Bond International Software plc. Annual Report & Accounts 2013

Transcription

1 Bond International Software plc Annual Report & Accounts

2 In this report Balance. Achieving performance, sustaining health. 1 Our strategy. It s all about customer choice. See pages 2-3 Bond proposes a range of deployment options to support diverse business needs. Software innovation. A continuous investment. See page 4 Our global footprint: flexibility, mobility, convenience. Bond stays at the heart of a connected world. Understanding the customer. Underpinning their business success. See page 5 Service that s geared to future needs. Bond s safe hands reassure businesses that payroll and HR demands are securely managed. Focus on Japan. See pages 6-7 Opportunities and challenges. As Bond s success across AsiaPAC strengthens, what are the catalysts for growth? Chairman s Statement 8 Group Chief Executive s Report 10 Directors and Advisers 14 Strategic Report 16 Director s Report 18 Corporate Governance Report 21 Remuneration Report 23 Independent Auditor s Report 25 Consolidated Income Statement 26 Consolidated Statement of Comprehensive Income 27 Consolidated Balance Sheet 28 Consolidated Cash Flow Statement 29 Consolidated Statement of Changes in Shareholders Equity 30 Notes to the Consolidated Financial Statements 31 Parent Company Balance Sheet 71 Notes to the Parent Company Financial Statements 72 More information is available online at:

3 Bond International Software 2013 Balance Achieving performance, sustaining health. Converting growth prospects, capabilities, relationships and assets into future cash flow is Bond s long term strategy. We value the creation of sustainable resilient programmes that will ensure the health of the business as well as maintaining our focus on short term performance. Our actions today will minimise our exposure to risk by acknowledging the pace of change. We are engineering flexibility into the organisation on a worldwide scale through the development of a portfolio of initiatives across our range of software products and services. It s all about a balanced approach. Maintaining earnings from our current activities while exploiting new areas for growth will give Bond the platform upon which to shape our future with confidence. Our customers seek enhanced speed and flexibility from our software and systems. They expect us to capture and integrate the power of new technologies to enable them to remain at the forefront of the international recruitment industry as they balance shifting demographics with a global workforce that increasingly demands freedom and mobility, while talent shortages bite even harder. For over forty years Bond International Software has pioneered the development of recruitment, HR and payroll software and solutions. We are tried and trusted. But this is not enough. Tomorrow will look very different from today. To prosper we are committed to shaping and strengthening the business through our people and our research and development programmes so we can continue to deliver the innovative and affordable solutions that our customers rely upon to succeed. Combining the power of Adapt with revolutionary mobile devices Staying in touch and recruiting on the move has been transformed by Bond s optimised applications for iphone, Android and BlackBerry. Adapt In Touch enables recruiters to access data, run workflows, and make live searches for instant results on the spot. With the number of smartphone users worldwide already over one billion, the number of apps available over two million and the phenomenal growth in mobile internet access the future is mobile. One world. One future. Daniel Richardson Chief Technology Officer Bond International Software (UK) Limited Balance 1

4 Annual Report & Accounts 2013 Our strategy It s all about customer choice. Software functionality, rather than how it is delivered or who it is hosted by, should underpin long term IT partnerships especially in the recruitment sector. Whatever route a customer takes, it is essential not to get diverted by the deployment methodology debate at the expense of the quality of the software. Bond Adapt offers a fully functional, robust solution that can be deployed to suit specific business requirements on-premise, SaaS single-tenant or multi-tenant. Cloud computing is now an integral part of IT. But hype and multiple options continue to confuse many companies. There is no simple answer to the Software as a Service versus On-Premise question even the cost equation can be more complex than it originally appears. From data location and security to the flexibility of Service Level Agreements and customisation opportunities, organisations need to consider not only the value of the out-of-the-box solution today but in the future. Bond counsels customers to consider the options before making such an important decision. Understanding SaaS Over the last ten years the way technology has been deployed has changed radically. Cloud based services increasingly dominate. So what is the appeal? Under the Software as a Service (SaaS) distribution model organisations have access to applications hosted by a vendor or service provider over a network typically the Internet. With attractive operating expenses and a subscription based payment model, SaaS also offers easier administration and automatic product updates. Internal IT investment in both infrastructure and people can be dramatically reduced. With good Internet access, it provides global reach. There are two approaches to SaaS multi-tenant and single-tenant. Under the multi-tenant model the entire environment is shared: a single code base and a single database will serve thousands of customers. Under the single-tenant model, an organisation has its own implementation hosted and subscription based but with the option of customisation, managed upgrades and a specific service level agreement. Generic versus Customised The implications of this distinction can be huge. A multi-tenant system has to be standardised allowing access by multiple businesses. True configurability can only really happen under single-tenancy, or delivered via a traditional on-premise solution. For smaller or start-up recruiting firms multi-tenant SaaS is compelling. Costs are controlled and there is no need to invest in IT resources. Businesses are small enough to enable management to impose business specific processes and attitudes within their culture, along with minor changes in areas such as the data representation layer. 2 Our strategy

5 Bond International Software One size does not fit all. We believe in choice. Toby Conibear Business Development Director Bond International Software (UK) Limited For a larger organisation, especially one that has not moved everything into the cloud, the financial model is more challenging. Under the SaaS rental approach, an organisation will typically take just two years to reach the equivalent onpremise investment costs it is the reduction in internal IT resource and infrastructure costs that delivers the long term financial value. If an organisation is not moving all applications to the SaaS model, such as Finance and HR, it will be important to understand the cost implications of a mixed on-premise and SaaS strategy. Furthermore, for a larger recruiter that needs to exploit technology to embed key business values, the lack of customisation can be a problem. Most medium to large scale enterprises build business value additions into managed processes and that means the ability to customise software to capture those unique differences is essential. Tinkering with data representation is not enough; these organisations require customisation in the workflow layer and that means either traditional on-premise deployment or singletenant SaaS. In-depth Perspective As more and more vendors come to the market with SaaS based solutions Bond are emphatic that it is critical for organisations to understand the pros and cons of each approach including traditional on-premise - and it is a powerful aspect of Bond s capabilities that Adapt can be deployed across all sizes of operation, worldwide. Technology investments are not short term, any change causes massive business upheaval and impacts user productivity. The wrong decision can be catastrophic. Without doubt the popularity of the SaaS model will continue to grow. It offers a host of benefits from both a cost and IT resource perspective; and it enables a recruiter to focus on its core skills and leave the IT to an expert provider like Bond. But it will never suit every organisation especially those with highly sensitive data that prefer to retain full control with an on-premise deployment solution. Whatever route a customer takes, it is essential not to get diverted by the deployment methodology debate at the expense of the quality of the software. Bond Adapt offers a fully functional, robust solution that can be deployed to suit specific business requirements onpremise, SaaS single-tenant or multi-tenant. We collaborate with our customers to deliver the breadth of options required to truly get the best, long term solution for their business. We collaborate with our customers to deliver the breadth of options required to truly get the best, long term solution for their business. Our strategy 3

6 Annual Report & Accounts 2013 Software innovation A continuous investment. Customer demand for innovative products and services combined with relentless competitor activity drive Bond to continuously evaluate and improve all areas of our business. This constant investment sustains Bond s reputation as a world class provider of staffing and recruiting solutions. Steve Taylor President & CEO Americas Bond International Software Inc. We launched AdaptSuite in 2013 and the system uptake means that demand for product enhancements is high. Our advanced scoring approach evaluates the requests that are received from customers and prospects resulting in a product development roadmap to help our customers run their businesses more efficiently. Our intense commitment to quality ensures we meet the rigorous standards demanded by the staffing and recruiting industry in the US. Antonio DeLiseo Manager Asia Pacific Bond International Software Pty. The dedicated multi-lingual services and software that Bond provides across the AsiaPAC region continue to evolve. Adapt s in-built Asian character sets Japanese, Chinese and Korean - and the local technical resources to sustain implementation that we have put in place, means that we can support our customers ambitions to grow their businesses successfully. We also assist with website engineering, system optimisation and search engine analysis. The majority of recruitment firms in China need a blueprint system that is easily replicable and scalable, and their employees need to instinctively engage with the user experience helping them to complete assignments with accuracy and efficiency. Bond s innovative solutions, combined with significant investment across the whole AsiaPAC region, mean that training is minimised and recruitment teams can be up to speed in the shortest possible time. This constant investment sustains Bond s reputation as a world class provider of staffing and recruiting solutions. 4 Software innovation

7 Bond International Software Understanding the customer Underpinning their business success. Our continued success in in the financial, health and charity sectors is founded on customer service and the flexible approach that we adopt when companies come to us seeking to outsource professional payroll expertise. Technical knowledge is balanced with sensitivity, and our ability to manage payrolls for companies that operate across twenty different countries worldwide, clearly demonstrates that not only can we streamline administration and eliminate errors, we also remove time-consuming tasks and improve productivity. Bond s comprehensive reporting provides instant visibility which is vital for high-value payrolls and we have pioneered online payslips. This has benefited those organisations with disparate systems across their operating divisions who seek to maximise economies of scale, improve efficiency and control. Neil Lagden Head of Bond Payroll Services Bond International Software (UK) Limited Strictly Education continues to establish itself as a mainstream provider in the school support services market. Our link with the National Association of Head Teachers which has 28,500 members across the UK has seen our new product Assure being recommended into an NAHT member running over 20,000 schools this is creating good opportunities for business growth. The education market in the UK is continually in a state of flux. As local authorities distance themselves from school support services and new businesses step in to fill the gap, Strictly Education must stay competitive. We remain focused on investment into software development and process improvements to streamline our services and provide real cost-savings within the sector. John O Neill Managing Director Strictly Education Limited Providing tailored HR and payroll web-based software solutions to customers with unique business processes has secured a significant number of new business contracts for Teamspirit. These can be attributed to the early signs of economic recovery and business confidence in our target sectors especially retail and leisure, where the implementation of self-service software benefits businesses and their employees. We continue to develop ways to interface Teamspirit s Pay & Charge system with Bond Adapt s web-recruit application and will soon launch our new Learning, Development & Appraisal module, further stimulating demand for our strong and flexible solutions. Roger Moore General Manager Bond Teamspirit. A division of Bond International Software (UK) Limited. Understanding the customer 5

8 Annual Report & Accounts 2013 Japan Opportunities and challenges. As Bond s success across AsiaPAC strengthens, what are the catalysts for growth? Japanese recruitment firms are expanding overseas as they look beyond their borders to seek international growth and recognition. These large staffing powerhouses have enormous resources and a strategic approach which is focusing on the high-margin white collar recruitment sectors in particular. It is estimated that Japan has the second-highest number of private employment agencies in any one country circa 20,000. This lags behind China s 56,000 approx., but accounts for 17% of total global industry sales taking it to second place behind the US with 23%. Bond has been agile in its pursuit of market share for Adapt software in this demanding environment. The language and character set capabilities and the investment made by the technical development teams to ensure system compliance with Japanese social and labour law, have created an authoritative and potent tool to aid productivity and deliver farreaching global functionality. This is essential in Japan, because the staffing market is becoming increasingly sophisticated at a fast pace. There are more specialist sector firms, and leading international recruitment companies making a foreign-capital investment in Japan. Their number has more than doubled to over 4,000 in recent years, as they attempt to seize their share of the world s second largest market. Also, many more people are using recruiters on the client side, as well as candidates. This increase can be attributed to the recovering economy and Japan s shrinking and ageing professional workforce. Add to that, the everpresent need for bilinguals and there seems to be no end in sight for the growing demand. 6 Japan

9 Bond International Software Bond has been agile in its pursuit of market share for Adapt software in this demanding environment. International companies in Japan have always competed vigorously for qualified job candidates whereas traditional Japanese corporations tended to promote from within and recruit straight from university. Loyalty and length of service was rewarded before productivity or innovative skills, so employees were incentivised to stay. But this is changing. Internationalisation has made recruitment a much more competitive arena and these organisations now need to find mid-career and non-new graduate hires to fulfil their business strategies. Japanese staffing firms are facing many challenges, and as they expand their horizons, they seek to partner with specialist staffing software providers who can bring them the connectivity, mobility and superior search results that will revolutionise their businesses. Bond is strategically placed to take advantage of this opportunity. OVERVIEW In 2013 the Japanese recruitment market hit a record high after m agency workers were employed, showing a significant rise of 26% compared to Q Overall, Japan represents 17% of the global agency work market, followed by the UK with 10.5%. The USA has the largest share with 28.9% of total annual sales. The agency work penetration rate is 1.4% in Japan, 1.6% in Europe and 2.0% in the USA. The US, Japan and Europe are together worth 82% of the worldwide market, and all reported a return to growth in Bond International Software established the group s Japanese office in Tokyo in Clients include leading recruitment firms: Persona and Faro. Japan 7

10 Annual Report & Accounts 2013 Chairman s Statement I am pleased to report the results for the year ended 31 December 2013 which show a year of improving profitability with operating profit before amortisation of all intangible assets and exceptional items rising. Martin Baldwin Chairman I am pleased to report the results for the year ended 31 December 2013 which show a year of improving profitability with operating profit before amortisation of all intangible assets and exceptional items rising by 13.1% to 6,124,000 (2012: 5,413,000) and operating profit before the amortisation of acquired intangibles up by 23.0% to 3,419,000 compared with 2,779,000 in As previously reported, the group s strategy has focused on growing recurring revenues as part of its drive to build value in the business. Recurring revenues provide less benefit in the year in which the revenue is acquired but in the long term they are more valuable to the group and to the future value of the business. The recurring revenues were marginally down on 2012, as they were impacted by the expiry of a fixed term contract which we are now invoicing on a time and materials basis. However the underlying trend continues to be upwards as we focus on increasing our SaaS (Software as a Service) customers along with recurring revenues from other sources such as the group s payroll operations. Looking forward the group expects to see increasing revenues from SaaS although the impact will be offset to some extent by reducing support revenues from our legacy products. In 2013 recurring revenues were 23,365,000 compared to 23,609,000 in These now represent a substantial 67% of total revenues (2012: 67%) and cover 95% (2012; 92%) of the group s administrative expenses (excluding the amortisation of intangible assets). These have reduced by 4.1% from 25,738,000 in 2012 to 24,672,000 in Profit before exceptional items has increased by 57.2% to 1,809,000 (2012: 1,151,000) and the group has made a profit before tax of 1,634,000 compared with 558,000 in The group has a reported undiluted earnings per share from continuing operations of 3.52p (2012: 2.30p) and diluted earnings per share from continuing operations of 3.52p (2012: 2.30p). In order to assist with understanding the underlying performance of the group we have reported adjusted earnings per share excluding the effects of the amortisation of acquired intangibles and one-off exceptional items. On this basis the adjusted profit after tax was 2,726,000 (2012: 2,556,000) and the adjusted undiluted earnings per share were 6.60p (2012: 6.19p) and the adjusted diluted earnings per share were 6.60p (2012: 6.19p). 8 Chairman s Statement

11 Bond International Software Bond has seen its payroll operations deliver consistent growth in revenue and profitability over the last few years and is seeking to expand them further both organically and through acquisition. The group generated 7,851,000 of cash from operating activities (2012: 3,952,000) helped by a reduction in the working capital requirement of 1,346,000 through improved credit control and cash collection. The group s capital expenditure on property, plant and equipment and internally generated product development increased by 6.5% to 4,184,000 (2012: 3,927,000) and the dividend payment increased by 50% from 496,000 to 744,000. The positive cash flows allowed the group to turn net debt of 1,790,000 at the end of 2012 to net cash of 1,352,000 at the end of Based on the progress made by the group, I am pleased to say that the board is recommending the payment of a dividend of 2.2p per share which is a 22% increase on last year. The payment is subject to shareholder approval at the Annual General Meeting on 26 June 2014 and, if approved, will be made on 8 August 2014 to shareholders on the register at 18 July Acquisition We have today announced the conditional acquisition of Eurowage Limited, which trades as FMP Europe, for a minimum consideration of 8.5m with additional amounts payable based on the company s performance over the next three years. The company offers fully managed international payroll solutions to principally UK and USA organisations expanding into new countries. Bond has seen its payroll operations deliver consistent growth in revenue and profitability over the last few years and is seeking to expand them further both organically and through acquisition. The payroll operations, which utilise Bond s intellectual property, are currently operating in the UK only. Increasingly companies with overseas subsidiaries or branches are looking for one payroll provider to meet all their payroll needs, something that Bond cannot offer in its own right. In order to broaden its customer base to multinational companies in the UK and international companies, primarily in the US, the board believes that Bond has to offer payroll solutions in countries other than the UK. Eurowage provides managed payroll solutions in many countries around the world. Bond has already partnered with Eurowage on previous deals but believe that bringing the operation into the Bond group will strengthen its product offering and drive sustainable growth in revenues and profits from payroll operations. Furthermore Bond s existing customer base includes organisations with operations in many countries around the world and to whom the group will be well placed to offer international managed payroll solutions through Eurowage. The company which was established in 2005 has seen revenues grow to 3.90m in 2013 with a profit before taxation of 1.78m and the board believes it will be earnings enhancing from the date of acquisition. Employees The group employs 460 people in our offices around the world. A motivated and committed workforce is vital to the continuing development of the group and I would like to thank all the staff for their continuing hard work, dedication and loyalty to the group. Prospects The board has been encouraged by the start to Trading conditions are good in the major markets in which we operate and we believe the group is well placed to benefit from the ongoing economic recovery. The acquisition we announced today will complement our payroll bureau operation by allowing us to offer international payroll solutions to customers and prospects alike. Martin Baldwin Chairman 8 April 2014 Chairman s Statement 9

12 Annual Report & Accounts 2013 Group Chief Executive s Report We have seen an improvement in margins with operating profit before the amortisation of acquired intangible assets improving by 23% to 3,419,000 (2012: 2,779,000). Steve Russell Group Chief Executive Recruitment software Recruitment software accounted for 51% of group revenues in 2013 compared with 57% in 2012 with the reduction reflecting the move from capital sale of software and services to the rental (SaaS) model especially in the UK and the USA. The move to SaaS continues to increase, although one contract expired at the end of 2013, the impact of which masks underlying growth in rental income. The majority of system sales are now on a rental basis. During the year we announced two significant contracts, one in the UK worth a minimum of 2.5m in revenue and one in the USA. Both of these contracts are on-going with further significant revenues and cash to be generated in 2014 and beyond. In Asia Pacific we are working on a major deployment which is scheduled for completion in the second quarter of This had a significant (but temporary impact) on the revenues and profitability in the regions. Recruitment software revenue by type Software sales & services 5,770 7,153 Software support 7,367 7,729 Software rental income 4,700 5,417 Total revenues 17,837 20,299 Revenue and operating profit/(loss)* by location of operating company Revenues Operating profit/(loss)* United Kingdom 8,512 9,071 2,504 1,071 USA 8,123 9,242 1,523 2,241 Asia Pacific 1,202 1,986 (577) (125) 17,837 20,299 3,450 3,187 *before amortisation of intangible assets and exceptional items 10 Group Chief Executive s Report

13 Bond International Software During the year we announced two significant contracts, one in the UK worth a minimum of 2.5m in revenue and one in the USA. Both of these contracts are on-going with further significant revenues and cash to be generated in 2014 and beyond. Bond Payrite 2,000 1,625 Bond Teamspirit 1,956 1,602 Bond Professional Bond Workforce Total revenues 5,262 4,559 HR and payroll software Bond Payrite and Bond Teamspirit are strategic products for the group and we continue developing and enhancing both products. They are at the heart of our Payroll Outsourcing operations, allowing the group to grow revenues and operating profits in those divisions. The analysis of revenue by product is shown above. Overall revenues for the division grew by 15% in 2013 to 5,262,000 (2012: 4,559,000) with strong growth in revenues from Bond Payrite and Bond Teamspirit. The division has benefited from the opportunities afforded by the introduction of RTI (Real Time Information) by HMRC in 2013 as well as the challenges faced by companies as a result of the government s legislation of auto enrolment of employees to company pension schemes. In March 2013 the group announced that agreement had been reached with Carpetright plc for Bond Teamspirit to provide integrated HR, Payroll and Time & Attendance software along with outsourced payroll for their entire business. Recurring revenues of 3,313,000 (2012: 3,361,000) represent 63% of total revenues (2012: 74%) and cover 112% of the fixed operating costs of the division (2012: 128%). The increase in revenues has contributed to a 16% rise in operating profit from 1,640,000 in 2012 to 1,901,000 in Group Chief Executive s Report 11

14 Annual Report & Accounts 2013 The group is seeing all markets improve on a worldwide basis and the results for the first quarter continue to provide encouragement that the recovery is real and sustainable. Recurring revenue Strictly Education 6,125 5,450 Bond Payroll Services 1,860 1,650 7,985 7,100 Non recurring revenue Strictly Education 3,617 3,187 Bond Payroll Services ,016 3,509 Total revenue Strictly Education 9,742 8,637 Bond Payroll Services 2,259 1,972 12,001 10,609 Outsourcing This division comprises two separate operations, Strictly Education which provides outsourced HR, payroll and other services to schools in the UK state sector, and Bond Payroll Services which provides payroll bureau services to organisations in both the private and public sectors. The revenues for the division are a combination of monthly fees under annual contracts for a variety of outsourced services together with fees payable in respect of consulting services for projects undertaken on behalf of customers. Strictly Education has had another year of excellent growth with a 13% increase in revenues from 8,637,000 in 2012 to 9,742,000 in Underpinning this growth is an increase of 12% in recurring income from annually renewable contracts. Consultancy revenues have also increased by nearly 13% as the company continues to increase the number of schools to which it provides outsourced service. The business now has the significant benefit of 95% (2012: 96%) coverage of all overheads by recurring contract income has also seen continued growth for Bond Payroll services with an excellent 14.6% increase in revenues to 2,259,000 (2012: 1,972,000). Significant new clients include Henderson Global Investors, Southern Dental, Fabulous Fanfayre and Vitacress. The business is now processing around 70,000 payslips per month which represents an 11% increase on last year. The outsourcing division delivered an operating profit of 2,041,000 (2012: 1,741,000) which represents a 17% increase. Both Strictly Education and Bond Payroll Services have made an encouraging start to 2014 and the division will be further strengthened by the acquisition of FMP Europe which we announced today. The acquisition will add international payroll solutions to the group s portfolio of products and services and enable the group to offer outsourced payroll solutions to multinational companies in the UK and overseas. 12 Group Chief Executive s Report

15 Bond International Software Product strategy We continue to invest a significant proportion of our overall revenue in enhancing our products although we have seen a small reduction in development costs from 4,821,000 to 4,515,000 which is still 12.9% of revenues compared with 13.6% in The group has continued to invest in its flagship product, Adapt, as well as configuring new applications using Adapt technology to achieve, where possible, a consistent technical platform. A number of major projects were carried out in 2013 that saw additional functionality being added to the Adapt platform including the ongoing development of a new integrated front and back office system for the US market, the development of a more intuitive and aesthetically pleasing user interface, the introduction of extremely advanced and intelligent search and match technology, and the development of dashboard technologies, allowing recruiters to set up snapshots of their working day. People The group employs around 460 staff around the world with offices in UK, USA, Australia, Singapore, Japan, Hong Kong, China and Peru as well as outsourced development teams in India and the Ukraine. I take this opportunity to thank them all for their hard work in 2013 and their continuing loyalty and support in Outlook The group is seeing all markets improve on a worldwide basis and the results for the first quarter continue to provide encouragement that the recovery is real and sustainable. The reorganisation that we effected in our US business in 2012 is having a positive effect and the combination of a rejuvenated salesforce and a brand new and exciting product portfolio is already showing returns. Asia Pacific continues to present opportunities for significant growth and we have already succeeded in selling systems to the indigenous clients in addition to multinational companies. Our payroll operations continue to grow and with the addition of FMP to the group, looks set to have another successful year in Steve Russell Group Chief Executive 8 April 2014 Group Chief Executive s Report 13

16 Annual Report & Accounts 2013 Directors & Advisers Executive Directors Steve Russell Group Chief Executive Bruce Morrison ACA Group Finance Director Tim Richards Managing Director, European Operation Steve s extensive career in software development spans over 30 years, during which he has held a number of senior management positions, including group managing director of Scan Data International Plc. Steve formed the company, which then acquired a controlling interest in Bond Associates Ltd in On the acquisition of Bond Associates Inc, he became the group s chief executive, and following a successful flotation on AIM, the chief executive of Bond International Software plc. Bruce joined Bond in July He qualified as a Chartered Accountant with KPMG in London where he became an audit manager before leaving to act as finance director of Wembley Stadium Limited, which was the major operating company within the Wembley plc group. Subsequently he joined Radio First plc, a startup company, as finance director. Tim joined Bond in April 1990, having successfully held a number of roles in the software sector, primarily relating to sales and sales management. During his time with Bond, Tim has been responsible for the recruitment and management of the Adapt sales and marketing operations, together with the acquisition of several multi-million pound contracts increasingly on a global scale. 14 Directors & Advisers

17 Bond International Software Registered Office Courtlands, Parklands Avenue Goring by Sea, West Sussex BN12 4NG Telephone: Facsimile: Company Number: Auditor Baker Tilly UK Audit LLP 25 Farringdon Street, London EC4A 4AB Nominated Adviser & Broker Cenkos Securities Limited 6,7,8 Tokenhouse Yard London EC2R 7AS Principal UK Bankers Barclays Bank Plc PO Box 112, Horsham West Sussex RH12 1YQ Solicitors Memery Crystal LLP 44 Southampton Buildings London WC2A 1AP Registrars Share Registrars Limited Craven House, West Street Farnham, Surrey GU9 7EN Coole & Haddock 5 The Steyne, Worthing West Sussex BN11 3DT Non-Executive Directors Martin Baldwin BSc, C Eng, FBCS Non-executive Chairman Richard Hall TD, MA, FCA Non-executive Director and Company Secretary Mark Leonard Non-executive Director Martin started his career in software in 1961 and became chief executive of Scan Data International Plc. During this time he was responsible for several successful acquisitions and ultimately for that company s flotation in He has held a number of executive and non-executive directorships, including Datapro Computers Group Ltd, Sage Data Inc, English and Caledonian Investments, Channel Business Systems Plc and MICAbuild Ltd. He has held his non-executive position at Bond since prior to the company s flotation in A graduate engineer, Richard qualified as a Chartered Accountant in 1966 and carried out the duties of finance director and company secretary for a number of international companies including INMOS International Plc. He was latterly finance director of Information Technology Plc and National Telecommunications Plc, both of which companies he took to the market. Since 1989, Richard has run his own consultancy with a number of non-executive directorships offering corporate, commercial and financial advice to major clients. He joined the board of Bond in 1997 as part-time finance director and subsequently became non-executive on the appointment of a full time finance director in Mark Leonard is President and Chairman of the Board of Constellation Software Inc, the group s largest shareholder. He founded Constellation Software Inc in Prior to this he worked in the venture capital business for 11 years. Mark holds a BSc from the University of Guelph and an MBA from the University of Western Ontario. Mark resigned on 21 March 2014 to pursue other interests. Directors & Advisers 15

18 Annual Report & Accounts 2013 Strategic Report The directors of the company present their Strategic Report for the year ended 31 December The Strategic Report is a new statutory requirement under the Companies Act 2006 (Strategic Report and Directors Report) Regulations The purpose of the Strategic Report is to enable shareholders to assess how the directors have performed their duty to promote the success of the company under Section 172 of the Companies Act Our business model The group has developed and acquired a range of software products and related services which help recruiters, human resource professionals and payroll professionals manage their businesses in a more productive and profitable way. The group charges customers for use of those products through the sale of a software licence or through agreement to provide a hosted solution in exchange for a monthly fee ( SaaS ), and for related consultancy services such as project management, data transfer, training and technical support. The group also uses those same software products to provide customers with outsourced payroll services ranging from fully managed payroll to simple payroll processing. Our operating environment The economic recovery is gaining momentum in the UK and USA, the two largest geographical markets in which the group operates. The UK economy grew by 0.7% in the fourth quarter of 2013 and 1.8% for the year as a whole, the highest rate since The recent strength of the economic recovery in the UK has seen a rise in the number of people between 16 and 64 in employment and a fall in the number of unemployed. In the US, GDP increased by 1.8% in 2013 with the unemployment rate falling from 7.9% at the end of 2012 to 6.7% at the end of Improving labour markets here and the US provide the group with opportunities to grow revenues and profits in the future. Our goal and strategic priorities The group s overall goal is to create value for shareholders through delivering software and services to customers in a profitable business model. To achieve this the group is pursuing a number of strategic objectives; To increase the proportion of the group s revenues that are recurring by expanding the provision of Software as a Service ( SaaS ); To expand the group s operations into new geographical areas such as the Asia Pacific region; To create market leading software products that allow the group to increase the market share and user base in the markets in which it already operates. Business Review A fair review of the business, the future developments and research and development activity is provided in the Chairman s Statement on pages 8 to 9 and the Chief Executive s Report on pages 10 to 13. The directors consider that the financial key performance indicators are turnover, operating profit before amortisation of acquired intangibles, earnings per share and the group s net debt/net cash. These are reviewed in the Chairman s Statement and Chief Executive s Report on pages 8 to 13. Non financial key performance indicators are not considered material to managing the financial performance of the group. There are a number of risks and uncertainties which could have an impact on the group s long term performance and cause actual results to differ materially from expected and historical results. The directors seek to identify material risks and put in place policies and procedures to mitigate any exposure. 16 Strategic Report

19 Bond International Software (i) Competitor risk The market for staffing software is extremely fragmented with a large number of small suppliers operating in all Bond s geographical markets. Very few of these suppliers have the necessary financial, technical and marketing resource to be able to sustain their competitive position. However the competition may intensify through consolidation or new entrants to the market and in order to mitigate this risk and maintain our competitive position, we work to build strong customer relationships and maintain and develop our products ahead of the competition. (ii) Economic risk The staffing industry has a reputation for being vulnerable to the ups and downs of the economy. The directors have taken a number of steps to mitigate any perceived risk such as increasing the proportion of contracted recurring income, geographical expansion and diversification into other vertical markets through acquisition and product development. (iii) Foreign currency Although the group has a significant proportion of its revenue and profit earned outside the UK, subsidiaries generally trade in their own currency. As a result the group is not subject to any significant foreign exchange transactional exposure. The group s main exposure therefore arises from the translation of overseas profits into sterling. To date the group has not sought to remit profits to the UK preferring to reinvest them in the countries where those profits have been earned. In the light of this the group does not hold any hedging instruments such as derivatives. (iv) Interest rate risk The group is exposed to interest rate volatility as its principal borrowings are at floating rates. Details of outstanding debt and interest rate profiles are set out in note 3(a) to 3(c). Where market conditions make this desirable the group will seek to fix interest rates on a proportion of its debt. In addition to the above, note 3 gives details of the company s financial risk management including price risk, credit risk, liquidity risk and cash flow risk. By order of the board Steve Russell Group Chief Executive 8 April 2014 Strategic Report 17

20 Annual Report & Accounts 2013 Directors Report The directors present their report and the audited financial statements of the company and the group for the year ended 31 December Principal activities and business review The principal activities of the group during the year were the provision of software, hardware and related support services, principally to the recruitment industry, the provision of HR and Payroll software and related support services and outsourced payroll services, and the provision of outsourced services to the state education sector. The principal activity of the company is to manage the group. Going concern The group s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman s Statement on pages 8 to 9 and the Chief Executive s Report on pages 10 to 13. The financial position of the group, its cash flows, liquidity position and borrowing facilities are described in the Chairman s Statement on pages 8 to 9. In addition, notes 3(a) to 3(d) to the financial statements include the company s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk. As highlighted in note 3(c) to the financial statements, the group meets its day-to-day working capital requirements through a revolving credit facility entered into in April The prevailing economic conditions can create uncertainty particularly over the level of demand for the group s products and services but, with a high proportion of recurring revenue from many customers in different sectors and across different geographic areas, the directors believe the company is well placed to manage its business risks at every stage of the economic cycle. The group s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the group should be able to operate within the level of its current facility. The directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. Results and dividends The group made profit for the year attributable to the owners of the parent of 1,454,000 (2012: 951,000), the details of which are shown in the Consolidated Income Statement on page 26. The directors recommend a dividend of 2.2 pence per share which, if approved at the Annual General Meeting, will be paid on 8 August 2014 to shareholders on the register at 18 July Directors The names of the directors who held office during the year are shown on page 14 and 15. In accordance with the Articles of Association, J M Baldwin retires by rotation at the forthcoming Annual General Meeting and, being eligible, offers himself for re-election. Mr Baldwin has a letter of engagement with the company which is subject to one month s notice. M Leonard resigned as a director on 21 March Qualifying third party indemnity provision was in place in respect of all directors throughout the year and up to the date of approval of these financial statements. Employment of disabled persons It is the group s policy to offer equal opportunities to disabled persons in matters of recruitment, training, career development and promotion. Where people become disabled during the course of their employment, the group makes every effort to retain their services and to provide retraining where necessary. 18 Directors Report

21 Bond International Software Employee involvement and communication Information about the group s affairs is communicated to employees through regular management meetings, electronic notice boards and social events. Suppliers The group does not follow any formal code or standard on payment practice. The group recognises the importance of maintaining good business relationships with its suppliers and its policy in the current and following financial year is to settle their invoices within agreed terms unless there are good reasons not to do so. The average number of days credit taken on the outstanding balance at the year end is 26 (2012: 23). Statement of directors responsibilities The directors are responsible for preparing the Strategic Report, the Directors Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare Group and Company Financial Statements for each financial year. The directors are required by the AIM Rules of the London Stock Exchange to prepare Group financial statements in accordance with International Financial Reporting Standards ( IFRS ) as adopted by the European Union ( EU ) and have elected under company law to prepare the company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The financial statements are required by law and IFRS adopted by the EU to present fairly the financial position of the group and company and the financial performance of the group; the Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group for that period. In preparing each of the group and company financial statements, the directors are required to: a. select suitable accounting policies and then apply them consistently; b make judgements and accounting estimates that are reasonable and prudent; c. for the group financial statements, state whether they have been prepared in accordance with IFRSs adopted by the EU; and for the company financial statements state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the company financial statements; d prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the company will continue in business; The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group s and the company s transactions and disclose with reasonable accuracy at any time the financial position of the group and the company and enable them to ensure that the financial statements comply with the Companies Act They are also responsible for safeguarding the assets of the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Bond International Software plc website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Directors Report 19

22 Annual Report & Accounts 2013 Directors Report (continued) Charitable donations During the year the group made charitable donations totalling 14,468 (2012: 17,751), comprising several small donations to local charities in the countries in which the group operates. The company made no political donations (2012: nil). Statement as to disclosure of information to the auditor The directors who were in office at the date of approval of these financial statements have confirmed that, as far as they are aware, there is no relevant audit information of which the auditor is unaware. Each of the directors has confirmed that they have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and establish that it has been communicated to the auditor. Auditor Baker Tilly UK Audit LLP has indicated its willingness to continue in office and a resolution for its reappointment will be proposed at the forthcoming Annual General Meeting. By order of the board Bruce Morrison Director 8 April 2014 Registered Office: Courtlands, Parklands Avenue Goring by Sea, West Sussex BN12 4NG 20 Directors Report

23 Bond International Software Corporate Governance Report Compliance with Corporate Governance Code principles The company s shares were admitted to trading on the Alternative Investment Market ( AIM ) of the London Stock Exchange in December AIM listed companies are not required to comply with the 2012 UK Corporate Governance Code ( the Code ). During the year, the Quoted Companies Alliance published its Corporate Governance Code for small and mid-sized quoted companies. The directors have decided to adopt this and have sought to meet its recommendations in so far as it considers them appropriate for a company of Bond s size and nature. The report provides a description of the board, its role and its committees together with information on the group s system of internal controls. Board The board of directors has overall responsibility for the management of the group. Its aim is to provide leadership and control in order to ensure the growth and development of the group whilst representing the interests of all the group s stakeholders. The board currently comprises the non-executive chairman, one further non-executive director and three executive directors. The board considers that, notwithstanding the fact that the non-executive directors have served on the board for more than nine years, the non-executive directors are independent of the executives and free of any relationship which could materially affect the exercise of independent judgment. The roles of Chairman and Chief Executive are held by separate directors and there is a clear division of responsibilities with the Chairman responsible for overseeing the running of the board and ensuring that no individual has unfettered powers of decision making whilst the Chief Executive oversees the day to day business of the group. Management supplies the board with timely and appropriate information. All directors are able to take training or seek professional advice in connection with their duties as a member of the board. All directors have access, at the company s expense, to the company s legal or other independent professional advisers. The board meets on a regular basis, normally every two months, with additional special meetings if required. At each meeting the board reviews the group s trading performance as well as considering the company s position with regard to significant risks and matters relevant to the board. The board also has a schedule of matters reserved for its decision including the review and approval of group strategy and long term plans, annual budgets, interim and annual financial statements, acquisitions and disposals, significant items of capital expenditure, banking arrangements and senior executive remuneration and appointments. The board does not currently undertake a formal evaluation of its performance and effectiveness and in this respect does not comply with the QCA Code. Election In accordance with the company s Articles of Association newly appointed directors are required to resign and seek re-election at the first Annual General Meeting following their appointment. Furthermore the Articles require that one third of the board is required to seek re-election each year. Audit Committee The Audit Committee has been established in accordance with the recommendations of the QCA Code. Its principal responsibilities are to assist the board in reviewing and approving the company s financial statements including any significant financial judgements contained therein, monitoring the company s internal financial control and risk management systems and making recommendations to the board with regard to the appointment and remuneration of the external auditor. The board is also responsible for ensuring that the engagement of the external auditor on non-audit services does not impair their independence. The Audit Committee, which comprises two non-executive directors, Martin Baldwin and Richard Hall, meets at least three times a year. The external auditor normally attends meetings and the executive directors may attend if the Audit Committee deems it appropriate or necessary for them to do so. In practice the finance director usually attends meetings. Corporate Governance Report 21

24 Annual Report & Accounts 2013 Corporate Governance Report (continued) The Audit Committee reviews the services provided by the external auditor, Baker Tilly UK Audit LLP, at least on an annual basis. This review includes consideration of the confirmation of independence which Baker Tilly UK Audit LLP provides to the company on an annual basis and the services which related Baker Tilly entities provide to the group, in order to ensure that the independence of the auditor is not compromised. Remuneration Committee The Remuneration Committee comprises Martin Baldwin (non-executive chairman), Richard Hall (non-executive director). Mark Leonard (non-executive director) resigned from the committee on 21 March It has formal terms of reference and its role is to review the performance of the executive directors and set the scale and structure of their remuneration and the basis of their service agreements with due regard to the interests of the shareholders. The Remuneration Committee prepares an annual report on the company s remuneration policy which is contained with the company s Annual Report and Accounts. Further details of the directors remuneration are set out in note 28 to the accounts. Internal control The board is responsible for maintaining a system of internal control to safeguard shareholders investment and the company s assets. The system has been established to provide reasonable assurance of effective and efficient operations, financial monitoring, the prevention and detection of errors and irregularities and compliance with laws and regulations. A system cannot however give absolute assurance against material misstatement or loss. The key procedures the board has established to provide an effective system of internal control are as follows: There is an organisational structure with clearly defined roles and responsibilities for the board and other senior management personnel. There is a schedule of reserved matters for decision by the board. There is a formal process for identifying and regularly reviewing major business risks faced by the group. Each year the board approves the annual budget including an assessment of the key risks of the business. Performance against budget is continually monitored through regular reporting to the board of variances from budget and the preparation of updated financial forecasts. There is a system for authorisation and approval based on tiers of authority. The board regularly reviews the effectiveness of the company s system of internal control including financial, operational and risk management. The company does not currently have an internal audit function. However the Audit Committee reviews this on an annual basis in the light of changes to the company s circumstances. Investor relations The company has an investor relations programme designed to maintain effective relationships with all our shareholders and analysts. In addition to its Interim and Annual Reports, the group provides access to up to date information via its website, including access to the Regulatory News Service, share price information and contact details for investor queries. The directors provide regular briefings to institutional shareholders, private client brokers and analysts, primarily following the publication of interim and preliminary results but throughout the year as required, at which there is an opportunity to discuss issues and gain feedback. The board also receives feedback through the company s stockbroker and financial PR advisers. All shareholders are invited to attend the company s Annual General Meeting to raise any questions regarding the strategy, management and financial performance of the group and the board is available to answer questions both during and after the AGM. 22 Corporate Governance Report

25 Bond International Software Remuneration Report The Remuneration Committee The company is not required by the Listing Rules or Companies Act to produce a remuneration report but has done so to maintain good standards of corporate governance although this does not comply with the Corporate Governance Code published by the QCA. The company s remuneration policy is the responsibility of the Remuneration Committee which comprised Martin Baldwin (non-executive Chairman), Richard Hall and Mark Leonard (non-executive Directors) during the year. General policy The company s policy is to provide remuneration packages for executive directors which aim to attract and retain high quality executives and which link their reward to the group s performance. Remuneration package There are four components to the remuneration package, namely base salary and benefits, bonus and commission, pension contributions and long-term incentive arrangements: The base salaries of the executive directors were set at levels considered to be appropriate when they entered into service agreements with companies in the group. The base salaries are reviewed by the Remuneration Committee annually and any increases are awarded having regard to performance and salary levels in comparable organisations. Benefits, which include a fully expensed car and private health insurance, are not pensionable. Stephen Russell and Bruce Morrison are entitled to a bonus based on the annual profits of the group before taxation. Tim Richards is entitled to a bonus on the profits of Bond International Software (UK) Limited. The group contributes to money purchase pension arrangements. Death in service benefit is also provided. The company has established approved, unapproved and Enterprise Management Incentive (EMI) share option schemes, in which the directors may participate. Details of the directors emoluments are set out in note 28 to the accounts. Service contracts and letters of engagement Stephen Russell and Tim Richards have rolling annual service contracts. Bruce Morrison has a service contract which requires twelve months notice by either party. Martin Baldwin has a letter of engagement relating to his appointment as non-executive Chairman. The agreement may be terminated by either party on one month s notice. Mark Leonard had a letter of engagement relating to his appointment as non-executive Director. The agreement could have been terminated in accordance with the Articles. Richard Hall has a letter of appointment covering his role as a non-executive director which is subject to three months notice by either party. The company is also party to an agreement with Richard Hall Consultancy for the provision of consultancy services which is subject to four months notice by either party. Remuneration Report 23

26 Annual Report & Accounts 2013 Remuneration Report (continued) Directors fees The executive directors are responsible for setting the fees of the non-executive directors. The non-executive directors do not receive any benefits or pension contributions. Share options It is the group s policy to issue share options at appropriate intervals to motivate and retain employees and to align their interests with those of shareholders. The company presently operates four share option schemes: An EMI scheme An HM Revenue & Customs approved scheme An unapproved scheme The 2009 Company Share Option Plan By virtue of its size the company is no longer able to grant share options under the EMI scheme, and the HM Revenue & Customs approved and unapproved schemes are closed to new grants. Under the 2009 Company Share Option Plan the Remuneration Committee may grant to directors and employees options to subscribe for shares in the company, at an exercise price not less than the market price at the time of the grant. Non-executive directors are entitled to participate in the 2009 Company Share Option Plan. Martin Baldwin Chairman of the Remuneration Committee 8 April Remuneration Report

27 Bond International Software Independent Auditor s Report Independent auditor s report to the members of Bond International Software plc We have audited the group and parent company financial statements ( the financial statements ) on pages 26 to 76. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). 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 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. Respective responsibilities of directors and auditor As more fully explained in the Directors Responsibilities Statement set out on page 19, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s (APB s) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council s website at Our-Work/Codes-Standards/Audit-and-assurance/Standards-and-guidance/Standards-and-guidance-for-auditors/Scope-of-audit/UK- Private-Sector-Entity-(issued-1-December-2010).aspx. Opinion on financial statements In our opinion the financial statements give a true and fair view of the state of the group s and of the parent company s affairs as at 31 December 2013 and of the group s profit for the year then ended; the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and the financial statements have been prepared in accordance with the requirements of the Companies Act Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and the Directors Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Paul Watts (Senior Statutory Auditor) For and on behalf of BAKER TILLY UK AUDIT LLP, Statutory Auditor, Chartered Accountants 25 Farringdon Street, London EC4A 4AB 8 April 2014 Independent Auditor s Report 25

28 Annual Report & Accounts 2013 Consolidated Income Statement For the year ended 31 December 2013 Note Continuing operations Revenue 4 35,100 35,467 Cost of sales (4,304) (4,316) Gross profit 30,796 31,151 Administrative expenses (24,672) (25,738) Operating profit before the amortisation of intangible assets 4 6,124 5,413 Amortisation of internally generated intangible assets (2,705) (2,634) Operating profit before the amortisation of acquired intangible assets 3,419 2,779 Amortisation of acquired intangible assets (1,610) (1,628) Profit on ordinary activities before exceptional items 1,809 1,151 Exceptional items 20 (475) Operating profit 1, Finance income Finance costs 21 (202) (216) Profit before income tax 1, Income tax (expense)/credit 22 (180) 393 Profit for the year attributable to the owners of the parent 1, Earnings per share attributable to the owners of the parent during the year (pence per share) 23 Basic 3.52p 2.30p Diluted 3.52p 2.30p 26 Consolidated Income Statement

29 Bond International Software Consolidated Statement of Comprehensive Income For the year ended 31 December 2013 Note Profit for the year 1, Other comprehensive income net of tax Item that may be subsequently reclassified to profit and loss Currency translation differences on foreign currency net investments (533) (368) Other comprehensive income net of tax (533) (368) Total comprehensive income for the year attributable to the owners of the parent There are no taxation effects in respect of the foreign currency translation differences. Consolidated Statement of Comprehensive Income 27

30 Annual Report & Accounts 2013 Consolidated Balance Sheet At 31 December 2013 Registered Number: Note ASSETS Non-current assets Property, plant and equipment 5 2,730 2,793 Intangible assets 6 31,013 31,659 Deferred tax assets 16 2,565 2,687 Trade and other receivables ,308 37,480 Current assets Inventories Trade and other receivables 9 8,035 9,127 Cash and cash equivalents 10 3,479 3,732 11,542 12,893 Total assets 47,850 50,373 EQUITY AND LIABILITIES ATTRIBUTABLE TO THE OWNERS OF THE PARENT EQUITY Share capital Share premium account 23,935 23,863 Equity option reserve Currency translation reserve (1,305) (772) Retained earnings 10,967 10,163 Total equity attributable to the owners of the parent 34,279 34,028 LIABILITIES Non-current liabilities Borrowings 14 2, Deferred tax liabilities 16 2,794 2,823 4,850 2,923 Current liabilities Trade and other payables 13 8,512 7,968 Current income tax liabilities Borrowings ,422 8,721 13,422 Total liabilities 13,571 16,345 Total liabilities and equity 47,850 50,373 The financial statements on pages 26 to 76 were approved and authorised for issue by the board of directors on 8 April 2014 and signed on its behalf by: Stephen Russell Bruce Morrison Directors 28 Consolidated Balance Sheet

31 Bond International Software Consolidated Cash Flow Statement For the year ended 31 December 2013 Note Cash flows from operating activities Cash generated from operations 25 7,851 3,952 Interest paid (202) (216) Income tax recovered/(paid) 373 (123) Net cash generated from operating activities 8,022 3,613 Cash flows from investing activities Interest received Purchase of property, plant and equipment (388) (381) Purchase of intangible assets (3,796) (3,546) Proceeds from sale of property, plant and equipment 7 6 Net cash used in investing activities (4,150) (3,823) Cash flows from financing activities Issue of new ordinary share 74 Proceeds from borrowings 1,450 Repayment of borrowings (3,352) (638) New finance leases Repayment of finance leases (118) (34) Dividends paid to owners of the parent 24 (744) (496) Net cash (used in)/from financing activities (4,062) 332 (Decrease)/increase in cash and cash equivalents for the year (190) 122 Cash and cash equivalents at the beginning of the year 3,732 3,713 Effects of foreign exchange rate changes (63) (103) Cash and cash equivalents at the end of the year 3,479 3,732 For the purposes of the cash flow statement, cash includes deposits at call with financial institutions. Consolidated Cash Flow Statement 29

32 Annual Report & Accounts 2013 Consolidated Statement of Changes in Shareholders Equity For the year ended 31 December 2013 Attributable to owners of the parent Currency Share Share Equity translation Retained capital premium option reserve reserve earnings Total Balance as at 1 January , (404) 9,589 33,941 Comprehensive income: Profit for the financial year Other comprehensive income net of tax: Currency translation differences (368) (368) Total comprehensive income for the year (368) Dividend paid (496) (496) Share options lapsed (119) 119 Balance as at 31 December , (772) 10,163 34,028 Comprehensive income: Profit for the financial year 1,454 1,454 Other comprehensive income net of tax: Currency translation differences (533) (533) Total comprehensive income for the year (533) 1, Dividend paid (744) (744) Issue of ordinary shares Share options lapsed (94) 94 At 31 December , (1,305) 10,967 34,279 The share premium account is used to record the amounts received in excess of the nominal value of shares issued. The currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. The equity option reserve is used to record the reserve set aside for share based payment expense. The retained earnings reserve and currency translation reserve represent the cumulative net gains and losses arising in the Consolidated Income Statement and Consolidated Statement of Comprehensive Income. 30 Consolidated Statement of Changes in Shareholders Equity

33 Bond International Software Notes to the Consolidated Financial Statements 1. General information Bond International Software plc ( the company ) and its subsidiaries (together, the group ) develop and sell computer software products together with related support and consultancy services to companies operating in the staffing industry. It also develops and sells HR and payroll software products together with related support and consultancy services and provides outsourced services. The group has a number of operating subsidiaries in the UK, USA, Australia, Hong Kong and Japan which sell the group s products across the world. The company is a Public Limited Company which is listed on the Alternative Investment Market of the London Stock Exchange and incorporated in England and domiciled in the United Kingdom. The address of its registered office is Courtlands, Parklands Avenue, Goring by Sea, West Sussex, BN12 4NG. 2. Accounting policies The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. Basis of preparation The consolidated financial statements of Bond International Software plc have been prepared in accordance with International Financial Reporting Standards and IFRIC Interpretations Committee ( IFRSIC ) applicable to companies reporting under IFRS and the Companies Act 2006 and have been prepared under the historical cost convention and in pounds sterling. As permitted under Section 408 of the Companies Act 2006, no profit and loss account is presented for the company. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group s accounting policies. The areas involving a higher degree of judgement or complexity or areas where assumptions and estimates are significant to the consolidated financial statements are discussed further below. IFRS has only been applied to the consolidated financial statements. The company has elected to keep and prepare its parent company financial statements in accordance with UK GAAP. The financial statements of the company are presented on pages 71 to 76. Going Concern The group s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman s statement on pages 8 to 9 and the Chief Executive s report on pages 10 to 13. The financial position of the group, its cash flows, liquidity position and borrowing facilities are described in the Chairman s Statement on pages 8 to 9. In addition, notes 3(a) to 3(d) to the financial statements include the company s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk. As highlighted in note 3(c) to the financial statements, the group meets its day-to-day working capital requirements through a revolving credit facility established in April 2013 and due for renewal in April The prevailing economic conditions can create uncertainty particularly over the level of demand for the group s products and services but, with a high proportion of recurring revenue from many customers in different sectors and across different geographic areas, the directors believe the company is well placed to manage its business risks whatever the economic outlook. The group s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the group should be able to operate within the level of its current facility. The directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. Notes to the Consolidated Financial Statements 31

34 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 2. Accounting policies (continued) Changes in accounting policy and disclosures (a) The following new standard has been adopted by the group in the year IFRS 13 Fair value measurement Disclosure (endorsed on 11 December 2012; effective date 1 January 2013) This provides a definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. (b) The following standards have been issued or amended, but have not had an impact in the current period: IFRS 7 Financial Instruments Disclosure (endorsed on 13 December 2011; effective date 1 January 2013) This proposes an amendment in respect of the offsetting of financial assets and financial liabilities. A table will need to be presented of assets and liabilities offset. IAS 19 Employee benefits amendments (endorsed on 5 June 2012; proposed effective date 1 January 2013) The corridor approach to the accounting for employee benefits will be removed. IAS 1 Presentation of Financial Statements (endorsed on 5 June 2013; effective date 1 January 2013) This details requirements for voluntarily disclosed comparative information and confirms that notes are not required to the opening statement of financial position presented on a change of accounting policy or retrospective restatement or reclassification. IAS 16 Property, Plant and Equipment (endorsed on 27 March 2013; effective date 1 January 2013) This provides guidance on classification of servicing equipment, spare parts and stand-by equipment as property, plant and equipment or inventory. IAS 32 Financial Instruments Presentation (endorsed on 27 March 2013; effective date 1 January 2013) This clarifies that income tax relating to distributions to holders of an equity instrument and income tax relating to transaction costs of an equity transaction are accounted for in accordance with IAS 12 Income Taxes. IAS 34 Interim Reporting (endorsed on 27 March 2013; effective date 1 January 2013) This requires disclosure of total assets and liabilities for a reportable segment if regularly provided to the chief operating decision maker and there has been a material change for that segment since the last annual financial statements. (c) The following standards and interpretations relevant to the group have been issued but are not yet effective, and have not yet therefore been adopted. IFRS 9 Financial Instruments (not yet endorsed; proposed effective date 1 January 2015) Deals with the measurement and accounting for financial assets. IFRS 10 Consolidated financial statements (endorsed on 11 December 2012; EU effective date 1 January 2014) This defines control as the basis for which entities to consolidate, and how the criteria are to be applied, and sets out the accounting requirements for the preparation of consolidated financial statements. IFRS 11 - Joint Arrangements (endorsed on 11 December 2012; EU effective date 1 January 2014) This replaces IAS 31 and establishes principles for financial reporting for all types of jointly controlled arrangements. IFRS 12 - Disclosure of interests in other entities (endorsed 11 December 2012; EU effective date 1 January 2014) This sets out the disclosure requirements for all forms of interest in other entities. IAS 27 Separate Financial Statements (endorsed on 11 December 2012; EU effective date 1 January 2014) This sets out accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity presents separate financial statements to consolidated financial statements. 32 Notes to the Consolidated Financial Statements

35 Bond International Software 2. Accounting policies (continued) Changes in accounting policy and disclosures (continued) IAS 28 Interests in Associates and Joint Ventures (endorsed on 11 December 2012; EU effective date 1 January 2014) The amendments require the use of the equity method of accounting for investments in associates and joint ventures and removes the ability to use proportional consolidation. IAS 32 Financial Instruments presentation (endorsed on 13 December 2012; effective date 1 January 2014) This is a consequential amendment in respect of the offsetting of financial assets and financial liabilities. IAS 39 Financial Instruments Recognition and Measurement Amendment; Novation of Derivatives and Hedge Accounting (endorsed on 19 December 2013; effective date 1 January 2014) This is a narrow-scope amendment to allow hedge accounting to continue when a derivative designated as a hedging instrument is novated from one party to a central counterparty as a result of laws or regulation. IAS 36 Impairment of Assets Amendment; Recoverable Amount disclosures for Non-Financial Asset (endorsed on 19 December 2013; effective date 1 January 2014) This requires disclosure of recoverable amount when an impairment loss is recognised or reversed in the period in respect of an individual asset or CGUs, and requires disclosure of the fair value hierarchy levels and, for levels 2 and 3, the valuation technique and key assumptions used, when that recoverable amount is based on fair value less costs of disposal. IFRS 10 Consolidated Financial Statements Amendment; Transition Guidance (endorsed on 4 April 2013; effective date 1 January 2014). This clarifies the date of initial application and reliefs from the presentation or adjustment of comparative information. IFRS 11 Joint Arrangements Amendment; Transition Guidance (endorsed on 4 April 2013; effective date 1 January 2014) This clarifies reliefs from the presentation or adjustment of comparative information. IAS 27 Separate Financial Statements Amendment; Investment Entities (endorsed on 20 November 2013; effective date 1 January 2014) This requires an investment entity to account for particular investments in its separate financial statements at fair value through profit and loss and provides guidance on accounting when investment entity status changes. IFRS 10 Consolidated Financial Statements Amendment; Investment Entities (endorsed on 20 November 2013; effective date 1 January 2014) This requires an investment entity to measure particular subsidiaries at fair value through profit or loss rather than consolidating them in accordance with IFRS 10. Confirms that an investment entity will not prepare consolidated financial statements if all of its subsidiaries are measured at fair value through profit or loss. IFRS 12 Disclosure of Interests in Other Entities Amendment; Investment Entities (endorsed on 20 November 2013; effective date 1 January 2014) This sets out disclosures for investment entities that measure subsidiaries at fair value through profit or loss, including information about exemption from consolidation, investment entity status and unconsolidated subsidiaries. IAS 19 Employee Benefits Amendment; Defined Benefit Plans: Employee Contributions (not yet endorsed; effective date 1 January 2014) This simplifies the accounting for contributions to defined benefit plans from employees or third parties that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the group when they come into effect. Notes to the Consolidated Financial Statements 33

36 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 2. Accounting policies (continued) Consolidation Subsidiaries Subsidiaries are all entities over which the group has the power to govern financial and operating policies. The group controls an entity when the group is exposed to, or has, the rights to, variable returns from its involvement with the entity and has the ability to affect these returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. The group uses the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities assumed and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date. On an acquisition-by-acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest s proportionate share of the acquiree s net assets. The excess of the fair value of the consideration transferred, the amount of any non-controlling interest in the acquiree, and the acquisition-date fair value of any previous equity interest in the acquiree over the group s share of the fair value of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary in the case of a bargain purchase the difference is recognised directly in the Consolidated Income Statement. Where necessary, adjustments are made to the financial statements of subsidiaries and associates to bring the accounting policies used into line with those used by the group. Inter-company transactions and balances between group companies are eliminated. Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Critical accounting estimates and judgements The group makes estimates and assumptions concerning the future. Whilst the directors believe that the estimates and assumptions used in the preparation of the financial statements are reasonable, the resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates that have a significant risk of causing a material adjustment to the carrying values of assets and liabilities within the next financial year are discussed below. i) Impairment of goodwill The group tests annually whether the goodwill has suffered any impairment. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations which require the use of estimates of future cash flows. Further information involving the basis for the impairment recognised in the year is set out in note 6. ii) Computer software The computation of the fair value of computer software acquired during the period is based on an estimate of the future cash flows arising from the ownership of those software products. Differences in the actual cash flows from those anticipated at the date of acquisition may give rise to impairment in the value of the software. iii) Customer contracts and relationships Similarly the computation of the fair value of customer contracts and relationships acquired is based on an estimate of future cash flows arising from those existing customers. iv) Probability of use of tax losses The recognition of a deferred tax asset assumes that there will be sufficient suitable profits to enable the losses to be used in future. 34 Notes to the Consolidated Financial Statements

37 Bond International Software 2. Accounting policies (continued) Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the group s activities. Revenue is shown net of Value Added Tax, returns, rebates and discounts and after eliminating sales within the group. The group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the group s activities as described below. The amount is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The group bases its estimates on historical results taking into account the type of customer, the type of transaction and the specifics of each arrangement. (i) Sale of software licences The group sells licences to use its software products either on a perpetual royalty free basis or on a rental basis for a fixed period of time. Revenue arising from the sale of perpetual licences is recognised at the time of sale provided that all the group s obligations associated with the sale of the licence have been fulfilled. Revenue from licences sold on a rental or subscription basis is recognised over the period for which the licences are rented/subscribed. (ii) Sales of services The group sells consultancy, training, implementation and project management services to customers either separately from or in conjunction with the sale of licences. Revenue from the sale of services is recognised when those services have been provided. (iii) Annual contracts The group enters into contracts to provide support services on an annual basis. Revenue from support agreements is recognised in equal instalments over the period of the agreements. (iv) Interest income Interest income is recognised on a time proportion basis using the effective interest method. Foreign currencies Items included in the financial statements of each of the group s entities are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The Consolidated Financial Statements are presented in sterling which is the company s functional and presentational currency. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Income Statement. The results and financial position of all the group entities (none of which has a currency of a hyperinflationary economy) that have a functional currency different from the presentational currency are translated into the presentational currency as follows: assets and liabilities for each balance sheet are translated at the closing rate at the date of that balance sheet; income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates in which case income and expense are translated at the rates on the dates of the transactions); and all resulting exchange differences are recognised as a separate component of equity. On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of the borrowings and other equity instruments designated as hedges of such investments, are taken to shareholders equity. Such exchange differences may be recycled to profit or loss on disposal. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Notes to the Consolidated Financial Statements 35

38 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 2. Accounting policies (continued) Segmental reporting Financial information on operating segments that corresponds with information regularly reviewed by the Chief Operating Decision Maker (CODM) is disclosed in note 4 to the accounts. Information on operating segments, which are components of the group that are engaging in providing related products, is presented. Geographical information presented is based on the location in which the subsidiary operates. Operating profit before the amortisation of intangible assets Operating profit before the amortisation of intangible assets, relates to the profit derived from the group s main trading activities. Employee benefits Pensions Pension contributions are made for a number of directors and employees on a defined contribution basis. Contributions payable for the year are charged in the Consolidated Income Statement. The group has no further payment obligations once the contributions have been paid. Share based payments The group operates a number of share option schemes which allow employees to acquire shares in the company. Where the company awards equity settled share options under these schemes, the fair value of options granted is calculated at the grant date using the Black Scholes Model and the resulting cost is charged to the Consolidated Income Statement over the vesting period at the end of which the recipient becomes unconditionally entitled to exercise the option and credited to the equity option reserve. Further information is set out in note 12. Borrowing costs All borrowing costs are recognised in the Consolidated Income Statement in the period to which they relate. Exceptional items Items which are non-recurring and sufficiently material are presented separately in the consolidated income statement. The separate reporting helps provide a better understanding of the group s underlying business performance. Dividends Dividend distributions are recognised as liabilities once they are no longer at the discretion of the company. Property, plant and equipment Property, plant and equipment is stated at historical cost less depreciation and any provision for impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is provided at the following annual rates in order to write off each asset on a straight line basis over its estimated useful life. The rates in use are: Freehold buildings 2% - 4% Short leasehold 10% - 20% Plant & equipment 10% - 25% Motor vehicles 20% - 25% Freehold land is not depreciated. Assets residual values and useful lives are reviewed and adjusted if appropriate at each balance sheet date. Gains and losses on disposal and repairs and maintenance expenditure are charged to the Consolidated Income Statement in the period to which they relate. 36 Notes to the Consolidated Financial Statements

39 Bond International Software 2. Accounting policies (continued) Intangible assets Goodwill Goodwill represents the excess of the fair value of the consideration for an acquisition over the fair value of the group s share of the net identifiable assets of the acquired business at the date of acquisition. Separately identified goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill. Goodwill is allocated to cash-generating units for the purposes of impairment testing. The allocation is made to those cash-generating units, or groups of cash-generating units, that are expected to benefit from the business combination in which the goodwill arose. The group allocates goodwill to each business segment in each geographic area in which it operates. Goodwill arising on the acquisition of overseas subsidiaries prior to the adoption of IFRS is recorded in sterling as permitted under the transition arrangements for adopting IFRS. Software Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. These costs are amortised over their estimated useful lives at rates of 12.5% to 33% per annum. Internally generated development costs associated with the production of identifiable and unique software products, including the payroll costs of the development teams, are recognised as intangible assets when they meet the following criteria: i) an asset is created that can be separately identified ii) the technical feasibility of the product can be demonstrated iii) it is probable that the product will generate future economic benefit iv) the costs of the product can be reliably measured v) the group has the necessary resources available to complete the development of the product Computer software development costs capitalised as assets are amortised over their expected useful lives of either 5 or 10 years with amortisation commencing once the computer software is fully implemented and brought into use and reviewed for impairment. Customer contracts and relationships Customer contracts and relationships acquired from business combinations are recognised at their fair value at the date of acquisition and amortised over periods of between eight and ten years and reviewed for impairment. Impairment of intangible assets and property, plant & equipment Intangible assets that have an indefinite life and are not subject to amortisation are tested annually for impairment. Indefinite life assets comprise goodwill. Other intangible assets and property, plant & equipment that are subject to amortisation or depreciation are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. Any impairment losses are charged to the Consolidated Income Statement in the period in which they are identified. Where an asset does not generate cash flows that are independent of other assets, the assets are allocated to cash-generating units and the group tests the recoverable amount of the cash-generating unit to which the asset belongs. Taxation Income tax expense represents the aggregate of the current tax and deferred tax charges. The current tax charge is based on taxable profit for the period. Taxable profit differs from profit before tax as reported in the Consolidated Income Statement as it excludes items of income or expense that are taxable or deductible in other years or are never taxable or deductible. The group s liability for current tax is calculated using tax rates that have been enacted at, or substantively enacted by, the balance sheet date. Notes to the Consolidated Financial Statements 37

40 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 2. Accounting policies (continued) Taxation (continued) Deferred taxation is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is determined using tax rates that have been enacted at, or substantively enacted by, the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax assets and liabilities are not recognised if the temporary differences arise from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the accounting nor the taxable profit. Leases Where an asset is acquired under a finance lease, the asset is capitalised and the corresponding liability to the finance company is included in liabilities. Depreciation on assets held under finance leases is provided in accordance with the accounting policy for depreciating property, plant & equipment. Finance lease payments are treated as consisting of capital and interest elements and the interest is charged to the Consolidated Income Statement to achieve a constant rate of interest on the remaining balance of the liability. Rentals payable under operating leases are charged to the Consolidated Income Statement on a straight line basis over the period of the lease. Inventories Inventories are stated at the lower of cost and net realisable value. Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, other short term, highly liquid funds with original maturities of three months or less and bank overdrafts. Bank borrowings due within one year or repayable on demand are shown within borrowings in current liabilities on the balance sheet. Bank borrowings not repayable on demand are shown within non current borrowings. Cash held in the Strictly Education Limited and Bond International Software (UK) Limited client accounts is not included within cash and cash equivalents because it is held on behalf of third parties and is netted off against the corresponding liability to those clients. The balance of client account cash offset is disclosed in note 10. Financial instruments Financial assets and liabilities are recognised in the Consolidated Balance Sheet when the group becomes party to the contractual provisions of the instrument. Trade and other receivables Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for the impairment of trade receivables is established when there is objective evidence the group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset s carrying value and the estimated value of future cash flows. The carrying value of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the Consolidated Income Statement within administrative expenses. When a trade receivable is deemed to be uncollectible it is written off against the allowance amount for trade receivables. Subsequent recoveries of amounts previously written off are credited against administrative expenses in the Consolidated Income Statement. Share capital Ordinary shares and non-voting convertible shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the share premium account. Trade and other payables Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the Consolidated Income Statement over the period of the borrowings using the effective interest method. 38 Notes to the Consolidated Financial Statements

41 Bond International Software 3. Financial risk management (a) Financial risk factors The group s activities expose the group to a variety of financial risks including market risk (foreign exchange risk and interest rate risk), credit risk and liquidity risk. The group manages these risks through an effective risk management programme that seeks to minimise potential adverse effects on the group s financial performance. Risk management is carried out by the central finance department under policies approved by the board of directors. An assessment of the risks is provided to the board at monthly board meetings and is discussed to ensure that risk management complies with group policy and that any new risks are identified and appropriately managed. (b) Market risk i) Foreign exchange risk The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar. As group companies trade principally in their functional currency, foreign exchange risk arises principally on net investments in foreign operations. Sensitivities of movements in foreign currencies have been considered by the directors and reasonable movements in exchange rates are not considered to have a material impact on group profits or equity in the future. ii) Interest rate risk The group is exposed to interest rate risk on its floating rate borrowings. The interest rate profile of the group s financial assets at 31 December 2013 was: Non interest Floating rate bearing financial financial assets assets Total 000 At 31 December 2013 Cash and cash equivalents 3,479 3,479 Trade receivables 6,182 6,182 Other receivables Accrued income ,017 3,479 10,496 The interest rate profile of the group s financial assets at 31 December 2012 was: Non interest Floating rate bearing financial financial assets assets Total 000 At 31 December 2012 Cash and cash equivalents 3,732 3,732 Trade receivables 4,927 4,927 Other receivables Accrued income 2,353 2,353 8,173 3,732 11,905 Notes to the Consolidated Financial Statements 39

42 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 3. Financial risk management (continued) (b) Market risk (continued) The benchmarks for interest rates on floating rate financial assets are bank base rates for the currencies in which those assets are held. Sensitivities of movements in interest rates have been considered by the directors and reasonably possible movements in interest rates are not considered to have a material impact on future group profits or equity. The table below shows the group s financial liabilities split by those bearing interest at fixed and floating rates and those that are noninterest bearing. The bank loan is fixed periodically by reference to LIBOR with 2,000,000 scheduled for rollover in January 2014 and ultimate repayment in April 2016 when the existing facility expires. The interest rate profile of the group s financial liabilities at 31 December 2013 was: Floating rate Fixed rate Non-interest financial financial bearing liabilities liabilities liabilities Total At 31 December 2013 Trade payables 1,129 1,129 Other payables Accruals Bank loans 2,008 2,008 Obligations under finance leases , ,146 4,273 Floating rate Fixed rate Non-interest financial financial bearing liabilities liabilities liabilities Total At 31 December 2012 Trade payables Other payables Accruals Bank loans 5, ,360 Obligations under finance leases , ,640 7, Notes to the Consolidated Financial Statements

43 Bond International Software 3. Financial risk management (continued) (c) Liquidity risk The group closely monitors its access to bank and other credit facilities in comparison to its outstanding commitments on a regular basis to ensure that it has sufficient funds to meet the obligations of the group as they fall due. The Board receives regular debt management forecasts which estimate the cash inflows and outflows over the next eighteen months, so that management can ensure that sufficient financing is in place as it is required. Detailed analysis of the debt facilities taken out and available to the group are disclosed in note 14. Maturity analysis The table below analyses the group s financial liabilities on a contractual gross undiscounted cash flow basis into maturity groupings based on periods outstanding at the balance sheet date up to the contractual maturity date. At 31 December 2013 Between Less than 6 months Between 1 6 months and 1 year to 5 years Total Trade payables 1,129 1,129 Other payables Accruals Bank loans 8 2,000 2,008 Obligations under finance leases , ,057 4,273 At 31 December 2012 Between Less than 6 months Between 1 6 months and 1 year to 5 years Total Trade payables Other payables Accruals Bank loans 5,360 5,360 Obligations under finance leases , ,162 The group would normally expect that sufficient cash is generated in the operating cycle to meet the contractual cash flows as disclosed above through effective cash management. In addition, the group maintains a committed bank facility of 6,000,000 (2012: 6,000,000) which can be accessed as considered necessary of which 4,000,000 was undrawn at 31 December 2013 (2012: 650,000). The facility expires in April Credit risk predominantly arises from trade receivables and cash and cash equivalents. Notes to the Consolidated Financial Statements 41

44 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 3. Financial risk management (continued) (c) Liquidity risk (continued) Credit exposure is managed on an operating company basis. Although external credit ratings are not obtained for customers, group policy is to assess the credit quality of each customer internally before accepting any terms of trade. Deposits are also required from customers before licences and/or services are provided. Failure to settle invoices can result in the cancellation of software licences and/or the withdrawal of software support. For deposits with banks and financial institutions, only independently rated parties with a minimum of an AA rating are accepted. The group s maximum exposure to credit risk relating to its financial assets is equivalent to their carrying value disclosed below. All financial assets have a fair value which is equal to their carrying value. Cash and cash equivalents 3,479 3,732 Trade receivables 6,182 4,927 Other receivables Accrued income 587 2,353 10,496 11,905 (d) Capital management The group s main objective when managing capital is to protect returns to shareholders by ensuring the group will continue to trade in the foreseeable future. The group also aims to optimise its capital structure of net debt and equity so as to minimise its cost of capital. The group manages its capital with regard to the risks inherent in the business and the sector, the economic conditions and the strategic objectives of the business. To maintain or adjust the capital structure, the group may adjust the dividend payable to shareholders or issue new shares to raise funds. The group considers its capital to include share capital, share premium, currency translation reserve, equity option reserve and retained earnings. Net debt comprises borrowings less cash and cash equivalents. The group does not have any externally imposed capital requirements. During 2013, the group s strategy, which was unchanged from 2012, was to reduce the group s overall level of net debt. The gearing ratios as at 31 December 2013 and 2012 were as follows: Note Total Borrowings 14 2,127 5,522 Less cash and cash equivalents 10 (3,479) (3,732) Net (cash)/debt (1,352) 1,790 Total equity 34,279 34,028 % % Total capital gearing ratio 5 42 Notes to the Consolidated Financial Statements

45 Bond International Software 4. Segmental reporting (a) Business operating segments For management purposes, the group is currently organised into operating segments, which are represented by three divisions Recruitment software, HR and Payroll software and Outsourcing. These divisions are the basis on which the group reports its segment information. The operating segments set out in the following tables are presented on the same basis as that used for internal reporting purposes to the Board, who are the Chief Operating Decision Makers (CODM). The group measures the performance of its operating segments based on revenue and profit from operations, before any exceptional items. Accounting policies used for segment reporting reflect those used for the group. Inter-segment sales are priced on an arms-length basis. Costs and overheads incurred centrally are assigned to an unallocated segment. The principal activities used to identify the segments for reporting are as follows: Recruitment software: HR and payroll software: Outsourcing: Supply of specialist recruitment software Supply of integrated HR and payroll solutions Outsourced HR, payroll and other services to schools in the state sector, and payroll bureau services to a variety of organisations in the state and private sectors. Unallocated items comprise mainly corporate and head office items. Notes to the Consolidated Financial Statements 43

46 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 4. Segmental reporting (continued) (a) Business segment (continued) Segmental information about these businesses is presented below. Year ended 31 December 2013 HR and Recruitment payroll Total software software Outsourcing Unallocated Group 000 Revenue Sales to external customers 17,837 5,262 12,001 35,100 Result Operating profit/(loss) before the amortisation of intangible assets 3,450 1,901 2,041 (1,268) 6,124 Amortisation of internally generated intangible assets (2,705) (2,705) Operating profit/(loss) before the amortisation of acquired intangibles 745 1,901 2,041 (1,268) 3,419 Amortisation of acquired intangibles (292) (983) (335) (1,610) Operating profit/(loss) ,706 (1,268) 1,809 Finance income 27 Finance costs (202) Profit before income tax 1,634 Income tax expense (180) Profit for the year from continuing operations 1,454 Assets and liabilities Segment assets 31,898 7,727 6,730 1,495 47,850 Segment liabilities (8,011) (1,809) (1,736) (2,015) (13,571) Total net assets/(liabilities) 23,887 5,918 4,994 (520) 34,279 Other segment information Capital expenditure Property, plant & equipment Intangible assets 3, ,795 Depreciation Amortisation of intangible assets Internally generated intangible assets 2,705 2,705 Customer contracts ,049 Software Notes to the Consolidated Financial Statements

47 Bond International Software 4. Segmental reporting (continued) (a) Business segment (continued) Year ended 31 December 2012 Revenue HR and Recruitment payroll Total software software Outsourcing Unallocated Group 000 Sales to external customers 20,299 4,559 10,609 35,467 Result Operating profit/(loss) before the amortisation of intangible assets 3,187 1,640 1,741 (1,155) 5,413 Amortisation of internally generated intangible assets (2,634) (2,634) Operating profit/(loss) before the amortisation of acquired intangibles 553 1,640 1,741 (1,155) 2,779 Amortisation of acquired intangibles (310) (983) (335) (1,628) Operating profit/(loss) before exceptional items ,406 (1,155) 1,151 Exceptional items (350) (125) (475) Operating profit/(loss) (107) 657 1,281 (1,155) 676 Finance income 98 Finance costs (216) Profit before income tax 558 Income tax credit 393 Profit for the year from continuing operations 951 Assets and liabilities Segment assets 34,607 8,222 5,752 1,792 50,373 Segment liabilities (7,386) (2,132) (1,258) (5,569) (16,345) Total net assets/(liabilities) 27,221 6,090 4,494 (3,777) 34,028 Other segment information Capital expenditure Property, plant & equipment Intangible assets 3, ,545 Depreciation Amortisation of intangible assets Internally generated intangible assets 2,634 2,634 Customer contracts ,046 Software Notes to the Consolidated Financial Statements 45

48 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 4. Segmental reporting (continued) (b) Revenue by product/service: Sales Product licence sales 2,463 1,989 Software consulting services 4,031 5,521 Other consulting services 4,016 3,508 Computer hardware sales Third party software sales Payroll stationery sales ,735 11,858 Recurring revenue Software support 10,535 11,090 Software rental income 4,968 5,418 Outsourcing 7,862 7,101 23,365 23,609 Total revenue 35,100 35, Notes to the Consolidated Financial Statements

49 Bond International Software 4. Segmental reporting (continued) (c) Geographical areas Further segmental information is provided in respect of the geographical region in which the subsidiary operates: Year ended 31 December 2013 United North Asia Total Kingdom America Pacific Group Revenue 25,775 8,123 1,202 35,100 Non Current Assets Property, plant & equipment 2, ,730 Intangible assets 22,585 8, ,013 Trade and other receivables Total non current assets 24,911 8, ,743 Year ended 31 December 2012 United North Asia Total Kingdom America Pacific Group Revenue 24,229 9,242 1,996 35,467 Non Current Assets Property, plant & equipment 2, ,793 Intangible assets 23,665 7, ,659 Trade and other receivables Total non current assets 26,367 8, ,793 (d) Major customer information The group had no customers who accounted for more than 10% of the group s external revenue during the year (2012 nil). Notes to the Consolidated Financial Statements 47

50 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 5. Property, plant and equipment At 1 January 2012 Freehold land & Short Plant & Motor buildings leasehold equipment vehicles Total 000 Cost 1, , ,876 Accumulated depreciation (239) (161) (1,434) (141) (1,975) Net book amount 1, ,901 Year ended 31 December 2012 Opening net book amount 1, ,901 Exchange differences (1) (15) (16) Additions Disposals (17) (17) (34) Depreciation charge (24) (69) (338) (8) (439) Closing net book amount 1, ,793 At 31 December 2012 Cost 1, , ,001 Accumulated depreciation (263) (230) (1,648) (67) (2,208) Net book amount 1, ,793 Year ended 31 December 2013 Opening net book amount 1, ,793 Exchange differences (8) (5) (13) Additions Disposals (1) (9) (10) Depreciation charge (29) (56) (336) (7) (428) Closing net book amount 1, ,730 At 31 December 2013 Cost 2, , ,295 Accumulated depreciation (292) (281) (1,949) (43) (2,565) Net book amount 1, ,730 Depreciation is included within administrative expenses in the Consolidated Income Statement. 48 Notes to the Consolidated Financial Statements

51 Bond International Software 5. Property, plant and equipment (continued) The details shown on the previous page include the following amounts relating to assets that are held under finance leases: At 31 December 2013 Freehold land & Short Plant & Motor buildings leasehold equipment vehicles Total 000 Cost Accumulated depreciation (161) (161) Net book amount At 31 December 2012 Cost Accumulated depreciation (112) (112) Net book amount Notes to the Consolidated Financial Statements 49

52 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 6. Intangible assets At 1 January 2012 Customers Internally contracts and generated relationships development Goodwill Software acquired costs Total 000 Cost 16,274 4,023 8,807 21,039 50,143 Accumulated amortisation and impairment (1,368) (2,356) (3,654) (10,100) (17,478) Net book amount 14,906 1,667 5,153 10,939 32,665 Year ended 31 December 2012 At 1 January ,906 1,667 5,153 10,939 32,665 Exchange differences (101) (12) (71) (106) (290) Additions 192 3,354 3,546 Amortisation (582) (1,046) (2,634) (4,262) Closing net book amount 14,805 1,265 4,036 11,553 31,659 At 31 December 2012 Cost 16,173 4,195 8,722 24,089 53,179 Accumulated amortisation and impairment (1,368) (2,930) (4,686) (12,536) (21,520) Net book amount 14,805 1,265 4,036 11,553 31,659 Year ended 31 December 2013 At 1 January ,805 1,265 4,036 11,553 31,659 Exchange differences (34) (2) (13) (78) (127) Additions 169 3,627 3,796 Amortisation (561) (1,049) (2,705) (4,315) Closing net book amount 14, ,974 12,397 31,013 At 31 December 2013 Cost 16,139 4,355 8,693 27,523 56,710 Accumulated amortisation and impairment (1,368) (3,484) (5,719) (15,126) (25,697) Net book amount 14, ,974 12,397 31,013 The capitalised internally generated intangible assets relates to costs incurred on specific product development programmes. The amortisation periods for software are between 6 and 7 years, customer contracts between 6 and 8 years and internally generated intangible assets up to 10 years. The charges for the amortisation of intangible fixed assets for the year are shown on the face of the Consolidated Income Statement. 50 Notes to the Consolidated Financial Statements

53 Bond International Software 6. Intangible assets (continued) Impairment tests for goodwill Goodwill arising on business combinations is not amortised but is reviewed for impairment on an annual basis or more frequently if there are indications that the value of the goodwill might be impaired. Management reviews the business performance on the type of business and geography and has carried out impairment reviews using these as the basis for each cash generating unit. It has identified the UK, USA and Asia Pacific as the main geographies. In the UK there are three business segments, Staffing Software, HR & Payroll Software and Outsourcing. The HR & Payroll business can be further analysed between Teamspirit Software which operates as a separate cash generating unit and the other HR & Payroll software products that operate as one cash generating unit. In all other geographies the group only has Staffing Software businesses. Goodwill is monitored by management at an operating segment level. The following is a summary of the carrying amount of goodwill allocation for each operating segment: 2013 Opening Exchange Closing balance differences balance 000 UK Staffing 2,205 2,205 UK Teamspirit UK Other HR & Payroll 6,809 6,809 UK Outsourcing 2,252 2,252 US Staffing 3,447 (34) 3,413 Asia Pacific staffing Net book amount 14,805 (34) 14, Opening Exchange Closing balance differences balance 000 UK Staffing 2,205 2,205 UK Teamspirit UK Other HR & Payroll 6,809 6,809 UK Outsourcing 2,252 2,252 US Staffing 3,548 (101) 3,447 Asia Pacific staffing Net book amount 14,906 (101) 14,805 At the balance sheet date an impairment test has been undertaken by comparing the carrying values of goodwill with the recoverable amount of the cash generating unit to which the goodwill has been allocated. The recoverable amount of a CGU is based on value-in-use calculations. These calculations use pre-tax cash flow projections covering a five year period based on financial budgets approved by management. Cash flows beyond the five years are extrapolated using the estimated growth rates stated below. The key assumptions used for value-in-use calculations are those regarding growth rates, increases in costs and discount rates. Management estimate discount rates using pre-tax rates that reflect the current market assessment of the time value of money and the risks specific to the cash-generating units. Growth rates and increases in costs are based on past experience and expectations of future changes in the market. The growth rate used is between 2% and 4% for the UK and 12% for the USA. The discount rate used to calculate value in use is 12% (2012: 12%). Notes to the Consolidated Financial Statements 51

54 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 7. Financial instruments recognised in the Consolidated Balance Sheet Current financial assets Cash and cash equivalents 3,479 3,732 Trade receivables 6,182 4,927 Other receivables Accrued income 587 2,353 Total financial assets 10,496 11,905 Current financial liabilities Trade payables 1, Other payables Accruals Bank loans and overdrafts 8 5,360 Obligations under finance leases ,216 7,062 Non-current financial liabilities Bank loans and overdrafts 2,000 Obligations under finance leases , Total financial liabilities 4,273 7,162 Financial assets comprise loans and receivables and cash. Financial liabilities are measured at amortised cost using the effective interest method. 8. Inventories Goods held for resale The cost of inventories recognised as an expense and included in cost of sales amounted to 159,000 (2012: 165,000). 52 Notes to the Consolidated Financial Statements

55 Bond International Software 9. Trade and other receivables Trade receivables 6,182 4,927 Income tax recoverable 393 Other receivables Prepayments and accrued income 1,605 3,255 8,035 9,468 Less non current portion of other receivables (341) Current portion 8,035 9,127 The non current portion of other receivables comprised the fair value of deferred consideration receivable on the disposal of Abacus Software Limited which was recovered during the year, ahead of scheduled payment terms. The fair values of trade and other receivables do not differ from the values at which trade and other receivables are carried in the financial statements. The average credit period in the year taken on sale of services is 51 days (2012: 51 days). At 31 December 2013 trade and other receivables of 314,000 (2012: 434,000) were impaired. The amount of provision was 314,000 as of 31 December 2013 (2012: 372,000). The individually impaired receivables relate mainly to disputes arising on contracts and have been fully provided for. The ageing of these receivables is as follows: 1 to 3 months to 6 months 144 Over 6 months At 31 December 2013 trade and other receivables of 3,156,000 (2012: 3,068,000) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade and other receivables is as follows: 1 to 3 months 2,342 1,940 3 to 6 months Over 6 months ,156 3,068 Movements on the group provision for impairment of trade and other receivables are as follows: At 1 January Provision for receivables impairment Receivables written off during the year as uncollectible (460) (416) Unused amounts reversed 160 (19) Foreign currency differences (5) 1 At 31 December Notes to the Consolidated Financial Statements 53

56 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 9. Trade and other receivables (continued) The amounts of trade and other receivables shown above were denominated in the following currencies: Sterling 5,637 6,899 Euros US dollars 1,610 1,521 Australian dollars Hong Kong dollars Singapore dollars 3 Chinese Yuan 13 Japanese Yen ,035 9, Cash and cash equivalents Cash at bank and in hand 3,479 3,732 As part of the outsourced payroll service provided by group companies, the group receives funds from clients to settle their payroll liabilities. These amounts are kept in a separate bank account which is under the control of the group but does not form part of these financial statements. At 31 December 2013 the amount of cash held in the account on behalf of clients was 22,893,000 (2012: 17,477,000). 11. Share capital Ordinary shares Non voting convertible of 1p each shares of 1p each Total Number 000 Number 000 Number 000 At 1 January ,583, ,720, ,304, At 31 December ,583, ,720, ,304, Issue of new shares 181, ,000 2 At 31 December ,764, ,720, ,485, The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at the meetings of the company. The non-voting convertible shares have the same rights and entitlements as the ordinary shares except that a holder of non-voting convertible shares shall not be entitled to vote on resolutions at general meetings of the company. Save as referred to below, each non-voting convertible share may at any time be converted into one ordinary share and any new ordinary share resulting from such conversion will rank pari passu with the then existing ordinary shares. No such conversion of any of the non-voting convertible shares may be made if, immediately following such conversion, the holder of the non-voting convertible shares (together with any member of its group or any persons acting in concert with it) is or shall become holders of 24% or more (from 20 October 2015, 29.9% or more) of the entire issued voting share capital of the company, save that if a takeover offer is made for the share capital of the company and is declared unconditional in all respects, this prohibition on conversion will not apply provided that the holder of non-voting convertible shares converts all such shares and accepts such offer in respect of all resulting ordinary shares. Save as summarised above the non-voting convertible shares rank pari passu with the ordinary shares including in respect of dividends and distributions of capital. 54 Notes to the Consolidated Financial Statements

57 Bond International Software 12. Share based payments The company s share based payment schemes comprise various share option schemes designed to reward and motivate the group s employees. The company has taken advantage of the transitional provisions which permit the company to only apply IFRS2 to share options that were granted after 7 November 2002 and had not vested at 1 January The company had four share option schemes in operation during the year to which the Standard applies, all of which are equity-settled schemes: (i) The Enterprise Management Incentive Scheme 2002 was adopted on 20 June This discretionary scheme permits the grant of options to all eligible employees of the group. The options are normally exercisable between three and ten years from the date of grant. (ii) The 1997 Approved Scheme was established by resolution of shareholders on 18 December This scheme permits the grant of options to UK employees and the options are normally exercisable between three and ten years from the date of grant. In accordance with the scheme rules the scheme expired on 18 December 2011 and no further grants can be made. (iii) The Unapproved Share Option Scheme 1997 was established by resolution of shareholders on 18 December This scheme permits the grant of options to primarily non-uk employees, who are not eligible for options under the Enterprise Management Incentive Scheme 2002, on substantially the same basis as their UK counterparts. In accordance with the scheme rules the scheme expired on 18 December 2011 and no further grants can be made. (iv) The 2011 Share Option Plan was established on 17 September 2011 as a discretionary scheme to grant options to all eligible employees of the group and to replace the Enterprise Management Scheme 2002 under which options can no longer be granted and the Unapproved Share Option Scheme 1997 which has now expired. No options have yet been granted under this scheme. The following tables reconcile the number of share options outstanding for the first three share option schemes referred to above and the weighted average exercise price ( WAEP ). For the year ended 31 December 2013 Enterprise Management Approved Share Option Unapproved Share Option Incentive Scheme 2002 Scheme 1997 Scheme 1997 Options WAEP Options WAEP Options WAEP number pence number pence number Pence Outstanding at 1 January , , , Exercised (181,000) (41.09) Lapsed (2,000) (40.00) (7,000) (188.50) (55,850) (115.56) At 31 December , , , Exercisable at 31 December , , , Exercise price range Weighted average fair value of options granted not yet exercised Weighted average remaining contractual life (years) Notes to the Consolidated Financial Statements 55

58 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 12. Share based payments (continued) For the year ended 31 December 2012 Enterprise Management Approved Share Option Unapproved Share Option Incentive Scheme 2002 Scheme 1997 Scheme 1997 Options WAEP Options WAEP Options WAEP number pence number pence number Pence Outstanding at 1 January , , , Lapsed (61,000) (82.43) (10,000) (188.50) (158,000) (89.69) At 31 December , , , Exercisable at 31 December , , , Exercise price range Weighted average fair value of options granted not yet exercised Weighted average remaining contractual life (years) Options were valued using the Black-Scholes valuation model. There are no performance conditions attached to the share options. The fair value per option granted and the assumptions used in the calculation are as follows: Apr Apr Sep Mar Apr Jun Grant date Share price at grant date 47.0p 86.0p 105.5p 114.0p 116.5p 109.0p Exercise price 47.5p 86.0p 108.0p 114.0p 116.5p 110.0p Options granted 51, ,950 47,000 75,000 87, ,000 Vesting period (years) Expected volatility* 64% 64% 65% 61% 60% 59% Expected term (years) Risk free rate 4.92% 4.50% 4.23% 4.37% 4.59% 4.75% Expected dividends 0.00% 0.00% 0.00% 0.88% 0.86% 0.92% Fair value per option Sep Oct Grant date Share price at grant date 139.5p 188.5p Exercise price 140.0p 188.5p Options granted 43, ,890 Vesting period (years) 3 3 Expected volatility* 58% 55% Expected term (years) 6 6 Risk free rate 4.73% 5.00% Expected dividends 0.72% 0.74% Fair value per option * The expected volatility is based on the actual volatility over the six year period prior to the date of each grant where such data exists. Certain awards do not have the full six years worth of historical data available due to the company only listing in December For such grants the valuation has followed the guidance in International Financial Reporting Standard 2 which suggests that newly listed companies should consider using volatility commensurate with the trading period to date of grant. 56 Notes to the Consolidated Financial Statements

59 Bond International Software 12. Share based payments (continued) On the basis of the above the share based payment expense for the year ended 31 December 2013 was nil (2012: nil). At 31 December 2013 the company had outstanding options over 378,600 ordinary shares of 1p each (2012: 624,450). The movement during the year was: Exercised Lapsed At 31 Exercise At 1 January Granted during during during December Price Exercisable between 2013 the year the year the year p ,000 (20,000) 40.0p ,000 (84,000) (2,000) 49.5p ,000 (75,000) 47.5p ,000 (2,000) 5, p , , p ,000 6, p ,850 (19,850) 114.0p ,150 55, p ,000 (33,000) 116.5p ,400 27, p ,000 15, p ,000 38, p ,000 17, p ,800 (10,000) 81, ,450 (181,000) (64,850) 378,600 The mid market value of the company s ordinary shares was 90.5p at 31 December 2013 and the range during the year was 45.5p to 94.5p. Notes to the Consolidated Financial Statements 57

60 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 13. Trade and other payables Trade payables 1, Other taxation and social security 1, Other payables Accruals and deferred income 5,906 5,876 8,612 7,968 The directors consider that the carrying value of trade and other payables approximates to their fair value. The average credit period taken during the year was 30 days (2012: 33). The amounts of trade and other payables shown above were denominated in the following currencies: Sterling 5,545 5,180 Euro 2 US dollars 2,580 2,310 Australian dollars Hong Kong dollars Chinese Yuan 4 8 Singapore dollars 5 Japanese Yen ,512 7, Borrowings Current Bank borrowings 8 5,360 Obligations under finance leases (note 15) ,422 Non current Bank borrowings 2,000 Obligations under finance leases (note 15) , Total borrowings 2,127 5,522 The directors consider that the fair value of borrowings approximates to the carrying value. 58 Notes to the Consolidated Financial Statements

61 Bond International Software 14. Borrowings (continued) Total borrowings include secured liabilities (bank and collateralised borrowings) of 2,127,000 (2012: 5,522,000). At 31 December 2013 the company has a Medium Term Loan Facility for 6million with Barclays Bank Plc of which 2,000,000 was drawn down at 31 December 2013 (2012: 5,350,000). The facility is secured by a legal mortgage over the company s freehold land and buildings which have a carrying value in the financial statements of 1,718,000 (2012: 1,717,000), and by cross guarantees between the company and its UK subsidiaries. The facility expires on 7 April 2016 and interest is payable at LIBOR plus 3.8%. The purpose of the facility is to provide working capital for the group as well provide funding for future acquisitions if and when the need arises. Other borrowings and finance lease obligations are secured on the assets which the borrowings were used to acquire. Obligations under finance leases are secured on the related property, plant & equipment as shown in note 5. The group s other borrowings are subject to fixed interest rates. The weighted average interest rate on the borrowings which are subject to fixed interest rates is 7.3% (2012: 7.55%). The terms of repayment of non-current borrowings (excluding obligations under finance leases) are: Payable between two years and five years 2,000 Borrowings (excluding obligations under finance leases) were denominated in the following currencies: Sterling 2,008 5,360 Borrowing facilities The group had the following undrawn committed facilities available at 31 December 2013, in respect of which all conditions precedent had been met at that date: Expiring within one year 650 Expiring between two and five years 4,000 All facilities incur commitment fees at market rates and would provide funding at floating rates. Notes to the Consolidated Financial Statements 59

62 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 15. Leases (a) Obligations under finance leases Minimum Present value of minimum lease payments lease payments Within one year Between two and five years Less future finance charges (12) (17) Present value of finance lease obligations Analysed as: Current borrowings (note 14) Non-current borrowings (note 14) It is the group s policy to use finance leases to acquire certain plant & equipment. The average lease term is 3-4 years. For the year ended 31 December 2013 the average effective borrowing rate was 7.63% (2012: 7.55%). Interest rates are fixed at the contract date. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. The fair value of finance lease obligations approximates to their carrying value. The group s obligations under finance leases are secured by the lessor s charge over the leased assets. The net book value of secured assets is disclosed in note 5. The amounts shown as finance lease obligations are denominated in the following currencies: US dollars Australian dollars (b) Operating lease commitments The group leases various offices under non-cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights. The group also leases various plant & machinery under non-cancellable operating lease agreements. The lease expenditure charged to the consolidated income statement is disclosed in note 17. The total value of future minimum lease payments under non-cancellable operating leases for each of the following periods is: Not later than one year Later than one year and not later than five years 1,583 1,825 Later than five years ,372 2, Notes to the Consolidated Financial Statements

63 Bond International Software 16. Deferred income tax The analysis of deferred tax assets and deferred tax liabilities is as follows: Deferred tax assets Deferred tax asset to be recovered after more than 12 months (2,332) (2,535) Deferred tax asset to be recovered within 12 months (233) (152) (2,565) (2,687) Deferred tax liabilities Deferred tax liability to be recovered after more than 12 months 2,110 2,269 Deferred tax liability to be recovered within 12 months ,794 2,823 Deferred tax liabilities (net) The gross movement on the deferred income tax account is as follows: At 1 January Exchange differences Income statement charge 55 (45) At 31 December The movement in deferred income tax assets and liabilities during the year is as follows: Other Tax losses Share based Accelerated tax timing carried payment depreciation differences forward expense Total 000 Deferred tax liabilities At 1 January 2012 (2,935) 12 2,822 1 (100) Charged to the income statement 1, (1,696) 4 45 Foreign exchange differences 4 (3) (82) (81) At 1 January 2013 (1,351) 166 1,044 5 (136) Charged to the income statement (884) (55) Foreign exchange differences 13 (13) (38) (38) At 31 December 2013 (2,222) 390 1,596 7 (229) The deferred tax for the group is calculated at tax rates prevailing in the countries where the assets and liabilities arise. Deferred tax and liabilities arise principally in the UK and are calculated at a rate of 21% and in the US and are calculated at a combined tax rate of 40%. The deferred tax assets in respect of tax losses are recognised in the accounts due to the expectation of future profits sufficient to relieve them. Notes to the Consolidated Financial Statements 61

64 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 16. Deferred income tax (continued) Unrecognised deferred tax assets The group has deferred tax assets not included in the financial statements as recovery is uncertain. These are recoverable against future profits and are as follows (calculated at the applicable rates): Tax losses carried forward Future tax allowances on non-current assets , Expenses by nature (a) Expenses by nature Depreciation of property, plant & equipment Amortisation of internally generated development costs 2,705 2,634 Amortisation of other intangible assets 1,610 1,628 Loss/(profit) on disposal of property, plant and equipment 3 28 Exchange losses Operating lease rentals rent paid on land and buildings other (including motor vehicles) Employee costs (see note 19) 19,454 20,660 Cost of sales 4,304 4,316 Other expenses 3,649 3,663 Total of cost of sales, administrative expenses and amortisation costs 33,290 34,316 (b) Auditor s remuneration The total fees paid by the group in 2013 to Baker Tilly UK Audit LLP and its associates for work performed during the year in respect of audit, tax compliance and other services to the group and its subsidiary companies are shown below: Audit services: Statutory audit of parent and consolidated accounts Other services: The auditing of the accounts of subsidiaries of the company pursuant to legislation Other services supplied pursuant to such legislation 7 8 Tax services Notes to the Consolidated Financial Statements

65 Bond International Software 18. Average number of people employed Number Number The average number of employees (including directors) of the group during the year was: Development Sales Implementations Support Administration Employee benefit expense Wages and salaries 17,441 18,354 Employer s social security costs 1,550 1,806 Employer s pension costs ,454 20, Exceptional items Restructuring and reorganisation Finance income and costs Finance income Bank interest receivable and similar income on cash and cash equivalents 6 12 Other interest receivable Total finance income Finance costs Interest on short term bank loans and overdrafts repayable within five years Finance charges payable under finance leases Other interest 9 14 Total finance costs Notes to the Consolidated Financial Statements 63

66 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 22. Income tax expense/(credit) Current tax expense UK Corporation tax Foreign tax (14) 39 Adjustment in respect of prior years 2 (396) Total current tax 125 (348) Deferred tax expense Origination and reversal of temporary differences 444 (1,742) Tax losses (389) 1, (45) Income tax expense/(credit) 180 (393) Reconciliation of effective tax rate The tax on the group s profit before tax differs from the theoretical amount that would arise using the effective rate of corporation tax in the UK of 23.25% (2012: 24.5%) applied to the group profit. The differences are explained below: Profit before income tax 1, Profit before income tax multiplied by the effective rate of corporation tax in the UK of 23.25% (2012: 24.5%) Effects of: - Expenses not deductible for corporation tax purposes Foreign exchange losses deductible (43) (110) - Research & Development Credits (197) (35) - Differences in overseas taxation rates (53) 24 - Share options (17) (4) - Losses carried forward not recognised in deferred tax Change in rates of tax (130) (77) - Over provision in prior years 2 (444) Total taxation reported in the consolidated financial statements 180 (393) Effective overall tax rate 11.3% (70.4%) Factors that may affect future tax charges During the year, as a result of the change in the UK main corporation tax rate to 21% from April 2013 and 20% from April 2014 that were substantively enacted on 2 July 2013, the relevant deferred tax balances have been re-measured. 64 Notes to the Consolidated Financial Statements

67 Bond International Software 23. Earnings per share (a) Basic The basic earnings per share is calculated by dividing the profit attributable to equity holders of the parent company by the weighted average number of ordinary shares in issue during the year. Profit attributable to equity holders of the company 1, Weighted average number of shares in issue (thousands) 41,355 41,305 (b) Diluted The diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. For these share options a calculation is done to determine the number of shares that could have been acquired at fair value determined as the average annual market share price of the company s shares based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated above is compared with the number of shares that would have been issued assuming the exercise of the share options. Profit attributable to equity holders of the company 1, Weighted average number of shares in issue (thousands) basic 41,355 41,305 Adjustments for: Share options (thousands) 1 35 Weighted average number of shares in issue (thousands) diluted 41,356 41,340 Options over 373,600 shares (2012: 436,450 shares) are antidilutive because the exercise price is higher than the average share price in the year and have not been included in the calculation of diluted earnings per share. Notes to the Consolidated Financial Statements 65

68 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 23. Earnings per share (continued) (c) Adjusted The Chairman s Statement discusses a comparison between the earnings per share from continuing operations adjusted for the impact of the amortisation of certain intangible assets and the share based payment expense for the periods covered by this annual report. The adjusted earnings per share are based on adjusted profit calculated as follows: Profit for the year from continuing operations 1, Adjustments: Amortisation of intangible assets arising on acquisitions 1,610 1,628 Exceptional items 475 Taxation effect of adjustments (338) (498) Adjusted profit 2,726 2,556 Weighted average number of shares in issue (thousands) used for adjusting EPS Basic 41,355 41,305 Share options ,356 41,340 Adjusted earnings per share Basic 6.60p 6.19p Diluted 6.60p 6.19p 24. Dividends Amounts recognised as distributions to equity holders in the period: Final dividend paid in the year ended 31 December 2013 of 1.8p per share (2012: 1.2p per share) Proposed final dividend for the year ended 31 December 2013 of 2.2p per share (2012: 1.8p per share) The proposed final dividend was approved by the Board of Directors on 8 April 2014 and is payable to all shareholders on the Register of Members on 18 July 2014 and is subject to the approval of shareholders at the Annual General Meeting. In accordance with IAS10 Events after the reporting period, the proposed final dividend has not been included as a liability in these financial statements. 66 Notes to the Consolidated Financial Statements

69 Bond International Software 25. Reconciliation of loss before tax to net cash flow from operations Continuing operations Profit before tax 1, Adjustments for: Depreciation of property, plant & equipment Amortisation of internally generated development costs 2,705 2,634 Amortisation of acquired intangible assets 1,610 1,628 Loss on sale of property, plant & equipment 3 28 Finance income (27) (98) Finance costs Operating cash flow before movements in working capital 6,555 5,405 Decrease in inventories 6 25 Decrease in trade and other receivables Increase/(decrease) in trade and other payables 389 (1,992) Cash generated from operations 7,851 3, Contingencies The group has contingent liabilities in respect of legal claims arising in the ordinary course of business. It is not anticipated that any material liabilities will arise from these contingent liabilities. Notes to the Consolidated Financial Statements 67

70 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 27. Related party transactions The company has a related party relationship with its subsidiary companies, with its directors and with its shareholders. Transactions between the company and its subsidiaries, a list of which is set out in note 30 have been eliminated on consolidation and are not disclosed in this note. Details of key management compensation are set out in note 28. The company has entered into an agreement with Richard Hall Consultancy for the provision of consultancy services of Richard Hall which is separate to his role as a non-executive director and his remuneration under this contract is disclosed as fees in note 28. Mr. Hall owns 100% of Richard Hall Consultancy. The agreement may be terminated by either party on three months notice. The balance due to Richard Hall Consultancy at 31 December 2013 was 600 (2012: 600). During the year there were no material transactions or balances between the group and its directors other than remuneration paid in accordance with the terms of each director s service contract, the details of which are set out in the remuneration report, and dividends paid to directors in respect of the equity shares they own, as set out in note Key management compensation The directors consider that key management comprises the directors of the company, and their emoluments are set out below: Total Estimated short term Post Salary benefits in employment employment & bonus Fees kind benefits benefits Total Total 000 J M Baldwin R G Hall B A Morrison T Richards M Leonard S R Russell The social security cost in respect of the above was 122,000 (2012: 79,000) Details of the highest paid director are included in the table above. Post employment benefits comprise pension contributions made to money purchase schemes on behalf of directors. Three directors (2012: three) were accruing benefits under defined contribution pension arrangements during the year. In addition the directors received dividends paid by the company as follows: J M Baldwin 1 1 R G Hall 1 1 T Richards M Leonard S R Russell Notes to the Consolidated Financial Statements

71 Bond International Software The following directors held options to subscribe for ordinary shares in the company: At Date At 1 January Exercised Expired 31 December Exercise from which Expiry 2013 during year during year 2013 price Exercisable Date Number Number Number Number Pence B A Morrison 75,000 (75,000) 49.5p B A Morrison 55,150 55, p B A Morrison 19,850 (19,850) 114.0p The mid market value of the company s ordinary shares was 90.5p at 31 December 2013 and the range during the year was 45.5p to 94.5p. The share options exercised during the year were exercised on 8 October 2013 and the shares were allotted on 21 October 2013 when the market value of each share was 93.5p. This resulted in a gain of 33, Events after the reporting period On 8 April 2014 the group entered into a conditional agreement to acquire the entire issued share capital of Eurowage Limited, trading as FMP Europe, for a minimum consideration of 8,500,000 comprising the payment of 6,000,000 and the issue of 1,073,537 new ordinary shares at an issue price of 93.15p with deferred consideration of 1,500,000 payable in two instalments of 1,000,000 and 500,000 on the first and second anniversaries of completion respectively. There is also provision for further amounts to be paid based on the financial performance of the company during the year ended 31 December 2014 and the average annual profits for the company for the three years ended 31 December Due to the timing of the acquisition the accounting has not yet been finalised. The board has recommended a final dividend of 2.2 pence per share which, if approved at the Annual General Meeting, will be paid on 8 August 2014 to shareholders on the register at 18 July The impact of the dividend will be to reduce the company s distributable reserves by approximately 830,000. Notes to the Consolidated Financial Statements 69

72 Annual Report & Accounts 2013 Notes to the Consolidated Financial Statements (continued) 30. Group entities Significant subsidiaries The group consolidates its subsidiary undertakings; the principal subsidiaries being: Percentage of voting rights Class of held at 31 Country of Company shares December 2013 incorporation Activities during the year Bond International Software (UK) Limited Ordinary 100 Northern Ireland Provision of computer systems for the staffing and related industries Bond International Software Pty Limited Ordinary 100 Australia Provision of computer systems for the staffing and related industries Bond International Software Inc Common 100 USA Provision of computer systems for the staffing and related industries Bond International Holdings Inc Common 100 USA Intermediate holding company Bond International Software China Limited Ordinary 100 Hong Kong Provision of computer systems for the staffing and related industries Bond International Software Shanghai Limited Ordinary 100 China Provision of computer systems for the staffing and related industries Bond International Software Singapore Limited Ordinary 100 Singapore Provision of computer systems for the staffing and related industries Bond International Software Japan K.K Ordinary 100 Japan Provision of computer systems for the staffing and related industries Strictly Education Limited Ordinary 100 England Provision of outsourced HR, payroll, property and financial services The following subsidiaries are held directly by the company and the rest are held indirectly: Bond International Software (UK) Limited Bond International Holdings Inc Bond International Software Pty Limited Bond International Software China Limited Bond International-Japan K.K. Strictly Education Limited Bond International Software (UK) Limited is based in England. All other principal subsidiaries operate in their country of incorporation. The accounting period ends of the subsidiary companies are all 31 December. There are no significant restrictions on the ability of subsidiary undertakings to transfer funds to the parent, other than those imposed by the Companies Act Notes to the Consolidated Financial Statements

73 Bond International Software Parent Company Balance Sheet At 31 December 2013 Registered Number: Note Fixed assets Intangible assets Tangible assets 3 1,723 1,721 Investments 4 23,244 21,821 25,017 23,794 Current assets Debtors recoverable after more than one year 5 10,988 Debtors recoverable within one year 5 7,931 1,587 Cash at bank and in hand 1 1 7,932 12,576 Creditors: amounts falling due within one year 6 (1,190) (7,531) Net current assets 6,742 5,045 Total assets less current liabilities 31,759 28,839 Creditors: amounts falling due after more than one year 7 (2,000) Provisions for liabilities 8 (33) (43) Net assets 29,726 28,796 Equity capital and reserves Called up share capital Share premium account 10 23,935 23,863 Equity option reserve Profit and loss account 10 5,109 4,159 Equity shareholders funds 29,726 28,796 The financial statements were approved and authorised for issue by the board of directors on 8 April Bruce Morrison Director Parent Company Balance Sheet 71

74 Annual Report & Accounts 2013 Notes to the Parent Company Financial Statements 1. Accounting policies Basis of preparation of financial statements The financial statements have been prepared under UK GAAP using the historical cost convention and in accordance with applicable United Kingdom Accounting Standards. The directors have taken advantage of the exemption available under Section 408 of the Companies Act 2006 and not presented a profit and loss account for the company alone. The company made a profit after tax of 1,600,000 (2012: Loss 1,508,000). The company has also taken advantage of the exemption from the requirement to prepare a cash flow statement under FRS1 Cash flow statements. The cash flows of the company are included in the consolidated financial statements. Tangible fixed assets Tangible fixed assets are recorded at cost less provision for depreciation and any impairment. Depreciation is provided at the following annual rates in order to write off each asset on a straight line basis over its estimated useful life. The rates in use are: Freehold buildings 2% Office equipment 20% Fixtures and fittings 10% Motor vehicles 20% Freehold land is not depreciated. Pensions Pension contributions are made for a number of directors and employees on a defined contribution basis. Contributions payable for the year are charged in the profit and loss account. Deferred taxation Deferred taxation is provided using the liability method on all timing differences between the profit computed for taxation purposes and the profit stated in the financial statements using rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are only included in the financial statements if recovery is more likely than not. Deferred taxation is measured on a non-discounted basis. Leases Rentals payable under operating leases are charged to the profit and loss account on a straight line basis over the period of the lease. Foreign currencies Transactions expressed in foreign currencies are translated into sterling and recorded at rates of exchange approximating to those ruling at the date of the transaction. Monetary assets and liabilities are translated at rates ruling at the balance sheet date. Exchange differences are included in operating profit. Goodwill The excess of the fair value of consideration for the acquisition over the fair value of the group s share of underlying net assets acquired is recognised as goodwill. This is then written off through the profit and loss account over 10 years, being the expected useful life over which the goodwill is expected to give rise to benefits. Goodwill is reviewed for impairment at the end of the first full financial year following acquisition and in other periods if events or changes in circumstances indicate that the carrying value may not be recoverable. 72 Notes to the Parent Company Financial Statements

75 Bond International Software Share based payments The company operates a number of share option schemes which allow employees to acquire shares in the company. Where the company awards share options under these schemes, the fair value of options granted is calculated at the grant date using the Black Scholes Model and the resulting cost is charged to the profit and loss account over the vesting period during which the recipient becomes unconditionally entitled to exercise the option and credited to the Equity Option Reserve. Related party transactions The company has taken advantage of the exemption in FRS 8 Related Party Disclosures and has not disclosed transactions with wholly owned group undertakings. Financial instruments Financial instruments are classified and accounted for according to the substance of the contractual arrangement, as either financial assets, financial liabilities or equity instruments. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities. Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt instrument those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in the balance sheet. Finance costs and gains or losses relating to financial liabilities are included in the profit and loss account. Finance costs are calculated so as to produce a constant rate of return on the outstanding liability. Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument. Dividends and distributions relating to equity instruments are debited direct to equity. 2. Intangible assets Goodwill 000 Cost At 1 January 2013 and 31 December ,013 Amortisation At 1 January ,761 Charge for the year 202 At 31 December ,963 Net book value At 31 December At 31 December Notes to the Parent Company Financial Statements 73

76 Annual Report & Accounts 2013 Notes to the Parent Company Financial Statements (continued) 3. Tangible fixed assets Freehold land & Office Fixtures & Motor buildings equipment fittings vehicles Total 000 Cost At 1 January , ,074 Additions At 31 December , ,107 Depreciation At 1 January Charge for the year At 31 December Net book value At 31 December , ,723 At 31 December , ,721 There are no fixed assets held under finance leases. 4. Fixed asset investments Shares in group Loans to group undertakings undertakings Total 000 Cost At 1 January ,327 4,494 21,821 Additions 1,143 1,143 Transfers 4,774 (4,774) Foreign currency differences At 31 December ,244 23,244 The loan due from subsidiary comprised loan notes due from Bond International Software Inc and were acquired as part of the acquisition of VCG Software LLC in November These loan notes were repaid on 30 June A list of the company s principal subsidiary undertakings is set out in note 30 to the consolidated financial statements. 5. Debtors Amounts owed by subsidiary companies 7,809 11,716 Prepayments and accrued income Other debtors ,931 12,575 Of the amounts due from subsidiary companies nil (2012: 10,706,000) is due after more than one year and of other debtors nil (2012: 282,000) is due after more than one year. 74 Notes to the Parent Company Financial Statements

77 Bond International Software 6. Creditors: amounts falling due within one year Bank overdrafts (note i) Bank loans (note ii) 5,350 Trade creditors Amounts owed to subsidiary companies 68 1,217 Other taxation and social security Other creditors 1 Accruals ,190 7,531 i) The company has an agreement with Barclays Bank for a Composite Accounting System overdraft facility the gross limit of which is 1,000,000 for indebtedness across the company and its UK subsidiaries. The facility is secured by a legal mortgage over the company s freehold land and buildings and by cross guarantees between the company and its UK subsidiaries. ii) At 31 December 2013 the company has a Medium Term Loan Facility for 6million with Barclays Bank Plc which is secured by a legal mortgage over the company s freehold land and buildings and by cross guarantees between the company and its UK subsidiaries. The facility expires on 7 April 2016 and interest is payable at LIBOR plus 3.8%. The purpose of the facility is to provide working capital for the group as well provide funding for future acquisitions if and when the need arises. 7. Creditors: amounts falling due after more than one year Bank loans (see note 6) 2,000 The terms of payment of creditors falling due after more than one year are: Within two to five years 2, Deferred tax Fixed asset Tax Share based timing differences losses payment Total At 1 January (59) (1) 43 Charged to profit and loss account (18) 7 1 (10) At 31 December (52) 33 There is no unprovided deferred tax. Notes to the Parent Company Financial Statements 75

78 Annual Report & Accounts 2013 Notes to the Parent Company Financial Statements (continued) 9. Share capital Ordinary shares Non voting convertible of 1p each shares of 1p each Total Number 000 Number 000 Number 000 At 1 January ,583, ,720, ,304, Issue of new shares 181, ,000 2 At 31 December ,764, ,720, ,585, Further details of the issued share capital are set out in note 11 to the consolidated financial statements. Details of outstanding options over the company s shares and the movements during the year are set out in note 12 to the consolidated financial statements. 10. Reserves Share premium Equity option Profit and account reserve loss account Total At 1 January , ,159 28,383 Issue of new shares Share options lapsed or exercised (94) 94 Profit for the financial year 1,600 1,600 Dividend paid (744) (744) At 31 December , ,109 29, Reconciliation of shareholders funds At 1 January ,796 30,800 Issue of new shares 74 Profit/(loss) for the financial year 1,600 (1,508) Dividend paid (744) (496) At 31 December ,726 28, Contingent liabilities The company is party to a cross guarantee with its UK subsidiaries covering borrowings by those companies. At 31 December 2013 the maximum potential liability of the company under the terms of the guarantee was nil (2012: nil). The company has a contingent liability in respect of UK Value Added Tax payable by its UK subsidiaries under a group registration. At 31 December 2013 the maximum potential liability was 884,000 (2012: 548,000). The directors do not expect any loss to arise from these contingent liabilities. 13. Related party transactions Related party transactions for the company are set out in Note 27 to the consolidated accounts. 14. Ultimate controlling party At 31 December 2013 there is no ultimate controlling party of Bond International Software plc. 76 Notes to the Parent Company Financial Statements

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80 Bond International Software plc Courtlands, Parklands Avenue, Goring, West Sussex BN12 4NG Tel: +44 (0) Fax: +44 (0) United Kingdom USA Australia Hong Kong China Japan Singapore South Africa Peru