Bond International Software plc

Transcription

1 Bond International Software plc Annual Report & Accounts 2014 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 2014 Bond International Software plc Annual Report & Accounts _Bond_R&A_ _COVER_vART.indd 1 15/05/ :08

2 Contents Chairman s Statement 2 Group Chief Executive s Report 4 Directors and Advisers 8 Strategic Report 10 Directors Report 12 Corporate Governance Report 15 Remuneration Report 17 Independent Auditor s Report 19 Consolidated Income Statement 20 Consolidated Statement of Comprehensive Income 21 Consolidated Balance Sheet 22 Consolidated Cash Flow Statement 23 Consolidated Statement of Changes in Shareholders Equity 24 Notes to the Consolidated Financial Statements 25 Parent Company Balance Sheet 67 Notes to the Parent Company Financial Statements 68

3 Bond International Software 2014 One world. One future. Bond International Software plc Annual Report & Accounts 2014 Annual Report & Accounts

4 Annual Report & Accounts 2014 Chairman s Statement I am pleased to report the audited results for the year ended 31 December Martin Baldwin Chairman Strategic review The Group continues to be financially robust with a strong balance sheet and consistent profitability/cash flow. Despite the ongoing change to the SaaS rental model, the Recruitment Software Division has seen revenues rise by 5% from 17,837,000 in 2013 to 18,737,000 in The acquisition of Eurowage Limited in May 2014 was a significant step change for the Group and the Board believes this will produce good growth prospects. The Board maintains their confidence that Bond is well placed to benefit from global growth, combined with the Group s continued innovation in products and services. Notwithstanding these strengths, the Group is constrained as a result of being a small, independent public company. As a result, the Board has determined this to be an appropriate time to evaluate the Group s future strategy to maximise the potential of Bond s market-leading software and services and take advantage of Bond s full growth potential. Given the financial strength of Bond, continuing with the current strategy and structure remains a viable option. Nevertheless, the strategic review will be wide-ranging. The Board will consider all strategic options available to the Group including a strategic partnership, acquisition(s) to increase the scale of the Group, corporate divestitures, a sale of the Company, or a new or extended bank facility to continue to invest in the Company. SunTrust Robinson Humphrey has been appointed to assist the Board in the strategic review. The Board anticipates that this process will take several months. Financial overview I am pleased to report the audited results for the year ended 31 December The Group s revenues have increased by 14.3% to 40,111,000 (2013: 35,100,000) through the acquisition of Eurowage and organic growth. The Group s strategy continues to focus on growing recurring revenues with an increase of 9.1% to 25,489,000 (2013: 23,365,000) and these now represent 64% of total revenues (2013: 67%) but more importantly cover 97% (2013: 95%) of the Group s administrative expenses (excluding the amortisation of intangible assets and expenses of acquisitions). These have increased by 6.3% from 24,672,000 in 2013 to 26,243,000 in 2014 although the year on year increase without the acquisition of Eurowage was only 1.7% as the Group continues to keep a tight control on costs. 2 Chairman s Statement

5 Bond International Software The Board maintains their confidence that Bond is well placed to benefit from global growth, combined with the Group s continued innovation in products and services. As a result 2014 has been a year of improving profitability with operating profit before amortisation of all intangible assets rising by 32% to 8,073,000 (2013: 6,124,000) and operating profit before the amortisation of acquired intangibles up by 50% to 5,124,000 compared with 3,419,000 in Operating profit has increased by 74% to 3,141,000 (2013: 1,809,000) and the Group has made a profit before tax of 2,909,000 compared with 1,634,000 in The Group has a reported undiluted increased earnings per share from continuing operations of 5.17p (2013: 3.52p) and diluted earnings per share from continuing operations of 5.17p (2013: 3.52p). 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 3,843,000 (2013: 2,726,000) and the adjusted undiluted earnings per share were 9.11p (2013: 6.60p) and the adjusted diluted earnings per share were 9.10p (2013: 6.60p). Further details are set out in note 22. The Group generated 7,056,000 of cash from operating activities (2013: 7,851,000) despite an increase in the working capital requirement of 1,430,000. As discussed in more detail below, the Group acquired Eurowage for an estimated consideration of 13,574,000, with a net cash outflow in 2014 of 2,650,000 with further payments to follow in 2015, 2016 and 2017, some of which is based on the financial performance of Eurowage over that three year period. The Group s capital expenditure on property, plant and equipment and internally generated product development fell by 6.6% to 3,905,000 (2013: 4,184,000). As a result of these cash flows the Group had net bank borrowings of 206,000 at the end of 2014 compared with net cash of 1,352,000 at the end of In addition the Group had further financial liabilities at 31 December 2014 comprising a loan note due to the vendor of Eurowage which had a fair value of 2,626,000 (2013: nil) and amounts due in respect of finance leases of 63,000 (2013: 119,000). Based on the progress made by the Group, I am pleased to say that the Board is recommending the payment of a dividend of 2.5p per share which is a 13.6% increase on last year. The payment is subject to shareholder approval at the Annual General Meeting and, if approved, will be made on 7 August 2015 to shareholders on the register at 24 July Acquisition In May 2014 year the Group continued its expansion through the acquisition of Eurowage, which trades as FMP Europe, for an estimated consideration of 13,574,000. Eurowage offers fully managed international payroll solutions to principally UK and USA organisations expanding into new countries. Bond has already partnered with Eurowage on previous deals and the Directors believe that bringing the operation into the Group strengthens its product offering and drives sustainable growth in revenues and profits from payroll operations. Details of the consideration including the maximum consideration payable and the assets acquired are set out in note 25. Employees The Group employs around 490 people 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. Martin Baldwin Chairman 20 March 2015 Chairman s Statement 3

6 Annual Report & Accounts 2014 Group Chief Executive s Report Following the acquisition of Eurowage, the Group has seen a significant increase in profitability with operating profit before the amortisation of acquired intangible assets improving by 50% to 5,124,000 (2013: 3,419,000). Steve Russell Group Chief Executive Recruitment software Revenues from recruitment software which accounted for 47% of group revenues in 2014 (2013: 51%), have increased by 5% from 17,837,000 to 18,737,000 with strong growth in Asia Pacific following the announcement of the material contract in our Australian office in April 2014 and Japan seeing a significant increase in revenues as a result of a contract win. Revenues from our US operation fell by 9% primarily as a result of the change to a SaaS rental model which led to lower licence and support revenue. The nature of the change to SaaS means that the US operation will see an increase in valuable recurring SaaS revenues over time with a short term impact on less valuable licence and maintenance revenues. Recruitment software revenue by type Software sales & services 6,897 5,770 Software support 6,934 7,367 Software rental income 4,906 4,700 Total revenues 18,737 17,837 Revenue and operating profit/(loss)* by location of operating company Revenues Operating profit/(loss)* United Kingdom 8,971 8,512 2,257 2,504 USA 7,387 8, ,523 Asia Pacific 2,379 1, (577) *before amortisation of intangible assets and exceptional items 18,737 17,837 3,378 3,450 4 Group Chief Executive s Report

7 Bond International Software 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. Bond Payrite 1,839 2,000 Bond Teamspirit 1,690 1,956 Bond Professional Bond Workforce Total revenues 4,702 5,262 HR and payroll software The division comprises four products of which two, Bond Payrite and Bond Teamspirit are strategic. The analysis of revenue by product is shown above. Overall revenues for the division fell by 11% in 2014 to 4,702,000 (2013: 5,262,000). The division has seen a reduction in income from the sale of licences and services because opportunities to earn consultancy in connection with Pensions Autoenrolment and HMRC s requirement for Real Time Information are no longer there. Recurring revenues of 3,146,000 (2013: 3,313,000) represent 67% of total revenues (2013: 63%) and cover 100% of the fixed operating costs of the division (2013: 112%). The decrease in revenues has contributed to a 24% fall in operating profit from 1,901,000 in 2013 to 1,439,000 in Group Chief Executive s Report 5

8 Annual Report & Accounts 2014 The group is confident that the improvement already seen in the staffing markets worldwide will continue to increase. The demand for candidates in all our operating areas is growing and though the effects may have taken time, the improvement is now being seen worldwide. Recurring revenue Strictly Education 6,594 6,125 Bond Payroll Services 2,013 1,860 Eurowage 1,884 10,491 7,985 Non recurring revenue Strictly Education 3,543 3,617 Bond Payroll Services Eurowage 2,262 6,181 4,016 Total revenue Strictly Education 10,137 9,742 Bond Payroll Services 2,389 2,259 Eurowage 4,146 16,672 12,001 Outsourcing This division comprises three separate operations, Strictly Education which provides outsourced HR, payroll and other services to schools in the UK state sector, Bond Payroll Services which provides payroll bureau services to organisations in both the private and public sectors and Eurowage that provides international managed payroll to customers in the UK and USA. 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 seen revenue growth of 4% from 9,742,000 in 2013 to 10,137,000 in Underpinning this growth is an increase of 7.7% in recurring income from annually renewable contracts. Consultancy revenues have fallen slightly as school budgets come under pressure has also seen continued growth for Bond Payroll services with an increase of 5.8% in revenues to 2,389,000 (2013: 2,259,000). Eurowage contributed a very impressive operating profit before the amortisation of intangible assets of 2,018,000 during the first 8 months of ownership by the Group. The outsourcing division delivered an operating profit of 4,473,000 (2013: 2,041,000) with 20% organic growth from Strictly Education and Bond Payroll Services and the balance from the acquisition of Eurowage. 6 Group Chief Executive s Report

9 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 increase in development costs from 4,515,000 to 4,826,000 which is 12.0 % of revenues compared with 12.9% 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 2014 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 490 staff around the world with offices in UK, USA, Australia, Singapore, Japan, Hong Kong, and China as well as outsourced development teams in India and the Ukraine. I take this opportunity to thank them all for their hard work in 2014 and their continuing loyalty and support in Outlook The Group is confident that the improvement already seen in the staffing markets worldwide will continue to increase. The demand for candidates in all our operating areas is growing and though the effects may have taken time, the improvement is now being seen worldwide. Our HR and Payroll Division has exciting new products for release in the first half of this year that will capitalise on the improving market conditions and will take advantage of the existing, large installed user base. Outsourcing continues to grow, both organically and by acquisition. The integration of Eurowage has gone extremely well and the company will become an increasingly important contributor to group profits. In summary, the prospects for the Group look better than they have done for several years and now is an appropriate time to consider the options available for the future structure of the Group. We look forward to a successful year in 2015 and will update the market on the options available to the Group in due course. Steve Russell Group Chief Executive 20 March 2015 Group Chief Executive s Report 7

10 Annual Report & Accounts 2014 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. 8 Directors & Advisers

11 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 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 Directors & Advisers 9

12 Annual Report & Accounts 2014 Strategic Report The directors of the Company present their Strategic Report for the year ended 31 December 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 latest outlook for the UK and USA, the two largest geographical markets in which the Group operates, looks promising with the IMF forecasting 2015 growth of 2.7% in the UK and 3.6% in the US. The outlook for employment in both countries looks positive in the most recent surveys and the improving labour markets should 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 we already operate. 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 2 and 3 and the Chief Executive s Report on pages 4 to 7. 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 2 to 7. 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. 10 Strategic Report

13 Bond International Software (i) Competitor risk The market for staffing software is extremely fragmented with a large number of small suppliers operating in all our 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 their interest rate profile 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 Tim Richards Director 20 March 2015 Strategic Report 11

14 Annual Report & Accounts 2014 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 2 and 3 and the Chief Executive s Report on pages 4 to 7. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Chairman s Statement on pages 2 and 3. 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 2013 and which is subject to review 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 2,181,000 (2013: 1,454,000), the details of which are shown in the Consolidated Income Statement on page 20. The directors recommend a dividend of 2.5 pence per share which, if approved at the Annual General Meeting, will be paid on 7 August 2015 to shareholders on the register at 24 July Directors The names of the directors who held office during the year are shown on pages 8 and 9. In accordance with the Articles of Association, T Richards and RG Hall retire by rotation at the forthcoming Annual General Meeting and, being eligible, offers themselves for re-election. 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. 12 Directors Report

15 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 32 (2013: 26). Statement of directors responsibilities in the preparation of financial statements 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 13

16 Annual Report & Accounts 2014 Directors Report (continued) Charitable donations During the year the Group made charitable donations totalling 17,667 (2013: 14,468), comprising several small donations to local charities in the countries in which the Group operates. The Company made no political donations (2013: 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 20 March 2015 Registered Office: Courtlands, Parklands Avenue Goring by Sea, West Sussex BN12 4NG 14 Directors Report

17 Bond International Software Corporate Governance Report Compliance with Corporate Governance principles The Company s shares were admitted to trading on the AIM 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 2013, the Quoted Companies Alliance ( QCA ) 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 15

18 Annual Report & Accounts 2014 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). 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 financial statements. 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. 16 Corporate Governance Report

19 Bond International Software Remuneration Report The Remuneration Committee The Company is not required by the AIM 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), and Richard Hall (non-executive Director) 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 the various operations for which he is responsible. 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 financial statements. Service contracts and letters of engagement Stephen Russell has a rolling annual service contract. Tim Richards and Bruce Morrison have service contracts which require 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. 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 17

20 Annual Report & Accounts 2014 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 20 March Remuneration Report

21 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 20 to 73. 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 13, 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 Basis for qualified opinion on financial statements We refer to note 25 where the Group sets out its opinion that 2.326m of contingent consideration in relation to the acquisition of Eurowage Limited should be accounted for as part of the purchase consideration, even though the acquisition agreement contains service conditions for the former owners. This is not in compliance with IFRS 3 which requires contingent consideration which is linked to former owners remaining as employees of the Group to be charged to the income statement as remuneration. Accordingly, in order to comply with IFRS 3, the consideration for the acquisition should be reduced by 2.326m, resulting in a reduction in both goodwill and current liabilities of this amount. In addition, a charge of 1.356m should be made to the income statement, representing remuneration for the period from the date of acquisition until the year end, with a corresponding increase in current liabilities. Opinion on financial statements In our opinion, except for the effects of the matter described in the Basis for qualified opinion paragraph, 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 2014 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 20 March 2015 Independent Auditor s Report 19

22 Annual Report & Accounts 2014 Consolidated Income Statement For the year ended 31 December 2014 Note Continuing operations Revenue 4 40,111 35,100 Cost of sales (5,795) (4,304) Gross profit 34,316 30,796 Administrative expenses (26,095) (24,672) Expenses of acquisitions (148) Total administrative expenses (26,243) (24,672) Operating profit before the amortisation of intangible assets 4 8,073 6,124 Amortisation of internally generated intangible assets (2,949) (2,705) Operating profit before the amortisation of acquired intangible assets 5,124 3,419 Amortisation of acquired intangible assets (1,983) (1,610) Operating profit 3,141 1,809 Finance income Finance costs 20 (288) (202) Profit before income tax 2,909 1,634 Income tax expense 21 (728) (180) Profit for the year attributable to the owners of the parent 2,181 1,454 Earnings per share attributable to the owners of the parent during the year (pence per share) 22 Basic 5.17p 3.52p Diluted 5.17p 3.52p 20 Consolidated Income Statement

23 Bond International Software Consolidated Statement of Comprehensive Income For the year ended 31 December 2014 Note Profit for the year attributable to the owner of the parent 2,181 1,454 Other comprehensive income net of tax Item that may be subsequently reclassified to profit and loss Currency translation differences on foreign currency net investments 294 (533) Other comprehensive income net of tax 294 (533) Total comprehensive income for the year attributable to the owners of the parent 2, There are no taxation effects in respect of the foreign currency translation differences. Consolidated Statement of Comprehensive Income 21

24 Annual Report & Accounts 2014 Consolidated Balance Sheet At 31 December 2014 Registered Number: Note ASSETS Non-current assets Property, plant and equipment 5 2,705 2,730 Intangible assets 6 41,396 31,013 Deferred tax assets 16 1,538 2,565 Trade and other receivables ,269 36,308 Current assets Inventories Trade and other receivables 9 9,271 8,035 Cash and cash equivalents 10 3,688 3,479 12,985 11,542 Total assets 59,254 47,850 EQUITY AND LIABILITIES ATTRIBUTABLE TO THE OWNERS OF THE PARENT EQUITY Share capital Share premium account 23,938 23,935 Merger reserve 989 Equity option reserve Currency translation reserve (1,011) (1,305) Retained earnings 12,233 10,967 Total equity attributable to the owners of the parent 36,821 34,279 LIABILITIES Non-current liabilities Trade and other payables Borrowings 14 6,484 2,056 Deferred tax liabilities 16 2,787 2,794 9,749 4,850 Current liabilities Trade and other payables 13 12,198 8,512 Current income tax liabilities Borrowings ,684 8,721 Total liabilities 22,433 13,571 Total liabilities and equity 59,254 47,850 The financial statements on pages 20 to 73 were approved and authorised for issue by the Board of directors on 20 March 2015 and signed on its behalf by: Tim Richards Bruce Morrison Directors 22 Consolidated Balance Sheet