Rubicon Software Group plc

Transcription

1 Rubicon Software Group plc Annual Report 2009

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3 1 Contents Board of Directors 2 Highlights 3 Chairman s statement 4 Report of the Directors 6 Statement of Directors responsibilities 9 Corporate governance 10 Report of the independent auditor 12 Principal accounting policies 13 Consolidated income statement 20 Consolidated balance sheet 21 Consolidated cash flow statement 22 Consolidated statement of changes in equity 23 Notes to the financial statements 24 Report of the independent auditor Company 33 Company balance sheet 34 Notes to the Company financial statements 35 Company information 38 Notice of Annual General Meeting 39

4 2 Board of Directors Robert Burnham (Non-executive Chairman, aged 60) Robert has worked in the IT services and telecoms sector for over 30 years. He has held a variety of executive and management positions with responsibility for consulting, training, systems integration and development, sales, marketing, outsourcing and recruitment. He has undertaken these roles in a variety of medium sized and large businesses and has served as an Executive Director of two main-market listed companies. Robert is currently Chairman of Connect Internet Solutions Limited and Non-executive Chairman of IntecPC Limited. Robert was appointed a Director of Rubicon Software Limited on 3 November 2005 and a Director of the Company on 30 May Alistair Hancock (Chief Executive Officer, aged 40) Alistair founded Rubicon in 1989 whilst completing his Computer Science degree at St John's College, University of Cambridge. Alistair has been integral to the development of Rubicon and, as Chief Executive Officer, continues to lead its evolution. Richard Blakesley (Non-executive Director, aged 44) Richard has over 15 years of European and United States investment banking experience, working as a mergers and acquisitions specialist for Lehman Brothers, Chase Manhattan and JP Morgan. Until 2003, he was Managing Director in charge of mergers and acquisitions for the Telecoms, Media and Technology sectors in Europe for JP Morgan. David Webber (Non-executive Director, aged 44) David was appointed Chief Executive of Patsystems Plc in January He was formerly Chief Executive of AttentiV Systems Group from March 2004 until December 2005, where his business leadership saw the company through significant expansion by both organic growth and acquisition. David joined AttentiV in 1994 as Finance Director and was subsequently appointed Managing Director in He led the management buyout and subsequent AIM flotation of the business and was retained as Chief Executive until December 2005 following the acquisition of AttentiV Systems Group Plc by TietoEnator. David has been a member of the Institute of Chartered Accountants since 1989 and holds a BSc in Economics from the London School of Economics and Political Science. Andrew Kirby (Finance Director, aged 38) Andrew joined Rubicon as Finance Manager in November 2007 and was appointed to the Board of Directors as Finance Director and Company Secretary on 15 October Prior to joining Rubicon he held a variety of roles within the finance team at Retail Decisions Plc. Between 2003 and 2007 Richard co-founded a telecommunications service provider, AdEPT Telecom, which was admitted to trading on AIM in February Richard is Managing Director and Head of Investment Management at investment bank Fairfax I.S. Plc. He is also a Director of two private companies. Richard joined the Company as a Director on 30 May 2006.

5 3 Highlights 1million, 5 year agreement renewed with a key client that includes a substantial upfront payment Investment received and strategic alliance formed with a new partner Broadened our client base and diversified into new technology areas Earnings before interest, tax, depreciation and amortisation ( EBITDA ) loss reduced to 2,000 (2008: EBITDA loss 123,000) Pre-tax loss for the year down to 194,000 (2008: 262,000)

6 4 Chairman s statement Financial results In the year to 30 June 2009, Rubicon generated revenue of 874,000, 29% down on the previous year s 1,231,000, but in line with expectations. This reduction reflects the loss of three clients at the end of 2008 and generally by the significant impact on our core market of the financial crisis. Despite these challenges we have broadened our target markets, won business in new sectors, and reaffirmed the strong relationships we have with existing clients. Despite lower revenues, we have reduced the EBITDA loss to 2,000 (2008: EBITDA loss 123,000) and reduced pretax losses by 26% to 194,000 (2008: 262,000) through cost savings made in the light of the deteriorating business climate. Retained loss for the year was 194,000 (2008: 137,000), reflecting R&D tax credits received in 2008 that were not available in Reconciliation of retained losses to EBITDA Retained loss (194) (137) Tax (125) Result from continuing activities before tax (194) (262) Net interest (15) 2 Operating result (209) (260) Depreciation and amortisation EBITDA (2) (123) Net cash outflow for the year was 32,000 (2008: 79,000) and the outflow for the second half of the year was reduced to 8,000. Operational review Existing clients Towards the end of 2008, we lost three significant clients in the financial services sector from which we would have expected to generate substantial revenue during the course of this financial year. Two of these became insolvent and the third withdrew from the UK market as a consequence of the collapse of the second charge loans market. We continue to enjoy excellent relationships with all of our remaining clients, with our software playing an integral part in their business operations. On 29 June 2009 we announced a 5 year extension to the licence, support and maintenance agreement with First Response Finance Limited ( FRF ) worth 1 million. Rubicon s automated underwriting and loan processing CRM system remains pivotal to FRF s business. Funding During the course of the year we developed a new partner relationship with Information Systems Associates Inc ( ISA ), a United States based business providing IT asset inventory and audit services. As well as being awarded a contract for software development services, we secured investment and formed a strategic alliance in April The key elements agreed were: ISA to purchase up to 5 million ordinary shares at 2p per share. 50,000 was received on 22 April ISA to be granted up to 5 million warrants for ordinary shares at 5p per share, subject to the delivery of 5 million of revenue to Rubicon from ISA over the next three years. Rubicon has become ISA s software development partner. ISA is now Rubicon s exclusive agent in the United States for the purpose of reselling Rubicon s products and services. Rubicon will provide resources to help ISA fulfil its contracts in the UK and Europe.

7 5 In addition to this investment, we have received a significant advance payment from FRF in accordance with the licence, support and maintenance agreement referred to previously. Together with the ISA investment this has strengthened the Group s cash position. Staff On behalf of the Board, I would like to thank all of our staff for their loyalty, support and professionalism in what have been very difficult trading conditions. New business We have also been broadening our client base and diversifying into new technology areas. During the year, this has included: For ISA, an innovative Windows Mobile solution that has improved the speed and accuracy of data collection operators recording the location, identity and configuration of all IT assets within large data centres. For a leading UK video-conferencing business, a new telepresence and video-conference management and scheduling platform built using Ruby on Rails. This allows their clients to manage and run video meetings across the globe regardless of the equipment type or location. Specialist Internet communities for a High Street bank and a large UK retailer. Rubicon s problem solving skills and experience continue to provide significant advantage to our customers. During the year, we have extended our network of sales consultants and partners and have undertaken a number of lead generation exercises with a view to growing our pipeline and reaching new clients. Dividends The Directors do not propose to pay a dividend for the period. Current trading and outlook With a strengthened post year end cash position as a result of the advance payment from FRF, clients in new sectors and strong relationships with existing clients, we are optimistic about the future and encouraged by signs of an upturn in business activity. We have recently won a project in a competitive tender against major international consultancies and this may lead to significant revenues in the future. More generally, as current projects mature, we would expect to grow our recurring revenues and be engaged by these clients for new projects in the future. Having taken action to reduce costs to match the economic environment and secured sufficient funding to support our plans, we are looking to grow our revenues and extend our offerings. Robert Burnham Chairman 13 November 2009

8 6 Report of the Directors The Directors present their report and the financial statements of the Group for the year ended 30 June Principal activity and business review The Group is principally engaged in consultancy and design, development and provision of computer software. The Group s services and solutions are sold to customers in a variety of sectors to automate business processes relating to client interaction, workflow management, Internet, Intranet and Local Area Network based solutions. During the year the Group continued to concentrate on the sale and distribution of its products whilst maintaining an appropriate level of product development to ensure the future success of the business. Strategy During the course of the year, we have continued to review our strategy in order to maximise our opportunities, researching new markets, products and services to enable the business to grow profitably. Business review A review of the Group s performance in the year to 30 June 2009 and its current trading and outlook is contained in the Chairman s Statement. The Key Performance Indicators used by the Group during the year were: Operating costs Operating costs in the year, excluding depreciation and amortisation, were reduced by 478,000 (35%) to 876,000. This decrease was largely as a result of reduced headcount and a renegotiation of office rent. There was a total of 17,000 of bad debts expense in the year (2008: 65,000) arising from a customer not paying for development work undertaken. Loss for the year The Group loss in 2009 was 194,000 (2008: 137,000) with the reduction relating to prior year tax credits received in 2008 that were not repeated in the current year. Intangible assets During the year the Group capitalised 39,000 (2008: 213,000) of development costs. These will be amortised over the three years following completion in line with the current intangible asset amortisation policy. Cash and treasury The Group generated net cash outflows of 8,000 in the second half of 2009 having incurred net outflows of 24,000 in the first half. The net outflow for the year was 32,000 (2008: outflow 79,000). As detailed in the Chairman s statement, on 22 April 2009 Rubicon received an investment of 50,000, before associated expenses, from ISA in consideration of 2,500,000 shares, which equates to 6.2% of the issued share capital. Revenue Revenue fell 29% from 1,231,000 in 2008 to 874,000 in As outlined in last year s annual report and the interim statement, we have faced the loss of three existing clients in the last 12 months, resulting in a reduction of both recurring and consultancy revenue for the period. This was partially offset by new software development project wins. Results and dividends The trading results for the year and the Group s and Company s financial position at the end of the year are shown in the attached financial statements. The Directors do not propose the payment of a dividend.

9 7 Financial risk management objectives and policies The Group s financial risk management objectives are detailed in note 14. Directors The Directors who served the Company during the year were: Robert Burnham s share options are exercisable in three tranches. The first of 186,500 is exercisable 12 months after the date of grant, the second and third of 93,250 each are exercisable 24 and 36 months after the date of grant. Substantial shareholders At 31 October 2009 the Company has been notified that the following held or were beneficially interested in 3% of more of the issued share capital of the Company. Robert Burnham (Non-executive Chairman) Alistair Hancock (Chief Executive Officer) Mark Peters (Commercial Director) (resigned 31 August 2008) Richard Blakesley (Non-executive Director) David Webber (Non-executive Director) Andrew Kirby (Finance Director) (appointed 15 October 2008) % of current issued Ordinary shares share capital Richard Blakesley 11,950, Alistair Hancock 11,438, Mark Peters 3,682, Information Systems Associates Inc 2,500, Gavin Jones 1,429, Employees Where appropriate, the Directors keep all employees informed of strategic, commercial, financial and human resource matters. Directors interests The beneficial interests of the Directors holding office at 30 June 2009 in the shares of the Company at that date are set out below, together with their holdings at 1 July 2008 or date of appointment if later. 30 June July 2008 Ordinary shares Ordinary shares Issued Options Issued Options number number number number Robert Burnham 635, , , ,000 Alistair Hancock 11,438,572 11,438,572 Richard Blakesley 11,950,041 11,950,041 David Webber 547, ,000 Andrew Kirby In order to help align the aspirations of our employees to the objectives of the Group, the majority are either shareholders or have share options enabling them to benefit from long term equity growth. The Group recognises its responsibility to ensure the fair treatment of all employees, regardless of any physical disability, gender, religion, race or nationality. Payment policy and practice It is the Group s policy to agree the terms of payment with suppliers when entering into a transaction and to pay suppliers within these terms. Average creditor days for the financial year were 58 days (2008: 43 days).

10 8 Report of the Directors continued Environment The Group aims to maintain good environmental practices in all of its activities. Although there are no formal environmental policies, all employees are encouraged to Auditor A resolution to re-appoint Grant Thornton UK LLP as auditor for the ensuing year will be proposed at the AGM in accordance with section 489 of the Companies Act conduct themselves in an environmentally considerate manner. Qualifying third party indemnity provision BY ORDER OF THE BOARD During the financial year, a qualifying third party indemnity provision for the benefit of all of the Directors was in force. Andrew Kirby Secretary 13 November 2009 Post balance sheet event On 17 July 2009, FRF paid Rubicon 300,000 plus VAT against a 1 million five year licence, support and maintenance contract due to commence on 1 July The associated revenue will be recognised in the relevant accounting periods in accordance with the policy for the recognition of annual licence revenue. Annual General Meeting The Notice convening the Annual General Meeting ( AGM ) together with the proposed resolutions is contained in the document accompanying this report. The AGM will be held on 15 December 2009.

11 9 Statement of Directors Responsibilities in respect of the Annual Report and financial statements The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law they are required to prepare Group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs) and applicable law. The Directors have elected to prepare the Company financial statements in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice UK GAAP). The financial statements are required by law to 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 these financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act They have a general responsibility for taking such steps as are reasonably open to then to safeguarding the assets of the Group and to prevent and detect fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. In so far as each of the Directors are aware; there is no relevant audit information of which the Group s auditor is unaware; and the Directors have taken all the steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information. make judgments and estimates that are reasonable and prudent; for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU, subject to any material departures disclosed and explained in the financial statements; for the Company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and 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.

12 10 Corporate governance The Directors recognise the importance of sound corporate governance, whilst taking into account the size and nature of the Company. The Company has three Non-executive Directors. Richard Blakesley and David Webber are considered to be independent within the definition contained in the Combined Code. Robert Burnham is not considered independent because of his day to day involvement in the management of the business. The Board retains full and effective control over the Company. The Company holds regular Board meetings at which financial, operational and other reports are considered and, where appropriate, voted on. Apart from regular meetings, additional meetings will be arranged when necessary to review strategy, planning, operations, financial performance, risk, capital expenditure, human resource and environmental management. The Board is also responsible for monitoring the activities of the executive management. To enable the Board to perform its duties, all Directors will have full access to all relevant information. If necessary the Non-executive Directors may take independent professional advice at the Group s expense. The Board met on eleven occasions in the current financial year including attendance by telephone. The Directors have established an audit committee and a remuneration committee with formally delegated duties and responsibilities. The Directors have not established a nominations committee as all new appointments will require the approval of all Directors. The audit committee The audit committee which comprises David Webber, Robert Burnham and Richard Blakesley, is chaired by David Webber and meets at least twice a year. The committee reviews the Group s annual and interim financial statements, including meeting with the auditor before submission to the Board for approval. The committee also reviews regular reports from management on accounting and internal control matters. Where appropriate, the committee monitors the progress of action taken in relation to such matters. The committee also recommends the appointment of, and reviews the fees of, the external auditor. The committee met twice during the year, all members were present. The remuneration committee The remuneration committee which comprises Richard Blakesley, Robert Burnham and David Webber, is chaired by Richard Blakesley and usually meets twice a year. It is responsible for reviewing the performance of the Executive Directors and for setting the scale and structure of their remuneration, paying due regard to the interests of Shareholders as a whole and the performance of the Group. The remuneration committee also determines allocations of any warrants or options granted under any share option scheme adopted by the Company in the future and is responsible for setting any performance criteria relevant to such warrants or options. The Directors comply with Rule 21 of the AIM Rules relating to Directors dealings and take all reasonable steps to ensure compliance by the Company s applicable employees. The Company has adopted and operates a share dealing code for Directors and employees in accordance with the AIM Rules. The committee met once during the year, all members were present. Internal control The Board is responsible for maintaining a sound system of internal control to safeguard Shareholders investment and the Group s assets and for reviewing its effectiveness. Such a system is designed to manage, but not eliminate, the risk

13 11 of failure to achieve business objectives. There are inherent limitations in any control system and accordingly even the most effective system can provide only reasonable, not absolute, assurance against material misstatement or loss. The Board reviews the effectiveness of the Group s systems of internal control on an ongoing basis. Annual budgets are prepared and detailed monthly management reports are presented to the Board and used to monitor financial performance and compliance with the Group s policies and procedures. All controls are covered including financial, operational and controls to manage risk. The monthly Board meetings are also used to consider the Group s major risks. Internal audit The Board reviews from time to time the need for an internal audit function and remains of the opinion that the systems of internal financial control are appropriate to the Group s size and present activities and an internal audit function is not necessary. Going concern The Board has reviewed the performance for the current year and forecasts for future periods. Based on this current information, the Board believes that the Group will continue in operational existence for the foreseeable future. On these grounds, the Board has continued to adopt the going concern basis for the preparation of the financial statements.

14 12 Report of the independent auditor to the Members of Rubicon Software Group Plc We have audited the Group financial statements of Rubicon Software Group Plc for the year ended 30 June 2009 which comprise the principal accounting policies, the consolidated income statement, the consolidated balance sheet, the consolidated cash flow statement, the consolidated statement of changes in equity and notes 1 to 21. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. Opinion on financial statements In our opinion the Group financial statements: give a true and fair view of the state of the Group s affairs as at 30 June 2009 and of its loss for the year then ended; have been properly prepared in accordance with IFRS s as adopted by the European Union; and have been prepared in accordance with the requirements of the Companies Act This report is made solely to the Group s members, as a body, in accordance with Sections 495 and 496 of the Companies Act Our audit work has been undertaken so that we might state to the Group 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 Group and the Group 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 explained more fully in the Statement of Directors Responsibilities on page 9 the Directors are responsible for the preparation of the Group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the Group 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) 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 APB s website at Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Report of the Directors for the financial year for which the Group financial statements are prepared is consistent with the Group 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: 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. Other matter We have reported separately on the parent company financial statements of Rubicon Software Group Plc for the year ended 30 June James Rogers, Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Slough 13 November 2009

15 13 Principal accounting policies General information Rubicon Software Group Plc is the Group s ultimate parent company. It is incorporated and domiciled in England and Wales. Rubicon Software Group Plc s shares are quoted on the AIM Market of the London Stock Exchange. The address of the registered office and principal place of business is found on page 38 of this report. Basis of consolidation The Group financial statements consolidate those of the Company and its subsidiary companies drawn up to 30 June Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights. Basis of Group accounting The consolidated financial statements have been prepared in accordance with applicable International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) as adopted by the EU. The financial statements have been prepared under the historical cost convention. The measurement bases and principal accounting policies of the Group are set out below. The accounting policies that have been applied in the opening balance sheet have also been applied throughout all periods presented in these financial statements. These accounting policies comply with each IFRS that is mandatory for accounting periods ending on 30 June The financial statements are being prepared on a going concern basis which the Directors believe to be appropriate. The Directors have considered the recent trading activity of the Group in conjunction with detailed forecasts for the 12 month period following the date of these accounts. These detailed forecasts reflect the strengthened post year end cash position, the recurring revenue base, less reliance on new business wins as well as the action taken during the year to reduce costs to match the current economic environment. Note 14 to the financial statement includes details of its financial instruments and its exposures to credit risk and liquidity risk. Unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. The results and net assets of subsidiary companies acquired in June 2006 are included in the consolidated income statement and consolidated balance sheet using the merger method of accounting, as explained subsequently in the principal accounting policies. Reverse acquisition accounting In June 2006 the Company became the legal parent of Rubicon Software Limited and its subsidiaries in a share for share transaction. The Company s continuing operations and executive management were those of Rubicon Software Limited. Accordingly, the substance of the combination was that Rubicon Software Limited had acquired Rubicon Software Group Plc in a reverse acquisition. Under reverse acquisition accounting an adjustment within shareholders funds is required to eliminate the cost of acquisition in the issuing company s books, and introduce a notional cost of acquiring the smaller issuing company based on the fair value of its shares. A further adjustment is required to show the share capital of the legal parent in the consolidated balance sheet rather than that of the acquirer. The resulting differences have been debited to the Merger Reserve.

16 14 Principal accounting policies continued Investments in subsidiaries Investments in subsidiary companies are included at cost less provision for impairment. Investments in associates Associates are those entities over which the Group is able to exert significant influence but which are neither subsidiaries nor interests in a joint venture. Investments in associates are initially recognised at cost and subsequently accounted for using the equity method. Acquired investments in associates are subject to the equity method. However, any goodwill or fair value adjustment attributable to the Group s share in the associate is included in the amount recognised as investment in associates. All subsequent changes to the Group s share of interest in the equity of the associate are recognised in the carrying amount of the investment. Changes resulting from the profit or loss generated by the associate are reported within Share of profit from equity accounted investments in profit or loss. These changes include subsequent depreciation, amortisation or impairment of the fair value adjustments of assets and liabilities. The Group s share of post acquisition profit or loss of its associate is recognised in the income statement and its share of post acquisition movement in reserves is recognised in reserves. The cumulative post acquisition movements are adjusted against the carrying amount of the investment, when the Group s share of losses in an associate equals or exceeds its interest in the associate, including any unsecured receivables; the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. If the associate subsequently reports profits, the investor resumes recognising its share of those profits only after its share of the profits exceeds the accumulated share of losses that has previously not been recognised. Unrealised gains and losses on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group s interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment losses from a group perspective. Amounts reported in the financial statements of associates have been adjusted where necessary to ensure consistency with the accounting policies of the Group. Revenue Revenue is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied and services provided, excluding VAT and trade discounts. Revenue is recognised as set out below: Consultancy and software development contracts Consultancy and software development contracts are recognised in line with the performance of the contract, typically: For time and materials contracts, the number of days worked in the period at the contracted rates and any materials consumed in the period. Where a contract involves delivery of several different elements and is not fully delivered or performed by the year end, revenue is recognised based on the proportion of the fair value of the elements delivered to the fair value of the overall contract. Licence income perpetual If the sale is unconditional and the revenue earned is nonrefundable, the value of software licence income is taken to the income statement in full upon delivery of the software to the client as this point represents full performance of the sale. If the sale is conditional then the value of the software licence income is taken to the income statement once user acceptance has been achieved, which binds the transaction as non-refundable.

17 15 Licence income Annual or any other term The value of software licence income is recognised evenly over the contracted licence period. Support and maintenance Support and maintenance income is recognised evenly over the contract term. Share-based payment The Company operates equity-settled share-based remuneration plans for certain employees (including Directors). Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled sharebased payments is expensed to the income statement on a straight-line basis over the vesting period, together with a corresponding increase in equity (via a credit to the share option reserve), based upon the company s estimate of the shares that will eventually vest. Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on management s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Where employees are rewarded using share-based payments, the fair values of employees services are determined indirectly by reference to the fair value of the instrument granted to the employee. Upon exercise of share options, the proceeds received net of attributable transaction costs are credited to share capital, and where appropriate to share premium. Property, plant and equipment Property, plant and equipment are stated at cost, net of accumulated depreciation and any provision for impairment. Depreciation Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows: Leasehold improvements 10% Office equipment 25% Material residual value estimates are updated as required, but at least annually, whether or not the asset is revalued. The useful economic life of the asset is also reviewed regularly. Software research and development costs Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in which it is incurred. Development costs incurred on specific projects are capitalised when they can be reliably measured and the projects to which they are attributable are separately identifiable, are technically feasible, demonstrate future economic benefit, and will be used or sold by the Group once completed. Development costs not meeting the criteria for capitalisation are expensed as incurred. Following completion of the development the capitalised cost is amortised on a straight line basis over the period during which the Group is expected to benefit, typically three years. This is shown separately in the income statement. The cost of internally generated software comprises all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by management. Directly attributable costs include; third party costs and employee costs incurred on software development, along with an appropriate portion of relevant overheads. Careful judgement by the Directors is applied when deciding whether the recognition requirements for

18 16 Principal accounting policies continued development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgements are based on the information available at each balance sheet date. In addition, all internal activities related to the research and development of new software products are continuously monitored by the Directors. Impairment of goodwill, other intangible assets and property, plant and equipment For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors goodwill. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually. All other individual assets or cash-generating units 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 or cash-generating unit s carrying amount exceeds its recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Group s latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect their respective risk profiles as assessed by management. Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cashgenerating unit. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment charge is reversed if the cash-generating unit s recoverable amount exceeds its carrying amount. Leased assets In accordance with International Accounting Standard ( IAS ) 17, the economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards related to the ownership of the leased asset. The related asset is recognised at the inception of the lease at the fair value of the leased asset or, if lower, the present value of the minimum lease payments plus incidental payments, if any, to be borne by the lessee. A corresponding amount is recognised as a finance leasing liability. The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to the income statement over the period of the lease. All other leases are regarded as operating leases and the payments made under them are charged to the income statement on a straight line basis over the lease term. Lease incentives are spread over the term of the lease. Rental income in respect of operating leases is recognised on a straight line basis over the lease term. Pension costs The Group provides a defined contribution pension scheme for all Directors and employees. A defined contribution scheme is a pension scheme under which the Group pays fixed contributions to an independent entity. The Group has no legal or constructive

19 17 obligations to pay further contributions after its payment of the fixed contribution. The assets of the scheme are held separately from those of the Group. The annual contributions payable are charged to the income statement. Taxation Current tax is the tax currently payable or receivable based on the result for the period. Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets. Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date. Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity (such as the revaluation of land) in which case the related deferred tax is also charged or credited directly to equity. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits. Equity Equity comprises the following: Share capital represents the nominal value of equity shares that have been issued. Share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue. Share options reserve represents equity-settled share-based employee remuneration until such share options are exercised. Merger reserve represents the difference between the nominal and fair value of shares issued for the acquisition of subsidiary undertakings in June 2006, in accordance with the Companies Act Retained earnings include all current and prior period results as disclosed in the income statement. Financial assets All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument. The Group currently only has loans and receivables in these financial statements. Loans receivable are measured subsequent to initial recognition at amortised cost using the effective interest method, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in the income statement. Provision against trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms

20 18 Principal accounting policies continued of those receivables. The amount of the write-down is determined as the difference between the assets carrying amount and the present value of estimated future cash flows. An assessment for impairment is undertaken on each financial asset at least at each balance sheet date. Financial liabilities Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial liabilities are categorised as at fair value through profit or loss and amortised cost. The Group currently has no liabilities categorised as fair value through profit or loss. Other financial liabilities are initially recognised at fair value, net of transaction costs, and are subsequently recorded at amortised cost using the effective interest method, with interest-related charges recognised as an expense in financial cost in the income statement. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the income statement on the accruals basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires. The Group s financial liabilities include borrowings, trade and other payables. Management of capital The Group s objectives when managing capital are: to safeguard the entity s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk. The Group sets the level of capital in proportion to risk. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. Significant judgements and estimates In making their judgment with regard to going concern, the Directors have considered the recent trading activity of the Group in conjunction with detailed forecasts for the 12 month period following the date of these accounts. The useful life assumption of intangible assets is disclosed in the software development accounting policy. Careful judgement by the Directors is applied when deciding whether the recognition requirements for development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgments are based on the information available at each balance sheet date. In addition, all internal activities related to the research and development of new software products are continuously monitored by the Directors.

21 19 Standards in issue but not yet effective IAS 1 Presentation of Financial Statements (revised 2007) (effective 1 January 2009). IAS 1 (Amendment) Presentation of Financial Statements Puttable Financial Instruments and Obligations Arising on Liquidation (effective 1 January 2009). IFRIC 18 Transfers of Assets from Customers (effective prospectively for transfers on or after 1 July 2009). None of these standards will have an impact on the Group s financial statements except IAS 1, the effect of which will be that it will have an impact on the presentation of the Group financial statements going forward. IAS 23 Borrowing Costs (revised 2007) (effective 1 January 2009). IAS 27 Consolidated and Separate Financial Statements (Revised 2008) (effective 1 July 2009). IAS 27 (Amendment) Consolidated and Separate Financial Statements Costs of Investment in a Subsidiary, Jointly Controlled Entity or Associate (effective 1 January 2009). IAS 32 (Amendment) Financial Instruments: Presentation. IAS 39 (Amendment) Financial Instruments: Recognition and Measurement Eligible Hedged Items (effective 1 July 2009). IFRS 1 (Amendment) First-time Adoption of International Financial Reporting Standards. IFRS 2 (Amendment) Share-based Payment Vesting Conditions and Cancellations (effective 1 January 2009). IFRS 3 Business Combinations (Revised 2008) (effective 1 July 2009). IFRS 8 Operating Segments (effective 1 January 2009). IFRIC 15 Agreements for the Construction of Real Estate (effective 1 January 2009). IFRIC 16 Hedges of a Net Investment in a Foreign Operation (effective 1 October 2008). IFRIC 17 Distributions of Non-cash Assets to Owners (effective 1 July 2009).

22 20 Consolidated income statement for the year ended 30 June 2009 Note Revenue ,231 Other operating income 2 14 Depreciation and amortisation (207) (137) Other operating charges (876) (1,368) Operating result 3 (209) (260) Finance income 18 1 Finance charges 6 (3) (3) Result from continuing activities before tax (194) (262) Tax credit Net results for the year (194) (137) Loss per share Pence Pence Basic and diluted 8 (0.5) (0.4) All of the activities of the Group are classed as continuing. The accompanying accounting policies and notes form part of these financial statements.

23 21 Consolidated balance sheet for the year ended 30 June 2009 Note Assets Non-current assets Trade and other receivables due after one year Property, plant and equipment Intangible assets Current assets Trade and other receivables due within one year Total assets Equity Called up equity share capital Share premium account Share option reserve Merger reserve Retained earnings 20 (1,281) (1,087) Total equity Liabilities Non-current liabilities Trade and other payables Current liabilities Trade and other payables Total liabilities Total liabilities and equity These financial statements were approved by the Directors on 13 November 2009 and are signed on their behalf by: A Kirby Director The accompanying accounting policies and notes form part of these financial statements.

24 22 Consolidated cash flow statement for the year ended 30 June Operating activities Result for the period before tax and finance costs (209) (260) Amortisation of intangible assets Depreciation of property, plant and equipment Change in trade and other receivables Change in trade and other payables (153) (90) Share option charges 2 4 Taxes received Cash flows from operating activities (65) 143 Investing activities Purchase of property, plant and equipment (7) Additions to intangible assets (39) (213) Interest received 18 1 Net cash used in investing activities (21) (219) Financing activities Proceeds from the issue of shares 45 Directors loan 15 Finance lease payments (3) Interest paid (3) (3) Net cash movement from financing 54 (3) Net movement in cash (32) (79) Opening cash balance (22) 57 Closing cash balance (54) (22) The accompanying accounting policies and notes form part of these financial statements.

25 23 Consolidated statement of changes in equity for the year ended 30 June 2009 Share Share Share options Merger Retained Total capital premium reserve reserve earnings equity Balance at 1 July (950) 425 Loss for the period (137) (137) Share options 4 4 Balance at 30 June (1,087) 292 Balance at 1 July (1,087) 292 Loss for the period (194) (194) Share issue Share options 2 2 Balance at 30 June (1,281) 145 The accompanying accounting policies and notes form part of these financial statements.

26 24 Notes to the financial statements for the year ended 30 June Segment reporting The revenue and loss before tax are attributable to the one principal activity of the Group being software development in the United Kingdom. An analysis of revenue is given below: United Kingdom 874 1,231 2 Other operating income Other operating income In 2008 other operating income consisted of 14,000 of rent receivable in respect of operating leases. This agreement was terminated in November 2007 and consequently there was no operating income in the year ended 30 June Operating result This is stated after charging: Share-based payment 2 4 Amortisation of intangible assets Depreciation of owned property, plant and equipment Depreciation of assets held under finance leases and hire purchase agreements 3 5 Fees payable to the Company s auditor for: the audit of the Group s annual accounts Tax services 3 5 Other accounting services 2 1 Operating lease costs: Buildings Directors and employees The average number of staff employed by the Group during the financial year amounted to: Number Number The aggregate payroll costs of the above were: Wages and salaries Social security costs Other pension costs Capitalised development costs (39) (213)

27 25 5 Directors and key management Remuneration in respect of directors was as follows: Emoluments receivable Share based payment 2 2 Value of Group pension contributions to money purchase schemes Emoluments of highest paid director: Emoluments receivable Value of Group pension contributions to money purchase schemes The number of directors who are accruing benefits under Group pension schemes is as follows: Number Number Money purchase schemes 2 3 Remuneration in respect of key management including directors was as follows: Emoluments receivable Value of Group pension contributions to money purchase schemes Finance charges Interest payable on bank borrowing 2 2 Finance charges

28 26 Notes to the financial statements continued 7 Income tax Corporation tax credit (34) Adjustment to tax in respect of previous periods (91) (125) Factors affecting current tax credit Loss on ordinary activities before taxation (194) (262) Loss on ordinary activities multiplied by the small company rate of corporation tax in the UK of 21% (2008: 19%) (41) (50) Expenses not deductible for tax purposes 42 2 Enhanced expenditure (20) Other timing differences not recognised 3 23 Adjustment to tax in respect of previous periods (91) Tax at a different rate 6 Increased tax losses (4) 5 Total current tax credit (125) 8 Loss per share Loss attributable to ordinary shareholders (194) (137) Weighted average number of shares (basic) 37,962,092 37,699,995 Basic loss per share (0.5)p (0.4)p At 30 June 2009, the Company had 1,513,750 share options outstanding. None of these options were exercised in the period. The options are anti-dilutive because the Group is loss making. 9 Intangible assets Development expenditure 000 Carrying amount 1 July Additions 213 Amortisation charge for the year (122) Carrying amount at 30 June Additions 39 Amortisation charge for the year (193) Carrying amount at 30 June Amortisation charged on intangible assets is included within depreciation and amortisation in the consolidated income statement.

29 27 10 Property, plant and equipment Leasehold Office improvements equipment Total Cost at 1 July Additions 7 7 Cost at 30 June Additions Cost at 30 June Depreciation at 1 July Charge for the year Depreciation at 30 June Charge for the year Depreciation at 30 June Net book value at 1 July Net book value at 30 June Net book value at 30 June Included within the net book value of 18,000 is 5,000 (2008: 8,000) relating to assets held under finance leases and hire purchase agreements. The depreciation charged to the financial statements in the year in respect of such assets amounted to 3,000 (2008: 5,000). 11 Trade and other receivables Trade and other receivables due within one year Trade receivables Prepayments and accrued income Other receivables Trade and other receivables due after one year Trade receivables Some of the unimpaired trade receivables are past due as at the reporting date. Financial assets past due but not impaired can be shown as follows: Past due but Past due but not impaired not impaired Trade receivables Less than 60 days More than 60 days All amounts are short term. The carrying value of trade receivables is considered a reasonable approximation of fair value. An amount of 4,100 has been provided in the current year for a specific piece of work that has been under dispute since August 2008 (2008: 7,000).

30 28 Notes to the financial statements continued 12 Trade and other payables current Bank overdraft Trade payables Other taxation and social security Amounts due under finance leases and hire purchase agreements 3 4 Other payables Deferred income Accruals Included in other payables as at 30 June 2009 is a Director s loan of 15,000. The loan was interest free for the purpose of providing short term working capital to the business whilst awaiting a significant client payment. The loan was repaid on 4 August The fair value of the Director s loan is not materially different from the carrying value. 13 Trade and other payables Non current Amounts due under finance leases and hire purchase agreements Financial instruments and derivatives The Group s principal financial instruments comprise cash and bank overdrafts. The purpose of these financial instruments is to finance the Group s operations. The Group has other financial assets and liabilities that arise directly from its operations, such as trade and other receivables and payables. The Group does not enter into derivative transactions such as forward foreign currency contracts. The main risks arising from the Group s financial instruments are credit risk and liquidity risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. Credit risk The credit risk is the carrying amount of the financial assets as shown in note 11. The Group s trade and other receivables are actively monitored to avoid a significant concentration of credit risk. Liquidity risk The Group monitors its liquidity position actively to ensure the business has sufficient resources to meet its requirements and to invest cash assets safely and profitably. At 30 June 2009 the Group maintained an overdraft facility with its bank and managed cash balances within this facility. This facility was closed on 22 July 2009 as the Group did not believe that it was necessary for the business to maintain a facility in the future. Market risk The Group considers its exposure to interest rate and foreign exchange to be immaterial. Fair values The Directors consider that the fair value of all the financial assets and liabilities is the same as the carrying value in the financial statements.

31 29 14 Financial instruments and derivatives (continued) The financial asset categorisation is presented as follows: Non-financial Loans and assets receivables Total Trade and other receivables Other non-financial assets Total Non-financial Loans and assets receivables Total Trade and other receivables Other non-financial assets Total The disclosure of the carrying value in respect of IAS39 categorisation of financial liabilities is as follows: Other financial Liabilities not liabilities at within scope amortised cost of IAS 39 Total Trade and other payables Bank overdraft Finance lease liability current 4 4 Finance lease liability non-current 4 4 Total Other financial Liabilities not liabilities at within scope amortised cost of IAS 39 Total Trade and other payables Bank overdraft Finance lease liability - current 4 4 Total Contractual un-discounted cash flows in respect of financial liabilities are as follows: 91 days to 13 months to 0-90 days 12 months 3 years Total Trade payables Bank overdraft Finance lease liabilities Total

32 30 Notes to the financial statements continued 15 Commitments under finance leases and hire purchase agreements Future commitments under finance leases and hire purchase agreements are as follows: Within 1 year 1 to 5 years Total Net present values Lease payments Within 1 year 1 to 5 years Total Net present values Lease payments Finance leases and hire purchase agreements are analysed as follows: Current obligations 3 4 Non-current obligations Amounts due under finance leases and hire purchase agreements are secured on the assets to which they relate. 16 Leasing commitments At 30 June 2009 the Group had commitments under non-cancellable operating leases as set out below: Buildings Buildings Operating leases which expire: Within one year Within two to five years Deferred taxation The amounts unprovided for deferred taxation are set out below: Provided Unprovided Provided Unprovided Tax losses available

33 31 18 Share capital Authorised share capital: ,000,000 Ordinary shares of 1p each 1,000 1,000 Allotted, called up and fully paid: Number 000 Number 000 Ordinary shares of 1p each 40,199, ,699, On 21 May 2009, the Company issued 2,500,000 new ordinary shares to ISA at a price of 2p per share, corresponding to 6.6% of total shares issued. Proceeds received in excess of the nominal value of the shares, net of associated issue expenses totalling 4,906, are included in share premium. 19 Share options The Group adopted the Rubicon Software Group EMI Scheme 2006 on 8 June An aggregate of 3,278,000 options have been granted to employees of the Group, in return for such employees releasing certain earlier EMI schemes options which were granted to them by Rubicon Software Limited. This is the only share incentive scheme of the Group currently in place. Weighted average 30 June Weighted average 30 June exercise price (p) 2009 exercise price (p) 2008 Outstanding at 1 July 2.1 1,763, ,278,000 Lapsed during the year 0.1 (250,000) 5.5 (1,514,250) Number of outstanding options at 30 June 2.2 1,513, ,763,750 As at 30 June 2009, there were 1,513,750 share options outstanding (2008: 1,763,750). Of these, 756,875 were capable of being exercised (2008: 881,875). The Black-Scholes valuation methodology was used for the valuation of all options. 20 Retained earnings Balance brought forward (1,087) (950) Loss for the financial year (194) (137) Balance carried forward (1,281) (1,087)

34 32 Notes to the financial statements continued 21 Related party transactions Directors fees of 24,000 were paid to David Webber and Richard Blakesley in respect of their non-executive duties (2008: 21,000). At the year end, other payables were made up of a loan from Richard Blakesley of 15,000. The loan was interest free for the purpose of providing short term working capital to the business whilst awaiting a significant client payment. The loan was repaid on 4 August For the period 20 November 2000 to 14 August 2009 Alistair Hancock provided a personal guarantee of 68,866 to NatWest Bank in relation to the bank overdraft facility. This personal guarantee has now been removed. In the prior year, Virtual Sonar Limited was a company that was considered a related party due to the fact that certain Directors of Rubicon Software Plc also held shares in that company. On 16 October 2008, 41.3% of the shares in Virtual Sonar Limited were transferred from Alistair Hancock and Mark Peters to the Group for no consideration. During the year ended 30 June 2009, the Group also carried out 5,815 of consultancy for Virtual Sonar Limited, an associate company. At 30 June 2009 there were no balances outstanding.

35 33 Report of the independent auditor to the Members of Rubicon Software Group Plc We have audited the parent company financial statements of Rubicon Software Group Plc for the year ended 30 June 2009 which comprise the balance sheet and notes 1 to 9. The financial reporting framework that has been applied in their preparation 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 Sections 495 and 496 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 explained more fully in the Statement of Directors Responsibilities set out on page 9, the Directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the parent company 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 APB s website at Opinion on financial statements In our opinion the parent company financial statements: give a true and fair view of the state of the company s affairs as at 30 June 2009; 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 Report of the Directors for the financial year for which the financial statements are prepared is consistent with the parent company 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. Other matter We have reported separately on the Group financial statements of Rubicon Software Group Plc for the year ended 30 June James Rogers Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Slough 13 November 2009 have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

36 34 Company balance sheet for the year ended 30 June 2009 Note Fixed assets Investments Current assets Debtors Cash and bank Creditors: amounts falling due within one year 6 (37) (22) Net current assets Net assets Equity Called up equity share capital Share premium account Share option reserve Retained earnings 8 (53) (37) Total equity These financial statements were approved by the Directors on 13 November 2009 and are signed on their behalf by: A Kirby Director The accompanying accounting policies and notes form part of these financial statements.

37 35 Notes to the Company financial statements 1 Principal accounting policies A summary of the principal accounting policies is set out below: Investments Investments are included at cost less amounts written off. The Company s shareholding in subsidiaries is detailed in note 4. Share based payment In accordance with FRS 20 Share-based payment, share options are measured at fair value at their grant date. The fair value is calculated using the Black-Scholes formula and charged to the income statement on a straight-line basis over the expected vesting period. 2 Loss of the parent company No profit and loss account is presented for the Company as permitted by Section 408 of the Companies Act The Company s loss for the year was 16,000 (2008: 33,000). 3 Directors and employees The average number of staff employed by the Company during the financial year amounted to: Number Number 3 3 The aggregate payroll costs of the above were: Wages and salaries Share based payment 2 2 Social security costs Investments Investment in Group undertakings 000 Cost at 1 July 2008 and 30 June At 30 June 2009 the Group held 20% or more of the allotted share capital of the following: Country of Class of share Proportion Nature Subsidiary undertakings incorporation capital held held of business Rubicon Software Limited England Ordinary 100% Software Accelerator Software Limited England Ordinary 100% Dormant Accelerator Software Limited is held indirectly through Rubicon Software Limited.

38 36 Notes to the Company financial statements continued 4 Investments (continued) Country of Class of share Proportion Nature Associated undertakings incorporation capital held held of business Virtual Sonar Limited England Ordinary 41% Software The year end of Virtual Sonar Limited is 31 March and the latest financial information available is for the year ended 31 March Virtual Sonar Limited has continued to make losses in the year ended 30 June 2009 and has a deficit in shareholders funds. The share of the losses relating to Rubicon Software Group Plc is as follows: Loss in the year of acquisition (19,608) % owned as associate 41.3% Share of loss (8,098) The net liabilities of Virtual Sonar Limited are as follows: Net liabilities at 31 March 2008 (66,221) Loss for the six months (19,608) Net liabilities acquired at acquisition date (85,829) 5 Debtors Amounts owed by Group companies Prepayments and accrued income Amounts owed to the Company by Group undertakings are due after more than one year. 6 Creditors: amounts falling due within one year Other taxation and social security 7 Other payables 15 Accruals Included in other payables as at 30 June 2009 is a Director s loan of 15,000. The loan was interest free for the purpose of providing short term working capital to the business whilst awaiting a significant client payment. The loan was repaid on 4 August The fair value of the Director s loan is not materially different from the carrying value.

39 37 7 Share options The Company adopted the Rubicon Software Group EMI Scheme 2006 on 8 June An aggregate of 3,278,000 options have been granted to employees of the Company, in return for such employees releasing certain earlier EMI schemes options which were granted to them by Rubicon Software Limited. This is the only share incentive scheme of the Company currently in place. Weighted average 30 June Weighted average 30 June exercise price (p) 2009 exercise price (p) 2008 Outstanding at 1 July 2.1 1,763, ,278,000 Lapsed during the year 1.0 (250,000) 5.5 (1,514,250) Number of outstanding options at 30 June 2.2 1,513, ,763,750 As at 30 June 2009, there were 1,513,750 share options outstanding (2008: 1,763,750). Of these, 756,875 were capable of being exercised (2008: 881,875). The Black-Scholes valuation methodology was used for the valuation of all options. 8 Reserves Share Share Share options Retained Total capital premium reserve earnings equity Balance at 1 July (37) 746 Loss for the period (16) (16) Share issue Share options 2 2 Balance at 30 June (53) 777 On 21 May 2009, the Company issued 2,500,000 new ordinary shares to ISA at a price of 2p per share, corresponding to 6.6% of total shares issued. Proceeds received in excess of the nominal value of the shares, net of associated issue expenses totalling 4,906, are included in share premium. 9 Related party transactions See note 21 of the Group financial statements.

40 38 Company information Company registration number Auditor Grant Thornton UK LLP Registered Auditors Registered office Rubicon House Guildford Road West End Woking Chartered Accountants Churchill House Chalvey Road East Slough Berkshire SL1 2LS Surrey GU24 9PW Solicitors Directors R Burnham R Blakesley A Hancock D Webber Thomas Eggar LLP Belmont House Station Way Crawley West Sussex RH10 1JA A Kirby Bankers Secretary A Kirby National Westminster Bank Plc 50 High Street Egham Nominated Adviser and Broker Surrey TW20 9EU W H Ireland Limited 5th Floor Colmore Row Birmingham B3 2BB Registrars Neville Registrars Limited Neville House 18 Laurel Lane Halesowen West Midlands B63 3DA

41 39 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be at Rubicon House, Guildford Road, West End, Surrey GU24 9PW, on 15 December 2009 at for the following purposes: Ordinary business 1. To receive and adopt the Report of the Directors and financial statements of the Company for the year ended 30 June 2009 together with the Report of the auditor. 2. To re-elect as director R Blakesley in accordance with the Company s Articles of Association and who, being eligible, offers himself for re-election. 3. To re-appoint Grant Thornton UK LLP as auditor of the Company. 4. To authorise the Directors to fix the auditor s remuneration. Special business 5. That the Memorandum and Articles of Association produced to the meeting and initialled by the Chairman of the meeting for the purposes of identification be and are hereby approved for adoption as the Memorandum and Articles of Association of the Company in substitution for, and to the exclusion of, the existing Memorandum and Articles of Association. 6. That, without prejudice to any other permitted method of communication, subject to any specific request by a member to receive hard copies, the Company may give any notice to a member by electronic mail to an address notified by the shareholder in writing or via a website the address of which shall be notified to the member in writing. Any notice or other document sent by electronic mail shall be deemed as being delivered at the time it was sent. Any notice or other document sent by a website shall be deemed as being delivered at the time it was sent. Any notice or other document sent by a website shall be deemed as being delivered when the material received (or is deemed to be received) notice of the fact that the material was available on the website. 7. That, in accordance with section 551 of the Companies Act 2006 (the 2006 Act ), the Board be generally and unconditionally authorised to allot shares in the Company or grant rights to subscribe for or to convert any security into shares in the Company ( Rights ) up to an aggregate nominal amount of 134,000 provided that this authority shall expire at the conclusion of the next Annual General Meeting of the Company; and the Company shall be entitled to make, prior to the expiry of such authority, any offer or agreement which would or might require shares to be allotted or Rights to be granted and the Directors may allot shares or grant Rights pursuant to such offer or agreement as if such authority had not expired. This authority is in substitution for all previous authorities conferred on the Directors in accordance with section 80 of the Companies Act 1985 or section 551 of the 2006 Act but without prejudice to any allotment of shares or grant of Rights already made or offered or agreed to be made pursuant to such authorities. 8. That, subject to the passing of resolution 7 and in accordance with section 570 of the 2006 Act, the Board be granted power to allot equity securities (as defined in section 560 of the 2006 Act) pursuant to the authority conferred by resolution 7, as if section 561 (1) of the 2006 Act did not apply to any such allotment provided that this power shall be limited to: i. the allotment of equity securities, in connection with a rights issue, subject to such exclusions or other arrangements as the Board may deem necessary or expedient to deal with fractional entitlements or legal or practical problems under the laws of, or the requirements of, any regulatory body or any stock exchange or otherwise in any territory; and for the purposes of this resolution rights issue means an offer of equity securities to holders of ordinary shares in proportion to their respective holdings (as nearly as may be) and holders of other securities to the extent expressly required or (if considered appropriate by the Board) permitted by the rights attached thereto; ii. iii. the allotment to the participants in the Company s various option schemes of 1,513,750 ordinary shares of 1p each in the capital of the Company (or such other number of ordinary shares which such persons shall be entitled to be allotted in accordance with the scheme from time to time); the allotment (otherwise than pursuant to resolution 8(i) and (ii) above) of equity securities up to an aggregate nominal value of 40,200;

42 40 Notice of Annual General Meeting continued and shall expire at the conclusion of the next Annual General Meeting of the Company unless previously varied, revoked or renewed by the Company in general meeting provided that the Company may, before such expiry, make any offer or agreement which would or might require equity securities to be allotted after such expiry and the Board may allot equity securities pursuant to any such offer or agreement as if the power hereby conferred had not expired. BY ORDER OF THE BOARD Andrew Kirby Company Secretary 13 November 2009 NOTES 1. If you have sold or otherwise transferred your shares in Rubicon Software Group Plc you should hand this document and the enclosed form of proxy at once to the purchaser or transferee of the stockbroker or other agent to whom the sale or transfer was effected for transmission to the purchaser or transferee. If you are in any doubt as to the action you should take, please consult an independent professional adviser authorised pursuant to the Financial Services Act 1986 immediately. 2. A member entitled to attend and vote at the above meeting is entitled to appoint a proxy to attend and on a poll to vote instead of him. A proxy need not also be a member of the Company. 3. To be valid, a proxy and any power of attorney or other authority under which it is assigned must be lodged with the Registrar of the Company, Neville Registrars Limited, Neville House, 18 Laurel Lane, Halesowen, West Midlands B63 3DA, no later than 48 hours before the time for holding the meeting. 4. Completing and returning a form of proxy will not prevent a member from attending in person at the meeting and voting should he so wish. 5. In accordance with the Companies Act 2006 and with the requirements of the Rules of the UK Listing Authority, the Register of Directors Interests in the share capital and debentures of the Company, is available for inspection at the Company s registered office during normal business hours. 6. The Company pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 specifies that only those shareholders registered in the Register of Members of the Company as of on 11 December 2009 shall be entitled to attend or vote at the meeting in respect of the number of shares registered in their name at that time. EXPLANATORY NOTES TO RESOLUTIONS Resolution 5 seeks to obtain shareholder approval for the adoption of new Memorandum and Articles of Association ( New Memorandum and Articles ) in order to update the Company s current Memorandum and Articles of Association ( Current Memorandum and Articles ) primarily to take account of changes in English law brought about by the Companies Act The principal changes introduced in the New Memorandum and Articles are summarised in Appendix 1. Other changes, which are of a minor, technical or clarifying nature, have not been noted in Appendix 1. The New Memorandum and Articles are available for inspection at the Company s registered office from the date of this notice until the conclusion of the Annual General Meeting. Resolution 7 asks shareholders to renew the Directors general authority to allot unissued shares should it be desirable to do so. In accordance with corporate governance best practice recommendations, this authority if approved is limited to a maximum of 13,399,998 shares, equivalent to one third of the Company s issued ordinary share capital as at 21 October This authority will expire at the next Annual General Meeting or, if earlier, 15 months from the date of passing of the resolution. Resolution 8 seeks to renew an existing authority given to the Directors each year to allot shares for cash to persons other than existing shareholders. The authority if approved is limited to a maximum of 4,020,000 shares, equivalent to ten per cent of the Company s issued ordinary share capital as at 21 October The authority will, if granted, expire at the next Annual General Meeting or, if earlier, 15 months from the date of passing of the resolution.

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44 Rubicon Software Group plc, Rubicon House, Guildford Road, West End, Surrey GU24 9PW Tel Fax Web