Errors, on the other hand, can lead to significant increases in Front Office volume, higher operational costs, and unsatisfied customers. Source: Frost & Sullivan The Back Office Problem Varied, complex and multi-stage processes Many input channels Variety of new and legacy systems High degree of manual interaction despite the investment in technology Many locations and varied working patterns The Requirement: Improve customer service and quality, demonstrate compliance & reduce cost The Challenge: Achieving these conflicting variables with the same or less resources The Solution: Enterprise Back Office Workforce Optimisation

13 Strategic Report Nordics United Kingdom USA Singapore India South Africa Australia Market Opportunities Frost & Sullivan foresees great growth opportunity for the back office workforce optimisation (BOWFO) market. The Financial Services industry and insurance companies are seen as the early adopters of the unique potential of BOWFO, but other sectors, including Government, Healthcare, Telecommunications, Utilities and Pharmaceuticals show great promise. eg s strategic objective is to retain product leadership and develop/enhance our product suite to meet the digital needs of our global enterprise customers. 11 Back Office Workforce Management Drivers Controlling workforce costs and increasing transparency are key business objectives throughout the world Technology + Business Transformation Customer service provision remains a people intensive business Improving Economies Companies remain cost conscious Saturated Markets Retain customers with improved service and increase profitability High Growth Markets Remain competitive and avoid the problems of the past Increasing Regulation Increasing requirement for greater transparency in all sectors eg solutions plc (LON:EGS) had its corporate rating restated by equities researchers at finncap. They have a target price on the stock of GBX 105 ($1.57).

14 eg solutions plc Annual Report & Accounts for the year ended Stock Code: EGS Our Customers Key for me was to drive change that not only took cost out of the operation, but also delivered a better and more consistent level of customer service, these are rarely achieved at the same time and at such pace, but we did it. We are now operating at a service level and cost control not previously achieved here. Director of Production and Operations 12 When surveyed, 100% of clients said they would recommend our services. 100% of staff agreed eg is a great place to work.

15 Strategic Report Case Study This is the best work position I ve seen in 5 years. As customers make contact with us our agents are able to provide accurate real-time information on the status of their enquiry. This manages the expectation for the customer of their end to end journey and has improved the overall customer experience including a reduction in demand on chaser calls Senior Operational Manager Client - Major UK Energy Company The customer needed to optimise workflows in the back office to deliver an improvement in productivity and reduce their Cost to Serve. Key requirements included the need to provide real-time information to all levels of management to monitor productivity against customer demands and to monitor and improve operational efficiency. Objectives Deploy a back office workforce optimisation software solution within a Cloud environment Deliver operational efficiency and provide a sustainable platform to improve performance of people, customer service, quality and cost Optimise performance to redistribute staff across the business to match business need (cross skill) Provide a foundation for developing a more flexible and agile workforce Solutions A combination of three core components of the eg operational intelligence software suite were delivered: Strategic Planning & Forecasting Real-Time Work Management Reporting & Analytics Results The result was an overall benefit of 30% improvement in productivity (guaranteed at the outset) and a substantial reduction in overtime. 13

16 eg solutions plc Annual Report & Accounts for the year ended Stock Code: EGS Financial Review 14 Jonathan Kay Chief Financial Officer Overview In the year ended, revenue was 7.54m, an increase of 3.08m (: 4.46m). The Group made a profit from operations of 0.52m (: loss from operations of 1.48m). Revenue Analysis Revenue earned in the first half of the year was 3.99m compared with 2.24m in the same period for the prior year. The Group continued the strong performance into the second half of the year with revenue of 3.55m, a 60% increase on 2.22m. Profit Before Taxation The Group produced a profit before taxation of 0.41m. (: loss before taxation of 1.48m). Taxation The Group has benefited from the favourable tax relief given on development expenditure. The effective rate of taxation credit is 33% (: effective rate of tax credit 14%). Earnings Per Share Earnings per share on a basic and fully diluted basis was 3.6p and 3.5p respectively. In the prior year the basic earnings per share was (8.9)p and on a fully diluted basis (8.9)p. Results and Dividend The trading results are set out on page 24. The Directors are unable to recommend the payment of a final dividend on the ordinary shares (: nil). Research and Development & Capital Expenditure The Group spent 1.60m on direct staff and contractor costs for research and development, of which 0.77m was capitalised. An additional 0.08m, in relation to direct costs, was also capitalised. In the Group expended 1.51m on direct staff and contractor costs developing its software product of which 0.71m was capitalised. An additional 0.04m, in relation to direct costs, was also capitalised. The expenditure relates to the development of new and enhanced software offerings. The Group invests in new product development and the continual modification and improvement of its existing products to meet technological advances, customer and new market requirements. Cash Flow The Group at had interestearning cash balances of 4.30m and no overdraft. (: interest earning cash balances of 0.01m and overdraft of 0.32m). Cash inflow in the year was 4.6m (: outflow 0.00m). In February, the Group raised 0.55m before expenses through the issue of convertible loan notes which were subsequently converted to equity at 50p per share in January. In January the Group raised 3.2m (before expenses) by way of a placing of 4,905,000 new ordinary shares of 1p each. Future Developments The Group has embarked upon a growth strategy which will extend its activities in financial services into other new UK market sectors, in addition to developing its activities outside of the UK. Key Performance Indicators The Group s progress on its strategic objectives is monitored by the Board of Directors by reference to the following key performance indicators. The matters mentioned in the Chairman s statement are a reflection of the performance of the business set out in the table on page 15 along with comparative prior year performance data.

17 Strategic Report Key Performance Indicators Note Revenue A 7,542,000 4,456,000 % Change B 69.3% (10.0%) Gross Margin % *(Restated) C 69.9% 65.1% Profit / (loss) from operations % D 6.9% (33.1%) Profit / (loss) after tax % E 7.2% (28.6%) Retained Cash Balances A 4,297,000 10,000 Overdraft A Nil ( 322,000) Cash inflow/(outflow) A 4,607,000 ( 3,000) Research and Development Expenditure on staffing costs (including capitalised staff development costs) A 1,599,000 1,513,000 Debtor Days F Creditor Days F A B C D E F Revenue, Cash and cash equivalents, Cash flow from operating activities and research and development staffing expenditure are as extracted from the financial statements. Revenue growth/reduction compares the change in revenue from one year to the next expressed in percentage terms. Gross Margin is the gross profit as a percentage of revenue. Gross profit and revenue are taken from the Statement of Comprehensive Income in the financial statements. Profit from operations is the profit from operations as a percentage of revenue. Profit after tax is the profit after tax as a percentage of revenue. Debtor days represent the length of time taken by customers to pay their bills and Creditor days represent the length of time taken by the Group to pay its suppliers. The number of days outstanding has been calculated by comparing the outstanding balance for trade debtors and trade creditors with the average value of sales or purchases for the previous 12 months respectively, inclusive of VAT, and multiplying by the number of days in the year. 15 * Gross margin restated after reallocation of 863k amortisation from direct costs to overheads. Risks and Uncertainties There are a number of potential risks and uncertainties which could have a material impact on the Group s long-term performance and cause actual results to differ materially from expected and historical results. Management seeks to identify material risks and put in place contingency plans to mitigate the Group s potential exposure. Competitor Risk The market for operations management improvement is becoming increasingly competitive. To mitigate this risk, management works to build strong customer relationships and develop the Group s product offering. Commercial Relationships Some of the products utilise interfaces with proprietary software licensed by independent, third party software developers. Any absence of key third party products could have a material impact on the business. To mitigate this risk, all key commercial relationships and developments in technology in the marketplace are kept under review. The Group also works with a diversity of partners to mitigate the risk inherent in working with a single partner. Operations The Group s facilities could be disrupted by events beyond its control such as fire or other issues. The Group prepares recovery plans for most foreseeable situations so that our business operations would continue should these situations occur. This report was approved by the Board of Directors on 24 March and signed on its behalf by: Jonathan Kay Chief Financial Officer 24 March

18 eg solutions plc Annual Report & Accounts for the year ended Stock Code: EGS 16

19 Strategic Report Corporate Social Responsibility We cannot express all that your help does in words, but please know that you are not just changing the lives of individuals but are building a community which will produce excellent leaders of tomorrow, and that will lead to a better country. Namsi Lesito, Principal at Doornkop Crèche, South Africa Employees eg s intention is to listen to and involve staff employee feedback is an important way of ensuring the continuous improvement of the business and can help improve staff satisfaction. Attracting and retaining talent is key to our strategic delivery. Employees are encouraged and fully supported by the Company should they choose to undertake further study and training to assist their professional development. eg held its first Hackathon, as part of the Company s initiative to encourage innovation throughout the team. This year s event has been an astounding success in engagement and team building and has uncovered some hidden eg talent too. eg solutions plc is an equal opportunities employer. Environment Our offices are energy efficient offices and in utilising the latest technology we are endeavouring to minimise our impact on the environment. It is Company policy that all waste materials are recycled. We recycle on average 1.2 tonnes of paper waste each year. Wherever possible eg uses FSC certified paper products and sustainable suppliers. Our UK office is within Dunston Business Village which has been awarded with various accolades including RICS Best Regeneration Project. South Africa The South African government introduced a comprehensive system to help integrate black people into society, postapartheid and therefore encourage and assist the transition of economic empowerment. Companies operating in South Africa have to achieve Broad Based Black Economic Empowerment (BBBEE) accredited status in support of these objectives. Businesses are classified by their size and measured in terms of how successfully they comply with a range of seven measures. eg are accredited with level 4 status (out of 10, 1 is the highest score). Company Charity Since establishing a subsidiary in Johannesburg in 2007, eg has chosen the Doornkop Needy Children s Centre (DNCC) as its Company charity. The centre provides safety, shelter, clothing, education, love and medical care from Monday to Friday for orphaned or fostered children aged 0 to 5 years old, some of whom are HIV positive. eg supports fundraising activities with staff and clients, as well as making its own financial contributions to the charity. The Company organises annual educational outings for the children and has provided items from a wish list of educational items using some of the funds raised to expand the facilities they have available and contribute towards the children s education. Here are some of the developments that have been made possible from the donations and fundraising that has taken place in the last 12 months: Provision of Learning Materials, Books and Toys Educational outings Enhanced crèche facilities with a new kitchen and toilets for the children Caregivers training to improve knowledge and skills in caring for the children Regular e-pap supplies epap is essential fortified, nutrient rich food formulated to address hunger. Important Priorities Child Welfare providing a safe environment for the children who would otherwise be left alone and at risk. Hunger and Malnutrition providing a safe haven and respite for parents, ensuring access to food and water to support their health. Education engaging the children in educational activities such as learning the alphabet, numbers, the concept of colour and providing access to educational toys. eg is the primary sponsor of DNCC and ensures that the crèche gets the right support to meet their everyday needs. eg have donated a minimum of R60k (Rand) every year to aid the development of the crèche. 17

20 eg solutions plc Annual Report & Accounts for the year ended Stock Code: EGS Board of Directors Duncan McIntyre Chairman Duncan has 20 years experience of building and developing growth companies. He has held the position of Chairman and Chief Executive with a number of quoted and private companies, mainly in the technology and digital sectors, and is normally an active investor in these companies. Elizabeth Gooch Chief Executive Officer Elizabeth Gooch started her career in industry, joining Forward Trust (a subsidiary of Midland Bank) and then Birmingham Midshires Building Society before establishing eg in Elizabeth pioneered the introduction of production management methodologies into the service sector and used these techniques as the basis for achieving improvements in customer service and guaranteed cost reduction for clients. Jonathan Kay Chief Financial Officer Jon has over 16 years experience at board level in software and IT services companies, working for larger quoted organisations and smaller private equity backed businesses with responsibilities in the UK, EMEA, Asia Pacific and North America. 18 Duncan started his career working for Price Waterhouse as a qualified Chartered Accountant. In 1994 he joined Morse plc, an IT reseller and services business which he built into a substantial listed organisation. Morse incubated Monitise and on its demerger in 2007 he took up the position of Chairman until his retirement in late 2013 when Monitise had a market capitalisation of 1 billion. He has also held the position, from 2009, of Chairman of Profero Limited, a global digital advertising agency, which was successfully sold to Interpublic Inc in January. He currently holds the position of Chairman at Technetix, a supplier of products to cable operators, working with the founder to turn around the business which is now the leading supplier in Europe with strong growth prospects. She designed and launched the eg operational intelligence software suite to embed best practice production management techniques into businesses in order to deliver sustainable benefits. eg pioneered the back office optimisation market, now worth approximately $3bn and eg s software is now recognised as the most complete purpose built back office optimisation suite in the world. Having successfully implemented eg s solutions in large financial services companies Elizabeth is recognised as a leading British IT entrepreneur and was recognised as the seventh leading female entrepreneur in Management Today s top 100 entrepreneurs for 2006 and His early career was spent at PwC, Kingfisher, Unilever and Capgemini where he performed a variety of audit, commercial and divisional Chief Financial Officer roles. In 2001 he was appointed Group CFO at Fox IT where he was instrumental in restructuring and re-positioning the business for growth, he moved to Vertex Data Sciences in 2004 where he became UK CFO, at Vertex he was a key member of the management teams that grew and successfully sold the Vertex Public and Private Sector businesses to trade. In 2012 he moved to Logica a FTSE 250 company as CFO for the UK business and became a partner before the business was sold successfully to CGI. Since then Jon set up and ran his own company and performed a variety of CFO roles in business and software services before joining eg solutions in November as the Group CFO. He is also Chairman of Acclimatise, a climate mitigation consultancy, and he advises Warbler Limited, a start-up which provides a managed platform for Mobile Network Operators in which he is an investor. Elizabeth was made a Member of the Order of the British Empire (MBE) in the Queen s Birthday Honours 2012 in recognition of her achievements in delivering significant benefits for clients with the products she designed. Jon holds an MA from Oxford University and is a Chartered Management Accountant.

21 Governance John Brougham Non-Executive Director During a successful international business career of 40 years, John has held senior financial and management positions in the telecommunications and technology sectors as well as Non-Executive Directorships with a number of public and private organisations. Mark Brady Non-Executive Director Mark Brady is a Chartered Accountant and Corporate Financier with over 25 years experience in advising both publicly quoted and private companies. Mark is a founding partner of SPARK Advisory Partners Limited, an independent mid-market corporate advisory business, and has held a number of senior positions in other financial advisory companies. Mark served as Chairman of the Quoted Companies Alliance ( QCA ) from 2005 to 2007, an independent membership organisation that champions the interests of small to mid-size quoted companies, where he also contributed to the drafting of the Corporate Governance Guide for Smaller Quoted Companies, which has become the standard for AIM quoted companies to follow. Spencer Mallder Non-Executive Director Spencer Albert Mallder, joined eg s Board as a Non-Executive Director in July He also holds the position of Senior Vice President, General Manager Workforce Optimisation and Chief Technology Officer of eg s strategic partner Aspect Software Inc. In January he was appointed Non- Executive Director and Chair of the Finance Committee of West Herts Hospital Trust and, since January 2010, he has been a Non- Executive Director of Technetix Ltd. In October 2007, he was appointed a Non-Executive Director and Audit Chair of Monitise plc where in April 2010 he became Chief Financial Officer, a role he fulfilled until his retirement in October Following an early career with STC plc, between 1986 and 2008 he was Financial Director and Board Member of BT Divisions, both domestic and international, including operations in the US, Netherlands, Germany, Spain, Ireland and Italy. John, a Fellow of the Chartered Institute of Management Accountants, is a Non-Executive Director and Chair of the Audit Committee. Mark is a Fellow of the Institute of Chartered Accountants in England and Wales and a Chartered Fellow of the Chartered Institute for Securities & Investment. Mark joined eg as a Non-Executive Director in May ; he is the Chairman of the Company s Remuneration Committee and serves on the Audit Committee. Spencer joined Aspect in October 2012 and has leadership responsibility for Aspect s workforce optimisation software and solutions business as well as for all areas of technology strategy, including product and solution delivery. He has over 25 years experience in software and technology services, sales and development, where he has held a number of senior management positions. Prior to joining Aspect, Spencer was Chief Technology Officer at Ziftit, an internet startup in social commerce and online gifting, Senior Vice President, Product Development, at Escalate Retail (2006 to 2011), A Partner at IBM s Consulting Services Group (2001 to 2006), and in 2011 he founded Software Sapience, LLC. During the previous 17 years from 1984 to 2001, he had a successful career in management consultancy with firms including Mainspring, Ernst & Young and Booz Allen Hamilton. 19 Spencer holds a master of Science degree in Applied Physics from George Mason University and a Bachelor of Science degree in Physics from Illinois State University.

22 eg solutions plc Annual Report & Accounts for the year ended Stock Code: EGS Corporate Governance 20 Board Structure and Committees The Board is responsible to shareholders for the proper management of the Company. A statement of Directors responsibilities in respect of the accounts is set out on page 22 of the annual report. The Non-Executive Directors have a particular responsibility to ensure that the strategies proposed by the Executive Directors are fully considered. To enable the Board to discharge its duties all Directors have full and timely access to all relevant information. There is a procedure for all Directors in furtherance of their duties to take independent professional advice, if necessary, at the expense of the Company. The Board has a formal schedule of matters reserved to it and meets at least quarterly. It is responsible for overall strategy, approval of major capital expenditure projects and consideration of significant financing matters. The following Committees, which have written terms of reference, deal with specific aspects of the Company s affairs: the Nomination Committee is chaired by the Chairman and comprises the Board. The Committee is responsible for proposing candidates for appointment to the Board, having regard to the balance and structure of the Board. In appropriate cases recruitment consultants are used to assist the process. All Directors are subject to reelection at least every three years; the Remuneration Committee is responsible for making recommendations to the Board on the Company s framework of Executive remuneration and its cost. The Committee determines the contract terms, remuneration and other benefits for each of the Executive Directors and senior employees, including performance related bonus schemes, share incentive plans, pension rights and compensation payments. The Board itself determines the remuneration of the Non-Executive Directors. The Remuneration Committee is chaired by Mark Brady, who was appointed to board in May, and is attended by Duncan McIntyre and John Brougham. Directors Remuneration is set out on pages 37 and 38 of the Annual Report and Accounts. The Remuneration Committee met once during the year; and the Audit Committee is chaired by John Brougham and is made up of two other Non-Executive Directors; Mark Brady and Duncan McIntyre. All 3 members of the committee are qualified accountants. The meetings are also attended, by invitation, by the Chief Executive Officer and Chief Financial Officer. Its prime tasks are to review the scope of external audit, to receive regular reports from Baker Tilly, and to review the half-yearly and annual accounts before they are presented to the Board, focusing in particular on accounting policies and areas of management, judgement and estimation. The Committee is responsible for monitoring the controls which are in force to ensure the integrity of the information reported to the shareholders. The Committee acts as a forum for discussion of internal control issues and contributes to the Board s review of the effectiveness of the Company s internal control and risk management systems and processes. The Committee also considers the need for an internal audit function. It advises the Board on the appointment of external auditors and on their remuneration for both audit and non-audit work, and discusses the nature and scope of the audit with the external auditors. The Committee has met 5 times during the year, 2 of these meetings included the audit partner. The Audit Committee also undertakes a formal assessment of the auditor independence each year which includes: a review of the non-audit services provided to the Company and related fees; discussion with the auditors of a written report detailing all relationships with the Company and any other parties that could affect independence or the perception of independence; a review of the auditor s own procedures for ensuring the independence of the audit firm and partners and staff involved in the audit, including the regular rotation of the audit partner; and obtaining written confirmation from the auditor that, in their professional judgement, they are independent. Internal Control The Directors are responsible for the Group s system of internal control and reviewing its effectiveness. The Board has designed the Group s system of internal control in order to provide the Directors with reasonable assurance that its assets are safeguarded, that transactions are authorised and properly recorded and that material errors and irregularities are either prevented or would be detected within a timely period. However, no system of internal control can eliminate the risk of failure to achieve business objectives or provide absolute assurance against material misstatement or loss. The key elements of the control system in operation are: the Board meets regularly with a formal schedule of matters reserved to it for decision. It has put in place an organisational structure with clear lines of responsibility defined and with appropriate delegation of authority; there are established procedures for the planning, approval and monitoring of capital expenditure and information systems for monitoring the Group s financial performance against approved budgets and forecasts; and the departmental heads are required annually to undertake a full assessment process to identify and quantify the risks that face their businesses and functions, and assess the adequacy of the prevention, monitoring and modification practices in place for those risks. In addition, regular reports about significant risks and associated control and monitoring procedures are reported to the Board to enable the Directors to review the effectiveness of the system of internal control. The process adopted by the Company accords with the guidance contained in the document Internal Control Guidance for Directors on the Combined Code issued by the Institute of Chartered Accountants in England and Wales. The Audit Committee receives reports from the external auditor on a regular basis and from Executive Directors of the Company. During the period the Audit Committee has reviewed the effectiveness of the system of internal control as described above. The Board receives periodic reports from all Committees.